Global Connect

Look at that socialism dripping out the side of that mouth.

First of all, I wanted to apologize to Shane for the last post on the Taliban (he understands why ;-P).  Of course the Taliban didn’t attack us on 9/11.  Also wanted to apologize to Matt who used to work for the International Peace Institute- saying they don’t know war is like saying the CIA doesn’t know economics. It just doesn’t make practical sense.

Alas, I wish I could claim I was just trying to impersonate Sarah Palin’s stupidity, but I won’t let myself sink that low.

Onto the post!

Yesterday the Associated Press reported on Henry Paulson- our good ‘ole neoliberal friend and former Treasury Secretary under George W. Bush. He defended the bailouts during his tenure saying that the US could have experienced unemployment up to 25% if the government didn’t intervene.  Now, Paulson is a Republicans Republican- if you don’t believe me than you should watch the Frontline Special on the financial collapse (I can’t remember the titles, but I remember two of them). The interesting thing is that our Republican friend Paulson orchestrated one of the biggest socialist moves in American history- bailing out our largest banks, AIG, and you know the rest of the story. If that isn’t the government stepping on the private sector’s hands- please tell me what is…

I throw Reagan into the mix because he oversaw the one of the biggest expansions of what President Eisenhower would refer to as the “military industrial complex.” Lowering taxes- yes you are a capitalist, increasing government spending- yes you are a socialist.

I throw Obama into the mix because a new Daily Kos/Research 2000 poll came out today indicating that 63% of Republicans think Obama is a socialist. Yes, if you consider any increase in government spending socialist than you are correct- but who the hell cares about what Republicans think?

Before you criticize my “socialist” rants let me remind you (or educate for those who aren’t) you of ECON 101 (macroeconomics at my undergraduate institution).  What are the two most effective ways to stimulate an economy?

1. Lower taxes and increase government spending.

2. Lower taxes + Government spending = Budget Deficit (not to be confused with trade deficits).

3. Get over yourself- if you read this blog you are already more economically in tune than a good chunk of your elected representatives in Congress.

You might get the answer, but you might not like the answer either.

“Man is a credulous animal and must believe something. In the absence of good grounds for belief, he will be satisfied with bad ones.”

- Bertrand Russell- philospher and winner of the Nobel Prize in Literature (1950)

I find it funny when people complain about politicians and other leaders being out of the “mainstream.” What is “mainstream” anymore?  What is “normal?” Just to give some examples: I have a friend that is an atheist, feminist, Republican.  Another that is a free-spirited, used to study to be a female Catholic priest, wanna-be mountain hippie (unapologetically).  Another that is a feminist, neo-Democrat male from Texas. And yet another that is a gay, successful executive that wants to marry a woman.

What the heck is “normal” anymore???

Well, it has come to my attention yet again that certain people in the world have a problem with “out of touch, ivory tower intellectuals. Do these people forget the value of education?

What is a cornerstone of a successful market-oriented democracy? *DING DING DING* Times up.

Your answer is: an educated middle-class.

Free flow of information and ideas drives our economy just as much as it threatens our politics. Its easy to sit back and tell people what they should think and what they should do… but I don’t find many of these critics asking questions.

Yes, our intellectuals may sit above the world when it comes to understanding how the world works (or even some that just pretend to). They may be worried about getting tenured at their accredited institutions, but America and the world economy wouldn’t be so dynamic if it weren’t for them.

Critics tend to forget that intellectuals ask more questions and disagree amongst each other than most people. For example, a theory as old as Comparative Advantage is still debated to this day. David Ricardo must be turning in his grave with the literature. What’s the result? We LEARN. We learn about trade theory and learn about what’s wrong with it and what’s right with it (a terrible run-on sentence I know).

We have specialists in certain professions because we know that they know more than us. You don’t go to a banker to ask what’s wrong with your heart, and you don’t go to a doctor to ask him where you should invest (or maybe you do). The point is: it is unreasonable to attack the intellectuals simply because what they say isn’t what you want to hear.  Most intellectuals stay out of politics for a reason- it’s not their place. Intellectuals ask the questions, so get ready for the answers.

P.S. One of my favorite arguments is that the Nobel Prize Committee is socialist. Did you forget they have a specific Economics Prize, too?

P.S.S. Karl Marx and Ronald Reagan- some of our greatest socialists never got it.

If they are so good at it, why blame poor countries for it?

There is a fairly famous story in the political economy of development regarding corruption:

There are two high level government officials from two different developing countries.  Country B’s official visits Country A to see the progress they have made in implementing many of the Washington Consensus economic reforms. Upon arrival she goes to visit Country A’s official who has recently received a grant from the World Bank to develop a modern highway to the countries port, linking its resource development industries from inside the country (infrastructure improvements).  The loft outside the capital city is stylish, modern, European- NOT cheap.

B’s official asks A’s: “How can you live so lavishly in such a poor country?”

A responds: “Look out the window and tell me what you see.”

B: “I see a highway being constructed through a forest.”

A responds: “I see 20%.”

A few months later, Country A’s official visits Country B under similar circumstances.  Walking into Country B’s place, it looks even grander than his.

A exclaims: “Your country is even poorer than mine!  How can you afford such nice things?”

B: “Look out the window and tell me what you see.”

A: “All I see is a forest.”

B: “I see 100%”

This is the sort of corruption that hinders development, and it is one that we are indirectly responsible for- given that we as citizens of industrialized countries give efficacy to our governments which give efficacy to places like the World Bank and IMF. Foreign aid given to develop government and private capacity is the wrong kind of capital we can spend in our development strategies towards LDCs (least-developed countries). What really needs to happen is industries which can be competitive on the world market need to be given the chance to do so.  Please read my blog about agricultural subsidies and you will see why (it has a pretty good discussion on Facebook’s Farmville as well). No one will be able to convince most economists or political scientists that trade reform isn’t a good place to start if we are to develop a coherent strategy towards the global South.

Corruption can’t be blamed for the woes of LDCs, but let me just say I’M NOT ADVOCATING CORRUPTION AS A MORAL ALTERNATIVE TO DEVELOPMENT.

Let’s take 2 examples: imitation of products and the so-called “greasing the wheel” argument

1. Imitation of products is a natural result of product-process innovation.  Ever wonder what happened to VCRs? In short, the US invented them, they showed up on the Japanese market, they improved it through their own technological innovation and started selling it for cheaper on ours. Then- DVD players came about. I’m glossing over a lot of important details, but the notion is still there. Imitation can be good for development. It can create industries in countries to export. Exports = good for development and it can lead to diversification in the economy.  Look at Japan now. Looks like they are sitting next to us at the G7 (or 8 or 9 or 20 now?)

2. Greasing the wheel is a phrase you might use for such things as…ummm… bribes. We don’t like it here in the US for moral reasons, but if you have ever been traveling abroad- especially in an LDC- it is likely you encountered it at some point. In the larger, more grander scheme of things, bribes can be used to give preference to certain companies and industries. This is probably what happened in the development of keiretsu, or Japanese conglomerates who had much contact with government. To this day, keiretsu is still hotly debated. Infant industry protection is important in development, so greasing the wheel can’t hurt. It’s just not a good idea to keep up with those practices.

Corruption is bad, but it isn’t to blame. What you need to remember about corruption is that it is just as much a political question as it is an economic one. Blaming the woes of LDCs on corruption, when the industrialized world doesn’t give LDCs a strong chance at dipping their feet in the big golden capitalist pool is hypocritical. After all, we didn’t develop because of a free market. So, blame yourselves for supporting the Farm Bill, tariffs, NTBs, and not protecting your citizens from the social ills of not having a safety net when we finally get that free market we are looking for.

They must have heard DIck Cheney wanted to marry Limbaugh and Robertson- otherwise this doesn't make much sense.

I don’t even know where to start with this one… If anybody can be blamed for the ills our country and the world have- I’d choose these guys over President Obama any day.

First of all, Pat Robertson has new people to hate- the Haitians! Go figure, not only are gays & lesbians to blame for Hurricane Katrina and 9/11, now the Haitians are to blame for enduring a tragic hurricane AND being the poorest country in the Western Hemisphere. I didn’t know that Mr. Robertson had such juicy conversations with the big guy upstairs, and last time I heard most Christian denominations (if not all) taught that God has a preferential option for the poor.  Doesn’t make much does it?

Then, to add insult to injury- Rush Limbaugh decides that President Obama wants to score political points from African Americans for sending aid to Haiti. Maybe while Rush was in Hawaii, and he so tragically did not die from heart problems, he forgot that during the Tsunami of 2004 President George W. Bush asked Presidents Clinton and H.W. Bush to lead the American relief effort to South Asia. Was he trying to score political points with Asians. Who knows, but either way they didn’t vote overwhelmingly for McSame and Failin’ in 2008.

At least we know that we as Americans are good at one thing: politicizing tragedies. I just finished watching JFK, the 1991 film staring Kevin Costner and that was an interesting, semi-fictional account of doing the same following the assassination of John F. Kennedy.

Then you have Dick Cheney who apparently has nothing else to do with his life but criticize every move by the Obama administration. I know Wyoming is really boring, but not THAT boring. I guess it speaks to the intelligence of the past administration when W keeps his mouth shut and Cheney does all the talking.

So, in the spirit of Dickology- I think these three should really think about supporting gay marriage.  They have so much in common it might actually work.

In other news I talked to my friend in London today: Stephanie. She’s still waiting for me to buy my ticket to visit the GB so we can go dancing. I’m so confused why European Stephanie loves dancing while American Stephanie hates it? The more I think about it I think that European Stephanie might hate going after I show up, but then again I can’t be blamed for free flowing tequila shots, gin and tonics, excessive dancing at the Cuff, people drinking themselves sick in Belltown (Seattle) and hogging the bathroom all night…

Then again, maybe Europe just hasn’t gotten enough of me yet.  Guess Stephanie and I will just have to change that soon.

Does red make me look fat?

You better be asking for higher taxes soon, or you really do like China’s rise. Personally, China’s rise doesn’t irk me as it may for some of you. In reality, it’s not too surprising. I mean, when your country (the U.S. that is) holds over 50% of world output after World War II, was the world’s currency until the 1970s, and could really call the shots- there really is no place to go besides down. Relatively down that is. In his book, “The Post-American World,” Fareed Zakaria makes it clear that globalization and the increased economic integration really isn’t about the downfall of the United States as it is about everyone else catching up. For you xenophobes, I’m sorry, but this means China, India, Brazil, Russia, South Africa, and some other places as well. It’s simple economics. We as Americans like to prescribe complex meanings to really simple situations. We end up with far more complex consequences and then C-SPAN ends up getting 5% of the market share on political news instead of 0.7%. We pay attention when things don’t go our way. It’s not our fault though, we’re Americans. Don’t worry though, we still are the world’s largest single economy, are the main world’s reserve currency, and still call most the shots. Just don’t expect it forever.

Anyway, so you are probably wondering why I say we need higher taxes or really embrace China. James Fallows and Benjamin Cohen do a swell job on describing the situation. Let’s look at the dollar (as Cohen wrote about). Really, when we purchase something made in China, a portion of the dollar travels overseas into a factory where assets are partially confiscated by the state for “development purposes” by a local financial board. These are then used to purchase T-bills on auction in the U.S., or put on reserve. In other words, China is using our own money to buy our own debt- its called debt recycling. Don’t blame China though, we freak out on any news that they aren’t going to show up to these auctions. Furthermore, China’s currency is pegged to ours at an artificially low rate (subsidized by American debt dollars they buy from us), making their export markets more competitive than ours- period. So, we all have something to lose if the relationship goes South- China can’t grow at 10% a year and America can’t spend, and spend, and spend. Not to mention that this symbiotic relationship is China keeping much of its population poor for the sake of putting dollars into you and I’s hands. So, if we want to keep up our lifestyles- put up a Chinese flag next to your American one on the 4th of July, but if not- then you better be asking for some other revenue stream to fix the budget and trade deficits. Next time you vote, ask for higher interest rates and taxes, otherwise you aren’t going to get that far.

Remember: its simple economics.

My taxpayers bought that Armani suit. Gimme gimme gimme!

Ya ya ya, you are all screaming SOCIALIST right now at me indirectly. Whatever. I’m no socialist, believe it or not. Well, in reality we all are if you read my last post (I’m pausing for you to read yesterday’s post ). Anyway, we had in interesting discussion today in class about the role of society in the marketplace. Are they two distinct facets of human economic existence or not? Before you close the window saying BORRRRINNNNNGGG as you might have before, I implore you to please read on- especially if the recession we have experienced touched you in any way.

Capitalism Will Lead to Socialism:

This is the central tenant of much of Joseph Schumpeter’s work. That is, the capitalist market is extremely successful at creating wealth. There is no doubt about this. Yet, the nature of capitalism puts strain on the human condition and society. As markets are fluctuating, presumably political development is at least legitimate, society demands more protection against market “corrections” (i.e. financial crises, you should all be well aware of those). Hence, the welfare state is born, then socialism. Who knows though? We might get bored of that after a while and go back to capitalism. Interesting guy.

The Market is Subservant to the Demands of Society:

Economist [Sociologist] Karl Polyani says that the market is embedded in society. That is, the economy will do what society wants- especially during those crazy corrections. Why do you think America always tends to bailout corporations affected by the crisis. THEY ARE TOO BIG TO FAIL. Don’t lie to yourself and say this is a capitalist tenant- capitalism would let them fail for making economically poor decisions. We just can’t fathom watching the social costs of letting them fail rise. It’s not good for SOCIETY.

Interesting reads. Just make sure you are careful next time you go to label anything- or the next time you find yourself in an economic crisis. I just might call you a socialist.

Stay away from my Farmville Farm you crazy Kiwi.

As the few of you who read this probably have figured out, I like to provide you with a little anecdotal fun. I think of it as my gift to you because really, who takes a keen interest in reading some random guy’s blog about international relations? Anyway, I know probably all of you are on or have heard of Facebook (you are in the 21st century right?). Well, there is this AWESOME game called Farmville. You should really check it out. You get to create your own farm, cultivate different crops, raise animals, build barns and homes and whatnot. The real feature that is cool is you get to have different neighbors who are your Facebook friends that are also playing Farmville. The not so cool thing about this is that, besides my American friends, my New Zealander and Canadian friends are taking over my farm.  Really. I’ll log onto Farmville one day expecting to see my cows doing there thing and then BAM! All of the sudden I will notice that these people are working on MY farm. Worse yet, sometimes they will GIVE me rabbits and cows. Like I need anymore of those. Come on guys! You have enough farms. Doesn’t New Zealand have a higher sheep population than human population? Really? Really.

Onto the important stuff now. Do I really care that New Zealanders and Canadians are taking over my fake farm? Not really, and in reality I do appreciate my friendships with Scott and Shane. The real thing that I’m getting at is the extent at how nationalist domestic agri-business is.

There is a handful of congressional districts in the United States which influence the massive transfer of wealth from the American taxpayer to sustain US agriculture. Yes, I said it a massive TRANSFER of wealth. Now, holding that most of these congressional districts are heavily conservative, it doesn’t seem very wise to complain about socialism encroaching on American ideals when in fact you are supporting one of its many forms. The worse thing about it is that people are perfectly fine with it. The “Buy American” mantra seems to be inate in many of us, when in fact- Not Buying Everything American is more economically wise.

If you haven’t been convinced yet, then perhaps you need to visit or revisit your college Microeconomics class. In its most simple form, there is a price for a product (here an agricultural good) dictated by the Law of Supply and Demand, and now that the world is very interconnected, there is a world price. Now, a country with extremely high living standards compared to, say, Burkina Faso means that the price of producing an agricultural product is higher. To obtain a profit as well as pay off fixed and variable costs, the producer needs to raise prices- most of the time above the world market price which may be what it is being sold at in other countries.  In order to depress agriculture prices, we as Americans pay for many farmers to keep their standard of living and be competitive on the world market. Wow. Socialism.

To be fair I must say that this is what occurs in certain agricultural products which are (at world market price) more competitive compared to other countries. Those include, but aren’t limited to, cotton, rice, sugarcane, corn, etc. There are agricultural products we could still be competitive with and not subsidize.

So, the next time you want to Buy American, make sure to bring your sickle and hammer. Don’t forget to wear a red shirt either.

By the way, look at that crazy New Zealander trying to take over my farm. Crazy guys…

Generally I don’t really want to touch on domestic issues because frankly I’m more interested in things that are on the international level, but this time I will digress. Recently I read an article by Alan Blinder regarding American political intervention in economic affairs. In short, he suggests that we tend to have soft heads and hard hearts in formulating policy. Like him, I too believe that we should have soft hearts and hard heads.

Its not too difficult to have hard heads when it comes to economic policy. In theory that is. However, as Americans, we do tend to create policies that can be explained in 10-second sound bites and in turn bankrupt the economy. Take for example, the Reagan administration. He proposed tax cuts and deregulation, but never a balanced budget (George W. Bush as well). Tax cuts were promoted on the basis of the infamous Laffer curve, that cutting taxes will over time raise revenues. However, people tend to forget or neglect that there is no factual base to this. If you know, where is the threshold where cutting taxes raise revenue. I must say that cutting taxes for ideological reasons has more basis than the Laffer curve. Deregulation in the 80s occurred in certain sectors, except the government actual grew in others. Not to mention, the deregulation through the 2000s (including with Clinton, to be fair) in no doubt contributed in some way to the current crisis we can only hope we are [getting] out of.

No one really understands that as Americans we pay some of the lowest amount of taxes in the developed world, but we also have run persistent budget deficits since the 1980s (except for a 3-year period at the end of the Clinton years). Yes, we are proud of our liberal (little l) upbringings, because any tax is too high. No one can politically run on the platform to raise taxes. That is suicide. However, there are things we as Americans do need to take responsibility for- and the first thing should be to ourselves. We can cut spending in certain areas and tax in others and still cut the budget. I know I’ll get a lot of flack for this, but let’s say that it is proven that the liklihood (not that it won’t happen, as 9/11 showed us) of getting killed in a terrorist attack is nil. However, we subsidize corn farmers and there is a obesity problem that is exasperating the healthcare crisis (i.e. corn syrup, look at your ingredients). It doesn’t mean some spending is important, but we should spend more wisely. I might add that if you are going to complain about socialism, government handouts to farmers is redistribution of social resources for the “good of the country.”

Did we forget about Keynes? I think he has some new-found importance now that we are in the Great Recession.

Being myself last night, with my International Political Economy professor still in Bosnia (grading my International Monetary Relations test), I decided to take a detour from mindless fiction film moire and turned Hotel Rwanda in. I remember first seeing this movie in theaters during high school- wondering why my friends Lara and Andrew were calling Bill Clinton an asshole (because he was a Democrat, not because of the lack of U.S. involvement in the Rwanda genocide). Oh the wonder years, when you thought all young people were liberal. Apparently I forgot that I went to a Catholic high school in suburban Denver. Well, I must say that seeing this movie after finishing my undergraduate work, and now being in my graduate work, really opened my eyes to the complexity of the 1994 Rwandan Massacre. It’s really weird to say this, but I remember going to see this movie expecting a Schindler’s List-type drama. Although the theme was somewhat similar, I must say that the Holocaust was much grander in scale- still as inhumane and unthinkable.

Colonialism in Africa, and pretty much anywhere else, is a troubling topic. In respect to Rwanda 1994, we must remember that the story goes back to AT LEAST the late 19th century. The glory days of Europe and Bismarck. It’s sick that the European powers sat down around a map of Africa and drew lines demarcating “their” territory. In short, the Rwandan people, who were part of the Taganyika region (including present-day Burundi) were bounced from the Germans to the Belgians, with the Belgians exasperating the existing differences between Hutus and Tutsis. Post-colonialism, the Tutsi minority experienced an uprising by the ethnocentric Interahamwe Hutu militia and Hutu-led military. Close to 1 million Tutsis and [sympathetic] Hutus were killed.

I have 2 points here:

1.  It isn’t our fault colonialism happened and

2. This doesn’t wash our hands of ignorance.

1. I’m not too sympathetic to the idea that somehow the world now has to pay reparations for past actions. In this sense, it really isn’t our fault that our ancestors from the 19th century were living in a far more realist-driven international system. This doesn’t necessarily excuse their actions, but it doesn’t mean its “our” fault either. However, before I get people shaking their heads, please listen. This may draw down the severity of what many people past and present may live through, but I can’t think of any other way to put it. These things are learning experiences. We know colonialism was, at many times, barbaric and immoral. We don’t need to assume responsibility for our ancestors actions, but we still must meet, head-on, the challenges that face the world today. You may sit comfortably in the developed world, but in many ways its because we are sitting on the shoulders of many people in poor countries (or even our own). This doesn’t mean we have to give up what we already have, it simply means we have a duty to help those below us.

2. The lack of intervention in the Rwandan genocide is a perfect example of Western ignorance. There was a conversation in Hotel Rwanda between Paul Russesabegina (sp.?), played by Don Cheadle, and U.N. General Oliver (based off of General Dallaire), played by Nick Nolte. The general explains that the European intervention force arrived to evacuate Western citizens, not Rwandans. He says, “we failed you, [the West] thinks your dirt because your Black. Your not even a n*gg$!, your an AFRICAN.” This quote really disturbed me, probably because it was true- whether General Dallaire said it or not. Had Rwanda been a wealthier country, or even a “more Western” one culturally, do you think the same thing would’ve happened? I know Pres. Clinton had some reservations given the failure of the U.S. intervention in Somalia, but why didn’t that stop him in the Balkans?

I’m still pondering this one…

On a lighter note, Hotel Rwanda is the 17th most rented film on Netflix. You should go see it! Or suggest it for classes on colonialism, African Political Economy, etc.

Take care.

I hope I get over this whole Paris thing really soon (that internship at the OECD is starting to look mighty fine). So I was talking to a good old friend of mine from Seattle U. and the World Affairs Council (a great organization, please go see UN Secretary General Ban Ki-Moon on Oct. 26th if you are in Seattle PLEASE!!!). Anyway, long story short I talked, from Centennial, Colorado, to my good friends Stephanie and Steven vacationing in Croatia. Long story short, Stephanie got an awesome internship in London and now she is hanging out in Croatia- the most I got to do is talk via Facebook Chat. Well Stephanie- you may be in Croatia- but I can be in Fake Paris all you want thanks to PhotoBooth on my new Apple Mac.

No, there really is a point to this. Remember in my last post when I said that our world is connecting at an awesome speed? Well this is EXACTLY my point. I’m not sure how many miles are between Denver and Zagreb, but I talked to Stephanie exactly as she was sitting right next to me. Still the good old times despite not seeing her since July. Furthermore, somewhere in Bosnia a professor of mine is “grading” our International Monetary Relations papers while I get to sit here writing about nonsense.

How awesome is that?

Communication has become GLOBAL. Economics have become GLOBAL. And a bunch of other things have gone global as well.

There was a pretty good skit on SNL about President Obama winning the Nobel Peace Prize. Apparently he won it simply because he is “not George W. Bush.” In some non-sensical way, this reminds me that although we can speak to our friends in Croatia or London or whereever else- the real struggle is to globalize politics. Despite our interconnectedness- the U.S. still occupies 2 states in the Muslim world and Russia not-to-long-ago partially occupied Georgia (not the U.S. state for those of my non-geographical friends).

Will Obama simply be another George W. Bush in Iraq and Afghanistan?

Why is that? If economics can drive politics (sorry Jimmy Carter), then why hasn’t globalization democratized global politics? Or has it? I mean, the G-8 blew up into the G-20 and we have a somewhat functional arrangement of regimes, institutions and havenot, but what’s missing?

Maybe Stephanie will find that out in Croatia.