International, International, International

The most fundamental aspect of the current crisis is its international nature. Essentially, huge seas of capital are sloshing around the world and creating great instability in the process. Trust in financial markets is hurt by the general instability and the particular abuses.

Carefully designed international regulations could increase transparency and accountability without squelching capital movement dramatically. The problem is that, when one country imposes such controls, capital can move to another country with great speed. International coordination is clearly desirable. Unfortunately, there is not enough trust for that either.

Robert Samuelson identifies the three layers of the crisis (consumer, finance, and international trade) that must be solved simultaneously. The current US government responses focus on the first two problems. On the third, there is little intelligent government response. In fact, we are likely to see increased protectionism, such as through the "Buy America" steel provision in the recent stimulus package.

The Obama interest in infrastructure development is a good first step towards addressing the need to be internationally competitive but we will not have addressed the challenges, and opportunities, of our economic moment until we look more seriously at international financial and economic structures.

Clear and Principled

Obama to Al-Arabiya:

And my job is to communicate to the American people that the Muslim world is filled with extraordinary people who simply want to live their lives and see their children live better lives. My job to the Muslim world is to communicate that the Americans are not your enemy. We sometimes make mistakes. We have not been perfect. But if you look at the track record, as you say, America was not born as a colonial power, and that the same respect and partnership that America had with the Muslim world as recently as 20 or 30 years ago, there's no reason why we can't restore that. And that I think is going to be an important task.

I have to say that I am excited and hopeful about Obama's pending visit to, and speech in, a Muslim capital.

Dear Dr. Krugman

I may not be a Nobel Laureate but I think that I can explain Obama's speech to Paul Krugman.

Krugman writes:

Thus, in his speech Mr. Obama attributed the economic crisis in part to “our collective failure to make hard choices and prepare the nation for a new age” — but I have no idea what he meant. This is, first and foremost, a crisis brought on by a runaway financial industry. And if we failed to rein in that industry, it wasn’t because Americans “collectively” refused to make hard choices; the American public had no idea what was going on, and the people who did know what was going on mostly thought deregulation was a great idea.

Obama's perspective entails:
1) holding the purchasers of subprime mortgages to account for their decision-making
2) at the same time, implying that such debacles of overleveraging are bound to happen in an unequal society, i.e. the poor are likely to overspend to try to keep up, at least, with the middle class
3) supporting the poor in their ambitions by developing new opportunities for them make economic contributions
4) recognizing that such 'opportunity development' is especially crucial when economic structures change (viz. globalization, the decline of American industry, the growth of the information economy)

It's a complex view that makes room for both individual responsibility and acknowledgment of social tendencies. Or, like others, I have simply divined in Obama's spacious words the perspective that I, myself, hold.

Prediction: Cuban Regime Will Fall Within Two Years

The Cuban regime has relied upon the sense of defiance of American imperialism to support its claims to political leadership. The American system can no longer look so convincingly monolithic to average Cubans. Won't the appeal of grasping the power that American voters have, to buck the establishment (whether it be the Clintons or the former WASP elite, be quite appealing to the Cuban people?

Are Castro's admittedly thoughtful words a strong enough brew to hold the Cuban system together, especially in the event of his apparently pending passing?

Castro:

Nobody can doubt the sincerity of Obama's words when he says he will make his country into a model of freedom, respect for human rights in the world and for the independence of other nations. . .

[But,] despite all the tests he has been put through, Obama has not faced the most important of all.

What will he do when the immense power he has grasped soon proves to be totally useless in overcoming the intractable, opposing contradictions of the (capitalist) system?

The final question may be interesting but I doubt that it will be sufficient to stir the Cuban people to defiance of the United States.

Hegel, Democrats, Republicans, Obama(, and the Financial Crisis)

Hegel wrote of a the distinction between the business/manufacturing class (somewhat arcanely referred to as the 'reflective class') and the 'universal' class, constituted of civil servants and others whose professional work demands a broad social perspective.

It is not too difficult to argue, I think, that the Democrats are led by the 'universal class' and the Republicans have tended to be led by Hegel's 'reflective class,' which I will refer to as the 'creative class.'

The crisis in Republican leadership is a result of the fact that the new leading creators tend to have an increasingly universal perspective. This is due to the increasing importance of human capital, which puts the onus upon industry leaders to be more aware of the social investments necessary for their continued prosperity. The future course of the Republican party is unclear so long as Democrats are able to seize the ground where 'universal' meets 'creative.' Obama does this intuitively.

Also: The government purchase of large parts of the economy is a recognition of the increasing importance of addressing universal concerns (i.e. social stability) in the face of pulsating flows of international capital. This is a further manifestation of the same phenomenon as that described above.

How We Will Really Get to Know Obama

John F. Harris and Jim VandeHei present a series of excellent questions about Obama:

The stirring rhetoric witnessed on the campaign trail and in Tuesday’s inaugural address is laced with spacious language — flexible enough to support conflicting conclusions about what he really believes.
Only decisions, not words, can clarify what Obama stands for. Those are coming soon enough.

Until then, here are the questions still left hanging as the Obama administration begins:

DOES HE REALLY THINK AFGHANISTAN IS WINNABLE? . . .

DO DEFICITS MATTER? . . .

HOW FAST IS TOO FAST IN IRAQ? . . .

[and more about surveillance, unions, Darfur, and the Left . . .]

Vacation Notice

A Musing? is on vacation. See you soon!

The Information Age Revolution is a Bigger Deal than You Thought

The internet is revolutionizing economic production and human relations. I'm not sure that there has ever been one machine that has so clearly revolutionized both of these phenomena simultaneously.

That concurrence of phenomena is revolutionary in extraordinary ways. Information technology is therefore transforming not only how we view work and how we view relationships but also how we view the relationship between the two.

The relationship between work and human relationships is one of the central questions of history. Namely, how is productive activity helped or hindered by the impulse to connect with other human beings?

Information technology is beginning to make us optimistic about the economic potential inherent in cooperative, creative relationship. That optimism is politically profound in that it calls into question the paradigm of human society that focuses on the role of the ruler vis-á-vis the ruled.

It is no coincidence that this reevaluation is happening at a time at which we can finally imagine that it is possible to care for the basic needs of all of humanity. Rather, that fact, the fact of plenty, affords us the comfort and confidence to re-imagine social relationships. At the same time, of course, information technology is partly responsible for the explosion of wealth that makes such a reality imaginable.

This revolution in social relationships has the potential to call forth an age of prosperity and peace that has been beyond our hopes. This is partly because information technology so clearly demands the mindset of cooperative thinking and so clearly highlights the potential inherent in the development of human capital.

Marx postulated that an age of cooperative production would be ushered in by the rise of the proletariat, the working classes. He did not, however, spend a great deal of time outlining the process by which the masses could prepare themselves to lead and organize society. His focus was on cooperation but not on the creative potential that has to be nourished to make cooperation worthwhile and productive. It is no surprise that Russia was never able to organize a society based on worker's empowerment: The workers were not sophisticated enough to run society. Inevitably, elites took over. Such elite control was inevitably, too, subject to corruption.

The rise of the paradigm of cooperative, creative production is at least as important as which class rules society. Information technology has highlighted, even to hardened capitalists and self-promoting entrepreneurs, the importance of developing human capital. This fact should not be dismissed with cynicism. Rather, it points to the forces of this age and should be seized upon accordingly.

Sovereign Wealth Funds

Sovereign Wealth Funds represent an attempt by states to benefit from markets but also have the potential to inject political considerations into macroeconomics. Is this inherently a bad thing? Free trade orthodoxy might say so. But, where is the bright line that distinguishes the familiar economic collective of individuals (i.e. the corporation) from the economic collective we call the state? In other words, will the time come at which free citizens endorse increased activity of such funds in the name of economic well-being? Will future citizens of the world look back and have difficulty understanding the distinction between capitalism and socialism?

What Do Financial Markets Tell Us about Ourselves?

Financial markets are like the mirror of mankind, revealing every hour of every working day the way we value ourselves and the resources of the world around us.

It is not the fault of the mirror if it reflects our blemishes as clearly as our beauty.

(Niall Ferguson, The Ascent of Money)

What do you think the financial crisis is telling us?

Foreign Policy Prediction

Obama's cool veneer on foreign policy issues still hasn't been matched by a convincing agenda: "Be gentler and wiser." does not a strategy make, even when paired with a great deal of detailed knowledge.

I have enough confidence in Obama to believe that he is capable of coming around to a progressive, but realistic strategy. The question is: How much pain will intervene? Furthermore, foreign policy difficulties could be the specter that haunts the Obama administration: It all depends on Obama's learning curve and the pace of world events.

My prediction is that Obama will eventually come around to a global stabilization policy that rests on stronger concerted action between democracies. He could certainly accomplish this, if he wished to, while maintaining the least combative stance possible towards authoritarian regimes.

My instincts tell me that Obama's conciliatory nature, and Democratic biases, will lead him to favor gentle diplomacy with rogue regimes. I suspect that this will bear some fruit but that it will also encourage some destabilization: some nations will be encouraged by Obama's caution. The logic of democratic convergence will eventually make itself clear and Obama will be capable of discerning as much. Will it be too late for him? I hope and suspect not but cannot rule out the possibility.

Community Organizing in Government

Obama's background as a community organizer is showing itself in his governing style. Today, for instance, (1) I received an e-mail from the Obama camp with a video responding to the prolific community discussion on health care found on the change.gov website. The e-mail talked about the importance of transparency and engagement and still refers to Obama, at times, as "Barack." Very heimish (warm, friendly). (2) Additionally, Obama took the opportunity of his meeting today with the National Governor's Association to ask for their feedback about how to spend stimulus money:

The meeting with the governors was "unprecedented," said Gov. Edward Rendell (D) of Pennsylvania, in that it was the first time a transition team for an incoming administration reached out to state governors to ask their help in crafting a national agenda. Forty-three of 50 states are facing serious deficits.

It looks like we have our first "information age" president.

The Nation-State and Global Integration

A few questions about strains on the power and efficacy of the nation-state:

(a) Does the global financial crisis call for international management of, say, currency exchange rates?

(b) Do globalization and the near-global triumph of capitalism undermine the greatest incentive (namely, international competition, respectively, among capitalist powers and between capitalist and non-capitalist powers) for leading capitalists to attend to the well-being of those who are not succeeding?

(c) Do global warming and other environmental strains demand an internationally-coordinated response that cannot entirely be managed by one nation-state?

My answer to all of these questions is 'yes' and points to the growing importance of international cooperation to solve many of our most pressing problems. I am not arguing that states are not strong. Neither am I am arguing necessarily for inter-governmental cooperation to solve these problems (although, such will sometimes be vital). Rather, I am arguing that a global perspective is becoming of greater importance. In due time, I believe that such a perspective will become the dominant paradigm, superseding the nation-state paradigm.

It is no coincidence that this pattern of integration presents itself as we find ourselves in a world in which everyone can be lifted out of poverty and in which universal education can be imagined. These goals can be achieved because (a) the global economy is sufficiently integrated to distribute basic goods, services, and skills to those in need of them, (b) globalization and the near-triumph of capitalism have led to a global economy in which human capital is of ever-greater economic value, and (c) environmental challenges force us to focus on how we can develop wealth without solely relying on materials. The best answers to this question are the development of technology and of human capital.

Emerging Independent Judiciary in Iraq

Briefly:

Here’s a story you don’t see very often. Iraq’s highest court told the Iraqi Parliament last Monday that it had no right to strip one of its members of immunity so he could be prosecuted for an alleged crime: visiting Israel for a seminar on counterterrorism. The Iraqi justices said the Sunni lawmaker, Mithal al-Alusi, had committed no crime and told the Parliament to back off.

Read more.

Impressed by Obama

Obama's strategy thus far, on three major issues, can be characterized as "focus, continue, and engage." The broad outlines are perfectly elegant.

Specifically:

+focus on the economy: little explanation is needed here. Obama has managed to include many major advisors in his administration: Geithner at Treasury, Summers at the National Economic Council, Goolsbee and Volcker on a special recovery taskforce.

+continue with the late second-term Bush approach to foreign policy: The caution here is reassuring to me and seems that it will be generally endured by those further to the left on such issues.

+engage on health care: Obama has chosen to extend internet democracy first to the discussion about health care. This is wise because (a) he can thus engage activists, and perhaps even temper their expectations as they are forced to wrestle with real world issues, even while he postpones immmediate action and (b) he may actually be able to glean a few good ideas as discussants will be able to sift the 'wheat from the chaff' through a participant-run ratings system.

Very impressed.

An Ironic Aspect of the Economic Crisis

One of the perceived causes of the crisis is that Americans do not save enough. Interestingly, many stimulus packages are designed to work only if Americans spend the money that they save.

American Competitiveness

Brooks on Michael Porter, of Harvard Business School, and his suggested response to the economic crisis:

Porter wrote that the U.S. economy has historically benefited from several great assets: an unparalleled environment for entrepreneurialism, a tremendous infrastructure for scientific research, the world’s best universities, a strong commitment to competition and free markets, decentralized regional economies, and efficient capital markets.

But, Porter continued, these advantages are starting to erode. The U.S. has an inadequate rate of reinvestment in science and technology. America’s confidence in free markets is waning. Lack of regulatory oversight has undermined capital markets. Universities have not sufficiently increased graduation rates. American workers do not have a credible safety net. Regulations and litigation have inflated the cost of business. Most important, there is no long-term economic strategy to organize responses to these problems.

Condolences

My condolences to the people of India, a vibrant and justifiably confident democracy. Of course, it is sad again to see fellow Jews targeted in a disconcertingly familiar episode.

Obama and Russia

I agree.

Obama enters office signaling that he will continue the policies of President Bush's late second term in Iraq and Afghanistan, and key architects of those policies, starting with Defense Secretary Robert Gates, will likely keep their jobs. That would leave Russia as the unexpected laboratory for Obama to shape his own foreign policy.

Read more.

GM, New Deal, Etc.

My apologies for my short-term hiatus.

This clip from "This Week with George Stephanpolous" presents interesting discussion about the role of the government vis-a-vis GM and infrastructure projects. The most intriguing idea, though perhaps not presented in the most substantive way possible during this particular interview, is David Brooks discussion of the importance of supporting social networks in the era of an economy dependent on human capital.