Monday, September 24, 2007

Don't Toss the Business Section

I love my friends Richard and Hilal who are putting us up in Santa Barbara since we rented our house. But I had to dig the Sunday NYT business section out of the bin, where it had gone straight to recycling. Since the middle-class, my hosts excepted, is super dumb about money - rich folks spending ours - we should really read business news more carefully.

Which I did right after I cancelled my sub to the WSJ, citing Rupert Murdoch's worldwide track record of corrupting the news side to suit his right-wing agenda. In the NYT I found Papa Ben Stein, my 11th favorite Republican, saying some true things about financial policy. In the real world, effect is tied to cause in ways that are inexact and variable. So simple statements of economicdogma are almost always wrong. Like cut taxes, grow the economy. Raise interest rates, fight inflation. Stein writes, "We do know that if the Fed starts printing money, Weimar style, and dropping it from helicopters, Bernanke style, we will probably have big inflation. Or maybe not." This last is far more accurate than most of the crap out there. Stein's main point: "The plain truth, as I paraphrase my sainted father for the millionth time, is that we simply do not know how the various parts of the monetary machine work on the economy."

More fun than Stein's main point is his summary of the Wall Street folk as they responded to the August financial crisis.

Here are some things we do know:

First, Wall Street desperately wanted a rate cut. People on Wall Street had gone into a sort of lenders’ panic as they saw the chickens of excess risk-taking come home to roost. The Wall Streeters loved the excess fees for excess risk. They just didn’t like the inevitable losses of excess risk.

As I have said before, the actual magnitude of mortgage losses was small, but Wall Street is run by young people who panic easily at the first sign of frustration, like overtired infants. They wanted to be reassured that Mommy cared about them and would give them her breast, in this case monetary ease.

When they got that liquidity, so to speak, they calmed down. It is a shame that we have to appease these big rich babies to keep the economy going, but they are very strategically placed big babies and they need care.
The actual article is good on where your money goes, and whom money strokes, and whose well-being it is spent on.

Click on the nursing-home spinning-wheel. There are the encompassing layers of ownership that absorb the money that was meant for care - before it gets to the care. See how Jack makes money. Find Jill's mommy, lost in the maze.

Thursday, September 20, 2007

If You Have a Big Column, Why Do You Blog?

That's a question for Paul Krugman, and a lot of other folks too. When do you actually get to think? Or read? Do you need more attention than you already have?

Maybe the idea is if that if you produce more words, you will have more influence over people with power. It is kind of amazing to see how little

More Krugman is generally a good thing, though his title is horrible - The Conscience of a Liberal. The allusion is to "The Conscience of a Conservative," a book by 1964 Republican presidential candidate and Arizona arch-conservative Barry Goldwater. Both "liberal" and "conservative" should be banned in America for 10 years, until people can have a few political ideas that don't involve either of them.

Good things about Krugman:
  • he hates economic oligarchy. When he's not stressing golden age bipartisanship, he's a class war kind of guy. Look at the chart, which shows the percentage of total income that goes to the top 10% in a given year. The post war period was when the top 10% only got about a third of national income.

  • he ties political democracy to economic equality. Can't have one without the other. He's right.
  • he thinks policies create both Gilded Ages (tax cuts, service cuts) and democratic ones. Yes again. He could be a lot clearer about how people don't first earn money and then the government either does or doesn't redistribute it. Governments - the rules of the economic game - largely determines who earns how much. No I'm not denying individual effort. I'm denying that life occurs in a vacuum, especially salary-producing life.
  • he implies we could have a more egalitarian and democratic US. It's a lovely thought.
If he were very clear about the limits of that period (racism galore, crazy, dangerous homophobia, Cold War militarism, gross gender inequality) - he'd be even better.

Perry Anderson addresses the ties between politics and economics in a great, long piece on Europe in the London Review of Books. He elaborates on absence of any kind of popular input into the operation of the European Commission, which elaborates endless rules that governments must follow. He then writes,
There was from the beginning a third vision of what European integration should mean, distinct from either federalist or inter-governmentalist conceptions of the Community. Its far-sighted theorist was Hayek, who even before the Second World War had envisaged a constitutional structure raised sufficiently high above the nations composing it to exclude the danger of any popular sovereignty below impinging on it. In the nation-state, electorates were perpetually subject to dirigiste and redistributive temptations, encroaching on the rights of property in the name of democracy. But once heterogeneous populations were assembled in an inter-state federation, as he called it, they would not be able to re-create the united will that was prone to such ruinous interventions. Under an impartial authority, beyond the reach of political ignorance or envy, the spontaneous order of a market economy could finally unfold without interference.
Unregulated markets and non-democracy not only work together, but are in Hayek and elsewhere advocated by the same people. "Freedom to Choose" conservatism means individual consumer choice, not collective sovereignty. The latter is something that the Right almost invariably fights.

I meant to say something nice about President Rupture for a change, and it's not too late. Sarkozy is trying to browbeat the European Central Bank into having some concern about the effect of its policies on France and its people. He has some bad reasons for this, but the basic idea is right - banks shouldn't govern people's economic lives like unapproachable dictators.

To see why this matters, read Anderson, and think about the ongoing thawing of the world financial system, which remains largely an invisible empire with real effect.

Wednesday, September 19, 2007

The Simple Noir Rule of Finance

The Financial Times has a two-part gee-whiz what-happened thumb-sucker today about the iron laws of finance - as they are this week. They're upset about the loss of liquidity: it couldn't happen, then it did happen, how could it have happened?

I've blogged about this silly stuff before - no systemic failure is possible, until it happens, markets are efficient, until they're not, we know best about everything, until we don't know anything!

A week from now, we won't know anything again. The paradigms won't expand, because then the simple political battering-rams would look like the medieval engines they actually are: markets are always right, central banks manage perfectly, equity funds create liquidity and value at the same time - except when they don't.

What if markets only worked some of the time? What if private equity geniuses where right only now and then? Well then we'd need other stuff too - governments, democratic inputs, democratic cooperation, institution building, public services, innovation as something ordinary people and not just bankers and CEOs do. Forget about it - no way we're letting all that come back.

The state of honest financier confusion is temporary, since all will be explained soon enough, contradictions fully intact, in spite of the best efforts of various angry columnists and shocking Greenspan-doubters.

But before the Men in Black memory stick flashes, let's remember the simple Noir Rule of Finance, spoken by banks to Feds everywhere. There is only one rule: do what we want when we want it. Tightening yesterday, cash flooding today, rate cuts tomorrow. Whatever. Just shut up and wait like the limo drivers outside the Warburg UBS building on 6th Ave 2:15 am until we send the new order.

Monday, September 17, 2007

Attacks on the Unreality-Based

Today's Paul Krugman column is quite pissed about Alan Greenspan avoiding responsibility for his mistakes with various tax cuts and with bubbles caused by cheap credit. I would add

A larger context for thinking about leaders in general came a week ago from another of my favorite public economists, Dean Baker. His attack on Greenspan includes a description of a reality-based, evidence-oriented approach to not only assessing the Real in economic life but in holding fund managers responsible for responding to evidence. Baker's idea is that the Chairman of the Federal Reserve would have explained the historical evidence showing that stock and, later, housing were in a state of great overvaluation. Managers who invested at the NASDAQ 5000 peak and lost tons of other peoples' money could be sued for negligence. They would be asked whether or not they responded rationally to the presentation of reasoned evidence by the Fed Chair. If not, they would lose the suit.

Accountability determined by recourse to fact-based reality! Old fashioned, I know, and a little naive epistemologically. But nonetheless, revolutionary!

Krugman and Baker are "professional-managerial class" (or professional middle-class) (PMC) folks in full revolt against the spinning, advertising, PRing, and lying, partly because they hate the results and partly because it negates the value of their professional expertise.

I've noted Pakistani jurists standing up for a middle class power of truth in expertise. I like this because it is opposed to tyranny and because it is one element - only one, but a crucial one - that would reduce exploitation and poverty.

Something similar is going on among French jurists as President Rupture tries to decriminalize certain business executive activity. One said he wouldn't want to be a judge with le Jogger's "zero tolerance" for petty criminals from the poor banlieu and zero penalization for wealthy bosses. The other noted that le J's core political strategy is to find a moment where social cohesion seems fragile, and then identify a "monster" that all can unite in driving out. This political theater blocks the need the fix fact-based procedures - if that is necessary - that make justice work. We have had forty years of this politics of the spectacle that trashes expertise whenever it gets in the way of what the folks in charge want to do. I can't believe it will take off in France, but le J's giving it a damn good shot.

By the way, it started with Wallace, Nixon, and Agnew in the 1968 campaign, not with Reagan in 1980. After the Goldwater debacle in 1964, Republican strategists realized hard-right arguments would never win unless the framework of argument itself was discredited. Then folks could vote their needs and prejudices with a clean conscience. This discrediting of argument is the main effect of current-events TV.

Baker also has a nice entry on the dumb American hostility to the notions of social development that are the only thing that will keep the American middle class from killing itself, and making the poor even worse off than before. Wake up!

Sunday, September 16, 2007

The Leader of the French World

I grew up in Los Angeles, which has great mountains and beaches but a pretty damn crappy city-scape. To see great trees and amazing buildings and have the feeling of luxurious calm they can give, my friend's dads would occasionally take us to some mogul party in Bel-Air. There you'd see Luxembourg- Gardens style glories of eternal summer, the peaceful abundance of a Fragonard painting , maintained by invisible faires hailing from Oaxaca and Guanajuato.

Manmade L.A. beauty was mostly private. There were a couple of Frank Lloyd Wright houses open to the public, about a half-hour of driving from each other and the La Brea Tar Pits, and the County Art Museum as we then called it. Mostly for aesthetic pleasure we went to Griffith Park Observatory or to the beach. UCLA's Powell library was a nice Moorish-Spanish fantasy, but they didn't like kids.

More generally, the parks were pathetic. The streets were one-story shop fronts built with ten-year write-offs in mind. The later upgrades, driven by Hollywood migrations west towards the ocean to beat the smog, meant that shopping strips got taller and the Gaps looked like a 1980s bank, as did fancy restaurants like Chaya Venice. Picture today's Santa Monica Promenade, morphed from the 3rd st concrete strip. I do like the airplane hanger Broadway Deli but stuff like that doesn't add up to a visible city.

Paris is the contrast. The beauty is public. There's the cafe in the courtyard of the Louvre, rue Mouffetard, the square around the Mairie du 14e, Butee aux Cailles, my own ordinary rue Pascal (pictured above), le Jardin des Plantes, all the cutsy little shopping streets in the 6e that American jam because it's human scale Disney "Main Street" of people face to face next to amazing clothes and perfect courtyards only its real. There are hundreds of places that look great and are there for everybody. I almost feel dumb saying it, it's so simple. Beauty for free. Public beauty. And it's really great.

The leader of the French world, aka Le Jogger, aka President Rupture - he likes private beauty. The weekly magazine Marianne has a story this week elaborating Sarko's obvious love of the rich and famous. The article is on the "Fricocrates" now surrounding and controlling a president who can't help but worship them ("fric" = dough as in money). For some reason, Marianne is about the only major national publication that seems upset by Le J's plutocracy dressed up as vigorous renewal. The magazine isn't radical, but it is independent. This reminds me that the major magazine voice on this subject in the States has been Lewis Lapham, the longtime and recently retired editor of Harpers who hated socialism but not quite as much as he hated fat-cat pseudo-democracy. Independence. Hmm, could be important.

The Marianne article is by Laurent Mauduit, who names lots of the huge money surrounding Sarkozy. Most of them don't mean much outside of France (or inside for that matter) - you've seen Bouygues, as in Martin Bouygues, on one of the Tour de France teams if you watch cycling, and he's a huge mogul in communications among other things. Most of Le J's big names are top 20 in the wealth-o-meter - several billions of euros, which is a lot of dollars as the dollar heads towards the value of the yen.

Some tidbits:
  • a Sarkozy insider, Henri Guaino, happily compares Sarkozy's vision to that of the Second Empire, the dictatorship of Napoleon III which Guaino describes as an era of modernization and economic renewal.
  • Le J is, we must repeat, a drooling dog around big money. Saluting his wealthy friend Stephane Richard in a state building, the Ministry of the Interior Place Beauvau, he said, 'you are rich, you have a beautiful house. . .You have made a fortune. Perhaps at some later point this too will happen to me."
  • One critic correctly says, these guys Sarkozy loves, they aren't really the entrepreneurs but the very rich. He actually prefers the inheritors of wealth to the empire-builders.
This last is the crucial point. The wealthy explain their money as the natural reward of value that they have personally created. But le J's wealthy didn't actually create much value.

One could generalize the point to the financial sector in general, which once could say is grossly overpaid for sometimes providing liquidity but mostly taking a huge cut of raising the price of everything. The Second Empire that Guaino praises was also a period of unhinged speculation in real estate and finance that arguably drained money from France's industrial development, which never came close to that of England or Germany. One of the victims of the power of investors over corporations today has been research and development, which companies have cut to the bone to help keep their stock price high.

We're supposed to be innovation economies. But does the Right's leading lights like Le J really support innovation? That's different from inflating asset values and collecting gigantic broker fees.

I can't prove it (yet), but innovation has everything to do with how you feel in a beautiful place that is entirely public.

Saturday, September 15, 2007

Greenspan Hatin' On Bush

Former Federal Reserve Chairman Alan Greenspan is coming out with one of those memoirs big enough to prop open the gates of Fort Knox. In it, according to a Washington Post report today, he loves Clinton and hates Bush. The reason, in Bob Woodward's summary, is that Clinton was a deficit slayer and Bush a deficit maker. Woodward's overview uses the standard categories:
Greenspan says, " 'Deficits don't matter,' to my chagrin became part of the Republicans' rhetoric."

He argues that "deficits must matter" and that uncontrolled government spending and borrowing can produce high inflation "and economic devastation."
While Greenspan regards the Bush Administration as shallow, thoughtless, irresponsible, "dysfunctional," and destructive, he heaps praise on Clinton.

[Greenspan} calls Clinton a "risk taker" who had shown a "preference for dealing in facts," and presents Clinton and himself almost as soul mates. "Here was a fellow information hound. . . . We both read books and were curious and thoughtful about the world. . . . I never ceased to be surprised by his fascination with economic detail: the effect of Canadian lumber on housing prices and inflation. . . . He had an eye for the big picture too."

During Clinton's first weeks as president, Greenspan went to the Oval Office and explained the danger of not confronting the federal deficit. Unless the deficits were cut, there could be "a financial crisis," Greenspan told the president. "The hard truth was that Reagan had borrowed from Clinton, and Clinton was having to pay it back. I was impressed that he did not seem to be trying to fudge reality to the extent politicians ordinarily do. He was forcing himself to live in the real world."
Overall, Greenspan's theme is the greatness of "free-market capitalism" and his own insights into this as a "libertarian Republican."

Points worth noting:
  • Bush's enemies hate him, but his friends hate him too. He may have alienated a larger portion of his party's elite supporters than any American leader in modern history.
  • The Bush Administration's intellectual emptiness and dishonesty drives everyone nuts. The sheer incoherence has made former moderates, like free-trader Paul Krugman, into stone enemies, but it has done the same to thinking conservatives.
  • Greenspan is honest enough to note that Reagan created a deficit mess and only Clinton cleaned it up.
  • Is he honest enough to admit that Republican prosperity depends on deficits - which pump up consumption? I doubt it, since that would conflict with his axiom that prosperity flows directly from the absence of government. (This hard-right Ayn Randian / Barry Goldwater principle became respectable during the Reagan era.)
  • the anti-deficit religion obscures two kinds of deficits. One is the old Keynesian "investment" deficit, in which the deficit is a byproduct of investing in public services and subsidizing new or larger businesses; the other is the operating deficit (ironically very Republican), in which tax cuts lead to failure to cover basic government operations, never mind building new or improved ones. Nobody likes the latter kind except in emergencies; the former, for the sake of economic and social development, are good, and can be paid back with the added value they create. By confusing the two, Republicans have destroyed support for social investment, making it look like a terrible burden on working people.
  • Greenspan's praise should remind us that Bill Clinton was a conservative president. Clinton used the anti-deficit religion not simply to reduce the deficit (good as such) but to abandon "investment" deficits, and the government's social development role.
  • there's a contradiction at the heart of Greenspan's views, embodied by the fact that he spent two decades running a monopolistic, quasi-authoritarian government institution that continuously managed and support his free markets. Will conservatives ever admit markets depend on government?
  • Simple Schumpter - the idea of "creative destruction" - remains largely uncriticized in Washington and on Wall Street. We still can't even ask the question whether it was bad to get rid of most of the great manufacturing industries of the twentieth century - we always already know the answer.
Greenspan's memoir sounds like a compendium of the Old School that brought us the 1980s and 1990s. But how much will last-century libertarianism really help us with the future?

P.S. 9/17: See Paul Krugman's Greenspan bashing column today: Krugman recalls Greenspan's support of the Bush tax cuts he now calls irresponsible, and reads him as yet another Bushite abandoning the loser administration he had a great role in shaping.

Thursday, September 13, 2007

Bimbo Geeks

I've been reading this story about Google founders Page and Brin getting special permission to use Moffett Field less than 2 miles from their offices because instead of having a Gulfstream V like all the other billionaire moguls, they have a wide-body Boeing 767. It reminded me that the last Boeing mogul was Hugh Hefner, who loved publishing pictures of himself in his Playboy Jet.

I could crankily note the exclusive deals governments love to shower on rich folks these days (as noted by Google's neighbors in the article). Or how the science angle makes plutocrats look hip, deserving, and loveably pranksterish - when I look at Page and Brin, I think Austin Powers, not Rupert Murdoch. Or how Google is a good emblem of total privatization in our day and age.

But then I wondered, will Google Air bring back Hef's airplane outfits? Or at least PSAs?

Monday, September 10, 2007

Dumbness On the March

The "Cashmere Mafia"? So desperate I don't know what to say. Meanwhile, back in "reality," Paul Krugman's column today makes some important summary points:
  • "four years of economic growth [Bush-style] have produced essentially no gains for ordinary American workers."
  • the growth went to a tiny economic elite: "Corporate profits rose 72 percent from the second quarter of 2003 to the second quarter of 2007. The real income of the richest 0.1 percent of Americans surged by 51 percent between 2003 and 2005."
  • "trickle-down economics" has been refuted - i.e. the dumb idea that when rich folks are even richer, they help the overall economy.
  • we need a "new Neal Deal."
We also need a philosophical basis for a New Deal, and that will mean an unwinding of a lot of recent American culture - love of Darwinist selection, belief in hierarchy, endless consumption of spectacles of other people's wealth, etc. We won't have another New Deal unless a majority starts believing that equality and solidarity are ethical and effective (like I was saying yesterday about Michael Moore and the French). Right now we think that billionaire fund managers "earned" their money naturally and fairly, and act like we want to worship them as gods.

Speaking of worship, Maureen Dowd's piece yesterday on Fred Thompson, gets it right about the American strongman impulse. "Dying for a daddy, the Republicans turn their hungry eyes to Fred." But she then succumbs to her own daddy fantasy of blasting Osama bin Laden "forward into the Stone Age," in a weird update of Richard Nixon. She also responds to bin Laden's latest tape by stuffing her fingers in her ears while making "blug blug blug" noises with her mouth. Dowd's column helps explain why so many folks distrust "liberals," by which they often mean elite media fence sitters. Dowd doesn't want Fred Thompson as daddy, but she wants somebody to kill Osama. Is that NOT wanting a daddy? Who's her daddy?

Is the public any less confused? A NYT poll published this morning shows that more Americans think the surge is working now than they did two months ago and that their preferred candidate for president would be "flexible" about withdrawing troops. To complete the discrediting of their judgment, the majority, long after the military supports an unjustified invasion, then botches the occupation from day 1 (remember the destruction of the archeological museum and most ministries other than that for oil?), fails to get proper equipment to the troops, tortures prisoners and covers it up, mistreats vets in military hospitals and covers it up, violates the Geneva conventions in various ways starting with its operation of Guantanamo, fails at its core job of keeping the peace in Iraq, and sends one politicized general after another to the Hill to say how well it's all going - after all this over 2/3 of the public trusts military commanders "to bring the war in Iraq to a successful end."

It's true that this was a forced choice question, and the alternatives were the White House and Congress. Doh! But how about picking "none of the above," to show we're not completely dumb?

Read the article for the contrary view that the American majority is not simply hoping that force will eventually win, and clinging to their deep faith in force, but showing "nuanced concern" about a situation they realize is complex.

I wish. It's actually simpler to explain these poll results by assuming the majority wants the control without the killing, and thinks maybe a partial withdrawal will reduce that.

The Times should ask, "whom would you say you trust the most with successfully resolving the war in Iraq?" - US military commanders, the Iraqi people, or a consortium of political and religious leaders from the Islamic world? Would the US military commanders beat local folks and local leaders by the same score they beat the ridiculous Bush? Probably, and then we'd have to wonder if we are exporting democracy (!) or handing out a strongman for everybody.

Meanwhile, a piece on network TV's fall lineup (thanks Lisa!) asks "where is the middle class?" And correctly answers, "Demeaning itself for money on reality and game shows, of course!"

Sunday, September 09, 2007

Michael Moore In Paris

Here's a shot I've taken a few times before, usually cursing tourists who mess up my pictures by wearing red. Why doesn't France's supposedly oppressive centralized state outlaw the wearing of red within 500 meters of 2- or 3-star Michelin tourist sites? Look at that jerk in the red jacket on the right - disgusting. And the red-cap guy right in the foreground?*#@!! But the red-cap guy turns out to be such a huge fan of France that he is forgiven.

We saw Michael Moore's film Sicko last night at our local theater in Paris. It's quite a great documentary film, maybe his best since Roger and Me.

It isn't a great film because he gives a balanced and well-rounded portrait of each of his locales. He doesn't - there are other things to say about Cuba and France than you'll see here, and the French audience guffawed at some of the idealizations of France coming from the Americans on camera who lived there. But for the rounded portrait people can do some extra reading.

It also isn't a great film because Moore has a complex deep analysis of how all the pieces of the health care system fit together. He doesn't have that either.

So why is it a great film? Because it goes right to the heart of the core problem and vividly shows its human effects. The core problem is the degradation and denial of health treatment for the sake of saving money. The core effect is that people's lives are diminished and destroyed, or simply ended prematurely.

SPOILER: Moore's trademark stunts here are particularly good because they take "reality" as seen on TV and turn it upside down. So we see his Canadian cousins buying insurance to travel to the United States. This nicely inverts the principle of American superiority that has Americans buying insurance to go to Mexico. We see free universal health care on "American soil" - but not for regular citizens, but for the detainees who are getting it partly so they can be force-fed on their hunger strikes. We see a cashier in a British hospital, but he gives out money to people for transportation home rather than raking money in.

The master stroke involves 9/11 rescue workers who can't get health care for conditions induced by their emergency work in the wake of the destruction of the Twin Towers. Moore rounds a bunch of them up, and they get on boats in Miami harbor and set off on what looks like Gilligan's three hour cruise. They go to Guantanamo and then to Havana. This nicely inverts the principle of American superiority illustrated by the Cuban boat people yearning to be free in the US. The 9/11 rescue workers are reverse boat people heading for the Cuban doctors and medicines no one will give them in the US. END OF SPOILER

Moore's "analysis" is in every frame: if you don't keep market logic out of human essentials, you damage and destory people. Period. That's the analysis. And it is correct.

The other countries - Great Britain, France, Cuba, and of course Canada - are there to show how much better people do when the criterion of care is patient need rather than business revenue. The health outcomes of that philosophy are so much better that that it reminds you of how detached from external reality American business "pragmatism" has become.

The film does include two sequences that suggest the deliberate nature of the less-is-more philosophy (less care for you, more money for me). The first is a conversation between President Richard Nixon and his chief aide John Erlichman on the eve of his announcement of a new health care system in 1971. (See Kaiser Permanente's rebuttal with some supporting documents, Nixon's 1971 "Special Message to the Congress Proposing a National Health Strategy" that followed the taped meeting, and his 1972 "Special Message to Congress on Health Care". See also Sicko's documentation, and the 4th International's dissatisfied review.) The private conversation describes the principle of private enterprise care as less care for more profits. Nixon approves.

The second sequence is Congressional testimony by Dr. Linda Peeno, a former medical reviewer for a large HMO. She said that her decisions to deny care had certainly killed some people, that this had been excellent for her management career, that physicians who denied the most care were directly rewarded with cash bonuses.

It's hard to miss the logic that less care means more profits (and more suffering). The logic is that of the Death Trip I've been blogging about, in which we embrace the principle that is slowly killing us.

Moore asks the great humanist question in the US today: "who are we?" What kind of people are we that we leave people on the sidewalks like trash? Are we monsters? Brainwashed "profits before people" neoliberals walking in lockstep to the obsolete dogmas of the Rupert Murdochs? A people in steady decline and simply afraid - afraid of our own government, as one of the Americans in Paris suggests?

For me the answer appeared in two sequences in France. The first came from a moment when Moore asks a comfortable French couple, so what are your biggest expenses after your mortgage and car payment, and the wife says, "the fish." They then spend some time together, this small French woman and the giant Michigander, peering into her well-stocked fridge. Moore is still wondering what they do with the money they don't spend on $200 office visits and $295 bottles of pills (my own tab for an advance supply of my cholesterol medicine since I was leaving the country and Blue Cross will pay only one month at a time). She says vacations, those are very important. We travel. And she shows Moore tiny bottles of sand she's collected on several continents.

The other sequence involves a French guy in his mid-30s who had moved to the US at 18 but who came back to France when he got cancer. It was all free, he said, and explains how the state-employer partnership assured him 100% of his salary for 3 months of rest and recuperation during his treatments, which he takes in the sun in the south of France. This guy shows Moore pictures of his tanned and smiling self hanging out with friends while the taxpayer foots the bill. Moore expresses surprise, and the guy, with no trace of American defensiveness, says something like, "in three months I went from being a 95 year old man back to this. I had to take care of myself. Now I'm recovered and can carry on, with my life and with my work."

My theory is that French people can expect and demand that everyone pay for everyone's healing as a society because they believe that life is about satisfaction, happiness, pleasure, and well-being. Their food culture is one expression of that, and so is government-funded child care. Another expression is affordable, high-quality health care for all. Life is short, you need to enjoy it, you need to be healthy, so what ELSE, exactly, is it worth spending our money on?

It's this jouissance that the US has lost - the sense of the RIGHT to happiness. We don't expect it for ourselves, so we don't care that the richest companies in the world can take it away from others.

Just a theory, but I do know that the French have much hipper and more beautiful eyeglasses than we do. And their sense of beauty fits together with how much better they treat each other than we do.

Saturday, September 08, 2007

Dumb Money

Lots of stories this week about the impact of the financial markets on the "real" economy (and on financial institutions). The August Financial Times piece I discussed recently had posited a barrier between financial problems and the "real" economy that is already crumbling. The media is starting to use terms like "rampant securitization" and "summer from hell."

There's something Orwellian about this, as I've noted before - numbers don't lie, until they do; financial markets accelerate prosperity, until they don't; government regulation hurts the economy, until it saves it. We haven't gotten to that last part yet.

That FT piece was right about one big thing: the core issue is not some bad subprime debt but the opacity of debt instruments, which makes it impossible in many cases to calculate a given position's exposure, risk, and value. Lots of people, including professional investors with billions of dollars in their care, buy instruments they don't understand based on revenue and risk claims they cannot evaluate. Turns out Standard & Poor and Moody's, the core ratings services, couldn't evaluate them either.

How did we get here? Two factors are
  • middle-class self-interest. 60 or 80% of the American public have not seen their incomes rise - corrected for inflation - since the late 1970s. So why not roll the dice for a little relief? Hell, working hard and paying taxes didn't get you ahead.
  • Wall Street self-interest, leading to biased financial policy, irrational tax subsidies, and mighty retail snow-jobs.
When buyer and seller have the same interest in wishful thinking about endless increases, bubbles blow up real big. There is an endless supply of greater fools.

I could go on with attempts at Financial Realism. Look at the chart above, which show selected investment returns in real dollars in the 2000s (click on it to get the big version, and read the article). Think about the increasing share of productivity gains that go to investors rather than labor. Review a report showing that upward mobility in the US has declined (and is lower than in many social democratic countries.) Look at the small group at the very top who get investment returns of 30% annually in economies that grow less than 3%. Read articles about how the financial markets do not actually raise money for productive investment, but have turned money into a commodity in which they make speculative profits. Refer yourself to a recent version of this argument in Le Monde. The list goes on and on.

But reality rarely beats fantasy or desire. I was reminded of this again last night at a family dinner, where I heard a story about one of my near relations, a cabbie who's now about 70, a really friendly and basically decent working-class guy. In the mid-1990s he started talking to a customer in his L.A. cab, who was telling my relative about the fire sale going on in the radio spectrum. If he bought a unit for $4000 or so, he could double his money in a few months. And there were lots of units for sale if he wanted to make it really big.

My relative had about $250,000 in savings from the death of his mother-in law among other things, and this money was chugging along at 4% or so - a little ahead of economic growth. But why put up with 4% when you can easily make 40%? This after all is America! Only little people think small, and they deserve the little lives they get. So my family member didn't buy one unit, or five (spending say 10% of his savings). He bought every unit he could with his $250k. And never heard from this guy again, and lost it all.

So he saved some money again. Ten years later his wife goes to get her teeth cleaned, and her dentist tells her that he's set up an investment pool for buying new state-of-the-art equipment for his expanded practice. For a few select patients, he'll borrow their money and pay them 15% - every quarter! So she goes home, and pretty soon the two of them have sunk $50,000 or so - again 100% - into this equipment. The promissory notes roll in. One night the relative calls the family and says he's now got about $3 million or so.

Six months later one of us reads an article that this dentist is under investigation for fraud and has moved to the Bahamas, where he's set up a website so that his investors can watch their millions of dollars grow. Six months after that he's back in L.A., in jail, awaiting trial for fraud. And another $50k in cabdriver savings is down the drain.

You may conclude that my family is dumber than most. Well it is quite possible, but that doesn't explain the shift in working-class hopes from security through government protections (social security, Medicare, etc) to protection through instant wealth.

Part of it is pervasive dumbness about money. Some people fall for dentists who try to get their patients to buy their own non-existent equipment. Other people buy collatoralized debt obligations backed with whatever, they don't know, when they can barely define the word "collatoralized." Both people are dreaming, and the dream is dumb. But given the great majority's decades of stagnation, the dream is also quite understandable.

If we can't be realists about capitalism at least we could be Noir about it. The people selling to you - they care about them, and they don't care at all about you.

Friday, September 07, 2007

Footnotes to Previous

Here are some nice illustrations of my comments below:

First, there's an excellent piece by the New York Times' Stephanie Strom on the effects of big-time philanthropy.
  • Because "the United States is one of a handful of countries to allow givers a tax deduction, . . . . the public is letting private individuals decide how to allocate money on their behalf."
It's worth reading that last phrase several times. The wealthy donor, like real estate developer Eli Broad (pictured), has so much influence over the spending of social resources that it's not unlike "one dollar one vote." This is one of the big economic issues that splits liberals from the left, with the former happily keeping elites in charge. Anyone remember Tom Hayden's late 1970s "Campaign for Economic Democracy"? The idea of democratizing the economy marked Hayden as still-radical. And it still would.
  • "Research shows that less than 10 percent of the money Americans give to charity addresses basic human needs, like sheltering the homeless, feeding the hungry and caring for the indigent sick, and that the wealthiest typically devote an even smaller portion of their giving to such causes than everyone else." (In Eli Broad's case, the "human needs" donations come to about 2%.)
Unsurprisingly, the wealthy spend money on their stuff, not on stuff for other people. Philanthropy works well for selected special projects, but does not promote general social development.
  • Direct elite control of so much social spending (defined broadly to include college football stadiums) is justified by genteel Darwinist contempt for the poor. Eli Broad repeats the proverb, "Give a man a fish, and you feed him for a day. Teach a man to fish, and you feed him for a lifetime.”
This proverb, wrongly applied to the poor, says that the poor are poor because they are incapable, i.e. dumb, lazy, and ignorant, and will be fine if they learn to be more like their betters. The wealthiest Democrat in world history, Warren Buffett, puts it differently: "I think the government ought to make sure that all the people here who drew short straws have a decent minimum."

Buffett's view is somewhat better, it that it says the poor are unlucky and not just inadequate. (He also publicly objects to the absurd injustices of current tax policy.) But we are still a long way from the concept that folks are poor because they are systematically underpaid and screwed over by gross inequities in everything from school quality to tax policy - by inequities that favor nice guys like Broad and Buffett. Such ideas place the Left outside the carefully protected political mainstream, and in the US exist under a media embargo.

Paul Krugman's column slams the Doltocrats for their usual foolish compromising on Iraq war policy that guarantees the war will continue. I assume his position flows from his horror at the war, the waste and the pointless death, but I can see it also flows from his deep, permanent rage towards those who cook stats and create fake realities. This rage is only slightly more intense than his rage at those who accept the cooked stats and the phony numbers. Krugman had a long history of liberal social views and neoliberal economic ones (he was a major proponent of "free trade" during the Clinton years, and still is). But he has been radicalized - on the narrow American terrain - by discovering in himself his own willingness to confront - as obnoxiously as necesdsary - the lies and the lying liars even or especially when they come from the top.

We need to be able to talk about all these things. The tax-subsidized social giving of the rich is a crucial issue as the U.S. turns increasingly into a class society much like Dickensian England, which its leaders advertise as a glorious victory to a world where 1% of the population owns 40% of the world's resources and 10% owns 85%.

Hurry up, world: in the US 40% of our national income last year went to the top 0.1%!

Thursday, September 06, 2007

Revelations of the Obvious

You'll be pleased to know that while my Internet service was out the venerable French newspaper Le Monde discovered that its country's president loves wealthy businessmen and likes to stay in their palatial homes. This paper's distinguished staff need to spend more time reading Paris-Match. Some of them might find they would prefer a career airbrushing presidential love handles.

Or they should just read some crime fiction, where everybody already knows that men in power make policies for their powerful friends and not for the general public. Why don't reporters ever know this?

Which reminds me of this dismal, silly piece by the reporter E.J. Dionne, on the liberal comeback. Dionne wrote a book on the subject ten years ago - "They Only Look Dead" - referring to progressive leaders. He was wrong then, but hope springs eternal.

Dionne's article is entirely oriented towards Republican thought and its errors, even as he warns against doing this. His descriptions of revived liberalism are painfully timid, and take place entirely on Republican terrain - he invokes 'social market capitalism" and more social justice without catering to minorities. This whole "revival" is DOA if it can't be cross-racial - there is, was, and never will be "progressive" politics in the United States without major participation and leadership from people of color. (Same goes for France, by the way.) Nobody is going to follow Dionne, Alan Wolfe, and Todd Gitlin.

And no, it's not because they're tiresome older white guys, though that is also the case. It's because they have taken a loyalty oath to the unbreakable media principle of non-confrontation with the men in charge. By that I mean Dionne et al they don't really challenge the basic economic and political groundwork on which the Reagan counterrevolution was built. A "social market" for them is a business-run market with some social services - i.e., exactly what we have now. "More equality" - that will be, what exactly? There isn't a single detail here, or criticism of a corporate tax policy, or of the belief that markets are efficient and hedge fund kings are too, or of welfare reform, or real estate speculation, or the hundreds of thousands of wealthy Democrats who happily pay taxes at half the rate of the public school teachers they won't send their kids to. For Dionne, more equality means something like "we're all in this together," i.e. the spirit of universalism. But in fact we're not all in this together. There's an obvious war on the economic majority that Dionne seems to think is a) a mistake and they didn't mean it or b) George Bush's doing or c) something that can be reversed with a political attitude. Well this combination - an egalitarian political sensibility in the electorate that has nothing to say against radically plutocratic economic policies - is what we have now.

This stuff reiterates the history of fragmentation among American progressives: liberals will not point out the self-dealing, amazingly selfish, economically inefficient class politics of elites, or their history of economically squeezing and then scapegoating poor communities of color. Dionne doesn't even really want to talk about the organized and systematic right-wing attack on the financial and political infrastructure of public life. The new liberal time he sees he will protect against anything that seems too oppositional or critical. The liberal-left gap will therefore persist - quite deliberately. That is bad news for progressive politics, but it is even worse for liberals who seek to lead.

Which reminds me of my Internet service. The French post office, French small business people, French mass transit - all great. French banks, French commercial television, French cable service - pretty bad. What holds France back is corporate France - its authoritarian patrons, its inequalities, its rigidity that blocks the flexible collaboration it says it wants. That's not the whole story, but it's a lot of it. And that's the real "reform" - of business leadership - that Sarkozy will never undertake. Or the liberal Dionne either.

Wednesday, September 05, 2007

In the Desert of the Real

Amidst the nonsense of the "real," which I will get to later, there's this excellent review of Roberto Bolano's The Savage Detectives. Imposssible not to quote this from Kunkel''s piece:
One person who never shows up in the reminiscences, except when the recording angel behind the oral history asks unavailing questions, is the teenage poet García Madero. This is because, heartbreakingly, no one remembers or has heard of him. So by the time we get to the third section, we understand that the half-forgotten poets Belano and Lima took with them on their quest for the all-but-forgotten poet Cesárea Tinajero a poet whose name was written on even swifter flowing water. In this way The Savage Detectives partakes, paradoxically, of the general oblivion it describes, since oral histories of undistinguished and out-of-print poets are not assembled in the first place, any more than the diaries of mute inglorious Miltons from Mexico City are ever published. Moreover, because the narrators’ accounts of their own lives as they briefly criss-crossed Belano’s and Lima’s truly resemble oral testimony rather than essays, stories or poems, these accounts would appear (but only appear) to possess no particular literary value worth preserving. No novel I have read is so movingly and appallingly lifelike in its unthematised accumulation of time and grief, and in its un-coordinated march towards oblivion.
The trick is to unremember the ever-present ones, and remember the forgotten ones. Otherwise the march will never stop.