Tragedy All Round

(ht Andrew Sullivan)

Abortion provider Dr. George Tiller was shot dead in a Wichita, Kansas church this morning -- the culmination of an escalating campaign of terror against him over the past fifteen years. This incendiary clip from the Bill O'Reilly show on Fox has been circulating on YouTube for the past year and a half, under the title "George Tiller -- Murdering for Cash:



Any time a fourteen year old child finds herself in this situation, it is a tragedy. But to use this tragedy either to advance a political agenda, as O'Reilly is clearly doing or as an excuse for murder is simply evil.

In his speech at Notre Dame two weeks ago, Barack Obama stressed both the difficult nature of the abortion question and the intractability of the debate. But he stressed the necessity of civility and tolerance in working toward a resolution of this incredibly difficult issue.

As followers of Christ we can never condone violence such as this -- not for any reason. And we know that to incite violence or to wish it is the same as committing it. As Obama noted, there is so much that we can do for women like this young woman, who find themselves pregnant. If we want to reduce or end abortion, we must provide genuine and supportive alternatives.

A Revolution for Netbooks?

A story I have been following but haven't commented on is the Moblin linux based operating system for netbooks. Standing for mobile linux, Moblin is specially designed for the Intel Atom processor that powers these ultra-compact notebooks.

I use a somewhat dated Asus eee 2G Surf, with a smallish 7" screen. The netbook optimized Ubuntu 9.04 apparently works poorly with the small screen, but it seems that Moblin works fine. While I love the Asus I find the Xandros OS limiting. So I look forward to an OS designed from the ground up for these machines.

Indeed, sorting out a free and open source OS could spark a revolution in computing, making netbooks both cheap and ubiquitous. Hauling around a laptop is not practical but a netbook with small size, light weight and rugged design means it can be tossed in a book bag and provide internet access and an adequate office suite anywhere.

What Could Have Been

As I write this, Israeli author Abraham Yehoshua is being interviewed by Eleanor Wachtel on CBC Radio's Author s and Company. The conversation has ranged across a number of topics, but the one I found most interesting was the profound change that came over Israeli society with the second Intifada.

I think we tend to forget how open the relationship between Israel and the Palestinians had become in the late 1990s. Hope was in the air with the Oslo Accords. The Rabin assassination by a radical settler had schocked Israeli society into a much greater acceptance of change.

When I visited Israel and the West Bank in early 1999, checkpoints were a mere formality and large numbers of Israelis routinely travelled to cities such as Ramallah and Jericho. The West Bank was enjoying its first taste of prosperity and per capital income was much higher than it is today. And this was under a Likud government.

A year and a half after my visit, two events changed everything. The first was Clinton's ill-advised attempt to force an accord before leaving office. This happened in July. I felt then and I feel now that this was driven much more by the ego needs of the President than by actual prospects for peace.

The second was Ariel Sharon's incredibly ill advised visit to the Temple Mount in October, escorted by hundreds of police. It was a deliberately provocative act and indeed this marked the start of the second Intifada.

And as Yehoshua recognizes, this uprising after a lengthy period of relative calm with real hopes for a lasting peace, had a devastating psychological impact on the Israeli people. Looking back, it seems that in the late 90s, a defacto one-state, or bi-national solution was emerging from the ground up. Not the one we are likely to see in the future with isolated Palestinian bantustans, but genuine, albeit very imperfect integration that likely would have improved over time.

It is increasingly clear that a two-state solution will never arise and that Israel is quickly evolving into something that resembles nothing so much as South Africa in the 1980s. Given what could have been, this is truly a tragedy.

More Innovative Views on Poverty

The World Bank has just published the latest in their Moving Out of Poverty Series, this one subtitled Success from the Bottom Up. Intriguingly, there are many similarities between the findings in this incredibly extensive study and the work of economist and Dead Aid author Dambisa Moyo, who I have written about previously (here and here).

The seven key findings in the report are that

1. there is no culture of poverty -- even the poorest tend to constantly search for a way out;
2. poverty is a condition and not a characteristic -- it is a situation rather than a condition of households;
3. "power within" or inner strength and confidence are the key predictors of success and success builds on success;
4. equal opportunity remains a dream as an established middle class uses market power and regulation to capture the best opportunities for themselves;
5. responsible local democracy is a strong predictor of general prosperity and that the state of local democracy is far more important than that at the national level;
6. while collective action helps poor people cope it is not a strong predictor of prosperity though it does help foster the type of local democracy that is; and
7. poverty reduction should be guided by the poor who should have agency and an effective say in local government.

As Moyo has argued so strenuously, government to government aid does little to address findings such as these. Even when it is not siphoned off in corruption, it seldom finds its way down to the local level where it can be most effective. And more often than not NGOs have their own agendas that can be insensitive to local needs.

Over the past couple of months, I have written about two initiatives that do seem to address these needs. The first is Acumen Fund, which funds entrepreneurial ventures based on the needs of the poor. The second on the growing propensity to give cash rather than aid in kind as a way of allowing more local and household decision making on how to deploy resources.

Those who want a sample of Moyo's argument can find it in her interview with Margaret Wente in yesterday's Globe and Mail.

Gorenberg on the Need for a Palestinian Ghandi

In April, Israeli author and blogger Gershom Gorenberg published an article in The Weekly Standard in which he argued that, as Israeli politics is now essentially bankrupt, any genuine movement toward peace will have to come from the Palestinians. The opening of the article imagines the source of this as a "Palestinian Ghandi."

Gorenberg also describes figures such as this who have emerged. But, he tells us, they have ultimately lost out both to a Palestinian elite that is opposed to their means and an Israeli state oppossed to their ends.

He also suggests that the first Intifada also contained the seeds of a nonviolent revolution .

The idea . . . was to end Israeli rule simply by ceasing to obey it, and by building a network of Palestinian committees that would govern instead. Involving everyone, unforgettably altering daily life, this was, in fact, a "popular" rebellion--tired as that term today sounds in English. It stood in singular contrast to the PLO's armed attacks from across the borders.

And indeed, the ultimate result of this uprising was the Oslo Accords, the creation of the Palestinian Authority and the very limited bit of self government that was acheived. Perhaps more important, Gorenberg suggests, it exposed a fissure in Israeli society between those who were comfortable with violence and repression and those who were troubled by it. And it is this fissure that is perhaps the last remaining hope for peace.

Reich on the Future of Manufacturing Jobs

Economist and former Clinton adviser Robert Reich has a succinct comment on his blog on the future of manufacturing jobs in the U.S.. In it he argues convincingly that the loss of manufacturing jobs has little to do with foreign competition and much to do with increased productivity.

He reminds us that a hundred years ago, 30% of the labor force worked in agriculture as opposed to two percent now. It is not that the U.S. stopped growitng food, but that the productivity of farmers increased exponentially.

The same, he argues, will hold true for manufacturing. The days when much of the working population laboured on assembly lines are simply over. He gives this example

When we think of manufacturing jobs, we tend to imagine old-time assembly lines populated by millions of blue-collar workers who had well-paying jobs with good benefits. But that picture no longer describes most manufacturing. I recently toured a U.S. factory containing two employees and 400 computerized robots. The two live people sat in front of computer screens and instructed the robots. In a few years this factory won't have a single employee on site, except for an occasional visiting technician who repairs and upgrades the robots.

So these jobs will not return with the end of the recession. And they cannot be protected by tarrif barriers or currency manipulation. Reich also suggests that rather than trying to save manufacturing jobs that will inevitably be lost, we should be focusing on bettering the lot of low wage personal service jobs -- retail, home care and the like.

For me, one of the real signs of hope in the U.S. is the S.E.I.U. led by Andy Stern. Just as unions were by far the most important social program for blue collar workers in the post-war period, so too must they be the key to the middle class for service workers. And as we know from the last sixty years, a mass middle class is also the ticket to economic prosperity and stability.

A Tale of Two Car Companies

Two announcements today put in sharp relief the difference between a brilliantly managed automotive manufacturer and a mismanaged one.

Magna, which has clearly won control of the European Opel division of GM, announced plans to build product in Canada. If successful, this will mean that in fifty years, Frank Stronach has taken an operation based in his garage to a world-class car manufacturer. Currently, Magna has a cash balance of $1.5 billion, making it one of the healthiest manufacturers on the planet.

Meanwhile, GM is apparently pinning many of its hopes on the Chevrolet Volt electric car. However, initial the initial price is slated to be twice that of Toyota's Prius. So this is a dim hope indeed. There are also seemingly vague plans to produce a new sub-compact.

In other words, Magna will prosper without the help of taxpayers, who will in turn sink $10 billion or more in a company whose future still seems hopeless. Perhaps it is time to at least think about putting this money into an automotive venture that has some chance of success.

Can You Feel the Love?

It turns out that the Clinton-Bush gab fest was what I said it would be -- a love in that glossed over every supposedly profound difference between the two administrations. Limbaugh must be catatonic.

As a NYT report describe it

as they settled into overstuffed chairs, Mr. Bush and Mr. Clinton became something of an ex-presidents’ support group, avoiding direct critiques of each other, or, for that matter, their future club member, President Obama (“I want you to understand that anything I say is not to be critical of my successor,” Mr. Bush said, “there are plenty of critics in American society.”)

If there is this little difference between two politicians who are seen to represent polar extremes, then can there be any point for Americans in voting?

Cookies vs. Waterboarding

From Raw Story via BoingBoing comes an interview with Ali Soufan, ex-FBI interrogator. It turns out that even in the infamous "ticking time bomb" scenario, cookies can be more effective than torture. As Soufan describes it, when questioning bin Laden lieutanant Abu Jandal

[I]noticed that he didn't touch any of the cookies that had been served with tea: 'He was a diabetic and couldn't eat anything with sugar in it . . . . At their next meeting, the Americans brought him some sugar-free cookies, a gesture that took the edge off Abu Jandal's angry demeanor. "We had showed him respect, and we had done this nice thing for him . . . so he started talking to us instead of giving us lectures.

Take that, Jack Bauer.

It would seem that not only is establishing common humanity a more effective interrogation technique, but it is also likely a more effective means of counter-insurgency. As another interrogator concludes

Torture does not save lives,” the interrogator, who spoke under a pseudonym, said. “And the reason why is that our enemies use it, number one, as a recruiting tool…These same foreign fighters who came to Iraq to fight because of torture and abuse….literally cost us hundreds if not thousands of American lives.

More Good News

My favorite senator, rebel Conservative Elaine McCoy noted on her blog, Hullabaloos, this morning that Le Devoir is reporting that several Liberal and Conservative senators are considering abandoning partisan labels and sitting as independents.

If successful, this would change the face of the Senate and undoubtedly change its role for the better. Sitting governments, however, would probably think otherwise.

The Harper crowd must rue the day they appointed this woman.

Great News!

BBC World Service just announced (3:30pm EDT) that Magna has succeeded in its efforts to acquire a controlling interest in Opel, GM's German division. So after months of watching Canada's beleaguered auto industry on the ropes, some evidence that we can compete with the world in this crucial manufacturing sector.

Another Dissenting Voice on Inflation

Brad DeLong has added his voice to those who think inflation worries are misplaced if not outright dishonest

When markets are scared that governmental finances are broken, the prices of long-term government bonds are low and the interest rates on long-term government bonds are high. While U.S. long-term Treasury bonds have fallen recently, their prices are not low by any standard. Markets are not yet nervous about broken American government finances and the risk of future inflation. Maybe they should be nervous. But they are not yet.

Thus any argument that begins: "financial markets are nervous about the U.S. long-run budget deficit..." needs to be thrown out the window.

Debunking the Inflation Myth?

In his column in this morning's NYT, Paul Krugman argues that worries about inflation, in both the short and medium term, are simply wrong.

First, he says, much of the increase in money supply is simply being held as reserves by banks; it is not being lent. In other words

. . . these aren’t ordinary times. Banks aren’t lending out their extra reserves. They’re just sitting on them — in effect, they’re sending the money right back to the Fed. So the Fed isn’t really printing money after all.

Second, fears that government will try to inflate its way out of debt are, he says, unfounded, and yet

. . . modern examples are lacking. Over the past two decades, Belgium, Canada and, of course, Japan have all gone through episodes when debt exceeded 100 percent of G.D.P. And the United States itself emerged from World War II with debt exceeding 120 percent of G.D.P. In none of these cases did governments resort to inflation to resolve their problems.

For Krugman, inflationary fears are much more political than economic in origin. He notes that government debt caused little concern when it was the result of tax cuts for the rich. It is, he notes, only when debt is the result of rescuing the economy and assisting the vulnerable that inflation fears really gain traction.

Final Though for the Day

Again, passing along this time the biblical passage from today's Verse and Voice newsletter, from Ezekiel 16:49

This was the guilt of your sister Sodom: she and her daughters had pride, excess of food, and prosperous ease, but did not aid the poor and needy.

This would seem to suggest that it was not sexual license that brought down God's wrath on Sodom, but instead hubris and greed coupled with an unwillingness to help those who had much less.

Surely, there is a lesson here for the Church. We should focus less on the sexual morality of others and more on our own idolatrous attachment to prosperity and security and our blindness to the needs of others.

And we must recognize that the gospel is not about condemnation; it is joyous good news. As Jesus proclaimed in His first public reading of scriptures

The Spirit of the Lord is upon me, because he has anointed me to bring good news to the poor. He has sent me to proclaim release to the captives and recovery of sight to the blind, to let the oppressed go free, to proclaim the year of the Lord’s favor

It's Official

From Bloomberg by way of Calculated Risk comes word that GM will file for court protection in the U.S. on Monday. It plans to sell most of its assets to a new company.

Plans are for a quick bankruptcy. As vice-chairman Bob Lutz describes it

We intend to get in and out very soon,” he said today at an Automotive Press Association luncheon in Detroit. “The U.S. government wants its money back, and our plan is to pay it back as quickly as possible. The U.S. government doesn’t want to own auto companies.

What emerges from this will be a publicly owned manufacturer, as

[t]he filing shows the U.S. Treasury owning 72.5 percent of equity in the new GM, a union health-care trust with 17.5 percent and 10 percent going to the old GM to hand to creditors in the bankruptcy process.

In Canada, the federal and Ontario governments will likely remain minority shareholders. The Globe article reports that

[t]he company said the U.S. Treasury would allocate a portion of equity to the governments of Canada and Ontario in return for Canadian participation in the loans. It did not say what proportion of that equity stak eCanada would take. ...

and that

[i]f Canadian governments received 18 per cent of proposed government equity in GM – proportionate to their expected loan contribution – they would end up with a 13-per-cent stake in the company.

The apparent goal is for GM to build on its two most successful brands, Chevrolet and Cadillac, in creating a much smaller but leaner manufacturer shorn of the burden of most of its legacy costs. Given this much stronger capacity to compete, one wonders if Ford will be able to avoid the same route, and if not, how much of a burden it will place on already cash-strapped governments here and in the U.S..

Troubling Allegations

CBC News is reporting troubling allegations regarding the treatment of a Jordanian business woman, Lubna Salah, who claims she was shoved against a wall and kneed in the groin by an agent of CSIS while being interrogated at Pearson International Airport in February regarding suspicion of "people smuggling". Her lawyer claims that the agent "beat a confession out of her".

This news is only surfacing now, CBC says, because until today there was a publication ban on her bail hearing. Her lawyer claims that in addition to physical abuse there were verbal threats and that as a result Salah feared for the safety of her children, who live in Jordan.

At this time, I am unable to find other news services carrying this story. Given CSIS' track record, however, it is important that these allegations receive a full public airing.

More Cash for a Bottomless Pit

The Globe and Mail is reporting this morning that Canada's contribution by the federal and Ontario governments to GM and Chrysler may rise to as much as $13 billion dollars. This would be more than four times the original commitment of $3 billion. And these figures, which are being steadily revised upward are the key factor in the ballooning federal deficit, currently pegged at $50 billion. The Ontario government is also running a historically high deficit of $14 billion, thanks in part to a $3 billion contribution to the auto sector.

As another piece in the same paper notes, one result of this will surely be years of government restraint reminiscent of the early 1990s when both Queen's Park and Ottawa made a series of drastic and painful cuts to turn large deficits into surpluses. Another will be tax increases that will stifle economic recovery.

The difference between now the the early 1990s is that we are not repaying deficit spending on social programs but instead the pain will be the result of bailing out an industry that has been ill-managed and produced shoddy product despite seeing the writing on the wall for at least thirty-five years. And most of this is going to just two companies.

While we have an obligation to protect pensioners, it seems increasingly clear that maintaining a dynamic automotive sector, which is crucial to Ontario, will require allowing manufacturers who are not viable to fail or to be absorbed by other, more promising companies. Over the next decade we will likely face substantial cuts to education, health care and a wide range of other programs because we propped up two companies that will likely fail anyway. This is not sound policy.

Ontario has a vibrant automotive industry. Magna International, which already assembles cars for other manufacturers, is set to purchase the Opel division of GM. We have Honda and Toyota plants that are world leaders. And our parts industry takes a back seat to no one. These are our future champions. It is time we stopped propping up aging dinosaurs.

I.F. Stone on Israel

Somewhere in the background noise last week I had heard a discussion on how books on current events almost always fail the test of time. One counter-example offered was I.F. Stone's 1946 book, Underground to Palestine.

This is indeed a remarkable piece of reporting. It describes Stone's travels with Jewish survivors of the concentration camps as they make their way illegally from displaced persons camps in eastern Europe across the Czech and Austrian frontiers, through the Soviet zone and finally to an undisclosed port and onto a boat that is to run the British blockade of Palestine. The entire trip, but especially that on two boats, is harrowing. And the Haganah, the forerunner of today's IDF are rightly lionized.

These were desperate people escaping from a Europe still rife with antisemitism and lawlessness. And it is the incredible story of the dream of making a home in a promised land.

Yet we know how this turned out. And by far the most haunting part of the book is an epilogue that Stone wrote in 1978, shortly after Begin's Likud had taken power. For Stone, it seems, this represented the death of the dream of Eretz Israel that he had described in the book. For him, and for many others, Zionism had always been about establishing a home in a land they would share with another people; it was to be a home for the Jewish people and not a Jewish homeland. In today's parlance, it was to be a one-state solution.

In the 1970s, Stone was excoriated by his own people for proposing what he called a "bi-national" state in the land west of the Jordan. Yet he argued in this epilogue that not only had this been the dream of many of the original pioneers but it was now the only hope for peaceful coexistence with the Palestinian arabs.

However, for Stone this was simply a vehicle for achieving the much more important goal of living in harmony with the original Palestinian inhabitants. He speaks of what he calls the "Other Zionism", a Zionism commited not to aggresive nationalism and chauvinism, but to a common life in a shared land. This, he both argues and demonstrates, was the original vision of many of the early Zionists, and it is, he was convinced, a prerequisite for the survival of the Jewish home in Palestine. It is worth quoting the final paragraph of the epilogue in full:

No matter which choice, the two peoples must live together, either in the same Palestinian state or side by side in two Palestinian states. But either solution requires a revival of the Other Zionism, a recognition that two peoples -- not one -- occupy the same land and have the same rights. This is the path to reconciliation and reconciliation alone can guarantee Israel's survival. Israel can exhaust itself in new wars. It can commit suicide. It can pull down the pillars on itself and its neighbors. But it can live only by reviving that spirit of fraternity and justice and conciliation that the Prophets preached and the Other Zionism sought to apply. To go back and study the Other Zionism is, for dissidents like myself, to draw comfort in loneliness, to discover fresh sources of moral strength, and to find the secret of Israel's survival.

Krugman on Economic Recovery

I may have left the impression the other day that Krugman thinks we are out of the woods. What I think he is saying is that while the cataclysmic meltdown of last fall and winter appears to have been stopped, we are still in for a very long, tough slog. All of the trillions of dollars we have thrown at this problem have so far only slowed the fall, not stopped it and certainly not reversed it.

This video comes via Calculated Risk. I apologize for the sound quality.

More from Sojourners

Another wonderful passage from Sojourners' Verse and Voice newsletter, this time from Dwight Eisenhower.

Every gun that is made, every warship launched, every rocket fired signifies in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. This is not a way of life at all in any true sense. Under the clouds of war, it is humanity hanging on a cross of iron.

Grumpy Old Men?

Move over Walter Mathau and Jack Lemmon. If ever you needed proof that political differences are largely phony, here it is. It seems W. and Mr. Bill have teamed up to hit the road for a series of public "conversations" on the issues of the day.

Maybe they can offer some insight on how, together, they screwed the pooch on North Korea. Or thought a housing bubble would be a swell idea. Or first ignored al qaeda and then chased them into the badlands of Pakistan before starting a pointless war elsewhere. Yes, it ought to be an entertaining time.

This dog and pony show hits the Toronto Metro Convention |Centre Friday afternoon. Tickets start at $230 . I, for one, won't be there.

More Gloom from Dr. Doom

In an op-ed piece in today's Globe and Mail, uber-pessimist Nouriel Roubini offers up nine reasons why this recession will not end any time soon.

He does not suggest that policy makers got it wrong. Much the opposite, noting that

. . . global policy makers got religion and started to use most of the weapons in their arsenal: vast fiscal-policy easing; conventional and unconventional monetary expansion; trillions of dollars in liquidity support, recapitalization guarantees and insurance to stem the liquidity and credit crunch; and finally, massive support to emerging-market economies.

Though "Dr. Doom" is relentlessly downbeat, we would do well to remember how often he has been right. As the article is only available to Globe subscribers, I will summarize his nine points:

1. Employment is still falling and will continue to do so through 2010;
2. there has not been any real deleveraging--debt has not been reduced but instead socialized;
3. countries running huge current-account deficits need to cut spending, not increase it or save rather than spend;
4. the financial system remains plagued by trillions of dollars of bad debt;
5. firms will continue to have little reason to invest or hire;
6. unprecedented government debt will eventually drive up interest rates;
7. central banks do not appear to have an "exit strategy from huge increases in the money supply;
8. emerging-market economies face unprecedented risk despite massive support; and
9. countries with huge current account surpluses face precipitous drops in demand.

For me, reading Roubini's piece along with that of Feldstein described earlier today suggests first that the massive stimulus, particularly by the U.S. government, may not be enough to sustain a recovery while at the same time there is not the financial or political capacity to do more. Clearly the second half of this year will be crucial.

Racist Rush?

There was a time when Rush Limbaugh served a useful purpose. As the court jester of a newly emergent conservative movement he was able to poke holes in progressive pomposity in ways that more mainstream commentators and politicians could not. And he was fun.

Sadly, the only thing Limbaugh now parodies is himself. His rants have become increasingly race-baiting if not racist. And the fact that he represents the cutting edge of Republican thought means that the conservative movement in the United States is stone cold dead.

Here is a sample by way of Andrew Sullivan

To Aid or Not to Aid?

From Economist's View, a description of an emerging food fight between Jeffrey Sachs, speaking for the African aid community and Dambisa Moyo among others speaking for those who oppose in particular aid to African governments.

Readers can find the particulars of this debate on the EV blog, so I won't repeat them here. I will however, offer a few comments.

First, as I have noted earlier regarding Moyo's work, her problem is not with feeding the hungry and other forms of emergency assistance, it is with government to government aid which she believes, as I do, simply fosters corruption. Both she and Sachs use the example of Paul Kagame, the President of Rwanda.

Kagame wants to reduce Rwanda's dependence on aid, which Sachs ridicules. But it should be noted that his anti-corruption credentials are impecable, a rarity in Africa. Romeo Dallaire, in his relentlessly depressing and pessimistic account of the genocide, Shake Hands with the Devil repeatedly cites Kagame as the one beacon of hope in that benighted nation. Kagame seems to understand that the route to both economic development and accountable government is reduced dependence on aid.

Indeed, as Minsky argued so strongly, albeit in a different context, the bulk of aid is more often than not captured not by those most in need but by those with the political clout to capture excess rents, which in the case of Africa is sadly political elites. My own experience on a trip to the Palestinian territories ten years ago was that the massive aid following Oslo was largely captured by the Palestinian Authority leadership or squandered on meaningless and unproductive pet projects.

In April, I wrote about Jacqueline Novogratz and the Acumen Fund. It is worth repeating a statement by her from that entry:

After more than 20 years of working in Africa, India and Pakistan, I've learned that solutions to poverty must be driven by discipline, accountability and market strength, not easy sentimentality. I've learned that many of the answers to poverty lie in the space between the market and charity and that what is needed most of all is moral leadership willing to build solutions from the perspectives of poor people themselves rather than imposing grand theories and plans upon them.

This is justice rather than charity. It is offering a place at the table rather than crumbs from it, and I am convinced that it is only in this way the Africa has a chance to truly thrive. For those who would like to invest in such a future, I would encourage them to visit the Kiva website.

The Morality of Bankers

From Calculated Risk comes news, via the WSJ that U.S. Banks are lobbying the FDIC for permission to draw on public subsidies to purchase toxic assets from their own loan books -- in other words to game the system.
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As I understand it, this would mean that banks could purchase bad loans off of their own books at full value and then receive a public subsidy for the difference between this price and what they are able to sell them for. In other words they would realize full face value on the bad loans that they made. Heads, I win, tails you lose.

Perhaps we should send some of our anti-piracy naval forces to the South Pier and have them retake Wall Street from the pirates.

Martin Feldstein Says Not So Fast

By way of Economist's View, Martin Feldstein has posted an article in which he argues that while the decline has certainly slowed it is far too early to claim a recovery is underway or even close, suggesting that

. . . my reading of the evidence does not agree with that of those who claim that the economy is actually improving, and that a sustained cyclical recovery is likely to begin within the ext few months. Although the stimulus package of tax cuts and increased government outlays enacted earlier this year will give a temporary boost to growth, we are unlikely to see the start of a sustained upturn until next year at the earliest.

Feldstein does expect to see a small uptick over the next few months as the effects of the stimulus package are felt, but he argues that the effect is likely to be temporary as the stimulus measures now in place are not enough to drive a sustained recovery, noting that

. . . the key thing to bear in mind is that the stimulus effect is a one-time rise in the level of activity, not an ongoing change in the rate of growth. While the one-time increase will appear in official statistics as a temporary rise in the growth rate, there is nothing to make that higher growth rate continue in the following quarters. So, by the end of the year, we will see a slightly improved level of GDP, but the rate of GDP growth is likely to return to negative territory.

So where are we? There seems to be little consensus. Markets are up, but so is unemployment, as is typical at the end of a recession. But there are still a host of problems in the financial sector. What was once the worlds largest corporation is set to enter bankruptcy protection, which will surely ripple through the economy. And on the political front, the right in the U.S. is gearing up for a zero sum war of attrition.

It remains to be seen.

You Can't Have it Both Ways -- Or Can You?

The Op-Ed page in today's Star has an interesting juxtaposition. Back to back pieces by former Ontario cabinet secretary Tony Dean and columnist Carol Goar both look at the performance of public servants both federal and provincial.

Dean is very positive, suggesting that government has made huge strides in serving the public. Key quote

My research compared the achievements of Canadian public service and political leaders with their U.K. counterparts, and the results are very favourable to Canada. It was rewarding to hear so many U.K. public service leaders ask about Canadian reforms. It seems that public service managers around the world are looking carefully at leading practices emerging in Ottawa and the provinces, especially Ontario.

Carol Goar, on the other hand, is quite critical. She notes how it is often non-profit organizations that deliver government funded and mandated services that coordinate and fill in the gaps and that bureaucrats are often isolated and insensitive. Thus she argues that

[g]overnments . . . lock their programs in place with rigid rules. They demand conformity. they manage change by imposing limits and off-loading responsibilities.

More damning still

More money would help in the battle against poverty . . ..But policy-makers could accelerate the process just by untangling their regulations, ending their turf wars and encouraging innovation.

So who is right?

In one sense, Goar is. As Donald Savoie argues so persuasively in Court Government, as the centre -- i.e. the premier or prime minister's office has become more powerful, government has become more inward looking and self-referential. The incentive is to deliver good news to the centre rather than serve the public. My own experience in government is that the public service has an astounding capacity to convince itself of its virtue even while ill serving the public.

In another sense, Dean is right, if looked at from a middle or upper-middle class perspective, dealing with government has become much easier and services are delivered much more efficiently. Front line staff are accesible and impediments are seen as a problem to be solved rather than immutable fact.

And what of the poor? Here we return to old-fashioned impenetrable bureaucracy far more concerned with rules and procedures than with service. And this I think is why Goar and Dean can, in all honesty, say such contradictory things.

Yes We Can Afford It

As it increasingly appears that we may have, if not emerged from this recession, at least avoided the cataclysm that appeared so likely a few short months ago, I am haunted by the thought of what the trillions we have just spent might have meant if they had been targeted at social justice rather than at rescuing the pathologically greedy from their folly.

What's done is done. And we will spend the next few years digging ourselves out of the huge public debt hole that we have so quickly created. I wrote earlier on what this money could have done. The lesson we must learn from this is that we can, if we choose, apply the same massive resources to achieving social justice -- eradicating the worst poverty, providing decent food, water and shelter for all and developing a sustainable culture. To not do so is not a fate, it is a choice. We have learned this over the past year, and we must never forget it.

U.S. to Nationalize GM?

From Bloomberg comes word that as GM gets set to enter bankruptcy protection on Monday that the restructured corporation that emerges will have the United States Government as the majority shareholder, noting that

The U.S. Treasury would get a majority of equity in a restructured General Motors Corp.

We live in strange times.

If anyone had suggested five years ago that GM would end up in bankruptcy and emerge from court protection nationalized they would have been tested for drugs. The Obama administration has already made one management decision, firing former CEO Rick Waggoner. It will be interesting to see whether they will continue in an activist role. And if they do, it will be even more interesting to see what the results of this are.

Shame on the Walrus

I am not a regular reader of Walrus Magazine, but I do touch base from time to time, and generally find it to be an excellent source of progressive Canadian thought.

So I was disconcerted yesterday when a came upon an article by Daniel Stoffman entitled Are We Safe Yet? an all too typical fear mongering screed on terrorism. Stoffman, whose work I am not familiar with, usually covers the immigration beat for the Toronto Star as well as blogs on the issue. Here is a sample of his work

it's 2020 and, in Toronto, the days when everyone used the public health-care system are gone. So is the time when a majority of affluent, middle-class parents sent their kids to public schools. In 2020, vast tracts of suburban slums occupy what used to be good farmland on the city's outskirts.

Traffic congestion and air pollution are unbearable. Toronto's reputation as one of North America's most livable cities is a distant memory. It's now known as the "Sao Paulo of the north."

This dystopian vision of the future of Canada's largest city is hardly far-fetched. Toronto is already suffering severe growing pains, the result of the federal government's insistence on maintaining the world's largest per capita annual immigration intake — around 250,000 people a year of whom about 43 per cent come to Toronto. That's more than 100,000 newcomers year after year after year.

It is impossible for any city to maintain its social and physical infrastructure in the face of such relentless population growth.

By 2020, Greater Toronto's population will have ballooned from 5 million to 7 million, or even more if immigration levels are raised higher still.

Switching his sights to terrorism for the Walrus article, Stoffman continues in the same "be very afraid" mode. And he continues with the same anti-immigrant stance with his focus on muslims. Canada in his telling is an immigration free for all awash with sketchy refugee claimants and home to a vast variety of terrorist groups. Thus he argues that

[b]ack in 1998, Ward Elcock, then director of CSIS, said that fifty international terrorist groups were active in Canada, more than in any other country, with the possible exception of the US. That’s no surprise to David Harris, a lawyer and a former chief of strategic planning for CSIS. “We offer everything a discriminating terrorist would want,” he says. “Good communications, ease of travel, a generous welfare system, a good health care system, an excellent banking system, and a wonderfully out-of-control immigration system.”

This of course is the same CSIS whose brilliance on the terrorism file brought us Mahar Arar's rendition to Syria and several similar incidents. Incompetent thuggery is a term that comes to mind.

Immigration has served Canada and particularly Toronto very well. As Richard Florida has noted in works such as Whose your City, Toronto's incredible diversity is its chief selling point. And older suburbs such as Scarborough, while they surely have pockets of real problems are not "vast urban slums" nor are they likely to become so.

More important, however, is our response to terrorism and the threat of terrorism. Canada has had a terrorist attack proportionally equal to 9/11. We lost more than three hundred people in the Air India bombings, the investigation of which was not CSIS' greatest moment. Yet we did not use it as a reason to embrace paranoia and hide behind walls of fear. We are better than this.

Tens of thousands of Britons died during the blitz of World War II. Yet the British people defiantly refused to live in fear. And this, more than anything else, allowed them to prevail. Similarly, if we refuse to live in fear, terrorism cannot prevail. If we embrace fear and succumb to anti-immigrant hysteria, however, they need not even attack us. They have won.

Krugman Sounds the "All Clear"?

Reuters reports that speaking in Abu Dhabi yesterday, economist Paul Krugman suggested that the world economy is stabilizing and that, having avoided "utter catastrophe", should register modest growth this year, further noting that

I would not be surprised to see flat to positive GDP growth in the United States, and maybe even in Europe, in the second half of the year.

He went on to argue, however, that this does not mean all is well. In fact, we may face a protracted stagnation similar to Japan's lost decade is sufficient action is not taken. In particular, he noted that export led growth is not an option as the entire global economy is in the same fix and we cannot "export to another planet".

Nevertheless, this is another Minsky moment. We have had an economic near death experience that has been rather quickly averted by both the automatic stabilizers of large government and by, in this case, unprecedented fiscal and monetary interventions.

And it seems clear to me that, particularly in this instance, with $2 trillion dollar deficits in the U.S. and massive increases in the money supply, in the medium term we will face much higher inflation and interest rates than we have seen in a long time coupled with, as Krugman noted, much tighter export markets. And for Canada, this could mean a return to the "stagflation" of the 1970s. Not a recession, but surely miserable.

A Final Thought for the Day

My reading tonight is Ivan Illich's 1974 classic, The Limits to Medicine. While the subject of this book is what he terms "medical nemisis" a core theme in this and most of his other work is the idea of "radical monopoly" and particularly the radical monopoly of the professions.

For Illich, a radical monopoly appropriates those features of society, as he puts it

. . . which have allowed people to cope on their own. Intensive education turns autodidacts into unemployables, intensive agriculture destroys the subsistence farmer, and the deployment of police undermines the community's self-control.

The disabling help of the teacher, doctor, specialist and bureaucrat of whatever stripe has left us largely powerless to act on our own behalf, individually or collectively. These helpers have become our priesthood. And any progressive politics, if it is to achieve lasting success, must find a way to disestablish this secular church of professionals and experts and their radical monopoly and teach people to once again act effectively on their own behalf -- to cope.

GM Bankruptcy and Pensions

As General Motors moves inexorably toward bankruptcy in both Canada and the U.S., the pension plan picture is becoming clearer. As the Globe and Mail reports, it seems that labor concessions and loans from the federal and provincial governments will contribute about $2 billion each to the shortfall. GM will then have six years to make up whatever shortfall remains. And workers' pensions will be preserved.

The larger question for me is how we ever got here. A defined benefit pension is a contract which, in order to be honored, must be adequately funded. Ontario's very own social democratic Rae government cut a sweetheart deal with the auto sector in the early 1990s that allowed deficits in return for modest contributions to the provincial fund that guarantees pensions. But surely they never envisioned deficits of this magnitude.

In the wake of this debacle, surely there is a need for careful regulation of private sector pension plans, particularly those of large corporations.

A Canadian Treasure

I noted earlier my visit yesterday to Socialist Action (a "cross country revolutionary socialist organization", no less). What I didn't talk about was Jim Stanford's talk. It was, in a word, excellent. He spoke clearly and understandably, without a hint of jargon, about the roots of the current crisis and more importantly what must be done if we are to emerge from it in a way that enhances social justice. He admonished the audience several times about hyperbole and a retreat into marxist cant. And he called bullshit just that.

In short, Stanford is a national treasure. His effortless synthesis of politics and economics makes him a natural for a leadership position in our floundering social democratic party. It is our loss that he is not there. For a sample of his work, I have include the following very cogent talk:



Social justice -- not charity and not self-blame.

Enjoy!

Geithner Interview

I just finished watching today's interview of Timothy Geithner by the Washington Post. I have included it below. While it is obviously a crucial interview, I think the only comment I have is that Americans are well served by a Treasury Secretary who is willing to submit to this process and by a press that is relentless in chasing down the story on the financial crisis and its aftermath, while in Canada we have neither.

It is inconceivable to me that Finance Minister Flaherty would would allow such an interview. Which is probably just as well, as our lapdog press probably wouldn't want to be bothered anyway. So for a taste of what it could be like, the video

Sustainable Agriculture Canadian Style

From the Los Angeles Times via NY Times' Mark Bittman, an article on Houwelings Hothouse, a Delta B.C. company that has developed an incredibly innovative model of greenhouse agriculture, and for climate reasons, applied it in southern California. This is truly a Canadian export success story.

Their vast twenty acre greenhouses use half the water of traditional agriculture, use sequestered CO2 and rely on equally vast arrays of photovoltaic cells for half of their power. And the growing process relies on a small fraction of the pesticides and artificial nutrients used in outdoor growing or traditional greenhouse operations. I have included a copy of their report on sustainable agriculture here (PDF). And it produces the type of year-round green collar job that everyone is talking about.

In short it is a technology that we could export to the world.

When Industry Minister Tony Clement is finished screwing the auto workers, maybe he can turn his attention to assisting Canadian champions such as this.

You Too Can Be a Spy

From the Wall Street Journal via Slashdot comes news that you too can be a spy. This must be every twelve year old male's fantasy (while, one of them at least) come true.

According to a startling report by the Wall Street Journal, the Internet has empowered ordinary people to be part-time intelligence officers, uncovering secrets like military facilities and prison camps across the landscape of North Korea. The report states, '[Curtis] Melvin is at the center of a dozen or so citizen snoops who have spent the past two years filling in the blanks on the map of one of the world's most secretive countries. Seeking clues in photos, news reports and eyewitness accounts, they affix labels to North Korean structures and landscapes captured by Google Earth, an online service that stitches satellite pictures into a virtual globe. The result is an annotated North Korea of rocket-launch sites, prison camps and elite palaces on white-sand beaches. "It's democratized intelligence," says Mr. Melvin. More than 35,000 people have downloaded Mr. Melvin's file, North Korea Uncovered. It has grown to include thousands of tags in categories such as "nuclear issues" (alleged reactors, missile storage), dams (more than 1,200 countrywide) and restaurants (47). Its Wikipedia approach to spying shows how Soviet-style secrecy is facing a new challenge from the Internet's power to unite a disparate community of busybodies.'"

Is this the beginning of an open source CIA?

Cash vs. Paternalism

From Aid Watch via Economists View comes this encouraging story. It seems that aid agencies are beginning to realize that it is not only more efficient, but ultimately more effective to simply give qualified recipients cash. The brief entry is worth quoting in full:

In 2007, people in the Western Province of Zambia lost their homes, their livestock and their crops when heavier-than-normal flash floods swept through their area. USAID’s office of disaster assistance stepped in with $280,000 worth of with seeds and fertilizer, training for farmers, and emergency relief supplies.

Two NGOs working in Zambia, Oxfam GB and Concern Worldwide, tried a different approach: they handed out envelopes stuffed with cash—from $25 to $50 per month per affected family, with no strings attached. An evaluation found that common fears about cash transfers—that the cash infusion will cause inflation in the market, that the money will be squandered, or that men will take control of the money—were unrealized.

What did people buy with the money? The list includes maize, beans, salt, cooking oil, meat, vegetables, clothes and blankets, paraffin, transport, soap and body lotion, and lots of other mundane household items. They also loaned it to friends, used it to pay back debts, purchased health care, education and transport, and rebuilt their homes. Only a very small fraction of the money (less than .5%) was spent on “unproductive” items, like liquor for the men.

Unconditional cash transfer programs can be fast and cost effective. With no technical experts’ salaries to pay, and no trans-Atlantic shipping costs for US-produced food aid, more of the cash can go straight to the recipients (in the case of the Concern Worldwide project 27% was spent on program administration, while 73% was distributed in the cash transfers.)

Cash transfers also acknowledge that poor people are capable of making good economic decisions without the help of outside experts armed with needs assessment checklists. An evaluation of another Oxfam cash transfer program, this one in Vietnam (summary here), found that villagers made sophisticated investment decisions, choosing whether to invest in seeds and fertilizer, family coffins and tombs, cows and buffalo, home improvements, debt repayment, and /or community roads.

As Duflo and Banerjee document in their study on the economic lives of the poor, the rich often assume that poor people have few choices about where to spend their money. And this notion allows aid agencies to assume the paternalistic role of decision-maker for the poor. Yet Duflo and Banerjee note that subsistence accounts for a lot less than 100 percent and the “poor do see themselves as having a significant amount of choice.”

Cash transfers have plenty of potential drawbacks, as these studies also point out. Handing out large amounts of cash comes with its own set of logistical hurdles and could invite theft or corruption. And what if this approach puts women and children at a disadvantage, while men take and spend the cash? There are improvements to be made, in targeting the right population, and equipping people with better tools (like financial training and savings accounts) to help them make the most of the money. Two studies by Innovations for Poverty Action and the Poverty Action Lab at MIT in Morocco and Indonesia (both ongoing) should shed more light on when and how cash transfers can be most effective. (See also studies collected by the UK-based Overseas Development Institute).

When USAID provides blankets, seeds and fertilizer to flood victims, they are doing their best to decide for the victims what their most urgent needs are. With the cash transfers, the people can decide for themselves how to meet their most urgent needs. This gives people who have lost their livelihoods, belongings or loved ones a new feeling of control over their lives, builds money-management skills, and restores to them their power to make economic decisions. If you were in their shoes, which would you prefer?

Ivan Illich among many, many others insisted that aid is often debilitating and disenfranchising specifically because it is paternalistic and ultimately judgmental. As I noted in quoting Bill Moyers on Friday, paternalistic charity offers crumbs from the table while allowing people the opportunity to make their own decisions offers them a place at it.

Let's Do theTime Warp Again

I inadvertently joined the comrades at the barricades yesterday when I went to hear the CAW's Jim Stanford speak on the roots of the financial crisis.

I hadn't realized that he was speaking at the Socialist Action convention which apparently is an annual event. These are Canada's very own real live revolutionaries. I hadn't seen that many Che posters since the sixties.

Given events at GM, Stanford was understandably held up, and so the entire show was running late. I had the chance to peruse the literature tables; Leon Trotsky, Fidel, Bob Marley and Emma Goldman (wasn't she an anarchist?) loomed large. It was like entering a time warp.

And speaking of time warps, I also was able to sit in on the opening speaker, one comrade Adam (yes, they really do talk like this). He held forth, in impenetrable Marxist jargon, on the current economic crisis. Drawing on my grad school days, I tried to interpret, and what I got was an analysis not appreciably different from that offered by Minsky twenty-five years ago (see my previous post). In the Q & A session it was clear that everyone there knew everyone else, and they spoke in the same impenetrable jargon and all addressed each other as comrade. It was embarrassing.

Serendipitously, I was at the same time finishing the second part of Orwell's Road to Wiggan Pier which readers may recall is a scathing critique of socialism as it existed in England in the interwar years. Orwell's argument, in brief, is that socialism is both necessary (in fact, desperately so) and yet impossible so long as this crowd is in charge of the project. He argues further that the job of the main stream is to take back this project and make it inclusive and welcoming for all.

The problem, therefore, is to walk a fine line between nonsense such as I saw yesterday and simply being co-opted remembering that power co-opts and absolute power co-opts absolutely.

Justice and Catholic Social Teaching

For several months now, I have been casting around trying to get a hook into a way to connect economics and faith in a way that goes beyond the usual (but necessary) charitable impulse. It occurs to me that the answer was right under my nose.

Catholic social teaching has more than a century of history. Though neither its origins are motives are pure (it reflects the church's visceral panic over socialism in any form) it nevertheless is probably the richest source there is on faith and social justice. It is, in one sense, a well developed economics of faith.

Over the next few weeks I would like to begin an exploration of CST on this blog. The goal will be less to expound than to ask questions and provide resources. I look forward to the discussion.

More on Social Justice

From Consumerist magazine comes this story (ht boingboing)

Ohio police are pissed with Verizon after the company refused to help them find a missing 62-year-old man unless they paid his overdue $20 cellphone bill.

The cops got a call that the man was rampaging around his house and breaking windows. When they arrived, the man had fled, taking bottles of pills with them. The Sherriff contacted Verizon to ask them to turn the man's cellphone on so they could track his signal, but the operator said the missing man's bill would have to be paid first. After some back and forth, the sherriff started to make arrangements to pay his bill. Just as he was doing so, the search party, which consisted of two K-9 units, several fire departments, and more than 100 people on foot, found the man, unconcious, after 11 hours of searching.

"I was more concerned for the person's life," sherrif Williams said. "It would have been nice if Verizon would have turned on his phone for five or 10 minutes, just long enough to try and find the guy. But they would only turn it on if we agreed to pay $20 of the unpaid bill. Ridiculous."

See, the essential problem is that in most call centers you don't get any bonuses for having humanity.

It is because of values like this that we are in the mess that we are in.

Charity vs. Justice

I subscribe to a daily newsletter from Jim Wallis's Sojourners. Each day, it includes a quote, usually on faith and social justice. Yesterday it was Bill Moyers, and it is worth repeating in full:

Charity depends on the vicissitudes of whim and personal wealth; justice depends on commitment instead of circumstance. Faith-based charity provides crumbs from the table; faith-based justice offers a place at the table.

I'm Back

I've been away for awhile -- illness and personal issues around illness. But I'm back and hope to be commenting at a more intense pace than before.