The Commons is a weblog for concerned citizens of southeast Iowa and their friends around the world. It was created to encourage grassroots networking and to share information and ideas which have either been suppressed or drowned out in the mainstream media.

"But if the cause be not good, the king himself hath a heavy reckoning to make, when all those legs and arms and heads, chopped off in battle, shall join together at the latter day and cry all 'We died at such a place;' some swearing, some crying for a surgeon, some upon their wives left poor behind them, some upon the debts they owe, some upon their children rawly left. I am afeard there are few die well that die in a battle; for how can they charitably dispose of any thing, when blood is their argument? Now, if these men do not die well, it will be a black matter for the king that led them to it; whom to disobey were against all proportion of subjection." (Henry V, Act V, Scene 4)

Friday, October 21, 2005

The price of Bush's cronyism -- Michael Brown's Feeble FEMA Response

In the midst of the chaos that followed Hurricane Katrina, a Federal Emergency Management Agency official in New Orleans sent a dire e-mail to Director Michael Brown saying victims had no food and were dying.

No response came from Brown.

Instead, less than three hours later, an aide to Brown sent an e-mail saying her boss wanted to go on a television program that night -- after needing at least an hour to eat dinner at a Baton Rouge, La., restaurant.

The e-mails were made public Thursday at a Senate Homeland Security Committee hearing featuring Marty Bahamonde, the first agency official to arrive in New Orleans in advance of the Aug. 29 storm. The hurricane killed more than 1,200 people and forced hundreds of thousands to evacuate.

Bahamonde, who sent the e-mail to Brown two days after the storm struck, said the correspondence illustrates the government's failure to grasp what was happening.

''There was a systematic failure at all levels of government to understand the magnitude of the situation,'' Bahamonde testified. ``The leadership from top down in our agency is unprepared and out of touch.''

The 19 pages of internal FEMA e-mails show Bahamonde gave regular updates to people in contact with Brown as early as Aug. 28, the day before Katrina made landfall. They appear to contradict Brown, who has said he was not fully aware of the conditions until days after the storm hit. Brown quit after being recalled from New Orleans amid criticism of his work.

Thursday, October 20, 2005

Advertising as Payola: Who really owns CNN?

Advertising as Payola: Who really owns CNN?
by HollywoodOz
Wed Oct 19, 2005 at 07:22:30 PM PDT

So I'm watching CNN today, taking it easy, putting my feet up, and as Anderson Vanderbilt-Cooper does his best to fulfill his new News-Rockstar persona by clambering over rusted out New Orleans cars and digging crusty beads out of rubble, something struck me... actually, it's struck me a few times over recent months, but it struck harder today.

Every ad break features ads for companies that make no products I can buy.

And I'm not just talking a few of them, I'm talking loads. Tons. Something close to a majority, even.

Let's roll through a few examples:

BOEING: This ad tells me how Boeing is working to ensure that the future is wonderful, because they're, I dunno, creating planes that will fly in space or something. So I went to Boeing's website to see if they had anything I could buy now, but alas, they don't. I did, however, find reference to programs such as their commercial airplane division, integrated defense systems, Boeing aircraft trading, airport technology, and something with the somewhat dubious title of Phantom Works. As much as I thought how much fun it might be to set up an account for MyBoeingFleet, turns out it's only for airplane owners, operators, and repairers. Which makes me wonder what possible return could Boeing get out of advertising to me?

DOW CHEMICAL: This ad takes great pains to tell me how Dow is awesome because they make the chemicals that everything in the world needs to be produced. Which is great, but what the hell do I care? I'm not in the market for Ethylene Oxide, nor Vinyl Acetate Monomer, and as much as Dow's `craft products' page tells me I can get a great deal on Styrofoam to make something called a `pumpkin block tower', I'm not entirely sure how much of a spike in Styrofoam business the company would need to generate from their ads to make them worth the money spent running them during CNN's prime time. Dow does, however, spend millions ($2.1m in 1997) on lobbyists. In fact, the company Greenpeace named 'polluter of the century' has over 25 full-time lobbyists in DC, and another 17 in Texas, where many of their plants are located. They seem to have no trouble getting whatever they want from our politicians, so the question remains... why are they advertising to me?

LOCKHEED MARTIN: Watching this ad made me feel really good about being in North America, and about how Lockheed Martin is ensuring that we all remain free. But when I went to their website to thank them by purchasing some of their fine products, there was nothing I could buy! They list their customers as the Departments of Agriculture, Commerce, Defense, Energy, Health & Human Services, Homeland Security, Housing and Urban Development, Justice, Transportation, Environmental Protection Agency, NASA, the Social Security Administration, the Office of the Secretary of Defense, the governments of Japan, Turkey, Chile and China, and the US Postal Service... but nowhere does it list `me'. So I looked deeper, at their products page... hmm... I guess if I save up I could maybe afford a C-141 Starlifter, or have the LM boys come around and turn my basement into a Center of Command Operations, with my very own Command Readiness Trainer System. And you know, that Compact Kinetic Energy Missile they're pushing would look REALLY good on the Prius... But here's the bottom line: Lockheed Martin sells nothing I can buy. And thus I again wonder... why are they spending money advertising to me?

BRITISH PETROLEUM: BP is great! How do I know this? Because they tell me so! According to this ad, which features a barely legibile `everyman' wondering where the next great advance in fuel will come from once oil runs out, BP leads the way because they plan to invest $1b in expanding natural gas production next year. Actually, when I think about that, it's completely irrelevant, especially since my car doesn't run on natural gas AND natural gas has risen in price by about 6000% in the last, I dunno, three days? Regardless, I wanted to tell BP that I was down with their bold plans to make lots of money on a natural resource, but then it dawned on me... there are no BP gas stations in the US! Oh sure, they have a stake in Amoco and Arco, but neither of those was being advertised on CNN - just BP.
So, once again... Why is a company that I can't buy anything from spending money advertising on CNN to me?
Update: As others below have pointed out, it seems there are BP gas stations in the US now. I'll concede the point, though their website doesn't make mention of them.

The UNITED STATES TELECOMMUNICATIONS ASSOCIATION: The TV ad for the USTA wants me to know that I can make a whole whack of investment profit if I invest in their member companies and tell the government to update the nation's telecom laws "to encourage market-based competition for communications." I guess they'd prefer I don't use a little independent thought and realize that such a move would mean my phone bill would go through the roof, but either way, I wanted to reward their advertising spend by buying something from them... like Adelphia. Alas, they sell nothing I can purchase. I could potentially join their association if I wanted to, but I'm not sure they're my kind of social crowd. So again I ask... Why are they advertising to me?

CONOCOPHILLIPS: Now this was a weird one. After a fairly generic ad that seemed to be saying how wonderful ConocoPhilips was for selling energy, or something (it was unclear what they do, much like the old ad that would tell me to `try the Purple Pill' but not tell me what it does), when I accidentally typed "canocophillips" into my Firefox URL window, it Google-forwarded me to a pdf file telling me about the effluent monitoring requirements of a Californian Conocophillips `tank farm', complete with lists of acceptable mercury, silver, lead and arsenic that can be pumped into the water supply. I figured that wasn't CP's actual website, so I corrected my typo and put a .com at the end, and lo and behold, I was right. So what can I buy from ConocoPhillips? Not a lot. I can go to one of the many gas stations they own, but then again, not once in the ad did the parent company mention those brands they own, nor encourage me to use them. What they were seemingly advertising was how awesome the corporate HQ is. So I'm baffled... why advertise to me?

Of course, there have been other advertisers like these that I've noticed on CNN in the past, like the one a few weeks back that seemed to be telling me, without actually saying the words, that they'd be an awesome company to buy a nuclear reactor from. Another doozy was the Royal Saud Investment Group, which was advertised about a year ago, when the Saudi royal family was copping a lot of flack for their close friendship with the President, and terrorists, and not necessarily in that order. As reported by Air America's Randi Rhodes, the ad basically ran along the lines of... "We're Saudi Arabia... We love you!"

It would have been hilarious if not for what was behind it. Around the time that ad started running, which had been very critical of Saudi Arabia, suddenly stopped discussing the Saudi royals. They stopped criticizing Saudi Arabia's lack of democracy, and their continual raising of oil prices, and their torture of prisoners. They no longer mentioned the talk, pre-election, that the Saudi Prince had told George W. Bush that they'd lower gas prices just before the November 2004 election. It was as if the words "we love you" had convinced CNN that Saudi Arabia really did have a boner for every American.

If you've ever seen the excellent documentary, The Corporation, you'll recall a story about a pair of Fox reporters, Jane Akre and Steve Wilson, that had exposed that Monsanto were pushing cow steroids as a means of expanding production for dairy farms. The udders, they reported, would expand to the point where the cow was in agony. Much of the time, the udders would bleed, and infections and pus would leak into the milk itself. For some cows, their udders dragged along the ground, they were so big. And what was worse, the steroids would then leech through into the milk itself, to be fed to our children at school.

Fox demanded the report be altered some 30+ times before it finally ran, demanding words such as "cancer" be switched for "health concerns", etc. The journalists refused, stating that this was important news, only to be told, "We paid $3 billion for these television stations. We'll decide what the news is. NEWS IS WHAT WE SAY IT IS."

Eventually, Fox killed the piece altogether, and as one of the journalists recounted, she was told that Monsanto spent tens of millions of dollars a year advertising their products on Fox, and so there was no desire at all to piss them off, nor retain the journalists in question. The journalists went to court to fight their unfair dismissal, but Fox was let off by the judge because, and I quote, "It isn't illegal to lie on TV," which meant they weren't officially whistleblowers, and thus had no case.

I caught up with one of those reporters, Jane Akre, a veteran of several decades of TV journalism, at the Sundance Film Festival when The Corporation played there in 2004, and I asked where she was working now. She replied that she hasn't really worked since. "Who would hire me now? They know they can't make me shut up - so I'm done." Then she asked ME about freelance corporate copywriting! I was gobsmacked - a trailblazing woman who should be celebrated and iconized was asking me for work.

And that, in my opinion, tells me all I need to know about the above advertisers and why they're running non-stop ads on CNN, CNN Headline News, MSNBC, Fox News... because when the ads are running, the criticism and investigation stops.

See for yourself - start taking notes of the ads you see on CNN. The next time you see an ad telling you how great it is that GE makes weaponry for the Department of Defense, mark it down. The next time you see a defense contractor advertise products you can't buy - mark it down. Because these are the companies that REALLY own CNN.

A quick look around the net will tell you WHY it's important for these companies to shut CNN up. Dow is STILL Refusing to properly compensate the dead and disfigured after the Bhopal disaster, Boeing has accepted liability for the Alaskan air crash that killed 88 people in 2000, while hiding sneaky sub-contracting scams on defense projects, and recent mass sackings haven't helped their image, while Lockheed Martin spends more time in court than your average DA for their corruption and kickbacks. BP and ConocoPhillips could do without any further discussion of the fact that gas prices have doubled, and CNN seems to no longer be interested in that topic, or if they are, they blame it on hurricanes, even though prices were skyrocketing for months earlier.

Now, some may say that the reason these ads are running is because they drive up the share price or the companies in question, so I looked them up:

ConocoPhillips up 75% since Nov 04
Dow Chmical same as Nov 04
Boeing Air up 40% since Nov 04
Lockheed Martin up 10% since Nov 04
British Petroleum up 10% since Nov 04

Considering gas prices are nearly double what they were a year ago, and we're engaged in TWO wars, these share prices are pretty dire, which I would think would disprove the 'advertising as a share price motivator' theory. Which only really leaves one viable theory: that the ads pay for journalists to look the other way.

The advertising of defense contractors and energy giants on news networks is nothing short of payola. And it must be stopped - NOW.

UPDATE! Thanks to Elise for pointing out the ads from Kerr-McGee, a company that calles themselves "a leader in oil and natural gas exploration and production", in their CNN ads, yet sells nothing any of us can buy - in fact, they don't list ANY products on their website at all.

Additionally, thanks to CakeStick for pointing out the oh-so-regular Tyco ads, which tell us how vital a part of "our world" they are, despite being based in the tax haven of Bermuda. Next time I need a "safety needle [that] provides engineering controls that maximize clinician safety without sacrificing clinical flexibility", I'll be sure to give them a call. Just don't talk about former owner Dennis Koslowski's $6000 gold-laced shower curtains if there'a TV camera on you, Mr Blitzer.

Further Update: I decided to do a little further research, to see how entwined these companies are with the corporate side of CNN, and what I found wasn't surprising.

* Former CNN correspondent joins Boeing Florida: Brian Nelson, a former CNN correspondent and veteran anchor, has been appointed director of communications for The Boeing Company's Florida operations based at the Kennedy Space Center.

* Boeing Unveils High-Speed Global Communications Service - CNN, Loral, Alenia, Matsushita, Mitsubishi, CNBC to Participate

Then there was this blurb about Kerr-McGee's advertising on their website, complete with links to the ads themselves, which made me vomit a little in my mouth:

Kerr-McGee has seven television commercials that air on network and cable programming in the United States. The 30-second spots air on CBS’s Face the Nation, NBC’s Meet the Press and various news programs on FOX News, CNN and MSNBC.

Environment: The environmental spot highlights the company's long-standing commitment to environmental stewardship, as well as Kerr-McGee's use of innovative spar technologies to provide the United States with vital energy resources.

Uinta Basin: Kerr-McGee places priority on caring for the environment as it explores for and produces oil and natural gas. This television spot features the company’s U.S. onshore operations in Utah’s Uinta Basin, and describes how the company focuses on being a good neighbor to the environment.

Yuck. Clearly neither of those are intended to push up share prices, they're nothing more than 'don't hate us for destroying the environment' propaganda pieces.

Remember Silkwood. Peace out.

Wednesday, October 19, 2005

"Rent-Seeking" Economy

From Wikipedia, the free encyclopedia.

The phenomenon of rent-seeking was first identified in connection with monopolies by Gordon Tullock, in a paper in 1967. It takes place when an entity seeks to extract uncompensated value from others by manipulation of the economic environment -- often including regulations or other government decisions.

The phrase was coined in 1973 by Anne Krueger in a paper written independently of Tullock's work. The word "rent" in this sense is not directly equivalent to its usual use meaning a payment on a lease, although it stems from Adam Smith's division of incomes into profit, wage, and rent. [1] Rent-seeking behavior is distinguished in theory from profit-seeking behavior, in which entities seek to extract value by engaging in mutually beneficial transactions. [2] However, in practice, it is often difficult to separate beneficial profit-seeking from detrimental rent-seeking. It can be a matter of opinion.

Rent-seeking is often associated with lobbying for economic regulations such as tariffs. For instance, if FooCorp, a domestic producer of widgets, can lobby the legislature to levy a tariff upon widget imports, then FooCorp can sell its widgets at a higher price. If the legislature bans the import of widgets, or effectively bans them through high tariffs, then the additional price extracted can be quite significant. Collusion between firms and the government agencies tasked to regulate them can be a haven for rent-seeking behavior, especially when the government agency must rely on the firms for knowledge about the market.

The moral hazard of rent-seeking can be considerable. If a firm can calculate the cost of lobbying, bribing, or otherwise causing the government to enact a favorable regulation, then it can compare this cost with that needed to accomplish a similar benefit within the market -- for instance, by capital improvements or increased efficiency. If "buying" a favorable regulatory environment is cheaper than building more efficient production, then a firm may reap incomes entirely uncompensated.

Claims that a firm is rent-seeking therefore often accompany allegations of government corruption, or the undue influence of special interests.

Rent-seeking behavior, in terms of land rent figures in Georgist political theory, where the value of land is largely attributed to the actions of the government (for example, road building) and the community in general, rather than being produced by the land owner.

Garrison Keillor - The land of Republican perfection

The land of Republican perfection
Where the only mistake you can ever make is to confess your sins.

By Garrison Keillor

If your alderman introduced a resolution in the city council called the Salute to Our Boys in Uniform Resolution, which proclaimed that we support the troops in their mission to light a beacon of freedom in a dark world, etc., and in small print in Section II, Division A, Paragraph 4, Line 122 was a provision giving the alderman's brother-in-law Walt the contract to haul garbage, the honorable gentleman would be denounced as a crook and a dodo. And yet this same dodge has worked beautifully for Republicans in Washington, who have clubbed their hapless opponents over the head with Old Glory and then set up shop and profited mightily, and more power to them. I am in favor of corruption so long as it makes people truly happy. And so long as somebody writes a good confessional memoir like John Dean's "Blind Ambition."

At this point in time, I don't see Karl Rove or Tom DeLay writing a good mea culpa, and I doubt that Colin Powell or Donald Rumsfeld will either. And of course presidents never do, and here is one more proof that we are not now nor have we ever been a Christian nation. Confession is at the heart of the faith. (All have sinned and come short of the glory of God.) But under this administration, the faith has been revised, all the stuff about the poor has been tabled and the confession of sin omitted, and prayer is now a promotional device in which you thank God for making you the terrific person you are. In the Christian view of the world, these folks rank lower than outright atheists, which is a terrifying aspect of the faith -- better never to have believed than to use sacred things for your grimy self-aggrandizement -- and which might scare a Republican into writing a decent book. One can hope for this.

Meanwhile, last week brought some good news, a report of President Bush having read a book during his long August vacation, a 546-page tome about the 1918 influenza epidemic, according to White House spokesman Scott McClellan. Whether the president read the entire book himself or read passages of it highlighted by his staff, McClellan did not say. But it's good news for us writers (somewhat offsetting the disappointment of seeing the Nobel Prize go to the dismal and tedious Harold Pinter) to imagine that the president might now and then interrupt his ambitious exercise program to pick up a book, sit down and read it. Or a newspaper.

Literacy is a good thing, as the president himself says every year during Literacy Week. A little more literacy might put him in touch with the intellectual standards that prevail today, so he could have anticipated the storm of opposition to the nomination of Harold Miers to the Supreme Court. (I have changed the nominee's gender to ward off accusations of sexism.) Harold's friends in the administration did him no favors when they came bounding to his defense, pointing to his lovely personality and his attention to correcting grammar and misspellings in staff memos. The ability to proofread is not in itself the best recommendation for a seat on the high court, nor is a pleasant disposition. And then the conservative columnist David Brooks savaged Harold simply by quoting the fluff and chaff he wrote while serving as president of the Texas bar association, stuff like "More and more, the intractable problems in our society have one answer: broad-based intolerance of unacceptable conditions and a commitment by many to fix problems."

Not to worry, Harold. Every member of the Senate Judiciary Committee has written worse than that. Take your seat at the witness table, smile in a determined way, and start your engines. When they ask about Roe v. Wade, lead them into the legal briar patch and run them around until they get tired. If they ask about wife beating, talk about Sweden, and if they ask who was that woman you were seen with last Saturday night, talk about the planet Saturn. Not all questions need be answered. Say what you want to say and express your commitment to solve problems and change unacceptable conditions within the framework of your mission. Do this with utter confidence, no shadow of uncertainty flickering across your handsome features, and above all -- listen now -- do not ever confess to a single mistake, error of judgment or misstatement of fact.

You ain't done nothing wrong, Harold. You is the man.

Stirling Newberry - Revolt of the Economists

Revolt of the Economists
by Stirling Newberry

The Nobel Memorial Prize for economics is often an award for full dress wingnuttery - the parade of hard right economists who have taken the stage in Sweden and extolled the genius of the reactionary regime in economics is legion - Schelling, Prescott, Mundell. They did brilliant formal work, but also used the pulpit provided to go far beyond economics and into politics. The architecture of economics that they have built is centered around a simple idea: allow asset inflation, and then keep the people who roll the money over very, very, very happy. The problems of "rational expectations" economics could simply be called "the rich rent the world to the rest of us".

The rise of a new economics is at hand - one which overthrows "rational expectations" and the Friedman-Mundell economy. The first shots of that rebellion have been fired - over inflation and unemployment. And not strangely, the libertarians are selling the ammo.

In the last few months a revolt has been rising against the economy that has been built - the Friedman-Mundell economy, which replaced Keynesianism. In Keynesian economics, the government allows inflationary monetary policy, and then uses tax policy to reduce rents and pressure down inflation by both economies of scale and spreading demand. The two go hand in hand - make it so that more people can afford goods, and goods will get cheaper to produce as fixed costs are paid. In the Friedman-Mundell economy, diminishing returns of energy mean that the economy has to be restrained, and instead of government spreading demand and investing, asset inflation is used - both to allow inflationary demand, and to force savings on the future. Keynesians save and invest, FMers speculate and squander.
An economy has to be believed to be seen. One doesn't measure most economic variables directly, but must sift them out of other observations. This means that when a new economic policy regime comes into existence, it often adjusts statistics so that it is measuring the responsiveness to its incentives. For the Friedman-Mundell economy, this has been embodied in changes to the Unemployment Rate and the Consumer Price Index which take asset inflation off the table as part of inflation. The more radical FMers argue that we should also change the way the savings rate is calculated, so that asset inflation is counted as "savings". Basically if you bought a house for 200K and it is now worth 500K, when the value of renting that house has only gone up 50%, the FMer argues that you have 200K of "personal savings".

But economic policy regimes only work so long as people believe the drift of what the numbers tell them. If unemployment feels low, and the number is low, then people think it probably is low. However, in the recovery from the 2001 recession, more and more people in the financial and economic world have openly questioned whether the current economic paradigm is measuring the world that voters and consumers live in.

The first blow to confidence was the stream of absolutely unbelievable jobs projections from the Bush executive attached to their tax cuts. In order to produce the number of jobs that they promised, American productivity would have had to crater. While productivity has taken a hit, it didn't crater. Brad DeLong was all over this one like red marks on a failed macro pop quiz.

The second was the NBER changing the rules to end the 2001 recession early. By the old rules, the recession would not have ended until May of 2003 or perhaps August of 2003. The result is that the recovery conforms to no known rules of recoveries past. No economy has produced so much "GDP" and so little employment.

And this slogging recovery led to the first open break: namely, the unemployment rate stopped resembling what people experienced. Even as jobs were scarce, and payroll employment crept upwards, the unemployment rate sank as people took non-paying jobs, illegal immigrants were counted in jobs but not population - the UI rate marched downwards.

At the same time CPI remained nominally subdued. And this too made no sense in two key ways. First of all, energy and food are supposed to vary around the core rate of inflation in the economy - whether Keynesian or FMer - part of the economic perscription is to prevent raw material costs from climbing the curve of diminishing returns. What this means is that at a certain point, the next barrel of oil is more expensive than the last, and the one after that is more expensive still, and so on. Staying off of the steep part of that curve is important.

For some time the "core" rate of inflation has been low, while energy has spiralled upwards. This is a contradiction in terms. A "core" rate of inflation can only be "core" if removing other variables only reduces volatility, and doesn't change the trend line. This is basic skedastics (study of volatility).

The other complaint was about the two waves of changes made to the CPI number - the first in the early 1980's which took out housing inflation, and the second in the mid 1990's which took out shoe leather costs and changed the basis of inflation from constant relative standard of living to constant absolute standard of living. These two changes have shaved a great deal off of inflation, and that has been used to lower social security costs, since social security is linked to CPI-U.

What should have been done was create an CPI-R, Consumer Price Index for retired people. This should not have included housing asset inflation - since retired people are cashing out, not in, to houses, but it should also have reflected the enormous gains in health inflation, since for retired people this is a larger component. This would have restrained the government from allowing health inflation.

Since January I have been using government numbers to calculate a CPI-W that reflects rising home costs - it runs almost 2% above the official number. The Mess That Greenspan Made calculates a series. The result, the recent home boom is inflationary. Combined with Greenspan's own calculations of "equity extraction", and my theory from 2004 - namely that all of the hiring in the economy is pure "Phillips Effect" - inflationary - job creation, is confirmed. We don't have low unemployment, we have high inflation for a large sector of the work force, and another large sector of the work force that is just dropping out of the cash economy and sneaking by.

In short, the reverse of the 1960's, when America was depovertized.


The other part of the equation is the creation of a large protected economy. If asset inflation is encouraged, then, logically, we should see effort moving away from capital - and exports, and towards rent, and those forms of economic activity that are shielded from import competition. And so we have. All of the job creation has been from housing, health care and homeland security. The US has not created one net export job in this recovery.

This becomes a vicious circle - protected economy rewards people in the protected economy, which encourages people to invest in the protected economy, which creates asset inflation, and pulls in more capital to the protected economy, which means the need for more revenue reductions, and again, lower and lower expectations from export.

This vicious circle was supposed to be propped up by Iraq - steal the one thing we need export dollars for - oil, and that would allow the circle to spin a lot longer. It would also create an export target. It was a brute force attempt to create a colony as a market for goods, and as a source of raw materials. Meanwhile money would be put in the hands of the upper class which ran the military contracting apparatus.

There is a word for this in 1770 - mercantilism. The current right wing order, by focusing on the problem of keeping the privileged in the system is neo-mercantilist.


All this may sound like inside baseball - dense with econospeak. However, what it means is explosive. The left is now on the forefront of having ideas - economic ones - which measure a different economy, and point to a different series of incentives. Instead of creating asset inflation - and with it resource inflation - to drive the economy, it points the way to shifting economic incentives away from rent and extraction and towards capital formation. The reality isn't that the right wing is capitalist against a socialist left wing, the reality is that the right wing is neo-mercantilist, against a neo-capitalist/neo-socialist left.


So what is the bottom line. The bottom line is this - if the FM economy worked, then we have nothing to worry about - inflation is low, though with some pressures, unemployment is low, so there is plenty of room to raise interest rates, and everyone should be happy as the economy takes off for a boom phase of the expansion. But the evidence, even from the inside, is that the FM economy is not working - that instead of 5.1% unemployment and 4.9% CPI, the reality is that inflation is 7.2% and the labor slack number is 7.2%. Instead of a nice misery index of 10%, the reality is a crushing 14.4%

In line with the FM economy - the solution being proposed is taxing the consumer to pay for the privileged to profit. Better luck next life America, and thank you for playing "How to Cheat the greedy electorate".

The next year will tell, and the evidence, from wall street, the bond market and the public is, that we are about to spin the FM dial. What are we going to replace it with? The answer is complex, and it will require some examintion of ideas that are more prevalent on the libertarian right than the left. You see, libertarians and liberals think about an issue which doesn't bother conservatives and reactionaries much, namely the problem of "the veil of money". And it is the question of money that is going to dominate the transition to the next century.

Comment by Benito:

"This becomes a vicious circle - protected economy rewards people in the protected economy, which encourages people to invest in the protected economy, which creates asset inflation, and pulls in more capital to the protected economy, which means the need for more revenue reductions, and again, lower and lower expectations from export."

What you are suggesting Stirling sounds very much like the rent-seeking society described by Anne Krueger (1974) in her famous article "The Political Economy of the Rent-Seeking Society" American Economic Review, American Economic Association, vol. 64(3), pages 291-303. Indeed, rent-seeking is a big topic in political-economy, but I haven't really seen the rent-seeking argument applied to the US post-Reagan macroeconomy as a whole in the way you do here. Very interesting. Have you published something on this yet?

Bascially, as I understand her argument, rents attract entrants into the rent-paying economy which reduces overall economic well-being due to the competition over rent extraction that entails. In essence, resources are poured into the rent-seeking economy by competing actors in order to secure rent-bearing assets (jobs in protected industries, import quotas and so on) in lieu of investment into more productive activities. In layman's terms, we are investing our time and resources into securing a larger piece of the pie rather than into ways into which to make the pie bigger for all.

You can see this directly in a couple of places -- the explosion in the tuition for higher education, especially for professional degrees, for example, is a result people wanting access to jobs in the protected rent-producing "service" economy. Tuition is therefore an unproductive bribe paid to the gatekeeper, the universities, which results in a ticket(degree) into the protected sector. Not only is the bribe unproductive, but the greater loss comes in enticing people to be lawyers or MBAs instead of, say, engineers. We develop, therefore, a useless, parasitical professional class that survives by manipulating capital for rent extraction or providing protected services. The irony is that this is self-defeating for people trying to enter the protected sector -- increased demand means the gatekeepers are able to extract more from each entrant while more entrants reduces the rent each individual rent-seeker manages to extract. Fixed costs of entry are increased while final payoff once entry is achieved is reduced -- everybody loses.

Another place where you see this, obviously, is the political system -- with the political parties being equivlent to rent-extracting mobsters who provide "protection services" to interests seeking protection.

You are exactly right to call this mercantilism.

by Benito on Wed Oct 19, 2005 at 07:55:48 AM PDT

Tuesday, October 18, 2005

Adam Bellow - Dealing in Dynasties

October 18, 2005, 8:26 a.m.
Dealing in Dynasties
Cronyism, nepotism, and the current President Bush.

By Adam Bellow

According to a Wall Street Journal/NBC poll, 54 percent of Americans think President Bush values party loyalty and personal friendship over competence. The poll was prompted — as if you didn’t know — by Bush’s habit of appointing friends and retainers to major jobs in his administration. Some of these seem qualified enough — Condi Rice, Alberto Gonzales. Others seem more questionable, none more so than Michael Brown and Harriet Miers.

In one sense this is nothing new for Bush. From the start, his administration was marked by a web of family connections, and certain members of the press were quick to cry nepotism. But, perhaps coincidentally, since the ascendancy of Senate Minority Leader Harry Reid — himself the subject of a major nepotism expose in 2002 — such talk has softly guttered out. Now it’s back in a new form — allegations of cronyism.

Dubya & the Dynasty
Nepotism and cronyism appear to be different things, but from a practical and ethical standpoint, the distinction is virtually meaningless. Only the modern liberal fetish with “blood ties” makes these acts appear different in kind. Both offend our public creed of meritocracy, and both are best understood as forms of family patronage. Which is to say, they are two faces of the same dynastic strategy.

You cannot understand George W. Bush without an understanding of his family, and dynastic families in general. Indeed, it might be said that Bush’s familial approach to politics has been his greatest strength and greatest weakness — his Achilles heel. Like Bonaparte, the same dynastic habits that brought him to power may bring him down again. They don't teach a course in patronage and nepotism at Harvard Business School — but they should. Instead they pretend that it doesn't exist. That does us all a disservice.

Dynastic families are not like yours and mine (unless your name is Bush or Kennedy). They are self-conscious, multigenerational enterprises displaying strong collective discipline and an innate, untutored grasp of certain perennial modes and orders that advance the family’s interest. All the great dynastic families in history have used these methods, though in our post-dynastic age they are most visibly preserved by the mafia. Indeed, those who compare the Bushes to the Corleone family are not far off the mark. Through a tangled web of marriage, adoption, instrumental friendship, and godparenthood, the typical mafia don creates a series of concentric rings around his family that extends his power deep into the countryside. Likewise, the Bushes have created an enormous social network based on their family. Like other large successful clans they prefer their own company and that of their relatives, friends, and retainers. Such families typically have their own compounds where they gather apart from the rest of society, and when someone useful swims into their view they adopt him as part of the family. This was the way the Bushes dealt with Prince Bandar of Saudi Arabia, whom they christened "Bandar Bush."

In short, dynastic families are nothing but socially sanctioned mafias based on nepotism and various forms of patronage. Now that we have a dynastic family in office, it is inevitable that this will be exposed to public view. Still, it is more than a little ironic for Bush's opponents on both Left and Right to be crying foul as though cronyism is not a permanent feature of the American political landscape. As Rick Brookhiser points out, cronyism has a long history in American politics. And as Jonah Goldberg noted in his qualified defense of cronyism, it is the soul of all political machines.

Abe's Cronies
Lincoln understood this very well, for while he himself was relatively free of nepotism (with the exception of some relatives of Mary Todd), his administration was heavily marked by cronyism. This stands to reason insofar as Lincoln, a man without family, rose to prominence through his talent for forming friendships. And friends delight in being useful to each other. It was Lincoln's Illinois friends who fanned out like a phalanx and got him nominated for the presidency at the Chicago convention, and he left no friend behind when it was time to staff his first administration. (A wonderful book has been written giving chapter and verse on his appointments, called Lincoln and the Patronage.)

Lincoln, having been deeply involved in building the Illinois Republican party, understood that patronage — jobs for the boys — is the sine qua non of a political organization. Ideology is important, but patronage is the glue that holds it together. In the words of G. W. Plunkitt, “Men ain't in politics for nothin'. They expect to get somethin' out of it.” The lifeblood of politics is the undisclosed commerce in favors that goes on behind the scenes. It is a dance of reciprocity: You scratch my back, I'll scratch yours. Patronage creates a web of obligations, a moral economy based on loyalty and gratitude. As Joseph P. Kennedy's father P. J. Kennedy used to say — a great political boss in his day — "Be grateful and be loyal."

This insight was not lost on FDR, who was arguably the greatest master of patronage in American history. The alphabet soup of federal agencies created by the New Deal was a patronage bonanza, creating over 100,000 new jobs which were listed for convenience in a little volume called the "Plum Book." Somewhere in FDR's correspondence is a brief note written to postmaster James A. Farley — the traditional chief of federal patronage — in regards to a particularly persistent and irritating office seeker: "For god's sake, if you love me, find a place for this woman!"

All of this is very ancient and is essentially coeval with bureaucracy. We can leave out the ancient Chinese imperial civil service and skip ahead to the papal curia. Each cardinal had what was called a "familia" — a retinue of bureaucratic retainers who depended on him for their appointments and sinecures. Since one's fortunes were permanently tied to those of your benefactor, considerable foresight was required in choosing the right patron. The pope's familia was the highest and enjoyed the richest spoils. They also functioned as an engine of mobility in an otherwise static society: Many a priest of humble origin rose to the heights of power and wealth through the patronage of a high-ranking prince of the church, and many became cardinals and popes themselves.

An 18th-century general's staff was likewise called his "military family." The most famous in our history was Washington's, which included the sons of many prominent Virginia families, as well as Alexander Hamilton, a nobody from nowhere who rose through Washington's patronage to the heights of the American establishment. (Hamilton is a great study in nepotism and cronyism, since he started his New York legal practice by exploiting his father-in-law's business connections — exactly as John Adams did.)

Judgment Problem
In all such cases, merit, and patronage were deeply intertwined, since (as I argue in my book on the subject) the informal and unwritten "rules of nepotism" require that patronage be bestowed with discretion on those who will not bring discredit on the patron. The same applies today in modern bureaucratic settings, though considerably modified by the meritocratic values of our technocratic age.

Which brings us to the Bushes. People have been trying to figure out what kind of bubble the Bushes live in for a long time. But it is not the cocoon of wealth that insulates them from reality and explains their frequent missteps and tone-deaf remarks, but that of family itself. The problem for W is that the ethic of friendship and loyalty that the Bushes cultivate and that brought him to power is threatening now to bring him down. He has made the common dynastic mistake of confusing loyalty and merit; in his eyes, the merit of people like Michael Brown and Harriet Miers consists in their being his friends. They are loyal to him, and their loyalty must be rewarded. Thus in Bush, the very loyalty that was a private virtue has become a public vice. His greatest failing is his inability to hold people accountable for their errors. Because they are his creatures, he seems unable to disown them or even to see their faults. This is an inexcusable failing in a democratic leader. As the Machiavellian FDR would be the first to acknowledge, aristocratic virtues have no place in the modern executive. For while Americans do love a prince, they want nothing to do with a king.

— Adam Bellow is executive editor at large for Doubleday and former literary editor of National Review. He is also the author of In Praise of Nepotism: A History of Family Enterprise from King David to George W. Bush.

Monday, October 17, 2005

Jay Bookman - D.C. press co-opted by war lies

D.C. press co-opted by war lies
Jay Bookman
Atlanta Journal Constitution
Published on: 10/17/05

These days, Washington is looking a little too much like Las Vegas of the early '80s. Neither place should be flattered by the comparison.

Working as a kid journalist in Vegas back then was like finding yourself at the opera -- not in the audience but onstage, surrounded by prima donnas playing out a high-stake drama of power, greed, sex and murder.

Headless bodies were appearing in the desert. Cars were getting blown up. A local federal judge publicly attacked federal law enforcement as "a bunch of crooks." Mobsters were not just part of the community, they were public figures, and they would call favorite reporters to plant stories about their rivals or discredit cops they couldn't buy off.

And everyone who thought of themselves as players -- mobsters, politicians, businessmen and not a few journalists -- traded information, access and anything that might bring them that most treasured of Vegas commodities, "juice."

"Juice" was power. "Juice" not only meant you got your phone calls returned, it meant you got free seats for Frank's show at Caesars. Juice meant you knew people who knew people; losing juice was the worst thing that could happen to you.

Well, other than ending up out in the desert without a head. And the crazy thing is, everybody in town acted as if all this was perfectly nice and normal.

Everybody but FBI Special Agent in Charge Joe Yablonsky. He came to town with this notion that Las Vegas was part of the United States and that federal law applied there. He thought that people in Vegas ought to pay taxes on their income, and the Mafia shouldn't skim profits from casinos and re-invest it in politicians. He quickly became a reviled figure, and some of the most powerful people in Vegas tried to run him out of town. Journalists would attack him regularly, complaining that he just didn't understand how Vegas worked.

But Yablonsky knew quite well how Vegas worked. He proved it by putting mobsters, politicians and businessmen behind bars.

Oh, and that federal judge too.

That was a long time ago. But over the past few years, watching how the Washington press corps handled the run-up to the Iraq invasion, a sense of déjà vu kept creeping over me. I had seen this kind of thing before.

The Washington establishment had decided that the nation had to be taken to war. That much was clear. But watching from the outside, it looked for all the world as though the leading lights in the Washington press had decided to play along with that decision.

Thus, information that advanced the argument for war was printed or broadcast without skepticism. Information that might have challenged that decision or raised doubt in the public mind was squelched. High-profile Washington journalists who had become more loyal to Washington than to journalism simply did not do their job, and the country has suffered as a result.

Today, with the invasion looking like the biggest foreign policy mistake in U.S. history, a lot of people in Washington, including members of the press, are trying to claim they had no way to know. That's baloney.

The administration's prewar claim of an alliance between Saddam Hussein and Osama bin Laden had been transparently, ludicrously silly. Contrary to administration assertions, experts in and out of government had warned that occupying Iraq would be terribly expensive and difficult. But nobody listened, including most of the media.

Perhaps the most egregious practitioner was Judith Miller of The New York Times. She became an eager conduit for "scoops" leaked to her by the administration. By publishing those leaks in the most respected newspaper in the country, she turned fabrication into fact and turned herself into a star. She got "juice."

These days, though, Miller is being squeezed of that juice like an overripe orange. U.S. Attorney Patrick Fitzgerald is investigating charges that administration officials illegally leaked the identity of an undercover CIA operative to the press, including Miller. His grand jury probe is raising uncomfortable questions about the way information is used in Washington to reward the docile and punish the inquisitive.

It's gotten so bad that last week, Richard Cohen of The Washington Post wrote a column instructing Fitzgerald to pack his bags and leave, because he just doesn't understand how Washington works. Maybe some federal laws were broken, Cohen wrote, but those laws aren't Washington's laws. If Fitzgerald pursues the case too hard, Cohen worried, he might actually "intimidate the press in its pursuit of truth, fame and choice restaurant tables."

I'm afraid he actually meant it.

*Jay Bookman is deputy editorial page editor

Sunday, October 16, 2005

Frank Rich - It's Bush-Cheney, Not Rove-Libby

It's Bush-Cheney, Not Rove-Libby
By Frank Rich
The New York Times

Sunday 16 October 2005

There hasn't been anything like it since Martha Stewart fended off questions about her stock-trading scandal by manically chopping cabbage on "The Early Show" on CBS. Last week the setting was "Today" on NBC, where the image of President Bush manically hammering nails at a Habitat for Humanity construction site on the Gulf Coast was juggled with the sight of him trying to duck Matt Lauer's questions about Karl Rove.

As with Ms. Stewart, Mr. Bush's paroxysm of panic was must-see TV. "The president was a blur of blinks, taps, jiggles, pivots and shifts," Dana Milbank wrote in The Washington Post. Asked repeatedly about Mr. Rove's serial appearances before a Washington grand jury, the jittery Mr. Bush, for once bereft of a script, improvised a passable impersonation of Norman Bates being quizzed by the detective in "Psycho." Like Norman and Ms. Stewart, he stonewalled.

That stonewall may start to crumble in a Washington courtroom this week or next. In a sense it already has. Now, as always, what matters most in this case is not whether Mr. Rove and Lewis Libby engaged in a petty conspiracy to seek revenge on a whistle-blower, Joseph Wilson, by unmasking his wife, Valerie, a covert C.I.A. officer. What makes Patrick Fitzgerald's investigation compelling, whatever its outcome, is its illumination of a conspiracy that was not at all petty: the one that took us on false premises into a reckless and wasteful war in Iraq. That conspiracy was instigated by Mr. Rove's boss, George W. Bush, and Mr. Libby's boss, Dick Cheney.

Mr. Wilson and his wife were trashed to protect that larger plot. Because the personnel in both stories overlap, the bits and pieces we've learned about the leak inquiry over the past two years have gradually helped fill in the über-narrative about the war. Last week was no exception. Deep in a Wall Street Journal account of Judy Miller's grand jury appearance was this crucial sentence: "Lawyers familiar with the investigation believe that at least part of the outcome likely hangs on the inner workings of what has been dubbed the White House Iraq Group."

Very little has been written about the White House Iraq Group, or WHIG. Its inception in August 2002, seven months before the invasion of Iraq, was never announced. Only much later would a newspaper article or two mention it in passing, reporting that it had been set up by Andrew Card, the White House chief of staff. Its eight members included Mr. Rove, Mr. Libby, Condoleezza Rice and the spinmeisters Karen Hughes and Mary Matalin. Its mission: to market a war in Iraq.

Of course, the official Bush history would have us believe that in August 2002 no decision had yet been made on that war. Dates bracketing the formation of WHIG tell us otherwise. On July 23, 2002 - a week or two before WHIG first convened in earnest - a British official told his peers, as recorded in the now famous Downing Street memo, that the Bush administration was ensuring that "the intelligence and facts" about Iraq's W.M.D.'s "were being fixed around the policy" of going to war. And on Sept. 6, 2002 - just a few weeks after WHIG first convened - Mr. Card alluded to his group's existence by telling Elisabeth Bumiller of The New York Times that there was a plan afoot to sell a war against Saddam Hussein: "From a marketing point of view, you don't introduce new products in August."

The official introduction of that product began just two days later. On the Sunday talk shows of Sept. 8, Ms. Rice warned that "we don't want the smoking gun to be a mushroom cloud," and Mr. Cheney, who had already started the nuclear doomsday drumbeat in three August speeches, described Saddam as "actively and aggressively seeking to acquire nuclear weapons." The vice president cited as evidence a front-page article, later debunked, about supposedly nefarious aluminum tubes co-written by Judy Miller in that morning's Times. The national security journalist James Bamford, in "A Pretext for War," writes that the article was all too perfectly timed to facilitate "exactly the sort of propaganda coup that the White House Iraq Group had been set up to stage-manage."

The administration's doomsday imagery was ratcheted up from that day on. As Barton Gellman and Walter Pincus of The Washington Post would determine in the first account of WHIG a full year later, the administration's "escalation of nuclear rhetoric" could be traced to the group's formation. Along with mushroom clouds, uranium was another favored image, the Post report noted, "because anyone could see its connection to an atomic bomb." It appeared in a Bush radio address the weekend after the Rice-Cheney Sunday show blitz and would reach its apotheosis with the infamously fictional 16 words about "uranium from Africa" in Mr. Bush's January 2003 State of the Union address on the eve of war.

Throughout those crucial seven months between the creation of WHIG and the start of the American invasion of Iraq, there were indications that evidence of a Saddam nuclear program was fraudulent or nonexistent. Joseph Wilson's C.I.A. mission to Niger, in which he failed to find any evidence to back up uranium claims, took place nearly a year before the president's 16 words. But the truth never mattered. The Bush-Cheney product rolled out by Card, Rove, Libby & Company had been bought by Congress, the press and the public. The intelligence and facts had been successfully fixed to sell the war, and any memory of Mr. Bush's errant 16 words melted away in Shock and Awe. When, months later, a national security official, Stephen Hadley, took "responsibility" for allowing the president to address the nation about mythical uranium, no one knew that Mr. Hadley, too, had been a member of WHIG.

It was not until the war was supposedly over - with "Mission Accomplished," in May 2003 - that Mr. Wilson started to add his voice to those who were disputing the administration's uranium hype. Members of WHIG had a compelling motive to shut him down. In contrast to other skeptics, like Mohamed ElBaradei of the International Atomic Energy Agency (this year's Nobel Peace Prize winner), Mr. Wilson was an American diplomat; he had reported his findings in Niger to our own government. He was a dagger aimed at the heart of WHIG and its disinformation campaign. Exactly who tried to silence him and how is what Mr. Fitzgerald presumably will tell us.

It's long been my hunch that the WHIG-ites were at their most brazen (and, in legal terms, reckless) during the many months that preceded the appointment of Mr. Fitzgerald as special counsel. When Mr. Rove was asked on camera by ABC News in September 2003 if he had any knowledge of the Valerie Wilson leak and said no, it was only hours before the Justice Department would open its first leak investigation. When Scott McClellan later declared that he had been personally assured by Mr. Rove and Mr. Libby that they were "not involved" with the leak, the case was still in the safe hands of the attorney general then, John Ashcroft, himself a three-time Rove client in past political campaigns. Though Mr. Rove may be known as "Bush's brain," he wasn't smart enough to anticipate that Justice Department career employees would eventually pressure Mr. Ashcroft to recuse himself because of this conflict of interest, clearing the way for an outside prosecutor as independent as Mr. Fitzgerald.

"Bush's Brain" is the title of James Moore and Wayne Slater's definitive account of Mr. Rove's political career. But Mr. Rove is less his boss's brain than another alliterative organ (or organs), that which provides testosterone. As we learn in "Bush's Brain," bad things (usually character assassination) often happen to Bush foes, whether Ann Richards or John McCain. On such occasions, Mr. Bush stays compassionately above the fray while the ruthless Mr. Rove operates below the radar, always separated by "a layer of operatives" from any ill behavior that might implicate him. "There is no crime, just a victim," Mr. Moore and Mr. Slater write of this repeated pattern.

THIS modus operandi was foolproof, shielding the president as well as Mr. Rove from culpability, as long as it was about winning an election. The attack on Mr. Wilson, by contrast, has left them and the Cheney-Libby tag team vulnerable because it's about something far bigger: protecting the lies that took the country into what the Reagan administration National Security Agency director, Lt. Gen. William Odom, recently called "the greatest strategic disaster in United States history."

Whether or not Mr. Fitzgerald uncovers an indictable crime, there is once again a victim, but that victim is not Mr. or Mrs. Wilson; it's the nation. It is surely a joke of history that even as the White House sells this weekend's constitutional referendum as yet another "victory" for democracy in Iraq, we still don't know the whole story of how our own democracy was hijacked on the way to war.