Wednesday Morning: Simple Past, Perfect Future

There are thirteen verb tenses in English. I couldn’t recall the thirteenth one to save my life and now after digging through my old composition texts I still can’t figure out what the thirteenth is.

If I have to guess, it’s probably a special case referring to future action. Why should our language be any more lucid than our vision?

Vision we’ve lost; we don’t elect people of vision any longer because we don’t have any ourselves. We vote for people who promise us bullshit based on illusions of a simple past. We don’t choose people who assure us the road will be hard, but there will be rewards for our efforts.

Ad astra per aspera.

Fifty-five years ago today, John F. Kennedy Jr. spoke to a join session of Congress, asking our nation to go to the moon. I was six months old at the time. This quest framed my childhood; every math and science class shaped in some way by the pursuit, arts and humanities giving voice to the fears and aspirations at the same time.

In contrast I look at my children’s experience. My son, who graduates this year from high school, has not known a single year of K-12 education when we were not at war, when terrorism was a word foreign to his day, when we didn’t worry about paying for health care because we’d already bought perma-warfare. None of this was necessary at this scale, pervading our entire culture. What kind of vision does this create across an entire society?

I will say this: these children also don’t recall a time without the internet. They are deeply skeptical people who understand how easy it is to manipulate information. What vision they have may be biased toward technology, but their vision is high definition, and they can detect bullshit within bits and pixels. They also believe we have left them no choice but to boldly go and build a Plan B as we’ve thoroughly trashed Plan A.

Sic itur ad astra. Sic itur ad futurum.

Still looking at past, present, and future…

Past

Present

Future

  • Comparing Apple to BlackBerry, developer Marco Arment frets for Apple’s future (Marco.org) — I can’t help laugh at this bit:
    …When the iPhone came out, the BlackBerry continued to do well for a little while. But the iPhone had completely changed the game…

    Not only is Arment worrying Apple hasn’t grokked AI as Google has, he’s ignored Android’s ~80% global marketshare in mobile devices. That invisible giant which hadn’t ‘completely changed the game.’

  • Ivanpah Solar Power Facility in the Mojave Desert caught fire (WIRED) — IMO, sounds like a design problem; shouldn’t there be a fail-safe on this, a trigger when temps spike at the tower in the wrong place? Anyhow, it looks like Ivanpah has other problems ahead now that photovoltaic power production is cheaper than buggy concentrated solar power systems.
  • Women, especially WOC, win a record number of Nebula awards for sci-fi (HuffPo) — Prizes for Novel, Novella, Novelette, Short Story and Young Adult Science Fiction and Fantasy works went to women, which is huge improvement given how many writers and readers are women and women of color. What does the future look like when a greater percentage of humans are represented in fiction? What does a more gender-balanced, less-white future hold for us?

Either I start writing late the night before, or I give up the pretense this is a * morning * roundup. It’s still morning somewhere, I’ll leave this one as is for now. Catch you tomorrow morning — maybe — or early afternoon.

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Tuesday Morning (Kind of): Assembly-Required Future

Sorry, gang, I’ve got a lot of balls in the air today and not much time to write. I’ll try to come back as time permits to flesh out this post but no promises.

I’ve been thinking a lot about the future — apart from the political realm, because that part of our future is just plain bat-shit crey — and I don’t know, nothing seems clear. My crystal ball reads like a shattered Apple iPad display.

Take a look at this new phone concept, Google’s Project Ara. Users can assemble the components they want or need at any time. In fact, I’d go so far as to say it’s not a phone at all. It’s a new mobile computer platform with communications capability. We’ll accept it more readily if we think of it as a phone first, though, especially since we have yet to fully grasp how our current smartphones have replaced PCs.

Do enough people want a customizable device like this badly enough to merit all the effort put into its R&D?

If you’re a parent, you’ve probably stepped barefoot on a LEGO piece in the middle of the night; imagine instead stepping on your kid’s camera component for their Ara. Or the baby swallowing one of the components. Or the cat flicking off the dresser a key part you needed with all your spreadsheets for work.

Color me skeptical.

The impending decision in the Oracle v. Google lawsuit over Java’s open-source license may also play a critical role. Not because Ara’s technology may be released as open source, but because a negative outcome in the lawsuit may have a chilling effect on development by component makers. If every company participating in the Java development community (prior to Oracle’s acquisition of Sun Microsystems) believed Java was open source, BUT the court thinks otherwise, what good are any other assurances that any technology is open source?

As usual, morning threads are open. Talk amongst yourselves. What’s the future look like in your crystal ball?

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Mullah Mansour Drone Strike: Important Milestone or Radicalizing Event?

How much more ironic could it be? More than 43 years after the last Americans evacuated Vietnam, ending our disastrous occupation there, the dateline reads Hanoi on President Barack Obama’s statement today on the US drone strike that killed Mullah Akhtar Muhammad Mansour. Mansour was the head of Afghanistan’s Taliban but was in Pakistan at the time the US killed him with a drone, striking a similarity to the US “secret” bombing of Cambodia during the Vietnam war.

From today’s New York Times, we have parts of Obama’s statement:

Calling the death “an important milestone,” President Obama said in a statement, released just as he was meeting with top officials in Vietnam, that the United States had “removed the leader of an organization that has continued to plot against and unleash attacks on American and coalition forces.”

“Mansour rejected efforts by the Afghan government to seriously engage in peace talks and end the violence that has taken the lives of countless innocent Afghan men, women and children,” Mr. Obama continued in the statement. “The Taliban should seize the opportunity to pursue the only real path for ending this long conflict — joining the Afghan government in a reconciliation process that leads to lasting peace and stability.”

So Obama is saying that the Taliban should respond to our extrajudicial killing of their leader by reconciling with the Afghan government (chosen in large part by John Kerry) and working toward peace. What are the odds of that happening? Max Abrahms has some very important points to make on that topic:

Dr Max Abrahms, from Northeastern University in Boston, said the US Government does not look carefully enough at the strategic implications of its strikes on extremist leaders.

He said he had done a number of studies on leadership decapitation of a militant group and he had not found a statistically significant reduction in the amount of violence perpetrated by the group after a leader was removed.

“In fact these decapitation strikes can actually be counter-productive, because one of the assumptions of the targeted killing campaigns is that the replacement of the leader that you killed will be more moderate,” Dr Abrahms said.

“And yet I find just the opposite to be true. The replacement is even more extreme.

“So for that reason, in the immediate aftermath of a successful targeted killing, like over this weekend, the group’s violence tends to become even more extreme, in the sense that it’s even more likely to attack civilian targets.”

And so our circle of irony is complete. Obama’s statement on the killing of Mansour, released from Vietnam, shows that US military misadventures still rely on faulty logic when major moves are made. A strike made to make the Taliban more peaceful seems virtually certain to result in more indiscriminate killing of civilians.

Because I know how much Marcy enjoys miraculous “left behind” documents, I couldn’t resist following up on a Twitter reference I saw flit by yesterday about how a passport for Mansour somehow survived the conflagration in the taxi in which Mansour met his death by drone. By following it, though, I found even more deep irony in the drone strike. This article by ToloNews carries a photograph of a pristine-looking passport. Compare that with the photo in the New York Times article linked above with the burned out wreckage of the vehicle Mansour was said to have been in when hit. How could the passport have survived?

But wait, there’s more! ToloNews tells us that the passport has Mansour’s name and carries a valid Iranian visa. Furthermore:

Meanwhile, a number of analysts said the Taliban in recent months tried to extend relationships with Iran and Russia to fight Daesh and that there is a possibility that Mansour traveled to Iran to escape ISI and talk with Iranian officials.

“Iran is afraid of Daesh presence in Afghanistan, because Daesh is an enemy to Iranian clerics; therefore, Iran wants to eliminate Daesh with the help of the Taliban. Previously, Taliban had strong affiliation to Saudi Arabia, but now there is a rift between Iran and Saudi Arabia and Iran wants to expand its influence on the group [Taliban],” political analyst Shafiq Hamdam said.

So while Mansour and his group have continued to reject peace talks with the Afghan government, at least some observers believe that he was in the process of trying to join the fight against Islamic State. And it may well be that he died because of that effort. Here’s a map of the region, showing that the site of the drone attack, Ahmad Wal, lies about 100 miles away from Quetta (where the Afghan Taliban has long been believed to be headquartered) along the highway that is the most direct route to Iran from Quetta.

Google map of the region surrounding Ahmed Wal, where Mullah Monsour was killed.

Google map of the region surrounding Ahmed Wal, where Mullah Monsour was killed.

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Monday Morning: Tarantela [UPDATE]

I could listen to this piece on a loop. It’s Santiago de Murcia’s “Tarantela,” performed by noted lutist Rolf Lislevand. The instrument he is playing is as important as the music and his artistry; it’s an extremely rare Stradivarius guitar called the Sabionari. While tarantellas more commonly feature additional instruments and percussion like tambourines, this instrument is stunning by itself.

You can learn more about the Sabionari at Open Culture, a site I highly recommend for all manner of educational and exploratory content.

And now to dance the tarantella we call Monday.

Wheels

  • What’s the German word for ‘omertà’? Because Volkswagen has it (Forbes) — Besides the use of obfuscation by translation, VW’s culture obstructs the investigation into Dieselgate by way of a “code of silence.” And money. Hush money helps.
  • Growing percentage of VW investors want an independent investigation (WSJ) — An association 25,000 investors now demands an investigation; the problem continues to be Lower Saxony, the Qatar sovereign-wealth fund and the Porsche family, which combined own 92% of voting stock.
  • VW production workers get a 5% pay raise (IBT) — Is this “hush money,” too, for the employees who can’t afford to be retired like VW’s executives? The rationale for the increase seems sketchy since inflation is negligible and VW group subsidiary workers at Audi and Porsche won’t receive a similar raise.
  • Insanity? VW Group a buy opportunity next month (The Street) — Caveat: I am not a stockbroker. This information is not provided for investment purposes. Your mileage may vary. But I think this is absolute insanity, suggesting VW group stock may offer a buy opportunity next month when VW publishes a strategy for the next decade. If this strategy includes the same utterly opaque organization committing fraud to sell vehicles, is it smart to buy even at today’s depressed prices? The parallel made with Apple stock is bizarre, literally comparing oranges to Apples. Just, no.

Bad News (Media)

Cybersec

  • Organized criminals steal $13M in minutes from Japanese ATMs (The Guardian) — And then they fled the country. What?! The mass thefts were facilitated by bank account information acquired from an unnamed South African bank. Both Japan and SA use chip-and-pin cards — so much for additional security. Good thing this organized criminal entity seeks money versus terror. Interesting that the South African bank has yet to be named.(*)
  • Slovenian student receives 15-month suspended sentence for disclosing state-created security problems (Softpedia) — The student at Slovenia’s Faculty of Criminal Justice and Security in Maribor, Slovenia had been investigating Slovenia’s TETRA encrypted communications protocol over the last four years as part of a school project. He used responsible disclosure practices, but authorities did not respond; he then revealed the encrypted comms’ failure publicly to force action. And law enforcement went after him for exposing their lazy culpability hacking them.
  • Related? Slovenian bank intended target for Vietnamese bank’s SWIFT attempted hack funds (Reuters) — Huh. Imagine that. Same country with highly flawed state-owned encrypted communications protocol was the target for monies hackers attempted to steal via SWIFT from Vietnamese TPBank. Surely just a coincidence, right?

Just for the heck of it, consider a lunch read/watch on a recent theory: World War 0. Sounds plausible to me, but this theory seems pretty fluid.

Catch you here tomorrow morning!

* UPDATE — 1:20 P.M. EDT —
Standard Bank reported it had lost 300 million rand, or USD $19.1 million to the attack on Japanese ATMs. First reports in South African media and Reuters were roughly 11 hours ago or 9:00 a.m. Johannesburg local time. It’s odd the name of the affected bank did not get wider coverage in western media, but then South Africa has a problem with disclosing bank breaches. There were five breaches alleged last year, but little public information about them; they do not appear on Hackmageddon’s list of breaches. This offers a false sense of security to South African banking customers and to banks’ investors alike.

Japan Times report attribute the thefts to a Malaysian crime gang. Neither Japan Times nor Manichi mention Standard Bank’s name as the affected South African bank. Both report the thefts actually took place more than a week ago on May 15th — another odd feature about reporting on this rash of well-organized thefts.

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Testing The Limits on Wealth Inequality

In this post, I pointed out that we are going to see an empirical test of Piketty’s theory of rising wealth inequality. The theory itself is not well understood, and Piketty has revisited it since the publication of Capital in the Twenty-First Century, and published an economist’s dream of a paper in full mathematical glory here. The American Economics Association devoted space in its journal to arguments about the theory, giving Piketty an opportunity to discuss his theory in what I think is a very readable paper, and one worth the time.

He starts by saying that the relation between r, the rate of return to capital, and g, the rate of growth in the overall economy, are not predictive. They cannot be used to forecast the future, and are not even the most important factor in rising wealth inequality. The crucial factors are institutional changes and political shocks. Neither can the relation tell us anything about the decrease in the labor share of national income. He points to supply and demand for skills and education in this paper, as he does in his book, but this is a at best an incomplete explanation, owing more to the neoliberal view that the problems of workers are their fault than to a clear understanding of social processes in the US. A better explanation lies in tax law changes, changes in labor law and enforcement of labor law, rancid decisions from the Supreme Court, failure to update minimum wage and related laws, and government support for outsourcing and globalization.

What the theory does say is the subject of Part II.

I now clarify the role played by r > g in my analysis of the long-run level of wealth inequality. Specifically, a higher r − g gap will tend to greatly amplify the steady-state inequality of a wealth distribution that arises out of a given mixture of shocks (including labor income shocks).

In other words, as the raw number r – g increases, wealth inequality reaches a limit at a higher level, and income and wealth mobility become lower.

The important point is that in this class of models, relatively small changes in r − g can generate large changes in steady-state wealth inequality. For example, simple simulations of the model with binomial taste shocks show that going from r − g = 2% to r − g = 3% is sufficient to move the inverted Pareto coefficient from b = 2.28 to b = 3.25. Taken literally, this corresponds to a shift from an economy with moderate wealth inequality — say, with a top 1 percent wealth share around 20–30 percent, such as present-day Europe or the United States — to an economy with very high wealth inequality with a top 1 percent wealth share around 50–60 percent, such as pre-World War I Europe.

The inverted Pareto coefficient β is a measure of inequality used by Piketty and his colleagues. Here’s how he explains it in this paper:

That is, if β = 2, the average income of individuals with income above $100,000 is $200,000 and the average income of individuals with income above $1 million is $2 million. Intuitively, a higher β means a fatter upper tail of the distribution. From now on, we refer to β as the inverted Pareto coefficient.

The theoretical basis for this result can be found here, where Piketty and his colleague Gabriel Zucman provide a typical economists mathematical explanation. I’ve read some of this paper, but it is tough going.

The returns to capital, especially business capital, are quite a lot higher than the levels given in Piketty’s example. Here’s the chart:

real returns on capital
The returns to all capital after tax are about 7%. Paul Krugman put up a blog post saying that a realistic growth rate is about 2.2% at best for the next few years. This gives a difference r – g = 4.8%. Then using the equations on page 1356, we get an estimate that the inverted Pareto coefficient would be in the range of 11, which is a lot higher than the levels Piketty uses in the quoted material. By way of comparison, with that number, the average wealth of people with more than $10 million net worth would be $110 million. In the example Piketty gives for the top .1% with β =3.25, the figure would be $32.5 million.

Piketty notes that these coefficients are a rapidly rising function of r – g, which is apparently the case. In a recent paper, Emmanuel Saez and Gabriel Zucman estimate that the top .1% has a wealth share of 22% as of 2012, and there is every reason to think that has risen.

With Piketty’s general rule standing alone, there is no obvious limit to the level of wealth inequality, but in practice there are many practical reasons that it will level off. Some people will have more children, so the fortunes are divided into smaller shares. Some are lucky in investments and others aren’t. There are external shocks, wars and depressions. There are divorces, which split fortunes. Some people are able to earn high levels of labor income on top of capital income, increasing their wealth. Some die early, so their offspring are forced to spend more of their capital income to preserve their existing level of consumption. Others have expensive tastes and spend too much. These external forces eventually bring about a more or less static level of wealth inequality. Overall, this static level is higher when the fraction g/r is lower.

The time periods in the theoretical models used by Piketty and his colleagues are generational, they run 30 years. The big changes in wealth inequality began in the 70s, I’d guess, but became prominent enough that they were noticed in the late 80s and early 90s as the Reagan/Bush era tax cuts took hold, and regulatory structures were dismantled. By 2000, the final touches of formal deregulation were complete, and the Bush administration stopped enforcing most remaining laws leaving capital accumulation without restraint from legal pressure. It’s been about 15 years with little change, about half a cycle. The results follow the line Piketty and his colleagues predicted, and every year the new data supports their theories.

From this we can see that the coming empirical test is the maximum level of wealth inequality, or to put it another way, it’s a test of the downward pressures on the limits of wealth accumulation.

As a nation we have only taken the smallest possible steps to stem that tide, such as slow increases in the minimum wage, and tiny increases in taxes on the wealthiest to the extent they choose not to evade taxation in all sorts of allegedly legal ways. Neither of the presumptive candidates has any intention of making the kinds of changes necessary to change the outcome.

That brings us to the second empirical test: the level of wealth inequality that a civilized nation will accept before demanding change.

Or maybe the test is whether we are so cowed we won’t ever make any demands on our new lords and masters.

Update: for more on the uselessness of tweaks to the current system, see this interview by the excellent Lynn Parramore with Lance Taylor.

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Friday Morning: Mi Ritmo

Oye como va
Mi ritmo
Bueno pa gozar
Mulata

— excerpt, Oye Como Va by Tito Puente

This Latin jazz song was on the very first album I owned — Santana’s Abraxas. I have no idea what possessed my father to select this way back in 1971 because he’s not musically inclined. I prefer to think he was persuaded by the music store staff to buy it for me rather than think the cover art did it for him. To this day I don’t dare ask; I’d rather live with my illusion.

Perhaps he simply liked Oye Como Va by Tito Puente and decided I needed it. Maybe that’s what he wanted to listen to when I played the album over and over again, ad nauseam. The song is still easy to listen to even when played by a septuagenarian, isn’t it? Though Puente probably still felt the same way about this song in his last live performance as he did when he first recorded it in 1963.

The personal irony I’m certain my father never considered: the last line is a reference to a mixed race “mulatto” woman. That’s me.

Vamos, amigos!

Wheels

  • South Korea frustrated by Volkswagen’s response to Dieselgate (Yonhap) — Hard to tell how many VW passenger diesel cars with the emissions controls defeat tech have been sold in South Korea to date. Last year’s sales of 35,700 suggest VW needs to exert itself a little more than offer to recall a total 125,000 cars.

Technology Trends

  • Breakthrough in memory technology could change computing dramatically (IBM via YouTube) — I’m still trying to wrap my head around this; could be the simplicity of the underlying science seems so obvious I can’t understand why it wasn’t discovered sooner. Using polycrystalline rather than amorphous material, more data can be stored and in a manner which is stable and not prone to loss when electricity is cut. This technology could replace DRAM at flash memory prices. Imagine how quickly systems could begin processing if they could avoid seeking programs and data.
  • Google’s annual I/O event chary on enterprise computing (ComputerWorld) — Wonder if Google executives’ expressed intent to focus on the enterprise is a veiled threat directed at Oracle? The I/O annual conference didn’t have enough enterprise applications to satisfy the curious; is Google holding back? Or are there pending acquisitions to fill this stated intent, ones not yet ready for publication? I wouldn’t be surprised to see Google launch something on par with Salesforce or Zoho very soon. Google Drive components already compete with or are integrated with some of those Zoho offers in its small business offering.
  • Android’s coming to Chromebooks — finally! (Google Blog) — I’ve put off buying another laptop until this happened, guess I’ll look at the first three models on which developers will focus their development. The applications available for Android phones have been mind-boggling in number; it’d be nice to have the same diversity of selection for laptops. And then maybe desktops in the not-too-distant future? That would really make a dent in enterprise computing.

Cybersec

  • Security camera not password protected? Police may be able to tap it (Engadget) — Love the subhead: “Don’t worry, it’s supposed to be for a good cause.” Just add the invisible snark tag. Purdue University researchers found surveillance cameras could be tapped to allow law enforcement to monitor a crime scene. I don’t know about you but this sounds like a backdoor, not a convenient vulnerability. If the police can use it soon, who might already be using it?
  • Qualcomm mobile chip flaw leaves 60% of Android devices exposed (Threatpost) — Not good, especially since this boo-boo may affect both oldest and newest Android versions. But a malicious app is required to take advantage of this flaw, unlike the Stagefright exploit. Android has already issued a patch; the problem is getting it to all affected devices.
  • LinkedIn’s 2012 breach yielded info on more than 100 million accounts (Motherboard) — Only 6.5 million accounts were initially breached — but that’s only the first batch published online. The actual haul from 2012 was at least 117 million accounts, now for sale for a mere five bitcoins or $2200. Are you a LinkedIn user? Time to check Have I Been Pwned? to see if your account is among those in the breach.

Climate Crises

  • Record high temp of 51C (124F) recorded in India (The Register) — Drought continues as well; article notes, “Back in India, relief from the heat is expected when the annual monsoon hits. The cooling rains generally arrive in mid-June.” Except that with a monster El Nino underway, the amount of rain and cooling will depart from average.
  • Polymath Eleanor Saitta considers climate change and comes to some grim, mortal conclusions (Storify by @AnthonyBriggs) — If you’re a policymaker, you’d better worry about dealing effectively with climate refugees and deaths in the millions. Maybe billions. Refugees from Syria will look like a minuscule blip. If you’re not terrified, you should be.

Looks like it’s going to be a lovely late spring weekend here — hope you’re going to have a nice one, too. See you Monday!

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Thursday Morning, Late: Like a Sucker Punch

It’s true
That it kicks you in the teeth when you are least expecting
Bad news
Oh it beats you black and blue before you see it coming

— excerpt, Bad News by Bastille

This little ditty seemed appropos for today. I’m surprised it was just a B-side.

Spin Factory
BAD DOG, REUTERS — When a big event happens, news media jump all over it and churn out reporting. But in the age of social media and the failure of traditional business models, crap is published and too often blown off. Like this tweet:Reuters_tweet_813am_19MAY2016
Looks innocuous, right? But it’s not — this is the replacement for a tweet that preceded it. Same story, but with a frigging picture of Donald Trump attached. I’d post that original tweet here but they deleted it before I could snag it.

Initial reaction too often is “It’s just a tweet, it’s just Twitter.” No. Hell, no. If Reuters can’t get something as simple as a photo on a tweet correct, what else are they getting wrong with slap dash coverage?

Reuters isn’t just any news outlet; businesses pay its parent corporation, Thompson Reuters for their information products. What are businesses getting in purchased real-time feeds? Some of these businesses are broadcasters. Are erroneous feeds shaping broadcasters’ perceptions before they even reproduce news content? It’s rather important today when some news outlets sought whacko tweets and quotes from Trump before attempting to get a reaction from the White House.

Reuters’ alleged bias has already been controversial; a contributor left in 2013 claiming editorial bias for climate skepticism demanding false balance made reporting on climate change difficult. Reuters denied the claim.

ON THE MEDIA — Rather than allow media churn to burn us with bad (as in poorly executed and unethical) news, best to consult On The Media‘s Breaking News Consumer’s Guide — Airplane Edition.
OnTheMedia_BreakingNewsConsumersGuideAirplaneEd_19MAY2016

FIFTY CENT PARTY — You’ve probably seen a news story about this research. Cut out the middlemen and read it at this link:

King, Gary, Jennifer Pan, and Margaret E. Roberts. How the Chinese Government Fabricates Social Media Posts for Strategic Distraction, Not Engaged Argument. 2016. http://gking.harvard.edu/50c.

RIP MORLEY SAFER — And more bad (as in sad) news: former CBS reporter and correspondent Morley Safer has died at age 84. The three-time Peabody Award winner retired from CBS only last week. We need more journalists like Safer, who began his career with reporting from the Vietnam War that galled then-President Lyndon Johnson for its honesty.

Busy day here, can’t spend any more time at the keyboard. See you here tomorrow morning!

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Imperialist Robert Kagan Disavows the Bureaucracy of Immense American Presidency He Championed

The chattering class is in love with this Robert Kagan op-ed warning of Donald Trump bringing fascism,

not with jackboots and salutes (although there have been salutes, and a whiff of violence) but with a television huckster, a phony billionaire, a textbook egomaniac “tapping into” popular resentments and insecurities, and with an entire national political party — out of ambition or blind party loyalty, or simply out of fear — falling into line behind him.

I suppose I’m unsurprised that Beltway insiders are so gleeful that this Hillary-endorsing Neocon has turned on Republicans in such a fashion. Or, perhaps more importantly, that they’re so thrilled someone with such a soapbox has written a warning of impending fascism that so neatly disavows any responsibility — for Kagan himself, and by association, for other insiders.

But there are a couple of real problems with Kagan’s screed.

First, Kagan would like you to believe that Trump’s success has nothing to do with policy or ideology or the Republican party except insofar as the party “incubated” Trump.

But of course the entire Trump phenomenon has nothing to do with policy or ideology. It has nothing to do with the Republican Party, either, except in its historic role as incubator of this singular threat to our democracy. Trump has transcended the party that produced him.

Kagan gets Trump’s relationship with the Republican party exactly reversed. The party did not in any way incubate Trump. 80’s style greed and cable TV incubated Trump, if anything. What the Republican party has long incubated is racism. Trump just capitalized on that and pushed it just … a … bit … further than Republican dogwhistles traditionally go, in a year in which the GOP had lost a great deal of its credibility.

Which is why Kagan is also wrong in claiming that Trump isn’t about policy or ideology. I admit that Trump has always shown great deal of ideological flexibility, both before and during this run. But he has been consistent on two points: that racism, but also protectionism. There are a lot of reasons those two ideological keystones have appealed this year, but one has to do with the failures of globalization and the related American hegemonic project it assumes. That’s ideology and policy, both Trump’s, but also DC’s, including Kagan’s.

Kagan goes on to deal with these two issues.

We’re supposed to believe that Trump’s support stems from economic stagnation or dislocation. Maybe some of it does. But what Trump offers his followers are not economic remedies — his proposals change daily. What he offers is an attitude, an aura of crude strength and machismo, a boasting disrespect for the niceties of the democratic culture that he claims, and his followers believe, has produced national weakness and incompetence. His incoherent and contradictory utterances have one thing in common: They provoke and play on feelings of resentment and disdain, intermingled with bits of fear, hatred and anger. His public discourse consists of attacking or ridiculing a wide range of “others” — Muslims, Hispanics, women, Chinese, Mexicans, Europeans, Arabs, immigrants, refugees — whom he depicts either as threats or as objects of derision. His program, such as it is, consists chiefly of promises to get tough with foreigners and people of nonwhite complexion. He will deport them, bar them, get them to knuckle under, make them pay up or make them shut up.

Note the assumption that Trump’s protectionism is not an economic remedy but some unstated alternative is? Note Kagan’s treatment of racism, an ideology, as fear divorced from that ideology of white American exceptionalism?

Fear!! Kagan wants to boil Trump’s popularity down to fear! A guy who has had a central role in ginning up serial American aggressive wars is offended that someone wields fear to achieve political power!!! And having done that, this warmonger says the ability to gin up fear is precisely what our Founders — the men who set up three competing branches of government, each jealously guarding its power — were concerned about.

Which brings me to the Kagan argument that most baffles me. After bewailing Republican politicians’ refusal to stand up to Trump’s demagoguery, Kagan then argues (though I’m not sure he even realizes he’s making this argument) that Article I and Article III (the latter of which goes entirely unmentioned in this op-ed) will be powerless to stop Trump and his “legions” once he becomes president.

What these people do not or will not see is that, once in power, Trump will owe them and their party nothing. He will have ridden to power despite the party, catapulted into the White House by a mass following devoted only to him. By then that following will have grown dramatically. Today, less than 5 percent of eligible voters have voted for Trump. But if he wins the election, his legions will comprise a majority of the nation. Imagine the power he would wield then. In addition to all that comes from being the leader of a mass following, he would also have the immense powers of the American presidency at his command: the Justice Department, the FBI, the intelligence services, the military. Who would dare to oppose him then? Certainly not a Republican Party that laid down before him even when he was comparatively weak. And is a man like Trump, with infinitely greater power in his hands, likely to become more humble, more judicious, more generous, less vengeful than he is today, than he has been his whole life? Does vast power un-corrupt?

Never mind that Kagan describes general election numbers that simply don’t exist in our democracy. What he’s really complaining about is that a President — one he happens to distrust and dislike — would have “the immense powers of the American presidency at his command: the Justice Department, the FBI, the intelligence services, the military.”  Of course, Kagan focuses not on the government as a whole, but on the Deep State and the Justice Department that has increasingly become an integral part of it.

The guy who, for years, championed the unfettered exercise of the Deep State in the hands of people like Dick Cheney is now troubled about what would happen if Donald Trump got the same powers Dick Cheney had. And for what it’s worth, while I don’t buy Michael Hayden’s claim the CIA would resist a President Trump’s order to torture (Hayden’s successors at NSA and CIA will likely do just what Hayden himself did, capitulate to unconstitutional demands), I also know that neither Trump nor anyone in his immediate orbit has the kind of bureaucratic mastery of the Deep State that Dick Cheney had.

One more really important point: the Deep State — those tools Kagan is horrified Trump might soon wield — got so powerful, creating the danger that a demagogue like Trump might tap into them fully formed, largely in the service of an imperial project significantly sold by Robert Kagan. Kagan has claimed to be selling “Democracy™” around the world, but all along that project has rotted our own democracy here at home.

Kagan (and his fellow imperialists) did that. Not Trump. Trump would just take advantage of the bureaucratic tools Kagan’s propaganda has served to justify.

I’m not denying Donald Trump is a huge threat to American democracy (though I happen to think Hillary’s foreign policy will come with great risks and costs as well). I’m saying that Robert Kagan is not the one to make this argument — at least not without a whole lot of soul searching and commitment to change the underlying empowerment of “the immense powers of the American presidency.”

But Kagan doesn’t want that. Rather, he just wants to hand those powers, still unchecked, to Hillary Clinton.

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The Theory of Business Enterprises Part 3: Capital and Credit

In Chapter 5 Veblen takes up the use of credit. He defines credit as any money obtained from third parties to run a business, including the owner’s capital, but excluding profits. He disregards the form in which the capital is contributed: equity, preferred stock, debt whether collateralized or not, all are credit. That’s because the business has to pay for the use of the money one way or another. Of course, structure matters in bankruptcy, because debt gets a preference over equity, and the order of payment is set by the documents of the capital structure. Veblen says that in economic downturns, bankruptcy takes hold, and the creditors determine the ownership of the material means of production and redistribute them in their best interests.

Veblen distinguishes the newer credit economy from the money economy described by the earlier economic thinkers, including Adam Smith.

It has been the habit of economists and others to speak of “capital” as a stock of the material means by which industry is carried on, – industrial equipment, raw materials, and means of subsistence. This view is carried over from the situation in which business and industry stood at the time of Adam Smith and of the generation before Adam Smith, from whose scheme of life and of thought he drew the commonplace materials and conceptions with which his speculations were occupied. It further carries over the point of view occupied by Adam Smith and the generation to whom he addressed his speculations. That is to say, the received theoretical formulations regarding business capital and its relations to industry proceed on the circumstances that prevailed in the days of the “money economy,” before credit and the modern corporation methods became of first-class consequence in economic affairs. They canvass these matters from the point of view of the material welfare of the community at large, as seen from the standpoint of the utilitarian philosophy. In this system of social philosophy the welfare of the community at large is accepted as the central and tone-giving interest, about which a comprehensive, harmonious order of nature circles and gravitates. These early speculations on business traffic turn about the bearing of this traffic upon the wealth of nations, particularly as the wealth of nations would stand in a “natural” scheme of things, in which all things should work together for the welfare of mankind. Chapter 6.

In Adam Smith’s time, and the generation after him, production occurred in a “money economy”. The earlier economists examined this from the standpoint of natural law and later utilitarianism. I understand the first part, about natural law. That appears in a number of French thinkers and British as well, and perhaps is part of the thinking of Smith, as Veblen asserts. The idea is roughly that factory owners would benefit from an engaged working class, and all would want to improve things in their communities because that would benefit them and because it was the natural order of things. Veblen adds the notion of the utilitarian philosophy which I assume is a reference to Jeremy Bentham, although that name does not appear in the book. The connection isn’t obvious to me.

By the early 1900s the money economy was replaced by a “credit economy”. Veblen seems to be saying that the ideas of the money economy were imported into the credit economy, including the ideas of natural law and utilitarianism. He does not elaborate on this idea at this point, turning to a discussion of the general forms of business organization.

Chapter 7, The Theory of Modern Welfare, is primarily a discussion of the business cycle. Financing costs, including interest on debt, preferred stock dividends, and a normal rate of profit, are more or less fixed. Prices decline because of competition as new entrants use more efficient machines and processes, while facing the same or lower financing costs. When prices decline, the more heavily burdened businesses fail, causing a downward spiral in prices for suppliers and their suppliers. It takes an external shock such as a war to restore the previous price levels. And, as noted, the creditors get to decide how to redistribute the capital equipment and factories of the bankrupt companies. From this he concludes that the natural condition of the capitalist economy is chronic depression.

He concludes his discussion of the business cycle by arguing that the economy will sink unless prices can be maintained by oligopolies and monopolies operated through trusts. That’s not a complete solution, though, unless almost all competition can be eliminated.

The great coalitions and the business manoeuvres connected with them have the effect of adding to the large fortunes of the greater business men; which adds to the large incomes that cannot be spent in consumptive expenditures; which accelerates the increase of investments; which brings competition if there is a chance for it; which tends to bring on depression, in the manner already indicated.

That doesn’t include workers, though. They are hung out to dry in this setting. Or as Veblen puts it: “there remains the competitive friction between the combined business capital and the combined workmen.”

Veblen begins Chapter 7 with this interesting observation. In a money economy, the welfare of the community, apart from issues of war and peace, “turned on the ease and certainty with which enough of the means of life could be supplied.”

Under the old regime the question was whether the community’s work was adequate to supply the community’s needs; under the new regime that question is not seriously entertained.

This fleshes out the section quoted above about natural law. With this measuring principle, under the natural law, “…all things should work together for the welfare of mankind”. It makes a nice contrast with the credit economy which disregards the welfare of the community and concentrates all its efforts on the frantic search for profits.

It seems to me that the structures and theories Veblen identifies have grown into the structures of business today, but observing them in their earliest stages is helpful in thinking about alternatives. Veblen’s point that the costs of financing are included in the price reminds us of something we rarely think about. The price we pay for goods in a credit economy includes the amount necessary to pay off banks, bondholders, preferred stockholders and so on, and to produce profits to pay off shareholders and managers. The profits have to be great enough to persuade the businessman to stay in the business. At each step in the process, the ultimate consumer pays for capital.

At the same time, Veblen points out that competition will force profits to zero over time through efficiency gains, mismanagement, or other mechanisms, usually with disastrous consequences. Theoretically the US has an antitrust policy which pushes back against monopoly, but that has mostly fallen into oblivion. As a result, we preach competition but operate in an oligopoly at best, and in many areas, in an effective monopoly. That means that capital is being paid more than necessary to produce sufficient goods and services for the community.

There is effectively no limit on the amounts that the monopolist can collect. We see this in operation in the pharmaceutical industry. Pfizer, for example, raises the prices regularly on drugs in which it has a monopoly or an oligopoly. See also this discussion of an interview Pfizer CEO Ian Read did with Forbes. The pricing strategy for new drugs is to maximize profits, not to provide for the needs of the community. The explanation is that a business valued by capitalization of future earnings, like Pfizer, must show increases in earnings every year, or the stock price will stabilize or perhaps fall, and perhaps even the interest rates charged by lenders will rise. That should make us ask why we think this is a good plan for something as important as medicine. But we don’t ask that question. Instead, our politicians protect businesses with favorable trade treaties and other accommodations, and raise prices to consumers for drugs.

Suppose the goal of manufacturing drugs is to produce sufficient quantities to meet the needs of the community, and to pay the owner of a plant a reasonable living wage, as Veblen says was the case in Adam Smith’s time. This business model was used by actual non-profit hospitals like the one my Dad worked at, a Catholic hospital built and operated with cash raised from the community. In that setting, there is no need to raise prices beyond inflation and depreciation (shorthand for new and replacement equipment and plant, training and so on). Any new entrant would face the same situation, so there is no advantage to be obtained in the near term from introduction of new capital. The business of creating new drugs can be pushed off to venture capital, as is mostly the case already, so there is no need to provide for R&D. There would be no need in this setting to pay dividends, and the need for interest payments would also be reduced. There would be other savings as well.

I leave as an exercise for the reader working out methods for forcing this outcome. I assume there must be some problem with this analysis, and leave that open as well.

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Wednesday Morning: Meet Me on the Floor

I admit it, I’ve betrayed my kind. I’ve been remiss in my responsibilities, haven’t been equitable.

To fix that, you need a dose of estrogen, stat. This morning’s medication is Veruca Salt’s Volcano Girls.

Feel better soon, eh?

Wheels
Mitsubishi’s Tetsuro Aikawa to leave, asks Nissan to name replacement (Bloomberg) — Announcement comes six days after Nissan announced it would buy a controlling interest in Mitsubishi. Nissan’s CEO Carlos Ghosn indicated he does not intend to subsume and phase out the Mitsubishi brand; this may have encouraged Aikawa he was leaving the company in good hands. I wouldn’t bet on some overlap between Nissan/Mitsubishi being eliminated.

Suzuki apologized for using the wrong fuel economy tests (Reuters) — Suzuki says it didn’t need to change its declared mileage data based on correct testing. I sure hope independent testing confirms this, though I suspect the same study which revealed Volkswagen’s cheat would have indicated additional validation needed.

Volkswagen says it will focus on profitability, pronto (Bloomberg) — Investors are restless and complaining about VW’s recalcitrance toward cost cutting in light of 16 billion euros it set aside for fixes and claims due to Dieselgate. Executives’ pay is on the butcher’s block. More than a little overdue as VW execs knew about the emissions controls defeat’s detection two years ago.

Forensic scientist reports to NHTSA Chevrolet’s dangerous cruise control problem (Zdziarski’s blog) — PAY ATTENTION TO THIS IF YOU’RE A LATE MODEL CHEVROLET OWNER. Read the linked post; Chevrolet’s response is deplorable, asking drivers to modify behavior rather than supply/fix product to work as documented and sold.

The (Fossil Fuel) Business
Goldman Sachs downgrades stocks to neutral while going bullish on oil (Bloomberg) — I like the subhead on this article: “Too many things to worry about.” ~LOL~ Excess valuation, lower growth, “a wall of stock market worries” encouraged the bear move. Things not explicitly mentioned: the U.S. and Australian elections and Brexit referendum outcome.

But…bullishness on oil out of whack (MarketWatch) — Another LOL-ish subhead today: “The fine print shows Goldman analysts believe oil will struggle to easily top $50.” So GS is telling its clients to reduce excess oil holdings while conditioning overall market to firm up what’s in their clients’ portfolios? ~smh~ Just as above, not mentioned in this take are any elections/referendums.

Note, too, that neither of these reports mentions Iran.

Anadarko Petroleum downgraded to neutral by Credit Suisse (Trade Calls) — You want another confusing take on fossil fuels? Read this article. Supports MarketWatch’s calling out GS on oil, though Anadarko also includes natural gas.

Total SA’s CEO Pouyanne pooh-poohs France’s ban on shale gas (Bloomberg) — Man, this dude is as arrogant as his predecessor. France could simply outlaw any imports without a certificate of origin, and force the industry to figure it out. Yet another article that doesn’t mention Iran, which sits on one of the largest natural gas reserves in the world. Pouyanne’s predecessor was cozy with Iran, too. So why all the attitude about North American shale gas imports?

Artificial Intelligence
Hedge fund used AI to pick through Fed Reserve’s minutes (Business Insider) — Using AI gleaned from a competition it hosted, Two Sigma fund analyzed the Fed Reserve. The app used Natural Language Processing and found some interesting trends. Wonder if the results would be different using Google’s SyntaxText open sourced this past week?

NSFWhut?
Cynically opportunistic marketing push promotes so-called ‘anti-Zika’ condoms (IBTImes-AU) — Pharmaco Starpharma Holdings and condom-maker Ansell will give Australia’s Olympians “Dual Protect” condoms lubricated with VivaGel for “almost 100-percent anti-viral protection” against Zika. Never let a perfectly good health crisis go to waste, right?

CDC says any condom will work against Zika (MarketWatch) — Yeah. That. I said this already: condoms are recommended for other viral STIs like herpes and HIV, will work fine for Zika, no special anti-Zika condom required. But you have to use the consistently and for at least six months after exposure to Zika since the virus can remain in men’s reproductive system for at least that long after infection.

ONE company will release condoms in 56 different sizes (Glamour) — Holy schnikes. This is a broader range of sizes than men’s off-the-rack suits. No excuses about not wearing condoms, there will be one bound to fit gents. Would be nice if ONE could hit the market with these in Brazil before the Olympics. (And don’t turn your nose up at Glamour. It’s one of the better articles I read today, includes some good links.)

There’s enough material to get you over the hump. Catch you in the morning tomorrow!

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