Saturday, May 29, 2010

Hot air about Israel

Once again Obama proves that he can talk the talk. We now know however that he often does not walk the walk. While the event below was full of nice symbolism and vague rhetoric, where is the mention of Iran and the nuclear threat overhanging Israel?

The athletes, the astronauts, the alternative music, the black rabbi, the white dress uniforms and, above all, the left-handed baseball giant: Welcome to Barack Obama's Jewish America.

The first-ever Jewish America Heritage Month celebration at the White House on Thursday underscored the Obama administration's determination not to be locked into Washington's conventional notions of Jewish leadership.

President Obama did not exactly snub the usual suspects who have peopled similar events for decades. There was Lee Rosenberg, the president of the American Israel Public Affairs Committee, and there was Alan Solow, the chairman of the Conference of Presidents of Major American Jewish Organizations. Both also happen to have been major fund-raisers for Obama's campaign, as were several others among the 250 or so in attendance.

But the image that the White House sought to convey was one of Jewish America not necessarily bound to the alphabet soup of the Jewish organizational world and of pro-Israelism. Instead, Obama presented an array of Jewish heroes and celebrities who pronouncedly defied Jewish stereotypes. In addition to the major givers, the entrepreneurs and the communal leaders, there were also sports heroes -- including Sandy Koufax -- veterans, non-profit innovators, journalists, actors and organizers.

The reception was in the works for months, and planning predated the tensions between Israel and the United States precipitated in early March when Israel announced a major housing start in eastern Jerusalem during an official visit there by Vice President Joe Biden, who also was at Thursday's reception.

Still, the White House's message was timely: Obama would not be second-guessed by his pro-Israel critics on his friendship to the Jewish community and to Israel. The reception included a traditional reference to the "unbreakable" Israel-U.S. alliance dating back to within minutes of Israel's establishment.

Obama also made it clear, however, that he sees the alliance as part of a America's strategy of outreach to the world.

"My administration is renewing American leadership around the world -- strengthening old alliances and forging new ones, defending universal values while ensuring that we uphold our values here at home," he said. "In fact, it's our common values that leads us to stand with allies and friends, including the State of Israel."

The dual message -- closeness to Israel coupled with global outreach -- has characterized the recent "charm offensive" launched by the White House in the wake of the recent tensions with Israel. Obama is hosting Israeli Prime Minister Benjamin Netanyahu next Tuesday, and the signs are that it will be a higher-profile reception than the thief-in-the-night encounter the two had when tensions were at their highest in March.



Fascist economics still alive and well

What is called "state capitalism" below is just Fascism reinvented

It's quite likely that the financial crisis that began in 2007 and is, just now, threatening to unravel the European Union represents the final period in a two decade era of the West's "end of history" hubris. While the wars in Iraq and Afghanistan have sullied the aura of Western military power, the financial crisis has surely cracked the other pillar of Western dominance, free market capitalism.

There is, in no other words, no better time for a challenger to rear its head and take on the "Washington consensus" that free markets and free politics are the true engines of growth, power and prosperity. And such a challenger has arisen in the form of what Ian Bremmer, in his engaging new book The End of the Free Market, dubs "state capitalism."

State capitalism, Bremmer writes, "is a system in which the state dominates markets primarily for political gain." From state-owned corporations operating in strategic industries like natural resources or defense, to enormous sovereign wealth funds in the hands of autocrats with opaque operating principles, state capitalism has enabled the world's autocratic states to reap the benefits of capitalist enterprise while maintaining a vice-grip on political freedom.

In Bremmer's telling, the world's autocratic states learned a valuable lesson from the implosion of the Soviet Union: command economies do not work and when they fail, they can bring down the over-arching political system with them. They also watched the post Soviet experiment in crash liberalization with horror. To protect their hides and preserve their privilege, autocratic rulers in China, Russia, Saudi Arabia and elsewhere have created a "hybrid" system that leverages many of the tools of capitalism to generate wealth while the heavy hand of the state ensures that wealth is put to the service of the elites and rulers of each country.

Most of Bremmer's slim, accessible volume (just 200 pages, excluding end notes) is devoted to a tour of the world's dominant and emerging state capitalist systems in places such as Malaysia, Brazil, and the United Arab Emirates. Bremmer's picture of global state capitalism is nuanced - he acknowledges that even free market democracies interfere in markets for political purposes, as is the case with Europe and America's generous farm subsidies and tariffs. The signature difference is the degree and scope of state interference and the lack of democratic transparency in the countries that practice state capitalism.

According to Bremmer, this hybrid model has serious repercussions for the U.S. and other capitalist democracies. Since economic competition is global, companies with state ownership or state influence can distort markets and harm consumers. They can, for example, pay above market prices for natural resource contracts to lock up long term supplies. They can trade freely with the world's pariah states, offsetting the impact of sanctions. More than that, as China emerges from the world's worst recession with 10 percent GDP growth, these state capitalist systems can lure "fence sitting" states like Brazil and India to their brand of government, further tilting the global economic playing field. Goodbye Washington consensus, hello Beijing consensus.

Only not quite.

Despite the dramatic (indeed, misleading) title of the book, there's no indication that we've reached the end of the free market. In fact, Bremmer says so explicitly in his conclusion. Unlike competitors of yore, state capitalism is less an ideology than a methodology. What unites the state capitalist systems of the world is how parochial they are: the leaders are too focused on defending their own skins to worry about world domination or exporting a revolution. What's more, as Bremmer writes, none of the practioners of state capitalism believe in mercantilism - the notion that there is a finite allotment of wealth and that the only way to grow share is to take share from others. So while their state champions and sovereign wealth funds can distort global markets, the world can escape the beggar-thy-neighbor cycle of economic destruction that marked the Great Depression.

Indeed, it's clear from the book and from Bremmer's confidence in free market capitalism, that state capitalist systems contain the seeds of their own destruction. As Bremmer demonstrates, the primary goal of capitalist activity under a state capitalist system is to defend the political interests of the state. But those interests often align quite closely with the material prosperity of the state's own citizens. China wants to maintain its torrid growth rates not so its president can lounge around in opulence, but to provide the millions of jobs it needs to stave off social unrest. The implicit social contract of state capitalism - you can earn a good living if you don't care about political freedom - acknowledges the urgent need to provide improved standards of living to its citizens.

That's a difficult straddle. China has managed it for thirty years and may be able to for thirty more, but the inherent inefficiencies and corruption of state capitalism don't augur well for its future.

That's not to argue for complacency. While he mercifully avoids the doom-mongering that often attends discussion of the rise of China or the re-emergence of Russia, Bremmer does make some brief and modest suggestions for U.S. policy in the face of state capitalist competition. Stay verbally committed to free market capitalism, expand free trade agreements, particularly with countries that practice state capitalism, sustain a military lead over potential competitors like Russia and China, and selectively assert American rights and interests with unfair competitors like China. In short: stay calm, and stay true to the principles that made the "Washington consensus" so attractive in the first place.



Harvard study finds increased gov’t spending results in unemployment

Don’t color Veronique de Rugy shocked, shocked to find that government spending crowds out private investment, but the results of the new study by Harvard Business School will certainly shock some Keynesian academics — and high-ranking government officials. Instead of providing a stimulating effect to the economy, government spending creates pressures on private industry to reduce staff and investment. The study’s authors count themselves as among the shocked:
Recent research at Harvard Business School began with the premise that as a state’s congressional delegation grew in stature and power in Washington, D.C., local businesses would benefit from the increased federal spending sure to come their way.

It turned out quite the opposite. In fact, professors Lauren Cohen, Joshua Coval, and Christopher Malloy discovered to their surprise that companies experienced lower sales and retrenched by cutting payroll, R&D, and other expenses. Indeed, in the years that followed a congressman’s ascendancy to the chairmanship of a powerful committee, the average firm in his state cut back capital expenditures by roughly 15 percent, according to their working paper, “Do Powerful Politicians Cause Corporate Downsizing?”

“It was an enormous surprise, at least to us, to learn that the average firm in the chairman’s state did not benefit at all from the unanticipated increase in spending,” Coval reports.

This surprising result does not come from a misapprehension about pork and its relation to the chairmanships of the committees. Indeed, the study shows that pork dollars flow in mighty streams from those chairs to home districts and states. It’s not just earmarks, either, but also legislative expenditures that increase:
The average state experiences a 40 to 50 percent increase in earmark spending if its senator becomes chair of one of the top-three congressional committees. In the House, the average is around 20 percent.

For broader measures of spending, such as discretionary state-level federal transfers, the increase from being represented by a powerful senator is around 10 percent.

And yet:
In the year that follows a congressman’s ascendancy, the average firm in his state cuts back capital expenditures by roughly 15 percent.

There is some evidence that firms scale back their employment and experience a decline in sales growth.

If this seems counterintuitive, it might be from marinating too long in Beltway conventional wisdom. When private entities (citizens or businesses) retain capital, it gets used in a more rational manner, mainly because the entity has competitive incentives to use capital wisely and efficiently. The private entity also has his own interests in mind, and can act quickly to use the capital to its best application. Private entities innovate and look to create and expand markets, creating more growth.

In comparison, government moves much slower with capital. It generally works to its own benefit and not that of private entities. Lacking competition, there is no incentive for efficiency. Most importantly, it rarely creates new markets or growth but instead creates a spoils system that ends up reorganizing the status quo to favor some and disfavor others.

All of that is certainly true in the long-term sense. It now appears true in the short-term sense as well, despite the immediate application of government funds to specific areas. If this study is true, it calls into question the entire concept of Keynesian stimulus, and it shows that the Obama administration has gone in an entirely wrong direction both in concept and in practical terms in attempting to create economic growth. The best way to achieve growth appears to be to eliminate government interventions and to keep capital in the hands of the private sector. And that’s no shock at all to anyone who pays attention to economics.




Two structural reasons why government fails: "The bottom line is that socialist planners attempting to abolish markets, but interested in efficiency, would have no way of knowing what people value, so they would be unable to determine what outputs to make from a given set of inputs or which inputs to use to make any particular output. They would not be ‘planning;’ they would be stumbling around in the dark and the result would be economic chaos and poverty. This critique holds not just for attempts to substitute planning for markets completely, but also for any government attempts to intervene in specific markets.”

Government: No costs, all benefits: "Government has no costs — only benefits — according to several professors in economics at the University of Missouri–Kansas City, which is well known for its heterodox (i.e., usually very anti-market) economics department, writing at The Huffington Post about deficit ‘myths.’ I hesitate to actually use the label ‘economist’ to describe any of these people, because they do not seem to accept the very basic economic concept of opportunity cost — at least not when it comes to government spending.”

Bursting the myths of the Great Depression: "Review of The Politically Incorrect Guide to the Great Depression and the New Deal by Robert P. Murphy: “Government of all kind depends on elaborate mythologies to keep the people complacent in the face of constant attacks on their liberty, their property, and even their lives. Kings used to proclaim that they were divine or at least that they ruled with divine approval, so disobedience to them was actually disobedience to God or the gods. That worked to keep most of the citizenry in line for a very long time. As religion started losing its hold over people, rulers came up with new ideas. One was that the state was like a big, sheltering family where everyone had to cooperate for the common good — as directed by the government. Another idea was that the alternative to control by the government, anarchy, was so terrifying that it must be opposed at every turn.”

Obama admin. down in Zogby poll: "Positive opinion about the federal government's handling of a British Petroleum (BP) Gulf of Mexico oil spill is down 13 points from two weeks ago, dropping from 29% to 16%, a new Zogby Interactive survey finds. Currently, 16% rate the federal government's response to the spill as excellent or good. The same question in a May 7-10 Zogby Interactive survey found a total of 29% giving a positive rating. Opinion of British Petroleum's handling of the spill is also down from the previous poll, going from positive ratings of 25% then to just 15% now."


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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)


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