The Invisible Matters

There is a certain group in the United States that loudly and confidently proclaims our own decline, saying that relative to the rising behemoths of Asia, such as India and the oh-s0-scary China, we’re screwed.  And that view, while not universally held, holds wide currency across the world.  While it’s clear that there’s a number of economies in the world that are set to grow at rates we would think of as stratospheric in the US, there’s a few things that we have to remember.

First off, countries such as India and China are emerging from a much poorer starting point.  The income of your average Indian or Chinese citizen is still far below that of any developed country, and it will likely remain that way for at least another century.

Second, development isn’t just about GDP growth figures.  It’s about infrastructure.  True, infrastructure can fuel GDP growth, but a lack of it can stifle it.  And, a lack of it can also be deceptive.  Meaning, things look like they’re going well, until they aren’t.  Case in point: 350 million (higher than the population of the US) people in northern India lost power for more than eight hours today.  The reason: a faulty electrical grid.  And this past month in Beijing, which at this time four years ago, was the center of the world’s attention for the 2008 Olympics, has experienced flooding that, according to government estimates, has killed upwards of 70 people.  Unofficial estimates put the death toll much higher.

My point is this: you can talk all you want about massive amounts of growth and engage in lots of vanity projects, but if you don’t have the nuts-and-bolts conditions right for a sustainable rate of that growth to take place, along with the infrastructure to support it, then that growth, over the long haul, isn’t going to be sustainable.  And the US should take note of this as well.  While our infrastructure is far superior to what exists in most of Asia, it’s not what it used to be.  Significant investment in our energy, transit and communications grids could provide hundreds of thousands of jobs, along with providing a significant boost for the economy.  For example: have you ever flown through LaGuardia airport?  If you have, then you’ll know what I’m talking about.  And if you haven’t, imagine an airport you’d expect to find in a third world country, except for the fact that it’s on the outskirts of the economic capital of the US.

And that’s just talking about physical capital.  There’s a whole other area of capital, that being of the human sort, that goes into building a nation.  Growth isn’t just about a GDP rate.  It’s about having the physical plant in place to support it, and the skills in a population that knows how to run it.


Is North Korea Becoming Less Nuts?

Short answer, possibly, but still far too early to say.  Much of the time, we in the west have a tendency to see things through our own particular lens, which offers a view that’s not nearly universal, particularly in countries such as the Democratic People’s Republic of Korea (sometimes I just like using the full name, as the old Marxist titles amuse me).

So what begs this question?  Is North Korea really opening up?  People are beginning to ask this for a few reasons.  The first is that the regime has changed.  Kim Jong-il is cold in the ground, and his baby-faced son, rumored to be younger than thirty, is now allegedly calling the shots.  Kim Jong-un, the successor prince, has also taken a new bride, something that was done suddenly and openly, another drastic break with tradition.  The regime has also begun acknowledging mistakes, both in the form of failed rocket launches and economic challenges, also something that would have been completely unthinkable two years ago.  This might not sound like much, but the fact of the matter is that any of these, in and of themselves, would have amounted to a tectonic shift in policy in Pyongyang.

So what does it mean?  It means that in the world of North Korean politics, where nothing is ever as it seems, nobody, not even North Korean political, economic and military elites, know what direction the winds are blowing in the Hermit Kingdom, and what is obvi0us to them, even after trying to make it so, is usually lost on North Korea watchers in the west.  This is for cultural reasons (lots of emphasis on the group over the individual, face-saving and respect for one’s elders) and political necessities, namely, that the regime is holding on to a country that should, by all reasonable metrics, have failed two decades ago.  The world has witnessed the spread of democracy over much of the globe, so we have a lot of precedents to which to look for answers.  The problem is, that each country that democratizes does it differently.  So in a process where each case will be highly unique, take the country that’s already the outlier, and then try and impose a rubric for change on the country.

Put simply, we should take these signs as positive, but not as proof positive of permanent reform unfolding in the DPRK.  It’s not clear that it’s even happening, though we’re beginning to accrue rudimentary evidence to point to the fact that the country is indeed entering that trajectory.  But we need to take the long view on this.  And when I say the long view, I’m talking decades, not weeks.  But keep watching, because if you don’t, then it’s likely that we’ll miss something.

Mitt’s No Good, Very Bad, Awful English Juncket

There’s something about being very rich that tends to make people more prone, at least in presidential politics, to say stupid stuff (John Kerry was prone to it, as was Bush the elder).  Case in point: Mitt Romney on his the foreign leg of his campaign.  He’s in London right now, and the trip has not been kind to him, as he’s not been kind to his hosts.

First, he questioned that ability of London to host the Olympics, saying that he had heard of ‘disconcerting’ signs of dysfunction at the games, namely in the area of security.  To which UK Prime Minister David Cameron said: ‘We are holding an Olympic Games in one of the busiest, most active, bustling cities anywhere in the world. Of course it’s easier if you hold an Olympic Games in the middle of nowhere.’  The ‘nowhere’ bit was a direct reference to Salt Lake City.

Second, he’s refused to take questions from the American press on his grand European tour thus far, which breaks with protocol, and, frankly, is just kind of shitty.

Third, he forgot to remember the name of Labor opposition head Ed Milliband, referring to him as ‘Mr. Leader’ in a photo-op.

Fourth, he mentioned that he had previously met with Sir John Sawders, the head of the Secret Intelligence Service (MI6).  Romney was given a briefing as a courtesy.  Usually, one does not announce to the global press when one has just received a briefing from the head of one of the most respected covert intelligence services in the world.  Mind you, this is the organization that the British government wouldn’t even acknowledge existed until fifteen years ago.  Oops.

Fifth, he announced that he was not going to watch his wife’s horse, Rafalca, in the dressage competition, which as Andrew Sullivan noted, if true is kind of shitty, and if not true, then makes him a bit of a liar.

Sixth, while on his trip to Britain, this passage from his book No Apology has suddenly started to get a lot of press: ‘England is just a small island. Its roads and houses are small. With few exceptions, it doesn’t make things that people in the rest of the world want to buy. And if it hadn’t been separated from the continent by water, it almost certainly would have been lost to Hitler’s ambitions.’

Judging from the title of his book, No Apology, I would venture to say that’s probably a good policy for Romney.  Were he to start apologizing for any of his numerous gaffes (a half dozen by day one of the trip), he probably wouldn’t be able to focus on anything else.  Ane while I’m usually not one for pointing out such relatively minor missteps, it’s slightly different when it happens abroad.  I’d liken it to a family situation.  All kinds of shit goes on behind closed doors when family is present that doesn’t really matter, but when the neighbors are around, in this case, the British, it just makes the whole family, in this case, the US, look like a bunch of morons.

So, Mitt, you’re onto Israel today.  Please try to not ignite another intifada with some offhand comments.

Germany: Likely Cutting off the Cash

The European Union was a grand project in human history, designed to be a triumph of liberal Western values over the bloody history of the continent.  Its hallmark was monetary integration on a scale unheard of since the days of the Roman Empire.  The debt crisis in Europe has been raging since shortly after the implosion of the global economy in the fall of 2008, and it seems no matter the measure taken by the member governments there, it stubbornly refuses to end.

Germany has been the paymaster of the continent, authorizing and reauthorizing bailout after bailout of the debtor countries: Greece, Portugal, Ireland, and likely Spain and Italy next.  Greece has seemed particularly resistant to the bailouts, as the government there has dragged its feet on implementing austerity and the economy there has been in a state of free fall for nearly two years.  Austerity is the new budgetary model for the continent, and it’s likely to persist for a long time in Europe.  Not that austerity has worked.  It hasn’t.  Most of southern Europe along with Britain is once again in recession, French growth has slowed once again and growth is beginning to show significant signs of slowing in northern Europe.

And the death knell for any future bailouts is coming up next: Moody’s has lowered the credit outlook on Germany, the Netherlands and Luxemburg to ‘negative,’ citing continued exposure to fallout from economic instability in Greece.  Even supposing that all of the major political and economic actors were in agreement on what needs to be done, which at this point is a stretch, the fact of the matter is that if markets view Germany as not having the wherewithal to credibly back further financial rescues, they won’t be forthcoming, regardless of whether or not already divided politicians can agree on them, which is unlikely in the first place.

The European project is on the ropes.  In some respects, it went too far, too fast (monetary union) and in other respects, it didn’t go far enough (budgetary coordination and a banking union).  Its fundamental problem, however, was that many member states, for a very long time, spent much more than they took in, and they expected, wrongly, that membership in the European Monetary Union would cushion whatever inevitable fallout they with which they would have to contend.  And that model worked, for as long as other member states were both willing and able to underwrite their political and budgetary dysfunction.

That willingness is quickly fraying, and if other ratings agencies follow suit, the ability will soon follow, and we will yet again begin seeing drachmas, lira and pesetas in circulation.

Avoidance and Evasion

Nobody likes taxes.  It’s a pain.  When I realize how much I’ve paid in taxes over the course of my life, be it in income or sales taxes, it adds up, and it does so quickly.  But, as Oliver Wendell Holmes, Jr. stated of taxes, they’re ‘the price we pay for a civilized society.’  And, as galling as it is to see the government take our money, that doesn’t happen to everyone.

A new report released this week by James Henry of the Tax Justice Network, a former chief economist at McKinsey & Co. (hardly a pinko outfit), titled ‘The Price of Offshore Revisited’ posits that between $21 and $32 trillion dollars have made their way from across the globe into offshore tax havens.  So, it seems that while some of us are paying our fair share (more than it, actually) there’s an entire class of people in the world who pay little to no taxes.

They do so because they’re able to, and they’re able to because they hire legions of lawyers and accountants to get around existing tax regulations.  It’s not just in the US that this is happening, it’s all over the world.  The $21-$32 trillion figure is about the combined size of the total output of the US and Japanese economies for an entire year.  And when you have cash flowing from the countries in which it was earned into offshore accounts, there’s no way that it’s simply going to be reinvested into the local economy, spurring consumption and jobs.  Put simply, that money doesn’t grow into anything bigger.  It’s just recycled into the global financial system, and does little to make the lives of ordinary people any better.

But that’s usually not what we’re told.  The chorus from the rich, and not just in the US, is that we shouldn’t make tax laws too hard on the rich, as they’re the ‘job creators.’  From what this report can tell, the only jobs that are being created are those of tax lawyers, accountants and offshore bankers.  It’s not like any of us are gleaning any benefit from these tax dodges other than the economic elite who so skillfully navigate them.

And, here’s the kicker: it’s largely legal.  It’s rational to minimize your tax bill.  It’s called tax avoidance.  And sometimes tax avoidance can look suspiciously like tax evasion.  To be sure, there’s a fine line between the two.  But the fact of the matter is that we have, both in the US, and globally, a tax system that’s broken and that benefits those who need that benefit least of all, the ultra-rich.  Now, when you’re reading this, and you’re worrying about a half million in your 401(k), let’s be clear, I’m not talking about you.  I’m talking about the likes of Mitt Romney, who, with his financial expertise, likely paid no taxes at all in 2009, despite having earned tens of millions of dollars.  In a day and age when governments across the world are bleeding nothing but red ink, that extra $21-$32 trillion would come in pretty handy when it comes to plugging budget deficits.

Today Is A Day For Politics

It’s rare that I openly, strongly and diametrically disagree with what President Obama says.  In connections with the shootings in Colorado this morning, he said: ‘There are going to be other days for politics. This, I think, is a day for prayer and reflection.‘  I concur with the second part, but not the first.  What better day for politics is there than today?  I like New York Mayor Mike Bloomberg’s take on the situation much, much better than what either the President or Romney had to say:

‘You know, soothing words are nice, but maybe it’s time that the two people who want to be President of the United States stand up and tell us what they are going to do about it, because this is obviously a problem across the country. And everybody always says, ‘Isn’t it tragic,’ and you know, we look for was the guy, as you said, maybe trying to recreate Batman. I mean, there are so many murders with guns every day, it’s just got to stop. And instead of the two people – President Obama and Governor Romney – talking in broad things about they want to make the world a better place, okay, tell us how. And this is a real problem. No matter where you stand on the Second Amendment, no matter where you stand on guns, we have a right to hear from both of them concretely, not just in generalities – specifically what are they going to do about guns?’

Every year, tens of thousands of Americans die because of gun violence.  That’s because in some states, such as Colorado, there are no legal limits on the purchases of AK-47s, the weapon responsible for killing twelve people in Colorado this morning.  Other reasons include that the laws we have on the books aren’t enforced rigorously enough.

I know that some reading out there are thinking to themselves ‘Guns don’t kill people, people kill people.’  Bullshit.  Twelve people are dead now, not because they were attacked with a spork, but because they were attacked with a Soviet designed assault rifle.  And I’m not taking issue with sportsmen or those who carry for protection.  I’m talking about the extended clips that were used when Gabrille Giffords was shot, and when Anders Breivik killed 72 people in Norway.  I’m talking about the Tec-9 that was used in Columbine.  I’m talking about the AK-47 that was used this morning.  I’m talking about the fact that our cops are routinely outgunned because Republicans had the foresight to let the Assault Weapons Ban lapse eight years ago.

This country has loves its guns, and that love doesn’t come cheap.  The fact of the matter is that our love affair with guns kills thousands.  Were it only true that right wing myth that Obama was going to ‘take yer guns.’  I don’t mind the shotguns.  I don’t even mind a Glock 9mm kept in the glove compartment.  What I take issue with is the weapons I listed above, and others like them.  Because, as we’re all to frequently reminded, it’s usually these semi-automatic weapons, extended clips and enhanced ammunition that kill these innocent Americans.

Today is a day for politics, because it’s politics that’s going to stop AK-47s from being available to kill Americans.

Bombing in Syria: The Inside Job

Things seem to be heating up in Syria.  Yesterday, three high-ranking officials (the defense minister, deputy defense minister and the head of the crisis management office) in the al-Assad regime were killed and two wounded (the interior minister and the head of the national security bureau).  Rebel groups claimed to have planted the bomb a day before in a room where the senior leadership of the regime would be meeting.

This brings to mind the failed July 20th, 1944 attempt to assassinate Adolf Hitler at his bunker in Rastenburg by members of the German officer corps.  Along with a senior cadre of German military officers, Colonel Claus von Stauffenberg brought a bomb in a briefcase into a briefing in which Hitler was present.  The bomb detonated, but due to the fact that it was placed under the table and the bunker itself was constructed of concrete, it merely injured Hitler, failing to kill him.  After the attempt, Hitler initiated a purge of the ranks of the German military, which, if anything, hastened the end of the war.

This has parallels to what happened in Damascus yesterday.  You don’t pull off an operation of this caliber without inside connections.  Meaning, someone within the regime sees the writing on the wall and is hoping to at least draw this conflict down before the killings turn into something more genocidal.  Yes, the killing in Syria has claimed the lives of at least 15,000 individuals, but if the al-Assad regime begins to use chemical weapons and really deploy its air force, then the death toll will begin skyrocketing at that point.

So why would the al-Assad regime do this?  Well, they don’t really have any other choice.  They either survive, or they end up on the docket in the Hague once they capitulate.  And in the off chance that the members of the regime actually succeed, it’s possible (albeit unlikely) that they might conceivably be running Syria in a few years.  If they throw in the towel and flee to Russia, then they’re done, and the leadership of the country will be in permanent exile, unable to travel, and living only on whatever money that they’re able to bring with them in suitcases (literally) and funds that they have stashed away in Swiss accounts, which would likely be frozen.

The battle for Damascus is intensifying, and the only way that a massive blood letting could be forestalled is if the West intervenes.  As that is rather unlikely, I’d expect many, many more people to die in the coming months than have previously, and for the region as a whole to become much more unstable.