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29 August 2006

What Harm in Insider Trading?
Do small shareholders deserve what they get when management and private equity funds alternate between MBOs and IPOs? Small shareholders could exert their voting power over corporate boards of directors to demand top performance and transparent accounting in their companies. In that case management couldn’t so easily manipulate the P&L and Balance Sheets for their own benefit, at the expense of small shareholders outside the buyout loop.

Instead, the growth of stock ownership, through 401Ks and mutual funds, has led small shareholders lazily to believe they can trust the market to maximize returns on their investments. In fact, investing is hard work: maybe the current best bet is to find private equity funds that welcome small investors.

Changes in a company’s market valuation mean short-term volatility. That has long been the source of rewards to smart traders in commodity as well as stock markets. Small shareholders who are patient and invest for the long term ride out these perturbations, missing the short-term possibilities for outsized windfalls, but capturing the payback on ultimate company success from the skills of their richly rewarded managers. In this view, the primary result of combating insider trading would be to smooth out the curve on the trend lines. Without their ups and downs, the smartest managers may go elsewhere.

26 August 2006

Nonprofits and Foreign Aid

General agreement that government is an inefficient, not to say ineffective, purveyor of U.S. foreign aid policy and funds led to the increasing role of nonprofit organizations in our international assistance programs, particularly since the 1970s. According to the GAO by 2000 over 50% of USAID obligations were made to nongovernmental organizations, rather than directly to foreign governments, international organizations, or other agencies. The Urban Institute has pointed out that government grants accounted only for 20% of the $15 billion in international NGO revenues in 2003, with 71% coming from private sources. If, however, the majority of those private contributions were tax deductible against a marginal tax rate of, say, 25%, then the government contributed in effect another $3 billion to NGOs’ international operations, or 40% of the total.

Nonprofits are supposed to be insulated from competing market-driven objectives in carrying out their policy goals overseas. However, as the government has become an increasingly dominant source of their revenues, it has unavoidably determined the direction of those goals. Not only must their programs be perceived as supportive of volatile political trends, they are also subject to unspoken pressure to preserve demand for their programs’ effects. If the long life of a NGO is dependent on poverty as the root cause of the need for its services, how enthusiastically will it work to eradicate it?

It’s not certain that nonprofits will more reliably accomplish the goals of U.S. foreign aid, even though it is probable that they will be more cost effective even when they fail. The danger is that nonprofits will try to extend their own longevity in order to avoid becoming supernumeraries.

24 August 2006

Averting Iran’s Nuclear Bomb

Iran's nuclear potential can be withstood by the West because we've lived through it before. We can again. It may be worth it to resort to the threat of nuclear retaliation in order to prevent this state-sponsored proliferation.

Do Iranians really want to have this sword of Damocles dangling over their heads Would averting that menace be sufficient incentive for them to overthrow the mullahs

08 August 2006

Confusing the Trappings with the Main Course

Why does the Bush Administration place so much stock in the trappings of democracy? You would think that its goal in the Middle East is to stage elections in as many countries as possible. That policy objective has not borne results favorable to American interests – not in Lebanon, where the government cannot control the use of its territory; not in Palestine where the affairs of its nascent state are hostage to another terrorist organization; not in Afghanistan or Iraq where the power of Western-leaning regimes is confined to the capital city or only one part of the capital city.

It’s not likely that we can gain more from accessories associated with democracy than from the peacefulness exercised by a liberated people. If they choose not to follow the dogma of a foreign conqueror whose liberal policies are not relevant to their culture, do they not have the right to make that choice? Do we have the patience to wait for them to judge the efficacy of the path they freely choose to lead to the achievement of their social and personal goals? We waited many decades for the mantle of Communism to be lifted from Eastern Europe – by those peoples themselves. Perhaps it will take that long, or longer, to reach a final outcome in the Islamic Middle East.

As reported in the 8 August 2006 Wall Street Journal, Condoleeza Rice and George Bush seem to have concluded that they “need to take the long view.” Let us hope they have learned something, and that they can pass that along to their religious right constituency. If not, we are overdue for a change in Washington to a more patient majority Congressional party.

04 August 2006

Everything a Surprise

Christopher Hitchens presented a pretty good list of considerations to keep in mind when assessing the unwisdom of the policy of the Bush Administration vis-à-vis Israel’s retaliation against Hezbollah in Lebanon. However, he left out one crucial factor: the precarious state of Republican control of the U.S. Congress.

Perhaps uncritical support for Israel is a play to the Republican base among fundamentalist Christian voters. This sop to “red state” citizens is more important to the bumbling Neoconservative strategists than a real resolution to the constant conflict in the Middle East. A forceful international intervention in the region is the only way to impose an equitable settlement of long-festering Palestinian resentment of the results of the creation of Israel. Until that happens, at the risk of offending the Religious Right in the U.S., the Middle East will continue to be a thorny bush in the global garden.

03 August 2006

Peacekeeping Force Needed in Southern Lebanon

It was reported on 3 August 2006 that Israeli Prime Minister Olmert articulated what it will take to resolve the security problem in southern Lebanon. The weak Lebanese government is unable to control the use of its territory by a terrorist organization for attacks on the defacto keeper of civil order in a neighboring state. Therefore, it is reasonable that a 15,000-man international peacekeeping force be imposed on that region to prevent its continuance as a base for outlaw operations against the state of Israel.

Regardless of the politics of the right of Israel to exist and the effect of Israel’s creation on the land and freedom of Palestinian Arabs, terrorist activities against the Israeli state threaten the human rights of its citizens. The international community is delinquent if it does not take steps to stamp out those outlaw actions, coupled with steps to impose an equitable and lasting solution on the region that satisfies the needs of civility in that part of the world.

01 August 2006

Greater Middle East Initiative at the Cost of Human Life

Israel must realize that it has become one of the victims of America’s policy to democratize the Middle East. That policy is replacing authoritarian rulers with weak states. Even a confirmed opponent of Israel like Assad could control a terrorist organization like Hezbollah better than the Lebanese democracy can.

What use is a threat or use of force against a weak government, albeit a democracy, that cannot rein in an outlaw group that violates the country’s border? Lebanon’s Aoun was right in the 31 July 2006 Wall Street Journal – all human life is equally precious. Apparently, the neocon masterminds behind the “greater Middle East initiative” believe that human life lost in attempting to achieve regional political reform is a price worth paying. So is the loss of the lives of U.S. military personnel in Iraq.

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