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22 December 2008

Obama's Team of Rivals and Free Trade

Econ 101 presents the analysis of Smith, Riccardo et. al. which was as valid then as now. The markets, if left alone, allocate our resources better than governments do. Just because other governments interfere in their economies doesn't justify that we do, too. In that case, as we have found this year, we pay the fool's price, just as the others have done.

Obama's team of rivals would do best to devise ways to combat the short-term ill-effects of other countries' industrial policies while continuing to advocate free trade.

21 December 2008

Vulnerability and Deterrence

China and Russia are just as challenged as we by the new force of anarchy that the Bush Administrations have incompetently combated over the last seven years. This existential threat, noted by Mark Helprin in his Wall Street Journal OpEd article on December 19, 2008, cannot be averted by relying on conventional strategic means. The errors of both the Right and the Left in dealing with it were in not recognizing that we were in a different sort of fight in which those traditional methods of warfare are ineffective.

The information technology revolution has helped raise the potential of non-state actors for disturbing international order. Conventional and, particularly, massively destructive warfare and weapons are not the appropriate means for “routing” them out of the system. While the Rumsfeld Defense Department realized this, it was insufficiently innovative to come up with a winning substitute action plan.

The Right and the Left need jointly to develop a new strategy that enlists all our intellectual resources, law enforcement tools and inspirational devices to win over anarchists and form an optimistic unified human community.

20 December 2008

Commerce and Globalization

The American century has come to an end. The dominance of the American economy and its technological leadership since the end of WWII has been met with competition from other parts of the world that have benefited from the widespread availability of information. America, ironically, made information technology the cornerstone of its international business strategy.

The U.S. Department of Commerce can be shaped to create a world that is more in keeping with America’s Weltanschauung. When it comes to the Middle East, for example, American business leaders should be encouraged to change their approach to the region into an invitation to join them as partners rather than a game of one-upmanship. They should enlist into that effort industry leaders in other Western nations, too.

Isn’t that what has happened in China? The wealth of that country takes the form of a surplus of intelligent labor. The strength of the Middle East is plentiful energy. Both cultures have non-material centers—Islam and Confucianism/Buddhism, with some overlap. In China, a way was found to combine the “separate but equal” approach of the West with the East’s universal sublimation of material gain to ineffable communal advancement. If a similar innovation were developed in the Middle East, its civilizational clash and energy rivalry with the West might also be resolved.

The ideologies that dominate Western and Eastern cultures result in contrasting balances of personal and societal values. It is all right in the East for a person to disregard the welfare of individual foreign competitors as long as he and his community benefit. In the West commercial standards constitute the mirror image: There, one can maximize his own individual welfare at the expense of an entire foreign community as long as he treats his personal competitor “fairly.”

One way out of this dilemma is for individual business leaders on both sides to enlist the active participation of their cultural communities in achieving their commercial goals. In addition to offering an equitable return to individual cross-border business partners, each side would devote a significant portion of the return on its investments in the other culture’s economy to serving that community’s common welfare. Consequently, each cultural community would have a stake in promoting responsible behavior by its members.

One illustrative feature of this approach would be to reduce the importance of tax avoidance in Western commercial practice. This ritual is enshrined in the definition of business cash flow as EBITDA (earnings before interest, taxes, depreciation and amortization), which makes taxes one of the principle costs of doing business that corporations are expected to minimize. This change in behavior would result, formally, in reduced net corporate revenues. However, equalizing between East and West the tendency to share a portion of business income with the community at large will help globalize corporate citizenship, leveling the playing field, as it were.

In reality, overall profits from business enterprise in the West will not change. Here’s why: During the 2008 financial crisis, the U.S. government has been forced to take an ownership position in several large private corporations in order to stabilize international markets. As a result, the public shares an equity interest with stockholders in the recovery and profitability of those enterprises. It is not much of a stretch to include taxes in the ROI of all private companies. This accounting rule change would bring shareholder dividends and corporate tax payments to the society as a whole into equivalence. If the political process achieves fair and progressive government fiscal policy, shareholders would also benefit paripassu from those tax payments.

The role of the Department of Commerce in the globalizing business world should be as much to raise the “transcultural” awareness of U.S. entrepreneurs as to help them compete on their own terms. The traditional division between domestic and international business has long lost its relevance. When it comes to the health and resilience even of local industry, the resources and policies of alternative producers around the world are important factors in creating viable business plans. The ability of American companies to profit from investment, exports and sales of technology or intellectual property depends not on making the rest of the world carbon copies of our culture, but on creating a union of objectives that transcends the different directions the cultures of the world carry us all in. The Commerce Department, under the leadership of its Secretary-designate, Bill Richardson, should focus a great deal of its energy on making U.S. business and industry a motive force behind the globalization tide, not its flotsam.

09 December 2008

Blackwater Pardons?

I am ambivalent about the prospect that the six Blackwater security guards who have been indicted for killing 17 Iraqi civilians in a Baghdad square should be pardoned by President Bush. That is obviously the objective of their plea bargain strategy following their surrender in Utah this week.

Certainly, someone must be held accountable for the unprovoked slaughter of victims of the U.S. invasion of Iraq—indeed all of the violence caused by the U.S. invasion was unprovoked. On one hand, the Bush Administration has to be made to account for all the lives, both American and Iraqi, and all the money lost in that ill-begotten war. On the other hand, that does not release from responsibility for their own actions mercenaries who willingly joined in an effort that allowed them to wreak havoc under the banner of America’s War on Terror.

When U.S. voters elect a President who they ought to have known would use the powers of his office in a mean and bullying way, it is unfair of them just to punish the President’s contractors for doing his dirty work. Our constitution gives that President the right to pardon those contractors, even though what they did would have merited punishment if it was not, by extension, in fulfillment of the will of the electorate. Among the reparations we owe the Iraqi people for letting the President get off scot-free for invading their country is compensation for the atrocities committed in his name. At the same time, it is understandable that security guards could reasonably have assumed they were acting legally when they directed unwonted firepower at supposed insurgents in their authorized range

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