Thursday, March 17, 2005

Fun fact: Alan Greenspan received the Enron Award for Distinguished Public service. Even in fall, 2001, as the company fell into its death spiral, having already confessed to cooking the books, it wasn't ashamed to give the award, and a recent documentary shows him beaming, receiving it.

It's been common, in liberal circles lately, to wonder if Greenspan isn't a bit of a political hack. But perhaps, to be fair and balanced, we should also be touting his awards and achievements -- particularly the lesser-known ones. This one in particular seems... worthy of note.

Judge George Greer, the poor guy responsible for the Terri Schiavo case, styles himself a "compassionate conservative". And as he considers himself bound by law to order what would have happened in another case long ago, he's feeling the compassion of his fellow conservatives:

"It's killing me to watch him struggle with this," said Mary Repper, a retired political consultant who worked on several of Judge Greer's campaigns. "Armed guards with him all the time. People threatening to kill him and claiming it has something to do with the right to life - explain that, will you?"

Well, gosh. Liberals have been asking questions like that for years.

In Soviet Communism, the Capitalist West faced an implacable enemy. But also one that was just plain creepy. Not least for its promotion of official illusions. Newpapers were rigorously censored. Reference materials were cut to fit the political winds -- the past was literally rewritten to suit the needs of the present. People who fell out of favor were airbrushed out of photographs. Subscribers to one encyclopedia were, at one point, famously asked to remove an article on the head of the secret police, Beria -- replacing it with an expanded piece on the Bering Sea.

The Chinese Communist party, these days, is different. But only in so far as they seem to like capitalists. For the moment. (The New York Times link generator can't find a permanent link to that article -- but that, I'm sure, is strictly coincidence).

Then again, maybe they like capitalists because our current generation of American capitalists seems to think like them:

The enduring legacy of Enron can be summed up in one word: propaganda. Here was a corporate house of cards whose business few could explain and whose source of profits was an utter mystery - and yet it thrived, unquestioned, for years. How? As the narrator says in "The Smartest Guys in the Room," Enron "was fixated on its public relations campaigns." It churned out slick PR videos as if it were a Hollywood studio. It browbeat the press (until a young Fortune reporter, Bethany McLean, asked one question too many). In a typical ruse in 1998, a gaggle of employees was rushed onto an empty trading floor at the company's Houston headquarters to put on a fictional show of busy trading for visiting Wall Street analysts being escorted by Mr. Lay. "We brought some of our personal stuff, like pictures, to make it look like the area was lived in," a laid-off Enron employee told The Wall Street Journal in 2002. "We had to make believe we were on the phone buying and selling" even though "some of the computers didn't even work."

And Dubya is bringing that ethos to our government, as in his "conversations on Social Security":

Not only are the panelists for these conversations recruited from administration supporters, but they are rehearsed the night before, with a White House official playing Mr. Bush. One participant told The [Washington] Post, "We ran through it five times before the president got there." Finalists who vary just slightly from the administration's pitch are banished from the cast at the last minute, "American Idol"-style.

Perhaps that's why Dubya feels comfortable, as Tom Friedman notes in a rare good column, running deficits that make us utterly dependant on the goodwill of the Chinese, who are financing them, for our economic well being. In effect, we've sold them rope that they could use to hang us. Maybe he thinks they just won't abuse the power. They're his kind of people.

Wednesday, March 16, 2005

The economically rational way to organize things is to give people financial incentives to act the way you want. If you want executives to generate profits, for instance, one thing you can do is promise them large bonuses for making financial targets. Which almost guarantees that you'll show hefty profits on the books.

Of course, there's more than one way to make that happen. One is to actually improve the health of your business. Another is to cook the books, take the bonus and run.

Tuesday, March 15, 2005

Here's another entry in my highly irregular series of economics puzzlers. This one will have more of a practical bent: Why is it interfering in trade when California tries to regulate toxic gasoline additives, but not when China pegs currency values?

I'm perhaps jumping the gun here a little bit. I'm referring to a case brought by a Candian company which was distressed to find that California had banned its gasoline additive. So, using provisions of the North American Free Trade Agreement, they are suing -- not in either an American or a Canadian court, but in a secretive tribunal set up by NAFTA. As I write, there has been no ruling yet. So, the board has not yet hit up the taxpayers of California for the billion dollars or so that the company is asking for. But they could.

So, what's going on here?

The world is getting increasingly bound up in trade treaties -- from NAFTA to the WTO agreements. And one of the things these treaties try to do to promote trade is to keep governments from levying tariffs and the like which retard trade. But tariffs are only one way that a government could try to keep foreign products out. They could also impose discriminatory health and safety regulations which ban foreign products outright for spurious reasons. And so, the treaties set up a mechanism of review panels to see whether a regulation is actually legitimate -- and to levy fines if it is not.

The upshot is that while these organizations are set up for the ostensible purpose of promoting trade, they are given review power local laws. More to the point, they are set up to treat them all -- not just, say, tariffs, but local environment and safety regulations as well, uniformly as "barriers to trade". To which they have only one possible response -- to demand removal of the "barriers", and penalize governments that keep them up.

It doesn't have to be that way. Disparate regulations in different jurisdictions do create trade friction -- but that friction could be resolved by subjecting countries to trade sanctions if they don't have health and safety regulations which meet certain basic standards. However, these organizations are not, in practice, really set up to do that. They can call for these regulations, as "trade barriers" to be removed; they cannot, or at any rate do not, call for them to be created or credibly enforced. The upshot is that a transnational corporation which finds local laws to be inconvenient can appeal to the WTO without fear; it'll either do nothing, or strike them down. Which makes these organizations powerful tools for corporations against the state, and against even beneficial kinds of regulation.

Now, it is one thing to believe that trade is good; it is another to believe that trade has a kind of transcendent goodness which deserves this kind of support. Particularly when the trade agreements are silent on yet another government strategy for influencing trade: by manipulating the value of their currency relative to others. The Chinese government, for instance, has "pegged" the value of its currency, the renminbi, to the dollar, and is buying immense amounts of dollar-demonminated securities (mostly treasury bonds and mortgage-backed securities) to prop up the dollar. It is widely acknowledged that if they stopped doing this, the result would be that the prices of Chinese goods in the U.S. would rise, and the prices of American goods in China would fall. And that this is a deliberate goal of the policy. China, in effect, has made American goods artificially more expensive -- retarding trade every bit as much as a tariff -- while also, in effect, subsidizing its exports to America. Even better: neither the subsidy nor the tariff is subject to the trade rules of the WTO. Environmental regulations can be reviewed by trade boards; monetary policy, even though it has a far more pervasive influence on trade, cannot.

(It's worth noting that, on China's part, this is one component of an overtly mercantile economic strategy which would not be dear to the hearts of the free traders. In fact, they are moving more directly to poach viable industry from the U.S. -- pressuring Silicon Valley companies like Cisco, and through Cisco, its subcontractors, to move jobs to China whether there's an economic rationale for that or not. This may not be sustainable, and if it all falls apart, both sides of the relationship may be hurt at the end of it. But if the Chinese see the game of the next century as a battle with us for economic power, they may not care how badly they wind up, so long as we wind up worse. But that's a topic for another day).

Obviously, a government might have perfectly good reasons to alter its monetary policy for reasons other than its effects on trade, per se. But that's true for environmental and safety regulations as well. Indeed, there already are large, transantional institutions, full of free trade advocates, which already dictate monetary (and even fiscal) policy for many third-world nations -- the World Bank and the IMF. The results aren't always pretty, but they do it. Hence, the puzzle: If the trade organizations' review processes are good enough for the one, why are they not trusted to oversee the other?

One last point: opposition to trade treaties and their review boards and the like is often painted not as opposition to a particular mechanism for the promotion of international trade, which has certain unfortunate side effects, but rather as "opposition to trade" per se. This takes framing into the realm of non-Euclidean geometry. It's impossible to believe that most of the victims of the "Miami model" were demonstrating in opposition to trade per se, because there's no earthly reason for most of them to give a damn about it -- and plenty of reason for them to care about the environment and about labor conditions, which are their actual, stated concerns).

There are plenty of ways to promote trade without imposing unaccountable review boards, gutting democracy and self-rule. What African farmers and textile workers need most to get their products into the United States isn't a few more bureaucrats reviewing EPA regulations in Geneva -- it's a vote in Washington to take away import barriers and price supports, which we can do all on our own without negotiating a thing with anybody.

And so it would be a lot easier to take the advocates of unaccountable, supranational organizations with veto power over local health and safety regulations as advocates for trade, per se, if they were more willing to put those proposals on the shelf until we were rid of the goddamn price supports -- a point which applies not just to the current administration, but to its predecessors, whose record on this point is likewise nothing to brag about.

Monday, March 14, 2005

Before the election, Abu Aardvark reminded us all what it was about: he posted one of the Abu Ghraib torture shots (not one of the worst), and said:

Vote for this or against it.

It really isn't that complicated.

I haven't posted much on torture, because I don't have the heart for it. The last time was I think I had much to say about it was in February, when Jane Mayer's article on "extraordinary rendition" revealed that we were kidnapping guys out of Bosnia and shipping them to Guantanmo. (Some apparently feel that it's a bigger deal that we're also kidnapping people out of Italy, without the cooperation of the Italian government. Sadly, they may be right).

Well, on the off chance that I'm your only lefty blog, Jeanne D'arc has a review of the other stuff you're missing, in the middle of a long meditation on the stark fact that, presented with Abu Aardvark's choice, "vote for this or against it", an apparent majority of Americans voted for it. (I know even Bush-ophile Christopher Hitchens has his doubts about the totals. Spare me. It shouldn't be close).

After the election, Jeanne tried to rationalize it by saying that maybe they voted on other issues. And lately, faced with the continuing flood of stories (again, see her piece, I haven't got the heart for it), she's starting to doubt that.

Me, I think it's plausible. Because it's easy enough to just avoid this news if you don't want to hear it. Most people haven't got the heart -- not unless broadcast news (the only kind that really matters) were reminding them on at least a weekly, if not a daily basis. And the reporters -- they don't have the heart either.

Meanwhile, those interested in my post from last week about the Army's indoctrination of new recruits might want to read this article about their home movies (via King of Zembla). As to the type of war they wind up fighting, Juan Cole's post on the aftermath in Fallujah might be a useful gut check. Three out of four water purification plants are destroyed; the fourth is badly damaged. And then there's the damage to housing, from which Cole quotes an AFSC report: "It is estimated that 40 percent of the buildings were completely destroyed, 20 percent had major damage, and 40 percent had significant damage." Add up the numbers.

Again, for reasons I explained in my first post, I'm not completely sure that the Army is wrong to train troops like this. But if you build a force for absolutely savage warfare -- and make no mistake, that's what we have -- it's immoral and just plain crazy to try to use it to keep the peace.