US Elections: Grand Plans versus Reality

WASHINGTON – America is in a deep funk. We have this unprecedented financial crisis whose dimensions, potential reach and likely duration we are still not sure about. Hence fear, if not outright panic. But, whatever the many countermeasures already undertaken and the chances of avoiding the worst regarding this plague, we should also keep in mind that this upheaval hit an economy already in bad shape, weakened by low growth, unsustainable leveraging, excessive consumption and negative personal savings.

The painful reality is that, quite apart from surviving the financial crisis, in order to recreate some balance and chances for future growth, we have to accumulate fresh capital for new productive investments. And this will take time, given the need to pay off the mountain of debt. There has been too much borrowing for unproductive purposes. Highly indebted individual consumers will have to cut spending for a number of years. This means recession, given the oversized relevance of personal spending as an engine of growth in the US. Prolonged spending cuts will spell disaster all over and especially in the huge services sector that depends on consumers. And all those clerks and waiters and salesperson who lose their jobs will also stop consuming, causing more contractions and more misery.

In all this, we have a presidential election. But the curious thing is that, while the candidates talk about this crisis, they sort of skip and jump, without seriously pointing out that this is going to mean prolonged pain throughout. In a rather disingenuous way, while the candidates admit the problem, they peddle their “plans” as magic remedies that will fix everything in almost no time, omitting the simple fact that, as we are already deeply in debt, the Government’s options will be severely constrained. Given the huge financial commitments that we have just created through various emergency programs, piled on top of already unsustainable public spending, realistically we have no real money for anything new.

Yet, the glaring contradiction between the current fiscal predicament and the electoral promises which promise more spending, strident as it is, goes essentially unnoticed. If a candidate gives a coherent 5 point solution to take care of this or that, well, this is “His Plan”. It does not matter that the solution is premised on increased spending that is just not available. The armies of commentators simply omit to mention this. Or, if they do so, they say it timidly. “Oh well, will candidate X be able to implement the overhaul of health care under the present fiscal circumstances”? Well, reason tells us that, no, he will not be able to do this. But, since the media and the analysts love someone coming along with a comprehensive solution, forcefully presented, they do not seriously challenge the fact that this or that program is based on unlikely premises of fiscal solvency.

Overall, it seems clear that, starting with the elites who shape the national commentary, people do not demand the “truth”, whatever that may be. The educated elites like to listen to a good doctor who seems to have the good cure, what it takes to fix the problems quickly and (maybe with magic) with little or no pain. There is no deep analysis of the assumptions, as long as the cure is well presented in an earnest and convincing way. And the winner is the one who sounds more persuasive. And if the solution is well articulated in 4 or 5 steps that, at least in principle, seem to follow some logic, well this is a “Real Plan”.

Barak Obama has come up with many such Plans. He sounds in control and thus intellectually ahead of his more disorganized opponent who seems to be all over the place and who has failed to articulate an equally compelling “Grand Strategy”. Besides, the bedside manners of Dr. Obama are clearly superior to those of Dr. McCain. Barak Obama successfully morphed from Messianic, visionary new leader who would transform the entire substance of the political dynamics in Washington, to the steady, reliable hand who can talk ably about grand policy plans and be believed in so doing. Hence he wins points for being  calm, while McCain appears flustered and unduly aggressive. Not bad for a freshmen Senator who was derided by his Democratic opponents during the primaries as naïve and inexperienced, someone whose career could be condensed in a couple of paragraphs. While one might argue that Senator Obama has grown through the grueling campaign process, we should not make the mistake that equates personal charisma which worked as a magnet to attract unprecedented funding for a well managed campaign with good governing skills. Right now the name of the game is persuasion. While governing certainly includes the ability to persuade, it is about persuading about doing “the right things”. And that is another matter.

On the other side, the feisty McCain-Palin Maverick Team has sputtered. Its message appeals mostly to its traditional base, a disoriented Republican constintuency that has become narrower and smaller in recent years. The strategy of appealing to the millions of uncommitted through an unconventional message that would transcend tradional politics has essentially failed. Their basic theme of “going to Washington to clean up the mess”, (including the mess caused by fellow Republicans), may sound good to some; but it is not reassuring to the millions who want “things” to be done, now, “for me, the suffering citizen”. McCain has not created a message that truly broadens his party’s political appeal and he does not have the polished plans that would include “things” to be delivered; or if he does, he does not communicate them well. His plans do not resonate.

Whereas Dr. Obama has a solid list of therapies and remedies, (remedies that include tangible benefits), targeted to the middle and lower middle class. And he explains them in a calm and steady way. He sounds “in control” and thus believable. And he is believed. He will tax some people; but, hey, not you and me. He will find money to reform health care, and, by modernizing antiquated administrative systems, he will manage to realize substantila savings, thus diminishing medical cost for all. He will get those millions of outsourced jobs back. He will give you what you need for work, child care, access to university, retirement. On top of that, he will retool the economy, revamp Detroit and create millions of new jobs by turning America into an efficient energy producer and consumer through massive investments in renewable energy. And he will end all the wars. He will finally catch Osama bin Laden and he will talk to foreign leaders, so that we can finally regain respect and good will in the international arena. Yes, he will do all that, deficits and economic meltdown notwithstanding.

Dr. McCain may have a few interesting points here and there; but his presentations are not compelling and they are not smooth. It all looks a bit confused. His good intentions are not necessarily in question; but his ability to keep it all together is in doubt. He has not convincingly articulated a “Grand Policy Plan” that will help Middle America. Besides, he is getting old. When he talks, his delivery is not secure and his voice not as silky as the other physician’s. His number two, Sarah Palin may be interesting. But she is too right wing for most independents and very green in terms of experience. Besides, McCain is too closely associated with the Republican Team in charge as the economic disease developed. Thus, one more reason to ditch the Republicans and try a fresh approach.

Of course, nothing, absolutely nothing in the record of either candidate indicates probability of success by choosing one or the other. While McCain has been around longer, showing some propensity to be a pragmatist, neither of the two Senators has had significant executive experience of any kind. They are politicians. They have not “run” anything. True, Obama’s smooth performance, his well oiled campaign, his long list of distiguished advisors would indicate an ability to manage and to plan. Yet again, quality of execution when governing is another matter.

But the national elites seem to have made up their mind based on appearance, debating skills and cleverness of delivery. But, most of all, the intellectual elites are instinctively in favor of social engineering. The consensus now being that the machinery of free enterprise is broken, they believe that now is the time to implement complex regulations that will bring about discipline and accountability. They are instinctively convinced that society needs to be fixed and that it is up to the technocratic elites (as they know better) to come up with the good solutions which they (the enlightened ones) will implement for the benefit of us all. And, as the intellectual consensus now is that the current crisis shows the perils of deregulation, the elites love the idea of being in charge of the plans to fix everything, while correcting injustices and finally creating a more equitable society.

So, the elites have already decided for Obama. Once the country digested the notion that a racially mixed candidate is quite alright, Obama’s talent as an articulate, thoughtful public speaker, seems to have done the trick. And the citizens are comfortable. Obama’s cure, at least on the surface, appears more detailed, better researched and more ably presented. Hence his lead in the opinion polls.

But does “The Plan” match reality? As I said, the question is not asked. For some reason a Big Plan is better than a Small Plan; even if it is based on questionable fiscal assumptions. This is the triumph of good presentation and clever delivery of a well scripted policy book; even if completely divorced from the unpleasant reality of fiscal emergency in which we are, due to the current crisis. Obama wins because of well articulated presentations and because of the appeal that programs laced with goodies have with the suffering middle and lower middle class. But the truth is that most of what either candidate recite, however smart and intriguing, is largely a rhetorical campaign exercise.

Most of it will not be done, as there is no money.

Let’s clarify this. Well before the financial emergency, the federal government was already on an unsustainable pattern of rapidly increasing debt that goes back to the very beginning of the Bush presidency, almost 8 years ago. Lower taxes, runaway spending and two prolonged wars have massively increased public debt. Fiscal year 2007-2008 that just ended on September 30 got us the highest federal deficit in the history of the United States: 455 billion dollars. While this is bad enough, the raft of emergency measures just undertaken to contain and hopefully stop the bleeding caused by the consequences of the financial insanity of the last decade amount to an additional trillion, (and we are still counting) of new spending. This means that the projected deficit for Fiscal Year 2008-2009 (which just started on October 1) is about a trillion. These are fantastic inbalances, even for the world’s largest economy.

And if we look further down the line at the aggregate fiscal implications of larger numbers of older people who will be collecting pensions, while requiring medical care, we are told that America has already accumulated unfunded liabilities in excess of 50 trillion dollars. And this was before the extraordinary new expenses forced by the need to contain the consequences of the financial tsunami! In other words, unless the national priorities are drastically changed, quite apart from the present contingency, we are headed towards financial catastrophe. Given all this, with this gigantic and growing fiscal shortfall, the new President will see that the already constrained policy options will be severely limited.

The truth is that we have almost no discretionary spending left, as the revenue is both insufficient (hence the need to borrow heavily) and already committed. From the general revenue that Washington gets, first we must take out money to be paid as interest on the debt (which must be handed over to all those Treasury bonds holders). Interest is going to increase as a percentage of total outlays in light of the additional borrowing. Then take out from the pool of available funds all the large and growing (due to an increasingly older population) entitlement programs: Social Security, Medicare, Medicaid, veteran benefits. All these programs run on autopilot. These obligations must be paid, along with built in cost of living adjustments. And with this, we have already eaten up more than two thirds of the total revenue. Then we have Homeland Security spending. It will be difficult to cut from Immigration, Border Patrol, Airport Security and the like. If anything, the experts tell us that we should be spending more to make the country more secure. And finally we have defense spending. Of course, we can play a little with it. But not too much, with two wars underway. You may cancel, delay and stretch some of the weapons programs and other procurement. Maybe you could save a few billions. But, contrary to popular opinion, most of the defense money goes to salaries and funding for current operations. It will be difficult to maintain a fighting force and save significant money at the same time, even assuming a successful fast track out of Iraq.

Simply stated, what is left for “non defense discretionary spending” which includes most of what government does, beyond the entitlement programs and national security, is very little, very little indeed. It is roughly 15 per cent of the total kitty. That’s right, when you take out interest on the debt, entitlements, homeland security and defense, the rest is about 15 per cent of all the dollars that Washington can allocate. And even this relatively small slice of the total is pretty much spoken for. Unless we want to eliminate or downsize entire departments or agencies, (how about cutting down 50 per cent from Commerce, NASA, NIH, or Agriculture?), unless we want to significantly cut foreign aid or close down embassies, most of the discretionary money goes to run operations for the entire federal government at current levels. The wiggle room is minimal. Senator McCain talks  forcefully about the exponential growth of earmarks, that is money allocated for projects that do not really serve the public good. Still, we could eliminate all earmarks today and the basic fiscal picture would not change that much.

And so, this dire financial scenario means that the convincing delivery of detailed cures and remedies that supposedly will take out of this mess under the reliable care of Dr. Obama is mostly that: good delivery of good intentions. The hospital has run out of almost everything. The fancy new therapies require new money. The electoral programs are about reintroducing fairness, about giving more to those who do not have a seat at the table. But the ability to engineer these complex reforms assumes extra funds; and we do not have any.

The fact is that both Dr. Obama and Dr. McCain know this. All of Washington knows this. The media pundits know this. And yet, somehow, the game of make believe, whereby the candidates engage in debates about things that in reality cannot be done, continues. And the complicit pundits give high marks to whomever sounds better; the one who can deliver the clever line with a secure tone of voice, showing to have better command of the issues and better stage presence, along with the necessary gravitas or humor, depending on the need of the moment. Whoever “seems” to have the policy that “seems” to meet the needs, well presented and artfully delivered, will win. Obama is better at this. No question. And he will probably win because he appears more in command, while his promises have broader appeal.

But Obama is not auditioning for the part of President in a new movie. This is the real thing. Taking for granted that both candidates have a modicum of intelligence and perspicacity, to be more personable, as Obama is, is a good trait for any human being and in politics it certainly is a plus. To be inspiring and reassuring, as he is, is even better. But, while these qualities can engender trust, neither of them are substitutes for real governing skills. Simply stated, complex governing programs that promise fixes, assuming financial resources that will not be found, is either a dream or a hoax, depending on your preferences.

As I said, this is not a movie about Washington, this is the real thing. No money will make it impossible to implement these complex ideas, at least not as stated. What will actually be possible, given the uncertainties of the cost of the current crisis and the paucity of fiscal resources, has not been seriously discussed. But, for the moment, the national elites have decided that they like the sophisticated policy plans, as many of them dream to be in charge of implementation, showing thus their superior talent. In step with the national intelligentsia, the frustrated people seem to have decided that the one who has the best of list of promises and who unquestionably looks better on stage is the one to be trusted.

The “Fundamentals” of the US Economy

WASHINGTON – Senator John McCain has been repeatedly mocked by his opponent, Senator Barack Obama, for having stated very recently that the “fundamentals of the US economy are strong” –or words to this effect. Of course, in light of the significant slowdown, with rising unemployment and now the unfolding, disastrous Wall Street and Main Street meltdown, McCain’s sunny optimism sounds dumb. But, whatever it was that McCain really meant, there is an obvious distinction between “the fundamentals” of the US economy and the present contingency faced by America. The present contingency is as bad as it can be. The dominance of finance over economic activity –intended as production of new wealth– with financial wizardry having turned into recklessness, has dragged the whole edifice down. So, the current situation is bad, if not awful; and the severe damage may be felt for years.

The real fundamentals

But what about “the fundamentals”? And what can we say about them? If we really focus on the fundamentals, is McCain’s optimism as silly as Obama describes it? Well, here the evaluation is not as clear cut. A reply to this –indeed—”fundamental” question needs to be nuanced, as the fundamentals have changed –and not for the better. 

They used to be good

Until not too long ago, it could be argued that the basic elements of the US economy were, if not excellent, quite good. America routinely ranked in the very top tier in most international comparisons on competitiveness and easiness to do business. The positives included a truly free society; a reasonably educated, mobile and flexible workforce, depth of capital markets. America had and still has a system in which the rule of law is usually dependable, in which contracts are enforced. But, most importantly –and this is truly the envy of the world– America had a system that favored healthy synergies between outstanding academic institutions producing basic research, significant public and corporate R&D spending, entrepreneurship and venture capital.

Rewarding innovators

This future oriented mix made it possible, indeed always desirable, to push the envelop, to think and do outside the box, with the expectation of being financially rewarded for developing new products and bringing them to market. So, the system would brew innovators who could find the money to commercialize their inventions; while the market place rewarded success, creating thus more incentives for others to do the same.

Good results

And we see the results. It is not due to random accident that the most significant innovations of the unfolding knowledge economy have been hatched here, in the USA. A competitive environment, in turn, encouraged established economic sectors to adopt the cost saving, efficiency enhancing, new technologies, with the objective of making their businesses leaner and more productive. Because of these investments, the overall economy has become more efficient and more productive. More could be said, but these are some of the critical “fundamentals” that other nations wished they had. This was the picture until not too long ago.

Can public policy make a difference?

Sure enough, public policy does matter in this context, as it affects the basic environment in which economic actors operate. But if we would want to take literally Senator Obama’s scathing critique of McCain’s apparently uninformed optimism, concluding –as Senator Obama asserts– that the fundamentals of the US economy are bad, then public policy, whatever its goals, would face tremendous obstacles, assuming bad fundamentals.

…It can fine tune; but it cannot make things happen

Indeed, if the fundamentals were really bad, well, public policy alone, however thoughtful and inspired, would make small inroads, as it would fall on an unreceptive terrain. To name just one variable, should there be all of a sudden a dearth of entrepreneurship in America, with no new companies launched, how could we have growth and how could we bring innovation into the market place?

Or, on a different level, should morality all of a sudden take a fall, with most people becoming corrupt, public policy could not turn this around. Forgive the extreme example: you can have the best public policy in the Congo DRC, but results would be small, as the country, unfortunately, still lacks most of the fundamentals. Public policy can strive to create an environment more favorable to enterprise, but it cannot make it happen on a significant scale, just by fine tuning the rules and creating fiscal incentives. If we do not have the fundamentals, or if the fundamentals are skewed by other factors, (take social ties that constrain economic behavior in Japan), governmental action will have at best a limited impact.

Good public policy can help unleash enterprise but it cannot create it

Good policies, and let us assume that Obama’s ideas are excellent, can have a truly positive impact if the “fundamentals” are good. If the society is educated and healthy, if there is respect for the rule of law, if sophisticated skills exist and are constantly upgraded, if people on balance are law abiding, if the courts are impartial, then we have the basic ingredients. In short, “good fundamentals” are the preconditions for a performing economy. Good public can help optimize performance; but it cannot create the system. This is why, lacking the fundamentals, good policies will have a modest impact.

Fundamentals stem from societal values

The fundamentals come into existence as part of the culture, of the value system of a given society. Sure enough what governments do does matter; but public policy alone, divorced from broader efforts aimed at creating or sustaining values will do little. Creating those fundamentals is immensely difficult. And there is no clear road map. It is a matter of complex cultural transformations grounded on belief systems tested over time through experience and results. There is no clear recipe, no one size fits all.

Repeated failures of attempts to “import” fundamentals

And the evidence of how difficult it is to create the culture underpinning and sustaining the fundamentals is in the repeated and in some cases catastrophic failures of development economics aimed at introducing, via new policies, the good underpinning and the values that would sustain them –all these constituting the good fundamentals– in parts of the world that never had them.

The bad record of development economics

Hundreds and hundreds of billions and hundreds of country strategies later, the results in international development efforts are modest. And this is not for lack of persistence. Disappointing results simply underscore how difficult it is to create and sustain what  development experts fondly call “the enabling environemnt”. A good “enabling environment” assumes many if not most fundamentals to be already in place and vibrant. All this does not mean that, with good fundamentals in place, there will be no crises, even though the present one gripping America is exceptional because of its depth and reach. But a society in which the fundamentals are still basically sound can overcome massive crises like this one.

Lacking values, good policies rarely create fast transformations

Thus, it should be clear to all that, aside from exceptional contingencies like the present one, in most cases, an overall bad economic environment, characterized by lack of development or disappointingly modest rates of growth, is due to the lack of fundamentals. These fundamentals unfortunately cannot be quickly wished in place by wise and well meaning policy experts. While bad policies can contribute to bad economic outcomes, the reverse is not necessarily true. Good policies alone cannot rapidly create a healthy situation, if the “fundamentals” are not in place.

If new policies were enough, Africa would be booming

Indeed, if good intentions and well meaning effort alone (see above) would suffice to will the fundamentals in place, then Africa should be booming, as it has been the focus of relentless attention by development planners and strategists for decades. But growth in Africa has been disappointing precisely because many of the fundamentals are not yet there, or at least not there in the measure that is required to create the virtuous cycle of healthy growth begetting more growth. Of course, change is possible, and there are some encouraging examples. But change is usually slow and uneven.

In Europe: loss of an old pro-growth culture

And if we look at Europe, we see countries that are developed –in fact countries that historically invented development– but whose growth, overall, is disappointing. Well, the causes could be debated. But many would argue that low growth is due to a change in the culture, that is a change in the societal disposition with all the attendant repositioning of values and economic and social priorities.

Conserving what exists, rather than create new things

In Europe today, on balance, there is a stronger emphasis on equality and the creation of guaranteed good conditions for all. And so we have a concern for keeping people in their existing jobs, even if these economic activities are less competitive, rather than stimulating risk taking with the possibility, albeit not the certainty, that more competitive jobs will be created. Overall, a dependable status quo seems preferable to a risky, free for all system in which some will win but many may be losers. So, the delivery of social services comes before enterprise creation. While the goals of social policies are laudable, as they are aimed at minimizing disruptions, they detract resources from investments and growth.

Demographic trends: more older people and retirees

Furthermore, given the demographic shift in Europe to older and older populations, the focus on social programs will mean that a larger and larger percentage of whatever wealth is produced will be spent on the needs of the older people who are growing as a percentage of the total population. With more resources absorbed by the no longer productive elderly, there will be less for anything else. Unless a new economic engine is created that will produce spectacular new wealth, this will mean even slower growth.

European fundamentals: not optimal for growth

This does not mean that the “fundamentals” are bad in Europe. It means that they are not optimal for growth. There is more social equality, while fewer people fall through the cracks, but less wealth overall. While public policy could change some elements of this picture, the underlying issue is a political culture more focused on justice, stability and distribution than on wealth creation. These values have consequences. They affect, indeed they shape priorities and thus the fundamentals.

What about America?

So, after saying all this, can we just conclude that, current financial crisis notwithstanding, we should congratulate ourselves, because the fundamentals of the US economy are basically sound and good? Well, not so fast. As I said at the beginning, there used to be almost total unanimity as to the soundness of America’s economic fundamentals. But some key elements in the picture have changed –and definitely for the worse.

Deterioration of human capital: a worrisome trend

As I have discussed elsewhere, one of the fundamentals, in fact a key fundamental that is increasingly becoming the foundation for everything else in knowledge economies, the quality of human capital, is deteriorating in America. And this is a systemic crisis surprisingly ignored or played down, even by those who should know better. Unless quality education is fully restored, indeed upgraded in the country as a whole, we have to conclude that the fundamentals, although still better than elsewhere, are deteriorating in America, with long term systemic consequences frankly far worse than the impact of the current financial panic. Bad quality of education will translate into low quality labor force and this will affect the future wealth generating capacity of the country as a whole. Panics come and go. But if a country loses its edge in skilled people, it may take generations to reconstitute this asset.

Not enough care for education

Without getting into too much detail, a future thriving knowledge economy is not founded on the quality of truck drivers and store clerks in shopping malls, but in the inventiveness and sophistication of software programmers, biochemists and molecular biologists, electrical engineers, physicists, corporate managers and venture capitalists. Their quality, their worldliness, thier knowledge and their ability and willingness to push forward into unknown territory and to come up with state of the art solutions that will have a market is “the” fundamental that, in the long run, will determine which country will be on top of its game.

Secondary education in crisis

And here we have a great deal of evidence that America has lost and keeps losing ground. Broadly speaking, the US secondary public education system is mediocre at best, abysmal in many instances. This fact is known. But the outcry is muted. No sense of crisis. Who knows, maybe some think cynically that it is fine to have a significant percentage of America’s youth functionally illiterate, as these low skills or no skills people will perform menial jobs that are after all still needed (even though many of them are performed by immigrants, legal or illegal). 

But, if this is the idea, it is an awful, unjust and stupid idea.

No real outcry

Lack of education for millions of Americans is terrible for them, as it amounts to a virtual sentencing to be and stay at the bottom of the pyramid; there perpetuating a situation in which “birth is destiny”. Furthermore, having millions of uneducated Americans in its midst will deprive society of the necessary skills that would contribute to national growth.

No real accontability at the root of the financial crisis

Of course, a lot more could be said about the need to improve on many other fundamentals. The current financial crisis indicates that, as a minimum, we do require much more transparency and accountability in economic transactions. The fact that top tier financial institutions massively engaged in inherently speculative and risky activities, without proper margins and safety measures, while regulators and enforces did not know or would not act, tells us about the loss of accountability standards, within a system whose health is predicated on their existence. 

Myth of easy money

And there is more. Something odd and dangerous happened to America alongside with our disregard for good education as the critical engine of future growth. Whatever the reasons, we were lured into a dream of perpetual wealth that would be generated magically by our little personal cornucopias in the guise of our homes from which we thought that we could extract equity forever, without any problem or downside.

Money has to be made via activities

In other words, we thought that we could sidestep the pressing issue of retooling ourselves in order to improve our wealth generation potential because we “discovered” that we were already much wealthier than we thought. If you sit on top of your own inexhaustible gold mine, well, you are fine. If the cost of keeping your gold mine, (your mortgage) is low and, in any event, it can always be renegotiated at a low or lower level, while the gold production of your mine keeps growing, well, you got it made! The amount of gold (the equity in your home) that you can extract will always outstrip the cost of keeping the whole enterprise going. This way you will always be ahead. You can have the extra cash to do much more than the income derived from your labor would warrant –and all this is risk free, and it will go on forever!

Collective folly in the real estate bubble

OK…It was not exactly as crass and as stupid as described here. But close, very close. Which is to say that the real estate bubble, coming along just at the time in which the US labor force, as a whole, was feeling the pressure generated by the new Asian low cost competition, provided a comfortable, if temporary, hallucination. “Hey, we do not produce as much wealth as we used to. But, not to worry. Our home values make up the difference, and then some!”

Spending forever

So, we had the temporary delusion that we could spend at will, even though our labor derived incomes for the most part were stagnant. We could spend with abandon all those home equity lines of credit, as “the market” would guarantee forever rising real estate value, and so we could extract more equity and spend more of it in the following years. Well, we know what happened……

Go back to the notion that innovation not rent produces real value

What does all this have to do with the fundamentals? A lot. One of the key fundamentals of a healthy, modern capitalistic society is that wealth needs to be produced, it cannot be willed into place by blowing up beyond reason the idea that one can live off one’s equity. Sure enough asset values do matter. If oil is found on my land, that changes my economic circumstances. If the city planners decide to have a subway stop next to my property, well its value will go up.

But by and large, the real health of a knowledge economy cannot rest on the delusion that for most people finite fixed assets will yield an endless stream of income that will be used use to finance consuymption and life style, forever. This is true in many cases featuring property owners collecting rent; but it cannot be a national economic plan. And in reality most spending was not coming from rent but from extracting cash from overvalued equity. So, this was about spending capital that was not recreated. Even assuming a large bank account, one can draw from it. But not forever. Borrowing more and more against an absurdly overpriced home is sheer folly.

Lessons from the Spanish kingdom 

Long ago the Spaniards thought that they had a good economic model founded on the looting of South America’s gold and silver. Well, aside from unleashing inflation in Europe, in the long term, this avalanche of gold did not help Spain a bit, as it was not used for modernization or productive investments in Spain; but to finance expenditures. And, the underlying fundamentals having stayed the same, when the gold finished, Spain was still feudal and backward, minus the gold. Without enterprise and captive of a lingering feudal culture, Spain was left behind; becoming afterwards one of the most stagnant economies in Europe. All the gold ans silver used to finance current expenditures did not do much good.

Back to us, the dimension of the real estate fantasy represented an unhealthy departure from some of the key fundamentals. Rule one should be the notion that real wealth is based on production rather than borrowing against assets. Whatever the value of those properties, (in hindsight we know that it was less than estimated), it was finite. Once it has been used up, there is no more –just like the looted Latin American gold.

Can America rediscover its values?

Assuming that the lesson from the real estate bubble will be learned, (let’s hope), a poorer and humbled America, all else being equal, should go back to the fundamentals and thus tend to the nurturing of human capital. This should be job one, as this –high quality human capital–is the real cornucopia, the source of future innovation and wealth creation. This is the key fundamental that is now in need of serious care and repair. It is often said, and it is indeed an accepted “Truth” that anything is possible in America.

American dream?

Anybody here, assuming determination and will power, can achieve anything they want, no matter their formal education or where they come from. While there is some truth to this, for large segments of the population, lack of eduaction opportunities in fact translates into lack of life opportunities. Hard work alone cannot overcome a huge knowledge divide. So, the restoration of this notion of America as a Land of Opportunity is predicated on spreading the gift of knowledge.

Spreading knowledge

Of course, this requires public policies. But it really requires a societal redifinition of what equality of opportunity should be. Meaningful efforts and the consequent reallocation of resources so that good education becomes truly available is predicated on a transformation of our value system. Hopefully, a new administration in Washington will be able to set the tone for a productive national debate on how best to define our goals and how to accomplish them.

Separating the fundamentals from the current crisis 

So, in the end, Senator Obama’s criticism of McCain’s optimism is justified, albeit not for the reasons that would appear to be self-evident: that is the current gigantic crisis. Leaving aside, if we can, the ongoing financial upheaval and the wasteland that it will leave in its wake, there are other, deeper, reasons for concern over the long term health and viability of the US economy. In a word, the “fundamentals” while still more than passable, have been seriously impaired for reasons not directly connected to the current hurricane. 

Fix education

The systemic flaw represented by the serious, progressive deterioration of the American education system needs to be exposed, addressed and remedied very fast. Assuming action and success, the fundamentals of the economy can be good again; but, until we reverse course, there is no guarantee.

Senator Obama thus is right in criticizing Senator McCain, but only if he truly understands this human capital shortcoming and if he has a better plan that would target education as a top priority and would engineer a societal consensus as to the need to reverse our decline in education standards and quality. Without such a plan and a new national determination and enthusiasm to implement it as soon as possible, the “fundamentals” will stay flawed.

The November winner will have to reverse the downward trend

Whoever will win, and Barack Obama looks the favorite, quite apart from the aftermath of the current financial crisis, he will have to reverse the downward trend that will eventually yield a diminished, sluggish, uncompetitive and ultimately poorer America –an America that will lack its trade mark optimism and consequently the means to be a force for good in world affairs.

McCain’s Ethical Crusade For A Frightened America?

WASHINGTON – Senator Barack Obama has a clear theme to draw appeal to his quest for the White House: the recreation of economic fairness in a society in which the current Republican leaders have taken care of those on the top and failed to do the same for those in the middle or lower. And this is the latest variation on a philosophy that proclaims that all should have a “fair share” of the pie, whatever the going perception of “fair” may be. This is not exactly a socialist program; but it is an aspiration to a more egalitarian society. While there is more than just wealth redistribution in this plan, the raw political message is: “Given growing unfairness, tax the rich and give more to the struggling middle class and the poor”. Reasonably appealing to begin with, in the midst of the current severe financial crisis, Obama’s message of “I’ll take care of you” has had an even stronger impact. The disoriented and frightened voters now lean decisively towards the Democratic contender and his reassuring message of a benevolent government that will finally take care of all those who have been left behind.

On the opposite side, Senator John McCain may have an economic and social agenda. Certainly he has articulated some thoughts about retooling America, about a new energy policy etc. But there is no “Grand Plan” founded on a policy program . His fundamental message is about ethics. It boils down to a vision of politics as ethical mission in which the first order of business is to clean up the mess caused by corruption and lax morals. Overall, today’s problems, according to McCain, are not so much the outcome of flawed, bad policies but of bad, unethical people who ultimately have corrupted the system. Whatever the political affiliation of unethical office holders and business leaders, their choices, whatever the ideological disguise, are inspired by personal greed and favoritism. And so the Common Interest is lost.

Hence the paramount importance of personal character in politics. Policies that look good in principle do not mean much in practice unless implemented by an Ethical Leader. And this Leader, once in office, will pursue the bad people, he will expose them and he will get rid of them. This action, in an as of itself, should cleanse the system and make it more responsive to the needs of the larger society.

Fine. But what about everything else? Well, for everything else, for governing that is, the Good Leader will rely on good judgment founded on ethical foundations coupled with seasoned experience. These qualities will tell him what can be done to get a consensus on this or that and get something “done” in the interest of the People. 

With the exceptions of a few general principles, such as the need to maintain a vibrant private sector based economy, the need for reforms that would increase the level of skills, the need for a new less carbon based energy policy, the need to make America more competitive and –in foreign policy– the need for vigilance against old and new threats, to be achieved also through rejuvenated alliances and coalitions of democracies, there are not that many more specifics that define a carefully crafted “McCain Plan”.

McCain’s basic political message is about a Moral Crusade that will restore the preeminence of the Public Interest. And McCain’s choice of Sarah Palin as running mate is a way to underscore this point. Whatever her moral conservative credentials that energized a dispirited Republican Christian wing, with this choice McCain wanted to create the “Maverick Team”. There is the lady from Alaska who rose to the top of her state’s politics mostly because of her record as the brave crusader against entrenched interests. She is portrayed as the classic anti corrupt establishment leader who will fight the good fight to restore confidence in a discredited political process by finally acting in the interest of the people.

So, Sarah Palin is a younger, female version of Senator McCain. By choosing her he also wanted to show that this ethical approach to politics is not just his own pet project but a real broad based plan that can have wide appeal across geography, demographics and gender. Of course, we now know that the appeal of the “Maverick Team”, significant after Palin came on stage, has waned. The initial questions about her thin credentials have turned into a broadly shared conclusion that, whatever her crusading record in Alaska, she is really not well qualified for high office.

Still, even assuming no questions about Palin’s resume, is this all there is in McCain’s message? Throw the rascals out and then do what is sensible by creating bipartisan coalitions in passing reforms such as immigration, energy and medical services?

Well, this stripped down approach that fundamentally says to America: “Trust me because I am moral and I have experience and I am pragmatic enough to find non partisan solutions for complex problems” is certainly not the joy of policy wonks who want to analyze complex platforms replete with multi-layered, interconnected policy solutions. This looks pretty thin, doesn’t it? Can this be the basis of an electoral program for someone who is running for the highest office in the most complex industrial democracy?

Well, yes; at least in principle it could be. It all depends on the quality of execution which rests on the (assumed) good instinct of a leader in terms of broad direction and the actual policy choices made under the guidance of his (assumed) ethical pragmatism. Let’s explain a little more. In American politics, with very few exceptions, complex political programs supported by ponderous policy briefs labored on by hundreds of experts in the end amount to not much, as these complex policy programs are soon disregarded, correctly judged to be impractical, unless substantially watered down and modified.

For example, who remembers that then candidate Bill Clinton centered his electoral message in 1992 on the need to craft a “National Economic Strategy” for America, a strategy to be fashioned following the (then winning) models of Japan (yes, Japan) and Germany? Well nobody remembers any of that, because the whole thing was quietly abandoned as soon as Clinton came into the White House. By the same token, Ronald Reagan’s pledge to abolish the Departments of Energy and Education, viewed by him as examples of unnecessary government meddling, went nowhere after he became president. Likewise, the partial implementation of Reagan’s agenda to shrink government and lower taxes led to the cutting of taxes without managing to achieve commensurate cuts in public spending, with the ensuing huge structural budget deficits that characterized his presidency. So, the frugal Republicans turned out to be the kings of the deficit and fiscal irresponsibility. Which is to say that Grand Plans, whatever their electoral appeal, do not work very well in America.

In this very fragmented, if not fractured, institutional system it is not easy to fashion strong and lasting coalitions that can lead to the implementation of radical change. In this inherently balkanized framework with multiple centers of power, the complete victory of one clearly defined ideological view point over another is next to impossible. And even when sweeping victories of one point of view occur, they are short lived. They are easily undone by a different coalition, usually within a short period of time.

Which is to say that, whatever the pristine visions offered to followers in the primaries and in the general election campaign may be, in the end there are not that many revolutions in American politics. On balance, the country is governed from the center, via non ideological compromise. Individual politicians may get attention by clamoring for radical positions on this or that (Congressman Tancredo: tough on immigration; Congressman Kusinich: end the war, impeach Bush), but the country is governed from the middle by people who, regardless of their political affiliations, agree on basic principles.

To the extent that a president is or appears to be strident and uncompromising on whatever issue, (think of George Bush) his leverage dwindles and, along with that, his popularity and his ability to present himself as the symbol of national unity. By the same token, a legislative branch guided by a majority with a strong, uncompromising program, will not go very far. The Republicans stunned Washington with their surprise victory in 1994 under the guidance of the extremely sophisticated and articulate Newt Ginrich. And that victory sprang from a platform of radical change. Well, despite some promising beginnings, the whole enterprise soon unraveled and Ginrich in the end resigned in defeat. Worse yet, the same Republican party that marched to victory in 1994, ten years later was a spent force with no distinguished leaders and a lot of corrupt members in jail; while it had completely abandoned its core principles of limited government, unleashing instead an era of unrestrained public spending.

Which is to say that McCain’s notion of a government of “good people” who would do “sensible things”, while thin on details, is frankly quite alright for America. If, in a centrist, non ideological, environment a New Leader would forcefully reinstate healthy principles of ethical behavior, fighting corruption and the influence of special interests, while pushing ahead sensible middle of the road reform, we could get a great deal more accomplished. So, John McCain, a seasoned Senator who has anti-special interest credentials, who is not an ideologue and who has a credible record as a maverick coalition builder should have a fair shot at the White House.

In principle, may be. But this is not the likely outcome of these elections. The country is frazzled and tired. The unfolding of the financial panic on top of an eeconomic downturn just weeks before the general elections have reinforced the idea that America now does not need someone with an “Ethical Government Plan” but someone with a “Rescue Me Plan”. Beyond the current tempest, the perception is that the troubles of the battered middle class spring from the mean spiritedness of the outgoing Republican president. While a maverick, John McCain is still a Republican and thus guilty by association of George Bush’ sins. Senator Barak Obama, the Democratic candidate promising fairness (translated into English: “more money to you”) to the exhausted middle class, has more direct, practical appeal than the candidate promising to fight corruption and special interests in order to restore the notion of government as selfless action in the name of the Public Good.

McCain’s promise of an ethical crusade may sound nice. But “money talks”. And when the distribution of aid, subsidies and help is also presented as ethical, as the need to reintroduce fairness, this is most likely a winning combination. Says McCain: “I shall do the right thing for you”. Says Obama: “I shall do the right thing for you; and, incidentally, here is the list of what I shall give you”. In these extremely difficult times, a vision of new ethical fairness accompanied by goodies is most likely preferable to new ethics without tangible presents.

Absent from Denver: The Gobal Economy

WASHINGTON– A somewhat disturbing feature of the Denver Democratic Convention has been the absence of a serious, in depth debate on the shifting of economic power to Asia and of the depressing effect on American wages caused by the addition to the global labor force of hundreds of millions of eager and inexpensive Asian workes who can perform the same tasks at a much lower cost. 

This new competition from Asian cheap labor is the main source of the troubles of the squeezed American middle class. Rather rapidly, American workers had to realize that they could no longer get relatively high wages, as their competitors can perform the same tasks for a fraction of what a US worker is paid. But the Denver narrative was almost entirely focused on the need to correct lack of fairness and lack of attention to the problems of the middle and lower middle class in America, as if this were a self-contained American problem, created primarily by wrong headed Republican policies. The implication of this “domestic context approach” is that fiscal policies aimed at redistributing burdens and rewards are the main instruments to be used to fix this social injustice generated by misguided domestic policies. (Needless to say, there are important problems that are truly domestic: the financial recklessness that has contributed to the current housing crisis and the aburd cost of health care, to name just two egregious ones. But it is a mistake not to appreciate that the repricing of US labor, due to the Asian competition, has created a true systemic shift that cannot be fixed with a bit of adjustment and fine tuning).   

Failing to focus on the new role of Asia, the extremely powerful external economic factors that have affected America –with a devastating impact (especially on the manufacturing sector) were not closely examined. The accepted interpretation of the sources of the plight of the middle class went as follows. Millions of jobs were lost –it was said– under George Bush. As he is the steward of the economy, this must be his fault. (Anybody who knows better is aware that no President is in control of the economy; but in politics, unlike science, anything that has a ring of truth becomes the truth). Well, George Bush does have many faults, including improvident fiscal policies; but he did not create the Asian economic rebirth and the ensuing competition caused by cheap Asian labor. Sure enough, a new president can change approach. However, fiscal and social policies alone, however well intended, unless accompanied by a serious strategy aimed at creating new sectors in which America can outrank the competition, will not cause the structural changes we badly need to create new, competitive sectors.  

The fact is that the world balance of economic power has shifted to Asia. But this fact is absent from this campaign. All players continue to debate on the basis of the outdated assumption that America is still number one and thus what happens in America and to Americans is still mostly dependent on policies devised in Washington. Well, while America is still number one in many ways, Washington is no longer in total control. 

In Denver, (as elsewhere in this protracted campaign), absent a close examination of the rise of Asia and the damage that this phenomenon has inflicted on the least competitive sectors of the US economy, the whole discussion was focused mostly on the need to reintroduce fairness in a society managed until now by Republicans portrayed as disconnected from the general population. Fairness will be achieved by redistributing resources from those who have gotten too much during the pro-business years of George Bush to those who got only a few crumbs. Hence the long list of the needy and the assistance, aid and relief that will be provided to all who are struggling.

This may be fine and, to some extent at least, justified, as the needs are real and, in some instances, urgent. But the problem is that –whatever the merits of fairness or lack thereof– the whole debate failed to take into account that the main factor negatively affecting the welfare of the large US middle class is not to be found in the exaggerated profits of Exxon; but in the impact of hundreds of millions of new, reasonably skilled and cheap Asian workers who have entered the global jobs supply, thus taking away most of the functions that used to be performed in developed countries; while putting pressure on the salaries of those lucky enough to still have a job in the West. If certain skills are in abundant supply at a low price all over the world, it is hard for an American worker to obtain more money than the new competitors, while selling those same skills. Many US corporations, if confronted with increasing  labor costs, have the option of closing down and reopening in Asia. We all know this.

Yes, low wages paid to millions of reasonably competent factory workers in China and elsewhere do have a negative impact on wages in the US. If global labor cost are down, it is hard for US workers to be the exception, unless they are employed in extremely competitive, high value sectors not affected by what happens in lower value sectors. (There are some such instances of emerging high value sectors in America; but not enough. And this is the main problem that affects the real income of tens of millions of low skilled, low paid Americans. More on this later).

The downward pressure on wages for the average worker in the developed world is the least palatable effect of globalization for those in the West who are situated at the lower levels of the value chain. As a result, we have the relative impoverishment, or at least stagnation, of the middle and lower middle class. This is an issue with a clear economic origin but with obvious social and political consequences. These millions of Americans, squeezed by international competitors, are not doing well and thus are not happy. (The parallel housing crisis and high gasoline cost certainly do not help in brightening the picture). But what is much worse for them, as they look ahead, is that there is no new “grand strategy” that would help change the economic fundamentals –in terms of larger investments in new sectors accompanied by skills upgrades–and thus improve their condition any time soon.

The fact is that for the first time in modern history we Americans are not the most sophisticated low cost producers capable of invading weaker, less efficient markets and thus causing disruption in less sophisticated productive systems. We are –and we shall be for quite a few years— on the receiving end of the globalization revolution made possible by low cost Asian labor. In this new era the lower cost of others is disrupting us! For the time being, this is mostly because Chinese workers are cheaper, not necessarily better. Should they become better, as well as cheaper, this would add another layer of pressure on the US productive systems; and the US workers would be the first to feel the brunt of it.

But did we hear much about this in Denver? Not really. It would appear that the plight of US workers, real or a bit exaggerated as it may be, is entirely due to failed domestic policies; or, worse, policies that openly favor corporate interests at the expense of the millions of workers. So, as the cause of the problems is primarily domestic, we can devise a solution based on the reshuffling of domestic factors.

But this is wrong. The real underlying problem is the cataclysmic reallocation of labor and its negative consequences on the standard of living of US workers. A constructive way to cope with this transformation and the downward pressures that it has caused on the wages and thus standards of living of the US middle and lower middle class is to put forward and discuss the best plans aimed at upgrading skills and creating new competitive areas in the US economy. This is the only long term strategy that can provide a chance to regain competitiveness.

But the global economy and its imperatives were at best distant echoes in the Democratic Convention. We heard about all this suffering and ways in which the Federal Government in the hands of the well intentioned Democrats will take care of it. Of course, right before a national election taking place when the economic pie is shrinking, the temptation to use the zero sum logic is strong. And indeed this is what we have heard in Denver: “If many do not have enough, it is because the greedy and well connected few have gotten too much. So, the issue on the table is a necessary and radical redress”.

Unfortunately, while there is some merit to this position, it is fundamentally wrong. While issues of fairness should be discussed, it is a delusion to believe that, once properly addressed, the solutions devised will take care of the systemic deficiencies of significant segments of the US economy, due to loss of competitiveness in sectors invaded and conquered by lower cost producers from developing countries –China first and foremost.

Sure, we have to agree with the Democrats that there is something fundamentally wrong when those who manipulate capital, without adding much value in the process, collect ridiculously high fees for those services. Likewise, the disconnect between the quality of services rendered by corporate leaders and their compensation should be addressed. And certainly, a dispassionate conversation about what causes a growing gap between those on top and those below would  be useful. But only to the extent as this does not become an opportunity for airing conspiratorial or populist views, whereby the rich are all greedy crooks, and the not so well off are the hard working, honest people who have been betrayed by a Government corrupted by the lavish donations of corporations. Of course, there is some truth in all this. There is greed, and there is corruption and there are resources diverted to special interests serviced by large armies of Washington based lobbyists.

But the real picture is of America as a society progressively divided into two categories: those who actively participate as authoritative protagonists in the global economy, and thus reap its rewards; and those who are the victims of global change and who see their stakes diminished as a result of the worldwide reallocation of labor and, as a result, of its rewards.

The highly educated, savvy, competent Americans are doing well. The well managed global corporations have competitive technologies, skills and (at least in general) sophisticated upper management. This upper management created in the super universities, refined through intensive on the job training around the world and polished via MBAs in the elite schools is at home in a global economy where their business operates seamlessly in Chicago, Sao Paulo or Shanghai. The world is the oyster of the Wharton or Stanford graduates. MIT welcomes change, in facts it causes it –and so do Carnegie Mellon and Caltech and so on. And the educated elites who populate the R&D centers at Cisco Systems, Microsoft, Apple, Xerox, General Electric, United Technologies, Boeing and Johnson & Johnson, or the state of the art National Laboratories of Oak Ridge, Sandia, Lawrence Livermore and Los Alamos look at the future as new horizons full of exciting of possibilities, not as an unavoidable Asian tidal wave that will obliterate them.

And the cream of the crop within these corporate elites are the people who populate the recession proof Four Seasons Hotels around the world, those who shun the chaos of overcrowded airports as they fly with their “corporate barge”. They keep the luxury goods industry in business and certainly gasoline prices are not a major factor in the upkeep of their multiple luxury vehicles. Their children have the mathematical certainty of getting placed in one of the elite private schools, the springboards to get into the best universities and thereafter the good careers.

But everybody else, the worker bees of the American economy, those who do not make the changes but who are affected by the new competitive economy in which profit margins are thinner and thinner, are not doing so well. In the glorious past in which the US was the quintessential volume manufacturer, inundating markets with relatively cheap goods, the US worker, in steel mills, auto manufacturing or machinery, did reasonably well. Quality was good, competition modest, margins high. Thus management, (often pressured by labor unions much stronger than they are today) could afford to be generous. There was enough fat for all: shareholders and labor.

But all this is in the past. With the exception of those well equipped to participate in the globalized economy, all the others are still trying to comprehend what happened to them. Why is it that the good jobs are gone? Why is it that those that are still here pay comparatively less than before? Ho much more outsourcing can we expect? There is disquiet, anxiety, some anger and quite a bit of fear about a future that appears controlled by unknown forces. 

It is a complex situation, with many drivers. The main ones (related to the modernization of significant parts of the developing world) are totally beyond our control. Nonetheless, we need a new strategy that would require taking stock of a transformed world economy in order to determine how we reposition ourselves. Unfortunately, all this is complicated. It cannot be easily framed into a catchy campaign slogan. And, in any event, as the problems are huge and systemic, realistically there can only be long term viable solutions.

Hence, in a hot political seasons in which politicians have to give the appearance of having powers that in truth go beyond their reach, the temptation on their part is to bypass the real story of the impact of globalization and to assert that all the problems are domestic and that it is possible to go for the quick fix of redistributive politics as a way to finance assistance to the needy. (Of course there is more in the plans debated than just “taking from the rich and giving to the poor”. For example, a true reform of the health care system and all the waste and run away costs caused by the present setup has merit and it should be undertaken in any case, whatever the underlying economic circumstances).

But, while politically expedient, especially at a time in which the ranks of the worried needy have swollen, relief via taxation/redistribution will have only the important but limited effect of improving the short term economic conditions of many. Unfortunately, relief alone will do nothing to make the millions of marginally competitive or non competitive Americans better steeled to face the rest of the world. But this underlying reality is not discussed in the campaign as the real source of the current distress. And this is true for both parties, Republicans and Democrats.

On the Democrats’ side, the campaign rhetoric is about the masses of those who work hard and, at the end of the day, cannot get the commensurate rewards. Thus they feel cheated by “the system”. But here we have a fundamental misconception. In this conventional wisdom, it is assumed that “working hard” is the same as “working smart”. Whereas, while working hard and being diligent is very important, the kind of work that is performed, and how any type of work is ranked in terms of value within the new global context, is far more important.

This is why one should listen with some concern to the open ended promises of “getting back home those high paying manufacturing jobs”. The same jobs? Even though those same functions can be performed at a fraction of the US cost in China? This is dreamland.

By the same token, while something was said by Barak Obama about creating education opportunities for all, the way the issue was painted it would appear that the major obstacle to a good education and thus high paying jobs is the cost of education. Sure, obstacles to access are significant factors, especially in the US where there is a growing disconnect between the overall cost of living and the incredibly high cost of higher education. But, while access is very relevant, far more important (and not at all discussed) is the quality of education that is received through this laborious and expensive process. The real test of the value of this coveted and expensive education is whether or not it gives the student and future worker a real qualitative edge which, in turn, will allow him/her to be employed in companies that can command higher prices because of the superior and competitive quality of their products and services. And here we have a serious problem.

As I have already written, the quality of US secondary education is somewhere between mediocre and horrible. And, in most instances, those who receive horrible education tend to be the poor and the struggling. Being poor and uneducated is a life sentence to marginalization in a society that needs and rewards sophisticated skills. Unless, as a nation, we repair this huge deficiency, no matter what generous subsidy programs will be created in other areas, the education gap will stay there. As a result of this gap, we shall have an even larger chunk of our work force downgraded in terms of their earning potential, as their qualifications will be no better than those of comparable unskilled workers in Asia whose employers will win new business because their labor costs are lower. And people lacking competitive skills can work as hard as they want. They will compete for the scraps and they will be paid little, no matter what.

We did not hear much of this in the policy debates within the Democratic Convention. In part this is because any objective analysis of the disastrous failures of the secondary education system would have entailed a closer examination of the role of unionized teachers who happen to be staunch Democrats.

Of course, it would be nice to go back to the days when the US was by far the leading world economy, when Pittsburgh made all the steel and Hollywood produced all the movies; when General Motors had no competitors and the general public could openly laugh at those peculiar Japanese who in the 1960s were trying to sell their ridiculous little automobiles in America. In that era Americans with little education could be trained to be assembly line workers and take home a reasonably good pay.

But that era and that world is gone –for good. Of course, this does not mean that the whole of America lost its edge and has been left behind. While a large chunk of the old economy has been destroyed, some new sectors have emerged. It is America that has created the fundamental components of the new knowledge economy. The Internet came from America and so did the first PC and the first mass produced PC operating systems. The US productivity revolution of the 1990s has been due to the massive transformations in almost all sectors of the economy due to the adoption of information technology tools developed primarily in the US.

But this edge was not permanent. The development of information technologies was just the beginning of a process. While all this began in the US, it is now a global phenomenon. If the US gave the world the first rudimentary components of the Internet, a vast innovative process with many new international players ensued. Today, Korea has faster broadband than the US. Nowadays, the global economy allows me to have my PC examined via the internet by a Dell technician in Chennai, in the south of India. The internet may be originally American and Dell is a US company, but this job is performed in India. An Indian technician is the one who gets paid.

At a different level, the spreading of knowledge at least about basic manufacturing, gave an immense edge to Asia, as its armies of new, motivated workers could start making the same products at a fraction of our cost. These new dynamics –and not mean spirited Republican policies– are at the root of the displacement of millions of US workers. (The Republicans have their large share of responsibilities; but will get to these another time).

The ideal way forward is for all of us –as a nation– to acquire the worldliness of Henry Kissinger and the creative skills of Steve Jobs. Of course, this is impossible in the short run; but not impossible in absolute terms. Yet, be that as it may, any constructive way forward has to include an urgent and honest debate about the parallel deficiencies of our obsolete economic sectors and of our secondary education system. We need strategies leading to the substantial upgrading of the quality of our schools and what children learn. They are the future players in the global economy. Any team sent out there to compete without proper training will not achieve much. And, if this happens, the coach is rightfully blamed. If we want to win, we better look at who the coach is and what kind of training is given. If we say that we cannot get a better coach because we do not have enough  money to pay for talent, then we are really in trouble, as we shall keep losing.

John Edwards and the Impossible Ethical Standards

WASHINGTON – We know what happened regarding the disclosure of former Senator and former would be Democratic party nominee John Edwards extramarital affair. There was the expected mini media earthquake and non stop coverage, at least for a while. Edwards caught in the act. Edwards hiding in a hotel bathroom. Edwards possibly had a child from his lover. All this while married and while his wife deals with breast cancer. A mix of juicy and sordid stuff. Hence the media feast. Edwards is finished. For now at least. For later, who knows. He may undergo therapy, self-examination, repentance and come back better than new. This is also a familiar segue to stories of personal misconduct.

Still, while the script is familiar, the real, important but not debated question is: why this story should have, as a matter of course, a political dimension? Indeed, why? This is garden variety adultery. An issue between Edwards, his wife, his lover and may be others. But why does this story immediately create political consequences? “Well, –many would say– because it reveals something important about the man’s character. He deceived his wife, thus he may deceive the Nation. Besides he lied about it”.

Oh well….Isn’t it a bit too much? True, any aspect of a person’s life reveals something about their character. But if anybody who had an affair should be disqualified from positions of high or even modest responsibility, then we would have a real problem. This is not to say that the issue does not exist. It does exist. But can we automatically translate someone’s marital infidelity into a definitive conclusion that this person is unfit to govern? This is silly. Or, rather it should be regarded as silly in a normal environment.

But the point is that in the United States of America we do not have a “normal environment”. Politics in America is not just about figuring out the most cost effective public policies that can benefit as many citizens as possible. Quite often, politics is a lot more about moralizing than about policies. And, case in point, John Edwards’ message was mostly about moralizing. It was about the plight of the poor and the downtrodden, the other America, the America forgotten, left behind, hopeless. Well, whatever the resonance of his message with the Democratic primary voters, (not much, judging by the numbers), Edwards was a preacher/politician.

From this angle, his rather human failings disqualify him from preaching while being a politician. He has lost the moral high ground. He cannot grandstand anymore, because he got caught (almost literally) with his pants down.

But if we could imagine a different context, a context in which the ability of someone to hold public office is based primarily on competence, this whole business of personal conduct, in issues that have nothing to do with public policy, should be looked at in a different light. Let us assume that Edwards had proven qualities of brilliance as a chief executive, would this extramarital business disqualify him, if we all agreed as a society that his love life and how he handles it, is his personal business? No, his personal conduct, (unless it were criminal), should be irrelevant.

But we are not in that different context. While there are real life debates about nuts and bolts issues in America, featuring people who aim at finding practical solutions to real life problems, somehow, politics, especially at the highest level, is about moral guidance. And one cannot be a moral leader, unless his/her personal conduct is totally without blemish. Any blemish, (unless theatrically revealed and atoned for, before one starts preaching) diminishes or denies the moral credentials. The understanding that human beings are imperfect and fallible, somehow does not apply to would be political leaders. The fact is that the people, the voters, seek reassurance along with competence. And sometimes the reassurance coming from someone who feels morally superior and who projects this aura of being some sort of prophet is more important than any real or presumed competence.

Of course, no one denies that leaders have to be inspiring. But there should be a limit to what should be expected in that department. Whereas here in America passionate speeches that call us to a higher duty are mistaken for political talk. And this explains the Barak Obama phenomenon. Passion, good delivery and a novel persona (half black and half white) accompanied by the declaration (made by himself) that the country is in a deep crisis, thus he cannot wait any longer, has been enough to propel an unknown politician to the national scene, giving him enough momentum to defeat all the others.

But what was the magic ingredient? He was propelled to the national scene by being different and talking passionately, with a fervor that has a distinct preaching flavor to it. People were not impressed with his record or his past achievements (slim at best); but by his passionate call to totally reform, change and transform the whole of America. Others of course have come along in the past with similar messages of total change; but this did not get them very far. Obama is different and he comes in a different package. But the basic point is that if the adultery story had had him as protagonist, he would be history, just like John Edwards. His credentials as prophet in chief would crumble, and with that his moral claim to be a new leader.

This is what we get when we mix a way of moralizing and preaching that applies to religious leaders and political skills. The outcome is not so good. The fact that someone can use his/her record in their personal life and their beliefs and passions as a political qualification is a mistake as it introduces extraneous elements in a context that is primarily about other things. Which is not to say that the moral qualities of people who want to be in public life are not relevant. They are relevant. The fact is that would be policy-makers should not be appreciated because they talk like saints; nor should they be held to impossible standards of sainthood. The notion that we need moral perfection as a prerequisite for anybody aspiring to high office is ridiculous. In fact it is worse than that, it is damaging to the nation. It causes many talented people to stay away from public life, because they would not subject themselves to a level of scrutiny that does not exist elsewhere in the rest of society.

In the meantime the lesson for John Edwards, for all the others who think that high office is a church pulpit and for the public willing to accept this confusion is: “Distinguish between moralizing and policy proposals. If you want sound public administration, examine the policies that are on the table. If you want to deliver or listen to a sermon, go to a church”.

America: Still Unserious about Energy

WASHINGTON – Amazingly enough, to this day, America does not have an energy policy even minimally related to the extraordinary crisis the country is facing. The growing global demand for oil, combined with rapidly dwindling resources at home, accompanied by completely unrestrained domestic consumption have caused a serious strategic dependence on foreign supplies; while the cost of imports –due to the higher crude prices– grows daily up to impossible levels.

This predicament is well known. And yet nobody has proclaimed that this is a national emergency requiring extraordinary action. Oil has gone from forty dollars to seventy and than doubled again in no time. So, here we are. America is still by far the world largest consumer. And yet, in a time of conflict and in a time of huge balance of payment deficits, (despite the unhappiness about high gasoline prices), we merrily continue to behave more or less in the same way as if we had a lot of cheap oil, produced in the US. Sure enough, gasoline at four dollars plus a gallon is going to force habits changes, including the types of cars that many people will choose. And this is better than nothing.

Still, we are in the midst of a presidential campaign and energy issues are featured only in a superficial, emotional way. At best, there is a search for culprits, not for solutions. Prices are too high? Well, it is the speculators, or the oil companies, or Bush and Cheney and their big oil friends. Or it is the war in Iraq, or whatever.

And the remedies proposed? From the left we hear that we should provide relief to the poor by taxing the rich and/or the oil companies and their scandalous profits. This way the burden of higher costs will be more equally shared.

The pro-growth crowd has a different but equally inane solution. Let’s drill some more at home; so that we’ll get our own oil. This idea fuels the totally mistaken fantasy that there are substantial reserves still to be exploited. If we only tried, we could get out of this mess. But it is not so. While there is more oil to be extracted at home, unless some truly gigantic new fields are discovered, new extraction would make a very small strategic difference, if anything delaying a bit the inevitable reckoning.

Given our present and projected needs, what we produce (currently about 35 per cent of our consumption), or can realistically produce, is woefully insufficient. Besides, regardless of current production, our known domestic reserves are dwindling fast, indicating even lower production in the years to come. Essentially, we have almost run out of our oil. Half a million extra barrels, or even a million or two added to daily production, even assuming that they existed, would not rebalance the long term supply needs.

And yet, despite these realities, the silly debate about drilling or not drilling some more received an inordinate amount of space, as if were a real discussion about meaningful strategic alternatives. As we continue to argue about these short term, myopic political proposals emerging now from a political campaign acquiring dangerously populist tones, we shall not get very far in creating real alternatives. We have now mostly non strategic approaches to a strategic crisis.

In order to change things, first of all, the tone has to change from emotional to serious. For the moment, while there is visible agitation and malcontent about high energy prices, this is still regarded as a major annoyance, not as a national emergency, indicating a major historic challenge.  Americans need to be told by their current and would be leaders that this country simply cannot continue to be a major economic and military power, being almost completely dependent on energy whose reliable supply it cannot guarantee; while its cost is becoming unbearably high. 

The reality that should be communicated is that, as a minimum, we need to do –right now–two very difficult things at the same time. Consumption needs to be massively curtailed; while the nation needs to embark in an all out effort to develop new technologies that will allow us to dimish and hopefully stop our dependence on oil. Consumption needs to be cut now. A dedicated effort at creating alternatives is more uncertain in terms of results, but it is likely to pay off.

The US economy is now at a historically high risk of being strangulated by any sudden supply disruption; while the cost of the oil bill at these prices is becoming too burdensome for an economy already crushed by a huge trade and balance of payment deficit. Of course, cutting consumption will have to be done in stages, so that we do not destroy the economy. But the message to be delivered is that we must do this as quickly as possible. Using less oil clearly is not a long term strategy. It is a temporary stop gap measure in the same way as cutting spending is a good policy when you are facing bankruptcy. It is not a real strategic plan; but it may create the breathing room to craft one.

But we hear nothing from the leadership of the nation about the need for drastic consumption cuts. Sure enough, current market prices will go a long way in dictating a new behavior that will result in lower consumption. But what is missing here is a serious political and policy consensus, a consensus that should provide guidance, thus helping the people define the situation and its true gravity. There is no coherent, clear message, no attempt to place the higher prices and dependance issues within their appropriate context.

Nobody from the top says to the public:

“Given all this, you have to change your habits today. Stop driving, unless it is truly necessary. Use public transport. If you must drive, ditch the SUVs and all other high consumption cars and switch now to smaller cars, including whatever is available now in the category of hybrids. Indeed, in order to impress upon you that this is a priority, we, the US Government, are going to tax high consumption vehicles and offer tax relief to all those who purchase smaller, low consumption cars. And we are going to introduce this new regime right now. If you thought of spending extra money to take a vacation this year and switch cars next year, revise your priorities. Forget about leisure. Spend the money to switch to a lower consumption vehicle now!”

By making these changes, collectively Americans could start cutting consumption today, without intolerable restrictions. It would take time. Yet just by choosing, as a nation, to drive less, while switching to more efficient compact cars, we could save millions of barrels a day. This would be significantly more than any added output coming from Alaska, should that reservoir ever come to be exploited. Of course, this would take a few years. But precisely because it is going to take time, we should start now. And it would take less time to achieve results if the public and industry received a clear message with clear policy guidance from the government.

As for positive action aimed at finding alternatives, sure enough there is activity, and these oil prices will provide significant new incentives. But again, we hear nothing from the top. Modest policy initiatives aimed at enhancing efforts here and there do not convey a political message of urgency. We spend billions every month in Iraq. Rightly or wrongly, just looking at budgets, Iraq is a policy priority. Looking at public resources expended, finding new energy sources may be considered important, but it is not a national priority.

Senator John McCain, the Republican candidate for the White House, just proposed a national competition with a 300 miilion dollar  prize to whoever would come up with a substantially improved battery that could fuel future electric cars. While this may be a good idea, he did not unveil a new Manhattan Project. 300 Million may sounds like a lot of money. But it is not really such a large sum for whoever may come up with an invention that could potentially transform the whole automotive sector worldwide. And McCain, in explaining his proposal, said that it would be only one dollar per US citizen. Not a major sacrifice –he said– for something so important. Indeed. But this is exactly what is wrong. This soft approach encourages the wishful thinking that somehow there is some kind of clever, cheap, painless way out of this.

Of course, there could be incredible technological breakthroughs just around the corner. This is possible. But, so far, we have dependence and historically high prices with no alternative in sight; while the country is involved in conflicts in the Middle East, the region of the world that holds the most significant oil reserves.

Those who propose increased domestic production affirm that America’s determination to augment supply would send a message to the markets about future declines in US demand and that this would stabilize future prices. Well, theoretically this might be true; but only assuming really huge increases to total supply resulting from massive new US extraction. A little bit more here and there, while useful, would do nothing to change the larger picture.

Whereas a credible national policy to start cutting consumption today would have an impact. America being the largest consumer, the aggregate effect of behavioral change on the part of millions as a matter of long term choices dictated by policy would send a message to the oil markets. Just by switching, as a nation, to smaller cars we could achieve lower consumption. In a few years this could amount to millions of barrels a day. Again, this is not a solution; but it would create some slack, by diminishing the tightness of this energy market.

In the meantime, it is going to take a great deal more than a glorified high school science project prize to transform our energy economy. The 300 million proposed by Senator McCain certainly beats the paltry initiatives of the Bush administration; but it is not that much for the world’s largest economy, spending now billions of dollars every month to finance the war in Iraq. America still has enormous resources. It is time that they are mobilized in order to safeguard, in fact to renew, our economic viability and chance to be meaningful participants in the future global economy.

But if the leadership does not communicate a real sense of urgency, more time will be wasted. In this as in other historic challenges inaction has a price. Beyond a certain point, there may be such a thing as being too late.

America the Christian

WASHINGTON – As the political season heats up in the United States, we are treated to yet another round of debates on the proper role of religion in politics. The candidates feel an obligation to make their faith known. Pundits, religious people and other experts debate the fine points of this religiosity. While this may not be a universally shared tenet, it is clear that for many voters a good candidate has to be a good Christian.

Hence an almost bizarre degree of scrutiny in which all aspects of the person’s history and behavior, not just his public policy positions, are fair game. According to this religious vantage point, good leaders have to be not only moral, but immaculate, in each and every sense. At least for some segments of the population, along with a president we are choosing an individual who has to embody our Christian spiritual essence. This explains for instance the bizarre debate as to whether Rudy Giuliani, because of his divorces and his positions on abortion, could have been considered a viable candidate by Christian voters.

Of course, religion influences politics elsewhere. For instance, in Europe there are many political parties that call themselves Christian. But this tends to indicate that these political forces subscribe to Christian social values. They do not indicate an obligation for all the party leaders and notables to subject themselves to an in depth personal scrutiny of their character in order to prove their suitability as Christian leaders.

But in America it is different. Especially at the highest level, the candidate has to convince at least some voters as to his/hers Christian ethical integrity. And for many this equals to subscribing to and adhering to in all aspects of life to a Christian morality.

But what explains this religious obsession in America?

My thesis is that this represents an attempt on the part of many to establish some kind of spiritual identity in this country of immigrants. There is no “ethnic America”. There is no historic “American Nation”, in the same sense as there is a historic “German Nation”, with its celebrated past, its myths and traditions with ancient roots, whatever the meaning attributed to them.

For many immigrants it may have felt uncomfortable to belong to a large and powerful country that does not have meaningful spiritual roots that can be shared as a common denominator for the majority of the citizens. This lack of national identity might have looked as an indication of lack of proper foundations. And so, at least for many, God, the Christian God, became the common denominator. “We may not be a Nation in the conventional sense of the word. But all of us who came here are all united in Christ. And this modern Republic is the expression of the intent of Believers to establish a polity that will affirm true Christian principles in all its manifestations. Hence the need for this Republic to be led by true Christians”.

Concerned as all humans are in claiming a lineage at least as old as the Nation, those who wish to make Christianity the essential spiritual core of America, can point at the Declaration of Independence, (among other milestones), and at its clear references to a Creator and faith in Divine Providence, as evidence that the United States of America are the expression of strongly felt Christian beliefs. Having thus established that America is the institutional expression of the Christian Faith, it follows that its leaders must adhere to Christian principles and that these principles must be reflected in everything: laws, practices and all policies. As for all the other non Christians (or Christians with dubious backgrounds, such as the Catholics) who came along at different times, they can stay, as long as they understand that this is a Protestant Christian country and Christianity thus rightfully dominates.

From this vantage point, the very notion of a non-religious republic, a secular state, in which all religions, to the extent that they do not breach any laws, are treated equally, with no special reference to anyone of them, is sacrilege.

America –the Believers claim—unmistakably was created as a Christian Country. Therefore there can be no real America without the open and constant re-affirmation of its religious nature. People belonging to other religions have to take a step back, not as a matter of discrimination, but as a matter of logic. “We, the Christians, came here first and shaped the institutions of the country. You came later and thus it is up to you to adapt to this reality. You can go about your business and worship what you want. But you cannot interfere or protest when we demand the reaffirmation of basic Christian principles as a matter of course. And that includes prayers in public schools and the display of the Ten Commandments in public places….”

There is some logic in all this, of course. Except that the historic legitimacy of this argument is more tenuous than it may appear. There is no doubt that all those who participated in the creation of America had a Christian background. Certainly it was not Muslim or Buddhist. But, more than anything else, the Founders were the spiritual children of the Enlightenment, the “Age of Light”. They subscribed to a political philosophy grounded on reason and confidence in science. While in many ways religious, as they believed in a Creator, their beliefs were not properly Christian. Many of the Founders were Deists, while others were Masons.

Deism, the belief in a benign Creator of the Universe and on the obligation for human beings to behave morally, while sharing basic principles with Christianity, cannot be considered a Christian denomination. The whole business of the Scriptures, of miracles, resurrections etc., was looked upon by the Deists as interesting history, not as dogma to be followed.

So we can say that the Founders were religious, to the extent that, just like most of their educated contemporaries, they shared the belief that Nature must have needed a Creator who had good intentions; and that human beings should strive to be good and do good. But they were not preoccupied with matters of dogma and certainly not interested in choosing the “right” Christian denomination as the spiritual custodian of America. Aware of a variety of Christian denomination in the former colonies, they affirmed freedom of religion, along with the prohibition to establish one as preferred. Likewise, the Masons subscribe to a peculiar form of belief that includes worshipping a Higher Being, the “Great Architect of the Universe”, along with the duty of the Mason to behave ethically. But Masonry cannot be called a Christian denomination.

While all this is still very controversial, many of the Founders, while believers in a broad sense in a Creator, were not really Christians as in strict adherents to a specific set of Christian beliefs.

But the modern day Christians of America, of course, will have none of this. The references in the Declaration of Independence and other documents and writings are deemed to be clear evidence as to the Christian essence of the principles that inspired the birth of this Nation. To deny the Christian spiritual underpinnings of America thus amounts to denying the very essence of America –for many of them a New Jerusalem– ands its moral purpose in the world.

For them, without the clear affirmation of its Christian essence, there is no real America; but just an assembly of secular moral relativists without a real moral compass, a modern day Gomorrah. Given all this, the true Christians have appointed themselves as the Guardians of the true essence of America against the onslaughts of secularists and/or the encroachments of other religions that would like to be treated equally. In its most acute manifestations, this attitude can easily become an “us against them’ contest. “We are the rightful heirs and defenders. They are the interlopers who want to change the principles of our Homeland and the way we live.”


But if this is so, there is a real problem in trying to get beyond this hurdle. Convincing people that this whole idea of the Christian spiritual origins of America is at least an exaggeration may be impossible; as those who find comfort in this belief, should this be de-legitimized, would feel all of sudden rootless, as there are no other meaningful spiritual roots in a past that, for most, is lost in the broken memories of immigrants –in many cases only too happy to have forgotten national origins associated with poverty or persecution.

It is one thing to say that we are here because, by coming to America, we affirmed and chose a High Moral Ground. We are here because we are believers in and supporters of the superior moral rectitude of this Nation. It is quite another to try and be the best we can be, inspired by secular moral principles of fairness and rectitude expressed in the political philosophy of the XVIII Century; principles that find their legitimacy and foundation on the assumption that people are mostly wise and reasonable.

And yet, this non dogmatic confidence in a reasonable human being is precisely what is good and what is great about the Birth of America, as the first modern republic. It was an attempt to create instruments of government whereby reasonably educated people, coming from different backgrounds, aware of the complexities of self-government, decided nonetheless to give it a try. In truth, they hoped to be protected by the Creator. But the Constitution not by accident gave life to limited and divided Government, as men –with or without Divine Guidance– can make mistakes.

In the intent of the Founders, America was to be a society in which basic principles of fairness and tolerance can prevail, not because they are mandated by a specific dogma, but as expressions of the natural human empathy and sociability shared by all men who pursue knowledge and wisdom. A society in which pragmatic, reason inspired, common sense would prevail on prejudice and bigotry.

It would be nice if recognition of all this and of the underlying humanitarian universalism that inspired it would provide enough moral ballast to all, without resorting to a theological, and, for some at least, a fundamentalist view of America. But, to the extent that Faith, and not intellectual constructs, provides the strongest comfort, it is going to take a while for this evolution to take place. Those who must have an unshakable identity understandably will continue to believe in the transcendental roots of the Nation.

However, all this is not without consequences. This assumption of being the Moral Nation oftentimes leads to single-mindedness and to the self-appointment of “Crusader in Chief”, for this or that cause. And self-righteousness, as we have seen, can lead to a detachment from reality, while creating a fantasy world of neatly divided Good and Evil.

America’s religious righteousness quite often surprises and baffles other more secular democracies. And all these rituals that include blessings and benedictions and constant references to God on the part of the political leaders of the most vibrant industrial democracy appear odd and make others uncomfortable. Is this a democracy or a theocracy? Is this a political society or a Church?

In many instances, the proclamation of moral principle as guidance for policy may be heroic. In other instances it may very well be misguided. Yet, every time a US President proclaims America’s “duty” or “mission” to do this or that, there is reason for concern. Indeed, those who are responding to higher authority quite often do not take into account the cost associated with fulfilling what they see not as a political objective but as manifestation of their spiritual essence.

All in all, it would be best to have policies inspired by reason rather than religious righteousness. But In America this is not going to happen any time soon.

Asia Rises, America Distracted

WASHINGTON – Five years into the invasion of Iraq, defined by its proponents as an essential component of the ongoing War on Terror, the outside world may rightfully conclude that the conflict between the West and the Islamic terrorists and their real or assumed supporters is the defining issue of our times. But is it really?

In historical developments there never is just one narrative. There are many and they may intersect and influence each other. It is only after the fact, sometimes long after the fact, that historians may be able to detect the main theme, the theme that was or was not addressed with the awareness that, among many, “this” was the issue, the challenge that deserved priority status.

Islamic Radicalism: Important but not crucial

Without waiting for the dust to settle, I dare say that this conflict with Islamic radicals, while obviously important, is not the defining issue of our times. The defining issue of our times is the epochal shift of the global balance of power –economic power first– from West to East. This is not taking place in the form of a “conflict”; but as progressive changes that are transferring clout from the West to Asia.

The loss of western technology monopoly: opening for Asia

The West used to have a virtual monopoly on know how, innovation and capital instruments. Primacy in these areas is slowly moving to the East. Asia is progressively assembling all of the above, with the added, intangible but crucial element of the “will and determination to emerge”; while the West is mostly characterized by the “desire to preserve” positions attained by previous generations. And these different intangible psychological drives, the first one clearly stronger than the second, may very well be at the source of the rise of Asia, while the West turns to a defensive posture –a posture in which success is measured in slowing down the progress of others. (Think about headlines as: “Trade Deficit Narrower than Anticipated”. As if losing by a smaller margin were a victory).

America is still fixated on the “War on Terror”

Of course, the news of the day would indicate that, on the contrary, the unfolding conflict with al Qaeda and associates, labeled in a rather grandiose and ominous fashion the “War on Terror”, is the issue. This conflict, sparked by the outrageous 9/11 attack, defined America’s foreign policy throughout President George Bush’s two terms.

We are now on the fifth anniversary of the American invasion of Iraq that began in March of 2003. For better or worse, this is and will be president’s George Bush’s legacy. Clearly the “expanded concept” of the “War on Terror”, as he infelicitously labeled this conflict, is the defining issue of this presidency. Unrepentant as ever, the president continues to proclaim that the invasion of Iraq was the right thing to do. It was and is the necessary manifestation of America’s “duty” to spread freedom around the world.

Justifying the ongoing effort

Thus, with or without weapons of mass destruction, (WMD), in Iraq, it was proper to topple a brutal autocrat who continued to be a threat to an already unstable region. The cost may be high; but worth every penny, including the attendant human losses. And the transformation of Iraq into a democracy, while painful and costly, will usher a broader transformation of the whole Arab world from backwater to cluster of vibrant democracies, at the same time immunizing their citizens from the noxious viruses of millenarian dreams to be achieved through violence and terror.

The “democratic cure” imposed on a reluctant patient may be hard and may seem brutal at first; but “we know” that it produces wonders, as democracies are peaceful; while democratic institutions allow people to pursue their dreams of personal growth. When democracy, following the Iraq example, will flourish the Terror nightmare will be over.

The Republicans still agree that this conflict should be our priority

Senator John McCain, the presumptive republican nominee in the unfolding race for the White House, leaving aside his strong differences with the Bush administration on the manner in which the war has been conducted, has declared time and again that the issue of our times is the struggle against Islamic radicalism. For better or worse Iraq has become a key theatre in this struggle. Conceding defeat there, argues McCain, would signal America’s weakness and will give heart to all those who wish the destruction of America, thus prolonging the struggle against a mortal enemy.

The US democratic opposition maintains now as ever that Iraq was a terrible blunder that distracted us from the real War on Terror –a war that should be fought where it began, in the inhospitable mountains at the border between Afghanistan and Pakistan. However, while not declared as the defining issue of our times, the struggle against Islamic radicalism is deemed to be a significant priority for the democrats as well.

How can this fixation endure for so long?

And it is natural that, given 9/11 and other attention grabbing events, violent radicalism should be viewed as a peril. But, frankly, it is more a peril for what it could do, should some terrorist really acquire weapons of mass destruction, than for what it is capable of doing now. But, for some reason, political violence and suicide bombers, maybe because they belong to an alien political culture, fascinate and frighten us beyond reason. The alien and in many ways incomprehensible worldview of the ideologically motivated terrorist willing to die for his cause seem to endow him with endless powers and resources and the consequent ability to inflict catastrophic damage to us all.

Exaggerated perceptions aside, indeed, militant Islamic radicalism is a serious problem. We have to protect ourselves. But, while taking into full account the danger for us, radicalism and its terror methods is mostly a tragedy for the societies from which it springs, as it wastes at least some of the intellectual and human resources of a large chunk of people engaged now and in the future in a futile struggle with an imaginary enemy (us).

Understanding radicalism

Of course, the West, given its checkered colonial past and other horrible blunders, is an easily identifiable culprit for the plight of the Muslim World. But, while it has its responsibilities, the West is not the cause of the underdevelopment of the Middle East. This has to be sought in a culture (whatever the religious influence) that essentially, at some point, concluded, (even though it may not have declared this explicitly), that there were boundaries for human pursuit and achievement; thus objectively inhibiting the natural drive towards discovery and innovation that humans seem to share.

What had once arguably been the most modern, most advanced, most refined and vibrant civilization of the Mediterranean, (while Europe was still digesting the barbarian invasions, experiencing what have been called perhaps unjustly the Dark Ages), at some point stopped progressing.

How Islamic societies stopped progressing

With its self-perception of being a manifestation of religious perfection, this culture could not recognize that the Christian Infidels, the product –according to them– of an inferior religion, could possibly create something qualitatively superior. Overtime, many Western discoveries were acquired by the Islamic World; but what was not acquired in those transactions was the new western spirit of inquiry that was at their roots and that guaranteed for centuries to come an endless stream of new scientific knowledge stemming from the West.

Fast forwarding to the present, the Islamic world, with due exceptions, is not the buzzing workshop of ideas and innovation that it was when Europe was in the Dark Ages. The inner drive towards development was stopped long ago. Ossification ensued. Foreign (namely mostly Christian) books were not translated. New knowledge was not spread.

In a climate of stagnation that discouraged change, it is altogether understandable that many developed the theory that the only way to renew past glory is in reverting to the strongest conformity to the old sacred principles, attributing present decay and troubles to their betrayal.

Looking for “culprits”: the emergence of religious radicalism

Yet, while understandable, this development that yielded intolerant fundamentalism and also al Qaeda and all its offshoots is a misfortune, not just for us, the targets; but for these socities. It is a misfortune, as this retreat into an imaginary world of flawless, intransigent orthodoxy represents a gigantic escape from reality and a waste of energy; with all the accompanying sorrow brought about by completely useless, ferocious violence visited mostly on innocents, conveniently targeted as they are part of enemy nations. As in other cases of action motivated by fantastically radical ideologies, death and destruction are the most tangible fruits.

But, leaving aside the special (albeit unfortunately possible) instance of the acquisition and use of weapons of mass destruction, this threat, however significant, is not the defining issue of our times.

Asia Rising: the real systemic change that will affect everything

The defining issue of our times is the gigantic shift of the world’s propulsion center from the West to Asia. For a few centuries, the West managed to retain the technological edge, notwithstanding its own horrible wasteful blunders, (the Napoleonic Wars, World War I, World War II, to mention just the most egregious), because of its unassailable lead in new science and consequent technological applications. This edge was powered by the spirit of scientific inquiry unleashed by the European Renaissance. This gigantic lead was at the foundation of the industrial take off of Great Britain, the spreading of the industrial revolution throughout Northern Europe and North America. It also allowed for the colonial expansionism of the XIX Century, leading to the western domination of almost the whole world.

The diffusion of knowledge

But, after WWII, knowledge was no longer a monopoly. The self-perpetuation of the western unassailable lead was no longer unquestionable. Knowledge started spreading, along with political institutions less inimical to innovation and economic development. While the West retains and nurtures significant sectors of native advantages, the genie of high technology is now out of the bottle. Among other tools, the internet works as a magic transmission belt. For those who wish to take advantage, heretofore unthinkable amounts of knowledge are out there. And much of it is free.

In Asia there is now optimism about the future 

The new vistas opened up by the “democratization” of access to science and critically useful information overtime triggered the immense desire for personal betterment that clearly motivates now millions and millions of Indians and Chinese, among others. This optimism has to be compared to the widespread aspiration of coasting to a position of relaxed comfort more common in the West. The Asian drive towards achievement compared to the more conservative Western spirit, unless something changes, overtime is bound to have quantitative consequences. Not to mention the fact that there are far greater numbers of Asians. Ultimately numbers do matter.

America’s lead, no longer unquestioned

At the moment, in the United States we can still have a model that can be summarized as “Designed in Silicon Valley, Made in China”. Yet, unless we postulate the ability to retain, forever, the lead on innovation and breakthrough technologies that will continue to give the West the edge and thus fund a high standard of living based on our continuing pre-eminence in the global knowledge economy, this satisfactory division of labor –“we invent, you make”– may not work for much longer, as the maker (Asia) is developing the ability to invent.

No one has a fixed monopoly on creativity. While hard to assemble, the critical components that yield creative and innovative environments with the attendant venture capital capable of bringing innovation to market in the form of new, advanced products, by now are known. Evidence of many failures to replicate the successful American model is no sure indication that new equally formidable competitors will not sprout, at some point.

Judging purely on the basis of incentives and motivation, we see that Asian societies have created a new, catchy cultural model in which scientific education is viewed as the golden road towards higher economic and social achievements for millions who until recently could not envision being more than manual laborers.

Asia’s enduring weaknesses

Of course, to date, most of the Asian academic institutions are of inferior quality, at least compared to the elite Western ones. However, the fact that our “super” schools are still better than theirs constitutes no long term guarantee; as all this may change. Given more talent available and strong motivation, these new generations of Asian eager scientists, many of them fortified by experiences in the West, will improve upon the available assets.

True, the Indian ICT boom started with the outsourcing by western companies of the least important processes to cheap “techno-coolies”. But this was only the first step. Bangalore is not Silicon Valley. But it may become Silicon Valley. The human talent is there. The Indians and millions of other Asians are moving up the value chain. The twin blockages of cultures suspicious of change and of lack of access to information have been eroded. The internet is the great equalizer. By no means a perfect instrument, the internet keeps getting better and cheaper, in large part because the efforts of western science have reduced costs and increased speed.

For all these reasons, the main narrative of our times is the fundamental readjustment of economic relevance in the global economy. And this presents at least two large problems for the West.

What will America do?

The first one is: can America’s “We are Number One” cultural postulate adjust to a situation in which this will no longer be true? And, if so, how? Will we accept the challenge and decide to really compete in this radically new environment in which we will no longer enjoy the inherent advantage of being by far the pre-eminent economy? Or will we retreat into protectionist fantasies, blaming our lost primacy on the unfair practices of the dishonest competitors?


This is the main challenge for a civilization now so accustomed to primacy to the point of regarding it as a birthright; not as something that needs to be nurtured and reinvented in order to be kept alive and vibrant. Unfortunately, the growing protectionist sentiment, fed by a host of stories of personal misfortune of the many of who have seen their jobs outsourced, seems to indicate that many tend to appreciate mostly the negative elements of globalization; with a growing generic wish to get out of this train, as if we could really retreat into some kind of special place, magically protected from global competition.

The necessary reshaping of the international relations system

The second one is: We live in a world largely shaped by the victorious Anglo-Saxon West, after WWII. Most of the institutions (the UN, the World Bank, The IMF, the FAO, etc.) and modalities to conduct international relations and business have been influenced (if not entirely shaped) by the western conception of fairness and rationality. Will these institutions and modalities be viable in the new Asia dominated world? And, if not, what changes can we expect? It would be preposterous to assume that eager, powerful, new comers will not want to make changes to systems that were given to them at a time in which their bargaining powers were modest.

But, of course, all this, the ultimate shrinking of the West, and the rise of Asia, although there are quite visible signs now, is still largely in the future. And it may be a fairly distant future. Indeed, the last time we checked America was and is still Number One. Deep in debt, a bit battered with a devalued currency and somewhat fiscally challenged, but still Number One.

Faint hope: Asia will stumble and fall back

And there is comfort in thinking that, who knows, maybe this change will not happen. We feared being swallowed by the “Japanese Monster” in the 1980s; whereas Japan was beached by its own internal social contradictions. Thus, we can find comfort in hoping that maybe China, given the contradictions between its economy and its outdated political institutions, will go through a major crisis. Or, maybe the Chinese environmental crisis will turn into an immense catastrophe that will halt development.

Maybe the Indians will be unable to modernize their horribly messy political institutions that objectively act as enemies of progress. Maybe they will be unable to modernize their infrastructure. Indeed, all this is possible. Historical developments are generally non linear. There will be ups and downs. The trick is to grasp the basic tendencies.

My bet is that the immense desire for personal betterment shared by tens of millions, combined with the availability of the necessary practical tools (improved education, know how) in the end will prevail in Asia. It may be messy; but the unfolding of the Asian Century is not a fantasy.

But it easy not to focus on this (or any other) gradual transformation. In large part this is due to the fact that these changes, as is the case in all systemic transformations, will be gradual; perhaps punctuated by some interesting fact here and there; but gradual altogether. Probably so gradual to be unnoticed.

The Republic of Venice: a case study of progressive decline

In the XIV and XV centuries, the foundation of the power of the Republic of Venice was in its ability to act as a commercial bridge between Europe and the East. But, later on, the discovery of new sea routes to Asia, slowly but progressively eroded this economic monopoly and the ensuing strategic advantage. This and other developments overtime shrank Venice’s relevance within Europe and the larger Mediterranean. But it is hard to point to one particular event that resulted in a historic turn. (After the fact we know that, in a broad sense, Venice’s loss was accompanied by the rise of the Dutch United Provinces and later on by the affirmation of England as the pre-eminent maritime power that built an Empire founded on the felicitous combination of capitalistic enterprise and the best navy. Contrast this with the fortunes of Spain and Portugal. They had the maritime spirit; but no capitalistic spirit. Britain brought capitalism to North America. Spain and Portugal brought feudalism to South America; and the effects of these complete different cultural legacies are still here today).

The end of purpose

Venice’s decline was a slow decline. But decline it was. The maritime city state did not go under overnight. It just lost influence and power. Along the way it also lost its old courage and its famous bluster. Overtime, the descendants of the rich patrician-merchants –that leadership who did not think a minute about risking everything on the bridge of Venice’s ships– had opted instead for beautiful Palladian Villas in the countryside. Painting and art had replaced the dogged, if futile, resistance displayed by the Venetian defenders in the siege of Cyprus. Marc’Antonio Bragadin, skinned alive by the Turks after Famagosta had fallen in 1572, was “replaced”  later on as a cultural icon by Giacomo Casanova.

The last Doge

In 1797, Doge Lodovico Manin, the last one in a proud line of those rulers who, along with the “Senato Mar”, the “Senate of the Sea”, for centuries could dispatch effective naval power all over the Mediterranean, presided over the surrender of Venice to the strutting newcomer of the time, a young Corsican artillery officer named Napoleon Bonaparte. It may not be entirely accidental that Manin came from the mainland and did not descend from the seafarers and that his family had purchased at a high price accession to the city’s aristocracy. It is also tragic irony that Manin’s ceremony for his accession to the seat of Doge was recorded as the most expensive ever in the history of the Republic. In the end, the “Serenissima”, the “Most Serene” Republic, surrendered to Napoleon’s superior power without firing a shot. A history that had lasted almost a thousand years was over.

Needless to say, there is still a Venice today. But it is a large scale tourist trap that has the residual, if sad, charm of great things that have been.

How do civilizations “lose it”?

But why cite examples of long ago? Because Venice had not been just a city of fat merchants enriched by trade. It had become a political leader strengthened by its mastery of the technologies of the time. State of the art shipbuilding, of course, but also glass works, the printing press, textiles. Its government, while just an embryonic rudimentary form of democracy by our standards, was light years ahead of the often obtuse autocracies that prevailed in Europe. The Venetian Foreign Service was in a class of its own. The Venetian Ambassadors had the obligation of writing daily reports on everything that they noted wherever they were. There was genius and industry along with courage and a fierce sense of one’s own independence and place in a difficult world. A place conquered with intelligence and not just force.

Nowadays there is still a Venice. But the Venetians have been downgraded to ice cream sellers only too happy to overcharge unsophisticated tourists who associate Venice with the Carnival and the relaxed mores of the last decades of the Republic. Which is to say that “the good” does not have a life of its own. It needs to be nourished and its value passed on to those who were not materially there, “at the creation”, as it were.

Are we westerners “losing it”?

So, let us go back to where we started. What will be the narrative of the early XXI Century? The rise of Asia, most definitely. But it is worrisome to note that, while many young Asians enthusiastically go and fill the ranks of tomorrow’s technocrats, we are not taking stock of this and what it will mean for us. Bill Gates of Microsoft goes to Capitol Hill asking for the relaxation of visa rules for highly educated foreigners needed to fill the ranks of American industries, because the American education system does not produce enough of them. Microsoft, as well as most other US high tech companies, needs them.

And we need foreigners by default, because, as Gates had already noted, the once coveted US education system is both too small and outmoded. Below the few elite universities, the American schools are not so good; while Americans just do not go and study science and technology in sufficient numbers.

We are in a “crisis”, but nobody is saying it

In and as of itself, to the extent that this facts indicate a systemic trend, this is a crisis, as it tells us that we are lacking today and we shall lack tomorrow the foot soldiers and the officers necessary to fill the ranks and compete in the global economy. But who defines this trend as “a crisis”? Where are the headlines, the grassroots movements of concerned citizens taking action in order to reverse all this?

The current version of the American Dream is for more consumption without too much regard for the means necessary to finance it. The recent real estate bubble, with all the public policy responsibilities that allowed it, was the perfect excuse for continuing a level of consumption not justified by income. The dream for a while was that ever increasing real estate values would allow people to use their growing equity as an endless ATM machine. What made this worse is that this new real estate equity, this “found money”, was rarely used for productive investments. It was more often utilized to finance a life style otherwise not affordable. Hence the growing chasm between static income and excessive consumption, temporarily masked by the illusion of new real estate created wealth.

Pipedreams of an easy life without producing wealth replaced by misplaced goals of wealth redistribution

Now the whole dream of an easy life funded by the magic of ever growing real estate equity has vanished. But now, as we are in the midst of untried rescue operations aimed at preventing this disaster from engulfing the whole economy, the political discourse in this electoral campaign is about redistribution of wealth and the offering of new services to those who did not enjoy the bonanza of the last few years.

Nothing wrong with advocating improved conditions for those who struggle. But there is fuzziness in describing how all this will be paid for. And publicly funded relief is unfortunately not the most appropriate policy message, without confronting head on the fact that we are no longer in an era of plenty.

There is much less wealth available for redistribution these days. Individual savings rate: zero on average. We have significant private debt; significant public debt; significant and ever growing balance of payments deficit. And also two costly wars underway.

More equity is a nice idea, but you need excess wealth to be shared

Equity and fairness should have a place in a democracy. But first we need to agree that, in this new, fiercely competitive global environment, collectively we need to produce more wealth by being more competitive. At the same we have to acknowledge that, while the modern armies of young Asian technocrats grow, we have difficulties forming and recruiting our own. Likewise, while Asia saves more, we spend more. And as we do not have enough money, we go into debt. Redistributive public policy by itself, while well meaning, will do nothing to change this lack of ability to produce more resources.

We are not finished, yet

Of course, the picture is not entirely bleak. In truth, America has many world class, truly competitive, multinationals. But this is less the national asset that one might think it is. Nowadays, US multinationals, precisely because they operate on a global chessboard, regard America as one of their markets. Their objective is their own growth and competitiveness, not necessarily America’s. As the US economy slows down, the multinationals increase their efforts in other markets. And they build their subsidiaries and R & D centers where convenient.

Indeed, just by looking at investment decisions by US multinationals one could detect the underlying systemic transformation discussed so far. When General Electric or Caterpillar state that they are beginning to invest more abroad than in the US and that they expect a larger and larger share of their sales and profits to come from foreign markets, this is an indication. Of course, these trends may change and multinationals have the flexibility to adapt. But will they change?

Looking at all this, the sad conclusion is that while a systemic shift is taking place whereby Asia is destined to affirm at all levels its new self-confidence, the leading power of the West is almost entirely focused on fighting Islamic radicalism, while the dream of the opposition is to re-direct the funds used for the military to finance new social programs to benefit their political base. 

We should focus on competitiveness issues 

The discourse in this political season is framed in a myopic introverted context in which our position vis-à-vis the outside world is rarely seriously discussed. It looks as if America is self-contained and affected by the world only in a negative way, due to the alleged stupidity or greed of misguided leaders who have caused unnecessary suffering through ill conceived free trade policies that serve the interest of the elites at the expense of the people. In this type of inward directed political debate, very little is said by all about the need to dramatically foster US competitiveness, the only real source of future prosperity and the essential precondition that determines our ability to do anything, including funding improved education for all or universal health care.

While we obsessively debate Barak Obama’s credentials as a true post-racial leader capable of healing old racial wounds, larger numbers of Asian youth go to school and get engineering degrees in a new world in which for them birth is no longer destiny, while a solid higher education is a proven key to success. The Asian Century is upon us and we are not ready.


In America, Politics as Self-Renewal

WASHINGTON – The paradox of American politics is this odd mixture between pragmatism and grandiose wishful thinking. Hillary Clinton studied for president for decades. She keeps reminding her audiences about all her accomplishments; or at least sophisticated knowledge about the issues that touch Americans today.

Then, out of nowhere, comes about a new entity, a new type of politicians who says: “What you know does not mean much; unless you create a new system that engages people to work together for a shared and just solution”.

Well, this changes the framework of the conversation. Clinton says: “I really know the issues”. Obama says: “Knowing the issues may be a good thing. But if you cannot create the new environment that invites genuine cooperation, we will not be able to make much progress”.

And here we are. Clinton keeps insisting on her field-earned qualifications. Beyond that, she is a woman. The really first, fully qualified female who can be a credible president. But this is not enough. Obama, also a first, as the first African American with a real shot at the highest national political office, keeps saying that he “has” the magic formula that will transform wishful thinking into tangible reality for the many, especially the many who feel taken for granted and routinely left out.

Obama’s message has had and has a tremendous echo. I have written already about the dangers of politics as some kind of spiritual re-invention. Yet, the fact that a man who is different, so different, in his “being”, in as much as his being is the personification of what can happen when black and white ethnic elements are mixed, can create so much good will is quite interesting. Who are Obama’s most enthusiastic followers? The young. Those who are generally not in the political process, as they find it –in its current status– reflexively dull and untrue.

Whatever can be said about Obama’s appeal, whereby “his” pronunciation of a yearning for “change” sounds true, probably because he believes in it, this appeal is in large part the reflection of a yearning for a quasi-religious sense of commitment to something “higher” in this land of New Things.

Let us remember that this Republic, at least in terms of a collective Dream that has been passed on to us, is an experiment about the possibilities of human ingenuity combined with industry. Obama’s reminder that, unless we change our ways, not much will be transformed in policies, has had a tremendously strong echo. What is most strange is that, beyond his own personal stated commitment to make this happen, we are all entirely clueless as to the means that he will/can adopt to get us into the New Promised Land of virtuous cooperation. But an (apparently) sincere desire to radically transform a system of half truths and institutionalized trench warfare, dominated by localized self-interests; a system in which it is a lot easier to stop something then to make it happen, seems to be enough for millions who have clustered around Barak Obama, this new biracial symbol of America’s perpetual self-regeneration.

Of course, descending into the boring practical world, the trick would be in really knowing how to marry in some meaningful fashion the lofty goals of self-renewal with the practical tools of government that we have available. But this is never discussed in any detail.

Despite that, even taking for granted Obama’s truthfulness and goals, how is he going to accomplish the goal-dream so much wanted by millions who would like to look at politics as the decent way to create fairness, openness and opportunity for most, in an equitable and bias-free fashion? While I do not know for sure, I guess that many would want America to be true to its slogan: “Real opportunity for all those who are willing to work hard, within a fair system that has no racial or class favorites, to achieve whatever they want to”.

This is the dream like vision of the non partisan intellectuals of the XVIII Century who really wanted a world free of bigotry, prejudice and intolerance. A world in which the enthusiastic pursuit of education would be the guiding force towards higher achievements. Education was thus pushed forward by the likes of Benjamin Franklin and Thomas Jefferson. And education, in their worldview at least, was not partisan. It was about creating on Earth “The Age of Light”.

So, back to the present; why Barak Obama? Because, in the current landscape, he is focusing on a different perspective. A message of Unity, even though he does not say how this Unity will come about, within the present institutional and political framework. We need Unity, says the Man who –at least symbolically– unites in his person two races in conflict. We should build bridges with all and focus on the way we pursue goals, as opposed to the goals themselves. If the way we pursue our goals is partisan and belligerent, well, we may be losing something important, so important as to devalue any meaning from whatever accomplishment.

Sure, if we dream a moment, let us think of someone who can indeed be trusted to be sincere, moved by a desire to promote the common good, as opposed to some special interest, would it not be wonderful to select this person as our steady leader? Yes, of course it would be.

But here, forgive me, we go back to the need to examine a fundamental premise: what is it that makes a republic a viable republic? Obama tells us what we are not, what we are lacking. Fine. And he is probably right. However, a successful modern republic is not about every now and then a great disinterested leader coming about. It is really about the premise of maturity of most citizens (and not just of One Leader) and their ability to engage in meaningful dialogue aimed at solving issues. If we need a Savior who will –who knows how really—help us out of the swamps in which we got ourselves because we do not have the rooted maturity upon which a modern republic is predicated, then the issue is not about Him; however sincere his argument; but, once again, about  us. If we cannot have a meaningful, mature polity constituted of reasonably mature people, then, as last reort, we need Obama, or, in the future, another Obama-like character who will come about to remind us of how low we have fallen.

But the hard solution, the really hard solution, is not in selecting Him as our Savior; but in understanding that the complicated issue is in how we should grow out of this nasty predicament created by our immature understanding of politics. A well functioning political process should be predicated on attained maturity on the part of the participants. Maturity, in turn, should give us a mature discussion as to how, collectively, we can advance the best type of common good for ourselves and the world we live in. If politics is about the advancement of a particular ideology that needs to see its political triumph, well, we have re-created another Monster. Little Monster, Big Monster, depending on the circumstances. 

However, Obama’s song “about new ways”and the surprisingly wide national echo it has created, should not be lost, as it tells us a lot of where we are. He is telling us that, no matter how smart some of us are, the issue is about more “mature attitudes” towards the policy process. The instinctive exceptional echo that his call to seriousness in our hearts has created is an important sign as to the need for reformulating the basic fundamentals of what is needed to advance the policy process.

Unfortunately, the issue is that, in a few months, after all this primary avalanche will be done and over with, the canary song –the Obama phenomenon– that tells us that there is gas in the mine shaft may be lost and easily forgotten.

Obama’s echo among the young, the instinctive outpouring of sympathy, and the cascade of millions towards this (apparently) different man trying to articulate a new way of looking at the political process, should tell us a great deal as to where the work should take place. In a sense, he appears to be what most people would like to see among elected leaders. Vision, passion, poise, good will, without the devilish element of ideological bias.

(Of course, Hillary Clinton, his opponent in this primary season has desperately tried to affirm that Obama is all appearance and no substance. Nice but empty speeches. The words may resonate; but there is no articulation of a political strategy and of believable policies to take care of actual issues. Not to mention that the man has no real experience. So Hillary Clinton appeals more to middle aged “practical” women. But Obama is the candidate of the young and of the intellectually sophisticated who collectively have thrown an avalanche of money into his campaign coffers, while he is appealing to the independent who may think that they may have finally found their champion,as Obama speaks a “different” language.)

What do I take from this Obama phenomenon? it indicates a real yearning; but it cannot possibly provide the solution to the problems that he points out. The “solution” to the collective soul searching that would like to find a magic cure by electing a “different” leader is escapism.

The real “solution”? Educate young people. Teach them about the ideologically free values of republican ideas; focused on: broadening opportunity as much as possible; and allowing people to take their rightful place within an unbiased society in which birth is not destiny. It is difficult, of course for most of us to realize that only by adopting these values and “ground rules” we can be the more co-operative citizens Obama talks about. Very difficult. But true.

Unfortunately, as always, we are rushing. We are rushing fast to determine who is going to be the nominee for the Democrats. Difficult to pause and reflect on the peculiar call for something radically “different” coming from around the nation triggered by the Obama phenomenon.

And what is the call about? The desire for declaring that we are now in a a post-racial America in which all ethnic issues have been resolved. The very fact that millions of whites do not have any problems in having faith in this biracial Man should tell us a great deal as to what unbiased human beings may be able to do. However, while noting all this, the problem is that we do not know anything about the depth of these feelings. Are they just fantasies or deeply thought through convictions? And when “Obama the Uniter” will call upon the many to work on behalf of the worse off what will the response be?

Europe and World Threats

WASHINGTON – “We must not –we cannot—become a two-tiered alliance of those willing to fight and those who are not”, Robert Gates, US Secretary of Defense told a largely European audience at a recent Munich Conference on Security Studies Policy, where NATO’s effort towards Afghanistan was a central topic. “Such a development, with all its implications for collective security, would effectively destroy the alliance”, he added.

Indeed. Strong language from the US Sec Def.

Anybody cares?

But not much of a ripple effect. Indeed, reading about NATO matters in Afghanistan on the official NATO website, one is lost in generic, (perhaps decidedly), confusing language as to who does what there and under what conditions and circumstances. Afghanistan is there on NATO’s busy agenda….and so is Kosovo…..and so is more……Any specific sense of urgency about Afghanistan? Can one detect that this is a strategic priority? If it is there, I missed it entirely. The actions of most member states indicate that the current level of effort is deemed to be “just about right”, in present circumstances.

The notion that the loss of Afghanistan would be a significant “symbolic loss”, especially for this Islamic, “appearance conscious” worldview –as it is indeed “the place” where this whole terror, anti-terror business actually started– is not available anywhere. 

US wanted to subcontract Afghanistan to NATO

The US Government, in its own hubristic idea of quickly transforming the Middle East, grabbing Iraq –after all a key state from any standpoint– conceived that idea, (at the time, in 2003), of subcontracting Afghanistan (relatively sleepy, then), to NATO; figuring out, (hoping?),that some kind of NATO-led occupation force would keep the country together.

Well, as we now know, it did not happen that way. Iraq proved to be a lot more difficult. Afghanistan has turned out to be a lot worse. The post-Taliban mess, in its own internally and externally torn confusion, in the end was extended to more or less equally friendly territory on the other side of the Afghan border. Pakistan’s North West is now also a huge mess. For the time being, the idea that an Islamabad led force will put things in order in the large region adjacent to Afghanistan is still a distant dream.

End of NATO is Europe does not do more?

But all this, from the picturesque, post card like, lovely European cities (that Americans get when looking at Europe through the nicely tinted eyes of marketers who insist on Europe as this lovely, slow and enchanting oasis of peace, culture and serenity), looks awfully distant and remote. Europe in danger? From Afghanistan/Pakistan? And why? We’ll find some accommodation. There must be…..a way…..Indeed.

Bob Gates said it in Munich…”Either we resolve this mess of unequal contributions to the war effort –I paraphrase– or it is the end of NATO as the primary tool for North Atlantic co-operation”.

If there was trembling within the old European palaces, at the notion that this mighty edifice of Western Power could be unraveled, it did not show.

After the end of the USSR, smaller NATO forces

In 1989, while still working at the Atlantic Council of the United States, I did not expect the so rapid crumbling of the Eastern Empire. Nobody really did. And, at the time, it looked fine. End of an Eastern threat, in a truly existential sense. As a result, defense spending within NATO countrie was cut. The Alliance, whatever its then status, could stay, as it was a reasonably proven tool for communication and for sorting out US-European affairs. Although, hardly an ideal set up, a NATO without meaningful force, was fine; to the extent that no large force was really necessary to protect the Allies from an enemy that had retreated and (militarily) basically ceased to exist.

Afghainstan, a new scenario

But now, Afghanistan, this new thing, has created a new set of problems. Europe seems to have no tools, no means –and especially no wil– to deal with this awkwardly far away country in which, unfortunately, (and here it all gets tricky, as people interpret unclear developments as they please), there is a fertile soil for the amalgamation of anti western, jihad ideas and policies.

The issue again is distance, and a strong desire to continue living just as in those lovely “picturesque post cards” of serene Europe that populate US TV programmes on Public Television (PBS). In that Europe that reasonably well heeled Americans want to go and visit to bathe themselves in proper culture an art, all is beautiful; all is neat, all is quiet and enchanting. In that context of order and quiet, vague, remote places, vague threats, mean little to the average person. There are no imminent dangers of “old fashioned armored divisions across the border”. And so, the Europeans try again to remove themselves from the danger area. They try so hard. The idea (for some at least) is that, just by being there, (in Afghanistan), we are on the bad guys list. We are known and counted. And later on they’ll come after us.

Europe is in denial

Who knows what the best strategy for Afghanistan may be. But a bit more of everything should be at least tried. More material aid, stronger presence, more visible and useful reconstruction, a stronger sense offered to the population that something better for them is in the offing. Are we really saying that the whole of Europe cannot dispatch more than 2000 troops here, 3000 there? And all that with the most intricate set of caveats in terms of “the contingent from this nation will go as far as here…but not beyond”, etc; Is that all there is? Is this all that this NATO Alliance can deliver?

Clearly, this is all it wants to deliver. Allowing this wound between Afghanistan and Pakistan to remain infested and to continue to attract more bad stuff, we’ll do the west no good. But, again, all dires scenarios are in the category of theoretical, possible, not certain.

Even when things were bad Europe was reluctant

I mentioned earlier “armoured divisions across the border”….Indeed.. But we remember those and the minimal mobilizing effect they had. What did those Warsaw Pact quite visible divisions do? Did that “danger” push the Europeans to spend more and build much stronger defenses? Hardly at all.

In the 1980s, (before the end of the old scenario with the collapse of the Soviet Union), in Washington DC we had a complicated policy debate, (we used to call it “burden sharing”), whose ultimate objective  was to find the Europeans materially at fault: that is, facts in hand, not delivering on promises to augment defense spending by certain yearly amounts.

Europe’s relaxed attitude about defense a moot point after the end of the USSR

And that did not go anywhere either. Of course, (and Thank God for that!), we’ll never really know what might have happened, had the then Soviets decided to test the actual strength and resolve of that NATO Alliance. Maybe because it would have been messy; maybe because it was about almost immediate nuclear escalation….who knows, really.

Europe’s wishful thinking

But now, after the Soviet demise, and the current danger, (Afghanistan), conveniently located in really distant areas, it appears that Europe can (try and) continue to be what it wants to be: an island of peace within an uncertain international sea. Nothing wrong with that, but only as an aspiration.

The Romans, who were rather no nonsense about all this, put it bluntly, long ago: “If you want peace….Be ready for war”. (“Si vis pacem, para bellum). Wanting peace is a great goal. Convincing others, in this confused world, that, no matter what they try and do, they shall not prevail, is an entirely different matter.

Real security requires not just pretending that one will take action, but really convincing the other(s) that action will take placea and that it will be swift and deadly. This Europe with lovely landscapes and nice parks does not overtly exude this certainty and determination. Or may be I have been watching too much Europe through the gentle marketing lenses of US Public Television…