Different Default Situations: US vs. EU

After the American Century

Both the EU and the US are struggling with massive public indebtedness, and in each case the problems emerge from bad decisions made during the last decade. The problems are quite different, however.

First, consider The United States. It seems hard to believe now but the US had balanced its budget and was rapidly paying off its national debt in 2000. The current fiscal woes are due to an excessive tax cut that overstimulated the economy, combined with massive military expenditures and a failure to regulate the banks. These problems all came from the White House, which dismally failed to protect the strong economy created in the 1990s. Bush overspent, undertaxed, and virtually abandoned regulation. The country needs years to get out of the mess he created, during which it needs to raise taxes back to where they were in 2000, particularly on wealthy people. But the Republicans, once a party of fiscal rsponsibility, have no intelligible economic program and they seem willing to let the nation go into default rather than compromise with the White House. In short, the American problem is firmly lodged in Washington, rooted in the failures of the Bush years. The problem is not impossible to solve from an economic point of view, but it is hard to resolve politically. The stupidity is, if you will, ideological.

Second, consider Europe. Here the problem is much different. The problem has emerged at the regional level - Greece, Italy, Spain, Portugal, and Ireland, all have weak economies and huge deficits. In contrast, some other members of the EU, notably Germany and Sweden, have strongly rebounding economies and do not have unbalanced national budgets. The problem here is that no single banking policy is appropriate for both the strong nations and those tottering on the brink of default. The stupidity in the EU is, if you will, a regional matter.

The US has a problem that could be easily solved by reverting to the tax code of the Clinton years. Possibly, something approaching this will occur, probably at the last minute. As Winston Churchill once said, the Americans always do the right thing in the end, but not before they exhaust all the other possibilities.

In contrast, it is much harder to see what the EU can do to solve its fiscal problems. The failure of Greece to pay its debts could set off a financial tsunami. Even the controlled default now being contemplated (or rather orchestrated in Brussels)  could have dire effects. The unity of the EU will be sorely tested if the fiscally responsible economies have to bail out those, like Italy, that are rife with tax cheating and black market labor. Why should Germans or French tax payers have to endure higher taxes when many wealthy in Greece continue to lie about their assets and pay less than they should?

History is not logical, of course, and it might be that the US will stumble into a completely unnecessary default, while the Europeans stumble through to a somewhat undeserved equilibrium. But the fascinating thing is to see how these wealthy countries have made such a mess of fiscal policy.  In a worse case scenario, default on either side of the Atlantic could trigger a larger world crisis, from which Asia would almost certainly emerge the stronger.

We are in for a perilous three months.

Check out Analogue Books in Edinburgh

After the American Century

On a short trip to Edinburgh last week I happened on a lovely small bookstore in the old part of the city. Located below and behind the Elephant Cafe, where many Harry Potter fans go to see the pleasant rooms where that series was begun, Analogue Books offered me the rare, almost unheard of pleasure of a carefully selected collection that had no best-sellers or media-driven titles at all. Indeed, I had never seen or even heard of a single book in the shop. It is a fantastic and engaging place. It may be small, but it still seems large when every book is an unknown.

I bought a fine non-fiction book that explores the history and aesthetics of type fonts. Written by Simon Garfield, Just My Type discusses the font preferences of famous people, including President Obama and Amy Winehouse, but it is far more than that. I am sure anyone who lays out a webpage or a term paper or a company brochure would learn useful things from it. There were many other interesting books, in a wide range of genres, all from small publishers as far as I could see.

I only wish I had found this bookstore sooner. I only spotted it an hour before leaving town, and by that time my suitcase was stuffed with other things. But on another visit, I am certain to go by 39 Candlemaker Row, and see what else I don't know.

Bankruptcy Not Needed: Greece can lease islands to banks

After the American Century

At first I thought of this as a joke, but it is beginning to look reasonable. The choice for Greece is not either go bankrupt or borrow more money. There is a third choice, a typical capitalist choice, the choice to lease parts of the country for 50 to 100 years. China leased away Hong Kong and got it back, with considerable improvements. Greece could lease a large island like Crete to the German banks, in exchange for wiping out their debts to those banks. The French banks could get Lesbos. I want my bank to lease Corfu.

Even more radically, Greece could sell off some of its smaller islands, with the proviso that the buyer could not sell to anyone else without Greek government permission, and reserving the right to purchase the island back at the market price.

Such plans would make it official. The banks already call the shots in Greece.

I know this sounds a bit strange, but it is somewhat like a corporation selling off some of its divisions in order to survive. No doubt offense to patriots, but surely this is better than bankruptcy.

Don't like that solution? How about this one? All European countries could copy Greece, spending way over budget, and then the Euro zone could devalue by, say 35%. The idea being, if the train is going off the cliff, let's get into first class and enjoy the ride while it lasts.

Academic Freedom of Expression? Not in Copenhagen

After the American Century

In Denmark at the moment academic freedom of expression is an issue. A professor at Copenhagen University criticized a proposed new law that will reestablish intensive border controls. The right-wing party that is pushing for these controls immediately attacked her through the media. The chairman of her department then ordered her to stop making public statements about the matter - or take a "media break" for an unspecified length of time. He also told all members of the department of political science at the university that they should refrain from making any public statements about this controversy to the press unless they first consulted him and the Dean. [update: the proposed law was passed, millions of kroner were spent on instituting more border controls, but they had almost no effect on anything in the real world. After the right-wing coalition that had forced through this change was voted out in the September, 2011 election, the new left-leaning coalition quickly abandoned the policy. Thus a professor was silenced for saying what the majority of politicians now agree was correct.]

This is a pathetic spectacle. The political scientists of all people should not be silenced in public debate on controversial proposals for new laws. In this case the Danish foreign minister is running around Europe trying to reassure governments that the new law will not violate treaty obligations. I am not an expert on EU law, but this is a matter of freedom of speech. If the entire department of political science at the largest Danish university has been silenced by its own administration, then that leadership ought to be removed. They have violated the most fundamental academic values.

Danish politicians and academic leaders will discover that there is a high price to pay for such outrageous cowardice. The best young minds will see the hypocrisy for what it is and seek careers elsewhere, some of them outside the country. The international evaluations of academic quality will undoubtedly hear of such behavior. It will hurt Copenhagen University in the yearly evaluations. Last year, even before these events, the university's rating fell far down the league table. Its fall can only continue in 2011.

The current crisis further worsens the university's reputation, already tainted by an on-going research scandal in the natural sciences. This "Penkova" case involves scientific fraud, abuse of research funding, and falsification of findings published in international journals. Several published articles have been withdrawn. Since most scientific articles have multiple authors, damage has been done to several individual reputations, as well as to the university as a whole. In that case, the university administration did not want to listen to its faculty, and those who tried to warn them that Penkova's research findings were problematic were ignored, if not silenced.

The vast majority of the faculty are not at fault. They are the victims of right-wing politicians and short-sighted university administrators. The University of Copenhagen has become a demoralized shambles.

BRIC Nations Driving Global Warming

After the American Century

I recently spent two days at the University of Michigan, attending a conference dealing with sustainability and the US / China relationship. My brief was to deliver a plenary lecture on the history of US energy use, and what that history suggests about the future.

The background for this discussion is the major shift in the sources of pollution that has taken place during the previous five years. In c. 2006 the United States released more CO2 into the atmosphere than any other country. Since then the US has reduced its carbon footprint, and at the same time its total energy use has stopped growing. In contrast, China's economy has been growing at a rate of 9 or 10% every year, and its energy use has shot well beyond the US level. In fact, China alone released more CO2 last year than the United States, Germany, and the UK combined.

When one adds the CO2 from Brazil, Russia, and India, the other "BRIC" nations, the pollution balance shifts even more dramatically. These four emerging economies taken together are demanding more and more energy and they are satisfying this demand mostly through the older polluting technologies. Alternative energies receive lip service. Indeed, the many Chinese delegates to the meeting in Michigan kept repeating that the pollution was created to manufacture things for the West, and therefore the CO2 releases should not be counted against China. 

This is a curious argument. Chinese factories choose to be highly polluting of their own water and soil in order to keep prices down, a subject that was dealt with at the conference. These factories also choose to pay workers poorly in order to keep prices down, a topic that however was scarcely mentioned. Exploiting their own land, air, people, and energy resources in a short-sighted manner, the Chinese are making  a good deal of money. But the CO2 somehow, they think, is not their responsibility.

In contrast, almost all the large western economies have managed to reduce their CO2 levels in the last decade. One must admit that they start from an entirely different position. Per capita, Americans, Germans, and Brits all use far more energy than the average Chinese and enormously more than the average Indian. Starting from a position of excessive energy use, the West can cut back largely by adopting new technologies that are more efficient and less polluting. 

The overall trend is worrisome. The BRIC national economies are growing rapidly, and their CO2 emissions are keeping pace. This is not a sustainable situation. Nor is it a necessary situation.

I explained why in my lecture. Drawing on my  Consuming Power, I briefly summarized the previous American energy regimes from colonial times to the present: muscle power, water power, steam power, electrical power, gas and oil, and the never entirely realized nuclear regime. 

I then drew several conclusions. 

First, that the US has had little or no historical experience with shortages. Shifts in energy use were driven by consumer demands for more rather than the need to replace disappearing sources. 

Second, that since c. 1820 there have been new energy regimes roughly every 40 years. This strongly suggests that the shift to alternative energies will also take four decades, and that it will not entirely replace but rather supplement previous energy sources. 

Third, statistics show that since c. 1940 the largest growth in energy use in the US has been in the consumer sector. Industry has been much better at curbing its appetites. The good news is, that, based on studies of best practices - i.e. using existing technologies - the US could cut its total energy use by 50%. This would not entail any hardships or major changes in lifestyle. Rather, this would mean that per capita US energy use fell to the level of Germany or Denmark. The existing technologies include improved housing insulation and heat exchangers, already in use in Germany, that come close to eliminating the need for most domestic heating or cooling. Heat pumps, passive solar, solar panels, geothermal, burning waste, and wind power together provide a good mix of alternatives. Utilized together with pumped storage of hydro power, they eliminate the bogus argument raised by the oil, gas, and coal companies, who claim that alternative energies cannot provide energy around the clock, because the sun does not always shine and the wind does not always blow.

Fourth, half of the reduced US energy demand could be met though a mix of alternative energies, including far more than wind and solar power. Again, new technologies are not necessary. What we already have is sufficient to achieve this result. But note that the cost of solar power has been steadily falling, at a rate that economist Paul Krugman estimates to be 7% every year.

In other words, rather than set a goal of unchanged total use, of which 25% is to be alternative energy, I firmly believe that the US goal should be to reduce its energy consumption by half and satisfy the  remaining energy demand by using alternative energies. Moreover, the BRIC nations could do the same thing. Rather than adopt old-fashioned technologies, such as coal-fired electrical plants, they could move directly toward the sustainable goal. Their models should be Denmark and Germany. They should not measure themselves against the US, whose energy use is indefensible and unsustainable. Indeed, there is some evidence that the Chinese have begun to understand this more quickly than the US itself. Certainly China has moved to be a global leader in solar energy.

The fundamental problem of excessive energy use is not technological, but social and political.

End of the World?

After the American Century

I think we can now say it is official: the world did not come to an end on May 21. This was announced as a certainty in full page advertisements in many American newspapers, including USA Today, which I get slipped under my door every day in the hotel where I am staying.

This apocalyptic vision is nothing new, of course. The Puritans were certain that the end of the world was close at hand, and the first best-seller in the Massachusetts Bay Colony was a "The Day of Doom" a long poem about the Last Judgement. In case you did not see the now expired prediction, it was worked out as part of a larger chronology of the history of the earth that Charles Darwin would find rather silly. It goes as follows (according to eBible fellowship)

TIMING OF IMPORTANT EVENTS IN HISTORY 

(My students should  take note, I do not endorse this chronology as a study aid for the final exam in US history)

11,013 BC—Creation. God created the world and man (Adam and Eve).  

What about the mosquito. Was it also created in 11,013 BC? And why did God not begin at number 1 and count forwards?In any case, note that on this date, too, were created all the geologic strata that apparently falsely suggest that the earth is millions of years older. No doubt these were laid down as a snare to trap godless scientists and the unredeemed of little faith.

4990 BC—The flood of Noah’s day. All perished in a worldwide flood. Only Noah, his wife, and his 3 sons and their wives survived in the ark (6023 years from creation). 

I have always wondered about the whales and the fishes (the Bible usually speaks not of fish but fishes) which should have been able to survive the flood rather easily. Also the octopi and the sharks. And what about ducks, which can paddle about quite comfortably in water?

7 BC—The year Jesus Christ was born (11,006 years from creation).  

This seems rather strange, this 7 BC. How could Christ be born 7 years before Christ (the meaning of BC)?

33 AD—The year Jesus Christ was crucified and the church age began (11,045 years from creation; 5023 calendar years from the flood).  

I am rather surprised that they think Christ was 40 years old when he died, as I had learned when preparing for confirmation that he did not live that long.

Remarkably, nothing much of note then happened for a long time!

1988 AD—This year ended the church age and began the great tribulation period of 23 years (13,000 years from creation).  

Why 1988? Because it was the end of Reagan's presidency? Because the Soviet Union was falling apart? And there seems a mistake here. Surely 1988 + 11013 would be 13,001. So the end of the "church age" should have been 1987, right? Maybe that accounted for the big drop in the stock market that year.

1994 AD—On September 7^th, the first 2300-day period of the great tribulation came to an end and the latter rain began, commencing God’s plan to save a great multitude of people outside of the churches (13,006 years from creation). 

Suddenly, we get a very specific date - September 7. Where does this come from? It seems quite arbitrary. I think it may have been Labor Day weekend. But surely the salient fact there is that the first Miss America pageant ever was held on September 7, 1921. That would be precisely 73 years before.

2011 AD—On May 21^st, Judgment Day will begin and the rapture (the taking up into heaven of God’s elect people) will occur at the end of the 23-year great tribulation. On October 21^st, the world will be destroyed by fire (7000 years from the flood; 13,023 years from creation)  Again, I am confused here, as 1998 + 23 does indeed equal 2011, but where did the number 23 come from? It seems to be plucked out of the air.

I suppose there is still a chance that the final consumption of the world by fire could take place on October 21. However, I want to register a complaint: the World Series of baseball is scheduled to begin on October 19, and even a four game sweep will take at least five days, with one day for travel. How can you destroy the world in the middle of the World Series? This makes no sense. It strikes me as downright un-American. [It turns out that October 21 has passed without the world being consumed by fire, which suggests a heavenlyk interest in the World Series, after all.]

I do note that October 21 (1833) is the birthday of Alfred Nobel, the inventor of dynamite and founder of the Nobel Peace Prize. Ending the world in fire on that particular day looks decidedly unpeaceful, and might be an unnecessarily spectacular advertisement for Nobel's explosives.  If it has to be done, though, then I propose we wait until 2033, which is the bicentennial of his birth.

But that does not solve the problem of a forever incomplete World Series.

Meditations on Borders Bookstore

Good bookstores select their books and know them.

After the American Century

More than three decades ago I spent some time in Ann Arbor while doing some research. I fell in love with a wonderful bookstore that was local. Later was pumped full of steroids, franchised, and made a national chain, and then an international chain. That local store was Borders, and it had a wonderful selection of academic books, and it had clerks who really knew about the books. In the process of becoming a chain, however, the quality of the store deteriorated and it became largely market driven, pushing best-sellers and whatever the New York Times happened to review. 

This process has continued, until now there are some disturbingly bad books on the shelves. Books that are long on attitude and very short on logic, research, or balance. Books that the old Borders of c. 1975 would never have bothered with. In my visit there tonight I could not find a clerk who knew anything about the books. They were so patently not interested in reading that I wondered how they could get hired. Ann Arbor is a university town, and some of the students still must read words bound in paper. 

I asked one fellow if they had any books on the assembly line, and where they might be located. He immediately turned to a computer and started to type, but then stopped and asked me how to spell assembly line. He did not know if the store had a section of books on business, labor, or the history of technology. The upshot was that after an hour of browsing without help from an incompetent staff, I was unable to find anything of interest on the assembly line.

Note that Michigan is the center of American automobile industry, and that the assembly line was invented in Detroit. You cannot get into a cab or sit on a bar stool without running into someone who used to work on an assembly line. One would think that a bookstore in Michigan's largest university town would be able to muster something on the subject. Worse, all the other non-chain bookstores seem to have closed, at least according to what people tell me, and what I can see in walking around.

You can also read in the newspapers that Borders, the chain of bookstores, is losing money and closing many stores. The conventional explanation is that on-line stores have killed the local stores. It seems a little more complex than that. First, the local stores were assaulted by bookstore chains, such as Walden Books, Barnes and Noble, and Borders itself. This was going on in the 1970s and 1980s, before the Internet was a factor.

The bookstores of the United States are fast disappearing. Back when I was here years ago I was told that the best bookstores in Detroit were all in Ann Arbor, i.e. an hour's drive away. Today, is seems possible that the best bookstores in Michigan may be in Chicago, Illinois. 

A good bookstore is a repository of public memory.  Once you lose good local bookstores,  local culture and the distinctive sense of local history begin to fade out.

Follow up note: Since I wrote this piece the entire Borders chain of stores has gone bankrupt.

Who Can Replace Trump, for Campaign Comic Relief?

After the American Century

I am sad to see Donald Trump quit running for president. He would have been a miserable choice, but what entertainment we could have had! Imagine him debating other Republican wannabes. Think of all the great editorial cartoons, with his trademark bad hairpiece!

Trump is the too-often hidden face of the Republicans. Not a Bible-thumper but a nasty New York businessman with contempt for most other people. A man of equisite bad taste, he has the great virtue of not pretending. He does not put on a bland face, but gets right in-your-face. Trump would have been the perfect candidate to run against Obama, in the sense that he would both lose and represent the business Republicans, i.e. the people who run that party, even if they have trouble, sometimes, steering the gaggle of lunatics they have recruited as foot soldiers.

Nonetheless, we can only hope someone equally colorful will emerge to give the coming election some comic relief. My guess is that Sarah Palin will not be able to resist running, but there is the danger that she will make stolid Mitt Romney look intelligent and responsible by comparison.

It may be time for a groundswell of enthusiasm for the resurrection of Dan Quayle - whose gleaming stupidity gave us some of the comic high points of the 1990s. He is now just 64 years old, and the only former Vice President the Republicans have that is healthy enough to run. He ought to be out there saying silly things. This is the man who apologized to Latin Americans for not being able to speak Latin.  His immortality is assured, for he also declared "I stand by all the misstatements that I've made." Not to mention his shrewd economic analysis: "“Bank failures are caused by depositors who don't deposit enough money to cover losses due to mismanagement.” Such subtle insights no doubt explain why since 2000 he has been a member of the Advisory Board of Cerberus, an investment house.  

With Trump gone, we need Quayle back. We need to smile again.

Euro Song Contest Maintains its Tasteless Traditions

After the American Century

It must have been that crazy European song contest. I cannot sleep tonight,  nor can I sing a single line from any of the 25 songs I heard. After at least a decade of steadfastly ignoring the event, I decided to watch. The day before I heard a long discussion on the radio, in which several university lecturers explained how the event had evolved over the years. Its style had been affected by American Idol and similar contests. It displayed a variety of ethnic and regional song traditions. The choreography had improved. The contest stimulated European integration. And on and on. I decided to watch again, to see how the contest had been transformed.

What I saw, however, was depressingly familiar. There were many bad copies of American popular songs, most of them sung in something like English. None of the songs was memorable enough for me to hum a line now. None of the lyrics told a story, so far as I could tell. The event was held in a football stadium, and its acoustics, at least on my television, were poor. There were some terrible costumes, and silly but very athletic dancing. Several of the contestants could not sing on pitch, notably  the French entry, who was a master of bathroom bathos. Quite a few female contestants seemed to have been chosen because of their beautiful legs, which were displayed all the way up. Much cleavage also was on display. Cyprus gave Greece 12 points. Romance language countries voted for each other. Former Soviet countries all voted for each other. Nordic countries voted for each other. Truly atrocious songs did rather well in the voting. In other words, this is the tasteless event that I remember from decades ago. It has maintained its traditions.

Azerbaijan won, which is perhaps the best thing one can say about this year's event. And, oh yes, Denmark finished a quite respectable fifth. Not too bad considering there were 25 finalists, selected from 43 national entries in the semifinals. Sadly, however, the Danes finished behind the Swedes, who will remind them of this frequently for the next year.

In this contest, unlike the European Cup in football, little countries have a good chance of winning. Britain lost, despite sending a professional band that I thought was rather good. Ireland did better, and should have been near the top. But it did not appeal much to the Eastern Europeans. 

For Azerbaijan, the victory is proof that it exists in the eyes of Europe. It is an invaluable advertisement. I am considering already when to go there on vacation - it looked so quaint in the video before the song. But it will absolutely not be to see next year's event.