Archive for January, 2009

Socialism vs. the Free Market?

Posted by Scott Erb in Culture, Political thought on January 14, 2009

(This is a continuation of sorts of my “Capitalism, Communism and Humanism” entry, spurred on by the discussion there, as well as some other net debates I’ve been reading).

Popular in parts of the blog world and amongst a group of people who see themselves as completely and totally devoted to liberty is a belief that the one and only way to have a moral and functioning society is to operate with a completely free market.   To them, that means no coercion in physical terms, and minimal government involvment, usually to prevent fraud and force.  Some take it to the extreme of anarchy; others simply want to turn the tide of history away from more spending towards a freer market.

What has always struck me in talking to committed socialists and committed free marketeers, is they have at base the same kind of vision of the future: humans free, voluntarily producing, exchanging and living actualized lives.  Each posits a nemesis.

For the Socialist, the nemesis is capitalism.  But not the capitalism of the free marketeer.  Remember, Karl Marx’s favorite economist was Adam Smith, he thought that socialism would allow the economy to function the way Adam Smith wanted it to.  But free markets don’t work, socialists argue, because of the nexus between big money (capital) and business.  This coopts governments and creates a situation where, rather than an Adam Smith like version of labor and capital negotiating in a fair manner, one group is structurally advantaged and lives off the work of the other.   This exploitation is a direct denial of freedom, it is the theft of the labor of others.  And, even if it seems to be voluntary, the structure of society constrains and empowers; depending on where you are in the social structure, you have different possibilities and opportunities.  That leads to as sure a denial of freedom as does taxation or anything a government does.

For the free marketeers, the nemesis is big government and regulation.  The market is posited both as a superior means of communicating demand and promoting flexibility in the economy, and as a moral imperative, whereby choice is posited as superior to coercion.   In some ways, the nemesis of each group is similar: free marketeers not only decry governmental bureaucracy, but also how big money and big business use government for their own advantage.  Many of the complaints from the socialists are mirrored in complaints by free marketeers, even if the lingo and emphasis differ.

Each also has a common weakness: they don’t have a real path of how to get from where we are to where they think we should be.  Socialists posited government as the way there, but that failed miserably with Soviet style bureaucratic socialism.   Scandinavian Social Democracy has fared better, but isn’t that much different than other western economies.  Free marketeers are vague; the market simply functions best if unhindered, they claim.  They have no real historical evidence to back up these claims, and even less of a sense of how to convince people to suddenly trust the market.   In the real world lack of government regulation leads to mafias, corruption, and the ability of the wealthy to exercise even more extreme power.   Or, at the very least, it leads people to demand a stronger government.

What both sides miss, I think, is the fact that they really want the same thing.  They want humans to be free, they want a moral (i.e., just) system, and they see and are appalled by the vast injustices and corruptions of our current system.   They each build ideological arguments supporting their position, and interpret reality through their ideology, thereby making it coherent and non-contradictory.   Yet they can’t both be right.  Or can they?

Perhaps socialists who see a withering away of the state, and free marketeers which see a minimalist state, each envision a time where people voluntarily choose to make communities, choose to help others who are in need or require  a hand, and treat other people with respect.   That kind of world seems like it should be so easy — we see that kind of behavior every day in the actions of friends and people in our community.  Why then do outcomes in the “real world” get so warped?

There is a real difference between individual choices, and social outcomes.  That’s created a lot of debate in philosophy — aren’t outcomes simply aggregates of individual acts?   But individuals do not act completely autonomously.  People act on beliefs, values, understandings, interests and expectations that they learn living in a culture.  At some level we’re programmed to think and act a certain way.  If one travels one sees starkly how different cultures produce different ways of perceiving the world, different customs, and different notions of self-interest, morality, and beliefs about human nature.   And, while humans can reflect on their beliefs and at some level try to figure out their program and “re-program” themselves, that’s not as easy as it sounds — those learned cultural values are deep inside of us, they feel normal and seem self-evident.

The only way we’ll ever get to a society where there is real freedom, with neither governmental power nor exploitation from the elite, is when our culture as a whole reflects the values of human rights, human dignity, and a sense that every human has value, should be allowed freedom, and should not be exploited.  If we could develop that kind of culture, we wouldn’t need to worry about ideology or what kind of economy we’d have — that would flow naturally from the culture.

So I’ll leave the ideologues to their debate.  There is value in such discussions.  But the bottom line is to work for a better tomorrow is to work to try to support core values in every day life.    They key isn’t what the legislature passes, but how we raise our children.  It’s not what the regulation of the day is, but how we treat others.   If we treat others with love, it will spread, and slowly, perhaps over generations, the world will change.  And, though they may deny it, the fact that both sides of the capitalism vs. communism debate share a common vision of a liberated, free and peaceful humanity gives me some hope that we can make it.

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Obama’s Mideast Chance

Posted by Scott Erb in Barack Obama, Foreign Policy, Iran, Israel Palestine on January 11, 2009

I have said for a couple years now that I have been impressed by how the Bush Administration learned its lessons from the utter failure of its foreign policy choices in the first four years.  By shifting from Rumsfeld to Gates, giving Rice a larger role, and sidelining Cheney, the Administration engaged in a stealth switch a realist foreign policy many didn’t notice.  Even the radical change in objectives in Iraq reflect the realist mindset.  The latest proof is that the Bush Administration apparently rejected many pleas from Israel to attack Iran, or to allow Israel to attack Iran.

This wasn’t, of course, out of some Bush fondness for the Iranians.  Rather, they feared that the use of Iraqi airspace with American weapons (which would be needed to have the possibility of success against deeply buried Iranian installations) would have implicated the US in the attack, and assured US expulsion from Iraq.  Instead, the US shared with the Israelis details of American efforts to sabotage Iran’s nuclear program, and other covert operations involving Iran.

There is some irony in this.  If the US had not attacked Iraq in 2003, and thus not gotten bogged down for coming on six years, there would have been no reason for the US to deny Israel the weapons.   If the US hadn’t wasted so many resources and prestige (not to mention life) on Iraq, both Israel and the US would have been in a far stronger position vis-a-vis Iran.

This adds to the evidence that attacking Iraq was perhaps the biggest fiasco of American foreign policy history.  Iraq was attacked because Saddam was feared as a threat, perhaps he might develop WMD and arm terrorists.   Yet Saddam was far from developing WMD (the weapons inspectors said so at the time), and as a secular Baathist, he saw the religious fundamentalists as enemies.  He might at times assist them against the US, but now with a nuclear weapon!  It took loads of imagination to really see how Iraq was a threat.  That’s why Dick Cheney called it “the one percent doctrine” (leading to a book by that title from Ron Suskind) — if there was one percent chance Iraq could do it, we should act as if it was a certainty.  That, of course, was absurd on its face, and look where it’s led.

Iran is a natural regional power.  It is large (near 80 million), sits on the Persian Gulf, has oil, and borders the Arab world on one side, the former USSR to the north, and Afghanistan to the south.  It was well armed by the US during the time of the Shah, though those weapons are now quite old.  Aiding and supporting terror organizations isn’t theoretical for Iran, they created Hezzbollah in Lebanon in 1982 after the Israeli invasion, and as the summer war of 2006 showed, Hezbollah remains strong and active.

With the US invading Iraq, Iran not only was shielded from a potential Israeli or American attack, but the Iranians have capitalized on the chaos to exert considerable control over Iraqi parties and militias.  The Iraq war has been a gift from President Bush to the Iranian Guardian Council.   Moreover, the Iranians have also learned some realism.  President Ahmadinejad spoke with Bush like bombast early on, but has now learned to the limits of Iranian power and has moderated his rhetoric (and, of course, he has a more realist guardian council to reign him in — the President of Iran is not the most powerful post in the country).

So what now?   Clearly Israel’s invasion of Gaza is a sign that they feel a two front existential threat, from Iranian backed Hezbollah in Lebanon, and the local grown Hamas in Gaza.  Hamas is Sunni extremist and Hezbollah Shi’ite, so at least Israel knows that there are divisions amongst its opponents.

A few days ago I wrote that there was no local solution to the Israeli-Palestinian conflict; neither side can win, the two peoples’ destinies are intertwined.  With the new revelations about how badly Israel wanted to strike Iran, I read the Gaza invasion in a different light.

This conflict sets Barack Obama up for an early Presidential triumph.   If the US comes forward with a plan to internationalize the conflict by bringing an outside alliance into Gaza and the West Bank, that also sends a message to Hezbollah and Iran: attack Israel, and you’re engaging a multi-lateral force, which will likely include some of Israel’s severest critics.   Impossible?

Not necessarily.   President elect Obama brings with him a sense of hope and change that might allow him to take bold moves early, bringing allies on board who might have otherwise been skeptical.  The carnage of the Gaza invasion may make Arab states more willing to support and participate.  The expected opposition of Israel to such a move may be weaker if they truly feel threatened by Hezbollah and Israel; they might see this as a game changer.  Suddenly Israel will be the one with more international favor, more cooperative, and willing to make peace.

In the past Israel’s had the rather weak “well, if our opponents wouldn’t fight us, then all would be peaceful” argument.   That doesn’t win international support.  But if they decided to embrace an Obama plan for an international response, it could recast the conflict into a clear division between Israel and forces working for peace on one side, and Hezbollah, Hamas, and Iran on the other side.   This could be a major step towards working out of this dilemma.  It could weaken Iran’s hardliners without risking a war that would kill massive numbers of innocents and which could spread, cause oil price spikes, and who knows what else.   From this dark day of headlines of death and destruction, perhaps a new dawn is ahead that will forge a path to ending the seemingly unendless conflict.

This depends on the will and actions of a lot of different people with diverse interests.  But it’s a chance I hope Barack Obama takes as soon as he enters office.

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Obama’s Trillion Dollar Gamble

Posted by Scott Erb in Barack Obama, Economy, US Politics on January 8, 2009

For the last few weeks I’ve been mulling Obama’s stimulus plan.   I believe pumping a trillion dollar stimulus into the economy is a mistake, though there is a chance it could work.   Our new President is going to start his administration with a trillion dollar gamble.   Whether he wins or loses will mean a lot for the future of the country.   Here are the arguments, and why I ultimately come down skeptical.

PRO:  When an economy is in recession the danger is that the slow down will spiral in on itself and last longer than necessary.  As people lose jobs, they buy less, meaning more people lose jobs, also buying less…a spiral with no natural mechanism for turning things around.   The way out is to pump money into the economy to get more people spending money, thereby creating a reverse spiral — more people spending means more demand, which means more jobs in order to meet that demand.   Theoretically, once the economy is growing again the money borrowed to “prime the economic pump” can be paid back, as we move from a recessionary to a growth cycle.

Moreover, there is a real need for government help to states, especially on health care costs and other state expenses that are squeezing budgets from Maine to California.   There is in part a moral obligation to do this, as states have been handed so many unfunded mandates that they have been put in a position where they simply can’t handle all they need to take care of.

In this view a stimulus package that helps individuals, states, and businesses will give the economy a jolt that will kick us back into growth mode and ultimately move out of the recession.  2008-09 may feel like 1980-82, but remember that 1984 was “morning in America.”  Recessions end, this is the way to do it.   The problem with that perspective is that while it sounds good in the abstract, it doesn’t address the real problems in the economy.  Taking the real condition of the economy into account, it becomes obvious that the stimulus choice has severe dangers.

CON:  The real problem with the United States economy is a serious imbalance between production and consumption.  The US has lived beyond its means for nearly three decades, borrowing money to the tune of an $11 trillion government debt, high private debt, and an on going and severe current accounts deficit.  The current accounts deficit is (was?) only sustainable because of the US role in the world as a superpower.  Countries like China assumed the US economy too big to fail, and saw that money spent on American bonds, investments and currency reserves translated into the ability of the US to buy more Chinese goods (before China, Japan engaged in a similar practice).   A major stimulus package may get the economy going again, but it may also make things worse by increasing the imbalance by expanding debt and consumption without doing anything to really increase production.

If that happens, after a short burst of economic activity thanks the stimulus, the economy would move to a stagflationary mode.   If the stimulus increases consumption rather than production we’ll spend the money and emerge with the exact same problem, only this time with even more debt.  The result would be that inflation would start rising even as the economy slows after the stimulus money has been spent.    Since the inflation will not be caused by an overheated economy, but by a drop in the value of the US currency, it will actually increase the depth of the recession by causing interest rates to rise, and perhaps spurring a flight away from US capital and currency reserves.

How can Obama avoid that worst case scenario, which would have a devastating affect on the US economy and our way of life?  The answer is to use the stimulus to address the core problem: the imbalance between consumption and production.   Usually one would see that as automatic — if people consume more, more must be produced.  But due to globalization, the increase in production could come from China, while the increase in consumption could happen here.    If that happens (or in general if the stimulus spurs an increase in consumption of foreign goods — any growth in the current account deficit), it would be the equivalent of getting a new credit card in order to pay off the old one.  For awhile the problem seems to go away, but when you get to the point you can’t make payment on the new card either you’re in a deeper mess than before.

So Obama has few options.  If he does nothing, the recession runs its course, we suffer a deep and painful period of higher unemployment and ultimately inflation as the world loses faith in the US economy.    In other words, stagflation probably cannot be avoided.  However, at some point the inflation will make American goods cheaper than foreign goods (both at home and abroad) and the economy would start to recover.   Optimally this would lead to a sustainable balance between production and consumption, with lower debt levels.

For Obama, that’s unacceptable.  It would be government standing by and letting the country lose prosperity and suffer a crisis without doing much to intervene.

The question then is whether the market alone is best to do this — the do nothing approach — and Obama’s desire to intervene is inherently misguided (free marketers would say so), or if an intervention/stimulus can be crafted that can push us towards a less painful rebalancing.   I am not a hard core free marketeer.  I believe that markets have inherent flaws and must be regulated, and that in normal times — especially if debt is low and the current account in balance — the proper response to a recession is a stimulus.

However, the economy has been so mismanaged over the past quarter century, creating illusions of wealth that were really speculative bubbles, that these imbalances were allowed to fester.   I don’t believe they can be relieved without a real, and deep recession that leaves us in balance, but less prosperous.  The reason we will be less prosperous is because we’ve been living beyond our means; we have to move from a gluttony financed by debt and trade deficits to a balanced lifestyle.

But Obama’s gamble could pay off.  If the stimulus is focused on spurring production and if all economic tools available are used to prevent a rise in the trade deficit (current accounts deficit), then maybe a spurt in domestic production can make the rebalancing quicker and less traumatic.    Obama’s Presidency may depend on whether or not this gamble pays off.

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Bringing Peace to Palestine

Posted by Scott Erb in Israel Palestine, World Affairs on January 6, 2009

Inevitably and expectedly the pictures of children with shattered spines, head wounds, and removed limbs are starting to spread, showing the suffering caused by Israel’s incursion into Gaza.  Meanwhile, Israel’s defenders play a surreal game of trying to talk about the assignment of responsibility, noting that the incursion would not have happened if not for Hamas tactics, and thus Hamas is to blame.  However, abstract arguments about blame and responsibility may make for interesting pundit debate, the reality is that such arguments are meaningless when compared to looking at the consequences of the Israeli action.  The consequence appears almost certainly to be a radicalized Hamas, weakened Palestinian moderates, an end to the blockade of Gaza, and an ambiguous conclusion to Israel’s attacks.  In fact, it appears that Israel may be playing right into Hamas’ hands.

One thing that leaders of states with a strong military force have been slow to learn is that military action against terrorist gangs and militias is more often than not counter productive.  The US learned that the hard way in Iraq, and had to radically adjust its goals just to find a face saving way out (which could still go wrong).

Israeli leaders have a clear goal: disarm Hamas and destroy as much of the leadership as possible.   In the short term, they will certainly have a weaker Hamas military wing, and a lot of dead Hamas leaders.    In traditional military thinking that’s progress — the more of them that are killed, the less of them that can threaten you.   But with organizations like Hamas, the more of them you kill can mean even more will arise to threaten.  Most of the population in Gaza is young, and easily radicalized by extremists who survive.  Moreover, in the Arab world sympathy for Hamas could rise.   Up until now, Hamas has not generated a lot of sympathy and even Gaza Palestinians have grown to resent Hamas’ tactics.

Why is it that politicians like to think that military force can simply eliminate this kind of opposition?   No doubt they can put together really persuasive plans that graph out tactics and estimate the amount of damage they can inflict on enemy combattants.  They certainly are thinking about how powerful their military is compared to Hamas, and quite likely they’ve got the upcoming Israeli elections in mind.    But they clearly are not thinking about the Palestinian innocents who are killed; they are just abstract collateral damage, a cost of war that must be paid.  They are not humans, they are statistics.

Past military leaders could think like that.  Before WWI, most war deaths were military personnel.   But now when 80% of the dead in most wars are civilians, and when asymmetrical war places a militia/political/terror organization like Hamas against a nation state like Israel, the usual war calculus has to be thrown out the window.   Israel cannot just occupy Gaza and declare victory.  That didn’t work in 1967, and in fact it spawned the violence we see today.  Israel can’t just back off and say “OK, now that we’ve proven our strength, deal with us.”  Extremists like Hamas don’t surrender, and the emotion caused by seeing family, friends and innocent children die (even if a lot of Hamas fighters die too) leads to anger and hatred.  In short, this kind of tactic does not work in this kind of conflict.

The Israelis are not dumb.  They know the risks, and I suspect many political and military leaders are extremely nervous about what this incursion may mean.   Their attempt to keep images of dead children and civilians out of the media has failed, and even UN schools have been hit.   At a certain point any military benefit gained by such an incursion loses to the propaganda benefit gained by the other side.  Moreover, Hamas recent goal has been to remove the blockade imposed on Gaza; when this is over, aid will certainly come pouring in.

But, while it’s easy to criticize Israel for a response that seems to create far more death and destruction than it prevents, one has to take seriously their difficult position.   They are afraid of rising threats from Iran, Hezbollah, and Islamic extremism.   They feel very vulnerable, despite their large military, to these rising non-state military organizations.   The only response that seems feasible is a military response — what other options exist?

When you look at it that way, Israel’s tactics are more easily understood, and one can sympathize with their effort to maintain their security.  Therefore I am forced to conclude that the problem of Palestine, Israel, and Hamas as no local solution.  Israel can’t win, Hamas can’t win, and if they keep it up, they may all lose.  The solution has to come from the outside.

The US, the EU, and a coalition of Arab states should develop a proposal for a two state solution, and a multilateral force to defend the borders between the two states.   A Marshall plan like proposal to rebuild Palestine should be developed, administered by a joint committee of the “alliance,” Israel and Palestine.   Counter terrorism experts from the special operations services of the countries in the “alliance” should converge on the region to, working with a provosional government in Palestine to de-fang extremists.  This operation should be backed by the UN Security Council, and the US should use a threat of cutting aid to Israel to force Israel to accept this.

I don’t really like this plan.  I am anti-interventionist at heart, and can see a lot of things that could go wrong.  But unlike Iraq in 2003, there is a crisis here which is on going and carries a tremendous cost in human life.  If the international community comes together and asserts its collective will to settle the one dispute that still could throw the world into a major war, it would be a signal that real multilateral cooperation to solve tough problems is possible in the 21st century.

Is such a course of action likely?  No.  It may be impossible for a variety of reasons.   But in looking at the entrenched positions in the Mideast, and the way Israeli and Palestinian moderates seem to have all chances for peace blocked by extremists of each group, I don’t think anything else will work.  The alternative — this conflict lingering and the militias like Hezbollah and Hamas growing stronger — creates an existential threat to Israel as well as to the Palestinian people.   And intervention with true multilateral cooperation, burden sharing, and with a goal of ending a deadly and dangerous conflict is one kind of intervention I could support.  Because right now the people who are suffering the most are innocents who happen to be living in the wrong place at the wrong time.

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Capitalism, Communism, Humanism

Posted by Scott Erb in Economics, Germany, Political thought on January 3, 2009

I’m currently teaching a winter term topics course on German unification.  It’s a three week course, taking place during that time that is usually the semester break.   There are only eight students in the course, so it’s a nice time to really get into the issues surrounding German unification and its aftermath.

One thing that studying Europe has shown me is that both communism and capitalism have very dark sides, and either one can exploit, enslave and abuse.  I have come to absolutely reject the views of those true believers who either embrace the state and government as the key to ending the ‘tyranny of big money,’ or those who embrace the free market as somehow able to create the best result possible.  Moreover, our culture tends to see the world in dichotomies, where one “side” is good and the other bad.  In such a world view the obvious evils of bureaucratic socialism (aka communism) means some take it as a matter of course that the other extreme is best.  If totalitarianism is complete lack of individual freedom, then wouldn’t free market capitalism be its ultimate expression?

Looking at the case of Germany, it’s hard to keep up that dichotomy.  First of all, no one in their right mind denies the evil that bureaucratic socialism created.  People were spied upon, their individual initiative thwarted, and basic freedoms denied.   Bureaucracies are inherently conservative and resist change.  Communist economies thus tended to reproduce past practices rather than innovate, and individuals with creative, intriguing ideas learned to suppress or at least keep quiet about those ideas.   The result was an economy that, after growing gradually from 1949 to the mid-sixties, started to stagnate, and then after 1971 lived beyond its means on borrowed capital, mostly from West Germany.  By 1989 the economic system was near collapse, mirroring conditions in the rest of the East.  The fall of communism had a clear cause: as an economic system, communism cannot work.

To be sure, it could have ended with a bang rather than a whimper.  If Gorbachev had not been a true humanist, more willing to see Eastern Europe break away and his reforms fail than to use force, the system could have persisted perhaps quite awhile longer in some form.  If Ronald Reagan had not changed his policies to stop his defense build up and work to build actual nuclear disarmament — in his second term he was actually quite “liberal” in that regard, and while they seem now to forget it, conservative Republicans were angry at him for becoming soft on communism — then perhaps Gorbachev would have failed and an actual war could have ensued.  Gorbachev and Reagan worked well together to prevent that.

But the failure was economic.  You can’t deny people their individual expression and initiative while running an economy through bureaucratic planning and have it keep up with dynamic market economies which use the market to gather diffuse information from every individual who participates.  But does that mean that market economics taken to an extreme are best?

No.  Communism emerged for a reason — a response to European sweat shops and exploitation that would appall anyone with a conscience.  And, while in the comfort of ones’ easy chair it’s easy to sniff, “well, they had to go through that to get to where they are today,” that’s an exceedingly arrogant and inhumane position to take.  Individual lives were involved, children killed in factories, people used simply to make money for those elites who thought nothing of abusing other humans for personal gain.  It was abstraction of humanity in the extreme, as evil as the abstraction used by dictators like Stalin to rationalize their horrors.

The most profound problems with markets are basic:  First, humans lack perfect information and in fact often deal with misconceptions and misleading information.  Those who can control or gain better information have a profound advantage.  Second, those who “win” in the market can use their advantage to structure future games to benefit them, usually through better access to information, as well as the capacity to do things others cannot.   The result is an inherently unjust system that gets manipulated by a few “winners” to create real class divisions and structural exploitation.   Socialists are right in how they diagnose many of the core problems of capitalism.  Capitalists are right in how they diagnose many of the core problems of socialism.

Modern market capitalism avoids most of the evils of pure market capitalism through regulation, whether prohibiting most forms of child labor, passing labor safety laws, protecting unions, limiting work weeks, and various other laws that try to create a more even playing field.  Nonetheless, the gap between the rich and poor has been increasing.  And while the poor may be doing better in absolute terms, politics operates through relative relations, not absolutes.

In Germany Christian Democrat Ludwig Erhardt pioneered the notion of a “social market economy,” as a compromise between capitalism and socialism.  Erhardt, archetect of the German post-war economic miracle and Chancellor of West Germany from 1963 to 1966, argued that market economies operate best, but must be steered to assure that the people are put first, not the profit or the bottom line.   People deserve fairness, they deserve health care, they deserve education, they deserve true opportunity.  This can be achieved without socialism.   Some call any government program socialism (e.g., the misnomer ‘socialized medicine’ for a health care system like those throughout Europe — that’s not socialism), but it’s really a mixed economy, with markets operating under loose regulation.  If the regulation gets too tight the economy veers towards the mistakes of bureaucratic socialism, if it is too light, the dangers of unrestrained market activity occur.

And to me that’s the key: put people first.  Ideologies are nice, but people get lost in the abstractions of arguments, concepts, claims to act on principle (for most people principle is the term they give to the ideas they are emotionally connected with — I ran into that in debates with an emotion driven anarchist way back in the 90s) so much that they forget that life is not just about justice, freedom, equality or material goods.  Life is about people.

By that I don’t mean life is about giving people material stuff, whether it’s health care, education, or jobs.  Life is also about allowing people freedom to create, work, express, and thrive.   Pure market capitalism can lead some to deny material needs to others through exploitation, rationalizing the inhumanity by market ideology.  Communism can lead leaders to strip people of that which makes life worth living — freedom and individuality — in order to service the “ism.”

So forget the ideology, forget trying to intellectualize and rationalize ones’ perceptions of reality in order to find out what the “right” system is.  The mind misleads, it rationalizes one’s emotional whims, and allows us to create logical edifices to protect whatever we want to believe in.  That is why ideologies consume people whole, causing them not to live as fully or appreciate their world.  In many cases they lead people to hurt, kill and abuse others.

Focus on people — practical ways in the every day to put people first.  No single policy path, no clear rational way to determine the role of government, markets or choice.   Erhardt’s social market economy was an effort to work on that principle.   But beyond economics it’s a good principle for life:  people first, then do the right thing.

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Predictions for 2009

Posted by Scott Erb in Uncategorized on January 1, 2009

As we head into 2009 there is a sense of uncertainty and unease about the end of this first decade of the 21st century.   The election of Barack Obama inspires hope as well, at least among his supporters.  So as we go into this year, here are my predictions for 2009:

1.  The Minnesota Vikings will win the superbowl.   (OK, that one is more wishful thinking, but…)

2.  The economy will not improve dramatically as it becomes clear that this is not a quick recession.   Unemployment may hit 10% late in the year, and GDP will drop by amounts not seen since WWII.

3.  Stagflation will return, thanks to the cheap credit and heavy borrowing being done to support a stimulus package.   Late in the year people will again be talking about the “misery index” (unemployment + inflation).

4.  Barack Obama’s approval rating will slip below 50% late in the year, as people will blame him for not taking the right actions to fix the economy.   In that Obama will join Presidents like Reagan and Clinton who had early problems, often being blamed for things beyond their control.

5.  The illusion to be shattered in 2009 is the idea that the government has the policy tools to fix this recession.   The stimulus will cause inflation, no stimulus will lead to a deeper recession or perhaps a depression.  Ultimately, people will understand that the key is to increase production.   The Obama Administration will target stimulus spending to that end, but  structural adjustments to the US economy will take years.

6.  Shi’ite Hezbollah, not really minding seeing its Sunni rival Hamas weakened by Israel, will choose a time to re-assert its position as the major anti-Israeli organization with actions from inside Lebanon.  Israel will signal to Iran that Hezbollah actions make an Israeli attack on Iranian facilities an almost certainty.  Iran will then reign Hezbollah in, leading to a public feud between Nasrallah and the Iranian Guardian Council.

7.  Oil prices will rise in the summer due to the tensions in the Mideast, but as the global recession hits Asian economies the price will drop back down.

8.  The EU Constitution will go into effect when Ireland approves it, choosing the constitution treaty over the option to leave the EU.

9.  The US will be removing troops all year from Iraq, even though it will become painfully obvious that the government really does not have much control over the country, which will be a defacto split between Sunni, Shi’ite and Kurd, with the Shi’ite sectors often under different kinds of leadership.   Although Iran will remain a dominant actor for the Shi’ite militias and parties, the departure of the US will also lead Shi’ite Iraqis to start breaking with control from Iran.

10.   Robert Mugabe will finally be removed from power (possibly by murder), and the international community will rush to bring food and security to the suffering Zimbabwean people.  By mid-2009 this will be the new “cause celebre” as concern for Darfur will fade, even though the problems there persist.

11.  The US will finally end its counter productive boycott of Cuba, and this will start a process whereby Cuba will liberalize and re-develop relations with the US.

12.  President Obama will conclude a surprising economic agreement with China designed to allow China to shift towards consumption and the US towards production.   Both sides will decide that it’s more important to steer the process than to just leave it to the market.

13.  The Christmas season of 2009 will be noted for a return to old fashioned values, away from the hyperconsumerism of recent years, and a trend will start towards “simplifying Christmas” and “the meaning of the season.”  Retailers will have a very poor year, and many stores and chains will go out of business.

14.  Al qaeda will attempt a terror attack designed to harm the western economic system, focused on trying to drive up the price of oil or limiting access to oil.

15.  A major global economic summit will lay the ground work for a new international economic order, with regulation of world credit markets, transnational corporations, and trade practices.  The resulting treaty will also exercise controls over private actors who have been able to evade the law due to weak international regulation.  Extremely controversial, only the large Democratic majority in the Senate will assure its passage.  Although coming in some of the darkest days of this recession, it will set the framework for a major recovery down the line.

16.  In the wake of the (above predicted) Zimbabwean revival, a new movement designed to bring real change and competent government to African countries will grow.   The push for transparency will have a real impact, and 2009 will be remembered as the start of the African revival.

17.  Despite the economic turmoil, the health care crisis in the US will need to be addressed.  Obama will early on help states who are way behind on Medicare payments, a situation which threatens the financial stability of hospitals across the country.   Pharmaceuticals will emerge as a villain this year, as their practice of trying to simply make new “super” drugs for profit are shown not to benefit patients, even as it contributes to massive health cost increases.  A major plan to reform and alter the health care system will be passed by the end of the year.  It will be extremely controversial, and represent a blend of federal mandates and choices for state implementation, and will alter the nature of health care in America perhaps forever.

In a year I’ll look back and see how my crystal ball fared.

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