Stop SOPA

In a matter of days, it looks likely that congress will pass SOPA (the Stop Online Piracy Act), another gift to special interest groups from motion picture and recording industry.

The bill targets sites like Sweden's The Pirate Bay, Hong Kong based MegaUpload or the Dutch site TorrentFreak requiring search engines, discussion forums, blogs and DNS providers to censor access to these types of sites prompting comparisons to China's great firewall.

The technical cluelessness on display in the congressional hearings is embarrassing, but, really, who expects anything different? Leading engineers have petitioned in opposition on the grounds that this legislation imposes serious burdens on infrastructure providers and probably won't even work.

How big a problem is this?

Technical issues aside, we should recognize that bootlegging movies or music is a fairly low-cost crime as far as society is concerned. Comparing it with illegal drugs, as The Economist does, is a joke when you think about lives wrecked by meth or crack or the ongoing drug war in Mexico. Piracy seems pretty benign next to the consequences of financial malfeasance in recent years, but now we're talking radical crazy talk.

The biggest consequence of piracy is that an artificial monopoly is less lucrative than it would otherwise be. Legal monopolies have a long history of abuse. They're a great way for politicians to give out favors and ask favors in return. In a textbook specimen of double-speak, any recognition of this economic and political reality is called sympathetic to piracy, something like being called a pinko in the McCarthy era.

A couple definitions

Rivalry is an economic concept describing whether the use of a good by one party precludes its use by another. The distinction being made here means that a million people could listen to Lady Gaga's latest tune at the same time. A million people could not ride in my car or live in my house. My house and car are rival goods. Songs are non-rival.

For every copyrighted work not pirated, how many would be purchased? My guess is that this ratio is low. I'm pretty sure nobody has convincingly shown otherwise. For the items not purchased, the utility of consuming them is lost, with no corresponding gain to the monopolist. This is called a dead weight loss, meaning some people could be made better off without making anyone else worse off, but we fail to do it. This loss is the music/movies/etc that wouldn't be enjoyed if they weren't pirated.

Willful ignorance of these simple but important ideas bugs me a lot more than bozo-grade technical knowledge.

Which is worse, the problem or the solution?

Now, it's important that creators of valuable intellectual property make a decent living. Few question that. What we're talking about is whether publishers should put up toll booths on the road between the consumer and the producer, and whether the government should enforce the use of these toll roads, when technology has made such choke points obsolete. Since distribution is now practically free, is it a good idea to create costly and ultimately ineffective legal barriers to replace the physical barrier that no longer exists?

Let's total up the costs. There's dead weight loss. There's a loss to innovation and culture which suffer when the interchange of ideas is impeded. There's the technical costs of implementing measures like SOPA, (and DRM and copy-protection before it), which tend to fall on paying customers.

To be fair, a partially market based means of valuing intellectual property and rewarding its creation is not to be dismissed lightly. Blocking access to download sites will result in some revenue trickling down to deserving artists. Too bad, no one speaks about the issue in terms of balancing benefits against costs.

The real problem

[The nightmarish SOPA hearings By Alexandra Petri, Washington Post]

It's shameful that congress is so eager to shill for corporations and their lobbyists rather than protect the interests of the people they are elected to serve.

Update:SOPA and it's sister PIPA (the PROTECT IP Act) have been temporarily shelved, thanks to an enormous public outcry and the opposition of Oregon Senator Ron Wyden. Clay Shirky sums it up, like so:

We should delight in the stand we’ve taken in favor of things like, say, notifications, and trials, and proof before censoring someone, but we should get ready to do it again next year, and the year after that. The risk now is not that SOPA will pass. The risk is that we’ll think we’ve won. We haven’t; they’ll be back. Get ready to have this fight again.

More on The Origins of Polical Order

Mark Kingwell, a University of Toronto political theorist, reviewed in Francis Fukuyam's The Origins of Political Order in the August 2011 edition of Harper's. I went to this review specifically looking for a left-leaning rebuttal, and I found one, but it wasn't exactly what I expected. The Tomist: Francis Fukuyama's infinite regression says plenty with which I can't agree, but also has some interesting insights.

Kingwell pulls a quote out of Origins that's underlined in my copy:

"Entrenched interest groups tend to accumulate in any society over time, which aggregate into rent-seeking coalitions in order to defend their narrow privileges."

The book gives the reader an appreciation for the constant erosion of political institutions by forces of narrow self-interest and short-term expedience, illuminating not just the origins of political order but its decay and decline as well.

Kingwell hits on a favorite theme of mine, the inseparability of politics and economics, calling it a "strange blind spot" in Fukuyama's thinking. In Kingwell's well-placed words:

"The central occlusion concerns the relation of politics and economics. [...] One reason political commentators consistently fail to understand the social order is that they enjoy the habitual exercise of concept-separation: driving a conceptual wedge between politics and markets, between democracy and capitalism."

Kingwell wonders, as many readers will, about the transformation of the author of The End of History and former neocon into the Fukuyama who wrote The Origins of Political Order. It seems to me, without having read the earlier work, that we get a more cautious and nuanced take on the subject from the newer book. I remember rolling my eyes at the title of Fukuyama's earlier work and the soon-to-be-short-lived triumphalism of the Washington consensus back in the 90's, even while supporting principles like free markets and free trade.

Remind me never to argue with Kingwell, lest I be pummeled with rhetorical zingers like this one: "Fukuyama's conclusion only gradually seeps through the masonry of his prose." Ouch. But, I found Fukuyama quite clear and readable, if not particularly florid.

Fukuyama, avoiding polemics, sets out to abstract factors of development away from specific political agendas. Ideology is shown as a tool for legitimating or delegitimating rulers and institutions, but no particular doctrine is espoused over another. Rather, the keys to a functional society and good governance are defined in technocratic terms of a strong state, rule of law and accountability.

Kingwell seems to resent this analytical detachment, calling Fukuyama's neutrality a "wearying evenness", as if inflammatory partisan ranting was in short supply. This is a baffling criticism. A muscular clash of "big ideas" might be more satisfying on some level but, that ignores the question of why the world is full of people quite enamored of big ideas about freedom, justice and equality whose governments conspicuously fail to practice anything of the sort.

The "turtles all the way down" story is a sticking point for Kingwell, who sites "unjustified force", "the violent structure of the founding act" as the ugly first cause down at the bottom of the chain of causation. That it may be, but the turtles story illustrates a completely different and equally interesting point. Like evolution, political development is not a deterministic process but a contingent one. If you could "rewind the tape" and run the experiment again, the results would likely be different. That this property is shared by complex systems as diverse as evolving organisms and systems of political economy is worth pondering. Perhaps, other emergent properties common to complex systems manifest themselves in political economy.

Whether it's mistrust in a reformed neocon or just academic cat-fighting, Kingwell doesn't like Fukuyama's book. As funny as they sometimes are, Kingwell's objections miss the central point that Fukuyama offers a framework for thinking systematically about politics and development, laying out several case studies for the reader to practice on and generalize from. The fact that he does this even handedly is to be commended.

The Origins of Political Order

I'm reading Francis Fukuyama's latest book, The Origins of Political Order, an ambitious survey of the development of political institutions and centers of power across civilizations. Sitting as we are, at a juncture between ascendent East and declining West, it's a good time to look back and extract some basic principles governing the rise and fall of civilizations.

Fukuyama starts off with instinctive human nature, the social and political baggage our species carries from our not-too-distant primate past. Primitive humans and other apes live in communities with definite social structure. But, up until recently, it was thought that primitive man was solitary. This view was held by enlightenment philosophers Thomas Hobbes and John Locke, originators of the theory of the social contract, and the idea of natural human rights, respectively. It's a bit discomfiting to consider that inaccurate ideas about the isolation of man in a state of nature strongly influence the American founding father's views on individualism.

In the time period covered by the book, up to the French Revolution, societies are mainly agrarian and structured into classes - a ruling nobility, land owning aristocracy, and peasantry. From this largely hereditary state, the middle class begins to emerge and modern states coalesce.

Fukuyama's three crucial characteristics of the modern state are a strong state, rule of law, and accountability. States successfully implementing all three of these institutions are generally free, prosperous, and stable. Fukuyama calls the process of reaching this happy balance getting to denmark.

Given these institutions and social classes, Fukuyama seeks to derive a theory of political development and decay - not a fully predictive theory, but a contingent theory, like evolution, dependent on historical accidents and circumstances.

Capable, accountable, rule-bound governments emerge when a delicate balance is struck between the classes / power centers. Absent this balance, various pathologies result in the form of dominance of one class or a coalition of classes against the others. Political systems rise, but they also decay. The rats always find a way in. "Over time, elites are able to protect their positions by gaming the political system [...] transmitting these advantages to their children through favored access to elite institutions"

The book builds its argument by surveying the history of political development in several countries. As a conscious effort to avoid Eurocentrism, China's early development of meritocratic bureaucracy is examined first. India, the Middle East, Europe and Russia follow. In each region, driven by agriculture, religion and warfare, political systems rise and fall striking different balances of power, always attended by the persistent reassertion of rent-seeking elites.

The Chinese state, which achieved a powerful state and meritocratic bureaucracy in Qin and Han dynasties around 200 BC, never succeeds in subordinating the state to rule of law. India develops rule of law and accountability, but with a weak central state. The Middle East gains and looses rule of law and accountability. In Russia, the rulers dominate unchecked by either law or any notion of accountability. The French monarchy was beholden to its aristocracy by debt, resulting in a weak central state and widespread corruption.

England is first to achieve all three ingredients. With the Magna Carta in 1215, the aristocracy obligated the monarchy to recognize their rights. Over time these rights came to apply increasingly widely across society, particularly to the rising middle class.

NO Freeman shall be taken or imprisoned, or be disseised of his Freehold, or Liberties, or free Customs, or be outlawed, or exiled, or any other wise destroyed; nor will We not pass upon him, nor condemn him, but by lawful judgment of his Peers, or by the Law of the land.

I might have been put off if I had known that the author was, at one time, associated with the neoconservative movement and had previously declared the "end of history". That would have been a shame. The Origins of Political Order is a fascinating read. The book is carefully constructed to avoid pushing ideological buttons, and makes its case largely independent of partisan politics. England and Denmark are held up as successful examples. The historical development proceeds from Chinese history first. I don't know my history well enough to evaluate the individual examples, but the framework for thinking about political development and centers of power seems to have a lot of value.

The planned second volume picks the story up in the modern age after the industrial revolution. Applying the same framework to the modern world is complicated by the post-colonial legacy, greatly increased communication, and globalization, along with entirely new actors such as corporations. It should be even more interesting than the first volume.

Reviews and commentary

On it's release, in April of 2011, the book generated lot of commentary, including write-ups in a slew of major newspapers, plus a bunch of blogs linked below. The author appears on several interview shows and podcasts. I'm going to hold off on all of this until after I finish the book, to give myself time to think about it.

• NY Times Francis Fukuyama’s Theory of the State
• Also from the NY Times: From ‘End of History’ Author, a Look at the Beginning and Middle
• Washington Post
• The Economist Theories of history: The good, the great and the gelded
• the Guardian
• Financial Times
• WSJ From Dynasty to Democracy Nations did not find stability, or sustained prosperity, until they became accountable to their citizens
• Slate

Interviews, audio and video

• Carnegie Council
• BookTV: Francis Fukuyama, The Origins of Political Order
• The Free Library Podcast
• New Books in History
• KQED forum
• NPR
• Francis Fukuyama & Jared Diamond

Other links

• Daniel Lende in PLOS Neuroanthropology Blog
• Fukuyama and Kuran
• Three Visions Of How The World Works
• China v America: The end of the end of history
• The Tomist: Francis Fukuyama's infinite regression in Harper's

The Slacker Economy

Recently, there's been a spate of articles about the virtues of slack, in this time of unemployment. CNN asks Are jobs obsolete? Thanks to automation and technology, the basic needs of society can be met using the productivity of a fraction of the population. So, the question becomes, what do the rest of us do?

So far, the answer seems to be the service economy, along with increasingly esoteric definitions of work and more frivolous things to spend money on. But, that runs out of steam, eventually. Most of us have too much to eat and all our time is spent working or consuming distracting amusements.

But, what if we're not driven to accumulate ever more marginally useful stuff, but rather reach a point where enough is enough. What, then, is the source of growth? In Work for post-materialists, the author confesses to being a “threshold earner”, as described by Tyler Cowen in The Inequality That Matters.

A threshold earner is someone who seeks to earn a certain amount of money and no more. [...] That person simply wants to “get by” in terms of absolute earning power in order to experience other gains in the form of leisure—whether spending time with friends and family, walking in the woods and so on.

In the old days, before I was a respectable family man, I used to work consulting gigs. That business attracts some sleazy characters, but that's another rant for another time. Anyway, for a stretch of a few years, I managed to get summers off. I prefer to think of myself as a gentleman hacker, but I guess that's another word for threshold earner.

[New York Times]

This phenomenon has a generational aspect to it. In The Experience Economy, David Brooks tells the tale of Sam, a hardworking American, born in 1900, who ran a business making brakes and his post-materialist grandson, Jared.

Sam’s grandson, Jared, was born in 1978. Jared wasn’t really drawn to the brake-systems business, which was withering in America. He works at a company that organizes conferences. He brings together fascinating speakers for lifelong learning. He writes a blog on modern art and takes his family on vacations that are more daring and exciting than any Sam experienced. Jared lives a much more intellectually diverse life than Sam. He loves Facebook, YouTube, Wikipedia and his iPhone apps. But many of these things are produced outside the conventional monetized economy. Most of the products are produced by people working for free. They cost nothing to consume.

But, while Jared is traipsing around the Burning Man festival in nothing but lime green body paint, someone has to do the dirty work. Soldiering, mining, cleaning hotel rooms, making car parts. Thinking about how we get some unfortunate people to do those unpleasant things in a world of overflowing plenty might not make you feel too good.

[Burning Man, Jim Urquhart/Reuters, Boston Globe]

Technology plays a role in generating high productivity in the first place, not to mention exaggerating inequality in the process, but also in providing cheap mostly-harmless virtual goods for us to consume. In 1996, William Gibson wrote The Net Is a Waste of Time. But, I've often had a different thought. The purpose of the internet is to absorb the excess productivity of mankind.

There's a lot to be said about the nature of work in the networked age: globalized, distributed, bursty. And thinking to be done about worthy purposes for all those liberated brain cycles, Clay Shirky's Cognitive Surplus. But, we'll leave those for later. In the meantime, I hope you're enjoying my non-remunerative contribution to the post-materialist slacker geek-fest gift economy that is the internet.

Who rules America?

An Investment Manager's View on the Top 1% contains a bunch of interesting factoids, mostly on what separates the working rich, the bottom half of the top 1% from the more elite fractions of the wealth distribution.

Since the majority of those in this group actually earned their money from professions and smaller businesses, they generally don't participate in the benefits big money enjoys. Those in the 99th to 99.5th percentile lack access to power.

...the American dream of striking it rich is merely a well-marketed fantasy that keeps the bottom 99.5% hoping for better and prevents social and political instability. The odds of getting into that top 0.5% are very slim and the door is kept firmly shut by those within it.

The picture is clear; entry into the top 0.5% and, particularly, the top 0.1% is usually the result of some association with the financial industry and its creations. I find it questionable as to whether the majority in this group actually adds value or simply diverts value from the US economy and business into its pockets and the pockets of the uber-wealthy who hire them. They are, of course, doing nothing illegal.

Wall Street created the investment products that produced gross economic imbalances and the 2008 credit crisis. It wasn't the hard-working 99.5%. Average people could only destroy themselves financially, not the economic system. There's plenty of blame to go around, but the collapse was primarily due to the failure of complex mortgage derivatives, CDS credit swaps, cheap Fed money, lax regulation, compromised ratings agencies, government involvement in the mortgage market, the end of the Glass-Steagall Act in 1999, and insufficient bank capital. Only Wall Street could put the economy at risk and it had an excellent reason to do so: profit. It made huge profits in the build-up to the credit crisis and huge profits when it sold itself as "too big to fail" and received massive government and Federal Reserve bailouts. Most of the serious economic damage the U.S. is struggling with today was done by the top 0.1% and they benefited greatly from it.

This comes from a blog called Who rules America? in support of a book of same name, by G. William Domhoff, a sociologist at UC Santa Cruz. Interestingly, the link was posted on Hacker News. A comment referenced the theory of control-fraud, developed by William K. Black, author of The Best Way to Rob a Bank is to Own One.

White-collar criminology findings falsify several neo-classical economic theories. This paper discusses the predictive failures of the efficient markets hypothesis, the efficient contracts hypothesis and the law & economics theory of corporate law. The paper argues that neo-classical economists' reliance on these flawed models leads them to recommend policies that optimize a criminogenic environment for control fraud.

...which just goes to prove the point that you can't separate economics from politics. Susceptibility to corruption is a huge factor in the success or failure of economic systems, or more accurately systems of political economy.

Making the patent system even worse

The economist explains the state of the US patent system like this:

At a time when our future affluence depends so heavily on innovation, we have drifted toward a patent regime that not only fails to fulfill its justifying function, to incentivise innovation, but actively impedes innovation. We rarely directly confront the effects of this immense waste of resources and brainpower and the attendant retardation of the pace of discovery, but it affect us all the same. It makes us all poorer and helps keep us stuck in the great stagnation.

Congress is in the process of passing a "first-to-file system". It's hard to see this as anything but a gift to big corporations. Writing in Foreign Policy, Clyde Prestowitz calls the Americans Invent act, "...a bill likely to cut the heart out of our innovative, entrepreneurial culture...". Even the pro-patent group American Innovators for patent reform says,

American Innovators for Patent Reform is opposed to the America Invents Act and we urge the House of Representatives to draft an entirely new law that truly addresses what needs to be reformed. The America Invents Act was crafted by lobbyists for the large corporations that are notorious infringers of patents!

...and...

Canada made the switch to first-to-file in 1989, and a 2009 study from researchers at Canada’s McGill University’s Department of Economics found that the change “failed to stimulate Canadian R&D efforts” and “skewed the ownership structure of patented inventions towards large corporations, away from independent inventors and small businesses.

It looks like the US patent system is about to become even more screwed up.

Nice work as usual, congress.

BTW, Mimi & Eunice is a work of genius

More links

• The America Invents Act: First to File versus First to Invent? - Podcast

The Deficit Is Worse Than We Think

In a WSJ op-ed, Lawrence Lindsey, a former Federal Reserve governor and assistant to President George W. Bush for economic policy, gives three reasons why The Deficit Is Worse Than We Think

• Interest expense
• Anemic growth
• Health care costs

At present, the average cost of Treasury borrowing is 2.5%. The average over the last two decades was 5.7%. Should we ramp up to the higher number, annual interest expenses would be roughly $420 billion higher in 2014 and $700 billion higher in 2020. Normal interest rates would raise debt-service costs by $4.9 trillion over 10 years, dwarfing the savings from any currently contemplated budget deal. [...] The Fed will increasingly have to factor in the effects of any rate hike on the fiscal position of the Treasury.

The PROTECT IP Act

The Protect IP Act (full text) enables the government and copyright holders to compel DNS providers, ISPs, search engines and advertisers to censor sites hosting copyright or trademark infringements. They're going to make linking to pirated material a crime.

Media companies want this because it's easier to go after the intermediaries, rather than the infringers, especially those outside the US. It's not that different from the Great Firewall of China.

This is the second attempt, the previous incarnation COICA having been introduced in September of last year. Senator Ron Wyden (D-Oregon), held up that legislation and is trying to do the same again. Cheers to Ron Wyden.

Larry Downes provides an excellent summary of the "full-scale war between content distributors and everyone else" in his Law of Disruption blog, including the property seizure tactics of the Department of Homeland Security's Immigration and Customers Enforcement division, a name straight out of Orwell.

The media industries, everyone agrees, are in the fight of their lives. These businesses rely for profitability on the controlled distribution of information goods whose individual copies have a marginal cost that keeps getting closer to zero.

The EFF has a couple articles on the PROTECT IP act and a petition.

One commenter asked, "Why is the attorney general wasting precious tax dollars enforcing corporate plutocracy?"

The real question

A lot changes when the costs of production and distribution are approaching zero. The question we should be asking is this: What still has value?

• The creation itself - the skill, insight and artistic judgement necessary to make movies, music, or writing that doesn't suck.
• The ability to sift through mountains of dreck to find the good stuff. The value of the filter goes way up in the new environment.
• The community? A viable place to discuss. I'm pretty sure that the difference between Quora and You-Tube comments has value.

Legislating without a clear idea of what's valuable in the new environment will lead to useless and harmful laws that burden legitimate service providers while only slightly inconveniencing pirates - something like requiring every new car to come with a trunk full of horseshoes to protect the blacksmiths.

Humans are a tribal animal

It's amazing how much of human nature can be explained by the fact that we're a tribal animal. I'm not sure if we're more like a herd or a pack, or exactly what's the difference anyway. Street gangs, nationalism, sports fan mania, racism, cults, even religion to some extent can be all be explained by a group membership instinct. How supportive people are towards the welfare state is proportional to racial homogeneity. Tribal identity shows up everywhere from music and fashion to the followers of certain programming languages. The structure of governments and corporations mimic the alpha male social dynamic of the apes.

The countervailing force is individualism. And, somehow, technology plays a role in freeing us from our local community, separating us from those directly around us, even while connecting us to those farther away.

The bubbles of the elite

In Fighting to Shut Out the Real India, Manu Joseph writes:

The pursuit of India’s elite is to protect themselves from India — from its crowds, dust, heat, poverty, politics, governance and everything else that is in plain sight. To achieve this, they embed themselves in their private islands that the forces and the odors of the republic cannot easily penetrate.

...

The bubbles of the elite have strong walls, but the realities of India are so potent that they very often break in. There is a limit to the isolation that the back seat of a Mercedes can provide. The odors of the driver; the crippled urchins knocking at the windows; the million honking horns; the smog of unmoving traffic, these are the relentless forces of the nation seeking to breach the walls of the elite.

Why the West Rules--for Now

Ian Morris draws on 50,000 years of history, archeology, and the methods of social science, to make sense of when, how, and why the paths of development differed in the East and West—and what this portends for the 21st century.

Stanford history professor Ian Morris put out a book this past October called Why the West Rules--for Now: The Patterns of History, and What They Reveal About the Future.

His answer to that question is not unlike Jared Diamond's excellent Guns Germs and Steel. The general trajectory of human societies is dictated by biology and sociology. The differences in their success is a matter of geography. But, the development of societies and technology periodically changes our relationship with geography.

Agriculture started in about 6 places around the world with favorable geography and climate. The invention of irrigation suddenly meant that you could grow crops in places where they formerly wouldn't grow. This theme repeats itself through the growth and decline of empires up to the invention of oceangoing ships and guns. Geography drives the development of societies and the development of societies then changes the meaning of geography.

Put together oceangoing ships and working guns and this is a very powerful package. The ships allow you to cross the oceans. The guns allow you to shoot the people you meet on the other side. This is great for everybody who's got them. ...it changes the meaning of geography once again.

The same process is still at work bringing about a shift of wealth and power from west to east. Whether that happens smoothly or not or whether it even matters by the time it's complete... those are open questions.

Morris sees the near future as "a giant race between, on the one hand, something like the singularity that Ray Kurzweil talks about, and on the other hand, some kind of nightfall scenario, where we trigger a set of changes that we simply can't control, and we are looking at a collapse of civilization on a scale that has never been seen before in history."

His factors of collapse are all too familiar:

• migration
• state failure
• famine
• epidemic
• climate change

Bruce Sterling: Network Society Isn’t Compatible With Democracy

The darkly euphoric Bruce Sterling at SXSW talking about his new book Gothic High Tech and Favella Chic, on why “hactivism” isn’t democracy and why he finds Sarah Palin “super interesting.”

Why the Dollar's Reign Is Near an End

For decades the dollar has served as the world's main reserve currency, but, argues Barry Eichengreen, it will soon have to share that role. Here's why—and what it will mean for international markets and companies.

"The greenback [...] is not just America's currency. It's the world's." The dollar's three pillars are:

1. depth of markets
2. safety, stability, liquidity
3. lack of alternatives

Three things that are changing are:

1. technology eases the problems of multiple currencies
2. rivals: the Euro and the Chinese Yuan
3. loss of confidence

The U.S. government has a history of honoring its obligations, and it has always had the fiscal capacity to do so. But now, mainly as a result of the financial crisis, [...] questions will be asked about whether the U.S. intends to maintain the value of its debts or might resort to inflating them away.

Shaping the cognitive map of the political-economy

Princeton's guest lecture archives are chock full of great stuff. One example is The Current State of the Economy (video and audio) a discussion between Matthew Taibbi and Gillian Tett moderated by Harrison Hong held in April 2010.

In case you listen, the audio for Gillian Tett is a little screwed up.

Taibbi is the guy who called Goldman Sachs a a great vampire squid wrapped around the face of humanity. Tett is the author of Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe. Both experts in central asian politics and corruption.

Taibbi got started as a journalist covering privatization in post-Soviet Russia. He describes the western media's story line as,"Communist gorilla gets first bananas". He covered the loans for shares program, which set up the well-connected entrepreneurs know as oligarchs during Yeltsin's time.

Nobody does corruption like the Russians ...until now.

The most interesting bit was an exchange about shaping the cognitive map. How did the public and the media fail to note the always cozy relations between Wall Street and Washington that were spiraling into an ever tighter nexus of finance and power?

[Tett believes that] a social silence (a concept outlined by French anthropologist/sociologist Pierre Bourdieu in his work Outline of a Theory in Practice) was a factor in facilitating and perpetuating the global credit boom that [collapsed in 2008]. Bourdieu’s social silence, as Tett explains, allows an elite group to control society not just by controlling the physical means of production but also by influencing the cultural discourse. Crucially, influencing the way society talks about itself also influences what is left unsaid – i.e. that which is regarded as impolite, taboo, boring, or taken for granted. Such silences can arise through overt strategies, but often come about less deliberately through social conformity or shared ideology and assumptions. According to Bourdieu, all that is required for the ideology to establish itself in this way is a complicit silence. Tett speculates that such a social silence may have been pivotal in the general acceptance of the idea that financial markets could regulate themselves.

Taibbi points that the news covers finance and the economy separately from politics. The fact that a newspaper has a separate section for business news and politics means that it's hard to tell economics as a political story or politics as an economic story. This reaffirms something I've thought for a long time. Politics and the economy are so entangled that studying one in isolation from the other is an express route to wrong answers.

During the Q&A, a fascinating side story comes up about Phil and Wendy Gramm and their involvement in Enron.

Phil Gramm, as Senate Finance Chairman, sponsored two key bills that deregulated finance. Gramm–Leach–Bliley Act of 1999, which repealed the Glass–Steagall Act of 1933, and Commodity Futures Modernization Act of 2000 which passed just before Christmas with little debate. This legislation specifically denied either the SEC or the CFTC the authority to regulate financial derivatives and swaps and contained the Enron loophole.

Phil Gramm's wife Wendy Lee Gramm headed the Commodity Futures Trading Commission (CFTC) from 1988 to 1993, during the presidency of Bush the first. In 1993, after a lobbying campaign from Enron, the CFTC exempted it from regulation in trading of energy derivatives. Weeks after resigning from the CFTC, Wendy Gramm took a seat on Enron's board of directors. Enron collapsed in fall 2001.

While this conversation is nearly a year old now, it is a reminder of a huge and tragic missed opportunity. The conditions existed during the financial meltdown that could have made it possible to fix the financial system, to truly modernize the legislation that emerged from the Great Depression, to break the hold of Wall Street on the political system. Was that opportunity used wisely?.

Current intellectual property laws are blocking innovation

Groklaw has a good summary of the state of intellectual property law, The White House Asks: What's Blocking Innovation in America? - My Answer: IP Laws. It's best feature is a link to video of James Boyle's brilliant talk, Four Ways to Ruin a Technological Revolution. Boyle references Thomas Jefferson's writing on the topic: a letter to Isaac McPherson (here, here and here).

The invalidation of Myriad Genetics' BRCA gene patents last year gives some cause for hope. That decision is in appeal now. I hope the powers that be don't fail to appreciate the power of collaborative innovation.

I still mean to get around to reading Lawrence Lessig's The Future of Ideas, the fate of the commons in a connected world.

Playbook for a Revolution

Congratulations and good luck to Tunisia and Egypt.

• Playbook Used in a Revolution, The Albert Einstein Institution is a nonprofit organization advancing the study and use of strategic nonviolent action in conflicts throughout the world.
• A Force More Powerful: A Century of Non-Violent Conflict

An Assassination’s Long Shadow

Patrice Lumumba, independence leader of the Congo was assassinated 50 years ago. Adam Hochschild writes in the New York Times of the profound, long-term consequences of the western-backed assassination and the subsequent dictatorship and civil war.

Lumumba’s violent end foreshadowed today’s American practice of “extraordinary rendition.”

The Rise of the New Global Elite

Chrystia Freeland writes in January's Atlantic that The Rise of the New Global Elite [print] is a consequence of technology and globalization and is resulting in growing income inequality in developing and established economies.

The new elites are different in some ways from the aristocrats of the last gilded age. They are more global and more likely to be hard working careerists than inheritors of great wealth.

...a defining quality of the current crop of plutocrats is that they are the “working rich.” ... They are not aristocrats, by and large, but rather economic meritocrats, preoccupied not merely with consuming wealth but with creating it. ... another defining characteristic of today’s plutocrats: they are forming a global community, and their ties to one another are increasingly closer than their ties to hoi polloi back home.

In America, many in the elite hold the opinion that the hollowing-out of the American middle class doesn't really matter. “...if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade,”

America’s business elites appear so removed from the continuing travails of the U.S. workforce and economy because the global “nation” in which they increasingly live and work is doing fine.

This isolation may end up their undoing. Instead of being grateful for the hundreds of billions in bailouts and hundreds of billions more in hidden subsidies by the Fed, the elites fret about the expiration of the Bush tax cuts and complain of Obama's anti-business attitude.

In America, the traditional remedy to class warfare has been social mobility. But, as mobility breaks down, the safety valve no longer works.

The real threat facing the super-elite [is] the possibility that inchoate public rage could cohere into a more concrete populist agenda.

...which pretty much describes what happened in Venezuela in the 90's.

The lesson of history is that, in the long run, super-elites have two ways to survive: by suppressing dissent or by sharing their wealth. It is obvious which of these would be the better outcome for America, and the world. Let us hope the plutocrats aren’t already too isolated to recognize this.

On the other hand, Felix Salmon responds...

The inchoate anger of the masses shows no sign of cohering into anything at all... The Tea Party, which is the closest thing we have to a populist revolt, is bought and paid for by plutocrats.

More...

• In Bubble Bath, Freeland proposes that people didn't cause the financial crisis; a bad system did
• Brief discussion on Morning Joe
• Who Will Stand Up to the Superrich?
• Still the Best Congress Money Can Buy
• rise and fall of the creative class
• Peak Globalization
• Welcome to the New Middle Ages
• Ralph Nader thinks only the super-rich can save us.
• The WSJ asks Do the Rich Need the Rest of America?
• Are the American people obsolete? The richest few don't need the rest of us as markets, soldiers or police anymore.