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.

WikiLeaks is free speech

It's little surprise that WikiLeaks founder Julian Assange has found himself in trouble. People in high places like to keep their secrets. But secrecy is incompatible with democracy and an open society. Maybe that doesn't mean there should be no secrecy. But it does mean there should be people fighting relentlessly to bring the truth out into the open.

It's revealing that the same people that promoted corporate funding of independent political broadcasts as free speech deny the same label to WikiLeaks.

I'm reminded of what happened to Eliot Spitzer when he pissed off the wrong people. He was taken down by a hooker scandal after a bank reported a suspicious wire transfer.

• WikiLeaks at the Guardian
• The Beginner's Guide to WikiLeaks
• How to Think About WikiLeaks
• Julian Assange and the Computer Conspiracy; “To destroy this invisible government”
• A defense of WikiLeaks: Some inconvenient facts

Will India's growth outpace China's?

The Economist's cover this week makes the claim that India's growth will outpace China's. India will be experiencing the demographic wave that other asian countries have ridden to prosperity in which a high percentage of the population falls within working age. Prevalence of English is an extra bonus. Further, India's democracy and entrepreneurial culture give it a flexibility unmatched by China's state dominated economy.

The conventional wisdom is that India's boom in the service sector is leaving a big chunk of the population stranded in poverty. This is because high skilled jobs like engineering or medicine -- even moderately skilled jobs in call centers -- require education and therefore are available largely to the children of the established middle class. In many countries, manufacturing has been the traditional stepping-stone out of subsistence agriculture. For example, a chinese factory girl might be the daughter of farming peasants from the countryside. These missing bottom rungs of the ladder have resulted in rising inequality. Amartya Sen warned that India risks becoming "half California and half sub-Saharan Africa".

Also working against India is it's crappy infrastructure and low literacy rates, 66% vs China's 93%. India's primary schools perform poorly and, the world-class IIT schools notwithstanding, its university system is undersized. The result is a chronic shortage of skilled workers. And business dealings involving land, natural resources and government contracts are riddled with corruption.

On India's cacophonous democracy, they quote a western banker as waying, "It's much easier to deal with the well-understood 'org chart' of China Inc than the freewheeling chaos of India.", which probably says a lot about western bankers.

I'd love to see India, with all it's contradictions, bust out and rival China. Based on Indian multinationals like Tata or Infosys, or the "frugal innovations" like $2000 cars, you might believe it possible. Whether the "freewheeling chaos" of democracy can function in a country of 1 billion; whether democracy is compatible with productivity; whether India can get its act together; those are some serious open questions. I hope the answer is yes.

• India's surprising economic miracle
• A bumpier but freer road
• relationship between China and India
• Economist country profile on India
• Amartya Sen on Radio Open Source
• Amartya Sen's Nobel prize autobiography
• Lakshmi Mittal