"The only things certain in life are death and taxes" Said Benjamin Franklin some 200 years ago. Surprisingly, Franklin´s “certainties“correspond to the quintessence of sovereignty and statehood: “Death“? Well, there is no sovereignty without the monopoly over violence (including the right to make use of force, inflict pain, retain freedoms, and even kill ).”Taxes” ? Since the State is a monopoly it finances its apparatus by raising taxes. Thus according to that line of reasoning the “State” institution is among the most certain things in life. Or at least should be.
However, Capital Markets have a different opinion about that matter, at least according to the information revealed in the prevailing prices of a rather obscure but common financial obligation, the denominated CDS (Credit Default Swaps) . (For those not familiar with financial markets : CDS is financial arrangement that resembles the mechanism of an insurance policy, though instead of securing a real asset (for example, a car), the CDS covers the risk that a specific financial obligation (Bonds , for example) could become useless in case the organization ( Governments, Corporations ) that emitted the obligation cannot meet its obligations. ).
First of all lets have a look on the prices (Price : Cost of securing an amount of debt for 5 years in percentage points)
Country Price
Spain 226.84
Germany 46.62
France 78.35
Italy 158.51
Greece 988.88
UK 57.64
China 74.39
Brazil 114.10
Russia 128.55
USA 42.04
What sort of information is revealed from the above prices ? That requires a brief explanation: Since these CDs are traded in financial markets, their price reflects the markets´ perception about the odds that a country would default: The higher the risk, the higher the demand and the higher the price the buyers are willing to pay to get the insurance. So we can see , for example, that the market puts a higher price for an insurance policy against a Greek default than to the German.
Now, CDS are traded not only to cover sovereign debts but for corporation and sectors. Let’s have a look on the CDS prices for defaults of some key sectors in Europe.
Automotive 24.83
Industrial 19.19
Consumption 23.73
Energy 24.82
Finance 146.86
If we compare the first Table of sovereign States to different economic sectors, the market is pricing the risk of default of most of the states is higher than private corporations. That is a weird result ! Countries, in theory, can always print money or rise taxes in order to meet their obligations, two advantages if compared to corporation’s risks of their own country. And can we imagine that a country defaults but its business sector keeps ongoing “business as usual”? Have the Markets go mad?
The answer is NO, markets understand that under the prevailing political and social system, States are there to serve the corporations interests, and the preference will always be to protect their interests, even if that requires the State´s default. THESE ARE THE REAL SOVEREIGNS; AND THE "MARKET" IS THE EXPRESSION OF THEIR WILL . Take for example Ireland, a model country for the last 20 years: The financial bubble created by a generous financing from foreign banks became at some moment unsustainable i.e. So when it became clear that private debts cannot be paid (and someone could lose money!! ), the State stepped in and absorbed an incredible amount of debt that will be paid by the Irish citizens (estimated at 36% of the country´s GDP for many years. Another example: Spain is a country with one of the lower public debt among the OECD but sinking under a pile of private debts, well hidden under accounting trickery at the Banks balances. How do the markets evaluate the risk of the banking sector?
Santander 197.57
BBVA 206.86
Well as you can see, the banks risks are considered as lower than the Spanish state (Note: I am aware that Spanish Banks work abroad, but their lion share of their business is still in Spain). The case of the banks is more severe than other sectors as these institutions by definition owe their very existence to the State thanks to its status as lender of last resort, so a lower risk for the banks is an absurd result. Unless, as you might guess the State is not more than a loyal servant of the Banks, the corporations and their interests… and would be ready to go bust in order to secure others.
Back to Franklin´s quote, is that overwhelming and apparent unconditional State protection of the corporation’s profitability and interest a new “certain thing”? Well, markets (and ironically K. Marx….) agree on that …That the real Sov
Wednesday, March 30, 2011
Wednesday, March 23, 2011
Profit Margins and Crisis
Figures can be interpreted in many ways. Lets take for example the following grap which depicts the evolution of the margin earning in the US:
That picture is reflected in other parameters, especially the shape of the main stock market indices. So many could argue that the graph reveals that the situation is just fine, we are back in business and the crisis is over. Is it so?
First of all, you can notice that the American business sector enjoyed the same extreme margins just before the last financial bubble exploded into the worst recession in 70 years. So the margins by themselves can be hardly regarded as a signal for “ Business as usual”.
As a matter of fact that profit rates are a genuine alarm before the next round of crisis. Let me explain: Business profits are the mirror picture of purchasing power of the average citizens or in simple words, every cent out of the total sale goes to the profit is taken from salaries. Therefore the graph means that the average citizen , the one that may own some shares or funds and predominantly lives from his salary is in nowadays worst shape than in the midst of the crisis .
But that is not just a question of justice and distribution but a very serious economic issue. If the average worker is poorer, then to whom will the business sell their products? That is exactly the very root of t he economic crisis we are still in , the unbalanced growth and concentration of wealth and profits among too few hands that are not able to consume the excessive production. The credit bubble was just a mean to cover that lack of purchasing power until it could not be sustained. As the crisis developed, the public sector stepped in to cover that lack of demand … ( no more taxes… but a lot of debts ). So the imbalance went from private hands into public hands.
So we are once again experiencing an unbalanced growth, though this time the reaction capacity of the governments will be much more limited. Under these circumstances a more intense crisis is just waiting around the corner or for the most a sluggish economic growth.
That picture is reflected in other parameters, especially the shape of the main stock market indices. So many could argue that the graph reveals that the situation is just fine, we are back in business and the crisis is over. Is it so?
First of all, you can notice that the American business sector enjoyed the same extreme margins just before the last financial bubble exploded into the worst recession in 70 years. So the margins by themselves can be hardly regarded as a signal for “ Business as usual”.
As a matter of fact that profit rates are a genuine alarm before the next round of crisis. Let me explain: Business profits are the mirror picture of purchasing power of the average citizens or in simple words, every cent out of the total sale goes to the profit is taken from salaries. Therefore the graph means that the average citizen , the one that may own some shares or funds and predominantly lives from his salary is in nowadays worst shape than in the midst of the crisis .
But that is not just a question of justice and distribution but a very serious economic issue. If the average worker is poorer, then to whom will the business sell their products? That is exactly the very root of t he economic crisis we are still in , the unbalanced growth and concentration of wealth and profits among too few hands that are not able to consume the excessive production. The credit bubble was just a mean to cover that lack of purchasing power until it could not be sustained. As the crisis developed, the public sector stepped in to cover that lack of demand … ( no more taxes… but a lot of debts ). So the imbalance went from private hands into public hands.
So we are once again experiencing an unbalanced growth, though this time the reaction capacity of the governments will be much more limited. Under these circumstances a more intense crisis is just waiting around the corner or for the most a sluggish economic growth.
Tuesday, March 22, 2011
The Modern Habitat
Watching TV on a rainy weekend afternoon is THE choice when I wish to turn off my mind for a while. However, since the options are rather limited to recycled movies or insignificant sports events I end the zapping round watching in a nature documentary. The last piece I´ve watched described the struggle for survival of a group of lions somewhere in Africa as filmed by a team that followed a herd in their search for food. With such perspective in mind, it is obvious that the film must lead to the typical hunting scenes (zebras in that case): Slow motion shots of feline movement ...the focus on the sharp eyes ... the zebras running away and finally the inevitable feast of flesh and blood with the resulting pile of dry bones Not for weak stomachs.
Notwithstanding that the film describes life of the wild habitat; the “struggle” motif is being frequently imported into the human social fabric by many ideologies. One of the well known translations was performed by the recalled “Social Darwinist”, which developed a whole theoretical edifice about the “survival of the fittest” , a theory that basically implies a binary code: Life is a jungle so the question “To be or not to be” is equivalent to “ Eat or be eaten”. That survival code became the foundations of ultra Capitalist ideologies and, ironically, Fascist streams.
We can argue that the binary scheme cannot be translated “as it is” into the human social much sophisticated social fabric .But even if we accept such direct and simplistic approach, there is still a question to be asked: Assuming that there are only two choices around (Eat or be eaten), the conclusion is that after many rounds,at some point in the future the “fittest” lions should be able to devour all the animals around. And what´s next? Even if the members of the majestic herd start to swallow each other, eventually, the last lion on Earth will perish from hunger (unless it becomes vegetarian ....). Therefore the dichotomised system is deemed to vanish with its fittest member.
Thus, the main underlying and unintended conclusion of the film is a bit different than the social Darwinist interpretation. The fitness to survive (BTW that concept was not developed by Darwin himself) should not be understood as the deepness of your stomach, but as the capacity to adapt to a given system in order to preserve the specie. As the term “system” implies, by definition, interdependence, such perspective means the irrelevance of a dichotomised /binary approach which , as we´ve seen , leads to its own demise.
Moreover, nature shows us the need to maintain a balance and to some degree opens the way for cooperation based on interdependence. True, there always will be some competition for limited resources but it is obvious that the interdependence requires some degree of cooperation. A smart lion would rather negotiate with the zebras instead of just killing them all, thereby guaranteeing a steady flow of food for the long run.
In such systemic approach, the term weak or strong became relative as even the apparently weak members got some power as the system relies also on their wellbeing and wishes, while the “strong guys” can impose their own rules without considering the reactions of the rest of the system. Since human beings are able not only to adapt to nature but modify the survival terms, the strength or weakness depends up to certain point on the power of will and consciousness.
That lesson is more acute in modern times. Why is it? We live in a society that managed to create a lot of wealth and well being through the division of labour and specialization. People nowadays can hardly handle elemental tasks in their daily life without some sort of specialist, let alone tasks that require long periods of training and study, while most of us are experts in our very little niche. That social economic edifice human beings totally dependent on the system in ways someone could not imagine a few decades ago. If Robinson Crusoe is an impossible fantasy ( or nightmare) for our civilization, thus the wellbeing of all the society rests on each one of the members.
So the modern hungry lion can get its loot by force only if other members are not conscious of their own strengths or just do not care. However, but it can work only on a short run, as the long run imbalance can be disastrous for the whole system.
As a final note, it seems that I should look for another distraction during the rainy afternoons , since even in front of lions and zebras the mind keeps on wandering .....
Notwithstanding that the film describes life of the wild habitat; the “struggle” motif is being frequently imported into the human social fabric by many ideologies. One of the well known translations was performed by the recalled “Social Darwinist”, which developed a whole theoretical edifice about the “survival of the fittest” , a theory that basically implies a binary code: Life is a jungle so the question “To be or not to be” is equivalent to “ Eat or be eaten”. That survival code became the foundations of ultra Capitalist ideologies and, ironically, Fascist streams.
We can argue that the binary scheme cannot be translated “as it is” into the human social much sophisticated social fabric .But even if we accept such direct and simplistic approach, there is still a question to be asked: Assuming that there are only two choices around (Eat or be eaten), the conclusion is that after many rounds,at some point in the future the “fittest” lions should be able to devour all the animals around. And what´s next? Even if the members of the majestic herd start to swallow each other, eventually, the last lion on Earth will perish from hunger (unless it becomes vegetarian ....). Therefore the dichotomised system is deemed to vanish with its fittest member.
Thus, the main underlying and unintended conclusion of the film is a bit different than the social Darwinist interpretation. The fitness to survive (BTW that concept was not developed by Darwin himself) should not be understood as the deepness of your stomach, but as the capacity to adapt to a given system in order to preserve the specie. As the term “system” implies, by definition, interdependence, such perspective means the irrelevance of a dichotomised /binary approach which , as we´ve seen , leads to its own demise.
Moreover, nature shows us the need to maintain a balance and to some degree opens the way for cooperation based on interdependence. True, there always will be some competition for limited resources but it is obvious that the interdependence requires some degree of cooperation. A smart lion would rather negotiate with the zebras instead of just killing them all, thereby guaranteeing a steady flow of food for the long run.
In such systemic approach, the term weak or strong became relative as even the apparently weak members got some power as the system relies also on their wellbeing and wishes, while the “strong guys” can impose their own rules without considering the reactions of the rest of the system. Since human beings are able not only to adapt to nature but modify the survival terms, the strength or weakness depends up to certain point on the power of will and consciousness.
That lesson is more acute in modern times. Why is it? We live in a society that managed to create a lot of wealth and well being through the division of labour and specialization. People nowadays can hardly handle elemental tasks in their daily life without some sort of specialist, let alone tasks that require long periods of training and study, while most of us are experts in our very little niche. That social economic edifice human beings totally dependent on the system in ways someone could not imagine a few decades ago. If Robinson Crusoe is an impossible fantasy ( or nightmare) for our civilization, thus the wellbeing of all the society rests on each one of the members.
So the modern hungry lion can get its loot by force only if other members are not conscious of their own strengths or just do not care. However, but it can work only on a short run, as the long run imbalance can be disastrous for the whole system.
As a final note, it seems that I should look for another distraction during the rainy afternoons , since even in front of lions and zebras the mind keeps on wandering .....
Saturday, March 12, 2011
The Sea of Schnorr
“All the rivers flow into the sea, Yet the sea is not full. To the place where the rivers flow, There they flow again” Ecclesiastes 1:7
A recent article published at the WSJ website includes an interview with E. Barak, Israel Minister of Defense.
WSJ, March 8th 2011
“Israel will need to boost military spending and may seek an additional $20 billion in U.S. security assistance to help it manage potential threats stemming from popular upheavals in the Arab world, Defense Minister Ehud Barak said Monday……
….."It's a historic earthquake...a movement in the right direction, quite inspired," Mr. Barak said in an interview with The Wall Street Journal, surveying the youthful revolts in Egypt, Tunisia, Libya and the Gulf. "It's a movement of the Arab societies toward modernity."….
The issue of qualitative military aid for Israel becomes more essential for us, and I believe also more essential for you," said Mr. Barak, a former prime minister. "It might be wise to invest another $20 billion to upgrade the security of Israel for the next generation or so....A strong, responsible Israel can become a stabilizer in such a turbulent region."
Mr. Barak is famous for his analytical skills; some even consider him a genius. Since I am an average man , I will not question the Aid itself but the argumentation exposed in the interview.
If we apply a rigorous and critical analysis to the argumentation presented for case, the whole debate becomes a complete waste of time. How it comes? The test for such assertion is by asking a simple question: What was Mr. Barak ( and the security establishment he represents) opinion in different circumstances, for example a movement of the Arab society against modernity (instead of “toward”)?? Does he change his mind when circumstances change? Or did the Schnorr become a mantra?
The answer to the test requires just a short glance on recent history: Even when the Middle East was apparently stable, as it was along the last 30 years, the flow of military aid from Washington to Israel was vigorous. The argument in those days was in the line of “under the apparent stability there is some amount of instability ( otherwise, there was no need for dicatorships ) which could, in a more distance future, turn into real threats “. As you can see, the argument was different, but the conclusion is always the same: Schnorr….Even the "Peace" argument i.e. Israel needs the aid to feel secure in order to deal with the inherent risks in any future deal with the Arabs does not hold water. The aid was there but the deal is still far away.
Or let’s take another example: What would be the argument if Arabs gets poorer? I guess that it would something like “Well, Israel is in the midst of a area with social conflicts that may end in military conflicts” Conclusion: Schnorr… . And what if the Arabs get richer (Petro Dollars, for example) ? “Well, Israel needs additional resources to maintain its military edge against powerful and rich potential enemies (Conclusion??)
So, if under any circumstance the conclusion is identical, any argumentation is needless, and as said previously, the interview becomes a waste of time. Therefore if “all the rivers (of reasoning) flow to the sea (of Schnorr)”, the examination should go one step deeper in order to understand the special status of the Schnorr as THE conclusion.
The Schnorr reflect is a logical outcome stemming from Mr. Barak vision of Israel as the “Villa in the Jungle” i.e. the impossibility of a genuine reconciliation between Israel and the Arab world which implies that the future of Israel depends SOLELY on its military might. A Modern Sparta, under constant and eternal threat with no in house Helots must have a sponsor.
Therefore the issue is not the aid itself (an important detail for anyone concerned about the security of Israel) but its wider context. Moreover, the Schnorr game, always disguised under heavy layers of hypocrisy is part of the political game in America and around the Globe. The main issue at stake is the philosophy behind the extended arm begging for foreign money, the message which takes for granted the eternity of war between Israel and its neigbours.
Actually, Mr. Barak can avoid the automatic responses and answer a few simple questions: Didn´t the Schnorr philosophy already fall into the illogical loop of a self fulfilling prophecy maintained by vested interest? A vicious circle of arm race? Now, If the need for aid is genuine, could Mr. Barak detail the set of achievable preconditions for a possible and future “No, Thanks” moment for any military aid?? And what can be done to get a bit closer to that moment? The first questions are informative, contemplative. The last is more of a reminder that history is in constant change, thus there are no eternal slogans valid for all cases. “No man ever steps in the same river twice, for it's not the same river and he's not the same man” ( Heraclit). The river of history have changed in the Middle East , so the sea of Schnorr idelogiy should change as well.
Wikepdia : Schnorrer (; also spelled shnorrer) is a Yiddish term meaning "beggar" or "sponger". The word Schnorrer also occurs in German to describe a person, who frequently asks for little things like cigarettes or little sums of money, without offering a return, and has thus come to mean “freeloader”. The English usage of the word denotes a sly chiseller who will get money out of another any way he can, often through an air of entitlement. A schnorrer is distinguished from an ordinary beggar by dint of his boundless chutzpah. The term does not apply to begging or being homeless, but rather a habit of getting things (food, tools) rather than money by politely wanting
A recent article published at the WSJ website includes an interview with E. Barak, Israel Minister of Defense.
WSJ, March 8th 2011
“Israel will need to boost military spending and may seek an additional $20 billion in U.S. security assistance to help it manage potential threats stemming from popular upheavals in the Arab world, Defense Minister Ehud Barak said Monday……
….."It's a historic earthquake...a movement in the right direction, quite inspired," Mr. Barak said in an interview with The Wall Street Journal, surveying the youthful revolts in Egypt, Tunisia, Libya and the Gulf. "It's a movement of the Arab societies toward modernity."….
The issue of qualitative military aid for Israel becomes more essential for us, and I believe also more essential for you," said Mr. Barak, a former prime minister. "It might be wise to invest another $20 billion to upgrade the security of Israel for the next generation or so....A strong, responsible Israel can become a stabilizer in such a turbulent region."
Mr. Barak is famous for his analytical skills; some even consider him a genius. Since I am an average man , I will not question the Aid itself but the argumentation exposed in the interview.
If we apply a rigorous and critical analysis to the argumentation presented for case, the whole debate becomes a complete waste of time. How it comes? The test for such assertion is by asking a simple question: What was Mr. Barak ( and the security establishment he represents) opinion in different circumstances, for example a movement of the Arab society against modernity (instead of “toward”)?? Does he change his mind when circumstances change? Or did the Schnorr become a mantra?
The answer to the test requires just a short glance on recent history: Even when the Middle East was apparently stable, as it was along the last 30 years, the flow of military aid from Washington to Israel was vigorous. The argument in those days was in the line of “under the apparent stability there is some amount of instability ( otherwise, there was no need for dicatorships ) which could, in a more distance future, turn into real threats “. As you can see, the argument was different, but the conclusion is always the same: Schnorr….Even the "Peace" argument i.e. Israel needs the aid to feel secure in order to deal with the inherent risks in any future deal with the Arabs does not hold water. The aid was there but the deal is still far away.
Or let’s take another example: What would be the argument if Arabs gets poorer? I guess that it would something like “Well, Israel is in the midst of a area with social conflicts that may end in military conflicts” Conclusion: Schnorr… . And what if the Arabs get richer (Petro Dollars, for example) ? “Well, Israel needs additional resources to maintain its military edge against powerful and rich potential enemies (Conclusion??)
So, if under any circumstance the conclusion is identical, any argumentation is needless, and as said previously, the interview becomes a waste of time. Therefore if “all the rivers (of reasoning) flow to the sea (of Schnorr)”, the examination should go one step deeper in order to understand the special status of the Schnorr as THE conclusion.
The Schnorr reflect is a logical outcome stemming from Mr. Barak vision of Israel as the “Villa in the Jungle” i.e. the impossibility of a genuine reconciliation between Israel and the Arab world which implies that the future of Israel depends SOLELY on its military might. A Modern Sparta, under constant and eternal threat with no in house Helots must have a sponsor.
Therefore the issue is not the aid itself (an important detail for anyone concerned about the security of Israel) but its wider context. Moreover, the Schnorr game, always disguised under heavy layers of hypocrisy is part of the political game in America and around the Globe. The main issue at stake is the philosophy behind the extended arm begging for foreign money, the message which takes for granted the eternity of war between Israel and its neigbours.
Actually, Mr. Barak can avoid the automatic responses and answer a few simple questions: Didn´t the Schnorr philosophy already fall into the illogical loop of a self fulfilling prophecy maintained by vested interest? A vicious circle of arm race? Now, If the need for aid is genuine, could Mr. Barak detail the set of achievable preconditions for a possible and future “No, Thanks” moment for any military aid?? And what can be done to get a bit closer to that moment? The first questions are informative, contemplative. The last is more of a reminder that history is in constant change, thus there are no eternal slogans valid for all cases. “No man ever steps in the same river twice, for it's not the same river and he's not the same man” ( Heraclit). The river of history have changed in the Middle East , so the sea of Schnorr idelogiy should change as well.
Wikepdia : Schnorrer (; also spelled shnorrer) is a Yiddish term meaning "beggar" or "sponger". The word Schnorrer also occurs in German to describe a person, who frequently asks for little things like cigarettes or little sums of money, without offering a return, and has thus come to mean “freeloader”. The English usage of the word denotes a sly chiseller who will get money out of another any way he can, often through an air of entitlement. A schnorrer is distinguished from an ordinary beggar by dint of his boundless chutzpah. The term does not apply to begging or being homeless, but rather a habit of getting things (food, tools) rather than money by politely wanting
Sunday, March 6, 2011
Garbage Out , Please
"Garbage In, Garbage Out" (GIGO) is a phrase from the field of computer science commonly used to describe failures in human decision making due to faulty, incomplete, or imprecise data. (Wikipedia). However, the application of GIGO to human behaviour overlooks the fact that for humans the “GI” part depends not only on “real” data but (mainly) on how reality is perceived. Moreover, we are able to adopt “GO” attitudes even it is evident that the hard data support a different conclusion.
Lets take for example the attitude toward a main social issue as “Income Distribution”: The following graph reveals one of the result of a survey about the attitude toward inequality in US. America is just a mirror, an example for other countries.
Source (http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph) from “Building a Better America – One Wealth Quintile at a Time by Michael I. Norton Dan Ariely Harvard Business School Duke University)
The results are very interesting: First, Americans perceive that social inequalities in their country are less acute than really are that “…..First, respondents dramatically underestimated the current level of wealth inequality” . I would say that “underestimated” is an underestimation.
First of all, wealth is regarded as the Direct command over money, but does not include indirect command. For example, under the modern shareholder structure , whoever holds just of a small portion out of the shares of a company is practically the one who holds the command over the overall company´s assets, much above his "real" holdings. That mechanism is denominated as the “OPM” (“Others People Money”) principle. And since Capital accumulation is not just a matter of bank account but of command, for practical matters the pecuniary figure becomes an underestimation of the real power behind Wealth.
In addition , the “Wealth” definition is somewhat misleading. According to the article “Wealth, also known as net worth, is defined as the total value of everything someone owns minus any debt that he or she owes. A person's net worth includes his or her bank account savings plus the value of other things such as property, stocks, bonds, art, collections, etc., minus the value of things like loans and mortgages.”
The problem with the above "Wealth" definition is that it includes personal house, which is not a typical “asset” but a sort of consumption item which is financed over a long period and does involve a command over future income streams ( as a typical financial asset should). Thus if we exclude housing from “Wealth”, we get an even worst picture of inequality as the lion share of the lower classes wealth is mainly their personal home.
The second conlusion “Second, respondents constructed ideal wealth distributions that were far more equitable than even their erroneously low estimates of the actual distribution…”
In clear contrast to the image of an ultra individualistic society: Most American citizens favour a more equal social model than they perceive, evidently much more equal than it really is. They favor a Swedish model society!
So if so many people favour a much more equal social model, how it comes that the actual state of affairs is so different to their ideal? Well, the article does not give a comprehensive answer to that question but on my opinion it´s about perception and its relation to what I call the “tolerance zone” . People generally tend to be pragmatic and would a reality that differs from their ideal as long as it falls within the boundaries of their "tolerance zone". For example we might not like exploitation but we can live with it until certain point.
Therefore perception is a fundamental piece in the social structure of inequality.If people REALLY understood that they live in a much more polarized society, some of them would not be ready to accept it ( i.e. it´s out their tolerance zone) and favour changes in the social structure.
Moreover, Democracy relies on free and accurate information that influence our decisions: if we manipulate data, freedom of decision becomes a fiction. So whatever our political view about inequality is, any genuine Democrat should support a free and accurate flow of information or in other words that there is as less as possible Garbage in the INPUT DATA , so whatever GO we get , we can at least be sure that it was not the outcome of a GI but from an internal BUG in the system.
Lets take for example the attitude toward a main social issue as “Income Distribution”: The following graph reveals one of the result of a survey about the attitude toward inequality in US. America is just a mirror, an example for other countries.
Source (http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph) from “Building a Better America – One Wealth Quintile at a Time by Michael I. Norton Dan Ariely Harvard Business School Duke University)
The results are very interesting: First, Americans perceive that social inequalities in their country are less acute than really are that “…..First, respondents dramatically underestimated the current level of wealth inequality” . I would say that “underestimated” is an underestimation.
First of all, wealth is regarded as the Direct command over money, but does not include indirect command. For example, under the modern shareholder structure , whoever holds just of a small portion out of the shares of a company is practically the one who holds the command over the overall company´s assets, much above his "real" holdings. That mechanism is denominated as the “OPM” (“Others People Money”) principle. And since Capital accumulation is not just a matter of bank account but of command, for practical matters the pecuniary figure becomes an underestimation of the real power behind Wealth.
In addition , the “Wealth” definition is somewhat misleading. According to the article “Wealth, also known as net worth, is defined as the total value of everything someone owns minus any debt that he or she owes. A person's net worth includes his or her bank account savings plus the value of other things such as property, stocks, bonds, art, collections, etc., minus the value of things like loans and mortgages.”
The problem with the above "Wealth" definition is that it includes personal house, which is not a typical “asset” but a sort of consumption item which is financed over a long period and does involve a command over future income streams ( as a typical financial asset should). Thus if we exclude housing from “Wealth”, we get an even worst picture of inequality as the lion share of the lower classes wealth is mainly their personal home.
The second conlusion “Second, respondents constructed ideal wealth distributions that were far more equitable than even their erroneously low estimates of the actual distribution…”
In clear contrast to the image of an ultra individualistic society: Most American citizens favour a more equal social model than they perceive, evidently much more equal than it really is. They favor a Swedish model society!
So if so many people favour a much more equal social model, how it comes that the actual state of affairs is so different to their ideal? Well, the article does not give a comprehensive answer to that question but on my opinion it´s about perception and its relation to what I call the “tolerance zone” . People generally tend to be pragmatic and would a reality that differs from their ideal as long as it falls within the boundaries of their "tolerance zone". For example we might not like exploitation but we can live with it until certain point.
Therefore perception is a fundamental piece in the social structure of inequality.If people REALLY understood that they live in a much more polarized society, some of them would not be ready to accept it ( i.e. it´s out their tolerance zone) and favour changes in the social structure.
Moreover, Democracy relies on free and accurate information that influence our decisions: if we manipulate data, freedom of decision becomes a fiction. So whatever our political view about inequality is, any genuine Democrat should support a free and accurate flow of information or in other words that there is as less as possible Garbage in the INPUT DATA , so whatever GO we get , we can at least be sure that it was not the outcome of a GI but from an internal BUG in the system.
Thursday, March 3, 2011
Wisconsin, Ohio : Isn´t the Right "Right" ??
The seizure of a Parliament by street protesters seems to be a terrific news item, but for some strange reason the events taking place in the heart of America do not get the appropiate mediatic attention they should (at least here abroad) . So as a courtesy I will begin the blog with a short introduction.
The story goes like that : Wisconsin Governor S. Walker has put forward a plan to end collective bargaining for most state workers. That has transformed Wisconsin into an ideological battleground between trade union activists and small-government conservatives. The State Capitol in Madison has become the focus for daily mass protests. And if this was not sufficient, today ( March 3rd 2011) Ohio's Senate voted to prohibit public employees from striking and to restrict certain collective bargaining rights, including negotiations on pensions and health care.
The fight in Wisconsin is being labeled by many commenters as THE major social battlefield; some even define it as a “Class War”. It that context it was interesting to read some comments which regard the Governor´s proposals not only as a serious step to fight the huge State´s deficit (under US Laws any State is obliged to operate under a balanced budget), BUT an opportunity to cut public employees´ “privileges” such as collective bargaining, health benefits or job security. Other see the opportunity to introduce “private sector” norms into the public sector and turning it more competitive ( to what exactly?) . Sounds as a war indeed….
The assertion “Simple working people are once again being forced to pay the price for an economic crisis caused by others….” it´s triviality. We don´t need Madison or Ohio to know that fact of life. Moreover, I would be surprised if this was not the response of a conservative establishment ( and the anemic US President) to the growing and mounting debts (which serve other interests… but that is for another blog). Therefore I would prefer to focus on other aspect of the events.
My claim is that Conservatives are correct in their observation. For example lets take the Collective Bargaining issue . In the US only app. 11% of the working force is unionized, an astonishing figure if compared even to the same US 30 years ago (20.8% in 1980). In some important corporations unions are banned and whoever tries to get organized can be fired at once. So the Newspeak that regards the right to maintain collective agreements a “privilege” of just a few is correct.
Or the health care “privilege”, which is indeed the correct definition for that basic service in a country where the right to enjoy a health insurance (for commoners) without being tied to a working place or falling into bankruptcy is not less than a “privilege”.
That’s exactly the point: The transformation of basic right into “privileges” reflects the short sight view of the American Unions. In many countries Unions have become the silent partners of the system securing their own “privileges” forgoing solidarity with the weakest. History can tell us that such strategy is dangerous : About 80 years ago German unions and the country as a whole paid a very high price for not paying too much attention to the “Lumpen ploretariat” the abandoned working class that became one or the main support of the Nazis. The similar sectorial approach dominates the American labor landscape where Unions are among the biggest supporters of the Democratic Party. As such they got their share in the actual state of affairs, they are the establishment.
So, if we might prefer to adopt the conservatives’ logic rather than a sectorial demand but with a twist: Want a “competitive” public sector? OK, raise the minimum salary in the private sector! ? Want to get rid of privileges? Guarantee that the right of free association in each and every workplace so it ceases to be a privilege …. And so on and so on. A solidary response is the proper reaction to the conservative avalanche emerging from the heart of America. However, if solidarity remains as a mean to achieve sectarian privileges than the lost battlefield of Wisconsin,, Ohio and others are just around the corner.
The story goes like that : Wisconsin Governor S. Walker has put forward a plan to end collective bargaining for most state workers. That has transformed Wisconsin into an ideological battleground between trade union activists and small-government conservatives. The State Capitol in Madison has become the focus for daily mass protests. And if this was not sufficient, today ( March 3rd 2011) Ohio's Senate voted to prohibit public employees from striking and to restrict certain collective bargaining rights, including negotiations on pensions and health care.
The fight in Wisconsin is being labeled by many commenters as THE major social battlefield; some even define it as a “Class War”. It that context it was interesting to read some comments which regard the Governor´s proposals not only as a serious step to fight the huge State´s deficit (under US Laws any State is obliged to operate under a balanced budget), BUT an opportunity to cut public employees´ “privileges” such as collective bargaining, health benefits or job security. Other see the opportunity to introduce “private sector” norms into the public sector and turning it more competitive ( to what exactly?) . Sounds as a war indeed….
The assertion “Simple working people are once again being forced to pay the price for an economic crisis caused by others….” it´s triviality. We don´t need Madison or Ohio to know that fact of life. Moreover, I would be surprised if this was not the response of a conservative establishment ( and the anemic US President) to the growing and mounting debts (which serve other interests… but that is for another blog). Therefore I would prefer to focus on other aspect of the events.
My claim is that Conservatives are correct in their observation. For example lets take the Collective Bargaining issue . In the US only app. 11% of the working force is unionized, an astonishing figure if compared even to the same US 30 years ago (20.8% in 1980). In some important corporations unions are banned and whoever tries to get organized can be fired at once. So the Newspeak that regards the right to maintain collective agreements a “privilege” of just a few is correct.
Or the health care “privilege”, which is indeed the correct definition for that basic service in a country where the right to enjoy a health insurance (for commoners) without being tied to a working place or falling into bankruptcy is not less than a “privilege”.
That’s exactly the point: The transformation of basic right into “privileges” reflects the short sight view of the American Unions. In many countries Unions have become the silent partners of the system securing their own “privileges” forgoing solidarity with the weakest. History can tell us that such strategy is dangerous : About 80 years ago German unions and the country as a whole paid a very high price for not paying too much attention to the “Lumpen ploretariat” the abandoned working class that became one or the main support of the Nazis. The similar sectorial approach dominates the American labor landscape where Unions are among the biggest supporters of the Democratic Party. As such they got their share in the actual state of affairs, they are the establishment.
So, if we might prefer to adopt the conservatives’ logic rather than a sectorial demand but with a twist: Want a “competitive” public sector? OK, raise the minimum salary in the private sector! ? Want to get rid of privileges? Guarantee that the right of free association in each and every workplace so it ceases to be a privilege …. And so on and so on. A solidary response is the proper reaction to the conservative avalanche emerging from the heart of America. However, if solidarity remains as a mean to achieve sectarian privileges than the lost battlefield of Wisconsin,, Ohio and others are just around the corner.
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