Progressives vs. Free Trade

I must say that I am saddened that it seems that progressives are adamantly against the idea of free trade entirely. As a self proclaimed progressive this doesn't sit well with me.

Free trade may be a misnomer in either what we're referring to or what we actually have but the idea of markets and trade is a very good idea that helps society progress. I take my opinions from a lot of different sources (Stiglitz, Krugman, Rodrik, Charles Derber) and I think we all have similar desires and share common threats.

Here's what I see, competition (honest and fair competition, that is) spurs innovation and lowers cost. That's a great thing. It also evolves our economy and pushes us out of certain labor markets. When a country develops and becomes more technologically advanced it usually prices itself out of the low income labor market. This is bad for unskilled laborers but good in the sense that we are "getting better" and becoming more profitable as a nation.

Here are the problems that I see:
1. LARGE corporations (not business in general) tend to dominate markets which may seem good if they are the best but it means competition isn't good enough. These corporations form effective monopolies (become "too big to fail") or share in an oligopoly. This stifles innovation and defeats the purpose of competition and markets offering lower prices. Not all large corporations do this but enough do that it's hurting our economy

2. Our shifting economy either creates large unemployment or protectionism. Neither of these are good for the economy or businesses in general. Businesses want the unemployment (cheaper labor for them) but don't realize that without any sort of unemployment job retraining they are getting less useful employees.

3. Politicians don't understand this problem, are unwilling to take a stand, or are summarily voted down so they match patchwork half ass accomplishments that are usually a mix of protectionism and bailouts.

We need a massive restructuring and maybe this economic crisis is the time to do it.

Enviroment and Globalization

Another interesting discussion in my globalization class today. Something I have thought about a fair amount: Europe and America developed economically by exploiting workers (slaves, women, children, low wages, long hours, unsafe working conditions) and raping the environment.

This brings up questions with developing countries today. Many of our low skilled laborer jobs are moving to developing countries (as they historically do) but also to questionable labor standards (obviously by our standards) but possibly more importantly to lower environmental standards.

Many authors have pointed out that even low worker standards are much higher than they used to be and that low standards in factories are still better than the options of working on a farm or as a prostitute. While this is not ideal progress it still is some progress.

The bigger economic issue is that the environment is in a really bad place right now and it is LARGELY due to American industrialization and individualism since we become more developed. Even if China and India weren't developing and using more energy and polluting more than they used to Americans would/should still cut back on their energy consumption and pollution drastically. The argument that I have heard (and heard widely reiterated in my globalization class) is that it is unfair to put American environmental standards into our trade agreements with others because since we polluted to develop it would be hypocritical of us to not allow other countries to develop by being horrible polluters.

The problem with this is that the world can't afford to let this happen. I agree it is a dick move for us to ruin the world by polluting too much and then hindering others growth by telling them not to develop as unfettered as we did. My solution wouldn't be to allow everyone to pollute as much as they want but to have America subsidize other countries clean efforts to not make the developing countries bear the entire brunt of the costlier development. If we are able to do this and keep strict environmental regulations then I think that the world community should also be able to enforce strict regulations on America's pollution levels to cap them and then bring them down with harsh fines for failure to comply.

I think this is the only way to save the environment and expand the international economy responsibly because two wrongs do not make a right. We need to both atone for our atrocious wrong and prevent others from making the same mistakes.

Culture shock (and fun with globalization)

I thought being at Bowdoin was culture shock to me because I was acutely aware that I was one of the least wealthy people there. I felt that I had an entirely different perspective and frame of reference. In hindsight I must say that at least most people that I met there seemed inquisitive and open minded and not openly malicious in any way. I may have still had a chip on my shoulder at times but most people's priorities (or at least the ones I surrounded myself with) had their priorities in the right place.

Fast forward to today. I'm now taking a class in the political science department that is simply called "Globalization." I could certainly expect that there would be a fair number of economically minded folk in the class but I assumed, also, that there would be some social science minded people who brought a balancing perspective to the class.

Today we talked in class about why most economists think that free trade and globalization are a very good thing and why public opinion has been against them and is only growing more opposed to them. Most seemed to be either puzzled by or dismissive of the fact. I didn't think it was too hard to figure out (hell we've been reading about it) that American workers are becoming more skilled in general so it does not benefit our economy to doing mass amounts of unskilled labor when other countries can be doing that while we are doing more technical tasks. Low skill workers are the ones losing their jobs and a lot of them can't easily transistion to other jobs and our country is shitty about job retraining programs. And since healthcare is tied to jobs in America, unemployment is much more perilous here than in the rest of the developed world.

Basically, globalization is good for our 'economy' but bad for a fair amount of our people. And those who haven't lost their jobs may either fear that they will or know someone who has. Add this to the fact that our jobs are rapidly transitioning from manufacturing to service (often a hard transition to make) and that many manufacturing jobs were unionized and provided good pay and good benefits and most lower level service jobs (think Wal Mart) have shitty pay and few benefits.

I think it was put very well by one of my classmates that the benefits of globalization (lower prices) are distributed evenly to everyone whereas the losses are more concentrated (job loss of mostly lower and middle class).

I don't know. Maybe I'm a marxist but there was an overwhelming feel of "yeah, I wonder why they don't get it." I agree that globalization is a good idea and, if done properly, will be very good for our country and others but we have to acknowledge that we're bad at it right now.

We set up these falls (in our country and in others) by creating artificial markets and protecting industries and distort the markets. Instead of protecting everyone by trying futilely to make sure that no one loses their current job, we need to make it easier to find new jobs, get trained for career shifts, and make unemployment not so devasting and stigmatized. I think most developed countries have done a better job of this than we have. Also underemployment is a huge problem in our country (although I've found it hard to find numbers on this for other countries)

Good and bad aspects of the Senate bailout passed

So first of all, for those who hadn't heard the Senate passed their version of the bailout 74-25 tonight. The house will vote on it Friday.

You many not have noticed though because it's called the "Paul Wellstone Mental Health and Addiction Equity Act of 2007." Nope, not joking. This was bundled with a bunch of other bills that were up for consideration to make it seem more appealing. So here's what they were bundled with:

• Tax credits for renewable energy
• Requiring group health care to include mental health and addiction treatment
• Alternative minimum tax extension/protection
• Temporarily raising FDIC from $100k to $250k

Couple notes: Obama, Biden, and McCain all voted for this so the vote itself is a wash (economy still favoring Obama).
Here's a question: shouldn't McCain be opposed to this because this $700B bailout was hidden/attached to a bill that had nothing to do with it?

Even though a lot of great progressive economists (Krugman, Stiglitz, and Kuttner) now favor the bailout I still have my apprehensions and applaud the 24 senators who voted against it (yeah Sanders and Feingold). I especially applaud those who think there is a different way or that we are being pushed into the bailout without exploring how necessary the bailout is or better alternatives. This gives Feingold the only senate trio (against War in Iraq, Patriot Act, and Bailout) although I will say that Sanders was in the house not the senate.

Lessons learned from business school...and applied to the bailout

Ok so let me give you the gist of a case/session I've seen presented by one of the faculty members of the MIT Sloan School of Management present several times to one of our biggest executive education clients.

The basics of it are a negotiation exercise where two employees are having a disagreement and a third person (the boss) is acting as arbiter. The boss has $50,000 to use as a bonus or incentive as they see fit but the employees do not know that the boss has the money to give so until the boss brings it up (or the boss doesn't have to bring it up).

When the professor does the debrief he tells a story about his kids arguing and asks the class what happens when he offers his children money to stop arguing. Inevitably most of the class understands guesses that the children stop fighting for a short period of time but only learn that they can make money by fighting. This does not solve the problem it merely postpones it and in most cases it enforces bad/destructive habits

So, tell me again why essentially irresponsible organizations should be given $700B without severe regulations? Won't they learn from this that acting irresponsibly is profitable and that the government will always bail them out?

I encourage everyone to read the progressive alternative to the bailout proposed by Rep. Donna Edwards and others.

Oh wow the markets are back up again, I guess that means...

little to nothing except that the stock market realized that it over reacted to the failure of the bailout. Everyone just needs to calm down and let this bailout/rescue plan run its course. I'd rather we take our time and get it right than rush into it (like the war and the patriot act).

The sky is not falling chicken little and if it is then this is the situation of the boy (Bush) who cried wolf. Either way, let's not mess this one up too by listening to the fanaticism, panic and fear of Bush and the bankers and economists who got us into this mess.

Mmmm, market over-reaction

So there is a credit crisis but the markets today went crazy and over-reacted and lost more in one day than they've ever gone down before (number wise, not percentage wise).

So republicans tried to saddle democrats with the bill (thinking that democrats were going to whole heartedly support it) and then they were going to run against the democrats on this. There was also some far right resistance because they hate regulations and accountability for corporations.

There were also some moderate democrats (who also didn't vote for this for electoral reasons) also did it because they are budget hawks and hate spending for anything.

There were progressive democrats who didn't support it because they think it's irresponsible, not the only way to improve the economy, and more bullying by an irresponsible administration.

All of these groups claim to want to protect the taxpayers. I'm not sure how much truth there is to that but I do think that a great portion of the crisis is created by stock holder panic.

Credit is tightening but that is due in large part to the mega banks making crappy loans and cooking the books (or lying to themselves about risk). Here's a question: where are the small regional banks who were less greedy and made sound investments and have decent liquidity? I imagine that they could really grow in a situation like this. I'm sure credit would still drastically tighten but isn't this how the markets work? Some corporations are irresponsible and have to sell their assets (even good ones) at firesale prices to corporations who can take on a little extra risk if it comes cheap. Or maybe the large corporations just sell off pieces of themselves at firesale prices until they achieve some liquidity and can survive as smaller companies.

Bail out home owners who were preyed upon but I'm still needing a really good explanation to bail out some greedy bastards.

Braindump and when your bs philosophy comes crashing in on you (Republicans and the $700B bailout)

Ok, so much shit to talk about concerning this bailout. I'll delve into the details about some of these points but there is a lot of just random things I would like to note.

McCain hasn't voted in the Senate since April 8th. Not for the FISA vote, not for the medicare vote (that Ted Kennedy left the hospital to vote for). And people in McCain's campaign have the audacity to criticize his 'present' votes in the Illinois legislature? Even after liberal groups with a stake in the votes have already defended Obama's present votes. And even though McCain is suspending his campaign (not really) to return to talk about the bailout he's still not sure if he'll show up for that vote.

Henry Paulson's initial proposal was one of the stupidest ideas I've ever heard. Give me $700B dollars and make sure the courts or government has no authority to question or prosecute me because of the way I use it. (I encourage you to read this bull esp. Section 8 because it's very short and then you will be ahead of John McCain. I guess he's banking on the fact that American's don't like voting for readers).

Ok now here's the interesting bit and what stake everyone has in it:
Bush and Paulson: Stupid/evil fucks who were laughing (along with other Republicans) when they were deregulating and allowing their crony buddies to engage in predatory lending practices. There buddies lost money so they need to give them money with no stipulations (they don't care about the debt because they're on their way out.

House/Senate Republicans: Many are up for re-election so they still have to be republicans and cry anytime we want to regulate anything but they are torn because big business are the people who fund them so they want a bill that helps big business but has nothing to do with regulation or taxes. So they want to use this opportunity to suspend capital gains taxes for individuals and corporations (something they could have never dreamed of in normal circumstances because it's such an elitist idea that favors the rich and does nothing for the poor)

Blue Dog democrats: They're wringing their hands over the national debt and don't understand any other aspect of this debate (record numbers of people losing their homes and being crushed by debt, credit freeze or anything like that). They'll have no good options because the republican plan will decrease government revenues while democratic plans will spend money (if history repeats they will probably cave to republicans because theirs has a smaller short term effect).

Typical democrats: Do not question the fact that a massive bailout is needed. Suggest regulations and stipulations on the money such as

1. Government purchases sketchy securities and sees benefits on any that pan out (ie taxpayers pay for it they should see some benefits/get as much back as they can)
2. Cap on executive pay
3. Give courts the right to restructure bad mortgage

That being said, democrats will probably fold on enough important issues to make most of their gains meaningless (in the interest of "bipartisanship")

Progressives and people who care about the people: They are a little split on the issue and I can see why they believe the following things

1. Some think that there is no crisis and this is just a last ditch effort of the Bush administration to grease the palms of his corporate buddies (the 'YOU HAVE TO DO THIS NOW OR WE'LL ALL DIE' rhetoric was already used for the War in Iraq and the Patriot Act and we now realized we we're lied to
2. Some make very compelling cases that the sum should be MUCH smaller (and there should be all the regulations that other democrats suggest)
3. Bernie Sanders has proposed a great idea that charges the rich for this bailout (because they're the ones who got us into it) and addresses systemic causes that lead to the situation in the first place

I think all of these can be rectified. There is a situation that could develop into a crisis but it is not crucial that a solution happens in the next 20 seconds, the sum should be smaller, and we need to sufficiently fix these problems systemically and fix the problems for the future.

I still don't get why McCain and Obama were invited to Washington (neither are economic whizzes and it only serves to politicize the issue and slow down progress). I will say that McCain is probably in the toughest political spot because he's already claimed (parroting Paulson) that something needs to get done now and the proposal getting pushed through is a democratic taxpayer model with regulation so it can't seem to be partisan and vote against it.

What do I think will happen?
Mediocre deal (hailed by limp wristed democrats) that spends $700B with some regulations but not enough

What is the best thing that might be able to realistically happen?
$200B - $350B initial bailout with pledge to revisit it later and all democratic stipulations including judicial right to renegotiate

Today's reasons why McCain is a moron

Ok so what's wrong with McCain today. Let's list some things:

1) Did anyone catch that McCain's campaign and Palin herself said that we need to pass the bailout quickly to avoid "an economic calamity the likes of which has not been seen since, potentially, the Great Depression"? What happened to the 'fundamentals of our economy are strong'? That was just a week ago.

2) What is with this suspend the debates and your campaign bullshit? How does that help anything? I tend to agree with Harry Reid that McCain should stay away from DC because it would only politicize the talks and slow them down. Apparently W doesn't feel the same because he's invited Obama and McCain to DC.

Those are the two major points that are pissing me off about McCain today. I'm sure tomorrow will bring more.

Live Blogging W's address to the nation

Bush is addressing the nation about the national economic situation.

8:59 PM Call me crazy but Bush doesn't seem to know what he's talking about. Not very teacherly and understanding like FDR

9:01 PM Bush is not really being honest. He's blaming this ENTIRELY on the borrowers who 'borrowed more than they could pay.' Just tell America that mortgage lenders got greedy, gave too many high-risk high-reward loans and then jacked up the prices to unreasonable levels

9:04 PM Foreclosures have already risen traumatically moron.

9:05 PM What do McCain and Obama have to offer specifically? I mean really? Neither of them are financial whizzes and it will just bring a circus around the process

9:07 PM WOW! Bush just became a whipping boy. 'Protect the taxpayers. Avoid windfalls for high level executives' those aren't Bush's talking points. He hates those things

9:08 PM Did Bush just imply that we ARE going to buy the securities at fire-sale prices AND get the profits back in the government? This might end up being a good deal if judges have the ability to restructure mortgages.

9:10 PM Mmmmm, don't forget to suck cock at the altar of capitalism there Bush. BEST SYSTEM EVER IN THE BEST COUNTRY EVER! WOOO! You're a dick.

Overall thoughts: Bush is stupid, was a lap dog to Paulson's bullshit plan until everyone who knows anything said he was a stupid evil fuck. This may be a moment in history where politicians and Americans wake up and realize that the republican party line is an evil piece of shit in this case and Democrats are the party of helping people.

Note: Watching Chris Dodd's response to the speech on the Rachel Maddow show. He is holding back but he did say two important points
1. There were regulators but the 'cops weren't on the beat'
2. Fannie and Freddie weren't the huge culprits of Fannie and Freddie
3. Dodd bitch slapped McCain by saying he's just politicizing and didn't seem to care about the issue before it started hurting him