Category Archives: CONGRESS WATCH

The Case Against Free-Market Capitalism

By Ngaire Woods – Free-market capitalism is on trial.

Just a quarter-century ago, the debate about economic systems – state-managed socialism or liberal democracy and capitalism – seemed to have been settled. With the Soviet Union’s collapse, the case was closed – or so it seemed.

Since then, the rise of China has belied the view that a state-led strategy will always fail, and the global financial crisis exposed the perils of inadequately regulated markets. In 2017, few of the world’s fastest-growing economies (Ethiopia, Uzbekistan, Nepal, India, Tanzania, Djibouti, Laos, Cambodia, Myanmar, and the Philippines) have free markets. And many free-market economies are suffering from growth slowdowns and rapidly rising inequality.

The conservative case, eloquently articulated by Theresa May, is that a free-market economy, operating under the right rules and regulations, is the greatest agent of collective human progress ever created. If that claim is true, the only logical conclusion is that we are doing it wrong.

So what measures are needed to get it right? more> https://goo.gl/ioQAAD

Rex Tillerson and the Unraveling of the State Department

With an isolated leader, a demoralized diplomatic corps and a president dismantling international relations one tweet at a time, American foreign policy is adrift in the world.
By Jason Zengerle – Tillerson was originally recommended to the Trump team by the former Defense Secretary Robert Gates and the former Secretary of State Condoleezza Rice, both mandarins of the Republican foreign-policy establishment who had consulted for Exxon Mobil, on the grounds that his vast knowledge of foreign governments and their leaders made him a perfect fit for the job. “The expectation was that Tillerson would be a grown-up and provide ballast,” says a 30-year veteran of the Foreign Service, “that he was someone who believed in America being the glue that created global stability and would be interested in upholding the world order as we have it.”

In a few short months, Tillerson had rid the State Department of much of its last several decades of diplomatic experience, though it was not really clear to what end.

The new secretary of state, it soon became evident, had an easier time firing people than hiring them — a consequence of the election that delivered him to Foggy Bottom.

In the past few months, the pace of nominations for the State Department has picked up. But even so, few of the nominees have qualifications that match those of their predecessors. more> https://goo.gl/qE5XZS

Updates from Chicago Booth

Should we stop the ‘revolving door’?
The movement of people between industry and government is a political talking point, but how big a deal is it? Research is starting to quantify the extent of the problem.
By Brian Wallheimer – When US President Donald Trump took office, addressing the “revolving door”—the movement of people between industry and government—ranked high on his agenda. In his second week, with members of his staff steps away, he signed new ethics rules while saying, “Most of the people standing behind me will not be able to go to work or do anything adverse to our wonderful country. Five-year ban. It’s a two-year ban now and it’s got full of loopholes.”

But the revolving door proved too irresistible not too push. The Trump administration hired former industry lobbyists for prominent jobs, and several cabinet positions came straight from corporate America. Even before Trump had a chance to sign the ethics order, which critics complained had its own loopholes, his former campaign managers had set up a lobbying shop.

Behind the revolving door is the idea of regulatory capture. Forty-six years ago, the late George Stigler described how a regulatory body tasked with protecting the public interest would ultimately be “captured” to serve the interests of the regulated industry.

Chicago Booth’s Sam Peltzman expanded on this theory, arguing that regulations come about through a balancing act involving politicians and interest groups, which can be companies or other affected parties. more> https://goo.gl/e2yyWn

Related>

Are Internet companies complicit in promoting hateful and harmful content?

By Hany Farid – In 2016, Facebook, Google, Microsoft, and Twitter announced that they would work together to develop new technology to quickly identify and remove extremism-related content from their platforms. Despite some progress, serious problems remain.

First, we need a fast and effective method to remove content. Once content has been identified, reported, and determined to be illegal or in violation of terms of service, it should be immediately removed (Prime Minister Theresa May is calling for a maximum of two hours from notification to take-down).

Fourth, we need to invest in human resources. While advances in machine learning hold promise, these technologies – as technology companies will admit – are not yet nearly accurate enough to operate across the breadth and depth of the internet. There are more than a billion uploads to Facebook each day and 300 hours of video uploaded to YouTube each minute of the day.

This means that any machine-learning based solution will have to be paired with a significant team of human analysts that can resolve complex and often subtle issues of intent and meaning that are still out of reach of even the most sophisticated machine learning solutions. more> https://goo.gl/X2ACdL

It’s Time to Rewrite the Rules of Our Economy

By Tim O’Reilly – Business leaders making decisions to outsource jobs to low-wage countries or to replace workers with machines, or politicians who insist that it is “the market” that makes them unable to require companies to pay a living wage, rely on the defense that they are only following the laws of economics. But the things economists study are not natural phenomena like the laws of motion uncovered by Kepler and Newton.

The political convulsions we’ve seen in the United Kingdom and in the United States are a testament to the difficulties we face. We are heading into a very risky time. Rising global inequality is triggering a political backlash that could lead to profound destabilization of both society and the economy. The problem is that in our free market economy, we found a way to make society as a whole far richer, but the benefits are unevenly distributed. Some people are far better off, while others are worse off.

Why do we have lower taxes on capital when it is so abundant that much of it is sitting on the sidelines rather than being put to work in our economy?

Why do we tax labor income more highly when one of the problems in our economy is lack of aggregate consumer demand because ordinary people don’t have money in their pockets? more> https://goo.gl/2DioyZ

When Even the Simple Stuff Is a Crisis

By Robert Schlesinger – What’s going on? If everyone agrees on these successful programs, why are they stuck in legislative purgatory?

The proximate cause is that the Republican majority got too distracted with its endless, fruitless attempts to roll back the Affordable Care Act. That consumed their attention through the year and very specifically in the crunch time during which the final deals should have been cut on basically noncontroversial legislation like renewing funding for CHIP and community health centers. But that went by the boards when the GOP dropped everything to push the late, unlamented, half-baked Graham-Cassidy bill.

Uncertainty abounds. And again, we’re talking about noncontroversial stuff here, which speaks to a larger problem with the political system. The failure of this Congress to understand “the need to act responsibly, to reauthorize needed programs without catastrophic disruption … is simply striking,” says the American Enterprise Institute’s Norm Ornstein, who has written extensively on GOP dysfunction (most recently “One Nation After Trump,” with Thomas Mann and E.J. Dionne). more> https://goo.gl/1xQG84

When Wall Street Owns Main Street — Literally

BOOK REVIEW

Makers & Takers: How Wall Street Destroyed Main Street, Author: Rana Foroohar.

By Rana Foroohar – Made up primarily of San Bernardino and Riverside counties, the Inland Empire was at the heart of the subprime mortgage crisis and has yet to fully recover.

In the early 2000s, predatory lenders flocked to the area, offering dicey deals to the largely minority and lower-middle-class white populations who, unable to afford housing on the coast, still craved the American Dream of homeownership. It ended, as it did in so many neighborhoods and cities across America, in tears and massive foreclosures, turning entire cities into ghost towns of derelict properties.

Private equity funds like Blackstone are giant financial institutions that operate largely outside the scrutiny of governmental regulation, since they are officially designated “nonbanks” or “shadow banks”—never mind that many of them are bigger than the better-known institutions that are subject to regulation.

Most people rightly associate private equity with offshore bank accounts (remember Mitt Romney and Bain Capital?), big corporate buyouts in which formerly healthy firms are loaded up with debt and stripped of their assets, mass layoffs, and an utter lack of transparency in their financial dealings.

But these days, the big news about private equity is that it is at the heart of the country’s housing rebound.

Private equity investors have become the single largest group of buyers in the residential housing market, purchasing $20 billion worth of steeply discounted properties between 2012 and 2014 alone and reaping huge rewards as housing prices have slowly risen from their troughs. more> https://goo.gl/P6fcNA

The flaws a Nobel Prize-winning economist wants you to know about yourself

BOOK REVIEW

Nudge: Improving Decisions about Health, Wealth and Happiness, Authors: Richard Thaler and Cass Sunstein.

By Eshe Nelson – Sorry to say it, but you’re not perfect. We like to believe that we are smart, rational creatures, always acting in our best interests. In fact, dominant economic theory these days often makes that assumption.

What was left of this illusion was further dismantled by the The Royal Swedish Academy of Sciences, who awarded the Nobel prize in economics to Richard Thaler, an American economist at the University of Chicago, for his pioneering work in behavioral economics, which examines humanity’s flaws—namely, why we don’t make rational economic decisions.

People can make bad economic choices based on something Thaler dubbed the “endowment effect,” which is the theory that people value things more highly when they own them. In other words, you’d ask for more money for selling something that you own than what you would be willing to pay to buy the same thing.

People experience the negative feeling of loss more strongly than they feel the positive sense of a gain of the same size. This is also impact by anchoring: If you are selling an item, your reference point is most likely to be the price you paid for something. Even if the value of that item is now demonstrably worth less, you are anchored to the purchase price, in part because you want to avoid that sense of loss.

This can lead to pain in financial markets, in particular. more> https://goo.gl/eR1B2B

The next financial crisis is probably around the corner—we just don’t know from where

By John Detrixhe – The German bank’s study of developed markets uses this criteria to define a financial crisis: on a year-over-year basis, a 15% drop in stock markets, 10% decline in foreign-exchange, 10% fall in bonds, 10% increase in inflation, or a sovereign default.

Deutsche Bank argues that crises have been increasingly frequent since the breakdown of the Bretton Woods system, which, after World War II, fixed exchange-rates and essentially linked them to the price of gold. That coordination ended in the 1970s when the US broke the dollar’s peg to the yellow metal. The link to a finite commodity helped limit the amount of debt that could be created.

As strategists at the Frankfurt-based lender see it, the resulting fiat money system has encouraged rising budget deficits, higher debts, global imbalances, and more unstable markets. At the same time, banking regulations have been loosened. In the US, the industry may soon have fewer restrictions and less oversight, a mere 10 years since the last worldwide crisis. more> https://goo.gl/vDnQ2w

Updates from Ciena

Optic Zoo Networks Keeps Vancouver’s Data Traveling at Blistering Speeds with Ciena

By Tony Ross – Optic Zoo Networks is a recognized brand throughout metro Vancouver due to our extensive carrier grade dark fiber network and infrastructure. Based on demand and to further accelerate our growth and better serve Tier 1 service providers, we knew it was time to take our offerings to the next level.

Our customers need to support bandwidth-hogging applications like virtual and augmented reality, as well as Internet of Things (IoT). However, in order for data to continue to flow with ease, we needed to ensure that Optic Zoo Networks was ready to support that growth. That meant offering new Carrier Ethernet Services (CES), and in turn, required that we build a Carrier Ethernet Network (CEN).

To continue to support top-echelon service providers, however, we needed to build a CEN that could scale instantaneously and meet the needs of organizations in a range of industries – from finance, healthcare, education, and more.

For example, customers that previously wanted to upgrade to higher levels of bandwidth had to go through inefficient processes, such as having to order a network loop that could take weeks. With our CEN, today’s 1G customers can easily upgrade to 10G tomorrow with a simple software upgrade. more> https://goo.gl/fh54t3

Related>