Archive for the ‘Politics US’ Category

What happened in 2017 and what might happen now?

December 24, 2017

My favourite Xmas card for 2017 reads,

“Three Wise Women would have asked for directions, arrived on time, delivered the baby, cleaned the stable, made a casserole….and there would have been Peace on Earth.”

 

Overwhelmed by news coverage of the Trump presidency, I think we have lost sight of what actually happened which is a precursor for trying to figure out the future.  I suggest that Trump is like the head of a nasty boil beneath which resides a lot of infectious puss resulting from some unpleasant causes. It could kill you but can hopefully be treated.

What follows may be an oversimplified explanation, but here goes. Since becoming selected as Republican candidate, being elected and governing for a year, Trump has managed to grab the headlines with outrageous comments and behavior. If anyone else had done this they would have been crucified politically and in the press. Trump manages to change the channel when public indignation is stoked. He is an artiste at managing the press. He is more clever than mad.

So far the president’s support is rock solid with 30-35% of the US electorate. Some are traditional Republican voters, while others probably supported Bernie Saunders and may not have voted for Clinton. The Saunders followers felt and still feel that Washington is a swamp and Trump’s boast to drain it remains attractive to them.

The 30-35%, or a portion of them, feel that they have not shared in the economic growth of the past decades. Growth has seen significant structural changes in the economy, such as the loss of manufacturing jobs and their replacement by a combination of outsourcing and growth of service sector jobs associated with rapidly evolving communications technology. At the same time, some groups have managed to shape the rules of the business game, through such things as tax breaks, subsidies and protectionism favouring certain investors and sectors. In turn, these favoured ones finance political campaigns and keep the swamp well infested.

Responsible for all this are the acts of previous Democrat and Republican administrations, which have shaped the policy infrastructure to the benefit of their traditional supporters. What we observe and experience today is the result of an evolving social, political and economic backdrop. Trump is the focus of this scene. But without him the same underlying forces would be at work leading to some probably unwelcome outcome.

Can there be a positive future given these events? Probably, but this depends on the sturdiness of the of the American political system over the next three years. Trump will have left some unexploded mines on the political battlefield. He will have governed by signing executive orders (Obama did the same thing in his second term with a Congress controlled by Republicans), and by making judicial appointments of people favouring his political views. In this sense Trump is here to stay by leaving a lasting mark on American society. It will take time and leadership to redirect the ship of state.

Seasons greetings to all.

 

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What might a post NAFTA world look like?

December 13, 2017

It is time to think about life after NAFTA. Since we don’t know what the details will be, all that can be done is to try to map out the factors, other than the revised terms, which could be no NAFTA, needing consideration. For this I refer to the methodology pioneered by Ronald Coase (Nobel Prize Winner in Economics 1991) focusing on how firms organize factors of production.

 

The term supply chain seems to have displaced vertical integration to outline how firms organize the production of goods and services. In general, firms weigh a make versus buy decision for the various goods and services needed, where make versus buy may involve a cross border transaction. An aluminum smelter may source bauxite and alumina from its own operation abroad or from an independent supplier abroad (or domestically). Both involve a transaction between the two stages of production. One is an intrafirm and one an interfirm transaction. Multiply these alternative opportunities for one stage of the supply chain by all the inputs required at different stages of production, and you get a large number of decisions to be made. A firm’s management has to get input from engineers, tax accountants, shipping specialists and others in order to reach the least cost way to organize the supply chain.

 

A similar situation exists when organizing the production and use of services, as opposed to goods. Input from lawyers and accountants, for example are needed to aim for the least cost way of production and distribution for a firm’s supply chain. For both goods and services, tariffs and non-tariff barriers are ingredients to take into account, hence the importance of the terms written into trade and investment agreements like NAFTA.

 

With ongoing technological change, it has become easier and cheaper to undertake crossborder transactions for goods and services, but especially for services such as finance, technology, accounting and advertising. The service alternatives available to many firms provide a similar challenge for those monitoring the operations of firms such as tax collectors.

 

What has this all got to do with the outcome of current NAFTA negotiations? Technological change has given firms more ways to organize domestic as well as international operations. The extent to which a NAFTA with new terms will raise costs for individual firms depends on the numerous alternative ways in which the supply chains can be organized.

 

The items to focus on include the ease with which capital, labour and technology can be moved across borders before and after a new international agreement is reached. At one time, Canadian manufacturing industry was protected by tariffs from imports. This lead to US firms hopping the tariff wall by investing in Canada, and more often than not setting up plants on a smaller less efficient scale in Canada, thereby creating what was called the miniature replica effect (plants that were too small to achieve scale economies in production and distribution). With lower tariffs due to NAFTA, imports could flow across the border in both directions. Similar opportunities opened up to Canadian firms selling into the US market as a result of NAFTA. If lower tariffs are removed, firms could be forced back into less efficient (higher cost) means of production.

 

It is highly likely that the abolition of NAFTA would lead to higher production costs and prices in Canada and the US, but the harm may not be as great as would have taken place a decade ago as firms have developed more ways to reduce costs. Where do these new opportunities exist? A combination of inward and outward investment, inflow of cheap labour (temporary foreign workers), and outsourcing abroad of work are areas to monitor and study.

 

When Ronald Coase researched similar issues, he did it by visiting plants and interviewing plant managers and workers on the shop floor who made the decisions about how to produce and ship goods and buy services. Others tend to do this by examining published statistics which is a step removed from the people actually handling the goods and making the decisions. Alfred Marshall, another economist used a similar methodology in research for his major work Economics of Industry (1879).

 

Of course, the cancellation of NAFTA will raise the costs of production for certain firms and industries, but the consequences may not be as dire as some predict.

Trumpmania

December 8, 2017

I confess I am addicted to following the antics of Comrade Trump, partly because it is such good theatre with the curtain rising on a new scene almost daily. But partly because events south of the border are already impacting our lives. Regardless of the outcome of the NAFTA re-negotiations, business will delay or cancel investment opportunities for the time being thereby slowing the economy. I am still amazed about why the US stock market is doing so well.

My addiction is fed by watching excerpts from Morning Joe on MSNBC for the anti-Trump view, and Fox News for opposing commentary by pro-Trump supporters. Add a puff of Steve Bannon and Breitbart News and the day can be shot without doing anything else, except to wonder whether Little Rocket Man or Humpty Dumpty (HD) will light the fuse for a nuclear holocaust. The Daily Show is another channel I watch. Hardly a day goes by that host Trevor Noah does not have a clip about the President and his supporters.

Each day Humpty Dumpty on Twitter offends someone personally, and as soon as the reaction gets out of hand he changes the channel –  from the charges laid against former campaign manager Paul Manafort, to Michael Flynn’s guilty plea, to testimony to Robert Mueller’s investigation, to the meeting of son Donald Jr with the Senate Committee on Russian election interference, to the decision to move the embassy in Israel from Tel Aviv to Jerusalem, to name a few. What will it be tomorrow?

The news media grab any story involving the President and his cabinet, and we the audience dutifully follow assuring that network audiences remain high. After a year in office, I conclude that one needs to watch both sides, in my case that is MSNBC versus Fox News with a touch of Breitbart. If one only listens to the MSNBC viewpoint then one misses the reason why HD won the election (OK with fewer votes), and why it is that over 30% of the electorate continue to support him, and apparently quite strongly. The majority of the electorate is fed up with the way Washington is run and support him as someone who could shake things up. Unfortunately, he is doing it for the benefit of his wealthy friends, not for the masses.

Michael Moore was one of the few people outside the President’s close supporters who called the election correctly. Moore spent time attending rallies for both candidates, noting that Clinton often had small and unenthusiastic audiences. And when Sanders’ supporters were asked if they would vote for Clinton, if Sanders was not the candidate, they often said no. Twenty-five years of Bill and Hillary in Washington was viewed as enough by many. And when Obama later accepted $400,000 for a speaking engagement five months after his term ended, this seemed to reinforce the need to drain the swamp.

HD is now behaving like a dictator. He asks the head of the FBI to drop the inquiry on Russian interference in the election; his legal advisor says he is above the law; his son claims client-counsel privilege when neither of them are lawyers; and he tweets his feelings daily. One hopes that the adults around the White House can keep him in check. They are mainly military men who must be wondering why they took their jobs. Tillerson from head of Exxon has become little more than an errand boy. Males groping females has now become headline news with the resignation of Al Franken, and the forgotten news that a president boasted about his groping.

These stories fill the headlines, and there will be more. Meanwhile important events are taking place in Europe and Asia which could ignite economic and political tumult around the world. Today our attention is drawn to the resignation of Senator Al Franken for behavior that HD boasted about. What will it be tomorrow?

When the Leader Stumbles

November 18, 2017

“The US is in the middle of a political meltdown, unable to manage a domestic agenda or a coherent foreign policy. The White House is in turmoil; congress is paralyzed; and the world is looking on in astonishment and dread.” (Jeffrey Sachs, 2017)

 

Trump manages to capture the headlines on almost a daily basis. Future readers will wonder what important news items did not get covered as Trump feeds the media raw meat, and the public eagerly devours it, partly because it tastes so good. The President has the knack for drawing attention to some new issue especially when the questioning on others gets too uncomfortable. His information sources appear to be cable news channels and a coterie of close advisers who themselves have had little experience of governing, although some, as military leaders, may have had impressive careers. As the days pass, the hope is that these don’t get fed up and decide to leave early, although in many countries the citizens shudder when the generals take over.

 

It will be interesting to see who was offered senior positions in the Trump administration and refused, who accepted jobs and their respective qualifications. It seems clear that senior levels of the US federal bureaucracy are being weakened by a failure to make appointments and the selection of poorly qualified people.

 

Canada’s proximity to the US is seen by most Canadians as offering enormous economic benefits. Arch nationalists may disagree, but many countries, at least in the past, would have eagerly swapped places with Canada in order to have ease of access to US capital and other markets. Now our neighbor is a flailing (failing?) nation with the attributes described by Jeffery Sachs.

 

In today’s world there are trained suicide bombers returning from the Middle East, others home-grown who never leave home and can learn details of their trade from the internet. Drones can be purchased from Costco and toy stores; trucks are available to rent. It is surprising that terrorists have not struck more soft targets like stadiums, bus and train stations and airports.

 

Managing these situations requires cooperation and trust between governments. Unfortunately, this is not what is happening as turmoil mounts in the US with isolationist forces on the rise, while the threats require international cooperation. Similar populist pressures advocating isolationism are growing in Europe both with Brexit and in individual countries. There are no easy solutions to the issues that give rise to these pressures, but it would be nice to know that mature grown-ups are trying to manage them. US observers tell us this is now not the case.

The Politics of Resentment

October 18, 2017
After watching and reading about Trump during his first ten months in office, I have gone from thinking him dangerous and mentally unstable to a feeling that he has a personality disorder. This still makes him dangerous because of how people may react to his antics and statements.
While no psychologist, I find his behaviour as petulant and childlike. But while a child can be disciplined and quarantined, this is not the case with an elected politician in a democracy. Hitler and Mussolini were elected via a democratic process and then overturned it. I am not sure about Franco and Stalin, but both had a core of strong supporters.

A mistake now is to focus too much on the man rather than on his supporters. After ten months, between 35 and 40 percent of the US electorate continue to support Trump. Many are not traditional Republican voters but people who feel that they have been getting a raw deal from their elected politicians. Like Hitler’s supporters, they are willing to follow a leader who offers them prospects, because it can’t be any worse than their present situation. The party label of the leader matters much less to them than the promises made. Eventually they may feel betrayed by their leader; the alternative could be a more extreme leader or a manning of the barricades as in Les Miserables.

What motivates the 35 percent is that over the past few decades their real incomes have declined, and the gap between the top 10 percent of families and the rest has widened with few prospects of better times. They are willing to support someone who offers better times ahead even if his manner is a bit rough up close. Of course if he does not deliver they may switch their support, perhaps to someone with more radical views and exhibiting more outrageous behaviour……caveat voter.

Trump connects with the 35 percent by understanding and appealing to their feelings of resentment. He feeds off it and so do they. I found the works of Michael Sandel, Professor of Politics at Harvard, and J.D.Vance author of Hillbilly Elegy provide good explanations of the American scene. The electoral success of right wing parties in Europe manifest similar political forces.When the Economist considers that Jeremy Corbyn could be a future UK prime minister you know something is afoot. Canada has a version of this with the Ford brothers in Toronto.

Turbulent Times – A Path to Dictatorship?

August 27, 2017

A rough path to dictatorship is to be elected by a recognized democratic process and then to use the powers to create a dictatorship. Hitler did this in the 1930’s in Germany, while Mussolini and Franco performed a version of this in Italy and Spain. Conditions prevailing in each country determined the particular means to the takeover. Could this happen again?

 

After less than a year in office, 35 percent of the US electorate continue to support the president. Many are people with lower incomes who have not enjoyed the benefits of economic growth enjoyed by the rest of the population. To-date, President Trump has the support of those disadvantaged who are willing to ignore or to forgive him for the erratic way in which he has chosen to govern – the failure to make appointments to key positions, scripted speeches outlining policies (increasing troop deployment to Afghanistan) together with incendiary remarks about the failure of Congress to enact his platform, and possibly a willingness to create turmoil by refusing to fund the government. Another sign of unrest is the number of appointees who have either been fired or resigned their positions in the first eight months of the administration.

 

Presidential power has so far been held in check to-date by a combination of media reporting, the courts and acts of Congress. Should these fail to receive public attention and support then the democratic process flowing from the US Constitution will be in jeopardy. Currently two areas of particular concern are what happens if North Korea (or any other nuclear state) initiates an attack, and what happens if funding to the federal government is terminated.

 

The circumstances today in the US are in many ways unlike those experienced by Germany, Italy and Spain in the 1930’s, but the seeds of dictatorship exist and could still take root. The growth of political and economic uncertainty, both domestically in the US and internationally, is bound to create instability – in what precise ways is difficult to predict.

Forty days into the new US administration – some thoughts

March 3, 2017

1. Michael Moore called the election correctly, unlike almost all the news media pundits. He did so by observing the enthusiastic crowds at Trump meetings, and Clinton’s lukewarm crowd support, plus the fact that Sanders supporters said they would not back Clinton if Sanders was not the candidate. Most of the media forecast the outcome they wanted, not what voters were signaling, which the democrats did not want to hear.

2. The Democrats nationally are now in the weakest position they have been in for decades with no obvious leadership candidates. They have lost Senate and House seats, governorships and control in a growing number of states. They did however get about three million more of the popular vote in the presidential contest. While this does not count in the way presidents are elected, it reinforces the message that the country is divided.

3. The newly elected president does not read mainstream media, although his staff does. He Tweets and watches cable news networks, especially Fox News. His behaviour suggests a cocktail of narcissism and mental instability. This seemed to change with a measured and lengthy speech to the joint Congressional Houses on Feb. 28th. The speech contained spending proposals which would vastly inflate the budget deficit and weaken the US dollar and raise interest rates. However the stock market has boomed since the election…..go figure.

4. The involvement of Russia in the election is still unknown, but after a brief honeymoon period between the US and Russia there are signs of future instability due to contacts between Republican cabinet appointees and Russian officials before the election. This could be linked to Trump’s tax returns which may show that he had funding from and commercial ties with Russian businesses.

5. Elected Congressional Republicans are having a hard time knowing how to respond to the President’s proposals. Some they like, but some they strongly oppose, and so does Ivanka.

6. A personal prediction (few turn out to be accurate) – the President’s close advisers, Bannon, Priebus, Conway, Spicer and Miller are unlikely to hold these positions a year from now. They helped to shape the campaign rhetoric but may not be the most adept advisors for governing.

7. Leading firms in the mainstream media are labelled as providing ‘fake news” when they criticize the new administration. These firms seem to be hanging in and retaining their influence and may become the most effective critics of the government.

Prediction – Marie Le Pen will win the French election.

What does populism mean?

February 22, 2017

Populism is a loosely defined term which seems to refer to actions taken by any group within a society which is fed up with conditions affecting them, low wages, unemployment, refugees, immigration and so on.

It is used to describe the reasons for Brexit in the UK, terrorism/racism/immigrants and unequal income distribution in the US, and refugees and related conditions in countries such as France, the Netherlands, Italy and even Germany.

In Canada, according to Wikipedia, populist movements describe the Social Credit and the Reform Party in Alberta, Creditistes, the Union Nationale and PQ in Quebec, the federal Liberal party under Prime Ministers Mackenzie and Laurier, labour parties leading up to the CCF and NDP, and support for various premiers of Ontario.

This seems to be rather all inclusive referring to any time when a group in society becomes activated and organizes politically. It merely describes contemporary political conditions. A recent case of populism today would be Ford Nation in Toronto, where one segment of the city feel that they are taxed for the benefit of another. The Ford brothers used this to their political advantage.

It does not seem to be a useful term unless the reasons for it are given.

Political correctness beyond understanding

November 28, 2016

Political correctness (PC) has gone rogue. Anything said by anyone that is conceived as mildly offensive to someone else is today often deemed to be off limits for discussing or even mentioning. The consequences for intelligent and informed debate are chilling, and reminiscent of what successful dictators attempt and often achieve, at least until their demise. The new Vice-Chancellor of Oxford University, Louise Richardson, in favour of promoting robust debate over contentious issues, stated that educational institutions are “places where we should hear any legal speech, and we should teach our students how to confront any speech which you (they) find objectionable.”

The Vice-Chancellor has specialised in studying and publishing on terrorism while holding academic positions on both sides of the Atlantic. Her research on terrorism and its causes culminated in an acclaimed 2006 book What Terrorists Want, described by the New York Times as an “essential primer on terrorism and how to tackle it”. In the 1970s, she was recruited by the student branch of the IRA, attended meetings and discussions but decided not to join as she could not endorse the use of violence.

If PC is given a free rein, it will ultimately restrict informed debate and support conditions for a type of theocracy to prevail that will suppress the discussion needed to stimulate understanding, especially regarding social (political and economic), cultural and scientific issues. We see this already in the field of climate change and global warming where not only deniers but sceptics are widely considered to be beyond the pale as they are told the “science is settled.” As opponents of Galileo found out, the science is never settled.

 

 

 

Where the light does not shine

November 21, 2016

One of the more interesting pieces on the 2016 US election is by David Remnick, editor of the New Yorker. It is available online at:

http://www.newyorker.com/news/news-desk/an-american-tragedy-2

The short video that follows it is worth watching as well.

 

Like others, journalists and non-journalists, Remnick failed to forecast the outcome, and is now commenting on the future, mainly for the US. He views it bleakly but cautions, as Orwell did during the 1930s, against despair.

The prospect is bleak for the US and other countries, but before peering ahead it might be useful to consider the counterfactual. What would have happened if Clinton and the Democrats had won? The outcome would have been that about half the US population that bothered to vote (turnout was 58% of the 224 million electorate, so 94 million did not vote), would be reacting with disgust and demonstrating their disappointment.

 

  1. The so-called Republican supporters (now in opposition) would consist of all those who voted Republican. They were Trump supporters and Sanders supporters, both of whom were protesting against the way Washington politics operates.
  2. This combination of Trump supporters (now on the losing side) would have protested that the election was rigged, and had resulted in the continuation of politics under Democratic leadership, which had held the Presidency for the past eight years and had failed to recognize the plight of many lower income Americans.
  3. Resentment would have increased and politics become even more toxic with unforeseen consequences at the next election. It would not have been a pretty sight.

 

Considering the counterfactual is not to welcome the actual outcome, but to use it as a warning for what might have happened, what could still happen, and what needs to change during the current administration, and by the traditional Democrat and Republican parties prior to the next election.

There are now two wings to both parties. For the Democrats there are the Clinton and Sanders supporters; many of the latter said that they would not have supported Clinton if Sanders was not the candidate. For the Republicans, there are those like McConnell/Ryan, and the Tea-Party group like Sarah Palin and possibly Ted Cruz (who may be a party of one as no-one seems to like him, although he is recognized as being smart).

Will the party structures change? I have no idea, but some sort of change seems to be in the wind. The media, traditional and online, will change as people adjust to how they receive information. At the moment, the shock of the results and a focus on Trump, his cabinet and advisers, exercises the media. In time, political and economic conditions in the US and the rest of the world will hopefully receive more attention.

In Canada, there is a certain smugness that it happened there and not here, and some Americans are talking about moving north as they did during times of slavery in the South and the Vietnam war. A fleeting acquaintance with what happened globally since 1900 should discourage a leaning towards smugness.

When your keys are lost, you look under the street lamp because that is where it is brightest.  You may need to look in the shadows. The same is the case for the fallout from the election. Some of the dark spots may be more revealing, like the number who did not bother to vote.