Friday, January 22, 2016

“Capitalism revisited: Do special interests rule?”, The Colorado Springs Business Journal, January 22-28, 2016, p. 20.


Capitalism Revisited

It’s that time again for new year’s resolutions, presidential “state of the union” speeches, or simply taking stock of capitalism as we know it.

When we hear that the price of a barrel of oil is declining to below $30, should we panic, rejoice, or ignore this data point? Do you recall when it was over $100 and we didn’t know if to panic, rejoice, or ignore it? Is this simply the result of, as economic textbooks have taught us, supply and demand? Or, is something else going on here?

What are the political ramifications of the decline in oil prices? Adversaries, from Russia and Venezuela to Iran and Libya are bound to feel the pain because their domestic budgets depend on high oil prices; even so-called friendly nations, like Saudi-Arabia and Brazil feel the squeeze. Are they all our competitors now?  

At home, mixed-messages abound: the stock market tumbles because oil giants are suffering and their losses are reflected in their stock prices which make up the index. Job losses are mentioned everywhere, as if the nation’s latest December upsurge in employment wasn’t real or lasting.

But wouldn’t lower oil prices, as translated into lower gas prices at the pump, not translate into greater discretionary spending elsewhere? And wouldn’t this create a domestic economic boom?

If you have a nagging suspicion that the argument about the natural wisdom of supply and demand and prices isn’t consistently applied to the market, you are not alone.

Robert Reich, the former Secretary of Labor under President Clinton, attempts to help us understand what’s wrong with American capitalism in his latest Saving Capitalism: For the Many, Not the Few (2015).

If anyone suspects Reich to be on the left of the political spectrum, he begins his analysis with the assurance that unlike Karl Marx’s prediction, capitalism isn’t inherently a bad system that will bring its own collapse.

Reich’s focus is on the rules that set up the marketplace, the political system that establishes the laws that support capitalism as an economic system. For him, it’s not the “free market” vs. “the “government,” but rather how the free market is supported by government regulations that are supposed to ensure its fairness and trustworthiness.  

Democratic governments set the rules by which market mechanisms work efficiently and for all, or inefficiently and just for the few. In recalling the warnings of politicians and justices from the past century, it becomes clear that the issue for them wasn’t how to protect the free market, but how to protect democracy from the wealthy elite.

Among the ones he quotes, the most blatant was supreme court justice, Louis Brandeis, who said in 1941 that “We can have democracy or we can have great wealth in the hands of a few, but we cannot have both.”

Was his warning prescient?

As far as Reich is concerned, when about half of all the senators and representatives who leave office (regardless of party affiliation) join lobbying firms and then pressure their previous colleagues to pass legislation that protects or promotes the interests of few corporate giants, then, yes, we have a political and economic collusion. to fruition!

Likewise, the concentration of wealth in the hands of the few, as Reich reports, is quite extreme: “the six Walmart heirs together had more wealth (in 2014) than the bottom 42 percent of Americans combined (up from 30.5 percent in 2007).”

Reich calls this a “redistribution upward” or a “pre-distribution” because it’s about the rules of the game of capitalism and how “invisible” they remain from public scrutiny. These rules, from intellectual property rights and monopoly power to contractual relations between corporations and their workers to the laws of bankruptcy and the lack of regulatory enforcement, ensure that the game is rigged in favor of large corporations, Wall Street, and wealthy individuals.

The days of “stakeholder capitalism”—where what was good for General Motors was good for America—have become after the 1980s the days of “shareholder capitalism”—where CEOs make decisions that favor themselves and a few large shareholders.

Reich reminds us of “interest-group populism” that prevailed after WWII when people joined local groups and professional associations to represent their interests, and what resulted was “neither rule by majority nor by minority but by a ‘majority of minorities’.” This way of thinking was inspired by John Kenneth Galbraith who argued for a “countervailing power” to limit the power of the wealthy.

So, instead of listening to pundits that lament the loss of jobs in the oil and gas industry, let’s remember that we can become the largest oil exporting power in the world, and that we can create millions of jobs in alternative energy industries!

Raphael Sassower is professor and chair of philosophy at UCCS. He can be reached at rsassower@gmail.com See previous articles at sassower.blogspot.com

Sunday, January 17, 2016

"Parallel Universe: How Wall Street & Republicans Thrive On False Negative Hype," LeadStories.com, January 17, 2016


Parallel Universe

If you listened to the last GOP presidential debate in South Carolina or have watched with anxiety the tumbling of the stock market, with a downward spiral that comes close to the 10% official “correction” designation, you’d think that the US is on the verge of collapse. If you were young and ambitious or retired with a sufficient nest-egg, you’d be checking the Internet on where to immigrate. Who would want to live in a country that is unsafe, led by a president who “doesn’t care about America,” and an economy that is so bad that more illegal immigrants are leaving than entering our southern border (by as much as 140,000 from 2009-2014, according to Pew Research Center). The political climate in Washington, DC is so contaminated and corrupt that some leading members of congress (Steve Israel of the 3rd district of New York is the latest casualty) are simply not seeking re-election (which is a guarantee to incumbents at the rate of over 96%, according to Louis Jacobson in Politifact).

But this isn’t the America I live in. I recall the announcement by the Bureau for Labor Statistics that some 292,000 nonfarm jobs were added in December 2015, that the economy was growing fast enough for the Federal Reserve to increase interest rates by .25%, that lower oil and gas prices and the discontinuance of the prohibition of oil exports will make the US not only energy independent and a net exporter of oil and gas but one of the leading producers of oil and gas in the world, and that overall we still enjoy civil rights that are denied by many of our allies, like Saudi-Arabia (whose legal system is based on a very strict orthodox interpretation of Sharia law). Paying less than $2/gallon of gas will allow all of us to spend more of our money on other goods and services which in turn will boost the economy, since about 70% of our Gross Domestic Product comes from consumer spending. Lower oil prices will lead to greater spending, and greater spending to economic growth; this, at least, is what neoclassical economic theory teaches us. But maybe this theoretical rosy picture is too na├»ve, maybe in the real world things work differently, even without a conspiracy theory at work.

In the real world of brokerage houses on Wall Street a stable economy that is slowly but steadily growing is not volatile enough for daily trading spreads. A bit of bad news followed by good news and vice versa ensures enough volatility to guarantee great profits. You can check the financial reports of any of the major investment banks in the US and see right away that the largest contribution to their bottom line comes from trading, what some call arbitrage (which is simply buying low and selling high). The margins are miniscule, but the volume is so large—billions of dollars daily—that by the end of the year there are substantial amount of money being made from little movements in stock or commodity prices. And when a bunch of hedge funds collaborate to bring prices down or up, as they have been fined after legal discovery, then the trust we have in the fairness of markets and the supposed reflection of prices of efficient information about supply and demand (EMH) falls apart. And if these margins aren’t sufficient, inside-trading is always available, as hedge funds, such as SAC Capital and its CEO Steven A. Cohen, have admitted as much when paying $1.8 billion(!) in fines.

Add to this the technically-enhanced “high-frequency trading” which finds the buying and selling prices of stocks nano-seconds before these prices appear on the market itself, and therefore are able to “game” the buy and sell orders before anyone else has a chance to fill them, and you have, once again, inside-trading plain and simple: information gained before anyone else has a chance to compete with you is still unfair, no matter what technical trick or loophole you were able to find. So, is volatility the dream of any trader? Yes, it is. Is knowing a bit before anyone else what someone is willing to pay for a stock inside-trading? Yes, it is. Grand conspiracy? Maybe not; but definitely an advantage to elite hedge-funds and investment banks that can game the system in the name of “free markets”; the term “collusion with impunity” seems apt. And when caught, years later, as Goldman Sachs was in its involvement with mortgages and the collapse of the economy, then a fine of $5.1 billion(!) makes it all okay—it’s the price of doing business. And the six million Americans who lost their homes can be forgotten. For those who are interested in a simple, straight-forward explanation of the mortgage bubble and its ensuing Great Recession, go watch the recently released movie The Big Short.

It’s plain why Republican presidential contenders claim that the country, led by a Democrat, is doing poorly—they want to build an argument for changing the guard: Democrats are bad, we are good, ergo: your next president must not be a Democrat but a Republican. It’s also plain why they would portray such a negative picture of America’s national security and its economy, not giving any credit to the president for any policy decision that helped us get out of the (Republican-induced) Great Recession of 2008-2012 or spending more on the Department of Defense than the entire world put together (ABC News 2/24/14), a budget which, incidentally, is voted on by Congress which, incidentally, is controlled by the Republicans. So what about the media?

You’d think the media would be smarter than all of that, telling us if the king has no clothes or telling us the truth about our own country. But you’d be sorely disappointed. What happened to independent reporting, cool-headed analysis, and a long-range perspective on what’s going on in the economy? What about calming the population rather than scaring it half to death, especially when there is no reason for alarm? Last I checked, there is something called self-fulfilling prophecies, the kind of alarmist pronouncements that make people withdraw their money from their local banks, only to perpetrate a run on the bank that in fact leads to its collapse… Have we learned nothing from our own economic history? Don’t journalists and pundits realize that the more positive their pronouncements are—given positive economic data—the better the economy (of consumers) will function? It’s plain that the latest negative hype is just a hype, nothing more nothing less. And the quicker we get over it, the better, because the American economy is still very strong!

Raphael SassowerWall


Monday, January 11, 2016

"The Trump Phenomenon: Something Quite Familiar," LeadStories.com, December 7, 2015.



 
The Trump Phenomenon
Raphael Sassower
No matter how bizarre Trump’s latest diatribes sound, there is something quite familiar in both their manner and content. This mixture of populism and xenophobia is American through and through with echoes found around the world. The sound is ideologically and historically-grounded. Though shocking to some sensitive ears, Trump speaks in a familiar voice.
The appeal of political leaders depends, most often, on a combination of several factors: charisma, zeal, racism, xenophobia, hopefulness, and fear-mongering. Different leaders have displayed a combination of some if not all of these factors, from our founding fathers to President Wilson, all the way to Stalin, Mussolini, and Hitler; Chairman Mao and General Peron come to mind as well. Though each offers his own variant with a combination of talents and personal characteristics, what is common is a sense of manifest destiny, delusional or real.
As a Republican presidential candidate, Donald Trump remains insanely entertaining. One wonders if he means what he says or is simply playing to the crowd, relishing a continuous string of cheers. But even this distinction—between the billionaire speaking his mind and the actor pleasing an audience—has become secondary. Like all theater, the blurring of the real and unreal, the suspense of disbelief, allows us as consumers of mass-culture to enjoy the ride and remain engaged.
And what a ride it is! Out of nowhere comes a privileged scion to a successful real-estate family to claim yet another piece of the American pie (or dream). What private jets and yachts symbolized a few decades ago, political power represents today. This, too, has a checkered American history, from the Rockefellers and Kennedys of yesteryear to more recent Silicon Valley trailblazers (eBay’s Meg Whitman and HP’s Carly Fiorina come to mind), it’s the latest coveted prize only money can buy. In this sense, there is nothing new here: a deep-seated conviction that financial prowess can be easily translated into political brinksmanship (even leadership).
But ordering people around as their boss doesn’t necessarily endear you to them. They may follow your orders but not respect you or your orders. And when the opportunity arises, they’ll jump ship as quickly as possible. Political wisdom comes with years of cultivating relationships, building trust, and ensuring that whatever compromise is reached, all parties can return to their constituencies with a genuine sense of accomplishment. Stirring the emotions is one thing, ensuring that these emotions are appropriately directed towards a common goal is quite another.
The latest claim by Trump to stop all Muslims from reaching our shores is also not as outrageous as it’s been portrayed. America has a history of singling ethnic and religious minorities for unfair, discriminatory, and cruel treatment: slaughtering and confining native Americans, importing and trading African slaves, interning Japanese-American citizens, and refusing entry to Jewish refugees fleeing Nazi Germany. From this perspective as well, Trump simply continues an ugly, shameful, and despicable tradition we thought we have left behind.
So what is novel about Trump’s utterances? Is it his poor grammar? No, W was just as inarticulate. Is it his flamboyant style? Not really, as there are numerous celebrities who can outdo him any day. Is it that he readily violates all standards of political correctness? This won’t do either, since the n-word rolls off all too many tongues and outright sexism is still blatant in all walks of life. What is novel is not that he says what’s on his or on his followers’ mind, but that he parodies the role and posture of a politician.
Trump’s parody is powerful insofar as it defies the standards of judgment (not to mention the standards of good taste). Politicians are supposed to be polished, Trump is not (except for his suits). They are supposed to be vague in their pronouncements, and he is not. They are supposed to be subservient to those who bankroll them, and he reminds everyone that he’s paying his own way. They are supposed to have a vision, and he does not. They are supposed to lead with a mandate from the majority while placating the minority, and he couldn’t care less about either group. But he still puts on a show, pretending to be a politician while all along enhancing his own brand.
Trump’s political success so far is the success of public venting, self-glorification, and branding. He excels in saying outrageous things—about Syrian refugees or Muslims—just to get attention, like the kid at a family gathering that screams or breaks dishes. We have many Trumps in our Age of Distraction, we call them celebrities. Popular culture pays attention to them in order not to have to think about or cover serious political and economic issues facing us. It’s easier and definitely more entertaining than having to compare alternative energy sources or the regulation of the banking industry, not to mention our infatuation with militarism and gun ownership. These topics we leave to academics, knowing full well that there is no danger that any reality show will ever follow them.
The Trump phenomenon is really not about Trump or his views; it’s about what American culture can tolerate in an Age of Tolerance. While the Supreme Court stretched the notion of free speech in 2010 to include corporation, it’s not that outlandish to find someone like Trump being publicly racist and religiously insulting. Where are the boundaries? Who sets them? And on whose behalf? Just raising these questions should alert us to what is unacceptable, and Trump is surely in that class of hate-speakers, the ones whose words are not only hurtful but can cause real and immediate damage. In short, Trump is a dangerous phenomenon America must stop.
    


"Tear Down Invisible Walls!," LeadStories.com, August 20, 2015


Tear Down Invisible Walls!

Raphael Sassower

The condensation from the Republican establishment and media dismissal of Donald Trump, the Republican presidential candidate front-runner, reminds me of the initial reception of the candidacy of George W. Bush whose pedigree and wealth overshadowed his inability to formulate grammatically-correct sentences. Without the benefit of an elderly cadre of advisors (Papa Bush’s buddies for W), Trump has come out with an immigration policy all other GOP candidates seem to endorse even if they aren’t thrilled with his rhetoric. It’s anchored by a commitment to completing the 2,000-mile long border fence (or wall) between Mexico and the US.

To be clear, it was President George W. Bush who signed the Secure Fence Act of 2006 with wide popular support from Congress and the voting public of border-states. When “57% Think US Should Continue Building a Fence along Mexican Border” (Pulse Opinion Research, LLC 4/9/13), Trump’s own bravado simply expressed popular sentiments. It’s a mixture of “strong on crime” mind-set associated with the Republican Party and a recognition that a law-abiding nation must disallow illegal immigration. A “great big wall” with a “big door” seems to fit this bill. Yet, this seemingly consistent argument for continuing the fence/wall construction is also met with the following public sentiment: 47% agree that “Immigration Helps more than Hurts” while 43% say the opposite (NBC/WSJ Poll, 7/26-30/15). Is there an internal inconsistency here? Or is it partially a veiled racist sentiment against a growing Hispanic population (with political implications if it votes for Democrats)?

Looking historically at walls around the world, the Great Wall of China is the first that comes to mind. Built between 700-206 BCE it spanned some 5,500 miles. Regardless of its partial success in defending and isolating China in the past, it’s now a tourist attraction. By contrast, the Korean Demilitarized Zone that has been in use since 1953 to separate North from South Korea, spanning some 160 miles across the peninsula, is still a functioning barrier. Miniscule by comparison to its Chinese counterpart, this barrier is a symbol of extreme xenophobia that causes hardships for an entire population. The Berlin Wall that was operational between 1961 and 1989 was a symbol of the Cold War with some 70 miles within the city and its environs. Given the famous challenge of President Ronald Reagan to the Soviet President Gorbachev, “Tear Down This Wall!” (6/12/87), why are presidential candidates still obsessed with wall building?

Perhaps one answer is the so-called success of the “separation barrier” on the 1949 “Green Line” border between Israel and its occupied territories of Palestine. Construction of this cement wall began under PM Barak in 2000, and its planned length is about 440 miles. Commonly cited is the fact that between 2000 and 2003 there were 76 suicide bombings in Israel’s pre-1967 borders; between 2003 and 2006 there were “only” 12 such suicide bombings. Hence, this wall has helped limit the danger from Palestinian attacks on Israeli civilians. A neoconservative narrative then extrapolates from the Israeli success-story to the ongoing illegal immigration through the Mexican border.

Facts about illegal immigration, deportation, and “dreamers” do not undermine the Republican narrative. The fact that there are less illegal immigrants coming over to the US today as compared to a decade ago is ignored (NYT 4/23/12). The fact that under President Obama (six years in office) more illegal immigrants were deported (over 2 million) than under President Bush (full two-terms in office) is also underreported (New Republic 4/17/14). And the fact that it’s Congress, now under Republican control of the two chambers, who ought to initiate immigration reform is also lost in the debate. Wasn’t it the Great Recession (2007-2012) that was a greater deterrent to immigration than any wall or fence?

Unlike the (visible) walls of separation, there are numerous invisible barriers of discrimination. It is those we should point out to the Trumps of this election cycle and ask them to tear them down. Among them is the glass ceiling that seems to be made of concrete, where upward mobility is limited if not impossible. Likewise, women’s pay inequality (77% as compared to men, Forbes 4/7/14) remains an embarrassing reality. Educational barriers (44% differential between rich and poor schools, The Hechinger Report 4/6/15) have become worse despite the rhetorical pronouncements of all presidential candidates. And most disturbing is the increasing gap in the opportunities for upward mobility of the poor (Nicholas Lemann, “Unhappy Days for America,” NYRB 5/21/15). As we saw in the latest housing bubble, the American Dream turns into an American nightmare with three missed mortgage payments.

Outside of the alleged socialist candidate for the Democratic nomination, Bernie Sanders, politicians are loath to bring up class warfare. But as the latest incidents of police brutality and murder of black youth from Ferguson, MO to Staten Island, NY and Cleveland, Ohio (to mention just a few such cases) show, racial tension is best understood in socio-economic terms, in terms of poverty and abject neglect of poor neighborhoods where blacks and Hispanics reside. Underemployed and falling outside the welfare net, these are also citizens (yes, they are legal residents whose voting rights are challenged (MSNBC 8/14/15), not illegal immigrants), who are part of the 12.9% medically uninsured (Gallup, January 2015); when there are still around 40 million Americans without health insurance, not to mention the fact that more than 45 million below the poverty line of $23,550 (Huffington Post 9/16/14), building a fence on the Mexican border looks absurd.

Instead of building walls of separation, we should tear down the invisible discriminatory barriers that still plague our country. Let’s turn our attention to the success of the Silicon Valley, where waves of immigrants—some with proper special visas, some without—have brought about creativity and ingenuity, hard-work and enormous prosperity. If Republican (and Democratic) candidates look for solutions to economic problems of growth, Silicon Valley is a model of tolerance, open-mindedness, and acceptance of all languages, countries-of-origin, racial, gender, and religious differences. Among the geeks of startup companies, only performance counts; all other characteristics are irrelevant. Is immigration a question of needed skills or race? Aren’t the special provisions for migrant agricultural workers in California not skill based? Or is it simply a profit motive that overlooks the immigration factor of the fantastically successful high-tech industry compared to menial work? This reminds us that we are a country of immigrants, after all, where one must climb the ladder of success and where the only indigenous people have been slaughtered or confined to reservations.

  










"From Greek Tragedy to European Farce," LeadStories.com, August 13, 2015.


From a Greek Tragedy to a European Farce

Raphael Sassower

When my sister and brother-in-law asked a cab driver in Portugal, just two weeks ago, what he thought of the economy, he casually answered: “What Hitler started, Merkel will complete.” This comment rings true as much in Greece as in Portugal.

The current German chancellor Angela Merkel’s behavior is far from the nastiness of Adolf Hitler and his fascist and racist regime, but her steadfast control of the European Union’s economy is reminiscent of the National Socialist Party’s concern, in the 1930s, over Germany’s inflationary descent into one economic crisis after another and its debt, post-World War I, to other European countries. So, on one level, economic conditions have historically dominated Germany’s political and ideological agenda.

On a second level, what the cabbie’s comment reminds us is that German dominance over Europe still upsets the Europeans, whether it is military occupation or economic supremacy. Germany’s economic strength is dependent on its exports to other European countries just as much as on its own economic discipline and efficiency. This has been amplified in finance capitalism, a new form of state-capitalist imperialism, where the banking sector determines all economic and political choices. Add to that the national guarantees afforded private banks, and the lines of demarcation between public and private interests are quickly erased.

And on a third level, there is a sad recognition by cabbies around the less fortunate EU member countries that German hegemony is malicious and intent on hurting them. Recall the derogatory PIGS or PIIGS (Portugal, Italy (and Ireland), Greece, and Spain) associated in the early 2000s with nations whose debt and economic strife came short of the financial targets set by Germany? It’s Germany’s way or the highway, as we say in the US! And those disgusting PIGS must conform to our high standards and turn into beautiful white swans.

But what makes the latest Greek tragedy of internal political strife and broken negotiations with bond-holders and yet another bailout request a European farce is the shift from financial analyses to explicit moralizing. Greek’s latest crisis is exposed as a moral failure as much as a financial one. The Greeks are singled out as corrupt tax evaders and lazy pensioners. Their refusal to follow austerity measures is an indication of leftist irresponsibility and infantile expectation that the nanny-state will provide unlimited and free services.

Unpacking the litany of moral accusations deserves careful analysis; instead, one may provisionally answer these charges in three ways. First, tax evasion is a cherished billionaires’ sport played around the world (and this doesn’t make it right). Greek billionaires registering their fleets and their multinational corporations in tax-haven islands is no different from German or American ones, from Halliburton’s headquarters in Dubai and Apple’s banking in Ireland all the way to those depositing their fortunes in private, secured accounts in Luxembourg and Andorra (as Switzerland is now more cooperative with foreign governments).

Second, since when did pensions become an indicator of laziness? Would Americans condemn military personnel, police-officers, fire-fighters, and teachers as inherently lazy? Last I checked, they all have pensions after anywhere from twenty to twenty-five years of service, similar to what Greek civil-servants enjoy, and this is a moral principle worth protecting (perhaps even extending to all working citizens).

Beware when financial arguments turn into moral judgments not because morality shouldn’t be part of the conversation but rather because it should. And if financial debt, as in the case of the Greeks, is so morally offensive, then the third point to recall is the German debt to Greece dating back to World War II (see an interview with London School of Economics’ Albreht Ritschl http://www.truth-out.org/news/item/27261-germany-s-unpaid-debt-to-greece-albrecht-ritschl-on-germany-s-war-debts-and-reparations).

Germany’s debt—financial and moral—to its European neighbors will never be fully repaid. Whenever self-righteousness is flagrant, as we have seen in the bailout negotiations with Greece, a farce is about to be exposed! Wasn’t it megabanks in the US who enjoyed a taxpayers’ bailout less than a decade ago?

"Iran Nuclear Deal Opposition: 'Dirty Hands'," LeadStories.com, August 7, 2015


DIRTY HANDS

Raphael Sassower

Just between observing the 70-year anniversary of the dropping of the first atomic bomb on Hiroshima (august 6th) and the second dropped on Nagasaki (August 9th), the Republican presidential candidates reiterated in unison their vehement contempt for the Iran deal to prevent it from building nuclear weapons. Instead of framing their outrage in moral terms or global disarmament terms, they merely want Iran not to have nuclear capability. The fact that the US is still spending billions annually to develop and build nuclear bombs wasn’t even mentioned. The first presidential debate saw the seamless mixture of a commitment to increasing the military budget and confessions of faith, enlisting divine intervention in America’s military might and global leadership.

The candidates’ misguided outrage against President Obama shouldn’t be about his weak negotiation skills with Iran, as some of them claim, but rather about his inconsistent, even hypocritical stance on nuclear weapons. While pledging in 2013 to reduce our nuclear arsenal and bring down nuclear weapon stockpiles around the world (meaning primarily Russia) he keeps authorizing billions of dollars in nuclear weapon spending, as is evident in the booming economy of Los Alamos, New Mexico. Does this sound like a Democratic capitulation to global nuclear threats? Has this Democratic president veered even slightly from his Republican predecessor’s hawkish stance? Would any American president dare challenge the military-industrial-academic complex that spends annually more than the entire world combined on its military might?

All of this reminds me of Jean Paul Sartre’s play “Dirty Hands” (1948) where intrigue and treachery are exposed as the way political maneuvers are bound to unfold over time, and where a straight-forward moral judgment is difficult to come by. The context of the play was World War II and the flirting of communist regimes with fascist Nazi Germany. Today’s realpolitik is cast similarly in terms of friends and foes, democratic regimes versus “Islamofascists,” where the moral high-ground can be asserted in unequivocal political terms. Does anyone seriously believe that a declaration of war against Iran will bring to an end tensions in the Middle-East? Are those who believe that the only way to handle Middle-East unrest is with another war be willing to personally participate in it, and if too old, send their sons and daughters?

Amidst this debate over nuclear threats, we should acknowledge the only nation ever to have actually used nuclear bomb has been the US, not once but twice, killing more than 200,000 people, primarily civilians. Was this the only way to end the Japanese threat? The debate, decades later, is still not settled. But it is this nation’s Republican candidates for the presidency who without a historical perspective or any sense of guilt or shame lecture the rest of the world on the danger of Iran’s nuclear program. Whose hands are “dirty” after all?

"Stop the Hypocrisy of Nuclear Threats," LeadStories.com, July 27, 2015


Stop the Hypocrisy of Nuclear Threats

Raphael Sassower

As Congress is about to review the deal made with Iran to lift international sanctions against it in exchange for slowing its nuclear ambitions, the specter of Israel’s survival has been brought up. Israel’s Prime Minister, Benjamin Netanyahu, has inserted himself into the American debate as if he were a member of Congress or at least a presidential candidate on the absurd level of a Donald Trump. Sensationalizing the threat to Israel, Netanyahu and some Republicans have argued against tipping the delicate balance of powers in the Middle East.

A few relevant facts must be recalled to set the stage for a rational (rather than hysterical) assessment of the deal. First, Israel isn’t party to the treaty with Iran, so why is its prime minister inserting himself into the debate? Second, if Israel will be affected, does its concerns overshadow those of all other nations in the region? How come they don’t intervene in American domestic politics? Third, since the treaty was signed by the UK, France, Germany, China, and Russia (in addition to the US), why only protest in the American media? Has Israel lost all credibility in the rest of the world? Fourth, if nuclear threat is at issue, have we all forgotten the open secret that Israel has nuclear capabilities and, according to some, nuclear weapons? The balance right now is wholly skewed in favor of Israel as compared to other nations in the region. Fifth, and related to the fourth point, Israel is also the only known nuclear power in the world that has not signed the international non-proliferation treaty—is this because a signature would be an admission of having nuclear weapons, or is it because American might protects it from international accountability.

The hypocrisy of demanding nuclear supervision of Iran but not of Israel is clear. For the longest time Israel has demanded to be considered beyond any moral reproach—and therefore its own hypocrisy couldn’t be mentioned in polite company—because of its designation as the homeland of the Jews, especially in light of the shameful international response to Nazi Germany’s extermination of the Jews during WWII. But we are no longer in 1945 (the end of the war) or 1948 (the establishment of the State of Israel). Israel is a military powerhouse that exports more weaponry than oranges, and has been able to conquer large territories of its neighbors in the Six Days’ War of 1967. As an occupying military force, it has behaved immorally (and many times in full violation of international law) towards its Palestinian wards. It’s hypocritical to demand moral authority only in the case of Iran, but display moral indifference about one’s own conduct in the occupied territories.

Even if Iran’s nuclear ambitions are neutralized for only a decade or two, it’s a far better solution to a nuclear arms’ race in the region. And how heart-warming to see Russia, China, and the US on the same side of the table with aligned interests in the region.

"The Age of Distraction," LeadStories.com


The Age of Distraction

While there are those who chase the latest diatribe uttered (with no cognitive filters) by Donald Trump or the latest photos of the outfit worn by the transgendered Caitlyn Jenner, real stories go under-reported. The fascination with the latest sensation would make sense if there was nothing of importance to report on; if there was nothing monumental that is taking place. But of course there is!

The fact that more than $1 trillion is owed in student loans; that these loans are made by private banks with government guarantees; that they cannot be written off in personal bankruptcy proceedings; that they are larger in the aggregate than home mortgages; and that they carry high interest rates, is an important story.

A minor reform, such as reducing the interest rate of these loans to the level enjoyed by commercial banks (less than 1% as opposed to 5%-9%), would offer an economic bonanza! The extra money not spent on interest payment could be used for increased discretionary consumption. No, this will not bring down the financial industry! No, this isn’t a socialist reform that would destroy capitalism; instead, it’s a reasonable suggestion already offered in the US Senate by Elizabeth Warren a long time ago. Why isn’t it a headline story?

You don’t have to be a tree-hugging environmentalist to realize that yes, there is a real story in closing down all coal mines in America. Stop talking about the loss of jobs—we are killing these laborers day after day by expositing them to devastating ailments (and by the way, who’ll pay for their treatment?). Start talking about technological innovations, from solar to wind energy, whose inception has been American but whose eventual execution (and the jobs associated with it) has been outsourced overseas. Yes, this is a story worthwhile putting on the front page!

What has been the cost-reduction of solar panels in the past 12 months? Does it therefore make sense to produce these panels here, in the US? Should there be government subsidy? If not, what other subsidies are worth discussing? Is there a built-in conflict-of-interest between consumers (rate payers) and producers (energy and utility companies, private and public)? How can we align their interests and ensure cheaper and less hazardous energy production and consumption?

No, energy isn’t sexy, not as much as watching the cleavage of this or that starlet; coal-mining diseases are ugly and afflict the working poor, so putting front-page photos of the latest victim isn’t sexy as well. But guess what, without talking about the real issues—no, not those I designate as real, but those that can be dealt with and solved with a bit of public input—we’ll never be out of the rut in which we, the 99%, find ourselves. Occupy Wall Street’s 15-minutes-of-fame may be over, but its message is not! It’s our responsibility to keep it alive rather than be distracted by few billionaires whose ego is so inflated that they can relate only to each other. 

Raphael Sassower (Professor and Chair, Department of Philosophy, University of Colorado, Colorado Springs)


Tuesday, September 8, 2015

“Closer look at the Stock Market Blues,” The Colorado Springs Business Journal, September 4-10, 2015, 23.



The Stock Market Blues

When I was a teenager I asked my father, a successful businessman, what he thought of a downturn in the stock market, and he calmly answered: those who bemoan a market downturn never tell you about the market upturn. They forget to tell you that their losses came after great gains.

My father was a refugee from Nazi Germany who never fulfilled his academic dreams; he was what we call an autodidact, a self-taught man, who began as a leather apprentice, brick-layer, and a truck driver; he eventually employed more than 100 people.

His words come to mind when looking at the most recent market collapse (and speedy recovery). What should we make of this financial turmoil? Whose opinion should we follow? Who on the networks and Internet is trustworthy?

There are two schools of thought when it gets to the stock market. One claims that the stock market is a reflection of the financial reality of the marketplace, a mirror through which we can clearly see the reflection of the health (or sickness) of the economy. 

This view is best articulated by the Efficient Market Theory, arguing that stock prices reflect or embody the best knowledge or information about a company and its financial prospects. 

In short, stock prices are an accurate measure of all available information of any individual company or an entire industry. In this sense, no manipulation is possible because too many hawks watch carefully every move of every company—transparency is best found in stock prices!

The second view claims that the stock-market is a side show where gullible investors waste their hard-earned money while professionals use algorithms to clean them dry. Private deals are cut behind the scenes, such as when the “prophet (or sage) of Omaha” (Warren Buffett) buys and sells companies outside of public channels. 

When he decided to “buy” some underpriced shares of Goldman Sachs after the last bubble burst that started the Great Recession in 2007/2008, he approached Goldman’s executives directly, named his conditions, and readily invested $5 billion. He “made” the market, rather than “followed” it or participated in its volatility.

Given that you may find one school of thought more appealing than the other, for whatever ideological reasons—there must be fairness! We are all equal investors, after all! My money is no different from a billionaire’s!—you still should be aware that it’s all about “framing.”

Framing is a favorite trope of behavioral economists who argue that judgments, choices, and decisions are made within specific frames of reference. Once the frame is changed, the decision will change as well. This is not “irrational,” but a reasonable reaction humans have to what appears relevant to their choice-making processes.

So, let’s frame the latest stock-market decline. On August 27, 2014 the DJIA stood at 17,122; a year later, on August 26, 2015 at 16,285; this is a 4.88% decline. Not something to cry over, is it? If someone told you that your house lost 5% of its value in one year, you might be upset a little, but not devastated.

If you look at a 5-year horizon, you find a different story. On August 27, 2010, the DJIA was 10,150, so that the same August 26, 2015 close of 16,285 represents now a 60% increase in value. Not bad for not doing much but letting your portfolio sit there, enjoying the economic recovery that was blessed by George W. Bush and implemented by Barack Obama.

For every Black Monday, August 24, 2015, with a so-called collapse of the market (588 point loss), there is Happy Wednesday, August 26, 2015, when the market rebounds (619 point gain). Do you live your life day-to-day or are you willing to look at a longer horizon? As I approach a milestone 60th birthday, I look at decades, not days.

Nutritionists and diet expert warn us not to check our weight hourly or daily, and remind us of normal body fluctuations. They do, however, look for trends of gaining or losing weight, when the cumulative difference is statistically significant. When my 94-year old mother began to lose weight rapidly, we knew she was dying; it was a unidirectional trend, not a daily fluctuation.

As under-educated as my father may have been, he had the common-sense of a refugee and a self-made businessman; he knew that when his business had a bad day, it didn’t mean he’d have a bad year, and vice versa.

The same is true of the restaurant business. It’s hard to remain optimistic when you have a bad day with few customers. But don’t forget the great night you also enjoyed. What makes the day-to-day ups and downs bearable is the optimism of a long-term horizon!

Raphael Sassower is professor and chair of philosophy at UCCS. He can be reached at rsassower@gmail.com See previous articles at sassower.blogspot.com