Wednesday, November 4, 2009

Politics and Economics

It's time to recognize an inconvenient truth--circumstances beyond our control have put the politics back into political economics. Yep, that's right. The playground has been invaded. And the invaders won't necessarily be all that impressed or swayed by technocratic arguments. The systemic risk will go up, and the breakage will be, well, non-trivial. Blame for the breakage, incidentally, will fall erratically on those who caused it, those who suffered, those who tried to prevent it and the completely uninvolved.

Timely indicator #1--This morning Bloomberg's website (of the organization, not the mayor)carried the following headline, "Profit Not Satanic, Barclays Says, after Goldman invokes Jesus". Now, there is a mindset. I suppose next we'll have evangelical pastors of megachurchs trumpeting the profitability of their organizations?

Timely indicator #2--McKinsey distributed a piece to its readership entitled, "Sociopolitical Issues in Hard Time . . . ", which is elegant corporate speak for 'the usual payoffs to politicians aren't working and we need to try something else'. The usual operating assumption of successful private sector executives is that regulatory/legal/public policy issues can be resolved through litigation, negotiation, lobbying, political contributions, and, if all else fails, compliance. That version of reality is, er, no longer operative.

It has taken over a year, but the political class in the United States is awakening slowly to a couple of facts:
1. A year ago the financial system failed. It has been on government support ever since.
2. The public is slowly, lost job by lost job, home appraisal by home appraisal, realizing that something is seriously wrong in its collective pocketbook.
3. The people running the financial institutions cannot be trusted to play the new game--they have used the respite to default back to their old reality.
4. A previously oblivious and indifferent swath of the public is in the process of a volatile and potentially disruptive political awakening.
5. Something's up.

Note that one rhymes with three and two rhymes with four, and five is the conclusion.

It's not clear whether the Republicans or the Democrats will grab onto this issue. The Republicans do the politics of bitterness and resentment better than the Democrats (regardless of who is in power). But the issue plays better into the Democratic world view (the Republicans are such toadying wealth worshippers on economic issues). And, while the Republicans enjoy the advantages of indiscipline and experimentation, they currently are squandering it by putting their kooky right on display (it will take a while for the new governors of Virginia and New Jersey to offset the antics of Sarah "the Maverick" Palin and Rick "Tea Party" Perry). Play to the faithful, play on, but remember, the rest of the world is looking on. The Democrats are busily rolling in the hay with the Wall Street Tar Baby, but tar can be washed off, and all the White House to do to shift gears is accept a couple of resignations (Geithner and Summers), install Volker in a postion of authority, and use the presidential pulpit to light into Wall Street (malefactors of great wealth, and so on, I believe there are some scripts in the vault).

Obama is a careerist, but he turned his back on Wall Street once before (after being president of The Harvard Law Review and clerking on the Supreme Court), and he could do so again.

Tuesday, November 3, 2009

Puzzles, Mysteries and the Rise of the Blogosphere

Some old fart who retired from the CIA years ago used to claim that there were two kinds of intelligence problems--the puzzles, which could be solved with additional pieces of information, and the mysteries, which required analysis, and, in the end, a judgement call. Puzzles tended to be quantifiable (both as formulated and as answered) while mysteries tended to be more subjective and dependent on analytical work (again, both as posed and in terms of response). The late-20th century mandarins of Pax Americana were, on the whole, happier with puzzles than with mysteries (at least as they surveyed the external world).

Certainly, today, the pride of the mainstream media lies in its ability to provide coverage and hard information. Some of this coverage may verge on the ridiculous (Anderson Cooper on the tip of the spear facing the Taliban, Anderson Cooper on the seawall facing the storm surge). Some of the coverage is historically heroic (printing the Pentagon Papers). But when the defenders of the existing media, with its far flung network of bureaus and stringers, its travel budgets and longstanding sources, make the argue that navel-gazing bloggers can't hope to meet the need for reporting, for hard information, they are focusing on the puzzles, not the mysteries.

What the bloggers do well--frequently better than the traditional media--is address the mysteries. And right now, and for the foreseeable future, the ability to decipher the mysteries is more useful than the capacity to unearth more pieces of the puzzle. The isn't always the case. But right now, particularly in the financial sphere, it is. Given that most financial news consists of rewritten press releases, conference calls posted on the internet, and statistical series with highly choreographed release rituals (admittedly designed more to insure the integrity of the financial markets and level the playing field than to insure maximum publicity), the opportunity for SCOOP are pretty small.

So, floreat Blogonia!

Just charge down Majuba Hill and don't worry to much about the point of the spear.