England’s Last Trench Vet

Harry Patch, the United Kingdom’s last surviving infantryman from World War One, passed away at the age of 111. He was apparently something of a national icon – the UK Poet Laureate even wrote a poem about him. Today, the AP quoted the following statements of condolence from British dignitaries:

Prime Minister Gordon Brown said the whole country would mourn “the passing of a great man.”

“The noblest of all the generations has left us, but they will never be forgotten. We say today with still greater force, We Will Remember Them,” Brown said.

Queen Elizabeth II said “we will never forget the bravery and enormous sacrifice of his generation.” Prince Charles said “nothing could give me greater pride” than paying tribute to Patch.

“The Great War is a chapter in our history we must never forget, so many sacrifices were made, so many young lives lost,” the prince said.

There’s some irony at work in this. Mr. Patch, who didn’t start talking about his experiences until he was 100 years old, described himself as a reluctant and frightened combatant who saw the war as a tremendous waste.  Meanwhile, historians increasingly see the ineptitude of political institutions and leadership as the primary cause of the conflict. As Adam Gopnik wrote in the New Yorker in 2004:

You could not have chosen a worse bunch of guys [in 1914] to have the fate of Europe in their hands. There is Kaiser Wilhelm, the deformed lesser member of the dominant royal family of Europe, intensely jealous of his cousin Edward VII and his Francophile ways (although Edward had died by 1910, the icon still shone), and determined to act in a manly and warriorlike way, yet caught in a bizarre cycle of peevishness, belligerent insecurity, and a superstitious fatalism that he thought of as “religious.” There is Count Conrad, who genuinely seems to have acted in part because he was in love with a married woman and imagined that success in war would help his romance. Even Herbert Asquith, the British Prime Minister, who for some reason gets off very lightly in British histories, seems hopelessly inadequate to the occasion.

Gopnik allows for the fact that WWI would prove a novel and harsh learning experience for military and political leaders, who could not foresee all of the battle field consequences that industrial technology would bring about:

…the previous century had been filled with wars, and none of them left behind much more than a scar and a memory of honor. The worst recent war in Europe, the Franco-Prussian War of 1870-71, had made a deep imprint on the French psyche, but it was immediately followed by the decade that resides in our imagination—courtesy of the Impressionists, but courtesy of the facts, too—as idyllic. How bad could a war be? The Germans thought that, more or less, it would be like 1870; the French thought that, with the help of the English, it wouldn’t be like 1870; the English thought that it would be like a modernized 1814, a continental war with decisive interference by Britain’s professional military; and the Russians thought that it couldn’t be worse than just sitting there.

He also points out that some of the primary actors were driven by some primal human desires:

Above all, the tragedy was that their goal was not to look weak. Even in Strachan’s dry and unemotional narrative, one wet and emotive word rings out again and again, and that word is “humiliation.” The game was not to prevail—for all the players, save perhaps some of the Germans, knew that none of them could—but to avoid being seen as the loser. There are, in the recorded words, few references to rational war aims, even of the debased, acquisitive kind; instead, you find a relentless emphasis on shame and face, position and credibility, perception of weakness and fear of ridicule. “This time I shall not give in,” Kaiser Wilhelm repeated robotically (to the arms manufacturer Krupp) in July of 1914. Lloyd George, on the British side, a key actor in favor of war, called for the mobilization of a million men lest Britain not be “taken seriously” in the councils of Europe. It was not runaway trains but a fear of being humbled, “reduced to a second-rate power,” that drove the war forward. The keynote is insecurity, an insecurity that arose, above all, from the German paranoia about encirclement, matched by Britain’s insecurity about its naval power.

A few observations:

First, the desire for humiliation — and its opposite objective, saving face — may be what human individuals and/or societies had been selectively adapted to entering the 20th century. In fact, the Armistice at the end of the war fully embodied the desire to further hobble and humiliate the vanquished.  John Maynard Keynes presciently warned the world of its likely consequences, including a second great war. What’s interesting is that in the Second World War, military aims became more about strategic objectives, and Allied leadership did not try to impose quite the same measure of humiliation that their forbears in WWI had. Interestingly — and despite the cultural popularity of martial ideals and practices in business (e.g., The Art of War) — the major players in WWI and WWII seem to have moved a bit beyond the primal motivations of saving face and avoiding humiliation — whereas they continue to play a strong role in most parts of the world. Perhaps the First World War was a crucible for this? These cross currents are alive and well in international business, e.g., in individuals/institutions vs kin/clan traditions (of course, as interesting as these seeming contrasts are, human beings are alike in more respects than they are different, and we all move through backgrounds, however varied, in which individuality, institutions, family, and friends all play important roles).

Second, Gopnik’s and modern historians’ descriptions of WWI are excellent examples of a “complex foresight horizon“. World War One must indeed have been a “world of emergence, perpetual novelty, and ambiguity” for all involved, whether in palaces, parliaments,  trenches, or manning a hearth. Gopnik provides the figure that 260,000 French were killed in the first 26 days — that’s the mind boggling equivalent of more than three 9/11 attacks per day occurring for twenty six straight days! If political and military leaders — and populations at large, as Gopnik aptly points out — had known the calculus beforehand, perhaps they would have shown more modesty. Still, the failures of leadership from 1914 through 1918 (and in many other incidents of political economy in the 20th century) are striking, and not easy to forgive. Perhaps it’s inescapable that people in positions of power will always struggle with the choice between the primal motivation to save face versus the more courageous act of speaking candidly and openly with constituencies (their own and their opponents’), and with the many ethical dilemmas and challenges of wielding power. Hopefully, institutional learning will continue apace.

Meanwhile, strong leadership traits can be heard in the words of the gentleman in question:

At a remembrance ceremony in 2007, Patch said…”Today is not for me. It is for the countless millions who did not come home with their lives intact. They are the heroes,” he said. “It is also important we remember those who lost their lives on both sides.”

The AP article also pointed out that Patch outlived three wives and his two sons — a burden that we probably don’t think about when wishing to live to a ripe old age.

URLs:

http://news.yahoo.com/s/ap/20090725/ap_on_re_eu/eu_britain_obit_patch

http://www.newyorker.com/archive/2004/08/23/040823crat_atlarge?currentPage=all

http://www.amazon.com/s/ref=nb_ss_gw?url=search-alias%3Daps&field-keywords=keynes+consequences+peace&x=0&y=0

http://www.telegraph.co.uk/culture/books/3671688/The-Five-Acts-of-Harry-Patch.html

http://www.santafe.edu/research/publications/workingpapers/95-12-106.pdf

DISCLOSURE: Symmetry Capital Management, LLC earns a 4% fee on sales for ‘click through’ purchases to Amazon.com’s website under the Amazon Associates program. Clients, principals, and the firm do not own any Amazon securities. The foregoing is for informational and/or educational purposes only, and is not an offer to buy or a recommendation to sell any security or to engage in any investment strategy.

An Obama Reset?

There’s a thoughtful op-ed in the WSJ today by Ted Van Dyk, a veteran Democrat and author who worked in the LBJ administration. In it, he argues that President Obama needs to “reset” his presidency by scaling back his policy ambitions and exerting more influence over the legislative process, arguing that by delegating control to Congressional leaders and committee chairs, he has come up short on his campaign promise to engage in genuine bipartisanship (we’ve emphasized our favorite passages in bold).

The first warning signals for me came with your acceptance speech at the Democratic National Convention. In it, you stressed domestic initiatives that clearly were nonstarters in the already shrinking economy.

Van Dyk takes a notable swipe at at least one senior Obama staffer’s cynical (or callously opportunistic) candor:

Many of the missteps that have followed flowed, in part, from your reliance on these Clinton holdovers. Your chief of staff, Rahm Emanuel, defined your early strategy by stating that the financial and economic crises presented an “opportunity” to jam through unrelated legislation. To many of us, the remark was cynical and wrong-headed.

The crises did not represent an opportunity. They presented an obligation to do one thing: Return our financial system and our economy to good health.

He then contrasts the manner in which the Johnson and Obama administrations have pursued health care and energy initiatives:

[A]t every stage [in the Johnson administration], congressional leaders of both political parties and financial, business, labor and other private-sector leaders were consulted. Johnson wanted to assure that his legislation was substantively sound and could get consensus support in the Congress and the country.

Your strategy, by contrast, has been to advocate forcefully for health-care and energy reform but to leave the details to Democratic congressional committee chairs. You did the same thing with your initial $787 billion stimulus package. Now, you’re stuck with a plan that provides little stimulus until 2010. A president should never cede control of his main agenda to others.

This tactic has already had negative consequences. Frightened by the prospective costs of your health-care and energy plans — not to mention the bailouts of the financial and auto industries — independent voters who supported you in 2008 are falling away. FDR and LBJ, only two years after their 1932 and 1964 victories, saw their parties lose congressional seats even though their personal popularity remained stable. The party out of power traditionally gains seats in off-year elections, and 2010 is unlikely to be an exception.

This might indeed be a factor behind the decline in Obama’s ratings over the last few months. However, we think it’s unlikely that the GOP will gain seats in 2010, based on the last time we checked the data (when only Sen. Dodd’s seat appeared to be at risk), some recent high profile implosions in the GOP, and an expanding vacuum of formidable GOP candiates for 2010 and 2012.

You made promises about jobs that would be “created and saved” by the stimulus package. Those promises have not held up. You continue to engage in hyperbole by claiming that your health-care and energy plans will save tax dollars. Congressional Budget Office analysis indicates otherwise.

Amen. We’ve been complaining about the double and triple speak since the 2006 Congressional elections. The first time we hear a politician talk in NET terms about some program they advocate — whether jobs, revenues, or outlays — we’ll announce it, loudly.

It’s time to re-examine these initiatives. Could your health plan be scaled back to catastrophic coverage for all — badly needed by most families, but quite affordable if deductibles are set at the right levels? Should the Rube Goldbergian cap-and-trade proposals be replaced with a simple carbon tax, with proceeds to be allocated to alternative-fuels development?

No wonder we like Van Dyk’s op-ed. We’ve advocated for both of these more centrist alternatives over the ‘expensive messes’ he says are now in the works:

The evolving health and cap-and-trade bills are loaded with costly provisions designed to gain support from congressional leaders and special-interest constituencies. In short, they have become an expensive mess. This legislation will not clear Congress by the August recess, as you have requested, and could be stalled for the remainder of 2009. Settle for incremental change: Do not press Democratic legislators to vote for something they fear will destroy them in 2010.

Van Dyk’s warning below about enacting ‘high risk’ legislation is probably sound, and we certainly like the centrist tenor of his piece. But as noted above, we can’t ignore the state of utter disrepair that the GOP finds itself in — and as Rahm Emmanuel might counsel, why not take advantage of the opportunity?

This tension between short term opportunism (Emmanuel) and sound long term strategy (Van Dyk) has analogues in the investment world. Short term opportunism contributed to today’s woeful state of the GOP, and will probably have similar effects on the Democrats, eventually. But for the time being, there’s little standing in the way of the party’s agenda.

DISCLOSURES: The foregoing is for informational purposes and/or entertainment only. It is not an offer to buy or a recommendation to sell any security, or to engage in any investment strategy. Please note that Symmetry Capital Management, LLC earns a revenue sharing fee of 4% from Amazon.com for any ‘click-through’ transactions. The firm, its principals, and its clients do not own shares in Amazon.com.

URLs:

http://online.wsj.com/article/SB124779697143755743.html

http://www.citypages.com/2008-02-13/calendar/ted-van-dyk/

http://www.amazon.com/gp/product/0295987510?ie=UTF8&tag=symmetrycapit-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=0295987510

http://news.yahoo.com/s/ap/20090717/ap_on_re_us/us_sc_governor_travel

Should Health Care be a Right?

There’s a deep philosophical debate underlying Congressional attempts to craft a health care reform bill, centered around whether access to health care is (or should be) a basic human right. Up front, we see compelling arguments on both sides, and the “Yes” camp might even have the weightier material arguments on its side.  But the philosophical ones should not be brushed aside – especially given that the philosophical underpinnings of classical liberalism have served the U.S. and other western democracies pretty well (to critics, yes, realities have been far removed from ideals at times, but overall, these systems have proven remarkably stable and reasonably progressive).

The American Declaration of Independence asserted that three rights had been granted by God to each individual – life, liberty, and the pursuit of happiness (or as Woody from Cheers memorably put it, “the purfuit of hapineff”). This was based on John Locke’s philosophical writings, and contextually, it was a declaration that no individual should be deprived of their life, property, or vocation involuntarily. In other words, the experience of human beings under governments should exclude unjustified limitations, expropriations, torture, and death. Thus the conservative nature of classical liberalism – there’s not a whole lot at work here, other than setting limits on what people can do to one another, including those in positions of political power. Within those boundaries, there’s a vast range of possibilities for human conduct.

In the modern secular world, rights are no longer granted to individuals by God, but are now social contracts – through democratic institutions, a society determines and declares what rights an individual is entitled to. For example, social welfare systems have evolved since the late 19th century as an embodiment of the idea that people should have a right (if they choose to exercise it) to a minimum standard of income (transfer payments), housing, and health care (e.g., Medicaid). Educational systems embody a similar principle. This modern version clearly has a more solid logical foundation, as deeming rights is clearly an endogenous human activity (presumably, if God cares and we get any of them wrong, he or she will let us know at some point). So that transition away from divinely granted rights seems OK to us. But like the opening of Pandora’s box, the transition carries risks — primarily that the list of rights grows substantially over time, with many unintended consequences.

[On a side note, this observation should illuminate the remarkable arc of governments since the time of Locke and later Jefferson. Back then, rights were necessary to protect individuals from the depradations of the powerful. Since then, governments have been increasingly designed to benefit the weak at the expense of the powerful (or perhaps more accurately, the poor at the expense of the wealthy). Of course, they don't always work that way. But clearly, the idea of 'tyranny from below' is more feasible in modern social democracies.]

So today, instead of determining that individuals have rights that limit a government’s power over them, we articulate rights to things which, in many cases, governments must provide or at least enforce the provision of. That’s the critical distinction between rights today and rights in earlier centuries. Those earlier rights were intended to level the playing field between, e.g., landed aristocracy and free individuals, by transferring a certain amount of political and social power from the former group to the latter. Today they are more often intended to extract resources from the haves for the benefit of the have nots – however defined for that particular right.* To the extent that that the public reallocation of private resources provides a greater level of security and productivity overall, it may be a desirable activity. But that doesn’t address whether those reallocations need to be, or should be, enshrined as ‘rights’.

This is tangential to the choice between a political system guided by principles versus one guided by mandates. A principles-driven system has a core of ideals that can be applied flexibly to a wide range of real world situations. It allows for the rational acceptance of human imperfections, and the development of institutions for dealing with them as they occur. A system based on mandates is inevitably more complex, with rigid and sometimes contradictory rules and regulations that often become more complicated over time, and utopian standards of outcomes and conduct that, carried to an extreme,  almost require that we legislate risk, bad outcomes, and human nature itself out of existence. An expanding list of human rights is almost certain to lead to the latter type of system. As just one example, consider ‘The Human Right to Health‘ declaration from The People’s Movement for Human Rights Education. It captures well the idea that we’ve gone beyond the right to not have government interfere with the voluntary conduct of individuals, to the right to have government provide (or ensure provision of) certain things for all individuals. These two kinds of ‘rights’ are conceptually so different that they probably ought to have different names.

If we’re going to take a rational approach to the question of whether access to health care is a right, we should look for a suitable existing analogue. To us, it looks like access is the key word, and that access to legal systems and political processes are close analogues. As law and political systems evolved, people have demanded (and received) greater access to them. More recently, as medical standards, technologies, and delivery have advanced, the demand for universal access to them has increased, and that’s not unreasonable. But whereas in Locke’s time, declarations of rights sought to reallocate power from ‘enemies’ of liberty who possessed too much of it (and too often wielded it unjustly), a declaration of a human right to health care requires a significant reallocation of resources from some of us to others of us. In other words, there is no ‘enemy’ in the situation at hand unless, to borrow from Pogo, one believes that enemy is us — that some have been depriving others of access to health care. And that presents a thorny set of issues for society to debate. Unfortunately, they’re not getting much attention.

As we noted at the outset, this is a deep philosophical question, and so this missive, like any colloquium in philosophy worthy of the name, utterly lacks a satisfying resolution. We would just ask people to be aware of the following: the distinct historical conceptions of rights; the unintended consequences that are bound to follow the adoption of any expanding compendium of human rights; and most importantly, in our view, the fact that past attempts at ensuring individuals’ access to health care have contributed directly to the large numbers of uninsured individuals and families and to the precipitous rise in medical expenditures. And we would point out that the current legislation only piles on to those previous errors.

* There are current debates that relate primarily to founding principles and rights. For example, same sex marriage clearly relates to liberty and (according to 20th century SCOTUS interpretations) the pursuit of happiness, and on its surface it would not appear to involve the reallocation of private resources. But ironically, it’s due to the existence of laws governing the allocation of resources, such as probate and spousal benefits, that same sex marriage becomes a thornier political issue than it might otherwise be.

URLs:

http://news.yahoo.com/s/ap/20090715/ap_on_go_co/us_health_care_overhaul

http://graphics8.nytimes.com/images/2007/11/25/arts/25carr2190.jpg

http://www.igopogo.com/we_have_met.htm

http://www.pdhre.org/rights/health.html

President Obama to the Motherland

President Obama made a powerful speech on governance in Ghana that he directed at all or most of Africa. While we would quibble with the idea that Africa and its people can be meaningfully addressed as a single pseudo nation-state, some of the observations he offered are applicable to all human societies. According to the Associated Press:

Speaking to the Ghanaian Parliament, he called upon African societies to seize opportunities for peace, democracy and prosperity.

“…Development depends upon good governance. That is the ingredient which has been missing in far too many places, for far too long.”

The son of a white woman from Kansas and a black goat herder-turned-academic from Kenya, Obama delivered an unsentimental account of squandered opportunities in postcolonial Africa…

In his speech to Parliament, America’s first black president spoke with a bluntness that perhaps could only come from a member of Africa’s extended family.

“No country is going to create wealth if its leaders exploit the economy to enrich themselves, or if police can be bought off by drug traffickers,” he said.

“No business wants to invest in a place where the government skims 20 percent off the top, or the head of the Port Authority is corrupt. No person wants to live in a society where the rule of law gives way to the rule of brutality and bribery.

“That is not democracy, that is tyranny, even if occasionally you sprinkle an election in there,” he said, “and now is the time for that style of governance to end.”

He added: “Africa doesn’t need strongmen, it needs strong institutions.”

Some reflections…

First, the President’s remarks are things that need to be said, and discussed more openly and frequently. Too often we subsume ethics and good governance to economic calculations, convenience, or fear. But the real costs of poor governance are staggering when you start trying to add them up.

Second, what a great moment for the people of Africa (our quibble above duly noted) to host (briefly) the most powerful leader in the world, who happens to be the son of an African man, and whose identity was forged in part by time spent as a young man in Kenya. The AP reporter is almost certainly right in saying that only a member of “Africa’s extended family” could speak so openly about Africa’s historic travails and paths forward. That he didn’t focus his implications on northern hemisphere powers for their historic contributions to poor governance in parts of the continent will surely disappoint some – but perhaps his relative silence on that aspect is intended to point out that, for the first time in centuries, the way forward may have more to do with African countries’ internal resources and governance than with external powers. Still, we suspect that Yao Opare-Asamoa, the skeptical Ghanaian editorialist whom we cite below, will not be alone in taking a more cynical view of the President’s visit and speech.

Third, we’d point out to the President that, although probably far less damaging, tyranny is still quite possible even under the strongest of political institutions. And though not as bad as some right wing pundits are likely to declare in the coming days, there are shades of irony in his comments, given his incredibly ambitious agenda and the costs that it will (or would) eventually force onto some within the American electorate. While the President decries tyranny of the individual and their clan – the rule of strongmen – he leaves out the concept of tyranny of the majority, a problem and concern that has been around as long as democracies themselves. We don’t disagree that there are some pressing issues that the Obama agenda is designed to address (or that ‘tyranny of the majority’ is sometimes invoked as convenient cover for private sector tyrants). But strongman rule is also designed to address pressing issues – most often experiences and/or expectations of a fixed or falling level of resources relative to population – and so its practitioners probably believe that they too are fighting the good fight, however it might look to those on the outside. But if any leader, whether strongman or duly elected, goes too far in exploiting a country’s resources in order to enact an agenda – be it clan centered or focused far more broadly on social well-being – then those resources are likely to come up short in the long run. In the case of the U.S., if the party now in power goes too far in exacting tribute from the financially successful – and/or the broad economy – then the level of success, and the number of successful people, are likely to decline, leaving society worse off overall. It’s never clear exactly where that line lies, and surely the President understands that it exists – but some in his party demonstrate a clear willingness to trample it, either blissfully unaware of the unintended consequences, or willing to accept them as trade offs against other consequences that are presumed to be more dire (e.g., climate change). Thus, while we no longer face endemic “wars over land” in the U.S., we can’t deny that our political system has been girding for a “[war] over resources” for some time. However, that observation does support the thrust of President Obama’s speech – that with well developed political institutions, those inevitable “wars” inflict far less damage on people than they otherwise would.

Fourth, the myth of ‘one Africa’ really is a curious one. While it can be a balm or a rallying cry when thinking about the damaging legacies of slavery and other forms of exploitation, it’s not very practical for addressing the diverse realities on the ground that are faced by people living there. And it seems to betray a simpler level of understanding of Africa in the northern and western hemispheres than of, say, Asia, where few would ever consider addressing, for example, China, Korea, Japan, Hong Kong, India, Indonesia, Pakistan, Singapore, Taiwan, Thailand, and Vietnam as a single entity (though if there’s a parallel in that list to Africa, it might be our tendency to look at China as a homogenous population and country). For those who are interested in learning more about the diversity, nuances, traditions, and futures of Africa and its people, the internet is a great place to begin. For starters, we happened across this wide ranging essay from Koranteng Ofosu-Amaah, whose diverse cultural and business experience – and apparently deep intellectual curiosity – allow him to spin some fascinating anthropology-in-reverse riffs, and develop a ‘Low End Theory of Technology’ that, while aimed at technology investments in poorer countries, seems to have broader applications to investment and development. Businesses that want to invest wisely in frontier markets should probably pay close attention to voices like his.

Fifth, governance and prosperity are very much a chicken and egg riddle. It’s not entirely clear whether one precedes the other (and which one, if so) or if they progress haltingly, roughly in tandem, or whether other key ingredients are necessary, be they aspects of political economy or happenstance factors and endowments. For example, one skeptical editorialist in Ghana offered an anecdote about a lost foreign direct investment (FDI) opportunity that revealed the critical role of business education and practices, infrastructure, and security:

Now that everybody is singing our praises, let’s take advantage of the situation and push for Foreign Direct Investments (FDIs). Let’s seek technical assistance to build up our Polytechnics and other vocational institutions. It is often said that ‘investments’ desire peace and stability; we do have a case good to present on this front. This is where we come in. We need to adequately prepare and provide the atmosphere for the FDIs. A few years ago, it was reported that Korle-Bu Teaching Hospital lost a big opportunity for major technical and financial assistance because the management was just not ready and couldn’t draw up a simple proposal to show how the Hospital would utilize the funds. The government should have a clear-cut vision of what it wants to do. It should have plans and proposals at the ready. We should be able to guarantee year-round uninterrupted power and water supply. Safety and security of peoples and goods should be ensured. Only after these and more should we present our case and pursue it with all the ‘clout’ that we seem to have gained.

So I would join my brothers and sisters to wish President Obama and his family well. I pray that his would be ‘change we can believe in’ even in Ghana and the rest of Africa.

The writer’s emphasis on FDI also exposes (implicitly) the need for continued development of a financial system capable of matching domestic income and savings – rather than just export dollars and repatriated earnings from abroad – with increasingly diverse domestic investment opportunities (the Ghanaian economy is still heavily dependent upon agriculture and mineral extraction). I’ve had the pleasure of meeting financial professionals from Ghana, and have little doubt that the country will continue to make progress on those counts. But it has some catching up to do in those areas with, for example, Botswana, which has a per capita GDP ten times higher, pristine public finances, and a relatively well developed commercial finance sector. On the other hand, Ghana compares favorably on things like recent domestic investment as a % of GDP and income distribution. And both countries, like much of the developing world, have relatively young populations compared to industrialized countries – while HIV/AIDS might be a contributing factor, this is still a promising endowment for future progress – as long as institutional settings permit the productive use of their time, energy, and talents, as the President pointed out.

Sixth, the Obamas also visited the powerfully symbolic Cape Coast Castle off the coast of Senegal, which was a major jumping off point for the transAtlantic slave trade. Known for its ‘Door of No Return’, an inscription there reads:

IN EVERLASTING MEMORY

OF THE ANGUISH OF OUR ANCESTORS.

MAY THOSE WHO DIED REST IN PEACE.

MAY THOSE WHO RETURN FIND THEIR ROOTS.

MAY HUMANITY NEVER AGAIN PERPETRATE

SUCH INJUSTICE AGAINST HUMANITY

WE, THE LIVING, VOW TO UPHOLD THIS.

Though he follows two immediate predecessors there, Obama’s presidential visit is made all the more poignant by the fact that First Lady Michelle had ancestors who travelled through similar ‘points of no return’, if not the Castle itself. Symbolic acts matter, and presidential visits to sites memorializing the transAtlantic slave trade and other human holocausts seem like a good idea to us.

Finally, we have to ask, does this guy – our President – plug himself into a wall outlet at night?! Travel, diplomacy, political strategy, executive leadership, negotiation, etc, are all demanding on one’s energy and resources. And a marathon presidential campaign has to be one of the most exhausting experiences there is. But Obama is like the Energizer Bunny…he keeps working…and working…and working…however, studies of health, stress, even anthropology teach us that bodies are not immune to the laws of biology (the analogue in economics is that there’s no free lunch), and even small but chronic deficits will take a toll, much as small but chronic caloric surpluses will allow us to pack on many pounds in adulthood. The U.S. Presidency seems to impose more than a small deficit on its successors, and Obama continues to go after the job with gusto. Apparently his accelerated physical aging was noted as early as last summer and again this spring (with a tip of the hat for that last link to the Village Voice, which apparently — and perhaps justifiably — feels there are better topics for seasoned reporters to cover). Still, he continues to burn brightly, and we sincerely hope there’s enough fuel there to feed the flames, as a presidential burn out wouldn’t be much fun for anybody. If nothing else, it’s a good reminder that, despite what most of us like to think and say, public service does, at least in some important ways (and for some people, some of the time…qualifications galore…) entail sacrifice. Of course one juicy book advance or a few hitches on the lecture circuit can produce an extremely positive ROI on said sacrifice – but there’s some sacrifice involved nonetheless.

DISCLOSURES: The foregoing is for informational purposes and/or entertainment only. It is not an offer to buy or a recommendation to sell any security, or to engage in any investment strategy. Please note that Symmetry Capital Management, LLC earns a revenue sharing fee of 4% from Amazon.com for any ‘click-through’ transactions. The firm, its principals, and its clients do not own shares in Amazon.com.

URLs:

http://www.ghana.gov.gh/

http://news.yahoo.com/s/ap/20090711/ap_on_go_pr_wh/obama

http://en.wikipedia.org/wiki/Tyranny_of_the_majority

http://symmetrycapital.net/index.php/blog/2009/07/tr2-why-well-leave/

http://koranteng.blogspot.com/2007/05/on-ibm-and-africa.html

https://www.cia.gov/library/publications/the-world-factbook/geos/GH.html

https://www.cia.gov/library/publications/the-world-factbook/geos/BC.html

http://www.modernghana.com/news/226743/1/obama-and-ghana-vis-vis-us-foreign-policy.html

http://www.politico.com/news/stories/0708/11520.html

http://www.nytimes.com/2009/03/05/us/politics/05gray.html?_r=2&hp

http://blogs.villagevoice.com/runninscared/archives/2009/03/breaking_obama.php

Stratfor’s Take on Iranian Election

George Friedman of Stratfor offers an interesting dissection of the election outcome in Iran, allegations of vote fraud, and the impact of Ahmadinejad’s re-election on U.S.-Iran relations. In a more general sense, Friedman’s analysis is a powerful lesson in thinking more critically about what we don’t know – in this case, failing to assess the quality of information emanating from Iran has led westerners to draw unsound conclusions and make poor predictions – garbage in, garbage out, as the saying goes.

Americans and Europeans have been misreading Iran for 30 years. Even after the shah fell, the myth has survived that a mass movement of people exists demanding liberalization — a movement that if encouraged by the West eventually would form a majority and rule the country. We call this outlook “iPod liberalism,” the idea that anyone who listens to rock ‘n’ roll on an iPod, writes blogs and knows what it means to Twitter must be an enthusiastic supporter of Western liberalism. Even more significantly, this outlook fails to recognize that iPod owners represent a small minority in Iran — a country that is poor, pious and content on the whole with the revolution forged 30 years ago…

Last Friday, Iranian President Mahmoud Ahmadinejad was re-elected with about two-thirds of the vote. Supporters of his opponent, both inside and outside Iran, were stunned. A poll revealed that former Iranian Prime Minister Mir Hossein Mousavi was beating Ahmadinejad. It is, of course, interesting to meditate on how you could conduct a poll in a country where phones are not universal, and making a call once you have found a phone can be a trial. A poll therefore would probably reach people who had phones and lived in Tehran and other urban areas. Among those, Mousavi probably did win. But outside Tehran, and beyond persons easy to poll, the numbers turned out quite different.

Some still charge that Ahmadinejad cheated. That is certainly a possibility, but it is difficult to see how he could have stolen the election by such a large margin. Doing so would have required the involvement of an incredible number of people, and would have risked creating numbers that quite plainly did not jibe with sentiment in each precinct. Widespread fraud would mean that Ahmadinejad manufactured numbers in Tehran without any regard for the vote. But he has many powerful enemies who would quickly have spotted this and would have called him on it. Mousavi still insists he was robbed, and we must remain open to the possibility that he was, although it is hard to see the mechanics of this.

Ahmadinejad’s Popularity

It also misses a crucial point: Ahmadinejad enjoys widespread popularity. He doesn’t speak to the issues that matter to the urban professionals, namely, the economy and liberalization. But Ahmadinejad speaks to three fundamental issues that accord with the rest of the country [which are piety, corruption, and national security]…

Perhaps the greatest factor in Ahmadinejad’s favor is that Mousavi spoke for the better districts of Tehran — something akin to running a U.S. presidential election as a spokesman for Georgetown and the Lower East Side. Such a base will get you hammered, and Mousavi got hammered…That [Ahmadinejad] won is not the mystery; the mystery is why others thought he wouldn’t win…

This is a very different view of things then we’re used to hearing in the media, but the logic is compelling. And there’s some recent and interesting evidence in a new documentary of the relationship between Ahmadinejad and Iraq’s citizens, including those who are not typically accessible to the west, called Letters to the President (the website images seem to suggest that it’s a propaganda film, but it’s not – it’s a very good piece of documentary journalism).

Friedman then looks ahead:

The question now is what will happen next. Internally, we can expect Ahmadinejad to consolidate his position under the cover of anti-corruption. He wants to clean up the ayatollahs, many of whom are his enemies. He will need the support of Iranian Supreme Leader Ayatollah Ali Khamenei. This election has made Ahmadinejad a powerful president, perhaps the most powerful in Iran since the revolution. Ahmadinejad does not want to challenge Khamenei, and we suspect that Khamenei will not want to challenge Ahmadinejad. A forced marriage is emerging, one which may place many other religious leaders in a difficult position…

[Regarding relations with the U.S.] What we have now are two presidents in a politically secure position, something that normally forms a basis for negotiations. The problem is that it is not clear what the Iranians are prepared to negotiate on, nor is it clear what the Americans are prepared to give the Iranians to induce them to negotiate. Iran wants greater influence in Iraq and its role as a regional leader acknowledged, something the United States doesn’t want to give them. The United States wants an end to the Iranian nuclear program, which Iran doesn’t want to give.

On the surface, this would seem to open the door for an attack on Iran’s nuclear facilities. Former U.S. President George W. Bush did not — and Obama does not — have any appetite for such an attack. Both presidents blocked the Israelis from attacking, assuming the Israelis ever actually wanted to attack.

For the moment, the election appears to have frozen the status quo in place. Neither the United States nor Iran seem prepared to move significantly, and there are no third parties that want to get involved in the issue beyond the occasional European diplomatic mission or Russian threat to sell something to Iran. In the end, this shows what we have long known: This game is locked in place, and goes on.

From an investment standpoint, this would suggest that there’s a relatively low probability of Iranian politics imposing any significant shocks on markets, for the time being.

UPDATE  2009.06.19  There’s been a fairly powerful “iPod uprising” in Iran since the election, which appears to be composed primarily of young people and centered in Tehran. That doesn’t undermine Friedman’s analysis above – but iPod liberalism is apparently a powerful political force, perhaps stronger than he seemed to imply.  As for vote fraud, various experts are all over the map, while an allegedly leaked letter from the Interior Ministry to the Ayatollah – which plays like a Cold War spook novel, and a bad one – is supposedly stoking resentment. The transcript, according to The Independent:

Interior Ministry’s letter to the Supreme Leader

Salaam Aleikum.

Regarding your concerns for the 10th presidential elections and due to your orders for Mr Ahmedinejad to be elected President, in this sensitive time, all matters have been organised in such a way that the results of the election will be in line with the revolution and the Islamic system. The following result will be declared to the people and all planning should be put in force to prevent any possible action from the opposition, and all party leaders and election candidates are under intense surveillance. Therefore, for your information only, I am telling you the actual results as follows:

Mirhossein Mousavi: 19,075,623

Mehdi Karroubi: 13,387,104

Mahmoud Ahmadinejad: 5,698,417

Mohsen Rezai: 38,716

(signed on behalf of the minister)

Color us skeptical. A couple of aspects of The United article are more interesting. First, government paramilitary and police forces are reportedly protecting the mostly pro-Mousavi protesters against pro-Ahmadinejad militias, or at least standing aside for the most part (though we’d note that there are conflicting reports circulating the blogosphere). This would support Friedman’s analysis, insofar as it confirms Ahmadinejad’s popularity with the country’s poor, and his arm’s length standing from the ruling Islamic Council. Second, the reported green wrist band protest by Iran’s soccer team at a World Cup match in Korea involved only five players, which supports the idea that this is not a majority movement. But that said, it clearly appears to have some mass behind it.

URLs:

http://www.stratfor.com/weekly/20090615_western_misconceptions_meet_iranian_reality

http://www.letterstothepresidentmovie.com/

http://news.google.com/news?um=1&ned=us&hl=en&q=iran+protests

http://www.independent.co.uk/opinion/commentators/fisk/robert-fisk-secret-letter-proves-mousavi-won-poll-1707896.html

A Big, Overwhelming Idea About Life

Economic historian Peter Bernstein passed away last week at the ripe old age of 90. He was a wonderful intellect, and made a career of explaining high minded economic and financial concepts in every day terms.

McKinsey has posted a video of Bernsten discussing the concept of risk as it has evolved in financial markets, business, and life (the title of this post is taken from that interview).

He also wrote some excellent books, which you can browse at Amazon.com here (please note that Symmetry Capital Management, LLC earns a referral fee of 4% for any purchases made under its Amazon Associates link).

URLs:

http://www.bloomberg.com/apps/news?pid=20601088&sid=aorrYydFwbEc&refer=muse

http://www.mckinseyquarterly.com/Organization/Strategic_Organization/Peter_L_Bernstein_on_risk_2211

http://tinyurl.com/bernstein-books

Kotok’s Scathing Indictment

We recently expressed our misgivings about Treasury Secretary Geithner; David Kotok of Cumberland Advisors let him — and the new Administration — have it with both barrels. This is an important read, whether one agrees with him or not (we do):

…Geithner (on page 81 and again on page 95) answered: “President Obama – backed by the conclusions of a broad range of economists – believes that China is manipulating its currency. President Obama has pledged as President to use aggressively all the diplomatic avenues open to him to seek change in China’s currency practices.”

“Manipulation?”  “Aggressively?“  This is strong language.  Geithner did not do this on his own authority.  These are prepared answers.  He is citing the new President, not once but twice.

…the dollar [is] likely to get stronger.  Right now it is the default choice of the world.  We have currency strength not because we are so desirable but because we are currently better than the others…

So what do we do within 72 hours of launching the Obama administration that says it is seeking “change?”  We fire the first public salvo in what could easily become a trade war or a threat to global financial integration.

What makes us so credible?  Is it our proven record of regulatory oversight of our financial markets, as demonstrated by the Madoff scandal and the SEC?  Is it the way our rating agencies work so diligently to place a coveted “AAA” on paper that was peddled to the rest of the world and was found out to be highly toxic?  Is it the way we honor the promises of federal agencies by having tier-one-eligible Fannie and Freddie preferred held in the US and abroad by institutions, and then essentially cause a structural default on that preferred (actually, dividend suspension)?  Or is it the way the actions of Treasury and the Federal Reserve allowed a primary dealer (Lehman) to fail, thus triggering a global contagion?

C’mon?  Where is the plan to restore confidence and credibility and transparency and consistent policy for the United States?  And how does the Obama administration believe that launching a fight with China is beneficial?

In the 1930s the severe recession of 1929-1931 was turned into the depression of 1931-1933 because of protectionism.  Every historian knows that.  Every economist learns it in school.  This is well-known by Geithner and even better-known by Larry Summers and Paul Volcker.  They are the three members of the Obama economic troika.

The statement Geithner repeated twice was certainly known to them in advance.  Why did they not temper it?  What is the plan?  Do they want to threaten and see if China backs down?  This, too, is dangerous.  Do they intend to pursue the Schumer tariff scheme?  There are more questions than answers.

Lastly, Larry Summers was going to attend the World Economic Forum in Davos, Switzerland.  He has cancelled.  Why?  Was it because he did not want to have to face the private conversations that would follow such statements as have been made by Geithner in the name of the President?

Watch Davos closely.  And remember that the absence of statements is as revealing, if not more so, than the presence of them.  Not one mention of trade openness appears in our reading of the 100 pages of answers to the Senate.  Maybe someone else can find an affirmation of free and open trade.  I cannot.

We fear protectionism.  It starts with rhetoric. We now have that threat.  If it is pursued, it ends badly for everyone.  No one wins.

Cumberland also posted Geithner’s written Q and A responses on its website.

http://www.symmetrycapital.net/newsandviews/newsandviews/2009012240.html

http://www.cumber.com/special/geithnerquestions2009.pdf