Showing posts with label human nature. Show all posts
Showing posts with label human nature. Show all posts

Thursday, February 21, 2013

Stapleton Roy: U.S. and China Must Halt Drift Toward Strategic Rivalry

Stapleton Roy: U.S. and China Must Halt Drift Toward Strategic Rivalry

HONOLULU (Feb. 20, 2013) -- With China’s leadership in transition and incoming Secretary of State John Kerry heading a new foreign policy team in the second Obama administration, leaders in both countries must face a “frightening array of domestic and foreign policy problems” in managing their vital relationship, longtime senior U.S. diplomat J. Stapleton Roy said in a Feb. 13 address at the East-West Center in Hawai‘i.

(View a video of Roy’s speech.)

“No task is going to be more important than trying to arrest the current drift in U.S.-China relations toward strategic rivalry,” he said. “If leaders in both countries fail to deal with this issue, there is a strong possibility that tensions will rise and undermine the benign climate that has been so important in producing the Asian economic miracle ­– and to a significant degree, political miracle ­– over the past 30 years.”

Roy, who served as U.S. ambassador to China from 1991 to 1995, said the two nations are “locked in the traditional problem of an established power facing a rising power, and we know from historical precedent that competitive factors that emerge in such situations often result in bloody wars.” The good news, he said, is that “leaders in both countries are aware of the historical precedents and are determined to not let history repeat itself.”

While top leaders on both sides have recognized the need to work together toward a stable balance between cooperation and competition, Roy said, neither country has been able to implement this, and “it remains to be seen if it is even possible to establish this new type of relationship.”

Roy said opinion polls over the last couple of years have shown a dramatic increase in the percentage of Chinese citizens and officials who view relations with the U.S. as characterized by hostility rather than cooperation. During the same period, he said, U.S. polls indicate that “we don’t think of China in same way.”

“This is something we need to be concerned about,” he said, “because the tensions and passions on the other side are stronger than they are on our side, and this requires careful management.”

While incoming Chinese President Xi Jinping and Premier Li Keqian have already declared their interest in implementing further market reforms and reining in pervasive corruption, Roy said, “the Communist Party may lack the legitimacy and will to force through the far-reaching reforms that are needed against the influence of special interests, especially large state-owned businesses. One can reasonably doubt if a party corrupted by wealth at the highest level can carry out the kind of fundamental systemic reforms that are necessary.”

In addition, he said, China’s new leaders will be faced with a litany of internal difficulties that “illustrate why it would still be foolish to postulate that the 21st century will belong to China.” These include what even outgoing premier Wen Jiabao has characterized as an “unstable, unbalanced, uncoordinated and unsustainable” economy, Roy said, along with a rapidly aging population, slowing economic growth, and what is known as the “middle income trap,” when a rising economy loses the competitive advantage of low-cost labor as it climbs the income scale.

“Wages in China have been rising rapidly, especially for skilled labor,” Roy said. “So they have to substitute something else, such as innovation or efficiency.” Historically, he said, “over 100 countries have reached the middle income trap, and 86 percent failed to get out of it. They grow, then reach a certain level and stall out. China has to find way to avoid this, and that’s a big challenge.”

Another huge issue, Roy said, is that “rising nationalism is pushing China toward a more assertive international style and enmeshing it in difficulties with a lot of its neighbors. This has the potential to undermine the benign international environment that has underpinned the dramatic accomplishments China has made.”

China’s more assertive recent behavior is “both typical and predictable for a rising power,” he said. “But China is finding that when it expresses this nationalism through more assertive behavior, its neighbors all show solidarity with the U.S., which is not what China is trying to accomplish. And this is causing resentment in China, because they find that they can’t use their growing power effectively as a result of the negative consequences.”

This could actually prove to be a positive phenomenon for the U.S., he said, “because if we’re skillful enough to understand this dynamic, we are in a position to constrain China when it’s behaving irresponsibly and cooperate with it when it behaves responsibly.”

“China is not the Soviet Union,” he said. “China’s rise has benefitted all of the countries around it, and as a result they don’t want a containment policy; they want responsible behavior by China so they can expand economic and trade relations, which already dwarf their relations with other countries. But when China behaves badly, then they want the United States to be present because they can’t deal with China on their own. It’s a dynamic that skillful diplomacy should be able to take advantage from.”

With China now “locked in a web of disputes” with its neighbors over small but potentially resource-rich islands in the region, Roy said, “the United States finds itself in the awkward situation of trying to reassure our allies at the same time we try to restrain their behavior, because we don’t want tiny little islands in the western Pacific to end up bringing us into a great-power confrontation with China.”

The threat of such hostility is real, he said, and “these disputes are having direct impact on U.S.-China relations – but it’s an asymmetrical impact, because Americans basically don’t care about these islands. But in China it is an issue of great nationalist importance, as it is for Japan, the Philippines and other claimants.”

Such issues, he said, illustrate the complexity of trying to manage this vitally important relationship: “A stronger China will undoubtedly see itself as again becoming a central regional player, but the United States intends to remain actively engaged in East Asia, where we have formal alliances and strategic ties throughout the region.”

The question for leaders of both countries, Roy said, is whether they can find a solution to this conundrum. As of now, he said, “there is a disconnect between the high-level desire on both sides not to have our relationship drift toward rivalry and confrontation, and the way we’re actually behaving, which is driving us in that direction.”

Open military conflict is unlikely and preventable, he said, but just the threat of it could cause a costly “military capabilities competition” for decades to come, at a time when the U.S. is already facing budget cuts.

“Chinese and U.S. declared strategic goals and their actions are not yet in conformity with each other,” Roy said. “In my mind, this is the central strategic challenge in the U.S.-China relationship, and if we don’t address it forthrightly, it will be more difficult to manage in the future.”


 
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The EAST-WEST CENTER promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue. Established by the U.S. Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options.

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Tuesday, February 12, 2013

Mortgage insurance: market structure, underwriting cycle and policy implications - Consultative paper released by the Joint Forum

Mortgage insurance: market structure, underwriting cycle and policy implications - Consultative paper released by the Joint Forum

February 2013
This consultative report on Mortgage insurance: market structure, underwriting cycle and policy implications examines the interaction of mortgage insurers with mortgage originators and underwriters. The report sets out the following recommendations directed at policymakers and supervisors with the aim of reducing the likelihood of mortgage insurance stress and failure in such tail events.
  1. Policymakers should consider requiring that mortgage originators and mortgage insurers align their interests;
  2. Supervisors should ensure that mortgage insurers and mortgage originators maintain strong underwriting standards;
  3. Supervisors should be alert to - and correct for - deterioration in underwriting standards stemming from behavioural incentives influencing mortgage originators and mortgage insurers;
  4. Supervisors should require mortgage insurers to build long-term capital buffers and reserves during the valleys of the underwriting cycle to cover claims during its peaks;
  5. Supervisors should be aware of and mitigate cross-sectoral arbitrage which could arise from differences in the accounting between insurers' technical reserves and banks' loan loss provisions, and from differences in the capital requirements for credit risk between banks and insurers; and
  6. Supervisors should apply the FSB Principles for Sound Residential Mortgage Underwriting Practices ("FSB Principles") to mortgage insurers noting that proper supervisory implementation necessitates both insurance and banking expertise.
Comments on this consultative report should be submitted by Tuesday 30 April 2013 either by email to baselcommittee@bis.org or by post to the Secretariat of the Joint Forum (BCBS Secretariat), Bank for International Settlements, CH-4002 Basel, Switzerland. All comments may be published on the websites of the Bank for International Settlements (www.bis.org), IOSCO (www.iosco.org) and the IAIS (www.iaisweb.org) unless a commenter specifically requests confidential treatment.

Wednesday, February 6, 2013

A Jersey Lesson in Voter Fraud. By Thomas Fleming

A Jersey Lesson in Voter Fraud. By Thomas Fleming
My grandmother died there in 1940. She voted Democratic for the next 10 years.The Wall Street Journal, February 6, 2013, on page A11
http://online.wsj.com/article/SB10001424127887323829504578272250730580018.html

Some youthful memories were stirred by the news this week that the president plans to use his State of the Union speech next Tuesday to urge Congress to make voter registration and ballot-casting easier. Like Mr. Obama, I come from a city with a colorful history of political corruption and vote fraud.

The president's town is Chicago, mine is Jersey City. Both were solidly Democratic in the 1930s and '40s, and their mayors were close friends. At one point in the early '30s, Jersey City's Frank Hague called Chicago's Ed Kelly to say he needed $2 million as soon as possible to survive a coming election. According to my father—one of Boss Hague's right-hand men—a dapper fellow who had taken an overnight train arrived at Jersey City's City Hall the next morning, suitcase in hand, cash inside.

Those were the days when it was glorious to be a Democrat. As a historian, I give talks from time to time. In a recent one, called "Us Against Them," I said it was we Irish and our Italian, Polish and other ethnic allies against "the dirty rotten stinking WASP Protestant Republicans of New Jersey." By thus demeaning the opposition, we had clear consciences as we rolled up killer majorities using tactics that had little to do with the election laws.

My grandmother Mary Dolan died in 1940. But she voted Democratic for the next 10 years. An election bureau official came to our door one time and asked if Mrs. Dolan was still living in our house. "She's upstairs taking a nap," I replied. Satisfied, he left.

Thousands of other ghosts cast similar ballots every Election Day in Jersey City. Another technique was the use of "floaters," tough Irishmen imported from New York who voted five, six and even 10 times at various polling places.

Equally effective was cash-per-vote. On more than one Election Day, my father called the ward's chief bookmaker to tell him: "I need 10 grand by one o'clock." He always got it, and his ward had a formidable Democratic majority when the polls closed.

Other times, as the clock ticked into the wee hours, word would often arrive in the polling places that the dirty rotten stinking WASP Protestant Republicans had built up a commanding lead in South Jersey, where "Nucky" Johnson (currently being immortalized on TV in HBO's "Boardwalk Empire") had a small Republican machine in Atlantic City.

By dawn, tens of thousands of hitherto unknown Jersey City ballots would be counted and another Democratic governor or senator would be in office, and the Democratic presidential candidate would benefit as well. Things in Chicago were no different, Boss Hague would remark after returning from one of his frequent visits.

I have to laugh when I hear current-day Democrats not only lobbying against voter-identification laws but campaigning to make voting even easier than it already is. More laughable is the idea of dressing up the matter as a civil-rights issue.

My youthful outlook on life—that anything goes against the rotten stinking WASP Protestant Republicans—evaporated while I served in the U.S. Navy in World War II. In that conflict, millions of people like me acquired a new understanding of what it meant to be an American.

Later I became a historian of this nation's early years—and I can assure President Obama that no founding father would tolerate the idea of unidentified voters. These men understood the possibility and the reality of political corruption. They knew it might erupt at any time within a city or state.

The president's party—which is still my party—has inspired countless Americans by looking out for the less fortunate. No doubt that instinct motivated Mr. Obama in his years as a community organizer in Chicago. Such caring can still be a force, but that force, and the Democratic Party, will be constantly soiled and corrupted if the right and the privilege to vote becomes an easily manipulated joke.

Mr. Fleming is a former president of the Society of American Historians.

Sunday, January 20, 2013

Are there clear affinities of Communism with Fascism?

Political philosopher John N. Gray on liberals' totalitarian temptation
Times Literary Supplement, Jan 02, 2013:

One of the features that distinguished Bolshevism from Tsarism was the insistence of Lenin and his followers on the need for a complete overhaul of society. Old-fashioned despots may modernize in piecemeal fashion if doing so seems necessary to maintain their power, but they do not aim at remaking society on a new model, still less at fashioning a new type of humanity. Communist regimes engaged in mass killing in order to achieve these transformations, and paradoxically it is this essentially totalitarian ambition that has appealed to liberals. Here as elsewhere, the commonplace distinction between utopianism and meliorism is less than fundamental. In its predominant forms, liberalism has been in recent times a version of the religion of humanity, and with rare exceptions— [Bertrand] Russell is one of the few that come to mind—liberals have seen the Communist experiment as a hyperbolic expression of their own project of improvement; if the experiment failed, its casualties were incurred for the sake of a progressive cause. To think otherwise—to admit the possibility that the millions who were judged to be less than fully human suffered and died for nothing—would be to question the idea that history is a story of continuing human advance, which for liberals today is an article of faith. That is why, despite all evidence to the contrary, so many of them continue to deny Communism's clear affinities with Fascism. Blindness to the true nature of Communism is an inability to accept that radical evil can come from the pursuit of progress.

John Gray is professor emeritus at the London School of Economics

Tuesday, January 8, 2013

Capital Requirements for Over-the-Counter Derivatives Central Counterparties

Capital Requirements for Over-the-Counter Derivatives Central Counterparties. By Li Lin and Jay Surti
IMF Working Paper No. 13/3, January 08, 2013
http://www.imf.org/external/pubs/cat/longres.aspx?sk=40220.0

Summary: The central counterparties dominating the market for the clearing of over-the-counter interest rate and credit derivatives are globally systemic. Employing methodologies similar to the calculation of banks’ capital requirements against trading book exposures, this paper assesses the sensitivity of central counterparties’ required risk buffers, or capital requirements, to a range of model inputs. We find them to be highly sensitive to whether key model parameters are calibrated on a point-in-time versus stress-period basis, whether the risk tolerance metric adequately captures tail events, and the ability—or lack thereof—to define exposures on the basis of netting sets spanning multiple risk factors. Our results suggest that there are considerable benefits from having prudential authorities adopt a more prescriptive approach to for central counterparties’ risk buffers, in line with recent enhancements to the capital regime for banks.

ISBN: 9781475535501
ISSN: 2227-8885
Stock No: WPIEA2013003

Saturday, January 5, 2013

We, Too, Are Violent Animals. By Jane Goodall, Richard Wrangham, and Dale Peterson

We, Too, Are Violent Animals. By Jane Goodall, Richard Wrangham, and Dale Peterson
Those who doubt that human aggression is an evolved trait should spend more time with chimpanzees and wolvesThe Wall Street Journal,January 5, 2013, on page C3
http://online.wsj.com/article/SB10001424127887323874204578220002834225378.html

Where does human savagery come from? The animal behaviorist Marc Bekoff, writing in Psychology Today after last month's awful events in Newtown, Conn., echoed a common view: It can't possibly come from nature or evolution. Harsh aggression, he wrote, is "extremely rare" in nonhuman animals, while violence is merely an odd feature of our own species, produced by a few wicked people. If only we could "rewild our hearts," he concluded, we might harness our "inborn goodness and optimism" and thereby return to our "nice, kind, compassionate, empathic" original selves.

If only if it were that simple. Calm and cooperative behavior indeed predominates in most species, but the idea that human aggression is qualitatively different from that of every other species is wrong.

The latest report from the research site that one of us (Jane Goodall) directs in Tanzania gives a quick sense of what a scientist who studies chimpanzees actually sees: "Ferdinand [the alpha male] is rather a brutal ruler, in that he tends to use his teeth rather a lot…a number of the males now have scars on their backs from being nicked or gashed by his canines…The politics in Mitumba [a second chimpanzee community] have also been bad. If we recall that: they all killed alpha-male Vincent when he reappeared injured; then Rudi as his successor probably killed up-and-coming young Ebony to stop him helping his older brother Edgar in challenging him…but to no avail, as Edgar eventually toppled him anyway."

A 2006 paper reviewed evidence from five separate chimpanzee populations in Africa, groups that have all been scientifically monitored for many years. The average "conservatively estimated risk of violent death" was 271 per 100,000 individuals per year. If that seems like a low rate, consider that a chimpanzee's social circle is limited to about 50 friends and close acquaintances. This means that chimpanzees can expect a member of their circle to be murdered once every seven years. Such a rate of violence would be intolerable in human society.

The violence among chimpanzees is impressively humanlike in several ways. Consider primitive human warfare, which has been well documented around the world. Groups of hunter-gatherers who come into contact with militarily superior groups of farmers rapidly abandon war, but where power is more equal, the hostility between societies that speak different languages is almost endless. Under those conditions, hunter-gatherers are remarkably similar to chimpanzees: Killings are mostly carried out by males, the killers tend to act in small gangs attacking vulnerable individuals, and every adult male in the society readily participates. Moreover, with hunter-gatherers as with chimpanzees, the ordinary response to encountering strangers who are vulnerable is to attack them.

Most animals do not exhibit this striking constellation of behaviors, but chimpanzees and humans are not the only species that form coalitions for killing. Other animals that use this strategy to kill their own species include group-living carnivores such as lions, spotted hyenas and wolves. The resulting mortality rate can be high: Among wolves, up to 40% of adults die from attacks by other packs.

Killing among these carnivores shows that ape-sized brains and grasping hands do not account for this unusual violent behavior. Two other features appear to be critical: variable group size and group-held territory. Variable group size means that lone individuals sometimes encounter small, vulnerable parties of neighbors. Having group territory means that by killing neighbors, the group can expand its territory to find extra resources that promote better breeding. In these circumstances, killing makes evolutionary sense—in humans as in chimpanzees and some carnivores.

What makes humans special is not our occasional propensity to kill strangers when we think we can do so safely. Our unique capacity is our skill at engineering peace. Within societies of hunter-gatherers (though only rarely between them), neighboring groups use peacemaking ceremonies to ensure that most of their interactions are friendly. In state-level societies, the state works to maintain a monopoly on violence. Though easily misused in the service of those who govern, the effect is benign when used to quell violence among the governed.

Under everyday conditions, humans are a delightfully peaceful and friendly species. But when tensions mount between groups of ordinary people or in the mind of an unstable individual, emotion can lead to deadly events. There but for the grace of fortune, circumstance and effective social institutions go you and I. Instead of constructing a feel-good fantasy about the innate goodness of most people and all animals, we should strive to better understand ourselves, the good parts along with the bad.

—Ms. Goodall has directed the scientific study of chimpanzee behavior at Gombe Stream National Park in Tanzania since 1960. Mr. Wrangham is the Ruth Moore Professor of Biological Anthropology at Harvard University. Mr. Peterson is the author of "Jane Goodall: The Woman Who Redefined Man."

Sunday, December 30, 2012

From "Weiwei-isms." By Ai Weiwei

Selection from "Weiwei-isms," by Ai Weiwei. Edited by Larry Warsh. Princeton University Press, 152 pp, ISBN-13: 978-0691157665

Living in a system under the communist ideology, an artist cannot avoid fighting for freedom of expression. You always have to be aware that art is not only a self-expression but a demonstration of human rights and dignity. To express yourself freely, a right as personal as it is, has always been difficult, given the political situation.—NY Arts, March-April 2008

Tips on surviving the regime: Respect yourself and speak for others. Do one small thing every day to prove the existence of justice.—Twitter, Aug. 6, 2009

Choices after waking up: To be true or to lie? To take action or be brainwashed? To be free or be jailed? —Twitter, Sept. 4, 2009

No outdoor sports can be more elegant than throwing stones at autocracy; no melees can be more exciting than those in cyberspace. —Twitter, March 10, 2010

Nothing can silence me as long as I am alive. I don't give any kind of excuse. If I cannot come out [of China] or I cannot go in [to China] this is not going to change my belief. But when I am there, I am in this condition: I see it, I see people who need help. Then you know, I just want to offer my possibility to help them.—The Paley Center for Media, March 15, 2010

The officials want China to be seen as a cultured, creative nation, but in this anti-liberal political society everything outside the direct control of the state is seen as a potential threat.—CNBC.com, May 12, 2010

During my detention, they kept asking me: Ai Weiwei, what is the reason you have become like this today? My answer is: First, I refuse to forget. My parents, my family, their whole generation and my generation all paid a great deal in the struggle for freedom of speech. Many people died just because of one sentence or even one word. Somebody has to take responsibility for that. —Der Spiegel, Nov. 21, 2011

In a society like this there is no negotiation, no discussion, except to tell you that power can crush you any time they want—not only you, your whole family and all people like you.—Financial Times, Feb. 24, 2012

China might seem quite successful in its controls, but it has only raised the water level. It's like building a dam: It thinks there is more water so it will build higher. But every drop of water is still in there. It doesn't understand how to let the pressure out. It builds up a way to maintain control and push the problem to the next generation. —Guardian, April 15, 2012

I will never leave China, unless I am forced to. Because China is mine. I will not leave something that belongs to me in the hands of people I do not trust.—Reuters, May 29, 2012

Tuesday, December 25, 2012

Smarter Ways to Discipline Children

Smarter Ways to Discipline Children. By Andrea Petersen
Research Suggests Which Strategies Really Get Children to Behave; How Timeouts Can Work BetterWSJ, December 24, 2012
http://online.wsj.com/article/SB10001424127887323277504578189680452680490.html

When it comes to disciplining her generally well-behaved kids, Heather Henderson has tried all the popular tricks. She's tried taking toys away. (Her boys, ages 4 and 6, never miss them.) She's tried calm explanations about why a particular behavior—like hitting your brother—is wrong. (It doesn't seem to sink in.) And she's tried timeouts. "The older one will scream and yell and bang on walls. He just loses it," says the 41-year-old stay-at-home mother in Syracuse, N.Y.

What can be more effective are techniques that psychologists often use with the most difficult kids, including children with attention deficit hyperactivity disorder and oppositional defiant disorder. Approaches, with names like "parent management training" and "parent-child interaction therapy," are backed up by hundreds of research studies and they work on typical kids, too. But while some of the approaches' components find their way into popular advice books, the tactics remain little known among the general public.

The general strategy is this: Instead of just focusing on what happens when a child acts out, parents should first decide what behaviors they want to see in their kids (cleaning their room, getting ready for school on time, playing nicely with a sibling). Then they praise those behaviors when they see them. "You start praising them and it increases the frequency of good behavior," says Timothy Verduin, clinical assistant professor of child and adolescent psychiatry at the Child Study Center at NYU Langone Medical Center in New York.

This sounds simple, but in real life can be tough. People's brains have a "negativity bias," says Alan E. Kazdin, a professor of psychology and child psychiatry at Yale University and director of the Yale Parenting Center. We pay more attention to when kids misbehave than when they act like angels. Dr. Kazdin recommends at least three or four instances of praise for good behavior for every timeout a kid gets. For young children, praise needs to be effusive and include a hug or some other physical affection, he says.

According to parent management training, when a child does mess up, parents should use mild negative consequences (a short timeout or a verbal reprimand without shouting).

Giving a child consequences runs counter to some popular advice that parents should only praise their kids. But reprimands and negative nonverbal responses like stern looks, timeouts and taking away privileges led to greater compliance by kids according to a review article published this month in the journal Clinical Child and Family Psychology Review.

"There's a lot of fear around punishment out there," says Daniela J. Owen, a clinical psychologist at the San Francisco Bay area Center for Cognitive Therapy in Oakland, Calif. and the lead author of the study. "Children benefit from boundaries and limits." The study found that praise and positive nonverbal responses like hugs and rewards like ice cream or stickers, however, didn't lead to greater compliance in the short term. "If your child is cleaning up and he puts a block in the box and you say 'great job,' it doesn't mean the child is likely to put another block in the box," says Dr. Owen.

But in the long run, regular praise does make a child more likely to comply, possibly because the consistent praise strengthens the parent-child relationship overall, Dr. Owen says. The article reviewed 41 studies looking at discipline strategies and child compliance.

Parents who look for discipline guidance often find conflicting advice from the avalanche of books and mommy blogs and the growing number of so-called parent coaches. (In 2011, 3,520 parenting books were published or distributed in the U.S., up from 2,774 in 2007, according to Bowker Books In Print database.)

"Many of the things that are recommended we know now to be wrong," says Dr. Kazdin, a leading expert on parent management training. "It is the equivalent of telling people to smoke a lot for their health."

Parents often torpedo their discipline efforts by giving vague, conditional commands and not giving kids enough time to comply with them, says Dr. Verduin, who practices parent-child interaction therapy. When crossing the street, "A bad command would be, 'be careful.' A good command would be 'hold my hand,' " he says. He also instructs parents to count to five to themselves after giving a child a directive, like, for example, "Put on your coat." "Most parents wait a second or two," he says, before making another command, which can easily devolve into yelling and threats.

The techniques are applicable to all ages, but psychologists note that starting early is better. Once kids hit about 10 or 11, discipline gets a lot harder. "Parents don't have as much leverage" with tweens and teens, says Dr. Verduin. "Kids don't care as much what the parents think about them."

Some parents try and reason with young children, which Dr. Kazdin says is bound to fail to change a kid's behavior. Reason doesn't change behavior, which is why stop-smoking messages don't usually work, Dr. Kazdin says. Overly harsh punishments also fail. "One of the side effects of punishment is noncompliance and aggression," he says.

Spanking, in particular, has been linked to aggressive behavior in kids and anger problems and increased marital conflict later on in adulthood. Still, 26% of parents "often" or "sometimes" spank their 19-to-35-month-old children, according to a 2004 study in the journal Pediatrics, which analyzed survey data collected by the federal government from 2,068 parents of young children.

At the Yale Parenting Center, psychologists have found that getting kids to "practice" temper tantrums can lessen their frequency and intensity. Dr. Kazdin recommends that parents have their kids "practice" once or twice a day. Gradually, ask the child to delete certain unwanted behaviors from the tantrum, like kicking or screaming. Then effusively praise those diluted tantrums. Soon, for most children, "the real tantrums start to change," he says. "From one to three weeks, they are kind of over." As for whining, Dr. Kazin recommends whining right along with your child. "It changes the stimulus. You will likely end up laughing," he says.

Researchers noted that not every technique is effective for every child. Some parents find other creative solutions that work for their kids.

Karen Pesapane has found yelling "pillow fight," when her two kids are arguing can put a halt to the bickering. "Their sour attitudes change almost immediately into silliness and I inevitably become their favorite target," said Ms. Pesapane, a 34-year-old from Silver Spring, Md., who works in fundraising for a nonprofit and has a daughter 10, and a son, 6.

Dayna Even has found spending one hour a day fully focused on her 6-year-old son, Maximilian, means "he's less likely to act out, he's more likely to play independently and less likely to interrupt adults," says the 51-year-old writer and tutor in Kailua, Hawaii.

Parents need to take a child's age into account. Benjamin Siegel, professor of pediatrics at the Boston University School of Medicine notes that it isn't until about age 3 that children can really start to understand and follow rules. Dr. Siegel is the chair of the American Academy of Pediatrics' committee that is currently reworking the organization's guidelines on discipline, last updated in 1998.

Tuesday, December 18, 2012

The rise of the older worker

The rise of the older worker, by Jim Hillage, research director
Institute for Employment Studies
December 12, 2012
http://www.employment-studies.co.uk/press/26_12.php

There are more people working in the UK today than at anytime in our history. Today's labour market statistics show another increase in the numbers employed taking the total to 29,600,000, up 40,000 on the previous quarter and 500,000 on a year ago.

Almost half of the rise has been among people aged 50 or over, with the fastest rate of increase occurring among those 65 or over, particularly among older women.

There are now almost a million people aged 65 or over in jobs, double the number ten years ago and up 13 per cent over the past year. Although these older workers comprise only three percent of the working population, they account for 20 per cent of the recent growth in employment. However this group has a very different labour market profile to the rest of the working population, particularly younger people, and there is no evidence to suggest older workers are gaining employment at the expense of the young generation. For example:
  • 30 per cent of older workers (ie aged 65+) work in managerial and professional jobs, compared with only nine per cent of younger workers (aged 16 to 24). Conversely 34 per cent of young people work in sales, care and leisure jobs, compared with only 14 of their older counterparts.
  • Nearly four in ten older workers are self-employed, compared with five per cent of younger workers.
  • Most (69 per cent) of 65 plus year olds work part-time, compared with 39 per cent of young workers (and 27 per cent of all those in work).
Jim Hillage, Director of Research at the Institute for Employment Studies, explains that:

‘There are a number of reasons why older workers are staying on in work. In some cases employers want to retain their skills and experience and encourage them to stay on, albeit on a part-time basis, and most older employees have been working for their employer for at least ten years and often in smaller workplaces. Conversely, some older people have to stay in work as their pensions are inadequate and it is interesting to note that employment of older workers is highest in London and the South East, where living costs are highest. Finally, there is also a growing group of self-employed who still want to retain their work connections and interests.’

2012 © Institute for Employment Studies


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Update: Long-Term Jobless Begin to Find Work. By Ben Casselman
The Wall Street Journal, January 11, 2013, on page A2
http://online.wsj.com/article/SB10001424127887323442804578233390580359994.html

The epidemic of long-term unemployment, one of the most pernicious and persistent challenges bedeviling the U.S. economy, is finally showing signs of easing.

The long-term unemployed—those out of work more than six months—made up 39.1% of all job seekers in December, according to the Labor Department, the first time that figure has dropped below 40% in more than three years.

[http://si.wsj.net/public/resources/images/P1-BJ893_ECONOM_NS_20130110190005.jpg]

The problem is far from solved. Nearly 4.8 million Americans have been out of work for more than six months, down from a peak of more than 6.5 million in 2010 but still a level without precedent since World War II.

The recent signs of progress mark a reversal from earlier in the recovery, when long-term unemployment proved resistant to improvement elsewhere in the labor market.

Total unemployment peaked in late 2009 and has dropped relatively steadily since then, while the number of long-term unemployed continued to rise into 2010 and then fell only slowly through much of 2011.

More recently, however, unemployment has fallen more quickly among the long-term jobless than among the broader population. In the past year, the number of long-term unemployed workers has dropped by 830,000, accounting for nearly the entire 843,000-person drop in overall joblessness.

When Michael Leahy lost his job as a manager at a Connecticut bank in 2010, the state had already shed about 10,000 financial-sector jobs in the previous two years and he had difficulty even landing an interview. By the time banks started hiring again, Mr. Leahy, now 59, had been out of work for more than a year and found himself getting passed over for candidates with jobs or ones who had been laid off more recently.

In July, however, Mr. Leahy was accepted into a program for the long-term unemployed run by the Work Place, a local workforce development agency. The program helped Mr. Leahy improve his resume and interviewing skills, and ultimately connected him with a local bank that was hiring.

Mr. Leahy began a new job in December. The chance to work again in his chosen field, he said, was more than worth the roughly 15% pay cut from his previous job.

"The thing that surprised me is this positive feeling I have every day of getting up in the morning and knowing I have a place to go to and a place where people are waiting for me," Mr. Leahy said.

[http://si.wsj.net/public/resources/images/NA-BU523B_ECONO_D_20130110211902.jpg]

The decline in long-term unemployment is good news for the broader economy. Many economists, including Federal Reserve Chairman Ben Bernanke, feared that many long-term unemployed workers would become permanently unemployable, creating a "structural" unemployment problem akin to what Europe suffered in the 1980s. But those fears are beginning to recede along with the ranks of the long-term unemployed.

"I don't think it's the case that the long-term unemployed are no longer employable," said Omair Sharif, an economist for RBS Securities Inc. "In fact, they've been the ones getting the jobs."

Not all the drop in long-term joblessness can be attributed to workers finding positions. In recent years, millions of Americans have given up looking for work, at which point they no longer count as "unemployed" in official statistics.

The recent drop in long-term unemployment, however, doesn't appear to be due to such dropouts. The number of people who aren't in the labor force but say they want a job has risen by only about 400,000 in the past year, while the number of Americans with jobs has risen by 2.4 million. That suggests at least much of the improvement is due to people finding jobs, not dropping out, Mr. Sharif said.

The average unemployed worker has now been looking for 38 weeks, down from a peak of nearly 41 weeks and the lowest level since early 2011.

The long-term unemployed still face grim odds of finding work. About 10% of long-term job seekers found work in April, the most recent month for which a detailed breakdown is available, compared with about a quarter of more recently laid-off workers. The ranks of the short-term jobless are more quickly refreshed by newly laid-off workers, however. As a result, the total number of short-term unemployed has fallen more slowly in recent months, even though individual workers still stand a far better chance of finding work early in their search.

And when the long-term unemployed do find work, their new jobs generally pay less than their old ones—often much less. A recent study from economists at Boston University, Columbia University and the Institute for Employment Research found that every additional year out of work reduces workers' wages when they do find a job by 11%.

Moreover, the recent gains have yet to reach the longest of the long-term unemployed: While the number of people unemployed for between six months and two years has fallen by 12% in the past year, the ranks of those jobless for three years or longer has barely budged at all.

Patricia Soprych, a 51-year-old widow in Skokie, Ill., recently got a job as a grocery-store cashier after more than a year of looking for work. But the job is part-time and pays the minimum wage, which she finds barely enough to make ends meet.

"You say the job market's getting better. Yeah, for these $8.25-an-hour jobs," Ms. Soprych said.

Economists cite several reasons for the drop in long-term unemployment. Most significant is the gradual healing of the broader labor market, which has seen the unemployment rate drop to 7.8% in December from a high of 10% in 2009. After initially benefiting mostly the more recently laid-off, that progress is now being felt among the longer-term jobless as well.

The gradual strengthening in the housing market could lead to more improvement. Many of the long-term unemployed are former construction workers who lost jobs when the housing bubble burst. Rising home building has yet to lead to a surge in construction employment, but many experts expect hiring to pick up in 2013.

Another possible factor behind the recent progress: the gradual reduction in emergency unemployment benefits available to laid-off workers. During the recession, Congress extended unemployment benefits to as long as 99 weeks in some states. Today, benefits last 73 weeks at most, and less time in many states. Research suggests that unemployment payments lead some recipients not to look as hard for jobs, and the loss of benefits may have pushed some job seekers to accept work they might otherwise have rejected, said Gary Burtless, an economist at the Brookings Institution. 

Sunday, December 9, 2012

Mobilizing Resources, Building Coalitions: Local Power in Indonesia

Mobilizing Resources, Building Coalitions: Local Power in Indonesia, by Ryan Tans
Honolulu: East-West Center, 2012
Policy Studies, No. 64
ISBN: 978-0-86638-220-5
http://www.eastwestcenter.org/publications/mobilizing-resources-building-coalitions-local-power-in-indonesia

What have been the local political consequences of Indonesia's decentralization and electoral reforms? Some recent scholarship has emphasized continuity with Suharto's New Order, arguing that under the new rules, old elites have used money and intimidation to capture elected office. Studies detail the widespread practice of "money politics," in which candidates exchange patronage for support from voters and parties. Yet significant variation characterizes Indonesia's local politics, which suggests the need for an approach that differentiates contrasting power arrangements.

This study of three districts in North Sumatra province compares local politicians according to their institutional resource bases and coalitional strategies. Even if all practice money politics, they form different coalition types that depend on diverse institutions for political resources. The three ideal types of coalitions are political mafias, party machines, and mobilizing coalitions. Political mafias have a resource base limited to local state institutions and businesses; party machines bridge local and supra-local institutions; and mobilizing coalitions incorporate social organizations and groups of voters. Due to contrasting resource bases, the coalitions have different strategic option "menus," and they may experiment with various political tactics.

The framework developed here plausibly applies in other Indonesian districts to the extent that similar resource bases--namely local state institutions, party networks, and strong social and business organizations--are available to elites in other places.

About the Author: Ryan Tans is a doctoral student in political science at Emory University. Previously, he received a Master of Arts in Southeast Asian Studies from the National University of Singapore.

Sunday, December 2, 2012

Human Nature: Jim Sinegal Dividend Tax Decision - Costco Will Borrow To Pay Dividends

Costco's Dividend Tax Epiphany. WSJ Editorial
Obama's fans in the 1% vote to beat Obama's tax increase.The Wall Street Journal, November 30, 2012, on page A14
http://online.wsj.com/article/SB10001424127887324705104578149012514177372.html

When President Obama needed a business executive to come to his campaign defense, Jim Sinegal was there. The Costco COST +2.07% co-founder, director and former CEO even made a prime-time speech at the Democratic Party convention in Charlotte. So what a surprise this week to see that Mr. Sinegal and the rest of the Costco board voted to give themselves a special dividend to avoid Mr. Obama's looming tax increase. Is this what the President means by "tax fairness"?

Specifically, the giant retailer announced Wednesday that the company will pay a special dividend of $7 a share this month. That's a $3 billion Christmas gift for shareholders that will let them be taxed at the current dividend rate of 15%, rather than next year's rate of up to 43.4%—an increase to 39.6% as the Bush-era rates expire plus another 3.8% from the new ObamaCare surcharge.

More striking is that Costco also announced that it will borrow $3.5 billion to finance the special payout. Dividends are typically paid out of earnings, either current or accumulated. But so eager are the Costco executives to get out ahead of the tax man that they're taking on debt to do so.

Shareholders were happy as they bid up shares by more than 5% in two days. But the rating agencies were less thrilled, as Fitch downgraded Costco's credit to A+ from AA-. Standard & Poor's had been watching the company for a potential upgrade but pulled the watch on the borrowing news.

We think companies can do what they want with their cash, but it's certainly rare to see a public corporation weaken its balance sheet not for investment in the future but to make a one-time equity payout. It's a good illustration of the way that Federal Reserve Chairman Ben Bernanke's near-zero interest rates are combining with federal tax policy to distort business decisions.

One of the biggest dividend winners will be none other than Mr. Sinegal, who owns about two million shares, while his wife owns another 84,669. At $7 a share, the former CEO will take home roughly $14 million. At a 15% tax rate he'll get to keep nearly $12 million of that windfall, while at next year's rate of 43.4% he'd take home only about $8 million. That's a lot of extra cannoli.

This isn't exactly the tone of, er, shared sacrifice that Mr. Sinegal struck on stage in Charlotte. He described Mr. Obama as "a President making an economy built to last," adding that "for companies like Costco to invest, grow, hire and flourish, the conditions have to be right. That requires something from all of us." But apparently $4 million less from Mr. Sinegal.

By the way, the Costco board also includes at least two other prominent tub-thumpers for higher taxes— William Gates Sr. and Charles Munger. Mr. Gates, the father of Microsoft's MSFT -1.22% Bill Gates, has campaigned against repealing the death tax and led the fight to impose an income tax via referendum in Washington state in 2010. It lost. Mr. Munger is Warren Buffett's longtime Sancho Panza at Berkshire Hathaway BRKB 0.00% and has spoken approvingly of a value-added tax that would stick it to the middle class.

Costco's chief financial officer, Richard Galanti, confirms that every member of the board is also a shareholder. Based on the most recent publicly available data, they own more than 4.1 million shares and more than 1.3 million options to purchase additional shares. At $7 a share, the dividend will distribute roughly $29 million to the board, including Mr. Sinegal's $14 million—at a collective tax saving of about $8 million. Even more cannoli.

We emailed Mr. Sinegal for comment but didn't hear back. Mr. Galanti explained that while looming tax hikes are a factor in the December borrowing and payout, so are current low interest rates. Mr. Galanti adds that the company will still have a strong balance sheet and is increasing its capital expenditures and store openings this year.

As it happens, one of those new stores opened Thursday in Washington, D.C., and no less a political star than Joe Biden stopped by to join Mr. Sinegal and pose for photos as he did some Christmas shopping. It's nice to have friends in high places. We don't know if Mr. Biden is a Costco shareholder, but if he wants to get in on the special dividend there's still time before his confiscatory tax policy hits. The dividend is payable on December 18 to holders of record on December 10.

To sum up: Here we have people at the very top of the top 1% who preach about tax fairness voting to write themselves a huge dividend check to avoid the Obama tax increase they claim it is a public service to impose on middle-class Americans who work for 30 years and finally make $250,000 for a brief window in time.

If they had any shame, they'd send their entire windfall to the Treasury.

Saturday, December 1, 2012

Debate: Progressives & Conservatives on Entitlements

Progressives

Sorry, Erskine, America Rejected Simpson-Bowles. By John Nichols
The Nation, November 29, 2012 - 8:46 AM ET
http://www.thenation.com/blog/171513/sorry-erskine-america-rejected-simpson-bowles
Erskine Bowles, who is sort of a Democrat, met Wednesday with House Speaker John Boehner to help Republicans promote proposals to cut entitlements, as part of the “fiscal cliff” negotiations.

This is the right place for Bowles, who has long maintained a mutual-admiration society with House Budget Committee chairman Paul Ryan, R-Wisconsin. The former Clinton White House chief of staff has always been in the corporate conservative camp when it comes to debates about preserving Social Security, Medicare and Medicaid.

It’s good that he and Boehner have found one another. Let the Republicans advocate for the cuts proposed by Bowles and his former Wyoming Senator Alan Simpson, his Republican co-conductor on the train wreck that produced the so-called “Simpson-Bowles” deficit reduction plan.

After all, despite the media hype, Simpson-Bowles has always been a non-starter with the American people.

Last summer, at the Democratic and Republican national conventions, so many nice things were said about the recommendations of the National Commission on Fiscal Responsibility and Reform that had been chaired by former Wyoming Senator Alan Simpson, a Republican, and Bowles that it was hard to understand why they were implemented. Paul Ryan went so far as to condemn President Obama for “doing nothing” to implement the Simpson-Bowles plan—only to have it noted that Ryan rejected the recommendations of the commission.

But, while a lot of politicians in both parties say a lot of nice things about the austerity program proposed by Simpson-Bowles, there is a reason why there was no rush before the election to embrace the blueprint for cutting Social Security, Medicare and Medicaid while imposing substantial new tax burdens on the middle class.

It’s a loser.

Before the November 6 election, Simpson and Bowles went out of their way to highlight the candidacies of politicians who supported their approach—New Hampshire Republican Congressman Charlie Bass, Rhode Island Republican US House candidate Brendan Doherty, Nebraska Democratic US Senate candidate Bob Kerrey. Bipartisan endorsements were made, statements were issued, headlines were grabbed and

The Simpson-Bowles candidates all lost.

Americans are smart enough to recognize that Simpson-Bowles would stall growth. And they share the entirely rational view of economists like Paul Krugman.

“Simpson-Bowles is terrible,” argues Krugman, a Nobel Prize winner for his economic scholarship. “It mucks around with taxes, but is obsessed with lowering marginal rates despite a complete absence of evidence that this is important. It offers nothing on Medicare that isn’t already in the Affordable Care Act. And it raises the Social Security retirement age because life expectancy has risen—completely ignoring the fact that life expectancy has only gone up for the well-off and well-educated, while stagnating or even declining among the people who need the program most.”

On election night, Peter D. Hart Research Associates surveyed Americans with regard to key proposals from the commission. The reaction was uniformly negative.

By a 73-18 margin, those polled said that protecting Medicare and Social Security from benefit cuts is more important than bringing down the deficit.
By a 62-33 margin, the voters who were surveyed said that making the wealthy start paying their fair share of taxes is more important than reducing tax rates across the board (62 percent to 33 percent).

But that’s just the beginning of an outline of opposition to the Simpson-Bowles approach.

To wit:
* 84 percent of those surveyed oppose reducing Social Security benefits;
* 68 percent oppose raising the Medicare eligibility age;
* 69 percent oppose reductions in Medicaid benefits;
* 64 percent support addressing the deficit by increasing taxes on the rich—with more than half of those surveyed favoring the end of the Bush tax cuts for those making more than $250,000.

Americans want a strong government that responds to human needs:
• 88 percent support allowing Medicare to negotiate with drug companies to lower costs;
• 70 percent favor continuing extended federal unemployment insurance;
• 64 percent support providing federal government funding to local governments;
• 72 percent say that corporations and wealthy individuals have too much influence on the political system.

AFL-CIO president Richard Trumka is right. On November 6, “The American people sent a clear message.”

With their votes, with their responses to exit polls, with every signal they could send, the voters refused to buy the “fix” that Erskine Bowles is selling.


---
Conservatives

The Crisis of American Self-Government. By Sohrab Ahmari
Harvey Mansfield, Harvard's 'pet dissenter,' on the 2012 election, the real cost of entitlements, and why he sees reason for hope.
The Wall Street Journal, November 30, 2012, on page A13
http://online.wsj.com/article/SB10001424127887323751104578149292503121124.html

Cambridge, Mass.

'We have now an American political party and a European one. Not all Americans who vote for the European party want to become Europeans. But it doesn't matter because that's what they're voting for. They're voting for dependency, for lack of ambition, and for insolvency."

Few have thought as hard, or as much, about how democracies can preserve individual liberty and national virtue as the eminent political scientist Harvey Mansfield. When it comes to assessing the state of the American experiment in self-government today, his diagnosis is grim, and he has never been one to mince words.

Mr. Mansfield sat for an interview on Thursday at the Harvard Faculty Club. This year marks his 50th as a teacher at the university. It isn't easy being the most visible conservative intellectual at an institution that has drifted ever further to the left for a half-century. "I live in a one-party state and very much more so a one-party university," says the 80-year-old professor with a sigh. "It's disgusting. I get along very well because everybody thinks the fact that I'm here means the things I say about Harvard can't be true. I am a kind of pet—a pet dissenter."

Partly his isolation on campus has to do with the nature of Mr. Mansfield's scholarship. At a time when his colleagues are obsessed with trendy quantitative methods and even trendier "identity studies," Mr. Mansfield holds steadfast to an older tradition that looks to the Western canon as the best guide to human affairs. For him, Greek philosophy and the works of thinkers such as Machiavelli and Tocqueville aren't historical curiosities; Mr. Mansfield sees writers grappling heroically with political and moral problems that are timeless and universally relevant.

"All modern social science deals with perceptions," he says, "but that is a misnomer because it neglects to distinguish between perceptions and misperceptions."

Consider voting. "You can count voters and votes," Mr. Mansfield says. "And political science does that a lot, and that's very useful because votes are in fact countable. One counts for one. But if we get serious about what it means to vote, we immediately go to the notion of an informed voter. And if you get serious about that, you go all the way to voting as a wise choice. That would be a true voter. The others are all lesser voters, or even not voting at all. They're just indicating a belief, or a whim, but not making a wise choice. That's probably because they're not wise."

By that measure, the electorate that granted Barack Obama a second term was unwise—the president achieved "a sneaky victory," Mr. Mansfield says. "The Democrats said nothing about their plans for the future. All they did was attack the other side. Obama's campaign consisted entirely of saying 'I'm on your side' to the American people, to those in the middle. No matter what comes next, this silence about the future is ominous."

At one level Mr. Obama's silence reveals the exhaustion of the progressive agenda, of which his presidency is the spiritual culmination, Mr. Mansfield says. That movement "depends on the idea that things will get better and better and progress will be made in the actualization of equality." It is telling, then, that during the 2012 campaign progressives were "confined to defending what they've already achieved or making small improvements—student loans, free condoms. The Democrats are the party of free condoms. That's typical for them."

But Democrats' refusal to address the future in positive terms, he adds, also reveals the party's intent to create "an entitlement or welfare state that takes issues off the bargaining table and renders them above politics." The end goal, Mr. Mansfield worries, is to sideline the American constitutional tradition in favor of "a practical constitution consisting of progressive measures the left has passed that cannot be revoked. And that is what would be fixed in our political system—not the Constitution."

It is a project begun at the turn of the previous century by "an alliance of experts and victims," Mr. Mansfield says. "Social scientists and political scientists were very much involved in the foundation of the progressive movement. What those experts did was find ways to improve the well-being of the poor, the incompetent, all those who have the right to vote but can't quite govern their own lives. And still to this day we see in the Democratic Party the alliance between Ph.D.s and victims."

The Obama campaign's dissection of the public into subsets of race, sex and class resentments is a case in point. "Victims come in different kinds," says Mr. Mansfield, "so they're treated differently. You push different buttons to get them to react."

The threat to self-government is clear. "The American founders wanted people to live under the Constitution," Mr. Mansfield says. "But the progressives want the Constitution to live under the American people."

Harvey Mansfield Jr. was born in 1932 in New Haven, Conn. His parents were staunch New Dealers, and while an undergraduate at Harvard Mr. Mansfield counted himself a liberal Democrat.

Next came a Fulbright year in London and a two-year stint in the Army. "I was never in combat," he says. "In fact I ended up in France for a year, pulling what in the Army they call 'good duty' at Orléans, which is in easy reach of Paris. So even though I was an enlisted man I lived the life of Riley."

A return to the academy and a Harvard doctorate were perhaps inevitable but Mr. Mansfield also underwent a decisive political transformation. "I broke with the liberals over the communist issue," he says. "My initiating forces were anticommunism and my perception that Democrats were soft on communism, to use a rather unpleasant phrase from the time—unpleasant but true." He also began to question the progressive project at home: "I saw the frailties of big government exposed, one after another. Everything they tried didn't work and in fact made us worse off by making us dependent on an engine that was getting weaker and weaker."

His first teaching post came in 1960 at the University of California, Berkeley. In California, he came to know the German-American philosopher Leo Strauss, who at the time was working at Stanford University. "Strauss was a factor in my becoming conservative," he says. "That was a whole change of outlook rather than a mere question of party allegiance."

Strauss had studied ancient Greek texts, which emphasized among other things that "within democracy there is good and bad, free and slave," and that "democracy can produce a slavish mind and a slavish country." The political task before every generation, Mr. Mansfield understood, is to "defend the good kind of democracy. And to do that you have to be aware of human differences and inequalities, especially intellectual inequalities."

American elites today prefer to dismiss the "unchangeable, undemocratic facts" about human inequality, he says. Progressives go further: "They think that the main use of liberty is to create more equality. They don't see that there is such a thing as too much equality. They don't see limits to democratic equalizing"—how, say, wealth redistribution can not only bankrupt the public fisc but corrupt the national soul.

"Americans take inequality for granted," Mr. Mansfield says. The American people frequently "protect inequalities by voting not to destroy or deprive the rich of their riches. They don't vote for all measures of equalization, for which they get condemned as suffering from false consciousness. But that's true consciousness because the American people want to make democracy work, and so do conservatives. Liberals on the other hand just want to make democracy more democratic."

Equality untempered by liberty invites disaster, he says. "There is a difference between making a form of government more like itself," Mr. Mansfield says, "and making it viable." Pushed to its extremes, democracy can lead to "mass rule by an ignorant, or uncaring, government."

Consider the entitlements crisis. "Entitlements are an attack on the common good," Mr. Mansfield says. "Entitlements say that 'I get mine no matter what the state of the country is when I get it.' So it's like a bond or an annuity. What the entitlement does is give the government version of a private security, which is better because the government provides a better guarantee than a private company can."

That is, until the government goes broke, as has occurred across Europe.

"The Republicans should want to recover the notion of the common good," Mr. Mansfield says. "One way to do that is to show that we can't afford the entitlements as they are—that we've always underestimated the cost. 'Cost' is just an economic word for the common good. And if Republicans can get entitlements to be understood no longer as irrevocable but as open to negotiation and to political dispute and to reform, then I think they can accomplish something."

The welfare state's size isn't what makes it so stifling, Mr. Mansfield says. "What makes government dangerous to the common good is guaranteed entitlements, so that you can never question what expenses have been or will be incurred." Less important at this moment are spending and tax rates. "I don't think you can detect the presence or absence of good government," he says, "simply by looking at the percentage of GDP that government uses up. That's not an irrelevant figure but it's not decisive. The decisive thing is whether it's possible to reform, whether reform is a political possibility."

Then there is the matter of conservative political practice. "Conservatives should be the party of judgment, not just of principles," he says. "Of course there are conservative principles—free markets, family values, a strong national defense—but those principles must be defended with the use of good judgment. Conservatives need to be intelligent, and they shouldn't use their principles as substitutes for intelligence. Principles need to be there so judgment can be distinguished from opportunism. But just because you give ground on principle doesn't mean you're an opportunist."

Nor should flexibility mean abandoning major components of the conservative agenda—including cultural values—in response to a momentary electoral defeat. "Democrats have their cultural argument, which is the attack on the rich and the uncaring," Mr. Mansfield says. "So Republicans need their cultural arguments to oppose the Democrats', to say that goodness or justice in our country is not merely the transfer of resources to the poor and vulnerable. We have to take measures to teach the poor and vulnerable to become a little more independent and to prize independence, and not just live for a government check. That means self-government within each self, and where are you going to get that except with morality, responsibility and religion?"

So is it still possible to pull back from the brink of America's Europeanization? Mr. Mansfield is optimistic. "The material for recovery is there," he says. "Ambition, for one thing. I teach at a university where all the students are ambitious. They all want to do something with their lives." That is in contrast to students he has met in Europe, where "it was depressing to see young people with small ambitions, very cultivated and intelligent people so stunted." He adds with a smile: "Our other main resource is the Constitution."

Mr. Ahmari is an assistant books editor at the Journal.

Tuesday, October 30, 2012

U2's Bono realizes the importance of capitalism

Notable & Quotable: U2 frontman and anti-poverty activist Bono realizes the importance of capitalism
The Wall Street Journal, October 30, 2012, on page A23
http://online.wsj.com/article/SB10001424052970203922804578080453358300198.html

Staff writer Parmy Olson writing at forbes.com, Oct. 22

Bono has learned much about music over more than three decades with U2. But alongside that has been a lifelong lesson in campaigning—the activist for poverty reduction in Africa spoke frankly on Friday about how his views about philanthropy had now stretched to include an appreciation for capitalism.

The Irish singer and co-founder of ONE, a campaigning group that fights poverty and disease in Africa, said it had been "a humbling thing for me" to realize the importance of capitalism and entrepreneurialism in philanthropy, particularly as someone who "got into this as a righteous anger activist with all the cliches."

"Job creators and innovators are just the key, and aid is just a bridge," he told an audience of 200 leading technology entrepreneurs and investors at the F.ounders tech conference in Dublin. "We see it as startup money, investment in new countries. A humbling thing was to learn the role of commerce."

Monday, October 29, 2012

Joseph Schumpeter on how a swelling mass of unemployable college graduates sets the stage for anticapitalist radicalism

Joseph Schumpeter in 1942 on how a swelling mass of unemployed and unemployable college graduates sets the stage for anticapitalist radicalism.
The Wall Street Journal, October 29, 2012, on page A21
http://online.wsj.com/article/SB10000872396390444897304578046520760656926.html

Joseph Schumpeter writing in "Capitalism, Socialism and Democracy," 1942:

The man who has gone through a college or university easily becomes psychically unemployable in manual occupations without necessarily acquiring employability in, say, professional work. His failure to do so may be due either to lack of natural ability—perfectly compatible with passing academic tests—or to inadequate teaching; and both cases will . . . occur more frequently as ever larger numbers are drafted into higher education and as the required amount of teaching increases irrespective of how many teachers and scholars nature chooses to turn out.

The results of neglecting this and of acting on the theory that schools, colleges and universities are just a matter of money, are too obvious to insist upon. Cases in which among a dozen applicants for a job, all formally qualified, there is not one who can fill it satisfactorily, are known to everyone who has anything to do with appointments . . .

All those who are unemployed or unsatisfactorily employed or unemployable drift into the vocations in which standards are least definite or in which aptitudes and acquirements of a different order count. They swell the host of intellectuals in the strict sense of the term whose numbers hence increase disproportionately. They enter it in a thoroughly discontented frame of mind. Discontent breeds resentment. And it often rationalizes itself into that social criticism which as we have seen before is in any case the intellectual spectator's typical attitude toward men, classes and institutions especially in a rationalist and utilitarian civilization.

Well, here we have numbers; a well-defined group situation of proletarian hue; and a group interest shaping a group attitude that will much more realistically account for hostility to the capitalist order than could the theory—itself a rationalization in the psychological sense—according to which the intellectual's righteous indignation about the wrongs of capitalism simply represents the logical inference from outrageous facts. . . . Moreover our theory also accounts for the fact that this hostility increases, instead of diminishing, with every achievement of capitalist evolution.

Wednesday, October 24, 2012

Everybody involved was, one, interested, two, dedicated, and, three, fascinated by the job they were doing

Notable & Quotable.
The Wall Street Journal, August 27, 2012, on page A15
http://online.wsj.com/article/SB10000872396390444506004577613080016153006.html

Astronaut Neil Armstrong, who died on Saturday at age 82, speaking about the 1969 Apollo 11 mission to the moon, from NASA'S Johnson Space Center Oral History Project:

I was certainly aware that this was a culmination of the work of 300,000 or 400,000 people over a decade and that the nation's hopes and outward appearance largely rested on how the results came out. With those pressures, it seemed the most important thing to do was focus on our job as best we were able to and try to allow nothing to distract us from doing the very best job we could. . . .

Each of the components of our hardware were designed to certain reliability specifications, and far the majority, to my recollection, had a reliability requirement of 0.99996, which means that you have four failures in 100,000 operations. I've been told that if every component met its reliability specifications precisely, that a typical Apollo flight would have about [1,000] separate identifiable failures.

In fact, we had more like 150 failures per flight, [substantially] better than statistical methods would tell you that you might have. I can only attribute that to the fact that every guy in the project, every guy at the bench building something, every assembler, every inspector, every guy that's setting up the tests, cranking the torque wrench, and so on, is saying, man or woman, "If anything goes wrong here, it's not going to be my fault, because my part is going to be better than I have to make it." And when you have hundreds of thousands of people all doing their job a little better than they have to, you get an improvement in performance. And that's the only reason we could have pulled this whole thing off. . . .

When I was working here at the Johnson Space Center, then the Manned Spacecraft Center, you could stand across the street and you could not tell when quitting time was, because people didn't leave at quitting time in those days. People just worked, and they worked until whatever their job was done, and if they had to be there until five o'clock or seven o'clock or nine-thirty or whatever it was, they were just there. They did it, and then they went home. So four o'clock or four-thirty, whenever the bell rings, you didn't see anybody leaving. Everybody was still working.

The way that happens and the way that made it different from other sectors of the government to which some people are sometimes properly critical is that this was a project in which everybody involved was, one, interested, two, dedicated, and, three, fascinated by the job they were doing. And whenever you have those ingredients, whether it be government or private industry or a retail store, you're going to win.

Tuesday, October 23, 2012

Globalization and Corporate Taxation. By Manmohan Kumar, and Dennis Quinn

Globalization and Corporate Taxation. By Manmohan Kumar, and Dennis Quinn
IMF Working Paper No. 12/252
October 22, 2012
http://www.imfbookstore.org/IMFORG/9781557754752

Summary: This paper analyzes the extent to which the degree of international economic integration, both financial and trade, affects corporate tax rates. It explores this issue in the context of strategic behavior by countries, taking into account other global and domestic political economy factors. Tax rates are analyzed using a unique tax dataset for advanced and developing economies extending over five decades. We report a number of novel results: there is no general negative relationship between financial globalization and corporate tax rates and revenues—results vary according to country grouping with OECD countries showing a positive relationship; the United States exhibits a “Stackelberg” type of leadership on other countries; trade integration is inversely correlated with tax rates; and public sentiment and ideology affect tax rates. The policy implications of these findings, particularly given budgetary pressures in the aftermath of the global crisis, are noted.

http://www.imf.org/external/pubs/cat/longres.aspx?sk=40059.0

Russia's Ex-Finance Chief Has Grim Outlook for EU. By Alexander Kolyandr

Russia's Ex-Finance Chief Has Grim Outlook for EU. By ALEXANDER KOLYANDR
The Wall Street Journal, October 23, 2012, on page A11

MOSCOW—Just over a year ago, Alexei Kudrin came out of the Group of 20 meetings in Washington warning that the U.S. and Europe weren't doing enough to head off economic slowdown. Now, no longer in government but still highly respected for his fiscal prudence, the former Russian finance minister doesn't have to mince words. His message is even more dire.

Alexei Kudrin, left, spoke with Russia's Deputy Finance Minister Sergei Storchak during the VTB Capital investment conference in New York, April 2012.

Keeping Greece in the euro zone? "Already impossible," he says in an interview. Spain and Italy next for the exit? "The probability is very high." And creditors beware—Mr. Kudrin sees both Greece and Spain defaulting on their sovereign debt.

"Everything should be done to avoid it, but I don't feel that the process is under control," says the man who shepherded Russia from default to financial stability.

As if that weren't worrisome enough, the 52-year-old who was named finance minister of the year by various publications on four separate occasions during his tenure says he now fears that Europe's economic problems may turn into political ones.

Democracies, he says, don't always survive when their citizens are asked to make the kinds of economic sacrifices that Europe now faces. Already, some analysts are comparing Greece's shocked polity to the Weimar Republic.

Mr. Kudrin is more cautious, but plans to participate next month in a conference at St. Petersburg State University, where he is now a dean, on the question of how economic hardships can lead to political upheavals. The case studies aren't inspiring—from Communist Poland to the Soviet Union to Latin American dictatorships.

Mr. Kudrin thinks that citizens of the Western countries aren't ready to accept the steep drop in living standards they face, but that if governments fail to cut spending they will get even deeper collapses.

"Russia faced that in the 1990s, but due to [Russian President Boris] Yeltsin we've passed it peacefully," he says. "I'm not sure the Western countries would be able to pass through such hardships; it may be very painful."

Mr. Kudrin sees the recent decisions of the European Central Bank as only a temporary relief because its funds aren't limitless. However, he says, the euro would survive dropouts.

Mr. Kudrin expects European economies to contract further in the short term, before growth resumes, and he urges governments to reduce debt in order to be prepared for growth.

His outlook for the U.S. isn't much better. While the looming "fiscal cliff"—tax increases and spending cuts scheduled to take effect Jan. 1—worries analysts and economists, he said the size of the U.S. deficit is the real longer-term risk.

No matter which party wins the White House, the outlook is tough. "Both are in a very difficult position," he says. Even so, the dollar's future is secure, he says.

"Trust in the U.S. dollar is not shaken yet. If the U.S. administration meets the task of the budget consolidation in several years, the dollar will be firm, but even if it weakens, there would be no other currency to replace, given its scale and importance."

Tuesday, August 28, 2012

Effects of Culture on Firm Risk-Taking: A Cross-Country and Cross-Industry Analysis. By Roxana Mihet

Effects of Culture on Firm Risk-Taking: A Cross-Country and Cross-Industry Analysis. By Roxana Mihet
IMF Working Paper No. 12/210
Aug 2012
http://www.imfbookstore.org/ProdDetails.asp?ID=WPIEA2012210

Summary: This paper investigates the effects of national culture on firm risk-taking, using a comprehensive dataset covering 50,000 firms in 400 industries in 51 countries. Risk-taking is found to be higher for domestic firms in countries with low uncertainty aversion, low tolerance for hierarchical relationships, and high individualism. Domestic firms in such countries tend to take substantially more risk in industries which are more informationally opaque (e.g. finance, mining, IT). Risk-taking by foreign firms is best explained by the cultural norms of their country of origin. These cultural norms do not proxy for legal constraints, insurance safety nets, or economic development.

http://www.imf.org/external/pubs/cat/longres.aspx?sk=26204.0

Excerpts:

Introduction

Understanding whether national culture affects a society‟s likelihood to generate risk-seeking firms is important for effective policy-making and for improving corporate governance. It can enrich discussions on government policies that encourage entrepreneurship and innovation. A grasp of the impact of cultural influences on corporate risk-taking would allow policy-makers to better customize their policies for firms with different risk appetites, thus promoting more competitive business environments. Understanding the impact of culture on corporate risk-taking decisions is also important to the internal conduct of multinational firms. Internal decisions in multinational firms, such as the decision to pursue a risky R&D project, require well-orchestrated responses from executives with diverse cultural backgrounds. Even in firms with standardized operating procedures, the interpretation of various financial decisions can vary among executives from different societies as a result of their cultural differences (Tse et al. 1988). Accounting for the impact of cultural influences on decision-making allows the firms themselves to accommodate and adapt to such differences, hence diminishing “noisy” interactions among executives and errors in decision-making.

This study employs four dimensions of national culture identified by Hofstede (2001) and an international sample of 50,000 firms spread across 400 industries in 51 countries to analyze the effects of cultural differences on corporate risk-taking. More specifically, it tries to identify the channels through which cultural values can influence corporate risk-taking. Culture can affect the institutional and economic development at the macro level, the industrial diversification and industry concentration at the market structure level, as well as the corporate and individual decision-making at the micro level, all of which may in turn influence firm risk-taking decisions.

Previous literature has shown that national culture does in fact predict cross-country differences in the degree of institutional and economic development. Culture has been linked with creditor rights and investor protection (Stulz and Williamson 2003), with judicial efficiency (Radenbaugh et al. 2006), with corporate governance (Doidge et al. 2007), with bankruptcy protection and insolvency management (Beraho and Elisu 2010) and with overall levels of transparency and corruption (Husted 1999). Research has further established that national culture has an impact on the composition and leadership structure of boards of directors (Li and Harrison 2008) and also on individual decision-making at the micro level (Hilary and Hui 2009; Halek and Eisenhauer 2001; and Graham et al. 2009). On the other hand, attitudes towards risk are likely to be indirectly affected by culture through many of the factors listed above, as well as directly by national cultural norms, which may encourage or deter risk-taking.

This paper is not the first to study the impact of cultural values on corporate risk-taking. The extant literature has briefly studied the relation between culture and risk-taking, but has mostly focused on firms in the banking and the financial sectors (Houston et al. 2010; Kanagaretnam et al. 2011; Lehnert et al. 2011; Li and Zahra 2012). For example, Kanagaretnam et al. (2011) show that aggressive risk-taking activities by banks are more likely in societies with low uncertainty avoidance and high individualism. They show that cultural differences between societies have a profound influence on the level of bank risk-taking, and the ability to explain bank financial troubles during the recent financial crisis. On the other hand, Griffin et al. (2012) show that uncertainty avoidance is negatively and individualism is positively associated with firm-level riskiness in the non-financial sector (in the manufacturing sector).

This paper innovated in at least four ways. First, this paper takes a more holistic approach to the study of cultural influences on corporate risk-taking by studying not only the banking and the financial sectors, but all industries in a market economy. We take this approach in order to capture cross-industrial differences in risk-taking. The influence of cultural factors, such as national uncertainty aversion, may be of greater importance for firms in more informationally opaque industries such as information technologies, financial services, oil extraction, and chemicals, where information uncertainty is higher relative to manufacturing and industrial firms, because of the greater complexity of operations and the difficulty of assessing and managing risk. Thus, we test whether corporate risk-taking in informationally more opaque industries is more sensitive to a country‟s national cultural norms. Second, we differentiate between the direct and indirect effects of national culture on firm risk-taking. We specifically test whether cultural norms remain important in determining corporate risk-taking behaviors even after taking into account their impact on the institutional, economic and industrial environments. Third, unlike previous research which has used standard ordinary least squares analyses, we model both the direct and indirect effects of culture on risk-taking by employing a hierarchical linear mixed model. The hierarchical linear mixed model allows testing multi-level theories, simultaneously modeling variables at the firm, industry and country level without having to recourse to data aggregation or disaggregation as previous cultural economics studies have had to do. Fourth, by using a hierarchical linear model in explaining firm-level risk-taking, we can model not only the firm, industry and country-level influences on risk-taking, but also their cross-level interactions.

This paper finds that:
 Culture impacts corporate risk-taking directly and not merely though indirect channels such as the legal and regulatory frameworks.
 Corporate risk-taking is higher in societies with low uncertainty avoidance, low tolerance for hierarchical relationships and in societies which value individualism over collectivism, with these effects even more accentuated in societies with better formal institutions.
 Additionally, firms in countries ranking high in uncertainty-aversion and low in individualism take significantly less risk in industrial sectors which are more informationally opaque (e.g. finance, IT, oil refinery and mining), compared to firms in countries lower in uncertainty-aversion and higher in individualism.
 Risk-taking by foreign firms is best explained by the cultural norms of their country of origin.
 These cultural dimensions are not proxying for legal constraints, economic development, bankruptcy costs, insurance safety nets, or many other factors.

The results of this study inform both theory and policy in several ways. First, these findings strengthen the argument that the same institutional rules can produce different economic outcomes in culturally-different societies. Second, they imply that policy-makers should take into account cross-cultural values and norms when drafting policies that promote competitive business environments. Third, they enrich governmental discussions on policies that address risk-taking in informationally opaque sectors.


Literature review

Several research studies in the financial, accounting, and management literatures have explored the importance of cultural values in decision-making. These studies find that culture can explain the institutional, legal and economic environments of a country at the macro level which can influence corporate risk-taking decisions, and offer evidence of the impact of culture on financial decision-making by individuals at the micro level beyond traditional economic arguments.

At the micro level, culture has (unsurprisingly) been shown to affect individual risk-taking behaviors. Breuer et al. (2011) find that individualism is linked to overconfidence and overoptimism and has a significantly positive effect on individual financial risk-taking and the decision to own stocks. Tse et al. (1988) show that home culture has predictable, significant effects on the decision-making of executives. Two decades later, Graham et al. (2010), using survey data in the U.S., also show that CEOs are not immune to the effects of culture. They find that CEOs‟ decision-making is strongly influenced by cultural values such as uncertainty-aversion.

At the macro level, cultural heritage has been linked to corporate governance, investor protection, creditor rights, bankruptcy protection, judicial efficiency, accounting transparency, and corruption. Doidge et al. (2007) find that cross-cultural differences explain much more of the variance in corporate governance than observable firm characteristics. Hope (2003a) shows evidence that both legal origin and culture (as proxied by Hofstede‟s cultural dimensions) are important in explaining firms‟ disclosure practices and investor protection. In fact, he finds that although legal origin is a key determinant of disclosure levels, its importance decreases with the richness of a firm‟s information environment, while culture still remains a significant determinant. Licht et al. (2005) find that social norms of governance correlate strongly and systematically with high individualism and low power distance. Stulz et al. (2003) find that cultural heritage, proxied by religion and language, predicts the cross-sectional variation in creditor rights better than a country‟s trade openness, economic development, legal origin, or language. Other studies find that culture predicts judicial efficiency and the transparency of accounting systems. Radenbaugh et al. (2006) find that countries in the Anglo cluster have an accounting system which is more transparent and less conservative than either the Germanic or the Latin accounting systems. Beraho et al. (2010) show that cross-cultural variables have a direct influence on the propensity to file for bankruptcy and on insolvency laws. Lastly, both Getz and Volkema (2001) and Robertson and Watson (2004) link cultural differences to corruption levels.

Furthermore, recent research has also linked cultural variables to economic and market development, although the evidence is mixed. Guiso et al. (2006) find that national culture impacts economic outcomes, by influencing national savings rates and income redistributions. Kwok and Tadesse (2006) find that culture explains cross-country variations in financial systems, with higher uncertainty-avoidance countries dominated by bank-based financial systems, rather than by stock-markets. Kirca et al. (2009) show that national culture impacts the implementation of market-oriented practices (i.e., generation, dissemination, and utilization of market intelligence) and the internalization of market-oriented values and norms (i.e., innovativeness, flexibility, openness of internal communication, speed, quality emphasis, competence emphasis, inter-functional cooperation, and responsibility). Lee and Peterson (2000) show that only countries with specific cultural tendencies (i.e., countries which emphasize individualism) tend to engender a strong entrepreneurial orientation, hence experiencing more entrepreneurship and global competitiveness. On the other hand, Pryor (2005) argues that cultural variables do not seem related to the level of economic development and are not useful in understanding economic growth or differences in levels of economic performance across countries. Additionally, Herger et al. (2008) also argue that cultural beliefs do not seem to support or impede financial development. This mixed evidence points to the idea that national culture might only indirectly influence economic and market development through its effects on the legal and institutional contexts.

The institutional and economic environments have been shown to affect corporate risk-taking decisions. There is a small strand of literature which has explored corporate risk-taking around the world which reflects countries‟ institutional and economic environments. For example, Laeven and Levine (2009) show that risk-taking by banks varies positively with the comparative power of shareholders within each bank. Moreover, they show that the relations between bank risk-taking and capital regulation, deposit insurance mechanisms, and bank activities restrictiveness, depend critically on the bank‟s ownership structure. Claessens et al. (2000) show that corporations in common law countries and market-based financial systems have less risky financing patterns, and that the stronger protection of equity and creditor rights is also associated with less financial risk. Overall, while the literature is relatively small, national culture has been indirectly linked with corporate risk-taking decisions in formal studies, although most of them only analyze the banking sector.

Culture has also been directly linked with corporate risk-taking, although again, most studies have focused on either the financial or the manufacturing sectors separately. Kanagaretnam et al. (2011) show that banks in high uncertainty avoidance societies tend to take less risk, whereas banks in high individualism societies take more risk. However, they do not control for institutional variables such as corporate governance, bankruptcy protection, judicial efficiency, transparency, and corruption, which have shown to be affected by national cultural norms and which could at their turn affect corporate risk-taking. Griffin et al. (2012) study the impact of culture on firms in the manufacturing sector in the period 1997-2006. To the best of our knowledge, they are the only ones who use a hierarchical linear mixed model to analyze the impact of culture on corporate risk-taking. They show that individualism has positive and significant direct effects, while uncertainty avoidance has negative and significant direct effects on corporate risk-taking.

This paper contributes to the literature on the impact of culture on firm risk-taking in several ways. While previous studies have studied either the direct or the indirect effects of culture on risk-taking, this paper tries to reconcile the two strands of literature and assess them simultaneously by using a hierarchical linear mixed model. This allow to test whether cultural norms remain important in determining corporate risk-taking behaviors even after taking into account their impact on the institutional, economic and industrial environments. Moreover, this paper extends the analyses of Griffin et al. (2012) and Kanagaretnam et al. (2011) to capture cross-industrial differences in risk-taking. Given the importance to national and global economies of the highly leveraged sector of finance, or the highly innovative sector of IT, or the highly risky commodity industries1, and given that firms in these industries are markedly different from manufacturing firms and have been more adversely affected by the recent global economic crisis, it is very important to understand the role of culture on cross-industrial variation in corporate risk-taking.