from my mind to yours...

March 2006
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On Foreign Investment and Homeland Security
Filed under: Politics and Economics
Posted by: site admin @ 8:35 pm

I’m completely baffled by the hue and cry over the Dubai ports deal. OK, I’m not completely baffled. I understand that xenophobia is a common problem with the small minded. I also understand that politicians are more than willing to score political points even if it creates all sorts of real problems in the process.

However, I am baffled that no one seems to have said the obvious. Namely, that painting all people of one culture with the same brush is almost always flawed. Why? Because the distinctions made by those outside a culture are rarely appropriately nuanced. More to the point, assuming that those who invest in this country would be willing to see their (somewhat significant) investment go down the toilet for ideological reasons is extremely shortsighted. Very few people with the wherewithal to accumulate wealth are willing to deliberately destroy what they’ve spent time building. Keep in mind that Osama bin Laden didn’t create the wealth he uses to fund his crusades - he inherited it.

If anything, one of the best ways to insure security in this country is to encourage more foreign investment. By doing so, we in essence coopt foreign citizens and their governments into helping insure our continued prosperity. And they pay for the privilege instead of us having to pay them. If instead we drive them away, all we do is generate the very misunderstandings that lead to terrorism in the first place.

In the future, some wisdom and backbone in Washington on these issues could go a long way towards solving the problem of terrorism - for free.

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On Spreading Democracy
Filed under: Politics and Economics
Posted by: site admin @ 9:50 am

The current Administration has made spreading democracy a fundamental tenet of its foreign policy. It has a near magical belief in the ballot box. I believe this policy is misguided. There are a number of reasons why:

1) Increasing resistance to the “new colonialism”. Foreign powers are becoming increasingly adept at turning this aggressive push for systemic change into a contest of local vs. foreign values. The current issue of Foriegn Affairs addresses this subject.

2) Systemic change doesn’t mean attitudinal change. Many “non-democratic” regimes in the Mid-East are favorable towards the US. A number of “democratic” regimes are not. The victory of Hamas in Palestine is an example of what can happen here.

But you’ve heard all this before.

The bottom line here is that the policy of spreading democracy fails to take history into account. Democracy as practised in this country is the result of 800 years of evolution. Since the Magna Carta, power has been slowly devolving to larger and larger groups, in both England and, later, here in the US. In just this country, we have moved, since pre-Revolutionary times, from a rule by psuedo aristocracy to voting rights for non property owners, to voting rights for women, to voting rights for all citizens. Even now we have not perfected the system (witness the 2000 Presidential elections). Expecting a society to make full use of a system that they have no history of is asking people to change a lot.

More importantly, we somehow have the idea that democracy is the ultimate form of government. Even the founders of this country viewed it as simply the least worst of the alternatives they had considered. The key to making any system of government work is to create a system where everyone perceives they have a stake in the outcome. It makes no difference if I perceive that you have a stake in the outcome - you have to perceive it as well. Further, you have to actually believe that the promises made by the system will actually be fulfilled. Creating this perception does not necessitate democracy.

A society without trust cannot easily deliver on such promises because politics is also the art of compromise. It is extremely rare for all stakeholders to get everything they want. Even if it were possible at some isolated point it time, this would only result in a change in the desires of the stakeholders. It is thus nearly inevitable that politics will be viewed to be and will actually become a zero sum game. This means that everyone has to sacrifice something. If the various stakeholders do not believe that their sacrifices will be rewarded, they are less likely to make them(1).

If we cannot create a system where everyone believes they have something to gain, then the only power a government has left is to create an environment where everyone believes they have something to lose. If a government cannot do either for the vast majority of the population, it will not long last. Those who have nothing to gain from the status quo and nothing to lose see no impediment to changing the system at any cost - because the portion of the cost to be borne by them will be perceived to be small compared to the potential gains.

Thus it becomes imperative that any governing body know how to foster a society where everyone has something to lose - something to live for. In almost every case, this boils down to money(2). History is replete with examples of governments coopting potentially dangerous groups in their societies by providing them with some level of prosperity. China today is a perfect example of this.

This prosperity in turn promotes good governance. Those with something to lose pay attention. And as more and more groups have something to lose, there emerges an interesting dynamic. These groups have less incentive to promote radical change, while having stronger incentives to promote better governance and other measures that improve the stability of society. This, in turn, promotes prosperity. And the cycle continues.

Net result: We should promote broad prosperity first - good governance will be the natural consequence. Compare what is happening in India and China with what is happening in the Middle East. While it may not be our national intent to promote prosperity in India and China, it is happening. And good governance is happening as well. And it has all been accomplished profitably - rather than by a costly war.

Final comment: Prosperity is intrinsically a devolution of power.

(1)In a system of divided power (the fundamental tenet of democracy) the ability to fulfill promises can be nearly non-existent. This is particularly true in young systems where it’s easy to know how to sabotage something, but hard to know how to make it succeed. It turns out that authoritarian systems have a much easier time delivering on promises simply because they need make fewer compromises.
(2) While that might seem crass, money is the mechanism that people use to obtain the things they want. As such, it makes a convenient surrogate and measuring tool that enables us to ignore many details.

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Big Brother - #1
Filed under: Politics and Economics
Posted by: site admin @ 8:13 pm

The following news article describes something that happened to me, although this is about someone else.

This invasion of privacy is not only insulting and inconvenient, it’s also incompetence of the highest order. Not only is this a complete violation of the 4th Amendment, its just plain stupid.

Twice in the last 2 months I’ve been punished for paying off my credit card by having my account flagged, thus freezing my account. Somehow, someone in Homeland Security thinks this will help stop terrorism. No, it won’t. What it will do is just drive terrorists underground. If I were a terrorist, I’d clue in pretty fast and stop using credit cards. If someone thinks they are actually going to catch terrorists this way, they are completely mistaken.

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Some Flaws in Outsourcing
Filed under: Politics and Economics
Posted by: site admin @ 8:05 pm

Outsourcing has been in the news a lot lately. Just today, President Bush was defending outsourcing while on a trip to Hyderbad, India. It’s become very popular with large corporations in the last decade. They perceive it as a way to cut costs for nearly anything. Like lemmings, one CEO after another is racing off the cliff with politicians egging them on. No one sees the flawed assumptions and long term consequences of the attitudes behind this.

First, a major flaw: The corporate sponsors of outsourcing look to countries like India and China as a nearly unending pool of low cost labor. They see what they perceive as a well trained labor force willing to work for 10-20% of the wages US workers will take. What they fail to realize is that the quality of that workforce doesn’t necessarily match that of the workforce from Western countries. The reason for this is simple: Emerging societies do not have a tradition of quality universal education. They can’t - they simply don’t have the infrastructure. While there are schools, not everyone can attend. What this means is that while these societies should have (statistically) the same percentage of talented people as any other society, not all of those with latent talent will have the opportunity to exercise that talent. Only those that can afford an education will be able to stretch themselves - and in societies that do not have a long tradition of meritocracy, that means that there won’t necessarily be a correlation between wealth and talent - and thus talent and education. The net result of this: It will take some time, probably as much as 2 generations, before the expressed abilities of the society match the latent abilities. In the meantime, those who think they are automatically hiring only the cream of the society will find out that many that they hire may come from well off families but aren’t necessarily the most talented themselves.

There are other flaws in the outsourcing philosophy as well. Another large one is the bizarre assumption that companies must look overseas to find talent. Instead of looking in places like Appalachia, Arkansas or Montana, companies think they must go to the other side of the earth to find the skills they need. They ignore the costs of communication and coordination that come from time and cultural differences, and presume that the costs of hiring anywhere in this country exceed the costs of everywhere in other countries.

And then these companies complain that they can’t find skilled workers here in the US. What they are really saying is that they don’t want to pay people here enough to give them the incentive to go into a particular line of work. While that is certainly their prerogative, what they fail to realize is that, long term, this lack of incentive also dries up the well for the future. We already see that in colleges and universities today. I used to teach as an adjunct at a local college. That job disappeared because enrollment dropped in the technical field that is my area of expertise.

What’s particularly shortsighted about this is that the government seems to have no clue about the long term consequences of this either. People aren’t stupid - particularly the people capable of doing sophisticated or technical work. If they are concerned that the investment of time and money in a particular set of skills won’t pay off, they are much less likely to make that investment. In times of rapid change, investing either time or money becomes riskier. When government policy encourages rapid change, it increases that risk even more. Eventually, it’s simply not worth the risk. And those who come to that conclusion may decide it’s not worth investing in anything. If enough people come to that conclusion, we can easily lose large bases of skill that we might never regain.

If you change the rules of the game too often, people stop playing. And all because a lot of people in power don’t understand the true meaning of outsourcing.

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