GOP Reactions to Senator Specter

From the The Washington Post: ED ROGERS (White House staffer to Ronald Reagan and George H.W. Bush; chairman of BGR Group):

Notice to Republicans: Arlen Specter changing parties is good for the Democrats and President Obama and bad for us. If you think otherwise, put down the Ann Coulter book and go get some fresh air. There's always a delusional element within the GOP that thinks if we lose badly enough the Democrats will gain so much power they will implement all their crazy plans, the people will revolt and purest Republicans will then be swept back into power. Even if this were true, it doesn't take into account the damage done while our opponents are in control.

Specter didn't want to be a Democrat. The party deteriorated to the point where there was no place for him. Who knows if he will be elected as a Democrat in November 2010? The damage will be done right away, when he votes with the majority. This is the latest in a series of wake-up calls the GOP should have gotten starting with the 2006 elections.

Despite this, I believe we have not lost the battle for ideas, because the Democrats don't have any. We have lost our majorities in Congress through corruption and mismanagement. Obama's victory in 2008 was an Obama phenomenon, not a Democratic Party phenomenon. What they haven't been able to do through legitimate party building, we've handed them on a silver platter. We need to stop.


When President Obama walked downstairs to his office on his first day of work, he encountered a wall full of pictures from his inauguration the day before. His staff of photographers stayed up through the night printing pictures so that Obama wouldn't face empty walls and lonely hooks in his new office. (Slate)

Reclaiming America’s Soul

"Reclaiming America’s Soul" by Paul Krugman

"Nothing will be gained by spending our time and energy laying blame for the past.” So declared President Obama, after his commendable decision to release the legal memos that his predecessor used to justify torture. Some people in the political and media establishments have echoed his position. We need to look forward, not backward, they say. No prosecutions, please; no investigations; we’re just too busy.

And there are indeed immense challenges out there: an economic crisis, a health care crisis, an environmental crisis. Isn’t revisiting the abuses of the last eight years, no matter how bad they were, a luxury we can’t afford?

No, it isn’t, because America is more than a collection of policies. We are, or at least we used to be, a nation of moral ideals. In the past, our government has sometimes done an imperfect job of upholding those ideals. But never before have our leaders so utterly betrayed everything our nation stands for. “This government does not torture people,” declared former President Bush, but it did, and all the world knows it.

And the only way we can regain our moral compass, not just for the sake of our position in the world, but for the sake of our own national conscience, is to investigate how that happened, and, if necessary, to prosecute those responsible.

What about the argument that investigating the Bush administration’s abuses will impede efforts to deal with the crises of today? Even if that were true — even if truth and justice came at a high price — that would arguably be a price we must pay: laws aren’t supposed to be enforced only when convenient. But is there any real reason to believe that the nation would pay a high price for accountability?

For example, would investigating the crimes of the Bush era really divert time and energy needed elsewhere? Let’s be concrete: whose time and energy are we talking about?

Tim Geithner, the Treasury secretary, wouldn’t be called away from his efforts to rescue the economy. Peter Orszag, the budget director, wouldn’t be called away from his efforts to reform health care. Steven Chu, the energy secretary, wouldn’t be called away from his efforts to limit climate change. Even the president needn’t, and indeed shouldn’t, be involved. All he would have to do is let the Justice Department do its job — which he’s supposed to do in any case — and not get in the way of any Congressional investigations.

I don’t know about you, but I think America is capable of uncovering the truth and enforcing the law even while it goes about its other business.

Still, you might argue — and many do — that revisiting the abuses of the Bush years would undermine the political consensus the president needs to pursue his agenda.

But the answer to that is, what political consensus? There are still, alas, a significant number of people in our political life who stand on the side of the torturers. But these are the same people who have been relentless in their efforts to block President Obama’s attempt to deal with our economic crisis and will be equally relentless in their opposition when he endeavors to deal with health care and climate change. The president cannot lose their good will, because they never offered any.

That said, there are a lot of people in Washington who weren’t allied with the torturers but would nonetheless rather not revisit what happened in the Bush years.

Some of them probably just don’t want an ugly scene; my guess is that the president, who clearly prefers visions of uplift to confrontation, is in that group. But the ugliness is already there, and pretending it isn’t won’t make it go away.

Others, I suspect, would rather not revisit those years because they don’t want to be reminded of their own sins of omission.

For the fact is that officials in the Bush administration instituted torture as a policy, misled the nation into a war they wanted to fight and, probably, tortured people in the attempt to extract “confessions” that would justify that war. And during the march to war, most of the political and media establishment looked the other way.

It’s hard, then, not to be cynical when some of the people who should have spoken out against what was happening, but didn’t, now declare that we should forget the whole era — for the sake of the country, of course.

Sorry, but what we really should do for the sake of the country is have investigations both of torture and of the march to war. These investigations should, where appropriate, be followed by prosecutions — not out of vindictiveness, but because this is a nation of laws.

We need to do this for the sake of our future. For this isn’t about looking backward, it’s about looking forward — because it’s about reclaiming America’s soul.


The Progressive Era and Race: Reform and Reaction

The Progressive Era and Race: Reform and Reaction, 1900–1917, by David W. Southern, Wheeling, W.V.: Harlan Davidson, 240 pages, $15.95

The Progressive movement swept America from roughly the early 1890s through the early 1920s, producing a broad popular consensus that government should be the primary agent of social change. To that end, legions of idealistic young crusaders, operating at the local, state, and federal levels, seized and wielded sweeping new powers and enacted a mountain of new legislation, including minimum wage and maximum hour laws, antitrust statutes, restrictions on the sale and consumption of alcohol, appropriations for hundreds of miles of roads and highways, assistance to new immigrants and the poor, women’s suffrage, and electoral reform, among much else.

Today many on the liberal left would like to revive that movement and its aura of social justice. Journalist Bill Moyers, speaking at a conference sponsored by the left-wing Campaign for America’s Future, described Progressivism as “one of the country’s great traditions.” Progressives, he told the crowd, “exalted and extended the original American Revolution. They spelled out new terms of partnership between the people and their rulers. And they kindled a flame that lit some of the most prosperous decades in modern history.”

Yet the Progressive Era was also a time of vicious, state-sponsored racism. In fact, from the standpoint of African-American history, the Progressive Era qualifies as arguably the single worst period since Emancipation. The wholesale disfranchisement of Southern black voters occurred during these years, as did the rise and triumph of Jim Crow. Furthermore, as the Westminster College historian David W. Southern notes in his recent book, The Progressive Era and Race: Reform and Reaction, 1900–1917, the very worst of it—disfranchisement, segregation, race baiting, lynching—“went hand-in-hand with the most advanced forms of southern progressivism.” Racism was the norm, not the exception, among the very crusaders romanticized by today’s activist left.

At the heart of Southern’s flawed but useful study is a deceptively simple question: How did reformers infused with lofty ideals embrace such abominable bigotry? His answer begins with the race-based pseudoscience that dominated educated opinion at the turn of the 20th century. “At college,” Southern notes, “budding progressives not only read exposés of capitalistic barons and attacks on laissez-faire economics by muckraking journalists, they also read racist tracts that drew on the latest anthropology, biology, psychology, sociology, eugenics, and medical science.”

Popular titles included Charles Carroll’s The Negro a Beast (1900) and R.W. Shufeldt’s The Negro, a Menace to American Civilization (1907). One bestseller, Madison Grant’s The Passing of the Great Race (1916), discussed the concept of “race suicide,” the theory that inferior races were out-breeding their betters. President Theodore Roosevelt was one of many Progressives captivated by this notion: He opposed voting rights for African-American men, which were guaranteed by the 15th amendment, on the grounds that the black race was still in its adolescence.

Such thinking, which emphasized “expert” opinion and advocated sweeping governmental power, fit perfectly within the Progressive worldview, which favored a large, active government that engaged in technocratic, paternalistic planning. As for reconciling white supremacy with egalitarian democracy, keep in mind that when a racist Progressive championed “the working man,” “the common man,” or “the people,” he typically prefixed the silent adjective white.

For a good illustration, consider Carter Glass of Virginia. Glass was a Progressive state and U.S. senator and, as chairman of the House Committee on Banking and Currency, one of the major architects of the Federal Reserve Act of 1913. He was also an enthusiastic supporter of his state’s massive effort to disfranchise black voters. “Discrimination! Why that is exactly what we propose,” he declared to one journalist. “To remove every negro voter who can be gotten rid of, legally, without materially impairing the numerical strength of the white electorate.”

Then there was political scientist John R. Commons, an adviser to the Progressive Wisconsin governor and senator Robert M. LaFollette and a member of Theodore Roosevelt’s Immigration Commission. Commons, the author of Races and Immigrants in America (1907), criticized immigration on both protectionist grounds (he believed immigrants depressed wages and weakened labor unions) and racist ones (he wrote that the so-called tropical races were “indolent and fickle”).

Woodrow Wilson, whose Progressive presidential legacy includes the Federal Reserve System, a federal loan program for farmers, and an eight-hour workday for railroad employees, segregated the federal bureaucracy in Washington, D.C. “I have recently spent several days in Washington,” the black leader Booker T. Washington wrote during Wilson’s first term, “and I have never seen the colored people so discouraged and bitter as they are at the present time.”

Perhaps the most notorious figure of the era was Benjamin “Pitchfork” Tillman, a leading Southern Progressive and inveterate white supremacist. As senator from South Carolina from 1895 to 1918, Tillman stumped for “Free Silver,” the economic panacea of the agrarian populist (and future secretary of state) William Jennings Bryan, whom Tillman repeatedly supported for president. “Pitchfork” Tillman favored such Progressive staples as antitrust laws, railroad regulations, and public education, but felt the latter was fit only for whites. “When you educate a negro,” he brayed, “you educate a candidate for the penitentiary or spoil a good field hand.”

Nor did African Americans always fare better among those radicals situated entirely to the left of the Progressives. Socialist Party leader Eugene V. Debs, though personally sympathetic to blacks, declared during his 1912 campaign for the presidency, “We have nothing special to offer the Negro.” Other leading radicals offered even less. Writing in the Socialist Democratic Herald, Victor Berger, the leader of the party’s right wing, declared that “there can be no doubt that the negroes and mulattoes constitute a lower race—that the Caucasian and even the Mongolian have the start on them in civilization by many years.” The celebrated left-wing novelist Jack London, covering the 1908 heavyweight title bout between black challenger Jack Johnson and white boxing champ Tommy Burns, filled his New York Herald story with lurid ethnic caricatures and incessant race baiting. “Though he was a committed socialist,” observed Jack Johnson biographer Geoffrey C. Ward, London’s “solidarity with the working class did not extend to black people.”

As Southern thoroughly documents, these examples just begin to scratch the surface. Progressivism was infested with the most repugnant strains of racism. But was there something more, something inherent in Progressivism itself that facilitated the era’s harsh treatment of blacks? According to Southern, who repeatedly maintains that racism derailed “the great promise” of Progressivism, the answer is no. “The ideas of race and color were powerful, controlling elements in progressive social and political thinking,” he argues. “And this fixation on race explains how democratic reform and racism went hand-in-hand.”

That is surely correct, but is it the whole story? As the legal scholar Richard Epstein has noted, “the sad but simple truth is that the Jim Crow resegregation of America depended on a conception of constitutional law that gave property rights short shrift, and showed broad deference to state action under the police power.” Progressivism itself, in other words, granted the state vast new authority to manage all walks of American life while at the same time weakening traditional checks on government power, including property rights and liberty of contract. Such a mixture was ripe for the racist abuse that occurred.

Take the Supreme Court’s notorious decision in Plessy v. Ferguson (1896), a case that has rightly come to symbolize the South’s Jim Crow regime. In Plessy, the Court considered a Louisiana statute forbidding railroads from selling first-class tickets to blacks, a clear violation of economic liberty. In its 7–1 ruling, the Court upheld segregation in public accommodations so long as “separate but equal” facilities were provided for each race, setting off an orgy of legislation throughout the old Confederacy. South Carolina, for example, segregated trains two years after Plessy. Streetcars followed in 1905, train depots and restaurants in 1906, textile plants in 1915–16, circuses in 1917, pool halls in 1924, and beaches in 1934.

No doubt many of those businesses would have excluded or mistreated black customers whatever the law. But in a market free from Jim Crow regulations, other businesses would have welcomed blacks, or at least black dollars, forcing racist enterprises to bear the full cost of excluding or mistreating all those potential paying customers. (This was one of the chief reasons the segregationists pushed for those laws in the first place.) The state, in the eloquent words of the historian C. Vann Woodward, granted “free rein and the majesty of the law to mass aggressions that might otherwise have been curbed, blunted, or deflected.”

Furthermore, this tangled web of regulations, ordinances, codes, and controls was spun during the heyday of Progressivism, precisely when such official actions were least likely to receive any meaningful scrutiny. Southern, despite his otherwise close attention to the many permutations of race and racism, fails to recognize this major defect in the Progressive worldview.

A similar failure handicaps his treatment of one of the era’s rare victories for African Americans. In Buchanan v. Warley (1917), the Supreme Court unanimously overturned a Louisville ordinance segregating residential housing blocks by race. The case involved a voluntary contract between a white seller and a black buyer for a housing lot located in a majority-white neighborhood. Under the law, the new black owner could not live on the property he had just purchased.

Writing for the Court, Justice William Rufus Day held that “this attempt to prevent the alienation of the property in question to a person of color…is in direct violation of the fundamental law enacted in the Fourteenth Amendment of the Constitution preventing state interference with property rights except by due process of law.”

Yet Southern dismisses this rare and important victory as “hollow” and incorrectly asserts that it “was decided not on the grounds of human rights, but on those of white property rights.” In fact, the judicial recognition of black rights stood at the very center of the decision. Justice Day’s opinion clearly states that the Fourteenth Amendment “operate[s] to qualify and entitle a colored man to acquire property without state legislation discriminating against him solely because of color.”

Nor should Southern’s characterization of this victory as “hollow” pass unchallenged. As the legal scholars David Bernstein and Ilya Somin have argued, the Buchanan ruling played a major though sadly underappreciated role in the burgeoning fight for civil rights. “Buchanan could not force whites to live in the same neighborhood as blacks,” Bernstein and Somin write, “but it did prevent cities from stifling black migration by creating de jure and inflexible boundaries for black neighborhoods, and may have prevented even more damaging legislation.” It is well worth noting, they continue, that the South did not adopt South African–style apartheid at this time, despite widespread white support for such measures.

In addition, Buchanan was the first major Supreme Court victory for the four-year-old National Association for the Advancement of Colored People, a huge boon for the organization that would go on to win the landmark Brown v. Board of Education (1954), overturning Plessy. W.E.B Du Bois, an NAACP founder and longtime editor of its newsletter, The Crisis, gave Buchanan credit for “the breaking of the backbone of segregation.”

Despite these significant shortcomings, The Progressive Era and Race deserves careful attention. The Progressive movement unleashed, aided, and abetted some of the most destructive forces in 20th-century America. The better we understand this history, the less likely we are to repeat it. (source: Reason Magazine)


Tea Party Time!

The New York Times Op-ed columnist Gail Collins writes "Twitters From Texas":

Let us pause to consider Rick Perry, the governor of Texas, and his feelings about seceding from the union.

This all started during the recent anti-tax protests. You undoubtedly saw the pictures of the demonstrations full of people wearing teabags or tricorner hats who kept comparing themselves to the founding fathers at the Boston Tea Party. True, when it comes to taxation without representation, they were slightly different from colonial New Englanders on the minor point of having representation. But let’s not be picky.

Have you ever noticed that the states where anti-tax sentiment is strongest are frequently the same states that get way more back from the federal government than they send in? Alaska gets $1.84 for every tax dollar it sends to Washington, which is a rate of return even Bernard Madoff never pretended to achieve. Yet there they were in Ketchikan waving “Taxed Enough Already!” signs and demanding an end to federal spending.

Also, have you noticed how places that pride themselves on being superpatriotic seem to have the most people who want to abandon the country entirely and set up shop on their own?

“What a great crowd,” Perry twittered, referring to the protesters he addressed in Austin, some of whom were waving American flags and yelling “Secede!”

Afterward, he told reporters that Texas had come into the union with a unique right “to leave if we decided to do that.” This is a beloved piece of state folklore despite its unfortunate drawback of being totally untrue.

“My hope is that America and Washington in particular pays attention,” Perry continued. “We’ve got a great union. There’s absolutely no reason to dissolve it. But if Washington continues to thumb their nose at the American people, who knows what may come of that.”

Later, while Perry was holding another press conference after signing a bill extolling states rights, he repeated the part about this being “a great union” but then said that he understood the secessionists’ feelings.

This is not exactly a ringing endorsement. It’s as if your spouse pointedly noted that it’s extremely easy to dissolve marriages these days, then added that although he was not currently advocating a divorce, he certainly understood why other people who knew you both might think it was a good idea.

And what about my country, right or wrong? Weren’t there complaints, some from Texan quarters, during the last election that Barack Obama seemed insufficiently up front about his love of country? Isn’t threatening to dissolve the union over the stimulus package a little less American than failure to wear a flag pin?

Remember the time when Michelle Obama said, in a moment she spent an entire campaign trying to take back, that 2008 was the first time she could remember ever feeling really proud of her country? Can you imagine how the conservative base would have reacted if she said that it was the first time she didn’t feel like renouncing her citizenship?

And how, by the way, can you stand at a rally waving the American flag while yelling “Secede”? It’s like an employer handing out “worker of the week” certificates to employees who just learned that he was moving the plant to Mexico.

Can’t feel the love.

Perry, who is the sort of person who calls other guys “dude,” used to be a cotton farmer, a group that seems to have a special talent for combining rugged individualism with intransigent demands for government assistance. Even as we speak, the Obama administration budget-cutters are trying to end a longstanding federal practice of paying the costs of storing the entire national cotton crop every year. No other farmers get this kind of special treatment, and I am sure Perry’s failure to mention it when he calls for an end to corporate bailouts is a terrible oversight that will be corrected immediately.

The big mystery here is why the tax-protest crowds were behaving as if the world was coming to an end when all Obama’s infant presidency has done is lower taxes for a vast majority of the public. And why people like Perry seem to feel compelled to egg them on.

The answer is that what’s left of the Republican Party is intent on cutting off the knees of the administration before it actually manages to fulfill any campaign promises on reducing the huge economic gap between the top 5 percent of the country and the rest of the populace. In pursuit of that mission, fortune favors the hysterical and rewards politicians who behave like gerbils that just bit into an electric wire.

We don’t want to blame all Texans for the high jinks in Austin. It’s a state full of lovely people, three-fourths of whom, according to a recent Rasmussen Reports poll, have no desire whatsoever to secede from the United States.

But Perry really understands how that other quarter feels-- by Gail Collins


Okay, I love Susan Boyle Too

'It knocked me back,' says Hooks about photo after King's murder
Though chilled by the images, locals glad they have surfaced

The photographs became obscure parts of a magazine archive in 1968, unpublished until Friday when they reminded the country of the man and the murder that transformed the civil rights movement in America.

A dozen photographs by LIFE magazine photographer Henry Groskinsky were discovered in the magazine's archives and posted on the LIFE Web site, reminding the world of the sniper attack that killed Dr. Martin Luther King Jr.

A series of more famous photographs had been used the morning after King's death, especially those of the men who surrounded King on the balcony of the Lorraine Motel. In that famous photo, most of King's entourage stood pointing to the boarding house across Mulberry Street where the sniper had hidden.
Groskinsky had been in Alabama when he learned of King's death and rushed with a reporter to Memphis. He arrived that night, and his after-the-fact photos captured the brother of the motel owner in the most graphic of the photos. They remind the world that King, a national hero with a national holiday, was a mortal with a mortal wound. Theatrice Bailey is photographed sweeping King's blood from the balcony and, later, scraping drying blood from the concrete.

"It knocked me back. It upset me," said Benjamin L. Hooks, the retired national chairman of the NAACP, who said he looked through the photographs online Friday. His family had owned Hooks Brothers Photographers, and he had worked with his father from age 12 until he was drafted into the Army at 18.

Hooks said Groskinsky's photographs were among many that went unpublished when a photo editor selected only four or five of hundreds of photographs shot.

"I'm glad they were not destroyed," said Hooks, who said the photographs now are part of a history that includes Hooks himself in King's motel room after the shooting. Hooks had been at a bar association meeting at the old Claridge Hotel when he learned King had been shot. When he rushed to the Lorraine Motel, he joined King's entourage."In the photograph we were sitting around discussing what had happened." As they recalled King's life, they were sometimes able to laugh, but, "We also cried."

King had often said he was fearful, but not afraid of being killed.

"Those of us who had worked closely with Dr. King for so many years looked for him to be killed. I had been with him so many times when he had been threatened," said Hooks.

Months before the shooting, he had persuaded the Southern Christian Leadership Conference to appoint Rev. Ralph Abernathy as first vice president with automatic succession rights.

"He was preparing for his death," Hooks said.

National Civil Rights Museum president Beverly Robertson said the photographs "were moving, but also chilling." Robertson said the museum is looking into acquiring the photos or using them on loan as part of its story of civil and human rights.

In Boca Raton, Fla., Groskinsky told The Associated Press that he was glad his photographs, none of which had been used, finally are "seeing the light of day." He said he no longer owns the photos, but is glad they are "a part of history. Unfortunately, it was a sad part of history."

source: article from the Memphis Commercial Appeal by Michael Lollar

Family of Dr. King Charged Group Building His Monument

In an ongoing effort to cheapen the legacy of Martin Luther King, the greedy money grubbing King Family is charging for the foundation to memorialize Dr. King. How tacky is that! According to the AP as reported in the New York Times: WASHINGTON (AP) — The family of the Rev. Dr. Martin Luther King Jr. has charged the foundation building a monument to him on the Mall about $800,000 for the use of his words and image, an arrangement one leading scholar said Dr. King would have found offensive.

The memorial, including a 28-foot sculpture depicting Dr. King, is being paid for almost entirely with private money in a fund-raising campaign led by the Martin Luther King Jr. National Memorial Project Foundation. The monument will be turned over to the National Park Service.

The foundation has been paying the King family for the use of Dr. King’s words and image in its fund-raising materials. The family has not charged for the use of his likeness in the monument.

David J. Garrow, a Cambridge University historian who won a Pulitzer Prize for his biography of Dr. King, said he did not know of any other descendants that had been paid such a fee.

“One would think any family would be so thrilled to have their forefather celebrated and memorialized in D.C. that it would never dawn on them to ask for a penny,” Mr. Garrow said, adding that Dr. King would have been “absolutely scandalized by the profiteering behavior of his children.”

According to financial documents reviewed by The Associated Press, the foundation paid $761,160 in 2007 to Intellectual Properties Management Inc., an entity run by Dr. King’s family. Documents also show a “management” fee of $71,700 was paid to the family estate in 2003.

In a statement to The A.P., Intellectual Properties said that the proceeds it receives go to the King Center in Atlanta and that the arrangement was made out of concern that fund-raising for the monument would undercut donations to the center.

Dr. King’s son Dexter is the center’s chairman, and his cousin Isaac Farris Jr. is president. Dr. King’s two other surviving children, Martin Luther King III and Bernice King, are lifetime members of the board of directors.


Indianapolis, Marion Co. schools fail fed report card

Indiana Superintendent of Public Instruction Tony Bennett said today that the number of Indiana schools failing to meet minimum federal education standards is unacceptable. About half of all Indiana schools failed to make adequate yearly progress under the federal No Child Left Behind Act.

The number of Indiana schools meeting that standard dropped this year as the state sets increasingly higher targets required under the federal No Child Left Behind Act.

For the first time, every traditional public high school in Marion County — all schools in IPS, the townships and Beech Grove and Speedway — was rated as failing to make adequate yearly progress.Metro-area schools that failed in 2008

Percentage of Marion County Schools Passing in 2008 = 31% (compared with 42% in 2007)

» Beech Grove: South Grove Intermediate, Beech Grove High.

» Decatur Township: Lynwood Elementary, Decatur Intermediate Learning Center -- Blue Academy, Decatur Intermediate Learning Center -- Gold Academy, Decatur Middle, Decatur Central High.

» Franklin Township: Acton Elementary, Kitley Intermediate, Thompson Crossing Elementary, Franklin Township Middle West, Franklin Central High.

» Lawrence Township: Amy Beverland Elementary, Brook Park Elementary, Crestview Elementary, Forest Glen Elementary, Harrison Hill Elementary, Mary Castle Elementary, Oaklandon Elementary, Skiles Test Elementary, Sunnyside Elementary, Winding Ridge Elementary, Belzer Middle, Craig Middle, Fall Creek Valley Middle, Lawrence Central High, Lawrence North High.

» Perry Township: Homecroft Elementary, MacArthur Elementary, Young Elementary, Winchester Village Elementary, Perry Meridian 6th Grade Academy, Southport 6th Grade Academy, Southport Middle, Perry Meridian High, Southport High, RISE Learning Center.

» Pike Township: Central Elementary, College Park Elementary, Deer Run Elementary, Eastbrook Elementary, Snacks Crossing Elementary, Guion Creek Middle, Lincoln Middle, Pike High.

» Warren Township: Eastridge Elementary, Hawthorne Elementary, Liberty Park Elementary, Pleasant Run Elementary, Creston Middle, Stonybrook Middle, Warren Central High, The Renaissance School.

» Washington Township: Fox Hill Elementary, Greenbriar Elementary, Harcourt Elementary, Nora Elementary, Spring Mill Elementary, Eastwood Middle, Westlane Middle, North Central High.

» Wayne Township: Chapel Hill 7th & 8th Grade Center, Chapel Glen Elementary, Chapelwood Elementary, Garden City Elementary, Maplewood Elementary, McClelland Elementary, North Wayne Elementary, Rhoades Elementary, Stout Field Elementary, Westlake Elementary, Lynhurst 7th & 8th Grade Center, Ben Davis 9th Grade Center (and Ben Davis High).

» Indianapolis Public Schools: Arlington Community High, Broad Ripple High, Crispus Attucks Medical Magnet High, Howe Community High, Manual High, Marshall Community High, New Horizons Alternative, Northwest High, Tech High, Washington Community High. Coleman Academy, Donnan Middle, Forest Manor Middle, Harshman Middle, Longfellow Middle, Pacers Academy, Sidener Middle, McFarland Middle.

Schools 11, 14, 15, 20, 27, 31, 34, 37, 39, 42, 44, 48, 49, 51, 54, 55, 57, 60, 61, 63, 65, 67, 78, 79, 83, 88, 92, 93, 94, 96, 98, 99, 102, 103, 105, 106, 109.

Cold Spring, Key Learning Community, Key Learning Community 2.

» Speedway: Wheeler Elementary, Speedway Senior High.

» Charter schools: Challenge Foundation Academy, Decatur Discovery Academy, Fall Creek Academy, Indiana Math & Science Academy, Indianapolis Lighthouse Charter School, Indianapolis Metropolitan High, Irvington Community, KIPP, Lawrence Early College High, Monument Lighthouse Charter, SENSE.

» Other schools: Indiana School for the Blind, Indiana School for the Deaf.

The Pirates of Wall Street

Obama Gets A Dog

Gays and The Military: A Bad Fit

According to the Washington Post: With the nation engaged in two wars and facing a number of potential adversaries, this is no time to weaken our military. Yet if gay rights activists and their allies have their way, grave harm will soon be inflicted on our all-volunteer force.

The administration and some in Congress have pledged to repeal Section 654 of U.S. Code Title 10, which states that homosexuals are not eligible for military service. Often confused with the "don't ask, don't tell" regulations issued by President Bill Clinton, this statute establishes several reasons that homosexuality is incompatible with military service.

Section 654 recognizes that the military is a "specialized society" that is "fundamentally different from civilian life." It requires a unique code of personal conduct and demands "extraordinary sacrifices, including the ultimate sacrifice, in order to provide for the common defense." The law appreciates military personnel who, unlike civilians who go home after work, must accept living conditions that are often "characterized by forced intimacy with little or no privacy."

While there have been changes in civilian society since this statute was adopted by wide bipartisan majorities in 1993, the military realities it describes abide. If anything, they are more acute in wartime.

In our experience, and that of more than 1,000 retired flag and general officers who have joined us in signing an open letter to President Obama and Congress, repeal of this law would prompt many dedicated people to leave the military. Polling by Military Times of its active-duty subscribers over the past four years indicates that 58 percent have consistently opposed repeal. In its most recent survey, 10 percent said they would not reenlist if that happened, and 14 percent said they would consider leaving.

If just the lesser number left the military, our active-duty, reserve and National Guard forces would lose 228,600 people -- more than the total of today's active-duty Marine Corps. Losses of even a few thousand sergeants, petty officers and experienced mid-grade officers, when we are trying to expand the Army and Marine Corps, could be crippling.

And the damage would not stop there. Legislation introduced to repeal Section 654 (H.R. 1283) would impose on commanders a radical policy that mandates "nondiscrimination" against "homosexuality, or bisexuality, whether the orientation is real or perceived." Mandatory training classes and judicial proceedings would consume valuable time defining that language. Team cohesion and concentration on missions would suffer if our troops had to live in close quarters with others who could be sexually attracted to them.

We don't need a study commission to know that tensions are inevitable in conditions offering little or no privacy, increasing the stress of daily military life. "Zero tolerance" of dissent would become official intolerance of anyone who disagrees with this policy, forcing additional thousands to leave the service by denying them promotions or punishing them in other ways. Many more will be dissuaded from ever enlisting. There is no compelling national security reason for running these risks to our armed forces. Discharges for homosexual conduct have been few compared with separations for other reasons, such as pregnancy/family hardship or weight-standard violations. There are better ways to remedy shortages in some military specialties than imposing social policies that would escalate losses of experienced personnel who are not easily replaced.

Some suggest that the United States must emulate Denmark, the Netherlands and Canada, which have incorporated homosexuals into their forces. But none of these countries has the institutional culture or worldwide responsibilities of our military. America's armed forces are models for our allies' militaries and the envy of our adversaries -- not the other way around.

As former senior commanders, we know that the reason for this long-standing envy is the unsurpassed discipline, morale and readiness of our military. The burden should be on proponents of repeal to demonstrate how their initiative would improve these qualities of our armed services. This they cannot do.

Consequently, our recent open letter advised America's elected leaders: "We believe that imposing this burden on our men and women in uniform would undermine recruiting and retention, impact leadership at all echelons, have adverse effects on the willingness of parents who lend their sons and daughters to military service, and eventually break the All-Volunteer Force."

Everyone can serve America in some way, but there is no constitutional right to serve in the military. The issue is not one of individual desires, or of the norms and mores of civilian society. Rather, the question is one of national security and the discipline, morale, readiness and culture of the U.S. armed forces upon which that security depends. It is a question we cannot afford to answer in a way that breaks our military.


Tainted Chinese Drywall

Knauf Tianjin – the main Chinese manufacturer so far singled out for blame – says it was responsible for only around 20 per cent of that supply, and the firm complains that because it was the only company that stamped its name on its product that it is being unfairly targeted.

Laboratory tests carried out for Florida's Department of Health showed that samples of Chinese-made drywall - including Knauf's - contained strontium sulfide, which gives a rotten egg odor when moistened and reacts with hydrogen in the air to take on corrosive powers capable of eating through metals and electrical wires.

"This is a noxious, pungent chemical compound. If it can corrode metals in your house, I hate to think what it's doing to residents and their children and pets," said Jordan Chaikin of Florida legal firm Parker Waichman Alonso, which has launched a federal class-action lawsuit against Knauf in the US District Court in Fort Myers.

"People are stuck with these homes, they can't afford to leave, they put their life's savings into them or they're mortgaged and they're turning to builders for help," he said. "But in some cases builders have filed Chapter 11 bankruptcy so there can be no claims against them. Some homes need to be bulldozed, in other cases gutted entirely, and that's very expensive for builders."

The crisis has woven a tangled economic and legal web. Among the builders on the receiving end of consumers' wrath is Lennar Homes of Miami, which has identified tainted drywall in over 80 of its properties and has pledged to pay the costs of replacing it and relocating residents in the interim.

Lennar Homes is the subject of some lawsuits. But, in turn, it has launched a suit itself against Knauf and another Chinese drywall manufacturer, Taishan Gypsum. It is also suing independent US contractors for installing the defective product in Lennar homes.

"They have refused to take responsibility for their defective product, leaving us no other option but to seek redress in a court of law," the company asserted in a written statement.

"The builders are victims too," says Howard Ehrsam, a civil engineer who founded Chinese Drywall Screening, of Port St Lucie, Florida, to meet growing demand from homeowners for diagnosis and advice.

source: CS Monitor

Casino Capitalism

The American Conservative's article "The Wealth Delusion" writes: ...In the past four years, America’s 500 largest corporations made a profit of $2.4 trillion, more than 4 percent of GDP. Did they use it to increase productive capacity, improve quality, or strengthen their balance sheets? No, $1.7 trillion went for stock buybacks and $900 billion for dividends. Of the $2.4 trillion they made, they passed on $2.6 trillion to their shareholders. They gave away more than they made and invested nothing.

Investment, as defined by Adam Smith, Max Weber, and most economics textbooks, is the use of deferred consumption for the purchase of capital goods, which create a cash flow in the future. For the past generation, however, when most of us used the word “investment,” it meant that a greater fool could be found to buy our house or share of a derivatives contract for more than we paid.

When the bore at a cocktail party says, “My house is the best investment I ever made,” he means he paid less than it is now worth. But his house does not create a cash flow. It is merely a consumption item whose value has gone up. We have a semantic problem: the word “investment” has come to mean two different things, and this confusion played a part in creating the bubble whose explosion will end up costing many of us our jobs.

Look at the archetypal “investment” of the past 30 years: the leveraged buyout. Private equity firms find a company with a steady cash flow, put up a little money, borrow lots more, and then use that company’s own cash flow to fund its takeover. They load a healthy firm with tons of debt, using existing cash flow to pay the interest. Retained profits, which the firm could have used for R&D, building new plants, hiring new workers, or productive investment, are sacrificed to service new, unproductive debt.

These leveraged buyout artists call themselves investors, but what they do is the opposite of investment. They are asset strippers. Traditional investors take savings created by deferred consumption and use it to create productive capacity for the future. Private equity firms take existing productive capacity, monetize it, and use it to fund their luxurious current consumption. Investment is supposed to mean sacrificing now to make the future richer. These pirates sacrifice the future to consume more today.

It didn’t used to be this way. In the 17th century, suppose an Amsterdam burgher restrained his desire for luxury, didn’t commission a Rembrandt portrait of his wife, and instead bought shares in the Dutch East Asia Company. The company used his money to outfit a ship bound for the Spice Islands. With a little luck, it returned two years later, sold its pepper for a profit and paid our burgher a dividend. His earlier restraint increased world trade, seasoned food all over Europe, and made him money. That is what we have always called an investment.

Or suppose a London rentier in 1880 bought bonds for a proposed railroad from Buenos Aires deep into the grasslands of Argentina. His money allowed the railroad to buy land, import workers, lay track. Worthless land became valuable. Cattle grazing there, previously slaughtered for their hides and left to rot, became a valuable export crop. The landlords cheerfully paid the railroad freight rates, the railroad paid the rentier his interest, and for the first time meat regularly appeared on the dinner tables of Europe’s urban poor.

Of course, real investment still occurs today. An immigrant saves some money, borrows more, and opens a curry shop. A software engineer with a brilliant idea finds a venture capitalist to back him and invents Google. But these investors, who create jobs and increase productivity, are generally not funded by investment banks or financial markets. They borrow from commercial banks or perhaps sell equity to venture capital firms. The huge profits once made at Goldman Sachs, Lehman Brothers, and Bear Stearns had little to do with funding productive investment. Casino-style trading, mergers-and-acquisition work, highly leveraged arbitrage—shorting the 30-year bond while going long on the 29-year—made big bucks for financiers. But it did nothing for the economy as a whole.

Central banks battled any threat to the financial economy by increasing liquidity. This huge pool of new money sloshing around, chasing things to buy, created spectacular asset-price inflation. Three decades ago, houses on my London block cost £3,000. Last year, they went for £1 million. Back then, share prices traded at six to eight times earnings. Today, despite the huge fall in stock prices, P/E ratios are still considerably higher than they were in the early ’80s. Why save when the value of your house goes up more than your annual salary? Why invest in new plants when firing workers makes your stock price—and thus your bonus—go up?

With asset prices rising for over a generation, investment lost its Calvinist roots. An investment no longer demanded sacrifice of current pleasure. Indeed it was the great borrowers who made fortunes. With CEO bonuses linked to short-term stock price increases, corporations spent retained profits to buy back shares, using their money to drive up stock prices instead of investing in things that would strengthen the firm in the long run.

Barry Eichengreen, perhaps the leading economic historian of the Golden Age, tells us that much of the growth in Europe after World War II was due to a social pact. Labor agreed to restrain its wage demands, and in return, capital agreed to reinvest most profits into the business. As productive investment rose, so did worker productivity, and between 1950 and 1970 real wages more than doubled. Investment in productive capacity works: it makes the entire society richer—entrepreneurs, bankers, and workers alike.

That compact has broken down. As finance has grown to dominate the rest of the economy, with interest payments as a share of GDP rising from under 1 percent to over 16 percent, real productive investment has declined. If you build a factory or invent a new product using borrowed money, you create a cash flow that allows interest payments to be paid no matter what happens in the financial markets. But when “investment” creates no new productive capacity, when the link between financial investment and the real productive economy is broken, finance becomes a faith-based enterprise in perpetual asset-price increases. When that faith begins to crumble, the debt structure has no foundation to hold it up.

Hyman Minsky, the Cassandra of this financial crisis, described three types of financial structure. The first, and safest, he called “hedged.” All borrowing—

interest and principal payments—is covered by cash flow. Minsky defines a “speculative” financial structure as one in which, in certain periods, cash flow will not be sufficient to fund interest payments but the value of the investment remains greater than the interest and principal payments due. The third and most fragile structure he calls “Ponzi.” Not only are interest payments less than cash flow, but the present value of the discounted cash flows generated by the investment are less than the money owed to fund it.

A Ponzi structure can only be maintained, Minsky said, by further borrowing, and this borrowing is only possible if interest payments do not rise while asset prices do. We have been deep into Ponzi finance for some time. Central bankers, recognizing the fragility of our financial architecture, have kept interest rates low. But the stability of the system required asset prices to keep going up so that the value of collateral grew, keeping banks confident enough to allow further borrowing. If asset prices stagnate, causing banks to reject the further loans necessary just to pay existing interest, the structure falls apart. That is why a relatively minor decline in American home prices brought the entire financial system to its knees.

The current crisis gives us an opportunity to rethink the link between the financial and real economies. For too long, those working in the productive economy of goods and services have subsidized bankers and traders who have done little to make the rest of us richer or more productive. Since we are bailing out their stupid bets, let us insist that from now on their investments serve our common future. We can no longer afford paper “investments” that merely represent a hope that since asset prices have gone up in the past, they will continue to do so forever.

The American Way

Bob Herbert of the New York Times writes: Pittsburgh--Late in the afternoon on Good Friday, in a cold, steady rain, a gray-haired 60-year-old woman sat shivering and praying on a stone step outside of 1016 Fairfield St., which is where the terrible shooting had occurred. She read from a prayer book and from time to time would take a drag on a soggy Newport cigarette. A candle flickered beside her as she prayed.

Police officers in a squad car a half-block away were keeping a close eye on the woman and the house with the boarded-up windows behind her.

Reluctant to talk at first, the woman eventually whispered, “I’m the grandmother of the kid that killed those cops.” She said her name was Catherine Scott and that she was praying for her grandson, Richard Poplawski, who is 22 and being held in the Allegheny County Jail, and for the three officers he is accused of gunning down: Stephen Mayhle, who was 29; Paul Sciullo II, 37; and Eric Kelly, 41.

The officers were killed a week and a half ago as they responded to a disturbance at the house. Police said they were met there by Poplawski, who was wearing a bulletproof vest and was armed with a variety of weapons, including an AK-47 assault rifle.

“My grandson did a terrible thing,” said Ms. Scott. “There is no mercy for what he did.”

Mercy or not, there is no end to the trauma and heartbreak caused by these horrifying, blood-drenched eruptions of gun violence, which are as common to the American scene as changes in the weather.

On the same day that the three Pittsburgh cops were murdered, a 34-year-old man in Graham, Wash., James Harrison, shot his five children to death and then killed himself. The children were identified by police as Maxine, 16, Samantha, 14, Jamie, 11, Heather, 8, and James, 7.

Just a day earlier, a man in Binghamton, N.Y., invaded a civic association and shot 17 people, 13 of them fatally, and then killed himself. On April 7, three days after the shootings in Pittsburgh and Graham, Wash., a man with a handgun in Priceville, Ala., murdered his wife, their 16-year-old daughter, his sister, and his sister’s 11-year-old son, before killing himself.

More? There’s always more. Four police officers in Oakland, Calif. — Dan Sakai, 35, Mark Dunakin, 40, John Hege, 41, and Ervin Romans, 43 — were shot to death last month by a 27-year-old parolee who was then shot to death by the police.

This is the American way. Since Sept. 11, 2001, when the country’s attention understandably turned to terrorism, nearly 120,000 Americans have been killed in nonterror homicides, most of them committed with guns. Think about it — 120,000 dead. That’s nearly 25 times the number of Americans killed in Iraq and Afghanistan.

For the most part, we pay no attention to this relentless carnage. The idea of doing something meaningful about the insane number of guns in circulation is a nonstarter. So what if eight kids are shot to death every day in America. So what if someone is killed by a gun every 17 minutes.

The goal of the National Rifle Association and a host of so-called conservative lawmakers is to get ever more guns into the hands of ever more people. Texas is one of a number of states considering bills to allow concealed guns on college campuses.

Supporters argue, among other things, that it will enable students and professors to defend themselves against mass murderers, like the deranged gunman who killed 32 people at Virginia Tech two years ago.

They’d like guns to be as ubiquitous as laptops or cellphones. One Texas lawmaker referred to unarmed people on campuses as “sitting ducks.”

The police department in Pittsburgh has been convulsed with grief over the loss of the three officers. Hardened detectives walked around with stunned looks on their faces and tears in their eyes.

“They all had families,” said Detective Antonio Ciummo, a father of four. “It’s hard to describe the kind of pain their families are going through. And the rest of our families. They’re upset. They’re sad. They’re scared. They know it could happen to anyone.”

The front page of The Pittsburgh Tribune-Review carried a large photo of Officer Mayhle’s sad and frightened 6-year-old daughter, Jennifer. She was clutching a rose and a teddy bear in a police officer’s uniform. There was also a photo of Officer Kelly’s widow, Marena, her eyes looking skyward, as if searching.

Murderous gunfire claims many more victims than those who are actually felled by the bullets. But all the expressions of horror at the violence and pity for the dead and those who loved them ring hollow in a society that is neither mature nor civilized enough to do anything about it.

source NY Times by Bob Herbert


Wall Street Pirates

Excess pay reflects badly on directors

When it was announced last week that Home Depot chief Frank Blake would forgo his $1.2 million cash bonus for 2008, many in Atlanta’s business community couldn’t help but reflect on our very own poster child for the excessively compensated executive, Blake’s predecessor, Robert Nardelli.

Nardelli’s $32 million pay in his last year paled in comparison to his $210 million severance package.

You have to really want somebody to leave to pay that kind of walk-away money. But, from what I’ve heard, it was worth every penny.

Executive pay once again dominates the headlines. But executive pay was out of hand long before the financial meltdown.

Like the spoiled children you encounter in the grocery store, it’s not so much their fault as it is the person pushing the cart.

In this case, the board of directors.

John Bogle, founder of Vanguard and a tough-as-nails critic of the lack of corporate governance, took on the overindulged executives in his 2005 book, “The Battle for the Soul of Capitalism.” He showed that in 1980, the average CEO earned 42 times the average worker. By 2004, that had risen to 280 times.

Corporate profits grew at an average annual pace of only 2.9 percent during that time. So any way you slice it, the CEOs didn’t earn such a jump in pay.

Some say the explosion in executive pay was lit by the act of trying to limit it. In the 1990s, Congress capped the corporate tax deductibility for executive salaries in excess of $1 million.

Quicker than you can say stock options, those and other ingenious payouts led to an explosion in compensation packages. It also led to risky, short-term business strategies because the stock price was all that mattered.

While we may wish for some saintly regulator to swoop in and right all we think is wrong, we should be mindful of who assumes that duty in reality —- Congress.

If its work in the 1990s weren’t disqualification enough, surely its recent escapades are.

The House’s move to tax AIG’s bonuses was so unconstitutional as to be laughable, if it weren’t for the revelation they not only don’t read the bills they are voting on but haven’t read the Constitution (see Article 1, Section 9, Paragraph 3).

But if boards of directors aren’t up to the task, then government seems more than willing to do it for them.

Home Depot learned the hard way. The Nardelli flap embarrassed its board, employees, founders and Atlanta.

Blake’s total compensation for 2008 was $9.2 million, somewhere just above the median point in The Wall Street Journal’s current survey of CEO pay.

Still, $9.2 million is a long way from the Nardelli norm ($30 million average the last three years).

It should be noted that only three directors remain on Home Depot’s board from that period.

source: Atlanta Journal Constitution

Alabaster Box

There was a woman who was a notorious sinner in that city. When she learned that Jesus was eating at the Pharisee's home, she took an alabaster jar of perfume and knelt at his feet behind him. She was crying and began to wash his feet with her tears and dry them with her hair. Then she kissed his feet over and over again, anointing them constantly with the perfume.

Now the Pharisee who had invited Jesus saw this and said to himself, "If this man were a prophet, he would have known who is touching him and what kind of woman she is. She's a sinner!" (Luke 7:37 - 7:39)


Happy Easter!

Steven Levitt: Why do crack dealers still live with their moms?

From the book Freakonomics "Chapter 3: Why Do Drug Dealers Still Live with Their Moms?":

Why experts routinely make up statistics; the invention of chronic halitosis . . . How to ask a good question . . . Sudhir Venkatesh's long, strange trip into the crack den . . . Life is a tournament . . . Why prostitutes earn more than architects . . . What a drug dealer, a high-school quarterback, and an editorial assistant have in common . . . How the invention of crack cocaine mirrored the invention of nylon stockings . . . Was crack the worst thing to hit black Americans since Jim Crow?

In other words, a crack gang works pretty much like the standard capitalist enterprise: you have to be near the top of the pyramid to make a big wage. Notwithstanding the leadership's rhetoric about the family nature of the business, the gang's wages are about as skewed as wages in corporate America. A foot soldier had plenty in common with a McDonald's burger flipper or a Wal-Mart shelf stocker. In fact, most of J. T.'s foot soldiers also held minimum-wage jobs in the legitimate sector to supplement their skimpy illicit earnings. The leader of another crack gang once told Venkatesh that he could easily afford to pay his foot soldiers more, but it wouldn't be prudent. "You got all these niggers below you who want your job, you dig?" he said. "So, you know, you try to take care of them, but you know, you also have to show them you the boss. You always have to get yours first, or else you really ain't no leader. If you start taking losses, they see you as weak and shit."

Along with the bad pay, the foot soldiers faced terrible job conditions. For starters, they had to stand on a street corner all day and do business with crackheads. (The gang members were strongly advised against using the product themselves, advice that was enforced by beatings if necessary.) Foot soldiers also risked arrest and, more worrisome, violence. Using the gang's financial documents and the rest of Venkatesh's research, it is possible to construct an adverse-events index of J. T.'s gang during the four years in question. The results are astonishingly bleak. If you were a member of J. T.'s gang for all four years, here is the typical fate you would have faced during that period:

  • Number of times arrested 5.9
  • Number of nonfatal wounds or injuries 2.4 (not including injuries meted out by the gang itself for rules violations)
  • Chance of being killed 1 in 4
A 1-in-4 chance of being killed! Compare these odds to being a timber cutter, which the Bureau of Labor Statistics calls the most dangerous job in the United States. Over four years' time, a timber cutter would stand only a 1-in-200 chance of being killed. Or compare the crack dealer's odds to those of a death row inmate in Texas, which executes more prisoners than any other state. In 2003, Texas put to death twenty-four inmates—or just 5 percent of the nearly 500 inmates on its death row during that time. Which means that you stand a greater chance of dying while dealing crack in a Chicago housing project than you do while sitting on death row in Texas. So if crack dealing is the most dangerous job in America, and if the salary is only $3.30 an hour, why on earth would anyone take such a job?

Larry Lessig: How creativity is being strangled by the law

Creativity and Education

Sir Ken Robinson's newest book, The Element: How Finding Your Passion Changes Everything (Viking, 274 pages, $25.95)The Element, he examines a common thread in people that found what has become all to uncommon for the masses: the intersection of passion and creativity for their own lives. As Robinson says, "Most people have no idea of their true talents or what might give them their own sense of fulfillment."


WASHINGTON (AP) — Barack Obama is inviting close friends and staff to a private White House meal Thursday to mark Passover, part of the new president's effort to reach out to Jewish voters.

...The White House says the seder meal will be traditional, including matzo, bitter herbs, a roasted egg and greens in the family dining room in the executive mansion. The evening will feature the reading of the Haggadah, the religious text of the holiday.

Passover began at sundown Wednesday. It celebrates the Jewish exodus from Egypt after 400 years of slavery.

White House aides say they believe this is the first president-hosted seder at the White House. President Bill Clinton's aides planned seders, but Clinton isn't known to have attended.

Obama's move won quick praise from the National Jewish Democratic Council.

"By hosting the first presidential seder in America's history, President Barack Obama shows the personal and deep relationship he has with the Jewish community," said Alexis C. Rice, the group's deputy executive director.


IPOD Fit For The Queen

10 Economic Principles

From the Financial Times, "Ten principles for a Black Swan-proof world," by Nassim Nicholas, Taleb (published: April 7 2009):

1. What is fragile should break early while it is still small. Nothing should ever become too big to fail. Evolution in economic life helps those with the maximum amount of hidden risks – and hence the most fragile – become the biggest.

2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.

3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. The economics establishment (universities, regulators, central bankers, government officials, various organisations staffed with economists) lost its legitimacy with the failure of the system. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.

4. Do not let someone making an “incentive” bonus manage a nuclear plant – or your financial risks. Odds are he would cut every corner on safety to show “profits” while claiming to be “conservative”. Bonuses do not accommodate the hidden risks of blow-ups. It is the asymmetry of the bonus system that got us here. No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.

5. Counter-balance complexity with simplicity. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious.

6. Do not give children sticks of dynamite, even if they come with a warning . Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them “hedging” products, and from gullible regulators who listen to economic theorists.

7. Only Ponzi schemes should depend on confidence. Governments should never need to “restore confidence”. Cascading rumours are a product of complex systems. Governments cannot stop the rumours. Simply, we need to be in a position to shrug off rumours, be robust in the face of them.

8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.

9. Citizens should not depend on financial assets or fallible “expert” advice for their retirement. Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).

10. Make an omelette with the broken eggs. Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the “Nobel” in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.

Then we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news.

In other words, a place more resistant to black swans.