Do We Need War to Grow our Economy?

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The economist Tyler Cowen wrote a piece in the New York Times today entitled “The Lack of Major Wars May be Hurting Economic Growth”. He raises a serious point that requires two questions to be answered. First, does modern capitalism rely on military and other “wasteful” expenditures to grow? Second, is growth of 4% per year necessary for the American economy to succeed?

Cowen makes a fairly convincing argument that preparing for war has led to increased growth since the end of the Great Depression.

It may seem repugnant to find a positive side to war in this regard, but a look at American history suggests we cannot dismiss the idea so easily. Fundamental innovations such as nuclear power, the computer and the modern aircraft were all pushed along by an American government eager to defeat the Axis powers or, later, to win the Cold War. The Internet was initially designed to help this country withstand a nuclear exchange, and Silicon Valley had its origins with military contracting, not today’s entrepreneurial social media start-ups. The Soviet launch of the Sputnik satellite spurred American interest in science and technology, to the benefit of later economic growth.

Neoclassical economics would have us believe that the invisible hand of the market in creating a balance of supply and demand will naturally create the kind of growth that makes capitalism the only possible economic system. Thus as we are reminded constantly by Republican economic orthodoxy, government intervention in the economy can only destroy this perfect balance and gum up the works. But Cowen (The Great Stagnation), a conservative economist, is arguing that since 1940 it has been government spending on military technology that made the difference in the post war average of 4% growth and our current relatively stagnant 2% growth. Although Cowen can point to the wonders of the Internet delivered by the Cold War, he admits that the wasteful cost of war (in blood and treasure) is not worth the growth. And then there is another source of waste that we need to look at. In 1950, total U.S. ad spending was $5.7 Billion. Last year it was $171 Billion. Why do I say waste? Because that box of Tide you just purchased had far more embedded costs in advertising and packaging than it did in ingredients (which were basically similar to the ingredients of all the competitive detergents).

Then there is a third source of waste for which we are paying dearly: Wall Street speculation.

Finance-Sector-as-percentage-of-GDP

Note how the role of Wall Street has grown since 1950. The vast proportion of this revenue is trading profits. This is not money going to finance productive growth of the economy, but rather the speculative profits of the trading desks of big banks. It is this speculative activity that caused the crash of 1929 and the Great Recession of 2008. Though the role of Wall Street fell dramatically in 1930, you will note that the Great Recession of 2008 was merely a hiccup in Wall Street Profits, mostly because men like John Paulson made billions betting the housing market would crash. And now, as Michael Lewis has reminded us, High Frequency Trading makes it possible for the Hedge Fund guys to let the computers do all the speculation, often trading in and out of a single stock four times a day.

So perhaps the invisible hand of the free market doesn’t really work without the government spending billions a year on missiles and bombers and the corporations spending billions a year to get you to buy stuff you don’t need. Perhaps Paul Ryan and Ted Cruz are just plain wrong in their belief in the growth fairy of Ayn Rand. But maybe we should look at it another way. Perhaps we don’t need to grow 4% a year. Given certain limits on our natural resources, perhaps a Steady State Economy might be a better idea. Cowen acknowledges this possibility.

We can prefer higher rates of economic growth and progress, even while recognizing that recent G.D.P. figures do not adequately measure all of the gains we have been enjoying. In addition to more peace, we also have a cleaner environment (along most but not all dimensions), more leisure time and a higher degree of social tolerance for minorities and formerly persecuted groups. Our more peaceful and — yes — more slacker-oriented world is in fact better than our economic measures acknowledge.

This of course brings me back to the point I made a couple of weeks ago from Moscow.

The mistake of the old wise men was that they thought man would gladly trade consumption for leisure—that living a modest life, rich in the aesthetics of writing songs or painting our masterpiece—would be a worthy trade.

It could be that we could create a sustainable society at lower growth levels. That there is not a single politician willing to acknowledge this possibility is depressing.

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Media and Polarization

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The Pew Center released a new poll with some fascinating conclusions. Our country really is far more polarized than ever before. This no surprise but what was fascinating to me is this other chart, which demonstrates how much of the country is not interested in either the extreme partisan position or in participating in a political process they see as fixed.

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Even though the percentage of voters on the extreme right and left is growing, it still represents only 20% of the potential electorate. But those who are the most extreme are exactly the folks who turn out at the polls.

Holding deeply negative views of the opposite party and its leaders is correlated with political participation, and this is particularly true among Republicans in the current context. Republicans who hold a very unfavorable opinion of the Democratic Party are 18 points more likely than those whose opinion is mostly unfavorable to say they always vote.

So what is the difference between the relatively benign atmosphere in the early 1990’s and our current poisoned chalice? I would argue that the rise of hard right talk radio and Fox News has made the difference. Andrew Sullivan writes of spending an evening watching Fox News.

Look: I know I may be a total sucker for even hoping to see some semblance of fairness and balance on Fox. But it’s still shocking to see programming designed not to uncover reality, but to create a reality in which no counter-arguments are ever considered, and in which hysteria is the constant norm. MSNBC is almost as bad, of course, but with CNN as the new Discovery Channel, the entire possibility of a balanced newscast has disappeared from cable – and from the lives of most Americans. Again, this is not new. But as it continues, it intensifies. And as it intensifies, the possibility of governing all of the country recedes into the distance.

This is a civil war without violence. And we are two countries now.

However, there may be an interesting development that could radically effect the 2016 election and that is a populist reform revolt against the elites of both parties. Writing in the National Journal, Ron Fournier notes that Eric Cantor’s defeat was not so much a product of a revolt against immigration reform as a revolt against crony capitalism, for which Cantor was the poster child. Fournier quotes Doug Sosnick (Bill Clinton’s political director), who feels the populist anger from both right and left could coalesce around a number of issues.

Which side of the barricade are you on? Populists from the right and the left—from the tea party and libertarian-leaning Rand Paul to economic populist Elizabeth Warren—are positioning themselves among the insurgents. Sosnik pointed to six areas of consensus that eventually may unite the divergent populist forces:

  • A pullback from the rest of the world, with more of an inward focus.
  • A desire to go after big banks and other large financial institutions.
  • Elimination of corporate welfare.
  • Reducing special deals for the rich.
  • Pushing back on the violation of the public’s privacy by the government and big business.
  • Reducing the size of government.

If those six issues are the platform for victory with the vast “silent plurality” that represents the middle of American politics then I’m not sure Hillary Clinton is prepared to embrace this program. Clearly Rand Paul could run there, but my own distrust of Paul as a “Manchurian Candidate” from the Lew Rockwell fringe of Libertarian politics, who is trying his best to look reasonable, makes me demur. Which of course leads back to Elizabeth Warren, who could run a populist campaign that just might be a winner.

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Does Talent Matter?

Over the weekend 12,500 screaming fans showed up at Citi Field in Queens for DigiFest NYC. They were not screaming in appreciation of some new boy band or rap star. They were screaming for Cameron Dallas, whose only apparent talent is that he looks cute. Cameron is well aware of his limitations.

 “Back in the day, you used to have to be a singer or an actor, but nowadays with social media, you can become well known just by being yourself.”

The devolution of teen fan hysteria can be charted from Frank Sinatra

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To Elvis Presley

screaming-fansTo The Beatles

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We have now arrived at Cameron Dallas.

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Except that unlike Frank Sinatra, Elvis or The Beatles, Cameron Dallas has no talent. How did we get here? Where the object of these girl’s affection does nothing but look pretty in front of his web cam. Are we so culturally bankrupt that this is the best we can do?

 

 

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St. Petersburg, Art Capital of the World

Hermitage Museum

Hermitage Museum

I’ve just spent four days exploring the art museums of St. Petersburg, Russia. I’ve spent a lot of time in the art museums of Paris, New York, Los Angeles, Berlin, Tokyo, Madrid, Rome, Florence and Venice and I think St. Petersburg has the deepest collections. I spent three days in The Hermitage and one day in the Russian Museum and I feel as if I had tasted an overview of the history of world culture from 800 BC to 1950.

In almost every era the collections are incredible. The Italians, French, Spanish, German classical work is so extensive it took me two full days to get to 1650. But what is so amazing is the the art from 1880-1930. The role of the major collectors, Sergei Shchukin and Ivan Morozov, both of whom had their collections nationalized by the Bolsheviks, is instrumental to the depth of the Hermitage modern collection. Rooms full of the most amazing Picasso’s lead you into the world of Magritte, Monet, Van Gogh andGauguin. These two Russian Businessmen seem to have bought up most of the output coming out of the major Paris painters from 1900 to 1915. Of course, when the Revolution arrived, their collections were seized and they both fled to Paris.

What is just as amazing is some of the Russian Avant Garde art from the same period, particularly Malevich and his contemporaries. What seems obvious to me is that the art made in Russia in the years preceding the Revolution, when there was an amazing amount artistic tumult in the air, is quite superior to the art made after the revolution, especially after Trotsky was purged and the artist became a servant of the party.

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Utility vs Aesthetics

 

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I had dinner in Moscow last night with a really smart Brit, who had come to Moscow to work in advertising eight years ago. In talking about the dining experience in Russia,he mentioned that many older Russians still regarded feeding yourself as a utility–maximum calories consumed in minimum time. I was reminded of a remark made by a biographer about eating with the great Russian revolutionary Leon Trotsky. It was an unpleasant experience he said, because Trotsky was so intent on scarfing down his dinner that he never paused to talk.

But if the Russians may rush through dinner, they will think nothing of spending three hours at the Bolshoi ballet, or three weeks reading “War and Peace”. In Trotsky’s utopian future, technology would take over all of the grunt work of society, leave the average man time to find his aesthetic muse.

Man will become immeasurably stronger, wiser and subtler; his body ‘will become more harmonized, his movements more rhythmic, his voice more musical. The forms of life will become dynamically dramatic. The average human type will rise to the heights of an Aristotle, a Goethe, or a Marx. And above this ridge new peaks will rise.

Of course this notion of the 15 hour week wasn’t just a Socialist fantasy, as Elizabeth Kolbert points out in the New Yorker this week.

To Keynes, the coming age of abundance, while welcome, would pose a new and in some ways even bigger challenge. With so little need for labor, people would have to figure out what to do with themselves: “For the first time since his creation man will be faced with his real, his permanent problem—how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won.” The example offered by the idle rich was, he observed, “very depressing”; most of them had “failed disastrously” to find satisfying pastimes.

Now of course neither Trotsky nor Keynes’ view of the future came true. And in cities like Moscow and Los Angeles, working the 80 hour week to “get more things” is the assumed wisdom. The mistake of the old wise men was that they thought man would gladly trade consumption for leisure—that living a modest life, rich in the aesthetics of writing songs or painting our masterpiece—would be a worthy trade.
How wrong they were.

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Thought Police on Campus

The Adventures of Huckleberry Finn

The Adventures of Huckleberry Finn

I’m afraid these poor sensitive sophomores can’t read “Huckleberry Finn” without a warning label.

Should students about to read “The Great Gatsby” be forewarned about “a variety of scenes that reference gory, abusive and misogynistic violence,” as one Rutgers student proposed? Would any book that addresses racism — like “The Adventures of Huckleberry Finn” or “Things Fall Apart” — have to be preceded by a note of caution? Do sexual images from Greek mythology need to come with a viewer-beware label?

Colleges across the country this spring have been wrestling with student requests for what are known as “trigger warnings,” explicit alerts that the material they are about to read or see in a classroom might upset them or, as some students assert, cause symptoms of post-traumatic stress disorder in victims of rape or in war veterans.

The warnings, which have their ideological roots in feminist thought, have gained the most traction at the University of California, Santa Barbara, where the student government formally called for them.

In a spring when commencement speakers have been banned from campuses, it feels like the PC crowd is completely dominating the rhetoric on campus. The very notion that we can’t hear speeches or read literature that might make us a bit uncomfortable is totally frightening to me. I must say that I am not encountering this at USC, yet. My basic beef is with post modernist writing, which for the life of me is like a secret code, meant to obscure meaning.

Part of the problem with this identity politics view of education is that it confuses content and context. I have been saying for years that many young people have almost no sense of historical context. How could you possibly read Mark Twain without any sense of what growing up in Missouri in 1840 was like? How could they have gotten all the way through high school and not really understand the American Civil War or the fall of the Roman Empire? And remember what Marquez said about history“I cannot imagine how anyone could even think of writing a novel without having at least a vague of idea of the 10,000 years of literature that have gone before.”

Perhaps every entering Freshman should be required to read and take a test on JM Roberts’ The Penguin History of the World before they arrive on campus. Then their poor sensitive souls might not be so shocked by Greek tragedies.

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United States of Secrets

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The Frontline documentary, United States of Secrets, Pt. 1 is one of the most important television programs of the last decade. It is a tale of how Dick Cheney and his lawyer David Addington, remade the surveillance policies of America in the wake of 9/11, without regard to the Fourth Amendment or other inconvenient truths of the Constitution. What is most astonishing is how clueless George Bush was to what was going on in his government. “The Program”, which the NSA ran, was authored in Cheney’s office and when 13 senior officials of the Justice Department (including the Assistant Attorney General and the Director of the FBI) threatened to quit if the program was reauthorized, Bush was totally blindsided, completely unaware that anyone in his administration objected to warrantless surveillance.

We all know the story of Edward Snowden, but what the Frontline film does is show the stories of countless insiders at the NSA who knew the program was unconstitutional and fought from the inside to get it changed long before Snowden gave the documents to the press. Many of them like House Intelligence committee staffer Diane Roark risked their careers to try to stop it. And many of them hoped when Barack Obama became President that the program would be terminated. But it was not to be. Obama talked transparency on the campaign trail in 2008, but once he became President, he not only maintained The Program, but also pursued the insiders what had tried to alert the press with relentless ferocity.

One of the Dept. of Justice officials, Jack Goldsmith describes Addington’s authorization which Bush signed as filled with “inadequate legal reasoning and flawed legal opinions.” When he and James Comey blocked the re-authorization by the Attorney General, Cheney simply ignored it and got Bush’s counsel Alberto Gonzales to sign the re-authorization.  Gonzalez and NSA Director Michael Hayden are both remarkably candid on camera in saying that they wanted to do whatever the President wanted and that Bush’s powers as a war time President topped the constitutional problems presented by the Fourth Amendment.

What is equally remarkable is that Frontline takes on the new York Times, whose Executive Editor Bill Keller turns out to be completely cowed by his meetings with Bush and Hayden. For those of us who grew up on “All The President’s Men” and the image of the courageous editor who is not afraid of the White House, the Times willingness to kill a story by James Risen before the 2004 election, that would have revealed “The Program”, is a true profile in cowardice. Next Tuesday, Frontline turns the lens on Silicon Valley and the role Google and Facebook played in the government’s panoptican of surveillance. That should be must see TV.

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Is the Music TV Show Dead?

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Fox began airing American Idol in June of 2002 and for eight straight years it was the number one rated TV show in America. It so outdrew the competition that the other networks pretty much gave up trying to counter program it. But now it is fading fast and even it’s newer rival The Voice is having a hard time drawing the younger audience advertisers crave. Bill Carter suggests that this is just one more example of too much of a good thing.

It is hardly the first time television has burned out a genre through mass imitation and overexposure. Networks rode westerns into the ground. They exhausted the audience with singers trying variety shows. At one point, almost every night had a newsmagazine. And, most famously, ABC ran the sprockets off its game show hit “Who Wants to Be a Millionaire,” with four episodes a week at its height, leading to a plunge in ratings and its relegation into syndication.

But I think there is something more to it than that. Idol arrived at that particular moment in American culture when our feelings were still raw from 9/11. The country needed a little old-fashioned simple entertainment in which multiple generations could share an experience. Simon Cowell, the Svengali behind Idol was smart enough to choose singers in the early days like Kelly Clarkson, Carrie Underwood, Jennifer Hudson and Taylor Hicks that could appeal to a broad demographic. And so for a while Idol could actually manufacture stars. But by 2011, that stopped happening. The fans grew tired of the highly produced pop and all of the me too shows like X Factor and even The Voice have failed to produce the kind of platinum selling artists that Idol turned out.

Cultures go through periods of manufactured pop followed by periods of more authentic and rougher artistry. Think about the transition from the wildness of Elvis and Little Richard in the mid 1950’s to the totally manufactured pop of Frankie Avalon and Fabian in 1960 and then back to rough reality of Bob Dylan in 1964. My guess is that we are in one of those periods where the rough authentic music is what is popular and the idea that Simon Cowell or Blake Shelton can “make a star” is fading into the sunset.

Posted in Music, Television | Tagged , , , , , | 3 Comments

Digital Monopoly Capitalism

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This week it was revealed that Amazon has been bullying the publishing house of Hachette to give it better terms.

Among Amazon’s tactics against Hachette, some of which it has been employing for months, are charging more for its books and suggesting that readers might enjoy instead a book from another author. If customers for some reason persist and buy a Hachette book anyway, Amazon is saying it will take weeks to deliver it.

The scorched-earth tactics arose out of failed contract negotiations. Amazon was seeking better terms, Hachette was balking, so Amazon began cutting it off. Writers from Malcolm Gladwell to J. D. Salinger are affected, although some Hachette authors were unscathed.

Amazon has a near monopoly position in the distribution of books. The supreme irony is that government regulators are so clueless to the effects of monopoly that they brought an anti-trust case against Apple, a relatively minor player in the books business instead of Amazon.

It wasn’t supposed to be this way. The Web’s supposed low barriers to entry would allow a very competitive landscape, but it hasn’t turned out that way. In search we have a monopolist in Google. In smartphone operating systems we have a duopoly in Apple and Google. And we soon might have a near monopolist in Broadband in Comcast and certainly a duopoly in mobile phone service in AT&T and Verizon. It turns out the Internet is very good a creating “winner takes all” scenarios. Continue reading

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WT-Friday

Johnny Manziel

Johnny Manziel

Johnny Humble

There was a point about two hours into last night’s NFL Draft where the supremely arrogant Johnny Manziel seemed like the kid that no one wanted to pick for their kickball team. After the 20th pick had gone by and Johnny was still in the corner drinking his water bottle I wondered if he was going be like Christine Lahti who was on a bathroom break when it was announced she won the Golden Globe. He was eventually picked by the Cleveland Browns and he came on stage with his usual “show me the money” bravado, but I doubt the money will be quite as much as if he had been picked number one instead of number 22.

Dr. Dre

Dr. Dre

Apple-Beats

For the life of me, I can’t figure out why Apple would spend $3 Billion to buy Beats. Obviously I’m happy for Dre and Jimmy Iovine and I hope they continue to be so generous to USC. But Apple could easily make a much better headphone, as almost any real audio engineer will tell you that there are 20 headphones on the market with much better sound. What Beats does have is marketing, but after all that is something that Apple does better than almost anyone else. The folks over at Re-Code suggest the reason is for Beats streaming music service. But I Tunes Radio is already just as good as Beats and probably has more listeners. All this does is muddy the I Tunes brand message.Tim Cook, Apple’s CEO has been under a lot of pressure to spend his $150 Billion cash hoard, but this just seems like a panic move.

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