Sunday, October 30, 2016

Totally Growthed Out!

Look at the above chart (measured in trillions of dollars, corrected for inflation to 2010 dollars). Washington Post, October 24th. See anything missing from the older numbers? How about the two nations that have risen, respectively to second and third place in recent years: China (almost $10T today) and India (almost $6T)? By 2030, those numbers should drop to $23.9T for the United States (assuming that our political system remains intact), but rise to $18.8T for China and $7.3T for India. The U.S. will still be top but will hold a lesser number and share of the total, facing a very probable move to second position by 2050 as China continues to grow.
What is fascinating is how both China and India were mostly limping along throughout most of the 20th century. Until 1991, India blocked its currency and had highly exclusionary trade barriers, particularly making foreign investment there almost impossible. Until China was able to shake its Maoist form of communism, which began in the 1980s under Deng Xiaoping, it wasn’t even a participant in the global economy at any measurable level. These two Asian nations didn’t even make the list of top economies until the 1990s. But the 21st century became the era of the rise of China and India to the highest levels of global impact.
While no one is saying that poverty is anywhere near eliminated in these two economic superpowers, and while the per capita numbers still push the United States way on top, the ultimate economic reforms, still very much underway in both nations, have lifted well over a billion people out of dire poverty and added hundreds of millions of people to the middle class. Meanwhile, Western powers are beginning to stagnate, burdened with aging infrastructure and a need to update and improve educational standard or risk being completely eclipsed by new Asian educational systems built to compete at the highest levels.
It is no wonder then that those in the developing world are beginning to believe that old world democracies – represented heavily by Europe and the United States – can no longer deliver the kind of economic growth that a centrally-directed economic power that calls the shots without much regard for the opposition. To many in the third world, they believe that this reality gives the People’s Republic of China the edge over India, which still seems to trip over itself in internecine political wrangling within its own democratic institutions. This, many in the developing world believe, is why they think China is a better-constructed power. And China is solidly under the control of a very-much-in-power strongman with a powerful “China first” mandate. Xi Jinping.
As Americans continue to lose faith in their own governmental institutions, the newest populist movement in the United States is clearly one that eschews basic constitutional limits and protections, arguing for restrictions on religious groups, mass deportations and increased open rules on gun ownership. Instead of focusing on achieving balance and compromise, the new trends in the United States seem to reflect this global trend toward centralized and rather blanket political power resting with a “strongman” at the helm… to solve the perceived failings of government.
While Donald Trump doesn’t look like he is going to score this time around, many argue that his strongman-arguments resonated with the majority of voters; it was only his deeply-flawed character that will cost him the presidency. He seems to have 40% popular support no matter the final results of the election. Is this where we are headed? Are we ourselves gravitating toward a centralized government… like China… and away from democracy?
A strongman philosophy in the United States is a fundamental rejection of the American model. We are even undermining the efficacy of democracy as viable in the 21st century. If even America is rejecting that path, this does suggest that we’re not much in the way of a model for those nations evolving their own futures. But China, with growth rates well over 6%, seems to be a shining beacon.
Justice David Souter, retired Supreme Court justice, has been listening to our election rhetoric… fearing that Trump’s suggested form of government, which rests on civic ignorance of democratic principles, is a much greater threat to our survival as a free and democratic nation than any extrinsic threats from overseas: “What I worry about is, when problems are not addressed and the people do not know who is responsible … some one person will come forward and say, ‘Give me total power and I will solve this problem,’” he said. “That is how the Roman Republic fell… That is the way democracy dies…”, October 24th.
The ancient Roman model elevated one Senator as a dictator to lead the empire in times of crises, with the notion that once the crises subsided, he would return to retake that Senate seat. They never did. They were called “Caesar” and simply held onto that autocratic power until they were usurped or simply died. Roman unraveled under this model. To Souter, the mere rise of such a “strongman” is a historical lesson for the beginning of the end for the form of any government that has positioned such an individual at the top with extraordinary and extra-constitutional powers.
If one were to pick governments by growth numbers, the U.S. cannot compete. We are a mature economy where GDP growth rates between 2% and 4% are more than satisfactory, and even a fall to lower than 2% isn’t the end of the world. We do not have the hundreds of millions of impoverished citizens yet left to elevate to create growth rates such as those in either India or China. So comparing growth rates between a very-well-developed economy and those of a developing economy would indeed be comparing apples and oranges.
And trust me, all is not a bed of roses for either China or India, where corruption and pollution could bring either nation to a grinding and bitter slowdown or even a reversal. “At the same time, China and India remain at the heart of profound global challenges: Both nations are grappling with the disastrous effects their economic ascent is having on the environment and will also account for some of Asia's most staggering rates of income inequality.” Washington Post.
The popularity of a “strongman” solution for American ailments is a terrible sign for the survivability of the United States as a single, powerful free nation. Should that political philosophy ever be implemented here, we can expect the country to shatter and break up into component nations… most likely with significant bloodshed. Not only can it happen here; it has happened here. If this new Civil War were to occur, the world will also experience an economic disruption that will make our last recession look like a little global sneeze.
I’m Peter Dekom, and until Americans start prioritizing compromise and putting America first (really, not just words), that existential threat to us all increases in probability every day.

Saturday, October 29, 2016

Affixed in Their Minds

This has been a fascinating presidential election, if not way too much too long, by any measure. Both candidates have evidenced some major flaws, testing veracity and character – suggesting everything from simple narcissism to sociopathology. My own astonishment, shared by a majority of those on earth who are paying attention, is how the United States has elevated a third-world-like strongman with severe and obvious serious character flaws riding a wave of misinformation (the ratio of fact-checking “inaccuracies” show that 80% of those misstatements came from Donald Trump and 20% from Hillary Clinton) to be the top-of-the-ticket for one of the two biggest political parties in the United States. Donald J Trump, a man with zero government working experience.
Obviously, his populism resonates with blue collar workers whose jobs have been outsourced, automated or rendered obsolete/over-priced by a global marketplace. It reflects a growing paranoia at global terrorism and perceived economic imbalances blamed on undocumented immigration and “unfair” trade agreements. There is a fear of change of moral values from white Protestant rural values slowly being superseded by once-designated minorities who are rapidly becoming the new majority. The thought of liberal judges in the federal court system, sure to undermine those traditional values, is another hot button… and out-and-out hatred of Hillary Clinton.
That’s politics, even if the underlying assumptions are simply wrong. Assume environmental and safety regulations are vaporized. Does anyone really think that coal miners, whose jobs have been steadily dwindling since the 1920s, are suddenly going to convince the global markets to give up much cheaper and much cleaner natural gas and opt for costly coal as the fossil fuel of choice for power generation? Really believe that if we raise trade barriers, which will send consumer prices through the roof, we are going to make life better for most of us? Do we believe that if we get rid of undocumented workers doing those menial jobs at the bottom of the economic ladder, there were will more and better jobs for the rest of us and that consumer prices will stay the same? Think cutting taxes for the rich will create good jobs? Look at poor Kansas that tried this tact. Still, all political rhetoric.
But what really fascinates me is how folks with purportedly deep conservative Christian values or what we believe are reasonably-educated American citizens can maintain support for a candidate with the deepest character flaws reported in the history of American presidential election politics whose entire campaign is predicated on “facts” that really do not exist. How do we explain these anomalies?
Bobby Azarian, with a PhD in psychology, attempts to fill in the blanks in his September 13th article (The Psychology Behind Donald Trump's Unwavering Support) in Psychology Today. Here are some of his explanations:
1.    Some believe that many of those who support Donald Trump do so because of ignorance — basically they are under-informed or misinformed about the issues at hand. When Trump tells them that crime is skyrocketing in the United States, or that the economy is the worst it’s ever been, they simply take his word for it.
The seemingly obvious solution would be to try to reach those people through political ads, expert opinions, and logical arguments that educate with facts. Except none of those things seem to be swaying any Trump supporters from his side, despite great efforts to deliver this information to them directly.
The Dunning-Kruger effect [emphasis added] explains that the problem isn’t just that they are misinformed; it’s that they are completely unaware that they are misinformed. This creates a double burden.
Studies have shown that people who lack expertise in some area of knowledge often have a cognitive bias that prevents them from realizing that they lack expertise. As psychologist David Dunning puts it in an op-ed for Politico, “The knowledge and intelligence that are required to be good at a task are often the same qualities needed to recognize that one is not good at that task — and if one lacks such knowledge and intelligence, one remains ignorant that one is not good at the task. This includes political judgment.” Essentially, they’re not smart enough to realize they’re dumb.
And if one is under the illusion that they have sufficient or even superior knowledge, then they have no reason to defer to anyone else’s judgment. This helps explain why even nonpartisan experts — like military generals and Independent former Mayor of New York/billionaire CEO Michael Bloomberg — as well as some respected Republican politicians, don’t seem to be able to say anything that can change the minds of loyal Trump followers.
My little additional observation: “News” organizations, in a race for ratings and advertising/subscriber dollars, have capitalized on this phenomenon to reinforce the disinformation, reinforcing this race to ignorance. Left and right. With excessive volumes of information literally deluging the electorate, too many have elected to filter out any information that might be inconvenient or that corrects their belief platform. They can then point to these media sources as the justifiable basis for their beliefs.
2.    Science has unequivocally shown that the conservative brain has an exaggerated fear response when faced with stimuli that may be perceived as threatening. A 2008 study in the journal Science found that conservatives have a stronger physiological reaction to startling noises and graphic images compared to liberals. A brain-imaging study published in Current Biology revealed that those who lean right politically tend to have a larger amygdala — a structure that is electrically active during states of fear and anxiety….
So how does this help explain the unbridled loyalty of Trump supporters? These brain responses are automatic, and not influenced by logic or reason. As long as Trump continues his fear mongering by constantly portraying Muslims and Mexican immigrants as imminent dangers, many conservative brains will involuntarily light up like light bulbs being controlled by a switch. Fear keeps his followers energized and focused on safety. And when you think you’ve found your protector, you become less concerned with remarks that would normally be seen as highly offensive.   
3.    [Terror Management Theory] is based on the fact that humans have a unique awareness of their own mortality. The inevitably of one’s death creates existential terror and anxiety that is always residing below the surface. In order to manage this terror, humans adopt cultural worldviews — like religions, political ideologies, and national identities — that act as a buffer by instilling life with meaning and value.
[The theory] predicts that when people are reminded of their own mortality, which happens with fear mongering, they will more strongly defend those who share their worldviews and national or ethnic identity, and act out more aggressively towards those who do not. Hundreds of studies have confirmed this hypothesis, and some have specifically shown that triggering thoughts of death tends to shift people towards the right.
Not only do death reminders increase nationalism, they influence actual voting habits in favor of more conservative presidential candidates. And more disturbingly, in a study with American students, scientists found that making mortality salient increased support for extreme military interventions by American forces that could kill thousands of civilians overseas. Interestingly, the effect was present only in conservatives, which can likely be attributed to their heightened fear response.
By constantly emphasizing existential threat, Trump creates a psychological condition that makes the brain respond positively rather than negatively to bigoted statements and divisive rhetoric. Liberals and Independents who have been puzzled over why Trump hasn’t lost supporters after such highly offensive comments need look no further than Terror Management Theory.
4.    [Donald Trump’s ability to present his position in an entertaining manner while Hillary Clinton makes traditional and often boring political speeches.] According to a recent study that monitored brain activity while participants watched 40 minutes of political ads and debate clips from the presidential candidates, Donald Trump is unique in his ability to keep the brain engaged. While Hillary Clinton could only hold attention for so long, Trump kept both attention and emotional arousal high throughout the viewing session. This pattern of activity was seen even when Trump made remarks that individuals didn’t necessarily agree with. His showmanship and simple messages clearly resonate at a visceral level.  
Essentially, the loyalty of Trump supporters may in part be explained by America’s addiction with entertainment and reality TV. To some, it doesn’t matter what Trump actually says because he’s so amusing to watch. With Donald, you are always left wondering what outrageous thing he is going to say or do next. He keeps us on the edge of our seat, and for that reason, some Trump supporters will forgive anything he says. They are happy as long as they are kept entertained.  
Donald Trump is a highly effective speaker, gets those little hooks into his constituency that defy traditional political analysis, and reaches deeply into the psyche of those predisposed to his style of rhetoric. The problem, it seems, is that such a large number of Americans have come to accept this political populist style as the “new normal.” This is not likely a one-off shift in political campaigning, and we are going to have to explain to our own children why these patterns of lying, bullying, intolerance and personal assaults are okay in politics but unacceptable to the rest of us for a long, long time.
I’m Peter Dekom, and is this change in American “politics as usual” more of an existential threat to us than the real terrorists who want to destroy the West and its values?

Thursday, October 27, 2016

Steakholders vs. Stakeholders

As any lawyer will tell you, the managers and directors of an American corporation owe a fiduciary duty – meaning a much higher level of loyalty, priority and commitment – to the shareholders. Not to the general public, only to customers to the extent it generates business for the shareholders, not to employees and most certainly not to any governmental entity. The managers and directors are there to grow the corporation and ultimately to deliver the highest level of sustainable profitability they can to those lucky shareholders. Shareholders come first.
Duties to those “other” non-shareholder players are created either by what makes more money for the shareholders or by law. There is no duty not to pollute, avoid fraudulent consumer practices, pay a fair share of taxes or a duty not to cut corners… except as may imposed by common or statutory law or regulations issued by legally empowered governmental agencies.
Unless you get more customers from that warm and fuzzy feeling of doing the right thing, there is absolutely no business reason to clean up toxic emissions or keep working conditions safe for your employees. If you can pollute and save money on pollution control systems, a prudent corporate CEO would not make his/her company’s price go up to pay for those environmental scrubbers unless (a) forced to by law and (b) knowing that competitors would be forced to pay for the same environmental scrubbers. Keeps the playing field level. That might be good for society, but make shareholders pay for equipment that reduces profits goes squarely against that mandate to make money at all costs. Unless they have no choice.
You can read tons of statutes, regulations and cases that examine what a director or manager of a corporation is legally obligated to do vis-à-vis shareholders. And while there is reasonable discretion as how to get there, within the bounds of law and regulation, this duty to shareholders is the absolute mandate for corporate decision-making. It is precisely how corporate obligations fit into the general schema we call “capitalism.”
It is also why there are guffaws and giggles from the legal community when industries say – loudly – “trust us” to engage in self-regulation. And where trade associations indeed come up with at least some level of standards to be applied by their member companies, the existence of such transcorporate bodies is primarily an effort to preclude much stronger direct governmental regulation.
This driving and seemingly immutable director/manager obligation to shareholders is one of the greatest contributing causes of companies going rogue – from Duke Energy decimating a major North Carolina river from massive pollution flows to unprecedented levels of income inequality to the Great Recession itself from unbridled greed without the slightest concern about society, the world or what is right or moral under any moral code I know – under this misguided and singular focus on shareholder values.
A recent book – Re-Imagining Capitalism (Oxford University Press), a compendium of articles edited by Dominic Barton, Dezso Horvath & Mattias Kipping – presents a possible going-forward “fix” to end a legal structure that not only allows such anti-social values to perpetuate but perhaps even mandates that they continue. Instead of mandating that “holy profit” fiduciary duty to shareholders, the authors argue, with much justification, for a duty instead to all of the relevant “stakeholders.” And trust me, defining who the “stakeholders” should be is anything but simple.
Nevertheless, in a modern and complex society, capitalism based on a blind commitment to shareholders without carefully weighing all relevant interests is decreasingly tenable. Wikipedia summarizes the new theory this way: “In the traditional view of a company, the shareholder view, only the owners or shareholders of the company are important, and the company has a binding fiduciary duty to put their needs first, to increase value for them. Stakeholder theory instead argues that there are other parties involved, including employees, customers, suppliers, financiers, communities, governmental bodies, political groups, trade associations, and trade unions. Even competitors are sometimes counted as stakeholders – their status being derived from their capacity to affect the firm and its stakeholders.” We are watching these new stakeholder schemes taking hold in countries like Switzerland and Sweden with growing effectiveness.
Indeed the rather stunning growth of global populism, from the Trump phenomenon (without the sexually explicit recording) here in the US to Brexit across the Atlantic, it is very clear that there are a growing number of people who simply think the existing systems are beyond corrupt and causing many more problems than they solve, accelerating income inequality even faster. “With articles contributed by well-known business leaders, the book is intended to acknowledge and address what the authors call ‘a growing public distrust of capitalism and its ability to improve wealth and well-being for the many.’
“‘Whichever direction capitalism ends up taking, it is increasingly apparent that the narrow shareholder model is being gradually eclipsed by a model that is more closely attuned to the complexity and diversity of the world we live in — a model that is more stakeholder-oriented and more guided by principles of long-term value creation and sustainability,’ says the book in a concluding chapter written by Horvath and Barton…
“As usual with great theoretical analysis, the hard part is making the transition. We can't snap our fingers and turn Canada [or the US] into Switzerland or Sweden. But what the new book's analysis shows is that keeping minimum wages low and letting the rich get very rich is not a necessity for business success. In fact, says Horvath, quite the opposite.”, October 7th.
While Europe and Canada might have an easier time of making this possible change – citizens there trust government far more than private enterprise – the growing distrust of government in the United States might just preclude this rather obvious (and to me, necessary) change here in the United States… even though I feel we need that change far more than do Canada and Europe. But I believe that we need to perform a top-down reformation of our corporate laws anyway – as the revealing Panama Papers strongly suggest – and moving to a new, defined stakeholder legal mandate is one very good place to start.
I’m Peter Dekom, and when an older system stops working in a new and modern world, it’s time to reform, modify and change that system accordingly.

Tuesday, October 25, 2016

Great Barrier Madness – R.I.P.

Change is the only constant. Virtually nothing in our world will remain the same forever, even the existence of world itself. Some change is for the better. Some is neutral and some is worse. Some of that change for the worse is avoidable. Depends on what matters to you and to society at large. But it does seem important to monitor those most significant events that tell us how vulnerable our planet is based on clearly measurable facts. That so much of that measurement occurs in less-than-obviously-observable places often makes those who deny damage certain they are right. But they never are. Facts as simply facts. Opinions, well, that’s where the trouble starts… often in a discussion of causation beyond simple denial.
So when the October 11th outdoor activity enthusiast magazine, Outside (and, published a rather startling obituary, I took notice:
The Great Barrier Reef of Australia passed away in 2016 after a long illness. It was 25 million years old.
For most of its life, the reef was the world’s largest living structure, and the only one visible from space. It was 1,400 miles long, with 2,900 individual reefs and 1,050 islands. In total area, it was larger than the United Kingdom, and it contained more biodiversity than all of Europe combined. It harbored 1,625 species of fish, 3,000 species of mollusk, 450 species of coral, 220 species of birds, and 30 species of whales and dolphins. Among its many other achievements, the reef was home to one of the world’s largest populations of dugong and the largest breeding ground of green turtles. 
The reef was born on the eastern coast of the continent of Australia during the Miocene epoch. Its first 24.99 million years were seemingly happy ones, marked by overall growth. It was formed by corals, which are tiny anemone-like animals that secrete shell to form colonies of millions of individuals. Its complex, sheltered structure came to comprise the most important habitat in the ocean. As sea levels rose and fell through the ages, the reef built itself into a vast labyrinth of shallow-water reefs and atolls extending 140 miles off the Australian coast and ending in an outer wall that plunged half a mile into the abyss. With such extraordinary diversity of life and landscape, it provided some of the most thrilling marine adventures on earth to humans who visited. Its otherworldly colors and patterns will be sorely missed…
In 1981, the same year that UNESCO designated the reef a World Heritage Site and called it ‘the most impressive marine area in the world,’ it experienced its first mass-bleaching incident. Corals derive their astonishing colors, and much of their nourishment, from symbiotic algae that live on their surfaces. The algae photosynthesize and make sugars, which the corals feed on. But when temperatures rise too high, the algae produce too much oxygen, which is toxic in high concentrations, and the corals must eject their algae to survive. Without the algae, the corals turn bone white and begin to starve. If water temperatures soon return to normal, the corals can recruit new algae and recover, but if not, they will die in months. In 1981, water temperatures soared, two-thirds of the coral in the inner portions of the reef bleached, and scientists began to suspect that climate change threatened coral reefs in ways that no marine park could prevent.
“By the turn of the millennium, mass bleachings were common. The winter of 1997–98 brought the next big one, followed by an even more severe one in 2001–02, and another whopper in 2005–06. By then, it was apparent that warming water was not the only threat brought by climate change. As the oceans absorbed more carbon from the atmosphere, they became more acidic, and that acid was beginning to dissolve the living reef itself…
No one knows if a serious effort could have saved the reef, but it is clear that no such effort was made. On the contrary, attempts to call attention to the reef’s plight were thwarted by the government of Australia itself, which in 2016, shortly after approving the largest coal mine in its history, successfully pressured the United Nations to remove a chapter about the reef from a report on the impact of climate change on World Heritage sites. Australia’s Department of the Environment explained the move by saying, ‘experience had shown that negative comments about the status of World Heritage-listed properties impacted on tourism.’ In other words, if you tell people the reef is dying, they might stop coming.
By then, the reef was in the midst of the most catastrophic bleaching event in its history, from which it would never recover. As much as 50 percent of the coral in the warmer, northern part of the reef died. ‘The whole northern section is trashed,’ Veron told Australia’s Saturday Paper. ‘It looks like a war zone. It’s heartbreaking.’ With no force on earth capable of preventing the oceans from continuing to warm and acidify for centuries to come, Veron had no illusions about the future. ‘I used to have the best job in the world. Now it’s turned sour... I’m 71 years old now, and I think I may outlive the reef.’
The Great Barrier Reef was predeceased by the South Pacific’s Coral Triangle, the Florida Reef off the Florida Keys, and most other coral reefs on earth. It is survived by the remnants of the Belize Barrier Reef and some deepwater corals.
In lieu of flowers, donations can be made to Ocean Ark Alliance.
We are all diminished by the loss… and every other such preventable loss.  Does it matter to you? It should.
I’m Peter Dekom, and as long as we sit idly by and let such horribles happen without screaming, we are part of the problem.