Inauguration Day Brings Wind of Change

BOULDER, Colorado -- We have recently been criticized for not writing enough about Russia, instead focusing our attention on such trivial matters as the global recession, America's trade deficit, and the dwindling squirrel population. But this is a special day for America, and I don't want to talk about basket case countries where oratory skills are measured by how much you can sound like a KGB thug.

The theme of this year's election - and the new administration - is "change." By coincidence, it so happens that one of the most popular songs in Russia, both today and 20 years ago when it was released, is all about change. So please enjoy this classic song from the German supergroup, The Scorpions:



As Itchy noted, if Barack Obama were Russian, these guys would be headlining his inaugural concert.

Obama's 10 Greatest Transition Disappointments

NEW YORK, New York -- Barack Obama is to be sworn in tomorrow (make that today -- it's early, early in the morning now), and this is a good thing.

I put in a few weekends of hectoring sometimes-hostile Pennsylvanians to do my part to get Obama elected. I am fully, fully convinced that America picked the best of all the candidates running at any point in this election. And I'm cautiously encouraged that something like 75% of Americans now support Obama, a show of moving national unity.

But at the same time, in the past two months the coverage of Obama has been almost worryingly positive. From time to time, it seems almost to justify Fouad Ajami, who wrote days before the election that the messiah-like status Obama can be argued to have taken on was somehow un-American, that it was more evocative of the Middle East he grew up in during the 50s and 60s. That region then dipped from one would-be redeemer Arab nationalist to another, with Egyptians and others taken with the charisma of men like Nasser and duped wild dreams of what they might do for them. The unspoken connection is that the American people should be more self-reliant than to look for deliverance -- economic, social, or otherwise -- from a politician.

Sing, Muse

Mr. Ajami's probably overstating the case a bit -- great hopes do ride on President-elect Obama, arguably too great, but in times of great difficulty, the public has swooned for Roosevelts (T. and F.D.), Washington, Jefferson, Jackson, Lincoln and (here's looking at you, Alex P. Keaton) even Reagan. Nonetheless, I think the Legionnaire and I, though openly supportive of Obama, will gladly take up Mr. Ajami's challenge and do Tocqueville some justice. It's exactly when someone's popularity is at its height that we must be most vigilant (as Alan Greenspan failed so stupendously to realize).

So we'd like to christen the Obama presidency with a list of the Obama Transition's Top 10 Disappointments:

10. Inexperienced military man may head NASA: At a moment when the existence and success of NASA hang in the balance as seldom in the last 45 years: with the emergence of a host of wannabe space powers (China, India, Japan and Europe), with both Russia and China outwitting the US in gaining valuable commercial business (not to mention international goodwill and dependencies) in launching satellites, warnings of a "perishable" American lead in space, and with NASA riven by infighting and soon to be reliant on Russian rockets as it retires the shuttle and dithers about what comes next while the military and intelligence services want a piece of NASA -- at a moment, in short, when NASA can either become a better-funded organization by expanding a mandate to work commercially and internationally or grow more inward and militarily focused -- Obama is reported to have chosen Major General Jonathan Scott Gration, a lifelong military man with no experience at NASA. We don't need military thinking or unfamiliarity with space and rocket science here. Not now. Mr. Obama, America hopes these rumors are unfounded. Pick a capitalist-minded NASA man or scientist.

9. Wall street donor with no car experience may be car czar: Steve Rattner, head of private equity firm Quadrangle and a big-time Democratic donor, is rumored to be tapped to be Obama's "car czar."

Rattner has no experience -- as in ZERO experience -- in the automobile or manufacturing industries. Manufacturing is still about 15% of the US economy, and auto is its crown. And, given the fall of finance and the unsustainable trade deficits facing us, manufacturing and auto-making will only grow in importance, if we're lucky. Now, if you're going to put one person almost singlehandedly in charge of rebuilding the auto industry and the billions in government money that will take (and already has taken), wouldn't it be nice if his experience went beyond buying up movie studios and being part of the leverage orgy that got us into this mess, as Slate asks? Even the normally stoic Bloomberg thinks Rattner would be a disaster. Not to mention that Detroit will be automatically suspicious and resentful of any Wall Streeter who comes in telling them why they don't know their own trade. Obama, you're a masterful politician. Think like one here.

8. Obama nominee for Secretary of Agriculture, Tom Vilsack: This is a place where Obama has failed to bring change to a post that was ripe for it. (It's also one of three traditionally neglected Cabinet posts that should have become as important as they deserve to be but continue to be neglected. See below for the other two.)

Why is the Agriculture Department ripe for change? Well, although many voices from the center, south and west of the United States are always vigilant about any government interference in any aspect of life, many of the residents and businesses of these regions benefit from the most egregious warpings of free trade and government interference that, if it were transposed to television (by better funding, say, a PBS science-focused network to finally offer people smart science programming where the Discovery Channel and Discovery Science have so failed) would create outrage in these very constituencies.

Three areas of the economy that we allow government to run roughshod over are infrastructure, which is normally publicly owned but might be better served by public-private partnerships; water, which is wastefully used in the West, where rivers and lakes are dying because of a publicly subsized thirst for precious water resources by farms and unsustainable cities (what privately owned water utility would ever give Las Vegas golf courses water?); and agriculture, the biggest source of market-distorting government subsidies in America, and one of the biggest WTO complaints against the US.

Additionally, the Department of Agriculture has for years been little more than a lobby for big industrial farming conglomerates. They're given handouts of cash and allowed to run almost unregulated. While America's farms are one of its largest sources of exports and the most productive food-producing concerns in the world, the big industry farms that dominate sales are incredibly wasteful, feed people unhealthy food, and are actually one of the most socialist industries in the country.

As Nicholas Kristof said last month, when more than one-third of Americans were farmers 100 years ago, the Agriculture Department made sense. Today, when fewer than 2% of Americans farm, it doesn't. What we all do, however, is consume food; and broadening and restoring the Agriculture Department into a Food Department would have been the true "change" play.

An interesting pick -- though no doubt a problematic one given his lack of managing a large organization -- would have been the writer Michael Pollan, who has also spoken of the need to shift the Ag Dept into the Food Dept.

So why doesn't Tom Vilsack appear to be on the cusp of reforming the Agricultural Department in 21st-century America's image?

Well, Vilsack is a major supporter of arguably the dumbest use of farmland ever to be implemented outside the Soviet Union or Maoist China: corn ethanol.

Additionally, Vilsack has proven himself to be a staunch defender of genetically modified food, which, while extremely profitable, cooler heads might argue should be treated skeptically until the jury has definitively spoken in favor of its safety.

Finally, and perhaps the most nakedly disturbingly, Vilsack has directly benefited from the US's agricultural subsidies to the tune of $40K+. Why did this not come up during his hearing, where, as the LA Times reports, he "sailed through" apparently promising ever more ill-conceived subsidies?

7. Obama nominee for Secretary of the Interior, Ken Salazar: OK, this isn't just another department that's traditionally treated as unimportant. It's an unbridled wreck. It's 10,000 times more corrupt than Agriculture. For crying out loud, it's so corrupt that there was barely a stir when it was revealed that Interior officials were taking drugs and sex from the oil companies they allegedly regulate.

It's gotta be hard not to improve this beast, right? I'd say so, but Salazar seems like a pretty crappy pick -- and it's not (just) the annoying cowboy hat. As the Legionnaire is out in Salazar's home state of Colorado, I'll let him speak at greater length if he chooses. But, given the mandate of the Interior Department to protect the United States' flora and fauna -- as it was envisioned by conservationist-extraordinaire Teddy Roosevelt -- it's quite disheartening, for starters, that Salazar threatened in the 1990s to sue the Interior Dept if it put the black-tailed prairie dog on the Endangered Species List.

But much more importantly, as the New York Times reported last month, Salazar appears to be a pushover harlot to mining and fossil fuels interests (just like almost all Interior Secretaries -- why the F&$# can't any president name a competent, serious person to this post who does what the job entails rather than fully undermine it? If nobody else wants it, give it to me).

Salazar has pushed for legislation to make it difficult to sue mining concerns and to allow oil and gas drilling in Colorado. His statements about the misguided notion of "energy independence" absolutely miss the mark as we thought only Sarah Palin could. Salazar thinks it somehow helps the US if we drill more oil, failing to realize that 1) US oil peaked in 1973 and will never again be a majority of the oil we use; 2) oil is fungible, so when the US drills more and uses more, it pushes up prices on the world market, enriching Iran and Venezuela; 3) fossil fuels cause global warming and while we all would like to live in Palm Springs, this is a bad thing.

The answer, of course, is to seek energy independence via alternative fuels. But that's too nuanced, perhaps, for Senator Salazar. Anyway, we'll shut up now and let his colleagues speak for him.

Luke Popovich, spokesman for the National Mining Association, released this statement upon Salazar's nomination: “Nothing in his record suggests he’s an ideologue. Here’s a man who understands the issues, is open-minded and can see at least two sides of an issue.”

Daniel Patterson, a former official in the Interior Dept's Bureau of Land Management and current Colorado legislator: “Salazar has a disturbingly weak conservation record, particularly on energy development, global warming, endangered wildlife and protecting scientific integrity. It’s no surprise oil and gas, mining, agribusiness and other polluting industries that have dominated Interior are supporting rancher Salazar — he’s their friend.”

6. Naming Leon Panetta to head the CIA: This is pretty well-publicized. His lack of experience seems galling for someone at so important an agency. Panetta has his supporters, and he may well turn out to be an inspired pick. But he's on the list (and at #6) because if it doesn't go well, it'll be a disaster. Playing with the CIA is like playing with matches.




5. The fifth columnism of Obama nominee for Secretary of Energy Steven Chu: As chronicled in an earlier Walter Duranty post from January 15. Never good when accomplished scientists start saying they support "clean coal." Or the Tooth Fairy.





4. Obama's choice of mega-pastor Rick Warren to provide his inaugural invocation: Not only is this bloated televangelist a vehement homophobe, but as the also-bloated Christopher Hitchens notes, he's got a touch of the anti-Semite to him as well as the anti-Mormon. And he propagates the black-and-white anti-evolution views that retard the development of science and generate hostility to modernity in America.

Maybe you don't like gays, Jews, Mormons, or nerds. But can you really say that someone who openly disdains all of them should be giving the invocation at the inauguration of the president who seeks to represent the inclusiveness of America and govern for the entire nation?

Let's keep this short. Barack, WTF?

3. Amnesty for Bush: This seems like a simple one. We were lied into a war. There should be a truth panel for this (see Yale Law's Professor Jack Balkin for more). And if crimes are revealed, nobody can ever be above the law, as Paul Krugman argues here and Dalia Lithwick here.





2. Obama nominee for Secretary of Transportation, Ray LaHood: This is indeed the #2 greatest disappointment.

The Transportation Department has traditionally been a back-burner agency (the third one, as mentioned above). Perhaps that's why our country is unparalleled in the developed (and much of the developing) world in its astouding lack of mass-transit options. There is, effectively, no commercial train travel, depriving regional economies (the Northeast, Mid-Atlantic, Florida, Midwest, California, Northwest all could benefit) of a powerful engine of commerce and trade. Subways in big cities are underfunded and disgusting. Almost nowhere can you take good public transit to the airport. Airports and ports are a mess.

Things need to get done, in short. Transformative transportation policies could be a major driver of US business. The kind of US business that isn't selling Chinese crap at Wal-Mart, outsourcing banking jobs to Mumbai, or giving people NINJA mortgages. The kind of business we need if we want to revive the economy in the long-term. Investing in mass transit would improve the economy's efficiencies and logistics to the tune of hundreds of billions of dollars; encourage and grow regionally based economies; and create demand for high-tech, expensive products like trains and light-rail that would be best made in Detroit.

Moreover, moving from highways to transit-based infrastructure would create huge demand for transit-oriented development. Just as the exurbs empty as a result of the financial crisis, gasoline volatility, increasing traffic congestion and aging Boomers looking to scale down their homes as well as younger people wanting to live out the urban "Seinfeld" life, there's a huge opportunity to build new, dense communities around new transit hubs: rail, light-rail, and subway -- a construction trend which could help house prices find a bottom, or at the least create construction jobs. With all these opportunities to make transit transform, and as the guy who'll have a big part in doling out the tens of billions of stimulus bucks marked for infrastructure, the transportation secretary should be an important player.

Enter Ray LaHood, a second-tier House Republican known for being a friend of Obama. Oh, and for being a notorious earmarker, as the Legionnaire recently noted. Indeed, LaHood has taken many contributions from paving companies (aka the mob), exactly the kind of 1950s infrastructure we need to move away from. And, as the Post reports, he's gone hat in hand for federal money to provide hundreds of thousands to a local Illinois cemetery to repave its paths. Hmm. Sounds like we have Jimmy Hoffa for Transportation (and they look slightly alike too).

So is this the guy who's going to be able to direct public and private partnerships toward building a comprehensive national high-speed train network? Dramatically expand light rail and transit-oriented development to reconfigure decades of suburban sprawl across the country? The person who will fix the chronic airport backlogs and plane delays? Fix Mike "Heck of a Job, Brownie" Brown's destruction of FEMA?

I somehow doubt it. (So do The New Republic and the cutting-edge media crew at Worldchanging.) No need to pick a token Republican when there's real work to be done at the Dept of Transportation. Time will tell what LaHood is able to do, but there's real work to be done and this guy is part of the congressional establishment that for years hasn't done a damn thing.

1. The stimulus package is shaping up to be a non-stimulating raft of rebate checks for people who won't spend them: This one deserves its own post (yes, again). We'll save it for Inauguration Day.

Pets or Meat II: The New Squirrel Economy

BOULDER, Colorado -- As our country spirals deeper into recession, the delicacies that we have enjoyed over these past fat generations may be beyond our reach - beef, pork, even the lowly chicken. Instead, Americans will come to rely on small woodland rodents for their protein, and if we're lucky, we can have a horse meat steak on Christmas.

But it appears as if the foodstuff of the future is in jeopardy. Up and down the east coast, acorns have vanished, and the squirrels that depend on them are dying off in large numbers. As you can see in my neighborhood, the squirrels have resorted to eating bagels.

The squirrel population is dwindling, but so are our resources to catch them. At least, that is according to the crazy customers in the gun store where my brother works; they are all convinced that Barack Obama is poised to strip us of our right to bear arms. So, when our guns have been taken away, and the few remaining squirrels are our last hope for survival before we begin consuming the flesh of other humans, we must all learn to master the slingshot. And the master of the deadly art is Rufus Hussy of Ashboro, Indiana:



Thanks to Andrew for the video link.

Pictures from the National Western Stock Show

DENVER, Colorado -- During this year's interminable election season, the McCain campaign resurrected a quaint yet poisonous notion: that we live in two Americas, one of them "real," and one of them "fake." Well, this past weekend I found the real America, and it was at the National Western Stock Show, the country's largest cattle showcase that has been held at the Denver stock yards since 1906. This is the second year in a row that I have gone to the stock show, and I thought I would share some of my highlights from this year's event.


Below I have posted a video of the Hereford cattle auction we attended. The bull up for sale in the video - his name was Patton, and he hailed from the Double L Ranch in Hearne, TX - sold for $57,500, and that was just for a 50% stake in him. The consortium of buyers that bought the share ranged from Montana to Illinois to Texas, meaning this young bull (he was just over a year old) will log a lot of miles traveling across the country to stud.



I found the auctioneer's voice mesmerizing, and it reminded me a lot of some sort of Central Asian throat singing. In addition to selling bulls and cows, embryos and sperm - as well as partial shares of them - were up for auction. Genetics and scientific breeding are a major part of modern animal husbandry, but it is still fascinating to see people buying and selling genetic material and advertising their animals' sexual functions. The stock yards are plastered with fliers advertising animals and their impeccable genetics, like the "Face of Change" pictured above. Another bull up for sale at the same auction carried this description in auction booklet:

861U is a fantastic prospect for the future! He is very easy fleshing with a huge hindquarter and powerful muscle from end to end. He is very sound with 100% pigment and a large scrotum. His dam [mother] is a very efficient, productive and fertile cow with an excellent udder.

Very few animals are actually sold at the stock show. Most farmers come to Denver simply to show off their livestock and have their pictures taken, in the hope that buyers will take notice of their product. People travel from as far away as New England simply to show off their cows. Obviously, they want their animals to look good, so washing and grooming is very important; often the result is cows that resemble show dogs instead of farm animals.


After the auction, we ended the day at the rodeo inside the Denver Coliseum. The competition was good, though there were a lot of "no times" in many events we saw on that particular evening. The slack (the entertainment in between the rodeo events), however, was fantastic. Mutton busting is easily my favorite rodeo event, when four- and five-year-old children are placed on the backs of frightened sheep and forced to hang on for dear life.


But the high point of the stock show, and perhaps this entire year for me, was definitely seeing a bunch of monkeys riding dogs and herding goats into a pen. I leave you with this amazing video:




The stock show runs until January 25.

Help Us Decide What to Do With Our Stimulus Checks

BOULDER, Colorado -- After the release of the economic stimulus plan proposed by Democrats in the House of Representatives, Republican Minority Leader John Boehner (it's pronounced "boner" - it really is, I promise) called the $825 billion dollar plan "disappointing."

Itchy and I are also very disappointed with this stimulus package, but probably for very different reasons than Rep. Boehner. We believe that Barack Obama and the Congress are squandering an opportunity to make this a transformational moment for the American economy. This watered-down proposal looks to be little more than a series of Reaganite tax cuts, porkbarrel road-paving projects (a side note: incoming transportation secretary Ray LaHood has very close ties to the paving industry in Illinois. Does anyone else realize that means he totally has connections to the mob?), and stupid refund checks.

As someone who does not make enough money to actually pay federal income tax, I resent the fact that government is going to send me a $500 check anyway. What about paying for all this new spending Obama has promised, like his renewable energy initiative, improving healthcare coverage, and investing in mass transit? We are tired of this populist pandering, so we are staging a protest. The government wants us to go out and spend those checks to "stimulate" the economy, but we are not going to do that.

Itchy wants to just put his in the bank, but I thought we could have some fun with the refund checks and ask our readers to decide for us what we should do with the $500. So, to the left of this posting you will find a poll of what we should do with that check that really isn't beneficial to the economy on the whole. Should the voting reach a reasonable quorum, I will do (I can't really speak for my partner) what the readers desire, and post the results here for all to see. Now, there is no guarantee that refund checks will be a part of the final legislative package, but if that day should come, here are a list of things I would rather do with $500 than put it towards a new Chrysler:

1. Put it in the bank
2. Bet it all at the dog track
3. Donate it to New York City's struggling MTA
4. Donate it to the Kalamazoo Promise, so some kids in Michigan can go to college
5. Give the money to whoever is running against America's Dumbest Senator, Richard Shelby (R-AL), in the next election
6. Donate it to a Palestinian relief organization
7. Have the check framed and never collect the money, like Rickey Henderson did with a $1 million bonus from the Oakland A's
8. Buy a plane ticket to Washington, DC, and try to strike a member of Congress in the face

So vote now and vote often, and once we get this awful, compromised bill made into law (and I get my dumb, wasteful check), I will let you know the results.

Pay Controls on Private Industries? Do We Get Color-Coded Cards to Determine Our Day Off?

NEW YORK, New York -- In a day when a plane crash-landed a few blocks from my office, the most interesting piece of news was not the fate of US Airways Flight 1549.

It was a plan to reform the finance and banking industry, put forth by former Federal Reserve Board chairman and Obama economic adviser Paul Volcker. (The plan can be accessed via a Washington Post article about it here.)


Mr. Volcker, don't overcorrect for Mr. Greenspan's failings

The plan calls for a number of regulations, but the most important and frightening is some sort of government control over executive pay. This idea, a populist measure meant to soothe the irate masses (but are they really so irate?), reeks of Bolshevism, and is the one regulation of the banking industry that I think could torpedo the economy. Here's why:

1. The banking industry, as fashionable as it currently is to despise it, has been one of the most successful segments of the US economy in recent years. In 2007, banking was responsible for 40% of all corporate profits (one of the major sources of individual wealth, along with inheritance and housing prices -- and we can forget about that one) in the US. And bankers love money. Telling them that Congress will determine their salaries is the one single measure that can actually have the effect of pushing huge amounts of money, jobs and brainpower to some unscrupulous hole like Abu Dubabi. So let's assume a migration of banking brains to Abu Dubabi. What happens? Well, Abu Dubabi has a huge new industry that we no longer do. And the same bankers doing trades there still have the same sway over the US economy. They'll still be buying shares and bonds in US markets. Finance is global; you can't wish it away or push it to another country -- nor should you.


The real threat to US businesses that politicians won't touch

I realize Congress wants to end the long run of inequality we've had and let other industries prosper. But there's no reason to cut off the nose to spite the face. Rather than punish the golden hen, why not take measures to make the less-successful industries more competitive (cough, cough, Chinese protectionism and dumping and our total lack of spine to stand up to that)?

2. Finance is essential for the normal workings of any other business. Car makers, farms and mom-and-pop stores all need loans from banks. The job of the financier is to determine who is the most creditworthy and deserves that loan -- in other words, to determine where the markets want money to go. Yes, bankers have screwed up recently, but that's not because they made loans to Target or Honda or John Deere. It's because they were trading derivatives that are a separate function of a bank altogether. Now, you tell bankers they can't by law make any more than some arbitrarily determined number, rather than what their own ability would have them earn, and nobody will want to be a banker. That puts us in a bind: I don't think we want C-students who are content with making $100,000 a year overseeing capital flows and determining what US businesses deserve to receive what amounts of money.

<-- He actually does us good

3. Limiting executive (or bankers') pay would remove one of the biggest draws of educated foreigners to the US. I know it's cool to hate on immigrants, but my God, people, that's what built (and builds) America. While you're playing Wii and feeling your friend with benefits' boob, immigrants are hard at work making money so you can find a job at Daddy's company.

4. This is just plain misguided. Regulation to make the industry less of a structural risk to the economy and push down indebtedness and sketchy credit default swaps is another question entirely; that's necessary, but it is most certainly not achieved by telling bankers that the law somehow prohibits them from making above some arbitrary number. If salaries are somehow a contributor to the problem (and they aren't compared with investors and the short-term profits they desire which put the long-term health of financial firms at risk) this is best addressed via stronger corporate governance, not congressionally mandated pay levels. Mandate independent boards of directors and forbid CEOs from serving on boards, then let enhanced corporate governance determine what a company itself wants to pay its employees, including executives.

5. Is this constitutional? I can't imagine on what constitutional grounds government can tell a private industry how much it can pay people. Why not have pay limits on lawyers, plastic surgeons, or people who lisp?

But here's a better idea: why not cap the salary of A-Rod and every other baseball player at $20,000. After all, as a monopoly, the MLB is regulated by Congress as well -- and unlike bankers they neither significantly effect the US economy nor produce anything that we've been able to export. Why the rage at bankers working 90-hour weeks year-round who make $2 million, but not at 22-year-old uneducated pitchers who make $28 million for playing a kid's game 6 months of the year, a few days a week? Let's give them mandated pay levels, too, and maybe Cuban players will stay in the Cuban leagues with their Raul Castro-mandated pay levels.

On another note, it's unbelievable how Congress (probably correctly) thinks the American people find it palatable to pay baseball players huge money to play a child's game but thinks the same American people can't stand a middle-aged, highly educated banker making much less. Do we really want Congress to make a law ensuring that the highest-paid Americans are steroid-soaked baseball players? Is that what we aspire to as a people? Hitting balls with sticks? It's an interesting philosophical/cultural/sociological point, and it's pretty damn messed up.

Lenin's rotting lips have probably curled into a smirk in the tomb. By the way, it was Lenin who gave workers color-coded cards to determine what day they would have off, since people should work on Sunday in an atheist society. Will Paul Volcker arbitrarily give us color-coded cards determining our salary?

Privatizations, Nationalizations and Mortalizations, Oh My!

NEW YORK, New York -- The New York Times' Economix blog reports today that the renowned British medical journal The Lancet has published a study that concludes that the privatization of businesses in post-communist states caused a spike in mortality rates.

In other words, after the Soviet Union and the socialist regimes in its satellite states collapsed in 1990-1992, selling factories and other formerly state-owned enterprises into private ownership caused people to die, in essence. The study alleges that privatizations increased the death rate in former communist states by 12.8%.


Would keeping you in the government's hands have saved lives?

To my mind, the report's conclusions sound suspicious. Here's a preliminary rebuttal, based on a quick perusal of the report and a few dashed-off thoughts.

I think controlling for privatizations is a difficult, problematic thing to do, first of all. The report's authors say they used a multivariable longitudinal regression analysis. And to effect of privatization, they controlled for "price and trade liberalization, income change, initial country conditions, structural predispositions to higher mortality, and other potential confounders." But they acknowledge that "one mediating factor could be male unemployment rates, which were increased substantially by mass privatization."

Well, not really. They draw a line between Russia and non-Soviet Eastern Bloc states, arguing that Russia saw more mass privatizations than the East European states (Croatia, Poland & co. -- Dickbag Cheney's "New Europe," in short). Now, although the authors acknowledge that they don't control for unemployment and that that could be a problem, they subsequently say it's not a problem because privatizations in Russia saw three times as much unemployment as in the East European states. This, to them, means that unemployment is linked to mass privatizations and that they can't be separated, or, equally, there's no use in separating them.

But that's not necessarily the case. It may be the case, but we don't know it must be. For what exactly tells us unemployment in Russia was higher because there were more mass privatizations there? Other factors could are just as likely to have come into play -- for instance, that Russia's economy was more tightly controlled by the communist state. (The Eastern Bloc states were as close as Soviets could get to a magical bohemia, where there was limited private industry, high-quality goods from the West, and less political oppression.) With the collapse of the centrally planned economy, Russia was, simply put, worse off than the others. Therefore it fell harder, and unemployment was higher. That's a structural problem of Soviet communism as practiced in Russia, not privatization.

Moreover, how do we determine that privatization, and not attempted coups (as in 1993 in Russia) and general political/mortal uncertainty, caused either unemployment or, ultimately, the deaths attributed to it? And then there's the Trump Card of Russia: You mix in the accessibility of alcohol, which was very limited under Gorbachev but repealed under Yeltsin, and you have a complicated picture. Study after study have shown that the status of alcohol sales and production has a huge impact on Russian life expectancy.

I don't doubt that being jobless contributed to people's misery, stress, and willingness to consume alcohol (though any person who has lived in Russia knows that employment/unemployment was hardly the biggest factor in alcohol consumption by Soviet workers). Nor do I want to argue that "shock therapy" was perfect. But the study's conclusions sound very dubious.

Take into account as well that what we got in Russia wasn't just privatization but crooked, swindled, corrupt privatization. Did the authors control for that? They don't mention it.

So there are methodology and controlling issues that may be at work. But there's also this, which the Times picks up on: “Many employers provided extensive health and social care for their employees, so through privatization workers experienced the ‘double whammy’ of losing not only their livelihood but also their means of surviving the crisis."

I get the feeling this report has almost westernized the situation in early post-Soviet Russia. All Russians have healthcare. It's not very good, but everyone has it, regardless of whether you work. There of course was no American-style system of private, employer-based health care in the Soviet Union, and there isn't today. This summary makes it sound as though losing one's job meant losing access to healthcare. And unless you live in a one-factory town where the closure of a factory meant the general abandonment of the town and closure of the local polyclinic, it is a stretch to imply that losing one's job meant losing one's access to healthcare.

Why do I care? Well, the report is quite political in its own way. (Living in Russia, you realize anything can take on political overtones if seized upon by the right people, i.e., Russian propagandists -- which the Lancet obviously is not, but someone reading their report may be.) Throughout, we encounter statements like this:

There were two approaches to capitalism. Radical
free-market advisers argued that capitalist transition
needed to occur as rapidly as possible. The prescribed
policy was called shock therapy, with three major ele-
ments: liberalisation of prices and trade to allow markets
to re-allocate resources, stabilisation programmes to
suppress inflation, and mass privatisation of state-owned
enterprises to create appropriate incentives. When
implemented simultaneously, these elements would cause
an irreversible shift to a market-based economy. By
contrast, gradualist economists, also known as insti-
tutionalists, called for a slow transition, recommending
that countries gradually phase in markets and private
property while allowing time to develop institutions that
are needed to make markets work well.

Meanwhile, we are told that "the main policy advisers at the EBRD, who backed the shock therapists, were also responsible for scoring progress in privatisation" and that their indices were "biased and subjective."

This paper sounds more like revisionist history than a medical study. Particularly, it sounds very much like the Great Oz Vladimir Putin's revisionist history. The Putin regime's founding myth, put forth incessantly in today's Russia, is about the evils of the "chaotic 90s" and the unscrupulous (and Jewish) oligarchs who cheated the people out of their assets. While the privatizations were quite corrupt, for Putin it becomes a question of Russia being sullied by the West -- the shock therapists and the likes of the EBRD. Putin and Lancet seem to converge, then. But Putin's intentions are darker than the journal's: For him, as for the discontented elements in Weimar Germany, the perceived indignities heaped upon his country by the West are a primary motivator. And they boil down to privatization. Today there is talk of re-nationalization in Russia. It's the culmination of years of visceral hatred of the privatizations.

For this reason, I think one must be very careful before drawing such stark conclusions about Russia's privatization. For they can be used to real consequence.

Wall Street Frats? It All Makes Sense Now

NEW YORK, New York -- Ever wonder in college how all the dumbest lacrosse players with the easiest major (i.e., Economics) all wound up in Wall Street jobs where the "cream of the crop" were supposedly off overseeing the world's capital flows?

It turns out you may have been onto something. Wall Street's grand poobahs actually have a fraternity for themselves. It's not the cocaine-strewn vortex of free time that your college frat was, though. This frat meets just once a year -- and last week's incarnation of the annual frat party/roast (held, as always, at the fantastical St. Regis Hotel in Midtown Manhattan) featured a rendition of Don McLean's "Miss American Pie" in which the fallen angels of finance sang the doggerel "Bye bye / to my piece of the pie."

The frat is named Kappa Beta Phi -- a corruption of Phi Beta Kappa, the best-known academic honor society. And while PBK's insignia features a hand pointing at three stars, KBP's key (see left) includes a hand pointing at a champagne tumbler, a beer stein and five stars representing Hennessey cognac.

Since this is the Wall Street Journal's story and I'm just parroting their enjoyable piece, just read it here. After all, pick-ups of other people's stories are crap. Which is why blogs are not journalism (at all) and can never replace newspapers (at all) -- but that's another story.

Although I realize I sound like a whiny bitch in writing about KBP, I actually think the idea of this sort of vaudeville roast is pretty intriguing. I'm somewhat impressed, knowing how much bankers (at least at Goldman Sachs) work, that they have time to be this creative. The idea of a night of wit and performance sounds pretty fun -- we'd probably think of it as pretty bohemian today, but I doubt that was the case in 1929. But still ... it does seem appropriate that Wall Street channels its creativity via a fraternity. ... Lehman! You're dead meat, nerd! Ah, finance.

The 'Thanks But No Thanks' Award

NEW YORK, New York -- And the winner is...

Dr. Steven Chu, President-elect Obama's Nobel Prize-winning nominee for Energy Secretary, and the man behind the latest Obama Cabinet disappointment.

Chu, who seems to be on top of things when it comes to recognizing the economic, geopolitical and environmental risks of fossil fuels, played to the Republitards in his Senate confirmation hearings yesterday.

Though the nominee has previously supported higher gasoline taxes (the only way to materially change Americans' driving habits and make the electric cars Congress is ordering Detroit to make marketable) and called coal his "worst nightmare," he did something of an about-face when confronted by knuckle-dragging Republican Senators from coal-producing states. Acting like the political animal many hoped he wasn't, Chu not only said gas taxes were "off the table" but added that he would support mythical "clean coal" and the quixotic quest for carbon storage technology to conveniently tuck away emissions from coal-burning plants ... under the earth. "Clean coal"? Really? Buy that one and I have a magical lute I can sell you that I saw in my Zelda game. I'd rather see Chu, and our government, jousting at windmills, in the most literal sense.

At this point, I can only ask how this guy differs substantially from Exxon McMobil, or whoever Bush's Energy Secretaries were (OK, it's Sam Bodman, not Exxon McMobil, but what's the difference, really?). Clean coal, cheap gasoline. No, we can't.

With so few smart people in politics, here's hoping Dr. Chu -- who seems to be one of them, without a doubt -- was just playing political games and intends to stay intellectually honest, and that he wasn't gaming up his own views with politics.

P.S. Walter Duranty promises (many) gas tax posts in the future, given that this is one of the most important policies America needs to embrace. Right, Dr. Chu? Or are you off "clearing brush" now?

Visions of Citi Division and a Curious Interview

NEW YORK, New York -- Citigroup, recently not only the world's largest bank but the world's largest company according to Forbes, is on the verge of splitting in two, according to media reports.

Lacking kryptonite and holding plenty of depressed real estate securities and CDOs, Citi has been hit hard by the financial maelstrom. A division of the company -- reportedly into "core" and "noncore" assets (likely splitting many of the struggling securities assets from the successful, less-exciting international commercial bank) -- would undo the years of deal-making by former Citi CEO Sandy Weill that famously created a banking behemoth.

Amid that backdrop, I am reminded of an interview of current Citi CEO Vikram Pandit that I saw in November on Charlie Rose.



Charlie has a reputation for being a "serious" interviewer, and I think this is generally fairly well deserved. But to imply that he generally tries to trip up his interviewees or push them too hard would be a bit much.

So when Pandit appeared generally at a loss when asked basic questions about the economy and financial markets on Charlie Rose, I was a bit alarmed. (If you can't access it above, the interview can also be seen here.)

I haven't seen Pandit speaking anywhere else. It's eminently possible he's an extremely smart, cognizant and capable man, banker and manager. And it's very possible that he's nervous when giving television interviews, or that his mind was preoccupied with other matters on November 25, 2008. But in his interview that day with Charlie Rose, I sensed an unconfident man with uncomfortable tics, someone with a surprising apparent lack of knowledge about his own bank's operations, and an interviewee generally dominated by Charlie Rose (compare it to David Miliband's interview in May, when it was he who made Charlie look stupid). Pandit seems to dodge many questions and defers like a novice cheerleader to commonplaces like "Citi is a unique place. We want to bring that uniqueness to the 109 countries we're in around the world." After watching that interview, you had to think, "I'd be surprised if he was still in this position in a year."

It's now a commonly held notion that Pandit's predecessor, Chuck Prince, was a dolt with little real knowledge or understanding of the massive bank he was running. But in his day, Prince certainly won the respect of many, just as Pandit enjoys today. (To be fair, recent days and poor share performance have seen a cavalcade of doubt in Pandit, but he had previously been quite highly regarded publicly.) After seeing his Charlie Rose appearance, I wasn't too sure I'd place any faith in him. But then again, Citi seems to be facing imminent division. Maybe with a banking "supermarket" the size of Citi, nobody really knows what's going on.