Dear Ehsani: you said: “The time has come for our nation to join the global market place in order to raise the living standards of our people.”

I am in agreement that raising the living standards is extremely important; however, can you elaborate on why joining the global market place would do this? Would not sanctions by the US be more influential if Syria joins the “global market place”?

“Higher economic growth will lead to more employment and more jobs.”

That is not necessarily the case. That all depends on what growth means and who is growing.

“May God bless the Syrian Arab Republic and its people.”

I hope the pres never says this.

Ehsani,

First, Syria has been under sanctions for decades. I heard every year warnings about the looming dire consequences.

This is analogous to the warning Israelis hear about their bleak future if they don’t settle with the Palestinians and Syrians… both warnings are valid, but we are probably still many years away from any severely negative consequences of the sanctions or of Israel’s failure to reach an agreement with the neighbors.

But I agree with you to some degree about the need to semi-privatize some of the state-owned businesses… like selling up to 40% in each to private investors.

Ehsani;
This is excellent, post, God Bless you, I second every word you said, very beautiful.
howerver two points I want to comment on;
“The government must get out of the business of running failing businesses. ”
my believe is that the goverment must get out of all buisnesses that belong to private sector, not only the failing one, The goverment job is to fascilitate people interactions, and provide security to the people.
the main issue of corruption, is not mentioned, there are many investors will not invest in Syria, because of the corruption, this is what is hurting the economy, the loyalists will florish in despotic system,contrary to free and democratic system, creating corruption.

Dear Ehsani,

Great ideas waiting for execution. I remember listening to President Assad a couple years ago recognizing everybody’s desire to move faster with reforms although he warned people against expecting to be able to drive fast cars on old unpaved roads by which he obviously meant the need to pick up the pace of building a more stable infrastructure that could support faster reforms.

I think it’s very hard to fire the extra hundreds of thousands of people from public companies at a time when unemployment and prices are so high already although the private sector could be made to later offset some of that drag. It’ll take sacrifices.

If there’s peace there will also be more unemployed military personnel looking to compete for jobs although peace will mean more international trade which will boost manufacturing and export related industries around the region including Israel and Lebanon.

You’re on the right track my friend. The main challenge is with speed of execution, old system dysfunctionalities and the persistent state of war and system instability in the region.

Peace and reform will be positively exciting although it will decrease external risk at the expense of increased internal threat.

Dear Ehsani
The Devil is in the Details

While I agree in principle on the need to privatize many of the government owned industries. The sale of government owned businesses can not be done in the “near-romantic” way you have described. You are ignoring the essential step of creating the legal and institutional framework to guarantee that such widespread sale does not result in (a) accumulating the country’s entire manufacturing and service base in the hands of a mafia (e.g. the early stages of the Russian privatization model), (b) transfering control of critical industries to extra-national interests, and (c) creating an economical upheaval that can easily tear the country a part.

Guarantees must first be established before the romantic speech. They can be in the form of anti-trust laws that ensure equitable market distribution and fair competition. You probably know more than anyone else the effect of low level corruption on the ability of small-businesses to thrive and of mid to high level corruption on the net impact of investments’ contribution to real economical growth (take Lebanon’s example).

Further guarantees must also be established to ensure not only governmental monitoring of large holdings private sector companies, but also public scrutiny. Independent governing boards of individual companies are more important in that regard than a mere independent international committee that oversees the sales. Will the members of the Syrian wealthy elite and their international partners be ready to relinquish control of their newly acquired companies to boards that include members from the public with real authority. Will they accept the court jurisdiction over mergers and acquisitions. Will they yield to whistle blower laws. In this regards, there are two points to ponder. First, if one thinks of the near-term historical origin of this elite, and the mechanisms by which the massive transfer and accumulation of wealth occurred over the past thirty some years, and that resulted in the creation of this elite, one would not be very optimistic. The second point is the nature of foreign investment. For example, do we think that American companies will throw investments in a country that has strong labor protection laws. Let us not kid ourselves, when international corporate talk about countries providing good environment for investment, they mean countries with lax environmental, labor, and consumer laws which allows the maximum return on each investment unit through reduction of marginal costs.

Laws must also be established to protect labor. Merely increasing employment is not enough. This is a must to avoid sliding into the Jordanian model, where Jordanian workers were replaced by cheap underpaid (occasionally unpaid), underfed, under-housed and largely abused foreign workers. Please note that I am not against foreign labor, I am against exploitation and modern slavery that is becoming increasingly, and rather shamefully and painfully, common in our region of the world.

A strong argument, which may first appear to counter my argument, is the fact that such laws do not exist even for state owned companies in Syria. Frankly I think that although true, such argument does not hold when one considers the motivation for economic reforms. What we want is progress, not to have a state-of-the-art factory, albeit nice to have, but to make sure that all Syrians have equal opportunities in a fair, growing and enlightened system.

In addition, consumer and environmental protection laws must also be in place along with the appropriate institutional framework of legislation and enforcement. This may be the subject of another utopian comment of mine. I do want to trust capitalism, but in no way I can bring myself to blindly trust Capitalists.

Let us for a few moments consider agriculture, which is the most important economical base of the country. In order for Syria to revitalize its agricultural sector and to bring investments into that sector, Syria would be required to completely relinquish control of the national seed bank to large corporations who will demand the establishment of “seed bank laws” to protect their patent to genetically enhanced seeds and to ensure their control of the entire seed market. Such laws will be devastating to Syrian farmers and to Syrian agriculture overall (Bremmer has executed such a crime in Iraq, and this issue has been a major issue in India as well as the US). Is the Syrian legal and institutional framework ready to resist this, to protect the national treasure, and the rights of the individual farmer to save their own seeds, while at the same time allows the country to effectively join the “global market”. Again, let us not kid ourselves, the international institutional arrangements of the past three decades have been nothing but friendly if not subservient to corporate control. These are little details, but they have tremendous impact on the long-term survival of any country.

I agree with basis for your comment, but I think legal and institutional reforms that ensure participation of the average Syrian, and thereby ensure not only transparency, but true accountability, must take precedent to economical reforms that will undoubtedly strengthen the elite’s hold on the economy if no guarantees are first established.

Ehsani,
Any privatizations while sanctions are still in place will be futile and counterproductive. It will only enable close and corrupt cronies of the regime to cherry-pick the businesses being privatized. We have seen this before in other countries’ neo-liberal reforms, the most striking case being Russia where all the viable and potentially profitable businesses went to insiders of the Yeltsin regime. Also in Argentina, Peru under Fujimori, Slovakia, and elsewhere. While still under sanctions with almost no access to international investors, Syria would trade a bad deal now for a worse deal in its near future. Your statement, “If private capital is allowed to take over state industries, employment will rise and not fall.”, is contrary to the historical record worldwide; jobs will be eliminated – its called downsizing – the fastest way to profitability; and there is no assurance in a free market system that they wlll be restored elsewhere. Free markets are not a panacea for countries like Syria; without the institutional infrastructure to organize and regulate markets, create honest bourses, and penalize wrongdoing in capitalist enterprise, an absolute train wreck is guaranteed, with increased joblessness and poverty, social unrest, and political instability.

Even if Assad has a wish of economic reform, he cannot very well procede until he gets the sanctions lifted. A peace deal with Israel is the key to that. If Ehsani is right and Syria is desperate to be rid of the sanctions, Assad must get to peace, even if at some cost to Syria’s influence in the region. That said, I predict this negotiation with Israel will be a slow and deliberate process designed to get to 2009 and a new US administration. Because the present US administration and Israel do not have identical goals, it complicates the negotiations – Israel maybe wanting to gain a peace agreement with Assad, isolating Iran, before Bush leaves office – while Assad stalls. Assad would like to reach a comprehensive peace deal that would include Iran, with international guarantees of security for both countries. That could bring Iran’s support to any deal with Israel. And that scenario seems more likely under a new US administration.

Good post Ehsani.

regarding Syriatel i would just like to add that part of their deal with the Syrian government is that the latter will acquire an increasing share of the company over time until its fully owned by the government. therefore selling it off to a foreign investor will not only allow a major company like that to remain privatized but it will also make business sense to the current owners of Syriatel whom otherwise will not own much of it in a couple of years.

Chamholding has been one of the main players in bringing global Syrian talent back to Syria. their head-hunter is my girlfriend and was the one who recruited Baha Issa 😉

Ehsani,
Thank you for the great article.

I would like to remind that several months ago I suggested the Syriatel deal as a test as to whether the sanctions have teeth. It turns out that indeed the sanctions are working.

They will not bring an end to Syria but they will certainly highlight the equation that many here have been rejecting: It is either “resistance” or high growth for Syria. It cannot have both.

As for privatization, the Syrians need to make sure not to repeat the mistakes the Russians made. Unfortunately, with the current corruption in Syria, I fear that all privatization will do is move companies from government hands to the hands of government cronies. Not much of a change.

I think the main reason Syria is pursuing talks with Israel is because of Syria’s dire economic situation. We will see if I am right in the future when the real economic situation in Syria becomes clearer.

David
You reinforced my comments, albiet more elegantly.
Thank you

Off the Wall,
Actually, it’s the other way around. Your essay went up while I was writing mine, else I wouldn’t have bothered. Your post is both more detailed AND elegant.

I was glad to see it.

UGARIT,

I will make sure Bashar skips the “God bless” comment, I promise.

No matter what growth means or who is growing, the fact is that “Higher economic growth will lead to more employment and more jobs.”
This is like 1+1=2 in my book, sorry.

majedkhaldoun

You are absolutely right on corruption. It is hard to eliminate corruption when the average government employee earns as little as $300 a month. Cronyism and corruption at the higher level is shameful and inexcusable.

WIZART,

The state can sell to the private sector but insist on keeping the workers for say 5-10 years. It will just mean a lower selling price of course. In effect, this issue must not stop the initiative from seeing the light of day.

OFF THE WALL,

Thankfully, your comment does not match your name.

Of course, massive work lies ahead in the legal and institutional arena before one can proceed with what I suggest.

I am calling for “embracing the concept” first. When this is done at the Presidential level, everything you suggest must follow suit.

DAVID,

Please see the link below:

http://www.privatisation.gov.pk/

Make sure that you read the “Rationale & Policy” section:

http://www.privatisation.gov.pk/about/Rationale-policy.htm

Pakistan has done an awesome job in this endeavour. Again, once the concept is embraced, a commission must be established. Everything you suggested with respect to the corrupt cronies needs to be carefully addressed. Just because the risks you cited exist, one must not halt the project altogether. The Russian example must be avoided and many countries that went down this road have indeed largely succeeded at avoiding many of the pitfalls that you highlighted.

IC,

Hope all is well. You are correct about Chamholding. To my knowledge, people at that level are being recruited for around $12,000-$15,000 in salary per month.

Shai, AIG,

Could you try doing something for the cause of peace, and ask your elected representatives to allow the seven Palestinian students, who have been offered Fulbright scholarships, to leave the Gaza strip to pursue their dreams?

Seeking,
Isn’t their government the Hamas government? Why don’t you ask them?

And I hope all of you now understand why I put all that energy towards the peace process : )

Syria can manage without a final settlement … this week alone Bashar met with a very close friend, the Emir of Qatar, then with another ally and friend … the Emir of Dubai, and then with the emir of Kuwait. Turkey, Iran, Russia, and perhaps europe (it depends) … will be good enough for now.

But everything depends on the successful settlement of hostilities with Israel. Everything .. not only economic reforms.

Ehsani said:

The time has come to pick a new economic czar for the country that believes in privatization and free markets. This person must be introduced to the nation during a press conference with the President making the following introduction:

Mr. Speaker,

I would like to nominate someone for the job…

EHSANI!

Excellent piece, as usual, ya shaykh.

Let’s hope that people are listening.

Ehsani said: ‘No matter what growth means or who is growing, the fact is that “Higher economic growth will lead to more employment and more jobs.”’

Not true.

All you can find is a link from Pakistan and one that represents the Commission of Privatisation? Do you really think they would contradict their own commission? That’s a bit naive don’t you think?

David:

Thank you for clearly stating the pitfalls of neo-libralism and the myths surrounding it.

OFF THE WALL: “..I do want to trust capitalism, but in no way I can bring myself to blindly trust Capitalists.”

You are speaking of reality. Capitalists should be handled with extreme caution. Without proper laws that are enforced Capitalists will be a bunch of gangsters.

How about the union members in Syria be given majority shares in the government companies and then the companies are privatized?

QN,

Habibi, you are the best. Finding Mr. X is the easy part once the young lion decides to pull the trigger.

UGARIT,

Are you saying that job creation and economic growth are inversely correlated? So, more employment and more jobs require lower growth?
Creating jobs comes when private businesses decide to invest and expand. Presumably, this decision is made when they expect higher profits and return on their investment. Jobs don’t fall from the sky. Socialist experiments have failed. Clearly, you are still holding on to the dream.

Ehsani,
I have read your Pakistani privatization website. I would invite you to read the report of Committee for Cancelation of Third World Debt on privatization in Pakistan as it has occurred in real time.

http://www.cadtm.org/spip.php?article3074

I note that the entire documents of the Commission for Privatization are full of the same idealistic language that Jeffery Sachs introduced to Russia, then Slovokia, that still ended up with near perfect corruption of the privatization process in both countries.

Make no mistake, I support your notion that economic reform is essential in Syria, further, that certain privatization initiatives could produce positive economic results, but in a country like Syria, with cronyism already deeply embedded in the country’s economy, getting from here to there – to a transparent privatization process will be very, very difficult.

When someone starts trumpeting the virtues of privatization, I’m always reminded of Margeret Thatcher’s brief privatization of GB’s old age pension system. Bankers and stock brokers churned EIGHTY BILLION pounds out of citizens’ retirement accounts in the few weeks before her exchequer shut it down. As stated,”…I do want to trust capitalism, but in no way I can bring myself to blindly trust Capitalists.”

Finally, I make extreme objection to your unfounded assertion that “Socialist experiments have failed.” Sweden is the most successful country on the planet, with the most socialist economic system on the planet. In countries all over the world public highways, public schools, social security retirement systems have been successful socialistic programs, and Europe’s socialist and excellent health care system is a huge competitve advantage for their economy.

It is popular among neo-liberal enthusiasts to repeat that old canard about failed socialism, but the fact is that well-crafted socialism works demonstrably as well as laissez-faire capitalism. No one has demonstrated otherwise. And, no, Russia was not a socialist system under communism; it was a self serving, elitist, state centered, right-wing oligarchy that practiced a kind of trickle-down economics that kept the masses from starving, that’s all, with less true socialism than even the US today.

Dear David,

There is little doubt that most privatization schemes are hard to implement. Human greed will ensure that the local sharks will jump on the opportunity to make quick profits from low paid government employees who are typically in charge of the execution of these transactions.

Let us step back and analyze why we are here in the first place:

Starting in the late 1960’s and the mid 1980’s the Syrian state had made the decision to monopolize some 250 different businesses and run them instead of the private sector. Once the state decided to make beer, no Syrian investor could compete in that industry. This example was repeated in industry after industry from biscuits to tires to bottled water. Of the 250 businesses, only 5 ever made any money. The ones that did were in energy and telecommunication (hard to screw that one even if you tried). The accumulated losses were closed by year end from the state treasury.

I would argue that this is unsustainable.

Selling is not simple. But, this does not mean that you postpone the inevitable.

Dear Ehsani,

Good post ,

Syria is in the hole , The hole of having poorly government run companies , The first thing that Syria needs is to stop digging , That means stop having new Government run companies , about privatizing the companies that exist , Syria does not need to do any thing but let these companies go like the dinosaurs did by not being able to compete because of their poor management ,

The Syria government needs to open the Syrian economy to new businesses and get out of the way happy with 15% tax which makes the government partner in every business , After all most jobs are produced by small businesses .

Putting taxes on real estate makes it more lucrative to invest in manufacturing and trade than in real estate and might make it easier for people to be home owners .

Last , Syria does not need a new Zaar , Syria has one , Syria only needs to move faster , They are still worry about the ramification of privatisation , when they see the benefit of free economy they will move faster.

For people who are worried about forign control of important Syria industries , I agree and the government should continue to manage better companies that are important to national security.

This is for Alex
most of my friends seem to be confused,about Syria wanting to have peace with Israel, and say Israel is not serious, and worry about splitting the alliance between Syria and Iran.
they either got used to stay hostile, or resistants, or in the opposition, or they do not understand why Syria is doing this, is it the economy,or politics!, is it to kill time till another american president comes in, or is it the american withdrawal from Iraq, will create new enviroment, where Syria wants to get ready for?, it is very hard to change from being an enemy,then suddenly become a friend.

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Financial Times FT.com
WorldCloseSyrians wary over Golan Heights peace hopes
By Heba Saleh, recently in the Golan Heights

Published: June 2 2008 03:00 | Last updated: June 2 2008 03:00

Across the valley, the sound of a bulldozer breaks the silence of the early afternoon. The machine’s orange tentacle moves back and forth in a clearing between the houses of Majdal Shams, a Syrian village in the Golan Heights, which have been occupied by Israel since 1967.

To the Syrian citizens watching the scene from a hilltop in the sliver of the Golan still controlled by their country, Majdal Shams, its roofs shimmering in the sun, appears so near – yet so far away.

It would take less than 10 minutes to get there on foot, but that would be a walk through a mined valley and into enemy territory.

There are no Israeli troops in sight, but two large military observation stations sit atop the mountains above the village, scanning Syrian movements in the foothills and on the plains beyond that stretch to Damascus, a mere 60km away.

All that could change if the latest peace talks between Israel and Syria lead to an agreement restoring the whole territory to Syria.

Israel occupies about 1,200 sq km of the strategic territory, including five Syrian Druze villages, most of whose 20,000 inhabitants profess loyalty to Damascus.

In Syria, news of the talks revived hope – tinged with a heavy doze of caution – that Israel would give back the Golan region.

“Our previous experience does not allow us to be optimistic,” said Hamed al-Halaby, a retired teacher originally from a Golan village. “We don’t trust Israel and for 35 years this has been an inactive front. So what is going to compel them to give it back?”

Not expecting the occupation to last, he left his Golan village to study in Damascus soon after the Israelis arrived in June 1967.

But for many years, Mr Halaby was completely cut off from his family on the other side.

There are tears in his eyes when he recounts how he watched from the hilltop facing Majdal Shams the celebrations at his sister’s house when his niece got married.

Contact with his relatives is now possible through internet calls and reunions in Jordan, which signed a peace treaty with Israel in 1994. But for decades the only way of talking to his family was by loudspeaker.

Little is known about the Israeli-Syrian negotiations, mediated by Turkey, though Damascus says Israel has agreed to a full withdrawal to 1967 lines.

Ehud Olmert, Israel’s beleaguered prime minister, has not confirmed this, but he has said that his country must be prepared for “painful concessions”.

The two countries came close to an agreement in 2000 during talks in Geneva, held under the auspices of Bill Clinton, the former US president.Syria pulled out when Israel insisted on moving the 1967 border to give it full control of Lake Tiberias.

This time, too, success could prove difficult.

Mr Olmert’s tenure as prime minister is in jeopardy following calls for him to step down over corruption claims. Attacks by Syrian-backed groups, such as the Lebanese Hizbollah or the Palestinian Hamas, could also torpedo the process.

“There are too many players and the process is very fragile and vulnerable,” said Samir Altaqi, a Syrian analyst familiar with the authorities’ thinking.

“Everything could inadvertently turn upside down in case of any minor player making a wrong move.”

Israel wants Syria to distance itself from Iran, its close ally, and from Hizbollah and Hamas, as a condition for a deal. Damascus has refused. On Wednesday, it signed a new defence co-operation pact with Tehran.

All the same, Mr Altaqi insists that both sides are serious about resolving their differences. But so far, the talks seem to have had only the grudging acceptance of Washington.

“I think the Americans mind that these talks are going on,” said a western diplomat in Damascus. “They don’t like the government here and they don’t want to reward it in any way.”

The Syrians say they are not banking on any US help as long as President George W. Bush is in office, but, according to Mr Altaqi, they want a peace process under way before the next US administration is in place.

“We shouldn’t wait until the next administration to begin something,” he said. “Let’s begin now, so it would be on the agenda of any incoming administration. Then it cannot be avoided.”

Youth in the Middle East and North Africa, see separate section

Copyright The Financial Times Limited 2008

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Ehsani,
I still support your notion of the need for change in Syria’s economy. As you say, the Government made a big mess in the 60s and 80s nationalizing all those businesses. And I would bet you that they did it with a certain amount of avarice aforethought. Its the same government, one generation later. So, can we expect it to be less corrupt de-nationalizing? Maybe more?

I live back and forth between Europe (France, specifically) and the US. I haven’t spent any time in the ME in over 30 years – what I know about the region is all from reading now. But I do know something about the mixed, socialist/capitalist economies of Europe. My neighbors in France and my friends elsewhere in Europe complain about their politics all the time, and their economic system to some extent. So, Europe isn’t perfect, but they seem to me, after my 40+ years of working hard to understand economics, to be a reasonable compromise between private enterprise, and caring for basic human needs. The European model, I think, offers more promise of sustainable economic development than anything I have seen elsewhere, and, I have been a moderately successful dog-eat-dog capitalist my whole life – had no choice. I see emerging economies in South America and Africa struggling with how to build a modern economy and state, and it is very discouraging to me that most choose one extreme or the other, either nationalize/socialize (eg, Chavez in Venzuela), or Washington Consensus neo-liberalism (eg Uribe, next door in Comumbia) and I wonder, ‘What are they thinking?’ The “European Consensus”, if I may use that phrase, needs looking at by a lot of the rest of the world – Syria, and the rest of the ME, included.

I will take the “European Consensus” anytime.

Majed,

Qifa Nabki wrote a very nice piece here:

http://creativesyria.com/syrianbloggers/?p=69

I’ll quote the part most relevant to the point you made above:

While things are off to a promising start, I do not believe that Syria and Israel will achieve a meaningful peace settlement anytime in the near future.

To turn around and make peace with Israel at this stage is unfeasible, because the resistance infrastructure that Syria has built up in order to gain leverage at the negotiating table cannot be packed up and stowed away at the regime’s command. Any peace deal between the two countries will require a significant span of time to implement, perhaps several years, during which time Syria’s allies will likely have to come to some kind of accommodation of their own with their archenemy. In the case of Hizbullah, this will likely take the shape of a peace agreement between Lebanon and Israel, through which the rhetoric of national resistance is transformed into the rhetoric of national defense.

yes, very nice post.
two years ago I used to disagree with Ehsani’s economic plans for Syria, but now I am a convert… Especially if we are talking about the “European Consensus” so to speak, because i believe in the free market that is well regulated and a government that protects the people as much as the power of corporations.

anyhow, I would like to second “Off the Wall”‘s comment as well as David’s follow ups.
The question for me is definitely, how can Syria open up to a market economy without traveling down the Russian road to free for all run by the mafia and other criminal enterprise (even that of the elites).

As Off the Wall suggests, this is going to require the construction of an entire institutional system and new legal system that can be available to enterprise interested in investing in Syria. The means an accountable legal system, non-corrupt, and transparent.

Ehsani responded that hopefully if the government embraces the ‘concept’ of the new economic model and the totality of the move to a free market European style economy, that they will then of course be open to building the legal infrastructure to go with it.

Alas, how is this going to happen???? how likely is it?

As I have thought many times, and maybe said here, the Syrian gov’t is in a bind. Up against the wall even. The economy is going to tank soon enough if they don’t do something. So, they MUST open the economy up if they don’t want an angry mob of starving unmarried youth at their doorstep.
However, to open the economy means a new legal system based on transparency and accountability. Such a system if allowed is a recipe for reform in other areas. It is all a big ball of string…that doesn’t end.
To demand for rule of law in Business and economics… will lead without a doubt to a questioning of all other aspects of the law… and of reform.
It would be a very brave thing indeed for the gov’t to go down that path. Or should I say risky??? to their own power…

When one begins with the premise that the law will rule without prejudice and above all, well then, this is the beginning of the end for tyrants and kings.

But what choice is there really… when one is up against the wall. To not choose the open path is also suicidal in the face of economic catastrophe… so…there is little choice but for this gov’t to let evolution happen.

Here is an example of what I was saying earlier today!

More Neocons putting the pressure on {resident Bush to not leave before he starts a process that will force Obama and McCain to have no choice but to continue boycotting Syria (and Iran)

He is still using the Hariri tribunal as an excuse …Syria is blocking it supposedly!

WSJ(6/2) Column:

Why Bush Must Still Confront Rogue States
2008-06-01 20:26 (New York)

By David B. Rivkin Jr. and Lee A. Casey

Messrs. Rivkin and Casey, Washington attorneys, served in the Justice Department under Presidents Reagan and George H.W. Bush.

With less than a year to go in office, the Bush administration may feel powerless as it attempts to deal with rogue states that support terrorists and proliferate weapons of mass destruction.
But there is still a lot President Bush and his team can do about the likes of Iran and Syria if they act now to keep these regimes in the international spotlight. On Sunday, the United States assumed the presidency of the United Nations Security Council (the seat rotates every month). This gives Mr. Bush an opportunity to launch a campaign to isolate these countries.

The first step could be to present the known and internationally accepted facts of the regimes’ misdeeds. At the very least, this would put Mr. Bush back in the driver’s seat of the domestic debate, compelling Barack Obama and John McCain to spell out how they would deal with such problems.

The case against Iran is especially strong. Even among rogue governments, Tehran stands alone, mixing disgusting deeds and despicable words. The State Department has fingered Iran as a state sponsor of terror since 1984; today it has become Terrorism Central.

Tehran has signed the nuclear Nonproliferation Treaty (NPT), but has pursued a nuclear weapons program anyway. There is compelling evidence that the regime has trained and funded Iraqi insurgents who target U.S. and Iraqi soldiers.

Iran has furnished weapons — particularly long-range missiles — and training to Hamas and Hezbollah. These weapons are used for indiscriminate attacks on Israeli civilians. Iran’s president, Mahmoud Ahmadinejad, has openly called for Israel to be “wiped off” the map and freely dispenses anti-Semitic propaganda and Holocaust denial.

There is a similarly compelling case to be made against Syria, which has been listed as a state sponsor of terror since 1979. Damascus gives sanctuary to terrorists from Hamas, Islamic Jihad and Hezbollah — and has done so for years. It has also, judging by recent intelligence disclosures, embarked on a clandestine nuclear program in conjunction with North Korea and in defiance of NPT obligations.

Syria’s brutal campaign to dominate Lebanon also makes it an international problem. Damascus is blocking, through Lebanese proxies, the U.N. investigation and prosecution of Syrian officials for the 2005 assassination of Rafiq Hariri, a former Lebanese prime minister. Lebanese authorities have arrested Syrian terrorists for two February 2007 bus bombings — attacks that Lebanese officials say Syria carried out. Lebanese politicians, military officers and journalists opposed to Syrian dominance have been assassinated.

These acts violate the U.N. Charter and U.N. Security Council resolution 1373, forbidding the “active or passive” support of terrorism by member states.

Mr. Bush’s critics claim the real problem is that the U.S. hasn’t opened high-level talks with Iran and Syria. But opening up talks at this point — while these regimes are engaging in abhorrent behavior — would be a serious mistake, particularly when the West faces a major security challenge from state-sponsored terrorism. Doing so would certainly bolster these leaders in the region and normalize their behavior.

Livini: Mossad agent
Uzi Mahnaimi in Tel Aviv

The frontrunner to become Israel’s next prime minister, Tzipi Livni, was a Paris agent for Mossad, Israel’s overseas intelligence agency, in the early 1980s when it ran a series of missions to kill Palestinian terrorists in European capitals, according to former colleagues.

They say Livni, now foreign minister, was on active service when Mamoun Meraish, a senior official in the Palestine Liberation Organisation, was shot dead by a Mossad hit squad in Athens on August 21, 1983. She was not directly involved in the killing, in which two young men on a motorcycle drew alongside Meraish’s car and opened fire, but her role in Mossad remains secret.

Shortly afterwards Livni resigned and returned to Israel to complete her law studies, citing the pressures of the job.

A quarter of a century later, Livni, 49, is poised to become prime minister amid accusations that Ehud Olmert, who has led Israel for the past 2½ years, accepted bribes from an American businessman.

An opinion poll on Friday showed that Livni had more than twice as much support inside the ruling Kadima party as Shaul Mofaz, a former defence minister who is her chief rival. Political commentators believe that Olmert will resign soon.

Livni joined Mossad after leaving the army with the rank of lieutenant and completing a year at law school. From her base in Paris she travelled throughout Europe in pursuit of Arab terrorists.

“Tzipi was not an office girl,” said an acquaintance. “She was a clever woman with an IQ of 150. She blended in well in European capitals, working with male agents, most of them ex-commandos, taking out Arab terrorists.”

Livni has never talked about her years with Mossad, but a glimpse of the nature of the work was given by her closest female partner on European assignments. “The risks were tangible,” said Mira Gal, who became head of her ministerial office. “If I made a mistake the result would be arrest and catastrophic political implications for Israel.”

Livni, a married mother of two, has enjoyed a meteoric rise in Israeli politics since she became an MP in 1999.

Her career was forged in the violent creation of Israel. Both her parents were arrested for terrorist crimes in the 1940s. Her mother Sarah, who died recently aged 85, was a leader of Irgun, the militant Zionist group that operated in Palestine at the time of the British mandate and whose exploits included train robbery.

“I was disguised as a pregnant woman and robbed a train carrying £35,000,” she said in an interview shortly before she died. “Then we blew up another train en route from Jerusalem to Tel Aviv.”

Livni’s father, Eitan, was sentenced to 15 years in jail for attacking a British military base. He escaped.

Livni, who unlike her parents supports a Palestinian state, would be no soft touch as prime minister. “While Tzipi is willing to give up the West Bank to the Palestinians, she is a hawk when it comes to Syria and Iran,” said a leading political commentator. “She is against withdrawal from the Golan [Heights], and once prime minister she will want to bomb Iran’s nuclear facilities.”

I really don’t believe that we should draw any categorical conclusions based on an article in Murdoch’s WSJ. There is no doubt that any country would prefer to not have sanctions imposed on it, but to argue that Syria is going to go out of its way to appease the US and Israel simply to have sanctions lifted is short-sighted to say the least.

First, to think that the mere lifting of US sanctions will bring Syria economic prosperity is naive. It is also more naive to believe that an agreement under Israeli terms would even allow Syria to develop into an advanced economy. Privatization and “free-market” economics are not the answers to Syria’s economic woes, especially given that Syria is still in a developing stage. To allow for its market to be invaded by more established western products and companies would spell doom for Syrians and would bring Syrian economy to near collapse.

What there must be is an oranization of the economy on a productivity basis. We need to increase production by improving our industries and increasing our agricultural output. As Syria becomes advanced and industrially established it can begin opening up more to global competition. We’ve seen what has happened to countries who have taken the advice of neo-liberal advisors all too often. Their economies crumble and they are left in very high debt, unable to rescue themselves from the mess they created.

I would urge the Syrian government to focus on true economic reforms. This would include the elimination of corruption, the focus on building industries and research/academic institutions, and the maximization of agricultural output. Simply opening the market to western invasion is bound to result in nothing short of disaster.

Finally, today’s headline on Syria News which stated that Syria has declared that the European Partnership Agreement is no longer agreeable absent specific amendments, I believe is more indicative of the true effects of those US sanctions on Syria.

This will make things clear,

Syria agrees to nuclear probeStory Highlights
Syria agrees to allow nuclear inspectors into the country in June

IAEA staff will look at a site Israeli warplanes destroyed in last September

Syria has denied U.S. claims that it was building a secret nuclear reactor
Next Article in World »

(CNN) — UN nuclear inspectors will visit Syria this month to investigate allegations that the country was building a nuclear reactor at a site attacked by Israel last September, officials said.

International Atomic Energy Agency’s Mohamed ElBaradei says the inspection team will visit Syria in June.

The International Atomic Energy Agency’s fact-finding mission is expected to take place from June 22 to 24.

Information about the Israeli bombing of the site did not come to light until April when U.S. officials informed IAEA head Mohamed ElBaradei that it believes the facility was a nuclear reactor.

At the time, ElBaradei said the IAEA will treat the information “with the seriousness it deserves and will investigate the veracity of the information.”

“Syria has an obligation under its safeguards agreement with the IAEA to report the planning and construction of any nuclear facility to the agency,” he said.

The White House said the covert nuclear reactor was hidden from view, would have been capable of producing plutonium and likely was “not intended for peaceful purposes.”

The White House also said that it believes North Korea assisted Syria’s nuclear activities.

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Syria’s ambassador to the United States criticized the Bush administration’s claims, saying Syria never worked with North Korea on a nuclear program.

“I hope the truth will be revealed to everyone,” Imad Moustapha told CNN at the time. “This will be a major embarrassment to the U.S. administration for the second time — they lied about the Iraqi WMDs (weapons of mass destruction) and they are trying to do it again.”

Israeli officials have not commented publicly on what the target of the strike was.
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Ehsani asked: “Are you saying that job creation and economic growth are inversely correlated? So, more employment and more jobs require lower growth? Creating jobs comes when private businesses decide to invest and expand.”

When privatisation occurs one of the first steps that private owners will do is lay off workers to become more efficient and hence create job losses. But the reference point of where to start counting job creation is the main issue. Neoliberals will say that jobs are being created after they have generated job losses.

We have to be honest. Syrians in the first few years will be worse off with privatisation and MAY be better off many years after privatisation.

Now potential investors such as you will certainly benefit but that doesn’t necessarily translate to average Syrians benefiting.

I wonder how much the US is going to pay North Korea to concoct information about Syria’s alleged nuclear program?

UGARIT,

Based on your logic, average Syrians would therefore benefit from more state-owned enterprises and not less. Perhaps the Government ought to take over whatever is left of the private sector in an effort to improve the lives of the average Syrians.

You want a fair distribution of the pie. While that is a noble cause, you are paying no attention to the fact that with the status quo you will soon have no pie left to cut and distribute around.

Ehsani,

Thanks for your insight. I appreciate many aspects of the American and European systems and we’re kind of ahead in a sense that we’ve seen the plus and minus of each and can borrow what works in each.

Glad to see so many new voices pitching in. Money is a universal topic so I think peace is best looked at from an economic perspective and I wonder how the Israelis would benefit from it. Unless there’s something economical to throw their way I don’t think they’ll bite in terms of giving up on wine and ski resorts!!

Cheers

Ehsani, Ugarit,

There are ways around the short term employment penalty of privatization. When a private investor negotiates with the government to buy let’s say 25% of “the national cement company” he will pay for the estimated value of that 25% share minus the cost of continuing to employ 50% more workers at the factory than necessary (for example) … that investor can guarantee in the contract his acceptance of keeping all employees for the next X years (3 or 5).

In the mean time, they can work on increasing production and efficiency and training ad quality control … they probably will end up needing those employees that they did not fire… it would be cheaper than hiring new ones when the time comes to expand.

EHSANI2 said: “Based on your logic, average Syrians would therefore benefit from more state-owned enterprises and not less. Perhaps the Government ought to take over whatever is left of the private sector in an effort to improve the lives of the average Syrians.”

Now you’re mocking me 😉 Yes Syrians are benefiting from state owned businesses and no the government should not expand its ownership of businesses. Read carefully, PERHAPS they can benefit with much more privatization of most if not all of these businesses. They MAY benefit more with privatization. You are saying that they WILL. There is no guarantee of that. BTW, we’re throwing around the word benefit which neither one of us defined.

“You want a fair distribution of the pie. While that is a noble cause, you are paying no attention to the fact that with the status quo you will soon have no pie left to cut and distribute around.”

There will always be pies. We have to be careful that privatization does not make things worse. Things are already bad. I am not a naive follower of socialism nor capitalism.

Were Syria a democracy wouldn’t Syrian citizens be the ones who should decide the fate of their government run businesses and not some Czar? The term Czar says a lot does it not? To me the term congers up an image of an authoritarian and a totalitarian figure. I thought we want democracy?

Most also West European countries created and developed many of their core industries using state owned companies. When did privatization actually happen in West Europe? The major wave happened in the 80’s and 90’s and still there is much to “privatize”. The following question that should be asked is what is Syria’s present economical development level compared to West Europe. Well Syria is maybe in level what Europe was after WW1. At least 50 years behind West Europe in economical and social development.

If the free trade advocates theory of low governmental interference and low (or no taxes) would be true the most successful economies would be Somalia and Afghanistan. The free trade system can be only adopted when a country has achieved certain development levels. Dreaming that an underdeveloped country jumps to the top through “free trade” is pure propaganda.

A functioning European style system needs steady financial income for the governmental organs (taxes and tax collecting systems), a huge amount of laws and standards, numerous other support systems etc. Even with the best will by the government, it will take decades for Syria to develop the needed infrastructure and make it function. Making a law is easy, establishing the system to “watch” that the law is obeyed is much more complex and time consuming. It takes 30 seconds to write that Syria needs better accounting systems and reporting, it takes in minimum 1 to 2 years to make the necessary laws and instructions, then it takes at least five to ten years to make the system really to “work”.

As Russia and other East European examples showed that an “early” privatization leads to a situation where gangsters and well connected ruthless “entrepreneurs” rob everything that is possible. These “entrepreneurs” can be domestic robber barons or international investors. Without doubt some Soviet-Israeli billionaire, who might have got rich by selling the U.S.S.R. weapons with a “healthy” profit to spread “democracy” around Africa and Asia, would love to to buy Syria’s oil industry. There would be no lack of foreign buyers of the most lucrative assets. The problem is what then after the “national bargain sale” and how the government uses the money.

Let us look at Iraq. If the country adopts completely the free trade ideology, it means that the citizens can kiss goodbye to the dreams of a prosperous, educated nation. If Iraq’s oil wealth is privatized, it means that big oil companies drill the oil and ship the raw oil out with minimum investments and using imported labour. On the other hand if Iraq’s oil wealth is put in use through state owned companies, that would mean that Iraq would own create petrochemical industries, begin to buy delivery chains, build supporting industries etc. It is 100 percent certain that the state owned company strategy produces more jobs and wealth for Iraqis and less wealth for the “West”. When international companies would run Iraq’s oil industry, they would most certainly make the engendering plans in the west, import building materials from the cheapest source (=China, India), use Asian cheap labour etc. And pay as small as possible tax / profit share for Iraq. So it has worked in numerous countries around the world in the past. None of those countries became rich.

Of course there are limits with the usability of state owned companies. There is really no need for the state owned companies to operate in “fields” which are not capital intensive and less strategic. But selling now fast the state’s property, which state owned companies are, simply to please American free trade “enthusiasts” is a mistake if it is not done slowly and using “brains”.

I could bet that the free trade chorus in the West will make 100 percent u-turn in coming years now when the financial assets of the world are “allocated” again. Let remember that oil producing countries could with a couple of days incomes buy major western companies and thousands of smaller ones.

SIMOHURTTA said: ‘It is 100 percent certain that the state owned company strategy produces more jobs and wealth for Iraqis and less wealth for the “West”.’

Excellent observation.

I think from our discussions it’s clear that we need to separate the strategic from non-strategic government run businesses.

Where can one find the list of 250 government run businesses?

Ehsani,

You titled your piece and Economic Plan but forgot to include a timeline and a sequence of events. Privatization is assumed to happen overnight and the benefits seem to be assumed to accrue overnight (classroom setup).

Would it be possible to identify what the plan would entail in terms of time lines. At what stage of the process will privatization occur (immediately or after the establishment of a sound legal foundation (anti-trust laws, property rights…). At what speed would the privatization take place, would the government sell off all the assets at once or take a more gradually approach.

What are the employment and inflation ramifications of this plan? On the welfare angle, what are the income distribution ramifications of this plan?

Should the government break up existing trusts or allow them to continue through the privatization process. Would the plan allow foreign nationals to buy state owned industries?

I understand that this plan is written with certain limits as to what can be discussed but then it probably should have been more aptly called a vision as it jumps to the end-of-the process conclusions but ignoring the time lines and the footwork necessary to realize it.

Dear Syrian,

It is not a “plan”. The title is not accurate. This is a very basic template to highlight the importance of the issue and the need to bring a very important topic out to the open. The senior members of the party do not even believe in the concept. The feeling is that the current system can and must continue. I, of course, think otherwise.

In the meantime, every single point you raised is very valid.

For those who continue to talk about backward Syria, Forbes just gave Damascus the number two position (worldwide) on this list …

Where the royals roam
These holidays are fit for a king—literally

By Terry Ward
Forbes Traveler.com
updated 12:26 p.m. ET, Fri., May. 2, 2008

As befits the sultan of Brunei, if your digs were endowed with more than 1,700 rooms, merely venturing between wings could be considered a holiday of sorts. But your vacations are bound to get decadent when you can afford 531 Mercedes Benzes, 185 BMWs and a bevy of Lamborghinis in addition to your own private Boeing 747 decked out in gold-plated accoutrements. And that’s just a peek at the Sultan’s alleged material inventory.

As is the case with many a moneyed royal, the sultan’s private life is so secretive that it’s difficult to confirm where he unwinds when he’s not busy bulking up his multi-billion dollar automobile collection.

A good bet, however, is Rancho Santa Fe, California—one of America’s richest communities—where the sultan owns an abode. With a median home price of upwards of $2.5 million, the San Diego-area enclave is undeniably privileged. Crisscrossed with bridle paths, and home to six private golf courses and near perfect year-round weather, it’s one of those otherworldly locales reserved for the high-net-worth set. (America’s own royalty, Bill Gates, also has a Rancho Sante Fe address.)

According to Lisa Lindblad of Lisa Lindblad Travel Design, a luxury custom travel service based in New York City, royals don’t necessarily opt for out-of-reach destinations when it comes to where they vacation. “I don’t think royals are any different than anyone else, except that they need more security and more rooms for their retinue,” she says. “They will vacation in places like Greece and Argentina.”

Indeed, the entire Dutch royal family chose to ring in 2008 in Argentina’s sublimely beautiful Lake District. Princess Máxima, who married Prince Willem-Alexander of Orange in 2002, is originally from Buenos Aires.

“When [the Dutch royals] were down in Villa la Angostura near Bariloche, they were very relaxed and took over what they needed and had a good old time,” says Lindblad, who was visiting the area at the same time. ” In general, royals don’t stay any more high-end than my clients… What they do look for is security and privacy—and they seek places where they won’t be ogled and can proceed with their vacation with a certain amount of quiet.”

In Europe, Lindblad says, the attitude toward royals tends to be more relaxed than it is Stateside. “It’s not such a big deal in Europe,” she says, “You often see royals all over the place—I know that in Turkey, Princess Margaret used to come on a friend’s boat and they would lunch together. She loved it, in particular, because she wasn’t treated any differently.”

Still, we Yanks can’t help but get a bit starstruck at the idea of sharing a ski gondola or golf course with someone of princely ilk.

Not that skiing first tracks with Saudi royalty was ever a possibility in Jackson Hole, Wyo. in 2004, mind you, when the Four Seasons reportedly arranged private gondola service on the mountain for Prince Alwaleed Bin Talal Alsaud and his entourage of 35. Reportedly, the prince never partook; the Wyoming winter was too nippy for his tastes.

Whether or not royals actually make it up the mountain, ski holidays figure big on their itineraries. Prince Charles and his boys regularly hit the mountain enclave of Klosters near Davos in the Swiss Alps (as did Greta Garbo in her day). And Denmark’s Crown Prince Frederik and his family also opted to do their schussing in Switzerland this year, in the posh Alpine burg of Verbier. Another Alpine locale big with royals is Lech, Austria, once frequented by Princess Diana and King Hussein of Jordan, is the preferred mountain address of Queen Beatrix of the Netherlands and other Dutch royalty.

For Saudi royalty, Lebanon and Syria are popular destinations due to the relatively freewheeling lifestyles they afford in comparison with life in the famously repressive kingdom. When fighting broke out between Israel and Hezbollah in Lebanon in the summer of 2006, Syria saw an even greater influx of Saudi Arabian royalty, who fled Beirut for Damascus.

But it’s not just the Saudis who are drawn to Damascus. “We get lots of other gulf state royals coming to Damascus during the summer from places like Abu Dhabi, Kuwait and Qatar,” says Julian Crane, director of marketing for the Four Seasons Hotel Damascus, which opened in 2006. “They go up into the mountains surrounding Damascus (the area is called Bloudan) for the cooler climate. It gets hot in Syria in the summer, but it’s not the same sort of humid heat you get in Saudi Arabia or Dubai.”

Of Damascus, Crane adds, “It’s no surprise why royalty would want to come here, but it’s also no surprise as to why anyone would want to come here… It’s only in the last seven years that the country has really opened up, and it’s such an unknown destination.” For one, the centuries-old souks, or markets, provide a refreshing alternative to the glamorous shopping malls that dominate so many other Middle Eastern cities.

“There’s this perception that Syria is a non-welcoming and highly religious country,” says Crane, “and it’s the complete opposite. Syrians are almost chivalrous in the way they treat foreigners.” Americans included.

As to whether Arab royals let loose when they leave the confines of their home countries, Crane demures slightly. “They can and they can’t let loose here,” he says, conceding that royals are free to behave however they like in Syria. “They can let loose in the hotel, sure, they can run off to the old city and to a restaurant… There are no restrictions in Syria.”

Another destination close to splashy Saudi hearts—and wallets—is the golf and sun seeker paradise of Marbella on the Costa del Sol in the South of Spain, where the House of Saud has been a permanent summer time institution since the Arab oil boom in the ’70s. King Fahd once installed himself in Marbella for the season with an entourage of more than 3,000 people, while shopkeepers foamed at the mouth at the promise of royal expenditures of upwards of $5 million per day.

King Juan Carlos of Spain was known to visit King Fahd in Marbella. But a favorite annual pilgrimage for the King of Spain is actually to neighboring Portugal and the fishing-village-turned-chichi-marina-town of Cascais, just outside of Lisbon. During the annual King Juan Carlos Cup sailing competition, the Spanish King is purported to bed down at the super plush Grande Real Villa Italia Hotel & Spa in Cascais.

“There’s a big link between old style Portuguese families and royalty in Spain and Italy,” says Frederico Champalimaud, director of golf at Oitavos Dunes Golf Course in Quinta da Marinha, a wealthy resort community near Cascais. “The King of Spain, being an avid sailor himself, comes down for regatta every year—there’s a close connection between yacht club members in Cascais and in Palma de Mallorca (in Spain).”

URL: http://www.msnbc.msn.com/id/24410251/

Norman

Syria ‘nuclear’ site ti be visited by Baradai.
If IAEA does not find anything, the US media will argue that the syrians cleaned up everything but no one will ask why the IAEA was called in so late and not before the ‘supposedly’ nuclear site was bombed by Israel and no one will question the right for a UN nation to bomb another UN nation…

Alex said:
Forbes just gave Damascus the number two position (worldwide) on this list …

Where is this list? I have not found it in the article.

AnotherIsraeliGuy said:

Seeking,
Isn’t their government the Hamas government? Why don’t you ask them?

Well, who is imprisioning whom? Don’t you think these students will be an asset in the search for peace?

Seeking,
Not really. The thousands upon thousands of Palestinians that have left Gaza to study have not been an asset at all. Instead they become leftist that preach for the one state solution.

Israel is at war with the Palestinians in Gaza. Why should we do them any favors? How about a deal, Hamas committs to not fire rockets for 6 months and we let them out. If that sounds good to you, please forward to the Hamas government. If not, let me know why.

AIG said: “Israel is at war with the Palestinians in Gaza. Why should we do them any favors?”

Ladies and gentlemen this is what Zionism is about. Notice that Israel, a state, is at war the Palestinians, a people. Not with Hamas but with Palestinians. Thank you AIG for clearly exposing us to what Zionism|Israel is really about.

Ugarit,
Learn to read, I specifically wrote: the Palestinians in Gaza
NOT the Palestinians.

Hamas has taken over Gaza and it is supported by most of the Palestinians there. How can we not be in war with the Palestinians in Gaza????

How about the deal? Do you like it? If not why not?

AIG said: “the Palestinians in Gaza”

Ooooh. That’s much better. Thank you again. Not Hamas in Gaza but THE Palestinians in Gaza.

AIG:

Using your logic, which I don’t agree with, every Jew in Israel who supports the government of Israel is a legitimate target. What an abhorrent view.

Israel is at war with the Palestinians in Gaza. Why should we do them any favors? How about a deal, Hamas committs to not fire rockets for 6 months and we let them out. If that sounds good to you, please forward to the Hamas government. If not, let me know why.

AIG how can you be at war with people with no state? Well if it possible then we can say that Adolf had equal “right” to have a war against Jews, because he wanted their property and wanted them to leave. Like you do want with Palestinians. Certainly Adolf would have “stopped” if you would have stayed peaceful in Warsaw Ghetto.

AIG during the first decades of occupation the Palestinian resistance was minimal. How did you “reward” them? You did begin to steal their land and tramp on their human rights. In earnest AIG what should Palestinians do? If they stop resisting does it guaranty that your New Testament burners do not come and steal their lands with the help of IDF.

By the way AIG what is your extremist buddies going to do with the grave of IDF’s Major Baruch Golstein (terrorist who killed 29 and wounded 150 in a mosque, before suicide bombings) grave when you have to leave Kiryat Arba (founded in 1968).

Ugarit,
Is my view that every Palestinian in Gaza a legitimate target for attack? No. But my view certainly is that Israel does not owe them any favors. They should go to complain to the Hamas government they elected and maybe next time not elect it.

But let me ask you, isn’t every Israeli citizen a legitimate target for Hamas and most of the Palestinians that support suicide bombing and attacks in general against civillians? What, are you playing coy now? How about all the Syrian missiles that are inaacurate and all they can do is hurt civillains in case of war? Is that abhorrent?

Sim,
Really, Hitler would have stopped sending Jews from the warsaw ghetto to death camps if the Jews stopped their resistance? Where do you get your history, Syrian text books?

Hitler killed Jews before they resisted and after the resisted.

Israel left Gaza but the Palestinians are firing rockets. You can’t see the difference but why am I surprised?

Palestinians don’t owe Israel ANY favors. Like Israel has EVER given any favors to Palestinians. Israel has been ethnically cleansing the land as best it can. Face up to the fact that you live in an apartheid state that will have to confront that reality one of these days. We’ve heard all the arguments from White South Africans and Zionists so please don’t waste your time and ours.

Ugarit,
Yes, the conflict is one sided. Israel bad, Palestinians good. How deep.

AIG: “Is my view that every Palestinian in Gaza a legitimate target for attack? No..”

You’re retracting a bit, I see.

We know what you meant with “the Palestinians in Gaza”. There is absolutely no ambiguity in what you meant. We all know that, so please stop embarrassing yourself. I do want to thank you again for laying on the table what Israel and Zionism stands for, however.

AIG: “Yes, the conflict is one sided. Israel bad, Palestinians good. ”

The conflict is hugely one sided. If you don’t see that then you are quite blind or simply don’t care. A state armed to the teeth with 150 nukes attacking mostly civilians and starving them?

Israel couldn’t really fight a true army like Hizballah because it’s been target practicing mostly on civilians for a long time.

Ugarit,
You are a crybaby. If Israel is weak attack it, don’t ask it for any favors. If you want peace, stop violence. If you don’t, then don’t complain. Go tell everybody how awful Zionism is for not accepting that the Palestinians from Gaza fire rockets at Israel.

Ugarit,

In the US people own shares in companies American companies , I think we have more say in choosing the board of directors of GE than you have choosing anybody in the cement company that owned by the Syrian Government , Actually you do not have a say even if the CEO of that companies is stealing ,

When Syria nationalised the companies they found out that these companies were really owned by the people of Syria in the shape of shares ,

Now i ask you again , who has more say , you in the Syrian company or I in GE , I think I have more say , Don’t you think ?.

Why – Discuss,

Strong countries do not abide by the rules and when Syria becomes strong economically and militarily nobody will be able to force inspection on them , Probably Syria after the inspection which should clear it should withdraw from the IAEA siting the lack of rules that govern that body and the lack of protection that the IAEA was able to offer Syria .

As I’ve discussed here before, I disagree that capitalism spells the best outcome for Syria. At best only a very limited form of such might be ok, but nothing on large scale.

It is an established fact (please check Ha-Joon Chang’s phenomenal “Bad Samaritans”) that none of the advanced countries of today progressed because they adopted free market/free trade/privatization/deregulation capitalism. Au contraire: they progressed because they avoided doing so. From South Korea to Finland, Germany to Japan, UK to US, the stories are similar.

More or less, all of them employed the exact opposite of free market: They had state-owned companies, protection of industries, import substitution. They violated intellectual property rights, they had a planned economy, regulations, subsidies, tariffs, control on free movement of capital. In short, they had everything the free marketeers preach against, often labeling it “socialistic”. That’s how they progressed. Only after they developed that they began allowing, selectively, some measure of free trade and free market.

The nature of capitalism, with greed as its central engine, will seek the cheapest and quickest dollar, without regard to what’s good for the long term of the country. In Syria that will probably mean (yet) more expensive restaurants, hotels, clothing stores, where the rich will spend and consume conspicuously. When money pours into healthcare and education, it will usually be private healthcare and private education for the elite few.

The arguments for privatization, capitalism and free market sound nice. They are simple and charming. Who can argue with “risk-taking entrepreneurs working hard and benefiting society” or the magical invisible hand of the market? The reality of capitalism, however, is often that of a horror show of speculation bubbles and bursts, deep inequality, anti-democratic concentration of wealth and power, devastated environment, massive waste, exploited workers, monopolies, greed, individualism, hyper-consumption, unaffordable housing, fragmented communities where the citizen once concerned about fellow citizens, is now turned into selfish consumer.

Is this good for Syria? Alas, it is already happening and people are screaming. But who will hear the cries of the poor who will dare not scream in a dictatorial system? And when the ugly realities of capitalism rise to the surface will we comfort ourselves by blaming the usual corruption, or insufficient privatization/free market? It should’ve served as a warning/hint that George Bush, Rush Limbaugh, the neocons, Richard Perle, Thomas Friedman, Fox news, and the US in general are pushing, at gun point if necessary, this wonderful ideology of the free market, just like the British Empire before them forced the free market on its subject areas, which ensured their regression and the exploitation of their resources. Who needs occupation and colonization when you have the free market?

Before anyone advocates the free market for Syria or any country at its level of development, please first read how economics work in the real world, as opposed to how it is “supposed” to work in economic text books. The best starting point is “Bad Samaritans” by Ha-joon Chang, a noteworthy scholar in developmental economics. I would also recommend Naomi Klein’s “The Shock Doctrine” if one thinks that democracy/freedom are compatible with the free market.

Norman writes:

In the US people own shares in companies American companies , I think we have more say in choosing the board of directors of GE than you have choosing anybody in the cement company that owned by the Syrian Government“

This gets to the heart of an important problem – a problem with capitalism. One has more say in GE to the extent that one owns shares. It is a one-dollar one-vote system, as opposed to the one-person one-vote democratic system. Share owning in companies is by no means democratic across the population. It is more like 10% of people owning 90% of shares. So, the richer you are the more say you have in capitalism. Is this the solution to dictatorial rule, where political dictatorship is now replaced by moneyed one?

No, the alternative need not be a Syrian government control of the cement company. Rather, a more democratic control of such to the degree people are affected by cement production and consumption. For example, a counsel of cement workers, consumers and neighboring residents (and/or their representatives) to determine need, production, distribution and pollution limits, with complete public transparency, open criticism of its workings, etc. This is just a suggestion, (intended also as a response to the customary “what do you suggest in place of capitalism?”) The exact way this might work has to be figured out step by step, through trial and adjustment by free people.

SAMI D,

Are you serious?

Have you been following events in Venezuela recently?

Sami D

There’s been a fair amount of criticism of that book. So, I don’t think you can say, unambiguously, that “it is an established fact … that none of the advanced countries of today progressed because they adopted free market/free trade/privatization/deregulation capitalism.”

The author has been lauded for his provocative ideas, but he hasn’t won the Nobel Prize just yet.

But I think your points are worthy. Lebanon also seems to be a case in point, although it may be more a function of corrupt politicians rather than immature conditions for free-market capitalism.

Ehsani2:

From your perspective what has been happening in Venezuela?

Where do you want me to start?

http://faculty-staff.ou.edu/L/Joshua.M.Landis-1/syriablog/2006/02/hugo-chavez-economics-for-syria-by.htm

I started writing about this back in 2006.

Mr. Chavez has been more of a disaster than I even expected then.

Sami D ,

I will answer you later ,

Dear Qifa Nabki, Thanks for your input. I have seen a couple of such criticisms, one by FT’s Martin Wolf, as well as Chang’s response. Here’s a sample from the latter: “Not all protectionist countries have succeeded. Many have done poorly. However, I present evidence, in the book and in my academic writings, that most countries that have succeeded used protectionism to one degree or another. Typically, countries have liberalized trade after, rather than before, they became rich. Most countries that adopted free trade prematurely have failed. And I am not talking only of the poorest countries.”

I have also seen a couple of recommendations of Chang’s work, sometimes raves, by notable intellectuals, (and Nobel Laureates, if that’s important) from the economics editor of the Guardian, to WP’s economic writer Paul Blustein, to Joseph Stiglitz, Chalmers Johnson and Noam Chomsky. A free market (FM) can be quite destructive to a relatively young, and third-worldish economy like Syria without an already established industry/specialty.

But we don’t need Chang to tell us what we can see around us: The advanced countries, even today, are careful to allow the market to operate only within limits, government oversight, and heavy regulations, taxes especially on wealth, subsidies to science, agriculture, medicine, etc, to limit its negative outcomes of inequality, monopoly, bubbles, pollution and concentration of power. The evil big government, maligned by the free marketeers, is quickly called upon to socialize-risks/privatize-profit — to bailout the “entrepreneurs” who “took bad risks” and as a result were threatening to drag the economy behind them.

From financial speculations, subprime bubbles, S&L scandals, Enrons, disappearing retirements, foreclosures, to the colossally wasteful healthcare insurance and PR-advertisement industries. Or the non-FM military Keynesianism that pumps $100s of billions of taxpayer’s subsidy yearly into private hi-tech economy in the name of “defense.” Granted, some of that spins off into good stuff, like technology, internet, airplanes, electronics, satellites, computers; but others go, at best, into wasteful military products and at worst into building an empire that helps subjugate those who dare take an independent course from the US free market doctrine.

These are some of the known byproducts of (and state intervention in) capitalism that we must consider before advocating FM for Syria. I am not advocating total rejection of FM, but a careful application based on democratic decision by a free, independent people – those who will be affected by the system.

Qifa Nabki wrote:

Lebanon also seems to be a case in point, although it may be more a function of corrupt politicians rather than immature conditions for free-market capitalism.

Corrupt politicians exist everywhere, in the countries that lagged as well as those that developed, in those with FM or those without. A more socialized 1950s US (with much more prosperity, equality and middle class than today), for example, exhibited much less corruption than the finance/tax havens/speculation/corporate-government revolving door US of today. Citing corruption as a reason the FM didn’t work is weak at best. FM, based as it does by definition, on selfishness, greed, profit, accumulation and driving the other guy’s income to zero (the goal of competition), can only be quite compatible with corruption.

Lebanon’s real problem is a lack of a uniting political ideological consensus and as a result, a strong centralized government. But that should be fine by more pure laissez-faire FM principles. The sectarianism & lack of a strong centralized government of Lebanon actually produces a closer to a pure FM system than otherwise. The outcome, civil wars and sectarian racism aside, is consistent with capitalism: Extreme wealth divide, slum-ridden areas of large poverty alongside glossy facades, a massive debt, everything-for-sale system, Asian maid slavery, exploitation of foreign/Syrian/Palestinian workers, a skin-deep, reality-show culture of plastic surgeries and status consumption. (Syria is not far behind, I am afraid, without the sectarian flavor). My apologies if this sounds unfair; I have only dear personal memories of the charming country, as well as many relatives there.

Dear Ehsani, Thanks for your response. Have you seen the double-digit growth in Venezuela most of which NOT in the oil sector? I have indeed seen some criticisms of Venezuela’s model, e.g. the famous one in Foreign Affairs, but I also have seen some responses, notably from Mark Weisbrot and some general assessment of the economy by Robin Hahnel. Here’s a clip from Weisbrot: “In the five years since the government of President Hugo Chavez Frias got control over the country’s national oil industry, real (inflation-adjusted) GDP has grown by more than 87 percent, with only a small part of this growth being in oil. The poverty rate has been cut in half, and unemployment by more than half. The economy has created jobs at a rate nearly three times that of the United States during its most recent economic expansion. Health care for the poor has been vastly expanded, with the number of primary care physicians in the public sector increasing from 1,628 in 1998 to 19,571 (by early 2007). About 40 percent of the population has gotten access to subsidized food. Access to education, especially higher education, has also been greatly expanded for poor families. Real (inflation adjusted) social spending per person has increased by more than 300 percent.”

Sami

What do you mean by “the lack of a uniting political ideological consensus”?

Lebanon’s ugly realities are not a secret, so you are not being unfair. However, I think you will agree that similar problems (extreme wealth divide, areas of poverty alongside glossy facades, Asian maid slavery, exploitation of foreign workers) exist in many areas of the region, esp. the Gulf.

Lebanon’s problems are more dramatic precisely the result of — as you say — its highly decentralized political system.

Sami, D

You remind me with my youth , I was wrong then and you are wrong now ,
Most American companies like GE and others have shares which are owned by their workers through their pension and 401 K and profit sharing plan , these shares are also owned by workers unions through their pension funds , In all there is more ownership of these companies by the public than ever the case in Syria or any socialist country,
Your ideas are noble but the demise of communism proved their futile nature .

If you still think that your way is the best way to compete and and build a good company , the free market economy will give you the chance to do that without being told that you can not ,

Yes you can build the company as you like it .

Ehsani said: “Mr. Chavez has been more of a disaster than I even expected then.”

How?

Sami D
Thank you very much for the link to Chalmer Johnson article on Chang’s book. The article was rather enjoyable and illuminating and it confirms what I have suspected, through common sense observations, for a long time now. I have read two or three of Johnson’s books. And I will be buying Chang’s books soon.

Yet, given Johnson’s high caliber intellectual honesty and accuracy, I was surprised to notice that Chang’s book does not mention one of the most striking “infant industry” protection in our modern history, and that is Slavery in the good old US of A.

The abhorring, and repulsive slavery was a state subsidy of land owners in the form of guaranteeing an endless supply of free labor. It was instrumental in establishing the first economic base for the country and for the development of competitive infant textile and tobacco, not to mention mining industries. Only when slavery became a hindrance to industrial development as it restricted the free movement of cheap labor particularly in growing urban centers, the notion of abolition took foothold among some within the white majority. One should not discount the role of idealism, as the country fought a civil war on that topic. But it is also possible that the war was mainly to protect the Union, with abolition being a byproduct. I must mention that I am not anti-American. I am an Arab American who by the action of emigrating to the US, have accepted this shameful inheritance as a part of my adopted new-history.

The topic of intellectual property right is very important to me. I am a scientist whose ability to conduct research depends not only on my own creativity, but on my ability to use scientific software to perform simulations, analyses, and visualization of huge multi-dimensional data. Over the past few years, I have become disillusioned with the slow development pace, tyranny, and lack of flexibility of industry standards software and of their insistence on burdening the software with useless bells and whistles. Price is also a big factor. I started searching and found a wealth of alternatives in the public domain. I now use these tools extensively, and in fact, my productivity, after going half way through the learning curve, has risen. True I still use commercial software for few tasks, but that is only to maintain some compatibility with colleagues. I hope to reach full migration to public domain OS and software within the next few months.

I brought up the above example not to be autobiographical, but to highlight two points. The first is to argue that there are alternatives out there to straight jacket approach to economic development. The real issue for a country like Syria would be to identify a basket of infant industries to develop and protect if Syria, and other countries are to follow the South Korean model. It should not be left to private entity interests to decide on that for most likely, their investments would gear towards service industries and towards low growth industries that are only complementary to developed world industries. The state, while not necessarily owning the basket, should have the right and obligation to encourage and direct the development of unique “niche”. The second idea I wanted to highlight is the role of community of nations. Take for example public domain software development community. Third world countries can learn from that community and work towards developing alternatives to IMF, WTO, and the World Bank. Pooling resources, working together in manners not seen since the collapse of the non-alliance movement. There are signs that such is taking place in Latin America, which was made possible because the US has been rather busy over the past eight years with other issues. It may be “Off the Wall”, but I suspect that if Third world countries combine to invest perhaps 1.0-2.00% of their annual GDP for few years into a pooled low interest, development financing system, the benefits would be much larger than the interests paid on their current IMF loans. I hope to hear from the economists amongst the posters here on whether this is simply an idealistic or a possible if distant idea.

Dear Norman,

Thanks for writing back.

First of all, please do not assume that because I am a strong critic of capitalism that this automatically implies that I am an advocate of socialism. Read what I wrote carefully. Independence and democracy for people to decide what’s best for them is what I call for. If people see that publicly-owned companies would help in some areas, then that’s their choice. If they believe some private ownership in others would help, that’s also up to them.

Norman wrote:

Most American companies like GE and others have shares which are owned by their workers through their pension and 401 K and profit sharing plan , these shares are also owned by workers unions through their pension funds , In all there is more ownership of these companies by the public than ever the case in Syria or any socialist country

My main point in this regard remains standing. While around 45% of the population own stocks (nothing close to the whole population), the majority of the stock values are owned by a minority, 10% or even 1%. Stock ownership, like wealth distribution under capitalism, is extremely exponential. So yes, capitalism indeed works – for some. In general, the top always manages to collect most of the prosperity created by capitalism, while people work harder and harder just to stay at their income level (in real dollars).

Furthermore, as a worker in a corporation like GE you take orders from above, period. It is dictatorial, although capitalism doubles as “freedom” sometimes. As an average citizen you definitely have no say in what GE does, and it is not accountable to you. It can only be so if you’re a major share-horlder or a major customer. Again, the one-dollar one-vote system. Some people are just “more equal than others” under capitalism.

Not to mention that under FM capitalism, your ownership of 401K stocks can also face the Enron treatment. “Sorry, we were kidding about your retirement. You’re on your own now. No unemployment package either, unless you’re the CEO and his buddies. You took a risk by choosing to work for us, and now you have to take responsibility for that risk turning sour. As a believer in personal responsibility, you sure don’t want society to bail you out either, especially after you’ve been railing about taxes and big government for years. Now stop complaining about your destroyed future and mortgages/college/medical/credit card/car bills piling up. Pull yourself up by the bootstraps and work hard; create your own business and take more risks. Don’t let the fact that most start-up businesses fail, deter you. Think only about yourself and be greedy, and then sit back and relax watching prosperity come to you and to society through the invisible hand of his holiness, the Free Market …” While this is my inner capitalist fiction writer, the scenario is quite real and is part of the mainstream free market dogma.

“Your ideas are noble but the demise of communism proved their futile nature”

Noble or not, “my” ideas were utilized by all the developing countries of today. These countries became capitalistic – in a limited way mind you– after they developed. Re-read my posts above and elsewhere on this blog.

Did you say GE? A fine example of a company that exists in its size today thanks to US government & defense subsidy, directly or indirectly – again the opposite of capitalism. That’s how technology, electronics, solid state, computers, pharmaceutical, internet, space, satellites, TV, GPS, communications, airplanes developed in the US — through government subsidy. While these industries were emerging and struggling, risks were taken by the government (i.e. the taxpayers). But when they became successful they get handed to private industry so they can collect the profit.

Facts are that the middle class will disappear if left to real capitalism. The US middle class of the post WWII prosperous quarter of a century, was created by government policies of subsidy and heavy taxation on the rich (see Paul Krugman’s “Conscience of a Liberal”). If capitalism is left to its own devices a lot of things will also disappear: Social security, minimum wage, the 8-hour day, unemployment compensation, rights on the job, welfare for the needy, Medicaid, Medicare and worst of all, the eco system.

Capitalism does not think about sustainability unless you can make a buck off of it, and by the time the market realizes the problem, it might be beyond repair. All capitalism thinks about is more, more and MORE. (In part, “more” is important for capitalism, so that some crumbs will manage to “trickle down” and keep the masses semi-quiet, without affecting the accumulation of those on top.) And of course there are the other defining characteristics of capitalism: accumulation, greed, profit, selfishness, materialism, inequality, individualism, commercialism, speculations, booms-n-recessions. While the power of selfish greed can be harnessed to increase/improve production, this can only be sustainable and fair if done within strict limits and government oversight & regulation.

Dear Qifa Nabki, Yes I meant Lebanon has the extremes of capitalism more so than other countries, although the others are now closing in fast, thanks to lack of democracy in economic decision-making and to adopting capitalism. What I had in mind when I wrote “lack of a uniting political ideology” is the lack of a cohesive unified nationalist agenda, in short, sectarianism. You’re right that that was vague.

Dear Sami D,

“So yes, capitalism indeed works – for some. In general, the top always manages to collect most of the prosperity created by capitalism, while people work harder and harder just to stay at their income level (in real dollars).”

You are obviously a smart man. So is Off the wall and my friend Ugarit who has long held different political economic views than me. While I salute the intellect of all three of you, I am afraid to tell you that you are all simply wrong.

I have studied economics all my life. I of course attended those development economics classes (in the UK) and was mesmerized by the work of a number of economists in that field. The sins of capitalism were drilled into my head for three straight years. Since I grew up in Syria, my head was of course a very fertile drilling ground for capitalism was synonymous with evil, imperialism and Zionism.

If an equal distribution of wealth is your metric, then you will find a lot to criticize in capitalism.

If an efficient allocation of ALL resources is your goal (happens to be mine), then capitalism is the best system available.

I highlighted the word “ALL” above to stress an important point:
Your quote above, and the intellectual underpinning of all three of you, is predicated on making sure that labor as a resource or an input of production is compensated fairly. I happened to agree with that. Regrettably, you stop there. Capital is another input of production. It too has to be compensated fairly. That compensation ought to be decided by the free market system as capital is free to travel. Capital also has a strong sense of smell. It usually moves to where maximum profits exist. Incidentally, land is the other resource and input of production.

Economics is about matching the above limited resources to our unlimited wants and needs (at least this is my definition). The task is to combine these limited resources and hit what is referred as the efficient frontier. In my opinion, the invisible hand and the free market system is the mechanism to do so.

The GE worker behaves the way you describe because that is the way the labor market decides his/her compensation. Once he is unfairly treated, the worker will not be at GE for long.
The investor in GE is only there because he/she expects a certain return on that invested capital. Once these expectations are not fulfilled, the investor is a mouth click away from transferring his hard earned capital to the next company that promises higher return.

I state the obvious here of course but I think that it is important for you to realize that without capital, no production/income will take place.

History has shown that countries that have attracted capital have also seen poverty drop fastest. Every emerging country that has attracted capital since 1980 has seen the tide lift millions of its people. Sure, some have benefited more than others. Those with the higher education or more capital have been the beneficiaries as they should. Years of IMF and World bank loans do not even come to compare the level of wealth creation that has come to these nations who moved down this path.

Dear Ehsani

Thanks for the compliment (the feeling is mutual) and for sharing some of your life’s stories. I will share some of mine in case it is of value. First, I haven’t studied economics academically, or taken any class in the field. What I learned was out of personal curiosity, starting maybe around 7-8 years ago. I went through the same educational system as you did in Syria, but I hadn’t a clue, until not too long ago, of what the difference between capitalism and socialism really was. And I didn’t care either, thinking they had no relevance to life & politics. For most of my first dozen years or so in the US I was actually repeating and agreeing with, unwittingly, all the basic canons of capitalism. It seeped into my consciousness without me deliberately learning anything about it.

But few things always bothered me in the States, like the lack of social life, the individualism, the selfishness, the materialism, the lack of neighborliness, at least in comparison to how Syria used to be. Happiness to many people in the US is buying a new gadget, dress, shoe, tool before later consigning it to the basement or transferring it to others via a garage sale. The ultimate dream is a huge house, as far away from people as possible, or a vacation on an island, again away from people. The way I see happiness is, on the other hand, spending time with close friends and family. The saying “Janneh bala naas ma btindaas” (An uninhabited paradise is not worthy of stepping into) is fundamental I think. Capitalism’s paradise is empty of people, but filled with all the dream things that one can consume. Of course I am generalizing about US culture, but the idea is to illustrate how capitalism skews things, like happiness and needs.

Eventually, when I traced the selfishness and materialism that I found in the US, and the resultant erosion of community and solidarity, to capitalism, I turned against it. The inequality and environmental depletion/pollution issues I discovered later made me realize that it was an unsustainable system, in addition to being a hostile and unfair one that commodified everything, turning in the process, citizens into consumers. The last thing I wanted for Syria is a system that destroys solidarity and increases selfishness and empty consumption. Alas, it’s too late now…

Onto some of the points you raised.

That I find the extreme –and I mean EXTREME– inequality (where 1% percent control most wealth and the bottom 20 barely eating) abhorrent, does not automatically translate to me wanting equal distribution of wealth. After all, distribution has to reflect how hard/long one works (otherwise where’s the incentive), and not who your parents are or how lucky you got betting on the right stock. Moreover, those who deserve more for working longer/harder, should not get a 1000 times more than someone who worked half as hard, as the case is under capitalism. Today, under capitalism, you can work as hard as you can, producing food for society for example, and end up making a thousand times less than someone speculating on tobacco and soft drinks. The ratio of average CEO-to-employee income is, I am sure you know, 475. This is capitalism. And I find it grossly unfair.

In response to my assertion that a worker at GE takes orders from above, you said that if the worker’s not happy s/he can change jobs. The problem is that wherever s/he goes to work, s/he will have to take orders from above too. That’s the nature of the corporation: It’s a private dictatorship, where orders are passed top-down.

Is capitalism efficient in allocating resources, or ALL of them as you say? Not in my opinion. I find capitalism often times very wasteful. For one, capitalism doesn’t just meet needs, but tends to create new wants, through deceptive advertisement. Suddenly, I “need” that new toy, or soft drink or 4×4 car. Besides, they would all make me look cool. How much money is wasted on creating a new look for cars every couple of years, fashion industry, changing styles just to convince people to throw away something that works perfectly, to be up to date on the latest trends, or to have the latest design, status consumption, etc? Not to mention the $1-2 TRILLIONS spent yearly on marketing and advertisements, in the US, and for what other than mostly to deceive people, including children, and creating wants.

Or take the other major waste under capitalism like the private health insurance industry; add a $trillion there. And have you seen the weekly mountains of furniture, TVs, bicycles, appliances, children’s toys, electronics disposed off at local dumps? Or take the countless houses built for “investment” during the subprime bubble, now lay empty, let alone the million foreclosed ones. Is this, or the bubbles-recessions pendulum that are so endemic to capitalism, indicate an efficient allocation of resources? And is capitalism’s allocation of labor so efficient that the government is the largest employer in capitalist America? Or the razing of Amazon forests to plant corn to fill up our SUVs, with each ethanol filling sufficient to feed one person for one year? Or the amount of substances dumped in rivers, creating massive dead zones in the oceans. Or the disappearing mountain tops, blown up to extract coal. In capitalist US, people consumes 5 times their share of the world’s population. The wastefulness of capitalism is beyond gargantuan; it is unsustainable and could very well threaten life on earth.

One problem with giving capital its “right” like labor, is that doing so will only mean that capital will eventually devour all the rights, while labor and citizens are left with none, as the acute inequality produced by capitalism indicates. Capitalism produces a lord class of few and a large class of have-nots, who have to rent themselves to those with capital, if they’re lucky, to stay alive. In the process of production we forget that while investment capital can serve as a catalyst, it is labor (physical and mental) in addition to natural resources that produce wealth in the first place. Thus, the capital that people accumulate and seek to expand through investment, represents the labor and resources, often of other people.

The problem with capital is that it is not necessarily interested in making things better; it is interested only in returning more capital for its owners, period. Capitalism’s claim is, of course, that “making things better” will come as a byproduct of such (via the invisible hand). But that is not necessarily the case. Capital will invest in tobacco and soft drinks, not say in affordable housing and long term industrialization, because the former may prove more profitable. When, on the other hand, you have more democracy in economics, i.e., people’s rights trump capital’s, then capital tends to get invested in things that are useful to society, like infrastructure, affordable health care, education, transportation, science.

And the more concentrated capital gets, the more power capitalists obtain, to the degree they can control ideas, discourse, society and life. They can control our media (they already do) and they can create think tanks to tell you that capitalism is it. They can create research that “discovers” that our consumption level actually does no damage to the environment, the same think thanks that tell us we should invade, bomb and “liberate” by spreading capitalism. No wonder Naomi Klein described the “think tanks” as people who are paid to think by the tank makers.

You mentioned how with a click of a mouse the investor will take his capital from one company/country to another. But is that really a good thing? It is precisely because capital can so easily shift across the globe that it will seek short term quick buck. Many of the successful and useful things for society were created thanks to long term investment and the willingness to sustain a loss for a couple of decades, before the investment turning profitable. Capital getting in then out of an investment destination can leave devastated communities behind; but it doesn’t give a damn. The minute it spots a better deal (usually cheaper, more exploitable labor/resource) somewhere else, off it goes. It has no responsibility or accountability to the community it purports to (indirectly) serve. That may represents an efficient allocation of resources, but to the people on top. It is certainly beneficial for capital — at the expense of labor. That’s why I see capital control important for developing countries. Capitalism is too dangerous to be left in the hands of capitalists. Let democracy decide.

Be well,
Sami

Sami

Nice response. But I think you miss the mark with the bit about “janna bala nass”. First of all, it’s impossible to speak of “American culture” per se… there are many cultures, and many of them are very socially oriented, family values, that sort of thing. Secondly, to take Lebanon as an example (a freewheeling capitalism economy, as you’ve suggested), it remains a highly social and family/friends-oriented society, a lot like Syria in many ways, this despite the materialism of its glitterati.

I agree with some of your critiques… You may enjoy this piece:

http://www.orionmagazine.org/index.php/articles/article/233

Qifa Nabki, You’re certainly right; there’s no American culture per se. I wrote that I was generalizing just to illustrate a point of societies at different stages of capitalism, early (Syria) and advanced (US). I just happened to run across this painful item from today, which could happen in today’s Syria from some of the stories I heard. The US of yesteryears, I hear, was too a much closer society than it is today. But even today people are resilient, in spite the penetration of capitalism. They try to maintain some social bonding, in Lebanon, Syria, and the US like in activist circles and farmer’s coop; capitalism’s dominance isn’t complete, luckily. Thanks for the article. I will read tomorrow. Orion is a nice magazine. One of its prominent writers (Wendell Berry) had a profound article in the May issue of Harper’s; it is called “Faustian Economics”. It is not to be missed. Harper’s site required subscription to read it. I had found a copy on the internet a couple of weeks ago but can’t locate now.
Best

Off The Wall, you’re welcome. I will add to what you wrote if I get a chance.

What Mr. Crude Oil Sees Ahead
Arjun N. Murti, Energy Analyst, Goldman Sachs
By LAWRENCE C. STRAUSS

AN INTERVIEW WITH ARJUN MURTI: Gas may have to hit $5.75 a gallon before consumption cools enough to take the heat off fuel prices.

2004, ARJUN N. MURTI, A TOP ENERGY ANALYST AT GOLDMAN SACHS, published a report predicting “a potentially large upward spike in crude oil, natural gas and refining margins at some point this decade.” It was a controversial call, with crude around $40 a barrel at the time. But it was right on the money.

Four years later, crude is trading around 139.

Murti sees energy in the later stages of a “super spike,” in which prices rise to a point where demand drops off. In a note last month, he wrote that “the possibility of $150-to-$200-per-barrel oil seems increasingly likely over the next six to 24 months.”

With supply growth constrained and global demand staying strong, prices must rise further, in Murti’s view. Barron’s caught up with him last week in his New York office.

Barron’s: What do you make of Friday’s big surge in oil prices?

Murti: There have been a number of bullish fundamental data points recently that contributed to the rally. These include further declines in U.S oil inventories announced June 4, the announcement of a decline in Russian oil production in May, and recent comments that Mexico expects further meaningful declines in oil production over the rest of this year.

Longer-term, what’s driving crude to such high levels?

Spare capacity throughout the energy complex seems very limited, whether for OPEC crude oil, natural gas or refining. In all of those areas, capacity is limited. And it’s getting very difficult for companies and countries to boost supply — something that became increasingly apparent to us over the first half of this decade.

Our view started shifting, from one of “It is easy to grow supply,” which was the perceived view of the 1990s, to “It is going to be more difficult to grow supply.” That’s partly because some oil-producing regions, like Mexico and the North Sea, are declining. The Lower 48 states in the U.S. are very mature.

There are growth areas, such as Brazil and Angola. But when we add up all those pluses and minuses, non-OPEC supply looks like it is not going to grow very much.

So, essentially, there is constrained supply, along with increasing demand?

Demand has been consistently growing. On the supply side, we don’t subscribe to the peak-oil view. We don’t think the world has run out of oil.

We do think that the places that have large quantities of recoverable oil, notably Saudi Arabia, Iraq, Iran, Venezuela and Russia, aren’t on track to grow their supply aggressively. It is growing at a very moderate rate, and so the remaining oil resources are concentrated. And, to some degree, high prices are disincentivizing some of these countries to either open up their industry or spend the money themselves.

What actually is keeping them from producing more?

These countries don’t need the incremental revenue. They’re getting the revenue through price; they don’t need it through volume. It means they have sufficient capital to try and develop their oil industry on their own. With high prices, they don’t need Western capital. Venezuela, where Western companies’ assets have been expropriated, is a good example.

You’ve made the distinction in your research that while the world’s oil supply is barely growing, if at all, there is a lot of oil that’s not being taken out of the ground. Take Russia, for example. Why aren’t they producing more oil?

In a lot of the key oil-exporting countries, the government is the key driver of whether their oil fields get developed. Relative to 10 years ago, Russia is in a very healthy position.

So, logically, there is less incentive for Russia to massively grow their supply and bring down oil prices. Frankly, that’s true for a lot of these countries.

In terms of your super-spike scenario, what phase are we in?

We are getting closer to the end game here, where despite eight years of rising energy prices, supply looks like it is going to barely grow this year. We have been bullish, but we didn’t expect such a slow growth rate of supply. And demand outside the U.S., Europe and Japan has been more resilient than we expected.

What markets are you referring to?

That would include China. The Middle East is a big demand driver, though it is often underappreciated. In aggregate, Middle East demand is about the same size as China’s and it’s growing at about the same rate. Demand from Latin America is also increasing.

Let’s talk about the possibility of crude hitting $200 a barrel. If we get there, how does it play out?

Our view has been that the price will keep going up to the level where it meaningfully reduces demand. This is Economics 101; we need more supply or less demand. And because there are various political and geologic constraints on growing supply, we’re left with looking for the price at which demand is reduced. We’ve never thought we knew what that exact number is. But we’ve tried to look at the 1970s, notably the economic impact of gasoline prices that ultimately led to a reduction in demand.

How does the current situation compare with the 1970s?

In the 1970s, you had a traditional supply shock. You took a bunch of oil off the market, and the price rose very quickly in a short period of time. That led to lower demand that proved sustainable, because the market worried that the supply wouldn’t come back. It has been, up until the last three or four months, a much more gradual increase — and therefore, people have generally been able to get used to the price. And it’s allowed demand to be more resilient than even we thought it would be.

But if crude does hit $200 a barrel, what kind of prices will we see at the pump?

Oil at $150 to $200 a barrel would imply between $4 and $5.75 a gallon.

At which point you probably see a falloff in demand, right?

We are already starting to see a drop in demand in the U.S., but they are still having demand growth in the non-OECD countries, including China, the Middle East and Asia. The OECD [Organization for Economic Cooperation and Development] countries are mainly the U.S., Europe and Japan. The real question: At what point do the non-OECD economies slow down? The other thing about U.S. demand is, at what point do you have sustainable change in consumer behavior? So if the price temporarily goes to $4 [a gallon], but immediately falls back to $3, it’s likely that people will keep driving cars with poor gasoline mileage. But if people believe the increase in oil prices is more sustainable, they might shift to taking mass transportation, if available, driving hybrids or taking the other kind of actions that are necessary to reduce demand on a sustained basis.

Do you see a sustained drop in demand at $200 a barrel?

That is the big question. We have always assumed that, at some point, you get a sustained drop in demand. Our long-term oil forecast looking out 20 years is [for crude] to fall back to $75 a barrel, or some lower number. The questions are: How long do prices stay high? How sharply do they rise? And do people truly change their behavior or are they just temporarily driving less? It’s an unknown at this point.

Sami,
I too am the product of the Syrian educational system which had brain-washed me into distrusting the free market, capitalist system, while cheering for the glorious equitable and encumbering socialist system. The Syrian media was an accomplice with the academic system at that time bombarding us with a barrage of analysis, stories and footage portraying the evilness of capitalism and how it can only be cured with the rational of socialism. That ideology was drilled into my head so frequently that I became one of its defenders. However, as an adult I discovered a few things about life that challenged those utopian ideals and made me re-educate myself based on the reality of human nature, not on what we wish it to be. I have come to acknowledge that while we humans are generally good, we are selfish by nature and constantly pursuing self preservation and enhancement in order to maximize our happiness. While this drive has brought us much pain and abuse throughout history, it is not all bad as our selfish nature has served us well over time by making us reach higher and dig deeper in our constant quest for a better life, which has in turn improved the lives of others.

I am well aware that happiness is in the eye of the beholder and it means different things to different people, but we can probably all agree that self betterment is a fairly good measure of happiness for most people, whatever that means to each of us. To some, it means more money, to others more education, more spiritual fulfillment, more social life, more possessions, more children, or even more romance. The ultimate goal seems to be growth of some sort. It is our instinctive drive to be curious and exploratory that has throughout human history driven us to do things better and more efficiently, which led us into this amazing evolutionary journey. I believe this instinctive drive in us should be recognized and celebrated, yet feared as it may ultimately lead us into self destruction if left unexamined.

Syria’s economic path is not so much a matter of choice as it is a matter of practicality. Syria can no longer afford to isolate itself from the rest of the world in today’s global economy. There is nothing unique about the Syrian economy that makes it worthy of special treatment. It adheres to the same economic principles and laws that rule the rest of the world. Discovering and exploring the country’s competitive advantages can best be identified and developed through a free but supervised market system, not artificial means that are doomed to failure in the long run. Protectionism has not worked in the past and will not work in the future. The country cannot limit access to its market in the name of preservation of national identity, or certain cultural or other unique qualities specific to Syria.

In order for Syria to join in the human evolution (economical, social and intellectual), it must unleash its citizens from the restrictions of planned economy which has restrained its progress for several decades, allowing its competitors to gain significant advantages. Syrians throughout history have always been competitive and successful entrepreneurs exploring domestic and international investments and trade opportunities, which enabled them to improve their lives and fulfill their aspirations. They were actively investing in Asia, Africa and Europe, wherever and whenever attractive economic opportunities presented themselves. They did not discriminate based on culture, religion or nationality. They wanted the best financial return. That free economic system has not only helped those entrepreneurs better themselves and meet their aspirations, but it provided for a more prosperous overall economic system wherever they employed their capital. This simple system has not lost its effectiveness over time, just become more diverse and sophisticated, which elevated the term free market to include certain regulations to level the playing field.

First order of business for Syria is to re-discover its economic competitive advantage by allowing investors (domestic and foreign) the freedom to explore economic opportunities and develop them into job opportunities for the masses. Of course, rules must be set to prevent abuses of all kind (labor laws, monopoly prevention laws, environmental laws, tax code and various legal reforms). We must not consume ourselves with the notion that nationality and culture must be preserved because the wheels of progress (good and bad) will eventually sweep away the unique qualities of every country. Evidence of such changes is already widely visible throughout the Middle East and other countries that have through various means tried to preserve their identity. The global economy is here to stay and Syria must embrace it in order to be embraced by it. When Syrians (and others) found opportunities in America and Western Europe, they were welcomed as contributors to their economic and cultural systems and were treated with respect. Those countries have benefited from such diversity and contributions. Syria can learn from those countries by welcoming those who wish to explore whatever economic advantages Syria has.

As for the side effects of free market such as inequality and consumerism, there is nothing new here. Human beings everywhere and throughout history have always sought to elevate their status at the expense of others through various means, some of which are unfair. Evidence of excessive consumerism and waste is everywhere and in all civilizations. In fact, governments have always been the biggest abusers and most wasteful of resources. Just look at the Egyptian Pyramids, Greek artifacts, Christian cathedrals, Islamic palaces and mosques all over the world. Consumerism is a behavioral issue that can only be controlled at the individuals’ level. I certainly don’t think we should trust any government into regulating our tastes, preferences and lifestyle.

Economic inequality has always been part of human history. Communism tried eliminating it, only to create a different kind of inequality that was artificial based on political advantages, instead of economic ones. Under free capitalism, anyone should have the right to be as wealthy as he can. If you take risk and subject yourself to potential losses, you should not be condemned for reaping the benefits when you succeed. As for the speculative part of capitalism and harmful products it sometimes produces (tobacco and drugs), I’d say it’s the right of all individuals to be as abusive of themselves as they wish, providing they are aware of the risk. Regarding the pay of CEO’s, that is a decision that each corporation should have the right to make, since they are the ones with the most to loose. The market will reward, or punish, them for their choices. No amount of government regulations will be more effective than this mechanism. CEOs, as well as any laborer, should have the right to negotiate their pay and maximize their benefits in a free market. Let the market determine their worth. In the long run, capitalism is efficient in allocating resources.

“The problem with capital is that it is not necessarily interested in making things better; it is interested only in returning more capital for its owners, period.” While you see that as a defect, I see it as an advantage that served human kind very well throughout history by holding us to high standards of efficiency. When a country becomes too inefficient due to high level of interference in the free market, capital looks elsewhere for efficiency. This actually has helped keep capital from being monopolized by any one particular nation throughout history. It basically says, I have no loyalty to any particular place and I do not discriminate based on race, gender, and ethnicity or else, I just want the most productive place. It demands incentives to stay in a place. How is that wrong? Capitalism is not a charitable system that makes investment in affordable housing or feeding the hungry its top priority. It would be bankrupt in no time and no shareholder will be willing to invest in such a losing proposition. Nevertheless, corporations do plenty of charitable works as part of their marketing and PR campaigns in their market areas in order to enhance their image and serve their customers. Capitalism is a system that provides the opportunity for those who are motivated to risk exploring ventures to better themselves.

As for the concentration of power, again that is not a new phenomenon. Power has always been concentrated in the hands of few elite members of any civilization who also control most of the economic means. It will always be part of any economic system, albeit at various degrees of severity depending on how developed the economic system is. In fact, thanks to capitalism, the concentration of power has widened and the class of elites has grown overtime to include some of those previously oppressed.

I disagree with the notion that government programs are responsible for the creation of the middle class in America, or any society. The expanded middle class is the product of the industrial revolution which expanded our options tremendously through technological innovations that revolutionaized productivity and flooded the world with new products and job opportunities, giving us vastly expanded options as laborers which forced corporations to compete for our skills, thus enhancing our economic status. Any impact from government programs on an economy in any country had been temporary, intended to provide speedy relief during time of economic crisis. The necessity of such programs is debatable as many economists believe a free market system will eventually find its way out of a recession or depression when economic imbalances are eliminated. However, I believe the government has a constructive role to play during time of sever crisis to prevent prolonged economic downturns.

A free market system that includes limited government supervision is not a perfect one by any mean, but it certainly is the most effective and most proven one over various civilizations and time areas. Evidence of that is everywhere and hard to ignore. It is not a coincident that the most prosperous and innovative countries have all one thing in common, a free enterprise system. What other options does Syria have…

Salam

MAJED97,

BRAVO.

Dear Majed97,

Thanks for your response; it brought many important points. Many others were already addressed in my posts above, for example the extreme inefficiency of the market. Some points we agree on, and some we don’t. I will comment on a few, mainly the ones I haven’t commented on above or ones that need clarification.

One thing important that I feel I need to clarify, lest there be more misunderstanding. I wouldn’t call for Syria to remain under the current centralized system, or even under a new one. I don’t care much about preserving “nationality and culture”; what matters to me is fairness, equity, justice, solidarity, community, freedom, sustainability.

What I believe in is in setting people free so that they themselves would decide on their economy, democratically and individually. What I call for is plain’ol freedom, not simply “freedom of enterprise”; a freedom within a social framework and within nature’s limits and capacity.

For all I know Syrians may likely choose a mixed economy, which I don’t find objectionable. But I doubt anyone will choose anything close to pure capitalism, since nobody else did (there were periods only of more or less capitalism in some countries, but nothing close to pure capitalism anywhere along the lines of Murray Rothbards and the Libertarian party). The current Syrian system is indeed rigid and is in bad need of a change; that’s what non-transparent, extremely centralized dictatorship, coupled with an outside well-funded/armed enemy helping society’s wealth get diverted into a wasteful military mammoth, generates.

But nor will I agree to a change of the centralized system from the political one to an economical one where power is now centralized in wealth owners, who will be in alliance with the old dictatorial hierarchy. After all, there’s no level playing field of competition in Syria today, where capitalism is to be kick-started: vast inequality of opportunity, power, political connections, wealth, schooling . . . the result can only be a more lopsided system of the few dominating the many.

Of course there’s inequality throughout history, as you write. But just because it more or less always existed doesn’t mean we have to accept it (let alone make it worse) in the extreme form guaranteed under capitalism. Most of the inequality comes due to unfair conditions, holding different power/wealth/born in the right family/right race, gender, luck, born with the right IQ, inability to move residence (due to unaffordability or immigration laws). Fair inequality is acceptable, on the other hand, like the one resultant from different effort, laziness, sacrifice, intensity of work, physical or intellectual. Capitalism only ensures this unfairness is made worse.

MIT economist and well-known author Lester Thurow once noted that the outcome of the free market’s reward/punishment has no match in any human characteristic: Jim may be twice or three times smarter than John, or Jim could work 2-3 harder/longer than John, but Jim’s reward from winning the competition with John could be a 1000 times more (or he could end up with a 1000 times more due to luck or speculation, for example.) This is an obscenely unfair system, and should not be preserved, certainly not by invoking the “inequality always existed” maxim.

If the prosperity capitalism produces gets vacuumed up into few hands, then why should we change to such an unfair system that hands the fruit of labor and innovation to those with wealth? Computers, automation, robotics were supposed to allow us humans to work less and enjoy more leisure; instead we have to work harder and longer just to make ends meet; that’s because wealth is going to fewer and fewer hands thanks to the magic hand of capitalism. There’s already a class of servants in Syria and a class of lord-owners and that divide can only deepen. Extreme inequality is very unhealthy societally, and capitalism is unable to fix that, but can only make it worse.

Majed97 wrote:

Consumerism is a behavioral issue that can only be controlled at the individuals’ level. I certainly don’t think we should trust any government into regulating our tastes, preferences and lifestyle.

Infinite consumption is dependent on planet earth being an infinite resource and an infinite trash can. This is false of course. Consumption and waste affect everyone, therefore democracy should have a say to the degree people are affected. If a factory that pollutes springs up 50 yards from your house, with smokestacks and chemical byproduct ejected in the air and water supply, you will feel you need to have a say in the location/amount of pollution, even though you are not the main consumer or producer of that factory’s output, no? But capitalism dictates that you should have no say; only the owner and consumers can decide. So will you leave the problem to the “self-correcting” market or will you gather with your neighbors and interfere?

In the US you have a democratic tradition and people can affect change in the location of that factory, and regulation on its pollution. In Syria people will have no say, unless democracy is allowed to prospers and take root before capitalism does. Capitalism without democratic oversight leaves many people adversely affected without representation.

Not to mention that consumption under capitalism is not simply an individual behavioral problem, but also part of a trillions-dollar system of advertisement and marketing in place to manipulate people’s taste and to create wants. All of us, to varying degrees, are stuck inside the web of advertisement industry, even without knowing it. So no, I don’t want government to regulate my tastes, preferences but nor do I accept the manipulation of such by the marketing industry.

The ultimate goal seems to be growth of some sort. It is our instinctive drive to be curious and exploratory that has throughout human history driven us to do things better and more efficiently, which led us into this amazing evolutionary journey. I believe this instinctive drive in us should be recognized and celebrated, yet feared as it may ultimately lead us into self destruction if left unexamined.

Amen! Right on! I don’t find anything wrong with growth in the sense you elucidate, to improve, growing intellectually, inventively, societally, culturally, morally, scientifically, technologically, materially, to grow in wisdom, in caring for others, to create medicine to cure diseases, to grow in solidarity with our fellow humans, to grow as a community. But to grow mainly in the material/consumptive sense, commanded by individual, competitive, greedy-selfish drive, beyond the sustainable limits of the eco system in the self-destructive manner you noted, is precisely the growth that should be unacceptable.

When you say that it could lead to self destruction “if left unexamined” who is it that will do the examining? The capitalists? They won’t and can’t, because capitalism tells them to focus on themselves and themselves only. It is the individualistic nature of the system. The problem that the capitalist faces is that if he stops his company’s unsustainable growth, if he dares think about being nice rather than about the bottom line (when these are mutually exclusive), his competitors who don’t will compete him out of the market. The law of the free market ushers us down from the basic rule of morality of “do unto others what you like others to do unto you” to “do others in before they do you in”. The best Arabic approximation I could think of is, “?? ?? ??? ?????? ??????? ??????” (“if you don’t become a wolf, you will be eaten by wolves”). Without an outside authority, democratic preferably, the capitalists in incapable of stopping the downward spiral; he will self destruct along with society, if left unchecked.

Majed97 wrote:

I disagree with the notion that government programs are responsible for the creation of the middle class in America, or any society. The expanded middle class is the product of the industrial revolution which expanded our options tremendously through technological innovations that revolutionaized productivity . . .

I am not sure if it is just a notion or a well-established thing about the origin of the middle class. For example, Princeton professor of economics and renowned NYT economist-columnist said exactly that in his latest book. And he’s pro free market (with regulations), by the way. Michael Lind has also stated the same thing in the Atlantic Monthly (“America’s successive middle classes has been artificially created by government-sponsored social engineering—a fact that is profoundly important for us to admit”). Or commentator and talk show host Thom Hartman: “The middle class is a new invention of liberal democracies, the direct result of governments defining the rules of the game of business. It is, quite simply, an artifact of government regulation of markets and tax laws.” Massive taxation of the rich in the 1950s, wage control, unionization and government investment in infrastructure, made extreme wealth rare and middle class prevalent.

Ever since the rise of Reagan’s free market neoliberalism, the 1950s middle class created by Roosevelt’s New Deal has been dwindling and inequality rising sharply in the US. Take Europe: There, you have government managed capitalism, with a healthcare system, safety net, heavy government investment in the economy, in the transportation system, and a lot of regulations. And they have a bigger middle class than the US. Same for Japan or South Korea and more so for Scandinavian countries. Often, the more there’s (transparent and democratic) government intervention the bigger the middle class. In all of these countries, government keeps an eye and regulates the free market. Competition creates, by definition, few winners and many losers. This is the essence of monopoly, oligopoly and inequality that capitalism breeds.

The industrial revolution, mixed with capitalism, also brought us, lest we forget, the Robber Barrons and the Gilded Age with few owning incredible amount of wealth and the majority laboring in third world condition by comparison to today. When the latter wanted more of their basic human rights of decent hours & work conditions they didn’t wait for the market to “self-correct” because it never did. They instead demonstrated, agitated, went on strike; and they were beaten, jailed and killed. That’s how we have many of the rights we have in the US workplace today, like the 8-hours day, laws against child labor, retirement, social security, healthcare. If left to the free market most likely none of these would exist today. After all, capitalism exists in most of the world today, especially where corporations’ operation are in Central American and south Asian countries, with slave-like labor conditions.

Majed97 wrote:

thanks to capitalism, the concentration of power has widened and the class of elites has grown overtime to include some of those previously oppressed.

This might be true if one compares, say, monarchies and feudalism of centuries ago with say US capitalism today. But that comparison is not appropriate, because people gained many rights through agitation and struggle (not because of capitalism as I elaborated above) over the past 100-200 years. A more apples-to-apples comparison would be, I think, if one compares within specific examples of capitalism close in time, for example in the US with periods of more capitalism (1980s and after) versus periods with less capitalism (1950s). When we do that we find concentration of wealth (power) has increased under more capitalism. Watch the measure of inequality for any country during periods of more liberalized economy versus periods of less. The US: in 1980 CEO to employee average income –one measure of inequality– was 40-to-1; by 1990 it doubled to 80-to-1. Now it is 10 times more, around 400-to-1. (Europe is more on the order of 20-to-1). Ownership/wealth was on the order of top 1% owning 30% of society’s wealth 30 years ago, and 40% about 10 years ago. Now the top 1% owns 50 of society’s wealth. But even the business press does not deny the increase of inequality and concentration of wealth.

The fact that the class of elites now includes the previously oppressed has only meant that the previously oppressed are now getting a chance to join the oppressor class. The real goal should be to cut down, if not end the whole lord-master, haves-havenots system, not simply to shuffle the identity of the haves and have-nots. This is why inequality must be reduced –something capitalism can only make worse. (Even the mobility associated with capitalism is disappearing, as the Economist editorialized a few years ago.)

Majed97 wrote:

“Sami D wrote: ‘The problem with capital is that it is not necessarily interested in making things better; it is interested only in returning more capital for its owners, period.’ While you see that as a defect, I see it as an advantage that served human kind very well throughout history by holding us to high standards of efficiency. When a country becomes too inefficient due to high level of interference in the free market, capital looks elsewhere for efficiency. This actually has helped keep capital from being monopolized by any one particular nation throughout history. It basically says, I have no loyalty to any particular place and I do not discriminate based on race, gender, and ethnicity or else, I just want the most productive place. It demands incentives to stay in a place. How is that wrong?”

The “efficiency” capitalism supposedly seeks can also mean “more exploitable”. If country A has worse labor protection standards, less safety, more labor hours per day per employee, less bathroom brakes for employees, less pay, more hungry-hence-obedient labor force and a dictatorial workplace than country B then it is more attractive to capital. After all, capitalism existed alongside slavery just fine.

Capital, in its search for efficiency will also seek places with less environmental regulations, (like the third world), where it is easier to pollute and dump. Capital will also seek resourceful countries where wealth and power are more concentrated in few hands that set the rules, preferably corrupt and bribe-able (like Nigeria and the gulf) rather than in places where natural wealth is nationalized and true democracy reigns.

There are also other “efficiencies” capitalism seeks, like quick rewards rather than long term progress for the investment target. Usually, real development comes from long term investment and the willingness to sustain a loss for long years before investment bearing fruit. Toyota took three decades of investment and protection, before becoming competitive, and 2 additional decades before becoming a leader. Add speculation on top of capital’s extremely fast motion across the globe, and you have very short-term capital seeking quick return now, without leaving communities the chance to develop, to grow and to improve.

On the issue of goodness of capitalism’s central tenets of selfishness and greed: Immorality and exploitation fit perfectly here. Thieves are motivated by selfish drives to improve themselves and their lives, as were Enron’s CEOs, inside traders and the speculators who drive economies into bubbles and collapse. The problem is that selfishness often comes at the expense of others and society. This is the issue with capitalism, in one short sentence. Oversight from outside of capitalism is needed to police that destructive behavior.

Majed97 wrote:

Protectionism has not worked in the past and will not work in the future.

Actually protectionism has worked, and that is why all the advanced countries of today employed it. (Please check Ha-Joon Chang’s phenomenal book. Protectionism can be reduced after countries developed. Sending off a child to compete in the real world can ensure her demise; Syria is in the growing, not grown-up stage of development in comparison to those it is supposed to compete with.) Advanced countries still use selective protectionism, like Reagan and Bush in the steel industry, let alone the “masked” government subsidies to high tech via the military sector and overt subsidies to agriculture. But one way to find out how well government intervention, like protectionism and subsidy, worked or not we can compare the 1960s-70s (more government intervention) to the 1980s-1990s (more trade liberalization). In the advanced countries, the growth in the less capitalistic decades was around 3.2% versus 2.1% in the more capitalistic. The developing countries’ growth, on the other hand, dropped by 50% during trade liberalization, (the number is even worse if you exclude China and India).

Majed97 wrote:

In fact, governments have always been the biggest abusers and most wasteful of resources. Just look at the Egyptian Pyramids, Greek artifacts, Christian cathedrals, Islamic palaces and mosques all over the world

Governments as “always” the most waster of resources is not necessarily true. From Japan, to Germany, to FDR’s US, governments can also force investment in societal advancement, technical know-how and general welfare and improvement. Again, I mentioned numerous times how the origin of almost every technology we have today is the result of government investment few decades ago, like electronics, solid state, aviation, internet, GPS, automation, bridges, highways. That part of history is not mentioned in the capitalist-friendly narrative that expunges a central part of history, and emphasizes a marginal one.

My point is that governments can do good especially when they are democratic, run by an aware and informed public. (In the US, money is undermining democracy, and the public is slowly marginalized and distracted.) The examples you cite, on the other hand, are of totalitarian monarchs who, in their waste, seek self glory and aggrandizement, with total disregard to others. (This has similarity to capitalism’s selfish drive, note). Not to mention the literally colossal waste under capitalism I outlined above. And companies, especially large ones, can be very inefficient too, let alone dictatorial, just like governments.

—

In short, my points are simple: Governments can do good, and capitalism can be extremely wasteful. Democracy is fundamentally important; what’s wrong with government of, by and for the people? People should have a say to the degree they are affected, not the amount of money they have. Amount of remuneration to people who work should be directly related to the intensity/length of the work they do, not the 1000-to-1 under capitalism due to luck or what school your parents afford to send you to. (I recommend reading about “Participatory Economics” by Albert & Hahnel) Selfish greed, as well as growth driven by such, can lead to terrible outcome, including societal and civilizational collapse. The insatiable appetite for material growth fundamental to capitalism by nations can also mean wars and empire. Add the commodification of everything and social Darwinism, implied under capitalism, which undermine human compassion and communities and produces predatory tendencies. If left unchecked by an outside, democratic eye.

Dear Sami,
I appreciate your detailed reply. Your points on fairness, equity, justice, solidarity, community and freedom are well taken, but unless I misunderstood the theme I though we are here to discuss economic growth, not social justice, ethics and morality.

I do not disagree with you on the issue of democracy and freedom, nor on setting limits to prevent abuses. As I said in my earlier post, free but supervised markets are what I’m advocating. Most libertarians today do not truly believe in the pure, Wild West style, free market. As I pointed out before, the free market system has evolved over time as economies have become more and more complex, requiring some regulations to keep our selfish nature in check. However, I don’t agree that a centralized economic system, where power is concentrated in the hands of few corrupt politicians, instead of wealthy entrepreneurs, is the answer.

By leveling the playing field, I meant preventing monopoly, protecting the environment and establishing rules to ensure continuity of a fair competitive economic environment. I did not mean enforcing economic equality, as I do not believe this is possible under any system. Economic inequality is a reflection of our competitive nature which must have consequences, namely success and failure. There is no cure for this natural drive, unless it is crushed by a centralized system that dictates how we should live our lives. Economic inequality is necessary in any economic model in order to maintain dynamism and provide incentives for people to invest, let along work. You talked about inequality being the product of “unfair conditions, holding different power/wealth/born in the right family/right race, gender, luck, born with the right IQ, inability to move residence”. I don’t disagree with you on many of them, but such conditions exist under any system. As I said before, the free market system is far from being perfect, but it is proven to be the most effective and progressive. As long as the opportunity exists for all to explore and prosper, regardless of race, gender or IQ, we shouldn’t punish those who succeed because others have failed.

Sami wrote: “Jim may be twice or three times smarter than John, or Jim could work 2-3 harder/longer than John, but Jim’s reward from winning the competition with John could be a 1000 times more (or he could end up with a 1000 times more due to luck or speculation, for example.) This is an obscenely unfair system, and should not be preserved, certainly not by invoking the “inequality always existed.”

Are you suggesting we should control the distribution of luck and limit economic returns on investments and hard work in order to insure equality?!? Where do we draw the line? Do we not all have the right to maximize our benefits, or just be lucky sometimes? Most of us have never won the lottery, succeeded in business venture, or correctly predicted the direction of the stock market. Should we turn our disappointments against those who prevailed, or “lucked out”, and strip them of their gains… If so, what are the incentives for anyone to take risk…? Economic inequality will always exist. Attempts to eliminate it through various well intended movements have failed and will fail in the long run because of that competitive instinct nature has embedded in us.

Sami wrote: “If the prosperity capitalism produces gets vacuumed up into few hands, then why should we change to such an unfair system that hands the fruit of labor and innovation to those with wealth? Computers, automation, robotics were supposed to allow us humans to work less and enjoy more leisure; instead we have to work harder and longer just to make ends meet; that’s because wealth is going to fewer and fewer hands thanks to the magic hand of capitalism.”

If the field is wide open for all to take risk, innovate, develop, build and market their ideas and labor, then what is so unfair about it?.. That’s the essence of capitalism, risk and reward. Just because most of us are risk averse, or have limited abilities or drive to explore, should we hold those who are more capable or daring to our timid standards in the name of equality? And do you really think all those inventions and developments capitalism brought us did not make our lives easier, longer, and healthier?!? Just because we can’t afford what wealthier people can, it doesn’t mean people who live in a capitalist system did not benefit from the prosperity capitalism generated for the society overall. Neither myself, nor anyone I know is wealthy, but we certainly prefer living in today’s world versus that of 40 years prior, let alone the 17th century.

Sami wrote: “All of us, to varying degrees, are stuck inside the web of advertisement industry, even without knowing it. So no, I don’t want government to regulate my tastes, preferences but nor do I accept the manipulation of such by the marketing industry.”

No one said you should accept manipulation from anyone. That’s the beauty of the free market system. Everyone has a choice. They have the right to sell us their products, and we have the right to say no, or yes. This simple system has always served us well throughout history. Again, the issue of consumerism is a behavioral one, no matter how much money and marketing are involved in it. Who else should we trust to control consumerism, if not ourselves individually… government? Restricting it require us to do away with our freedom of choice all together. We should be held accountable for our behavior as each one of us must have the right to make choices based on our limitations and life styles. The government’s job is not to think for us and determine what products/services suite us best. We are all faced with choices every day and the large majority of us can navigate well through the barrage of options capitalism presents us with.

Sami wrote: “When you say that it could lead to self destruction “if left unexamined” who is it that will do the examining? The capitalists?”

Just like in America and Europe, monitoring should be done in part by capitalists (internal control), but more importantly by independent bodies that set standards and safeguards, i.e. FDA, EPA, FIDC, SEC…

Sami wrote: “I am not sure if it is just a notion or a well-established thing about the origin of the middle class.”

The middle class first appeared in Europe in the late middle ages with the revival of trade and industrial development. It underwent enormous expansion in the 19th century as a consequence of the industrial revolution, which offered both new forms of production and new scales of production that provided much more flexible investments than the land held by the nobility and the Church. Of course over time, the middle class went through various periods of expansion and contractions depending on the ever changing economic cycle.

Sami wrote: “Advanced countries still use selective protectionism, like Reagan and Bush in the steel industry, let alone the “masked” government subsidies to high tech via the military sector and overt subsidies to agriculture.”

Protectionism has never worked in the long run. True, it has been used selectively as a temporary tool to prolong the life of an inefficient industry and delay the inevitable. It is also sometimes deployed to level the playing field and offset protective measures carried out by competing countries (example U.S. versus Japan and Europe). A free market system works best when all participants are on board. In the case of the American steel industry, the government’s action was due to foreign competitors being heavily subsidized by their governments. Nevertheless, in the long run, these protective measures often fail. Since 1998, firms accounting for 30% of U.S. steel capacity have filed for bankruptcy. The U.S. auto industry is another example of failed protectionism. Chrysler was bailed out in the 1980’s and stiff quotas were imposed on foreign car imports at that time to protect U.S. auto makers. This allowed American auto makers to be highly inefficient, not to mention lose touch with consumer and market trends. I don’t have to tell you how dire their condition is today. All of them are near bankruptcy.

Sami wrote: “Again, I mentioned numerous times how the origin of almost every technology we have today is the result of government investment few decades ago, like electronics, solid state, aviation, internet, GPS, automation, bridges, highways.”

This is simply not true. Innovations and the technological advancements, from cars to computers to airplanes to microwaves are the result of private investments which have been soaring since the industrial revolution, powered by growth attributed to the free market system over the past two centuries. Any government funded programs to advance specific projects were done through the corporate and academic infrastructure. The Bell Labs illustrates my point well. Currently owned by Alcetal-Lucent, it was created in 1925 by AT&T. It was the most productive lab in the world for many decades developing a wide range of revolutionary technologies, including radio astronomy, the transistor, the laser, information theory, the UNIX operating system, and the C programming language. There have been 6 Noble Prizes awarded for work completed at Bell Laboratories. Numerous other companies have performed similar technological achievements through their R&D investments (Kodak, Zerox, IBM, Intel, Microsoft, GE, Boeing, many drug companies….). True, the U.S. government paid Bell Labs, IBM, GE, Boeing and others for specific projects (usually national security-related), but to say that the government was responsible for every technological invention is simply not true. The free market system allowed successful enterprises like AT&T, IBM, GE, Boeing and others to generate large amount of profits which fueled their expansion and helped them invest into building huge R&D programs that brought us the miracles we enjoy today. It is the free market system to be credited for those innovations, not the one who paid for specific projects. That’s like giving credit for building a house to the one who bought it and occupies it, not the builder who employed his creativity, expertise and risked investing in a construction company with equipment and staff. Having said that, governments did produce some major inventions through government managed institutions like NASA and others, but most of these programs are restricted to government entities due to national security concerns; therefore, it is not fair to conclude that capitalism did not contribute when it wasn’t even allowed to participate in those programs. In any case, government entities like NASA sub-contract most of their work to private corporations who have the technology needed for their programs. By the way, funding for those government projects is generated from taxation on profits and payrolls spurred by capitalism.

The European and Japanese big government economic programs have brought them high inflation, high unemployment and anemic investments, which is why many of those countries have reversed course in recent years to privatizing many of their inefficient industries. Although the defining feature of the French model is the role of central government, in recent years efforts to reduce its role in economic life through fiscal reforms, privatization and deregulation have been wide spread. The economic performance in nearly every European country is generally poor compared to the U.S. and a few other countries that share the U.S.’s characteristics (i.e. UK, Canada and Ireland). Unemployment rates are generally far higher than those in the U.S., U.K., Canada and Ireland. And labor force participation rates have been lower for decades due to huge welfare programs. A country’s economic model determines its economic activities. A dynamic economy is a crucial determinant of the country’s economic performance. Where there is more entrepreneurial activity (and thus more innovation), there are more jobs to fill, and those added jobs are relatively fulfilling. Participation rises accordingly and productivity climbs to a higher path.

Syria has certain competitive advantages it can explore such as agriculture, textile and tourism, but it has to open its borders for investments in those industries, and others, in order to discover how competitive they are in the global economy. It is true that Syria is in the growing, not grown-up stage of development, but so are all of those neighboring countries it is competing against. While the government can do some good in certain areas, it can be extremely inefficient, not to mention corrupt and intrusive, when giving too much control. The development of a country’s economy has to be from the ground up, which means from the individuals’ level. That is the secret recipe behind America and Western Europe’s success.

Salam

MAJED97,

AGAIN BRAVO.

Bravo Majed??? Give me a break.
forget majed,

extra Bravo SamiD.

I think Majed’s account is mythology frankly.

I can’t wait until Simohurtta wakes up hopefully soon enough to thrash this argument a bit, since this arena is his forte.

I myself simply can’t do it justice, but I will mention a few annoying parts.

“The government’s job is not to think for us and determine what products/services suite us best. We are all faced with choices every day and the large majority of us can navigate well through the barrage of options capitalism presents us with

Majed, you put so much faith in the wise consumer who will know how to navigate through the system and protect themselves from corporate abuses and a shoddy bill of goods. Unfortunately this has proven to be false. And it is clear why when we are subject to the billion dollar marketing industry.

The most glaring example is the disaster the country is in right as we speak – a horrendous financial credit crisis precisely because of predatory lending in mortgage targeted directly at uncomprehending consumers. This was allowed to happen precisely because of the lack of any oversight by the federal gov’t of these corporate interests. And the people themselves clearly COULD NOT NAVIGATE the choices before them.

A second easy and similar example is simply the tremendous debt that the average citizenry is carrying around. The most heinous being the credit card debt. We have twenty year olds with tens of thousands of dollars of credit debt they cannot get out from under…
so the evidence speaks to the possible outcome of lack of government protection of the consumer and the public in general.

Another less important statement:

“The middle class first appeared in Europe in the late middle ages with the revival of trade and industrial development. It underwent enormous expansion in the 19th century as a consequence of the industrial revolution

I am not sure what middle class you are referring to. I think it is the move from peasantry to something slightly above that…like merchant…
But the “Middle Class” as we know it today, as in own a house, a car, and go to college, did not really emerge until after WWII. And this was most certainly made possible by FDR, and by the decimation of all the European competition in world markets. The war machine- did a lot for our economy as well. But… I do think this was social engineering.
The capitalist enterprises of the late 19th century did not create a middle class in this country. That is simply false.

Thirdly, you concede that: “True, the U.S. government paid Bell Labs, IBM, GE, Boeing and others for specific projects (usually national security-related),”… ” but to say that the government was responsible for every technological invention is simply not true. The free market system allowed successful enterprises like AT&T, IBM, GE, Boeing and others to generate large amount of profits which fueled their expansion…”

well, we disagree. I think it is important that it is first and foremost the government that provided the contracts and the money that allowed those corporations to do what they did, to grow, profit, expand, and innovate.

Everything in our legal system and in our tax system allowed the corporation to accumulate that level of wealth. It is not all about the free market with just a little seed money at the start.

Such mythology!!! and ideology at work.

Please Majed, for you own balance of thought, do go rent the documentary entitled “The Corporation” … it is well worth a glance, and may give you a more balanced picture.

The “free” market, as SamiD describes it- has cause as harm as good.

Finally, you asked: “Are you suggesting we should control the distribution of luck and limit economic returns on investments and hard work in order to insure equality?!? Where do we draw the line? Do we not all have the right to maximize our benefits…?”

well, YES. Yes, I would suggest that we should control the distribution of economic returns on investments – that we call PROFITS – for the sake of equality and the distribution of wealth. We call this TAXATION. And it is supposed to be for the good of the people as a whole.

SamiD already gave you the stunning statistics of the percentages in terms of holding of wealth in this country. As well, he provided the stats on income inequality.
Do we really accept 1-2% of the population of the USA owning 50% of the wealth? That is sick.

We have no moral priority for taxing the corporation. We have privileged individual property and wealth and then considered a corporation, legally speaking, to have the same rights, and even more rights at times than people.
That is immoral and does NOT in fact lead to adequate “trickle down” to the population. It is not an amazing thing to decide that there can be limits on profit. We are not even in the ball park of a fair taxation of corporate profits. Things have only moved in the wrong direction for the past twenty years, and we can see where that has gotten us in terms of accumulation of wealth and hence power. I would argue again, as I did on the other post that this is a grave threat to democracy in America.
The highest GDP (when that measure says nothing about the economic well being of PEOPLE not corporations) does not equate to an outcome of the most functioning and satisfactory life for a society.

While the government can do some good in certain areas, it can be extremely inefficient, not to mention corrupt and intrusive, when giving too much control. The development of a country’s economy has to be from the ground up, which means from the individuals’ level. That is the secret recipe behind America and Western Europe’s success.

Well lets us remember correctly the history. Western European countries adopted “free markets” 10 – 20 years ago, when they already were on the “top”. Still there exists a huge number of state/community owned companies, custom barriers, technological / standardization barriers, legal product quality demand barriers etc. Also EU controls industries through legislation in thousands of ways. Actually it would be interesting to see the consequence if governmental systems would allow individuals do what ever they want with their businesses. Certainly companies would not waste money for saving the environment or pay decent salaries if they are not forced to do that by the society.

When we watch the best countries by nominal GDP the list is lead by Luxenbourg (=financial “safe haven”) then come Norway, Qatar, Iceland, Ireland, Switzerland, Denmark, Sweden and Finland. Then comes USA. Especially the success of Northern European is remarkable and is not simply explained by “free markets”. North European countries have the highest tax levels in the world (and we have had them for a long time), high social security, free education, best workers rights, longest holidays etc. Why these countries which are no beacons of free trade are so successful in economical terms?

Well, Finland did build much of its core industries using state owned companies (mining, steal, power, telecommunication). We also had a very regulated markets until the 80’s. Including that only Finnish citizens could own Finnish companies share, well there were some exceptions with a special permit. Finnish land could be bought by foreigners only when Finland joined EU. When Finland opened its financial markets in the late 80’s (wast credit expansion) it partly joined with the collapse of Soviet union (major trade partner of Finland) created a very serious depression in the beginning of 90’s (one of the worst in capitalistic countries history).

It is still to early to say is the free market “theory” really successful in the end. Certainly there are many areas of economy where privatization leads to unhealthy development. For the customers, not for the new owners. In Finland for example the privatization of electricity production has led to a rapid increase of the price (and an astonishing rise in the worth of managements options). An other example of not a very successful privatization here is the mandatory motor vehicle inspection business. The prices have multiplied and the one’s who bought the inspection stations (cheaply) from the government have become astonishing rich considering their business’ difficulty level.

Sim,
You are just plain wrong.

If you would take the US and chop it up into areas with population the size of Denmark or Finland, let alone Iceland or Luxemborg, you could easily identify 20 areas with the highest GDP per captia in the world. The US GDP per capita is the average of Manhattan and Tuksalosa County in Mississipi.

Further, the Danes or Finns or Irish were given the ability to develop by a US security blanket during the cold war, something that they did not pay for. If they had to fund it themselves or if they had to stand themsleves against the Soviet union, where would they be? What percentage of Finland is already occupied by Russia and is never going to be given back? 33%?

By the way Sim, you are looking at the wrong rankings. the right one is:
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

According to this ranking, the one that matters, the US AS a WHOLE is way ahead of all European countries except Norway and Luxemborg that have a combined population of 5.3 million (there are 0.5 million people in Luxemborg and most of Norway’s wealth comes from energy).

Zenobia,
Check out the major stock indices and you will see that in the US there has been way more change in the companies that are dominating them. Microsoft, Apple, Intel, not to mention Google and hundreds of other comapnies have not been around that long and were not created by “old money”. That is the dynamism of the US economy that is lacking in Europe.

By the way, do you know how Ireland advance so much in the last years? By cutting corporate taxes!!! Doing the OPPOSITE of what you demand. That is how wealth is built. In a globalized world corporation and rich individuals can choose to pay taxes were they want.

Last time I talked about per capita GDP, some of the same commentators opined that it is total GDP that matters. Now that I bring up total GDP, I am reminded that it is per capita GDP that is relevant.

I am not going to respond to every point made because some of these issues have been beaten to death on this forum before and I see no need to repeat them.

People on the other isle of this topic base their argument on the fairness issue when it comes to wealth distribution under a free market capitalist system.

I reside in the U.S. I am employed by a financial institution. My combined taxes per year amount to 42% of my gross income. Is that not enough? How much is? 52%, 62%, 72% or how about 82%?
People seem to envy if not detest the high compensation of U.S. CEO’S? It is so easy to argue that a CEO making $70 million a year is outlandish and shameful. Tell that to the Boards of Citigroup, Merrill Lynch and Union Bank of Switzerland. Under Chuck Prince, Citigroup has written off close to $30 Billion already. Goldman Sacks paid its star CEO $70 million as a reward for avoiding the market turmoil of late. I actually think that he deserved a lot more. Merrill, Citigroup and UBS would have loved to have had him and all three would have been happy to have paid him $200 million.

Bill Gates is the world’s richest man. He is worth over $60 Billion. Is it fair?

Rather than envy his wealth, think of the Billions of wealth that he created for him and others. Microsoft went public in March 1986. On a stock split adjusted basis, the initial price was 7 cents a share. Had you invested $1000 then in that company, that investment would have been worth $857,000 by the end of 1999 as the stock hit $60 (now it is $27.63).

The two founders of Google are worth Billions. Think of how Billions they created for others as their company was sold to the public for $85 a share. In a mere two years, it was trading at $750. One of the founders was Russian. The French student who founded EBAY after he attended Tufts university in the U.S. can now boast a market cap of $36 billion for his company in a mere 10 years of it going public.

American households (110 million of them) sit on a combined wealth of close to $40 trillion. No nation on the face of earth can even come close.

Given the technological and financial revolution of late, those with the highest education, capital and entrepreneurial spirit were likely to reap a disproportionate level of the benefits.
Many here would like the building to look and feel the same for all tenants. They would like to see no penthouses, middle floors and a basement where people with different skills, education, capital and entrepreneurial spirits live.

Yes, those penthouses are getting fancier while the basements get infested and rot. This is the unfortunate byproduct of capitalism. I see no problem with it. Doing otherwise would mean that my tax bracket moves upwards from its already high 42%. Those who feel that 82% is the more appropriate level can stay away in Scandinavia, and Europe, thank you very much.

You are creating a dichotomy where there shouldn’t be one. You are claiming that those with an opposing outlook want all floors in the building to be the same and equal, nobody said that.

and my own focus was on corporate taxation, not so much that individuals need to pay more than 42% tax.
Another question has to do with where the tax money goes, which we didn’t even address.

personally, I am not saying that entrepreneurs should not be able to reap big financial benefits from their business creations, but there are limits to what one should be able to keep for just money making money. And yes, it does come down to distribution.

Bill Gates may have vast personal wealth, but he also founded the Gates Foundation which spend huge amounts of money all over the world on good causes and global needs of poor people.

Perhaps, this kind of redistribution should be a requirement for anyone who brings in 70 million dollars a year.

The penthouses are getting fancier, which is ok, and having the penthouses are ok. but then what are you going to do – about the fact that the majority is living in the basement? That is, I think, the concern of those with a conscience.

Zenobia,
You are right, I do put a lot of faith in the wise consumer who by and large does know how to navigate through the system and even benefit from it.

“Unfortunately this has proven to be false. And it is clear why when we are subject to the billion dollar marketing industry.”?!? How are you so sure that this is “proven to be false”, perhaps in your mind, but have you noticed any of the great things you and I have harvested from this “false” system?

You talk of the current turmoil in the financial markets as evidence of its failure. Following headlines is a dangerous thing, Zanobia. The U.S. and European credit crunch is far from being fatal. While a few of the large financial institutions have acted irresponsibly during the housing boom, the large majority of banks have not done so. They are doing just fine even today, albeit at a slower pace due to economic slow downs, which is part of the economic cycle.

“And the people themselves clearly COULD NOT NAVIGATE the choices before them.” In this statement, you somehow managed to limit the definition of “the people” to less than 2% of home owners who over stretched themselves and are now facing the consequences!! Never mind the fact that the overwhelming majority of home owners have acted and continue to behave responsibly in navigating through a world filled with choices. As for the tremendous debt that the average citizen is carrying around, it is averaging $3,000 per U.S. citizen today; and again, the large majority of those card holders are acting responsibly and managing their debt well. Those who file bankruptcy represent less than 1% of total credit card holders (851,912 filings in the U.S. 2007). It is highly unfair to use the failure of a very small percentage of the population as a rational for punishing us all. Exceptions should not be used as standards, Zenobia.

The origin of the middle class is a matter of historical fact, not an opinion. You are putting too much emphasis on the FDR era, which was an extraordinary time (WW2) that required extraordinary measures. You should not be measuring economic successes or failures based on extraordinary events. That era has long passed and, in case you haven’t noticed, many wonderful things have occurred since then, thanks to capitalism.

Zenobia, instead of watching movies and listening to headlines, I suggest you study economics and look at trends and historical facts. By the way, I’ve seen “The Corporation”, but unlike you, I don’t use it to as source of my economic education/analysis. There are plenty of other movies/documentaries out there supporting opposing views. I won’t rely on them either to support my views.

Your quest for equality through regulation of luck and returns by the way of high taxation and increasing government control “for the good of the people as a whole” is rather naive, not to mention obsolete. If perfection is what you’re after, then I submit to you that I don’t have the answers. If you wish to spend your time searching for problems in the capitalist system, while dismissing the amazing progress it brought us, then treat yourself… I, on the other hand, prefer to live in a less than perfect world…as long as I live free.

Salam

“Zenobia, instead of watching movies and listening to headlines, I suggest you study economics and look at trends and historical facts. By the way, I’ve seen “The Corporation”, but unlike you, I don’t use it to as source of my economic education/analysis.”

could you be a little more condescending do you think ?

aren’t you assuming a lot (was it the fact that i mentioned one movie?) that you think my entire education comes from movies and headlines or that i based my ideas on that one source? Wow, that’s great insight…

Look, we disagree. And that’s it. but don’t assume that somehow your education is better than mine because it is unlikely. There are plenty of other perfectly well educated people who see things the way I do.

It may be that it is a small percentage of irresponsible people who have fallen into a financial pit, however that small percentage and the results of the credit sink- has caused a lot of damage to everyone.

They are doing just fine even today, albeit at a slower pace due to economic slow downs, which is part of the economic cycle.

Well, right now, this “cycle” has taken us down to a thirty four year low…
But of course, that’s merely a “headline”..

I guess we’ll just have to wait and see. After another five years, we will see where we are.

here’s one view…

Anxious in America

By THOMAS L. FRIEDMAN
Published: June 29, 2008

Just a few months ago, the consensus view was that Barack Obama would need to choose a hard-core national-security type as his vice presidential running mate to compensate for his lack of foreign policy experience and that John McCain would need a running mate who was young and sprightly to compensate for his age. Come August, though, I predict both men will be looking for a financial wizard as their running mates to help them steer America out of what could become a serious economic tailspin.

I do not believe nation-building in Iraq is going to be the issue come November — whether things get better there or worse. If they get better, we’ll ignore Iraq more; if they get worse, the next president will be under pressure to get out quicker. I think nation-building in America is going to be the issue.

It’s the state of America now that is the most gripping source of anxiety for Americans, not Al Qaeda or Iraq. Anyone who thinks they are going to win this election playing the Iraq or the terrorism card — one way or another — is, in my view, seriously deluded. Things have changed.

Up to now, the economic crisis we’ve been in has been largely a credit crisis in the capital markets, while consumer spending has kept reasonably steady, as have manufacturing and exports. But with banks still reluctant to lend even to healthy businesses, fuel and food prices soaring and home prices declining, this is starting to affect consumers, shrinking their wallets and crimping spending. Unemployment is already creeping up and manufacturing creeping down.

The straws in the wind are hard to ignore: If you visit any car dealership in America today you will see row after row of unsold S.U.V.’s. And if you own a gas guzzler already, good luck. On Thursday, The Palm Beach Post ran an article on your S.U.V. options: “Continue to spend upward of $100 for a fill-up. Sell or trade in the vehicle for a fraction of the original cost. Or hold out and park the truck in the driveway for occasional use in hopes the market will turn around.” Just be glad you don’t own a bus. Montgomery County, Md., where I live, just announced that more children were going to have to walk to school next year to save money on bus fuel.

On top of it all, our bank crisis is not over. Two weeks ago, Goldman Sachs analysts said that U.S. banks may need another $65 billion to cover more write-downs of bad mortgage-related instruments and potential new losses if consumer loans start to buckle. Since President Bush came to office, our national savings have gone from 6 percent of gross domestic product to 1 percent, and consumer debt has climbed from $8 trillion to $14 trillion.

My fellow Americans: We are a country in debt and in decline — not terminal, not irreversible, but in decline. Our political system seems incapable of producing long-range answers to big problems or big opportunities. We are the ones who need a better-functioning democracy — more than the Iraqis and Afghans. We are the ones in need of nation-building. It is our political system that is not working.

I continue to be appalled at the gap between what is clearly going to be the next great global industry — renewable energy and clean power — and the inability of Congress and the administration to put in place the bold policies we need to ensure that America leads that industry.

“America and its political leaders, after two decades of failing to come together to solve big problems, seem to have lost faith in their ability to do so,” Wall Street Journal columnist Gerald Seib noted last week. “A political system that expects failure doesn’t try very hard to produce anything else.”

We used to try harder and do better. After Sputnik, we came together as a nation and responded with a technology, infrastructure and education surge, notes Robert Hormats, vice chairman of Goldman Sachs International. After the 1973 oil crisis, we came together and made dramatic improvements in energy efficiency. After Social Security became imperiled in the early 1980s, we came together and fixed it for that moment. “But today,” added Hormats, “the political system seems incapable of producing a critical mass to support any kind of serious long-term reform.”

If the old saying — that “as General Motors goes, so goes America” — is true, then folks, we’re in a lot of trouble. General Motors’s stock-market value now stands at just $6.47 billion, compared with Toyota’s $162.6 billion. On top of it, G.M. shares sank to a 34-year low last week.

That’s us. We’re at a 34-year low. And digging out of this hole is what the next election has to be about and is going to be about — even if it is interrupted by a terrorist attack or an outbreak of war or peace in Iraq. We need nation-building at home, and we cannot wait another year to get started. Vote for the candidate who you think will do that best. Nothing else matters.

“The penthouses are getting fancier, which is ok, and having the penthouses are ok. but then what are you going to do – about the fact that the majority is living in the basement? That is, I think, the concern of those with a conscience.”

I love the last sentence. The implication here of course is that only those who think of the people in the basement have a conscience. Others don’t.

So, let me get it straight:

42% individual tax is enough. It is that 35% corporate tax that is the problem. Does it matter that some EU countries are in the process of cutting their own corporate taxes to compete? What is a reasonable corporate income tax? 65%, 75%? The higher taxation is a sure way for business to start to either hide income or leave the country altogether. As they do, there goes all jobs and the very people in the basement that you are trying to protect. GM’s problem is the massive health care and retirement liabilities. You want to raise taxes on them to deliver the final blow? They employ 330,000 people. Great plan indeed.

Looking after those in the basement is a noble cause.

How do you want to pay for it?

Gates decided to give away some of his fortune to charity. Good for him. This was his personal choice. It was not and it should not be the decision of a government planner or a civil servant at the IRS to decide what he can/should do with his wealth. His partner Paul Alan decided to spend his wealth on yachts. This is his choice. Once you go down that slippery road, the penthouses are soon all basements.

Since this is Syria comment, remember Syria’s experiment with fairness, confiscation of wealth and property and high taxation.

The tax rate was close to 80% at one stage. I will leave it to your imagination to think about the consequences and the way things turned out.

Zenobia

For the record, I think you began by being condescending toward Majed. 😉

Bravo Majed??? Give me a break.
forget majed,

extra Bravo SamiD.

I think Majed’s account is mythology frankly.

I can’t wait until Simohurtta wakes up hopefully soon enough to thrash this argument a bit, since this arena is his forte.

…

Such mythology!!! and ideology at work.

Please Majed, for you own balance of thought, do go rent the documentary entitled “The Corporation” … it is well worth a glance, and may give you a more balanced picture.

Bravo Ehsani & Majed.

QN,

No, sorry. Your mistake. I took issue and was critical of his argument. I didn’t say that he gets them from movies or that he clearly isn’t educated about economics and needs to read some more books before he can have a valid opinion.

there is a big difference. If he doesn’t like my views thats one thing, but his comment was a personal criticism.

but also, my bravo comment was directed at Ehsani, not majed, even though it was concerning the debate between Sami and Majed. i think Sami made a much better argument than Majed, but because the content fits Ehsani’s belief system he gave his congrat to the latter.

“Yes, those penthouses are getting fancier while the basements get infested and rot. This is the unfortunate byproduct of capitalism. I see no problem with it.’

ok, maybe I am being not nice with the conscience comment, but statements like this make you sound kind of like you don’t have a conscience about the basement. It is not our (your) personal responsibility but just the blind hand of the market at work. What else can I conclude? It sort of says that on its face.

anyhow, we have had these exact arguments two years ago already. And we didn’t agree then either.
It is interesting to me that the disagreement gets framed like it is one of not having enough “facts” or enough education.
Maybe we should remember that Economics is SOCIAL SCIENCE full of models and theories and predictions and interpretations of the “facts”…
so, the difference have a lot more to do with ideology than of anything else. We all choose our historical data and our facts and put them together to form a narrative about economic history and whose theory prevails.
We also all chose to emphasize which parts seem the most important to us.

By the way Sim, you are looking at the wrong rankings. the right one is:
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

According to this ranking, the one that matters, the US AS a WHOLE is way ahead of all European countries except Norway and Luxemborg that have a combined population of 5.3 million (there are 0.5 million people in Luxemborg and most of Norway’s wealth comes from energy).

Again AIG you show your lack of education and knowledge. I clearly mentioned GDP (nominal) which is a little different as GDP (PPP).

You and Eshani2 should understand that North Europeans pay in their taxes expenses like healthcare education of their children, which Americans pay from their own pockets (or lend from loan sharks). Those insuarance costs and education funds are a big part of an average Joe’s income.

—-

Last time I talked about per capita GDP, some of the same commentators opined that it is total GDP that matters. Now that I bring up total GDP, I am reminded that it is per capita GDP that is relevant.

As I mentioned then the per capita figure tells the living standard, the total GDP of a country tell its ability to make “big” things. Luxenbourg hardly could build an´aircraft carrier, Iran could do it. When we discussed the last time we spoke about an different issue.

—–

The average tax rate in Finland was in 2007 43.1%.

Finland
income tax corporate
26%
income tax individual
9-32% national, 16-21% municipal
VAT / GST / Sales
22%

USA
income tax corporate
15-39% (federal income)
0-12% (state income)
income tax individual
0-35% (federal income)
0-10.3% (state income)
0-7.65%(federal payroll)
VAT / GST / Sales
0-10.25% (state and local sales tax)

Israel
27% income tax corporate
10-47% income tax individual
15.5% VAT / GST / Sales

Hmmmm…

The facts are clear.

Every time governments get involved in the business of running businesses good things don’t happen.

Every time, markets are allowed to function and allocate resources in the most efficient manner, good things happen.

Every time, governments give themselves the mandate to heavily tax people and confiscate wealth, bad things happen.

Penthouses, middle floors and basements exist. Forcing the building to all look the same risks moving all under a tent.

I’ve enjoyed re-reading this thread. Some enormously interesting debates here… Bravo to Sami, Majed, Ehsani et al for maintaining respectful and complimentary attitudes while disagreeing strongly on the issues.

Those aren’t facts. Those are conclusions based on your own analysis.

and if you choose to reduce the world to only the variables that matter to you (or within your ideological viewpoint), it is not unlikely that you can come to the conclusions you were looking for.

Qifa Nabki,
Thanks for noticing Zenobia’s insensitive remarks.

Zenobia, you’re the one who used a movie and headlines (housing and credit card debt) as back up for your argument against capitalism before dissecting the data. All I did was hold you accountable for your argument. Did I act “capitalist’ in holding you responsible for what you said? It’s been my theme all along…

“Well, right now, this “cycle” has taken us down to a thirty four “year low…”

Zenobia, here you go again, using headlines…Are you relying on Thomas Friedman now to support your argument? You must be kidding… This man has no credibility at all. He is an activist, flip flopping on every issue, depending on which direction the wind is blowing. He is best known for being wrong and manipulative on everything he said, including the Iraq war. Funny how you take the most sensational part of his article (GM at 34-year low) and run with it against the whole capitalist system. Do you know why GM, Ford and Chrysler are in such a poor condition today? Here are two hints…Unions and Government protection against foreign imports. By the way, there are thousands of companies, new and old, that are thriving in this capitalist world, but some of us choose to dismiss them conveniently. The demise of some poorly managed companies doesn’t prove failure of a system.

One other thing must be mentioned here and that is the current economic decline in America and the rest of the world has a lot to do with the terrible foreign policy conducted by Bush and his gang, which as you may know, brought instability and devastation to world economies through soaring commodity prices, particularly energy. I’m sure most of us are hoping those responsible for the mess we’re in today held accountable.

Salam

I think QN is just seizing an opportunity to get his own little slap in to make up for yesterday.

Well Bush and his gang, interestingly enough, hold a very similar economic policy view as you do. Do you notice any irony there, considering that some of the “devastation” they wrought had to do with controlling those ‘markets’ in the Middle East?

I think this is not a conversation now, but a sparing match, and I am not interested in doing that. I think you were rude in a personal and condescending way, and that my criticism – albeit snarky- was not directed at you as a person or as an attack on your competence or source.

I really don’t care where you get your education from or your opinions.
And I really don’t care whether I quoted a “headline” as if this is some strange sin or really low form of debate on a blog.

So, if you think Tom Friedman is an idiot, that’s fine. Sometimes, I think he is spouting nonsense.
But sorry, the credit crisis is not just a headline. It is a reality.
If you want to say that the economic situation in this country is just hype, go ahead.
I disagree.
and that is fine, but you needn’t go on trying to personally discredit me.
I would repeat what I said about social science above, but apparently that didn’t sink in.
I started out saying that you speak ideologically, as Ehsani does. As we all do.
And in case you didn’t know, there are competing economic theories and value systems and ideologies in this country regarding the issues. So, your view, or the establishment view, or Princeton economics does not have a lock on defining reality.

Wonderful debate.

I tend to agree with Zenobia and Sami_D

Income should not be our goal … utility is what counts:

http://en.wikipedia.org/wiki/Utility

The facts are clear.
Every time governments get involved in the business of running businesses good things don’t happen.

Penthouses, middle floors and basements exist. Forcing the building to all look the same risks moving all under a tent.

Well, well. Western countries’ governmental systems control companies and markets in countless ways. A rational free market enthusiast could ask himself why, if the markets know what is the best for the whole society. The countries have anti-trust laws, laws to “check” financial market, countless laws and standards for product quality and safety, laws for environment protection etc. Certainly these laws, regulation systems, standards etc were not created because the “markets” and companies wanted them, because they demand “unnecessary” investments and lower the profit margin. The laws, standards etc were created for the protection of the whole society. We could say with “good” arguments that the western governments protect us from the “markets'” unhealthy business practices. It is also fair to say that western countries control markets much more than the underdeveloped countries.

About the taxes. The Federal debts are now more than USD 10 trillion. ALl of us who have studied economics know with what these debts are in future paid. Federal debts are future taxes. Eshani2 enlightened us that American households (110 million of them) sit on a combined wealth of close to $40 trillion. Well sooner or later that over 10 trillion debt must be reduced or at least stop that rapid growing indebtedness. It is a miracle if that can be done without tax increases.

I agree with Alex it’s been a crucial month long debate with healthy occasional heat despite the different freshhold of sensitivity between men and woman on the debate team. I especially credit Zenobia, Ehsane and Simo for keeping this important debate alive with their clear practical knowledge and diverse experience.

My reservations about pure capitalism can be reflected by the following fact based practical essay which might offer Syria’s planners the insight both Sami, Majid and others want to offer as they navigate the issues surrounding economic reform and wellbeing.
——————————————————————

The American Civil War fades away. It now appears that a new social unrest has taken root in America. But the debate was to be fought in the economic world. The question was, how should the government interact with business? The issue splits into two main views, that of Laissez-faire, and that of General Welfare. Laissez-faire is a rather straight-forward philosophy. It can be best described by saying that the government should have absolutely no interaction within the business world. These thinkers trust that the government’s sole purpose is to protect life and property, and that the role of government should end there. The tree of Laissez-faire has many branches, two of which are classical economics and Social Darwinism. Believers in classical economics base most of their philosophy on mercantilism and its effects. They have no doubt that government interaction with the business world is inept, and can only hurt economic growth. Social Darwinism was a popular belief. It grew from studies of Charles Darwin, and his publication, The Origin of Species. Charles Darwin argued that species had not been created, but had evolved. But most importantly to the philosophy of Social Darwinism, Darwin theorized that evolution takes place by survival of the fittest. It was that idea in the survival of the fittest that became the backbone for Social Darwinists. The Social Darwinists believed that the involvement of government in business interfered with the natural selection of those that were best suited to survive. On the other side of the issue was the general welfare state. The philosophy of the general welfare state, called the Social Gospel, was advocated in part by Christians in the United States. They believed that individuality had gone too far and that it was necessary for government involvement. Increased urbanization and industrialization also led to the belief in the general welfare state. It was the opinion of these thinkers that laissez-faire was not the answer to the problems of economics. Laissez-faire may have been a significant step in the evolution of economics to many people, but there were also many silent threats that it carried. Without government protection, big business can exploit the many people that make it work. Such exploitation could be brought about in low wages and poor working conditions, long working hours, and many others. Many believed that government protection was needed to insure fair competition and high standards of morality. In the 1860s oil became more and more essential as an everyday item. Its demand grew dramatically. The main use at that time for oil was kerosene. Kerosene was used in several ways, although its most popular use was in lamps. Crude oil needs to be refined to produce products such as Kerosene. Pennsylvania was the main location that oil refining was done in the 1860s, but times were changing. The Lake Shore Railroad helped Cleveland become one of the new centers for oil refining. It was obvious that the railroads were invaluable to the oil business. In the new refining city of Cleveland, Ohio, a new refining company was created. This company was the Standard Oil Company, owned primarily by John D. Rockefeller.John D. Rockefeller is a legend of the business world. He started a relatively small oil refinery in Cleveland, Ohio in 1870. In just two years, it grew into an enormous monopoly, producing ninety percent of the nations refined oil. His business ethics have been hotly debated because of many apparent rebates and other schemes. The Standard Oil Company’s success can be attributed to Rockefeller’s business aptitude. Aside from his great business qualities, the Standard Oil Company’s success in the oil industry is because of the secret illegal rebates by the railroads. A rebate in the railroad business is a reduction in shipping fares in exchange for promised use of the railroad’s services. These rebates were brought about through the South Improvement Company, which was set up in 1872. The South Improvement Company was designed with one mission, to destroy all competition to the Standard Oil Company, and other companies that were part of the South Improvement Company. It was started by several large corporations, including the Standard Oil Company. Rockefeller is reported to have met with other oil businesses and tell them that if they do not join the South Improvement Company, they will be wiped out of business due to the lower shipping rates given to the South Improvement Company. Eventually the public gained knowledge of this conspiracy through . After nonstop opposition, the railroads eventually gave in and stooped giving the rebates. The South Improvement Company collapsed in April of 1872, and the Congressional Committee on Commerce denounced it as one of the most gigantic and dangerous conspiracies ever committed. After the failure of the South Improvement Company, the Standard Oil Company also tried secret pacts and bribing. Rockefeller’s objective was to keep the price of crude oil down. If he could buy oil at cheap prices, transport it at low rates, and could sell the refined oil at high prices, he could make enormous profits. Through his deceiving ways, Rockefeller turned the Standard Oil Company to one of the most famous monopolies of all time. He had turned the oil refining industry away from free market competition and towards monopolization. Ida Tarbell, lady journalist and famous muckraker, became John D. Rockefeller’s greatest nemesis. As a journalist for the popular McClure’s Magazine, Ida Tarbell was hired by S.S. McClure at the age of thirty-seven. She became an immediate sensation with readers. By 1900 McClure’s was reaching 350,000 homes thanks to her. She became known for her biography on Napoleon, and then her series on Abraham Lincoln, which took her four years of research. But she earned her place in the history books for her pursuit of the Standard Oil Company, and the Famous Tycoon that ran it, John D. Rockefeller. In the October, 1902 issue of McClure’s Magazine Ida announced that she had finished her research on the most perfectly developed trust in existence (The Gentlewomen and the Robber Barron 185). For two years and in eighteen installments, Ida Tarbell revealed the scandalous nature of the Standard Oil Company and its primary owner, John Rockefeller. She gained her knowledge of the monopoly, through interviews with business people with first-hand knowledge of the Standard Oil Company, and Rockefeller. As the months passed, Ida Tarbell published her installments, which portrayed Rockefeller as a ruthless tycoon, obsessed with taking over control the oil industry. Miss Tarbell urged her readers not to support monopolists such as Rockefeller. She argued that a thing won by breaking the rules of the game, is not worth winning (The Gentlewomen and the Robber Barron 190). In 1909, the Standard Oil Company was accused with violation of the Sherman Act. On May 15, 1911, the U.S. Supreme Court had finally come to a decision. It found the Standard Oil Company, guilty (The Gentlewomen and the Robber Barron 191). Essentially, the supreme court agreed with Ida Tarbell. Ida Tarbell’s study of the Standard Oil Company had raised a controversial question. Is it better to have free competition, with fierce survival of the fittest, or is it better to have industry fall under the control of a single dominance which could maintain order and profits (The Gentlewomen and the Robber Barron 192)? Ida Tarbell wrote and published many other works of literature after that of the Standard Oil Company, but none had such an impact on society. Ida was and is a role model for women of all ages, races, and social classes. She proved that a woman can gain the same amount of admiration and respect as a man. The issues of Laissez-faire versus General Welfare and competition versus Monopoly were becoming more and more hotly debated. It was time for the U.S. Government to start taking sides and making decisions. This was done through the U.S. Supreme Court. By the mid 1880s people were starting to take notice to the fact that the practices of John D. Rockefeller in the oil industry was not an isolated phenomenon. The same practices of monopolizing were happening in the meat packing, copper, steel, coal, sugar, and countless other industries. It was obvious that Adam Smith’s philosophy of laissez-faire was leading the economic world into one populated and governed by monopolies. The question was, whether or not to do anything about that. The question started to get answered in 1887 by the Interstate Commerce Act. The Interstate Commerce Act was the first of several laws that were a turning point on the governments position of Laissez-faire and monopolies. The Interstate Commerce Act was designed to prevent particular unfair actions, taking place within the railroads (The Supreme Court Decides 37). Examples of such unfair actions are rebates, discrimination, ‘unreasonable’ rates, and several others. In 1890 the Sherman Anti-Trust Act was passed. This act was designed to forbid unfair competition among large firms, and essentially, make monopolies illegal. The Sherman Anti-Trust Act was written with very broad language, which left it to the courts decide how to interpret it (The Supreme Court Decides 37). We would now have to wait to see how the courts would use these new weapons against monopolies. It was soon found out how the courts would use the Sherman Act in the court case, U.S. v. E.C. Knight, 1894. The court case revolved around the purchase of four sugar refineries in the Philadelphia area, by the American Sugar Company. This purchase gave the company control of 98% of the nations’ sugar refining capacity (The Supreme Court Decides 38). The American Sugar Company was found not guilty of attempting to monopolize. This loss seemed to make the Sherman Act look like a failure, and for the time being it was. Several other businesses were taken to court, and only a small percent were won by the government. After Theodore Roosevelt took office as president, the prosecution of big business with the Sherman Act was altered, to the disadvantage of big business. Theodore Roosevelt took forty-four different businesses to the supreme court. The most famous one was U.S. v. Standard Oil, 1907. The Government claimed that John D. Rockefeller led his Standard Oil Company to a monopoly through illegitimate means. The Government won. This lawsuit was one of the most dramatic because the government was taking on the largest corporation in the nation at the time (The Supreme Court Decides 39). It now appeared that the government and the courts had made their decision. There was to be no Laissez-faire economy, and monopolies would not be tolerated in the United States of America. What role the government plays in the regulation and intervention of American life is not just a eminently debated issue from the past. It is an issue that has proved to be a major concern and interest of almost all Americans. It is the feeling of many people that business should be unregulated by the federal government. But there are also those many Americans that believe that the government should regulate the growth and behavior of economics, to protect the American Citizen. These two opposite opinions are one of the main divisions of political parties. The Republican party is one that is very attractive to big business. It stands for smaller government intervention in the business world. The Democratic Party stands for larger government interaction in the economy and lives of America’s citizens. It stands to protect the citizens from the dangers of small government intervention. Many people fear a large unregulated economy. It is possible that an economy can run out of control and exploit the consumers and workers. This was illustrated by a study of the Standard Oil Company, headed by the ruthless’ Rockefeller. When a business is able to monopolize within a single industry the outcomes can be potentially devastating. The abuse of consumers is no longer a difficult task. When a consumer has no choice but to purchase from a certain company, that monopoly is able to regulate prices to whatever they deem ‘fair’. It is not always the consumer that is defiled. One may overlook the common worker. When there are no unions to watch over the treatment of workers, employers may exploit them. Long work hours with little pay, and poor working conditions were just two of the many cruelties that early muckrakers uncovered. It is also possible that too much government control over the economy can be present. This is why our present day society exists in a mixed economy. In a mixed economy, private ownership is combined with some government control. This system attempts to eliminate inefficiencies inherent in capitalism or socialism alone. It is in this mixed economy state that a potential median between both philosophies is found. But our philosophies are always changing, as is our government.

Oil edges up in Asia, stays above $140
Tuesday July 1, 1:43 am ET
By Alex Kennedy, Associated Press Writer
Oil edges up in Asia, staying above $140, on concerns about Iran, dollar weakness

BANGKOK, Thailand (AP) — Oil prices edged higher Tuesday in Asia, staying above $140 a barrel, amid concerns about tensions between Iran and Israel and a weakening dollar.
“You have supply-side concerns, such as the rhetoric on Iran, that will likely keep a floor under prices,” said Victor Shum, an analyst with Purvin & Gertz in Singapore. “I don’t see much resistance to $150, which could happen in the coming weeks.”

Oil also rose on expectations the European Central Bank will likely raise interest rates at its next meeting on Thursday, a move that would help strengthen the euro against the dollar, Shum said.

As the dollar has weakened, investors have been piling into oil contracts, betting that they will gain, thereby offsetting the dollar’s decline. Since the start of the year, crude has shot up nearly 50 percent.

Light, sweet crude for August delivery rose 35 cents to $140.35 a barrel in Asian electronic trading on the New York Mercantile Exchange, midday in Singapore.

On Monday, the contract soared to a record $143.67 a barrel. It later fell back to close at $140.00 on reports of weakening U.S. oil demand and end-of-the-quarter profit-taking by traders.

Traders were still anxious about tension in the Mideast after the commander of Iran’s Revolutionary Guards warned that if his country is attacked, Tehran would strike back by barraging Israel with missiles and that it would control a key oil route in the Gulf.

Those comments, reported Saturday in Iran’s conservative Jam-e-Jam newspaper, came after Israeli military exercise over the Mediterranean Sea that was seen as sending a message to Iran to curb its nuclear ambitions.

Iran is the world’s fourth-largest oil exporter and OPEC’s second-largest exporter. About 40 percent of world oil exports pass through the Gulf.

Traders were also digesting news from the Energy Information Administration, which reported Monday that U.S. oil usage in April was lower than previously estimated, falling to 4.2 percent to 19.768 million barrels per day from 20.631 million. That was 3.9 percent lower than in April 2007 and the lowest level for the month in six years.

“We’re starting to see demand destruction in the U.S., but in China and other developing countries, we still see demand growth,” Shum said. “It could take several months before recent fuel price hikes in developing countries start to slow oil demand in those places.”

The dollar was little changed at 106.07 yen in Asian trading Tuesday, while the euro was also nearly flat at US$1.5752.

In London, Brent crude futures were up 57 cents at $140.40 on the ICE Futures exchange in London.

SimoHurtta,

“About the taxes. The Federal debts are now more than USD 10 trillion. ALl of us who have studied economics know with what these debts are in future paid. Federal debts are future taxes.”

And your solution is… bigger government, more spending and larger deficit, right?!? As you said, those of us who “studied economics” know how deficits are created and how they damage economies by weakening currencies; causing high inflation and interest rates, resulting in widespread economic distortion. All of the options used to finance government spending have adverse consequences. Taxes discourage productive behavior, imposing high tax rates on work, saving, investment, and other forms of productive behavior. Borrowing consumes capital that otherwise would be available for private investment. Government spending consumes almost half of Europe’s economic output, one third higher than the burden of government in the U.S. Not surprisingly, a large government sector is associated with a higher tax burden and more government debt. Bigger government is also associated with subpar economic performance.

Simo said: “Western European countries adopted “free markets” 10 – 20 years ago, when they already were on the “top”

Have you wondered why those countries would change course to privatization if they were on ”top” doing so well?!? They did so because they were near collapse. More on that later…

Simo said: “When we watch the best countries by nominal GDP the list is lead by Luxenbourg (=financial “safe haven”) then come Norway, Qatar, Iceland, Ireland, Switzerland, Denmark, Sweden and Finland.”
Simo also said: “North European countries have the highest tax levels in the world (and we have had them for a long time), high social security, free education, best workers rights, longest holidays etc. Why these countries which are no beacons of free trade are so successful in economical terms?”

Again, “those of us who understand economics” don’t use workers rights, holidays, free education, or other unfunded bloated social programs to measure economic progress. I’m not sure where you studied economics, but the economics I was taught measures economic progress based on: real GDP, Unemployment rate, Productivity, Investment, Inflation, labor participation, innovation…Here are few startling economic comparisons for you:

Per capita economic output in the U.S. was $37,600, more than 40% higher than the $26,600 average for EU–15 nations.

Real economic growth in the U.S. over the past 10 years (3.2% average annual growth) has been more than 50% faster than EU–15 growth during the same period (2.1%).

The U.S. unemployment rate is significantly lower than the EU–15 unemployment rate, and there is a stunning gap in the percentage of unemployed who have been without a job for more than 12 months (11.8% in the U.S. versus 41.9% in EU–15 nations).

Living standards in the EU are equivalent to living standards in the poorest American states (roughly equal to Arkansas and Montana and only slightly ahead of West Virginia and Mississippi, the two poorest states).

Manufacturing productivity grew twice as fast in the U.S. as in Western Europe over the past eight years.

Overregulated labor markets contribute to the high unemployment rates in Europe. An anemic growth rates is also a consequence of high tax rates. There is a correlation between bigger government and diminished economic performance. Here are some findings by the world’s top economic institutions and publications:

IMF: “Tax induced distortion in economic behavior results in a net efficiency loss to the whole economy, commonly referred to as the ‘excess burden of taxation,’ even if the government engages in exactly the same activities—and with the same degree of efficiency—as the private sector with the tax revenue so raised.”

A study from the Federal Reserve Bank of Dallas also noted: “Growth in government stunts general economic growth. Increases in government spending or taxes lead to persistent decreases in the rate of job growth”

An article in the European Journal of Political Economy found: “We find a tendency towards a more robust negative growth effect of large public expenditures”

Study in Public Finance Review reported: “Higher total government expenditure, no matter how financed, is associated with a lower growth rate of real per capita gross state product”

An article in the Quarterly Journal of Economics reported: “The ratio of real government consumption expenditure to real GDP had a negative association with growth and investment,” and “Growth is inversely related to the share of government consumption in GDP, but insignificantly related to the share of public investment”

A Public Choice study reported: “An increase in GTOT [total government spending] by 10 percentage points would decrease the growth rate of TFP [total factor productivity] by 0.92 percent [per annum]. A commensurate increase of GC [government consumption spending] would lower the TFP growth rate by 1.4 percent [per annum”

Study in Public Choice reported: “A one percent increase in government spending as a percent of GDP (from, say, 30 to 31%) would raise the unemployment rate by approximately .36 of one percent (from, say, 8 to 8.36 percent)”

The Organization for Economic Cooperation and Development acknowledged: “Taxes and government expenditures affect growth both directly and indirectly through investment. An increase of about one percentage point in the tax pressure—e.g. two-thirds of what was observed over the past decade in the OECD sample— could be associated with a direct reduction of about 0.3 per cent in output per capita. If the investment effect is taken into account, the overall reduction would be about 0.6–0.7 per cent”

A National Bureau of Economic Research paper stated: “A 10 percent balanced budget increase in government spending and taxation is predicted to reduce output growth by 1.4 percentage points per annum”

An IMF article confirmed: “Average growth for the preceding 5-year period…was higher in countries with small governments in both periods. The unemployment rate, the share of the shadow economy, and the number of registered patents suggest that small governments exhibit more regulatory efficiency and have less of an inhibiting effect on the functioning of labor markets, participation in the formal economy, and the innovativeness of the private sector”

I won’t bore you with more hard numbers from numerous other ECONOMIC studies.

Simo said: “Well, Finland did build much of its core industries using state owned companies (mining, steal, power, telecommunication). We also had a very regulated markets until the 80’s. Including that only Finnish citizens could own Finnish companies share, well there were some exceptions with a special permit. Finnish land could be bought by foreigners only when Finland joined EU. When Finland opened its financial markets in the late 80’s (wast credit expansion) it partly joined with the collapse of Soviet union (major trade partner of Finland) created a very serious depression in the beginning of 90’s (one of the worst in capitalistic countries history).”
Simo also said: “It is still to early to say is the free market “theory” really successful in the end. Certainly there are many areas of economy where privatization leads to unhealthy development. For the customers, not for the new owners. In Finland for example the privatization of electricity production has led to a rapid increase of the price (and an astonishing rise in the worth of managements options). An other example of not a very successful privatization here is the mandatory motor vehicle inspection business. The prices have multiplied and the one’s who bought the inspection stations (cheaply) from the government have become astonishing rich considering their business’ difficulty level”

I think it’s time to dispel the myth surrounding the so called Scandinavian/European economic success. Since some on this board are fascinated with Finland, let’s examine this very tiny country of 4.5 millions first.

Dr. Risto E. J. Penttilä (Director of Finnish Business and Policy Forum) exposed the fundamental misunderstanding regarding Finland’s economic achievements over the past decade. “Fifteen years ago the country was in a limbo: the banking system had all but collapsed, public debt was running out of control and unemployment rate was soaring over 20%.” Finland’s success is not a story of a static Finnish model as you may think. Quite the opposite, it is a story of radical changes. Some people believe that Finland’s success is based on a static economic and social model developed in the 1970s. According to the myth the Finnish model was tested in the early 1990s, when Finland entered the most severe depression of any OECD country, and passed with flying colors. Nothing could be further from the truth. Finland’s economic and social model did not survive the crisis. It was transformed during the crisis. The transformation was radical. In fifteen years Finland moved from a closed economy to an open free market economy. Prior to the 1990s Finland’s economy was strongly regulated. There was a very low degree of investments both into and out of Finland. Labor markets were controlled by trade unions. All welfare services were produced by the public sector. “The creative destruction of the old Finnish model began in the mid-1980s with a (botched) deregulation of the financial markets. It was hugely accentuated by the demise of trade with the Soviet Union (which had accounted for more than twenty percent of all trade). And it was brought to a climax with a crisis of public finances in the early 1990s.” The crisis began a series of fundamental reforms. Corporate taxes were cut. The tax system was streamlined. Conditions for welfare payouts were reformed. The banking system was restructured. A very tight fiscal policy was followed. The pension system was changed. As a result Finland managed as the only country north of Germany to adopt the euro in 2002. Still, not everything in Finland is rosy. Unemployment rate is still around 8%. Taxes are high; wages are low. As a result a lot of people have difficulties making ends meet. According to a recent study, more than half a million Finns (that’s 12% of the population) live within a risk of poverty as defined by the European Union. Yet, Finland has come a long way. “Today Finland is a liberal market economy with a relatively well-functioning labor market. The only part of the old Finnish model that still exists is the municipal sector and that very sector is today the biggest headache of Finnish decision-makers.”

Sweden:
Here is an article by a Swedish economist, Stefan Karlsson, on the Swedish myth: http://www.mises.org/story/2259

The current situation is Sweden has a vast budget deficit (55% of GDP) and (close to) deflation, which in turn made it expensive for companies to invest. Fortunately, the EU forced the Swedish Central Bank to lower the interest from an average of 15-20% to 5-6% during late 1990s. Still, the unemployment is approximately 14%, but 10% are “hidden” by the government in student and trainee programs, costing the government enormous amounts. When Sweden joined the EU in 1995, the country had lived on credits for almost 50 years, and suddenly had to pay back. Over a night, the currency plunged over 30% and the interest rates skyrocketed to 750%.

“In the early 1950s, Sweden was still one of the freest economies in the world, and government spending relative to GDP was in fact below the American level. But between 1950 and 1976, Sweden experienced an expansion in government spending unprecedented during a period of peace, with government spending to GDP rising from about 20% in 1950 to more than 50% in 1975. Virtually every year, taxes were increased while the welfare state expanded relentlessly, both in the form of a sharp increase in the number of government employees and ever more transfer payment benefits.”

“During the first 20 years, relentless government expansion took place seemingly without major problems, as Sweden benefited from rapid global growth, although Sweden’s growth had already started to slip in relative terms, from well above average to just average. This changed in the 1970s after Olof Palme, from the left wing of the Social Democratic party became Prime Minister. Palme stepped up the socialist transformation in Sweden, rapidly increasing anti-business regulations and sharply increased payroll taxes. The payroll-tax increases, along with increasing wage demands from unions, made Swedish businesses highly uncompetitive on the global markets, something which Palme decided to solve by devaluing the Swedish krona. As a result, price inflation rose sharply, leading to repeated devaluations. Popular discontent from the economic woes created by the global economic downturn, the massive tax increases, the increased regulations, and the increasing inflation enabled the center right to come into power in 1976, breaking 44 years of uninterrupted Social Democratic rule. The situation has, however, changed tremendously throughout the 1990s. From being a country, in which almost all areas were strongly influenced by a socialist government, most of the government-regulated companies now are parts of the free market.”

Based on a study by Harvard International Review, in 1993, the Swedish system (model welfare state) could no longer handle the artificial employment rate created by the injection of government jobs into the system, massive government spending, and inflation that governmental policies had not addressed. Simply put, the government was growing too fast to be sustained by the private sector. By 1990, government spending matched 57% of the GDP, government jobs accounted for 33% of total employment, and annual inflation hit 10%. All of these factors led to a spike in unemployment between 1992 and 1993, constituting an implosion in the model welfare state.

“Sweden has come far since the economic crisis of 1993. Due to stringent reforms made in response to the economic faults of the 1990s, government spending is still large, but has been limited. Over 90% of Sweden’s industrial production is now privatized. These gains in private sector growth are a direct result of massive deregulation of industries in response to the early 1990s recession.”

However, despite a decade of reform, many dormant problems remain and have started to manifest themselves in recent years. High tax rates and government programs continue to create distortions, and the issues of the past are beginning to resurface. Government injection is not sustainable in the long run.

“Because employee benefits are so generous, many abuse the system by faking illnesses and escaping work. Absenteeism is the largest unaccounted-for contributor to the discrepancy between government data and actual statistics. Also fueling the inaccuracy is the number of people either supported by or working for the government. Because the government is taking so much money from certain citizens and gifting it to others, there is a corresponding loss of consumerism on the side of the former and loss of a drive for productivity on the latter. Because of the abuse of social programs, many welfare benefits are not serving to help the masses, but are instead being milked by undeserving individuals.”

The Swedish government does not produce much of anything, nor does it generate profits from abroad. What results is taxing of jobs created and paid for by the same government, creating a cyclical dependence on bureaucracy.

Conclusion: “Big government is Sweden’s main problem. For all intents and purposes, it is impossible to have a tax system conducive to growth when government consumes more than one-half of economic output. To be sure, Sweden could ameliorate some of the worst features of the current tax system by reducing top marginal income tax rates. But such reforms merely make the best of a bad situation. Sweden needs to fundamentally re-think the welfare state and move to an economic system based on self-reliance and economic opportunity.”

http://www.freedomandprosperity.org/Papers/sweden/sweden.shtml

Europe as a whole:
Olaf Gersemann, an international news editor of the Financial Times, cited few important facts about the European economy: “For while there is persistent mass unemployment in many European countries— with jobless rates hovering near double-digit levels in Germany, France, and other parts of the continent for most of a decade now. The inescapable reality is that the economies of the major countries on the European continent are basket cases: They produce the unemployed by the millions. Even more frightening, European economies are creating a new kind of stratified society, in which a substantial and growing minority is shut out from the labor market permanently through absurdly high minimum-wage requirements and overly strict regulations (like the employment protection laws that can make it almost impossible to fire people).”

In the three largest European countries with the largest economies (France, Germany, and Italy) stagnation, joblessness, and low or no growth are now facts of life. Together, these countries account for about three fifths of the Euro Zone’s economic output, and they have not been healthy for years. Britain, which has similar model to America, has thrived over the last decade. Its unemployment rate is half the Euro’s, its growth has been almost twice the level of the Euro Zone, poverty is declining in Britain, and business creativity is rising.

“Measured simply as GDP per hour worked, productivity is not much higher in the United States than, say, France. But America is close to full employment, whereas in Europe millions of poorly educated people can’t find an employer willing to pay them the artificially high minimum wage or willing to take a chance on such hires because they may be impossible to fire in the future. In other words, Europe seems to be productive only because a large portion of its people are simply left out of the productivity statistics (and working life).”

“The real problem in Europe is the involuntary unemployment of millions, because of economies that do not grow. That is the reason for the lower output and smaller incomes in European societies. More specifically, the U.S. labor market is much better equipped to integrate workers who may be disadvantaged high school dropouts, the very young, the very old, women, immigrants. Consider this: In the U.S., the employment rates for citizens and immigrants are virtually the same. In Germany, the working age immigrant population doubled over the last 25 years, yet the number of immigrants with jobs didn’t rise at all.”

Europeans sense that their economic systems are failing. They have noticed that their beloved welfare and regulatory systems no longer provide the economic security they used to. Consider a poll conducted among 11,200 Europeans. The German market research company GfK asked people what they considered the most important challenge facing their respective home country. “In each of the Big Three countries, the largest share of respondents spontaneously named unemployment as the most pressing problem: 38% in Italy, 58% in France, and a staggering 81% in Germany. (In the U.K., which is much closer to the laissez-faire economic model, the share choosing unemployment as the major national problem was a minuscule 4%).”

The attitude still most widely held in Europe is that it is the job of politicians to distribute and redistribute society’s goods like jobs, income, or wealth. They want politics, not competition, to govern economics. “Asked in April 2005 whether competition is good for economic growth and employment, only 45% of Germans strongly agreed. In both France and Italy, the share was only 29%. Germany’s federal government currently taxes away about 44% of the nation’s output, and the government has long insisted this is not enough. Germans, in other words, are behaving like people on the sinking Titanic who insist their drinks be shaken, not stirred.”

When economic performance got bad enough in a number of European countries in the recent past, majorities decided they were ready to change course. A good example is Great Britain which made a sweeping move toward the American model, cutting taxes and regulations, and inviting many U.S. corporations to set up bases under business-friendly conditions. Ireland exploded in prosperity, and today enjoys a per capita income about 20% higher than in France or Germany. The Netherlands has made some sensible policy changes. So has Denmark. The government there has maintained fairly high unemployment benefits, but it has made it easier for employers to fire employees; and gotten tough on people who receive welfare benefits yet don’t actively look for jobs. The result is a labor market that is more Americanized than any other in continental Europe, and an unemployment rate near U.S. levels.

Ireland has dramatically changed its fiscal policy in the past 20 years. In the 1980s, government spending consumed more than 50% of economic output, and high tax rates penalized productive behavior. This led to economic stagnation, and Ireland became known as the “sick man of Europe.” However, the government decided to act. As one economist explained, “After a stagnant 13-year period with less than 2% growth, Ireland took a more radical course of slashing expenditures, abolishing agencies and toppling tax rates and regulations.” The reductions in government were very impressive. A Joint Economic Committee report explained: “This situation was reversed during the 1987–96 period. As a share of GDP, government expenditures declined from the 52.3% level of 1986 to 37.7% in 1996, a reduction of 14.6% points.” Ireland has been able to keep government from creeping back in the wrong direction. Little wonder that a writer for the Financial Post wrote that “Ireland’s biggest export was people until the country adopted enlightened trade, tax and education policies. Now it is the Celtic Tiger.”

New Zealand also has an impressive record of fiscal rejuvenation. Government spending has plunged from more than 50% of GDP to less than 40% of economic output. One former government minister justifiably bragged: “When we started this process with the Department of Trans-portation, it had 5,600 employees. When we finished, it had 53. When we started with the Forest Service, it had 17,000 employees. When we finished, it had 17. When we applied it to the Ministry of Works, it had 28,000 employees. I used to be Minister of Works, and ended up being the only employee.… We achieved an overall reduction of 66% in the size of government, measured by the number of employees.” It is especially amazing that New Zealand was able to accomplish so much in such a short period of time. In the first half of the 1990s, “Real spending per capita fell by 12%.” This fiscal reform, combined with other free market policies, helped New Zealand recover from economic stagnation.

Slovakia is another success story, which may prove to be the most dramatic. After suffering from decades of communist oppression and socialist mismanagement, Slovakia is becoming the Hong Kong of Europe. With a 19% flat tax and a private social security system, Slovak leaders have charted a bold course that includes significant reductions in the burden of government. Government spending has plummeted in just seven years from 65% of GDP to 43% of GDP.

I can go on and on citing hard ECONOMIC facts exposing that romantic fiction called “European success”. Enough said.

Salam

Facing High Gas Prices
And Time Crunch,
Commuters Start Biking

One rainy morning earlier this year, T.J. Kelly, general manager of Sportgenic, Inc., a start-up sports media company in San Francisco, was sitting in traffic on the bus ride to work and noticed a surprising number of bikers outside. Mr. Kelly, a bike enthusiast, started crunching numbers.

With gas hovering around $4.69 a gallon; parking ranging from $17 to $30 a day; a monthly bus pass costing $80 a month, or adding up to $150 a month on a purchase-per-ride basis, his commute — a combination of car and bus — was costing him close to $600 a month. Plus, with the 12-to-16-hour days he’d been putting in at work, he’d been struggling to find time to exercise.

The bus ride took about 55 minutes each way. Biking takes 50 minutes each way, plus about 20 minutes of shower time at the gym on the first floor of his office building. “It all just clicked,” says Mr. Kelly, who decided to turn his workout into his commute.

Frank Colson moved to the Bay Area from Texas in February to become Sportgenic’s senior director of ad operations. “Being in California I had to find a way to be outside more,” he says, adding that back in Houston he was a five day-a-week gym guy.

When he noticed Mr. Kelly coming up the freight elevator in the morning, bike in tow, Mr. Colson — also a bike enthusiast — decided to jump on the bike-to-work bandwagon.

The two co-workers now bike to work together, logging more than 75 miles per week, and have also become good friends outside of the office.

Mr. Kelly, 36, is married and is 6 feet tall and 190 pounds. Mr. Colson, 33, is married and has two children. He is also 6 feet tall and weighs 215 pounds. They both live in Mill Valley in Marin County, Calif.

The Workout

Three to four mornings a week Mr. Kelly and Mr. Colson bike to and from the office. They come from two different directions in Mill Valley, but meet in between and continue into San Francisco’s financial district. The ride is 14 miles each way and is often faster than driving or taking public transportation.

Once they’re over the Golden Gate Bridge, traffic and congestion pick up, particularly around the Embarcadero near Market Street, which is busy with cars, buses and cable cars.

Would you commute by bike?

What kinds of incentives would you need to do it? If you’re already riding to work, share your thoughts and advice in an online forum with Jen Murphy. The ride is far from leisurely. Mr. Colson and Mr. Kelly push each other to keep a challenging pace. Mr. Kelly says he tracks the calories he burns on the ride to work on his heart rate monitor. When he rides alone he burns about 515 calories, but if Mr. Colson is with him he usually burns around 715.

Mr. Kelly has also introduced Mr. Colson to the Bay Area mountain bike scene. They try to put in about two hours trail riding one night per week and about three hours either on Saturdays or Sundays. “I try to show him a new spot each time we go riding so he can know the trails around Marin,” says Mr. Kelly.

There is a Club One Fitness Center in their office building and as an incentive for employees to keep fit, Sportgenic pays for employees who use the facility at least eight times per month. Mr. Colson says he still tries to get to the gym a few afternoons a week to “blow off steam.” He’ll typically work up a sweat on the elliptical machine or StairMaster and then focus on his upper body for weightlifting. And Mr. Kelly tries to get down to the gym for spinning classes on days he doesn’t bike to work.

THE WORKOUT

Monday: Mr. Kelly takes spinning class. Mr. Colson does either the elliptical or StairMaster and circuit training at the gym.
Tuesday: 100-minute round trip bike commute to work for both
Wednesday: Mr. Kelly takes spinning class; Mr. Colson does either the elliptical or StairMaster and circuit training at the gym.
Thursday: 100-minute round trip bike commute to work; two-hour evening mountain bike ride for both
Friday: 100-minute round trip bike commute to work for both
Sunday: Three hours of mountain biking for bothThe Diet

Before Mr. Kelly got married one year ago he did the South Beach diet to trim down and lost about 25 pounds. His diet now mirrors a modified version of South Beach. He focuses on proteins and vegetables while avoiding sugar and white bread and other similarly starchy foods.

In the morning Mr. Kelly has an Accelerade, a sports drink similar to Gatorade, but with more protein, before he leaves for work. He brings his lunch, usually a salad topped with a protein like chicken. Mr. Kelly says eating healthy snacks throughout the day prevents him from binge eating and he tries to stock his office drawers and home pantry with nuts, string cheese, whole wheat crackers and peanut butter. However, now that his wife is pregnant, he says that the Ben & Jerry’s in the fridge is very hard to avoid. Mr. Kelly says dinner is usually some sort of chicken dish, salad and rice.

Mr. Colson doesn’t eat before he rides. When he gets into San Francisco he buys what he calls “bad foods” like bagel-and-egg sandwiches for breakfast, but makes healthier choices, like sushi or a salad, when he buys lunch. His wife usually cooks dinner for the family — something healthy like a lean chicken dish. Mr. Colson says he keeps a bar of dark organic chocolate hidden at home for when he wants to indulge.

The Cost

Mr. Kelly bought his Specialized Allez Elite II road bike for $1,800 about six years ago and says he’s ready for an upgrade. His big purchase last year was a Specialized Enduro Expert SL mountain bike ($3,400). Mr. Colson bought his road bike, a Specialized Tarmac Pro, for $3,200 off eBay. The Gary Fisher Sugar 1 mountain bike he rides on weekends cost $3,200.

The Effort

Mr. Colson has a work computer at home but Mr. Kelly usually finds himself lugging his laptop back and forth. The evening ride home is far more dangerous with more traffic on the road. There have been some near misses, but no injuries so far.

The Benefit

When Mr. Kelly commuted by bus he did work on his computer or phone. The bike ride forces him to have down time.

“It’s an awesome way to clear my head,” he says. Mr. Kelly says biking to work also makes his weekend activities more enjoyable. “If I maintain a higher level of fitness I’m not miserable, sucking wind trying to keep up with my buddies,” he says. “I can ride and enjoy it.”

Mr. Colson says he that thought he was fit when he was working out for an hour, five days a week at the gym in Texas. But since he started riding to work and on the weekends he has lost about 20 pounds and four inches from his waist.

Mr. Colson says that biking to work is also one way to take advantage of living in California. “You pay a premium to live here,” he says, so you want to take advantage of it and find ways to be outdoors.”