Cyreenik Says
In my basic model for Panic and Blunder-based thinking and action, the starting point is having the community stressed, then having something novel and scary happen, and when those two are mixed the leadership will produce a Blunder in response to the novel and scary event.
The model explained the response to the 9-11 Disaster well, but I'm wondering if it's going to explain the response to the 2008 recession as well.
The stress is here, we've had the housing price collapse in 2008 and the bear market and credit freeze up in early 2009, and now we have over 10% unemployment in the US in late 2009. That's lots of stress, so where's the Blunder?
I think the Blunder we are getting into in this situation is the Never Again Blunder. Congress and various government agencies are looking over the economic wreckage of the past two years and are ready to take action to ensure that this doesn't happen again.
Here are two characteristics of Never Again Blunders: First, they guard against the wrong problem, and second they are designed by deciding what feels good rather than by rationally analyzing what needs to be done.
Here are the blunders I see coming up:
o Financial controls -- Investors got burned on this; they have the smoking fingers to prove it. They feel pain directly, so they will take care of themselves, so I don't see how more government intervention can be anything but a blunder.
o Asking the wrong questions -- Recessions are a time of dream changing, but I don't hear politicians or media people asking how America is going to continue to be a world leader in economic power or moral stature as we pull through this. Instead they are asking how consumers can spend more, how we can get greener, and how the government can get more in debt. Ummm... not the right questions, folks! Our nation's attention is being focused on the wrong things. In particular, trying to get housing back to the good old days is a big mistake. That was a mortgage boom bubble, folks, give housing twenty years to recover, not twenty months!
o Fixing too big to fail and the deficit -- The government spent a whole lot of money to keep the pain from getting worse, and it did. But now there is no good plan to get America off the money narcotic, instead there is serious talk of adding to it with Obamacare. The deficit could become the biggest blunder of this episode. It could torpedo America's world standing and give us a Lost Decade much as the Japanese experienced in the 1990's. If we find that in 2020 people talk about China, India, Brazil, Europe... oh, and the US, too! It will be a scar of this deficit we are building and not planning well to retire.
o The feeling that small business will take care of itself -- The government is already too busy taking care of other things, and planning on smacking small business owners with more onerous regulations of many sorts. A few voices are pointing out that US growth is powered by small business growth, but those voices are few and far between.
So, I sense blunder in the wind, but it's not as overt as the 9-11 experience. The good news? The good news is that the War on Terror is receding, and our national attention is moving on. Our Decade of Terror seems to be receding steadily. Thank goodness!
This article in the November 18th, 2009 Wall Street Journal shows some of the craziness that surrounds thinking about immigration "The Other Immigrants: Low quotas, long lines hurt U.S. competition for human capital"
People leave their homes and families for many reasons, but the two most common are curiosity and getting more resource. Curiosity is the heart of tourism and getting more resource is the heart of immigration.
Given that making money is at the heart of immigration, it's hard to justify why some locals are so vocal about the problems that immigrants bring. "They are criminals and they take our jobs," are the most common complaint themes of locals.
Neolithic Village thinking can explain why there's a lot of emotion behind this fearful thinking. "These people are strangers, and strange people can't be trusted."-thinking goes way, way back.
But, in reality, do people travel half-way around the world to steal other people's chickens and women? Is there good logic behind such a choice?
No, people travel halfway around the world to make better money than they can at home. And people get invited to travel halfway around the world because not enough people in the destination want to do the work the immigrants are coming to do at the price the locals want to pay.
Personally, I've been on two sides of this coin. When I was in college, I helped my college roommate pick apples on his family farm. Whew! It was a lot of work, and I felt I wasn't getting paid enough! But, there were people from other parts of the world who felt like the pay was sufficient. They felt that way because it beat what they could make at home by a whole lot, and my roommate's family hired them to do what my roommate and I sure didn't want to do any more of.
Later in life, I went to Korea to teach English. In this circumstance I was the immigrant. I traveled a long way, and I did it because I was paid well compared to what I was doing in my homeland. (being a freelance writer) (...and, in truth, I was curious too.)
In either of these cases did I feel the locals were worse off because there was an immigrant working? Not at all! The immigrant made life a lot better!
So much for the stealing jobs part, now how about the crime issue? Based on my personal experience, when I crossed the dotted line between the US and Korea, did I suddenly feel compelled to steal chickens? Ummm... NO! In fact, I was even more worried about the consequences of being on the wrong side of the law because I was all alone in a strange land.
So why and when does an immigrant commit crimes? The immigrant will be a criminal for the same reason a local will be one: When the person feels disenfranchised -- not part of the system and not protected by the system.
And for this reason -- to keep crime from becoming an attractive activity -- it is important that immigrants be treated as part of the system. For this reason, the campaigns to do things such as keep illigal immigrants from getting driver's licences or receiving health care are insane -- they are inviting the immigrants to feel like they are outside of the system and it's therefore OK to become chicken stealers.
...just insane!
Distrust of strangers made sense in Neolithic Village times, but in a civilized world, one where we gain by cooperating with wider and wider circles of people, it makes no sense. Not only does it make no sense, it's expensive, and it can lead to self-fulfilling prophesy when immigrants are kept outside the system and because of that feel they are disenfranchised.
The Fort Hood rampage of Maj. Nidal Malik Hasan on November 5th was a novel and scary event. The man jumps up on a table in a cafeteria, shouts Allah Akbar!, and then guns down 30 people before he himself is gunned down.
Whew! Whatever else it is, it's a spectacular 2009 version of going postal.
Being strange and scary means that the media is interested, and we have the first step in creating a blunder response. The other necessary ingredient to creating a blunder response is a lot of stress, and another helping ingredient is having to act quickly.
When something is this strange and scary, one of the first responses after the fact is second-guessing. The media plays up the question of, "Who dropped the ball on this one?" The correct answer is, "No one. This hasn't happened before." but that's not an answer that plays well with the media or people who get emotionally involved in something such as this.
So, we get fingerpointing, and this Wall Street Journal article is a good example of the fingerpointing starting. Part of this Wall Street Journal article of November 10th says:
The Pentagon said it was never notified by U.S. intelligence agencies that they had intercepted emails between the alleged Fort Hood shooter and an extremist imam until after last week's bloody assaults, raising new questions about whether the government could have helped prevent the attack.
A top defense official said federal investigators didn't tell the Pentagon they were looking into months of contacts between Maj. Nidal Malik Hasan and Anwar al-Awlaki. The imam knew three of the Sept. 11 hijackers and hailed Maj. Hasan as a "hero" after the shooting last week at Fort Hood that left 13 people dead.
"Based on what we know now, neither the United States Army nor any other organization within the Department of Defense knew of Maj. Hasan's contacts with any Muslim extremists," the official said.
The false presumption here is that Hasan is the only person, or even the only nutcase, who surfs the Internet and talks to radical muslims. There are thousands of nutcases, but only one in a thousand, or one in ten thousand, do something as spectacular as Hasan.
The lesson we as community members need to learn, and relearn, and relearn, is that we shouldn't make laws and policies based on unique scary events. We need to make laws and policies based on things that are likely to happen over and over, not on one-in-a-million shots.
"Recessions are a time for dream changing."
This is a Roger Saying, and this dream changing applies to more than just the community's businesses and finances. It also affects the cultural dreams as well.
This article in the Nov 2nd, 2009 edition of The Times describes an example of the cultural dream changing that is going on in Japan. Here is a related article in The Economist Oct 29th, 2009 issue, They Need Another Hero, and another in the 18 Apr 10 Mainichi Daily News Japan's herbivores are blurring boundaries -- and upsetting stereotypes by David McNeill.
I propose that these changes are a result of the Lost Decade recession there. Here is an excerpt from The Times article:
At the age of 18, Mitsuhiro Matsushita already has a good idea of his ideal future. After he graduates from university a few years of work will be followed by marriage to an industrious wage earner. When children arrive it will be Mitsuhiro who stays at home looking after them, baking cakes and biscuits and living the traditional life of the Japanese housewife.
None of this would be noteworthy but for one thing. Mitsuhiro is not a conventionally minded Japanese woman, but a thoughtful, articulate and fashionably dressed young man. And far from being a marginal eccentric he is a member of a large and growing tribe of Japanese manhood that is attracting the fascinated and anxious attention of companies, academics and the mass media.
This in a Japan that during the 1980's was noted for its culture of hard-driving industriousness and conformity.
This is an example of recession-driven cultural dream changing.
It is a blunder to think that we can stop the next recession with new government regulations on things such as bankers' pay.
This article in the Nov 3rd, 2009 edition of the Wall Street Journal talks about a much better way to avoid the next recession. Here is an excerpt:
The pain of the financial crisis has economists striving to understand precisely why it happened and how to prevent a repeat. For that task, John Geanakoplos of Yale University takes inspiration from Shakespeare's "Merchant of Venice."
The play's focus is collateral, with the money lender Shylock demanding a particularly onerous form of recompense if his loan wasn't repaid: a pound of flesh. Mr. Geanakoplos, too, finds danger lurking in the assets that back loans. For him, the risk is that investors who can borrow too freely against those assets drive their prices far too high, setting up a bust that reverberates through the economy.
Investors have been burned, they don't need the federals telling them, "Ah, ah... don't do that again." Sheesh! their charred and smoking fingers are telling them that already!
What these investors don't know is what they did wrong, and, once again, regulations designed in an atmosphere of panic aren't going to do the right kind of protecting. In this crisis that means regulations designed to protect investors and the public from greed -- such regulations will completely miss the point that caused the problem, and even worse, much worse, they will unintentionally stifle really good solutions that can be developed as this problem is better understood.
We should not forget that in 2007 investors were surprised they got burned, and regulators were surprised they got burned as well.
What we all need is better understanding, and once we have that we won't need any new regulations at all.
The work of people like Mr. Geanakoplos is what we need more of, not more regulations that are swinging in the dark.
As I reflect back on the various recessions I've endured and read about, one consistency is a strongly supported popular movement involving resource conservation in some form.
o In the current recession this is called getting greener.
o In the 1990's it was supporting recycling with recycling bins becoming widespread.
o In the 1980's it was supporting environment protection.
o In the 1970's saw the creation of the EPA, and movements to support better automobile safety and fuel economy, with auto safety and CAFE regulations being the highlight.
o In the 1930's it was called resource conservation and featured building dams such as Hoover Dam and improving recreation areas, with the Civilian Conservation Corps being the prominent symbol of that activity.
Many conservation movements exist and are promoting conservation ideals long before any recession hits, but when one does, one or two will grow in strength and political interest, and laws favoring those concepts de jour are enacted. This is important because the resulting laws often suffer from The Curse of Being Important -- we end up with legislation that feels good at the time, but is self-defeating because it doesn't keep up with changing economic and technological reality. After a while, the regulations don't help conserving any more, they actually impede further conserving by limiting how a product or service can change to take advantage of new circumstances.
As we work at being green in this decade, we need to keep in mind that we don't want to put obstacles in the way of being even greener in future decades.
-- The End --