Taxation and Morality

Why pay taxes? Is it a moral issue? Is it something else?

Governments need money to fix the roads; to keep airports running; to keep bridges safe; to pay the armed forces; to maintain fire departments and police departments; to maintain a clean and secure water supply and to provide a social safety net for the old, infirm or less fortunate.

The common good, as described by Professor Esther Reed in her contribution to a 2014 document on Taxation and Morality, is humanity’s shared project of living together. It is less about the specifics and substance of what that common good is than an understanding that the common good is a communal endeavor and a recognition that people exist in relation to each other.

The tragedy of the commons is often cited in support of a capitalist model. The fact that everyone acting rationally in their own self-interest can destroy a shared resource should more properly be understood not as a reason to extol the pursuit of private property and self-interest without regard for the need of others, but rather as a reason to derive a better understanding of the common good.

 Politics and the Common Good

 Agreement on what the common good is quickly becomes a question of politics. There would be no requirement for taxation without government spending. In the Big Picture – a site referenced before in these articles – a team brought together by Steve Ballmer, former CEO of Microsoft, pulls together the financial picture of the USA and gives insights to federal, state and local finances.

Government spending is an expression of the things a society holds important as part of the common good. Government spending represents the accumulation of priorities established by both (in the case of the United States) political parties. It is something that citizens on both sides of the political divide have had a share in creating.

In the United States currently, expenditures exceed revenues collected and the government must borrow to fund the gap. Taxation is how revenues are collected. If the common good has a moral underpinning – there are both secular and religious arguments that say it does – then there is a moral basis for taxation and, necessarily, a moral argument that evading or avoiding tax is immoral.

Is Legality the Right Standard?

 Arguments have been made that taxation is unconstitutional. Brushaber vs. Union Pacific Railroad squashed this argument. Evading tax – consciously ignoring the rules requiring a particular tax result – is both criminal and immoral. The grey area is tax avoidance. A common reaction to the publication of the Panama Papers and Paradise Papers is to ask what is wrong with engaging in legal planning to avoid taxes that would otherwise be payable?

Legality is not always an acceptable answer to questions of morality. Slavery and child labor were once legal. They were never morally acceptable. Asserting compliance with a complex web of rules governing taxation in jurisdictions that overlap and interlock in sometimes incoherent ways cannot be a sufficient answer in questions of corporate social responsibility (CSR). Milton Friedman’s quote:

“There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”

is relevant and often cited in discussions of what constitutes CSR. Friedman’s quotes can be a rich source of discussion, but the words can be parsed in different ways. Staying within the ‘rules of the game’ requires an understanding of the rules and, of course, what the game is.

If ‘the game’ is the business of producing profits for shareholders, that begs the question of what the profits are for. Those who argue that the common good is a lofty goal beyond the responsibility of corporate decision-making may have been overtaken by evolving norms of CSR.

Tim Cook, CEO of Apple wrote an Op-ed in the Wall Street Journal on November 3, 2013 where he urged passage of the Employment Nondiscrimination Act. He claimed that:

Apple’s antidiscrimination policy goes beyond the legal protections U.S. workers currently enjoy under federal law, most notably because we prohibit discrimination against Apple’s gay, lesbian, bisexual and transgender employees. A bill now before the U.S. Senate would update those employment laws, at long last, to protect workers against discrimination based on sexual orientation and gender identity.”

While claiming to hold Apple to higher standard than that imposed by law in this area, Cook has a slightly different approach to taxation. His standard is that Apple pays every dollar of taxes owed under current law in the US and in the jurisdictions in which it operates. Perhaps – though the recent release of the Paradise Papers makes that unclear. Apple’s effective tax rate, depending on how the calculation is done, is between 15-24%, far short of the 35% marginal rate of corporate tax.  Holding the company to a higher standard in nondiscrimination than the standard of minimum legal compliance in tax law appear inconsistent.

Regardless of whether Cook is aware of the choices he is making in the area of taxation, moral choices are being made as a matter of CSR. The definition of what comprises the common good has entered the realm of corporate decision-making. It is a threshold once crossed that cannot be retraced.

 Tax Reform in the United States

How does this relate to tax reform in the United States? The reasons why tax reform triggers such passionate widespread coverage is precisely because taxation is a moral issue. The burden is clear and, because the burden must be shared, the issue of how that burden is shared goes to matters of fairness.

If the reduction in the corporate tax rate to 20% is made permanent, but the reductions in personal taxation and the adjustment of bands of taxation sunset after ten years in order to comply with the parliamentary procedure of Reconciliation and the Byrd Rule, that seems unfair. If the forgiven tuition of post-graduate students becomes taxable but the carried interest loophole remains, that seems unfair.

The constraints for passage of tax reform are a product of the current hyper-partisan state of politics. Because no-one expects that both parties in the Senate will be able to work together for tax reform; and because Senate Republicans are – probably correctly – convinced that if they do not pass tax reform this year, they will suffer electorally in the 2018 elections, tax reform must be able to pass with a simple majority. Reconciliation first requires a budget resolution to have been passed. This has been done already and permits a 10-year deficit not exceeding $1.5trn. Providing a tax bill is not scored by the Joint Committee on Taxation to exceed this deficit, it may be passed with a simple majority. Whether this procedure has been complied with can be objected to as a procedural matter. The matter is ultimately decided by the Senate Parliamentarian.

 Conclusion

The moral underpinnings of taxation are clear. Whether current tax reform proposals conform to a broadly held understanding of the common good is not clear. Frustratingly, it is not even apparent that this is the criterion for approving tax reform. That appears to have much more to do with the pragmatic calculations of electoral survival. Congress would seem to be engaged in its own version of the Tragedy of the Commons – the shared resource in this case being the United States economy.

 

How Can Journalism Survive in the Era of Fake News?

The Oxford English Dictionary, according to ThoughtC0, attributes the term “Fourth Estate” to Lord Brougham in 1823. In England, the Fourth Estate comes after the three estates of King, Clergy and Commoners. In the United States, the Fourth Estate sits alongside the three branches of government.

A recent Guardian article highlights the challenges facing the Fourth Estate. The Freedom of Press guaranteed in the US by the First Amendment carries with it the obligation that the press should be the watchdog of the people. The only way for the electorate to responsibly exercise its constitutional duty to elect representatives to carry out the job of governing is to be well informed both about issues that matter and about those elected to deal with those issues.

As is the case with many aspects of out current social and political ecosystems, Donald Trump is breaking fresh ground by debasing many of the currencies of social exchange. He is not, however, the source of the problem, merely the most conspicuous symptom of a broader malaise. Apple has historically been less an inventor than it has been a shaper of new technology in a format most likely to bring it to its highest and best use among consumers.

Donald Trump, by contrast, typically takes something already bad – sexism, misogyny, mendacity, intellectual laziness, poorly used language –  and makes it truly awful. In doing so, he has heightened awareness of those things that one cherishes in public discourse and social interaction and forced people to confront the underpinnings of their continued existence.

Measuring the Media

The Fourth Estate is under attack – it is important to understand how it should best be defended. As the Guardian article points out, ‘democracy’ in media is not a great test. Ranking the importance of media by the circulation or viewership numbers is a process likely to result in a defining down of media to the lowest or most popular common denominator.

There is a pecking order of news: at the top of the UK circulation rankings sit two papers whose focus on sex, sensationalism and voyeurism is well known. The Daily Mail and the Sun are certainly popular but do not move the chains of human understanding forward anymore than gladiatorial combat did in Ancient Rome.

The parallel chart for the US tells a different story. While there are some similarities between the attention-grabbing style of some of the top-ranked USA Today headlines, the paper quickly breaks into more substantive news, whereas the Daily Mail goes ever deeper into the shallowness of sensational and tawdry stories.

The most striking contrast, however, is in the second-place ranking: The Sun vs. The Wall Street Journal. Both are owned by News Corporation, but could not be farther apart in style, quality or topics they cover.

Quality and Viability

Investigative journalism costs money, and its results do not always pay for the effort required to produce them. Pro Publica, with an annual budget of $10m, keeps track of the impact its stories have. Its series on acetaminophen is estimated to have cost $750,000 and taken two years. The information is available free on the Pro Publica website. Its funding is from foundations and individuals. The payoff in lives saved is incalculable, and the value of this kind of journalism is beyond question.

Aggregators such as Drudge and Breitbart claim simply to curate news from all sources, but they leak selection bias from the right. Slate and Huffington Post provide a similar diet with a left-leaning selection bias. This, of course, is worrying.

Talk radio and cable TV have MSNBC, CNN and Fox News fighting for their constituents and the ratings that go with them. Fox News was conceived by Roger Ailes on the premise that viewers and listeners did not necessarily need to be informed, provided they felt informed. This had major budgetary implications: rather than conduct the kind of investigative journalism expected of the more traditional news media, Fox could simply curate news second hand.

Debasing the Medium

The rationalisation of less reputable news sources has found its perfect pitchman in Donald Trump. As part of the anti-elite, anti-mainstream media narrative, he has persuaded his base not only to distrust mainstream sources but also to see criticism of more marginal sources such as Breitbart and InfoWars by the so-called elites as proof positive of their reliability.

An unfortunate consequence of the mainstream media’s outrage (or ‘gloatrage’) is that political bias has begun to leak from the opinion pages into the news coverage, giving detractors further reason to eschew what have been traditionally high-quality news outlets such as the Washington Post and the New York Times.

The Fourth Estate has entered something of a crisis in which outrage, bias, entertainment, ratings, the internet (and the proliferation of un-curated sources with limited quality control filters) have merged into a fast-flowing stream of uncertain depth where those who enter have no reliable tools to navigate.

The news audience has become unmoored from its bearings, and the unreliability of a few sources has begun to taint all sources and drive the argument that if all sources are tainted, then any source is as reliable (or unreliable) as any other. False equivalence is rife, and people tend to take refuge where their bias is comfortably affirmed.

Facts, Facts, Facts

True and false do exist. Facts are not negotiable. Some people are, on some topics, more qualified to be heard than others. Better speak to an oncologist about a suspected tumour. Better listen to a physicist if you want to learn about string theory. They are both members of an elite.

Those who ignore them because of their elite membership status do so at their own risk. The skills required to report the news daily are considerable. Journalism is a craft that needs to be learned. It is not hard to discern quality in journalism or to be appalled by the lack of it.

People do, of course, have the right to choose what news they consume. Do people have a right to remain uneducated? No. All children must attend school through high school, with 26 US states setting the benchmark at 16 and other at 17 or 18. There is, however, no obligation to remain informed beyond that. The hope, presumably, is that the first 18 years will have sufficiently conveyed the importance of doing so.

The news is a worthy project in need of careful attention. Just as Amnesty International carefully examines all possible clues to veracity in examining alleged human rights abuses, so news organisations have an obligation to examine the truthfulness of facts on which they report.

The increasingly sophisticated means by which “fake news” can be produced requires the diligence process to become more sophisticated. Tools exist – examining metadata for pictures being one example – to uncover mischief, but the battle is just beginning and more tools are needed.

Conclusion

The job of the Fourth Estate is to provide the information and insights that keep the citizenry informed.

The journalists that staff the quality sources are intelligent, resourceful people – they are above the body slams and denigration to which they are currently being subjected – but they must guard their reputations jealously and, while never shirking their duty to report for fear of the consequences, must not be dragged into the wrestling ring.

Tesla Solar Singles – Raise the Roof

When Elon Musk announced late last year that Tesla would manufacture solar roof shingles, it was not clear whether the cost would be competitive. Recent announcements suggest it will be. For new roofs and replacement roofs, the decision should be clear: if they cost the same as shingles or slates (maybe less), why would they not be the choice? The question is whether the electricity savings justify the cost for roofs that still have some design life remaining.

Tesla is building Gigafactory 2 in Buffalo New York to produce both traditional solar panels and solar roof shingles. Two varieties are available for installation now; another two varieties will be available in 2018. Production initially will be in California and will move to Buffalo when the factory is complete. (Tesla broke ground on Gigafactory 1, in Sparks, Nevada for the production of the upcoming Model 3 vehicle and for the production of batteries in 2014).

Tesla’s website provides a handy tool using Google’s solar project to determine, based on address, what the appropriate mix of solar to non-solar roof tiles should be. It estimates costs and savings, making assumptions about electricity consumption, the tax credit available and, if required, financing costs.

If a consumer chooses to finance the roof cost, the benefit of the tax credit will go immediately to the financing party – Tesla – and be factored into the financing rate.

Financing creates another wrinkle in the sale of the property, but this is not a new issue.

Tesla is also selling batteries to permit storage of the energy produced for use during periods when the panel are not producing energy – nighttime for example. The savings shown on the Tesla site do not factor in any benefits that may be available by selling any excess energy produced back to the grid – the so-called net metering. Net metering is available in 41 states currently.

Visionary CEO?

Musk is, without a doubt, a visionary: cars, space and solar panels are all substantive accomplishments. Some, however, consider him to be a 21st-century P.T. Barnum. Which is it?

Tesla receives a lot of tax subsidies. California, Tesla’s home state, allocates credits in the form of zero emission vehicle credits (ZEVs) to manufacturers producing zero emission vehicles. Currently, Tesla is the only manufacturer eligible for ZEVs. California requires all auto manufacturers to produce a certain – arbitrary – number of zero-emission vehicles or to purchase the equivalent in the form of ZEVs. According to Tesla’s most recent annual report, it received $302m, $168m and $216mn of regulatory credits in 2016, 2015 and 2014 respectively. While not an insignificant number, these credits represent an average of around 5% of Tesla’s revenues for the past three years.

$302m is what Tesla received in regulatory credits in 2016

Tesla also benefits from local tax incentives for building factories in areas that are keen to see the additional jobs. This, however, is no different from many manufacturers – auto and others.

Tesla has been accused of benefitting from ‘crony’ capitalism and of producing products that are of no interest to consumers absent the tax benefits. The products may not, according to critics, even be produced in the first place if Tesla itself did not receive the tax handouts mentioned above. Tax incentives of $7500 per vehicle, attractive while they last, will phase out after the sale of the 200,000th vehicle (probably sometime in 2019).

Why Pick on Tesla?

Tesla is not the only company or industry to receive substantial benefits from government tax policy.

Over the past fifteen years, corporate tax subsidies, largely in the form of tax credits and grants to the renewable energy industry, have amounted to approximately $68bn. Federal loan or bailout aid over the same period has amounted to $17.8trn, of which Bank of America, Citigroup, Morgan Stanley and JP Morgan Chase received $3.5trn, $2.6trn, $2.1trn and $1.3trn respectively.

The private equity industry enjoys a benefit of around $2bn per annum from the favourable treatment of carried interest.

The government must make choices in tax policy. Some of those choices involve decisions that could be described as industrial policy. Generally, the position of this author is that private market is better equipped to make decisions regarding the allocation of resources. It does a better job and tends to make smaller mistakes. Solyndra is a good example of government folly. No doubt.

While hard to find a clear government policy on any industry, including the energy industry, inferences can be made. The government appears to have a significant interest in the financial services business. It also appears to have a clear interest in the renewable energy business.

Conclusion

It is often said that the US is not producing things anymore and is becoming increasingly a service economy. This complaint is a large part of the trade surplus/trade deficit discussion. If the US does not produce ‘stuff’, ‘stuff’ has to be imported. It is not hard to understand why the government is interested in promoting the emergence of a company such as Tesla.

So, P.T. Barnum or visionary? The case for visionary is compelling. Electric cars that look great, accelerate quickly – very quickly. Rockets that can be re-used are exciting too. Solar panels that look like traditional slates have a compelling aesthetic; electricity savings make a compelling economic case. Tesla’s tax subsidies are not greater than banks, renewable energy companies, real estate and insurance companies. Why the bad press?

One thought: envy. It is not attractive and it is not the best America has to offer. It is not why immigrants such as Musk come to America.

US Climate Change – Don’t Worry, Be Happy

BP recently released its 66th annual statistical review of world energy. This is a remarkable achievement and a library of data worth paying attention to. It tells us that carbon emissions for the last year were essentially flat, as was global energy use. Perhaps President Trump had an early copy – it would explain why he felt comfortable pulling out of the Paris Accords. All is good: both global and US climate change is under control and there is no need to worry.

Energy Consumption: What Are the Factors?

Global energy demand was weak. Half of all growth came from India and China. The mix of energy sources continued to shift away from coal and towards renewable energy (a third of total growth), although the latter accounts for only four percent of global energy consumption. Because of the shift in mix and the softness of overall demand, carbon emissions are essentially flat. Is it a long run trend or cyclically driven – a result of lower growth in China, for example, or a result of a shifting pattern of energy consumption as China changes from developing to developed?

Carbon Emissions

Flat carbon emissions suggest that there is no need to worry. On the other hand, according to BP,

“The world economy is expected to almost double over the next 20 years, driven by emerging economies, with growth averaging 3.4% per year and, more than 2 billion people lifted from low incomes. Meanwhile, the world’s population is projected to increase by around 1.5 billion people to reach nearly 8.8 billion.”

That means more cars, white goods, air travel, etc. The world needs to keep running just to stand still. Complacency will not get the job done, and we will quickly lose ground.

Why So Much Heat?

To say the discussion about climate change is politicised is an understatement. One camp views the concern about climate change to be a conspiracy of the ‘left’ to appropriate trillions of dollars of resources from the developed world and redistribute them to the developing world while siphoning a significant percentage to elites investing their time and energy for ‘the cause’. The other camp is simply horrified – outraged – that anyone could doubt the need to take urgent action to prevent the world burning up in a suffocating cloud of carbon.

Planet Earth is largely indifferent to whether we deal with the issue of climate change or ignore it. The planet has shown the ability to regenerate and evolve. Its timetable is unknown and there is no morality in the life and times of the universe. It helps to be clear that the real issue is whether the planet remains a pleasant place to be for the human race. Biodiversity and the ability of the atmosphere to absorb carbon dioxide are critical to our survival.

Competition for Resources in Alleviating Human Misery

How much should be spent in pursuit of the IPCC’s targeted reduction of 1.5% in global temperatures by 2025-2030? Clean energy, reducing the utilisation of non-renewable resources, limiting ocean acidification, the rise of sea levels, the reduction in biodiversity and doing as much as possible to leave as small a footprint as is possible are all laudable objectives. However, how should the cost of meeting the IPCC goal be measured and compared to the cost of reducing diseases of human misery such as cholera, malaria, Zika, and the West Nile virus? How are these matters inter-related? What is the utility benchmark against which these competing goals can be measured? Is there a per dollar human benefit/detriment measure that can help?

How to Proceed?

The recent decision by the Trump administration to pull out of the Paris Accords very clearly surrenders leadership in the debate about climate change solutions. It sets a tone for US participation that emphasises narrow national interest over global context. While climate change is more easily measured and understood on a local level, climate factors are indifferent to national and political boundaries. Success in impacting global temperatures requires all 190 signatories to the Accords to take their part in meeting their obligations.

Historically, a popular narrative has been that China and India’s carbon footprints and their willingness to compromise climate goals in favour of economic development severely undercut the efforts of the rest of the world. Not anymore. Recent research restates this narrative and indicts President Trump’s policies.

Progress is not a luxury. While it is encouraging that corporations and individual cities and states in the US are affirming their commitment to climate change initiatives, President Trump surrendering a seat at the international table is a step backwards and must be a cause for concern. Clear thinking, honest debates with a clear understanding of underlying motivations, accurate measurement criteria and a detailed understanding of associated costs are all critical to a proper allocation of resources to achieve goals that are realistic and can be clearly articulated.

How Vietnam is Moving into the Future, One Scooter at a Time

There are nine million people in Hanoi and some four million scooters, which are the primary mode of transportation. They create a very distinct mood while also subtly suggesting much about the politics and economics of the nation.

Politics and Urban Development

Vietnam is a communist country. CINO (“communist in name only”) may be a better description. There is only one party to choose from, so participating in the political process is more like joining a club and becoming an officer. The economy, however, feels very capitalist. Hanoi is a great example.

 

The Vietnamese government discovered the libertarian principle of subsidiarity, which holds that matters should be decided at the level closest to where they can be effectively resolved. In the case of Hanoi, while it was impossible for a central government to provide a solution for all housing issues, the resources to do so existed abundantly at the level of the individual actual or prospective homeowner and the construction businesses ready to make a profit by serving their needs. Provided minimum standards were met, the government would provide services. By allowing ‘nature’ to take its course and providing a relatively light touch regulation, homes were built, services provided and slums were avoided.

An interesting feature of development in Vietnam is the role of taxes in shaping urban development. Because property taxes were levied on the width of property frontage to the street, buildings are noticeably narrow, go back a long way and then widen out. In other words, tax policy heavily influenced architectural style. This phenomenon is not unique to Vietnam: the window tax in the 18th and 19th centuries in England, France, Ireland and Scotland resulted in buildings with bricked up window spaces ready to be glazed at the point when the tax was repealed.

Transition to a Mixed Economy

Vietnam has undergone many transitions in its journey to one of the world’s fastest growing economy. According to a forecast by PricewaterhouseCoopers in February 2017, Vietnam may be the fastest-growing of the world’s economies, with a potential annual GDP growth rate of about 5.2%, which would make its economy the 20th-largest in the world by 2050.

A journey from Hanoi to the coast at Ha Long Bay reveals a mixture of villages where rice can be seen drying by the side of the road (yes, scooters do run over it sometimes, but it gets washed subsequently), towns with water mains being installed in front of the typical mix of shophouses (a car repair shop next door to a nail parlor) and larger towns with large factories run by companies such as Foxconn or Canon as the main employers.

The traditional communist central planning with its five and ten year plans still exists, but the gradual evolution toward a mixed economy has swept away much of the communist ideology from daily business life. For a visitor seeking to discern some pattern in the development of the various pieces of the economy seen in the progress from village to town to city, there are few clues. The overwhelming impression is that, while the streets are teeming with restless energy, the path, like that of the many scooters, is somewhat haphazard.

Ho Chi Minh’s Cult of Personality

Even Vietnamese tour guides are educated, consistent with the intention of the Communist Party of Vietnam, in the virtues of Ho Chi Minh as a great leader and father of the nation. His humility in refusing to occupy the impressive house used to receive foreign heads of state (he chose a nearby hut on stilts) is a staple feature of the tour guide narrative and parallels Pope Francis’s decision to live in the Vatican Guesthouse rather than the papal apartments in the Apostolic Palace.

Ho was certainly impressive in many respects. He spoke Russian, French, Cantonese, Mandarin and English in addition to his native Vietnamese. He travelled widely as a ship’s hand in his youth and spent time in France and Russia. His political philosophy, Ho Chi Minh Thought, though based on the teachings of Marx and Lenin, incorporates other strands of thinking and is believed by some in Vietnam to be a cover under which non-socialist ideas are smuggled into the economy without undermining the socialist legacy.

While there is some recognition that Ho is less popular in parts of the south of Vietnam and among some Vietnamese living abroad, it is hard to get an unbiased view in a country that still forbids critical writing about him.

Political History and Its Social Residue

Vietnam was in the grip of war with the United States for about nine years, under French colonial rule for ninety-six years and in a struggle with the Chinese for much longer. Half its border is with the South China Sea; the rest with Cambodia, Thailand, Laos and China. It occupies a strategic position in South East Asia. No doubt this is responsible for its interest to foreign powers. Since independence in 1975 and the fall of the Soviet Union (Vietnam was a member of COMECON), Vietnam has been allowed to get on with the business of planning its emergence as a sovereign nation.

There is no sense that there is a resentment of foreign influence. The population is ninety-one million, 25% of which is under the age of fourteen and is growing at over one percent per annum. The country looks forward and never backwards.

Trump and North Korea – Can You FIx Crazy?

This article captures the absurdity of the situation the world finds itself in. The location – Blackpool – is my long-ago birthplace and usually home to political conferences and bachelor parties. Now it is also home to the “ultimate lads’ prank”, which might, incidentally, be an apt description of the approach that President Donald Trump took to running for office in the first place.

Trump recently referred to Kim Jong-un as a “madman with nuclear weapons” in a conversation with Filipino President Rodrigo Duterte, but also said he would be honoured to meet with Kim. The problem with quotes concerning Kim and Trump is, as John Oliver recently pointed out in one of his segments, that the words describing one are largely interchangeable with the other – bad hair included.

What Is the Problem?

The problem is that both leaders are ‘playing’ with live ammunition and millions of people’s lives are at risk. This is not a playground fight between two bullies. Nuclear weapons have long been associated with geopolitical status. Occasionally, the world arrives at the brink of a huge accident such as the Cuban missile crisis. Khrushchev and Kennedy managed to avert that crisis, though there were those ‘in the room’ on both sides who, at the time, were prepared to let the missiles fly.

If possession of a nuclear capability confers status and power, giving them up has consequences. The Ukraine in 1994 gave up its nuclear weapons in exchange for a guarantee that it would enjoy UN protection from aggression and violation of its territorial integrity. That did not work out too well for The Ukraine. Hopes that Kim may give up nuclear weapons are distant indeed.

It is tough to negotiate with someone the world considers to be deranged and evil, especially when the negotiation itself would signal a geopolitical victory for Kim, who would cherish a seat at the table with world leaders.

How Did This Problem Occur?

Kim is the third generation of North Korean leaders since his grandfather launched the Korean war with Soviet assistance after Japan was defeated in WW2.

Within a year of taking power, he proceeded to consolidate power by executing his uncle, Jang Sung-thaek and a number of his family members – a warning to any who might be tempted to consider a coup.

The particular mode of execution he is fond of is the anti-aircraft gun – it gets the attention of the world press, something that is very important to Kim. The correlation between weapons, power and notoriety is well established, and Kim has succeeded spectacularly in cementing his position as the bad boy of East Asia. Mission accomplished.

Donald Trump, of course, is also in need of constant media attention. Pulling out of the Paris Accords and attracting the opprobrium of more or less all the world’s media is a huge win for him – just as every successful missile launch is a huge win for Kim. Too bad that we are prepared to indulge both with the coverage they crave and exhaust our peace of mind in the process.

How Bad Is It?

Until recently, the working assumption has been that, aspiration notwithstanding, Kim does not have the technical know-how or expertise to build a missile with a nuclear warhead attached with sufficient range to threaten the United States.

That may still be true, but it is not clear that should be the relevant anxiety threshold. A nuclear strike on South Korea may be too close for comfort for the North, but a strike on former occupying power, Japan, may be enough to accomplish whatever it is that might be Kim’s motivation in this whole sorry saga.

The Cold War during the Soviet era rested upon the premise of MAD (mutually assured destruction). If two opponents possess the means to destroy the other, what would be the point in either side starting the process that would surely lead to its own destruction?

Kim must know that any act of nuclear aggression would lead to a retaliatory attack. Perhaps. Maybe his gamble is that the stakes are much less for him and his impoverished nation. He would presumably take shelter in his nuclear-winter-resistant bunker and damn the consequences for his people.

Again, perhaps. It is difficult to construct a rational argument for a madman. It is also difficult to get high-quality news and information from North Korea. The architect of Pyongyang-induced stress may be Kim, or it may instead be a group of generals manipulating him.

Trump’s Answer

It is a commonly held belief that it “it is hard to fix crazy” (though it does not absolve us from trying). One of Trump’s transition moves was to call Taiwan’s President – widely perceived as a diplomatic faux pas of legendary proportions.

It does not seem to have injured his ability to develop a dialogue with Xi Jinping (and enjoy excellent chocolate cake at Mar-a-Largo). His constant bashing of European allies; NATO criticism; pulling out of the Paris Accords have not destroyed his position as world leader. Sending cruise missiles to Syria has not limited his room to move in Middle East diplomacy. Unpredictability is perhaps a useful ally in keeping his and America’s foes off-balance.

Perhaps, but it is too soon to know. Despite the crescendo of media outrage, there has not been a foreign policy crisis to test Trump yet. There has been concern that North Korea might present such a crisis; that Putin or Assad might provoke an ‘exploratory’ crisis to test Trump’s decision-making.

Does Crazy Help?

Historically, the world has wondered how North Korea keeps going amidst poverty and an evident misallocation of available resources toward weapons research and development. How could a people allow such a leader to continue unopposed?

Terror casts a broad reach. When individuals are incentivised to inform on their fellow citizens to avoid being punished themselves, the urge to rebel is constrained; the freedom to rebel is likely non-existent. The barriers are considerable even for the elites with more power to act.

Perhaps China will be sufficiently disturbed by the prospect that Trump may take action on North Korea to persuade it to bring pressure to bear. The tension between China and the United States in the South China sea about China’ island reclamation and military exercises makes this a multi-layered issue.

The United States has a different problem but with potentially a similar effect. The fact that the media’s outrage-meter is constantly in the red zone tends to exhaust people’s ability to stay engaged in resisting the outrageous acts.

If tweeting “covfefe” can occupy a whole day of illiteracy-disgust, an incident of consequence may go less noticed by those who turned away, fatigued by faux crisis. Just as with a magician, it is wise to pay attention to what is happening away from the action, so with Trump, we should be wary of what the media is not reporting.

While crazy may keep Kim off-balance, it keeps allies – and the American public – off-balance too. Trump’s record of lies about matters large and small has forever damaged the credibility of anything he says. Trust depends on credibility.

If the President of the United States asks for public trust and confidence in a difficult decision, the world would like to give him benefit of the doubt. Trump has forfeited this. Crazy, but true.

In the end, crazy may be a tactic, but it is no substitute for nuanced and strategic thinking. Criticism of Obama was frequently that there was too much analysis and too little action. Criticism of Trump is so far the reverse. If this is true, it is hard to see how crazy will help.

Trump Overseas: The President Returns Home

President Trump, eager to remove himself from the accumulation of scandals, snafus and bad judgement that so far comprise his presidency, decided to take a tour of Saudi Arabia, Israel and Europe to provide himself with some much-needed distraction. Saudi Arabia and Israel went according to plan. Europe not so much.

The Middle East

Saudi Arabia seems perfectly suited President Trump’s sense of style: grand palaces, lots of gold and fawning hosts whose archaic laws repress any possible protests. He danced with swords and told his hosts that he was not there to lecture them about their troubling human rights record, but rather to assure them of America’s strong support.

He did, however, see fit to berate Iran as world enemy number one. Irandoes not bring clean hands to the party and certainly bears responsibility for sponsoring some bad actors in the Middle East. Iran had, though, in an irony no doubt lost on President Trump, just held elections and opted to re-elect the (relatively) moderate Rouhani.

President Trump moved right through the irony to the approval of an arms deal for his hosts, noting that “no discussion of stamping out this threat would be complete without mentioning the government that gives terrorists…safe harbour, financial backing and the social standing needed for recruitment.”

However, as Fareed Zakaria points out in his recent Washington Post column, responsibility for over ninety percent of the terrorist attacks since 2001 lies with Sunni jihadists – ISIS, al-Qaeda – and virtually none have been linked to Iran and its Shiite brand of Islam.

Saudi Arabia’s brand of Islam – Wahhabism – is especially radical, promoting the supremacy of Sharia law and violent jihad. Saudi money is helping to proselytise these ideas in other parts of the world, including Europe.

The Faustian bargain with Saudi Arabia is not President Trump’s. It dates back to 1933 when full diplomatic relations were established. The US and Saudi have partnered in resisting communism (pushing the Soviets out of Afghanistan) and in striving for stability in oil price and supply. They have disagreed on Israel, the invasion of Iraq in 2003, the Iran nuclear deal and certain aspects of the war on terror. As President Obama said in 2014, the relationship is complicated.

In striking a nuclear deal with Iran, the US has clearly started a process of potential rapprochement with Iran, which is not a bad idea for all sorts of good reasons. It does, however, put the US in a complicated position with two of its allies: Saudi Arabia and Israel. Both opposed the Iran nuclear deal, and neither has good relations with Iran.

Israel

President Trump went from Saudi Arabia to Israel, where he enjoyed another warm reception. Israel’s Prime Minister, Benjamin Netanyahu, had a famously bad relationship with Barack Obama. Improved Israeli-American relations under President Trump were inevitable and the Israelis were not disappointed.

President Trump made encouraging noises and, despite lacking any substantive reason to say so other than his limitless faith in his own deal-making skills, he again proclaimed his hope for an Israeli-Palestinian peace deal.

The essence of Prime Minister Netanyahu’s problem with President Obama was not that Obama was not smart or thoughtful or that he lacked a sense of history. Rather it was that Obama was, in Netanyahu’s view, ignorant of the underlying tensions between Israel and Palestine, and arrogant and legacy-focused in his approach to seeking peace.

While Prime Minister Netanyahu has much more in common with the US Republican party and, by extension, President Trump, it is as yet unclear that he has confidence or trust in Donald Trump.

Netanyahu and Abbas also share the same problem with Trump with many people: Trump is not thoughtful; does not read or digest information from serious sources; does not appear to have a sense of history; is impulsive in speech and behavior; has a casual relationship with the truth and appears to have difficulty factoring in much beyond his own immediate need for adulation and affirmation into his decision-making.

In the same way that Saudi Arabia is the ally that the US has rather than the one it wants, so Donald Trump is the ally that Benjamin Netanyahu is supposed to be able to rely on, rather than the one he truly seeks.

On Israel, the jury is out, but the superficial atmospherics are so far good. There is, naturally, more irony here too. In stating that he never mentioned Israel as the trusted intelligence source in his meeting with the Russians, President Trump unintentionally confirmed that Israel was, in fact, the source in question.

On to Europe

If President Trump’s negotiating style in the Middle East was conciliatory and more subtle than usual, he returned to his more abrasive self during his visit to Europe.

His first stop was Rome for an audience with Pope Francis. The Pope is a modest man who forsakes the traditional papal accommodation for something more modest. Donald Trump once tweeted that he did not like the idea that Pope Francis stood in line to pay his own hotel bill – “It’s not Pope-like!”.

Pope Francis must have been interested to finally meet the US’s prime-time showman. Both men have a strong sense of their message: the Pope to spread a broader message of love and forgiveness to a market of souls that is proving increasingly elusive; Trump to spread a message of empowerment to a demographic that has come to feel disenfranchised.

Trump smiled broadly, confessing that he had learned a lot and emerged with a strong determination to achieve peace. Pope Francis looked less enthusiastic. He probably also learned less.

Brussels

Having pushed his way past the Prime Minister of Montenegro to his rightful position of prominence in a NATO photo shoot, President Trump settled into Brussels.

Eschewing the courtesies that European allies have come to expect from a US president, President Trump failed to say that which was appropriate – affirming Article 5 of NATO’s founding documents (presumably briefed that the first time NATO solidarity had been invoked was in favor of the US after September 2001) and instead berated fellow NATO leaders for failing to live up to their financial obligations.

Continuing to test Angela Merkel’s good nature and patience for foolishness, Trump showed a poor understanding of trade and criticised Germany for the millions of cars it sells in the US. From its $7bn plant in South Carolina, BMW produces 400,000 cars and is the top automotive exporter in the US.

Facts are stubborn things but rarely do they derail President Trump’s narrative.

G7 Summit

Returning briefly to Italy, President Trump’s final act of intransigence was to decline to sign on to the climate section of the communique that was the official dispatch to end the summit.

While it is not clear that President Trump has thought deeply about the challenging issues of climate science, he is nevertheless not prepared to join his European colleagues in a principled stand to address the problem. The Paris accord, while far from perfect and perhaps not even enforceable, represents a serious approach to a serious issue.

President Trump, however, claimed he had more thinking to do.

Back Home

On his return to the US, President Trump decided to re-engage with his Twitter account and continue his battle with “FakeNews”.

The tragic-comedic aspect of this trip abroad, as it is with the President’s domestic presence, is that the media must engage with him and write about him. Many, many, talented, thoughtful, analytical, concerned, professional journalists must write about someone whose only real talent is self-promotion. Because he is President of the United States, Trump must be reckoned with. The presidency is not a dry run: it is loaded with live ammunition.

There is no better way to end than this article than with a quotation from the editor of Der Spiegel, a highly respected German weekly new magazine whose cover is stunning:

Donald Trump is not fit to be president of the United States. He does not possess the requisite intellect and does not understand the significance of the office he holds nor the tasks associated with it. He doesn’t read. He doesn’t bother to peruse important files and intelligence reports and knows little about the issues that he has identified as his priorities. His decisions are capricious and they are delivered in the form of tyrannical decrees…”

As J.K. Rowling put it on her own Twitter account in reference to Trump pushing past the Prime Minister of Montenegro – the “tiny, tiny, tiny little man” is home.

Fearless Girl vs. The Wall Street Bull

Yesterday’s New York Times features an article informing us that the sculptor of the Charging Bull is insulted by the presence of the statue of the Fearless Girl, the work of sculptor Kristen Visbal that was commissioned by State Street Global Advisors and installed in March of this year. Fearless Girl vs. Wall Street Bull

Background to The Charging Bull

The statue has attracted considerable attention since it was placed facing the Charging Bull in a posture of defiance, or, as one commentator has said, of finger wagging.  The Charging Bull was placed in its current location in 1989, having been fabricated by its sculptor, Arturo Di Modica, at a cost estimated at over $3o0,000. The 3.5 ton Charging Bull was initially placed by the sculptor on Broad Street in front of the New York Stock Exchange with no permit and without permission from the city (The Charging Bull) as a symbol of Wall Street’s strength after the crash in 1987. It was impounded by the police and, after some outcry, placed in its current location just north of Bowling Green, with a temporary permit. Thirty years later, the statue seems quite permanent.

Some have argued that the temporary permit granted to the Fearless Girl statue should also be extended. The Charging Bull sculptor apparently feels that the presence of the Fearless Girl undermines the message of his statue, which, he states is one of freedom, peace, strength, power and love. He believes the Fearless Girl stands in opposition to the Charging Bull making its presence a negative one.

Art in Context

This argument raises some interesting questions. Since, as a legal matter, the Charging Bull’s presence is also subject to a temporary permit, it is not clear what rights the sculptor is asserting to the space surrounding his sculpture; or whether those rights are different from or greater than the rights enjoyed by the Fearless Girl sculpture and its sponsors. If the legal right is not the issue, perhaps the issue is more artistic in nature. Does the creator of art placed in a public place have any rights to assert a particular intended meaning? Perhaps, as a matter of information and context. It is not clear that any artist may insist on his or her understanding of a piece of art being of such importance that the context in which the art is located must remain undisturbed by anything that might, in the artist’s opinion, detract from that understanding.

Context is important, but meaning is surely subjective. Once placed in the public domain, any work of art may be subject to as many interpretations as there are viewers. The artist has, in large part, lost control.

The Fearless Girl: Friend or Foe?

It is interesting to reflect on the context of the Fearless Girl. State Street Global Advisors motivation in placing the statue on the eve of the International Women’s March was apparently to represent the power of women in leadership. Among the many comments made in the New York Times piece about whether the statue of the Fearless Girl should stay or go, two are, in the opinion of this author, noteworthy. The first invites an inclusive and contemplative reaction:

“Art is a dialogue. Invite the unexpected. The bull and the little girl, they are already friends. Quiet yourself and listen to what they have to say.”

— Landon Rose, 66, Brookline, Mass.

The second points out that history is forever changed by the juxtaposition of the two statues:

“As a lawyer, woman and minority, I believe that no matter what the outcome, demanding that ‘Fearless Girl’ be removed is a losing battle. If ‘Fearless Girl’ is removed, the bull will become even more representative of men trying to stop women from achieving equality.”

— Elizabeth Veit, 35, Alexandria, Va

Evolution of Meaning

To attempt to claim a continuity of meaning for the presence of the Charging Bull thirty years after its placement as guerilla art seems naïve. Wall Street has changed dramatically over this period. The culture has evolved, its shortcomings well documented in many movies and court cases and its daily routines reshaped by technology. The role of women in financial services and in the broader economy remains a work in process and falls well short of parity. The Fearless Girl suggests that change has occurred and is continuing. The Charging Bull is not humbled or disparaged:

“I do not see the bull in a negative way now that the ‘Fearless Girl’ has shown up. Rather, the bull is now confronted with a formidable counterpoint to an emerging vision of a new kind of power.”

The Nature of Conflict

Is our default state harmony or conflict? A post-Eden view might suggest conflict. We seek harmony but in a flawed way through our flawed selves. We desire closeness in relationships but are inclined to lapse into dysfunction. Until what? What is the contingency that will unravel this Gordian mess?
Consider the ideal state of a market economy: all rational economic actors motivated by their own self-interest magically contributing to an outcome that, in the aggregate (if not for everyone) is beneficial to the whole economy. Out of self-interest comes harmony – benign conflict. The wisdom is in the multiplicity of individuals struggling to optimize their own outcomes. No higher purpose; no overarching social good. Such big picture goals are doomed to fail because not all outcomes are knowable. Strategic goals are like supertankers: slow to navigate obstacles. Strategy architects become invested in target outcomes and are therefore biased against course corrections that undermine the original blueprints.
Alternatively, we need a strategy. Societies and economies are long-term projects. Absent vision and well-thought policies, outcomes are too haphazard and will ignore stewardship of natural assets such as biodiversity and the ability of the planet to absorb carbon dioxide. How does the tragedy of the commons unfold in circumstances where all pursue exploitation of available but exhaustible resources? Rising above immediate self-interest to take an enlightened view of an interconnected economic reality requires an effort of imagination.
Corporations are inherently selfish stewards of their shareholders’ interests – in theory. Notwithstanding their legal personality, corporations comprise self-interested employees whose incentives are diverse. Arguably, as the pyramid broadens, the incentives are less aligned with shareholder interests and more with the maximization of take-home pay and minimizing the effort required to ensure continuity and longevity. C-Suite incentives are typically designed to be different: compensation is higher and expectations of strategic thinking are greater. Moral deficiencies are in sharper focus and can undermine not only shareholder interests but the interests of all stakeholders, destroying the goodwill and trust on which corporate employment is built.
Corporations are larger scale, institutional, individual rational economic actors that have greater leverage in shaping economic outcomes. Politicians are supposed to ensure a level playing field and supervise fair play. Their behaviour does not always reflect this ideal…
Back to conflict. In Congress, State Legislatures, Local Government (Zoning Boards), churches, country clubs, conflict abounds. The nature and extent of this conflict does not correlate to the purpose of the body. It is a function only of the presence of people, the individual agents of conflict. Some find it energizing; most find it stressful, lose sleep, seek to avoid.
The field of psychology holds these truths to be inalienable: people must feel understood, appreciated, be given the benefit of the doubts, be treated as an equal, be treated respectfully and have the freedom to decide. These truths might be described as conflict mitigants. Why are they not more widely used as such? Ignorance perhaps, together with the illusion that imposing one’s will on another is some kind of personal victory. Arguments to justify this behaviour are plenty. Typically, a core belief is cited to justify the end. This might be political philosophy; it might be a core religious or moral belief. If abortion is bad, then stopping abortion is good and all who hold an opposite point of view are also advocating something bad. And so it goes.
In a book called “Living” by Kerry Egan, the author advocates a world view more tolerant of the grey zone, as opposed to a world view that is either black or white. Rarely are difficult and complex issues of human action and interaction black and white. Grey is itself a kind of harmony, a blending of black and white, a denial of either extreme as the defining picture.
The vision of the Garden of Eden was black and white: you may eat of all the trees in the garden except this one. Simple, clear, unattainable. Perhaps mankind was simply not designed for black and white. Black and white is always conflict. The mission is to listen, to blend, to embrace the grey. Respecting the dignity of every human being is challenging. It involves embracing the nuances of individuals and their tendency to go awry. It involves recognizing that the weakness one finds in oneself is likely the weakness that exists in others and giving them the benefit of the doubt.
Our default state is neither conflict not harmony. We are wired for both.

Playing Russian Roulette with Our Future

I have wondered why I have not felt motivated to add anything here recently. The truth is, the slow train wreck that is the Trump administration and the attendant coverage is an energy black hole.

Seriously weak and I should get over it. So here goes. Why am I angry? Clearly, as readers of this blog know well by now, Trump was not my candidate. Sometimes you lose. Obama was not my candidate in 2012 – Romney was. I didn’t feel angry or dispirited then. Why now?

The mountain of lies is discouraging. The re-awakening of the viler aspects of our society – racists, bigots etc. – is discouraging. The sense of fear in the immigrant community about not only the racism but also the prospects of deportation is discouraging. The deadly mixture of arrogance and ignorance that our President displays is troubling. The sense that he is too arrogant and narcissistic to know that he is being manipulated by dark characters such as Steve Bannon is troubling. The fact that he may just back us into a corner in some area of foreign policy is concerning. The fact that he may, through inattention to the available information on climate change and favors promised to the energy lobby, contribute to a huge backward step in managing our relationship with our environment is disappointing. The hypocrisy of championing states’ rights regarding transgender bathroom access and yet suggesting inserting Federal law when it comes to state laws on recreational marijuana is embarrassingly laughable. Dismissing reports from DHS when they don’t confirm the President’s bias is a sign of shutting down inquiry and debate based on facts, as is selecting the news organizations who are given access. There is more and I could go on. The daily news – the mainstream media he despises – is full of the latest despicable steps taken by the Trump administration.

Am I happy that he is planning to dismantle some of the regulatory machinery that has grown up over decades? As someone who is fundamentally libertarian, I approve of that to some degree – depending on the specifics. Am I happy that he is allowing the Dakota Access Pipeline? Generally yes. I believe that was a terrible cause driven mostly by the fact that the Standing Rock tribe did not get the economic deal they wanted and decided to fight. It is a project that should happen. We will be better off having that oil move through a pipeline than across road and rail. There are some things that the administration is doing right. A broken clock is right twice a day.

Above all else, what bothers me and unsettles me every time I hear Trump’s voice, is the abuse of truth and language. He uses words and sentences at a grade school level. He tells lies as if the truth does not matter. He is singlehandedly dragging public discourse back to the stone ages – pictures would be preferable (think Moose Lamb – thank you Melissa McCarthy). Not only does he abuse truth and language wantonly, but he celebrates the cloud of ignorance it produces as a populist victory against those he claims comprise an arrogant elite. To protest the abuse is, in his eyes and in those of the masses he energises, further confirmation of the change that needs to be wrought.

What about those who are complicit in his administration? The Sean Spicer and Kellyann Conway jokefest? Gary Cohn, Steve Mnuchin, Rex Tillerson, James Matthis? Perhaps some of them are convinced they can make a difference by restraining some of Trump’s worst inclinations. Perhaps they are right. Some have impressive credentials and are clearly trying to bring order from chaos.

To some degree, one is bound to normalize a President. They are elected by a process that we honor and respect.  We should all calm down perhaps. Perhaps Trump will do himself in as Milo Yiannopoulos did. Perhaps. Language and truth are important. They offer a standard and a medium of communication that serve us well. If  lose our grip on truth and debase our currency of communication, we are cast adrift as shapeless utterances in a chamber of lies – travelers with no compass listening to discordant sounds with no redeeming musical elements. A wasted opportunity and a waste of time.

Sad to see Pence as a better option. Terrible. Wrong. Bad. Fix it!