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Transparency Thursday: Helping the Poor Help Themselves

Lots of attention is paid, rightfully so, to those in extreme poverty in the developing world. However, those living in relative poverty in wealthier countries face similar problems as those living in extreme poverty (albeit generally to a lesser degree) : malnourishment, an underestimation of the value of education, and poor financial choices due to a very high “discount rate” (a little pleasure now is worth more than a lot of pleasure in the future, possibly because of a pessimistic view of the future driven by living in poverty).

Another important similarity is that financial shocks always affect poorer people more than wealthier people; with less income to go around, an unexpected strain causes a poorer family to have to make difficult financial decisions with potentially serious ramifications. This problem is compounded by the fact that poorer people tend have worse credit ratings, further hurting their ability to utilize the financial tools available to them and deal with unexpected financial shocks.

“When there is no cushion, one small mistake can be catastrophic — if you rely on a car to get to work, for example, missing a car payment can result in the loss of a job.”

A major difference is that in the developed world, the institutions, organizations, and infrastructure already exist to help these people. In the developing world, projects often have to be built from the ground up, financing is harder to find, and projects are more susceptible to corruption and general volatility/insecurity that could threaten its success. In the developed world, it is not so much about building a financial system, (and a strong government / judicial system to oversee that financial system) as it is teaching people how to use systems already in place to their advantage. This simplifies the job of poverty reduction in the developed world immensely.

The social “safety net” is a good system, however providing welfare services does not address the root cause of of poverty, it simply mitigates the human suffering being poor can cause. By doing more to prevent people from having to rely on entitlement spending, and helping people avoid entitlement spending by being more financially responsible, the sustainability and integrity of the social safety net is preserved.

“Ideally, the coach can help clients set up systems that keep them on track: automatic savings, automatic bill payment, automatic reminders by text. ‘Distress is an economic state but also a psychological state,’ said Mullainathan. ‘The remedies have to address both.’”

A large part of this process is helping people overcome the fear associated with handling financial problems. This process will depend on experts simplifying ones budget and teaching them about simple financial tools that will help their problems more accessible (and then signing them up for those programs).

People often feel overwhelmed by financial troubles and ignore the situation, which only compounds the problem. By addressing the fear behind getting finances in order, poor people are empowered to take control of their finances. By setting up simple automatic measures, one’s financial position can change drastically.

“Jaimes said that most of his clients come to their first meeting with a stack of collection letters — unopened. ‘Can I open these envelopes for you? We have to deal with them,’ Jaimes tells them.”

 “Lisser begins by addressing clients’ stress, step by step: ‘You will feel relieved after you settle the first one,’ she says. She leads them through opening the debt notices, calling the collections agencies and beginning negotiations. When the client takes over making the calls, she will coach by scribbling notes.”

The process is appealing because it is not “giving” in the sense of a traditional welfare program, but is “empowering”. This empowerment should build confidence when handling financial issues and help build optimism towards the future (and therefore better decision making skills), increasing social mobility while breaking the root causes of “poverty traps”.

This program is currently being championed by, guess who, Michael Bloomberg (you knew it had to be either Bloomberg, Gates, or Buffet right?):
“Currently there are more than 30 centers lodged in neighborhood organizations around the city, offering counseling in multiple languages. Bloomberg Philanthropies, the mayor’s personal charity, is now providing grants to Living Cities’ Cities for Financial Empowerment Fund to replicate and customize the model in Philadelphia, Nashville, Denver, San Antonio and Lansing, Mich., — places that won out over 45 others for these grants. The first centers will open in March.”

It will be interesting to see how successful this program is when tried in different locations. If it is successful, the U.S. government should seriously consider further investing in this empowering model of poverty and debt reduction.  

(Note: debt reduction and poverty reduction are not the same thing, but they are very closely related)

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Economic Outlook: Fixing Egypt

Yesterday we discussed the ongoing opposition of Egyptian President Muhammad Morsi. While the opposition has political and secretarian issues with Egypt’s first democratically elected president, these issues alone would constitute a very weak argument for the removal or Morsi or demands of a national coalition government. Knowing this, the opposition has created an atmosphere that is not conducive to economic activity. Egypt’s economy has been producing below potential since the instability caused by the ousting of former Dictator Hosni Mubarak. The Egyptian pound has depreciated, but Egypt has been unable to take advantage of having cheaper exports because it cannot mobilize its factors of production to produce more exports (compounding the issue, there’s no escaping higher food prices, as Egypt is a net food importer and everybody has to eat to survive).

The monetary crisis has turned into a humanitarian crisis. People are having trouble feeding themselves, there is not enough oil being produced to meet both international and domestic needs, creating food and fuel shortages usually symptomatic of a country at war (and compounding the stagnation in the Egyptian economy, people cannot be as productive without enough food and machines cannot run without an energy source).

With the economy producing below capacity, the government’s ability to provide basic services to the people is in jeopardy. Less tax revenue means it is much more difficult to pay for social programs that people rely on. Printing more money would further weaken an already weak Egyptian Pound, and Egypt cannot assume more debt as it seeks an IMF loan contingent on strong fiscal indicators. Competitive devaluation of the currency would scare off potential investors; having a more competitive Fx rate has done little to boost Egyptian production up until this point, so there is no reason to believe further devaluation would be an effective measure.

Egypt needs a more stable environment to grow its economy. People often point to political uncertainty (rightfully so) as a reason for a slow recovery from the “Great Recession”. Imagine how much slower it would be if on top of political uncertainty you had instability and insecurity that threatened the overall legitimacy and sustainability of the current government in power (and if that government was a new government attempting democracy after decades of dictatorship):

“Mursi’s supporters say the protesters want to overthrow Egypt’s first democratically elected leader. The unrest has prevented a return to stability ahead of parliamentary elections due within months, and worsened an economic crisis that has seen the pound currency tumble in recent weeks.”

Egypt needs IMF loans and Foreign Direct Investment (FDI) from developed countries and Multi-National Corporations (MNC) to get its economy growing again. However, international capital will not flow into Egypt with its current level of instability and insecurity, regardless of the expected rate of return on investment:

“German industry leaders see potential in Egypt but are concerned about political instability.

‘At the moment many firms are waiting on political developments and are cautious on any big investments,’ said Hans Heinrich Driftmann, head of Germany’s Chamber of Industry and Commerce…Germany’s ‘offer to help with Egypt’s transformation clearly depends on it sticking to democratic reforms’”

I, for one, believe that any call for a national coalition government is illegitimate and would damage the long term sustainability of democracy in Egypt. What would it say for the future of democracy if a violent minority could successfully influence the way Egyptian politics work. However, defending the long term sustainability of democracy in Egypt may be a fool’s errand if there is a real chance that Morsi’s democratic regime may break down in the very short run. Morsi must also be careful in using military power and/or executive orders to ensure security in Egypt. Any use of these measures will unfairly associate Morsi’s democratically elected government with Mubarak’s military dictatorship.

The opposition, instead of being concerned with the future of the Egyptian state, has used current instability as a tool in hopes of ousting Morsi or at least strong-arming him into appointing members of the opposition to positions within his government:

“’Our demand is simply that Mursi goes, and leaves the country alone. He is just like Mubarak and his crowd who are now in prison,’ said Ahmed Mustafa, 28, a youth who had goggles on his head to protect his eyes from teargas.”

“Opposition politician Mohamed ElBaradei called for a meeting of the president, ministers, the ruling party and the opposition to halt the violence. But he also restated the opposition’s precondition that Mursi first commit to seeking a national unity government.”

Egypt has the potential to be a dynamic economy and a symbol of democracy and modernization working alongside Islamic principles. Setting this precedent would go a long way in establishing a friendlier relationship between the “Western world” and the Middle-East. Just as the many citizens of Egypt (and the region as a whole) have much to gain from such a relationship, the current elite and those ideologically opposed to “Western values” have much to lose.

Democracy in Egypt could be a lynchpin to this mutually beneficial relationship, but such a relationship is far from a foregone conclusion. The Morsi regime must be able to provide stability and security in order to maintain its legitimacy. The key to this objective is jump-starting the Egyptian economy with foreign capital. Sources of foreign capital have been apprehensive to get involved in Egypt because of the instability and uncertainty caused by Morsi’s opponents.

As you can see, we have a circular pattern here where Egypt’s economy continues to stagnate and the opposition continues to undermine the regimes legitimacy. Hopefully the international community can come together with President Morsi to figure out a way out of this vicious cycle that works for everyone. A national unity government may undermine the principles of a democratically elected government, but if it would bring the requisite stability and security needed to sustain democracy in Egypt (and infuse desperately needed international capital into Egypt’s economy), then it is an idea worth pursuing.


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Conflict Watch: Egypt in a “State of Emergency”

Protesters opposing Egyptian President Mohamed Mursi march despite a nighttime curfew in the city of Suez January 28, 2013. REUTERS/Stringer

This past weekend marked the two year anniversary of the ousting of former Egyptian dictator Honsi Mubarak. Unfortunately, instead of serving as a uniting force in Egypt, the anniversary seemed to reignite the flames of revolution for many Egyptian dissenters. 52 people have been killed in violent uprisings in the past week. These uprisings were (in general) a response to disillusionment with the Morsi government and specifically to the death sentences given to 20+ violent soccer “ultras” by an Egyptian judge.
The continuation of the struggle of the different political forces … over the management of state affairs could lead to the collapse of the state,” said General Sisi, who is also defense minister in the government Mursi appointed.

He said the economic, political and social challenges facing the country represented ‘a real threat to the security of Egypt and the cohesiveness of the Egyptian state’ and the army would remain ‘the solid and cohesive block’ on which the state rests.”

The Economic issues facing Egypt have two primary sources. One is the depreciation of the Egyptian pound, which has meant higher prices for food and other imports.  Egypt owes countries “oil debts” based on previously agreed upon contracts. As the currency depreciates, Egypt will owe more oil, as oil contracts are typically denominated in an international currency (which is appreciating against the Egyptian pound). Further compounding the problem, a depreciating currency has meant Egypt cannot keep up with international demand for it’s oil, “The state-owned Egyptian General Petroleum Corporation has been unable to receive some deliveries of crude because it could not obtain letters of credit.” Not only can Egypt not increase its oil production for additional revenue, it is currently having trouble fulfilling already agreed upon contracts.

Monetary instability has led to a second related issue, the stagnation of the Egyptian economy. The Egyptian economy suffers from inadequate investment, there is simply not enough credit for the economy to function at (or even near) full output. Higher food prices and lower oil revenues mean less domestic savings and investment in the economy. Compounding the problem, companies are not exactly lining up to invest in Egypt due to political uncertainty and general insecurity. The government cannot assume more debt, because it hopes to secure an IMF loan to help fix its currency problems:

“Most worrying to economists and former government officials is the possibility that the government will not able to gain a consensus on austerity measures needed to get the country on track after two years of instability, rising unemployment and lower tourism revenues.

Such measures would also help to secure a $4.8 billion loan from the International Monetary Fund, talks on which were suspended last month by the president, Mohammed Morsi, because of the political crisis surrounding the constitution.

The IMF loan would provide a quick, cheap source of funds but, more importantly, send a signal to international donors and investors that Egypt is on the path to a sustainable economy.”

What Egypt really needs, first and foremost, is political stability. Political instability drives away desperately needed foreign investment (both FDI and IMF loans). Physical insecurity from fighting and violent protests hurts the day-to-day domestic economic activity that underpins any strong economy (no economy can flourish solely on exports).

I blame Morsi’s opposition groups for most of the instability in Egypt. Mursi’s opponents have called for more protests on Monday. ‘Down, down Mursi, down down the regime that killed and tortured us!’ people in Port Said chanted as the coffins of those killed on Saturday were carried through the streets.”

These are the same opponents who have time and time again refused to come to the negotiating table with Morsi. If you will not negotiate for what you want, and instead call for violent protests and overthrowing the government, then you do not represent a legitimate faction. Political ideology almost always flows from the top down, top opposition officials could call for either compromise or opposition; they have made their stance very clear.

It would be one thing if Morsi was indeed a dictator who would not let his opposition have a voice, but this is not the reality of the situation. Morsi was elected democratically, and his constitution passed an open and transparent vote. Democracy needs to be given a chance to work in Egypt; up until this point it has not. Instead of working with Morsi to ensure the stability and security needed to fix Egypt’s economic problems, the opposition has used economic (and ensuing social) issues as an opportunity to challenge Morsi’s presidency.

Egypt is a very important Western ally in the Middle-East.  The opposition needs to come to the bargaining table with Morsi in order to stop the violence that has destabilized the country. Once there is political cooperation and less violent protest, the Morsi government will be able to better provide the social services needed for a democracy to function. It will also allow Egypt to attract the international investments it needs to get the economy producing closer to capacity, which will reinforce political and social cohesion (when people prosper, everyone is happy, when they do not, no one is).

It is in everyone’s best interest for Democracy to work in Egypt. The only people who would suffer are the old Mubarak-era-elite who stand to lose power as democracy and modernization envelope Egypt. Morsi and the international community cannot let this loud minority to continue to play the “spoiler” role, there is too much at stake.   


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Monday Morning QB: Baseballs Best Outfields

The Pro Bowl was less of a disaster than last year, although Peyton Manning’s speech to take the game seriously did not seem to work for the AFC, as they got trounced 62-35 by the NFC. I think the Pro Bowl can be saved by:

A) always having it in Hawaii (so guys want to come) B) making it the week after the Super Bowl so more guys can participate (how much fun would it be to have Ray Lewis play in one last Pro Bowl after the Super Bowl before he retires?) and C) add a skills competition of sorts (NFL players are among the most physically gifted athletes in the world, lets highlight those abilities for everyone to see!).

The NHL season continues, as the Rangers seem to be getting into form. The Knicks won a nail-biter versus the Atlanta Hawks on Sunday behind Melo’s 42 point performance (including 9 3-pointers, tying a NYK franchise record). Amar’e seems to be getting back into game shape, and the Knicks as a whole are getting healthier.

Without football to focus on this weekend, my mind started to wander to the upcoming MLB season. With the trade from the Diamondbacks to the Braves, the Upton brothers will be playing on the same team next season. The combination B.J Upton, Justin Upton, and Jason Heyward have people wondering how this Braves OF stacks up against the rest of the majors. Without further ado, a ranking of my top 10 outfields going into the 2013 MLB season (for shits-and-giggles, here’s how the analysts ranked-em’, obviously lots of similarities but also some differences):

1) LA Angels: Not much of an argument here, when your outfield consists of Mike Trout, Josh Hamilton, and Mark Trumbo. This outfield has 3 legitimate MVP candidates, and should combine for 100+ HRs, 300+ RBIs and close to 300 runs. All three have above average arms, and Trout and Hamilton are both above average fielders. No other OF can compare to the Angels. (If they decide the go with Peter Bourjois for defense and put Trumbo at DH, they still have the best OF in MLB in my opinion).

2) Atlanta Braves: Wow, this outfield is currently number 2 and has a chance to be a top 3 outfield for the next 10 years if they can keep the talent they now have healthy. The Upton brothers are both 5 tool players, although Justin has showed a higher ceiling than B.J. thus far in their respective careers. Jason Heyward is another 5 tool player, who had a bounce back year last year after a prodigious sophomore slump. I look for Justin to get back to his MVP-caliber 2011 form, Jason to continue to progress into a perennial All-Star, and B.J. to have a career year as a part of this tandem. When I think of this groups potential (90+ HR, 300+ RBI, 300+ runs, 90+ SBs), I cannot think of any other OF ever to put 3 legitimate 5 tool outfielders together in the primes of their careers like this (doesn’t mean it’s never happened, I just can’t think of a comparable OF, can you?).

3) LA Dodgers: Oh boy, it’s an arms race in L.A., with the focus on big OF bats. The combination of Matt Kemp and Carl Crawford makes this a top 10 OF itself. Add in Andre Etheir, a career .290 hitter who will benefit from a stronger supporting cast this season, and you got the number 3 OF in the league.

4) St. Louis Cardinals: Matt Holiday is a stud OF, who can hit for power and average. Carlos Beltran had a comeback year last year which should carry over into the upcoming season. John Jay is not as much of a household name as the other two guys, but despite injuries this kid had a great 2012 campaign which he is sure to roll-over into 2013.

5) New York Yankees: I may be accused of being a homer ranking the Yanks this high, and that may be a fair accusation. Here’s why I am so high on the Yanks OF this year (and really their whole lineup); it features a great balance of power, speed, and contact hitting. Granderson will hit 40+ HRs and should steal 20+ bases (while probably hitting .230-.260, his “Achilles heel” as a hitter is strikeouts/batting average). Ichiro hit well over .300 after coming to the Yanks, while showing both power and speed. Brett Gardner is coming back from injury and should be healthy. If he play a full year he is a lock for 50+ steals, and I believe he will finally play up to his potential and hit over .300. The Yankees outfield may not have as much power as other years, but they can all play very well both offensively and defensively. If you doubt this prediction, just wait and see.

6) Toronto Blue Jays: It is well documented that I have been “High on [the] Jays” this whole offseason, and why not with the acquisitions they have made. Jose “Joey Bats” Bautista will be among the league leaders in HRs again this year. Rajai Davis provides a spark with his speed, which should work nicely with Reyes’ speed and ability to get on base as well. The wildcard in this group is Melky Cabrera; the guy almost had a batting title before testing positive for PEDs last season. While he may not be “batting title good”, Melky is still an above average hitter and fielder in the prime of his career. The Blue Jays are no joke this year, and neither is their outfield.

7) Oakland Athletics: A surprise team from last year, whose success I expect to carry over into the upcoming season. Josh Reddick matured into one of the premier power hitters in the game last season. Yoenis Cespedis, a Cuban defect, rewarded the A’s confidence in him by producing in a big way (particularly after the All-Star break). Coco Crisp was very good for the A’s down the stretch, although it remains to see how they juggle both Crisp and the newly acquired Chris Young. Having too many good OFs to start at once, however, will not cost you a spot on this list.

8) Baltimore Orioles: Another surprise team from last year that should be as good in the upcoming season. Adam Jones has developed into a top 10 OF (arguably top 5) with 5 tool talent. Nick Markakis and Nate McClouth are both similar players. Neither one will wow you with eye-popping offensive numbers, but both will hit for a high average, have respectable power numbers, display excellent base-running skills and play great defense. The overall talent of the Orioles OF earns them a spot on this list.

9) Cincinnati Reds: The Reds did their best “Big Red Machine” impression last year, and seem likely to make another playoff run this year. The addition of Shin-Soo-Choo will bolster an OF already featuring Jay Bruce and Ryan Ludwick. Bruce is a premiere power hitter (hitting 30+ hrs each of his last 2 years and 20+ each of his first 5 seasons, it is hard to believe this guy will only be 26 years old this season). Ludwick was a pleasant surprise for the Reds, clubbing 26 HRs in a nice bounce-back season for the vet. When your OF has 100 HR potential, (although anything over 90 would surprise me), your OF gets on this list.

10) Milwaukee Brewers: The Brew-Crew finish-out this top 10 list. First and foremost, Ryan Braun has established himself as one of the premiere OFs in the league. The guy can do it all, and is a perennial MVP candidate. The PED scandal did not seem to slow him down at all last season–Braun is primed for another huge year. Carlos Gomez is one of the fastest guys in the league, and last year showed some of the “pop” that was missing in his swing (hitting a career high 19 HR last season, with 14(!) coming in the second half). Norichika Aoki showed the ability to get on base and steal with regularity, and should have a full time gig given the ineffectiveness of Nyger Morgan last season.

Honorable Mention: Nationals, Marlins, Rangers, Tigers, Red Sox, Rockies

This is certainly a topic which is open for discussion / debate. If you disagree with my rankings, be sure to let me know how you would ranks these teams in the comment section. If anyone would like me to explain any of the “honorable mentions” in more detail, be sure to ask.


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Poll: How Should America Intervene in Mali?


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Transparency Thursday: Recycling New York City’s Garbage

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Turning waste into energy may seem futuristic, but in this case the future is today. There is currently a high capacity operational waste-to-energy plant in Malaysia.
“K.S. Sivaprasad, an engineer from India, spent four decades perfecting a factory that accepts city trash, dries it, picks out the burnable elements and ignites them to create electricity. His first full-scale plant chews through 700 tons of garbage a day and delivers 5.5 megawatts to the power grid.”

In the U.S., waste-to-energy used to be unregulated and, as you could imagine, quite environmentally harmful. Burning trash, without taking the proper measures, released all sorts of greenhouse gasses into the atmosphere. Over time, the process has become more regulated and environmentally friendly:

“Proponents of WTE technology argue that thermal processing is a form of recycling and that new technologies and EPA regulations have eliminated the odor and air pollution many people connect with the process of incinerating trash. Professor Nickolas J. Themelis, director of the Earth Engineering Center at Columbia University, said he thinks that much of the opposition to creating WTE plants in the city stems from people’s memories of the bad old days.

“At one point New York had 30 municipal incinerators and about 15,000 residential incinerators with no regulation at all. It was a mess,” said Themelis. “There is this kind of animus among people who have been exposed to incinerators in the past. They associate them with black smoke and horrific pollution. But the truth is, those are all gone now. The pollution generated by trucking waste to landfills can’t compare to how little a modern WTE facility produces. The people who oppose these technologies are like the Flat Earth Society, they are holding back progress.”

Mayor Bloomberg called for a pilot waste-to-energy program in NYC this past March:

“Mayor Michael R. Bloomberg announced on Tuesday that the city was looking for a pilot “state of the art facility” that could handle a maximum of 450 tons of trash a day — out of a total of 10,000 tons currently in need of disposal — with plans to double that capacity if successful. The plant, which must be in New York City or no farther than 80 miles away, would be privately built and operated.”

Mr. Sivaprasad wants to expand his operation, not in NYC, but in India.

“Mr. Saxena’s involvement will help the company apply for a grant from the Trade and Development Agency in the United States for the next project that Mr. Sivaprasad would like to build: a plant that would absorb 1,200 tons of trash a day and produce 10 megawatts of power in the southern Indian cities of Chennai or Bangalore.

“Some improvement is coming in, and with American money I can clinch a project,” he said. “This has taken a very long time.”

If he is applying for American financing, the project should be in America. Seeing as Mayor Bloomberg is a proponent of the project, and Mr. Sivaprasad clearly has the ability to create a high capacity fully functional waste-to-energy plant, a NYC project seems like a natural fit for both parties.

“There are currently 10 WTE facilities statewide licensed by the Department of Environmental Conservation to burn municipal waste and convert it into steam and electricity. One is located in Peekskill, about 50 miles up the Hudson River. The facility is owned by Wheelabrator, a subsidiary of Waste Management, the country’s largest waste processor, which serves more than 20 million residential, commercial and municipal customers nationwide.”

This idea sounds like a great way to deal with New York City’s garbage in a sustainable and profitable way, whats not to like about it? It is literally making money from trash, brilliant!


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Economic Outlook: The End of Team America World Police (Part 2)

Yesterday, we examined the roots to what President Eisenhower referred to as the “military-industrial complex”. The U.S. has many legitimate reasons for maintaining a strong military; having said that, U.S. military expenditures are out of control. The U.S. spent $ 711 billion in 2012, that’s 41% of global military expenditures. The next closest countries are China at 143 billion (8.2%), Russia at 71.9 billion (4.1%). Let’s be clear here, when we talk about spending cuts for the military, we’re talking about shaving a few billion dollars off the bloated D.o.D. budget—under no proposed circumstances would the U.S. lose its prominence in global security issues. Clearly our allies need to pick up some of the slack in ensuring global security.

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To clarify, some military spending goes to soldier benefits, which under no circumstances should be cut (retroactively). It would be a slap in the face to cut current veterans benefits, these people signed up and served our country under the belief they would get these benefits—they signed contracts with the U.S. government. However, veterans’ benefits accounted for only $127 billion in 2012, about 18% of the defense budget, so there is room to adjust the budget without reneging on promises already made to our service men and women.

When considered next to federal deficits, the case for cutting military spending is even stronger. Military expenditure accounted for 25% of federal spending in 2012. For comparisons sake, Education accounted for 3%, Health Care 23%, and Pensions (Social Security) 22%. It is absurd that the U.S., which is in no real threat of being invaded, spends 8 times as much on defense spending than on education on a yearly basis. If you ask me, the greatest threat to American prosperity is not terrorism or globalization; it is the systemic underinvestment in education.

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The “War on Terror” has led America to rethink how we intervene in other countries, as it has been so costly:

“With enactment of the sixth FY2011 Continuing Resolution through March 18, 2011, (H.J.Res. 48/P.L. 112-6) Congress has approved a total of $1.283 trillion for military operations, base security,reconstruction, foreign aid, embassy costs, and veterans’ health care for the three operations initiated since the 9/11 attacks: Operation Enduring Freedom (OEF) Afghanistan and other counter terror operations; Operation Noble Eagle (ONE), providing enhanced security at military bases; and Operation Iraqi Freedom (OIF). This estimate assumes that the current CR level continues through the rest of the year and that agencies allocate reductions proportionately. Of this $1.283 trillion total, CRS estimates that Iraq will receive about $806 billion (63%), OEF $444 billion (35%) and enhanced base security about $29 billion (2%), with about $5 billion that CRS cannot allocate (1/2%). About 94% of the funds are for DOD.”

“He [Obama] asks more detailed questions about how sending 100 troops, or 10,000, might influence long-term outcomes. Paraphrasing the president, one aide said he is more likely to ask, ‘So if we put troops into Syria to stabilize the chemical weapons, what can they accomplish in a year that they couldn’t accomplish in a week?’… ‘He has got to find the happy medium between not committing us to a decade-long ground war and choosing not to do anything,’ said Anne-Marie Slaughter, who was the head of the State Department’s policy planning operation for Mr. Obama’s first two years in office and has urged him to intervene more strongly in humanitarian disasters.”

I agree with Anne-Maria Slaughter, that part of smarter (D.I.M.E) intervention must involve shifting resources from the D.o.D. to the D.o.S. Both departments have the same mandate, to protect America’s interest abroad. However, more should be done in a preventative capacity. Protracted Social Conflict theory gives insights into future conflict zones; preventative action in these areas would save money and lives. Admittedly, there are instances where Defense must act instead of State (for instance, if fighting has already begun in a region), so it is essential to have both departments adequately funded. Currently the D.o.D. budget is more than 10x larger than the that of the D.o.S., some rebalancing is in order.

I would like to go back and highlight a quote from French Ambassador Jean-David Levitte I posted yesterday:

It should be obvious, he said, that the United States has other priorities and is concentrating on Asia, and need not act everywhere. So if we are both independent and true allies of the United States we should be in a position to act when need be.

The rest of the world is beginning to realize that it must take more of a collective role in global security. There is one last point I would like to make, which is addressed by Mr. Levitte; the future of military efforts in Asia.

There is little reason that we should refocus our military interventions in Asia. Yes, North Korea, Yemen, and a number of other Asian countries pose terror risks, but not immediate risks to America. The strongest nations in Asia; China, India, and Japan, are our allies. We should be able to count on them to ensure regional stability, with the U.S. offering logistical, financial,  and intelligence assistance as necessary. I sincerely hope that Obama takes this opportunity, with European nations taking greater responsibility in Northern Africa and the Middle-East, and rising military expenditures in Asia, to reallocate D.o.D. spending to the D.o.S (and not to just shift defense spending from one region in the world to another). This shift may be politically unpopular, and some would inevitably call Obama “soft” on Asia / China / terrorists, but such action would ultimately be in America’s best interests

Obama has been a very friendly president toward the D.o.S., streamlining U.S. diplomatic efforts and scaling up the USAID budget. However, changes have so far been modest. Hopefully Obama uses his second term to make significant changes in U.S. foreign policy.

If our allies around the world help share in the cost of ensuring global security, the U.S. can focus more on domestic issues and preventative peacebuilding. This vision for the future is attainable, but far from guaranteed; it will take real political will and leadership to accomplish. Hopefully president Obama has what it takes to start America on this path.


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Conflict Watch: The End of Team America World Police (Part 1)

The United States has by far the largest military in the world. Tomorrow I will get into the numbers, so for now you’ll have to take this information on good faith. The American military has been a global force for good since WWI (and probably before that). The U.S. intervened on the side of democracy in both WWI and WWII, and was central in efforts to promote global coordination, cooperation, and mutually beneficial trade throughout the 20th century (The League of Nations, U.N, N.A.T.O. G.A.T.T. W.T.O, I.M.F, W.B, the list goes on and on).  The Marshall Plan, the large post WWII European reconstruction aid package, and the ensuing ideological standoff with the Soviet Union, further cemented America’s position as global defender of “Western values”.

The United States has carved out this position, as a global protector of modernization, democracy, and capitalism, for many reasons. The most pronounced reason relates to American values, at its base a humanitarian plea. However, there are also economic and national security reasons for promoting these values around the world. The rapid expansion of capitalism after The Cold War has led to unprecedented growth in the global economy. This growth is mutually beneficial; as poorer countries develop new markets for American exports open up.

This growth must be protected; there are still those who oppose the forces of modernization, either because it will take power away from the current elite, or because it is at odds with traditional / religious values, or perhaps because of a contentious colonial history. There is no shortage of reasons why other people do not like us (and if one does not exist you can count on someone to fabricate a reason). In order to protect ourselves, and in hopes of creating new trade partners and lifting the world’s most impoverished from the shackles of extreme poverty, the U.S. has invested trillions of dollars into this global vision (prompting Matt Stone and Trey Parker, the two comedic geniuses behind South Park, to create a satirical movie “Team America: World Police”, to highlight America’s prominence in foreign conflicts) . I have argued that resources should be shifted from a bloated D.o.D. to the D.o.S., and still hold strongly to this belief, but this is an ideological argument about the same agreed upon principle; As technology advances, and globalization progresses, the world will only become smaller and more interconnected. As a result, foreign policy (both America’s and other nation’s) will become even more important.

There has to be a rethinking of how the U.S. intervenes. Gone are the days of the classic “world war”; today’s most prominent conflict is the Protracted Social Conflict (PSC). U.S. interventions in Iraq and Afghanistan, while “successful” in terms of ousting oppressive leaders, have been very costly. The U.S. can no longer afford to play the role of “Team America: World Police”. Arab Spring interventions have highlighted a shift from overt military action to covert operations. It is now common knowledge that nation rebuilding must be a part of military intervention, in order to ensure the power vacuum created is not filled by someone who is even less aligned with “Western interests”. The cost of ensuring global security and protecting the international trade system must be more evenly shared by the developed world.

It would be natural to start by analyzing French foreign policy, as they have been most directly involved in the current Northern Africa conflicts. However, I would like to first focus on Germany. Germany has come a long way from being defeated in two world wars and being divided by the Berlin wall. Due to economic responsibility and stability, Germany has become a world power (it is the most powerful country in the EU in economic terms). Germany has, ironically, benefited from having limited military power after WWII (imagine how different the U.S. economic picture would be with a more reasonable defense budget):

“After World War II, West German politicians rejected military force for any goal other than self-defense, and a strong pacifist streak developed in the public. The end of the cold war brought the beginning of a long period of halting change. Allies, particularly in the United States, have repeatedly called for Germany to take more responsibility and a larger share of the burden…’I don’t think it’s healthy for the future of Europe to give Germany this refuge where Germany handles the economy and doesn’t have to deal with the dirty stuff,’ Mr. Böhnke [head of the Berlin office of the European Council on Foreign Relations]”.

’A country of our size,’ Mr. Köhler [former German president] said, ‘with its focus on exports and thus reliance on foreign trade, must be aware that military deployments are necessary in an emergency to protect our interests, for example, when it comes to trade routes, for example, when it comes to preventing regional instabilities that could negatively influence our trade, jobs and incomes.’”

It is time for Germany to step up to the plate and share the responsibilities of being a world power. France already has a large military, and sees a dynamic and pragmatic military as an essential component of global security:

“France has maintained its ability to send troops and equipment quickly to large parts of the globe, and it should soon overtake an austerity-minded Britain as the world’s fourth largest military spender, after the United States, China and Russia…The French are willing to intervene militarily, but on the basis of new conditions, which differ, French officials argue, from the old colonial habits and traditions known as ‘Françafrique.’”

“’We think it is absolutely necessary for other European countries to do what we do,’ Mr. Levitte said. ‘Otherwise there will be a kind of strategic irrelevance of Europe as a whole.’ It should be obvious, he said, that the United States has other priorities and is concentrating on Asia, and need not act everywhere. ‘So if we are both independent and true allies of the United States we should be in a position to act when need be.’”

French officials have also called for African troops (and Algerian troops specifically) to take a larger role in regional security affairs:

France’s foreign minister told African leaders that ‘our African friends need to take the lead’ in a multilateral military intervention in Mali…’We must, as quickly as possible, furnish the logistical and financial means required by the Malian Army and Ecowas,’ he [Foreign Minister Laurent Fabius] said.”

Military intervention is costly, both in terms of human lives and monetary cost. Global security has an element of “the tragedy of the commons” to it; everyone benefits from security, so there are bound to be “free rider” issues when it comes to paying for global security operations. It has become obvious that America cannot afford to play world police anymore; we cannot support the military bill and still provide the services needed to grow America domestically without amassing large amounts of debt (which has also been called a national security threat; damned if you do intervene, damned if you don’t). It is time for the rest of the world to share in the cost of our collective freedom and prosperity.

Come back tomorrow for part 2 of “The End of Team America World Police”, when I will focus on military and humanitarian expenditures by country to further highlight the need for a more evenly shared approach to foreign intervention and global security.


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Monday Morning: QB The Harbaugh Bowl

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MLB lost two historic figures this weekend, Stan Musial and Earl Weaver. Musial was one of the greatest hitters of all time, a fan favorite in St. Louis during and after his playing career, and by all accounts a gentleman who played the game the right way. Weaver was a greatly successful manager for the Baltimore Orioles. He won close to 1500 games, 4 pennants, and 1 WS title in his 17 years managing the Orioles. Both men will be greatly missed in the MLB community.

The NHL season kicked off this weekend. The New York Rangers looked rusty, losing their first 2 games. Their rivals, the Boston Bruins and Pittsburgh Penguins, both looked very good; it will be a difficult road to the Stanley Cup this year.

On to the NFL; the playoffs have eliminated all but two teams, who will now face off in two weeks in the Super Bowl. Those teams are the San Francisco 49ers and the Baltimore Ravens. I was 7/10 in predicting playoff winners, not too shabby! Considering the Broncos gave their game away, and the Seahawks probably should’ve beaten the Falcons, I feel I only really got one game “wrong”—49ers vs. Packers. Even still, 70% is pretty good.

This Super Bowl matchup should be very interesting. We have two brothers, Jim and John Harbaugh, who will be head coaching against each other; without checking I can safely say this is the first time brothers have head coached against each other in the Super Bowl. Both teams boast shutdown defenses and high powered offenses. These two teams, well coached and well balanced, should give us a very competitive Super Bowl. I know I am looking forward to more than the commercials this year.

So who will win the Lombardi trophy this year? Surely, a strong argument can be made for each team. The Ravens bring playoff experience to the table, Joe Flacco appears to be on top of his game, as does Anquan Boldin. Ray Rice and Torrey Smith are All-Pro caliber players, and Jacoby Jones is an X factor as both a slot receiver and a return man. On the defensive side of the ball, there is no question that Ray Lewis and the gang will come ready to play.

The 49ers are equally dangerous. Colin Kaepernick showed poise last weekend, running a balanced offense after falling behind 17-0 in the first quarter of the NFC championship game. Frank Gore is an elite running back, and Vernon Davis creates match-up nightmares. Michael Crabtree has emerged as a true number 1 WR, and Randy Moss seems to be getting on the same page as Kaepernick. The 49ers can beat you in so many ways on offense; it is hard to believe Kaepernick will be starting only his 10th game when he takes the field in New Orleans on February 3rd. On the defensive side of the ball, the 49ers are as good as anybody.

Ultimately, it will come down to 3rd down efficiency and who wins the turnover battle. I know this is a bit of a cop-out; almost every NFL game comes down to these two statistics. However, with two teams as balanced as these on both sides of the ball, with head coaches who know each other so well, I can’t think of anything else that could swing this game. Perhaps the deep ball, as both QBs have the ability to make big strikes through the air (although both teams secondaries have the ability to shut down the deep game as well).

I’m calling this one for the 49ers. I don’t think any team, even the Raven’s, can stop all the weapons the 49ers have. That option play, where either Kaepernick or Gore/James keeps the ball, is so hard to stop, just ask the Falcons defense.

Either way, it should be a game for the ages. There will be tons of speculation over the next two weeks (as well as memorable sound bites from media week), at this point all we can do is tune in and see what actually happens when the two teams take the field.


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