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A Question

| Tue Mar. 17, 2009 1:31 PM EDT
I've asked this before, but I'm going to ask it again.  This time I don't want it to get lost, so I'm including no long discussion or analysis.  Just the question.  Here it is:

Why is the modern financial system so profitable?  Shouldn't it actually be getting less profitable over time?

All types of guesses are welcome.  Give it your best shot.

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I'm Flicking the Lights Off

| Tue Mar. 17, 2009 1:20 PM EDT


Sarah Silverman did it first but this crew does it DARKER for Earth Hour: Saturday 28 March 8:30pm. You can too. Don't forget.

Madagascar's Coup d'Etat

| Tue Mar. 17, 2009 1:04 PM EDT

During a college semester abroad in Fort Dauphin, Madagascar, I suddenly felt compelled to write long letters to anyone who I thought might read them. Partly it was to plaster entire envelopes with the country's beautiful palette of penny stamps--everything from lemur scenes to Elvis tributes. But I also really needed to tell someone about the malnourished, 24-hour banana salesmen who slept in doorways, the giant hissing cockroaches in the outhouses, and the men who stood on the rocks alongside the coral beaches and hurled out fishing line, bending over as it unspooled off the tops of their heads.

Madagascar has never been a practical country, and I suppose that's part of its charm. The bridges are all washed out. The national highway is a soup of laterite. Rural folk live in mud-brick hovels yet spend the afterlife within palatial cement replicas of airplanes and taxi brousses--the jacked-up WWII-era troop carriers that are the only way to get around. The less intractable of these problems were, according to Fort Dauphin's students, caused by the greed and ineptness of the country's then-president, Didier Ratsirika, who clung to power only because his party rode into town before each election atop huge loads of free rice.

An island off the southeast coast of Africa, Madagascar is in some ways even more tragic than the continent's cliches. When humans first drifted there from Africa and Indonesia beginning only about 1000 B.C., it was as if they followed the wake of a second Noah's Ark. They found lemurs the size of gorillas, pygmy hippos no bigger than pigs, and elephant birds, which stood 10 feet tall and weighed half a ton. Those creatures were long ago engulfed in wave of extinction that continues to this day. Among the most tenuous survivors is the Aye Aye, which seems like a fusion of monkey, bat, and woodpecker. Despite Madagascar's status as a virtual mini-continent where 80 percent of species are found nowhere else, its infrastructure has been too unreliable to support what should be a thriving tourism industry.

There was once hope that politicians could turn things around. In 2002, Malagasy president Marc Ravalomanana, a self-made dairy farmer, ousted Ratsirika at the polls in a wave of popular support and optimism. Of course, Madagascar was still a country where children stood on the side of the road in the middle of nowhere, waiting to dance for the occasional driver in hopes he'd toss coins out the window; poverty ran deep. So when Andry Rajoelina, the young, charismatic disc jockey who'd become mayor of the nation's capital, Antananarivo, organized protests against rising food prices and government graft last year, Ravalomanana had him ousted. The ensuing three-month standoff ended this week when troops sympathetic to Rajeolina stormed the presidential palace and forced Ravalomanana to cede power.

"This is no clash of policies; it is a clash of personalities," the BBC opined. That doesn't mean it's any less a disaster. The Madagascar military has ended its tradition of not taking political sides. Rajoelena has refused to submit to a referendum on the presidency, paving the way for an uncertain period of dictatorship. And tourism has ground to a halt and will likely take months or years to start up again, especially in the midst of a global downturn.

As the coup clearly shows,  tourism and poverty are uneasy bedfellows. The tragedy in Madagascar is that they need not be. Though hard to reach and difficult to navigate, Madagascar is far from dangerous. It simply needs more ways for tourist money to flow to people at the bottom of the economic ladder, and more tourists who won't let a few sand fleas, stomach bugs, and lost tires get in the way of seeing the most unique place on the planet.

The Great Recession

| Tue Mar. 17, 2009 12:17 PM EDT
Justin Fox posted this chart yesterday showing job losses (so far) during the current recession compared to job losses during the Great Depression.  It's a pretty good panic corrective, showing just how far away we are from the problems of the 30s.

It's also, I think, a tribute to how much more we know about the economy these days than we did back then.  Sure, it often seems as if we're still so far in the dark we can barely see our own hands in front of our faces, but the fact is that we're doing pretty well despite the fact that our underlying problems are probably every bit as severe as the imbalances that caused the Great Depression.

Consider, after all, that our response to the Depression appears to have been 180 degrees wrong.  We literally did almost everything possible to make it worse: we tightened the money supply, balanced the budget, raised interest rates, passed protectionist legislation, and allowed banks to fail by the hundreds.  It escalated a panic into a Depression.

And this time around?  Just the opposite: interest rates are close to zero, we're running an enormous budget deficit, protectionism has largely been kept at bay, money is being pumped into the economy prodigiously, and with the notable exception of Lehman Brothers banks are being saved right and left.  These actions have reduced a panic to a severe recession.

If we had taken the same policy actions that Hoover and Mellon took in the 30s, does anyone doubt that the results would have been another Great Depression?  I don't.  We may still be doing a lot of dumb things, but we're an awful lot smarter than we were 80 years ago.

More on Crises

| Tue Mar. 17, 2009 11:21 AM EDT
This subject is admittedly a little arcane, but here's Matt Yglesias arguing, contra Ezra Klein and me, that the United States is indeed unsuited to dealing with short-term crises:

The U.S. political system, with its high number of veto points, is arguably unsuited to taking decisive action in response to a crisis compared to alternative models, such as the Westminster system in play in the United Kingdom and Canada or to the multiparty coalition systems of northern Europe. It’s hard to know how to evaluate that claim. There is, however, a political science literature indicating that American-style systems are more prone to total constitutional breakdown in a crisis.

I can't comment on the political science literature, but it seems to me that the U.S. doesn't do any worse than other developed countries on this score.  You can argue about whether our historical responses to immediate crises have been correct, but they certainly seem to have been as decisive as anyone else.  To pick the example of our current economic meltdown, which countries have done better?  Japan?  Germany?  China?  Iceland?

There's a pretty good case to be made that these countries have all acted both more slowly and with less sense of genuine urgency than the U.S.  At the very least, it's safe to say that almost no one has done demonstrably better.  We do indeed have a large number of veto points in our political system, but in practice it's not clear that this has prevented decisive action during a genuine emergency.

Dear Mr. President: Please Bring Change We Can Believe in to the FEC

| Tue Mar. 17, 2009 11:14 AM EDT

The inadequacy of the Federal Elections Commission is an old hobby-horse around here. Today, CREW has some wise things to say on the subject:

Come May 1, President Barack Obama will face a first test of whether he will make good on his promise to change the way Washington works. The test will come at an agency that most Americans have never even heard of — the Federal Election Commission — where there could be three vacancies that day.

...the FEC has long been made up of commissioners hand-picked from the ranks of the political party faithful, and its interpretation of the nation’s campaign finance laws has consistently been to the benefit of the parties rather than the people.

CREW then spends some time providing examples of the FEC's failings, which you should check out if you're not well-versed on the subject. Then it lays out Obama's options:

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Blackwater Contractors Looking For New Jobs

| Tue Mar. 17, 2009 11:05 AM EDT
Muscled men in dark sunglasses speeding down Iraqi roads in armored SUVs, guns at the ready and looking for trouble, have been a regular fixture in Iraq since 2003. But with Blackwater's State Department contract set to expire in May, many of its highly skilled (if sometimes reckless) security contractors will soon find themselves on the unemployment line. But according to the Washington Post, the lucky ones could be snatched up by Triple Canopy and DynCorps, the two security companies to which the State Department has turned to pick up the slack. "One or both of the firms are likely to undertake the task of rehiring some personnel now working for Blackwater," the Post's Karen DeYoung reports.

Still, there will inevitably be fewer high-paying private security jobs available than there are free agents looking for work (welcome to the recession, guys). General Ray Odierno, the US commander in Iraq, has ordered his forces to begin shedding private contractor jobs at a rate of 5 percent per quarter in favor of hiring more local Iraqis to do the work for less money.

Bob Gates' Pentagon Revolution

| Tue Mar. 17, 2009 10:50 AM EDT

When all is said and done, it may be Secretary of Defense Robert Gates, a Republican, who is seen as Barack Obama's most revolutionary cabinet pick. The Boston Globe reported Tuesday morning that Gates is poised to make "the most far-reaching changes in the Pentagon's weapons portfolio since the end of the Cold War," and plans to cancel as many as six major weapons programs this month, including the F-22, the Navy's Zumwalt-class destroyer, and new Army ground transports.

Cutting these programs won't be easy. When Dick Cheney was Secretary of Defense, the Globe notes, he tried to cancel the V-22 Osprey four times. Each time Congress resurrected the program. Big weapons programs mean jobs for states, and members of Congress don't want to be blamed for their cancellation, especially in a recession. Besides, if this was easy, it would already have been done: the F-22, for example, has not even been used in the wars in Afghanistan and Iraq. But that hasn't stopped it from being built. Andrew Exum (a.k.a. abu muqawama), a fellow at the Center for a New American Security and a top counterinsurgency blogger, writes: "Prepare to fight three wars at once: one in Afghanistan, one in Iraq, and one in Washington against the bi-partisan coalition of lobbyists, congressmen, and industry leaders who will fight Robert Gates tooth and nail on this. It is going to be awesome to watch, that's for sure."

Rep. Barney Frank (D-Mass.) has been campaigning against out-of-control military spending and "Cold War-era weapons" like the F-22 for a quarter-century now. Last month, he and other liberal Democrats hosted a forum on Capitol Hill demanding Obama cut the Pentagon budget and shutter programs like the ones Gates plans to kill later this month. Obama's budget increase for the Pentagon, announced just a few days later, was a setback for Frank and his allies. But now it looks like Frank may have a friend in the Pentagon after all. The next few weeks should give us a better sense of exactly what kind of change Gates can push through.

When Are the Steelers Visiting the White House?

| Tue Mar. 17, 2009 10:10 AM EDT

In light of today's news that Steelers owner Dan Rooney will be the next US Ambassador to Ireland, it's only appropriate to ask the most pressing question in Steeler Nation (or at least the little corner of Steeler Nation that works at Mother Jones): when are the Pittsburgh Steelers, who won Super Bowl 43 on February 1, getting their customary visit to the White House? Rooney and head coach Mike Tomlin are both huge Obama fans, and before the Super Bowl various Steelers players cited a visit to Barack Obama's White House as extra motivation. Obama himself professes to have been a Steelers fan growing up in Hawaii, and admitted before the Super Bowl that he was rooting for the Steelers over the Cardinals.

Yet six weeks have passed since the Steelers won their NFL-leading sixth ring and no mention of a visit. I called the White House press office this morning to ask for an explanation and received a beleaguered "I don't know" that had strong hints of "please stop bothering us." I understand the White House is busy, put c'mon folks. We're going to have a March Madness champion soon, and NHL and NBA winners after that. You can't let these things pile up.

Photo by flickr user Pixteca MX used under a Creative Commons license.

Steelers Owner Rooney to Be Named Irish Ambassador Today

| Tue Mar. 17, 2009 9:38 AM EDT
A Democratic congressional staffer confirms to Mother Jones that Pittsburgh Steelers owner and Obama supporter Dan Rooney will be named the United States Ambassador to Ireland today.

Rooney became president of the Steelers in 1975 and owner in 1988, continuing a line of family ownership that began when Rooney's father, Art Rooney, known as "the Chief," bought the team in 1933 for roughly $2,500 in horserace winnings. In addition to being involved in the Steelers' league-leading six Super Bowl championships, Dan Rooney is known for guiding the creation and implementation of what is commonly called the Rooney Rule, which requires NFL teams to interview at least one minority candidate when filling a head coaching vacancy. The rule is widely credited for adding to the diversity of the NFL's coaching ranks. When the Steelers won the Super Bowl last February, their head coach, Mike Tomlin, was only the second African-American head coach to pilot a team to the championship. Rooney was inducted into the Pro Football Hall of Fame in 2000.

Rooney has long ties to Ireland. He created the Rooney Prize for Irish Literature and founded the American Ireland Fund. Despite being a lifelong Republican, Rooney supported the candidacy of Barack Obama, going so far as to campaign for him in important swing states.

Currently, Pittsburgh area papers are reporting that Rooney "may" be named to the ambassadorship. The congressional staffer who confirmed the move to Mother Jones said that his member received a courtesy call from the administration informing his office of the appointment.

Update: The White House emailed reporters announcing Rooney's appointment at 10:04 am. Beat 'em by about 25 minutes. Obama had this to say: "I am honored and grateful that such a dedicated and accomplished individual has agreed to serve as the representative of the United States to the Irish people. Dan Rooney is an unwavering supporter of Irish peace, culture, and education, and I have every confidence that he and Secretary Clinton will ensure America’s continued close and unique partnership with Ireland in the years ahead."