Michael Lewis on the US Department of Energy (highly recommended!)

Michael Lewis, the author of The Big Short, has written a great article for Vanity Fair.

Why the scariest nuclear threat may be coming from inside the White House is a fascinating portrait of the Department of Energy.

If you’re interested in politics, management, innovation, nuclear weapons or environmental pollution, you should read the article now.

I especially liked the description of how the managers appointed by the Obama administration could not transfer their knowledge to their successors. That’s because the newcomers weren’t appointed on time, or because the new political managers simply weren’t interested in learning the complexities of the DoE.

The story is a great case study that contains lessons which are relevant for all organizations. MBA students: read this instead of the Harvard Business Review!


What I like about America, finance edition

Or to be more precise, debate about the financial institutional framework edition.

How should banks be regulated? Ten years ago, this question would have only interested a few specialists. Discussions about bank supervision and the role of the central bank were way too boring for the general public1. Besides, bankers surely knew what they were doing?

The global financial crisis and its aftermath changed this complacent attitude. The existing rules did not prevent the worse financial crisis since the 1930s. Governments had to bail out banks at a moment’s notice. Politicians took drastic decisions during the panic of September 2008. While those actions were taken with little democratic oversight, national leaders2 were the only agents willing and able to stop the collapse.

The crisis spurred a thorough update of bank regulation. Both in the United States and in Europe, legislation was passed to make banks safer. Avoiding a repetition of ad-hoc bailouts became a priority. The U.S. got its Dodd-Frank Act. The European Union (EU) set up the European Banking Authority (EBA) and worked towards a banking union3. America and Europe implemented capital and liquidity standards based on the Basel III recommendations. Continue reading “What I like about America, finance edition”

So little time (reading list)

I have wanted to write a series on power in democracies ever since my How to win votes post from June 2016. Being elected is not enough (or necessary) to have real power. Policy need to be implemented. There can be opposition from civil servants and judges appointed by previous regimes1. The press can selectively report on what politicians are (not) doing.

Unfortunately, I haven’t found the time yet to write down my general ideas on power, as I have been too busy with my book on banking. But right now, the Trump administration is exposing the hidden assumptions many commentators have about democracy. This makes the Trump regime a great case study for anyone interested in real world politics, rather than the fantasy version2 many people desperately want to believe in.

If you’re bored with the (very annoying and unoriginal) “Waaah, Trump is a meanie” fluff you can read everywhere, here are some interesting articles:

On leadership and politics:

This is why authoritarian leaders use the Big Lie (by Xavier Marquez)

Why do rulers follow the rule of law? Thoughts on Trump, Erdogan, and history (by Jared Rubin)

On institutions and the “deep state”:

Egypt’s failed revolution (by Peter Hessler)

Former Obama Officials, Loyalists Waged Secret Campaign to Oust Flynn (by Adam Kredo)

Hail to the Pencil Pusher (by Mike Konczal)

On life in non-democratic countries:

Everyday authoritarianism is boring and tolerable (by Tom Pepinsky)

On censorship and ideas:

Raining Frogs (by Isaac Simpson)3

On trade:

What exactly does Mexico export to the US? (by J. W. Mason)

On culture:

Origins of political correctness, Lugenpresse found in panics (by Brett Stevens)

On Political Correctness (by William Deresiewicz)

James Burnham’s Managerial Elite (by Julius Krein)4

What is global history now? (by Jeremy Adelman)

A Hard Future for a Soft Science (by Bradford Tuckfield)

Liturgy of liberalism (by Adrian Vermeule)

On big data and statistics:

Do You Trust Big Data? Try Googling the Holocaust (by Cathy O’Neil)

On psychology/convictions:

Why Facts Don’t Change Our Minds (by Elizabeth Kolbert)

Dopamine Puppets (by Scott Adams)

On sociology:

A Miscellany of Foundations and First Principles for the Study of Sociology (by “Dissenting Sociologist”)

On ethnic conflict:

The Lost World of West Philadelphia (by Devin Helton)

On monetary policy and central bank independence:

Why conservatives should fear a Trump Federal Reserve (by Peter Conti-Brown)

I’ll expand the list if I come across other good articles. Hat tip to pseudoerasmus and HappyAcres, who always share quality stuff.

Last update: July 14, 2017

From Moses to Trump: elites against the establishment

Elites cannot act against their own interests, right?

Donald Trump has been running a populist campaign against the establishment. To many of his critics, this is absurd.

Why should a billionaire care for the working class? How can a man whose shirts and ties are made in China be against trade deals? Is Trump credible when he calls for a wall at the US-Mexican border, knowing he hired Mexican workers himself?

Trump is so much part of the elite that his Democratic rival Hillary Clinton even attended his wedding to Melania.

It appears that Trump belongs to the establishment which benefits from the status quo. Why would anybody who is a ‘winner’ in the system want to change it?

These critics, however, miss two important points.

First of all, the critics assume that members of the elite are only motivated by their personal financial interests. This, however, denies human nature. People have strong feelings on what is just and right. Elites have the means to become champions for others they sympathize with. Continue reading “From Moses to Trump: elites against the establishment”

The sultan, the czar and the refugees

A conflict with Turkey and Russia on opposing sides. The violence causes a stream of refugees towards Europe. Are we talking about Syria in 2016?

Although history never repeats exactly, there are a remarkable number of similarities between events of today and what happened in 1864. Over 150 years ago, there also was a caliphate and terror motivated by religion.

The Ottoman Empire has fought a series of wars against czarist Russia. These great powers had conflicting interests in the territories bordering the Black Sea.

When Russia conquered the Caucasus in 1864, it ethnically cleansed the indigenous peoples. Hundreds of thousands of Islamic Circassians fled to the Ottoman Empire. Many of them went to the Ottoman provinces in the southern Balkans, what is now Romania and Bulgaria. Continue reading “The sultan, the czar and the refugees”

How to win votes

The rise of Donald Trump and the Brexit referendum have led to a lot of commentary on democracy itself. Understandably these comments usually come from people who dislike the outcome. But that does not mean they do not have a point.

This article looks at the democratic process up to the casting of the ballot. How the votes are counted, what is done with the result, how votes are translated into representatives and policy, the influence of non-elected lobbyists on legislation… is outside the scope of this post.

If this post comes across as cynical, it’s probably because it describes reality.

 

The fantasy

A lot of pundits have a cartoonish view of democracy, which can be summarized as follows:

  1. People get informed on issues, programs and candidates
  2. Voters weigh the arguments
  3. A rational evaluation leads to a decision in the form of a vote

Even if commentators do not actually believe this is how it works, their opinions betray that they think it is how democracy should be in the best of worlds.

Let us now scrutinize how elections work in reality. As always on this website, we take a step by step approach to make all assumptions explicit. As a thought experiment1, a number of possible changes to the existing election process are suggested. I pose some fundamental questions that should be answered by those who are not satisfied with the status quo.

Continue reading “How to win votes”

What voters like about Donald Trump

The rise of Trump should interest everybody in “the West” for two reasons. First of all, many problems faced by the United States are similar to those in Europe. Secondly because of the immense economic, political and above all cultural influence America has on the world.

The media portray Donald Trump as a sexist, a racist and an ignorant warmonger.

Is this picture correct? Why are so many voters attracted to him? This post lists the items put on the political agenda by the Trump campaign.

 

Slogan: Make America Great Again

Summary: America First

 

Domestic

Enforcing immigration law. This means that illegal immigrants – who by definition broke the law – should be deported  from the USA1. A wall at the border with Mexico should prevent future illegal immigration. Trump links illegal Mexicans to crime. His adversaries reinforce this point by burning the American flag and waving Mexican flags while harassing his supporters at one of his rallies.

Continue reading “What voters like about Donald Trump”

Helicopter money part II: politics

Helicopter money (HM) is money printed by the central bank that is given to the people. Figuratively speaking, Mario Draghi1 would fly over the Eurozone and drop new €50 bills out of a helicopter to the population below. In the first part of this series, I explored the possible sources of HM. The current post looks at the political constraints that prevent the ECB from firing up the engines of its helicopters. Continue reading “Helicopter money part II: politics”

Trump and the media

Donald Trump is a genius. Don’t be fooled into thinking he is a brainless blowhard. The man is following a very rational strategy.

The entire business empire of Trump is built around his name. For years, he has cultivated the image of a successful rich self-made man who gets things done. His name is on his skyscrapers, and he was the star of the reality TV show The Apprentice.

When Donald Trump announced that he would be running for president of the USA in the summer of 2015, he had a wealth of experience in self-promotion and in using the media to his advantage. Continue reading “Trump and the media”