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The choices that confront America
November 10, 2008
During the US presidential campaigning, neither candidate was about to let the financial crisis dictate a wholesale remake of his economic platform. As the markets crashed and the recession rolled in, every promise stood, however ancient its provenance, as though nothing had changed and dealing with the crisis was a separate issue. It took Barack Obama three days – from the election result to his first press conference – to think again.
At said conference, the president-elect declined to confirm that he would raise top tax rates soon. Is he wondering if John McCain, his Republican opponent, was right, and this is no time to be raising anybody’s taxes? Mr Obama also said that his promised tax cuts for “95 per cent of working families” should be seen as part of a new fiscal stimulus. Previously, he had not mentioned this as a reason for cutting taxes. On the contrary, he had emphasised that his plan was roughly revenue neutral, implying that any stimulus would be second order.
A question too complicated for campaign speeches, and which neither side even wanted to think about, now needs an answer. How can the next administration reconcile its longer-term goals for the economy with the imperatives of the economic crisis? Getting this right will not be easy, but is the key to success or failure in Mr Obama’s presidency.
The remainder of the article can be read here. Please post comments below.
Reasons to support carmakers:
1) Carmakers sit at the heart of a huge industrial eco-system. This is similar to banks, though not to the same extent;
2) European carmakers have been bailed-out. This confers an unfair advantage over their US counterparts;
3) It might be true the US does not have a competitive advantage in automobile manufacturing, but neither does labour in the car industry have an option to migrate to Korea. Protecting the industry is the only way to protect workers’ livelihood (they cannot become software engineers either). Lacking total labour mobility, globalisation is incomplete. It would be foolish to fully adopt the precepts of free-trade, when reality differs in essential respects from some of the assumptions in the model.
In conclusion: were I an Obama adviser I would steer clear of theoretically elegant economic orthodoxy in favour of a pragmatic third-way approach. Reality on the ground is messy, so policy prescriptions cannot be all neat and elegant. Of course, when the tide changes there will in due course be a need for a corrective return to a more laissez-faire approach. But we are now at the opposite end of that cycle.
Posted by: RCS | November 10th, 2008 at 4:02 am | Report this commentThe last sentence in my previous post (starting with ‘Of course…’) has nothing to do with the argument. I should have left it out.
Posted by: RCS | November 10th, 2008 at 4:06 am | Report this commentI agree with RCS. Automaking is a key US industry as the major supplier of transportation, guaranteeing mobility and generating employment in a wide range of related sub-industries and services. In Germany even the finance firms which provide loans to purchasers of cars are likely to get government aid if they need it.
Obama has set his priorities.
“Joining up the dots” is something that he can usefully do, with his departure point being the expensive bailouts by the state, and his goals being economic recovery, some form of universal healthcare and the renewal of infrastructure*.
Regarding the automakers: GM is currently capitalized at only $2B, Ford at $3B. 250 000 jobs are at risk at GM**. Recapitalisizing the automakers should be done in return for the state (US taxpayers/citizens) receiving a proportionate shareholding in companies being bailed out.
Oabama is apparently intending to overturn as many as 200 decisions of the Bush administration. Reviewing, and if need be, rescinding or re-adjusting the terms of government bailouts to date is a must, imo, if Obama wants to act “in the interest of all Americans”. Only the state and the president are willing/able to provide the massive funds needed to recapitalize the automakers in order to retool a fast changeover to clean cars.
As regards joining up the dots, how can government bailouts lead to generating cash for
Obama’s goals of some form of universal healthcare and a renewal of US infrastructure?
It’s a fact that several major EU countries have wide experience of state ownership of industries and services, which in the 1980s and 1990s were privatized and produced huge windfalls for the state. The same strategy will work for Oabama, if the bailouts are made on the conditions outlined above. Then at some later date, after the companies which have been bailed out and restructured, the state shareholdings in such companies can be sold off to private investors and the proceeds can be used to help fund healthcare and infrastructure.
*The US Assoc. of Civil Engineers has already listed $1600B (yes!) worth of “urgent” work to be done on roads, bridges, ports and the electricity network.
**As regards employment: micro-managing the jobs market has never been the task of the private sector; it is the responsibility of a government.
Posted by: J.J. | November 10th, 2008 at 8:49 am | Report this commentAs regards strategies to deal with the negative effects of economic downturns on jobs, one can learn from other countries’ experience (Germany for example).
I am not sure who wrote the Friday 7/11 commentary about the suitability of Bill Clinton to become Special Envoy to the Middle East, but if it was not you, perhaps you would be kind enough to pass this along to whoever did.
Americans (I am one) do not want a lying, cheating, viciously vindictive individual representing them in any part of the world!! Skirt-chasing Bill Clinton with all the moral gravitas of a kite is absolutely the wrong person to shoulder so delicate and meaningful a task as Middle East envoy. The fact that he wrote down some “parameters” is a shoddy reason to entrust him with a title and bona fide role. America gave him chance after chance…..he blew them all. Clinton’s self interest and narcissim will forever prevent him from being a productive part of our government and world position. Witness his latest…complaining that he could never be a great president because he did not live in a great age!!!!! The buck never stops with Bill Clinton. Whenever Bill Clinton’s name is mentioned, the next line will inevitably be “I did not have sex with that woman.” Middle East Special Envoy? Nominate someone we can be proud of.
Really, really bad idea. Stick to finance. Thank you.
Posted by: Chiara Byrne | November 10th, 2008 at 12:26 pm | Report this commentWhy not a tax cut across the board? The take for the Feds increased significantly with the Bush tax cuts, only to be outdone by the increase in spending. How about a tax cut, without an increase in spending and let the economy “self correct”?
Obama could show some courage and let the auto industry get fixed pretty easily. With $1.72 gasoline, it is now the best time in years to buy an SUV. Drop CAFE now, and let the automaker get healed. Would cost nothing, and provide a serious shot in the arm to the economy.
JBP
Posted by: John Powers | November 10th, 2008 at 1:36 pm | Report this commentBelow is an article from 2005 that MaryAnn Keller, an astute and long-term security/industry analyst of the automobile industry, had published in the Washington Post. I selected it at random. Unauthorized reproduction, but I assume Ms. Keller and the Washington Post do not mind.
I reproduce it because it is just one of innumerable analyses by experts on the industry that correctly excoriate the inward-looking, truly pathetic management of the USA auto industry since the 1960s.
I agree with RCS that the industrial eco-system should not be allowed to try to right itself through bankruptcy. All that does is waste funds on intermediaries on legal, accounting and similar expenses along with disruption in operations.
By the same token, any investment or guarantees by USA taxpayers should eliminate all top management of the automakers and recapitalize the industry through market value payment for outstanding equity and debt capital and additional capital as needed to permit retooling.
Union members who provide labor will have to bear their portion of the cost of recapitalization, although the blame lies squarely on the shoulders of management and on ownership for permitting management to destroy owners’ capital for decades.
Federal government has a golden opportunity to “kill many birds with one stone” - force a shift to fuel-efficient vehicles in essence that will vastly reduce the dependence on Middle Eastern oil that in turn has shaped so much abysmal policy, activity and truly mind-boggling waste of human and financial resources on the part of the USA government for decades, most notably of course under the Bush Administration.
Just compare what will eventually amount to $3 trillion in USA tax-payer funds for the invasion and occupation of another country that additionally has killed and maimed hundreds of thousands of people while contributing to the fleecing of the world’s consumers of oil-based products to a tiny fraction of that spending - without the death and destruction - by forcing a minimally intelligent industrial policy on ingrown and recalcitrant industry management.
As J.J. notes the market value of ownership of the USA automotive assemblers is well below $10 billion. I do not know the comparable market value of debt, but given that the USA Congress just authorized $25 billion in loan guarantees, I assume the market value is somewhat close to that number.
In a Detroit suburb in the late 1980s, General Motors established a large technical facility it called the Mona Lisa center, where its engineers disassembled Honda Accords and Toyota Camrys in a desperate search for the secret of their Japanese competitors’ success. They analyzed the smallest pieces trying to figure out the best attributes to include in future GM models.
The reasons for GM’s decline could have been found there on the floor of the Mona Lisa center, but not among the parts. It was the whole approach. Taking apart existing cars is a backward-looking exercise; it doesn’t tell you what’s going to sell four or five years down the road. So while GM was staring in its rearview mirror, its competitors were zipping ahead.
What ails GM today is much the same as what ailed it then — and it’s not just a matter of big pension plans, health care costs for workers or undervalued Asian currencies. The problem is that GM has forgotten how to make cars that people want to buy.
That’s why the 25,000 layoffs that GM announced on Tuesday were only part of the week’s distressing news for the automaker. The company also said that it is hard at work at a concept car called the Buick Centieme, a seven-passenger “crossover” vehicle designed to compete with popular rivals from Honda, Ford and Chrysler. (Crossovers have SUV attributes, but are built on car, not truck, platforms.) GM’s lack of a seven-seat crossover wagon to sell in 2005 is a problem now, but the new model car won’t arrive until sometime between 2007 and 2009. Will it be substantially better than what I could buy today? GM has never behaved as if it understood that the competition is always moving forward. The car I can buy today is not something I want in four years. The company might as well still be stuck in the Mona Lisa center.
It’s hard to pinpoint when GM lost its touch. At the start of my career as an auto industry analyst in 1972, General Motors had a triple-A credit rating and a portfolio of distinctive and powerful brands that suited America’s growing affluence and emerging suburban lifestyle. I myself had bought a new Pontiac Tempest just after college in 1966 and I loved it.
But I’ve owned only one GM car since then. For the past 33 years, I have watched, analyzed and chronicled the decline of GM’s market share and leadership among the world’s automakers. In the 1970s, the company lost its creative edge, paying more attention to financial calculations than consumer tastes. Since the 1980s GM has been forced into more downsizings and restructuring than I care to document. Each time, it has touted multibillion dollar cost savings and a corporate revival based on new products in the pipeline.
That’s what happened, again, last week. At the company’s annual shareholder meeting, chief executive G. Richard Wagoner Jr. delivered a statement essentially identical to what we’ve heard time and again. He announced yet another round of job cuts and factory closings while expressing confidence in the success of future models. GM stock surged, just as it has after every other cost-cutting scheme.
But while Wagoner is trying to exude confidence, GM cars are languishing on dealers’ lots. And history tells us that getting rid of people and factories is not going to close gaps in product development and production efficiency with competitors such as Toyota. It is simply aligning the company’s assets to a new reality of a permanently lower market share.
This would have been unimaginable to Alfred Sloan, the legendary GM chairman who rebuilt the company after an earlier brush with bankruptcy and who retired in 1956. He had left behind a heritage of engineering innovation and financial controls that supported smart decisions without stifling creativity. The company was so dominant, it could have run on cruise control — at least for a while.
Sloan’s successors lost touch with consumers. People used to speak with awe about the executive offices on the 14th floor of GM headquarters. Visitors had to go through two sets of electronically locked glass doors and file past guards. Inside, it was like a sanctuary — very, very quiet with beige carpeting and wood paneling. The executives had their own private dining rooms and secretaries sat watch over closed office doors, preventing any opportunity for casual conversation. Cocooned there, GM’s executives became smug.
By the 1970s, new forces — rising gasoline prices and competition from Japan — were beginning to assault the company and Sloan’s world was passing. GM responded to cheap Japanese imports by cutting quality. One Chevy model actually left out the back seat to cut costs. Brand definition, Sloan’s genius, was blurred.
In the 1980s, Roger Smith, whose long tenure as CEO was marked by GM’s greatest failures, took the company through a disastrous reorganization and then proceeded to spend more than $15 billion on robots and factory automation, none of which helped product quality or cut costs.
Smith also acquired Electronic Data Systems, which Ross Perot had founded, to shake up the company’s culture and Hughes Aircraft to introduce space age technology into the car. Money that should have been devoted to designing better automobile engines and restoring the luster of, say, Cadillac (which had degenerated into a tarted-up Chevrolet) was spent on diversions. Smith also added Saab to the roster of money-losing ventures. A multi-billion-dollar investment in Saturn was supposed to spur a cultural revolution by getting management, labor and dealers to work together. But in the 1990s, GM’s next CEO, Jack Smith, and his team starved that division, which had enjoyed modest retail success at the outset because of a strong and dedicated dealer body. Today Saturn has been relegated to just another undistinguished GM brand that has cost the company more than $10 billion.
During the 1990s, GM focused on productivity and quality with some success. Profits soared for a while. But once again dollars that should have been invested in cars were diverted into stock buybacks at prices considerably above the current level, vehicle production in China and elsewhere in Asia, Internet startups and lastly into Fiat, the Italian automaker. That Rick Wagoner can argue, as he has, that the $4 billion to $5 billion it cost to get in and out of Fiat (about half to buy a stake and half to get out of an obligation to buy the rest) was money well spent is beyond belief. It is baffling that GM — a company supposedly run by “bean counters” demanding forecasts of double-digit returns before approving investments — wasted so much.
Jack Smith, who got the top job in 1992, brushed aside concerns about the slide in the company’s U.S. market share by saying that GM’s global share mattered more because of faster market growth abroad. No one at the company seemed to understand that the United States has been, is and will be the source of virtually all of the profits earned by world automakers. How could GM think that it could save itself in Asia when the Japanese and Korean auto companies have been intent on increasing sales here because this is where the profits are?
Jack Smith also blamed GM’s U.S. problems on poor marketing rather than poor vehicles. In an effort to establish unique brand identities in the increasingly crowded American market, the company expanded the influence of market researchers even as it reduced the ranks of engineers. GM convinced itself that by using “psychographics,” a hocus pocus term that means a combination of psychology and demographics, it could profile the U.S. population and create niche products. Car designers surrounded themselves with photos of their intended customers . I remember being taken through these studios with then-executive vice president for marketing Ron Zarella. On the wall of one studio hung large photographs of vital young men and women doing the things that GM associated with Pontiac. One photo showed a Spandex-clad young woman rock-climbing, the supposed inspiration for the prototype of what would become the Aztek. The car, by comparison, was anything but agile and sleek. GM managed to create a vehicle that everyone hated.
One has to wonder why it has been so hard for GM to figure out what car buyers want and then give it to them. The company has not been able to leap ahead of the competition since the early 1980s when it led the way into front-wheel drive. Its failures are numerous.
Chrysler launched the first minivan in 1984. It took more than a decade, but the Japanese established themselves in the sector while GM failed to come up with a desirable model. Today, GM’s minivans still lack the seating configurations that have become the norm, forcing the company to lure consumers by offering thousands of dollars in “incentive” discounts, ultimately a self-defeating exercise that gives the impression (correctly) that the company is having trouble selling its cars.
GM has all but given up trying to come up with a competitor to the Toyota Camry and Honda Accord that its Mona Lisa center took apart. But Toyota added a hit SUV, the RX 300 in its Lexus line. When Toyota realized that the Lexus brand was attracting only older buyers, it created Scion and matched unique style with unconventional marketing to appeal to the young generation. When GM faced the same problem of appealing only to seniors with Oldsmobile, it ended up killing off the brand and sacrificing more market share.
GM’s product planning has also ignored the possibility that fuel economy might again become a priority for consumers. When I was a member of a National Academy of Sciences panel studying the Corporate Average Fuel Economy (CAFE) standards for the auto industry in 2001, GM argued against raising them. At the same time that it was forecasting bigger auto sales in China, it was denying the impact that would have on oil markets. And it is virtually alone in arguing that aging models explain its falling SUV sales while every other vehicle manufacturer points to fuel prices as the reason. The SUV boom of the 1990s is over and with it the huge profits that these titans generated.
GM’s management tells us to wait until the new GMT 900 series of SUVs and pickups hit the showrooms next year. These will be followed by more new models, including the new entrants into the surging crossover category. But GM’s Asian competitors are introducing new models and refreshing existing ones at a faster pace, so that GM is always reacting rather than forcing its rivals to respond. And there are just too many examples of the company’s failure to match the competition, let alone innovate, leaving us to wonder why we should believe that what’s in the pipeline will be any better.
It’s true, as management argues, that health care costs are a huge burden for GM. But management agreed to the health care provisions in past contracts based on faulty assumptions of rising production. It seems unfair to ask hourly workers to sacrifice wages without equal sacrifice among executives or the shareholders who still get a $2-a-share dividend from the company’s large but rapidly dwindling cash horde.
What is so tragic about the GM story is that the company has always attracted highly talented and dedicated people who want to do the right thing. No one at GM wants to close factories or bribe customers with rebates or employee pricing. GM invests more money and time in the creation of a new model than Toyota. So why does GM get it wrong so often? Why was Lee Iacocca able to save Chrysler? How is it that Carlos Ghosn was able to turn Nissan around in a few years and GM hasn’t been able to stabilize itself in three decades?
It’s hard to change a corporation’s culture, especially when the corporation is as large as GM. The age-old refrain about GM is that its executive ranks are dominated by treasurer’s office graduates while car guys are nowhere to be found. Yet Jack Smith moved the company away from Roger Smith’s imperial style to consensus management. Rick Wagoner, admitting a lack of product expertise, brought in Bob Lutz and gave him the freedom to revive GM styling. But a stifling corporate culture plagued by slow decision-making and a lack of accountability is hard to change.
Perhaps Ghosn’s and Iacocca’s secret weapon was a willingness to admit to a crisis. So far, GM has only told us to wait for the new models while it leans on the United Auto Workers for concessions.
Back in the Sloan era, GM was so dominant that it was worried that government trustbusters would order a breakup of the company. Those days are long gone. And while the company still has substantial resources, unless it can come up with some more appealing vehicles, no amount of UAW concessions or layoffs will be enough.
Posted by: Wendell Murray | November 10th, 2008 at 4:35 pm | Report this commentWM. Thx for the long post, but easily readable, well-spaced out. I saw Roubini (NYU)? on CNN Sqwauk Box today. What he said left the others mostly speechless. The US state has spent $167B on AIG - so far. And on the ticker came up the news that Deutsche Bank had downgraded GM to SELL, with a target price of $0 (zero) - which I posted on Rachman’s blog. I wonder who the analyst in Frankfurt was - I’ll check
Posted by: J.J. | November 10th, 2008 at 5:31 pm | Report this commentYou write,
“At said conference, the president-elect declined to confirm that he would raise top tax rates soon.”
On the contrary, he confirmed a “net” tax cut for “Ninety-five percent of working Americans” :
“The — my tax plan represented a net tax cut. It provided for substantial middle-class tax cuts. Ninety-five percent of working Americans would receive them. It also provided for cuts in capital gains for small businesses, additional tax credits. All of it is designed for job growth.”
Logically, _only_ a plan that has _some_ tax increases can provide a _net_ tax cut, or did that escape you? So, there is no evasion of his plan as stated; instead, he directly reiterated it. Your characterisation is misleading–some might call it flatly _false_.
You write,
“Mr Obama also said that his promised tax cuts for “95 per cent of working families” should be seen as part of a new fiscal stimulus. Previously, he had not mentioned this as a reason for cutting taxes. On the contrary, he had emphasised that his plan was roughly revenue neutral, implying that any stimulus would be second order.”
To quote Dick Cheney: “So?”
As it happens, a fairer tax schedule which shifts the disproportionate burden which Bush placed on middle and low income households _back_ on to the top income levels _would_ among other things _also_ create a helpful stimulus to the depressed economy. Are you opposed to this or merely to his having pointed it out here?
You write,
“Lower tax rates, as opposed to rebates, are worse in this regard because they are not self-correcting. Ask President George W. Bush. His tax cuts were scheduled to expire in 2010 – not because he wanted this to happen, but because it disguised a deteriorating fiscal outlook.”
It’s interesting that you wrote ” [Bush’s] tax cuts were scheduled to expire in 2010″, almost as though you were aware that rather than there still being an expiration date to them, Bush _pushed_ for and _got_ them made _permanent_. And you, of course, wrote a scathing denunciation of that measure, _didn’t_ you? Since, whether it’s Obama or Bush making such cuts permanent, you’d be opposed on _principle_ to that, _wouldn’t_ you?
You write,
“One-shot tax rebates fit the bill. The first stimulus took this form, and it worked fairly well. The problem is that under present circumstances too much of a rebate gets saved rather than spent.”
The point, really, is not so much whether relief comes as a tax rebate or a tax cut, as long as it comes and comes to those who most _need_ it. Only “Bush tax cuts” result in “too much get[ing]saved”. The reason is simple: they’re aim heavily at the wealthiest of households, those who can easily provide for more than all their needs _without_ having to spend a penny of their tax rebate or cut, whichever it may be. An _Obama_ tax cut or rebate, being directed to help those who are struggling to feed, house and clothe themselves, would certainly be spent—giving direct stimulus benefits to the economy—and spent as soon as its received.
You write,
“One thing Mr Obama and Mr McCain agreed on was that the Bush tax cuts should be maintained (for 95 per cent of working households, at any rate).”
They did? That would be very odd then, since I have yet to hear the first word of any of George W. Bush’s tax proposals as adopted actually providing for an effective tax _cut_ for “95 percent of working households.” That may be because no Bush tax plan ever proposed, much less _did_, any such thing. So, where do you get the idea that Bush’s tax cuts, which overwhelmingly went to the wealthiest households, benefited “95 percent of working households”?
You write,
“Why a worker in a US-owned car factory deserves more generous treatment than any other kind of US worker escapes me. Asking those other workers to pay for these privileges seems to add insult to injury. Perhaps President Obama will be able to explain.”
Somehow, you don’t seem to have been so concerned when, throughout the Bush tenure, “more generous treatment” relative to income, was lavished on the wealthiest households through the tax schedule, while those with far less in income were taxed at regressive rates. Suddenly you’re concerned about equitable treatment? Since the lower paid, lowering earning segment of American workers are going to pay _less_ in taxes, rather than _more_–as they had to do under Bush—it’s not really the ” other kind of US worker” who’ll be “asked” to bear the burden, it’s rather those who, again, got the lion’s share of tax cuts under Bush, those same wealthy who in fact least needed them to decently feed, clothe and house themselves. Your description suggests that President-elect Obama [doesn’t that phrase sound wonderful!!??] would pit one set of the oppressed against another when in fact, his plan is to relieve all the more oppressed, burdened, and to do so at the expense of those who’ve reaped _fabulous_ benefits out of all proportion to their desserts under George W. Bush.
Again: you’d be _opposed_ to that? And in favor of leaving the current lop-sided tax schedules as Bush and the Republicans designed them?
You write,
“Perhaps President Obama will be able to explain.”
Perhaps he shall when _you_ explain _your_ rationales.
Posted by: GRB | November 10th, 2008 at 8:08 pm | Report this comment“Somehow, you don’t seem to have been so concerned when, throughout the Bush tenure, “more generous treatment” relative to income, was lavished on the wealthiest households through the tax schedule, while those with far less in income were taxed at regressive rates. Suddenly you’re concerned about equitable treatment? Since the lower paid, lowering earning segment of American workers are going to pay _less_ in taxes, rather than _more_–as they had to do under Bush”
Red Queen argument again. Somehow a 35% tax rate is reasoned to be lower than a 0% tax rate. Just wrong any way you look at it, but typical of the lunacy that affects those who want to penalize a minority for political gain.
JBP
Posted by: John Powers | November 10th, 2008 at 10:19 pm | Report this commentWould you please explain your comment “Managers and unions have conspired for years to drive US-owned, US-based car manufacturing into the ground.”?
That does not make any sense to me. It is like you are saying the managers and unions conspired to fail.
Are the U.S automakers responsible for the subprime mortgage mess? Did you forecast oil would go almost overnight to over $147/bbl?
It is easy to fault the automakers now, but at the time decisions had to be made, management was looking at what is best for stockholders- and that is usually short-sighted thinking. They were producing the most profitable vehicles they could, what the markets were demanding at that time.
You cannot just switch to fuel efficient vehicles overnight. IF you were in their shoes, would you really have done anything different?
The automakers were caught by a financial crisis and energy prices soaring at the same time. It is no wonder they are in trouble.
The automakers should have been making their factories more flexible and designing more fuel efficient cars, - but could they have done that with stockholders demanding more and more?
Also, are you advocating all manufacturing jobs should have the same pay? Sounds very socialistic to me.
The unions got the best deal they could get at the time because usually, the automakers were making a lot of money at contract time. Have you ever spent time at an automaker’s plant? It is hard work.
I do agree with you that outsourcing jobs to lay off your higher paid workers was also losing your customers, I do not understand how the unions agreed to that. It was more short sighted thinking.
Frank Turkovich
Posted by: Frank Turkovich | November 10th, 2008 at 10:24 pm | Report this commentATTEMPTING TO FIX THE ‘FINANCIAL CRISIS’ SHOULDN’T OBSTRUCT COORDINATED INTERNATIONAL ACTION TO “CONSTRUCTIVELY” DEAL WITH NORTH KOREA & IRAN!!
America’s new President and cabinet ought to put too-long-mishandled foreign policy issues at the forefront of the USA’s (&allies’) priorities- ahead of even financial ones.
A stable and cohesive developed and developing world will be far better able to deal successfully with the financial problems confronting nations- and world order- than a world that is locked in precipice-to-war loggerheads over nuclear weapons proliferation…
Despite recent progress, the obvious motivations for North Korea’s- & similarly positioned nations such as Iran’s- fractious, oppositional relationships with developed world nations need to be “constructively addressed” instead of- in a perceived-as-bullying, hostile way- opposed.
Outsiders ‘currying insurrection’ in any country- as the USA has reportedly been doing in N Korea & Iran for years- can only cultivate lack of goodwill & animosity- if not defacto ’states of war’- between countries that otherwise could have mutually beneficial relationships.
Done right, engagement policies could, realistically, generate the internal changes people living in Iran & North Korea need most: “democratic, rule-of-law & economic-development INERTIA”!!
Engagement-policies ought to mean attempting to get these countries (leaders) to VOLUNTARILY ‘work with’ & assist the world community in long-term projects, preferably types that are perceivably prestigious & that would, indirectly, oblige these countries’ opening up to the rest of the world: in ‘productive-for-all parties’ ways.
How?
Led by the UK, USA & leading EU nations such as France, the developed world ought to:
->>> Offer both N Korea & Iran the rights to be exclusive locations for the International Thermonuclear Energy Research project, ITER (in planning stages, recently awarded to Cadarache, France, http://www.iter.org ).
ITER is, by its design & nature, international in function, thereby enabling competent oversight, precluding Iran or N Korea from misusing the project’s resources.
Publicly offering the ITER project would, in effect, call these nations’ leaders’ bluff about needing secretive nuclear technology development programmes… & also would neutralize their basis for alleging that many developed-world nations harbour unseemly motives for being against their development of advanced nuclear technology.
An ITER campus/sight in North Korea would invariably lead to South Korean technical & financial participation.
South Korea co-developing/maintaining & co-running an ITER campus/sight in North Korea could only greatly assist & productively amplify the currently improving political, social & business ties between these two unnecessarily separated, highly-culturally similar states…
->>> Offer Iran rights to co-host the 2016 Olympics with Qatar (which was bidding for the games).
Guaranties of significant logistical & financial support to Iran (from developed world nations) for its participation in such a ‘world project’ would go a long way to making such an offer seem palatable & not-too-contrived to Iran’s citizens.
Other states in the wider region could be approached for participation, with a “Middle East” Olympic games an optimal objective.
->>> Additionally, offer to pay for, & partner in the building of significant infrastructure for N Korea, & possibly Iran, of a type that will instill national-prestige, as well as facilitating an improved connectedness- both physical & psychological- to the outside world.
Japan’s government has been pushing for a greater global role for Japan.
Supporting/participating in strategies like the above would go a long way towards this… as would paying for & assisting in the construction of a Japanese-type high-speed “bullet” train to connect North & South Korea’s capital cities to each other & to China.
A pan-Korean peninsula high-speed rail link could only contribute to & make more permanent the existent, but very counterproductively limited, trade, industry & societal connections between these two (virtually) culturally homogeneous states.
If accepted, altruistic overtures such as the above would enable global stages where these 2 egotistically defensive country’s- & many Islamic nations- could feel that they can show their positive potential & achievements.
As well- meeting the developed world’s political & defense objectives- would effectively require these countries to “fit”, & productively “work with” the world community.
Furthermore, & most importantly, offering N Korea & Iran the ITER project; the 2016 Olympics & committing to pay-for & partner-in-the-building-of much needed infrastructure would go a long way to eliminating their (+ many Islam nations/people’s) perceptions of threat from developed world & “Judeo Christian” country’s- removing their leaders’ main argument for alleging a requirement for developing: advanced nuclear technologies that are applicable to the production of nuclear weapons; & long-range ballistic missile programmes.
If attempts to constructively “set directions of development” for N Korea & Iran do not work- the developed world has sufficient fire-power to revert to heavy handedness, & “bash” till both these mal-governed countries are moonscapes.
Roderick V. Louis,
Posted by: Roderick V. Louis | November 11th, 2008 at 5:51 am | Report this commentVancouver,
Canada,
ceo@patientempowermentsociety.com
Clive writes:
The bail-out currently being sought by the big US carmakers falls squarely into this category. Managers and unions have conspired for years to drive US-owned, US-based car manufacturing into the ground. Now they seek public subsidy to pay for investments they should have undertaken in any case, and to sustain wages and benefits that comparably qualified workers in other industries cannot hope to enjoy.
Why a worker in a US-owned car factory deserves more generous treatment than any other kind of US worker escapes me. Asking those other workers to pay for these privileges seems to add insult to injury. Perhaps President Obama will be able to explain.
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Okay, so really this article is an attack on the unions and the auto industry.
Let’s put it another way. Why do workers in the financial industry deserve more generous treatment than workers in other industries?
I am not entirely sure why the right wing (of which you appear to be a strong proponent, Mr. Crook), seems to want the American auto industry to go bust. I suspect its to put the final nail in the coffin of the auto industry unions, which I believe are still some of the largest in the US.
Fortunately, the new president (as opposed to the highly unpopular lame duck individual who we must endure for 9 more weeks) seems to want to help the American auto industry and preserve the unions who work in it. He sees that these workers are the backbone of the American economy, and wants to promote them, not tear them down.
So I believe that you should begin to embrace the new direction of this forward thinking president and observe how he wants to help ordinary middle class workers in the US, and not just the elite CEO’s, as his destructive predecessor has done.
Either that or get left behind.
Posted by: meljomur | November 11th, 2008 at 9:47 am | Report this commentAll must embrace the worthy leader, or be in danger of the rapturous consequence of being “left behind”.
There can be no dissent; 53% of the people demand that the other 47% follow without question.
JBP
Posted by: John Powers | November 11th, 2008 at 1:47 pm | Report this commentWell Mr. Powers, I will submit to you that no person needs to follow President Obama’s positions without dissent. However you will recall that Mr. Bush (who received a bit less of the popular vote, in fact in 2000 he lost the popular vote!) basically ignored ALL opposition to his policies, and arrogantly pursued his far right agenda, without compromise.
I find it interesting that now that the Democrats are in complete control of Congress and the WH, the Conservatives are screaming for bi-partisanship.
Where was this view for the first 6 years of the Bush administration?
Posted by: meljomur | November 11th, 2008 at 7:08 pm | Report this commentThe Bush Administration was over-the-top bipartisan, with majorities of both parties supporting such legislation as No Child Left Behind and the Prescription Drug Benefit, as well as bailouts for the Finance and Airline industries. Tom DeLay led the campaign for the prescription Drug Benefit program, one of the more Socialistic programs ever introduced in the USA.
The Wars in Afghanistan and Iraq were also bi-partisan efforts, you may recall. The vast increase in earmarks was also a bi-partisan effort (though opposed by John McCain, to little avail)
I am not much in favor of bi-partisanship, but characterizing the Bush Administration as one-sided is historical revisionism at its worst.
I think the Left should get used to a good portion of people opposing a good portion of their policies.
JBP
Posted by: John Powers | November 11th, 2008 at 10:35 pm | Report this comment“I think the Left should get used to a good portion of people opposing a good portion of their policies.”
I think the “Right wing” should get used to being out of power, ideologically discredited and generally despised by those who aren’t brain-dead or morally bankrupt.
Posted by: GRB | November 12th, 2008 at 9:47 am | Report this commentMr. Powers,
I am not going to get into an ongoing debate on the supreme partisanship of the Bush administration, to deny it is so comical it defies logic.
For example we could look at how many bills Mr. Bush has vetoed since the Democrats took control (albeit limited) of Congress in 2006, or the fact that as President he has added more signing statements than any other president in history.
Suffice it to say, if there is one thing I have learned from 8 years of GW Bush in office, its that if you well and truly want to accomplish your agenda while in office, there is no such thing as being bi-partisan.
The Republicans are in an extremely weak position, and I hope the Democrats stay strong and on track and manage to push through a political agenda which takes the US back on track, after being forced into the ditch!
It remains to be seen how bi-partisan a president, Barack Obama will be. Personally with the mandate in which he was voted in, I am not sure it even matters!
Posted by: meljomur | November 12th, 2008 at 1:41 pm | Report this commentGRB,
Despising a political opponent is certainly a symptom of a weak ideology. Given that the Republican message has been all over the ball park since Gingrich resigned, how would you even know what you are despising?
Meljomur,
Obama got 53% of the vote, running against an extremely unpopular party, with the media in the tank for him. That is not much of a mandate for imposing a Leftist Economic system on the USA.
Bush vetoed 12 Bills in his 8 years, 1/3 the number as Bill Clinton, 1/6 the number of Reagan, 1/20 the number as Harry Truman. The revisionist history of the Left cannot change that.
Bi-partisanship was Bush’s (and thus the Republican) downfall in my opinion.
JBP
Posted by: John Powers | November 12th, 2008 at 4:14 pm | Report this comment“Despising a political opponent is certainly a symptom of a weak ideology. Given that the Republican message has been all over the ball park since Gingrich resigned, how would you even know what you are despising?”
For starters, I have you as a guide.
You write:
“Despising a political opponent is certainly a symptom of a weak ideology.”
Indeed!? Are you quite sure of that? You did write, “is _certainly__ a symptom of a weak ideology.”
My ideology is informed and inspired by genuine democratic principles as opposed to the gross sham version typically defended by so-called “conservatives” (who in ll things _worth_ conserving are anything _but_ conservative) and by pseudo-democrats whether of capital “D” or lower-case “d”) who talk about democracy but won’t lift a finger to advance it in practice.
I’m an admirer of Popper’s arguments in ‘The Open Society and Its Enemies’ and yes, I _despise_ the antitheses of open societies—closed, secretive, oligarchical and anti-democratic societies and the regimes which promote them. In short, I despise the sort of society which so-called conservatives in the U.S. and elsewhere either _helped_ Bush and Cheney _promote_ or, if not helped, stood by and did nothing effective to oppose.
By the same token and in the same vein, I oppose and despise, for example, the practical precepts and practices of Hitler’s Nazi (and his imitators) rule of Germany in the 1930s and her conquered territories in the 1940s. Would you assert with the same nonchalance that democracy’s defenders who frankly despised the regimes of Hitler and Mussolini were evidence of democracy’s symptomatic “weakness”?
What you’ve written so far shows me that you’re out of your depth here.
Posted by: GRB | November 13th, 2008 at 11:47 am | Report this commentDear Mr. Powers,
Barack Obama is hardly a “leftist” politician. You really should get out of the US more often.
I am presently living in London, and I am always bemused at what Republicans consider “leftist” leanings.
I do agree the US is a center right country, but I feel that will change in the next few years.
Regarding Bush’s vetoes, none were made in his first 6 years. I wonder what happened those last 2 years??
Posted by: meljomur | November 13th, 2008 at 2:16 pm | Report this commentGRB,
Your intellectualism is astounding. Popper! Wow, that sealed it! You are correct, we must hate the others. I am now convinced; we must despise those who dare to promote individual liberty, lower taxes, and easy customs clearance.
Meljomur,
So quantifiably you are wrong about the bipartisan nature of Bush tenure, but oh well, facts be damned, it is rhetoric.
Obama’s voting record is a left as it gets in the US. As of yesterday his economic plan consisted of enabling trade barriers in Colombia to prevent import of US goods.
JPB
Posted by: John Powers | November 13th, 2008 at 2:44 pm | Report this commentJPB (or is it JBP? or can’t you make your mind?)writes:
“Your intellectualism is astounding. Popper! Wow, that sealed it! You are correct, we must hate the others. I am now convinced; we must despise those who dare to promote individual liberty, lower taxes, and easy customs clearance”
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Are you proud of this as a reply?
It’s laughable. In my neighborhood, your comment announces that you have nothing of substance to say in answer. I’d already recognized that, too. It’s in keeping with the generally shallow level of commentary in this newspaper’s opinion pages—excepting the letters of readers un-like you. If I were betting, I’d bet that you’re the hand-puppet of Crook. You have much of his snide, poorly-reasoned argumentation. The marks of having suffered from exposure to the weekly “Economist”-style of journalism.
It’s a pity that the Financial Times picks up the left-overs from the Economist. And, if I’m mistaken, then you should apply for work there. Your “thinking” and writing “style” are of their bent.
Posted by: GRB | November 13th, 2008 at 5:40 pm | Report this commentGRB: In defense of JBP, his comments may reflect borderline nutcase rightwingism, but from all I can tell he is sincere, unlike a few others who make nutcase comments here that are nothing more than baseless slander.
Posted by: Wendell Murray | November 13th, 2008 at 6:29 pm | Report this commentYawn,
I have reached a new low being defended by WM.
JBP
Posted by: John Powers | November 13th, 2008 at 9:34 pm | Report this comment(insert meaningless philosopher to show my intellectualism) (insert hateful screed against those who differ from me)
(submit)
Posted by: John Powers | November 13th, 2008 at 9:36 pm | Report this commentJBP