Saturday, October 22, 2016

What California's Direct Democracy is up to This November

Here in California, the seventh largest economy in the world ($2.4 trillion/2014) we take our direct democracy seriously. In the upcoming election on November 8, we will vote on 17 state propositions. This year we get to vote on weighty matters (abolishing the death penalty (Yes!), legalizing marijuana, gun control), on fiscal matters (approving school bonds, hospital fees, and taxes on high income earners), on school policy (bilingual education) and on the more prosaic (approving a ban on single use plastic bags, non-binding constitutional advice on Citizen's United, and whether actors in the adult film industry should wear condoms). 

For anyone interested, here's what we're concerned about this November in California now that Hillary is safely heading for the White House. 

Prop 51.  Yes on School Bonds. This is an initiative statute that authorizes $9 billion in general obligation bonds for new construction and modernization of K-12 public schools, vocational schools, and community colleges. With interest this amounts to $17.6 billion over 35 years, if interest is 5%. With interest at 5% payments from general fund would be $500 million/year for 35 years. At the present time, interest payments may be significantly less than 5%. This infrastructure spending will create jobs, the money is cheap, it’s a good time to build. I’m voting “Yes.”

Some interesting facts: There are 6.2 million students in California (k-12), attending 10,000 schools.  There are 950 School Districts.  In addition, there are 2.1 million students who attend community colleges in 113 campuses. The state is currently paying $2.4 billion annually on accumulated bonds, plus $300 million for CC debt. This is roughly 2% of the state budget of $109 billion (2015).

Prop 52.  Yes on Hospital Fees. This would make permanent fees imposed on hospitals required to obtain matching federal funds. The fees fund Medi-Cal  and health services for the uninsured and children. The fees are being collected currently, but Prop 52 would make the fees permanent. The federal government will have to approve these fees as well.  I’m voting “Yes.”

Interesting facts: 2015-16 spending on Medi-Cal was $95 billion; $23 billion coming from the general fund. There are 450 general acute care hospitals with 20% being public hospitals.

Prop 53. No on Voter Approval of Large Revenue Bonds. Requires voter approval of all statewide revenue bonds in excess of $2 billion.  Current projects affected would be the CA water fix (2 tunnels through Sacramento San Joaquin River Delta) and High Speed rail.  The term “project” is not well defined.  Large infrastructure projects are always very difficult to get approved politically. This would throw another road-block to future development. I’m voting “No.”

Prop 54. No on Freezing Legislation Before Vote. This would require all proposed statutes to be published, and left unmodified, for 72 hours before a final vote.  Opponents argue that this would give special interests an extra opportunity to attack legislation, and it would prevent last minute compromises which is often the only way to get legislation done. Supporters argue that it would provide more transparency and give the public a chance to weigh in. The measure is bankrolled by Charles Munger, a Republican billionaire who was also active with California redistricting.

One of my peeves about the way we get new legislation is that the people voting on legislation don’t understand what’s in it.  Legislators have a keen sense of what will buy them support (money or votes) or opposition, but that is very different from having a keen understanding and independent judgment on legislation.  Prop 54 won’t address that problem. It is also unclear to me that providing three days with no amendments to legislation before every vote will reduce the power of special interests (monied interests) over the general good. The argument against prop 54, that it will increase the power of special interests seems plausible to me. Recording and having video’s available within 24 hours seems like a good idea, but it is mostly being done now, and it’s not like any meaningful segment of the population looks at these recordings.  It seems plausible to me that there is some benefit to make last minute compromises and adjustments to legislation in order to get things passed.  I have too many unanswered questions on this and am giving the benefit of the doubt to the “No” argument.

Prop 55. Yes on Extending Tax on High Earners. More than half of state revenues go to education. Prop 55 extends through 2030 the increases in state income tax on high earners that was passed in 2012 in order to help pay for education. Prop 55 also adjusts the formula for funding Medi-Cal, the state health care program that serves 13 million of California’s poorest people (~1/3 of population).  Money raised by this tax can vary from $4 billion to $9 billion depending on the economy and the stock market—i.e. depending on how much high earners earn.

The predicted fluctuation in revenue illustrates a problem with the California tax base. We have a problem in that our tax base is heavily dependent on high earner income taxes.  This results in a highly variable income stream for the state and makes planning difficult.  For joint filers the 2012 increase which is proposed to be extended here is 1.0% for income of $526,000 to $632,000; 2.0% for income between $632,000 and $1,053,000; and 3.0% in income in excess of $1,053,000.

I’m voting in favor because a) schools need the money; b) where else are we going to get it; c) it mitigates income inequality; and d) state needs to learn how to handle the fluctuations, and I’m willing to see how they do.

Prop 56. No on Cigarette Tax. Increases cigarette tax by $2.00/pack, and equivalent increases in the sale of other tobacco products and e-cigarettes.  This would raise revenue of $1 billion +.  But it is a regressive tax. About 11% of adults and teens in California smoke. This is about 3.4 million smokers. They tend to be less affluent, less educated than non-smokers. This tax would raise the cost of pack of cigarettes from approximately $6/pack to $8/pack. The rationale for the tax is to make it prohibitively expensive for kids to start smoking. It’s also being justified as a user tax to offset the increased medical costs for treating patients who get cancer from smoking. The proposition is long and convoluted and not very transparent for voter approval. This is a tax the legislature could enact if they chose to, and they have the job and resources to hold hearings, and consider all the fine print.  Although I’m sympathetic to using tax policy to reduce smoking, the regressive nature of the tax, the size of the increase, and the unclear text of this proposition for the average voter lead me to say “No.”

Prop 57. Yes on Reducing Prison Population. In California we have 128,000 individuals in state prisons.  That is 328 per 100,000.  That is ten times higher than the rate of gun deaths, or fatal car injuries. It’s a bit less than new cancer cases each year (454/100k).  Notably it is significantly less than the national average of 456/100k.  But it is three times higher than the rate of incarceration across Europe (133/100K) and nearly twice the rate in Canada (188/100k). Our rate of incarceration is too high. Prop 57 will help reduce the rate of incarceration.

Prop 57 would make more prisoners eligible for parole and would authorize the CDCR to award sentencing credits to inmates.  It would also end making the transfer of some juvenile offenders automatic, depending on the seriousness of the crime.  Transfer would always be subject to review by a juvenile court judge.  Governor Brown and the state’s chief probation officer support Prop 57. We are still recovering from the reactionary hard on crime policies of the 1980's and 1990's, e.g. three strikes legislation (1994). I'm voting "Yes" on Prop 57.

Prop 58. Yes on Flexibility for Bilingual Instruction. This allows school districts more flexibility regarding instruction of the 20 percent of California students who are English learners. It permits flexibility on bilingual education that was taken away by Prop 227 passed in 1998. It would permit English speakers to take advanatage of Spanish (and other languages) immersion programs. Credible parties are lining up on both sides of this issue.  The revision had more than 2/1 support in both the Senate and Assembly in Sacramento. This looks like local educators and parents vs. ideologues.  I’m giving the benefit of the doubt to local control.  I’m voting “yes.”

Prop 59. No on Meaningless Advice. This is an advisory question, whether the California legislature should do what it can to amend to U.S. constitution to permit the full regulation or limitation of campaign contributions and spending…, and to make clear corporations don’t have the same rights as human beings.”  I think this compound question is less than clear, and I think an advisory opinion is not useful. I’m voting “No.”

Prop 60. No on Adult Film Regulations. This seeks to enact regulations governing the adult film industry. I don’t think this an appropriate thing to do through initiative with six pages of fine print in our voter pamphlet. I’m voting “No.”

Prop 61. No on Half-Backed Drug Pricing Edict. Lower drug prices are good. This would require the State agencies to not pay more for drugs than the VA manages to negotiate.  This seems not well thought through. California is a large customer of drug purchasers. They should be able to obtain favorable pricing on their own. VA pricing is not always available (may be subject to confidentiality agreements).  If the state wants to enter a common market with the VA, it should take steps to achieve national legislation making this possible, or to enter into a compact with the VA to make this possible. This legislation does not sound like a solution: legislating what a third party (drug companies) will agree to seems like wishful thinking. I’m voting “No.” 

Prop 62. Yes on Abolishing the Death Penalty. Since 1978 California has sentenced 930 criminal defendants to death.  Of these, 15 have been executed, 103 have died prior to execution, and 64 had their sentences reduced by the courts.  748 remain on death row.  No executions have taken place since 2006 because of legal issues surrounding the state’s lethal injection procedures.

This measure abolishes the death penalty in California. The 748 inmates on death row would be resentenced to life in prison without possibility of parole. Inmates would be required to work, and 60% of their wages can be deducted for any payments owed to victims. Abolishing the death penalty will save the state approximately $150,000,000 annually in legal and other costs.

This is a moral imperative. The death penalty has been unevenly and discriminatorily applied.  A number of those convicted of murder have subsequently been cleared.  When it applies this ultimate sanction, the state, like anyone else makes mistakes. When it comes to putting people to death such mistakes are intolerable. The death penalty has been shown not to have a deterrent effect. As to retribution, when we put people to death in middle or old age for a crime committed in youth, there is no meaningful connection to retribution. At the end of the day it’s just another killing. It does not make up for the initial crime, it does not achieve justice, it does not deter others….and it costs a fortune.

Doing away with the death penalty is long overdue. I’m glad we get to do it in this election. 

Prop 63. Yes on Regulating Firearms and Ammunition. In the United States we have approximately 33,000 gun deaths annually.  One third of these are homicides and two thirds are suicides.  And there are more than 300 gun injuries each day, or ~130,000 annually. Mass shootings continue to jar us on a regular basis.  Gun deaths in the United States are far higher than they are in other wealthy countries.

After every mass shooting there has been an outcry for action in Congress, but each time the gun lobby has beaten back attempts to tighten regulation. For twenty years, Congress has not managed to pass meaningful gun regulation, and they even blocked funds for the study of gun violence.

California has been on the forefront of gun regulation in the U.S. Under federal and state laws some individuals are currently prohibited from owning firearms, e.g. 1) individuals convicted of felonies and some misdemeanors (assault and battery); 2) individuals found by a court to be a danger to themselves or others; and 3) persons with a restraining order against them.  In California, people not allowed to have firearms are also not allowed to have ammunition.

Under federal law gun dealers must complete a background check of gun-purchasers. There exist a National Instant Criminal Background database for this purpose. The California Department of Justice also maintains a data base of legal gun owners in the state and uses this database to remove guns from individuals who are no longer allowed to own guns. Other existing state regulations include limits on the type of firearms that can be bought, a ten day waiting period before a dealer may give a firearm to a buyer, and requirements for recording and reporting firearm sales.

In 2016 the state also passed legislation to regulate ammunition in a similar way as gun purchases. Starting in 2018, individuals and businesses selling ammunition will require a licensee from the DOJ. Beginning in July 2019, ammunition dealers will be required to complete a background check of purchasers (using the official databases). The state also recently enacted limits on ownership of large-scale magazines (more than 10 rounds).

Proposition 63 would add additional regulations and create an enforcement agency. Here is what it would do:
  • Requires all purchasers of ammunition to obtain a license from the DOJ, to be renewed every four years. The DOJ must verify that purchasers of ammunition have the required permit. There will be a $50 fee.
  • Requires the DOJ to revoke licenses from people who become ineligible (e.g. because they are convicted of a crime, there is a restraining order, or they are found to be a threat to themselves or others)
  • Creates new court process for removing firearms from persons who become ineligible to have firearms (e.g. because they are convicted of a crime, there is a restraining order, or they are found to be a threat to themselves or others)
  • Implements reporting requirements (e.g. dealers must report ammunition thefts; requires individuals to report stolen firearms)
  • Eliminates previous grandfather clause on possession of large-capacity magazines. Anyone in possession of magazines with capacity of more than 10 rounds must return them. 
  • Penalties for theft of firearms are increased.
This proposition is a big deal. The legislative analyst estimates that cost of the new enforcement courts could be in the $10’s of millions annually. 

Guns are not toys. They kill thousands every year. It’s time to start treating them seriously. I’m voting “Yes” on proposition 63.

Prop 64 Yes on Regulating Our Biggest Cash Crop….it’s Overdue. Marijuana is California’s biggest cash crop, but it remains almost completely unregulated. Growers don’t pay their way with taxes, they degrade the environment, they don’t provide solid and dependable jobs. All this must change and proposition 64 is a start. This is a much better proposal than last time this was on the ballot.  Lt. Governor Gavin Newsom convened a blue ribbon panel of marijuana experts that crafted the ballot measure, and it shows.

It’s a conservative measure. It cleans up the criminal aspects in a productive way. It imposes an age limit of 21 and limits legal possession to one ounce. It also contemplates that marijuana consumption will stay on the margins, hidden away in smoke-easies and in private homes.  Smoking will not be allowed while driving.

It’s time to make our biggest cash crop part of the regular economy. I’m voting “Yes.”

Prop 65 No on the Plastic Bag Ban Poison Pill. This proposition is sponsored by the plastic bag industry and they are playing games. Each year, about 15 billion single use plastic carry bags are provided to shoppers (400 bags per Californian). In the past few years about 150 local jurisdictions have adopted bans of single use plastic bans.  These local ordinances cover about 40% of the California population. In 2014 the California legislature followed suit and passed a state wide plastic bag ban (SB270). SB270 also required stores to charge at least 10 cents for paper bags or other reusable bags. Under SB270 stores can keep this money.

Prop 65 would require stores collecting their 10 cents per bag mandated by SB270n to pay this money into an environmental fund. That all sounds good.  However, Prop 65 was put on the ballot by the plastic bag industry and their cynical hope is that the SB270 single use plastic bag ban will be overturned.  The companion Prop 67—see below—is on the ballot as a referendum on SB270.  If it does not pass, the statewide ban on single use plastic bags will be gone.

This proposition is dressed up in attractive language directing fees collected on reusable bag fees.  It is dressed up as vote bait. However, Section 6 of this proposition 65 says if it receives more votes than Prop 67 (except they misleadingly don’t identify it) then Prop 65 will go into effect and the referendum on SB270 (Prop 67 and its statewide single use plastic bag ban) will fail, and the plastic bag industry will get to sell single use plastic bags again! 

I’m voting “No” on this devious and deceptive Proposition.

Prop 66 No on This Alternative to Abolishing the Death Penalty. We need to abolish the death penalty, see Prop 62 above.  I’m voting “No” on this alternative that would tweak death penalty procedures.

Prop 67 Yes to Approve the Statewide Ban on Single Use Plastic Bags. As noted above under the discussion of Prop 65, this is a referendum on the SB270, a statute passed in 2014 that banned single use plastic bags. 

The evidence on the environmental benefits of banning single use plastic bags is not slam-dunk.  See, for example, this Bloomberg article on the mixed results found by Austin Texas. See this Pacific Research Institute report. Here is a Media Matters report that finds bans effective.The San Diego Union Tribune recently wrote “In 2012 after San Jose adopted its ban, surveys found an 89 percent reduction in bag litter in its storm drain system and about a 60 percent reduction in city creeks, rivers, streets and neighborhoods.” After long opposing bans on singly use plastic bans, they are now on board.

San Francisco was the first city in California to adopt the ban in 2007, soon after we moved here. It seems to have worked well. We bring our cloth Public Radio bags to walk to the grocery store. There’s something aesthetically pleasing about it. The deceptive campaign of the plastic bag industry is resolving any remaining doubts for me.  I’m voting “Yes” on Prop 67 to uphold the statewide single use plastic bag ban.

You can follow me on Twitter @RolandNikles

Sunday, October 16, 2016

Litigation is Like Throwing a Rock, and Waiting Five Years for it to Sail Through the Window…, all the while burning a comet's tail of money.

Comet and Oort Cloud,
"I haven't seen a dime. These things go on forever and forever. Never get involved in litigation. Your hair will fall out, your bones will turn to sand. And it will still be going on. … It was like throwing a rock through a window-but you wait for five years to hear the sound. Litigation is like picking up a glass of water with a prosthetic hand. It's very frustrating, and you'll never get it to your lips. But when you have to, you have to. If somebody burned your house down, you'd have to do something about it."
                            – Tom Waits, The Observer November 23, 1992

I recently almost finished a trial; a bittersweet experience and confirmation yet again that Tom Waits had it right in 1992.

In 1983, the year I graduated from law school, a group of professors published a study attempting to evaluate the costs and benefits of litigation. They evaluated what they called an “investment model” of litigation: do parties get more out of it than they put in? Does litigation make economic sense? See The Costs of Ordinary Litigation, 31 UCLA Law Review 72 (1983). The professors were optimistic about the process and concluded, “yes,” for plaintiffs and defendants alike, litigation was often a good investment.  But the costs of litigation they reported were quaint by today’s standards. After 33 years of legal practice I can report that parties often get more than they bargained for when they throw that rock of litigation and wait five years for it to sail through the window. The rock burns money like a comet’s tail as it flies, and the window sometimes shatters in unexpected ways. A failure to properly evaluate and resolve a case early can be painful.

Case in Point 1. For a while one of my clients had the dubious distinction of having the longest running civil case in the Alameda County, California court system. It was an ordinary fee dispute between an architect and his mechanical, electrical, plumbing engineering consultant for the construction of a new public hospital. When the engineering client came to me in 1996 they were owed about $800,000 in fees: not an inconsequential amount. The problem was, for various good reasons, the architect had convinced the county board of supervisors to reconfigure the new hospital and substantially increase its size. A selling point for the new plan was that the construction cost would remain unchanged—but this was a misrepresentation to the board.  The architect also neglected to say that the new project would entail significantly more architectural and engineering services (and fees). That request would come later, after the project was approved.

There are studies which claim that for public infrastructure projects, like hospitals, roads, bridges, political decision-makers get lied to about the costs at the point of decision making 90% of the time. This hospital project was an example. The decision to build the new hospital was made in the early 90’s. The county was obligated to provide county health care services—but they were not required to build a new hospital. Privatizing was in vogue politically at the time and some board members advocated that the county should outsource medical services rather than build a new county hospital.  An extra $10 million of construction costs for the new hospital might have tilted the balance of arguments against building a new hospital. So hospital administrators and their service provider, the architect, (all of whom badly desired approval of the new hospital project) represented the revised project plan as “on time and on budget, but better” when compared to the original plan. In order to make this claim they made a number of dubious assumptions about costs. In short the board was being lied to about the true costs in order to get the project approved politically.

Once the expanded project was approved, the county’s project administrators had to find inventive ways to justify the increased costs that would invariably be needed—like the extra architectural costs and the extra engineering costs. They couldn’t very well go to the board and say “Ahem, we need more fees for the architect and its consultants because we misrepresented the true costs to you a couple of years back.” So as committed fees ran out, and as the architect and consultant kept working on the project, pressure mounted.  Finally, the county administrator and the architect found a way to make an added fee request in conjunction with a further addition to the project.  But … in the process… my client’s $800,000 fee request was not addressed.  The architect made a final deal with the county and agreed he would ask for no further fees for its consultant, now. Perhaps later…. 

On construction projects the expectation is that owners will pay for the architectural and engineering fees, and the architect will not pay consultants until fees are squared away with the owner first. That’s how it should work if everyone does his or her job. In this longest running case, however, the architect failed to properly manage the process. In order to get the project approved initially, and in order to secure its own fee increase later, the architect neglected to secure fees it would need to pay its consultant. Having represented the project as “on time and on budget” in order to help sell it to a resistant board, and later failing to include my client’s additional fees in the change order with the county, the architect was hemmed in. The architect found he was unable to obtain approval of a further fee request for my client after the fact.

When my client, the engineering consultant, threw the rock and articulated its claim in a lawsuit, the architect should have recognized that it was in a vulnerable position. It should have found a way to settle with the consultant.  Indeed, at the outset of the case the architect would have resolved the issue for approximately $380,000.  That was the range of settlement demand by my client at the outset. Correct evaluation at the outset of the case was critical.

But the architect and its attorneys failed to properly evaluate the case. They considered the normal process—money must come from the owner—and they refused to acknowledge the unusual circumstances, or any separate responsibility for the architect.  So that rock of a lawsuit sailed through the court system for 14 years burning money like a comet. There were two court trials and two appeals, and at the end a judgment for my client in the amount of $4.7 million. In addition to paying this judgment, the architect had to pay its own attorneys an undisclosed amount.  If you are curious the 2nd Appeal can be found here: Ted Jacob Engineering Group, Inc. v. The Ratcliff Architects, et al. Failing to properly evaluate a case early can be very expensive.

Case in Point 2. The arbitration I just concluded involved payment due to my client, a subcontractor on a $72 million high school construction project. For reasons unrelated to my client, the school district elected to terminate its relationship with the general contractor five years ago, shortly prior to completion of all the work. The usual factors were at play: bad architectural plans, construction defects, and mismatched, or overmatched, personalities.

My client was responsible for earthwork, such as grading under building pads, installation of site utilities (potable water, fire water, storm drains, sanitary sewers, and gas) and preparing the ground for laying a synthetic baseball field.  At the time the owner and general contractor parted ways, my client was owed about $900,000, less a credit for some deleted work under the ball field.

In the heat of battle, when the school district terminated the general contractor, the school district grossly overvalued the credit for my client’s deducted work.  The value of the deducted work was somewhere between $350,000 and $526,000. [There were some other issues, very interesting to construction lawyers but not relevant to our point here]

There was good reason, therefore, to resolve my client’s final contract amount early at somewhere between $374,000 and $500,000.  In fact, my client offered to settle for $300,000 with the general contractor five years ago in 2011. This offer was rejected.

The general contractor’s rejection of my client’s $300,000 offer in 2011 was understandable because my client’s claim was a pimple on a much larger dispute between the general contractor and the school district. The problem is that by September 2015, when the school district and the general contractor settled their issues, my client’s rock of litigation had been sailing through space burning money like a comet for four years. It was known to everyone at the outset that if my client recovered anything, he would also recover attorney’s fees; in other words, the defendants would be responsible for that comet’s tail of money trailing the rock of litigation.

Since there was no question that my client would be the prevailing party in the lawsuit, it was just a question of how much, not whether my client would recover, the rational thing to do was to settle early.  The defendants, however, elected to wait until two days into arbitration before making a reasonable offer of settlement. The case, which could have settled for less than $500,000 in 2011, settled for $1 million two days into arbitration, five years later.

Like any settlement, the result was a mixed bag. Deducting litigation costs, my client achieved approximately the result he would have had his offer been accepted five years ago. Collectively, the defendants paid a lot more than if they had settled earlier.  In addition to the $1 million dollars the defendants paid to my client in settlement, they also incurred their own attorneys fees, the last 12 months exclusively on this matter. The total costs to the defendants of deferring settlement is bound to be in excess of $1.3 million. And it could have been worse. If the case had proceeded to judgment, depending on the amount of interest and attorneys fees the arbitrator might have awarded. At the point of settlement in mid trial, the flight of the rock was beyond the defendant’s control.

Tom Waits had it right: litigation is like throwing a rock and waiting five years for it to fly through the window. Settle in mid-flight and the comet tail of money trailing this rock vanishes into thin air as sunk costs. If the matter proceeds to judgment, the rock and the accumulated weight of its comet tail come crashing through the window. It can burn your house down. If possible, it’s better never to throw rocks. But, as Waits said: “when you have to, you have to.”

Note: If you've not run into Tom Waits, he's worth paying attention to. You can also watch him in Jim Jarmusch films. Check out "Down by Law" for example.  Here is Waits singing his iconic "Heart Attack & Vine."

Tom Waits: "Heart Attack & Vine"

Sunday, September 25, 2016

Formalizing our Thinking about the Interplay Between Investment in Economic Growth Capacity and Investment in Security

Imagine, sang John Lennon in 1971: Imagine there's no countries, no religion too; no property, and only people living for today. For 98 percent of modern man's (i.e. Homo Sapiens) existence that was our lot. John Hobbes imagined it in 1651 and was not so sanguine.

Hobbes thought that such a state of nature was incompatible with civilization:
In such condition there is no place for industry, because the fruit thereof is uncertain, and consequently no culture of the earth, no navigation nor the use of commodities that may be imported by sea, no commodious building, no instruments of moving and removing such things as require much force, no knowledge of the face of the earth, no account of time, no arts, no letters, no society, and which is worst of all, continual fear and danger of violent death, and the life of man, solitary, poor, nasty, brutish, and short.
For 196,000 years of our existence we did not have dominion over the fowl of the air, and over the cattle, and over all the earth, and over every creeping thing that creepeth upon the earth. Not at all. Our existence was at a subsistence level, and we teetered precariously on the edge of extinction. We were low man on the totem pole of life on earth. As recently as 50,000 years ago when Homo Sapiens set forth from Africa, we were down to a small band of 10,000.

The Paradox of Civilization

Ernesto Dal Bo, director of the Berkeley Center for Political Economy, housed in the Haas School of Business, at the University of California, has written an interesting paper about the paradox of civilization with Pablo Hernandez, professor at New York University in Abu Dhabi, and Sebastian Mazzuca at John's Hopkins University. Brad DeLong, has linked it HERE. In this paper they set up a model to help us think in a more formal way about the trade offs between economic productive capacity--and enjoying the fruits thereof--and national and international security.

Take the earliest known civilization, Sumeria, which emerged along the lower reaches of the Tigris and Euphrates in Mesopotamia around 4,000 BCE. How did this civilization emerge? 

The lower reaches of the Tigris and Euphrates were blessed with rich alluvial soils, an abundance of diverse plant life, domesticable animals, and good weather. With irrigation and political organization the Sumerians were able to produce a surplus of food, and they began to devote energy and resources to civilization building. 

But here is the paradox: the lower reaches of the Tigris and Euphrates were not naturally fortified against intruders. In a state of nature, where tribal societies hunt and gather and move around, any weakly defended region that manages to produce a surplus is likely to be overrun and the surplus dissipated among a wider population. Prosperity attracts predation, and predation discourages the investments that create prosperity.  

In order to overcome this paradox, a society must not only manage to create a surplus sufficient for civilization building, but it must also create security sufficient to protect this surplus and this civilization. Sumeria was the first to manage this. They built city states fortified with external walls. These city states were initially ruled by priests and later by military rulers. In addition to city fortifications, the Sumerians are credited with innovating the plough, irrigation, writing, division of time into 24 hour days and 60 minute hours among many other accomplishments. And they held it together for nearly 2,000 years. 

From the abstract of the paper: 
We study the trade-offs facing a proto-state on its path to civilization through a formal model informed by the anthropological and historical literatures on the origin of civilizations. We emphasize pre-institutional forces, such as physical aspects of the geographical environment, that shape productive and defense capabilities. The solution of the civilizational paradox relies on high defense capabilities, natural or man-made. We show that higher initial productivity and investments that yield prosperity exacerbate conflict when defense capability is fixed, but may allow for security and prosperity when defense capability is endogenous. Some economic shocks and military innovations deliver security and prosperity while others force societies back into a trap of conflict and stagnation. We illustrate the model by analyzing the rise of civilization in Sumeria and Egypt, the first two historical cases, and the civilizational collapse at the end of the Bronze Age.
Civilization is a balancing act between surplus production and surplus security. This balancing act  is not easy to pull off considering that among the thousands of primitive societies, over a period of nearly 1000 years, only Sumeria and Egypt managed the trick of forming civilizations. [First signs of urbanization in the Indus valley did not appear until 3,000 BCE; the first Chinese dynasty did not appear until 2100 BCE]

With inadequate security civilizations can teeter and fall. Dal Bo and his colleagues focus on the collapse of civilization in the eastern Mediterranean in 1,200 to 1,150 BCE known as the late bronze age collapse. 
For a period of almost 400 years, multiple states emerged in the Eastern Mediterranean that improved their productive capacity and were capable–mainly due to fortified walls and chariots–of defending their wealth against “barbarian” populations. This set of thriving states included the city-ports of the Levant, the kingdoms of Anatolia, the Egyptian empire, and the city-states of Mesopotamia and Cyprus. But suddenly a collapse epidemic swept across the Eastern Mediterranean around 1200BC. As Eric Cline puts it (2014: 241), “...the world as they had known it for more than three centuries collapsed and essentially vanished”. According to Drews (1993: 3), “Altogether the end of the Bronze Age was arguably the worst disaster in ancient history, even more calamitous than the collapse of the western Roman Empire.”

Historians speculate that climate change may have been a factor, or new war techniques that suddenly made the level of investment in defense of these civilizations inadequate, or a combination of these and other factors. 

Application of the Model

By developing quantifiable models the authors aim to assist us to think more formally (and better) about the interaction of investing in productive economic capacity and investing in security capacity.  The authors hope to develop insights that might be applied in a wide class of development trajectories in which potentially prosperous regions are surrounded by predatory threats. How do such regions avoid the traps of security-enhancing stagnation or self-defeating prosperity? Dal Bo and his colleagues have an eye, for example, on world investment in developing sub-Saharan states in Africa. If we assist such countries, how much of our efforts should go towards economic development capabilities, and how much should go towards investment in security and stability?

How to foster economic capacity and how to assure stable (and just) security, of course, are related and very large questions.  How is security to be provided, and who will provide it? And how do we keep such security organizations accountable and responsible? 

Over the past seventy years we have witnessed the relationship between economic capacity and investment in security in the creation of Israel and its subsequent growth. We are witnessing it in Ukraine now. How much investment is required in Ukraine's security capability, and how much should be invested in infrastructure and industries that will generate prosperity? Poland, and the Baltic states face the same questions. When it comes time to rebuild Syria the trade off between economic development capacity and security will be front and center. 

The United States is blessed by strong natural defenses--the Pacific Ocean and the Atlantic Ocean--and much weaker and friendly neighbors on both sides. Yet we have invested in the world's most powerful army. Is it overkill? To the extent that we are securing the sea lanes world-wide in order to enable international trade, and we are providing the security blanket for Europe, Japan, and much of the world's economy, perhaps not. To the extent that we have been, and remain for now, the guarantor of Western Civilization, perhaps not? 

Having the analytical tools to formally examine the interplay between investment in economic growth capacities (education, infrastructure, basic research, social services ....) and investment in security (both domestically, and internationally) is surely of benefit. I'm glad good and smart people are engaged in such work. 
USS Theodore Roosevelt leads a formation
in the Persian Gulf (2005)/U.S. Navy photo
Read the paper HERE

Follow me on Twitter @RolandNikles

Friday, September 23, 2016

Ron Suskind on Trump: The Fact We Hate him is a Big Selling Point for His Supporters

"You can't turn to a foreign head of state and say, 'You're fired!'" quipped Hillary Clinton recently on the campaign trail. "That's not how the world works," she said.  But how does a world work where--according to Nate Silver--Donald Trump currently has a 40 percent chance of becoming the next President of the United States?

So wonders Christopher Lydon on Radio Open SourceLydon's recent guest, Ron Suskind, provides one of the more compelling, and  chilling explanations of the Trump phenomenon that I have heard.

Suskind harkens back to the Bush White House. The Bushites, he says, were in the business of making reality, inventing stuff on the ground.  They were faith based; or fantasy based. They created reality, they did not feel constrained by it.  Think "weapons of mass destruction," think "mission accomplished," think about the exploitation and exaggeration of the terror threat during the 2004 election cycle.  The Bush White house felt itself loosed from the barriers and bonds of reality. Their words didn't necessarily mean what they said: they were using code words, tapping into deep nativist urges, into people's senses of their identity and dislocation.  They showed the way. They showed that conjuring a fictional reality works in today's America.

Suskind means that the Bush White House, like the GOP more generally was playing to Middle America. Middle America, he says, is a different culture from what we have on the West Coast and in the Northeast corridor. In many ways these cultures are as different as the North and South before the Civil war.

Trump is carrying this realization forward. It results in a map like this, below. It represents 55 million Trump voters:

Before Trump, the GOP and people in Middle America were distracted by social wedge issues (e.g. abortion, gay rights, affirmative action, voting rights, immigration). Trump got this. He tuned into this "us vs. them" reality. "You people in Middle America," says Trump, "you're getting screwed." And that's reality.

"Those people on the coasts, they are on the updraft of of the global economy," says Trump. Not "you." "Don't worry about these shiny objects like abortion, gay rights, or affirmative action," says Trump, "but do worry about immigration."

"You are in a race to the bottom with people who are happy to get $3/day" says Trump to Middle America. "You are left behind. I'm going to be the guy who bloodies everybody on the coasts on your behalf:  the cognoscenti, the establishment (even though I lived among them and I have golden towers on both coasts)."

The folks in Middle America are not idiots, says Suskind. They're just like we are on the coasts. They vote based on their self-interest and Trump's playing to it.  But it's a curious kind of self-interest: it's the self interest of destructively lashing out, it's the self interest of getting back at "those people on the coasts."  Trump is foolish, he's lying, he doesn't know what's what, he doesn't know his history.... but all that doesn't matter. He's pissing off the people on the coast, and that's enough.

Like football, Trump occurs in the media, on television. What will he do next? We can't take our eyes off him. What will he say next...., it doesn't matter; the more outrageous, the better. It's reality TV values. Just make sure the eyes are always on you! Even if what you say is nonsensical, even if you lied, even if you flip flop a hundred times... they can't take their eyes off you. We are frozen in the high beam of Trump's occurrence. He understands this power.

In real life people make mistakes. We apologize; we move on; we try to do better. But in politics we have this fantasy: we expect our politicians to run the table and never say anything wrong. Politicians forced to cater to this fantasy get diminished over time. They get smaller and narrower, they get whittled down. We have been whittling Hillary Clinton down to size for 30 years.

But Trump has broken free from the straightjacket of reality. What he says is racist, pure bigotry, it's misogynistic.... and it vanishes. No apologies, no scandal. What happened to "rapists, murderers," what happened to the Khan's and the Gold star mother? .... vanished. We've moved on... What's next?

Hillary Clinton is up against a master of creating "reality" on cue, in the glare of Television. He's everywhere. "It's the feat of Sheherazade," says Suskind, "Trump is managing to tell a story over and over in different ways so as not to get his head chopped off."

And he's very hard to counter. For Hillary Clinton, who is not easily authentic and fresh on cue, on camera, it's particularly hard. "Clinton represents the establishment that has largely failed in the eyes of many Americans," says Suskind. There is a yearning for structural and fundamental change in the United States, and Hillary Clinton does not represent change. "Trump, to many people, represents change: it could be disastrous change, change that ruins America for years to come, but he is change and she's not."

Trump is here to overthrow the status quo at a time when many people feel the status quo is inadequate to America's needs; Clinton is here to defend the status quo. In Texarkana, Ohio, the hills of Kentucky, and many places in this country, economic issues have festered and worsened over decades, and we have not addressed it. And people in Middle America don't see a better life for their kids. They don't see a way forward. It's not working for them and so they are receptive to flipping the existing order.  "I want someone who will bloody all of you," says the Trump voter, "someone who will punch you all in the nose on my behalf." Trump is that man. They don't know what Trump wants to do, but he'll bloody the people on the coasts and punch them in the nose. And the more he drives us crazy, the louder that we protest about the dangers of Trump and how horrible he is, the louder they cheer. The more they love him.

Trump is their voice. He's created a narrative that the disenfranchised and left behind in Middle America feel comfortable with, says Suskind. He's their avatar, their ombudsman, their talisman. They like the way he walks and the way he points; and they don't read the New York Times or the Wall Street Journal, ever. They love it that he drives people on the glorious coastlines on the updraft of the global economy crazy. 

Suskind was telling an anecdote from Mark McKinnon, a Bush advisor, when Bush was president. But Suskind meant this anecdote to apply to Trump: "You people on the coasts think he's an idiot. Keep attacking him for the malaprops, the things he said, because, you know what they don't  like? They don't like you. So when you attack him it's good for us; our numbers go up. Keep it up."

It's the song Kellyanne Conway is singing.

"Trump gets that," says Suskind. "He understands that every time he gets attacked he seems more and more of them and not of us, and his numbers rise."

Will there be a reveal from Trump? Has he himself planned the closing act? "Sure," says Suskind. "Trump must think about this all the time."
Probably when you get into October, maybe late October, he's going to have a moment of crafted intimacy, which is going to be his reveal; where he's going to say, look, I've said things that I regret. It's a show, folks. Here's what I really believe. I'm really you're guy. Let me tell you why. And he'll go low in that register. And he's good; he's got a very strong cadence like an actor. He's practiced. And he'll do that and he'll seem to be evolving in a way that will kill off some doubts and engender some sense of possibility. People want change. That's what Hillary has to worry about. She needs to beat him to that punch if she's gonna win that popular vote.
He could win it. But I think not.

Bernard Avishai listens to this and says Hillary needs to take control of the story of this election. Easier said than done. These candidates will remain the record holders for highest disapproval ratings.  They have both smashed the previous record set by Barry Goldwater in 1964.

This campaign promises to stay negative. As to the remaining states in Middle America it seems unlikely that Clinton can significantly sway them her way. The good news for us on the hated coasts is that even with every state that is significantly in play in Trump's column, the Electoral College is likely to go to Clinton according to Nate Silver.

The current chances of Hillary Clinton winning any of the electoral votes from Middle America are de minimis, to use a highfalutin term from the coasts riding the updrafts of the global economy:
Idaho (1.0%)           Montana (17.0%)            North Dakota (6.8%)
Wyoming (1.5%)    South Dakota (12.0%)     Utah (3.0%)
Nebraska (5.0%)     Kansas (9.0%)                  Missouri (11.8%)   
Kentucky ( 2.0%)   Indiana (5.9%)                 Tennessee (1.5%)
Texas (8.6%)          Oklahoma (0.7%)              Louisiana (1.7%)
Wyoming (1.5%)    Mississipi (2.6%)              Arkansas (1.8%) 
Missouri (11.8%)    South Carolina (9.2%)      West Virginia (1.8%) 
Hillary Clinton is not going to make a play for these Middle America voters this election. The question is, will she be able to engage them once she's president? The golden lining for her may be that she'll work from a very low level of expectation.  Her unfavorability ratings, one would think, can only go down.

Do listen to Open Source Radio; do read Bernard Avishai.

Follow me on Twitter @RolandNikles

Saturday, September 17, 2016

100 Years Since the Battle of the Somme: Are we Wiser?

The Somme river flows gently across 152 miles of northern France, discharging into the English Channel south of Calais. But during the summer and fall of 1916, months before the U.S. entry into the war, the Western Front of World War I ran across its headwaters, and the Somme valley was not peaceful.

For 141 days more than two million men were thrown at each other with machine guns, bayonets, rifles, artillery, horses, wagons, poisonous gases, and--for the first time in history--tanks. For 141 days these men fought the bloodiest battle of World War I.

A million men were sacrificed and at the end the Western Front had moved a few miles. It seems barbarous.

How many men were responsible for these monstrous decisions? How did such evil come about? From this vantage point the slaughter seems incomprehensible and unnecessary.  Who would say it was right, and if we'd have to do it over again, we would?

I think not.
Western Front 1916
The heavy artillery barrage that opened the battle of the Somme on July 1, 1916 was less effective than expected. The British generals ordered their soldiers to march across open fields in broad daylight with rifles and bayonets, and they marched right into German machine gun fire. Fity-seven thousand young men lost their lives or were gravely wounded that day.

Since the Battle of the Somme our armaments have become ever more deadly and sophisticated. More sophisticated and deadly armaments, however, have not increased the death rates of war.

British Mark-1 tank at
the Battle of the Somme
The tank, an armed behemoth to protect men against rifle and machine gun fire, was a natural development flowing from the experiences of the American Civil war, trench warfare, and the internal combustion engine. Who wouldn't want to have some protection when marching into enemy fire? Winston Churchill was an early proponent of tanks and ordered several to be built during his tenure as First Lord of the Admiralty. Thirty-two of these tanks were used at the Battle of the Somme, but they proved unreliable and of marginal utility in battle.

By World War II the German Blitzkrieg utilized tanks to great effect. The Germans recognized the potential of highly mobile tanks connected through radio communication, accompanied by infantry, and protected by a superior air force that could dominate the skies.

By 1942 the German Blitzkrieg reached Stalingrad, their forces were overextended, their supply lines  vulnerable, and they were short on fuel. The Russians had learned from the early German successes in the war and, by 1940, they had started to manufacture their T-34 tank model, which proved to have superior firepower, good reliability, and superior armor.

By the end of World War II the United states dropped atomic bombs on Hiroshima and Nagasaki.

Yes, the death toll of World War II, nearly 80 million, was horrendous. But these deaths did not result from the increased firepower of our weaponry. Thirty million died as a result of starvation and disease. Six million died in the Holocaust. But the Holocaust did not come from the air, or from tanks: it came up close and personal, by pistol, rifle, mass-shootings with machine guns in the woods, and mass extermination in camps.

Powerful artillery, and tanks, and bombs from planes caused relatively more property damage than they killed people. During the London Blitz 32,000 died; during the Dresden firebombing at the end of the war, historians now think, fewer than 25,000 died; at Hiroshima and Nagasaki the combined death toll was 225,000. These war casualties of advanced weaponry are horrendous figures by September 11, 2001 standards, but they are not the million dead at the Battle of the Somme.

Even as the potential for mayhem from our weaponry has increased exponentially, our danger may not have increased. We have gotten used to this new fire power. It was not always so. Think of the alarm we felt during the Cuban Missile Crisis, or during the height of the Beyond War movement. We used to teach school kids to "duck and cover" under their desks to get away from atomic bombs. But we have gotten used to living with atomic bombs. Today, we don't tremble at the thought of North Korea possessing them. Recently Netanyahu and his American supporters made a big deal about Iran possessing nuclear weapons. But I did not perceive Netanyahu as trembling at the thought; it was all tactical and about political advantage.

Today we have unmanned drones, cruise missiles that can be deployed with great accuracy, and supersonic fighter bombers with stealth technology that makes them invisible to radar. But the net result of this increased fire power and ever more sophisticated weaponry has been fewer war dead.

After six years of brutal war in Syria casualties are said to be 500,000. It is half the number the generals served up in 141 days on the Somme. We have nuclear arsenals sufficient to wipe out much of humanity, but so far it has made the generals and politicians more sober. Are we wiser than we were at the Battle of the Somme?

Saturday, September 10, 2016

Football and the Flag: A Discussion Worth Having

Jeremy Lane of the Seahawks and Colin Kaepernick of the 49'ers
San Francisco 49'ers quarterback Colin Kaepernick has started a protest movement. During a pre-season game with the Green Bay Packers he refused to stand for the national anthem. “I am not going to stand up to show pride in a flag for a country that oppresses black people and people of color,” he said in an interview after the game. He has since been joined in his protest by Jeremy Lane of the Seahawks, and others. There are rumors that the entire Seahawks team will join in the protest in their game against the Miami Dolphins tomorrow afternoon.

In the United States, at the start of every professional league sporting event, we play the national anthem. It's an American thing; other countries don't do this. The song was played at baseball games starting mid 19th century. It gained a big boost from World War I fervor, Babe Ruth, and the 1918 World Series. Congress declared the song our national anthem in 1931 and after Pearl Harbor major league baseball began to play the song before every game. It's now an entrenched custom that spans all professional leagues. Athletes stand at attention,  hand on heart. Patriotism inflates the significance of the event. Fans expect it; athletes' egos are lifted. Singers are challenged by the 1.5+ octave range peaking with "rockets red flare."

Even when it was performed by Whitney Houston, all dressed in white at the 1991 Super Bowl, this song is a marshall affair. The lyrics come from Francis Scott Key's war poem glorifying the bombardment of Fort McHenry by British ships during the war of 1812. We stole the melody from the British. Each year the Pentagon approves several hundred requests for fighter-jet fly-overs following performance of the song. As Luke Cyphers and Ethan Trex noted for ESPN right after 9/11: "Our nation honors war. Our nation loves sports. Our nation glorifies winning. Our national anthem strikes all three chords at the same time."

Today we sing only the first verse of Key's original poem, but the poem has roots in our history of slavery and racism. In reference to former slaves who fought with the British attackers, Key's third stanza includes the following:
No refuge could save the hireling and slave
From the terror of flight, or the gloom of the grave:
And the star-spangled banner in triumph doth wave,
O'er the land of the free and the home of the brave.
In 1813 the "land of the free and home of the brave" excluded slaves and native Americans. The song referred to white Europeans. Today we ignore this history and we stick to the first stanza of the poem. And black athletes reverently salute the flag and place their hands on their hearts while they listen to the anthem.

The flag has both divided and united us from the start. During the civil war it was prominently displayed by northern citizens as a sign of pride. The South had their confederate flag, a symbol of racism to this day. The American flag united us after 9/11. During the Vietnam war it divided us.

The flag has served as a tool of patriotism and protest alike. During the Vietnam war the flag was stomped on, burned, hung upside down from University dorms bedecked with peace symbols, and sewn onto jean pockets. In 1968, after a flag was publicly burned during an anti-war protest in Central Park in New York, Congress reacted by passing a broad statute prohibiting desecration of the flag. The statute made it a criminal offense to knowingly cast contempt on the U.S. flag by mutiliating, defacing, or defiling it in any way.  The following year, Sidney Street burned a U.S. flag to protest the attempted murder of civil rights worker James Meredith. Specifically, Street protested inadequate police protection  for civil rights workers: "Yes; that is my flag; I burned it. If they let that happen to Meredith, we don't need an American flag," he said.

Street's message is Colin Kaepernick's message. It is the message of Black Lives matter. If we are going to continue to shoot minorities and incarcerate them in disproportionate numbers, is it right for well paid football players (68% of whom are Black) to venerate the flag before every game? In a year when the Republican party has come out of the closet as a racist party of whites, and in a time when this racist white party has attempted to appropriate patriotism and the flag for itself for the past 30 years, should black football players meekly venerate this flag before every game? Kaepernick thinks not.

Sidney Street was convicted of a misdemeanor and given a suspended sentence. In 1969 the United States Supreme court overturned his conviction, finding that Street's verbal protest "I burned it; if they let that happen to Meredith we don't need an American flag" was protected speech under the First Amendment. (Street v. New York, 394 U.S. 576) In 1989 the Supreme Court followed up and held that flag burning was protected symbolic speech. (Texas v. Johnson, 491 U.S. 397) Finally, in 1990, the Court held that all flag desecration for political purposes was symbolic speech protected by the First Amendment and could not be prohibited. (U.S. v. Eichman, 496 U.S. 310).

A helpful summary and timeline of the flag desecration issues in the United States can be found HERE.

"The extreme right is extremely patriotic," said Michael Kimmel in a portrait in Salon (Nov. 2013):
"They love their country, their flag, and everything it stands for. These are the guys who get teary at the playing of the national anthem, who choke up when they hear the word America. They have bumper stickers on their pick ups that show the flag with the slogan “These colors don’t run.”
Kimmel' portrait was of the radical right fringe, but much of this resonates with Donald Trump's GOP.

At their convention this year the Democrats fought back and embraced their patriotism as much as any Republican convention of the past. Chants of "USA, USA, ..." were in part opportunistic, meant to drown out rowdy Bernie Sanders supporters. Nevertheless, Democratic politicians have appropriated patriotism. No longer are they cowed into wearing the flag on their lapel as a defensive measure: they have embraced their patriotism loudly and proudly.

It's been a decade since we've heard talk of a constitutional amendment to permit jingoistic legislation prohibiting flag desecration. But as we drove the lonely roads of Highway 6 through Nevada last week, beautiful and desolate landscape so memorably described by John McPhee, we encountered muscular pick-up trucks, driven by white men, streaming large American flags.

Ashton Pellum/WBTV South Carolina
This photo is from a school incident in South Carolina, but pick-up trucks in Nevada looked just like this.  I did not speak with these men, but I surmise they are not Hillary voters.

Is there a connection between these flags on pick-up trucks and the patriotic display at our professional sporting events? Does the racist right's embrace of our flag present a challenge to what we are doing when we salute the flag with our anthem at football games? Colin Keapernick and his supporters challenge us to consider these questions. It's a discussion worth having.