The end of neoliberalism?

I just read the first two chapters of a book used by one of the econ profs here at Bentley to introduce neoliberalism.  The first chapter distinguishes neoliberalism from the classical liberalism of Adam Smith that lasted until the Great Depression, the pragmatic liberalism of Keynes that lasted between the Great Depression and the economic shocks of the late 70s, and libertarianism in general.  Chapter Two talks about how Reagan and Thatcher  (and to some extent Fraser and Mulroney of Australia and Canada respectively) trumpeted the idea of neoliberalism and initiated it quite effectively.  It also describes how Reagan implemented it through supply side economics while Thatcher implemented it through monetarism.  It also contrasts their neoliberalism from the neoconservatives like Irving Kristol who had a similar economic philosophy but a very different way of looking at the rest of government’s role.  Counter to their political and economic philosophies, neither was able to rein in spending, in Reagan’s case because of the arms race with the Soviets and in Thatcher’s case because of the National Health Service. 

The crash of 2007 seemed to signal the end of the neoliberal era.  The GOP was rejected and Obama and the democrats took over.  The administration presumed a mandate to increase spending (although that was actually started by Bush) to stimulate the economy. They also tried to implement a more centralized, interventionist kind of governance (although this was stymied by GOP senate filibuster and now the GOP majority in the House).  

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I bring this up today because of President Obama’s State of the Union address and his rhetoric on taxation. And the thought that it isn’t either activist government of the progressives or the laissez faire government of the neoliberals that seem to make any difference.  It is the quality of the implementation.  Reagan succeeded at first, which wasn’t too surprising considering how high inflation was, and how hard the Fed under Paul Volcker worked to fight it.  But then foreign policy was his undoing (economically speaking – it was a great result that the Berlin Wall fell). 

With Obama, I think he had the right idea in stimulus, at least for that time, and it worked a little bit.  But it skyrocketed the deficit much more than is justified by the weak growth we got out of it.  He spent the money increasing consumption rather than investment.  So the money got spent, stimulating the economy, but then was gone (much of it to China for electronics and apparel).  

It is too bad that politics and extreme wings of both parties seem to screw us up every time.  It seems like we are always so close to doing things right.  We get Presidents with visionary ideas and good motives.  But then politics gets in the way.  Or perhaps extremist ignorance and confirmation bias.  If a little of a policy seems to work, then more must be better. 

In my idealistic vision, I imagine a Constitutional Convention just like we had back when we converted the Articles of Confederation into the US Constitution.  The realist in me knows that it would be quickly hijacked by lobbies, special interests, and extremists.  But I just imagine some new Thomas Jeffersons, James Madisons, Alexander Hamiltons, emerging from the grassroots (or netroots) and transforming Washington into a working government again and trampolining the US back to a “light unto the nations” that it has historically been.

Affirmative v negative rights

There were two cases I heard on the radio today that are fantastic examples of the conflict between affirmative and negative rights.  The first story was about the Internet.  According to the Bill of Rights, we have the right to access the media available to communicate within our freedom of speech.  What that means is not that we get free broadband, but it means that the government has the goal to provide universal access (hence the tax we pay on our phone bills) and that a common carrier (like AT&T), even though it is private, cannot deny you service if you have the money to pay.  This is the negative right.  No one has the right to deny you the access (the negative part), but you don’t have the affirmative right to demand it either.  So we have an affirmative right to free speech, but a negative right to Internet access.

Then there are some rights that are related to government restrictions.  In a public place, the government does not have the right to prevent you from saying something.  But in a private place, the owner does.  They can kick you out of the premises if you insist on speaking about a particular topic.  Google is collecting all kinds of data about you when you navigate the Internet but the government cannot do the same.  The Supreme Court is deciding whether the government can subpoena those records and if you have the right to know when they do.

The second story was about a proposed law in Concord, MA whereby restaurants (as private property) can refuse to serve anyone for any reason, including those protected by the Civil Rights laws (race, religion, gender, etc.).  This seems to violate the Civil Rights laws.  What qualities are affirmative rights and what are not?  The show’s hosts and callers were clueless about the law (what else is new with talk radio).  They didn’t see the difference between denying someone service for being black/female/gay and denying them service for being sloppy, smelly or some other attribute that isn’t protected by law.  Even on private property, you have a partial negative right to service to any business serving the public (like a restaurant) – they can’t deny you service for being in a legally protected class, but they can deny you service for anything else they want (like being a jackass, or wearing an ugly purple shirt).  And for some safety and health laws, they have to deny you service (smoking, no shoes, etc). 

Health care is a muddled example.  An emergency room has to serve anyone who comes in.  It isn’t just protected classes that have the positive right, but so does everyone else. They can bill you later, but if you can’t pay it becomes complicated.  But either way, they can’t deny you service up front based on your ability to pay.  So do you have the positive right to emergency room care?  Sort of.  Until we come to a solid and explicit conclusion on this, we will never solve our health care problem.  It is really the basis of whether Obamacare’s individual mandate is Constitutional or not.  The only way the mandate can be unconstitutional is if we let ERs deny service to unprotected classes (i.e. people who can’t pay and don’t have insurance).  But if we have the right to ER treatment, we have to allow the individual mandate.  You can’t have both the right to ER care even if you can’t pay and have the right not to get insurance to pay for it.  That just encourages freeloading.

Then the other muddled part is whether a religious institution or individual can deny a service that violates their religious beliefs.  The controversial one is abortion, but what about birth control (hospitals that will refuse to let your primary doctor give you advice on it, or drugstores that won't give you the morning after pill even if you have a prescription)?  Or can Scientologist parents refuse treatment for their minor children because of their religious beliefs (regardless of what the kid thinks)?  We can make these decisions on pure ideological grounds (freedom of religion or a right to health care) or we can decide based on practical considerations (how easy is it to just go somewhere else for treatment or to buy the item).  If one Walgreens doesn’t sell condoms to minors, I can go to another one or to a CVS.  But if I am at the only hospital covered by my insurance, can they deny me a procedure that my insurance covers?  If not, I have no other options.

Then another good one is whether prisons are legally required to provide Kosher or vegetarian meals to prisoners that need them.  Obviously, the person isn’t in the prison by choice, so they can't just go somewhere else.  But a lot of prisons are privately owned and managed so they aren't governed as strictly as government agencies are.  Religion is a protected class, so do prisons have to serve you a Kosher meal on Kosher plates prepared in a Kosher kitchen?  That could be expensive.  Hotels often go to a nearby Kosher takeout and give you a disposable Styrofoam box and plastic cutlery.  Do prisons do the same?  And what about vegetarian?  This is not a protected class.  So there is no legal obligation for the prison to give you a vegetarian meal.  How about lactose intolerance or allergies?  Those aren’t protected classes, so does the prison have the right to deny you a nut-free eating environment if you are allergic to nuts?  I wonder if you could get paroled just because you are costing the prison too much money to give you a Kosher and vegan meal in a nut-free and gluten-free room. 

Supreme Court Ruling

If you follow the news about the Supreme Court or about police investigation power, you will know that the Supreme Court made a very important ruling yesterday.  The dispute arose because the cops put a GPS tracker on a suspected drug dealer's car and tracked his whereabouts for 4 weeks. The 4th Amendment protects us against "unreasonable search and seizure" from the authorities (Google is welcome to track us as much as they want).  The traditional standard for what is "reasonable" is the individual's "reasonable expectation of privacy."  So it is up to the judges to decide what is "reasonable."

The problem is that a bunch of old judges who were selected because no Senators had a strong enough opinion to block the nomination.  They are usually pretty clueless when it comes to technology.  They decided that the reason this search violated the suspect's "reasonable expectation of privacy" is that the cops physically put the tracker on the car and they left it there for four weeks.  If it had not been physically attached or had not lasted four weeks, it would have been OK.

Companies all over the world are developing tiny UAVs for military applications.  They can easily make up one of their insect sized UAVs with a GPS tracker and a long life battery and sell it to law enforcement.  It can follow the car from a few inches away (or even fly underneath the car to be really sneaky) and because it is not physically "touching" the car, it would be totally legal.

As usual, the Supreme Court is right on target in philosophy but way behind technology.  I bet any of you could license one of these micro-UAVs, partner up with a techie who can customize it for the law enforcement market, and then advertise it as a response to the Supreme Court decision.  You could sell it to thousands of police departments (and government always pay whatever you ask for something unique like this).  If you are first on the market and build a tough-guy brand reputation around it, you could get great first mover advantages.

Anyone interested?

Venture Capital vs Vulture Capital

The big todo about whether Romney's work at Bain was good or bad for society is missing the whole point.  I guess I should expect this, but I always hope . . . .

Anyway, there are lots of different kinds of venture capital deals.  On one end of the spectrum are the ones that benefit society.   Investors come in, buy up a company that is at risk of going bankrupt (possibly laying off all the employees), merge it with a stronger company, and save it.  Some people may still get laid off, but it is fewer than would have if they didn't come in.  The investors are richly rewarded, but so are the owners of the other businesses and at least some jobs are saved.

At the other end of the spectrum are the truly evil ones that deserve the name vulture capital.  In these, the investors borrow a ton of money from banks, paying little of their own cash to run the company.  As owners, they pay themselves a special dividend to get their own money out right away.  Then if the company goes bust, they declare bankruptcy and the banks eat the losses.  If not, they still own 50% of the company or so, which is just gravy since they already got their original money out.  And with the load of debt the company now has (it is the company's debt, not the investor's), they often go under and all the workers lose their jobs.

Then of course there are a lot in the middle.  So if Romney did Type 1, he was a great business leader.  If he did Type II, he is the devil.  Most likely, he did a bunch of different kinds of deals in the middle - some good, some not so good.