AIG-Bonuses

The House has passed a bill taxing the bonuses AIG gave out after it had passed into the government's hands 90% (NY Times). This kind of retroactive action seems problematic to me (apart from the fact that it is nothing but populist policy and additionally unimportant in the big scheme of things (Drezner) from a credibility point of view. The Economist criticizes it from a political point of view, IPE at UNC for more economical reasons (it were to encourage excessive risk-taking; drive the best and brightest employees from firms under government control and set a [dangerous?] precedent of retroactive punitive tax policy).

While I agree with the assessment that this macroeconomically irrelevant, I believe that symbolic politics matter and I also have a hard time believing in the danger of driving the best and the brightest away, if only because it reminds of Kennedy's administration which delivered so far less than it had promised it's not even funny anymore. On a more general level I simply don't believe there is a big difference in quality at the top of any game or profession. You might have a few dominating people (Jordan, King James), but the difference between some random power forward playing in Spain and the guy on the bench behind David Lee is just not that big I believe. If you apply this to the business world, it follows that the guys driven away from AIG (or any other government owned/funded financial company) will only marginally (if at all) be better than those taking over. This especially considering that the best and the brightest, did not really produce.

To make a final and larger point, I believe that this whole discussion points out an apparently system-inherent problematic of the capitalist system as it exists in the United States. Abstracting from the macroeconomic irrelevance of this issue and the potentially negative impact of this retroactive decision, I think it is obvious that the AIG-employees did not deserve these bonuses, after all their company failed and had to be bailed out by the government. How is it possible that they receive bonuses for their work if they fail at it? Do go back to an illustrative example, does a construction worker receive a bonus after the building he worked on crumbles? Does the UNC team of last year receive an extra car per player from some booster because they lost against Kansas? This evidently is a problematic situation and this is the case, because there is no sufficient oversight in these financial (and other business) institutions. Evidently, if I determine my own salary and that of my colleagues and friends I will pay myself more than I am worth, after all that is a normal human reflex. I am not familiar enough with the administrative construction of these companies to suggest anything here or even to criticize them in a more precise manner, but it seems obvious that something is afoul (and not just morally) in a systematic manner if something like these bonuses are given out. Especially, because this is not the first time something like this takes place.

Lettres à un ami allemand

Je suis tombé sur ce livre l'autre jour par hasard et vu qu'il n'a que ~80 pages, je l'ai lu ces derniers jours. Il est très sympa. Albert Camus écrit des lettres à un ami allemand, quelqu'un avec qui il avait une relation amicale avant la guerre, avec qui il avait discuté sur la politique, sur la nation, sur le monde. Il montre comment et dans quelle mesure lui (et son peuple en général) aurait été tenté par quelques aspects de la philosophie de cet ami allemand (sans doute un militant des Nazis), mais il montre surtout pourquoi cette perception du monde a tort. Comment elle va inévitablement perdre et pourquoi la France (ou l'occident démocrate) va finir par vaincre son ennemi. Les essais (il y a quatre lettres en total) sont d'une beauté remarquable, je les ai trouvé très agréable à lire et très persuadant sur nu niveau philosophique.

Mon seul problème avec cet oeuvre est lié à mon point de vue cynique habituel. Cela veut dire que même si je suis bien d'accord sur la suprématie de la pensée de Camus envers la pensée des Nazis je ne suis pas convaincu que la victoire de la France (ni les alliés en général) a été inévitable. Je ne crois pas à une victoire nécessaire du bien sur le mal. Je voudrais bien y croire évidemment, mais je ne peux pas.

Currency Appreciation and the Iraqi Insurgency

I had already linked to this paper (props to IPE at UNC for making me aware of its existence) a few days ago and only got around to truly reading it this morning. Amazing paper. Seriously. Read it! It might very well have no validity, or its underlying thesis might be accurate yet have had no true impact or not a big one, in any case its impact is not measurable. But fascinating concept

The authors argue that the decline in insurgency activity in Iraq (measured by for example the number of American and Iraqi (solider and civilian) deaths) has been accompanied by a strong appreciation of the Iraqi and that the two are in fact linked. Why? The underlying assumption is that the civilian population will be willing to aid (if passively as in not aiding the counter-insurgency forces) an insurgency if they accrue a net benefit through its activities. The insurgents need to provide social welfare to civilians in effect (see Hamas or Hezbollah as examples of organizations that have perfectioned this mixture of guerrilla warfare and social welfare provider). In order for them do this efficiently (and provide a net benefit to the population) the insurgent group needs to receive financial assistance from abroad. If it were to finance itself domestically some kind of a tax needs to be raised and considering the costs of running an organization and the efficiency losses accompanied through the raising of taxes (and even more so of taxes not enforceable through a true government) no net benefit would accrue to the population.

If this is taken for granted, and the argument seems intellectually sound, then the increase in real value of the Iraqi Dinar versus the Dollar (and the Saudi currency which is pegged to the Dollar) had a direct (and negative) impact on the insurgency's capacity to buy hearts and minds in Iraq. This especially in a country where a large number of insurgents simply became such in order to provide for a living for themselves and their families. For the authors this was not a result that the US (or the Iraqi government) expected and had tried to achieve, but simply an accidental by-product of the currency appreciation due to the lift of sanctions and the massive inflow of cash through the American occupying forces.

Evidently it seems preposterous to argue that this was the only reason for the diminution in insurgent activities. The surge, changes in strategic thinking (the Awakening Councils) and tactical measures on the ground (the US forces realizing that peace-making is different from war-making) played important roles. But the thesis of the paper seems valid, important and relevant for a variety of other conflicts as well. Definitely some food for thought.

Au bonheur des dames

J'ai voulu écrire une critique du livre Au bonheur des dames d'Émile Zola depuis longtemps. Maintenant, il fait un peu trop de temps que je l'ai lu, seulement quelques remarques courts alors.

Zola dans ce bouquin détaille l'émergence d'une grande magasin à Paris (comme le Bon Marché) et ses effets sur les petits vendeurs au quartier. Peu surprenant, sa description est loin d'être flatteuse. Il montre le patron du magasin, sa clientèle accro, et ses vendeurs traités uniquement comme des sources de revenues. D'une certaine façon le livre peut être lu comme une critique anti-moderne seulement, mais au même temps un caractère fort sympa qui ne réussit pas à s'adapter au magasin disparaît inglorieusement au contraste avec le patron qui trouve son bonheur (même si ce bonheur n'est plus basé sur les aspects financières). Je peux carrément recommandé le livre, je l'ai bien aimé, même si j'avais du mal à comprendre certains partis descriptives sur le tissus vendus par exemple. Les seuls choses critiquables de mon points de vue ont été les constants références aux caractéristiques 'juives' (l'avarice, la capacité de devenir riche), mais au même temps il semble impossible d'accuser Zola de l'antisemitisme. Deuxièmement, il serait très instructive de lire une critique féministe de cette œuvre - vu que l'idée structurelle est que les grands magasins réussirent parce que les femmes sont très faibles de résister les prix à bon marché.

Europe

One of my professors at UNC last year, Thomas Oatley, generally takes a rather critical view of monetary aspects of European integration. In his IPE textbook for one his outlook on the future of a common European currency without an accompanying economic government is rather pessimistic (or realistic, but in any case not rosy). Recent events seem to provide evidence that he is right (and the € doomed) and even mainstream European publications have picked up on the possibility of monetary union failing. On his blog there now is a post mocking (criticizing if you want) review of European leaders' responses to the monetary crisis.

I do not have much to say in defence of European governments, I wholeheartedly agree with Mr Oatley's implication that these national responses are not sufficient in fact. Especially Germany needs to step up to the plate and help its neighbors in need, simply because it is one of the few countries (if not the only European one) that can, because of its own interests (preserving the €) even coming at a short-term price, but also out of interest in the higher ideals of European integration and the amazing progress we have made on this continent ever since 1945.

What I think needs to be stressed are the underlying reasons for this lack of European coordination. The main (philosophical) problem as far as I am concerned is that there is no European identity. The news, the discussion, the political leaders in Europe (or in the two countries, France and Germany, where I follow the news in any case) are French or German and nothing else. There is not enough acceptance of an overriding European frame-work. Merkel is a German politician that has to deal with the impact of her policies on a German electorate (federal elections in September!) that is not willing to pay for the 'spend-thrift' countries of Southern and Eastern Europe. She has to furthermore deal with an inner-party rival in Seehofer (who recently emerged as the new leader of the Bavarian section of the Union (CDU/CSU) (imagine the Dixiecrats having formed their own party at some point and constantly winning by large percentages in the South while still working as part of the Democrats in Washington; it's not a good situation as anyone familiar with Strom Thurgood can attest)) who through populist attacks is trying to make up for the recent electoral losses of the CSU. National politics and posturing simply pays more than European solidarity (see Sarkozy's initiatives at the outbreak of the Gaza War for example, completely ignoring its effects on the perception of the Czech EU-presidency).

On a more structural level two aspects seem to be of relevance to me.
As part of a realist approach, Germany ever since its reunification (and the disappearance of the dinosaur Kohl) has shown more willingness to assert itself on the European political scene. A mixture of a bad conscience (and thus genuine conviction) and a perception of it being the only way leading to international acceptance after the Second World War, made the Federal Republic willing to foot a large part of the bill of European integration. This is not the case anymore. Constrained budgets in Germany (and an obsession with a debt-free budget) and the difficult economic period following the reunification, further increased this aversion to pay for developments perceived as emanating from other countries only.

On a cultural level, the problem quite simply is that there are not enough Europeans governing Europeans countries. The descriptive aspects enumerated above concerning Merkel could easily be transferred to Sarkozy or any other European national leader. The politicians of this generation have not had the same exposure to Europe as (some) members of my generation did. Merkel never spent a significant amount of time abroad, neither did Sarkozy. I had a course with Hubert Védrine (Secretary of State in France under the Jospin government; came up with the controversial term of hyperpuissance) here in France and his point of view is also extremely nationalist. I honestly feel like there is a disconnect between the EU as it has evolved over the years, between the reality of European life and interdependence and the people that actually govern it (above the EU-bureaucrat level that is). If I look at the members of my generation that care about European (and international) politics, then I see a group of people that speaks three languages at least (English and the respective mother tongue being a given) that has friends and significant others' of different nationalities and different origins. These circumstances of life shape decisions and perspectives. European leaders today lack this perspective.

Yet, to be slightly more optimistic (weird position for me to be in admittedly) and even though I really like Alexandre Dumas, it is not unus pro omnibus, omnes pro uno of course, but rather the ever deeper union. Even the United States needed 21 years from independence to the ratification of its constitution and that took place in a union far smaller and diverse than today's EU. We need some more time for any kind of true European solidarity to emerge.

I personally hope that the current crisis will lead to an extension and deepening of European integration. But then maybe I am a hopelessly naive federalist.