Discussion Board: Global Outlook Amidst Financial Crisis

[Joshua Schlachet]

Dear JASCers,

I would like to open up this new discussion thread as the first in our series of JASC Presents exclusive online content. Please feel free to post any thoughts on the current state of the global economy, comments on the various proposed strategies to get us out or the roles of Japan, the US and the international community in ensuring future financial prosperity. I'd like to get the ball rolling with a disturbing clip from Obama's address to Congress last night regarding bringing jobs in renewable energy back to the US. Here is the President in his own words:

"It begins with energy. We know the country that harnesses the power of clean, renewable energy will lead the 21st century. And yet it is China that has launched the largest effort in history to make their economy more efficient. We invented solar technology, but we've fallen behind countries like Germany and Japan in producing it. New plug-in hybrids roll off our assembly lines, but they will run on batteries made in Korea. Well, I do not accept a future where the jobs and industries of tomorrow take root beyond our borders, and I know you don't either. It's time for America to lead again."

I will keep my comments minimal, but I wonder if this type of economic protectionism could be avoided by enhancing the international exchange efforts between our various countries, which has always been a central element of the JASC experience. Given the rigidity of our current national interest-based model of international relations, does retreating back into "my-country-first" (in this case America first) attitudes stem naturally from our inability to extend diplomacy into the realm of true global citizenship? Does the notion that America needs to 'lead' the economic recovery or the idea that the jobs and prosperity of Americans should be more valuable to Americans than those of other countries' citizens make the prospect of true global cooperation impossible? I look forward to hearing everyone's comments!

Thanks!
Josh Schlachet
JASC 59 & 60, JP Organizer

[K. Hirata]

Hello Jascers,

My name is Kayoko Hirata and I'm a 61st AEC as well as a member of the JP team.

I'd like to comment on President Obama's State of the Union address (which Josh led up to) and Sayaka's comments of Clinton's Asia tour.


I thought that the order she visited these countries was interesting (Japan, Indonesia, South Korea and China) While it would have been geographically feasible to visit South Korea, then China after Japan, she went to China last. She also could have visited other countries in Asia, but perhaps it was a conserative intention not to visit Taiwan (thus accepting its independence from China) or Thailand (still in political turmoil?).

Regardless, her Asia tour proves evident that the Obama admin is committed to global affairs, although after watching yesterday's State of the Union address, you could counterargue that...

http://www.seanpercival.com/blog/2009/02/25/obama-state-of-the-union-transcript/

Like Josh wrote, his retreat back to the American isolationist policy and reaffirming the US' hegemonic state is troubling. While it may be important to restore the faith of the American people, globalization has shrank this global society (or Friedmann says "The World is Flat") and I dont think the US can keep up with the myopic perspective of "US first". We can push for free trade, force developing countries to open up their markets, harass those who set tariffs, but if his priorities are protecting American interests, not to mention his conclusion,

"avoid the possibility of escalating protectionism"

it sounds hypocritical.

But then again, his oratory is always mesmerizing and his words are powerful, or perhaps it seems so because Bush and most Japanese leaders possess very little charisma.

With no so-called "honeymoon period," Obama inherited a country with low self-esteem and a heavy debt on its back. We'll see how the stimulous plan and his first term in office goes.

thanks for reading,

kayoko

2009/2/25 Joshua Schlachet <joshuaschl...@gmail.com>

--
Kayoko Hirata
61st Japan-American Student Conference
American Executive Committee, Treasurer
JASC Presents Boston, Event Coordinator

Cornell University, Class of 2011
College of Architecture, Art, and Planning
Department of Urban and Regional Studies

JASC website: http://iscdc.org/index.php?option=com_frontpage&Itemid=1
JASC AEC blog: http://jasc61.blogspot.com/

[Josh Schlachet, 59th & 60th]

Is it Time for a New Socialism?

Despite the rising populist outrage against the largest banks (which
is certainly well deserved), in order to solve the financial crisis
must we admit a politically unspeakable truth: both the banks and the
population are partially responsible for the downturn we have
witnessed over the past several months. Amidst the talk of corporate
corruption, predatory lending, toxic assets and the like, we often
forget (or rather intentionally excuse) the issue of personal debt. In
2007 in the US, the personal debt to GDP ratio reached 100%, which
basically means that many Americans cannot afford to pay off the debt
they already have. With this in mind, why does the proposed solution
in Congress revolve around making sure that banks lend more money?

As President Obama and many other have said, credit is the "lifeblood
of our economy," which is true, but not in the sense that he means it.
The ever-increasing quality of life standards in the US have enticed
individual consumers to live lavishly on borrowed money, and I cannot
imagine how creating the opportunity to borrow more will alleviate
this problem. Of course, the current focus of the flow of credit in
the government's eyes is on small businesses rather than individuals,
but could we be missing the most basic element of the problem? Is it
possible that our problem is not moral bankruptcy within the
capitalist system (corrupt practices undertaken by bankers and
businessmen using borrowed money), but rather that capitalism as a
system is morally bankrupt?

Of course, by a "socialist" solution, I do not refer to the potential
nationalization of banks for which republicans have attacked the
democratic leadership. I mean something more basic: the out-of-control
inequality of income distribution that denies ordinary citizens the
opportunity to pull themselves out of the debt that has overcome them.
If i can write these politically poisonous words, would we not be
better served by an targeted upper-class tax increase designed to
redistribute wealth to those most in need? Instead, we continue to
focus on lending (and thus borrowing on the consumer end) as a means
to lift us out of recession. Doing so may help ease the pain of the
immediate problem, but it may only solidify the mentality of unlimited
growth and prosperity that fuels our eventual economic downfall.

I hope this post was inflammatory enough to get someone to respond. I
am looking forward to hearing what everyone has to say!

In JASC Spirit,
Josh Schlachet
59th & 60th JASC, JP Organizer

[Lane]

You're right that both the banks and the population are responsible
for the current financial crisis. The government is as well, to some
extent--Greenspan is still taking a lot of fire for not keeping a
tighter monetary policy and being too concerned about inflation (and
don't even get me started on the topic of current account balances and
trade deficits).

But you're wrong to suggest that the responsibility for individuals'
personal economic situations--including the millions of households in
the US and abroad who are sitting on underwater mortgages or have been
foreclosed on--lies with the banks, or with our capitalist system.
Capitalism is nothing more than the sum of each of the decisions made
by individual participants in the system. To blame something as
abstract as capitalism is to take focus away from the real issue, and
from finding a real solution.

Just because a bank offers to lend you money doesn't mean you need to
take out a loan. Just because your credit card offers you a huge line
of credit, doesn't mean that you need to go out and buy a new car with
it. I think Americans are very good at shirking personal
responsibility and putting the blame for their own actions onto other
people, and this is no exception. The capitalist system is designed
to work under the assumption that every player is individually
responsible and acts in their own best interest. I think one reason
it's falling apart now is because people didn't act in their own best
interests, and thought they'd never have to pay the price (because,
you know, "house prices can only go up"). For every family that's in
trouble economically, there's another family that was more prudent,
didn't take out mortgages they can't afford, and is doing okay right
now.

I don't mean to suggest that the current crisis hasn't affected
everyone--because it has--but I'm talking about first-order effects
(being under too much debt), not second-order effects (losing your job
as a result of the economic slowdown). The fact that people who
_have_ acted in a responsible manner are nevertheless drawn into a
crisis like this is one of the saddest parts, to me.

Nobody would argue that the income distribution in our country isn't
extremely unequal. But my response is that America always has been
the land of opportunity, and it still is, and will be, even if
opportunity is scarce at the moment. Complaining about inequality
gets you nowhere--go back to school, invent something, start a
business, start investing--do something to pull yourself up.
Socialism is a failed experiment, and I don't think it has anything to
offer us today, aside from partial and temporary workarounds, like
nationalizing failed banks. Focusing on lending is the right thing to
do, and is the best route out of the crisis, because credit really is
the lifeblood of the economy. Proving this point is easy: imagine
what would happen if everyone took their paycheck home and stuffed
their money into a mattress instead of putting it in the bank,
investing it, or spending it. Oh, wait--that's exactly what's
happening now...

(By way of background, I'm a 57th JASCer who currently works in
finance in Hong Kong.)

Lane

On Mar 3, 11:27 pm, "Josh Schlachet, 59th & 60th"

[Josh Schlachet, 59th & 60th]

**Posted on behalf of Mo Campbell. Thanks Mo!**

"Spreading the Wealth," the Issue of Opportunity, and Redefining
Success

During the 2008 Election Campaign, President Obama was attacked for
his
plans to cut out the tax cuts that had become standard for the

wealthier segments of society in this country. Listening to NPR the
other day, the budget was being discussed with reference to the tax
issue of potentially not only foregoing the tax breaks but also
raising
taxes for those households with a combined income of more than
$250,000

per year. The increase would begin in 2011 to help fund programs that
are being put in place for job creation, expediting the healthcare
system, and revamping our energy expenditures among other things.

I understand that the threat of a tax increase is reprehensible in a

recession that is affecting everyone from the top business officials
in
the downtown offices to the minimum-wage earners and entry-level
college graduates. At the same time, I think it is time that those who
do make a much higher income than the population's average based on no

doubt hard work and dedication (but for some, nepotism and sheer luck)
do not get tax breaks that are incongruent with the needs of the
society surrounding them. I agree with Josh that continuing to borrow
and rely on credit is a deeper issue that deserves more consideration

on a whole theoretical level in addition to its practicality.

I cannot help but think that the Horatio Alger stories that have
convinced Americans for generations that as long as we work hard, the
world is open to us and we can accomplish anything are partly at fault

for the situation in which we find ourselves today. I would not deny
that determination and hard work go a long way to overcome
socio-economic setbacks and disadvantages of various degrees, but now
is not the time to fall on old rhetoric that is simply not true.

Society is built in such a way that the Horatio Alger story is not
possible (nor desirable?) for all, and the underlying belief that we
should all aspire
to own larger than neccessary homes and buy-in to inconspicuous

consumption on a grand scale is one with which I particularly take
issue. I am well aware of the economic benefits of capitalist
societies
and more importantly, the freedom and liberties that come along with
them; however, free-market societies should focus less on the market
of

unnecessary trinkets and goods and more on sustainable technologies
and
products that truly raise our standard of living from a health
standpoint. The American lifestyle needs to be reworked and we should
have been living in a more fiscally-responsible way in the first place

- but it is the underlying philosophical issue of how we as
individuals
reach fulfillment and what defines a successful life that must also be
considered.

With this in mind, could not those who have benefited from capitalist

institutions give back to the democracy that allowed them the freedom
and opportunity to rise to the position in which they find themselves
today? The funding from a tax increase would afford others the
opportunity to excellent education and adequate healthcare which would

put America back on the path to being a world leader in technology and
high living standards. As Thomas Friedman discusses in *The World is
Flat*,
the education gap coupled with a lack of funding and interest in the

sciences in America is what will hurt the country in the long run. Put
simply, the retail sales clerk relies on America's ability to compete
in the global economy in the same way as a bank CEO with an exorbitant

salary. Both rely on a healthy, educated, and forward thinking
America,
and one can financially contribute to making it happen; therefore
those
in the higher tax bracket should pay higher taxes to fund projects
that

are in their own self-interest as well as the interest of their
country.

It has been a while, and I have been out of the academic loop so I
apologize that my writing and thoughts are not more coherent and fluid

but I wanted to take part in the discussion and share my two cents.
Thanks Josh for yours,

Mo Campbell
JASC 59

[Josh Schlachet, 59th & 60th]

First off, thanks to Lane and Mo for your recent posts on this topic.
I really enjoyed reading them both. Lane, I think you made an
extremely good point about the capitalist system relying in people
doing what is in their own best interest. For me, here is where it
gets sticky: building off of Mo, I would add that at the lower
economic levels of a capitalist society, the system also relies on
people having the ability to do what is in their own best interest. We
often talk about this in terms of structure vs. agency. Whereas the
American Dream functions on the assumption of absolute agency (anyone
is capable of anything as long as they work hard enough), there are
deep social structures that prevent drastic upsurges in economic and
social standing among the underprivileged and especially the
disenfranchised. In this sense, the unequal distribution of
opportunity (and of money) becomes a very serious issue in how we
solve this economic crisis for everyone.

I'd like to add a few more comments, starting with a few words from
John Galbraith, who puts it much more poetically than I ever could
myself (from "The Dependence Effect" in The Consumer Society Reader,
Juliet Schor, ed., 2000):

"Were it so that a man on arising each morning was assailed by demons
which instilled in him a passion sometimes for silk shirts, sometimes
for kitchenware, sometimes for chamber pots, and sometimes for orange
squash, there would be every reason to applaud the effort to find the
goods, however odd, that quenched this flame. But should it be that
his passion was the result of his first having cultivated the demons,
and should it also be that his effort to allay it stirred the demons
to ever greater and greater efforts, there would be question as to how
rational was his solution. Unless restrained by conventional
attitudes, he might wonder if the solution lay with more goods or
fewer demons" (21).

In other words, counter to many of our current economic models, the
notion of a inverse-correlative relationship between supply and demand
doesn't quite fit because it relies on the assumption that production
is designed to fulfill the preexisting needs and desires of the
consumer. In reality, we find that the creation/cultivation of
consumer desire is a process -- the ever-expanding and diversifying
range of available goods can only sustain demand by "creat[ing] the
wants that the goods are presumed to satisfy" (22). Put differently,
supply does not drive demand, demand drives demand.

I will readily admit that capitalists are not he only ones to largely
disregard this fundamental problem (even Marx's concept of use-value
does not tackle the possibility that the 'purpose' good are designed
to fulfill may be socially or symbolically constructed), but
capitalism is the system in which such an oversight can have the most
disastrous consequences.

For example, a chair likely fits a preexisting demand, as most people
at some point in their lives will probably need to sit down. On the
other hand, I recently saw and advertisement for a kitchen tool
designed to slice exclusively avocados is a very efficient and perfect
manner. While there may be a person or two out there who were really
dying for a way to blast through the giant pile of avocados on their
kitchen counter, it is more likely that consumers would need to be in
some manner convinced to buy this tool that does only a fraction of
the job of a knife they probably already own.

For me, this is the fundamental contradiction of the capitalist
system: the logic of profitability in the marketplace disguises itself
as 'find a niche and fill it' when the true process is 'create a niche
and fill it.' In this sense, I don't believe that capitalism is any
more 'free' than some other economic forms, but rather that it creates
such a powerful internal ideology of freedom that we all (myself
included) have trouble seeing beyond its borders. Such growth for the
sake of growth is an unsustainable model, yet we are treating it as a
goal to which we want our economic system to return.

Now, I'm sure that after reading to this point, most of you guys are
thinking, "this Josh guy's definitely not an economist." And you're
right. As a historian, I am deeply uncomfortable with one of the core
bases of economics as a field: using models based on previous events
to predict what will happen in the future. Not only are the 'lessons'
of history too diverse to be molded into coherent and singular models,
but we have a dangerous tendency to treat their predictive ability as
a natural science rather than a social one, despite the fact that a
model based on past events is fundamentally incapable of anticipating
with certainty anything that has yet to happen.

Hopefully this has gotten enough people fired-up to write something in
response. I look forward to reading the posts to come! Thanks so much
for tuning in, everyone!

In JASC Spirit,
Josh Schlachet