Risk Rap

Rapping About a World at Risk

Regulation and Social Democracy

Last year during the height of the banking crisis I remember Larry Kudlow stating that the US market has a choice. It could pursue the EU model of high regulated markets producing low consistent returns or the American model of less regulation and volatile cycles of high risk and potentially higher returns. If the sole focus of government was the peace of mind and well being of investors Mr. Kudlow’s observation would be valid. Government however must consider a larger community of stakeholders in its scope of concern. Regulatory oversight, the harmony of capital and labor and the incubation of an economic culture that is favorable to and supportive of SMEs are the critical questions confronting all governments particularly those in developed economies.

The EU’s social democratic economic models embody the best and worst aspects of these issues. The social democratic state attempt to combine entrepreneurial impulses of capitalism with the management and administration of social welfare for all its citizens. Democratically “elected administrators” use the apparatus of the state to facilitate and manage the competing interests of capital and labor, free markets and regulation while seeking to balance an entrepreneurship friendly culture with long term sustainability.

Yesterday a toxic tsunami of aluminum sludge coated 16 square miles of pristine Hungarian countryside. It is a telling example of a severe risk event that confronts modern life. A lassiaz-faire approach to the event is not viable and offers no solace to those harmed by this assault. Communities cannot be asked to suffer a market response that promises to correct the problem of the next instance of this event. The construction of better berms and the implementation redundant protection devises to safeguard against this risk for the future is little compensation to those who were killed, injured and lost property or livelihoods as a result of MAL Zrt poor risk management practices.

Better to suffer a regulatory initiative that is based on an understanding of an economic ecosystem as complex and inhabited by competing interests of diverse stakeholders. The ecosystem including the shareholders of MAL Zrt, residents of the surrounding communities, plant workers (also community residents), small businesses (SME) and down stream farmers making a living on arable land and access to clean water all have a stake, albeit competing, in the safe operation of the plant. The possibility that the toxic sludge may find its way into the Danube poses a threat to the water supply of other eastern European nations. This elevates this catastrophic event to other EU jurisdictions. The inter-dependencies and interconnectedness of the pan-regional and larger global economy requires vigorous regulatory safeguards, mitigation initiatives and enforcement response.

The true cost of this event is potentially staggering. It supersedes the narrow interest and economic value of shareholders rights and capital invested in MAL Zrt. Bad economic behavior exemplified by BP’s Horizon Deepwater failure to install redundant protective devises to keep production costs to a minimum, ended up costing BP shareholders and Gulf Coast stakeholders dearly.

State intervention in markets and the reemergence of managed economies is a reality of the global economy. The “managed economy” of the Peoples Republic of China places western style “free market” economies at a disadvantage. The managers of the PRC efficiently deploy and manage capital, effect trade and market protections and scrupulously manage currency valuation. It has created enormous social wealth for China and has contributed to its rapid rise as a preeminent world power. China’s rise requires better coordination of private capital and government to marshal a competitive market response to the challenges posed by managed economies to free and open markets of western democracies. The massive pools of capital deployed by sovereign wealth funds of oil producing regencies and the growing insurgency and power of underground economic activity also pose significant challenges to the viability of unregulated markets.

America’s free market model that eschewed regulation since the 1980’s evolved into a mercantile economy with a weakened economic base. The outsourcing of manufacturing infrastructure loosened free market impulses that left in its place a debtor nation whose warped economy depended on housing/commercial real estate construction (collateral creation/securitization), credit marketing, retailing and a service sector that was designed to support the new economic paradigm. It is a model that has proven itself to be wasteful, costly and unsustainable.

Deregulation has led to the dislocation of the capital markets from the real economy. It has contributed to the massive disparities in social wealth and a crumbling infrastructure. Milton Friedman’s mistaken belief that free market impulses would preserve infrastructure investment has been proven incorrect. Ironically this has added to the government’s burden to provide social assistance to segments of the population disenfranchised from economic participation. Some believe that the basis for the prosecution of the wars in Iraq and Afghanistan are economic stimulus programs designed to keep the economy going due to the vacuum created by the loss of manufacturing.

China’s example nor the resurrection of the soviet socialist model is not a desirable alternative for western democratic capitalist societies. Centralized control and state economic planning is rife with inefficiencies. State run economies threatens liberty, stifles innovation and encumbers economic dynamism. The virtues of capitalism (innovation, dynamism, liberty) needs to be encouraged and blended into the new economic reality of a highly dependent and interconnected world that requires cooperation, coexistence, sustainability, fair asset valuation, and the equitable sharing of resource and responsibility. SME’s are at the forefront of innovation, value creation and dynamism and will play a leading role in the creation of new social-political values as sources of sustainable growth and wealth in the emerging economic paradigm.

You Tube Music Video: Franz Liszt, Hungarian Rhapsody No.2 Orchestra

Risk: regulatory, capitalism, sustainability

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October 6, 2010 Posted by | democracy, economics, government, labor, politics, real estate, recession, regulatory, risk management, SME | , , , , , , , , , , , , , , , , , , , , , , , , , , | Leave a comment

Reality Bites Back

If you build the foundation of your house on a pile of sand, when the water rises it will fall with a great crash.

Wendell Phillips reminds us that “eternal vigilance is the price of liberty.” That vigilance demands that we examine the proclamations, actions and behaviors of the people running for office. As free people endowed with the grace of liberty we must hold up the proclamations and representations of people seeking office to the light of truth. Every free person must scrupulously examine the candidates and the evidence they offer so as to confer our vote to those who most closely represent the ideals and aspirations we desire for our community and country.

When a candidate comes before us claiming to be one of the common folk and bases a good measure of their candidacy on proclaiming their commonness to appeal to popular sentiment it is fitting if we examine their conduct and actions to see if their claims ring true when held up to the light of truth.

Sarah Palin, the self proclaimed hockey mom is not as common as she would like American’s to believe. Ms. Palin is a skilled politician who knows how to trade on her political currency to advance her career. Ms. Palin’s selection as McCain’s running mate was a cynical attempt by a stagnating campaign to enlist a willing media to derail the electorates attention from the substantive issues painfully confronting this country.

More has been written and debated about the sexism of people who raised questions about Ms. Palin’s qualifications then elucidating a coherent and complete response to those questions. My belief is that the Republican Party could have surfaced a more competent and capable candidate to assume a role that is one heart beat away from the presidency of the United States.

More has been made of Ms. Palin’s opponents elitism and urban chauvinism then a thorough examination of her insistence that real American’s reside on the Main Streets of small town America. My belief is that this is divisive. It does not build national unity and is harmful to a necessary national consensus that democracies require in order to function. Ms. Palin’s demonization of opponents does great harm to our republic.

More has been spoken about Ms. Palin’s claim to be a leading proponent of Maverickanism. Americans would be well served to examine her program to determine the extent of its divergence from the current administration. My belief is that Ms. Palin advances a program that remains subservient to the interests of large oil companies and big business and is fully wedded to the continuation of the policies of the current administration. Does the slogan “drill baby drill” sound familiar? This country has been rudderless and bereft of any effective leadership under two successive republican administrations. We need a break from SOP. We need a transformational president. (AKA A Real Maverick)

We must also ask, “when is a hockey mom not really a hockey mom?” Do all hockey mom’s spend $150K on clothes? This nation’s hockey moms are rarely seen in fancy leather jackets and very slick dress suits replete with fine complimentary accessories. Today, the majority of hockey moms are hoping they can afford the fees and expensive equipment that participation in hockey leagues requires. Hockey mom’s hope they have the extra dosh to fill up the tank to drive their worry and work weary self and child to make it to the rink for a 6:00AM Saturday morning ice time. Your Neiman Marcus and Saks Fifth Avenue suits might just be enough to get you kicked out of Hockey Moms United USA. It certainly will get you a membership into the uber elite Waldorf Des Rothschild’s Social Club.

The other recent pillar of the McCain campaign has been the emergence of Joe the Plumber. Joe the Plumber is not a licensed plumber. Joe the Plumber is a laborer who is on the lam from the Arizona DMV for skipping out on a bunch of parking tickets. Joe the Plumber is not in any position to buy his bosses business and it appears that his hope to make a $250K salary remains a very long longshot. But incredibly enough John McCain holds this guy up as a poster child for unfair taxation. McCain’s argument is that sometime in the future if Joe the Plumber buys a business and makes $250K he’ll have to suffer a 3% increase in taxes.

McCain’s incredibly incomprehensible and disingenuous campaign is dangerously crowned by the destructive robocalls that shout Obama is a socialist, a supporter terrorists and is eager to fleece the middle class of America and give their money to the people who don’t make money. I don’t know from what planet McCain has just arrived from but if he’s spent any time recently with the middle class of America he would well know that 8 years of unbridled republicanism has already fleeced the treasure of the middle class and is now in possession of the monied interests that the republican party slavishly serve.

Most dangerous and cynical of all is a McCain campaign flyer put out by the RNC insinuating Mr. Obama’s terrorist ties. It shows an airplane and a picture of Obama ostensively guiding a crew of terrorists to fly into a building to continue the rein of terror and bring down Babylon America.

McCain has been flying this flag for months. I would ask McCain if he and his campaign have evidence concerning Mr. Obama’s support of terrorist activities to bring it to law enforcement officials so American citizens can be protected from the devises of this pernicious subversion. Thats what true patriots are called to do Mr. McCain. Mr. McCain’s fear mongering, character assassination and attempts to question people and groups love of country and patriotism is a sick pandemic that the real enemies of this republic encourage. And like the Hockey Mom Sarah Palin and Joe the Not Yet Plumber, Mr. Obama the terrorist is a well crafted fiction in the senile mind of sedentary campaign bordering on political dementia.

I welcome the conclusion to McCain’s ugly campaign. Built on sand, existing as a fictive sand castle in Mr. McCain’s mind it is hoped the election will wash away this nonsense in a tide of an affirmative mandate for real transformation.

Music Video: Temptations, Just My Imagination

Music Video: Windmills of Your Mind

Risk: truth, voter distrust, political ambivalence’s, electoral alienation

October 23, 2008 Posted by | culture, elections, McCain, Palin, politics, RnB, soundtrack | , , , , , , , , | Leave a comment