Day: October 8, 2008

Dialectica Radio: Show Four – Defense Acquisition

This week’s host/co-producer Sanjeet Deka and co-producer C.P. Smith examine the ongoing debate facing defense acquisition and procurement. Guests interviewed for the show include: Admiral Bobby Inman, Lyndon B. Johnson Centennial Chair in National Policy at the LBJ School of Public Affairs and Former Deputy Director of the CIA; Kenneth Flamm, Professor of Economics and the Dean Rusk Chair of International Affairs at the LBJ School of Public Affairs; Lt. Col. Fred Puthoff, U.S Army Senior College Fellow at the University of Texas at Austin. [soundcloud url=”” params=”” width=” 100%” height=”166″ iframe=”true”...

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Re-thinking Poverty

U.S. welfare policy is based on short-term goals; most welfare programs provide short-term assistance but their ability to support upward movement in the labor market is limited. The reason for this is the way poverty is viewed and understood in the United States. For more effective policy we need a thorough understanding of what poverty is. It is common to see people moving from one welfare program to another, becoming “dependent” on welfare. Critics allege that these programs create distortions in the labor market in the form of disincentives to work. Building on this argument some people advocate against welfare programs. From the standpoint of a society with deeply rooted beliefs in the power of the markets, these critics believe the cure to poverty (something viewed by many in the United States as a simple lack of income) is to participate in the market. Thus, programs creating distortions in the market are not good generally or for reducing poverty, as is understood by most. Poverty, however, is not only lack of income; it is deprivation. It is multidimensional, and a policy to tackle it needs to be holistic. Health, nutrition, emotional and psychological well-being, access to clean drinking water, a healthy environment, happiness and rights are all things that determine what poverty is. A welfare program with work requirements might force a participant to get a job that he...

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Returning Public Services to Public Hands

Before sunrise on November 7, 2005, I joined members of the Observatorio Ciudadano de Servicios Públicos as we erected a blue tent in front of the Palacio de Justicia in Guayaquil, Ecuador. Volunteers readied vote deposit boxes, paper ballots, and signature pages in anticipation of the crowds of people to come. Over the next two weeks, more than 41,000 of Guayaquil’s citizens participated in a “consulta” regarding the water and sewage services provided by Interagua, a local subsidiary of the U.S. Bechtel Corporation. The results were overwhelming: Privatization as a strategy for effectively and efficiently improving water infrastructure in Guayaquil had failed during its first four years. An overwhelming majority (92%) of participants declared that the Bechtel subsidiary was not fulfilling its contractual requirements to Guayaquil’s consumers. I spoke personally with dozens of citizens who expressed serious problems with the water and sewage services. Privatization is the selling of a publicly operated government service or industry to a private company. The World Bank and other international lending institutions popularized, and arguably required, privatization as a win-win development strategy during the 1980s and 1990s. Dozens of Latin American governments reluctantly gave up local public control, often to transnational corporations, in the hopes that the private sector’s access to credit and financial efficiency would improve the quality of services. As in Guayaquil, governments offered concessions in terms favorable for the corporations,...

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A Rational Market?

Who noticed when the titans of finance proclaimed absolute mastery over risk? Who stayed up late at night worrying about the outrageous levels of borrowing needed to feed our profit-hungry investment banks? And who noticed when the markets stopped behaving rationally? Markets are supposed to rely on buyers’ and sellers’ complete understanding of the consequences of their actions. High risk investments, like subprime-mortgage-backed securities, are not supposed to be as safe as low risk investments, such as municipal bonds. That’s why their returns are much higher. And since the economic world is supposed to work in a rational and predictable way, high risk investments should fail more often than low risk investments. Yet, when homebuyers, mortgage brokers, lenders, credit rating agencies and investors all stop understanding the risk behind what they are buying and selling, rationality flies out the window. The market failed to warn investors, homebuyers and everyone else about the complexity and risk of these investment schemes. Everyone was happily making money when the bottom dropped out. Along with it went the confidence of the investment bankers, the commercial bankers, the re-insurance industry and the credit rating industry; just about everyone’s jaw hit the floor. And once confidence was eroded, the flow of money through borrowing and lending seized up, causing the current credit crisis. When the market fails to account for the irrational behavior of its...

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Quick Jump