Archimedes’ Hot Tub

The middle class makes democracies work, in conventional thinking. Middle class citizens use the power of their votes and their massed wealth to provide an effective counter to oligarchies of all sorts. But Joshua Kurlantzick argues that in Thailand and elsewhere in the developing world, a “democracy-hating middle class” now holds sway.

Kurlantzick thinks that the Thai middle-class, by driving Thaksin Shinawatra out of elected office, has broken with democratic process. Worse, he says the middle class in Mexico, Russia, Venezuala and other developing nations no longer believe they get fair representation, that the rural poor overwhelm their votes.

“Once the middle class realizes it cannot stop the elected tyrants, it also comes to another, shattering realization: If urban elites can no longer control elections, all of their privileges — social, economic, cultural — could be threatened. “

This shift in thinking by the middle class upends what we know about democracy, and calls its very existence in these nations into question, Kurlantzick says. He sees democracy in crisis, where the tyranny of the majority of voters overwhelms the rights of a society’s most successful members.

It sounds more like clever rhetoric to me. Protest, anger, fear about the rule of law, these things afflict young democracies. Why should we expect the Thais to behave differently than the English or the Americans on our own rocky roads to modern democratic society?

The Becker/Posner blog grimaces at the Federal Reserve’s lack of independence. Yes, says Becker, the normal political pressures faced by central banks become overwhelming during crises. “So the rather complete bending of the Fed to the Treasury’s wishes during the present worldwide recession is not surprising,” Becker concedes. But he doesn’t like it, and in particular he thinks it will create very difficult problems for the Fed when the economy recovers.

He particularly fears the inflationary potential caused by the swell in bank reserves from about $8 billion to about $800 billion. Longer-term, he sees higher interest rates as an inevitable consequence of the stimulus plan, and a Fed stuck between choosing recession and inflation.
Posner’s post on the same topic goes on at length, and seems less troubled (but not untroubled) by the Fed’s manuevers and obvious lack of independence.

The ASJA awards for 2009 are formally announced. I was sorry to miss the awards breakfast, but proud to be on the list of winners!

The New York Times has tweeted an interview with President Obama that will run in its Magazine this Sunday. The interview was conducted by David Leonhardt, an economics columnist and staff writer for the NYT Magazine.

Throughout the interview, Obama reinforced what I’ll call his Job narrative, because he constantly says we’re going to have to suffer for awhile. Obama himself seems to have a Job-like patience, which on its flip side means he doesn’t seem to be doing enough to solve our problems. You could support either perspective in this interview. Many of the problems he addresses, healthcare, education, the fall of manufacturing, seem intractable. His answers suggest that we’re going to have to live with a difficult period, which of course none of us want to hear.

This was one of my favorite comments about the silver lining in the Wall Street bailout: “We don’t want every single college grad with mathematical aptitude to become a derivatives trader. We want some of them to go into engineering, and we want some of them to be going into computer design.”

From an economics perspective it was probably most revealing that he does not think his economic team is overly-dominated by the ghost of Robert Rubin, and that he plans to talk directly with Paul Krugman and Joseph Stiglitz, two of his most outspoken critics. He again sat in the dust with Job, saying

as we’re making economic policy, I think there is a certain humility about the consequences of the actions we take, intended and unintended, that may make some outside observers impatient. I mean, you’ll recall Geithner was just getting hammered for months. But he, I think, is very secure in saying we need to get these things right, and if we act too abruptly, we can end up doing more harm than good. Those are qualities that I think have been useful.

The final piece of his Job narrative involves his political future:

whether I’m a one-termer or a two-termer, the problems are big enough and fundamental enough that I can’t sort of game it out. It’s not one of these things where I can say, Oh, you know what, if I time it just right, then the market is going to be going up and unemployment will be going down right before re-election. These are much bigger, much more systemic problems. And so in some ways you just kind of set aside the politics.

Here’s an odd bit from today’s Wall Street Journal, a paragraph from this article on Companies worldwide rethink strategies:
Japan’s new frugality runs counter to the brand- and quality-obsessed image it had during boom years, according to Emmanuel Huet worldwide leader, actually) of our Center for Consumer Insight “Whenever as a country you live through a crisis, there are traces of it in the psyche of consumers,” Mr. Huet said, referring to Japan’s economic crisis in the 1990s. “The big difference is that Brazil, Russia and Mexico also have been through crises in the recent past. Not so for India and China.” [emphasis mine]
It looks like the writer took the attribution from a comment by a person at Boston Consulting Group, quoted separately in the piece. Huet is also at BCG. Glad to know I’m not the only journalist who can cut and paste inappropriately. I am surprised this would get past copy editing; but then, the Journal did cut a bunch of copy editors earlier this year.

“Print media is going the way of facial hair. It looks good, but who needs it when you have central heat and air?”

A comment on Jon Fine’s piece on the death of Portfolio.
I am still scratching my chin over the sheer oddness of this non-sequitur.

Andrew Brown, my friend and fellow Templeton-Cambridge Journalism Fellow, found out this morning that his book “Fishing in Utopia,” won the Orwell Prize, Britain’s top prize for political writing. I hope the book is soon available in the U.S. For now, a hearty congrats to Andrew!

The way the brain evolved suggests that businesses will continue to become more team-oriented. That’s one of the important lessons for modern commerce that I picked up last week in Cambridge, England, where I listened to a variety of thinkers discuss human evolution and the brain.

The seminar, part of the Templeton-Cambridge Journalism Fellowships in Science and Religion, brought together thinkers from disciplines like anthropology, archaeology, biology and neuroscience. A theme that emerged was that the brain seems to have developed through social behavior - rather than being part of a drive towards DNA reproducing itself, the idea of the selfish gene and individual behavior that should be focused on the self, the brain appears more likely to have developed in response to group interaction. In other words, being part of the group was more important than individual stardom.

This flies in the face of hierarchy and star systems and empire building and other acts aimed at the self. It also flies in the face of intuition; people don’t want to be bees, after all, droning along nameless in groups. We’re also very early on in understanding things about our brain.

No theory covers every business situation; the potential methods are too rich. But this powerful idea that human organization emerged through cooperative interaction seems powerful. How to apply it to business? Does this, for instance, mean you should only hire team players? Probably not. But if you’re hiring people who are destructive to teams, that’s likely to work poorly in many circumstances.

Let’s think about this another way. Group interaction means information exchange. In fact, one of the researchers made the comment that human evolution was sparked by gossip. This doesn’t mean you should encourage your employees to hang around the water cooler for hours, swapping stories.  “Gossip” serves as a metaphor for information. So the comment suggests the more information workers, customers and suppliers have, the better the business is likely to do.

It’s also clear that about 4000 years ago, human societies developed values beyond mere survival. The archaelogist Colin Renfrew talked about Vana, a site in Bulgaria that features what may be the earliest examples of religious objects. Little wonder that the same sites also feature the earliest burial sites that include decorative gold objects. If people were able to develop a sense of being part of something bigger than themselves, like a religion, why shouldn’t they also imbue some objects with more value than others?

Values and belief systems are now inextricably entwined in business. Understanding that we are more effective when we work well with others, and that human value systems are now intrinsic, seem like good potential building blocks for most companies.

I will continue to look at questions of what our brain means for us. It’s clear from the books I get that this is an emergent theme in business thought.

I’m in Cambridge, England, attending a Templeton-Cambridge science and religion journalism seminar on evolution and cognition. Several of my colleagues  are blogging on the talks. Here are links to their items:

BeliefNet’s Steven Waldman has posts on talks by Colin Renfrew, Harvey Whitehouse, Gillian Beer and Simon Conway Morris.

USA Today’s Cathy Grossman has posts on Conway Morris, Alasdair Coles and Fraser Watts, Beer and Renfrew.
Author and New Scientist contributor Michael Brooks blogged on Gillian Beer and Darwin-as-novelist.

Yesterday I listened to Colin Renfrew, the famed archaeologist, walk through a bit of history about money and value. He talked about how early in the history of humankind, things like gold don’t appear to have had any value that we can tell. Decorative gold objects don’t appear in burial sites until 4,000 B.C., from Varna bulgaria. It’s at about the same time that artifacts appear that seem to be signs of religious ritual. So humans gave importance to things besides the basics needed for survival at about the same time.

That objects we couldn’t eat or wear had value makes it not a far stretch to creating the concept of money, measured by weight or other material collateral. In the last 100 years, money has gone close to being completely virtual. The last big move in this arena was Nixon’s move from the gold standard in 1971. Perhaps we can blame Nixon for helping create our current mess, by unbundling money from the physical world!

What money is worth is changing in ways we can’t yet predict. I don’t imagine we’ll go back to the gold standard or something like it. The goal right now is to find a value for these intangible assets that were sliced up into little pieces and sold without collateral. One thing that won’t change is a return to money based on something physical, like gold. We’ve become very good at  creating value that does not correspond to anything physical, and that’s unlikely to go away, even in the wake of the downturn. Oddly, at the same time many people are finding less value in the idea of God (at least as set up by organized religions in the Western world).

Perhaps the Colin Renfrews of the future will look at the spareness of artifacts from our society and posit that religion and money disappeared at the same time. They’ll be wrong, but how will they know?