With the shift from "stuff" to "intellectual property" we are seeing a new type of law emerge. It started with changes to the traditional copyright concept, first by extending it to things other than the written word and then by lengthening its duration beyond what anyone had originally contemplated.

In addition the control of copyrighted material has been extended, notwithstanding the existence of the concept of fair use. Snippets of music that appear in other's music must now be cleared for use and paid for. Even images of things in public spaces, like skyscrapers, are demanding payment if the image features in a movie.

Right now we are in the midst of what may turn out to be an epic battle between publishers, authors and Google over the use of technically copyrighted material, but where the holder can no longer be found. These are called "orphan" works and Google wants to sell access to them, even though they don't have any rights, just because they took the time to digitize them. The also want an exclusive right to offer this service. This is an entirely new concept, privatizing something in the public domain.

I want to discuss a different aspect of the "ownership" issue. That is where the object itself is unique, such as a painting or sculpture. Ordinarily once such an item is sold the artist loses all rights to it. Some have made agreements concerning subsequent display of the item for commercial purposes (such as in a book). In other words they want to control the "content", but not the item itself.

A more interesting issue is what happens to the work when the original buyer choses to resell it? Typically, for a well-known artist, the price obtained may be much higher than the original buyer paid. The gain in value goes to the owner, not to the artist.

I'd like to propose a formal change to this concept of "ownership". In any future sales the artist gets a certain percentage of the gains realized. Why shouldn't the creator benefit from his work the same as an author? If a book suddenly becomes popular after it is published, the author benefits from the royalties from the additional sale.

I would extend this right to share in the gain indefinitely into the future, even after the original artist is dead. Collectors buy antiquities that are the cultural heritage of the society they come from, but the society doesn't benefit. Many times these are sold illegally so only the thieves make any money from the transaction. Several countries are now demanding that museums return items obtained under such questionable circumstances, especially those obtained during the heyday of colonialism.

In my scheme, when there is no direct line to the original artist, the royalty from the resale would go to a fund that is used to promote the arts and/or conserve other historical artifacts.

The system wouldn't be perfect, but music rights are collected by groups such as ASCAP and BMI and doled out according to a sampling scheme. Small private sales wouldn't be tracked, but the bigger sales go through auction houses or other public sales and keeping track wold be simple. Such places already keep databases of who owned various items and how much they have sold for over the years. Thus, those items which bring in the most money would be included in the plan. If a private seller avoided the scheme and then the person he sold it to later wanted to sell it at an auction, the lack of proof that the royalty had been paid could be used to collect the prior missed amount.

Artists should profit from their work, whenever anyone else does, it seems only fair. If they hadn't created it to start with there would be nothing to sell.

This is a follow on to my prior essay The slow work movement

I thought I'd relate some of my personal experiences with semi-custom makers as examples of what has been practical in the past. I invite others to add their own stories. In no particular order.

Food

We need to bring some nibbles to a memorial service for a couple of old friends who died recently. So we went into the local bakery and discussed choices with the baker and then ordered the needed amount of small pastries to be ready for pickup on Saturday. He even gave us an extra dozen for "free".

Last Christmas I wanted a goose. This is no longer a popular choice around here, most stores only carry turkey and ham in quantity. We went into the local butcher shop and they ordered one for us in time for the holiday. On another occasion I wanted a duck and my daughter, who lives in a slightly less populated suburb than I do, went to the local farmer who had one already prepared. If he hadn't found one in his refrigerator he said it would be ready in an hour or so!

Wood

At one time I was an avid recorder player (vertical wooden flute) and ordered two different models from a well-known English maker. It took 18 months until they finished the order. One of them needed a bit of modification, so I took it with me on a trip to England and stopped at the workshop to drop it off. I discovered why there was such a long backlog. A worker was hand fitting two sections together. He chalked up one part fitted them and looked to see where the chalk had rubbed off, then took some sandpaper and made an infinitesimal change. This was repeated dozens of times. The same firm makes plastic injection molded instruments by the thousands. The handmade ones sell for about 500 times the plastic ones. This illustrates the two extremes.

I used to make some of my own furniture. At the time there was an old family business in the Bronx that catered to woodworkers (I just looked them up and they seem to have moved to Florida and gone web-based). So I drove there (only about 15 miles) and went through their lumber yard and picked out some beautiful pieces of walnut and mahogany for my projects. They also had many exotic hardwoods, but those were too rich for my budget. Home centers still sell furniture grade lumber, but only oak, maple and pine and only in narrow widths. I did buy some veneer from them on other occasions and then getting nicely matched pieces is even more important. I wish I could say my veneering efforts matched the quality of the supplies, but this was one of my failures... Some things really required expertise and specialized equipment.

Clothing

The women in my family are all into the fabric arts, so I've been able to "commission" several hand knit sweaters and quilts. Of course sometimes they make what they want as a gift and that's nice too. Being surprised has its rewards as well. They make more than we all can use and give away a steady supply as gifts to all the new babies that seem to be appearing in our circle. I've never heard of a single recipient (the parents, if not the babies) who wasn't thrilled.

Media

Even though I've tried to focus on the practical (recorders being the exception), much of what we have around the house that is handmade falls into the "arts and crafts" category. So we have several ceramic pots and sculptures made by friends as well as various paintings and prints bought from the artists themselves.

Recently I decided to package up the essays on my web site into a book I could give to people. I found, what can be seen as the prototype of my new semi-custom enterprise model - a demand publisher. Using modern technology this firm can take my formatted electronic file and produce a single copy of a hardbound book for a price similar to what one would pay in a store. This will be a boon to poets and novelists who will no longer have to order hundreds of copies from a printer and then fill up their basement with them while they try to sell them over time. Multiple copies cost the same as the single copy price, unless one wants to buy in the range of conventional publishing in which case prices get cheaper. The only limitations on what I could do concerned the actual page size. This is restricted to about a dozen of the most common formats. Even commercial printers impose such restrictions in most cases.

Future

Technology already exists (and is being used) to create custom fabric designs using something similar to inkjet printing. With this capability one will be able to design one's own fabric and order enough for a single garment or so, just as I have done with my book.

Modern sewing machines already have computerized software that will accept scanned in pictures and will generate embroidery patterns that they can execute. I expect to see more decorated clothing using this capability as prices for the machines come down. Perhaps there will even be a rise in home clothing making, especially as budgets get tight. A computer capability that will allow printing out of a pattern for cutting the pieces of a garment to measure would complete the process and remove the need for the skill to resize commercially obtained patterns.

I think there is similar technology available for decorating pottery, which would allow for custom designed dinnerware. I know there are inkjet printers for putting edible pictures made of icing on cakes, so why not for ceramic glazes? Many communities already offer ceramics classes and thus have the appropriate firing equipment.

I've just heard of a company that is planning to decentralize car assembly and do away with huge factories. With standardized parts one could mix and match and get exactly what one wants in a vehicle. We will see if his idea turns out to be practical.

Look around your environment and see how little of it exists that isn't mass produced. We may be cogs in the big machine of modern life, but we should be able to put some of our own preferences into our individual environment. We may be cogs, but at least we can be brightly colored ones.

Let's hear your stories, or ideas for a new age of responsiveness.

In an earlier article I argued for a lifestyle which is less based upon material possessions and more focused on getting joy out of life.

Too Many People, Too Little Work

Suggesting that people work less is fine, but people still need to do some work in order to live. The question is what sort?

Historical Work Patterns

Modern society has altered the traditional division of labor which consisted of a large peasant class, a very small landowning class, and a modest sized merchant class. As mechanization improved, the number needed for tilling the land decreased, while a new class of factory workers emerged which absorbed much of the displaced workforce. This was not a smooth transition, a lot of excess labor was forced to emigrate, especially from Europe to the New World and Australia. Now that these areas have filled up, displaced workers in other regions have been forced into more extreme situations. The biggest, ongoing, trend is from the countryside in Africa and Asia and into the cities. They don't find the factory or entrepreneurial jobs as rewarding as the earlier migrants did. Many end up in extreme poverty with minimal social services living in fringe shanty towns.

The advanced societies are now moving away from almost all agricultural (the US employs about 2% of the working population in this area), and the mass-production factory model, which was the backbone of the growth of the middle class during the 20th Century, is also going into decline. The boosters of the brighter tomorrow dream say that "service" jobs will replace the traditional employment opportunities. Service jobs, however, fall into two broad categories. I'll call them labor substitution and middlemen. A typical modern example of labor substitution:

A woman with children enters the labor force and then spends most of her salary paying another woman to take care of her kids. Or she works so late that she has to buy prepared foods on the way home to serve her family. The food preparer substituted for the traditional home role. I'm not saying that this a good or bad development, just that it has become increasingly common as the percentage of women in the workforce continues to rise. Many women resented being forced into a role of "housewife" when they had ambitions of their own. More options can only be a positive development. Other labor substitutions have grown without much notice, at one time only the barber and the bread baker were common labor substitution professions. The first because it needed a certain degree of skill and the second because many poor families didn't have ovens. Now we have people to do our shopping for us, wrap our packages, make us a cup of coffee and give us financial and "lifestyle" advice.

The other category of service job is the creation of layer upon layer of intermediaries. I don't need to enumerate them, but a typical firm will now have training, human resources,payroll, accounting, food service and cleaning all delegated to specialized firms. The argument is that a specialized firm can be more efficient than a company doing everything for its self. In limited cases this may be true, but the middlemen need to make a profit too and it is not clear that the service actually ends up cheaper as a result.

In an earlier age a banker's skill lay in being able to assess the risk of making a loan. Now bankers hire risk analysis firms, risk insurance firms, management firms, credit rating agencies, appraisers, etc. in an almost endless progression of new services. These new services don't add new value to the ultimate transaction. A loan gets made or it doesn't, but they do keep lots of people employed. I've maintained that this is an entirely proper social organization for a society to adopt, as long as what is being done is agreed to by the citizenry explicitly.

The legislators have no trouble making such an argument when it comes to military spending. They explicitly cite the number of jobs that will be created by making death machines. Right now, in the US, a similar argument is being made for keeping the huge middleman structure of the health services sector. There are about six million in the "Healthcare Practitioner and Technical Occupations" listing kept by the US Department of Labor, but the workforce in the overall field is about 16 million. In other words, about half of all jobs are middlemen. If a society wants to deliberately provide make-work jobs, then that's fine as long as everyone understands what is the goal. The Japanese provide support for small plot rice farmers by keeping imports at a disadvantage. Everyone pays a bit more, but these marginally economic farmers are kept on their land and employed. The expense is seen as being socially worthwhile.

To summarize: Agriculture and factory work are in decline, "service" industries are on the increase, but many of the new jobs are really make-work tasks or labor substitution. The push toward labor substitution is also a result of the way the GDP is calculated. Getting back to my working mother case, when she stays home, her work does not contribute to the GDP, but if she hires someone else to do the tasks, then both transactions are counted. This anomaly is used as a way to shape public policy, even if the planners may not realize it.

Slow Work

A few years ago a "slow food" movement started. People were supposed to cook for themselves and take time to enjoy the entire process of preparation and eating. In addition raising food locally or buying from small farmers rather than big industrialized operations was seen as a desirable end. By analogy I'm coining the term "slow work", which I'll define in a moment.

Starting near the beginning of the 20th Century there was a revulsion to the increasingly dehumanized factory system and in both Britain and the US there arose movements dedicated to recreating the traditional hand crafts. Usually this is called the "Arts and Crafts" movement. Many of the creations of these small shops and skilled workman now command huge prices, but the movement was always aimed at the elite.

During the 1960's there was a second wave with many "hippies" moving to Vermont and other rural areas and setting up furniture, pottery and jewelry operations. Some even survive to this day. Even food preparation became part of the movement with bakers and other shops offering alternatives to mass-produced food.

My "slow food" movement is an attempt to extend this beyond the elite that have been its mainstay so far. The one thing that people can't really buy these days is individually made items. Almost everything we buy is mass-produced. Advertisers go to great lengths to make people identify with products and make them think that this defines their individuality, but in truth it is just the opposite. The "unique" sweater that you buy in a shop may only be carried in a dozen or so copies, but it is likely that it is in hundreds of other shops elsewhere. The "uniqueness" is an illusion.

My proposal is to shift away from mass production for much of what we buy. Certain items are now so complex or difficult to build that getting a hand-made one is impractical. How could a hand-made mobile phone even be created? On the other hand the Volvo model showed that autos could be made from start to finish by work teams rather than on an assembly line. With a bit of tweaking even such complex system as this could be individualized. The assembly team would do more that take predefined parts from the appropriate bins, but would have some say on what parts were incorporated, following a customer's desires. With modern computerized control systems, even one-off machined parts are feasible.

Other areas like clothing, furniture and home furnishings lend themselves to a non-factory model. What I'm suggesting is not the false "customization" provided by huge firms. For example Levy's Jeans offers custom fitted clothes, but all that changes is that the cutting machine is programmed with the customer's actual measurements. Everything else about the process is still the same. The objective is to get people out of the factories and into workshops where they are designers as well as builders. Of course, this will be less "efficient" than the one-size-fits-all mass production model. But the loss in efficiency is compensated by the increased need for employment. This is the social goal that I'm advocating. "Efficiency" fails to take in the total cost to a society of how things get done. Where is the cost of those not working factored in? Where is the loss of self worth from people on the fringes accounted? Just like the GDP distortion, failing to price life satisfaction skews priorities.

I've built a lot of the furniture in my home over the decades (including two harpsichords) and the feeling one gets from living with one's creations provides a lasting satisfaction that no mass produced item can match, regardless of how much we are told to the contrary. Living with items bought (or bartered) from people that you have met and discussed your needs with is also a source of pleasure. Not everything needs to be material output to fall into to my scheme. Farmer's markets show that people have the same feelings toward the breads, jellies and other items that are for sale. With a bit of thought this type of personalized labor can be extended to many other areas, including "services".

One pays more for the items one buys, but one gets more for the items that one sells. And if it takes months to make a harpsichord then someone trying to do this for a living will just make fewer and charge appropriately. The lessened income will reduce the mad rush toward excess materialism and the continual replacement of perfectly good items for newer ones in an attempt to make up for the lack of meaning in many people's lives.

That's my slow work movement. Enjoy the labor, see the results of your efforts and know that others appreciate getting things that aren't mass-produced and ill-suited to one's actual needs. Done right there will be enough honest work for all that need it.

There is much discussion going on these days over the idea that corporations must maximize profit in order to satisfy their stockholders. Many take the position that this isn't even a choice, but that firms are required to do so by the terms of their incorporation. To do less would be to fail to properly represent the interests of the investors.

Along with this idea there has arisen a discussion of what flexibility firms have when spending money. For example, is it proper for a firm to invest in "green" technology, which may be more expensive, but which benefits society at large? Similarly can firms donate money to charitable causes or provide services (pro bono) for free?

Those who support both the charitable actions and the assumption over maximizing earnings turn to convoluted arguments to bolster their ideas. So, for example, charity can add to a firm's "good will" and make customers more likely to want to deal with it in the future. Similarly "green" investment can make a firm more appealing to customers. Certainly firms buy into this logic as can be seen by the amount of green-washing going on as polluting firms try to improve their image.

All of this misses a key point. Firms operate as state-sanctioned entities. The rules that they must follow come from laws and regulations. It is within this framework that they are allowed to maximize profit. A firm must, for example, pay minimum wage and provide for a safe and healthy workplace. There are limits on hours worked and the age of employees. There are limits on how waste can be dealt with and one sort of damage can be done in extracting raw materials. Products must meet certain safety and efficacy standards as well. There is no such thing as maximizing profit in the abstract.

So such discussions are not really about maximizing profit, but rather are about what are the limits that government can impose. Firms use spurious arguments about fiduciary responsibility rather than say that they want a license to pollute or abuse workers. It is somewhat ironic that firms spend so much time opposing regulation, since most of it actually benefits them. Without regulations firms that engage in illegal activity would have an edge over ethical firms. Who would make more profit, a firm selling a well-tested drug or one selling a counterfeit? Who would make more profit, a firm employing skilled workers or one using slaves (or illegal immigrants)? Many of the big failures in finance over the past several decades have involved firms engaged in fraud forcing other firms to try to compete so as not to lose business. Enron was such an example as was Madoff's Ponzi scheme. How can a real investment firm compete with a firm that is just a shell?

Firms benefit from a level playing field. It means the ones which are the best managed and the most innovative will prosper. Many firms, which know they are poorly run, deliberately try to get special favors from government to compensate. This frequently takes the form of seeking tax advantages or restrictions on offerings from competitors, i.e. protectionism.

One should be very wary of firms which ask for such favors. If they can't make a profit without government help then why have they been granted the benefits that accrue to limited liability corporations? Firms which are expected to be uneconomic are generally set up as non-profits, such as hospitals and educational institutions. They get the protection of limited liability and the tax benefits so that they can perform inherently unprofitable activities for the public good.

Maximizing profit is, thus, a false justification for seeking competitive advantage over one's competitors. Such claims should be seen for what they are - special pleading.

The problem with many popular economic measures is that they are like the drunk looking for his key near the light-post. The measures are used because they are near the source of light (government data), not because they will help reveal what is happening.

The two biggest offenders are GDP and CPI (gross national product and consumer price index).

GDP measures economic activity without any regard to whether this activity is socially valuable or not. That's why we keep hearing about digging holes and filling them up as a way to provide stimulation. This is said in jest, but we really have many such programs in existence. Building useless, and redundant, military hardware (more F22's, new nuclear subs and aircraft carriers just being the most prominent right now) does not add to the social welfare. Favoring a "strong" military when the term is undefined and the goals shift allows for no measure of what is appropriate or sufficient.

Repairing the Gulf Coast also adds to the GDP, but when it is done we will have an area which is still blighted and the fixed capital will be worth less than before the storms. GDP doesn't reflect this. In fact the destruction from the storms shows up in no statistics because we don't have a measure of fixed capital. Companies keep track of the value of their plant and equipment and even use something called "good will" to reflect the value of their intellectual capital and brands. They then apply depreciation formulas to account for wear and tear. Why don't we do the same thing for the economy as a whole?

Then there is inflation. There have been many attempts to measure this more accurately, with things like hedonic adjustments being tried. This is an attempt to adjust for products getting "better" while the price stays the same or goes down. A modern computer may cost $1000, but is is much more powerful than a $1000 computer of five years ago, so by this measure it is "cheaper". But if one still has to lay out the $1000 is there "deflation"?

The current rapidly deflating asset bubble in housing and stocks was a form of inflation, but was not treated as such, except to the extent that inferred rents were considered. Most measures don't treat stocks as a factor in the market basket of purchases. The nominal value is treated when calculating people's net worth, however. This is illogical.

Then there is the issue of how to weight the market basket. Elizabeth Warren has shown that the proportion of household spending for services like education, health care and transportation has increased while the traditionally measured items like hard goods has declined. There have been adjustments to the market basket over time, but this has been highly imperfect. What inflation looks like to a young family with kids planning to go to college is much different than that for retirees on a fixed income and facing probable rising health costs.

Families have had to borrow to compensate for this unacknowledged inflation. Their net worth has decline or has been masked by the inflation in home values. But having higher debt and a variably valued asset is not the same as having no debt and a paid off home. There is a difference in risk which also doesn't show up in economic statistics.

Finally there is the use of spending as a percentage of GDP to measure future crises. Right now it is health care that is seen as being the biggest worry, but if GDP is a poor measure than using it as the denominator in a ratio is also misleading.

Along with the failure to measure capital investment there is a failure to account for the depletion of natural resources. The world has been eating its seed corn, in the form of fossil fuels and minerals, since the beginning of the industrial revolution. These can never be replaced, but their consumption is not accounted for in national or international balance sheets.

The biggest crisis in terms of the US federal budget is runaway militarism, which now accounts for 54% of discretionary spending. This is a much more accurate measure than using the percent of GDP. If half of the government spending is going to militarism then the rest of the needed services are being starved of funds, and there are just some things that only government can do. So no matter how big the GDP looks these functions will still be shortchanged.

In Europe the biggest crisis is the lack of a sustainable industrial and energy policy. The panics over fuel supplies from the east should have been a wakeup call, but apparently not yet. In Asia the biggest crisis is population growth, increasing use of raw materials with a rising standard of living, and the lack of any pollution policy

We need better measures of social health, such attempts as "gross national happiness" are novel, but still don't capture the complexity of the real world.

If policy makers focus on maximizing the measures they have (like GDP) or minimizing the "bad" ones, like inflation, they will end up making bad policy. Perhaps the world could get by with some mistakes like this when it was mostly empty and still had lots of undeveloped resources. It is now full and resources are running short. There is no margin for error anymore.

I claim it is to save capitalism and the investor class that funds both political parties. One of the frequent comments these days is that FDR saved capitalism by creating various government structures to keep it from self destruction.  

So what are the two sides fighting about? 

As far as I can tell it is whether the plutocracy should have to make any personal sacrifices while the economy is being re-inflated. Tax cuts for the better off are promoted. Deals to keep big firms from failing are deemed essential. Funding for the military and domestic policing (homeland security) is being increased. The war in Afghanistan is being ramped up. Traditional pork projects in civil engineering are being put forward. In other words same old, same old. 

On the other "side" there is a bit of a movement to help those at the bottom of the pyramid through expanded social services. The plutocrats are afraid that these temporary measures will become permanent. The Schip debate highlights this. Once (legal) immigrant children were added to the program it is clear that they will never be removed in the future. They don't want to see more programs like this. 

Proposals to fund part of expanded social programs by shifting wealth and income from the top are met with a barrage of cries of socialism and various pseudo-scientific studies showing that this will lead to the end of the American way of life. When one claim doesn't hold up another is put forward using the "throw everything at the wall and see what sticks" mode of argument. 

The American people want increased social services, they want better regulation of foods, drugs and other consumer items. They want better working conditions and the right to organize if they wish. They want income security through assured health and retirement benefits. They want better education and prospects for their children. 

That their goals and those designing the "bailout" are different couldn't be more stark. Obama is being pushed into putting some symbolic populist measures into place as a way to forestall the public becoming more insistent on the goals I outlined. Limiting pay and perks is just one such misdirection. 

For a long time the most popular essay on my web site had to do with immigration. Starting last October those dealing with wealth inequality have become the most read. The public mood has shifted and the plutocrats know it. Unfortunately they still control the levers of power and it seems that they will be able to forestall any fundamental shifts in the social structure. 

Minimizing the pain for the unemployed is a pretty poor goal for the Dems to be satisfied with, but that seems to be all they aspire to.

In most countries there are four (or five) centers of power:
1. The executive
2. The legislature
3. The judiciary
4. The military
5. The church

In the US the church has always wielded indirect power, although in the past four decades there has been an unusually close alliance between certain religious sectors and the Republican part. This is atypical for the US.

What I want to focus on is branch that we are taught in civics class doesn't exist: the military. The idea is that the US doesn't have such a fourth branch of government because the military is under "civilian" control. This is a convenient fiction, 99% of the military structure remains in place from one administration to the next. It is the largest recipient of discretionary federal funds, now at 54% of the budget. To ignore its influence is to make a big mistake.

Until the 20th Century the US tended to have a small military and the general sentiment was for America to stay out of foreign entanglements. There were some exceptions with the Monroe Doctrine and the like, but most military expansionism was focused on continental territory.

When leaders wanted to engage in foreign military action they needed to gin up support by creating a sense of outrage in the public. "Remember the Maine" was used to justify the Spanish American war. Wilson used various claims to get support for entering WWI, LBJ invented the Gulf of Tonkin and even FDR had a campaign of assisting England before Pearl Harbor to sway public sentiment. Recent events have followed this pattern.

There has been a subtle change since WWII, however. Once the military was ramped up to the extent that it became a world player it has never gone back to being only reactive. The first to be affected by the rise of the permanent fourth branch of government was Truman. Enough evidence has now come out over the decision to use the A bomb on Japan to show that he was influenced (or manipulated) by the group that had been working on the bomb and the generals who wanted to use it as a way to signal US superiority, especially to the USSR, in the post war period. Truman was the first modern president to be held captive by the military.

I won't recite all the other examples, but it is clear that LBJ and Nixon were also manipulated. Their mishandling of the Vietnam war was directly related to the poor intelligence information and biased advice they were getting.

The responses of both Bushes to events in the Middle East are just the latest in this chain. The fact that Bush II was happy with false intelligence only shows that some people are content to live in their bubble.

We now come to Obama. Even before he was elected he started to make statements that are right out of the permanent military playbook. This includes the need to expand the military and, now, to ramp up attacks in Afghanistan and Pakistan. The statements that are made by his military advisers sound just like those heard from McNamara and his crew during the Vietnam war. These include the idea that we can pacify the local population, by eliminating the insurgents, that the failure of our programs is due to corruption or lack of adherence to our plans by the government leaders and that an increase of troops on the ground will make a difference.

None of these tactics have ever worked in the past. The evidence of history is there for all to see, not just in wars that the US has fought, but elsewhere. The IRA was not conquered, the parties finally realized that a political solution was the only way out. The rebel forces in parts of Africa have been carrying on civil wars for as long as 40 years. The Kurds have been doing so for centuries.

So what can explain Obama's shortsightedness? Is he a war hawk like Bush? Not likely. Is he in a bubble where all he hears are the daily threat assessments? Perhaps. What I claim is that all presidents are captives of the military branch. They wield so much power, have so many "friends" in congress and control so much of the industrial production of the country that a president isn't able to muster enough support to go against their wishes.

How would he do it? Suppose he proposed a sudden pullout of troops, or a radical downsizing in military spending. Would congress pass the enabling legislation? No. Would he be re-elected. Doubtful.

Is there anything Obama can do to dig himself out of the Middle East quagmire? I'm stumped, recent history seems to indicate not. We only leave after we have not only lost, but been throughly humiliated. When a segment of our government is larger than that of all the other industrialized countries combined to think that its doesn't wield power is naive.

If anyone one thinks they have a way to remove the undue influence of the military on US policy, I'd love to hear it and if you think you have a way to "win" in Afghanistan please explain that too.

I got three pieces of mail yesterday each of which contained a deceptive offer. At the risk of boring the reader with the details:

1. An offer by a local law firm calling itself "The Tax Adjustment Agency" to file an appeal on my behalf over the amount of my property assessment. In return for filling out a bit of paper which contains little more than my name, address and lot number (which I can do myself for free) they will take 50% of any reduction in taxes I might get in the first year.

2. An offer by the local phone company for a combined rate for phone and internet use, but only for six months and with no indication of what the rate becomes afterwards.

3. A note from my credit card company stating that as they have been taken over by a new bank in the future any standard payment arrangements I may half to pay off an outstanding balance will be replaced by one in which they just deduct the minimum. Furthermore the order of which loans will be paid will be to their benefit, namely lowest interest loans first.

Being clever all of these offers are strictly legal, but still deceptive. They don't inform me of how little they are doing for the money, or my other options, don't state the full details of a contract I'm entering into and depend up the average consumer not to notice the payment changes.

Just one more example. A TV show had a segment about "payday" loans which used to be only offered by loan sharks, but are now a big business. They will lend you $300 for two weeks and they you pay back $345. If you can't pay then they will extend the loan for another $45 etc. It turns out that about 85% of the people who use such loans are repeaters and are "trapped". The attractive young woman from the industries trade association (called "The Community Financial Services Association of America") explained with a perfectly straight face that this service was only intended for those who had a rare, sudden need for some extra cash, in spite of the evidence to the contrary.

I wonder how she lives with herself? Did she plan on becoming a spokesperson for loan sharks when she was growing up?

I'm going to propose a Gresham's Law of work: Bad jobs drive out good ones.

Firms which want to behave ethically are put at a disadvantage compared to those who don't. Of course we understand that outright fraud has an advantage, one only has to look at the success of Enron or Bernie Madoff's Ponzi Scheme, but no one can compete with crime. A man sticking a gun in your face has a very high return on his investment.

A bank which didn't boost its fees by deceptive means, or charge the maximum interest it could get away with wouldn't earn as much as its rivals. Investors would complain about its lack of financial "innovation" and demand a management team that was more like the others. And they would get it too.

Alan Greenspan finally stated that he was mistaken when he thought that firms would remain ethical and prudent enough not to damage their own enterprises, but as a promoter of unbridled competition and lax enforcement what did he expect would happen.

As has been explained many times, one needs a balance of forces. On one side is the force of acquisitiveness which leads people to start up and run enterprises. Then there is the desire for fairness demanded by the public and provided by government acting on their behalf. Finally there is the demands of the workers to fair compensation and working conditions as expressed by collective associations that they establish.

Take away or shorten one leg of the stool and it tips over.

Is there any way to restore a sense of ethics to the business world and to make people fee shame when they cheat for a living? You tell me.

The fact that politicians go before us everyday and lie to our faces about the reasons for the positions they take helps set the tone for what is acceptable in a society, but that's a topic for another day.

The meltdown in the financial sector has brought forth lots of pontificating about the need to restructure the economy or, at least, the financial sector. But before this is done, one has to figure out what the present system is.

Here are some indicators:

All large business sectors get economic support from the government. These fall into two broad categories, tax breaks and purchase support. The aerospace industry is kept afloat because of the purchase of military hardware, as is the US shipping industry. Agricultural commodities receive subsidies and tariff support. Surpluses are bought by the government or their sale is facilitated to foreign states. Transport is subsidized through road construction, airport construction and passenger rail subsidies. Broadcast and telecom firms get radio spectrum and contracts for communications services including contracted wiretapping.

The extractive industries get depletion allowances, cheap land leases, and various other tax breaks. Newspapers and broadcast stations are allowed to restrict markets through joint ownership exemptions. Mortgage and student loans are handled through quasi-governmental firms. Now the big financial institutions have received funds to allow them to keep operating as have the auto companies. Even retail stores get real estate and sales tax breaks as an inducement to them moving into a new locale.

During this downturn the government has been explicitly pushing for the consolidation of financial firms. This is a complete reversal of the policies for most of the 20th Century where "trust busting" and anti-trust legislation was the norm. There isn't even a mention of excessive industry consolidation these days no matter how concentrated markets become. Bulk agricultural products in the US are controlled by three firms, meat processing by about five, etc.

What we have is state sanctioned enterprises which are monitored indirectly by means of the subsidies they get from the government. In addition there is a revolving door between business and government which ensures that the mindset of those in both areas are the same. There is no concern about monopolies, since the government is managing them anyway.

The fuss in the US and the UK at the moment is whether to allow this symbiotic relationship to be made explicit. If the government "takes over" a bank then we are seeing "socialism" which has been the ideological bogeyman of capitalism for 150 years. The fact that we have had something similar for decades is the dark secret.

Bailout plans amount to little more than deciding which pocket to take the money out of and which to put it in. Is there any real difference between the Federal Reserve lending a firm some money based upon "assets", taking preferred stock as collateral or "taking over" the firm? The only thing that changes is the name of the CEO. The present bailouts have all been outsourced to management firms to handle because the Treasury department doesn't have the "expertise" or staff to do it on its own.

I'm stuck with what to call this system. The Chinese seem to call it state controlled capitalism, but maybe we should call it pseudo-socialism or invent a new term altogether. Whatever it is, it isn't capitalism. That only exists for the small players who continue to fail at the typical rate of 80% within five years. This churn makes it look like free enterprise is the basis of the economy, but is more like background noise.

State sanctioned oligopolies have their benefits. They provide high profits at low risk, they provide good earnings to those fortunate enough to get on the inside and they ensure that workers can't push their cases effectively. In other words they benefit the select.

They also have their drawbacks. They stifle innovation and prevent new firms or technologies from entering markets as easily as otherwise. They keep prices high and choices limited. They are inefficient in their use of resources. The allow their economic power to influence political events, that is the are anti-democratic. In other words they benefit the select.

Is there any chance that a new era of trust busting and the elimination of the  alliance between business and government can happen? Have you heard Obama or anyone in his team mention monopolies?

For awhile people have been trying to name the Reagan-Bushes era by analogy to the Gilded Age, the Jazz Age, etc. Well recent events which have brought it to an abrupt end have revealed what it actually was: the Ponzi Age.

The real Ponzi Scheme now in the news is just a small example of the underlying story, which is based upon government encouraged private actions.

Here's a quick outline.

Ponzi Schemes require using the money from those who join later to pay back those who joined earlier along with the huge profits they were promised. It can continue as long as the new arrivals supply enough funds to keep those in the scheme happy. As time goes, on this number grows geometrically which is why it is also called a pyramid scheme, with those at the top (the original participants) being support by a bigger and bigger base.

In the US there was a shift in economic philosophy starting with Reagan. No longer was the ideal behavior one of tucking away money for the future, saving up enough for a down payment on a home, and depending upon a company run pension plan for one's old age.

Instead workers were encouraged (or forced) into becoming investors to supply the needs of their old age. Participation in the stock market used to be in the 10-15% range, but the creation of IRA's and 401K's has pushed this number to over 50%. This money flows into the financial sector every month and provides the fresh blood that a Ponzi scheme needs.

Along with the shift in savings allocation firms were encouraged (bribed by tax breaks) to shift their pension funds from bonds and other secure investments into the stock market and other risky activities. This added to the supply of fresh funds.

So much money has to go somewhere and since there are a limited number of stocks (and corporate bonds) issued there is competition to hold them. When there are many buyers and fewer sellers you get price inflation. This is exactly what happened. Over the past 40 years the stock market has risen to unprecedented heights, both as compared to earnings and as compared to yields from other investments. People were led to expect 15% or more returns on a steady basis, even though the long term average is more like 8%.

There is an old joke about two diamond dealers who keep selling the same stone back and forth to each other at ever higher prices, until one says he doesn't want to buy. Then the market collapses.

Much has been made of the huge rise in wealth inequality over this period, but the principle reason is because the wealthy have owned the type of investments that have seen the biggest rise up in price. If you own a million shares in a stock and it goes from $1 to $10 you are "worth" $9 million more. You housekeeper's IRA owns the same stock, but she only has $10 invested, she becomes $90 wealthier. Before the rise the wealth difference was $999,990, after 9,999,900 a huge increase in spread.

In the past decade or so the influx of money into the stock market from investors has slowed because many more people were already in the system. There was not the same rapid shift into these plans as before so the growth rate slowed. At this point the system was in danger of imploding. Fortunately for the financial sector, the shift to globalization occurred at the same time and the funds available expanded to include much of the rest of the world.

Now the financial markets had infusions of cash from China, Japan and elsewhere to buoy them up and the party continued for almost another decade. This has now, finally, slowed as well as these countries have started to need these funds for their own domestic purposes and as the yields and safety of their investments has become less secure.

The traditional economists have been thrown into a panic. First, their livelihood depends upon them promoting the virtues of Ponzi investing and, second, the "assets" which have been the basis of the wealth rise are shrinking. There is much talk about the dangers of deflation, but who does it really hurt? If you are a consumer and gasoline or TV's are cheaper in the future why should you complain? Even if you home is worth less, you still get to live in it and have the value that it provides. When you buy a new car it immediately goes down in value, but you continue to pay off the loan because you are still getting the same utility out of it as when it was first purchased.

There is also the argument that consumers will stop buying because they will be better off waiting since prices will be lower in the future. But modern electronics gets cheaper all the time and people buy it anyway even knowing that a better deal will be available later. There is a worth to having the use of a purchase now and not in the future that outweighs this type of calculation for many items. In addition necessities like food and clothing can't be put off, one has to eat and one can't walk around naked.

So the assets which are deflating are those held by the wealthy and these are the ones which they are really worried about going down. To go back to our millionaire and the housekeeper if things go back to the way they were originally she loses $90 and he loses $9 million. Who is worried?

Let's have a little honesty here, the aim of government and the economists who they employ is to preserve the Ponzi generated wealth by re-inflating the balloon as quickly as possible, but where is the fresh money supposed to come from? The average worker is already participating at a level which can't change much and foreign investors are moving elsewhere. So governments do what they always do in such cases, they print money and pump it into the economy. More money sloshing around means more available at the base of the Ponzi pyramid.

Can this work? Not over the long term. More money always leads to inflation which, while it makes apparent prices go up, does nothing for the real price of assets. In fact banks and other lenders hate inflation because they get back devalued currency. The reluctance of banks to lend the bailout funds shows that they understand that inflation is on the horizon and that lending money now is not in their interests. Economists have been predicting that inflation is under control because of the new understanding of fiscal and monetary controls. These are the same people who claimed that we were in a new era of continually rising asset values just a few years ago. Wrong then, wrong now.

The Gilded Age ended with the creation of the "progressive era" regulatory structures. The Jazz Age ended with the Great Depression. What will come now that the Ponzi Age is winding down?

There is much talk lately about what should be done about all the illegal acts committed during the Bush administration. The Democrats are already talking about "moving forward" and not focusing on the past. This is a claim to practicality, but is just an excuse.

There have been clear indications for much of the past 50 years that GOP administrations are more willing to violate the laws. These fall into two broad categories. The easier one to deal with has to do with standard corruption. Selling government influence, taking bribes in the form of campaign contributions or promises of future employment, or favors while in office.

This has become especially outrageous during the Bush years as a total lack of desire to prosecute, or even investigate such misdeeds, rose to an unprecedented state. Even private firms have become generally immune to punishment for violating the law.

The second violation of the law has to do with government actions meant to further legitimate aims, but which themselves break the laws to achieve their aims. Right now those in the forefront have to do with sanctioning torture, violating the privacy provisions of the Fourth Amendment and obstructing investigations by the legislative branch.

As the Clinton years showed the GOP is willing to use legal mechanisms for political aims. The impeachment of Clinton being the pinnacle of their efforts. There were many others, including the refusal to allow federal judges to be seated and misuse of the filibuster.

Now if the Dems turn around and start to prosecute the violations of government policy the they will run the risk that the next time the GOP is in power they will even engage in more politically motivated persecutions. This is what happens in third world countries which only pretend to be democracies. At each change of government all the prior leaders are at risk of prosecution. Such a course of action leads to the complete destruction of any adherence to the rule of law. Since the GOP has already shown that they are willing to play this game, timidity by the Dems is unwise. You don't defeat a bully by giving in to him.

So what should be done?

I suggest two courses of action. The activities which are based upon traditional monetary corruption should be left to the appropriate judicial departments to investigate. This, of course, means that the hacks and cronies have to be removed from the departments. Obama seems to be making some moves in this direction, but a lot depends upon appointments of US Attorneys and the willingness of local jurisdictions to investigate regional crimes. The regulatory agencies have to be restored as well.

As for policy-based misdeeds. There needs to be away to counter the already-forming critique that any investigations are just "partisan politics". Existing law protects most government officers even if they do the most stupid or ill-conceived things as long as they do them in good faith and as part of their official duties. So "heckuva job" Brownie never gets charged for being incompetent.

There is nothing to stop congress, however, from holding hearings on what went wrong and who was responsible. This is similar to the truth and reconciliation commissions that have arisen elsewhere. I'm not sure about the forgiveness part of the process, people in the US don't seem very willing to ever admit to a mistake or apologize.

In addition to hearings, the Obama administration should sign the treaty which established the International Criminal Court. If there are injured parties, say Guantanamo detainees, who want to bring charges at the ICC then this would allow them to do so. International law allows countries to arrest people accused of being war criminals as the UK did with Pinochet. If the ICC decides to issue a warrant for Gonzales or Cheney or Rumsfeld then this is not a political act by the Obama administration.

If the US is not willing to adhere to international law, including taking responsibility when it breaks it, then why do they expect others to do so. We are quick to condemn Al Qaeda or Hamas for their actions, but don't want to be judged for ours. This is not the rule of law, it is the law of the jungle - might makes right.

How about, Mr. Constitutional Lawyer president? Join the ICC.

As has become abundantly clear over the past few years there are no "good" solutions to the energy crisis. Clean coal has been revealed to be anything but. Tar sands rip up the landscape, create huge pools of contaminated water and tailings and have a low net energy yield. Corn and other plant-derived ethanol consumes resources needed for crops and doesn't yield much net energy. Oil and gas remain the most economic choices, but suffer from variable availability, price uncertainty and declining reserves.

In addition, all of these fossil fuels contribute to the rise of atmospheric carbon dioxide levels. Efforts to sequester the waste gases are not available and many proposals lack scientific rigor.

Wind, wave and solar will become increasingly important, but it is unlikely that they will provide enough of a solution to meet demand. At this point I usually argue for cutting down on demand by re-framing the consuming societies so that they are not so wasteful.

I think that there is another alternative that we should consider - nuclear power. The world has enormous stocks of highly refined Uranium and Plutonium which could be reprocessed and used as fuel for nuclear power stations. In addition existing spent fuel can be reprocessed and provide fresh fuel. In addition there is the possibility of building more breeder reactors to provide further supplies.

There are several objections to nuclear power. The ones about control of nuclear material are based upon unfounded fears. The risk of "proliferation" because there is fuel in a reactor is irrational. The world handles huge amounts of radioactive material every day for use in medical and industrial applications. Radiation from Cobalt is more deadly that that from Uranium fuel rods, yet adequate controls keep the number of incidents to a handful each year.

There are new generations of nuclear power plant designs which avoid the problems of the past. Several of these are currently in use and several others being considered for new plants. Part of the problem with nuclear plants has been poor citing decisions, poor planning for storage of spent fuel, and a lack of community involvement. If a plan to build huge solar arrays, far from population centers in the US desert, can be considered then so can citing nuclear plants in similar locations.

One of the big issues has to do with funding new nuclear plants. Some studies claim that if total costs are included they are not economical. The latest number being bandied around is in the range of $0.20 per kilowatt hour, about ten times what the industry claims. For the sake of argument, let's assume that this true.

This cost is only excessive when compared against flawed analysis of alternatives. The two biggest costs that are ignored when calculating the cost of fossil fuel plants are the value of the non-replaceable fuel and the cost of the emissions on the health of the planet. At some point such costs become unacceptable and only those processes which avoid them are a viable choice. We don't put a price on depletion and pollution because we can't, not because they don't have a cost.

I propose we decommission all nuclear weapons over time and use the nuclear material for power generation - the swords into plowshares of the title. In addition I propose that all aspects of nuclear power generation be run by government agencies set up specifically for this purpose. In the US the TVA has provided power to an under-served region for many decades. The government undertook this because a private solution was unworkable.

As the recent disaster with a TVA coal-fired plant shows, even government agencies can become complacent and sloppy. The solution to weak supervision is better monitoring, not condemning government administration. The number of disasters associated with private power generation shows that who owns the plant is no indication of safety or good management.

I don't like nuclear power, I think the risks are minimized, but I think this is because private firms need to make a profit from something which cannot compete economically with fossil fuel. Eliminating the profit motive and the need to cut corners can help ensure that plants are built and run safely. If it costs more, it costs more. It's better than seeing our coastlines underwater in a few decades.

Nuclear power won't be a permanent solution, that's where my usual push for reforming our social systems so they aren't based upon excessive consumption and consumerism. However, if done wisely, it can provide a bridge to a new system and allow time for alternative technologies to be developed. I'm still hopeful that some sort of controlled fusion can be made to work, but we need to get there from here and burning more oil is not the way to do it.

When faced with only unpleasant choices one still has to chose. Even doing nothing is a choice, a fact that those who want to minimize the climate threat seem not to realize. I'm not trying to rehash all the debates on nuclear power from technological or economic views, these seem never to end and how you feel about the issues seems more to be based upon personal prejudices than on the available information.

I'm arguing for nuclear power as a moral issue. We need to get rid of nuclear weapons, a moral choice. We need to reduce greenhouse gasses, a moral choice. We need to leave a habitable planet for future generations, a moral choice. For too long decisions have been based upon economic arguments. Since when did money become the measure rather than morality?

The never-ending debates over how to best get the economy going again swing between tax policies, interest rate adjustments and public spending. All of these require a huge bureaucratic system to be put into motion. My plan is much simpler and can be put in effect immediately.

Here's how it works, those who are unemployed or underemployed get income support through existing insurance programs. Then instead of sitting around or pretending to look for work they use their time to volunteer.

There are many areas where extra hands could help. For example, teaching reading or helping kids with their homework in public libraries in the afternoons and weekends.

Or monitoring after school activities that give kids a place to go while their parents are working. The gym, library and auditorium are there, it just needs some adults to supervise or create activities.

How about driving people to doctors appointments or job interviews or the like? Even visiting the home-bound just for companionship is a good idea.

If you want to get more ambitious, those with the appropriate skills could volunteer to help people fix up their homes with improved insulation and the like. The issue of who pays for the building supplies would need to be worked out, but many localities already offer grants for this type of thing.

I'm sure there are dozens of other areas which could benefit from some volunteer labor. Since these volunteers are being paid they are not sacrificing financially by being good Samaritans.

Unlike the job corps or the peace corps or the WPA these efforts would be from the bottom up and responsive to local needs. One could use a mechanism like Craig's List to coordinate things. All of these projects are "shovel ready" right now.

Why the Middle East Conflict Never Ends

The strife in the middle east has been going on, in its latest phase, for 60 years. Now when something goes on this long without being resolved there has to be a reason. The reason can usually be found by examining who stands to gain from the status quo.

I'll offer three hypothesis as to who these might be.

First there are what I call the "magic sand" people. These belong to all three of the monotheistic religions of the region: Judaism, Christianity and Islam. All claim that certain spots in the desert have special properties to them and their group is thus entitled to control over these regions. In some cases they all lay claim to exactly the same spots. They use historical evidence as justification for their positions, even though these claims are based upon conditions which existed over a 1000 or even 2000 years ago. Historical clams can't be allowed to trump everything that has happened since.

This group is very vocal and can be counted on to create civil unrest and perform acts of violence in pursuit of their cause, but they are tools of the other groups.

Second are the oligarchs who run all of the countries in the region. There are no functioning democracies in the region, although a few have elections and other democratic trappings. In addition, they all suffer from gross disparities of wealth. Not only within a state, but between them. Egypt has no oil and is poor, Kuwait has too much oil and is obscenely rich.

I have some statistics on this which can be seen in the table at this link. Look at the column which list oil reserves per person to see the imbalance.

Another measure is the "Gini" Index which ranges from 0 for a perfectly equal society to 100. For comparison, Norway has the lowest at 25.8, the US at 40.8. There are only statistics for a few middle eastern states: Egypt 34.4, Yemen 33.4. The lack of data for the most unequal like Saudi Arabia and the Emirates is telling. The states where everyone is poor release statistics, those with the most extremes in wealth suppress them. International agencies, which could estimate this, seem reluctant to do so, since they don't want to offend our friends with the oil.

Third are the oil consuming states, principally the US and Europe. They have long pursued a policy of keeping the oil states economically, socially and politically underdeveloped. This is a variation of the banana republic strategy that was the norm for South America for much of the 19th Century. We support oligarchs because it is easier to do business with a small group of powerful individuals than to have to deal with messy democracies and the will of the people.

The oligarchs don't want the population noticing this and rising up to remedy the situation, so they create distractions. These distractions are the issue with Israel and the ethnic rivalries that never get resolved. This is where the magic sand people come in. By blaming everything that is wrong with the region on Israel it is not necessary to deal with the local injustices.

The US also has its proxy in Israel. It supplies it with arms and other materiel so that it can perform the type of destabilizing tactics that the US wants without the US having to get its hands dirty. Notice that all the fighting in the regions that has involved Israel has never been directed at toppling a major Arab political hierarchy and replacing it with democratic institutions.

In addition the Arab states have refused to allow the displaced Palestinians to resettle elsewhere in the region. They want to keep this group bottled up and angry generation after generation so that there is a steady supply of foot soldiers.

There are no players with clean hands in this conflict.

The Jews in 1948 did some sort of land grab, whether this was done under a "mandate", whether it was fair, whether Arabs were forced out, fled from fear, or were duped into leaving by their leaders, is a historical question which seems impossible to answer fully. Whatever the circumstances, it happened. It was an injustice, but it wasn't the only injustice in history.

The Arabs who fled have been mistreated by fellow Arabs ever since. This is also an injustice, but it is a continuing one.

The Arabs who stayed in the region have also been mistreated. The ones in Israel proper somewhat less than those in the areas claimed by the Palestinians. These are currently being mistreated by both the Israelis and the radicals in their midst.

Solutions

Are any of the proposed "solutions" viable? It would seem not or they would have been implemented already.

To my mind the "two state" solution is the least viable option. The territories that the Palestinians would end up with are not big enough and don't have enough resources to provide for a decent standard of living. A divided state is also unworkable. Even if the free movement between Gaza and the West Bank became the norm this would still add gross inefficiencies to any economic development.

The desire of the magic sand people to have those in the opposing groups vanish from the region is, of course, also impossible. That some keep wishing for this just means that they have been programmed to avoid thinking about realistic solutions.

Stamping out opposition by military means has also proven a failure. This has been a failure not only between states, but within states as the recurring battles in Lebanon illustrate. One cannot solve problems of civic injustice by military means. One can cower a population as totalitarian states have done in many cases in the 20th Century, but the cost is high in terms of low economic development and blighted lives.

I suggest a new approach. Redressing the history of injustice by means of money.

All those who have suffered by being displaced, or being put into situations of economic constraint, should be compensated financially. This means, at a minimum, "Palestinians" living in camps throughout the region as well as those currently living in the disputed regions. The compensation should extend to the third generation of those affected. That is those who still under 20 years old as well as those who experienced displacement and hardship directly.

The compensation should be large enough that these families can establish themselves economically. I don't have an exact figure, but let's say somewhere in the neighborhood of $50-100 thousand per adult. This money would be paid out over a period of a few years via an international agency which would hold the funds in a special banking system set up for this purpose.

Those countries which are now keeping refugees bottled up or refusing to allow them to become full citizens would need to allow them to integrate into the general society, or move to countries in the region which would be willing to do so. For each case that was thus resolved the host country would also get some direct aid to assist in resettlement and integration.

The Palestinian areas would enter a new status. Gaza would become a "special administrative unit" of Egypt and the west bank of Jordan. This requires a bit of explanation.

The idea of sovereign states based upon cultural homogeneity has been a dominant trend over the past several hundred years. Regional difference in Europe were generally minimized to promote the idea of a nation. This can be seen in the consolidation in France, Italy, Germany and the UK. Cultural and language differences have been minimized and a national identity created in its place. The results have been fairly successful. Using this model has worked less well in other areas of the world, especially in Africa and the middle east. Arbitrary sovereign state borders were created by colonial powers with little regard to the ethnic groups within the regions. The results have not been good. There have been continual flareups of ethnic violence ever since.

I propose a new type of citizenship for groups in these regions. They maintain their sovereign-based citizenship, but also have a clan or ethnic group formal identity. This second identity permits them to participate in the administration of local affairs using traditional cultural mechanisms. We have a model of this in the US with American Indians. They are US citizens and, if they wish, they can participate in tribal affairs. The rules for such participation are up to the tribe and may involve living on the reservation or other criteria.

Many countries with large numbers of people living elsewhere also accommodate this by allowing them to continue to vote in local elections. In some cases they don't lose this right even if they obtain citizenship in their new place of residence. An example where such a dual identity could work to reduce friction is with the Kurds who are spread over three sovereign countries, but consider themselves as one people.

Ethnic groups with a strong cultural tradition want to preserve this and the primary focus for them has to do with education and local land disputes. There is no reason why these administrative tasks can't be handled locally.

So the "special administrative districts" I'm proposing for the Palestinians would be like this. If they chose to remain in their enclaves they can run their own local affairs. If they chose to minimize their cultural heritage and move into the larger society then they give up some of these special privileges.

Fears, such as those expressed by the King of Jordan, about his country's national character being overwhelmed by the increase of new citizens are a type of cultural racism. History has shown that immigrants integrate into the general society, almost completely by the third generation, if they are allowed to. If the US can accommodate people of widely differing backgrounds, Jordan can accept some who differ only slightly from the native population.

People who are granted full rights become just as patriotic as those who have lived their before. It is only when the governments continue to emphasize the differences that problems arise. So the Palestinians become dual citizens or not as they wish.

Chances for Success

Is any of this possible? As I said out the outset, the reason there has been no resolution to the issues is because there are strong forces who favor the status quo. Are they about to give up their privilege voluntarily? Will the west push for democratization of the region and take on the associated risks of having to deal with populations that want to trade their resources on their own terms, not ours? Will the military establishment be willing to stop selling unneeded, expensive and provocative armaments to the region and lose the revenue?

Will the local oligarchs be willing to cede control to the people? Will the hyper-wealthy oil states be willing to share their revenue more equally with their own population, and more importantly, with their impoverished neighbors?

Obviously the vested interests have the upper hand. Change has to happen from the bottom up. The people of the region have to demand a better deal. The first step in this is education. They have to learn that their interests are being ill served and who it is that is working against them. Focusing on the Israel/Palestinian conflict is a deliberate distraction and only education can explain this.

The west cannot force a solution on the region, even if it wanted to, but those interested in social equity and economic advancement can promote a better understanding of the issues and not fall into the trap of debating which side's moral failings are more egregious.

First comes education and the fostering of good will, then comes cooperation, then come the calls for social justice within the population. Then, and only then, can real solutions emerge.

With investments falling in price recently people have been looking at the whole concept of money and value more closely again. Money is a topic which has confounded thinkers for several thousand years, so I don't think I'll be able to explain it either. Instead I'll just ask some questions.

Until the invention of paper money, money was based upon some relatively rare tangible object. Silver and gold have been popular choices for a long time. Their virtue was that one can't counterfeit them, although there have been cases of adulteration and "clipping".

Having a governing body issue coinage was a way of simplifying trade since the provenance eliminated the need to verify each coin every time a trade was done. The problem with gold and silver is that the "wealth" of a society was based upon an arbitrary commodity which had insignificant purpose aside from as a medium of exchange. Jewelry is just another way to hold on to this commodity.

It was only in the past 100 years or so that gold and silver have been needed for actual industrial production. Silver in photography and some electronics and gold in electronics. Even today industrial use of gold is only about 20% of the amount mined.

With the rise of mercantilism and industrialization the limits on the actual amount of gold and silver acted as a barrier to trade. One might have a large amount of grain to sell, but if the buyer didn't have the gold to pay for it there was no deal. This led to the creation of credit. So "money" was now created without any connection to scarce commodities, but only based upon a promise. From letters of credit to central banks and the issuance of paper money has been a long path in time, but a short leap conceptually.

Once we permit trade to take place based upon credit then we have allowed money to be created outside the direct control of national mints. Credit is a promise and the "value" of the promise is based upon expectations that the loan will be paid in a timely fashion.

Those who see the evil in "fractional banking" and "fiat money" have confused a specific mechanism for the creation of credit with the idea that money is based upon trust, regardless of how this is defined. So proposals to limit banks to lending only what they have in reserve, for example, just put the entire creation of the money supply in the hands of the government. If they fail to put enough money into circulation (either in the form of paper or bonds) then trade becomes constrained just as it was with a limited amount of coinage in circulation.

Proposals to substitute something for credit all are variations on going back to the old system. Should we base wealth on land or a basket of commodities? If so then how do you determine the "value" of these things. We have seen recently that land and oil can change value just as rapidly as anything else. There are no physical commodities which have a value independent of what people assign to them.

One could argue that the use of credit has worked well since it became the norm in the 20th Century, but this isn't true. There have been dozens of revaluations of money and a successions of international mechanisms set up to deal with problems. Going off the gold stand, Bretton Woods, the creation of the IMF and World Bank have all been attempts to systematize a process which is fundamentally based only on trust. We are now going through the latest international convulsion over money and will probably see some new ad hoc mechanisms put in place to restore confidence.

As I said, I don't have any ideas, but it seems to me that we will be stuck with trust-based credit for the foreseeable future.