jueves, 12 de febrero de 2009

Thoughts on the stimulus and the bailout

Without a doubt, this has been an important week in Washington. Our elected leaders have made decisions over the past several days that will likely have an enormous impact on both the American and world economies for many years to come. On Tuesday, Treasury Secretary Tim Geithner (D-Goldman Sachs) unveiled a 1.5 trillion dollar financial rescue package, intended to restore the flow of credit to individuals and businesses. Today, the House and Senate agreed on a $789 billion economic stimulus plan, which aims to create or save 3.6 million jobs. Both the financial rescue plan and the stimulus are not completely terrible. Geithner appears to have abandoned the idea of over-paying the banks for toxic assets as a means of rescuing the financial system, likely under public pressure. Progressive activists also deserve a lot of credit for making the stimulus bill less bad than it could have been. Thanks to their activism, the bill has been stripped of some of its most awful components, including subsidies for "clean coal" and nuclear power plants, and still includes several progressive components which came under fire from the right, including the "Buy American" provision and funding for medical effectiveness research.

Nonetheless, the financial rescue and the stimulus in particular are quite disappointing. When the country is legitimately facing the most severe economic crisis since the great depression, half measures are not good enough. Progressive economists like Dean Baker and Paul Krugman have issued direct, specific recommendations for what the government ought to do to get us out of this crisis. However, their advice has gone largely unheeded. Of course, it's nothing new for the government to reject the advice of the likes of Krugman and Baker, who advocate policies like single payer health insurance and the elimination of patent protection for pharmaceuticals, which threaten the obscene profits of entrenched elites. However, given that we're facing a true crisis, I was under the bizarre delusion that our government would do the right thing. As I said, bizarre.

With regard to the collapse of the credit markets, the government really has only one solution: nationalization of the banks. We cannot allow the banks to fail completely because doing so would lead to the further collapse of the financial system and potentially depression-like conditions. We could just hand out cash to the banks through loans with no strings attached or purchases of bad assets at above market prices, aka Lemon Socialism, and there's an outside chance that might jumpstart the financial system. But Lemon Socialism, which is what we've been doing since last September with no success, leaves the banks' management in place, aka the folks who got us in this mess, and protects the banks' shareholders. In other words, it's just welfare for rich people and thus ought not to be and ought not to have been considered an option. Additionally, according to Economist James Galbraith, leaving the banks' management in place likely prevents the public from being able to access the banks' books. Without having unfettered access to their books, we won't know what their assets are worth, if in fact they're worth anything at all. Many large financial institutions, like Bank of America and Citibank, are likely already insolvent and only being propped up by the expectation of government aid. Thus, the only reasonable option we're left with is to take state ownership of the banks, fire the management and wipe out the shareholders, and then recapitalize them. State ownership ensures that the people control what the banks do with the money. Taxpayers also get an equity stake when you nationalize the banks, so if they return to profitability the returns go to you and I, not private investors. According to Matt Yglesias, the Geithner rescue might, through a roundabout way, lead to nationalization. Let's hope that actually happens. However, both Geithner and Obama have publicly opposed the idea of nationalization, so it's highly unlikely, to say the least.

As for the stimulus, according to Dean Baker, it's relatively simple to calculate how much the government needs to spend to get our economy back on track. Due to the wealth effect, the collapse of the $8 trillion housing bubble, the $7 trillion stock market bubble, and the multi-trillion dollar commercial real estate bubble will lead/ is leading to an $800 billion decline in annual consumption. Additionally, the collapse of the construction industry due to the popping of these bubbles will reduce demand by another $450 billion dollars. In total, that adds up to approximately $1,250 billion in lost annual demand. Yet, the federal government plans to spend $789 billion over the next two years, which is clearly nowhere near enough. Some of that spending, such as infrastructure investments, aid to state governments, and increased unemployment benefits, generates more dollars in increased economic output than it costs the government in additional spending, due to the multiplier effect. However, tax cuts, which represent 36% of the bill, have no such effect, and generally produce much less in added economic activity than they cost the government. Of course, it is possible that, against all odds and all predictions, the economy will recover quickly and a stimulus of such magnitude will be rendered unneccessary. But such a situation isn't really all that bad, because, as Krugman explains in his recently re-released book, The Return of Depression Economics, it would only lead to inflation. Policymakers know how to counter inflation, in fact they have many tools at their disposal to deal with it. For instance, they could raise taxes, increase the interest rate, or even better, institute wage and price controls. In contrast, when faced with the risk of deflation, which is a real possibility in this economic climate, policymakers are generally clueless; Japan was stuck in a recession for an entire decade due to deflation and it was only thanks to an export boom that they escaped it (now of course, they're back in a recession). An export-driven expansion is unlikely to happen in the United States or anywhere in the near future, because the whole world is doing badly.

Faced with such dire conditions, one would assume that a responsible congress and executive would propose similarly bold solutions. Instead, the debate on the stimulus has been absolutely maddening, with Republicans pushing for ineffective tax cuts and declaring which kinds of spending constitute stimulus (ignoring, of course, that spending is by definition, stimulus ), "centrist" Democrats and Republicans demanding billions of dollars in cuts from essential and effective programs, and Democrats being forced to defend an already inadequate House stimulus bill as the best possible option. It would be comical if the repercussions of such craven irresponsibility and indifference to suffering weren't so dangerous for our nation. In subsequent appropriations bills, there should be opportunities to add more stimulus spending. I hope congress decides to spend a lot more in the coming months, just like I hope the Geithner plan will lead to nationalization of the banks. However, given the sideshow that was the debate over this stimulus and Geithner's well known bias in favor of his former constituency, I'm somewhat less than optimistic.

viernes, 6 de febrero de 2009

Robot Wars

A threat to humanity?

Do any of my readers remember the show Battlebots, which aired on Comedy Central from 2000 through 2002? For those who don't, the show was a live action game show in which people designed remote-controlled robots, armed with things like saws and flame throwers, and put them in an arena to fight in various tournaments. Rather transparently, the show was geared towards young, sexually frustrated and geeky men, combining engineering, competition, violence, and sex appeal (for announcers, the show hired former baywatch actresses and playboy models). While the show is no longer on the air, robot fighting tournaments are still held in the U.S. and the U.K. The "sport" of robot fighting was also the subject of a recent episode of the CBS sitcom, "The Big Bang Theory".

Despite the fact that, from 2000 through 2002 I closely resembled the target audience of the "Battle Bots" television show, I was never really a fan and have never seen an entire episode. I only mention Robot Fighting because it's come to my attention that the use of robots for combat has entirely transcended innocent game shows and science fiction novels. In fact, unmanned and armed robots have become a major part of our nation's military arsenal. For more on the use of robots in war, check out Amy Goodman's interview with P.W. Singer, author of "Wired for War: The Robotics Revolution and Conflict in the 21st Century" on today's Democracy Now.

According to Singer, The U.S. military now possesses over 5,000 unmanned aerial drones and over 12,000 robots used for ground attacks. Just 6 years ago, the military had just a hand full of drones and zero ground robots. The aerial drones have made the headlines quite a lot recently, as they are frequently used to carry out attacks against suspected terrorist targets in the tribal regions of Pakistan, along the Pakistan-Afghanistan border. In fact, the first military order carried out by our new commander-in-chief, President Obama, was an aerial drone attack in Pakistan, which killed 22 people and at least 3 children. In total, drone attacks have been responsible for the deaths of 250 people in Pakistan. The drones, as well as ground robots designed to do everything from surveillance, to bomb diffusion, to shooting m-16's, are also widely used in the occupations of Iraq and Afghanistan.

The use of robots in combat provokes a variety of ethical dilemmas, several of which are posed by Goodman and Singer during the interview. Firstly, by risking fewer American lives, Singer points out that using robots as weapons lowers the political cost of war. Resistance to war is likely to be far lower if future conflicts are fought with machines rather than American men and women, particularly in the U.S. political climate, in which American military deaths are rightly considered tragedies but little attention is paid to either enemy or civilian casualties. There's also the question of unavoidable mechanical errors, which may result in deaths. In such cases, who should be held responsible? The operator/pilot of the robot? The program designer? More broadly, Amy Goodman asked Mr. Singer, "how does international law address robots in war". His response: "we don't have a good answer to that question".

Another serious issue is the psychological impact of piloting robots in combat. According to Singer, many pilots of aerial drones in Iraq are based in Nevada, 7,000 miles away from the combat zone. This puts pilots in a very awkward position, somewhere between life on the front lines and normalcy. Being based in the U.S. allows pilots to drive to work, carry out bombing missions for 12 hours in a far away land, and then drive home, pick up your kid from softball practice, and have dinner with your family. However, it turns out that this arrangement may be even more psychologically damaging than actually being in the war zone: drone pilots suffer from higher levels of post traumatic stress disorder than soldiers in Iraq. Given that Iraq veterans are suffering from an epidemic of PTSD, which has led to an unconscionable rash of suicides, the percentage of drone pilots suffering from psychological disorders must be astronomical. Further, given the culture of the military, the general failure of the armed forces to deal with psychological disorders, and the distance of drone pilots from the actual war zone, drone pilots have little access to needed assistance and would likely feel ashamed to even ask for help.

Goodman and Singer also delved into the questions of who has access to these combat robots and who ought to have access to them. In the United States, not only does the military use unmanned drones, they are also used by the department of homeland security. While the drones were purchased with counterterrorism funds, they've largely been used for other reasons, namely to police the US-Mexico border. I think it's a bit of a stretch to consider economic refugees fleeing the catastrophe of neo-liberalism that is our southern neighbor terrorists. Local law enforcement officials, like the scion of human rights that is the Los Angeles Police Department, have expressed interest in using unmanned drones for criminal surveillance. Private mercenary armies, including the war criminals at Blackwater, have access to these robots as well. Moreover, unlike fighter jets or aircraft carriers, which have to be built in large, sophisticated industrial plants, combat robots are far simpler and cheaper to build. According to Singer, you can purchase a kit to assemble a ground robot for $1000 which, while unarmed, can conduct surveillance from more than a mile away and could easily be weaponized by someone with engineering experience. I can imagine there are all sorts of unsavory individuals, from peeping toms to criminal syndicates to terrorist organizations, who wouldn't mind having such a toy to play with and wouldn't have all that much trouble scrounging up a thousand bucks.

Towards the end of the interview, Singer compares combat robots to the atomic bomb and says that the history of the A-bomb offers a powerful lesson. Atomic weapons were built and used (only by the US of A of course) before there was any public discussion of their ethical implications. In contrast, the makers of these robots publicly advertise them and the army has not been shy about their use. This increased transparency gives us an opportunity to have an open, public discussion about the ethical and moral implications of the use of robots as weapons. I hope Singer's presence on Democracy Now today helps spark that discussion. Competitions like Battle Bots are fun (for geeks of course) because, in the end, the only thing that gets hurt is a soulless piece of metal, and perhaps the pride of the losing side. Taken out of the arena, combat robots are not fun, they are quite terrifying. Weaponized robots are a threat to human life and human rights. Humanity would likely be far better off banning their production and use than encouraging or even tolerating them.