The opiate of the people

Communism teaches that religion is the opiate of the people, a consolation that prevents the masses from rising up against their oppressors.  Apparently, judging from this article by David Ignatius, the true opiate of the people in still-Communist China is material prosperity and pop culture:

Americans sometimes assume that a richer China will soon demand greater freedom and democracy. Don’t bet on it: What Chinese repeat to foreign visitors, in so many settings that the canned phrases become credible, is something like this: We like what we’ve got; we’re worried about losing it; we want stability even if it means less freedom and openness.

Chinese don’t seem to know much about Xi Jinping, the man who this week became heir apparent to President Hu Jintao, beyond the fact that he is a “princeling” son of power and that he is married to a star singer. This makes him a man who is likely to maintain the status quo — and perhaps reform the system and spread the wealth just enough to keep any dissenters quiet. For most Chinese I encountered, those qualities seem to be enough. . . .

There’s protest in China, to be sure, but it’s largely about economic and property issues. The freedom agenda of Tiananmen Square in 1989, embodied today by the imprisoned Nobel Prize winner, Liu Xiaobo, has mostly been throttled. Among the elite in China’s wealthy cities, fear of the peasants in the hinterlands seems to be a bigger concern than the opaque Communist Party leadership.

For a snapshot of China’s future, talk with students at Beijing High School 101. Decked out in their blue-and-white uniforms to meet visiting Western journalists (organized by the Committee of 100, a private U.S. group that promotes Chinese-American dialogue), the children are astonishingly bright and well-spoken in English. But even here at the top of the heap, there’s a fragility. They’re all products of China’s one-child policy, and you sense the heavy expectations of their parents: Study, succeed, prosper, don’t lose your seat on the express train to riches. . . .

At Tsinghua University, a graduate student named Yin Wang offers a catchy and probably accurate line: “Young people don’t care who succeeds Hu Jintao; they care about who succeeds Michael Jackson.”

A recurring theme here is self-censorship by a population that doesn’t want to risk crossing the fuzzy limits on free speech. Students attend journalism school partly to learn what subjects are off-limits. Young reporters who dig beyond the official account get branded as “unreliable” and lose good assignments.

The government monitors the Internet to keep it tame, and Chinese businesses and consumers play along. One of China’s biggest Web sites is said to employ 100 people to scan the proliferation of micro-blogs here. Parents avoid telling their children about the Tiananmen protests for fear they will ask more questions — and get in trouble.

The threat to this elite urban life comes from the still-poor rural provinces. The Chinese revolution began among such peasants, and there’s an almost palpable fear that the new China’s growing inequality could trigger another such revolt. That’s one reason people are nervous about democracy: They don’t want to enfranchise those angry peasants.

via David Ignatius – In China, it’s all about prosperity, not freedom.

And isn’t that a danger here as well, that materialism and our entertainment fixation (“who will succeed Michael Jackson?”), are breeding political and spiritual apathy?

Money pollution in the Gulf

The Gulf coast way of life survived the oil spill.  But will it survive all of that money BP has thrown at them?

On a truly normal evening, Acy Cooper Jr. would be out shrimping. Instead, one recent night, he was staying home, as he has done more often these days.

“Why? It don’t pay me to do that when they’re going to pay my claim anyway,” said Cooper, vice president of the state’s shrimpers association.

Today, it is BP’s money, not its oil, that is most visibly altering the Gulf Coast. The company has been trying – on federal orders – to protect not just the water but the way of life there. But BP’s waterfall of cash has changed people’s lives profoundly.

The oil company has already paid out $965 million and set aside $20 billion in a separate compensation fund. The money has been welcomed as a lifeline. But it has made the coast feel like an open-air economic experiment: Some hardworking fishermen think it’s in their best interest to be idle, losing market share they will need next year. And those who haven’t been paid are looking for legal and illegal ways to work the system. . . .

So far, BP has paid $569 million to locals who participated in the Vessels of Opportunity program, helping to spot, sop up and burn the oil.

It also gave out about $396 million to compensate fishermen, hotel owners and others who lost money during the spill, before handing the process over to Feinberg in August.

For those who played their cards right, BP’s money brought a summer of quiet windfall. Ted Melancon, a shrimper from Cut Off, La., worked for BP for 130 days.

“They sure helped us out, you know, they stepped up to the plate and helped us out. . . . It would have been a bad year,” said Melancon (pronounced “meh-lan-sahn”). He said he hasn’t counted his full take, but he made enough to buy new nets and new cable for his shrimp boat, as well as a new Ford F-150 pickup.

“Which I didn’t really need, but I had to buy. Because, you know, tax write-offs,” he said, meaning that the truck and other items could be written off as business expenses. On top of that, he’s expecting to get another BP payout, compensation for the shrimping he couldn’t do this summer while large areas of the gulf were closed.

“I’m done for the season,” Melancon said. “It don’t pay to go back to work.”

via Adrift in oil, then money.

Vindicating middle management

As we saw in the mortgage foreclosure fiasco, paperwork is necessary.  And, according to some research in India, so are the processes, policies, and record-keeping associated with “bureaucratic” business management:

Imagine a world without middle managers. If you’ve done time in a cubicle, you might picture a paradise where workers are unshackled by pointless bureaucracy, meaningless paperwork and incompetent bosses. A place where stuff actually gets done.

Despite a proliferation of management gurus, management consultants and management schools, it remains murky to many of us what managers actually do and why we need them in the first place. A new World Bank-Stanford study titled “Does Management Matter?” provides an answer. Working in collaboration with the consulting firm Accenture, the researchers randomly selected a set of textile factories in India to receive a complimentary five-month management makeover and compared the profitability and efficiency of these revamped factories with a control group of factories that continued doing business as usual. It turns out that management does matter: The consultants boosted productivity by about 10 percent by improving quality, managing inventory and speeding up production.

via In defense of middle management.

Freedom and Government

To the list of great political theorists, I would like to add director John Ford. I’d like to raise for your consideration a comment I made on the “Who holds the deed to your house” post:

We watched “The Man Who Shot Liberty Valence” last night in my film class. The lawless “state of nature” does NOT promote private property or free enterprise. Rather, in that movie, the lawless cattle ranchers, with their power and gunslingers, were taking the property of the small farmers so they could have an “open range.” Only until law came to Shinbone and the people voted for statehood was private property protected.

(What a great movie, by the way! Jimmy Stewart AND John Wayne AND Lee Marvin AND Lee Van Cleef, not to mention great supporting actors such as Andy Devine. And the incomparable direction of John Ford.)

To expand the point: Many conservatives and libertarians believe that government, by its nature, limits human freedom. In a state of minimal government, free enterprise economics would thrive, and human beings would form in other dimensions of life an analogous self-regulating order.

In the thought experiment that is John Ford’s movie, “Liberty” Valence may have liberty, but he is about the only one. There is no private property. When he wants to take someone’s steak, he just takes it. When the cattlemen want their cattle to graze on farms, they just cut the fences. Because the advocates of the “wild west” do not respect anyone’s private property, there is no free enterprise economics. “Shopkeepers” stand with the small farmers to work for a rule of law and statehood for the territory. The community has to stand up against Liberty Valence. Violence (cf. “valence”?) is indeed necessary to create social order. Liberty Valence has to be shot. And those who can stand up against him, like Tom Donophan (John Wayne), ironically, also have no place in the new civilized order.

But, according to Ford, government is necessary for freedom. Not that government cannot also squelch freedom, as in the totalitarian systems of Fascism and Communism, both of which Ford fought. But a democratic government and the rule of law, in his mind, was a prerequisite for both personal freedom and a free economy. Isn’t he right?

Who holds the deed to your house?

You have probably heard of the moratorium on home foreclosures due to sloppy paperwork in the mortgage industry. But there is potentially a far bigger problem, one that may affect your own paid-up mortgage. A court in Kansas has ruled that the old practice of registering titles to property in the local courthouse is, in fact, the law of the land. This was largely ignored during the mortgage book, with its high-tech mortgage repackaging and speculating. Let’s let the New York Times explain it:

For centuries, when a property changed hands, the transaction was submitted to county clerks who recorded it and filed it away. These records ensured that the history of a property’s ownership was complete and that the priority of multiple liens placed on the property — a mortgage and a home equity loan, for example — was accurate.

During the mortgage lending spree, however, home loans changed hands constantly. Those that ended up packaged inside of mortgage pools, for instance, were often involved in a dizzying series of transactions.

To avoid the costs and complexity of tracking all these exchanges, Fannie Mae, Freddie Mac and the mortgage industry set up MERS to record loan assignments electronically. This company didn’t own the mortgages it registered, but it was listed in public records either as a nominee for the actual owner of the note or as the original mortgage holder.

Cost savings to members who joined the registry were meaningful. In 2007, the organization calculated that it had saved the industry $1 billion during the previous decade. Some 60 million loans are registered in the name of MERS.

As long as real estate prices rose, this system ran smoothly. When that trajectory stopped, however, foreclosures brought against delinquent borrowers began flooding the nation’s courts. MERS filed many of them.

“MERS is basically an electronic phone book for mortgages,” said Kevin Byers, an expert on mortgage securities and a principal at Parkside Associates, a consulting firm in Atlanta. “To call this electronic registry a creditor in foreclosure and bankruptcy actions is legal pretzel logic, nothing more than an artifice constructed to save time, money and paperwork.”

The system also led to confusion. When MERS was involved, borrowers who hoped to work out their loans couldn’t identify who they should turn to.

As cases filed by MERS grew, lawyers representing troubled borrowers began questioning how an electronic registry with no ownership claims had the right to evict people. April Charney, a consumer lawyer at Jacksonville Area Legal Aid in Florida, was among the first to argue that MERS, which didn’t own the note or the mortgage, could not move against a borrower.

Initially, judges rejected those arguments and allowed MERS foreclosures to proceed. Recently, however, MERS has begun losing some cases, and the Kansas ruling is a pivotal loss, experts say.

While the matter before the Kansas Supreme Court didn’t involve an action that MERS took against a borrower, the registry’s legal standing is still central to the ruling.

via Fair Game – The Mortgage Machine Backfires – NYTimes.com.

Now factor in this from the Washington Post:

The federal government’s pressure on lenders Wednesday to fix the paperwork problems plaguing foreclosures left unaddressed a far greater potential threat facing the financial system and the U.S. economy.

Financial and legal analysts are divided over how the ownership questions will be resolved and the scope of the potential damage. Lenders and investigators are in the midst of a painstaking process of unraveling the complex chain of loans that were sold from one party to another, a process that some analysts say could take years.

Of the nearly $11 trillion in mortgages in the United States, about two-thirds was turned into securities that were traded around the globe.

After a home buyer gets a mortgage, the lender typically pools that loan with hundreds of others to create a security that can be traded like a stock. This process is commonly called securitization and has been the preferred method of financing debt in America for more than a decade.

Wall Street firms would set up partnerships called “trusts” and would raise money from pension funds, university endowments, hedge funds and other investors to buy these mortgage securities. The investors would then share the cash flow from the payments made by homeowners every month.

However, local laws in most states dictate that each time a mortgage changes hands, the transaction needs to be recorded in courts or county offices. But the speed with which the loans were being generated during the housing boom and then pooled together and passed around Wall Street meant that big financial firms took shortcuts, consumer lawyers said.

Often the proper paperwork got lost or was passed along without being filled out, lawyers say. Some documents have been found retroactively signed or even forged.

“It now appears that in many cases: 1. the paperwork was not properly transferred and 2. it is unclear in many cases where the actual paperwork actually rests today,” Citigroup Global Markets analyst Josh Levin wrote in a note to investors this week.

Some think this can be fixed easily; others think it might paralyze the housing industry and bring down banks, investors, and the financial system.

Titles are a legal bulwark of private property. What we often dismissed as “mere paperwork” can be profoundly important. Or do you think physical titles and the like are obsolete in the age of internet transactions? But even if we need to adjust the system to the new technology, how do we get from here to there without going through an economic mess? And, in the meantime, who holds the deed to your house?

HT:  FWS

The reverse Okie syndrome

During the Great Depression, thousands of Okies left the dust bowl that was the Sooner State for brighter prospects in California, as well as other states.  Now, during the Not-So-Great Depression, thousands of Californians, as well as denizens of other states, are flowing to Oklahoma.  Here the economy is much better, there are lots of jobs, and housing costs are astonishingly low (with the median homes in Oklahoma City selling for $150,000).  This article details why Oklahoma is flourishing and what turned the state around: More Californians reverse course and head to Oklahoma – USATODAY.com.

I was born in Oklahoma and grew up there.  I too left the state to find work, but I do miss it.  One factor the article cites in the state’s growth is people who left the state moving back.  A good line from the article:  “Oklahoma is one of those places you have to come from to think it’s beautiful.”

But here is something to discuss:  One of the reasons Oklahoma City has become cool all of a sudden is that the local government pushed a number of new initiatives.  Voters imposed upon themselves a sales tax, which, among other things, developed “Bricktown,” a fun downtown entertainment district, including a river walk, music venues, good restaurants, lively bars, a minor league baseball stadium, and (a short distance away) the home of the new NBA team the Oklahoma Thunder.  Reasons the state has been attracting businesses is that the state and local governments have been promising tax breaks, subsidies, and other sweeteners.

In other words, it isn’t just the free market that has brought prosperity to Oklahoma.  Do you think these government programs are legitimate?  (Take into consideration the difference between local governments and federal governments.)


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