Wednesday, May 28, 2014

Piketty, Intangibles, The Inequality Of Nations

The economist Thomas Piketty is on the defensive for some of the data imported into Capital in the Twenty-First Century. The rich—so The Financial Times asserts—cannot be shown to be getting richer on the slope Piketty’s graphs depict. Actually, that the top ten percent of Americans owns around seventy percent of national wealth is not disputed. So this challenge to his spreadsheets will prompt superfluous debate about whether he’s exaggerated inequality by presenting an arguable trend in how fast capital is amassed. What it will also do, unfortunately, is preempt another debate: whether he (like much of the economics profession) underestimates inequality by ignoring an inarguable trend in what capital is. I am speaking here of the growth in the proportion of corporate assets that are a kind of collective knowledge—assets accountants reckon as “intangible.” 

Piketty claims, without really justifying this, that the inequality within nations is more “worrisome” than inequality between nations. But the latter inequality is troubling enough.  Anyway, the most arresting way to see the importance of the growth in intangible assets in all economies is to consider whether investments by global corporations in poor countries contribute to, or help mitigate, their poverty. I take up the point in the following post in The New Yorker.

For years, development economists have suggested that, when companies from the developed world invest in poor countries, it helps to mitigate international inequality. Early in his book “Capital in the Twenty-First Century,” the economist Thomas Piketty expresses skepticism about this idea. The owners of corporate assets tend to pocket most of the income generated by those assets, he points out, so a foreign company operating in a poor country levels the field about as much as a rich person opening a sweatshop in a slum. He writes:

None of the Asian countries that have moved closer to the developed countries of the West in recent years has benefited from large foreign investments, whether it be Japan, South Korea, or Taiwan and more recently China. In essence, all of these countries themselves financed the necessary investments in physical capital and, even more, in human capital, which the latest research holds to be the key to long-term growth.

It’s clear that Piketty admires governments that encourage domestic companies to produce products and provide services. Typically, these governments also educate an √©lite group of potential managers and scientists, acquire (or ignore) licenses and patents, and organize capital to fund domestic firms. And they insist that foreign companies looking to do business enter into joint ventures with domestic partners.

Those who advocate for this method as a better alternative to foreign investment seem to assume that a company’s assets are made up primarily of physical stuff; Piketty, for his part, defines corporate capital as “land, dwellings, commercial inventory, other buildings, machinery, infrastructure, patents, and other direct owned professional assets.” But there’s a problem with this assumption. Capitalism isn’t really about physical property—not anymore.

In fact, in the twenty-first century, intangible assets, such as the knowledge shared by employees, dwarf physical holdings. (Elsewhere in the book, Piketty acknowledges that a company’s value is also determined by the knowledge contained within the corporation, not just its patents but “its information systems and modes of organization.”) “Capital in the Twenty-First Century” is studded with charts illustrating changes in commercial life over the past century. (On Friday, Chris Giles, in the Financial Times, questioned some of the data regarding how inequality has changed over time.) But Piketty doesn’t include any charts showing the growth of intangible assets in major global corporations over the past several decades. The trend can be seen, vividly, in this chart. It shows, over time, how much of the combined market cap of companies on the S.&P. 500 could be attributed to intangible assets rather than tangible ones:

Continue at The New Yorker

Tuesday, May 27, 2014

Rivlin: The Next President And The Last Pope

Rivlin, second from the left
Reuven "Ruby" Rivlin is positioning himself to be the next president and he may well succeed. I thought--since Pope Francis just left, and Rivlin is giving interviews--to repost the following, which I wrote about Rivlin's reaction to the last papal visit exactly five years ago.  But first watch Shimon Peres's remarks greeting the Pope a couple of days ago, imagine Rivlin in his stead, and tell me you don't feel a prospective sense of loss. 

Pope Benedict XVI is not a man to feel sorry for himself, or even think his pronouncements just those of a man. Yet it is hard not to extend him some sympathy for braving a trip to Jerusalem this week. The mission was delicate from the start, stepping as he was into the middle of a blood feud between Israeli Jews and Palestinian Muslims. As the world's most famous neither-of-the-above, he was bound to be seen as a some kind of proxy for the conscience of the world--something like what the stately Notre Dame complex has come to represent among the buildings of Jerusalem: a neutral place where Israelis and Arabs go for "dialogue," while Christians listen, encourage--remind. The Pope's silence would have been interpreted, not as tactfulness, but as cowardice. Who in the middle of a quarrel does not imagine, well, an audience?

At the same time, of course, the Pope represents the great rival tradition whose dogmas and power have inspired both ghettos and crusades. Both sides want him in a state of apology, or at least vaguely official regret. And here is where missions become impossible. Dwell on Jewish suffering from European anti-Semitism, and you invite a reprimand from Palestinian nationalists and Muslim clerics that you are implicitly justifying the Naqba. Dwell on the occupation of Palestine, and you are inviting a reprimand from Zionists and Rabbis that you are justifying attacks on the national home. Fail to dwell on either, however, and you are accused of not assuming the church's indirect responsibility for both catastrophes: the Jews will say you are cavalier about the Holocaust, the Muslims ditto about colonialism. Both will say the old suffering of Jews led to the new suffering of Palestinians. Who in the middle of a quarrel does not also wish for a third party to blame? Habemus Papam, no?

All of this explains why this pope more than others has needed to rely, if not just on photo ops, then speech writers with an over-sized delete button. Indeed, this pope of all popes, a writer in his own right, has almost certainly developed a strong propensity to (as Nabokov put it) "kill your darlings." He tried to get fancy about the sources of The Western Tradition and found himself skewered for Orientalism. He thought to reinstate those he did not need to reinstate, retreated, and wound up making his infallibility seem rather hypothetical. So if anyone has learned the value of Rashi's aphorism, "kol ha'mosif gorea," ("he who adds substracts"), it is Benedict XVI. Which brings me to Reuven Rivlin, the Speaker of the Knesset--"Ruby" to his friends.

RIVLIN WAS NOT happy with things left out of the Pope's speech at Yad Vashem. He had already boycotted the Pope's arrival ceremony, even the visit to President Peres' residence. But Rivlin did go to Yad Vashem on Monday evening. By Tuesday morning he was all over the airwaves. "He came and told us as if he were a historian, someone looking in from the sidelines, about things that should not have happened. And what can you do? He was a part of them," Rivlin told Israel Radio. "With all due respect to the Holy See, we cannot ignore the burden he bears, as a young German who joined the Hitler Youth and as a person who joined Hitler's army, which was an instrument in the extermination":

I came to the memorial not only to hear historical descriptions or about the established fact of the Holocaust. I came as a Jew, hoping to hear an apology and a request for forgiveness from those who caused our tragedy, and among them, the Germans and the church. But to my sadness, I did not hear any such thing.

(You may read the Pope's Yad Vashem's address here and judge Rivlin's complaint for yourself.)

WE SHOULD UNDERSTAND who is talking here. Ruby Rivlin, 70 years old, a lawyer by training, whose undistinguished legal career amounted to advising and managing Betar Jerusalem's football team. He graduated, in other words, from Menachem Begin's Herut youth movement into a party job, and from there into party politics. He postures as the scion of a great sage's family, but he has been, really, the product of a club-become-party-become-job.

And since the party he joined was more or less fanatic, he became a fanatic, too. Rivlin never met a settlement he did not like or a war he did not think "existential." He opposed the Oslo process, bad-mouthed Yitzhak Rabin (even after his assasination), and mocked any movement toward a two-state solution. He railed against Aharon Barak's Supreme Court's efforts to bring in protections for elementary human rights. Even Ariel Sharon, whom he had sucked-up to for a generation, proved not hawkish enough for him in the end. He split with Sharon over the Gaza operation, not on security grounds, but because he did not think Jews should drive Jews "from their homes."

And while I'm on the subject, Rivlin is a notorious glad-hander. He thinks his smile, which is zealously sweet, makes up for any excess or offense. He is blushingly plump and uncomfortably chummy. He thinks that gravitas means saying a little louder than others what is perfectly conventional. He teared up when, after running for the presidency against Peres, he withdrew so as not to lose by a mile; he declared his withdrawal "statesmanship." Imagine a cross between Hubert Humphrey and Sean Hannity .

SO THE REAL question that Rivlin's morning after interview evokes is this: where does a hack like him get the nerve to attack the Pope in this way, after all, the head of a church of a billion and a half Christians, and your guest, for Christ's sake? How could this kind of talk seem so conventional, so approved, that a person so lacking in erudition and moral authority as Rivlin feels that it's safe, even cool, to treat a Pope's visit to Jerusalem the way, say, Pat Buchanan might be treated at an AIPAC convention?

Just to be clear: the young Ratzinger never joined Hitler Youth (though all youth like him were added to it rolls automatically). His father was bitterly anti-Nazi; his retarded cousin was taken away and killed by the SS. He was drafted into an anti-aircraft battery at 16 and soon thereafter deserted. And as Tel-Aviv Univeristy's Dina Porat gingerly put it (on the radio the following day), we need a little perspective--kzat proportzia--here. In 1904, Pope Pius X told Theodore Herzl: "The Jews have not recognized our Lord, therefore we cannot recognize the Jewish people. Jerusalem cannot be placed in Jewish hands." No sooner had Pope Benedict XVI landed at Ben-Gurion Airport than he expressed the wish that "both peoples may live in peace in a homeland of their own, within secure and internationally recognized borders," and then he added: "It is right and fitting that, during my stay in Israel, I will have the opportunity to honor the memory of the 6 million Jewish victims of the shoah... [and] pray that humanity will never again witness a crime of such magnitude."

True, virtually all of my Catholic friends think Pope Benedict a kind of Church Likudnik, dogmatic, imperial, allergic to dissent. But that is hardly the point for Rivlin or is implied by the loose talk. For this Israeli government in particular, the Pope's squelching of Vatican II's energies fits nicely with their own orthodoxies. What they want is more about the Holocaust, more contrition.

Funny, in the early 1960s, Israeli elites saw the Jewish state so much as a pioneering adventure--the culture of Hebrew labor, the dignity of self-defense--that they tended to bury talk of the Holocaust, which seemed to them a symbol of Diaspora Jewry's woeful path. Ben-Gurion staged the Eichmann trial just to correct what he took to be Zionism's aloofness from the suffering of Holocaust survivors. Foreign dignitaries, meanwhile, were taken to the kibbutz, or the Hebrew University. Today, guests are whisked off so quickly to Yad Vashem that they cannot tell the difference between its gloom and their jet-lag. Their speeches must include a syllogism in which the "Holocaust" forms the first part and "the Jewish state" the second. They cannot just express their fellow-feeling. They will be graded for levels of sincerity, from "cold" to "understanding." Mention Iran and you get extra credit.

MY LATE FRIEND, Ilona Karmel, who barely survived the Plashow death-camp (and like the Pope was an avid reader of the theologian Karl Rahner), once described American Jews who kept bringing up the Holocaust to her as people with "scars but no wounds." It is like they are trying to get a moral pass in advance of any moral action, she said. Israelis do have wounds, of course, and Holocaust Remembrance Day has now been so braided in with Passover, on one side, and Memorial Day and Independence Day, on the other, that it is seems officially necessary to forget where wounds stop and scars begin.

Still, one listens to Rivlin and cannot help but wonder what, if anything, he learned from the 20th. century other than the need to serve his movement more fiercely and to say "mine" more loudly; to take the territories promised by his movement and be holier than you know who. You also have to wonder if his arrogance, which blends all too easily into Israel's political background, does not suggest a new fundamentalism. If many Jewish Israelis, like many Christians before them, are not trying to achieve innocence simply by identifying with the scars of the innocent murdered, by means of a passion play of their own, with a gospel of their own, only the Romans are the Nazis, and "the Jews" are Poles (Ukrainians, Hungarians, etc.).

Alas, as Rahner might have said, innocence is overrated. He did say, unremarkably, that "self-realization...embodies the result of what a man has made of himself during life." Presumably, this is true of nations, too. Does Rivlin really need Hillel and Jesus to know that passion is not justice and apology is not permission?

Monday, May 26, 2014

The Europeans Vote, The Israeli Press Analyzes

Israel is trending right, we often hear, but this is misleading. Hard-core Greater Israel types are stuck somewhere between 30-35% of the population, which is about the same level the pollster Khalil Shikaki tells us Hamas supporters in Palestine are stuck. The real trend, and danger, is a kind of collectivist cynicism that's taken hold, nuanced by neocon-like codes, and spread by what passes in Israel for the mainstream media--especially Reshet Bet, the public radio service that virtually all of us turn to for news.

This morning was a case in point. The Pope is visiting; presumably, the platitudes could wait. The wake-up show host, Arye Golan, led with a report on the French vote that propelled Marine LePen's party into first place in yesterday's vote for the European Parliament.  LePen got about 25% of the vote, while pro-EU parties held their own almost everywhere else. To sort things out, Golan asked Tel Aviv University's Avi Primor--a former ambassador to Germany and the EU--to join the conversation.

This was an earthquake, was it not?, Golan began, perhaps the beginning of the end of the EU. (Decoded: Strong nationalist ties are inevitable and will always trump liberal dreams such as the EU; which is why Israelis have to privilege national solidarity--the "Zionist" principle--over any peace agreement, whose cosmopolitan ideals cannot be trusted, right?)

Primor, perhaps the country's most seasoned expert on the EU, was determined to cloud the issue with facts.  No, he said, this was not an earthquake.  Only around 45% of the French electorate voted, and LePen's voters were the ones that tended to be mobilized. Her party, like other proto-fascist parties across Europe, always gain ground when unemployment is high and growth is slow.

Ah, Golan replied, but the EU's economy is doing well now. (Decoded: Stop with the materialist explanations you academics always drag out. People are rich enough but naturally bigoted. So why do they always blame Jews for their desire to do for themselves over others?)

Actually, Primor responded, the economic recovery has not been felt in the lower rungs yet, and may not be for some time.

But--Golan reached for his ace--the vote still implies a reversion in Europe to its traditional anti-Semitism, does it not? (DecodedDeep down, they hate Jews, and will always hate Jews, right? Anti-Semitism is surging in vile new forms, so isn't EU criticism of the Israeli occupation just a false front on implacable sentiments? They are just looking for ways of delegitimizing us, and LePen's victory tears the veil off, right?)

There is surging anti-Semitism, Primor answered, but the Semites it is directed to are mainly Arab Muslims.  The party of the right tends to adore Israel, in France as in the US.

But still, the EU's architecture must be in danger. (Decoded: Oh, come on. How can such a borderless system hold together when ordinary people are naturally suspicious of those beyond their borders.)

No, Primor insisted, the EU will always have some problems, including local nationalist excesses, but its architecture reflects globalist processes that are in many ways irreversible.

Well, anyway, Golan ended things, "Thanks for an optimistic interview." (Decoded: You are terribly naive. )

You see, the problem is not the ideology of the right, but the defensive and slightly creepy ways media personalities valorize Bibi's status quo: by relentlessly implying that liberal principles are un-Zionist, foreign criticism is hypocritical, and positive proposals for diplomacy are vaguely feckless. Primor was cogent. Golan wasn't buying it; he doesn't want to look like a fool.

Tuesday, May 6, 2014

Independence Day: Choosing Words Carefully

It has been a week since John Kerry apologized, with a certain recalcitrance, for having suggested, in an address to a closed-door meeting of the Trilateral Commission, that Israel was at risk of becoming “an apartheid state.” While Israel prepares to celebrate its Independence Day on Tuesday, the White House has declared a “pause” in its peace efforts, the American Israel Public Affairs Committee (AIPAC) has rallied lawmakers to admire “the lone stable democracy in the Middle East,” and Martin Indyk, the chief U.S. negotiator, has returned to Washington. Susan Rice, who was known to be skeptical of Kerry’s gambit, is coming to consult with Prime Minister Netanyahu about the Iranian nuclear negotiations. It seems as if Israel has managed to ditch the talks while keeping its friends.

Israelis who seek a stable democracy, however, are feeling betrayed by the Obama Administration’s hasty retreat, and they are regretting Kerry’s expression of regret not because they like the word “apartheid” but because they don’t like American effeteness. These Israelis have been heartened by Kerry’s strong drive to achieve two states (which Israeli Defense Minister Moshe Ya’alon dismissed as “messianic”)—and to mobilize a democratic Israeli majority against a fierce minority who take occupation for granted. In clarifying his original statement, Kerry insisted, “I will not allow my commitment to Israel to be questioned by anyone.” But one cannot simply have a “commitment to Israel”; one must be committed to one or the other vision of Israel’s future—to one group of Israelis over another.

This idea remains difficult for people outside the country to grasp. The risk for the future is not that the Green Line separating Israel from the West Bank will disappear, and the Israeli majority—and hence Israeli democracy—will be compromised. The risk is that the forces of “settlement” are winning. Over time, these forces—whom Netanyahu has drawn into his coalition, and with whom he probably sympathizes but cannot easily control—have assumed commanding positions in the Likud Party, in key ministries, in the Army, and in the legal system. It would be insensitive, given the horrors of Jewish history, to call these people fascists. So let us say that they include ultra-nationalists who traffic in xenophobic grievances, religious messianists who are unashamed of racist claims, militarists who regard liberal Tel Aviv as decadent, proponents of civil solidarity who scoff at legal constraints, wards of the state who depend on a command economy, and acolytes of authoritarian “spiritual leaders.”

Read on at The New Yorker