Growing Inequality

Growing Inequality

An “eclectic excerpt” provided by delanceyplace

Today’s selection is from the new book, Capital in the Twenty-First Century by Thomas Piketty. Amid increased concern over growing inequality, a European economist has garnered global attention and stirred controversy with his recent claim that the world is entering a period of inequality similar to what existed in Europe prior to 1914. Added to that controversy is his recommendation that a progressive tax on capital is the solution. In one quote, his assessment of recent U.S. income tax cuts is that they will “eventually contribute to rebuild[ing] a class of rentiers in the U.S., whereby a small group of wealthy but untalented children controls vast segments of the U.S. economy and penniless, talented children simply can’t compete….there is a decent probability that the U.S. will look like Old Europe prior to 1914 in a couple of generations.” His explanation of the cause is very simply that “r > g,” in other words that “when the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based”:

“The overall conclusion of [my] study is that a market economy based on private property, if left to itself, contains powerful forces of convergence, associated in particular with the diffusion of knowledge and skills; but it also contains powerful forces of divergence, which are potentially threatening to democratic societies and to the values of social justice on which they are based.

“The principal destabilizing force has to do with the fact that the private rate of return on capital, r, can be significantly higher for long periods of time than the rate of growth of income and output, g. The inequality r > g implies that wealth accumulated in the past grows more rapidly than output and wages. This inequality expresses a fundamental logical contradiction. The entrepreneur inevitably tends to become a rentier, more and more dominant over those who own nothing but their labor. Once constituted, capital reproduces itself faster than output increases. The past devours the future.

“The consequences for the long-term dynamics of the wealth distribution are potentially terrifying, especially when one adds that the return on capital varies directly with the size of the initial stake and that the divergence in the wealth distribution is occurring on a global scale.

“The problem is enormous, and there is no simple solution. Growth can of course be encouraged by investing in education, knowledge, and non polluting technologies. But none of these will raise the growth rate to 4 or 5 percent a year. History shows that only countries that are catching up with more advanced economies — such as Europe during the three decades after World War II or China and other emerging countries today — can grow at such rates. For countries at the world technological frontier — and thus ultimately for the planet as a whole — there is ample reason to believe that the growth rate will not exceed 1-1.5 percent in the long run, no matter what economic policies are adopted.’

“With an average return on capital of 4-5 percent, it is therefore likely that r > g will again become the norm in the twenty-first century, as it had been throughout history until the eve of World War I. In the twentieth century, it took two world wars to wipe away the past and significantly reduce the return on capital, thereby creating the illusion that the fundamental structural contradiction of capitalism (r > g) had been overcome.

“To be sure, one could tax capital income heavily enough to reduce the private return on capital to less than the growth rate. But if one did that indiscriminately and heavy-handedly, one would risk killing the motor of accumulation and thus further reducing the growth rate. Entrepreneurs would then no longer have the time to turn into rentiers, since there would be no more entrepreneurs.

“The right solution is a progressive annual tax on capital. This will make it possible to avoid an endless inegalitarian spiral while preserving competition and incentives for new instances of primitive accumulation. … This would contain the unlimited growth of global inequality of wealth, which is currently increasing at a rate that cannot be sustained in the long run and that ought to worry even the most fervent champions of the self-regulated market. Historical experience shows, moreover, that such immense inequalities of wealth have little to do with the entrepreneurial spirit and are of no use in promoting growth. Nor are they of any ‘common utility,’ to borrow the nice expression from the 1789 Declaration of the Rights of Man and the Citizen with which I began this book.”

author: Thomas Piketty
title: Capital in the Twenty-First Century
publisher: Belknap Press
date: Copyright 2014 by the President and Fellows of Harvard College
pages: 571-573
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Published in: on April 27, 2014 at 2:01 pm  Leave a Comment  
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The 3/5ths rule in the U.S. Constitution

In today’s excerpt – in the U.S. Constitution, Indians who renounced their tribe were counted toward a given state’s population for the purpose of determining how many members of the House of Representatives each state had. “Other persons,” the Constitution’s euphemism for “slaves,” counted as 3/5 of a person for this same purpose. The debate over this horrible compromise unleashed a level of vitriol among the framers that barely subsided before it erupted again scarcely more than thirty years later and then finally erupted in the American Civil War:

United States Constitution, Article I, Section 2: Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.

“Census enumerators began to include Indians who had renounced their tribes in 1860. The instructions provided for the 1880 census said ‘Indians not taxed’ meant ‘Indians living on reservations under the care of Government agents, or roaming individually, or in bands, over unsettled tracts of country.’ In 1940 the government did away with the category ‘Indians not taxed.’

“[The ‘other persons’ clause] is one of the most infamous clauses in the Constitution, because not only did it countenance slavery but it was seen as doubly demeaning to the men and women held in bondage that they
were each counted as but three-fifths of a person. The political dynamic behind this clause, however, is full of ironies. It was the North that opposed counting a slave as a whole person. It was the South that wanted slaves to be so counted. The three-fifths compromise meant that the ill-gotten gains of slavery were no longer solely financial but that slaveholders were to receive political gains as well – the more slaves a state had, the more representatives it would have in the Congress. …

“Under the Articles [of Confederation that preceded the Constitution], in which each state had the same representation, there was no incentive to show a large population, and states faced the threat of a population-based tax. So they had an incentive to understate their true population. The Constitution changed the equation. Suddenly representation in Congress was no longer equal for each state but was based on population. So states now had reason to bolster their population. The issue was an existential one for the country. William Davie of North Carolina is recorded in The Records of the Federal Convention as saying that he ‘saw that it was meant by some gentlemen to
deprive the Southern States of any share of Representation for their blacks. He was sure that N. Carola. would never confederate on any terms that did not rate them at least as 3/5. If the Eastern States meant therefore to exclude them altogether the business was at an end.’

“Of the three-fifths clause, Gouverneur Morris, the Pennsylvania
delegate, said this to the Convention: ‘The admission of slaves into the
Representation when fairly explained comes to this: that the inhabitant
of Georgia and S. C. who goes to the Coast of Africa, and in defiance
of the most sacred laws of humanity tears away his fellow creatures
from their dearest connections & damns them to the most cruel
bondages, shall have more votes in a Govt. instituted for protection of
the rights of mankind, than the Citizen of Pa or N. Jersey who views
with a laudable horror, so nefarious a practice.’ The three-fifths clause,
Luther Martin declared in The Genuine Information, involved ‘the
absurdity of increasing the power of a State in making laws for free
men in proportion as that State violated the rights of freedom.’ ”

Seth Lipsky, The Citizen’s Constitution, Basic Books, Copyright 2009 by Seth Lipsky, pp. 7-8.

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Delanceyplace is a brief daily email with an excerpt or quote we view as interesting or noteworthy, offered with commentary to provide context. There is no theme, except that most excerpts will come from a non-fiction work, mainly works of history, and we hope will have a more universal relevance than simply the subject of the book from which they came.

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Published in: on March 10, 2010 at 12:58 pm  Leave a Comment  
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The Collapse of Long-Standing Empires

Excerpt from Delancey Place

In todays excerpt – the collapse of a long-standing empire has very often occurred in a very short span of time:

“What is most striking about [Rome’s] history is the speed of the Roman Empire’s collapse. In just five decades, the population of Rome itself fell by three-quarters. Archaeological evidence from the late fifth century – inferior housing, more primitive pottery, fewer coins, smaller cattle – hows that the benign influence of Rome diminished rapidly in the rest of western Europe. What [Oxford historian Brian] Ward-Perkins calls ‘the end of civilization’ came within the span of a single generation.

“Other great empires have suffered comparably swift collapses. The Ming dynasty in China began in 1368, when the warlord Zhu Yuanzhang renamed himself Emperor Hongwu, the word hongwu meaning ‘vast military power.’ For most of the next three centuries, Ming China was the world’s most sophisticated civilization by almost any measure. Then, in the mid-seventeenth century, political factionalism, fiscal crisis, famine, and epidemic disease opened the door to rebellion within and incursions from without. In 1636, the Manchu leader Huang Taiji proclaimed the advent of the Qing dynasty. Just eight years later, Beijing, the magnificent Ming capital, fell to the rebel leader Li Zicheng, and the last Ming emperor hanged himself out of shame. The transition from Confucian equipoise to anarchy took little more than a decade.

“In much the same way, the Bourbon monarchy in France passed from triumph to terror with astonishing rapidity. French intervention on the side of the colonial rebels against British rule in North America in the 1770s seemed like a good idea at the time – a chance for revenge after Great Britain’s victory in the Seven Years’ War a decade earlier – but it served to tip French finances into a critical state. In May 1789, the summoning of the Estates-General, France’s long-dormant representative assembly, unleashed a political chain reaction that led to a swift collapse of royal legitimacy in France. Only four years later, in January 1793, Louis XVI was decapitated by guillotine. …

“The sun set on the British Empire almost as suddenly. In February 1945, Prime Minister Winston Churchill was at Yalta, dividing up the world with U.S. President Franklin Roosevelt and Soviet Premier Joseph Stalin. As World War II was ending, he was swept from office in the July 1945 general election. Within a decade, the United Kingdom had conceded independence to Bangladesh, Bhutan, Burma, Egypt, Eritrea, India, Iran, Israel, Jordan, Libya, Madagascar, Pakistan, and Sri Lanka. The Suez crisis in 1956 proved that the United Kingdom could not act in defiance of the United States in the Middle East, setting the seal on the end of empire. Although it took until the 1960s for independence to reach sub-Saharan Africa and the remnants of colonial rule east of the Suez, the United Kingdom’s [centuries old] age of hegemony was effectively over less than a dozen years after its victories over Germany and Japan.

“The most recent and familiar example of precipitous decline is, of course, the collapse of the Soviet Union. With the benefit of hindsight, historians have traced all kinds of rot within the Soviet system back to the Brezhnev era and beyond. Perhaps, as the historian and political scientist Stephen Kotkin has argued, it was only the high oil prices of the 1970s that ‘averted Armageddon.’ But this did not seem to be the case at the time. In March 1985, when Mikhail Gorbachev became general secretary of the Soviet Communist Party, the CIA estimated the Soviet economy to be approximately 60 percent the size of the U.S. economy. This estimate is now known to have been wrong, but the Soviet nuclear arsenal was genuinely larger than the U.S. stockpile. And governments in what was then called the Third World, from Vietnam to Nicaragua, had been tilting in the Soviets’ favor for most of the previous 20 years. Yet less than five years after Gorbachev took power, the Soviet imperium in central and Eastern Europe had fallen apart, followed by the Soviet Union itself in 1991. If ever an empire fell off a cliff – rather than gently declining – it was the one founded by Lenin.”

Niall Ferguson, Complexity and Collapse, Foreign Affairs, March/April 2010, pp. 28-30.

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Published in: on March 2, 2010 at 10:45 am  Leave a Comment  
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The Roaring 20’s

An exerpt from “Delancey Place

In todays excerpt the Roaring 1920s brought a boom in cigarette smoking. U.S. cigarette production doubled during the decade as people hungered for sophistication, and as Prohibition, which had unintentionally increased alcohol consumption, increased cigarette smoking along with it:

“New issues of securities of industrial companies would increase from 690 [in 1924] to nearly 2,000 in 1929. Brokers’ loans to investors and share ownership would quadruple by 1929. The number of Americans who paid tax on income of a million dollars a year also would quadruple.

“The new optimism about the future led to a boom in consumer spending. Radio sales doubled in 1923, then tripled in 1924. On average, nearly every family had a car, and drivers were branching out from black Model Ts to an assortment of new makes in colors ranging from ‘Florentine cream’ to ‘Versailles violet.’ Average people bought items they hadn’t imagined spending money on just a few years earlier: from Listerine mouthwash and crossword puzzle books to vacuum cleaners and meat slicers to new golf clubs and even property in Florida.

“Prosperity changed the culture. Suddenly there were traffic lights, filling stations, and new concrete highways with chicken dinner restaurants and tourist rest stops. Giant broadcast radio stations with nationwide hookups brought Graham McNamee’s play-by-play or the Happiness Boys or reports on the Scopes Monkey Trial into more than one out of three homes. More Americans followed politics now, including the presidential nominating convention, which was covered live from Madison Square Garden. …

“Along with America’s new wealth came a hunger for sophistication. College applications spiked, as did international travel. The most popular nonfiction books included Outline of Science, The Story of Philosophy, Why We Behave Like Human Beings, and Emily Post’s Book of Etiquette (the top seller). The now-literary-minded masses read an astonishing rush of new novels during this period: F. Scott Fitzgerald’s The Great Gatsby, Ernest Hemingway’s A Farewell to Arms, Herman Hesse’s Siddhartha, Franz Kafka’s The Trial, and Virginia Woolf’s Mrs. Dalloway. Newly minted intellectuals tried to parse James Joyce’s Ulysses or T S. Eliot’s The Waste Land. New fans of the arts listened to George Gershwin’s Rhapsody in Blue, and saw plays by Eugene O’Neill, who won three Pulitzer Prizes during the 1920s.

“One sure way for both men and women to appear sophisticated was to smoke cigarettes. Advertisers depicted pretty girls, cigarettes in hand, imploring men to blow smoke their way. Tobacco manufacturers announced that ‘now women may enjoy a companionable smoke with their husbands and brothers.’ Women had earned the vote and entered the work force, now millions of women of all ages exercised their right to take up smoking. Blue tobacco smoke wafted through theater lobbies, where Greta Garbo’s most important silent movies – Flesh and the Devil, The Temptress, The Torrent, and Love – appeared in 1926 and 1927, just as talking movies debuted. Sports fans smoked as they watched Babe Ruth, also a smoker, hit sixty home runs in 1927 for the New York Yankees; his teammates, known as ‘Murderers’ Row,’ easily smoked their way through the World Series that year. Prohibition also fueled smoking, just as it increased illegal alcohol consumption. The more people drank, the more they craved a smoke. …

“During the decade prior to 1929, U.S. cigarette production doubled.”

Frank Partnoy, The Match King, Public Affairs, Copyright 2009 by Frank Partnoy, pp. 91-93.

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Published in: on February 19, 2010 at 11:43 am  Leave a Comment  
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Today’s Business Leaders

Excerpt from Delancey Place

In today’s encore excerpt – writing in the late 1990s, Quinn Spitzer and Ron Evans contrast the business leaders of the immediate post-World War II period to more contemporary businesses leaders raised on a steady diet of business publications, management books, MBAs and consultants:

“During the 1990s virtually an entire generation of top executives left their businesses, retired, or passed away. Many of these executives had achieved legendary status – [David] Packard at Hewlett-Packard, [Akio] Morita at Sony, [Sir John Harvey-] Jones at ICI, [Sam] Walton at Wal-Mart, and [Jan] Carlzon at SAS, to name a few. These leaders shared some notable characteristics that differentiate them from their successors. They lived through the Great Depression, which crippled the world’s economy in the 1930s; they experienced the horrors of World War II; they served their business apprenticeships in the postwar rebuilding period of the late 1940s and early 1950s. But what may differentiate them most from their counterparts of today is the issue of management.This ‘old guard’ was the last of a breed of executives who developed their management skills almost entirely in the workplace. They were building businesses while management ‘science’ – if it can be called that – was still in its infancy.

“In 1948 … the Harvard Business Review had a robust circulation of fifteen thousand. That number had reached nearly two hundred fifty thousand by the mid 1990s. The Harvard Business School itself and the few other graduate business schools in existence in 1948 awarded 3,357 MBAs – a far cry from the 75,000 MBAs awarded forty-five years later. Even McKinsey, the best known of consulting companies, was a relatively small firm with annual revenues of under $2 million, compared with 1994 revenues of more than $1.2 billion. Management guru Peter Drucker was a youngster of thirty-nine. Seven-year-old Tom Peters was probably ‘in search of’ a new bike.

“The executives of [the immediate post-war] period were not uneducated – in fact, many were extremely well educated – but they did not learn their approach to business from a business school, a management expert, a celebrated management book, or an outside consultant. Options such as these were not generally available. These executives learned their business skills in the industrial jungle. …

“The forty-year-old executive of the 1990s, by contrast, probably holds one of the tens of thousands of MBAs awarded each year. His formal management education is supplemented by dozens of business periodicals and hundreds of management books. If, however, a situation seems resistant to even this mass of management wisdom, there are several hundred consulting firms and more than a hundred thousand consultants ready to provide additional management skill and knowledge. In 1993 businesses around the world spent $17 billion for consultants’ recommendations, and AT&T alone lavished $347.1 million on outside expertise.

“That does not necessarily mean that the business executives of the past were superior to those of the present. … Still, we suspect that if those [managers] of years gone by found themselves at the helm of any of today’s extraordinarily complex and competitive business enterprises, they would steer a straight and successful course.”

Quinn Spitzer and Ron Evans, Heads You Win!, Fireside, Simon and Schuster, Copyright 1997 by Kepner-Tregoe, Inc., pp. 15-17.

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Published in: on February 18, 2010 at 1:28 pm  Leave a Comment  
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The Five Causes of Prohibition

From Delancey Place: http://www.delanceyplace.com

In today’s excerpt – after World War I, a national prohibition against alcoholic beverages was enacted in both the United States and Canada. This prohibition, however, led to a dramatic increase in alcohol consumption and the rise of large-scale criminal organizations to support it. Why was it that prohibition was enacted?:

“How [Prohibition] came about can be boiled down to about five causes:

1) The First World War.
2) The new authority of women.
3) A half-century of campaigning by church leaders, politicians, evangelists and women’s groups.
4) The existing moral climate of the time.
5) Rural paranoia about urban intrusion.

“Most blame the First World War, which had a tremendous influence upon the eventual passage of legislation that took away a person’s freedom to drink. During the war, both the U.S. and Canada, as already stated, enacted laws that set the groundwork for full bans on liquor and beer. It was believed that money should be diverted from liquor to ‘war fitness.’ … The moral climate in the U.S. brought on by the war permitted the easy passage of the Volstead Act (Prohibition). …

“Another wartime condition that aided Prohibitionists in both the U.S. and Canada was the new authority of women. Before and during the war, women found voice in numbers. They banded together in [temperance] groups. Women had also acquired far more responsibility during this time, as they were forced to fend for themselves during the war, to find work and feed their families while their husbands were fighting in the trenches overseas. … More importantly, during this period women won the right to vote in elections.

“The half-century of campaigning by groups like the Anti-Saloon League (U.S.) contributed perhaps more than any other factor in generating support for Prohibition. By the early 1900s in the U.S., the great temperance leaders ordered their forces to use any means necessary to shut down the saloons – even hatchets if necessary. The Bible and hatchet-carrying Carry Nation and her male counterpart, the iron-fisted Dr. Howard Russell, were the most popular of the U.S. temperance leaders. …

“This Prohibitionary craze may seem unfathomable out of context but, on closer examination, the period up until 1920 was dominated by prohibitions – on clothing, behavior and even food. In Ontario, especially, the straight-laced Protestant ethic dictated an exclusive code of conduct. It was strictly forbidden in 1919, for example, to purchase a cigar, an ice cream cone, a newspaper or anything vaguely frivolous on a Sunday. And playing sports of any kind was absolutely banned on the Lord’s Day. In Michigan, as an extreme example, it was considered a crime for women to wear high-heeled shoes. In such a world a ban on intoxicating beverages did not seem so out of place.

“In addition to all of these factors, the farmer was regarded as the silent partner of the Prohibition movement. The Prohibitionists relied upon the farmer to cast his ballot against the evils of drunkenness and sloth, which he viewed from the safety of his front veranda in he remote and serene countryside as something distinctly urban. The Farmer’s Sun told farmers what they already knew – that their rural sanctuary could only be ensured if they voted to bring cities and towns under the umbrella of Prohibition.”

Marty Gervais, The Rumrunners, Biblioasis, Copyright 1980, 2009 by Marty Gervais, pp. 14-18.

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Published in: on February 9, 2010 at 11:56 am  Comments (4)  
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Those that are already expert at their craft

Selected from http://www.delanceyplace.com

In today’s excerpt – for those who are already expert at their craft, there are perils to rushing or overrehearsing. Here Paul Shaffer frantically tries to reach Sammy Davis, Jr., to select a song and schedule rehearsal before his appearance on the David Letterman show:

“Every time I called [Sammy Davis, Jr., to try and select a song or discuss rehearsal], he was either working or sleeping. He never did return my calls.

The morning of the show I was feeling some panic. Sammy was flying in, and we still didn’t know what he wanted to sing. At 10 a.m., the floor manager said I had a backstage call. It was Sammy calling from the plane.

‘ ‘Once in My Life’ will be fine, Paul,’ he said. ‘Key of E going into F.’

‘Great!’ I was relieved.

I was also eager to work out an arrangement. We whipped up a chart, nursed it, rehearsed it, and put it on tape. That way when Sammy arrived, he could hear it.

Then another backstage call. Sammy’s plane had landed early, and he was on his way over. When I greeted him at the backstage door with a big ‘We’re thrilled you’re here,’ I was a little taken aback. He looked extremely tired and frail. He walked with a cane.

‘We have an arrangement, Sam. You can rehearse it with the band.’

‘No need, baby. Gotta conserve my energy. I’m just gonna go to my room and shower.’

‘I wanna make it easy for you. So I’ll just play you a tape of the arrangement on the boom box. That way you’ll hear what we’ve done and tell me if it’s okay.’

‘Man, I know the song.’

‘I know, Sam,’ I said, ‘but what if you don’t like the chart?’

‘I’ll like it, I’ll like it.’

‘But what if the key’s not right?’

‘Okay, if you insist.’

I slipped the cassette in the boom box and hit ‘play.’ To my ears, the chart sounded great. Sammy closed his eyes and, in Sammy style, nodded his head up and down to the groove. He smiled.

‘It’s swinging, man,’ he said, ‘but think of how much more fun we could have had if I hadn’t heard this tape.’

His words still resonate in my ears; the notion still haunts me. Sammy swung that night, but as he was performing, I couldn’t help thinking that his carefree feeling about time – as opposed to my lifelong notion of the pressure of the time – was coming from a higher spiritual plane. As a musician, I’ve always thought I rushed. I still think I rush. The great players never rush.

It reminds me of that moment when I watched Ray Charles turn to his guitarist, just as the young guy was about to solo, and say, ‘Take your time, son. Take your time.’ ”

Paul Shaffer, We’ll Be Here for the Rest of Our Lives, Flying Dolphin Press, Copyright 2009 by Paul Shaffer Enterprises, Inc., pp. 234-235.

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Published in: on December 21, 2009 at 2:09 pm  Comments (1)  
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General Washington was not very good at military strategy

Selected from http://www.delanceyplace.com 12-14-09

In today’s excerpt – General George Washington, though indispensable to the cause of the American Revolution and a supremely gifted leader, showed poor instincts for military strategy throughout the revolutionary war. When the time came for the final decisive battle of in Yorktown, Virginia – the battle that ended the war – Washington’s strong preference was to try and retake Manhattan from the British instead. However, the French general who had just been sent to serve under him, the seasoned military strategist Comte de Rochambeau – whose government was strained financially and highly eager to end the war – maneuvered things to insure that Washington’s army went to Yorktown instead:

“When Washington and Rochambeau met in May 1781 in Weathersfield, Connecticut, to plan that year’s last-ditch campaign, they knew few of [American General Nathaniel] Greene’s successful activities and nothing of [British General] Cornwallis’s decision to march his army into Virginia. Once the pleasantries – a military parade and formal dinner – were out of the way, the two generals and their staffs sat down to talk. The discussions were frank and at times heated. After revealing the financial gift that his country was making to its allies, Rochambeau asked Washington what operations he envisioned for the coming summer. To one’s surprise [given his war-long obsession with retaking Manhattan], Washington urged a campaign to take New York, claiming that Clinton, [the British general in New York] was weaker than ever, having sent raiders to Virginia and reinforcements to the Carolinas.

“Losing his patience – a French observer later said that Rochambeau treated Washington with ‘all the ungraciousness and all the unpleasantness possible’ – the French commander earnestly reiterated his objections to focusing on New York. He then proposed a campaign in Virginia. Though unaware of Cornwallis’s epic decision [to march north to Virginia], Rochambeau knew there was a British army of roughly thirty-five hundred men in Virginia. The allies would have numerical superiority. If they could trap the enemy force, the long-awaited victory that could break Great Britain’s will to continue might be achieved. But Washington was intransigent. The allies must focus on New York. Washington ‘did not conceive the affairs of the south to be such urgency,’ the French general subsequently recalled. Given that Rochambeau remained under orders from France to defer to the wishes of the American commander, he consented to march his army from Rhode Island to the periphery of Manhattan, where the allies would prepare for a joint operation to retake New York.

“Washington was delighted. He had prevailed, or so it seemed. The campaign for New York of which he had dreamed for three long years was imminent. After three days of talks, Washington bade farewell and rode back to the Hudson to await the arrival of the French army. But there was something that Rochambeau had not divulged. He had neglected to inform Washington that the French fleet in the Caribbean had been ordered to sail to North America that summer. Immediately following Washington’s departure from Weathersfield, Rochambeau sat down at his desk and drafted a crucial letter to the Comte de Grasse, commander of the French fleet. He did not ask him to sail to New York. Instead, Rochambeau urged de Grasse to bring the fleet to the Chesapeake. Unbeknownst to Washington, and in defiance of his wishes, Rochambeau was secretly planning what he believed would be a campaign that was more likely than an attack on New York to produce a decisive outcome. His object was to confront General Washington with a fait accompli.

“As the lush days of spring faded into high summer in 1781, three army commanders ruminated over strategy. Only Washington believed the allies could succeed in a campaign to take New York. Rochambeau and Clinton – both lifelong professional officers, were convinced that the redcoats, having had five long years to prepare for the defense of Manhattan and Long Island, could repulse anything the allies threw at them, even a joint land-sea siege and assault. Indeed, Clinton prayed that the allies would attack New York. If their campaign failed, as he was certain it would, the will to continue hostilities would surely evaporate in France and America. Great Britain would do very well at the peace conference that followed. In his wildest dreams, Clinton even imagined that Britain might win this war in the event of a failed allied campaign to take New York.”

[Washington yielded to Rochambeau, and the American army turned south and went to Virginia where it overwhelmingly defeated Cornwallis and ended the war.]

John Ferling, The Ascent of Washington, Bloomsbury, Copyright 2009 by John Ferling, pp. 209-211.

Published in: on December 14, 2009 at 1:54 pm  Leave a Comment  
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The Most Violent City in the World

Selected from http://www.delanceyplace.com
12-11-09
In today’s excerpt – by the estimate of journalist Philip Caputo, the most violent city in the world is not located in Afghanistan, Iraq or some Sub-Saharan African country, but across a river from the United States in Juarez, Mexico. And in the almost three years since President Felipe Calderón launched a war on drug cartels, some 14,000 people have been killed in the country of Mexico, and part of the country is effectively under martial law:

“The U.S. government estimates that the cultivation and trafficking of illegal drugs directly employs 450,000 people in Mexico [out of 110 million people]. Unknown numbers of people, possibly in the millions, are indirectly linked to the drug industry, which has revenues estimated to be as high as $25 billion a year, exceeded only by Mexico’s annual income from manufacturing and oil exports. Dr. Edgardo Buscaglia … concluded in a recent report that 17 of Mexico’s 31 states have become virtual narco-republics, where organized crime has infiltrated government, the courts, and the police so extensively that there is almost no way they can be cleaned up. The drug gangs have acquired a ‘military capacity’ that enables them to confront the army on an almost equal footing. …

“Of the many things Mexico lacks these days, clarity is near the top of the list. It is dangerous to know the truth. Finding it is frustrating. Statements by U.S. and Mexican government officials, repeated by a news media that prefers simple story lines, have fostered the impression in the United States that the conflict in Mexico is between Calderón’s white hats and the crime syndicates’ black hats. The reality is far more complicated, as suggested by this statistic: out of those 14,000 dead, fewer than 100 have been soldiers. Presumably, army casualties would be far higher if the war were as straightforward as it’s often made out to be. …

“The toll includes more than 1,000 police officers, some of whom, according to Mexican press reports, were executed by soldiers for suspected links to drug traffickers. Conversely, a number of the fallen soldiers may have been killed by policemen moonlighting as cartel hit men, though that cannot be proved. Meanwhile, human-rights groups have accused the military of unleashing a reign of terror – carrying out forced disappearances, illegal detentions, acts of torture, and assassinations – not only to fight organized crime but also to suppress dissidents and other political troublemakers. What began as a war on drug trafficking has evolved into a low-intensity civil war with more than two sides and no white hats, only shades of black. The ordinary Mexican citizen – never sure who is on what side, or who is fighting whom and for what reason – retreats into a private world where he becomes willfully blind, deaf, and above all, dumb. …

“[The City of] Juárez’s main product now is the corpse. Last year, drug-related violence there claimed more than 1,600 lives, and the toll for the first nine months of this year soared beyond 1,800, and mounts daily. That makes Juárez, population 1.5 million, the most violent city in the world.”

Philip Caputo, “The Border of Madness,” The Atlantic, December 2009, pp. 63-69.

Published in: on December 13, 2009 at 11:44 pm  Leave a Comment  
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Innovation

Selected from Delancey Place

In today’s excerpt – historically, 85% of the increase in per capita GDP (gross domestic product or wealth) in the U.S. economy has come from innovation – the invention of new products and services or the invention of better ways to make existing products and services. It follows that any durable and sustainable program to create jobs in an economy would focus foremost on innovation:

“Since the 1950s, economists have understood that innovation is critical to economic growth. Our lives are more comfortable and longer than those of our great- grandparents on many dimensions. To cite just three improvements: antibiotics cure once-fatal infections, long-distance communications cost far less, and the burden of household chores is greatly reduced. At the heart of these changes has been the progress of technology and business.

“Economists have documented the strong connection between technological progress and economic prosperity, both across nations and over time. This insight grew out of studies done by the pioneering student of technological change, Morris Abramowitz. He realized that there are ultimately only two ways of increasing the output of the economy: (1) increasing the number of inputs that go into the productive process (e.g., by having workers stay employed until the age of sixty-seven, instead of retiring at sixty-two), or (2) developing new ways to get more output from the same inputs. Abramowitz measured the growth in the output of the American economy between 1870 and 1950 – the amount of material goods and services produced – and then computed the increase in inputs (especially labor and financial capital) over the same time period. To be sure, this was an imprecise exercise: he needed to make assumptions about the growth in the economic impact of these input measures. After undertaking this analysis, he discovered that growth of inputs between 1870 and 1950 could account only for about 15 percent of the actual growth in the output of the economy. The remaining 85 percent could not be explained through the growth of inputs. Instead, the increased economic activity stemmed from innovations in getting more stuff from the same inputs.

“Other economists in the late 1950s and 1960s undertook similar exercises. These studies differed in methodologies, economic sectors, and time periods, but the results were similar. Most notably, Robert Solow, who later won a Nobel Prize for this work, identified an almost identical ‘residual’ of about 85 percent. The results so striking because most economists for the previous 200 years had been building models in which economic growth was treated as if it was primarily a matter of adding more inputs: if you just had more people and dollars, more output would invariably result.

“Instead, these studies suggested, the crucial driver of growth was changes in the ways inputs were used. The magnitude of this unexplained growth, and the fact that it was exposed by researchers using widely divergent methodologies, persuaded most economists that innovation was a major force in the growth of output.

“In the decades since the 1950s, economists and policymakers have documented the relationship between innovation – whether new scientific discoveries or incremental changes in the way that factories and service businesses work – and increases in economic prosperity. Not just identifying an unexplained ‘residual,’ studies have documented the positive effects of technological progress in areas such as information technology. Thus, an essential question for the economic future of a country is not only what it produces, but how it goes about producing it.

“This relationship between innovation and growth has been recognized by many governments. From the European Union – which has targeted increasing research spending as a key goal in the next few years – to emerging economies such as China, leaders have embraced the notion that innovation is critical to growth.”

Josh Lerner, Boulevard of Broken Dreams, Princeton, Copyright 2009 by Princeton University Press, pp. 43-45.

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Published in: on November 20, 2009 at 11:34 am  Leave a Comment  
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