Sunday, November 30, 2008

Collective Intelligence

Looking to Wikipedia for answers

By Thomas Malone

Published: November 5 2008 14:43 Financial Times

To understand how large-scale work was organised during the past 100 years, the best models were traditional hierarchical organisations such as General Motors, IBM, and Wal-Mart.

But to understand how large-scale work will be organised in the future, we need to look at newer examples such as Wikipedia, eBay, and Google.

In Wikipedia, for instance, thousands of people from across the globe have collectively created a large and surprisingly high-quality intellectual product – the world’s largest encyclopaedia – and have done so with almost no centralised control. Anyone who wants to can change almost anything, and decisions about what changes are kept are made by a loose consensus of those who care.

Wikipedia is a remarkable organisational invention that illustrates how new forms of communication, such as the internet, are making it possible to organise work in new and innovative ways.

Of course, new ways of organising work are not desirable everywhere. In many cases, traditional hierarchies are still needed to capture economies of scale or to control risks. But in an increasing number of cases, we can have the economic benefits of large organisations without giving up the human benefits of small ones – freedom, flexibility, motivation and creativity.

These human benefits can provide decisive competitive advantages in knowledge-based and innovation-driven work. During the coming decades, we can expect to see such ideas in operation in more and more parts of the economy.

These new practices have various names: radical decentralisation, crowd-sourcing, peer production, and wikinomics. But the phrase I find most useful is “collective intelligence”.

In our work at the Massachusetts Institute of Technology Center for Collective Intelligence, this phrase has inspired us to ask the provocative question:

“How can people and computers be connected so that – collectively – they act more intelligently than any person, group, or computer has ever done before?”

What if we could have any number of people and computers connected to, for instance, care for patients in a hospital? Or design cars. Or sell retail products.

We might that find the best way to do a task that today is done by five full-time people would be to use one part-time employee and a host of freelance contractors each working for a few minutes a day.

One important type of collective intelligence is “crowd intelligence”, where anyone who wants to can contribute.

Sometimes, as in the case of Wikipedia or video sharing website YouTube, people contribute their work for free because they get other benefits such as enjoyment, recognition, or opportunities to socialise with others. In other cases, such as online retailer eBay, people get paid to do so.

Anyone can become an eBay seller and most of the key decisions about product mix, pricing, and advertising are made not by managers at eBay, but by the collective intelligence of the eBay sellers themselves.

A few years ago, eBay managers were surprised to find members successfully selling automobiles on the site, so they added additional support for this product line.

Sometimes, crowd intelligence can even operate inside the boundaries of a single company. Google, Microsoft, and Best Buy have all used internal “prediction markets” to tap the collective intelligence of people throughout their organisations. In these prediction markets, people buy and sell “shares” of predictions about future events such as revenue levels. If their predictions are correct, they are rewarded (either with real money or with points).

Microsoft has used prediction markets to estimate completion dates for internal products. When it launched one of the first of these markets, the share price for a product scheduled to be finished three months later declined within minutes to a price indicating only a 1.2 per cent probability it would be completed on time. The managers in charge of the project had thought it was on schedule, but when they saw these results they investigated further and found problems. The product was eventually released three months late.

Here was a case where knowledge about the project’s problems was available inside an organisation but it took a prediction market to bring it to the attention of people who could do something about it.

Another important type of collective intelligence is “cyber-human intelligence”, where computers do not just connect people to each other, they provide their own “intelligence” as well.

Google harvests the intelligence of millions of people who create web pages and link them to each other, but its sophisticated algorithms also rank the pages based on how many links exist to a given page.

Electronically connected forms of crowd intelligence and large-scale forms of cyber-human intelligence have never before existed. Yet these examples are just the beginning, and it is very likely that innovative organisations will discover more ways to radically change existing industries or create new ones.

These changes will not happen overnight, but the rate of change is accelerating and business people a hundred years from now may find the pervasive corporate hierarchies of today as quaint as we find the feudal farming system of an earlier era.

Thomas W. Malone is the Patrick J. McGovern Professor of Management at the MIT Sloan School of Management and the founding director of the MIT Center for Collective Intelligence

Copyright The Financial Times Limited 2008

Friday, November 28, 2008

Housing Prices Keep Declining

Price Declines Accelerate in September Data

by Dean Baker (CEPR)

Policy makers somehow still can't understand that the economy has a housing bubble.

The Case-Shiller 20-city house price index showed an accelerated rate of price decline in September. The index fell by 1.9 percent for the month. It has fallen at a 14.9 percent annual rate over the last quarter. The index has dropped 17.4 percent over the last year and is now down 22.1 percent from its peak in May of 2006, a fall of almost 30 percent after adjusting for inflation. This would imply a loss in housing wealth of almost $6 trillion.

It is important to realize the extent to which these data lag the current situation. The September data are an average of the contracted prices for houses sold in August, September, and October. Since there is typically a six to eight week period between when a contract is signed and when it is sold, the data in the Case-Shiller index are based on contracts that were signed primarily in the months of June, July, and August.

The sharp falloff in the economy that began in September and October would not be reflected yet in these data. If house prices continued to fall at the 1.9 percent monthly rate reported for September, then the price of houses contracted today would already be 7.5 percent lower than the numbers the index shows for September. Of course, if the September-October plunge affected house prices, then the decline over this period would be even larger.

The price declines were broadly based in September, with not a single city reporting a price rise. The sharpest declines were again in deflating bubble markets. Prices in San Francisco fell 3.7 percent in September and have fallen at a 31.0 percent annual rate over the last quarter. Phoenix had the second sharpest price decline, with 3.2 percent drop in the month. House prices in Phoenix have fallen at a 32.8 annual rate over the quarter.

Prices in San Diego fell 2.5 percent in September and have dropped at a 24.6 percent rate over the quarter. Prices in Washington, D.C., fell 2.0 percent and have fallen at a 15.4 percent rate over the quarter. New York prices have yet to feel the full impact of layoffs in the financial sector, but they still dropped 1.1 percent in September and have dropped at a 6.6 percent annual rate over the quarter.

Perhaps the most disturbing item in the new data was the continued price decline in cities without bubbles. In Atlanta, where real house prices are almost back to their mid-90s levels, house prices fell by 0.9 percent in September and have fallen at a 6.2 percent rate over the last quarter. In Detroit, where real house prices are almost 15 percent below their mid-90s level, house prices fell 2.4 in September and have fallen at a 14.3 percent rate over the quarter.

In these markets, there is a real risk of a downward spiral that will go far beyond a simple correction from bubble-inflated prices. As prices continue to fall, foreclosure and abandonment rates will increase, putting further downward pressure on prices. In addition, very few people in the area will have any substantial amount of equity in their current homes to use for a down payment on the purchase of a new home. And of course, banks will be reluctant to lend in markets where prices are falling rapidly.

It would be useful for the federal government to seek to stabilize house prices in such markets. Unfortunately, there has been no public discussion in Washington policy circles about a housing policy that distinguishes between deflating bubble markets and markets where there is no bubble or the bubble has already deflated. It would be a pointless waste of taxpayer dollars to try to stabilize prices in the former markets, while stabilizing house prices in the latter markets will be essential to the economic stability of these areas.

Policymakers in Washington managed to completely miss the bubble as it grew to enormous levels. Remarkably, even as the bubble's collapse is throwing the economy into the worst recession in 70 years, they somehow still can't see the bubble.

-- November 26, 2008

Thursday, November 27, 2008

Regular Folks in Georgia - Asia

Liberation, August 26, 2008

«Rester signifiait qu'il fallait prendre les armes contre mes compatriotes»

Merab, 48 ans, a fui, avec sa femme et son fils, les bombardements par les Russes de la ville de Gori. Il est actuellement réfugié, avec une vingtaine d'autres familles, dans une crèche du village de Dzegvi, à vingt kilomètres de Tbilissi.

«Quand la guerre a commencé, tout le monde me connaissait, personne ne m'a chassé. Mais j'ai décidé de partir car rester signifiait qu'il fallait prendre les armes et tirer sur des Géorgiens. Je suis d'abord allé chez mon oncle à Eredvi, un village géorgien près de Tskhinvali : là, on a défendu le village mais on ne combattait pas vraiment. Puis, nous sommes allés à Gori. Nous étions logés avec d'autres réfugiés dans la cité universitaire. Nous étions cent familles, tous très à l'étroit.

On a tout perdu en un jour. Une de mes soeurs est réfugiée ici, à Dzegvi, avec moi ; une autre habite dans un village près de Gori, avec ses enfants. Je ne veux pas dire le nom du village, les Russes sont là-bas. Pour l'instant, ils ne touchent personne mais on a très peur. Tout le monde se connaît, les Ossètes savent tout, qui est géorgien, qui est ossète, qui a fait quoi par le passé. Ces jours-ci, ils viennent dans les villages et brûlent les maisons de ceux qui ont fait la guerre en 1991. Ils viennent se venger.

Mais il faut dire quand même que tous les Ossètes ne sont pas pareils. Ceux qui cohabitaient encore avec des Géorgiens après la guerre étaient plus conciliants. Par contre, ceux de Tskhinvali et des villages des hauteurs ont été beaucoup aidés par la Russie ces dernières années, ils recevaient des bonnes retraites. Ça compte beaucoup. Ils nous disaient : "Vous, les Géorgiens, vous n'avez rien, qu'est-ce que vous pouvez nous donner ?"

Aujourd'hui, nous sommes réfugiés une nouvelle fois. Encore maintenant, je rêve de ma première maison à Tskhinvali. Nous étions partis de là-bas il y a dix-sept ans, et maintenant nous avons dû quitter notre deuxième maison de Gori. Nous avions réussi à refaire une vie, j'avais beaucoup d'amis, un travail. Cela ne s'est pas fait en un jour. J'ai 48 ans, à cet âge-là, normalement, en Géorgie, on est grand-père. Mais je ne me suis marié qu'il y a huit ans, je n'avais pas eu le temps d'y penser avant. A la limite, peu m'importe de savoir où je vais vivre. Maintenant, ma vie, c'est mon fils. Il a 7 ans. Il est né à Gori, mais il n'a pas de vrais repères, il est né réfugié. Quand il me demande quelle est son adresse, je lui dis seulement que c'est la Géorgie.

Tout ça, c'est la faute de la grande politique. Avant, on vivait bien ensemble, j'avais des amis Ossètes. On fêtait les noces, les enterrements ensemble, on se mariait entre nous. C'est vrai qu'à partir de la perestroïka, les Ossètes ont commencé à avoir des ambitions nationalistes. Les Russes, qui les aidaient en cachette, ont tout compliqué. Il y avait de l'argent, des armes qui passaient la frontière. Tout a empiré quand Zviad Gamsakhourdia, le premier président géorgien, est arrivé au pouvoir, en 1990.

Mais les Ossètes l'ont mal compris, ils se sont servis de ses slogans, par exemple "La Géorgie aux Géorgiens", comme un prétexte pour se séparer de nous. On sentait que tôt ou tard, quelque chose allait arriver.»

Merkel criticises US over crisis

By Bertrand Benoit in Berlin and Nikki Tait in Brussels
Published: November 26 2008 23:11 |Financial Times

Angela Merkel, the German chancellor, turned the tables on her international critics on Wednesday by accusing the US and other governments of making “cheap money” a central tool of their economic management, thus planting the seeds of a similar crisis in five years.

“Excessively cheap money in the US was a driver of today’s crisis,” she told the German parliament. “I am deeply concerned about whether we are now reinforcing this trend through measures being adopted in the US and elsewhere and whether we could find ourselves in five years facing the exact same crisis.”

There have been calls from outside Germany for it to beef up fiscal support, but Ms Merkel has been wary of raising public borrowing to stimulate demand, fearing that the extra income could boost Germans’ savings rate, which is already high.

The chancellor defended her government’s modest fiscal stimulus – worth €12bn over the next two years – as a “measured and proportional response . . . tailored to the situation”.

Ms Merkel’s comments came as the European Union proposed a €200bn economic stimulus plan aimed at avoiding a deeper recession through tax and infrastructure plans. There were immediate doubts as to whether member states would back the measures.

The proposals envisage the EU’s 27 states contributing about €170bn with the European Commission and the European Investment Bank providing the remaining €30bn, partly through accelerated spending programmes.

Economists and politicians quickly questioned whether all member states would step up as required, or whether individual governments’ responses would diverge from the Commission’s suggested measures.

“Angela Merkel and other conservative leaders such as [Italian premier Silvio] Berlusconi may well water down the plan and refuse to make the necessary national investments,” said Poul Nyrup Rasmussen, the former Danish prime minister who heads the Socialist party in the European parliament.

The larger-than-expected package represents about 1.5 per cent of EU gross domestic product. It must be reviewed by finance ministers and by government leaders in mid-December.

Analysts at Capital Economics, the consultants, said: “The proposed boost has yet to be agreed by member states and would sadly not do enough to bring European economies out of the gloom for some time anyway.”

Business Europe, the main business lobby group in Brussels, agreed with the proposals but said a “clear commitment from EU member states” was needed to implement stimulus packages of at least 1.2 per cent of GDP.

The proposal failed to impress investors, with most stock markets in Europe trading lower.

A European slowdown was one of the factors contributing to a decision by the Chinese authorities to slash interest rates by 108 basis points, the biggest cut in a decade. The move reflects concern about a weak housing market and declining export demand.

Sunday, November 23, 2008

Across France, Cafe Owners Are Suffering

November 23, 2008

By STEVEN ERLANGER

SAULIEU, France — Nathalie Guérin, 35, opened Le Festi’Val bar and cafe here two years ago full of high hopes, after working at this little Burgundy town’s main competition, the Café du Nord. But this summer, business started to droop, and in October, she said, “it’s been in free fall.”

“Now there’s no one,” she said, standing in a somber room with a few sad holiday decorations, an idle pool table and one young man playing a video game.

“People fear the future, and now with the banking crisis, they are even more afraid,” she said, her eyes reddening. “They buy a bottle at the supermarket and they drink it at home.”

The plight of Ms. Guérin is being replicated all over France, as traditional cafes and bars suffer and even close, hit by changing attitudes, habits and now a poor economic climate. In 1960, France had 200,000 cafes, said Bernard Quartier, president of the National Federation of Cafes, Brasseries and Discotheques. Now it has fewer than 41,500, with an average of two closing every day.

The number of bankruptcies filed by cafe bars in the first six months of 2008 rose by 56 percent over the same period a year ago, according to a study by Euler Hermes SFAC, a large credit insurance company. No reliable figures are available for the latter part of this year, when an economic slowdown here has been accelerated by the general financial crisis, a collapse in consumer confidence and the quick tightening of credit.

But the impression is that business is bad and getting worse, with people and companies cutting back on discretionary spending and entertainment budgets. And that is only compounding longer-term problems stemming from changes in how people live and growing health concerns.

“The bar of a cafe is the parliament of the people,” as Honoré de Balzac wrote, but it is being less frequently visited these days, especially by the young.

Not only are the French spending less, and drinking less, cutting down on the intensity and quality of the debates, but on Jan. 1 of this year, after much huffing and puffing, France extended its smoking ban to bars, cafes and restaurants.

Marco Mayeux, 42, the bartender of Le Relais, a Paris cafe in the 18th Arrondissement, said the ban alone had cut his coffee and bar business by 20 percent.

“A place like mine doesn’t appeal to everyone; it’s very working-stiff,” he said. “There is a coffee-at-the-counter feel that isn’t attractive anymore.”

Before, clients would go inside a cafe, have a coffee, a cigarette and another coffee. But now they go out to smoke, and sometimes they do not come back, many cafe owners said.

Gérard Renaud, 57, owner of the Restaurant de L’Église in Marsannay-la-Côte, said that business was down at least 30 percent. “Now people don’t eat,” he said. “They come in for a coffee or a little aperitif and that is it. We are used to being busy, but now we feel lazy, and it is depressing.”

Ms. Guérin is trying to sell her cafe, but has had only one nibble in this lovely town of some 3,000 people, much visited by tourists, where the renowned hotel-restaurant Relais Bernard Loiseau is just down the street.

Jean-Louis Humbert is the district director of the Federation of Cafes, Brasseries and Discotheques, and he is blunt about Ms. Guérin’s chances. “It’s finished for her,” he said. “No one wants to buy it. The banks don’t want to lend her any more money, and it will end up in liquidation.”

Daniel Perrey, 57, owner of the Café du Crucifix in Crimolois, blamed social change, saying: “Sadly, it is the end to a way of life. The culture is changing, and we feel it.”

People are drinking less, smoking less and spending less, and even those who drink are newly wary of the local police, who now hover near the bar, especially at night, to test the sobriety of drivers. President Nicolas Sarkozy has asked the police to crack down on drunken drivers.

“Workers don’t take taxis,” Mr. Perrey said, stroking his lavish mustache and laughing. He gleefully showed photos of a small police car wrapped around a tree in his parking lot after an accident, saying, “They had to call the firemen to get them out!”

The cafe, he said, is a kind of public living room, especially in small towns and cities, and it is suffering as habits and laws change.

“We need the cafe to have an equilibrium between the village and the world outside,” Mr. Perrey said. “Without the cafe, you lose the conviviality. You lose your mates. Business agreements are made behind the zinc” of the bar.

“We have to be very careful,” Mr. Perrey continued. “If we standardize everything in France, and we study everything, and forbid everything, we destroy respect for our culture. We need to preserve the cafe bar. What is a village but a cafe, a school, a pharmacy, a bakery and a city hall?”

Edouard Etcheverry, known simply as Doudou, with a wide, friendly face and a well-tended belly, is an “Amélie” version of a bartender and the owner of L’Express, a crowded bar and restaurant on the Rue Saint-Honoré in Paris. He keeps his prices down — a small coffee for a euro (about $1.25), a Pernod for two.

He pointed at a customer sitting alone at a table drinking a glass of tap water. “That’s our new customer!” he shouted. Then he turned to a group of bank employees at another table and said, “You see, they got 386 billion euros from the government, but they can’t spend a cent when they come here!”

Maria and Philippe Malichier, owners of the newly refurbished Duc d’Albret restaurant in Paris, look miserable. They have 35 seats, and on a recent day at lunch the place was almost empty, except for an old Spanish couple and a lone woman. With the economic crisis, Ms. Malichier said, “now it’s a carafe of tap water, main course and off you go.”

In Paris, Bernard Picolet, 60, is the owner of Aux Amis du Beaujolais, which his family started in 1921 on Rue de Berri. “The way of life has changed,” he said. “The French are no longer eating and drinking like the French. They are eating and drinking like the Anglo-Saxons,” the British and the Americans.

“They eat less and spend less time at it,” Mr. Picolet said.

People grab a sandwich at lunchtime and eat as they walk or sit at their desks. They stand in line to buy prepackaged espresso sachets, to drink coffee at home, or have coffee at the office, at the boss’s expense.

In Crimolois, at the Crucifix, Mr. Perrey’s wife, Nathalie, runs the kitchen and works 14 hours a day. “My wife is in love with her work; she loves her kitchen,” Mr. Perrey said.

But in fact Mrs. Perrey, 37, says she feels trapped. “The crisis started progressively, but now it moves very fast,” she said. “I worry it will last a long time.”

They thought about selling, she said, but it is not necessary now. “But the banks won’t lend to us, and if we shut, we can’t get any financial support from the state,” she said. “We’d have to go on unemployment, so we’re trapped.”

Mr. Quartier and his union have started a school for new cafe owners, to try to teach them to find a niche, to serve better drinks and food, to think about installing a flat-screen television, to make sure they serve the favorite bottled drink among French youth: Coca Light.

In Paris, Mr. Picolet, of Aux Amis du Beaujolais, said simply: “The bar-cafes? They’re finished. Twenty years ago, people would go in the morning before work for a coffee and a cigarette. And now, it’s over. Young people don’t drink during the day, and when they drink, they drink to get wasted. Smoking is forbidden and they eat en route, with coffee in a paper cup. They smoke and drink at home.”

Maïa de la Baume contributed reporting from Paris.

Why agreeing a new Bretton Woods is vital


By Martin Wolf
Published: November 4 2008 19:35 | Last updated: November 4 2008 19:35


We have arrived at the point in a crisis when ambitious leaders call for a “new Bretton Woods”. It is easy to mock such language. Yet it is easy to see why this crisis should make people think in such heroic terms.

First, the world economy has come full circle, with a massive financial crisis emanating from the US, then and still the world’s dominant financial power. The Great Depression of the 1930s was accompanied – and aggravated – by failures of economic co-operation, disintegration of the global economy and resurgent nationalism. But it also led to a revolution in economic thinking. “Never again” was the aim of the negotiators in Bretton Woods, New Hampshire. Mired in the worst financial crisis since the 1930s, we have good cause to say the same.

Second, it is unnecessary to wait for calmer times before thinking afresh. The Bretton Woods conference culminated in July 1944, while the second world war was far from over. If they could fight a war and redesign the global economy at the same time, so can we fight a crisis and redesign global institutions simultaneously.

Third, today’s global financial system is dysfunctional. What is at stake in reform is maintenance of the open world economy that offers opportunities to so many. Also at stake is sustained co-operation among states. Nothing is less likely than effective co-operation among inward-looking states presiding over frightened, even xenophobic, societies.

Finally, what is happening lies at the intersection between global macroeconomics – money, the exchange rate and the balance of payments – and global finance: capital flows, financial fragility and contagion. The imperative of co-operation remains. But as Robert Zoellick, World Bank president, said on October 6: “We must modernise multilateralism and markets for a changing world economy.”

So how is this to be done? We must start with the underlying challenges.

The first is the inability to gain a purchase on the policies of countries that run huge and persistent current account surpluses. That was a dominant concern of John Maynard Keynes in 1944. Ironically, the problem then was US surpluses. Today, it is the collapse in the ability of US households and those of a few other high-income countries to offset the vast current account surpluses generated by China, Germany, Japan and oil-exporting countries. Surplus countries love criticising those who spend what they wish to lend. The former will soon discover they cannot do without the profligacy of the latter.

The second is that of financing countries subject to “sudden stops” in capital inflows of the kind we are seeing, as banks and other foreign-currency lenders cut off financing to a wide range of borrowers, particularly in emerging countries. Many of the latter have made an immense and costly effort to reduce vulnerability by accumulating foreign currency reserves (see chart below). By August of this year, the total foreign currency reserves of emerging countries had reached $5,500bn, dwarfing the $260bn available to the International Monetary Fund. Yet self-insurance is inefficient and, as it has proved, too unequally distributed.

The third challenge is that of making the financial system less unstable and, above all, less vulnerable to such huge swings in risk appetite – from financing anything, however ridiculous, to financing nothing, however meritorious. At present, moreover, as Stephen King of HSBC has pointed out on the FT’s economists’ forum, the efforts of governments to force rescued banks to finance domestic borrowers are bound to come at the expense of their lending to emerging countries.

The final challenge is that of making the global institutional architecture less illegitimate than today. The Bretton Woods institutions – the IMF and the World Bank – are dominated by the western powers: in the case of the Fund, the US still had 17.1 per cent of the quotas (which largely determine votes) and the European Union another 32.4 per cent in May 2007. Meanwhile, China had just 3.7 per cent and India 1.9 per cent. These are simply anomalous. So, too, is the persistence of the group of seven high-income countries as the co-ordinating group for the world economy, particularly as three of them – Germany, France and Italy – do not have independent currencies. The group of 20, whose summit will take place in Washington on November 15, looks too large. Mr Zoellick suggests a G14, which would add Brazil, China, India, Mexico, Russia, Saudi Arabia and South Africa.

What is interesting about this agenda is how familiar much of it would seem to the participants at Bretton Woods, with one exception. Keynes would be horrified that the world has let the genie of free capital flows out of the bottle. This, he would note, is why more external financing is needed than ever before, why vast foreign currency reserves have been accumulated and why financial crises are once again global, rather than local. He would add that “a sound banker, alas, is not one who foresees danger and avoids it, but one who, when he’s ruined, is ruined in a conventional and orthodox way along with his fellows, so that no one can really blame him”. We have far too many such bankers. He would surely add that these undercapitalised and illiquid institutions are little short of financial time-bombs (see chart below).

Yet can anything useful be done to meet such challenges? It is certainly possible – and indeed necessary – to change the global architecture, not least in response to changing economic weights. It is equally necessary to give the IMF more financial resources in support of its new short-term lending facility. But it is surely too optimistic to believe that the Fund would ever be able to provide reliable warnings of looming crises. Even if it did, it is even less likely that the countries which matter would do anything in response.

Nor am I optimistic that we can sever the links connecting banking as a stodgy utility that provides essential services to the economy to banking as a casino offering opportunities for taking huge bets. Bankers have been given a licence to gamble with taxpayers’ money. That is a wonderful business to be in. It is also one we seem unable to bring to heel.

Yet I wish to be proved wrong. I hope that the summit of the G20 will set the agenda for serious reform, by creating working groups that prove able to produce radical and effective proposals. For what is happening now may well be the last chance for an open and dynamic world economy. First, we have to get through the present crisis. Then we have to have to make such catastrophic financial collapses vastly less likely. If not us, who? And if not now, when?

martin.wolf@ft.com

Saturday, November 22, 2008

Panic Seize Markets

A week of living perilously

By Martin Wolf in London

Published: November 21 2008 18:43 | Last updated: November 21 2008 18:43

Panic seized markets this week. Just one asset class is deemed safe: the liabilities of highly-rated governments.

The price of a barrel of oil is below $50. The dividend yield on the S&P 500 is higher than the yield on US 10-year treasuries. The yield on short-dated US inflation-indexed bonds is higher than on their conventional equivalents. The yield on ten-year government bonds is now 3.2 per cent in the US and 3.8 per cent in the UK.

This is pricing for deflationary Armageddon. The fundamental rule of investment is: buy when others are frightened and sell when others are confident. The economic position looks ghastly. But, at least for those with sufficiently long time horizons, the investment position does not.

Yet good economic news is likely to take a long while in coming. All the principal advanced countries are now in recession. According to the November Consensus Forecasts, gross domestic product is forecast to contract in the advanced countries next year, with world growth down to a miserable 1.1 per cent. It is almost certain to end up lower still – perhaps with a reduction in global output.

Meanwhile, the financial system remains dysfunctional. With liquidity still hoarded by banks, heavily indebted investors – hedge funds and private equity funds – are compelled to retrench. So-called “carry trades” – inherently absurd notions – are imploding, generating flight back to lower-yielding currencies, principally the yen and the dollar.

The leverage machine is operating in reverse and, as it generated fictitious profits on the way up, so it takes those profits away on the way down. As unwinding continues, highly indebted consumers cut back, corporations retrench and unemployment soars. Round after further round of losses befall the lenders.

Yet governments are not helpless. They can continue to recapitalise financial institutions. The entire funding of the US TARP – the “troubled asset relief program” – should be used for this purpose. It is ridiculous to conserve ammunition until after the battle is lost. But banks must also be forced to lend. Today, everybody is losing out, because lenders are too cautious, just as they loved risk two years ago.

As the deflationary danger comes closer, central banks can finance anything – above all, government borrowing. This will work much better, however, if all countries act together. For surplus countries with limited financial fragility to choose this moment to creep willingly into recession – thereby exacerbating the difficulties of the indebted, on whose demand they depended – is economic vandalism.

Deep depressions deliver not healthy cleansing of excess, but social and political catastrophe. The time for aggressive countervailing action is now. Patient investors may be able to wait for a long term reward. The rest of the world cannot.

More than 80,000 jobs cut in just five days

By Andrew Taylor in London

Published: November 21 2008 17:50 | Last updated: November 21 2008 17:50

More than 80,000 job losses were announced around the world this week as the global recession tightened its grip in virtually every business sector.

A Financial Times study of company announcements, press briefings and union statements over the past five working days reveals the spread and depth of the downturn.

Jobs have haemorrhaged from businesses as diverse as a Chicago kosher hot dog factory, a German airline and car plants in Japan. Companies have been forced into savage cost cutting as the effects of the credit crunch have sapped confidence and sent order books and commodity prices plummeting.

Almost 30,000 job losses have been announced by British companies alone in the past two weeks.

Richard Adkerson chief executive of Freeport-McMoRan Copper & Gold, the world’s largest publicly traded copper producer, which is cutting more than 600 jobs in the US, said: “We’re running our business on the basis of being prepared to live with low commodity prices for an extended period.”

More than half the job losses this week, were announced by Citigroup, the US bank, which has increased the number of staff it is making redundant to 52,000.

But even without Citigroup, businesses around the world announced job cuts at the rate of more than 5,500 a day. Economists expect worse to come as output falls in developed countries and growth continues to slow in emerging markets such as China and Russia.

Carmakers and their suppliers, from component manufacturers to steel producers, have been particularly badly hit, prompting producers in the US to seek a government bail-out.

Toyota, Japan’s biggest carmaker announced on Friday that it was cutting its domestic temporary workforce by 50 per cent, or 3,000 jobs. Mazda is not renewing contracts for 1,300 temporary staff while Isuzu, the Japanese truck manufacturer is scaling back production with the loss of 1,400 temporary and contract workers. Temporary and part-time workers account for about a third Japan’s workforce. Asian business centres are also starting to feel the backlash of big job cuts announced by international banks this year. HSBC was reported this week to be cutting 500 jobs, the bulk of them in Hong Kong. Morgan Stanley handed notices to about 100 of its 1,700 Hong Kong staff while Standard Chartered is eliminating 527 jobs at its main office in South Korea.

European job losses are also mounting. On Thursday alone, AstraZeneca, the Anglo-Swedish drug manufacturer announced that it was cutting 1,400 jobs and closing plants in Spain, Sweden and Belgium; Rolls Royce, the UK jet engine manufacturers, planned to cut 2,000 jobs worldwide; Sandvik of Sweden, the world’s largest manufacturer, announced that it was axing 2,300 jobs; Voestalpine, Austria’s biggest steelmaker, said it would not be renewing contracts for 2,100 temporary staff and Peugeot Citroën, the French carmaker, said it was cutting 2,700 jobs.

Air France-KLM also revealed that it was postponing taking delivery of new fuel-efficient aircraft with the group preferring to hold on to its cash. Global airline-passenger traffic, according to the International Air Transport Association, dropped in September in the first fall for five years.

Air New Zealand announced plans to axe 200 jobs this week while Deutsche Lufthansa is cutting about 500 staff at its regional carrier CityLine.

In the US, where the number of Americans filing for unemployment benefits is highest for a quarter of century, jobs are being cut in almost every sector.

In addition to the continuing flow of redundancies at financial services companies, job losses were announced this week at Pepsi Bottling Group (3,150 jobs to go of which 750 are in North America); Lam, the San Francisco chip equipment manufacturer (600); Pilgrim’s Pride, the largest US chicken producer (335); Boeing’s defence manufacturing plant at Wichita Kansas (800); International Game Technology, which manufactures computerised gaming machines (460); and Sara Lee which is closing a kosher hot dog and meat processing facility in Chicago (185).

There are thousands of other jobs being cut at small businesses. According to figures from Automatic Data Processing the world’s largest payroll processing company, small businesses in the US employing 49 or fewer people lost 25,000 jobs in October.

Tom Peters These Days

Lunch with the FT: Tom Peters

By Stefan Stern

Published: November 21 2008 19:41 | Last updated: November 21 2008 19:41

Outside the markets were tumbling, traders were panicking, and the end of the world seemed nigh. But inside, seated quietly in his favourite French restaurant, Tom Peters was calmness itself. This is not how most people would picture the world’s most famous management guru. Mention Peters to business types and they will recall spectacular (and noisy) stage presentations, filled with loud assertions, garish PowerPoint slides and rarely a pause for breath.

Roussillon in Pimlico, central London – Peters’ choice – provided a weirdly tranquil setting for a discussion about management and the meaning of life when disaster appeared imminent. When he is in London, the 66-year-old likes to eat here. Not only is the food good but – full disclosure – the owner is a distant relative of his wife’s. We were certainly well looked after, given a large table that sat proudly in the restaurant’s attractive bay window.

Peters looked at home in this elegant setting. He was wearing a tweedy jacket, blue shirt, yellow tie and charcoal slacks. His hair was greyer than it was the last time I had seen him but, then, so was mine. The only obvious concession to age was a pair of spectacles that remained perched on his nose throughout our chat.

He was in London for a rare non-work trip – a family reunion. His mother-in-law had been born in England but had emigrated with her new American serviceman husband after the war. Sixty years on, various siblings had gathered on the Isle of Wight off the south coast over the preceding weekend but now the scene had moved on to London.

We had been studying the menu for only a few moments when the first amuse-bouche arrived: a dainty construction involving smoked eel and beetroot with a mustard sauce. Peters, of course, possesses one of the most amusing bouches there is, and my battle this lunchtime was to try and elicit answers to a few specific questions without getting sidetracked by too many of the nice old stories.

The mad days of rampant globetrotting are now behind him but Peters is still in demand at home and abroad. Overall he is a bit less busy – by choice, he says – than he used to be. There is now more time to be spent with his artist wife on his farm in Vermont, clearing brush, blogging, and marvelling at the continuing idiocies of management around the world.

Twenty-six years have passed since the publication of In Search of Excellence, the book he wrote with his fellow former McKinsey consultant Robert Waterman. When people think about the great management blockbusters, this is the text they have in mind. Search made the business book news. It has sold more than 10m copies and is still the model to which many business authors – whether they realise it or not – aspire. It also launched Peters on the path to global, jet-setting guru-dom, a status that has left him open to mockery and criticism.

Few,however, have criticised what he does for a living as ferociously as Peters himself. “I say to people, ‘You got a bad deal, paying money to see me,’” he tells me. “I have utterly nothing new to say. I am simply going to remind you of what you’ve known since the age of 22 and in the heat of battle you forgot. You’d have to be one of those television preachers to believe that you’re going to work with a group of 500 people and change their lives. First of all, most of them agree with you. You’re not going to pay £1,000 [a head] to go and see someone if you think the guy’s a jerk.

“In a room of 500 managers, there are going to be four who are on the verge of doing something really interesting, whether inside or outside the company, and you simply give them the will. In American football terms, they are five yards short and you push them over the line. To claim anything more than that is grotesque egocentrism,” he says.

Time to order. There may be a crisis in the outside world but there’s a crisis at Roussillon too: no foie gras. But it has been replaced by equally delicious sweetbreads, so I take that as my starter, followed by pigeon. Peters opts for delicate ricotta gnocchi first, with red mullet as a main.

And to drink? Just water for Mr P. “I don’t drink now. It’s not an AA thing, it’s a getting old thing,” he says. “Being on the road a lot – there’s nothing worse than drinking by yourself. I didn’t always have the willpower I should have had. I was sitting in too many hotels and raiding the mini-bars. I stopped about four to five years ago and I’ve never looked back.” So, just me then: a glass of pinot grigio.

Fortified, I give him my best shot. Is management getting harder? “No,” he replies firmly – and in defiance of the conventional wisdom. But what about all that new technology, the end of deference, the increased pace of life, and the heightened expectations of employees? Doesn’t that all make management harder?

On the whole, Peters thinks not. We exaggerate the extent of change, he feels. It is the arrogance of modernity to believe that we face unique and unprecedented challenges. What people say now about the internet they used to say about the railways, the telegraph, the radio ...

“You know, I get paid large sums of money for running around and saying that the past was simple and the current generation faces immeasurable difficulties,” Peters says. “But my mom died two years ago a month short of her 96th birthday, which means that she lived through the arrival of long-distance telephones, automobiles, airplanes, jet airplanes, a man on the Moon, the great Depression, world war one, world war two, the cold war, Vietnam, Iraq one, Iraq two, and I have the nerve to stand in front of people and say, ‘Life is tough!’ So, yes, I think we way overdo it.”

The reference to warfare is significant because Peters himself saw active service in Vietnam. He talks about it reluctantly – it takes several (impertinent? distasteful?) nudges and a degree of patience on my part to get him to describe it.

“I was there as a combat engineer – so we weren’t trying to kill Vietnamese,” he says. “We were trying to build bridges for the Marine Corps who would go out to kill Vietnamese. I’m not saying it wasn’t a bloody affair, I’m just saying I was one step removed.”

I ask if he ever came under fire. This question produces a slightly disappointed look. Perhaps you just never ask war veterans about what they have seen and done? “Never confuse us with a marine infantry battalion but, yes, we routinely came under fire. People shot mortars at us, we had some people killed in our battalion – it was a war zone, and there was no doubt about that,” Peters explains.

Vietnam gave Peters something else: a crucial insight into man management. “I had two tours of duty, two commanding officers. I’m not exaggerating but I really spent the next 40 years of my life writing about Dick Anderson. He was a guy who believed that young men aged 23 needed a chance to express themselves. He believed that [writing] reports was incidental but that building stuff for your customers, typically the Marine Corps, was what you were there for.

“On tour two I had a naval academy graduate who would rather have produced an excellent report about things we hadn’t built than a lousy report about things we had. One guy wanted you to do something, the other guy wanted you to write reports. It was the best management training that one could possibly have had. Do what Dick did and avoid what Dan did – there’s the book ... it’s a very short book!”

The US Navy funded Peters through his postgraduate years at Stanford in California. He returned there after Vietnam to complete an MBA and PhD in decision science and organisational behaviour, leaving his home city (Baltimore) far behind. He only came back east to settle in Vermont after two decades on the west coast.

After Stanford, Peters spent several years working in McKinsey’s San Francisco office in the 1970s, developing the ideas that were to form the guts of In Search of Excellence. But the book did not have an easy birth. Its breezy tone did not play well with earnest colleagues at The Firm, as its authors were to find out. “There’s no way to describe the viciousness with which Bob and I were attacked within McKinsey,” Peters says. “This was not the Holy Writ. It was the intellectual challenge to what McKinsey stood for at the time.

“To some extent what Waterman and I were looking at was the business of ‘execution’, and execution is fundamentally a management thing. We were saying, ‘If you can execute well, it doesn’t matter what the hell the strategy is. The doing is what counts.’ But this was when ‘strategy’ was at its apex. We were pushing back. We were just royally pissed off by it all.”

Peters has been criticised for the way he assembled data for the book. He even fuelled the controversy himself a few years ago in a free-wheeling interview for a business magazine. But today he is clear and concise. “We were looking for companies that worked,” he says. “We went to Chris Lorenz [the FT’s management writer of the time] and McKinsey partners, collected 100, sieved it, and 20 came out.”

It was not hard science. But what in management is? “It’s mostly luck, for God’s sakes!” Peters says. He feels the same way about this mega blockbuster that made his name: “A decent book with perfect timing” is his verdict. “There’s not an ounce of false humility in that.”

We both round off the meal with peach parfait and coffee. It is now nearly 3pm. Time for complete candour about the secret of his success. “Look,” Peters confesses, “I was born in 1942, in the US. I was protestant. I had relatively intelligent parents and I was white – that’s the first 99.9 per cent of it. Hard work may have done the rest.”

There is no secret: try hard, then try again. “Are you throwing enough spaghetti at the wall so that some of it will stick? Whoever does the most stuff has the highest chance of doing well. It’s about getting stuff done.

“I had a neighbour who won a Nobel prize for his work on kidneys – he carried out the first effective transplant. I once asked him how he’d done it. ‘We did the most operations,’ he told me. At any point in time there are 10 people up there – one of them does the most.”

You see, if you just keep at it for long enough something good is bound to emerge. It’s a bit like having a long, amiable chat over lunch with Tom Peters.

.........................

Roussillon
London SW1

1 x sweetbreads
1 x ricotta gnocchi
1 x grilled squab pigeon
1 x pan fried red mullet
2 x peach parfait
1 x glass pinot grigio
2 x coffee
3 x sparkling mineral water

Total £86.63

Stefan Stern is the FT’s management writer

Financial Times on Tim Geithner

Geithner is viewed as top player

By Aline van Duyn and Henny Sender in New York

Published: November 22 2008 00:45 | Last updated: November 22 2008 00:45

Tim Geithner, Barack Obama’s choice to become the new US Treasury secretary, has been at the centre of efforts to fight the financial and economic storm engulfing the world.

The New York native took over as president of the Federal Reserve Bank of New York five years ago.

As the regulator with the closest connections to Wall Street, he has played a leading role in efforts to tackle the financial eruptions that rocked Bear Stearns in March and Lehman Brothers and AIG in September.

The inability of officials, including Mr Geithner, to prevent the bankruptcy of Lehman Brothers, followed by the government takeover of the AIG, the insurer, days later, generated controversy, especially in light of the meltdown of financial markets across the world after the bank’s collapse.

Born only weeks after president-elect Obama, and now 47 years old, Mr Geithner began his government career at the Treasury in 1988. He worked there under one of his main rivals for the position of Treasury secretary, Lawrence Summers. Unlike many of the world’s leading economic officials, Mr Geithner does not have an academic background in economics or finance.

Unusually among senior US officials, Mr Geithner has extensive international experience. He spent much of his childhood in Asia and Africa. As the Treasury attaché in Tokyo in the mid-1990s, Mr Geithner witnessed first hand Japan’s “Lost Decade” of economic woes and the price to be paid for not acting swiftly enough to prick a bubble in asset markets.

He joined Mr Summers’s international team under Robert Rubin, Treasury secretary. Mr Geithner rose rapidly, playing a big part in shaping the US response to the Asian financial crisis.

“He is very bright, independently minded, thoughtful, and has an unusual sense of public service – he is a very easy person to get along with,” Mr Rubin told the Financial Times this year.

“He is practical, worldly in the sense that he has a feel for things – for the psychology of markets, the politics of what he is doing – and a good sense of humour.”

In speeches going as far back as 2004, Mr Geithner praised innovations in finance such as securitisation and globalisation. But at the same time he warned that these developments, while reducing the probability of a crisis, could exaggerate the downside if one ever did occur.

Surprisingly little is known about Mr Geithner’s private life but he is a keen tennis player and an enthusiastic skier who recently took up snowboarding. He married young to Carole Sonnenfeld, a college sweetheart, and has two children.

Within the Fed, Mr Geithner has a reputation as a fiercely competitive sportsman.

He joined the Legal Department’s basketball team, where he played in defence. “He was the best player on the team,” said one former Fed executive.

Tuesday, November 18, 2008

Fake University Reforms in France

Université : des réformes en trompe-l'oeil,
par Jean Fabbri, Bertrand Monthubert et Jean-Baptiste Prévost
LE MONDE | 17.11.08 | 13h26

Le gouvernement clame haut et fort que la recherche et l'enseignement supérieur constituent ses "premières priorités". Il impose, par une série de réformes, un véritable bouleversement de ces activités, au mépris de toutes les mises en garde des étudiants et des personnels qu'il accuse d'"immobilisme". Et il communique à l'envi sur les moyens qu'il allouerait à ces secteurs. Nous ne demanderions qu'à le croire. Mais nombreux sont les éléments qui dessinent un paysage bien plus sombre, notamment pour les universités.
Pour que ces dernières puissent accueillir correctement les étudiants, il faudrait accroître leurs moyens, aussi bien matériels qu'humains. Trop de locaux universitaires sont encore dans un état lamentable. Et si de nombreux étudiants tentent de contourner l'université, en s'inscrivant dans d'autres filières, c'est notamment pour bénéficier d'un meilleur encadrement et de meilleures conditions d'études.

Les dépenses par étudiant le prouvent : moins de 8 000 euros par an à l'université, contre 14 000 en classes préparatoires. Cela a inéluctablement des conséquences sur la réussite des étudiants. Le budget 2009 nous permettra-t-il de progresser ? Il n'en est rien. En effet, nous avons appris cet été que 900 postes vont être supprimés dans l'enseignement supérieur et la recherche.

Les besoins humains seraient partiellement satisfaits à coups d'emplois de courte durée, sans avenir. Comment, face à une telle précarisation et avec de telles annonces, s'étonner que les jeunes se détournent des métiers de la recherche et de l'enseignement, que les masters recherche se vident peu à peu, que bien des laboratoires, y compris les plus prestigieux, rencontrent des difficultés pour attirer des doctorants ? Le gouvernement organise de fait la "fuite des cerveaux" qui a pourtant été l'un de ses arguments pour imposer, au nom du "déclin" de la recherche française, ses réformes.

Le gouvernement entend réduire l'échec que connaissent beaucoup de jeunes à l'université. Nous partageons cette ambition. Mais pour lutter contre l'échec, il faut améliorer l'encadrement des étudiants et remplacer, notamment en première année, les cours en amphis de plusieurs centaines d'étudiants par des enseignements en petits groupes. Ce type d'évolution pédagogique a déjà été mis en place avec succès dans certaines universités ou filières. Pour les généraliser, il faut des moyens humains et matériels.

Qui, à part la ministre, peut croire que les recours aux heures supplémentaires, déjà surutilisées et qui diminuent le temps consacré aux activités de recherche, ou à des tuteurs sans qualifications permettront d'augmenter le nombre d'heures de cours ou de dédoubler les amphis ? Le tutorat peut être nécessaire pour soutenir certains étudiants, mais il ne s'agit pas de cours en tant que tel. Le gouvernement doit donc se rendre à l'évidence et abandonner ses postulats idéologiques sur le prétendu excès de fonctionnaires : nos universités ne pourront relever le défi de la démocratisation sans création de postes.

Ce dont nous avons besoin en matière d'encadrement a été chiffré depuis longtemps et représente moins de 10 % des sommes dites supplémentaires annoncées au budget 2009. Ce sont, d'abord, 1 000 créations d'emplois d'enseignants-chercheurs pour améliorer l'encadrement en premier cycle universitaire. Mais il faut aussi donner le temps aux enseignants-chercheurs de développer leur activité de recherche en réduisant leur service d'enseignement pour se rapprocher des standards internationaux. Enfin, les établissements ont besoin d'emplois techniques et administratifs qui contribuent, notamment, à un meilleur accueil des étudiants dans des universités parfois trop "anonymes".

Qu'en est-il par ailleurs de la "priorité" budgétaire accordée à l'enseignement supérieur et incarnée par ce fameux 1,8 milliard d'euros supplémentaires mis en avant ? Nous sommes ici face à un pur effet d'annonce : la croissance des crédits budgétaires se réduit en fait à 740 millions, ce qui, avec une inflation de 3 % en 2009, correspond à une croissance réelle nulle dans une enveloppe globale de 24 milliards !

Nous sommes bien loin des discours optimistes de Mme Pécresse. Elle assure avoir amélioré les conditions de vie des étudiants alors que 9 étudiants sur 10 subissent une baisse de pouvoir d'achat du fait de décisions qui lui sont imputables (hausse des droits d'inscription, réforme des bourses). La seule réponse annoncée en cette rentrée est la possibilité pour les étudiants de s'endetter. La crise bancaire actuelle démontre, s'il en était besoin, l'inadaptation d'un tel dispositif.

Concernant la recherche, nous avons besoin de redonner de l'oxygène aux laboratoires, de permettre aux chercheurs de faire de la recherche plutôt que de passer du temps à chercher de l'argent. Les budgets de base des laboratoires vont à nouveau baisser cette année. L'augmentation du budget de la recherche est essentiellement préemptée par le crédit d'impôt recherche (CIR), dont le montant explose, mais qui n'est plus sous contrôle ni du gouvernement ni des universités. Depuis 2002, ces aides de l'Etat aux entreprises se sont accrues de 1,6 milliard d'euros, sans effet d'entraînement réel sur les dépenses de recherche privées : l'efficacité du CIR reste à démontrer.

Nicolas Sarkozy aime à parler de rupture. Assurément, la suppression de 1 000 emplois, pour la première fois depuis quinze ans, dans un secteur prétendument prioritaire en est une ! Il y en a d'autres : la marginalisation de 71 % des universités, écartées du plan campus et qui risquent d'être de plus en plus coupées de la recherche, alors que nous avons proposé une mise en synergie des universités au niveau territorial pour tirer le système vers le haut.

Dans un contexte économique fragilisé par la crise financière, où le gouvernement démontre qu'il peut en une nuit débloquer plusieurs milliards d'euros pour sauver un système bancaire en faillite, il refuse de donner aux étudiants et aux personnels les moyens de leurs ambitions. Alors même que les dépenses d'avenir sont dans l'éducation, l'université et la recherche.

L'avenir de la France est-il servi par ces mesures ? Assurément pas. Pourtant, la communauté universitaire aspire à des transformations, fondées sur le dialogue avec ceux qui font la recherche et l'enseignement supérieur, ceux qui en connaissent la complexité et, chaque jour, en défendent les valeurs. Ce ne sont pas que des mots : au printemps 2007, avec d'autres organisations, nous avons formulé des propositions dans le prolongement des états généraux de la recherche de 2004. Le gouvernement les a contournées, a imposé des réformes qui aggravent les difficultés.

Il est urgent et indispensable de donner une tout autre ambition à l'enseignement supérieur et à la recherche, pour passer à une nouvelle étape de la démocratisation. Comment atteindre autrement l'objectif européen de 50 % d'une classe d'âge diplômée de licence ? Au-delà de la nécessaire augmentation des moyens, il est grand temps d'engager les transformations profondes dont notre système d'enseignement supérieur et de recherche a besoin. Cela suppose de rapprocher universités et grandes écoles (où les inégalités sociales jouent à plein) ; d'ouvrir un débat national et transparent sur la carte universitaire et la carte des formations, tant les regroupements actuels d'universités sont anarchiques et autoritaires ; de revaloriser la recherche publique et ses métiers en garantissant son indépendance ; d'engager une réforme profonde du système d'aide sociale aux étudiants pour lutter contre la dégradation de leurs conditions de vie ; de lancer un véritable plan Marshall en faveur des premiers cycles universitaires. Toute autre politique préparerait une explosion des inégalités.

Jean Fabbri est secrétaire général du SNESUP-FSU ;

Bertrand Monthubert est président de Sauvons la recherche ;

Jean-Baptiste Prévost est président de l'UNEF.


Article paru dans l'édition du 18.11.08

G20 Shows Split Between France and the US

Le G20, théâtre de la discorde franco-américaine
LE MONDE | 15.11.08 | 08h46 • Mis à jour le 15.11.08 | 12h31
WASHINGTON, ENVOYÉS SPÉCIAUX

Derrière le communiqué commun percent deux conceptions fort différentes de l'économie et de la finance. Le sommet de Washington qui réunissait, vendredi 14 novembre pour un dîner et samedi 15 novembre, les dirigeants des vingt pays les plus riches de la planète, le G20, a appelé à une relance économique, une réforme de la surveillance financière mondiale et des institutions internationales. Il a aussi révélé l'écart qui sépare la France des Etats-Unis.

Première divergence : le modèle économique mondial. Nicolas Sarkozy appelle depuis des semaines à une refondation du capitalisme. Les Américains ne veulent pas en entendre parler. "Cette crise n'est pas l'échec de l'économie de marché. Et la réponse n'est pas de réinventer ce système", avait lancé le président George Bush à la veille de la réunion. Il a enfoncé le clou vendredi : "Tous nos pays doivent rejeter les appels au protectionnisme, au collectivisme et au défaitisme face aux défis présents", a expliqué M. Bush, qui voulait que soit fait mention de l'objectif de conclure d'ici à la fin de l'année le cycle de libéralisation commerciale de Doha, en dépit des réticences françaises.

La deuxième querelle porte sur les responsabilités. M.Sarkozy, qui avait ménagé le président américain depuis son élection, a critiqué Washington à propos de la guerre en Géorgie et de la finance. "La crise est mondiale, mais on sait très bien d'où elle est partie", avait déclaré, le 7 novembre à Bruxelles, le président français, fort d'un mandat des 27 pays européens.

"Les Américains n'ont pas apprécié que Nicolas Sarkozy explique que le sommet se déroulait chez eux parce qu'ils étaient à l'origine de la crise", confirme un conseiller de l'Elysée. Le secrétaire au Trésor américain, Henry Paulson, a rétorqué, mercredi, que les "déséquilibres mondiaux persistants" et les "excès" ayant conduit à la crise "ne peuvent pas être attribués à une seule nation". Cette querelle a conduit la Chine à refuser, vendredi, que ces déséquilibres globaux soient mentionnés dans le communiqué final. Pékin, avec son yuan jugé sous-évalué et ses excédents commerciaux, refusait de faire figure de bouc émissaire.

SERVICE MINIMUM

Troisième sujet de discorde : la mise en scène politique. Le communiqué final de cinq pages est rédigé dans le langage des experts financiers. Il a l'avantage de fixer une feuille de route jusqu'au 31 mars et d'établir un accord global entre les pays du G20. "Sur ces sujets, il était impossible depuis des années d'avoir le moindre consensus", se réjouit Paris. Il n'empêche, la chancelière allemande Angela Merkel et Nicolas Sarkozy ont regretté que le texte ne soit pas plus politique. Pourquoi ne pas pouvoir employer le langage de l'homme de la rue, en critiquant les hedge funds, ces fonds qui "spéculent" à l'abri de "paradis fiscaux"? Au lieu de cela, le G20 devait parler de "fonds capitalistiques" logés dans des "entités non coopératives"… M. Sarkozy a embarqué dans son avion une équipe de TF1 et un reporter du Journal du Dimanche pour donner un large écho à la réunion qu'il avait appelée de ses vœux fin septembre, aux Nations unies. Mais la technicité du dossier rend les conclusions du sommet difficiles à vendre à l'opinion publique française. "Elles ressemblent plus à un pudding qui a eu du mal à cuire qu'à un roman policier", concédait l'Elysée avant le sommet.

M. Bush, quant à lui, comptait faire le service minimum. Pas de grande conférence de presse avec les dirigeants du monde entier confinés dans leurs hôtels. L'Amérique s'intéresse davantage à la possible nomination de Hillary Clinton au poste de secrétaire d'Etat ainsi qu'au plan du président élu Barack Obama pour les écoles.

Barack Obama, justement, s'occupe des Américains mais pas des dirigeants étrangers, au regret de Nicolas Sarkozy, qui espérait être le premier à le rencontrer en tant que président de l'Union européenne (UE). Il avait fait préparer un avion pour se rendre à Chicago, avant de battre en retraite. M. Obama a signifié qu'il ne rencontrerait aucun dirigeant étranger avant sa prise de fonctions le 20 janvier. M. Sarkozy devait prolonger son séjour américain par un voyage privé à NewYork avec son épouse Carla Bruni-Sarkozy.

M. Obama devrait participer au prochain sommet, annoncé pour avril. Il devrait se tenir au Royaume-Uni, ce pays présidant le G20, alors que le premier ministre britannique Gordon Brown est parmi les plus allants en matière de réforme, convaincu qu'il s'agit du meilleur moyen de préserver la City.

Arnaud Leparmentier et Corine Lesnes

World Wants Germany to Act Against the Crisis

Le monde presse l'Allemagne d'entrer dans la voie de la relance

LE MONDE | 17.11.08 | 10h29 • Mis à jour le 17.11.08 | 14h00

Washington, envoyé spécial

Après la Chine et le Japon, l'Allemagne ? Les dirigeants des vingt principales puissances économiques du monde, réunies au sein du G20, ont appelé, samedi 15 novembre, à "utiliser des mesures budgétaires pour stimuler la demande interne avec des résultats rapides". En clair, un plan de relance, qui ne peut marcher que si les grands exportateurs jouent le jeu. La Chine et le Japon avaient agi en amont de la réunion de Washington (455 et 207 milliards de dollars de relance). Reste l'Allemagne, premier exportateur mondial et seul pays européen à disposer, avec les Pays-Bas, de fortes marges de manœuvre budgétaires.

Selon la Commission européenne, la puissance économique dominante du Vieux Continent aura un budget quasi équilibré en 2009 et 2010. Rien à voir avec la glissade britannique –un déficit de 5,6 % du produit intérieur brut (PIB) est prévu pour 2009 –, française (3,5 %) et espagnole (2,9 %), qui limite leur marge de manœuvre. L'Italie, un peu mieux lotie (2,6 %), compte annoncer un plan de 80 milliards d'euros.

Seule l'Allemagne d'Angela Merkel est réticente. "Faire du déficit budgétaire pur sans objectif stratégique ciblé ne résout pas les problèmes", prévient Ulrich Wilhelm, le porte-parole de la chancelière allemande. "Il ne faut pas générer une nouvelle bulle, comme l'a fait Alan Greenspan aux Etats-Unis, ni espérer une solution simple qui ne viendrait que de l'Allemagne", précise-t-il. Quant à la faiblesse de la consommation allemande, le gouvernement assure qu'il n'y est pour rien, le taux d'épargne des ménages étant extrêmement élevé.

Depuis des années, les relances budgétaires étaient proscrites, les économistes préconisant l'arme monétaire en cas de choc affectant toutes les économies. Si le G20 reconnaît "l'importance du soutien que la politique monétaire peut apporter", les marges de manœuvre sont devenues nulles au Japon – les taux sont à 0,25 % – mais aussi aux Etats-Unis (1,5 %).

Résultat, les dirigeants redécouvrent les vertus d'une relance keynésienne mondiale, à condition que tous jouent le jeu. L'objectif est d'éviter qu'un pays relance seul, comme la France en 1981, ce qui avait profité à ses partenaires commerciaux. "Le plan de relance budgétaire d'un pays peut être deux fois plus efficace pour augmenter la croissance si ses principaux partenaires commerciaux adoptent eux aussi un plan de relance", a expliqué Dominique Strauss-Kahn, le directeur général du Fonds monétaire international (FMI), qui a plaidé pour une relance budgétaire de 2 % du produit intérieur brut (PIB) susceptible selon lui de générer un surcroît de croissance de 2 %.

EN ATTENDANT M. OBAMA

Nul ne conteste l'urgence d'agir, d'autant que la crise, financière hier, économique aujourd'hui, sera sociale demain, comme l'a expliqué le premier ministre australien, le travailliste KevinRudd. Il faut éviter le spectre de la crise de 1929 (déflation, chômage massif, récession) sans retomber dans les erreurs des années 1970 : la relance consécutive au choc pétrolier avait conduit à une spirale inflation-salaires génératrice de chômage et à une perte de compétitivité.

"Relancer la croissance, cela ne veut pas dire créer de nouveaux déséquilibres. Ce serait une erreur majeure", a mis en garde le président de la Commission européenne, José Manuel Barroso. Agacé, Nicolas Sarkozy, qui a redécouvert Keynes, l'a interrompu pour dire qu'il voulait une relance "forte", tout en assurant qu'une telle politique "ne veut pas dire augmentation des prestations, distribution de l'argent qu'on n'a pas".

Les Allemands, qui veulent rester sur leur ligne orthodoxe, proposent toutefois d'agir au niveau du budget européen, en réaffectant les crédits non utilisés de la politique agricole commune, en raison du niveau élevé des cours mondiaux (2,4 milliards d'euros prévus en 2008). Une telle opération avait été réalisée pour financer les satellites Galileo. "Normalement, ces surplus doivent revenir aux Etats. L'Allemagne veut bien les réaffecter au financement de projets d'innovation", propose M. Wilhelm.

Cette proposition serait compatible avec le plan de relance que détaillera la Commission européenne le 26 novembre. Elle veut agir sur l'investissement et l'innovation, notamment en matière environnementale et énergétique. Ce biais permettrait d'aider l'automobile, alors qu'elle regarde avec suspicion les volontés de sauvetage français et allemand.

Restent les Etats-Unis. Leur marge de manœuvre est limitée tant que le président élu, Barack Obama, n'aura pas été investi, le 20 janvier. Le Congrès, dominé par les démocrates, veut dès à présent d'un plan de relance de 60 à 100 milliards de dollars (jusqu'à80 milliards d'euros). Mais le Sénat ne l'a pas adopté et George Bush s'y oppose. "Si le Congrès n'adopte pas un plan immédiat pour donner à l'économie l'encouragement dont elle a besoin, ce sera ma première décision en tant que président", a promis M. Obama.

Arnaud Leparmentier

Monday, November 17, 2008

As Economy Sours, Presidential Pay Draws Increased Scrutiny

From the issue dated November 21, 2008

The price of leadership continues to rise in higher education, particularly for public-university presidents. According to The Chronicle's latest survey of executive compensation, median pay and benefits rose 7.6 percent in 2007-8, to $427,400, for the leaders of 184 public research universities.

Many of the nation's wealthiest private institutions also had big pay increases at the top. And some community-college leaders, who earn far less than their four-year peers, made big strides in the past year.

Over all, compensation stayed relatively flat at private research universities but rose about 6 percent at private master's and at bachelor's institutions, the survey found.

Presidents of public research universities, who have traditionally earned less money than their private-college counterparts, are gaining ground. Fifteen public universities paid their top officials more than $700,000 in total compensation in 2007-8, the survey found. In 2006-7, just eight public-university leaders earned that much.

And it is not just the richest institutions that are putting more money in their leaders' pockets. Presidents at nearly one-third, or 59, of the public research institutions surveyed earned total compensation of more than $500,000 in 2007-8. (Among private college presidents, 89 earned $500,000 or more in 2006-7, about a 10-percent increase from the year before.)

E. Gordon Gee of Ohio State University was the highest-paid public-university president in the 2008 academic year. Including a $310,000 bonus announced this month, he brought in $1,346,225. Only three private-college leaders made more in 2007, the most recent year for which data are available: David J. Sargent, of Suffolk University ($2,800,461); Henry S. Bienen, of Northwestern University ($1,742,560), and Lee C. Bollinger, of Columbia University ($1,411,894).

Economic Troubles

The pay increases at many institutions happened before the worst of the economic turmoil hit. Since then a handful of college leaders have handed back their bonuses or turned down raises, as their campuses grapple with state spending cuts, hiring and building freezes, and worries over rising tuition. (See article.)

Increases in presidential pay have stirred concerns on Capitol Hill. Charles E. Grassley, the top Republican on the Senate Finance Committee, who has scrutinized the finances of the wealthiest colleges, said in a statement released last week that he is worried about presidential pay increases at a time of rising tuition and tight student aid.

"The Chronicle's study shows that the executive suite seems insulated from budget crunches," Mr. Grassley said. "In these hard economic times, apparently belt-tightening is for families and students, not university presidents."

Mr. Grassley said that the salary increases may be justified but that students, parents, and university boards should be given more information "so they can decide for themselves" whether presidential pay is reasonable.

As executive compensation faces questions, The Chronicle looked at how college presidents' pay compared with the compensation of chief executives at nonacademic organizations, and it asked a college president and a faculty member to weigh in on whether college leaders deserve their salaries. (See all articles in this supplement.)

Other highlights in this report:

Thinking of serving on a corporate board? The pay's great — but so are the risks.

Why does little-known Suffolk University have the highest-paid president?

Presidents of regional state universities have responsibilities similar to those of leaders of more complex institutions, but they earn considerably less.

Like many community colleges, those in California are having trouble attracting leaders.

Big blind spots can hinder presidential searches.

Want a raise? Try looking in the Evergreen State.

In January, The Chronicle will offer salary information about other top officials at private colleges. The data will include the salaries of the chief financial officer, the chief academic officer, and the five other highest-paid employees on about 600 campuses. Look for announcements of this data in the coming weeks on our Web site.

Section: Executive Compensation
Volume 55, Issue 13, Page B3
http://chronicle.com/weekly/v55/i13/13b00301.htm

Cornell Bans Hiring as Financial Crisis Hits Schools

By Julie Ziegler and Alex Nussbaum

Oct. 31 (Bloomberg) -- The worst financial crisis since the Great Depression is beginning to shake up the budgets and planning on U.S. college campuses, even in the elite Ivy League.
Cornell University, one of eight Ivy League institutions, yesterday became the latest school to react to the declining economy. The school will suspend hiring of non-faculty staff from outside the university through March 31, Cornell President David Skorton said. Construction won't begin for any new projects on Cornell's Ithaca, New York, and New York City campuses for at least 90 days.

Publicly supported schools, which educate about 80 percent of U.S. undergraduates, can expect shortfalls for at least the next two academic years, given state projections of continuing deficits, said Donald Heller, director of the Center for the Study of Higher Education, at Penn State University. Cornell's move may be matched at other colleges, he said.

``This is a harbinger of things to come in the coming years,'' Heller said in a telephone interview from State College, Pennsylvania.

The result will be more cutbacks, rising tuition and a migration of students to cheaper community and two-year colleges, he said.

Cornell's measures address anticipated budget cuts from the state of New York, contractions in the school's $6 billion endowment, and a potential decline in donations, Skorton said in a telephone interview. Cornell, a private university, receives about $170 million from the state because of research grants and through its status as a land-grant school. The state has already cut as much $3 million this year from the funding, and new cuts may be three times as large, Skorton said.

Seeking Efficiencies

``Like the state of New York and like the country in general, we have to grow our way out of this,'' Skorton said. The university will use the next three to five months to see how tough it will need to be with other measures should the economic slowdowns in the U.S. and New York be prolonged.

``Cornell may end up even stronger because it will force us to look more carefully at our efficiencies,'' Skorton said.

Cornell, which has a combined budget of $2.8 billion a year for its Ithaca campus and its medical school in New York City, will probably impose tuition increases next year, he said.

``I'm sure we will raise tuition,'' Skorton said. ``We will give very careful consideration to do it as moderately as possible.''

Hiring of faculty and internal filling of staff positions will continue during the freeze, as will construction projects already under way, the university said.

Michigan State

Mary Corbett Broad, president of the Washington-based American Council on Education, whose 1,600 university members include Princeton University in New Jersey and the University of Wisconsin in Madison, yesterday said budget cuts in at least 17 states will most likely point to tuition increases next year.

Michigan State University, in East Lansing, said in a statement Oct. 24 that a 1.2 percent tuition increase would take effect during the semester that begins in January, though the university would offset the cost until July.

The University of Georgia in Athens announced a series of moves this month, including a hiring freeze, shorter hours at a student learning center, reductions in campus police overtime and the cancellation of one of every five library subscriptions, after state officials cut $30 million from the school's budget.

``If the economy shifts, as I hope and believe it will, we will be in better stead,'' said Michael Adams, president, in remarks on the university's Web site.

Boston University

Private schools with endowments may also be affected by declines in the stock market. The Standard & Poor's 500 Index has fallen 35 percent this year and 18 percent in October, which is poised to become the worst-performing month for the index since 1987.

Boston University President Robert Brown announced a freeze on ``non-critical'' jobs this month, citing the ``worldwide financial crises'' as well as rising fuel and food costs. New construction may also be banned, though existing projects, including a $150 million dormitory already under way, will continue. The private school is struggling with budgetary pressures as it anticipates rising demands for financial aid from its 33,000 students, Brown said in an Oct. 16 letter to students and staff.

Cornell, founded in 1865, is a land-grant institution, so named for 19th-century U.S. laws promoting agricultural and technical education.

The Ivy League comprises eight universities and colleges in the U.S. northeast: Brown, Columbia, Cornell, Dartmouth, Harvard, Princeton, the University of Pennsylvania, and Yale.

To contact the reporters on this story: Julie Ziegler in Boston atjziegler@bloomberg.net; Alex Nussbaum in New York anussbaum1@bloomberg.net.
Last Updated: October 31, 2008 14:30 EDT

Calls grow to overhaul 401(k) retirement plans

The financial crisis, which has caused a dramatic decline in the value of the average worker's account, has undermined confidence in the system.

By Jim Puzzanghera

November 16, 2008

Reporting from Washington — For nearly three decades, working Americans have been part of a huge experiment with their future well-being: Old-fashioned pensions that guaranteed specific retirement benefits have given way to old-age benefits that depend on personal investing in the financial markets.

But now, with those markets in crisis and the value of workers' investments plunging, a bundle of ideas for modifying the system or replacing it entirely -- ideas shunted aside when the stock market was soaring -- are about to get a careful new look.

For one thing, Democrats have campaigned on the promise of a better deal for middle-class Americans. Also, many workers are aghast at the sudden discovery that their retirement years may be a lot less golden than they expected.

Even for people who have faithfully participated in the new retirement plans, which depend on annual savings and investment in 401(k) and similar accounts, much if not all of what they gained in the stock market over the last 10 years has been wiped out.

So far this year, the average worker's 401(k) account balance has dropped between 21% and 27%, depending on the worker's age and time with his or her employer, according to the Employee Benefit Research Institute.

That's a potentially disastrous turn of events, because the key to making the savings plans work is the hoped-for gains from long-term investing, not just the amount workers set aside.

The present system is further called into question by the fact that millions of Americans have not had such plans available to them or have not participated for other reasons, including stagnant incomes that made saving difficult or impossible.

"The current 401(k) system has not turned out to be as secure as we want it to be," said Rep. George Miller (D-Martinez), chairman of the House Education and Labor Committee. "It has not provided the returns that we want it to. And it's not provided the level of savings that we want it to. It's kind of failing on a number of fronts.

"Should there be a serious reassessment? Absolutely," he said.

Miller's committee already has held two hearings on the effects of the financial crisis on retirement savings plans. At one, a professor from New York's New School for Social Research called for creating government-backed retirement savings accounts that would offer a guaranteed, inflation-adjusted 3% return. The government would contribute to the accounts using money gained by eliminating the annual tax breaks for 401(k) savings -- about $80 billion.

The idea has not been embraced by key lawmakers, perhaps in part because abolishing the tax break on 401(k) savings could reduce participation.

But the fact that the idea received a serious hearing before Congress is a measure of how much the crisis has shaken confidence in the 401(k) approach.

"In July, my plan was looked on at best as a noble idea . . . but completely unrealistic," said the plan's author, Teresa Ghilarducci, a professor of economic policy analysis at the New School and a longtime critic of 401(k) plans. "I was viewed as thinking out of the box, and now I'm in the box."

Other ideas for overhauling the 401(k) system are being advanced. UC Berkeley political scientist Jacob Hacker, author of "The Great Risk Shift," has proposed a variation of guaranteed government retirement accounts.

And the Aspen Institute'sInitiative on Financial Security last year proposed several changes, including individual retirement accounts that have a government contribution match for lower-income workers and guaranteed annuities to supplement Social Security.

U.S. corporations used to offer pensions known as defined-benefit programs because employers promised to pay specified benefits, usually based on workers' earnings and years of service.

The predominant system today is known as a defined-contribution plan. Workers agree to have specified amounts deducted from their pay and put into investment accounts such as 401(k)s. As incentive to participate, the workers receive tax breaks.

At retirement, workers commonly take the total in their account and buy an annuity. The bigger the sum in the account, the bigger the worker's monthly stipend.

Until recently, employers usually contributed to workers' accounts as well. Many now cap their contributions or have stopped contributing entirely.

The transition to the defined-contribution system occurred largely over the last two decades, with relatively little public debate. In 1983, 62% of workers with employer-sponsored retirement plans had a defined-benefit plan, according to Boston College's Center for Retirement Research. By 2004, only 20% of such workers had defined-benefit pensions.

And the proportion of workers who relied solely on 401(k) plans rose to 63%, from 12%.

The transformation allowed people to benefit if they made smart investment decisions or if the markets soared.

But it put retirement income at risk when the economy turned bad.

"We suddenly found ourselves, without anyone making a purposeful decision, in a world where the primary plan was this 401(k)," said Alicia H. Munnell, director of the Center for Retirement Research. "In the wake of this financial crisis, I think a consensus is emerging that we just can't have a retirement system that exposes people to this type of risk."

President-elect Barack Obama so far has called for modest changes to the 401(k) system, such as temporarily allowing penalty-free withdrawals for people facing economic trouble and suspending requirements that seniors older than 70 1/2 make annual withdrawals from their accounts.

Defenders of the defined-contribution system say the problem is that people expect too much.

"What happened in the '90s -- and there's still a little carry-over -- is that some people are expecting returns in their plans that are unrealistic," said David L. Wray, president of the Profit Sharing/401k Council of America, which represents companies that sponsor 401(k) plans. He said a major overhaul wasn't needed for what he called "a very efficient savings machine."

Jerry Bramlett, president of BenefitStreet Inc., an independent advisor for 401(k) and other defined-contribution plans, said that people who wanted a more guaranteed return could shift their 401(k) money into bonds and other low-risk investments. But that carries its own risk: The money may not grow enough to retire on.

"Exchanging the equity investments in your retirement account for Treasury bills is not a sound long-term investment strategy and will subject retirees to substantial inflation risks," Bramlett told Rep. Miller's committee last month.

Wray said a well-balanced portfolio would earn 7% to 8% annually compounded over time.

"The average 401(k) participant is 45," Wray said. "There is plenty of time for the historical correction that comes from these kind of situations to occur and for people to be in good shape."

The Investment Company Institute, which represents mutual fund companies, said the average 401(k) account balance was up 79% from 1999 to 2006, despite falling 8% from 1999 to 2002 at the end of the tech stock boom and the 2001 recession.

Critics don't see it that way. "The market might recover from a crash, but people don't recover from aging," Ghilarducci said. "For many people the market will recover two years after they're dead."

The risk of being caught in a market downturn at the moment of retirement is amplified if workers don't balance their investments, making sure that as they near retirement, they lower the percentage of stocks in their accounts and increase the percentage of lower-risk bonds and other securities.

But even Noble Prize-winning economists have admitted that they don't closely monitor their 401(k) statements -- allowing an initially well-balanced portfolio to become dangerously overexposed to stocks as those investments grow faster than bonds.

According to the nonpartisan Employee Benefit Research Institute in Washington, 27% of people between 56 and 65 had more than 90% of their 401(k) investments in stocks at the end of 2006. Special target-date funds that automatically rebalance workers' accounts as they near retirement age have an average of only about 51% of their investments in stocks for people that age.

"If you're not really managing your assets well in these critical years, it's going to have a huge impact on your retirement years," said Jean Setzfand, director of financial security for senior advocacy group AARP. "One of the lessons that we're learning is consumers have a really hard time grasping the concept of risk."

But people have had little trouble grasping the concept of fear as the financial crisis has deepened. An AARP survey of workers 45 or older found that 65% said they would have to delay retirement if the economy didn't improve significantly.

President Bush counsels patience, saying time will make good the losses as markets recover. But most experts think it will be many years before that happens. And many workers will find that they can't wait it out. They will be forced to retire by medical misfortune, company downsizing or other factors beyond their control.

Such workers will have to live out the rest of their lives on whatever their depleted savings yield -- probably much less than they expected or need to maintain a semblance of their pre-retirement lifestyles.

That's why Democrats -- with a new president and bigger majorities in Congress -- are expected to put the retirement system under the microscope in the months ahead.

Puzzanghera is a Times staff writer.

jim.puzzanghera@latimes.com

http://www.latimes.com/business/la-fi-retire16-2008nov16,0,2937536.story

Sunday, November 16, 2008

Explaining the South

Down There on a Visit

By Charles Simic
New York Review of Books - Volume 51, Number 13 · August 12, 2004

For years now I've been looking at a photograph Walker Evans took in the summer of 1936 in the South. I thought of it again while getting ready to travel to the South a few weeks ago. At the intersection of two dusty, unpaved roads stands a dilapidated building with a small porch and a single gas pump. There's no human being in sight. The intense heat and the bright sunlight must have made the locals, a few of whom can be seen standing on the very same porch on another occasion, seek shade. The shutters of the two upstairs windows are closed except for small openings where the slats are broken or have been removed. The postmaster and his wife, who run the pump and the store, are most likely napping, their heads covered with newspapers to protect them against the flies.

Downstairs, in the small side room with a scale and rows of bins for the mail, there are a few letters whose recipients live too far or receive mail too rarely to bother making the trip. With so little to see and so much to imagine, a photograph like this is an invitation to endless conjecture. There's nothing more ordinary, nothing more American than what it depicts: a small town one passes with barely a glance on the way to someplace else.

This June, driving around Mississippi, Alabama, and Georgia, I decided to pay a visit to Sprott and Hale County, where Walker Evans and James Agee collaborated on Let Us Now Praise Famous Men, their photographic and verbal record of the lives of three dirt-poor tenant farmer families in the region. I wanted to, as it were, poke around the photograph on my wall. I drove from Mobile past a series of tiny little towns with names like Sunflower, Wagarville, Sunny South, Catherine, and Marion. It was early Sunday morning so my daughter and I were a bit dressed up, hoping to find a church along the way and attend a service. We saw plenty of houses of worship, but oddly, not much activity around them yet. Driving through one of the bigger towns, we were surprised to find a huge Wal-Mart open at 9:20 with dozens of cars parked outside.

The other puzzle was a number of abandoned churches both in towns and in the countryside. I recall a small, unobtrusive, white wooden church sunk in the earth, the grass and weeds grown tall around it. It had a thick, squat steeple, a single door, two windows on each side covered up with boards. The sky over it was cloudless, the quiet so deep we could hear the crows flap their wings as they flew over our heads in alarm. The people who came to pray there must have died or moved away years ago, but the spirit they sought after lingered on. I wondered if there was anything left inside the church, a hard bench, a hymnal, a suspended oil lamp, a skeleton of a dead bird.

The landscape of central Alabama alternates between patches of woods and rolling fields of cultivated land that open onto long vistas before closing up again. We found the crossroads Evans photographed and a small shut-down country store where the old one most probably stood. It did not appear that much had changed in sixty-eight years. There was a large sign announcing a rodeo in nearby Marion, two half-collapsed barns across the road, and a cat that came out of the bushes hungry and lonely, but ran away every time my daughter tried to make friends with it. The population of Sprott today is reputed to be ten people and that sounds about right. Hale County has 17,185 inhabitants and the county seat, Greensboro, only 2,731. I have no idea how many people lived there in the 1930s, when the cotton plantations were in full operation, but there must have been more. The impression one gets is that there's not much work to be had on the farms that remain. Most of these are large and require a small number of people to work the machinery. Whoever can pick up and leave the county does so, or if they decide to stay, they commute great distances to their jobs. On weekdays, the traffic to Tuscaloosa, Birmingham, and Montgomery tends to be heavy. Most of these commuters are heading to low-paying retail and service jobs in numerous shopping malls at the outskirts of these cities.

We headed south to Selma. What we found there surprised us. Its spacious downtown, where some 30,000 people once gathered with Martin Luther King to make a march to Montgomery, is badly rundown. It's a shell of the town it once was. Many of its beauti-ful turn-of-the-century buildings and storefronts appear in part vacated while others are completely closed. This I found almost everywhere to be the case. The heart of Montgomery has broad avenues, a restored Greek Revival state capitol atop a hill where Jefferson Davis took the oath of office on February 18, 1861, as the president of the Confederate States, and the famous civil rights landmarks, like the Baptist church where the bus boycott was organized in 1956, but there are few people there even on a Monday morning.

The capital of Mississippi, Jackson, is deserted on Friday afternoon. No one walks its streets. There are no restaurants or bars and no hint of where people who work in its many offices get fed. Old photographs of all these places show streets teeming with pedestrians, stores big and small, signs and marquees advertising cafés, drug stores, tobacco shops, and five-and-dime emporiums. The centers of many of the most interesting Southern cities, the neighborhoods that make them most distinct and attractive, have been forsaken for fast-food places, gas stations, and shopping centers at the outskirts, which resemble any other place in the United States.

The middle classes and the rich reside in well-maintained old and new suburbs and vote Republican, while their impoverished neighbors, who tend to be mostly African-American and who outnumber them in many counties, live in rural slums. While there's no official segregation between the races, there is a caste system with clear class distinctions and accompanying inequality that is apparent wherever one goes. There are towns like Jonestown, Mississippi, that in their shocking poverty make one gasp. Weathered, sagging, and unpainted houses, boarded-up windows, others covered with plastic, yards full of dismantled rusty cars, their parts scattered about amid all kinds of other junk and trash, are everywhere. Idle people of all ages lounge on collapsing porches or stand on street corners waiting for something to do. In the countryside with its fertile dark soil, soybeans have become the chief crop, poultry farms are a major business, and there are nine gambling casinos in the next county. All that has increased per capita income in the region, but there was no evidence of it among the blacks I saw.

In Clarksdale, the former capital of the cotton kingdom, which President Clinton visited during his 1999 tour focusing on the nation's poorest communities, I saw in a parking lot of a closed supermarket two ancient cars parked side by side with their four doors wide open. Over their hoods, roofs, and doors, spread out and draped, someone's once-pretty dresses and worn children's clothes were covering every available space. Two black women sat on low stools, one on each side, waiting for a customer. This is the town, they say, where the blues began. One of its legends, Robert Johnson, was reputed to have sold his soul to the devil at a crossroads nearby. There's a blues museum in town and an excel-lent restaurant and juke joint called Ground Zero owned in part by the actor Morgan Freeman, a part-time local resident. The downtown buildings of what was once clearly a flourishing city reminded me of towns in the Midwest and New England after their industries went broke in the late 1960s and their factories were shut down. Clarksdale has the despoiled look of a conquered and sacked city. Ranking conditions of poverty is a risky business, but what I encountered in Mississippi surpasses anything I've seen in a long time in this country. That the people here vote Democratic and have a liberal black Democratic congressman has not been of visible help to them.

When one enters the small store that also serves as a post office in nearby Belen, one first comes upon shelves cluttered with ancient TV parts. On one side, in the half-dark, an old black man sits poking his screwdriver into the back of a black-and-white set that must be at least forty years old. Beyond the TV repair section, there's a grocery store selling a few absolute necessities like canned beans and white bread, and finally in the back, the post office itself with its single oval and barred window where one can purchase a stamp. The old white storekeeper who shows me and my friend around could have walked out of one of Eudora Welty's Depression-era photographs. He is so pale; he probably rarely leaves the premises. In the meantime, he is happy to chat. It's not a cliché that people are courteous in the South. Many of them tell memorable stories, love words, and can make something unexpected out of the simplest verbal ingredients. No wonder so many great writers have come from Mississippi.

My first acquaintance with the South was in 1961, when I spent four months at Fort Gordon, Georgia, being trained by the US Army to be a military policeman. On my weekly passes, I went into Augusta, where there was little to do beyond getting drunk in dives frequented by soldiers. With the news of men and women who protested segregation being beaten and occasionally murdered all over the South, it was not the most comfortable place for a Northerner to be. Without even trying, one inevitably got into arguments with the locals. The place seethed with hatred, I thought then. All that changed, of course, over the years, and so did my own understanding of the complexities. There were plenty of racists to be sure, but there were also people of conscience who did their best to alleviate the wrongs in their midst.

Fifty miles from Jonestown, Mississippi, is William Faulkner's Oxford. It has a pretty courthouse square, a bookstore that could match any in New York City or Boston, fine cafés and restaurants, most of which have second-story porches with tables and chairs overlooking the square. People laze there for hours sipping a drink and gabbing. One could live here— one thinks—in a kind of timeless present. Bank, church, a few elegant stores, a barbershop, and a hotel—what more does one need? In the afternoons, when the shadows lengthen and the heat subsides a bit, one has the overwhelming sense of well-being as if everything were just dandy everywhere and one really had no cause to make oneself a nuisance to strangers with whom one happened to strike a casual conversation.

Unfortunately, the local newspapers brought me out of my reverie. The Clarksdale Press Register, which I'd bought earlier that day, had the following letter:

Dear Editor:

I am a Jesus freak.

Jesus said that you can't serve two fathers. Either you serve God the Heavenly Father or you are damned and serve Satan. All true conservatives will be against homosexuality. It's not acceptable in God's house. I believe they can be saved and change this lifestyle. Anyone that says it is OK to kill babies is damned. God made human life in His own likeness. We as Christians expect Americans to be against us. They were against Jesus. God has blessed us, but for how long? For America's weakness is turning its back on God. We better not think that God won't put his wrath on America soon. America better thank God for Christians who are praying for this country. The rest of the people are not getting what they can get in riches. May God heal the churches and people. It's time Christians take a stand in voices and elections. Get these liberals out of government, and get conservative Christian leadership in government.[1]
During my trip, I was asked several times point-blank whether I was a Christian. The first time it happened, I was so surprised I didn't know what to reply. Finally, I mumbled that I was brought up in the Eastern Orthodox Church and to further buttress my credentials, I mentioned that I had priests in my family going back a couple of centuries. As far as I could tell, that didn't seem to make much impression. What people were eager to find out was whether I had accepted Jesus as my Savior. For the writer of this letter, and for others I met, Christians are to be distinguished from the rest of Americans, who are something else— liberals, secular humanists, Catholics, atheists, abortionists, etc. They all share one thing in common, however: they are all going to hell.

The absolute certainty of that outcome, I found, is a source of deep satisfaction to the believers. They enjoy hearing about the torments that await the damned. That must be the explanation for the great success of Glorious Appearing by Tim LaHaye and Jerry B. Jenkins, the twelfth and final book in a series that recounts the story of those left behind when the Apocalypse arrives and the Rapture gathers the elect into heaven. The first eleven novels have sold 40 million copies and the new one is also a best seller.[2] The blood and gore of the final battle of the ages between Jesus and the legions of the Antichrist are described at great length and in loving detail:

Tens of thousands of foot soldiers dropped their weapons, grabbed their heads or their chests, fell to their knees, and writhed as they were invisibly sliced asunder. Their innards and entrails gushed to the desert floor, and as those around them turned to run, they too were slain, their blood pooling and rising in the unforgiving brightness of the glory of Christ.

"For My sword shall be bathed in heaven; indeed it shall come down on Edom, and on the people of My curse, for judgment.

"The sword of the Lord is filled with blood. It is made overflowing with fatness. For the Lord has a sacrifice in Bozrah, and a great slaughter in the land of Edom.

"Their land shall be soaked with blood, and their dust saturated with fatness."[3]

It was reported that President Bush tried to enlist the Vatican for help in his reelection when he paid a visit to the Pope last month. He has no need to make a similar appeal to the churches in the South. During the many hours of listening to Christian radio, I was assured again and again that the Bible is the best source of information on contemporary events and the only guide anybody needs on how to vote. When I watched religious talk shows on TV at night, I heard that the many wars that the President has promised us have happily been foretold in the Bible. "Let us restore to God the thunder," the poet John Crowe Ransom wrote in 1930,[4] and the people who called in would have readily agreed. Peace on earth went unmentioned. What excited the people I heard was the force of deadly weapons. I got the impression that it was a greater offense to believe in evolution than to bomb a city into rubble. As a letter to the Mobile Register signed "Addison DeBoi" put it,
What the left has not come to realize is that most of today's suffering is the result of the left's continued efforts to remove horror and pain from war.... The point is, war is hell, and it should be. The more respectable we make war, the more we make it less horrific, the more we seek to not harm civilians, then the greater the risk and frequency of war.[5]
Skepticism, empirical evidence, and book learning are in low esteem among the Protestant evangelicals. To ask about the laws of cause and effect would be a sin. They reject modern science and dream of a theocratic state where such blasphemous subject matter would be left out from the school curriculum. Their ideal, as a shrewd young fellow told me in Tuscaloosa, is unquestioning obedience and complete conformity in matters of religion and politics. The complaint about so-called secular humanism is that it permits teachers and students too much freedom of thought and opinion. If evangelicals haven't gone around smashing TV sets and computers, it is because they recognize their power to spread their message. Aside from that, they would like to secede intellectually from the rest of the world.

As if to alert me of the danger of such sweeping statements, I stumbled on a magnificent exhibition of Baroque art at the Mississippi Arts Pavilion in Jackson. It came from the State Arts Collections in Dresden and included porcelain, costumes, sculpture, armor, and paintings by Rembrandt, Rubens, Titian, Mantegna, Velázquez, Van Dyck, Lucas Cranach, Vermeer, and a few other Old Masters. It was fairly well attended. There were even families with kids. I've no idea what they thought of the sensual teenage Madonna holding a mischievous-looking two-year-old. The museum guides and attendants appeared to be volunteers. They stood at various points of the huge exhibition and kept asking each visitor if he or she were enjoying the show and were exceedingly pleased to hear that we did. It sounded as if there had been complaints and that they needed confirmation that they were, indeed, taking part in something worthy.

At the Mississippi Museum of Art there was another imported show— "Paris Moderne," art deco works from the 1920s and 1930s. Almost next door, Confederate flags were flying over the state buildings, often in close proximity to landmarks commemorating the civil rights struggle. A few well-known participants in the most gruesome events of its bloody history are still alive in nearby towns and remain unconvicted, as columns in newspapers on the anniversary of their crimes reminded their readers.

On another cloudless day, I drove south toward Hattiesburg and Mobile. The roadside fruit stands were overflowing with baskets of ripe peaches, tomatoes, and watermelons. There was also something called "boiled peanuts" which I was wary to try. On the radio, the burning issue was the new policy just passed by the Mississippi legislature that will drop from Medicaid eligibility 65,000 of its neediest elderly citizens and chronically ill patients with severe disabilities, leaving them to rely solely on the federally funded Medicare for their drugs. The governor, Haley Barbour, the brains behind the rollback, is the former chairman of the national Republican Party. In his view, taxpayers ought not to have to pay for free health care for people who can work and take care of themselves and just choose not to.

Most callers to the show sounded scared. The host of the program maintained that their fears were exaggerated, that Medicare would help out; but they were not buying it. They griped about the difficulties they already had signing up for the federal government's new prescription drug discount cards. The host of the show blamed the fiscal crises in the state on a teachers' pay raise and so did some of the other callers. He was willing to admit that there may be some inconvenience to the elderly, but he wanted them to realize that in the end nothing could be done. What came through were the inability and the reluctance of more than a few people to grasp the kind of hardship that faced their fellow citizens. The familiar Republican Party line—less government, no new taxes —eventually silenced the most stubborn of the complaining voices.

The lack of compassion for the less fortunate is also to be found in New Hampshire, where I live. Our politicians are as heartless as the ones in Mississippi and see themselves, despite their assurances otherwise, as being elected primarily to serve the well-to-do. Let the fittest survive is their attitude. However, they don't invoke God as they go about ensuring that the poor stay poor. As for the losers, both in the South and in the North, their outrage is not directed against the politicians. This is one of the great puzzles of recent American politics: voters who enthusiastically cast their vote against their self-interest, who care more about "family values," school prayer, guns, abortion, gay marriage, or the teaching of evolution than about having decent health care insurance and being paid a living wage. They squabble, as they did in Alabama recently, over whether the Ten Commandments ought to be posted in a courthouse while the education of their children continues to be underfunded and their overcrowded public schools are violent and dangerous places.

The result of these dogmatic inconsistencies of belief—which I found wherever I went—is fragmentation: "the growing social, physical, economic, and cultural separation of Americans from each other," as Sheldon Hackney points out in a fine new collection of essays by thirteen different authors, Where We Stand, Voices of the Southern Dissent.[6] Even Pentecostals don't see eye to eye when it comes to theology. A town with no more than five hundred inhabitants has a dozen churches lining the highway. They stand barely fifty yards apart, all belonging to different schisms and factions. One of them is just a large trailer with a hand-painted name of the church tacked to its side. The door is open. Three old-model cars are parked in front.

A dozen miles down the highway is Mobile with its modern skyscrapers, and not too far beyond, the pretty little town of Fairhope on the eastern shore of the bay with its elegant boutiques, art galleries, and good restaurants. Fairhope was founded in 1884 as a model community inspired by a belief in land as common inheritance and as a cooperative commonwealth free from all forms of private monopoly and opportunities to prey upon one another. In his bittersweet reminiscence of growing up in Fairhope, included in Where We Stand, Paul M. Gaston, whose grandfather was one of the founders and guiding forces of the community, laments its transformation into what it is today, an upscale resort town where one of the shops for the well-heeled women is called Utopia without any irony. He writes of the morally benumbed citizenry unconcerned about disparities of wealth and the social apartheid such towns as Fairhope seem to serve.

It's easy to put all that out of one's mind as one cruises past the sandy beaches of Mobile Bay. The end of a long pier with a gazebo at Point Clear seems a good place for an afternoon siesta on a bench with the blue sky and sea birds for company. It's hot, but there's a breeze from the water. After a while, I hear the sound of chamber music. It's live, coming from the spacious lawn of the resort hotel next door where a wedding, it appears, is about to take place. There are some fifty chairs lined up in rows with a pulpit in front but no guests yet, only a string quartet playing Mozart. Eventually, as the guests begin to emerge from the hotel, I draw closer. They are a distinguished bunch, the men in tuxedos and the women in stylish, well-cut summer dresses. They come alone or in pairs strolling across the rich lawn to take their seats. With the quartet playing a lovely minuet the four bridesmaids, all wearing dark red dresses, come out one by one trailed by the groom and his parents. The bride, on the arm of her father, is the last to appear. She's a very pretty blonde.

I'm too far away to hear the minister, but I can see them exchange rings. On a platform by the edge of the water, I see people setting up tables, decorating them with flowers for what I assume will be the wedding feast. It's all very proper, very charming, and very inviting. The servers are mostly black and I realize that they are the first people of color I've seen since I drove into the Fairhope region. By now the wedding is over, the sun is setting over Mobile Bay, and the photographer is in a hurry to have the newlyweds pose against it. He wants them smooching and they oblige again and again, each kiss more lusty than the last one, to the joy of the younger members of the wedding party and the disapproving glances of the old. After that's over, they all file by me on the way to dinner, smiling and nodding in a most friendly way.

Yes, people told me on my trip, the American dream has been going wrong somewhere. I saw TV evangelists bring thousands of ecstatic believers to their feet. These programs were a mixture of old camp meetings, revivalist tents, rock concerts, and sales pitches on how to make millions in real estate "without spending a dime of your own money." The huge crowds were made up of well-dressed, middle- class people of all ages and races. Their piety was touching. Their eyes grew moist when Jesus was mentioned. God frets about them individually and they count on his guidance in practical matters. So many of the sermons I heard were about turning around one's life, overcoming financial worries, achieving worldly success. The men doing the preaching had made millions saving souls and had no qualms offering themselves as a model to emulate. Their lack of humility was astonishing. I'm flying high, the faces said, because God has time for me.

"There is going to be trouble in this country," a lawyer warned me. He wouldn't tell me from what direction. Like others I had met in the South, he kept a gun in his car; he had, he said, several more at home and worried that the government may take away his arsenal. What are they for? In one of his books, the Mississippi novelist and short story writer Barry Hannah suggests an answer:
The gun lobby, oh my peaceful friends, you may hate, but first you had better understand that it is a religion, only secondarily connected to the Bill of Rights. The thick-headed, sometimes even close to tearful, gaze you get when chatting with one of its partisans emanates from the view that they're holding a piece of God. There is no persuading them otherwise, even by a genius, because a life without guns implies the end of the known world to them. Any connection they make to our "pioneer past" is also a fraud, a wistful apology. Folks love a gun for what it can do. A murderer always thinks it was an accident, he says, as if a religious episode had passed over him.[7]
There are fireworks for sale in almost every town in Alabama. Small rockets wrapped in red, white, and blue paper. People are all set, I was told, to celebrate George W. Bush's reelection in November. He is liked a lot in the South, especially when he speaks about American moral supremacy and our right to kick someone else's ass in the world. I did not encounter many people able to entertain the thought that we could ever be at fault as a nation or that our president could be a fool leading us into a mess. When I asked what Kerry's chances were, even friends looked at me as if I had three heads. Near Flatwood, Alabama, I almost ran off the road after seeing a small "Elect Kerry" sign. It's the only one I came across. In fact, I didn't see any Bush signs either—there's no need for them since he's following God's plan, as everybody there knows. We have always had professional true believers, but in the past their apocalyptic views were marginal and never had such strong support in Congress and the White House, where they are now regularly invited and consulted on matters of national interest. Nor did they ever before have fans even among Catholic and Jewish intellectuals on the right, who find them to be model citizens even with their fanaticism and their love of violence.

"The grungier the town, the better the music and the ribs are liable to be." So I heard. Unfortunately, as I discovered, this is not really true. Most poor people eat mostly poorly prepared food and the better musicians tend to gravitate to cities where customers have cash to spend. The best ribs I had on my trip were not in any of the smaller towns, but in Atlanta. Fat Matt's Rib Joint is a small, unassuming place that promises little from the outside. It serves slabs of pork ribs on paper plates with slices of white bread. There are also bags of potato chips, bowls of rum-soaked beans, and plenty of paper napkins to wipe one's fingers and lips. The crowd is socially and racially mixed. Sitting side by side at long communal tables, eating and drinking pitchers of beer, are well-dressed men and women who could be doctors, lawyers, truck drivers, gas station attendants, and undertakers. The ribs are delicious and cheap, and there's live music. A terrific band is playing a little blues, a little country.

The four white musicians look as if they have day jobs. Three of them are grizzled men in their early sixties who could have come out of an R. Crumb drawing and all of whom one would guess have had plenty of ups and downs in their lives. The songs they play are bawdy, funny, and have a tough realism about them that any serious writer would envy. "A woman gets tired of one man all the time," an old blues song says. Cheating wives and husbands, bad luck, and trouble are the themes. The musicians are enjoying themselves and so is everybody else. That's what our protectors of virtue find so scandalous about the cities. The way diverse classes of people and races get together, drink beer, dance, and make whoopee. But as one of my tablemates, a woman from south Georgia, told me, "Atlanta is not the South."

Notes

[1] The Clarksdale Press Register, June 3, 2004.

[2] See Joan Didion's essay on the Left Behind series in these pages, "Mr. Bush & the Divine," November 6, 2003.

[3] Glorious Appearing: The End of Days (Tyndale House, 2004), p. 226.

[4] Religion in the American South (University of Carolina Press, 2004), p. 167.

[5] From the Mobile Register, Sunday, June 6, 2004.

[6] NewSouth Books, 2004, p. 189. The title recalls that of I'll Take My Stand, the collection issued in 1930 by the Southern Agrarian writers, including John Crowe Ransom, Allen Tate, Robert Penn Warren, and Randall Jarrell.

[7] Bats out of Hell (Houghton Mifflin, 1993), p. 83.