Summer in Nicaragua!

In Central America it’s common for airports to be in the center of big cities, nestled in deep valleys. Airline pilots have to pass a special course in which they demonstrate their proficiency in approaching the runway at a 90-degree angle, then banking a 747 so severely that it pirouettes on its wingtip and drops onto a postage stamp runway, where the pilots clamp on the brakes and pray.

Landing in Managua, Nicaragua was not quite that severe, so I feel that I’ve started my summer research adventure on a good note! My checked bag made it here, customs took a mere 20 minutes and my Spanish was sufficient to get me to the hotel; all in all, Central America y yo parecemos de llevarnos bien!

Being Smart and Efficient on the Stimulus and My Career

Zach McDade recently posted explaining the housing bubble and how it has helped shred the broader financial system. I wanted to note two trigger factors obscured by his general statement: “the market decided that we had built too many houses.” Here they are:

1. Suburban housing values fell, causing people to default on mortgages, precisely because demand for new subdivisions slackened. This happened at exactly the same time as energy prices spiked (both home energy use and transportation are higher in the suburbs), and America saw its first net flow of people from the suburbs to the cities since the 1950s. Decoded: the energy crisis => the change in suburban-urban land use value => the housing crisis

2. Low-income urbanites started defaulting on mortgages or rent payments as the cost of fuel, energy, and food rose. Food prices rose due to A. rising energy prices increasing input costs and B. crop failure due to adverse weather in several food-producing areas (US Midwest, East Africa, India, Australia)  globally reducing supply. Decoded: the food crisis (itself caused by the energy and climate crises) + the energy crisis itself => rising cost of living for poor => the housing crisis.

So what does this have anything to do with me, the career I’ll be trying to start when I graduate in 10 months, or the stimulus package?

A Lack of Focus

Mr. McDade did an excellent job in detailing with what went wrong and caused this current economic crisis, and we should focus immediately on focusing the current crisis.  The best route would be to detoxify the banks and to buy up their assets – the primary goal of fixing up the economy should be to fix the credit system, which is currently rather dysfunctional due to the various poorly-made loans.

However, we are having a lack of focus on solving the economic crisis from across the aisle, for both Republicans and Democrats.  Much of this is due to rampant populism that has once again reared its ugly head and prevented Congress from taking the necessary steps to fix the economy, as many  Americans seem more interested in punishing the various banks and their executives than in taking the necessary steps to actually fix the economy, as shown through the current AIG Bonus controversy, where various Congressmen and the American people bemoaned the idea of paying the dues of a company that has been virtually nationalized.  Furthermore, we are seeing hints of protectionism appearing once again, best demonstrated with the current spending bill which contains a provision that terminates a project allowing 97 Mexican trucks on American highways as specified under NAFTA.  While it may feel good to attack the “greedy” banks and their “corrupt” executives, it is not a productive path, and will unfortunately lead to disaster as the economy continues to muddle along in its current stupor.

What went wrong: Subprime lending

This post is for those who still feel they couldn’t quite answer the question, “What went wrong with our economy?” It looks at one aspect of the problem, subprime lending.

The economy essentially has two levels – the real and the nominal. The real level is the production of real (actual) goods and services. The nominal level is the one that concerns money – its creation, use and exchange. (To help connect nominal with money, remember that money comes in denominations.) 

The real level and the nominal level interact, of course, whenever you use money to buy a real good or service. So, to sum, the two different levels of the economy are distinct, but connected. (In other words, the economy could operate with only the real level; we would just exchange goods and services for other goods and services – a barter economy.) 

So, what went wrong? To answer that, remember that there is one primary way to make money on the nominal level – that is, to make money with money: Lending. If you have money that someone else wants, you lend it to her for a fee. Say you want to buy a home. You go to the bank, take out a loan, agree to pay it back, plus interest, and this exchange is entirely on the nominal level. 

Gaza Abroad: Reflections From Morocco

Rabat, Morocco 2/9/09: Last month in Morocco hundreds of thousands of demonstrators flooded the streets waving Palestinian flags to show solidarity and demand action; many even brought their children to foster a deeper sense of solidarity with the more than 300 Gaza youth victims. Lahcen Haddad, a professor of Cultural Studies in Rabat, said he “had never seen anything like it in Morocco.” Although the second Intifada drew a million Moroccans to a single protest, last month’s response was a more channeled resistance to the war in Gaza. Much of this took the form of action over the net as petitions and letters circulated to charge involved Israeli officers for war crimes and to pressure action from world leaders.

Home to roughly 10% of the Arab-Muslim world, a long time host and friend to Jews the world over, and the Western most country in the Muslim world, Morocco’s internal response and subsequent mobilizations reflect a growing sense of concern in the region over the “Palestinian Question.” As new president Obama and the U.S. formulate policies aspirant of respect internationally, historically moderate Morocco’s internal response offers a case study of insight towards that goal.

America’s chief Middle East export: Rigid Ideology

 

It’s been interesting for me to compare American attitudes toward the latest conflict between Israel and Palestine with American attitudes toward our own politics. Domestically, we have a largely black and white political spectrum: either you’re conservative Republican or liberal Democrat. With respect to the Middle East either you’re pro-Israel and its right to assert its regional dominance or you’re pro-Palestine and anti-Israeli aggression.

In reality, just as with our own political parties, the situation is much more subtly nuanced. I hope that the position I’m about to advocate seems as obvious to you as it does to me.

Let’s start with Israel.  At least four of its closest neighbors explicitly and repeatedly denounce its very right to exist, and advocate killing Israelis by virtue of their…existence. In 2006 the people of Gaza (not the West Bank) democratically elected a militant government whose stated aim is to annihilate Israel. Hamas makes good on its claim every day, launching dozens or hundreds of homemade rockets from residential neighborhoods into Israel. Though they rarely kill anyone, Israelis nonetheless have constantly to live with the sight and sound of rockets plummeting down on their homes.

Fractured Perceptions

Thomas Abraham, my dad, was born and spent much of his life in the Persian Gulf country of Bahrain, was a journalist for the small island nation’s newspaper for several years, and later focused on Middle Eastern issues while working in a humanitarian faith-based non-profit in New York City. When he went to Jerusalem many years ago, he got “Jerusalem sickness” the sudden, unexpected and almost apocalyptic depression and fear that occasionally assaults visitors to the hearth of the three great monotheistic faiths.

Thomas Friedman – that globalization theorist and New York Time Opinion Writer who is much loved-and-hated in the Macalester context - recently wrote an intriguing proposal in the New York Times. Putting aside the audacity he displayed by writing as Abdullah bin Abdul Aziz, the king of Saudi Arabia, he proposes a creative Five-State Solution, which, as implausible as it may seem, actually demonstrates some keen insight into the perverse and tangled political allegiances that could empower the Arab world to help solve the two-state crisis. We can argue about global flattening all we want, but thank goodness for some creativity, regardless of how hairbrained it may end up being, or how much we might wish to deny it as implausible.

Less consumerism, same consumption

 

I’ve been taking the “Transformation” EXCO class this semester. It has been a wonderful experience if for no other reason than it is, necessarily, forward looking. The transformation on our minds – and most other Mac minds, I wager, is: how do we transform our global economy? Economic collapse aside, the mandate of modern capitalism to consume, consume, consume just isn’t sustainable. 

I’m an economics major. I very much enjoy the subject and I think that modern economics – as opposed to modern capitalism (consumerism) – is still the best way to explain our economy and an important way to formulate direction for our future. 

An assumption: Economics assume that the goal of any rational actor is to maximize utility. Utility is most often defined as consumption. Hence, more consumption = more utility. (Note: many economists use utility, happiness and well-being interchangeably.) 

I’m not so sure about this assumption. It makes graphing and explaining and model-building really easy. And, to a large extent, it explains Western economic behavior. I’m really not sure about it. 

Fear. Hope. Possibility.

I have been thinking about fear and hope lately. In fact, I bounced between the two feelings for quite a long while in the months leading up to the election and I am still caught between them. But maybe that is as it should be. It seems that the bipartisan politics that I watched at play this autumn came to represent, at one end of the spectrum, FEAR, and at the other, HOPE.

There wasn’t much middle ground this election season. With fear and hope, this played out on two levels. The first was within me: one agenda or set of thoughts represented the way I did NOT want the world to continue to unfold (scared me shitless) while the other represented a particular set of ideals and practices that I hoped would be engaged to get us on the right track (filling me with a great sense of hope). The second level on which the fear/hope dichotomy played out was the ways in which fear and hope were used by the two campaigns as the central emotion upon which to gain votes: one candidate ran on a platform of FEAR (we must defend against terrorism, economic insecurity, protect democracy, etc. – everything is at risk); the other candidate ran on a platform of HOPE (Yes We Can; heal this nation, create the world we need and want – everything is at a stage of potential/possibility which we can capitalize on).

HOPE won. Yes We Can.

But what does this mean?

Strategic Planning and the Future of the IGC

I will liberally take advantage of the theme “What’s Next?” by posing some questions regarding what’s next for the IGC. As some of you know, I’m currently on the IGC Strategic Planning Committee which is a semester long(ish) council consisting of staff, faculty and students which is outlining a short-term and long-term recommendation plan for the IGC. This includes conceptual ideas, programmatic recommendations, and “how-to” sorts of things like partnership building for example. We would like this process to be open to the Macalester community for anyone who would like to make constructive recommendations. So here is your chance!! Please post to this article anything that might answer the following questions: