Reflections on Cyprus Independence Day

I watched a little bit of the military parade in Nicosia today. I can't help wishing this day could be commemorated with something more than shrill journalists from state-owned channels eulogising young men in uniform, while old politicians in sharp suits and Rambo-style shades applaud from the stage.

Of course we need military preparedness. But independence today, no matter in what country we live in, is so much more than this.

So much more than the hollow slogans and fixations with military equipment that is itself 2 generations old.

Where is the parade dedicated to economic competitiveness or innovation? Where is the parade dedicated to cyberwarfare and digital capabilities? To effective diplomacy and alliances? To an efficient public sector?

To honest and uncorrupted politicians, capable of strategic governance? That would be an empty parade indeed.

I reflect that Cyprus has made tremendous efforts in re-organising its civil defence and conscription system and is now in the process of professionalising its military. This is laudable, although no doubt more can be done. There are also few alternatives for this, given Cyprus' geographic position, history, and neighbourhood, and the fact that 38% of Cyprus is occupied by Turkey.

Yet, Cyprus has gone through 5 major economic crashes in 15 years. All of these are attributable to a lack of effective regulation, to political capture of regulatory institutions and banks, to abysmal managerial decisions, and to a society prepared to believe the impossible.

None of these economic crashes is attributed to military preparedness. Yet all of them have reduced Cyprus' independence significantly.

Independence today will be something secured by:

·       Effective and accountable politicians.

·       An independent and effective public service, adapted to the digital age and the globalised world we are living in, where a condition of ignorant stasis is fatal. This includes a modern justice system.

·       A consensus between political parties and society on what is considered mandatory, and what can be open to ideological interpretation. Ideally, issues like the national educational system, justice, and military should be non-political and non-ideological.

·       A society that invests to compete, rather than investing in flashy consumption. Particularly when the latter is financed by expensive bank loans.

·       A society capable of historical memory, real analysis and the ability to resist demagoguery, rather than one hypnotised by "proinathika", trashy serials, self-indulgence and narcissism.

·       A society capable of forging a balanced and coherent social compact between the young, the employed, the old and the disadvantaged.

·       Effective and innovative public and private sector management. Probably the greatest weakness we confront today.

·       A military force capable of very rapid and mobile, independent reaction, using asymmetric technological threats against a numerically-superior force with overwhelming conventional superiority in the air and on the ground.

·       Infrastructure capabilities shielded from digital and electro-magnetic warfare and unrestricted warfare.

·       A very effective public service, diplomatic corps, and media capabilities necessary to shift international public opinion and decision-making.

·       The ability to properly leverage and benefit from international alliances, avoiding the paroxysms and oxymoronic behaviour of all too many politicians today and yesterday.

·       An equally effective intelligence service.

·       A culture of investing in excellence, innovation and performance, at all levels. This is the only avenue a small country has today to survive and compete in a brutally rational economic age.

·       The ability to attract productive and innovative investment (domestic or foreign) and maintain a positive current account balance, as well as a balanced GDP and public sector budget.

I find myself today thinking of that iconic poster from the X-Files.

I want to believe.

Image of Fox Mulder courtesy of The TV Addict.

(c) Philip Ammerman, 2016 

My Top 5 plus 1 Picks for US President

Jeffrey Immelt. Photo (c) Eric Piermont / AFP / Getty Images, courtesy of the Wall Street Journal

Like almost everyone I know, I find it impossible to be inspired or confident by the choice of Hillary Clinton or Donald Trump as presidential nominees this year.

Rather than dwell on these two candidates (as I have in many other posts), I’d rather start with a clean slate and brainstorm who I would be willing to vote for.

What am I looking for in a President?

·       At least 30 years of clear-headed experience and achievement, ideally spanning both the private and public sectors;

·       A rational, post-ideological, non-partisan approach towards governance;

·       The ability to analyse root causes and effects, and frame complex issues into a manageable structure;

·       Someone combining systems thinking with real leadership in the real world, not an ivory tower or an ideological wet dream (I’m thinking of you here, Ted Cruz);

·       The ability to delegate and manage teams in a complex operating environment;

·       The ability to make hard decisions;

·       Health and stamina: Able to work long hours under pressure;

·       A strong sense of personal ethics;

·       Ideally, a self-made man or woman, rather than someone of inherited wealth;

·       A commitment to serving the greater good while (a) upholding the Constitution and laws of the United States, and (b) ensuring that minority interests are protected;

·       The ability to work across party lines;

·       An internationalist agenda; a willingness to work with international organisations and allies in a meaningful and realistic manner;

·       A skepticism of easy slogans and sound bytes; an understanding that there are no easy solutions (or at least, few that are sustainable), and that complex solutions demand hard work, good planning and real sacrifice;

·       Knowledge of at least one foreign language and some international experience;

·       Capability to set objectives and monitor results;

·       A strong knowledge of history (and reality).

Top 5 Picks

So here is my pick, in order of preference.

1. Jeffrey Immelt

CEO of General Electric. If there is one person who knows how the American and global economy works across all sectors, including manufacturing, finance and services, it’s Jeff Immelt. Incredible line experience in the private sector. Incredible project management skills. Experience in managing teams in the most complex operating environments possible. By far the strongest, multi-sectoral international experience of any candidate: GE is working in over 170 countries. Critically aware of the need for innovation and competitiveness, including the need to develop and retain brilliant scientists, investors, and salespeople. Vast finance experience. Vast experience in complex turn-around management in complex competitive situations, which is exactly what America needs right now. Vast operational experience in value curve migration and new technology integration. He is more humble than his predecessor, “Neutron Jack” Welch. Although there has been a lot of turbulence at GE, this reflects the changing economy and multiple business cycles rather than poor leadership. The only negative point is that he has no public sector experience in the United States. But he certainly knows how government works, at all levels (Federal, State, Local). And he has worked with public sector officials of both parties for over 30 years now. I would vote for Immelt immediately and unreservedly, assuming he follows a centrist platform.

2. Michael Bloomberg

Former Mayor of New York City; founder of Bloomberg LLC. A real innovator; a very accomplished track record in New York City. A strong mix of private and public sector experience, although the latter is at the municipal, not the national level. Then again, it’s New York City. Hard to think of a more difficult global city to manage in the United States today. An internationalist and realist. A financial engineer who can hopefully find ways to deal with America’s burgeoning public debt. I would vote for Bloomberg immediately and unreservedly. I’d love to see him remodeling the Oval Office into a bullpen. Or just relocating where he does business. The only reason he’s second on this list is his age.

3. John Kerry

Decorated war veteran. Senator from Massachussets. Secretary of State. One of the most level-headed public servants America has, even if he can’t always express himself quite so well. This is someone who has literally bled for America. He knows how the system works at the state and federal level. An added bonus is his international background. One issue against him is his lack of financial / economics experience. A second issue is whether he can say no at the right time. He ran against George W. Bush in 2004 and lost, but continued in public service. He would be a safe pair of hands, but would need strong backstopping at Treasury and Commerce, and should not be beholden to Democratic party interests.

4. Colin Powell

Soldier, working his way up to 4* General and Chairman of the Joint Chiefs of Staff. Secretary of State in the George W. Bush administration. His greatest failure is his acceptance of the Iraqi WMD fiction. I believe he was bamboozled, and I believe he will not make the same mistake twice. An inspirational figure: a minority who has pulled himself up by his bootstraps to the highest offices in America by virtue of service. Only two issues against him: (a) lack of financial and economics sector experience, and (b) possibly not willing to rock the boat too much. Other than these points, this is a vastly superior candidate to anyone currently in the race.

5. Bill Gates

Founder of Microsoft, co-founder of the Bill & Melinda Gates Foundation. After co-writing the operating system that everyone loves to hate, Bill Gates has spent 20 years donating his fortune to doing very beneficial policy- and science-based public service through his Foundation. My one worry is that he has no line management experience in the public sector, and would probably find this exasperating. He would also probably have difficulty running a campaign and relating to at least 50% of voters. But it’s difficult to think of a more intelligent systems thinker and futurist with a real track record of significant scale.

No Female Candidates

My one regret here is that I haven’t been able to identify any female candidates for President with equivalent seniority, ethics and experience. Anne-Marie Slaughter would be a strong choice, but she does not have the seniority and breadth of experience that the others on this list do. Carly Fiorina and Meg Ryan turned out to be less than stellar. Probably, I don’t know enough others. Any suggestions in this area would be very welcome.

Plus one Wild Card

Bruce Springsteen

I know. You’re probably thinking WTF!? But think about it. He’s 66 years old, and he still plays 4 hour live gigs on tour. He probably knows more about the working class and the average American than anyone else on this list. He’s pulled himself up by his bootstraps and has been composing and singing inspiring music for nearly 50 years now. He’s authentic. He’s artistically and financially successful. He’s been in every single US state and all over the world. We wouldn't have to live through any more navy blue suits and red ties and teleprompters. Sure, he has no public sector experience. He would need a really strong executive team to get him through the complex stuff. But he has great instincts and ethics. This is probably one guy you could trust not to lie to you on the campaign trail, or anywhere else. The only downside of electing him is that the E-Street Band would have to stop playing. If you gave me the choice of The Boss on November 8^th, I would vote for him over Hillary or Donald immediately.

 See you on November 8th. 

(c) Philip Ammerman, 2016

Hillary Clinton and the Optics of Decline

Hillary Clinton. Photo (c) Politico, AP Images

In terms of optics, the past few days have signaled a downturn for Hillary Clinton’s campaign. This downturn reflects many of the symptoms of the political class. And unfortunately, it signals yet another reason why the United States faces incredible challenges in the near future.

Clinton’s Basket of Deplorables

At a campaign fundraiser on Friday, 9 September, she made the following comment (quote from CNN):

"To just be grossly generalistic, you can put half of Trump supporters into what I call the basket of deplorables," Clinton said. "Right? Racist, sexist, homophobic, xenophobic, Islamaphobic, you name it."

She added: "And unfortunately, there are people like that and he has lifted them up. He has given voice to their websites that used to only have 11,000 people, now have 11 million. He tweets and retweets offensive, hateful, mean-spirited rhetoric."

However true this may be (or appear to be), it is an unfortunate thing to say. Right up there with Mitt Romny’s 47% comment. Also made at a fundraising speech. 

It is important to remember that Trump and his surrogates have been encouraging supporters to “lock her up” and, in some cases, to execute her. I haven’t seen an equivalent apology from Donald Trump about this, even though the chants take place at his rallies, at his prompting.

The next event came yesterday, at a 9/11 memorial service. Attempting to enter her van, she appeared to stumble and fall. This will lend further credence to Republican attacks on her that she has an undiagnosed illness and is not fit for office.

The last thing a presidential candidate should do is appear weak. The second-to-last-thing a candidate should to is insult the voters of the other side.

Yet this is what is happening on a daily basis in this electoral campaign. It frames the terms of the debate. It establishes perception, which may be far removed from any facts.

Elections are Perception. They Distort Reality. Then they Define It.

Events like this begin to frame a larger narrative. It’s clear that the political class in most western countries today has several common features:

·       Elections are fought on perception, not fact;

·       Average voters appear to suspend any form of critical thinking or historical memory, and accept political lies;

·       The political class apparently feels empowered to say one thing in smaller, campaign fundraising events, and another thing in public;

·       I have yet to see any politician or political party offer a comprehensive policy analysis and means-tested solution to the very real problems of flagging productivity, declining competitiveness, demographic decline, fiscal distortion and other critical issues.

Unfortunately, this trend has now spread to the largest economy in the world (in real terms). It has long been there, but the Trump-Clinton election marks a watershed of political failure that will define the new normal for generations to come. 

United States Exceptionalism

The United States is, once again, an exception. But not in a positive way. In many respects, it appears to be a frontrunner of political and economic decline among developed nations. It is not unique in this.

The public debt situation in the United States is deliberately concealed, with Federal debt reported, with very real and tangible debts of key governmental organisations (Fannie Mae / Freddie Mac), state and local government and mandatory unfunded liabilities (Medicare, Medicaid, Social Security) on the books, but not reported in a consolidated format. This is a widely-known and accepted fiction, which cannot continue without high and unsustainable costs.

Federal spending is only being kept low through artificially low interest rates (ZIRP), which reduce interest expenditure, and through non-consolidation of total public debt.

In fiscal year 2015, the US Federal government spent $ 402 billion in interest. In FY 2016, October – August, it has already spent $ 413 billion.

This high interest expenditure takes place in an era of low interest rates, with FY 2016 year-to-date effective interest rates at 2.237% (in August 2016), lower than the 2.337% YTD figure from 2015.

If anyone is still wondering why the Fed is delaying raising interest rates, this is probably the answer.

Federal budgeting is a disaster, with billions of dollars in expenditure unaccounted for, and trillions recorded by accounting stopgaps.

Economic inequality is now at historic levels. 90% of US households earned $ 33,068 or less per year in 2014. Most working families on minimum wage (or even 50-75% above minimum wage) are essentially wage slaves, unable to meet basic demands.

The Affordable Healthcare Act has removed any semblance of price discipline on suppliers through collective bargaining—due mainly to Republican and Democratic resistance to a single payer system. US basic healthcare remains among the most expensive in the world, for some of the poorest health outcomes on record. The very fiscal prudence that Republicans espouse for the private sector is ignored in the public sector, mainly due to lobbying. The pernicious effects of this are all too obvious.

The US is possibly the only country where key law enforcement (sheriffs) and justice officials (judges) are elected this widely. Where they must collect campaign contributions to win an election. And where they must then sit in a regulatory or enforcement position on the very people who paid to elect them.

US GDP and employment figures are distorted (favourably) by 2-3 key sectors. These distortions extend into tax revenue and policy. A further distortion is seen in the role of the US dollar as a global currency, and in US Treasuries as a reserve of value.

US political campaign finance is a recipe for undue influence and corruption. This is possibly the one area that Republicans and Democrats agree on. Yet this is the one area where neither side can afford to yield in what amounts to a financial arms race.

There is a general political inability to craft sustainable and rational policy responses to key sectors such as public finance, the overall financial sector, electoral reform (at state and federal levels), justice, gun control and registration, healthcare spending, education, manufacturing and trade policy, and immigration. In the absence of meaningful reform, costs rise and competitiveness declines.

Informed observers must look beyond the latest scandalous comment made by Trump or Clinton, to the abject politicization of elected officials and electoral systems from the local level all the way up to the Presidency.

They must look beyond the latest unicorn listing or the next $ 500 billion enterprise valuation to the vast number of companies that fail in the United States every year. Not just in the tech sector—in every sector.

The United States has some of the most unique strengths and advantages in the world. It has made incredible contributions in every sector. It is the oldest functioning, continuous democracy and remains a country where innovation and entrepreneurship thrive despite increasingly expensive mandatory costs and distortions: primarily healthcare and legal.

Unfortunately, none of these positive attributes appear to be reflected in the political system. And politics is, arguably, destroying them.

I am hoping, perhaps against all hope, that the political system will miraculously find a way to stop the decline. But I see few indications of this, and certainly none that are ticking away as fast as the consolidated debt clock.

As mentioned at the start: the US is a frontrunner, but it is not unique. The same trends are clear in nearly every other industrialised democracy in the world today.

The question is not why the metaphorical train wreck will happen. The question is when.

© Philip Ammerman, 2016

Empty Seas in China

I know that among so many other issues, natural resource utilisation tends to be overlooked. We don't lack products on supermarket shelves, after all.

But the world's population reached 7.4 billion in March (according to the United Nations), and is on track to reach 11.2 billion by 2100. This means that certain basic issues like food supply will become critical in the developed world, let alone the developing world.

Adam Minter has a terrifying article in Bloomberg on overfishing in China, and its political and resource implications. It's a textbook case of over-utilisation, aggravated by a seemingly "rational" economic policy (fisheries support) taken to irrational lengths through price and subsidy distortions. It also includes a very explicit link to nationalism and territorial ambitions.

The EU and US have been struggling with this issue for generations, but neither has the population or development pressure that China has.

Back in 1990, we were studying the South China Sea and the Spratly Islands as a textbook case of mining and politics in Geology class. Back then, the Berlin wall had just fallen and apartheid was still in place.

This month, I'm reading that Vietnam is moving Israeli-made rocket artillery to concealed positions in the Spratlys, that Japan is re-arming and that the Philippines is negotiating new base agreements.

I wonder how far our enlightened but geriatric continent is prepared for new major power conflicts, either in Asia, or on our own borders. Certainly, we ignored Syria as long as we could, until it bit us in the ass. Then as soon as the refugee inflow slowed, we ignored it some more.

And I wonder if just a fraction of the time we spend on ephemera like Pokemon Go or how many medals "we won" in Rio were not better invested preparing for more serious, even existential, challenges.

(c) Philip Ammerman, 2016 

Sources:

Bloomberg: China's Empty Oceans

https://www.bloomberg.com/view/articles/2016-08-17/it-s-up-to-china-to-save-asia-s-oceans

Wikipedia: World Population 

https://en.wikipedia.org/wiki/World_population

Reuters: Vietnam moves new rocket launchers into disputed South China Sea

http://www.reuters.com/article/us-southchinasea-vietnam-idUSKCN10K2NE

Defense News: With new rules, Japan emerges in the Pacific

http://www.defensenews.com/story/defense/policy-budget/budget/2015/05/03/japan-us-guidelines-military-isr-cyber-industry/26691819/

Military Time: The US is moving into these five bases in The Philippines

http://www.militarytimes.com/story/military/2016/03/21/us-plans-use-five-new-bases-philippines/82072138/