Tag Archives: Economic Development

Big Infrastructure Is Back On The World Geopolitical Stage

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Photo: Getty Images

“STRATFOR WORLD VIEW” By Jeff Goodson

“China’s focus on building infrastructure in some of the world’s most strategic places not only represents a geopolitical threat to the West but also challenges the long-standing Western approach to development.

The new U.S. International Development Finance Corp. offers an alternative to countries that are desperate for infrastructure but don’t like the risk and sovereignty implications of some of China’s financial terms.”


“Big infrastructure is back. Long relegated to a secondary development objective by the West, China’s gambit to use infrastructure as a vehicle for promoting foreign policy objectives is changing the geopolitical landscape.

Infrastructure is the highest priority in almost every developing country. As I learned from working in 49 of them, when you ask the leaders about their top development priority, the answer is always the same: roads, power and water. Not necessarily in that order, and communications infrastructure is increasingly in the mix, but the response is consistent everywhere. That’s because infrastructure — along with security and good governance — makes economic growth and stability possible.

Big infrastructure dates back millennia. From the Phoenician ports to the Roman roads to the pre-Columbian causeways of Mesoamerica, large engineering works enabled the growth of empire. Today infrastructure plays a crucial role in everything from economic growth to poverty reduction and from health care to national security.

Unfortunately, it’s expensive. The price tag and unusual cash-flow profile of infrastructure — high upfront costs and slow long-term returns — present major problems for countries trying to secure financing for it. In developing countries, infrastructure needs are estimated at trillions of dollars through 2030 and range from 4 percent to 25 percent of gross domestic product. Recurring costs for operations and maintenance make up about half of that estimate, and security costs in countries like Afghanistan can add 30 percent to the price.

The Western Development Model

The historical approach of the United States to international development has largely tracked global geopolitical shifts. During the Cold War, U.S. development in most countries focused on small-scale technical assistance and training activities funded at just a few million dollars a year. This was part of the global chess game between the West and the Soviet Union, where presence was often more important than project impact.

That approach evaporated with the dissolution of the Soviet Union after 1991. The U.S. development footprint quickly shrank, and it refocused on promoting democracy and market economics in the newly independent states. Infrastructure was de-emphasized, although the United States continued building in a few strategic places, such as Egypt, the West Bank and Gaza Strip, and the Philippines, where large and sustained development budgets were assured. After 9/11, the focus changed back in favor of infrastructure as funding grew for reconstruction in Iraq and Afghanistan.

Private sector financing of big infrastructure has been around for centuries, as the American experience with railroads, power, water and communications attests. Starting in the 1980s, the role of the private sector expanded significantly overseas as foreign direct investment started to dominate country development. Today most private sector investment occurs in advanced countries because of the lower financial risk, but investment in developing countries is also growing through direct investment and public-private partnerships.

China’s Development Gambit

In contrast to the West, China has always focused on infrastructure as essential to the development of nations. It has also learned that building infrastructure is the best and fastest way to make friends overseas. As one Chinese spokesman put it, “China wants to do business with its neighbor. Infrastructure is the first step, followed by trade and investment and industrial cooperation.”

China has learned that building infrastructure is the best and fastest way to make friends overseas.

As far back as the mid-1970s, China was building World Bank-funded infrastructure in Africa and elsewhere to generate foreign exchange and employ a surplus Chinese workforce — the modus operandi still in effect today. In the 1990s, however, it became disillusioned with World Bank financing when activists used the bank’s policies to try to kill funding for China’s massive Three Gorges Dam project. China quickly turned to outside financial sources, and in 15 years it completed the project.

As the World Bank Group shifted away from building big infrastructure, China stepped into the breach. In 2007 it created the China-Africa Development Fund, followed by the Overseas Infrastructure Development and Investment Corp. The Belt and Road Initiative came online in 2013 and the Asian Infrastructure Investment Bank — now with 87 member countries — in 2016. These, along with the accumulation of massive foreign exchange reserves, put China in a position to use infrastructure finance as a potent vehicle for economic statecraft.

Good News for Developing Countries

China’s infrastructure gambit has riveted the attention of both Western donors and recipient countries. Not only does it represent a geopolitical threat to the West, but in promoting a state-led development model of infrastructure investment, it also challenges the long-standing Western approach to development of leveraging governance, social sector and economic policy reforms.

With China building core economic infrastructure in some of the world’s most strategic places, the United States is adapting to the new reality. In October, U.S. President Donald Trump signed bipartisan legislation creating the U.S. International Development Finance Corp. (IDFC) for overseas infrastructure, funded at $60 billion. As diplomats are fond of saying, the move is necessary but not sufficient. The new funding level is tiny compared with the trillion dollars China plans to spend on its Belt and Road Initiative, even though the IDFC will also leverage funds from the private sector and other sources. The IDFC establishes an alternative, however, for countries that are desperate for infrastructure but don’t like the risk and sovereignty implications of some of China’s financial terms.

With a range of other new financing mechanisms also evolving, the IDFC adds to the list of options now available to fund infrastructure in the many developing countries that are hungry for it. For them, this is good news indeed. It means that outside competition to finance their infrastructure is growing — a global trend that, for once, can work in their favor.”

https://worldview.stratfor.com/article/return-big-infrastructure-geopolitical-tool

ABOUT THE AUTHOR:

Jeff Goodson

Jeff Goodson is a retired U.S. Foreign Service officer. In 29 years with the U.S. Agency for International Development, he worked on the ground in 49 countries in Africa, Asia, Europe, the Middle East and Latin America. Mr. Goodson writes and lectures on national security, strategic development and irregular warfare.  His work has appeared in The Hill, Real Clear Defense, Defense One, the Small Wars Journal, War on the Rocks and other publications. 

UNITED STATES WARFARE REALITIES TODAY

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“ROSE COVERED GLASSES” By Ken Larson  – 2 Tour Vietnam Veteran and Retired Aerospace Contracts Manager

In the last 17 years the U.S. has reacted to the 911 tragedy by creating a behemoth machine that cannot and will not continue. 

It Knows Only Killing – Has Little Understanding of Foreign Cultural Factors – Spawns New Versions of Our Old Enemies – Creates a Dangerous Outgrowth of Technology Exporting It for Profit and Defies Financial Control 



Knows Only Killing 

 

This outrageous explosion of watch listing—of monitoring people and racking and stacking them on lists, assigning them numbers…  assigning them death sentences without notice, on a worldwide battlefield—it was, from the very first instance, wrong,” the source of the documents told the Intercept. “We’re allowing this to happen. And by ‘we,’ I mean every American citizen who has access to this information now, but continues to do nothing about it.”
She Kills People From 7,850 Miles Away

Has Little Understanding of Foreign Cultural Factors in Nation Building

Our government has not considered the risks, the indigenous cultural impact, the expense and the sacrifices required to sustain the nation building that must occur after we invade countries in pursuit of perceived enemies and place the burden of governance on military personnel who are not equipped to deal with it or manage USAID contractors who have profit motives in mind and corruption as a regular practice.
Risks, Expenses and Sacrifices in Nation Building

Spawns New Versions of Our Old Enemies 



An observer of our military actions over the last two decades in the Middle East could in no way have predicted the splintered, irrational, “Turn-Your-Back-And-You-Have-Two-New-Enemies”, scenario the US faces today. Perhaps a look back over our shoulder, examining cause and effect relationships along the road is in order.

Cause and Effect Relationships in the Middle East

Creates a Dangerous Outgrowth of Technology in the Military Industrial Complex and Then Exports It for Profit

The United States remains the leading arms exporter increasing sales by 23 percent, with the country’s share of the global arms trade at 31 percent.

Record US Weapons Sales to Foreign Countries – $1.6 Billion in Lockheed Martin Missiles Alone

Very smart people in the Pentagon believed that connecting sensitive networks, expensive equipment, and powerful weapons to the open Internet was a swell idea.

This ubiquitous connectivity among devices and objects — what we now call the “Internet of Things” — would allow them to collect performance data to help design new weapons, monitor equipment remotely, and realize myriad other benefits. The risks were less assiduously cataloged.

That strategy has spread huge vulnerabilities across the Defense Department, its networks, and much of what the defense industry has spent the last several decades creating.

The Pentagon Hooked Everything to the Internet

Defies Financial Control With Dire Consequences for the Nation’s Economic Future

A law passed in 1994 initially set the deadline for 1997, but the Pentagon’s books were in such disarray that it blew past that date. Then, in 2010, Congress told the Pentagon to comply by 2017.

The next year, Defense Secretary Leon Panetta pledged that the department would by 2014 be ready for a partial account of its finances – a much less detailed accounting than requested of the military services — but the department missed that deadline too.

Pentagon Remains Stubbornly Unable To Account for Its Billions

The Above Machine  Cannot and Will Not Continue.

The debt is too great a burden for generations of tax payers.

It is too risky in terms of technology that has fallen fall into enemy hands, either through the “Internet of Things” or by blunders in export management. 


It will be replaced by domestic and foreign relations programs that emphasize global human progress and economic development in lieu of threats.  The result will rely on uplifting, cooperative efforts among nations in lieu of killing. 


The globe has become too small to operate the Military Industrial Machine and the resources that have fueled it will be redirected. 


There simply is no other way. 

The change will be brought about in the following manner:


Facing geopolitical and economic realities, stopping war interventions and investing in relationships within and without our country by offering mutual collaboration.


Ceasing to dwell on threat and building long term infrastructure, education and international development.  The threats will melt away. 


Investing for the long term at the stock holder, company and  national levels based on a strategy dealing with both present day and long term challenges in education, communication and society value transitions.


Electing a Congress and an Administration that knows how to strike a balance between long and short term actions. Letting them know what we think regularly by communicating with them. 


Knowing that most cultures and societies in upheaval today are watching our national model and choosing whether to support it, ignore it or attack it.


The Dire Necessity for U.S. Long Term Strategic Vision 

https://rosecoveredglasses.blogspot.com/2015/11/united-states-warfare-realities-today.html

“ABOUT THE AUTHOR”

Ken Portrait - Copy (2)

KEN LARSON is a 2 Tour US Army Vietnam Veteran,  retired from 36 Years in the Defense Industrial Complex.  Ken worked on 25 major weapons systems, many of which are in use today in the Middle East. 

He is a volunteer Micro Mentor Counselor, specializing in Small, Veteran-owned, Minority-Owned and Woman-Owned Businesses beginning work for the Federal Government. Micro Mentor is a non-profit organization offering free assistance to small business in business planning, operations, marketing and other aspects of starting and successfully operating a small enterprise.  He can be reached at:  Ken at Micro Mentor

How “Baby Boomers” Broke America

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Image:  Ross MacDonald For TIME

“TIME MAGAZNE” As Adapted from “Tailspin” By Steven Brill

Talented, driven Americans chased the American Dream and they won it for themselves then pulled up the ladder so more could not share in their success.

Now equally talented, equally driven achievers have grown so disgusted by what they see that they are pushing back.  They believe that America can be put back on the right course. They are laying the groundwork for the feeling of disgust to be channeled into a restoration.”


ONE

“Lately, most Americans, regardless of their political leanings, have been asking themselves some version of the same question: How did we get here? How did the world’s greatest democracy and economy become a land of crumbling roads, galloping income inequality, bitter polarization and dysfunctional government?

As I tried to find the answer over the past two years, I discovered a recurring irony. About five decades ago, the core values that make America great began to bring America down. The First Amendment became a tool for the wealthy to put a thumb on the scales of democracy. America’s rightly celebrated dedication to due process was used as an instrument to block government from enforcing job-safety rules, holding corporate criminals accountable and otherwise protecting the unprotected. Election reforms meant to enhance democracy wound up undercutting democracy. Ingenious financial and legal engineering turned our economy from an engine of long-term growth and shared prosperity into a casino with only a few big winners.

These distinctly American ideas became the often unintended instruments for splitting the country into two classes: the protected and the unprotected. The protected overmatched, overran and paralyzed the government. The unprotected were left even further behind. And in many cases, the work was done by a generation of smart, hungry strivers who benefited from one of the most American values of all: meritocracy.

This is not to say that all is rotten in the United States. There are more opportunities available today for women, nonwhites and other minorities than ever. There are miracles happening daily in the nation’s laboratories, on the campuses of its world-class colleges and universities, in the offices of companies creating software for robots and medical diagnostics, in concert halls and on Broadway stages, and at joyous ceremonies swearing in proud new citizens.

Yet key measures of the nation’s public engagement, satisfaction and confidence – voter turnout, knowledge of public-policy issues, faith that the next generation will fare better than the current one, and respect for basic institutions, especially the government – are far below what they were 50 years ago, and in many cases have reached near historic lows.

It is difficult to argue that the cynicism is misplaced. From matters small – there are an average of 657 water-main breaks a day, for example – to large, it is clear that the country has gone into a tailspin over the last half-century, when John F. Kennedy’s New Frontier was about seizing the future, not trying to survive the present.

For too many, the present is hard enough. Income inequality has soared: inflation-adjusted middle-class wages have been nearly frozen for the last four decades, while earnings of the top 1% have nearly tripled. The recovery from the crash of 2008 – which saw banks and bankers bailed out while millions lost their homes, savings and jobs – was reserved almost exclusively for the wealthiest. Their incomes in the three years following the crash went up by nearly a third, while the bottom 99% saw an uptick of less than half of 1%. Only a democracy and an economy that has discarded its basic mission of holding the community together, or failed at it, would produce those results.

Meanwhile, the celebrated American economic-mobility engine is sputtering. For adults in their 30s, the chance of earning more than their parents dropped to 50% from 90% just two generations earlier. The American middle class, once an aspirational model for the world, is no longer the world’s richest.

Most Americans with average incomes have been left to fend for themselves, often at jobs where automation, outsourcing, the decline of union protection and the boss’s obsession with squeezing out every penny of short-term profit have eroded any sense of security. In 2017, household debt had grown higher than the peak reached in 2008 before the crash, with student and automobile loans staking growing claims on family paychecks.

Although the U.S. remains the world’s richest country, it has the third-highest poverty rate among the 35 nations in the Organisation for Economic Co-operation and Development (OECD), behind only Turkey and Israel. Nearly 1 in 5 American children lives in a household that the government classifies as “food insecure,” meaning they are without “access to enough food for active, healthy living.”

Beyond that, too few basic services seem to work as they should. America’s airports are an embarrassment, and a modern air-traffic control system is more than 25 years behind its original schedule. The power grid, roads and rails are crumbling, pushing the U.S. far down international rankings for infrastructure quality. Despite spending more on health care and K-12 education per capita than most other developed countries, health care outcomes and student achievement also rank in the middle or worse globally. Among the 35 OECD countries, American children rank 30th in math proficiency and 19th in science.

American politicians talk about “American exceptionalism” so habitually that it should have its own key on their speechwriters’ laptops. Is this the exceptionalism they have in mind?

Perhaps they should look at their own performance, which is best described as pathetic. Congress has not passed a comprehensive budget on time without omnibus bills since 1994. There are more than 20 registered lobbyists for every member of Congress. Most are deployed to block anything that would tax, regulate or otherwise threaten a deep-pocketed client.

Indeed, money has come to dominate everything so completely that the people we send to D.C. to represent us have been reduced to begging on the phone for campaign cash up to five hours a day and spending their evenings taking checks at fundraisers organized by those swarming lobbyists. A gerrymandering process has rigged easy wins for most of them, as long as they fend off primary challengers–which ensures that they will gravitate toward the special-interest positions of their donors and their party’s base, while racking up mounting deficits to pay for goods and services that cost more than budgeted, rarely work as promised and are seldom delivered on time.

TWO

The story of how all this came to be is like a movie in which everything seems clear only if it is played back from the start in slow motion. Beginning about 50 years ago, each scene unfolded slowly, usually without any sign of its ultimate impact. The story of America’s tailspin is not about villains, though there are some. It is not about a conspiracy to bring the country down, nor did it spring from one single source.

But there is a theme that threads through and ties together all the strands: many of the most talented, driven Americans used what makes America great–the First Amendment, due process, financial and legal ingenuity, free markets and free trade, meritocracy, even democracy itself–to chase the American Dream. And they won it, for themselves. Then, in a way unprecedented in history, they were able to consolidate their winnings, outsmart and co-opt the forces that might have reined them in, and pull up the ladder so more could not share in their success or challenge their primacy.

By continuing to get better at what they do, by knocking away the guardrails limiting their winnings, aggressively engineering changes in the political landscape, and by dint of the often unanticipated consequences of their innovations, they created a nation of moats that protected them from accountability and from the damage their triumphs caused in the larger community. Most of the time, our elected and appointed representatives were no match for these overachievers. As a result of their savvy, their drive and their resources (and a certain degree of privilege, as these strivers may have come from humble circumstances but are mostly white men), America all but abandoned its most ambitious and proudest ideal: the never perfect, always debated and perpetually sought after balance between the energizing inequality of achievement in a competitive economy and the community-binding equality promised by democracy. In a battle that began a half-century ago, the achievers won.

The result is a new, divided America. On one side are the protected few – the winners – who don’t need government for much and even have a stake in sabotaging the government’s responsibility to all of its citizens. For them, the new, broken America works fine, at least in the short term. An understaffed IRS is a plus for people most likely to be the target of audits. Underfunded customer service at the Social Security Administration is irrelevant to those not living week to week, waiting for their checks. Except for the most civic-minded among them, corporate executives are not likely to worry that their government doesn’t produce a comprehensive budget. They don’t worry about the straitjacket their government faces in recruiting and rewarding talent or in training or dismissing the untalented because of a broken civil-service system. Civil service is another great American reform that in the last 50 years has become a great American moat, protecting incompetent or corrupt workers, like those who supervised the Veterans Affairs hospitals where patient waiting lists were found to have been falsified.

On the other side are the unprotected many. They may be independent and hardworking, but they look to their government to preserve their way of life and maybe even improve it. The unprotected need the government to provide good public schools so that their children have a chance to advance. They need a level competitive playing field for their small businesses, a fair shake in consumer disputes and a realistic shot at justice in the courts. They need the government to provide a safety net to ensure that their families have access to good health care, that no one goes hungry when shifts in the economy or temporary setbacks take away their jobs and that they get help to rebuild after a hurricane or other disaster. They need the government to ensure a safe workplace and a living minimum wage. They need mass-transit systems that work and call centers at Social Security offices that don’t produce busy signals. They need the government to keep the political system fair and protect it from domination by those who can give politicians the most money. They need the government to provide fair labor laws and to promote an economy and a tax code that tempers the extremes of income inequality and makes economic opportunity more than an empty cliché.

The protected need few of these common goods. They don’t have to worry about underperforming public schools, dilapidated mass-transit systems or jammed Social Security hotlines. They have accountants and lawyers who can negotiate their employment contracts or deal with consumer disputes, assuming they want to bother. They see labor or consumer-protection laws, and fair tax codes, as threats to their winnings–which they have spent the last 50 years consolidating by eroding these common goods and the government that would provide them.

That, rather than a split between Democrats and Republicans, is the real polarization that has broken America since the 1960s. It’s the protected vs. the unprotected, the common good vs. maximizing and protecting the elite winners’ winnings.

Ross MacDonald for TIME

THREE

I was one of those elite winners. In 1964, I was a bookworm growing up in Far Rockaway, a working-class section of Queens. One day, I read in a biography of John F. Kennedy that he had gone to something called a prep school. None of my teachers at Junior High School 198 had a clue what that meant, but I soon figured out that prep school was like college. You got to go to classes and live on a campus, only you got to go four years earlier, which seemed like a fine idea. It seemed even better when I discovered that some prep schools offered financial aid. I ended up at Deerfield Academy, in Western Massachusetts, where the headmaster, Frank Boyden, told my worried parents, who ran a perpetually struggling liquor store, that his financial-aid policy was that they should send him a check every year for whatever they could afford.

Three years later, in 1967, I found myself sitting in the headmaster’s office one day in the fall of my senior year with a man named R. Inslee Clark Jr., the dean of admissions at Yale. Clark looked over my record and asked me a bunch of questions, most of which were about where I had grown up and how I had ended up at Deerfield. Then he paused, looked me in the eye and asked if I really wanted to go to Yale – if it was my first choice. When I said yes, Clark’s reply was instant: “Then I can promise you that you are in. I will tell Mr. Boyden that you don’t have to apply anywhere else. Just kind of keep it to yourself.”

What I didn’t know then was that I was part of a revolution being led by Clark, whose nickname was Inky. I was about to become one of what would come to be known as Inky’s boys and, later, girls. We were part of a meritocracy infusion that flourished at Yale and other elite education institutions, law firms and investment banks in the mid-1960s and ’70s. It produced great progress in equalizing opportunity. But it had the unintended consequence of entrenching a new aristocracy of rich knowledge workers who were much smarter and more driven than the old-boy network of heirs born on third base–and much more able to enrich and protect the clients who could afford them.

After college, I went on to Yale Law School and graduated in 1975, at a time when demand for lawyers in the flourishing knowledge-worker economy was exploding. By the mid-1980s, in terms of dollars generated, the legal industry was bigger than steel or textiles, and about the same size as the auto industry. The new lawyers were increasingly concentrated in fast-growing firms that served large corporations and were prepared to pay skyrocketing salaries to attract the best talent. Soon, the gap between pay in the private and public sectors was too large to attract enough talented young lawyers to government or public-interest law–a change described by Stanford law professor Robert Gordon in 1988 as “one of the most antisocial acts of the bar in recent history.”

I played a role in this “antisocial” movement. In 1979, I started a magazine called the American Lawyer, which focused on the business of law firms and the intriguing questions lurking behind their elegant reception areas. Which ones were best managed? Which offered the most opportunity to women or minorities? Which were more likely to promote associates to partnership? Which had the fairest or most generous bonus systems? And, yes, which provided the highest profits for partners?

That last question resulted in the American Lawyer launching a special issue every summer, beginning in 1985, in which we deployed reporters to pierce the secrecy of these private partnerships so that the magazine could rank the revenues and average profits taken home by partners at the largest firms. When the first survey was published, I received a call from a former classmate who practiced at a large Los Angeles firm. He was outraged because he–and his wife–had found out that another classmate who worked at a seemingly fungible L.A. firm made about 25% more than he did. Until then, they had been perfectly happy with his six-figure income.

The fallout from this report and those from similar trade publications was significant and double-edged. The new flow-of-market information about these businesses made those who ran them more accountable to their partners, their employees and their clients, but it also transformed the practice of law by the country’s most talented lawyers in ways that had significant drawbacks. The emphasis was now fully on serving those clients who could pay the most.

Ross MacDonald for TIME

 

FOUR

The Meritocracy’s ascent was about more than personal profit. As my generation of achievers graduated from elite universities and moved into the professional world, their personal successes often had serious societal consequences. They upended corporate America and Wall Street with inventions in law and finance that created an economy built on deals that moved assets around instead of building new ones. They created exotic, and risky, financial instruments, including derivatives and credit default swaps, that produced sugar highs of immediate profits but separated those taking the risk from those who would bear the consequences. They organized hedge funds that turned owning stock into a minute-by-minute bet rather than a long-term investment. They invented proxy fights, leveraged buyouts and stock buybacks that gave lawyers and bankers a bonanza of new fees and maximized short-term profits for increasingly unsentimental shareholders, but deadened incentives for the long-term growth of the rest of the economy.

Regulatory agencies were overwhelmed by battalions of lawyers who brilliantly weaponized the bedrock American value of due process so that, for example, an Occupational Safety and Health Administration rule protecting workers from a deadly chemical could be challenged and delayed for more than a decade and end up being hundreds of pages long. Lawyers then contested the meaning of every clause while racking up fees of hundreds of dollars per hour from clients who were saving millions of dollars on every clause they could water down.

They deployed litigators to fend off private-sector unions in the South and to defend their firings of union supporters and other blatant violations of law, for which they happily paid fines equivalent to 1% to 2% of what they saved by underpaying their workers.

Deploying the First Amendment right to “petition the Government for a redress of grievances,” thousands of achievers began in the 1970s to turn Washington into a colony of lobbyists. Through the power of the campaign cash increasingly wielded by their clients, much of which they helped raise and distribute, the hordes of lobbyists were able to get riders or exemptions worth billions inserted into legislation governing trade, the tax code, job safety or industry subsidies. Although labor laws were routinely being violated by employers in highly publicized fights, and Democrats controlled both houses of Congress and the White House, they were able to block legislation introduced by President Jimmy Carter that would have toughened penalties for violations and helped level what had become a lopsided playing field when it came to organizing unions in the private sector. As private-sector unions continued to dwindle, the achievers made sure that no similar legislation even came up for a vote in the four decades that followed.

A landmark 1976 Supreme Court case brought by lawyers for consumer-rights activist Ralph Nader gave corporations that owned drugstores a First Amendment right to inform consumers by advertising their prices. In the years that followed, lawyers for the protected morphed that consumer-rights victory into a corporate free-speech movement. The result has been court decisions allowing unlimited corporate money to overwhelm democratic elections and other rulings allowing corporations to challenge regulations related to basic consumer-protection issues, like product labeling.

As government was disabled from delivering on vital issues, the protected were able to protect themselves still more. For them, it was all about building their own moats. Their money, their power, their lobbyists, their lawyers, their drive overwhelmed the institutions that were supposed to hold them accountable–government agencies, Congress, the courts.

There may be no more flagrant example of the achievers’ triumph than how they were able to avoid accountability when the banks they ran crashed the economy. The CEOs had been able to get the courts to treat their corporations like people when it came to protecting the corporation’s right to free speech. Yet after the crash, CEOs got prosecutors and judges to treat them like corporations when it came to personal responsibility. The corporate structures they had built were so massive and so complex that, the prosecutors decided, no senior executive could be proved to have known what was going on.

Meanwhile, the lobbyists for the big banks swarmed the often invisible process under which the thousands of pages of regulations were drafted to implement the Dodd-Frank financial-reform act, which was passed in 2010 to address the risks and regulatory gaps that precipitated the crash. As a result, about 30% of the 390 required regulations had not been promulgated as of mid-2016, according to the law firm Davis Polk. Under the Trump Administration and continued Republican control of Congress, efforts intensified to roll back the rules that were already in effect even as the big banks–which had argued that Dodd-Frank would kill their businesses–were enjoying record profits and market share.

It may be understandable for those on the losing side of this triumph of the achievers to condemn the winners as gluttons. That explanation, however, is too simple. Many of the protected class are people who have lived the kind of lives that all Americans celebrate. They worked hard. They innovated. They tried things that others wouldn’t attempt. They believed, often correctly, that they were writing new chapters in the long story of American progress.

When they created ways to package mortgages into securities that could be resold to investors, for example, it was initially celebrated as a way to get more money into the mortgage pool, thereby making more mortgages available to the middle class. But by 2007 it had become far too much of a good thing. As the financial engineers continued to push the envelope with ever-riskier versions of the original invention, they crashed the economy.

Thus, the breakdown came when their intelligence, daring, creativity and resources enabled them to push aside any effort to rein them in. They did what comes naturally – they kept winning. And they did it with the protection of an alluring, defensible narrative that shielded them from pushback, at least initially. They won not with the brazen corruption of the robber barons of old, but by drawing on the core values that have always defined American greatness.

They didn’t do it cynically, at least not at first. They simply got really, really good at taking advantage of what the American system gave them and doing the kinds of things that America treasures in the name of the values that America treasures.

And they have invested their winnings not only to preserve their bounty, but also to root themselves and their offspring in a new meritocracy-aristocracy that is more entrenched than the old-boy network. Forty-eight years after Inky Clark gave me my ticket on the meritocracy express in 1967, a professor at Yale Law School jarred the school’s graduation celebration. Daniel Markovits, who specializes in the intersection of law and behavioral economics, told the class of 2015 that their success getting accepted into, and getting a degree from, the country’s most selective law school actually marked their entry into a newly entrenched aristocracy that had been snuffing out the American Dream for almost everyone else. Elites, he explained, can spend what they need to in order to send their children to the best schools, provide tutors for standardized testing and otherwise ensure that their kids can outcompete their peers to secure the same spots at the top that their parents achieved.

“American meritocracy has thus become precisely what it was invented to combat,” Markovits concluded, “a mechanism for the dynastic transmission of wealth and privilege across generations. Meritocracy now constitutes a modern-day aristocracy.”

The frustrated, disillusioned Americans who voted for President Trump committed the ultimate act of rejecting the meritocrats – epitomized by the hardworking, always prepared, Yale Law – educated Hillary Clinton – in favor of an inexperienced, never-prepared, shoot-from-the-hip heir to a real estate fortune whose businesses had declared bankruptcy six times. He would “drain the swamp” in Washington, he promised. He would take the coal industry back to the greatness it had enjoyed 80 years before. He would rebuild the cities, block immigrants with a great wall, provide health care for all and make the country’s infrastructure the envy of the world, while cutting everyone’s taxes. Forty-six percent of those who voted figured that things were so bad, they might as well let him try.

FIVE

It seems like a grim story. Except that the story isn’t over. During the past two years, as I have discovered the people and forces behind the 50-year U.S. tailspin, I have also discovered that in every arena the meritocrats commandeered there are now equally talented, equally driven achievers who have grown so disgusted by what they see that they are pushing back.

From Baruch College in Manhattan to the University of California, Irvine, more colleges are working to break down the barriers of the newly entrenched meritocracy. Elite Eastern institutions such as Amherst, Vassar and Princeton are using aggressive outreach campaigns to attract applicants who might otherwise be unaware of the schools’ generous financial-aid packages.

Entrepreneurs like Jukay Hsu, a Harvard-educated Iraq War veteran who runs a nonprofit called C4Q out of a converted zipper factory in Queens, are making eye-opening progress with training programs aimed at lifting those displaced by automation or trade back into middle-class software-engineering jobs. “Some of the smartest, hardest-working people I’ve ever met were soldiers who didn’t graduate from college,” says Hsu. (Disclosure: I am an uncompensated board member of C4Q.)

Even Washington is poised to benefit from the new wave of achievers. Issue One, a nonprofit ensconced in an office on lobbyists’ row on K Street, is fighting for campaign-finance reforms and pushing legislation that would limit the influence of lobbyists by reining in their checkbooks. The group is supported by a growing band of disillusioned politicians from both parties. Better Markets, a well-funded lobbying organization that squares off against the usual lobbyists and is filled with people whose meritocracy credentials match those of their adversaries, is going after continuing abuses and lack of accountability on Wall Street. Two other organizations, the Bipartisan Policy Center and the Partnership for Public Service, are preparing blueprints for civil-service reform, tax reform, better budgeting and contracting, and infrastructure investment–all of which can attract bipartisan support if and when our elected officials finally get pushed to act.

Although their work is often frustrating, the worsening status quo seems to energize those who are pushing back. “My kid complained the other day that he still couldn’t play the violin, even though he’d been practicing for two days,” says Max Stier, president of the Partnership for Public Service. “Well, yeah, that’s true, but you have to keep at it. Persistence is an underrated virtue.”

Stier and the others believe that the country will overrun the lobbyists and cross over the moats when enough Americans see that we need leaders who are prepared and intelligent, who can channel our frustration rather than exploit it, and who can unite the middle class and the poor rather than divide them. They are certain that when the country’s breakdown touches enough people directly and causes enough damage, the officeholders who depend on those people for their jobs will be forced to act.

The new achievers are doing what they do not because they are gluttons for frustration, but because they believe that America can be put back on the right course. They are laying the groundwork for the feeling of disgust to be channeled into a restoration.”

http://time.com/5280446/baby-boomer-generation-america-steve-brill/

Steven Brill's Tailspin
Steven Brill’s Tailspin

Brill is the author of Tailspin, from which this article is adapted, out this month from Alfred A. Knopf, an imprint of The Knopf Doubleday Publishing Group, a division of Penguin Random House LLC

This appears in the May 28, 2018 issue of TIME.

Former “Blackwater” CEO Eric Prince Now Champions Economic Development As the Key to Peace, Stability and Security

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Erikprince“NATIONAL DEFENSE MAGAZINE”

“Blackwater Worldwide founder Eric D. Prince once made handsome profits as a private security contractor to the U.S. government. He no longer sees a future in that industry, though, and has shifted gears to the economic development business, mostly in Africa.

“Even the most basic forms of infrastructure delivered in a quality and reliable manner greatly improve people’s lives. And people who see a path forward for economic development and a future for their families are less likely to fight.”

It was an abrupt change of direction for Prince, a former Navy SEAL who became the poster boy for private security excesses at the height of the Iraq war. He sold Blackwater — now called Academi — in 2010 to private investors following years of lawsuits, congressional investigations and criminal complaints against the company.

Prince is currently managing director of Frontier Resource Group, a small private equity fund, and also chairman of Frontier Services Group, a Hong Kong-based public company that specializes in construction, road building, trucking, barging and air transport services mostly to companies that want to operate in Africa.


The shift from war contractor to peacetime developer was a straightforward business decision, Prince told National Defense in a recent interview. There are huge opportunities in Africa for investors who are willing to take a risk, he said. “I started investing in Africa and I saw the amount of opportunities there were to build roads, mines, infrastructure, oil fields … and the large amounts of money that would be needed to do that.”

Asian investors, especially the Chinese, are fueling much of the growth and have poured billions of dollars into Africa. They see the continent both as a fountain of natural resources and as an increasingly important trade partner.

“Asian investors have the appetite to take on that level of risk,” Prince said. But others, too, see a future in Africa. “Whether it’s a Western mining company or a European oil company or a Chinese firm, they all have similar needs and requirements to operate there.”

While everyone recognizes Africa’s potential, the operating environment is challenging, with a weak and undependable infrastructure. Travel and transportation in many areas are difficult and expensive, and many countries in Africa create legal and regulatory risks for businesses. Prince’s company, he said, is all about making it easier for corporations to do business in Africa. “We have built strong relationships with trusted local partners across the continent.”

In a blog post on his company’s website, Prince champions the idea that economic development is the key to peace, stability and security. “Fragile countries in Africa have been historically trapped in a vicious cycle of instability and poverty,” he said. Development over time can help end the continent’s brutal wars. “Even the most basic forms of infrastructure delivered in a quality and reliable manner greatly improve people’s lives. Investors are bullish on Africa despite the tough environment, said Prince. “Africa comes with a higher risk, they expect quicker returns in the projects they invest in. … Investors are in it to make money. There is not enough charity in the world to develop Africa.”

http://www.nationaldefensemagazine.org/blog/Lists/Posts/Post.aspx?ID=1704