EconMatters Global

Trump’s Trade Playbook: The Earth was never flat, after all

2024-11-08T14:00:00.001-06:00

Thomas Friedman’s “The World is Flat” painted an optimistic picture of globalization, where economic borders would dissolve, leading to a world of endless opportunities and mutual prosperity through interconnected economies. This vision, however, has faced significant scrutiny and revaluation, especially post-COVID-19.

The vulnerability of global trade networks

The COVID-19 pandemic laid bare the fragility of global supply chains. Far from being resilient, these networks were shown to be highly susceptible to disruptions, as the world grappled with shortages and delays that had ripple effects across various industries.

China’s shift in priorities

Before the health crisis, the belief was that China’s economic strategy was all about maintaining its status as the world’s factory. But under Xi Jinping, China has pivoted, showing it’s willing to prioritize political control over economic gains. This willingness to undermine its own export economy for internal policy control has been a wake-up call.

Geopolitical realities over economic ties

Russia’s invasion of Ukraine, despite mutual economic benefits, starkly demonstrated that geopolitical strategies can override economic interdependence. This action underscored the limitations of economic ties in preventing conflict, suggesting that economic interdependence alone isn’t a reliable peacekeeper.

The asymmetrical nature of trade

The concept of free trade between nations like the U.S. and China has been revealed to be less reciprocal than anticipated. American companies face substantial barriers when entering the Chinese market, often forced into partnerships that lead to the loss of intellectual property and control over technology. This imbalance shows that what was thought to be a level playing field is, in fact, tilted.

Strategic competition and economic strategy

The original intent behind opening trade with China was to integrate it into the global economic system, promoting liberalization and reducing the risk of conflict. While economic growth was achieved, reducing poverty, it also positioned China as a formidable strategic competitor. China now uses its economic leverage for national security objectives, complicating global economic stability.

The need for new economic diplomacy

Given these developments, there is an urgent need to reassess how nations engage in global trade. The old models of globalization, centered on open markets and economic interdependence, must evolve. A new approach should balance the advantages of global commerce with protecting national interests, ensuring economic security alongside prosperity.

In this complex geopolitical landscape, the simplistic view of a “flat world” has been replaced by a nuanced understanding of global trade dynamics, where strategic interests and national security play as significant a role as economic incentives. The challenge now lies in crafting policies that navigate this intricate balance, ensuring economic growth does not come at the expense of national security.

Courtesy of FreightWaves

The views and opinions expressed herein are the author's own and do not necessarily reflect those of EconMatters.

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Trump’s plans to extend tax cuts and slash red tape will likely spur economic growth − but there’s a cost

2024-11-08T10:00:00.001-06:00

The economy was one of their top issues as voters went to the polls this year. So what does Donald Trump’s return to the White House – as well as Republican gains in Congress – mean for the U.S. economy?

I followed the election closely, with a keen interest on each candidate’s economic plans. I believe there are two key areas in particular where Trump’s victory could produce economic benefits over the next four years. But there’s also a cost that will have to be paid.

Extending Trump’s 2017 tax law

Let’s start with taxes.

Nearly all of the provisions of the Tax Cuts and Jobs Act of 2017, which Congress passed and Trump signed into law in his first year in office, expire at the end of 2025. If those parts of the law aren’t extended, it would result in a tax hike of about US$4 trillion through 2034. This would impose an additional burden on households coming out of a period of high inflation that resulted in significant hardship for many families – and contributed to Trump’s victory.

Extending the individual income tax cuts would keep marginal tax rates from jumping and lead – relative to letting them expire – to an increase in economic output in the long run. This occurs because lower taxes increase demand for goods and services in the short run. Lower tax rates increase the incentive to work, save and invest, which leads to more hours worked, more capital, increased labor productivity and new business formations in the long run.

The law also improved tax simplicity by doubling the standard deduction. And it promoted fairness by increasing the child tax credit, reducing how many taxpayers are subject to the alternative minimum tax and capping the deduction on state and local income taxes. The expiration of these provisions would result in a significant increase in the tax burden on many lower- and middle-income households.

Given that Trump signed the act into law in 2017, I believe it’s a good bet that, at a minimum, he’ll extend the law, which will be much easier with a Republican Congress. And many economists would argue that will be good news for American households and the economy as a whole.

Removing more red tape

More importantly, in my view, are what I expect will be his more business-related policies that should promote innovation, investment and productivity, many of which also relate to the 2017 tax law.

A few of these policies also relate to the same tax law – and so are very likely to be extended or reformed early in Trump’s second term. Two provisions that are set to expire soon are the 20% small-business deduction and a measure that allows for the expensing of equipment such as computers and manufacturing machinery.

The small-business deduction, which allows owners to deduct up to 20% of their share of the company’s income from their individual tax bills, was found to increase employment by 1.2 million jobs a year. It’s also important to ensure that small businesses remain competitive with larger rivals. Allowing businesses to fully expense the cost of equipment has been found to increase economic output by about 5% over the long term.

It’s important to extend these provisions to avoid a large tax increase on small businesses that would reduce job creation and innovation and lead to slower growth and lower living standards.

A related issue is accounting for research and development expenditures. The 2017 tax law actually raised taxes for companies by requiring these expenses be spread over five years, which raises the cost of capital and disincentives investment. Trump has said he would change this so all expenses, including R&D, can be immediately expensed. This should promote economic growth.

More broadly, Trump’s first term in office was characterized by a reduction in red tape as regulatory reform was a major focus of his administration. Research on the economic cost of new regulations suggests the extra burden of regulations during the Trump administration was significantly lower than during the administrations of George W. Bush, Barack Obama and Joe Biden.

Research suggests the U.S. economy remains stifled by heavy-handed and poorly targeted regulations that slow growth and innovation. Trump has promised to further reduce regulations during a second term, so it could lead to solid gains in economic output.

Given the promise of artificial intelligence to increase productivity and growth in the near future, I believe it is more important than ever to ensure that government agency’s set the rules of the game in a fair and efficient manner, without choking off the economic benefits of increased innovation.

Offsetting the costs

But there’s one big caveat to this. Extending those tax cuts will put serious strain on the national debt, which is currently at unsustainable levels.

Since the turn of the century, U.S. debt has increased from $10 trillion to over $35 trillion, and the Congressional Budget Office projects that the debt will increase as a share of GDP from 99% in 2024 to 166% in 2054.

Reforming the tax code to avoid a significant increase in taxes is important, but offsetting the revenue loss with spending cuts will be vital to avoid adding to the debt. Failing to do so would significantly increase the deficit and national debt, and put the nation’s finances on an even more precarious path.

But Trump could go further than simply finding offsets. The start of the new administration is a perfect time, in my view, to create a new fiscal commission to jump-start a bipartisan conversation on sustainable fiscal policy solutions.

Courtesy of John W. Diamond via The Conversation

John W. Diamond does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment

Our Fragile Infrastructure: Lessons From Hurricane Helene

2024-11-07T15:30:00.001-06:00

Asheville, North Carolina, is known for its historic architecture, vibrant arts scene and as a gateway to the Blue Ridge Mountains. It was a favorite escape for “climate migrants” moving from California, Arizona, and other climate-challenged vicinities, until a “500 year flood” ravaged the city this fall.

Hurricane Helene was a wakeup call not just for stricken North Carolina residents but for people across the country following their tragic stories in the media and in the podcasts now favored by young voters for news. “Preppers” well equipped with supplies watched in helpless disbelief as homes washed away in a wall of water and mud, taking emergency supplies in the storm. Streets turned into rivers, and many businesses and homes suffered extensive water damage if they were not lost altogether.

The raging floods were triggered by unprecedented rainfall and winds, but a network of fragile dams also played a role. On Sept 27, when the floods hit, evacuation orders were issued to residents near a number of critical dams due to their reported “imminent failure” or “catastrophic collapse.” Flood waters were overtopping the dams to the point that in some cases the top of the dam structure could not be seen.

The dams did not collapse, but to avoid that catastrophe, floodgates and spillways had to be opened, releasing huge amounts of water over a number of days. Spokesmen said the dams had “performed as designed,” but they were designed for an earlier era with more stable, predictable climates and no population buildup below the dams.

Five days after the floods hit in East Tennessee, half a million gallons of water were still being released per second from Douglas Dam, northwest of Asheville and upstream from Knoxville on the French Broad River. (Video clip of opened floodgates.) The Watauga Dam in Tennessee was also releasing record flows, surrounding nearby homes in water. WTVC NewsChannel 9 Chattanooga reported that Chickamauga Dam, upstream from Chattanooga, released approximately 566,118 gallons of water per second.

The Nolichucky Dam, in Tennessee near the North Carolina border, was reported to have “withstood nearly twice the water flow of Niagara Falls.” (See dramatic videos on Fox Weather showing the overflow and the floodgate release continuing three weeks later, a similar clip from 11Alive adding the damage downstream, and overflow footage on WKYC Charlotte.) Other major dams in which the floodgates were opened included Cowans Ford Dam, north of Charlotte (see video clip of the floodgate release); and Waterville Dam (also called Walters Dam), upstream from Newport in Tennessee (video). Homeowners accused Duke Energy of sacrificing poor neighborhoods for wealthier properties, but as one official said, the excess water had to go somewhere. It had to go downstream. They did what they had to do to avoid outright collapse of the dams, a much worse disaster.

Upriver from Asheville, the auxiliary spillway of the North Forks Dam was activated. It too is said to have “performed as designed,” but the result was again significant flooding. Mandatory evacuation orders were put in place from the dam to Biltmore Village in Asheville, which suffered major damage. North Forks Dam is classified as a ”high-hazard potential dam,” meaning its failure could result in potential loss of life and serious property damage.

One concerned Asheville podcaster complained that the city had known for 20 years that the North Forks Dam was inadequate and a lethal danger under flood conditions, but it hadn’t been repaired. The dam was put to the test in September, when residents were told there was no choice but for the flood gates to be opened to prevent the dam from breaking. The result was a 30 foot wall of water that swept homes and lives away, rushing so fast that people were found in the tops of trees. The podcaster’s suspicions were aroused because lithium worth billions of dollars is located in Western North Carolina, where a mining company has been trying to restart operations since 2021, over community protests.

That was also true of the nearby town of Spruce Pine, downstream from the North Toe Dam, which was submerged under eight feet of water from the combination of torrential rain and the release of the dam’s floodgates. Spruce Pine is a major producer of high-quality quartz, a rare but necessary resource for many tech products. Mining companies have been attempting to double their operations in Spruce Pine, but they too have met resistance from local landowners. For some controversial details, see here.

Asheville is also downstream from Lake Lure Dam, which was reported on Sept. 27 to be “at risk of imminent failure” as the river was overtopping the dam. Most heavily affected was Chimney Rock, the town immediately downstream from Lake Lure, known for both its rustic scenery and its lithium mines. The damage was extensive.

According to an Oct. 2 broadcast on WBTV News in Charlotte titled “Lake Lure Dam ‘high hazard’ and needed repairs at time Helene hit,” the dam, completed in 1926, does not meet current state safety requirements. Repairs were ongoing but unfinished. Lake Lure Dam is one of 1,581 dams across the state considered “high hazard,” and according to a 2022 report, North Carolina has 194 high-hazard dams in poor or unsatisfactory condition, meaning they “may require immediate or emergency remedial action.”

The High Cost of Repair

The catastrophic flooding and destruction in western North Carolina has caused a record $53 billion or more in damages and recovery needs, according to North Carolina Gov. Roy Cooper’s administration. The storm and its aftermath caused 1,400 landslides and damaged over 160 water and sewer systems, at least 6,000 miles of roads, more than a thousand bridges and culverts, and an estimated 126,000 homes. Some 220,000 households are expected to apply for federal assistance.

Whether the federal government will have the funds, and how long it will take residents and businesses to get assistance, are yet to be determined. On Oct. 2, Homeland Security Secretary Alejandro Mayorkas told reporters that the Federal Emergency Management Agency (FEMA) did not have enough funding to make it through the hurricane season, which runs to Nov. 30. President Biden said that the more urgent problem now is the Small Business Administration, which provides low interest loans to homeowners (up to $500,000) and businesses (up to $2 million) for rebuilding after disasters. The SBA announced on Oct. 15 that its funds would soon run out and that it was pausing its loan offers to disaster survivors until Congress appropriates additional funds.

Applications for those funds are complicated, and reimbursement can take years — too late for demolished businesses to get back on their feet, or displaced homeowners living in tents on their properties to rebuild.

Failing Dams Are a Nationwide Problem

Dams in poor condition are found not just in Appalachia but across the country. A May 5, 2022 NPR report cites an Associated Press analysis of dams needing repair:

More than 2,200 dams built upstream from homes or communities are in poor condition across the U.S., likely endangering lives if they were to fail. The number of high-hazard dams in need of repairs is up substantially from a similar AP review conducted just three years ago.
There are several reasons for the increased risk. Long-deferred maintenance has added more dams to the troubled list. A changing climate has subjected some dams to greater strain from intense rainstorms. Homes, businesses and highways also have cropped up below dams that were originally built in remote locations. …
The nation’s dams are on average over a half-century old. They have come under renewed focus following extreme floods, such as the one that caused the failure of two Michigan dams and the evacuation of 10,000 people in 2020.
The $1 trillion infrastructure bill signed last year by President Joe Biden will pump about $3 billion into dam-related projects, including hundreds of millions for state dam safety programs and repairs….
Yet it’s still just a fraction of the nearly $76 billion needed to fix the tens of thousands of dams owned by individuals, companies, community associations, state and local governments, and other entities besides the federal government, according to a report by the Association of State Dam Safety Officials [ASDSO].

Less than a year later, the ASDSO announced the release of a new report dated February 2023, stating that the current cost of rehabilitating all non-federal U.S. dams is an estimated $157.5 billion, more than double ASDSO’s estimate from 2022.

Our Neglected National Infrastructure

Repairing dams is only one of a litany of infrastructure needs across the country, including roads, highways and bridges; public transportation; ports, harbors and other maritime facilities; intercity passenger and freight railroads; freight and intermodal facilities; airports; and telecommunication networks. National spending on infrastructure has fallen to its lowest level in 70 years, to 2.5% of the nation’s GDP. That’s half the comparable level in Europe and one-third the level in China. As a result, productivity, investment and manufacturing have collapsed; and we are losing our worldwide competitive edge.

The American Society of Civil Engineers (ASCE) estimated in its 2021 report that $6.1 trillion is needed just to repair our nation’s infrastructure, of which $2.6 trillion is currently unfunded. The gap, which increases the longer the work is put off, is now $2.9 trillion according to the latest ASCE update. Meanwhile, the federal debt is over $34.8 trillion, with the interest tab alone topping $1 trillion annually.

How can infrastructure requirements be met without driving the federal government $3 trillion further into debt? We need some form of off-budget financing. We have done it before, notably when Congress was heavily in debt right after the American Revolution, and when the banking structure had completely collapsed in the Great Depression of the 1930s.

Alexander Hamilton, our first U.S. Treasury secretary, developed the national infrastructure bank model used by many other countries today. Winning our freedom from Great Britain left the country with what appeared to be an unpayable debt. Hamilton traded the debt along with a percentage of gold for shares in the First U.S. Bank, paying a 6% dividend. This capital was then leveraged many times over into credit to be used specifically for infrastructure and development. The Second U.S. Bank, based on the same model, funded the vibrant economic activity of the first decades of the new country.

Today, virtually our entire circulating money supply is created by banks in this way when they make loans. The new money is not inflationary so long as it creates new goods and services, allowing supply to rise with demand and keeping prices stable. The new money is liquidated when the loans are paid off with profits from sales.

In the 1930s, Roosevelt’s government pulled the country out of the Great Depression by repurposing an agency created under President Hoover into a lending machine for development on the Hamiltonian model. The Reconstruction Finance Corporation was an off-budget source of revenue, allowing the government to build infrastructure all across the country and fund a world war while actually turning a profit. Many of today’s dams were built with that credit, but they are nearly a century old. They need an upgrade, which can be financed by a national infrastructure bank on the same model. A fuller discussion is here.

HR 4052 (formerly HR 3339), titled “The National Infrastructure Bank Act of 2023,” is currently before Congress and has 40 sponsors. It has been endorsed by dozens of legislatures, city and county councils, and many organizations. Like the First and Second U.S. Banks, it will be a depository bank capitalized with existing federal securities held by the private sector, for which the bank will pay an additional 2% over the interest paid by the government. The bank will then leverage this capital into roughly 10 times its value in loans, as all depository banks are entitled to do. The bill proposes to fund $5 trillion in infrastructure capitalized over a 10-year period with $500 billion in federal securities exchanged for preferred stock in the bank. Like the RFC, the bank will be a source of off-budget financing, adding no new costs to the federal budget. For more information, see https://www.nibcoalition.com/.

State-owned Banks

Leveraging available funds into new credit-dollars for disaster relief can also be done locally at the state level. The possibilities are illustrated by the century-old Bank of North Dakota, currently our only state- owned bank. The BND’s emergency capabilities were demonstrated in 1997, when record flooding and fires devastated Grand Forks, North Dakota. The town and its sister city, East Grand Forks on the Minnesota side of the river, lay in ruins. Floodwaters covered virtually the entire city and took weeks to fully recede. Property losses topped $3.5 billion.

In NC, FEMA was criticized for still being absent from recovery efforts a week after the Helene emergency was declared, too late for people trapped in rivers or under debris who could be reached only by helicopter. In North Dakota by contrast, the response of the state-owned bank was immediate and comprehensive.

Soon after the floodwaters swept through Grand Forks, the BND was helping families and businesses recover. The bank quickly established nearly $70 million in credit lines – to the city, the state National Guard, the state Division of Emergency Management, the University of North Dakota in Grand Forks, and for individuals, businesses and farms. It also launched a Grand Forks disaster relief loan program and allocated $5 million to help other areas affected by the spring floods. Local financial institutions matched these funds, making a total of more than $70 million available.

Besides property damage, flooding swept away many jobs, leaving families without livelihoods. The BND coordinated with the U.S. Department of Education to ensure forbearance on student loans; worked closely with the Federal Housing Administration and Veterans Administration to gain forbearance on federally backed home loans; established a center where people could apply for federal/state housing assistance; and worked with the North Dakota Community Foundation to coordinate a disaster relief fund, for which the bank served as the deposit base. The bank also reduced interest rates on existing Family Farm and Farm Operating programs. Families used these low-interest loans to restructure debt and cover operating losses caused by wet conditions in their fields.

The city was quickly rebuilt and restored. Remarkably, no lives were lost, vs. an official death toll to date in North Carolina of 98, thought to actually be much higher. Grand Forks lost only 3% of its population to emigration between the 1997 floods and 2000, while East Grand Forks, right across the river in Minnesota, lost 17% of its population.

Small businesses are now failing across the country at increasingly high rates. That means layoffs, need for more government assistance, lower productivity, and higher taxes. But that’s not true in North Dakota, which was rated by Forbes Magazine the best state in which to start a business in 2024. On Oct. 2, Truth in Accounting’s annual Financial State of the States report rated North Dakota ND #1 in fiscal health, with a budget surplus per taxpayer of $55,600.

Meanwhile in Helene-ravaged Appalachia

Publicly-owned state and federal banks are possibilities for future disasters, but they will be too late for the flood victims of Western North Carolina and Eastern Tennessee. Survivors’ moods have been lifted in the meantime by the extraordinary generosity of local and out-of-state volunteers, who were on the ground immediately with supplies, equipment and labor.

But it has been a month, supplies are falling off, and the need is still great. According to a podcast titled “Helene VICTIMS need THESE 5 things One Month Later!,” 98% of businesses are still open; but they are largely based on tourism, and tourists have been scarce because the news media have featured the disaster areas to the exclusion of the small surrounding towns that are still functional, beautiful and welcoming visitors. First on that podcaster’s list of needs was prayer.

People whose houses have been lost are camping on their land, trying to hang onto properties that in some cases have been in their families for generations. With winter coming, they need heavy duty camping equipment— winter tents, winter sleeping bags, small propane tanks. Other supplies for which there is particular need are food and water, cold and flu medicines, and first aid kits.

Though the situation is still dire for many, an Oct. 31 wrapup from Gov. Roy Cooper and country music star Eric Church, following a visit to the state’s mountain area, was hopeful. So, too, is this story told with soul: HURRICANE HELENE — A Love Letter To Appalachia ♡.

____________________________

This article was first posted as an original to ScheerPost.com. Ellen Brown is an attorney, founder of the Public Banking Institute, and author of thirteen books including Web of Debt, The Public Bank Solution, and Banking on the People: Democratizing Money in the Digital Age. She also co-hosts a radio program on PRN.FM called “It’s Our Money.” Her 400+ blog articles are posted at EllenBrown.com.

Liberal Los Angeles DA Ousted

2024-11-07T13:11:00.008-06:00

George Soros’s puppet Los Angeles County Dist. Atty. George Gascón failed his reelection on Tuesday when city residents decided to choose someone who would make their town safe again, Nathan Hochman.

Los Angeles Times reported that Hochman defeated Gascón by a wide margin (23-point lead based on early returns).

“The rightward shift across America last night is heartbreaking. Democrats have a long road ahead, but the work is more vital than ever, and our commitment will not waver,” Gascón said, according to the news source.
“I’m deeply proud of what we’ve accomplished over the past four years and grateful to the communities who have been and will always be the heart of criminal justice reform,” he added.

Hochman released a statement on Twitter on Wednesday after winning the election.

“The voters of Los Angeles County have spoken and have said enough is enough of D.A. Gascon’s pro-criminal extreme policies; they look forward to a safer future. As D.A., I look forward to representing all of the people, whether they voted for me or not, since their safety will be my responsibility,” he wrote.

The voters of Los Angeles County have spoken and have said enough is enough of D.A. Gascon’s pro-criminal extreme policies; they look forward to a safer future. As D.A., I look forward to representing all of the people, whether they voted for me or not, since their safety will be…
— Nathan Hochman (@NathanHochmanDA) November 6, 2024

Later, on the same day, Hochman published another social media post, stating he would spend the entire Wednesday being interviewed by journalists.

“I was happy to speak with Phillip Palmer this morning on ABC7 about our historic win in last night’s DA election. I have a full day of media interviews lined up and look forward to sharing my plans for the office with the residents of L.A. County,” he wrote.

I was happy to speak with Phillip Palmer this morning on ABC7 about our historic win in last night’s DA election. I have a full day of media interviews lined up and look forward to sharing my plans for the office with the residents of L.A. County. pic.twitter.com/TgBYX29Iql
— Nathan Hochman (@NathanHochmanDA) November 6, 2024

Child abuse prosecutor Jonathan Hatami also congratulated Hochman, adding that now people who live in Los Angeles would be able to live in a safe city again.

“There are still votes to be counted but I believe the 4-year reign of George Gascón is finally over. Gascón will go down as the worst DA in LA history,” he wrote.
“I want to congratulate @NathanHochmanDA on becoming the District Attorney of Los Angeles County.”

Hatami also noted that he is “ready to work” with Hochman and “continue [his] service & leadership to our great LA community by making sure all of us, especially our children, families and vulnerable members, are safe.”

There are still votes to be counted but I believe the 4-year reign of George Gascón is finally over. Gascón will go down as the worst DA in LA history.

Even though it has been one of the most difficult 4 years of my professional life where I continue to go to work every single…
— jonathanhatami (@jonathanhatami) November 6, 2024

Courtesy of Tyler Durden, founder of Zerohedge.com

Could America Have a French-Style Revolution?

2023-12-12T12:43:00.008-06:00

Combine all these factors and the result is a potentially volatile mixture awaiting a catalyst.

In the past, I reckoned the odds of America experiencing a revolution akin to France 1789 were low due to the different political, economic and cultural conditions present then and now, but recently I've considered the possibility that America's extremes of wealth, income and power inequality are a powder keg awaiting ignition.

By French-Style Revolution I don't mean a violent overthrow of the ruling elite as much as a tumultuous reset of how resources and power are distributed. Systems become vulnerable to such resets when they become highly asymmetrical in how they distribute resources and power, and rigid in their defense of the extreme inequality of the distribution.

The fundamental source of democracy's stability is the dynamic competition of various interests and the dynamic equilibrium of the three branches of the state each balancing the others by restraining the dominance of any one branch or interest.

But extremes of inequality undermine this stability, as the wealthiest elites now bring such a preponderance of wealth to bear that each of the three branches of the state are now beholden to the interests of the few, leaving little recourse to the many.

When the agenda and narratives have been shaped by the wealthiest elites' foundations, think tanks, corporate PR and lobbyists, then electing different representatives has little effect on the power structure.

The masses can still influence cultural / social policies by voting in a liberal or conservative slate, but the distribution of wealth, power and resources remains unchanged.

As wealth and power are concentrated into ever fewer hands, the mythology of broad-based access to prosperity has vastly expanded the pool of second-tier elites who feel entitled (via implicit promises made by the system) to their fair share of income, wealth and power--financial security and political agency, i.e. a say in public decisions.

These second-tier elites are primarily university graduates and the offspring of upper-middle class households who have been led to expect a secure slot in the upper reaches of the economy or state is a birthright gained by their education and class.

That there are no longer enough slots for this class means those left out constitute the raw material of a potently dissatisfied and potentially angry political class. Historian Peter Turchin presents this as the result of the overproduction of elites, a dynamic he has traced back to previous eras of tumultuous upheaval.

Another common factor driving the masses to revolt is when the essentials of life are no longer affordable or available in sufficient quantity. Historian David Hackett Fischer has documented the perilous impact of inflation, i.e. the collapse of the purchasing power of wages.

Yet another potentially explosive factor is the supreme confidence of the wealthiest elites that the system they rule could ever turn against them or crumble beneath their feet--in a word, a hubris as extreme as their wealth and power. The resignation of the masses and the ease of distracting them with ginned-up controversies and crises and consumerist novelties has fed elite confidence that their supremacy is unassailable.

This hubris leads to the elite becoming tone-deaf to their own excesses and the instability their excesses are generating within the system, an instability that's currently hidden beneath the resignation and distraction of the masses and the mute frustration of the second-tier elites facing lifetimes of insecurity.

Another factor is the promises made by the state generations ago can no longer be met without creating new money on a scale that guarantees destabilizing inflation. This new money is issued as Treasury bonds which are purchased for income by the wealthy, further exacerbating wealth and income inequality.

The power elite are incapable of demanding sacrifices of the wealthy as the prime directive of the status quo is to defend the current asymmetry of wealth and power. This undermines the collective consensus needed to take the collective action needed to reset the system.

Combine all these factors and the result is a potentially volatile mixture awaiting a catalyst. The confidence of the status quo that it is essentially omnipotent (the Federal Reserve will always save us, etc.) and eternal is itself a factor in the mix.

The key factor is the rigidity or flexibility of the power structure. If the structure is incapable of resetting to a more flexible, symmetric distribution of power as resources, it will come apart as pressures mount.

Courtesy of Charles Hugh Smith at of Two Minds

Surging Anti-woke Backlash in Universities

2023-12-11T19:27:00.001-06:00

The dam has finally burst.

Most Americans of every political stripe gagged last week seeing three leading university presidents’ Congressional testimony on anti-semitism. After years of punishment and censorship of centrist and conservative viewpoints at their schools and others across America, none of the three could say that calls for genocide against Jews violated their schools’ codes of conduct.

America saw through the hypocrisy — and many saw its root cause as well, which is the diversity equity and inclusion (DEI) bureaucracy dominating most schools. The left’s Fareed Zakaria, writing at CNN, was among them, putting it this way:

People sense the transformation…. Having coddled so many student groups for so long, university administrators found themselves squirming…. What we saw in the House hearing this week was the inevitable result of decades of the politicization of universities. Out of this culture of diversity has grown the collection of ideas and practices that we have all now heard of — safe spaces, trigger warnings, and micro aggressions…. America’s top colleges are no longer seen as bastions of excellence but as partisan outfits, which means they will keep getting buffeted by these political storms as they emerge.

Universities face a reckoning. The University of Pennsylvania’s president already lost her job over it. Others likely will follow. The University of Wisconsin perhaps figured this out. On Friday, it announced a deal with critics that would freeze hiring for diversity positions through the end of 2026 and shift at least 43 diversity positions to focus on “student success.” The system also would eliminate any statements supporting diversity on student applications. However, the Board of Regents rejected the deal on Saturday.

Perhaps most impactful, donors have revolted, and if anything gets the attention of university bureaucrats it’s money.

It’s time for universities to do what’s right, which happens also happens to be in their own interest.

Among Illinois schools, one maintains a policy that most conspicuously enforces the culture of DEI oppression Zakaria described. That’s the University of Illinois Urbana-Champaign with its mandatory DEI loyalty policy for faculty. It’s called Communication 9 and was finalized earlier this year. It’s summarized here and detailed here. Compliance is “optional” currently but becomes mandatory in two years.

It’s particularly egregious because it goes further than demanding agreement with DEI principles: It mandates DEI work and requires annual statements demonstrating that work. Going forward evaluations, promotions and tenure decisions must be based in part on the adequacy of the DEI work performed, Communication 9 says. It doesn’t matter what field one is in; all faculty are bound by it.

“Engage in DEI activism, or else.” That’s how The College Fix put it in their headline when Communication 9 was in draft last year.

The policy even mandates use of woke language in the required personal DEI statements:

“Candidates should be sensitive about the use of language that perpetuate prejudices and words that apply external value judgments that minimize the experiences, strengths, and contributions of individuals and/or groups historically marginalized and/or underrepresented in academia.”

“It is important that candidates avoid statements that overgeneralize or make sweeping claims about a group of people,” says the policy.

(It’s safe to assume, however, that wouldn’t apply to claims like “Whiteness prevents white people from connecting to humanity,” which we hear from DEI champions like Ingram X. Kendi.)

Communication 9 begs for litigation as a violation of the First Amendment, as we wrote when it was in draft. It’s a classic example of unconstitutional “forced speech.” Two First Amendment experts we spoke to compared it to unconstitutional loyalty oaths required during the years of McCarthyism.

Ending Communication 9 would also help cut some of the DEI administrative bloat that plagues U of I, which is among the worst on that count. It ranks seventh highest in the nation with 71 DEI staff, according to a Heritage Foundation study we reported on last year.

“A review of salary data shows that the universities of Michigan, Maryland, Virginia and Illinois, plus Virginia Tech, boast some of the highest-paid DEI staffers at public universities,” said a Fox News column on that study.

“These institutions’ top diversity employees earn salaries ranging from $329,000 to $430,000 – vastly eclipsing the average pay for the schools’ full-time tenured professors.” Sean C. Garrick, vice chancellor for diversity, equity and inclusion at the University of Illinois, earned nearly $330,000 annually, salary disclosures showed, according to the Fox column. But the average Illinois full-time professor salary hovers only around $152,000, Fox said.

Many other universities require DEI statements and have bloated DEI staffs like UIUC on which they, too, should backtrack. But UIUC seems among the worst with its Communication 9, and it should lead.

UIUC is a superb school in most other ways and an exceptionally valuable research institution. It, along with some of our other universities, are priceless Illinois assets.

They better act before they face the wrath of unhappy donors and Americans fed up with DEI excess.

Courtesy of Tyler Durden, founder of Zero Hedge

Fundrise is Democratizing Venture Capital Investing

2023-12-11T19:02:00.002-06:00

Fundrise Innovation Fund Provides Retail Entry to Hot Startups

Venture capital deal flow has historically concentrated among elite institutional investors, blocking everyday individuals from potentially lucrative private company ownership. However, Fundraise, an established fintech property platform, recently launched an Innovation Fund to dismantle these barriers. By allowing investments as low as $10, Fundrise intends to open venture-style returns to ordinary investors.

Leveraging Platform Experience and Scale

As a proptech leader itself, Fundrise enjoys key partnerships and business experience to assess potential equity deals. Its first Innovation Fund investments in proptech firms Jetty and Inspectify were existing rental property partners. This background provides unique diligence into targeted verticals like real estate technology, artificial intelligence, and data infrastructure.

Additionally, by pooling smaller investments from individuals, Fundrise gains an advantage through its scale. With over 2 million members, portfolio companies gain valuable exposure, sales leads, and perceived validation. Fundrise touted 100 new business opportunities for Inspectify immediately following its disclosed investment.

Filling Post-Correction Capital Void

The 2022 venture market correction cleared space for new capital sources like the Innovation Fund. As speculative excess washed out and previous investors pulled back, Fundrise filled demand from quality companies still seeking to bolster balance sheets. Taking minority stakes then allows for upside capture as markets stabilize.

Early Stage Bets Plus Data Heavyweights

Currently housing 19 assets, the Innovation Fund portfolio combines early bird investments into emerging startups and larger allocations to leading late-stage private companies. On the established side, it holds an 8% stake in big data disruptor Databricks and around 5% in software leader ServiceTitan.

Meanwhile, the fund seeds younger firms like Jetty and Inspectify with ownership bets in the 1-2% range. Across these public and private players, the fund targets outsized longer-term payoffs.

Access Without Lockups

Traditionally, venture capital and private equity imposed multi-year investment horizons on investors. However, the perpetually open-ended Fundrise model allows entry and exit flexibility akin to public market mutual funds. By purchasing direct ownership stakes in private companies, the fund provides investors with continual fair value estimates and return transparency missing from other VC players.

Gaza’s next tragedy: Disease risk spreads

2023-11-22T14:30:00.001-06:00

After more than a month of being subjected to sustained bombing, the besieged people of the Gaza Strip are now confronted with another threat to life: disease.

Overcrowding at shelters, a breakdown of basic sanitation, the rising number of unburied dead and a scarcity of clean drinking water have left the enclave “on the precipice of major disease outbreaks,” according to the World Health Organization.

As an expert in Palestinian public health systems who wrote about the many relationships between war and health for my forthcoming book “How War Kills: The Overlooked Threats to Our Health,” I believe that the looming crisis cannot be underestimated. The easy spread of infectious disease in wartime conditions can be just as devastating as airstrikes to health and mortality – if not more so. Health care services in Gaza – already vulnerable prior to the Israeli bombing campaign – have essentially no capacity to cope with a major outbreak.

Disease already rampant

History has proved time and again that war zones can be a breeding ground for disease. Anywhere impoverished and underresourced people crowd for shelter or access to resources – often in facilities with inadequate living conditions, sanitation services or access to clean water – is prone to the spread of disease. This can be through airborne or droplet transmission, contaminated food or water, living vectors like fleas, mosquitoes or lice, or improperly cleaned and managed wounds.

In any situation of armed conflict or mass displacement, the threat of infectious disease is among the primary concerns of public health professionals. And from the outset of the Israeli bombing campaign, experts have predicted dire health consequences for Gaza.

After all, the Gaza Strip had fragile health and water, sanitation and hygiene sectors long before the Oct. 7, 2023, Hamas attack that killed 1,200 Israelis and prompted the retaliatory airstrikes. The health system of Gaza, one of the most densely populated places in the world, has long been plagued by underfunding and the effects of the blockade imposed by Israel in 2007.

Waterborne illness was already a major cause of child mortality – the result of the contamination of most of Gaza’s water. In early 2023, an estimated 97% of water in the enclave was unfit to drink, and more than 12% of child mortality cases were caused by waterborne ailments, like typhoid fever, cholera and hepatitis A, that are very rare in areas with functional and adequate water systems.

Other forms of infectious disease spread have also been reported in recent years. Gaza had experienced several previous outbreaks of meningitis – an inflammation of the tissues surrounding the brain and spinal cord typically caused by infection – notably in 1997, 2004 and 2013.

In late 2019, a small outbreak of measles – a highly contagious, airborne virus – was reported in Gaza, with almost half of reported cases in unvaccinated people. Despite a relatively high vaccination rate in Gaza generally, these gaps in vaccination and the inability to respond quickly to outbreaks were attributed by the WHO to “the continuous socio-economic decline since 2009, conflict, and closure.”

And the COVID-19 pandemic hit the Gaza Strip hard, exacerbated by the Israeli blockade that prevented or delayed the import of vital personal protective equipment, testing kits and vaccines.

A system overwhelmed

The vulnerability of Gaza’s health care meant that from the outset of the latest conflict, organizations such as the WHO voiced concern that the violence and deprivation could quickly overwhelm the system.

There are several ways war in general, and the conflict in Gaza in particular, accelerates and promotes infectious disease risk.

Almost concurrently with the start of the bombing campaign, Israel imposed siege conditions on Gaza. This prevented the import of fuel needed to run generators for vital infrastructure. Generators are needed because Israel shut off electricity to Gaza.

As fuel has essentially run out in recent days, this has meant no power for desalination plants or for solid waste collection. As a consequence, many people have been forced to consume contaminated water or live in conditions where living carriers of disease, like rodents and insects, thrive.

Even basic cleaning supplies are scarce, and equipment used to sterilize everything from medical equipment to baby bottles is inoperable.

These unhygienic conditions come as hundreds of thousands of Palestinians in Gaza attempt to flee the bombing to the few remaining places left to shelter. This has caused massive overcrowding, which increases the risk of an infectious disease outbreak.

Children especially vulnerable

Already, the WHO has reported worrying trends since mid-October 2023, including more than 44,000 cases of diarrhea in Gaza.

Diarrhea is a particular risk for young children who are prone to profound dehydration. It represents the second-leading cause of death worldwide in children younger than 5 years of age. Half of the diarrhea cases reported in Gaza since the Israeli bombing campaign began have been in children under 5.

Meanwhile, nearly 9,000 cases of scabies – a skin rash caused by mites – have been reported, as have more than 1,000 cases of chickenpox.

More than 70,000 cases of upper respiratory infections have been documented, far higher than what would be expected otherwise. These are just cases that were reported; undoubtedly, more people who were unable to get to a health facility for diagnosis are also sick.

Reports of the spread of chickenpox and upper respiratory infections like influenza and COVID-19 are particularly dangerous considering children’s vaccination schedules are being highly disrupted by conflict. With health services overstretched and the mass movement of families, young children and newborns are likely going without vital, lifesaving inoculations just as winter – the peak season for respiratory infections – arrives.

Upper respiratory infections are also exacerbated by the amount of dust and other pollutants in the air due to the destruction of buildings during bombing.

Then there is the direct impact of the bombing campaign. A lack of antibiotics – due to both the siege and the destruction of health facilities – means physicians are unable to adequately treat thousands of patients with open wounds or in need of medical operations, including amputations.

More death and suffering

Increasingly, doctors are even running out of wound dressings to protect injuries from exposure. Poor infection prevention controls, high casualty rates and high concentrations of toxic heavy metals, among other factors, are leading to reports of antimicrobial resistance, which occurs when bacteria and viruses evolve over time to no longer respond to antibiotics and other antimicrobial medications. This has the potential to lead to health issues long after the bombing stops. Similar trends were also seen in Iraq, where antimicrobial resistance rates remain high despite the peak of bombing campaigns ending many years ago.

And with many bodies laying under rubble, unable to be retrieved, and the necessity of digging multiple mass graves near sites where people are sheltering, there is also increased risk of disease arising from an inability to adequately dispose of the dead.

While the images and photos from Gaza of areas and people that have been bombed are devastating and have caused a massive death toll – at least 12,000 by mid-November, according to Gaza health authorities – the rapid spread of infectious disease has the ability to cause even greater mortality and suffering to a population reeling from weeks of sustained bombing.

Courtesy of by Yara M. Asi, Assistant Professor of Global Health Management and Informatics, University of Central Florida via The Conversation