Will the New Global Middle Class Adopt American-Style Bourgeois Values?

David Brooks discusses the new global middle class in an interesting column prompted by a new version of Hans Rosling's viral TED video about income growth and life expectancy. Brooks is usually good when he sticks to his forte, which is sociology, but his attempt to sell the U.S. model as the future for the new middle-class is to stretch it too far, way too far.

To be middle class is to have money to spend on non-necessities. But it also involves a shift in values. Middle-class parents have fewer kids but spend more time and money cultivating each one. They often adopt the bourgeois values — emphasizing industry, prudence, ambition, neatness, order, moderation and continual self-improvement. They teach their children to lead different lives from their own, and as Karl Marx was among the first to observe, unleash a relentless spirit of improvement and openness that alters every ancient institution.

(...)
Americans could well become the champions of the gospel of middle-class dignity. The U.S. could become the crossroads nation for those who aspire to join the middle and upper-middle class, attracting students, immigrants and entrepreneurs. (David Brooks: Ben Franklin’s Nation)

This is a narrow American perspective, "bourgeois values — emphasizing industry, prudence, ambition, neatness, order, moderation and continual self-improvement." It excludes other values that have grown all over the world as more and more people are entering the middle class, values such as social welfare systems, universal health insurance, long paid vacations, paid maternity leave, abolishment of death penalty, and so on. I don't know if Ben Franklin would have objected to parental leave, but that doesn't really matter. For all their glory, the Founding Father's had their limits (as well as their slaves). The new global middle class will of course get "Americanized" as they become relatively wealthy, but that doesn't mean that they will give up their traditional culture or preferences for social security and a more humane society. U.S. observers often think they see themselves whenever somebody abroad opens a can of soda, but that is not always the case!

Hans Sandberg

Here is Hans Rosling's presentation:

Living Standards in the U.S. and Europe are Much Closer than They Appear to Be

If you compare the incomes in Europe and the U.S., it looks like people in Europe are much worse off than people in the U.S., but this could be an illusion according to a a research paper for the National Bureau of Economic Research (NBER) in the U.S. written by Charles I. Jones and Peter J. Klenow. The authors state that:

"...living standards in Western Europe are much closer to those in the United States than it would appear from GDP per capita. Longer lives with more leisure time and more equal consumption in Western Europe largely offset their lower average consumption vis a vis the United States."

What Will the Tea Party Folks Say When They Wake Up To a 2nd Stimulus Package?

As much as I am frustrated by Obama's seemingly unbreakable hope in "bipartisan" goodwill, I wonder if it might not be the Republicans that will have to pay the largest political price for today's "deal". What are they going to tell the tea party crowd now that they have betrayed the deficit fanatics. I suspect that many tea party people will go after Boehner & Co for adding another trillion dollars to the deficit. However ill designed the compromise is, you could say that it is a second stimulus package of sorts, as David Leonhard points out in New York Times.

Hans Sandberg

Call the Republican Bluff by Letting All of the Bush Era Tax Cut Expire!

Everybody (on TV at least) talks about the disaster that would strike if the Bush tax cuts were to expire, but you rarely hear any of the pundits specify how much people would have to pay in tax if the entire unfinanced tax cut were allowed to expire as it was intended to do. The bottom half of the population would have to pay between $5 and $836 more in tax in 2011. Big deal! The 3,4 % making 200-500.000 would have to pay $7,484, which is peanuts considering their income and the fact that their tax break for 2004-2010 was $54,707. Why all this hysteria? Call the bluff, and let the whole thing expire!

For more data, check out this link.

This in from Arizona: "Yes, We Can!" (Let You Rot and Die!)

Here is a story that is NOT written by Charles Dickens in time for Christmas:

Francisco Felix, 32, a father of four who has hepatitis C and is in need of a liver, received news a few weeks ago that a family friend was dying and wanted to donate her liver to him. But the budget cuts meant he no longer qualified for a state-financed transplant. He was prepared anyway at Banner Good Samaritan Medical Center as his relatives scrambled to raise the needed $200,000. When the money did not come through, the liver went to someone else on the transplant list. “I know times are tight and cuts are needed, but you can’t cut human lives,” said Mr. Felix’s wife, Flor. “You just can’t do that.”

To which all stern scroogelike born-again or just born budgetcutters join in a fiscally conservative Christmas Carol:
YES WE CAN!
(Aren't their graveyards to take care of those who can't take care of themselves?)

David Kessler Talks About Fat, Food and Health

Also watch Charlie Rose's interview with David Kessler

The Incredible Increase in Inequality in the USA and How it Happened

Författarna till “Winner-Take-All Politics: How Washington Made the Rich Richer — and Turned Its Back on the Middle Class” presenterar sin bok.

The 111th Congress Delivered, Despite Republican Belligerence and Tea Party Agitation

Here is a summary from the Think Progress:

When Speaker Nancy Pelosi (D-CA)   gaveled in the 111th Congress in January 2009, the country faced severe problems, none more pressing than a cratering economy. The unemployment rate had skyrocketed since 2007 with no signs of relenting, and the private sector needed a jump start. In its first month, the 111th Congress passed the American Recovery and Reinvestment Act, which President Obama quickly signed into law. The non-partisan CBO  found that the bill created 3.7 million jobs, and GDP and manufacturing have both grown steadily over the past year. The bill also included significant tax cuts. The Tax Policy Center  found that the tax cuts contained in the stimulus bill saved an average of $1,179 for 96.9 percent of U.S. households in 2009. Congress later passed, and Obama signed, the Small Business Jobs Act of 2010 , which cut taxes by $12 billion for small businesses and leveraged $300 billion in private sector lending for small businesses. Congress also passed -- and Obama signed -- a $26 billion   jobs bill to save over 300,000 teachers, police, and other public workers from layoffs. Congress provided additional stimulus for the economy with the   Hire Act, which created up to 300,000 jobs by starting a payroll tax holiday and other tax credits for businesses that hire unemployed workers, and with an extension to unemployment benefits  for those still unable to find work in a tough economy. Aside from these major steps to jump-start the economy, the 111th Congress also reformed several dysfunctional institutions. The   Affordable Care Act transformed the country's health care system, by reforming health insurers' discriminatory practices, expanding Medicaid coverage, and income-based help for health care, and creating health insurance exchanges where consumers can shop for high-value coverage. The Wall Street reform bill  ended taxpayer-funded bailouts of large financial institutions, created numerous regulations to prevent irresponsible behavior by such institutions, and created the Bureau of Consumer Financial Protection to serve as a Wall Street watchdog. The 111th Congress also reformed the student loan industry by passing a bill  that marked the largest investment in college aid in history: it increased Pell Grants, strengthened community colleges, and ended wasteful subsidies to private lenders. The bill is  expected to pump $100 billion into the economy thanks to the increased earnings of new students who can take advantage of the reforms. Congress also passed the  Lily Ledbetter Fair Pay Act, which restored basic protections against pay discrimination towards women.

Santity Restored, at Least Temporarily

It was a great rally, and the fact that it was almost three times larger than Glen Beck's rally in late August, gives you a little hope for the american part of humanity. It was not a rally about nothing, but a rally about respect, about tolerance, for believers and unbelievers of all strands, for conservatives, independents and progressives, i.e. for human decency.
There was also an underlying critique, and it was geared towards the political coverage in our 24/7 news cycle, where "if it screams, it leads" has repaced the old adage "if it bleeds, it leads."

Alex Altman, from Time Magazine, reports:
"The press is our immune system," Stewart said. "If it over-reacts to everything, we get sicker, and maybe eczema." If you listened to the attendees, however, the point of coming was simple: "to have fun," as one D.C. resident (who didn't want to give her name because she worked for the federal government) put it. Marsha Eck, a 54-year-old teacher from South Bend, Ind., expressed hope that the gathering could provide "a model for a new kind of conversation." A trio of teenagers from Downington, Pa., who came with their high-school civics class and wore matching lime-green t-shirts so that their teacher could spot them, explained that the rally was important because "everybody is yelling but nobody listens to each other."

My youngest son Alex enjoying the rally.

Jon Stewart Rally Attracts Estimated 215,000


Why Extreme Income Inequality Hurts the Economy

For a short and clear discussion on income inequality, read this article by professor Robert H. Frank:

Income Inequality: Too Big to Ignore

"Recent research on psychological well-being has taught us that beyond a certain point, across-the-board spending increases often do little more than raise the bar for what is considered enough. A C.E.O. may think he needs a 30,000-square-foot mansion, for example, just because each of his peers has one. Although they might all be just as happy in more modest dwellings, few would be willing to downsize on their own.

People do not exist in a social vacuum. Community norms define clear expectations about what people should spend on interview suits and birthday parties. Rising inequality has thus spawned a multitude of “expenditure cascades,” whose first step is increased spending by top earners."

***

"The middle-class squeeze has also reduced voters’ willingness to support even basic public services. Rich and poor alike endure crumbling roads, weak bridges, an unreliable rail system, and cargo containers that enter our ports without scrutiny. And many Americans live in the shadow of poorly maintained dams that could collapse at any moment.

ECONOMISTS who say we should relegate questions about inequality to philosophers often advocate policies, like tax cuts for the wealthy, that increase inequality substantially. That greater inequality causes real harm is beyond doubt.

But are there offsetting benefits?

There is no persuasive evidence that greater inequality bolsters economic growth or enhances anyone’s well-being."

Ever Heard of Hericsson Mobile, the Chinese Cellphone Manufacturer?

A Chinese company has brazenly copied the Swedish telecom giant Ericsson’s name and logo, but added an H to the name. Hericsson Mobile Technology says on its website that it “is one of the leading manufacturers of cellphone in Shenzhen, China…” and that it distributes its phones in North- and South America, Europe, the Middle East, Asia and Australia. “This is not an Ericsson affiliated site,” says Kathy Egan, vice president, external communications at Ericsson North America after we shared the news about Hericsson.

“Hericsson” writes on its website that it “is specializing in designing and manufacturing of quad-band dual SIM dual standby TV mobile phones , also 3G, Smart Phones with WIFI and GPS, dual mode GSM/CDMA mobile phones and Windows Mobile 6.5, also with Google Android. Since established in 2005, we have been always devoting to keep pace with first-class technology and management of the world. Currently, we have several international advanced production lines.”

We called the company, but nobody picked up the phone. It says on its website that it has a “high-tech manufactur park base in LongGang district,We have up to 1,000 employees”, and that it has a R&D team of over 20 engineers. They claim that they “keep close cooperation with world famous telecom company and IC developing companies,RF and software for all our products are from Gualcomm, marvle, MTK，Infineon and Spreadtrum.” (It is hard to know if the referring to Qualcomm, or Gualcomm, which seems to be a software tool. Spredtrum Communications is a Shanghai based RF company.)

The Hericsson corporate culture is – according to the site – “engaged in more convenient for entertainment, information, and communication, we provide products for mobile handset integrated with fashion, simplicity, and function.”

Quality is of course a core value and priority: ”Any idea or action that risks delivery of quality is totally wrong. High quality rises from continuing creative management and technology innovation. Customers will benefit from best quality with lowest cost only if we work hard to cut down cost or improve quality constantly.”

What is Hericsson? We don't know yet, but it is quite possible that it is an Chinese startup that "borrowed" Ericsson's name and logo as they are well-known in China. Most Chinese speak little or no English and are not all that familiar with the latin alphabet, why slight modifications can dupe consumers, making them think that they are buying an Ericsson phone, when in fact they are buying a Hericsson phone.

“Our Corporate Legal and Brand management departments are presently looking into the situation to decide upon the right action,” says Ericsson's Kathy Egan. It's going to be interesting to see what happens now that Ericsson's lawyers take a closer look at Hericsson.

Hans Sandberg

PS. The plot thickens! It seems that Hericsson has been around for a long time. I found a press release from Unitech Industries, Inc., dated Scottsdale, Arizona, March 27, 1995 (!!!) and distributed by PRNewswire.

"Unitech Industries, Inc. (Nasdaq-NNM: UTII) said today that it has completed the first phase of its acquisition of Solidex and its sister company Hericson International Ltd. with the purchase of the net assets of Solidex for $3.4 million in cash. Solidex is a California-based distribution company that markets video, wireless communication and computer accessories.

According to John Londelius, president and chief executive officer, Unitech expects later this month to complete the acquisition of Hericson International, Ltd., a Hong Kong-based engineering and manufacturing company of video cellular and computer accessories. The company believes that based on 1994 revenues the Solidex acquisition could add approximately $17 million to Unitech's revenues during the next 12 months, with an additional $8 million in revenue added when the Hericson purchase is completed."

Is this the same Hericsson as the Shenzhen company?

Hans Rosling's TED Talk About Child Mortality

Hans Rosling is wonderful ....makes me proud to be a Swede!

Elite Advice to Jobless Journalists: Go East Young Men, and Women

Tina Brown and Tom Brokaw seems to hav e seen the end of the tunnel for journalists left behind by the combined foreces of the recession and bloggerization of their trade. Move to India.

Here is a quote from Tina Brown as reported by New York Magazine:

"Young journalists [should] go work in India," she said. "There are so many great newspapers in India. I go quite a lot, actually. It has a very vibrant newspaper and magazine culture. There's a lot of energy in Delhi, a lot of newsmagazines. It's a very literary culture, it's great." What if we're staying put, though? "It's a transitional moment for journalists but it's much better, as a journalist, to be young than it is to be 50," she said. "So just wait it out and it'll get good again. I think there's a lot of very good talent coming up, I just worry for them because they have to get the experience. They have to be trained."

Former "NBC Nightly News" anchor Tom Brokaw recommends anybody with a college degree to leave the country once known as the land of opportunity:

"I wouldn't be looking just within our borders for opportunities. I'd be looking to see what the chances are of getting a job in the Middle East, for example. Or in India. Or in China, .... I've talked to a number of very senior American executives who -- so much of their work now is offshore -- say one of the things they need are people who are willing to pack up and go there and become middle managers."

Go East, young men and women! May the force be with you!

Hans Sandberg

The Hidden Skyscraper - Empire State Building

They are mighty, but often hard to see from the street level.

Swedish Bishop: ”We Are Building a Church and a Mosque Under One Roof”

A drawing of the proposed Church and Mosque center
in Nacka, east of Stockholm, Sweden.

We will strengthen a shared feeling of belonging and trust in God’s house by building a Christian church and a mosque under one roof, writes Bengt Wadensjö, a bishop in the Lutheran church of Sweden, in Svenska Dagbladet, a leading Swedish daily. “I want to highlight a completely different image of Sweden,” he writes contrasting this unique project with the fact that the xenophobic Sweden Democrat party won 20 seats in the parliament.

The new joint center of worship will be built in Nacka municipality east of Stockholm, and house a Lutheran church, a Catholic church and an Islamic mosque. Bishop Wadensjö recalls that the leader of the Sweden Democrat party last year claimed that “the Muslims are the biggest foreign threat.” This is however not the case in Nacka, the bishop writes. “We see them as an asset. We have worked for several years … towards integration and living together as good neighbors. (…) For the past few years, we have had a discussion about Nacka’s parish in the /Lutheran/ Swedish church, St. Konrad’s catholic parish in Nacka and the Islamic association in Fisksätra /a suburb/ about building a joint House of God. The people of Nacka are about to get a church and a mosque as good neighbors under one common roof.”

“A model of the planned center of worship shows a mosque and a church side by side, unified by a joint foyer,” he continues. There will be a common space with space for both the Lutheran church and the Roman-Catholic church to follow their separate liturgical traditions, while the mosque will be an open forum for Muslims and friends. “The goal is to make a joint manifestation of shared belonging independent of faith, culture and language,” he writes, adding that there are “ignorant people within both Christianity and Islam,” but rejects the notion that extremists in either side represent either religions.

The proposed religious center in Nacka will be unique, but it is not the first time a church has shared space with a mosque. Bishop Wadensjö points to the Ummayad Mosque as an example from the 7th century. The Grand Mosque of Damascus was originally a Christian basilica dedicated to John the Baptist, but became a dual-use house of worship after the Muslim conquest of Damascus in 634.

“The goal of the project is not to blend the faiths and not to proselytize. It strives to give more chances for people of different religious traditions to meet, contribute to a positive development in Fisksätra and demonstrate that religion can be a unifying force in the local society.” (Fisksätra is a development in Nacka municipality with 7 000 inhabitants, many of which are immigrants.)

“Word history is created in Fisksätra. World peace begins in Fisksätra,” the bishop concludes his article.

Hans Sandberg

Three Visions of the Future of the Book

Fascinating.... and a little scary.

The Future of the Book. from IDEO on Vimeo.

Jacques Brel: Dans Le Port d'Amsterdam

If you love Edith Piaf, you will love Jacques Brel, and vice versa.

What To Think of a Place Where 90 Percent Owns 2 Percent of All Wealth

•The top 10 percent of Americans now earn half of our national income, while the bottom 90% collectively own less than 2 percent of the nation's wealth. There is more income inequality in America than at any time since 1928, when this statistic was first kept.

•61 percent of Americans "always or usually" live paycheck to paycheck, which is up from 49% in 2008 and 43 percent in 2007.

•Approximately 21 percent of all children in the United States are living below the poverty line, which is the highest rate in 20 years.

•Only the top 5 percent of U.S. households have earned enough additional income since 1975 to match the rise in housing costs.

•83 percent of all U.S. stocks are in the hands of just the top 1% of Americans. And the top 1 percent of U.S. households own nearly twice as much of America's corporate wealth as they did just 15 years ago.  

For all its achievements, America still has a long way to go before it can be said that this is a country of fairness and basic equality, where everybody's got a fair chance in the "game" of life. Leo Hindery, Jr. recites these shocking facts in a column about Ariana Huffington's new book Third World America. He is an investor and chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations.

The Big Difference Between the German and the U.S. Economy is Spelled WAR

David Brooks is a reasonably reasonable conservative, and his sociological insights often canny, but his political conclusions are usually off. In his column last Friday, The Parent Model he is trying to twist reality against Obama's stimulus package, but that is absurd. The German economy - like many other European economies - has built-in automatic stabilizers. The Germans didn't need to pass laws to boost the economy as it already has a system in place, which protects jobs and secures people's income and health insurance in a recession. This is not the case in the U.S., making a more forceful government action necessary. The fact that the U.S. is deeper in debt than the Germans is a result of conservative recklessness, especially the Bush tax cuts and the unfunded wars. Which brings us to the probably most consequential difference between the U.S. and Germany.... the war cost. The civilian American economy is undermined by the military expenditures, which perverts its competitiveness and increases the country's reliance on outsourcing.

Good parenting is not going to solve this issue.

Hans Sandberg 

Transforming the American Economy Through Innovation

Taking Green to the Platinum Level at the Empire State Building

The Empire State Building. Photo: Hans Sandberg 2010

The Empire State Building is going through a huge makeover supported by a group that includes, among others, the Clinton Climate Initiative, the Rocky Mountain Institute and the building’s owner, Wien & Malkin. The green retrofit will cut the building’s energy usage by 38 percent, but Skanska USA cut the energy costs for its new office by 57 percent compared to its previous office, reaching the top level of energy efficiency - LEED Platinum.

Elizabeth Heider leads Skanska
USA's Green Council. Photo: Hans Sandberg

We visited the Swedish construction giant’s U.S. headquarters on the 32nd floor of the iconic skyscraper and met with Elizabeth J. Heider, senior vice president at Skanska USA Building, and founder of its Green Council. Heider was recently named one of the top ten women in green building and design by the Green Economy Post, and is also a director on the board of the U.S. Green Building Council (USGBC.)

Heider knows the ins and outs of green construction, and is the first one to admit that “true sustainability is really hard.” Profit is the number one goal for builders and owners of buildings, even more so in a down market. If you can’t show that going green improves the bottom-line, it is harder to make it happen. The first argument you need to win is the business argument. But the good news is that green can be profitable. “We are beginning to see more awareness on the part of the owners, especially institutional owners and those that want to sell buildings to a more sophisticated audience,” she says.

Her passion for the environment was nurtured early on by her mom, who was an earth sciences teacher and one of the initiators of the first Earth Day. Heider started out as an architect, but soon got involved in the business side of construction. During the late 1990s she did research for the General Services Administration (GSA) studying the cost of greening the federal workplace. One result of the research was identifying a 2.5% increase in funding adopted by the Federal Government to achieve their LEED Silver mandate for new construction projects. (LEED is a certification system – Certified, Silver, Gold, and Platinum – developed by the USGBC).

“I entered the whole LEED-green arena from an economic perspective. I’ve done a lot of true value-engineering where the goal is to help owners make informed decisions about initial costs and future value, something that never has been more important than today. In my view, you should consider investing a little bit more upfront to improve the performance of your building, so that you can save big money over time” she says.

“I believe that we need to be good stewards of the environment, but that is my personal opinion, which may or may not be important to the customer,” she says, adding that ”setting aside the environmental benefits, there is a compelling business argument to be made. People want to do what’s right, but it is very difficult to make the commitment if it is prohibitively expensive, or perceived to be so.”

The business issue came up again when Skanska USA decided to move its headquarters from 136 Madison Avenue to the Empire State Building on Fifth Avenue between 33rd and 34th Street.

The building of the iconic 102-story
skyscraper began in March 1931.
Photo: Hans Sandberg

“Our leadership agreed that we could target LEED Platinum if it didn’t cost extra,” she says. “We challenge our customers to shift their perspective from initial cost to life cycle value – so our internal agreement was that the LEED Platinum tenant fit out could cost no more than a conventional fit out - over the life of the 15-year lease.” It was a challenge, but it didn’t stop the team from forging ahead, and any visitor can see the result.

At first glance, the 16,600 square-feet office looks like any modern Manhattan office, but as Heider takes us on a tour, she points out features that make it special. First, there are no closed corner offices hogging the view and keeping the sunlight out. Most private offices are wrapped around the center of the floor, towards the core of the building, with its many elevators and stairways. And where you might have had corner offices, there are open office landscapes. You can walk around the perimeter of the floor with an unobstructed view of Manhattan, and even take a seat on one of the padded file cabinets lining the inside of the outer wall. The key to the design is to let in as much natural light as possible, lowering the need for artificial lighting. And as all offices and conference rooms have walls of glass; the whole floor has a light and airy feel to it.

Another radical change Skanska made was to eliminate the typical dropped ceiling, relocating the ventilation system under a raised floor. If the ceiling had been lowered to make space for air ducts, the top of the windows would have been blocked, obstructing the view and blocking 20 percent of the sunlight windows could otherwise let in. When the project engineers compared electricity consumption before and after the change to the new system with air ducts under the floor, they found a saving of 27 percent. Smart lighting control systems adjust the light levels to take advantage of natural light. Occupancy sensors turn off lights in empty offices. The lighting system saves a tremendous amount of energy, but sometimes the light goes out in your room if you sit still in front of your computer too long.

Skanska moved in to the new office in November 2008, and by May of 2010, the annual energy consumption had come down by 57 percent compared to what it was at the Madison Avenue office (when adjusted for differences in office size and electricity prices.)

“The punch line is that we will realize a return on our investment (ROI) in less than 5 years – far faster than the 15-year challenge we set for ourselves. Over the life of the lease, we will save half a million dollars through energy savings,” she says.

“For anyone leasing space in this building, making smart choices about energy performance makes good business sense. Moreover, we are assuming only a modest escalation of energy and electricity costs, which may be understated. We are also hearing a lot about cap & trade, starting on the west coast, which makes it reasonable to expect some form of carbon metrics in the 15 years that we lease the building. Our savings projections don’t include soaring energy prices or the potential benefit of living under a cap and trade scenario,” she says. “Energy efficiency will help us avoid future risk.”

Most tenants are not thinking in terms of savings over a 15 year lease, and would like a ROI in 5 years or less. “But it is a different story if you look at universities and hospitals, the Federal Government, and institutional owners that build and hold their buildings for the life of the project. They will be very interested in how the building is designed upfront and in making appropriate investments now that will yield future savings.”

“I suggest that owners first do things that are simply smart in terms of the intrinsic design, to use efficient windows, good insulation, and position the building on the site properly, to take advantage of what the site gives you.”

10-15 years ago people talked about smart buildings in terms of IT, and Wall Street gutted buildings because they thought that they could rent them out if they sold them as IT-buildings. The idea was that customers will come if you add functionality. Is that what you are doing? More light means more productivity?

“That is absolutely right! The USGBC analyzed the potential savings of associated with a LEED building over a 20-year time span. Their study indicated a total savings of $62 per square foot. $46 per square foot of these savings came from improved human productivity, while energy savings counted for about $5,” she says.

“Savings from productivity enhancement are great, but difficult to measure, and people tend to believe what they can measure. Here at Skanska we have looked at sick leave as a measurable indicator of productivity. We compared the core office staff here with the same group at the Madison Avenue building and found an 18 percent reduction in the amount of sick leave taken. Was it because of the recession? Or was it because people felt healthier? We think it indicates that the space enhances our productivity. I was an architect for ten years and I believe in better living through good design. Our collaboration with Swanke Hayden Connell and Cook + Fox delivered a space that functions well, feels good and makes good business sense. Did I mention that it treads lightly on the environment?”

Skanska USA's green office is part of the overall remaking of the Empire State Building, which is one of the world’s most famous buildings, and also an example of the 43 percent of all office space in New York City that was built before 1945. These older buildings are responsible for two thirds of all emissions of greenhouse gases in the city, and the situation is similar in most big cities in the world. “Constructing new green buildings won’t move the needle in mitigating this problem. It is far more important to address the existing building stock,” the building's owner Anthony Malkin told the magazine Metro Green + Business in June 2008. This is exactly why the Clinton Climate Initiative, Johnson Controls Inc., Jones Lang LaSalle, and Rocky Mountain Institute decided to support a green makeover of this iconic building.

Hans Sandberg

Philosophy of Life at the End of Week 99

Two stories in the same newspaper and a whole world between them.

On the Op-Ed page of today's New York Times, David Brooks describes two very different, but complementary attitydes to life. His column is called The Summond Self, and when you have read it you might want to flip back to page one and read about Alexandra Jarrin, who two years ago had a decent job as director of client services, but was laid off, and now finds her self sliding into the abyss, having nothing besides her food stamps and car to sleep in once she has to leave her cheap hotel room.

Let's imagine that she picked up David Brook's well-meaning column where he offers the following piece of advice:

"I’m living in a specific year in a specific place facing specific problems and needs. At this moment in my life, I am confronted with specific job opportunities and specific options. The important questions are: What are these circumstances summoning me to do? What is needed in this place? What is the most useful social role before me?"

This is where the philosophical rubber meets the road.

Hans Sandberg

My Dream Laptop - For Outdoor Use

One of the biggest paradoxes with laptops, notebooks, and netbooks (including the iPad) is that they are pretty much useless if you take them outside on a sunny day. Right now it's a sunny day here in Princeton Jct., NJ, and not too hot. I would love to move my work outside, but the thought of squinting in front of my laptop makes me stay right where I am, in front of my desktop.

OLED and Uni-Pixel's TMOS technology will probably give us portable color screens for use in full sunlight, but in the meantime, why hasn't anybody build a laptop/notebook/netbook as legible in sunlight as Amazon's Kindle? I would run out and buy one today. I don't need color to read and write outside. All I need is a screen that doesn't fade out!

That's my two cents....

Hans Sandberg

PS. If you read Swedish, you can read my 2001 reportage about OLED here!

The latest issue of Newsweek has a story about the Kindle vs. iPad. Read it here!

Sweden Seen From a Pakistani Perspective

Google brought me a story that I - being born in Sweden - simply couldn't resist. It's written by Ahmad Rafay Alam, who writes for the Pakistani newspaper the Express Tribune, and bears the title:
Ball bearings: a pakistani’s view of sweden
What???
Then comes an opener that grabs you by the .... well, let's just say that it grabs your interest.

While landing at Sweden’s Arlanda airport, some 30 minutes outside its capital Stockholm, one can be forgiven for wondering where all the people are. Coming from Pakistan, where rare is the moment one’s line of sight is not interrupted by another human being, Sweden appears to the uninitiated as unpopulated; a vast swathe of pristine forest dotted every now and then with a cottage and the odd lake. The presence of nature is all encompassing — there’s forest everywhere — and it is one of the reasons Swedes have a deep connection with their environment. But one would be quite mistaken to think, what with nearly eight months of darkness, that Sweden is a land where nothing goes on.

Half way down the article, the author offers this sharp summary of Swedish history:

"Sweden, the land of Vikings, Ikea, Bjorn Borg, ABBA and the sauna, didn’t really coalesce into a nation until 1521, when King Gustav Vasa unified the many other tribes of hunter gatherers and races that had collected on the Baltic archipelago. A generation later, Sweden had broken with the Pope and by the end of that century, the country officially became Lutheran Christian. By this time, a hereditary monarchy had been introduced (it still continues, with the marriage of Crown Princess Victoria to her former gym trainer and “commoner” boyfriend taking place last month) and King Gustav had broken the back of the Hanseatic League, a collection of merchant-gangsters who ensured safe passage through the Baltic Sea at an appropriate cost. With the League’s monopoly over sea routes broken, money began to flow into Sweden’s coffers like never before and the country saw its golden era. Fast forward 500 years, and you’ve got Sweden, so to speak."

Not bad at all! Sometimes the distance makes you see things more clear.
But what about the ball bearings?
Well, here they are:

"During our tour, we were informed that Swedes had invented things as common as the zipper, the three-point seat belt and ball-bearings. Ball-bearings seem to me a perfectly apt metaphor of what Sweden and Swedish people are like. Strong willed, efficient and not meant to be noticeable."

The invisible Swede? Ouch! That hurts, but on the other hand, they do say a lot trough their work, for who hasn't heard of Ericsson, Ikea, H&M, and SKF (the maker of the ball bearings)?

And let's not forget Stieg Larsson.

Hans Sandberg

Lost in a Cloud of Words

Welcome to the wordcloud. I just got a press release from Microsoft about their big partner conference in Washington, D.C. People from all over the world have gathered there to "seize new opportunities in the cloud" and help consumers "tap into the cloud through all the screens in their lives."

Lost in translation? No, Microsoft is not Volkswagen having fun with words like fahrvergnügen or Ikea being cute with Swedish names. Microsoft is from Redmond, WA.

"WASHINGTON — July 13, 2010 — Today at the annual Microsoft Worldwide Partner Conference, Jon Roskill, Microsoft Corp.’s new channel chief, addressed the Microsoft partner community for the first time, unveiling business strategies and resources to help partners of all types seize new opportunities in the cloud. The company also detailed new products and services to help consumers tap into the cloud through all the screens in their lives — from the largest screen in the living room to the smallest screen in one’s pocket."

I know what they mean, but isn't there a fundamental communication disconnect here?

The digital era has given us many new words, and a whole new way to view the world. We have learned to understand expressions like the world wide web, and reinterpret others, like computer (which used to be a person who calculates) and surfing (no board needed these days). I have no problem with that, but then we have the Globalyst stuff. No, it's not something from Harry Potter. It was a new PC-series launched by AT&T in 1994 after the company had bought NCR and renamed it Global Information Services. I remember the press conference when the Globalyst PC was introduced, featuring a communications program called Vistium. I asked one of the marketing guys about the weird name. He shook his head and said that all the good names were already taken.

Fast forward to July 2010:

“The industry is at an inflection point....and we are committed to helping our partners adapt and find the right cloud opportunities....,” said Jon Roskill.

Well, the cloud makes sense as a concept and is okay on a powerpoint slide, but beyond that I'd like my clouds in the sky. Leave it to the true believers to seek opportunities in the cloud.

Hans Sandberg

IEA Report: A Global Energy Technology Revolution Is Underway

"International Energy Agency says a global energy technology revolution is underway. According to a new report by the International Energy Agency, global investment in renewable electricity generation, led by wind and solar, reached an all-time high of $112 billion in 2008 and remained broadly stable in 2009 despite the economic recession. In OECD countries, the rate of energy efficiency improvement has increased to almost two percent per year, more than double the rate seen in the 1990s. And funding for low-carbon research, development and deployment has increased by one third between 2005 and 2008. However, the report, Energy Technology Perspectives 2010, also finds that without new policies to rapidly deploy low-carbon technologies on a large scale, energy-related CO2 emissions will almost double by 2050."


(Source: Apollo Alliance Weekly Update July 7, 2010)

Does the Internet make squirrels out of us? (Niccolas Carr's "The Shallows")

I'm sitting in my backyard watching the squirrels in their non-stop nervous search for something hidden underground. They rarely ever sit still and any distraction will set them off in a new direction. It used to be that way for humans too, the author Nicholas Carr says in a CNET News interview. If they didn't, they would be eaten, but there was an era where you could allow yourself to focus, to read a book, to think long and deep, instead of browsing for nuggets of information.

I think he is on to something very important, even if you consider the counter argument that we now can absorb so much more information from so many more sources. Carr is however not telling us to abandon our inner squirrel, but rather to try to preserve and grow out counter-instinctual habit of digging deep. You need systematic education and extensive reading in order to build an intellectual framework, to form an independent mind that can allow you to navigate the Internet instead of only jumping around like a squirrel.

Hans Sandberg

Should Japan Copy the Swedish Model?

Asahi Shimbun reports on its English web edition that Prime Minister Naoto Kan wants to tackle Japan's budget problems using the Swedish model, which combines high taxes and a broad social security net.

The newspaper writes that the Prime Minister "got advice from an economics professor who champions the Swedish example of a very high tax burden in exchange for social security benefits that allow retirees to live comfortably." It was on May 17 that the then Financie Minister Naoto Kan consulted Naohiko Jinno, a professor emeritus of economics at the University of Tokyo.

"Here's why I think we need to impose a heavier tax burden," Jinno said. "It would create a solid welfare system and a strong economy. Those two points will ensure that domestic consumption remains strong as people will be able to spend," said Jinno, who is the key member of the government's Tax Commission.

Naoto Kan became leader of the Democratic Party of Japan, and was chosen as Prime Minister by the Japanese parliament on June 4th, following the resignation of Yukio Hatoyama on June 3rd.

Asahi Shimbun writes:

"Economic theory, according to Kan, centers on the following: Japan has no time to waste in implementing fiscal reconstruction. To do that, tax increases are indispensable. But simply raising taxes will cool the economy. If the government uses the additional tax revenue to fund improved social security programs, gloom about the future will evaporate, and, as a result, people will start spending again. Based on this idea, if the government pumps money into medical services and nursing care, areas where demand is expected to grow sharply due to the aging population, economic growth will follow."

I don't know enough about Japan to say whether this is a good idea or not, but I like the concept of balancing the budget while at the same time providing people with something in exchange. Instead of cutting the deficicits so that the already rich can keep more of their wealth, the Prime Minister suggests strengthening people's sense of security could make them spend money.

Hans Sandberg

Noble Prize Winner Urges Obama to Act on Climate Change

I found this link at Andrew C. Revkin's New York Times blog.

"A recipient of the 1976 Nobel Prize in physics, Richter was a signatory on a letter from 34 Nobel laureates to Obama last year pushing for a big and sustained rise in the federal investment in energy research. (He told me he is unaware of any response from the White House.) He also has written “Beyond Smoke and Mirrors,” a cogent road map for facing the daunting long-term challenge of cutting emissions of greenhouse gases even as humanity’s growth spurt crests in the next few decades."

It's well worth listeing too.

BP’s Chairman Spoke, and (Mostly) Said the Right Thing

Chairman Carl-Henrik Svanberg, Tony Hayward, and other top BP executives met with President Barack Obama at the White House and he delivered. BP promised to do everything in their power to undo the damage they have wrought, and compensate those that have and will suffer economic losses due to the spill. BP’s commitment includes a $20 billion fund that will be managed by Kenneth Feinberg, who oversaw the payment of compensation to the victims of the 9/11 attacks.

President Barack Obama, who was immediately castigated by the insta-pundits, and even taken to task by New York Times in an editorial for his speech last night, today came out with full force and seemingly in full control.

When the top executives from BP exited the White House, they were met by a press corps out for blood, but the silent Swede, Carl-Henrik Svanberg, didn’t act the part he had been assigned. Commentators were looking for arrogance, European arrogance, and one CNBC commentator quipped “is that a smirk on his face,” but the smile on Svanberg’s face was not arrogance, but nerves. He felt the immense pressure, and his English was broken and he talked about the affected people in the Mexican Gulf region as the “small people” (probably a direct translation of the Swedish expression “småfolket” which means common people, the little guy vs. the big and powerful.) He was obviously not aware that “small people” in America refers to “little people” (dwarfs.) But this should be written off as an honest mistake. What was more important was that Svanberg could report that BP is doing the right thing, and that they had agreed to President Obama’s demands. They have also decided to cancel all further dividends for 2010, amounting to over $10 billion, money that can now be made available to the people in the Gulf region, rather than the shareholders.

Svanberg expressed full understanding for President Obama’s “frustration,” and asked the American people for forgiveness. When asked about mistakes and wrongdoings leading up to the disaster, he said that the board is investigating this.

For president Obama, the last two days has been a proof of strength, a show of a different kind if strength than the pundits like to see. Less swagger and more analysis and then action. It is politics for result, even if it doesn’t always look as good on TV as when a president dresses up in a military uniform and declares Mission Accomplished.

For BP and Chairman Svanberg, the meeting in Washington, DC., was the first step out of the pit it dug for itself.

Hans Sandberg

A Silent Swede Goes To Washington

There is a Swedish proverb that says "Tala är silver, tiga är guld" (tr. "speech is silver, silence is gold"). Waiting for BP's chairman Carl-Henric Svanberg to adress the BP oil disaster, one could get the impression that we here have a man stuck in his nordic roots, bound by the Law of Jante, or simply unwilling to join the public chatter, prefering to just let the company dig and drill itself out of the mess. But the Swede who has been called to the White House by President Barack Obama is not the silent type.

James Savage, a writer at the English-language Swedish newspaper The Local draws a quick portrait of Carl-Henric Svanberg, who became a BP director in Septemnber and took over as chairman of BP in Janruary 2010:

But in Sweden, where he was CEO of telecom equipment vendor Ericsson, Svanberg has been the country's most high-profile company leader of the past decade. For observers of his career, this makes his handling of the crisis rather puzzling. He is widely viewed as one of the Sweden’s most able business leaders and best communicators. His reputation in the US and the UK for being media-shy and unforthcoming is lightyears away from how he is perceived at home:

“He is very communicative, verbal and charismatic,” says Torbjörn Carlbom, telecoms reporter at Swedish business weekly Veckans Affärer.

“This is why the Swedish media are very puzzled by the way he is coming across in the current crisis at BP.”

Margareta Pagano, a commentator for the British paper The Independent asked in a caustic piece on June 6th How far do we have to drill to find BP's chairman?

Where is Carl-Henric Svanberg hiding? And, more pertinently, why is he hiding? The Swedish chairman of BP is proving every bit as mysterious as one of the characters out of a Stieg Larsson novel, while his chief executive, Tony Hayward, is being crucified by the world's press as the demon destroying America's coastline. Svanberg has made only one public statement since disaster struck just over a month ago in the Gulf of Mexico, throwing both BP and the future of deepwater drilling into jeopardy.

If Carl-Henric Svanberg, who is actually quite comfortable speaking to politicians, is going to survive his upcoming meeting at the White House, he will have to pull out all the stops and convince President Barack Obama and the American public that BP really, really, will do the right thing.

At moments like this, silence is not gold, but outright dangerous.

Hans Sandberg

"Just Say No" Is Not Much Of An Answer To the Oil Spill

Thomas Friedman takes the environment seriously, and he is usually a sharp commentator, although his flair for storytelling often rests on simplistic assumptions like in his latest column where he comments on the BP-made disaster in the Mexican Gulf. (This Time Is Different) In it he quotes his pal Mark Mykleby, who has written a letter to the editor for The Beaufort Gazette in South Carolina.

"It is the best reaction I’ve seen to the BP oil spill — and also the best advice to President Obama on exactly whom to kick you know where."

Well, let's listen to this piece of advice:

"This isn’t BP’s or Transocean’s fault. It’s not the government’s fault. It’s my fault."

Which of course is true in the sense that we are living in a democracy, and we have voted for politicians that made the oil spill possible. We should acknowledge our collective responsibility for letting BP, Haliburton and Transocean drill at 5,000 feet without knowing what they were doing besides drilling, and without having any plans for what to do if things go wrong. But what can we learn from that?

"It’s what we do as individuals that count," Friedman's friend writes, writing off both the left and the right in the next sentence with an equanimity that sounds nice, but is about as clever as trying to solve the drug problem with "Just Say No!"

"Government regulation will not solve this problem," Mykleby writes, but the fact is that government regulation could have prevented the oil spill. But the American public has followed Reagan's anti-government, anti-regulation ideology for too long, and we are now beginning to pay a terrible price for that. Just look at those birds, and all those families whose livellyhood is being wiped out by the oil. Mykleby concludes:

"Here’s the bottom line: If we want to end our oil addiction, we, as citizens, need to pony up: bike to work, plant a garden, do something."

Do something? Like... Just Say No to oil?

Biking is great, but we also need to tax oil - an idea I believe Friedman has supported in the past - and have the government invest in new energy technology and a radical shift in our transportation system. America rejected public, collective transportation, which was incredibly good for the auto industry, and led to a growth pattern that made it very hard to live and work without a car.

Even such a simple thing as taking the bike to work will in most cases require political decisions and changes in city planning. Countries like Denmark and Sweden have shown what you can achieve by redesigning cities to make it easier for people to take the bike to work, but this was not a moral, individualistic choice, but a collectivistic political choice. You need government to make it possible for the individueal to Just Say No.

Nice and pretty doesn't cut it when we are dealing with big, social and structural problems, like energy independence, energy efficiency and sustainability.

Chris Matthews On the BP Oil Disaster, Dick Cheney, Obama, and Rush Limbaugh

How To Read the iPad? Revolution Or Power Grab?

Sue Halpern have written essay about the iPad and its wider implications for the New York Review of Books. Here is her conclusion:

The Open Source movement and Creative Commons both derive from the Internet’s essential freedom, a leveling that allows designers and filmmakers and singers and craftsmen and any number of writers, activists, politicians, artists, and entrepreneurs, many of them amateurs, to develop and disseminate their ideas. Imagine what the Internet, and our lives, would be like if, after inventing the Mosaic Web browser back in 1993, Marc Andreessen and Eric Bina not only required users to buy it but required payment for every click or download or page view. Try to imagine how a privatized, monetized Internet might have developed, and you can’t, because its evolutionary path would have been so different. Apple’s iPad apps may be ingenious. They may be fun and entertaining. They may be useful. What they can’t be is free of Apple’s control.

It is true that the iPad, like the iPhone and iPod Touch, comes with a Web browser app that takes the user directly to the Internet. Arguably, this makes these devices comparable to any computer and renders the complaint about gatekeeping moot. In fact, Web browsing on the iPad is less than ideal. Keeping more than one window open at a time is not possible, and Apple’s refusal to enable Flash, a piece of proprietary software owned by Adobe Systems that underlies many websites and allows for animations and video, means that those websites are either not fully functional or not available at all. But why bother going through a browser to get to YouTube or to read the AP headlines or check the weather when there is a dedicated app for each of these? This is what is really revolutionary and game-changing about the iPad: once there is an app for everything, it’s Apple’s Web, not the wide world’s.

If Apple want's to conquer the world, maybe we have to wait to see what Google's Android-tablet will look like when it comes.

Hans Sandberg

Note: Sue Halpern makes a minor mistake when she calls the Rocket eBook that Barnes & Noble launched in 1998 for the "RockBook." I was there at the pressconference on October 23rd with Stephe Riggio and the poet laureate Robert Pinsky.

Paul Krugman Debunks Myths About Greece and the U.S. Economy

If you listen to the CNN/CNBC/MSNBC pundits, America is cursed and damned, like a fiscally irresponsible Odysseus drifting in a sea of debt, while Zeus is itching to strike and Poseidon can't wait to whip up a terrible storm.

Paul Krugman gives the keynote at Woodrow Wilson
School on May 13. Photo: Hans Sandberg.

If you on the other instead listen to Paul Krugman, which I did yesterday at seminar held by the Center for International Security Studies at the Woodrow Wilson School, you would worry about the long-term debt the U.S. is accumulating (mostly thank's to the Bush-Cheney tax-cuts for the rich and senseless invasion of Iraq), but you would never even consider joining the Tea-party.

"We are not Greece," Krugman said, pointing out that the greek economy is about the size of the State of Michigan, and it tanked without pulling the U.S. economy down with it. Another thing to remember is that the U.S. export is only 3 percent of GNP. The root of the Greek crisis has, according to Krugman, a lot to to with the Euro, which he feels was pushed through way to early by the European elites, shackling the possibilities of a country like Greece to adjust by devaluing their currency. He seemed very pessimistic about the possibility to solve the Greek financial crisis, and expects it to blow up later on, as the austerity policy could lead to deflation and economic implosion. His most common answer during the Q&A-session was to shake his head. It's bad news for Greece, but it's not going to pull the U.S. or the world into a malstroem...

Here is a video clip from the keynote:


Here is Krugman's May 14-column for the New York Times:
We’re Not Greece.

Hans Sandberg

Microsoft Pushes A Smooth Envelope With Office 2010

I've been using Office for at least ten years, but I'm not a loyalist. I could as well use OpenOffice, which is an excellent suite, and a free one at that. Today I went to Microsoft's press event for Office 2010, which was held at the same NBC-studio at Rockefeller Center where Saturday Night Live is filmed, but the event was despite this rather dull and predictable with an delayed opening, where we were treated to PowerPoint slides telling us among other things that people in 60 countries were watching today's event, which must have made the delay exponentially more embarrassing.

Stephen Elop, president of Microsoft's Business Division (left photo), was a fresh face - he joined Microsoft in January 2008 - but he did okay. Not exactly a Steve Jobs-show, but this was after all a press conference about office productivity. Once the rather predictable customer interviews and even more predictable videos were played, things got interesting.

Chris Capossela, senior vice president of Microsoft's Information Worker Product Management Group, did a very convincing demo of Office 2010, and brought out its many innovations and its integration across platforms, showing how you or a team can work with a document on your PC, laptop and smartphone at the same time, and for example broadcast a PowerPoint slide show from your desktop PC to other people's browsers or cellphones.

I came back from the event with a similar first impression as I had when I returned from the Windows 7 launch in October. Microsoft seems to finally have figured it out. Here is elegance, ease-of-use, really intelligent applications and smart integration, and not much of the annoying interference with our work we learned to hate with Vista.

Hans Sandberg

Note: Microsoft did not allow any photography at the event, so I had had to rely on the company for these two photos.
Disclosure: Microsoft handed out a free copy of Office Professional 2010 to participants in the press conference.

Bill Clinton Compares Today's And Yesterday's News Media

Former president Bill Clinton was interviewed on PBS's new show Need To Know on May 7, 2010. One of the questions was about the change in the media landscape today compared to 1992, when he won the presidential election. Here is part of President Clinton's answer in my transcript:

"The good news is that people who are comfortable in cyberspace can get more information more quickly than ever before. The bad news is that you often don't even know if the facts are right, and it promotes - in terms of our citizenship, our politics - a 21st century version of what we saw in the early 19th century, when only white male property owners could vote, and there were zillions of newspapers, and they were avowedly political and written with a political stance so you couldn't tell the difference between the editorial page and the news page."

He compared this to today's "atomized" media world with all the blogs, and where a lot of young get their news from cable shows and comedy shows like John Stewart's.

"The thing I'm worry about number one is the loss of a common fact base. When I was a kid the Vietnam war was raging and the civil rights movement was being contested. We had three major networks so that there was enough competition between them to keep them honest, and they could afford send people of my age to Vietnam to cover events, people with 30 years of experience, people who knew the history, people who were deeply involved, and they didn't necessary have to have a quick hit everynight on the news, or a big flash every day in the news stories. The atomization of the communication network have given us access to more information than ever before, but it has made it more difficult to have a common dialog. The economic pressures on the media, on the news magazines, on the daily papers, all this stuff is making it more difficult to have a common dialog. The other thing I think it's worth pointing out, is that it's human nature to be around people who like you, but that's not good in politics. In politics you need to talk to people that disagree with you."

Hans Sandberg

Dr. Doom Collects His Prescient Thoughts About Economics and the Financial Crisis

Nouriel Roubini and Stephen Mihm has written a book about the financial crisis that could become the most influential book on the subject thanks to Roubini's brilliance and track record as the man who most clearly and definitively predicted the crisis.

The new book is called Crisis Economics - A Crash Course in the Future of Finance and is reviewed in today's New York Times. "Instead of imposing a doctrinaire theory upon the facts, Mr. Roubini employs an eclectic, common-sense approach to history, picking à la carte from the thinking of such disparate economists as John Maynard Keynes and Joseph Schumpeter," Michiko Kakutani writes in her review.

Stephen Mihm, a journalist and professor of economic history at the University of Georgia, wrote an excellent portrait of Dr. Doom in New York Times Sunday Magazine in August 2008, the month before the financial collapse. Mihm's story began like this:

On Sept. 7, 2006, Nouriel Roubini, an economics professor at New York University, stood before an audience of economists at the International Monetary Fund and announced that a crisis was brewing. In the coming months and years, he warned, the United States was likely to face a once-in-a-lifetime housing bust, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. He laid out a bleak sequence of events: homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he went on, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac.

The audience seemed skeptical, even dismissive. As Roubini stepped down from the lectern after his talk, the moderator of the event quipped, “I think perhaps we will need a stiff drink after that.” People laughed — and not without reason. At the time, unemployment and inflation remained low, and the economy, while weak, was still growing, despite rising oil prices and a softening housing market. And then there was the espouser of doom himself: Roubini was known to be a perpetual pessimist, what economists call a “permabear.” When the economist Anirvan Banerji delivered his response to Roubini’s talk, he noted that Roubini’s predictions did not make use of mathematical models and dismissed his hunches as those of a career naysayer.

So much for the power of abstract mathematical models in economics! Or as Mihm puts it in his 2008 essay:

The dismal science, it seems, is an optimistic profession. Many economists, Roubini among them, argue that some of the optimism is built into the very machinery, the mathematics, of modern economic theory. Econometric models typically rely on the assumption that the near future is likely to be similar to the recent past, and thus it is rare that the models anticipate breaks in the economy. And if the models can’t foresee a relatively minor break like a recession, they have even more trouble modeling and predicting a major rupture like a full-blown financial crisis. Only a handful of 20th-century economists have even bothered to study financial panics. (The most notable example is probably the late economist Hyman Minksy, of whom Roubini is an avid reader.) “These are things most economists barely understand,” Roubini told me. “We’re in uncharted territory where standard economic theory isn’t helpful.”

In their book, Roubini and Mihm analyses the current proposal for reform of the financial markets, proposals that have the backing by both President Barack Obama and treasuru secretary Timothy Geithner. They are way too timid according to the authors, who also propose a break-up of Wall Street's financial giants:

Throughout most of 2009, Goldman Sachs chief executive Lloyd Blankfein repeatedly tried to quash calls for sweeping regulation of the financial system. In speeches and in testimony before Congress, he begged his listeners to keep financial innovation alive and “resist a response that is solely designed to protect us against the 100-year storm”.

That’s ridiculous. What we’ve experienced wasn’t some crazy once-in-a-century event. Since its founding, the United States has suffered from brutal banking crises and other financial disasters on a regular basis. Throughout the 19th and early 20th centuries, crippling panics and depressions hit the nation again and again. The crisis was less a function of sub-prime mortgages than of a sub-prime financial system. Thanks to everything from warped compensation structures to corrupt ratings agencies, the global financial system rotted from the inside out. The financial crisis merely ripped the sleek and shiny skin off what had become, over the years, a gangrenous mess.

The road to recovery will be a long one. For starters, traders and bankers must be compensated in a way that brings their interests in alignment with those of shareholders. That doesn’t necessarily mean less compensation, even if that’s desirable for other reasons; it merely means that employees of financial firms should be paid in ways that encourage them to look out for the long-term interests of the firms.

Securitization must be overhauled as well. Simplistic solutions, such as asking banks to retain some of the risk, won’t be enough; far more radical reforms will be necessary. Securitization must have far greater transparency and standardization, and the products of the securitization pipeline must be heavily regulated. Most important of all, the loans going into the securitization pipeline must be subject to far greater scrutiny. The mortgages and other loans must be of high quality, or if not, they must be very clearly identified as less than prime and therefore risky.

Some people believe that securitization should be abolished. That’s short-sighted: properly reformed, securitization can be a valuable tool that reduces, rather than exacerbates, systemic risk. But in order for it to work, it must operate in a far more transparent and standardized fashion than it does now.

Absent this shift, accurately pricing these securities, much less reviving the market for securitization, is next to impossible. What we need are reforms that deliver the peace of mind that the Food and Drug Administration (FDA) did when it was created.

There is an allegory that bites!
Wall Street is a lawless jungle that has served us rotten food, hence we need a financial FDA! I'm sure Upton Sinclair smiles in his grave! (His 1906 novel about Chicago's meatpacking plants, The Jungle, led to new food inspection laws in 1906, and eventually - 1930 - the FDA.)

Hans Sandberg