Tuesday, 29 May 2012

On philanthropy, and why free speech is expensive

This is an interesting story by Curtis White, who was asked by Orion magazine, a not for profit, to write about philanthropy in the USA.  White was hesitant: "From the first I was dubious about the assignment. I said, “Not-for-profit organizations like you cannot afford to attack philanthropy because if you attack one foundation you may as well attack them all. You’ll be cutting your own throat.”  He forged ahead anyway, until the editor that asked him to contribute left the organization and the new editor's view was that "publishing the essay would be an exercise in “self-mutilation.”"  But there's an internet, so it gets published anyway.  White says:
In the United States, everyone may enjoy freedom of speech so long as it doesn’t matter.  For those who would like what they say to matter, freedom of speech is very expensive. It is for this reason that organizations with a strong sense of public mission but not much money are dependent on the “blonde child of capitalism,” private philanthropy. This dependence is true for both conservative and progressive causes, but there is an important difference in the philanthropic cultures that they appeal to.
The conservative foundations happily fund “big picture” work.  They are eager to be the means for disseminating free market, anti-government ideology. Hence the steady growth and influence of conservative think-tanks like the Heritage Foundation, Accuracy in Media, the American Majority Institute, the Cato Institute, the Brookings Institute, the Manhattan Institute, the Hoover Institute, and on (and frighteningly) on.
On the other hand, progressive foundations may understand that the organizations they fund have visions, but it’s not the vision that they will give money to. In fact, foundations are so reluctant to fund “public advocacy” of progressive ideas that it is almost as if they were afraid to do so. If there is need for a vision the foundation itself will provide it. Unfortunately, according to one source, the foundation’s vision too often amounts to this: “If we had enough money, and access to enough markets, and enough technological expertise, we could solve all the problems.” The source concludes that such a vision “doesn’t address sociological and spiritual problems.”
And then there's this:
One of the most maddening experiences for those who seek the support of private philanthropy is the lack of transparency, that is, the difficulty of knowing why the foundation makes the decisions it makes. In fact, most foundations treat this “lack” as a kind of privilege: our reasons are our own.  One of the devices employed by philanthropy for maintaining this privilege is what I call the mystique of the foundation’s Secret Wisdom. 
So you want to ask, “What do you know that I don’t know?  What do you know that makes your decisions wise?”  The closest thing to an answer you’re likely to hear is something like this: “The staff met with some Board members last night to discuss your proposal, and we’re very interested in it.  But we don’t think that you have the capacity [a useful bit of jargon that means essentially that the organization should give up on what it thought it was going to do] to achieve these goals.  So what we’d suggest is that you define a smaller project that will allow you to test your abilities [read: allow you to do something that you have little interest in but that will suck up valuable staff time like a Hoover].  Meanwhile, we’d like to meet with your Board in six months and see where you are.”
And on you go one year at a time. But cheer up, you’ve made your budget for the year! 
More at the link.  The article demonstrates why accountability is not just an issue for government.  If government is going to subsidize and defer social goals to philanthropy to solve, then it becomes very important how philanthropy works, and who decides which issues matter and are worthy of support and which do not and are not, and what goals those working in philanthropic organizations actually seek to serve.




Monday, 28 May 2012

Insider trading: Facebook edition

From Matt Taibbi: regular investors got their now customary late-to-the-party treatment from Facebook, and some are suing.  But by now we know the game is rigged to favor the big, well-connected investor.
...virtually every week now we see stories like this that hint at a kind of two-tiered market system – in which most of the real action takes place inside an unregulated black-box network of connected insiders who don’t disclose their relationships or their interests, while everyone else, i.e. the regular suckers, live in the more tightly-policed world of prospectuses and quarterly reporting and so on. 
All of these stories suggest that Wall Street is increasingly turning into a giant favor-and-front-running factory, where the big banks and broker-dealers that channel vast streams of crucial non-public information (about the markets generally and their clients specifically) are also trading for their own accounts, and sharing information with a select group of "preferred investors," who in turn help the TBTF banks move markets in this or that desired direction by jumping on or off various pigpiles at the right times. 
Sooner or later, people are going to clue into the fact that one or two big banks, acting in concert with a choice assortment of unscrupulous "preferred investors," can at least temporarily prop up or topple just about anything they want, from Greece to Bear Stearns to Lehman Brothers. And if you can move markets and bet on them at the same time, it's impossible to not make tons of money, which incidentally is made at everyone else's expense.
This connects the dots between the farcical nature of SEC disclosure and the systemic problem of highly unequal access to the capital markets.  Maybe shareholders would benefit from more comprehensive SEC disclosure, but the unequal access problem cannot likely be fixed.  Ordinary investors are trapped with no where to invest without behind the scenes rigging ensuring high risk and low probability of returns.  Does the ordinary investor go back to storing her bank notes in the mattress?

Economist: Don't cut the budget for data

Cuts on data collection and analysis are "penny wise, pound foolish" because "knowledge helps target government spending on those who need it most." Republican congress members, led by Daniel Webster of Florida, seek to cut the census-taking budget since “what really promotes business…is liberty, not demand for information.” Some Republicans suggest the census survey is unconstitutional, a position another Daniel Webster would have probably laughed at. The Economist concludes: "In 2008 Barack Obama quipped that his Republican foes seemed to “take pride in being ignorant”. In this area, congressional Republicans seem to feel that ignorance is bliss."

An argument for labor inefficiency

From the NYT, and includes an argument for lower taxes on labor: "The relentless drive for productivity may have some limits; if our economies don't continue to expand, we risk putting people out of work."

Sunday, 27 May 2012

Race to the bottom

Adrian McDonald decries the madness of state level film tax incentives, but then calls for a national incentive to compete with the likes of Canada.  Wrong answer.

You can see inequality from space

The difference in rich and poor neighborhoods is visually apparent, as shown by Tim De Chant:

Here is a comparison of west Oakland, CA vs Piedmont:

More visual comparisons at the link.  Jess Zimmerman comments, with several additional links: "Since trees increase property values, this is a classic case of the rich being given whatever they need to get richer. And considering the other things trees do for us, it’s also a case of the rich getting to be smarter, cooler, and have fewer allergies."

EU fin trans tax

The EU proposes an FTT of 0.1% for shares and bonds and 0.01% for derivatives, after a couple of years of debate:
Parliament has been calling for a financial transaction tax for close to two years and the Commission tabled a legislative proposal for one late in 2011.  The latest Eurobarometer survey shows that 66% of Europeans favour such a tax.
It's designed to slow down speculative trading of course and includes this compliance measure:

The resolution also raises the stakes to make evading the FTT potentially far more expensive than paying it. Taking the UK stamp duty approach, the text links payment of the FTT to the acquisition of legal ownership rights. This means that if the buyer of a security did not pay the FTT, he or she would not be legally certain of owning that security.  As FTT rates would be low, this risk is expected to far outweigh any potential financial gain from evasion.
Like buying a car, you can't get a license plate unless you pay your sales taxes; here, no tax, no title.  But compliance is complicated, is it not, by existing rules that allow for confidentiality of ownership and chains of ownership through trusts etc outside the jurisdiction?  I'm not sure the stamp duty method can cope with this.