News this week was dominated by
the death of Nelson Mandela. Alan
Paton, a South African novelist and anti-apartheid activist, wrote the book,
Cry,
the Beloved Country in 1948. It is set
in Johannesburg and in rural South Africa. It is a poetic description of family
breakup, murder and redemption. Most important, it describes its principal
character’s love for his people, the inherent goodness in all people, and his
love for his country, despite how it has hurt his people. Paton died before Mandela was released from jail
in 1990, but this quote by Paton seems to sum up Mandela’s life beautifully:  

Use it to write your homily for
today.

David Horsey’s remembrance incorporates
Mandela’s quote that is on the wall of the Apartheid Museum in Johannesburg:

Mandela was not a saint. He was an angry young man with a malleable philosophy that ranged from Methodism to Marxism. After his release from prison, he even agreed that his enemies were correct to call him a terrorist. What turned him into a great man with a legacy comparable to that of Martin Luther King or Gandhi, was his turn away from hate and towards forgiveness. Mandela was a man like any other except for his capacity to open his heart, even to his enemies. He also said:

Mandela never ceased being a revolutionary. He remained a socialist; he was an admirer of Fidel Castro. The man now being praised by the likes of Ted Cruz and George W. Bush was denounced by Ronald Reagan and Margaret Thatcher, who felt he was a communist. Mandela learned a key lesson that most revolutionaries, politicians and world leaders never learn: Before you can change the world, you must change yourself.

In other news, Jeff Bezos, Amazon revolutionary, announced a drone delivery system:

The 113th Congress only works for another 7 days. Give thanks for your present:

The Detroit bankruptcy will be the XMAS gift that keeps on giving:

Regarding Inequality, What Would Jesus Do?

The Inequality debate continues:

Last
week was chock full-o’-news: We saw the JFK anniversary, the end of the easy Filibuster
by Republicans, and a temporary deal with Iran. This week, many Americans will
have a ceremonial turkey dinner and a trip to the mall to begin their efforts to
boost the economy. Well, except for Walmart workers, who need financial support
in order to make it through the holidays.

The author Phillip Dick said in “The Man in the High Castle”:

Walmart helps with the declining hope:

Aren’t you glad the Pilgrims didn’t need visas to land here?

A week to celebrate the eternal flames of each party:

The reasons behind using the Nuclear Option:

Harry Reid pisses off the elephant:

Remembering the day the Music Died:

We
had an election. It was over analyzed all week.

We
also had another week of Obamacare blues. The insurance industry hits Mr. Obama
with a 2×4. He apologizes because he can’t control the private sector, but he
should have apologized for his failure
to understand the insurance industry. Any excuse to raise fees was
going to be used by the industry, and it really is the state insurance regulators that should
be the focus of anyone who is “disenfranchised” by their insurer.

In
other news, Iran may hit the trifecta:

1. It’s likely to see the sanctions currently crushing its economy loosened without
   having to halt uranium enrichment.
2. Its
   client Iraq is going to get US help to defeat its radical Sunni adversaries.
3. The
   Assad regime, its other main client, got a free pass from the West to stay in
   power for the foreseeable future.

Turning to Israel’s poutrage, how
did Mr. Netanyahu get so outfoxed? He has been neutralized by Mr. Obama. He
now functions as the principal spokesman for the Kingdom of Saudi Arabia (which
wants to see Iran go nuclear even less than Israel does), but, throwing public
tantrums about US policy only makes him look impotent.

One
Western diplomat told Reuters that Israel’s fury at the proposed deal might
actually make it easier for Mr. Rouhani to sell an interim deal to skeptics among
Iran’s security and clerical elites who are wary of US overtures to Tehran, 33 years after Washington
broke off diplomatic relations.

Use the quote below from Albert Einstein to write a homily about
smart people like Netanyahu who turn out to display weapons-grade stupid, at
precisely the wrong time:

The 3 types of people in politics. Is Netanyahu in box #3? Should the world be running away?

The race for 2014 begins:

Tea Party was not a big help on Election Day:

Christie Landslide validates the hug:

Obama’s hope for the end of November:

What’s
Wrong Today:

Yesterday, we talked about JP Morgan’s $13 billion settlement
with the Department of Justice, and how parts of Dodd-Frank required claw back
of bonuses based on bad behavior by financial executives. Today, the NYT’s Deal
Book reminds us that the US House of Representatives is working this week to
undermine two other elements of the 2010 Dodd-Frank Act:

The two bills, HR 992 and HR 2374 are
part of a broader campaign to weaken Dodd-Frank. Of 10 recent bills that alter
Dodd-Frank or other financial regulations, six have passed the House this year.
This week, these two are likely to also be approved by the House.

HR 992 would prevent implementation of Section 716 of Dodd-Frank,
which requires banks to “push out”
most derivatives from the banks’ deposit taking entities into new entities
that would not be eligible for bail-outs by the Federal Deposit Insurance
Corporation (FDIC). You remember derivatives, those fancy financial instruments that led directly to the Great Recession and our bail-out of Wall Street?

According to Bloomberg,
both Bank of America and JP Morgan Chase hold most of their derivatives in
their banks:

Just two
banks hold $132 Trillion in their banks, banks that we insure. The value of our
entire Gross Domestic Product in September
2013 was $16.6 Trillion. Does it sound sensible to you that we guarantee
the banks if they are allowed to keep their derivatives in the unit with the
deposits we insure?

HR 2374 would
delay implementation of what is known as the “fiduciary rule,” which would
broaden the definition of “fiduciary” to cover all financial advisers who offer
individuals investment advice for a fee. Despite
what you may have thought, under the new rule, for the first time individual financial
advisers would be legally required to work in the best interest of their
clients.

Currently,
it is common for financial advisers, more than 80% of whom are NOT fiduciaries,
to self-deal when offering
advice. First, they obtain significant fees from the retirement products they
sell. According to the think tank Demos,
a median-income, two-earner household will pay $155,000 during their lifetime
to financial advisers. The lifetime gains for two-earner households from
retirement accounts are around $230,000, meaning that nearly two-thirds of the profits go to the industry. Second,
non-fiduciary financial advisers can enjoy kickbacks; there is no rule against
an adviser from a mutual fund company encouraging clients to put their money in
specific funds sold by that company. In fact, that’s the norm, and the adviser
typically receives a commission for the sale.

None of
these have to be disclosed to the customer, under the current standard.

Lobbyists
claim that the new fiduciary rule would force investment advisers and brokers
to drop millions of
small accounts, depriving investors of all the great financial advice they
offer. The industry is basically saying that it can’t afford to help small
investors if it’s not allowed to rip them off. This is like the industry saying they don’t have a viable business
model if they need to do what is best for their customers.

The rule
has not been updated since 1975, before 401(k)’s and IRAs even existed. The
Labor Department, which is the primary enforcement agency, wants to broaden the
definition of a “fiduciary” to cover all financial advisers who offer individual
investment advice for a fee.

The Treasury Department, the SEC and consumer groups have urged lawmakers to reject both bills, warning that
they could leave the nation vulnerable again to excessive financial risk taking.
The White House threatened on Monday to veto the bill on investment advisers.

But simply voting on
the bills generates benefits for House lawmakers. It comes in the form of
hundreds of thousands of dollars in campaign contributions.

In the case of HR
992, the derivatives bill, Citigroup’s lobbyists also redrafted the proposal,
striking out certain phrases and inserting others, according to Deal Book. The
House Financial Services Committee, a magnet for Wall Street campaign
donations, adopted
the bank’s recommendations in 2012 and again this May.

Wall Street’s support
for the House extends beyond favorable votes. When bank executives are called
to testify before Congress, industry lobbyists distribute proposed questions to
lawmakers and their staff, seeking to exert some control over the debate,
according to emails written by staff members on the House Financial Services
Committee that were reviewed by The Times.

The Wall
Street-backed legislation has attracted broad support from lawmakers in both
parties in the House, including Democrats Rep. Carolyn Maloney (D-NY) and Rep. Jim
Himes (D-CT), who is the second-largest recipient among House Democrats of
financial sector donations, and is a former Goldman Sachs executive.

Why would
anyone be suspicious of legislation drafted by Citibank, pushed by a former Goldman-Sachs
executive, in a House with the majority “whipped” by Eric Cantor, a
guy married to another GS executive? And
the legislative purpose is further deregulating derivatives? You know, those
Wall Street creations Warren
Buffett called “weapons of mass financial destruction” in 2002?

Both bills are
scheduled for a vote on Wednesday.  

While these measures
have companion bills supported by a few Senate Democrats, the bills have little
chance of passing the Senate. But, it is possible that lawmakers could tuck
some of the provisions into a broader budget deal at the end of the year.

Any roll
back in regulations as part of a budget deal should only be traded for a financial
transactions tax. Democrats should hold any budget deal hostage until they
get a tax on financial transactions to help us start paying for the fiscal disaster
that has occurred since the Reagan administration.

This
is what democracy looks like in America: Spying on our citizens, granting
corporations the right to free speech, and not one prosecution for the fraud
committed by Wall Street when they crashed the economy by knowingly selling worthless
collateralized debt obligations.

The House will shill
for the banks as long as the money flows in.

What’s
Wrong Today:

From USA
Today at 1:30pm today:

It is unclear whether Mr. Boehner really has the votes in his caucus to make this happen. Here is a tweet that sums up Boehner’s argument to the Tea Party:

From
Jake
Sherman:

The Senate announced a plan to do a clean,
one-year extension of the Debt Ceiling. So, polarized and incapacitated
government continues in DC, to no one’s surprise.

Our
Founding Fathers abhorred factions. The 10th Federalist Paper,
written by James Madison in 1787, was a study of how to defend our fledgling
republic against the dangers of organized zealots. Here is the introduction by
Madison:

Madison
says later:

Not
anymore. The bone of contention then was disputes over the “unequal
distribution of property”, and that remains true even today, in the bitter
political fight between the parties, between those who would like to see a soft
landing to our deficit spending and those who insist we must live within our means
starting tomorrow.

Madison believed
a powerful Federal Congress rather than powerful state legislatures would work
against factions. Regional diversity would help buffer the ideological tides. And
that is what in fact, happened.

Gridlock
was largely avoided even though the US Constitution creates a significant separation of powers.

But now, according
to Ambrose
Pritchard, the number of voters
who split their tickets fell to 11% in the 2012 elections, an all-time
low. He reports that a Princeton study shows that the political rift is even
more extreme today than under Reconstruction after the Civil War. This is why
the clash over the debt ceiling has become so volatile, and so dangerous.
Neither side has much incentive to reach across the divide. Each is looking to
its own militant base.

When we
hear the mainstream media ask Mr. Obama about “prioritization” of the Treasury’s
obligations in a Debt Ceiling default, we are hearing a Tea Party talking
point. Tax revenues will cover about two thirds of federal spending and debt
service costs between October 17 and the end of the year. Prioritization is music to the ears of Tea
Party.
In one stroke, America’s social programs would be “defunded”, the Teahadists
great wet dream come true. This is one reason why Mr. Obama has said no
negotiations before an extension of the Debt Ceiling.

None of this is necessary.
The US does not have a deficit crisis. The Congressional Budget Office says the
US deficit will be 4% of GDP this year, 3.4% in 2014, and 2.1% in 2015, plenty of time for the parties to negotiate.

From Menzie
Chin: (emphasis by the Wrongologist)

BTW, there
is no such thing as “technical default” except in the political-speak
of the GOP. We don’t commonly see expressions like “technically dead”, much less “technically
too dumb to be involved in the legislative process“.

To use the
term “technical default” is to adopt another Tea Party talking point. The point to watering down the reality of default with
“technical” is to make default seem permissible and not really a big
deal.

So, Mr.
Obama has every reason to hold his ground, and will almost certainly do so. The
“smart” money is no longer with him, however. The money markets are beginning
to hedge their bets on US Treasury debt. From the WSJ
 on Tuesday:

The WSJ
article continues: (emphasis by the Wrongologist)

Finally,
from Paul
Craig Roberts:

Roberts
goes on to say:

Too few of these
“New Economy” jobs have appeared in US payroll statistics, or in the Labor
Department’s projections of future jobs. Corporations, economists and
policymakers simply agreed with the give away of a good chunk of the US economy
to enhance corporate profits.

One result
has been to create in the US the worst distribution of income of all developed
countries. US median family income has
not increased for a quarter of a century. The lack of consumer income
growth is why 5 years of massive monetary stimulus by the Fed and fiscal
stimulus by the government have not brought full economic recovery.

Our real
crisis will not be addressed unless the factionalism dies. Jobs must be created
and the wars must be stopped. Tax receipts have to increase. But powerful
organized political interests oppose doing anything about these measures.

So,
Congress will pass a new debt ceiling and the real crisis will continue.

Another
week where America proves that we don’t deserve nice things. Our government can’t
get out of its own way; we will likely see a government shutdown, a perfectly
avoidable self-inflicted wound. We may see a default on our debt as well, due to Tea Party nihilism. By
utilizing the dual threats of a government shutdown and a default on the debts
owed by the United States, House Republicans have moved far beyond traditional
political horse trading and into the realm of government by extortion.

How
exceptional are we right now? Use the quote on the church sign to craft your
own homily:

Republican Logic:

Economic Terrorist takes over the Senate:

Now they are “phone friends”:

The reason there was no handshake this week:

Francis tries to move the agenda:

What’s
Wrong Today:

Turkey
is an ally of the US, it is member of NATO; it has hosted American nuclear
weapons since 1957.

According
to Turkey Wonk, the US deploys as
many as 70 nuclear weapons in 24 underground vaults at the Incirlik air base.
We used our military presence in Turkey to signal to Russia at the time of the Cuban Missile
Crisis
in 1962 when we traded the removal of missiles in Cuba for the removal of
missiles in Turkey.

We
placed Patriot missile batteries on the ground in Turkey in January, ostensibly to
protect its cities on the Syrian border from missiles fired from Syria. The
Wrongologist visited Turkey in March, and wrote:

When Recep
Tayyip Erdogan, Turkey’s prime minister, was returned to power in 2011 for his
third successive term, he soon ran into trouble with his increasingly illiberal
rule. The spark was Mr. Erdogan’s plans to remove Gezi Park near Istanbul’s Taksim
Square. Five protesters, most of them from the Alevi minority, died.

Mr.
Erdogan’s reputation had already been damaged by Turkey’s habit of jailing
journalists (more than in any other country). His ranting that the
“international interest-rate lobby” (Jews) and their Western media stooges had
orchestrated the protests supported claims that he might be losing his grip on power.
Mr. Erdogan even banned political slogans at football matches.  

Turkey’s
GDP has grown at a 5% average since the AKP took power in 2002. Per capita
income tripled during the same period, but the economy is not the shining star
it once was. The Wall Street Journal reports:

Turkey’s
total foreign debt has nearly tripled since 2002 to $350 billion, more than
half of which must be repaid or rolled over within one year. That puts
short-term liabilities at about a quarter of Turkey’s GDP, two to three times
more than Brazil and India.

A large
part of the AKP’s political appeal has come from its decade of economic
success, but the years of easy growth may be over, and that has political consequences.
MetroPoll, one of Turkey’s leading pollsters, said support for the AKP slipped
to 43% in July from a peak of 52% in December 2011. Still, Mr. Erdogan is
likely to hold on to power.

Time
for some regional perspective:

In
regional affairs, Mr. Erdogan has blamed Israel for the coup in Egypt which
ousted his ideological soul mate, Muhammad Morsi. Erdogan and the AKP see
themselves as a model for the Muslim Brotherhood (MB) and have engaged with the
regional MB parties to this end, principally in Egypt.

The
AKP’s idea that they are a role model is based on their own example: If they
could moderate and come to power through democratic elections, like-minded
Egyptian and Syrian MBs could do the same in Cairo and Damascus. This explains
why Ankara was unhappy with Washington’s response to the ouster of the
government of Mohamed Morsi, issuing a rare public rebuke of Washington, blaming
the US and the West for the bloodshed in Egypt.

There
are four dominant Muslim countries in the Middle East: Turkey, Iran, Saudi
Arabia and Egypt. In the pre-Arab Spring period, they challenged each other, promoting opposing values. The
Arab Spring expanded the scale and scope of these regional rivalries. First,
the uprisings weakened the authoritarian states in the region. The Syrian civil
war is a case in point.

Second,
Egypt’s paralysis took it out of the four-way regional game. Political
polarization and a weak economy has made Egypt just another theater for
regional competition among the three remaining Muslim powers.

Turkey
used to look at the Middle East from the West. It has been in negotiations to
join the European Union for decades, but
after Gezi Park, Germany froze the talks, and a January survey by the Centre
for Economy and Foreign Policy Research, an Istanbul-based think-tank, found
that 66% of Turks think the country should drop its request for full membership.

According
to a report from Trans Atlantic
Trends,
completed in June, 2013, 64% of Turks held an unfavorable opinion of the US, up
7 percentage points from their 2012 survey. Now, Turkey looks east, rather than
exclusively to the west, it has embraced a new stance towards the Middle East,
looking at it from the AKP’s largely pro-MB vantage point. From CNN:

This
tri-axial Middle East is vying to control the three weak states of Lebanon,
Syria, and Iraq, whose borders are increasingly bleeding together. This creates
new tactical alliances. Although Turkey and the Saudis support different camps
in the opposition in Syria, they are, nevertheless, united against Iran. At the
same time, Ankara and Riyadh challenge each other in Egypt with Turkey standing
with Morsi’s Muslim Brotherhood party and the Saudis with General Al-Sisi’s
government.

The
US is allied with two of these three players in the Middle East. Iran is the
outlier for America. For Iran, Syria is the linchpin of its effort to extend
beyond a Shia-governed Iraq. Turkey stands with the MB, the US, and as the
Economist reports, is attempting to build a permanent
relationship with the transnational Kurds:

Iraq’s
Kurds are wary of Baghdad, and have edged closer to Ankara, building on the energy
corridor already being developed between them. The Syrian Kurds, too, are
seeking Turkey’s protection. Turkey’s recent peace talks with its own Kurdistan
Workers Party (PKK), which holds sway among not just Turkish Kurds but also
Syrian Kurds, will help this rapprochement.

So,
Ankara’s clout among the Kurds may make its success in the region larger, and more
permanent.

What do we really know about our long-time ally, Turkey? Their domestic and
regional strategies are in motion, like those of the other major players in the
Middle East. Both of our allies are majority Sunni Muslims. So is al-Qaeda. The
Sunni-Shia
Divide exists throughout the Middle East, and whenever we have followed a
sectarian-only strategy, it has bitten us badly.

But,
Americans always want to reduce problems to their simplest: For George W. Bush,
it was telling other countries that “you are either with us or with the terrorists”.
That was both simplistic and troubling, since few nations are ever really WITH
us. And Mr. Bush didn’t seem to understand the difference between Sunni and
Shia.

There
are pockets of anti-American/anti-Western sentiment everywhere and incidents
will happen. We can’t default to armed intervention every time if we aspire to
remain a great nation.

Wise
up, America! Learn something about the countries we depend upon.

Learn
to accept some ambiguity; learn to be a team player.

What’s Wrong Today:

The Very Serious People (VSP) say that that US credibility is on the
line in Syria. Now the question is, to bomb or not to bomb. The VSP also say that
the credibility issue is caused by Mr. Obama’s vacillation over what to do about Syria.

Two years ago, he said that Syrian President Bashar al-Assad must go.
Last year, he drew the now-infamous “red line” on chemical weapons use.

Then, after chemical weapons were used on civilians, most likely by the
Assad regime, Obama called for military action. Then he punted the decision to
the Congress, which the VSP say, hurt Mr. Obama’s credibility.

Merriam-Webster defines credibility as “the quality or power of
inspiring belief.” Applied here, it means that when you draw a line in the
sand, you have to be willing to fight when that line is crossed.

Perhaps we
should take a broader view.

It is clear that our
credibility has been in free fall since George W. Bush was president. We, along
with the rest of the world will be paying for his willfully destructive
behavior for generations. Our credibility is not necessarily going to improve
regardless of the decision in this instance; the world thinks that we simply
aren’t trustworthy anymore, given past and expected future body counts. It won’t change,
regardless of whatever the obvious, or not-so-obvious facts are in the case of
CW use in Syria.

So the questions are:

1. What
are the likely consequences of going it alone?

2. What
are the likely consequences of working with the UN?

At the heart of
the current debate in DC is whether a limited missile strike would make any
difference. No one is arguing that we should work within the framework of the
UN. The near-unanimous opinion is America needs to intervene. Yet, from the
porches of America’s heartland to the marbled floors of the Capitol, the
consensus is that a limited missile strike is more likely to aggravate matters rather
than solve anything.

How
will going into Syria alone improve our credibility? We have yet to see a coherent answer that looks better for our
credibility than a coherent answer to #2.

One way we could
improve our global credibility is by leaving
this decision to the UN. Let them build the evidence, make the case, condemn
the current regime, and along the way, embarrass the Russians and Chinese who support Assad. Even
if the UN fails to build the case, if the evidence isn’t there, the ideal outcome is that an
international norm is upheld. And
you keep your leverage with the global community and against North Korea and
Iran on the subject of WMD.

Either way, let the
war run its course. Work to get a Sunni from within the regime or the military
to replace Assad explicitly because he killed his own people. This would remove much of the rationale
for many opposition groups to keep fighting and it might permanently tilt the
conflict to the one political entity that can maintain control over the CW
stockpiles.

If we go it alone,
the worst outcome is that the Syrian regime loses control of some of their CW stockpiles.
They might then get distributed around the Middle East by trans-national
anti-American (maybe anti-everyone) entities, precipitating a race between
Russia, Iranian proxies and the West to control the CW stockpiles on the ground.
Along the way, there could be gassing of both civilians and military personnel in
Syria and/or abroad and possibly, a direct conflict between the nuclear states.

Secretary Kerry says,
blowing up some of Assad’s toys will certainly make him very sorry (kind of like giving your kid a time-out) and give
others pause while at the same time holding us above the civil war. But it’s still unclear how a strike that
doesn’t alter the dynamic of the war (or give aid to people we really don’t
like) is somehow better than a strongly worded letter or a UN resolution when
it comes to sending the world a message about using chemical weapons.

Despite
the thinking of the VSP’s, seeking Congressional approval for a limited act of
war (which is what lobbing missiles into another country is called) is laudable,
and may actually boost our global credibility.

It is
useful to remember that there was a vigorous debate, in both Congress and the
public, during the buildup to Operation Desert Shield and the Gulf
War in 1991. Despite widespread opposition, both operations went ahead. Eleven
years later there was a vigorous debate both in Congress and in public, during
the buildup to the invasion of Iraq. A month before the invasion, Feb. 15, 2003, was the largest single day
of peace protests in the history of both the US and of the planet.
Despite that widespread opposition, the operation went ahead.

Now, once again, 11
years after the 2002 Authorization for the Use of Military Force (AUMF), there
is vigorous debate, in both Congress and in the public and there is widespread opposition.

There were all the
“little” wars such as Kosovo, Afghanistan, Grenada, and Panama where
the debate was skipped and war also came.  

None of
these events, whether debated or not, did anything for our “credibility”.

As responsible
citizens, we learned the difference between Sunni and Shia Islam, we then
learned about Wahabism and Salafism and about Copts and Kurds while the “deciders”
learned more about how to line up with this year’s “friends” and
“foes.” Oh, and how to play
video poker on the iPhone during hearings.

And all of us who
made an effort to become as informed as possible and who engaged in those
debates in opposition to the mad rush to war were chumps.

Chumps in denial
about what keeps the US economy running.

We have not left the
hubris of being “the world’s sole superpower” behind, even though W. ended
our ability to be that country.

We were the people
with no credibility: Chumps.

Chumps who, at a tender age listened to Gandhi and MLK,
Jr. Two people walked their talk.

People with real credibility.    

There had been
earlier marches, but the 1963 March on
Washington for Jobs and Freedom was on a scale so much larger than
anything that had come before that it is rightly thought of as a singular moment: An event so significant that the history of the civil rights movement can be
measured in terms of before the March, and after the March.

The day is
remembered almost exclusively for MLK’s “Dream” speech, famously delivered to
the throngs from the steps of the Lincoln Memorial.

And as Rick Interlope writes in The Nation, in a country that
ignores its history, the march is remembered, and mostly, it is remembered
clearly. The day before the march, white America was very nervous about what
would happen if hundreds of thousands marched in DC. The day after, many in
America had bough into the dream.

(far left) Bayard Rustin, march organizer

Life Magazine reports that “I Have a Dream” had
been used before by MLK. He had delivered a speech to 25,000 people in Detroit
several months before that included several sections and phrases that he would
include, verbatim, in his address on August 28, 1963.

 

A. Phillip Randolph was the nominal head of
the March on Washington, but it was really
organized and managed by Bayard Rustin. Randolph led the Brotherhood of Sleeping Car Porters, the first predominantly
black labor union. In the early civil-rights
movement,
Randolph led the March on Washington Movement, which convinced President
Franklin D. Roosevelt to issue Executive
Order 8802
in 1941, banning discrimination in the defense industries during World War II.  After the war, Randolph pressured President Harry
S. Truman to issue Executive
Order 9981
in 1948, ending segregation in the armed services.

Dr. King
became a leader of the movement post-march.

At the
core of MLK’s speech was a simple, radical, but compelling argument. King
explains that the demonstrators have come “to cash a check.” America’s
constitution and declaration of independence were:

His
argument was that the demonstrators were asking merely for the rights
guaranteed to all Americans by the country’s founding documents. Segregationists,
therefore, were not just bullies and bigots; they were failures as Americans,
because they misunderstood or ignored
the country’s fundamental premise.

King presented
his “dream” as the American dream. Dr. King’s speech laid out four major
grievances:

• Discrimination
  by private businesses and local government

• Barriers
  that kept black Americans from voting

• Unfair
  treatment by police

• Lack
  of social mobility and economic opportunity

Dr. King
said:

The Civil
Rights Act of 1964 directly addressed the first grievance. Signed by Lyndon
Johnson 10 months after the march, it banned businesses from refusing to serve members of
the public on the basis of race; it prohibited the denial of access to public
facilities on the basis of race; it authorized the attorney-general to sue
local authorities to force school desegregation; it banned discrimination by
the recipients of federal funds and it outlawed discrimination by businesses
employing more than 25 people, creating the Equal Employment Opportunity
Commission (EEOC) to respond to such complaints.

The Voting
Rights Act of 1965 addressed King’s second grievance. It outlawed poll taxes,
literacy tests and other practices designed to prevent blacks from voting. Until
key sections were struck down by the SCOTUS in June 2013, it gave the Justice
Department and federal courts the power to veto proposed changes to voting
procedures in jurisdictions with a history of discrimination.

The acts
had lasting political effects: In 1963, Congress had five black members, all
representatives from northern and western cities. Today, roughly one in ten
members (40) of the House is black; they come from 25 states and territories. In
the 2012 presidential election, black voter turnout exceeded that of any other
racial category.

Little at
the time was done politically to address the economic issues raised at the march,
which included a call for a minimum wage, an end to discrimination in federally
funded housing and that “…every person be given training and work with
dignity to defeat unemployment and automation”.  

Measured
against conditions at the time of Dr. King’s speech, black American have made
real progress:

• In
  1966, the earliest year for which comparable data is available, 42% of
  African-Americans lived in poverty; in 2011, 28% did, while the national poverty rate for all races was 15%

• The median family income for blacks
  was $22,266 in 1963. It was $40,495 in 2012

• In 1963, 25.7% of blacks age 25 and older had completed at least four years of
  high school, while in 2012, 85.0% of blacks age 25 and older
  had completed at least four years of high school

• In 1963, 365,000 blacks had at least a bachelor’s degree. In 2012, that number
  had grown to 5.1 million

But, measured
against the progress of whites in America, black progress looks less
impressive. Pew Research reports several
areas where the gaps have widened: 

The
bursting housing bubble took a far greater toll on black families than whites,
reducing their median wealth, according to the Pew Research study, by 53%
between 2005 and 2009 (adjusted for inflation). Over the same period white
median wealth fell by just 16%. In 2009 more than one-third of black households
had zero or negative net worth, compared with 15% of white households. In 2011
the median household wealth (comprising cash, investments, homes, cars and
other assets) for America’s white families was $110,500. For blacks it was $6,314.

PBS’ Report on Race reminds us that the
American government provided low-interest loans to returning veterans and other
white Americans after World War II. This created a boom in home ownership and
helped suburbanize America; but blacks, 125,000 of whom served
overseas in WWII, were excluded from participating. At the same time,
the government was building high-rise public housing for minorities in inner
cities. The segregation in America between a largely dark inner city and a
largely white suburban community is not something that just magically happened
from market forces. It was part of government policy in the 1950’s and 1960’s. The
chart below shows that less has changed in population above the poverty line or
in home ownership:

The chart
below shows that the gaps have narrowed in life expectancy and high school
completion. Interestingly, black voter turnout exceeds that of whites:

The
civil-rights era has not ended: Blacks remain likelier than whites to lack
jobs, be poor, get arrested and serve time in prison. Residential segregation
of blacks from other races still persists. After years of narrowing, the gap
between black and white median incomes has widened since 2000, and the gap in
household wealth is enormous.

But the job
of fixing what remains may now fall to different hands. For the past 75 years, the responsibility for
ending segregation and repealing racist laws was mainly the federal government’s.
But with a divided government, with a conservative Supreme Court, the ability
of the federal government to make a difference is much less today.

On the other hand, the federal government’s attack on the
Bill of Rights impacts all races and blunting that attack may become our next
“dream”. We sheep must again become wolves, or as 73 years old Rep. John Lewis (D-Ga.) said at a rally
yesterday:

He is one
man, he is speaking of only one of the Bill of Rights.

There is so
far to go, just to get back to where we were. The fight is never over.

The
Wrongologist believes it will take another non-violent era, a mass effort by
the people to take this country back from the plutocrats and corporatists.

What’s
Wrong Today:

The Wrongologist has
written here
and here
about the problems with CEOs chasing short-term shareholder value, which remains
pervasive in large organizations.

His thesis
is that today’s version of capitalism no longer functions in a manner that
makes all stakeholders better off. Let’s remember that a firm’s stakeholders include
the shareholders, employees, customers, suppliers and the communities in which
the firm operates.

Take a
look at the ratio of corporate profits (after taxes) to GDP since 1950:

Without
the inconvenient interruption of the Great Recession, corporate profits have
headed almost straight up since 2000. Let’s also remember that we still have
more than 11.5 million Americans unemployed and that we have 3 million fewer
jobs today than in 2008.

Now the Financial Times reports that the theory
of maximizing short-term shareholder value has a new feather in its cap: it is
responsible for killing the economic recovery that should have occurred after
the financial meltdown of 2008.

Robin Harding, in his
article entitled “Corporate investment:
A mysterious divergence”
[gated @FT.com] pinpoints the role of shareholder value theory in undermining the US economic
recovery. He asks a question that
has puzzled the world’s top economists: why
is net investment at 4% of output when pre-tax corporate profits are now at
record highs – more than 11% of GDP?

In
standard economic theory, this makes no sense. When profits go up, companies
should find new investment opportunities to lay the groundwork for even more
profits in future. In turn, that investment should create jobs, generate more
capital goods and lead to higher wages. That’s how capitalism is meant to work.

So
why isn’t it happening? Mr. Harding explores the leading scapegoats for what’s
gone wrong—regulations, Obamacare, tax policy, fear of another financial crisis
and so on—and shows why they don’t add up. Ever since the financial crisis,
corporations have hoarded an increasing amount. The pile reached $2.2 trillion
at the end of last year, up from $1.5 trillion at the end of 2007, according to
data from the Federal Reserve. The phenomenon of firms sitting on mountains of
cash and unable to find anything useful to do with them reflects management
processes constrained either by fear, or lack of imagination.

Harding
references a study by economists from the Stern School of Business and Harvard
Business School, Alexander Ljungqvist, Joan Farre-Mensa, and John Asker,
entitled “Corporate Investment and Stock Market Listing: A Puzzle?” that
compares the investment patterns of publicly traded companies and privately
held firms. It turns out that the lag in investment is a phenomenon of the
public companies more than the privately held firms.

From the
Article’s Abstract:

Ljungqvist,
Farre-Mensa and Asker found that, keeping company size and industry constant, private US companies invest nearly twice
as much as those listed on the stock market: 6.8% of total assets versus just
3.7%.

They also found
that private firms’ investment decisions are
more than four times more responsive to changes in investment opportunities
than are those of public firms.

Finally, they
found that firms that recently had an Initial Public Offering (IPO) are significantly more sensitive to
investment opportunities in the five years before they go public than they are afterwards.

Harding
concludes:

The
argument offered by executives that “the stock market made us do it” has the
same legitimacy as “the dog ate my homework”. The Wrongologist has two words
for them: Warren Buffett.
There are many ways to play the investment game. It is becoming increasingly
difficult to win at the game when the average investor is working against
computer algorithms and split second trading.

A
year ago in Big,
Bad and Wrong Ideas, the Wrongologist argued that the idea that the mandate
that companies must maximize return to shareholders needs to be reassessed. He
cited the following:

• Today’s shareholders are
  the most mobile of corporate stakeholders: High frequency trading
  represents 70+% of today’s stock trading by volume. High frequency
  shareholders hold their positions for fractions of a second, so they are
  only interested in corporate strategies that maximize short-term profits
  and dividends.

• Professional funds managers own
  large chunks of equity in public firms. They have a free hand to get
  wealthy because they earn management fees tied to the fund’s size, without
  real responsibility for the longer term performance of the corporations whose
  equity they hold.

• Some companies even ignore
  votes by shareholders that turn directors out of office. So the power of
  small shareholders has diminished over time.

But public
companies like Amazon [AMZN], Whole Foods [WFM] and Costco [COST] have
successfully pursued customer value, despite the pressures of Wall Street. Isn’t
it about time we stop compensating corporate leaders for meeting their
quarterly numbers and instead shift the focus of business to its true goal of
adding value to all stakeholders of their firms?

Instead,
the short-term focused CEOs:

• Focus
  their R&D on current cash cow products without creating a transition to new
  products or technologies

• Change
  their company’s benefits plans to the detriment of the workforce, to get higher profits now, but high turnover and low morale later.

• Acquire
  companies that have good public image and cash flow but are poor fits with the
  greater organization

So, Corporations’ short-term
earnings mentality has produced a series of “accomplishments”:

• It
  has led to “profits” based on cutting corners with customer loyalty

• It
  is responsible for offshoring of manufacturing, thereby destroying a major
  segment of the US
  Economy

• It
  has even undermined US
  capacity to compete
  globally

Capital is
entirely triumphant in the United States from a political perspective. There is
no one in Congress with the political will to even raise this issue in a
serious way, much less address it substantially. In decades past, labor unions,
farmers, and small businesses had sufficient political strength to
force congress to pass laws limiting the power of big
business. That is all long gone.

When
everyone thinks the long term future is someone else’s problem, there will be
no long term future.