February 17, 2017

The US Corporate Tax Structure Is an Incentive to Send Jobs Abroad

The way the US currently taxes corporate income is toxic for American workers when coupled with globalization. It turns free trade, which I think is a good thing, into unfair trade. It is a bizarre structure which only its parents – lobbyists and those corporations which benefit from it – could love.

Problem 1: in theory, the US taxes domestic corporations on their worldwide income with a deduction for foreign taxes paid. But, besides the obvious problem of ever discovering what the true income is in places immune from audit, there’s a huge loophole. Foreign income is NOT taxed until it’s brought home. Obviously, this is incentive NOT to bring the foreign income home if there’s any use at all for it abroad; this costs tax revenue.

Even worse, there’s an incentive to turn domestic income into foreign income. Here’s one easy and very popular way: transfer corporate patents to a subsidiary in a low-tax country like Luxembourg or Ireland and then charge the US corporation huge fees for the use of the patents. The overall corporate earnings don’t change; they just get shifted to the low-tax subsidiary – but they don’t get taxed “until the profits come home” -  like never or not until Congress passes a “tax holiday” to get the money back into the country.  This causes indirect job loss (as well as tax loss)because the incentive is to invest these profits abroad rather than here

But there’s worse. If the corporation build a subsidiary factory in the low-tax jurisdiction and charges a high price to the parent company for goods it buys from that factory, these goods are cheaper to the corporation as a whole than if they were purchased in the US – even if the cost of manufacture is actually the same – because no present taxes are due to the US on the profits of the foreign subsidiary. Now American workers not only have to compete with foreign workers who may or may not be paid less, they also are disadvantaged by their own tax code. That’s a high hurdle to climb.

Problem2: Our competitors mostly use a tax system which rewards exports from their countries at the expense of imports. It’s called a value added tax (VAT) and it’s rebated on exported goods (if you travel and are as diligent as Mary, you may have claimed your VAT rebate at the airport before coming home). The US taxes export sales at the same rate as imports. That sounds fair but it isn’t if everybody else is favoring their exports. The effect is that goods imported to the US are cheaper by the amount of tax that was rebated on them than goods made in the US which are fully taxed. Once again, American workers are paying the price for this disparity in tax policy between us and our trading partners – they either have to get paid less or lose the sale.

Mea culpa: I blindly assumed globalization is a good thing because it IS in economic theory. It took the revolt which propelled Sanders and Trump and even made Clinton a protectionist (after she wasn’t) to make me look harder at whether globalization has resulted in fair trade as well as free trade.

Next post: is a border-adjusted tax the answer?

February 15, 2017

It Depends How You Ask the Question – The Asian Disease Problem

Which explains a lot of where we are today

Quotes are from Michael Lewis’ The Undoing Project describing the work of Israeli psychologists Daniel Kahneman and Amos Tversky.

“Problem 1. Imagine that the U.S. is preparing for the outbreak of an unusual Asian disease, which is expected to kill 600 people. Two alternative programs to combat the disease have been proposed. Assume that the exact scientific estimate of the consequence of the programs is as follows: If Program A is adopted, 200 people will be saved. If Program B is adopted, there is a 1/ 3 probability that 600 people will be saved, and a 2/ 3 probability that no people will be saved. Which of the two programs would you favor?”

An “overwhelming majority” of people chose Program A which saves 200 lives for sure.

Now ask this question:

 “Problem 2. If Program C is adopted, 400 people will die. If Program D is adopted, there is a 1/ 3 probability that nobody will die and a 2/ 3 probability that 600 people will die.”

An “overwhelming majority” of the group given problem 2 chose Program D. Note that Program A and C are identical in their outcomes as are B and D. The questions are just framed differently. When A was framed as a gain, people chose it; when it was phrased as a loss (as it is in C), people rejected it.

This is scarcely new news. Every salesperson worth his or her salt knows that fear sells. Sales 101 (which I only attended by osmosis) teaches “first create anxiety in the prospect.” IBM famously used FUD (fear, uncertainty, and doubt) in the early mainframe days to convince IT managers not to buy cheaper computers from competitors like Burroughs and Sperry Rand (remember them?). “You’ll never get blamed for picking IBM”… but, if the cheap computer you chose breaks, ….

As we’ve seen, a political campaign based on xenophobia and fear of job loss (they overlap but they’re not the same thing) can be successful against long odds. And as we see now, fear of President Trump is a potent fund-raising theme and impetus to demonstrate even where it is not clear exactly what the demonstration is against.

Framing may explain why so many polls about BREXIT and Trump were wrong. Probably unconsciously, pollsters phrased their questions in a way likely to elicit the response they expected. The lesson of the quotes above is that people respond to the framing of a question, not to its actual content. I will never again pay any attention to a poll unless I see the exact question that was asked.

More broadly framing may explain why some people persist in socially dangerous anti-vaccination behavior: they are avoiding what is explained to them as a risk, which we tend to do at almost any cost. Framing may also explain why discussions on what actions should or shouldn’t be taken to avoid climate change are shouting matches rather than exercises in reason: the two sides have the question framed differently in their minds.

More on The Undoing Project is here.

February 13, 2017

Don’t Believe the Experts

A frightening study

We know from recent experience that political experts don’t have a very good track record but we’d all like to think that a doctor’s opinion is a fact. This scary old story is from Michael Lewis’ new book The Undoing Project.

Way back in 1968 Lew Goldberg published a study of how consistent doctors were in diagnosing ulcers from x-rays. Here’s how Lewis tells the story:

“The researchers then asked the doctors to judge the probability of cancer in ninety-six different individual stomach ulcers, on a seven-point scale from “definitely malignant” to “definitely benign.” Without telling the doctors what they were up to, they showed them each ulcer twice, mixing up the duplicates randomly in the pile so the doctors wouldn’t notice they were being asked to diagnose the exact same ulcer they had already diagnosed….

“More surprisingly, the doctors’ diagnoses were all over the map: The experts didn’t agree with each other. Even more surprisingly, when presented with duplicates of the same ulcer, every doctor had contradicted himself and rendered more than one diagnosis: These doctors apparently could not even agree with themselves. ‘These findings suggest that diagnostic agreement in clinical medicine may not be much greater than that found in clinical psychology— some food for thought during your next visit to the family doctor,’ wrote Goldberg. If the doctors disagreed among themselves, they of course couldn’t all be right— and they weren’t.”

The really interesting – and scary –  part for me is that each doctor contradicted himself or herself at least once.

1968 was a long time ago. We have much better imaging technology. It’s likely that doctor training has gotten better. But my point is about experts. These were the experts of their time.

Now here’s the good part of the story if you’re a nerd like me. The same researchers asked the same doctors how they made their diagnoses. They took the doctors’ answers and wrote a simple computer algorithm to do the analysis the way the doctors said it was supposed to be done. The computer did better than even the best doctor in the group!

Lewis’ conclusion is “You could beat the doctor by replacing him with an equation created by people who knew nothing about medicine and had simply asked a few questions of doctors.” But he is also an expert and he isn’t telling us 1) how the programmers decided what method to use when doctors disagreed and 2) how the model got access to the data; back in 1968 computers read punch cards, not pictures. I suspect some human read the pictures and coded them for the computer so that human actually had a hand in the diagnosis.

You could conclude that the doctors didn’t follow their own prescription or that that the algorithm was crowd-sourced wisdom and therefor better than what any one doctor would do. You could also say we still need experts to come up with the rules which become the programs which do the diagnoses. The latter was true but artificial intelligence and big data available to be processed is all about generating rules. That’s how cars learned to drive themselves.

But surely we need experts (nerds) to write the programs that process the data that make the rules that do the diagnoses… but for how long?

February 09, 2017

No Job is Bad

Raise the Minimum Wage AND Remove Disincentives for Work.

This is a radical non-partisan proposal; probably both the left and right will hate it.

The national and Vermont unemployment rates ignore huge numbers of people who could be working but aren’t – the people who aren’t actively looking for jobs. At least part of the cause of the drug epidemic raging in America is the demoralizing effect of joblessness. The economy is held back both because potentially productive people are not productive and because we have a vast and duplicative welfare apparatus to support both those who aren’t working and those whose jobs don’t pay them enough to get by. Children who grow up in a house without a wage earner are less likely to successfully enter the labor force themselves.

For many people, not working is currently a good personal economic decision even if it is a poor lifestyle decision and bad for the economy as a whole. The jobs they can get pay less than the benefits they are eligible for if they don’t work. We need to address both sides of the equation: raise the pay for entry level jobs and reduce or eliminate benefits for not working – except, of course, for those who can’t work.

These two steps have to be taken together. Together they will be very powerful. This is part of how we put America to work again.

Let’s look at some of the objections that will be raised:

  1. Employers like restaurants can’t afford to pay more. The truth is that they can’t afford to UNILATERALLY pay more. If McD pays 30% more than Burger King, it will price itself out of business. If both pay 30% more, the price of fast food will go up but neither of them will be at a competitive disadvantage.
  2. Prices will go up. This is true (see above). But taxpayers are subsidizing the low wages and low hamburger prices by paying needed supplements (welfare) to those who can’t get by on what they’re paid. If wages go up, it IS essential that this be reflected in a reduction or elimination of benefits for those who will now be able to support themselves. We will pay more for hamburgers but less in taxes and less in the social and dollar cost of permanent unemployment. One over-simplified way to look at this is that the middle class is subsidizing low wages to benefit the 1%.
  3. Some jobs will disappear if the minimum wage is raised. This is also true; the incentive to automate will get even larger. However, a stronger economy will produce more jobs; people who earn more spend more. Right now in Vermont there are MORE minimum wage jobs available than people willing to take them – look at the help-wanted signs in every fast food restaurant. Employment - real employment – can go up even if some jobs are eliminated. However, it is important that these steps be taken at a time when there are jobs available. This isn’t a strategy for a recession; it’s a strategy to make us stronger before the next recession.
  4. It will be harder for kids to find part time work. This is true and needs thought. An apprentice program with a lower minimum wage would be good for kids but might drain too many jobs from adults. Overall I think it’s most important that kids have the example of working parents.
  5. It’s inhumane to tell people they will lose their benefits if they don’t take jobs they don’t find fulfilling. No Job is Bad. It is very bad not to have a job. Any job which is safe and pays a living wage is better than no job. It is inhumane to discourage people from working with our current policy of an historically low minimum wage AND high benefits for not working. It is inhumane to force those who are working to also become dependents of the welfare system to get by.
  6. What we really need are more higher-paying jobs and people trained to fill them. Yeah, we need those things, too. But we must immediately address the problem of people without fancy skills. Moreover, there is no better job training program than a job.
  7. It’s not so simple. We’ll need a transition. We’ll need to make sure people don’t fall through the cracks. Health care is still “unaffordable”. Child care is an issue. But the tradeoff of higher wages for lower subsidies needs to be set in law and set in motion.

Because we do have both unfilled entry-level jobs in Vermont and people who have left the labor force but can work, we are in a position to implement this here now. We don’t need permission from the Feds. We might set a good example, which we always like to do. The motto might be Everyone Works for a Living Wage.

February 06, 2017

Good news: Climate Change Page Still on EPA Website

Bad news: It’s still misleading

Last week Reuters ran a story headlined “Trump administration tells EPA to cut climate page from website: sources”. That would be a bad thing. However, at least so far, it hasn’t happened. The climate change page still has a link on the front page of epa.gov and the link is still live. Moreover, noaa.gov, the website of the National Oceanic and Atmospheric Administration, still has a link on its front page saying “2016 marks three consecutive years of record warmth for the globe”.

Good. We really don’t want to suppress information. But I have a complaint: both the NOAA headline and the NASA report pointed to by the EPA site are inaccurate and misleading in the same way as they were under Obama. This isn’t just a quibble; what’s happening climate-wise is important and the government ought to be reporting it accurately. These websites shouldn’t be used for propaganda of any kind.

The inaccuracy is that the difference in measured temperature between 2015 and 2016 was less than the margin of error in the methodology used to derive the number. NOAA says that temperatures in 2016 were .07 degrees Fahrenheit higher than in 2015 (NASA doesn’t give the actual difference in their story). But NASA does say that the likely uncertainty in recent annual data is .09 degrees F. This error margin is actually much less than what is claimed in the United Nations IPCC report – about .36 degrees F. Either way, there is no statistical difference in the average temperature for 2015 and 2016. That means that no scientist should say that one year was hotter than the other. The data is not conclusive.

The UK Meteorological Office – firm believers in anthropogenic climate change – nevertheless manages to be accurate in reporting the data; their headline is “2016: one of the warmest two years on record”. That is what the data shows. They are clear that the difference is less than one-tenth the margin of error.

Why does it matter if 2016 was the hottest year in the relatively short time we have been collecting such data or only tied for hottest? Well, it obviously mattered enough to whoever wrote the stories for NASA and NOAA to violate the norms for reporting uncertain data. It matters because we know we’re in a warming trend since the last ice age AND we know we’re adding greenhouse gasses to the atmosphere AND we need to make important, expensive decisions based on how much of warming is attributed to those gasses and how much is a long term trend we may not be able to influence.

According to a Wall Street Journal column by Holman Jenkins, leaving the uncertainty interval out of climate press releases started in the second year of the Obama administration. The Trump administration can improve public knowledge of scientific information by making sure it is reported accurately and completely on government websites. Press which is, rightfully, obsessing about government telling the truth should make sure its reporters know enough to ask the right questions when they get a “scientific” press release from a government agency. The Trump administration isn’t the first to have an agenda to support and it won’t be the last.

February 03, 2017

Worried About an Imperial Presidency? Support Gorsuch

If you’re worried, as I am, that President Trump will both threaten civil liberties and expand the power of the Presidency even further than Obama took it, you should support the nomination of Neil Gorsuch to the Supreme Court. His record indicates that he will defend the constitution and our rights under it.

Neal Katyal was an acting solicitor general in the Obama administration. He knows Gorsuch both personally and professionally. Here’s some of what he wrote in a New York Times op ed:

“I am hard-pressed to think of one thing President Trump has done right in the last 11 days since his inauguration. Until Tuesday, when he nominated an extraordinary judge and man, Neil Gorsuch, to be a justice on the Supreme Court…

“I have no doubt that if confirmed, Judge Gorsuch would help to restore confidence in the rule of law. His years on the bench reveal a commitment to judicial independence — a record that should give the American people confidence that he will not compromise principle to favor the president who appointed him [emphasis mine]. Judge Gorsuch’s record suggests that he would follow in the tradition of Justice Elena Kagan, who voted against President Obama when she felt a part of the Affordable Care Act went too far. In particular, he has written opinions vigorously defending the paramount duty of the courts to say what the law is, without deferring to the executive branch’s interpretations of federal statutes, including our immigration laws.”

Yes, Gorsuch is a conservative in the same way the late Antonin Scalia was; he is a strict constructionist. He does not think it is the job of the courts to rewrite the Constitution to accomplish goals which Congress or the States have not accomplished, no matter how worthy those goals. He does not support executive branch attempts to legislate by misinterpreting statute (see above).

Most importantly, as a strict constructionist, he does not think that court rulings should reflect the personal views of the judges. This makes his personal views on social issues largely irrelevant. For example, he has written that he is against assisted suicide. I do think it should be allowed. If a case on assisted suicide comes to the Supreme Court, I think Gorsuch would vote that states have a right to permit or deny the practice even though he thinks (personally) it should be banned.

The elephant in the room is Roe vs. Wade, the Supreme Court decision that states cannot ban abortion although they can regulate it like any other medical procedure. This decision ended an era of hypocrisy when I was a young adult in which rich guys’ pregnant girlfriends could get abortions (often in Canada) and poor couples had shotgun weddings. Also women had very dangerous illegal abortions. I think this decision got the right result in the wrong way – judicial legislation. The danger in that is now clear: if unelected judges can make law, they can also unmake it.

If Gorsuch is confirmed, the court will have the same liberal-conservative balance it had before Scalia’s death. Justice Kennedy is often the crucial swing vote, although, on any particular issue, the Chief Justice may vote on the “liberal” side – as he did in a key decision on Obama Care. Roe vs. Wade is probably not endangered by confirming Gorsuch. However, if Trump appoints a replacement for a liberal Supreme, it may be. The worst case, I think, is that the court rules that states “may” ban abortion. The good news is that we can all weigh in at the state level.

Some of Gorsuch’s decisions have benefited businesses; others have not. As far as I can tell, he has followed where the law and constitution lead. It is not the role of the courts to achieve any outcome except adherence to applicable law and the constitution. If the law is wrong but constitutional, then the law must be changed legislatively.

Please forget the fact that Republicans did not allow hearings to be held on Obama’s Supreme Court nominee. 1) we’re not going to go four years with filling Supreme Court vacancies; 2) this is very much an inside the beltway issue with senators shamelessly changing sides depending on circumstance.

Here’s what Senator Schumer said back in 2007 at the end of the Bush Presidency: “We should not confirm any Bush nominee to the Supreme Court, except in extraordinary circumstances.”  Way back at the end of the elder Bush’s term, Joe Biden was chair of Senate Judiciary. He said that the President “should consider following the practice of a majority of his predecessors and not name a nominee until after the November election is completed.” There turned out not be a vacancy, but, had there been one, Biden said his committee should consider “not scheduling confirmation hearings on the nomination until after the political campaign season is over.” (these quotes are from a Wall Street Journal story).

The practice of appointing Supreme Court Justices for life is a good one; it makes them independent.  Many presidents have been “disappointed” by the rulings of their appointees. If Trump tries to trample constitutional rights, I think he’ll find Neil Gorsuch an obstacle. We need a constitutional firewall against growing executive power in general and this President in particular.

February 01, 2017

Tough Love in China

Recently I visited my 18-month old grandson and his parents in Lanzhou, China. The sign below is from the playground school he goes to a couple of times each week.


School

I suspect that even this disclaimer would not protect the school from lawsuits in the US when the falling and head-bumping happens.

But I think they’re right. I also think that kids need to eat some dirt as they grow up.

When they get to college, they should be subject to intellectual bumps and bruises. There should be no such thing as an intellectual safe space.

In life they’ll encounter bad bosses, unpleasant co-workers, profound differences of opinions, the difficulties of making an intimate relationship work, and election results they don’t like. If they’ve had their share of bumps and bruises, eaten enough dirt, and learned that good people can disagree, they’ll know that there is a world of room between passive acquiescence and a hissy fit.

January 30, 2017

We Need Infrastructure, Not Another Stimulus Bill

Democrats and President Trump seem to be in agreement that America needs another trillion-dollar stimulus program to build infrastructure. It’s ironic that this rare agreement is also wrong. It ignores the lessons of the last trillion-dollar stimulus package at the beginning of the Obama administration: it didn’t work.  If it had worked structurally, we wouldn’t still be looking at the same problems of decayed and inadequate infrastructure we have today. If it had worked economically, we would have had a much more robust recovery from the great recession.

Why didn’t it work to aim all that money at projects which desperately needed doing? I was Vermont stimulus czar, responsible for trying to make best use of the almost billion dollars of stimulus that came our way. Why isn’t Vermont infrastructure much better because of it? (there have been some improvements in telecom and electric metering because of stimulus dollars but minor compared to what could’ve been).

The problem isn’t lack of money for infrastructure; it’s a regulatory process which makes it take at least 20 years to a medium-sized project, whether that project is funded by the public or private sector.

I wrote the post below at the end of my stimulus career so you could take it as an excuse for not accomplishing more. But I think we need to learn these lessons from not very long ago to make America greatER.

Twenty years of major construction projects are bottled up in regulatory queues. If the time in queue were shortened to a maximum of two years, we'd have a flood of new construction AND much of the infrastructure we need to be competitive in the globalized years ahead. No subsidies from the deficit-ridden federal government are required. Conversely, tax revenue from those directly or indirectly employed on these projects and the economic value of the projects themselves will increase government revenue and help close the budget gap.

The majority of these projects have private sector funding lined up. American corporations are sitting on piles of money, waiting for a chance to invest it for future profit. In the short term, they're not going to hire more people to make more things until demand picks up [now demand has improved]. But, planning for the long term, they will invest in infrastructure for their future growth IFF given the opportunity. How do I know? Because all over America there are pipeline, power grid, oil drilling, gas extraction, broadband, wireless, factory-building, shopping center, and even a few nuclear power plants projects queued up waiting almost endlessly – and, what is worse, unpredictably – for the permits they need to proceed and then the long slog through decades of appeals. [I didn’t know then, of course, that Keystone would be rejected; Dakota Access halted when almost complete; or the Vermont Gas Pipeline expensively delayed after it was approved.]

State and local governments have transportation projects queued up in the same way. Even with a flood of stimulus money, all we could do was permitless repaving; the big projects are stuck in regulatory hell. Nothing in America is shovel ready. The stimulus dollars allocated to broadband and smart metering are just beginning to be spent; these projects may still forfeit their federal funding because of the time required to get permits. Another stimulus bill – besides being unaffordable – would run into the same roadblocks. But, if projects can be accelerated out of queue, credit-worthy states will be able to build them. More significantly, the huge stash of private dollars waiting for opportunity will come into play.

We don't need another "regulatory review". Ask regulators to review their regulations and they'll write some new ones. We need to set a goal that every project gets to yes or no within two years of initial application and remake the regulatory processes at the federal, state, and local levels to assure that the goal is met. Even a fast “no” is better than a twenty-year “maybe”; it frees up money for other projects which may get approved.

We have to redo the laws which allow virtually anyone (anyone who has access to lawyers, anyway) to impose a delay of almost any duration on any project at virtually no cost to themselves but huge cost to the project. BTW, it not just "environmentalists" or people protecting the view from their backyards who delay projects; business is very adept at using regulatory delay to stymie would-be competitors. The law should require anyone who appeals a granted permit to post a bond equal to the cost of delay, such bond to be forfeit if the appeal fails. Note that this does not discourage participation in the initial regulatory process by those opposed to a project.

Faster regulation is better regulation. During a twenty-year approval process, the world changes. Yesterday's projects finally get approved for today's world. Project benefits are delayed; and stop-gap measures have to substitute for larger projects.

A shovel-ready America will be an awesome competitor in a globalized world. We will build the infrastructure we need to link our mines, forests, fields, dams, power plants, and factories – just as we have done at least before with canals, railroads, pipelines, and highways. We'll build 21st century information infrastructure. The projects are already in queue; the money is in hand; but we're not shovel ready.

Related posts:

Energy for Jobs – Vermont Version

What Government CAN do to Create Jobs

Confessions of a Stimulator

January 27, 2017

The Secret of the Twist Off Lid

I have broken the male code and told Mary how to get balky lids off bottle. Since I’ve already betrayed my gender, I might as well make it public.

You know the drill. Woman takes bottle out of fridge or off a back shelf. She wraps her hand around the lid if her hand is big enough, strains to turn, and the lid doesn’t budge. She may try once more with a dish towel around the lid for better purchase. Still no movement.

Woman turns to man assuming one is handy. “Here, big strong boy, please open this for me.”

Man takes the bottle in hand, disdains the dish towel wrapper. The veins pop out in his forehead and his arm muscles (if not covered by fat) ripple. He grunts. “Here, my dear.” He hands her the jar with the now loosened lid.

In words or looks she says “Oh, you’re so strong.”

But it’s fraud! The popping veins and bulging muscles are used, as a magician would, to distract attention from what the hands are really doing. As the torque is ramped up, the top hand wiggles the lid. Every stuck lid yearns to be free. Brute pressure against whatever is blocking the threads rarely helps; but the wiggle lets the lid find its own path to release. It’s all in the wiggle.

Of course, now that Mary can open anything she can get her hands around, I am of even less use during food preparation. That’s the price of being a traitor to my gender.

January 25, 2017

The World Economic Forum at Davos - Continued

The world elite in a happier time.

The World Economic Forum at Davos was probably a happier place in 2000 at the height of the Internet bubble than it was lat week. Back then globalization seemed a huge success (at least to those who were succeeding), the World Trade Center still stood, and Donald Trump was still an iconic playboy (but wasn't at Davos). Even peace in the Middle East seemed a possible dream. There were some anti-globalization protestors then but they seemed like a radical fringe and were held back by the Swiss Police with water cannons, which are very effective on cold nights,

I can tell by the headlines and bylines that many of the same people still attend Davos. I imagine, but don't know, that Brexit, Trump, and whatever may come next seemed like cold water thrown on their party. The story below is about Davos as we saw it in 2000 and is from my book hackoff.com: an historic murder mystery set in the Internet bubble and rubble. The fictional characters are hackoff.com CEO Larry Lazard, his wife Louise, and their new Israeli friends the Roslovs.

 

On Saturday afternoon, Bill Clinton speaks. Tickets to the Great Hall are almost impossible to get, but there are a sufficient number of listening rooms furnished with headsets which translate to many languages and wide screen television views of the podium. Larry and Louise are in one of these.

There is a delay. Apparently the American Secret Service has become alarmed and want everybody out of the hall so that they can go through and look for bombs. They have both dogs and electronic noses ready. But they can’t empty the room because of the crush of people trying to come in. There is a dissatisfied mutter about the arrogance of the Americans who are not satisfied with security arrangements, which were, after all, good enough for everyone else.

The Secret Service compromises on just clearing the first five rows since these will be closest to the President. This is doable but means that the VIPs who have these rows will have to be shuffled out, so more offense is taken. To make matters worse, once the Secret Service and its hounds have finished, the relative plebeians flock into the seats meant for the patricians. It takes most of the staff and tact of the WEF to sort this out.

Finally, it’s time for Herr Klaus to introduce the President. “You graduated from Yale University. You were a Rhoades Scholar who studied in London,” he says to the President. “You were Attorney General and then Governor of the State of Arkansas. In 1992 you were elected to be President of the United States of America; and, in 1996, you were re-elected. You have pursued a strong domestic agenda and you are well-known and well-liked in the capitals of the world. You have been a strong voice for negotiated settlements to the world’s problems.

“President William Jefferson Clinton, it gives me great pleasure to introduce you here at World Economic Forum 2000 in Davos, Switzerland. The delegates look forward to your remarks.”

Clinton beams. He likes the audience and the audience likes him. He jokes about the security and he is forgiven for it. He speaks nonspecifically but sincerely about a “shared vision”. The audience shares this nonspecific vision.  When this likeable man speaks, it does seem that differences will disappear, that prosperity will overcome despair, that the darkest, coldest corners of the world will be lit and warm — that, indeed, the spirit of Davos, the vision of Davos, the inclusiveness and well-meaningness of Davos, can and will become the spirit of a happier world.

“He was good,” says Louise afterwards.

“He didn’t say a fucking thing,” says Larry.

“He doesn’t have to,” says Louise.

Saturday night is the big night at Davos; on this night a tux or equivalent national dress is suggested. The main hall at the Congress Center has been transformed into a huge nightclub with small tables in front of a large stage.  Counters of food line the edges of the room with ample small bars between them. Larry and Louise have come early and take a table near the stage.

Simon Peres, his wife, and another couple take the table in front of them.  Peres nods to Larry and Louise but it is not clear whether he recognizes Larry from the meeting or is just friendly. [nb. See previous post for how Larry met Simon Peres.]

There is much table-hopping. The Peres table is visited first by the new King of Jordan and his wife. The women are on cheek-kissing terms. The men shake hands warmly. The Jordanian royalty chats with the Israelis for ten minutes or so before moving on. Various delegates in national garbs stop by to pay their respects to the Pereses; a good percentage of them are in Arab robes.  Peace seems possible at Davos.

The premier act of the night’s entertainment is a group of 200 gypsies playing violins. They fill the huge hall with rich sounds alternating between joy and sorrow. The country-less violinists are a hit with the delegates, all of whom have countries of their own at the moment.

After the nightclub dinner and show, there are national parties to discover throughout the Congress Center. Sometime during the entertainment, Larry’s new friend Chaim Roslov has joined them at their table with his wife Devorah. Larry and Louise and Chaim and Devorah go first to Mauritius for a party. It is in and around a huge pool, perhaps used as a swimming pool at other times, in a building which connects through a huge walkable (and warm) hose to the Congress Center. The awesome Mauritian band is on a platform in the middle of the pool as isolated as Mauritius itself is in the middle of the Indian Ocean. It’s not clear how they got there or how they’ll get back. They can’t and don’t take breaks.

At one end of the pool is food, which is presumably Mauritian. There are large variety of vegetarian dishes ranging from mild to extremely spicy; these are the contributions of the island nations’ mainly Hindu population. There are also a variety of the spicy pork and goat dishes favored by the minority Creole population. Most confections have a coconut base.

At the other end of the pool is a dais where some Mauritians give speeches. They are very glad to have the delegates visit their party and hope that they soon will visit Mauritius. They will find it is a country that realizes its future is within and not isolated from the world economy. To that end, the Prime Minister has begun a program of legal reform to create the required transparency and to assure that contracts are respected. Protectionism is as dead in Mauritius as the dodo which once thrived there.

It would be helpful if the developed world would remove punitive tariffs on the agricultural and manufactured products of Mauritius and would stop unfair subsidies to domestic sugar growers. That is, the world should notice, all that Mauritius is asking in addition to some reasonable forbearance of debt contracted by previous profligate regimes. Mauritius is not asking for foreign aid. The new loans it seeks are economically sound and can be amply repaid.  Even the old loans can be repaid if only those unfortunate and unproductive tariff barriers were just to be removed.

The Mauritians are good hosts who speak briefly and smile often. The band plays very danceable Reggae, and the delegates and their spouses dance standard American dances on platforms erected on the sides of the pool. Magdala, the Lazard’s appointed guide to the WEF, is there with her “significant other”, a tall thin Swiss of about thirty with a German accent. He is a consultant and dances well. Chaim and Larry each dance a couple of times with Magdala and each other’s wives while Magdala’s significant other makes sure no trailing spouse is left a wall flower. Chaim has a brief conversation with Magdala and the significant other in German.

Next to the food tables there is a bar. A very potent punch, which may or may not be indigenous to Mauritius, is served there, as well as a standard selection of bar wines, beers, and hard liquors. It is not clear what the scion of an Argentinean steel company was drinking before he fell off the dance floor and into the pool. No matter; he is quickly and efficiently hauled out by a combination of wait staff and quickly-appearing security forces. The dancers stop to cheer as he is helped wetly away. The puddles behind him are immediately mopped.

Chaim exchanges a few words of Hindi with some of the hosts.

The US party features blues from Chicago sung by a very sexy black woman who is an expatriate Chicagoan, but usually to be heard in Europe and sometimes Japan. The room is dark, partly illuminated in ultraviolet, and with creative neon outlines of jazz instruments on the walls.  Either there is no speaker at the US party or the Lazards and their new friends the Roslovs arrived too late to hear them. These blues are not meant to be danced to, although some people try.

Chaim and the singer speak Italian for a few minutes.

The Russian party is renowned for its vodka and caviar — especially the caviar. The Lazards and Roslovs first heard rumors of the Russian caviar while still in Mauritius. In Chicago, between blues numbers, they speak to people who have actually been there and seen and eaten the mountains of tiny eggs. But no one can describe exactly how to get to the Russian party. Undeterred, the Lazards and Roslovs set out to find the land of vodka and caviar.

In one of the many sublevels of the Congress Center, they follow music hopefully into a loud room. Wrong country: it’s France. But it would be rude to tear yourself out of the grip of the buxom French farm women with plunging décolletage who pull you into the room. The food here is mainly elaborately constructed pastry. Champagne bubbles from a replica of the fountains of Versailles. A chamber trio plays baroque music in a corner.

Now, unfortunately, there will be a short speech. It is in French, which Larry understands not at all, and Louise only a little. However, Chaim translates concurrently: France is very much in favor of economic globalization. After all, the French invented international trade. However, there is a danger in globalization. This danger is cultural. One country in particular has imposed its culture on much of the world to the detriment of other cultures everywhere.

“Yeah, we make everyone wear fucking jeans…” says Larry a little too loudly. He is hushed by Louise and some of the people around them.

The speech goes on to regret that the benefits of the Internet — an outgrowth, one might say, of minitel, which was invented, of course, in France — these benefits are denied to much of the world because so much of the Internet is in English. In fact, the Internet, which ought to be international is fast becoming a mechanism for dangerous cultural imperialism. It is to be hoped that the delegates gathered here in Davos can work together to stem these unhealthy excesses of globalization and restore balance to international culture and…

“Anyone know where the Russian party is?” asks Larry rather loudly and very rudely of his neighbors. They either don’t know, don’t speak English, or don’t care to answer.

Chaim engages one of the security guards in a conversation in an unidentified language. He swears he has obtained the true location of Russia. To get there one must go up one staircase and down another; one must also go east in one hallway and west in another. There are various detours north and south and a final half story descent into a hallway at the end of which is, sure enough, the fabled land of vodka and caviar.

The mountains of caviar have suffered the ravages of time and appetite. You can deduce their former scale by the diameter of the plates the crumbled hills and scraps still sit on. Cracker crumbs have been ground into the floor and pasted down by squashed eggs. There are no longer crackers on tables with caviar nor is there caviar on tables with crackers. Condiments, in general, are available only on tables with neither crackers nor caviar. The persistent can still find more or less clean plates, load them with crackers from here, add caviar from there and find condiments somewhere else. This is what Larry and Louise and Chaim and Devorah do.

Here, as in France, breasts push up from low-cut peasant blouses. The Volga boatwomen are better-endowed and certainly more friendly than their French counterparts. Ignoring the women and the caviar, but drinking vodka freely and usually neat, there are multi-national clusters of over-dressed men.

“What do you think they’re talking about? Basketball?” asks Larry looking at an almost seven-foot Cossack in a black suit talking to an over seven-foot Chinese in a yellow suit. “I don’t understand Russian.”

“Actually,” answers Chaim, “they are speaking Mandarin and they are discussing oil in large quantities which does not pay taxes.”

“Really?” asks Louise. “Are people allowed to do business at the World Economic Forum? I haven’t seen or heard anyone else doing that.”

“Russians make their own rules,” says Chaim. “They are new to Davos as capitalists and they are enjoying themselves. But they still can bang their shoes on the table if they want to. Over there, for example, there is a Chechen discussing ‘precious weapons’ with a Kuwaiti.”  He is looking at a very small man in electric blue talking to an equally small man in Arab robes.

“Shouldn’t we tell someone?” asks Louise. “I mean that can’t be good, especially if precious means what I think it means.”

“Actually, I believe that the Kuwaiti works either for the CIA or Mossad so he is on the way to finding this source.”

“How could you possibly know that?” asks Larry. “If the Chechen doesn’t know who he’s talking to, how would you know?”

“I have sources, my friend,” says Chaim. “Didn’t I find Russia for us?”

By 3:00 AM the countries are a blur. Most of the food is gone, although there is apparently no end to the liquor or the music. Larry and Louise head unsteadily down the hill to Sunset Reising. It is bitter cold and a wind is blowing seriously. A few lights on the mountain sides illuminate huge swirls of blowing snow across and around the avalanche fences.

The water cannon and its accompanying troops are gone. There is no sign of protestors. Globalization is apparently safe for the time being, at least in Davos.

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