Tag: politics

Soccer, Politics and the World Cup

Category : Political Science & Economics, Sports
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Yesterday, I made the trip down to Chicago to see the US soccer team take on Honduras in a World Cup Qualifier at Soldier Field.  It was the first time the US had played a qualifier in Chicago, mostly because the US Soccer Federation is worried that Chicago would not give the US a home field advantage, as there are many immigrants in the Chicago area.   It turns out that they were right, but the US still was able scratch out a 2-1 come from behind win, just about guaranteeing the US a spot in South Africa 2010 with five more qualifying matches to go.  I would guess that at least 35,000 of the 55,000 fans in attendance were sporting el bicolor (white and blue stripes), and it seemed like even more, as the Hondurans knew how to cheer and make noise. There is nothing more intense than attending a well played international soccer game.  

I went to the 2006 World Cup in Germany and have yet to find another sporting event that matched the passion, enthusiasm and national pride of the fans.  I’ve been to some great Badger football, basketball and hockey games, Packer games and Brewer games, but none matched the intensity of even the Costa Rica vs. Ecuador game in the group stage of the World Cup.  The feeling that I had singing the National Anthem in Nuremberg 2,000 or so other Americans was electric and unforgettable.

If you are a soccer fan, or even if you only casually follow the sport, make a point of going to a World Cup Qualifier or Gold Cup Match if there is a game in your area.  The fans are into the game, Sam’s Army is singing and chanting and the opposing fans are playing drums and blowing horns.  It’s an amazing atmosphere and mostly friendly, but I was disappointed by some Americans, mostly drunk college kids, in the crowd who yelled things like “go jump back across the border” or “go back to mexico” at Honduran families.  Its unoriginal and dumb and I wish more people would have told them to stop. In the US, sports and politics don’t usually mix.  

To me, the coolest part of the game  was that most of the Honduran fans were clearly immigrants to the US, spoke English, and were still proud of where they were born.  Many of the  Honduran fans sang the US National Anthem and joined in the cheers of USA, USA, USA after the game, but wore Honduras shirts and cheered intensely for Honduras during the game.  The woman in front of me made it very clear that while she was cheering for Honduras, she “loved the USA” and “cheered for the US” whenever they weren’t “playing Honduras.”  One of the most amazing parts our country is that immigrants assimilate into society and love the country, unlike many European countries where immigrants are shuttered in slums by de facto segregation.  It was also cool to see most Hondurans telling their own fans to stop throwing empty cups over the second deck in the second half when they were upset with a call.

In other parts of the world, soccer and politics mix all the time.  Ivory Coast’s qualification to the 2006 World Cup stopped their civil war.  Iran’s qualification to the 1998 World Cup caused massive celebrations, alcohol fueled parties and women throwing off their veils, that some thought might be the spark that overthrew the government.  When Iran beat the US in France ’98, the entire country rushed into the streets to celebrate.   A 1969  riot during an El Salvador and Honduras World Cup Qualifier caused la guerra del fútbol, the soccer war, that claimed over 2000 lives.

Iran is back in the news as it tries to qualify for the 2010 World Cup in South Africa.  On Friday, the Financial Times featured an article ahead of Iran’s must win Qualifier against North Korea that claimed the Soccer Result Could Affect the Iranian Election.

Some argue that failure to qualify – Iran needs to win its remaining three fixtures over the next 11 days to be guaranteed a place at next year’s World Cup finals in South Africa – could damage the re-election hopes of Mahmoud Ahmadi-Nejad, the president. “The government of Mr Ahmadi-Nejad has shown it would like to make the best use of sports in politics and failure in football will surely have negative impacts on his votes,” said a senior reformist politician. The comment might be seen as wishful thinking by a government opponent but it is echoed by a fundamentalist politician, sympathetic to Mr Ahmadi-Nejad: “The results of these football matches might shift a significant number of votes from one candidate to another.” In an election expected to be close – and where Mir-Hossein Moussavi, the rival reformist candidate, is said to be gaining support – that could be significant.

Iran was banned by FIFA from international competition for a few weeks back in 2008 because the President fired the head of the Football Association and appointed a political hack.  After Ahmadinejad backed down and brought the old FA head back, Iran were allowed to continue to compete. This story put me in the awkward position of rooting for North Korea to do something good for a change, in hopes that Iran miss out on the world cup and throw the horrible Ahmadinejad out of office in favor of a more reform-minded alternative.

In Saturday’s qualifier in Pyongyang, Iran and North Korea played to a 0-0 draw, leaving Iran on the outside looking in.  Iran need to win both of their next two games in order to qualify and hope that North Korea and Saudi Arabia do not do well.  It will be interesting to see how the next few weeks shape up in Iranian soccer, as well as politics.

America Doesn’t Plan for the Future

Category : Political Science & Economics
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The other disturbing trend has been building slowly since the 1980s.  It is a “dumb as we wanna be” mood that has overtaken our political elite, a mood that says we can indulge in petty red state-blue state cat fights for as long as we want and can postpone shoring up our health care system and our crumbling infrastructure, postpone addressing immigration reform, postpone fixing Social Security and Medicare, and postpone dealing comprehensively with our energy excesses and insecurity indefenitely.  The prevailing attitude on so many key issues in Washington today is “we’ll get to it when we feel like getting to it and it will never catch up to us, because we’re America.”    

–    Thomas Friedman, Hot, Flat and Crowded

I was rereading the beginning of Hot, Flat and Crowded today when this passage caught my attention.  It summed up my feelings about our government for awhile now, but even more so now since the financial crisis.  Our government is simply not planning for the future and I’m not sure what we can really do about it.

Government has done little, or nothing, to address energy independence, social security, a sprawling, complex tax code, healthcare, infrastructure, over crowded prisons, underachieving school and job creation.  Instead, government has focused on abortion, illegal drugs, same sex marriage, online sports gambling, online poker, steroids in baseball and short term fixes to America’s major problems.

Both parties, and the system as a whole, are to blame.  First, gerrymandering has robbed America of many competitive election fights, leading to more partisan politicians getting into office, at the expense of moderates who would be more willing to compromise.  Second, the political class has to raise money to continue to be elected.  With the rise of lobbyists, our elected officials face an ever increasing temptation to accept contributions in exchange for influence.  The constant election cycle hurts our political process.  Third, it seems fewer smart people are going into politics.  When the founding fathers were writing the constitution, they were some of the smartest people in the world.  The founding fathers would be ashamed to be compared to today’s political class.  Fourth, the constant campaigning and fundraising pushes elected officials to work on “flavor of the month” and divisive projects, rather than working toward large, long term goals.  Lawmakers who work toward big goals may be thrown out of office by their constituents for not being liberal or conservative enough (ie, working across the aisle on a big issue). 

Its gotten so bad that I wouldn’t trust 95% of politicians, Republican or Democrat, to run a gas station for two years, much less our entire government.  The “dumb as we wanna be attitude” is a symptom of the disease I outlined above.  American politicians think in 2-6 year time frames.  The major problems facing America today cannot be dealt with that quickly.  They require multi-decade approaches that combine government, private business and ordinary citizens.

An example of the dumb as we wanna be attitude is the government’s response to the financial crisis.  The financial crisis was caused by excess leverage by banks, homeowners and consumers.  People were living beyond their means.  The government’s response (both Bush and Obama)?  Start the printing presses and borrow more money.  We are simply exchanging one form of leverage for another.  As I wrote a month ago, I am worried about the US dollar and America’s standard of living.  I believe that our short term approach to avoid any further pain will only worsen the pain in the future.  It does not make logical sense for our government to do what it is doing, expect to make sure that it gets elected again.  We are being as dumb as we wanna be.

An item becomes less valuable as it becomes available in greater quantities, no matter what the item is.  This statement holds true for dollars, just as it does for doughnuts.  It is not logical to think that the US can simply print its way out of massive debts, yet that is the path that the US in on.  I believe we are on that path because its the easy road and the politicians want to make sure they continue to be elected. 

Contrast America’s approach over the last two decades to that of China.  The Chinese government, unlike their American counterpart, thinks in terms of decades, not single years.  For example, in the 1990s, Deng Xiopeng set a goal to make China the leading producer of rare earth metals, the valuable metals used in most high tech products including solar panels, microchips, high capacity batteries and many more.  In 2009, China succeeded.  It now controls 95% of the world’s supply of these valuable metals and have imposed strict export quotas so that industry is forced to move to China.  This is not to say that we should follow the Chinese model, as the ends do not always justify the means, but I believe we can learn a lot of China.  They have lived within their means, saved money and invested it wisely.  China is being rewarded for it now, while the US is being punished.

I’m not really sure what we can do to get our politicians to focus on the big, multi-decade projects that are important to our country’s future.  The only thing I can think of is to educate the voters and demand action on big projects, rather than quick fixes.  Reward congressmen for spending 2 years on fixing social security, not sending pork barrel projects home to the districts.  We are America, but the world is catching up.  I fear they will have caught up because we are falling at the same time they are rising, not because they are rising faster than we are.  I wish there was an easy button, but sadly, there isn’t.  What do you think?

A Free Way to Create American Jobs

Category : Entrepreneurship, Political Science & Economics
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The recent stimulus bill focused on creating new jobs, especially in alternative energy startups.  The cost creating these jobs is probably going to be high.  What if there were a way to create good American jobs that did cost anything out of pocket, up front?  I believe that startups are the quickest and easiest way to create  good, new jobs and new, lasting value for an economy.

Paul Graham has a suggestion that I think is not only reasonable, but also timely.  He argues that “[t]he single biggest thing the government could do to increase the number of startups in this country is a policy that would cost nothing: establish a new class of visa for startup founders.”  He says that it isn’t tax policy, employment law or Sarbanes-Oxley, but rather our immigration policy that is holding back the number of startups.  He advocates creating a new class of visa, the “Founder Visa” that would be open to 10,000 founders of startups who want to do business in the USA.

I think this is a great idea.  Unlike other types of visas, nobody can argue that immigrants on Founder Visas were taking American jobs.  In fact, they are creating American jobs.  If an immigrant on a Founder Visa creates a new startup, at some point they will need employees.  Since the startup is located in America, they will have to hire Americans.  This process creates jobs.  Not only does it create jobs, but it also increases the chances that the US will be the home of the best new companies, thereby generating more tax revenue at a time when the US has a huge amount of debt.

Graham contends that 10,000 Founder Visas could create up to 2,500 new companies per year.  Obviously, not all of them would be successful, but one would assume that at least some of them would be.  These new companies would be great for our economy and country as a whole.

Is the Dollar America’s Achilles Heel?

Category : Political Science & Economics
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“…the US government has a technology, called a printing press (or, today, it’s electronic equivalent) that allows it to produce as many US dollars as it wishes at essentially no cost. By increasing the number of US dollars in circulation, or even by credibly threatening to do so, the US government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”  Ben Bernanke, 2002

Throughout history, the world’s economic powers have had to decide how they should be paid for their goods and services.  At first, gold, silver and precious stones were stores of value that could be exchanged for goods and services.  As currencies were developed and became widely accepted, countries had to decide which currency or currencies they would accept for their hard work.  The most widely accepted currency is usually known as the reserve currency.  Countries hold these reserves as a store of value and as national savings.

Until the early 1900s, there was no official reserve currency, but some currencies acted in a de facto reserve status.  Starting in the 1700s, the de facto reserve currency was a combination of the French Franc, the British Pound and the Dutch Gilder.  Later, in the 1800s, it was a combination of the British Pound, US Dollar and the Russian Ruble.

By the 1900s, many currencies were backed by gold.  This means that a person could exchange paper money for an exact amount of gold.  After World War II, the global powers signed the Bretton Woods Agreement, which made the US dollar the central reserve currency.  It allowed countries to exchange their currencies for dollars or gold at fixed exchange rates.  This system worked well while the US had a much stronger economy compared to other countries, but as Japan, Europe and Asia began to recover after WWII, the Bretton Woods Agreement began to to show signs of strain.  The US felt it was paying more than its fair share.

In the 197s0s, the Bretton Woods Agreement broke down as other countries rose to prominence and began demanding gold from the US in exchange for their US dollars that they had accumulated through trade.  After Nixon closed the gold window and permanently detached the US dollar from gold, the United States was in the unique position of being able to print the reserve currency, but not have it convertible into anything tangible.  The US could print money out of thin air and use it to buy cars from Japan.

Since the US can issue the world reserve currency, it receives huge economic benefits in the short term.  The US can simply print as much currency as it wants, as long as the rest of the world is willing to accept dollars in exchange for goods or services.  This process allows the US to live beyond its means for as long as foreign countries are willing to continue to accept dollars.  Countries, like China, accumulate US dollars and loan them back to us at low interest rates.

This process has been going on since the 1970s, but has accelerated since globalization has taken hold.  The United States lost its manufacturing base to China, India and Asia and has been paying for goods and services through increased leverage and increased running of the “printing press.”  Printing press is a misnomer, as most of the new money that is created is just created out of thin air and deposited by the Federal Reserve into the world economy via banking reserves.

As the US continues to go into more debt, we are forced to either raise taxes or print more money to pay off our debt.  Since raising taxes is politically unfeasible and cutting spending is even harder, the US will most likely pay off the debt by printing even greater quantities of dollars.  China now holds over 1.95 Trillion dollars in its foreign reserves, most of it denominated in US dollars.  They are worried that the US will simply print itself out of debt, rendering its hard earned savings worthless.

We saw how extreme debt and leverage destroyed the big investment banks.  I am worried that the US is in a similar situation.  The national debt is currently $11.2 trillion dollars, or $36,000 per man, woman and child in America.  We pay $3.6 billion dollars per day in interest.  It is compounding at its worst.

If China decides that it no longer wants to continue purchasing US paper, the dollar will decline precipitously and interest rates will rise.  There even could be a run on the dollar.  This would be disastrous for the United States.

China and Russia have already started to push for a new global reserve currency, either backed by gold or backed by a basket of currencies at the United Nations or the World Bank.  China’s equivelant to Ben Bernanke recently posted an essay advocating a new reserve currency.  I fear that the US dollar will lose its reserve status, as the rest of the world has grown tired of watching America print prosperity.  Its not logical that these countries will continue to allow this to happen.  They know that they cannot defeat US hegemony in a military war, so they realize that if they wish to dislodge the US as the hegemonic power, they must use a different strategy.  I believe it will be attacking the US where it is weakest: the reserve status of the US dollar.  It is our Achilles Heel.

There really is only one conclusion to this story: the standard of living in the United States is fated to fall.  Nobody knows how far it may fall, but there is no way that the last twenty years of prosperity, brought to you by leverage and the printing press, is sustainable.  At some point, China and the rest of the world will say enough is enough and will demand real, tangible payment for their hard work.  This will be disastrous for the average US citizen and for US power in general.