Category Archives: Africa

We Want No Taxation, No Representation

Financial time bombs are no longer shocking to discover these days.  Collateralized debt obligations, the American auto industry, real estate, credit, struggling state government balance sheets, etc.

IRC Stupidity

Yesterday Obama gave a speech on how health care needs to be fixed immediately as costs are spiraling out of control.  The New Yorker just had a good story on health care costs, essentially discovering that a privatization bent (prioritized over the Hippocratic Oath) was leading to ballooning costs at one Texas hospital.

On the daytrading IRC channels I’m on, people predictably took the ignorant, mouth-breathing line, extending health care costs to other financial bombs:

<piratelady> just like fed subsidized education loans brought down the cost of college…..right?
<Me> federally subsidized loans didn’t make college more expensive
<piratelady> u have your opinion, I have mine
<piratelady> not gonna argue the point

<piratelady> buffett not smarter than me ;)

<guppy> if my heathcare is going to cost less,,how are we paying for all this..
<sailohana> obama talking raising revenue…here come the taxes to pay for healthcare

<Char> why can’t we exercise some personal responsibility and get the govt out of individual lives

<jwx> your best health bet is inheriting lucky genes

<boober> Xeus, you don’t think Clinton lied about his surplus , do you?

<boober> you can believe what you want to, but the facts are in 2000 everything fell apart before 911

<sublime> you have illegals flooding the healthcare system adding to skyrocketing insurance rates and healthcare bills too

<sublime> heck let everyone come in so we go bankrupt as a nation then as they roam the streets and violence skyrockets you can look for O to save you.

The daytrading channels are generally filled with old, white retirees who are fairly well-off and pretty rabidly conservative, and, as far as I can tell, detached from modern American life.  They find Larry Kudlow and Neil Cavuto relaxing and reassuring to listen to.

Frank Rich, by the way, just wrote an insightful column, in part on Shepard Smith at FOXNews noticing a increasingly disturbing taint in the viewer e-mails he’s been receiving.

Anyway, today I read a blog post from a guy I follow at UC Berkeley:

“A public relations bomb just landed in my inbox: an email fromUC Berkeley Chancellor Robert Birgeneau and Provost George Breslauer announcing the impending reality of horrific budget cuts across the Berkeley campus and the rest of the UC system as the state slowly faces up to fiscal reality. Instead of the 8% cuts (approximately $67.2 million) that the campus had originally projected during their budgeting process, they now anticipate that the cuts likely to be approved by the legislature will force a 20% (or $145 million) cut.”

University costs are astronomical now and they’re still expanding.  But it’s unsustainable.  Will our American education system, already in hot water for choking off its innovation pipeline in the last decade or so, be able to manage a drastic reduction in outlays for basic research, hiring professors, and recruiting international students?  I’m a little worried.

How is it that our nation has become so incompetent with its finances?  Well, to be honest, it’s not quite that simple — finances often collide with interests in promoting initiatives, expanding a business, lobbying government, etc.  So it’s not just a matter of people not knowing how to balance the books — usually it’s as a result of an organization saying, “We’re willing to go in to debt because we need to do A and B in order to grow.”

But I’m deeply worried about the strength of America’s most important institutions in the competitive international community — namely, its universities, companies, and human capital.

Ideology

I just finished reading Paul Collier’s “Wars, Guns, and Votes”.  In it, he says that security and accountability are the two keys towards bringing about democratic governments.  Without both, a “democracy” and having elections can actually bring about dictatorships, coups, and civil war.  That is, pushing democracy can actually be destructive.

An underlying idea for accountability is one that I suspected in my international development studies but which was rarely addressed:  the idea that taxation is necessary for accountability.

Taxation is a major hot button issue in the US.  Much of the conservative platform is based on the idea of less taxation.

But there is more economic literature and statistical analysis proving that in Africa, where much of the research is being conducted into how governments become stable and democratic, less taxation is actually a coping strategy by dictators and authoritarian governments.  Paul Collier makes the case in his book.

American children are taught about the famous line, “No taxation without representation.” American colonists objected to the British taxing them even though they had no political sway.

Now conservatives push for greatly reducing taxation.  This implies “no taxation” but without the “without representation”.  When we are taxed less, we do not care as much where our money goes and how it is used by the government.  We are less civically engaged.  Our leaders are held less accountable for their actions relative to what we want from them.

Granted, the relationship is not direct — it is possible to have deeply caring politicians or citizens, regardless of what their monetary interests are.  But in general, the more you are taxed out of your own money, the more you are probably going to care about how that money is being spent, in a developed country.

Says Collier:

“The critical invention of the Dutch was political accountability. People were only prepared to tolerate high taxation if the government of the state became accountable to citizens. Not all citizens, of course, but the rich citizens who were paying the taxation. Further, with an accountable state the government was able to borrow: people were prepared to lend once they saw that the government was being forced to conduct its finances in such a way that it would always be able to pay them back. The Hapsburgs found that gold and silver were not quite enough, and so they too decided to borrow. But nobody had forced them into accountability. And so the battle for the Netherlands turned into a battle of interest rates. The power of compound interest to gradually gut the finances of a profligate borrower ensured that final victory would go to the state with the better credit rating.”

Conclusion

I am not conflating increasing costs across the board with conservative allergies to taxation.  I guess my point in this post is that the US is completely confused when it comes to running budgets and controlling finances when placed against the power of the vote.

As a patriotic American, my underlying worry is that the US is losing its competitive edge and is not adequately securing its future in terms of intellectual and human capital.  We need to keep developing clever, intelligent, and responsible bureaucrats just as much as we need clever, intelligent, and responsible teachers and engineers and scientists and doctors and lawyers.

Demanding less accountability from the government is a surefire way to descend us into a failure of providing for public goods that we need to remain competitive.  In a completely privatized world, we lose our national identity and will to collaborate in order to be more competitive.  Certainly we do not want to be over-taxed, and both parties want their money to be used smartly, but there must be a Laffer curve-like medium between being taxed too much and not enough, not just for our pocket books but also for our quality of governance.

Pushing transparency in order to fulfill Collier’s social good of accountability is also big, and so I find it fulfilling to be working on Galapag.us, building an open and transparent reputation system (check out our info page on Galapag.us).  As my buddy Monkey Pope said to me about Galapag.us, “It’s amazing how I see it now in almost all aspects of life — data, the necessary transparency to see that data, and the need for tools to properly analyze that data.”.

But our basic notions of how a successful democracy operates and how to nurture that successful democracy are wrong.  I suppose it is comforting that people like Paul Collier are providing statistically-tested conclusions on what the proper notions should be.

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Filed under Africa, Business, Development, Economics, Globalization, Government, International Affairs, Policy, Politics

The Digital Africa Surprise

For my African Development class, I was required to write a 15-page paper on some aspect of African economic development. I chose to write about converging factors, such as the east coast Africa backbone coming online, the cloud, and cheap online tools, contributing to a surprising boom in African digital connectedness to occur in the next decade. Will people be paying attention?

Read my INAF-450 Paper 1:  “The Digital Africa Surprise”.

[I’ve also converted the paper to Google Docs if you’d like to read it. (and here’s the .doc format).]

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Filed under Africa, Communications, Computers, Economics, Education, Globalization, Government, International Affairs, Internet, Mobile, Policy, Tech, Web