Opinion-Columns.com

Of Mice and Men, Global Warming and Hundred-Year Storms

Letter from Prague

The best laid plans, we are told, of mice and men often go astray. That’s particularly the fact when the plans are postponed for reasons of budget, inattention, better things to do and the assurance promised in the very phrase “hundred-year storm.” I have had experience with all of the above.

As for budget, was there ever a plan that could not be reamed of its very essence by budgetary constraint? These are hard times, budgeting times, and thus infrastructure must be put off. Recent times were flush times, but other excuses sufficed as bridges in Minneapolis fell into the river. Here in Prague, the government was too busy selling state assets and running off with the dough to invest in dams and floodgates and damn floodgates.

We are (by the by) frantically building a flood wall at the moment along the scenic Prague river named Vltava. It’s been raining off and on for the past three months, more on than off. The timeless and historic watercourse that’s threaded its way under the Charles Bridge for lo these past 552 years is licking its chops for another flood, the hundred-year event arriving 93 years ahead of schedule.

As a younger man, in what seems an alternative existence, I had occasion to appear before various Chicago-area planning boards. I was the hired gun, the mercenary assuring the various raised eyebrows of skeptical commissioners that this or that planned community or corporate layout would scarcely affect the environment. Traffic? No problem. Air quality? Hey, we have the charts and expert witness to calm your fears. And yet commutes edge toward two hours and groundwater is so unsafe we opt for the bottled variety.

I wish they had found a more accurate term for what’s happening to the planet than global warming, because we have temperatures rising in some parts of the world and dropping in others. One can kayak to the North Pole while the Antarctic ice fields expand. What we have is global temperature disruption. North America is scheduled to get warmer and drier, while here in Europe we expect cooler and wetter weather patterns. Thus the Vltava lurks.

Seven years and six weeks ago, mid-August of 2002, our friendly river was twenty feet above flood stage and halfway up the second story windows of buildings familiar to tourists in the quiet side streets of the Old Town. 50,000 people had been evacuated and huge outlying areas of the country were underwater. Damage took two years to repair and the Karlin section of Prague had to be essentially rebuilt. Now Karlin is home to the brightest and most glossy new developer complexes and the Vltava lurks once again. This weather pattern is nearly identical to 2002 and the middle of August is six weeks away.

Well, Prague will survive, but the message (if there is a message) is that the world is no longer the same. Basic weather patterns such as the Atlantic Gulf Stream are shifting while we argue about whether Chicago is really all that much hotter this summer. Perhaps we’re gazing at the wrong navel.

It’s a shame to watch this fine old city gird for another assault, but that’s a tale of mice and men. The late and insightful George Carlin had it right; “The planet is not in trouble. The planet is perfectly all right and will continue to be just fine. It’s man who is in danger of extinction.”

LISTENING TO A NOBEL LAUREATE GET IT WRONG

Falling Wage Syndrome

By PAUL KRUGMAN

Wages are falling all across America.

Some of the wage cuts, like the givebacks by Chrysler workers, are the price of federal aid. Others, like the tentative agreement on a salary cut here at The Times, are the result of discussions between employers and their union employees. Still others reflect the brute fact of a weak labor market: workers don’t dare protest when their wages are cut, because they don’t think they can find other jobs.

Whatever the specifics, however, falling wages are a symptom of a sick economy. And they’re a symptom that can make the economy even sicker.

Wrong target, Paul. Falling wages are not a symptom, they are a result. The sickness of this economy is evidenced by fraud, greed and engineered bubbles. The cure is what we are watching and, that includes falling values, lost investment and falling wages.

. . . After all, many workers are accepting pay cuts in order to save jobs. What’s wrong with that?

The answer lies in one of those paradoxes that plague our economy right now. We’re suffering from the paradox of thrift: saving is a virtue, but when everyone tries to sharply increase saving at the same time, the effect is a depressed economy. We’re suffering from the paradox of deleveraging: reducing debt and cleaning up balance sheets is good, but when everyone tries to sell off assets and pay down debt at the same time, the result is a financial crisis.

The effect is only a depressed economy if the economy is based upon, dependent upon and captive to consumption. Read my lips, Paul, "the sticky wicket in which we find ourselves is a direct result of excessive leverage." We are getting well, Paul, if the last rites of the Church of Consumerism are not called in to 'save us.'

In particular, falling wages, and hence falling incomes, worsen the problem of excessive debt: your monthly mortgage payments don’t go down with your paycheck. America came into this crisis with household debt as a percentage of income at its highest level since the 1930s. Families are trying to work that debt down by saving more than they have in a decade — but as wages fall, they’re chasing a moving target. And the rising burden of debt will put downward pressure on consumer spending, keeping the economy depressed.

Yep. Household debt came from careless loans and the mentality that encouraged market fraud and bubble economies. If you want a scapegoat, don't blame falling wages, dial up Alan Greenspan. Household debt will fall (eventually) by what the moneylenders fear most--bankruptcies and foreclosures. I hate to disabuse you of other ghosts in the closet, but it still happens that way, 80 years later.

. . . Concern about falling wages isn’t just theory. Japan — where private-sector wages fell an average of more than 1 percent a year from 1997 to 2003 — is an object lesson in how wage deflation can contribute to economic stagnation.

So what should we conclude from the growing evidence of sagging wages in America? Mainly that stabilizing the economy isn’t enough: we need a real recovery.

Big difference in the Japan example is that Japan prevented its banks from writing off bad loans--something Ben Bernanke is only trying to do. 2nd big difference, Japan fell apart while the rest of the world followed the 'Timex' example--took a lickin' and kept on tickin.' The rest of today's planet is in the toilet, along with us.

. . . To break that vicious circle, we basically need more: more stimulus, more decisive action on the banks, more job creation.

All of which only makes sense if you believe we had a strong and vibrant economy a year ago, in the good old anything goes, credit default swaps, derivative weapons of mass destruction environment. If you don't (and I happen not to) believe those were healthy economic times, you see the wreckage as a necessary deconstruction, a sort of storm before the calm.

There are more guys on your team than mine, Paul and I lack a Nobel Prize in economics . . . but that doesn't mean you're right.

THE UPS AND DOWNS OF OBAMA'S CZECH VISIT

Reflections from Prague

President Barack Obama came to Prague, likely because the Czechs hold the current and rotating presidency of the European Union. It was a courtesy call and a chance to speak to the world on international policy. Certainly the draw was not the grim-jawed current president, Vaclav Klaus, George Bush’s political mirror-image. Nor was it to shore up the embarrassment of the Czech government having failed a vote of confidence to sustain their own government halfway through an EU presidency. Stuff happens.

But he came and began a courtship, both promising and not without its awkward moments.

The Czechs are a tough audience, courteous and at the same time watchful. Promises are rhetoric and they are not fond of rhetoric. A beer-drinking, pragmatic country, Czechs spent most of the last century paying the personal costs of Western abandonment. So, when Barack beamed, saying ‘we are all in this together,’ the applause was minor, scattered and, if you looked closely enough, the president noticed.

Not that they don’t love him, they do. He is the universally loved American president, because he’s charming and honest, enthusiastic and straight. Who wouldn’t love that in a Czech pub, in Chicago or Prague?

But there’s history here and as Tip O’Neill famously told us, “all politics is local.” At the end of the First World War, Czechoslovakia was created and flourished as a free nation until the Brits  traded it away twenty years later at Munich for ‘peace in our time.’ Czechoslovaks weren’t even at the table as their country was turned over to the Nazis. Peace finally came, but it was a short celebration as the Brits and Americans once again sold out Czechoslovakia, this time to the Soviets at Potsdam. Munich brought seven years of Nazi atrocities, Potsdam, forty years of gray and relentless communism.

Then the Soviets collapsed, Czechoslovaks shook off the euphoria of sudden freedom, Bill Clinton arrived to play sax jazz at Prague’s Reduta Jazz Club and everyone’s heart skipped a beat. Next, George Bush arrived unexpectedly and announced a ‘for us or against us’ policy to the world, leading it to war and finally into a financial abyss.

Sunday Barack told the crowd we’re ‘all in this together.’ All? Excuse the Czechs if the applause was not thunderous.

They like him. They poured out to see him in record numbers, all smiles and adoration on a sunny spring day in arguably the most stunningly beautiful of European cities. Ex-pat Americans (and there are thousands of us here in Prague) were finally proud to be Americans, after eight years envying our friends with Canadian passports.

But 70% of Czechs are against the American radar installation expected to be built here. Czechs had their fill of Nazi and communist weaponry. The radar has become the national symbol of Czech government ignoring Czech citizenry. Wrong message, Barack.

“For over a thousand years, Prague has set itself apart from any other city in any other place. You have known war and peace. You have seen empires rise and fall. You have led revolutions in the arts and science, in politics and poetry. Through it all, the people of Prague have insisted on pursuing their own path, and defining their own destiny.”

Umm, except for those 500 years when the Habsburg and Austro-Hungarian Empire was running the show or, more recently, the above-mentioned Nazis and communists.

Obama finally cut to the chase nearly a thousand words into his speech and it might have improved chances for the love-affair if he’d done it a bit earlier. The Czechs are a tough audience.

“This marks the tenth year of NATO membership for the Czech Republic. I know that many times in the 20th century, decisions were made without you at the table. Great powers let you down, or determined your destiny without your voice being heard. I am here to say that the United States will never turn its back on the people of this nation. We are bound by shared values, shared history, and the enduring promise of our alliance. NATO's Article 5 states it clearly: an attack on one is an attack on all. That is a promise for our time, and for all time.”

They liked that, not so much for the promise, but the recognition that the West was not always there. Of ‘shared values and shared history’ they are not so sure. So far, their immediate evidence is a tsunami of Western capital, bringing with it an impossible housing bubble (truly shared) and a financial virus hatched in the Petri-dishes of Wall Street. A virus that’s halved the value of their currency, cut tourism by a third and pretty much destroyed exports to the West.

Another hunk of the speech with an unattended applause-line was;

“The people of the Czech Republic kept that promise after America was attacked, thousands were killed on our soil, and NATO responded. NATO's mission in Afghanistan is fundamental to the safety of people on both sides of the Atlantic. We are targeting the same al Qaeda terrorists who have struck from New York to London, and helping the Afghan people take responsibility for their future. We are demonstrating that free nations can make common cause on behalf of our common security. And I want you to know that we Americans honor the sacrifices of the Czech people in this endeavor, and mourn the loss of those you have lost.”

Czechs valued inclusion in NATO more than EU membership. NATO was finally and truly there to protect. But they understood that protection as against attack from the outside, rather than committing Czech troops to the “Bring ‘em on” pre-emptive strike policy of the United States. Who suspected that aggression would come from inside the alliance? They wonder if a bomb went off in central Prague, killing a couple thousand, if America (or indeed NATO) would follow their flag and their drum to an essentially unilateral mission of revenge.

From the 1989 ‘Velvet Revolution’ until 2003, Vaclav Havel (the poet, playwright and imprisoned dissident) was the first president of independent Czech Republic. Havel told Obama in private conversation that enormous hopes have been pinned on him, as if that pressure wasn’t already building back home. With people expecting the quick birth of a better world, disappointment might turn them against him, Vaclav warned. Obama reportedly smiled, thanked Havel and said he has begun to notice such changes himself.

But they loved him just outside the gates of Prague Castle, make no mistake. There was much to cheer in the speech and they cheered, though sometimes less than American audiences. Europe has been circumspect and cautious in their response and the Czechs are the toughest audience so far.

But Europe and the Czechs seem ready to love Americans again and that’s a major breakthrough.