Saturday, June 16, 2007

Is there a Difference between Democrats and Republicans?

I saw an interview of Nancy Pelosi last night. Ms. Pelosi was discussing the Iraqi War. She stated that the Bush administration should not defend the elected Iraqi government and instead limit the military to fighting terrorism. It is difficult for me to understand Ms. Pelosi's point. There is a fine line between fighting terrorism and supporting the Iraqi government. While Ms. Pelosi claims that her position is a major departure from President Bush's, the difference seems vacuous.

Is there a difference between Democrats and Republicans? In the late 18th and 19th centuries there was a debate between federalists and anti-federalists. The federalists, led by Hamilton, were elitist. They believed in central banking, supported the interests of the wealthy and believed in limiting democracy. In contrast, the anti-federalists, led by Jefferson, opposed a central bank (what today is the Federal Reserve Bank), believed in maximizing democracy and believed in supporting the common man, who was a farmer. The Jeffersonian anti-federalists were often more racist than the federalists. Ultimately, the Jeffersonians were allied with early labor unions (and the Workingmen's Parties) but also with the southern "slave power".

Through their successors, the Whigs and then the Republicans, the federalists allied business and northern religious interests, northern farmers and abolitionists. The anti-federalists, through the Democrats, allied labor interests, the white working class of big northern cities like New York, southern interests and the "slave power".

Today, it would seem that the federalists have won a complete victory for two reasons. First of all, central banking is no longer debated, although it ought to be. The public has accepted the Keynesian monetary project.

Second, the New Deal reinvigorated the federalist concept that an elite was necessary for the US economy to work. In the progressives' view, the elite is comprised of university-trained experts. But the knowledge that enables such experts to make decisions has never been specified. The reason is that it does not exist. Business schools have multiplied in number, but competence to manage the New York City subways, for example, has eluded both Democrats and Republicans for seven decades.

What struck me about Ms. Pelosi was that she evinced no indication of the slightest grasp of military strategy or anything else relevant to the War in Iraq, but she is entirely convinced that she is expert concerning it. Is Ms. Pelosi's arrogance peculiar to the Democrats, or do both the Republicans and the Democrats implicitly favor Pelosian elitism? Are both parties alternative versions of neo-federalism?

Both favor inflationary Federal Reserve policies. More than $10 trillion have gone gone into circulation around the globe, with less than $2 trillion in circulation here in the US. We are sitting on an inflationary time bomb. With demand for stocks inelastic because of loose credit, companies have followed easy, low-risk cost strategies of moving jobs overseas to to nudge up stock prices, inflating executive compensation but leaving average Americans feeling alienated. Jefferson would turn in his grave.

Both parties favor regulation. The Democrats say they do, the Republicans say they don't, but after three Republican presidents and a decade and a half of a Republican Congress there is as much regulation now as there was under Jimmy Carter. Since 1980, government has markedly expanded in cost and scope.

The difference is that the Democrats would have unemployed American workers dependent on them for welfare, while the Republicans would have underemployed American workers working for Wendy's. Both are willing to support policies that encourage home buyers to borrow five times their annual incomes to purchase homes; both oppose policies that would permit Americans to keep their paychecks to pay cash for their homes.

It is difficult for me to see the difference.

Pamela Hall in Washington, DC

Pamela Hall of the United American Committee spoke on June 1o, 2007 in Washington, DC at a rally. Her speech is available on Youtube here. She concludes: "God bless America. God bless Israel." And God bless Pamela.

Monday, June 11, 2007

Interlocking Boards of Trustees and University Presidents

I have just been going through some biographical information about college presidents. Two points appear salient. First, of the top 50 schools, better than 80 precent of college presidents are outside hires. That means that college presidents' pay ought to be largely a market phenomena as opposed to being driven by "internal equity" or organizational culture considerations. I was somewhat surprised that most top tier university presidents are outside hires as opposed to promotions from within. That may be because inside hires bring past political baggage with them, or it may be because there is a glamour to outsiders, i.e., "familiarity breeds contempt" and "the grass is always greener on the other side of the fence".

The second interesting point is that many of the top tier schools' presidents serve on corporate boards as well as boards of other colleges. This would be consistent with the idea that social pressure plays a role in pay determination. Since interlocking or cross-serving boards suggest the presence of social pressure and cognitive dissonance, such factors may be playing a role. Jensen and Fama might argue that college presidents are hired to corporate boards because of their management expertise. If this is so, then why are their salaries so much lower than corporate executives'? (The order of magnitude is that corporate presidents' salaries are around ten times higher than college presidents').

In other words, there seems to be a contradiction. If presidential skill levels are so scarce as to warrant high salaries in the corporate world, why are skills of college presidents, who earn one tenth those amounts, in demand for corporate boards?