Rural Ruminations

[Originally published in the Randolph Herald.]

Back in the years following the Second World War, many European countries were seriously politically divided between the right and the left. In many respects, that was the result of the essentially favorable view of the Soviet Union held by the left in those years.

Even though the Stalinist purges had already taken the lives of tens of millions Soviet citizens, that fact was not widely known or admitted in European leftist circles. Because most of the left wing, or Socialist, parties had their philosophical roots in Marxism, the Soviet Union represented for them a branch of Marxism with which they could identify, a little bit of their heaven on earth, as it were, even though there was little in reality that connected the two.

It would take decades for the Socialist left in Europe to understand and then admit that Marxism-Leninism was nothing more than a crude and repressive perversion of their beloved socialism. Ultimately, that came about as a result of heavy-handed methods used by the Soviets to keep their empire together.

East Germany, Hungary and Czechoslovakia were the obvious manifestations of Soviet imperialism that helped the political left in Europe to change its view of Marxism-Leninism.

During that changeover in Western Europe, a mild political anarchy prevailed, which led directly to economic uncertainty. In England, for example, the Labor (Marxist, socialist) Party would win a national election. They would then spend their entire time in office nationalizing as much of basic industry as possible. When the Conservative (capitalist, free enterprise) Party subsequently came to power it would undertake the denationalization of as much of the newly nationalized economy as was possible in the time allotted them.

If you were a businessman in England at the time, what were you to do? The parties were so radicalized and the voting public so polarized that there was no way to know what would work economically. There was no stability in the economy or markets, and that did not create an economy that was conducive to national economic growth.

At the same time, the United States was the polar opposite. Republicans and Democrats were not that far apart in either their political or economic philosophies. As a result, there was a level of predictably in this country that created the perfect environment for economic growth, and we had that in spades.

That harmony began to come unstuck with the passage of the Civil Rights Act in 1964, which led to a realignment of our political landscape. Where the Republican Party previously had been socially liberal and fiscally conservative, the Act, so strongly supported by the Democrats, almost forced southern Democrats to look for another party. They tried the Independent approach for a while, but in the end, the Dixiecrats (Southern Democrats), who had never been socially liberal, moved into the Republican Party and turned it, as we now see, into a socially conservative, some would say intolerant, but economically spendthrift party. In 40 short years, we have seen total role reversal.

The real importance of this change in our political landscape has been the marginalization of the political center. Before 1964, the center, whether Republican or Democrat, had run the country. Today, however, America—to its detriment— is in the hands, or at the mercy of, the right or the left, not the center.

We see the result in the sub-prime meltdown. It followed 12 years of Republican domination of the Congress, featuring a fiercely partisan laissez-faire approach to economic regulation, an approach which speeded up the required conditions for our economic problems. Now we see the Democrats beginning to assert their ideological positions in reaction to the proposed Republican solution, as proffered by Secretary Paulson.

During the deliberations on the financial rescue legislation, both parties trotted out much of their ideological hardware. Democrats insisted on reforming pay for top executives, gaining equity in bailed-out companies and permitting judges to rewrite mortgages. Republicans have called for the suspension of the capital gains tax and an additional, permanent tax cut as a way to create capital.

That has led to a “compromise” bill that, while carrying out the $700-billion intent of the Bush administration, contains pork from all political persuasions. That is not to say that this fat does not represent valid political issues. They are, however, not mainly economic issues. This shows clearly, at a time when speed may be the only thing that can save us from further disaster, that the old ideological political imperatives persevere even at a time when bipartisanship should be mandatory.

Forty years ago, that would have come to us naturally. Today, after forty years of political warfare and the virtual destruction of the political center, we seem not to know how to do it.

Given the often petty bickering of both Republicans and Democrats, it may well be time to seriously consider a third party, if for no other reason than, for the sake of the nation, we need to move our political structure back toward the center.

Haviland Smith is a former long-time resident of Brookfield who now lives in Williston.

Read Full Post »

[Originally published in the Rutland Herald.]

Make no mistake about it, our current financial problems are the direct result of greed supported by a lack of effective regulation by the federal government. This is a climate that has been consciously created by the Bush administration, which, true to its Republican roots and convictions, does not believe in regulation and has done everything humanly possible to weaken and minimize it.

Lacking effective regulation, the markets revert to a jungle in which anything goes. The overwhelming greed involved in the subprime mess is a natural adjunct to our free enterprise system. When given the opportunity, people will cut virtually any corner to make money. And that is why we need regulation.

For anyone who has lived abroad, the democratic capitalist, free enterprise system is the one to beat. Essentially, it lets market forces provide the risk/reward system for investors. Communism, fascism, socialism, are all systems that impose political ideologies on economic activity, to the detriment of those managed economies everywhere.

The key to this issue lies in the corruptibility of man. If you acknowledge his imperfections and his proclivity to cheat, then you will conclude that in a country where we have the best known system, we must have regulatory systems that minimize man’s ability to successfully cheat. We haven’t had that since the Carter administration, and that’s why we are dealing with our financial meltdown today.

The consensus is that our current economic miseries are the result of the subprime mess and that we will not move on to better times until there has been a further “correction” in the housing market — shorthand for a further drop in the value of our homes.

The fact that banks were able to pull the sleight-of-hand required to slip the marginal mortgages they were selling in among other, stronger items, obfuscating, but not eliminating, the inherent weaknesses in their products is laid to the weak regulatory system.

If you balk at the thought of greater, more comprehensive regulation, consider the fact that in the AIG meltdown, all the fiscal problems that caused the collapse came in the unregulated sectors of the company. The regulated sectors within AIG had no problems, remain viable and are the only thing about the company that potential investors might find financially attractive.

The only peril in bolstering the regulatory climate in America lies in an overreaction. If in America’s currently politically polarized condition, class warfare, or political, populist grandstanding against corporate interests gain sway, we will be in trouble. To be successful and effective, any regulatory changes will have to carefully retain and nurture a free-enterprise, entrepreneurial system. That is what attracts capital investment and creates wealth.

The other side of our problem is that we create far too little capital here at home. Our main sources of investment capital come from abroad. Yet we live in a society that canonizes spending. We were recently told by our president to spend, spend, spend as the way out of the perils of 9/11. In fact, we spend more than any people in the world. We buy the most inefficient vehicles on earth and then spend, spend, spend to keep them rolling. We spend like drunken sailors at any mall. To do this, we mortgage ourselves to the hilt in our credit card and other retail debt. We pay for nothing and borrow everything.

Under globalization, most of the goods we see are made somewhere else. That means that our spendthrift tendencies not only create debt at home, but cause the flow of dollars abroad to pay for the goods we buy on credit at the mall. Dollars that could become capital instead end up in foreign producers’ hands.

A country that behaves this way cannot conceivably accumulate capital. Without capital, no one prospers, because it is the basis of all borrowing, not just for retail profligacy, but for business formulation and expansion and all the other endeavors that create wealth.

There is potential for a vast, untapped source of capital out there in the middle class, if one of the parties could figure out a way to make long-term investing more attractive and safe for them. That does not mean privatizing Social Security, for if we had given all the Social Security money to Wall Street, as the Republicans wished, that would have wiped out not only Social Security, but the middle class with it.

Not only must we design the world’s best regulatory system, we need to change our ways on capital creation.

Haviland Smith is a retired CIA station chief who lives in Williston.

Read Full Post »

[Originally published in The Herald of Randolph.]

The word “change” is all the rage these days on the presidential campaign trail.  Unfortunately, its meaning has been so obscured for political reasons that it’s hard to sort through what’s really going on.

In today’s America, when any politician talks of change, it simply has to mean change away from the policies of the Bush Administration, starting with Iraq, continuing through New Orleans/Katrina, tax cuts, deficit spending to the sub-prime mess, to name but a few. The need for change, if you are looking at it substantively, has to be change from current Republican policies – Republican because those policies were enacted with the compliance of a Republican Congress in the days before 2006.  That means, presumably, that the Republicans in Congress agreed with the President and supported him on his policies.

John McCain, who has supported Republican positions in 88.3% of his Senate votes, has decided that he is the true agent of change because he has disagreed with the Administration on a small number of points.  He is against earmarks, wants to stop lobbyist using money to get at legislators, co-authored a bill on climate change control, believes in using embryonic stem cells, and wants to legalize the flow of foreign workers to the US.  Thus, he sees himself as a maverick who has taken on his own party on a number of issues.  But, essentially, he has been an “agent of change” on only a few hobby issues.  In the main, he has supported Republican legislative goals at an almost 90% rate,

Sen. McCain has redefined “change” to mean taking on one’s own party, rather than the onerous policies of the opposition party.  He says that Obama can’t be an agent of change because he is a died-in-the-wool liberal Democrat who has never taken on his own party on any issue and therefore, under the new McCain definition, cannot be an agent of change!

Please, that’s why he is an agent of change!  The only politicians who can really be agents of change in today’s American context are the Democrats.  They are the only ones who think that the Republican policies of the Bush era are absolutely wrong and have to be changed for the good of the country.  They actually have alternative policies to offer as a change from Republican policies largely supported by McCain and are prepared to spell them out, if anyone will listen.

But then, this campaign, more than most, and thanks largely to Republican strategy, is not about issues and reality. It is about emotion and cosmetics. As long as the campaign remains that way, we will focus on a Republican presidential candidate whose best and boldest changes have been designed to make himself more appealing to the Republican base and a Democrat candidate whom Republicans paint negatively as a captive of his own party!

On real policy issues there isn’t a nickel’s difference between McCain and Bush and that covers economic, tax, energy, health care, military, education and foreign policies.  He calls himself an agent of change because he plans to “clean up Washington”, not radically change its current policies, with the help of a vice presidential candidate who has allegedly “cleaned up Alaska”, but whose main attraction to his base is her ultra-conservative philosophy.

There is no talk of changing those Bush policies that got us into the multiple messes in which we now find ourselves. That is presumably because he has no plans to change them.  No, he will fight corruption, lobbyists, the old ways of doing business, and that’s just fine, but he has articulated few plans to change the Bush policies that Obama says he will change.

The campaign appears to be going well for McCain, proprietor of the “Straight Talk Express”. On the heels of the Republican Convention, he is pulling even and even surpassing the Democrat candidate while running a campaign that has almost nothing to do with issues and everything to do with his new definition of “change”.  Is that really straight talk?

Unless the voting public suddenly becomes interested in the critical issues involved – the candidates’ real positions on Iraq, foreign policy, deficit spending and the rapidly worsening economy at home – it seems likely that this strange, disingenuous campaign strategy will continue in place, largely because the McCain campaign sees it as potentially leading to the White House.

If that is the case, we will have elected a new president who will change little other than the cosmetics of Washington dynamics, while pursuing the policies of his predecessor, policies that gave gotten us into the mess in which we now find ourselves and which easily could change the current downturn in America’s fortunes into a total disaster.

Haviland Smith is a former Northeastern Republican turned independent who believes in social liberalism and fiscal conservatism.   He sees his former party as having been hijacked by Dixiecrats and turned to social conservatism and fiscal profligacy.  He lives in Williston.

Read Full Post »

[Originally published in the Herald of Randolph.]

Americans are in a bind.  We are bogged down in an incredibly costly adventure in Iraq.  Our dollar is crashing.  Our national and foreign debt is skyrocketing.  We are mired in personal debt and losing our homes. Inflation is increasing at an unusual rate.  We have a worldwide petroleum shortage bringing us frightening prices at the pump and the furnace. And we face mounting prices for the food we need. There’s not a whole lot of good news out there.

In the midst of all this, we face the existential threat of global warming, a judgment which is now supported by the vast majority of scientists worldwide and even by President Bush, one of the earliest nay-sayers.  Americans who continue to deny this are living in a fool’s paradise, prayerfully hoping it isn’t so and driving SUVs and Hummers.

White House supporters tell us that we are going to solve all our problems by finding and pumping more crude.  Yet they all admit that this tactic will have no effect for at least 10 years, and probably not much even then.  Neither they, nor the Democrats have a solution for tomorrow.

There seems to be agreement, even among those who would drill in our waters and in Alaska, that we can’t pump our way out of the shortage.  So what are we to do?  Are we going to turn coal into oil?  The Germans did a lot of that during the Second World War and, God knows, we have a lot of coal.  Are we going to start producing shale oil?  There are apparently gazillions of barrels available there. Of course the problem with all of this is that these are carbon-based fuels that, when burned, contribute mightily to global warming.

So, it would appear that to solve both our energy needs and the global warming issue, we will have to do something else, something new, something different.

T.  Boone Pickens, the Texas oil billionaire and conservative Republican, sees the problem and has a passionate solution.  He is investing heavily in solar and wind energy.

General Motors arbitrarily scrapped its first electric, the EV-1, in 1999, before the advent of new, more efficient batteries. This car was produced from 1996-99 to comply with California clean air standards. The cars, all of which were available solely on lease, were recalled in 2003 and crushed, as if to remove all the evidence.  Now, GM says it will have a new, plug-in hybrid model, the “Volt”, in showrooms in 2010.

Right now, we are spending trillions of dollars on imported petroleum from abroad, using dollars that have been devalued by our profligate spending in Iraq, by our tax cut program, by our relentless consumption of imported goods and by our incredible energy consumption.

Some of that money indirectly supports terrorism aimed against our interests.  Most of it is coming back here and buying America lock stock and barrel. With real estate foreclosures rampant, Asians, Europeans and Middle Easterners, people with strong currencies, are snapping up American properties.  The same is true of our stocks and bonds and government instruments.  America is for sale!

Even if you can’t stand him, Al Gore is right! So is T. Boone Pickens and at least one GM executive.  We need to invest heavily in alternative, non-carbon based energy innovation. We need to become self-sufficient.

Americans are clever.  We always have been.  We can solve the technical problems involved here and in doing so, we will create products and technologies that will be in high demand around a globally warming world, items that will fix our balance of payments problems and put us squarely on our international and national economic feet again.  This will happen only if we get going right now.

Winston Churchill once said, “Americans always do the right thing, but only after they have tried everything else!” That’s remarkably perceptive. The absolute worst thing that could happen to us, given this Churchillian observation, would be to see the price of crude go down in any meaningful way.  If gas dropped to $2 a gallon, we would never put a penny into alternative energy research, prolong our petroleum pain and ultimately cook ourselves off our globe.

In fact, as some have suggested, we probably would be well served if the Federal Government put a floor under the price of crude.  Let’s say, they would never let it be bought here for less than $130 a barrel.  Any income they made in the process could be channeled into research on alternative fuels while the reality of that price would keep private investment focused on the research process and American drivers pushing industry and government for viable alternatives to their SUVs and Hummers.

Americans probably look at our current energy plight as wholly negative.  In fact, it bears with it the seeds of our national and international economic and political redemption.  America really needs to get on with it.

Haviland Smith is a retired CIA station chief who served in East and West Europe, the Middle East and as chief of the counterterrorism staff.  A long-time resident of Brookfield, he now lives in Williston.

Read Full Post »

Read Full Post »

[Originally published in the Burlington Free Press.]

The Vermont economy, like the national economy, is in trouble. We are often given vapid reassurances by politicians that things are not all that bad, but economists and real working people have rather different take on the matter.  Unfortunately, many are anticipating a further, probably fairly serious deterioration of our national economy.

Vermont does not have the kind of balanced revenue mix that mitigates economic recessions. It is a state that is inordinately dependent on tourism for its income.

Spending on tourism is almost entirely discretionary. That money is spent after the necessities of life have been secured, that is, if there is any money left over. Vermont’s visitors, who directly and indirectly provide a large amount of Vermont’s tax revenues, are squarely in that category.

Wednesday’s Burlington Free Press had an interesting front-page article on IBM’s decision to invest $l.5 billion in new production and 1,000 new “nanotech” jobs in New York rather than in Vermont (“IBM investing $1.5 billion in New York,” July 16). In it, IBM’s concerns about the negatives of conducting business in Vermont, which have been made “quite clear” to Vermont officials, are laid out once again. Listed are: “the circumferential highway, energy prices, housing costs and site permitting issues”.

In contradistinction to these issues stand the contemporary Vermont preoccupations with sprawl, opposition to the Circ, environmental laws that slow down and sometimes paralyze the permitting process as well as attitudes toward energy generation, particularly alternative approaches, and other regulatory issues.

Vermont Republicans, in the main, would like to see a more favorable business climate because it would stimulate job growth and that, in the long run, would increase state revenues. Additional revenues would then permit investment in Vermont’s infrastructure, which would also support a more favorable business climate.

Democrats, on the other hand would like to have more money for social programs, medical services, education, low income housing and support for our underprivileged citizens. Presumably this would come through increased across the board taxation.

Increased taxation and the continuation of Vermont’s current attitudes toward businesses like IBM will not provide new income sources for Vermont’s economic needs. In purely economic terms, that will not foster growth. Without growth, there will be little hope for increased revenues to support the projects favored by either Democrats or Republicans.

It is absolutely pointless take sides on these issues, even though virtually all Vermonters do so. Given the structure and current state of Vermont’s economy, which does not favor increasing state incomes, Republicans and Democrats want additional resources, albeit for different purposes.

And yet, no party seems ready to budge an inch. Talk about the softening regulatory environment or building the Circ and there is a great hue and cry from those organizations that oppose them, even though they might be part of the solutions they seek for greater revenues. Talk about increased state resources for education in support of a better-prepared work force or state sponsored health care that would ameliorate the business climate and the Republicans howl.

The key here is well-paid jobs. Right now, because of its practices, laws and policies, Vermont has not positioned itself favorably in the national inter-state competition for those jobs.

No one can have it both ways. The kind of entrenched, diametrically opposed political attitudes that exist in Vermont today are not going to solve any of the state’s problems, particularly in these difficult economic times. Vermont will continue to have to try to muddle through.

Haviland Smith lives in Williston.

Read Full Post »

[Originally published in the Randolph Herald.]

Americans are more upset and more unified about the prices of crude oil and its byproducts than they are about Iraq or abortion.  We are, after all, incredibly dependent on that commodity in our daily lives.  And just wait until next heating season!

The automobile is absolutely indispensable in suburban and rural America. What happens when gas costs the commuter who lives 25-50 miles from his job, as is so often the case, an additional $50-100 a week?  He can’t afford it.  All he can afford is public transportation, but outside our major population centers, there isn’t much of any.  Much of rural America, including Vermont, is crisscrossed by abandoned rail, trolley and bus lines, facilities we have given up injudiciously during our love affair with the automobile.

Everyone has a special demon to blame for the price of energy.   We blame Iran, Venezuela, the Arabs, OPEC, Russia, international oil companies, in short, anyone we don’t like who is in any way involved.  How easy that is!  Unfortunately, the real reason is even simpler.  The real reason is that the international demand for energy has skyrocketed in the past decade.  Thousands of new automobiles constantly hit the roads of India, China and the rest of the world.  There are daily almost 20,000 additional humans inhabiting our planet, demanding food, housing, heating and cooling and all the other things that people feel they need.

And through all of this, Americans remain by far the highest per capita users of energy on the planet. As it is, our energy self-indulgence is forcing up the price we pay for it, damaging our balance of payments problems and our economy, lowering our standard of living and making our lives more precarious.

The solution to this problem is tightly entwined with global warming.  The two simply cannot be separated.  Calls to drill into the Alaskan reserve and all the other untapped suspected pools of crude hardly will solve the long-range dual problem.  Ditto coal reserves.  Such activity may add to established reserves, but it will exacerbate climate change.   Even the Bush Administration, traditionally denigrators of climate change theory, have now acknowledge it exists and is a problem.

For that reason, many of the so-called “solutions” to the energy problem are purely political – typical pandering hogwash.   The “gas tax holiday”, the cessation of replenishing the strategic oil reserve, a windfall profits tax on the oil companies and the otherworldly Chrysler offer for $2.99 per gallon gas for three years to help them sell unsellable, gas-guzzlers, are all really useless suggestions that do not address the real problem.

This country needs to stop all the political and commercial grandstanding and accept two realities:  Oil is in sort supply and burning oil threatens the planet.  The solution to the problems lies in investment in new energy sources over which we have control and which do not exacerbate global warming.  None of that includes finding and pumping new crude or digging more coal.  It involves cutting our self-indulgent use of energy and that means, God forbid the word should be used, conservation:  new mileage standards, better public transportation, new searches for alternate power, a nationwide 55 mph speed limit, etc, etc.  The four-day work week (20% energy saving) isn’t even a bad idea!

If you don’t like these ideas, you are not only part of the problem, in a democratic society, you are the problem.   We Americans are truly self-indulgent folks – unlikely to apply the necessary political pressure to change things quickly.

Over the past couple of centuries, America has repeatedly demonstrated one basic characteristic.  We do not easily plan ahead!  In this case, we love our cars and the sense of freedom they give us.  If there is more crude to be found, let’s go ahead and pump it wherever it is and to hell with the economic ramifications or climate change!  And so, we move forward on paths that do not have rational bases and do not lead to solutions to the root problems.  And guess what?  We don’t find needed solutions because they are not being sufficiently vigorously sought.   Then, we suddenly are faced with disaster!

The better side of our national character is that, faced with imminent disaster, and perhaps only then, America has always, at least until now, come up with real solutions.  The issue to consider right now is whether America is still up to that performance, and even if it is, why not face reality today, get on with finding solutions and avoid real pain before the situation goes completely critical?

Haviland Smith is a retired CIA station chief who served in East and West Europe and the Middle East and as chief of the counterterrorism staff.

Read Full Post »