So much for Bush-onomics

The crowing from earlier this week about real economic recovery faded in the face of exactly what I predicted: far fewer new jobs than any of the pundits expected, according to the Bureau of Labor Statistics. If, as was argued earlier this week by economists at investment firms excited about productivity numbers, jobs were the crucible, the paltry 57,000 new jobs during November reported today are flame suppressant on the economic kindling.

Many of the jobs were in hospitality, which always ramps up this time of year — those jobs and a lot of others will be gone after the holidays — yet the nation has accepted trillions in deficit spending in order to create a lousy 328,000 jobs since July. As a return on investment, the tax cuts are yielding the nation’s taxpayers far less then they need to. George W. Bush is as bad a president as he was a CEO, if you measure by return on investment. We’re faced with trillions in debt for what? For the wealthiest one percent President Bush thinks will save us through their investment activity. When the nation’s fate is handed to a very small group, democracy is destroyed.

This is a travesty of wealth transfer to Bush’s class, which represents a plutocracy in the making. Throw the bums out in November 2004.

Diebold SERVEs us right

I’ve been asked a question by SXSW’s Bits & Bytes Blog, which I answered in the way they asked me not to (in detail). The question was four sentences long and they want only three or four sentences in response — as the question is full of assumptions that I think distract from the real question at hand, I went into detail.

This is posted in the spirit of open democratic debate, not a concern that the folks at SWSX are not shooting straight. Check out the blog, they have a group of people answering interesting questions twice a week.

Question: Many questions have surfaced in the last few days regarding Diebold, the company whose touch-screen voting machines are becoming more and more prevalent across the United States. As noted in a New York Times column by Paul Krugman (http://www.nytimes.com/2003/12/02/opinion/02KRUG.html), “What we do know about Diebold does not inspire confidence. The details are technical, but they add up to a picture of a company that was, at the very least, extremely sloppy about security, and may have been trying to cover up product defects.” Does the influx of technology and the increased automation of the voting process in this country make you feel more or less secure about our democracy?

My long answer: There are two issues with regards Diebold’s electronic voting systems that are undemocratic that have little to do with whether Diebold is the “right” company to provide electronic voting systems in U.S. elections. (Yes, “right” is a double entendre in Diebold’s case.) I don’t think the company is any more sloppy than any other technology company — all code is buggy. It is the wrong reason for the very undemocratic nature of its product and the terms it is offering the American people.

Problem 1: The system is proprietary and closed, which makes it impossible to for the public to assess the fairness of its vote counts. Since we have many other devices that measure things public and private — everything from the Federal Elections Commission’s disclosure process for campaign contributions to the volume of gasoline delivered at the pump and the weight of trucks — and these systems of measure are subject to regular verification of accuracy by public employees, it is bizarre that Diebold claims no one should be able to see inside its black box to verify the accuracy of votes recorded.

Problem 2: Besides the voting technology itself, there is no way to verify the vote, as there is no physical record. Even with a mechanical voting machine there is a physical record that, as long as the machine has been checked for its accuracy, represents the state of the machine when the voter pulled the lever to vote. With Diebold’s system, the vote could be hacked even before the voter indicates they are prepared to enter their vote. A poorly written or hacked Diebold ballot could indicate the voter has selected one candidate while actually setting voter’s ballot for another candidate.

The response to these issues is not to abandon the notion of electronic voting, which could be a powerful tool. The answer is to make the system completely open so that voters would have access to technology developed to record a vote for their personal records. There’s no reason we couldn’t have a smart card that keeps our voting records for use if we believe an election has been stolen that could be swiped to actually record the vote (voting would be like going to the ATM, only you’d swipe your card at the end of the transaction to confirm your selections).

Finally, Diebold should not be allowed to provide closed technology because of its founder and CEO’s avowed support for George W. Bush. As a country, we have always avoided the opportunity for corruption when possible. Using a technology which could be corrupted and cannot be verified because of the majority owner’s private interests, when that same majority owner has public preferences that are an obvious conflict with the preferences of the majority of voters in the previous election, is irrational and criminal.

While we’re at it, Diebold isn’t the only problem. The Department of Defense SERVE Project, an electronic voting system for use by the armed forces is being offered to voters in many states, as well. This means that an agency of the executive branch, the very branch of government we are voting on in a presidential election, will have control of the recording of votes. That’s insanely conflicted. I wrote about this in July, but it has been widely ignored by the press. Yet, here in my home state, Washington, the county accessor is offering me the opportunity to vote through SERVE, which she describes as “exciting.” Scary is more like it.

Democracy in a nutshell?

Any thoughts on the following are most welcome….

Democracy is the process and practice of self-government, nothing more and nothing less. We want people to understand that any emergent qualities organizations may have, the definition of democracy is sufficiently flexible to accommodate “emergence.” Just as “democratic” is appended to “markets” and “organization” to explain that to some degree the members of institutions are governing themselves, “emergent democracy” is a process and practice that is democratic in which unplanned results are realized through the input of the widest possible range of individual and institutional participants. It is bottom-up governance that resists the past for the past’s sake and reinvents society anew constantly. It is innovative, preserving and cannibalizing the past to create better solutions to social problems each day. It is many small changes that add up to profound solutions, an order that is intended to change, everything that has made democracy the most compelling form of government (governance?) on Earth. Democracy is so attractive that even the most undemocratic governments wrap themselves in the flag of democracy to look good for the crowds they rule.

(From Jon: There is a sentence above that I didn’t quite get. In this sentence: We want people to understand that any emergent qualities organizations may have, the definition of democracy is sufficiently flexible to accommodate “emergence.” – a word seems to be missing?)

Because democracy is practice and process, it is susceptible to changes via the application of technology. Democracy is much more than voting, it is a system of communication, debate and choice-making. Networked computers, we know, are tools that dramatically transform all these activities.

Likewise, democracy is founded on the dissemination and analysis of information among citizens. Education is both the by-product and a significant driver of a healthy democracy, as demonstrated by the high levels of educational achievement in the United States and Europe compared to most of the world during the first half of the 20th century and the rapid transition towards democracy among nations where educational levels were increased during the second half of the 20th century. Democracy demands informed people and informed people seem to demand democracy.

The proliferation of the Internet has carried information and education to parts of the world, as well as places in the United States and Europe, where it has never been available so conveniently or with such speed, enabling new achievements in education and decision-making.

From Jon: we should clarify that democracy is discussion and debate leading to decision – and one problem with purer forms of democracy is the difficulty getting past discussion to an informed and timely decision. (We should also make clear that e-demo happens within the larger framework of “democracy,” extending the existing definition of participation without really changing the basic structure of democracy, that is, self-rule)

What comes first, democracy or discussion? How does a society reach the point where it can make informed and timely decisions? Many of the mainstream ideas about democracy argue a nation has to achieve a certain order or level of prosperity to enable democratic deliberation. If you look, however, at the history of economic development, the most successful countries have always embraced investment in education before they reached prosperity — and education is a keystone of democracy, as well, if it is directed toward the growth of rationality and critical thinking. They rise together, that in totalitarian states, discussion started in small groups, who learn from one another and also learn to share control, to debate and vote and accept the rule of a majority that constantly shifts in its composition. They co-evolve or perish.

When we talk about emergence we mean that no one is in total control, but there is a great deal of control working within the emergent system. Societies establish processes for decision-making. Practice emerges and evolves based on initial processes. Emergence is a bottom-up experience of change in society in contrast to the top-down business of politics in a mass media system.

Modern media has actually caused a retrograde movement in politics, as the local gave way to the domination by national top-down forces. The availability of tools for connecting people concerned with the same issues can, but won’t necessarily, transform the politics of the 20th century into something new.

The phenomenal thing about tools is that, while they may be very expensive or difficult to obtain or build at the beginning of their lifecycle, they always become commodities, available to everyone at a very low cost eventually. In the case of tools for democracy, there are a number of factors driving the cost down more quickly than ever: the open source movement; the globalization of the Net, which yields many more sources of tools, and; the urgency felt by people who crave increased liberty and a voice in the conduct of government.

The tools we’ll discuss and use as examples in this book are primarily open source, though we’ll touch on how email and other proprietary tools can be tied into a growing system of open source tools to create additional political leverage.

But the real challenge in changing the political system is first understanding what needs to be changed before the change can happen. This challenge exists on two levels: Understanding what can be improved in democratic societies where big money and big media currently dominate the communication of ideas, and; Understanding the consequences of choices made when designing and applying new tools to human processes.

Chinese Banks Will Be Bailed Out, Again

The Wall Street Journal writes enthusiastically about growing competition in the Chinese financial services industry while dropping the biennial news that China will use public funds to clean up $120 billion in under-performing debt at the Big Four banks in the PRC:

On another tack, Mr. Liu confirmed that a rescue plan was in the works for the country’s biggest banks. That plan would involve capital injections, the hiving off of bad debt and possible stock listings. The experiment would likely begin with one or two of the banks before being expanded to others, Mr. Liu said. He offered no financial details.

The China Business Post, citing a Ministry of Finance official, reported Monday that the capital injections would take place next year and could involve hundreds of smaller Chinese commercial banks in addition to the big four state-run banks. The four — Bank of China, Industrial and Commercial Bank, Construction Bank and Agricultural Bank — hold about $120 billion in nonperforming loans, accounting for about 21% of total loans, according to government figures. Some private economists put their ratio of nonperforming loans closer to 50%.

When the state isn’t bailing out those banks, there will be real competition. For now, the increased access to the market by foreign banks is good news, but only because it points to increased access to capital for the Chinese. China’s government will continue to subsidize economic activity to the tune of several hundred billion dollars every few years in order to sustain the economic story that keeps today’s leaders in power. Who needs tariffs when you can write down capital investments in uncompetitive companies?

Six Degrees of Hedging Your Bets

Interesting article in the New York Times today about Reid Hoffman of LinkedIn and Mark Pincus of Tribe, who purchased the so-called “Six Degrees patent” from YouthStream Media Networks for $700,000. It’s clearly a defensive move, since neither of these guys is dumb enough to think they can turn a patent into business model; the question is whether they will turn this kind of tax on their own innovations on social networking into a resource the can bind social networks together through some common interfaces for sharing data.

Thing is, they could use the patent as a tool for slowing others down or they could put it into the public domain, where it belongs, and use it to spur this little industry along. I’m of the same mind as Anthony Brydon of Visible Path (though not because I think they have better technology), who told the Times: “I think we’re going to find that many of the things being protected today are completely irrelevant a year from now.”

The value of the patent will certainly vanish if Hoffman and Pincus keep the patent in their back pocket and the smart move is to take that $700,000 investment and turn it into a standards investment that keeps the industry running along the same tracks LinkedIn and Tribe follow.

Black Friday or Black Hole?

The early reports of increased sales at retail after Thanksgiving are fueling a good day on the market, but it doesn’t look sustainable to me. With sales up 4.8 percent overall on Friday, much of that concentrated in discount stores, the anticipated gains aren’t large enough to sustain a substantial increase over last year, when year-to-year growth was an abysmal two percent. The fact that discounters did record business is no solace, since a good day for Wal-Mart is generally a bad day for everyone else, including the manufacturers who sell to Wal-Mart on razor thin margins, if the take any profit.

Sales fell off over the weekend and the other “biggest day” of the year, the last weekend before Christmas, when discounts are already kicking in a last ditch effort t attract shoppers, is looming ahead. It looks to me like the projected recovery is already running out of gas — and, considering that we’ve invested about $4 trillion in deficits to spur the sluggish job growth, the American people are getting a raw deal.

Wouldn’t it be better to spend $1 trillion on, say, education, today and see if that true investment in the people wouldn’t yield much greater long-term economic returns? But, no, we’re getting supply-side IOUs that our kids will have to pay back.

UPDATE: The strong results of the Institute for Supply Management manufacturing index, which came in at an unexpected 62.8 (anything above 50 is considered expansion) is undercut by the slower, much slower growth of the employment index the organization produces, which just crossed over the no-expansion mark this month. That means that if growth isn’t real during the holiday season, jobs will fall back into contraction territory and it is likely that having over-shot projections the manufacturing index will correct downward, too. All that said, Joel Narrof, chief economist at MFR Inc. is quoted by the Wall Street Journal as writing in a research note today: “This expansion is the real thing. We even have the possibility that in the payroll report, the manufacturing sector may no longer be a drag. While actual job increases may not show up for a while, we might expect that the losses will be minimal in November.”

Okay, so we’ll watch job figures carefully. If employment falls or does not show significant growth in November, the evidence suggests the recovery is running out of gas.