Fears Rising, Spaniards Pull Out Their Cash and Get Out of Spain

Spain’s picture is growing dimmer

By LANDON THOMAS Jr.

It is, Julio Vildosola concedes, a very big bet.

After working six years as a senior executive for a multinational payroll-processing company in Barcelona, Spain, Mr. Vildosola is cutting his professional and financial ties with his troubled homeland. He has moved his family to a village near Cambridge, England, where he will take the reins at a small software company, and he has transferred his savings from Spanish banks to British banks.

“The macro situation in Spain is getting worse and worse,” Mr. Vildosola, 38, said last week just hours before boarding a plane to London with his wife and two small children. “There is just too much risk. Spain is going to be next after Greece, and I just don’t want to end up holding devalued pesetas.”

Mr. Vildosola is among many who worry that Spain’s economic tailspin could eventually force the country’s withdrawal from the euro and a return to its former currency, the peseta. That dire outcome is still considered a long shot, even if Spain might eventually require a Greek-style bailout. But there is no doubt that many of those in a position to do so are taking their money — and in some cases themselves — out of Spain.

In July, Spaniards withdrew a record 75 billion euros, or $94 billion, from their banks — an amount equal to 7 percent of the country’s overall economic output — as doubts grew about the durability of Spain’s financial system.

Confident ignorance

Obama's Dreams

by Thomas Sowell

After reading Barack Obama's book Dreams from My Father, it became painfully clear that he has not been searching for the truth, because he assumed from an early age that he had already found the truth – and now it was just a question of filling in the details and deciding how to change things.

Obama did not simply happen to encounter a lot of people on the far left fringe during his life. As he spells out in his book, he actively sought out such people. There is no hint of the slightest curiosity on his part about other visions of the world that might be weighed against the vision he had seized upon.

As Professor Richard Epstein of the University of Chicago Law School has pointed out, Obama made no effort to take part in the marketplace of ideas with other faculty members when he was teaching a law course there. What would be the point, if he already knew the truth and knew that they were wrong?

This would be a remarkable position to take, even for a learned scholar who had already spent decades canvassing a vast amount of information and views on many subjects. But Obama was already doctrinaire at a very early age – and ill-informed or misinformed on both history and economics.

The Battle Begins

There will be blood

by Mark J. Grant

If the leaks from the European Parliament are to be believed then the lines are being drawn in the sand for quite a fight. The rumor is that Mr. Draghi is going to propose a plan to buy short sovereign debt (0-3 years) without limit if a nation fills out the requisite form and officially asks for aid with conditionality. The rumor further states that this short term-buying, which involves lending money directly to various governments and not just buying bonds in the secondary market, does not violate the mandate of the ECB which specifically forbids the ECB from doing exactly what he may be proposing. I find his argument spurious as defined by maturity and it will be quite interesting to see what reaction Germany and her allies may have to this scheme. The dog fight will begin later today as he releases his actual plan to the various central banks in Europe. The constant speculation will end and the reactions of the various governments will be front and center upon the world’s stage.

“He thinks it’s not a violation of the treaty and you can do it under the current legal framework,” said Gauzes, a French Christian Democrat. “He said for example three years is ok, 15 years no.”

I find this once again proof that the rules and regulations in Europe, the very stipulations that we rely upon, can be changed, modified or distorted with the blink of an eye and the wave of a hand. It seems that nothing is set in concrete, nothing is firm and that everything is moveable upon a moment’s notice. I find Mr. Draghi’s argument ridiculous, if the report is to be believed, and one fraught with fiscal danger as it would probably mean that all new sovereign financing would be within the timeframe that he sets and so the amount of upfront debt, which would constantly have to be rolled, would present a series of dangers including the inability to finance it as it comes due along with a balance sheet at the ECB that could swell well past the $4 trillion mark where it is now or 45% larger than the current balance sheet at the Fed. The world does not receive funding from alien worlds and there are consequences that append from having a ledger that expands without boundaries and where the slightest imperfection pricks the balloon and the whole bloated piece of plastic twizzles off into the air with frightening results and a dreadful sound.

Everybody knows

How "Policy By Panic" Can Backfire for Environmentalists

Kansas Dust Bowl drought 1930's

Saying that droughts are caused by global warming leads to public distrust and disengagement when the rain starts to fall.

By Bjørn Lomborg

“Everyone knows” that you should drink eight glasses of water a day. After all, this is the advice of a multitude of health writers, not to mention authorities like Britain’s National Health Service. Healthy living now means carrying water bottles with us, sipping at all times, trying to drink our daily quota to ensure that we stay hydrated and healthy.

Indeed, often we drink without being thirsty, but that is how it should be: As the beverage maker Gatorade reminds us, “your brain may know a lot, but it doesn’t know when your body is thirsty.” Sure, drinking this much does not feel comfortable, but Powerade offers this sage counsel: “You may be able to train your gut to tolerate more fluid if you build your fluid intake gradually.”

Now the British Medical Journal reports that these claims are “not only nonsense, but thoroughly debunked nonsense.” This has been common knowledge in the medical profession at least since 2002, when Heinz Valtin, a professor of physiology and neurobiology at Dartmouth Medical School, published the first critical review of the evidence for drinking lots of water. He concluded that “not only is there no scientific evidence that we need to drink that much, but the recommendation could be harmful, both in precipitating potentially dangerous hyponatremia and exposure to pollutants and also in making many people feel guilty for not drinking enough.”

The drink-more-water story is curiously similar to how “everyone knows” that global warming only makes climate more extreme. A hot, dry summer (in some places) has triggered another barrage of such claims. And, while many interests are at work, one of the players that benefits the most from this story are the media: the notion of “extreme” climate simply makes for more compelling news.

Economics and the Citizen

In Western democracies today, the study of economics is practically outlawed

This article is excerpted from Human Action, chapter 38, "The Place of Economics in Learning."

by Ludwig von Mises

Economics must not be relegated to classrooms and statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man's human existence.

To mention this fact is not to indulge in the often-derided weakness of specialists who overrate the importance of their own branch of knowledge. Not the economists, but all the people today assign this eminent place to economics.

All present-day political issues concern problems commonly called economic. All arguments advanced in contemporary discussion of social and public affairs deal with fundamental matters of praxeology and economics. Everybody's mind is preoccupied with economic doctrines. Philosophers and theologians seem to be more interested in economic problems than in those problems which earlier generations considered the subject matter of philosophy and theology. Novels and plays today treat all things human — including sex relations — from the angle of economic doctrines. Everybody thinks of economics whether he is aware of it or not. In joining a political party and in casting his ballot, the citizen implicitly takes a stand upon essential economic theories.

In the 16th and 17th centuries religion was the main issue in European political controversies. In the 18th and 19th centuries in Europe as well as in America the paramount question was representative government versus royal absolutism. Today it is the market economy versus socialism. This is, of course, a problem the solution of which depends entirely on economic analysis. Recourse to empty slogans or to the mysticism of dialectical materialism is of no avail.

The Shape of things to come

Inside America's Most Indebted City

by Mike "Mish" Shedlock

The town's 50,000 citizens are on the hook for $1.5 billion according to the NPR article Inside America's Most Indebted City.

The city has delayed payments to light bulb venders and paper sellers. Restaurants have hired their own security. A local strip club paid to keep the street light on. The city is projected to run out of money entirely in October.

A judge has recently ordered a 1% income tax hike on the people still left in Harrisburg. But the city council has promised to fight it.

$1.5 Billion Does Not Include Schools, Pensions, Unfunded Liabilities

The Patriot News notes Harrisburg's eye-popping debt total is just one piece of city's bleak financial puzzle

 It’s almost impossible to say exactly how much money the elected and appointed officials of Harrisburg have borrowed.

Missing financial audits, complicated transactions and intertwining finances create a labyrinth of money that stretches decades into Harrisburg’s history. 

At best estimates, based upon reviews of independent reports and audited financial statements, the amount of debt owed by the city and its affiliated entities — with interest — stands somewhere north of $1.5 billion.

U.S. Companies Brace for an Exit From the Euro by Greece

It’s not impossible or unthinkable anymore

By NELSON D. SCHWARTZ

Even as Greece desperately tries to avoid defaulting on its debt, American companies are preparing for what was once unthinkable: that Greece could soon be forced to leave the euro zone.

Bank of America Merrill Lynch has looked into filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. Ford has configured its computer systems so they will be able to immediately handle a new Greek currency.

No one knows just how broad the shock waves from a Greek exit would be, but big American banks and consulting firms have also been doing a brisk business advising their corporate clients on how to prepare for a splintering of the euro zone.

That is a striking contrast to the assurances from European politicians that the crisis is manageable and that the currency union can be held together. On Thursday, the European Central Bank will consider measures that would ease pressure on Europe’s cash-starved countries.

JPMorgan Chase, though, is taking no chances. It has already created new accounts for a handful of American giants that are reserved for a new drachma in Greece or whatever currency might succeed the euro in other countries.

Stock markets around the world have rallied this summer on hopes that European leaders will solve the Continent’s debt problems, but the quickening tempo of preparations by big business for a potential Greek exit this summer suggests that investors may be unduly optimistic. Many executives are deeply skeptical that Greece will accede to the austere fiscal policies being demanded by Europe in return for financial assistance.

55 MPG is Going to Cost Us

Long Live Caesar

By Eric Peters

It’s fortunate for the car industry that the government regards it as “too big to fail” – because it’s going to fail again. Because of the government.

This will be third time, actually.

The first time was back in the late 1970s, when Chrysler rolled over like a mortally wounded battleship – to a great extent because it wasn’t able to turn a profit selling the cars it had anticipated the market would want – but was stuck trying to sell cars the government told Chrysler it wanted. Cars that met the first round of federal Corporate Average Fuel Economy (CAFE) standards, which stipulated 27.5 MPG at a time when the typical American car was as large as the current-era’s largest cars, with a big V-8 under the hood instead of something Toyota Corolla-sized, with a four under the hood. The Japanese at that time made nothing but small, four-cylinder cars – so Uncle handed Toyota, Datsun (Nissan now) and Honda an artificial leg up in the market – while kicking Chrysler, et al, in the soft parts.

It’s true the American cars of that time were not of primo quality. And it’s true the first round of Japanese imports were also just good little cars that sold on the merits. But it’s also just as true that CAFE imposed ruinous costs on the domestics, who were forced to prematurely retire entire vehicle platforms (and engines) long before the investment in designing, tooling and so on had been amortized (paid off) over the course of these vehicles’ otherwise natural life cycle. It almost killed Chrysler – which was (and still is) the weakest of the Big Three, with fewer resources to fall back on. But it also hurt GM and Ford.

Why Listen To Keynes In The First Place?

A great guy!

by James E. Miller 

In a recent BBC News article, philosopher John Gray asks the quaint but otherwise vain question of what would John Maynard Keynes do in today’s economic slump.  I call the question vain because practically every Western government has followed Keynes’ prescribed remedy for the so-called Great Recession.  Following the financial crisis of 2008, governments around the world engaged in deficit spending while central banks pushed interest rates to unprecedented lows.  Nearly four years later, unemployment remains stubbornly high in most major countries.

Even now in the face of the come-down that inevitably follows any stimulus-induced feelings of euphoria, certain central banks have taken to further monetary easing.  The Bank of England recently announced an extension of its quantitative easing program by £50bn.  Not to be outdone, both the People’s Bank of China and the European Central Bank cut interest rates in an effort to boost consumer borrowing.  Still, these new rounds of monetary stimulus don’t appear to be doing the trick.  The Keynesian miracle cure has been a spectacular dud thus far.  All that modern day disciples of Keynes can do is scratch their heads and say “more should have been done.”  They never allude to how many more trillions of paper dollars should have been created or spent; just call it the excuse that keeps on giving.

Euro zone factories faltering as core crumbles

The national picture remains one of widespread contraction

By Jonathan Cable

The euro zone manufacturing sector contracted faster than previously thought last month, despite factories cutting prices, as core countries failed to provide any support, a survey showed on Monday.

The downturn that began in the smaller periphery members of the 17-nation bloc is now sweeping through Germany and France and the situation remained dire in the region's third and fourth biggest economies of Italy and Spain.

"Larger nations like France and Germany remain in reverse gear... the (manufacturing) sector is on course to act as a drag on gross domestic product in the third quarter," said Rob Dobson, senior economist at data collator Markit.

Markit's final Purchasing Managers' Index (PMI) for the manufacturing sector fell from an earlier flash reading of 45.3 to 45.1, above July's three-year low of 44.0, but notching its 13th month below the 50 mark separating growth from contraction.

Labor Day 2012

The Future of Work

by Charles Hugh Smith

Technology and the Web are destroying far more jobs than they create. We will need to develop a "Third Way" based on community rather than the Market or the State to adapt to this reality.

What better day to ponder the future of work than Labor Day? Long-time correspondent Robert Z. recently shared an essay on just this topic entitled Understanding the 'New' Economy.

The underlying political and financial assumption of the Status Quo is that technology will ultimately create more jobs than it destroys. Bob's insightful essay disputes that assumption:

Over the past 15 years, the global economy has experienced structural changes to a degree not seen in nearly 150 years. Put simply, the Industrial Revolution of the 1800s has given way to a post-industrial economy. In this post-industrial economy, technology has now evolved to the point where it destroys more jobs than it creates.

Still, most people are Luddites to some extent. Human nature is to resist dramatic change, either actively or passively, until we have no other choice. If you don’t believe that, just listen to our presidential candidates.

Both Mitt Romney and Barack Obama will give us happy talk about maintaining entitlement benefits (e.g., Medicare and Medicaid) that cannot possibly be sustained. They will talk about energy self-sufficiency. They will talk about creating jobs. They will tell us that we can somehow ‘grow’ our way out of our economic distress. But neither candidate will admit that technology now destroys more jobs than it creates, because to do so would be to commit political suicide. The fact is that none of the happy talk will ever come true. Instead, the Federal Government, with the tacit approval of both major political parties, continues to run trillion-dollar-plus deficits year after year in a futile attempt to spend our way out of our economic problems and to sustain an economic model that cannot be sustained.

EU's Poorest Member Country Smacks Down Euro As Bulgaria Refuses To Join Eurozone

Bulgaria is Going Short on Euro

When a parasitic technocrat asks to shake your hand, you refuse

By Tyler Durden

If one needs a shining example of why the days of Europe's artificial currency are numbered, look no further than the EU's poorest country which moments ago said "Ne Mersi" to the Eurozone and the European currency. From the WSJ: 

"Bulgaria, the European Union's poorest member state and a rare fiscal bright spot for the bloc, has indefinitely frozen long-held plans to adopt the single currency, marking the latest fiscally prudent country to cool its enthusiasm for the embattled currency. Speaking in interviews in Sofia, Prime Minister Boyko Borisov and Finance Minister Simeon Djankov said that the decision to shelve plans to join the currency area, a longtime strategic aim of successive governments in the former communist state, came in response to deteriorating economic conditions and rising uncertainty over the prospects of the bloc, alongside a decisive shift of public opinion in Bulgaria, which is entering its third year of an austerity program. 

"The momentum has shifted in our thinking and among the public…Right now, I don't see any benefits of entering the euro zone, only costs," Mr. Djankov said. 

"The public rightly wants to know who would we have to bailout when we join? It's too risky for us and it's also not certain what the rules are and what are they likely to be in one year or two."

Spontaneous Order in Sports

Civil Order at Work

By Stephen Davies

One of the most profound and difficult insights of the economic way of thinking is that free association can produce complex, rule-governed institutions and social orders that no single person or small group designed. Professional sports illustrates this insight dramatically.

Today professional sports is an important business and a major social phenomenon. It is a staple of casual conversation, a topic that most people have opinions about (even if only that they hate it), and a large part of both television and print media. The Super Bowl is America’s most-watched television program, and the World Cup and Olympic Games attract a truly worldwide audience. There are many kinds of organized competitive sports, with no fewer than seven widely played kinds of football, for example. Most of these have formal governing bodies and elaborate rules both for playing and for settling disputes. There is even a sporting “world court,” the Court of Arbitration for Sport in Lausanne. Typically sports have a complex technical language, which is often impenetrable to someone not familiar with the game in question–as generations of Englishmen have discovered when trying to explain cricket to baffled Europeans and Americans.

This vast array of practices, institutions, and rules is generally taken for granted: Few ever ask how it came about. The story, however, is fascinating. While there certainly was purposeful action, and many rules and institutions were consciously created, organized sports are not cases of straightforward, “top down” planning.

The Coming Higher-Ed Revolution

The Dinosaurs are dying

by STUART M. BUTLER

In recent decades, key sectors of the American economy have experienced huge and disruptive transformations — shifts that have ultimately yielded beneficial changes to the way producers and customers do business together. From the deregulation that brought about the end of AT&T's "Ma Bell" system, to the way entrepreneurs like Steve Jobs forever changed the computer world once dominated by IBM, to the way the internet and bloggers have upended the business model of traditional newspapers, we have seen industries completely remade — often in wholly unexpected ways. In hindsight, such transformations seem to have been inevitable; at the time, however, most leaders in these fields never saw the changes coming.

The higher-education industry is on the verge of such a transformative re-alignment. Many Americans agree that a four-year degree is vastly overpriced — keeping many people out of the market — and are increasingly questioning the value of what many colleges teach. Nevertheless, for those who seek a certain level of economic security or advancement, a four-year degree is absolutely necessary. Clearly, this is a situation primed for change. In as little as a decade, most colleges and universities could look very different from their present forms — with the cost of a college credential plummeting even as the quality of instruction rises.

If this transformation does come to pass, it could have profound and beneficial implications. It could significantly increase the international competitiveness of American workers in a world in which we need higher skills and productivity to compete. It could sharply improve the employability of those on the bottom rungs of America's income ladder, giving them the tools they need to move up. And it could do much to restore the American Dream for those who have begun to believe that opportunity in this country is disappearing. In other words, such a change could hardly come too soon.

The myth of a democratic socialist society funded by capitalism is finished

This is the defining political problem of the early 21st century

By Janet Daley

Whatever the outcome of the American presidential election, one thing is certain: the fighting of it will be the most significant political event of the decade. Last week’s Republican national convention sharpened what had been until then only a vague, inchoate theme: this campaign is going to consist of the debate that all Western democratic countries should be engaging in, but which only the United States has the nerve to undertake. The question that will demand an answer lies at the heart of the economic crisis from which the West seems unable to recover. It is so profoundly threatening to the governing consensus of Britain and Europe as to be virtually unutterable here, so we shall have to rely on the robustness of the US political class to make the running.

What is being challenged is nothing less than the most basic premise of the politics of the centre ground: that you can have free market economics and a democratic socialist welfare system at the same time. The magic formula in which the wealth produced by the market economy is redistributed by the state – from those who produce it to those whom the government believes deserve it – has gone bust. The crash of 2008 exposed a devastating truth that went much deeper than the discovery of a generation of delinquent bankers, or a transitory property bubble. 

Thugs Win Again

And when thugs win, that provides more incentive for thuggery

From The Jerusalem Post:

Egged [the largest bus company in Israel] and the company in charge of bus advertisements have decided that rather than be forced to put up ads with women in Jerusalem due to court action claiming discrimination against the gender, they will remove all people — both men and women — from the bus advertisements.

Starting August 1, Cnaan Advertising quietly removed all persons from their bus advertisements in the capital. The policy was clearly laid out in a letter from Egged to Cnaan obtained by The Jerusalem Post: “In the Jerusalem area there will be no images of people at all, though in other parts of the country it will be possible to use such images,” the letter from July 31 stated.

Cnaan, the company responsible for the bus ads, claims that haredi [ultra-Orthodox-Jewish -EV] extremists have defaced buses with paint and stones and even set an empty bus on fire because of ads featuring images of women they deemed “immodest.” Cnaan refused to run any advertisements with women, claiming that it will cause the company financial damage, and activists accused the company of discrimination against women. After the Transportation Ministry said it would refuse to work with any companies that discriminate based on gender on July 11, legal advisers from Egged and Cnaan decided the best course of action would be to remove any people from bus advertisements....

Whether the government was right in refusing to work with the company unless it treated ads depicting men and ads depicting women equally is a separate question. But while the company decided not to run ads depicting men because of the threat of government action, it’s clear that the company decided not to run ads depicting women because of the fear of thuggery by religious extremists. I sympathize with the company’s predicament, but the bottom line is that the thugs won: Their threat of vandalism and arson has led to the suppression of speech that they dislike.

And when thugs win, that provides more incentive for thuggery, not just by thugs of this ideological stripe but by others as well. It seems that there is serious peril for Israeli democracy and liberty here, and a serious need to do something about this sort of religious extremism that is willing to enforce its censorship schemes not just by social pressure but by criminal attack.

The Rulers And The Ruled

It is impossible to free a serf 

By Bill Buckler

The truth that without property rights, no other rights are possible has been known for millennia. In the formalised study of politics, it is more than 300 years old, having been articulated with great care by John Locke in the late 17th century. The modern study of economics is well over 200 years old. Adam Smith’s Wealth Of Nations was published in 1776 - the same year as Thomas Jefferson’s Declaration Of Independence. The great work which finally integrated money with politics and economics celebrates its centennial this year. Ludwig von Mises published his Theory Of Money And Credit in 1912 - the year before the US inaugurated an income tax and a central bank. Ten years after that in 1922, von Mises published Socialism - a book which established beyond refutation the fundamental truth that any form of central planning and/or government control of the means of production cannot work because it makes economic calculation impossible. Picture if you will the state of ANY other branch of human endeavour if ALL the knowledge about it gained over the past three centuries had been summarily dismissed.

Property rights are a prerequisite for any kind of exchange - direct or indirect. The ability to exchange is fundamental to any type of viable economic activity. The efficiency of exchange is fundamental to the success of that economic activity and the resultant prosperity of the nation that engages in it. Indirect exchange using a MEDIUM of exchange or money is hugely more efficient than direct exchange or barter. That makes money the most important economic good in existence. The tragedy of our present global plight is the simple fact that money is also the least understood economic good in existence.

The first pre-requisite of the establishment of a “society” of the rulers and the ruled has always been the same. The rulers must gain control over the medium of exchange. For obvious reasons, no nation can ever progress to a state of advanced economic activity until a medium of exchange is established. Once it is established, there is no going back. An advanced economy cannot operate by means of barter. The problem is that once the government or the rulers gain control of money, it progressively ceases to be a medium of exchange and becomes a medium of control. That impinges on the functioning of markets which in turn impinges on the maintenance of property rights. Thus, we come full circle from a free society to a command society. There has never been any shortage of those who want to rule. The problem has always been with the vast majority who are content to be ruled. Today’s global outcry for the manufacturing of more and more “money” out of thin air is an eloquent testimony. It shows that most people have no understanding of freedom, markets or money. Lacking such understanding - and having no desire to gain it - most people have accepted government as their masters.

As Robert Heinlein stated the problem - it is impossible to free a serf or a slave. He or she must free themselves and most are much more terrified of that prospect than they are resentful of being ruled.

Why Our Pets Have Better Health Care Than Us

Stem cell therapy for dogs!

By JULIA SZABO

Why can’t doctors be more like vets? With medical breakthroughs quietly taking place in the field of animal medicine, it’s a question more Americans should be asking — whether or not they have pets.

Thanks to advances in veterinary medicine, pets have access to more superior medical care than humans do. Dogs that suffer from arthritis may undergo stem cell regeneration therapy, in which their own autologous (adult) stem cells are harvested from their own fatty tissue and then injected into their joints. The healing benefit is remarkable, as I have witnessed myself with two of my own dogs. Unfortunately, this particular therapy is not yet available for humans in the United States.

Meanwhile, in Florida late last year, a Yorkshire terrier underwent a routine spay procedure, but something went very wrong during the anesthesia process and the dog emerged from resuscitation with cortical blindness. Veterinarians advised the dog’s owner that euthanasia might be the kindest option in this case. Then, a quick-thinking vet at Calusa Veterinary Center in Boca Raton suggested hyperbaric oxygen therapy; with nothing to lose, the dog’s heartbroken owner consented. Thirty-five HBO2 treatments later, the dog’s blindness was reversed.

Counsel of Despair?

Liquidating malinvestments

By Robert Higgs

Over the years, I have heard many people say that the government’s adoption of a laissez-faire stance during a business recession or depression amounts to “do-nothing government”—the unstated assumption always being that it is better for the government to “do something” than to do nothing. Recommending such a hands-off stance is often described as a “counsel of despair.” Moreover, it is frequently added, in a democratic polity, the electorate will not tolerate such a policy.

Implicit in such criticism is the assumption that the government knows how to improve the situation and has an incentive to do so. If only it will take the known remedial action, people’s suffering will be relieved, and the economy will return more quickly to full employment and rapid economic growth. All that blocks such remedial action, it would seem, are outdated ideas about the proper role of government and, perhaps, the opposition of certain selfish special interests. Government need only step on the gas pedal, by means of expansionary fiscal and monetary policies, and the economic engine will accelerate. If the government is already taking such actions, it need only press down harder on the gas pedal.

A Politics of Knowledge

The capacity of a society for learning must match its capacity for change

by JOHN O. MCGINNIS

Over the past few decades, the rise of information technology has dramatically recast Americans' everyday experiences. Cell phones suddenly allowed us to stay in touch anytime, anywhere, only to be replaced by Blackberries, iPhones, and ever smarter devices. The internet and its search engines have given us instant access to unprecedented amounts of information, opening doors to a virtual reality that has become nearly as important to many of us as the tangible, physical world. From doctors accessing patient records on their laptops during examinations to university professors using meeting software to instruct students three time zones away, these new technologies are continuously transforming how we work, play, and live.

But we rarely pause to consider what such relentless technological progress might mean for our lives as citizens, and for the work of our government. At the core of the information revolution is an explosion of networked computing power, and the great promise of that revolution is therefore the promise of networked information processing. It is the promise not so much of doing more as of knowing more — of turning vast quantities of raw data and diffuse knowledge into manageable, usable, and focused expertise and understanding. The potential of such power for a government like ours is enormous, because the reach of our government constantly exceeds the grasp of our understanding. We lack a clear picture of what our government now does well and what it does poorly: Massive federal programs disburse billions of dollars with no real sense of whether they achieve their purposes; new programs are created based on vague and ill-informed projections of their future effects; and bureaucrats in Washington are expected to know far more than any small group of technocrats ever really could.