Obama's Political Roots

Bodysurfing in Hawaii

Barack Obama was born in Hawaii and went to its prestigious Punahou High School, spending a few years of his childhood in Indonesia. I lived across the street from his high school, although a few years after he graduated. I don't know Obama, at least not much more than anyone watching the news these days, but I do have some insights into the environment he lived in while in Hawaii.

One of the things to recognize was that Obama lived in Hawaii while a Japanese-American governor came to power. While in high school, he would have seen Gov. George Ariyoshi emerge as the first US governor of Asian descent, an extraordinary event at the time that was widely celebrated in Hawaii.

Why Political Economy?

Political Economy examines the interplay between powerful economic actors and market forces. It looks at government, NGOs, news organizations, religions, unions, oligopolistic corporations, and even individuals that possess either great wealth, political power, charismatic personalities and/or celebrity status.

Economics is based on a beautiful yet fleeting abstraction: that dynamics of nature drive the forces of supply and demand to produce an equilibrium price that will satisfy everyone involved. The state of natural perfection, often called the "market" will constantly adjust and readjust via the price system to achieve the "one price" that will "clear the market" of all products and send all customers happily on their way home.

Political Economy does not deny market forces, but recognizes that the real world consists of actors that have little interest in being subject to market forces. Every business strives to transcend market forces and establish a dominant presence with the power to set its own prices. Governments work to even out the business cycle with intentional policies to either stimulate or (rarely) slow down the economy. Central Banks like the Federal Reserve use their power over the money supply to influence the economy.

Resist Shock: Employ Rationality

Tonight I went to a talk by Naomi Klein, columnist for The Nation and author of the recent bestseller, The Shock Doctrine: The Rise of Disaster Capitalism. The book is a excellent antidote the current preoccupation with market fundamentalism and doctrines of Milton Friedman and Friedrich Von Hayek.

The book is a great critique of the Commanding Heights, an intriguing book about globalization and the move from governments, but one that falls short of a penetrating analysis. It is an interesting travelogue of how different countries overcame the legacies of colonialization and communism, with great personalities, and an optimistic view of the structural readjustments undertaken by many countries. The impact of privatization for example. I plan to compare the two in one of my classes.

I've not bought into Klein's perspective entirely, but her warnings about the use of crisis to implement radical economic changes are very useful in a time when we are debating building more nuclear power plants and drilling offshore many of America's most beautiful beaches.

35 MPG: Bush Signed the US Auto Industry into Extinction

Just after Christmas I wrote about the laughable Energy Bill mandating an average 35 mpg for car companies by the year 2020. With a stroke of his pen, President Bush had signed the death sentence for the US automobile manufacturers. True, the bill took forever to get through Congress, primarily because the Republicans refused to increase the requirement of electricity that electric utilities needed to get from renewable sources. Basically the bill was a testament to the power of entrenched powers - oil, electric, and auto - to control the energy policy.

Today I checked the stock prices on those companies and GM was under $10 at $9.69 for the first time in 50 years while Ford hit a new low of $4.60. GM needs some $15 billion to remain solvent according to Merrill Lynch and with consumers racing away from trucks and SUVs its difficult to see how they will return to profitability.

The price of crude oil is $141.65 while the price at the pumps went way over $4 a gallon. We have basically had the same automobile industry - that includes the logistics/distribution system for its primary fuel - for a hundred years. Now it looks like Bush added 12 more years to this dying legacy.

Some of my friends say let the "free market" take care of this. OK, I have a Toyota. I'm doing my part.

So what is the point? Government needs to kick this industry in its butt. We need guidelines that are more realistic, like 50 mpg by 2015. Electric hybrids with regenerative braking is the most promising technology on the horizon. Hydrogen also has potential (but so did Zeppelins). Government needs to put the pressure on these companies to adapt the new technologies and become much more efficient. This is the "competition" the US automobile industry needs.

The Ghost of Enron

It doesn’t help that the world’s oil is primarily pumped by dictatorship-led countries with little concern about upgrading their facilities and that America is overrun with gas-guzzling SUVs, but that doesn’t explain the dramatic hike in energy prices over the last year.

The new “energy crisis” appears to arise out of a confluence of factors, but a central one appears to be what is becoming known as the "Enron loophole." Enron of course was the multi-billion dollar Houston company that went bankrupt in 2002 and the same company that caused rolling blackouts in California to raise the price of electricity. Needless to say, there is probably not a better example of corporate sleaze in American history.

Enron used its political connections to create an unregulated market for energy. “Kenny Boy” Lay, Enron’s founder and last CEO was instrumental in translating Ronald Reagan’s “get government off our backs” credo into a carte blanche for energy markets.

The Enron Loophole exempts energy traders who make trades electronically from US regulation. These speculators, mainly hedge funds, are largely responsible for the rise to the $140+ a barrel of crude we are experiencing today. They are riding a typical speculative bubble, playing chicken with America’s future.

Further Report on Symbolic Economies and Second Life

My course, Y19.0312 Political Economy of Digital Media, with 21 students, participated in the Interdisciplinary Study in the Virtual Environment of Second Life at New York University. This course addresses issues of creative work and productivity, industry organization and integration, electronic payments and monetary policy, international trade and outsourcing, and an examination of capital markets and their impact on technological innovation and social wealth.

While the course did not focus exclusively on Second Life, it provided an inquiry into economic processes designed to provide insights into the virtual as well as the real world. An initial understanding of markets and price systems for example was meant to help students appreciate the role of monetary currency in a virtual world, especially given that Second Life’s resident cash, the Linden dollar, plays a crucial role in the online community.

Most of the coursework on Second Life examined the dynamics of user-created content. Cory Ondrejka, a Second Life co-founder and until recently, the Chief Technical Officer for Linden Labs, the developer of Second Life identified four problems with creating content in virtual worlds like Second Life and even in creating video games. They were the difficulties in: 1) creating first-class art; 2) the lengthy development cycles needed; 2) the hours of gameplay that had to be produced; 3) the many players that needed to be accommodated, and 4) the large teams that had to be hired and managed effectively to create digital content. Creating virtual worlds by the traditional model of a single group producing it is highly unlikely. He suggested that online virtual worlds are really only possible if: 1) Its users are given the power to collaboratively create the content within it; 2) each of those users receives broad rights to their creations. These would be primarily property rights over virtual land, in-world games, avatar clothes, etc.; and 3) they also need to convert those creations into real world capital and wealth.

Online virtual worlds, like real world economies, need a system of incentives and symbolic currencies to propel them.

Obama Expected To Visit Hawaii - Politics News Story - KITV Honolulu

Obama Expected To Visit Hawaii - Politics News Story - KITV Honolulu

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Obama: Rock our World

If Obama wants to talk international policy, he should come out forcefully for a strong dollar. The time is right to pop this commodity bubble and watch the oil prices come down to earth. Wall Street would love it and public approval over the shrinking gas prices will more than make up for the concerns by farmers (who are still angry at McCain for not supporting ethanol price supports) and other exporters who are certainly profiting from the low dollar.

In a process called "jawboning" Obama could talk up the dollar and do much more for the price of oil than merely giving a summer "tax holiday" on the price of gas at the pump. He should come out with a policy statement about the economic positives of his presidency and the favorable conditions for future US growth he will create.

On taxes he should say that the government debt is the Republican problem and that he will work with them to help reduce it.

But the US has to be serious about its energy policy and can be a global leader with some government prodding on energy research, mileage standards, and the support of a modern electrical grid that would promote entrepreneurial opportunities for local energy production.

The global foreign exchange markets are too big for the Treasury to intervene very effectively. But the time is right for a major voice to emerge on economic issues. Obama could be in a historic position to leverage his position as the likely Democratic nominee to quell the current hunger for economic clarity and burst a speculative bubble which is causing serious pain for the American public. A radical move here could pay off big for Obama and provide energy dividends for the American public.

Who is to Blame? Bush or the Fed?

Let's face it. The economy is pretty scary. The real test will come this week (April 29/30, 2008) with the FOMC meeting. If they continue to drop the Fed Funds rate that will indicate that the credit crisis is still a major hazard on the horizon. If they keep them the same or raise them it will indicate that they are on to the major inflation problem that has emerged both in the US and around the world. That is the future. What about the past?

The dot.com crash of 2000 (ff @ 5.75%), 9/11/01, and the Enron/telecom crash of 2002 freaked out Chairman Greenspan and the Fed took the Fed Funds rate to 1% in 2003. 1%!! The housing market boomed with low interest rates and speculation hype as everybody and their mother began to feel they had to buy a house or lose out. Add a new credit chain that bypassed the traditional S&Ls and channeled mortgages into commercial bonds that were then sold internationally through unregulated OTC markets.

We can thank the repeal of Glass-Steagall, the benchmark regulation of the New Deal that separated brokerages from banks, for this new credit system as it allowed investment banks into the mortgage business. OK, that was done during the Clinton administration. Commercial lenders such as Citigroup began to underwrite and trade these mortgage-backed securities and collateralized debt obligations. Becoming ultimately a $45 trillion dollar business!

Dystopian Political Economies in Second Life

I gave a talk last night (April 17, 2008) about Second Life, the online virtual world popular on the World Wide Web. It gave me a moment to reminisce about my PhD dissertation, Symbolic Economies and the Politics of Global Cyberspaces (1993) as well as begin the wrapping up of a year-long project on Second Life in our NYU curriculum and particularly as it related to my class, the Political Economy of Digital Media.

The talk was held in downtown NYC at the Woolworth Building, known as the "Cathedral of Commerce" when it was built in 1913. I went back to my dissertation because it looked at money in fictional virtual worlds, particularly William Gibson's cyberspace trilogy, and his classic Neuromancer (1984) as well as the later Neal Stephanson's Snow Crash (1994). At the time I was looking for a progressive political stance in the wake of the fall of the USSR and I decided to compare these cyberspace subgenre (characterized by the 4 Cs: Corporations, Criminality, Corporeality, and of course Computers or Cyberspace) novels with the utopian genre. Sir Thomas More's Utopia (1516) was imagined primarily as a place WITHOUT MONEY. So I used the notion of symbolic thirds from Jean-Joseph Goux to analyze the political economy of utopias and the "dys"topias of these cyberpunk genre novels. Now, some 15 years later I decided to revisit my old work to examine Second Life.

I had a particularly useful bridge, work of Cory Ondrejka, a Second Life co-founder and until recently, the Chief Technical Officer for Linden Labs, the developer of Second Life. His "Escaping the Gilded Cage: User Created Content and Building the Metaverse" also used the cyberpunk genre as a point of departure. One of his inspirations was the Mystery of Capital by Hernando De Soto, a very popular economist throughout the "Third World", who focused on capitalism being a system of representations and rights. Connecting poor people to property via a system of legal representations was the most effective way to empower them to build wealth. You could say it was a more effective presentation of what President Bush would call the "ownership society". Keep in mind the issue here is more along the lines of what the Communist China leader Deng Xiaoping once referred to as "distributing wealth rather than distributing poverty". Remember my concern here is a progressive political economy rather than an apology for capitalism and its tendencies towards monopoly and excess. But lets get back to Second Life.

Ondrejka identified four problems with creating content in virtual worlds like Second Life and even in creating video games. They were the difficulties in: 1) creating first-class art; 2) the lengthy development cycles needed; 2) the hours of gameplay that had to be produced; 3) the many players that needed to be accommodated, and 4) the large teams that had to be hired and managed effectively to create digital content. Creating virtual worlds by the traditional model of a single group producing it is highly unlikely. User-created content is the key.

He suggested that online virtual worlds are really only possible if: 1) Its users are given the power to collaboratively create the content within it; 2) each of those users receive broad rights to their creations. These would be primarily property rights over virtual land, in-world games, avatar clothes, etc.; 3) they also need to convert those creations into real world capital and wealth. Online virtual worlds need a system of incentives and symbolic currencies to propel them.

Player created content is not entirely new to digital games. id Software, the small Texas-based company used the ego-centric perspective to create the first person shooter (FPS) game, Wolfenstein, in May of 1991. id followed with the extraordinarily successful DOOM in December 1994. DOOM combined a shareware business model with the nascent distribution capabilities of the Internet. Just two months after Netscape introduced its first browser as freeware over the Web, DOOM enthusiasts by the droves were downloading the game by FTP to their PCs, many of them with a 14.4 kb modem. In a prescient move, id decided to make DOOM’s source code available to its users. Making the code available allowed new modifications of the game called “mods”. This innovation allowed their fans to create their own 2.5D (not quite 3-D) levels and distribute them to other players. A popular one involved the using the characters from the Simpsons’ animated TV show running around the DOOM environment with Homer Simpson able to renew his health by finding and eating donuts. The US military created a version called Marine DOOM designed to desensitize soldiers to the idea of killing. Many of the company’s new employees were recruited because of the excellence of their mods and the extra help allowed them to create the next stage of their innovative online gameplay, QUAKE.

Second Life was born in June 2003. It offered users the ability create content using built-in tools. They could develop objects and their scripted behaviors (ie a tree and its leaves swaying in the wind). They could create their own avatar (representation of themselves or an entirely fictitious persona). They could buy and sell land and any of the other objects they created because they sought to protect intellectual property. Some 99% of the new world was user created and no permits, pre-approval processes, or separate submission were required. The key was the ability to perform transactions and maintain rights to property.


The dynamism of virtual worlds depends on the ability for players to sell items to each other for in-game virtual currency, or barter for such items. The purchase of in-game items for real-world currency is also crucial as is the exchange markets to convert virtual currencies for real-world currencies and vice-versa. It will be interesting to watch these dystopian virtual worlds emerge.

How the Rich Get Richer - BCS

The good news - The University of Hawaii received $4.4 million today for its participation in the BCS Sugar Bowl football game on January 1, 2008.

The bad news - damn, the big schools pull this type of money down every year, and Georgia (which beat Hawaii) got nearly $17 million dollars for itself and its SEC brethen.

Thus the BCS (Big Cash System) pumps money into a few select schools and conferences. Restraint of trade?

Hawaii - the exception that proves the rule.

Barach Obama's Full "Bitter" Quote

"So, it depends on where you are, but I think it's fair to say that the places where we are going to have to do the most work are the places where people feel most cynical about government. The people are mis-appre...I think they're misunderstanding why the demographics in our, in this contest have broken out as they are. Because everybody just ascribes it to 'white working-class don't wanna work -- don't wanna vote for the black guy.' That's...there were intimations of that in an article in the Sunday New York Times today - kind of implies that it's sort of a race thing.


Here's how it is: in a lot of these communities in big industrial states like Ohio and Pennsylvania, people have been beaten down so long, and they feel so betrayed by government, and when they hear a pitch that is premised on not being cynical about government, then a part of them just doesn't buy it. And when it's delivered by -- it's true that when it's delivered by a 46-year-old black man named Barack Obama (laugher), then that adds another layer of skepticism (laughter).

But -- so the questions you're most likely to get about me, 'Well, what is this guy going to do for me? What's the concrete thing?' What they wanna hear is -- so, we'll give you talking points about what we're proposing -- close tax loopholes, roll back, you know, the tax cuts for the top 1 percent. Obama's gonna give tax breaks to middle-class folks and we're gonna provide health care for every American. So we'll go down a series of talking points.

But the truth is, is that, our challenge is to get people persuaded that we can make progress when there's not evidence of that in their daily lives. You go into some of these small towns in Pennsylvania, and like a lot of small towns in the Midwest, the jobs have been gone now for 25 years and nothing's replaced them. And they fell through the Clinton administration, and the Bush administration, and each successive administration has said that somehow these communities are gonna regenerate and they have not. So it's not surprising then that they get bitter, they cling to guns or religion or antipathy to people who aren't like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.

Um, now these are in some communities, you know. I think what you'll find is, is that people of every background -- there are gonna be a mix of people, you can go in the toughest neighborhoods, you know working-class lunch-pail folks, you'll find Obama enthusiasts. And you can go into places where you think I'd be very strong and people will just be skeptical. The important thing is that you show up and you're doing what you're doing."

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