Gallimaufry I

Stephen DeAngelis

June 9, 2006

Gallimaufry is a hash made from leftovers. Over the years the term has also come to mean a hodgepodge. Occasionally I want to be able to address a hodgepodge of items that don’t follow a single theme or are not worth more than passing comment — hence the title of this post.

 

INFORMATION SECURITY. This morning on Good Morning America there was a short segment on ID theft. A reported 55 million people have their personal information compromised every year according to this report. I have discussed this topic before (Human Error and Information Security). What prompted that post was the theft of a Veterans Administration laptop containing personal data on over 26.5 million veterans (including over 2 million individuals still on active duty). Later revelations indicated that information concerning veteran’s families might also have been compromised. Congress tried to address this problem by enacting the Federal Information Security Management Act. In its last assessment of how well the Federal Government was doing complying with FISMA, the Office of Management and Budget (OMB) gave the government an overall grade of D+. Ouch.

 

Those receiving failing grades included: Department of Agriculture; Department of Defense, Department of Energy, Department of Health and Human Services, Department of Homeland Security, Department of Interior, Department of State, and the Veterans Administration. To be fair not every department and agency did poorly. In fact, some did quite well. Those receiving A grades included: USAID (A+), Environmental Protection Agency (A+), General Services Administration (A-), Department of Labor (A+), National Science Foundation (A), Office of Personnel Management (A+), and Social Security Administration (A+). It’s pretty clear, the bigger you are the more difficult the challenge.

 

DEVELOPMENT-IN-A-BOX™. In his New York Times column today (Plenty of Enemies to Go), Tom Friedman notes that it is not enough for Democrats to decry Bush administration policies if they want to return to power, they need to present an agenda of their own. He refers readers to two books that should help them do that (The Good Fight: Why Liberals — and Only Liberals — Can Win the War on Terror and Make America Great Again by Peter Beinart, editor at large of The New Republic, and With All Our Might: A Progressive Strategy for Defeating Jihadism and Defending Liberty, essays edited by Will Marshall, who heads the Progressive Policy Institute.

Harry Truman’s great achievement, argued Mr. Beinart, was persuading his party and the country “that anti-Communism was a liberal principle, not just a conservative one, and that Democrats had their own strategy to deal with it — a strategy that included powerful international institutions like NATO, which made American power legitimate abroad, and civil rights, which made America a better country at home.” Democrats need to do the same today. That means, he said, building institutions that can intervene in failed states, offering their own strategies for confronting the jihadists, and dealing honestly and decently with prisoners in this murky war. [Emphasis added]

One of those institutions would be Tom Barnett’s System Administrator Force, whose primary purpose is to aid failed states or secure the peace in post-conflict situations. Even more important than institutions, however, is the establishment of an approach that can be used to help coordinate the activities of extant institutions. As I have often written, we believe that Development-in-a-Box with its standards-based foundation and flexible framework is such an approach.

 

Spending vs. Development. Countries emerge from poverty when they manage to create a true middle class. That happens when real jobs, with real earning capacity, are generated. To show the difference between real and false prosperity, one need look no further than what is happening in China and Venezeula. A study in the latest The McKinsey Quarterly (“The value of China’s emerging middle class,” by Diana Farrell, Ulrich A. Gersch, and Elizabeth Stephenson) asserts:

The rising economy in China will lift hundreds of millions of households out of poverty. Today 77 percent of urban Chinese households live on less than 25,000 renminbi a year; we estimate that by 2025 that figure will drop to 10 percent. By then, urban households in China will make up one of the largest consumer markets in the world, spending about 20 trillion renminbi annually—almost as much as all Japanese households spend today. Furthermore, since these estimates were calculated at today’s tightly managed exchange rates, they may significantly underestimate China’s future consumer purchasing power.

China’s middle class is being developed slowly — it will take at least another twenty years, according to the McKinsey analysts, for it to fully emerge — but it is being created through jobs and investment. Compare that to what is happening in Venezuela.

 

An article in The New York TImes (“With Oil’s Cash, Venezuelans Consume,” by By Jens Erik Gould, 08 Jun 2006), reports what looks like prosperous times in that country.

With oil revenue flowing into its coffers, the government is spending like never before on social development programs that free up cash for the poor by providing free education and health care and cheap food. Wage increases and infrastructure projects also fill the economy with money that filters down to Venezuelans’ pockets. As a result, consumers are buying more each year, helping Venezuela post growth that exceeded 9 percent last year and in the first quarter of 2006.

I think I heard on the radio that gas in Venezuela costs about 13 cents per gallon! The article goes to say that the flush times won’t last.

Economists [in Caracas] and abroad say that such rosy indicators are part of an artificial economic boom that could later hurt the country; the spending spree, they say, is masking the fundamental limitations of an economy propped up by spending, but failing to generate enough new private investment to sustain longer-term growth and job creation.

Whereas workers in China save nearly a quarter of their after-tax income, Venezuelans are hardly saving or investing at all. The differences are stark and the outcomes will be stark as well. Of course, it is not too late for Venezuela to turn its windfall oil profits into real investments that generate jobs and sustained prosperity. Only time will tell whether they have the foresight to make such decisions.