Tuesday, December 29, 2009

Freedom & Technology - Inextricably Linked

Monness, Crespi, Hardt & Co., Inc.

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New York, NY 10017
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                                                                                                                                                                  Sydney M. Williams
                                                                                                                                                                  November 9, 2009

Market Note
Freedom and Technology – Inextricably Linked

“A society of sheep must in time beget a government of wolves”
                                                                                                                                    Bertrand de Jouvenal (1903-1987)
                                                                                                                                    French philosopher

“When computers (people) are net worked, their power multiplies
geometrically. Not only can people share all the information
inside their machines, but they can reach out and instantly tap the power of
other machines (people), essentially making the entire network their computer.”
                                                                                                                                    Scott McNealy (1954 - )
                                                                                                                                    Former Chairman
                                                                                                                                    Sun Microsystems

The tearing down of the Berlin Wall twenty years ago today came to symbolize the victory of freedom over oppression. More countries have become democratic in the last thirty years than at any other time in history. In the past decade, the internet has enhanced the ability of people in all societies to communicate easily and freely, and has helped spread the cause of capitalism and democracy. It brings new meaning to the words of a song written in 1918 by Joe Young and Sam Lewis: “How you gonna’ keep ‘em down on the farm after they’ve seen Paree?”

So, it comes as a disappointment that a dispiriting aspect of the Obama Presidency is their instinct and inclination to avoid siding with brave, democratic dissidents in their battle against totalitarian leadership. This fact has been very visible in Iran and Honduras, in the decision not to meet with the Dalai Lama and in the absence of the President from ceremonies marking the removal of the Berlin Wall. The dissidents have, at great personal expense, challenged their authoritarian leaders and, while the excuse may be that it is none of our affair - it is an internal matter, it is argued, and dictatorships provide stability – the truth is that the world is less safe with people like President Mahmoud Ahmadinejad of Iran, Kim Jong-Il of North Korea, Hugo Chavez of Venezuela, or even Manuel Zelaya Roslaes of Honduras.

Contrast, if you will, Iraq under Prime Minister al Maliki today versus Iraq under the tyrant, Saddam Hussein. The desire to be free is inherent among all people. The world is an ever-changing place and democracies are far more flexible in adjusting to dynamic change than dictatorships. This gut instinct of people to rise up should be supported, not suppressed, and was, in fact, better understood by the previous Administration than the current one. This reminds me of a point I have made in the past – a problem with liberals is that they are not liberal; they are often intolerant of those with whom they disagree and they believe that personal responsibility should be subsumed to the State.

For the past few years, global economic growth has been driven by countries like China, Brazil and India. The financial problems which brought this growth to a halt in 2007 were not caused by them. And it was not caused by hedge funds, the scourge of the Press and the Beltway. It was caused by leverage incurred by consumers who bid up asset prices, encouraged to do so by big, regulated, banks (both commercial and investment) and nourished by Washington politicians who wanted a house at the end of every driveway.

The United States is now at a turning point. The old “West” is decaying in a miasma of socialism, aging and declining populations. Throughout history much of the United States has been tied to the West. It is the foundation of our culture and our laws. That culture and those laws have served us well for two hundred years, but Western Europe has been turning its back on the very fundamentals which brought enlightenment and made it strong and successful. The Twentieth Century, with its two world wars killing 100,000,000 people, has taken its toll. After the Second World War, the United States stood ready to defend Europe against the encroachment of a nuclear-armed Soviet Union, so Europeans put away their weapons and hid behind our skirts, while focusing on a “Nanny State” style of socialism. In recent years, Germany and then France picked leaders more capitalist than their predecessors, but not strong enough to alter the course followed for six decades. The only Western European leader who truly proved revolutionary was England’s Margaret Thatcher, now disparaged by so many; her ideas forsaken in a “politically correct” world.

It is difficult to view old Europe with much optimism; aging populations and declining birth rates suggest they are not optimistic either.

But in their place, arising like the phoenix of Greek myth, are China, Brazil, India and the newly democratized nations in Eastern Europe.

At the same time, people everywhere are becoming electronically connected. Growth, when not experienced, will be seen (virtually); competitive, aggressive, intelligent people of all nationalities want their share. Government can do two things to quell this surge: they can become more dictatorial and so suppress the internet, or, more subtlety, they can increase the dependency of their citizens on a “benevolent” government, thereby making people less willing to take risks. It is into this latter camp that “Old Europe” risks falling, and so does the United States, as socialism is substituted for capitalism.

A world that for forty-four years was divided between the West and the East, between the U. S. and the USSR, will soon be divided between capitalists and socialists, and the irony is that “old Europe”, the source of much of our heritage, looks to become the losers in this new world. And we risk following suit.

Human nature does not change; the use of force to compel one nation to submit to another will be a constant threat. Thieves will operate, as will terrorists and fear mongers. In this world, relativism has little value. It certainly does not among those who would do us harm. A belief in and a willingness to stand up for, universal moralities will be essential to achieve success. As political columnist, Charles Krauthammer has said, political correctness is a political abomination and a danger.” A “wild west” world is vulnerable to anarchy. So sheriffs are necessary, and the United States, at present, is the only one in town. But we won’t be for long and that, in and of itself, is not bad. China’s army is bigger than ours. Their navy is becoming stronger by the day. Its enormous surplus of dollars will permit them to one day match ours. Does that portend another arms race? Perhaps. Is that something to worry about? No, as long as we understand the stakes.

It has become almost universally accepted that the United States is in decline. I am not sure. We are, however, at a turning point. Issues such as universal health care, cap-and-trade, global warming dominate our Press and the thinking of liberal elites. I do not dismiss the importance of any one of those problems, but they pale in comparison to fixing the financial system and restoring economic growth.

Unlike Europe, which has made the bed in which they must sleep, options remain for us. But it will take daring and courage, and at times we may be accused of acting alone, but our system of creative, responsible capitalism must prevail. Otherwise we fail.

A student of Dr. Hans Rosling, a Swedish professor of international health, when once asked to describe the difference between developed and undeveloped nations, responded: developed nations have small families and long lives; undeveloped nations have large families and short lives. Think about that statement – small families and long lives, absent an engine for growth, lead to declining birthrates and aging populations, a recipe for ultimate decline.

We are different from “Old Europe”. Our immigrant-based population is unique in the annals of nations. They provide the “promise of America”. To ensure our future growth and maintain our pre-eminent place in the world, we must align ourselves with the developing world and with the change and hope that technology and democracy are bringing to a billion and more people. It is more important to embrace this change than be everybody’s friend. Those marchers for freedom in places like Iran and Honduras are far more likely to be our partners in a revitalized world than dictatorial leaders, intent on pillaging their people and denuding their resources in order to sate their personal desires.

We should never forget the fear and misery experienced by East Germans during the forty-four years of Soviet occupation, nor the hope provided them when on June 12, 1987, President Reagan spoke out, “Mr. Gorbachev, tear down this wall!”, nor the elation experienced when, on November 9, 1989, the wall was first breached. No more should we forget or ignore current cries for freedom emanating from Burma, Iran, or Honduras.

The internet has hastened the path toward democracy. The two are inextricably linked; we benefit from their union; we ignore them at our peril.

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