Stonebridge International and other sneak peeks from Obama's transition

Ken Silverstein, blogging about press commentators' financial conflicts of interest, notes:

And just yesterday, the Times ran a story on the Obama administration’s likely China policy which cited Kenneth Lieberthal, identified as “a China specialist now at the Brookings Institution.” But Lieberthal, a regular commentator on China, is also a top official at Stonebridge International, a big economic consulting firms that also has big interests in China. He “advises the firm's clients on matters related to China and Asia,” says his resume on the firm’s website. “A leading China scholar, Dr. Lieberthal has advised numerous Fortune 500 firms on their business strategies in China.” (I’ve written about Stonebridge for the magazine. Another of its top officials is Jeffrey Bader,  a leading Obama advisor on China and media regular on the country.)

I thought "Stonebridge" rang a bell.

Sure enough, another member of Obama's transition team members, Michael Warren, is on partial leave from Stonebridge International, according to his official bio on Change.gov: 

Michael Warren, currently on partial leave from his role as chief operating officer of Stonebridge International, is a leader of the Treasury Department agency review team. He is also part of the working group overseeing international trade and economics agencies. Warren previously served as president of Appfluent Technologies, a data usage and query performance software provider. He is also chairman of Ironbridge Systems, which provides analytics and technical support services. Warren also worked for McKinsey & Company as a tech industry consultant, and consulted on the U.S. and Asian semiconductor industries for the McKinsey Global Institute.

I'm not implying that there's anything wrong with Stonebridge. I'm just anticipating that we're going to be hearing more about this company in the months ahead.

The transition period is like spring training. It's important to get to know the players.

Every administration has its close corporate allies, whether that's good or bad depends on the administration and the corporations involved. If the transition period is any indication, McKinsey & Co, UnitedHealth, and Stonebridge International will be among the names to watch under Obama.

On a positive note, I'm impressed by how many folks with ties to the Center for American Progress have gotten spots on the Obama transition team. I count John Podesta, Melody Barnes, Gayle Smith, Robert Sussman, Shirley Sagawa, Bill Ivey, Thomas Kalil, Mara Eve Rudman, Michele Jolin, Todd Stern, and Brad Kiley.

I wish we could claim these appointments as a triumph of the netroots. CAP sponsors Think Progress, one of the finest progressive blogs on the internet. 

Alas, correlation does not necessarily imply causation. Although, I'd like to think that CAP's early and successful embrace of the web and the netroots made Obama especially well-disposed towards the organization. 

Another correlation I've observed which probably has greater explanatory power is that the CAP appointees tend to have served in the Clinton administration. Again, it's not surprising that many former members of the Clinton administration went on to work at CAP.  John Podesta, the founder of the Center, served as chief of staff to Bill Clinton.

Here's a question for the hivemind: Is it unusual, by the standards of Democratic presidential transition teams, to include so few people from organized labor?

Working group member Ray Rivera is the former political director of AFSCME. Other than that, I'm not seeing any transition team members currently or formerly associated with unions in their bios on Change.gov.

Comments

[Alon Levy]

What conflicts of interest might CAP introduce into the administration?

[Lindsay Beyerstein]

I don't know of any conflicts of interest that CAP might introduce as an organization. I mean, it's conceivable that someone might want CAP to recast itself as the next RAND Corporation and get itself awarded huge numbers of government contracts to study things, but I have no reason to think that's on anyone's agenda. I mention the possibility because it's a standard conflict of interest for politically connected think tanks.

I believe John Podesta's brother has a public affairs firm of some sort.

As far as potential outright conflicts of interest, that's all I can think of off the top of my head.

Of course, the fact is that the CAP folks are mostly old Clinton hands. That's not a conflict of interest per se, but it's something to keep in mind.

As far as CAP's substantive agenda, it's slightly left of center. I haven't followed the careers of CAP-connected transition team members closely, but I'm sure you can get a good idea of where they stand on their issues of expertise from the CAP website.

[Alon Levy]

Ah... so no big union contracts? I'd imagine that would be the standard conflict of interest for a liberal organization. If there isn't any, then kudos to CAP for being clean and the Obama team for supporting a clean think tank.

[Lindsay Beyerstein]

Big union contracts for what?

[Alon Levy]

PR, or strategy. I'm pretty sure a big part of the sham research being peddled about how the sky will fall if GM goes into Chapter 11 is funded by the UAW, rather than GM itself.

[Church Secretary]

One of the biggest 'shams' being peddled regarding the Big 3 is that their financial problems are largely due to organized labor. This is provably false. Likewise, the notion that UAW is somehow in tight with a president-elect who is stocking his incoming administration with neoliberals and neoliberal-friendly Clintonians is laughable.

Organized labor will have very little substantial representation in the Obama administration, especially considering the corporate-friendly 'centrists' who are already dominating. And you won't see anyone in corporate media complain about this, either. I guess organized labor can expect to join the ranks of the DFHs in getting thrown under the bus this time around, too, and all in the name of 'reaching across the aisle' to the very jackals who put us in this trick bag. That's Change™ you can believe in, folks.

[Alon Levy]

The link doesn't show what you think it does. It says nothing about the UAW's $73/hour package. What it does say about pensions is misleading: even with universal health care, workers would need income support in old age.

The argument it offers for helping GM is that it's needed for Flint. This is an emotional argument, not an economic one. Progress always has people left behind. Industrialization and urbanization devastated many rural communities, and involved wage stagnation for people who didn't go to high school, who were the majority of the US population until after WW2. Many countries tried to avoid these problems and concentrate on deriving wealth from agriculture, and consequently fell behind and joined the third world, so that poverty became universal instead of concentrated in just a few population-losing areas.

[Church Secretary]

I don't think you read it correctly, Alon.

It says nothing about the UAW's $73/hour package.

That figure comes out of pro-corporate, anti-labor propaganda. GM's labor costs aren't substantially higher than any other automaker's costs, especially given the numerous concessions given to the company by UAW; the reality is that GM's financial difficulties owe far more to upper level mismanagement than to labor costs.

The labor cost meme has life because so many people seem ready to put the nail into organized labor's coffin. And, respectfully, your vague history lesson about global 'progress' is both immaterial and baseless. I imagine that any example you give of the dynamic you describe would not support your thesis if subjected to minimal cross-examination; but, then, that's why you gave no example, isn't it?

The crisis being suffered by GM is just one more casualty of a lax (or nonexistent) regulatory environment that has served to benefit the interests of concentrated private wealth over public infrastructure and general welfare. These developments are no more organic or inevitable than the baking of a good soufflé; changes in policy got us into this mess, and it will take changes in policy to dig us out. You can characterize that as an 'emotional' argument if you wish, but some of us don't wait until an anvil drops on our own head before we are moved to do something about those falling anvils.

[rvman]

It is labor costs, just not those related to anyone currently on staff. UAW and GM reached labor contracts back in the '70s and '80s based on GM being 1/3 of the overall car market, and set up under-funded pension and health plans which relied on future (i.e. now) production to pay for then-current labor. Instead, they are more like 1/6 (and falling), and those contracts are coming back to bite them. GM's financial difficulties are due to management which is long dead or retired, and a powerful UAW which no longer really exists and which represented workers no longer working. UAW could waive all of the pay scales and current benefits, and it still can't help GM with these liabilities coming due. GM is kind of like a European country - lots of retirees, not so many current workers producing enough to pay those retirees. What we are seeing is a test run for what Italy, Germany, and France are about to experience.

[Church Secretary]

The solution that Congress proposes to GM's problems will depend heavily upon the ideology that prevails in the decision-making process. If the Republican/'centrist' Democrat faction has its way, then the workers and retirees will be forced to bear the brunt of the financial fallout. Personally, I suggest imposing austerity upon the compensation packages of upper management and upon the shareholders, since they are the ones who took home the bacon while the store was falling apart. If GM can't live with that, then perhaps the company should be subject to partial or complete nationalization. If the public is going to suffer the financial consquences of GM's failure anyway, then perhaps it is time for the inefficient and costly middleman to be removed from the equation.

[Alon Levy]

That figure comes out of pro-corporate, anti-labor propaganda.

As opposed to your figures, which come from anti-business, pro-union privilege sources?

I imagine that any example you give of the dynamic you describe would not support your thesis if subjected to minimal cross-examination; but, then, that's why you gave no example, isn't it?

Do you want examples of countries that tried to stick to agriculture and failed (China from the mid-1400s onward, Ireland under the IRA, Uruguay), or examples of countries that had creative destruction in industrialization and succeeded (South Korea under Park, Taiwan under the KMT, Ireland since the 1990s, present-day China, the US for most of the 19th century)?

You can characterize that as an 'emotional' argument if you wish

No, I characterize the "GM must be saved because otherwise Flint will be devastated, as Michael Moore shows" argument as emotional. And emotional it is: any economic policy has winners and losers. American labor unions think that if the losers don't live in the US then it's fine, but if they do, then it must be the subject of demagogic documentaries that never try to look at the causes of deindustrialization, preferring instead to demonize business. In 1984, Jane Jacobs demonstrated how single-product cities always become depressed, and specifically cited Detroit as a major example (the other was Manchester, which died under Labour's semi-nationalized economy); you'd think Michael Moore would mention that in a movie made in 1989.

If GM can't live with that, then perhaps the company should be subject to partial or complete nationalization.

It really shouldn't. It'll just become a money-losing government enterprise, i.e. public works. The Obama administration should engage in public works that advance the national infrastructure - green energy, high-speed rail, mass transit - instead of make American Trabis.

[Church Secretary]

Good points all, Mr. Levy, but this--

American labor unions think that if the losers don't live in the US then it's fine, but if they do, then it must be the subject of demagogic documentaries that never try to look at the causes of deindustrialization, preferring instead to demonize business.

--is a decidedly hit or miss proposition. While US labor unions often have a serious problem coping with the international context, that cannot be laid entirely at their feet; they are competing with a neoliberal domestic and global agenda (championed by multinational corporations and the US gov't) that has sapped their bargaining power. Also, 'demonizing business' is a rather crude way of describing legitimate criticism of corporate excesses and mismanagement (and the accompanying government policies that encourage such poor leadership) that shoulder far more of the blame for the current economic crises than organized labor's political myopia.

And that is the crux of my point. The crisis of the Big Three automakers is not the product of an organic, Darwinian cycle. It is the result of mismanagement and short-sighted greed at the highest levels. The UAW's greatest sin was failing to join other labor activists-- and, indeed, other farsighted liberals-- in demanding the kind of structural changes that you recommend in your comment, and others such as universal health care and reverses of the sort of neoliberal foreign policy (aptly described by Naomi Klein) that has helped create the increasingly serf-like global labor market with which UAW is forced to compete.

And nationalizing GM need not lead to it becoming any more of a money pit than it already is. GM has greatly improved the quality of its product, but it has to outlive a reputation earned by decades of mismanagement and failure to appropriately reinvest its profits in its own growth and development. If you eliminate the incentive to focus on short-term gain at the expense of long-term viability and progress, then you can reinvigorate GM (no matter who is running the show).

[Alon Levy]

While US labor unions often have a serious problem coping with the international context, that cannot be laid entirely at their feet; they are competing with a neoliberal domestic and global agenda (championed by multinational corporations and the US gov't) that has sapped their bargaining power.

That's true for all unions. Some have succeeded in adapting to the new age, for example unions in Sweden, Norway, Denmark, and Germany. In Germany, unions realized early that it was in their interest to make their industries more competitive, and that included avoiding making claims for higher wages in bad times, such as the 1990s and early 2000s; they resumed striking only recently, after German economic growth had picked up. In contrast, unions in the US, Britain, and France remained hostile to business; all three countries have suffered from deindustrialization in ways the previous four haven't, even though in the US and Britain business beat labor while in France labor beat business. A French neoliberal demagogue could make a movie called Roger et Moi about the heart-wrenching poverty of Marseille or the Paris suburbs, and blame union excesses for ending economic growth.

Also, 'demonizing business' is a rather crude way of describing legitimate criticism of corporate excesses and mismanagement

But that's not what led to the poverty in Flint that Moore describes and your article warns against. Industries don't last forever; the US can't reasonably expect to keep making better cars than 209 other countries forever. The problem is that Detroit let the Big Three take over its economy. It wasn't always like this - when Ford built his factories there, it was a diverse manufacturing center. But then it became Motor City, and eventually it needed big auto more than big auto needed it. Manchester had the same problem with textiles; Birmingham, Jane Jacobs notes, fared a lot better because it was more economically diverse going back to the 19th century.

reverses of the sort of neoliberal foreign policy (aptly described by Naomi Klein) that has helped create the increasingly serf-like global labor market with which UAW is forced to compete.

It's interesting that you quote Klein here. Klein has never really offered a recipe for growth. Other people have; for example, neoliberals will tell a country to open its markets and help first-world corporations invest in it. There are other recipes, but none that the anti-globalization movement would approve of. For example, Ha-Joon Chang's Bad Samaritans, which argues that there's only one way to develop and that's with protective tariffs, starts from the example of South Korea, whose per capita income went from $80 in 1960 to $13,000 in 2000. In South Korea, work hours were at 19th century levels in the 1980s and are still the longest in the world; strikes were illegal; wages were kept low using authoritarian tactics in order to make exports more competitive. I don't think Klein or any first-world labor liberal would support that kind of arrangement, even though it clearly succeeded: South Koreans are now almost as rich as Italians, and are no longer in the Industrial Revolution-like conditions they were in thirty years ago.

[Church Secretary]

First off, Mr. Levy, I don't think you are understanding Michael Moore's argument. Here is a copy; it is quite thoughtful and innovative, and it holds promise should Congress and the incoming executive choose to act progressively (though the recent no-strings giveaway to the financial sector isn't reassuring to that end).

Second, the European countries you mention all roughly share a basic quality that the US sorely lacks, and that is that they all are, more or less, social democracies. They all have social infrastructures of some sort (health care, education, public transit, etc.) that we don't have or that we insist upon shortchanging and sabotaging. These differences reflect a generally different outlook on the relationship between citizens of different economic status, as well. So the dynamics of their labor/management/market relationships will naturally play out differently, especially in any concessions that organized labor might be willing to make. When you know you have guaranteed health care and education for your family, you might be more willing to take a pay cut; likewise, workers will be more amenable to compromise when they know the pain is going to be shared by the wealthy investor class.

Also, your analysis of the S. Korean 'miracle' assumes that similar results could not have been achieved by more egalitarian means. And your definition of 'success' would be debated by thousands of S. Koreans who might trade some of that unevenly distributed wealth for less repression and more democracy. (That is the type of point that Klein makes very well, especially when she talks about our foisting of neoliberal policies on Latin America at the point of hired local guns).

Again, it's all fine and good to shrug one's shoulders and rationalize the bloody and destructive excesses of neoliberal capitalism as long as those deleterious effects aren't falling on your own head. But not to worry; the recent tremors in our economy are just the approaching footfalls of our massive chickens on their way home to roost. We'll soon get to see if we can be so smug about the catastrophic failures of laissez faire capitalism.

[Alon Levy]

I'm talking of Moore's argument as explained in Roger and Me, the movie...

As for France, it still has its pockets of poverty, just like the US. The people who live in them have health care at levels Americans don't, but they're just as socially excluded as the people in inner-city Flint or Buffalo, have to contend with just as much crime (though less gun crime). They in principle can go to college for free, but in practice can't pass the entrance exams. And they're less likely to find jobs - even in good times, France has 7-8% unemployment, Marseille 15%, and Algerian suburbs 30-50%. The poverty that created the Paris riots of 2005 is hardly any different from the one that created any riot in an American city since the 1960s.

Michael Moore might come to a French or Canadian suburb and rationalize the situation as not real poverty. And a French Gaullist or Canadian Conservative might come to New York and be so impressed by the low unemployment rates, especially for immigrants, that he'll return home and say Americans aren't really poor.

Also, your analysis of the S. Korean 'miracle' assumes that similar results could not have been achieved by more egalitarian means. And your definition of 'success' would be debated by thousands of S. Koreans who might trade some of that unevenly distributed wealth for less repression and more democracy.

You can debate the hypotheticals, but every country that transitioned from third world to first had practices that would horrify today's anti-globalization activists. Israel, Ireland, the Tigers, Southern Europe - all of them had wages and labor standards that fit their circumstances and not the United States'. And with the exception of Singapore and Hong Kong, all of them are democratic and have more equal distribution of wealth than the US, and most have more equal distribution of wealth than the US did at its most equal.

Consensus among neoliberals and social liberals alike is that economic development leads to more democracy, and, conversely, poverty makes it easier for authoritarian coups to succeed. A revolution typically occurs when the regime can't fulfill expectations; this requires expectations to be high to begin with. The protests that toppled the military dictatorships in South Korea and Taiwan couldn't have been carried out by the peasant population of the 1950s, who didn't really expect much from their dictators to begin with.

[Church Secretary]

Consensus among neoliberals and social liberals alike is that economic development leads to more democracy, and, conversely, poverty makes it easier for authoritarian coups to succeed.

I think you have all the elements included correctly, Mr. Levy, but the cart is before the horse, the devil's in the details, etc. In polite company neoliberals will pay lip service to the connection between democracy and economic development, but they are clearly more dedicated to the latter and willing to sabotage the former if it threatens to stand in the way of their desired economic benchmarks; see our numerous covert and overt interventions in Latin America for demonstrations of this. Regarding the second clause of your formulation, you may also refer to our adventures in Latin America for practical clarity. Authoritarian coups in our hemisphere have succeeded in large part because they received various (but always crucial) levels of outside aid, primarily from a very powerful economic empire whose ruling class decided that its interests would best be served if their wealth-generating organs (multinational corporations) could operate with virtual impunity in smaller, weaker neighboring countries.

In other words, democracy and economic development often go hand in hand, but the key to their harmonious growth depends upon the intended beneficiary of the economic development. If the economic development is intended to benefit most of the population, then you'll generally see more democratic conditions; if the economic development is intended to benefit an elite minority (including foreign investors), then at best you'll see a fig leaf of democracy covering a repressive police state. The latter situation, which we've helped to develop and maintain in countless other countries, is unfolding here in the U.S. even as we type.

[Alon Levy]

I'm not sure which neoliberals you have in mind when you say that they sabotage democracy. Certainly not the economists: even Milton Friedman never defended Chile's political repression, only giving it economic advice. Paul Collier has excoriated corruption and autocracy. Thomas Friedman-style neoliberalism emphasizes democracy and openness so much that Ha-Joon Chang has had to argue that mainstream economists insist too much that developing countries democratize and eliminate corruption.

Overall, the overlap between the neoliberalism defended by Delong, Collier, and Sachs and the demon that Naomi Klein calls neoliberalism is very small. The sort of authoritarianism practiced by South Korea and Taiwan until the 1980s is a little more recognizable as what anti-globalizationists call neoliberalism, but even it is based on the idea that economic development should reach everyone, as these countries' low Gini index attests. Ironically, one of the three highest-Gini countries in the world is Botswana, long hailed by many social liberals and leftists as a success story of democracy...

[Church Secretary]

The neoliberals to whom I refer are the ones who remain largely nameless and faceless as such to most of the public. They are usually more easily identified as "Democrats" and "Republicans." Milton Friedman and other academics usually have little direct control over public policy or foreign policy. So it is tempting to give them a pass by saying (even if correctly) that they don't advocate the genocide, disparity, and destabilization that tend to accompany the implementation of their economic theories. As Naomi Klein clearly illustrates (yet again), though, one is hard pressed to find examples of such policies being successfully implemented without those disastrous effects, so the protestations of innocence and piety from the theorists ring hollow.

[Alon Levy]

So it is tempting to give them a pass by saying (even if correctly) that they don't advocate the genocide, disparity, and destabilization that tend to accompany the implementation of their economic theories.

I could say the same about anti-globalizationists. Before the fall of the Soviet Union, leftists viewed South Korea as a backward fascist country while crowing about North Korea. Nowadays the left has been tamed, but it still likes leaders like Hugo Chávez, a petrocrat who recognizes no limits to his power and has shut down opposition media, and and Mahathir Mohamad, who hates Jews and Chinese people, and even then is no different from South Korea's Park in his view of development.

The problem is that leftist development policy just failed. I would know; I grew up in Israel, which had privatized but protected industry in Tel Aviv and Haifa, and collectivized agriculture in the kibbutzes (which formed the Labor Party's backbone). In the 1950s, the kibbutzes could plausibly claim to be forward-looking, and attracted many idealists from all over the world; by the 1970s, nearly all of them had stagnated and fallen behind the rapidly growing cities. Nowadays, the only kibbutzes that don't need subsidies are those that own factories and operate them as a private operation. It turns out that no matter how attractive you try to make the peasant life look, the industrial city will still be richer and more dynamic.

As Naomi Klein clearly illustrates (yet again), though, one is hard pressed to find examples of such policies being successfully implemented without those disastrous effects, so the protestations of innocence and piety from the theorists ring hollow.

Except that Ireland, the Tigers, and Israel haven't had any of the ills you talk about. Singapore and Hong Kong have disparity, but even there, the standard of living rose for everyone, including the poorest, until 1997, and is still rising for the top 70-80% of the population. It's the US where only the top 30-40% have gotten ahead in the last decade. In the third world, everyone is getting ahead, even in high-inequality countries. For all its inequality, China is increasing its entire urban population's living standards - the urban poor are actually seeing higher wage growth than the rich.