Monday, November 29, 2004

TIA Daily Sample Issue

TIA Daily -- November 29, 2004

A Day in the Life of Capitalism

A single day's news stories demonstrate how capitalism unleashes human ingenuity, encouraging and rewarding human achievement on a day-by-day basis.

Top News Stories

1. The "Orange Revolution"
2. Iran's Gambit
3. Chirac Rejected?
4. Bush's New Economic Team
5. Commentary: The Virtue of a Unified Executive
6. Commentary: Europe and Iran vs. the US

Departments
7. Human Achievements: Newton and Modern Culture
8. Things of Beauty: Sandstead Photo

Feature Article
9. A Day in the Life of Capitalism, by Robert Tracinski

Capitalism Is an Engine of Human Achievement

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Top News Stories

1. The "Orange Revolution"

Nearly every Eastern European nation--Poland, Czechoslovakia, Hungary, Romania, even Russia--had a moment in the late 1980s or early 1990s when its people stood up and rejected dictatorship. Ukraine never had that moment; Communism fell apart around them, without the need for them to act. But the necessity for action in the defense of freedom can never be avoided, so Ukraine is now fighting--successfully, it seems--its own version of the "Velvet Revolution." (For a sense-of-life report on the protests, see a moving piece from NRO's Andrew Stuttaford at http://tinyurl.com/6lyfb .)

"Departing Ukrainian President Would Support New Elections," Steven Lee Myers and C.J. Chivers, New York Times, November 29

"'If we really want to preserve peace and consensus and build this just democratic society,' Mr. Kuchma said in a statement, 'let us have new elections.' His words were echoed in part by the man who has been declared the
winner of the Nov. 21 vote, Prime Minister Viktor F. Yanukovich, who said he would agree to hold a new vote in the country's two eastern regions if mass fraud were proven to have taken place, as charged by the opposition."

2. Iran's Gambit

The problem with issuing diplomatic ultimatums to a dictatorship is that they might comply--complying, that is, with the superficial details of Western demands, while they secretly violate the agreement. That is exactly what Iran is now doing, with the aid and abetment of Britain, France, and Germany. The only demand we ought to be issuing to Iran's mullahs is a demand for unconditional surrender.

"Iran Backs away from a Demand on A-Bomb Fuel," Elaine Sciolino, New York Times, November 29

"Iran on Sunday backed off a demand to operate uranium enrichment equipment that could be used either for energy purposes or in a nuclear bomb-making project, European and Iranian officials said. The Iranian retreat appeared to salvage a nuclear agreement reached Nov. 15 between Iran and France, Britain, and Germany
to freeze all of Iran's uranium enrichment, conversion and reprocessing activities. It also paves the way for the 35 countries that make up the ruling board of the International Atomic Energy Agency, the Vienna-based United Nations nuclear monitoring body, to pass a resolution that will be only mildly critical
of Iran's nuclear program. Such a resolution, expected to be passed Monday, is certain to disappoint the Bush administration, which is convinced that despite Iran's denials, it has a covert program to build nuclear bombs, not simply to produce energy."

3. Chirac Rejected?

Three of the four leaders who backed the Iraq War are or likely will be re-elected (Australia's Howard, America's Bush, and Britain's Blair). But what about the Axis of Weasels? Jacques Chirac is facing an increasing challenge from Nicholas Sarkozy, who is more friendly to free markets--and, as a self-made man who rose from outside the French establishment, is considered more "American" in his outlook.

"Sarkozy to Lead France's Ruling Party," Keith B. Richburg, Washington Post, November 29

"In his acceptance speech Sunday, Sarkozy showed no reluctance to embrace contentious positions. Among other things, he proposed a "profound reform" of France's 35-hour workweek, a centerpiece of the last Socialist government's economic policy. It is popular with workers, but businesses have decried it as too costly. 'I am ready to carry your energy, I am ready to embody your hopes,' Sarkozy said. 'I am ready because I know that deep inside, France no longer fears change, but is ready for it.' Sarkozy's rise to the top of France's largest political machine--a party begun, under another name, by Chirac nearly 30 years ago--is an unlikely success story for France, where most politicians come from the same elite social class and the same school, the Ecole Nationale
d'Administration. Sarkozy is the son of a Hungarian immigrant father and a French mother with Jewish roots. Sarkozy also is a lawyer, not a professional administrator from the prestigious school. His popularity soare! d after he became Chirac's interior minister in 2002 and he launched a crackdown on crime
by borrowing from New York City's 'zero tolerance' policy. He also earned plaudits from French Jews for being among the first to speak out forcefully against anti-Semitic attacks in France."

4. Bush's New Economic Team

Bush's replacement of cabinet officers on his "economic team" is a good sign, because it shows that Bush is once again taking his domestic agenda seriously and is looking for cabinet members who can effectively back his plan for Social Security semi-privatization. This article also indicates the likely order and timetable of Bush's domestic legislative agenda.

"Bush to Change Economic Team," Mike Allen, Washington Post, November 29

"Republican officials said Bush's economic team has been weaker than his national security advisers, and that the president believes he needs aides who can relate better to Congress and the markets. A more skilled team is essential, the aides said, because of the complex and politically challenging agenda of overhauling Social Security to add private investment accounts and simplifying the tax code. 'The president knows that he doesn't have the strength in that stable, and he's going to another corral to find it,' said a member of Bush's political team.... Bush aides, who have been debating what parts of his legislative package to send to Capitol Hill first, will start with measures to restrict medical malpractice claims and other lawsuits. Bush will then try to
advance his initiative on Social Security, after which will come proposed changes in the tax laws. In the next month or two, Bush plans to name a commission to make recommendations on the tax code that could eliminate some loopholes and even replace the income tax with a sales tax or value-added tax."

5. Commentary: The Virtue of a Unified Executive

This is a nice "political science" piece addressing the complaint that Bush is appointing "yes men" to the cabinet. Stephens makes a good point about this: that it is better to have the president who is in harmony with his cabinet and relies on them as real policy makers--rather than having him in conflict with his cabinet and working around them through the unofficial advisors of a "Kitchen Cabinet."

"What Is a Cabinet For?" Bret Stephens, Wall Street Journal, November 29

"It's easy to dismiss these complaints as high-toned versions of the usual partisan griping--which, in fact, is what they are. It's also easy to dismiss the suggestion that loyalty is no virtue in a cabinet officer: Should a president seriously consider appointing secretaries he knows will frequently be at odds with, and reluctant administrators of, his policies? But there is also a serious case being made here, which is that the primary purpose of a cabinet is to act as a kind of Senate within the executive. And this case needs to be addressed. The Constitution itself is vague on the subject of the cabinet: It says only that the president 'may require the Opinion, in writing, of the principal Officer in each of the executive Departments, upon any Subject
relating to the Duties of their respective Offices.' But in Federalist No. 70, Alexander Hamilton specifically rebuts the idea of government by what he calls 'executive council.' 'No favorable circumstances palliate or atone for the disadvantages of dissension in the executive department,' he writes. 'They serve to embarrass and weaken the execution of the plan or measure to which they relate.... They constantly counteract those qualities in the Executive which are the most necessary ingredients in its composition, vigor and expedition.' "

6. Commentary: Europe and Iran vs. the US

Michael Ledeen offers a very insightful comparison between European negotiations with Iran and the Palestinian "peace process." Just as the "peace process" is intended to restrain Israel, not the Palestinian terrorists--so the European negotiation with Iran are intended, not to stop Iran's nuclear program, but to restrain the US from taking action to defend itself (and Europe) from Iranian nukes.

"Europe's Ritual Dance," Michael Ledeen, National Review Online, November 29

"I think [the Europeans] expect Iran to 'go nuclear' in the near future, at which point they will tell President Bush that there is no option but to accept the brutal facts--the world's leading sponsor of terrorism in possession of
atomic bombs and the missiles needed to deliver them on regional and European targets--and 'come to terms' with the mullahcracy. In other words, as the editorialists at the Wall Street Journal have wryly commented, the real goal of
the negotiations is to restrain the United States, which, left to its own devices, might actually do something serious. If President Bush found a way to prevent Iran from acquiring atomic bombs, it might well wreck the Europeans'
grand appeasement strategy. There is certainly no risk that the United Nations will do anything serious, which is why the Europeans keep insisting that it is the only 'legitimate' forum for any discussion of the Iranian nuclear menace."

Departments

7. Human Achievements

Newton and Modern Culture

I recently did a quick walk-through of the "Newtonian Moment: Science and the Making of Modern Culture" exhibit at the New York Public Library (running through February 5th).

I was impressed by the ambitious goal of the exhibit--to demonstrate the transmission of Newton's ideas through the culture. While I doubt that the exhibit actually achieves that lofty goal, the large collection of rare books on display showing the diffusion of Newton's ideas in the culture over the centuries, the collection of Newton's own manuscripts and notebooks, and the death mask of Newton once owned by Thomas Jefferson are well worth a visit if you are in town.

To learn more visit the exhibit website.

"This exhibition tells the story of the conception and diffusion of Newton's ideas, and the tensions and often public clashes they engendered. Notwithstanding these burgeoning controversies, or perhaps because of them, for
friends and foes alike Newton became an icon to be emulated or rejected, revered or excoriated--but always there to contend with. Hence, the era of Enlightenment and Revolution may be viewed as the Newtonian Moment."

Thanks to TIA Daily readers Robert Begley and Blair Schofield for recommending this exhibit.

Send your recommendations for the Human Achievements column to editor@TIADaily.com.

-- Shrikant Rangnekar

8. Things of Beauty

Photo: Sunrise over NYC, by Lee Sandstead

Lee Sandstead has taken many beautiful photos for the back covers of the print edition of TIA, but this photo of a sunrise over New York City is one of my favorites of his photos. I love the way the city is mostly picked out in dark shapes with just a few of the city's lights on. (When you see nighttime shots of NYC, there are many more lit windows.) Mr. Sandstead has captured the city just as it is beginning to wake--and he's caught the sun at the same moment, just as it is beginning to rise. I also love the way the dark blue clouds contrast with the vibrant orange glow of the sunrise, and how the orange color is picked up in many of the lights around the city. Notice also the contrast between the soft, downy shapes of the clouds and the sharp, angular shapes of the buildings. This beautiful photo, as well as many of Lee Sandstead's other photos, are now available for purchase through his website, or you can get to this particular image by clicking here.

-- Sherri Tracinski

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TIA Daily Feature Article

9. A Day in the Life of Capitalism

Capitalism Is an Engine of Human Achievementby Robert TracinskiOur regular "Human Achievements" feature often highlights the business achievements of entrepreneurs and industrialists, past and present. But sometimes we are reminded that what we cover is just a small percentage of the outpouring of human ingenuity that a capitalist society encourages and rewards on a daily basis.

Three stories in today's newspapers provide just such a reminder. They are three stories, from a single day, that highlight the impact of three innovative business ideas.

Today's Washington Post has a story, at http://tinyurl.com/6582y, about the rise of XM Radio, a company that has pioneered the new medium of satellite radio--radio stations that can be listened to nationwide, from one's car and now from a small, "wearable" receiver. The idea is that you no longer have to search the dial to find what happens to be offered in a particularly city (only to discover, say, seven country & western stations and nothing that offers classical music).

The beginning of this piece establishes a pattern that recurs in stories of this kind: a story of the leadership, intelligence, and energy of a single individual.

"Hugh Panero has never had much patience for naysayers. As a young man, after being turned down for a job reporting on the cable industry for a trade journal, Panero created his own version of the publication, complete with original stories and a mock cover. He sent it in and was hired, said Doug Panero, one of three younger brothers.

"As one of the early pioneers in pay-per-view TV, Panero overcame doubts that consumers would ever pick pay-per-view over the video store.

"Six and a half years ago, he believed in subscription radio service when few others did. Secure in that belief, Panero turned a staff of fewer than a dozen working out of a windowless basement office in downtown Washington into the leading satellite radio service, with more than 500 employees and 2.5 million subscribers. Its only direct competitor, Sirius Satellite Radio Inc. of New York, has 800,000 subscribers."

One of the amusing aspects of this story is the cheerful feistiness that XM shows toward its competitor, as when Panero reacted to the appointment of an executive from a giant media firm as Sirius's new CEO. Panero takes credit for pionerring the new medium, then concludes, "I'm glad we could provide Mr. Karmazin with gainful employment."

In a culture whose intellectuals cling to the Marxist dogma that businessmen are exploiters, this piece is largely written as a tribute to, and reminder of, the virtues of character required for business success.

"Back in 2001, when the attacks of Sept. 11 looked as if they would sink XM's scheduled launch, Panero never betrayed any doubt in the company's prospects, recalled Gary Hahn, XM's vice president for advertising and creative services. Hahn worked with Panero at his previous employer, Request Television Inc., a pay-per-view company in Denver. 'He led by that day-in and day-out relentless pursuit of goals. You tend to look at a leader if you have second thoughts. He had none,' Hahn said."

Later, Panero indicates that he is not done with this relentless quest: "In this kind of business, what you did today is forgotten quickly. We have to find new and innovative ways to reach people."

Our culture will make an enormous stride forward when it realizes that this--the "day-in and day-out relentless pursuit of goals" and the commitment to always keep doing more and better--is the essence of human morality.

This is also the theme of an article in the New York Times, at http://tinyurl.com/43vyf, about another startup company offering high-speed satellite internet connections for businesses in big cities.

"Jeff Thompson may be afraid of heights, but he appears to be at home on the 81st-floor terrace of the Empire State Building.

"Overlooking the 1,000-foot drop, Mr. Thompson said he saw the entire New York metropolitan area as the battleground where his company, TowerStream, will challenge phone companies for high-speed Internet business customers by delivering fast, cheap service without digging up streets to install cables.

"Next to him, a TowerStream antenna, perched on the parapet, beamed high-powered wireless Internet connections to companies several miles away. This kind of aerial system, many technology experts say, could uncork the most nettlesome bottleneck in the telecommunications industry: the phone companies' control of the 'last mile' of wire that travels from their switching stations to homes and offices.

" 'We're competing against the Bells,' Mr. Thompson said, 'so we have to work quickly.' Waving his arm toward the blaze of buildings and potential customers below, he said with a laugh, 'This is when I get excited by heights.' "

This story also highlights how such entrepreneurs help to overcome the limitations of old technology--as well as the artificial barriers created by government regulation and special favors to factions such as labor unions, as in the example of a New York City grocery business that is one of TowerStream's customers:

"Mr. Trachtenberg heard about TowerStream, which began service in New York in June 2003, through a friend, then learned he could get a WiMax connection set up in less than a week. By contrast, ordering a fixed wire line can turn into a logistical nightmare, Mr. Trachtenberg said. While phone companies say they typically install data lines within a few weeks, it can take months if Internet service providers, phone companies, and union workers who handle the installation have to coordinate schedules."

Still, government doesn't just get in the way. It is also needed to establish and protect property rights--something today's leaders do not regard as a priority. Thus:

"[T]here are limits to WiMax's expansion. Because it uses public airwaves rather than a licensed spectrum, signals are vulnerable to interference if providers overload a frequency in a market. (TowerStream says that it has acquired the right to force latecomers who install antennas near theirs to move if interference is created. The company also says that its connections are encrypted and not vulnerable to eavesdroppers.)"

Nevertheless, the main challenge faced by startups like this one is competition--a challenge that only spurs innovation forward more quickly. For example, this report indicates, "Mobile phone companies, which are investing billions of dollars in third-generation cellular networks, may also increase the speeds of their data connections to compete with WiMax."

Finally, a report in the LA Times, at http://tinyurl.com/6tj2u, indicates that capitalism encourages more than just technological innovation. It can also break open a greater market for innovative art and entertainment. That's the case with Netflix, a company that lets its members rent DVDs that are reserved online and delivered by mail. The customer pays only a fixed monthly fee. I've been using Netflix for about a year now, and it has many advantages over movie rentals (such as no worries about late fees), but the greatest benefit is that Netflix offers a far wider variety of DVDs than you can find in your local Blockbuster, including documentaries, educational series, and slightly obscure old television series (e.g., the BBC adaptations of P.G. Wodehouse's "Jeeves &Wooster" stories).

The LA Times reports that Netflix is seeking to capitalize on this by establishing itself as a distributor of smaller "independent films" that do not have major distributors.

"Seeking to broaden its hold on folks who want to watch art-house films in the comfort of their own homes, Netflix Inc. has forged an unusual alliance with a group representing thousands of independent filmmakers hungry for wider exposure.

"Under an agreement expected to be made public today , the largest online purveyor of DVD rentals would partner with the nonprofit Independent Feature Project/Los Angeles, making available to its [IFP's] 9,000 members all movies nominated for the Independent Spirit Awards, the offbeat alternative to the Oscars....

" 'A disproportionate number of our members are independent film fans,' said Ted Sarandos, Netflix's chief content officer, explaining why Netflix sought to partner with IFP."

I'm not writing this just to boost any particular company covered in these stories. I don't know which of them will ultimately survive and prosper. And that's another continuing theme from all of these stories appears in this article. No innovator can rest on his laurels. Any successful new idea will immediate face competition from rivals who seek to take that idea and implement it in a larger, cheaper, faster, or better way. Thus:

"With more than 2 million subscribers, [Netflix] has struggled to compete with large retail chains such as Wal-Mart Stores Inc. and Best Buy Co., which sell DVDs for discounted prices. In recent months, Netflix's stock has plunged 41%, in part because of speculation that Amazon.com Inc. would enter the rental business. To better compete with the rental industry leader, Blockbuster Inc., Netflix recently reduced its monthly fee to $17.99."

This is just a "day in the life" of capitalism. And these stories highlight all of the virtues of a free market economy. It is a system that rewards purposeful, creative, hard-working innovators, allows no one to rest on his laurels--and produces a dynamic society characterized by relentless progress.

This is the big truth being reported every day on the business pages of the nation's newspapers. When will this story make it onto the editorial pages? When will our intellectuals, commentators, and politicians accept, understand, and embrace the virtues of a capitalist society?

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Copyright 2004 by The Intellectual Activist

PO Box 8086, Charlottesville, VA 22906.

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