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Yes, the Economist was right in 1999 that industrial capitalism was built on limited liability. But were the resulting statism, bubbles and risk-shifting really necessary?

April 5th, 2011 No comments

Here is another piece of my dialogue on the comment thread to Matt Ridley‘s “Nuclear crony capitalism” post that I blogged on earlier.

Posted by, Robin Guenier (not verified) (emphasis added)

Tom:

I disagree. I’m sure that limited liability was a key factor in making available to mankind many of the benefits developed in the nineteenth and early twentieth centuries. I think that the Economist put it well in 1923 when it suggested that whoever invented the concept might earn ““a place of honour with Watt, Stephenson and other pioneers of the industrial revolution”. Of course, it was the latter not the former who, as you say, “kicked off” all that technological innovation. But, for its widespread exploitation, it needed huge amounts of capital. And that was provided by private investors – I cannot see how that would have happened without limited liability.

However, as I indicated in an earlier post, I strongly agree about the pernicious consequences of the many current examples of moral hazard. But I’m unconvinced that they’re a direct result of limited liability. For that, I think it’s necessary to look elsewhere.

Robin

Friday 1st April 2011 – 09:25am
I just left the following comment, which I don’t see up yet (emphasis added):
Robin, thanks for your further thoughts.

In retrospect, isn’t it clear that the Economist is praising stock market BUBBLES, which are destructive disruptions created by artificial credit expansions by banks and central banks? http://www.economist.com/node/347323

Unwary individual investors, lulled by government regulations of “public companies” that have removed managers from all shareholder oversight, have been badly burned — and much capital wasted and directed into the pockets of executives and traders, who have shifted risks of failure to shareholders and to the governments that continue to bail out these failed organizations.

Sure, all that technological innovation required huge amounts of capital, which was provided by private investors. But capital is created by savings. Those savings could have been more wisely invested if shareholders bore greater residual risk – and were thus more incentivized to monitor the risk-taking by executives.

I think there is growing empirical evidence that firms that are more closely overseen by shareholders are more profitable. This, in addition to the hurdles to the public capital markets created by Sarbanes-Oxley, is leading to greater reliance on private capital-raising.

Tom


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“The first principle is that you must not fool yourself – and you are the easiest person to fool.”
Richard Feynman

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For the disastrous failure of ‘Disaster Memory’ at Fukushima, we must thank – surprise! – nuclear crony capitalism

April 5th, 2011 No comments

Science reporter Andrew Revkin, writing at NYT’s Dot Earth blog, can’t seem to get his head around the complete failure of Tokyo Electric, its suppliers (GE, Westinghouse, Hitachi etc.) and the Japanese government to consider the possibility that large tsunamis might hit the Fukushima coast  history: (emphasis added).

‘Disaster Memory’ and the Flooding of Fukushima

Over the weekend, I mused on a question that’s bothered me since I read Roger Bilham’s report on the great earthquake and tsunami of March 11: Given the history of devastating tsunamis not far away, how could it have taken until 2006 for the word “tsunami” to show up in government guidelines related to the  Fukushima nuclear complex? (For instance, in 1933 a tsunami more than 90 feet high  erased coastal villages along part of the same stretch of  Honshu coast devastated on March 11.)

Revkin quotes from geologist Roger Bilham:

In hindsight it appears impossible to believe that nuclear power stations were located on a shoreline without recognizing the engineering difficulties attending prolonged immersion by a large tsunami. In 1896 a 33-meter high tsunami drowned the Sanriku coastline 200 kilometers to the north of Fukushima. A 23-meter wave surged on the same coast in 1933, and in 1993 a 30-meters wave swept over Okushira Island.

But to me, the puzzlement itself seems puzzling. I sent Andy the following tweet (emphasis added)

[email protected] Andy,as I emailed b4,there was so little ‘Disaster Memory’ at simply bc Govt absolved all from personal responsibility

Which I followed with this comment to his blog post: (emphasis added)

Andy,

This really is not so hard. The problems at Fukushima are just the latest manifestation of poor decision-making, resulting from pervasive, institutionalized risk-shifting, brought to us by LEAVE IT TO US, WE’LL HELP YOU! governments. The snowballing rot started with the creation by government of that form of human association known as ‘corporations’, whose shareholders are freed from any liability for the harm that corporate acts may cause others. That lack of personal liability eliminated a need to closely monitor risks, managers and employees.

Injured citizens have insisted that governments step into the breach, but bureaucrats and politicians are oddly susceptible to influence from those firms whose profits and competitive advantages may depend on government regulation.

Beyond ‘Nuclear Crony Capitalism’: Does state-created corporations mean we are stuck with a wonderfully confused ‘capitalist’ mess of socialized risk? – TT’s Lost in Tokyo http://bit.ly/gFfDlQ

“Rational Optimist” Matt Ridley blasts Japan’s “Nuclear Crony Capitalism,” fails to examine limited liability corps http://bit.ly/eCBbvW

Institutionalized moral hazard: Fun with Nuclear Power in Japan, or, prepare for a glowing twilight, with scattered fallout in the morning – TT’s Lost in Tokyo http://bit.ly/hvvWHU

Risk-Shifting,BP +now #Fukushima:Cliff Notes version of my stilted envirofascist view of corps+govt -TT’s Lost in Tokyo http://bit.ly/9oBkC7

Tom


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“The first principle is that you must not fool yourself – and you are the easiest person to fool.”
Richard Feynman

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Do contributions by corporations to 'progress' mean we should ignore sick dynamics set in motion by limited liability?

April 5th, 2011 No comments

I post here some of my further dialogue on the comment thread to Matt Ridley‘s “Nuclear crony capitalism” post that I blogged on earlier.

Posted by, Robin Guenier (not verified)

Tom:

Yes, I agree with much you say. But, nonetheless, I’m sure that limited liability has, on the whole, been beneficial. I haven’t time now to elaborate properly on this so I’ll confine myself to the following:

The concept of limited liability is very old. But it didn’t take off until 1811 when New York State allowed manufacturing companies to adopt limited status. Thereafter, it became widely accepted throughout the USA – and in Britain in 1854. As a direct result, because private investors no longer risked total ruin (even prison) if their company went bust, vast sums of new capital became available to finance the new industries that went on to transform the world and radically improve the lot of millions of people. In my view, without limited liability that transformation is most unlikely to have happened.

Robin

Thursday 31st March 2011 – 09:30am

Posted by, TokyoTom (not verified) [emphasis added]

Robin, thanks for your response.

I understand your argument, but the acceleration of innovation at the time of the Industrial Revolution was NOT kicked off or led by corporations.

Perhaps I naively have more faith in human ingenuity than you, but I suspect that the great leap in human welfare could and would have continued without limited liability corporations. We don’t get do-overs, so it’s hard to know; but there were plenty of sophisticated organizations where partners and shareholders retained personal liability or significant residual risk (e.g., companies with shares that were NOT fully paid-in).

In any case, limited liability has also led directly to where we are today, with (i) large governments – purportedly on missions to protect the public from now faceless capitalists who are anonymous to the communities they affect – entangled deeply in a revolving-door game of rent-seeking, influence and corporate welfare, and (ii) publics now nursed and cosseted by governments who demand from bankrupt government more of the ‘welfare’ that the government have so generously bestowed on large, ‘too-big-to-fail’ financial and other firms whose self-interested managers and traders, unchecked by shareholders, have lodged their companies firmly on the shoals of institutionalized agency problems and moral hazard.

The real need is simply to understand the roots of our present problems, so we can find productive approaches to move ahead. More government bailouts – either for everyone or for the most disfunctional and damaging firms – is clearly not going to improve the situation, though of course it may give more power to politicians and bureaucrats, and may put more money in the pockets of industry ‘leaders’ who are socializing risks and privatizing gains.

Sincerely,

Tom

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A glossary of double-speak: The brave old world of TEPCO, BigGov + coopted Japanese establishment media

April 3rd, 2011 No comments

Further to my earlier cross-post of an interview with Japanese freelance journalist Takahashi Uesugi, today I stumbled across a blog post where someone had put together a tongue-in-cheek explanation of the lingo used in press conferences by TEPCO executives and the DPJ’s crisis point man, chief cabinet secretary Yukio Edano.

I had fun translating it, tweeted most phrases and thought my readers might enjoy them as well. The original Japanese is at bottom.

A glossary to words and phrases frequently used at Japanese press conferences:

Incident”   => critical accident.
immediately”  => (1) only at the present moment. (2) don’t know after that; things may worsen.
we are in the process of confirming”  => we don’t have clue.
we are hurrying”  => maybe we’ll do it later.
to make doubly sure”  => to make sure we are not criticized later.
no news has come in that X”  => we don’t want to hear the news that X.
experts”  => (1) those responsible (2) academics on the payrolls of those responsible.
planned”  => (1) might not do; (2) might be unable to do.
stable”  => was stable in the past, but quite possibly may get worse.
things are fine” (if said inside Japan) => things are okay for up to three hours — and very likely to be in a critical situation thereafter.
It’s safe”  => It would be nice if things were safe. We want you to believe that it’s safe.
calmly”  => without questioning the veracity of what we say. E.g., “My fellow citizens, please conduct yourselves calmly.”
Press Conference”  => Deception; e.g., “TEPCO’s press conference/deception has begun.”
under investigation”  => a big problem; e.g., “The release of radioactive water yesterday is under investigation” [note:the Japanese version refers to “tomorrow”].
rumors”  => the commonsense view of citizens.
Sorry [lit., I’ve no excuse]”  => (1) It’s none of your business. (2) Go crawl under a rock and die.
after thorough review”  => after determining what to stress and what to hide.
can’t deny the possibility that X”  => (1) X is happening.  (2) X is very likely to happen.
a loud sound and white smoke occurred”  => there was an explosion.
under X’s supervision”  => X is personally doing nothing about:eg.,”under the supervision of Prime Minister Kan”
it’s my understanding that”  => I beg you please to leave it at that+not inquire further. eg., It is my understanding that there is no impact on human health.
initiated”  => we’ve decided to make plans, but no one has started doing anything yet.

会見でよく出てくる言葉「会見用語集」

【事象】・・・完全な事故。 例:原発で爆発事象がありました。
【ただちに】・・・(1)その瞬間のみ。 (2)その後の事はわからない。悪化の可能性がある。
【明日以降】・・・明日も含んではいるが、最短でも明後日。
【確認中】・・・よくわからない。
【急いでおります】・・・後回しにします。
【情報が入ってきてない】・・・情報を聞かれたくない。
【念のため】・・・あとで文句を言われないため。
【専門家】・・・(1)利害関係者。 (2)御用学者。
【予定】・・・やらないかもしれない、やれないかもしれない。
【安定】・・・過去(過ぎた事)限定で、先の事はわからない。悪化の可能性がある。
【日本国内の人が言う「大丈夫」】・・・有効期間は最短3時間程度。その後は高確率で深刻な状況である。
【安全です】・・・多分安全だったらいいな、安全だと信じてください。
【冷静に】・・・発表を鵜呑みにして。 例:国民の皆さんは冷静に行動してください。
【会見】・・・ごまかし。 例:東京電力の会見が始まりました。
【検討中】・・・困っていること。 例:明日の放水を検討中です。
【風評】・・・発表による国民の常識的な判断のこと。 例:風評により物資が届かない。
【申し訳ない】・・・(1)関係ありません。 (2)死んでください。
【整理してから】・・・公開する情報と隠蔽する情報を選別・判断してから。
【○○の可能性も否定できない】・・・(1)○○している。 (2)○○の可能性が高い。
【大きな音と白煙が発生した】・・・爆発した。
【○○の主導の下に】・・・○○は何もしていませんが  例:菅総理の主導の下に
【○○と理解しております】・・・○○ということにしておいてくれ、頼むよ、突っ込まないで。例:健康に影響はないものと理解しております。
【着手】・・・計画を作る事が決定した時点のことで、実際にやっていることではない。 例:外部電源敷設に着手

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Interview with Takashi Uesugi, truth-telling former NYT journalist now hated and frozen out by TEPCO, Japanese government and MSM

April 3rd, 2011 No comments

With permission from the bilingual online journal Time Out Tokyo, I bring to you in its entirety an interview by their reporter James Hadfield with Japanese freelance journalist Takahashi Uesugi, a critic of the Japanese news reporting establishment who now is lancing some of the lies and half-truths coming from TEPCO and the Japanese government with respect to the Fukushima nuclear reactors. (The bolding is mine.)

Uesugi tweets at @uesugitakashi; his home page is uesugitakashi.com

Takashi Uesugi: The Interview; Time Out meets the journalist who TEPCO love to hate

 

In the immediate aftermath of the March 11 earthquake and tsunami, the Japanese media stayed remarkably calm. While overseas news outlets fretted about nuclear meltdown and terrified expats stranded in a ‘City of Ghosts’, their Japanese counterparts generally hewed closer to the official line: stay calm, go about your business as usual. And, yes, you can still drink the tap water.

But that was only part of the picture. While the mainstream media presented a reasonably united front, a group of freelance and internet journalists were openly dissatisfied with the explanations being given at Tokyo Electric Power Co.’s seemingly endless stream of press conferences. Why wasn’t the company mentioning levels of plutonium around the stricken Fukushima Daiichi power plant? What had happened to TEPCO’s president, Masataka Shimizu – last seen on March 13?

One of the most influential members of this group of dissenters is Takashi Uesugi, a former New York Times journalist and, in an earlier incarnation, aide to Liberal Democratic Party bigwig Kunio Hatoyama. The author of books including The Collapse of Journalism [TT: in Japanese; an English discussion is here. Uesugi lists his books here], Uesugi is a vociferous critic of Japan’s ‘Kisha Club’ system – a network of exclusive press clubs that, he says, nurtures excessively close relationships between reporters and the organisations they are supposed to cover.

Gadfly to some, hero to others, Uesugi is a much-sought commentator. He makes weekly appearances on Tokyo FM and Asahi Newstar, and is a regular contributor to the Diamond Weekly business website, along with various weekly tabloids. However, he’s most prolific on his own website and via Twitter, where he commands a following of 177,000 and counting. One place place he won’t be appearing any more is TBS Radio, who booted Uesugi from his regular weekly guest slot this month (more on that later).

Time Out caught up with Uesugi last Monday, during a brief lull between press conferences at the TEPCO head office in Shimbashi. We’d gone expecting to have a nice chat about tweets and microsieverts, but smalltalk apparently wasn’t an option. What followed was a eye-opening, if occasionally paranoid tirade against TEPCO, the government and the mass media, delivered in rapid-fire Japanese.

Obviously a lot has happened over the past couple of weeks, but what are the main things you’ve learned?

Basically, something that I knew from the beginning, but has become more blatant yesterday and today [March 27-28], is this terrible situation where the government and TEPCO are suppressing information. To be more specific, I thought it was strange that there was nothing written about plutonium when the data about reactor 3 was given out at the TEPCO press conference on the 27th, so I asked them if it was true that no plutonium had been detected in reactor 3, and for how long it had not been detected. TEPCO answered: ‘Plutonium hasn’t been detected.’ To confirm what they were saying I asked if perhaps it wasn’t that none had been detected, but that they hadn’t actually taken any measurements. They were alarmed, and it turned out that it wasn’t even that they hadn’t taken any measurements, but that they didn’t have the instruments to do so in the first place.

That’s one example. Another is the question of where exactly has the TEPCO company president gone? There was a rumour doing the rounds a while ago that he had been hospitalised, when actually he had been away because of fatigue. This time they’re using the pretence of hospitalisation for the same situation. All of it’s lies. It’s emblematic, isn’t it? [Note: TEPCO president Masataka Shimizu was hospitalised on March 29, and subsequently resigned.]

Two weeks ago I told someone in the government that TEPCO was lying. I called a friend from back when I was a governmental aide directly on their mobile phone and said that the government was being deceived, but I didn’t get any response at all. On top of that, even though I was able to attend the Chief Cabinet Secretary’s press conferences before the earthquake, after the quake, all the freelance journalists, foreign media and Internet reporters were kicked out. So I took on the role of representative for those media outlets, and tried to negotiate by constantly badgering the official residence – like a stalker – saying, ‘If you don’t let in the foreign media too, there won’t be any way for information to be conveyed abroad, will there?’

Ever since the [nuclear] trouble started, I’ve been saying again and again via the different media and radio programs that I appear on that TEPCO are concealing things about the accident, that they’re lying, and that the government is being fooled. I’ve been saying that TEPCO is a client of the media and the press clubs, being one of their biggest advertisers – so the press won’t be able to say certain things, and will be holding back, won’t they? But then, at the end of one of the programs, the producer came to me and asked me to stop doing the show at the end of the month, and I was dropped. When I criticized TEPCO on a different program, they also wanted to get rid of me. But the producer of that particular program is a strong person, and actually went ahead and did it without a sponsor.

TEPCO are such an important advertiser that the television and newspapers are completely silent. Even now, they’re running TEPCO commercials on the television, aren’t they? This week, there are also full-page advertisements in the newspaper. Despite the fact that they’ve caused such a scandal, TEPCO are still putting ads in the newspaper. If they have such enormous sums of money, they should send it to the areas hit by the disaster.

It’s like the false announcements made by the Imperial General Headquarters 70 years ago [during World War II] are happening all over again. I’m shocked that something I’ve seen in history textbooks, and had thought was completely implausible, is happening right before my eyes. I never thought that I’d become a party to anything like this. [Laughs]

 

Have you been following reports in the foreign media, then?

Yes, all the time.

Would you say that they’ve been overdoing it?

No, I wouldn’t, because the foreign media was just reporting what was possible. I think the correct way to report about the events at the nuclear power plant is to assume the worst case and write about it, and then also add what the current situation is in relation to that. Newspapers and television shouldn’t say, ‘Don’t worry, it’s safe. You don’t need to run away,’ like Japan’s have. There’s absolutely no problem with the way the foreign media has covered this news. It’s not fanning people’s fears if we report by saying it’s possible for things to reach such and such a point, but at the moment the situation is like this, so you don’t need to worry. There’s also nothing wrong with the foreign media referring to the examples of Chernobyl and Three Mile Island. After clarifying the source, I have also talked about those kinds of things in my email newsletter and in my regular reports for websites, as well as on radio shows and satellite TV programs where I’m a regular guest. Except recently, the more I talk about those topics, the more complaints I get after the program has finished – in incredible numbers. People say things like, ‘Don’t lie!’ or ‘It’s safe!’ But they’ve got no grounds to say that. Japanese people want to believe that it’s safe, don’t they? They just don’t want to look at how things really are. It’s like an ostrich burying its head in the sand.

We’ve read a lot of opinions from scientists recently, and the majority of them seem to fall in line with what the government’s saying: that this isn’t another Chernobyl, and Tokyo isn’t at risk from radiation…

That’s because at the moment, any scientists who say that the current situation is dangerous are being removed from the mass media. Ultimately, the most dangerous situation is one where the only information available is what suits the government and TEPCO. From the outset, the mass media haven’t been using the people who are reporting that the worst possible outcome could happen. And yet the evacuation area was changed from 2km to 3km, and then to 10km, and to 20km, and finally to 30km. America has specified a 50 mile (80km) evacuation zone, but Japanese people still say that things are OK as they are…

Then the next week I said [to Chief Cabinet Secretary Edano], ‘You were wrong, weren’t you? Radioactive material has been found in the area outside the 30km line, and even though you said radioactive material would never reach Tokyo, it has, hasn’t it? The government is responsible for the consequences of what it says so you should make a proper apology. Correct your mistakes.’ He replied, ‘That is not the case.’ When I said that, far from being within the 30km radius, radioactive material was found 40km away, and that he should correct the mistake, he told me to ‘Submit that properly in writing.’ I asked a question in the middle of a press conference, and he actually told me to put it on paper. [Laughs] At that point I just couldn’t believe it any more. It’s the first time that has ever happened to me – to be asked to submit a question in writing in the middle of actually asking it. Basically, it’s hopeless, isn’t it? Something in the minds of the government has burst.

When The New Yorker interviewed you recently, you talked about how the Japanese public were ‘brainwashed’ by the media. Can you tell us a bit more about that?

From a young age Japanese people become convinced that newspapers and the television are correct, and that magazines and the Internet are full of lies. But the information in the newspapers and on the television is just what the government is giving out through the press clubs. Even if it’s different from the information and data that reporters have gathered themselves, they just accept what the government announces. So the people here who think that the newspapers and television are right always believe the information given to them, and it’s why the same kind of brainwashing is happening now too. But one thing that’s a little different from how things have been up until now is that people, mostly the younger generation, are starting to realise what’s going on, and using the Internet to say, ‘Hang on, there’s something that’s not right, isn’t there?’ Even my Twitter timeline has been incredible since this morning, with messages like, ‘What the newspapers and television are saying is not the truth!’ It’s just like Egypt and Tunisia. That’s where we can clearly see changes happening.

Interview by James Hadfield
Translated by Virginia Okno

上杉隆
1968年福岡県生まれ。都留文科大学卒業。テレビ局・衆議院公設秘書・「ニューヨークタイムズ」東京支局取材記者などを経て、フリージャーナリストに。政治・メディア・ゴルフなどをテーマに活躍中。自由報道協会(仮)暫定代表。最新の著書は2011年3月に発売された『ウィキリークス以後の日本 – 自由報道協会(仮)とメディア革命 – 』(光文社新書)

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