Monday, November 30, 2015


With record profits one might be inclined to think that corporate America and the economy are doing fine, right? Think again. Corporate America is in no position to lead the economic "recovery," and now owes more than it did before 2008.


This happened because corporate America has spent years playing accounting tricks with their bailout-sourced money. As economist Joseph Schumpeter might have put it, corporate America has effectively been playing monopoly rather than building them. And they've gone wildly into debt in the process.

This is how it happened.

The Federal Reserve's post-2008 decision to bailout Wall Street and corporate America with a seemingly endless stream of cash has put a flood of money into our markets. Banks and pseudo banks around the world have been able to borrow lots of money at record low interest rates because of the Federal Reserve's bailout policy. Here's a useful, if not stunning, visual of the trillions made available to corporate America.

All of this money was supposed to lead to renewed investment, higher incomes, and more profits after the market collapse of 2008. Instead, dumping a boatload of money in to the laps of an already greedy and rich class of people has only exacerbated a trend that's been going strong for the better part of 30 years now: Wages are stagnating while profits, especially in the financial sector, have soared.


How has this been happening, you ask? This is a good question, and takes us to the primary reason for this post.

While we can blame globalization (shifting jobs overseas) and new technology (replacing jobs with machines) for stagnating wages, the reality is favorable legislation (especially pro-globalization, anti-union, and low tax legislation) and regular bailouts (again, trillions of dollars) have allowed the financial sector to gobble up the vast majority of money made (i.e. profits).

The chart below, courtesy of Zero Hedge, shows us how regular bailouts and favorable legislation have made access to money so easy that corporate America effectively decided borrowing money to make bets in bond markets was easier than making real investments. So they got lazy and borrowed lots of money to make these bets. Today corporate America now owes 15% more than it did before the market collapsed in 2008.


"Gross Leverage" = Borrowed Money / Investment Grade Bonds = IG / High Yield Bonds = HY

What's happened is corporate America decided to focus on smoke and mirror accounting tricks to boost their numbers. Specifically, corporate America:

* SMOKE: Used borrowed and low interest money (courtesy of the Fed) to pay dividends to impress and keep impatient shareholders.
* MIRRORS: Used borrowed money to buy back stocks, which artificially boosted popularity and pumped up prices.
* MAN BEHIND THE CURTAIN: Used borrowed money to pursue costly mergers that may boost revenues and lower costs in the short term but - as Carly Fiorina's history of merger fiascos at Hewlett Packard demonstrate - often cause more problems than they're worth

In a few words, in spite of record profits, corporate America has not been investing in brick and mortar (or aps and software) projects. They've used favorable legislation and cheap money to borrow and play accounting tricks. Unfortunately, they've now borrowed more than they did before the 2008 market collapse. Once interest rates begin to move upward this debt and bond driven business model will begin to unravel.

Here's the real problem: While they will have no one to blame but themselves for choosing to play monopoly rather than build them, corporate America will no doubt blame others when the going gets rough.

And Wall Street will be at the front of the bailout line that, incredibly enough, is already forming.

- Mark 

Wednesday, November 25, 2015


Not many people know that I once spent a good deal of time studying the poultry industry in Mexico. In fact, I published several specialized reports and a book chapter with one of my research colleagues from the Universidad Autonoma de Queretaro several years ago. My experiences with the poultry industry in Mexico is just one of the reasons why I found this article on the increasing size of Thanksgiving turkeys so interesting.

In a few words, the super birds we see on our Thanksgiving table today have been artificially "engineered" to satisfy market demand. Today's stoop framed and debeaked frankenbirds are no accident, as this Mother Jones article makes clear.

I encourage you to read the article because it helps us understand two things about the modern poultry family (which include chicken, turkey, and quail among others). First, the size of our poultry "products" have been supercharged in unnatural ways. Second, the time needed to grow poultry has been sped up.

In our 2009 book chapter, for example, my colleague and I explain how chicken producers have employed new farming techniques to reduce the amount of time necessary to grow a four-pound chicken. A four-pound chicken no longer needs nine-and-one-half weeks to grow, as was the case in the late 1960s. Today you need just six weeks to grow a four-pound chicken.

What this means is that four production cycles per year (1960s) have been increased to 5.7 cycles per year because of improvements in technology, environment, and management.

A modern poultry farm, with two hatcheries.
In human terms this is the functional equivalent of engineering and modifying our environments so that children become full-sized "adults" (i.e. reach their 18-year-old size) by the time they're a 13-year-old.

There's more, but you get the point. Your Thanksgiving turkey is a frankenbird.

- Mark 

Tuesday, November 24, 2015


- Mark


Many are still unaware that the Syrian refugee crisis represents the largest displacement of people in our time. At least half of Syria's pre-war population is now displaced, with most fleeing to neighboring countries Turkey, Lebanon, Jordan, Egypt, and even Iraq. 

With the GOP doing their level best to use the Syrian refugee crisis to become America's racial and religious gate-keepers (once again) it's time to wipe away the hypocrisy from the Republicans "all lives matter" claim.

I've posted on the GOP's hypocritical pro-life position before, but it needs to be brought up once more since the GOP is turning their back on human life, again.

Specifically, if you have a "pro-life" friend, who likes talking about how they support the sanctity of life, you might want to ask them the following:

1. Do you support torture? 
2. Do you support the death penalty?  
3. Do you oppose euthanasia for the terminally ill?  
4. Do you believe that over 100,000 civilians killed (as collateral damage) in a reckless war of choice is justified?
If they answer yes to one or all of these questions - and they are opposed to letting any Syrian refugees into the U.S. - they do not appreciate the sanctity of life, and are not pro-life. They're pro-something, but it's definitely not pro-life. 

Seriously. How does turning a blind eye to torture, state sanctioned murder, human suffering, and mindless death make you a defender of the sanctity of life? How about those who say they are pro-life but who also work to deny food and health care to children and the working poor?


There's more, but you get the point. Many in the pro-life crowd have a demented vision of human dignity, and don't really appreciate the sanctity of life. 

- Mark

Wednesday, November 18, 2015


As several of you have noticed, I haven't posted much recently. There's a reason. Simply put, I'm swamped. That said, I'm seeing a light at the end of the tunnel. To help kick start this opening we have this article from former Labor Secretary Robert Reich below. He explains how ego and money, outright lies, and bigotry have become the dominant features of American democracy.


The next president of the United States will confront a virulent jihadist threat, mounting effects of climate change, and an economy becoming ever more unequal.
We’re going to need an especially wise and able leader.
Yet our process for choosing that person is a circus, and several leading candidates are clowns.

How have we come to this?
First, anyone with enough ego and money can now run for president.
This wasn’t always the case. Political parties used to sift through possible candidates and winnow the field.
Now the parties play almost no role. Anyone with some very wealthy friends can set up a Super PAC. According to a recent New York Times investigation, half the money to finance the 2016 election so far has come from just 158 families.
Or if you’re a billionaire, you can finance your own campaign.
And if you’re sufficiently outlandish, outrageous, and outspoken, a lot of your publicity will be free. Since he announced his candidacy last June, Trump hasn’t spent any money at all on television advertising.
Second, candidates can now get away with saying just about anything about their qualifications or personal history, even if it’s a boldface lie.
This wasn’t always the case, either. The media used to scrutinize what candidates told the public about themselves.
A media expose could bring a candidacy to a sudden halt (as it did in 1988 for Gary Hart, who had urged reporters to follow him if they didn’t believe his claims of monogamy).
But when today’s media expose a candidates lies, there seems to be no consequence. Carson’s poll numbers didn’t budge after revelations he had made up his admission to West Point.

The media also used to evaluate candidates’ policy proposals, and those evaluations influenced voters.
Now the media’s judgments are largely shrugged off. Trump says he’d “bomb the shit” out of ISIS, round up all undocumented immigrants in the United States and send them home, and erect a wall along the entire U.S.-Mexican border.
Editors and columnists find these proposals ludicrous, but that doesn’t seem to matter.
Fiorina says she’ll stop Planned Parenthood from “harvesting” the brains of fully formed fetuses. She insists she saw an undercover video of the organization about to do so.
The media haven’t found any such video, but no one seems to care.
Third and finally, candidates can now use hatred and bigotry to gain support.
Years ago respected opinion leaders stood up to this sort of demagoguery and brought down the bigots.
In the 1950s, the eminent commentator Edward R. Murrow revealed Wisconsin Senator Joe McCarthy to be a dangerous incendiary, thereby helping put an end to McCarthy’s communist witch hunts.
In the 1960s, religious leaders and university presidents condemned Alabama Governor George C. Wallace and other segregationist zealots – thereby moving the rest of America toward integration, civil rights, and voting rights.
But when today’s presidential candidates say Muslim refugees shouldn’t be allowed into America, no Muslim should ever be president, and undocumented workers from Mexico are murderers, they get away with it.

Paradoxically, at a time when the stakes are especially high for who becomes the next president, we have a free-for-all politics in which anyone can become a candidate, put together as much funding as they need, claim anything about themselves no matter how truthful, advance any proposal no matter how absurd, and get away bigotry without being held accountable.
Why? Americans have stopped trusting the mediating institutions that used to filter and scrutinize potential leaders on behalf of the rest of us.
Political parties are now widely disdained.
Many Americans now consider the “mainstream media” biased.
And no opinion leader any longer commands enough broad-based respect to influence a majority of the public.
A growing number of Americans have become convinced the entire system is rigged – including the major parties, the media, and anyone honored by the establishment.
So now it’s just the candidates and the public, without anything in between.
Which means electoral success depends mainly on showmanship and self-promotion.
Telling the truth and advancing sound policies are less important than trending on social media.
Being reasonable is less useful than gaining attention.
Offering rational argument is less advantageous than racking up ratings.
Such circus politics may be fun to watch, but it’s profoundly dangerous for America and the world.
We might, after all, elect one of the clowns.

- Mark

Friday, November 13, 2015


This just another reminder that, when it comes to Republican talking points about how horrible things are under President Obama, the GOP simply doesn't have a clue what they're talking about. Here's the big picture.

Then we have the numbers when it comes to comparing how jobs and unemployment have fared under recent Democratic and Republican presidents ...

Then we have market performance by presidential administration.

One thing is clear. When it comes to comparing the difference between Democratic and Republican administrations from William McKinley through President Obama (Aug. 2012), Democrats outperform Republicans (by far) when it comes to Total Returns (787% vs. 332%) and Average Annual Return on investment (15.31% vs. 5.43).

Since the graph above only goes through August of 2012, the total returns and average annual return on investment are much higher for President Obama and other Democratic administrations. This is because markets (both the NYSE and the DJI) have climbed significantly over the past three years.

So, yeah, whether it's how the GOP works to ignore how President Obama has worked to clean up President Bush's mess, or how they ignore Democratic administrations outperforming their Republican contemporaries in the market since the late 1800s.

Finally, in the FYI category, as I discussed last week, the jobs picture in the U.S. has improved significantly since the Republican Party announced that Obamacare was going to kill jobs in America.

There's more, but you get the point. Republican presidential hopefuls are either delusional or have no clue what they're talking about when it comes to the economy or their market talking points.

- Mark 

Wednesday, November 11, 2015


This orchestra is made up of musicians from the U.S. military, and they're playing probably the best "Unchained Melody" instrumental you'll hear anywhere.


As we celebrate Veterans Day I also thought it would be a good idea to remind ourselves of people who actually went to war when they didn't have to, and perished in the process.

Unlike our modern day cowardly politicians, and blow hard media pundits who cheer every war opportunity without sacrificing anything, these are Americans who had fame and fortune but also believed they should contribute more to the cause. Not one of the three individuals below were drafted or forced to abandon the charmed and comfortable lifestyles that would be part of their future (regular readers will recognize these stories from previous posts).

Glenn Miller was a band leader in the swing era. His career was beginning to sky rocket with still recognizable hits like "In the Mood" and "Moonlight Serenade." In 1942, while making between $15,000 and $20,000 per week (roughly between $200,000 and $300,000 today), Miller decided to join the war effort. At 38 he was too old to be drafted, and was initially told by the Navy that they did not need his services. He convinced the U.S. Army that they could use him to help "modernize" their music, which allowed him to serve by entertaining the allied troops.

Miller and his 50-piece band played across Europe, and perished on December 15, 1944 while crossing the English Channel to play in Paris. Glenn Miller is still listed as Missing In Action.

Pat Tillman was a football player in his prime playing for the Phoenix Cardinals in the late 1990s. After the 9/11 attacks Tillman left a lucrative career in the National Football League to enlist in the U.S. Army at the age of 25. At one point Tillman turned down a multi-year $9 million contract from the St. Louis Rams because of the loyalty he felt towards the Cardinals. Before enlisting in the U.S. Army Tillman also turned down a 3-year $3.6 million contract offer from the Cardinals.

Tillman joined the Army Rangers and died in the mountains of Afghanistan under circumstances - first called an ambush, and later labeled as "friendly fire" - that remains a mystery for many today.

The Joseph Kennedy, Jr. story is a unique one because of his family connections and wealth. His father made a name for himself on Wall Street, and as Franklin D. Roosevelt's Ambassador to Britain. His younger brother, John F. Kennedy, would become the 35th President of the United States.

A graduate of Harvard, Kennedy studied for a year at the London School of Economics before attending Harvard Law School. A delegate to the Democratic National Convention in 1940, Kennedy was already fabulously rich as a young man because his father, as the story goes, gifted each of his kids $1 million (about $17 million today) so they could make their own way in life, while telling the family to go to hell if they wanted.

Kennedy voluntarily left Harvard before finishing his final year in law school to join the U.S. Navy in 1942. There he completed 25 combat missions, and volunteered for Operation Aphrodite weeks before his tour was up. He died on a mission over England.

*  *  *  *  *  *  *  *  *  *

- Mark 

Monday, November 9, 2015


Hedy Lamarr, Austrian film icon from Hollywood's Golden Age, would be 101 years old today. Lamarr is best known for her starring roles in Algiers (with Spencer Tracy), Comrade X (with Clark Gable), John Steinbeck's Tortilla Flat (with John Garfield), and Samson and Delilah (with Victor Mature).

What many don't know about Hedy Lamarr is that she was also a mathematician and inventor of the first order. Specifically, inspired by her anti-Nazism, she was the co-creator of a frequency-hopping system that's an integral part of much of the communication technology we use today, including GPS, Bluetooth, Wi-Fi networks, and CDMA (used in cordless/wireless phones). Lamarr's earlier inventions included technology that improved the traffic stoplight and a tablet that dissolved in water to create a carbonated drink.

There's more to Lamarr's story, which you can access in these articles from C/NET, Finding Dulcinea, and NPR.

- Mark

Saturday, November 7, 2015

WEEKEND READING (Nov. 6, 2015)

Conservative school board members who pushed for 'patriotic' history get booted (Think Progress).

And the market favors to the banks continue ... Freedom Caucus votes for $17 billion in government payouts to banks through highway funding bill (Huffington Post).

Dorms for grownups: A solution for lonely Millennials (The Atlantic)?

Rupert Murdoch takes over National Geographic, then lays off award-winning staff (Reverb Press).

'It's out, and it's UGLY': 10 reasons why TPP is a total freaking disaster (Reverb Press).

8 sneaky racial code words and why politicians love them (The Root).

Democratic Socialism has deep roots in American life (History News Network).

Is the economy overheating? Here's why it's so hard to say (NY Times).

As America's middle class collapses, no one is buying stuff anymore (Boing Boing).

Stiglitz: Here's how to fix inequality (The Atlantic).

George H.W. Bush slams 'iron-ass' Cheney, 'arrogant' Rumsfeld in new biography. Also faults Bush 43 (Washington Post).

George H.W. Bush settles old scores with Cheney and Rumsfeld (The Atlantic).

4 predictions Republicans made about the economy that are really embarrassing now (Think Progress).

10 lies Republicans love to use to terrify Americans (Forward Progressives).

Exposing 5 of the biggest lies Republicans tell about the economy (Forward Progressives).

Republicans to rally with pastor (Kevin Swanson) who says God is about to destroy America due to gay marriage (Right Wing Watch).

Opal Covey, who came in last place in Toledo Mayoral race, claims she actually won (because God told her she did) but lost because of "another attack from the devil" (Patheos).

Pastor who prayed for Obama's death calls President communist 'bastard' with 'whore' mother (Addicting Info).

Mormon church bars same-sex couples and their children (NY Times).

Kevin Swanson: Sex slavery better than welfare (Right Wing Watch).

Ben Carson assures conservatives that his campus speech monitoring would only target liberals (Right Wing Watch).

Ben Carson says archaeologists are wrong about Egyptian pyramids, says they were built to store grains (Patheos).

Ben Carson caught in big lie about West Point "scholarship" (Crooks & Liars).

White middle-aged people in U.S. dying quicker than in any other developed nation - Princeton Study (Russian Times).

Programmers: Stop calling yourselves engineers ... it's ticking off the real engineers (The Atlantic).

Nuclear fuel has melted through base of Fukushima plant (The Telegraph).

Dog Talk: If you see your dog do this, this is what they're trying to tell you (Boredom Therapy).

- Mark 

Friday, November 6, 2015


The Affordable Care Act was signed into law in March of 2010. Days before it became law the Republican leadership announced that Obamacare would be a "job-killing government takeover of health care." Dan Diamond, health and pharma expert from Forbes magazine, just put out this graph.

Diamond writes:

The economy looks drastically different than in March 2010 — more than 11 million jobs have been created, and the unemployment rate has been cut nearly in half.

In fact, health care jobs grew 50% more in 2014 than in 2013. There's more, but you get the point. Republicans got it wrong, big time, about Obamacare.

- Mark


Senator Elizabeth Warren (D-MA) has filed a bill that would make CEOs pay for cost of living increases that have been effectively stolen from Social Security and veteran beneficiaries. She's doing this primarily for two reasons.

First, corporate CEOs have seen their wages climb since the market collapsed in 2008, and just saw their salaries jump by another 3.9% this year. As well, Social Security and veteran beneficiaries are not going to see an increase in their checks this year because their increases are indexed to a complex inflation formula that says prices aren't going up, even though everyone knows that the price of health care, food, college tuition, etc. are rising.

Senator Warren is doing the right thing.

Seniors and our veterans have been dealing with paltry cost of living increases for some time now. The reason for reduced cost of living increases is tied to congressional efforts to cut federal spending, which really picked up steam after President Reagan's annual budget deficits spiked our national debt (Reagan's borrow and spend policies effectively tripled our national debt).

Unfortunately, rather than looking at what was driving our nation's spending upward - reckless tax cuts for the rich and increased military spending - our nation's lawmakers decided to punt and let a commission come up with plan to cut spending. And they did.

What's presented below explains what happened, and why Elizabeth Warren's legislation is a good thing.

In a few words, we are no longer measuring inflation realistically. In order to understand why let's go back to the early 1990s when Bill Clinton was in the White House.

With Reagan and Bush era policies raising our national debt Washington's elites were once again concerned about government expenditures. Specifically, they were concerned with a national debt that had quadrupled in 12 years. But instead of focusing on rising defense expenditures and foolish tax cuts for the rich policies, policy makers looked to cut other programs and, once again, looked at anticipated social security costs.

Of course, also Congress ignored on-going social security program surpluses, and paid lip service to the trillions the federal government owed the program (now about $2.7 trillion) after decades of raiding social security surpluses. Instead, the U.S. Senate put together the Boskin Commission.

The Boskin Commission knew what they were doing from the beginning. They knew they couldn't suggest that Congress cut benefits outright. This would be political suicide. In order to chip away at expenditures (i.e. Social Security payouts) they would have to find another path. And they did. They focused on reducing mandated cost-of-living-allowances (COLAs) that are granted annually. These inflation-indexed increases were viewed too costly so the commission said, in effect, "Hey, let's play with how we measure inflation. Maybe we can move it downward without anybody noticing."

In effect, the Boskin Commission was going to move the goal posts.

Let's make this clear. The Boskin Commission's real goal wasn't to find a new mouse trap for measuring inflation. It's goal was to find a way to reduce social security payments. And they needed to do it in a way that would confuse everyone enough so the recipients wouldn't notice (or give up trying to figure it out).

Here's how they did it.

All of us know that home prices doubled in a short period of time before the markets collapsed. Anyone who goes food shopping know what's happened to food prices. Then we have insurance premiums, medical costs, co-pays, education and other service fees that we have to pay, especially as government budgets and services are cut back or privatized.

Yet, over the years, the consumer price index (CPI), which measures our nation's inflation rate, has barely budged over the past 20 years. But we also know that our dollar and hourly wages don't buy as much.

In a few words, if we go by the annual CPI numbers we're told to believe that our household costs have increased by an average of 2-3% per year, and even less over the past 7 years.

Do you believe this is the case? Neither do I, and I have the bills to prove it.

I'm sure you do too.

Here's what's been happening.

In simple term the Boskin Commission recommended that the U.S. government use smoke & mirrors to measure inflation. In economic-speak, they urged the government to begin measuring inflation with "hedonic" adjustments. What are hedonic adjustments, you ask? Good question. Let's use a simple purchase to explain how hedonic adjustments work.

Assume you pay $1,000 for a new computer. You might have paid $1,000 five years ago, but your computer today is 2-3 times faster, and has many more gadgets for you to play with. This is where it gets fun.

According to hedonic adjustments, since your computer is twice as fast as your old one the government concludes that you really paid half as much for it. Huh?

Think of it this way. In the government's eyes, because you have two times the computer power your $1000 computer really only cost you $500. What this means is that you got a bargain because you actually paid less for your computer - at least in the eyes of the government. Because other computer purchasers find themselves making similar purchases we now millions of people paying a cheaper price for their computers.

And just like that we now have downward pressure on overall prices.

That, my friends, is how hedonics works.

So you know, the people who figure out inflation use the same hedonic tools when they figure out how much your car or refrigerator cost.

I was perplexed by this method when I first found out about it. So I called the people in Washington who use the method. They're nice people. Many of them have Ph.D.s in economics, or some other advanced degree, so they're really smart too.

They walked me through the computer scenario, and a few others. From a math perspective, the method makes sense, at least on some levels. But you and I know that we are still paying $1,000, right? We feel it in our pocket book.

But the new measuring smoke & mirrors tool doesn't end with hedonics. Check this out.

Because of the Boskin Commission, when the government sees the price of steak go up it assumes that consumers replace steak with chicken, or some other meat-like substance (note: the "core CPI" actually excludes food & energy prices). What this means is that pesky price rises, according to the Boskin Commission, don't count if you don't really want them to count.

But, in the real world, you and I know the price of steak went up. We also know that we paid $1,000 for our computer.

The point here is that with hedonics, substitutions, and many other accounting tricks, the Boskin Commission helped reduce inflation in America to the trickle you now see today.

Like the little boy on the Twilight Zone segment who wished things he didn't like into the cornfield, the Boskin Commission's recommendations have allowed America's policymakers to wish inflation away.

And just like that, America's retirees, veterans, and middle-class wage earners have seen the size of their social security checks, and other raises, stagnate as real prices rose in America. And it's been going on for decades now - all because we needed to pay for tax cuts and our military build up.

This development, in many ways, is not just a massive redistribution of wealth, it's public theft.

So, yeah, Senator Elizabeth Warren isn't really doing our seniors and veterans any favors. She's simply doing what's right.

- Mark

Hat tip to Donna for the Warren link.

Thursday, November 5, 2015


This story on the new Prime Minister of Canada, Justin Trudeau, probably won't get much attention in the United States, but it's worth a look.

- Mark

Hat tip to Kristie for this link.


FYI, these running reality checks will start showing up here on a regular basis.

- Mark

Wednesday, November 4, 2015


After whining so much about their "rough treatment" from CNBC moderators, this is the unflattering reality Republican presidential hopefuls have created for themselves.

President Obama explains the new reality to the GOP presidential hopefuls with this one comment ...

- Mark


President Obama channels President Reagan's call for higher taxes on the rich.

For a longer version of this tax story and our unbalanced tax code click here.

Finally, as governor and president, Ronald Reagan's tax history is more myth than reality, as I discuss here.

- Mark 

Tuesday, November 3, 2015


We're having the second mid-term in my Theory of International Relations class (PS 304). What follows below are some notes to help my students prepare for several of the questions on the mid-term. 

While it's clear that war and conflict are very much a part of our modern world, we can acknowledge that advances have been made. Nation-states do cooperate with one another, and this practice has been picking up steam over the millennium. Specifically, nation-states have learned how to cooperate because of three long-term trends and developments that we don't notice on a daily basis but come to life when we take a long look at history.

LIBERAL REVOLUTION: Contrary to what many pessimists (or "Realists") might want to believe, we have a long series of events and eras that speak to the more positive elements of the human condition. After the Magna Carta and the fight to end slavery (especially by the British), many in the global community embraced the ideas from the Renaissance, the Reformation and the Enlightenment, and worked to develop and promote individual rights and liberty. Fighting for both helped create the modern Liberal Republics that promote treaties and the liberal spirit of cooperation between nation-states today.  

TREATIES & THE SHADOW OF WAR: War has cast such a long shadow over humanity that we've learned to agree to disagree, if for no other reason than we've gotten tired of fighting increasingly destructive and ugly wars. Multi-lateral treaties in 1648 (Westphalia), 1714 (Utrecht), 1815 (Vienna), 1917 (Versailles) and 1945 (Bretton Woods / San Francisco) have forged patterns of cooperation between nation-states. These patterns have maintained a degree of cooperation that otherwise would not exist, and breathed constitutional characteristics into the world's post-war treaties.

TECHNOLOGICAL REVOLUTIONS: As technological advancements have been made we find it much easier and faster to communicate and see one another. This has created problems that many never anticipated. For example, soon after the arrival of the steam train we learned that trains traveling across the continent arrived at uncertain times. They also took longer to arrive when moving west to east. All of this made train schedules both uncertain and even dangerous. Technology forced nation-states to figure out how to cooperate on the issue like time (in this case, leading to the Prime Meridian Conference in 1884) which requires nation-states to work together. 

So, yes, the long roots and driving force(s) of cooperation and institution building between nation-states are tied to the shadow of war, the Liberal Revolutions, and the new realities created by technology. I will discuss the first two only below. 

Before 1776 - when Adam Smith’s The Wealth of Nations was published and the
Declaration of Independence was signed - the Western world was still stuck in a feudal mindset where myths, custom, and tradition dominated what the vast majority of society believed. If someone fell on the floor, in what we now know is an epileptic seizure, anyone in the crowd could be singled out for witchcraft or sorcery. 

As well, most commoners had little say over what they wanted to do when they “grew up” and even less control over who would rule over them. Economic feudalism and political monarchies stifled both individual initiative and political freedom. Custom and tradition, rather than individual acumen and personal talent dominated our social and political environment. 

This would change because of three intertwined developments that helped bring about Liberal Revolution ...

The era known as the Renaissance brought knowledge and the creative spirit back to Europe by reopening the classics to society. St. Francis (1181-1226) and others began to challenge the notion that the world was merely a collection of symbols expressing God’s message, waiting to be unraveled by the priests. Universities were established during the High Middle Ages (1000-1300 AD), creating places where conventional wisdom was discussed and even challenged. 

Later, the Reformation - a succession of wars fought to establish religious conformity and “moral universalism” throughout Europe - helped raise questions about the Catholic Church. These wars would end in 1648 with the signing of the Treaty of Westphalia. It was at this point that individual monarchs declared that it was better to allow one another to determine how people would worship and pray within their borders. 

The key to the Reformation lay in how Martin Luther’s 95 theses (tacked on a church door in 1517) questioned internal church practices. This, in turn, helped create an environment that would lead scholars and others to question the church’s authority, and veracity on many topics. It should come as no surprise that these development would open the door for many feudal customs and traditions to be challenged. 

Finally, the Enlightenment - a period of scientific discovery and philosophical discourse - raised serious questions about our world views. By questioning and disproving church teachings scientists and scholars helped “secularize” our world by illustrating how and why the church could be wrong. For example, when Galileo looked through his telescope and showed that the earth moved the impact was immediate. 

If the church could be wrong about the earth not being the center of the universe could it also be wrong about the divine right to rule? What about original sin? Should one simply accept their station in life? Better yet, what if peasants and others didn’t have to accept their fate in life? Were the monarchs and the aristocrats really the rulers God wanted? 

These were heady questions indeed. 

The Liberal Revolutions - specifically, the Renaissance, the Reformation, and the Enlightenment - would eventually lead to the emergence of new "liberal republics" in America, France and, later, throughout Europe. While it's not readily acknowledged, or even understood, the ideas from the Liberal Revolutions placed a primacy on both liberty and the cooperative spirit that have led to binding multi-lateral treaties since 1648. 

These treaties are the subject of the next section.

The Treaty of Westphalia, 1648

Since the end of World War II the United States has helped u
nderwrite global security. Specifically, what's been called the American Peace - or Pax Americana - has been maintained because the United States openly embraced the creation of multilateral institutions, on many levels (after failing to do so after WWI)

The institutions that were built after WWII (NATO, the United Nations, and those created at Bretton Woods) helped shape diplomacy and maintain order. Perhaps most importantly, while wars have been fought and atrocities committed, there has been no World War III. Just as importantly, the Cold War ended with the Russians deciding against slugging it out, as empires have done in the past when confronted with their demise. 

The Russians saw, as have many other nations, that the halting and even stunted promises of liberty within the post-WWII institutional order provided enough opportunities for them to operate and succeed as an independent nation-state. 

Simply put, in the modern world institutions and treaties matter. Diplomacy and global stability have moved beyond the simple embrace of balance of power, shifting alliances, coercion, and brute force.

This is critical to note because history tells us that global order built on shifting alliances and simple coercion not only break down, but tend to swallow the world into increasingly destructive wars.   

The bloody wars of religion brought on the Protestant Reformation, which reached a climax with the Thirty Years War, which ended with the Treaty of Westphalia in 1648. These wars were followed by new intrigue and the War of Spanish Succession (1701-1714), which ended with the Treaty of Utrecht.

The instability and carnage that occurred during the Napoleonic Wars (1799-1815) was brought about by a new distribution of power, and was finally brought to a close with the Treaty of Vienna (1815). This lead to the Concert of Europe, which is known to history for the stability that it brought to the European continent for almost 100 years. 

But the Treaty of Vienna failed to take into consideration new political realities (especially how Napoleon had planted and inspired new ideas that would swamp the continent). The post-Napoleonic era of European stability would be followed by the ugliness and destruction of World War I, which ended with the signing of the Treaty of Versailles (1917). 

The United States famously failed to participate in the institutions created after WWI, which insured the Treaty of Versailles would be a failed treaty before the ink was dried on the document. The destruction of World War II would follow, which inspired scholars to think of both WWI and WWII as modernity's version of the Thirty Years War. 

All of this is important to understand because we've learned over time, albeit begrudgingly, that strong and binding treaties have an impact. 

Treaties crafted at Westphalia (1648), Utrecht (1713), Vienna (1815), Versailles (1919), and at Bretton Woods (1944), San Francisco (1945) and Potsdam (1945) have helped to establish international rules, protocols, and global patterns that, in many ways, create the functional equivalent of a global constitution (see G. John Ikenberry After Victory).

Established patterns have created expectations that have built - as we discuss in class - islands of order in a sea of anarchy. This doesn't mean that war can (or will) be eradicated. It simply means that the proclivity towards war can be reduced. This can only happen if other nation-states see institutions, and the nation-states that create those institutions, as legitimate. 

Institutional legitimacy today comes only when responsible leaders are prepared to use force with cause. But it also comes when everyone, including the biggest actors, play by the rules established by the treaties and institutions created.

- Mark

Addendum: For the question on Globalism (and Modernization Theory) you can find additional notes by clicking here