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Hybrid New Deal-Military Keynesianism for Iraq?

Sunday, December 16th, 2007

Steve DeAngelis of ERMB had an excellent post on Iraq that I believe has a lot of resonance for historians:

Dealing with Iraq’s Great Depression

“When Americans think about the Great Depression of the 1930s, they think about soup kitchens, unemployment, and Franklin Delano Roosevelt’s New Deal. Those people who managed to remain employed during the depression were considered fortunate. To some extent that is the situation facing people in southern Iraq (the northern Kurdish sector is booming in comparison). The U.S. just announced a new approach for dealing with the lack of jobs and the lack of security in the south. It is a mixture of Roosevelt’s New Deal and Lyndon Baines Johnson’s Great Society programs [“U.S. Plans to Form Job Corps For Iraqi Security Volunteers,” by Karen DeYoung and Amit R. Paley, Washington Post, 7 December 2007]. Once again it is the U.S. military leading the way.

“The U.S. military plans to establish a civilian jobs corps to absorb tens of thousands of mostly Sunni security volunteers whom Iraq’s Shiite-dominated government has balked at hiring into local police forces. The new jobs program marks a sharp departure from one of the most highly touted goals of the so-called Sunni awakening, which was to funnel the U.S.-paid volunteers, many of them former insurgents, into Iraq’s police and military.”

The program aims at alleviating two of the most crucial challenges facing southern Iraq — jobs and security. As DeYoung and Paley report, the program is aimed primarily at Sunni citizens who have been unable to find work under the Shi’ite regime. The program has raised questions, however.

“President Bush and Gen. David H. Patraeus, the U.S. commander in Iraq, have said the volunteers have played a major role in the recent downturn in violence and would provide a key element of local security as U.S. forces draw down. Plans to reconfigure the program raise new questions about the permanence of security and political structures the United States has sought to impose on Iraq.”

The Bush administration’s program seems to be based on three assumptions. First, people need jobs so they can once again feel good about themselves and support their families. Second, jobs help the security situation by eliminating many unhappy and unemployed people from the list of potential insurgent supporters and, by giving them a stake in the future, Sunnis will get involved in the war against the insurgents. And third, the job program reduces sectarian violence by getting Sunni and Shi’ites working side by side.

Read the whole thing here.

The period of the Great Depression and the later postwar occupation is rich with potential lessons and analogies for exercises in state-building in Iraq or elsewhere. Steve mentioned the Civilian Conservation Corps as a model, probably one of the most popular public memories of the New Deal. a program where adolescents and young men of all backgrounds did public works and environmental projects under the supervision of active and retired U.S. Army NCO’s .

Iraq certainly does not lack for oportunities to repair or improve infrastructure, something that would both create jobs and future platforms to facilitate economic growth as well as enmeshing local elites in positive partnerships with coalition forces. My suggestion here, to build on Steve’s New Deal paradigm, would be to complement any physical construction -jobs effort with one of the New Deal’s least appreciated major programs which would be even more appropriate for Iraq today than it was for the United States in the 1930’s, the Reconstruction Finance Corporation.

What makes the RFC, originally created by the Hoover administration but given expanded powers under FDR, different from other New Deal agencies was the focus on reestablishing liquidity and the extension of lines of credit to private banks and businesses on a sound financial basis but one with a realistic adaptation to the conditions of the Depression. This was made possible by the astute judgment of the imposing Texas financial wizard who headed the RFC, Jesse H. Jones. Chairman Jones, historian Jordan Schwarz wrote:

“He could be an expedient lender; frequently he accomodated schemes of dubious creditworthiness, and New Dealers remained suspicious of Jones’ personal coziness with bankers and big business. Ironically, RFC-financed programs such as rural electrification were dear to their hearts and made possible profounder consequences for American society than those of almost any other New Deal program” [1]

Jones’ discernment  of  a borrower’s viability was such that out of the $ 2 billion 1930’s gold dollars in credit extended to banks, local governments, corporations and small business concerns during the Depression, nearly every loan was repaid. More remarkably, Jones disproportionately targeted the relatively undeveloped South and West for the RFC assistance in building networks of finance capitalism that made possible the later Sunbelt Boom of the 1960’s.  In his person, Jones combined a wealth of experience in entrepreneurial capitalism and banking with an intimate “local knowledge” of the political, social and economic conditions giving him a degree of success that made him irreplaceable to FDR.

A RFC on the Euphrates could only work in close collaboration with Iraqis who possess the prized “local knowledge” that we lack – mostly former Iraqi central bank types leavened with key Kurdish and Shiite equivalents with an American holding the pursetrings but the Iraqis vetting borrowers for viability rather than collateral, much the way Jones himself did in the cash-poor South and West. The effort could be enhanced by a separate microloan program, perhaps funded by NGO’s, attached to coalition commands to get smaller enterprises off the ground and help revive local economies.

If great care is exercised, state capitalism in Iraq can become a catalyst for the growth of the liberal markets of actual capitalism.

1. Schwarz, Jordan  The New Dealers:Power Politics in the Age of Roosevelt.  Alfred A. Knopf. New York 1993

Friday, June 15th, 2007


Steve DeAngelis at ERMB recently had an important and thought provoking post that should resonate with anyone who has experienced the imposing conformity of a corporate cubicle. In ” The Tension Between Creativity and Efficiency“, DeAngelis spotlighted an important area of friction as organizations struggle to adapt to macroeconomic shifts created by globalization and the information revolution. While the focus in Steve’s post happened to be corporations, it is a paradigm that applies equally well to public education, the military, intelligence agencies, universities – basically any entity that has a legacy organizational structure from the “mass-man“, ” second wave” era of industrial mass production and Cold War that was so deeply influenced by Tayloristscientific management“.

Specifically, Steve was looking at an article that detailed the implications for the rate of innovation of Six Sigma type programs. Some excerpts:

“The problem, according to the article, is that the culture created by Six Sigma clashes directly with the culture required for innovation.

“Now his successors face a challenging question: whether the relentless emphasis on efficiency had made 3M a less creative company. That’s a vitally important issue for a company whose very identity is built on innovation. After all, 3M is the birthplace of masking tape, Thinsulate, and the Post-it note. It is the invention machine whose methods were consecrated in the influential 1994 best-seller Built to Last by Jim Collins and Jerry I. Porras. But those old hits have become distant memories. It has been a long time since the debut of 3M’s last game-changing technology: the multilayered optical films that coat liquid-crystal display screens. At the company that has always prided itself on drawing at least one-third of sales from products released in the past five years, today that fraction has slipped to only one-quarter. Those results are not coincidental. Efficiency programs such as Six Sigma are designed to identify problems in work processes—and then use rigorous measurement to reduce variation and eliminate defects. When these types of initiatives become ingrained in a company’s culture, as they did at 3M, creativity can easily get squelched. After all, a breakthrough innovation is something that challenges existing procedures and norms. ‘Invention is by its very nature a disorderly process,’ says current CEO George Buckley, who has dialed back many of McNerney’s initiatives. ‘You can’t put a Six Sigma process into that area and say, well, I’m getting behind on invention, so I’m going to schedule myself for three good ideas on Wednesday and two on Friday. That’s not how creativity works.'”

Does that mean that efficiency and creativity must always be at odds? Can the same company establish efficient processes and foster creativity? The article implies that it may be impossible.

….There are a couple of ways that companies can deal with this conundrum. The first is to separate creative portions of a company from process-oriented portions and apply different rules to the different parts. The second way to deal with the dilemma is to automate processes while leaving the people free to be creative. One of the reasons Enterra Solutions has attracted the interest of big companies is that they see the benefits of relieving people from the drudgeries of routine processes. Not only is process automation efficient and effective, even those who must deal with the rule automation process can be creative in how they approach their job. Six Sigma and Lean Six Sigma approaches can be used to drive automated processes without having to change an entire company’s creative culture.”

Read Steve’s post in full here.

I agree with Steve that Six Sigma philosophy has it’s place, particularly in terms of final delivery of a service or good but it is ill-suited for maximizing potential productivity in the sense of generating that which is new. Six Sigma, TQM, ISO 900 and related “zero defects” mentality programs, applied unreasonably and unthinkingly across the board by Jack Welch wannabes, have significant costs. For example:

* The emphasis shifts from finding new opportunities to not making mistakes:

This inculcates a “gotcha” attitude in middle-management and makes employees exceedingly risk-averse, conservative and uncommunicative ( when management is hunting for mistakes that will hurt your career, do you run to the boss with bad news. Or do you keep your head down ?). Moreover, employees don’t actually have to “be” productive so much as they need to “appear” productive, relative to the instruments by which their performance will be measured. This analytically reductionist perspective discourages a systemic approach.

* It creates a focus on the present process, not alternative pathways:

Maximizing the present and applying multiple measurement tools for individual performance leaves little time or resources for ” unproductive” time for speculation, experimentation or planning. People tack to where their incentives are. Moreover, in the hands of middle-management the measurement tools begin to replace common sense in terms of driving the setting of daily objectives and prioritizing the use of time. Independent thought is strongly discouraged.

Creativity required for innovation requires behavior that is inherently “unproductive”. There is an apocryphal story of a woman being led on a tour of the Institute for Advanced Study, who was taken by an office where some old loafer had his feet up on a desk and his eyes were closed, hands serenely behind his head. The woman was indignant until her guide solemnly explained that she ” had been privileged to see the great Albert Einstein at work”. Creativity requires time to explore new things, time to engage in “free play” with co-workers, unstructured time, in other words. In my experience, allowing this to happen is something that appears to cause members of middle-management a significant degree of intense physical pain.

Organizational creativity requires employees who are both autonomous as well as autotelic, which means that their supervisors must be less “managers” and more ” leaders” with a style that emphasizes facilitation, connection, strategic thinking and motivation. A model suitable for flatter, flexible, networked-modular organizations rather than authoritarian hierarchies that implicitly encourages intrinsic motivation to create:

Friday, February 9th, 2007


Steve DeAngelis at ERMB has two very meaty posts up “HBR 2007 Breakthrough Ideas, Part 1” and “HBR 2007 Breakthrough Ideas, Part 2” based on “The HBR List:Breakthrough Ideas for 2007“. Steve gives his insights, links and extensive excerpts on the breakthrough ideas which are:

1. Accidental Influentials
2. Entrepreneurial Japan
3.Brand Magic: Harry Potter Marketing.
4.Algorithms in the Attic
5.The Leader from Hope
6.An Emerging Hotbed of User-Centered Innovation
7.Living With Continuous Partial Attention
8.Borrowing from the PE Playbook
9.When To Sleep On It
10. Here Comes XBRL
11. Innovation and Growth: Size Matters
12. Conflicted Consumers
13. What Sells When Father Knows Best
14. Business in the Nanocosm
15. Act Globally, Think Locally
16. Seeing is Treating
17. The Best Networks Are Really Worknets
18. Why U.S. Healthcare Costs Aren’t Too High
19. In Defense of “Ready, Fire, Aim
20. The Folly of Accountabalism

An impressive density of concepts and commentary in just a couple of medium size posts.

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