Fiscal Management Quotes

Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich. [...] "But we have also," continued the management consultant, "run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying on ship's peanut." [...] "So in order to obviate this problem," he continued, "and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and...er, burn down all the forests. I think you'll all agree that's a sensible move under the circumstances.

Most people who win the lottery are exactly as they were prior within a few years if they are not worse off. The fiscal management skills that lead one to give over daily money for scratch-offs will also cause the new money to vanish.

If," ["the management consultant"] said tersely, “we could for a moment move on to the subject of fiscal policy. . .” “Fiscal policy!" whooped Ford Prefect. “Fiscal policy!" The management consultant gave him a look that only a lungfish could have copied. “Fiscal policy. . .” he repeated, “that is what I said.” “How can you have money,” demanded Ford, “if none of you actually produces anything? It doesn't grow on trees you know.” “If you would allow me to continue.. .” Ford nodded dejectedly. “Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.” Ford stared in disbelief at the crowd who were murmuring appreciatively at this and greedily fingering the wads of leaves with which their track suits were stuffed. “But we have also,” continued the management consultant, “run into a small inflation problem on account of the high level of leaf availability, which means that, I gather, the current going rate has something like three deciduous forests buying one ship’s peanut." Murmurs of alarm came from the crowd. The management consultant waved them down. “So in order to obviate this problem,” he continued, “and effectively revalue the leaf, we are about to embark on a massive defoliation campaign, and. . .er, burn down all the forests. I think you'll all agree that's a sensible move under the circumstances." The crowd seemed a little uncertain about this for a second or two until someone pointed out how much this would increase the value of the leaves in their pockets whereupon they let out whoops of delight and gave the management consultant a standing ovation. The accountants among them looked forward to a profitable autumn aloft and it got an appreciative round from the crowd.

If the case isn't plea bargained, dismissed or placed on the inactive docket for an indefinite period of time, if by some perverse twist of fate it becomes a trial by jury, you will then have the opportunity of sitting on the witness stand and reciting under oath the facts of the case-a brief moment in the sun that clouds over with the appearance of the aforementioned defense attorney who, at worst, will accuse you of perjuring yourself in a gross injustice or, at best, accuse you of conducting an investigation so incredibly slipshod that the real killer has been allowed to roam free. Once both sides have argued the facts of the case, a jury of twelve men and women picked from computer lists of registered voters in one of America's most undereducated cities will go to a room and begin shouting. If these happy people manage to overcome the natural impulse to avoid any act of collective judgement, they just may find one human being guilty of murdering another. Then you can go to Cher's Pub at Lexington and Guilford, where that selfsame assistant state's attorney, if possessed of any human qualities at all, will buy you a bottle of domestic beer. And you drink it. Because in a police department of about three thousand sworn souls, you are one of thirty-six investigators entrusted with the pursuit of that most extraordinary of crimes: the theft of a human life. You speak for the dead. You avenge those lost to the world. Your paycheck may come from fiscal services but, goddammit, after six beers you can pretty much convince yourself that you work for the Lord himself. If you are not as good as you should be, you'll be gone within a year or two, transferred to fugitive, or auto theft or check and fraud at the other end of the hall. If you are good enough, you will never do anything else as a cop that matters this much. Homicide is the major leagues, the center ring, the show. It always has been. When Cain threw a cap into Abel, you don't think The Big Guy told a couple of fresh uniforms to go down and work up the prosecution report. Hell no, he sent for a fucking detective. And it will always be that way, because the homicide unit of any urban police force has for generations been the natural habitat of that rarefied species, the thinking cop.

So severe is the crisis that in 2011 Governor Rick Snyder persuaded the state legislature to grant him broad and unprecedented powers to take control of fiscally unstable local governments and to abrogate union agreements, a highly controversial maneuver that smacks of malevolent paternalism more than sound public management.

How did Japan manage to delay painful and destabilizing change? By employing the so-called Bubble Fix, a term popularized by former Morgan Stanley economist Stephen Roach, whereby central bankers and government officials soothe markets with monetary and fiscal stimulants in the short run in ways that create financial imbalances in the long run, essentially curing bubbles with new ones.

The management of the New York fiscal crisis pioneered the way for neoliberal practices both domestically under Reagan and internationally through the IMF in the 1980s. It established the principle that in the event of a conflict between the integrity of financial institutions and bondholders’ returns, on the one hand, and the well-being of the citizens on the other, the former was to be privileged.

The great irony, then, is that the nation’s most famous modern conservative economist became the father of Big Government, chronic deficits, and national fiscal bankruptcy. It was Friedman who first urged the removal of the Bretton Woods gold standard restraints on central bank money printing, and then added insult to injury by giving conservative sanction to perpetual open market purchases of government debt by the Fed. Friedman’s monetarism thereby institutionalized a régime which allowed politicians to chronically spend without taxing. Likewise, it was the free market professor of the Chicago school who also blessed the fundamental Keynesian proposition that Washington must continuously manage and stimulate the national economy. To be sure, Friedman’s “freshwater” proposition, in Paul Krugman’s famous paradigm, was far more modest than the vast “fine-tuning” pretensions of his “salt-water” rivals. The saltwater Keynesians of the 1960s proposed to stimulate the economy until the last billion dollars of potential GDP was realized; that is, they would achieve prosperity by causing the state to do anything that was needed through a multiplicity of fiscal interventions. By contrast, the freshwater Keynesian, Milton Friedman, thought that capitalism could take care of itself as long as it had precisely the right quantity of money at all times; that is, Friedman would attain prosperity by causing the state to do the one thing that was needed through the single spigot of M1 growth.

The larger Europe grows, the more diverse must be the forms of co-operation it requires. Instead of a centralised bureaucracy, the model should be a market — not only a market of individuals and companies, but also a market in which the players are governments. Thus governments would compete with each other for foreign investments, top management and high earners through lower taxes and less regulation. Such a market would impose a fiscal discipline on governments because they would not want to drive away expertise and business. It would also help to establish which fiscal and regulatory policies produced the best overall economic results. No wonder socialists don't like it.

In 2036, the USA elected an over-the-top, unapologetic fundamentalist president named Andrew Handel. Yes, that Handel. During his term, he tried to ban election of non-Christians to any public post, and tried to remove the constitutional separation between church and state. He was nominated, supported, and elected based on his religious views, rather than on his political or fiscal expertise. And of course, he appointed persons of similar persuasion to every post he could manage, in some cases blatantly ignoring laws and procedures. He and his cronies rammed through far-right policies with no thought for consequences. In a number of cases, when challenged on the results, he declared that God would not allow their just cause to fail. He eventually brought the USA to its knees in an economic collapse that made the 2008 recession look like a picnic in the park.

Pointsman is the only one here maintaining his calm. He appears unruffled and strong. His lab coats have even begun lately to take on a Savile Row serenity, suppressed waist, flaring vents, finer material, rather rakishly notched lapels. In this parched and fallow time, he gushes affluence. After the baying has quieted down at last, he speaks, soothing: “There’s no danger.” “No danger?” screams Aaron Throwster, and the lot of them are off again muttering and growling. “Slothrop’s knocked out Dodson-Truck and the girl in one day!” “The whole thing’s falling apart, Pointsman!” “Since Sir Stephen came back, Fitzmaurice House has dropped out of our scheme, and there’ve been embarrassing inquires down from Duncan Sandys—“ “That’s the P.M.’s son-in-law, Pointsman, not good, not good!” “We’ve already begun to run into a deficit—“ “Funding,” IF you can keep your head, “is available, and will be coming in before long… certainly before we run into any serious trouble. Sir Stephen, far from being ‘knocked out,’ is quite happily at work at Fitzmaurice House, and is At Home there should any of you wish to confirm. Miss Borgesius is still active in the program, and Mr. Duncan Sandys is having all his questions answered. But best of all, we are budgeted well into fiscal ’46 before anything like a deficit begins to rear its head.” “Your Interested Parties again?” sez Rollo Groast. “Ah, I noticed Clive Mossmoon from Imperial Chemicals closeted with you day before yesterday,” Edwin Treacle mentions now. “Clive Mossmoon and I took an organic chemistry course or two together back at Manchester. Is ICI one of our, ah, sponsors, Pointsman?” “No,” smoothly, “Mossmoon, actually, is working out of Malet Street these days. I’m afraid we were up to nothing more sinister than a bit of routine coordination over the Schwarzkommando business.” “The hell you were. I happen to know Clive’s at ICI, managing some sort of polymer research.” They stare at each other. One is lying, or bluffing, or both are, or all of the above. But whatever it is Pointsman has a slight advantage. By facing squarely the extinction of his program, he has gained a great of bit of Wisdom: that if there is a life force operating in Nature, still there is nothing so analogous in a bureaucracy. Nothing so mystical. It all comes down, as it must, to the desires of men. Oh, and women too of course, bless their empty little heads. But survival depends on having strong enough desires—on knowing the System better than the other chap, and how to use it. It’s work, that’s all it is, and there’s no room for any extrahuman anxieties—they only weaken, effeminize the will: a man either indulges them, or fights to win, und so weiter. “I do wish ICI would finance part of this,” Pointsman smiles. “Lame, lame,” mutters the younger Dr. Groast. “What’s it matter?” cries Aaron Throwster. “If the old man gets moody at the wrong time this whole show can prang.” “Brigadier Pudding will not go back on any of his commitments,” Pointsman very steady, calm, “we have made arrangements with him. The details aren’t important.” They never are, in these meetings of his.

I will show that this spectacular increase in inequality largely reflects an unprecedented explosion of very elevated incomes from labor, a veritable separation of the top managers of large firms from the rest of the population. One possible explanation of this is that the skills and productivity of these top managers rose suddenly in relation to those of other workers. Another explanation, which to me seems more plausible and turns out to be much more consistent with the evidence, is that these top managers by and large have the power to set their own remuneration, in some cases without limit and in many cases without any clear relation to their individual productivity, which in any case is very difficult to estimate in a large organization. This phenomenon is seen mainly in the United States and to a lesser degree in Britain, and it may be possible to explain it in terms of the history of social and fiscal norms in those two countries over the past century. The tendency is less marked in other wealthy countries (such as Japan, Germany, France, and other continental European states), but the trend is in the same direction. To expect that the phenomenon will attain the same proportions elsewhere as it has done in the United States would be risky until we have subjected it to a full analysis—which unfortunately is not that simple, given the limits of the available data.

Politicians are the only people in the world who create problems and then campaign against them. Have you ever wondered why, if both the Democrats and Republicans are against deficits, we have deficits? Have you ever wondered why if all politicians are against inflation and high taxes, we have inflation and high taxes? You and I don’t propose a federal budget. The president does. You and I don’t have Constitutional authority to vote on appropriations. The House of Representatives does. You and I don’t write the tax code. Congress does. You and I don’t set fiscal policy. Congress does. You and I don’t control monetary policy. The Federal Reserve Bank does. One hundred senators, 435 congressmen, one president and nine Supreme Court justices — 545 human beings out of 235 million — are directly, legally, morally and individually responsible for the domestic problems that plague this country. I excused the members of the Federal Reserve Board because that problem was created by the Congress. In 1913, Congress delegated its Constitutional duty to provide a sound currency to a federally chartered by private central bank. I exclude all of the special interests and lobbyists for a sound reason. They have no legal authority. They have no ability to coerce a senator, a congressman or a president to do one cotton-picking thing. I don’t care if they offer a politician $1 million in cash. The politician has the power to accept or reject it. No matter what the lobbyist promises, it is the legislators’ responsibility to determine how he votes. Don’t you see the con game that is played on the people by the politicians? Those 545 human beings spend much of their energy convincing you that what they did is not their fault. They cooperate in this common con regardless of party. What separates a politician from a normal human being is an excessive amount of gall. No normal human being would have the gall of Tip O’Neill, who stood up and criticized Ronald Reagan for creating deficits. The president can only propose a budget. He cannot force the Congress to accept it. The Constitution, which is the supreme law of the land, gives sole responsibility to the House of Representatives for originating appropriations and taxes. Those 545 people and they alone are responsible. They and they alone should be held accountable by the people who are their bosses — provided they have the gumption to manage their own employees.

...the centrality of competitiveness as the key to growth is a recurrent EU motif. Two decades of EC directives on increasing competition in every area, from telecommunications to power generation to collateralizing wholesale funding markets for banks, all bear the same ordoliberal imprint. Similarly, the consistent focus on the periphery states’ loss of competitiveness and the need for deep wage and cost reductions therein, while the role of surplus countries in generating the crisis is utterly ignored, speaks to a deeply ordoliberal understanding of economic management. Savers, after all, cannot be sinners. Similarly, the most recent German innovation of a constitutional debt brake (Schuldenbremse) for all EU countries regardless of their business cycles or structural positions, coupled with a new rules-based fiscal treaty as the solution to the crisis, is simply an ever-tighter ordo by another name. If states have broken the rules, the only possible policy is a diet of strict austerity to bring them back into conformity with the rules, plus automatic sanctions for those who cannot stay within the rules. There are no fallacies of composition, only good and bad policies. And since states, from an ordoliberal viewpoint, cannot be relied upon to provide the necessary austerity because they are prone to capture, we must have rules and an independent monetary authority to ensure that states conform to the ordo imperative; hence, the ECB. Then, and only then, will growth return. In the case of Greece and Italy in 2011, if that meant deposing a few democratically elected governments, then so be it. The most remarkable thing about this ordoliberalization of Europe is how it replicates the same error often attributed to the Anglo-American economies: the insistence that all developing states follow their liberal instruction sheets to get rich, the so-called Washington Consensus approach to development that we shall discuss shortly. The basic objection made by late-developing states, such as the countries of East Asia, to the Washington Consensus/Anglo-American idea “liberalize and then growth follows” was twofold. First, this understanding mistakes the outcomes of growth, stable public finances, low inflation, cost competitiveness, and so on, for the causes of growth. Second, the liberal path to growth only makes sense if you are an early developer, since you have no competitors—pace the United Kingdom in the eighteenth century and the United States in the nineteenth century. Yet in the contemporary world, development is almost always state led.

The economic theory propounded by John Maynard Keynes in the 1930s dwelled heavily on the role of governments vis-à-vis cycles. Keynesian economics focuses on the role of aggregate demand in determining the level of GDP, in contrast with earlier approaches that emphasized the role of the supply of goods. Keynes said governments should manage the economic cycle by influencing demand. This, in turn, could be accomplished through the use of fiscal tools, including deficits. Keynes urged governments to aid a weak economy by stimulating demand by running deficits. When a government’s outgo—its spending—exceeds its income—primarily from taxes—on balance it puts funds into the economy. This encourages buying and investing. Deficits are stimulative, and thus Keynes considered them helpful in dealing with a weak economy. On the other hand, when economies are strong, Keynes said governments should run surpluses, spending less than they take in. This removes funds from the economy, discouraging spending and investment. Surpluses are contractionary and thus an appropriate response to booms. However, the use of surpluses to cool a thriving economy is little seen these days. No one wants to be a wet blanket when the party is going strong. And spending less than you bring in attracts fewer votes than do generous spending programs. Thus surpluses have become as rare as buggy whips.

Moreover, the sheer size and complexity of imperial power and the expanded role of the military make it difficult to impose fiscal discipline and accountability. Corruption becomes endemic, not only abroad but at home. The most dangerous type of corruption for a democracy is measured not in monetary terms alone but in the kind of ruthless power relations it fosters in domestic politics.

Patrick Marsh's remarkable ability to manage and maintain budget surpluses throughout his career as a city manager underscores his financial acumen and responsible fiscal management.

Interestingly, such a change is not illegal. An explanation might appear in a footnote to the financial statements, but then again it might not. Maybe you noticed in chapter 6 that the Hewlett-Packard footnote regarding revenue recognition policy mentioned 2009 and 2010. That’s because later in that same section the company describes what it did differently in 2008: For fiscal 2008 . . . HP allocated revenue to each element based on its relative fair value, or for software, based on VSOE of fair value. In the absence of fair value for a delivered element, HP first allocated revenue to the fair value of the undelivered elements and the residual revenue to the delivered elements . . . .

In the course of the 1960s, the left adopted almost wholesale the arguments of the right,” observed Daniel Patrick Moynihan, a domestic policy adviser to all three of the decade’s presidents. “This was not a rude act of usurpation, but rather a symmetrical, almost elegant, process of transfer.” Exaggerating for effect—but not to the point of inaccuracy—Moynihan remembered that by decade’s end, “an advanced student at an elite eastern college could be depended on to avow many of the more striking views of the Liberty League and its equivalents in the hate-Roosevelt era; for example that the growth of federal power was the greatest threat to democracy, that foreign entanglements were the work of demented plutocrats, that government snooping (by the Social Security Administration or the United States Continental Army Command) was destroying freedom, that the largest number of functions should be entrusted to the smallest jurisdictions, and so across the spectrum of this viewpoint.”2 Driven primarily by the expanding war in Vietnam, this new current on the left took up individualistic and anti-statist themes that were once the province of the right. Another part of this convergence was the rise of the economics profession. The new economics appeared a success on its own terms; growth had picked up across the Kennedy years. By 1965, GNP had increased for five straight years. Unemployment was down to 4.9 percent, and would soon drop below the 4 percent goal of full employment. As James Tobin reflected, “economists were riding the crest of a wave of enthusiasm and self-confidence. They seemed, after all, to have some tools of analysis and policy other people didn’t have, and their policy seemed to be working.”3 With institutional economics a vanquished force, most economists accepted the tenets of the neoclassical revolution: individuals making rational choices subject to the incentives created by supply and demand. Approaching policy with an economic lens cut across established political lines, which were often the creation of brokered coalitions, habit, or historical precedent. Economic analysis was at once disruptive, since it failed to honor these accidental accretions, and familiar, since it spoke a market language resonant with business-friendly political culture.4 Amid this ideological confluence, Friedman continued his dour rumblings and warnings. Ignoring the positive trends in basic indicators of economic health, from inflation to unemployment to GDP, he argued fiscal demand management was misguided, warned Bretton Woods was about to collapse, predicted imminent inflation, and castigated the Federal Reserve’s basic approach. Friedman’s quixotic quest—and the media attention it generated—infuriated many of his peers. Friedman, it seemed, was bent on fixing economic theories and institutions that were not broken.

I once worked with an executive team that needed help with their prioritization. They were struggling to identify the top five projects they wanted their IT department to complete over the next fiscal year, and one of the managers was having a particularly hard time with it. She insisted on naming eighteen “top priority” projects. I insisted that she choose five. She took her list back to her team, and two weeks later they returned with a list she had managed to shorten—by one single project! (I always wondered what it was about that one lone project that didn’t make the cut.) By refusing to make trade-offs, she ended up spreading five projects’ worth of time and effort across seventeen projects. Unsurprisingly, she did not get the results she wanted. Her logic had been: We can do it all. Obviously not. It is easy to see why it’s so tempting to deny the reality of trade-offs. After all, by definition, a trade-off involves two things we want. Do you want more pay or more vacation time? Do you want to finish this next e-mail or be on time to your meeting? Do you want it done faster or better?

It’s also worth noting that getting more resources will be perceived as recognition or a reward. Leadership should publicly celebrate managers who are actively improving their operational efficiency, for example by coming in under budget at the end of the fiscal year or “giving back” headcount allocation.

A bit of technical debt is natural, particularly at smaller companies where it makes more fiscal sense to move quickly; but there are some points where technical debt becomes crippling for development and releases, and makes a codebase unstable.

Despite claims that these radical policy changes were driven by fiscal conservatism—i.e., the desire to end big government and slash budget deficits—the reality is that government was not reducing the amount of money devoted to the management of the urban poor. It was radically altering what the funds would be used for. The dramatic shift toward punitiveness resulted in a massive reallocation of public resources. By 1996, the penal budget doubled the amount that had been allocated to AFDC or food stamps.100 Similarly, funding that had once been used for public housing was being redirected to prison construction. During Clinton’s tenure, Washington slashed funding for public housing by $17 billion (a reduction of 61 percent) and boosted corrections by $19 billion (an increase of 171 percent), “effectively making the construction of prisons the nation’s main housing program for the urban poor.”101 Clinton

The resulting financial overhead consists of claims on the economy’s actual means of production. Yet most people think of these bonds, bank loans and stocks and creditor claims as wealth, not its antithesis on the debit side of the balance sheet. This inside-out doublethink is a precondition for the bubble economy to be applauded by the mass media, keeping its corrosive momentum expanding. From the corporate sphere and real estate to personal budgets, the distinguishing feature over the past half-century has been the rise in debt/equity and debt/income ratios. Just as debt leveraging has hiked corporate break-even costs of doing business, so the cost of living has been increased as homes and office buildings have been bid up on mortgage credit. “Creating wealth” in a debt-financed way makes economies high-cost, exacerbated by the tax shift onto labor and consumers instead of capital gains and “free lunch” rent. These financial and fiscal policies have enabled financial managers to siphon off the industrial profits that were expected to fund capital formation to increase productivity and living standards. The

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The management of the New York fiscal crisis pioneered the way for neoliberal practices both domestically under Reagan and internationally through the IMF (international monetary fund) in the 1980s. It established the principle that in the event of a conflict between the integrity of financial institutions , on one hand , and the well-being of the citizens on the other, the former was to be privileged .it emphasized that the role of the government was to create a good business climate rather than look to the needs and well-being of the popualtion at large.

Es reicht, über die Geschäfte des Unternehmens im Bilde zu sein, dank erwiesener Ertragskraft, hoher Kapitalrenditen, niedriger Schulden und exquisiter Produkte beruhigt der Zukunft entgegenzusehen, die Gewissheit zu haben, dass fähige Manager am Drücker sitzen, und in ein Unternehmen zu investieren, das generell hoch im Kurs steht.

MANAGING GOD’S MONEY Honor the Lord with your wealth, with the firstfruits of all your crops; then your barns will be filled to overflowing, and your vats will brim over with new wine. Proverbs 3:9–10 This concept of fiscal responsibility was not lost on me as governor of Alaska. That’s why I used my line-item veto to cut spending by almost 10 percent. I rejected a pay raise. (As mayor, I took a voluntary pay cut.) I invested billions of dollars in state savings. I forward-funded education. See, I knew the resources were not mine to squander and that I had to do right by the people who hired me. Alaska reaped the benefits of that fiscal responsibility: during my tenure, both Standard & Poor’s and Moody’s upgraded Alaska’s credit rating. Our politicians in Washington should be so wise with taxpayer dollars because what’s good for an individual, family, and state is also good for a nation; God’s principles apply across the board. Wasteful spending that robs the American people—like $500,000 to study shrimp on a treadmill, or subsidizing the annual National Cowboy Poetry Gathering in Senator Harry Reid’s state of Nevada—doesn’t seem to qualify as the fiscal responsibility this Scripture describes. And funding Planned Parenthood certainly does not honor God—fiscally or morally. SWEET FREEDOM IN Action What’s in your hand is not yours. It’s a loan. God expects you to be obedient and wise with what He’s allowed you to manage. Today, honor Him for His blessings and pray America does the same.

Stop and think about it: even just leveling the playing field with China for a decade would be the equivalent of one-fifth of our national debt (and would have been one-third of our debt had we not elected the community organizer). You add in several hundred billion a year from putting OPEC in line, hundreds of billions from negotiating properly with the many other countries that are ripping us off, root out the hundreds of billions of incredible fraud that occur every year (more on that later), and now we have a debt problem America can manage—one where we can attack waste and abuse and whittle down the remaining debt to get our fiscal house in order. So that’s the first step: bringing home the hundreds of billions of dollars that the petro thugs at OPEC and our enemy China steal from us every single year—and then go after all of the others.

As he had learned during the formative years coming up, you really didn’t have to sweat the work—it just sort of flowed around you, nothing but meetings, talking heads, and staff work delegated down the food chain. The other stuff was out of the senior manager’s playbook: Once a year, either propose an amorphous new “program,” or close down an existing program in a display of efficiency and fiscal rectitude; be sure to fire one or more struggling underlings each quarter to prove you’re a leader; and know that there is no limit to obsequiousness and flummery when dealing with superiors. It was really quite easy. The

The key architects of the nation’s economic policy in the Clinton era (Greenspan, Rubin, and Summers) allowed the build-up of forces that would eventually blow the housing and banking industries sky-high. These forces were then multiplied by the reckless fiscal policy of the Bush Administration that enlarged the size of the national debt and set the stage for an economic train wreck.

Over Europe as a whole, alterations in state control of capital and of coercion between AD 900 and the present have followed two parallel arcs. At first, during the age of patrimonialism, European monarchs generally extracted what capital they needed as tribute or rent from lands and populations that lay under their immediate control - often within stringent contractual limits on the amounts they could demand. In the time of brokerage (especially between 1400 and 1700 or so), they relied heavily on formally independent capitalists for loans, for management of revenue-producing enterprises, and for collection of taxes. By the eighteenth century, however, the time of nationalization had come; many sovereigns were incorporating the fiscal apparatus directly into the state structure, and drastically curtailing the involvement of independent contractors. The last century or so, the age of specialization, has brought a sharper separation of fiscal from military organization and an increasing involvement of states in the oversight of fixed capital. On the side of coercion, a similar evolution took place. During the period of patrimonialism, monarchs drew armed force from retainers, vassals, and militias who owed them personal service - but again within significant contractual limits. In the age of brokerage (again especially between 1400 and 1700) they turned increasingly to mercenary forces supplied to them by contractors who retained considerable freedom of action. Next, during nationalization, sovereigns absorbed armies and navies directly into the state's administrative structure, eventually turning away from foreign mercenaries and hiring or conscripting the bulk of their troops from their own citizenries. Since the mid-nineteenth century, in a phase of specialization, European states have consolidated the system of citizen militaries backed by large civilian bureaucracies, and split off police forces specialized in the use of coercion outside of war. By the nineteenth century, most European states had internalized both armed forces and fiscal mechanisms; they thus reduced the governmental roles of tax farmers, military contractors, and other independent middlemen. Their rulers then continued to bargain with capitalists and other classes for credit, revenues, manpower, and the necessities of war. Bargaining, in its turn, created numerous new claims on the state: pensions, payments to the poor, public education, city planning, and much more. In the process, states changed from magnified war machines into multiple-purpose organizations. Their efforts to control coercion and capital continued, but in the company of a wide variety of regulatory, compensatory, distributive, and protective activities.

These conditions were all provided for by the Boomers’ elders, who worked and saved to ensure that the fiscal house was in reasonable order when it was passed down. Doing so required older generations to tax themselves at rates that no politician today, however far Left, would dare propose. When possible, it was pay as you go, so unlike more recent wars, the Korean War was substantially financed out of current tax receipts, as were many of the great infrastructure projects, whose costs were overwhelmingly borne by earlier generations even though later generations would reap so much of their benefit. In cases where no level of tax could balance the budget, as was the case with World War II, prior generations retired the debt as quickly as possible. Motivated by fiscal probity, Americans paid extraordinary taxes for two decades, with the highest marginal rate a downright confiscatory 94 percent in 1945 (against which today’s 39.6 percent, the source of so much present angst, seems modest).17 The result of these sacrifices was that, by the 1960s, World War II debt had been reduced to a manageable size. Taxes could therefore be lowered, though the top rate remained a hefty 70 percent.

Video stores invented a new kind of independent director that became so pervasive it instantly became a caricature: the fiscally insolvent, vociferously unglamorous dude (and it was always a dude) who used his video store experience to build an encyclopedic, unorthodox, pretentious cinematic worldview. The 1995 coming-of-age comedy Kicking and Screaming includes a minor character who manages a video store while preparing to direct his own feature film, yet plans to continue working in the video store after his movie is released so that he can properly stock it on the shelves.

From where most hospital managers sit, Disney looks like a picnic compared to the fiscal, legal, and regulatory nightmare they face every day in a high-risk environment over which they have very little of the kind of control they would have at Disney.

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Risk aversion has been a recurring theme in economic policymaking, particularly across many African nations. For instance, numerous governments have shown reluctance to pursue bold economic reforms that could spur investment and accelerate industrialization. Instead, they often opt for conservative fiscal strategies aimed at preserving short-term stability rather than fostering long-term progress. A prime example lies in the region's approach to managing state-owned enterprises (SOEs). Despite clear and widespread evidence that many SOEs are inefficient, deeply indebted, and a strain on national budgets, comprehensive reforms—such as restructuring or privatization—have been largely avoided. This hesitation is often driven by fears of job losses, political fallout, and resistance from labor unions, leading to stagnation even as these enterprises continue to operate at significant deficits.

Some public pension plans are responding to the continued disappointing returns. The California Public Sector Retirement System (CalPERS) is often regarded as a thought leader among other pension funds, and with over $300 billion in assets it is one of the largest institutional investors in the world. In September 2014 it announced (CalPERS 2014) the elimination of hedge funds from its portfolio, concluding that the cost of investing wasn't justified by the returns. One interesting disclosure was that in the most recent fiscal year through June 2014, CalPERS had paid $135 million in fees on a $4 billion portfolio that earned 7.1%. The approximately $280 million in investment returns ($4 billion × 7.1%) means that for every $2 in returns, it paid away a third dollar in fees. Of the gross returns (i.e., before fees), two-thirds went to CalPERS and one-third to the hedge fund managers. When you consider that it's possible to invest in equity index funds for less than 0.1%, this division of investment profits between the provider of capital and the managers must have appeared as absurd to CalPERS as it does to everyone else.

These policies would come back to haunt Europe in the aftermath of the 2008 collapse. Instead of the vigorous, countercyclical fiscal, monetary, and debt relief policies called for in the wake of a 1929-scale crash, Europe’s institutions promoted austerity reminiscent of the post–World War I era. The debt and deficit limits of Maastricht precluded strong fiscal stimulus, and the government of Angela Merkel resisted emergency waivers. Germany, an export champion, which in effect had an artificially cheap currency in the euro, profited from other nations’ misery. Germany could prosper by running a large export surplus (equal to almost 10 percent of its GDP), but not all nations can have surpluses. The European Central Bank, which reported to nineteen different national masters that used the euro, had neither the tools nor the mandate available to the US Federal Reserve. The ECB did cut interest rates, but it did not engage in the scale of credit creation pursued by the Fed. The Germans successfully resisted any Europeanizing of the sovereign debt of the EU’s weaker nations, pressing them instead to regain the confidence of capital markets by deflating. Sovereign debt financing by the ECB went mainly to repay private and state creditors, not to rekindle growth. Thus did “fortress Europe,” which advocates and detractors circa 1981 both saw as a kind of social democratic alternative to the liberal capitalism of the Anglo-Saxon nations, replicate the worst aspects of a global system captive to the demands of speculative private capital. The Maastricht constitution not only internalized those norms, but enforced them. The dream of managed capitalism on one continent became a laissez-faire nightmare—not laissez-faire in the sense of no rules, but rather rules structured to serve corporations and banks at the expense of workers and citizens. The fortress became a brig. There was plenty to criticize in the US response to the 2008 collapse—too small a stimulus, too much focus on deficit reduction, too little attention to labor policy, too feeble a financial restructuring—but by 2016, US unemployment had come back down to less than 5 percent. In Europe, it remained stuck at more than 10 percent, with all of the social dynamite produced by persistent joblessness.

Despite claims that these radical policy changes were driven by fiscal conservatism...the reality is that government was not reducing the amount of money devoted to the management of the urban poor. It was radically altering what the funds would be used for....Funding that had once been once used for public housing was being redirected to prison construction.

As he had learned during the formative years coming up, you really didn’t have to sweat the work—it just sort of flowed around you, nothing but meetings, talking heads, and staff work delegated down the food chain. The other stuff was out of the senior manager’s playbook: Once a year, either propose an amorphous new “program,” or close down an existing program in a display of efficiency and fiscal rectitude; be sure to fire one or more struggling underlings each quarter to prove you’re a leader; and know that there is no limit to obsequiousness and flummery when dealing with superiors. It was really quite easy.

DATE: August 13, 1992 TO: Senior Managing Directors, Managing Directors, Associate Directors FROM: Alan C. Greenberg You are correct! It is exciting to be associated with Bear Stearns. The first six weeks of our new fiscal year have been a continuation of last year’s record-breaking performance. Top talent continues to join us and it looks like our head count will soon exceed the number we employed in October, 1987.

The variables which were apt for management by central authorities were interest rates and taxation, which he proposed that governments should adjust in order to stimulate investment and to seek full employment. However, he said little of emergency public works, and nothing about fiscal methods of demand management. He did not recommend increasing the government’s current expenditure by running a budget deficit to meet a deficiency of demand. He gave no encouragement to profligate finance ministers. He urged that additional government expenditure should be on capital account and financed from a separate capital budget while so far as possible the regular budget should be kept in balance. He suggested that full employment might be maintained by redistribution of income. If wealth was more equitably dispersed in the population, effective demand would be stimulated and would thus help capital growth. As the scarcity of capital diminished, investors would be rewarded less. He never believed that state planning would eliminate economic instability. He saw national economies as inherently wobbling: they were susceptible to rational management, but with irrational elements.73

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