Apr 7 2013

The Life of a Tortoise

A wild tortoise who lives near the cabin where we were staying in the high desert above Yucca Valley, CA has learned that people will give him lettuce.

He comes out when he hears people because he likes lettuce. There’s only just enough plant life for survival in those parts so it’s easy to see why he’d be tempted.

He’s been living there for at least 30 years and has a female consort who we didn’t see. Maybe she didn’t come out because she’s shy, more likely because the weather wasn’t really hot enough yet, or perhaps it was because he told her not to. He has a rival, a bigger fellow, with whom he battles for control of the territory and access to the female. The way battle works for tortoises is they try to flip each other over. An upside-down tortoise has no way to right itself and soon dies.

These battles must be noisy. The tortoise hissed loudly if we did not give him the next piece of lettuce as fast as he wanted. I expect he’d look even more menacing if the issue was survival.

He usually loses the battles because he’s smaller than the interloper, but not always. Our landlady once found both of them on their backs. She checks on them many times a day when the weather is hotter and had to right the home tortoise five times one day. She has repeatedly taken the interloper several miles away in her car but he always comes back.

Apr 6 2013

Opposing Senate Resolution 65 re Iran & Israel

Please, everyone, join me in urging your Senators to defeat Senate Resolution 65 which would commit us to a disastrous war with Iran that would not even be entered into by our own decision. Use my letter below as a base if it helps. I’m sending a slightly different version to my other Senator, Angus King, because he has not sponsored the Resolution.

With these links you can get your Senators’ email address and if they sponsor S.Res.65 as well as its text.

Dear Senator Collins,

With utmost seriousness I urge you to withdraw your support for, and in fact work to defeat Senate Resolution 65.

S.Res. 65’s conclusion, “if the Government of Israel is compelled to take military action in self-defense, the United States Government should stand with Israel and provide diplomatic, military, and economic support to the Government of Israel” would commit us to war with Iran whenever Israel decides. It would not be our Government but Israel’s that decides whether or not to invade Iran.

Although S.Res.65 ends: “Nothing in this resolution shall be construed as an authorization for the use of force or a declaration of war”, that is exactly what it is. If the Government of Israel decides to strike Iran, S.Res.65 would commit us, too.

War on Iran is very much against our interests. As former Secretary of Defense (2006-2011) Robert Gates, said in a speech on October 3 last year: “The results of an American or Israeli military strike on Iran could, in my view, prove catastrophic, haunting us for generations … An attack would make a nuclear-armed Iran inevitable. They would just bury the program deeper and make it more covert.”

Just like the claim that Iraq had weapons of mass destruction, the claim that Iran is making nuclear weapons is false. US Director of National Intelligence James Clapper told the Senate on March 12 this year: “We do not know if Iran will eventually decide to build nuclear weapons”. He said Iran is not enriching to weapons grade and we could quickly detect it if they do. Inspectors at the International Atomic Energy Agency who monitor Iran’s nuclear sites say the same thing.

I care deeply about this both as an American and a parent. I proudly support our son’s service in the military. I believe you care about him, too. Do not blindly commit him to a war that is against our interests and would not even be entered into by our own decision.

Respectfully,

Feb 10 2013

Mr Economy’s Paralyzing Stroke

Finance is like the circulatory system distributing oxygen and nutrients through the human body, stabilizing its temperature, and so on. It’s prone to strokes. What led to Mr Economy’s massive one in 2007? Will he have more? How severe will they be? And will he ever recover from the paralysis that one caused?

Our economy depends on finance to flow. Unfortunately, Washington has the wrong model. When the flow stopped in 2007 they applied giant plungers, TARP and Quantitative Easing, to what they imagine is a blocked financial toilet. Not surprisingly, the flow has not been restored.

To understand what led to the cerebrovascular accident and what risk factors to change, we must first know the purpose of finance, what it should do, and its basic mechanisms. Its purpose is to help people save, manage, and raise money. What it should do is allocate capital where it will have most value and efficiently reallocate risk. Its mechanisms are securities, credit and insurance.

We need to know how those mechanisms work to understand how and why the circulation of finance got interrupted.

Securities can be bought and sold. Their traditional function is for commercial enterprises to raise new capital from investors who seek income and/or capital gain. Their traditional categories are equity and debt. Equity securities represent fractional ownership of the issuer, debt securities a loan. Debt securities typically require regular interest payments and the issuer must repay the loan. Equity securities are not entitled to payment but may receive a periodic share of the issuer’s profits. Equity owners hope the value of the issuer, and therefore their securities, will increase.

Credit has traditionally been supplied by bank loans governed by an agreement between issuer and borrower. Those loans could not be traded. The issuer received interest payments for the use of their capital and protected against failure to repay with a claim on the borrower’s assets, i.e., collateral.

Insurance transfers the risk of a loss from one entity to another in exchange for a payment. The insured accepts a definite small loss in the form of their payment to the insurer in return for compensation in the uncertain event of a larger financial loss.

Several things changed in the past three decades. There was a great increase in securitization of what was originally credit. Security, credit and insurance transactions got combined in new and ever more complex ways. Financial regulation was relaxed and funding of regulatory oversight was cut.

Mortgages (i.e., credit) were bought in bulk, repackaged and resold as new types of securities, CDOs, Collateralized Debt Obligations, Re-REMICs, Re-securitizations of Real Estate Mortgages, ABS, Asset-Backed Securities, MBS, Mortgage-backed Securities and etc. Banks could now originate more mortgages because the ones they sold were no longer on their balance sheet. Buyers of mortgage-backed securities could pay for them with money borrowed against other securities as collateral and hope to resell them for a quick profit. They could insure against their collateral’s possible loss of value. And so on and so on.

That increased complexity accelerated the financial system’s growth but also made it more fragile, which increased risk for the overall economy. Issuance of these new kinds of derivative securities (chains of transactions derived from an asset) exploded from less than $100B in 2000 to more than $500B in 2007. That’s when the uber-stimulated financial system cratered and Mr Economy had his paralyzing stroke.

Financing , refinancing and securitizing doubled household debt from 48% of GDP in 1980 to 99% in 2007. Most of that increase was in residential mortgages, up from 34% to 79% of GDP.

Financial services grew not just from credit intermediation. Management fees grew as people switched from owning individual securities to managed funds, transferred their assets to professional managements, traded more, and as asset values increased. Only 25% of household equity holdings were professionally managed in 1980. That more than doubled to 53% by 2007.

The growth in insurance was mainly in new kinds of insurance associated with securitization.

Earnings of financial services employees grew rapidly along with the financial sector’s growth. In 1980, they typically earned about the same as their counterparts in other industries. By 2006, they earned an average of 70% more.

The increase in household debt and associated derivative securities drove the value of total financial assets, stocks, bonds, derivatives, and etc from about five times GDP in 1980 to double by 2007. The ratio of financial assets to tangible assets, e.g. plant and equipment, land, residential structures and etc. grew in the same rapid way. Debt creates money because if you lend me $100 there is now $200, my $100 plus your $100 asset, i.e., my promise to repay. Assuming I do repay.

Much of the asset growth came from securitization of loans on bank balance sheets, i.e., transforming credit into securities. The total value of debt securities was 57% of GDP in 1980. Securitization of loans added 58% by 2007. The total value of debt securities more than tripled to 182% of GDP.

Much of the growth in equity securities came just from higher equity valuations, i.e., the exuberant willingness of buyers to pay more for potential future gain. The total value of equity securities nearly tripled as a share of GDP between 1980 and 2007, from 50% to 141% of GDP.

Financial institutions traditionally earned spreads on loans on their balance sheets, i.e., they got higher rates of interest on capital they lent than they paid to depositors. That changed with securitization. Now they profited mainly from fee income. By 2007, 61% of home mortgages were in loan pools of mortgage-backed securities, 72% of which were guaranteed by the Federal Housing Administration (FHA) or one of two Government Sponsored Enterprises (GSEs), Fannie Mae or Freddie Mac.

Securitization of credit was a major part of the development of the “shadow banking” system. Many types of non-bank financial entities now perform some essential functions of traditional banking. Like banks, they use short-term borrowing to issue or buy longer-term securities. Their short term lenders can demand repayment at any time, and they are vulnerable to a drop in the value of longer-term securities, either of which can result in the equivalent of a bank run because deposits at shadow banks are not federally insured.

When financial transactions were primarily between a security issuer and a purchaser, or a bank and a borrower, each party’s risk could be known. When a package of mortgages is securitized, however, third parties buy the securities, insure themselves against severe loss with a fourth party which perhaps insures itself with a fifth party, and so on and so on. It becomes impossible to assess risk for any party. Prudently managed entities can be brought down by others in the chain and if large enough ones fail, the economy of which they are part can collapse. That’s what happened in 2007.

In future posts I will explore, not necessarily in this order:

What Washington and Wall Street did that made the collapse inevitable
Why Washington bailed out Wall Street’s largest enterprises instead of allowing them to fail
Why some Wall Street enterprises were fined for criminal behavior but no executives were jailed
What must be done so the financial system will fulfill its purpose

We will, I’m sorry to say, come to see that our financial system that should function as a circulatory system is instead being operated as a Washington/Wall Street mine and we are being poisoned by its toxic waste. By exploring how that happened we’ll identify essential changes so the system will instead do what it should. Now, where did I put my hard-hat, flashlight and canary?

Jan 29 2013

The Military-Industrial Complex

In The Federal Budget and GDP and The Canary and the Colly Bird I said I’d take a flashlight, calculator and canary to investigate the “Military-industrial mine-shaft that keeps us in a ruinously costly perpetual state of war”. There’s a lot of camouflage but my flashlight shed some light on the business results of what I’ll call Military Operations Inc (MOI). The canary was distressed at times but it’s OK now, maybe because I didn’t yet take it very deep.

What I mean by camouflage in this context is none of the numbers I found so far can entirely be trusted. As the Congressional GAO repeatedly says: “serious financial management problems at the Department of Defense make its financial statements unauditable.” Nonetheless, the following numbers are sufficiently OK to show relative sizes. To set them in context, DOD spending is 20% or more and DOD plus non-DOD military spending 30% or more of federal spending, i.e., around half of total estimated Federal tax revenues. Military spending grew 9% annually since 2000, much faster than GDP, and now accounts for 5%-8% of GDP.

Our stated military spending, which exceeds the next 20 nations combined, is actually a lot higher than the $711B for 2011 shown below. That number is said to include War on Terror spending but I doubt all those costs are included. Additional spending on defense-related programs, e.g., Veterans Affairs, Homeland Security, and nuclear weapons maintenance brings the total above $1T and even to $1.4T with interest on debt incurred in past wars. We have military bases in at least 150 countries, almost 1.5M active military personnel, an additional 100K DOD personnel and substantially more than 100K contractor personnel in Iraq and Afghanistan.

US and Other Nation Military Spending 2011

Spending dropped after the collapse of the Soviet Union but greatly increased following the 2001 terrorist attack that killed 3,000 US civilians. The canary was distressed to learn that the War on Terror response to that attack, recast by the Obama administration as Overseas Contingency Operation, has so far resulted in over 6,500 US military personnel killed and 50,000 wounded. The bird may not have recovered if I’d been able to find dependable counts of Iraqis, Afghanis and others killed and wounded.

Although the canary sees ratios, it is fundamentally innumerate. It recovered while I returned to my calculator. The numbers in the chart below are understated, as noted above, but they do correctly illustrate the spending pattern. A 2011 Congressional report estimates the total cost of the Iraq and Afghanistan wars will be $1.8 trillion. An academic report the same year that includes other areas of related spending estimates $5.4 trillion.

Total US Defense Spending since 1947

The canary showed new signs of distress when I examined the spending rationale. When President Bush declared war on terror he said it “will not end until every terrorist group of global reach has been found, stopped and defeated.” The canary was troubled because:

Such a war can never end
The justification for the first big operation was false – satellite images said to be of Iraqi factories for enriching uranium were not
That operation was followed by ones the public barely questioned in Afghanistan, the Philippines, Somalia, Trans Saharan Africa, Pakistan and Yemen
We are repeatedly told to be prepared for future actions against North Korea and Iran

The canary recovered while I looked at more numbers. We can’t know for sure where the money goes, but the next chart gives a sense of the breakdown. Pay and housing for military personnel fluctuates fairly closely around $100B. Spending on weapons and procurement increased steeply during the Vietnam War, again toward the end of the Cold War and again from the start of the War on Terror. Spending on war operations, in other words MOI’s revenue from conducting war, which also grew during the Vietnam War and Cold War escalation, increased dramatically in the past decade.

Defense Spending Composition since 1962

Defense R&D spending remains relatively consistent. I’ll come back to this another day because it yields some civilian benefits, e.g., the Internet. Most of the $700B to $1T we spend on defense is simply a burden on income tax payers, a tax whose only rationale is to prevent the possible occurrence of negative things.

What, then, have I learned on Day 1 of this exploration? MOI’s Overseas Contingency Operation (OCO) product line is yielding greatly increased revenues. The obvious next question is the OCO product line’s longer term potential in the “negative things” market. How much further can OCO revenues be grown and for how long? To approach answers, I will next explore OCO product strategy in the context of MOI’s overall business strategy and organizational structure. I’ll carefully watch the canary for signs of distress.

Jan 27 2013

The 2nd and 3rd Amendments

We should periodically review assumptions that direct our beliefs. The world may have changed so they are no longer accurate. We may need to make structural changes to direct new behavior.

Businesses that don’t update their assumptions fail. My 1980s minicomputer consulting clients no longer exist. They were ex-pioneers who imagined their competition was still each other. They were aware of networked microprocessor-based systems but not the implications of a competing technology with a cost advantage that was already tenfold. Their customers were little harmed because they could simply switch to new suppliers.

A nation’s customers, its citizens, can be greatly harmed, however, because it’s not easy to switch to a new one. Nations keep going where they’re headed like giant cruise ships whose passengers were happy enough for long enough so the captain assumes they always will be happy. He’s still happy. He doesn’t notice the passengers’ distress now they’re in Antarctic waters in summer clothes.

Just as businesses degenerate slowly then collapse when their structure is not kept up to date, so it is with nations and empires. The structure of GM, for example, where each brand (Chevy, Buick, Cadillac, etc) was targeted to a distinct market segment within which it battled competitors later ossified into baronies whose leaders fought each other. Our Congress in the USA has similarly degenerated into warring factions whose eyes are closed to new realities.

The problem is in part institutional. Our direction is governed by a Constitution established two and a half centuries ago with no requirement for periodic update. Let’s consider two Constitutional Amendments to illustrate this issue.

The 3rd Amendment decrees that: “No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner, nor in time of war, but in a manner to be prescribed by law.” That is just about as useful today as prohibiting an elephant from being quartered in our house without our consent. Citizens once needed such protection. We no longer do. This Amendment is now so completely irrelevant that must people are unaware it even exists.

The USA 3rd Amendment echoed the English Bill of Rights 1689 that prohibited the monarch from “raising and keeping a standing army within this kingdom in time of peace without consent of Parliament, and quartering soldiers contrary to law” and was in response to 1760s and ’70s British Quartering Acts that required American colonies to pay the costs of British soldiers here and colonists to provide space for them to live.

The English Bill of Rights was passed when Protestant William and Mary were invited by parliament to replace Roman Catholic King James II and become joint sovereigns of England. It set limits on the powers of the crown and among other things reestablished the right of Protestants to own firearms. James II had tried to disarm Protestants and maintain a standing army. Civilians were at that time required to help suppress riots.

So the English Bill of Rights was also the basis for the 2nd Amendment to the US Constitution as one of our Bill of Rights which decrees that: “A well regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed.” It was adopted on December 15, 1791, along with the rest of the Bill of Rights and, interestingly, is the only amendment to the Constitution that states a purpose.

There was at that time substantial public opposition to a standing army from both Anti-Federalists and Federalists. On May 8, 1792, Congress passed an Act decreeing that: “every free able-bodied white male citizen of the respective States, resident therein, who is or shall be of age of eighteen years, and under the age of forty-five years […] shall severally and respectively be enrolled in the militia…[and] every citizen so enrolled and notified, shall, within six months thereafter, provide himself with a good musket or firelock, a sufficient bayonet and belt, two spare flints, and a knapsack, a pouch with a box therein to contain not less than twenty-four cartridges [and etc] and shall appear, so armed, accoutred and provided, when called out to exercise, or into service”.

The purpose of the 2nd Amendment, to provide for “the security of a free state“, has for many years been met in a different way. We now have a standing militia armed with weapons whose power could never have been imagined in the days of muskets and firelocks. Unlike the 3rd Amendment, however, its provisions are still relevant but are applied to a different purpose.

It would be better to retire both the 2nd and 3rd Amendments and draft new legislation suited to the purpose today.

People still want successors to muskets and firelocks for some of the same reasons left unstated in the 2nd Amendment, to hunt animals for food, defend themselves if police are unavailable, or just recreation. It would be far easier to establish broadly acceptable legislation specifying who could own what firearms if we were now drafting legislation specifically for that purpose.

Jan 25 2013

“If You Really Want to End Suffering,

it’s very simple,” Shugen Sensei told us at the start of our week of Zen Buddhist meditation: “Stop creating it.” I’ll come back to that in a moment. Just notice he did not say it’s easy.

Thinking why I blog reminded me of what Steve Jobs said is the secret to product development “Start somewhere”. Just starting has always been my path. Only later, sometimes much later, if what I started still feels worth doing, do I try to understand why. The urge to figure out the why of Himalayan exploration, Buddhist practice, economic and governance research and blogging has now arrived. To my surprise, it centers on ending suffering.

It all started ten years ago in the Himalayan mountains. It wasn’t my idea to go there and I had no specific objective. What happened was I found myself among people who appeared to be living with dignity, not aggressively, not hurriedly, and happily without the nice things we take for granted. Could it be true? Did they have a recipe my society might learn from? So I kept going back.

I began to wonder if Buddhism was part of the recipe. When we visited Buddhist temples our crew always lit lamps and prostrated. But later, when we visited Hindu temples and the dwelling places of animist spirits, they showed reverence there, too. I’d done some Buddhist reading by that time and was trying to meditate. That’s why I went to the Zen monastery.

By the end of the first day I was pretty sure I’d made a mistake. It was so hard to do nothing, sit completely still, just notice my thoughts, make no judgments, not reject or follow them. By the end of the day I was exhausted although I’d “done” nothing. I fell instantly asleep. In the morning I thought, “I’ll see how it goes until breakfast”. After breakfast I thought, “I’ll see if I can hang on ’til lunch”. At day’s end I thought, “Maybe day three will be better“. It was worse. Day four was a little better, though, and so it went. I’d suffered a lot by the end of the week but I’d also had glimpses of the truth of what Shugen Sensei told us at the start. I was bringing my suffering onto myself. That felt worth knowing.

Before I could go to the Himalayas I’d forced myself to retire. It was hard because from then on, investments would have to support us. With more time to worry, I realized my ignorance of how the economy works meant I had little confidence we’d made good investments. So, when I wasn’t in the Himalayas I studied investment and economic theory. The Great Recession arrived just as I was starting to feel I had the theories sufficiently clear.

Now I had to understand why our economy collapsed. I studied governance and saw some parallels with the paralysis of government in Nepal. That’s when I started blogging. The US economy is embedded in the global economy. There are so many moving parts in the system. I had to start recording facts and analyses to get a holistic picture. Charts and writing are my best tools for thinking and I hoped for critical feedback.

It’s only recently that I began to sense all these activities are related and they all start where Shugen Sensei was pointing. They’re all aimed at happiness and stopping the creation of suffering.

The historical Buddha taught that we will only become truly happy when we work to end the suffering of others. It must be so because we are not separate from others. If they are unhappy we will also be made unhappy. Communities were small two and a half thousand years ago. People made each other happier or not with face to face interactions. Today we also interact via nation-state and global systems that impact both us and future generations. That’s why I care about governance.

Dec 21 2012

A Tale of Two Constitutions

Nepal’s political morass has not changed in the months I was gone. Progress is stymied by too many squabbling children in politician bodies crying “mine, mine, mine”. How did it get this way? Does history of the US Constitution offer guidance?

A transitory coalition of the other 5 leading parties recently announced they would no longer attend public meetings where Maoist Prime Minister Baburam Bhatterai or anyone else in his unappointed government is present. The parties are united in wanting his government to fall, at odds on what should happen next. The government is unappointed in the sense that there was no provision for what would happen if the Constituent Assembly (CA) failed to draft the new Constitution.

When the CA was dissolved in May four years after its two year term began, Prime Minister Baburam said (a) we need an election to establish a body that will do what the CA failed to do, (b) we need a government in the interim, and (c) the existing government should stay in place to hold elections asap. The second largest party, the Nepali Congress (NC), said that’s OK but Baburam must resign in favor of an NC leader. Baburam said that’s no good because the President, who had the authority to disband the CA, is a member of the NC. There would be too much risk the NC would hang on to power until they thought they could win an election. If we want to make a change, he said, we should choose a coalition government for the interim.

It’s not clear how a coalition government would differ from what’s already in place nor how the politicians could ever agree who would make up the Cabinet. The NC can’t even agree which of them would replace Baburam in the impossible event anyone else agreed to that. Meanwhile the smaller parties make transitory alliances to promote specific agenda items that cannot be implemented in the current situation, anyway.

The leader of a party that recently split off from the Maoists published a 90 point demand. One third of these demands relate to India, including that Indian vehicles must be banned from Nepal, Hindi movies must not be shown and Hindi music must not be broadcast. The leader said his party would begin enforcing the demands nationwide and immediately. Like other such initiatives, even the ones that makes sense, that soon fizzled out.

Having failed to accomplish what they were elected to do, the politicians fear they will not be reelected. The one thing they can agree on is it’s best to keep delaying a new election. It’s not clear how those not in the Cabinet are getting paid but it’s never clear how money flows in this society. Transparency International reports that Nepal is the only South Asian nation whose Corruption Perception Index has worsened in the last seven years. To get a government-financed contract, contractors must pay 50% of the project budget to politicians and civil servants who could block it. Only 20% to 30% of the budget is spent on the goods or services provided. They are inevitably of poor quality.

For some, the argument over the number of States in Nepal is philosophical; broader representation (more States) vs strengthening Nepal as a nation (fewer States). For others, it’s personal. Tribal leaders allegedly fighting for their people but wanting access to the money trough, “Nationalists” wanting to preserve the Hindu establishment’s lock on power, the breakaway party motivated by anti-Indian prejudice and seeing high caste Nepali Hindus as “really Indian”.

How did it get this way? A regional prince who conquered his neighbors and unified the territory paid his generals with rent they could collect from newly conquered land. After further conquests were halted by British India and imperial China the monarchy was pushed aside by the Rana family and, under new ownership, Nepal continued to be operated as a private family tax farm. No industry developed because Nepal has no coal, oil or useful minerals and its geography makes transport very hard. Subsistence farming was supplemented by petty trading. One third to half the total economic output went to the center as rent. Many men left to be soldiers in the British Indian army. When the Ranas fell 60 years ago the monarchy was restored. Foreign aid began to arrive but much was siphoned off by the elite. Almost the only government Nepal had ever had that was for the people was in villages with a good head man. No surprise that apart from tourist services there are still few alternatives to getting a position to extort bribes, getting property to rent, or working abroad.

How important is a new Constitution for Nepal? A nation’s Constitution is much like a business strategy; every business should have one and it should not be a bad one but several good ones could be successful. A well executed good strategy will always beat a less well executed better strategy. So Nepal’s politicians just need to choose one of the good ones, apply it diligently, and adjust as conditions change. To illustrate, let’s take a quick look at the US Constitution that was established with equally high hopes and, as it happens, around the time Nepal first became a nation.

The US Constitution reached its current form in three stages. First, the structure and purpose of government was articulated: (A) three branches of central government to make, enforce, and interpret the law, (B) the roles and powers of central and local governments, and (C) what the national government would provide the people, namely justice, civil peace, common defense, things of general welfare they could not provide themselves, and freedom. It was adopted in 1787 by a Constitutional Convention, ratified by conventions in eleven states and went into effect in 1789. Next, ten amendments known as the Bill of Rights were proposed in Congress and came into effect in 1791 after approval by three-fourths of the States. It had been too hard to agree everything at once. In the third stage, the Constitution undergoes periodic clarification and/or amendment. It refers, for example, to “the people” but the rights it asserts for them were understood for very many years to apply only to white men. Rights for American Indians, African Americans, women and others were adopted much later.

The US Constitution does not specify the nation’s borders, or the borders between States. US territory greatly expanded after the Constitution was adopted and some State boundaries changed. The Constitution is not explicit about whether States could secede and form a new nation. The 1860s Civil War aka War of Northern Aggression established that the southern States would not be allowed to do that. The great ongoing debate, however, is about the third element of the Constitution, the social contract, what the central government should provide to the people and how it should do so.

How have the first three Amendments, presumably considered to be the most important, stood the test of time?

The first amendment says: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.” This may be the most important principal in the entire Constitution. The devil, however, is in the details. How much freedom, for example, should there be about speech on behalf of political candidates? My freedom is abridged if my campaign contributions are limited but if there’s no limit, I can in effect silence you. Estimated contributions for the most recent US election range up to $6B. Because US politicians now need so much money to get elected they must depend on a wealthy few to whom they must deliver correspondingly big favors. So a side effect of the Constitutional right to freedom is, at this time, a corrupt central government.

The second amendment says: “A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed”. The intent of that tortured phraseology, at a time when only single shot firearms existed, was to prevent the central government from tyrannizing the States and, by implication, its citizens. There was no need then to define what kinds of Arms the people could bear. The federal government now has nuclear arms, however, and killer drones. Does this Amendment mean the States and “the people” also have the right to them? Nobody I know believes that but many Americans support the right to bear assault weapons (I’ll say more about that in a future post). Some even imagine they must have assault weapons to defend against central government attack.

The third amendment says: “No Soldier shall, in time of peace be quartered in any house, without the consent of the Owner, nor in time of war, but in a manner to be prescribed by law”. Although this Amendment has long been entirely irrelevant it continues to be enshrined as part of the Constitution.

What conclusions should Nepali politicians draw from this and other nations’ Constitutions and from the above examples, (1) a profoundly important right that also has a deeply corrupting effect, (2) an important safeguard when the Constitution was established that is now ineffective against that risk and creates unanticipated new dangers, and (3) a provision that became completely irrelevant ?

First, since several structures of national government have proven to be effective, Nepal’s politicians should just choose one and start governing. Second, they should not imagine that even the most finely crafted Constitution will guarantee what the people get from their government. Third, some Constitutional provisions will need significant update when conditions change and not all will remain relevant, anyway. Above all, what is important is good governance. The time for that is now.

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