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Hazel Henderson is author of Ethical Markets: Growing The Green Economy (2007) and co-creator with the Calvert Group of the Calvert-Henderson Quality of Life Indicators regularly updated at ( She can be reached at More
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Ethical Markets: Growing the Green Economy
  • Review Of Making Things Work: Solving Complex Problems And Makers: The New Industrial Revolution

    Making Things Work: Solving Complex Problems in a Complex World by Yaneer Bar-Yam, NECSI Knowledge Press, Cambridge, MA 2004

    Makers: The New Industrial Revolution by Chris Anderson, Crown Business, NY, 2012

    Review by Hazel Henderson

    These two books, Making Things Work and Makers, study pragmatic issues of efficient organization and production at two levels: 1) re-tooling our paradigms, theories and strategies for organizations and human societies as they evolve and 2) the actual fabrication of products and materials using digital methods of 3D printing and fabrication now revolutionizing our mass-production models. These are fostering a revival of artisanal, small-scale methods and distributed customized manufactures by a new generation of crafts, makers and entrepreneurs.

    The two authors of these very complementary books are superstars in their respective fields: Professor Yaneer Bar-Yam, a veteran complexity scientist and founder of the New England Complex Systems Institute (NECSI), and Chris Anderson, doyen of the digerati, author of The Long Tail, which renamed risk, and editor of WIRED Magazine. Braiding their two worldviews together yields a breath-taking view of our rapidly accelerating processes of globalization and technologies - reminiscent of Alvin and Heidi Toffler's Future Shock, their perennial best-seller from 1970.

    In Making Things Work, Yaneer Bar-Yam demonstrates the power of systems thinking and complexity science and how it can be applied to problems as diverse as restructuring US health systems, education, ethnic violence, terrorism, global conflicts and new approaches in aid to developing countries. I highly recommend Part I which is a masterful yet readable primer on complexity science and its key principles, explained through analogies to ecology, biology, the human body-mind system and evolutionary concepts beyond the simplistic "selfish gene" of Richard Dawkins. I wrote in Ethical Markets: Growing the Green Economy (2007) of the hijacking of Charles Darwin by Victorian elites in Britain and their focus on the "survival of the fittest" as justification for their privilege - a phrase actually coined not by Darwin but by Herbert Spencer in The Economist. Bar-Yam explains the error of these early "social Darwinists" as focusing on competition - whereas all complex systems, including human societies and organizations, keep competition in balance with cooperation in their many functional levels.

    Recently, Bar-Yam has developed a complexity model that demonstrates the links between rising food prices, rioting among deprived populations, market speculation in commodity futures and government subsidies to corn-based ethanol. While obvious to a trained policy wonk like me, leading to my views that these perverse subsidies should end and my call for pension funds to "refrain" from such commodity speculation - Professor Bar-Yam has proved these links mathematically in his research (NECSI). He is now applying complexity science models to the European sovereign bond market - to show how these bonds can be mispriced (see also my CSRWire "Grossly Distorted Picture"), making a similar argument using other evidence. I showed how bond markets focusing on GDP growth in evaluating sovereign bonds in Ireland, Portugal, Greece, Spain and Italy fail to account for the value of their productive ecosystems efficient modern infrastructure and well-educated populations. These assets are all set at zero and unaccounted in GDP. I highly recommend Making Things Work for all financial analysts, traders and asset managers, as well as policy analysts and business managers.

    Makers is a page-turner by Chris Anderson, a brilliant observer and a talented story-teller. In a deeply personal way, Anderson lures us into his own fascination with the Maker movement. He takes us to the "makers's faires," incubators, tech shops to meet the millions of tinkerers, inventors, hackers and experimenters now creating this new industrial revolution of 3D printing and remote fabrication of thousands of products worldwide. The reader is led into this unfamiliar new underground world, soon to explode around us into the mainstream and how its new entrepreneurs and their facilities are out-competing mass-producers with batch-processing for niche markets.

    Most of these "fab" enterprises and their businesses are conducted online and their products marketed via the web. This desktop manufacturing is a new kind of high-tech "cottage industry" built on 1) digital DIY, 2) a culture of sharing and collaboration and 3) common standards for designs and open-source, creative commons distribution. This upends the competitive industrial model, allows copying and use by all comers, while building their unique brands as names, logos and icons.

    Anderson sees the Maker movement as the best antidote to today's jobless economic growth which began decades ago with the advance of computers and automation, as I describe in Building a Win-Win World (1996). Anderson takes us on a global tour of some of the successful companies run by these self-employing Makers, including his own company, 3D Robotics, which fabricates tiny insect-size drones. These new sectors often are self-financed through now familiar crowdfunding methods such as Kickstarter - outside traditional venture capital reach - as we cover on our crowdfunding page at Indeed, I found many commonalities in our own company Ethical Markets Media (USA and Brazil) and our partner Biomimicry 3.8 - both global internet-based companies whose products are intellectual and educational. These are licensed, marketed and distributed electronically by lean operations and many far-flung collaborators - often enthusiastic volunteers. Makers is a wonderful, enjoyable read - but also very valuable to all those looking for "the next big thing."

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: economy
    Nov 19 2:57 PM | Link | Comment!
  • Review Of BULL BY THE HORNS By Sheila Bair

    REVIEW OF BULL BY THE HORNS: Fighting To Save Main Street From Wall Street And Wall Street From Itself by Sheila Bair, Free Press, 2012

    By Hazel Henderson © 2012

    For worried retail investors like me as well as asset managers everywhere, Bull by the Horns is an insiders account of the battles in Washington and the current status of financial reform. Author Sheila Bair was chairman of the US Federal Deposit Insurance Corporation (FDIC), appointed by President George W. Bush in 2006, who President Obama re-appointed in 2009. Bair, a lifelong Republican, thus served during the tumultuous financial crisis and its still unfolding aftermath, a key player along with the Fed's Ben Bernanke, Treasury Secretaries Hank Paulson and Tim Geithner, Senator Chris Dodd and Congressman Barney Frank, as well as in the deliberations of the G-20, the Euro Zone and the Bank for International Settlements in crafting the new rules of Basel III. The FDIC's role insuring US retail bank deposits restored confidence in banks after its formation in 1933 during the Great Depression. FDIC's funding comes not from taxpayers, but from insurance premiums paid by all the banks it regulates. Its 4,500 employees and billion-dollar operating budget overseeing $4 trillion of these insured retail deposits had stabilized banking, and in 2007, bank failures were at a historic low.

    During the 1980s, the FDIC staff had grown to 12,000 to deal with the savings and loan crisis, caused by deregulation of these thrift institutions. The clean up cost US taxpayers more than $125 billion (p. 84). Upon Bair's arrival at FDIC, the next series of debacles was just beginning and her personal account of the financial crises takes the reader inside all the meetings she attended with top bankers; Hank Paulson's desperate efforts to obtain his $700 billion "bazooka"; the arm twisting of Congress to pass TARP. Bair witnessed the bailouts of the big banks, AIG, Fannie and Freddie, GM and Chrysler, and the Lehman bankruptcy's global fallout. Bair opposed TARP and most of the bailouts, pointing out that only two of the big banks forced to take TARP funds were in trouble: Citi and Bank of America. She held that Citi was hopelessly mismanaged and could be broken up since its parts were more valuable as stand alone entities. Bank of America, still trying to absorb the toxic mortgages of Countrywide for which it had overpaid at $18 a share could not also absorb a shotgun merger with Merrill Lynch and its equally toxic book of mortgages.

    Bair's criticisms of the bailouts put her in opposition to Hank Paulson, Bernanke and Geithner, then president of the New York Fed. Bair was more aware than they were that the housing sector was just as much of a threat to the economic system as Wall Street's banks. She pushed for marking the toxic mortgages to market or putting them in a "bad bank" while saving performing assets in "good banks." She cited FDIC studies to show that a tsunami of foreclosures would be more damaging macro-economically while it would be less costly to banks to keep distressed homeowners in their homes by reducing their mortgage principals and restructuring their loans. Congress agreed and TARP only passed with the proviso that the $700 billion would go to bailing out homeowners and conserving local economies and neighborhood values. Instead, Bair called Paulson's injections directly into big banks a "bait and switch" done to protect Citi's weakness by forcing them all to take the TARP funds.

    Bair's account is in line with that of Neil Barofsky, the special Inspector General of TARP (Bailout), but it earned her the enmity of Tim Geithner who was confirmed as Treasury Secretary in 2009. Geithner began by trying to get Sheila Bair fired, accusing her of being "difficult" and not a team player. As I and many others have noted, Geithner, like Larry Summers, Gary Gensler, Jason Furman and other appointees were protégées of Robert Rubin, Treasury Secretary in the Clinton Administration who enjoyed "guru" status among key Democrats. As CEO of Goldman Sachs, Rubin was a free market believer who advocated risk-taking and was known as "Mr. Leverage." Rubin's reputation fell after his testimony at Phil Angelides Financial Crisis Inquiry Commission when he acknowledged his $100 million-plus compensation as Citi's Vice Chairman, but admitted that he had no responsibilities other than high-level introductions (i.e., schmoozing). But Rubin's aura and influence over Democrats gave him undue access to the incoming Obama administration, and he pushed the appointments of Larry Summers, Tim Geithner, Gary Gensler and other members of the economic team. Paul Volcker, Sheila Bair's choice, was soon pushed aside and his Volcker Rule (an updated version of Glass-Steagall) barely survived in the Dodd-Frank law, which left most rule-making in the hands of regulators and bank lobbyists.

    Sheila Bair signaled to the Obama administration that she was equally willing to step down from her FDIC chair - or stay if the president wished. Geithner's objections were over-ridden and Bair was re-appointed in 2009. Her ensuing battles with Geithner were over protecting homeowners as well as shielding FDIC funds from use in further bailouts of General Motors and its GMAC and Ally Bank subsidiaries. She was under constant pressure from Treasury, abetted by Larry Summers and the free marketer holdovers at the Office of the Comptroller of the Currency (NASDAQ:OCC) and the Office of Thrift Supervision (OTS), as well as those at the Fed from the Alan Greenspan years and his belief in self-correcting markets and deregulation. Bair comments on the "deregulation mania" of both the Clinton and George W. Bush years:

    The truth is that many people saw the crisis coming and tried to stop or curtail the excessive risk taking that was fueling the housing bubble and transforming our financial markets into gambling parlors for making outsized speculative bets through credit derivatives and so-called structured finance. But the political process, which was and continues to be heavily influenced by monied financial interests, stopped meaningful reform efforts in their tracks. Our financial system is still fragile and vulnerable to the same type of destructive behavior that led to the Great Recession. People need to understand that we are at risk of another financial crisis unless the general public more actively engages in countering the undue influence of the financial services lobby.

    Bair also provides concrete, often simple policy approaches to preventing the next financial crisis which I and others see as imminent (Broken Markets, Dark Pools, Bailout). TIME named Bair on its "100 Most Influential People" in 2008, calling her the "little guys' protector in chief." Among Bair's recommendations for reform are those headlined below and carefully spelled out in detail in Chapter 26, "How Main Street Can Tame Wall Street." I support them all, many covered in Ethical Markets Transforming Finance video series.

    • Raise Capital requirements. (Bair won her proposed increases under Basel III.)

    • Maintain the Ban on Bailouts in the resolution authority that Bair fought to get into Dodd-Frank (now miscast by Republicans as "codifying" bailouts).

    • Break up the too-big-to-fail Banks and other institutions.

    • Require an "insurable interest" in all Credit Default Swaps. (Without this, they are merely bets, not financial instruments.)

    • Impose an Assessment or Tax on Large Financial Institutions - beyond the "living wills" and resolutions authority in Dodd-Frank. (All these were bitterly fought by Geithner.)

    • A Financial Transactions Tax of below 1% to curb speculation and high frequency trading (now endorsed by UN Secretary Ban Ki Moon; on the G-20 agenda and supported by Paul Volcker, Paul Krugman, Vanguard founder John Bogle and many other financial professionals).

    • Keep the new Consumer Financial Protection Bureau (still bitterly opposed by banks).

    • Restructure the Financial Stability Oversight Council (FSOC). (Bair now chairs an independent watchdog group to review FSOC.)

    • Abolish the OCC as unnecessary and captured by financial interests.

    • Merge the SEC and the CFTC and give them independent funding.

    • End the Revolving Door (an endemic problem in Washington).

    • Reform the Senate Confirmation Process (used too often for political purposes).

    • Abolish the GSEs Fannie and Freddie (which are still a liability owned by taxpayers).

    • Stop Subsidizing Leverage through the Tax Code. (The hedge fund and private equity industry, as well as banks, live on cheap, tax-supported borrowing.)

    • Tax Earned Income and Investment Income at the Same Rate. (This inequity has contributed to the widening gap between the 1% and the 99%.)

    • Reduce the National Debt. (This can be done by cutting the massive subsidies to fossil fuels and nuclear power, closing loopholes, restructuring the Pentagon and Homeland Security while raising the income cap on Social Security, shifting medical fee for service to best practices and prevention, and providing Medicare for all with its 2% overhead versus 14% for private insurers.)

    This book presents a brilliant, in-depth analysis of global finance, wonderful insights and vignettes and a positive view of how reforming markets, metrics and rule-making can steer toward a sounder financial future worldwide.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Oct 08 4:31 PM | Link | Comment!

    These two well-researched volumes, Reckless Endangerment and Age of Greed,  provide complementary examinations of the financial crisis of 2008-9.  Both books approach the issues by looking in-depth at how leading players acted.  They review the rapidly evolving global casino and the role of financial innovations and regulatory missteps that led to the collapse.

    Veteran NY Times reporter Gretchen Morgenson teams up with market insider Joshua Rosner  in Reckless Endangerment to explore how Fannie Mae and Freddie Mac went from their small role in the US housing market to underwriting most of the US mortgages and leading the charge in securitization and mortgage-backed securities.  They focus on the role of James Johnson, CEO of Fannie Mae to tell the wider story of how Washington politicians were manipulated. They detail the lobbying, campaign contributions and influence-peddling by the Fannie Mae Foundation and the escalation of executive salaries. 

    All of this led Wall Street to follow suit into the mortgage securitization game.  No earlier book on the financial crisis of 2007-8 covers in such detail the GSEs and how they ended up as wards of the US taxpayers.  Since the Dodd-Frank law left Fannie and Freddie untouched, the reform of the GSEs is still an urgent issue on the US agenda.  Others have covered the housing bubble in similar detail, notably Paul Muolo and Matthew Padilla in their Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis (2008) and the scandals of the mortgage origination game.  Lawyer Ellen H. Brown's Web of Debt deep investigation of the foreclosure frauds also tracks the computerization of mortgage documents and the Mortgage Electronic Recording Service (MERS), which destroyed original paperwork that most US courts require in foreclosures.  Morgenson and Rosner also provide enlightening inside looks at the Byzantine relationships between Wall Streeters, Washington politicians, think tanks, academics and grassroots advocacy groups and how the seductive vision of home ownership as central to the American Dream led them all into the housing bubble.

    Jeff Madrick's Age of Greed provides a complementary context, telling the story of Wall Street and its Washington regulators through successive administrations.  Madrick tracks how Glass-Steagal and other regulations were dismantled.  These New Deal laws had helped protect investors until the onset of the ideologies of deregulation took hold under Jimmy Carter, Ronald Reagan, George H. W. Bush and Bill Clinton – culminating in the bailouts and socialization of markets under George W. Bush and Hank Paulson, which continue today under Obama, Bernanke and Geithner.

    Madrick also tells his historic tale through the personal careers of key Wall Street and business players: from Waller Wriston, Ivan Boesky, Ted Turner, Sam Walton, Steve Ross, Paul Volcker, Jack Welch, Michael Milken, Carl Icahn, George Soros, John Meriweather, Sandy Weill, Jamie Dimon, Jack Grubman to Jimmy Cayne, Richard Fuld, Steve O'Neal and Chuck Prince.  Through these personal stories, author Madrick traces the shift from partnership firms to publically traded companies, conglomeration,  M and A, derivatives and the rise of hedge funds. 

    The next chapter is still to be told: how global satellite communications, the internet and other public investments created, along with computers, the new issues: still unregulated derivative and high-frequency trading and the off-shoring of finance in tax havens.  As retail investors flee Wall Street, they fear these new trends, along with the latest bubbles in commodities and ETFs.  We at Ethical Markets Media keep abreast of these trends in our Transforming Finance initiative.  We also worry about carbon trading and the frauds around carbon derivatives ("From Rigged Carbon Markets to Green Investing") and the mis-pricing of fossil fuel reserves ("Pricking the Carbon Finance Bubble").  We are watching trends as investors bypass Wall Street in favor of local, sustainable companies they can understand, along with LEED-certified real estate, solar trees in parking lots, LED lighting, energy efficiency, solar, wind and other renewable investments and finding new asset classes like Entrex Tigrcubs ( and those they fund at Investors Circle, SJF, Slow Money and such funds as those of RSF Social Finance and Portfolio 21.  The US economy can grow in a more efficient and sustainable direction with more accurate asset valuation models and the new quality-of-life indexes (Beyond GDP).

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Aug 02 11:33 AM | Link | Comment!
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