I gave a talk at a lunch last week in London at which I was asked to speak about "Social Media and Revolution." While this is a very worthy and interesting topic to me I chose to broaden (but I hope not trivialize) the topic by making a connection between the role of social media in the Arab Spring and the status of super injunctions against publication in the UK.

The role of internet and related technologies in the civil uprisings that continue to roil the Middle East have been well documented including in this blog (see Internet Freedom Finds a Fertile Crescent). Where once a coup could be achieved or blocked by securing the palace and the radio station today much of the world carries an even more powerful broadcast device in the form of an internet-enabled smart phone. What is perhaps less clear is the relationship between the Green Revolution and Englsih football.

First a bit of background is needed. Under Englsih law it has been possible for some time for individuals to bring a court action to obtain an inunction (a form of legal order) barring the publication in any form of information which the petitioner has legal grounds to keep private. The resulting legal order is so powerful barring even the mention that a court order has been obtained that it is commonly referred to as a "super-injunction." In fact there is nothing common about this legal process as the significant expense required (£60000+) puts it out of the reach of most everyone other than the celebrities including footballers who typically apply for one.

Now to return to the connection to social media-assisted revolution while the events of the Arab Spring were unfolding the blogosphere and the Twitterverse began to fill with posts and tweets naming a certain player for Manchester United and exposing a marital affair the existence of which does not appear in doubt. The tricky bit is that all the while the so-called mainstream press and broadcasters have been barred by super injunction from reporting these facts. Under US law such "prior restraint" would be unimaginable save in cases of absolute national security but current English law provides a broader right of privacy and libel protection.

While legal scholars on both sides of the Atlantic debate the finer jurisprudential points of these laws I write to make a different point: Technology has moved on and regardless of legal doctrine there is no longer any practical means of enforcement. Much as the music business learned the hard way that it is very difficult to prosecute millions of illegal file sharers (as opposed to the services they used) so English judges are discovering that while they can stop on-shore publications like the FT and BBC from publishing it is an order of magnitude more difficult to block 75000 tweets from the far corners of the world.

The connection to the Arab Spring is I hope now clear. The internet while it certainly can have a dark side and be applied to evil purposes is a giant distributed transparency machine which over time tends to promote democracy. What President Mubarak could not shut down in Egypt so English judges will fail in bending to their gag orders.

What is needed is not a better super-injunction for the wealthy but a better global framework for all citizens which balances a legitimate desire for privacy and protection from online evils such as child pornography and malware with a healthy bias in favor of maximum political freedom and freedom of expression. President Sarkozy made a similar point at last week’s e-G8 conference in Paris but most commentators preferred to stick to the safe shibboleths of government leaders who wish to regulate everything and internet leaders who wish nothing to be regulated.

As a father and I hope a responsible leader of a digital business I reject both extremes but note the great practical difficulty in achieving the right balance – especially as the internet has blurred and superseded the application of national laws. So for example when a reader based in France reads a piece about an English footballer written by a blogger from Brazil who posted the article using a service hosted in the Amazon cloud somewhere in the US whose law applies? This is not some theoretical law school exam question but the everyday reality of the modern media business.

Governments everywhere should tread very lightly in this new global domain and resist the temptation to believe that their own national norms and beliefs apply universally. Their guiding principle like Hippocrates should be to "do no harm." They should also recognize that not all societal evils nor medical conditions are susceptible to a quick cure. Rather a few embarrassed English footballers than a nation deprived of the freedom of speech.

I made the annual Amtrak trek to attend the White House Correspondents Dinner – an intimate affair in which the President and the First Lady along with thousands of other guests fête the journalists who cover the White House. There are some worthy scholarships and awards bestowed but everyone goes (i) to see and be seen (ii) to attend the pre- and post-dinner parties and (iii) to hear the President and sometimes even the invited comedian crack jokes.

Each year in the days leading up to the dinner I question why I want to spend another Saturday night away from the kids yet come Sunday morning I am up for another year (not to mention a Bloody Mary chaser). This year was particularly good; not only because it is an honor and a treat to be included but because this President happens to be very funny. This is not a political view (although I am conscious of blurring what I find funny with what I agree with politically) but a comedic one based on how well the President delivers his lines and even quite endearingly laughs at this own jokes.

This year the “official” comedian was Seth Myers of Saturday Night fame and he was also very funny. The one theme that linked both the President’s and Myers’ routines was an absolute Navy Seal attack on Donald Trump. Now normally my respect for minority groups like the follicly-challenged would cause me to rush to the defense of the Donald but in truth his behavior has been absolutely indefensible — especially his recent embrace of the “birther” attack on President Obama. This surely surpasses all his prior comb-over antics including the “Tour de Trump” bike race and his thrice-bankrupted Trump casino properties in Atlantic City.

Here is what the President had to say Saturday night:

“Donald Trump is here tonight. Now I know that he’s taken some flak lately but no one is happier no one is prouder to put this birth certificate matter to rest than the Donald. And that’s because he can finally get back to focusing on the issues that matter — like did we fake the moon landing? What really happened in Roswell? And where are Biggie and Tupac? “

Seth Myers was no less on target:

“And then of course there’s Donald Trump. Donald Trump has been saying he will run for President as a Republican which is surprising since I just assumed he was running as a joke. Donald Trump often appears on Fox which is ironic because a Fox often appears on Donald Trump’s head. If you’re at the Washington Post table with Trump and you can’t finish your entree don’t worry – the Fox will eat it… Donald Trump said recently he has a great relationship with the blacks but unless the blacks are a family of white people I bet he is mistaken. I like that Trump is filthy rich but nobody told his accent. His whole life is models and gold leaf and marble columns but he still sounds like a know-it-all down at the OTB.”

Now the one thing most Democrats and Republicans can agree upon is that the Donald is unelectable but I have to admit the comedian in me relishes the thought of four years of Trump Presidential press conferences – provided I can watch them from whatever other country admits me as a citizen.

I was reminded recently that I travel a bit excessively for a non-pilot when my chosen home remedy for a blocked ear and sinus infection was to plunge 30000 feet in a couple of minutes.

Let me explain. On the back of what had already been a pretty intense travel start to the year (see some of my previous posts on Japan and the Middle East) I had committed to help launch our new killer legal research service Revista Online in my beloved Brazil. This was always going to be a short two-day trip to Sao Paulo then made shorter by the need to attend the funeral of a wonderful man in Toronto on what was to be the second day of the trip.

The absurd turned into the ridiculous when the plane I was taking to Sao Paulo lost its cabin pressure necessitating the rapid decent. Now it must be said I never enjoy awaking at 4:40AM to the sight of those little orange oxygen masks deploying over my head while traveling somewhere over the Amazon. However on this occasion the unpleasant feeling was exacerbated by the pilot’s need to rapidly descend 30000 feet to avoid all of us blacking out when the oxygen ran out – not a recognized homeopathic cure for blocked ears.

What followed fortunately was the usual boring story of someone else’s travel delas (hours waiting around an airport too many bags of salty snacks masquerading as meals the search for roaming dial tone etc.) but the story itself ended well. I made it to the launch event in Sao Paulo just in time for a quick speech a caipirinha. and a mad dash back to the airport to — you guessed it — get on another plane.

As I write this on board another plane from London to New York all I can say is that I am glad I have no fear of flying.

I am en route home from what was always going to be a long trip (Abu Dhabi Dubai Qatar France UK) made longer by an unscheduled visit to ravaged Japan.

Japan has long been a very special place for me. Maarit and I lived in Tokyo during much of 1989 and took the opportunity to travel the country widely and get to know its wonderful people. I have been fortunate through my work to have occasion to visit Japan at least once every year and have thus maintained my relationships with and affinity for its people. There are of course wonderful people all over the world but I have always admired the very particular grace determination and collective spirit of the Japanese. These have never been in as high demand as during the past two weeks. A record earthquake devastating tsunami and ensuing nuclear crisis have tested these fine qualities.

Much as after 9/11 I felt I should return to New York as soon as possible so too was I drawn to visit Japan as soon as my presence would not constitute more of a burden than benefit to the the already over-worked staff of Thomson Reuters Japan. In my visits to our various offices and talks with individuals and small groups I heard many heroic stories: Missing relatives reunited; nights spent sleeping under work desks or walking marathon distances home and back to work; and herculean efforts to serve our customers.

Much has been written about the devastation of the earthquake and tsunami the science of nuclear melt-down and the response of Tokyo Electric and the Japanese Government — much of the best of it in Reuters News. Instead for me inspired by the jewel-like concentration of much of what I admire most in Japan I offer this Haiku to my friends in Japan.

In our deep sadness
We must nonetheless rebuild
For all the children

I participated in a fireside chat last week at the Abu Dhabi Media Summit in which I was interviewed by the talented Lebanese journalist Raghida Dergham. Raghida writes a well-read weekly column in Al Hayat and is a close follower of political developments across the Arab world. Thus I should have been on notice that our scheduled discussion on the future of media could not ignore the remarkable changes taking place across the region.

During a wide-ranging discussion of the future of media (not an unfamiliar theme to the readers of this blog) and the role of social media in the popular uprisings sweeping the region I stated that I believed that access to the internet was now a basic human right. By this I did not mean to imply that governments should not regulate noxious material such as child pornography or hate speech on the internet nor that all societies regardless of their current state of development needed to provide free universal internet access immediately but simply that citizens would not stand to be deprived of the basic information and connectivity they needed to function as participating members of modern societies. Thus President Mubarak’s clumsy attempt to shutdown the internet in Egypt only fanned the flames of the popular rebellion.

I am not so naiive or optimistic to think that the online tools provided by Twitter and Facebook can in the short-run protect individuals from the guns and tear gas of a totalitarian state. However over time suppression of the internet will undermine the legitimacy of any government and sow the seeds of its downfall. I also have the 160-year history of Reuters News as a guide. There have been brief periods when governments have sought to punish the company for adhering to our Trust Principles and reporting the truth. However over the longer-term by sticking to our convictions we have earned the trust of the societies in which we operate. So too the internet will triumph. Not thanks to a single publisher no matter how respected but via the loud and competing voices of a multitude of self-publishers.

Fighting the tide of history is always a losing bet.

For me two major themes ran through the recent World Economic Forum — unequal economic recovery and the advent of social media. While neither item is novel that misses the essential Davos point. Themes at the WEF are seldom new or innovative; rather the snowy valley acts a large reverb box to bounce around amplify and finally rebroadcast whatever memes are then trending in the wider world. As the author William Gibson once observed “the future is already here — it is just unevenly distributed.” So goes the global economic recovery.

Last year the focus was all on the BRIC nations and the emergence of a two-speed world. The West Europe and the US included were mired in recession and their various government stimulus plans compared very unfavorably with the Chinese ability to rapidly turn policy into rising GDP and employment. This year the Forum organizers proclaimed that we were living in a “multispeed” world. This is not only more complex to model than a simple growth/no growth duality it changes the psychological geography as well. Through 2009 the health of Western economies was generally poor. If you were a European politician you could simultaneously blame the US for causing the crisis and feel reasonably comfortable that the large US economy was not performing any better than the local one. Schadenfreude indeed.

Come January 2011 two things had changed. First and foremost the US economy began showing signs of life in the second half of 2010. Second while US bankers are not completely off the hook (nor should they be) the causes of the financial crisis and the ensuing global recession have been found to be more complex and multi-sourced. So for example while the US mortgage and securitization market witnessed some morally awful (and by the way long-term economically stupid) conduct the external debt to GDP ratio in the US did not exceed 1 to 1 while various European countries allowed their ratios to expand to 2 (France) 4 (UK) or even 10 (Ireland) to 1. A similar pattern emerges if one compares bank balance sheet to GDP ratios. While some WEF attendees European officials in particular preferred to stick to the simpler (and more comfortable) truths of the 2010 Winter Meeting the multispeed recovery is slowly refocusing attention on fundamental issues such as innovation labor mobility and productivity and entrepreneurship and their impact on relative economic growth rates. A series of bankers (the always blunt amusing and smart Jamie Dimon first among them) also began to speak more publicly about the need to distinguish between banks that acted responsibly through the crisis and those that were found to be still dancing when the music stopped. To me the lesson is clear: Stop talking in generalities and hurling retrospective blame start looking at the underlying data and move on to implementing polices intended to encourage long-term growth prosperity and an adequate social safety net.

The other overriding theme of the “great global debate” this year was social media. Those of us who have been playing with Web 2.0 technologies for some time can be excused for not seeing the novelty in this but that would again miss the larger point. For the last 45 years the Winter Meeting of the World Economic Forum in Davos has itself been a grand social network — think of it as a bricks and mortar precursor to the newer virtual models. Before there were tweets and pokes and friending and unfriending there were years of quick hallway meetings kept to 140 platitudinous characters: “Hi how are you? Great to see you here. All well with your business? See you at the Mckinsey party.” There were large “plenary” sessions akin to writing for all to see on a friend’s wall and quick bilateral meetings in semi-private rooms not unlike direct messaging. Above all there was plenty of re-tweeting going on as delegates repeated the witty aphorism they had just heard at their last session.

All this reminded me of how we were taught to "hand simulate" code when I was learning to program. Back in what now seems like the days of ENIAC we learned to simulate the computer and attempt to interpret or complie each instruction by hand to determine if our program worked as intended or would hang in some endless loop. So the thought occurred to me that Davos was really one huge hand simulation of Facebook starting of course with that coveted small white and blue WEF facebook. The parallels abound. Will that potential client or partner accept my invitation to a bilateral meeting? No different than awaiting a response to a pending Facebook friend request. Will my comments on the panel be judged approvingly? No different than not knowing how my friends will react to my latest wall post. Moreover that same sense of belonging to some inner circle of being in the know replete with that speed dating rush of quantity of interactions over quality.

No wonder Sheryl Sandberg seemed to appear in more sessions than even Klaus Schwab.

Devoted readers of this blog will recall that I sometimes credit my 89 year-old mother with teaching me (by negative example) the need to stay current with technology. So I only have myself to blame for deciding it was a good idea to buy her a new Mac Book Pro for her last birthday.

Ursula had been making noises that she was interested in this “new email thing” and that it might be practical to be able to order groceries for home delivery. Given my addiction to electronics I needed little encouragement to hit the Apple store for laptop printer and router provision cable broadband and set up a home network for mom. What I should have recalled was (i) I have never been long on patience as a teacher or otherwise and (ii) the last piece of technology my mother had mastered was the IBM Selectric II typewriter. Never having made the transition to fax word processor or mobile phone let alone first generation PC my mother had missed successive waves of tech learning. We tend not to think about it much in large part because it has become second nature but manufacturers of everything from cars to microwave ovens expect that every half-literate adult can operate a touch screen choose options from a set of radial buttons scroll down a screen and manipulate a mouse. Not Grandma.

Thanks to the good nature of my wife and my occasional emergency intervention my mother has almost mastered the power button and has managed to send a couple of Gmails. There are of course some humorous misadventures and questions. I particularly appreciated Ursula’s query when she was having trouble sending an email to a relative in Israel with a “.il” rather than a “.com” address. In the age of the world wide web (ps. that’s a clue Mom) my mother asked whether perhaps the reason she was getting message failures was that we had not paid for “long distance” service.

Equally charming was the time Ursula failed to send us a welcome home message and her Mac said there was a problem with the “Airport.” I later assured her that we had breezed through customs at JFK but that her wireless Apple Airport was the culrprit. There was also the time I got nervous call from my mother worrying that she would be convicted of trademark infringement because I had set her password to include a very common proper name. I only wish that I had been so good a lawyer as to have worried about such an attenuated claim.

What my mother kept asking for was a set of written instructions which could demystify the computer for her or at least guide her down a narrow path to accomplish the handful of things she wanted to do. While I did hide icons to simplify her screen and set up programs to remember her user ID and password I could not give her a simple set of instructions to cover all issues that might appear or fail to appear on her screen. While she insisted that the kids and I must have learned how to use this “wretched machine” in school I came to realize that we had learned through simple trial and error. Unfortunately my advice that she should “hang loose stay agile and experiment” in the face of confusing warning messages did not have its intended pedagogic effect.

While my mother may not be thrilled that I am sharing her technology travails quite so publicly I think it is a good challenge. I will tell her there are some amusing stories about her on my blog and see if she can find her way here. If she does and then commits a very late term abortion of her only son as a result I know I will have succeeded in my mission.

I gave the following remarks this morning in London to a meeting of British American Business an organization dedicated to supporting business and fostering cooperation between the US and the UK. As my remarks picked up some of the themes I’ve written about in other posts to this blog I include them in their entirety below.

BABI Breakfast Briefing

December 7 2010

I’d like to thank British American Business for hosting this breakfast and I’d like to thank all of you for coming out early to join us this morning.

I’ve been fortunate to be both a member of and to have worked with BABI over many years spanning the seven years I lived here in London and time in NY before and after. I do have to say that I’ve learned a lot about doing business in both great capitals both the similarities and some differences.

I’m actually sorry to see that the American business breakfast seems to be catching on here in London. I’m sorry to have infected the culture here. Business breakfasts always remind me of a true story from the time I worked as a lawyer in Paris when one of my clients told the story of a particularly overeager client from Texas who sought to organize a business breakfast with my friend.

When the good-natured and eager Texan suggested a 7:30am breakfast meeting to Jean-Claude he responded in mock seriousness “But why don’t you just join me in the shower at 6:30am. We could discuss business while you soaped my back?”

There are of course other more serious areas in which business practices are converging in the US and Europe. I wanted to talk about one such subject today. This is a topic I sometimes call “the death of domesticity” in the financial markets.

Now let me explain what I mean. In 2005 the average allocation of UK pension funds to domestic stocks was about two-thirds of their portfolio according to Mercer. Today that allocation stands at about 50%. Again according to the Mercer 2010 Asset Allocation Survey some 35% of European pension funds plan to reduce their exposure to domestic equities partly in favor of international stocks over the coming year.

While the serious recession in Europe explains some of this reallocation I think a deeper trend is at work. Again let me explain. There was a simpler time in the markets if you were an institutional investor in the 1970s and 1980s when your investments were made closer to home. Let’s say you were a pension plan you sought to match the inflation and interest rate exposure of your pension fund participants with investments in companies that were exposed to similar factors. Thus in a less global market at the time it made sense to invest the savings of UK pensioners in UK domestic companies traded on the London Stock Exchange. This original reasoning was quite economically sound.

However little by little over the years the connection between the forces acting upon the assets and liabilities sides of the balance sheet began to diverge so that companies that were formerly UK domestic businesses actually became very global enterprises that just happened to be headquartered and listed in the UK. I ran one such firm which was Reuters. But the truth even at Reuters pre-acquisition was that only 15% of our revenues came from customers in the UK. Notwithstanding this fact we were deemed a domestic investment and pension funds and other institutional investors whose mandates were limited to domestic investments could easily hold our shares if they so chose.

The UK has always been a very open and forward-looking financial market. One of the great attractions of being headquartered and listed in London is the regime of principles-based regulation practiced in the City of London and companies from all over the world seek to be listed here for that reason. At times especially during turbulent periods like these that openness is questioned. So for example when the Borealis Infrastructure Management Company from Canada recently bought up a large piece of UK infrastructure the Channel Tunnel Rail Link eyebrows were raised. This of course is nothing new as major parts of the UK banking infrastructure were bought over the last couple of decades by international banks. It was argued at the time that this so-called “Wimbledon effect” worked well enough in rising markets but as soon as markets went in the other direction continental and international banks would pull back to their home bases and fire their London staffs thereby decimating the UK economy.

Well in fact it’s hard to imagine a worse shock than the financial crisis of 2008 and I suppose you could say that the bankruptcy of Lehman Brothers did cause them to pull back from their London headquarters across the plaza from Thomson Reuters in Canary Wharf but I don’t think that’s exactly what people had in mind by the “Wimbledon effect”. The way it has worked out is that London has remained a vibrant center of international finance. However London investors just as investors all over the world are seeking better returns by investing in the most international of companies. Whether you’re a hedge fund manager in London or a mutual fund manager in New York it’s difficult to explain why you’re not invested in Asian equities if this is an asset class that is expected to outperform over the next 10 years.

Unfortunately many political leaders are resorting to protectionist policies in the light of the shrinking pie represented by their domestic economies. While this has a certain jingoistic appeal in the long run this is the surest way in which we will lower living standards for all. Finance and the internet show us the direction toward a more interconnected borderless world. Yet nation-states do still matter and many are engaged in a dangerous game of international brinkmanship.

Take for example the recent controversy over the US Federal Reserve’s announcement of its second round of quantitative easing nicknamed amusingly QE2. Chairman Bernanke as well as President Obama have said QE2 is not a deliberate effort to weaken the dollar and strengthen US exports. However numerous finance officials around the world have taken an opposite view. In fact Brazil’s finance minister Guido Montegna was quoted to have said that “we are in the midst of an international currency war unleashed by these actions”.

Unhelpfully the US and South Korea recently failed to come to an agreement on new a free trade pact and last month’s G20 summit in South Korea also failed to produce any consensus among the world’s leading economies on how to encourage global economic growth.

This is no time for parochialism. What we need instead is a system of international cooperation that makes the pie larger for everyone. So for example the China versus the rest of world tug of war on currency values is instructive. A lot of jawboning emanates from US officials seeking to pressure China to allow the Renminbi to float more freely and presumably appreciate to its full trade-weighted value against the dollar and other currencies. Much of this talk goes on for purely domestic political consumption since it is unlikely that the Chinese will actually bow to such pressures. In fact I’ve heard it said in China that the Chinese government will allow the Renminbi to float exactly one year after the US stops demanding that the Renminbi appreciate.

Regardless of your political analysis from an economic perspective it is far from clear that solely allowing the Renminbi to appreciate will solve the US export-import imbalance. This is because goods and services from other nations will likely take the place of the currently lower cost Chinese items. What is more important is that China actually develop a larger domestic consumption market and this will not occur until the social safety net in China is more developed. In the end it is not unreasonable for a people to be great savers if they have relative uncertainty concerning who will pay for their retirements in a one-child per family environment and who will pay for healthcare in a system in which there is not widespread health insurance. Once these large social issues are settled there is no reason to believe that Chinese consumption will not pick up and China will not add to global demand in much the same way they are now adding to global supply.

So the moral of my story is that the solution lies in more openness more free trade and more interconnectedness and not in the zero-sum game of cloistered domestic markets.

And this I should note with a nod to our hosts is a position that British American Business has consistently advocated between the US and the UK.

Thank you.

In my last piece I argued that the burgeoning national debt threatened the supremacy of the United States (see Reducing the National Debt Before it Reduces the Nation). Here I explore how an economy hanging in the balance explains much of the polarization of national politics and sense of social angst. In short we are beginning to act like a nation of debt holders in a credit workout.

First some history and context. For much of its history the United States has benefited from and projected the economically-inspiring vision of the American Dream. At its core this vision holds out a promise of equal opportunity: If the grandson of Russian immigrants can grow up to become the billionaire mayor of America’s largest city then any one of its citizens can as well. However critics have often labeled the American Dream as the American Myth because the odds of any of its citizens actually growing up to become a Mike Bloomberg are very low yet the chance to become Mike is held out as a reason we should tolerate very wide distributions of outcomes in terms of education healthcare and of course wealth.

Closely related to faith in the American Dream is a venture capital-like disregard for business failure. For example we do not stigmatize bankruptcy in the way Europeans have traditionally done instead emphasizing the opportunity for a fresh start. I believe that it is this sense of boundless optimism this deeply-felt notion of American exceptionalism that gave the early settlers the courage to populate the American West and still inspires the entrepreneur to start the company of her dreams despite the overwhelming odds of failure. Thus the United States has always been an equity culture — a society convinced that the pie is always expanding. If this is your view of the world it is easy enough to understand why you would create or at least tolerate a culture with few limits on the rewards that accrue to the winners. At the core of equity ownership (think common stock) is the right to participate in the uncapped upside of the enterprise once the fixed obligations of the firm (think debt) have been satisfied.

Now what happens if enough of the population lose faith in the American Dream; if they begin to look at the data of personal experience (job loss stalled growth in family income loss of homeownership) and come to believe that their children will not live as well as they did? I submit that under these conditions we begin to act like a nation of debt holders all claiming our piece of a pie which is no longer growing. In the capital structure of the nation debt holders have given up their claim to the upside of the enterprise in return for a fixed (they hope) share in the pie. And if the nation has issued too much debt (say almost $14 trillion) there is not even enough pie to satisfy the fixed entitlements. Welcome to the workout nation.

If I am accurate in my depiction of the national balance sheet and if the American Dream truly lies in the balance as we relinquish the mindset of stockholders for debt holders then much of the heat and noise of the Tea Party and their leftwing equivalents can be understood as the sound of an angry and confused nation struggling to come to terms with the waning of its long-cherished exceptionalism. It is not wrong to be angry and the urgency is welcome; we just need to channel it towards restoring a growth-oriented job-creating equity culture.

It is not too late to rebuild the City on the Hill but we must begin by paying-off the mortgage.

As of the precise moment that I write the total outstanding public debt of the United States stands at $13805199866881.18. At some $45000 per US citizen this is not a small IOU. If your family owed this much it might motivate you to trim expenses but not if you were the US Government. In fact the Congressional Budget Office estimates that the US Federal budget deficit will approach $1.3 trillion by the end of 2010 or 9.1% of GDP.

These sums are worryingly high in their own right but they take on special significance when we recall that most great empires fall as a result of economic not military collapse. The economic historian Niall Ferguson has noted:

“This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army Navy and Air Force… The precedents are certainly there. Habsburg Spain defaulted on all or part of its debt 14 times between 1557 and 1696 and also succumbed to inflation due to a surfeit of New World silver. Prerevolutionary France was spending 62 percent of royal revenue on debt service by 1788. The Ottoman Empire went the same way: interest payments and amortization rose from 15 percent of the budget in 1860 to 50 percent in 1875. And don’t forget the last great English-speaking empire. By the interwar years interest payments were consuming 44 percent of the British budget making it intensely difficult to rearm in the face of a new German threat. Call it the fatal arithmetic of imperial decline. Without radical fiscal reform it could apply to America next.” (Newsweek Nov. 28 2009).

It is with this as backdrop that I welcomed the draft report of the White House Fiscal Commission co-chaired by Alan Simpson and Erskine Bowles. The controversial plan which has something for everyone to hate identifies $4 trillion in deficit reductions over the next decade. Liberals have already rejected the proposed reductions in entitlement programs including a one-year postponement in the eligibility age for collecting social security. Conservatives are lining up against the proposed tax increases and cuts in military spending.

Here’s the point that everyone is missing: sacrifice. There is no painless plan to restore America to fiscal responsibility and thus greatness. Rather than repeat the selfish calculus of “what’s in it for me” we all need to focus on the prize – the collective common good.

Let’s take the example of military spending. I believe that a strong military is and should be an important component of US national policy but it is only a component. With all the focus on advanced weapon programs and counter terrorism we sometimes forget the goal: A secure United States of America that can protect its vital interests around the world. Simpson-Bowles would trim the Pentagon budget in the name of deficit reduction. Secretary Gates has also targeted $100 billion in savings; however he would reinvest the savings in other military programs including combating cyber-terrorism which I strongly support.

If we recall the principle discussed above that great empires fall when their economies not their militaries fail then I could argue that the single most important thing the Department of Defense can do to advance its mission (“to provide the military forces needed to deter war and to protect the security of our country”) would be to contribute significantly to the reduction of the US national deficit.

Could debt and deficit reduction be the stealth weapon and strategic missile shield of the 21st Century?