For more information, see this week’s Research Report.

by Rushworth M. Kidder

I write this column with some trepidation. After all, the markets have been rising, spring is coming, and I’m an implacable optimist — dangerous conditions for writing about the current economic crisis. But here’s a thought: Is it possible that this recession could end rather quickly?

I know, I know: There’s plenty of economic theory to refute this thesis. These days the dismal science even finds support from politics, sociology, and demographics — not to mention the three laws of thermodynamics, which have been translated colloquially as You can’t win, You can’t even break even, and Things will get worse before they get better.

But “spring is the mischief in me,” as Robert Frost once wrote in his poem about mending stone walls. The neighbor with whom the poet’s been working isn’t interested in anything new, so he tries to “put a notion” in his head. Here’s my notion: We’ve never had a recession where our information technologies have been as fast paced or broad based as they are today. That same speed may get us out of this mess quicker than we imagine.

I was musing on this the other day while driving to the airport in Portland, Maine. Not long after I began making these trips regularly some 25 years ago, an enterprising financial firm took up lodging in a hollow along the road known as Stroudwater, bought a massive stock ticker, and mounted it so cars coming down the hill could see it at some distance. In those days, it was a useful bit of technology: With cell phones and PCs still in their infancy, how else could I have known what the market was doing at, say, 10:37 on a Tuesday morning?

Perhaps a decade ago the ticker disappeared. I never knew whether prosperity or calamity drove its owners out of Stroudwater. Either way, it was no longer needed. Even in those early days, anyone wanting to follow the markets had far more sophisticated ways to do so. Since then, computer technology has roared ahead according to something called Moore’s Law (and its similar brethren), which predicts that the speed of microprocessors, the size of memory, the ease of access to networks, and nearly every other relevant measure concerning computers will double every two years. Result? Our technologies are exponentially ahead of where they were during prior recessions. And since economists extrapolate future trends based on previous experience, consider for a moment what they have as benchmarks for today’s crisis:

• The recession of 1960-61. In those days, people typically kept stock certificates in safe-deposit boxes. Buying and selling stocks took seven days, allowing time for mailing or hand-delivering certificates to brokers. In 1960, the first stock market quotation system, later known by its trade-name Quotron, was installed in investment offices.
• The recession of 1973-74. During that period of market collapse and stagflation, investment managers had much better information as Quotrons and their competitors expanded. But a typical office in that period may have had one or two terminals per floor, which portfolio managers checked perhaps once a day.
• The recession of 1980-82. Following the revolution in Iran and the spike in oil prices, markets shuddered. By then Quotrons were on individual desktops — by 1984 there were 72,000 of them in use. The effect, says a friend of mine who was a portfolio manager during those days, was “mesmerizing,” leading to an upsurge in rapid-fire, short-term trading as the old buy-and-hold mentality tailed off.
• The recession of 1990-91. By then, financial information had become so cheap and accessible that individuals were finding ways to be their own investors. Why? In part because IBM had introduced the first PC in 1981. Almost overnight, the once-dominant Quotron became a money-losing relic.
• The recession of 2001. The last benchmark today’s economists can study found the public still playing catch-up with the new technologies. To check the markets in 2001, I recall I had to be at a computer plugged into a modem. By 2005, though my laptop was wireless, I still needed a location with Wi-Fi service.
• The recession of 2008-? Now, on my Blackberry, I can know within seconds what’s happening to the Dow — or the DAX, the Hang Seng, or the Nikkei — wherever I am, whatever the time.

The question is, What will that knowledge do to me? Will it make me (and millions like me) more startled by volatility, less willing to trust, more fearful about spending? If so, it will lengthen the recession. Or will it make me more confident in the long-term future, less flappable over extremes, more willing to buy and hold? If so, it could shorten the cycle.

Intellectually, I’m persuaded that knowledge tends to create confidence rather than fear. Economically, it seems clear that nations prosper in proportion as money circulates, with faster and more fearless circulation usually creating more prosperity. Morally, it’s evident that public outrage over Wall Street’s ethical lapses is demanding speedy responses from regulators and legislators. And historically, one trend is sure: Over the last 200 years, as knowledge has expanded, recessions have shortened. Okay, the Great Depression in the twentieth century went on for 10 years. But of the seven recessions in the nineteenth century, only two were as short as three years. The others ranged from five to seven years, and one dragged on for 23 years.

Somehow, I don’t think that’s us. I suspect speed may be an ally this time. But maybe that’s just a poetic notion.

©2009 Institute for Global Ethics

Questions or comments? Write to newsline@globalethics.org.

“As a school, we’ve done a lot of work with human rights. But you can’t have kids saving Darfur and isolating a peer in the lunchroom. It all has to go together.”

– Michael McDermott, the principal of New York’s Scarsdale Middle School, discussing his school’s efforts to teach students to be more empathetic with their classmates and local community. The discussion is part of a New York Times profile of educators’ efforts nationwide to groom “children to be better citizens and leaders by making them think twice before engaging in the name-calling, gossip and other forms of social humiliation that usually go unpunished” in school.

Source: New York Times, Apr. 4.

Now in the hot seat: prosecutors who allegedly acted unethically

WASHINGTON
In a stunning development in one of the most visible public-ethics cases in years, the U.S. Justice Department said it will drop its corruption case against former Alaska Sen. Ted Stevens because of improper tactics by prosecutors — a reversal of fortune that immediately spawned two new dilemmas.

New U.S. attorney general Eric Holder said he personally had reviewed the record of the case and was not willing or able to defend against allegations that government lawyers withheld evidence they were required to furnish to the defense, CBS News reports.

Now, there are at least two major ethics questions lingering in the wake of the reversal:

• Whether Stevens, who lost his election shortly after the tainted conviction, deserves his old seat back. The Wall Street Journal reports that some GOP leaders, including Alaska governor Sarah Palin, are calling for the resignation of Sen. Mark Begich, who beat Stevens in November, and for Stevens to run in a new special election.
• Whether prosecutors themselves should be prosecuted. In an editorial, the Anchorage Daily News contends: “Whether prosecutors were merely harried and sloppy due to an accelerated trial schedule or were knowingly deceptive, they botched the case. During the trial, prosecutors were repeatedly caught withholding key information from the defense and drew repeated rebukes from the judge…. The Department of Justice must now follow through with its investigation of the prosecution team and publicly disclose the results. If its conduct was indeed unethical, the offenders should be punished.”

Vacating the conviction still requires court approval, but as this edition of Newsline went to press, ABC News and other sources were reporting that setting aside the verdict was a formality and all but assured.

Sources: Anchorage Daily News, Apr. 3 — Wall Street Journal Law Blog, Apr. 2 — CBS News, Apr. 1 — ABC News, Apr. 1.

For more information, see: Related Newsline story, Nov. 10, 2008 — Related Newsline story, Nov 3, 2008 — Related Newsline story, Oct. 27, 2008 — Related Newsline Commentary, Aug. 4, 2008 — Related Newsline story, Aug. 4, 2008.

75-page indictment paints sweeping canvas of alleged graft

CHICAGO
Former Illinois Gov. Rod Blagojevich, his brother, and several former aides were formally indicted on corruption charges last week.

Blagojevich was arrested last December in an alleged conspiracy to trade public jobs for cash, and last week’s indictment arrived just ahead of the legal deadline for it to be filed, according to UPI.

The 75-page indictment charges Blagojevich with 16 felony counts, including racketeering, conspiracy, extortion, wire fraud, and lying to federal agents. Included in those counts are the most incendiary charges already made public, according to the Chicago Tribune: trying to auction off Barack Obama’s vacated Senate seat and leaning on the owner of the Tribune to fire editorial writers who criticized Blagojevich.

In an editorial, the Chicago Sun-Times calls on state lawmakers to enact sweeping reforms, contending that the staggering allegations in the indictment are clear evidence that the “campaign finance system is broken…. We have no limits on how much anyone can contribute to a politician. None. On the other end of the corruption equation — the ‘play’ in ‘pay-to-play’ — we have a state contract system that’s easy prey for crooked politicians looking to deal out goodies to their friends and contributors,” the editorial says.

Sources: Chicago Tribune, Apr. 3 — Chicago Sun-Times, Apr. 2 — UPI, Apr. 2 — Editor & Publisher, Mar. 31.

For more information, see: Related Newsline story, Feb. 23 — Related Newsline story, Feb. 23 — Related Newsline story, Feb. 16 — Related Newsline story, Feb. 2 — Related Newsline story, Jan. 12.

They say the measure will force influence back underground; also, according to CNN analyst, it turns out that lobbyists seem to have necessary expertise to keep the wheels of government moving

WASHINGTON
An extraordinary coalition of public interest groups is making what for them is an unprecedented request: They want the Obama administration to back off on its restrictive lobbyist rules.

The American Civil Liberties Union (ACLU), Citizens for Responsibility and Ethics in Washington (CREW), and the American League of Lobbyists asked for the president to rescind a directive that bars officials who administer economic stimulus funds from talking to registered lobbyists face to face, reports Politico.com.

Some of the protests against the directive are based on First Amendment grounds, according to the Hill, a publication that covers Congress.

Also, reports the National Journal, the directive regulates only registered lobbyists, not the thousands of advocates in Washington and outside the Beltway who don’t meet the specific criteria — a situation critics claim provides an incentive for people to abandon the registration process.

Also, critics argue, the lobbying rules could cloud efforts for transparency by allowing a non-lobbyist, such as a venture capitalist or a CEO, to have a vested interest in the stimulus package, exert influence over how it is spent, but not have the public be aware of it, according to the National Journal analysis.

And there’s a related problem — what CNN senior political analyst Gloria Borger calls the “dirty little secret” of Beltway lobbying: “Those who lobby on specific issues are often the most knowledgeable on those issues. And they’re getting shut out, no matter which side they’re on…. Sure, the president wants the stimulus money to go only to worthy projects, but why not be allowed to get some help in navigating the government bureaucracy?”

Sources: CNN, Apr. 2 — Washington Post, Apr. 1 — National Journal, Mar. 31 — Hill, Mar. 31 — Politico.com, Mar. 31.

For more information, see: Related Newsline story, Mar. 30 — Related Newsline story, Jan. 26 — Related Newsline story, Nov 17, 2008 — Related Newsline story, Sep. 22, 2008 — Related Newsline story, June 2, 2008.

Business schools blamed by some for running programs long on technical skills but short on ethics; one of the nation’s largest homebuilders is peppered with complaints that it contributed to the housing bust by steering buyers into bad loans; falling economic tide sinks of a lot of boats

VARIOUS DATELINES
Among the top news last week from the intersection of ethics and the economy were these stories:

• Business schools are getting some of the blame for the economic downturn, according to some recent media reports. The Washington Post carries a piece by Joel M. Podolny, former dean of the Yale School of Management, in which he writes that business schools “provide students with many technical skills, but they appear to do little, or nothing, to foster responsibility and accountability. Society implicitly trusted MBAs to do no harm when it allowed financial markets to operate in a relatively unregulated fashion — but its faith has been betrayed. As a result, there’s an active distrust of business schools and their graduates.” The BBC echoes that theme in an analysis of the world financial implosion, reporting that, “critics of business education blame the crisis on business schools for running programs short on ethics. They point out that students are trained to devise hasty solutions to complicated financial problems…. Others say business schools have become too removed from the real world, and instead have been producing students who are too focused on protecting shareholders’ interest to the detriment of social considerations.”
• A major force behind the building boom now is being blamed for its alleged role in the housing bust, with foreclosed homeowners accusing KB Home of unethically pushing them into loans they could not afford, reports the New York Times. Several former homeowners made that claim at KB Home’s annual shareholders’ meeting in Los Angeles. KB had a lending arrangement with Countrywide Financial, according to the Times, and critics are alleging that the builder pushed buyers into borrowing from the affiliated lender, steering them into interest-only loans. A KB spokeswoman said in an email to the Times that the company stands ready to help homeowners “in any way we can to ensure they are pleased with their purchase.”
• The plummeting economy has caused an unexpected sinking side effect: boat owners who no longer can afford payments or maintenance of their watercraft are simply abandoning the vessels. Scientific American reports that the abandoned boats — some sunk deliberately, others cast away with identifying information destroyed — pose environmental hazards because of leaking fuel and degrading paints. A similar piece in last week’s New York Times notes that the abandoned boats also are straining state budgets, since taxpayers often must foot the bill for the reclamation and disposal of boats whose owners can’t be identified.

Sources: BBC, Apr. 3 — Washington Post, Apr. 2 — Scientific American, Apr. 2 — New York Times, Apr. 2 — New York Times, Mar. 31.

For more information, see: Related Newsline story, Feb. 16 — Related Newsline story, Dec. 8, 2008 — Related Newsline story, Oct. 6, 2008 — Related Newsline story, Sep. 22, 2008.

Jury says Ward Churchill was fired over protected free speech, but offers only $1 in damages

DENVER
A Denver jury last week ruled that the University of Colorado illegally fired a tenured professor who likened some victims of the 9/11 terrorist attacks to an infamous Nazi.

While Ward Churchill was awarded only $1 in damages, the minimum allowed under technicalities of the court system, the verdict clears the way for his possible reinstatement to his former post, the Associated Press reports.

While the reasoning behind the $1 award was not immediately clear, a report from the Chronicle of Higher Education indicates that it was a compromise between jurors who felt Churchill deserved damages and a holdout who did not.

Churchill’s controversial essay, “Some People Push Back: On the Justice of Roosting Chickens,” implied that some of the 9/11 victims, particularly finance workers from New York, were part of a system that prompted the attacks, referring to them as “little Eichmanns,” a reference to Nazi Adolf Eichmann, who engineered the annihilation of the Jews in World War II but later claimed he was only following orders.

Churchill was stripped of his position and suspended in May 2006, but not, according to a panel of scholars who reviewed his work, on charges related to the Eichmann reference. Instead, the review panel at the Boulder campus ruled that Churchill had plagiarized and fabricated throughout the body of his work. Churchill remained on paid leave until the state Board of Regents voted to fire him in 2007.

Last week, a Colorado jury ruled that Churchill in fact was fired over protected free speech, reports the Denver Post.

After the verdict, Churchill maintained that “what was asked for and what was delivered was justice,” according to a report from Denver television station KUSA.

A legal analyst interviewed by KUSA said it appears that the university probably has no legal recourse other than to rehire Churchill or else face another lawsuit.

The Boulder Daily Camera notes that former University of Colorado president Hank Brown said it would be a “travesty of justice” if the school is forced to rehire Churchill, who he called dishonest.

“Churchill walks away the big winner,” KUSA legal analyst Scott Robinson said. “The probability of reinstatement is great, and from that point on, the University of Colorado has to treat Ward Churchill with kid gloves.”

Sources: Chronicle of Higher Education, Apr. 3 — KUSA-TV, Apr. 2 — Denver Post, Apr. 2 — AP, Apr. 2 — Boulder Daily Camera, Apr. 2.

For more information, see: Related Newsline story, May 5, 2008 — Related Newsline story, Apr. 30, 2007 — Related Newsline story, Aug. 7, 2006 — Related Newsline story, Mar. 14, 2005 — Related Newsline story, Feb. 14, 2005.

They had sent seminude photos of themselves via cell phone — an increasingly common practice in the sexually charged teen cyberculture

SCRANTON, Penn.
A debate over laws and ethics applicable to emerging technology made headlines last week, as a federal judge in Pennsylvania declined to pursue child pornography charges against those who distributed seminude photos of teenage girls — in this case, the teenage girls themselves.

The practice of sending sexually suggestive pictures over cell phones or posting them on blogs — an activity increasingly known as sexting — has become a popular practice among some teens, reports the Agence France-Presse.

But in the words of a Christian Science Monitor report, “the disconnect between the legal system and the adolescent cyberculture became glaringly apparent” when two 13-year-old girls were threatened with child pornography charges for sending provocative photos of themselves.

The charge could have resulted in the girls being labeled as sex offenders and being forced to register with authorities for 10 years, reports PC Magazine.

The case started after about 20 teens from a Pennsylvania school were investigated after school officials found suggestive photos on cell phones confiscated from students, the Scranton Times-Tribune reports.

Sources: Christian Science Monitor, Apr. 3 — AFP, Apr. 1 — PC Magazine, Mar. 30 — Scranton Times-Tribune, Mar. 30.

For more information, see: Related Newsline story, Oct. 1, 2007 — Related Newsline story, Sep. 17, 2007 — Related Newsline story, Mar. 29, 2007 — Related Newsline story, May 21, 2007 — Related Newsline story, Mar. 26, 2007.

He urges world leaders not to forget about aid to developing world, particularly Africa

THE VATICAN
Pope Benedict XVI, in a letter to leaders attending the recent G-20 economic summit in London, says ethics is critical to the world’s economic recovery.

The pope contends that “the way out of the current global crisis can only be reached together, avoiding solutions marked by any nationalistic selfishness or protectionism,” USA Today reports.

According to the London Daily Telegraph, the pope called for ethics in finance, saying any proposals coming from the G-20 Leaders’ Summit on Financial Markets and the World Economy must “offer security to families and stability to workers.”

The pope also warned against scaling back assistance programs, especially for Africa, notes the Reuters news agency.

The Times of London says such strong and direct intervention by the pope is unusual and reflects the depth of international concern over the social implications of the financial crisis.

Sources: USA Today, Apr. 2 — Times of London, Mar. 31 — Telegraph, Mar. 31 — Reuters, Mar. 31.

For more information, see: Related Newsline story, Mar. 23 — Related Newsline story, Dec. 15, 2008 — Related Newsline story, Oct. 20, 2008 — Related Newsline story, Apr. 21, 2008 — Related Newsline story, Jan. 28, 2008.

But poll finds “much less trust toward social networking sites”

From BBC World News America/The Harris Poll:

“A solid majority of American adults trust their doctors and hospitals to maintain the privacy of personal information. Other organizations including email providers, banks, and government agencies also are seen as trustworthy when it comes to handling personal information in a confidential manner.

“Internet sites especially social networking sites such as Facebook and MySpace are not seen as doing a good job protecting personal information….

“Other interesting results of this BBC World News America/The Harris Poll indicate that for the most part Americans trust the following organizations to handle their personally identified information (such as credit card information, contacts, and others) in a properly confidential and secure manner:

• “Health providers such as doctors and hospitals (74% trust a great deal or some vs. 26% not trust much or at all);
• “Email providers (62% trust a great deal or some vs. 38% not trust much or at all);
• “Banks and brokerage companies (59% trust a great deal or some vs. 41% not trust much or at all);
• “State and local governments (56% trust a great deal or some vs. 44% not trust much or at all);
• “Federal Government (54% trust a great deal vs. 46% not trust much or at all).

“American adults are less trusting of Internet sites. This includes: search and portal sites (like Google or Yahoo!) (51% not trust much or at all vs. 49% trust a great deal or some) and social networking sites (like Facebook or MySpace) (77% not trust much or at all vs. 23% trust a great deal or some).

“…Still these sites are used by tens of millions of adults every day; presumably people are willing to accept that tradeoff between safety and privacy on the one hand and the convenience of being able to interact easily and frequently with many friends, family and others on the other hand….”

For the full press release from Harris/BBC America, Mar. 30, click here .

“The assertion that ‘all men are created equal’ was of no practical use in effecting our separation from Great Britain, and it was placed in the Declaration not for that, but for future use.”

– Abraham Lincoln (16th U.S. president, 1809-1865)