Keller and Krugman

Mr. Keller is “Wising Up to Facebook.”  He frets that the thrill is gone, and that is a good thing for us and maybe for the future of social media, too.  Prof. Krugman looks at “Another Bank Bailout” and says an old routine plays out in Spain, with the banks getting help while the unemployed continue to suffer.  Here’s Mr. Keller:

What’s the difference, I asked a tech-writer friend, between the billionaire media mogul Mark Zuckerberg and the billionaire media mogul Rupert Murdoch?

When Rupert invades your privacy, my friend e-mailed back, it’s against the law. When Mark does, it’s the future.

There is truth in that riposte: we deplore the violations exposed in the phone-hacking scandal at Murdoch’s British tabloids, while we surrender our privacy on a far grander scale to Facebook and call it “community.” Our love of Facebook has been a submissive love.

But now, not so much. In recent weeks it seems the world has begun to turn a jaundiced eye on this global megaplatform. While that may not please Facebook’s executives, it is a good thing for the rest of us — and maybe for the future of social media, too.

The recent history of the Facebook phenomenon has been a serial bursting of illusions.

Most conspicuously, there was the disappointing public stock offering — disappointing, at least, to the prospectors who hoped to flip the stock for a quick payday. As my colleague Joe Nocera pointed out, the I.P.O. did exactly what it was intended to do; it raised $16 billion for the young company to invest in its long-term future. Moreover, the plummeting value of the stock since the launch has generated a healthy skepticism about other new Internet businesses. Still, it can’t be fun for Facebook insiders to wake up to headlines containing words like “fiasco” and “debacle,” or to read press coverage suggesting that advertisers are not sold on Facebook as a brand platform.

Then there is the persistent attention to the dark side of life online. It wasn’t an entirely new thought a year ago when I fretted in this paper that the faux friendships of Facebook and the ephemeral connectedness of Twitter were displacing real rapport, real intimacy. The response at the time — “Luddite!” “Sacrilege!” — suggested that a fair number of people had elevated a very useful tool into an object of mindless worship. But the research keeps reinforcing the argument that social media, while an innovation with a wonderful menu of practical uses, are not a happiness machine. “Is Facebook Making Us Lonely?” asked the cover of The Atlantic magazine last month. A resounding “yes” — lonely, and narcissistic and actually ill — was the answer.

Nor can Facebook’s marketing missionaries be pleased that their product shows signs of becoming simply uncool. While Facebook has colonized much of the world’s population, there is anecdotal evidence that teenagers are moving their online party to other platforms — Twitter, Tumblr, X-Box — in part because Facebook became a place where mom and dad hang out. You know the zeitgeist is trending against you when your product is mocked on “Girls,” the aggressively hip HBO millennials melodrama.

SHOSHANNA: Oh My God! You’re not serious? I mean — that’s like not being on Facebook.

JESSA: I’m not on Facebook.

SHOSHANNA: You are so [expletive] classy …

You may find a bit of poetic justice in this if you recall that, before it acquired its messianic aura, Facebook had its origins in an algorithm with the not-so-lofty mission of letting horny Harvard boys rate the looks of female classmates.

We should be as suspicious of the Facebook-is-over hype as of the original euphoria. Lee Rainie, who studies Internet culture at the Pew Research Center, said that polling does not reflect a significant Facebook backlash so far; the empire is still growing toward a billion users, and more and more people say they use it every day. What has changed is that users say they are more wary of posting private information — especially when contemplating a job hunt, a college application or a budding romance. And many Facebook users — a third, according to a new Reuters/Ipsos poll — are cutting back the time they spend there.

“The infatuation phase is morphing into a more mature phase,” Rainie told me.

Jonathan Zittrain of Harvard’s Berkman Center for Internet and Society adds that this reckoning is mutual, and natural, as Facebook grows from a plaything born in a college dorm room into a very serious enterprise. “Even Facebook has to lose its own romantic vision of itself,” he said.

After a period of idealizing social media, the public is beginning to recognize that these are enterprises with ambitions and appetites. They are businesses. Public companies have an imperative to grow profits, which Facebook will do by monetizing you and me — serving us up as the targets for precision-guided advertising.

One of the most interesting stories I’ve read in the recent, more aggressive spate of coverage was Somini Sengupta’s report in The Times about Facebook’s entry into the Washington influence game. Every company, of course, protects its interests in the places where laws are made and adjudicated, so in hiring its corps of Washington insiders and dispensing cash from its political action committee, Facebook is just joining the mainstream. But Facebook’s way of friending the powerful is original. It ingratiates itself with members of Congress by sending helpers to maximize the constituent-pleasing, re-election-securing power of their Facebook pages. “If you want to have long-term influence, there’s nothing better than having politicians dependent on your product,” one envious Silicon Valley executive told me.

What might Facebook want from its new friends in Washington? It’s not hard to imagine. Since Facebook’s most promising path to prosperity is selling ads based on your likes and dislikes, the company will be wary of any government attempt to enforce privacy standards that interfere with the company’s ability to mine your information. Since the company is jostling for dominance with the likes of Google, Apple, Twitter and Amazon, it will be paying attention to antitrust actions that could curtail its ability to use its market muscle. (Jonathan Zittrain sent me a graphic that gives you a little sense of Facebook’s power in the marketplace. In 2010 Facebook was displeased with the developers of a game called Critter Island, one of many online games and services that basically rent space and services in the Facebook condominium. Facebook simply disabled the game, and the chart shows the user base collapsing from 14 million to zero in a couple of days.)

Beyond Washington, activists for various causes have upbraided Facebook for failing to protect dissidents who use the site to expose and mobilize against oppressive regimes. Critics say the company’s policy of forbidding pseudonyms — intended to assure more civil behavior online (and, a cynic might speculate, to enrich the value of the user base to advertisers) — makes it a risky communications tool in authoritarian states.

“That’s fine if you live in an ideal world,” said Rebecca MacKinnon, whose recent book, “Consent of the Networked,” examines the corporate sovereigns of cyberspace. “If you’re an activist in China, it leaves you extremely vulnerable.”

Her book persuaded one high-profile journalist, Steve Coll, to announce in The New Yorker that he was renouncing his citizenship in “Facebookistan,” which he had come to see as a highhanded corporate autocracy.

MacKinnon herself is not encouraging an exodus. She favors sticking around to help Facebook become more responsible. “It’s kind of like China — do you engage, or disinvest?” she said. “I’m still at the engagement stage. The main thing is that people need to act more as constituents, not as passive residents.”

And in fact, she says, Facebook has responded to activist pressure by, among other things, becoming an observer at the Global Network Initiative, an important forum for the advocacy of privacy and free expression.

Somewhere on his way from Harvard geek to Silicon Valley titan, Mark Zuckerberg adopted an ideology of “radical transparency.” He is getting what must be an uncomfortable dose of that now. This surge of scrutiny ought to make us smarter, more sober consumers. The challenge for Facebook is how to retain the trust of its wised-up users even as he commoditizes us — that is, how to sell us on without creeping us out.

Facebook lost my trust when they started “sharing” my information without my knowledge.  I haven’t messed with it for months.  And now, of course, it seems that every company in the nation wants us to be its “friend” on Facebook.  Feh.  Here’s Prof. Krugman:

Oh, wow — another bank bailout, this time in Spain. Who could have predicted that?

The answer, of course, is everybody. In fact, the whole story is starting to feel like a comedy routine: yet again the economy slides, unemployment soars, banks get into trouble, governments rush to the rescue — but somehow it’s only the banks that get rescued, not the unemployed.

Just to be clear, Spanish banks did indeed need a bailout. Spain was clearly on the edge of a “doom loop” — a well-understood process in which concern about banks’ solvency forces the banks to sell assets, which drives down the prices of those assets, which makes people even more worried about solvency. Governments can stop such doom loops with an infusion of cash; in this case, however, the Spanish government’s own solvency is in question, so the cash had to come from a broader European fund.

So there’s nothing necessarily wrong with this latest bailout (although a lot depends on the details). What’s striking, however, is that even as European leaders were putting together this rescue, they were signaling strongly that they have no intention of changing the policies that have left almost a quarter of Spain’s workers — and more than half its young people — jobless.

Most notably, last week the European Central Bank declined to cut interest rates. This decision was widely expected, but that shouldn’t blind us to the fact that it was deeply bizarre. Unemployment in the euro area has soared, and all indications are that the Continent is entering a new recession. Meanwhile, inflation is slowing, and market expectations of future inflation have plunged. By any of the usual rules of monetary policy, the situation calls for aggressive rate cuts. But the central bank won’t move.

And that doesn’t even take into account the growing risk of a euro crackup. For years Spain and other troubled European nations have been told that they can only recover through a combination of fiscal austerity and “internal devaluation,” which basically means cutting wages. It’s now completely clear that this strategy can’t work unless there is strong growth and, yes, a moderate amount of inflation in the European “core,” mainly Germany — which supplies an extra reason to keep interest rates low and print lots of money. But the central bank won’t move.

Meanwhile, senior officials are asserting that austerity and internal devaluation really would work if only people truly believed in their necessity.

Consider, for example, what Jörg Asmussen, the German representative on the European Central Bank’s executive board, just said in Latvia, which has become the poster child for supposedly successful austerity. (It used to be Ireland, but the Irish economy keeps refusing to recover). “The key difference between, say, Latvia and Greece,” Mr. Asmussen said, “lies in the degree of national ownership of the adjustment program — not only by national policy-makers but also by the population itself.”

Call it the Darth Vader approach to economic policy; Mr. Asmussen is in effect telling the Greeks, “I find your lack of faith disturbing.”

Oh, and that Latvian success consists of one year of pretty good growth following a Depression-level economic decline over the previous three years. True, 5.5 percent growth is a lot better than nothing. But it’s worth noting that America’s economy grew almost twice that fast — 10.9 percent! — in 1934, as it rebounded from the worst of the Great Depression. Yet the Depression was far from over.

Put all of this together and you get a picture of a European policy elite always ready to spring into action to defend the banks, but otherwise completely unwilling to admit that its policies are failing the people the economy is supposed to serve.

Still, are we much better? America’s near-term outlook isn’t quite as dire as Europe’s, but the Federal Reserve’s own forecasts predict low inflation and very high unemployment for years to come — precisely the conditions under which the Fed should be leaping into action to boost the economy. But the Fed won’t move.

What explains this trans-Atlantic paralysis in the face of an ongoing human and economic disaster? Politics is surely part of it — whatever they may say, Fed officials are clearly intimidated by warnings that any expansionary policy will be seen as coming to the rescue of President Obama. So, too, is a mentality that sees economic pain as somehow redeeming, a mentality that a British journalist once dubbed “sado-monetarism.”

Whatever the deep roots of this paralysis, it’s becoming increasingly clear that it will take utter catastrophe to get any real policy action that goes beyond bank bailouts. But don’t despair: at the rate things are going, especially in Europe, utter catastrophe may be just around the corner.

 

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One Response to “Keller and Krugman”

  1. Reginald van Gleason III Says:

    Compelled to comment. I thought FB was breached by the media hordes only to see that to comment on many sites requires a FB pledge. Of course politicos require of themselves to be up on the latest fad and they are forever in my heart.

    I have a question for Krugman. My brilliant son asked me if I knew what the difference was between the illustrious bailout and reality? He is a recent graduate of a prestigious mechanical engineering school on a fellowship and as such as no time to waste on frivolity. I broadened the tome to include QE. First let me add that QE really is a poor not an apt naming for very obvious reasons. I suggested finally that to address the seven trillion dollar debt on the books of the Fed or Treasury if you believe that gullible lie that banks which transgressed their neighbors property were obliged to pay out by transfer of deed to the Fed in return for which they got US T’s. I suggested a number like 9:1 or 10:1. So he asked how much would be repaid? I said I really don’t know except what I’ve read and attributed to Ben Bernake and Mr. Krugman and Geithner all of whom are absolutely brilliant and for whom we are in moral counsel but what I can figure out is from the bailout of such small sums like ten billion very little profit was added to the treasury account therefore the next problem. If the debtors trade for monies how much do they repay. In sum I suggested very little but in reality I think perhaps inaccurately that of the sum pledged the treasury would recoup in full and the debtors and debtors in possession would repay in full that amount on the Feds balance sheet and not that which was given to them in sum by the treasurer to avoid collapse. If that’s correct than the bill would be balanced in full and be complete at which time the recession would be over. Until then we are on borrowed time. Others would suggest the recession is some numbing account by the numbers of jobs and credit markets and GDP. it ain’t over till the fat lady sings.

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