Thursday, June 18, 2009

Congress and the IMF's Power Grab

Congress and the IMF's Power Grab. By Judy Shelton
There are better ways to promote international economic stability
WSJ, Jun 18, 2009

A sad spectacle played out in Washington this week as House Democrats pushed through a $106 billion supplemental appropriations bill to fund our troops in Iraq and Afghanistan that also provides a whopping $108 billion in expanded credit to the International Monetary Fund (IMF). The bill, which will soon be voted on in the Senate, also permits the IMF to sell $13 billion in gold for the chief purpose of establishing a permanent endowment for itself.

The Obama administration went to great lengths to get the IMF its billions. Last week, congressional leaders received a letter that made a firm connection between global economics and global security. "We know from the 1930s that a protracted global economic slump can foster undesirable and unforeseeable reactions to hardship and adversity," it stated. "Financial hardship and poverty breed desperation, which helps terrorist networks to attract new recruits with messages of hate, violence and intolerance."

The letter then urged Republicans and Democrats to support the president's request for IMF funding. "We believe that the current instability poses a significant risk to the long-term prosperity and security of the United States." It was signed by Secretary of State Hillary Clinton, National Security Adviser James Jones, and, most notably, Secretary of Defense Robert Gates.

Whoa! Clearly the implication was that a vote against the IMF funds would be a vote against national security. But does such a claim make sense? To answer that we must first seriously consider: 1) the impact of international financial instability on global security, and 2) whether the IMF is a force for good in establishing a stable financial foundation for economic prosperity.

The era of the 1930s is invoked often these days, usually to compare today's economic recession with the Great Depression years triggered by the U.S. stock market crash on Oct. 29, 1929. The international impact was exacerbated as countries grew protectionist and turned inward, erecting tariff barriers against imported goods and engaging in competitive currency devaluations. Monetary nationalism and the breakdown of international trade worsened the downward global economic spiral, paving the way for Adolf Hitler to come to power in hard-hit Germany and leading to World War II.

Certainly, it was recognition of the damaging economic impact of currency chaos and its worrisome political implications that drove U.S. Treasury Secretary Henry Morgenthau to ask his deputy, Harry Dexter White, to begin devising a plan for coordinated monetary arrangements among the U.S. and its allies. It was Dec. 14, 1941, one week after the attack on Pearl Harbor. The goal was to lay the groundwork for a more hopeful future for the Allied nations. Instead of returning to the beggar-thy-neighbor policies of the 1930s, they could look forward to a stable postwar international monetary system that would provide a foundation on which to rebuild their economies and attain new levels of prosperity.

Ultimately, the plan was developed into the Bretton Woods agreement of 1944 -- which established the IMF to operate a gold-exchange standard. White had decided early on that maintaining stable exchange rates was a separate task from providing cheap loans to Allied countries. A different organization -- the International Bank for Reconstruction and Development (later called the World Bank) -- was designated to perform that function.

The IMF carried out its exchange-rate duties for the next quarter century, permitting foreign central banks to redeem excess dollars at the fixed conversion rate of $35 per ounce of gold. The period from 1947 to 1967, known as the "Bretton Woods era," marked the emergence of a new world economic order based on solid money and increasingly free competition in the international marketplace.

The system came under pressure in the late 1960s as the U.S. began to inflate its money supply to accommodate growing fiscal strains. A liberal agenda of increased spending for social programs coincided with an escalation of the Vietnam War. The U.S government borrowed money to pay for it all, forcing other nations to absorb some of the inflationary impact through their own fixed-exchange rates with the dollar.

The Bretton Woods system ended on Aug. 15, 1971, when President Richard Nixon "closed the gold window" -- i.e., denied the convertibility privilege and thus delinked the dollar from gold. Since then, in the absence of a monetary anchor, exchange rates have been left to "float." Today, the dollar's residual role as key global reserve currency reflects the waning credibility of the U.S. government in carrying out responsible fiscal and monetary policies. Which is why China, Russia, Brazil and other developing nations are now calling for a new global reserve currency to provide an alternative to the dollar. And why the IMF funding provision in the current wartime supplemental bill needs to be closely examined.

Officials concerned about global security are right to recognize that financial instability breeds discontent and fosters social resentment that can challenge ruling interests and topple whole regimes. The question is whether short-term fixes -- in the form of emergency loans to a flailing government, the sort of assistance the IMF is prepared to offer -- provide a solid foundation for economic growth.

Just as overdone fiscal "stimulus" undermines confidence in future prosperity due to its inflationary consequences, it makes no sense to throw money at struggling nations without providing the hope of a more permanent solution that will enable them to meaningfully participate in the global marketplace. Money meltdown occurs when governments face overwhelming gaps between revenues and expenditures; foreign investors abandon the currencies as they race to the exits, leaving bereft citizens with worthless paper.

Putting out financial fires has become the specialty of the IMF, and the temporary respite offered through emergency loans may mitigate immediate damage to certain vulnerable countries, especially those exposed to contagion from neighbors. But the IMF is not capable of fulfilling its original mandate to oversee a stable international monetary system because there is no international monetary system. And the IMF's desire to sell gold to obtain windfall profits to fund its own permanent endowment was never envisioned under the Bretton Woods Articles of Agreement.

That agreement offered the countries fighting World War II the prospect of a more stable world. All the IMF is offering our dangerous world is the prospect of lurching from one short-term economic fix to the next.

Ms. Shelton, an economist, is author of "Money Meltdown: Restoring Order to the Global Currency System" (Free Press, 1994).

Tom Goldstein' op-ed on Sotomayor on TNYT

Today’s New York Times Op-Ed on Judge Sotomayor. By Roger Clegg
Bench Memos/NRO, Tuesday, June 16, 2009

The New York Times today has an op-ed by Tom Goldstein about Judge Sotomayor’s decisions involving race.

Mr. Goldstein “conclude[s] that Judge Sotomayor does not allow bias to infect her decision-making.” It’s not a persuasive op-ed.

Let me note at the outset that others, including our own Ed Whelan, have earlier noted some problems with Mr. Goldstein’s methodology. Let me note also that others, including The Washington Post, have counted the cases involved differently than Mr. Goldstein.

Mr. Goldstein’s discussion in today’s op-ed begins and ends tendentiously, lamenting that “many of us remain incapable of having a conversation about ethnicity that does not devolve into charges of racism,” that “critics have latched onto [Judge Sotomayor’s] decision” in the New Haven firefighters case to “infer … that Judge Sotomayor must be biased against whites”; he calls this “hysteria” and ends with another lament, of “[u]nsubstantiated charges of racism.” It’s ironic that the op-ed, which implicitly calls for a white lab-coat, calm and disinterested review of the facts, should bracket its discussion with such name-calling.

Mr. Goldstein’s discussion of a narrow range of cases also completely ignores the fact that some of the suspicion of Judge Sotomayor, and the fear that she might be influenced by race, ethnicity, and sex in her opinions, is fueled by the fact that, in her talk and writing off the bench, she has said that judges are influenced by race, ethnicity, and sex in their opinions, and seems to think that this is perfectly fine. So it’s not unreasonable for the judge’s critics to be looking especially hard for problems in her decisions.

Nor is it very persuasive to argue, as Mr. Goldstein does, that such fear can be refuted by statistics showing that, in percentage terms, most of Judge Sotomayor’s decisions are not problematic. Suppose the shoe were on the other foot, and a conservative judge had just a couple of decisions that the Left objected to in, say, the abortion area — would that be the end of the matter? The answer, of course, is that it would not — and I’m not hypothesizing here: We know from past experience that is not. Nor should it be: A bad decision in a particularly difficult and sensitive case can reveal a lot about what kind of a justice a judge will be, when her cases will almost all be difficult and sensitive.

On the court of appeals, on the other hand, we would not expect that all or even most decisions would be problematic. No doubt most cases are so clear-cut, one way or the other, that judges on both ends of the spectrum will agree on their disposition. What’s more, saying that a panel is unanimous doesn’t mean that the decision was not problematic (the panel might have been composed of all activists); saying that some of those panels included “a Republican-appointed judge” does not avoid that problem (there are plenty of activist Republican-appointed judges — like, say, Earl Warren and William Brennan, not to mention David Souter and Judge Sotomayor herself, who was, technically, a Republican-appointed district judge).

I have not “reviewed every single race-related case” on which Judge Sotomayor has ruled, but I know of at least three disturbing ones. There’s the New Haven case, of course; and Hayden v. Pataki¸ in which, Mr. Goldstein acknowledges, “she concluded that felon disenfranchisement laws are [racially] discriminatory and violate the Voting Rights Act”; and Brown v. City of Oneonta, which Ed discusses here.

Oh, and by the way: Mr. Goldstein is looking only at decisions in one area. So he’s not considering her decisions on property rights, the Second Amendment, etc., which have also come in for criticism.

In this regard, I should also note that one of the cases that Mr. Goldstein (and the Washington Post, in an article last week) cites as supposedly reassuring involved a policeman who was fired for mailing out racist and anti-Semitic fliers. Judge Sotomayor, in dissent, wanted to rule against the police department — just as the ACLU's New York affiliate had urged the court to do. So, sure, her position favored a bigoted policeman, but she also wanted to use an aggressive interpretation of the First Amendment to tie the hands of the police department. Thus, this decision is hardly evidence of non-activism, which is the real issue. And in that regard, pace Mr. Goldstein’s op-ed, the fact that Judge Sotomayor doesn’t urge judges “to disregard the plain language of any statute or to invent exceptions to statutes” obviously doesn’t mean that she isn’t doing so.

There is, in sum, plenty for the Senate Judiciary Committee to be concerned about.

Reagan's reaction on Poland events - Solidarnosc, Solidarity

Does Obama care?. By Scott Johnson
Powerline blog, June 17, 2009

Barack Obama's muted and ambivalent response to the events in Iran raises the question whether he cares about the fate of freedom in Iran, and what his attitude toward the Iranian regime is. Does he identify with the regime or its opponents? Does he care?

Ronald Reagan's reaction to the imposition of martial law in Poland provides an instructive contrast with Obama's muted reaction. On arriving in office, John O'Sullivan writes in The President, The Pope and the Prime Minister, Reagan had impressed upon his aides that he wanted to be kept well informed on Polish developments. "Less than two weeks after his inauguration," O'Sullivan relates, "Reagan met with his senior foreign policy advisers to discuss how to undermine Communist power in Poland and discourage Soviet intervention."

When the Communist government of Poland declared martial law to crush Solidarity on December 12-13, 1981, more than 4,000 Solidarity activists were arrested, Lech Walesa was interned and Solidarity itself was outlawed. Steven Hayward reminds us in his forthcoming The Age of Reagan: The Conservative Counterrevolution: 1980-1989, "the fact that the Soviets had the Poles do their own dirty work provided enough of a fig leaf for Western leaders to downplay the matter."

Western leaders spoke up to express their understanding of the government's crackdown on Solidarity. They all but supported it.

Not Ronald Reagan: "Ronald Reagan," Hayward recounts, "was livid over Poland." Ed Morrissey notes that Reagan immediately reacted to the imposition of martial law by publicizing his conversation with Pope John Paul II the next day:

The President. "Your Holiness, I want you to know how deeply we feel about the situation in your homeland."

"I look forward to the time when we can meet in person."

"Our sympathies are with the people, not the government."

Reagan elaborated his views three days later at a press conference:

All the information that we have confirms that the imposition of martial law in Poland has led to the arrest and confinement, in prisons and detention camps, of thousands of Polish trade union leaders and intellectuals. Factories are being seized by security forces and workers beaten.

These acts make plain there's been a sharp reversal of the movement toward a freer society that has been underway in Poland for the past year and a half. Coercion and violation of human rights on a massive scale have taken the place of negotiation and compromise. All of this is in gross violation of the Helsinki Pact, to which Poland is a signatory.

It would be naive to think this could happen without the full knowledge and the support of the Soviet Union. We're not naive. We view the current situation in Poland in the gravest of terms, particularly the increasing use of force against an unarmed population and violations of the basic civil rights of the Polish people.

Violence invites violence and threatens to plunge Poland into chaos. We call upon all free people to join in urging the Government of Poland to reestablish conditions that will make constructive negotiations and compromise possible.

Certainly, it will be impossible for us to continue trying to help Poland solve its economic problems while martial law is imposed on the people of Poland, thousands are imprisoned, and the legal rights of free trade unions -- previously granted by the government -- are now denied. We've always been ready to do our share to assist Poland in overcoming its economic difficulties, but only if the Polish people are permitted to resolve their own problems free of internal coercion and outside intervention.

Our nation was born in resistance to arbitrary power and has been repeatedly enriched by immigrants from Poland and other great nations of Europe. So we feel a special kinship with the Polish people in their struggle against Soviet opposition to their reforms.

The Polish nation, speaking through Solidarity, has provided one of the brightest, bravest moments of modern history. The people of Poland are giving us an imperishable example of courage and devotion to the values of freedom in the face of relentless opposition. Left to themselves, the Polish people would enjoy a new birth of freedom. But there are those who oppose the idea of freedom, who are intolerant of national independence, and hostile to the European values of democracy and the rule of law.

Two Decembers ago, freedom was lost in Afghanistan; this Christmas, it's at stake in Poland. But the torch of liberty is hot. It warms those who hold it high. It burns those who try to extinguish it.

Over the two weeks following the imposition of martial law Reagan convened meetings of the National Security Council about the Polish crisis almost daily. Hayward quotes Richard Pipes's description of "an emotionally charged atmosphere inspired largely by Reagan's mounting fury." Reagan derided the "chicken littles" in Europe.

Turning to archival sources, Hayward finds Reagan at the December 22 NSC meeting declaring that this was "the last chance of a lifetime to go against this damned force." Reagan expressed his disgust in an indignant message to Brezhnev via the hotline on December 23: "[N]othing has so outraged our public opinion as the pressures and threats which your government has exerted on Poland to stifle the stirrings of freedom." On December 23 Reagan also gave his eloquent speech condemning the Polish crackdown. Reagan declared:

I want emphatically to state tonight that if the outrages in Poland do not cease, we cannot and will not conduct "business as usual'' with the perpetrators and those who aid and abet them. Make no mistake, their crime will cost them dearly in their future dealings with America and free peoples everywhere. I do not make this statement lightly or without serious reflection.

What prevents Barack Obama from making a similar declaration? Does he care?

Wednesday, June 17, 2009

How many jobs are onshorable? Re-interpreting the Blinder numbers in the light of new trade theory

How many jobs are onshorable? Re-interpreting the Blinder numbers in the light of new trade theory. By Richard Baldwin
VoxEU, Jun 15, 2009

According to Alan Blinder, constant improvements in global communications will bring much more offshoring of “impersonal services’’, with an estimated 30 million to 40 million US jobs potentially offshorable. This column warns against taking these numbers at face value and recalls that the US is actually a net insourcer. With the advance of communication technologies, the US should see lots more service jobs “offshored” and lots more “onshored”.

Before the global crisis hit, offshoring was one of the scarcest things on rich nations’ economic radar screens – especially the offshoring of “good” service sector jobs. Alan Blinder was one of the first to point out the threat in his 2006 Foreign Affairs article “Offshoring: The Next Industrial Revolution?” He wrote: “constant improvements in technology and global communications virtually guarantee that the future will bring much more offshoring of ‘impersonal services’’— that is, services that can be delivered electronically over long distances with little or no degradation in quality.”

Blinder has more recently produced some estimates of the size of the revolution. And they make it look like “the big one”. Blinder (2009): "I estimated that 30 million to 40 million US jobs are potentially offshorable."

This sort of media-friendly statement is part of what I consider to be very confused thinking by non-specialists – not that the economists involved are necessarily confused, but tacitly or not, they are allowing the media to misinterpret the numbers.

Let me start off by saying that I consider Alan Blinder to be one of the world’s leading macroeconomic policy specialists. Moreover, I greatly appreciate the way he uses his knowledge of economics to make this a better world (rather than focusing entirely on impressing the other inhabitants of academe). This time, however, I’m not sure it has worked out right.

I don’t wish to take issue with his numbers or methods. I wish to question the implications of those numbers. The trouble is that his numbers are being interpreted in the light of the “old paradigm” of globalisation – the world of trade theory that existed before Paul Krugman, Elhanan Helpman, and others led the “new trade theory” revolution in the 1980s.


The new trade theory: Micro, not macro, determinants of comparative advantage

Krugman’s contribution, which was rewarded with a Nobel Prize in 2008, was to crystallise the profession’s thinking on two-way trade in similar goods.1 This was a revolution since the pre-Krugman received wisdom assumed away such trade or misunderstood its importance. In 1968, for example, Harvard economist Richard Cooper noted the rapid rise in two-way trade among similar nations and blamed it for the difficulty of maintaining fixed exchange rates. Using the prevailing trade theory orthodoxy, he asserted that this sort of trade could not be welfare-enhancing. And since it wasn’t helping, he suggested that it should be taxed to make it easier to maintain the world’s fixed exchange rate system – a goal that he considered to be the really important thing from a welfare and policy perspective (Cooper, 1968).

Trade economists back then took it as an article of faith that trade flows are caused by macro-level differences between nations – for example, national differences between the cost of capital versus labour. Nations that had relatively low labour costs exported relatively labour intensive goods to nations where labour was relatively expensive.

This is the traditional view that Blinder seems to be embracing.

What Krugman (especially Krugman 1979, 1980) showed was that one does not need macro-level differences to generate trade. Firm-level differences will do.

In a world of differentiated products (and services are a good example of this), scale economies can create firm-specific competitiveness, even between nations with identical macro-level determinants of comparative advantage. Krugman, a pure theorist at the time, assumed that nation’s were identical in every aspect in order focus on the novel element in his theory (and to shock the “trade is caused by national differences” traditionalists). His insight, however, extends effortlessly to nations that also have macro-level differences, like the US and India.

This brings us to interpreting Blinder’s 30 to 40 million offshorable jobs.


Blinder’s calculations

Blinder’s approach is easy to explain – a fact that accounts for much of its allure as well as its shortcomings.
  • Step 1 is to note that Indian wages are a fraction of US wages.
  • Step 1a is to implicitly assume that Indians’ productivity-adjusted wages are also below those of US service sector workers, at least in tradable services.
  • Step 2, and this is where Blinder focused his efforts, is to note that advancing information and communication technology makes many more services tradable. The key characteristic, Blinder claims, is the ease with which the service can be delivered to the end-user electronically over long distances.
  • Step 3 (the critical unstated assumption, if not by Blinder, at least by the media reporting his results) is that the new trade in services will obey the pre-Krugman trade paradigm – it will largely be one-way trade. Nations with relatively low labour costs (read: India) will export relatively labour-intensive goods (read: tradable services) to nations where labour is relatively expensive (read: the US).

The catch

This last step is factually incorrect, as recent work by Mary Amiti and Shang-Jin Wei (2005) has shown. They note: “Like trade in goods, trade in services is a two-way street. Most countries receive outsourcing of services from other countries as well as outsource to other countries.”

[graph: US insourcing and outsourcing of jobs]
Source: Author’s manipulation of data from Amiti and Wei (2005), originally from IMF sources on trade in services.

The US, as it turns out, is a net “insourcer”. That is, the world sends more service sector jobs to the US than the US sends to the world, where the jobs under discussion involve trade in services of computing (which includes computer software designs) and other business services (which include accounting and other back-office operations).

The chart shows the facts for the 1980 to 2003 period. We see that Blinder is right in that the US importing an ever-growing range of commercial services – or as he would say, the third industrial revolution has resulted in the offshoring of ever more service sector jobs. However, the US is also “insourcing” an ever-growing number of service sector jobs via its growing service exports. The startling fact is that not only is the trade not a one-way ticket to job destruction, the US is actually running a surplus.


Conclusion

None of this should be unexpected. The post-war liberalisation of global trade in manufactures created new opportunities and new challenges. To apply Blinder’s logic to, say, the European car industry in the early 1960s, one would have had to claim that since the German car industry (at the time) faced much lower productivity-adjusted wages, freer trade would make most French auto jobs “lose-able” to import competition. Of course, many jobs were lost when trade did open up, but many more were created. As it turned out, micro-level factors allowed some French firms to thrive while others floundered, and the same happened in Germany. Surely the same sort of thing will happen in services, as trade barriers in that sector fall with advancing information and communication technologies.

In short, what Blinders’ numbers tell us is that a great deal of trade will be created in services. Since services are highly differentiated products, and indivisibilities limit head-to-head competition, my guess is that we shall see a continuation of the trends in the chart. Lots more service jobs “offshored” and lots more “onshored”. What governments should be doing is helping their service exporters to compete, not wringing their hands about one-way competition from low-wage nations.


Footnotes

1 Full disclosure: Krugman was my PhD thesis supervisor and we have coauthored a half-dozen articles since 1986.


References

Amiti, M. and S.J. Wei (2005), “Fear of Service Outsourcing: Is it Justified?”, Economic Policy, 20, pp. 308-348.
Blinder, Alan (2006). “Offshoring: The Next Industrial Revolution?” Foreign Affairs, Volume 85, Number 2.
Blinder, Alan (2009). “How Many U.S. Jobs Might Be Offshorable,” World Economy, 2009, forthcoming.
Cooper, R. (1968). The Economics of Interdependence. New York: McGraw-Hill.
Grossman, G. and E. Rossi-Hansberg (2006a). “The Rise of Offshoring: It’s Not Wine for Cloth Anymore,” July 2006. Paper presented at Kansas Fed’s Jackson Hole conference for Central Bankers.
Krugman, Paul (1979). "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479,
Krugman, Paul (1980). "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, vol. 70(5), pages 950-59, December.
Krugman, Paul (1991), “Increasing Returns and Economic Geography”, Journal of Political Economy 99, 483-499.

The U.S. has been bringing soldiers home as soon as they get any experience

General McChrystal's New Way of War. By Max Boot
The U.S. has been bringing soldiers home as soon as they get any experience.
The Wall Street Journal, Jun 17, 2009, page A13

Gen. Stanley McChrystal was appointed commander in Afghanistan to shake up a troubled war effort. But one of his first initiatives could wind up changing how the entire military does business.

Gen. McChrystal's decision to set up a Pakistan Afghanistan Coordination Cell means creating a corps of roughly 400 officers who will spend years focused on Afghanistan, shuttling in and out of the country and working on those issues even while they are stateside.

Today, units typically spend six to 12 months in a war zone, and officers typically spend only a couple years in command before getting a new assignment. This undermines the continuity needed to prevail in complex environments like Afghanistan or Iraq. Too often, just when soldiers figure out what's going on they are shipped back home and neophytes arrive to take their place. Units suffer a disproportionate share of casualties when they first arrive because they don't have a grip on local conditions.

There was a saying that we didn't fight in Vietnam for 10 years; we fought there for one year, 10 times. The North Vietnamese, on the other hand, continued fighting until they were killed or immobilized. That gave their forces a huge advantage.

In Vietnam, units already in the field would get individual replacements from home, thus making it hard to maintain unit cohesion. Sometimes new soldiers were killed before anyone even knew their names.

The policy now is unit rotation -- an entire battalion or brigade (or a higher-level staff) trains together, deploys together, and leaves together. That makes for better cohesion, but makes it even harder to maintain continuity because there is little overlap between units.

In a tribal society like Afghanistan's, the key to effectiveness is having personal relationships with tribal elders, which argues for keeping troops in place much longer than currently is the case. But there are limits to the stress that soldiers can endure -- effectiveness degrades severely for anyone who spends too long in combat. And in an all-volunteer military, there is always the danger that if troops are forced to be away from their families too long they might not sign up for another hitch.

The U.S. Special Operations Command (the military command for all special operations units) has responded by creating a deployment cycle whereby units spend roughly six months deployed in a war zone and six months at home, keeping tabs on their area of operations while they're away and returning to the same area time after time. This arrangement, which has been in use for several years, allows personal relationships to be cultivated and continued while still giving troops some downtime.

It's an intriguing approach, and one that Gen. McChrystal, a veteran of special operations, is now migrating to the conventional military world. The new Pakistan Afghanistan Coordination Cell is an attempt to strike a balance between personnel needs and war-fighting needs, and it is a move in the right direction.

I would argue for going even further by extending staff deployments (which aren't as stressful as combat jobs). Volunteers should be allowed to spend years at a time in places like Afghanistan -- not only soldiers but also diplomats and intelligence officers.

Who would volunteer to live in such an inhospitable environment? Well Sarah Chayes, a former NPR reporter, has been living and working in Kandahar since 2001. While in Afghanistan recently, I also met a former Special Forces soldier, now working as a State Department counter-narcotics contractor, who said he has been in Afghanistan for four years. Such people are invaluable for their knowledge of the local landscape.

The British, from whose glory days we can still learn many lessons, recognized this. Gertrude Bell, Richard Francis Burton, T.E. Lawrence and numerous others made an outsize contribution to their empire by "going native." They may have been sneered at by typical army officers, who were primarily interested in polo, whist and gin, but the knowledge they acquired proved invaluable.

Consider the case of Col. Sir Robert Warburton, a 19th century artillery officer who was the offspring of a marriage between a British officer and an Afghan princess. He spent nearly 30 years on the Northwest Frontier of India working as a political officer, negotiating with tribesmen who were (and are) suspicious of all outsiders.

"It took me years to get through this thick crust of mistrust, but what was the after-result?" he wrote in his memoirs. "For upwards of fifteen years I went unarmed amongst these people. My camp, wherever it happened to be pitched, was always guarded and protected by them. The deadliest enemies of the Khyber Range, with a long record of blood-feuds, dropped those feuds for the time being when in my camp."

Warburton retired in May 1897. Within months the frontier was aflame with a great uprising that took tens of thousands of troops to suppress. (You can read all about it in Winston Churchill's first book, "The Story of the Malakand Field Force," which contains eerie echoes of current fighting on both sides of the Afghanistan-Pakistan border.) Warburton, who had been known as the "King of the Khyber," was convinced that if he were still on the job, the contacts he had cultivated would have allowed him to prevent the uprising. He may well have been right.

What Gen. McChrystal realizes, in effect, is that we need to create our own Robert Warburtons. If his experiment succeeds, future commanders can build on the precedent to provide the kind of cultural and linguistic skills that we will need to win the long war against Islamic extremists.

Mr. Boot is a senior fellow in national security studies at the Council on Foreign Relations. He is currently writing a history of guerrilla warfare.

Health Reform and Competitiveness

Health Reform and Competitiveness. WSJ Editorial
WSJ, Jun 17, 2009

Democrats have spent years arguing that corporate tax rates don't matter to U.S. competitiveness. But all of a sudden one of their favorite arguments for government-run health care has become . . . U.S. corporate competitiveness. Political conversions on this scale could use a little scrutiny.

"Businesses now recognize that if we don't get a handle on this stuff then they are going to continue to be operating at a competitive disadvantage with other countries," President Obama recently remarked. "And so they anxiously seek serious reform."

Sure enough, many business leaders who should know better have picked up the White House theme. "You won't fundamentally solve the problems in business until you solve the problem of spiraling health-care costs, which is driving everybody crazy," said Google CEO Eric Schmidt the other day.

Messrs. Obama and Schmidt need to brush up on their economics. Employers may write the checks to the insurance companies, but workers still pay for the coverage they get from those employers. The total cost of an employee is what matters to businesses, and fringe benefits are as much a part of compensation as cash wages. When health costs rise, firms don't become less competitive, as if insurance were lopped out of profits. Instead, nonhealth compensation drops. Or wages rise more slowly than they otherwise would.

A recent study from none other than the White House Council of Economic Advisers notes exactly this point: If medical spending continues to accelerate, it expects take-home pay to stagnate. According to the New York Times, White House economic aide Larry Summers pressured CEA chairman Christine Romer to make the competitiveness argument, "adding that it was among the political advisers' favorite 'talking points.'" Ms. Romer pointedly retorted, "I'm not going to put schlocky arguments in there." How the schlock gets into Mr. Obama's speeches is a different question.

It's certainly true that the U.S. employer-based insurance system can dampen entrepreneurial spirits. There's the "job lock" phenomenon, in which employees fear leaving a less productive job because they're afraid to lose their health benefits. Another problem is that insurance costs more for small groups than the large risk pools that big corporations assemble, meaning that it's harder to form new businesses that can offer policies. But all this is really an argument for developing the individual health insurance market, where policies would follow workers, not jobs.

As for the competitiveness line, it's nonsense for most companies. The exceptions are heavily unionized businesses like auto makers that have locked themselves in to gold-plated coverage, especially for retirees. They have a harder time adjusting health costs and wages. Other companies might get a bit more running room in the short run if government assumed all health costs a la the single-payer systems of Western Europe. But over time the market would clear -- compensation being determined by the demand for and supply of labor -- and wages would rise. Or they might not rise at all if health-care costs are merely replaced by the tax increases necessary to finance Mr. Obama's new multi-trillion-dollar entitlement.

This is where the real competitiveness argument is precisely the opposite of the one pitched by Messrs. Obama and Schmidt. Consider the European welfare states, where costly entitlements and regulations make it extremely expensive to hire new workers. The nearby table lays out the tax wedge, the share of labor costs that never reaches employees but instead goes straight to government. In Germany, France and Italy, the tax wedge hovers around 50%, in part to pay for state-provided health care.

By contrast, the U.S. tax wedge was around 30% in 2008, according to the OECD. In other words, the costs of providing insurance would merely be converted into a larger wedge, which would itself eat into compensation. This is why Europe has tended to have higher unemployment and slower economic growth over the past 30 years.

If Democrats really want to increase U.S. competitiveness, they could look at the corporate income tax, which is the second highest in the industrialized world and a major impediment to U.S. job creation when global capital is so fluid. Or drop their proposals to raise personal income-tax rates, which affect thousands of small- and medium-size businesses that have fled the corporate tax regime as limited liability companies or Subchapter S corporations. Or cut capital gains rates, which deter risk taking and investment. Or rethink their plans to rig the rules in favor of organized labor by doing away with secret ballots in union elections.

On all these issues and more, Democrats want to increase, not reduce, the burdens on U.S. business. Their health-care line is, per Ms. Romer, "schlocky" political spin.

WSJ Editorial Page on Federal President's Position on Iran's Elections

Obama's Iran Abdication. WSJ Editorial
Democracy interferes with his nuclear diplomacy script.
The Wall Street Journal, Jun 17, 2009, page A12

The President yesterday denounced the "extent of the fraud" and the "shocking" and "brutal" response of the Iranian regime to public demonstrations in Tehran these past four days.

"These elections are an atrocity," he said. "If [Mahmoud] Ahmadinejad had made such progress since the last elections, if he won two-thirds of the vote, why such violence?" The statement named the regime as the cause of the outrage in Iran and, without meddling or picking favorites, stood up for Iranian democracy.

The President who spoke those words was France's Nicolas Sarkozy.

The French are hardly known for their idealistic foreign policy and moral fortitude. Then again many global roles are reversing in the era of Obama. The American President didn't have anything to say the first two days after polls closed in Iran on Friday and an improbable landslide victory for Mr. Ahmadinejad sparked the protests. "I have deep concerns about the election," he said yesterday at the White House, when he finally did find his voice. "When I see violence directed at peaceful protestors, when I see peaceful dissent being suppressed, wherever that takes place, it is of concern to me and it's of concern to the American people."

Spoken like a good lawyer. Mr. Obama didn't call the vote fraudulent, though he did allow that Ayatollah Ali Khamenei "understands the Iranian people have deep concerns about the election." This is a generous interpretation of the Supreme Leader's effort to defuse public rage by mooting a possible recount of select precincts. "How that plays out," Mr. Obama said, "is ultimately for the Iranian people to decide." Sort of like the 2000 Florida recount, no doubt.

From the start of this Iranian election, Administration officials said the U.S. should avoid becoming an issue in the campaign that the regime might exploit. Before votes were cast, this hands-off strategy made sense in that the election didn't present a real choice for Iranians. Whether President Ahmadinejad or his chief challenger, Mir Hossein Mousavi, won wouldn't change the mullahs' ultimate political control. Mr. Mousavi had been Ayatollah Khomeini's Prime Minister, hardly the resume of a revolutionary.

But Friday's vote and aftermath have changed those facts on the ground. Like other authoritarians -- Ferdinand Marcos in 1986 or Slobodan Milosevic in 2000 -- Tehran misjudged its own people. Having put a democratic veneer around their theocracy, they attempted to steal an election in such a blatant way that it has become a new and profound challenge to their legitimacy. Especially in the cities, Iranians are fed up with the corruption and incompetence rampant in the Islamic Republic. This dissatisfaction was galvanized by the regime's contempt for their votes and found an accidental leader in Mr. Mousavi. The movement has now taken on a life of its own, with consequences no one can predict.

The Obama Administration came into office with a realpolitik script to goad the mullahs into a "grand bargain" on its nuclear program. But Team Obama isn't proving to be good at the improv. His foreign policy gurus drew up an agenda defined mainly in opposition to the perceived Bush legacy: The U.S. will sit down with the likes of Iran, North Korea or Russia and hash out deals. In a Journal story on Monday, a senior U.S. official bordered on enthusiastic about confirming an Ahmadinejad victory as soon as possible. "Had there been a transition to a new government, a new president wouldn't have emerged until August. In some respects, this might allow Iran to engage the international community quicker." The popular uprising in Iran is so inconvenient to this agenda.

President Obama elaborates on this point with his now-frequent moral equivalance. Yesterday he invoked the CIA's role in the 1953 coup against Iranian leader Mohammad Mossadeq to explain his reticence. "Now, it's not productive, given the history of the U.S.-Iranian relations, to be seen as meddling -- the U.S. President meddling in Iranian elections," Mr. Obama said.

As far as we can tell, the CIA or other government agencies aren't directing the protests or bankrolling Mr. Mousavi. Beyond token Congressional support for civil society groups and the brave reporting of the Persian-language and U.S.-funded Radio Farda, America's role here is limited. Less than a fortnight ago, in Cairo, Mr. Obama touted his commitment to "governments that reflect the will of the people." Now the President who likes to say that "words matter" refuses to utter a word of support to Iran's people. By that measure, the U.S. should never have supported Soviet dissidents because it would have interfered with nuclear arms control.

The Iranian rebellion, though too soon to call a revolution, is turning out to be that 3 a.m. phone call for Mr. Obama. As a French President shows up the American on moral clarity, Hillary Clinton's point about his inexperience and instincts in a crisis is turning out to be prescient.

Tuesday, June 16, 2009

The Group of Friends of the UN Secretary General on the UN Observer Mission in Georgia Resolution

Joint Statement by the Group of Friends of the UN Secretary General on the United Nations Observer Mission in Georgia Resolution
Bureau of Public Affairs, Office of the Spokesman
US State Dept, Washington, DC, Tue, 16 Jun 2009 17:35:10 -0500


Following is the text of a Joint Statement by the Spokespersons of the United Kingdom, the United States, Germany, and France as members of the Group of Friends of the UN Secretary General.

Begin Text:

We deeply regret Russia’s decision to veto a resolution on the United Nations Observer Mission in Georgia (UNOMIG), which has resulted in the termination of the Security Council mandate for the Mission after 15 years of valuable service providing military transparency on the ground, promoting the human rights of the local population, and seeking to create conditions for the voluntary, safe, and dignified return of internally displaced persons and refugees. We note that Russia had twice accepted a reference to UNSCR 1808 since the August conflict, in resolutions 1839 and 1866. The closure of the UN mission, like that of the OSCE mission, is a setback to international efforts to resolve this conflict.

We call on all parties with forces on the ground to exercise the utmost restraint and to abide by the August 12 and September 8 ceasefire agreements. We call on all participants in the Geneva talks to commit themselves to continuing efforts to find a peaceful and political resolution to the conflict and to alleviate the plight of refugees and IDPs. We reaffirm our firm support for the European Union Monitoring Mission.

We also reiterate our strong support for Georgia's independence, sovereignty and territorial integrity within its internationally recognized borders.
###

PRN: 2009/602

The Language of Macroeconomics: The National Income Accounts

Paraphrasing Macroeconomics: Understanding the Wealth of Nations. By David Miles, Imperial College, and Andrew Scott, London Business School. Chichester, UK: John Wiley & Sons, 2005

Chapter 2
---------
The Language of Macroeconomics: The National Income Accounts
------------------------------------------------------------

2.1 What Do Macroeconomists Measure?
-------------------------------------

At the foundation of macroeconomics is a concern with human welfare[, but it] is notoriously hard to calculate, particularly in macroeconomics where the relevant measure is the welfare of society as a whole. Even if we could accurately measure individual welfare, how can we compare levels of happiness across individuals and construct an aggregate measure?

Rather than try and directly measure welfare, macroeconomists take a short cut. They focus on the amount of goods and services—the “output”—produced within an economy. The justification for this is simple—if an economy produces more output, then it can meet more of the demands of society. Using output as a measure of welfare [now begs] many questions[, since there is no consensus on values and half of the population worries about the environment, inequality, etc.]

These questions suggest that output will only be an approximation to wider concepts of welfare ... But producing more output should enable a society to increase its standard of living.

2.2 How Do Macroeconomists Measure Output?
-------------------------------------------

> Real vs Nominal output

Chained weights

GDP deflator = Nominal GDP/Real GDP

Real GDP focuses on how production in the economy changes by using constant prices. Nominal GDPchanges because of changes in production and changes in prices.

2.3 Output as Value Added
--------------------------

Value added is the difference between the value of the output sold and the cost of purchasing raw materials and intermediate goods needed to produce output.

2.4 National Income Accounts
-----------------------------

Output, income and expenditure

AD: aggregate demand
AS: aggregate supply

AD = Y output + M imports = C + I + G + X, or Y = C + I + G + (X-M) (net exports)
I = Ik gross fixed capital formation (the new capital stock installed) + Iinventories (output not sold)

Is it true that AD = AS = Y? No:

Desired AD = C + Id + G + X, Id = Ik + Iidesired
Actual AD = C + Ia + G + X, Ia = Ik + Iiactual

---------> Actual AD = AS = Y


GDP can be measured either as value of output produced, the income earned in the economy by capital and labor, or the expenditure on final products.

> GDP or GNI?

GNI = GDP + remittances_nationalcompanies + remittances_nationals + Foreign aid you receive - remittances_foreigncompanies - remittances_foreignindividuals - Foreign aid you give to others


2.5 How Large Are Modern Economies?
------------------------------------

Comparing countries' GDP via exchange rates

Comparing countries' GDP taking into account PPP

GDP per capita

2.6 Total Output and Total Happiness
-------------------------------------

GDP measures economic activity, but is a good measure of standard of living?

There are two separate issues lurking here. The first is a measurement one—is GDP correctly measured (which is not) and, if not, does this reduce its ability to approximate the standard of living? Some see corrections to make:

Families frequently have money earners and people that provide services (cooking, child caring, elderly caring, administration). Purchasing these services and goods in the market is a substantial amount. For 2000, the U.K. Office of National Statistics estimates that compared with GDP of £892bn, household production provided services that would have been worth £693bn if purchased through the market with childcare accounting for £220.5bn.

Another measurement problem for GDP is environmental pollution and the destruction of natural resources.

The second is a conceptual one—even if it is properly measured, does GDP really capture our concepts of welfare? For economists, measures of aggregate output are still the dominant indicators of the standard of living, but alternative measures have been suggested: Human Development Index (HDI).

Although there are these patterns of outliers, the overall correlation remains strong—GDP seems a useful approximation for even broader measures of welfare.


C O N C E P T U A L Q U E S T I O N S

FAST ANWSERS, not checking the literature

1. (Section 2.2) “[An economist] is someone who knows the price of everything and the value of nothing.” (Adapted from George Bernard Shaw.)
Discuss.

Besides mediocre economists, who damage the profession with badly communicated opinions, there are truths (the state of knowledge at least) that are inconvenient for others to hear, and this knowledge seems too cold, rational and unsensitive to the needs of the poor. If 90 pct of the people had an economic education probably the number of bleeding hearts would diminish. Or not.

2. (2.3) Coffee beans cost only a few cents when imported. But to buy a coffee at a coffee bar costs far more. What does this tell you about value added?

3. (2.3/2.4) Try to explain to someone who had never thought about measuring the value of economic activity why the output, income, and expenditure ways of measuring national production should give the same answer. It helps to think of a simple economy producing only two or three different things.

4. (2.5) Would you expect that a country where the share of wages and salaries in GDP was falling, and the share of profits and interest was rising, to be one where consumption as a percent of national income was also shifting? Why? Would you expect the distribution of income to
become more unequal? Suppose the trends were due to demographic shifts, more specifically to a rapidly aging population. Would this change your answers?

5. (2.5) Do you think it is easier to evaluate the relative welfare of different generations of people in one country (by comparing per capita GDP over time), or to compare the relative standards of living in different countries at a point in time (by converting current per capita GDPs into a common currency)?

6. (2.5) How would you treat the activities of criminals in GDP accounting? What about the activities of the police force?

.1 Parasites
.2 A waste of resources, a tax on the economy.

7. (2.6) The Beatles claimed that “I don’t care too much for money, money can’t buy me love.” (Shortly after first making this claim they joined the ranks of the richest people in the world.) Does their claim undermine the use of GDP to measure welfare?


A N A L Y T I C A L Q U E S T I O N S

For another day.

We're unable to read our own body language

We're unable to read our own body language
British Psychological Society, Monday, Jun 15, 2009

Reference: Hofmann, W., Gschwendner, T., & Schmitt, M. (2009). The road to the unconscious self not taken: Discrepancies between self- and observer-inferences about implicit dispositions from nonverbal behavioural cues. European Journal of Personality, 23 (4), 343-366 DOI: 10.1002/per.722

A fascinating study has shown that we're unable to read insights into ourselves from watching a video of our own body language. It's as if we have an egocentric blind spot. Outside observers, by contrast, can watch the same video and make revealing insights into our personality.

The premise of the new study is the tip-of-the-iceberg idea that what we know about ourselves is fairly limited, with many of our impulses, traits and beliefs residing below the level of conscious access. The researchers wondered whether people would be able to form a truer picture of themselves when presented with a video of their own body language.

In an initial study, Wilhelm Hofmann and colleagues first had dozens of undergrad students rate how much of an extrovert they are, using both explicit and implicit measures. The explicit measure simply required the students to say whether they agreed that they were talkative, shy and so on. The implicit measure used was the Implicit Association Test. Briefly, this reveals how much people associate ideas in their mind, by seeing whether they are quicker or slower to respond when two ideas are allocated the same response key on a keyboard.

Next, the participants recorded a one minute television commercial for a beauty product (they'd been told the study was about personality and advertising). The participants then watched back the video of themselves, having been given guidance on non-verbal cues that can reveal how extraverted or introverted a person is. Based on their observation of the video, they were then asked to rate their own personality again, using the explicit measure.

The key question was whether seeing their non-verbal behaviour on video would allow the participants to rate their personality in a way that was consistent with their earlier scores on the implicit test.

Long story short - they weren't able to. The participants' extraversion scores on the implicit test showed no association with their subsequent explicit ratings of themselves, and there was no evidence either that they'd used their non-verbal behaviours (such as amount of eye contact with the camera) to inform their self-ratings.

In striking contrast, outside observers who watched the videos made ratings of the participants' personalities that did correlate with those same participants' implicit personality scores, and it was clear that it was the participants' non-verbal behaviours that mediated this correlation (that is, the observers had used the participants' non-verbal behaviours to inform their judgements about the participants' personalities).

Two further experiments showed that this general pattern of findings held even when participants were given a financial incentive to rate their own personality accurately, as if from an outside observer's perspective, and also when the task involved anxiety personality ratings following the delivery of a short speech.

What was going on? Why can't we use a video of ourselves to improve the accuracy of our self-perception? One answer could lie in cognitive dissonance - the need for us to hold consistent beliefs about ourselves. People may well be extremely reluctant to revise their self-perceptions, even in the face of powerful objective evidence. A detail in the final experiment supports this idea. Participants seemed able to use the videos to inform their ratings of their "state" anxiety (their anxiety "in the moment") even while leaving their scores for their "trait" anxiety unchanged."

When applied to the question of how people may gain knowledge about their unconscious self, the present set of studies demonstrates that self-perceivers do not appear to pay as much attention to and make as much use of available behavioural information as neutral observers," the researchers said.

Sunday, June 14, 2009

Sotomayor's Mind-Numbing Speeches

Sotomayor's Mind-Numbing Speeches. By Matthew J. Franck
Bench Memos/NRO, Thursday, June 11, 2009

I have just come up for air from the stifling smog of banality generated by the collected speeches of Sonia Sotomayor. They can be seen as the attachments to Question 12d on this page set up by the Senate Judiciary Committee, but let me hasten to add that I have wasted my morning on reading them so you don't have to.

I was interested in part in whether I was right to speculate yesterday that maybe her best-known speech, 2001's "A Latina Judge's Voice," was partly "unscripted" or ab-libbed, since that might explain the occasionally bad writing in its published form. It could not have been wholly off-the-cuff, of course, with its recitation of statistics and its quotations from a few sources—but those might have been on notecards. Having gone through virtually all the speeches on the Senate website, I can say that what the Berkeley La Raza Law Journal published was almost certainly based on a prepared text. I say that for a couple of reasons.

First, Judge Sotomayor's speeches all display mediocre writing, and frequently exhibit errors of various kinds, and the copies of them that have been made public are in most cases quite obviously her own originals. She said of herself as long ago as 1994 that "I consider myself merely an average writer," and as recently as 2007 that "[w]riting remains a challenge for me even today . . . I am not a natural writer." This is a salutary self-awareness, because her speeches are bad—uniformly boring, almost invariably devoid of actual ideas, and completely forgettable. I am not sure she has ever uttered an interesting thought off the bench—unless you count her celebration of the "wise Latina," which is interesting only to the pathologist of confused identity politics.

Second, Sotomayor's speeches are mind-numbingly repetitious when read in series. This may seem an unfair comment; each one was presumably a first-time listening experience for her audience (one can hope, anyway). But reading them in series, I began quietly to mutter to the speaker, "Get some new material. Aren't you boring yourself?" She didn't just once deliver the line "I became a Latina by the way I love and the way I live my life"; she delivered it easily a dozen times to (mostly Hispanic) audiences over the course of ten years or so. And the repetition allows us to see the same little mistakes over and over. To take just two: Sotomayor has a fond memory from her childhood of the Mexican comedian Cantinflas, but she never once spells his name correctly in at least a half dozen speeches (after which I stopped counting). And she likes relating how the city girl came to Princeton and had never heard a cricket before, and how she imagined it looked like "Jimmy the Cricket" from the Disney movie Pinocchio (once she called him "Jiminy the Cricket," which gets a little closer, but in subsequent speeches she went back to Jimmy). Such repeated mistakes over a period of years provide us with some assurance that all the errors we see are her own, and not transcription errors from audio recordings. So when she refers to "Anthony Scalia" for "Antonin" or "Thurmond Marshall" for "Thurgood," we can be pretty sure that's Sotomayor's own mistake.

I can also confirm what others have observed about the notorious "wise Latina" speech at Berkeley: that it was not an isolated instance of such an argument against traditional notions of judicial impartiality.

Sotomayor's speeches for the most part fall into three large categories: 1) celebrations of her Latina background, combined with exhortations to strive as she has done, delivered to young Hispanic audiences; 2) encouragement to law students to take up pro bono work and benefit their communities; and 3) brief descriptive accounts of the work of the courts on which she has served, trial and appellate. In the first category there are mostly harmless hurrahs for being Hispanic or Latino or Puerto Rican or whatever. Many of these contain a variant of this paragraph from 1998:

America has a deeply confused image of itself that is a perpetual source of tension. We are a nation that takes pride in our ethnic diversity, recognizing its importance in shaping our society and in adding richness to its existence. Yet, we simultaneously insist that we can and must function and live in a race- and color-blind way that ignores those very differences that in other contexts we laud. That tension between the melting pot and the salad bowl, to borrow recently popular metaphors in New York, is being hotly debated today in national discussions about affirmative action. This tension leads many of us to struggle with maintaining and promoting our cultural and ethnic identities in a society which is often ambivalent about how to deal with its differences.

Nothing here, without more, should cause anyone to conclude that Sotomayor is for race-consciousness in judging. The paragraph is almost studiously non-committal and merely descriptive, except for its initial characterization of the "tension" between diversity and colorblind equality as a mark of a country that has a "deeply confused image of itself." Lots of Americans could easily explain to Judge Sotomayor how this is no source of confusion at all.

But then, overlapping with all these mostly boring celebrations of the joys of being a Latina, we find the speeches that do indicate something about Sotomayor's view of judging. The Berkeley La Raza speech, given in October 2001, was given again in almost identical form on February 26, 2002, and October 22, 2003. And an earlier version, containing much of the same material but not yet polished into its best-known form, was given on March 17, 1994 in Puerto Rico, on the topic of "Women in the Judiciary." Because of that topic and the audience listening to the speech, Sotomayor referred to a "wise woman with the richness of her experiences" rather than a "wise Latina." But the essentials of the speeches we know from 2001 and later were all there: the disagreement with Judge Miriam Cedarbaum's argument for judicial neutrality, the expectation that better judging will come from women and minorities because they are women and minorities, and the plumping for more appointments of Hispanic judges in particular.

In sum, we can say that Judge Sotomayor has, with few exceptions, given just three or four speeches to public audiences in her career—the same three or four, over and over and over. One of her repeated themes is on the virtue of race-conscious and sex-conscious bias in judging. Like her other themes, this one cannot be "walked back" by White House claims that she "misspoke" or could have made her point differently. She is, on the evidence of her speeches, a great self-absorbed bore, a mediocrity as a writer, and a polished practitioner of identity politics.

WaPo: The Obama Diet it's not going to slim down the federal budget anytime soon

The Obama Diet. WaPo Editorial
It's not going to slim down the federal budget anytime soon.
WaPo, Friday, June 12, 2009

IMAGINE GOING on a diet in which you figure out how many calories a day you eat and pledge to make up for any amount beyond that with vigorous exercise. Except that your regular consumption includes four gooey slices of chocolate cake daily -- which you have no intention of giving up. You might not put on weight as quickly, but you're not likely to slim down, either. This is about what President Obama proposed this week with new legislation to codify congressional pay-as-you-go rules. "The 'pay-as-you-go rule' is very simple," the president said. "Congress can only spend a dollar if it saves a dollar elsewhere."

Well, not exactly. First, as under existing House and Senate rules, what is known as the PAYGO law would not apply to discretionary spending programs, which account for about 40 percent of the federal budget; these programs, which Congress reviews and funds yearly, could continue to grow without corresponding cuts or new revenue. Only extra spending for mandatory programs (Medicare, Social Security and the like) and tax provisions would be covered. Second, Mr. Obama would write into the law four whopping exceptions to the pay-as-you-go rule: extending most of the Bush tax cuts, keeping the estate tax at its current level, preventing the alternative minimum tax from hitting more taxpayers and increasing Medicare payments to doctors. This adds up to a $2.8 trillion loophole over 10 years.

What to make of this move? Well, it's better than nothing, and if implemented it would improve on the record of Mr. Obama's predecessor, who -- with plenty of Democratic encouragement -- dug the entitlement hole even deeper with the creation of a Medicare prescription drug plan that was not paid for. By contrast, Mr. Obama vows that his health-care reform will have to be financed with spending cuts or tax increases. That is important under the current budgetary circumstances, and to the extent that pay-as-you-go legislation would make it more difficult for lawmakers to get around their self-imposed rules simply by voting to ignore them, all the better.

But the president's self-congratulatory back-patting about fiscal rectitude is more than a bit hard to take in light of the huge exceptions he would grant. Yes, the president inherited a budget in arrears, an economy in tatters and a tax system that is unsustainable as written. It was necessary to add to the deficit in the short term to jolt the economy back to life. The House has these four exemptions in its pay-as-you-go rule; even without the Obama exceptions, there was no reasonable hope that these costs would be paid for.

Yet Mr. Obama's professions of being willing to make hard choices are belied by his failure to adjust his spending plans to budgetary reality. Something will need to give -- either raising significantly more revenue or dramatically scaling back government. He doesn't deserve much credit for a pay-as-you-go proposal that elides this reality instead of confronting it.

Naturalism Has Been Hijacked

Naturalism Has Been Hijacked. By George Ball
Man is not a cancer on the planet.
WSJ, Jun 13, 2009

Mankind has really been put in its place over the past 500 years. Why only the other day, back in 1400, the sun orbited the earth; man was God's consummate work of art; humans were masters of themselves and the domain God provided for them.

Our secular fall from grace began with Copernicus, who dislodged the world from its celestial catbird seat. Later, Darwin established that man, far from being the animal kingdom's pièce de résistance, was a bit like a baboon in clothes. Then Mendel documented the laws of inheritance -- so much for free will -- and Freud subordinated what was then left of our minds to unseemly drives over which we have little control.

In the 20th century, technology assumed a size and complexity too big to fit into what was left of our brains. In the 1890s, an intelligent layman could achieve a rudimentary grasp of the scope of current scientific thought. Perhaps no one -- scientist or not -- fathoms the full scope of technology today.
According to scientist and futurist Raymond Kurzweil, the coming technological-evolutionary quantum leap, known as the Singularity, will erase the line between human beings and technology. He maintains that technology's exponential progress will result in part-human, part-machine beings with infinitely greater brain power and life-spans approaching immortality.

Mr. Kurzweil envisions the time, if a body part fails, one need only grab its replacement from the pantry and snap it in place. Already, lawyers are busy devising the constitutional framework for a post-human future, in view of the shifting nature of what comprises a human being. The classic paradox comes to mind: Once the knife's blade and handle are each replaced several times, is it still the same knife? Once all your parts have been replaced a few times, are you still you?

Now a segment of the Green movement presents a fresh challenge to mankind's place within nature. Humans, the thinking goes, are one species among the many, a life form coexisting with others, our rights commensurate with those of snail darters, mosquitoes and coral reefs.

The new environmentalist thinking occupies that treacherous terrain between rationality and romanticism. It's highly logical, too, an all-encompassing equation where everything is equivalent to everything else -- communism at a cellular level.

The premise glows with the innocence we forsook when Adam larcenously appropriated an apple from its rightful owner, the tree.

This dangerous new unnatural naturalism sees the planet as a realm of halcyon purity. Conversely, mankind is portrayed as a cancer on the planet. Welcome to secular subhumanism.
The Earth-Firsters are not fools. There are choice elements in their deranged philosophy that merit consideration; such is the essence of temptation. However, their failure is that they undermine their cause with acts of brutality. Theodore Kaczynski, the Unabomber, a Ph.D. with kindred neo-Luddite views, was one such activist run amok, responsible for dozens of injuries and four deaths. He is a case study of how, contaminated with extreme emotion, logic becomes toxic.

Self-described "evo-lutionaries" and animal-rights activists feel justified in spiking trees, burning down housing developments, vandalizing laboratories and threatening the lives of researchers and their families. By all means save the Red-Cockaded Woodpecker, but not at the cost of human lives, no matter how few. That way lies madness.

One activist author posits that the planet can support only one billion people -- a number surely including the writer, his friends and extended family. Another activist advocates saving the world through euthanasia, abortion, suicide and sodomy. However, the truly repugnant part of this story is that these are both tenured professors in wealthy universities.

In Switzerland, proposed legislation protects the rights of plants. As you roam the Swiss mountains, do not violate the rights of the wildflowers by picking them: An undercover gnome might arrest you. Internationally, the greener-than-thou brigade scorns bioengineered seeds -- the 20th century achievement that vastly increased the world's food supply and rescued billions from starvation -- forgetting that nature has been creating hybrids since the beginning of time.

A Yale professor maintains that owning pets is a kind of species colonialism, an exploitative master-subject relationship. The word "pet" is now viewed as pejorative; if you must hold a creature hostage, call it your "animal companion."

The political views of the Eco-elitists defy easy categorization, if not also comprehension. Their anti-business stance might mark them as liberals, while their hard-edged fundamentalist views about nature and brittle nostalgia for a lost Peaceable Kingdom are surely conservative.
Perhaps they are little more than one of nature's newest 21st century hybrids: Progressive-Reactionaries.

Mr. Ball is chairman of W. Atlee Burpee & Co., and a former president of the American Horticultural Society. This op-ed was adapted from an entry on his blog (www. heronswoodvoice.com).

A society of children cannot survive?

Retreat into Apathy. By Mark Steyn
A society of children cannot survive.
NRO, Jun 13, 2009

Willie Whitelaw, a genial old buffer who served as Margaret Thatcher’s deputy for many years, once accused the Labour party of going around Britain stirring up apathy. Viscount Whitelaw’s apparent paradox is, in fact, a shrewd political insight, and all the sharper for being accidental. Big government depends, in large part, on going around the country stirring up apathy — creating the sense that problems are so big, so complex, so intractable that even attempting to think about them for yourself gives you such a splitting headache it’s easier to shrug and accept as given the proposition that only government can deal with them.

Take health care. Have you read any of these health-care plans? Of course not. They’re huge and turgid and unreadable. Unless you’re a health-care lobbyist, a health-care think-tanker, a health-care correspondent, or some other fellow who’s paid directly or indirectly to plough through this stuff, why bother? None of the senators whose names are on the bills have read ’em; why should you?

And you can understand why they drag on a bit. If you attempt to devise a health-care “plan” for 300 million people, it’s bound to get a bit complicated. But a health-care plan for you, Joe Schmoe of 27 Elm Street, didn’t used to be that complicated, did it? Let’s say you carelessly drop Ted Kennedy’s health-care plan on your foot and it breaks your toe. In the old days, you’d go to your doctor (or, indeed, believe it or not, have him come to you), he’d patch you up, and you’d write him a check. That’s the way it was in most of the developed world within living memory. Now, under the guise of “insurance,” various third parties intercede between the doctor and your checkbook, and to this the government proposes adding a massive federal bureaucracy, in the interests of “controlling costs.” The British National Health Service is the biggest employer not just in the United Kingdom, but in the whole of Europe. Care to estimate the size and budget of a U.S. health bureaucracy?

According to the U.N. figures, life expectancy in the United States is 78 years; in the United Kingdom, it’s 79 — yay, go socialized health care! On the other hand, in Albania, where the entire population chain-smokes and the health-care system involves swimming to Italy, life expectancy is still 71 years — or about where America was a generation or so back. Once you get childhood mortality under control, and observe basic hygiene and lifestyle precautions, the health “system” is relatively marginal. One notes that, even in Somalia, which still has high childhood mortality, not to mention a state of permanent civil war, functioning government has entirely collapsed and yet life expectancy has increased from 49 to 55. Maybe if government were to collapse entirely in Washington, our life expectancy would show equally remarkable gains. Just thinking outside the box here.

When President Obama tells you he’s “reforming” health care to “control costs,” the point to remember is that the only way to “control costs” in health care is to have less of it. In a government system, the doctor, the nurse, the janitor, and the Assistant Deputy Associate Director of Cost-Control System Management all have to be paid every Friday, so the sole means of “controlling costs” is to restrict the patient’s access to treatment. In the Province of Quebec, patients with severe incontinence — i.e., they’re in the bathroom twelve times a night — wait three years for a simple 30-minute procedure. True, Quebeckers have a year or two on Americans in the life-expectancy hit parade, but, if you’re making twelve trips a night to the john 365 times a year for three years, in terms of life-spent-outside-the-bathroom expectancy, an uninsured Vermonter may actually come out ahead.

As Louis XV is said to have predicted, “Après moi, le deluge” — which seems as incisive an observation as any on a world in which freeborn citizens of the wealthiest societies in human history are content to rise from their beds every half-hour every night and traipse to the toilet for yet another flush simply because a government bureaucracy orders them to do so. “Health” is potentially a big-ticket item, but so’s a house and a car, and most folks manage to handle those without a Government Accommodation Plan or a Government Motor Vehicles System — or, at any rate, they did in pre-bailout America.

More important, there is a cost to governmentalizing every responsibility of adulthood — and it is, in Lord Whitelaw’s phrase, the stirring up of apathy. If you wander round Liverpool or Antwerp, Hamburg or Lyons, the fatalism is palpable. In Britain, once the crucible of freedom, civic life is all but dead: In Wales, Northern Ireland, and Scotland, some three-quarters of the economy is government spending; a malign alliance between state bureaucrats and state dependents has corroded democracy, perhaps irreparably. In England, the ground ceded to the worst sociopathic pathologies advances every day — and the latest report on “the seven evils” afflicting an ever more unlovely land blames “poverty” and “individualism,” failing to understand that if you remove the burdens of individual responsibility while loosening all restraint on individual hedonism the vaporization of the public space is all but inevitable. In Ontario, Christine Elliott, a candidate for the leadership of the so-called Conservative party, is praised by the media for offering a more emollient conservatism predicated on “the need to take care of vulnerable people.”

Look, by historical standards, we’re loaded: We have TVs and iPods and machines to wash our clothes and our dishes. We’re the first society in which a symptom of poverty is obesity: Every man his own William Howard Taft. Of course we’re “vulnerable”: By definition, we always are. But to demand a government organized on the principle of preemptively “taking care” of potential “vulnerabilities” is to make all of us, in the long run, far more vulnerable. A society of children cannot survive, no matter how all-embracing the government nanny.

I get a lot of mail each week arguing that, when folks see the price tag attached to Obama’s plans, they’ll get angry. Maybe. But, if Europe’s a guide, at least as many people will retreat into apathy. Once big government’s in place, it’s very hard to go back.

— Mark Steyn, a National Review columnist, is author of America Alone.

Texas Tort Bar: The plaintiffs-lawyer lobby blows $9 million and gets nowhere

Texas Tort Victories. WSJ Editorial
The plaintiffs-lawyer lobby blows $9 million and gets nowhere.
WSJ, Jun 13, 2009

Texas recently finished its legislative session, and the best news is what didn't pass. Namely, some 900 bills put forward by the tort bar.

The plaintiffs-lawyer lobby spent $9 million in last year's state legislative elections to help smooth the way for these bills, which were designed to roll back tort reforms passed in recent years, or to create new ways to sue. Yet that money wasn't enough to convince most Texas legislators to give up two-decades of hard-won legal progress, which ranges from class-action clean-up to medical liability reform.

Among the more notable failed proposals were a bill that would have shifted the burden of medical proof away from plaintiffs and on to defendants in asbestos and mesothelioma cases; an attempt to rip up Texas's successful system of trying multidistrict litigation in a single court; and legislation to allow plaintiffs to sue for "phantom" medical expenses.

Part of this success was due to the legislature's gridlock over a controversial voter ID bill. Yet Republicans who run the Senate and House also did yeoman's work to keep many bills from ever reaching the floor. Republicans also got a helping hand from a number of brave, antilawsuit Democrats, many of them from South Texas, where litigation has exacted more of an economic toll.

Speaking of the economy, it's notable that Texas created more new jobs last year than the other 49 states combined. Texas's low tax burden is one reason. But also important is a fairer legal environment in which companies are less likely than they were a generation ago to face jackpot justice.

College: If they can find time for feminist theory, they can find time for Edmund Burke

Conservatism and the University Curriculum. By Peter Berkowitz
If they can find time for feminist theory, they can find time for Edmund Burke.

The political science departments at elite private universities such as Harvard and Yale, at leading small liberal arts colleges like Swarthmore and Williams, and at distinguished large public universities like the University of Maryland and the University of California, Berkeley, offer undergraduates a variety of courses on a range of topics. But one topic the undergraduates at these institutions -- and at the vast majority of other universities and colleges -- are unlikely to find covered is conservatism.

There is no legitimate intellectual justification for this omission. The exclusion of conservative ideas from the curriculum contravenes the requirements of a liberal education and an objective study of political science.

Political science departments are generally divided into the subfields of American politics, comparative politics, international relations, and political theory. Conservative ideas are relevant in all four, but the obvious areas within the political science discipline to teach about the great tradition of conservative ideas and thinkers are American politics and political theory. That rarely happens today.

To be sure, a political science department may feature a course on American political thought that includes a few papers from "The Federalist" and some chapters from Alexis de Tocqueville's "Democracy in America."

But most students will hear next to nothing about the conservative tradition in American politics that stretches from John Adams to Theodore Roosevelt to William F. Buckley Jr. to Milton Friedman to Ronald Reagan. This tradition emphasizes moral and intellectual excellence, worries that democratic practices and egalitarian norms will threaten individual liberty, attends to the claims of religion and the role it can play in educating citizens for liberty, and provides both a vigorous defense of free-market capitalism and a powerful critique of capitalism's relentless overturning of established ways. It also recognized early that communism represented an implacable enemy of freedom. And for 30 years it has been animated by a fascinating quarrel between traditionalists, libertarians and neoconservatives.

While ignoring conservatism, the political theory subfield regularly offers specialized courses in liberal theory and democratic theory; African-American political thought and feminist political theory; the social theory of Karl Marx, Emile Durkheim, Max Weber and the neo-Marxist Frankfurt school; and numerous versions of postmodern political theory.

Students may encounter in various political theory courses an essay by the British historian and philosopher Michael Oakeshott, or a chapter from a book by the German-born American political philosopher Leo Strauss. But they will learn very little about the constellation of ideas and thinkers linked in many cases by a common concern with the dangers to liberty that stem from the excesses to which liberty and equality give rise.

That constellation begins to come into focus at the end of the 18th century with Edmund Burke's "Reflections on the Revolution in France." It draws on the conservative side of the liberal tradition, particularly Adam Smith and David Hume and includes Tocqueville's great writings on democracy and aristocracy and John Stuart Mill's classical liberalism. It gets new life in the years following World War II from Friedrich Hayek's seminal writings on liberty and limited government and Russell Kirk's reconstruction of traditionalist conservatism. And it is elevated by Michael Oakeshott's eloquent reflections on the pervasive tendency in modern politics to substitute abstract reason for experience and historical knowledge, and by Leo Strauss's deft explorations of the dependence of liberty on moral and intellectual virtue.

Without an introduction to the conservative tradition in America and the conservative dimensions of modern political philosophy, political science students are condemned to a substantially incomplete and seriously unbalanced knowledge of their subject. Courses on this tradition should be mandatory for students of politics; today they are not even an option at most American universities.

When progressives, who dominate the academy, confront arguments about the need for the curriculum to give greater attention to conservative ideas, they often hear them as a demand for affirmative action. Usually they mishear. Certainly affirmative action for conservatives is a terrible idea.

Political science departments should not seek out professors with conservative political opinions. Nor should they lower scholarly standards. That approach would embrace the very assumption that has corrupted liberal education: that to study and teach particular political ideas one's identity is more important than the breadth and depth of one's knowledge and the rigor of one's thinking

One need not be a Puritan to study and teach colonial American religious thought, an ancient Israelite to study and teach biblical thought, or a conservative or Republican to study and teach conservative ideas. Affirmative action in university hiring for political conservatives should be firmly rejected, certainly by conservatives and defenders of liberal education.

To be sure, if political science departments were compelled to hire competent scholars to offer courses on conservative ideas and conservative thinkers, the result would be more faculty positions filled by political conservatives, since they and not progressives tend to take an interest in studying conservative thought. But there is no reason why scholars with progressive political opinions and who belong to the Democratic Party can not, out of a desire to understand American political history and modern political philosophy, study and teach conservatism in accordance with high intellectual standards. It would be good if they did.

It would also be good if every political science department offered a complementary course on the history of progressivism in America. This would discourage professors from conflating American political thought as a whole with progressivism, which they do in a variety of ways, starting with the questions they tend to ask and those they refuse to entertain.

Incorporating courses on conservatism in the curriculum may, as students graduate, disperse, and pursue their lives, yield the political benefit of an increase in mutual understanding between left and right. In this way, reforming the curriculum could diminish the polarization that afflicts our political and intellectual classes. But that benefit is admittedly distant and speculative.

In the near term, giving conservative ideas their due will have the concrete and immediate benefit of advancing liberal education's proper and commendable goal, which is the formation of free and well-furnished minds.

Mr. Berkowitz is a senior fellow at Stanford University's Hoover Institution.

North Korea Says It Will Start Enriching Uranium - Also Will Weaponize All the Plutonium It Can Find

North Korea Says It Will Start Enriching Uranium. By Blaine Harden
Weapons Move Is 'Retaliation' for Sanctions
Washingt, Sunday, June 14, 2009

TOKYO, June 13 -- North Korea adamantly denied for seven years that it had a program for making nuclear weapons from enriched uranium.

But on Saturday, a few hours after the U.N. Security Council slapped it with tough new sanctions for detonating a second nuclear device, the government of Kim Jong Il changed its tune, vowing that it would start enriching uranium to make more nuclear weapons.

Declaring that it would meet sanctions with "retaliation," North Korea also pledged to "weaponize" all the plutonium it could extract from used fuel rods at its Yongbyon nuclear plant, which was partially disabled last year as part of the North's agreement to win food, fuel and diplomatic concessions in return for a promise to end its nuclear program.

That agreement collapsed in April, when North Korea -- fuming about Security Council condemnation of its March launch of a long-range missile -- kicked U.N. weapons inspectors out of the country and began work to restart its plutonium factory. It tested a second bomb on May 25, and South Korean officials have said more missile launches and a third nuclear test are possible in the near future.

"It makes no difference to North Korea whether its nuclear status is recognized or not," the Foreign Ministry in Pyongyang said in a statement carried by the state news agency. "It has become an absolutely impossible option for North Korea to even think about giving up its nuclear weapons."

The 15-member Security Council unanimously passed a resolution Friday that imposes broad financial, trade and military sanctions on North Korea, while also calling on states, for the first time, to seize banned weapons and technology from the North that are found aboard ships on the high seas.

North Korea seemed Saturday to have interpreted the seizure resolution as a "blockade." But at the insistence of China and Russia, the North's traditional allies, the resolution does not authorize the use of military action to enforce any seizure that a North Korean vessel might resist, nor does it restrict shipments of food or other nonmilitary goods.

"An attempted blockade of any kind by the United States and its followers will be regarded as an act of war and met with a decisive military response," North Korea said.
Secretary of State Hillary Rodham Clinton said North Korea's "continuing provocative actions are deeply regrettable."

The bellicose language in North Korea's statement -- which describes the Security Council action as "another ugly product of American-led international pressure" -- is similar in tone to previous North Korean responses to U.N. sanctions.

But the North's announcement that it would process enriched uranium to make more weapons was an extraordinary public admission of active involvement in a program whose existence has been denied by Pyongyang since 2002, when it was first mentioned in a U.S. intelligence report.

That year, the Bush administration accused North Korea of secretly continuing with nuclear weapons development in violation of a 1994 agreement. It then canceled construction of two light-water reactors in the North that were to have been used to produce electricity for the impoverished country.

But in 2007, the Bush administration began to back off its assertions that North Korea had an active program to enrich uranium. The chief U.S. intelligence officer for North Korea, Joseph R. DeTrani, told Congress at the time that although there was "high confidence" that North Korea had acquired materials that could be used in a "production-scale" uranium program, there was only "mid-confidence" that such a program existed.

Uranium enrichment, which offers a different route for making nuclear weapons than plutonium, uses centrifuges to spin hot uranium gas into weapons-grade fuel.

Insisting that it had no uranium-enrichment program, the North Korean government took an American diplomat to a missile factory in 2007, where there were aluminum tubes that some experts had said could be used in uranium enrichment. North Korea allowed the diplomat to take home some samples.

Traces of enriched uranium were unexpectedly discovered on those samples. Other traces were found on the pages of reactor records that North Korea turned over to the United States in 2008, as part of now-aborted negotiations on denuclearizing the North.

In recent years, U.S. officials have suggested that although North Korea has tried to enrich uranium, it has not been very successful.

North Korea on Saturday said it has indeed made progress.

"Enough success has been made in developing uranium-enrichment technology to provide nuclear fuel to allow the experimental procedure," the government said. "The process of uranium enrichment will be commenced."

This may have been bluster, at least in the short term.

It will take many years for the North to develop the uranium route to a bomb, according to Siegfried S. Hecker, a periodic visitor to the Yongbyon complex who was director of Los Alamos National Laboratory and is co-director of Stanford University's Center for International Security and Cooperation.

Writing last month in Foreign Policy magazine, Hecker said North Korea lacks uranium centrifuge materials, technology and know-how. He warned, however, that Iran has mastered this technology and could help the North move forward with uranium enrichment. North Korea and Iran have shared long-range missile technology that could enable both countries to deliver a nuclear warhead.

North Korea also said Saturday that the spent fuel rods at its Yongbyon reactor are being reprocessed, with all the resulting plutonium to be used in nuclear weapons. The government said that it has reprocessed more than a third of them.

Hecker said in a recent interview that there is enough plutonium in the spent rods for "one or two more" nuclear tests. He also said it would take the North about six months to restart its Yongbyon plant, and that it could then produce enough plutonium to make about one nuclear bomb a year for the next decade.

Early this year, North Korean officials said that technicians have used all the plutonium previously manufactured at Yongbyon to make nuclear weapons.

In South Korea on Saturday, several analysts said the North's fist-shaking response to Security Council sanctions suggests that hard-liners in the country's military are exercising increasing power in running the government.

Kim Jong Il suffered a stroke last summer and has appeared frail in public appearances. He is believed to have chosen his youngest son, Jong Un, as his successor. It is unknown, however, how far the succession process has progressed in the secretive communist state.

"Given Kim's ailing health . . . the North Korean leader is likely to have yielded to the demands and pressure of military people who have little awareness of the outside world," said Koh Yu-hwan, a professor of North Korean studies at Dongguk University in Seoul.

Special correspondent Stella Kim in Seoul contributed to this report.