Category: Political Science
Tony Judt’s new book *Thinking the Twentieth Century*
It is a wide-ranging dialogue with Timothy Snyder, you can buy it here. I will gladly recommend this book, but I have mixed feelings about it. It is Judt’s “deathbed conversations” with Snyder, when he was paralyzed.
Is it fascinating? Yes. Did I read it straight through without pausing? Yes. Did I learn a lot? Yes.
Yet it doesn’t show Judt in such an overwhelmingly favorable light. He is cranky, unfair to his intellectual opponents, and he repeatedly misrepresents thinkers such as Hayek on some fairly simple points. He conducts unsubstantiated attacks on various New York Times columnists, as if they had once beaten him in a debate and this was his revenge. It shows his lifelong and mostly unhealthy obsession with what Daniel Klein has called “The People’s Romance.” Unlike in some of his previous writings, his proposals for a one-state solution to the Israel-Palestine problem come off as an irresponsible and somewhat flip symbolic gesture, easy enough to make because he doesn’t have to live with the outcome. As a reader and reviewer it is hard to not wonder whether/how Judt was medicated during these conversations, and how well he had thought through his lack of editing options before publication. Or is this the real Judt? Are we all really like this? Pondering that question is as interesting as the dialogue itself.
The Austrians will be happy when Judt writes: “The three quarters of century that followed Austria’s collapse in the 1930s can be seen as a duel between Keynes and Hayek.” Yet he has the odd view that free market ideas were “imported to the U.S. in the suitcases of a handful of disabused Viennese intellectuals.” Others may underrate the importance of central/eastern Europe but in these dialogues he overrates it.
One does not have to agree with Hayek’s Road to Serfdom to find this an unfair characterization:
Hayek is quite explicit on this count: if you begin with welfare policies of any sort — directing individuals, taxing for social ends, engineering the outcomes of market relationships — you will end up with Hitler.
My favorite part of the book comes at Kindle location 1294, here is part of that discussion:
But even when Blunt was outed as a Soviet spy, in 1979, his standing in high society, and in the distinctive codes of that society in England, still protected him…Thus Blunt — a spy, a communist, a dissembler, a liar and a man who may have actively contributed to the exposure and death of British agents — was nonetheless deemed by some of the his colleagues to be guilty of no crime serious enough to justify depriving him of the fellowship of the British Academy.
If you are seeking to “normalize” this review, I consider Judt’s Past Imperfect to be one of the best books of the last few decades, his Postwar to be one of my favorite books ever, and his late essays to be some of the best writing, in any genre, in a long time. (Though I didn’t like Ill Fares the Land.) I can recommend this too, as something worth consuming and pondering and spending money on, but I still have a slightly queasy feeling in my stomach.
Thomas Sargent on federal bailouts
In 1789, the political price for our federal constitution included a bailout of the 13 indebted states. But it was by refusing to bail out the states a second time in the 1840s that the United States preserved its federal system, with substantial fiscal independence for state governments. Facing a similar moment, Europe might learn from our experience.
…Appealing to the precedent set by the 1789 bailout, state creditors asked the federal government to bail out the states once again. After an enlightening debate, in the early 1840s Congress declined, so many states repudiated their debts.
In the aftermath of those repudiations, many states rewrote their constitutions to require year-by-year balanced budgets, something they had never done before. As noted, fiscal crises, like the one in Europe today, often produce political rearrangements—at best peaceful ones like these.
There is more here. If that WSJ link doesn’t work for you, type “Thomas Sargent” into news.google.com.
Why is the quality of American governance so low?
Frank Fukuyama writes:
Conversely, I would argue that the quality of governance in the US tends to be low precisely because of a continuing tradition of Jacksonian populism. Americans with their democratic roots generally do not trust elite bureaucrats to the extent that the French, Germans, British, or Japanese have in years past. This distrust leads to micromanagement by Congress through proliferating rules and complex, self-contradictory legislative mandates which make poor quality governance a self-fulfilling prophecy. The US is thus caught in a low-level equilibrium trap, in which a hobbled bureaucracy validates everyone’s view that the government can’t do anything competently. The origins of this, as Martin Shefter pointed out many years ago, is due to the fact that democracy preceded bureaucratic consolidation in contrast to European democracies that arose out of aristocratic regimes.
The post is interesting throughout.
Can Greece now leave the eurozone?
Meg Greene writes:
I have long thought that the troika would cut Greece loose and let it default and exit the eurozone once eurozone banks had been sufficiently firewalled. Perhaps this aggressive proposal by Germany is one of the unintended consequences of the ECB’s three year long term refinancing operation (LTRO). If eurozone banks have as much access to cheap, three-year ECB funding as their collateral allows, perhaps Germany and the troika have decided that eurozone banks can survive a Greek default. Greece is clearly insolvent and must leave the eurozone to eventually return to growth. The German proposal may have accelerated the inevitable.
I recall someone on Twitter noting that if Greek leaders turned fiscal sovereignty over to Brussels, the relevant parties would end up hanged for treason, or something like that. I’ll predict against that outcome. Angus adds comment. The general point here is that apparent progress also makes it easier for parts of the Eurozone to unravel. In this context what counts as “good news” or “bad news” can be quite tricky.
The Innovation Nation versus the Warfare-Welfare State
We like to think of ourselves as an innovation nation but our government is a warfare-welfare state. To build an economy for the 21st century we need to increase the rate of innovation and to do that we need to put innovation at the center of our national vision. Innovation, however, is not a priority of our massive federal government.
Nearly two-thirds of the U.S. federal budget, $2.2 trillion annually, is spent on just the four biggest warfare and welfare programs, Medicaid, Medicare, Defense and Social Security. In contrast the National Institutes of Health, which funds medical research, spends $31 billion annually, and the National Science Foundation spends just $7 billion.
That’s me writing at The Atlantic drawing on Launching the Innovation Renaissance. Here is one more bit:
Our ancestors were bold and industrious–they built a significant portion of our energy and road infrastructure more than half a century ago. It would be almost impossible to build that system today. Could we build the Hoover Dam today? We have the technology but do we have the will? Unfortunately, we cannot rely on the infrastructure of our past to travel to our future. Airports, an electricity smart grid that doesn’t throw millions into the dark every few years, ubiquitous Wi-Fi — these are among the important infrastructures of the 21st century, and they are caught in the regulatory thicket.
Putting innovation at the center of the national vision is not simply about spending more, it’s about how we approach all problems. Read the whole thing for more discussion of regulation and other issues.
Sentences to ponder, the eurozone crisis as political failure
Italian Prime Minister Mario Monti’s program includes no general wage cuts. In Portugal, the government abandoned attempts to engineer unit labor cost reductions through “internal devaluation” after meeting political opposition. In Ireland, the Croke Park accord prevents the government from further reducing public-sector wages. Despite nearly two years of troika programs, Greek unit labor costs have hardly budged.
That is from Peter Boone and Simon Johnson (pdf). Here is another batch:
Once risk premiums are incorporated in debt, Greece, Ireland, Portugal, and Italy do not appear solvent. For example, with a debt/GDP ratio of 120 percent and a 500-basis-point risk premium, Italy would need to maintain a 6 percent of GDP larger primary surplus to keep its debt stock stable relative to the size of its economy. This is unlikely to be politically sustainable.
I am not suggesting that a 6 percent of gdp primary surplus is easy. Nonetheless some countries are unwilling to do it. One is free to take a Keynesian view of how spending cuts damage gdp in the short run. Even then, Italy could combine an increase in private debt with wealth transfers (e.g., give creditors a mortgage share in Italian homes), but of course they don’t want to. Today, Italy could still enjoy a living standard better than what the country had in the 1980s, when everyone was calling it so dynamic (not your grandfather’s Versailles Treaty). That’s no longer good enough.
Critics get it wrong when they blame the euro crisis on “too much socialism.” For one thing excess public ownership is only a secondary problem (while a problem), for another thing Sweden is doing fine. When it comes to “failure to remedy the euro crisis,” as opposed to initial causes, let’s look long and hard at “unwillingness to consider solutions which admit that citizens’ standards of living will fall.” That’s not socialism, but it is one pernicious form of modern interventionism and you will find it very much here in America too.
On a somewhat different note, here is a good blog post on the shortening of collateral chains, and how the ECB’s policies are hitting at some REPO markets.
Betting markets in everything
From the Irish:
You can also bet on which cliché Obama will use first in Tuesday’s State of the Union Address…
The long list is here. Favored is “We have more work to do” while “Life is a box of chocolates” comes in at only 250-1.
For the pointer I thank A.
The new fiscal treaty?
It seems the Irish are spilling the beans on the phoniness of the promised “austerity” provisions:
However, a new draft leaves it open to the Government to enshrine a “golden rule” on debt and deficits in secondary legislation.
As I’ve stated numerous times, the real summit action was the ECB three-year loan program to the banks, not the cheap talk about binding austerity.
I expect your comments on this post will be awful, try to prove me wrong
Karl Smith asks:
I am specifically going to ask Yglesias, Drum, Cowen, Ozimek and Barro (Josh) to chime in on this. Anyone else feel free as well, but I would like to hear from these guys.
I don’t care if Mitt Romney pays negative taxes, cheated on his mistress with her daughter, fired his Grandmother while at Bain, and lied to kids to get the GOP nomination, etc.
What are the significant differences that you think we could actually see come to pass from a Romney Presidency versus an Obama Presidency?
I am generally a better-the-devil-you-know kind of guy, but I am pretty open here. So, let me here it.
Kevin Drum offers a specific answer. I have not invested much energy in following Romney or the other Republican candidates, so this is a rough, impressionistic response. Here are a few points:
1. I expect Romney to claim he has repealed ACA, but in fact he will change five aspects of the law and cement the rest of it in place, albeit in a less progressive manner and with lower Medicaid expenditures. (Outright repeal actually would not be easy, not to mention filibuster issues.) He knows he doesn’t have any other “right-wing health care plan” in his back pocket, won’t be willing to restore the status quo ex ante, and he will be willing to take the “Tea Party knock on the chin” very early on in his term, hoping to repair the fence later. Ultimately letting the issue fester doesn’t help him, and he is smart enough to realize that.
2. The Republican Party will split very quickly. For instance, will AEI support or oppose Romney in an early action like this? I don’t know, but I see massive carnage. Democrats may end up happier than they expect.
3. Romney will use conservative judge nominations, corporate tax cuts, Dodd-Frank repeal (does anyone understand it anyway?), and estate tax repeal to try to keep the base in line. Democrats may end up less happy than they expect.
4. Medicare won’t be touched, not fundamentally. There is some chance that a “twenty years from now” plan is passed (remember Waxman-Markey?), yet without any secure mechanism for commitment to make the actual cuts.
5. I worry if Obama wins on a platform of envy and anti-rich sentiment; such ideas rarely translate well into policy. If Obama loses, future Democrats will continue the cash goodies they deliver to constituents but fold on a lot of regulatory issues (don’t want to appear “anti-business”), and they will pay greater lip service to Deficit Commission recommendations and the like, while insisting that the governing Republicans take the heat for an actual budget deal. It is a much better outcome if Obama is re-elected from a promise to govern as a moderate and a fiscal conservative. So far I don’t see that as the Democratic strategy, so I am more worried about an Obama re-election than I used to be.
As noted, those are very rough predictions and I don’t have much faith in them, but they are my best guesses.
What else can Karl Smith get me to do?
*Demystifying the Chinese Economy*
That is the new book by Justin Yifu Lin, who is also Chief Economist of the World Bank. It is derived from lectures delivered in China. Much of the book is an OK survey, though I did not find it added much insight to extant accounts.
The discussion of why China had no Industrial Revolution does not consider individualism or liberalism, a’la McCloskey. And what am I to make of sentences like this?:
Building the new socialist countryside, now on the right track, has produced remarkable results.
I suppose it can be held to be true in both the literal and Straussian senses, but when I read it (and some others) frankly I felt my intelligence was being insulted.
There is plenty of talk lately about ethics standards for economists. How about a new proposal? For anything in the social sciences written by a citizen of China, or by someone with relatives living in China, or by someone working in or for China, there should be a disclaimer on the publication: “Produced under conditions of censorship and threat of career penalty.” I don’t favor actually doing that, but the absence of this idea from the debate is itself revealing.
Arab Spring and the stability of monarchy
Victor Menaldo has a new paper:
This paper helps explain the variation in political turmoil observed in the MENA during the Arab Spring. The region’s monarchies have been largely spared of violence while the “republics” have not. A theory about how a monarchy’s political culture solves a ruler’s credible commitment problem explains why this has been the case. Using a panel dataset of the MENA countries (1950-2006), I show that monarchs are less likely than non-monarchs to experience political instability, a result that holds across several measures. They are also more likely to respect the rule of law and property rights, and grow their economies. Through the use of an instrumental variable that proxies for a legacy of tribalism, the time that has elapsed since the Neolithic Revolution weighted by Land Quality, I show that this result runs from monarchy to political stability. The results are also robust to alternative political explanations and country fixed effects.
Here are his other papers.
The Destruction of Pompeii
The Art Newspaper: A Unesco report has identified serious problems with the World Heritage Site, including structural damage to buildings, vandalism and a lack of qualified staff….The collapse of a column at Pompeii on 22 December raised further alarm. The column was in a pergola in the courtyard of the House of Loreio Tiburtino, whose adjacent rooms have very fine frescoes.
…The Pompeii crisis came to a head with the collapse of the Schola Armaturarum, known as the House of the Gladiators, in November 2010, along with three further collapses later in the month. This was after extremely heavy rain.
The problems at Pompeii are all too familiar in Italy:
Staffing at Pompeii remains a fundamental problem. The structure is “very rigid”, with “jobs being secure until retirement”, making it “virtually impossible to recruit new staff”. Although around 470 people are employed at Pompeii, it is “very short” of professional staff, there are “very few” maintenance workers and only 23 guards are on site at any one time.
The guards do not wear uniforms and fail to display their badges. The experts observed them “grouped together in threes or fours”, which meant there was a limited presence on the enormous site. Since 1987, the number of guards has been reduced by a quarter while visitor numbers have increased considerably.
And how about this for an Italian microcosm:
Management changes have resulted in further problems. In July 2008, the Italian government declared Pompeii to be in a “state of emergency”, putting it under special administration until July 2010 (two commissioners served during this period: Renato Profili and then Marcello Fiori). There have been four successive superintendents since September 2009: Mariarosaria Salvatore, Giuseppe Proietti, Jeannette Papadopoulos and Teresa Elena Cinquantaquattro.
Jeff Madrick, unwittingly, makes the case for fiscal austerity
There is a far better solution. And it would not require the failure of the euro. The eurozone and perhaps the entire EU must act like a unified country, ready to recognize that it must take responsibility for the drastic social effects of rapid spending cuts… A financially unified Eurozone must then issue bonds to raise the money to pay back debts but also to provide a social net for the people of nations that are cutting back their spending on social programs to meet their remaining financial commitments…This can be accompanied by demands for reforms in nations like Greece where taxes must now be collected more efficiently and unusually excessive public spending stopped.
There is more here, and of course similar advice will work for Belgium too.
The economics of the Arab Spring
Adeel Malik and Bassem Awaadallah now have a paper on this topic. I would like to give you the abstract, but control-C into WordPress does funny things from this paper. The link is here, and for the pointer I thank RovingBandit.
Does wealth equal power?
That request was the first on the list and it came from Ezra Abrams, who wrote:
Wealth is equal to raw naked power: the power to fund PACs; the power to endow university chairs to influence people; the power to tear down neighborhoods and erect shopping malls. to what extent does the increase in wealth and income of the upper x% (relative to median or some other broad measure) mean that too much power is concentrated in the hands of too few people one amusing example is from Kahnemann’s thinking fast and slow. Small schools show the best results b gates poured money into small schools However, what gates didn’t realize is that this is a small numbers artifacts; small schools show the best and worst results cause with a small school you can deviate from the mean …there you have raw naked power having a huge influence on educational policy
I disagree with most of that. The scholarly literature suggests that campaign finance reform doesn’t matter as much as people think.
The big banks control our government less than some critics have suggested.
Academics are quite liberal/democratic, yet college students seems to be slightly more conservative than the American public as a whole. The major impact of endowed chairs is to cement the roles of Harvard, Princeton and comparable schools as intellectual leaders.
Bill Gates influenced computer operating systems a good deal, but since he earned his money I’m not sure he has had a big impact on final outcomes. (The anti-malaria campaign may yet pay off.) He also has moved away from the “small classroom” idea, after he viewed the data. Fiscal pressures — not pressures from the wealthy — probably mean the idea will lose out anyway.
There are several reasons why wealth does not translate into power so easily. First, effective philanthropy is extremely difficult to achieve, especially if that philanthropy is trying to counteract prevailing social trends. Nor should it be assumed that non-profits are always the drivers of change. Second, the wealthy in groups do not always coordinate very effectively, to say the least. Each is used to being in charge (remember when the Lakers had Karl Malone and Gary Payton as well as Bryant and O’Neal?) Third, many of the very wealthy choose to consume ego rents rather than effectiveness. Fourth, “democracy” and “the market” control large chunks of modern life, and it is hard for outsiders to commandeer those processes. Most of the major functions of government are there because people want them to be there, for better or worse.
The best way to think about wealth and power is with some ideas from Harry Eckstein. There will be, for reasons of spontaneous order, a general concordance between the status and influence of groups in the broader world, and the power of those groups when it comes to government. American economic policy, for instance, really is more pro-business than in much of Europe, and that does stem from the more commercial nature of our republic. That said, the ability of the rich at the margin to control policy through intentional acts, either individually or in groups is much overrated.
Wealth does protect you from the depredations of others, such as being treated very badly by the police or legal system. In this defensive sense wealth can give you a good deal of power.
Overall the quality of argumentation and evidence on this topic is extremely low.
Addendum: Iceland, by the way, doesn’t want the money of the Chinese billionaire.