Monthly Archive for July, 2010

A few pieces today talk about our spending habits in Afghanistan and how miserably imbalanced they’ve become. In the NYT, Nick Kristoff writes critically about the decades-long trend of the militarization and weaponization of U.S. foreign policy, tools which he argues have limited efficacy in eradicating foreign extremism and transforming the societies in which it thrives. What does work, says Kristoff, is education:

For the cost of just one soldier in Afghanistan for one year, we could start about 20 schools there. Hawks retort that it’s impossible to run schools in Afghanistan unless there are American troops to protect them. But that’s incorrect.

CARE, a humanitarian organization, operates 300 schools in Afghanistan, and not one has been burned by the Taliban. Greg Mortenson, of “Three Cups of Tea” fame, has overseen the building of 145 schools in Afghanistan and Pakistan and operates dozens more in tents or rented buildings — and he says that not one has been destroyed by the Taliban either.

Aid groups show that it is quite possible to run schools so long as there is respectful consultation with tribal elders and buy-in from them.

Though building and operating new schools is great, I’m not sure how it answers the hawks’ fears that it’s not sustainable unless there are American troops around to protect them. After all, there are 100,000 U.S. troops there now. After the U.S. is gone will the Taliban’s subsequent consultation with those tribal elders be quite as "respectful?"

Sustainability of all these programs is a very serious issue. The U.S. has spent $345 billion on the war in Afghanistan, including $72 billion this year alone. The trouble is, Afghanistan’s entire GDP is only about $10 billion, with somewhere between a third and a half of that coming from the illicit opium trade. Their whole annual government budget is only around $1 billion. And next year we’re spending $14 billion alone on training and equipping the Afghan security forces. We’re paying first world prices for third world results. It’s obviously a bad deal and one that can’t be sustained without maintaining a massive flow of foreign investment and subsidy for decades to come. 

But as Kristoff notes, while we’re certainly spending a boatload, perhaps our spending priorities are woefully out of whack.

In the New Republic, Peter Bergen makes the humanitarian case for staying, and he cites polling that shows a majority of Afghans both hate the Taliban and support a U.S. troop presence in their country. He also highlights the need for more non-militarist solutions and a better spending balance going forward: Asked what were the greatest challenges confronting them, one-third of Afghans answered poverty and unemployment. In response Bergen argues for a renewed and more effective committment to job-creating reconstruction projects. He’s particularly interested in high-profile and vital infrastructure like unfinished roads, dams, and aqueducts. Sadly, much of our reconstruction aid thus far never reaches the Afghan people. Instead:

[T]he funds have been consumed by the various international organizations whose four-wheel drives clog the streets of Kabul. A 2008 report by the British charity Oxfam found that around 40 percent of aid to Afghanistan was funneled to donor countries to maintain home offices in the West and pay for Western-style salaries, benefits, and vacations. Another study found that less than 20 percent of international aid ended up being spent on local Afghan projects.

This is unbelievable to read after nine years of war. These infrastructure projects represent tens of thousands of jobs as well as the only possible chance we have of helping to foster or inspire some sort of stable civil society that can outlive us after we’ve gone. The level of corruption and graft in the Afghan government is deservedly legendary, but as this CAP report notes, a huge majority of the foreign aid Afghanistan receives (77%) is outside of its government’s control; we should be able to get some of this stuff done before the drawdown begins.

But the question remains: will it matter? Is there anything we can build now that can’t be destroyed or coopted or run into the ground by the forces of theocratic reaction or official incompetence and malfeasance? Who thinks the nefarious influence of Pakistan’s ISI will magically abate once we’ve gone? Will Karzai and his minions awake one morning and stop ciphoning off the life and wealth of their country in order to line their own pockets?

These are very consequential questions with very pessimistic answers. I haven’t yet reconciled myself to the equanimity and stoic resignation required when faced with a situation where doing the right thing may just be impossible. This is no consolation, but I don’t think our leaders have either.

David Brooks writes today about the great progressive experiment currently underway in government, what with all its experts and educated elites trying to solve common problems toward the common good:

When historians look back on this period, they will see it as another progressive era. It is not a liberal era — when government intervenes to seize wealth and power and distribute it to the have-nots. It’s not a conservative era, when the governing class concedes that the world is too complicated to be managed from the center. It’s a progressive era, based on the faith in government experts and their ability to use social science analysis to manage complex systems. […]

This progressive era amounts to a high-stakes test. If the country remains safe and the health care and financial reforms work, then we will have witnessed a life-altering event. We’ll have received powerful evidence that central regulations can successfully organize fast-moving information-age societies.

If the reforms fail — if they kick off devastating unintended consequences or saddle the country with a maze of sclerotic regulations — then the popular backlash will be ferocious. Large sectors of the population will feel as if they were subjected to a doomed experiment they did not consent to. They will feel as if their country has been hijacked by a self-serving professional class mostly interested in providing for themselves.

This is a crude framing, and an uncharacteristically cartoonish analysis. David’s trying to turn very unradical attempts to deal with quite urgent national problems into another battle of the unending culture war.

Let me get this right: During conservative eras the governing class "concedes that the world is too complicated to be managed from the center"? First, I’ll be charitable and assume that by "the world" David means domestic policy in America: since the conservative faith in American militarism abroad and surveillance statism at home would seem to demolish his argument that conservatives don’t like managing things from the center.

So does this resigned conservative governing class just go on holiday when it’s their turn, so daunted and paralyzed are they in the face of all that unknowable complexity? Well no, in theory they would say that they attempt to use the vast centralized power structure that they’ve inherited in order to bring about conservative policy ends. That means, so I hear, trying to devolve power to the state and local level, and cutting taxes to ameliorate, well, everything. Sounds just rosy.

But what David leaves out is that passing laws that deregulate large chunks of an interconnected economy is still "managing from the center." And running up the federal debt by cutting taxes is also a decision to "manage from the center"; it just leads to an altogether different policy outcome. And—perhaps David has noticed—both decisions lead to a whole alternative set of lovely unintended consequences.

David worries that the recent health care and financial reforms may "kick off devastating unintended consequences or saddle the country with a maze of sclerotic regulations." Sure, maybe. But arguing that our health care and financial systems are too complicated to manage is not exactly a great  campaign theme. You can duck the problems by saying their too complicated; but alas, the problems remain.

Take health care. Our decentralized health care system is a joke that devolves power not to earnest common-sense local leaders but to heads of insurance companies and to the AMA and to any other interest group with the clout to write their own legislation. The system leaves thirty million Americans without insurance and provides care for the rest at double the cost of any other industrialized country. Our private insurance, employer-based model is rife with market distortions and perverse incentives for all players.

These are indeed very complicated problems. In response, you can, as David suggests, do nothing because things are too complicated. Or you can try to ameliorate the worst of these problems by incorporating the results of decades of policy research and the experiences of other wealthy countries. The tepid reforms that Republicans offered during the health care debate suggested that they thought the current system was pretty OK. Fine, that’s their perogative. But make no mistake; that was a centralized policy judgement they made. Doing nothing doesn’t mean nothing happens, it just means something else happens.

Likewise, did David happen to notice any "devastating unintended consequences" that befell our gutted and deregulated financial system a few years back? Did not the era that precipitated the financial crisis rely just as much on David’s much-derided "government experts" who put their faith not in social science analyses but in hoary "traditional" economic fables about infallible market efficiency and rational self-interest? Didn’t those same conservative "experts", with all their supposed intellectual modesty, help turn the idea of home-ownership into a national religion, financed by wisps of capital, adding to our lexicon such terms as "credit default swaps" and "mortgage-backed securities"?

Yet David says that if all these new corrective reforms fail:

Large sectors of the population will feel as if they were subjected to a doomed experiment they did not consent to. They will feel as if their country has been hijacked by a self-serving professional class mostly interested in providing for themselves.

That’s interesting. That’s just how I felt before the new reforms! Barack Obama and the Democrats campaigned on these exact reforms in 2008 and they won a sweeping electoral victory. And in a ruinous political climate they still have managed to make good on their campaign policy commitments. If there are seeds of a public backlash now, I would argue that it’s not because they’ve passed laws they said they were going to pass. It’s because the official unemployment rate is at 10% and the stimulus wasn’t sufficiently large to boost system-wide demand. David’s column could have been eight words long: Bad economies make people anxious and incumbents suffer.

Look around David. The "doomed experiment" was the conservative one. And we’re all still reeling from the unintended consequences.

The financial crisis has spawned much debate about the salience, the level, and the potential legacy of growing income inequality in recent decades. And it has been growing. There’s no real argument about where the economic spoils have been going. Here’s a graph from the Center for Budget and Policy Priorities:

The share of total income to the top 1 percent of earners is at the highest level since 1928. But it leads to an immediate question: should we care? Is growing inequality a bad thing in itself, or is it only bad insofar as it leads to bad outcomes, or serves as a symptom of larger problems? Or are there no bad outcomes or larger problems?

It’s an extremely contentious question in the economic policy world, since its so easily muddled by ideological warriors who are either discomfitted by the very idea of inequality, or on the other side by people who would applaud the above graph by talking about the omniscious awesomeness of the meritocracy.

Others think that income inequality doesn’t give credence to either side. Will Wilkinson has a recent paper for Cato in which he argues that disparity of income as a measure of inequality is a flawed metric. Instead, he wants us to look at consumption levels as the true markers of overall economic well-being. Will presents data showing that while growth in income has indeed accrued disproportionally to the very, very rich in the past forty years, consumption inequality has remained relatively flat.

First, if inexpensive goods improve in quality more rapidly than expensive goods, the typical bundle of goods and services consumed by poor families will come to more closely resemble the bundle typically consumed by rich families. To put if more breezily, if cheap stuff gets better faster than expensive stuff, the gap between cheap and expensive stuff narrows, which in turn narrows the gap in the quality of life between rich and poor. Second, if the goods and services typically consumed by poor families rise in price more slowly than those typically consumed by rich families—if the rich face a higher effective rate of inflation—gaps in incomes will not reflect equivalent gaps in real consumption.

You can see leveling in quality across the price scale in almost every kind of consumer good. At the turn of the 20th century, only the mega-rich had refrigerators or cars. But refrigerators are now all but universal in the United States, even while refrigerator inequality continues to grow. The Sub-Zero PRO 48, which the manufacturer calls “a monument to food preservation,” costs about $11,000, compared with a paltry $350 for the IKEA Energisk B18W. The lived difference, however, is rather smaller than that between having fresh meat and milk and having none. The IKEA model will keep your beer just as cold as the Sub-Zero model. Similarly, more than 70 percent of Americans under the official poverty line own at least one car. Despite a vast difference in price, the difference between driving a used Hyundai Elantra and a new Jaguar XJ is practically undetectable compared with the difference between motoring and hoofing it. A similar compression has occurred for food, clothing, and shelter.

So yes, even as the superrich get ever-more super, those at the bottom still have their used Hyundais and their cheap, functional appliances. Fair enough.

But there are a few problems with this. First, not all consumption is the same. Will mentions food. This Mike Konzcal post shows the problem with thinking that all price flattening is good. Here’s a graphic from the New York Times on recent price inflation of various foods:

As you can see, it’s true, as Wilkinson posits above, that the inflation rate of food that poor people buy has been much lower than that of food that rich people buy. Just like refrigerators. Everyone can afford a cheap fridge and everyone can afford cheap food. But as you’ve figured out by now, the problem is that cheap food is generally very caloric, processed, and unhealthy, and its predominance has led to insane levels of obesity and diabetes among lower-income Americans. These long-term health consequences affect us all, and that calculus is missing from breezy explanations about the increased purchasing power of the poor.

There’s a bigger problem with the consumption thesis. How can it possibly be that consumption levels remain stable even as income levels diverge drastically? How does someone making $35k/year weather a prolonged period of stagnant wages? Well, Will explains that they engage in something called “consumption smoothing.” As your income fluctuates in both absolute and relative terms, you maintain stable consumption habits by using savings and—since if you’re making $35k you probably have no savings—by using credit. If credit is quite hard to come by, I suppose you would have no choice but to cut back your consumption in at least some ways. You could probably still keep the fridge but maybe even that used Hyundai would now be out of reach.

But we haven’t really lived in a world where credit has been hard to come by, have we. Why?

A piece last week by Raghuram Rajan offers an explanation. Rajan is a former chief IMF economist and current professor of finance at the University of Chicago. He basically argues that inequality is bad because it causes government to do awful and expedient things to paper over it:

The everyday consequence [of growing inequality] for the middle class is a stagnant paycheck and growing job insecurity. Politicians feel their constituents’ pain, but it is hard to improve the quality of education, for improvement requires real and effective policy change in an area where too many vested interests favor the status quo.

Moreover, any change will require years to take effect, and therefore will not address the electorate’s current anxiety. Thus, politicians have looked for other, quicker ways to mollify their constituents. We have long understood that it is not income that matters, but consumption. A smart or cynical politician would see that if somehow middle-class households’ consumption kept up, if they could afford a new car every few years and the occasional exotic holiday, perhaps they would pay less attention to their stagnant paychecks.

Therefore, the political response to rising inequality – whether carefully planned or the path of least resistance – was to expand lending to households, especially low-income households. The benefits – growing consumption and more jobs – were immediate, whereas paying the inevitable bill could be postponed into the future. Cynical as it might seem, easy credit has been used throughout history as a palliative by governments that are unable to address the deeper anxieties of the middle class directly.

Now Rajan’s preferred solution is to tackle what he sees are the root causes of inequality, namely an education system that simply does not train enough people to compete for higher-wage jobs in the global marketplace.

Is that true? And is it feasible to fix? I sure don’t know. But Rajan sets up an interesting causal chain. Inequality leads to growing availability of credit, which eventually leads to bubbles that eventually burst, and if the access to easy credit goes on long enough, it’ll precipitate a major financial crisis. Inequality equals financial crisis. Possible?

Paul Krugman thinks so. Perhaps it’s not merely coincidence that the two highest peaks in income inequality in the last hundred years were both followed by major macroeconomic crises. But what’s the mechanism? This Krugman slideshow looks at the question. He presents a ton of provocative correlation. Income inequality has gone up. Household debt has skyrocketed. Congressional political polarization has gone up. The size of the financial industry as a share of total GDP has exploded.

Where does it all fit? Is there a magic linkage somewhere that holds the key to preventing the next great crisis? Will regulating the hell out of the financial industry curb endemic leverage and indebtedness? Would ramping up government-coerced redistribution turn us into an egalitarian paradise and make us all happy and tall and Danish and uninterested in wealth-signalling? Can we come to a time where we all agree that Robert Rubin is an asshole? Isn’t it a little nuts that they’re rebooting Spiderman so soon? It’s great that the computers from Minority Report are here but when the hell can I get my own pre-cog?

Alas, these are all imponderables. I can only frame the discussion, dear reader.

A little more on the way that patriotism may be used to sanction government immorality in our names. Over the weekend I was watching an interview with Michael Leiter, the Director of the National Counterterrorism Center. Newsweek’s Michael Isikoff was asking him about the Obama administration’s decision to authorize the targeted killing of Anwar al-Awlaki, a U.S. citizen currently hiding in Yemen, alleged to have inspired Fort Hood shooter Nidal Hasan, and to have played a more direct operational role in Abdulmutallab’s Christmas plot and Faisal Shahzad’s attempted Times Square bombing; I’ve written about this psychopath before.

Director Leiter was asked about the extraordinary claim of the executive branch that it can assassinate American citizens without due process. He answered:

I will tell you from my perspective as director of the National Counterterrorism Center, if someone like Anwar al-Awlaki is responsible for part of an operation to kill more than 300 people over the city of Detroit, I think it would be wholly irresponsible … not to at least think about and potentially direct all elements of national power to try to defend the American people. I think that’s what the American people expect….Ultimately, for us not to have that discussion and not make that decision if we have to, for me, would be reprehensible.

Well Mr. Leiter, I will tell you from my perspective what is reprehensible: That you advocate for the right to assassinate American citizens without indicting or charging them with any crime, or finding them guilty in a court of law. Am I to be comforted by the fact that you, Leon Panetta, and President Obama have the power to decide which Americans are worthy of trial by jury and which should just be summarily executed by a predator drone, their irrefutable guilt merely asserted by you?

The most disturbing part of Leiter’s answer is his expectation that the American people agree with him, and his insinuation that we should find reprehensible the idea that our government wouldn’t target bad Americans for assassination. Leiter says that Awlaki deserves an executive death warrant because he was part of an operation that, if successful, would have killed a whole bunch of people. Why not extend that moral argument to the plotters of serial murders or other habitual violent criminals? 

To tie it in to yesterday’s discussion on patriotism: If patriotism is love of country, then in the American context love of country can only mean love of and fealty to a specific set of foundational principles and documents. These indeed are wonderful principles and documents, but what do they say in aggregate? I think it’s hard to argue against the idea that they, first and foremost, embody an attempt to circumscribe the powers of government as against the rights of its citizens. When the president empowers his secret intelligence agencies to kill American citizens without charge or trial, I find that antithetical to the letter and spirit of the foundational principles which serve as the common wellspring of American patriotism and exceptionalism. Why does Mr. Leiter’s version of patriotism lead him to argue that the president should be signing death warrants for U.S. citizens on the basis of secret evidence with absolutely no public oversight? Mr. Leiter admits that he is arguing from his perspective as director of the NCTC. Fair enough. But then who is arguing against him from my perspective? Where is Congress?

This is a part of the Obama adminstration’s troubling continuity with Bush-era wartime practices. Both administrations claim the same extraordinary executive power divined from one document that was passed three days after 9/11: the authorization of the use of military force, or AUMF. As Eli Lake wrote in Reason a few months ago, while President Obama often tries to emphasize a break from the previous administration on issues of counterterrorism, the difference is little more than rhetorical:

While it’s true that President Obama appears more reluctant to use these extraordinary powers than his predecessor, he is nonetheless asserting, enthusiastically at times, that he has such powers. And because so much of the American war on terror is conducted in secret, it is difficult to know what Obama is and is not doing to wage it.

And even though Obama has outlawed the most egregious Bush administration outrages like torture, Eli notes that he did so only by executive order, which can be reversed by any future president. Eli concludes:

Obama, like Bush, is committed to a long war against an amorphous network of terrorists. In at least the constitutional sense, he is no harder or softer than his predecessor. And like his predecessor, he has not come up with a plan for relinquishing these extraordinary powers once the long war ends, if it ever does. If change is going to come to U.S. policy on terrorism, it will have to come from a bipartisan recognition that Americans cannot trust their government to tell them when they are safe again.

Americans would indeed be safer if Anwar al-Awlaki wasn’t breathing any longer. But we and the president, and even Mr. Leiter, owe allegiance foremost to our foundational principles and documents, not to one feverish resolution passed in the bloodlust-fogged days after 9/11. Sadly, I think Eli’s call for "bipartisan recognition" of this is a long, long way off.

Anyone who checks in here at all regularly will know that I’m not terribly shy about linking to or quoting at length the work of Christopher Hitchens. Years ago I read his essay anthology Love, Poverty, and War, which taught me many things; the most consequential being quite simply that there were sides to be taken out there and cases to be made, and so best to get on with it. Apathy toward the outcome was puerile and unserious; and ignorance did not attenuate one’s moral responsiblity but rather redoubled it. His essays on foreign affairs (the man must have reported from every war zone of the last thirty years) definitively exposed to me the emptiness and torpor and self-indulgence inherent in the phrase “the personal is political”, and they served as a significant impetus for my eventual decision to study international relations more formally. His prodigious output on literature and culture is equally influential, and I notice that my bookshelf is rife with volumes inspired by his intellectual and literary lineage. That’s the thing about falling under the sway of polymaths: they tend to fill your bookshelves very quickly.

And so the news that Hitchens has esophogeal cancer is sad indeed.

Two pieces out today keep the focus on the work, which is where I think Chrisopher would agree it belongs. David Brooks has a tender column today extolling Christopher’s literary perspective in his approach to politics and policy. It’s an excellent and astute point, and one that is usually ignored in favor of Hitch’s more incendiary stuff. Indeed, the real message of Chrisopher’s best-selling polemic God is Not Great is that the true enemy of absolutism and despotism (supernatural or otherwise) is literature. It is in literature, philosophy, and poetry where the spectrum of human moral and ethical experience is played out and elucidated. It is there that one encounters the transcendent and the numinous.

Next, in the New Criterion, Michael Weiss has an excellent character study in which Hitch’s literary affinities serve in part as a lens into his moral and political committments. Weiss’s piece is wonderfully dense with references and allusions and assumes a more-than-casual knowledge of, well, everybody and everything; so before you read you might brush up on your Trotsky, Conquest, Auden, Larkin, Waugh, Wodehouse, and Orwell, not to menton the history of post-war English cultural decadence, and the central figures and disputes among the anti-Stalinist Left Opposition and their successors. I hereby nominate Weiss to be official Hitchens court biographer. May he have another thirty years of apprenticeship before him.

Anyway, all this focus on Hitchens the Man of Letters has led me to take down his wonderful collection of literary essays, reviews, and criticism, Unacknowledged Legislation. That’ll be my weekend reading.

I just saw Hitch speak a few weeks ago at Politics and Prose promoting his new memoir. He was witty and vibrant as always, and I do hope he gets through this all right and rejoins the fray as soon as possible. He is needed as ever. As he’d say, Allons travailler.