Life at New Animal Farm Won't Be All That Bad
By Victor Davis HansonBy July, we will come to feel that 2009 will be one of the most upbeat years in our history, as what used to be the news media∗ begins to get behind America and report on all the mysteriously wonderful things that are suddenly taking place.
All the campaign talk of the Great Depression, a Vietnam-like war, and our shredded Constitution will now thankfully subside as the Obama administration assumes office and solves problems with conciliation, dialogue, and multilateral wisdom, rather than shrillness, unilateralism, preemption, and my-way-or-the-highway dogmatism. We will hear that, by historical levels, unemployment is still not that bad, that GDP growth is not historically all that low, and that deficits, inflation, interest rates, and housing starts are all within manageable parameters. "Depression" will transmogrify into "recession" which in turn by July will be a "downturn" and by year next an "upswing" on its way to boom times.
Indeed, almost supernaturally crises will be solved with the departure of the hated Bush: no more flooding streets from cracked water mains that were a result of a President's neglect of infrastructure, and no more spontaneous crashes of Mississippi River bridges due to diversions of critical federal aid from cash-strapped states to Iraq. And when the temperatures rise or drop, the wind howls, the clouds burst forth or go away, the snow melts or piles up, it will be, well, nature that caused the havoc, not the current occupant of the White House who failed to sign Kyoto.
As we watch the innocent die from natural mayhem, it will be due to the breakdown of local responders who now suddenly kill people, not federal inaction--except perhaps for an occasional few Bush federal holdovers that have not yet been rooted out. Human nature, of course, now will be seen more culpable, more selfish, as in needlessly resisting wise and caring federal interventions, rather than being inherently noble but shunned by an uncaring Washington. Yes, when dikes collapse and planes collide on crowed runways, it will be due to a cruel and unpredictable nature, or intrinsic design flaws, or improper local use and maintenance, or the past President's nefarious legacy, not current government policies. (But if you still must bash the government, it will be wise to do it in 1950s style of inattentive state and local officials, prone to regional and tribal prejudices, blocking the infinite wisdom of a caring federal government.)
Some military action abroad could be necessary--and necessarily reported on as measured and reluctant, rather than cowboyish and gratuitous. European whining will be a result of miscommunications or the Euros' unfair caricatures of Americans, not Bush's alienation of allies. If radical Islam strikes, it will be, well, radical again and sometimes even dangerous, not a figment of neocon pipe dreams. If an administration official quits, goes on 60 Minutes, and writes a nasty tell-all book about Obama's insensitivity and his government's directionless ennui, he will be a heretic, a whiner, a turncoat, not a truth teller or brave maverick who blew the whistle in need of a bestseller hyped from NPR to the New York Times. We will come again to hate the filibuster, obstructionist Congressional policies, and the occasional loud-mouthed Senator who voices slurs against our nation in unpatriotic fashion.
Those around Barack Obama understand that precisely those measures most derided during the campaign--wiretaps, the interrogation of prisoners in Guantanamo, the decimation of al Qaida members in Iraq and Afghanistan, overseas detentions--probably account likewise most for the absence of another 9/11-like attack. In other words, as the Obamians privately ignore the media hype about flushed Korans and hundreds of innocents caught in the cauldron of war and unfairly detained, and instead examine the sort of killers who are presently in Guantanamo, the type of intelligence gathering that led to prevention of dozens of planned attacks since 9/11, and those who turned up and were killed or arrested in Iraq and Afghanistan, they will realize how dicey it will be to follow through with campaign rhetoric about Bush, Inc. torching the Bill of Rights, fighting made-up enemies abroad, and generally alienating our allies.
So all that will change for now will be the sudden absence of shrill complaints that we live in an America without a Constitution. Static, same-old, same-old government policy will, of course, be said to have altered radically ("hoped and changed"), but it will also be refashioned in the media as "sober" and "judicious", as the administration moves "in circumspect fashion" to probe and explore "complex" and often "paradoxical" matters of national security that "indeed at the end of the day have no easy answers".
Expect much of the same on the economic front. For all the campaign hysteria about greedy Bushites who destroyed the economy, Obama realizes that in fact the seeds of the current financial weeds were sown years ago, and watered and fertilized by an array of both Democratic and Republican facilitators in Congress and hacks in government-affiliated mortgage sinecures. So expect the bailouts to continue. We will see Wall Street in about 24 hours after January 20 transmogrified from Gordon Gecko's habitat into a sort of the old Robert Rubin/Warren Buffet-like necessary institution about which a Sen. Schumer or Chris Dodd can offer invaluable advice and consultation.
Socially, we will get a mix of Maya Angelou, Oprah, and Rick Warren, a rich diversity of therapeutics that appeals to everyone's popular feel-my-pain tastes. Rev. Wrights and Father Pflegers are "that was then, this is now" has-beens (not that they and their Blago-ilk with a memoir or weird disclosure won't try to crash the party from time to time), replaced by the bromides of the Purpose-Driven Life. The Left will once again see the U.S. as the last, best hope for mankind, a flawed, often errant nation that nevertheless in its heart always showed the world what was right in the end. "Diversity" and "progressive" themes will replace Bush's hokey old-time patriotism, as we return to a more nuanced and sophisticated love of country that at last "came home."
In other words, one can also at last enjoy that nice wood-floored study, tastefully granite-countered kitchen, with plenty of stainless steel appliances, in a mostly un-diverse neighborhood, still send your kids to a mostly predetermined racially-appropriate school, and still make a pretty good salary, drive a comfortably large car (though please--preferably a Volvo or Mercedes SUV rather than a Tahoe or Yukon), and feel like you are out there on the barricades of radical environmental, cultural, and political change (and hope too!).
Al Gore will be courted, get an occasional photo-op head-pat--but when he gets too loud quietly sent back upstairs to the closet. Ditto the uncouth Sharpton and Jackson, snapping pit bulls muzzled and dispatched to the kennels. Jimmy Carter will once again be weird old jet-setting Jimmy Carter, a meddler, a spoiler, a PR junkie on the verge of senility rather than the principled Nobel laureate of the Carter Center.
Those inside the big house change, the commandments on the barn wall subtly are crossed out and updated, but the farm for us animals stays about the same.
______________
∗ I say used to be the news media, since when they report good news about the Divine Obama we have no idea whether it's encomium or fact; and if they are ever slightly negative, we don't know whether the complaint derives from His real error or merely that they are stung by past criticism and ostensibly trying to be periodically balanced. In short, the age of Murrow is over--and the divine era of Augustus with his Livy and Dio is upon us.
2008: We Learned What We Don't Know
2008: We Learned What We Don't Know
By Robert SamuelsonIt's the end of an era. We know that 2008, much like 1932 or 1980, marks a dividing line for the American economy and society. But what lies on the other side is hazy at best. The great lesson of the past year is how little we understand and can control the economy. This ignorance has bred today's insecurity, which in turn is now a governing reality of the crisis.
Go back to the onset of the crisis in mid-2007. Who then thought that the federal government would rescue Citigroup or the insurance giant AIG; or that the Federal Reserve, striving to prevent a financial collapse, would pump out more than $1 trillion in new credit; or that Congress would allocate $700 billion to the Treasury for the same purpose; or that General Motors would flirt with bankruptcy?
In 2008, much conventional wisdom crashed.
It was once believed that the crisis of "subprime" mortgages -- loans to weaker borrowers -- would be limited, because these loans represent only 12 percent of all home mortgages. Even better, they were widely held, diluting losses to individual banks and investors.
Wrong. Subprime mortgage losses (20 percent are delinquent) triggered a full-blown financial crisis. Confidence evaporated, because subprime loans were embedded in complex securities whose values and ownership were hard to determine. Similar doubts afflicted other bonds. Demand for all these securities shriveled. Lenders hoarded cash and favored safe U.S. Treasuries. Because investment banks and others relied on short-term debt (a.k.a. "leverage"), a loss of confidence and credit threatened failure. Lehman Brothers failed. The financial system had overborrowed and underestimated risk.
It was once believed that American consumers could borrow and spend more, because higher home values and stock prices substituted for annual savings. Consider: From 1985 to 2005, the personal savings rate dropped from 9 percent of disposable income to almost zero. But over the same years, households' net worth (assets minus liabilities) quadrupled, from $14 trillion to $57 trillion.
Wrong. In recent years, consumers increasingly overborrowed, especially against inflated home values. With the housing "bubble" now collapsed, net worth is falling. Homeowners' equity in their homes -- the share not borrowed -- is at a record low of 45 percent, down from 59 percent in 2005. Consumers have responded by retrenching big-time. Retail sales have dropped for five straight months; vehicle sales are a third below 2006 levels.
It was once believed that the rest of the world would "decouple" from the United States. As Europe, Asia and Latin America expanded, their buying would cushion our recession. A better-balanced world would emerge, with smaller U.S. trade deficits and lower surpluses elsewhere.
Wrong. The crisis has gone global; economic growth in 2009 will be the lowest since at least 1980. Even China has slowed; steel output was down 12 percent in November from a year earlier. The crisis has spread through two channels: reduced money flows and reduced trade. Global financial markets are interconnected. Customer redemptions forced U.S. mutual funds and hedge funds to sell in emerging markets (such as Brazil or Korea), whose stocks have dropped about 60 percent from their peak. Credit has tightened, as money flowing into developing countries is expected to shrink 50 percent in 2009 from 2007 levels, estimates the World Bank. The bank expects trade, up 7.5 percent in 2007, to fall in 2009 for the first time since 1982.
So much that has happened was unexpected that the boom and bust's origins are obscured. These lie in the side effects of declining inflation that started in the 1980s and, in the process of reducing interest rates, boosted stock prices and housing values. Recall that in 1981, when inflation was 9 percent, 30-year mortgages averaged 15 percent. As rates fell (mortgages were 10 percent by 1990, 7 percent by 2001), home prices rose. People could afford more. With lower interest rates, stocks became more valuable.
All the bad habits of recent years -- excessive borrowing by consumers and money managers, careless and reckless lending -- grew in a climate when gains seemed ordained. Even after the "tech bubble" burst in 2000, stock prices at year-end 2002 were seven times their year-end 1981 level. Home prices increased steadily; in the 1990s, they rose 45 percent.
Prosperity, apparently forgiving of mistakes, bred the complacency that undid prosperity. On bad mortgages, losses could be recovered by selling the homes at higher values. Thus rationalized, bad loans were made. Some stocks might decline, but over time, most would rise. Risk seemed to recede, so investors and money managers undertook riskier strategies.
What will emerge from these shattered illusions? Will the crash stir social unrest, abroad if not here? Will Americans become so thrifty that they hamper recovery? Will economic nationalism surge? How will capitalism be reshaped? Much depends on whether the frantic policies to combat the recession succeed. Probably they will, but there are no guarantees. Our ignorance is humbling.
Israel and Gaza
Israel and Gaza
The air war continues
Israel continues its assault on the Gaza Strip, killing over 280 people
A SECOND day of Israeli bombing in the Gaza Strip on Sunday December 28th took dozens more Palestinian lives—lifting the reported total death toll above 280 people—but failed to staunch Hamas rocket fire into Israel. Ground incursions into Gaza by Israeli forces have thus become more likely and may even be imminent. The army has massed regular armoured and infantry units on the Gaza border, and the cabinet has approved an order to call up some 6,500 reservists. Both steps have been well publicised, perhaps in the hope they might deter further rocket firing and avert a ground war after all.
An initial wave of Israeli air strikes on Saturday morning killed more than 200 Palestinians. Some 60 warplanes, helicopters and drones took part, dropping 100 tonnes of ordnance within four minutes on Hamas offices, training camps, police stations and storehouses in Gaza City and throughout the Strip. Most of the dead were thought to be Hamas militiamen and police, but there were civilian casualties too. In follow-up raids on Saturday and Sunday the main Gaza security complex and prison was hit, as were Hamas’s Al-Aqsa television station and a mosque that, Israel claims, is used by militants for their operations.
The Israeli cabinet approved the attack in principle on December 24th, leaving the timing to the prime minister, Ehud Olmert, the defence minister, Ehud Barak, and the foreign minister, Tzipi Livni. Hamas and other Palestinians were caught off-guard. Mr Barak announced before the weekend that he would open the border crossings and let food and other staples into the Strip. Soldiers in border camps were allowed home for the weekend. Ministers publicly scheduled more consultations over Gaza for Sunday.
Hamas’s rockets have reached farther into Israel than before. One hit a home near the port city of Ashdod on Sunday, almost 40 km from the Gaza Strip, although there were no casualties. On Saturday a shorter-range rocket killed a man in the town of Netivot. Otherwise there have been no Israeli fatalities.
The goal of Israel’s campaign is to stop—or at least significantly reduce—the rocket fire, just as it was in the month-long war between Israel and the Lebanese Hizbullah in the summer of 2006. Then, Mr Olmert was advised that aerial bombardment could silence the missile launchers, but Hizbullah’s missiles proved resilient (they were also more lethal than those used by Hamas now). Three weeks later, and with a third of Lebanon virtually paralysed, grounds forces were sent in. They performed poorly against the entrenched Hizbullah fighters and a cease-fire after three days left Hizbullah free to claim victory and Israel’s military and political leaders embroiled in mutual recriminations.
“After Lebanon,” says Tzachi Hanegbi, chairman of the Knesset Foreign Affairs and Defence Committee, “everyone understands that rocket fire can’t be silenced by air power alone.” But Hamas, hopelessly outgunned from the air, may well want to lure Israeli ground troops into the heavily built-up Gaza Strip where they could be engaged in street-fighting.
“We are not spoiling for a fight,” Mr Olmert told Israel in a television broadcast on Saturday night. But if this campaign, too, ends badly for Israel, he would go down in history as the leader who lost two wars against two vastly inferior foes. Mr Olmert, facing corruption investigations, is heading a caretaker government pending the formation of a new government after an election, which is due on February 10th.
For Mr Barak, the outcome of the current conflict could shape his future. Whatever Mr Olmert’s formal powers, the defence minister and Labour Party leader is seen as running the war. He has encouraged this perception with a string of tough-sounding interviews to Israeli and foreign media.
Mr Barak has been lagging far behind Ms Livni of Kadima and Binyamin Netanyahu, the opposition Likud leader, in the election campaign. In desperation, he mounted a countrywide campaign last week, on billboards and on the Internet, admitting that he is “not nice”, “not cuddly”, and “not trendy”. Such qualities might be useful in attacking Hamas, and may perhaps prove popular among the Israeli electorate too.
A different take on the cashless society
Venezuela's alternative currencies
Tokens of utopia
A different take on the cashless society
A KILO of ripe papaya from Oliva Unamo’s stall at the community market in Río Chico, a small town in the coastal region of Barlovento, will cost you three cimarrones. For the same price, you could buy six sticks of sugarcane at the stall next door. But your cimarrones won’t go far at the shops down the road.
The cimarrón is one of at least ten alternative currencies in different parts of Venezuela. They have the blessing of Hugo Chávez, the country’s left-wing president. They will help do away with capitalism and hence combat poverty, he says. But none of these tokens can be exchanged for the bolívar, the country’s legal currency. Their use is limited to “prosumers”—you have to bring something to sell before you can actually buy anything with them. The markets where they circulate are modest affairs: at Río Chico only a dozen or so products were on sale. But that is not the point.
“It’s magic,” says Pablo Mayayo, an Argentine who is advising Venezuelans on these schemes. “When you take away money, which is the cause of almost all the great evils in the world, people relate to each other in a different way, by co-operating, not competing.”
The revolutionary spirit seems to be flourishing among the prosumers of Barlovento. “I grow coconuts,” says Angenia Hernández. “In the shops they cost 3.5 bolívares each ($1.63 at the official exchange rate), but we’re going to sell them at [the equivalent of] 1.5.” It is, she says, a way of “putting an end to commercial fascism.”
Lewes and Totnes, two towns with radical traditions in southern England, both have community “pounds” aimed at encouraging shoppers to buy local products. But they can be exchanged for sterling. The other difference in Venezuela is that the alternative currencies are not local initiatives but have been decreed from the top as part of Mr Chávez’s drive to impose “21st-century socialism”. Few people in Río Chico, small though it is, had heard of the market. The prosumers were bused in by the government from nearby villages.
According to José Guerra, the former head of research at the country’s Central Bank, the cimarrones are a regressive echo of Venezuela’s semi-feudal past in which landowners paid their serfs in tokens that could be exchanged only for goods produced or sold on their estates.
Mr Chávez has spoken about requiring farmers to sell a proportion of their products through the prosumer markets. But so far only about 2,000 people have signed up for them. On past form, the president will eventually lose interest. The cimarrón, a curious, circular cardboard token illustrated with a picture of a runaway slave, seems destined to end up as a collectors’ curiosity.
An imaginary retrospective of 2009
An imaginary retrospective of 2009
By Niall Ferguson
It was the year when people finally gave up trying to predict the year ahead. It was the year when every forecast had to be revised – usually downwards – at least three times. It was the year when the paradox of globalisation was laid bare for all to see, if their eyes weren’t tightly shut.
On the one hand, the increasing integration of markets for commodities, manufactures, labour and capital had led to great gains. As Adam Smith had foreseen in The Wealth of Nations, economic liberalisation had allowed the division of labour and comparative advantage to operate on a global scale. From the 1980s until 2007, the world economy had enjoyed higher, more widespread growth and fewer, less severe crises – hence Federal Reserve chairman Ben Bernanke’s hubristic celebration of a “great moderation” in 2004.
On the other hand, the more the world came to resemble an intricate, multi-nodal network operating at maximum efficiency – with minimal inventories and just-in-time delivery – the more vulnerable it became to a massive systemic crash.
That was the true significance of the Great Repression which began in August 2007 and reached its nadir in 2009. It was clearly not a Great Depression on the scale of the 1930s, when output in the US declined by as much as a third and unemployment reached 25 per cent. Nor was it merely a Big Recession. As output in the developed world continued to decline throughout 2009 – despite the best efforts of central banks and finance ministries – the tag “Great Repression” seemed more and more apt: although this was the worst economic crisis in 70 years, many people remained in deep denial about it.
“We assumed that we economists had learned how to combat this kind of crisis,” admitted one of President Barack Obama’s “dream team” of economic advisers, shortly after his return to academic life in September 2009. “We thought that if the Fed injected enough liquidity into the financial system, we could avoid deflation. We thought if the government ran a big enough deficit, we could end a recession. It turned out we were wrong. So much for [John Maynard] Keynes. So much for [Milton] Friedman.”
The root of the problem remained the US’s property bubble, which continued to deflate throughout the year. Many people had assumed that by the end of 2008 the worst must be over. It was not. Economist Robert Shiller’s real home price index in 2006 had stood at just under 206, nearly double its level just six years earlier. To return to its pre-bubble level, it therefore had to fall by 50 per cent. Barely half that decline had taken place by the end of 2008. So house prices continued to slide in the US. As they did, more and more families found themselves in negative equity, with debts exceeding the value of their homes. In turn, rising foreclosures translated into bigger losses on mortgage-backed securities and yet more red ink on banks’ balance sheets.
With total debt above 350 per cent of US gross domestic product, the excesses of the age of leverage proved difficult to purge. Households reined in their consumption. Banks sought to restrict new lending. The recession deepened. Unemployment rose towards 10 per cent, and then higher. The economic downward spiral seemed unstoppable. No matter how hard they saved, Americans simply could not stabilise the ratio of their debts to their disposable incomes. The paradox of thrift meant that rising savings translated into falling consumer demand, which led to rising unemployment, falling incomes and so on, ever downwards.
“Necessity will be the mother of invention,” Obama declared in his inaugural address on January 20. “By investing in innovation, we can restore our faith in American creativity. We need to build new schools, not new shopping malls. We need to produce clean energy, not dirty derivatives.” Commentators agreed that the speech was on a par with Franklin Roosevelt’s on his inauguration in 1933. Yet Roosevelt had spoken after the worst of the Depression was over, Obama in mid-tailspin. The rhetoric flew high. But the markets sank lower. The contagion spread inexorably from subprime to prime mortgages, to commercial real estate, to corporate bonds and back to the financial sector. By the end of June, Standard & Poor’s 500 Index had sunk to 624, its lowest monthly close since January 1996, and about 60 per cent below its October 2007 peak.
The crux of the problem was the fundamental insolvency of the major banks, another reality that policymakers sought to repress. In 2008, the Bank of England had estimated total losses on toxic assets at about $2.8 trillion. Yet total bank writedowns by the end of 2008 were little more than $583bn, while total capital raised was just $435bn. Losses, in other words, were either being massively understated, or they had been incurred outside the banking system. Either way, the system of credit creation had broken down. The banks could not contract their balance sheets because of a host of pre-arranged credit lines, which their clients were now desperately drawing on, while their only source of new capital was the US Treasury, which had to contend with an increasingly sceptical Congress. The other credit-creating institutions – especially the markets for asset-backed securities – were all but paralysed.
There was uproar when Timothy Geithner, US Treasury secretary, requested an additional $300bn to provide further equity injections for Citigroup, Bank of America and the seven other big banks, just a week after imposing an agonising “mega-merger” on the automobile industry. In Detroit, the Big Three had become just a Big One, on the formation of CGF (Chrysler-General Motors-Ford; inevitably, the press soon re-christened it “Can’t Get Funding”). The banks, by contrast, seemed to enjoy an infinite claim on public funds. Yet no amount of money seemed enough to persuade them to make new loans at lower rates. As one indignant Michigan law-maker put it: “Nobody wants to face the fact that these institutions [the banks] are bust. Not only have they lost all of their capital. If we genuinely marked their assets to market, they would have lost it twice over. The Big Three were never so badly managed as these bankrupt banks.”
In the first quarter, the Fed continued to do everything in its power to avert the slide into deflation. The effective federal funds rate had already hit zero by the end of 2008. In all but name, quantitative easing had begun in November 2008, with large-scale purchases of the debt and mortgage-backed securities of government-sponsored agencies (the renationalised mortgage giants Fannie Mae and Freddie Mac) and the promise of future purchases of government bonds. Yet the expansion of the monetary base was negated by the contraction of broader monetary measures such as M2 (the measurement of money and its “close substitutes”, such as savings deposits, that is a key indicator of inflation). The ailing banks were eating liquidity almost as fast as the Fed could create it. The Fed increasingly resembled a government-owned hedge fund, leveraged at more than 75 to 1, its balance sheet composed of assets everyone else wanted to be rid of.
. . .
The position of the US federal government was scarcely better. By the end of 2008, the total value of loans, investments and guarantees given by the Fed and the Treasury since the beginning of the financial crisis had already reached $7.8 trillion. In the year to November 30 2008, the total federal debt had increased by more than $1.5 trillion. Morgan Stanley estimated that the total federal deficit for the fiscal year 2009 could equal 12.5 per cent of GDP. The figure would have been even higher had President Obama not been persuaded by his chief economic adviser, Lawrence Summers, to postpone his planned healthcare reform and promised spending increases in education, research and foreign aid.
Obama had set out to construct an administration in which his rivals and allies were equally represented. But his rivals were a good deal more experienced than his allies. The result was an administration that talked like Barack Obama but thought like Bill Clinton. The Clinton-era veterans, not least Secretary of State Hillary Clinton, had vivid memories of the bond-market volatility that had plagued them in 1993 (prompting campaign manager James Carville to say that, if there was such a thing as reincarnation, he wanted to come back as the bond market). Terrified at the swelling size of the deficit, they urged Obama to defer any expenditure that was not specifically targeted on ending the financial crisis.
Yet the world had changed since the early 1990s. Despite the fears of the still-influential former Treasury secretary Robert Rubin, investors around the world were more than happy to buy new issues of US Treasuries, no matter how voluminous. Contrary to conventional wisdom, the quadrupling of the deficit did not lead to falling bond prices and rising yields. Instead, the flight to quality and the deflationary pressures unleashed by the crisis around the world drove long-term yields downwards. They remained at close to 3 per cent all year.
Nor was there a dollar rout, as many had feared. The foreign appetite for the US currency withstood the Fed’s money-printing antics, and the trade weighted exchange rate actually appreciated during 2009.
Here was the irony at the heart of the crisis. In all kinds of ways, the Great Repression had “Made in America” stamped all over it. Yet its effects were more severe in the rest of the world than in the US. And, as a consequence, the US managed to retain its “safe haven” status. The worse things got in Europe, in Japan and in emerging markets, the more readily investors bought Treasuries and held dollars.
. . .
For the rest of the world, 2009 proved to be an annus horribilis. Japan was plunged back into the deflationary nightmare of the 1990s by yen appreciation and a collapse of consumer confidence. Things were little better in Europe. There had been much anti-American finger-pointing by European leaders in 2008. The French president Nicolas Sarkozy had talked at the G-20 summit in Washington as if he alone could save the world economy. The British prime minister Gordon Brown had sought to give a similar impression, claiming authorship of the policy of bank recapitalisation. The German chancellor Angela Merkel, meanwhile, voiced stern disapproval of the excessively large American deficit.
By the first quarter of 2009, however, the mood in Europe had darkened. It became apparent that the problems of the European banks were just as serious as those of their American counterparts. Indeed, the short-term liabilities of the Belgian, Swiss, British and Italian banks were far larger in relation to those countries’ economies, while the German, French and Danish banks were much more dangerously leveraged. Moreover, in the absence of a European-wide finance ministry, all talk of a European stimulus package was just that – mere talk. In practice, fiscal policy became a matter of sauve qui peut, with each European country improvising its own bailout and its own stimulus package. The result was a mess. Currencies outside the Euro area were afflicted by severe volatility. Inside the Euro area, the volatility was in the bond market, with spreads on Greek and Italian bonds exploding relative to German bunds.
The picture was even worse in most emerging markets. Especially hard hit in eastern Europe were Bulgaria, Romania, Ukraine and Hungary. Of the Brics (Brazil, Russia, India and China), Brazil had the best year, Russia the worst. It was a terrible year for oil and gas exporters, as prices plunged, taking currencies such as the rouble down with them. The Indian stock market, meanwhile, was battered by escalating tensions between New Delhi and Islamabad in the wake of the Mumbai terrorist attacks.
Political instability also struck China, where riots by newly redundant workers in Shenzhen and other export centres provoked a heavy-handed clampdown by the government, but also a renewed effort by the People’s Bank of China to prevent the appreciation of the yuan by buying up yet more hundreds of billions of dollars of US Treasuries. “Chimerica” – the symbiotic relationship between China and America – not only survived the crisis, but gained from it. Although Obama’s decision to attend the first G-2 summit in Beijing in April dismayed some liberals, most recognised that trade trumped Tibet at such a time of economic crisis.
This asymmetric character of the global crisis – the fact that the shocks were even bigger on the periphery than at the epicentre – had its disadvantages for the US, to be sure. Any hope that America could depreciate its way out from under its external debt burden faded as 10-year yields and the dollar held firm. Nor did American manufacturers get a second wind from reviving exports, as they would have done had the dollar sagged. The Fed’s achievement was to keep inflation in positive territory – just. Those who had feared galloping inflation and the end of the dollar as a reserve currency were confounded.
On the other hand, the troubles of the rest of the world meant that in relative terms the US gained, politically as well as economically. Many commentators had warned in 2008 that the financial crisis would be the final nail in the coffin of American credibility around the world. First, neo-conservatism had been discredited in Iraq. Now the “Washington consensus” on free markets had collapsed. Yet this was to overlook two things. The first was that most other economic systems fared even worse than America’s when the crisis struck: the country’s fiercest critics – Russia, Venezuela – fell flattest. The second was the enormous boost to America’s international reputation that followed Obama’s inauguration.
. . .
If proof were needed that the US constitution still worked, here it was. If proof were needed that America had expunged its original sin of racial discrimination, here it was. And if proof were needed that Americans were pragmatists, not ideologues, here it was. It was not that Obama’s New New Deal – announced after the Labor Day purge of the Clintonites – produced an economic miracle. Nobody had expected it to do so. It was more that the federal takeover of the big banks and the conversion of all private mortgage debt into new 50-year Obamabonds signalled an impressive boldness on the part of the new president.
The same was true of Obama’s decision to fly to Tehran in June – a decision that did more than anything else to sour relations with Hillary Clinton, whose supporters never quite recovered from the sight of the former presidential candidate shrouded in a veil. Not that the so-called “opening to Iran” produced a dramatic improvement in the Middle East region. Nobody had expected that either. It was more that, like Richard Nixon’s visit to China in 1972, it symbolised a readiness on Obama’s part to rethink the very fundamentals of American grand strategy. And the downfall of the Iranian president Mahmoud Ahmedinejad – followed soon after by the abandonment of the country’s nuclear weapons programme – was a significant prize in its own right. With their economy prostrate, the pragmatists in Tehran were finally ready to make their peace with “the Great Satan”, in return for desperately needed investment.
Meanwhile, al-Qaeda’s bungled attempt to assassinate Obama – on the eve of Thanksgiving – only served to discredit radical Islamism and to reinforce Obama’s public image as “The One”. Another of the many ironies of 2009 was that the mood of religious reawakening triggered by the economic crisis benefited the Democrats rather than the deeply divided Republicans.
By year end, it was possible for the first time to detect – rather than just to hope for – the beginning of the end of the Great Repression. The downward spiral in America’s real estate market and the banking system had finally been halted by radical steps that the administration had initially hesitated to take. At the same time, the far larger economic problems in the rest of the world had given Obama a unique opportunity to reassert American leadership, particularly in Asia and the Middle East.
The “unipolar moment” was over, no question. But power is a relative concept, as the president pointed out in his last press conference of the year: “They warned us that America was doomed to decline. And we certainly all got poorer this year. But they forgot that if everyone else declined even further, then America would still be out in front. After all, in the land of the blind, the one-eyed man is king.”
And, with a wink, President Barack Obama wished the world a happy new year.
Niall Ferguson is a contributing editor of the FT and the author of ‘The Ascent of Money: A Financial History of the World’ (Penguin)
Should the Crisis Shake Our Faith in the Market?
Should the Crisis Shake Our Faith in the Market?.
As 2008 draws to a close, we do well to reflect on the lessons we have learned. A new president has been elected and will be inaugurated in a few short weeks. The outgoing president claims that he must abandon free-market principles in order to save the free market. Somehow, this has translated itself into a multibillion-dollar bailout for politically favored carmakers. Should the current turmoil cause us to abandon hope and forsake the market economy?
The financial crisis is causing many — among them former Federal Reserve Chairman Alan Greenspan — to question their faith in the power of the free market. Unfortunately, the idea that the current unpleasantness has its roots in unfettered, unrestrained capitalism has gained some traction in the popular media. Two immediate responses come to mind. First, the crisis is not the product of unregulated capitalism. Second, if anything, the crisis should strengthen rather than temper our zeal for the free market. As economist Thomas Sowell once put it, we do not have "faith" in the power of the free market. We have evidence. And I expect that once all of its root causes are discovered and analyzed, the current crisis will be another data point supporting the case for free markets.
The incoherence of political rhetoric and the impotence of political solutions has been evident throughout the debate. We are to believe that "affordable housing" is a worthwhile and noble policy goal, but not if it comes at the expense of falling home values. Senator John McCain argued in the third presidential debate that Joe Sixpack (and Joe Lunchbucket, Joe the Plumber, Average Joe, GI Joe, Trader Joe, and other assorted Joes) are "innocent victims of greed and excess on Wall Street and in Washington," which suggests that if we could just get people to be less greedy and less excessive, we wouldn't have these problems.[1]
For the last few decades, the term "housing crisis" has been used to describe the run-up in home prices that has created a supposed shortage of affordable housing. To correct the modern housing crisis, Senator McCain proposed spending $300 billion to buy bad mortgages to prevent home prices from falling further.
Rhetoric from Senator Obama was similarly depressing. In the third debate, Obama referred to the revised bailout as a "financial rescue plan" and a "rescue package for the middle class," which is much more politically palatable, no doubt, than "giveaway to favored political constituencies." He argued that the country should try to "save jobs" with mercantilist policies and "get homeowners in a position to be able to renegotiate their mortgages."
Left unsaid is the fact that these mortgages will be "renegotiated" at gunpoint. The government will have to either strong-arm or bribe lenders into renegotiating bad mortgages. In the first case, the government's use of force would be very bold, perhaps too bold to be politically feasible. In the second case, the government's use of force involves an unassuming third party: the American taxpayer.
Political rhetoric about taxing corporations fails to grasp two things. First, it fails to consider who actually owns corporations. Second, it doesn't heed what we know about tax incidence. Senator Obama argued that large corporations like ExxonMobil can afford to pay more so that Joe the Plumber can have a tax cut. Taxing corporations makes a lot of voters think that the government is taxing top-hat-wearing, cigar-chomping plutocrats, but the burden of the tax falls on all shareholders in the corporation. This means that anyone who owns stock in ExxonMobil — which would include probably anyone with a well-diversified stock portfolio comprised in part of market-index mutual funds — will bear the burden of taxes on corporations, to say nothing of the people who work for these companies. To add insult to injury, taxes on corporations might fall disproportionately on Joe the Plumber rather than on Tad the Plutocrat. Joe doesn't have the wherewithal to hire high-priced tax attorneys and accountants to shield his 401k from taxes, while Tad can invest considerable resources in avoiding taxation.
As George Bernard Shaw wrote, "A government which robs Peter to pay Paul can always depend on the support of Paul."[2] In the short run, taxing Rich Peter to pay Poor Paul looks very attractive, politically, and this is precisely what Senator Obama proposes doing with his plan to tax the top 5% of income earners while cutting taxes for the rest of us. In the third debate, Obama pointed out that his supporter and advisor Warren Buffett is willing to pay higher taxes to do what is needed, and so too is Senator Obama. Their intentions are noble, no doubt, but there is no one stopping them from writing a check to the US Treasury right now. The rest of us, seeing the wastefulness of government "stewardship" of our earnings, are understandably hesitant.
Acclaimed minister Adrian Rogers once said that you cannot multiply wealth by dividing it. Trying to spread the wealth via a tax-and-redistribute scheme will not bring prosperity. It will only share misery (albeit perhaps more equitably). The solution is to pursue more market-oriented reforms that remove obstructions on entrepreneurs. As theory and evidence suggests, market-oriented reforms are not faith-based initiatives. They are our only hope for the long run.
Sunday, December 28, 2008
Sue for Libel?
Sue for Libel?
by Walter Block
Should I sue the bad guys for libel? There is nothing I would like more. These people have, indeed, engaged in such acts, at least according to several lawyer friends of mine.
For example, Fr. Linnane, S.J., President of Loyola College in Maryland said that neither he nor the institution he heads up would "endorse or support racism, sexism or any other form of intolerance," in a context where he clearly claims I am guilty of such. A letter signed, presumably, by the entire economics department of this college (actually, two of its members, Prof. Tom DiLorenzo, and Prof. Hank Hilton, S.J., chairman of this department, refused to sign it) characterized my lecture (which most of them did not even attend), as follows: "insensitive," "incorrect," "offensive," "racially insensitive," "poor-quality scholarship," (guilty of) "gender … (and) … racial prejudice." And then, to add insult to injury, my own Loyola University New Orleans colleagues, the members of our Affirmative Action Diversity Task Force, piled on with a "statement" to the effect that I have no "commitment to inclusion" and that I "marginalize women and African Americans"; that I do not want to "instill… in every one of our students a desire to pursue excellence"; that I do not appreciate "the valuable contributions of" some ethnic, racial and gender groups; that my remarks are "flawed" and, even, "dangerous." Needless to say, none of the members of this "Task Force" attended my lecture, either. Further, there was a rash of letters to the editor of the Times Picayune newspaper, which, charitably, can be characterized as libelous condemnations of this lecture of mine, which of course, none of them had attended.
Oh, yes; there is nothing I would want more than to sue these illegitimi for all they are worth, and then, of course, to donate the proceeds to the Mises Institute, without whose support I would not have been able to publicize these moral, spiritual, intellectual, and, yes, illegal outrages that have been perpetrated upon me.
However there is one barrier to doing so, at least for the libertarian. While libel is indeed a crime on the law books, we libertarians are not legal positivists. Not for us the notion that whatever the law is, is right. No, members of our persuasion cast a piercing light on the extant legal codes, and do not at all support them en masse. Rather, we pick and choose. We claim they are legitimate only to the extent they accord with the twin pillars of libertarianism, private property rights based on homesteading, and the non initiation of aggression axiom.
How do libel laws stack up in this regard? Not too well.
In the view of Rothbard:
"Does Smith have the right to disseminate false information about Jones? In short, should ‘libel’ and ‘slander’ be illegal in the free society?
"… how can they be? Smith has a property right to the ideas or opinions in his own head; he also has a property right to print anything he wants and disseminate it. He has a property right to say that Jones is a ‘thief’ even if he knows it to be false, and to print and sell that statement. The counter-view, and the current basis for holding libel and slander (especially of false statements) to be illegal is that every man has a ‘property right’ in his own reputation, that Smith’s falsehoods damage that reputation, and that therefore Smith’s libels are invasions of Jones’s property right in his reputation and should be illegal. Yet, again, on closer analysis this is a fallacious view. For everyone, as we have stated, owns his own body; he has a property right in his own head and person. But since every man owns his own mind, he cannot therefore own the minds of anyone else. And yet Jones’s ‘reputation’ is neither a physical entity nor is it something contained within or on his own person. Jones’s ‘reputation’ is purely a function of the subjective attitudes and beliefs about him contained in the minds of other people. But since these are beliefs in the minds of others, Jones can in no way legitimately own or control them. Jones can have no property right in the beliefs and minds of other people.
"Let us consider, in fact, the implications of believing in a property right in one’s ‘reputation.’ Suppose that Brown has produced his mousetrap, and then Robinson comes out with a better one. The ‘reputation.’ of Brown for excellence in mousetraps now declines sharply as consumers shift their attitudes and their purchases, and buy Robinson’s mousetrap instead. Can we not then say, on the principle of the ‘reputation’ theory, that Robinson has injured the reputation of Brown, and can we not then outlaw Robinson from competing with Brown? If not, why not? Or should it be illegal for Robinson to advertise, and to tell the world that his mousetrap is better? In fact, of course, people’s subjective attitudes and ideas about someone or his product will fluctuate continually, and hence it is impossible for Brown to stabilize his reputation by coercion; certainly it would be immoral and aggressive against other people’s property right to try. Aggressive and criminal, then, either to outlaw one’s competition or to outlaw false libels spread about one or one’s product.
"We can, of course, readily concede the gross immorality of spreading false libels about another person. But we must, nevertheless, maintain the legal right of anyone to do so. Pragmatically, again, this situation may well redound to the benefit of the people being libeled. For, in the current situation, when false libels are outlawed, the average person tends to believe that all derogatory reports spread about people are true, ‘otherwise they’d sue for libel.’ This situation discriminates against the poor, since poorer people are less likely to file suits against libelers. Hence, the reputations of poorer or less wealthy persons are liable to suffer more now, when libel is outlawed, then they would if libel were legitimate. For in that libertarian society since everyone would know that false stories are legal, there would be far more skepticism on the part of the reading or listening public, who would insist on far more proof and believe fewer derogatory stories than they do now. Furthermore, the current system discriminates against poorer people in another way; for their own speech is restricted, since they are less likely to disseminate true but derogatory knowledge about the wealthy for fear of having costly libel suits filed against them. Hence, the outlawing of libel harms people of limited means in two ways: by making them easier prey for libels and by hampering their own dissemination of accurate knowledge about the wealthy."
I, too, am on record as opposing the criminalization libel. In my book Defending, I state:
"Now, there is perhaps nothing more repugnant or vicious than libel. We must, therefore, take particular care to defend the free speech rights of libelers, for if they can be protected, the rights of all others – who do not give as much offense – will certainly be more secure. But if the rights of free speech of libelers and slanderers are not protected, the rights of others will be less secure.
"The reason civil libertarians have not been involved in the protection of the rights of libelers and slanderers is clear – libel is ruinous to reputations. Harsh tales about lost jobs, friends, etc., abound. Far from being concerned with the free speech rights of the libeler and slanderer, civil libertarians have been concerned with protecting those who have had their reputations destroyed, as though that in itself was unpardonable. But obviously, protecting a person’s reputation is not an absolute value.
"If it were, if, that is, reputations were really sacrosanct, then we would have to prohibit most categories of denigration, even truthful ones. Unfavorable literary criticism, satire in movies, plays, music or book reviews could not be allowed. Anything which diminished any individual’s or any institution’s reputation would have to be forbidden…
"… what is a person’s 'reputation'? … Clearly, it is not a possession which may be said to belong to him in the way, for example, his clothes do. In fact, a person’s reputation does not 'belong' to him at all. A person’s reputation is what other people think of him; it consists of the thoughts which other people have.
"A man does not own his reputation any more than he owns the thoughts of others – because that is all his reputation consists of. A man’s reputation cannot be stolen from him any more than can the thoughts of other people be stolen from him."
"Whether his reputation was 'taken from him' by fair means or foul, by truth or falsehood, he did not own it in the first place and, hence, should have no recourse to the law for damages.
"What then are we doing when we object to, or prohibit, libel? We are prohibiting someone from affecting or trying to affect the thoughts of other people. But what does the right of free speech mean if not that we are all free to try to affect the thoughts of those around us? So we must conclude that libel and slander are consistent with the rights of free speech."
Thus, while I would like, more than almost anything else, to meet these defamatory people in a court of law, in my opinion libertarian principles prevent me from so doing.
But, am I not being too extreme? Is not logical consistency the hob goblin of little minds? And, has not the great Murray Rothbard opined that every dog gets one bite: a person can still be considered a libertarian even if he acts inconsistently with this doctrine on one issue. Why not make libel laws my one exception?
This will not do, for I have already compromised on libertarian principle. I have previously given up on anarcho capitalism, a logical implication of the twin libertarian axioms. I am on record as saying that government is justified (I did this in one of my lectures at the Mises University; if you want to see lots of similar compromises with principle, attend this seminar). That is, I have favored limited government. Well, strictly-limited government. My claim is that the state should have only one function: to compel everyone to read the books of Mises and Rothbard. But not only read them: understand them, too. To that end, the government should set up quiz centers to ensure comprehension of books such as Human Action and Man, Economy and State (please, the scholar’s editions of each), and jail sentences (take that, Stephan Kinsella and Dan D’Amico!) for those who fail to fully understand these books.
So, you see, gentle reader, being guilty of one deviation, I dare not add a second to my record.
Is there any way out of this morass? Is there a path that will allow me to both have my cake and eat it too? That is, sue ‘em, but, somehow, do so in a way that is compatible with libertarian principles?
Consider the following attempts (all suggested to me by friends of mine) in this regard. I fear they all fail, but I am certainly open to all such attempts.
- "I don't see how suing these rascals for libel conflicts with libertarian thought. We believe in economic compensation for wrongs done to us, right?"
Well, not exactly. The only wrongs for which forced compensation is justified under libertarianism involve a violation of either private property rights or the non aggression axiom. Does libel, lying about someone’s views in this case, constitute such a violation? I think not. Fr. Linnane, S.J., did not punch me in the mouth, nor steal my car. Yes, he besmirched something even more valuable to me, far more valuable, my reputation, but, still, I don’t own my reputation (it consists of the thoughts of others about me), thus there is no wrong committed against my property rights.
- "I'm sure that you can figure this out so that you may avoid this criticism while using the threat of this action and the sure outcome to defend your opinion – as well as your method of teaching."
Here is another version of this attempt:
"I don't think that you must see it all the way through. When they realize that they cannot win, they will back out of court. You get the judgment (compensation) for damages to your career, etc. They shut the hell up. (The ultimate ideal would be that they back down, make public apologies, and after that, you forgive them for the debt – doubt that a lawyer would agree to this – so, how about they apologize publicly, in writing – in newspapers, even if it costs them money – then you take their compensation and donate it to some good charity?"
That sounds like a great idea: threaten to bring a libel suit against these worthies, but do not carry through. That is, perhaps, have a lawyer send them a letter with this threat, and hope that this will be sufficient to entice them to climb down from their present position. At least offer an apology, and, perhaps, offer to settle out of court, since my case (I have been assured by several lawyers) is a strong one. Very tempting; even a public apology would go some way toward demonstrating to the politically correct crowd that they cannot bully everyone.
The problem with this from a libertarian perspective is that there is an intimate connection between what one may properly threaten, and what one may licitly do. That is, it is impermissible to threaten to engage in act X, if you have no right to actually carry X out. I have no right to threaten that unless you give me your wallet, I’ll shoot you, because I have no right to shoot you in the first place. On the other hand, if I do indeed have a right to do Y, then I have a right to threaten that I will do Y, unless you pay me money. This insight is the key element of the libertarian analysis of blackmail. In this case, since I have the right to gossip about you, I have the right to threaten to gossip about you, unless you pay me not to do so, which is all that blackmail consists of. For further elaboration of this claim, see here, here, here, here, here and here.
- "A libel suit is just a use of force. It is arguably permissible if it is used defensively – e.g. in a counterclaim. So – see if you can think of a case that these people are committing aggression against you – e.g. by supporting taxation etc."
I would gladly do this. And, yes, my tormentors all, certainly, support taxes. But, that is all they did to me: libel. They only libeled me. They didn’t use coercion against me. How I wish they had.
This reminds of the time when Robert Nozick used rent control legislation against Eric Segal, fellow Harvard professor, novelist (Love Story), and his landlord. The press had a field day with Nozick, under the heading of Anarchy, State and Rent Control, a take-off on the title of his famous book, Anarchy, State and Utopia. Nozick was widely and properly condemned for his hypocrisy. Suppose, however, contrary to fact conditional coming up here, that Segal had punched Nozick in the mouth, under conditions where this could not be proved. Then, would Nozick have been justified in utilizing rent control provisions against Segal? I do not see why not. As stated above "A libel suit is just a use of force." If violence was initiated by these people, then countermeasures, such as a libel suit, would be justified. I only wish that some of these libelers had been guilty of a real crime; I would not hesitate, then, to utilize libel law against them. Alas, however, they did not, and thus I may not.
- "Ask XX (a lawyer) about the libel law aspect. These people deserve to have the (bleep) scared out of them, and Walter, the hell with ‘no damages.’ Sue them all for big bucks, and give the money to the Mises Institute."
I fully agree with this friend of mine that these people deserve not only to have the (bleep) scared out of them, but to pay, and big. Needless to say, I would donate any proceeds from a lawsuit along these lines to the MI. (I had previously considered the possibility of suing them, merely, for an apology; I have long since relinquished this idea.) However, and this is a big however, I'm having no little difficulty reconciling suing them for libel with libertarian theory, according to which libel is not a crime.
Suppose, arguendo, I were to sue for libel. At whom would I direct my lawsuit? To the individuals involved? Fr. Linnane, S.J. has no money: zero. As a Jesuit priest, he has sworn a vow of individual poverty (but not group poverty: his Catholic order is a very wealthy one.) On the other hand, he has violated, with impunity, Paragraph 22 of The Spiritual Exercises of Saint Ignatius, which are the spiritual foundation of Jesuit life. If he has transgressed against this one rule, why not others? Who knows how much money he has socked away, contrary to his vows of individual poverty? Well, likely, not too much, if any at all. Certainly, I have no independent reason to suppose that Fr. Linnane, S.J., has violated this one oath, just because he has ignored another. My other libelers are mainly professors, and, probably, no one will get rich from suing any of them, or even all of them put together.
Why not, then, search for "deep pockets?" Loyola University New Orleans and Loyola College in Maryland both have rather large endowment funds. For that matter, I might as well sue the entire Jesuit order, if it is deep pockets at which I am aiming. Unhappily for this trend of thought, seeking out such defendants would also be proscribed by libertarian considerations. To wit, respondeat superior is incompatible with the individualist elements of libertarianism. This is the doctrine according to which the employer (the entire Jesuit Order, Loyola University New Orleans, Loyola College in Maryland, respectively) is civilly responsible for the actions of his employees (my several libelers, in this case). Under libertarianism, in sharp contrast, people are only responsible for their own acts, not those of others. For more on this, see here.
- "Get someone else to do the suing. If you are limited by your libertarian principles in this regard, there are others, friends of yours, who will not be so picky."
There is precedent for this sort of thing. In the Jewish tradition, there is the practice of the Shabbos goy. This is a non Jew who is not bound by Halachic (Hebrew) law to, for example, refrain from turning lights on or off during Shabbos (the Jewish Sabbath, which takes place between sunset Friday and sunset Saturday). He can perform this service for a Jew without violating any rules that apply to either of them.
This, I confess, initially sounded to me like a "winner." At last, I could see the libelers writhe, score a few points against these bullies, strike a blow for freedom, and all this without running afoul of libertarian requirements.
Alas, ‘twas not to be. There is such a thing as "standing" in the law, and properly so. This means that there must be some connection between the plaintiff and the harm done. But, no one else has any standing, apart from me. No one else’s reputation was attacked. I am not lawyer enough to know whether any other libertarian would have sufficient standing, based on only that fact; even if so, there would still be logical difficulties here. To the extent that such a person really was a libertarian, he would have standing, but would have to renounce all libel lawsuits, for reasons given above. To the extent that such a person was willing to sue in my behalf, he would lose any vestige of standing that might or might not be according to any of my fellow libertarians; he would no longer be one of our tribe. - "It is not you who are doing the libel. It is they. So, play by their rules. I think in this case, you can play by their rules and still win. It's the best of both worlds, no?"
I fear not. To play by "their" rules is to renounce libertarian principle. But, the point of the exercise I conducted in Baltimore was to promote liberty, not adopt their policies. In other words, we want to achieve liberty in a very narrow and limited way: by using libertarian means, and only libertarian means. To sue anyone for libel is to that extent to put paid to this.
So, what to do, what to do? If anyone has any suggestions, if anyone can mention another tack that I have missed, please let me know. (By the way, unless otherwise told, I intend to blog some of the many magnificent letters I have received in response to this thread; of course, on an anonymous basis. Tom DiLorenzo has started this practice, and I intend to follow up on his lead.)
There is a course of action I have tentatively decided to embark upon. Given that I cannot sue for libel as a libertarian, is there anything else I can do to bring these harassers down a peg or two? Yes. I can go to ecclesiastic court. Fr. Linnane, S.J. is a member in good standing of the Jesuit order. Yet, he has violated its strictures. The members of the economics department at Loyola College in Maryland are not Jesuits (apart from their department chairman, Fr. Hilton, S.J., who did not sign that letter), nor are those who comprise the Affirmative Action Diversity Task Force of Loyola University New Orleans. However, both sets of individuals are employed by these two Jesuit institutions of higher learning, and are, presumably, bound at least to some extent to follow practices of civility as required by the Jesuit order. Surely, there must be some penalties meted out to those who so outlandishly set these aside.
However, I am now stepping way outside the bounds of my expertise, such as it is. I need a lawyer well versed in ecclesiastical law to advise me on this matter. If anyone knows of such a person, please ask him to contact me, and/or give me contact information about him.
A note on another matter.
In a previous column in this thread, I has occasion to say this: "Now, even mentioning IQ in the typical university setting (apart from debunking the entire concept) is, for many, akin to shouting out the F word in the drawing room. Indeed, it is simply not done in "polite" society, in their view. I beg to differ."
My friend Gary North points out that most institutions of higher learning, certainly including both Loyola College in Maryland and Loyola University New Orleans rely, heavily, upon SAT and ACT scores in choosing their freshman classes. But, SAT and ACT ratings are not unrelated to IQ. It is more than passing curious, then, that members of each of these communities are so bitterly opposed to the latter, when they embrace the former as an everyday matter – well, ever-year matter. They are thus acting – how shall we put this politely? – in a logically inconsistent manner. Are they also racists and sexists for utilizing a concept (SAT, ACT) that is so highly correlated with the IQ score they hate and revile so much? They are, at least according to the limitations they have attempted to place upon me. Logic, then, compels them to either cease and desist from employing SAT and ACT scores in their decision making, or, to withdraw the calumny they have placed at my door for merely mentioning IQ.
December 29, 2008
Dr. Block [send him mail] is a professor of economics at Loyola University New Orleans, and a senior fellow of the Ludwig von Mises Institute. He is the author of Defending the Undefendable and the newly released Labor Economics From A Free Market Perspective.
'Stimulus' Doesn't Have to Mean Pork
'Stimulus' Doesn't Have to Mean Pork
How Obama can reform government while boosting the economy.
CLIFFORD WINSTON
President-elect Barack Obama says he will create or protect some three million jobs by spending a massive amount of federal dollars to build roads and other "shovel ready" government projects across the country. The projects in this economic stimulus package, he says, will "not be based on politics and lobbying."
Nice thought. But already Mr. Obama is facing pressure by public officials from coast to coast to run in the other direction. In recent weeks, for example, the U.S. Conference of Mayors forwarded to Congress a list of 11,391 infrastructure projects that, we are to believe, are "ready to go." Several media outlets quickly pointed out that this list is full of pork -- the most flagrant examples are a polar-bear exhibit, an antiprostitution program, and a water-park ride. The nation's governors, transit officials, and the American Association of State Highway and Transportation Officials have sent along their own lists, which are likely to contain their own "bridges to nowhere."
But the deepest problem Mr. Obama faces is not the diversion of funds to pork-barrel projects -- contrary to popular belief, this generally amounts to a modest share of public expenditures. The problem is rather that infrastructure spending itself is productive only when it produces a large social return.
If Mr. Obama is to make good on his promise to stimulate the nation's economy by firing up the nation's steamrollers, cement trucks and the like, the challenge is to find a way to make run-of-the-mill projects cost effective while also cutting the cost and time of travel. In other words , he needs to wring wasteful spending not just out of pork projects, but out of all of his transportation spending as well.
Critically, his administration needs to face the problem that those who use roads, bridges and airports do not pay for the full cost of maintenance, nor do they pay for the cost they impose on other travelers by contributing to congestion. Those who use public buses and trains have long been heavily subsidized to encourage ridership.
When travelers don't pay for the full cost of their use of the transportation system, policy makers are left with the impression that new roads, airports and urban rail systems should be built to cut down on congestion. But if prices were aligned with actual costs (through tolls), demand would fall. This would especially be true during peak travel periods, and therefore public expenditures would not be wasted on dubious projects.
One of the biggest killers of all is that states insist on allocating federal transportation funds through a politically devised formula. The result? Smooth, well-paved rural highways and worn-out urban roadways that are paved with a layer of asphalt too thin to withstand heavy use and are therefore in need of excessive, costly maintenance.
But don't blame the states for all the inefficient use of highway dollars. Federal regulations have also inflated the cost of providing roads, trains and so much more for a public on the move.
It takes the nation's busiest airports decades and billions of dollars to build new runways, for example, because of onerous regulations imposed by the Federal Aviation Administration and the Environmental Protection Agency. Davis-Bacon mandates, which effectively require that "prevailing" union wages (often much higher than the actually prevailing market wage) be paid to workers on any construction project receiving federal funds, also drive up the costs of roads and other federal transport projects. The Federal Transit Act also makes it extremely expensive to lay off transit employees.
All of this wouldn't be so bad if even inflated costs brought back large returns. In co-authored peer-reviewed research, I've published two papers on this subject in recent years in the Journal of Urban Economics. What I found was that over the past decade we have reaped a mere 1% return on our highway investments. And what's more, for every $1 the government has spent trying to reduce roadway congestion, motorists have saved a mere three cents in travel time and other costs.
The wish lists that special interest groups are lobbying Congress to stuff into Mr. Obama's stimulus package do nothing to move us away from the over-priced, low social-benefit projects of the past.
Instead of funding every special-interest pet project, the incoming administration would be better served by taking a two-step approach. First, work with Congress to address things that can reduce costs in the short run. Reforming Davis-Bacon, for example, would be a good start. Second, formulate a carefully considered set of infrastructure investments that are likely to generate the largest benefits to the traveling public, while boosting employment.
In my view, such investments are likely to include building additional runways at congested airports and expanding highways in the most congested metropolitan areas where land is available to do so. The benefits from such investments will be greater if the driving and flying public are charged prices that actually reflect the costs that they incur.
Unlike the bailout of the financial system, sound economic guidelines do exist to enable the Obama administration to develop a successful infrastructure stimulus package to help address the current crisis. The country would best be served if those guidelines are followed.
Mr. Winston, a senior fellow at the Brookings Institution, is the author of "Government Failure Versus Market Failure" (Brookings , 2006).
Hollywood Celebrates Che Guevara
Hollywood Celebrates Che Guevara
But it makes no films about the Cuban resistance movement.
Hollywood hotshot Benicio Del Toro is not a stand-up comic, but he seemed to be playing one earlier this month when he said he found the role of Cuban Revolution hero Ernesto Guevara, in the new film "Che," like Jesus Christ.
![[The Americas]](http://s.wsj.net/public/resources/images/OB-CW452_oj_amc_E_20081228210505.jpg)
APThe Ladies in White march in front of Havana's Capitol building to protest the jailing of political dissidents, Dec. 10.
"Only Jesus would turn the other cheek. Che wouldn't," Mr. Del Toro explained. Right. And Bernie Madoff is Mother Teresa, only she wasn't into fraud.
With next month marking the 50th anniversary of the Castro dictatorship, it's no surprise that the film industry is trying to cash in by celebrating pop-culture icon Guevara. As one of Fidel Castro's lieutenants in the Sierra Maestra and a Castro enforcer in the years following the rebel victory, his name is synonymous with the Cuban Revolution.
Interesting films are hard to come by these days and "Che" is a good example of the problem. Rebel glamour sells T-shirts and coffee mugs so why not another airbrushed rerun of Guevara's life? Or, more precisely, some mythical version of it, sanitized for the mass market. Meanwhile the real marvel of the past 50 years in Cuba -- the steady stream of heroic nonconformists who have risked all in their aspiration to think, speak and act freely -- remains the untold epic of our time.
If Mr. Del Toro's "Christ" comment is foolish, it's nothing compared to film director Steven Soderbergh's explanation of why we should care about Che. Bad things happen in society when "you make profit the point of everything," the movie director told Politico.com. Che's "dream of a classless society, a society that isn't built on the profit motive, is still relevant. The arguments still going on are about his methodology."
Putting aside for a moment the hilarity of Mr. Soderbergh's personal revulsion with profits, the "methodology" that he suggests is debatable is otherwise known as murder. Che had a "homicidal idea of justice," Alvaro Vargas Llosa explained in The New Republic in 2005, after researching his life. In his April 1967 "Message to the Tricontinental," Che spoke these words: "hatred as an element of struggle; unbending hatred for the enemy, which pushes a human being beyond his natural limitations, making him into an effective, violent, selective and cold-blooded killing machine."
The results of Che's utopian agenda aren't much to admire either. As author Paul Berman explained in 2004 in Slate, "The cult of Ernesto Che Guevara is an episode in the moral callousness of our time. Che was a totalitarian. He achieved nothing but disaster."
The miserable Argentine was killed in 1967 in the Bolivian Andes while trying to spread revolution in South America. But his vision of how to govern lives on in the Cuba of today. It is a slave plantation, where a handful of wealthy white men impose their "morality" on the masses, most of whom are black and who suffer unspeakable privation with zero civil liberties.
There is something rich about the supposedly hip, countercultural Hollywood elite making common cause with Cuba's privileged establishment in 2008. Its victims -- artists, musicians, human-rights activists, journalists, bloggers, writers, poets and others deprived of freedom of conscience -- would seem to deserve solidarity from their brethren living in freedom. Instead, the ever-so avant-garde Soderberghs side with the politburo.
The Cuban regime loves its apologists. They give cover and deflect international criticism while at home the regime brutalizes its people. Reports from the island are that since Raúl took over from Fidel in 2006, the repression has gotten worse.
Oswaldo Payá, leader of the Varela Project, which collected more than 11,000 signatures calling for free elections and civil liberties in 2002, says that in recent months there has been a crackdown, "with a fierce persecution against Varela Project activists, other members of the opposition, and the ongoing scandal of not freeing the prisoners of conscience."
Among Castro's captives is Oscar Elias Biscet, an Afro-Cuban doctor who is renowned for his commitment to peaceful resistance and is serving a 25-year sentence. Fifty-eight journalists, writers and democracy advocates rounded up in March 2003 also languish in Fidel's deplorable jails. The total number of political prisoners is not known but is undoubtedly much higher.
State security and rapid-response brigades -- aka thugs paid to rough up dissidents -- have been fully employed this year. But, despite the terror and the threat of imprisonment, the Cuban spirit still struggles for freedom.
At least five resistance publications now circulate in eastern Cuba. Thirty-two-year-old blogger Yoani Sánchez has been warned to keep quiet, but she still chronicles the ridiculousness of Che economics, giving a voice to ordinary Cubans who live lives of desperation. The Ladies in White -- wives, sisters and mothers of prisoners of conscience -- still walk quietly in Havana on Sundays. Rock bands mock the old dictator.
This is the wonder of the revolution: Fifty years of state terror hasn't silenced the resistance. Maybe one day Hollywood will make a film about it.
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