A Country or a Benevolent Organization?

In his latest Washington Post column Robert Samuelson warns about the potential consequences of the trade war between China and the United States:

The name that comes to mind is Charles Kindleberger, an eminent economic historian of the post-World War II era who taught for years at the Massachusetts Institute of Technology and was a prolific author of books and articles. One of his masterpieces was “The World in Depression, 1929-1939.”

The crux of Kindleberger’s thesis was that the underlying cause of the Depression was a vacuum of leadership. By this, he meant that Britain — which had provided that leadership in the 19th century — had been so weakened by World War I that it could no longer perform that function in the 1920s and early 1930s. Meanwhile, the United States — which would fill that role after World War II — was not ready to do so.

In this context, the dominant country would keep its markets open to imports, so the trading system would not collapse under the weight of mounting protectionism. Another requirement was that the leading country (the “hegemon”) had to have the financial strength so it could lend to banks and other needy borrowers during a crisis so that the financial system, the repository of much wealth, would not self-destruct.

In the recent foreword of the latest version of Kindleberger’s book, economists J. Bradford DeLong and Barry Eichengreen of the University of California at Berkeley put it this way:

“The root of Europe’s and the world’s problems was the absence of a benevolent hegemon: a dominant economic power able and willing to take the interests of smaller powers and the operation of the larger international system into account by stabilizing the flow of spending through the global [economy] . . . by acting as a lender and consumer of last resort.”

I’m unhappy with the present situation, too. It didn’t have to be this way. The United States didn’t have to lose millions of manufacturing jobs in the space of just a few years in the early Aughts. The same number might have been lost over a period of decades rather than a period of years. We didn’t need to see the wealthiest prospering so mightily while the rest of the people struggled along. We didn’t need to have personal consumption expenditures approaching three-quarters of the economy.

We are a country not a benevolent organization. Rather than governing by slogan or sound bite (or tweet) policies must be carefully constructed, monitored, and managed so that they benefit the great bulk of the people rather than just the Walton family or a handful of other billionaires. It’s the results that matter, we have seen the results, and they have not been particularly good.

I’m in favor of free trade but, make no mistake, a free trade agreement can be written on the back of a napkin. When an agreement runs to thousands of pages it is not a free trade agreement. It is managing trade to pick winners and losers and such a process is inevitably political.

Had the situation been managed patiently and prudently from the beginning the necessary correction would have been less painful. But a correction is, indeed, necessary. We can’t survive economically as a country with just retail and health care. We can’t continue to have U. S. companies finance the world’s R&D while the Chinese reap the benefits through theft or illegal forced technology-sharing agreements.


Predicting a Democratic Victory

It’s still a bit early for predictions about the 2020 presidential elections but they’re starting to appear. As of today the econometric models without exception (at least to my knowledge) predict that Trump will be re-elected. That is, presumably, why all of the breathless anticipation on the part of the media at each hint of a recession.

However, I thought you might be interested in this interview at Salon by Paul Rosenberg of a political scientist who called the results of the 2018 midterms on the nose. Her position is that we’re in the midst of a “political realignment” and that Trump’s defeat is very nearly a foregone conclusion:

The good news is that so long as Trump is in office, negative partisanship gives Democrats an edge, as electoral realignment continues. Rather than fearing Trump’s ability to repeat his 2016 upset, on July 1 of this year Bitecofer released her 2020 projection, which shows Democrats winning 278 electoral votes versus 197 for Trump, with several swing states too close to call. Bitecofer also isn’t worried about the Democrats losing their House majority. On Aug. 6, Bitecofer released a preliminary list of 18 House seats the Democrats could flip in 2020, nine of them in Texas. The most significant threats that concern Democrats are actually golden opportunities, according to her model.

In essence her position is that the 2018 midterms did not turn out as they did because voters who had voted for Trump in 2016 voted Democratic in 2018 but because the Democrats were better able to get their base out in 2018 than they had been in 2016.

I do not know who will win the 2020 presidential election. Like Dr. Bitecofer I think that turnout is important but unlike her I think it matters who the Democratic presidential candidate is for just that reason. I’m also uncertain I agree with her on just who the Democratic base is.

All that I have to add is that the political landscape is littered with the corpses of the political ambitions of people who underestimated Donald Trump. Historically, presidents have tended to be re-elected and whether the incumbent or not the winning candidate has been the candidate who painted the brightest picture of the American people and the country’s future. Maybe that’s changed. If Dr. Bitecofer is right, all the more reason to be more concerned about the Democrats than the Republicans.


Gammon’s Law Applied to Health Care

The graph above, linked from Fiscal Times but from Uwe Reinhardt’s last book, illustrates the steep growth in administrators in health care over the last 25 years. It is an illustration of the working of Gammon’s Law AKA the Theory of Bureaucratic Displacement. As stated by Max Gammon

In a bureaucratic system, an increase in expenditure will be matched by a fall in production. Such systems act rather like “black holes” in the economic universe, simultaneously sucking in resources and shrinking in terms of “emitted production”.

The only point I’m making with this is that bringing health care spending more into line with “emitted production”, however measured, is the sine qua non of health care reform. No reform, whether “market-based”, whatever that may mean in a health care context, or single-payer or Medicare for All or any other reform, can control health care spending without reducing the bureaucratization of medicine.

I have a question attendant to that chart, however. Obviously, something happened in the early 1990s that impelled that growth in the number of administrators. What was it?

As a side note education has precisely the same problem.


Bolsheviks, Left and Right

I don’t have much to contribute to the conversation going on at Outside the Beltway, first from James Joyner, then from Stephen Taylor. I can’t help but think that it’s mostly breastbeating about the Trumpification of the Republican Party, a subject in which I have little interest.

Why isn’t it interesting to me? My city councilman is a Democrat, the mayor of my city is a Democrat, the president of the county board is a Democrat, the governor of my state is a Democrat, the leadership of both houses of the state legislature are Democrats, and there are Democratic supermajorities in both houses of the legislature. Is it any wonder I’m more interested in Democrats than Republicans?

I do disagree with one point James makes repeatedly first here:

But, unlike Sullivan, I also think “the left” is too small a force in American politics to do more than marginal harm.

then here

I’m much less tempted since, again, I think the left far less powerful than Sullivan suggests.

What’s missing from both Dr. Joyner’s piece and Dr. Taylor’s is most of the American electorate. Most are not intensely interested in politics, strong committed partisans, or comfortable with either political party. Yes, Trump’s approval rating is low but the Congress’s is even lower. Support for one’s own Congressman while not at an historic low, is phlegmatic.

What I see is in our politics is a small group of left Bolsheviks punching far above their weight, to the extent that they’re dominating the debate in the Democratic presidential debates, and a small group of right Bolsheviks, also punching far above their weight, with most of the American people left out of the discussion.

What I would remind everyone of is that the original Bolsheviks never comprised a majority in Russia and were unimportant until, suddenly, they were very important, indeed.


Ignatius’s Grudging Support

Ideally, we would always do the right thing for the right reasons, saying the right things about our choice. Real life is less holding out for the ideal than it is deciding which less than ideal course of action is the best. Is it better to do the wrong thing for the right reason? Say the right things about doing the wrong thing? Or is it better to do the right thing regardless of your reasons or what you say about it?

That’s the problem David Ignatius faces in his most recent column. What do you say about Trump’s doing the right thing about Hong Kong?

President Trump has been as erratic on Hong Kong as on most foreign-policy issues. In the early days, he all but invited Beijing to crack down, calling the protests “riots,” and saying it was a matter between Hong Kong and China, “because Hong Kong is a part of China.”

This week, as a crackdown seemed near, Trump whined about being blamed for Chinese intervention and offered a “personal meeting” to resolve the crisis peacefully with the “great leader” President Xi Jinping.

Then, on Wednesday, he personalized the issue even more by linking a trade deal with Xi with a cooperative resolution of the Hong Kong crisis.

Much as I dislike Trump’s crass and self-centered comments, he is avoiding one important mistake in the Hong Kong crisis. He’s not implying that the United States is prepared to step in to protect the demonstrators from the consequences of their actions. He recognizes that Hong Kong is a matter for Beijing and Hong Kong to resolve, and he’s not writing checks that the American people in the end wouldn’t cash.

Like it or not noninterference is the right policy. Personalizing noninterference is certainly the wrong reason and clumsy remarks about the situation are clearly the wrong way of phrasing your policy.

If we were going to proclaim our full-throated support for the freedom-loving people of Hong Kong, the right time to do it would have been 1997. Now it is not merely too little too late, it would be undue interference in internal Chinese politics and, in all likelihood, force Xi’s hand to crack down more harshly.

So, which do we value more? Doing the right thing for the wrong reasons and saying it inappropriately? Doing the wrong thing for the wrong reasons but saying it elegantly? Or doing the wrong thing for the right reasons?


The Risk of Warren for President

I see that Josh Kraushaar, writing at National Journal sees Elizabeth Warren somewhat as I do, a poor choice for a presidential candidate:

If a candidate’s strongest case for electability is that she won a Senate seat in the most Democratic state in the country—in a banner year for the Democratic Party—then she’s got an electability problem.

The fact that Warren is still hanging onto her victory over Brown is revealing. It would be the equivalent of Republicans reveling over defeating Sen. Doug Jones of Alabama in next year’s election—a result that many GOP officials expect, given the conservative nature of the state.

Every other bit of empirical evidence on Warren’s standing back home is much worse. Her job approval in Massachusetts is down to 49 percent, according to Morning Consult’s latest quarterly survey—the fifth-highest home-state disapproval rating in the entire Senate. Among Bay State Democrats, she lags behind both Joe Biden and Bernie Sanders in presidential primary polling. She won 60 percent of the vote against a no-name opponent in last year’s Senate race, unable to improve on Hillary Clinton’s performance. (Charlie Baker, the Republican governor, won 67 percent of the vote running on the same ballot.)

albeit for somewhat different reasons. Leaving aside his complaints about “electability”, which some these days view as code that she’s a woman, my reason is that she won’t bring black voters to the polls. The core of the Democratic Party, like it or not, is not young voters, Hispanic voters, or white women with college educations. It’s black voters over 50. Black voters under the age of 50 are not the reliable voters to whom Democrats have become accustomed.

I don’t think that black voters will suddenly vote Republican en masse but it wouldn’t take that to deny Democrats a victory in 2020. All it would take is more blacks voting for Trump than voted for George W. Bush amid generally weak turnout among black voters.

One of Woody Allen’s more memorable wisecracks is that 80% of life is showing up. Black voters over 50 show up.


First, Kill All the Lawyers

At Law and Liberty John O. McGinnis explains the developments in the practice of law that have transformed the role of lawyers in the United States from defenders and preservers of traditional wisdom to agents provocateurs with the objective of changing our political and social order to be more to their liking:

But with the rise of the administrative state in the Progressive Era and the New Deal, the government became an important source of work for lawyers. The more the state expanded, the more opportunities for business for lawyers. It was but a short step for lawyers to recognize that their bread was buttered more from government than from private ordering. Of course, today private ordering is pervasively regulated by government and that is all the better for lawyers. They constitute a transaction cost, and have an interest in increasing that cost.

Even without the progressive change in the nature of government, changes within jurisprudence made lawyers more friendly to innovation. At the time of the Founding, common law itself was a conserving institution. Lawyers thought they were discovering the law, aided by the epistemic help provided by precedent. But the nature of the common law changed by the early 20th century. It became a more active policy calculus where courts could change the law if they thought the innovation could result in better rules.

That revision in jurisprudence permitted lawyers to try to shape the law themselves by their own litigation decisions. Not surprisingly, some scholars have found that lawyers shaped the law to be better for lawyers. The law expanded in scope even as it became less clear, requiring more litigation to settle matters.

Note that such a role for lawyers is an artifact of a common law system, something that only a handful of Anglophone countries have, and, I would argue, a violation of the basic structure of our system. In France and Germany lawyers are not agents of change.

It does cast some light on the bitter controversies over new members of the Supreme Court. When you can achieve your political or social will not by convincing people but by getting someone with the correct views grants a lifetime appointment to the Supreme Court the energy formerly devoted to election is much efficiently deployed in battles over Supreme Court appointments.

The financialization of the economy has been observed, with some truth, to be behind our perverse modern economy but the vastly increased litigization of our society surely plays a role in the malign trajectory of that society. Not coincidentally, both benefit the wealthy.


Why Chicago?

The editors of the Chicago Tribune lament the large number of shootings in Chicago:

A day after Chicago’s weekend from hell, when outbreaks of gunfire killed 12 people and injured at least 62, the carnage continued.

Derrick Hall, 22, was waiting for a bus in the 9100 block of South Cottage Grove Avenue on Monday morning when a man approached and shot him to death, the Tribune reported. In the afternoon, three men were shot on West Iowa Street in South Austin. Later, a man was shot in the wrist by someone in a passing car. A man was hit in the stomach. A man was struck while getting into a vehicle. At least 10 people were shot in eight incidents Monday on the South and West sides.

Don’t look for a pattern. Gun violence in Chicago is random the way destructive wind gusts are random. You can brace yourself but still not anticipate the location or severity of a blast. Monday easily could have been the quiet after the storm. We know of no connection between a man killed at bus stop Monday and a 17-year-old girl killed at block party Sunday, except that both were homicide victims in a city awash in illegal guns, and tormented by gang activity and the drug trade.

But why Chicago? Back in the early 1990s, the homicide rate in Chicago was as ugly as it was in New York and Los Angeles. Then began a steady national decline, Chicago included — until the abrupt recent upswing in violence here.

Allow me to answer their question.

  1. Chicago and Illinois politicians are in bed with the gangs.
  2. Chicago has a larger, more concentrated black population than New York or Los Angeles.
  3. Chicago’s population and economy are declining.
  4. Chicago and Illinois are more corrupt than New York, Los Angeles, New York State, and California.
  5. The Chicago police have essentially given up on the six neighborhoods in which most of the killings take place
  6. The communities in those neighborhoods have given up on the police.

Shorter: thanks, Mike Madigan.


What Happens When China Cracks Down?

Speaking of thought-provoking, here’s Doug Bandow’s prediction at National Interest of what would happen when China cracks down on the demonstrators in Hong Kong which both I and, apparently, he think is inevitable:

The SAR would lose its relative autonomy, almost certainly ending up under direct Chinese rule, and, likely temporarily under military control. Business and investment would flood outward, not likely to return for years, if ever. Wealthy individuals would look to transfer their wealth overseas while seeking any possible foreign refuge.

The commercial impact elsewhere on China would be modest, but some foreign firms likely would prepare for Western economic and political retaliation. With foreign relations almost certain to collapse, businesses that remain in the PRC could become collateral damage.

The United States would revoke Hong Kong’s special trade status. Economic sanctions of some sort would be equally inevitable. A trade embargo would remain unlikely, but in contrast to 1989 the debate over American policy would occur during the nadir of post-Mao Sino-U.S. relations. The economic relationship already is under siege; human-rights concerns are on the rise; the Pentagon is emphasizing security issues in the Indo-Pacific region. A bloody crackdown would shatter what remains of bilateral ties and strengthen arguments of hawks who believe that a new Cold War is imminent, if it has not already arrived.

Europe also would face significant pressure to act. Despite their desire for expanded economic ties, European governments have become more concerned about recent Chinese behavior. When NATO members met in April the PRC topped the agenda. “China is set to become the subject of the twenty-first century on both sides of the Atlantic,” opined German Foreign Minister Heiko Maas. Earlier this month Secretary General Jens Stoltenberg urged greater attention to Beijing: “This is not about moving NATO into the Pacific, but this is about responding to the fact that China is coming closer to us.” Europe could ill afford not to impose at least some economic penalties on the PRC.

Asian countries would be more reluctant to act. However, those reliant on America for their defense could ill afford to continue business as usual with China. Even in its own region Beijing would find its neighbors more wary and hostile, and readier to strengthen their own militaries. Whatever additional stability the CCP might believe it gained by cracking down would be dearly bought.

Here are my questions.

  1. Will China crack down on Hong Kong?
  2. What will result from the crackdown?
  3. What would the consequences of the end of “one country two systems” be for the Asian financial system?
  4. What has Hong Kong’s role in the rise of China been? Note that much of China’s rise has occurred subsequent to the adoption of “one country two systems”.
  5. Whatever that role does China still need it? I don’t believe that the Chinese authorities think they do or, at least, they don’t believe its cost is worth maintaining.

What Happens If the World Population Stops Increasing?

I found Zachary Karabell’s review of a pair of books at Foreign Affairs on the relationship between capitalism and demographics thought-provoking:

For most of human history, the world’s population grew so slowly that for most people alive, it would have felt static. Between the year 1 and 1700, the human population went from about 200 million to about 600 million; by 1800, it had barely hit one billion. Then, the population exploded, first in the United Kingdom and the United States, next in much of the rest of Europe, and eventually in Asia. By the late 1920s, it had hit two billion. It reached three billion around 1960 and then four billion around 1975. It has nearly doubled since then. There are now some 7.6 billion people living on the planet.

Just as much of the world has come to see rapid population growth as normal and expected, the trends are shifting again, this time into reverse. Most parts of the world are witnessing sharp and sudden contractions in either birthrates or absolute population. The only thing preventing the population in many countries from shrinking more quickly is that death rates are also falling, because people everywhere are living longer. These oscillations are not easy for any society to manage. “Rapid population acceleration and deceleration send shockwaves around the world wherever they occur and have shaped history in ways that are rarely appreciated,” the demographer Paul Morland writes in The Human Tide, his new history of demographics. Morland does not quite believe that “demography is destiny,” as the old adage mistakenly attributed to the French philosopher Auguste Comte would have it. Nor do Darrell Bricker and John Ibbitson, the authors of Empty Planet, a new book on the rapidly shifting demographics of the twenty-first century. But demographics are clearly part of destiny. If their role first in the rise of the West and now in the rise of the rest has been underappreciated, the potential consequences of plateauing and then shrinking populations in the decades ahead are almost wholly ignored.

but flawed. For example human history did not begin in 1AD but about 2,000 years earlier and the human story is hundreds of thousands of years older than that. From 10,000 BCE to 1700 CE the human population increased by about .04% per year. And, depending on what you mean by “capitalism”, it’s a lot older than 300 years old.

Here’s another one.

Capitalism is, essentially, a system that maximizes more—more output, more goods, and more services.

That is certainly not what I learned in economics class and I have never worked for a company that had the objective of maximizing output. I doubt that Mr. Karabell has, either. What I learned is that markets optimize the production and distribution of goods, a far cry from maximizing output. Quite to the contrary, history tells us that command economies maximize production, often to their own detriment due to the misallocation of resources that is inevitable.

I see no conflict between a market economy and a static population but there may be such a conflict between a static population and a socialist regime that depends on an ever-increasing population to pay for its mistakes in the present. It’s an interesting question.

I had some issues with this observation as well:

Some societies, such as the United States and Canada, are able to temporarily offset declining population with immigration, although soon, there won’t be enough immigrants left.

Is that actually true? Is the native population of the United States actually declining and by how much? Or is the recent decline in the birth rate an artifact of a very high proportion of immigrant population with a sharply declining immigrant birth rate? Between 2008 and 2017 the immigrant birth rate declined three times faster than the native birth rate did. When you combine a historically high proportion of immigrants, a declining immigrant birth rate, and the effects of the second generation, it might mean that the U. S. native population is actually stabilizing. It’s hard to tell.

Still, I agree with his bottom line observation:

Either way, the reversal of population trends is a paradigm shift of the first order and one that is almost completely unrecognized.

I do not expect to live to see its implications realized. I’ll open the question to the floor. What would a world with a stable human population look like?

BTW the apothegm “Demography is destiny” appears to belong to author and demographer Ben Wattenberg. Whatever you may read Auguste Comte never said or wrote it. The word “demography” was not coined until two years before his death.