Krugman on International Development

Paul Krugman has a good and interesting post on international development in his New York Times column today. Here’s his peroration:

The result is a world in which inequality among countries is declining if you look from the middle upward, but rising if you look from the middle down. Fundamentally, however, it’s a story of diminishing Western exceptionalism, as the club of countries that can take full advantage of modern technology expands.

There are some things I think he’s missing. That’s exactly what you’d each as rich countries abandon the habits, values, and cultural practices that made them rich in the first place and some countries adopt them or, at least, some of them, while others do not.

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When Do Sanctions Work?

There’s a great and timely post at Defense One from Jonathan Schanzer, pointing out just how limited sanctions are in effecting changes of behavior from foreign governments:

There is a rare and growing bipartisan consensus in Congress about the need to smack Saudi Arabia with human-rights sanctions, or perhaps even tougher penalties, for its role in the death of Jamal Khashoggi, the journalist who walked into the Saudi consulate in Istanbul earlier this month but never walked out. Sanctions seem inevitable.

The only problem is that many of the same experts pushing for sanctions against Saudi Arabia have previously argued, in other contexts, that sanctions don’t work. That was the near-unanimous conclusion of top policy experts who supported the Obama administration’s decision to drop sanctions on Iran, which had brought its economy to the brink of collapse, in exchange for a nuclear deal. It’s just one example of a broader trend: analysts suddenly discovering the Middle East is more complex than they’d previously admitted.

Read the whole thing. Here’s his conclusion:

Implementing effective policies in the Middle East is complicated. If nothing else, that’s now clear. We may never get justice for Jamal Khashoggi. But we would be lucky if this incident yielded a little more humility and a little less cocksure certainty among the pundit classes. Analysts who are enamored of their own wisdom and who routinely sneer at challengers in condescension have suddenly discovered that their tweets haven’t aged well. Sanctions are not always bad, engagement is not always good, and transactional policy cuts both ways.

But let’s dig a little deeper. When do sanctions work and when do they not? Let me suggest a model. They worked against South Africa but not against Russia or Iran. And it’s very unlikely they would work against Saudi Arabia or China. Why? It wasn’t that the stakes are higher. South Africa ended apartheid even though it was a political (and possibly physical) death sentence.

But South Africa was an essentially European country with values similar to our own. They knew that apartheid was wrong. Russia, Iran, Saudi Arabia, and China are countries with values genuinely different from ours and they’re convinced that what they’re doing is right.

There is no universal system of values. Cultures really are different. When cultures are genuinely incompatible with ours or even antithetical to ours as that of Saudi Arabia certainly is, the choice is between exterminating our values or theirs or dealing with them when we must and otherwise limiting contact with them to the bare minimum.

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The Plot Thickens

Remember that Bloomberg story from a couple of weeks ago I repeated here about the Chinese spy microchips. Director of National Intelligence Dan Coats has now said it ain’t so:

Director of National Intelligence Dan Coats told CyberScoop on Thursday that he’s seen no evidence of Chinese actors tampering with motherboards made by Super Micro Computer, becoming the latest national security official to question a Bloomberg report that stated the company was the victim of a supply chain hack.

“We’ve seen no evidence of that, but we’re not taking anything for granted,” Coats told CyberScoop. “We haven’t seen anything, but we’re always watching.”

and Apple CEO Tim Cook is demanding that Bloomberg retract the story:

Apple CEO Tim Cook, in an interview with BuzzFeed News, went on the record for the first time to deny allegations that his company was the victim of a hardware-based attack carried out by the Chinese government. And, in an unprecedented move for the company, he called for a retraction of the story that made this claim.

Since the first story Bloomberg has actually doubled down on the story:

Reached for comment, Bloomberg reiterated its previous defense of the story. “Bloomberg Businessweek’s investigation is the result of more than a year of reporting, during which we conducted more than 100 interviews,” a spokesperson told BuzzFeed News in response to a series of questions. “Seventeen individual sources, including government officials and insiders at the companies, confirmed the manipulation of hardware and other elements of the attacks. We also published three companies’ full statements, as well as a statement from China’s Ministry of Foreign Affairs. We stand by our story and are confident in our reporting and sources.”

This may well end up court. Non-trivial amounts of (Tim Cook’s) money are involved.

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Consumption-Oriented Economic Policy

At The American Interest Oren Cass argues that for the last sixty years we’re been pursuing a “consumption-oriented economic policy”, it’s a flop, and it’s time for a change. Here’s the kernel of his argument:

What Americans increasingly see are their children struggling and their neighbors sick or dying. Half of Americans born in 1980 were earning less at age thirty than their parents had made at that age. Most Americans still do not complete even a community college degree, yet the median income of a high school graduate lifts a family of four less than 40 percent above the poverty line; in the 1970s, such an earner would have cleared that threshold by three times as much. That’s for people who are working. At the Great Recession’s end, Charles Murray reported in Coming Apart, barely half of working-class households had a full-time worker present.

And then there are the “deaths of despair.” Mortality rates have risen since the turn of the century for middle-aged white Americans, driven by higher levels of suicide, liver disease, and drug overdoses for those with only a high school degree. Such an upsurge had no precedent in American history, and nothing similar is occurring in other developed nations. The nation’s suicide rate climbed 24 percent between 1999 and 2014, with stunning increases of 43 percent and 63 percent for men and women aged 45 to 64. Opioids are now killing Americans more rapidly than HIV/AIDS ever did. Life expectancy nationwide fell in 2015, for the first time since 1993, and then again in 2016, marking the first consecutive years of decline since the early 1960s. Preliminary data indicate yet another decline in 2017.

and here’s the meat of his prescription:

Economic growth and rising material living standards are laudable goals, but they by no means guarantee the health of a labor market that will meet society’s long-term needs. If we pursue growth in ways that erode the labor market’s health, and then redistribute income from the winners to the losers, we can produce impressive-looking economic statistics—for a while. But we will not generate the genuine and sustainable prosperity we want. Growth that consumes its own prerequisites leads inevitably to stagnation.

This shift in perspective from consumer to producer conjures a vision of two constituencies vying for the same resources, but here the dynamic is more complex. Every individual is both a producer and a consumer, the economy an engine of both production and consumption. An emphasis on the consumption lens has long been a tenet of classical liberalism: “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only so far as it may be necessary for promoting that of the consumer,” wrote Adam Smith in The Wealth of Nations. Superficially, at least, consumption seems a sensible focus.

But only through production does the ability to consume exist. Production without consumption creates options; consumption without production creates dependence and debt. Most of the activities and achievements that give life purpose and meaning are, whether in the economic sphere or not, fundamentally acts of production. Yes, material living standards contribute to prosperity, but accomplishments like fulfilling traditional obligations, building strong personal relationships, succeeding at work, supporting a family, and raising children capable of doing all these things themselves are far more important to life satisfaction. What these things have in common is their productive nature not as boosts to GDP but as ways that people invest effort on behalf of others. Our social norms recognize productive activities as essential to a functioning and prosperous society, and so we award respect, dignity, and gratitude to those who perform them.

Without work—the quintessential productive activity—self-esteem declines and a sense of helplessness increases; people become depressed. Where fewer men work, fewer marriages form. Unemployment also doubles the risk of divorce, and male joblessness appears the primary culprit. These outcomes likely result from the damage to both economic prospects and individual well-being associated with being out of work, which strain existing marriages and make men less attractive as marriage partners.

His proposals include a number of things that are deeply unpalatable to many Americans accustomed to the conventional wisdom: more vocational training, tracking, more labor standards established by negotiation rather than by the federal government (that’s the case in many European countries), and wage subsidies.

Let me propose a thought experiment. Calculate the effect on per capita productivity when you import a very large number of low-skilled, poorly compensated workers. For extra credit calculate the effect on consumption of those same workers. I think you’ll find that they boost consumption far more than they do productivity.

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What Are “American Values”?

In his Washington Post column Josh Rogin expresses skepticism about an “America First” foreign policy that doesn’t promote “American values”:

Just governments that respect the rights of their people, limit their own power, permit dissent and open their societies make better allies. This is the message Khashoggi sent in his final column for The Post , a plea for international support for basic freedoms inside Saudi Arabia. His story shows why the Trump administration can’t succeed overseas unless it finds a way to incorporate American values into “America First.”

Okay, I’ll bite. What are American values? Judging by recent performance it’s forcible regime change, something we’ve been trying make stick in Afghanistan without a great deal of success.

Although his prescription sounds like the romanticism I just posted about I can’t help but think he has his causality reversed and that what he really means is that Western European countries, the countries with which we have the most in common politically, economically, socially, culturally, linguistically, and in just about every other way make better allies. English-speaking countries probably make the best allies of all.

Take a look at the record. For most of our history the American value that we promoted most aggressively in other countries was Christianity. Does Mr. Rogin think we should be sending more missionaries?

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Romanticism

Yesterday in comments I lamented how much we tend to romanticize the rest of the world but didn’t elaborate on it. I’ll remedy that now.

The world is a harsh, rough place and most of the people in it have different views of what’s right or wrong than we do as well as different ideas about family relationships, men and women, sexual mores, basic rights, and so on. Many envy our prosperity but that doesn’t mean they want to adopt our way of life. Many would like to have material prosperity like ours but retain their own ways of doing things.

We and the Europeans live in what are, effectively, walled gardens. Those gardens have been protected by distance, oceans, mountain ranges, laws, our willingness to enforce our laws, and the poverty of so many of the people of the world. Modern transportation has eroded the effectiveness of distance and natural barriers as well as reducing the cost of travel. Our laws have moderated over time and in many cases we aren’t even willing to enforce those.

So, what do I mean by “romanticism”? Thinking the world isn’t a harsh place, that everyone wants their society to have the broad freedoms we have enjoyed, That people do not bring their own notions of right, wrong, and social order when they come here, or that we can alter our basic attitudes or social arrangements at will without repercussions are all romanticism.

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More Tribes

RealClearPolitics has its own analysis of the “tribes” of America:

“Every difference of opinion,” Thomas Jefferson warned in his first inaugural address, “is not a difference of principle.” Speaking to his countrymen after an election every bit as bitter as the one that put Donald J. Trump in the White House, Jefferson was trying to soothe the reigning animosity between the nation’s two dominant political parties. “We are all Republicans,” he added. “We are all Federalists.”

Not anymore. In 21st century America, any notion that election results end the argument, however temporarily, is an anachronism. So, too, is the conceit that a nation this large and diverse is divided neatly along “50-50” lines, with half of America’s 253 million adults supporting Democrats, and the other half backing Republicans.

The “tribes” into which RCP divides Americans are:

  • The Resistance (28%)
  • MAGA (the Trump base) (12%)
  • Traditional Republicans (14%)
  • The Detached (24%)
  • Independent Blues (24%)

I’m probably reasonably considered to be in the last group. I also think they’re overestimating the size of The Resistance somewhat. They’re more loud than numerous.

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October Surprise

J. B. Pritzker, the billionaire heir of the Pritzker fortune who is likely to be anointed Illinois’s next governor, received an unhappy surprise yesterday. He’s being sued for racial discrimination. From the ABC 7 Chicago:

CHICAGO (WLS) — In the race for governor, J.B. Pritzker’s campaign is being sued by 10 staff members for racial discrimination and harassment.

They claim they were hired to fill a race quota and to do specific race-related duties. They also say white staff members were treated better.

Pritzker denied the allegations at a campaign event in Joliet.

“I know that the African-American community knows who I am, knows that I will fight for them when I’m governor,” he said.

I have no idea what the merits of this are if any. I wouldn’t be surprised if it was a hustle but I can’t really tell.

Sadly, I suspect this is just a speedbump in Pritzker’s road to the governor’s mansion. It may reduce turnout among black voters a bit but I doubt it will have enough effect to change the outcome.

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Rahm’s Last Budget

Chicago Mayor Rahm Emanuel submitted his last budget yesterday. In it he kicked just about every can he could find down the road, lobbing a softball to City Council members running for re-election. It’s bad for the dwindling number of Chicagoans who will be forced to shoulder the increasing burdens his foolishness has imposed on us. It’s the perfect ending for a mayor who thought solely about electoral gain and not a bit about what politics is about which is people.

He should have limited his remarks on the budget to a single sentence: “Lots of luck, suckers.”

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On KSA

  1. Jamal Khashoggi was not a good guy.
  2. Even bad guys have a right not to be murdered for their views.
  3. The Washington Post deserves some criticism for cozying up to a bad guy and their present indignation about his murder is unbecoming. Where was the indignation when the Saudis murdered a busload of children?
  4. Mohammed bin Salman is a very bad guy (and probably not particularly bright).
  5. We don’t need Saudi Arabia as much as we used to.
  6. The Saudis have been persistent supporters of radical Islamism and radical Islamist terrorist groups around the world.
  7. We shouldn’t be supporting their war against Yemen and we shouldn’t support Saudi Arabia at all.

Detachment is probably the best policy we could follow. I’d prefer more punitive measures against the whole Saud family. They’re monsters and the world would be better off without them.

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