I both agree and disagree with Lawrence Summers’s observations in his op-ed in the Washington Post. For example:

More broadly, the United States’ economic future is shaped much more by policy choices made in Washington than those made in Beijing. To the extent that China trade has caused disruption in the United States, it is the result of China’s remarkable growth and increase in capacity to produce, not unfair trade policies.

I agree that we’ve been making problems for ourselves. Under the Clinton Administration China was granted Most Favored Nation trading status, something that should never have been afforded to a command economy the size of China’s, and then granted World Trade Organization membership under certain conditions which it has never satisfied.

Since then China engaged in massive currency manipulation in the 1990s, has tariffs twice as high on average as ours, imposes quotas on imports of U. S. goods and services, places obstacles in the way of U. S. banks and financial services companies, and subsidizes its own domestic and export companies on a colossal scale. It has also been challenged in claims before the WTO far more frequently than should be expected in a country with an economy China’s size as I’ve documented here.

In other words China has not been a good trading partner and we should not expect it to become one in the foreseeable future. China’s behavior is complicated by its lack of a robust system of civil law, something else it won’t have in the foreseeable future.

But I think that Dr. Summers falls victim to the all of nothing fallacy. If China were to import just 10% more than it does now, not 100% or 200% as might be the case under something more closely resembling market conditions, it would result in millions more jobs in the United States.

I think that a carbon border adjustment tariff or health and safety border adjustment tariff are good ideas that we don’t need an agreement with China to implement. All that is needed is a more general recognition of just how damaging a trading partner China has been and that it’s not likely to get much better.

If Dr. Summers wants American businesses to take a longer-term view, I’d appreciate it if he fleshed out that idea a bit. It’s hard to think long-term when your compensation depends on quarterly reports (or even daily stock moves) and when you’ve got to report your results to the federal government every quarter.

What should our policy with respect to Syria be? What do we want to happen?

Although it’s nine months old, in the light of recent developments I found this analysis by Thanassis Cambanis at The Century Foundation useful in considering those questions.

First, what has our policy been? In effect whether deliberately or accidentally the U. S. strategy has had the following components:

• We have engaged in limited military intervention preventing any side from winning outright.
• We have provided support to neighboring countries
• We have provided support for Syrian refugees.

IMO the second two of those are practical, productive, warranted, and even necessary; the first has been counter-productive.

As to what our policy should be, Mr. Cambanis lists these as our alternative objectives:

1. Assad, and nothing else. Promote an outright Assad victory. Supporters of this approach argue that Assad’s rule is more stable than any alternative. If the United States made a full about-face, it could pull support from rebels and pressure allies to do the same, and signaling that it would accept consolidation of Assad’s power.
2. Full withdrawal. Close down the covert rebel aid program, even curtailing or stopping the war against the Islamic State group. Such a course would probably come as part of a wider embrace of U.S. isolationism.
3. Attack only Islamic State. Abandon any military involvement, direct or indirect, unless it is entirely concerned with Islamic State, and not the Syrian government.
4. Partial withdrawal with humanitarian enhancement. Give up on influencing the prospect of a political solution, and decide that the United States will only take actions aimed to reduce death toll and displacement, and contain cross-border spillover of conflict. Increase non-military aid to bordering countries.
5. Balancing the civil war and containing its spillover (the status quo). Provide military and financial assistance so that rebels do not lose, but not enough so they can make advances. Contribute to palliative humanitarian care, but not enough to actually contain refugee crisis.
6. Enhanced containment. Intervene militarily and promote a negotiated settlement that includes all major parties, Syrian and foreign. Increase military action by advisers, proxies, and allies designed to reduce civilian death and displacement, and increase risk to Syrian government and allied forces of engaging in indiscriminate bombings and shelling. Deepen collaboration with unsavory rivals (Russia, Iran, Syrian government) to promote negotiated settlement, along with a renewed willingness to confront those rivals.
7. Regime change. Give rebels sufficient military support to overthrow government and take Damascus, knowing such a course will likely result in a long, continuing civil war and further sectarian reprisals, with no natural successor to Assad on the horizon.

I believe that any of the first four of those might be workable. Any of the last three would be disastrous. This morning I heard Tom Friedman talking about the “pro-U. S. rebels”. There are no such things. They are fabulous beasts.

We should start thinking in terms what the possible outcomes are. As I see it they are:

• A secular, multi-ethnic, multi-confessional Syria. I believe that to whatever degree that was once possible our support for opposition rebels has reduced its chances. Additionally, I note than in Mr. Cambanis’s list of “unsavory rivals” he does not include the Gulf States. They stand opposed to a secular, multi-ethnic, multi-confessional Syria and as long as that’s the case and they continue to provide support for the opposition, none will be possible.
• An Arab, Sunni Islamist Syria. I don’t believe that is in anyone’s interests other than Arab Sunni Islamists and we should not act as though it were.
• A Syria partitioned along ethnic and sectarian lines. That would result in a Kurdish area, an Alawite area along the coast, and a landlocked Arab Sunni Islamist area in the region in the eastern part of present Syria that is dominated by DAESH. I think that the stability of such an arrangement is unlikely and it would invite ongoing intervention by the Russians, Iranians, Hezbollah, Turks, and Gulf States. Basically, it’s a formula for continuing civil war.

If we were to engage in nuclear brinksmanship, willing to deploy significant U. S. military force in Syria, and willing to occupy the country on an indefinite basis, we could impose a secular, multi-ethnic, multi-confessional Syria on the warring sides who would be united only in opposing us. I don’t see that as possible so I discount it as an outcome. That means that such an outcome inevitably requires the present Alawite regime, with or without Assad.

Pick an alternative and then relate means to ends.

I want to draw your attention to the remarks made by JPMorgan Chase CEO Jamie Dimon in his company’s annual report (PDF), particularly his assessment of our public policy needs.

The remarks made by Mr. Dimon open with a summary of JPM’s business position and follows that with his analysis of the impact of financial sector regulatory reform since 2008. In essence he thinks that the reforms have been effective. Although Mr. Dimon knows more about banking than I do, I think that in this passage:

The American public has the right to demand that if a major bank fails, they, as taxpayers, would not have to pay for it, and the failure wouldn’t unduly harm the U.S. economy. In my view, these demands have now both been met.

On the first count, if a bank fails, taxpayers do not pay. Shareholders and debtholders, now due to total loss absorbing capacity (TLAC) rules, are at risk for all losses. To add belts and suspenders, if all that capital is not enough, the next and final line of defense is the industry itself, which is legally liable to pay any excess losses. (Notably, since 2007, JPMorgan Chase alone has contributed $11.7 billion to the industry deposit fund.)

On the second count, a regulatory takeover of a major bank would be orderly because regulators have the tools to manage it in the right way.

he fails to distinguish between hypothetical capabilities and political reality. While in theory what he says may be true, in practice in the event of a financial crisis of the sort that occurred in 2007 there will always be irresistible political pressure to do something and that elected officials will respond by backstopping the banks.

And the managers of big banks know this. That’s an incredibly huge subsidy to banks which they exploit.

Absent an unimaginable sea change in American politics, I think there are only two ways of countering that political reality: we could nationalize the banks or we could break them up. Both of these are moves that I suspect that would horrify Mr. Dimon or, in other words, he likes things as they are very much, thank you (Mr. Dimon’s present pay package is $28 million per year).

However the most interesting part of his remarks are his observations on public policy considerations beginning on p. 32. His basic message is “…it is clear that something is wrong — and it’s holding us back”. He points out that not only is growth phlegmatic, productivity growth is at historic lows (if any of this were due to increased automation productivity would be rising not falling) and labor force participation has declined. Not only is it low by the standards of recent U. S. history, it’s lower than any other OECD country other than Italy.

Consider the graph at the top of this post. It clearly demonstrates that job growth and business investment are in lock step, with jobs lagging investment slightly, as you might expect.

But note the area that I’ve circled. Not only has business investment been below trend for most of the last 30 years the last five years have been anomalous. Business investment is more characteristic of a contraction than an expansion while jobs continue to increase as though we were in an expansion. That can’t be explained by inadequate consumption, technological unemployment (if that were happening business investment and productivity would both be increasing), or any other obvious cause. I’m at a loss to explain it unless we need to start looking at what that graph doesn’t show. It doesn’t show who has been hired, whether they were previously employed, or whether the wage at which they were hired is greater, less, or the same.

Although I don’t have the raw data to back it up, I think the likely explanations are that a) businesses are investing much, much less and spending much, much more on compensation for the highest paid staff and managers and b) many of those being hired are foreign and at lower wages than the workers they’re displacing. That’s the only way I can reconcile the graph above with the increase in top earners’ incomes. How else do you reconcile that with real median incomes decreasing?

There’s a great post from Noah Smith at Bloomberg View on the situation that middle class Americans have found themselves in. Basically, neoliberalism has not been good to them. Here’s the kernel:

Writer Alex Pareene, in a recent article in Fusion, colorfully describes how vendors of all sorts cashed in on enthusiasm for conservative politicians:

[The conservative era] was a fantastic deal for…companies selling newly patented drugs designed to treat the various conditions of old age, authors of dubious investing newsletters, sellers of survival seeds, hawkers of poorly written conservative books, and a whole array of similar con artists and ethically compromised corporations and financial institutions.

But Pareene’s focus on conservative political appeal is much too narrow. The white middle-class that tended to support leaders like Ronald Reagan, Newt Gingrich and George W. Bush, lost huge percentages of their life’s savings because of excessive fees paid to actively managed mutual funds, financial advisers, stockbrokers, pension fund managers and the like. They also paid 6 percent real estate commissions even as people in most countries paid much less. They rejected the Clintons’ health-care plan in 1993, and ended up paying double what people in other countries pay for comparable treatment. They forked over more and more money in college tuition. They paid higher prices to companies that went on to monopolize markets after spending millions convincing the government to allow their megamergers. The spectacular rise of U.S. wealth inequality shows that trillions of dollars in middle-class assets were shifted up the socio-economic ladder into the hands of a relatively small and fantastically rich upper tier.

Each of these little free-market failures was another slice off of the ham that was the wealth of the American middle class. The people who thought they were going to be the guests of honor at the feast ended up being the main course.

There’s a quip attributed to many but is probably a bit of commonplace wisdom among poker players going back many, many years. If you look around the table and you can’t tell who the sucker is, it’s you.

There are hundreds or thousands of plans for improving the world that all begin with taxing “the rich” or having somebody else pay the tab. Americans, particularly middle class Americans, have fallen for these plans hook, line, and sinker.

“The rich” aren’t going to pay the tab. The other guy isn’t going to pay the tab. You’re going to be stuck with it.

If you wonder what prompted my last post, consider what’s being said.

New York Times editors

On the plus side, the airstrikes have given Mr. Trump a lift in Sunni states in the Persian Gulf, which chafed at Mr. Obama’s refusal to take direct military action against Mr. Assad. European allies and members of Congress also endorsed his decision. But the action lacked authorization from Congress and the United Nations Security Council, raising questions about its legality and spotlighting a rich irony. In 2013, Mr. Trump argued that Mr. Obama must get congressional approval before attacking Syria. Congress, with a long history of ducking its war-making responsibility, refused to give it.

Studies show that one-off military strikes achieve little. Whether this one has given Mr. Trump any leverage with which to press Russia for a diplomatic solution may become clearer when Mr. Tillerson visits Moscow next week. But the greater need is for a comprehensive strategy and congressional authorization for any further military action. There are risks the president simply cannot take on his own.

Was refusing to give authorization for military action in Syria Congress shirking its Constitutional responsibilities, Congress disagreeing with a feckless policy, or partisan and/or racist opposition to the Obama Administration? We may know soon.

Nicholas Kristof

My proposed course in Syria is the same one that Hillary Clinton and many others have favored: missile strikes to ground Assad’s small air force. This should help end the barrel bombs and make Assad realize that he has no military solution, and that it’s time for negotiation. The most plausible negotiated outcome would be a long-term ceasefire and de facto partition of Syria, putting off reintegration until Assad is no longer around.

Draw a map. What partition does he have in mind? As I’ve noted Assad isn’t the only problem. The next Alawite strongman to replace him will do exactly what Assad has done. An Islamist Sunni government will ethnically cleanse the Alawite minority out of existence.

Washington Post editors

PRESIDENT TRUMP’S decision to strike a Syrian air base in response to a chemical weapons attack by the regime of Bashar al- Assad was right as a matter of morality, but it could also yield a host of practical benefits. The Assad regime may be deterred from again using deadly gas on civilians — a heinous war crime that, if tolerated, would make not just Syria but the world more savage.

Russia and Iran should have new cause to consider whether they will continue backing the blood-drenched Damascus dictator, or cut a deal to get rid of him.

Spell it out. Do you mean just replacing Assad or replacing the whole Alawite regime? With what? What do you think will happen if that is done?

Fareed Zakaria

U.S. policy on Syria remains unclear. The Trump administration had repeatedly announced that it had shifted away from the Obama administration’s calls for regime change in Syria. In fact, Trump had indicated that he was happy to leave the country to Assad as long as this would help defeat the Islamic State. Last week, Secretary of State Rex Tillerson basically affirmed that approach. On Tuesday, the day of the chemical attack on Idlib, White House press secretary Sean Spicer reiterated it. The missile strike appears to have reversed that policy.

If so, it is a major shift and raises important questions: Is the United States now engaged in the Syrian civil war? Will it use military force to help oust Assad? Do these actions help the Islamic State and al-Qaeda — which are fighting against the regime? And what happens next in the overall war against the Islamic State?

Robert Kagan

American missile strikes against Syria are a critical first step toward protecting civilians from the threat of chemical weapons, and President Trump deserves credit for doing what the Obama administration refused to do. But Thursday’s action needs to be just the opening salvo in a broader campaign not only to protect the Syrian people from the brutality of the Bashar al-Assad regime but also to reverse the downward spiral of U.S. power and influence in the Middle East and throughout the world. A single missile strike unfortunately cannot undo the damage done by the Obama administration’s policies over the past six years.

Trump was not wrong to blame the dire situation in Syria on President Barack Obama. The world would be a different place today if Obama had carried out his threat to attack Syria when Assad crossed the famous “red line” in the summer of 2013. The bad agreement that then-Secretary of State John F. Kerry struck with Russia not only failed to get rid of Syria’s stock of chemical weapons and allowed the Assad regime to drop barrel bombs and employ widespread torture against civilian men, women and children. It also invited a full-scale Russian intervention in the fall of 2015, which saved the Assad regime from possible collapse.

The major media outlets are deluging us with a torrent of opinions from neoconservatives and liberal interventionists with only one thing in common: the desire to increase our use of military force to solve a problem which has no good solutions and in which other than humanitarian concerns we have little interest.

We can’t solve every problem and in particular we can’t solve every problem with military force.

Update

Wall Street Journal editors

The alternative to this surrender is to reassert U.S. influence with diplomacy and military force, and Mr. Assad’s chemical attack is the opening. Mr. Trump may understand this as he ordered an attack on the air base from which the chemical attack was launched, and Mr. Tillerson said Thursday that Mr. Assad has no future in Syria.

The quickest way to punish Mr. Assad for his aerial chemical attacks, and to ensure they won’t happen again, is to destroy his air power. This is the plan that Mr. Obama flinched at in 2013 when he let Mr. Assad cross his “red line.” He has now crossed that line again—this time after having promised to destroy his chemical stockpiles.

We know how this movie ends. We’ve seen it unfold before in Libya. IMO inflicting the chaos of Libya on Syria would be worse than the present civil war.

So, yes, if the regime uses chemical weapons, punish it. But recognize that the regime, reprehensible as it is, remains the best of a lot of very bad alternatives.

I don’t have a great deal to add about Syria:

• Punitive strikes, like President Trump’s missile attack on Syria, are justifiable.
• Military action without just authority is not.
• Just authority requires Security Council or Congressional authorization.
• Assad isn’t the only problem in Syria.
• The Alawite Assad regime remains the only viable alternative for a secular, multi-ethnic, multi-confessional Syria.
• The Middle East is a mess. It would take an Alexander, Attila, or Genghis Khan and an enormous amount of ethnic cleansing and forced resettlement to untangle it.
• We aren’t that and shouldn’t want to be.

There are no good courses of action for us in the Middle East. Our best alternative is to reduce our interests in the Middle East, not increase them. We should also stop putting our military might behind the regimes there.

First, read yesterday’s editorial at Bloomberg:

It counts as progress that the president of the United States now acknowledges that he, not his predecessor, is responsible for the policy of the United States in Syria. Now the question is how Donald Trump will fulfill his responsibility after this week’s horrific chemical weapons attack.

For starters, Trump needs to be careful not to repeat one of his predecessor’s worst mistakes. In 2012, President Barack Obama warned Syrian leader Bashar al-Assad not to cross the “red line” of using chemical weapons — then failed to take action when he did. Trump has amped up Obama’s rhetoric, saying that this week’s attacks “crossed a lot of lines for me.” It was, he said, “beyond a red line.”

Worse, he made these remarks shortly after all but throwing an ultimatum at North Korea to stop its missile and nuclear programs, and putting Iran “on notice” for its missile tests. North Korea and Iran will take their cues from his response in Syria. So will China and Russia.

Now consider those remarks in the context of yesterday’s events, outlined here.

There is a single message to be gleaned from Christopher Balding’s post at Bloomberg View on the discrepancy between what the Chinese authorities are saying about the Chinese banks and what those banks are actually doing. The Chinese authorities are much better at issuing press releases than they are at carrying out reform.

There’s plenty of room for debate over the thesis of Noah Smith’s post at Bloomberg View on Japan’s recovery from its decades-long economic torpor—that Japan can serve as a model for anything but Japan. However, I found something very interesting. Based on the statistics presented in the post by Mr. Smith, over the last six years Japan’s unemployment rate, already very low, has declined even farther while its labor force participation rate has increased.

Especially when you take into account that Japanese industry is even more automated than our own, that’s an effective refutation of the claim by American futurists that there will be a near term end of work—that for the first time in history technological unemployment has become chronic.

It hasn’t happened in Japan. There’s a much better, obvious explanation: Japan organizes its trade very differently than we do. We’re doing things wrong.