American politics

Democracy in America

  • Patriotism and crop subsidies

    How 'ya gonna keep 'em down on the farm?

    Mar 8th 2011, 21:31 by W.W. | IOWA CITY

    IN THIS chat with Ezra Klein, Tom Vilsack, the secretary of agriculture, offers a pandering defence of agricultural subsidies so thoroughly bereft of substance I began to fear that Mr Vilsack would be sucked into the vacuum of his mouth and disappear. 

    When Mr Klein first raises the subject of subsidies for sugar and corn, Mr Vilsack admirably says, "I admit and acknowledge that over a period of time, those subsidies need to be phased out." But not yet! Vilsack immediately thereafter scrambles to defend the injurious practice. Ethanol subsidies help to wean us off foreign fuels and dampen price volatility when there is no peace is the Middle East, Mr Vilsack contends. Anyway, he continues, undoing the economic dislocation created by decades of corporate welfare for the likes of ADM and Cargill will create economic dislocation. Neither of these points is entirely lacking in merit, but they at best argue for phasing out subsidies slowly starting now.

    Mr Vilsack should have stopped here, since this is as strong as his case is ever going to be, but instead he goes on to argue that these subsidies sustain rural culture, which is a patriotic culture that honours and encourages vital military service: 

    [S]mall-town folks in rural America don’t feel appreciated. They feel they do a great service for America. They send their children to the military not just because it’s an opportunity, but because they have a value system from the farm: They have to give something back to the land that sustains them.

    Mr Klein follows up sanely:

    It sounds to me like the policy you’re suggesting here is to subsidize the military by subsidizing rural America. Why not just increase military pay? Do you believe that if there was a substantial shift in geography over the next 15 years, that we wouldn’t be able to furnish a military?

    To which Mr Vilsack says:

    I think we would have fewer people. There’s a value system there. Service is important for rural folks. Country is important, patriotism is important. And people grow up with that. I wish I could give you all the examples over the last two years as secretary of agriculture, where I hear people in rural America constantly being criticized, without any expression of appreciation for what they do do.

    In the end, Mr Vilsack's argument comes down to the notion that the people of rural America feel that they have lost social status, and that subsidies amount to a form of just compensation for this injury. I don't think Mr Vilsack really believes that in the absence of welfare for farmers, the armed services would be hard-pressed to find young men and women willing to make war for the American state. He's using willingness-to-volunteer as proof of superior patriotism, and superior patriotism is the one claim to status left to those who have no other. As Julian Sanchez put it in this insightful post:

    [A] lot of our current politics has less to do with actual policy disagreements than with resolving status anxieties. You can think of patriotism as a kind of status socialism—a collectivization of the means of self-esteem production. You don’t have to graduate from an Ivy or make a lot of money to feel proud or special about being an American; you don’t have to do a damn thing but be born here. Cultural valorization of “American-ness” relative to other status markers, then, is a kind of redistribution of psychological capital to those who lack other sources of it.

    Mr Vilsack's retreat to the patriotism of rural Americans as justification for continued subsidies—subsidies that mostly enrich huge corporations—I think vindicates Mr Sanchez's claim that politics is largely a matter of creating and catering to status anxieties, while also demonstrating that the case for agricultural subsidies has hit rock bottom. Unfortunately, winning the intellectual debate over agricultural subsidies is far from sufficient to motivate politicians to begin opposing them in earnest. The combination of rural status anxiety and the lobbying heft of the agribusiness giants should be enough to keep laying the hurt on the world's poor farmers and grain consumers for a long time to come.

    (Free exchange has more on this topic. Photo credit: Bloomberg News)

  • Robots and social justice

    The distributive consequences of automation

    Mar 8th 2011, 17:46 by W.W. | IOWA CITY

    THERE have been a number of stimulating blog posts in response to this unusually stimulating Paul Krugman column about which classes of workers can and cannot be replaced by soulless automatons, and the implications this has for policy. Mr Krugman is correct that more diplomas for all won't restore "broadly shared prosperity". Instead, Mr Krugman advises direct interventions to more equitably spread the wealh. "We need to restore the bargaining power that labor has lost over the last 30 years," Mr Krugman argues, "so that ordinary workers as well as superstars have the power to bargain for good wages."

    To which Tyler Cowen sensibly retorts:  

    Trade unions, even if they could become strong again (which is hard to see), would likely accelerate this process of substituting capital for labor, rather than counteracting it. A one-time union wage premium, even if it does not come at the expense of other workers, will put only a small dent in the long-term trend.

    Mr Cowen's comment jostled loose a thought I had meant to share in our earlier, riveting discussions of the distributional role of unions. One important factor in the decline of private-sector unions is the increasing automation of heavily-unionised manufacturing jobs. American manufacturing output has grown robustly while the portion of the workforce employed in manufacturing has plummeted. Thanks robots! Now, this strikes me as sort of obvious, but I rarely see it mentioned, so I am going to mention it. The difference between making stuff with workers and making stuff with machines has profound distributive implications! Moreover, these implications are entirely independent of questions of union power.

    Suppose I own a cartoonishly simple manufacturing concern in a cartoonishly simple economy. When I employ labour, production is a matter of the coordinated integration of capital goods with valuable human skill and effort. Productive cooperation naturally raises questions about the fair division of the spoils. Now suppose I replace all my workers with machines. Questions of distributive fairness disappear! I own the machines; I don't owe the steely suckers anything! Of course, the principal reason I choose to automate is not that machines don't slack off, become indignant in the face of injustice, or go on strike. I choose to automate because it saves me, and thus makes me, money. Of course, "robots" are expensive. I buy them from robot manufacturers. At some point, a good robot "pays for itself". Until then, I'm dividing profits with the robot-makers instead of workers. (Imagine I'm paying in installments out of my revenue; it's a lot like paying wages.) After then, I internalise all the gains from production. All mine!

    Now, I don't know what all those workers I laid off are doing. Not doing what robots can do at a lower cost, I suppose. Certainly my demand for robots, and that of other clever capitalists like me, has created vigourous growth in the robot manufacturing sector. But one has to assume that job growth there can last only as long as it takes to come up with robots that build robots that build robots, and so on. So workers are slowly squeezed out of manufacturing by automation. And the squeeze continues. This squeeze has many implications, one of them being that here is an important sector of the economy in which more or less all the gains accrue to the owners of capital and more or less none to the working class, simply because the working class doesn't work here anymore. Intuitively, the distributive upshot of such developments is that the owners of robots become a bit richer than they were when they employed workers, and that the robot-owning class moves up a bit relative to the no-longer-manufacturing working class, even if the efficiencies of increasing automation, together with that of other innovations, have given the working class, now employed in "services", a steady or slightly rising real standard of living.   

    This little tale is of course rife with oversimplification, but I think it draws our attention to what seems to me an important neglected truth: technological change shifts the distribution of income and wealth in ways that have nothing to do with (a) the decline of union power or (b) structural injustice. When the nature of production in a large swathe of the economy changes, a lot of things change with it. Sometimes, trends in income growth and inequality are among those changes. If we decide, for whatever reason, that we preferred the pattern of income and wealth that prevailed in days past, we may elect to instate redistributive programmes intended to make the pattern match our preference. But it's important to see that in these cases redistribution does not "fix" the pattern. It didn't break. It changed. 

    Of course, it's never this simple. It's certainly possible that the rise of the robots has affected the distribution of income and wealth in the way just described (which I take to be morally neutral) while also leading to waning union power and, thereby, to the kind of rich-favouring shift in the balance of political power Jacob Hacker and Paul Pierson hypothesise. Whether you consider this sort of shift in political influence bad or neutral depends on any number of other beliefs. For example, when Mr Krugman calls for "broadly shared prosperity", implicit in his call is an opinon about how prosperity ought to be shared. I'm sure Mr Krugman and I don't quite see eye to eye on this, but I certainly see danger in the possibility of extreme stratification between owners and non-owners of capital. As Mr Cowen says, "This is a reason to encourage the ownership of capital and on a quite broad basis." Eventually, a society of adequately shared prosperity not based on constant, disruptive, inefficient redistributive intervention will need to be based on universal ownership of claims to the output of robots.

    It is in this light that the "privatisation" of Social Security—shifting to an old-age pension policy based on mandatory savings and investment—is revealed as a programme of progressive paternalism aimed at distributive justice. 

    (Photo credit: Bloomberg News)

  • Commodities crisis

    Protecting our vital interests

    Mar 8th 2011, 15:49 by M.S.

    I DON'T usually go along with arguments that American presidents are at fault when foreign conflicts disrupt the flow of some commodity or other to our unslakeably greedy economy, but I have to confess that with the events of the past couple of days it's become clear to me that Barack Obama's failure to take action in this current crisis is simply shameful and displays both unforgiveable timidity and a callous disregard for the vital daily needs of ordinary Americans. It's one thing to recognise that America can't force democracy on other countries and can't determine their future for them. But we also can't just sit back and watch while a clearly disturbed dictator defies the wishes of his own people, embroils his country in civil war, and then uses as his final weapon his control over his nation's supplies of the fuel that drives the economies of America and the rest of the developed world. There is such a thing as "vital American interests". Mr Obama needs to act, not next week, not after further deliberations with NATO allies, but now.

    With that in mind, I propose that Mr Obama:

    • order the United States strategic coffee reserve to immediately release into the market quantities of bean sufficient to calm nervous consumers worried about supply disruptions

    • call on Congress to repeal all environmental legislation impeding development of America's domestic coffee production

    • demand that Laurent Gbagbo of the Ivory Coast give up control of that country's coffee production or face possible American naval action to secure stockpiles

    And don't even get me started on cocoa. We should just make it clear that all options are on the table.

    (Photo credit: Rex Features)

  • Budget cuts

    One man's fiscal illusion is another man's budget mirage

    Mar 7th 2011, 23:33 by M.S.

    TYLER COWEN, in a New York Times op-ed yesterday, was pretty pessimistic about America's chances of getting its fiscal ducks in a row.

    The technocratic Keynesian recommendation was to run deficits in bad times and surpluses in good times. But except for one stretch during the Clinton administration, this notion has been broken since the early 1980s. In the United States, at least, Keynesian economics has failed to find the necessary political institutions to enact and sustain a wise version of the theory.

    Now that fiscal constraints are starting to bite, many politicians are afraid to reform or even to discuss changes in the largest problem areas: Medicare and Medicaid. Yes, some laudable cost controls on Medicare are embedded in the new health care law, but they’re not enough. Most likely, we will end up making other spending cuts that won’t solve our fiscal problems—and in areas that could instead benefit from Keynesian employment stimulus. These kinds of knee-jerk, poorly reasoned decisions are what happens when fiscal illusion reigns.

    By "fiscal illusion" Mr Cowen refers to the tendency to view short-term borrowed money as more real than the long-term money with which one will have to pay it back. His solution is classically conservative, in the sense of "pessimistic about human nature", and even a bit obscurantist; he quotes an old professor who believed that "the real choice was between a religion of budget balance and a rule of illusion. Seeking an optimal technocratic path is not on the menu." I would have more instinctive affinity for this view if it didn't appear that basically every country in the world has substantial public debt, and there seems to be little relationship between debt as a percentage of GDP and wealth. In my layman's fashion, this leads me to suspect that maybe it's possible for a country, like a company, to have too little debt financing. (Which is not to deny that America's current level of debt should probably be lower, and that we have serious long-term debt problems.) Of course part of what's going on here is that richer countries borrow more because they can; investors credit their ability to repay their debts. Then again, the same holds for companies. What do I know.

    But it's certainly true that the largest problem areas in the long-term budget picture, far and away, are Medicare and Medicaid. Indeed, Paul Ryan agrees, too; check out the charts he's been showing to congressional Republicans to coax them to support his budget plan. And it's absolutely true that the "knee-jerk, poorly reasoned" budget cuts Republicans are carrying out this year have nothing whatsoever to do with solving America's medical cost-inflation problem.

    The Times has been running an excellent editorial series on the consequences of the Republican cuts: $235m from USDA inspectors and the FDA, more than 10% of their budgets, potentially bringing meat and poultry plants to a halt; essentially eliminating federal funding for poison control centres; zeroing out American funding for the International Panel on Climate Change. (This last goes beyond the war on science; it's just slap-in-the-face politics, pure sneering provocation at those they perceive as their enemies. I'm more used to seeing this sort of thing in the Russian Duma.) One thing that's striking is how many of the cuts not only won't reduce American health-care costs, but will clearly increase them. What do you think happens when you eliminate poison control centres? As the Times points out, emergency-room visits are considerably more expensive than phone calls.

  • Georgia's legislature

    Second thoughts, with magic marker

    Mar 7th 2011, 15:11 by J.F. | ATLANTA

    HERE is a fun Monday morning graphic for you. One of the loonier bills to come out of this year's legislative session in Georgia was introduced last Monday by Mark Hatfield, a conservative from south Georgia (from Waycross, in fact, home of one of the south's best barbecue contests, but that's for another post). It would require all presidential candidates who wish to be on the ballot in Georgia to provide certified copies of their long-form birth certificate. Mr Hatfield insisted that the bill is not about Barack Obama. Of course not. Perish the thought. In any event, he managed to get 93 of his colleagues (92 of them Republican) to sign on to the bill. You can see their signatures in the image of the bill posted above (larger image here).

    Two days later, David Ralston, speaker of Georgia's House (and like Mr Hatfield, a Republican), mentioned that he believes Mr Obama is "the duly elected president" and that there are "a lot of big issues that need to come to the floor". Also, Mr Hatfield's bill was moving forward as the Georgia Ports Authority was pressing the White House for funding for the Port of Savannah (a necessary route, given that Congressional Republicans swore off earmarks, a previous source of funding) and for transportation. Given that 93 of Mr Ralston's 180 colleagues had put their signatures on the bill he could not dismiss it outright. So he promised a full and robust discussion...in committee. Late the next day, out came the magic marker. First to strike was John Meadows, head of the Rules Committee: it determines what bills come to the floor. More followed. You can see the current state of the bill at right (larger image here).

  • Middle-class stagnation

    Canadian unionisation and the class-war story

    Mar 4th 2011, 21:06 by W.W. | IOWA CITY

    STOP me if you've heard this one before. The American median wage has stagnated, despite the growing productivity of labour, because the wealthy have internalised all the gains. That is to say, the distribution of the surplus from economic production has shifted from Joe and Janet Lunchpail to Phineas P. Tophat. Jacob Hacker and Paul Pierson (interviewed here by David Leonhardt) attribute this shift not so much to the declining power of unions to win for workers a bigger pre-tax-and-transfer cut of profits, but rather to the declining power of unions to maintain the middle-class' post-tax-and-transfer cut of national income in the face of the rising political influence of business interests. Union decline shifted the balance of power in Washington leading working Americans to lose ground in the class war.

    Tyler Cowen points to one problem with this popular narrative: the economic story appears similar in countries where the political story appears different. Mr Cowen notes that in Canada, "The median earnings of full-time Canadian workers increased by just $53 annually—that's right, $53 annually—between 1980 and 2005."

    Linda McQuaig, the "Michael Moore of Canada", tells a familiar story:

    In the 1950s and 1960s, for instance, the real median family income in Canada was growing fast enough to double every 20 years. Since 1980, it has barely grown at all.

    Middle class families have only managed to maintain their standard of living by working much harder than their parents, typically relying today on two incomes instead of one.

    But now let's compare. According to the BLS, from 1970 to 2003, American union membership dropped by 11.3%, while Canadian membership grew 22.3%. More relevant are measures of union density, which tell us what portion of the total workforce is unionised. According to the Canadian government:

    While the United States has experienced a rapid rate of decline in union density, from just over 20% in 1983 to 12% in 2006, Canada’s union membership has increased by 72,000 to 4.2 million in the first half of 2007, a union density rate of 29.7%, virtually unchanged over the past decade.

    So, what accounts for Canada's median wage stagnation? Why has Canada's strong union sector failed to act as an effective countervailing power against the influence of Canada's wealthy? Moreover, as Mr Cowen notes, "Canada is not ruled by the so-called Republican Right." I guess if it comes down to it, we can always blame the Kochs.

    (Photo credit: AFP)

  • Trains again

    All countries with passenger trains also have highways

    Mar 4th 2011, 18:17 by M.S.

    BECAUSE I wanted to have an all-transportation blogging day, I'm just going to note Ezra Klein's sensible response to George Will's weird column a few days ago arguing that people who like trains hate individualism and freedom:

    I come from Southern California. We have a lot of cars down there and not much in the way of alternative transit options. Driving is a nightmare, as the streets are overloaded. Living in Washington has been a vast improvement for me: The subways and Amtrak take me where my car has trouble going, and I use my car for the errands and travels that suit its strengths. And as long as my tax dollars are going to subsidize transportation networks, I’d like them to subsidize a sensible transportation network such as Washington’s, not the endless traffic that I escaped when I moved away from Los Angeles.

    Conversely, I come from Washington, DC, and I'd just like to add a couple of things. First, countries that have fantastic rail transportation networks also have roads and highways, and people there value their cars a lot. The Netherlands is blanketed with intercity rail, high-speed rail, trams, and a couple of subway systems, not to mention buses, probably the world's most extensive bike lane system, and the odd ferry and canal barge. Yet car-ownership rates are high as well, highways are not noticeably less extensive than in the northeastern United States, and the country is not full of anti-car conformists who hate freedom; indeed it just had provincial elections in which the Christian Democrats (CDA) ran on a highway-building platform under the slogan "The more CDA, the fewer traffic jams." Also, speed limits are frequently 120 kph, which is near 80 mph and thus higher than limits on most American highways. My experience driving in France is that highways there these days are also newer, better, less crowded and faster than those in the northeastern United States. China is another example of a country that both loves trains and is rapidly losing its mind in a newfound love affair with cars. Highways and railways don't come free, you have to pay taxes and tolls for them, but the assumption that train lovers hate cars is just not borne out by people in train-loving, car-loving countries.

    The second point is that Washington, DC's rail network is still nowhere near extensive enough. Outside of a few downtown neighbourhoods, you really can't get around the city without a car, and even there the density (in terms of how close stations are to each other, and in terms of how much stuff can be packed in close to the stations due to height-density restrictions) is too low. The plan to bring in trams is a good sign, but the fact that traffic jams in upper Northwest have gotten vastly worse since my youth testifies to the need for a subway spur along upper Connecticut Avenue, even at the risk of turning some residents of Chevy Chase into mindless totalitarian peons.

    The final point is that American car owners are not, in this century, individualistic in their driving or car-owning behaviour. Indian and Israeli car owners are individualistic in their driving behaviour. And there was a period when many Americans were individualistic in their car-owning behaviour. It looked like this:

    But the people who owned cars in that fashion probably don't share George Will's political predilections, and may even be train-loving socialists.

    (Photo credit: Marshal Astor, via Flickr)

  • High-speed rail

    Eminent domain but not for trains

    Mar 4th 2011, 14:49 by M.S.

    RESPONDING to Paul Krugman's train-sceptical commenters, Matthew Yglesias points out that high-speed rail in the northeast corridor would benefit coast-to-coast air travelers by freeing up more runways for routes that can't be traveled by train. You can't take a train from New York to Los Angeles, so we should upgrade train service from New York to Boston in order to reduce the need for New York-Boston air travel and free up runways at La Guardia (and planes, and jet fuel) for the LGA-LAX route. Then, on a realist note, he adds:

    Now a separate question is whether there’s any feasible way to actually do this in a country that doesn’t have a French (or Chinese) level of central political authority empowered to build straight tracks through people’s suburban backyards. The answer seems to be “no,” but the potential gains from greater rail capacity in the northeast are large and would (via airplanes) spill over into the rest of the country.

    This is true. The government hasn't been able to use its eminent domain powers effectively in recent decades to clear land for railways. But up until a few years ago, there was a strange corollary to this failure, which was that American government was increasingly using its eminent domain powers to do other things that have a much less clear connection to the public benefit. The old-fashioned idea that rapid land-based transit from New York to Boston needs a straight thoroughfare, and that the tens of thousands of property owners who lie along that route will be unlikely to organise themselves spontaneously to create a railroad or expressway, is a pretty clear case of a collective-action problem that requires government intervention. The idea codified by the Supreme Court's 2005 Kelo decision, that regional governments should be able to seize people's property and give it to a corporate developer on the theory that the developer will be able to generate more economic activity and thus benefit the community as a whole, was a much more tortuous case.

    One might have concluded that we would have an easier time getting high-speed rail in America if Amtrak were a fully private corporation. It seems to be  hard to get the government to do anything in the public interest these days, but Congress is still pretty enthusiastic about handing out corporate welfare to Exxon, ADM, JPMorgan Chase and so forth. So this would seem to argue for more aggressive use of public-private Build-Operate-Transfer (BOT) deals to fund private transportation, since government seems to be more easily motivated to do a deal with a for-profit corporation than to build things with taxpayer money. And indeed BOT deals have built a lot of great infrastructure around the world, and many of the feasibility studies for high-speed rail in America involve BOT deals funded with a bond issue.

    That might have been the conclusion one would draw five years ago. But it's not the way things are turning out. The public's reaction to Kelo, particularly on the right, was furious, and there are now laws in 42 states restricting the use of eminent domain to benefit private corporations. And the thing is, because so much transportation infrastructure is built by private corporations, this public hostility is now making it harder to build old-fashioned infrastructure. In North Tarrant, Texas, property owners are objecting to the use of eminent domain to build a new airport expressway because it will be in part a toll road operated by a private company, and they're appealing to Texas laws passed in the aftermath of Kelo to restrict eminent domain for private corporations. In Florida, people are resisting utility company use of eminent domain for expansion of power transmission networks.

    This is a version of a widespread neo-liberal political problem. In the face of conservative hostility to government, the neo-liberal solution has often been to turn to public-private partnerships. But the same voters who are hostile to using government to address public issues are often even more hostile when government empowers private companies to solve public issues. This is what's happened with health-care reform: neo-liberals (not to mention conservatives in George H.W. Bush's administration!) thought they could satisfy conservative hostility to government-run universal health insurance by deputising the private sector to do the job. (Jon Chait comments on an article in the libertarian magazine Reason as late as 2004 advocating an individual mandate.) But it turned out that however much conservative voters hate paying taxes for universal health insurance, they hate having a mandate to buy private health insurance at least as much. They want the benefits, but they don't want the government to provide them, and they don't want the government to empower the private sector to provide them. I'm not sure there's a way around this problem, apart from trying to explain to people over and over and over that the reason they are stuck in traffic and don't have health insurance is that this is what they've voted for.

    (Photo credit: AFP)

  • Insurance and rights

    Can same-sex bathrooms be far behind?

    Mar 3rd 2011, 14:29 by M.S.

    ON TUESDAY the European Court for Human Rights ruled that insurers in the EU can no longer charge different premiums for men and women. The Financial Times' Lex writes:

    The judgment is philosophically ignorant and practically almost pointless... As far as auto insurers are concerned, the genders are not equal, as there is overwhelming evidence that women are safer drivers than men (especially the young, high testosterone variety). They therefore charge them lower premiums. Unisex rates may abstractly be good for sexual equality, but they are unfair to the safer sex.

    Life assurers can also scarcely fail to notice that women live longer. And health insurers will wonder how to calculate unisex rates for the risk of breast or prostate cancer. Men and women are different enough by nature that it seems fair to charge them different rates for life assurance and pensions (while discrimination on the basis of skin colour or religion would still plainly be unfair).

    This seems to me to reflect a misunderstanding of the purpose of insurance, as well as an idiosyncratic use of the word "fair". In what sense is it fair to charge me more for car insurance because I am male, regardless of my actual driving behaviour? I didn't choose to be born male; what is fair about charging me a financial penalty for it, or about granting a woman with identical driving behaviour an award for having had the wisdom to be born female? The attempt to head off the analogy to racial discrimination doesn't work at all. Blacks have significantly shorter life expectancies than whites; if insurers are justified in charging women less for life insurance, they should be justified in charging blacks more. (In West Africa, perhaps they ought to charge blacks less, as whites are significantly more vulnerable to malaria.)

    Ah, one objects, but blacks aren't shorter-lived because of their biology; it's because they are more likely to be poor, to smoke, and various other third factors. Insurance policies should incentivise blacks, like whites, to live healthily, not penalise them for the colour of their skin, which they can't control. Similarly, men don't crash cars because their penises get in the way of the steering wheel, but because they are more likely to drive recklessly. Insurance policies should incentivise men, like women, to drive carefully, not penalise them for being born with genitalia that are correlated with risky driving.

    What we're seeing here really goes beyond questions of sexual egalitarianism; it goes to the heart of what insurance is for. The social purpose of insurance is to protect people from suffering unreasonable financial punishment due to factors beyond their control. One way to say this is that it's unfair for people to be punished for having bad luck, or for being who they are. Another way to say it is that by collectively smoothing the pointless risks of birth or accident, by softening the slings and arrows of outrageous fortune, we free people up to make more productive and efficient choices about the things they can control. If I have to pay more for car insurance because I'm a man, I will be discouraged from starting a delivery service, no matter how carefully I plan to drive, and even if a delivery service would otherwise be the most productive use of my skills.

    The extension of this argument is more important to American readers. One often hears from people opposed to universal health insurance that making people unlikely to get sick pay higher premiums to compensate for the costs of people likely to get sick is not actuarially sound. This confuses the social purpose of insurance, to share pointless risks, with the profit incentives of insurers. Insurers will naturally try not to insure people likely to get sick through no fault of their own, who are, obviously, precisely the people insurance is designed to protect. Further, insurers will naturally choose to discriminate on the basis of sex or race where they are correlated with risk; sex and race are easy markers which cost insurers little to detect. But no social value is generated by charging people for things they can't do anything about. If the European ruling means insurers will have to take the extra effort to devise metrics that measure people's behaviour, creating incentives for improvement, it will have been a very productive ruling.

  • Hollywood on the dole

    Draw the curtain on filmmaker subsidies

    Mar 2nd 2011, 22:43 by W.W. | IOWA CITY

    MICHAEL KINSLEY delivers a persuasive plea against the now-common practice of states dangling subsidies in front of filmmakers to lure their glamourous creative efforts, and the substantial spending that comes with it, to their proud patch of America. In particular, Mr Kinsley sticks it to Bill Richardson, the former governor of New Mexico, for sticking up for this ludicrous form of regressive redistribution despite the lean times. Writes Mr Kinsley:

    Richardson says that the film and TV subsidy has brought "nearly $4 billion into our economy over eight years" and has created 10,000 jobs. By "our," he means New Mexico. He says every state should emulate this success.

    But of course every state cannot do that because it essentially is a "beggar thy neighbor" strategy. Some of the movies that have been bribed to locate in New Mexico would have been made in New Mexico anyway. That part of the subsidy is a total waste. Most of the movies that have come to New Mexico for the subsidy would otherwise have been made in other states. New Mexicans may not care if the citizens of those states lose out, but inevitably those other states respond with subsidies of their own and New Mexico gets beggared along with everybody else.

    In any event, Richardson's statistical claims are suspect, to say the least. He would not win an Oscar for math. ...

    Taking the whole zero-sum subsidy game into account, the only sure winners are Harvey Weinstein and his ilk, who need your money like you need 25 pounds. What's more, the film and TV incentives racket is a hotbed of corruption. Mr Kinsley points us to this report by Robert Tannewald, an economist at the Center on Budget and Policy Priorities, which points out the scandalously dodgy accounting states use to justify their taxpayer-bilking incentive programmes. But the corruption doesn't end at cooking the books.

    Here in the Hawkeye state, the state government's film office got itself into a bit of a pickle playing fast and loose with tax credits for filmmakers. As a consequence, the programme was shut down and "Cedar Rapids", a comedy about an insurance conference set in, yes, Cedar Rapids, was filmed in Michigan. As Ed Helms, the star of "Cedar Rapids", summarised the matter: "Some guy was making a shitty movie in Iowa and bought a Range Rover using their tax credits." Or something like that. Despite the dreadful chill that comes of seeing an ersatz City of Five Seasons on the silver screen, the Iowa film-office scandal had a happy ending—for Iowans at least. Iowa's once and current governor, Terry Branstad, seems to have no plans of restarting it. Anyway, downtrodden Michigan taxpayers are probably too numb by now to feel another kick.

    (Free exchange has more on state movie subsidies. Photo credit: Fox Searchlight)

  • Language and opinion

    Framing climate change

    Mar 1st 2011, 22:15 by W.W. | IOWA CITY

    OUR readers are evidently fascinated by American attitudes toward global warming and/or climate change. I say "and/or" because it turns out that opinion on the subject is sensitive to the language one uses to refer to the putative meteorological phenomenon. A new paper (ungated) in the scholarly journal Public Opinion Quarterly by Jonathon P. Schuldt, Sara H. Konrath, and Norbert Schwarz examined the websites of conservative and liberal think tanks and found that conservatives are more likely to speak of "global warming" whilst liberals are inclined to speak instead of "climate change". The elite conservative usage seems to be a cause or effect (probably both) of conservative public opinion.

    Republicans were less likely to endorse that the phenomenon is real when it was referred to as “global warming” (44.0%) rather than “climate change” (60.2%), whereas Democrats were unaffected by question wording (86.9% vs. 86.4%). As a result, the partisan divide on the issue dropped from 42.9 percentage points under a “global warming” frame to 26.2 percentage points under a “climate change” frame.

    What explains this? "Global warming", the authors note, directly elicits thought of rising temperatures, which encourages the anecdotal use of unusually cold or snowy weather as disconfirming evidence, whereas "climate change" puts the emphasis on the systemic transformation of weather patterns, which offers a broader context for the odd cold snap or snowmageddon. Additionally, the authors surmise, "global warming" connotes human causation and culpability somewhat more than "climate change".

    But why isn't liberal opinion affected by the choice of semantic "frame"? Shuldt, Konrath, and Schwarz write:

    First, Democrats tended to endorse high belief (Ms = 5.94 on a 7-point scale), raising the possibility of a ceiling effect. Second, Democrats’ beliefs about global climate change might be more crystallized and thus more protected from subtle manipulations, consistent with research showing that stronger attitudes are more resistant to change.

    I take the upshot of the study to be that Americans are less polarised about climate change/global warming than they may appear. Disagreement under the "climate change" frame is really fairly mild. And the fact that conservative opinion is so susceptible to framing effects suggests a relatively low level of confidence about the issue.

    I expect ideological disagreement over climate change will decline further as the debate over climate policy takes shape in the public imagination. In my experience, many libertarians and conservatives are motivated to deny global warming because they think admitting a problem amounts to handing government a blank check and a mandate to do whatever it wants to "fix" it. Once it becomes clearer that the best policy response to climate change is a tax on carbon, which can be entirely offset by cutting taxes elsewhere, those Americans wary of opening the door to enviro-fascism will begin to relax.

  • GOP budget cuts

    A million here, a million there, you're still not talking about real money

    Mar 1st 2011, 20:27 by M.S.

    SPEAKING of above-average teachers who create social value not reflected in their salaries, it took George Will, of all people, to call my attention to the fact that Teach for America has apparently been designated an "earmark" in the GOP budget and slated for elimination. Teach for America costs the federal government $21m a year.

    That's what happens when you pass an $858 billion tax cut and then try to make up for it with cuts to domestic discretionary spending. Now if we can just eliminate 20,000 more programmes like Teach for America, we might get back to deficit-neutral, though it's an open question whether future Americans will care about our achievement since they won't know how to add.

  • Unions

    The importance of Walker and Rhee

    Mar 1st 2011, 17:32 by R.M. | WASHINGTON, DC

    I WAS one of many Washington residents who was disappointed when Michelle Rhee resigned her post as schools chancellor following the defeat of her boss, Adrian Fenty, in last year's mayoral race. But there were many more Washingtonians who were happy to see her go, and over on Slate last week Richard Kahlenberg had a thoughtful essay admonishing fans of Ms Rhee for buying into her seductive and simplified message about education reform. His reproachful tone is often warranted, but I would take issue with one of Mr Kahlenberg's complaints: that Ms Rhee eschewed collaboration with the teachers unions. While there is no doubt Ms Rhee was an overly combative figure, the author's argument rests on the assumption that the DC teachers union was a willing collaborator. Mr Kahlenberg's broader prescriptions also take for granted that teachers unions are ready for reform. That is debatable, and the case of Ms Rhee is helpful in understanding the current fight over public-sector unions. 

    To take one example from Ms Rhee's tenure, Mr Kahlenberg says the chancellor focused on firing teachers "in a fashion that unfairly demean[ed] large numbers of educators", while ignoring an alternative policy called peer review, a somewhat controversial evaluation procedure in which expert teachers critique their colleagues. Mr Kahlenberg notes that the American Federation of Teachers (AFT), the nation's second-largest union, supports peer review. But that invites the question of why it has been sparingly adopted across the country. And the answer is because reforming the evaluation system has not been a union priority. Much more effort has been expended fighting the use of value-added testing than promoting policies like peer review. More importantly, evaluation reform means little unless the process for firing bad teachers is streamlined, and there has been little movement on this front. Even in peer-review systems, the unions still go to bat for those deemed "ineffective". 

    On another controversial issue, merit pay, Mr Kahlenberg says Ms Rhee's intentions were good, but any such programme needs to be structured in a way that encourages cooperation between teachers. Fair enough, but the unions have been more wary than Mr Kahlenberg of pay reform, and efforts to change the tenure system have been bitterly opposed. As the author himself admits, "Too often, union leaders protect incompetent teachers and make it difficult to pay outstanding educators more." In general, the unions always seem to give more thought to how certain reforms may not work, and less thought to how they could.

    How does this relate to the larger debate about public-sector unions? Last week, my colleague noted that public-sector reforms, whether it be pension restructuring or allowing the firing of incompetent teachers, "will be unachievable if unions correctly understand that their opponents...are not in fact interested in collaborating with them on solutions, and are instead trying to destroy their existence as institutions." But the opposite is also true. (The AFT spent as much as $1m trying to end Mr Fenty's administration.) And this is why people like Michelle Rhee and Scott Walker, the governor of Wisconsin, play an important role in the reform process. 

    It could be said that both Ms Rhee and Mr Walker dealt with large problems by arrogantly pushing over-the-top, sub-optimal solutions. But their excessive actions were useful in forcing unions to abandon their rigid positions and play a more constructive role in the proceedings. In Wisconsin, for example, the public-sector unions only agreed to accept many of the proposed cuts to their benefits once their collective-bargaining rights were threatened. In the case of teachers, only recently have some of the unions declared themselves open to change in the face of broad support for reform. You'd like to think that collaboration and compromise would be easier to come by. But sometimes it takes an overwhelming force to dislodge a seemingly immovable object from its fixed position.

    In the case of Wisconsin, we will now see if that force (ie, the governor) can moderate itself. Perhaps not, and a compromise may prove unachievable in the short term. But in another op-ed this past weekend, even Mr Kahlenberg admits, albeit indirectly, the positive impact of people like Ms Rhee and Mr Walker. After criticising them for most of his piece, he writes, "Teachers should use this moment to articulate a powerful reform agenda." He then compliments the AFT for making a "good start" on that path. There is a reason they are acting now.

    (Photo credit: Reuters/AP)

  • Arab spring

    Who lost Egypt?

    Mar 1st 2011, 14:11 by M.S.

    EIGHT years after the craziness that was the invasion of Iraq, I barely have the patience to address neo-conservative fantasies about how to turn political evolution in the Muslim world into a story that's somehow all about America liberating grateful locals. So I'm glad Daniel Larison still does, though, in responding to Niall Ferguson, he seems to be almost out of patience too:

    The sobering thing about rapid political change in these countries is that there really is very little that the U.S. could have done differently in just the last few years that would have produced a significantly different outcome. Democratists look at what happened in the 1980s, they reason foolishly that 1989 happened because of what the U.S. and Western allies did in supporting political dissidents, and they conclude that “we did it before, we can do it again!” Just as Iraq war supporters stupidly invoked Japan and Germany as meaningful precedents for the political transformation that could happen in Iraq, Ferguson is invoking the successes of eastern European dissidents as precedents for what could have happened in the Near East.

    What makes Ferguson’s comparison even harder to take is the presumption that Western support for eastern European dissidents was important to their success, when the success of eastern European revolutions in 1989 rested almost entirely with the peoples of those countries. Ferguson’s analysis and recommendations seem to hinge on believing that Western support for dissidents in communist states was important to the successful political transition in those states, because Ferguson can’t seem to imagine foreign political movements that succeed or fail regardless of what Westerners do or don’t do...If there is anything more pathetic than the usual round of “who lost [fill in the blank]?”, it is the risible attempt to claim that all would be well if there had just been more American emphasis on democracy promotion earlier on.

    I think I can suggest one thing that's more pathetic than the usual round of "who lost [fill in the blank]", and that would be a round of "who lost [fill in the blank]" when we won. Nobody lost Egypt! Egypt just ousted its dictator in a non-violent popular revolution! It's going to have democratic elections in six months! In what perverse universe does this count as a defeat for American foreign policy, for the West, for enlightenment civilisation, for lovers of human rights? Sweet Douglas Feith, what do these people want?

  • Countervailing what?

    After unions

    Feb 28th 2011, 21:12 by W.W. | IOWA CITY

    IN HIS Newsweek column, Ezra Klein tells us why he thinks we still need unions. Among other reasons, Mr Klein mentions this classic:

    [U]nions are a powerful, sophisticated player concerned with more than just the next quarter’s profit reports—what economist John Kenneth Galbraith called a “countervailing power” in an economy dominated by large corporations. They participate in shareholder meetings, where they’re focused on things like job quality and resisting outsourcing. They push back on business models that they don’t consider sustainable for their workers or, increasingly, for the environment. In an economy with a tendency toward bigness—where big producers are negotiating with big retailers and big distributors—workers need a big advocate of their own. 

    There's clearly something to this, but I don't think the matter is so clear. Unions are at least likely to amplify as contain the power of big business. Over at Economics by invitation, our debate forum for dismal scientists, Gilles Saint-Paul offers a powerful summary of what I take to be the standard economic critique of labour unions, including this rebuttal of the "countervailing power", argument:

    Unions do not provide a countervailing force to the supposed power of big business. Whenever big business gets rents from monopoly power, unions often manage to share some of those rents (this explains why unions are more present in concentrated industries like automobiles, as opposed to, say, retail trade). This benefits the employees of big business, and it has indeed been shown that these employees enjoy higher wages and greater fringe benefits. But by raising labour costs it further adds to the harm done to consumers (and workers in the competitive sector) by the monopoly power of business. In addition to being too high because firms collude, the price is also too high because employees collude. Furthermore, the interests of the union and their employers are convergent whenever they deal with the outside world: both want to increase the revenue that the firm or the industry can extract through lobbying activities. To the extent that union leaders provide additional voices, unionisation adds to the lobbying power of an industry.

    Private-sector unions and big business come to blows over a cutting-the-cake problem. But the interests of labour and capital are aligned when it comes to the size of the shared cake. Auto workers certainly did not act as a countervailing force when it came time for failing American car manufacturers to seek subsidies from taxpayers. And this is why my brow furrowed when Mr Klein said unions "push back" on business models that aren't environmentally sustainable. I think you'll find that unionised coal miners are as unenthusiastic as the coal companies they work for about regulations that would restrict the growth of mining operations or reduce demand for coal.

    However, Mr Klein is surely correct that unions are antagonists to businesses that seek to enlarge the cake in ways unlikely to be shared by domestic union workers. When unions successfully resist outsourcing, they hurt consumers, foreign workers, and the competitiveness of their firm, which eventually leads to domestic layoffs or reduced domestic job-creation. This is not the sort of countervailing we're hoping for.

  • Partisanship

    A vague thought on global polarisation

    Feb 28th 2011, 18:43 by M.S.

    OVER the weekend Ronald Brownstein made the point in National Journal that the opposition of today's Republican governors to Barack Obama's agenda is much fiercer and more ideological than anything Bill Clinton had to face from their predecessors, and that this is part of the increasing polarisation of American politics: "American politics increasingly resembles a kind of total war in which each party mobilizes every conceivable asset at its disposal against the other. Most governors were once conscientious objectors in that struggle. No more." Steven Pearlstein made the same point about politicisation and back-and-forth regulation changes at the National Labor Relations Board. Ezra Klein added that the increased partisanship is evident in the courts too, with Democratic-appointed judges ruling the Affordable Care Act constitutional and Republican-appointed judges ruling the opposite, "which is not what most legal scholars and analysts predicted":

    Dahlia Lithwick went back to the initial coverage of the GOP's lawsuits. "It was an article of faith among court watchers that President Obama's health care reform plan would be upheld at the Supreme Court by a margin of 7-2 or 8-1," she concluded. Lee Epstein, a law professor at Northwestern University, told me the same thing. "Even my very, very conservative colleagues last year said that if the Court follows existing precedent, this is a no-brainer."...In other words, partisan polarization, which has long been evident on the Supreme Court, is spreading deeper into the court system.

    When people start talking about political systems in which politics overwhelms the constitutional order because the supposedly independent constitutional court is too weak to resist partisan interests, and makes rulings that are clearly driven by narrow power-politics concerns, I know you like me immediately think of one country: Thailand. Well, okay, you probably don't, and obviously the American constitutional order is very unlikely to collapse the way that Thailand's did under the pressure of conflicts between former premier Thaksin Shinawatra, elements of the military, the royal house, and the Bangkok elite who became the base of the "yellow-shirt" movement. The Thai constitution was just eight years old when the coup occurred, not 220-plus, and Thailand has long been known for the fluidity of its politics and its difficulty with grounding consistent, lasting institutions. But there is something recognisable about the yellow-shirt and later red-shirt movements, the ease with which they shrugged off procedural democracy, refused to acknowledge the legitimacy of an elected government, and proclaimed themselves the true voices of the people. Thailand gave us something new, in an age of colour revolutions: the spectre of two antagonistic colour revolutions happening at the same time, facing each other across of a gap of deliberate mutual incomprehension. As demonstrators in Wisconsin pick up the lessons of the tea-party movement, I find I keep thinking about Bangkok.

  • Economic morality

    The meaning of overpaid

    Feb 28th 2011, 14:34 by M.S.

    THE range of ways in which people can talk past each other probably exceeds the range of ways in which they can understand and engage with each other. Last week Megan McArdle (commenting on Jim Manzi) picked up on one of the ways in which people discussing the union controversy in Wisconsin might be talking past each other, and it's pretty interesting.

    You can argue, of course, that [the compressed income distribution typical of government wages] is an ideologically much more attractive income distribution.  Which highlights, I think, the core difference between the way people like Manzi and I look at this, and the way that progressives do.  I don't think of state employment as a way to create, in miniature, my ideal labor utopia.  I think of it as a way to procure services.  I define people as being "overpaid" not if they are paid more than someone with a similar level of education, but if they are paid more than I need to pay to attract adequate workers.

    I have defined people as being "overpaid" in this fashion, too, when I was looking to hire someone to fill a job. This is "overpaid" defined from an employer's point of view. But defining "overpaid" this way excludes the possibility that everyone in a labour category might be underpaid. It makes it impossible to say "teachers are underpaid, and people who broker complex derivatives are overpaid". Teachers, as a class, can't be underpaid, because the salaries they earn were ipso facto adequate to attract them to do the job. You're defining the issue of the social value of the work out of the question. For instance, in December, as Planet Money reported, economist Eric Hanushek published a paper for the NBER finding that:

    A teacher one standard deviation above the mean effectiveness annually generates marginal gains of over $400,000 in present value of student future earnings with a class size of 20 and proportionately higher with larger class sizes.

    From society's point of view, one might conclude that teachers are seriously underpaid. Or one might conclude that better-than-average teachers are seriously underpaid, and we need to institute merit-based pay and fire bad teachers. But looking at things from an employer's point of view, it's not clear there's really a problem here. The school system is effectively getting hundreds of thousands of dollars a year in free value from each teacher who's one standard deviation above the mean. Why change that? Meanwhile, there are a whole lot of respectable economists who believe that most of the financial industry produces no value whatsoever. And yet, if you tried to recruit a hedge-fund analyst at a public-school teacher's salary, you'd have great difficulty filling the position. Does this mean hedge-fund analysts aren't overpaid?

  • Pro-union populism

    Democrats need tea and parties, too

    Feb 26th 2011, 16:17 by W.W. | IOWA CITY

    EARLIER this week, I wrote a short post at my personal blog drawing a parallel between the American left's new-found, pro-union, placard-waving enthusiasm and the tea-party movement. Reading the comments, the comparison seems to have pleased no one. But I'm especially interested in the reaction from the left. The tea-party movement, you see, is an "astroturf" movement, financed by billionaire puppetmasters, fueled by hatred, agitating for rank injustice. The labour movement, on the other hand, is the real deal: a bottom-up coalition of working Americans courageously standing up against the thuggery of bought-and-paid-for Republicans and their shamelessly insatiable plutocrat bosses. 

    This zanily Manichean way of characterising the situation I think rather confirms my suspicion that the equivalence I drew is sound. Michelle Malkin, a zanily Manichean right-winger, is delighting in the chore of cataloguing the many scandalous rhetorical sins against propriety committed by the pro-union crowds in Madison. Ms Malkin's ridiculous point is that the pro-union rabble is guilty of the racism, sexism and homophobia of which the courageous tea-party movement has been falsely accused. My point is that when folks get angry, they get stupid, and stupidity knows no party or clique. Progressives should not meet this truism so defensively. I know we want to believe the best of our comrades. And I know that loudly congratulating one's team for its superior intellect and virtue is a critical part of keeping a bubble of enthusiasm aloft and rising. So we adults can speak in whispers, if we must. But it's a plain fact that the fuel-mixture of potent populism includes generous helpings of stupidity and self-regard. Democrats got flattened last fall by a fired-up, pie-eyed right. They should welcome an equivalent efflorescence of inchoate rage from the left. The naked, monkey-minded tribalism of an "engaged" political faction is not lovely to behold, but then smash-mouth politics is not brunch at the club. The big question is whether or not Governor Walker's gift will keep on giving. Can Democrats stay mad all way through 2012, or will the eye of the tiger be a bit heavy-lidded by then?

    My guess is that a labour-movement victory in Wisconsin will kill union-busting ambitions elsewhere. While this will keep the Democratic Party's cash cow fat and happy, an early win will make it harder to keep the vivifying sense of existential threat alive. A series of losses to Republican governors could create a mounting tide of righteous grievance sufficient to push Democrats over the top in 2012, but leave them badly undermined in the longer term.

  • Environmental regulation

    The irony of the tragedy of the commons

    Feb 24th 2011, 22:58 by M.S.

    THE American Economic Review just turned 100. It turns out that the original issue in 1911 featured an article by Professor Katharine Coman of Wellesley College entitled  “Some Unsettled Problems of Irrigation”, and in the anniversary issue, Robert Stavins (via Mark Thoma) cleverly decides to retrace what's happened since then with economic theory on "commons problems". Basically, he writes, Pigou and Coase and those who followed them have done yeoman work that's led to the institutionalisation of tools like cap-and-trade allowances for fishing permits and pollution permits, which are superior to command-and-control rules both from an environmental and economic perspective:

    First, economic theory—by focusing on market failures linked with incomplete systems of property rights—has made major contributions to our understanding of commons problems and the development of prudent public policies. Second, as our understanding of the commons has become more complex, the design of economic policy instruments has become more sophisticated, enabling policy makers to address problems that are characterized by uncertainty, spatial and temporal heterogeneity, and long duration. Third, government policies that have not accounted for economic responses have been excessively costly, often ineffective, and sometimes counterproductive.

    For example, he writes, the 1990 law establishing tradable permits to bring down sulfur dioxide emissions rather than using command-and-control regulations saves the economy $1 billion a year. And with what he calls the "ultimate problem of the commons", greenhouse gases, "there is widespread agreement among economists (and a diverse set of other policy analysts) that economy-wide carbon pricing will be an essential ingredient of any policy that can achieve meaningful reductions of CO2 emissions cost effectively, at least in the United States and other industrialized countries (Gilbert E. Metcalf 2009; Louis Kaplow 2010). The ubiquitous nature of energy generation and use and the diversity of CO2 sources in a modern economy mean that conventional technology and performance standards would be infeasible and—in any event—excessively costly (Newell and Stavins 2003)."

    The problem with this picture is passed along by Dave Roberts at Grist. The public, according to a new poll, does want to cut CO2—and smog, and mercury. But they want to do it through EPA regulation, ie command-and-control, not tradeable permits or Pigovian taxes.

    I've never seen a behavioural economics study on this, but I'm sure somebody's done it, because it seems pretty widespread: people generally prefer rules telling them something is not allowed, rather than charges making them pay for it, even if the latter are clearly more efficient at maximising social value. Mr Stavins does recognise this, observing that in terms of political appeal, aversion to the word "taxes" is probably one reason why cap-and-trade systems for carbon emission permits have already been instituted in Europe; but he also notes that "now that cap and trade has been demonized—in US politics, at least—as 'cap and tax,' this difference has surely diminished."

    The darkly ironic side of all this, of course, is that administrative command-and-control solutions like detailed EPA emissions rules are definitely more expensive than cap-and-trade or carbon taxes would be. If anything, when the public votes for EPA regulation rather than cap-and-trade, that's when it's imposing a tax on itself. Fifty years after Coase and 90 after Pigou, the economists are pretty sure they've finally got the solution for fixing commons problems without diminishing social value, only to have the public reject it because they think that's the tax. If the tragedy of the commons is "Romeo and Juliet", the rejection of Coasian cap-and-trade solutions to commons problems is "Blood Simple": a hilariously bitter demonstration of the human capacity for selfish stupidity that ends with the only guy who's figured it all out getting shot through a door by the wrong person for the wrong reasons.

  • The war in Afghanistan

    Going the Manchurian candidate one better

    Feb 24th 2011, 17:04 by M.S.

    JUST when I thought it had gone full circle, it went another full circle. It was crazy enough when, as Jane Mayer and others have documented, the CIA took the manuals developed by military trainers for hardening soldiers against the kinds of torture and psychological-manipulation techniques that had been used on Americans by North Korean and North Vietnamese interrogators, reverse-engineered those techniques, and started using them on captives at Bhagram, Abu Ghraib and Guantanamo. Then, when John McCain, who had himself been subjected to those torture and psychological-manipulation techniques in a Vietnamese prison camp, went ahead and endorsed their use by CIA interrogators, I thought the irony could go no deeper.

    Never underestimate the American military! Rolling Stone's Michael Hastings scores another coup:

    The U.S. Army illegally ordered a team of soldiers specializing in "psychological operations" to manipulate visiting American senators into providing more troops and funding for the war, Rolling Stone has learned – and when an officer tried to stop the operation, he was railroaded by military investigators.

    The orders came from the command of Lt. Gen. William Caldwell, a three-star general in charge of training Afghan troops – the linchpin of U.S. strategy in the war. Over a four-month period last year, a military cell devoted to what is known as "information operations" at Camp Eggers in Kabul was repeatedly pressured to target visiting senators and other VIPs who met with Caldwell. When the unit resisted the order, arguing that it violated U.S. laws prohibiting the use of propaganda against American citizens, it was subjected to a campaign of retaliation.

    Among the senators subjected to psy-ops manipulation by his own army: John McCain. I can't think of a funny closing line that could possibly top the straight-up Hollywood madness of this, so I'll just have to go with Mr Hastings's own serious observation, which is that the use of psy-ops techniques on American legislators shows the army is pretty desperate to convince people the war in Afghanistan is going swimmingly. Briefly, before the psy-ops guys get to my brain and zap my memory and logic cells, it isn't.

  • The power of free association

    Libertarian unionism

    Feb 23rd 2011, 22:34 by W.W. | IOWA CITY

    I'VE repeatedly argued that private- and public-sector unions operate in different institutional settings, raise fundamentally different moral and political questions, and that it is altogether reasonable to support private-sector unions while rejecting public-sector unions on account of the nature of their differences. A common response I've heard from the left is that I'm slyly seeking to sow discord by disingenuously arguing that the larger union movement is not in fact one, but is instead a coalition of fundamentally distinct organisations of unequal moral standing. A common response I've heard from the right is basically the same: "you don't really support private-sector unionism, do you"? 

    Well, I do. Sort of. It's complicated because American labour law is complicated. 

    The right of workers to band together to improve their bargaining position relative to employers is a straightforward implication of freedom of association, and the sort of voluntary association that results is the beating heart of the classical liberal vision of civil society. I unreservedly endorse what I'll call the "unionism of free association". My difficulty in coming out wholeheartedly for private-sector unions as they now exist is that they are, by and large, creatures of objectionable statutes which have badly warped the labour-capital power dynamic that would exist under the unionism of free association.

    Progressives and libertarians generally part ways on the justifiability of legislation that boosts the bargaining power of unions. Progressives generally think, not implausibly, that government has already put a thumb on the scale in favour of employers through the legal definition of the character and powers of the corporation, such that it is manifestly unjust for government to fail to put an equalising thumb on the scale in favour of unions. For now I only want to say that I think there is indeed a plausible case for government stepping in to help strengthen workers' bargaining power when inequalities in such power (often created by law and legislation) lead to a systemically unfair division of the gains from productive cooperation. I don't think the same plausible case applies to public-sector unions for reasons I've recited ad nauseam.  

    So, do circumstances merit a further statutory boost for private-sector unions? I don't know. Rather than become mired in largely intractable metaphysical disputes over fairness of the division of the cooperative surplus, which we would need to do in order to determine whether government should do more to augment union power, I believe it would be much more productive to focus on the ways in which the prevailing legal regime clearly handicaps labour relative to the power unions would have under conditions of free association. I heartily agree with Kevin Carson, a left-libertarian theorist and activist, when he argues that:

    [T]he room for change lies mainly, not with adding further economic intervention to aid labor at the expense of capital, but rather with eliminating those policies which currently benefit capital at the expense of labor. The question is not what new laws would strengthen the bargaining power of labor, but which existing ones weaken it. ...

    The most obvious forms of state intervention that hobble labor are legislation like:

    1) The provisions of Taft-Hartley which criminalize sympathy and boycott strikes;

    2) The Railway Labor Relations Act and the “cooling off” provisions of Taft-Hartley, which enable the government to prevent a strike from spreading to common carriers and thus becoming a general strike; and

    3) “Right-to-Work” (sic) laws, which restrict the freedom of contract by forbidding employers to enter into union shop contracts with a bargaining agent.

    Further, we should examine the extent to which even ostensibly pro-labor laws, like the Wagner Act, have served in practice to weaken the bargaining power of labor. Before Wagner, what is today regarded as the conventional strike—an announced walkout associated with a formal ultimatum—was only one tactic among many used by unions.

    Mr Carson then goes on to enumerate some of those now-rare tactics, which, taken together, add up to a compelling case that a return to the unionism of free association would improve the bargaining position of labour relative to the status quo.  

    It is in this light that I wish to join the Washington Examiner's Tim Carney in congratulating Mitch Daniels for his opposition to the "right-to-work" legislation proposed by Indiana Republicans. Presidential, indeed. 

  • Protectionism

    Barriers to trade back in the day

    Feb 23rd 2011, 21:31 by M.S.

    MATTHEW YGLESIAS cites Alan Taylor's "American Colonies: The Settling of North America" on how French-Iroquois warfare tacitly served both groups by erecting a protectionist barrier between northern Indians in Quebec and the Dutch colony at Fort Orange (now Albany)...

    Because the northern Indians possessed better furs, they would, in the event of peace, become the preferred clients and customers of the Dutch, to the detriment of the Iroquois. As inferior suppliers of furs, the Iroquois had a perverse common interest with the French, an inferior source of manufactured goods. They both tacitly worked to keep apart the best suppliers of furs (the northern Indians) and of manufactures (the Dutch).

    ...and quips: "And today France is a rich country thanks to all the good middle-class jobs this Iroquois protectionism helped save."

    From the NRC Handelsblad, "Ignoring History in the Westerschelde Debate":

    The fall of Antwerp in 1585 and the Dutch blockade of the Scheldt [pictured above] were a pivotal moment for the separation of North and South, of the Republic and the Spanish Netherlands. Antwerp was cut off from the sea; Amsterdam took over Antwerp's dominant position. After the 1648 Peace of Münster the Dutch Republic managed to perpetuate the Scheldt blockade. It wasn't until the Treaty of London of 1839, in which the great powers agreed to the independence of Belgium, that the reopening of the Scheldt river was finally guaranteed.

    Is Amsterdam a rich city today thanks to all the good middle-class jobs this Dutch protectionism helped save? In part, yeah, to the extent that any modern economic circumstances can be traced to things that happened centuries ago. The Dutch blockaded Antwerp for over 200 years, from 1585 until the Netherlands became the Napoleon-aligned Batavian Republic in 1795. That may not be the primary reason why the Dutch manufactures available at Fort Orange were so cheap, but it's not unrelated, and it's certainly a major reason why Amsterdam was a thriving world commercial centre in the mid-1600s while Antwerp became a declining provincial town. If the French had wanted to justify protectionist behaviour in North America by arguing that the Dutch did it too, they would have been right.

    This isn't to say that it's a good idea to ratchet up levels of protectionism when, as now, overall barriers to trade are low and declining. But when everyone's doing it, it's probably true that the people who do it more effectively are benefiting from it.

  • Mitch Daniels

    A quick thought on Mitch Daniels

    Feb 23rd 2011, 19:24 by C.H. | CHICAGO

    MITCH DANIELS seems to be doing everything he can to ensure that he loses a Republican presidential primary. Last year he called for a truce on social issues, so that leaders could focus on more pressing matters. Conservatives are still having conniptions about this. Now he is chiding Hoosier Republicans for pushing a right-to-work bill, saying that the fight may derail other, more urgent legislative priorities. Such efforts will be fodder for conservative opponents in a primary. They also suggest that Mr Daniels would be a rather good president.

    (Photo credit: AFP)

  • Unions

    Teaching quality and bargaining

    Feb 23rd 2011, 17:15 by M.S.

    SCOTT LEMIEUX passes along a pretty useful point to keep in mind, courtesy of his friend Ken Sherrill.

    Only 5 states do not have collective bargaining for educators and have deemed it illegal. Those states and their ranking on ACT/SAT scores are as follows:

    South Carolina – 50th
    North Carolina – 49th
    Georgia – 48th
    Texas – 47th
    Virginia – 44th

    If you are wondering, Wisconsin, with its collective bargaining for teachers, is ranked 2nd in the country.

    As Mr Lemieux says, this doesn't show that collective bargaining makes school systems better. But it makes it pretty hard to argue the converse.

    On a broader note, I think this is illustrative of the need for people who are interested in better outcomes for national social challenges to stop arguing that their opponents are illegitimate and should be annihilated. In the particular case of unions, it's pretty clear from all the research that the existence of unions in a workplace can either increase or decrease productivity, depending on how unions and management interact. Conservatives who want to argue that unions destroy productivity almost inevitably use the example of the American auto industry and the UAW, which is an interesting example because American car manufacturers were defeated on quality and price by car manufacturers from two countries with extremely high rates of unionisation, Germany and Japan. When GM staged a last-ditch effort in the 1980s to learn how to make cars the Japanese way, they sent management and union teams to work with Toyota to see how to arrange collaborative union-management relationships.

    There are clearly some serious problems facing American governance, and public-sector unions are going to have to make adjustments to solve those problems, whether it means pension restructuring or allowing the firing of incompetent teachers. But those kinds of reforms will be unachievable if unions correctly understand that their opponents, including Scott Walker and the modern Republican Party, are not in fact interested in collaborating with them on solutions, and are instead trying to destroy their existence as institutions.

  • Chicago Mayor Rahm Emanuel

    Rahm Emanuel wins

    Feb 23rd 2011, 14:45 by C.H. | CHICAGO

    NEW eras tend to be declared too easily. Chicago’s election of Rahm Emanuel on February 22nd, though, was a turning point. True, the mayoral race did have an air of familiarity, if only because it honoured the city’s penchant for the bizarre. Mr Emanuel was almost disqualified by a legal fight over the meaning of the word “reside”. Carol Moseley Braun, a black contender, called a lesser opponent a crack addict. A blizzard prompted candidates to battle over their shovelling skills. On Twitter, an impostor posing as Mr Emanuel won 36,000 followers with tweets composed almost entirely of expletives.

    Nevertheless, the election really did mark the end of an age. Richard Daley senior ruled Chicago from 1955 to 1976; his son has reigned over the city since 1989. Now a new powerbroker will take charge with no Daley in the offing. Mr Emanuel clobbered his opponents by winning 55% of the vote, well above the level needed to avoid a run-off. Mr Emanuel’s effect on the city, of course, has yet to be determined. But the election itself proved just how much Chicago has changed.

    The mayoral race was unlike any in recent memory, and not simply because Mr Daley was absent. Chicago’s rules of racial politics have become tangled. Mr Emanuel, a Jewish former congressman and aide to Barack Obama, was one of four main candidates. The Latino community, in a sign of growing prominence, produced not one but two credible contenders: Gery Chico, once Mr Daley’s chief of staff, and Miguel Del Valle, the city clerk. After much debate the black community rallied behind Ms Braun, a former senator. “The early assumption,” says Juan Rangel, a Latino leader and supporter of Mr Emanuel, “was that the election would be all about race.” But it wasn’t. Mr Chico’s most vocal backers were union members. Ms Braun tried and failed to incite class warfare. Mr Emanuel won in part because of his success in wards with high concentrations of black voters.

    Meanwhile the notorious Chicago machine is not what it was. Mr Daley’s machine was different than that of his father; his power base included Latinos and executives at global firms, for example. But in recent years the machine had grown rusty too. Federal investigations disrupted Chicago’s convenient system of rewarding political workers with city jobs and promotions. Mr Daley’s underlings were convicted in 2006 and 2009, but the boss himself was not implicated. The old patronage armies, says Dick Simpson of the University of Illinois at Chicago, have shrivelled.

    Mr Emanuel is hardly an outsider to Chicago’s political establishment—he courted community leaders such as Mr Rangel aggressively. But his tactics were less old Chicago than new Washington. He followed the requirements of any modern campaign: raise cash and deliver a clear message. By January Mr Emanuel had raised $11.8m, compared with $2.4m for Mr Chico. In the old days a patronage army might have fanned out across an important neighbourhood. Mr Emanuel’s money let him accost voters through their television sets. He also campaigned diligently, visiting more than 100 train stops to greet befuddled commuters. He stuck to his message (strong schools, safe streets, stable finances) and kept his famous temper in check.

    Winning the election, however, was the easy part. Mr Emanuel is more accustomed to being an aide than the chief. But on May 16th Mr Emanuel will become the executive of America’s third biggest city. A fiscal mess awaits him. Mr Daley closed recent budget gaps by using cash from asset sales; Mr Emanuel could not repeat this trick even if he wanted to. A brawl with local unions, who opposed him in the election, seems certain. He may also struggle with the city council. These challenges are formidable. Mr Emanuel’s temper, so controlled in the campaign, is sure to erupt. But if Mr Emanuel can survive the next few years, he may be the mayor for 20 more.

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