Thursday, June 30, 2005

Some cautionary notes on aid

Longtime readers of -- all seven of you -- are aware of my studied ambivalence about the idea that boosting foreign aid and debt relief to Africa will improve economic conditions in that area.

With the Live8 concert approaching, and the One campaign being hyped by celebrities (including a certain former poli sci student from south of the border), it seems worth pointing out that there's a big difference between wanting to help alleviate poverty and pandemics in Africa and actually doing it.

It's with that frame of mind that I came across this Financial Times story by Andrew Balls:

The International Monetary Fund has warned that governments, donors, campaigners and pop stars need to be far more modest in their claims that increased aid will solve Africa's problems.

Days before the Live-8 concerts around the world, and next week's Group of Eight countries summit in Scotland, the IMF has released two extensive research papers that suggest aid flows to poor countries have not led to higher growth rates, the main driver of poverty reduction.

“We need to be careful given the chequered history of aid, that we do not place more hopes on aid as an instrument of development than it is capable of delivering,” the fund said.

The research, which took into account duration, type of donor and governance record of recipient, found aid did not boost growth.

This conflicts with the findings of an influential World Bank study five years ago that found aid boosted growth in countries with good policy environments.

“The basic message is that it is good that people are talking about increasing aid flows but that we have to find ways to make them more effective. “It is not the case that all that matters is good governance,” said Raghuram Rajan, the fund’s chief economist and co-author of the reports. “We know far less about what makes aid work than the public or governments would like. By acting like we know all the answers raises false expectations.”

Read the whole thing.

Oh, and for conservatives who stress the productive role that remittances can play in fostering economic growth, be sure to click onto this IMF staff paper by Ralph Chami, Connel Fullenkamp, and Samir Jahjah. The abstract:

There is a general presumption in the literature and among policymakers that immigrant remittances play the same role in economic development as foreign direct investment and other capital flows, but this is an open question. We develop a model of remittances based on the economics of the family that implies that remittances are not profit-driven, but are compensatory transfers, and should have a negative correlation with GDP growth. This is in contrast to the positive correlation of profit-driven capital flows with GDP growth. We test this implication of our model using a new panel data set on remittances and find a robust negative correlation between remittances and GDP growth. This indicates that remittances may not be intended to serve as a source of capital for economic development.

[So you're saying the situation is hopeless--ed.] Nope. The FT story goes on to observe:

Separately, the World Bank highlighted improving recent economic performance in Africa. The bank's African Development Indicators showed that since 1995 growth in sub-Saharan Africa has averaged 3.3 per cent per year, compared with 1.7 per cent in the previous decade.

John Page, World Bank chief Africa economist, said: “There is a happy coincidence of the high level of political attention on Africa and more evidence in the data to support hopes of a turning point in Africa now than there has been in the past 20 years.”

Mr Page pointed to greater differentiation in the data. While a number of African countries continue to struggle, 15 countries have grown on average by more than 5 per cent a year over the past decade, including Botswana, Burkina Faso, Ghana, Uganda and Tanzania.

The spread of democracy, the willingness of African governments to take responsibility for promoting growth and development, and reduced impediments to private-sector led growth, and some evidence of better natural resource management has supported growth, the bank said.

“It’s a much more varied picture, it’s not all doom and gloom any longer. Where there has been robust growth there has been poverty reduction and improvements in social indicators,” Mr Page said. “The turnaround story is the most important thing that emerges from the data.”

Click here for the World Bank's press release on its latest Africa report.

posted by Dan at 11:02 AM | Comments (21) | Trackbacks (4)

Vladimir likes the bling-bling

Some stories are so odd that all you can do is post them without comment:

Russian President Vladimir Putin walked off with New England Patriots owner Robert Kraft's diamond-encrusted 2005 Super Bowl ring at a recent meeting with U.S. business executives.

But not to worry: Kraft says the ring was a gift to Putin, presented out of ''respect and admiration.''....

''I showed the president my most recent Super Bowl ring,'' Kraft said in a statement. The Russian president ''was clearly taken with its uniqueness.''

''At that point, I decided to give him the ring as a symbol of the respect and admiration that I have for the Russian people and the leadership of President Putin.''

Putin met with the businessmen Saturday near St. Petersburg, Russia. Near the end of the meeting, Kraft took off the ring, and handed it to Putin. Putin tried it on, put it in his pocket and left, according to Russian news reports.

It's an amazing coincidence.... it's my understanding is this is exactly how it worked with Gazprom as well.

posted by Dan at 10:17 AM | Comments (2) | Trackbacks (0)

Tuesday, June 28, 2005

Open Bush speech thread

I wasn't able to watch Bush's speech tonight, but that doesn't mean you can't comment on it here. Fire away!

[What if they missed it?--ed. Then go check out David Adesnik's liveblogging.]

posted by Dan at 11:07 PM | Comments (52) | Trackbacks (0)

Signs that the end is not upon us

As the New York Times frets about China's rise to economic pre-eminence, Americans are understandably concerned about the size of the trade deficit and the possibility of a housing bubble. I've been moderately concerned about both -- but two small stories muddy up my worries a bit.

The first is the fact that the U.S. is relying less on official purchases to finance its current account deficit:

The US became less dependent on inflows for foreign central banks to support the dollar in the first three months of the year, according to figures released on Friday.

The current account deficit hit a record $195.1bn in the first three months of the year - equivalent to 6.4 per cent of GDP. Some economists now expect the deficit for the year to reach $800bn - requiring huge inflows of foreign funds into the US in order to prevent a fall in the dollar.

Recently the US has relied heavily on purchases of US assets by Asian central banks in order to fund its deficit - in particular from China, where the authorities buy dollars in order to prevent a rise the renminbi from hurting exports.

Over the latest quarter, however, private investors took more of the strain. Net official flows were just $24.7bn in the quarter - down from $94.4bn in the final three months of last year.

Meanwhile, net private inflows rose from $73bn in the forth quarter to $131bn in the first quarter of 2005.

"Every trading day the US needs to attract about $3bn of net foreign inflows - which makes a huge demand on the world's savers," says Nigel Gault, director of US research at Global Insight, a consultancy. "But so far there are few signs that investors world wide are tiring of US assets. There may be worries about the US economy but most other places look a lot worse." (emphasis added)

This is always the thing to remember about the U.S. economy -- as parlous as conditions may look right now, one must always compare the United States to other possible locations for investors. Compared to the regulatory, demographic, and political uncertainties present in Europe, Japan, and yes, even China, the U.S. looks pretty good.

As for the housing bubble, Daniel Gross points out in Slate that housing has been the primary job engine since the start of the 2001 recession -- but that could be changing:

The apparent reliance on housing to spur job growth could mean we're cruising for a fall if the red-hot sector shows signs of cooling. But it's also possible that housing was the bridge that helped us get over the post-bust job chasm. Between June 2004, when the Federal Reserve began raising rates, and April 2005, [Northern Trust economist Asha] Bangalore notes, "housing and related industries have accounted for 13.0% of private sector payrolls." [this is in contrast to the time period from November 2001 to the present, when 43.0% of payroll jobs were created in the housing sector--DD.] In other words, as talk of a housing bubble increased, other nonhousing-related sectors were retaking the lead in job creation. To paraphrase Thomas Jefferson, it could be that a little bubble now and then may be exactly what this economy needed.

None of this is to say that the U.S. does not suffer from some serious economic imbalances that will require a combination of policies to solve. However, the situation may not be as hopeless as many prognosticators are saying.

At least, this is what U.S. consumers and job-seekers seem to believe.


posted by Dan at 03:38 PM | Comments (15) | Trackbacks (0)

Monday, June 27, 2005

Interpreting Iran's election

The Economist asks the questions on many people's minds following Iran's presidential elections:

WAS it a backlash by Iran’s devoutly Muslim poor against a corrupt elite? Or was it a massive fraud perpetrated on the people by the hardline clerics? Perhaps it was a bit of both. Whatever the case, the margin of victory for Mahmoud Ahmadinejad in the second round of Iran’s presidential election, on Friday June 24th, was striking. Mr Ahmadinejad, the mayor of the capital, Tehran, and a hardline religious conservative, garnered around 62% of the vote, despite having gone almost unnoticed in the field of seven candidates who had contested the first round of voting, a week earlier.

However, Gordon Robison has an op-ed in the Beirut Daily Star suggesting that the western media fell down on the job in covering the Iranian elections:

So Ali Akbar Hashemi Rafsanjani is not Iran's new president. That result must come as a particular surprise to anyone who tried to follow the campaign by light of the Western media.

As recently as last Thursday - the day before the run-off vote between Rafsanjani and his rival, Tehran mayor Mahmood Ahmadinejad - reputable polls gave the latter a clear lead. Yet headlines in the International Herald Tribune continued to describe Rafsanjani as the "front-runner." In the run-up to the first round of voting on June 17, his campaign was the focus of most election coverage in the Western media. CNN's interview with Rafsanjani during the campaign treated him as a president-in-waiting.

So what happened, exactly?....

The answer may be much simpler, if no less embarrassing: Granted how little most of us outsiders know about the politics of the Islamic Republic, it was probably just easiest to focus on Rafsanjani because he, alone among the candidates, was a familiar figure to Western journalists....

Prior to the election [reformer Mustafa] Moin was often seen in the West as Rafsanjani's main competition. The assumption in that narrative was that Rafsanjani represented the conservative old guard. Moin, a former cabinet minister who was initially barred from standing by Iran's Council of Guardians (the body that approves potential candidates for Parliament and the presidency), was seen as the obvious successor to Khatami. That might have been true, but it ignored the fact that there is more than one type of "reform." Reform can mean loosening restrictions on how people dress and behave in public and private. But it can also mean tackling corruption and cronyism - which was the vein of popular anger into which Ahmadinejad tapped.

Well, to be fair, some of the western media had already figured some of this out:

In truth, so much of this [analysis about Iran's election] is rubbish and disinformation. The country's supreme leader, the Ayatollah Khamenei, remains firmly in charge of the country -- exactly as he would have been had Mr. Rafsanjani won the other day. The pop analysis aside, the election will have no effect on Iran's weapons of mass destruction or its role in supporting terrorism.

posted by Dan at 11:41 PM | Comments (19) | Trackbacks (1)

Irwin Stezler's short-term memory

When Americans get skittish about China's growing economic power, free market advocates -- myself included -- tend to remind everyone about the excessive skittishness Americans had about Japan in the late eighties.

In the Weekly Standard, Irwin Stezler offers some reasons for why China now is different from Japan back then:

Once again, politicians and policy wonks are up in arms about a foreign takeover of an American company, in this case the attempted acquisition of Unocal by China's National Offshore Oil Corporation (CNOOC). To those who remember the hysteria that greeted Japan's purchase of Rockefeller Center, the jewel in the crown of New York real estate, in the late 1980s, "It's déja vu all over again," to borrow from the Yankee sage, Yogi Berra.

That might just be dangerously wrong. The current Chinese takeover movement is different from the earlier buying spree by Japanese companies. Japan was not a rival for influence in Asia, or in the world; China is. Japan was not a major competitor for scarce resources such as oil; China is. Japanese companies were privately owned; China's acquirers are state-run entities. Japan is a democratic country, and by and large an American ally; China most definitely is not. Japan did not engage in the wholesale theft of intellectual property, China does. Japan did not buy strategic assets: ownership of New York real estate has no implication for national security; ownership of oil resources does.

Now, I'm not necessarily disagreeing with Stezler's big point about the differences between China now and Japan then, but I remember enough of the late eighties hysteria to point out the various ways in which Japanophobes would have rebutted Stezler's alleged differences between Japan and China:

1) Japan was not a rival for influence in Asia. Japan's FDI flows to the rest of East Asia in the late eighties were pretty massive. Their official development assistance was also generous but tied to purchases of Japanese products. American's feared their growing political influence then;

2) Japanese companies were privately owned. Who exactly were the owners? The keiretsu system of interlocking cross-corporate ownership made it next to impossible to identify the real owners of Japanese capital. This was one reason why the Japan Inc. metaphor was used so widely fifteen years ago. Another reason was the belief that Japan's Ministry of International Trade and Industry (MITI) was engaging in extaordinary forms of industrial policy administratively guiding Japanese firms towards the government's desired ends.

3) Japan is a democratic country, and by and large an American ally. In 1990, Japan had been ruled by the Liberal Democratic Party for all but one year of the post-war era. As for being an American ally, in The Japan That Can Say No: Why Japan Will Be First Among Equals, Shintaro Ishihara had great fun toying with the idea of Japan selling its semiconductors to the Soviet Union rather than the United States;

4) Japan did not buy strategic assets. Two words -- Fairchild Semiconductors. Fujitsu placed a bid on the semiconductor firm in late 1986; if memory serves, the Department of Defense investigated the security implications of that bid, to the point where Fujitsu backed off. Fairchild was later purchased by a French firm.

One final tidbit -- in 1990, Robert Reich conducted a poll of both elites and ordinary citizens and asked them to choose between a world where the U.S. economy grew by 25% and Japan grew by 75% over the next decade, or one where the U.S. grew by 10% and Japan by 10.3%. With the exception of economists, majorities in both groups preferred the second choice to the first one.

My point in this little exercise is not to exonerate China's less desirable qualities -- it's to point out that when another country is perceived as an economic threat to American hegemony, it is easy to find ways of painting that country in a sinister light.

UPDATE: The Economist has two articles worth reading on China's new interest in foreign direct investment. Neither the article about CNOOC in particular or the article about Chinese outward FDI is terribly sanguine about what's going on.

ANOTHER UPDATE: The similaities/differences between Japan and China were also the topic of Paul Krugman's column today. Krugman also touches on a theme mentioned by the other articles linked here:

The Japanese, back in the day, tended to go for prestige investments - Rockefeller Center, movie studios - that transferred lots of money to the American sellers, but never generated much return for the buyers. The result was, in effect, a subsidy to the United States.

The Chinese seem shrewder than that. Although Maytag is a piece of American business history, it isn't a prestige buy for Haier, the Chinese appliance manufacturer. Instead, it's a reasonable way to acquire a brand name and a distribution network to serve Haier's growing manufacturing capability.

Maybe my memory is off, but the Japanese also set up a fair amount of greenfield FDI in the auto sector as well.

Also, what difference wlould it make how the Chinese use their investments? None, unless you care about relative gains a fair amount -- which is what Krugman seems to be doing, according to both Tyler Cowen and Don Boudreaux.

Both also link to Sebastian Mallaby's sensible observation in the Washington Post:

[T]he protectionists say that if the Unocal bid is allowed to go forward, the Chinese will use the power of corporate ownership to manipulate oil prices; worse, China could even blackmail America by withholding energy supply. This echoes old fears of Japanese semiconductor makers, which were said to be plotting sinister dominance of the memory-chip business in the 1980s. As the protectionists explained it, the Japanese plan was to destroy U.S. rivals by undercutting their prices, then later to ramp up their own prices and hold U.S. industry (including the defense industry) for ransom.

But the protectionist fears are based on a misunderstanding of markets, which are harder to corner or manipulate than people seem to understand. Japan's assault on the memory-chip market never did produce the feared lock on this product. Instead, U.S. chipmakers prospered by moving upscale from plain memory chips to fancy microprocessors, and the supposedly oligopolistic Japanese memory-chip firms were soon challenged by South Korean rivals....

[I]t's hard to paint a plausible scenario in which Chinese control of Unocal would hurt us -- despite loud exclamations to the contrary from Congress. For one thing, Unocal's oil output accounts for a tiny fraction of U.S. consumption. The firm's chief asset is undeveloped natural gas in Indonesia that's going to take at least five years to develop -- by which time the current tightness in the energy market will probably have dissipated because of the development of new oil fields.

But there's a more fundamental objection to the protectionist anxiety. The protectionists worry that China will ship all of Unocal's output home to its own industries, thus hogging scarce oil supplies and taking them "offline." Even if this were possible, it wouldn't matter: Unocal's oil and gas would be meeting Chinese demand that would otherwise have to be met by Chinese purchases on world markets. In other words, China would be reducing both the supply and the demand for energy in the open market. Prices paid by American consumers wouldn't budge.

LAST UPDATE: Alex Tabarrok goes completely medieval on Krugman.

posted by Dan at 04:08 PM | Comments (25) | Trackbacks (2)

Sunday, June 26, 2005

So how's the transatlantic relationship doing?

One of the bizarre sociological facts of attending multi-day conferences about current events is that – even as one is discussing policy topics of the day in earnest – a news vacuum is created, shielding participants to facts both new and salient to the topic of debate.

So, even as your humble blogger tirelessly debated the state of transatlantic relationship in conference rooms, poolside bars, sumptuous restaurants, and then back at more bars, the following events didn’t come up that much in conversation:

  • The US/EU co-hosting of the Iraq donor conference;

  • The sharp divergence of FDI flows between France, Germany, and Great Britain (click here for the salient OECD report)

  • Tony Blair’s peroration to the European Parliament; (link)

  • France’s additional difficulties coping with offshore outsourcing, as well as Germany's – a sharp contrast with how U.S. entrepreneurs are exploiting such opportunities (not to mention IBM).

  • The uneven persistence of America’s unpopularity in the court of global public opinion (persistent in Europe, less persistent elsewhere).
  • [So, the conference was a bust, eh?—ed.] First, no conference held at this location can be a bust. Second, I left this conference feeling much better about transatlantic relations than I have in quite some time.

    I attended this same conference three years ago. It was a rancorous affair, with both Americans and European blasting away at each other's flaws. At best, that meeting ended with both contingents agreeing to disagree on key issues of the day.

    This time around, there was a much greater sense of humility on both sides – the Americans on Iraq and the Europeans on, well, the future of the EU. From this humility, a fair amount of pragmatism appeared. Americans on both sides of the aisle emphasized the need for the United States to accentuate its soft power resources in the rest of the world. Regardless of their attitudes towards Iraq, the Europeans who attended were far more accepting of a value-oriented foreign policy than in the past -- i.e., democracy promotion. It was also the Europeans, and not Americans, who were questioning what the next step would be if engagement talks with Iran fell apart.

    Does the growing public resentment of the United States mean that this new spirit of pragmatism at the elite level will die out quickly? I'm not sure. I doubt Bush's meeting with German President Gerhard Schroeder will be warm and fuzzy, but the leaders who are on the rise in Europe -- the UK's Tony Blair, Germany's Angela Merkel -- are the ones who favor closer relations with the United States. Despite Pew's findings, it remains the case that anti-Americanism is an empty platform for governance.


    posted by Dan at 09:03 PM | Comments (11) | Trackbacks (0)

    Thursday, June 23, 2005

    Does China contradict the liberal paradigm?

    The constant in U.S. policy towards a rising China for the past three administrations is encapsulated in the current National Security Strategy:

    China has begun to take the road to political openness, permitting many personal freedoms and conducting village-level elections, yet remains strongly committed to national one-party rule by the Communist Party. To make that nation truly accountable to its citizen’s needs and aspirations, however, much work remains to be done. Only by allowing the Chinese people to think, assemble, and worship freely can China reach its full potential....

    The power of market principles and the WTO’s requirements for transparency and accountability will advance openness and the rule of law in China to help establish basic protections for commerce and for citizens. (emphasis added)

    In other words, by trading with China, and by encouraging them to embrace the information revolution, the Chinese will inevitably morph into an ever-more-open society that will therefore become more benign in world politics.

    There are valid reasons to doubt the second part of that logic, but I'm more concerned about the first part for now: is U.S. trade with China making the country more free?

    I ask because of this Philip P. Pan front-pager in the Washington Post from last week on how Chinese President Hu Jintao is consolidating his power:

    More than two years after taking office amid uncertainty about his political views, Chinese President Hu Jintao is emerging as an unyielding leader determined to preserve the Communist Party's monopoly on power and willing to impose new limits on speech and other civil liberties to do it, according to party officials, journalists and analysts.

    Some say Hu has cast himself as a hard-liner to consolidate his position after a delicate leadership transition and could still lead the party in a more open direction. There is a growing consensus inside and outside the government, however, that the 62-year-old former engineer believes the party should strengthen its rule by improving its traditional mechanisms of governance, not by introducing democratic reforms.

    Hu has placed particular emphasis on tightening the party's control over public opinion, presiding over a crackdown to restore discipline to state media and intimidate dissident intellectuals. He has also gone further than his predecessor, Jiang Zemin, by adopting new measures to regulate discussions on university Internet sites and the activities of nongovernmental organizations.

    Meanwhile, Paul Mooney reports similar information about the Chinese academy in the Chronicle of Higher Education (sorry, subscription only):

    Shortly before a new, younger generation of Chinese leaders took office in 2002, intellectuals in Beijing were hoping that Hu Jintao, who is now the country's president, would be a force for reform.

    Since taking the reins of power, however, the new regime has launched a bitter attack on freedom of expression. Newspapers have been shut down, books banned, journalists and dissidents imprisoned, and scholars brought under increased pressure to toe the official line. The political situation is the worst it has been in years, many scholars say.

    "I'm very pessimistic," says Xu Youyu, a researcher at the Institute of Philosophy at the Chinese Academy of Social Sciences. "I'm sure that these harsh policies are not just for a short time."

    As for the power of the Internet to make China more free, Rebecca MacKinnon has tirelessly covered the Chinese government's recent efforts to expand its monitoring and filtering capacities -- click here for one example.

    This would all seem to suggest that our open trade policy with China ain't generating a lot of political openness on their side. By the Freedom House measures, China has been rated as "not free" for the entire history of our expanded trade relationship with them. Within that category there are some subtler trends -- in the eighties both the poliitical rights and civil liberties measures improved slightly. Both went back down after Tiannamen, and then since 1998 the civil liberties score has improved marginally.

    So does China vitiate the underlying premise that an open economic relationship leads to political openness?

    Well consider that even the Freedom House data and the Chronicle story suggests that economic openness can have an effect on civil liberties -- it's just that the effect is very small and trumped by Hu Jintao. See this section of the Chronicle story:

    Free speech was given a big boost in China in recent years by the commercialization of the news media and the advent of the Internet, two channels that gave scholars unprecedented ways to disseminate their opinions. Newspapers and magazines once controlled by the government are now scrambling to attract readers. The Beijing News, which has won a large readership with its bold reporting, devotes an entire page each day to articles written by prominent intellectuals.

    However, nothing has been as important as the Internet. "It's almost revolutionary," says Jiang Wenran, associate professor of political science at the University of Alberta, in Canada, and a native of China. "Without the Internet, how could they speak out?"

    Anything important that has been written can be found online, and that, says Mr. Jiang, "gives intellectuals confidence that they have a voice and can use it to express their opinions."

    Academics have also set up numerous Web sites, though they have had to exercise caution. Some sites voluntarily shut down every year before the anniversary of the May 4th Movement, marking the 1919 student demonstrations on that day in Beijing against the Treaty of Versailles, and the 1989 crackdown that grew out of the student protests in Tiananmen Square. If they did not take that self-imposed break, China's vigilant Internet police -- said to number in the tens of thousands -- might take more drastic action, forcing them to shut down permanently.

    Second, remember that China is a special case because of its market size. China can get Microsoft to do what it wants, but smaller countries cannot.

    Third, when questioning the utility of a certain policy, one always needs to compre it to the alternative set of options. There is no other option that would cause China to democratize any faster that a policy of openness.

    Fourth, as I argued earlier this year, the effect of the information revolution on authoritarian states is not a continuous one. It is possible that repressive regimes can succeed in maintaining control for long periods of time -- but then crumble quickly. One reason for Hu's recent decision to crack down is his acute recognition of this fact.

    So maybe current U.S. policy will work in the long run. The thing is, none of those points makes me feel any more sanguine about current U.S. policy in the short run.

    UPDATE: David Shambaugh has an interesting piece in The Washington Quarterly on the complex triangle between the U.S., China, and Europe.

    posted by Dan at 06:11 PM | Comments (26) | Trackbacks (7)

    So how is moderate Islam doing?

    Two years ago, then-Malaysian prime minister Mahathir Mohammed gave a controversial talk at the Organization of the Islamic Conference. The gist of it was, "We Muslims must embrace modernization -- so we can crush the Jews."

    Two years later, current Malaysian PM Abdullah Ahmad Badawi is preaching the first, less offensive part of that message. The New York Times' Wayne Arnold explains:

    In the Malaysian capital, the government is using the 30th meeting of the OIC's Islamic Development Bank to push an agenda that would give the organization a more direct role in economic integration and development.

    "It is economic strength which can give the OIC greater clout and secure for itself a more influential voice in international affairs," Abdullah told delegates to a two-day OIC trade forum.

    Among Malaysia's proposals are the creation of an $11 billion infrastructure fund, a master plan for developing financial services in the Muslim world and the creation of a pan-Islamic trading bloc. If approved, Malaysia's initiatives could mark an important juncture in the life of the OIC, whose members, ranging from oil-rich Qatar to war-devastated Sierra Leone, have little in common but religious faith.

    In some ways, Malaysia appears to want the OIC to make the same transition that the Association of Southeast Asian Nations made a generation ago, shifting from an organization based on shared diplomatic interests into an agent for promoting development through trade and investment....

    Abdullah has the kind of credentials to sell such a progressive message in the Islamic world, analysts and observers say. His father and grandfather were religious leaders, and Abdullah holds a degree in Islamic studies. Just as important, analysts say, Abdullah wants to sell a more pro-development version of Islam in the West.

    "He's very strong about communicating Islam to the West in a way that is understood, because it is really being misunderstood at the moment," said Jumaatun Azmi, managing director of Kasehdia, which publishes The Halal Journal, a trade publication for companies selling products that adhere to Islamic strictures.

    Whether Abdullah is a Nixon going to China or a Mahathir in sheep's clothing is a question I will leave to the comments.... once they've digested those inelegant metaphors.

    posted by Dan at 05:41 AM | Comments (9) | Trackbacks (0)

    Wednesday, June 22, 2005

    Need something more to worry about?

    Foreign Affairs has a special section in their July/August 2005 issue devoted to "coping with the next pandemic." After reading Laurie Garrett's excellent introduction to the section (subscription only) about the emergence of the H5N1 avian influenza, I feel both better informed and freaked out.

    Garrett also identifies the economic reasons why there isn't a booming market for flu vaccines:

    The total number of companies willing to produce influenza vaccines has plummeted in recent years, from more than two dozen in 1980 to just a handful in 2004. There are many reasons for the decline in vaccine producers. A spate of corporate mergers in the 1990s, for example, reduced the number of major international pharmaceutical companies. The financial risk of investing in vaccines is also a key factor. In 2003, the entire market for all vaccines -- from polio to measles to hepatitis to influenza -- amounted to just $5.4 billion. Although that sum may seem considerable, it is less than two percent of the global pharmaceutical market of $337.3 billion. Unlike chemical compounds, vaccines and most other biological products are difficult to make and can easily become contaminated. There is also a large and litigious antivaccine constituency -- some people believe that vaccines cause harmful side effects such as Alzheimer's disease and autism -- adding considerable liability costs to manufacturers' bottom lines.

    The production of influenza vaccines holds particular drawbacks for companies. Flu vaccines must be made rapidly, increasing the risk of contamination or other errors. Because of the seasonal nature of the flu, a new batch of influenza vaccines must be produced each year. Should sales in a given year prove disappointing, flu vaccines cannot be stockpiled for sale in a subsequent season because by then the viruses will have evolved. In addition, the manufacturing process of flu vaccines is uniquely complex: pharmaceutical companies must grow viral samples on live chicken eggs, which must be reared under rigorous hygienic conditions. Research is under way on reverse genetics and cellular-level production techniques that might prove cheaper, faster, and less contamination-prone than using eggs, but for the foreseeable future manufacturers are stuck with the current laborious method. After cultivation, samples of the viruses must be harvested, the H and N characteristics must be shown to produce antibodies in test animals and human volunteers, and tests must prove that the vaccine is not contaminated. Only then can mass production commence.

    The H5N1 strain of avian flu poses an additional problem: the virus is 100 percent lethal to chickens -- and that includes chicken eggs. It took researchers five years of hard work to devise a way to grow the 1997 version of the H5N1 virus on eggs without killing them; although there have been technological improvements since then, there is no guarantee that an emerging pandemic strain could be cultivated fast enough.

    Garrett also makes a very solid case for why, even in an open global economy, the U.S. government should ensure there is a domestic industry for these vaccines:

    Were the United States to falter, it would probably not be able to rely on Canadian or European generosity, as it did just last year. When the United Kingdom suspended the license for the Chiron Corporation's U.K. production facility for flu vaccine due to contamination problems, Canada and Germany bailed the United States out, supplying additional doses until the French company Sanofi Pasteur could manufacture more. Even with this assistance, however, the United States' vaccine needs were not fully met until February 2005 -- the tail end of the flu season....

    In the event of a deadly influenza pandemic, it is doubtful that any of the world's wealthy nations would be able to meet the needs of their own citizenry -- much less those of other countries....

    There would thus be a global scramble for vaccine. Some governments might well block foreign access to supplies produced on their soil and bar vaccine export. Since little vaccine is actually made in the United States, this could prove a problem for Americans in particular.

    Click here to read a brief Q&A with Garrett on the problem.

    And click here to read Michael Osteholm's assessment of the damage that a new pandemic would wreak on the global economy.

    The arrival of a pandemic influenza would trigger a reaction that would change the world overnight. A vaccine would not be available for a number of months after the pandemic started, and there are very limited stockpiles of antiviral drugs. Plus, only a few privileged areas of the world have access to vaccine-production facilities. Foreign trade and travel would be reduced or even ended in an attempt to stop the virus from entering new countries -- even though such efforts would probably fail given the infectiousness of influenza and the volume of illegal crossings that occur at most borders. It is likely that transportation would also be significantly curtailed domestically, as smaller communities sought to keep the disease contained. The world relies on the speedy distribution of products such as food and replacement parts for equipment. Global, regional, and national economies would come to an abrupt halt -- something that has never happened due to HIV, malaria, or TB despite their dramatic impact on the developing world....

    SARS provided a taste of the impact a killer influenza pandemic would have on the global economy. Jong-Wha Lee, of Korea University, and Warwick McKibbin, of the Australian National University, estimated the economic impact of the six-month SARS epidemic on the Asia-Pacific region at about $40 billion. In Canada, 438 people were infected and 43 died after an infected person traveled from Hong Kong to Toronto, and the Canadian Tourism Commission estimated that the epidemic cost the nation's economy $419 million. The Ontario health minister estimated that SARS cost the province's health-care system about $763 million, money that was spent, in part, on special SARS clinics and supplies to protect health-care workers. The SARS outbreak also had a substantial impact on the global airline industry. After the disease hit in 2003, flights in the Asia-Pacific area decreased by 45 percent from the year before. During the outbreak, the number of flights between Hong Kong and the United States fell 69 percent. And this impact would pale in comparison to that of a 12- to 36-month worldwide influenza pandemic.

    Kudos to Jim Hoge and Gideon Rose at Foreign Affairs for putting together this special section and scaring the bejeezus out of me.

    posted by Dan at 09:33 AM | Comments (15) | Trackbacks (1)

    Roger Cohen dreams of Eumerica

    Since I'm supposed to be advancing transatlantic understanding, here's one relevant link -- in his Globalist column for the International Herald Tribune, Roger Cohen dreams of a world where the best of Europe and America are combined. I'm pretty sure both Americans and Europeans would find something to object to in his section on politics and economics, but this section might actually appeal to all:

    Needless to say, the coffee in Eumerica would be Italian, the (absence of) speed limits and the cars German, the steaks and the refrigerators and the air-conditioning and the can-do outlook American, the fresh cream and the rock bands and the tolerance for eccentricity British, the herring Scandinavian, the climate Spanish, the college fees European, the duration of a college education (and most of the professors) American, the vodka Polish, the roads (and landscaping) French, the beer Czech, the chocolates Belgian and the national sports soccer and baseball.

    posted by Dan at 09:14 AM | Comments (22) | Trackbacks (1)

    Tuesday, June 21, 2005

    What's causing the trade deficit?

    Gosh darn it, if part of being a transatlantic fellow for the German Marshall Fund of the United States means going to northern Italy for the rest of this mid-June week to try and promote greater transatlantic understanding, then I have no choice but to do my duty. Blogging could be erratic over the next few days.

    Talk amongst yourselves. Here's a topic -- is the a massive current account deficit a function of the sizeable budget deficit, the low U.S. savings rate, currency manipulation, or a global savings glut?

    The global savings glut argument has been advanced by Ben Bernanke, who is likely to be the next Fed chairman. A quick precis of his argument: I will take issue with the common view that the recent deterioration in the U.S. current account primarily reflects economic policies and other economic developments within the United States itself. Although domestic developments have certainly played a role, I will argue that a satisfying explanation of the recent upward climb of the U.S. current account deficit requires a global perspective that more fully takes into account events outside the United States. To be more specific, I will argue that over the past decade a combination of diverse forces has created a significant increase in the global supply of saving--a global saving glut--which helps to explain both the increase in the U.S. current account deficit and the relatively low level of long-term real interest rates in the world today....

    [S]pecific trade-related factors cannot explain either the magnitude of the U.S. current account imbalance or its recent sharp rise. Rather, the U.S. trade balance is the tail of the dog; for the most part, it has been passively determined by foreign and domestic incomes, asset prices, interest rates, and exchange rates, which are themselves in turn the products of more fundamental driving forces. Instead, an alternative perspective on the current account appears likely to be more useful for explaining recent developments. This second perspective focuses on international financial flows and the basic fact that a country's saving and investment need not be equal in each period....

    That inadequate U.S. national saving is the source of the current account deficit must be true at some level; indeed, the statement is almost a tautology. However, linking current-account developments to the decline in saving begs the question of why U.S. saving has declined. In particular, although the decline in U.S. saving may reflect changes in household behavior or economic policy in the United States, it may also be in some part a reaction to events external to the United States--a hypothesis that I will propose and defend momentarily.

    One popular argument for the "made in the U.S.A." explanation of declining national saving and the rising current account deficit focuses on the burgeoning U.S. federal budget deficit, which in 2004 drained more than $400 billion from the national saving pool. I will discuss the link between the budget deficit and the current account deficit in more detail later. Here I simply note that the so-called twin-deficits hypothesis, that government budget deficits cause current account deficits, does not account for the fact that the U.S. external deficit expanded by about $300 billion between 1996 and 2000, a period during which the federal budget was in surplus and projected to remain so. Nor, for that matter, does the twin-deficits hypothesis shed any light on why a number of major countries, including Germany and Japan, continue to run large current account surpluses despite government budget deficits that are similar in size (as a share of GDP) to that of the United States. It seems unlikely, therefore, that changes in the U.S. government budget position can entirely explain the behavior of the U.S. current account over the past decade....

    The weakening of new capital investment after the drop in equity prices did not much change the net effect of the global saving glut on the U.S. current account. The transmission mechanism changed, however, as low real interest rates rather than high stock prices became a principal cause of lower U.S. saving. In particular, during the past few years, the key asset-price effects of the global saving glut appear to have occurred in the market for residential investment, as low mortgage rates have supported record levels of home construction and strong gains in housing prices.... The expansion of U.S. housing wealth, much of it easily accessible to households through cash-out refinancing and home equity lines of credit, has kept the U.S. national saving rate low--and indeed, together with the significant worsening of the federal budget outlook, helped to drive it lower. As U.S. business investment has recently begun a cyclical recovery while residential investment has remained strong, the domestic saving shortfall has continued to widen, implying a rise in the current account deficit and increasing dependence of the United States on capital inflows.

    According to the story I have sketched thus far, events outside U.S. borders--such as the financial crises that induced emerging-market countries to switch from being international borrowers to international lenders--have played an important role in the evolution of the U.S. current account deficit, with transmission occurring primarily through endogenous changes in equity values, house prices, real interest rates, and the exchange value of the dollar.

    Is Bernanke correct? This argument does jibe with recent research suggesting that reducing the budget deficit doesn't have a large impact on the trade deficit. However, for critiques of this argument, see Daniel Gross' link-rich essay in Slate, as well as cogent posts by Brad Setser and this post by Brad DeLong.

    My take -- this isn't an either-or question. Bernanke identifies a cause that has been underplayed by administration critics, but Bernanke himself makes it clear that he thinks domestic factors also play a role.

    Much more disconcerting is this section of Bernanke's speech:

    Because investment by businesses in equipment and structures has been relatively low in recent years (for cyclical and other reasons) and because the tax and financial systems in the United States and many other countries are designed to promote homeownership, much of the recent capital inflow into the developed world has shown up in higher rates of home construction and in higher home prices. Higher home prices in turn have encouraged households to increase their consumption. Of course, increased rates of homeownership and household consumption are both good things. However, in the long run, productivity gains are more likely to be driven by nonresidential investment, such as business purchases of new machines. The greater the extent to which capital inflows act to augment residential construction and especially current consumption spending, the greater the future economic burden of repaying the foreign debt is likely to be.

    A third concern with the pattern of capital flows arises from the indirect effects of those flows on the sectoral composition of the economies that receive them. In the United States, for example, the growth in export-oriented sectors such as manufacturing has been restrained by the U.S. trade imbalance (although the recent decline in the dollar has alleviated that pressure somewhat), while sectors producing nontraded goods and services, such as home construction, have grown rapidly. To repay foreign creditors, as it must someday, the United States will need large and healthy export industries. The relative shrinkage in those industries in the presence of current account deficits--a shrinkage that may well have to be reversed in the future--imposes real costs of adjustment on firms and workers in those industries.

    There is another danger -- the encouragement of speculative investment in housing in the U.S. and elsewhere. See the New York Times' David Leonhardt and Motoko Rich, as well as the Economist, for more on this.

    posted by Dan at 12:46 PM | Comments (19) | Trackbacks (1)

    Open Downing Street Memo thread

    A few commenters have asked me to post something on the Downing Street Memo(s). Truth be told, I missed this story while putting together the tenure file, and I've found with stories like this that it's tough to jump in in mid-wave. The memos already have their own Wikipedia entry, their own web site, and their own blog, so I'm not sure what I can add except my own initial reaction and a place for people to vent.

    [And how is that different from every other blog entry of yours?--ed. As opposed to the half-assed thoughts that make up your average blog posts, I'm only using a third of my ass on this one.]

    The big bad graf that everyone is harping on is this one from the :

    C [ Secret Intelligence Service Sir Richard Dearlove] reported on his recent talks in Washington. There was a perceptible shift in attitude. Military action was now seen as inevitable. Bush wanted to remove Saddam, through military action, justified by the conjunction of terrorism and WMD. But the intelligence and facts were being fixed around the policy. The NSC had no patience with the UN route, and no enthusiasm for publishing material on the Iraqi regime's record. There was little discussion in Washington of the aftermath after military action.

    According to

    The contents of the memos are shocking. The July 23, 2002 minutes detail how our government did not believe Iraq was a greater threat than other nations; how intelligence was packaged to sell the case for war to both Congress and the American public; and how the Bush Administration’s public assurances of "war as a last resort" were at odds with their privately stated intentions.

    My quick reaction:

    1) First, a defense of Blair: there's been a lot of chatter about how the memo demonstrates the minimal influence the Brits had on Bush. Actually, I'd argue that they did have significant influence on the thing Blair cared about the most: going to the UN. The memo says "NSC had no patience with the UN route," and yet Bush wound up going to the UN twice at the behest of Blair (tag-teamed with Colin Powell).

    2) Others have made much of the sentence that "There was little discussion in Washington of the aftermath after military action." While this has been a subject of serious venting on this blog, I'm not sure that this sentence is as devastating as people think. This took place in mid-2002, six months before anyone thought military action would take place. Some serious discussions should have been started around then, but blasting the administration for not having completely thought out the matter six months in advance seems a bit much. [What about not having thought out the matter even after the invasion?--ed. That's fair game, but it's also extraneous to these memos.]

    3) As I said back in late 2002, the fact that other countries were more active on the nuclear proliferation front does not mean that the use of force in Iraq was misplaced:

    Why, then, is the U.S. going after Iraq while “consulting” on North Korea? It’s not because pre-emption can’t apply to both countries; it’s because the power politics of the Middle East are radically different from those of the Far East. Invade Iraq, and no other great power’s sphere of influence is dramatically affected; the Middle East will remain an American bailiwick for quite some time. North Korea borders China and Russia; a pre-emptive attack against Pyongyang understandably ruffles more feathers.

    North Korea can be temporarily handed off to others -- Iraq can't. No other great power can influence Iraqi behavior, so it’s up to the United States to do what only the United States can do; threaten and use force. Geopolitics raises the costs of a pre-emptive U.S. attack on North Korea, but those same geopolitics also renders North Korea more vulnerable to multilateral pressure. On the Korean peninsula, Russia and especially China have incentives similar to ours; get the DPRK to give up its WMD capabilities. These countries value stability in the region and trade with South Korea. Chinese and Russian coercive pressure has forced North Korea into making concessions in the past. Coercion in the present won’t permanently solve the problem, but it will -- temporarily -- arrest North Korea’s nuclear program.

    This is how foreign policy works. Neoconservatives and Wilsonians expecting consistency will cry foul, but in a world where even American resources are finite, no foreign policy doctrine will ever emerge unsullied by foreign policy practice.

    4) The biggest charge is that the president shaped the intelligence to gin up an excuse for the war. On this point, Fred Kaplan's essay in Slate does a nice job of encapsulating what I think:

    The memos do not show, for instance, that Bush simply invented the notion that Iraq had weapons of mass destruction or that Saddam posed a threat to the region. In fact, the memos reveal quite clearly that the top leaders in the U.S. and British governments genuinely believed their claims....

    The implicit point of these passages is this: These top officials genuinely believed that Iraq had weapons of mass destruction—and that they constituted a threat. They believed that the international community had to be sold on the matter. But not all sales pitches are consciously deceptive. The salesmen in this case turned out to be wrong; their goods were bunk. But they seemed to believe in their product at the time.

    The administration was clearly wrong about the WMD threat -- but I think they thought they were right. They deserve any criticism they get about being wrong -- but they don't deserve the meme that they consciously misled the American people.

    So those are my thoughts. Feel free to contribute yours.

    UPDATE: Check out Tim Cavanaugh's take as well.

    posted by Dan at 01:00 AM | Comments (78) | Trackbacks (3)

    Monday, June 20, 2005

    Whither grade inflation?

    Both Alex Tabarrok and Kevin Drum flag Mark Thoma's recent research on grade inflation. The key paragraphs from Thoma's preliminary findings:

    There are two episodes that account for most grade inflation. The first is from the 1960s through the early 1970s. This is usually explained by the draft rules for the Vietnam War. The second episode begins around 1990 and is harder to explain. High school GPAs rise during the same time period (entering students at the UO had a high school GPA of 3.30 in 1992, 3.31 in 1996, 3.37 in 2000, and 3.47 in 2004 while SAT scores remained relatively flat, though they did increase modestly in math).

    My study finds an interesting correlation in the data. During the time grades were increasing, budgets were also tightening inducing a substitution towards younger and less permanent faculty. I broke down grade inflation by instructor rank and found it is much higher among assistant professors, adjuncts, TAs, instructors, etc. than for associate or full professors. These are instructors who are usually hired year-to-year or need to demonstrate teaching effectiveness for the job market, so they have an incentive to inflate evaluations as much as possible, and high grades are one means of manipulating student course evaluations.

    If Thoma's finding hold up, it would appear to be a classic case of economic incentives outweighing social norms.

    [Why?--ed. If asked to predict the pattern of grade inflation, I would have predicted the opposite trend. In my own experience, graduate students tend to be the harshest critics of undergraduate work, folloed by junior faculty (tenure track or not), followed by senior faculty. Mostly this is because, in my field, graduate students are first trained to be critics before they have to create their own work. One way this critical edge usually plays itself out is in grading others. However, Thoma's findings would suggest that this social effect is completely swamped by straight-forward material incentives. One question I would have, however, is whether this result holds at top tier research universities.]

    posted by Dan at 11:43 AM | Comments (17) | Trackbacks (1)

    Saturday, June 18, 2005

    A fun book meme

    Eszter Hargittai has tagged me with John Cole's book meme:

    Do you ever read those stuffy book lists you see circulating, like 'List your five most important books,' and think to yourself- no wonder these people are so damned boring. Some of the titles give me a damned headache, they are so dull. Knowing things is great, but fiction makes life bigger and better and in color.

    So, in the proud spirit of anti-intellectualism (just kidding), I am going to offer... the five books I liked enough as a teen/young adult to read again as an adult.

    Here are my five -- two of which might surprise Cole:

    1) Bloom County Babylon, by Berkeley Breathed. The first time I read Bloom County was in my high school freshman physics class. I was laughing so hard that even my teacher -- easily the most absent-minded and clueless instructor I ever had -- appeared to be vaguely aware of my behavior. I didn't care -- Bloom County was just too funny. Opus remains one of my favorite cartoon creations.

    2) Ender's Game, by Orson Scott Card. As a young adult, I found the notion that young children have the capacity for evil, brutality and politics to be utterly shocking. As the parent of young children, of course, I am not surprised in the least. This book is also worth re-reading because of Card's prescience in anticipating the Internet's role in political debate.

    3) Under the Frog, by Tibor Fischer. An episodic account of life in Hungary from 1944 to 1956. Sounds grim, but it's actually pretty funny -- the chapter with the eating contest always makes me laugh. This was an essential read when I was in Ukraine.

    4) Holidays in Hell, by P.J. O'Rourke. I first read this in my junior year in college, when I was studying in London for a semester. There are so many classic essays in this collection -- his voyage on a Soviet cruise ship sponsored by The Nation, his ramble through a Lebanon torn apart by civil strife, his first-person account of student protests in South Korea -- but the all-time classic remains his essay describing what it was like to be trapped in Europe immediately after the U.S. bombed Libya in 1986. O'Rourke, in venting his spleen at the end of that essay, managed to provide catharsis for every American who lived abroad and grew weary of defending their country of origin.

    O'Rourke also gets consideration for what he wrote in the preface:

    I wanted to know where trouble came from and why the world was such a lousy place. I wasn’t curious about natural disasters—earthquakes, mudslides, floods, and droughts. These are nothing but the losing side of the Grand Canyon coin toss. Okay, it's sad. Now what? I was curious about the trouble man causes himself and which he could presumably quit causing himself at the drop of a hat, or, anyway, a gun. I wanted to know why life, which ought to be an only moderately miserable thing, is such a frightful, disgusting, horrid thing for so many people in so many places.

    At a primal level, O'Rourke's rationale was certainly one reason why I got a Ph.D. in political science.

    5) Summer of 49, by David Halberstam. I stumbled onto this book one summer (naturally) and was completely hooked, despite the fact that Halberstam's Yankee bias comes through loud and clear. This book (and O'Rourke's) also nicely refutes John Cole's absurd claim that, "Nonfiction and history books may be good for facts, evidence, and showing relationships between people, places and events, but they in many cases tend to make the world smaller.... Fiction, on the other hand, makes the world bigger, more colorful, and more pleasant." No, good writing and a sense of narrative makes the world more alive. I could have easily given this spot to Kennedy's Profiles in Courage, Brinkley's Washington Goes to War, or Hofstadter's The American Political Tradition. However, Summer of 49 best conveys the sweet sadness of what it was like to be a Red Sox fan before 2004.

    Readers are encouraged to list their five. I'll tag Daniel Nexon, Megan McArdle, Tyler Cowen, Kevin Drum, and Laura McKenna.

    posted by Dan at 11:42 PM | Comments (19) | Trackbacks (1)

    Which editor at the Washington Post owes Blaine Harden money?

    I ask this question because a personal debt is the only possible explanation for why Harden landed a front-page story in today's WaPo about whether Starbucks is bankrupting America's highly educated youth:

    At a Starbucks across the street from Seattle University School of Law, Kirsten Daniels crams for the bar exam. She's armed with color-coded pens, a don't-mess-with-me crease in her brow and what she calls "my comfort latte."

    She just graduated summa cum laude, after three years of legal training that left her $115,000 in debt. Part of that debt, which she will take a decade to repay with interest, was run up at Starbucks, where she buys her lattes.

    The habit costs her nearly $3 a day, and it's one that her law school says she and legions like her cannot afford....

    "A latte a day on borrowed money? It's crazy," said Erika Lim, director of career services at the law school.

    Absolutely correct, it's a waste of money.... unless you believe that gourmet coffee generates efficiency improvements in human capital formation.... and student loans usually have lower-than-average interest rates.... and the income boost provided by law school massively outweighs the cost of Starbucks consumption.... and question whether after racking up over $115,000 in debt, it's really the extra thousand or two rom coffee consumption that affects career choices... and you believe Harden's underlying, unproven premise that too many students consume too many lattes.

    I could go on, or ask caffienne addict Brad DeLong or Starbuck enthusiast Virginia Postrel to go on, but I see that David Adesnik has already addressed this issue -- go check him out.

    posted by Dan at 09:45 PM | Comments (9) | Trackbacks (3)

    Friday, June 17, 2005

    How whirlpool does globalization

    Louis Uchitelle has a nice case study of how one U.S. multinational deals with global sourcing questions in the New York Times:

    Globalization is often viewed as a rootless process of constantly moving jobs to low-wage countries. But the issue is more complex, as illustrated by Whirlpool's worldwide operations. What attracts Mr. Fettig and other chief executives is a relatively new form of globalization that emphasizes first-rate centers of production and design in various countries - including the United States.

    Whirlpool's global network, a work in progress, includes microwave ovens engineered in Sweden and made in China for American consumers; stoves designed in America and made in Tulsa, Okla., for American consumers; refrigerators assembled in Brazil and exported to Europe; and top-loading washers made at a sprawling factory in Clyde, Ohio, for American consumers, although some are sold in Mexico.

    Read the whole thing. One interesting result is that despite the fact that globalization supposedly flattens the world, geography (in the form of shipping costs) and history (in the form of past investments) still matter a great deal.

    posted by Dan at 05:54 PM | Comments (4) | Trackbacks (0)

    A very important post about.... Katie Holmes


    For the past month I've been fighting my instinct to blog about the future Mrs. Tom Cruise. Even though the infamous Oprah video bothered me, and even though Cruise's comments about psychiatry in general and Brooke Shields in particular bothered me, my superego said this wasn't a blogworthy topic.

    With the announcement of their engagement at the bottom of the Eiffel Tower, I think the question needs to be asked -- what is it about this coupling that provokes people into creating elaborate Free Katie web sites?

    [Maybe it's the age gap--ed. If that was true, then Catherine Zeta-Jones' marriage to Michael Douglas should have provoked more outrage -- the gap in their ages is twenty years. Same with Warren Beatty and Annette Bening. Hell, I think the public's opinion of Ashton Kutcher went up after he started dating Demi Moore. Also, is anyone really shocked by a generational difference among celebrity couples anymore?]

    [Maybe it's the Scientology?--ed. Well, Scientology certainly has its critics. But then again, so do most other religions. And frankly, why should we care if Ms. Holmes decides to leave the Catholic Church? Besides, the furor over their relationship began before any discussion of conversion entered into the mix.]

    My hunch is that it's some syncretic combination of a bunch of factors, including the age gap, the Scientology, and the fact that, according to the Associated Press, "The former star of television's 'Dawson's Creek' grew up with a poster of Cruise on her bedroom wall and has said she grew up wanting to marry him." But I'm not sure.

    So I will put it to the readers -- what is it about this relationship that weirds so many people out?

    posted by Dan at 04:15 PM | Comments (42) | Trackbacks (4)

    Unsung examples of U.S. soft power

    A common meme among foreign affairs cognoscenti across the policy spectrum is that the U.S. needs to do more to improve its public diplomacy and "soft power" activities. This is a nice assertion to make -- I'm sure I've made it myself -- but it usually overlooks the fact that the U.S. government already has a lot of programs that try to advance this goal. We just don't hear about them all that often.

    The Chicago Tribune's Mary Ann Fergus has a front-page story on one of these programs:

    In a vanguard California high school, Nazifa Jafary organizes her digital portfolio on a laptop, writes poetry based on class skits and calls her teachers by their first names.

    Students eat, drink and break out in song during classes, and Nazifa studies it all with warm green eyes and a ready smile.

    Now, none of it surprises her. Not even the girl with the house key dangling from her loop earring.

    Nazifa is one of 13 girls and 26 boys from Afghanistan who have studied in U.S. high schools this year. They are the first group of foreign-exchange students from Afghanistan to come to America in more than 30 years, and their year here is coming to an end.

    Nazifa's serene expression changes as she considers describing her days as a sophomore at High Tech High International to the folks back home.

    "Even if I told them, they might think that is not school," Nazifa says, shaking her head and laughing. "They would think you would have gone somewhere else."

    Just as her new life begins to feel normal, Nazifa prepares for home. The students, here through a U.S. State Department program called Youth Exchange and Study, are to return to Afghanistan in late June....

    The students will become members of an alumni program, also sponsored by the State Department, in which they can share their experiences and work to improve their country. In August, another group of 40 Afghans, including 19 girls, will begin to study in America.

    Read the whole thing. One interesting and unanticipated side-effect of the program has been the effect it has had on the different Afghan representatives:

    While the program's main objective was to expose Afghan students to American ideals and education, it also built unity within the group, which represents six provinces in a nation with long-established divisions. To prepare for America, the group spent a month in Kyrgyzstan, where they bonded, regardless of gender or ethnic background, before going to places like Southern Pines, N.C., and Longview, Wash.

    Click here for more information on the State Department's Partnerships for Learning, Youth Exchange and Study: "During academic year 2004-2005, 450 students joined the program from: Afghanistan, Algeria, Bangladesh, Egypt, Indonesia, Iraq, Israel (Arab Community), Jordan, Kuwait, Lebanon, Malaysia, Morocco, Nigeria, Oman, Pakistan, Philippines, Syria, Tunisia, Turkey, West Bank/Gaza, and Yemen."

    posted by Dan at 09:43 AM | Comments (7) | Trackbacks (3)

    Thursday, June 16, 2005

    Projecting the demand for offshore labor

    Peter Marsh writes in the Financial Times about what the global market for service jobs will look like with the rise in offshore outsourcing:

    Growth in outsourcing of service jobs from rich countries is likely to be constrained because only one in seven workers in low-wage nations has the skills needed to work for multinationals, according to a McKinsey study published on Thursday.

    “Offshore employment [in services] will grow gradually, making no sudden impact on labour markets overall in developed countries,” says the report by the McKinsey Global Institute, a research arm of the strategy consultancy.

    It says the trend will have “little effect” on wages in rich countries, scotching the idea that offshoring could help hold down inflation in those nations....

    One reason for [the slow pace of offshoring] is multinationals' attitudes to recruitment, McKinsey says. The consultancy conducted 83 interviews with human resources managers working for multinationals and found that, presented with workers from emerging economies with appropriate academic qualifications, they were likely to reject 87 per cent on other grounds.

    The main reasons for the low likely take-up were poor language skills, “the low quality of significant portions of the educational system [in developing nations]” and cultural differences. Diana Farrell, director of the institute, said multinationals often failed to take up offshoring because of initial costs and other hurdles.

    Marsh has another story about the MGI report here. One interesting bit:

    Even though the supply of young people in low-wage economies with good educational qualifications is likely to increase substantially in the next decade, demand for employing them in their own nations in jobs transferred from rich countries is likely to be muted, the report says.

    On top of this, many young professionals in the 28 low-wage countries studied by the institute even though they may have university degrees lack the work-related experience and aptitude that foreign companies are looking for.

    “A lot of developing countries are churning out new graduates but not giving enough thought to the practical skills they will need if they are to work for multinational companies,” says Diana Farrell, director of the institute.

    The report indicates that even though many manufacturing jobs have migrated from rich countries to emerging economies over the past 10 years, due to cost-cutting pressure, the service sector is unlikely to see the same trend.

    This last point is stressed in the executive summary of the McKinsey report:

    At a country level, our observation is that labor markets in developed economies are experiencing and will continue to experience the trend toward offshoring as a slow, evolutionary change. It will have less impact on patterns of employment than the decline in manufacturing employment developed economies have experienced recently. In the United States, for example, the share of manufacturing jobs in overall employment fell by 11 percentage points to 21 percent in the 30 years to 2002. By contrast, the total number of service jobs in the United States that could in theory be filled remotely represents 9 percent of total current employment.

    The moderate impact and generally slow pace of offshoring will not soften the blow for those individuals in developed countries who do lose their jobs as a result. However, most are college graduates, and therefore likely to be more amenable to retraining than manufacturing workers. And in the United States, growth rates in both wages and jobs in the computer and data processing services sector, where offshoring is prevalent, are higher than in the economy as a whole.

    This jibes with data and analysis of the U.S. economy in recent years. In terms of employment, a glance at Bureau of Labor Statistics data shows that manufacturing has suffered far more than services (though in both cases the extent to which offshore outsourcing has been blamed has been much greater than its actual causal effect). Similarly, the figures for which service sector jobs are theoretically likely to be outsourced match up with Ashok Bardham and Cynthia Kroll's study from 2003.

    Click here to access McKinsery's three-part series of reports on the issue.

    Thanks to George Adair for the link.

    posted by Dan at 12:12 PM | Comments (27) | Trackbacks (0)

    The biggest threat to Moneyball

    With all of the debate over the business logic underlying Michael Lewis' Moneyball, there was a simple underlying assumption behind the book -- baseball teams that are successful on the field are also successful at the gate.

    Erik Ahlberg had a front-pager in yesterday's Wall Street Journal suggesting that this assumption doesn't necessarily hold for the Chicago White Sox:

    The Chicago White Sox have the best record in baseball, and their best chance in years of ending an 88-year drought of World Series championships. But here in one of America's great sports towns, hardly anyone seems to care.

    The team has tried almost everything to lure fans, including half-price tickets on Mondays, $1 hot dogs, and roving bands of cheerleaders who give free tickets to anyone who happens to be wearing a White Sox hat or jersey. Still, the Sox are averaging only 23,000 fans a game -- a tad more than half the capacity of their South Side home, U.S. Cellular Field. When the Sox recently faced another first-place team, the Los Angeles Angels, only about 20,000 showed up, despite delightful weather and a 2-for-1 ticket special.

    "I've always said that the PR department should just hand out tickets to the upper deck -- they'd at least get the money for parking," Sox pitcher Mark Buehrle says. Despite his 7-1 won-loss record, the 6-foot-2-inch lefthander says he rarely gets recognized around town....

    At the heart of the Sox's troubled wooing of Chicago lies a conundrum worthy of Yogi Berra: They haven't been good enough to win, and they haven't been bad enough to tap into baseball's romance with hapless losers....

    as of yesterday afternoon, the Sox led the American League's Central Division by five games. They've built their 42-21 record on strong pitching, speedy base-running and late-inning comebacks. Mirroring the South Side's rough-and-tumble image, the team consists mostly of scrappy, low-priced, no-name players.

    Some blame attendance problems on owner Jerry Reinsdorf, who threatened to move the team to Florida in the 1980s and was a leading hard-liner in the 1994 baseball strike, which began when the Sox happened to be in first place in their division.

    Some fans say Tribune Co., which owns the Cubs and two of Chicago's biggest media outlets -- the Chicago Tribune and WGN-TV -- slights the Sox in its coverage. Mike North, a local sports-radio host, says the Sox get the most ink when there's a crime near their ballpark. Tribune sports editor Dan McGrath says, "We try to be as fair and balanced as we can."

    Many people fault Comiskey Park, which one local columnist has described as having the feel of West Berlin during the Cold War. The park, which replaced the old Comiskey in 1991 and was renamed U.S. Cellular Field in 2003, is bordered by a rust-stained concrete wall, train tracks and an interstate highway. Some of Chicago's toughest housing projects loom beyond the outfield fence. There are only a few bars within walking distance....

    The Cell, as the team's ballpark is often called here, was one of the last efficient but unappealing fields built before stadiums in Pittsburgh, Milwaukee and San Francisco showed how to design a park that's equal parts ballfield and tourist attraction. In response to fan complaints, the White Sox have spent $80 million over the past five years to make their stadium cozier, adding shapely awnings, tearing off the uppermost rows and, for opening day next year, switching seats from blue to forest green.

    There are advantages to attending a Sox game. Bathroom lines are short and foul balls are easier to nab. But many Chicagoans prefer the cozy confines of historic Wrigley Field, with its ivy-covered outfield walls, hand-operated scoreboard and neighborhood teeming with saloons. Despite a mediocre performance most of the year, the second-place Cubs have played to 98% capacity, and nearly had a sellout April 23 when they lost to the lowly Pittsburgh Pirates in near-freezing temperatures with 25-mile-an-hour winds blasting off Lake Michigan.

    "Even if we win the World Series this year, Wrigley will still sell out next year," Sox first baseman Paul Konerko says. "But I can't guarantee we'd be sold out here."

    As it turns out, last night I took my father to a pretty exciting game at the Cell -- and would have to concur that the West Berlin answer makes the most sense. The park itself is actually quite nice -- it's not Wrigley, mind you, but it's fan-friendly. However, there is simply nothing (in the way of shops, restaurants, bars, etc.) surrounding the ballpark.

    UPDATE: As has been pointed out in the comments, there is a double irony in all of this -- most sabermetric analysts predicted that this year's White Sox team -- built on speed and pitching -- would crash and burn.

    posted by Dan at 12:54 AM | Comments (26) | Trackbacks (0)

    Wednesday, June 15, 2005

    It's a strange day in the blogosphere....

    Matthew Yglesias agrees with John Derbyshire about the fallout of Michael Jackson's trial.

    I agree with Derbyshire about the fallout from the results of Terry Schiavo autopsy.

    And Ana Marie Cox agrees with Derbyshire about homosexuality -- no, just kidding on that last one.

    But Wonkette does factor into the general cultural weirdness of my day by contributing "Wonkette on Wonkette" for the University of Chicago Magazine -- in which I discovered the following:

    [M]y first significant paycheck came from—believe it or not—Hustler, for a story of mine they published in Barely Legal magazine. I wrote it because a friend of mine was interested in getting actual women (as opposed to men pretending to write as women) writing for them. I wrote under the pseudonym Ana Marie Dix.

    After all this, hearing that Katie Holmes will convert to Scientology really doesn't faze me that much (though if you are still fazed, click here).

    posted by Dan at 03:32 PM | Comments (11) | Trackbacks (2)

    What to make of this corporate trend?

    Tobias Buck reports in the Financial Times on the growth of an interesting corporate trend:

    More than half of the world's biggest companies reveal details of their environmental and social performance, according to a KPMG survey that provides fresh evidence of business leaders' support for corporate social responsibility.

    The survey, published every three years, found that CSR reports for 2005 now cover a much wider range of issues, and that many companies also provide CSR information in their annual financial reports. Fifty-two per cent of the top 250 companies in the Fortune 500 list published separate reports on corporate social responsibility, up from 45 per cent three years ago.

    George Molenkamp, chairman of KPMG's sustainability services, said the growth of CSR reporting had proved the sceptics wrong. “When we started observing these issues, many people argued this was just a fashion that would disappear as soon as the economic situation got worse. But the economic situation has deteriorated, and still more and more companies are doing this.”

    Click here for the actual KPMG report. Among the interesting facts:

    What are the business drivers behind corporate responsibility? In their corporate responsibility reports almost 75 percent of companies state that these are economic reasons, while over 50 percent give ethical reasons and talk about integrity and values....

    The typical industrial sectors with relatively high environmental impact continue to lead in reporting. At the global level (G250), more than 80 percent companies are reporting in electronics & computers, utilities, automotive and oil & gas sectors, whereas at the national level (N100), over 50 percent of companies are reporting in the utilities, mining, chemicals & synthetics, oil & gas, oil & gas and forestry, paper & pulp sectors. Most remarkable is the financial sector which shows more than a two-fold increase in reporting since 2002....

    The survey analyzed how companies select the issues discussed in the reports and whether the users of the report are systematically consulted during the process. The survey revealed that report content is most commonly decided based on GRI [Global Reporting Initiative) guidelines (40 percent) with only a fifth (21 percent) mentioning stakeholder consultation. About a third of the companies (32 percent) invite stakeholder feedback on the report.

    If I'm working for an NGO devoted to corporate social responsibility, I'd be very, very happy with these results.

    [Why? These corporations are primarily reporting to advance their own self-interest--ed. Yes, and that's a self-perpetuating mechanism, which is much better that corporations acting against their own self-interest. This might be a case where NGOs have managed to reconstitute how corporations define their interests]

    posted by Dan at 12:43 AM | Comments (2) | Trackbacks (1)

    Activating the Kurdish SEP field

    Continuing the theme from my last post is this story by Steve Fainaru and Anthony Shadid in the Washington Post about what's going on in Kirkuk:

    Police and security units, forces led by Kurdish political parties and backed by the U.S. military, have abducted hundreds of minority Arabs and Turkmens in this intensely volatile city and spirited them to prisons in Kurdish-held northern Iraq, according to U.S. and Iraqi officials, government documents and families of the victims.

    Seized off the streets of Kirkuk or in joint U.S.-Iraqi raids, the men have been transferred secretly and in violation of Iraqi law to prisons in the Kurdish cities of Irbil and Sulaymaniyah, sometimes with the knowledge of U.S. forces. The detainees, including merchants, members of tribal families and soldiers, have often remained missing for months; some have been tortured, according to released prisoners and the Kirkuk police chief.

    A confidential State Department cable, obtained by The Washington Post and addressed to the White House, Pentagon and U.S. Embassy in Baghdad, said the "extra-judicial detentions" were part of a "concerted and widespread initiative" by Kurdish political parties "to exercise authority in Kirkuk in an increasingly provocative manner."

    The abductions have "greatly exacerbated tensions along purely ethnic lines" and endangered U.S. credibility, the nine-page cable, dated June 5, stated. "Turkmen in Kirkuk tell us they perceive a U.S. tolerance for the practice while Arabs in Kirkuk believe Coalition Forces are directly responsible."

    ....Abdul Rahman Mustafa, the Kurdish governor of Kirkuk province, said the reports of abductions were "not true," although prisoners were often transferred to other provinces to relieve crowding. Jalal Jawhar, who heads the Patriotic Union of Kurdistan in Kirkuk, said some suspects were transferred to prisons in Irbil and Sulaymaniyah with the "complete cooperation" of the U.S. military.

    "This is a normal procedure," Jawhar said.

    Maj. Darren Blagburn, intelligence officer for the 116th Brigade Combat Team in Kirkuk, acknowledged that Arab and Turkmen detainees were surreptitiously transferred to Kurdish prisons without judicial oversight. He denied any U.S. role in the transfers and said they were necessary because of crowding in Kirkuk's jails.

    Blagburn said he and other U.S. officers intervened with Kurdish leaders after discovering the practice nearly a month ago. He said he was "pretty sure" the practice had ended.

    posted by Dan at 12:23 AM | Comments (5) | Trackbacks (0)

    Tuesday, June 14, 2005

    Activating the Saudi SEP field

    If you study international relations, you quickly become very aware of the power of an SEP field:

    An SEP field can be erected on, or projected around a bizarre and unbelievable scene so that the unconscious minds of the observers instantly abdicate responsibility for its existence, assert that it's "somebody else's problem", and therefore don't perceive it at all.

    This Associated Press report by George Jahn makes me wonder just how many governments will be deploying an SEP field:

    Saudi Arabia is defying the United States, the European Union and Australia by resisting U.N. efforts to verify that it has no nuclear assets worth inspecting, according to a confidential EU document obtained by The Associated Press on Tuesday....

    While the Saudi government insists it has no interest in having nuclear arms, in the past two decades it has been linked to prewar Iraq's nuclear program and to the Pakistani nuclear black marketeer A.Q. Khan. It also has expressed interest in Pakistani missiles capable of carrying nuclear warheads, and Saudi officials reportedly discussed pursuing the nuclear option as a deterrent in the volatile Middle East.

    Over the past few weeks, the United States, the European Union and Australia urged the Saudis in separate diplomatic notes to either back away from the small quantities protocol or agree to inspections.

    But the EU briefing memo - made available to AP by a diplomat accredited to the agency who insisted on anonymity because he was not authorized to release it - reported Saudi unwillingness to bow to the Western pressure.

    It quoted the Saudi deputy foreign affairs minister, Prince Turki bin Mohammed bin Saud al-Kabira, as telling EU officials in Riyadh that his country would be "willing to provide additional information'' to the IAEA "only if all other parties'' to the protocol did the same.

    posted by Dan at 04:20 PM | Comments (14) | Trackbacks (1)

    Debating grand strategy

    Diplomatic History is "the sole journal devoted to the history of U.S. diplomacy, foreign relations, and national security," according to both its publisher and its editor. In a laudable attempt to generate topical scholarship, the journal has recently asked eminent historians to write about current American grand strategy from a historical perspective.

    The June 2005 issue has a roundtable on "The Bush Administration’s Foreign Policy in Historical Perspective," led off by Melvyn Leffler. His thesis:

    My argument is that there is more continuity than change in the policies of the Bush administration. Bush’s rhetoric and actions have deep roots in the history of American foreign policy. Understanding these roots is important because they help to illuminate the different trajectories that inhere in the American diplomatic experience. The possession of immense power and the belief in a universal mission have the potential to produce great good and great harm. Given this dynamic mix of power and ideals, there is no substitute for the exercise of good judgment.

    While stressing continuities, there has also been important change. Change, however, does not constitute a revolution. The change I see constitutes a recalibration in the complicated interaction between the assessment of threat, the calculation of interest, the enunciation of values, and the mobilization of power. In the history of U.S. foreign policy, threats, interests, ideals, and power always have had a dynamic and changing relationship with one another. At times of heightened threat perception, the assertion of values mounts and subsumes careful calculation of interests. Values and ideals are asserted to help evoke public support for the mobilization of power; power, then, tempts the government to overreach far beyond what careful calculations of interest might dictate. The genius of American foreign policy is the capacity to recalibrate the relationships between these variables; the nightmare of American foreign policy is that the relationships forever remain unstable, subject, as they should be, to changing perceptions of threat.

    The editors of Diplomatic History then did something really provocative -- they asked non-historians to comment on Leffler's hypothesis.

    This is a longwinded way of saying you can read my take on Leffler's hypothesis by reading my rejoinder, "Values, Interests, and American Grand Strategy." If you're pressed for time, here's the gist of it:

    First, it is far from clear that the dichotomy of ideas and interests is as stark as Leffler presents. Second, time is a powerful constraint on the push for value-heavy foreign policies. American grand strategies are constantly revised over time—and even during periods of heightened threat perception, the power of ideational factors in determining grand strategy wanes as uncertainty about the state of the world decreases. Third, the distinction between rhetoric and action needs to be stressed—and on the latter account, it is unclear just how value laden the Bush administration’s foreign policy really is.

    Click here for a summary of the issue -- other contributors include Robert Kagan, Walter L. Hixson, Carolyn Eisenberg, Arnold A. Offner, and Anna Kasten Nelson (plus a final reply from Leffler).

    More importantly, congratulations to Diplomatic History for generating a useful and policy relevant debate -- and for giving me the guilty pleasure of publishing outside my disciplinary boundaries.

    posted by Dan at 11:34 AM | Comments (11) | Trackbacks (3)

    Monday, June 13, 2005

    Why is GM still in business?

    Following up on my last post, there's an interesting question to be asked about General Motors -- why is it still in business?

    If that sounds heartless, it's not meant to be -- it's because I much of the past week's commentary sounds awfully familiar. For those who can remember the very early nineties, many were asking whether GM could survive -- at one point it had filed the biggest quarterly loss in the history of American business. GM may not be in great shape now -- but it's been 15 years and they're still the largest single producer of automobiles purchased in the United States.

    The Economist has a story that touches on this question:

    To both its admirers and its enemies, the most awe-inspiring feature of capitalism is its ruthless efficiency. In theory, poorly performing firms are shown no mercy. They are crushed and cast aside as fitter rivals come up with superior goods and services or cheaper methods of production. In fact, the system is nothing like as ruthless as it is cracked up to be. Plenty of suppliers fail to deliver goods on time. Lots of firms are slow to adopt new technology. Many managers are hopeless at motivating their staff. And badly run firms can survive for years, even in the same industry as state-of-the-art companies.

    All of this has long had economists pondering two questions. First, why are there such wide differences in the productivity of competing companies? Second, why do these differences persist, rather than being squeezed to nothing by the remorseless market? They ascribe some of the gaps to differences in the quality of capital equipment, or in workers' skills, or in the development and installation of new technology. But there has long been a suspicion that quite a lot of the discrepancy between fit and flabby firms has to do with the quality of management.

    The difficulty lies in putting a number on it. If economists are to explain company performance in terms of management practices, these must somehow be quantified. But how do you measure the “quality” of the layout of a shop floor, communication with workers or incentives for employees? An intriguing new study by Nick Bloom and John Van Reenen, of the London School of Economics, and Stephen Dorgan, John Dowdy and Tom Rippin, all consultants at McKinsey, attempts to do just that, and goes on to examine why badly run firms survive.

    The study is based on interviews with managers at more than 730 manufacturing companies (none of them McKinsey clients), ranging from 50 employees to 10,000, in America, Britain, France and Germany. The interviewees knew only that they were taking part in a “research” project, not that their management practices were being appraised.

    You can see the paper and the executive summary by clicking here. The takeaway points from the paper:

    1. Product market competition, at the national sector level, plays a key role in determining the level of management practice, with higher competition likely to increase the exit rate of badly managed firms so improving average management practices. We find little evidence for any additional “effort” effect of competition in getting managers to work ‘harder’

    2. Older firms, controlling for selection effects, have poorer management practices. This is consistent with the idea that new entrants find it easier to adopt the better management practices of the era they were founded than their older counterparts.

    3. Stronger labour-market regulation significantly impedes good management practice, particularly in firms with longer tenured employees. This suggests that regulation impedes the adoption of new management practices.

    Reason #1 would explain GM's persistence -- global competition has increased in the auto sector, but it's still not a model of perfect competition.

    [Hey, wasn't this done by management consultants?--ed. In part, yes, but their methodology seems sound.]

    posted by Dan at 04:52 PM | Comments (21) | Trackbacks (1)

    Sunday, June 12, 2005

    Who wins from GM's misfortunes

    The announcement by General Motors that it planned to 25,000 or more assembly-line jobs over the next few years would seem to advance the hypothesis that the United States suffers from expanding international trade.

    Gregg Easterbrook does a nice job of pointing out why that's not true in the New York Times today:

    The announcement last week that General Motors would cut 25,000 jobs and close several factories is yet another blow to the Goliath of automakers and its workers. But only if you work for G.M. is the company's decline a worry. For consumers, the decline can be seen as a symbol of healthy competition....

    In the 1950's, General Motors had 46 percent of the American auto market, Ford and Chrysler 44 percent, and everyone else combined just 10 percent. Today, G.M. sells 27 percent of the cars bought in America, Ford and DaimlerChrysler combined sell 32 percent, and other automakers add up to 41 percent.

    This means that the international competition, once trivial compared with General Motors, is now bigger than General Motors. Intense competition within the auto industry has resulted in steady improvements in the workmanship, performance, safety and design of cars, while holding down prices. That's the ideal outcome for consumers but not for General Motors, which, as the largest automaker, had the most to lose....

    General Motors also declined because of poor quality. But in this spring's influential J. D. Power & Associates automotive workmanship rankings, General Motors rose to No. 2, trailing only Toyota for overall quality. The Buick and Cadillac divisions ranked ahead of Mercedes.

    Yet even if a new generation is drawn to G.M.'s products, recovery of its former position seems unlikely. Other brands have improved, too: J. D. Power estimates that for the auto industry overall, manufacturing defects declined 32 percent since 1998 alone.

    There is also great pressure to hold prices down, which is bad for companies like G.M. with vast amounts of overhead. According to the consumer price index, new cars and light trucks today cost less in real-dollar terms than in 1982, despite having air bags, antilock brakes, CD players, power windows and other features either unavailable or considered luxury options back then.

    This means that during the very period that General Motors has declined, American car buyers have become better off. Competition can have the effect of "creative destruction," in the economist Joseph Schumpeter's famous term, harming workers in some places, while everyone else comes out ahead.

    [Yeah, but life is still bad for workers in the auto indistry, right?--ed.] Well, that depends on where you live. Easterbrook points out some other employment trends in the automobile sector beyond General Motors:

    [T]he same week that G.M.'s cut made the front pages, DaimlerChrysler announced it would invest $40 billion in North American operations over the next five years, including building a new assembly plant in Illinois and expanding factories in Ohio and Michigan.

    According to a study by the Association of International Automobile Manufacturers, non-Detroit automakers have in the last two years created 55,000 new factory jobs in the United States. Today just under 50 percent of the "foreign" cars sold in America are made here, with BMW, Honda, Nissan, Toyota and others operating large factories in Alabama, California, Indiana, Kentucky, Mississippi, Ohio and Tennessee. About 800,000 passenger vehicles are expected to be manufactured this year in Alabama, all for global brands; cars have become to the state's economy what cotton once was.

    AIAM's press release about that report also mentions, "When the number of jobs created by the new American automakers is combined with related new vehicle dealership employment, this sector of the industry has generated 1.8 million jobs in the U.S. economy."

    posted by Dan at 03:00 PM | Comments (29) | Trackbacks (0)

    Friday, June 10, 2005

    My colleges are in the news

    Tom Friedman received an honorary degree from my alma mater and -- of course -- manages to turn it into a column. This one highlights a lovely graduation tradition:

    Every year, in addition to granting honorary degrees, Williams also honors four high school teachers. But not just any high school teachers. Williams asks the 500 or so members of its senior class to nominate the high school teachers who had a profound impact on their lives. Then each year a committee goes through the roughly 50 student nominations, does its own research with the high schools involved and chooses the four most inspiring teachers.

    Each of the four teachers is given $2,000, plus a $1,000 donation to his or her high school. The winners and their families are then flown to Williams, located in the lush Berkshires, and honored as part of the graduation weekend....

    "Every time we do this, one of the [high school] teachers says to me, 'This is one of the great weekends of my life,' " said Williams's president, Morton Owen Schapiro. "But it is great for us, too. ...

    "When you are at a place like Williams and you are able to benefit from these wonderful kids, sometimes you take it for granted. You think we produce these kids. But as faculty members, we should always be reminded that we stand on the shoulders of great high school teachers, we get great material to work with: well educated, well trained, with a thirst for learning.

    "So we have been doing our little part to recognize that. ... We take these teachers, who are not well compensated and often underappreciated, and give them a great weekend."

    If you think these awards are not important for the teachers receiving them, then you don't know anything about teachers.

    I must also applaud President Schapiro (for whom I was a teaching assistant when he taight Economics 101) to for being savvy enough to lure Friedman out to Williamstown and getting some fine press for the institution in the New York Times.

    Meanwhile, my current institution of higher learning has also generated some press which reinforces all the good things you hear about the U of C. Scott Jaschik explains in Inside Higher Ed:

    To understand why professors need great libraries, says Andrew Abbott, “you need to think about an ape swinging through the trees.”

    Abbott is not an evolutionary biologist, but a sociologist at the University of Chicago. And to Abbott, a scholar in a library is just like a swinging primate. “You’ve got your current source, which is the branch you are on, and then you see the next source, on the next branch, so you swing over. And on that new hanging vine, you see the next source, which you didn’t see before, and you swing again.”

    When books aren’t browsable or instantly available, Abbott says, a scholar becomes the ape “with no branch to grab, and you are stopped, hanging on a branch with no place to go.”

    At far too many libraries, he says, that is becoming the norm. Many universities are boasting about how they are digitizing collections or building vast, off-site facilities to store millions of books. Even when those books are available within hours, Abbott says, that destroys the way scholars need to think — moving from source to source, not knowing which source they will stumble on.

    Abbott heads a faculty committee at Chicago in charge of guiding a mammoth expansion of the Joseph Regenstein Library there. Chicago recently embarked on a plan that will end up with Regenstein housing more volumes — 8 million — under a single roof than any other university library in the United States (the University of Illinois at Urbana-Champaign currently has the honor, with 7.5 million volumes in its main library). What’s more, none of the library’s collections will be moved off site, most monographs will be browsable, and miles of new stacks will be added in the expansion of 38,000 square feet....

    To understand how unusual the Chicago expansion is (Regenstein currently has only 4.5 million volumes), Harvard University offers an illustrative comparison. Harvard has more volumes in total — 15 million — than any American university. But Harvard has more volumes stored off-site (5.5 million) than in its single largest library, Widener Library, which has 3.5 million volumes.

    The non-bibliophile might ask, isn’t 3.5 million plenty?

    Judith Nadler, director of the library at Chicago, answers with an emphatic No, which isn’t surprising given that she supervises the purchase of 150,000 new volumes a year. “Collections within quick reach matter,” Nadler says. “Our research today is interdisciplinary. You don’t just go in one subject area. So the more you have under one roof, under one classification system, the easier it is, the better it is for scholars.”

    Nadler is quick to point out that Chicago is not Luddite with regard to the role of technology in helping libraries. Regenstein’s users, for example, have access online to full text of more than 40,000 journals. But she says that the hype about digitization ignores the limits technology offers, especially for research facilities with global subject matter.

    “I think the significance of what we are doing is enormous,” she says. “We have a very, very large and rich collection, and it is rich in area studies, in languages, rich in materials from all parts of the world — including many parts of the world where digitization will not come for a very long time in the future.” Chicago intends to step up its purchasing in such areas in the years ahead, Nadler says, creating a repository of materials that the best search engine couldn’t find.

    Thanks to alert reader B.K. for the pointer.

    UPDATE: The utility of searching the stacks contrasts nicely with James Falows' lament about computer searches in the New York Times:

    Search engines are so powerful. And they are so pathetically weak.

    When it comes to digging up a specific name, date, phrase or price, search engines are unstoppable. The same is true for details from the previously concealed past....

    Yet for anything but simple keyword queries, even the best search engines are surprisingly ineffective.

    Recently, for example, I was trying to track the changes in California's spending on its schools. In the 1960's, when I was in public school there, the legend was that only Connecticut spent more per student than California did. Now, the legend is that only the likes of Louisiana and Mississippi spend less. Was either belief true? When I finally called an education expert on a Monday morning, she gave me the answer off the top of her head. (Answer: right in spirit, exaggerated in detail.) But that was only after I'd wasted what seemed like hours over the weekend with normal search tools. If it sounds easy, try using keyword searches to find consistent state-by-state data covering the last 40 years.

    posted by Dan at 10:53 PM | Comments (4) | Trackbacks (1)

    Economists are flummoxed

    When Alan Greenspan can't explain the bond market, I start to get very, very nervous.

    Among the biggest surprises of the past year has been the pronounced decline in long-term interest rates on U.S. Treasury securities despite a 2-percentage-point increase in the federal funds rate. This is clearly without recent precedent. The yield on ten-year Treasury notes, currently at about 4 percent, is 80 basis points less than its level of a year ago. Moreover, even after the recent backup in credit risk spreads, yields for both investment-grade and less-than-investment-grade corporate bonds have declined even more than Treasuries over the same period.

    The unusual behavior of long-term interest rates first became apparent almost a year ago. In May and June of last year, market participants were behaving as expected. With a firming of monetary policy by the Federal Reserve widely expected, they built large short positions in long-term debt instruments in anticipation of the increase in bond yields that has been historically associated with a rising federal funds rate. But by summer, pressures emerged in the marketplace that drove long-term rates back down. In March of this year, market participants once again bid up long-term rates, but as occurred last year, forces came into play to make those increases short lived. There remains considerable conjecture among analysts as to the nature of those market forces.

    Of course, what Greenspan is sure about doesn't make me feel any better:

    Our household saving rate remains negligible. Moreover, modest, if any, progress is evident in addressing the challenges associated with the pending shift of the baby-boom generation into retirement that will begin in a very few years. And although prices of imports have accelerated, we are, at best, in only the earliest stages of a stabilization of our current account deficit--a deficit that now exceeds 6 percent of U.S. gross domestic product (GDP).

    Now part of the reason savings is at a historic low is that asset prices have been rising so dramatically over the past ten years -- equities in the late nineties and housing now. So it's tough to say that the American consumer is behaving irrationally -- why save income when your assets are appreciating at a healthy clip?

    Tyler Cowen speculates on whether this is true and is just as flummoxed as Greenspan is about the bond market:

    So what is the problem? Does liquifying real assets somehow bring excess leverage to the economy? I don't see why. Or does borrowing against real assets lead to a later switch toward consumption, thereby necessitating transformation costs? Each individual thinks he has a more liquid savings position than is the case; borrowing is cheap but society as a whole must incur reallocation costs to convert the real capital into consumption. But how big a factor can this be?

    All seems fine. Yet in my neo-Austrian gut I cannot bring myself to think as capital gains as analytically equivalent to abstinence out of income.

    I file this one under the category of "macroeconomic problems I've been thinking about for twenty years but haven't made much progress on."

    Now is normally the point in the post when I give you my take on things. Not this time -- I'm just as stumped as Cowen and Greenspan on these questions.

    posted by Dan at 07:45 AM | Comments (18) | Trackbacks (0)

    Thursday, June 9, 2005

    Spin better!!!

    One of my favorite Simpsons moments is when Homer is watching a TV set showing Prairie Home Companion’s Garrison Keillor -- at which point he bangs on the set and says, "Be funnier!!"

    That moment came to my head when I read this Jackie Calmes report in the Wall Street Journal that this year's budget deficit is smaller than projected:

    While the administration and Congress won't officially revise their separate annual deficit projections until midsummer for fiscal 2005, which ends Sept. 30, government and private-sector analysts agree the shortfall is more likely to be about $350 billion, rather than the $427 billion the administration forecast in January. Treasury Secretary John Snow is expected to carry the tidings to London for this weekend's summit of finance ministers from the Group of Eight leading nations, who have harped on the growing American debt and foreign borrowing.

    Administration officials say the improved fiscal picture suggests the president is on track to deliver more quickly on a campaign promise to cut the annual deficit in half as a share of the total U.S. economy, to 2.3% of gross domestic product. (By comparison, last year's $412 billion deficit was 3.6% of GDP.) Private analysts don't put much stock in that promise, however; even if Mr. Bush claims victory, the nation still faces long-term deficit problems. Overall federal spending is increasing, including for war costs. More broadly, spiraling health-care costs for Medicare and Medicaid programs, including a prescription-drug benefit for seniors starting next year and a wave of baby-boomer retirements after 2008, will drive federal deficits to unsustainable sizes....

    "With the president's focus on spending discipline, we are seeing positive signs for the American economy, and for the federal government's balance sheet," Budget Director Joshua Bolten said in a statement. (emphasis added)

    Why did I think of that moment? Because Bolten's comment was so absurd that I was tempted to bang the computer and yell "Spin better!!"

    Finding out that the annual budget deficit is 20% smaller than previously should be manna from heaven for the administration. And there's an excellent line for the explanation -- the administration's policies have fostered faster-than expected economic growth which has increased tax revenues. So if I were working for the administration, I'd say, "With the president's focus on growing the economy, we're seeing an improved balance sheet for the government." That's spin in the best sense -- accentuating your positive attibutes.

    What I wouldn't mention is "the president's focus on spending discipline," which brings up two unformortable facts: a) this administration has no spending discipline; and b) combine that with a Congress that loves to spend as well and you've got widening deficits for some time.

    posted by Dan at 10:20 AM | Comments (19) | Trackbacks (2)

    Wednesday, June 8, 2005

    Can North Korea overtake South Africa?

    Via Oxblog's Patrick Belton, I see that North Korea has managed to get itself sanctioned by another international organization:

    Political rivals Japan and North Korea are set to play in a World Cup football qualifier in an empty stadium in Bangkok.

    The two teams will take to the field on Wednesday night (1030 GMT, 0630 ET) amid boosted security measures that will ensure no North Korean or Japanese fans are in sight.

    In a rare move, the World Cup governing body FIFA moved the game from Pyongyang to Bangkok to punish North Korea after unruly crowd behavior during the country's game against Iran in Pyongyang in March.

    This step by FIFA -- and North Korea's ongoing campaign for Rogue State of the Year -- got me to wondering: which country in the world has been the most popular target of sanctions approved by an international organization?

    As someone who's written a bit about economic sanctions, I confess to not having a definitive answer -- to my knowledge, no one has ever researched this question. Certainly North Korea has been moving up in the ranks -- the UN (back during the Korean War), the IAEA in 1994, and now FIFA.

    However, I'd still be willing to bet that the answer to this question is apartheid-era South Africa. At one point or another, the United Nations, Organization for African Unity, European Economic Community, South African Development Community, and the Commonwealth imposed sancdtions -- not to mention the International Olympic Committee and FIFA.

    The hard working staff here at will be on top of this issue to see if and when North Korea can overtake the rogue state of the twentieth century. I hjave no doubt that the regime in Pyongyang is capable of pulling this off.

    posted by Dan at 04:13 PM | Comments (7) | Trackbacks (0)

    The costs and benefits of military primacy

    I've blogged in the past about the security benefits of American military hegemony -- namely, that when one state holds military primacy, the incentives for other countries to engage in arms races and military advanturish declines. One obvious measure of these kind of security benefits is the reduction of aggregate military expenditures. As Gregg Easterbrook noted two years ago:

    Annual global military spending, stated in current dollars, peaked in 1985, at $1.3 trillion, and has been declining since, to $840 billion in 2002. That's a drop of almost half a trillion dollars in the amount the world spent each year on arms.

    Soooo..... I was a bit chagrined to read this AP report that says global defense spending is on the rise:

    Global military spending in 2004 broke $1 trillion for the first time since the Cold War, boosted by the U.S. war against terror and the growing military budgets of India and China, a Swedish think tank said Tuesday.

    Led by the United States, which accounted for 47% of military expenditures, the world spent $1.035 trillion, equal to 2.6% of global gross domestic product, the Stockholm International Peace Research Institute (SIPRI) said.

    The world total grew 6% in 2004 from the previous year, the institute said. Adjusted for inflation, the total is only 6% lower than its Cold War peak in 1987-88, said researcher Elisabeth Skons, who coauthored the annual report.

    Sounds like a strike against the theory of hegemonic stability. However, if you click on the SIPRI report and go to Chapter Eight, you find out the cause of the increase:

    The major determinant of the world trend in military expenditure is the change in the USA, which makes up 47 per cent of the world total. US military expenditure has increased rapidly during the period 2002–2004 as a result of massive budgetary allocations for the ‘global war on terrorism’, primarily for military operations in Afghanistan and Iraq. These have been funded through supplementary appropriations on top of the regular budget. The supplementary appropriations for this purpose allocated to the Department of Defense for financial years 2003–2005 amounted to approximately $238 billion and exceeded the combined military spending of Africa, Latin America, Asia (except Japan but including China) and the Middle East in 2004 ($193 billion in current dollars), that is, of the entire developing world. Thus, while regular military spending has also increased in the USA as well as in several other countries and regions, the main explanation for the current level of and trend in world military spending is the spending on military operations abroad by the USA, and to a lesser extent by its coalition partners.

    What are the normative implications of this? We go back to the AP report:

    "It's hard to put the United States in the center, or blame everything on the U.S.," said Alyson Bailes, the think tank's director. "Despite all the ongoing problems, the state of world security is a great deal better than it was in the Cold War." (emhasis added)

    posted by Dan at 12:15 PM | Comments (57) | Trackbacks (2)

    The OECD's recipe for economic growth

    Psst... hey, buddy -- want to make some more money?

    Chris Giles writes in the Financial Times on the Organization for Economic Cooperation and Development's latest working paper:

    Workers in advanced economies could gain the equivalent of a full year's income over their working lives if countries increased competition in their domestic economies and reduced trade barriers, the Organisation for Economic Co-operation and Development said on Tuesday.

    The international body charged with improving the economic performance of its 30 member countries came down firmly on the side of market liberals after examining the effects of restricting competition.

    “At a time when Europe may be losing momentum in its drive to open product and services markets, the study shows that the economic rationale for such liberalisation remains very strong,” said Jean-Phillippe Cotis, the organisation's chief economist.

    You can access the OECD's summary here, and the full report here. By barriers, the authors are referring to tariffs, limits on foreign direct investment, and product market regulation. The bulk of the gains come from regulatory reforms.

    How big are the benefits? This is from the report's cover letter:

    The benefits to be expected from such a liberalisation exercise are... substantial:

  • In the United States, GDP per capita would increase by 1% to 2.5%;

  • In Europe, GDP per capita would be boosted by between 2 to 3%, which is equivalent to two years of growth. Compared with the United States, gains would be stronger in Europe, reflecting its tighter initial stance of regulation.

  • Spill-overs outside the European Union and the United States may be large: 2% for Canada and Mexico, 1.5% for Turkey, Japan and Central Europe....
  • An important lesson of this work is that product market deregulation rather than tariff lowering would provide the main source of economic gains. This finding should not come as a surprise, however, knowing that tariff and non-tariff barriers are now rather small while domestic product market regulations remain often substantial, especially so in the services sector.

    The magnitude of estimated output gains look very significant to us but they may seem too modest to some observers. A first answer would be that our estimation of the gains of liberalisation are indeed very prudent. In this exercise, we have only assessed the “one-shot”or “static gains”, coming from greater international trade specialisation and better allocation of resources. But many would argue that liberalisation produces “dynamic gains”, that is more open product markets stimulate research, innovation and technical progress on a sustained basis. Empirical research indeed suggests that these gains could be quite large although their estimated magnitude is still surrounded by substantial margins of uncertainty.

    Read the whole thing.

    UPDATE: Robert Tagorda at Outside the Beltway has some more thoughts on the OECD report.

    Meanwhile, Gary Hufbauer and Paul Grieco's op-ed in the Washington Post yesterday makes a similar point about the past benefits of economic openness:

    Using four different methods, we estimate that the combination of shrinking distances--thanks to container ships, telecommunications and other new technologies--and lower political barriers to international trade and investment have generated an increase in U.S. income of roughly $1 trillion a year (measured in 2003 dollars), or about 10 percent of gross domestic product. This translates to a gain in annual income of about $10,000 per household.

    Unfortunately for the cause of continued liberalization, Americans do not receive this money as a check marked “payoff from globalization.” Instead, the payoff is hidden within familiar channels: fatter paychecks, lower prices and better product choices (compare the telephones available now with the standard black model of 1980).

    Nevertheless, each of our four methods uncovers a large payoff. First, we parse international data that correlate the expansion of international trade with economic growth. This shows that the increase in U.S. income sparked by more intense trade equates to 13.2 percent of GDP. In the second method, we calculate how lower tariffs stimulate U.S. productivity through competitive forces and bring greater product choices to U.S. producers and consumers. The estimate for these benefits comes to 8.6 percent of GDP. Third, we draw on a computable general equilibrium model to suggest how today's economy would react to the restrictive Smoot-Hawley trading environment of the 1930s. That exercise indicates an estimate of 7.3 percent more in GDP from liberal trade. Finally, we calculate the productivity benefits arising from use of imported components and find a benefit of 9.6 percent of GDP. While none of the four estimates is perfect, the broad result is clear: The benefits of trade and investment liberalization are positive and large.

    Given the large gains from past liberalization, and today's low tariffs and modest investment barriers, skeptical commentators might say, "Been there, done that." But our estimates of future policy liberalization alone (excluding likely benefits from better communications and transportation) indicate that a move from today's commercial environment to global free trade and investment could produce an additional $500 billion in U.S. income annually, or roughly $5,000 per household each year. Much of the benefit would come from sectors of the economy that were effectively ignored during earlier rounds of liberalization: services, agriculture, transportation and trade with developing countries.

    [But the costs... what about the costs!!--ed. Ah, yes, they measure that too:

    Surveying several estimates, we arrive at a middle-of-the-road figure of roughly 225,000 trade-related job losses per year. Most dislocated workers find new jobs in six months, many far sooner; but some are unemployed for an extended period. Even workers who are re-employed may face significant pay cuts. Taking these features into account, we estimate that the lifetime costs of a year's worth of trade-related job losses is roughly $54 billion, about $240,000 per affected worker. This is a huge loss on a personal level, but only about 5 percent of the annual national gains from liberalization. (emphasis added)

    Click here to read more.

    posted by Dan at 12:36 AM | Comments (16) | Trackbacks (3)

    Tuesday, June 7, 2005

    492326* words later....

    Readers may have detected a somewhat harried nature to my blog posts of the last few weeks. The reason is that I was preparing to hand in my tenure file -- the packet of information that is sent to external referees asked to write about my case. A tenure file consists of:

    A) Updating my cv;

    B) Compiling hard copy versions of everything that's mentioned in the cv that I want my betters in the field to actually read with a careful eye (i.e., no "occasional publications," op-eds, or blog posts);

    C) A statement that encapsulates the underlying themes of my research and teaching to date.

    If this sounds like all it would require is a cloistered weekend and some toner, well, that's what I thought six weeks ago. I then discovered, however, that writing a statement of research and teaching is the equivalent of writing a ten page cover letter saying, "Look at me!! LOOK AT ME!!!" You'd think with my blog and everything this would be easy to write, but you'd be wrong.

    Then I decided that this would be an excellent opportunity to revise my book manuscript and polish all of the draft articles I have in the wings. Not surprisingly, this took a bit longer than expected, and distracted me a hell of a lot more than my lovely wife expected.

    I handed in the file this morning. As I sank back into my chair, I began to wonder just how many words I had printed out. In a fit of sheer bloody-mindedness, I opened up every document, did a word count, and added it all up. Which is where I got the title to this post.

    [What's with the asterisk?--ed. Because that word count, while accurate, is nevertheless inflated. Like every other political scientist, I publish my scholarly work in both article and book form. Many of my articles are simply book chapters that have been hived off into stand-alone essays. Similarly, I have sometimes published more accessible forms of my research in policy journals. So while the word count is pretty high, there's a lot of duplication. How much duplication?--ed. I'd say that buried beneath that word count are about three big ideas, four pretty big ideas, three smaller ideas, and some nice moments of criticism.]

    Anyway, it's off my desk and out of my hands -- so I'm now off to do some serious drinking.

    After the whole process is over -- i.e., in early 2006 -- I might be motivated to post something about the political economy of getting tenure. For now, however, political scientists should click over to Henry Farrell's informative post about how to get your conference paper accepted for the American Political Science Association annual meeting.

    posted by Dan at 03:25 PM | Comments (10) | Trackbacks (1)

    Monday, June 6, 2005

    What I got out of Mark Felt this week

    The orgy of commentary and journalism produced by the revelation that W. Mark Felt was Deep Throat has been staggering -- and mostly unproductive. The revelation that a key source for Woodward and Bernstein was the number two man in the FBI and a J. Edgar Hoover loyalist has produced a lot of bullshit -- and in the case of Pat Buchanan, outright lies.

    So has there been any commentary of value to be gleaned from this revelation? I've seen two things worth reading -- though both of them are only tangental to Felt's coming out party. Surprisingly enough, they're written by two people who probably don't get along very well -- David Brooks and Sasha Issenberg (click on this Noam Scheiber essay to find out why they don't get along).

    Brooks does a great riff off of Bob Woodward's first person account of how he first met and got to know Felt. This allows him to talk about the topic he covers so well -- what aspiring young people do to get ahead:

    Bob Woodward... was in the midst of the starting-gate frenzy.

    Places like Washington and New York attract large numbers of ambitious young people who have spent their short lives engaged in highly structured striving: getting good grades, getting into college. Suddenly they are spit out into the vast, anarchic world of adulthood, surrounded by a teeming horde of scrambling peers, and a chaos of possibilities and pitfalls. They discover that though they are really good at manipulating the world of classrooms, they have no clue about how actual careers develop, how people move from post to post.

    And all they have to do to find their way amid this confusion is to answer one little question: What is the meaning and purpose of my life?

    ....Entering the world of the Higher Shamelessness, they begin networking like mad, cultivating the fine art of false modesty and calculated friendships. The most nakedly ambitious - the blogging Junior Lippmanns - rarely win in the long run, but that doesn't mean you can't mass e-mail your essays for obscure online sites with little "Thought you might be interested" notes....

    This is now a normal stage of life. And if Bob Woodward could get through something like it, perhaps they will too.

    For that is the purpose of Watergate in today's culture. It isn't about Nixon and the cover-up anymore. It's about Woodward and Bernstein. Watergate has become a modern Horatio Alger story, a real-life fairy tale, an inspiring ode for mediacentric college types - about the two young men who found exciting and challenging jobs, who slew the dragon, who became rich and famous by doing good and who were played by Redford and Hoffman in the movie version.

    As you would expect, one Junior Lippman takes the time to respond -- but if you ask me, Brooks' point has attracted too much attention for it to be dismissed lightly -- see Elizabeth Bumiller and Tim Noah for more on this theme.

    Issenberg, meanwhile, has a great piece in Slate about how Felt's revelations bring to mind an excellent Watergate movie -- and it ain't All the President's Men:

    Unlike the movie that made Woodward and Bernstein into matinee idols, the 1999 comedy Dick stripped Watergate of its cloak-and-dagger and left it in pigtails....

    Superficially, Dick was a spoof on All the President's Men. In place of the earlier film's battle between two grand Washington institutions, Dick renders the White House and the Washington Post as sitcom offices. Heroic Woodward is played not by dashing Redford, but by Will Ferrell, with the halting inanity he brings to every role.

    But Dick was really a riposte to Oliver Stone's 1991 epic JFK, which trolled every nook and cranny of Kennedy-assassination conspiracy. In exploring each little question raised by the events in Dallas (including many that are settled, in the eyes of every serious scholar), Stone seeks out the most abstrusely nefarious explanation possible....

    Our disenchantment with Deep Throat follows a common American narrative: What begins as conspiracy is eventually reduced to camp. Dick sends up what Richard Hofstadter in 1964 identified as "the paranoid style in American politics." The movie doesn't make light of Watergate—the gravity of Nixon's crimes isn't questioned, and his young friends are shocked by his meanness, even if he doesn't come across as diabolical—as much as it spoofs the narrative impulses that drew us to Watergate as a tale. Both Dick and the recent Deep Throat unveiling leave us to reckon with the dissonance of Watergate's importance and its minor-league cast of characters. With JFK, Oliver Stone tried to invent a story that, in its sprawling scope, could be as big as the death of a president—a counterpoint to a Warren Commission version written in a language of narrowing: lone gunman, single-bullet theory. In Dick, both heroes and villains come only in size small: They are all central-casting buffoons.

    Hmmm.... paranoid style in American politics infecting public commentary... yes, that sounds familiar. Well, at least Felt's revelations will put the conspiracy meme to rest on this question. Oh, wait....

    posted by Dan at 06:08 PM | Comments (20) | Trackbacks (0)

    When graduate students discover the Internet

    "Alan Mendelsohn" has a pretty funny first-person account in the Chronicle of Higher Education about what happens when a literature department at "a major research university on the West Coast" sets up a blog for grad students. The results are not pretty at all. One example:

    Our discussion group was no longer a safe place. That nascent fear was borne out in full a year later, when our department was interviewing candidates in two areas, Renaissance literature and 20th-century literature by minority authors. Marsha urged everyone to attend the job talks and voice an opinion about the hiring process. "You can have an influence on the hiring process, even if it's not your field," she wrote. She feared that a reactionary candidate would be hired for the Renaissance job, and warned us that the department's conservative professors might hijack the other search by hiring the "Clarence Thomas of Minority Lit."

    Within 10 minutes of her message, Dave had pounced. It was hard enough being a specialist in minority literature, he wrote. "We don't need to be condescended to as well." He angrily questioned why a minority hire must always be associated with tokenism and incompetence. He was galled by Marsha's "unconscious (dare I say) racism."

    Here we go again, I thought: We won't see the last of this for several hours. I was wrong. It would be days.

    In a bizarre performance, Brian vaulted into the discussion to announce that Dave was "the boy who cried racism." Neither Dave nor Marsha wanted a reactionary hire, so what were they arguing about? "We are all on the same fuckin' side," Brian announced: "Diversity is good, hegemony is bad," and if Dave or his supporters felt like protesting, Brian admonished, "bite your tongue."

    Now that's public consensus with a vengeance. (And a tire iron.) Students' network connections had been sparking, but the toss of that oil drum led to an all-out conflagration, bringing out people's worst sides.

    Postings from what seemed like half the students in the department alternately demanded that Dave or Brian apologize, and those postings were themselves attacked as "bad faith." A South Asian woman told a Jewish man that he could have no conception of what racism was. The debate began to develop "threads" that had little to do with the original Clarence Thomas figure of speech: One student emphasized that no charge of racism had ever, in fact, been made -- Dave had attacked the way in which Marsha's rhetoric had been "interpellated" by racist discursive formations, not Marsha herself.

    It was during the follow-up responses that the term "postmodern wanker" was first used, to be deployed by both factions in various ways over the next week.

    Ah, the academy -- almost everyone on the same side of the ideological fence, and nary an agreement in sight.

    "Mendelsohn" concludes that maybe the Internet is not the nirvana of Habermasian discourse, but the academic version of crack:

    Where online environments are concerned, we may not kill each other, but we'll probably end up suing. You can spend so much time drafting a criticism of a theoretical trend that you're bored with the essay by the time it appears in a peer-reviewed journal, but at least you've produced something more lasting than a blog-delivered, "You think you're so sympathetic to the oppressed, Dr. New Historicist, but when it comes to labor activism in the community, you're a no-show."

    Wherever these new technologies take us, I've certainly started living by my own set of rules -- e.g., no postings unless it's for a summer sublet. Spending time on the Internet may well be an academic's version of watching too much of the boob tube, and I'm going to limit myself to one hour a day.

    "Alan Mendelsohn", by the way, is a pseudonym -- and I can't say I blame him. But I will always be grateful to him for the introduction of "postmodern wanker" into my lexicon.

    posted by Dan at 10:45 AM | Comments (12) | Trackbacks (3)

    Sunday, June 5, 2005

    Giving a whole new meaning to "the chosen people" means

    This Economist story makes me very, very uncomfortable:

    The idea that some ethnic groups may, on average, be more intelligent than others is one of those hypotheses that dare not speak its name. But Gregory Cochran, a noted scientific iconoclast, is prepared to say it anyway. He is that rare bird, a scientist who works independently of any institution....

    Together with Jason Hardy and Henry Harpending, of the University of Utah, he is publishing, in a forthcoming edition of the Journal of Biosocial Science, a paper which not only suggests that one group of humanity is more intelligent than the others, but explains the process that has brought this about. The group in question are Ashkenazi Jews. The process is natural selection.

    Ashkenazim generally do well in IQ tests, scoring 12-15 points above the mean value of 100, and have contributed disproportionately to the intellectual and cultural life of the West, as the careers of Freud, Einstein and Mahler, pictured above, affirm. They also suffer more often than most people from a number of nasty genetic diseases, such as Tay-Sachs and breast cancer. These facts, however, have previously been thought unrelated. The former has been put down to social effects, such as a strong tradition of valuing education. The latter was seen as a consequence of genetic isolation. Even now, Ashkenazim tend to marry among themselves. In the past they did so almost exclusively.

    Dr Cochran, however, suspects that the intelligence and the diseases are intimately linked. His argument is that the unusual history of the Ashkenazim has subjected them to unique evolutionary pressures that have resulted in this paradoxical state of affairs.

    Read the whole article to understand the explanation of Cochran et al. Here's a link to their working paper on the topic.

    The thing is, Cochran has also advanced the idea that, "homosexuality is caused by an infection," which is just strange.

    posted by Dan at 04:58 PM | Comments (23) | Trackbacks (0)

    Saturday, June 4, 2005

    June's Books of the Month

    If last month's selection theme was books written by U of C faculty, this month's theme is threefold:

    1) Books about suicide terrorism;

    2) Books with the word "Dying" in the title;

    3) Books that thank me in the acknowledgements.

    The international relations book for this month is my colleague Robert Pape's Dying to Win : The Strategic Logic of Suicide Terrorism. Pape has collected data on all events of suicide terrorism over the past three decades and distills from that data several interesting hypotheses and policy recommendations. [Why not go into more depth?--ed. Because I've blogged about Pape's work on this subject before -- click here, here, and here for my thoughts about Pape's argument, methodology, and policy pronouncements.]

    The general interest book for the month is... on the same topic -- it's Mia Bloom's Dying To Kill: The Allure of Suicide Terror. In contrast to Pape, Bloom conducted field research in conflict zones where suicide terrorism took place -- including Israel and Sri Lanka. The assessment from Publisher's Weekly:

    An "explanation of the unexplainable," this lucid and comprehensive study of the historical roots and contemporary motivations of suicide terror is a major study. Bloom's historical range is formidable; the first eight chapters are a marvel of historical compression, moving from the Zealots of first-century Judea to the Japanese kamikaze of WWII within a few bleak but instructive pages. Bloom stresses that suicide bombings can only thrive with the implied consent of an aggrieved population, which can be withdrawn: the Omagh bombing of 1998, for example, was a disaster for the IRA. Over and over again—from Chechnya to the West Bank—history teaches that harsh counterterror tactics become part of the cycle, or, as University of Cincinnati political scientist Bloom terms it, part of the contagion of violence. She sees hopeful signs in Turkey's recent measured and partially successful response to the Kurdistan Workers' Party, or PKK. The book also includes a fascinating chapter on suicide terror as practiced by women, especially in Chechnya and Sri Lanka, and how it is viewed, ironically, as a source of female empowerment.

    Combined, Bloom and Pape offer a lovely refutation to claims that the academic study of international relations does not care about policy relevant research.

    Go check them out.

    posted by Dan at 03:21 PM | Comments (24) | Trackbacks (0)

    Thursday, June 2, 2005

    Run away!! run away!!!

    Throughout my life there have been activities that I have shied away from, not because I disliked them but because I feared liking them so intensely that they'd impinge on the rest of my life. This was why I never played Dungeons & Dragons as a kid. My brain starts sounding like a Monty Python voice yelling, "Run away!! Run away!!!"

    Occasionally, despite my mental efforts, one of these addictive activities sneaks its way through my defenses. I'm convinced that had I not gotten hooked on Sid Meier's Civilization II game, I'd have another article somewhere on my cv. Thankfully, I kicked that habit five years ago -- all that's left is a non-functional icon on my desktop.

    [What about blogging?--ed. A more complex answer -- I'd probably have another article or two, but on the other hand the articles on outsourcing and blogging would not be there either.]

    Which brings me to (if, as you're reading this, you know what I'm talking about and don't want to be hooked into another diversion, just click away now)...... sudoku!!!


    What you see above you is a sample game of sudoku in an Economist article I stumbled onto while traveling last week. The rules of the game are very simple:

    On a board of nine-by-nine squares, most of them empty, players must fill in each square with a number so that each row (left to right), column (top to bottom) and block (in bold lines) contains 1 to 9.

    Click here for the solution to the above puzzle.

    The Economist thinks this is the Next Big Thing in puzzles -- apparently the broadsheets in Great Britain are falling all over themselves to create the winning New-York-Times-crossword-style brand.

    Seth Stevenson, in Slate, fessus up to his addition:

    When Slate asked me to write about "sudoku"—the number puzzle that's taken Britain by storm (and seems poised to conquer the United States, too)—I thought it might be a pleasant little assignment. After all, I like puzzles. I'm always up for trying a new one.

    And now it's 2 a.m., my deadline is looming, and (as you can see) I'm only on my second paragraph. All because, damn it, I can't stop playing sudoku. I'm a full-on sudoku addict. Thanks, Slate....

    It takes just a moment to feel the rush and become addicted (sort of like crack). Also (again, like crack), sudoku is cheap to obtain and widely available.

    Stevenson goes on to analyze whether sudoku will be just as addictive as the NYT's crossword. His conclusion:

    I guess the most basic difference is that sudoku is a puzzle of logic—not a puzzle of esoteric knowledge and literate playfulness. Logic is less my bag. And I'd rather interact with someone's precious, painstaking creation than with a set of numbers spat out by a computer program.

    Proceed to the London Times sudoku page at your own risk.

    posted by Dan at 05:49 PM | Comments (17) | Trackbacks (5)

    Wednesday, June 1, 2005

    Diplomacy 201

    Congratulations to Josh Marshall for the opening of TPM Cafe, a virtual smorgasbord of blogs, including Matthew Yglesias's new home.

    Closer to home, Josh has managed to rustle up some high-profile international relations scholars and policy wonks for TPMCafe's foreign policy blog, America Abroad -- contributors include G. John Ikenberry, Anne-Marie Slaughter, and Ivo Daalder. As Henry Farrell put it, "The IR-academic corner of the blogosphere has been relatively underpopulated up until very recently.... it’s experiencing a bit of a population boom. Nice to see."

    Yes it is -- now let's get to the fun part of critiquing the posts.

    Anne-Marie Slaughter posted yesterday about the shortcomings of the Bush administration's diplomacy. She uses the recent failure of the NPT negotiations as an example:

    Notwithstanding all the hype about public diplomacy, the Administration is still managing to be a global bad press machine. As Ivo describes, we have managed to generate still more global animus by apparently refusing to take the Non-Proliferation Treaty (NPT) review seriously, even though Iran and North Korea are front-burner issues and there is general consensus that the NPT needs amending to prevent states from getting to the edge of nuclear capability in complete conformity with the treaty and then legally withdrawing and making a bomb.

    Nor is there any lack of proposals out there. IAEA director Mohammed el-Baradei has proposed a five-year moratorium for all uranium enrichment and plutonium production for all 188 signatories of the NPT. The U.S. and Iran both opposed that -- as did France, Brazil, Japan, Australia, Canada, and the Netherlands -- on the grounds that it would limit their future nuclear fuel options. But what about a one-year moratorium? Or making all nuclear fuel generating facilities part of multinational consortia, so they are not controlled by a single state?

    The larger point is that the Administration has not mastered the basic diplomatic art of making a positive proposal and putting other countries on the defensive, rather than always being the naysayer, or, as in this case, ignoring the multilateral proceedings and going our own way, thereby uniting everyone else in opposition to our unilateralism. Worse still, the Administration has ideas and initiatives worth expanding in the non-proliferation area. The Proliferation Security Initiative (PSI), which is now a very loose and ad-hoc network of states committed to stopping shipments of WMD and delivery systems, is a promising start....

    Given that the PSI purportedly conforms to existing international law and treaties, why couldn't the Administration propose expanding its membership and connecting it to the NPT treaty? Why are we so afraid to suggest that other states join with us to identify "state actors of proliferation concern"?

    ....Would it be so terrible actually to show up at an international conference as the leader of a coalition of states seeking to institutionalize an ad-hoc arrangement? At the very least, we would be the proposer rather than the nay-sayer for a change.

    My very mixed reaction to this post:

    1) If the U.S. joins France, Brazil, Iran, Japan, Australia, Canada, and the Netherlands in opposing something, it's not clear to me whether the U.S. has really triggered "global animus" or just animus among international lawyers.

    2) Trying to get the PSI attached to the NPT would be an unmitigated disaster. The precise reason the PSI works is that membership is restricted to important like-minded states. Attaching that to a universal-membership treaty is almost (but not quite; I'll explain why in a sec) tantamount to suggesting that NATO be subsumed under the United Nations.

    3) If this Wall Street Journal story by Jay Solomon and Gordon Fairclough is any indication, it actually looks like the Bush administration has more up its diplomatic sleeve than the PSI in dealing with North Korea:

    As the North Korea nuclear crisis deepens, an interagency team inside the Bush administration is working with East Asian governments to curb what U.S. officials say is Pyongyang's booming trade in counterfeit cigarettes, pharmaceuticals and currency....

    Larry Wilkerson, who was former Secretary of State Colin Powell's chief of staff, said in an interview that the effort -- which officials named the Illicit Activities Initiative -- was launched to augment, rather than undercut, diplomacy. He said the State Department believed that to get Pyongyang to give up its nuclear program, the U.S. would have to offer inducements. Washington also must show that "we could severely cut off North Korea's economic lifeline" if the country's leader, Kim Jong Il, doesn't come to the negotiating table, Mr. Wilkerson says.

    The North Korea initiative, Mr. Wilkerson says, was launched by the State Department in support of a wider Bush-administration effort to choke off the global trade in weapons of mass destruction. Yesterday, the White House touted its Proliferation Security Initiative, which calls for the interdiction of suspect international ships, for notching nearly a dozen successes in curtailing missile and nuclear-related technology headed to countries such as Iran.

    4) There is a compelling logic to the Bush administration's position. This quote from a David Sanger story in the New York Times last week (link via Ivo Daalder) crystallizes their position:

    Before the [NPT] meeting, administration officials said President Bush wanted to move the discussion to smaller groups where nations like Iran could not block a consensus. The officials, who did not want to be identified because the negotiating stance was in flux, named the Group of 8 industrial nations and the obscure Nuclear Suppliers Group.

    With informal accords, the suppliers group controls the flow of nuclear-related technology to nations seeking to build nuclear infrastructures. By operating through that organization, Mr. Bush seems to hope to impose new rules without having to renegotiate the treaty.

    Bush officials like these ad hoc coalitions. Slaughter wants arrangements like the G-8, PSI, and NSG to be converted from ad hoc coalitions to adjuncts of larger international organizations. I'd rather see them stay as private clubs, but become more institutionalized on their own (This, by the way, is why the NATO analogy above wasn't quite fair. NATO is institutionalized to a far greater extent than the PSI or NSG -- which might be one reason that multilateralists like NATO so much).

    5) Finally, the most trenchant criticism by Slaughter is her contention that "the Administration has not mastered the basic diplomatic art of making a positive proposal and putting other countries on the defensive, rather than always being the naysayer".

    Nowhere is this more evident than the Bush administration's policy on global warming. The administration rejected Kyoto, and rightly so (a fact that former Clinton officials will acknowledge if you get them good and liquored up). Bush officials said at the time of rejecting Kyoto that it would come up with an alternative plan. An even though it's actually implemented some useful programs in this area, it never followed through with a positive alternative. So even though I seriously doubt any European signatory to the Protocol will actually abide by the friggin' treaty, the U.S. looks like the bad guy. It's just so unnecessary.

    A fnal query to readers. America Abroad and Duck of Minerva are the two recent blogs I've seen to be run by international relations scholars. Beyond them, Rodger Payne, and March Lynch (a.k.a. Abu Aardvark), readers are encouraged to clue me in to other IR scholar-blogs out there.

    posted by Dan at 07:03 PM | Comments (57) | Trackbacks (1)

    The Dutch say nee but not non

    The Dutch were more emphatic than the French in saying no to the EU constitution -- but their reasons for saying no were not precisely the same. Oh, there were some surface similarities -- Emma Thomasson and Paul Gallagher explain for Reuters:

    The Netherlands emphatically rejected the European Union constitution in a referendum on Wednesday, an exit poll showed, deepening a crisis in the bloc and potentially dooming a treaty already spurned by France.

    Interview/NSS projected the "No" camp had won 63 percent of votes based on an exit poll to 37 percent for the "Yes" camp with voter turnout at an estimated 62 percent -- well above the 39 percent that voted in European Parliament elections in 2004.

    The resounding "No," even stronger than nearly 55 percent against the treaty in France on Sunday, is the latest sign of Dutch anger with the political elite since the 2002 murder of anti-immigration populist Pim Fortuyn. Unease was further stoked by the killing last year of a filmmaker critical of Islam.

    This rationale strikes me as different from the French fear of Turkey, which seemed predicated on both economic and cultural fears. In the Dutch case, I think the assassinations show it to be more of a direct concern with the threat to the Dutch commitment to liberal values (in both the classical and modern sense).

    Marlise Simons of the New York Times provides more motivation behind the Dutch decision:

    Among the main complaints, reflected in opinion polls, is that the Dutch feel pushed around by the big countries and that the union's heavy bureaucracy lacks transparency and democracy and is growing too fast. They resent that they are already the union's largest net per capita contributor without being the richest member, and that the new constitution would lessen their voting power.

    The Dutch were furious when, after seriously tightening their belts in the last two years to respect European Union budget rules, France and Germany ignored those same rules. More recently they were irritated when Italy and Greece admitted that they had provided the union with false budget information.

    I'm more sympathetic to motivations behind the Dutch 'no' than the motivations behind the French 'non.'

    If anyone can find a link to the actual exit poll results, post them in the comments.

    I do wonder if this is another part of the master plot to prevent the euro from ffurther appreciation against the dollar.

    UPDATE: This site has the official vote count. So does trhis one. Another bleg -- does anyone know why Utrecht is such an outlier for the yes vote? My limited knowledge about Utrecht ends at 1713.

    As for the Netherlands, Dutch blogger Arjan Dasselaar asks a simultaneously provocative but obvious question:

    If 85 percent of Parliament wants to support a constitution that 63 percent of the constituency rejects, it seems obvious that our representatives in the Second Chamber (our Lower House/House of Representatives) no longer represent us.

    ANOTHER UPDATE: Max Boot has an excellent analysis of the EU in the Los Angeles Times. The paragraph that must vex those in Brussels:

    The European Union provides a convenient punching bag. In Britain, people hate the EU because it's too socialist; in France because it's too capitalist. In Eastern Europe, they're upset that the EU isn't doing more to facilitate labor mobility; in Western Europe, where the low-wage, if largely mythical, "Polish plumber" is a dreaded figure, they think it's already done too much.

    David Adesnik also has an excellent analysis at Oxblog.

    posted by Dan at 04:30 PM | Comments (15) | Trackbacks (3)

    The housing market: foam or no foam?

    I don't normally blog about the housing market (see here for an exception), but since everyone from Alan Greenspan to Brad Setser has been talking about whether the U.S. is experiencing a housing bubble right now, I thought it might be useful to link to this Chicago Fed Letter by Richard Rosen that suggests the answer is no. The highlights:

    Some believe that the rapid increase in housing prices is a sign of a bubble. In this Chicago Fed Letter, I document changes in the median sale price of a house in the United States and
    for major markets in the Seventh Federal Reserve District. I show that the increase in housing prices in most areas, including the Seventh District, can be largely explained by falling mortgage interest rates and changes in household income.

    Do note the big caveats in the article, namely:

    1) Rosen assumes all homebuyers will use fixed-rate mortgages;

    2) Housing is not purchased for investment purposes.

    For a summary of the report, see this Chicago Tribune story.

    posted by Dan at 11:44 AM | Comments (17) | Trackbacks (1)

    No one trashes guido the killer pimp on my watch!!!

    What could David Adesnik be thinking?:

    [I]n case you were thinking of watching Risky Business after reading about it on OxBlog, I have one word for you: Don't.

    Any movie with the line, "Joel, get off the babysitter" deserves better treatment than that. Heresy, I say!! Heresy!!

    On a slightly more serious note -- I haven't seen the movie in some years, but my memory is that it's quite a good flick. The interesting question is whether this is true because I first saw the movie when I was roughly the protagonist's age. It's possible -- not probable, but possible -- that I'm viewing this film through rose-colored glasses. There are movies that occupy a more prominent place in our personal pantheons because of when we see them, and the good memories we associate with that time. There are "generational" movies that are valued because they click on some level with one's entire peer group -- The Shawshank Redemption for Generation Y or Rebel Without A Cause for baby-boomers, for example.

    Readers are encouraged to debate the merits of Risky Business, or to confess the movies that they adore but recognize may not be as good as they originally thought. Oh. and this seems as good a time as any to link to Time's "All-Time 100 Movies."

    UPDATE: Hey, apparently this concern of mine has a name -- the Tron effect.

    posted by Dan at 11:05 AM | Comments (16) | Trackbacks (1)

    I wonder if Bangkok will take a check?

    Note to self: no matter how much money they offer, never, ever accept an offer to become the governer of Thailand's central bank.

    The BBC explains why:

    A former Thai central bank governor has been fined 186bn baht ($4.6bn; £2.5bn) for his leading role in the country's 1997 financial crash.

    Rerngchai Marakanond spent that figure trying - and failing - to prop up the country's currency during the crisis.

    The Bangkok Civil Court has now ordered that Mr Marakanond must reimburse the Bank of Thailand within a month.

    Otherwise he will face the seizure of his personal assets. The case was brought by the Thai government.

    Adding insult to injury, the Bangkok Post reports that on top of the 186 billion baht, "The court also ordered Mr Rerngchai to pay 7.5% a year interest, retroactive to July 2, 1997, the date of the central bank's last currency transaction, although the court limited total interest charges to 62 million baht." I wait with bated breath to see if there is a Far East Economic Review story reporting that the court has also ordered Rerngchai's girlfriend to dump him.

    Kidding aside, the Economist pointed out three years ago that, "The whole exercise seems grossly unfair, in that many other officials and politicians must have had a hand in the policy, as well as pointless, in that Mr Rerngchai seems unlikely to stump up the 186 billion baht he is alleged to owe." Actually, I think it's worse than that -- surely this will dissuade competent people from taking the job -- no matter how big Thailand's foreign exchange reserves are right now.

    UPDATE: Brad Setser has semi-serious thoughts about whether the head of China's central bank needs to worry about this.

    posted by Dan at 01:36 AM | Comments (6) | Trackbacks (6)

    Don't hold your breath on TAFTA

    Glenn Reynolds links to a John O'Sullivan column on the fallout from the French rejection of the EU constitution. It's an odd column, in that carries a lot of normative appeal to me but doesn't make complete sense.

    O'Sullivan correctly brings up a worrisome byproduct of the French rejection -- the effect on Turkey:

    Since the Turks have been seeking entry -- and getting half-promises of it -- from the Europeans since the early 1960s, rejection is likely to create a series of international crises. In Turkey the reaction would be profound and bitter. The Turks would reasonably feel that they had carried out every reform requested by Brussels, significantly altering their political, social and economic life, and still have been rejected. Both the major parties -- the traditional Kemalist opposition and the new Islamic conservative government -- would be weakened since both supported the European orientation of Turkish foreign policy.

    The forces likely to be strengthened by rejection are the Turkish army, extreme Turkish nationalists and Islamist fundamentalists. Since these are all radically opposed to each other -- the army being secular and pro-American, the Islamists in favor of a Turkish identity rooted in Islam and closer links with the Arab world, and the extreme nationalists, well, extremely nationalist -- there will probably be a series of crises in Ankara until a new political status quo is established.

    No disagreement with that analysis. Then things get very strange:

    "There is no Plan B" -- Plan A being Turkey's EU admission. And Washington echoes the same slogan because it strongly supports the Turkish application.

    In reality there is always a Plan B, even if the politicians avoid considering it until Plan A has collapsed. Under this particular Plan B, the United States would rescue Turkey and the EU from their joint crises while also advancing U.S. interests in transatlantic integration.

    It would work as follows:

    First, the EU and the United States (together with its partners in NAFTA) would merge their markets to form TAFTA -- or a transatlantic free trade area.

    Second, they would invite all the existing European countries not in the EU, including Turkey, Norway and Switzerland, to join this enlarged TAFTA. (Ukraine, Russia and Latin American countries outside NATFA would be eligible to join once they met criteria similar to those required for EU entry.)

    Third, this TAFTA would establish joint procedures for harmonizing existing and new regulations between NAFTA, the EU and non-EU states,.

    Fourth, free movement of labor would not be a provision in TAFTA, but there would be preferential immigration rules between members.

    Laid out in this way, such a Plan B inevitably sounds utopian. Many of its individual features, however, have been widely discussed for years. Indeed, a full-scale EU-U.S. free trade area almost came about a decade ago.

    At the time it was vetoed by the French. But Europeans might now see the value of a program for economic integration that does not involve free immigration -- but that would offer Turkey a solid substitute for EU membership, mollify the Islamic world, and build an long-term economic bridge to Russia, North Africa, the Middle East and Latin America.

    And in their currently shaken state, even the French might be prepared to accept American leadership out of the crisis -- so, Condi, act quickly.

    Okaaayyyyy.... just a few questions for O'Sullivan:

    1) If a large percentage of the French opposition to the constitution was that it was too liberal, how is a free trade area with the United States going to be viewed by the French?

    2) If Americans are hostile to the Kennedy-McCain version of immigration refor, how do you think Americans will react to any arrangement whereby Mexicans would receive "preferential immigration rules"?

    3) Would anyone on either side of the Atlantic be comfortable with an arangement whereby there would be "joint procedures for harmonizing existing and new regulations between NAFTA, the EU and non-EU states"? How does O'Sullivan think that would work with, say, genetically modified foods?

    To be clear, I think O'Sullivan's proposal has a lot of merit on substance -- I just don't think it has any hope of succeeding at the current political moment.

    I am curious whether there would be support in the U.S. for something a bit simpler -- a free trade agreement with Turkey. Comment away!!

    posted by Dan at 12:01 AM | Comments (11) | Trackbacks (0)