Saturday, March 27, 2004

More feedback on Kerry's international tax plan

Bruce Bartlett examines the Kerry tax proposals and comes away unimpressed:

There are many problems with Kerry's plan to tax the unrepatriated overseas profits of U.S. companies. The main one is that few other countries tax the foreign profits of their companies at all. Consequently, U.S. firms are already at a competitive disadvantage tax-wise. Kerry's plan would make the situation worse, encouraging U.S. companies to reincorporate in other countries.

As far as jobs are concerned, the Kerry plan probably would reduce employment in the U.S. That is because a very considerable amount of exports go from U.S. businesses to their foreign affiliates. And, contrary to Kerry's implication, the bulk of earnings on sales by foreign affiliates are repatriated to the U.S. annually, thereby offsetting a significant portion of the trade deficit.

I also received an e-mail that's worth re-printing:

I've worked in Operations/Supply Chain for one of those gigantic multi-nationals for almost 20 years, and I have outsourced product and services since the early 90s. I have done dozens of "Make/Buy" analyses and can recite the formulas we use almost by heart.

We NEVER justify an outsourcing decision on TAX alone. In fact, I just finished a major analysis to centralize some of our far-flung operations in an region with no (read 0%) corporate tax...BUT yet, tax considerations weren't part of the analysis. We make our decisions based on all the other reasons: labor content & costs, logistics, ability of the local supplier to generate ongoing productivity, technical skills of the local population... pretty textbook stuff.

We'll look at potential tax savings after we make our decision as "icing on the cake." The reason is simple: tax laws change. We'd never make a major move and cause a business disruption betting on the assumption that politicians would leave things alone.

So John Kerry's plan won't factor into our decisions at all.

Just one person's account? Not according to Kerry's economic advisors. From the New York Times:

Would ending deferral keep jobs at home? Or would other cost savings from going abroad - in particular, lower wages - override the loss of the tax advantage? Mr. [Jason] Furman [a Harvard-trained economist] argues that absent the tax advantage, many more jobs would stay in America, but he does not brim over with conviction on that score.

"There is a conceit among people in the business community that you don't make decisions for tax reasons," he said. "You make them because of the underlying fundamentals and then you ask the accountant to figure out, given the choice you've made, how to lower the tax. I don't think that is a rational explanation of the thinking of executives who are trying to maximize profits."

This story has additional lukewarm sentiment from the business community.

So, I'm underwhelmed -- but oddly encouraged.

Why? This is much less populist than I had feared based on Kerry's rhetoric during the primary season. This is a key point of the Times article cited above. The key bits:

What is striking about the candidate's economics team is that all of its members - not to mention nearly every adviser they are reaching out to - served the Clinton administration in one way or another....

...the fixes that Mr. Kerry and his core economic advisers are beginning to offer are clearly rooted in Clinton economics, which is resolutely centrist. Fiscal responsibility and deficit reduction, hallmarks of the Clinton years, are bedrock orthodoxy in the Kerry camp, too.

So is faith in the private sector's powers to generate prosperity. Job creation will come from corporate America, not government, once the right incentives and subsidies are in place, the war room says. In fact, the Clinton-era god of deficit reduction and private-sector supremacy is also worshiped in the Kerry camp. "This group is consulting literally daily with Bob Rubin," Mr. Altman said. "He was the best secretary of the Treasury since Alexander Hamilton and he is the single most influential figure in business and finance."....

The galaxy forming around Mr. Altman is particularly important. Mr. Rubin is there, of course. Lawrence H. Summers, Mr. Rubin's successor as Treasury secretary, is consulted - although now, as president of Harvard, Mr. Summers takes no active role in the campaign.

OK, The praise of Rubin might be a bit over the top, but I find a lot of this reassuring. The fact that, as the article reports, "[this] sort of thinking does not appear to sit so well with Senator Edward M. Kennedy" is just gravy.

posted by Dan at 07:25 PM | Comments (45) | Trackbacks (5)

The ten-year anniversary of the Rwandan genocide

The Economist has an article marking the 10-year anniversary of the Rwandan genocide and the lessons learned from it. There's an interesting contrast between the lessons learned by the "international community" and the lessons learned by the survivors of the genocide:

Though they would deny it, Rwanda's ruling party and its tough-as-kevlar president, Paul Kagame, have concluded that the only way to guarantee the survival of the Tutsis is to remain in power indefinitely. In many respects, they rule well: Rwanda has seen a remarkable recovery since 1994. But they tolerate no serious domestic opposition, nor much in the way of free speech. Rwanda today is a thinly-disguised autocracy, where dissidents, who are usually accused of genocidal tendencies, live in fear, or exile, or both. The regime is also a menace to its neighbours. It was justified in invading Congo to disperse the génocidaires who were using the place as a base for attacks on Rwanda, but it surely did not have to kill 200,000 people in the process.

The rest of the world has learned different lessons from its failure ten years ago. Then, the West's reluctance to get involved was largely a consequence of America's shambolic intervention in Somalia the previous year. Since then, the response to all remotely similar emergencies has been guided by a desire not to allow a repeat of Rwanda. Some of the results have been encouraging. NATO eventually checked Serb aggression in the Balkans, though only after the 1995 Srebrenica massacre. British troops ended Sierra Leone's terrible civil war. Last year, in Congo's Ituri region, UN peacekeepers found themselves in a position with ominous echoes of Rwanda in April 1994: outnumbered, lightly armed and unable to prevent horrific tribal killings. Instead of cutting and running, Europe sent a French-led force to restore order, with some success.

The genocide has also jolted the world into reconsidering how to prosecute mass killers. Ad hoc international tribunals for Rwanda and the former Yugoslavia, though slow and costly, are gradually securing convictions. Several countries have passed laws allowing their courts to try those accused of genocide, regardless of where the crime was committed. The impetus to set up an International Criminal Court sprang partly from the world's shame over Rwanda. Legally, genocide is oddly defined—why is it worse to seek to eliminate an ethnic group than a socio-economic one? It is also hard to prove. Few cases are as clear-cut as Rwanda's; Slobodan Milosevic, the former Serb leader, may be acquitted of genocide, though probably not of other grave charges.

UPDATE: Nicholas Kristof points out why this is a far from academic conversation:

For decades, whenever the topic of genocide has come up, the refrain has been, "Never again."

Yet right now, the government of Sudan is engaging in genocide against three large African tribes in its Darfur region here. Some 1,000 people are being killed a week, tribeswomen are being systematically raped, 700,000 people have been driven from their homes, and Sudan's Army is even bombing the survivors.

And the world yawns.

David Gelernter writes in the Weekly Standard about the relevancy of genocide prevention to Iraq as well. Both articles are worth checking out (and thanks to commenters for raising both topics).

posted by Dan at 12:30 PM | Comments (16) | Trackbacks (5)

Friday, March 26, 2004

The media whore of Hyde Park

I'm going to go out on a limb and suggest that my outsourcing essay is starting to attract some attention. Here's my day today:

1) Wake up to do phone interview on outsourcing with WPTT's Jerry Bowyer in Pittsburgh.

2) Log on, discover that Arts & Letters Daily has linked to "The Outsourcing Bogeyman."

3) See mention of outsourcing piece by Bruce Bartlett in his latest column (Bruce has links to two other reports on outsourcing that are worth checking out).

4) Arrange to do radio interview with Rick Jensen on WDEL next week.

5) Receive e-mail notification that the Foreign Affairs web editor is very pleased with the web traffic. Thanks for that should go to MetaFilter and Kuro5hin for highlighting the piece. [UPDATE: Thanks to Dan Gillmor as well.]

6) Receive phone call from ABC News Business correspondent Betsy Stark requesting interview on Kerry's economic speech and outsourcing. Have camera crew invade office and bemuse colleagues.

So, it looks like there's a decent chance that I'll be on World News Tonight with Peter Jennings this evening. Check your local listings!!

Here's the funny/scary thing -- I have no idea how the interview will be framed. I was critical of Kerry on outsourcing but I also said that the corporate taxation proposal he announced today indicated a change in rhetoric from "Benedict Arnold CEO's." We talked for ten minutes, and there was a lot of tape -- they could go either way with it. [You should have followed Brad DeLong's advice on interviews--ed. Now you remember to tell me.]

UPDATE: Nope, they cut me. C'est la vie.

posted by Dan at 04:36 PM | Comments (13) | Trackbacks (0)

John Kerry on corporate taxation

The Washington Post reports that John Kerry is giving a major economic speech in Detroit today, proposing a mixture of temporary and permanent cuts in corporate tax rates in return for "the most sweeping reform of international tax law in over 40 years." The gist:

In today's speech at Wayne State University in Detroit, Kerry will reiterate his call for the elimination of all tax breaks that encourage U.S. companies to locate operations and jobs overseas. For the first time, he will target a popular tax incentive, known as "deferral," offered to most U.S. companies that do business in lower-taxed foreign countries.

To soften the blow to corporations, Kerry will propose a one-time, one-year offer to tax at 10 percent any profits a company brings back to the United States and invests here, an expanded tax credit to companies that create domestic jobs, and a reduction in the corporate tax rate to 33.25 percent from 35 percent -- a 5 percent cut.

"The most salient feature, or at least symbolic feature, is the corporate tax rate [cut]," said Roger Altman, a top economic adviser to Kerry. "When is the last time you saw a Democrat propose a corporate tax cut?"

Gene Sperling, another Kerry economic adviser, said the tax cuts for business will be fully funded by the international tax changes.

But R. Bruce Josten of the U.S. Chamber of Commerce said the Kerry plan seems to ignore the complexity of the global economy. "There is a broader point he completely misses: There are companies that open up overseas" for reasons other than tax avoidance, he said.

Here's the Associated Press analysis: "[Kerry] settled on a blend of loophole-cutting populism and business-friendly moderation, casting his package as jobs-producing tax reform."

Discuss below.

UPDATE: Reaction at The Corner and Hit & Run. Here's a link to the details of the proposal. My gut reaction is three-fold:

1) This is a lot more about symbolism than substance. According to the Post story, the total sums involved in these tax changes are around $12 billion. That sounds like a lot, but it's around 1% of the federal budget. Not a lot of money either way.

2) That said, the symbolism is important, in that "corprate tax reductions" sound a lot better to the business community than "Benedict Arnold CEOs."

3) The economic advisors quoted in the Post story are Roger Altman and Gene Sperling. They fall decidedly into the "sane" camp of Democratic economic advisors.

posted by Dan at 01:22 PM | Comments (41) | Trackbacks (0)

Palestinians for nonviolence

In the wake of the second intifada and the increase in suicide bombings over the past four years, it's tempting -- particularly post 9/11 -- to pidgeonhole all Palestinians as a feckless, violent people. Sheik Yassin's assassination and the resulting protests in the occupied territories only reinforce that perception.

That kind of easy stereotyping is dangerous, because it obscures the complexities within Palestinian society that I've discussed in the past. I'm not saying that Palestinian civil society is in a healthy state -- merely that it would be a mistake to assume that Hamas/Islamic Jihad/Al-Aqsa = Palestine.

On that note, the Chicago Tribune reports the following:

Sixty prominent Palestinian political figures and intellectuals published a statement Thursday urging restraint and peaceful protest instead of violent revenge for Israel's assassination this week of Sheik Ahmed Yassin, founder of the militant group Hamas.

The unusual appeal came after Hamas and other armed factions vowed to strike Israel on an unprecedented scale in retaliation for the killing of Yassin in a helicopter missile strike Monday in the Gaza Strip. It also came a day after a 16-year-old boy wearing an explosives vest was disarmed in the West Bank, an event that shocked many, including the boy's family.

The Palestinian statement, published on half a page of the Al-Ayyam newspaper, called on Palestinians to break the violent cycle of strike and response, reflecting a growing assessment among mainstream leaders that armed attacks have hurt the Palestinian cause....

The signatories included senior members of the mainstream Fatah movement, lawmakers, academics and peace advocates.

"We feel Sharon has dictated his agenda on both sides, condemning the Israeli people to acts of retaliation and more suicide bombings, and he has also forced the hand of the Palestinian organizations to exact revenge," said Hanan Ashrawi, a lawmaker who signed the statement.

"We want to expose Sharon's policy and prevent the Palestinians from reacting constantly, and to say that there is a way to resist occupation through non-violent means," she added.

Another signer, Ahmad Hilles, the head of the Fatah movement in the Gaza Strip, said that "it is not in the Palestinians' interest for the conflict to become an armed conflict, . . . the arena preferred by Sharon."

posted by Dan at 10:57 AM | Comments (30) | Trackbacks (0)

A fitting coda for Jayson Blair

Don Wycliff, who was a stern critic of Jayson Blair when he was discovered last May to have made up or cribbed other people's stories, reports on how well Blair's "memoir" is selling:

Blair's book, "Burning Down My Masters' House," was published March 6 and has barely made a ripple in terms of sales--fewer than 1,400 copies sold nationwide in the first nine days, according to Nielsen Book Scan.


[Isn't that still higher that the totals sales from your first and second books combined?--ed. True, but mine got better reviews!]

posted by Dan at 10:20 AM | Comments (11) | Trackbacks (0)

Thursday, March 25, 2004

More Clarke links The Clarke-Rice smackdown!!*

For those who are reluctant to shell out the money, Julia Turner creates a "good parts" version of Against All Enemies in Slate.

Brad DeLong, meanwhile, composes what Condoleezza Rice's public testimony would have looked like -- it looks pretty credible. [UPDATE: the New York Times reports that Rice will testify before the 9/11 Commission again in private -- she had testified behind closed doors for four hours last month.]

Fox News reports on the emnity between Rice and Clarke:

[M]uch of the back-and-forth between the administration and Clarke has focused on seemingly bad blood between Rice and Clarke. Clarke suggested in his recently published book, "Against All Enemies," which attacks the White House for inaction, that Rice appeared as if Clarke didn't know whom he was referring to when he mentioned Al Qaeda to her during a discussion early in the administration's tenure.

He also said that the national security adviser might have gotten clues to the Sept. 11 attacks by holding daily counterterrorism meetings in the summer of 2001, the way he had done in 1999. He credits those briefings to the discovery of a plan to launch terrorist attacks during New Year's Eve celebrations in the United States.

"That kind of information was shaken out in December 1999, it would have been shaken out in the summer of 2001 if she had been doing her job," Clarke told the panel on Wednesday.

But McClellan said it wasn't the briefings that prevented the attack.

"Mr. Clarke continues to say that because of the meetings at the White House, they were able to prevent the plot — the Millennium plot. Well, we know from news reports at that time that it was the hard work of an individual Customs agent who was able to thwart the Millennium plot, by stopping this individual at the border," he said.

Rice has also countered that it's Clarke who wasn't doing his job, refusing to attend her meetings. Officials say privately that Clarke was angry that CIA Director George Tenet gave President Bush his weekly counterterrorism briefings, something Clarke had done for President Clinton in the previous administration.

The Economist has more here and here. The latter story nicely sums up the state of play:

The Bush administration was urged to do more before 9/11, and chose not to, for reasons that seemed right and reasonable at the time. It was working on a strategy to deal with al-Qaeda, but too slowly to do any good. Some of its members were more concerned about Saddam Hussein than Osama bin Laden. Nothing here can be called indefensible. Whether this is the record of someone who treated al-Qaeda with the utmost seriousness is another matter.

*Post title changed upon request from Tom Maguire.

UPDATE: David Adesnik has more.

posted by Dan at 11:07 PM | Comments (69) | Trackbacks (1)

Reading Against All Enemies, part II

Over at Time, Romesh Ratnesar accuses Clarke of "sexing up" his interactions with Bush. One example:

Perhaps Clarke's most explosive charge is that on Sept. 12, President Bush instructed him to look into the possibility that Iraq had a hand in the hijackings. Here's how Clarke recounted the meeting on 60 Minutes: "The President dragged me into a room with a couple of other people, shut the door and said, 'I want you to find whether Iraq did this'.....the entire conversation left me in absolutely no doubt that George Bush wanted me to come back with a report that said, 'Iraq did this.'" After Clarke protested that "there's no connection," Bush came back to him and said "Iraq, Saddam — find out if there's a connection." Clarke says Bush made the point "in a very intimidating way." The next day, interviewed on PBS' The NewsHour, Clarke sexed up the story even more. "What happened was the President, with his finger in my face, saying, 'Iraq, a memo on Iraq and al-Qaeda, a memo on Iraq and the attacks.' Very vigorous, very intimidating." Several interviewers pushed Clarke on this point, asking whether it was all that surprising that the President would want him to investigate all possible perpetrators of the attacks. Clarke responded, "It would have been irresponsible for the president not to come to me and say, Dick, I don't want you to assume it was al-Qaeda. I'd like you to look at every possibility to see if maybe it was al-Qaeda with somebody else, in a very calm way, with all possibilities open. That's not what happened."

How does this square with the account of the same meeting provided in Clarke's book? In that version, Clarke finds the President wandering alone in the Situation Room on Sept. 12, "looking like he wanted something to do." Clarke writes that Bush "grabbed a few of us and closed the door to the conference room" — an impetuous move, perhaps, but hardly the image that Clarke depicted on television, of the President dragging in unwitting staffers by their shirt-collars. The Bush in these pages sounds more ruminative than intimidating: "I know you have a lot to do and all, but I want you, as soon as you can, to go back over everything, everything. See if Saddam did this. See if he's linked in any way." When Clarke responds by saying that "al-Qaeda did this," Bush says, "I know, I know, but see if Saddam was involved. Just look. I want to know any shred....." Again Clarke protests, after which Bush says "testily," "Look into Iraq, Saddam."

Nowhere do we see the President pointing fingers at or even sounding particularly "vigorous" toward Clarke and his deputies. Despite Clarke's contention that Bush wanted proof of Iraqi involvement at any cost, it's just as possible that Bush wanted Clark to find disculpatory evidence in order to discredit the idea peddled by Deputy Defense Secretary Paul Wolfowitz and Defense Secretary Donald Rumsfeld that Baghdad had a hand in 9/11. In the aftermath of 9/11, Bush rejected Wolfowitz's attempts to make Iraq the first front in the war on terror. And if the President of the United States spoke "testily " 24 hours after the worst terrorist attack in U.S. history, well, can you blame him?

This is on pages 32-33 of Against All Enemies -- and actually, Clarke's written account of the Bush encounter is more charitable to the President than Ratnesay indicates. The key passage occur right after the encounter:

"Paul Kurtz walked in, passing the President on the way out. Seeing our expressions, he asked, "Geez, what just happened here?"

"Wolfowitz got to him," Lisa[Gordon-Hargerty] said, shaking her head.

"No," I said. "Look, he's the President. He has not spent years on terrorism. He has every right to ask us to look again, and we will, Paul."

[Yeah, and don't forget what Clarke said on background in mid-2002!--ed. Actually, I'm not terribly persuaded that this should weaken Clarke's credibility. As anyone who's worked in government should know, what's said in an official capacity will read differently than what's said when one is allowed to be candid. Clarke was acting as a dutiful bureaucrat in 2002, and not as an independent agent.]

posted by Dan at 04:04 PM | Comments (69) | Trackbacks (2)

An interesting correlation

Mickey Kaus says what I was thinking:

During Kerry's last week of public campaigning, his numbers sank. After a few days holed up in Ketchum, Idaho, with the Clarke anti-Bush allegations getting huge play, he's back up. ... Kerry's future campaign strategy seems clear: Stay on vacation until November! Let the media do his work for him. The less people see him the better he looks.

[But that contradicts Noam Chomsky's thesis that the media has been bought and paid for by Bush!--ed. You did that just to link to Chomsky's new blog, didn't you? Er, yes - but his permalinks don't seem to work--ed.]

CLARIFICATION: Commenters on this post seem to think that I think this is more than a coincidence. I don't -- and I'm assuming Mickey's tongue is mostly in his cheek as well.

posted by Dan at 12:34 PM | Comments (31) | Trackbacks (0)

Reading Against All Enemies

As I said before, Richard Clarke's criticisms of the Bush administration need to be taken seriously, so I went out and bought Against All Enemies yesterday. Last night I read the preface and the first two chapters. What stood out for me so far came on page x in the preface, in which he writes:

It is also the story of four presidents:

  • Ronald Reagan, who did not retaliate for the murder of 278 United States Marines in Beirut and who violated his own terrorism policy by trading arms for hostages in what came to be called the Iran-Contra scandal;

  • George H.W. Bush, who did not retaliate for the Libyan murder of 259 passengers on Pan Am 103; who did not have an official counterterrorism policy; and who left Saddam Hussein in place, requiring the United States to leave a large military presence in Saudi Arabia;

  • Bill Clinton, who identified terrorism as the major post-Cold War threaty and acted to improve our counterterrorism capabilities; who (little known to the public) quelled anti-American terrorism by Iraq and Iran and defeated an al Qaeda attempt to dominate Bosnia; but who, weakened by continued political attack, could not get the CIA, the Pentagon, and FBI to act sufficiently to deal with the threat;

  • George W. Bush, who failed to act prior to September 11 on the threat from al Qaeda despite repeated warnings and then harvested a political windfall for taking obvious yet insufficient steps after the attacks, and who launched an unnecessary and costly war in Iraq that strengthened the fundamentalist, radical Islamic terrorist movement worldwide
  • So, in Clarke's account, three Republicans dropped the ball on terrorism, while the lone Democrat fought the good fight but failed to achieve anything because of Republican attacks.

    Let's assume for the moment that Clarke is telling the truth in his characterization of the four presidents (I still need to read those portions). Is he telling the whole truth? Tell you what, let's rework those bullet points a little bit:

    It is also the story of four presidents:

  • Ronald Reagan, who retaliated vigorously against the most prominent source of anti-American terrorism during the eighties -- Libya -- through a concerted military and intelligence campaign, and who authorized the capture of Palestinian terrorists following the hijacking of the cruise ship Achille Lauro;

  • George H.W. Bush, who waged a successful diplomatic campaign in the United Nations to impose sanctions on Libya, which eventually forced that country to admit complicity in the Pan Am 103 bombings and permit the operational planners to be extradited; who waged a successful diplomatic and military campaign to expel Saddam Hussein from Kuwait, impose the most comprehenseive sanctions regime in UN history, and protect the Kurds from retribution following the invasion;

  • Bill Clinton, who -- despite being freed from the strictures of the Cold War era -- failed to retaliate following the downing of a Black Hawk helicopter in Somalia, and subsequently pulled U.S. forces out of the area; who failed to pressure Saudi Arabia into cooperating in the investigation following the 1996 Khobar Towers bombing; and who again failed to retaliate following the bombing of the USS Cole;

  • George W. Bush, who took aggressive and appropriate actions following the 9/11 attacks to expel al Qaeda from their Afghan sanctuary; who forced the Pakistani regime to reverse course in their support of the Taliban; who dispatched crucial anti-terrorist support to poor states like Yemen, Georgia and the Philippines; whose efforts have led to the capture or death of two-thirds of al Qaeda's top echelon of leaders; and who removed Saddam Hussein from power.
  • Did I stack the deck in the second set of bullet points? Absolutely. My point, however, is that Clarke stacked the deck in the first set of bullet points.

    Why would he do this? Some will say it's because Clarke is a partisan hack, which isn't really credible -- he was a registered Republican voted in the Republican primary in 2000, served under three Republican presidents, and already vowed not to advise Kerry. My hunch is that it's more simple and personal than that. Let's rework those bullet points one last time:

    It is also the story of four presidents:

  • Ronald Reagan, during which I was just a State Department DAS and therefore had marginal influence;

  • George H.W. Bush, whose Secretary of State demoted me;

  • Bill Clinton, who was wise enough to listen to my sage advice and let me run the Principals meetings on counterterrorism;

  • George W. Bush, who had the gall to strip me of the hard-won autonomy and power I achieved under Clinton and force me to work through the regular chain of command
  • I'm still going to read the rest of the book. It's worth remembering that Clarke was correct in his assessment of Al Qaeda, and as the Chicago Tribune points out, even George W. Bush acknowledged to Bob Woodward that bin Laden was not on the top of this administration's priority list when it took office. And I am curious to see what he has to say about whether/how the decision to invade Iraq undermined the military effort to defeat Al Qaeda.

    Still, it's hard not to believe that Clarke's evaluation of presidential performance is directly correlated with how well those presidents treated Clarke.

    UPDATE: Greg Djerejian posted something about Clarke from three weeks ago that's also worth reading.

    posted by Dan at 09:42 AM | Comments (118) | Trackbacks (14)

    Wednesday, March 24, 2004

    Globalization and creative destruction

    In previous posts, I've treated trade and technology as competing explanations for why employment has declined in certain sectors. However, to be fair, the effects are not mutually exclusive. Open borders increase the incentives for technological innovation, and innovation increases the rewards from trade.

    On this point, the New York Times ran an article two days ago about how the trade and technology are intertwined. Their case study -- how globalization is affecting the orange-growing industry. The highlights:

    Chugging down a row of trees, the pair of canopy shakers in Paul Meador's orange grove here seem like a cross between a bulldozer and a hairbrush, their hungry steel bristles working through the tree crowns as if untangling colossal heads of hair.

    In under 15 minutes, the machines shake loose 36,000 pounds of oranges from 100 trees, catch the fruit and drop it into a large storage car. "This would have taken four pickers all day long," Mr. Meador said....

    [A]s globalization creeps into the groves, it is threatening to displace the workers. Facing increased competition from Brazil and a glut of oranges on world markets, alarmed growers here have been turning to labor-saving technology as their best hope for survival.

    "The Florida industry has to reduce costs to stay in business," said Everett Loukonen, agribusiness manager for the Barron Collier Company, which uses shakers to harvest about half of the 40.5 million pounds of oranges reaped annually from its 10,000 acres in southwestern Florida. "Mechanical harvesting is the only available way to do that today."....

    [T]he economics are in mechanization's favor. A tariff of 29 cents per pound on imports of frozen concentrated orange juice lets Florida growers resist the Brazilian onslaught — but not by much. According to Ronald Muraro and Thomas Spreen, researchers at the University of Florida, Brazil could deliver a pound of frozen concentrate in the United States for under 75 cents, versus 99 cents for a Florida grower.

    Mechanical harvesting can help cut the gap. Mr. Loukonen of Barron Collier estimates that machine harvesting shaves costs by 8 to 10 cents a pound of frozen concentrate.

    Read the whole thing. The creative desctruction of technological innovation does impose short-run dislocations on certain segments of the American economy -- particularly unskilled workers. However, the long-run effects are unambiguously positive, as Ted Balaker argues over at Reason (link via Virginia Postrel).

    This is not a new debate -- Frédéric Bastiat made these arguments in mid-19th century France. The Dallas Federal Reserve has a nice primer of Bastiat's arguments (thanks to Scott Harris for the link).

    The rhetoric of Bastiat's opponents sound awfully familiar today.

    posted by Dan at 11:35 AM | Comments (35) | Trackbacks (2)

    Tuesday, March 23, 2004

    Regarding Richard Clarke

    Being out of town and putting the Foreign Affairs essay to bed, I'm late to the Richard Clarke story. Clarke has a new book, Against All Enemies: Inside the White House's War on Terror--What Really Happened. He also appeared on 60 Minutes. The Bush administration using the big guns -- Condoleezza Rice and Richard Cheney -- to fire back. Howard Kurtz provides a nice rundown of the state of play.

    The blogosphere is getting into it as well -- check out Josh Marshall, Matthew Yglesias, Kevin Drum, David Adesnik, Chris Lawrence, James Joyner, and David Frum. The basic liberal line is that Clarke's account is a damning indictment of the Bush team's woeful unpreparedness for the war on terror, in part due to an obsessive focus on Iraq. The basic conservative line is that Clarke is just a disgruntled ex-bureaucrat who's hawking a book.

    So what's my take?

    1) Richard Clarke is no Paul O'Neill. Back in January I pointed out the flaws of Paul O'Neill as a messenger on Iraq. Clarke is a different story. This guy managed to work at a high level at the National Security Council for three different administrations. This is highly unusual -- most NSC staffers are either political appointments who leave with a departing administration or career bureaucrats who cycle out of State, DoD, or the intelligence community for a two-year stint.

    What does it mean that Clarke was able to hang around so long? It means two things. First, he was very capable at his job, in a way that O'Neill wasn't. Deputy National Security Advisor Stephen Hadley said on 60 Minutes that:

    Dick is very dedicated, very knowledgeable about this issue. When the President came into office, one of the decisions we made was to keep Mr. Clarke and his counter-terrorism group intact, bring them into the new administration--a really unprecedented decision, very unusual when there has been a transition that involves a change of party.

    Ryan Lizza adds, "this White House has never been confronted with such a credible and nonpartisan critic on the issue of terrorism."

    Second, he was extremely skilled in the art of bureaucratic politics. One official who saw Clarke in action -- and has no love for this administration -- described him to me as "smart, conservative, dedicated, insecure, and vindictive." I've heard stories from both friends and foes of Clarke, and they have one common thread -- you did not want this man for an enemy. He knows how to retaliate. [UPDATE: check out Fred Kaplan's sidebar and main story in Slate about Clarke for examples.]

    So, when the Bush team decided to jettison Clarke sometime after 9/11, they made an enemy out of Clarke. And they're paying for that now.

    So, does Clarke have a personal incentive to stick it to this administration? Absolutely. Does he know what he's talking about? Absolutely. Can what he says can be ignored? Absolutely not.

    2) The administration ain't helping its own cause. Ryan Lizza has a fine rundown of the different lines of attack levied against Clarke in the 48 hours since this story went live. They range from the plausible (Clarke was obsessed with process and not outcome) to the implausible (Cheney's implication that Clarke was out of the loop prior to 9/11). They also contradict each other at times. The fact that both Rice and Cheney have addressed this head-on demonstrates, in Kevin Drum's language, that "the White House is sure acting like they have the potential to do some serious damage."

    3) The administration could help its own cause. Stephen Hayes points out in the Weekly Standard that Clarke does come off as biased in throttling the Bush administration for apparent lassitude while the Clinton administration seems to gets a free pass:

    In his own world, Clarke was the hero who warned Bush administration officials about Osama bin Laden and al Qaeda ad nauseam. The Bush administration, in Clarke's world, just didn't care. In Clarke's world, eight months of Bush administration counterterrorism policy is more important than eight years of Clinton administration counterterrorism policy.

    It's worth remembering that every new administration needs about six months to work out the foreign policy kinks -- flash back to the Clinton team's firxt six months if you think this is a recent problem. To claim that they were slow to move on Al Qaeda misses the point -- unless it was a campaign issue, every new administration is slow to move on every policy dimension.

    Furthermore, as the Washington Post reports, in the end the administration did get this one right, in the form of a September 10, 2001 deputies meeting that agreed upon a three-part, three-year strategy to eject Al Qaeda from Afghanistan. For all of Clarke's accusations about the Bush team's neglect, it's hard to see how things would have changed if this decision had been made a few months earlier. Post-9/11, for all of Clarke's claims about intimidation to show Iraq caused 9/11, the policy outcome was that we ejected the Taliban from Afghanistan. Iraq was put on the back burner. I'm someone who's been less than thrilled with Bush's management of foreign policy. Some of what Clarke says disturbs me, particularly about homeland security. But for this case, it does look like the system worked.

    The best thing for this administration is to say in response to Clarke would be: "Yes, if we could turn back time, we'd have given AQ more consideration. But it probably would not have prevented 9/11. And don't claim that we could solve a problem in eight months that the last team -- in which Clarke was the lead on this policy front -- couldn't solve over eight years."

    4) There is a deeper policy split at work. Rational Bush opponents are happy to see Saddam gone but do not see any connection between the war in Iraq and the larger war on terror. Rational Bush supporters will acknowledge that at best there was a loose connection between Iraq and Al Qaeda, but that remaking Iraq is a vital part of the war on terror because it will help to remake the Middle East, terrorism's primary source.

    David Frum writes:

    The huge dividing line in the debate over terror remains just this: Is the United States engaged in a man-hunt - for bin Laden, for Zawahiri, for the surviving alumni of the al Qaeda training camps? - or is it engaged in a war with the ideas that animated those people and with the new generations of killers who will take up the terrorist mission even if the US were to succeed in extirpating every single terrorist now known to be alive and active? Clarke has aligned himself with one side of that debate - and it's the wrong side.

    I'm not completely convinced that Frum is being fair to Clarke, but the comment raises an interesting parallel between current debates over how to wage the war on terror and previous debates over how to contain the Soviet Union.

    55 years ago, George Kennan and Paul Nitze had different positions on how to wage a containment policy, with Nitze taking a much more aggressive posture in NSC-68 than Kennan did in "The Sources of Soviet Conduct." I'm not sure that it's ever been decided which position was right. The same will likely be true of current debates.

    posted by Dan at 02:15 PM | Comments (214) | Trackbacks (17)

    A query to those worried about outsourcing

    The lion's share of the critical feedback I've received from "The Outsourcing Bogeyman" essay has been targeted at my claims about the IT sector. I'm supposedly wrong on the IT side of the equation, and therefore better-paying jobs will follow lower-paying jobs overseas.

    What's interesting is that I haven't heard much discussion about either the manufacturing part of the story or the business processes part of the story. Does this mean people are willing to acknowledge that these are sectors where standard trade theory apply?

    [Now you're just goading your critics--ed. No, just curious -- plus, it might make a good article about public perceptions of economics.]

    posted by Dan at 12:08 PM | Comments (46) | Trackbacks (1)

    Monday, March 22, 2004

    Critiquing one critique

    Scott Kirwin posts his critique on why I’m wrong on outsourcing. It boils down to:

    1) I’m relying on the outdated theory of comparative advantage, which according to Paul Craig Roberts, no longer applies when capital and technology are mobile.

    2) I’m relying too much on statistics from the McKinsey Global Institute to support my case because it’s “the research arm of one of the world's great outsourcing firms. It's like citing Japanese gov't statistics to justify whaling.”

    3) I’m underestimating the extent to which better-paying jobs can be outsourced.

    I’ve dealt with the “death of comparative advantage” argument in the past – or rather, Noam Scheiber has.

    However, it’s worth pointing out that the current direction of capital flows bears no resemblance to what either Roberts or Kirwin fear. The U.S. currently runs a massive capital account surplus, which finances both our budget and trade deficits. When restricted to foreign direct investment, the overwhelming majority of U.S. outrward FDI goes to other OECD countries. This objection is the reddest of red herrings.

    On relying too much on MGI data because they’re big into outsourcing – hey, I’ll relinquish MGI data if Kirwin and others renounce the use of data from Gartner, Forrester, Deloitte, etc. [You're being flippant!--ed. Here's a more substantive response.] All of these firms are equally into outsourcing but still put up overhyped guesstimates about projected job losses. As I pointed in the Foreign Affairs article, these firms also have a strong incentive make outsourcing a business fad. Think their job loss numbers might be exaggerated a tad?

    On the future of better-paying jobs, Jacob Kirkegaard of the Institute for International Economics points out that the Forrester study that got everyone hyperventilating in the first place points out that most jobs projected to be lost are below the US average wage.

    Certainly the data to date don’t support Kirwin at all. According to Kirkegaard:

    Computer programmers engaged in relatively simple tasks (when compared to other software occupations) have seen a sustained job loss since the end of 1999, while more advanced software occupations have increased their employment since the beginning of 1999. This is an indication that indeed low-skilled tasks within the software sector may be migrating out of the United States, but higher-skilled tasks remain. Such a trend of technological destruction of US IT jobs, where increasingly standardized tasks are either automated or offshore outsourced, may also be present in other IT occupations…

    [E]xcluding management occupations, of the 12 IT occupations that earned more than $50,000 in 2002, 75 percent increased their employment from 1999 to 2002. IT jobs earning more than $50,000 expanded by 184,000 from 1999 to 2002, of which computer software engineers earning approximately $75,000-a-year accounted for 115,000 jobs.


    posted by Dan at 06:46 PM | Comments (54) | Trackbacks (3)

    Statebuilding proceeds in Iraq

    The Washington Post reports on an imminent deal to disarm the two big militias remaining in Iraq. The key parts:

    Leaders of Iraq's two largest militias have provisionally agreed to dissolve their forces, according to senior U.S. and Iraqi officials. The move is a major boost to a U.S. campaign to prevent civil war by eliminating armed groups before sovereignty is handed over to an interim Iraqi government on June 30, the officials said.

    Members of the two forces -- the Shiite Muslim Badr Organization and the Kurdish pesh merga -- will be offered a chance to work in Iraq's new security services or claim substantial retirement benefits as incentives to disarm and disband. Members of smaller militias will also be allowed to apply for positions with the new security services, but those that choose not to disband will be confronted and disarmed, by force if necessary, senior U.S. officials said.

    The occupation authority is still negotiating with Kurdish and Shiite leaders, who want more extensive guarantees than they have been offered. But U.S., Kurdish and Shiite officials said they had secured an agreement in principle and likely will announce a formal deal within the next few weeks.

    "We believe that all militia members should be part of one national army and police force," said Hamid Bayati, a top official of the Supreme Council for the Islamic Revolution in Iraq, the Shiite political party that controls the Badr Organization, which is estimated to have at least 10,000 members.

    Jalal Talabani, one of Iraq's two top Kurdish leaders, said in an interview that Kurdish officials have "an agreement with the coalition to find an honorable solution for the pesh merga."

    posted by Dan at 12:14 PM | Comments (22) | Trackbacks (1)

    posted by Dan at 12:10 PM | Comments (58) | Trackbacks (0)