Thursday, November 16, 2006
I saw the best minds of my generation destroyed by the Nassau Inn
Blogging will be light for the next 48 hours as I wend my way to Princeton for the first meeting of the International Political Economy Society.
The quickest and dirtiest path out of Iraq
As sectarian violence rises in Iraq and the White House comes under increasing pressure to revamp its strategy there, a debate is emerging inside the Bush administration: Should the U.S. abandon its efforts to act as a neutral referee in the ongoing civil war and, instead, throw its lot in with the Shiites?The political science literatue on civil wars would recommend backing the Shia. Monica Duffy Toft summarized this logic in a Washington Post op-ed:
The fighting can stop in a variety of ways -- by military victory or negotiated settlement. Historically speaking, military victories have been the most common and have most often led to lasting resolutions. So while a negotiated settlement may seem the most desirable end point, this resolution is frequently short-lived even with third-party support....Similarly, James Fearon summarized the state of poli sci knowledge about civil wars in his testimony to Congress:
By any reasonable definition, Iraq is in the midst of a civil war, the scale and extent of which is limited somewhat by the US military presence.The political science on this is pretty clear. The morality of such a policy is clearly more troubling. That said, Kevin Drum makes a valid point:
Would this be an appalling strategy to follow? Of course it would. Appalling options are all that's left to us in Iraq.Discuss.
Milton Friedman, R.I.P. (1912-2006)
Milton Friedman died today at the age of 94.
Here's the Cato Institute's obituary. And here's the New York Times obit. The best quote in that one comes from Ben Bernanke: "His thinking has so permeated modern macroeconomics that the worst pitfall in reading him today is to fail to appreciate the originality and even revolutionary character of his ideas."
The obit aso contains these surprising (to me) facts:
In his first economic-theory class at Chicago, he was the beneficiary of another accident — the fact that his last name began with an “F.” The class was seated alphabetically, and he was placed next to Rose Director, a master’s-degree candidate from Portland, Ore. That seating arrangement shaped his whole life, he said. He married Ms. Director six years later. And she, after becoming an important economist in her own right, helped Mr. Friedman form his ideas and maintain his intellectual rigor.
Why do foreigners overpay for US brands?
Daniel Gross asks this question in Slate with regard to foreign purchases of American conumer companies in the U.S. His answer:
It's not that dim foreign owners are screwing up the healthy American brands they acquire. Rather, they are buying brands that are already on a downward trajectory. To foreigners, these companies may seem like iconic, big brands. IBM did invent the PC. Reebok is a pioneer in fitness. And Pier 1 is the biggest independent home furnishings chain—as of February 2006, it had more than 1,100 stores in the United States (plus 43 Pier 1 Kids stores) and $1.78 billion in annual sales. Foreign companies like these brands not because they're global icons, although Reebok and IBM have international presences, but because of their domestic cachet. It would take immense sums of money to build such brands in the United States from scratch....Of course, sometimes American companies overpay for foreign assets too.
Wednesday, November 15, 2006
Will Bush 43 become like Bush 41?
The purported dichotomy between 41 people (good!) and 43 people (bad!) is dramatically overstated.... Paul Wolfowitz was on the Bush 41 team. So was Condoleezza Rice. And, of course, so was Colin Powell. Don Rumsfeld, meanwhile, wasn't. The reality is that presidents almost always -- especially in the first terms of their administrations -- appoint reasonably diverse groups of people to national security positions. They proceed to disagree with each other. The President of the United States then decides what he wants to do. Bush 41 had some real nutters working for him who pushed some nutty ideas inside his administration. Bush 43 had some reasonably sensible people working for him who pushed some reasonably sensible ideas inside his administration. The difference wasn't in the advisors, it was in the presidents. More often than not, Bush 41 made reasonable choices while Bush 43 made bad ones.This is a fair point, but it does not necessarily mean that the Gates/Rumsfeld switch doesn't matter. The key question is whether Bush 43 has learned from his decision-making failures. One could argue, in fact, that the Gates/Rumsfeld switch is evidence suggesting that he has decided to switch tack.
Or, it could be a PR stunt.
As I said when debating Matt, I'm not sure which it is. I assume my readers will have fewer doubts one way or the other.
I, for one, welcome our protectionist overlords
The most important--and unfortunately the least debated--issue in politics today is our society's steady drift toward a class-based system, the likes of which we have not seen since the 19th century. America's top tier has grown infinitely richer and more removed over the past 25 years. It is not unfair to say that they are literally living in a different country. Few among them send their children to public schools; fewer still send their loved ones to fight our wars. They own most of our stocks, making the stock market an unreliable indicator of the economic health of working people. The top 1% now takes in an astounding 16% of national income, up from 8% in 1980. The tax codes protect them, just as they protect corporate America, through a vast system of loopholes....The op-ed consists mostly of a critique of the existing situation -- not a lot of suggested solutions. For that, we have to go to his campaign web site, where we find:
This country is splitting into three pieces. As a result of the internationalization of the economy, the people at the top have never had it so good. The middle class is continuing to get squeezed by stagnant wages and rising cost of living. And we are in danger of creating a permanent underclass. We must reexamine our tax and trade policies and reinstitute notions of fairness, and also enforce our existing trade laws so that free trade becomes fair trade."Fair trade" is a vague term, but given Webb's rhetoric, it's safe to say that he kind of policies that Webb favors will:
a) Have little effect on the income of the richest Americans -- though their capital gains will fall dramatically;Combine that with reduced overall growth, and, well, it's gonna be a scary Senate for international economic policy.
[L]et's suppose for a moment that a free-market economist were hired by the Dems to offer policy advice. If the boss's goal is to reduce income inequality, what is the best way to do that?
The sort of news story that keeps me up at night
This New York Times story by Robert Worth has very little good news in it:
More than 700 Islamic militants from Somalia traveled to Lebanon in July to fight alongside Hezbollah in its war against Israel, a United Nations report says. The militia in Lebanon returned the favor by providing training and — through its patrons Iran and Syria — weapons to the Islamic alliance struggling for control of Somalia, it adds.
Tuesday, November 14, 2006
Will Kaesong subvert North Korea?
I'm probably more enthusiastic than most about the ability of multilateral economic sanctions to topple the North Korean regime. On the other hand, it looks like real multilateral enforcement ain't gonna happen anytime soon.
So.... what's left? Well, there's the engagement option, of course. Which leads me to Anna Fifield's FT journal from Kaesong, the joint ROK-DPRK industrial zone. If commercial engagement is going to change the DPRK regime from within, this should be the flashpoint.
Fifield's piece sounds optimistic, but I have my doubts:
South Korea’s sunshine policy has clearly failed to change the regime’s behaviour – Seoul has sent billions of dollars to Pyongyang over the past eight years and has received almost nothing in return. Seoul must start to demand information about where its money is going – preferably paying Kaesong workers directly – and make it clear how it expects Mr Kim’s regime to act in return for this assistance.My research suggests that in places where sanctions don't look like a viable tool of statecraft, engagement does not work any better, but you, dear readers, be the judge -- is Fifield's cautious optimism well-placed?
Best endorsement ever
This evaluation of the blog might have to be excerpted on the sidebar:
This is a personal website, by a person call Daniel D. Rezner, where he has a section on his opinions and terrorism and its impact on the world's economy. He has some interesting comments and suggestions so you can visit his site if you are interested.
What deep capital markets you have!!
A common lament among financial market analysts in the U.S. is that the onerous provisions of Sarbanes-Oxley (SOX) are costing American equity markets lost listing oppotunities, threatening a sector that's vital to the United States. These people find unlikely allies in Nancy Pelosi and Barney Frank.
I certainly support making SOX compliance easier for new start-ups, but it should be noted that I don't see the U.S. losing its primacy in equity markets anytime soon. For those doubters out there, click over to this Foreign Policy list of candidates to supplant the New York Stock Exchange.... in a century or two. The most important sentence in the piece is the first one: "The New York Stock Exchange dominates global trading. At nearly $23 trillion, its market capitalization—the value of the stocks it lists—is more than four times that of its closest competitor."
Monday, November 13, 2006
Assignments for the Economist blog
I'm pleased to see that the Economist has entered the blogging age, with its Free Exchange blog. As per the Economist's rules for its print magazine, there is no identification of the authorship of individual posts, but I have it on good authority that Megan McArdle is using her invisible hands to guide its development.
As I am knee-deep in day-job activities, I would like to welcome Free Exchange into the blogosphere by requesting that it comment on two memes currently making their way through the blogosphere:
1) Over at Crooked Timber, Chris Bertram asks a pointed question to libertarians -- what kinds of inequality matter?[T]he crux of Tyler [Cowen]’s argument has been that Europe’s ageing population matters because it will lead to lower growth rates and that the compounding effect of these will be that Europe’s position relative to the US (and China, and India) will decline, and that that’s a bad thing for Europeans. Whilst Tyler insists that these global relativities matter enormously, Will [Wilkinon] suggests that domestic relativities between individuals matter hardly at all. Since I think of Will and Tyler as occupying similar ideological space to one another, I find the contrast to be a striking one, and all the more so because I think that something like the exact opposite is true. That is to say, I think that domestic relativities matter quite a lot, and that global ones ought to matter a good deal less (if at all) just so long as the states concerned can ensure for all their citizens a certain threshold level of the key capabilities.UPDATE: Drezner gets results from Free Exchange!!
What's going on in international education?
A few odds & ends from the world of international education:
1) It would appear that the U.S. has finally reversed the decline in international students wishing to study in the U.S. Karen Arenson summarizes the latest information in the New York Times:The number of new foreign students coming to the United States grew this school year, after several years of weakness that followed the terrorist attacks of 2001, according to a survey to be released today by the Institute of International Education.Parenthetical thought -- how does Lou Dobbs feel about this info? On the one hand, the increase in student visas means greater flows of foreigners into the United States -- which Dobbs the nativist would surely condemn. On the other hand, the increase in foreign students actually improves our balance of trade ($13.5 billion according to this estimate), since they count as an export of services -- which Dobbs the mercantilist would surely like.