America and Myanmar: Be Realist, but Be Liberal, Too

President Obama just got finished with a trip to Myanmar. This trip is of massive significance, because Myanmar has been a pariah state since the 1990s. The trip is a sort of reward to Myanmar for making positive changes. This is a situation in which sanctions seem to have worked: Myanmar did not like its pariah status, in part because strict Western sanctions meant that it had to rely heavily on China. Myanmar is now looking to diversify its options. This also comes at an opportune time for American policy: America is in the middle of a strategic “pivot” towards Asia. Sanctions have thus been in place for liberal reasons like promoting democracy and human rights and encouraging the release of Aung San Suu Kyi. Removing some of those sanctions is also a way to encourage Myanmar to continue improving. At the same time, however, they also serve a strategic, realist purpose. Has the shift towards good relations with Myanmar been too fast? In other words: Is America getting overly concerned with balancing against China and leaving liberal causes by the wayside?

Myanmar has made some very positive changes towards more openness and democracy. Aung San Suu Kyi has also approved of these changes and the loosening of sanctions against Myanmar in order to support continued change. Myanmar's legislature now includes mostly elected politicians and it seems to have some real influence on governing, which is a welcome change to full-on dictatorship. However, these changes are still limited and, perhaps more importantly, imminently reversible. There are still problems with the repression and mistreatment of ethnic minorities and there are still conservative factions within the army that are opposed to further opening. Myanmar is thus not there yet. Some sanctions, however, are also still in place. They should not be fully removed until the country has arrived at liberal democracy. Are we moving too fast? It seems the most onerous sanctions are already gone. There is also a further danger: Myanmar may see the US “pivot” towards Asia as a reason the United States will want to embrace Myanmar no matter what it does. What's more, the country's leaders would have reason to think this.

In the autumn of last year, the Obama Administration announced a "pivot" towards Asia. The main reason for this strategic shift is that the Administration rightly sees Asia is the future. Specifically, though, it has seen that US allies in the region are increasingly nervous about the rising power of China. Since 1945, with a few glaring exceptions such as the Korean and Vietnam wars (which are not necessarily considered exceptions, but let's leave that for now), the Asia-Pacific region has experienced what is known as the “Pax Americana.” The US presence in the region, including important security guarantees to allies like Japan and South Korea, has meant that countries there have been free to concentrate on economic development and have not needed to worry about the military prowess of their neighbors. Japan has a military that, according to its own constitution, is purely for defensive purposes. It also has no nuclear weapons, though it certainly has the capability to develop them. This stability will be at risk if countries in the region feel that the United States can no longer maintain the status quo there and that they themselves must be able to defend themselves against a rising China.

It does not matter whether or not China or its neighbors actually seek war. What matters is that little bit of fear in the back of leaders' minds that makes them think they had better be prepared – just in case. The result could be a buildup of arms in the region, possibly including Japanese and South Korean nukes. Each build-up would then serve to make each country's immediate neighbors more nervous, encouraging them to build up as well. This conundrum is known as the "security dilemma.” The US presence in East Asia has so far prevented this outcome, and the Obama Administration seems to wish to continue doing so for as long as possible.

This focus on broader strategic goals is good. Over time, of course, the US may not be able to maintain the Pax Americana. But in the short to medium term, it makes sense to try (I won't discuss the pitfalls here). The risk in the case of Myanmar, however, is that the US places realist strategic goals ahead of liberal ones. Generally, if the choice comes down to those two, then I support realism. We do not yet have to choose, however. America can still pivot towards Asia and it doesn't necessarily need Myanmar to do so. What's more, balancing is occurring anyway. China's neighbors are uncomfortable with its power and with its maritime claims in the South China Sea. These countries have been cultivating better relations with each other and with America already. The region's other superpower, India, has also grown much closer to America. America's pivot towards Asia is therefore in many Asian countries' own self interest. America doesn't need to bribe them much (though it should cultivate good relations with them). There is thus no need yet to sacrifice liberal causes on the altar of strategic realism.

America can thus both stick to its principles of support for democracy and human rights while keeping an eye on important strategic goals like stability, security, and, in the end, peace. Hopefully, the Obama Administration and future American Administrations recognize this and will continue to keep the pressure on Myanmar whenever needed in order to keep rewarding it for moving in the right direction. Hopefully, too, both the leaders of the United States and Myanmar realize that the loosening of sanctions is every bit as reversible as Myanmar's own move towards democracy and its promotion of human rights.

Israel V Hamas: Why Is the Violence Picking Up?

Hamas and Israel are currently duking it out against each other in the Middle East. The number of rockets launched at Israel from the Gaza Strip has risen sharply recently. Rockets so far this year total at least 1,197, with 396 having fallen on Israel since November 14th! What is going on? What explains this sudden uptick in violence?

Hamas seems to have been deterred after the 2008-09 Gaza war. The number of rocket attacks increased throughout the years 2007 and 2008 and then fell off a cliff in early 2009. Things were then quiet through 2010, and even in 2011 during the upheaval of the Arab spring, things still remained relatively quiet. In the past few months, however, this has changed. Why?

The simplest answer is that Hamas perceives its circumstances to have changed. These changes include a great improvement in its own capabilities – it now possesses rockets in greater numbers, including some that are much more advanced, capable of reaching Tel Aviv and Jerusalem. In addition, and perhaps more importantly, there are political changes in the world around the Gaza Strip and Israel. The most obvious of these is the changed situation in neighboring Egypt. The Egyptian government is now headed by Mohammed Morsi, a Muslim Brother. At first, this didn't seem to have made much of a difference. But if anyone thought that things would continue as they were before, they were mistaken. One big sign of this change was the visit to Gaza of Qatar's Emir Sheikh Hamad bin Khalifa Al Thani. This was a huge show of support for Hamas, but it pales in significance when compared with the visit earlier this week by Egypt's Prime Minister Hesham Qandil.

To understand why, picture this: The Egyptian Prime Minister visits Gaza. During this time, Hamas launches rockets at Israel and Israel retaliates. (So far so good: All this happened.) Imagine that, during Israel's retaliation, the Egyptian Prime Minister was injured or killed. The political consequences for Israel would be dire. Egypt would have the pretext to turn wholly against Israel and, perhaps more importantly, Israel's allies might find it more difficult to provide Israel with solid backing. Under the circumstances, Egypt might not care about losing the vast aid that it receives from the United States. If it turned down this aid, that would remove substantial leverage that the United States has on Egypt that it has so far been able to use to moderate Egypt's position regarding Israel and the Palestinian territories.

Of course, none of this happened. Egypt's Prime Minister was in Gaza for only a very short time, no doubt because he had no intention of risking his life for the conflict. Nevertheless, all of this is symbolic of massive changes on the political front in the Middle East. Specifically, it shows Egypt is increasingly willing to throw its weight into the conflict on the side of Hamas. In my view, it is this, combined with the domestic pressures that Hamas faces, that have emboldened it to these unprecedented attacks on Israel, including never-before-seen attacks on Tel Aviv, Israel's main city. The chaos in Syria may also be playing a role: Bashar al-Assad's regime supported Hamas, and Hamas's external leadership long called Damascus its home. Hamas may thus be using a fight with a hated neighbor in order to distract from its involvement with a bloody regime in Syria and rising dissension at home within the Gaza Strip.

Hamas is this now testing the new limits it now perceives. How much can it get away with? How deep is its support within the Arab world? How much influence does the United States continue to have there? Overall: How much have things shifted in its favor? In essence, Hamas is attempting to change the "rules of the game" that were set in 2009 to gain itself more leverage. None of this bodes well for Israel, not only now, but also over the medium to long term.

If Iran Goes Nuclear: Missile Defense vs. Deterrence

There has been a lot of discussion in the media recently about the possibility of Iran obtaining nuclear weapons. I won't dive into the debate about whether or not Israel or the United States should attack Iran's nuclear facilities. Instead, I would like to write about the choices Israel will face if Iran does go nuclear.

Some have argued that the defenses required if Iran goes nuclear would bankrupt Israel's economy. Presumably, this defense refers to missile defenses and things like detectors at ports and border checkpoints. Such measures could indeed put a heavy strain on Israel's economy if implemented. But do they make sense?

Missile defense may be of limited use in a non-nuclear situation, but it is pointless in a nuclear one. Currently, Israel has to deal with regular rockets being launched from the Gaza Strip. Israel's deterrence of the militants launching these rockets is not absolute: They do not launch all the rockets they have or rarely launch full-on assaults of Israel; but there is a steady, low-level stream of rockets. Israel's current missile-defense system makes sense for protecting Israeli citizens against these every day non-nuclear rocket launches. Because Israel's deterrent strategy does not rely on launching rockets for rockets, there is minimal risk of escalation. This does not mean no risk at all: Militants could launch rockets directly at Sderot with a domestic (i.e. Palestinian) audience in mind with the expectation that the rockets will be stopped anyway. Perhaps the goal would be just to cost Israel money by forcing it to launch expensive interceptor rockets. If any Gazan rockets get through, however, an Israeli counterstrike could be imminent. However, this is not really all that different from the situation without the missile-defense shield, as rockets do sometimes hit civilians obliging Israel to hit back. On balance, the shield therefore seems to make sense.

At the same time, however, such a shield could never be expected to provide any real defense against a heavy onslaught. The number of interceptor rockets is limited, interception is not 100% assured, and Israel's interceptor rockets are vastly more expensive than the rockets militant groups launch from the Gaza Strip. A launch of hundreds of rockets from the Gaza Strip could therefore easily overwhelm the system. Such a system is no good at providing 100% security.

This is also the reason why a missile shield against nuclear missiles makes no sense. In a nuclear situation, prevention must be absolute. One nuclear-tipped missile getting through is too many. There are two reasons given why missile defenses don't make sense. The first is that they do not work, the second is that they can lead to instability, undermining deterrence. Both of these propositions cannot be true at the same time. If missile defenses don't work, then there is no reason that they should cause instability. If they cause instability, then they must work somehow or other. Even so, it is possible that both these propositions could be true at different times. This is the reason why it's plausible that politicians might build an expensive and ultimately ineffective missile-defense system.

During an initial phase, Iran might not have very many nuclear missiles. It might therefore seem feasible to stop two, three, or four missiles using a high-tech missile defense shield. It would be expensive, but it would almost seem to make sense. If this shield is seen as solid enough by Iran, it could very well lead to instability via an arms race. Iran would recognize that the way around the missile shield is to build enough nuclear missiles to overwhelm it. If Israel tries to keep up, this would be very expensive indeed. All of this could only occur, however, if both sides focused blindly on missiles. There is always the possibility of smuggling a nuclear bomb into a country by other means and this seems even harder to rule out altogether.

During the second stage, a missile defense system is less likely to cause instability or a further arms race because it will become increasingly clear that it cannot be effective. It would always be possible to overwhelm the system and, because such a system could never be 100% reliable, it would always be possible to make sure that one missile (and that is all that is required) would get through. The level of control required to seal off all of Israel's borders and to provide an ultimately incredible degree of reliability from the missile-defense system would turn Israel into a police state and be staggeringly expensive.

All of this suggests that the best move is to rely on deterrence and not bother with missile-defense for nuclear missiles. To do this, Israel may need to make its presumed nuclear capability explicit and more transparent. Deterrence may also not be 100% safe, but as I have illustrated, missile-defense would not increase that security in the slightest. Given (at best) equal levels of security, it seems obvious to me that leaders should choose deterrence due to its lower cost and the smaller number of restrictions that would have to be placed on Israelis' civil liberties. Neither of these situations may be desirable, and leaders might like to look like they're doing something (whereas deterrence might look like doing nothing). When that something is surely ineffective, expensive, and heavily restricts civil liberties, however, there is not really much of a choice at all.

Pension Ponzi

After I wrote the last post, I wasn't entirely satisfied with it. What it did do was explain why certain types of taxes are essentially the same as borrowing (I'm certainly not the first to point that out). What it didn't do is make this any less abstract. A debt-to-GDP ratio of 400%! Sounds big, but what does it mean? Since countries don't die very often, America could have centuries to pay off that debt. Put that way, it doesn't seem like such a big deal. That assumes that America's creditors would keep rolling over the debt and not want to cash it in, though.

Anyway, all that's abstract, too. So I thought I'd make an extremely simplified model of a pension scheme. We're going to make a pretend company that starts off with 100 workers, none of which are retired, and then see how things progress. Our company could just as easily be an entire economy: It's population can grow, as can its workforce. They can also both shrink. We'll see with examples exactly how birth rates, life expectancy, and retirement ages affect everyone in the system. It requires only a little math, and I'll use easy numbers wherever possible. Oh, and I won't adjust for inflation or anything else. Again, it's not supposed to be reality, just a quick illustration with stick figures, if you like.

OK, so our company has 100 workers. Let's say they all earn the same amount. We introduce a retirement plan. Those who turn 65 get to retire on 2/3 of their salaries. Everyone else will pay from their own salaries to support them. In the first year, two retire. They are replaced by two new hires. We have 100 people supporting 2 people who only receive 2/3 of a salary. That makes 2*2/3=1.33. That means the workers have to pay 1.33% of their salaries into the pension program. Easy, and not much of a burden. The "old age dependency ratio" (the ratio of workers to old people) is 50 to 1.

In each subsequent year, two people also retire and two are hired to replace them (always 100 workers). The number of retired rises by two per year. So there are 4 the second year. The dependency ratio is now 25 to 1. Each worker now has to pay 2.67% of his or her salary to support the pensioners. Still not much of a burden, but it has doubled.

Let's say the average pensioner lives 20 years. We'll take that average and just pretend that they all live exactly 20 years for simplicity's sake. That means the number of pensioners would rise for 20 years. After that, it would stabilize at 40 pensioners for 100 workers. Each worker would now have to pay an eye-watering 26.67% of his or her salary for the pensioners. The dependency ratio is now 2.5 to 1. Let's not forget that these workers also have to support children, so the overall dependency ratio is even worse. These are hard-pressed workers indeed. This, in a nutshell, is what's happening. But it may be even worse. The reason is that the work force in rich countries is actually set to decrease (or is already), even as the number of pensioners rises (due to baby boomers retiring and increased longevity).

For years, the opposite happened: more people entered the workforce each year than retired. That made it seem like pension promises could be kept. If the workforce shrinks, this gets harder. We now add three per year to the pensioners (e.g. as the baby boomers retire), but maybe only one per year to the workers. After 20 years, there are 80 workers supporting 60 pensioners. This would obviously be impossible: Each worker would have to pay 50% of his or her income to support the pensioners.

Of course, the numbers are not that extreme or round, but that is the gist of what's happening. One solution is to raise the retirement age. Let's see what happens. We'll start again with 40 pensioners and 100 workers (the stable numbers we had before, but with a high pension burden). Here's a year-by-year breakdown if we instantly raised the retirement age to 70 but kept replacing workers at the original rate of 2 per year. This used to keep everything constant. Now, the workforce grows again and the number of retired declines.

Workers    Pensioners     Pension payment (%)
100            40                 26.67
102            38                 24.84
104            36                 23.08
106            34                 21.38
108            32                 19.75
110            30                 18.18
110            30                 18.18

With no further increase in life expectancy (which would increase the number of pensioners), birth rates (which would eventually change the number entering the workforce), or immigration (an increase of which would also increase the number of workers), the system would stabilize at a somewhat more affordable level. Each person would work longer, paying into pensions longer, and also be retired a shorter time, thus drawing less money out of the system.

In the case of most rich countries, this change would be gradual and could thus at most hope to slow the rise of pension premiums rather than slash them. It's still the right move. Health care, by the way, is a much more significant problem than pensions in the US, at least, but pensions are easier to illustrate (this is basically how Social Security works, except that it also does have a trust fund--which is being drained).

What about fairness? If you think back to when the system was implemented, those who retired first got a great deal: they paid nothing in and got 20 years of free pension payments (in reality, people didn't live so long in those days, so it wasn't quite so generous).  The people who worked while the system was ramping up also paid in less than those who came later. Those who are stuck paying the most and forced to pay longer (by working longer) and spend less time retired are clearly getting a raw deal. It's a sort of inter-generational transfer of wealth: The young people of today are shifting money back to the old people of the 1930s. That may seem unfair, but that is EXACTLY what debt is: spend now, pay later. With governments, that means this generation spends now, some later one pays. The bill, my friends, is coming due. The music is stopping, and it looks like we're the ones with no chairs to sit on.

The "informational" part of my post ends here. The rest is a bit of a rant, which you may want to skip if you don't want to get revved up. If you do, though, by all means: read on.

Was it past generations' fault? Surely our parents worked hard? No question mark needed. They DID. Our parents and grandparents did, however, benefit heavily from the schemes put in place. It was innocent enough: With growing populations and workforces, the scheme is sustainable. It's also easy to see why, even as demography began to shift, with old people living longer and the workforce growing more slowly, no one wanted to change. The problem had not become a crisis and no one wanted to be the sucker generation that got stuck paying the bill by finally owning up to the emerging problem and dealing with it.

Do we blame politicians? Sure, but we also have to blame those who voted for them. What about the media, which are supposed to inform the electorate and highlight issues? Yes, they are to blame, too. But: we've been hearing about the problem for ages and have failed to act AND people also only get the news media they deserve. If we'd rather watch newscasts with anchors who read Twitter feeds about Kim Kardashian and chat with each other about how they spent their weekend, then that's what the advertisers will pay for and that's what stations will provide us. In the end, this is not about blame. Blame gets us nowhere even if there's plenty to go around. We need to look forward, not back.

What is the solution here? The best of all worlds would be everyone deciding we needed to get to work and fix this stuff. Everyone decides to demand good news coverage and analysis and holds politicians to account. Everyone realized that we all will have to make further sacrifices and that no one can be spared. We all demand discussions rather than bickering, solutions rather than recriminations, and look to the future as a target place we want to get to proactively, rather than something we are trying to pretend we don't see coming in the hope that we won't have to address any of the problems that have been mounting for decades.

Fantasy. Or is it? As the crisis continues, people are being forced to pay more attention to its causes. Britain in the 1970s looked a lot like America today: a deeply divided country with a bickering, rudderless government. The empire was gone, Britain's world standing had faded, its industries were dying, its debts were high. Britain today has the same problems America has today, too. In fact, its debts are even higher. There's one crucial difference, though: Britons seem to be getting on with the work of tackling the issues. There's still plenty of fighting, but there is an acceptance that something must be done and somewhat of a consensus on approximately what that might be.

Consensus has emerged at crucial times in America, too. The country survived the Civil War (barely) as an incredibly divided place. It went on to do great things. In the depths of the Great Depression, a sort of FDR consensus emerged that lasted decades. A Cold War consensus also eventually emerged. Cue the bla bla about crises and opportunity.

Is this time different? The other disturbing question: how bad does it have to get, and how many false paths do we have to follow, taking us how close to ruin, before a new consensus emerges?

That should be the end of the post, but I have one further thing to say: I increasingly wonder if things like good news coverage need to be subsidized. They benefit more than just the people who watch and read them, making them a public good, something that makes economic sense to subsidize. The problem is always deciding what's "good," though, but I think we need to try. "Infotainment" is the abomination word of my generation, I think. There is no such thing. Reality isn't always entertaining and funny. That doesn't mean we can just change the channel. Whatever channel (or website, or blog) you follow, reality is still there, waiting to bite you in the ass if you ignore it too long.

Why Social Security is debt by another name

There is a lot of debate in America today about the country's long-term fiscal position. Some of the confusion around this debate centers, I think, on what seems like a minor technicality: the definition of what is a tax and what is borrowing. Most people view Social Security payments as a type of tax. Indeed, the payment is even called “Social Security tax.” But it's just as sensible, or perhaps even more sensible, to view Social Security as a form of debt taken on by the US federal government. Here's why.

What's the difference between taxing and borrowing? This seems like a very simple matter, but it's not. This might pass as a sensible definition of a tax: A tax is money charged by the government that it is free to use however it wishes, obviously within the confines of the system of government (laws, citizen approval if it's a democracy, etc.). It does not create a specific liability and does not have to be paid back in a specific way. Sure, we expect our governments to spend the tax money we pay in some fashion that will benefit us in some way, but there isn't a specific liability nor specific need to pay us back in a specific way (and it is usually accepted that more money is taken from some groups than they receive and vice versa).

Borrowing, on the other hand, means there is a specific liability. If someone borrows money from you, the understanding is normally that they will pay it back with interest. The way they pay it back, and how much they pay back, are usually subject to the terms of the borrowing arrangement.

Viewed this way, Social Security is more like borrowing than a tax. You give money to the government in the form of the Social Security tax, but the government is obligated to pay it back to you in the form of a pension. In effect, the government has borrowed this money from you and this has created an obligation. In the private sector, any such arrangement would be counted as a debt and accounting rules would mean that the company would have to show how it planned to pay for the future liabilities it was incurring through this debt. Governments, however, are not required to do this. If the US government were required to list Social Security payments as a tax, US government debt today would already be much much higher than its current official figure. In fact, it would be around $61.6 trillion if Social Security, Medicare, and Medicaid (also promises the government makes to pay for care over time that are currently unfunded and thus a form of borrowing). That's a debt-to-GDP ratio of around 411%!!! Put another way, that's over $205,000 of debt per person in the US! That makes my student loans sound like a pittance. Basically, everyone has to pay for an additional mortgage or two before they retire.

Members of the tea party who are really thinking (that may not be a large proportion) are upset because of figures like these. They are right to be. One group of citizens who are not particularly upset are young people. This must be because of ignorance, since they are the ones who are going to bear the brunt of this massive debt burden, a colossal transfer of wealth from the young and healthy to those who are old and need care.

It's a thorny issue to say the least. These debt obligations are also moral obligations to make good on what the government, and through it the American electorate, have promised. We surely can't cancel old peoples' pensions or simply stop paying for care for the needy and the old. But we do have to take action, and it has become clear that the amount of payments we are currently set to dispense are simply unsustainable. In some way, healthcare costs must be brought down (see my plan), the pension age raised, contributions to Social Security and healthcare programs increased, and, possibly, Social Security payments reduced in some way. This is horrendous, but it is unavoidable. The longer we ignore it, the worse it will become.

Netanyahu is right about "red lines" for Iran

If you follow Iran's nuclear developments or Israeli politics even remotely, you'll have heard about the Israeli Prime Minister Benjamin Netanyahu's fight with US President Barak Obama over setting "red lines" for Iran's nuclear program. Netanyahu says he won't be able to relax or feel confident that the US will really prevent Iran from developing a bomb unless these "red lines" are drawn firmly by the United States. The US (and not just Barak Obama) refuses to do this.

Red lines are basically lines someone sets that tell an opponent "if you cross this line, X will happen." They're a way of communicating exactly what actions an opponent can expect in order to deter something very specific. In the case of Iran, the red line might be enrichment to a certain level, for example. The reason Netanyahu wants them is twofold: 1. They would make it clear to Iran that it cannot go beyond a certain point of no return or it will suffer consequences; 2. They would force the United States to make a specific commitment to act that would be hard to back down from. Basically, Netanyahu would like the US AND Iran to be backed against a clear wall in order to minimize uncertainty about the future.

This post is not about whether red lines are a good idea. But Netanyahu is right about their effects, which is precisely why the US refuses to set them. Obama does not want to create a situation where the US would be forced to act. He wishes to retain the US's freedom of maneuver. Netanyahu is therefore also right, I think, that the US is not really committed to stopping Iran from getting the bomb no matter what. If it would be too dangerous to stop it, US policymakers may privately be thinking that containment would be less bad than the threat of yet another war in the Middle East, one that would likely only delay Iran's bomb-making (while making Iran more determined to get one). They look around and note that some pretty belligerent foes (think North Korea) have yet to ever use nuclear weapons on their enemies.

As for me, I think Iran having a bomb would bad on several levels. Two examples are an arms race in the region and a more "leaky" anti-proliferation regime, as Iran might help its friends to develop nukes as well. It would also reduce Israel and the US's freedom of maneuver in the region as they would be deterred by Iran's bomb. This, I think, is the number one reason why Israel, above all, fears it. I too, though, am unconvinced that we should to anything and everything to stop Iran from getting the bomb. That doesn't mean I've decided, it just means that other outcomes might actually be worse and attacking Iran needs to be a definite last resort. Netanyahu and Obama, then, must agree to disagree for now. If Romney becomes president, I'm not sure that would change.

Free Speech and Self-Censorship

The recent and ongoing protests (including the killing of the US Ambassador in Benghazi, Libya) in the Muslim world against the US because of an anti-Muslim amateur movie originating in America have brought the topic of free speech back to mind.

Everyone can remember the last time this happened (the cartoons). A few people I know remarked that it was a travesty because we have the freedom of speech and at least one asserted that Western government sshould have rallied around the cartoonists to support their right to free speech.

That sounds laudable. But is that really the issue? It feels bad if we discover that newspapers are self-censoring, not publishing things their readers would like to see. But is self-censorship akin to a loss of the right to free speech?

It certainly does mean people have to watch what they say, which is unfortunate in many ways. Still, you have to watch what you say in polite company and around children, too, or there might be protests in the "society" you find yourself in. Freedom of speech does not mean you will be free from the consequences of that speech. The government may not arrest you for saying something that rubs someone else the wrong way, but that person might very well kick you out of his house--as is surely his right, too.

We need to remain vigilant, of course, but in the US at the very least, free speech is very well protected, and the Supreme Court tends to err on the side of allowing speech when it is debatable. So we're free to say what we want, and we should say what needs to be said when it's important, but we also have to weigh consequences and benefits: Was this video important? Were the cartoons? Are they important enough to countenance violence, outrage, and diplomatic issues? That's a different topic entirely, and it doesn't really have that much to do with free speech.

Hawks are not always the best deterrers

While considering where to look for evidence that Israel is deterred by Hamas, I thought of something that seems totally obvious once it is said: If the reward I offer you for not attacking me is worse than my attacks against you if you do, you will keep attacking me. In other words: Deterrence is not only about threats of punishment, it is also about rewarding "good" behavior. In order for Israel to decide not to attack Hamas in the Gaza Strip, Hamas has to offer something more enticing to Israel in return. If its alternative is "dissolve yourself," Israel is obviously not going to choose to be deterred.

Again, this may seem obvious, but it is an interesting nuance because most people associate policies of deterrence with so-called foreign policy hawks. This is because the main feature of the type of deterrence that has dominated world politics for decades is threats of unacceptable retaliation for attacks (think of the US and Soviet policy of Mutually Assured Destruction when it came to nuclear attacks). Deterrence is certainly not a cuddly, "let's let in the Age of Aquarius" sort of foreign policy stance. But the alternative to attacking the US in the case above was peace, since deterrence was mutual. Peace is a pretty nice alternative to nuclear war, so it stuck. Crucially, destroying the Soviet Union was not a US policy (though many in the US openly wished for it).

The case with the US also illustrates another factor: Further alternatives must be less palatable than accepting deterrence. The main alternative was wiping the US out before it could strike back, thus removing the threat and the constraint of US deterrence on Soviet policymaking. This policy was unrealistic, and the US explicitly made sure of this by ensuring that the Soviet Union could never be certain of wiping out the whole US nuclear arsenal, meaning its own destruction would likely be imminent if it attacked the US. No realistic alternative there.

The main things required to block the alternative route of wiping out an enemy are power and resilience (two things the US nuclear arsenal had and has in abundance). In light of this, Hamas's strengthening in recent years may actually be a blessing in disguise for peace in the Middle East, if not necessarily for Israel's ambitions. Hamas has shown that, with occupation or without it, Israel cannot eliminate the organization without taking measures that it would not consider (like wiping out the entire Gaza Strip). For a while in the early to mid-2000s, with Israeli security stopping the vast majority of suicide bombings by 2005, it looked like Israel might be able to defeat Hamas militarily and thus need not be bound by any Hamas attempts to deter it. Rocket attacks have changed this prospect. Bombers could be stopped from entering Israel, rockets cannot. Even the Iron Dome missile defense system could not stop a concerted effort: A massive number of rockets flying toward Israel would overwhelm the system.

It therefore seems that Israel would be extremely hard-pressed to either eliminate Hamas or deny it the ability to attack Israel. This means that the choice of accepting a sort of truce with Hamas has become more palatable.

Going back to the main point of this post, the "peaceful" alternative has also become more available from Hamas's side as it has moderated its actions (if not much of its rhetoric) over the years to allow for short- to medium-terms cease-fires with Israel. In other words, Hamas needed to become more dovish to stop Israeli attacks.

Will this be a permanent change? Anyone who tries to predict the future in the Middle East is a fool. Hamas's continued grip on the Gaza Strip is not assured, and there are other, less moderate groups, who are too Hawkish to deter Israel. Dovishness on the part of Hamas has also been encouraged by Israel's massive superiority. This differential, too, is not written in stone. Over time, things could change and destabilize the current situation. Finally, since this set-up is based on both sides' perceptions of their and their opponent's power and the credibility of their threats, a change simply in the perception of the situation could spark another round of violence. My guess would be that such a round would eventually return to a tenuous peace, but how peaceful is a situation that repeatedly erupts into violence every few years?

For these reasons, the future is dependent on whether or not Israel and Hamas take further steps towards cementing peace. Everyone knows this, so there is no need to discuss it. My hypothesis, however, is that deterrence may help give the two parties the breathing room they need to move forward--if they are bold enough.

Switzerland: the Safe Investment that Isn't?

Economic conservatives often fret that loose monetary policy (low interest rates), like that seen in the US, Japan, the UK, and, to a certain extent, the eurozone, can be dangerous as it causes bubbles as investors seek higher returns in more risky assets elsewhere. It's been hard to see any bubbles in the economies mentioned, however, as they continue to stagnate and have difficulty digesting debt and uncertainty.

For a while, it seemed that stocks in emerging markets as well as global commodities might be the bubble. Emerging economies have cooled, however, and this has caused commodity prices to come down as well. The relaxed pace of both means that neither seems to have been a bubble in hindsight.

Well, I have a bubble prospect: Switzerland. The central bank in Switzerland has set its interest rate to between 0 and 0.25% (just like America). At the same time, I recently read that rents for shops on one of Zurich's main shopping streets have tripled over the past few years (real estate prices in the US have trended downwards, though there's been some pickup as late). This one anecdote is far too little information to spot a general real estate boom or bubble, of course, though a quick check of an online resource suggests that Swiss house prices are rising significantly faster than inflation. In addition, the currency is riding high as money floods into Switzerland seeking safety. Apparently not all that money has stayed in bank accounts but is instead flowing into investments within the country. The danger is that, when things finally calm down, the capital flow will reverse and the Swiss franc will lose value quickly.

Whether this will damage the economy on the whole is harder to say, as it will depend on whether exporters are able to survive the high currency value to then get a boost from a falling one and whether the economy turns to rely too heavily on consumption and imports during the current inflow boom. I wouldn't put my money there, though.

On the Way to War? NATO May Follow Turkey into War with Syria

"It's always a ship somewhere," a friend and former US diplomat once told me, referring to the point when the US enters wars. It's staggering how often this has been the case. This list covers all the incidents I can think of, but there may very well be more (I encourage comments to help make the list more comprehensive):

• The Spanish-American War of 1898 began when the USS Maine exploded in the harbor of Havana, Cuba (then a colony fighting for independence from Spain). It later turned out that the ship had almost certainly blown up of its own accord, but that was of little interest to propagandists in the yellow press at the time.
• The US entered WWI after the sinking of the passenger ship Lusitania by a German U-boat (though this was not the main reason and did not occur immediately).
• In an example that doesn't fit the bill 100%, the US entered WWII when the Japanese sank a large number of US naval ships in Pearl Harbor.
• The "Gulf of Tonkin" incident, which included an attack that was probably just radar "ghosts," provided the impetus for the US Congress to authorize President Johnson to use conventional military forces in Southeast Asia, essentially beginning the Vietnam War (Wikipedia referenced for all of these).

Why always ships? My diplomat friend suggested, obliquely, that the reason was that ships are isolated and so it is hard to deny the official story of what happened. Pretty cynical, but pretty believable, too. In any case, that description fits aircraft, too, especially aircraft flying over the ocean.

You may have heard that Syria shot down a Turkish fighter jet allegedly flying in international airspace. The jet "had strayed over Syria very briefly and had been shot down after leaving Syrian territory." When it was shot down, it was located "13 nautical miles out of Syria, when Syrian territorial space is 12 miles," according to Turkey's Foreign Minister Ahmet Davutoglu.¹ So far, this has not led to Turkey invoking NATO's article 5, which would require all NATO members to join in to protect Turkey (the last invocation of this clause came after 9/11, when the US used it to start the NATO war in Afghanistan). But it's not over yet. Syria has apparently since opened fire on a second Turkish aircraft, this time a "reconnaissance plane searching for wreckage of the fighter jet downed last week." Although Syria claims it has "no intention of going to war over the matter," that is not entirely up to Syria. Turkey is apparently asserting that it could invoke Article 5 of the NATO treaty, dragging much of Europe, Canada, and the US into a war with Syria.² This is ominous.

This all could be a way for Turkey to act tough in the face of a Syrian attack (and it most likely is). Few in NATO look forward to getting involved in yet another Middle Eastern quagmire. Syria is a heavily divided country without a clear opposition that could be supported. Al Qaeda fighters have also moved in. Intervention there would not quickly bring peace. Although it might be possible to knock out the Assad regime, it is not clear what, if anything would take its place. It might simply lead to a long and bloody civil war (much as seems to be happening now, anyway). As the German newspaper Die Zeit put it, bloodshed will happen whether we intervene or not, and intervention might make it worse.

On the other hand, this could be the beginning of a more hawkish stance against Syria that could lead to a relatively slow escalation eventually ending in war. There is also always the possibility of the "tail wagging the dog," that is: that Turkey might drag the rest of the countries in NATO in without them really wanting to get involved. After all, tensions have been rising between Turkey and its southern neighbor for a while, with Turkey making "many veiled threats to move against Syria."³ Maybe it's always a ship--or a plane--somewhere?

1. Arsu, Sebnem, and Rod Nordland. “Turkey to Consult NATO Allies on Jet.” International Herald Tribune. Damascus, June 25, 2012, Kindle edition, sec. World News.
2. Nordland, Rod. “Turkey Says Syria Opened Fire on a 2nd Aircraft.” International Herald Tribune. Ankara, June 26, 2012, Kindle edition, sec. Front Page.
3. “Turkey’s foreign policy: Growing less mild.” The Economist. Ankara, April 14, 2012, Online edition, sec. Europe. http://www.economist.com/node/21552602.

"Compassion? Why bother? Poor People Are Poor Because They Deserve It." A Rebuttal of Neal Boortz's Speech

Right wing advocates are winning the argument on economic morality by using an appealing line of reasoning that seems right on the surface. It is not, and anyone who cares about justice in any form cannot let this stand.

I recently received an email with an alleged "commencement speech" by Texas lawyer Neal Boortz. Maybe you received it, too. It turns out that he never gave that speech at an actual commencement (link). The issue here is not where the speech was given or even the fact that Boortz thinks it was "more widely distributed... than any commencement speech that actually has been delivered at any college or university in the past 50 years" (something the readers of Steve Jobs's speech might find hard to believe). The point is that a lot of people have read and heard the speech (it seems he read it out on his popular radio show). The speech bashes liberals on several fronts for being "imbeciles." There are two main ideas behind his, any many right wing advocates', argument: that government spending beyond a few bare necessities is wasteful and the related idea that people who receive government benefits are undeserving and are little better than thieves.

Let's start with that wasteful spending. All of us who've dealt with governments (the US is certainly included and may even be worse than most) can be pretty sure it is not spending every dollar wisely. Farmers, who are currently doing well, receive massive subsidies. Corn ethanol, which is no solution for energy dependence, is not much better than gasoline for the environment, and the production of which helps drive up world food prices, received loads of government funding, too (though this was sensibly scrapped, I believe). These are just a couple examples, though I'd say the fact that they are both related to agriculture is no coincidence. Our legislature seems to be designed for inefficient and complicated outcomes due to the over-representation of states with small populations in the senate (giving it different priorities from those of the House), the filibuster, gerrymandering of the House, etc. etc. Maybe government spending would be more efficient if Congress were. But I digress.

Boortz talks about the US Government backing dictators with foreign aid, funding stupid research, and paying for artists whose work no one wants to buy. The first argument is a bald-faced lie (or at least a tactical misrepresentation), and I simply cannot believe he doesn't know this. Dictators have received more support in defense spending and favorable weapons deals than with "liberal" foreign aid, spending  for which accounts for around a paltry 1% of the federal budget (and thus only about 0.18% of the US's overall GDP, see link).

But what about all that frivolous research? As someone who has seen the process of applying for funding first-hand (albeit in the UK and not the US, but the UK, a more "social" place, is hardly going to be harsher than the US), I can tell you the idea that people are getting funding for all kinds of ridiculous things is laughable. There are review panels for this sort of thing, and any researcher applying for funding must show that the research is new, that the results will have a large benefit, and that the research provides good value for money (i.e. there isn't a simpler and cheaper way to reap similar benefits).

Government-funded research lead to such creations as the Internet, which has revolutionized the way the world stays in touch and does business, and the Human Genome Project, whose benefits to health and research cannot yet fully be known but which are already showing great promise. This sort of high-risk research that only occasionally brings extremely high rewards benefit lots of people. The economic benefits generally do not come back solely to those who engage in the research, making this sort of work unattractive to private companies. "Unattractive to private companies" does not, by any stretch of the imagination, equate to "not worth it," as just these two examples ought to show. Should we perform stringent tests on funding to determine who should get awards? Absolutely. Should we concentrate only on ones that will bring definite economic returns for the "investors"? Absolutely not.

Finally, those awful artists. I suspect Boortz is annoyed with the National Endowment for the Arts (NEA). It funds "projects exhibiting artistic excellence." That means it's REALLY hard to get funding. And there isn't much funding to get: It's 2011 annual budget was just under $154.7 million. That may sound like a lot, but consider that the entire US federal budget for 2011 was $3,598,000 million (that's right: take the NEA's budget and multiply it by nearly 23,258!!!)! You might also consider the number of billionaires living in the US and note that the NEA's funding is likely to be less than 10% of any individual billionaire's net worth. Just to put things into perspective. For a final perspective: The US Government spent $227,000 million just paying interest on debts it had incurred previously. What's more likely to be bothering Boortz is the NEA's funding, from time-to-time, of art that conservatives don't like. (Wikipedia was my, admittedly somewhat unprofessional, source for all information in this paragraph.) If that's the issue, say so, rather than attacking "hippie artists" no one cares about.

So the government doesn't really waste as much as many seem to think (even if you consider measly spending on the arts and foreign aid a waste (the latter can be a helpful foreign policy tool as well)). But social security, medicaid, and medicare together make up about 43% of the federal budget, and I believe states pitch in some money for healthcare, too. Unemployment benefits come on top of that. That means something like 50% of spending is on so-called "entitlements." Boortz argues you're not entitled. "That bum sitting on a heating grate, smelling like a wharf rat? He's there by choice. He is there because of the sum total of the choices he has made in his life."

This is where the real problem is. Is it annoying to watch people constantly screw up and then ask us to bail them out? Sure it is. But there are two problems with this line of reasoning, and I'm sure Boortz is aware of this but just does not wish to accept it: That homeless guy is not receiving government money, and our lives are more than the sum total of our choices. Boortz is a successful guy. He points out that "nobody really wants to accept the blame for his or her position in life." The thing is, the opposite seems to be true for credit. Boortz believes he is successful because he is just so damn awesome. If he had been born in the vacuum of space, he undoubtedly would be at least as successful as he is now. After all, no hand-out receiving freeloaders would have taken his hard-earned money to line their own pockets. It was just his good choices. Just as it is always bad choices that make people poor.

Is there personal responsibility? Absolutely, and philosophizing to the point where we question free will would cause society to collapse because the justice system could not function. People must take responsibility for their choices. But this only goes so far. What about the girl born into a poor family? What choice does she have? Can she choose to go the worst school in town? Can she choose to walk past drug dealers and gangs on her way home? Can she choose to do her homework by herself because her single father has to work long hours to pay rent and put food on the table? Is it any wonder that her teachers, who have long ago given up, partly out of fear of their own students, are not able to bring her to the next level? Maybe Boortz, who was born with an infinitely strong will and determination to succeed, which I guess had nothing to do with luck at all, would have thrived anyway. After all, some people do. That's the American Dream.

But how many actually do? The American Dream, it seems, is more of a reality in Scandinavia than in America. One very important factor correlated with economic success in later life in America (and Britain) is how much your parents earn. In Scandinavia and Canada (Germany's pretty good, too), this is much less important, meaning that more poor kids grow up to be wealthy and middle-class adults than in America. At the same time, more rich people move down the scale in Scandinavia than do in America. Are rich Scandinavians choosing to be poor more often than rich Americans? Obviously, the system makes a difference. The condition the American Dream requires is equality of opportunity (NOT equality of outcomes!). Everyone cannot and should not earn the same. It is also hard to see how everyone could be given the same opportunities in life. Surely it is rich parents' right to send their kids to private schools. The fact is, though, that opportunities in America are nowhere near equal. In fact, they're not even decent for the poorest 20%. (Source)

Boortz's attack on liberals' compassion for those undeserving of successful people's money is disingenuous. It is nice to be alleviated of the feeling of moral responsibility for those around us who are suffering. Unfortunately, though, we are all responsible for the government system we have helped to create, the same system that makes it extremely difficult for around 20% of the US population to get ahead in life. This doesn't mean the end of personal responsibility. On the contrary, we are ALL personally responsible for this sad state of affairs and the slow death of the American Dream. Do something about it. Do not let superficially plausible arguments convince you and your friends that people are rich because they deserve to be and poor for the same reason and that we should therefore cut off the poor leaches and leave them to their own devices. That's not just a lack of compassion, but the sort of lack of foresight that has brought down arrogant ruling classes throughout the centuries.

Why Germans' Ideas on Inflation Are Delusional

Germans are inflation hawks. This is with good reason: The hyperinflation of the Weimar period is widely seen as contributing to the rise of Hitler, who promised to bring stability to Germany again. After WWII, the German Bundesbank was famous for its inflation fighting. Germans were rightly proud of their post-war currency, the Deutsche Mark, and were resistant to giving it up. Germany enjoyed low and stable inflation. This stability allowed the German government to borrow money at low interest rates (it also helped that the German government tended not to borrow much money in the first place, though).

Germany no longer controls its own interest rates, however. Interest rates are set for the entire euro area by the European Central Bank (ECB), headquartered, at Germany's behest, in Frankfurt am Main, Germany. The ECB has done an "impeccable" job at maintaining stable inflation, its former head Trichet said. It's true: eurozone inflation has been stable since the euro was introduced. And yet Germans continue to warn of high inflation. The problem is, Germans don't seem to understand that inflation in Germany is only one part of the eurozone inflation picture.

Countries like Greece, Spain, Italy, and Ireland all have to accept swingeing cuts to government spending and are suffering a credit crunch. This is likely to lead to low or even negative inflation rates in those countries (Ireland experienced deflation of 7% near the end of 2009!). The correct response from the ECB in that case, if this low inflation meant the average weighted inflation throughout the eurozone was under 2%, would be to cut interest rates and try to keep inflation from falling any lower. Because Germany is not suffering austerity or a credit crunch, it's economy is growing. Inflation there will be higher as a result. If Germany is the fastest-growing economy in the eurozone (as it currently is), it is not unreasonable to expect it to have one of the highest inflation rates (or the highest). If everyone else's inflation rate is 1%, Germany's would need to be significantly over 2% (maybe 3, 4, or even 5%) in order for eurozone inflation on the whole to average 2%.

This terrifies Germans, but it shouldn't. This is not the Weimar Republic. The ECB has not abandoned all orthodoxy (in fact, compared with the Fed, the Bank of England, and the Bank of Japan, it's still quite conservative). A decision to cut rates when inflation has fallen due to reduced domestic demand is not madness, it's sensible policy. Higher inflation in Germany is also sensible. The euro crisis occurred due to imbalances within the single currency. Wages and prices (inflation) rose too quickly in the crisis-hit countries. They lost competitiveness, importing and paying for it by borrowing (a bit like the US, but more extreme). Much of the money borrowed came from Germany and France, by the way. In any case, prices and wages in Greece, Spain, and Italy (Ireland's have fallen again a lot already) need to fall relative to those in Germany to restore competitiveness and ease the imbalances in the zone. For this to happen, inflation would have to be low or negative in those countries for quite some time, or higher in Germany, Austria, the Netherlands, and Finland for quite some time. Or a little of both. If the ECB targets average inflation of 2% and Germany does not instate its own policies to try to cap inflation, that's what will happen.

Prices and wages need to rise faster in Germany and other "creditor" countries in the eurozone than in the debtor countries. That's just math. Allowing this to happen is not dangerous, it's sensible. Inflation is ugly, but deflation is even uglier. Germans need to accept this and let the ECB continue its "impeccable" management of the European economy. The euro crisis is the result of structural problems within the euro, which the ECB could not correct all by itself. It did not warn (or not enough) of the dangers of the bubbles in Spain and Greece (but neither did most other experts), so it's management has not been perfect, but as far as inflation is concerned, it has a good record. Germans have no reason to fear eurozone hyperinflation and should accept somewhat higher inflation in Germany. Germany has profited from the euro, too, though many seem to be unaware of this. I'll get to that in another post.

A Solution for Jerusalem

Blogs are great because you can do crazy things on them; like suggesting a solution for how Palestinians (from an as-yet non-existent Palestinian (or West Bank) state) and Israelis could share Jerusalem, allowing it serve as the capital for both countries. I like to focus on structure. The UN wished for Jerusalem to be an international zone administered by the UN itself (see General Assembly resolution 181). Funny, right? At the other extreme is just dividing the city in half. Considering the holy sites that are scattered around the city and are important to both sides and to other communities, that seems a terrible compromise. How about an essentially autonomous city-state partially influenced by the governments of Israel and Palestine, but designed to cater above all to the interests of Jerusalem itself?

It sounds crazy, I know. But it seems to me that the only way the two sides could co-exist in the Holy City is if those who live there are responsible for running it themselves. The only way the two sides would allow that, though, is if they had assurances that demographic changes, for example, wouldn't trample their interests there.

Here's how my little idea would look: Those who have had their main residence in Jerusalem for at least one year and are citizens of either Israel or Palestine would be eligible to vote in Jerusalem elections. Israelis would also be able to vote as usual in their own governments' elections, as would Palestinians. Jerusalem would have a mayor-governor elected by popular vote (using a run-off if necessary). This would hopefully make the mayor-governor a centrist character.

The legislature would need to be bicameral: A lower house would be elected using proportional representation of political parties. Any party getting at least 5% of the vote would be eligible for one of the 20 seats in this house. Eight candidates for the upper house would be appointed 50/50 by the governments of Israel and Palestine. The electorate would then select their favorite four of these to become the actual members of the upper house. This would allow those governments to rest assured that no laws would be passed in Jerusalem that would scare them (like changing voting laws or the constitution to one side's advantage). It also means that Palestinians would have the ability to vote on which Israeli-nominated candidates they liked and vice versa, somewhat reducing the likelihood of later gridlock and encouraging moderate candidates (much like the idea behind an open primary election as is being tried in Oregon and California).

Sound like a recipe for gridlock? Well, it might very well be, but the only way forward would be for the sides to find compromises. The way the system is designed, it should help to encourage moderates and discourage extremes while giving the two governments an emergency stop button if necessary. I don't see any way any of these facets could be changed.

Now on to the details: Jerusalem would be a semi-sovereign city-state. It would have no citizens, however, only residents. Furthermore, only its residents who were citizens of either Israel or Palestine would have the right to vote. There would be no checkpoints within the city, only on either side when leaving (though the Jerusalem police could put up entry checkpoints on either side, too, if it felt that necessary). If arriving by plane, for example, a visitor would have to have a valid visa for either Israel or Palestine. The statelet would have its own constitution, courts, and administration. People within Jerusalem would be subject to Jerusalem's laws, not those of either Israel or Palestine (though the two "parent" countries would obviously have some influence on laws passed there).

On to money: It's important to avoid coercion through government grants, so Jerusalem would have to have its own system of taxation. Residents would be exempt from income taxes in Israel and Palestine and subject to Jerusalem taxes instead. The only areas where Jerusalem would not be sovereign would be in foreign policy, trade policy, military, and on the grounds of the quarters of the two governments, who would both call Jerusalem their home.

Anything going into or out of Jerusalem via Israel would be subject to Israeli law, anything via Palestine to Palestinian law. This would likely make Jerusalem a competitive place alive with commerce, as customers and businesses could choose the best laws from the two countries as far as trade was concerned. Jerusalem could not make laws governing trade, as this would be the job of Israel and Palestine. It would likely have to share the Israeli and Palestinian currencies. People would have to get used to dealing with both. One might win out, however, as the government could decide freely which currency it would like to tax and spend in, giving one a competitive advantage. All these sorts of things could simply be left to fall into place.

This city would likely be a vibrant place, but also a wild one. Despite laws forbidding it, I can only imagine it would be teeming with intelligence agents from both sides and likely abroad as well (think Cold-War West Berlin). Years (or centuries, depending on how you count) of sectarian tensions would be unlikely to disappear over night. It would thus be important that the police and courts were appointed by the mayor-governor and approved by the upper chamber, ensuring that police actions were balanced between Israelis and Palestinians.

If sharing is possible (and that's an admittedly big "if"), it is only within a framework that promotes compromise while safeguarding core concerns. This is my attempt to suggest one.

When Privatization Makes Sense--and When It Doesn't

Governments are often bad at running businesses, but when there's no actual market, they may still be a better choice.

I was just reading about Bolivia's privatization of Transportadora de Electricidad (TDE), it's national power transmission grid. There's been a trend (again) towards nationalization of industries in South America. Argentina recently nationalized an oil company there owned by a Spanish company. Bolivia is paying the Spanish firm for the nationalization, however, whereas Argentina just expropriated the parent company's property.

The moral questions about confiscating property aside, however, there's a more important issue: Is private ownership always better? If not, when is it better for a government to own something? As hinted in the subtitle, it has to do with whether there's a market or not.

There are certain areas, like transportation networks, utilities, and infrastructure, where natural monopolies tend to arise. Monopolies are bad news because people are forced to buy from them, giving them too much power to jack up prices to whatever they want and make a ton of money. That obviously hurts everyone else. Think about city streets. Imagine if private companies ran them and had toll booths for their use. Not only would it be really irritating, but you would be forced to use certain streets. There wouldn't really be competition between "providers." You have to use the street you live on or cross that bridge into town. This is why it makes sense for governments to build and maintain roads. Some highways are privatized, but you can often use other roads and the pricing is generally controlled by a government authority.

Ports (including airports), suppliers of water, electricity, and telecommunications, public transportation, and rail networks (i.e. the tracks the trains use if not the train operators) are other good examples. It doesn't make sense to have five different companies running subway lines competing with each other, each with their own tracks. It would be wasteful and the price would be higher. It makes sense in such a case to have the government running it. Government provision of water and sewage treatment is also sensible. (Notice that waste collection is good in private hands, as the companies drive to consumers and can compete fiercely with each other.) Electricity grids, if not the providers, can also be sensibly placed in government hands. If they're not, the alternative is that the government sets rules on the prices the companies may charge to transmit competitors' electricity. The point is: there has to be a functioning, competitive market, regulation, or government ownership.

Bolivia's privatization of its power grid, therefore, is not necessarily unreasonable. If it is capable of doing a decent job expanding and maintaining it, and doesn't give special prices to favored power generators, then it may be an improvement. It would probably have been easier to solve any problems with targeted regulation instead, however.

Argentina's nationalization of an oil company, by contrast, makes no sense from the start (if the point is to improve things for consumers, that is). Oil producers compete heavily with each other. There are loads of them. If the government felt too much money from oil extraction in its territory was going abroad, it could have raised the taxes on oil companies (much as Australia has raised taxes on mining companies). Nationalizing an oil company serves no purpose except that the government can get its hands on a bunch of cash and assets without paying for them. In other contexts we call that what it is: theft. There are also other dangers: if the Argentinian government fails to invest in production, the oil company will return less and less money (Mexico and Venezuela are cases in point). This would reduce world oil supplies and rob Argentina of a viable industry, killing jobs along the way.

So privatization is no panacea. It makes sense in most cases as long as there is a real market (Britain's privatization of its water supply was probably a mistake, for example). If there's a competitive market, private companies will almost certainly do a better job than the government at providing goods and services efficiently. Where there's no market, however, there can be good arguments in favor of public provision. US Republicans would do well to remember that toll booths on sidewalks are silly and that some government money is needed to make sure bridges don't collapse. Privatizing all of them instead is, at best, a second-rate solution.

The Power of Passive Resistance

Passive resistance may very well be more effective than terrorism

Looking back over the history of modern terrorism, one of the most notable aspects is that is almost always fails to achieve its objectives.¹ In fact, terrorism used by itself has only ever been effective in a strict anti-colonial context. In colonies throughout the world, terrorism was sometimes capable of raising the costs of occupation enough to reduce the benefits to the point where the colonial power decided staying wasn't worth it. Other groups have sought to emulate these successes in other contexts and have failed miserably. Examples include the IRA, RAF, al-Qaeda, Hamas, and just about any other group you can think of.

None of these groups are anti-colonial. The IRA viewed Northern Ireland in a colonial context, but it was wrong: The majority of the Northern Irish viewed themselves as British and wished to remain part of the United Kingdom. This was a case of majority rule. Colonies consist of a minority ruling over a majority from far away. The Northern Irish were represented in the UK Parliament and the majority of the population wished things to stay that way. The IRA failed in the end because it failed to understand that Northern Ireland was not a British colony.


Palestinian terror groups have made the same mistake. Israel is not a colony; it is a nation-state ruled by the state's citizen residents. Demanding Palestinian control of Israel is demanding that Israelis agree to destroy their own state. That's something they will never agree to, and that should be obvious to anyone.


But what about the Occupied Territories? These do resemble colonies: They're controlled from afar and the majority of those in the territories is not represented and does not agree with the occupation. Some Palestinian groups have been using terrorism for decades to try to end the occupation, but they haven't really been successful. Why?


Two reasons. One: their goals have been total, including the destruction of Israel. This has made it difficult for any Israeli government to negotiate with them because the very existence of these groups is seen as a threat to the survival of Israel itself. Two: they are using terrorism, which is violent and robs them of support and sympathy in many people's eyes.


One could argue that Hamas has actually achieved success in Gaza: The occupation there has ended and Hamas controls the Strip. Imagine if the groups used only passive resistance, however. Passive resistance is also only likely to work in an anti-colonial context, but that means it would be appropriate to the Occupied Palestinian Territories.

Terror groups suffer two problems stemming from their use of terror: They scare people enough to cause voters and governments to desire to wipe them out rather than negotiate, and they lack legitimacy. Civil disobedience would, like terrorism, make continued occupation of the territories more difficult, raising its cost. Refraining from violence, however, would also remove one of the benefits of the occupation: security. One reason for the continued occupation at the moment is that every time Israel pulls out (as with autonomy agreements implemented during the '90s or the withdrawal from Gaza), violence against Israelis increases. If this were not an issue, one significant incentive for the occupation would be removed. Finally, with passive resistance, no one would question the morals or objectives of Palestinians peacefully protesting and practicing civil disobedience. The actions would attain a level of legitimacy and sympathy that terrorist actions cannot.


I haven't done the necessary work on passive resistance to make solid claims about its comparative effectiveness, but I bet that the Palestinians would have their own state by now if they had opted for civil disobedience instead of terrorism. Terrorism is not the "only option," chosen out of desperation, as many groups pretend. There are others, and they may be more effective. There is one nagging problem, however: Passive resistance more obviously stands no chance of turning Israel into Palestine and would require all groups, even extreme ones, to give up that goal. So we're back where we started, because that is a core issue. Still, food for thought.


1. For an excellent book on this, see: Peter R. Neumann, and M.L.R. Smith, The Strategy of Terrorism: How It Works, and Why It Fails, Contemporary Terrorism Studies, London: Routledge, 2008.

Why Should Polygamy Be Illegal?

Anti-gay rights activists often ground their argument against gay marriage using the "slippery slope" analogy: If we allow this, soon we'll have to allow polygamy, pedophilia, and bestiality. This, of course, is silly (and gravely insulting). We don't "have" to do anything. Slippery slopes do exist, so the analogy is not always a red herring, but in this case it's a bit like arguing that we shouldn't allow women to vote because soon children, prison inmates, and farm animals will want the vote as well. Besides, the fundamental line of separation here is mercifully clear and uncontroversial: it's consent--at least for most of the cases. Children are not capable of consenting to sexual acts they (and their bodies) do not understand. Sex with children will thus always be unacceptable and a crime (all arguments about the age at which a person is mature enough to consent aside). Animals have no way of expressing consent and, at the risk of stating the obvious, there is little reason to think they would give it if they could! That leaves polygamy.

Polygamy (which includes polygyny and polyandry) is not socially acceptable in most places in "Western" countries. Even the Mormons no longer allow it. If we follow the consent principle, though, it is hard to find solid arguments for outlawing it. Let me make one thing clear right here: no good arguments for disallowing something does not equal good arguments for engaging in something. I'm not promoting polygamy (or even polyamory) here. What I am promoting is people's choice to be polygamous if they and their partners wish. It's about freedom and consent.

"Polygyny is degrading to women." I'll admit on an emotional level it sure seems odd to share one man among several women. In the end, though, this comes down to claiming to know what's good for others better than they know it themselves. This is always tricky. We do accept such paternalism as the norm in some cases, however. Seatbelt laws are just one example. The reason we have them is because they save lives because we are all apparently too shortsighted to save our lives without laws mandating that we do so! So do people always make the best choices for themselves? Obviously not. But the harm in polygamy is not clear, or at least not clear enough to make it criminal. It seems to me your family and friends (if anyone) should be the ones telling you not to do it, not the state. Besides, we're talking about polygamy as a whole here. Is polyandry degrading to men? Are men considered equally incapable of judging what is good for them? If not, then the whole argument about banning polygamy because it is degrading to women centers on women being incapable of thinking for themselves. Who's degrading women now?

This reminds me a bit (tangentially) of calls to ban Islamic face coverings and head scarves. Some also consider these to be degrading to women. Once again, though: How do we pick out those who are pressured into wearing them by their husbands and fathers and those who choose to do so out of a personal sense of piety? (I have known some women in the latter group.) This topic is less controversial in the US, with its strict tradition of freedom of religion and religious expression, than in Europe. But as one woman in an English class I taught in Austria pointed out (she was the only one in the class against banning face coverings): "Prohibiting women from covering their faces is just as bad as forcing them to cover them. No matter what, they are not free to choose."

So bans on polygamy are based in religious tradition and paternalism and are thus overly restrictive of individual freedoms in my book (you all know I'm a social--but not economic--libertarian). Thoughts?

Taiwan's Fate Is Sealed

Taiwan will become a de facto (and not just de jure) part of China--the only question is how

Taiwan's chances of becoming a fully independent state are essentially nill. The island is currently only recognized by a very few countries as an independent state. For most of the world, then, Taiwan is already a de jure (by law) part of China. Taiwan is de facto sovereign, however, deciding over all its own affairs. The United States has taken it upon itself to protect this state of affairs. In a series of communiques during the 1970s, the United States agreed that there was only one China and that Taiwan was part of China. The catch for China is that both it and the US agreed that neither Taiwan nor China was to decide on a change in the status quo between Taiwan and China unilaterally or by force. This means that the US cannot support Taiwanese de jure independence, but that China would theoretically be barred from "reunifying" Taiwan with the mainland by force. As long as everyone sticks to the bargain, things are OK, even if they are quite messy from an international relations or international law viewpoint.

The thing is, China expects unification with Taiwan to occur eventually and does not seem willing to wait forever for this to happen: "In 2005 China passed the Taiwan Anti-Secession Law, which commits it to a military response should Taiwan ever declare independence or even if the government in Beijing thinks all possibility of peaceful unification has been lost" (The Economist, Apr 7 2012). This seems to be rather close to violating those communiques, since the latter part, at least, would be a unilateral Chinese move toward unification. On the other hand, the US was supposed to slowly reduce its arms sales to Taiwan over time--it has not. As is distressingly often the case in international politics, a tiny political entity has the power to set a frightening chain of events into motion.

What if Taiwan were to declare independence? This came close to happening under Taiwan's President Chen in 2002, when he declared that there was "one country on either side of the Taiwan Strait."¹ Disaster was averted, however, when US President Bush began to reign Chen in, making it clear that the US's stance on unilateral changes to Taiwan's status applied to Taiwan as well as China.

The people of Taiwan eventually voted Chen out, partly out of fear that his loose talk could prompt a Chinese attack. Fear that China would attack and clear signals from Washington that the US would not back Taiwan if it declared independence should be enough to prevent it from doing so. (At least, I hope those signals from Washington are clear!)

But what happens if China decides that "all possibility of peaceful unification has been lost" and decides to forcefully annex Taiwan? At the moment, this still seems unlikely due to the US's power in the region. But China is increasing its capabilities in its backyard quite quickly. It's not a case of China needing to achieve military parity with the US. It's only a case of being able to defend itself against a US attack on its immediate coastal area including Taiwan. That is considerably easier than achieving parity. Would the US really be able, or willing, to stand up against China for the sake of Taiwan?

The US policy on the topic is "strategic ambiguity," which basically means it says it could get pissed off about a number of things, it just won't tell anyone what things would lead to which responses. The advantage of this is flexibility and the belief that this uncertainty will make the Chinese wary of provoking the US. What it actually is, in my view, is a way for the US to prevent admitting that it could not stop China from taking Taiwan if the former really wanted to, especially if China decides to do this in, say, 10 years or so when its capabilities will have grown much greater. The US is a long way from Taiwan, but China's entire military force could easily and quickly be brought to bear on the island. Over the medium to long term, there is little the US could do to stop such an occurrence. "Strategic ambiguity" is a sponginess that allows the US to convince all parties that they will get what they want and deserve, while knowing full well that this is impossible.

1.Dumbaugh, Kerry. “CRS Report for Congress.” Federation of American Scientists. 20 April 2007. 14 Jun. 2008 <http://ftp.fas.org/sgp/crs/row/RL33684.pdf> cited in Kirchofer, Charles. “U.S. Foreign Policy and Interests Reharding Tensions in the Taiwan Strait”. Webster University, Vienna, July 10, 2008. http://www.english4you.biz/papers/taiwan.pdf.

Would Energy Independence Insulate the US from Oil Price Spikes and Reduce Wars in the Middle East?

What energy independence would mean--and what it wouldn't

The US's dependence on foreign oil is often cited as the root of several evils. The two most prominent are the ones in the title. The short answer to the first one is "probably not, but potentially." The answer to the second is "no."

Let's put aside the shear difficulties involved in becoming energy independent for a moment to concentrate on this hypothetical situation. In an apolitical and amoral world, an energy independent United States could halt oil exports and insulate itself from rising prices by cutting off the excess demand for US oil and using it exclusively for the domestic market, for which there would be enough oil to go around (hence prices would not rise). We don't live in an apolitical and amoral world however. Here's why that matters: cutting off exports is known as a beggar-thy-neighbor policy. The reason is that it would benefit American oil consumers while harming consumers in the rest of the world. That is because some additional supply would be removed from world markets, driving up the oil price still further.

Not only does this rub against our moral sensibilities, the political (and economic) backlash would be huge. And it wouldn't just be about higher oil prices. The US has encouraged free trade for decades and built up a global economic system based upon that idea. A move like that would be hypocritical and seriously undermine the US's credibility. The result could be a trade war, with other countries erecting trade barriers as well, slowing global trade, driving up consumer prices, and killing the world economy. In other words, the result could very well be worse than higher energy prices themselves would have been. So it would be better if the US didn't use its (fictional) energy independence in this way to keep its own prices low.

On to war in the Middle East (ME). Hasn't US involvement there been based on its thirst for the region's oil? Hasn't this led to wars? This is unfair. US involvement in the Middle East is due in no small part to the region's oil. To deny this would be a bald-faced lie. But I think many people assume that US involvement would somehow be proportional to the amount of its oil it gets from the region. This is a misunderstanding of economics. The US imports less than 25% of its oil from the Middle East (that's including the entire "rest of the world" statistic as being all from the Middle East, which surely drastically overstates things). But this is completely irrelevant. The oil price is determined by global supply and global demand. It doesn't matter if your traditional suppliers still have the same amount of oil. If another supplier doesn't, demand for oil from your suppliers will rise, and so will the price. Even if the US didn't import any oil from the ME, that region would still be among the world's most important suppliers, if not the most important one. It could therefore never be ignored.

This means that the US and every oil consuming country in the world has an interest in ensuring that ME oil keeps flowing. The US, however, is one of the few countries with the power to do so--so it does. Does this cause wars? I actually don't really think so. The US is guilty of promoting "stability" in the region over the years, which has often meant doing business with, and at times outright supporting, Arab dictators. As I've explained in other posts, though, these were marriages of convenience. As the Arab Spring has shown, if all other things are equal, the US will support democracy. Usually all other things are NOT equal, however. The alternative to doing business with dictators is not doing business with dictators, who will then do business with others and stay in power. This would mean the US would also have little influence on those countries (influence it could use for good) and would be more beholden to a smaller number of suppliers, putting its energy supplies at risk and artificially raising its oil prices, damaging its economy. In short, everyone would be worse off. I personally think following rigid and allegedly moral principles to the point that everyone suffers is a false, and facile, morality.

So energy independence doesn't make sense? Well, that's not entirely true, either. In an emergency, it would mean the US could ban exports as detailed above, or threaten to do so, giving it more leverage. That's the sort of "political dark arts" side of it. More cheerfully, energy independence would probably have to mean more green technology--efficiency improvements, renewables, etc., which are a good thing in their own right because of climate change, for one. Efficiency gains are also good because they reduce the energy intensity of the US economy. That means the US would require less energy for each dollar of GDP it produces. THAT really would make the US economy more resilient against rises in the oil price. Why? It's like this: if the US requires one barrel of oil for $2,000 of GDP, a rise in the oil price will have a greater effect than if a barrel of oil can generate $4,000 of GDP simply because the oil price will make up a smaller proportion of total costs in the economy. In the end, then, energy independence as a goal in its own right is not so important, which explains why the US hasn't pushed that hard for it. Reducing US dependence on oil by reducing the economy's energy intensity would provide the greatest benefits of all at a reasonable price.

And we're in luck: US oil consumption has fallen since 2005, despite rising GDP and a larger population. That means its oil intensity is falling (and actually, its overall energy intensity has been falling, too). This will make the US economy more resilient to energy price shocks over time. That can only be a good thing, because energy prices don't look set to fall much in the coming decades (except maybe for natural gas, but even that is uncertain). Just don't expect that to bring peace to the Middle East or to reduce US involvement there. Democracy just might, though, you never know...

Sandra Fluke, Rush Limbaugh, Contraception, and Clashing Values

Quite often when I write a post, I get a nervous feeling: I'm about to write something that could potentially piss people off, both on the right and left ends of the spectrum. This is especially acute with such emotionally charged (in the US at least) issues as contraception in all its forms. The antidote to this, to some degree, is to remain respectful and fair, and that's just the solution to the problem, as I will now argue.

Sandra Fluke is a law student at Georgetown, a prestigious catholic university. She testified before Congress in support of mandating that insurance companies pay for contraception for women. In this case, I believe the contraception specifically in question was birth control pills. Her argument centered around the costs of birth control during a student's time in law school (up to $3,000 according to her estimate) and the fact that birth control pills can be used to treat other medical issues, such as ovarian cysts. This condition caused a fellow student of hers to lose an ovary, and the implication was that, had Georgetown been willing to fund birth control pills, she would not have had to suffer that loss. Fluke argued "It's not about church and state, it's about women's health."¹

Rush Limbaugh attacked her on character grounds, saying that asking for others to pay her so she could have sex made her a "slut" and a "prostitute." Don't worry, I'm not about to defend him. Georgetown University President John DeGioia said it best when he called Limbaugh's remarks "misogynistic, vitriolic, and a misrepresentation of the position of our student."²

So where's the controversy? It's that I'm on the fence in this debate, though Obama has apparently already suggested the sensible thing in exempting religious organizations from the rule and putting the onus on insurance companies to offer free contraception.

The thing is: contraception can only cost $3,000 if you're using birth control pills. Why not use condoms? They'd be cheaper unless you're having a lot of sex. If you are, fine by me, but I also am not sure other people should help pay for condoms if you're using so many you can't afford them yourself. But this talk is bringing the debate dangerously toward Limbaugh's position, which is not at all what it's about. Let's bring it back to more likely condom use. One argument would be that condoms can break. Well, then use the morning after pill. Condom failure is really not an issue if women have access to the whole palette of contraceptive options, which they should, in my view. And there's another argument for condoms: only they can prevent the spread of most STDs. Birth control will not, so only using that is a risk to women's (and everyone's) health by itself.

There are other reasons for using birth control. Many may use it for health reasons (like for ovarian cysts). So be it, surely an exception for medical necessity ought not to be the vitriolic debate starter it is.

So what am I arguing? I am NOT arguing against birth control and certainly not against contraception in any of its forms. I AM arguing against mandating that all insurance companies must always pay for one of the more expensive forms of contraception whenever a woman wishes to have it: birth control pills. They might instead be required to cover funding for condoms... or not, they ought to be cheap enough and many organizations give them away for free. Birth control pills ought to be offered by insurance companies in cases of other medical necessity on the recommendation of a doctor.

What would this look like in practice? If you're a woman and want birth control pills, you would be free to choose an insurance provider who would pay for them (or buy them yourself, of course). If the plan is too expensive, you'd have two options: switch to condoms or convince your doctor you need them for health reasons. If you really do, then obviously that would be the route you should take, no questions asked. If you don't really need it for your health, I'd personally recommend the first choice because of my views on honesty.

In short: women should have a right to contraception and be free to choose whatever form of it they wish. However, it does not follow from that line that all forms of contraception must be made available free of charge, regardless of the relative merits and costs of other forms. In an age of rising health care costs and increasing government austerity, we should be looking at ways to save public money where this is feasible and does not cause undo harm. This seems like an okay area to do so. If only we could have a sane conversation about it...

As always, I welcome your comments. I actively encourage everyone to express whatever views they have, but please keep the discourse respectful and stick to the facts.

1: “Obama Calls Student Insulted by Talk Show Host.” Yahoo!, n.d. http://uk.news.yahoo.com/obama-calls-student-insulted-talk-show-host-034907306.html.
2: “Obama Calls Student in Slut Slur.” BBC, March 2, 2012, sec. US & Canada. http://www.bbc.co.uk/news/world-us-canada-17241803.