Obama in the Middle East.

Was President Obama wrong to avoid intervention in the Syrian Civil War?  Was he wrong to seek escape from Iraq and to hesitate to commit American forces to the war against ISIS?  These questions matter on several levels.  For one thing, there are an awful lot of dead people, no?  Could the huge death toll of the Syrian Civil War been avoided, to say nothing of the Western hostages butchered, and the Jordanian pilot burned to death, and the Yazidis murdered, and the Iraqi soldiers massacred after surrender?

For another thing, we’re in the death throes of an American presidential election.  The aspiring successors to President Obama both criticize his eight years of restraint.  Recently, a gaggle of American diplomats used the free-speech channel at the State Department to dissent from administration policies, and current-Secretary of State John Kerry acknowledged their viewpoints.  Whoever wins the election in November 2016, the United States is likely to be blowing up things on a grand scale soon afterward.

Lonely voices defend the president.[1]  To the surprise of no one who has spent time studying the history of international relations, countries define for themselves and then pursue their individual interests.[2]  Sunni and Shi’a Islam are now engaged in a great civil war in the Middle East and elsewhere.  As a result, Saudi Arabia and Iran are at daggers drawn.  Or perhaps it is the other way around.  Saudi Arabia and Iran are at daggers drawn, so there is a Sunni-Shi’ite civil war.  It’s a tricky business.  In any event, Iran backs the Shi’ite majority in Iraq and the Alawite minority in Syria, and Hezbollah in Lebanon, and the Houthis in Yemen.  Saudi Arabia backs the Sunni rebels in Syria, and the government in Yemen, and does nothing very evident to oppose ISIS in Iraq and Syria.  Neither country will bend before American will.

Then, Americans often believe that the course of events is determined by Americans.  For the Right this often means that the United States must just “stand firm” in a Viagraesque way.  For the Left, this means that the United States, usually at the behest of big business, picks the winners in foreign social conflicts.  Neither interpretation could be further from the truth.[3]  The domestic balance of forces determines the outcomes of conflicts.  The United States merely accommodates itself to the de facto government.  In the case of the “Arab Spring,” President Obama’s initial idealism soon got short-circuited by reality.  In similar fashion, his idealism, and the foolishness of Hillary Clinton, led to a disastrous intervention in Libya.  On the core issues, however—Syria, Iraq, Iran—President Obama has been reluctant to intervene in foreign civil wars.  Just as Britain and France hesitated to intervene in the American Civil War.

Most of all, the Middle East just isn’t that important to America at the dawn of a new century.  Fracking has reduced world dependence on Middle Eastern oil.  The Middle East has oil but no industry.  The Russo-American conflict is no longer about existential issues.  Even terrorism can’t destroy America or Western Europe.

Political scientist (and former Obama Administration advisor on the Middle East) Marc Lynch concludes that “America can be more or less directly involved, but it will ultimately prove unable to decide the outcome of the fundamental struggles by Arabs over their future.”  The voice of reason.

[1] Marc Lynch, The New Arab Wars: Uprisings and Anarchy in the Middle East (Public Affairs, 2016).

[2] “The strong do what they can and the weak suffer what they must”—Thucydides.

[3] See, for example, Chiarella Esposito, America’s Feeble Weapon: Funding the Marshall Plan in France and Italy, 1948-1950 (Praeger, 1994).

 

The Great Game.

Under the tsars of the 19th Century, Russia greatly extended its territories.[1]  Some incidents in this expansion caught the attention of Westerners: the “Great Game” played between Britain and Russia in Afghanistan and Persia (now Iran); Japan’s humiliating defeat of Russia in 1905; and the rivalry in the Balkans between Russia and Austria-Hungary that helped bring on the First World War.  Less noticed, at the time and since, Tsarist Russia conquered many small Muslim states in Central Asia.  This gave Russia, and later the Soviet Union, a huge Muslim population.  What was to become of these people if Russia, and later the Soviet Union, broke up?  As with Russia’s original expansion into the region, recent events here have not been much noticed by Western media or much discussed by Western officials.  For both the Russkies and the local peoples, however, the issues are important.

One example comes from the Turkic region.  Back in the First World War, the Ottoman Government had vast visions of a central Asian Empire that encompassed the Turkic people inside the Russian Empire.  Defeat in war and the victory of the Communists in the Russian Civil War put paid to that fantasy.  After the collapse of the Soviet Union, many of the Turkic peoples created various “stans” as independent states.  Turkey revived its dreams of extending its influence throughout the region.  Turkey spread its influence by fostering cultural, educational (lots of exchange students), and business connections (investment).[2]

However, the particular emphasis—“pro-Muslim Brotherhood, rather than pan-Turkic”—given to this long-term effort by Turkish President Recep Tayyip Erdogan began to rankle.  Russia remains far more important the region than is Turkey.  The attitudes toward Islam are more varied among the Turkic peoples than Mr. Erdogan’s own preference.

So problems had been developing.  Then the Turks—foolishly—shot down a Russkie fighter-jet that had briefly over-flown Turkish territory while attacking Syrian rebels.  The Russkies weren’t too pleased.  They slammed on all sorts of sanctions.  Russian police and immigration officials continually harass Turks working in or visiting business in Russia itself.  Turkic Russians resist burning bridges.

Another example comes from Chechnya.[3]  Russia fought several gory wars to retain possession of the little territory in the North Caucasus, then put in a former rebel, Ramzan Kadyrov, as the ruler.  Since then, the government has “Islamized” Chechnya.  It’s almost impossible to buy alcohol, women wear the hijab, and the mosques are packed.  However, Chechnya’s Islamists are Sufis, rather than Wahhabists.  Saudi Arabian-sponsored Wahhabism is what inspires ISIS and similar movements.  Among those similar movements were the jihadis who initially fought for Chechen independence from Russia.[4]

There are two points worth pondering.

First, Turkey is a member of NATO.  Do the Russians have a right to think of Erdogan’s forward policy among the Turkic people—like tighter links between the European Union (EU) and Georgia or Ukraine—as a hostile act?

Second, have the Russians found a means of defusing radical Islam by embracing an equally intense, but less radical, version?

[1] There is a greater similarity here to the simultaneous expansion of the British Empire and to American “Manifest Destiny” than English-speaking peoples like to admit.

[2] Yaroslav Trofimov, “Turkey’s Rift With Russia Frays Ties With Turkic Kin,” WSJ, 24 June 2016.

[3] Yaroslav Trofimov, “Under Putin Ally, Chechnya Islamizes,” WSJ, 3 June 2016.

[4] See, for example, https://en.wikipedia.org/wiki/Shamil_Basayev and  https://en.wikipedia.org/wiki/Ibn_al-Khattab

Campaign Issues 2016 3.

Hind-sight is 20/20; foresight is not.  The basis of the Affordable Care Act (ACA) lay in a plan to require many younger, healthier, and lower income people to pay premiums that would subsidize the health-care costs of older, sicker, and wealthier people.[1]  Even so, support for the ACA has grown with the passage of time.  In 2013, less than a third (32 percent) approved of the ACA, while 61 percent disapproved.    By July 2015, 47 percent approved, 44 percent disapproved, and only 9 percent “didn’t know.”  Opponents of the ACA have been the big losers here, bleeding away almost a third of their numbers to either supporters or to “don’t know.”[2]

Before the Affordable Care Act (ACA) went into effect, 17.1 percent of Americans had no health insurance.  By 2013, the share without health insurance had fallen to 13.3 percent; in 2014, 10.4 percent of Americans had no health insurance.[3]  By Spring 2015, that number had fallen to 11.9 percent, a reduction of 5.2 percent.[4]  (This seems like a lot of hassle just to reduce the number of uninsured by one-third. )  In March 2015, the Congressional Budget Office (CBO) predicted that 21 million people would have signed up for coverage by state exchanges under the ACA by late 2015. This would be a pretty extraordinary jump: only 9 million people were registered in late 2014.  By late October 2015, only an additional million people had enrolled.

The great thing about a market economy is that it forces sellers of any good to find a price that is high enough for them to make a profit and low enough to attract customers.  The first years of the ACA have seen insurers searching for that sweet spot.[5]  One big problem is that many people remain outside the insurance market, regardless of the individual mandate.  The newly-insured have turned out to be sick people, rather than a broad range of the population.  Costs for insurance companies have gone up more than have income from premiums.  As a result, health insurance premiums rose by 5 percent for 2016.  Now, major insurance companies are seeking an average 10 percent increase in premiums for 2017.[6]  (The desired rates for Washington, DC and New York City are 16 percent.)  At some point, the insurance companies will find the right price.  Where is that price?  Will premiums continue to rise after 2017?  It’s difficult to say.  Why do uninsured people not enroll?  Young, healthy, and less-well-off people seem to be staging a libertarian revolt against the mandate that everyone have health insurance.

The ACA is a substantial extension of the entitlements safety-net for the benefit of poor people at the expense of not-so-poor people.  The federal government subsidizes to varying degrees many of the insurance premiums.  This means that higher premiums will increase federal spending on health care.  At some point, even in America, taxes are going to have to go up to pay for spending or spending is going to have to come down to what the country is willing to pay.[7]  However, people with higher incomes who buy insurance on the market-place lose the subsidies, so they are going to feel the sticker shock.  If it comes to higher taxes, Democrats are going to favor preserving the entitlement by taxing the one-percent, while Republicans are going to favor sending the ACA in front of a “death-panel.”

[1] This sounds like a Republican plot, but Republicans had no voice in the ACA.  This is all Democrats.

[2] “Poll Watch,” The Week, 10 July 2015, p. 17.

[3] “Noted,” The Week, misplaced the exact reference.  Sorry.

[4] “Noted,” The Week, 24 April, 2015, p. 16.

[5] Reed Abelson and Margot Sanger-Katz, “Obamacare Premiums Are Rising, Not a Little,” NYT, 16 June 2016.

[6] These sorts of developments have been predicted by Republican critics from the beginning.  Some of them have predicted that it will end in a “death spiral” as rising premiums force people out of the market.   Democrats derided this as partisan fear-mongering.

[7] I realize that this is a disturbing new way of looking at things.

Campaign Issues 2016 2.

Republicans say that the “War on Poverty” has been lost.[1]  Democrats say that it hasn’t been won, yet.  According to the New York Times, the conservative stereotype of poor people is that they’re criminals or they’re lazy.[2]  According to conservatives, the conservative stereotype of poor people is that they’re intelligent and entrepreneurial, but that liberals have created a set of incentives to dependency.  Is there any indication of who is more nearly correct?

According to the Census Bureau,[3] in 2011, there were 76 million families.  Of these, 55.5 million consisted of married couples, and 20.5 million consisted of Other families.  Among those Other families, 5.4 million were male-headed and 15.1 million were female headed.  So, 73 percent were married couples and 27 percent were Other families.  Among Other families, 73.6 percent were female-headed households and 26.4 percent were male-headed households.

White, non-Hispanics accounted for 52 million of the households.  Of these, 41.5 million consisted of married couples and, 10.5 million consisted of Other families.  Among those Other families, 3 million were male-headed and 7.5 million were female-headed.  So, 80 percent were married couples and 20 percent were Other families.  Among Other families, 71 percent were female-headed households and 29 percent were male-headed households.

African-Americans accounted for 8.7 million of the households.  Of these, 3.8 million consisted of married couples and 4.9 million consisted of Other families.  Among those Other families, 800,000 were male-headed and 4.1 million were female-headed.  So, 43 percent were married couples and 56 percent were Other families.  Among Other families, 83 percent were female-headed and 17 percent were female-headed.

Married couples are much less common among African-Americans (43 percent) than among White non-Hispanics (80 percent) or the national average (73 percent).  Other families are much more common among African-Americans (56 percent) than among White non-Hispanics (20 percent) or the national average (27 percent).  Female-headed households are somewhat more common among African-Americans (83 percent) than among White non-Hispanics (71 percent) or the national average (73.6 percent).  African-Americans account for 27.1 percent of the female-headed households, while African-Americans account for about 14 percent of the population.

Current anti-poverty programs include food stamps, housing subsidies, and various tax-credits like the earned-income tax credit and the child tax credit.  People can obtain these benefits provided that they remain poor.  Raise your income and lose the benefits.

Back in 1965, Daniel Moynihan published The Negro Family: The Case for Action.[4]  He concluded that “The steady expansion of welfare programs   can be taken as a measure of the steady disintegration of the Negro family structure over the past generation in the United States.”  In short, Uncle Sam displaced black fathers.  While there is a lot to criticize here, it is also possible to argue that part of poverty is volitional: don’t have kids outside of marriage; stay in school and don’t disrupt class, then go to a community college; get a job, even if it is a crummy one; then trade-up to better jobs.  This issue will not be discussed in the 2016 election.

[1] Oddly, they never say that about the “War on Drugs.”  https://www.youtube.com/watch?v=j3SysxG6yoE  It can be argued that the War on Drugs and the War on Cancer were Republican distractions or alternatives to the War on Poverty.

[2] David M. Herszenhorn, “Antipoverty Plan Skimps on Details and History,” NYT, 15 June 2016.

[3] See: https://www.census.gov/prod/2013pubs/p20-570.pdf

[4] See: https://en.wikipedia.org/wiki/The_Negro_Family:_The_Case_For_National_Action.

Campaign Issues 2016 1.

Currently, Social Security faces two fundamental problems.[1]  One fundamental problem is that Social Security is based on a “pay-as-you-go” model: withholding taxes from people who are working pay for the retirement of people who are no longer working.  Fine.  If there are a lot of people working and a smaller number not working, then the system functions smoothly.  What if the number of people working declines relative to the number of those who are not working?  That’s more of a problem.  Taxes on those still working will have to rise to pay for those no longer working.  That is the situation in which Americans find themselves as the “Baby Boom” generation passes out of the work force and into the work-for-me force.

This problem has been around for a long time and people in authority have been trying to devise a solution for a long time.   In 1983 a bi-partisan commission investigated solutions.  Congress followed the commission’s recommendations by raising taxes and extending the age of full eligibility. That fixed the problem for a while, but—of course–“I’m back!”  In a report of 2015, the trustees reported that the Social Security trust fund will go broke in 2034, with the Social Security Administration able to pay less than 79 cents on the dollar of benefits.  In 2011-2012, President Barack Obama sketched a budget compromise agreement in which Social Security would be continually eroded by inflation.  The Republicans weren’t buying this idea.  Another solution, which could be combined with de-coupling Social Security benefits from the inflation index, would be to raise the cap on with-holding taxes.  Currently, only income below about $134,000 a year is subject to with-holding.  Raising that ceiling would generate a lot of revenue.  Taken together, these proposals probably offer a manageable means to solve the Social Security problem for the immediate future.

A second fundamental problem is that Social Security was never designed to be a full retirement pension.  It was meant to provide a basic income for retirees, who were expected to save from current income to pay for the bulk of their future retirement needs.  However, many members of the “Baby Boom” did not do any significant saving for their retirement.

Now, under the influence of the Bernie Sanders campaign, the Democrats have come out for expanding Social Security to make its benefits more generous.  Hillary Clinton has pledged to increase benefits for widows and for those who stop working to be care providers for children or sick family members; to resist reduction of cost-of-living increases; and to resist increasing the age for full eligibility.  She would pay for these increased benefits through higher taxes on the wealthy.  Still, even these proposals don’t go as far as the left wing of the party wants.  President Obama has remarked that “a lot of Americans don’t have retirement savings [and] fewer people have pensions they can really count on.”  How to make up for this lifetime lack of thrift?

Current proposals include increasing the benefits for all recipients while providing additional benefits for the uncertain number of the “most vulnerable”; and/or increasing cost-of-living adjustments to include medical costs.

Several questions arise out of these problems.  First, which “Baby Boomers” did not save and why did they not save?  Moral recriminations are going to be a part of this debate.  Second, what are these proposals likely to cost?  Third, how large a share of the well-off will have to be taxed more heavily?  Just the “1 percent” or the “5 percent” or anyone who did manage to save?  Fourth, do Americans want to transition Social Security from the current partial pension system to a full-blown national retirement system?   What would a long-term system require?

[1] Robert Pear, “Driven by Campaign Populism, Democrats Unite on Social Security Plan,” NYT, 19 June 2016.

Saudi Arabia and 9/11.

In the 9/11 attacks, 15 of the 19 hijackers came from Saudi Arabia.[1]  Osama bin Laden was a Saudi who had begun his career in “jihad” by raising money and recruiting men for the war against the Soviet Union in Afghanistan.  This came to be called the “Golden Chain.”  It is now a commonplace to note that Saudi Arabia has promoted the Puritanical form of Islam known as Wahhabism and that there is a striking similarity between Wahhabism and the ideology of ISIS.  Immediately after 9/11, the Saudi Arabian government flew 160+ Saudi Arabians out of the US on chartered jets, while the rest of America was grounded.[2]  So, inquiring minds want to know, did Saudi Arabia have anything to do with the 9/11 attacks?

Conspiracy theorists aren’t the only ones to ask the question.[3]  In 2002, a Joint Congressional Inquiry investigated intelligence failures on the road to 9/11.  President George W. Bush felt it necessary to bar release of 28 pages of the report which dealt with Saudi Arabian involvement.  (The Congress People[4] are allowed to read the pages under supervision, but they are barred from talking about what they have read.)

Did ObL’s “Golden Chain” continue to operate after the war in Afghanistan?  Did Saudi donors finance the attacks on the World Trade Center and the Pentagon?  Did Saudi government officials facilitate the work of the terrorists?  In response to these questions, equivocation is rife.  The Saudi government emphatically denies having anything to do with 9/11.  The 9/11 Commission declared that there was “no evidence” of Saudi government involvement at the upper levels.  What about at the lower levels?  What about rich guys not in government?

People who are privy to the various investigations dissent from the qualified answers offered by the government.  John Lehman, a member of the 9/11 Commission, said that “there was an awful lot of participation by Saudi individuals in supporting the hijackers, and some of these people worked in the Saudi government.”  Bob Graham, a co-chair of the group investigating intelligence failures, said that the question of financing of 9/11 “points a very strong finger at Saudi Arabia.”

At what do people look specifically?  First, at Omar al-Bayoumi, who is suspected of being a Saudi intelligence officer posted in Southern California with a watching brief on Saudi dissidents living in America.  In January 2000, two of the future hijackers (who had slipped through the many cracks in American intelligence before 9/11) arrived in Los Angeles.  Neither spoke any English, yet they managed to disappear for two weeks.  Then they met Bayoumi.  He drove them down I-5 to San Diego, found them an apartment (co-signing the lease) and fronted them the rent, and put them in touch with a local imam, Anwar al Awlaki.  (See “Just like Imam used to make.”)  Second, at Fahad al-Thumairy, a Saudi consul and imam in Southern California.[5]  He had contact with Bayoumi; he was deported in 2003; and he was interviewed by the EffaBeeEye several times in 2004.  Thumairy denies everything.

On the one hand, one of the implicated Saudi officials says “Saudi Arabia has nothing to hide.”  On the other hand, Saudi Arabia recently said that it will sell $750 billion of its American assets (mostly US Treasury bonds) if the secret 28 pages are de-classified.  That seems likely a testy response if there’s “nothing to hide.”  Still, American officials cringe before the threat.

[1] “Noted,” The Week, 15 July 2005, p. 18.

[2] There were 84,436 Saudis in the United States that year.   Why fly out only 160 or so of them?

[3] “Saudi Arabia and 9/11,” The Week, 24 June 2016, p. 13.

[4] See their hit song “White-House-C-A.”

[5] Mark Mazetti and Scott Shane, “28 Pages May Not Unlock Mystery of Saudis and 9/11,” NYT, 18 June 2016.

The Rise and Decline of Nations.

Back in the day–as young people used to say before they moved on to some other expression up with which I have not caught—I was going to be an economic historian. I came across a book by Mancur (Man-Kur or Man-Sur, depending on who your listening to) Olson.[1]  It’s a remarkable book, although—like many another remarkable book—long forgotten.

At the core of the book is a puzzle.  Germany and Japan lost the Second World War big time, while the United States won big time.  So how come the post-war German and Japanese economies were so dynamic, while the American economy slowed down?

Olson’s answer is one that will be obvious to sailors.[2]  You leave the boat in salt-water and it will pick up barnacles.  It also will be obvious to heart surgeons.  You have too many double bacon cheeseburgers with the twisty fries covered in BBQ sauce and your arteries will get clogged with sludge.  In either metaphor, the system gets loaded with stuff that slows down its operation.

What, in economic terms, are these barnacles/sludge?  They are the various interest groups that grow up around an established way of doing things: unions, government regulators, tax collectors, and business monopolies and cartels.  They grow up with—well, slightly behind– any new industry.  They figure out how the system works.  They figure out how to work the system.  They’re opposed to change because they know how to work the existing system.[3]  They fight over shares of the existing pie, rather than over how to expand the pie.  Eventually, the contending groups reach agreement on how to divvy-up the pie.  These agreements Olson labels “distributional coalitions.”  They are the “masters of the crossroads.”[4]

The thing is that the Second World War destroyed all these “distributional coalitions”—the barnacles, the sludge, the interest groups, the barriers to new technology and new relationships–in Germany and Japan.  War “emergencies” caused the German and Japanese governments to break down established relationships from the pre-war era.  Then the American and British occupations banned many regime-associated groups.  In contrast, the victor nations institutionalized their own “distributional coalitions.”  American and British unions foreswore strikes, while lots of leading businessmen took “dollar-a-year” jobs with the government.[5]  Subsequently, many interest groups dug-in to established positions.  So, Germany and Japan were able to achieve rapid economic growth, while the United States merely chugged along and Britain soon fell behind the countries against which it had fought from the first day of the Second World War to the last.

In a sense, then, catastrophic defeat in war serves as a kind of social and economic angioplasty.[6]  Obviously, Olson was talking only about already advanced industrial economies.  I doubt that anyone expects Iraq to be the next “economic miracle.”

Trite observation though it is, the same analysis might be applied to any organization.  For example, colleges facing severe competition either ruthlessly adapt or wither.

[1] Mancur Olson, The Rise and Fall of Nations: Economic Growth, Stagflation, and Social Rigidities (Yale UP, 1984).

[2] Nevertheless, will all the non-sailors please spare me the abusive remarks about me wearing pink—“salmon” in the imagination of my brother-in-law—pants, blue Polo shirts, and Topsiders?  Please?

[3] Big Carbon—coal and oil—has a lot more drag with the gummint than does Not-So-Big Renewables.

[4] See: https://en.wikipedia.org/wiki/Papa_Legba  See also: Madison Smartt Bell, All Souls’ Rising (1995); Master of the Crossroads (2000); and The Stone That the Builder Refused (2004).

[5] See, for example, Alan Brinkley, The End of Reform: New Deal Liberalism in Recession and War  (1995). 

[6] Curiously, this is how mainstream economists saw a business-cycle recession before the Great Depression.