Month: September 2012

Freedom of Speech – Final Thoughts (for a while at least)

Our right of free speech is not a partisan issue in America. Democrats and Republicans, both President Obama and Presidential aspirant Romney, vigorously support its value and its constitutional guarantee. The extent of that right, which is not without limits, is greater in the U.S. than in any other country. The right to speak in some countries is simply at the whim of the existing government. The residents in some counties, such as Egypt, have more limited but legally defined (in principle at least) rights. Even the UK limits its press more than it is in the U.S. (think of the invasion of the privacy of the Queen and her family, though British standards are evolving too).

On this as with so many other issues, the world would benefit from a civil but vigorous discussion of the value of free speech to a healthy society and as a check on the powers of government and of where it is most appropriate to define its boundaries with the right to privacy and other values. We also need to understand and respect (but not necessarily agree with) the boundaries established by other countries and cultures.

President Obama reflected the American view well in his UN speech September 25.

“As president of our country, and commander in chief of our military, I accept that people are going to call me awful things every day. And I will defend their right to do so…. We do so because in a diverse society, efforts to restrict speech can become a tool to silence critics, or oppress minorities. We do so because given the power of faith in our lives, and the passion that religious differences can inflame, the strongest weapon against hateful speech is not repression, it is more speech — the voices of tolerance that rally against bigotry and blasphemy, and lift up the values of understanding and mutual respect…. There are no words that excuse the killing of innocents. There is no video that justifies an attack on an embassy. There is no slander that provides an excuse for people to burn a restaurant in Lebanon, or destroy a school in Tunis, or cause death and destruction in Pakistan.”

The next day, to the same UN audience, Egyptian President Mohamed Morsi defined a different position: “The obscenities that I have referred to that were recently released as part of an organized campaign against Islamic sanctities are unacceptable. We reject this. We cannot accept it. We will not allow anyone to do this by word or deed…. Egypt respects freedom of expression, [but] not a freedom of expression that targets a specific religion or a specific culture.”[1]

Any real dialog over this issue requires a deeper understanding of just President Morsi means when he says “we will not allow anyone to do this.” He clarified this in the same speech: “Egypt respects freedom of expression,… [but] not a freedom of expression that targets a specific religion or a specific culture.”[2]

The arrest in Cairo of Alber Saber, a 27-year-old Coptic Christian Egyptian illustrates an application of what President Morsi means. Saber was accused of providing a link on his Facebook page to the inflammatory video “Innocence of Muslims”, which he denies.  He “was arrested two weeks ago on charges of disdaining religion and ridiculing religious beliefs and rituals….  Showing contempt toward what Egyptian statutes call the “heavenly” religions — Christianity, Islam and Judaism — is punishable by up to five years in prison.

“The same day, [as Obama’s UN address] Egyptian authorities announced that charges would be filed against a prominent Islamist activist and TV personality, Ahmed Mohammed Abdullah, who tore up a copy of the Bible during a demonstration outside the U.S. Embassy in Cairo…. But liberal activists here say the blasphemy laws are so vague, and applied almost exclusively when people allegedly defame Islam, that they are nothing more than a political tool.”[3]

Clearly Egypt has a very different standard of free of speech than we do. We have very good reasons for believing that our more liberal standards are better and we should defend that view. But obviously views differ and those differences must be respected.

The freedom of speech is not absolute anywhere. All Americans know that we are not free to shout fire in a theater unless we think there is one. We are not allowed to deliberately tell lies about others in public. But that already puts us in some difficult waters, as the distinction between deliberate and unknowing lies is not easy to establish. In seeking the best balance between free speech and the right to privacy, American libel laws have set different standards for public (politicians, movie stars, etc.) and private individuals on the grounds that by choosing to become “public” officials or celebrities, such people have chosen to forgo some of their privacy.

For most of our country’s existence, free speech was thought to apply primarily to political speech and religious expression. America’s legal system evolved from English Common Law, which set a rather low standard for the prosecution of publishers of libelous material, who could be jailed for material that damaged the reputation of a member of the community. In 1734 New York publisher John Peter Zenger was imprisoned for printing political attacks against the colonial governor of New York.  However, his lawyer established a new legal precedent by arguing successfully that truth was a proper defense in libel cases. Prior to that, truth of allegedly libelous statements was not relevant to whether libel had been committed. Since the Zenger case, however, someone can sue successfully for libel only if the defamatory information is proven to be false.

Since the 1964 Supreme Court ruling in the case of New York Times Co. v. Sullivan, “public officials no longer could sue successfully for libel unless reporters or editors were guilty of ‘actual malice’ when publishing false statements about them…. Retired Justice William J. Brennan, Jr., who wrote the Sullivan decision, defined it as ‘knowledge that the [published information] was false’ or that it was published ‘with reckless disregard of whether it was false or not.’ In other words, public officials no longer could sue for libel simply by proving that something that had been broadcast or printed about them was false. Now they would have to prove that a journalist had knowingly printed false information while making little, if any, attempt to distinguish truth from lies.”[4] Egypt obviously has a different balance between conflicting rights in mind.

Even in the United States, freedom of speech is under constant attack from within. Columnist George Will, with his usual flare for sarcasm reports on bone chilling attempts by North Carolina’s Board of Dietetics/Nutrition to stop Steve Cooksey from offering nutritional advice on his internet blog based on his personal experience with losing 75 pounds. They argue that he does not have a license to offer such advice (hopefully the self interested protection of the right of only their members to offer such advice doesn’t need to be explained).[5]

Finding the best balance between free and acceptable speech is an ongoing quest and different societies, even the same society at different points in its history, define it differently. I, like most of my countrymen and our constitution, believe that we have very good and compelling reasons to tightly limit exceptions to and limits on free speech to the minimum. In defending this view to others, we must respect that they may prefer a different balance, while at the same time explaining the reasons for our view.

That said, the quality of any society also depends on what actually gets said. A society in which most residents adhere to the values of mutual respect and make public pronouncements that are thoughtful and well meaning is clearly a more desirable one that where many are rude and thoughtless and speak hatefully. But the freedom of all members of society to speak freely is, in my view, is the best way to develop a thoughtful and civil society.

[1]Anne Gearan, “Egypt’s president Morsi tells UN insults to Muhammad unacceptable” The Washington Post, September 27 Page A2.

[2] Ibid

[3] William Booth, “Egyptian blogger Alber Saber’s arrest shows differences over freedom of speech” The Washington Post, September 27, 2012, page A9

[5] George Will, “Bureaucrats declare war on free advice”, The Washington Post, September 27, 2012.

Further thoughts on Free Speech

Why are Americans (in particular) so attached to free speech, even repugnant free speech? Why is the first item in our Bill of Rights (i.e. the First Amendment to our Constitution) devoted to its protection? Our strong defense of free speech rests largely, in my view, on three beliefs held by most Americans.

The first is that it is our right and our responsibility to decide for ourselves what to read, view or listen to. We turn to ourselves and our families first and to our communities and our government second and third for most things. No one is absolutely self-reliant (even Robinson Crusoe had his man Friday), but Americans have historically been more self-reliant than most any other people. We trust our own judgment more than that of a public morality police. Though we often turn to trusted advisors in our churches or communities for guidance, we choose whose guidance we respect. No one has a stronger interest in our getting it right than we do ourselves. I don’t buy the paternalistic argument of some “do gooders” that the poor or uneducated just don’t care.

The second belief, born of centuries of experience and accumulated evidence, is that government power is always in danger of being corrupted to the service of those in power if not carefully checked and balanced. If government had the power to control what we heard, it would, sooner or later, be abused. If government is able to filter what we see and hear, it will not be able to resist filtering out information inconvenient to or critical of itself.

The third belief is that competition in ideas and information as well as in the provision of goods and services will reward the truth and drive out falsehood. This issue of discovering the truth is complicated. These days anyone can say anything and post it on the Internet. However, it doesn’t generally take long for the truth to crowed out lies (the claims that Ambassador Stevens body had been sodomized or that American Embassy Marine guards did not have live ammunition come to mind). To the extent that we trust the statements of our government it is only because we know that we (and the press) are free to contradict it if we have contrary evidence.

Our strong defense of free speech does not obligate us to defend the content of that speech. The Turkish Prime Minister Recep Tayyip Erdogan said that “’both the mentality and the organization behind this movie and those perpetrating terrorist actions exploiting Islamic symbols and discourse’ were equally to be condemned.” (The Washington Post “Anti US fury widens in Muslim world” 15/9/2012). Secretary of State Hillary Clinton called the offending video “disgusting and reprehensible.” She was right to say so, though I found the film merely pathetic.  We defend the right of the cretins who made this film to make it and to show it where ever they can convince some company or person to do so while also defending our right to denounce it.

This brings us to the “Muslim” reaction to the film. Many Muslims around the world have complained loudly about pictures or films that denigrate Mohammed, as do many Christians when pictures or films denigrate Jesus. That is simply an exercise of free speech. But what about demonstrations at American Embassies? “The right of the people peaceably to assemble,” is merely one of the means of exercising free speech and is also protected by the First Amendment to our Constitution.

Attacking our Embassies and their officials and employees is quite another matter. Muslims are wrong to do this and their governments should not allow it. I hope that you stumbled at my broad brushed attribution of this violence to “Muslims”.  If you didn’t you should have. Muslims did not kill four Americans in Benghazi or set various American properties on fire in several countries. “It is no more accurate to condemn the Muslim world for the atrocities of a relative few than it is to indict America because one lowbrow decides to upload a lousy flick that nobody otherwise would watch or even know about.” (Kathleen Parker, “In Libya and America-imbeciles affecting foreign policy” 14/9/2012.) Individuals did these things, each with their own motives. What drew people to these demonstrations? Who are they and what are their goals? In Benghazi, the murderers may have been al-Qaeda linked. The attacks in Egypt were primarily lead by hard line Islamists groups against the somewhat more tolerant and moderate new government of the Muslim Brotherhood. (David Ignatius, “Cairo and Libya attacks point to radicals jockeying for power” The Washington Post 12/9/2012)

Not everyone in the world understands or accepts our strong commitment to free speech. Our self-interest calls for us to carefully explain to the rest of the world its value and importance for the kind of societies that respect individuals that we want to live in.

American Values and Foreign Policy

One of America’s values and traditions is standing together in the face of foreign attack or challenge. Presidential candidate Mitt Romney has violated that tradition by attacking the statements of the American Embassy in Egypt’s condemnation of an anti-Muslim film made in California: “The Embassy of the United States in Cairo condemns the continuing efforts by misguided individuals to hurt the religious feelings of Muslims — as we condemn efforts to offend believers of all religions.”

Following news on September 11 of American casualties at an American consulate in Libya, Romney’s foreign policy advisers recommended that he speak out against the government’s apologies. He issued the following statement:

“I’m outraged by the attacks on American diplomatic missions in Libya and Egypt and by the death of an American consulate worker in Benghazi. It’s disgraceful that the Obama Administration’s first response was not to condemn attacks on our diplomatic missions, but to sympathize with those who waged the attacks.”

The next day Romney pressed his attack further, saying that, “I think it’s a terrible course for America to stand in apology for our values, that instead when our grounds are being attacked and being breached, that the first response of the United States must be outrage at the breach of the sovereignty of our nation. An apology for America’s values is never the right course.”

Romney was apparently not aware that the American Embassy’s statement on September 11 had been issued before the tragic death of Ambassador Stevens and three other Americans in Libya. Christopher Stevens was a fraternity brother of mine from the ATO house in Berkeley, though we were not there at the same time and I have never met him. President Obama in fact condemned the killings and according to the Washington Post: “unnamed White House officials told news outlets later Tuesday night that the [Egyptian] embassy statement did not reflect U.S. government views.” That is a pity because it does reflect American values and should reflect U.S. government policy.

Since neither Romney nor Obama seem to understand what American values are in this context, I am volunteering a refresher course.

We believe passionately in free speech and tolerance of the views of others. This is far from accepting anything someone might say. It is hardly the same thing as condoning insulting or ignorant things people sometimes say. Sam Bacile’s “The Muhammad Movie” is crude and disgusting. It deserves to be condemned and the Egyptian Embassy was quite right to apologize for it. Terry Jones, the hate mongering, Koran burning, so-called Christian minister in rural Florida has been promoting the film. Real Christians should condemn him, while at the same time acknowledge his right to state his twisted views.

Our values were reflected, for example, when many Christians complained that Andres Serrano had received $15,000 from the National Endowment for the Arts (a government agency) for his photograph of a crucifix submerged in a glass of urine without questioning the artists right (at his own expense) to do such things. Although the artwork was condemned by many as an affront to Christians, mobs did not storm the gallery that planned to show it nor the NEA. Secretary of State Hillary Clinton is one of the few to get the balance about right: http://www.washingtonpost.com/blogs/she-the-people/post/hillary-clinton-speaks-out-for-the-same-american-values-upheld-in-retracted-embassy-statement/2012/09/13/ccbf05f2-fdd6-11e1-b153-218509a954e1_blog.html

Standing together in the face of foreign attacks does not mean that we cannot or should not criticize foreign policies that we think do not service the best interests of our country.  But wise and thoughtful people know when the timing is right for such serious discussion. The present moment of grieving for our lost brothers and sisters is not a time for divisive political maneuvering. Romney’s foreign policy advisers have given him bad advise before (think Israel/Palestine. See my earlier blog: https://wcoats.wordpress.com/2012/08/05/romney-on-culture/). Romney should fire them.

Has the ECB provided the missing piece to resolve the EU debt crisis?

On September 6, Mario Draghi, president of the European Central Bank (ECB), announced that the ECB would engage in unlimited secondary market purchases of government bonds of member countries adhering to the policy conditions agreed to with the IMF and EU (and thus qualified to borrow from the European Financial Stabilization Fund – EFSF – or the European Stabilization Mechanism – ESM) to the extent needed to promote the efficient transmission of monetary policy throughout the Euro area. The over all liquidity impact of such purchases will be sterilized (offset by the sale of some other ECB assets), as needed, in order to preserve the ECB’s inflation objective of an inflation rate below but near 2% over the next two years. What does this add to the existing European tool kit and is it enough to resolve the EU debt crisis?

All responsible government officials recognize and accept that in the long run nations, like individuals, must live within their means (pay fully for what they consume). Their standard of living will depend on what they are able to produce (productivity).  Eliminating government deficits requires reducing government spending and/or increasing its tax revenue. Increasing the sustainable standard of living of its people (the level of consumption they can fully pay for with what they produce) requires liberalizing restrictions on labor and product markets and investment that will increase the productivity and thus output of workers and businesses. The debate is primarily over the optimal pace of introducing the measures needed to balance budgets and increase productivity and competitiveness.  This matters in that it takes time for the economy to adjust to reforms before it enjoys the benefits of more rapid growth. In the interim continuing but declining deficits must be financed either in the market (if market lenders have confidence in the effectiveness of the measures being taken), or by the IMF/EU/ECB until market confidence can be established.

I have elaborated these points in earlier blogs: “European debt crisis: causes and cures”; “Saving Italy and the euro”;   “Buying time for Italy”; and “Saving Greece-Austerity and/or Growth”.

Throughout the crisis Germany has demanded that Greece and other over indebted and uncompetitive countries undertake the needed corrective measures before being granted the financing needed for the transition back to normal market borrowing.  Events have proven Germany to be right as earlier “bailout” commitments have led to a suspension or slow down in policy reforms thus prolonging recovery.  For the same reason Germany has vigorously opposed (correctly in my view) the adoption of Eurobonds, which would allow Greece and others to borrow at the same interest rate as Germany and all other EU members. The moral hazard of bad fiscal behavior when market discipline of over borrowing is removed is a real and serious issue.

On the other hand, Germany is also pushing for Fiscal Union in order to gain better EU wide control over excessive national deficits. This may or may not be a good idea for Europe (I have my doubts) but it is certainly not, contrary to much opinion, essential for the viability of the Euro. The idea behind the German push for Fiscal Union stems from the markets’ failure to properly price the risk of lending to Greece, Portugal and some other overly indebted countries and Germany’s belief that the only way it can protect its tax payers from supporting inflated living standards to the South is by gaining control over their governments’ expenditures. Until the last few years, the governments of Greece and Portugal could borrow in the market at interest rates very close to the rates paid by the German government, which by the way has borrowed quite a lot itself (the ratio of German government debt to its GDP is currently above 81%). These governments spent and over promised future benefits recklessly on the (temporary) basis of relatively cheap debt financing in the market.

It is certainly a fair question to ask why the market failed in this regard and over lent to a number of governments that now have difficulty repaying. The expectation that Germany and other Northern EU countries would not allow the profligate southern ones to default made such lending seem risk free and the market priced it accordingly.  Fiscal Union and/or EU-wide fiscal rules are one way to limit such excessive borrowing and unfunded future promises. Improved market discipline of borrowing via more accurate risk premiums on market lending is another, and in my opinion, superior approach. Greece’s orderly default (75% haircut) on its publicly held debt and the current crisis have restored a large measure of market discipline to sovereign borrowing. Greece and Portugal do not need to borrow from the market for several more years as long as they implement and adhere to the reforms demanded by the IMF/EU/ECB. However, Spain and Italy closely watch the now far more sensitive interest rates demanded by the market when lending to them. Given the substantial outstanding debt of these countries, those interest rates can make the difference between the success or failure of reform efforts. Ireland, which has successfully, though painfully, implemented all of the conditions of the IMF et al “bailout,” is well on the way to full recovery and is now able to borrow again in the market at reasonable interest rates.

The missing piece in the EU/ECB tool kit to manage the ongoing debt crisis is the availability of sufficient temporary adjustment financing for larger countries such as Spain and Italy should markets loss confidence in one or both of them before their reforms have had time to bear fruit. The resources of the EFSF/ESM, still waiting for the German constitutional court’s approval, are not sufficient to finance stabilization programs with both countries. This leaves markets uneasy and volatile.  Market interest rates on ten-year Spanish government bonds have varied this year between under 5% to 7.6%. German government bond rates have varied between 1.24% and 1.85%.  Mario Draghi’s commitment of ECB funds to buy short-term sovereign debt (with maturities of up to three years) in secondary markets does not augment the resources available to the EFSF/ESM to finance adjustment programs with the IMF, but by buying such bonds in the secondary market should liquidity in a program country dry up, the ECB should be able to significantly reduce the prospects of what it considers unrealistically high risk premiums for such bonds. The ECB would only buy bonds of countries meeting the conditionality of an IMF supported adjustment program. Outright secondary market purchases are a standard and traditional liquidity management tool for central banks. What is unique in the European context is that open market purchases must be for the bonds of individual countries and the choice of countries matters. It is for others to determine whether, as Mr. Draghi claims, the new initiative is consistent with the ECB’s mandate.

This past week I attended a meeting of the Mont Pelerin Society in Prague. Friedrich Hayek, Milton Friedman and a few other free market champions founded the MPS in 1946. Czech President Vaclav Klaus, also an MSP member, hosted this year’s meeting. President Klaus has opposed the Czech Republic’s adoption of the Euro. It has kept its own currency, which the Czech National Bank has managed very well under an “inflation targeting” policy regime. However, Spanish economist Jesus Huerta de Soto spoke at the meeting in defense of the single currency. He favors a return to the gold standard but convincingly argued that the monetary discipline on Spain provided by giving up its own currency to the Euro was a good second best.  The key to success or failure of the Euro for the overly indebted countries that use it is whether they reform deeply enough to live within their own means within a few years and to sufficiently improve their competitiveness with the rest of Europe and the rest of the world. Failure to do so will harm the defaulting country far more than it will harm the Euro.  I wish them well.