In contrasting our treatment of others as competitors or enemies in my blog on “What to do About China” I am reminded of the 120 days I spent in Baghdad as an advisor to the Central Bank of Iraq paid for by the USAID and supervised by the US Treasury. Our occupation of Iraq included staff from the US Treasury, USAID, Commerce Dept, State Department, and, of course, the Dept. of Defense. Competition by each of them to do a better job than the others would clearly be win-win making our overall occupation more successful. But too often one agency treated the others as enemies diminishing and undermining their efforts rather than supporting them. My biggest fear with my dual association with USAID and Treasury was that each would see me as on the other side, which would have undermined my effectiveness. Luckily the each saw me as on their own side. “Iraq-An American Tragedy-My Travels to Baghdad”
Category: News and politics
Persuasion or Coercion
Alabama Sen. Tommy Tuberville might be right or wrong about opposing the defense Department’s policy “of providing travel expenses for service women seeking an abortion.” But President Biden is certainly right in claiming that Tuberville’s unilateral “blocking more than 300 military [nominations] with his extreme political agenda” is “jeopardize[ing] the country’s national security.” “Biden Tuberville military clash”
The DOD must determine the policies that will attract the solders that we need in our All Volunteer Military. Those policies should be open to public debate. But Tuberville has chosen coercion to impose his views rather than persuasion to seek consensus . This is not proper in a free society governed by publicly endorsed laws. It prevents the sort of public debate that will most likely find the best balance between the opposing views of people living in the same space. And it will certainly deepen divides that will diminish rather than enhance civility. In short, it bad for the nation.
But our liberal democracy has survived for two hundred and fifty years because when the pendulum swings too far in one direction, it invariably swings back. Hopefully we are reaching the extreme of the pendulum swing of right-left antagonism. Efforts are growing to rebuild the civil dialog from which we can better live together in liberty. See for example groups like Braver Angles https://braverangels.org/ We should fight to preserve our freedom to live as we choose rather than to restrict the choices of others to live as they choose.
Goodbye Unipolar World, and Good Riddance
“Power tends to corrupt and absolute power corrupts absolutely.” Lord Acton. The United States has accomplished a lot—a lot of it good—as the world’s indispensable nation. But as Lord Acton said, power tends to corrupt and as the time of American dominance has gone on its diplomatic skills have eroded. It behaves more and more like a bully that expects to get its way. It is in our interest to recognize and adjust to our diminished relative power and to rebuild our diplomatic, soft power skills of persuasion. It will help us better adhere to the values and rules we preach to others but increasingly ignore ourselves.
In the July, 2023 issue of Foreign Affairs, Justin Winokur offers an excellent review of the adjustments we need to make in The Cold War Trap How the Memory of America’s Era of Dominance Stunts U.S. Foreign Policy “Cold war trap-America foreign policy”
These days our most important international challenge is our relationship with China. While each sovereign nation is entitled to its own approach to its internal governance, its interactions with the rest of the world require mutual understandings and/or agreements. Following World War II, the rules for such cross border interactions have generally been developed by international organizations to which all or most countries are members, such as the UN and its many agencies, the World Bank and regional development banks, and the IMF. To take but one example, the skies full of telecommunications satellites would not be able to serve anyone properly without the rules and spectrum allocations via the International Telecommunications Union.
It is in America’s interest, as well as the interest of most countries, to draw China more fully into the international organizations established after World War II—the Bretton Woods and UN Institutions. “Chinese competition-Asia stability-institutional balancing” But China is increasingly going its own way and creating its own international organizations. BRICS, China’s Belt and Road Initiative, Asian Development Bank, The Shanghai Cooperation Organization, Asian Infrastructure Investment Bank. Why?
Why have we failed to convince China that its interests are also serviced by joining and cooperating with the liberal international order? When China was admitted to the World Trade Organization on December 11, 2001, and requested help from the IMF with how best to satisfy the WTO’s rules, the IMF sent me. The officials I met with in China told me over and over that there was no differences of opinion in China over where it wanted to go (in joining the liberal international order). The debate was only over how fast to get there. In recent years this has changed. It has changed, in my view, in part because the U.S. has abused its dominance in the world and failed to yield (balance) appropriate power to China.
As I have spent most of my professional life with the International Monetary Fund, let me illustrate these points with the determination of IMF quota’s which is meant to reflect its members voting strength and financial contribution to world trade. A member country’s quota reflects its size and position in the world economy. The basic formula, which provided the base line for quota decisions is: Quota = (0.50*GDP + 0.30*Openness+ 0.15*Variability +0.05*Reserves)^K.
But when the IMF was created, the US wanted to ensure that it would dominate it. It insured that some important decisions could only be taken with super majorities. A few even required an 85% majority, such as to adjust quotas, or amend the IMF’s Article of Agreement. The U.S. was initially given a quota well above that 15% that gave it veto power over these limited policies. As the rest of the world has grown, the size of the US economy relative to the whole world’s output has fallen from 40% in 1960 to 24% in 2019. “US share of global economy over time” China’s GDP relative to world GDP, on the other hand, rose from 4.5% in 1960 to 16.3% in 2020. Thus, a strict adherence to the IMF’s quota formula should have significantly increased China’s quota and reduced the US quota.
Quoting from Wikipedia: “China has been trying to expand its political and decision-making power within the IMF. The IMF’s voting system weights each country’s vote based on the amount of that country’s monetary contribution to the Fund. China has been trying to raise its quota. In May 1980, the Chinese government appealed to adjust its IMF quota. With approval from the IMF board, the quota of China was increased from 1.2 billion SDRs to 1.8 billion SDRs. China also obtained a single-country seat on the IMF executive board, which expanded the number of IMF directors to 22 members. As of 2017 the quota of China in the IMF was 30.5 billion SDRs, giving it 6.09% of the total vote.
“To further rebalance power in the IMF, China appealed for changes that would transfer voting power to developing economies.[5] In 2010, the Chinese executive director of the Fund, Zhou Xiaochuan, addressed the board and asserted that giving more power to the emerging economies was critical for the group’s legitimacy, accountability and long-term health.” China and the International Monetary Fund – Wikipedia
Currently the IMF quota for the US is 17.43%, remaining well above the critical 15% needed to retain its veto power, while those of other larger economies are China 6.40%, Canada 2.31%, Germany 5.59%, Japan 6.47%, and UK 4.23%. This is not in keeping with the IMF’s base line quota formula.
This exploitation of American dominance is driving China away and dividing global cooperation to the detriment of the whole world, including the U.S. The current U.S. approach to “competing” with China is not consistent with our values nor our long run interest. “Competing with China”
Our economic and political success—the beacon on the hill that has attracted the best and the brightest to our shores—is the result of our individual freedom and rule of law, not our coercive power and its bullyish use. I hope that we wake up before it is too late. “Why do we promote growth in other countries?”
The Debt Deal
CNN reported today on the compromise bill to raise the Federal debt ceiling agreed between Biden and McCarty, saying that:” The Congressional Budget Office estimates the bill would reduce budget deficits by $1.5 trillion over the next 10 years, and reduce discretionary spending by a projected $1.3 trillion from 2024 to 2033.”
Language can be tricky. Debt and deficit are not the same. Reducing projected spending need not mean a reduction in actual spending. In fact, the package agree to by Biden and McCarthy will continue to increase the Federal debt (though at a slower rate than was proposed initially by Biden) and all categories of spending will continue to grow. Not only will they continue to grow, they will be growing from the abnormally high levels reached during the COVID pandemic.
If we really want all of these expenditures, we should, and will ultimately need to, raise taxes to pay for them. But do all of them pass the cost benefit test? Do all of them contribute to American wellbeing?
One Republican blind spot is defense spending (which, by the way does not include foreign aid to, for example, Ukraine). The defense budget for 2023 is 9.8% higher than in 2022 and is projected in the Biden/McCarthy package to continue to grow over the next two years covered by that deal. Our huge defense budget has resulted from (or encouraged?) American military adventurism that does not contribute to our security.
Buy American
In recent years the U.S. government has become more protectionist (protecting its domestic firms from foreign competition). Last year it even provided billions of dollars to subsidize chip production and other designated products in the U.S., an example of industrial policy (state directed development). The CHIPS Act passed last year will shell out over $200 billion over the next five years to subsidize domestic chip production.
To add insult to injury, the so called “Inflation Reduction Act” may violate World Trade Organization rules: “We have concerns about a number of discriminatory elements in this Inflation Reduction Act which puts requirement for local content, for local production,” Dombrovskis, who also is a European Commission vice president, told Bloomberg in Prague.” EU Is Assessing If US Inflation Act in Breach of WTO Rules – Bloomberg Did we really think that we could cheat and Europe and the rest of the world would just roll over and play dead.
President Biden has proclaimed that these expensive policies are needed to create jobs in American. This is bazar given that we are currently suffering from a labor shortage. Manufacturing output in the U.S. is at an all-time high. U.S. employment in manufacturing has gradually declined in recent decades because our workers have become more productive. But that is surely a good thing, resulting in an increase in our standard of living. President Biden has taken steps to lower our standard of living in order to create American job. Take a deep breath. If we don’t significantly increase legal immigration, you can count on the continuation of long waits on the phone to talk to a real service person.
Where does the “Buy American” impulse come from? It seems that some people see American nationalism as keeping everything at home whatever the cost, while I see it as enjoying the fruits of our largely free society to work and innovate and flourish as we each see fit for the benefit of all.
Several years ago, Ito and I celebrated the 4th of July at the American Embassy in Roma at the invitation of our friend David Zimov, at that time Counselor for Economic Affairs at the U.S. Embassy in Rome. It was really a fun event overflowing with hot dogs and hamburgers. While listening to the Marine Band and waving the little American flags we were all given, I noticed that the flag had been Made in China (clearly tagged). I am guessing that the American nationalists I referred to above were appalled. I, on the other hand, was grateful that my tax dollars were being spent as carefully and wisely as possible—on this occasion at least. https://wcoats.blog/2023/01/22/trade-once-again/
Diversity Training
America was founded on the principle that every person deserves respect and equal treatment. While our constitution incorporated an unfortunate compromise by permitting slave ownership in the South, which was fixed after our civil war, many scars remain. Each generation needs to be taught our proper principles and we should do our best to reflect them in our dealings with our fellow citizens of all races and creeds.
As Tom Palmer put it some years ago: “The recognition of individuality, of the uniqueness of each individual, is commonplace in all cultures…. Each human person is unique…. What is less commonly grasped is that we all share something morally significant and that therefore all human beings have legitimate claims to rightful treatment by each other, that is, to respect for their human rights.” “Freedom is the birthright of all humanity”
I assume that diversity training is an attempt to provide such understanding and to endeavor to remove the remaining scars of historical prejudices. That is certainly an important and laudable goal. But perhaps the new generation would benefit more from a forward-looking, positive approach rather than stressing atonement for an unchangeable past. Diversity is a fun and enriching phenomenon.
Let’s learn more about the cultural and historical backgrounds of our fellow citizens and how and why they or their ancestors came here. Let’s sample their food and music. Let’s rejoice in the diversity around us. Most cab drivers in the DC area are immigrants or immigrants once removed. I enjoy asking them where they or their parents are from. Most of them enjoy sharing such information. Every now and then one of them will reply with sarcasm that they are from Arlington or some such place. And I reply, “Yes, yes, but where did your ancestors come from? We all came from somewhere else” (overlooking our natives).
Diversity is more than a moral duty. It is a unique blessing of the American experience.
Restoring Regular Order to Congress
In my “Hopes for the New Year” blog last week I listed among my hopes: “Restore Congressional Leadership. Enforce the War Powers Act. Restore regular order and cross aisle cooperation to address real problems. “Our dysfunctional Congress”
The promises made by Kevin McCarthy to gain the required majority support for his Speakership of the House, largely deliver my wish. They weaken the power of the overly powerful Speaker and increased the power of your and my Congressman or Congresswoman. Each appropriation will be properly and separately considered (first by the relevant committee) rather than the all in one rush package no one has time to read in the final minutes before the government must shut down. The issues and proposed remedies were presented a few days ago by Bruce Fein “Deliverance from the Republican House”
OK guys, please get on with addressing the issues and needs of the country that depend on law. The term “guys” here is a standard reference to both men and women. It reminds me of the many meetings we had in 2000 in Istanbul with the new head of the new Turkish Banking Supervision body created to manage Turkey’s exchange rate and banking crises. We (our IMF team) met with him and his team daily and often well into the night and he often referred to us as “girls” or in his better moods “ladies.”
Hopes for the New Year
We each have our own beliefs, customs, and preferred lifestyles. But we live together in communities and nations with others who have their own beliefs, customs, and preferred lifestyles. Generally, each of us doing our own things does not interfere with others doing theirs. But sometimes it does, raising issues of the rules governing those interaction. Our personal freedom and peaceful coexistence with others depend on how wisely we define those rules. Finding and observing an optimal balance of personal freedoms with community restraints and obligations enhances the wellbeing of everyone. The U.S. has a bigger space for personal freedom than most countries and has flourished because of it.
Generally, my freedom of behavior stops where my fist meets your face. What I do with my fist otherwise should not be your concern. But some people (or countries) seem to go out of their way to find behavior by others to object to. We had no national interest or need to attack Iraq, Syria, Kuwait, Libya, Liberia, Somalia, or Kosovo, to name a few of the countries we attacked in the last twenty years. Two men suing a baker for refusing to bake their wedding cake when another baker across the street would be happy to do it are looking for fights rather than harmony. With the same reasoning: should a website designer be required to design a website for the Ku-Klux-Klan when she disagrees with their message and activities?
Nor is it credible, nor a contribution to the rule based international order meant to keep the peace among nations with divergent political systems, to ignore the rules you expect other nations to follow. “The rule of law-China and the U.S.” The U.S. attack on Iraq violated international law as much as does Russia’s attack on Ukraine. Rather than press China to abide by international trade rules, the U.S. is ignoring them itself. “WTO ruling-Trump tariffs violate rules” Our bullyish hypocrisy is more than embarrassing. It undermines our international standing and influence and is contrary to our national interest.
With that background, what are my most important wishes/hopes for 2023?
–Stop pushing us into WWIII. Remove the neocons from our government. “Ukraine war-how does it end?”
–End the Russian war on Ukraine. Yes we can (push Ukraine and Russia to the negotiating table) “End the war in Ukraine”
–Fix our immigration laws/policies. https://wcoats.blog/2022/09/23/a-land-of-immigrants/
–Join the Trans Pacific Partnership (now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership) “Tony Judt on trade”
–End our Industrial policies. “Industrial policy sounds good but is unsound”
–End our trade protectionism “Trade protection and corruption”
–Compete with China fairly “Competing with China”
–Return to our principles re-Israel/Palestine “Dear Congressman Kevin McCarthy”
–Restore Congressional Leadership. Enforce the War Powers Act. Restore regular order and cross aisle cooperation to address real problems. “Our dysfunctional Congress”
–Restore fiscal sanity—balance the Federal budget via spending cuts (especially so-called defense). https://wcoats.blog/2011/04/23/thinking-about-the-public-debt/
–Restore the domestic rule of law (even on Trump): “A reflex U turn from the January 6 Committee”
–Restore the Republican Party to the principals I have always supported—get rid of Trump. “More on Trump acquittal”
–Protect our free speech but restore civility to public debate. “Sacred tension-uncanceling ourselves – Jonathan Rauch”
The above would be a good start in restoring America to the principles and scope of government that made us the Land of the Free – Home of the Brave.
Happy New Year
Who Decides?
Who decides what we eat, drink, and how to go about being merry? Societies range from those that rely heavily on government determination to those that leave most choices to individuals. At one end of the spectrum, the government determines what it is healthy or safe for us to consume and do and at the other end each person freely makes their own decisions about most aspects of their life. Neither of these extremes is absolute, of course. At the freedom end we are not free to violate the freedom of others (steal their property, assault their bodies, etc.). At the cradle-to-the-grave -government-protection end we safely eat, drink, and enjoy the activities the government allows us to.
America flourished economically and culturally because we were largely free to make our own decisions. Government largely enforced property rights and public safety and provided information on which we could make better informed private choices. We innovated and took calculated risks with the deployment of our ideas and flourished.
In recent decades the government has increasingly restricted our choices to what it determined was good or safe. The superiority of our private choices depends on how well informed and responsible we are. While we and the government may both think we are motivated to act in our personal best interest, the incentive to get it right is stronger for the individual actor. And incentives always matter.
Take but one example—the “War on Drugs.” Despite this war, 11,712 people died from drug overdoses in 2000 rising in two decades to 83,558 in 2020 (from 6,190 to 64,183 for opioids). “Drug overdose deaths-fentanyl-Greenville NC” I believe, with many others, that ending the drug war (legalizing the purchase and consumption of them) and instead educating the public about their effects (honest, fact-based information) would reduce such deaths.
The growing, selling and consuming of Cannabis is now legal in 21 states. When I gave into the social pressure in college to take a drag as a joint was passed around, I learned that it makes me less social. Wine was my better option. Not only do I enjoy wine, but I appreciate its socializing properties. So, it has probably been 50 years since I have smoked marijuana. Its not clear whether its legalization along with better information and education on its pros and cons will increase or decrease or leave unchanged its consumption. The destructive prohibition of alcohol and the organized crime syndicates that grew up to circumvent it and its subsequent repeal did not eliminate the damage that alcoholism visited on some people. However, Americans have generally benefited from the reliance on education and persuasion rather than government coercion. Rather than crime syndicates to distribute illegal booze, we have AA and health facilities to help those who have not been able to resist overusing it.
Challenging and sensitive examples concern racial, sexual and religious discrimination. The Civil Rights Law of 1964 attempted to address racial discrimination but in some ways overreached. The case of same sex marriage and the cake baker come to mind. We are still struggling to find the best balance between potentially conflicting individual rights. I fail to see how the refusal of a baker to cook for the marriage of two men (which violates his religious beliefs), interferes with their right and ability to marry —an arrangement society has always seen as beneficial and important (and thus not to be denied to homosexuals).
The case of affirmative action also provides a challenging example of addressing a problem with social attitudes vs coercion. The Supreme Court decided in 1978 that the prohibition against racial discrimination could be violated for a temporary period in the interest of greater racial diversity and balance. Harvard University chose to discriminate against Asian students, who would have been overrepresented if admitted on the basis of academic merit only, in order to admit a larger number of African Americans. Asian students have challenged Harvard’s policy and the Supreme Court is expected to rule next year in “STUDENTS FOR FAIR ADMISSIONS, INC., Petitioner, v. PRESIDENT & FELLOWS OF HARVARD COLLEGE, Respondent” on the question “Should this Court overrule Grutter v. Bollinger, 539 U.S. 306 (2003), and hold that institutions of higher education cannot use race as a factor in admissions?”
I believe that a public discussion of the benefits of diversity to schools and other institutions as well its contribution toward overcoming earlier and existing negative discrimination against African Americans is the more promising and flexible approach to this issue than government coercion. I find it interesting that many federal court judges take race into account in hiring their clerks. “Appeals court judges consider race of their clerks” This is also an interesting perspective: “How liberals lost their way on affirmative action”
The times are changing
In 1978 China began to free up and open its economy to move its economic policies toward ours. Although the Communist Party of China remained in complete control of the political domain, the growth in China’s economy was dramatic. “According to the World Bank, more than 850 million Chinese people have been lifted out of extreme poverty; China’s poverty rate fell from 88 percent in 1981 to 0.7 percent in 2015, as measured by the percentage of people living on the equivalent of US$1.90 or less per day in 2011 purchasing price parity terms.” “Poverty in China”
As I wrote 11 years ago: “Chinese people strike me as more like us than most any other people (including Europeans) I have met. And who do I mean by “us?” I don’t mean just Anglo Saxons like myself. I mean the hard working, innovative, entrepreneur types who are creating most of the wealth in this country like Google founders, Larry Page (American born Jew) and Sergey Brin (Russian born Jew), or Steve Jobs, who was born in San Francisco to a Syrian father and German-American mother, as well as many Anglo Saxons like myself.” ‘My G20 trip to China”
Sadly, Xi Jinping has been reversing this free market trend with very damaging results to economic growth and personal privacy and freedom in China.
Sadder still, the United States has reversed direction since 9/11 as well, though more slowly. Not only has our government increasingly intruded into our privacy (it didn’t end with Edward Snowden’s revelations: “Civil rights-Brennan-domestic terror-white supremacy”), but it has flooded the economy with excessive regulations, increasing trade restrictions and even the launch of industrial policies and subsidies that violate WTO rules. “US chip war to hit allies as hard as it does China” “Competing with China” Our championing of the rule of law is growing increasingly hollow. Asset forfeiture provides but one example: Coats on the abuse of civil forfeiture” and George Will on civil forfeiture nightmare”
How can this be? Why do we seem to want to be more like China? Many of today’s voters had not been born when the Berlin Wall fell in 1989. We must make the case for free markets and limited government again and again, but in a way that is understood by, and appeals to the concerns and sensitivities of, generations X and Z and our future children. “Global protests-democracy-autocracy”
The attack on Paul Pelosi
The quality of our lives and that of our community/country depends on how responsibly and wisely we use the considerable freedom we each enjoy. For example, we each have a responsibility to minimize the spread of false information. Sadly, a surprisingly large number of people are eager to jump on and spread information that feeds their existing opinions without taking the time to investigate its authenticity.
“On Saturday, Hillary Clinton, the former first lady and 2016 Democratic presidential nominee, posted a tweet assailing Republicans for spreading ‘hate and deranged conspiracy theories’ that she said had emboldened the man who attacked Ms. Pelosi’s husband, Paul, inside the couple’s home in San Francisco early Friday.” In addition to eagerly spreading lies, too many of us also fan the flames of hate with such statements that are making serious discussion of issues almost impossible.
“In a reply to Mrs. Clinton’s tweet, Mr. [Elon] Musk wrote, ‘There is a tiny possibility there might be more to this story than meets the eye’ and then shared a link to an article in the Santa Monica Observer. The article alleges that Mr. Pelosi was drunk and in a fight with a male prostitute.“Mr. Musk’s tweet was later deleted.” “Musk tweets Hillary Clinton Pelosi Husband”
Mr. Musk was a bit quick with his tweet but at least he removed it shortly there after. In fact: “The man accused of breaking into House Speaker Nancy Pelosi’s home and assaulting her husband with a hammer allegedly told police he was on a ‘suicide mission’ and had a target list of state and federal politicians as part of his effort to combat ‘lies’ coming out of Washington.” “David Depape Pelosi attack” David Wayne DePape, 42, was caught on police cameras breaking into the Pelosi home in San Francisco. “There, on camera, was a man with a hammer, breaking a glass panel and entering the speaker’s home.” “Capitol police cameras caught break in Pelosi home”
Sadly, too many people are contributing to our damaging atmosphere of distrust by carelessly forwarding obvious lies. But what about those who invented this and other lies to begin with. Are these irresponsible kids who think it would be fun to pull our legs, too immature to understand the damage they were inflicting? Or are they evil traitors deliberately undermining our public comity and undermining confidence in our institutions?
Warren's space 