To Kill a Mockingbird

Earlier this week, Ito and I attended a performance at the Kennedy Center of the play version of this moving and powerful novel by Harper Lee. It was a well-staged production, faithful to the movie as best I can remember it from 50 years ago. Beyond its laudable, powerful attack on racism, it champions a moral position I have trouble with.

The play centers on the story’s hero attorney, Atticus Finch, who defends a black man falsely accused of raping a white woman. The alleged rape victim, Mayella Ewell, was actually beaten by her father, Bob Ewell, because she had kissed the accused black man, Tom Robinson. Despite the valent efforts of Atticus to defend Tom, who could not have beaten the white girl on both sides of her head because of his unusable left arm from an earlier accident, the all while jury convicts him anyway.

The play opens with Atticus’s daughter, Scout, addressing the audience about the local newspaper’s report of the death of Bob Ewell by falling on his knife. No one can fall on their own knife, says Scout. What is going on here?

Near the end of the play the mysterious, reclusive neighbor, Boo Radley, who Scout and her older brother Jen have never actually seen before, carries an unconscious Jen to his home for treatment. Jen and Scout had been attacked in the night by their white trash neighbor Bob Ewell. When the sheriff finds the dead body of Bob Ewell, Atticus fears that his daughter has killed him during his attack on her and Jen. But the sheriff concludes it was Boo Radley who plunged the knife into Bob Ewell to protect the children.

In a private conversation between Atticus and the sheriff, it is decided that the Sheriff will claim that Bob Ewell fell on his knife rather than risk the verdict of a bigoted jury. Atticus does not want his children to hear the discussion of the lie. Bob Ewell was a bad guy and no one is very sorry that he is dead. The plan ends with Scout facing the audience and saying, “I guess he fell on his sword.”

The play has many instances in which Scout and Jen defy inappropriate customs and views. I applaud those attacks on bigotry and outmoded customs. We recently watched the British series “Cranford”, which masterfully depicts the power of customs (which fork to use and how to dress), the disruption of progress (the building of the railroad into this quant English town) and the ultimate adjustment to positive changes. I highly recommend it.

The moral dilemma for me is the following. Atticus correctly and bravely defended Tom against the clearly false charges. Both the Judge and the Sheriff were strongly on the side of the truth and the law, but bigotry won out. Thus, the judge and Sheriff set aside the law and lied to protect a good man and his good deed against a bad man. Good wins out but only because in this instance the Sheriff and Judge are on the side of ultimate justice.

Many Filipinos also accepted former President Rodrigo Duterte’s green light to kill drug dealers on the streets of Manila without trail. It may well have been that most of those killed were indeed drug dealers. But if we rely on ignoring the truth and the law to achieve good ends, we open a dangerous door. We can’t always rely on the Sheriff and the Judge to be good people. We need strong and trusted institutions as well.

Corruption and the American Empire

I truly believe that the vast majority of American’s who worked in Afghanistan after the U.S. toppled the Taliban government in December 2001 where genuinely motivated by the desire to help Afghanistan (and thus the U.S.)—myself included. “Warren’s Travels”  But as Ms. Chayes makes clear, we are just bad at it. “Afghanistan’s corruption was made in America”

Pursuing Empire is not what we are about. It is not “The beacon on the hill” that has rightly attracted the best and brightest to our shores. Of late even that beacon is threatening to go out. We should stay home and rebuild the capacity to cooperate where needed to enable us each to flourish in our own ways.

More on constructive competition

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”

What to do about China?

“China’s much anticipated post-pandemic recovery appears to have flopped, with signs of a significant slowdown after decades of supercharged growth and data flashing warning signs.” Bloomberg “China’s failing recovery”

“Signs of deflation are becoming more prevalent across China, heaping extra pressure on Beijing to reignite growth or risk falling into an economic trap it could find hard to escape.”

What, if anything, should the U.S. response be? That depends on whether we see China as a competitor or an enemy. That should depend on our assessment of China’s objectives. Does China want to expand its territory one way or another, or to expand its influence in the global order? China’s behavior might support either assessment.

China claims sovereignty over almost the entire South China Sea, including the Paracel and Spratly islands, which are also claimed by Vietnam, the Philippines, Malaysia, Brunei, and Taiwan. In 1947 China asserted its claims with a map depicting a U-shaped line covering almost 70 percent of the South China Sea, known as the nine-dash line. In 2016, an Arbitration Tribunal rejected many of China’s maritime claims as lacking a basis in international law.

The UK returned Hong Kong to China July 1, 1997, with the understanding that it would be self-governed independently of the Peoples Republic of China for fifty years. China violated this agreement with its full takeover in 2020.

In 1972 President Richard Nixon confirmed that Taiwan was part of the People’s Republic of China but would continue to govern itself independently until it agreed to merge its government with the mainland’s. In the Taiwan Relations Act of 1979, the U.S. committed to providing defensive weapons to Taiwan to defend itself from invasion (as opposed to the volunteer absorption into the Peoples Republic envisioned in the One China Act). What we provided instead were heavy weapons irrelevant to Taiwan’s defense but prized by America’s defense industries. “Taiwan-China policy assurances military” The U.S. has more recently seemed to even question its commitment to the One China agreement.

These aggressive moves by China are better seen as solidifying its borders (much in the same way the US worries about its borders with Cuba) than military expansions. On the other hand, China joining the World Trade Organization, pressing for representation in the IMF and World Bank that is more reflective of its economic size, and its Belt and Road, Asian Infrastructure Bank and BRICS initiatives reflect China’s desire to gain status in the global system comparable to that of the U.S. In short, they reflect the behavior of a rising economic competitor.

We seem to be treating China as an enemy rather than the trade and economic competitor they see themselves as. Among sportsmen, competition takes the form of doing your best—of being the best you are capable of. Within our economy we rightly see competition as good and healthy. With fair competition, both sides benefit. The world is made wealthier. Kneecapping our competition is the approach of bad guys. I explored this more fully in my blog “Competing with China”

But China is not competing fairly either. We would be wiser to use the mechanisms of the global system of rules to push and pull them into compliance. We should end our own tariff—industrial policy violation of these rules as well. We might start by restoring the dispute resolution body of the WTO. While there will be genuine security justifications for trade restrictions, they should be very limited.  They should not include taxing steel purchased from Canada. Trade is win, win.

A recent G-7 statement clarified that: “We are not decoupling or turning inwards. At the same time, we recognize that economic resilience requires de-risking and diversifying.” US Treasury Secretary Janet Yellen stressed this message during her recent visit to China. We should facilitate and encourage China’s economic rise as it contributes to our own. The opposite direction—treating China as an enemy—ends in war.

America’s Unipolar period has corrupted us. We demand that others follow rules that we violate ourselves when we don’t find them convenient. We have become a bully. My hope is that we adjust to the fact that we are no longer the world’s sole superpower by strengthening the rules we helped develop and competing fairly under them: “Goodbye unipolar world and good riddance”

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.

Child labor

How much should the government protect us from things?  What form should government protection take? When does “protection” become top down coercion?

The US Labor Department wants to roll back some of the relaxation of “child labor” restrictions allowed by some States. https://thehill.com/homenews/education/4123821-dol-cracks-down-on-child-labor-while-states-loosen-laws/  What should we (or for minors—our parents) be allowed to decide for ourselves and what should the government be allowed to decide for us?

Back to my childhood in Bakersfield again. I was absolutely thrilled when I was able to earn money delivering the morning newspaper. I can’t remember my age exactly, but I think it was 14 or 15. I got up at 5:00 or 6:00 in the morning when a stack of the morning paper was dropped on our porch. I rolled them up and put them in a backpack, mounted my bicycle, and threw them as close to the porches of the subscribers on my list as possible. Bakersfield being semidesert was pleasantly cool in the summer mornings and very cold –freezing cold—in the winter. It virtually never snowed in Bakersfield because if virtually never rained, but it certainly froze any water around in the winter. The wide swing of temperatures between the night and the day is typical of deserts.

Having this job absolutely thrilled me more than the modest money I earned. Prior to qualifying age wise to deliver newspapers, I made money growing tomatoes in our back yard and selling them to the neighbors door to door. They were thrilled to buy my big red delicious and very fresh from the vine tomatoes. No one minded that I might have been breaking some law or other. When I became 16 and had a driver’s license, I went to work for Fedway Department store as an assistant to the parking lot attendant. The next year I was promoted to a salesclerk inside the store. These were weekend jobs.

The money I made was helpful (75 cent per hour if I recall correctly) but the experience was even more valuable. I loved having these jobs. They were indications of growing up. If for some reason and some how they were bad for me (exploitive?? Ha ha), it was rightly up to my parents to say no. Big Brother is overreaching into our lives again. Helicopter moms are bad enough.

It’s Hot

Here in Washington DC, the temperature has reached 96 degrees and the news warns of the dangers of such heat. When I was in college in California (Bakersfield College and UC Berkeley) in the early 1960s I worked in the oil fields as a Roustabout for Shell Oil when the temperature was generally 104-6 degrees every day with two or three days each summer reaching 112. Why were we not in danger and you might be here in DC?  The difference is humidity. Bakersfield is in the semi desert of Kern County and the hot air is dry. This facilitates sweating that cools our bodies. The Washington DC area has very high humidity, which impedes sweating and its cooling affect.

I learned the power of sweating when in my third summer in the oil fields I was promoted from a Roustabout (ditch digger, basically) to a Well Puller. As a well puller I worked on a well pulling, or service rig. Unlike the bigger drilling rigs, a service rig does no drilling. Rather it pulls up the pipes and pump of an established, operating well for servicing. You might have seen the oil well rockers that move the rod holding a pump at the bottom of a well up and down thus forcing oil up the pipe to the surface. Over time the pumps wear out and need to be serviced or replaced. Our service rig performed that task by first remotely opening the bottom of the pump so that the oil flowed out the bottom rather than being lifted up the pipe to the surface.

Occasionally the pump can’t be opened. When that happened the oil was pulled up with the pump as our service rig pulled the pump to the surface, resulting in what the guys called a wet well. As we pull the pump up on a wet well the oil spurts out the top of the rig and all over the surrounding area.

As luck would have it on my first day on our well pulling rig, we had a wet well. I was advised by the other two guys on our rig to put on rubber rain gear to keep the oil from getting on my skin. I thought that was rather sissy (not to mention really hot inside the rain gear) and choose not to. So, I became drenched in oil, which sealed all my sweat glands and I almost passed out. I had to quit working for the rest of the day.

FedNow

The Federal Reserve has launched FedNow, which executes instant payments 24/7. What does that mean? When I led IMF technical assistance missions to the former Soviet Union (Kazakhstan, Kyrgyzstan, and Moldova) and to post conflict countries (Afghanistan, Bosnia and Herzegovina, Iraq, Kosovo, Serbia), the payment experts on my teams referred to the Clearing and Settlement of payments. I never fully understood what that meant. “Federal Reserve FedNow Payments”

The key to understanding the meaning of “clearing and settlement” is to understand the deference between the authorization to make a payment and actually debiting and crediting bank accounts to execute the payment. When I pay from my bank account to yours, mine is debited and yours is credited. My bank executes the debt and credit if your account is also at my bank. If not, my bank debits my account and “sends” the money to you at your bank via an intermediary (usually the central bank) at which both my bank and yours have accounts that can be debited and credited. When my account has been debited and your credited, the payment has been “settled.”

The clearing part of clearing and settlement has to do with communicating the authorization to our banks to execute the debit and credit. It refers to the messaging systems that authorize the actual settlement of a payment. This is what FedNow is about (as is the well-known SWIFT messaging system for authorizing cross border payments). It will replace paper checks or electronic payments such as Venmo, Zelle, PayPal, etc. that now authorize our banks to debit our accounts and credit the accounts (somewhere) of the payees.  “Econ-101-Retail Central Bank Digital Currency-CBDC”

I haven’t mentioned what it is that is being paid. If it is from my bank account, it is US dollars (ultimately a claim on the Federal Reserve Banks of the U.S.). Every currency (dollars, Euros, bitcoin) has its system of clearing and settlement.  And of course, there are markets for exchanging one currency for another (FX markets).

FedNow is a messaging system that authorizes settlement in seconds 24/7 that replaces (or supplements) systems that now can take days.

My Travels to Kosovo

Post-World War II Yugoslavia consisted of the federation of Bosnia and Herzegovina, Croatia, Macedonia, Montenegro, Serbia, and Slovenia. Though its residents were predominantly Albanian, Kosovo was a province of Serbia. During part of its post-WWII history, Kosovo was relatively autonomous within Serbia, while part of the time it was ruled directly by Serbia. Frictions between Albanian and Serbian Kosovars escalated in the 1990s into armed conflict, which ended only with the North Atlantic Treaty Organization’s (NATO) bombing of Serbian Army forces in Kosovo and Serbia proper from March 24 to June 10, 1999.

Following the June 10 end to the fighting, the United Nations Mission in Kosovo (UNMIK) took over the governance of a ruined Kosovo. Among the normal needs to be restored most urgently (food, water, electricity, etc.), was the ability to pay for things. Kosovo’s banks were closed, and its financial and monetary connection with Belgrade and the rest of the world was not functioning. There was an urgent need to revive Kosovo’s ability to make payments while also determining what sort of financial systems to build for a future, more integrated with the rest of Europe.

If only by using it, Kosovars themselves had answered what currency they wished to use—the German mark (DM). But arrangements were urgently needed for how to acquire and maintain DM banknotes and coins (I remember well the tattered currencies in post-war Bosnia and Iraq), and to adjust the procedures of banks and other money handlers to the use and safekeeping of DM, rather than the Serbian dinars previously supplied by the National Bank of Serbia.

The International Monetary Fund (IMF) joined with the United Nations, the World Bank, the United States Agency for International Development (USAID), and other international organizations to provide the needed emergency humanitarian assistance and to help in the rebuilding of a potentially transformed economy. I led the IMF missions to address the money and banking aspects of this effort. The revival and/or restructuring of Kosovo’s monetary capacities needed to be achieved in days and weeks rather than months and years. This was a tall order.

My latest book documents our work to revive and transform Kosovo’s monetary system and some of the challenges and adventures we encountered in the process. Most of us only see the public face of our payment systems (currency, ATM machines, credit cards). In recounting our experiences in restoring and transforming Kosovo’s payment system, I will endeavor to pull back the curtain a bit to expose what is behind and generally out of sight.

If this interests you, you can buy the paperback or kindle versions here. https://www.amazon.com/s?k=Warren+Coats&i=stripbooks&crid=10ON15E99H8X6&sprefix=warren+coats%2Cstripbooks%2C63&ref=nb_sb_noss_1  This will also give you the opportunity to rate the book. I hope that you will enjoy it.

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?”