Never Again

On this 20th anniversary of the 9/11 attack on America, many of us are saying “NEVER AGAIN”. What those saying it mean will determine the future of our country.

If “never again” means to you that we will never allow attacks on our homeland again, you are saying that out of your fear you chose safety over liberty. You support the authoritarian, repressive measures of the so-called Patriot Act and the related government intrusions in our privacy and liberties in the name of greater security. This is not the spirit of those Americans who continue to get into their cars to drive to work or wherever despite automobile accidents killing ten times more Americans every year as American soldiers who have died in Afghanistan in the past 20 years.

For me and thankfully for many other Americans, it means that we will never again surrender to the fear that blinded us to the tragic mistakes of American aggression in Afghanistan, Iraq, Libya, Somalia, Syria, and Uganda. Lawrence Wilkerson explains our self-destructive behavior in the following interview. COL Wilkerson was a senior official in the Bush administration when it launched the Iraq invasion. Now he calls it a mistake born of rage and fear. https://www.cnn.com/videos/tv/2021/09/10/amanpour-wilkerson-9-11.cnn

We have the most powerful military in the world. No military force could protect us at home (to the extent that our safety depends on military force) better. When it comes to its effectiveness in offensive attacks on other countries, its effectiveness is less clear and its effectiveness in efforts to rebuild the countries it has occupied…… well this fantastic three hour discussion reveals it as worse than zero https://www.youtube.com/watch?v=GkjsjBknWfo

We once revered and defended our liberty above all else and we were respected and envied around the world. We prospered. Over the last twenty years we have gradually, year by year, squandered our cherished traditions and our standing and respect in the world has declined as a result. Former President Trump signed an agreement with the Taliban promising to remove all American troops from Afghanistan by May 1 of this year. It was a bad agreement, but our departure was many years overdue. President Biden extended our stay for a few more months but has now honored Trump’s commitment. Why our military was unable to prepare properly for our withdrawal from Afghanistan with this two-year notice is a mystery we need to investigate.  

Never again should mean that we never again act out of fear. https://wcoats.blog/2021/09/05/nation-building-in-afghanistan-2/

Nation Building in Afghanistan

The lesson of Afghanistan is not that the US is washed up as a great power. The lesson is that the US is such a great power, militarily and economically, that it is continually tempted to try hopeless things that nobody else on earth – including China – would ever attempt. 

David Frum

On July 8, 2021, President Biden said that: “the United States did what we went to do in Afghanistan: to get the terrorists who attacked us on 9/11 and to deliver justice to Osama Bin Laden, and to degrade the terrorist threat to keep Afghanistan from becoming a base from which attacks could be continued against the United States.  We achieved those objectives.  That’s why we went.
We did not go to Afghanistan to nation-build.” “Remarks by President Biden on the drawdown of U.S. forces in Afghanistan”

In fact, except for killing Osama Bin Laden, we had achieved those objectives before I arrived with an IMF team in January 2002 to contribute to building a more effective government. Finding and killing Bin Laden was delayed until May 2, 2011, because of the redirection of American efforts to the ill-advised and illegal war in Iraq. So why were American troops still occupying Afghanistan until August 30, 2021?

In an August 18, 2021, interview with George Stephanopoulos, President Biden explained what happened asking: “Then what happened? Began to morph into the notion that, instead of having a counterterrorism capability to have small forces there in — or in the region to be able to take on al-Qaeda if it tried to reconstitute, we decided to engage in nation-building. In nation-building. That never made any sense to me.”  “Biden’s claim that nation building Afghanistan never made any sense”

George W Bush opposed nation building in his 2000 presidential campaign. In his memoir, Decision Points, he states that “After 9/11, I changed my mind.” Already by April 2002, he stated that “We know that true peace will only be achieved when we give the Afghan people the means to achieve their own aspirations. Peace will be achieved by helping Afghanistan develop its own stable government.” He was right. However, as he noted: “Our government was not prepared for nation building.” He was right about that as well.  “Bush on nation building and Afghanistan”

The U.S. officials responsible for “nation building” in Afghanistan knew little about its history and culture. They foolishly imposed an alien Western style government dropped on a diverse people as if from a drone. The US military is an excellent machinery of war. The best in the world. However, it does not have the skills required for “nation building.” Our military couldn’t even recruit the right solders or provide the training they needed to fight on their own, much less build a proper military organization. “Afghanistan combat interpreter Baktash Ahadi: U.S. cultural illiteracy”  And attempting nation building at the point of a gun is bound to fail.

And why did the Afghan soldiers that Americans trained for decades not fight to defend the existing government? “Afghan forces were demoralized by neglect, corruption and ethnic bias among their superiors. Often they went without pay and ammunition, and sometimes without rations….  ‘The why is corruption, the why is poor leadership,’ John Sopko, told The Washington Post in 2017, ‘If leadership is poor, the people below don’t care, and they wonder why they have to die.’” “Afghanistan U.S. troop withdrawal”

On Sunday August 15, 2021, Taliban forces walked into Kabul and took over the government without a shot.  “The Band of Brothers and Afghanistan”   But what did they take over or replace? And did 20 years of so-called nation building make any difference.  “Nation building” is often given a bad name because it has too often been associated with the imposition of a “government” by an occupying military force as with imperialism.  Afghanistan is a very different place than it was 20 years ago. Both the nation and its government and its institutions have changed considerably. We can hope that the Taliban has changed as well.

Governments consist of ruler/decision makers, and the institutions that administer whatever it is that the government does. A nation extends beyond its government to include civil society, and social and cultural norms. The Taliban have displaced Afghanistan’s President Ashraf Ghani, who fled to Uzbekistan then to the UAE rather than step aside for a transition period as had been agreed. Afghanistan’s Chief Executive Officer, Abdullah Abdullah, remained and with former President Karzai is discussing the composition of a new government with Taliban leaders.

“Taliban co-founder Mullah Abdul Ghani Baradar will lead a new Afghan government….  Haibatullah Akhundzada, the Taliban’s supreme religious leader, will focus on religious matters and governance within the framework of Islam.

“While the Taliban have spoken of their desire to form a consensus government, a source close to the Islamist militant movement said the interim government now being formed would consist solely of Taliban members. It would comprise 25 ministries, with a consultative council, or shura, of 12 Muslim scholars, the source added.

“Also being planned within six to eight months is a loya jirga, or grand assembly, bringing together elders and representatives across Afghan society to discuss a constitution and the structure of the future government, the source said.”  “Taliban co-founder Baradar will lead new Afghanistan govt”

Prior to the fall of Kabul, the government of Afghanistan consisted of the cabinet of ministers, provincial governors and the national assembly, with a democratically elected president serving as the head of state, head of government and commander-in-chief of the Afghan Armed Forces. It appears that the new government will retain the same administrative units. In addition to the central bank (DAB), which I advised, these would include functions such as Foreign Affairs, Internal Affairs, Finance, Economy, Agriculture, Energy and Water, Justice, Information and Culture, Education, Industry and Commerce, Transportation, Women’s Affairs, Public Health, Mines, and of course, National Defense. Though the U.S. did a poor job developing Afghanistan’s National Defense institutions, more experienced international agencies made considerable progress in developing more efficient and effective agencies in many other areas. Of at least equal importance, a generation of Afghan men and women have grown up expecting their place in the world to reflect their skills and accomplishments (merit) rather than who they knew.

I have written earlier about the dramatic progress in modernizing the central bank’s operations. It was achieved in the proper, traditional way of “nation” and institution building. We explained best practice for central banks derived from the experiences of established central bank and the approaches we thought would fit best with Afghanistan’s existing central bank and economy. But DAB’s management and staff made the decisions of what to embrace and how to move forward and we offered guidance on designing and implementing those decisions. “BearingPoint Afghans”

But one institution can’t develop independently of what is happening in the rest of the country. In particular, developing the rule of law is critical and difficult. An example was provided by DAB’s (the banking supervisor) confrontation with a corrupt President and Attorney General over the resolution of the insolvent and criminal Kabulbank in 2010-12. The founders and owners of Kabulbank (President Karzai’s brother Mahmood was the third largest shareholder) had rapidly grown this newly licensed local bank into the country’s largest depository and had lent almost all of its deposits to themselves. During the global financial crisis of 2008, many of Kabulbank’s owners’ investments failed and they were unable to repay their depositors. DAB’s banking supervisors were blamed for weak supervision and even arrested and jailed in disregard of the provisions of the central bank law. The scandal revealed considerable corruption, but the supervisory resolution of the bank somewhat strengthened (modestly) the rule of law in the process.  “Afghan President Ghani’s attack on corruption”    “The Kabul Bank Scandal”

Another huge set back to the impressive development of DAB resulted from President Ghani appointing an unqualified friend, Ajmal Ahmady, as Acting Governor of the central bank. He fired many of the best of the BearingPoint Afghans and brought in his own small group of cronies. Mr. Ahmady’s appointment was rejected by the Parliament, but he illegally remained in his post.  The Taliban (???) have now appointed Haji Mohammad Idris as the Acting Governor of the central bank. “Mr. Idris was head of the Tabliban‘s finance section, but he has no formal financial training or higher education.”  “Haji Mohammad Idris”

These examples are meant to illustrate the distinction between a government’s leaders and its administrators. Time will tell whether our “nation building” efforts with DAB survive the attacks on it from Afghanistan’s leaders (current and past). But as a result of the nation building efforts of many international bodies, Afghanistan is a very different and better place, and its young population has very different expectations, than twenty years ago. I hope that the Taliban leaders that have taken over the government are also very different than their repressive and brutal forebearers of twenty years ago.

While the new government will no doubt leave many of the institutional structures in place that have been developed over the last two decades, from which they and the country have benefitted, the big question is what policies and rules they will establish under the name of Sharia law, especially with regard to the rights of women. The Taliban have their own internal factions that need to be sorted out and their earlier version of Sharia was an extremely harsh interpretation not shared by most Muslims. The Taliban has pledged to treat women and others fairly, within the dictates of Sharia Law. Other Muslims will need to convince the Taliban to moderate their earlier interpretations of what that means. The United States, the EU  “EU sets five conditions for future operational engagement with Taliban”, China, Russia, and the international organizations, have enormous financial and diplomatic leverage with which to encourage the Taliban government’s better behavior. They should be used vigorously to help build a better Afghanistan. Early signs are not encouraging, but these are early days. One Afghan friend changes locations every night in the hopes of not being found. Other friends are afraid to leave their homes at all.

The idea that we should refuse to cooperate with the new government and should oppose it at every turn from the outset is bone headed. Just ponder the alternatives for a second. Do not think that it is easy for me to sit here in my comfortable Bethesda home and urge us to give the Taliban a try. My days begin with heart wrenching pleas for help from Afghan friends and strangers. I challenge you to read the following account of dashed hopes without weeping: “After a university falls in Afghanistan a DC organization scrambles to keep students safe and still learning”   

Efforts to achieve a better Taliban government this time around may be a long shot, but the alternatives of a return to civil war and worse yet the return of American and NATO troops are not pretty either. The U.S. intention to cooperate with the new government in countering ISIS-K is encouraging, but, like anything else in life, not without risks.  “US may coordinate with Taliban to take on ISIS-K”  Nation building by everyone but the U.S. government over the last 20 years has not been a waste of time. Now is not the time to give it up.

Nation building is unlikely to be successful when coerced, i.e., when it is part of a military intervention. It does not follow that nation building–sharing best practice in the design and operation of institutions public and private–is an unworthy objective and undertaking.

BearingPoint Afghans

Sometime around 2004 or 2005, the US Agency for International Development (USAID) contracted BearingPoint (now part of Deloitte Consulting) to recruit and mentor approximately 80 young Afghan college graduates into Afghanistan’s central bank (DAB) and Finance Ministry. These young Afghans worked in DAB and the Finance Ministry for two years while being trained and mentored by BearingPoint experts. Following these two years they were offered regular jobs in these two institutions. While some moved on to higher paying jobs elsewhere most of them stayed with DAB and the MOF. Over the years that followed they rose within these institutions, and in DAB headed many of the departments including the position of Second Deputy Governor. Working with and watching the progress of these young Afghans was one of the most enjoyable and gratifying assignments in my career with the International Monetary Fund. They were smart, honest, and dedicated to improving life in their country (including their own). They were, and I hope still are, the hope for a better future for Afghanistan.

The elected Afghan government under which these BearingPoint Afghans worked has now been toppled by the Taliban, a group that harshly ruled Afghanistan from 1996 until displaced by an American-British invasion in November 2001.  Back in 1996: “Gaining control over most of the country, the Taliban impose their rule, forbidding most women from working, banning girls from education, and carrying out punishments including beatings, amputations and public executions. Only three countries officially recognize the Taliban regime: Pakistan, Saudi Arabia and the United Arab Emirates.”  “Afghanistan conflict timeline”

The Taliban in 1996 claimed to impose Sharia Law on Afghanistan. “Sharia” translates to ‘the way’ in Arabic and refers to a wide-ranging body of moral and ethical principles drawn from the Quran and from the sayings and practices of the Prophet Muhammad. The principles vary according to the interpretation of various scholars who established schools of thought followed by Muslims who use them to guide their day-to-day lives. Many Muslim-majority countries base their laws on their interpretation of the principles of Islamic law but, despite this, no two have identical laws.”  “Taliban and Sharia Law in Afghanistan”

The Taliban imposed a very severe version of Sharia that has not been embraced by very many Muslims. It was particularly restrictive on the activities and rights of women. Twenty years later Afghanistan is a different place, and the Taliban sounds like a different organization.

“KABUL, Afghanistan (AP) — The Taliban vowed Tuesday to respect women’s rights, forgive those who fought them and ensure Afghanistan does not become a haven for terrorists as part of a publicity blitz aimed at reassuring world powers and a fearful population.

“Following a lightning offensive across Afghanistan that saw many cities fall to the insurgents without a fight, the Taliban have sought to portray themselves as more moderate than when they imposed a strict form of Islamic rule in the late 1990s. But many Afghans remain skeptical — and thousands have raced to the airport, desperate to flee the country.

“Older generations remember the Taliban’s previous rule, when they largely confined women to their homes, banned television and music, and held public executions. A U.S.-led invasion drove them from power months after the 9/11 attacks, which al-Qaida had orchestrated from Afghanistan while being sheltered by the Taliban.”  “Afghanistan Taliban Kabul”

So, what should American policy be toward the forthcoming Taliban or Taliban lead government? What does the Taliban pledge to “respect women’s rights consistent with their version of Sharia Law actually mean? We should deploy every diplomatic tool possible to encourage/pressure the new government to live up to its promises. Former President Karzai, current CEO Abdullah Abdullah and others are currently in discussions with the Taliban leadership over terms for an inclusive government.

The alternative of nonrecognition, once there is a government to recognize, is to encourage and even support civil war. Or, God forbid, to send our troops back (there is not much chance that our NATO allies would be conned a second time into join us there again). And how did that work out for us last time? Our over used weapon of economic sanctions harms the public we should be trying to help. Our inhuman sanctions on Cuba and Venezuela are imposing horrible pain on the their citizens with little impact on their governments. “Evidence-costs and benefits of economic sanctions”

In a recent Washington Post oped Nikki Haley argued that we should not recognize the Taliban government no matter what. “Nikki Haley-America must not recognize Taliban” I respected Ms. Haley when she was Governor of South Carolina but I eventually got over her when she embarrassed us while Ambassador to the UN. “The future of Israel and Palestine” Her unqualified attack on the Taliban firmly ties her to those who were responsible for our Afghan disaster in the first place. The new Afghan government may turn out to be as bad as the previous Taliban government, but we should do everything possible to prevent that.

The U.S. has suspended currency shipments purchased by Afghanistan’s central bank. Afghan assets (foreign exchange reserves, etc.) deposited abroad have been frozen including “its” access to reserves at the IMF. These may appear to be rejections of a new government, but they are not. There is no new government yet and those holding Afghan assets must keep them safe until their new owners are clearly and properly identified. The situation is much like the bank in which you have deposited money, freezing your deposits when you die until the new lawful owner is determined. There is an unavoidable, awkward period of uncertainty. It is not too late to reverse our mistake in closing our Embassy and running out while at the same time accusing the Afghan Army of behaving the same way.

It is also not true that nothing was accomplished these past 20 years. Our military leaders may have failed in their task of building a reliable Afghan Army, but many others, myself included, did not waste our time by helping Afghans build better institutions (see the story of the BearingPoint Afghans I started this article with above). See the discussion of this issue by Jonathan Rauch: “The  Afghanistan war was a partial success”

No one knows what the Afghan government will look like or which way it will go, but we all (except for the war mongers) have an interest in promoting its success, especially the hopeful, new generation of Afghans. “Can US work with Taliban”    “What do Taliban’s really want?”

And we must resist the siren calls of those who think that we can and should impose our vision and institutions on the rest of the world. We must keep our Army home to defend our homeland rather than messing with other people’s business. Our defense industries have profited enough.

The Band of Brothers and Afghanistan

Sunday night Ito and I finished the tenth and final episode of the WWII story of Easy Company of the 101 airborne division of the U.S. Army–The Band of Brothers. It is a moving and masterful depiction of the horrors of war, and its impact on those (often) brave men who fight them.  How, I asked myself, can good people do such terrible things to each other?  And why?  Who benefits (that is too obvious to answer explicitly)?

I woke up that morning to the fact that the government in Afghanistan that I had been working with for the past 20 years had been replaced by the Taliban who intends to form a new government. Fingers are being pointed all over the place in the search for fault. I am afraid that this American question is of little interest to my Afghan friends. Those who have not already left the country are holed up in their homes afraid to go to work. Their question is what the new Taliban regime will look like.

Our objective now should be to join with all other nations to exert diplomatic pressure on the new government (which potentially will have the cooperation of at least former President Hamid Karzai, CEO Abdullah Abdullah, and Islamic Party leader Gulbuddin Hekmatyar) to adhere to UN standards of humanitarian treatment of its citizens and to help them administer an efficient and honest government. America’s leadership in this regard will be critical for Afghanistan’s future.

But who should we blame for, and what lessons should we learn from, Afghans fleeing the country by climbing onto the outside of planes leaving the Kabul Airport (something I have done many times but more comfortably seated)? Working backward, President Trump gave our military leaders a May 1 deadline for leaving. It rather looks like they ignored him (tempting but not appropriate).

The speed with which the Taliban took over the country with barely a shot fired surprised most of us. We had dinner at the home of Edward and Dalya Luttwak Saturday. During the conversation I passed on the statement by an Afghan friend emailed to me that afternoon that the Taliban could take Kabul by the next day or week.  We all thought that would be impossible, thinking it might be as fast as a few months. In fact, they peaceably took over the city the next day (Sunday Aug 15).  In fact, our Embassy and Military leaders should not have been surprised. My work in Afghanistan with its central bank did not require that I be thoroughly versed on Afghan history and customs, but that is not true for our foreign policy establishment working in and on Afghanistan.

Rather than arm, train, and support Afghan fighters in regions they cared about, we pulled together a national Army with the incentive of money. In addition, the broader Afghan public did not strongly support its corrupt government and could fairly easily change sides. “Afghanistan military collapse-Taliban”  Moreover, waring tribes and political groups such as the Taliban have a long tradition of negotiating peaceful surrenders when the outcome seems clear.  “Afghanistan history-Taliban collapse”

The initial blame for our failure to “build” a strong government in Afghanistan falls on George W Bush who gave in to the Cheney/Rumsfeld fantasies of American Imperialism, and abandoned the original and sensible approach of American support of the Northern Alliance war against the Taliban. “Its plan was for small teams of CIA officers, along with Green Berets and U.S. air power, to assist the indigenous Afghan resistance—the Northern Alliance.” “Afghanistan withdrawal-CIA-bin Laden-al Qaeda-Bush-Biden-Northern Alliance” Instead we took over and occupied the country.

Rather than work with and build from Afghanistan’s traditional tribal structures, we imposed an alien, centralized government that was not understood and was generally resented outside of Kabul. Rather than elevating village chiefs to govern provinces, for example, Kabul sent strangers to oversee areas they knew nothing about. Our ignorance and arrogance were mind boggling, but sadly typical. And our military—the best in the world for waging wars— is incompetent at nation building, which should be the job of others. We couldn’t even build an Afghan Army in 20 years. “How America failed Afghanistan”  

Those who are most loudly criticizing Biden’s troop withdrawal are those most responsible for creating this mess to begin with.   “Afghanistan disaster started with withdrawals most ardent critics”  See my account of my work with the central bank in Kabul:  “My travels to Afghanistan”

My travels to Afghanistan

Afghanistan: Rebuilding the Central Bank after 9/11 — My Travels to Kabul

By Warren Coats

Kindle and paperback versions available at:  “Afghanistan-Rebuilding the Central Bank after 9/11”

Watching the collapse of the twin Trade Towers in New York on September 11, 2001 on the TV in my hotel room in Bratislava, I never imagined that I would be in Kabul several months later and spend 212 days there spread over 19 trips from January 2002 to December 2013 to help modernize Afghanistan’s central bank–Da Afghanistan Bank (DAB). I learned more than I taught and share the highlights in this book. I became friends with many wonderful Afghan people, and bonded with my IMF team members. DAB was almost completely rebuilt. Watching its eager young staff mature into effective managers was a joy. Whether it will last in Afghanistan’s uncertain political and cultural environment is an open question.

I learned as much as I could about Islam and its internal struggle to denounce Islamism (radical Islamic fundamentalism). I share details of the collapse of Kabulbank, Afghanistan’s largest bank, and the corruption surrounding it and its resolution. The IMF’s presence and work in Afghanistan was not without tragedy. The IMF’s resident representative, in whose guest facilities we stayed, was killed in a terrorist attack. And I learned much about walls.

Previous Books

One Currency for Bosnia: Creating the Central Bank of Bosnia and Herzegovina

by Warren Coats (2007)   Hard cover: One Currency for Bosnia

Zimbabwe: Challenges and Policy Options after Hyperinflation

by Warren L. Coats (Author), Geneviève Verdier (Author)  Format: Kindle Edition

Zimbabwe-Challenges and Policy Options after Hyperinflation-ebook

Money and Monetary Policy in Less Developed Countries: A Survey of Issues and Evidence

by Warren L. Coats (Author, Editor), Deena R. Khatkhate (Author, Editor)  Format: Kindle Edition

Money and Monetary Policy in LDCs-ebook

Nation Building in Afghanistan

Ambassador Crocker rightly calls the American role in “rebuilding” Afghanistan, “complicated.”  “I-served-in-Afghanistan-no-its-not-another-Vietnam”  I first met Ambassador Crocker in January 2002 when he was servicing as America’s chargé d’affaires to Afghanistan. We met in the American Embassy that had just been reopened after a decade or so of abandonment.  A decade’s worth of dust still covered the embassy floor several inches deep. Its newly returning employees were sleeping in cots along the hallways.

Following al-Qaeda’ 9/11 attacks in the U.S., I supported NATO’s UN sanctioned attack on Afghanistan’s Taliban regime as a necessary measure to deprive al-Qaeda of its sanctuary there. I wept when we abandoned that objective unfinished in order to pursue another war in Iraq, which I strongly opposed. The Washington Post just published Defense Department documents evaluating America’s 18-year war in Afghanistan and finding it a costly failure. https://www.washingtonpost.com/graphics/2019/investigations/afghanistan-papers/afghanistan-war-nation-building/

“Former defense secretary Jim Mattis defended American efforts to rebuild Afghanistan as part of the 18-year-old U.S. war there, saying Friday that ‘we had to try to do something in nation-building, as much as some people condemn it, and we probably weren’t that good at it.’  Speaking to journalists at The Washington Post, he cited an increase in the number of Afghan women who are educated, the development of Afghan diplomats and the inoculation of civilians against disease.

“Mattis, who oversaw the war as the four-star head of U.S. Central Command from 2010 to 2013, said violence in Afghanistan is ‘so heartbreaking that it can blind you to the progress,’ and he acknowledged that the United States made a strategic mistake by not paying enough attention to the country as the administration of George W. Bush launched the war in Iraq in 2003.  ‘That we didn’t do things right, I mean, I’m an example of it,’ Mattis said, recalling that as a one-star general, he was pulled out of Afghanistan in the spring of 2002, promoted and told to prepare for war in Iraq.

“’I was dumbfounded,’ he said. ‘But we took our eye off of there.’” “Mattis-Afghanistan-papers-we-probably-werent-that-good-nation-building”

But should we have remained as military occupiers and then as peace guarantors for another 18 years and counting?  I have spent a lot of time in Afghanistan over those 18 years, most intensively as a member of the IMF team addressing the Kabul Bank scandal from 2010-14 (22 visits after that first one in January, 2002).   “The Kabulbank Scandal–Part I” Cayman Financial Review, January 2015  “The Kabulbank Scandal–Part-II” Cayman Financial Review, April 2015  “The Kabulbank scandal–Part-III” Cayman Financial Review, July 2015

I have worked with many wonderful, mainly young, patriotic Afghans and have grown to care a great deal about their conditions and their future. We (the U.S., IMF, World Bank, EU) have a lot to teach them about the institutions of capitalism and they have been very eager to learn. However, the United States has rarely been very good at “building” modern nations that it conquered militarily.  Our Generals and Ambassadors, who rotate in and out every two to three years, rarely understand the cultures and histories they are trying to deal with.  With our military on the ground it is too easy to attempt to impose our institutions on societies unfamiliar with them without more patiently growing more modern institutions from what is in place that are thus better adapted to their traditions and thus more likely to function successfully.

Nation building at the point of a gun has not and is unlikely ever to work for us or for them. https://wcoats.blog/2009/11/16/afghan-national-army/https://wcoats.blog/2012/10/23/our-unsupportable-empire/.

My hope for the future of Afghanistan rests with its young, dedicated and increasingly well-educated young people. Our advice can be valuable, especially if filtered and adapted by Afghans themselves. After centuries of relative isolation, the modern world of the Internet, offers them the knowledge of the world. We need to get our troops and our billions of corrupting dollars out of their way.

Central Banking award

The Central Banking Journal annually awards central bankers (best governor, best central bank, and providers of services to central banks) for their performance.  This year’s ceremony was held in London on March 13 and I was awarded Outstanding Contribution for Capacity Building. Here is a video of my acceptance speech.

 

Our dysfunctional Congress

Congress is failing to do its job. It sometimes overrides states’ laws when it shouldn’t. At other times it fails to exercise its authority over the Executive branch, which then exceeds its constitutional authority. For many years it has failed to build broad consensus for important public policies resulting in laws with narrow partisan support or no action at all. This rather long note examines several examples of the above.

The rule of law requires that properly adopted laws be enforced. I favor states’ rights to the maximum extent consistent with the Constitution, such as the overriding federal principle of equal protection of the law for everyone. In particular, I favor the right of each state to determine whether growing, selling and consuming marijuana is legal within that state. Federal law has made dealing with pot illegal. The conflict is untenable and the dominant jurisdiction of laws on pot should be clarified. I favor the states’ right to determine the law in this area.

With regard to national laws, I favor legalizing the residency status of immigrants brought to the United States illegally when they were children (the Dream Act) as well as broad immigration reforms. Currently there is no such law and what to do with and about the rest of those here illegally remains highly controversial.

I also (sort of) support Attorney General Session’s move to rescind the Obama Administration’s enforcement guidelines for the federal enforcement of its anti marijuana laws. “Those guidelines had finessed the state-federal conflict by saying, in effect, that federal prosecutors wouldn’t go after people who complied with state laws, but would instead concentrate on drug cartels, money laundering and other high-priority targets…. In a memo, [Session] said the federal pot statutes “reflect Congress’s determination that marijuana is a dangerous drug and that marijuana activity is a serious crime.” “Is this stuff legal? federal-position-on-pot-makes-situation-foggy-draws-pushback” However, given that resources are always limited, law enforcement agencies must prioritize their law enforcement efforts. With or without DOJ guidelines they are likely to adhere to the priorities suggested by the Obama Administration.

And I strongly support President Trump’s rescinding of Obama’s executive order halting the deportation of those who came to the U.S. illegally as children.

In this note I want to explain why I hold these seemingly contradictory views—pro legalization of pot and dreamers and pro rescinding the executive orders that accomplished each of those. More broadly I want to appeal to our dysfunctional legislative branch to shape up and do its job for the citizens and residents of this country.

Immigration Policy

The history of our immigration laws is complex reflecting compromises between interests with very different motives and objectives. It is currently a mess that does not serve the broad interests of the country very well. As Ilya Shapiro put it: “Immigration is quite possibly the most feckless part of the federal government. More than advancing bad policy, our immigration system consists of schizophrenic laws that don’t advance any particular goal.  If you tried to draw up rules for how foreigners enter a country, how long they can stay, and what they can do here, you’d be hard-pressed to come up with anything worse than our hodge-podge of conflicting regulations. This immigration non-policy serves nobody’s interest, except perhaps lawyers and bureaucrats. And yet Congress has shamelessly refused to fix it.“ President Obama’s DAPA order oversteps his Immigration Powers

The 1965 Immigration and Nationality Act expanded the annual number of permitted immigrants and extended the preference given to members of nuclear families (spouses and underage children) to extended family members (aunts and grandmothers, etc.). Extended family members now take the majority of slots allowed annually—so called chain migration. In my opinion, the preference for extended family members should be rolled back to the nuclear family and preference given to those with the skills and education demanded in the labor market. We must not lose the enormous benefits we have enjoyed from our immigrants. See: A nation of immigrants

A particularly contentious issue concerns what to do with the 11 or so million people who are here illegally, often by overstaying their visas. Deporting them would disrupt their lives as well as the enterprises that depend on their labor. But letting them stay seems unfair to those waiting patiently to enter legally. Jeb Bush and Clint Bolick provide an excellent discussion of these issues in their book: Immigration Wars: Forging an American Solution. See also my earlier blog on: Illegal-aliens.

Early on broad, across the aisle, agreement was reached to single out those who were brought into the country as minors and remain illegally, while continuing the debate about what to do with the rest. These illegal residents did not knowingly break the law on their own and many cannot even remember their earlier lives abroad.

Legislation to grant this group conditional residency leading eventually to permanent residency and maybe citizenship, which later became known as the Dream Act (Development, Relief, and Education for Alien Minors Act) was first introduced in 2001 but failed to received the required 60% in the Senate needed to avoid a filibuster. Over the succeeding years it was reintroduced, some times as part of broader immigration reforms, on a number of occasions without success. The 2011 attempt added stronger enforcement provisions against illegal alien workers by requiring employers to verify the legality of each worker in the government’s E-Verify database, the government’s Internet-based work eligibility verification system. But even with this compromise it again fell short of the 60% favorable votes needed in the Senate.

Giving up on Congress, President Obama announced on June 15, 2012 that the government would stop deporting undocumented immigrates matching the criteria covered by the failed DREAM Act. His executive order was called the Deferred Action for Childhood Arrivals (DACA) program.

A year earlier President Obama had said:  “America is a nation of laws, which means I am obligated to enforce the law…With respect to the notion that I can just suspend deportations through executive order, that’s just not the case…There are enough laws on the books by Congress that are very clear in terms of how we have to enforce our immigration system that for me to simply through executive order ignore those congressional mandates would not conform with my appropriate role as President.” (March 28, 2011)

Though I sympathize with the President’s impatience with Congress, his reversal of his earlier understanding of his executive powers is more than a stretch. In recognition of this stretch, DACA only granted temporary residency and work authorization, which would have to be reauthorized from time to time. This is not a very satisfactory solution, even if legal, which is very questionable.

On November 14, 2014 President Obama issued another executive order “offering temporary legal status to millions of illegal immigrants, along with an indefinite reprieve from deportation called the Deferred Action for Parents of Citizens and Lawful Permanent Residents (DAPA) policy.

The executive action would have two key components:

  1. “It would offer a legal reprieve to the undocumented parents of U.S. citizens and permanent residents who’ve resided in the country for at least five years. This would remove the constant threat of deportation. Many could also receive work permits.
  2. “It would expand the 2012 Deferred Action for Childhood Arrivals (DACA) program that allowed young immigrants, under 30 years old, who arrived as children to apply for a deportation deferral and who are now here legally. Immigrants older than 30 now qualify, as do more recent arrivals.

“People in both groups will have to reapply every three years.“ WashPost complete guide to Obama’s immigration-order

DAPA not only protected five million undocumented immigrants from being expelled, but also permitted them to have work permits. This order was blocked in the courts—ultimately by a divided Supreme Court. In Mr. Shapiro’s and the Cato Institute’s view, DAPA was good policy, bad law, and terrible precedent.

In September of last year the Trump administration also withdrew DACA. In making the announcement to rescind DACA Attorney General Jeff Sessions said:  ‘The program, called Deferred Action for Childhood Arrivals, or DACA, put a temporary halt to the deportation of immigrants who came to the United States illegally as children and who have grown up in the country going to school or working.

“We are a people of compassion and we are a people of law. But there is nothing compassionate about the failure to enforce immigration laws,”

Homeland Security Acting Secretary Elaine Duke said the decision was not taken lightly, but was an attempt to reconcile the program with existing law.

“As a result of recent litigation, we were faced with two options: wind the program down in an orderly fashion that protects beneficiaries in the near-term while working with Congress to pass legislation; or allow the judiciary to potentially shut the program down completely and immediately,” Duke said in a statement. “We chose the least disruptive option.”

The Trump administration said no current beneficiaries would be impacted before March 5, 2018, giving Congress time to act.” Session terminates Obama’s immigration executive order

In my opinion Trump/Sessions did the right thing in terms of the law and of the desirability of finding a more permanent determination of the status of DREAMers, which can only be provided by Congress. Now it is Congress’ turn to finally fix this.

While they are at it (but without holding up the Dream Act) they should fix as much of the immigration mess as possible. For example, the Immigration Act of 1990 allows the Attorney General to provide temporary protected status (TPS) to immigrants in the United States who are temporarily unable to safely return to their home country because of ongoing armed conflict, an environmental disaster, or other extraordinary and temporary conditions in their home country. This authority was transferred to the Department of Homeland Security last October.

The TPS program currently covers about 300,000 people from ten countries, namely El Salvador, Haiti, Honduras, Liberia, Nepal, Nicaragua, Somalia, Sudan, South Sudan, Syria, and Yemen. The DHS recently announced the termination of TPS status for about 2,500 immigrants from Nicaragua and 45,000 Haitians and most recently 200,000 Salvadorians. They will all have about two years to find a new status or pack up and leave. Most of them have been here since devastating earthquakes struck Central America in 2001. Some 192,000 U.S.-born children, who are therefore U.S. citizens, have at least one Salvadoran parent who holds TPS. In my opinion, children born in the U.S. to nonpermanent residents should not automatically receive citizenship. But a compassionate and realistic treatment of TPS residents requires ignoring existing laws. The rule of law requires that laws be enforced. But then we need to be sure that we only have laws we want enforced. This is a dilemma with an obvious solution, which has not been easy to achieve.

Marijuana and States’ Rights

In the case of the legalizing marijuana, the issue is the rights of state versus federal law. Racial discrimination allowed and/or promoted by some state laws in the past tarnished the image of states’ rights. The constitution (XIV Amendment) and related federal laws appropriately deal with such discrimination in the market place, though the poison in some hearts remains a problem that only education and public debate and good will can address. States should be given the maximum latitude possible to regulate their own affairs. Bad ideas and approaches will be exposed through their experience and good ones demonstrated and copied by other states. Congress should rescind any laws that label marijuana a dangerous or restricted substance.

I support shifting more responsibility to the states for fashioning the details of medicaid within each state.

War powers and the eternal war on terror

In other instances Congress has given away powers that should only belong to it. We should not fight abroad unless Congress approves it. Yet at the moment the U.S. military is involved directly or indirectly in our “Global war on Terror” in 76 countries largely without explicit congressional approval. “Seeing_our_wars_for_the_first_time”.

Congress has not declared war since World War II. It has authorized military engagements on a number of occasions since then without actually declaring war on anyone. The Korean War was dubbed a police action and undertaken under a UN Security Council Resolution. The Vietnam and related wars were fought under the authorization of the Gulf of Tonkin Resolution of Aug 7, 1964. The Persian Gulf War with Iraq (remember that) was authorized by the UN and by our Congress in the Authorization for Use of Military Force Against Iraq Resolution of January 12, 1991.

Three days after the 9/11 attach on New York and Washington DC, Congress enacted the Authorization for Use of Military Force (AUMF). The law provided that: That the President is authorized to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons, in order to prevent any future acts of international terrorism against the United States by such nations, organizations or persons.

The law was passed one vote short of unanimously. “The lone dissenter, Representative Barbara Lee, warned that the resolution gave a “blank check to the president to attack anyone involved in the Sept. 11 events — anywhere, in any country, without regard to our nation’s long-term foreign policy, economic and national security interests, and without time limit.” Rome’s empire without end and the endless U.S. war on terror. This law provides the continuing authority under which the U.S. and a few other countries attacked and still fight in Afghanistan as well as in Yemen, Somalia, Philippines, Pakistan, Libya, Iraq, and Syria.

President George W Bush signed the Authorization for Use of Military Force Against Iraq Resolution on Oct 16, 2003.

Individual liberty takes second place to security in times of war. But we now live in an era of permanent war and we are not escaping its price.

“The Committee for Responsible Foreign Policy – a bipartisan initiative designed to advocate for more oversight of U.S. military intervention abroad – commissioned research on U.S. citizens’ positions on war intervention. The coalition announced [recently] that the results prove a majority of Americans are mostly skeptical of the benefits of military intervention overseas and military aid in the form of funds or equipment…. The research showed that 67.4% of American voters disapprove of Congressional leadership allowing our involvement in conflict overseas without formally approving military action – or even allowing a debate.” http://responsibleforeignpolicy.org  “A November poll from J. Wallin Opinion Research showed the vast majority of Americans, over 70%, want Congress to impose at least some specific limits on overseas conflicts and exercise more direct oversight.” “Yemen-proves-US-needs-get-handle-war-making-powers”

Our polarized Congress

In the latest Gallup poll (Dec 4-11, 2017) 78% of those responding “disapproved of the way Congress was handling its job.” Congress’ failure to build broad inter party consensus on important public issues such as immigration, medical care and insurance, taxation, use of our military, marijuana and states rights more generally, has led the executive branch to over reach its proper authority, state and federal law to conflict as the Federal government extends its reach, the failure of Congress to resolve dysfunctional laws such as immigration, and the failure of Congress to agree on budget priorities that would arrest the upward march of our national indebtedness.

There are many reasons for Congress’ dysfunction and the deepening division of public attitudes toward our government and fellow citizens. The gerrymandering of congressional districts into safe Republican and safe Democratic districts has encouraged the selection in primary elections of each party’s more extreme candidates. I place considerable fault on the extent to which government has grown and dictates more and more aspects of our lives. This forces us to take public positions on one side or the other of issues that we used to be able to deal with (or ignore) privately allowing a more live and let live environment. Our sources of news have also become more siloed making it more difficult to confront all of the pros and cons of public policy issues.

What can we do? To name but a few ideas, we should each strive to restore civil public discussion. We should each commit to regularly consulting at least two sources of news from reputable sources coming from different sides of each debate. For example, I read the Washington Post and the Wall Street Journal every day. We must open our ears and minds and listen to what others say. Check out the following from what I bet is a different (and I think refreshing) side of the sexual harassment issue: “Catherine Deneuve denounces #metoo”. I will do my best to convince you that a more limited government will promote greater social harmony, individual freedom, and economic prosperity. And I will demand (if the courts don’t do it first) that my crazy congressional district (Maryland’s 6th congressional district—look it up and be amazed) be redrawn more sensibly. Even-a-gerrymandering-ban-cant-keep-politicians-from-trying-to-shape-their-districts

Cayman Financial Review, Q3 2015

Dear Friends,

The Third Quarter issue of the Cayman Financial Review is now available on the web: http://www.compasscayman.com/cfr/. I am on the Editorial Board and have two articles in this issue that might interest you. The first discusses the continued decline of U.S. world leadership exemplified in the case of the new Asian Infrastructure Investment Bank located in China: http://www.compasscayman.com/cfr/2015/08/19/US-leadership-and-the-Asian-Infrastructure-Investment-Bank/

The second is the final installment of my series on the Kabul Bank scandal. The failure of Kabul Bank in Afghanistan was probably the biggest bank failure and fraud in history on a per capital basis.  As this final article looks at some of the legal issues and developments in recovering stolen assets held abroad and Afghanistan’s uneven struggle to strengthen its criminal justice system, Gary Gegenheimer, a lawyer who also worked in Afghanistan, joined me to write this third installment: http://www.compasscayman.com/cfr/2015/08/19/The-Kabulbank-scandal–Part-III/

I hope that you enjoy them.

Best wishes,

Warren

The All Volunteer Military: Unintended consequences and a modest proposal

America’s war in Vietnam, its longest before Afghanistan, relied on the obligatory military service of its young men if drafted. When we turned 18, we were required to enroll with the Selective Service System and those of us who did not volunteer lived in terror for about ten years of eligibility that we would be “called up.” To protect the education of our more talented youth, deferments from the draft were given to those of us in college. Not surprisingly this did not go down well with those who could not or chose not to go to college and the fairness of the system was challenged. Thus, college deferments for anyone older than I was (lucky me) were ended and replaced with a lottery at the beginning of each year based on the selective service numbers we received when we first enrolled. Those whose numbers where at the top of the list were sure to be drafted and those closer to the bottom were sure not to be.

Because of the draft the majority of American families with sons were emotionally involved and connected to the war and as it became more and more unpopular this broad connection helped finally bring it to an end.

In 1967, a group of libertarian University of Chicago students and I founded the Council for a Volunteer Military to publicize the inequities of the draft and the benefits of an all volunteer military. We were not subject to the draft ourselves as our college deferments were grandfathered, and thus we were purely motivated by our sense of fairness and believe in the superior effectiveness of a volunteer Army. The Council’ directors were Jim Powell, Henry Regnery, myself as Executive Secretary, Danny Boggs, and David Levy (the one who is now a Professor of Economics at George Mason U). Our Sponsors included my teacher, Milton Friedman, as well as Yale Brozen, Richard Cornuelle, David Franke, James Farmer, Karl Hess and socialist Norman Thomas.

President Richard Nixon appointed Professor Friedman to a commission to study the viability of an all volunteer military headed by Thomas S. Gates, Jr. This led to Nixon’s replacement of the draft with higher pay and other employment conditions that made it possible to man our military with hired professionals. The result was a more expensive (the draft was effectively a tax on those drafted, who tended to be poorer to begin with) but significantly more effective military. After some years adjusting to the new approach, even the Generals praised the great success of our all-volunteer force.

As our military adventurism of recent decades has resulted in more and more American troops fighting and dying abroad, some observers have noted that the volunteer force left most American families unaffected directly by these wars thus undercutting the opposition they might otherwise express. This was obviously an unintended and negative aspect of the All-Volunteer Force (AVF). If there were no way to compensate for this negative consequence, the AVF would still be the best and fairest approach to manning our military. However, there is a simple way to help mitigate this negative feature, which has much merit in its own right.

Since 2001 our wars have cost us $1.6 trillion dollars ($10.5 million dollars per hour). This is just the direct budgetary cost and does not take account of the lives lost and other indirect costs and distortions to the economy, worsened relations abroad, etc. While the top 20-30 percent of income earners in the United States provide almost none of their sons and now daughters to fight these wars and thus might be more inclined to support them, they do provide almost one hundred percent of the taxes raised to finance our government. (In 2012, the latest income tax data available, about half of American families reported taxable income of which the top 50% paid 97.2% of all income tax revenue in that year. The top 5% of tax payers earned 36.8% of total adjusted gross income reported that year and paid 58.9% of total income taxes received.) None of the costs of these wars have been paid for by raising taxes or cutting other spending (except within the Defense Department, where equipment and weapons development expenditures suffered). The funds were borrowed from those buying U.S. treasury securities, adding to our debt that will have to be paid by our children.

My modest proposal, echoing one made a few years ago by U.S. Congressman David Obey, D-Wis., who on Nov. 19, 2010 introduced H.R. 4130, the “Share the Sacrifice Act of 2010,” is that any budget supplemental appropriations to cover the costs of fighting abroad must be paid for fully by an income tax surcharge. See Bruce Bartlett’s discussion of this issue: http://www.forbes.com/2009/11/25/shared-sacrifice-war-taxes-opinions-columnists-bruce-bartlett.html. By explicitly putting the cost on income taxes, any war and its financing will get the attention it deserves from the wealthier members of society who pay that tax. Taxing to pay for wars has the double benefit of adhering to principles of sound finance (properly paying for whatever the government spends), and of bringing the costs (at least the budgetary costs) of war to the pocket books of American voters.