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As everyone knows by now, US Treasury Secretary Paul O’Neill and U2 frontman Paul “Bono” Hewson just completed a week-long tour of Africa. While the unlikely pair seem to play off each each other well on stage, and seem to be getting along well offstage, it is not entirely clear how Mr. Bono has suddenly emerged as a power-broker. Several news sources attributed this quote to the man with the wraparound shades:
“[O’Neill] is the man in charge of America’s wallet … and it’s true, I want to open that wallet.”
None of the news sources I saw chose to elaborate on this comment’s obvious falseness. The treasury cannot release any funds until the proper appropriation and authorization bills have made their way through Congress. (I will cut Mr. Hewson some slack because he is not an American; but if certain members of the press need a refresher course in this area, I would recommend that they review their Schoolhouse Rock.) At any rate, it makes you wonder why we should take anything else the guy says seriously.
Bono’s cause is third-world debt relief. He argues that the heavy external debts of foreign governments are the principal obstacle to their emergence from poverty. We shall examine those claims briefly. How effective are official debt-relief programs in improving economic performance? Well, we can let history be the judge, since we have tried this before. In the late 1980s, the US treasury department began a debt-relief program called the Brady Plan, in which creditor banks were encouraged (through the stick / carrot of the federal tax code) to refinance debt at subsidized rates and reduce principal levels by allowing banks to replace severely discounted loans with new debt at levels closer to par value.
Was the Brady Plan a success? It depends on how you define success. If the objective was debt reduction as an end in itself, then the Brady Plan looked good — more than $60 billion in foreign debt was forgiven, by one estimate. But did the Brady Plan succeed on a larger scale, i.e. did it promote economic growth and encourage more responsible borrowing by third world governments? Sorry, Bono, but the track record there is not so good.
In his book International Debt Reexamined (unfortunately no longer in print, though I have a copy from my grad-school days), economist William R. Cline demonstrates that the economies of Brady Plan participants did not outperform those of nonparticipants with similar debt levels in the 1990s. So much for the argument that debt relief is a sine qua non of future economic growth.
Moreover, there is evidence that the Brady Plan (and other official debt relief programs) merely crowded out private debt relief efforts such as debt-for-equity and debt-for-nature swaps, which had commendably been on the rise throughout the mid to late 1980s. The announcement of the Plan itself had the effect of encouraging further profligacy — if your mortgage banker announced that it might be forgiving or substantially reducing your mortgage debt in the near future, wouldn’t you think twice before mailing in your next payment?
Bono’s line of reasoning on third-world debt would have found a favorable audience with economists a generation ago, but has long since fallen out of respectability. The new generation of development economists, spearheaded by the Peruvian economist and think-tank chairman Hernando de Soto, argues that the people of the third world already hold the solution to their poverty. This makes things difficult for would-be celebrity messiahs like Bono. Sorry, pal, but the world is ready to move on, with or without you.
A group of Harvard and MIT professors, spearheaded of course by MIT’s Noam Chomsky, is calling for the Harvard endowment to sell its investments in a variety of companies which “benefit from or support the Israeli military.” (If the Harvard-MIT Divestment Campaign has its own website, I cannot find it; but this story in The Harvard Crimson cites IBM, General Electric and McDonald’s as examples of such firms targeted by the Campaign.)
What exactly does the Campaign hope to accomplish? Even if they got their way, this action would not cause the slightest bit of economic harm to Israel. This would be the case even if we were talking about an institution with vastly greater holdings than the Harvard Endowment trust. The only way for Harvard to sell its shares of IBM or McDonald’s is for some other investor to purchase them (duh!) Perhaps they spend too much time listening to the empty suits on MSNBC and other “instant analysts” on the tube, who attribute every dip in the stock market to a “sell-off,” never considering that every share traded on the floor of the NYSE is both purchased and sold at the same time.
Maybe you can chalk this up to delusions of grandeur, or the mistaken notion that Harvard holds as much sway in the financial world as it does in the intellectual realm. One of the most important (and under-reported) trends in the economics in the last 20 years has been the rise of “institutional capitalism” — financial institutions such as pension funds and mutual funds now own an outright majority of all corporate equities, rendering bit players such as the Harvard endowment largely irrelevant. In any case, this represents an awfully strange way to try to pressure the Israeli government.
So why are they doing it? I can think of two reasons … essentially they must believe that the Campaign serves some political or propagandistic purpose, because it is difficult for me to believe that they think their actions will directly punish Israel in any way.
Symbolism — elevating the cause to the level of the anti-apartheid movement. In the 1980s, there were a variety of disinvestment campaigns leveled against South Africa, and the Campaign wants their own cause elevated to the level of the global struggle against apartheid. I don’t think that I need to explain why such a comparison is preposterous, but they are trying to create that linkage in people’s minds. (This makes even more sense in light of the protestor I met in Washington a few weeks ago, who told me that the Palestinians were ‘the N
As a citizen-journalist who lives five time zones west of GMT, I am often the last Samizdatan to get a crack at the day’s news. I read Fukuyama’s lame remarks in the WSJ this morning, but by the time I got home to write about it, everyone from Virginia Postrel to the sage of Knoxville to our own Perry de Havilland had already taken the time to thoroughly refute Prof. Fukuyama’s anti-libertarian screed.
But I am going to join the scrum anyway. Fukuyama criticizes the Cato Institute, accusing them of “propound[ing] isolationism in the ’90s, on the ground that global leadership was too expensive.” He points to a Cato analysis from 1991 that rejected the Gulf War on a cost-benefit basis and extrapolates from this one (1) data point that Cato is anti-war. Check out this excerpt from the Cato Handbook for the 105th Congress, which was written well in advance of 9/11. The authors criticize the lackluster response to previous state-sponsored terrorist attacks against the US (Khobar Towers, the USS Cole, etc.) and argue that state sponsored terrorism against the US should be treated as a matter of war and not as a criminal justice / extradition matter.
While Harry Browne and some other libertarians have elevated their antiwar rhetoric since 9/11, the Cato Institute has done no such thing. Consider these words from longtime Cato analyst (now their VP) Ted Galen Carpenter, posted to the site on 9/11:
The first order of business must be to determine who is responsible for these terrible acts and to order appropriate retaliation. Terrorist assaults of this magnitude should be treated as an act of war against the United States, not merely as a criminal justice matter. The President should immediately seek the full authorization of Congress to use whatever military force is necessary against the guilty parties. If the perpetrator is a government, the objective of the United States should be nothing less than the removal of that government. If the perpetrator is a terrorist organization without government sponsorship, the objective of the United States should be to track down and eliminate the members of that organization.
Fukuyama would have us believe that Cato thinks we ought to hold hands in a big circle and sing “Come on people now, smile on your brother” by Jessie Collin Young and the Youngbloods. Pacifism and isolationism are not the mainstream libertarian opinion by any stretch of the imagination, but it makes a convenient straw-man for Fukuyama to direct his puffery.
iFeminists.com reports that the Queensland state government in Australia has given license to five legal brothels, with three more pending. Licensing fees and operating revenues from these facilities will go to the government. At the same time, the government there has aggressively cracked down on unlicensed brothels (aka “competition”) — 72 unlicensed houses of ill repute have been shut down since January of 2001.
“We take a tough approach to illegal prostitution while at the same time provide strict laws to ensure health and safety standards within the legal industry,” says Queensland Premier Peter Beattie. Of course, the very fact that prostitution (outside these few licensed facilities) is illegal is what creates health and safety problems. If someone sells you a defective car, you can sue to get a new car; but if an illegal brothel operator lies to a client about the health of one of the workers, you can’t get the law involved without incriminating yourself. Similar problems arise in the illegal drug trade, obviously.
I suppose that the Aussies in Queensland are to be applauded for partially legalizing prostitution; but of course they are only doing it because they found a way to make money from it. (Likewise, governments generate billions of dollars from lotteries, but would prosecute the exact same lottery system in the private sector as a “numbers racket.”) The unanswered question remains: why do certain activities carry so much moral baggage that only the government may participate?
Author Salman Rushdie would have gotten a lot more attention for his comments in today’s Washington Post, but for the fact that his piece lay side-by-side with a scathing indictment of European anti-Semitism by Charles Krauthammer. Krauthammer’s piece was the hot item in the Blogosphere all day; of course Glenn Reynolds was all over it early in the day, and Tony Adragna of QuasiPundit ran with it too — but Rushdie’s comments deserve their time in the spotlight.
While Rushdie can’t help but take a few irrelevant and somewhat distracting sideswipes at Dubya and at Lady Thatcher, his skewering of the French is priceless — throwing Voltaire right in their faces! Rather than confront the rising tide of economic nationalists (or whatever the favored euphemism for “fascism” is now), they tend to their gardens, while insisting that fascism engages only the fringes and not the heart of French politics. And when anti-Semitism and fascism start percolating through their politics, why, who left those things lying around?
The voters blame the parties for not offering better choices; the incumbent Left blames the electorate for not being smart enough to continue voting for them. But in either case, the French have been far too busy casting judgment on the rest of the globe to take a critical look at themselves. Yes, Chirac will almost certainly beat Le Pen, but Rushdie is right to criticize the French, who for so long insisted that candidates like Le Pen only appealed to a tiny fringe element.
The Brians (Linse and Micklethwait) are going to argue right past each other on this soccer thing until they realize what the real problem is: Americans do not get, and have never gotten, The Real Deal when it comes to soccer. We are used to seeing baseball, basketball and hockey played at the highest level in the world; but Americans never get to see the very best soccer players as they toil away for the likes of AC Milan, Arsenal, Bayern Munich, Real Madrid, etc. The soccer [MLS and indoor mutations] that most Americans do get to see, frankly, DOES suck and IS rather boring, but I do enjoy tuning into the English Premiership, where 0-0 and 1-0 matches are the exception rather than the rule.
I think that American sports would do well to emulate some of the things they do in Europe! (And ask yourself, Mr. Linse, whether you really want to see scantily clad cheerleaders at a match between Paris St. Germain and Auxerre, for example.) I love the idea of “relegation” — every year, the top few teams in one league and the bottom few teams in the next highest league have to switch places! Imagine Major League Baseball played under these terms — instead of an American and National league that are equals, fashion an upper and a lower division. No more making excuses about small markets and such — small market teams would mostly play each other in the lower division, occasionally getting bumped up to play the big boys.
I have been away from the Blogosphere for a while, because I recently moved from my native Detroit to Washington DC, but I did enjoy ringside seats for the weekend’s, uh, festivities downtown. It is easy to dismiss the protestors as uninformed stooges duped by Chomskyite / Naderite garbage, and too many bloggers have already dwelled on their behavioral and rhetorical excesses for me to bother piling on. But I did come away with a few impressions of my own …
— there is an excellent book by Brink Lindsey (of The Cato Institute) called Against the Dead Hand: The Uncertain Struggle for Global Capitalism. Lindsey points out that, while both proponents and critics of “globalization” talk as though globalization is happening at breakneck speed, nothing of the sort is actually occurring. The world is becoming more liberalized, but it is happening at a snail’s pace. So what are all these people protesting against, exactly?
— it seems fashionable at these protests to compare the plight of the Palestinians to that of the civil rights struggle in the US. More than one advocate described the Palestinians as “the [big N’s] of the middle east.” This is an idiotic and meritless comparison. The Civil Rights movement here was about creating individual liberties for African-Americans … whereas the Palestinian question is about the conflicting claims of groups to govern a certain land mass. And regardless of whether the Palestinians get their own country, they are not much into individual liberty!
— It’s too bad none of the anti-IMF protesters knew what they were talking about (e.g. what the IMF is, what it does, who pays for it, etc.) because the IMF does deserve to be roundly roasted for creating a culture of global financial moral hazard. But hoisting a sign that reads: “IMF = International MoFo” doesn’t cut it.
— shouldn’t a committed “anti-globalist” also oppose things like global government, the United Nations, etc.? Just a thought.
Perry (below) makes reference to the idiotic comments of US Senator Edward Kennedy (D-MA) — the folks at Best of the Web have also had some fun with this one — see today’s Stupidity Watch. But this is not the first time that Kennedy botched a sports analogy with an absurd malapropism. In 1998, he managed to refer to fellow Democrats Richard Gephardt and Tom Daschle as “the Sammy Sooser [sic] and Mike McGwire [sic!]” of politics during a campaign stump session. (For our European readers, Sammy Sosa and Mark McGwire play baseball, a distant cousin of cricket played by men in pajamas.)
Kennedy’s staffers must hand him this stuff — he probably didn’t know his constituent team had won the Super Bowl until his interns told him — but what is more disturbing is his suggestion that we are fighting against “individualism.” I am still trying to think of a single aspect of OBL’s ideology that favors individual rights over collectivism. And, as Perry astutely observes, the New England players honed their skills and negotiated their robust contracts in a spirit of self interest, not “sacrifice to a greater cause.”
One word for you, Senator: O’Doul’s!
I am in the process of moving, from my native Michigan to the western suburbs of Washington DC. When I closed on my current home in April 2000, I financed the loan at 7.75% apr for 30 years. I am currently qualified to borrow at 6.40% for 30 years. The yield on 30-year US treasury bonds has fallen by a similar amount.
Why do I bring this up? Remember, back in 2000, American politicians were talking up the surplus. Today, thanks to recession, a flat stock market and post-911 spending, the US will probably finish with a deficit in fiscal 2002. But according to a novel theory recently introduced by Senate Majority Leader Tom Daschle, federal deficits cause mortgage rates to rise! So see, tax cuts would increase the deficit, which would increase mortgage rates, which would make new home purchases more expensive, which would hurt working families. Well then, if that is true, why is my lending rate so much more favorable now than it was when the US budget was solidly in the black?
The US does not finance much of its debt with 30 year bonds. In fact, the duration of the national debt (a fancy way of saying the average time to maturity) is just under 5 years. The federal treasury does not contribute very much to the demand for long-term funds. So it should not be surprising to learn that there is essentially no historical relationship between federal borrowing and mortgage rates. In fact, the US did not start to aggressively work down the duration of the debt until the Democrats and Treasury Secretary Rubin came into power!
If Daschle wants to pay down the debt, why would he want to do it in a period in which yields on long-term debt were falling? As anyone who stayed awake in finance 101 knows, prices and yields move in opposite directions, so lower yields mean that it would cost more to retire long-term debt from bondholder’ hands. This would amount to little more than a subsidy paid by US taxpayers to bondholders, who increasingly are foreign investors.
Politicians used to be smart enough to know that they aren’t very smart about economics. Senator Daschle evidently does not feel constrained by his ignorance.
This latest Don Feder column, advocating the continued embargo against Cuba, nearly chokes to death on its own contradictions. First, Feder contends:
Castro has nothing we want and nothing to pay for what he wants from us.
If Cuba had something we wanted, of course, they would have something with which to pay for what they want. And in his concluding paragraph, Feder, perhaps unintentionally, concedes that Cuba does indeed have something Americans want:
Besides supporting oppression of the Cuban people, unrestricted U.S. trade — and the tourist dollars to follow — would be invested in America’s destruction. As U.S. forces clean out the Tora Bora caves, we would be nuts to subsidize a branch office of the terrorist international 90 miles from our shores.
Hmmm … so Cubans do have something Americans want — tourism, for one thing. If they “had nothing we wanted,” they would not earn any income with which to pad the coffers of terrorists, now, would they?
The antiterrorist argument is a nonstarter. We do not trade with Cuba now, and they are already a bastion of terrorism. Terrorists could function anywhere, and they generally choose not to set up shop in open, free societies. They operate from repressive places like Afghanistan, Libya and Cuba, right? By keeping Cuba cordoned off from US markets, we are making the place more inviting to terrorists. Moreover, if we opened trade to them, we could at least threaten to shut them out of our markets again if they don’t vigorously prosecute terrorists.
Castro has plodded on in Cuba precisely because of the embargo. With no access to American products, Cubans do not see what they have been forcibly denied. Castro can blame America rather than his own kleptomania / thuggery for the nation’s woes. End the sanctions on Cuba, and watch Castro topple.
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Who Are We? The Samizdata people are a bunch of sinister and heavily armed globalist illuminati who seek to infect the entire world with the values of personal liberty and several property. Amongst our many crimes is a sense of humour and the intermittent use of British spelling.
We are also a varied group made up of social individualists, classical liberals, whigs, libertarians, extropians, futurists, ‘Porcupines’, Karl Popper fetishists, recovering neo-conservatives, crazed Ayn Rand worshipers, over-caffeinated Virginia Postrel devotees, witty Frédéric Bastiat wannabes, cypherpunks, minarchists, kritarchists and wild-eyed anarcho-capitalists from Britain, North America, Australia and Europe.
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