Archive for January, 2011
Democracy in Tunisia?
In the wake of President Zine el-Abidine Ben Ali’s abdication in Tunisia on Friday, both President Obama and Secretary of State Hillary Rodham Clinton stressed the need for quick elections in a country that has never known democracy, freedom of the press, or the rule of law:
Secretary of State Hillary Rodham Clinton . . . reacted Friday to Ben Ali’s departure with a statement condemning government violence against protesters and calling for free elections.
“We look to the Tunisian government to build a stronger foundation for Tunisia’s future with economic, social and political reforms,” she said. . . .
President Obama condemned the use of violence against the protesters and urged the government to hold elections that “reflect the true will and aspirations” of Tunisians.
I’m reminded of Fareed Zakaria’s concerns about the blithe promotion of elections in his article “The Rise of Illiberal Democracy” (pdf; later expanded into a book, The Future of Freedom: Illiberal Democracy at Home and Abroad):
…for almost a century in the West, democracy has meant liberal democracy—a political system marked not only by free and fair elections, but also by the rule of law, a separation of powers, and the protection of basic liberties of speech, assembly, religion, and property. In fact, this latter bundle of freedoms—what might be termed constitutional liberalism—is theoretically different and historically distinct from democracy. As the political scientist Philippe Schmitter has pointed out, “Liberalism, either as a conception of political liberty, or as a doctrine about economic policy, may have coincided with the rise of democracy. But it has never been immutably or unambiguously linked to its practice.” Today the two strands of liberal democracy, interwoven in the Western political fabric, are coming apart in the rest of the world. Democracy is flourishing; constitutional liberalism is not….
Constitutional liberalism, on the other hand, is not about the procedures for selecting government, but rather government’s goals. It refers to the tradition, deep in Western history, that seeks to protect an individual’s autonomy and dignity against coercion, whatever the source—state, church, or society. The term marries two closely connected ideas. It is liberal because it draws on the philosophical strain, beginning with the Greeks, that emphasizes individual liberty. It is constitutional because it rests on the tradition, beginning with the Romans, of the rule of law….
Since 1945 Western governments have, for the most part, embodied both democracy and constitutional liberalism. Thus it is difficult to imagine the two apart, in the form of either illiberal democracy or liberal autocracy. In fact both have existed in the past and persist in the present. Until the twentieth century, most countries in Western Europe were liberal autocracies or, at best, semi-democracies. The franchise was tightly restricted, and elected legislatures had little power…. Only in the late 1940s did most Western countries become full-fledged democracies, with universal adult suffrage. But one hundred years earlier, by the late 1840s, most of them had adopted important aspects of constitutional liberalism—the rule of law, private property rights, and increasingly, separated powers and free speech and assembly. For much of modern history, what characterized governments in Europe and North America, and differentiated them from those around the world, was not democracy but constitutional liberalism. The “Western model” is best symbolized not by the mass plebiscite but the impartial judge….
It is odd that the United States is so often the advocate of elections and plebiscitary democracy abroad. What is distinctive about the American system is not how democratic it is but rather how undemocratic it is, placing as it does multiple constraints on electoral majorities….
While it is easy to impose elections on a country, it is more difficult to push constitutional liberalism on a society. The process of genuine liberalization and democratization is gradual and long-term, in which an election is only one step. Without appropriate preparation, it might even be a false step….
Today, in the face of a spreading virus of illiberalism, the most useful role that the international community, and most importantly the United States, can play is—instead of searching for new lands to democratize and new places to hold elections—to consolidate democracy where it has taken root and to encourage the gradual development of constitutional liberalism across the globe. Democracy without constitutional liberalism is not simply inadequate, but dangerous, bringing with it the erosion of liberty, the abuse of power, ethnic divisions, and even war.
Let’s hope that the new leaders and the newly active citizens of Tunisia focus on developing freedom of the press, civil liberties, the rule of law, and constitutional limits on the power of government–including economic policies (pdf) more conducive to growth and progress–even as they move toward holding elections.
Inflation Is Here
“Faced with rising international food prices,” Steven Mufson writes in the Washington Post, “governments around the world are cooking up measures to protect domestic supplies and keep a lid on prices at home.” Instead of export bans, subsidies, and price controls, governments might better consider the role of their central banks in creating money out of thin air and causing price inflation. Cato senior fellow Gerald P. O’Driscoll, Jr., made that point at the blog ThinkMarkets:
“Prices Soar on Crop Woes” reads the headline in today’s Wall Street Journal.
Global output of key crops such as corn, soybeans and wheat is down, and their prices are up, respectively, 94%, 51% and 80% from June lows. Today’s PPI report has wholesale prices up 1.1% in December after rising 0.8% in November. The Journal reminds us that in 2008 high food prices sparked riots around the world.
Meanwhile Fed officials tell us they don’t expect inflation. It is not an issue of expecting inflation, but of observing it here and now. The Fed prefers, of course, to look at “core” inflation rates, which are much lower. A former Fed colleague explained to me the central bank does so on the theory that people do not need to drive to work and can stop eating.
In our global economy, easy US monetary policy has thus far mainly affected commodity prices (including now food), real-estate in Asia and now broader price measures in Asia. It is implausible that the US would remain unaffected. Food, energy and clothing prices are all rising. I don’t think many households are presently gripped with a fear of deflation.
In the Mises/Hayek theory of economic fluctuations, the transmission of monetary shocks works through producer prices and incomes, and only later consumer prices. No measure of consumer prices, and certainly not a subset of consumer prices, is an adequate gauge of inflation.
(For another take on rising food prices, you can read the views of Paul Krugman and Lester Brown, who say that at last — at last! — we really are running into those “binding resource constraints” that Brown has been predicting for his entire life and that will finally require us to start living at Chinese levels.)
Did We Miss Out on the Bargain of the Century in Iraq?
Stuart Reid’s Twitter points to this Condi Rice discussion with Katie Couric in which the following exchange takes place over the decision to invade Iraq:
RICE: …I’m also, frankly, just very glad [Saddam Hussein is] out of power. Now, to be frank, we tried to take him out of power without going to war. We tried to take him out of power by — we got a report from an Arab state that shall remain nameless that he would take a billion dollars to lead — to leave. We said, deal. Right? (Laughter.) We tried to (find ?) him –
COURIC: Has that — has that been made public before?
RICE: Yeah, I — it may be in President Bush’s book. I’m not sure. I don’t remember. But we did. We said, if he’ll go, everybody’s happy.
A colleague intrepidly Googled this, and turned up this 2007 article in the Washington Post. The article reports that for a billion dollars and if allowed to “keep information on weapons of mass destruction,” Saddam Hussein told Egypt’s Hosni Mubarak that he would have been willing to go into exile. President Bush’s own book, per Secretary Rice’s mention, covers the matter in this way:
…Our last ditch hope was that Saddam would agree to go into exile. At one point, an offer from a Middle Eastern government to send Saddam to Belarus with $1 to $2 billion looked like it might gain traction. Instead, in one of his last acts, Saddam ordered the tongue of a dissident slashed out and left the man to bleed to death. The dictator of Iraq had made his decision. He chose war.
Lots of people like to make fun of President Bush’s prose style, but even for him (or his ghostwriter) this is pretty peculiar. First of all, it isn’t clear why “person who cuts off dissidents’ tongues and leaves them to bleed to death” is mutually exclusive with “person willing to take a billion or two dollars and go into exile.” Saying Saddam cut a dissident’s tongue out doesn’t necessarily bear on his willingness to take a payout and go into exile.
Second, it’s almost certain that this was pursued and didn’t go anywhere, but if there was anything approaching a realistic opportunity to make this happen, we really missed out on the bargain of the century here. You’re looking at something like 500%-1000% returns, not counting several thousand American and a-hundred-or-so-thousand Iraqi lives saved.
Thirdly: Belarus?
This Week in Government Failure
Over at Downsizing Government, we focused on the following issues this week:
- The White House and Congress need to restructure our military responsibly, based on a realistic assessment of available means and achievable ends, with the savings being returned to U.S. taxpayers.
- Policymakers in a position to do something about the Federal Aviation Administration need to start thinking bigger: privatization.
- While new House Agriculture Committee chairman Frank Lucas may be a “Wheat Champion,” he sure isn’t a Taxpayer Champion — at least not on agricultural issues.
- Rep. Kevin Brady (R-TX) has introduced the Cut Unsustainable and Top-heavy Spending (CUTS) Act, which would cut spending by $44 billion annually.
- A perfect illustration of why government subsidies for economic development are immoral.
Congress: Where 20 Jobs = $580m
When talking to groups about the political economy of trade protection, I always mention concentrated benefits versus diffuse costs. Public choice theory explains many bad policies, of course, but tariffs and subsidies are excellent examples of interventions that benefit the few at the expense of the many.
Congress, or specifically two members of that esteemed body, have recently provided me with a textbook example. The Generalized System of Preferences is a federal program that offers duty-free access to the U.S. market to certain goods from certain developing countries. Or, I should say, was a federal program, because it expired on December 31. My opinion of the program is ambivalent at best, but one cannot deny that the program brings real cost savings to American consumers and businesses — to the tune of $580 million a year — through lower import duties.
But those duty savings are, apparently, worthless in the face of special interest politics. From Inside U.S. Trade on January 6 [$]:
An Alabama sleeping bag manufacturer that benefited from the expiration late last year of the Generalized System of Preferences (GSP) program is now taking further steps in an attempt to ensure that Congress does not renew the program this year in the same form.
Exxel Outdoors CEO Harry Kazazian this week said his company is in the process of expanding its U.S. plant by adding workers and increasing production, and that this expansion is occurring as a direct result of the fact that Congress allowed the GSP program to expire on Dec. 31.
Under GSP, Bangladeshi sleeping bags that competed with the Exxel Outdoors product were able to enter the U.S. duty-free. On behalf of Exxel Outdoors, Sen. Jeff Sessions (R-AL) last year refused to let any renewal of GSP pass that would not remove at least some sleeping bags from the scope of the GSP program (Inside U.S. Trade, Dec. 23).
Non-Taxpayers for a Tax Hike
Advocates of limited government often worry about how to maintain republican government and freedom if a substantial portion of the population don’t pay taxes and are net beneficiaries of government largesse.
Lately, it seems like a lot of the advocates of bigger government and higher taxes don’t pay their own taxes — like Tom Daschle, Timothy Geithner, Eleanor Holmes Norton, Charles Rangel, Al Franken, Governor David Paterson’s top aide, Democratic National Convention staffers, Al Sharpton, and so on.
Now the Washington Post has found another one:
Since joining the D.C. Council two years ago, Michael A. Brown has become the chief advocate for raising taxes on the city’s wealthiest residents, arguing that those who earn at least $250,000 a year are not paying their share.
Yet Brown and his wife have failed to pay the property taxes on a Chevy Chase home assessed at $1.4 million, according to public records. Brown, who earns more than $300,000 a year, owes the District $14,263 for property taxes, the records show.
I guess it’s easy to support higher taxes if you don’t intend to pay them. But I suggest that Brown bite the bullet, recruit Daschle, Franken, Norton, and their colleagues, and form a new organization:
Non-Taxpayers for a Tax Hike
‘Geolocation’? ‘Geotagging’? What is This Stuff?
If the Army is educating recruits about “geolocation,” maybe you should know about it too. In fact, the U.S. Army primer entitled “Geotags and Location-Based Social Networking” is a pretty good basic resource. Check it out.
Understand this: Your mobile phone sends out signals to cell towers, creating records of where you go throughout your day. If it is enabled with GPS, it can produce even more precise location information.
Law enforcement and intelligence agencies are rushing to exploit the potential of geolocation data, acquiring details of people’s movements and activities that once required costly, 24/7 surveillance. Uses of these data range from tracking fugitives, to reconstructing suspects’ travels, to analyzing the movements of whole populations in search of “suspicious” behavior patterns.
Senator Ron Wyden (D-OR) is drafting legislation to set standards for government access to geolocation data under both criminal law and the Foreign Intelligence Surveillance Act. On Wednesday, January 26th, Cato will host him at an event we’ve titled “Location-Tracking Technology and Privacy.”
We’ll ask you to silence your cell phone when the program starts. You might consider turning it off on the way here…
Community Development Booze Grants
In a recent post on earmarks and federal grants, I cited the crazy example of HUD’s Community Development Block Grant program funding facade renovations for a wine bar in Connecticut. Now a Michigan newspaper reports that Bell’s Brewery in Kalamazoo is looking for $220,000 in CDBG money to expand its facilities.
I consider Bell’s to be one of the finest breweries in the United States. Bell’s desire to expand its production facilities reflects its success in getting people to part with their money voluntarily in exchange for their products. Now federal taxpayers, whether they like Bell’s or beer, could effectively be forced to give their money to Bell’s.
There are over 1,500 craft breweries in the United States. Those breweries must pay federal taxes, so if Bell’s were to receive its grant, then the federal government would basically be forcing the other breweries to subsidize a competitor. Should the federal government therefore be in the business of subsidizing all craft breweries in the United States? It’s doubtful that any federal politician would answer in the affirmative. Why then the special treatment for Bell’s?
This is a perfect illustration of why government subsidies for economic development are immoral. Politicians and their benefactors justify the redistribution by pointing to the jobs and development created (often allegedly) by the subsidies. But they completely ignore the fact that the handouts cannot occur without money being taken out of somebody else’s hand first. Therefore, what politicians innocuously label as “economic development” can also accurately be labeled as “theft.”
As a Cato essay on community development programs states, “Community development is a local concern, and only local leaders and businesses using their own funds can make sound cost-benefit decisions on projects.”
Preparing for Life as a Light Bulb Black Marketeer
I’ve decided the time has come to become an entrepreneur — as a black market operator.
Come next January, 100-watt incandescent light bulbs will be illegal, courtesy of Congress and President George W. Bush. Lower wattages will be banned the following year. As usual, politicians in Washington believe they know best and are determined to inconvenience the public in the name of saving energy.
No matter that incandescent lights offer a softer light and are a better value than fluorescent bulbs if turned on only briefly. And no matter that breaking a fluorescent light will spill mercury, creating what in any other circumstance would be considered to be a biohazard.
There are other consequences of the coming prohibition. Notes Tim Carney of the Washington Examiner:
- Citing this law, GE has closed its incandescent light plant in Virginia. For the coming years, while they’re still legal, Americans will be buying their GE incandescents from Mexico. This probably means less efficient manufacturing and more shipping.
- GE makes its CFLs in China. The factories are likely dirtier and less efficient, and certainly there will be more shipping costs.
- Because of the warm-up time for CFLs and the knowledge that they use less energy, people are more likely to leave them on for longer, I imagine.
- In northern latitudes, incandescents’ inefficiency is not wasted. Think about it: in Alaska, summer nights are very short and winter nights are very long. That means a vast majority of light-bulb time happens in the winter. The incandescents waste energy in the form of heat, but if it’s cold, that added heat slightly reduces your need to use a furnace.
And why stop there? I could become an incandescent bulb pusher once the prohibition takes effect. I don’t think drug prohibition makes any sense, but I have no desire to get into that market. Customers and competitors are an ugly lot and I really don’t want to go to prison. But selling light bulbs — now there’s something I could do!
I’d be even happier, however, if the new Congress dropped the coming prohibition. Fluorescent bulbs often are a wise choice, but not always. A supposedly free society should leave at least a few choices to people — like deciding which light bulbs to use.
Upcoming Debates on Obamacare, Use of Foreign Law
Last year I hit about 35 states on various lecture/debate tours. To round that out — and further reduce the states I’ve never visited (though Alaska, Iowa, Nebraska, and the Dakotas will stubbornly remain untrodden by my feet) — this winter I have a schedule that’s eventful but not insane like my fall was. Here are the rest of my public events in January (all sponsored by the Federalist Society):
- Jan. 18 at noon — Debate on the Constitutionality of Obamacare — University of Colorado-Boulder Law School
- Jan.19 at noon — Debate on the Constitutionality of Obamacre — University of Wyoming Law School
- Jan.20 at 11am — Debate on the Constitutionality of Obamacare – BYU Law School
- Jan.24 at 12:15pm — Debate on the Use of Foreign Law in Constitutional Interpretation – University of Utah Law School
- Jan.26 at 5pm — Debate on the Constitutionality of Obamacare – Widener University Law School (Wilmington, DE campus)
As always, if you attend any of these events, please do come up and introduce yourself. You can also follow me on Twitter at @ishapiro.
Race and Homeownership: Historical Trends
A common rationale for federal policies to expand homeownership is the desire to reduce observed racial differences in homeownership. Receiving the most attention has been the gap in homeownership rates between white households and African-American. The current homeownership rate for whites is 76.5% (2007), while that for African-Americans is 54%, leaving a gap of 22.5%.
Limitations on available data have made observations prior to 1940 difficult (1940 was the first “Census of Housing”). A new working paper adds to our understanding by constructing a time series back to 1870, using previous Census data. The findings are quite surprising.
In 1870 the gap between white and African-American homeownership rates stood at an astonishing 48.8 percent. As mentioned, this gap in 2007 was 22.5%, representing a 26.3 percentage point decline. However, of that 26.3 narrowing, 25.3 occurred before 1910. That is correct, almost all of the decline in the racial homeownership gap occurred before we had any national policies targeting said gap. Given all the massive resources that have been devoted to pushing homeownership, it is somewhat surprising that these policies have made almost no difference in the racial homeownership gap.
Obviously homeownership rates in general, and by race, have steadily increased (until the recent bursting of the housing bubble), but these rates largely increased the same across racial groups. We should also note that the vast majority, if not all, of the racial homeownership gap is explained by factors such as age, income, family status, wealth and local housing costs (see Coulson and Dalton forthcoming). Given what little impact these policies have had, and their significant costs, it should be clear that we, as a society, would be better off abandoning efforts to socially engineer a specific homeownership rate, either for the population in general or by racial group.
Dear Defamed: Trust Us, We’re the Government
With the release of a new report analyzing a quietly amended Government Accountability Office study that’s been used to club for-profit colleges, fear of GAO bias has reached a fever pitch. Sadly, the GAO’s response to the report does anything but assuage that fear.
To get a decent sense for the government abuse both surrounding, and possibly perpetrated by, the GAO study in question, it’s worth a quick rehash of events.
Basically, the study was requested by Sen. Tom Harkin (D-IA), the chairman of the Senate Health, Education, Labor, and Pensions Committee who has been waging war against for-profit colleges on the suspicion that the sector is rife with fraud, waste, and abuse. To get data to support his suspicion, Harkin asked the GAO to conduct “secret shopper” research in which investigators pretending to be prospective students visit schools to discover fraudulent admissions and financial aid practices.
In August 2010 the GAO released selected findings in testimony to Harkin’s committee and an accompanying report. The GAO said that it found abuses in all the schools it visited, which Harkin and others suspicious of profit-seekers seized on to assert that the sector is, indeed, teeming with fraud. That the GAO’s report explicitly noted that the sample of schools it visited was non-random and, therefore, its results impossible to apply to all of for-profit higher education was no matter: the rhetoric of those with a bias against for-profit schools was off and running.
In November, while for-profit schools sought unsuccessfully to get all the recorded and other material needed to substantiate the GAO’s findings, the GAO silently slipped a revised version of the report out, one that featured numerous changes, all of which redounded to for-profits’ favor. And it wasn’t just correcting minor oversights: There was lots of recorded dialogue that had been missing from the original report, material that the GAO must have known about before issuing it’s initial, very damaging report.
Which brings us to the present day, and the new report that tears apart the amended version of the GAO study. Using available audio recordings of the shoppers’ visits — and many recordings and other evidence is not available, being held by the GAO and U.S. Department of Education — investigators from the firm of Norton/Norris, Inc., commissioned by the Coalition for Educational Success, report that only a quarter of the GAO’s findings can be substantiated after factoring out missing recordings. In other words, an already crumbling report seems to be utterly collapsing.
So is the GAO apologizing for this, or at least saying they’ll make all their material available? No way, as their statement to Inside Higher Ed makes clear:
“The consultants hired by the Coalition to discredit the report never contacted GAO for explanations and failed to take into account many factors, including the fact that not all information in the report can be found on the audio tapes posted to the Internet,” Chuck Young, GAO’s managing director for public affairs, said in an e-mailed statement. “For example, GAO turned over some videotapes to the inspector general at the Department of Education due to evidence of serious wrongdoing uncovered by investigators. Audio from those visits was not able to be posted. There were also written materials that were examined as part of the work and are not on the tapes. We are reviewing the tapes to see if there were any segments that were not provided to the committee.
“But the bottom line remains that a GAO review team independent from the investigators who did this work examined the report and found no material flaws in the evidentiary support for the overall message of the testimony and consequently our findings did not change. We did issue the errata at their suggestion to clarify our work and provide more precise language. We continue to stand by the overall message of this report.”
You don’t have to suffer from tinfoil-hat paranoia to see real and potential government abuse all over this sorry episode. First, opportunist politicians and others misused the initial GAO report to smear the whole for-profit sector. Then, once the damage was done, the GAO made significant changes to their report without even so much as issuing a press release. And now, as even the amended report is being ripped to shreds, the GAO’s response is basically “you can’t have access to the evidence being used against you, and you don’t need it: We’ve already decided we’re right and you’re wrong.”
Now, are for-profit schools pure and blameless? Absolutely not: Norton/Norris confirmed several of the GAO’s findings, and some findings they questioned are probably accurate. Moreoever, as I’ve pointed out before, many for-profit schools are happy to take students carrying taxpayer dollars despite knowing there’s little chance that those students will ever finish their studies. Of course, that makes those institutions no different from many public and nonprofit private schools about which Sen. Harkin evinces no concern.
Ultimately, though, much more important than the immediate effect of all of this on for-profit schools is the lesson it offers for all Americans: Run afoul of the sensibilities of the wrong politicians – especially if you make a deal with the devil and take government funds — and government can hobble you without ever worrying about due process, transparency, or just plain fairness. All it has to do is make accusations.
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