Free Markets, Free People

Monthly Archives: March 2011


Islam, the Middle East and ruthlessness

Reading through Martin Walker’s Feb. 28th piece for UPI about the unrest in the Middle East and N. Africa, I found this interesting:

That heady early talk of an Arab spring and a democratic flowering across the Arab world now seems distinctly premature. It is going to be much more difficult, and much more complicated, as the Europeans found when they started turning back thousands of Tunisians looking for jobs and opportunities in Europe rather than staying home to enjoy the new freedoms.

Beyond the unpleasant endgame of the Gadhafi regime, there are three predictable crises yet to come in North Africa. The first will be the question of food shortages and subsidies in Egypt, where the price of bread has been kept artificially low for decades at a cost of more than $3 billion a year. (The Mubarak government spent more on its various subsidies than it did on health and education.)

Egypt’s new government faces a tough dilemma. It cannot afford the subsidies but nor can it afford the popular outrage among the poor if it tried to end them.

The second crisis will come when business returns to normal and 30 percent of Egyptians and Tunisians in their 20s remain unemployed and a new class of graduates emerges to join them. They will demand government jobs. The government will try to comply but the government has no money. Money will be borrowed and printed. Inflation will result.

The third crisis will be more a problem of U.S. domestic politics but it will have grave implications for Egypt. It concerns Israel. The new Egyptian government, whatever its politics, will find it difficult to be quite as accommodating to Israel as Mubarak used to be. In particular, it will find it politically very unpopular to maintain the siege of Gaza.

His point, of course, is while there are many other problems attendant to any forced overthrow of a government, there are some others that will likely manifest themselves that will put even more stress and pressure on compromise governments (by the way, whatever happened to ElBaradei in Egypt?).

In fact, the new Prime Minister of Tunisia’s latest government just stepped down over dissatisfaction that change wasn’t coming fast enough.  So as hard as putting some form of government together that can quickly take the reins and effect the changes that the protesters have said they want, there are other externalities, beside a lack of history or tradition with a free form of government, that may sabotage their efforts.

As most pundits are now saying – after the initial orgy of opinions claiming this was nothing short of the flowering of democracy in some very arid land – we’re “early” into all of this. That’s called “walking it back”.   Now that the heady days of nonsensical optimism have passed, more sober analysis is becoming prevalent.  And, as one might expect, many are looking back into history to find a clue to what may happen in these countries.

Lo and behold, some are finding some fairly disturbing examples and principles that seem they may apply themselves to these particular situations.  For instance, as David Warren reminds us, the “most ruthless usually triumph”.   And our history is rife with examples.

A couple of points from Warren’s piece.  First ruthless doesn’t just apply to those who rise in opposition to the current government.  A recent example:

It does not follow, from the fact everyone is hooting, that Moammar Gadhafi will fall. He might, tomorrow, for all I know, or all anyone knows who is not clairvoyant. But as I recall, Saddam Hussein did not fall after the Gulf War of 1991. And the comparison is instructive. Every part of Iraq not directly attached to him through extended family and tribal networks (so tightly that they would share his fate) rose against him. And the world, beginning with the United States, was then as now urging his opponents on.

Saddam endured plenty of defections. Eventually, even "no fly zones" were established, to stop him from using airplanes and helicopters against the general population. But by the time these could be declared, and enforced, he had broken the back of the insurrection, and needed ground force only.

Saddam’s consistent policy was to be more ruthless than any potential rival. He slaughtered people by the tens of thousands to retain power, on that occasion alone. And that was not the only occasion on which his power was challenged. The casualties in the Iran-Iraq war, that continued eight years from September 1980, may never be adequately counted. Mixed in with them were huge numbers from his own side that Saddam massacred "pour encourager les autres." Millions of Iraqis found themselves being minced between two satanic giants: the other, of course, being Ayatollah Khomeini.

Gadhafi is also ruthless.

Loony as a cartoon character, but certainly ruthless.  That sort of ruthlessness obviously has a value to the person or organization that uses it – it provides a means to keep or take power.

Ruthlessness can come in many guises, but it essentially means letting nothing stand in the way of attaining an ultimate goal.  Whether it is in politics, sports or revolution, the most ruthless in the pursuit of their goal usually triumphs.  And that’s regardless of whether or not you agree with their methods. 

So Libya has descended into unspeakable violence.  But I’d guess few would believe anyone more ruthless than Gadhafi (and his family) exits there – but there may very well be.

Which takes us to part II of this.  Why do some nations who go through the throes of this sort of revolutionary change find it within themselves to create a more free and democratic society while others fall into even more and greater tyranny than before?  Warren’s theory:

We should grasp, for instance, that the American Revolution was almost unique in history, for ending so well. We should also grasp why. It was, from beginning to end, under the leadership of highly civilized men, governed by a conception of liberty that was restrained and mature. George Washington commanded, in his monarchical person, the moral authority to stop the cycle of reprisals by which revolutions descend into "eating their own." Nelson Mandela achieved something similar in South Africa.

Alternatively, a whole society -I am thinking here of the nations of Central Europe after the fall of the Berlin Wall -may be so exhausted by revolutionary squalor that they long for return to "normal" life and have constitutional orders in their own, historically recent past, available as models. But even they needed Walesas and Havels.

Where such men exist, they are visible at any distance, from the start. Nowhere in the Arab world -and particularly not in Egypt, its centre of gravity -can such leaders be detected; only ridiculous pretenders. Nor do the conditions exist for wise statesmen to emerge. Nor have any of the Arab states a stable constitutional order to look back upon. Tyranny begets tyranny.

Certainly there are many shades and flavors of tyranny, and a nation may even lessen the hold its tyranny without actually ending it.  But as Warren observes, there are no real leaders emerging (at least not yet) that one could label, at least in the way Westerners would, that could be considered “highly civilized men” imbued with a sense of liberty that is “restrained and mature”. 

Instead, given the area, the culture, the history, we see this as what will likely emerge:

As we should surely have observed by now, whether or not the Islamists command Arab "hearts and minds," they are not only the best organized force, but the most ruthless. They are also in possession of the simplest, most plausible, most easily communicated "vision."

Islam, in whatever form, shape or flavor is the common thread of these revolutions.   As I’ve mentioned before, what is considered a “moderate” in most of these countries would be viewed, were he a Christian, as a fundamentalist in most other places. The inclusion of Islam into the everyday lives of the people is as natural as breathing.  They take for granted it will be an essential part of any government they form.

There are no Walesas and Havels in those countries.  There are Imams and Ayatollahs who fill that function.  And, as Warren points out, the vision they present is indeed the “simplest, most plausible, most easily communicated vision” of all of them, to include secular representative democracy. 

They also fulfill the other two historical requirements to take power  – they’re the best organized and, as we’ve seen in many other places, the most ruthless.

~McQ


Gas prices, economics and politics

Gallup tells us that economic confidence has slumped sharply in the past two week due mainly to the spike in gas prices driven by the unrest in the Middle East and North Africa.

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Funny how that works, no?  Gas prices go up, economic confidence goes down.  And the rest of that goes “economic confidence goes down, incumbents suffer”.

So you’d think smart politicians would want to ensure that they’ve done everything they could to ensure gasoline prices remain as low as possible.

You’d think.   But that’s not exactly what has happened here, is it?  We’re now in the 10th month of a drilling moratorium imposed by this administration, so there’s really no immediate or impending increases in production domestically that could help ease this, is there?

Says Gallup:

The slump in confidence is likely tied to gas prices, which have risen sharply amid growing political instability in the Middle East, most notably in Libya. The U.S. Department of Energy reported an increase in gas prices from an average $3.14 per gallon nationwide during the week ending Feb. 14 to $3.38 this past week. In addition, news media focus on the challenges governments are having in passing budgets may also affect Americans’ perceptions of the economy.

Gallup’s Economic Confidence Index comprises two measures — one assessing consumers’ views of current economic conditions and another measuring their perceptions of whether the economy is getting better or worse. Both components are more negative than they were two weeks ago, but most of the change has come from increasingly pessimistic expectations about the economy’s direction.

The pessimism is being driven by the understanding that we haven’t the means to effect the problem nor have we done anything in the interim to improve our ability to effect the problem.  In other words, we’re more at the mercy of foreign oil now than we were when this administration took office.

Secretary Salazar has been on a vendetta against oil, using the unusual but certainly horrific accident on the Deep Horizon platform, to effectively shut down a critical portion of the domestic oil industry.  It has cost thousands of jobs and billions of dollars (not only to the industry but to the government in the form of royalties and taxes).   Rigs which were scheduled to be deployed in the Gulf before the moratorium are now deploying elsewhere.  It costs millions for companies when oil drilling rigs sit idle.  So they’re off to do what – exploit foreign oil fields.  And they most likely won’t be back in Gulf waters anytime soon.

The point, of course, is the entire energy situation in the US is being badly mishandled by the incumbent administration.  And while they sit and fiddle, we become less and less able to effect world pricing for oil because our capability has been hamstrung by a government and bureaucracy that is basically antagonistic to fossil fuels.

That’s a risk, especially in these economic times.  If the economy is still in this sort of shape, pessimism still holds the majority in consumer confidence and gas prices hang around the $3.50 range, even some of the so-called front runners in the GOP at this point might be able to squeak out a win.  And it would most likely, as Charlie Cook predicts anyway, mean a tough election for Congressional Democrats in both houses.

Gasoline isn’t going to go down anytime soon as the unrest continues to roil the ME and N Africa.  And if something happens in Saudi Arabia, all bets are off.  But it is interesting to see how quickly the price of one commodity – albeit a critical commodity – can turn sunshine to gloom with the public.  It is something to watch going forward.

~McQ


Kinsley restores my belief in the irony impaired left

Michael Kinsley goes on a bit of a tear about states subsidizing the film industry in an LA Times piece.  Kinsley is just flat upset that states are giving way subsidies to “millionaires”.  Frankly, I don’t think government should be subsidizing any industry.  But back to Kinsley:

Government, in order to work, must be a monopoly. The appeal of the movie industry to beleaguered state treasurers, in addition to its glamour, is its mobility. There are no huge factories. Regardless of where the movie is supposedly set, it can be shot almost anywhere. And it will employ locals and spend money.

But mobility giveth and mobility taketh away. Pit the states against one another and the subsidies will inevitably become more generous and less effective at the same time.

The same logic applies when the competition is foreign. True, we might tire of having to watch film after film often implausibly set in Vancouver. But in any attempt to outbid Canada for the privilege of hosting a movie shoot, even a successful effort will be self-defeating.

"Governors and legislatures should call ‘cut!’ on cynical efforts to kill forward-looking incentive programs for film and TV production, in New Mexico and in all other states," Richardson says.

"Cynical" is an odd word to describe people (and there aren’t many) who want deeply indebted state governments to stop forgoing billions in tax revenue in the futile effort to entice the movie business to make its next western in Erie, Penn., or wherever.

Whatever indeed.  I don’t disagree.  For once I can give Kinsley kudos. 

Well, almost.   In the same article he says, talking about Bill Richardson, former governor of New Mexico (and the “Richardson” quoted above):

Richardson might well be a candidate for one of the "respected elder statesman" seats that come open every generation (sort of an American version of the British House of Lords, only chosen by the media instead of the government), bringing with them memberships of prestigious commissions, offers of ambassadorships, opportunities to express concern on "Charlie Rose" or the PBS "NewsHour" shows (if those institutions manage to survive the current Republican onslaught) and so on.

Yes, you caught it.  He’s talking about the subsidy the Federal government gives the Corporation for Public Broadcasting, a multi-million dollar corporation that helps fund PBS, another multi-million dollar tax subsidized entity.

Irony – still a mystery to much of the left.

Next Kinsley will be urging us to buy a book on how to save the trees.

~McQ


David Brooks: austerity, “death panels” and spending exemptions

David Brooks helps demonstrate the problem we face in doing anything meaningful about the fiscal mess our government has gotten itself in.  To give him his due, he is trying, at some level, to address the problems facing the country. But he manages to end up putting himself in precisely the position which seems  prevalent today among those not really serious about doing what is necessary to put the fiscal house in order (but like to pretend they are)  – that is “we want budget cuts but don’t touch my favorite programs”.

Let me give you an example from his column today entitled “The New Normal”.

He begins by acknowledging that there is going to be (needs to be?) a whole lot of deficit cutting over the next few years.  And, his first principle of austerity, as he calls it, is that lawmakers must, as he inartfully but correctly puts it, “make everybody hurt”.  He’s right – no exemptions.  Every program, department, echelon, you name it, associated with government (yeah, that means you public sector unions) are going to have to sacrifice something.  Fine to that point.  When you’re looking at 1.3 trillion in a single year deficit, everyone does have to “hurt” if you hold any hope of eliminating it.

However, in this column  he launches into his second principle of austerity and loses me immediately.

A second austerity principle is this: Trim from the old to invest in the young. We should adjust pension promises and reduce the amount of money spent on health care during the last months of life so we can preserve programs for those who are growing and learning the most.

This “principle”  is based in a very nasty premise that “we” are in control of all the money “spent on health care” during the last months and should use that power to help balance the budget (and the fact is, with Medicare, that premise is true).  In other words, “we” will decide to pull the plug on the treatment for oldsters in favor of treatment/”investment” in youngsters.  Not the old folks themselves, mind you.  They’ll have no say in it. He’s talking about the collective “we”.  But don’t you dare say “death panels” you hear me?  And note, he immediately violates his first principle of making “everyone hurt” by claiming that if we throw the oldsters under the bus, we can “preserve programs” for the young.  Where’s the cut in spending when we’re “preserving”?

Oh, it’s not “spending” … we’ll call it “investing”, shall we?

Brooks then expands his “for the children” campaign with this bit of nonsense where he takes a shot at House GOP members:

In Washington, the Republicans who designed the cuts for this fiscal year seemed to have done no serious policy evaluation. They excused the elderly and directed cuts at anything else they could easily reach. Under their budget, financing for early-childhood programs would fall off a cliff. Tens of thousands of kids, maybe hundreds of thousands, would have their slots eliminated midyear.

You’d think Brooks, someone the NYT pays to be informed about how government works, would understand that the legislation he questions isn’t a budget, but a continuing resolution (CR) to fund government in the current fiscal year.   That’s not where you make “serious policy evaluations”.  You do that in budget legislation, something which the Democrats in the House failed to pass last year.   The government has been running on a series of CRs all year.  That doesn’t remove the crying need for cuts in spending, but the only spending under their control in a CR is discretionary spending.  And that’s where they’re cutting.

Brooks prefers to ignore those facts in favor of the emotional argument that they’re going after children in favor of old folks.

What is instructive about the Brooks argument is this is precisely the type arguments that you’re going to see from now on.  Arguments like the one Brooks puts forward here are going to begin with statements like “we must make cuts” and then spend the entire rest of the time arguing against making them.   And 90% of those arguments are going to be based in emotion, not facts or sound reasoning.

Mr. “Make Everyone Hurt” then advances his third austerity principle:

Which leads to the third austerity principle: Never cut without an evaluation process. Before legislators and governors chop a section of the budget, they should make a list of all the relevant programs. They should grade each option and then start paying for them from the top down.

I don’t necessarily disagree with the point, but it is again inconsistent with his first principle, isn’t it?  If everyone has to “hurt”, then something must come from every spending point – to include children’s programs and education.  What Brooks wants is some sort of arbitrary “evaluation” which will – wait for it – justify or rationalize exempting certain programs, policies, departments from spending cuts.

Any guess as to which programs he wants exempted?  Certainly not those effecting older Americans.

Brooks isn’t really serious about cutting spending.   Like many politicians and pundits, he mouths the words and makes the point about all of us sacrificing something, but he really doesn’t mean it. When pressed, he falls right into the “cut everything else but don’t cut my favorite program” group in which you find much of the populace today.  That’s not “shared sacrifice”.

Its hard to take someone seriously who doesn’t seriously address the fact that we have massive debt, massive deficits staring us in the face, a huge new entitlement program on the books and and conclude there’s an urgent need to cut spending in all areas, period.   Brooks should have stopped with his first principle, if he actually wanted to be taken serious.  That is the “new normal”.

~McQ


One picture tells the US’s problem

It is sort of surprising that it is even necessary to put this up, but as most of us know, people pay more attention to visual evidence than written. And written is sometimes open to misinterpretation. I challenge anyone to misinterpret this:

 

usa-income-statement

If the US were a business, this would be it’s “Income Statement”.   And this isn’t a one time “it’ll get better next year” sort of statement either.  Neither income nor spending are projected by the administration to be much different in its 10 year budget projections.

Note where 58% of the spending comes from.  Do your own calculations -the most simple, of course is taking $2.2 trillion from $3.5 trillion and understanding that you have a shortfall of S1.3 trillion.

The chart comes from a very interesting report from a financial analyst at KPCB, Mary Meeker.  She takes a look at the US’s finances as if the country was a business.  Business Insider (HT: Pundit Review) lays out some of the gory details and what is discussed in the report as recommendations:

• Spending as a percent of GDP rose 3 percent each year from 1790 and 1930. Worse: It rose 24% in 2010.

• Debt levels will be three times current levels by 2030. Entitlements and interest alone will exceed total revenue by 2025.
• Only 1 in 50 Americans needed Medicaid when it was first created in 1965, 1 in 6 Americans receives Medicaid now.
• Extended unemployment benefits could set back America Inc. $34 billion in the next two years alone.
• The only good investments: technology, education and infrastructure.
• The crucial reforms: entitlement and tax policies
• There is no quick-fix to America’s deficit problem. While raising taxes could help, the only real solution is cutting costs.
• Why we should cut Medicare benefits by 53%
• Why we should increase the retirement age to 73 or cut Social Security benefits by 12%.

Emphasis mine.  Essentially the ground truth about the country’s financial situation is the only way to get it in order is to commit to massive cuts in spending. Superfluous to that argument is any argument claiming certain programs or government departments or any other aspect of government should be exempt. That said, it is clear to anyone with eyes that the major problem lies in too much spending for entitlements. For instance how is it a program that was designed to fund medical care for the poor in this country and when started had 1 in 50 Americans enrolled now enrolls 1 in every 6 Americans?  My guess is you’ll find the same to be true of most so-called “anti-poverty” programs today. 

And the billions upon billions we throw at education through the Dept. of Education which hasn’t raised the yearly results of our students one iota since its inception.  Or the Department of Energy – created in Jimmy Carter’s day to do what?  Lessen our dependence on foreign oil.  That’s worked well hasn’t it?

We’re talking drastic action here, folks.   And we’re talking getting a grip and facing reality – not this “hey, make cuts but don’t touch our entitlements” nonsense that  some polls reflect.  Nor can these cuts fall victim to whining by special interests.  And it would be wonderful, in an obvious era of austerity, if the White House could manage a little leadership as well:

Last July, Obama announced that he wanted federal workers to cut down on business travel and commuting by car in order to reduce emissions produced by the federal government:

The White House was announcing Tuesday that the government will aim to reduce carbon dioxide and other greenhouse gas emissions from indirect sources like employee driving by 13 percent in 2020, compared with 2008 levels.

That’s for everyone else.  The Obama’s of course, are exempt from such things and as an example, fly in their personal trainer every week for a workout.  Imagine the reduction in emissions if they were to actually practice what they preach and hire a local personal trainer.

Pulling it all together, this is the problem we face in getting the country’s house in order.  Those that are talking about (and actually trying) cutting spending are now cast as bad guys.  Special interests are spooling up their sob stories.  The bureaucracy is beginning to fortify the walls around its huge and expensive kingdom.  And much of the public wants cuts without pain.  Meanwhile, other than lip service, the so-called leadership of this country doesn’t seem to understand what leadership is, what it entails and why it is important to set a good example –  that is if they’re actually serious about doing what they claim we must do.

If this were a company, as Mary Meeker lays out in her study, investors would be cashing out as quickly as they could and others would be avoiding anything to do with this wreck.  The bottom line of Meeker’s report is the road down which we’ve kicked the can for decades has come to a dead-end.  We’re there.  We can’t kick it one single foot further.

The time has finally come and the question is, are we up to the task at hand?  Do we have the political will and leadership necessary to get done what must be done?  Unfortunately,  I don’t think so – financially speaking and addressing the quality of leadership available, the election of the empty suit in the White House couldn’t have come at a worse time. 

There are at least two ways this crisis will be solved.  Deliberately through tough and painful measures enacted by a leadership that directly confronts the problem and makes tough choices, or spontaneously when we reach a tipping point and everything collapses in a heap and we’re left surveying the ruins and wondering what happened.

Any guess as to which scenario I think is most likely?

~McQ