Europe fears war, hopes for peace, and gets neither

Economic and monetary union remains unfinished

By David Marsh

Helmut Kohl, the former German chancellor, used to say that his landmark European project — economic and monetary union (EMU) — was a matter of war and peace. It would make European conflict impossible. Kohl got it partly right, partly wrong, for different reasons than those he anticipated.

Europe is enduring a long-running but profoundly unsettling ceasefire between debtors and creditors. Neither war nor peace is breaking out. As long as doubt persists on whether the euro truce will hold, so will the uncertainty overhanging the world economy. That encapsulates the mood of many participants at the annual meetings of the International Monetary Fund and the World Bank that ended at the weekend in Tokyo.

As one Asian central banker put it: “We will not have a disaster, but we will not have a solution.” A large fault line in EMU runs through Germany, which the IMF openly blames for not having alleviated far earlier the running sore and vicious circle of low EMU growth and persistent imbalances.

The European Central Bank, on the other hand, emerged from the meetings with reputation and credibility intact. An important point underlined by ECB President Mario Draghi, and backed up by key governing council members such as Austria central bank governor Ewald Nowotny, is that the ECB has to remain distant from the “will they, won’t they?” kerfuffle over whether the Spanish government will apply to European governments (and the IMF) for a new bailout program.

Mexico is the forgotten story of US election

At which point maybe Mexico will have to tighten its border security

By Edward Luce

They say elections have consequences. But it is doubtful November 6 will have much impact on the biggest trend facing the US – its transformation into a Latin American country. Not only is the difference between Barack Obama and Mitt Romney incidental to the tides of US demography and regional integration. But the debate between the two is irrelevant to them.

Consider this: Mexico is fast turning into America’s most important trading partner – and is already its second-largest export market. Yet the only context in which the country is mentioned on the campaign trail is drugs or illegal immigration. It is rare that reality and politics so sharply diverge.

Here is Uncle Sam’s Latin American reality. First, Mexico is rapidly becoming as important to the US economy as China. There has been much excitement in recent months about the possibility of “reshoring” manufacturing jobs from China to America. If you broaden the destination to North America, the trend is already under way. Mexico is now vying with China as the manufacturing hub of choice for US and other multinational companies – it is as economically integrated with the US as any two members of the eurozone are to each other.

Economic Singularity

For countries that have been trapped in the gravity well of debt, there is only the pain that comes with restructuring

By John Mauldin

"Concern about politics and the processes of international co-operation is warranted but the best one can hope for from politics in any country is that it will drive rational responses to serious problems. If there is no consensus on the causes or solutions to serious problems, it is unreasonable to ask a political system to implement forceful actions in a sustained way. Unfortunately, this is to an important extent the case with respect to current economic difficulties, especially in the industrial world.

While there is agreement on the need for more growth and job creation in the short run and on containing the accumulation of debt in the long run, there are deep differences of opinion both within and across countries as to how this can be accomplished. What might be labelled the 'orthodox view' attributes much of our current difficulty to excess borrowing by the public and private sectors, emphasises the need to contain debt, puts a premium on credibly austere fiscal and monetary policies, and stresses the need for long-term structural measures rather than short-term demand-oriented steps to promote growth.

"The alternative 'demand support view' also recognises the need to contain debt accumulation and avoid high inflation, but it pushes for steps to increase demand in the short run as a means of jump-starting economic growth and setting off a virtuous circle in which income growth, job creation and financial strengthening are mutually reinforcing. International economic dialogue has vacillated between these two viewpoints in recent years."

– Lawrence Summers, The Financial Times, October 14, 2012

There is indeed considerable disagreement throughout the world on what policies to pursue in the face of rising deficits and economies that are barely growing or at stall speed. Both sides look at the same set of realities and yet draw drastically different conclusions. Both sides marshal arguments based on rigorous mathematical models "proving" the correctness of their favorite solution, and both sides can point to counterfactuals that show the other side to be insincere or just plain wrong.

Spain and Greece are both examples of what happens when there is too much debt and austerity is applied to deal with the problem. One side argues that the cure for too much debt is yet more debt, while the other side seemingly argues that the cure for a lack of growth is to shrink the economy. It is as if one side argues that the cure for a night of drunken revelry is a fifth of whiskey while the other side prescribes a very-low-calorie diet of fiber and veggies.

The Affirmative Action Quagmire

Rather than place restrictions on race-based preferences, the Supreme Court should let colleges run themselves

by Richard A. Epstein

Should institutions of higher education be allowed to engage in affirmative action programs that extend certain privileges to minorities, specifically African-Americans and Hispanics? Though that issue has been left unaddressed in the presidential campaign, it will be center stage at the United States Supreme Court on October 10. In the highly anticipated case of Fisher v. University of Texas, Abigail Fisher, a white woman who was denied admission to UT Austin’s campus in 2008, protests the admissions procedures that she claims vaulted less qualified minority students into the university ahead of her.

Affirmative Action in Texas

UT’s admission policies are, in large measure, a response to the 1996 decision of the Fifth Circuit in Hopwood v. Texas, which struck down the school’s explicit racial preferences in admissions decisions on the ground that diversity in education did not count as “a compelling state interest.”

Hopwood prompted a swift reaction: The Texas legislature approved a program that finessed Hopwood, making it mandatory for all UT campuses to automatically admit all Texas high school seniors who finished in the top ten percent of their class. The explicit rationale for the law was that it would boost the percentage of minority students in the UT system. That is just the way the results played out, as exhaustively documented in the Fifth Circuit Fisher decision, which narrowly upheld the plan.

Japan security environment tougher than ever

East Asia in Turmoil  

By Kiyoshi Takenaka

Prime Minister Yoshihiko Noda told his navy on Sunday that Japan's security environment was tougher than ever, underscoring tension with China over a territorial dispute and the threat of North Korea's weapons programs.

Sino-Japanese relations deteriorated sharply after Japan in September bought from private owners some of the East China Sea islets that both Tokyo and Beijing claim. That sparked violent anti-Japanese protests across China and badly hurt trade.

"It is needless to say that the security environment surrounding Japan is getting tougher than ever," Noda told about 8,000 servicemen and women, mostly from the navy, from aboard the destroyer Kurama.

"We have a neighbor that launches missiles under the pretence of satellite launches. We have various developments concerning territory and sovereignty."

Savile: the mad hunt for a conspiracy of witches

With its contagion of accusation and counter-accusation, the Savile scandal has exposed the Salem-style irrationalism of the modern elite

by Brendan O’Neill 

With each passing day – hour, in fact – the Jimmy Savile scandal looks more and more like a modern-day version of the hysteria that gripped seventeenth-century Salem, when a small town in Massachusetts became convinced that it had witches in its midst. Since the first accusations of child abuse were made against the late BBC entertainer in an ITV documentary on 3 October, Britain’s chattering classes have become consumed by a witch-hunting mentality, with almost every respectable institution, from the BBC to the NHS to the child-protection industry, finding itself dragged into a vortex of Savile-related suspicion and rumour, accusation and counteraccusation.

So as in Salem, Savile-obsessed modern Britain has its alleged conspiracy of witches, in the shape of Savile himself, described by the Guardian as ‘the devil who tries, and succeeds, in passing himself off as a saint’, alongside other named or hinted-at individuals. Together, these ‘blood-curdling child catchers’ (Guardian again) apparently ‘stalked children’s homes and hospitals… preying on the most vulnerable victims one could imagine’. They were part of a ‘child sex ring’, say the tabloids, which ‘lurked’ deep within ‘the corporation’ (the BBC). Savile was even worse than JK Rowling’s Voldemort, journalists tell us; he was a beast more wicked than could have been imagined by ‘even the most gifted weavers of children’s nightmares’.

The Future of America Is Japan

Runaway Deficits, Runaway Debts

by Charles Hugh-Smith

If you want a look at the fiscal future of the U.S., look west to Japan, a nation that sits precariously on a fiscal cliff a thousand feet high.

If you want to know how the Keynesian Cargo Cult's grand experiment in borrowing money to fund bloated fiefdoms, rapacious cartels and bridges to nowhere ends, just look west (from California) to Japan. The Japanese State, partly because they seem to believe in the Cargo Cult, and partly to avoid exposing the insolvency of their crony-capitalist financial sector, has been borrowing and spending money on a vast scale for two decades.

The Keynesian Cargo Cult's primary article of faith is that borrowing and blowing huge sums of money on anything and everything will magically restore "aggregate demand," i.e. the animal spirits that drive people to borrow and blow money on consumption. This is of course pure insanity, as people cannot borrow if their balance sheet has been destroyed, their real incomes are declining and they have lost trust in institutions that fear transparency and the truth like the Devil fears garlic.

Recall that the Federal Reserve's Survey of Consumer Finances for 2007-2010 found that the median net worth of households fell a staggering 39%, from $126,400 to $77,300, and average household income fell 11% from $88,300 to $78,500.

But rather than face the fraud and corruption at the heart of American (and Japanese) finance and governance, the Keynesians just want to leave the predatory, parasitic crony-capitalist Status Quo intact and create an illusory world of bogus "demand" and grotesque malinvestment funded by ever-increasing debt. In effect, the entire Keynesian Project seeks to reinflate asset and government revenue bubbles--the very causes of the global financial meltdown.

Scotland: the world’s most childish nation

The SNP thinks children should be trusted with votes, but adults shouldn't be trusted with booze and fags

by Rob Lyons 

This week, the UK Lib-Con coalition government and the Scottish National Party (SNP), which holds the majority in the Scottish Parliament, are set to announce they have come to an agreement on the terms for a referendum on Scottish independence. The SNP has agreed that there will be only one question on the ballot paper: should Scotland leave the UK. In return, the UK government will agree to the nationalists’ preferred date for the election - some time in 2014, to coincide with Glasgow hosting the Commonwealth Games and the seven-hundredth anniversary of the Battle of Bannockburn. More importantly, it seems, the two sides have agreed to allow 16- and 17-year-olds to vote, too.

There is plenty to be said about the wisdom of throwing away 300 years of common history. Scotland became part of the United Kingdom in 1707 once the Treaty of Union was approved by parliaments north and south of the border and the history of the two countries has been intimately entwined ever since. There seems little benefit to dissolving this union now. It is also right to wonder what exactly ‘independence’ would mean within the European Union. When so much law is now decided in Brussels rather than Westminster, and the Scottish Parliament already has considerable control over domestic law and policy, how much more ‘free’ would Scotland be if nominally independent?

IMF Board Sees Biggest Power Shift Reshuffle in Two Decades

Emerging markets remain concerned about the slow pace of reforms of the governance structure of the IMF

By Sandrine Rastello

The International Monetary Fund’s executive board is undergoing the biggest reshuffle in two decades in a shift emerging markets including Brazil say remains insufficient to reflect their rising economic power.

Starting next month, some western European countries are realigning to give nations such as Turkey and Hungary more say under a 2010 pledge to give up two seats on the 24-seat board. Changes are also taking place among emerging markets, with Colombia leaving Brazil’s group to join Mexico’s.

The overhaul reflects “significant economic realignments at the global as well as regional levels,” said Eswar Prasad, a Cornell University professor and a former IMF official. “Small countries are jockeying for position to make sure their voices are heard while some of the larger but less dynamic economies are trying hard to preserve their clout despite their diminishing economic significance.”

Charles Murray’s Fatal Conceit

Belmont's upper class is anything but traditional, and it lacks any sense of noblesse oblige

By PAUL GOTTFRIED

As a European historian specializing in the 19th century, I’ve never been able to figure out what American journalists and politicians (not to mention academic sociologists) mean when they refer to “classes.” This term has two time-tested meanings. Either we’re talking about social groupings with legally recognized statuses which until the 19th century had certain political rights that other groups did not, or else what we mean is what Marx understood as “classes,” socio-economically dominant forces like the medieval aristocracy or the bourgeoisie that replaced them. Classes are not simply people who fall at one point or another into a particular income bracket or who buy SUVs rather than compact sedans or high-definition TVs instead of pick-up models at Kmart. It drives me absolutely nuts when I hear geeky-looking “economic experts” yapping on about how the “middle class,” that is, middle-income families or clusters of co-inhabitants, are hurting for this or that. “Middle class” used to translate as “bourgeois,” which referred to a social class of many centuries, as opposed to those who are moving up and down the income scale. The indiscriminate bandying about of the term shows how culturally ignorant we’ve become.

A former colleague of mine who teaches political theory observed that it’s now impossible to teach students about Aristotle’s conception of the family as a household. The kids get annoyed that an ancient Greek thinker held such a skewed view of family relations. It makes no sense, for example, that an aging dude was put in charge of other family members. After all, women should be wage-earners as well as make their own decision about reproductive rights. One young Brazilian exchange student went ballistic when the instructor failed to scold Aristotle for not discussing gay marriage. Isn’t this about family togetherness, the student asked, an attitude we should be praising instead of ignoring?

How the United States became a superpower of the left

From Kennan to Trotsky

By MARTIN SIEFF

Russia and China today both enjoy the same grand-strategic advantage against the United States that the United States enjoyed through the 44 years of the Cold War.

The Soviet Union was then the superpower of the left, as the left had been globally understood since the French Revolution. It was the state committed to the promotion of revolutionary change across the world.

The United States, by contrast, was the superpower of the right. It was committed to the maintenance of stability and continuity in government systems around the world.

The United States won the Cold War. The craving for stability, peace, and continuity among governments and populations alike proved infinitely stronger than the fleeting flashes of revolutionary fervor. The Soviet Union eventually became physically exhausted and globally isolated by its ideological commitment to revolutionary change.

Today, however, the roles of the two great powers have been reversed. Since the advent of Madeleine Albright as secretary of state in 1997, the United States has become increasingly ideologically committed to the spreading of “instant powdered democracy” in every nation of the world, as defined and approved by the United States. Russia and China have become the main “conservative” or “right-wing” powers committed to preserving the status quo.

The BRIC rescue that wasn’t

What was hoped would happen was wishful thinking

By Robert J. Samuelson

Just in case you didn’t hear it, that was the sound of the BRIC bubble popping.

The acronym stands for Brazil-Russia-India-China. Coined by economist Jim O’Neill of Goldman Sachs, it symbolizes the rise of once-poor countries (“emerging markets”) into economic powerhouses. More recently, the message has been: The rapid expansion of emerging-market countries will help rescue Europe, the United States and Japan — the “old world” — from their economic turmoil. The BRICs will prop up the global demand for industrial goods and commodities (oil, foodstuffs, metals).

Forget it.

For a while, the prospect seemed plausible. During the 2007-09 financial crisis, some BRIC countries — China, most notably — adopted large stimulus programs, and others just grew rapidly. In 2010, China’s economy expanded 10.4 percent, India’s 10.1 percent and Brazil’s 7.5 percent. Today’s outlook is more muted. In 2012, China will grow 7.8 percent, India 4.9 percent and Brazil 1.5 percent, according to the latest projections from the International Monetary Fund. Although the IMF predicts slight pickups in 2013, some economists forecast further declines.

Can Government Create Opportunity?

The state erects obstacles to prosperity; never pathways

by James E. Miller

Last year, the Boston branch of the Federal Reserve put out a working paper which contained detailed data on the declining trend of economic mobility in the United States.  According to the paper, the percentage of Americans who reside in the lowest income quintile and move up either to the middle quintile or higher has been in decline over the past three decades.  This statistic should be alarming as it is indicative of stagnation within an economy that supposedly fosters the entrepreneurial spirit.  Without the opportunity to create and deliver things which enhance the lives of others, society as a whole ends up being denied the work of the most constructive members. To some, it has meant that government at all levels is doing an inadequate job in addressing what appears to be a growing divide between the haves and have-nots.  Calls for higher taxes to pay for programs and schemes of redistribution which would enable the less-fortunate in following their ambitions usually follow.

U.S. Drone Strikes Setting Dangerous Global Precedent

Fuelling terror

A drone launches from the deck of the USS Lassen.
The legality of U.S. drone strikes is coming under
 increasing scrutiny and questioning.

By Isabelle de Grave

U.S. counterterrorism measures are under intense scrutiny from United Nations (U.N.) experts and civil rights groups declaring drone strikes illegal under current frameworks.

During the 20th Session of the U.N. Human Rights Council in Geneva from Jun. 18 to Jul. 6, these experts declared such measures in urgent need of greater accountability and transparency.

Targeted-killing programs, including drone strikes, are “a strongly asserted but ill-defined license to kill without accountability”, wrote former special rapporteur on extrajudicial, summary or arbitrary executions Philip Alston in his 2010 report to the council.

Two years later, strategies that the United States justifies as a necessary response to terrorism remain questionable both in legality and according to humanitarian principles.

Argentina's Debt Picture Looks Increasingly Disastrous

Argentina cannot refinance its obligations as they mature

The Economist

WHEN Argentina proposed a brutal 65% haircut to holders of its defaulted sovereign bonds in a 2005 restructuring, one argument the country’s officials used to justify the offer was that the country could not take on more debt than it could reasonably expect to pay. As painful as the loss might be, the argument went, at least the new bonds the government would issue would be creditworthy.

Just seven years later, that claim now looks harder to support. This month the impoverished northern province of Chaco was unable to pay $263,000 of interest, after Argentina’s Central Bank refused to sell it the necessary dollars. That forced the province to announce it would compensate its creditors in pesos, converting the amount owed at the official exchange rate, which is roughly 25% less than the currency’s value on the black market. It was the first time an arm of the Argentine government had failed to deliver a debt payment in full since the country’s massive 2001 default.

Is Chaco's technical default a canary in the coal mine for Argentine debt in general, or merely an isolated nuisance? In the short run, most bondholders can stay calm. Although the Chaco paper is denominated in dollars, it is governed by Argentine law, which allows borrowers to settle their obligations in local currency. Ever since the Central Bank clamped down on the foreign-exchange market last year in an effort to slow capital flight, its official policy has been that local issuers can only buy dollars to fund infrastructure projects.

How To Spot A Keynesian

Mortgaging your posterity with debt and deficits is somehow “virtuous"

by Gregory Cummings 

According to the great Doctor Gary North, the litmus test of Keynesianism is the attack on austerity. He writes:

Let’s say that you are reading an article on what the Greek government should or should not do. You read that the government’s proposed austerity measures will lead to a reduction of production. This will lower tax revenues. The government-debt-to-GDP ratio will increase. Austerity will therefore not solve Greece’s economic problems.

The article was written by a Keynesian.

In an opinion piece published by The Globe and Mail entitled “Europe must realize austerity doesn’t work,” Pierre Briancon is true to this Keynesian form:

The Greek economy has shrivelled to three quarters of what it was three years ago, before embarking on its successive turnaround-cum-bailout plans. Euro zone governments keep contributing religiously to their own recession by forcing ever higher degrees of pain on their sick economies.

An “Austrian” In China

Zhang Weiying: China’s Anti-Keynesian Insurgent

By Jeff Harding

It’s a rare afternoon in the Chinese capital when smog hasn’t blocked the skies, and one of China’s most famous economists is in a sanguine mood. The economy is in trouble as the Communist Party heads for a once-in-a-decade transfer of power while prosecuting its former golden boy, Bo Xilai, on criminal charges. Worried investors want signs that Beijing remains committed to growth—and the sign they’d most like to see is a big Keynesian stimulus.

Zhang Weiying would say that they’re wrong to panic. The economic slowdown, he calmly says over tea, is actually good news that “makes the government think we need to change”—toward reform and away from priming the pump. We aren’t all Keynesians now in China, he insists.

Three years ago, Keynesianism was official policy. The 2008 financial crisis had Beijing gloating over the failure of the free-market “Washington Consensus” and touting the “China Model” of government intervention. Keynesianism fit the statist zeitgeist and Beijing then suffered an export slump, so the government allocated $3.5 trillion—or about 50% of gross domestic product—in bank loans and direct spending.

Fighting The Terrorists By Terrorizing The Innocent

It's all in your name

Civilian Victims of Drone attack in Pakistan

By Gonzalo Lira

Something I read:

"In the United States, the dominant narrative about the use of drones in Pakistan is of a surgically precise and effective tool that makes the US safer by enabling “targeted killing” of terrorists, with minimal downsides or collateral impacts.

This narrative is false."

These are the first words of a devastating report I have just read, “Living Under Drones: Death, Injury, and Trauma to Civilians from US Drone Practices in Pakistan”.

This thing is required reading. 

This isn’t some half-assed, crazed droolings of some hippy-dippy Lefty twerp who ought to get a bath and a haircut: This was written by Stanford and New York University lawyers—and it shows. It’s clearly and devastatingly written, with the facts, testimony and evidence so scrupulously laid out that it’s almost like the brief for the prosecution of the war crimes trial that we can only pray will one day take place. 

Too big to fail ?

Too big to maintain

By George F. Will

If in four weeks a president-elect Mitt Romney is seeking a Treasury secretary, he should look here, to Richard Fisher, president of the Federal Reserve Bank of Dallas. Candidate Romney can enhance his chance of having this choice to make by embracing a simple proposition from Fisher: Systemically important financial institutions (SIFIs), meaning too-big-to-fail (TBTF) banks, are “too dangerous to permit.”

Romney almost did this in the first debate when he said the Dodd-Frank Act makes TBTF banks “effectively guaranteed by the federal government” and constitutes “the biggest kiss that’s been given to — to New York banks I’ve ever seen.” Fisher, who has a flair for rhetorical pungency, is more crisp:

There are 6,000 American banks, but “half of the entire banking industry’s assets” are concentrated in five institutions whose combined assets amount to almost 60 percent of the gross domestic product. And “the top 10 banks now account for 61 percent of commercial banking assets, substantially more than the 26 percent of only 20 years ago.” The problems posed by “supersized and hypercomplex banks” may, Fisher says, require anti-obesity policies equivalent to “irreversible lap-band or gastric bypass surgery.” The land of TBTFs is “a perverse financial Lake Wobegon” where all crises are “exceptional,” justifying “unique” solutions that are the same — meaning bailouts. This incurs “the wrath of ordinary citizens and smaller entities that resent this favorable treatment, and we plant the seeds of social unrest.”

America in Decline?

It’s a Matter of Choices, Not Fate

By Robert J. Lieber

The notion of American decline, although now pervasive, is not entirely new. Current concerns need to be seen against a history of pessimistic assessments, as for example during the Great Depression, the post–Vietnam War era, and again in the late 1980s when fears of Japanese primacy and the rise of the European Union as a world power were widely held. Once again the United States needs to overcome serious problems, but much of the thinking and writing about the American future reflects a stubborn undervaluation of the country’s resilience, fundamental strengths, and ability to overcome adversity.

Ironically, while much of the current focus has been on the impact of financial and economic crises, a lagging recovery, serious problems of debt and deficit, and competition with a dynamic and rising China, the United States actually continues to possess far greater material strengths than commonly assumed. In any case, decline is not destined by some ineluctable cycle of history. Instead, America’s future is a matter of will and willpower, in the sense of crucial choices to be made about policy and strategy. Willpower in particular involves leadership and well-informed decision making. If the right choices are made in the years ahead, the robustness of American society coupled with its unique capacities for adaptation and adjustment should once again prove decisive.

Despite a lagging recovery from the worst financial and real estate crises in eighty years, the United States still accounts for some twenty-one percent of world GDP (based on market exchange rates, the IMF’s preferred indicator for international comparisons). The rate is only modestly lower than its twenty-six percent of 1980 and, as of 2012, is twice the size of China’s.

John Locke’s Lesson for the Arab World

Intolerance is inconsistent with democratic pluralism

by Richard A. Epstein

This past week saw the murder of U.S. Ambassador Chris Stevens and three other American diplomats in Libya, while a fresh wave of riots and attacks on American embassies and schools took place throughout the Islamic world, from North Africa to South Asia. Clearly, the so-called Arab Spring is in disarray as intolerance rises rapidly throughout the region.

These unnerving events should have come as no surprise. The dangers of fundamentalism were detailed in 1995, when religious scholars Martin Marty and R. Scott Appleby completed their extensive eight-year Fundamentalism Project for the American Academy of Arts and Sciences, which charted the rise of conservative religious movements around the world.

Their writings warned of the serious dangers that fundamentalism posed to democratic institutions around the globe. Fundamentalist movements, they argued, are marked by a strong set of interlocking hierarchical arrangements in which power rests with a single person or group that wields absolute authority over their subject population. On the one hand, husbands can dominate their wives and children; on the other, religious observers must unquestioningly follow a complex set of rules, which prevents their exposure during schooling to intellectual and social influences from the outside that might temper their views.

The Unstoppable March Toward National Bankruptcy

Who's To Blame?

By Mark Hendrickson

The opening line of the Beatles’ iconic “Sergeant Pepper’s” album is echoing in my thought: “It was 20 years ago today…” Well, not quite to the day, but 20 years ago I published an article titled, “$4 Trillion and Counting.” In it, I despaired at the rapid increase in the national debt from its first-ever crossing of the $1 trillion mark during the Reagan presidency to four times that gargantuan amount in only a decade.

Today, a mere two decades later, we have quadrupled the national debt again, to $16 trillion. (That figure represents the official national debt, but if you add the many “off-budget” items and all the liabilities that are conveniently omitted from government “accounting,” then it’s multiples of the official number.)

Who is to blame?

Let’s start by picking the low-hanging fruit: “progressives,” a.k.a, Democrats. The Dems always want more federal spending, higher taxes, more government. Indeed, there is no major area of economic activity over which they want less control. Whether it’s food, energy, housing, health care, retirement, finance, transportation, education, etc., they always want to expand the government’s scope and power.

The Democrats have led the way toward bigger government. They always succeed in getting Republicans to blink every time the debt ceiling is reached, because whereas Republicans are ambivalent and divided about Big Government, progressives are united and utterly committed to it. They do not vacillate; the Republicans do, and so they buckle.

Surely, though, now that we are racing toward a jarring fiscal cliff, the government’s credit rating is at risk, and major entitlement programs are on a collision course with insolvency, Democrats will compromise to fix these problems before it’s too late, won’t they?

The short answer, dear reader, is “No.” On the contrary, the threat of insolvency is something that progressives welcome. They view it as a means to an end.

Utopian Experimental Socialism

Beta testing radical proposals on a small scale with consenting subjects

By Bryan Caplan

Larry White's The Clash of Economic Ideas points to a wonderful short essay by Joshua Muravchik.  In it, Muravchik makes the most original observation about socialism I've encountered in years:

He ["Utopian socialist" Robert Owen] was no obscure crank. When he arrived in the United States in 1824, he was received by a joint session of Congress that met over two separate days with outgoing President Monroe and incoming President John Quincy Adams, among the many luminaries who came to hear him out.

Owen then bought an already developed settlement on the banks of the Wabash River from a religious sect. The members of this group had developed it, and it included not only homes but vast fertile farmlands and more than twenty highly productive workshops that produced goods sold all across the country. Yet within a year after taking it over, Owen and his thousand followers had turned this little Switzerland into an Albania. All the other collective settlements, except for some that were first and foremost religious communities, had similar histories of failure.