Perpetual war, for perpetual "peace"

Imperial by Design

John J. Mearsheimer [2]

IN THE first years after the Cold War ended, many Americans had a profound sense of optimism about the future of international politics. President Bill Clinton captured that mood when he told the UN General Assembly in September 1993:

It is clear that we live at a turning point in human history. Immense and promising changes seem to wash over us every day. The Cold War is over. The world is no longer divided into two armed and angry camps. Dozens of new democracies have been born. It is a moment of miracles.

The basis of all this good feeling was laid out at the time in two famous articles by prominent neoconservatives. In 1989, Francis Fukuyama argued in “The End of History?” that Western liberal democracy had won a decisive victory over communism and fascism and should be seen as the “final form of human government.”¹ One consequence of this “ideological evolution,” he argued, was that large-scale conflict between the great powers was “passing from the scene,” although “the vast bulk of the Third World remains very much mired in history, and will be a terrain of conflict for many years to come.” Nevertheless, liberal democracy and peace would eventually come to the Third World as well, because the sands of time were pushing inexorably in that direction.

One year later, Charles Krauthammer emphasized in “The Unipolar Moment” that the United States had emerged from the Cold War as by far the most powerful country on the planet.² He urged American leaders not to be reticent about using that power “to lead a unipolar world, unashamedly laying down the rules of world order and being prepared to enforce them.” Krauthammer’s advice fit neatly with Fukuyama’s vision of the future: the United States should take the lead in bringing democracy to less developed countries the world over. After all, that shouldn’t be an especially difficult task given that America had awesome power and the cunning of history on its side.

U.S. grand strategy has followed this basic prescription for the past twenty years, mainly because most policy makers inside the Beltway have agreed with the thrust of Fukuyama’s and Krauthammer’s early analyses.

The results, however, have been disastrous. The United States has been at war for a startling two out of every three years since 1989, and there is no end in sight. As anyone with a rudimentary knowledge of world events knows, countries that continuously fight wars invariably build powerful national-security bureaucracies that undermine civil liberties and make it difficult to hold leaders accountable for their behavior; and they invariably end up adopting ruthless policies normally associated with brutal dictators. The Founding Fathers understood this problem, as is clear from James Madison’s observation that “no nation can preserve its freedom in the midst of continual warfare.” Washington’s pursuit of policies like assassination, rendition and torture over the past decade, not to mention the weakening of the rule of law at home, shows that their fears were justified.

To make matters worse, the United States is now engaged in protracted wars in Afghanistan and Iraq that have so far cost well over a trillion dollars and resulted in around forty-seven thousand American casualties. The pain and suffering inflicted on Iraq has been enormous. Since the war began in March 2003, more than one hundred thousand Iraqi civilians have been killed, roughly 2 million Iraqis have left the country and 1.7 million more have been internally displaced. Moreover, the American military is not going to win either one of these conflicts, despite all the phony talk about how the “surge” has worked in Iraq and how a similar strategy can produce another miracle in Afghanistan. We may well be stuck in both quagmires for years to come, in fruitless pursuit of victory.

The United States has also been unable to solve three other major foreign-policy problems. Washington has worked overtime—with no success—to shut down Iran’s uranium-enrichment capability for fear that it might lead to Tehran acquiring nuclear weapons. And the United States, unable to prevent North Korea from acquiring nuclear weapons in the first place, now seems incapable of compelling Pyongyang to give them up. Finally, every post–Cold War administration has tried and failed to settle the Israeli-Palestinian conflict; all indicators are that this problem will deteriorate further as the West Bank and Gaza are incorporated into a Greater Israel.

The unpleasant truth is that the United States is in a world of trouble today on the foreign-policy front, and this state of affairs is only likely to get worse in the next few years, as Afghanistan and Iraq unravel and the blame game escalates to poisonous levels. Thus, it is hardly surprising that a recent Chicago Council on Global Affairs survey found that “looking forward 50 years, only 33 percent of Americans think the United States will continue to be the world’s leading power.” Clearly, the heady days of the early 1990s have given way to a pronounced pessimism.

This regrettable situation raises the obvious questions of what went wrong? And can America right its course?

Another one down the drain

Egypt's Islamist Era

By Benny Morris

The world will probably have to wait for another six months before the dust of Egypt's revolution begins to settle. Meanwhile, after the completion of the first installment of the first stage of the country's first free elections, it is clear that Islamists will probably dominate Egypt’s political landscape in the coming years. This comes after the clear victories of Islamist parties in the parliamentary elections this month in Tunisia and Morocco.

Going into the elections, most opinion polls predicted that the fundamentalist Muslim Brotherhood would gain at least 40 percent of the vote in the elections for parliament's lower house, the People's Assembly, that began this week in a third of the country's provinces, including the major cities of Cairo, Suez and Alexandria. Next month and on January 3, two more bouts of voting will complete the election of the lower house, with counting and results due toward the end of January.

The lower house is due to debate and issue a new constitution—defining, among other things, the place and powers of the army and of Islam in the polity—and appoint from its midst a new government or cabinet. This will replace the incumbent interim cabinet appointed recently by the Supreme Military Council, which has ruled Egypt since the overthrow by mass street demonstrations of President Hosni Mubarak back in February.

In February and March of next year, Egyptians will go to the polls once again, this time to elect their representatives in parliament's upper house, or Senate, and by the end of June—if the military's leader, General Tantawi, is to be believed—they will vote for a third time, this time to elect a new president and complete the cycle of elections. The powers of the new president will presumably be defined in the constitution the lower house will hammer out. It is not yet clear whether the Muslim fundamentalists will field a candidate of their own for the presidency. At the moment, the two secularist front-runners for the job are Amr Musa, a hard-line former secretary general of the Arab League, and Mohammed ElBaradei, the (anti-Western, anti-Israeli) former head of the UN's International Atomic Energy Agency.

Tantawi last week promised that the military will relinquish power to the elected leadership, but many Egyptians remain distrustful of the army.

The start of the election process was briefly in doubt last weekend as the secularists and liberals demonstrated in Cairo's Tahrir Square, demanding that Tantawi and the military regime step down immediately and hand over power to civilians—it was unclear to which civilians—and that the elections be postponed. But the Muslim Brotherhood, the largest and best organized political party in the country, sided with Tantawi and backed elections on schedule, and Tantawi stuck to his guns. Voting was mandatory, with those staying away from the polls threatened with fines amounting to one month's average salary.

But it appears that the fragmented secularists, including the masses of tweeting and SMS-ing youngsters who occupied the square and spearheaded last February's revolution, voted as enthusiastically as the veiled womenfolk, hoping to reduce the fundamentalists' say in the future governance of Egypt. The elections, by all accounts, passed smoothly, with only minor problems—a shortage of ballots, late opening of polling stations and some allegations of fraud—reported in several localities. People queued in orderly fashion for hours, and there was a heavy turnout. If the military indeed leaves the stage and moves to the political sidelines, the real battle for Egypt down the road will be between young, Westernized secularists and fundamentalists who wish to impose sharia law on the country.

The demographics are not encouraging. It is reported that some eighty-three thousand Coptic Christians have fled Egypt since February, fearing Muslim intolerance if not repression. And, speaking geopolitically, a taste of what may be in store for the region was afforded in last Friday's Muslim Brotherhood rally in Cairo, in which the mufti of Egypt declared that the impending elections were only the "first step on the march to Jerusalem"—that is, in the struggle to "liberate" Palestine from the Jews.

A correspondent of the Israeli daily Haaretz interviewed a number of participants in the rally. He quoted one, Na'il Zihum, an engineer, as saying: "We are . . . for the [anti-Mubarak] revolution, but Jerusalem and the Islamic umma [nation] are our top priorities. First, we are Muslims, and we must tell the Israelis that they cannot exploit the fact that Egypt is busy with elections to harm the Aksa Mosque [the most sacred Muslim site in Palestine/Israel, on Jerusalem's Temple Mount]."

Zihum's reference was to the planned demolition of the temporary Mughrabi Bridge that connects the Wailing Wall Plaza with the entrance to the Temple Mount compound. Israeli engineers and archaeologists have warned that the structure is unsafe and must be demolished, but Israeli prime minister Benjamin Netanyahu last week ordered the postponement of the demolition in order to cool Islamist passions in Cairo.

At the rally, the masses shouted, "Khaybar, Ya Yahud" (Jews, remember Khaybar)—an oasis that was the site of a battle in seventh-century Hejaz in which Muhammad defeated and destroyed one of the region's Jewish tribes. More explicitly, Abd Khaled, a certified public accountant who also participated in the rally, told the Haaretz reporter: "We vow here to fight the Jews until the last drop of our blood. We can't do it now, but we will win the elections, unite the people, strengthen our army and prepare the hearts and minds of the soldiers so that we will be able to go to war against Israel."

The Big Lie

Pepper-Spraying Taxpayers

“Diversity” boondoggles are the real scandal.

By Heather Mac Donald

As protesters festively (oops! I mean “heroically”) rally on college quads across California in the wake of the gratuitous macing of a dozen Occupy Wall Street wannabes at University of California–Davis last Friday, UC Berkeley’s Vice Chancellor for Equity and Inclusion declared that the rising tuition at California’s public universities is giving him “heartburn.” It should, since Vice Chancellor for Equity and Inclusion Gibor Basri and his fellow diversity bureaucrats are a large cause of those skyrocketing college fees, not just in California but nationally.

It is to be expected that students will be immaculately ignorant of the matters they protest, but it takes a special type of gall for a bureaucrat such as Basri to shed crocodile tears over California’s tuition increases, which had been a seeming target of OWS-inspired protest before the brutish UC Davis pepper-spray incident provided a more mediagenic reason to cut classes. OWS-ers are theatrically calling for a general strike of the University of California for this coming Monday.

Basri commands a staff of 17, allegedly all required to make sure that fanatically left-wing UC Berkeley is sufficiently attuned to the values of “diversity” and “inclusion”; his 2009 base pay of $194,000 was nearly four times that of starting assistant professors. Basri was given responsibility for a $4.5 million slice of Berkeley’s vast diversity bureaucracy when he became the school’s first Vice Chancellor for Equity and Inclusion in 2007; since then, the programs under his control have undoubtedly weathered the recession far more comfortably than mere academic endeavors.

UC Berkeley’s diversity apparatus, which spreads far beyond the office of the VC for E and I, is utterly typical. For the last three decades, colleges have added more and more tuition-busting bureaucratic fat; since 2006, full-time administrators have outnumbered faculty nationally. UC Davis, for example, whose modest OWS movement has been happily energized by the conceit that the campus is a police state, offers the usual menu of diversity effluvia under the auspices of an Associate Executive Vice Chancellor for Campus Community Relations. A flow chart of Linnaean complexity would be needed to accurately map all the activities overseen by the AEVC for CCR. They include a Diversity Trainers Institute, staffed by Davis’s Administrator of Diversity Education; the Director of Faculty Relations and Development in Academic Personnel; the Director of the UC Davis Cross-Cultural Center; the Director of the Lesbian, Gay, Bisexual, Transgender Resource Center; an Education Specialist with the UC Davis Sexual Harassment Education Program; an Academic Enrichment Coordinator with the UC Davis Department of Academic Preparation Programs; and the Diversity Program Coordinator and Early Resolution Discrimination Coordinator with the Office of Campus Community Relations. The Diversity Trainers Institute recruits “a cadre of individuals who will serve as diversity trainers/educators,” a function that would seem largely superfluous, given that the Associate Executive Vice Chancellor for Campus Community Relations already offers a Diversity Education Series that grants Understanding Diversity Certificates in “Unpacking Oppression” and Cross-Cultural Competency Certificates in “Understanding Diversity and Social Justice.”

If the OWS campus campers really wanted to understand California’s growing tuition costs, they might also check out the University of California, San Francisco, which created a Vice Chancellor for Diversity and Outreach earlier this year at the height of the state’s budget crisis. Naturally, this new sinecure was redundant with UCSF’s existing Office of Affirmative Action, Equal Opportunity and Diversity, the Diversity Learning Center (where you can learn how to “Become A Diversity Change Agent”), the Center for LGBT Health & Equity, the Office of Sexual Harassment Prevention & Resolution, the Chancellor’s Advisory Committee on Diversity, the Chancellor’s Advisory Committee on Disability Issues, the Chancellor’s Advisory Committee on Gay, Lesbian, Bisexual and Transgender Issues, and the Chancellor’s Advisory Committee on the Status of Women.

The OWS-ers should also look into UC San Diego, which announced the creation of a Vice Chancellor for Equity, Diversity, and Inclusion in May 2011, even as the campus was losing three prestigious cancer researchers to Rice University and was cutting academic programs. Needless to say, UCSD’s Vice Chancellor for Equity, Diversity, and Inclusion replicated an equally fearsome mountain of diversity functions.

Do not think that the exploding diversity bureaucracy is confined to public universities. In 2005, Harvard created a new Senior Vice Provost for Diversity and Faculty Development, responsible for $50 million in diversity funding, and six new diversity deanships. Whereas Harvard’s previous diversity bureaucrats collected mere diversity data about faculty hiring and promotions, the new SVP for D and FD would be collecting “diversity metrics.” Yale already has 14 Title IX coordinators (not enough to stave off a specious Title IX investigation by the Office of Civil Rights in the federal Education Department), but it nevertheless recently put a Deputy Provost in charge of assessing the “campus climate” with respect to gender and overseeing the 14 Title IX coordinators. All these new bureaucrats in campuses across the country — nearly 72,000 non-teaching positions added from 2006 to 2009 — cost $3.6 billion, estimated Harvey Silverglate in Minding the Campus earlier this year.

Just where do the OWS-ish student protesters think that their tuition money is going? In the vast majority of colleges and universities, there are no greedy shareholders sucking their profits from the livelihoods of workers or other “community stakeholders.” Rather, rising tuitions funnel straight into the preposterously unnecessary diversity bureaucracy and the rest of the burgeoning student-services infrastructure, as well as into the salaries of professors who teach one course a semester, the arms race of ever more sybaritic dorms and social centers, and the absolute monarchies of the football and basketball programs. It is particularly amusing to see New York University’s Andrew Ross spearheading a campaign against the student-loan industry; we may safely assume that Ross’s princely salary as Professor of Social and Cultural Analysis (achieved when NYU outbid Princeton for his services) was impervious to what should have been Ross’s reputation-destroying unwitting publication of a hoax parody of cultural-studies gibberish in his journal, Social Text, in 1996.

The Austrian business cycle theory is going mainstream

China's Hard Landing

By WSJ Editorial

The state-led growth model is leading the country into trouble.

The People's Bank of China's surprise announcement Wednesday of a half percentage point cut in banks' required reserve ratio is an admission that the economy is facing stiff headwinds. Consumer price inflation remains relatively high at 5.5%, and the true level of inflation as reflected in the GDP deflator is probably closer to 10%.

Most analysts expected monetary easing to start next year when inflation had subsided further. But then most China analysts were predicting a "soft landing" for the economy. The data in recent days suggest the stagflation trend will continue and the landing may be bumpy.

Property prices have fallen for three consecutive months and the trend is accelerating. HSBC's and the government's own purchasers managers' indices of corporate sentiment took a big tumble in November, falling into negative territory for the first time since early 2009. This time China can't export its way out of its domestic problems, since external demand is shrinking.

China is a poster child for the Austrian school of economics' theory of the business cycle. After undertaking the biggest stimulus program the world has ever seen in response to the global financial crisis, the country is drowning in unproductive investments financed with credit.

The government spent 15% of GDP largely on public works projects in inland regions, financed with loans from the state-owned banks. Investment as a share of GDP soared to 48.5% in 2010, and the M2 measure of money supply ballooned to 140% that of the U.S.

Now comes the hangover. The public works projects are winding down, unleashing a wave of unemployment and an uptick in social unrest. The banks' nonperforming loans are rising, and local governments are insolvent. The country is littered with luxurious county government offices, ghost cities of empty apartment blocks, unsafe high-speed rail lines and crumbling highways to nowhere.

One effect of negative real interest rates was a nationwide bubble in private housing, with the average price of an urban apartment reaching eight times the average annual income. Real estate is the most popular investment for the wealthy, according to a central bank survey in September. Millions of luxury apartments are vacant, even as there is a shortage of affordable housing for the poor.

Property construction became "the most important sector in the universe," in the words of UBS economist Jonathan Anderson. It directly accounts for about 13% of the economy, 20% if one includes related industries like concrete and steel. It also provided 40% of local government revenues through land sales.

Worsening inflation forced the government to put on the brakes this year. As with most property busts, transactions dried up, followed by a free fall in prices. Land prices were down 60% year on year in September. Property developers are slashing prices of new homes to stave off bankruptcy.

Beijing recognizes the dangers of a property bubble and deliberately popped this one by telling banks to cut back loans to developers. The government seems to be determined to force some of the smaller developers to the wall, both to force consolidation in the industry and convince the remaining developers to get on board with the state-run program of building low-income housing.

Earlier this year banking regulators conducted stress tests that supposedly showed the financial system can withstand a 40% fall in property prices. Loans to developers and mortgages account for about 20% of the banks' loan books. But since the health of the wider economy is tied to property, China could face a scenario close to that of the U.S. in recent years. Because the private market for housing was tiny 10 years ago when the current boom began, the country has never experienced a broad-based decline in property prices.

The government and the more sanguine analysts say low-income housing construction will pick up the economic slack, as activity at the top end of the market contracts. The problem is that even if the government meets its goals, the program is still too small to save the economy. Barclays estimates that it will contribute one percentage point to growth in 2011, and 0.5 percentage points in 2012.

There is no easy way to avoid the bust that is coming. The silver lining is that China's increasingly state-led growth model will be discredited, and a debate will begin on restarting the reforms that stalled in the mid-2000s. A financial sector that allocates credit based on politics rather than price signals led China into this mess. Popular pressure to dismantle crony capitalism is building, and the Communist Party would be wise to get in front of it while it can.

News from the war on business

Choking on Obamacare

By George F. Will

LOS ANGELES

In 1941, Carl Karcher was a 24-year-old truck driver for a bakery. Impressed by the large numbers of buns he was delivering, he scrounged up $326 to buy a hot dog cart across from a Goodyear plant. And the war came.

So did millions of defense industry workers and their cars. And, soon, Southern California’s contribution to American cuisine — fast food. Including, eventually, hundreds of Carl’s Jr. restaurants. Karcher died in 2008, but his legacy, CKE Restaurants, survives. It would thrive, says CEO Andy Puzder, but for government’s comprehensive campaign against job creation.

CKE, with more than 3,200 restaurants (Carl’s Jr. and Hardee’s), has created 70,000 jobs, 21,000 directly and 49,000 with franchisees. The growth of those numbers will be inhibited by — among many government measures — Obamacare.

When CKE’s health-care advisers, citing Obamacare’s complexities, opacities and uncertainties, said that it would add between $7.3 million and $35.1 million to the company’s $12 million health-care costs in 2010, Puzder said: I need a number I can plan with. They guessed $18 million — twice what CKE spent last year building new restaurants. Obamacare must mean fewer restaurants.

And therefore fewer jobs. Each restaurant creates, on average, 25 jobs — and as much as 3.5 times that number of jobs in the community. (CKE spends about $1 billion a year on food and paper products, $175 million on advertising, $33 million on maintenance, etc.)

Puzder laughs about the liberal theory that businesses are not investing because they want to “punish Obama.” Rising health-care costs are, he says, just one uncertainty inhibiting expansion. Others are government policies raising fuel costs, which infect everything from air conditioning to the cost (including deliveries) of supplies, and the threat that the National Labor Relations Board will use regulations to impose something like “card check” in place of secret-ballot unionization elections.

CKE has about 720 California restaurants, in which 84 percent of the managers are minorities and 67 percent are women. CKE has, however, all but stopped building restaurants in this state because approvals and permits for establishing them can take up to two years, compared to as little as six weeks in Texas, and the cost to build one is $100,000 more than in Texas, where CKE is planning to open 300 new restaurants this decade.

CKE restaurants have 95 percent employee turnover in a year — not bad in this industry — and the health-care benefits under CKE’s current “mini-med” plans are capped in a way that makes them illegal under Obamacare. So CKE will have to convert many full-time employees to part-timers to limit the growth of its burdens under Obamacare.

In an economic climate of increasing uncertainties, Puzder says, one certainty is that many businesses now marginally profitable will disappear when Obamacare causes that margin to disappear. A second certainty is that “employers everywhere will be looking to reduce labor content in their business models as Obamacare makes employees unambiguously more expensive.”

According to the U.S. Small Business Administration, by 2008 the cost of federal regulations had reached $1.75 trillion. That was 14 percent of national income unavailable for job-creating investments. And that was more than 11,000 regulations ago.

Seventy years ago, the local health department complained that Karcher’s hot dog cart had no restroom facilities. He got help from a nearby gas station. A state agency made him pay $15 for workers’ compensation insurance. Another agency said that he owed more than the $326 cost of the cart in back sales taxes. For $100, a lawyer successfully argued that Karcher did not because his customers ate their hot dogs off the premises.

Time was, American businesses could surmount such regulatory officiousness. But government’s metabolic urge to boss people around has grown exponentially and today CKE’s California restaurants are governed by 57 categories of regulations. One compels employees and even managers to take breaks during the busiest hours, lest one of California’s 200,000 lawyers comes trolling for business at the expense of business.

Barack Obama has written that during his very brief sojourn in the private sector he felt like “a spy behind enemy lines.” Puzder knows what it feels like when gargantuan government is composed of multitudes of regulators who regard business as the enemy. And 22.9 million Americans who are unemployed, underemployed or too discouraged to look for employment know what it feels like to be collateral damage in the regulatory state’s war on business.

You can't teach an old dog new tricks

Egypt’s Descent 

Two-thirds of the Arab world’s largest nation is voting for sharia.

By Mark Steyn

I’ve been alarmed by the latest polls. No, not from Iowa and New Hampshire, although they’re unnerving enough. It’s the polls from Egypt. Foreign policy has not played a part in the U.S. presidential campaign, mainly because we’re so broke that the electorate seems minded to take the view that if government is going to throw trillions of dollars down the toilet they’d rather it was an Al Gore–compliant Kohler model in Des Moines or Poughkeepsie than an outhouse in Waziristan. Alas, reality does not arrange its affairs quite so neatly, and the world that is arising in the second decade of the 21st century is increasingly inimical to American interests, and likely to prove even more expensive to boot.

In that sense, Egypt is instructive. Even in the giddy live–from–Tahrir Square heyday of the “Arab Spring” and “Facebook Revolution,” I was something of a skeptic. Back in February, I chanced to be on Fox News with Megyn Kelly within an hour or so of Mubarak’s resignation. Over on CNN, Anderson Cooper was interviewing telegenic youthful idealists cooing about the flowering of a new democratic Egypt. Back on Fox, sourpuss Steyn was telling Megyn that this was “the unraveling of the American Middle East” and the emergence of a post-Western order in the region. In those days, I was so much of a pessimist I thought that in any election the Muslim Brotherhood would get a third of the votes and be the largest party in parliament. By the time the actual first results came through last week, the Brothers had racked up 40 percent of the vote — in Cairo and Alexandria, the big cities wherein, insofar as they exist, the secular Facebooking Anderson Cooper types reside. In second place were their principal rivals, the Nour party, with up to 15 percent of the ballots. “Nour” translates into English as “the Even More Muslim Brotherhood.” As the writer Barry Rubin pointed out, if that’s how the urban sophisticates vote, wait till you see the upcountry results. By the time the rural vote emerges from the Nile Delta and Sinai early next month, the hard-core Islamists will be sitting pretty. In the so-called Facebook Revolution, two-thirds of the Arab world’s largest nation is voting for the hard, cruel, bigoted, misogynistic song of sharia.

The short 90-year history of independent Egypt is that it got worse. Mubarak’s Egypt was worse than King Farouk’s Egypt, and what follows from last week’s vote will be worse still. If you’re a Westernized urban woman, a Coptic Christian, or an Israeli diplomat with the goons pounding the doors of your embassy, you already know that. The Kingdom of Egypt in the three decades before the 1952 coup was flawed and ramshackle and corrupt, but it was closer to a free-ish pluralist society than anything in the years since. In 1923, its finance minister was a man called Joseph Cattaui, a member of parliament, and a Jew. Couldn’t happen today. Mr. Cattaui’s grandson wrote to me recently from France, where the family now lives. In the unlikely event the forthcoming Muslim Brotherhood government wish to appoint a Jew as finance minister, there are very few left available. Indeed, Jews are so thin on the ground that those youthful idealists in Tahrir Square looking for Jews to club to a pulp have been forced to make do with sexually assaulting hapless gentiles like the CBS News reporter Lara Logan. It doesn’t fit the narrative, so even Miss Logan’s network colleagues preferred to look away. We have got used to the fact that Egypt is now a land without Jews. Soon it will be a land without Copts. We’ll get used to that, too.

Since the collapse of the Warsaw Pact two decades ago we have lived in a supposedly “unipolar” world. Yet somehow it doesn’t seem like that, does it? The term “Facebook Revolution” presumes that technology marches in the cause of modernity. But in Khartoum a few years ago a citywide panic that shaking hands with infidels caused your penis to vanish was spread by text messaging. In London, young Muslim men used their cellphones to share Islamist snuff videos of Westerners being beheaded in Iraq. In les banlieues of France, satellite TV and the Internet enable third-generation Muslims to lead ever more disassimilated, segregated lives, immersed in an electronic pan-Islamic culture, to a degree that would have been impossible for their grandparents. To assume that Western technology in and of itself advances the cause of Western views on liberty or women’s rights or gay rights is delusional.

Consider, for example, the “good” news from Afghanistan. A 19-year-old woman sentenced to twelve years in jail for the heinous crime of being brutally raped by a cousin was graciously released by President Karzai on condition that she marry her rapist. A few weeks ago, you may recall, I mentioned that the last Christian church in the nation had been razed to the ground last year, as the State Department noted in its report on “international” religious freedom. But Afghanistan is not “international” at all. It is an American client state whose repugnant leader is kept alive only by the protection of Western arms. Say what you like about Egypt’s Muslim Brotherhood but at least their barbarous theocratic tyranny doesn’t require vast numbers of NATO troops to build it.

I am not a Ron Paul isolationist. The U.S. has two reasonably benign neighbors, and the result is that 50 percent of Mexico’s population has moved north of the border and 100 percent of every bad Canadian idea from multiculturalism to government health care has moved south of the border. So much for Fortress America. The idea of a 19th-century isolationist republic holding the entire planet at bay is absurd. Indeed, even in the real 19th century, it was only possible because global order was maintained by the Royal Navy and Pax Britannica. If Ron Paul gets his way, who’s going to pick up the slack for global order this time?

Nevertheless, my friends on the right currently fretting about potentially drastic cuts at the Pentagon need to look at that poor 19-year-old woman’s wedding to her cousin rapist and ponder what it represents: In Afghanistan, the problem is not that we have spent insufficient money but that so much of it has been entirely wasted. History will be devastating in its indictment of us for our squandering of the “unipolar” moment. During those two decades, a China flush with American dollars has gobbled up global resources, a reassertive Islam has used American military protection to advance its theocratic ambitions, the mullahs in Tehran are going nuclear knowing we lack the will to stop them, and even Russia is back in the game of geopolitical mischief-making. We are responsible for 43 percent of the planet’s military spending. But if you spend on that scale without any strategic clarity or hardheaded calculation of your national interest it is ultimately as decadent and useless as throwing money at Solyndra or Obamacare or any of the other domestic follies. A post-prosperity America will mean perforce a shrunken presence on the global stage. And we will not like the world we leave behind.

Must-See: Jon Stewart On Secret Federal Reserve Bailout Of Big Banks

Not a Laughing Matter: Fed Throws Trillions at U.S. and Foreign Banks in Secret … Hides from Congress

The Daily Show with Jon Stewart
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

The actual number is somewhere between $16 trillion and $23 trillion. Plus there’s trillions more in back-stopping the big banks’ derivatives, another new bailout of foreign banks (in addition to all of the old ones), and all sorts of other types of secret bailouts.

But hey, we should just support the status quo of the Fed doing its thing … shouldn’t we? After all, this is all too complicated for anyone but economists to understand, and economists say it’s necessary, right?

No, they don’t.

See also http://www.minority-opinion.com/2011/11/talking-about-specifics.html for further details

The euthanasia of the saver

The Government Is Expropriating Private Wealth at a Rapid Rate

By Robert Higgs

About a month ago, I posted in regard to what I called “the euthanasia of the saver.” This comment had to do with the fact that nominal interest rates in the United States for financial investments such as bank certificates of deposit and bank savings accounts—the kinds of investments traditionally employed by retired persons and small savers, who wish to gain income without exposing their funds to great risk of capital loss—now fall considerably below the rate of inflation, and hence the real (or inflation-adjusted) yield on such investments is negative. That is, the nominal payoff is insufficient to offset the loss of purchasing power of the money invested.

About a month before I wrote my commentary, my old friend Richard Rahn had, without my noticing, written on the same issue in a commentary article published in the Washington Times, but he had gone beyond the simple point I made. Rahn notes that besides suffering the loss of wealth occasioned by the negative real yield on such investments, the investor has to pay tax on the nominal yield—truly a case of the government’s adding insult to injury. He notes that given the currently prevailing rates of interest, rate of inflation, and tax rates, a small investor who earns a nominal yield of 1% and pays a 20% marginal tax rate, while the rate of inflation is 3.5 %, actually ends up paying a real tax rate of 370%. For example, an investor buys a $100,000 CD, earns $1,000 in annual interest, pays a tax of $200, and incurs a loss of $3,500 in purchasing power on the invested principal. Total (nominal) income is $1,000; total real tax (nominal tax plus inflation tax) is $3,700.

This expropriation of private wealth is not accidental. It is the joint product of the Fed’s near-zero interest-rate policies, the Fed’s money supply increases that underlie the current rate of inflation, and the tax rates established by Congress and administered by the IRS, including the taxation of nominal interest earnings even when they amount to real losses of capital, rather than genuine earnings. The government clearly aims to expropriate private wealth on a massive scale. The only plausible alternative interpretation of these policies requires us to believe that the government officials who set these policies are complete idiots about basic economics.

The expropriation amounts to a huge sum. For example, the value of the Non-M1 component of the monetary aggregate M2—consisting of savings and small time deposits, overnight repos at commercial banks, and non-institutional money market accounts—currently amounts to more than $7.5 trillion. If investors lose 2.7% on this investment each year (nominal yield minus the sum of the amount lost via taxation of nominal interest and the amount lost via the inflation tax), the loss amounts to about $204 billion. Because this type of investment is not the whole of the investments subject to this effect, the total amount the government is expropriating comes to a much larger sum. Because this taking continues year after year, so long as current conditions persist the continuation of this expropriation for another year or two will bring the cumulative amount expropriated in this fashion to more than $1 trillion since the onset of the recession and the Fed’s adoption of the near-zero interest-rate policies, along with its allowance of substantial growth of the money stock and the consequent decrease in the money’s purchasing power. This is a rough calculation for the purpose of illustration. My point does not hinge on a precise estimate, because any well-founded estimate is sure to amount to a gigantic sum.

In sum, the government’s monetary and fiscal authorities are currently engaged in the expropriation of private wealth on a vast scale. Entire classes of investors—especially people who saved during their working years and expected to live on interest earnings on their accumulated capital during their retirement years—are being steadily wiped out. Astonishingly, this de facto robbery  is being committed by a government that misses no opportunity to shed crocodile tears over how single-mindedly it seeks to protect the weak and helpless among us.

How to protect candle-makers

Why We Should Thank the Chinese Currency Manipulators

Yes, China manipulates its currency, but it’s a form of generous foreign aid to Americans

By Mark J. Perry

At a recent event hosted by The Aspen Institute,"Is U.S. Trade Policy Helping or Hurting Manufacturing?" and featuring former U.S. Trade Representative Susan Schwab and former principal economic adviser to Vice President Joseph Biden Jared Bernstein, there was a lively debate on a number of issues relating to trade and manufacturing. While there were differences of opinion on most topics, there was a strong consensus (including among the attendees) on one topic: China is a currency manipulator. Here is a summary of that consensus, as I understand it:

1. China manipulates its currency by keeping the yuan undervalued and the dollar overvalued.

2. That currency manipulation gives China an economic advantage that harms the United States.

3. The United States and other countries should individually or collectively take steps to persuade or force China to stop its manipulation.

4. Solutions to China’s currency manipulation range from direct legislation, like the bill passed recently in the Senate that will impose stiff tariffs on Chinese goods if the Treasury finds evidence of currency manipulation, to other forms of indirect pressure on China to persuade it to stop manipulating its currency.

Let me break from that consensus about China’s currency policy and present an alternative position:

In the best of all possible worlds for the United States, China would use its labor and capital to manufacture consumer products like clothing, footwear, furniture, electronics, and appliances and send $300 billion worth of these products to U.S. consumers for free every year as a gift or a form of foreign aid to the American people. In addition, the Chinese would produce and send to America another $100 billion worth of raw materials, parts, industrial supplies, inputs, and natural resources at no charge, as a gift to American manufacturers every year. (Note: That’s roughly the amount of goods we will purchase from China this year.)

Can there really be any argument that such an arrangement, where America would receive $400 billion worth of free goods every year from China, would be to the unquestionable economic advantage of the United States? Unfortunately, that extreme Chinese generosity is not realistic, so here's a possible second-best outcome:

Instead of sending us $400 billion worth of goods annually for free, China offers an attractive alternative. It agrees to send us $500 billion worth of consumer and industrial goods every year, but agrees to sell us those manufactured goods at a substantial 20 percent discount for only $400 billion. In that case, the amount of foreign aid will be less than the $400 billion in the first example, but will still be significant—a $100 billion gift every year from the Chinese people to the American people.

How will China generate this $100 billion in annual foreign aid to the United States? One way is to keep its currency undervalued to bring about the 20 percent discount on its products coming to America.

Which then raises the question: If China is willing to undervalue its currency, and in the process provide approximately $100 billion of foreign aid annually to American consumers and businesses, what’s the problem? Why should we complain?

And that is my main point: that the "manipulation" of China's currency is actually to the distinct advantage of millions of American consumers (especially low-income Americans) and U.S. businesses buying products made in China. Those two groups certainly aren't complaining about low-priced Chinese products, and in fact would be made worse off if China were forced to revalue its currency and in the process make its products more expensive for Americans.

So if neither American consumers nor U.S. import-buying businesses would benefit from a stronger yuan and a reduction in China's "foreign aid" to America, who would really benefit? The same group that always benefits from protectionist, mercantilist trade policies: domestic producers who compete against foreign rivals in China and elsewhere.

We know from economic theory and empirical evidence that protectionist tariffs produce benefits for domestic producers, but also higher costs for domestic consumers. Unfortunately, the costs to consumers from protectionism are greater than the benefits to producers, resulting in a net economic loss for the country and a reduction in its standard of living.

Likewise, forcing China to appreciate its currency would be equivalent to a protectionist tariff on Chinese goods and would make American consumers, import-buying companies, and the country as a whole worse off.

So when you hear discussion of China’s currency manipulation, keep the following in mind:

1. China's currency manipulation is a form of foreign aid, and to the direct advantage of millions of U.S. consumers, especially low-income groups, and to the direct advantage of thousands of American companies buying inputs from China.

2. Forcing China to revalue its currency would benefit some American manufacturers competing with China, but would significantly harm those American consumers and businesses currently buying undervalued imports. On net, there would be more harm to American consumers than benefits to American manufacturers, which would reduce our overall standard of living.

3. Like other forms of mercantilism and protectionism, forcing or pressuring China to appreciate its currency would favor certain domestic producers over millions of consumers and import-buying companies, but would make the United States worse off, not better off.

4. Finally, instead of complaining, we should be thankful for China's foreign aid to Americans through an undervalued yuan, overvalued dollar, and undervalued goods that collectively save American consumers and companies billions of dollars every year.

Bottom Line: If you wouldn't object to China sending products to the United States for free, then on what basis would you object to currency “manipulation” that allows you to purchase undervalued Chinese imports at a huge discount and great bargain?

What will it take to end this madness?

What name will future generations give to this unprecedented Age of Foolishness?

By Dinocrat

You can’t look at the chart above without thinking that America has lost its mind. The intergenerational theft from our children and grandchildren is evidence of insanity or idiocy. James Lewis in The American Thinkermakes some points that have appeared here as well:

As a nation we are under the thumb of idiots. Not just indoctrinated, or wrong-thinking, or power-hungry, or manipulative, or even malevolent people. No, I mean real lowbrows, people who constantly fall for really stupid ideas. Neanderthals. (Look at the Governor of California just running the state budget into the ground. See what I mean?…

The Federal EPA is about to officially declare carbon dioxide to be a pollutant. That’s not just false and unscientific; it’s not just an excuse for taxing everything in sight, including breathing. It’s not merely wrong. It’s idiotic. It marks a low point in our national conversation. Scientists or engineers with a grain of sense shouldn’t be taking the EPA seriously for a second. Forget the“climate experts,” with their grossly inadequate computer models…

Or look at Obama’s unbelievable spending spree. No sane and sensible taxpayer could possibly believe that spending trillions and trillions of dollars on blue-sky fantasies makes any sense at all; the only reason Americans aren’t in open rebellion yet is that half of them can’t believe it’s happening, and the other half are idiots. We haven’t seen the effect (yet) on our pocketbooks…

Or look at the global warming farce, still hotly pursued by thepolitical classes in Europe and this country, although theAustralians seem to be coming to their senses. China now has more millionaires than the UK, because they use all their resources, like coal, to fire their industrial plants. They will never sacrifice a single luxury car to the cap and trade fraud. Neither will India. China and India have been under the thumb of egomaniacal socialists (in the case of India) and communists (in the case of China). They’ve been there, done that, seen the suffering…

No wonder those Chinese college students fell all over themselves with laughter when Timothy Geithner assured them that Obama would never spend the United States into debt. What an idiot! They laughed because Geithner’s stupidity or mendacity was too obvious for words…

Obama’s power-grab over the medical sector of the economy? It’s profoundly stupid…Even if we already have two national lemons in our garage, Medicare and Medicaid, which nobody likes. Now Obee is trying to sell us on a really, really expensive dream mobile that will fix our problems forever, plus it’ll be cheaper than what we have now!

On the last point, health care, it is very hard to believe that Americans are that stupid or gullible. There are fewer than 800,000 doctors in the US. The Obama plan intends to provide insurance to 47 million additional people. So there is a 15% increase in potential demand from physicians, and a 0% increase in supply. Whether you support Obama or not, increasing demand while supply remains constant raises prices, the opposite of what Obama claims. It’s just not possible to do what he says he wants — price control regimes always result in rationing, lower quality, and black markets — but no one seems to care (at least so far).

Here’s the thing, perhaps: The young are disconnected from the past, and live in a world of digital utopian images. They don’t remember a hard past. So they are in the process of creating a hard future. This seems to us one of the greatest avoidable tragedies in history. Sigh.

China once again called for a new reserve currency other than the dollar, as it did first in March. China won’t pay the bill for America’s current idiocy or insanity. Who is going to pay for Obama’s party? The rich can’t. What will it take to end this madness?