The Keynesian Revolution Has Failed: Now What?

In the next depression, everyone will have plenty of money but it won’t buy much of anything

by Scott Minerd

In 1968, America was literally over the moon. Apollo 7 had just made the first manned lunar orbit and the nation would soon witness Neil Armstrong’s moonwalk. The United States was winning the war in Southeast Asia and the Great Society was on the verge of eliminating poverty. I remember my father taking me to the Buick dealership that summer in Connellsville, Pennsylvania, where he bought a 1969 Electra. As we drove home I asked him why we had bought the 1969 model when we had the 1968 one, which seemed equally good.

“That’s just what you do now,” my father said, “Every year you go and get a new car.” “Wouldn’t it be better,” I asked as a precocious nine year-old, “if we saved our money in case a depression happened?” I will never forget my father’s reply: “Son, the next depression will be completely different from the one that I knew as a boy. In that depression, virtually nobody had any money so if you had even a little, you could buy nearly anything. In the next depression, everyone will have plenty of money but it won’t buy much of anything.” Little did I realize, then, how prescient my father would prove to be.

Five years have passed since the beginning of the Great Recession. Growth is slow, joblessness is elevated, and the knock-on effects continue to drag down the global economy. The panic in financial markets in 2008 that caused a systemic crisis and a sharp fall in asset values still weighs on markets around the world. The primary difference between today and the 1930s, when the U.S. experienced its last systemic crisis, has been the response by policymakers. Having the benefit of hindsight, policymakers acted swiftly to avoid the mistakes of the Great Depression by applying Keynesian solutions. Today, I believe we are in the midst of the Keynesian Depression that my father predicted. Like the last depression, we are likely to live with the unintended consequences of the policy response for years to come.

This Depression is Brought to You By...

John Maynard Keynes (1883—1946) was a British economist and the chief architect of contemporary macroeconomic theory. In the 1930s, he overturned classical economics with his monumental General Theory of Employment, Interest and Money, a book that, among other things, sought to explain the Great Depression and made prescriptions on how to escape it and avoid future economic catastrophes. Lord Keynes, a Cambridge educated statistician by training, held various cabinet positions in the British government, was the U.K.’s representative at the 1944 Bretton Woods conference and, along with Milton Friedman, is recognized as the most influential economic thinker of the 20th century.

Strawberry Fields – Forever?

Bill Gross Latest Monthly Outlook: "We May Need At Least A Decade For The Healing"

You didn't build that ..........     332

I built that .......................      206

Well, I guess that settles it: you didn’t build that after all. Or maybe you did, but not all of it. Or maybe like the convoluted John Lennon above “you think you know a yes, but it’s all wrong. That is you think you disagree.” Whatever. Rather than an economic mandate, November’s election was more of social commentary on the Republicans’ habit of living with eyes closed. Their positions on what Conan O’Brien labeled “female body parts” – immigration, gay rights and student loans – proved to be big losers, and they will have to amend rather than defend those views if they expect to compete in 2016. I suspect they will. Political parties are living social organisms that mutate in order to survive. We will see straight talking Chris Christie or Hispanic flavored Marco Rubio leading the Republican charge four years from now versus a reenergized Hillary Clinton. It should be quite a show with a “No Country for Old (White) Men” caste to it.

But whoever succeeds President Obama, the next four years will likely face structural economic headwinds that will frustrate the American public. “Happy days are here again” was the refrain of FDR in the Depression, but the theme song from 2012 and beyond may more closely resemble Strawberry Fields Forever, as Lennon laments “It’s getting hard to be someone but it all works out.” Why is it so hard to be someone these days, to pay for college, get a good-paying job and retire comfortably? That really was the economic question of the 2012 election towards which very few specifics were applied from either side. “There’s a better life out there for us,” Governor Romney bellowed to a crowd of thousands in Des Moines, Iowa just days before the election, but in truth he never told us how we were going to achieve it or, importantly, why we weren’t realizing it in the first place. The president’s political mantra of “Forward” was even more vague.

Franco-German rift threatens EU banking union

Berlin is left to foot the bill for banks too weak to survive on their own

By by Annika Breidthardt and Jan Strupczewski

Germany and France clashed publicly on Tuesday over plans to put the European Central Bank in charge of supervising banks, deepening a dispute over the scope of ECB powers that threatens to derail one of Europe's boldest reforms.

With time running out to meet a pledge to complete the legal framework for an EU-wide banking union by the end of the year, Germany's Wolfgang Schaeuble told a meeting of finance ministers he could not support a plan that would give the ECB's Governing Council the final say on supervision.

France's Pierre Moscovici and the ECB protested against any watering down of a plan central to Europe's response to a five-year banking crisis and which promises to unify the way it deals with problem banks, ending a previously haphazard approach.

"The right of the last decision cannot be left to the ECB Governing Council," Schaeuble said in comments broadcast to reporters, going on to say that allowing it to happen could obscure the ECB's primary monetary policy mandate.

There could be no deal unless national supervisors had responsibility for most banks, he added, dampening expectations of a quick agreement on what will be a cornerstone of the closer integration needed to secure the euro's future.

"A Chinese wall between banking supervision and monetary policy is an absolute necessity," he said, also voicing skepticism that an independent central bank such as the ECB could even take on the tasks of supervision.

The Unprecedented Implosion Of European Car Sales

Socialist and protectionist Europe does all it can to preserve much needed votes jobs in the critical, if greatly uncompetitive, car making sector

The graphic above, which presents an unvarnished picture of Europe's true economic state, needs no explanation:

Source: FT

In the context of the above, no explanation is also needed that quietly, and without much fanfare, French car-maker, Peugeot, and Europe's second largest after VW, was recently GMed, and received a government bailout.

Carmaker Peugeot gets $9.1B government bailout

The French government has agreed to underwrite up to €7 billion ($9.1 billion) of bonds issued by Banque PSA Finance SA, the financing unit of carmaker PSA Peugeot Citroen SA, allowing the French automaker to offer low-cost credit to its dealerships and clients amid a slump in sales.

Peugeot announced the deal on Wednesday, Oct. 24. It also said it had agreed the basis of a €10.5 billion restructuring of existing loans and asked banks to provide a further €1 billion of new debt to its finance unit.

The deals effectively immunize Peugeot's credit unit against recent downgrades of its parent's debt rating. That had threatened to drive the lending arm's rating to junk and would have forced it to increase the rates on loans to its own dealerships and to clients, hurting car sales that are already suffering from a Europe-wide slump.

The Monetization Of America

J.P. Morgan suggested that the Fed would account for 90% of all new US debt issuance

By Mark J. Grant

In the piece I wrote over the weekend and subsequently published as an “Out of the Box” yesterday I touched upon the Fed’s buying and what it will mean for the bond markets. Today I wish to concentrate on the implications of what the Quantitative Easing will do to the fixed income markets and, to a lesser extent, to the equity markets. Many people, and erroneously, think that all of the purchasing by the Fed will go to both markets in equal amounts but this is not the case.

More money for the stock markets would have to come from asset reallocations by money management firms, insurance companies, pension funds and the like and this is not going to happen anytime soon given the 2008/2009 experience. Consequently the greatest flows generated by the Fed’s recent and forward actions will affect the bond markets much more than the equity markets.  What this means is a massive compression of available securities against Treasuries which continues what has been underway since early last year. The demand for Treasuries will also push down absolute yields so that my springtime prediction of a 1.25% ten year Treasury yield, the actuality is 1.38% so far so I was close enough, will be breached in 2013 as the Fed takes in and monetizes somewhere between 80-100% of all new Treasury issuance.

Hitler’s Strange Afterlife in India

The evidence is that Hitler has plenty of admirers in India

By Dilip D’ Souza

Hated and mocked in much of the world, the Nazi leader has developed a strange following among schoolchildren and readers of Mein Kampf in India. Dilip D’Souza on how political leader Bal Thackeray influenced Indians to admire Hitler and despise Gandhi.

My wife teaches French to tenth-grade students at a private school here in Mumbai. During one recent class, she asked these mostly upper-middle-class kids to complete the sentence “J'admire …” with the name of the historical figure they most admired.

To say she was disturbed by the results would be to understate her reaction. Of 25 students in the class, 9 picked Adolf Hitler, making him easily the highest vote-getter in this particular exercise; a certain Mohandas Gandhi was the choice of precisely one student. Discussing the idea of courage with other students once, my wife was startled by the contempt they had for Gandhi. “He was a coward!” they said. And as far back as 2002, the Times of India reported a survey that found that 17 percent of students in elite Indian colleges “favored Adolf Hitler as the kind of leader India ought to have.”

In a place where Gandhi becomes a coward, perhaps Hitler becomes a hero.

Loss of income caused by banks as bad as a 'world war', says BoE's Andrew Haldane

Bank should have done more to deflate the bubble ahead of recession

By Philip Aldrick

Andy Haldane, the Bank’s executive director for financial stability, added that public anger at the banks was fully justified and that pay in the industry remained too high.

“In terms of the loss of incomes and outputs, this is as bad as a world war,” he said. “It would be astonishing if people weren’t asking big questions about where finance has gone wrong.

“If we are fortunate, the cost of the crisis will be paid for by our children. More likely it will still be being paid for by our grandchildren. There is every reason why the general public ought to be deeply upset by what has happened – and angry.”

Four years since the crisis struck, the economy is still 3pc smaller than at its peak. The scale of the problems will be exposed again on Wednesday when the Chancellor updates the country on the economic outlook and his austerity plans.

To boost “growth, job creation, exports, investment, and business confidence”, George Osborne needs to be “bold” in his mini-Budget, the British Chambers of Commerce said as it downgraded its growth forecasts for next year and 2014.

From cradle to grave

Labour must set out a new, nonstate, collective approach to welfare reform

BY FRANK FIELD

Britain’s welfare state is broken-backed: the number of claims is soaring and with them the welfare bill. Well over 22 million citizens already depend on means-tested assistance. Means tests paralyse self-help, discourage self improvement and tax honesty. Means tests attack the basis of independent citizenship and community cohesion and at the same time incentivise bad behaviour. It was not meant to turn out like this. The Labour government led by Clement Attlee, elected in 1945, aimed for very different results when it implemented the welfare programme set out in Sir William Beveridge’s report Social Insurance and Allied Services, published on 1 December 1942.
Ultimately Beveridge’s scheme failed but not for the reason normally trotted out – that he did not envisage the changed position of women in society. His scheme could easily have been adapted to accommodate changing gender roles if there had been the political will and the imagination in Britain in the postwar period.

A roadmap for destroying an economy

France Sexy No More for Entrepreneurs Escaping Hollande: Taxes

A decision by France’s richest man, LVMH Moet Hennessy Louis Vuitton SA (MC) Chief Executive Officer Bernard Arnault, to seek Belgian citizenship created a media frenzy over tax exiles. Arnault had to quickly come out and say that he plans to retain his local residence and will continue to pay French taxes.

By Helene Fouquet

With President Francois Hollande’s government readying a vote this month on its first annual budget law that seeks to raise 24.4 billion euros ($31.7 billion) in additional taxes, some of France’s entrepreneurs and wealthy are heading for the door. Hollande’s hitting businesses and individuals with at least a dozen new measures, including a 75 percent levy on income of more than 1 million euros, to narrow the budget gap.

“France is no longer a sexy place to be,” said Rosenblum, founder and former owner of Pixmania, an online seller of computers. “To attract and keep business and jobs you have to put on your best face, especially in tough economic times. With all the costs, the taxes and the social pressure, France looks more like an old maid to me.”

Rosenblum -- who says he’s leaving France with his wife and two little children this month to open a new business in a country he won’t disclose -- is among people fleeing a slew of levies announced by Hollande since the Socialist president was elected in May. The 75 percent millionaire tax was followed by new levies on capital gains, an increased tax on income and wealth, a boost to inheritance charges and an exit tax for entrepreneurs selling their companies.

The weight of the levies is prompting a wave of departures, said Philippe Kenel, Geneva-based tax lawyer at Python, Schifferli, Peter & Associates.

Doubled Relocations

“It’s impossible to measure yet how many people are leaving or have left as no one wants to go public,” Kenel said. “But frankly, I’ve doubled the number of relocations this year with a sharp increase since Hollande unveiled his new fiscal rules in September. Retirees go to Switzerland. Entrepreneurs go toBelgium or to London.”

U.S. and Germany Wake Up to Putin

The schism in the Russian elite is already a step toward a new reality

By Lilia Shevtsova

The West is starting to change its views on Russia. In September, the European Parliament adopted a resolution criticizing how court decisions are often politically driven in Russia. In October, the European Parliament proposed that the  European Council come up with its own Magnitsky list. In November, the Magnitsky Act was approved by the U.S. House of Representatives and the German Bundestag approved a sharp resolution criticizing the Kremlin's crackdown on human rights and other elements of a democratic society.

These steps may spell the end of Washington and Berlin's illusions regarding a possible integration of Putin's Russia into the West. The adoption of the Magnitsky Act effectively ends Washington's reset policy, while the Bundestag's resolution signals the end of the German experiments in a "modernization partnership."

At the same time, however, the loss of patience with the Kremlin does not mean Washington and Berlin are ready to completely bury the reset with Moscow. Both the U.S. and Germany are fixated on their own problems. Russia is ready to cooperate with the West, although the Kremlin will probably continue to engaging in anti-Western rhetoric for domestic political reasons.

The realistic views prevail in both capitals. They call for continued cooperation with Russia under any circumstances, believing that everything will turn out all right if the Kremlin is not criticized. Besides, the U.S. and Germany receive pressure from large business interests, which will benefit from their governments' leaving the Kremlin alone.

But by supporting the Magnitsky Act, the U.S. has made it clear that it is prepared to search for a new equilibrium between cooperation with Russia and a harsher stance toward the Kremlin's policies of suppressing society. Essentially, Congress has moved closer to creating a new paradigm of relations with kleptocratic regimes based on the principles of conditionality. Its position on suspected Russian human rights abusers is clear: Your ability to enjoy U.S. privileges will depend on how you behave at home.

China as number two -- or even three

Chinese workers would have to quadruple their productivity in order for the Chinese GDP to equal the U.S. GDP

By Clyde Prestowitz

As China prepares for a momentous change of leadership at the top, a question increasingly being posed is how the new leaders will guide a country that will soon be the world's largest economy. That the Chinese economy will reach the top rung sometime between now (some economists believe it already is the biggest economy) and the early 2020s is assumed as part of the conventional wisdom, having been confidently predicted by such influential voices as the International Monetary Fund, the Economist magazine, and virtually all of the leading pundits both in the West and in Asia.

So it was fascinating last week for me to meet with one of Beijing's top economists who says "it's never going to happen." Because this analyst requested anonymity, I cannot reveal who it is which I believe is itself a commentary on some of the reasons why it may not happen. Nevertheless, the substance and logic of the analysts argument is compelling and important.

The first point is that the Chinese economy today is not, as is commonly stated, half that of the U.S. economy. Rather it is only about a third the size of the U.S. GDP. This is because a lot of the growth of the past was accomplished by building stuff that will never be used sufficiently to justify its cost and should thus represent negative growth if it were correctly counted.

Farewell to Europe

Giants and Pygmies

By Clyde Prestowitz

All my life I've been a Europhile. My dad worked for a Belgian company. I was a high school exchange student to Switzerland in 1958. My first posting as a Foreign Service officer was as vice consul to Rotterdam. I lived in Brussels for five years in the 1970s as head of Scott Paper Company's European marketing operations. I take my family to Europe frequently and maintain a wide range of work and other activities there.

Through all the vicissitudes of mid-night negotiations, I admired the dedication and vision of the negotiators who were building the European Union. I believed in the vision of a united Europe and welcomed the advent of the Euro as a major step along the way. When the recent crisis first broke three years ago, I welcomed it, thinking that surely it would be a catalyst for Europe to move to full financial integration and to greater political integration on the way toward realizing the vision of a truly united Europe.

I was wrong, and I have come to realize that my dream of a united Europe a la  the United States, is not the European dream. Indeed, with great disappointment I have at last concluded that there is no European dream because a las those whom we on the outside call Europeans are not and don't want to be Europeans.

I spent part of last weekend with a group of leading intellectuals from various European countries. The Germans were firm in their conviction that the primary cause of the EU crisis is the laziness, profligacy, free rider attitude, and mendacity of the so called Peripheral Countries ( Spain, Portugal, Ireland, Italy, Greece, and even maybe France), especially Greece, Portugal, and Spain. They emphasized that Germans believe in paying their way, in spending prudently, saving, investing, producing, and maintaining sound money and strong currencies.

The Tragedy of Inaction

A chronicle of the West’s early failure to take action against Bolshevism

By GUY F. BURNETT

“Russia, my lords and gentlemen, is the decisive factor in the history of the world at the present time,” observed Britain’s then-Secretary of State for War Winston Churchill in 1919. In his new book, Spies and Commissars: The Early Years of the Russian Revolution, Oxford historian Robert Service shows that not only Churchill, but also most of the West, were aware of the emerging Soviet presence. For a crucial five years, though, the West remained passive while the new Bolshevik government teetered on the brink of failure.

Service, who has authored biographies of the holy trinity of Russian Communism—Lenin, Stalin, and Trotsky—as well as nine more books on the Soviet Union, is meticulous in his treatment of Communist rule. The new book’s only downfall is its misleading title, which sounds like a publisher’s choice. While spies and commissars do factor into the book, those looking for tales of espionage and intrigue will be disappointed. This is a study of the early years of the Russian Revolution through both Russian and Western eyes.

Service begins with the Bolsheviks’ narrow consolidation of power over the Russian government in 1917. The new regime became Lenin’s and Trotsky’s own: vicious in a fanatical pursuit of a better world for their preferred classes of workers and peasants. As a German Communist noted: “One can’t make a revolution in white gloves. . . it will be necessary to pass through rivers of blood and mud to get to the destination.”

Why USA Is Not Greece (Yet)

The bottom line is that if US doesn't want to be Greece, she can't act like Greece

By Howard Marks

What do you think of when you hear the word "Greece"?

• An uncompetitive, low-growth economy,
• for years, a higher credit rating than it deserved,
• the resultant ability to borrow money it shouldn't have been able to, at interest rates that were unjustifiably low,
• excessive public spending,
• generous benefit promises that it can't fulfill given the realities and, as a result,
• soaring debt and deficits.
• Consequently, the need to cut spending and increase taxes, and
• mandated austerity and deleveraging, with very negative implications for economic growth.

Crime ISN'T falling, it's just that we've given up trying to combat it

Like all appeasement of evil, this policy invites a reckoning in the future

By PETER HITCHENS

Has anything been happening while much of our media have been obsessed with a foreign contest between two mediocrities for a post that isn’t as important as it looks?

Well, how about this blood-freezing statistic? More than 50 rapists have been let off with cautions, without ever facing a trial. 

No doubt you thought that cautions were the sort of thing they gave to teenagers found drunk and flat on their faces in the street. But rape? Isn’t that important? 

In fact, isn’t it – thanks to political correctness – one of the few crimes that everyone still takes seriously, even Guardian readers? And more than 50 rapists, who have admitted the offence, have been given cautions for it? Shouldn’t the Government have fallen?

You might expect the Tories  to make a fuss about this  but – now of course you remember – the Tories are in this Government and, in fact, dominate it.

Actually, this is only a small part of a much bigger problem uncovered by the Magistrates’ Association, whose members had begun to wonder why business in their courts was getting so slack. Had crime stopped? 

No, it hadn’t. Something else had happened. Criminals, the Government and the police were co-operating in a vast project which benefits everyone except the British public. 

The police benefit because they look as if they’re doing something, when they’re not. The criminals benefit because they get let off so they can go and commit more crimes. And the Government benefits because it does not have to build the hundred or so huge new prisons that would be needed to house malefactors if we still took crime seriously.

Α move of moderation among leaders in Northern Europe

Merkel Signals Greek Write-Off Possible as Buyback Begins

“If Greece one day can rely once again on its own revenue, without having to borrow, then we’ll have to look at this situation and make an evaluation,” German Chancellor Angela Merkel told Bild am Sonntag in an interview when asked about the prospect of debt forgiveness

By Patrick Donahue

Chancellor Angela Merkel opened the possibility that Germany may ultimately accept a write-off of Greek debt, as policy makers this week attempt to engineer a buyback that’s crucial for Greece to receive more funding.

With Greece announcing bids today to repurchase bonds issued earlier this year, Merkel told Bild newspaper yesterday that euro leaders might consider writing off debt once the country has a budget surplus. Germany has until now ruled out such a scenario as violating European Union treaties.

“If Greece one day can rely once again on its own revenue, without having to borrow, then we’ll have to look at this situation and make an evaluation,” Merkel told Bild am Sonntag in an interview when asked about the prospect of debt forgiveness. It wouldn’t happen before 2014 or 2015, “if everything goes according to plan,” the chancellor said.

The shift on Greece’s mounting indebtedness, which triggered Europe’s debt crisis three years ago, signals a growing consensus that a Greek exit could doom the 17-member single currency. German lawmakers approved the latest package to alleviate Greece’s burden after Finance Minister Wolfgang Schaeuble said a default could foreshadow the euro’s collapse.

Merkel’s signal of openness to eventual debt forgiveness marks “the end of denial,” Carsten Brzeski, an economist for ING Groep in Brussels who, said in a phone interview. “It’s definitely a shift, but on the other hand, it’s obvious,” said Brzeski, who called an eventual debt writedown inevitable.

The rise of the Power-Grid (and new taxes)

The New Future of Energy Policy

by Gregor Macdonald

Flood myths are common to human culture. Swollen rivers, tidal storms, and tsunamis make their appearance frequently in literature. But Hurricane Sandy, which has drawn newly etched high-water marks on the buildings of lower Manhattan (and Brooklyn), has shifted the discussion from storytelling to reality.

Volatility in climate has drawn the attention of policy makers for a decade. But as so often is the case, a dramatic event like superstorm Sandy – the largest storm to hit New York since the colonial era – has punctured the psyche of the densely populated East Coast, including the New York-Washington, DC axis where U.S. policy is made.

Not surprisingly, in the weeks since the historical hurricane made landfall, new attention is being paid to the mounting costs that coastal world megacities may face.

Intriguingly, however, this new conversation about climate, energy policy, and America’s reliance on fossil fuels comes after a five-year period in which the U.S. has dramatically lowered its consumption of oil and seen an equally dramatic upturn in the growth of renewable energy. America’s production of CO₂ in the first quarter of 2012 fell to twenty-year lows. The country is using less coal, increasing its use of natural gas, and (like the rest of the OECD) is seeing its transportation demand migrate from cars and trucks to rail. While Europe is often cited as being at the forefront of renewable power, the U.S. has also started to produce very strong growth ratesfor wind and solar power:

The dirty little secret of Canadian Banking

Canadian debt and the prospects for an upcoming banking crisis

By Redmond Weissenberger

The propaganda you hear about the Canadian banking sector is just that – propaganda. Canadian banks are as leveraged up as there international counterparts – if not more: in fact Canadian banks have no reserve requirement whatsoever, zero. Of course you needn’t worry about your deposits in the event of a banking crisis, deposits of up to $100 000 insured by the Canadian Deposit Insurance Corporation. The CDIC doesn’t hold enough cash on hand to actually pay out the potential claims, but it does have the Bank of Canada ready to print the money up out of thin air to make you whole – with your own money. How do we know that the BoC would pony up the fiat currency? We come to the dirty little secret of Canadian Banking – the big five were bailed out just like every other bank in the world. The report in question was prepared by a left wing think tank, so we can question their motives, but the reality is that Canadian bank sector is subject to the same problems of fractional reserve banking as the rest of the western banking system.

Now what could lead to a Canadian banking crisis? Simple: exactly the same factors that led to the housing crisis in the US and Europe, namely artificially low interest rates leading to a bubble in real estate prices and unsustainable consumer debt.

The factory is closing

U.S. birthrate plummets to its lowest level since 1920

By Tara Bahrampour

The U.S. birthrate plunged last year to a record low, with the decline being led by immigrant women hit hard by the recession, according to a study released Thursday by the Pew Research Center.

The overall birthrate decreased by 8 percent between 2007 and 2010, with a much bigger drop of 14 percent among foreign-born women. The overall birthrate is at its lowest since 1920, the earliest year with reliable records. The 2011 figures don’t have breakdowns for immigrants yet, but the preliminary findings indicate that they will follow the same trend.

The decline could have far-reaching implications for U.S. economic and social policy. A continuing decrease could challenge long-held assumptions that births to immigrants will help maintain the U.S. population and create the taxpaying workforce needed to support the aging baby-boom generation.

The U.S. birthrate — 63.2 births per 1,000 women of childbearing age — has fallen to a little more than half of its peak, which was in 1957. The rate among foreign-born women, who have tended to have bigger families, has also been declining in recent decades, although more slowly, according to the report.

But after 2007, as the worst recession in decades dried up jobs and economic prospects across the nation, the birthrate for immigrant women plunged. One of the most dramatic drops was among Mexican immigrants — 23 percent.

Next comes mob rule

Colleges have free speech on the run

By George F. Will

In 2007, Keith John Sampson, a middle-aged student working his way through Indiana University-Purdue University Indianapolis as a janitor, was declared guilty of racial harassment. Without granting Sampson a hearing, the university administration — acting as prosecutor, judge and jury — convicted him of “openly reading [a] book related to a historically and racially abhorrent subject.”

“Openly.” “Related to.” Good grief.

The book, “Notre Dame vs. the Klan,” celebrated the 1924 defeat of the Ku Klux Klan in a fight with Notre Dame students. But some of Sampson’s co-workers disliked the book’s cover, which featured a black-and-white photograph of a Klan rally. Someone was offended, therefore someone else must be guilty of harassment.

This non sequitur reflects the right never to be annoyed, a new campus entitlement. Legions of administrators, who now outnumber full-time faculty, are kept busy making students mind their manners, with good manners understood as conformity to liberal politics.

Liberals are most concentrated and untrammeled on campuses, so look there for evidence of what, given the opportunity, they would do to America. Ample evidence is in “Unlearning Liberty: Campus Censorship and the End of American Debate” by Greg Lukianoff, 38, a graduate of Stanford Law School who describes himself as a liberal, pro-choice, pro-gay rights, lifelong Democrat who belongs to “the notoriously politically correct Park Slope Food Co-Op in Brooklyn” and has never voted for a Republican “nor do I plan to.” But as president of the Foundation for Individual Rights in Education (FIRE), he knows that the most common justifications for liberal censorship are “sensitivity” about “diversity” and “multiculturalism,” as academic liberals understand those things.