The Power and the Money

Ain’t gonna study war no more?

  John Mueller repeats in this month’s Political Science Quarterly an argument that he’s made before:  war is becoming rare.  Developed countries no longer fight.  Underdeveloped countries rarely fight.  Imperial wars have disappeared with empires.  And civil wars are becoming rarer. 

Even if you want to quibble with Mueller’s typology (maybe Gulf War 2 and Chechnya are imperial wars, the Rwanda-Congo interventions could be called interstate wars instead of civil ones, perhaps you want to call the Caucasian countries developed), the data are pretty incontrovertible. 

The world has become steadily more peaceful since 1989, probably since the mid-1960s.  Mueller has some ideas about the causes of this decline in bellicosity.  I hope Mueller is right.  For while honesty compels me to admit that I would like to add a third (and fourth and fifth) picture to the sequence shown above, I must also admit that I do not want any of those additions to see anything even resembling combat. 

Therefore I ask you:  in the case of war, does the performance of the past two decades predict future results?

An admonition to Micheletti supporters and an admonition to his opponents

  In a previous post, I mentioned Mexico in 1936 and Argentina in 1945 as possible parallels for what the Honduran military was thinking when it exiled President Zelaya instead of simply arresting him.  Steven Taylor mentions a third parallel, a cautionary tale:  Colombia in 1953. 

He raises a good point:  breaking the law in order to save it is always risky and often stupid.  But the specific parallel doesn't apply.  General Gustavo Rojas Pinilla took power in 1953 and established a dictatorship that lasted four years; Roberto Micheletti ascended to the interim presidency with a vote of Congress and seems to be waiting until the November election to hand over power to either Elvin Santos or Porfirio Lobo. 

In other words, the typical historical parallels really don't apply in this situation.  An inability to recognize that is the main reason why the OAS is botching the diplomacy.  (As opposed to the U.S., which is playing it very well ...  but very much in the national interests of the United States and nothing else.)  They keep seeing Pinochet when what they've really got is an unelected Liberal government marking time until they can hand over to an elected government ... preferably also Liberal.  If the OAS diplomats can recognize that, then they can get inside the other guy's head (and his decision loop) and start brokering compromises that will allow everyone to win.

But I have my doubts that insisting on constitutional purity and making absolute demands will accomplish anything.  Demanding that some soldiers be punished, or agreeing that Zelaya should be tried while remaining titular president, those could get somewhere.  But so far that isn't the tack the OAS is taking. 

See also my comment and Steven's response here.  The short version below the fold.

Bad politics at the OAS, updated

  It strikes me that the diplomats trying to reinstall President Zelaya, particularly Secretary General José Miguel Insulza of the Organization of American States, are employing a lousy strategy.  The problem is that Honduras is a still a democracy.  The new government is conducting everything with an eye to the November elections, and unless the diplomats recognize that, they won't succeed.

You can't understand the coup in the context of a military takeover, because the military has not taken over and does not appear to be calling the shots.

The interim government needs to be persuaded that any compromise or backdown on their part will be a vote-winner.  There are a number of ways that could be accomplished.  The government could agree that Zelaya's expulsion was unconstitutional, give one of the military leaders a slap-on-the-wrist, and invite Zelaya back to reassume the presidency while facing trial.  (The same way, say, President Clinton faced trial.)  They could have Zelaya reassume the presidency after issuing a public apology for violating the Supreme Court order.  They could sit down and hammer out a third compromise.

The problem right now is that the OAS seems to have only sticks.  Getting hit with sticks, however, might just increase Liberal support at the polls in November; nationalist sentiment tends to work that way.  Delegitimization is a good prod, but Micheletti can't only be offered a choice between admitting his party is undemocratic and running out the clock, because he'll choose the latter.

Instead, we have Insulza in Tegucigalpa refusing to negotiate with anyone.  The military has admitted that it screwed up in banishing the President, and the OAS can't figure out a way to broker a compromise.  Instead, we've got a tragedy:  the death of an innocent. 

Anatomy of a coup

  The op-ed for Forbes is up. 

 I co-authored it with Steve Haber of Stanford University.  When I say we co-authored, I really mean co-authored:  Steve and I write by continuously tossing ideas past each other, dissecting them to death (and usually rejecting them) scribbling and re-scribbling versions, reading out loud to each other, and then finally finishing.  It's a lot of fun.  

The more expanded analysis is below the fold.  It takes into account some (surprisingly heated!) discussions with colleagues, Steven Taylor's blogging, and several of the comments on this blog.  I don't think I'll be dropping this issue anytime soon, so more comments and questions are highly welcome.

The importance of form

  The heat is turning up on Honduras’s new government.  Ambassadors are leaving, the borders are closed, World Bank money is gone, as are the U.S. military’s training programs.  Meanwhile, the hemisphere is united against the new government.

There would seem to be three lessons here.  (Note my weasel phrasing!  It isn’t accidental, as all three regular readers know by now.)  First, form matters.  Steven Taylor alluded to this point, and I think he’s correct.  Now, I don’t think that he’s correct about the underlying legality.  The Honduran constitution makes no provision for calling a second constitutional convention.  The Supreme Court, therefore, was completely within reason to tell Zelaya to knock it off with the referendum. 

Nor (given the facts so far) am I sure that Taylor is right as a matter of domestic political strategy.  If it was simply a matter of domestic calculus, a Supreme Court order followed by a quick bundling of the president out of the country might have been the best way to avoid worse conflict.

But Professor Taylor is completely right that hustling the President out of bed at 3am looks terrible. In retrospect, it was certain to produce a bad international reaction, even though I wouldn’t’ve predicted how bad beforehand.  (Hey, I was wrong.  Yes Bernard, I’ll get to Ecuador one of these days.) 

What the Honduran military and Supreme Court and I missed was the reverse Chávez effect.  Once Hugo (inevitably) started tub-thumping and threatening war, the best way for the United States to undercut him was to walk back its initial position and bandwagon on the international opprobrium.  And man, has the United States been successful.  Nobody seems to note that Washington was behind the international curve. 

In short, Honduras has gotten itself into a pickle.  The Supreme Court and military should have thought more about the politics.  The confused messages about resignations and drug-dealing and all the rest did not help; it was propaganda aimed at five-year olds, people who watch Glen Beck, not serious observers.  Now, it would have been damned risky for the Court to issue an order removing and arresting the President, but it would have been much better to have done that (preferably with a concurring Congressional vote ) and hope that Zelaya would be a little slow in mobilizing support, giving you time to bundle him off to Costa Rica after having crossed all the constitutional T’s ... or at least having seemed to. 

Form matters, even when the substance is uncertain and impossible to determine.  Perhaps especially so.  And that goes double in a hemisphere where electoral democracy enjoys the contradictory status of being simultaneously hegemonic and fragile. 

More on the Honduran constitution

  Hmm.  My opinion of the coup is moving back towards legal. 

In November 2003, the Honduran government (still under President Maduro) amended the constitution.  (You can find a history of all Honduran constitutional reforms here.)  The reason, ironically, was that they wanted to repeal the traditional absolute immunity held by high government officials in both the executive and legislative branch.  Thus, they repealed Article 205, clause 15, which had read: 

[Congress has the power] To declare if there is cause against the President, presidential delegates, Congressional deputies, Supreme Court justices, members of the National Electoral Tribunal, Chief of the Armed Forces ... and Subdirector of Administrative Probity.

They also altered Article 313, clause 2, as follows:

Original:  [The Supreme Court of Justice has the power] To begin initial proceedings against high state officials, when the National Congress has declared cause.

New:  [The Supreme Court of Justice has the power] To begin initial proceedings against high state officials and deputies.

The implication, I think, is that the Supreme Court has the power to remove officials from office when it determines that they have broken the law.  President Zelaya pretty clearly broke the law when he refused to obey an order from the Supreme Court to call off the referendum, and as I pointed out earlier, the Honduran constitution clearly (if stupidly) bans any consultatory referenda touching on presidential term limits. 

So my new version is:  Zelaya broke the law, the Supreme Court called him on it, and the military took the initiative in enforcing the Court's order.  (Maybe too much initiative.)  That interpretation will depend on how closely the armed forces and the Supreme Court cooperated in the ouster.  (The more it looks like the Court got the ball rolling, the more legal the coup will seem.)  Given the legal fog, the Obama Administration seems to be taking a pitch-perfect tone here.  Some other governments, like Brazil and Colombia, may have walked themselves into positions that they are going to regret. 

Be sure, though, to take my positions with a grain of salt.  I change them as the facts change, and as radically as necessary.  For a subtler discussion of the implications of the coup, go here.                            _{(Photo courtesy of Steven Taylor.)}

UPDATE:  The whole mess is filled with judgment calls.  Zelaya wanted to call a constitutional convention, which he publicly admitted would be intended to change the constitution to allow for re-election.  The referendum question that the Supremes kiboshed, however, only called for a convention, with no other stipulations.  So ... were the Supremes justified?

It all comes back to the problem that a constitution which declares procedural matters to be forever inalterable is a badly-written constitution.

An Andrew Jackson moment

  “The decision of the Supreme Court has fell still born, and they find that they cannot coerce Georgia to yield to its mandate.”
                                                                        —President Andrew Jackson

The common misquote of the above is much sexier:  “John Marshall has made his decision; now let him enforce it!”  Which is not a bad summary of Manuel Zelaya’s throwdown when his country’s Supreme Court told him that he could not go ahead with his planned referendum on repealing term limits.  Zelaya’s “No one will stop Sunday’s vote!” is on a par with Jackson’s aphorism.

In fact, it is worth considering what was in Zelaya’s televised speech on Sunday, after the Honduran Supremes slapped him down.  “The Court of Justice, which makes justice only for the powerful, the bankers and the rich of this country, has declared illegal the people’s participation in a legitimate and constitutional poll ... What a shame for all Hondurans, this Court of Justice!  We’re in the presence of a technical coup d’état.  It’s a swipe at Honduran democracy.  I want to appeal to the commanders of the Armed Forces, the officers and the soldiers.  They are part of the people, they should not play this game of the media elite and economic oligarchy, of a deviant bourgeoisie.”

Why is this significant?  Because Honduras could have avoided this crisis with a better constitution.  The Honduran constitution had two major flaws.  First, it took re-election off the table forever.  I mean that quite literally.  Read: 

Article 5:  Voting in advisory plebiscites is mandatory.  Projects intended to reform Article 374 of this constitution will not be objects of referenda or plebiscites.

Article 373:  The National Congress can alter this Constitution in ordinary session with two-thirds of the votes of all members. 

Article 374:  In no case can be reformed the previous article, this article, the constitutional articles that refer to the form of government, the national territory, the presidential term, the prohibition that no citizen can again be president who has carried out the role under whatever title, and the one referring to those who cannot become president of the republic for the subsequent period.

It is a bad bad idea to declare any procedural part of a constitution to be forever inviolable.  The U.S. constitution does this in respect to the apportionment of the Senate, and that is a bad idea that may yet come back to haunt us. 

The Honduran constitution then added insult to injury with its second flaw:  a complete lack of procedures by which the courts, legislature, or popular opinion could remove a sitting president for breaking the law.  The closest is Articles 321-327, which lay out the responsibility of public servants and organisms that break the law and cause civil damages to individuals, or Article 233, which lays a pretty draconian anticorruption law.  But neither really apply in this situation. 

In short:  Zelaya broke a stupid constitutional clause.  Twice, in fact, first by firing an officer who refused to administer an unconstitutional referendum and second by proceeding with the referendum anyway.  Congress could not do anything.  At that point the increasingly-angry military, acting in concert with the Supreme Court, decided to extraconstitutionally remove the president from office. 

I do not like it.  But I am also not sure that this is an abrogation of democracy either.  Judging by their statements, the Obama Administration is equally torn:  they would like Zelaya back, but they aren’t going to wade into another country’s Andrew Jackson moment. 

What do you think?

P.S.  I am not a fan of Andrew Jackson.

Coup in Honduras, updated

  It seems as though the Honduran military just deposed President Manuel Zelaya.   That said, this is not a stereotypical South American coup:  Congress appears to have ratified the Army's action, and a civilian is taking control. 

In an unsurprisingly pointless move, Hugo Chávez put his military on alert.  (Or at least he says that he did; it would not surprise me to find that no official orders have been given.)  He went on to declare, “The people of Alba are in combat, because this does not end today.”  The leaders of the Alternative Bolivariana have condemned the “coup” and its leaders will hold a summit in Nicaragua today. 

But Alba's declaration is less political than it sounds.  Unasur, the OAS, and the United States have all condemned the ouster, although the U.S. is not calling for Zelaya to be reinstated.   

I don't know why the military moved before Congress did, or why the new leaders are going through this charade of pretending that Zelaya resigned before he actually resigned.  But I do know that Zelaya ignored a Supreme Court ruling on June 25th that ordered him to reinstate the general that he had fired because the general refused to use to the Army to organize an unofficial referendum on abolishing term limits.  (I met Zelaya's predecessor about a year ago;  he didn't have a lot of good to say about his successor.)   I'll add here that Article 374 of the Honduran constitution, stupidly, declares that the ban on re-election can not be reformed in any way, no how, forever and ever.  A dumb provision, however, is still a provision. 

For what it's worth, my guess is that the coup will stand.  There is enough of a fig leaf of legality about it to allow OAS governments to walk back their condemnation.  Now, escalating street protests could force the U.S. to pressure the Honduran congress into reversing its vote.  But if I had to bet right now, based on what I've heard from Tegucigalpa, Zelaya will remain out of power.

UPDATE:  The legality of the situation is shakier than the above implies.  Hell, it seems to be blatantly illegal, a good old-fashioned coup.  Why have I changed my mind?  Well, as far as I can figure, the Honduran constitution has no provision for the congressional removal of the president.  The closest provisions are as follows:

Article 205, Section 12:  [Congress has the power to] accept the constitutional oath of office of the elected President and Vice-president of the republic, and other appointees they select; grant them permissions and accept or reject thier resignations and fill vacancies in the case of the complete absence of one of them;

Article 205, Section 20:  [Congress has the power to] approve or disapprove the admistrative conduct of the executive branch;

Article 242:  In the case of a temporary absence of the the President of the Republic, the Vice-president will carry out the functions of the President.  Should the Presidency be permanently vacant, the Vice-president will exercise the powers of the executive branch for the remainder of the constitutional term.  Should the Vice-presidency also be vacant, the powers of the executive branch will be exercised by the president of the National Congress.

Thus, the need to declare that President Zelaya had “resigned” before giving the executive powers over to Roberto Micheletti.  (The office of Vice-president is currently vacant, so having the power pass to Micheletti is kosher ... it's the whole removing of Zelaya what appears to be illegal.)  Note that while Micheletti says that everything is constitutional, this article from the Honduran press cites no clauses or precedents. 

The whole thing looks much shakier upon skimming the text of the constitution in the light of day, or least what passes for it in this, the fourth straight week of rain in New England.  I'll go ahead and call it a “coup.”  It's chances of standing are less than I originally believed.

Greater Trinidad?

  This is a strange story.  Sometime in 2007, the prime minister of Grenada tried to “associate” his country with the Republic of Trinidad and Tobago, in order to get access to “Trinidad and Tobago's education system, health system, transportation system, et cetera.”

Prime Minister Patrick Manning loved the idea; he's been trying to annex his neig ... unite the Caribbean for some time now.  His cabinet, however, was less than thrilled.  “The only thing that the letter didn't speak of having access to was the Trinidad and Tobago treasury. But, of course that was an unspoken word. But clearly we would have been in effect minding Grenada,” said one former minister.  Another more colorfully said that the Grenadian PM was trying to get Trinidad “to pay his bills” and was “mamaguying” — mocking — Trinidad and Tobago.

As you might expect from reactions like those, it didn't happen.  But now there is another union proposal on the table.  The intention is to unite the OECS and Trinidad in something slightly more than the European Union but less than straightforward annexation.

I'll be honest and say that I suspect nothing will come of it.  Which is, I think, too bad. 

Growth is good

  I temporarily moved to Santiago in late 1991.  For the first few months, I had a room in a house owned by an elderly couple way out in upscale suburb called Las Condes, beyond the end of the metro.  (There were only two metro lines.)  Back then, it was a neighborhood of single and double-family homes.  Apoquindo Avenue was essentially a suburban strip, densely built-up by American standards, with the occasional high-rise and pedestrian-friendly sidewalks, but a suburban strip nonetheless.

I wouldn't've recognized the neighborhood (since I couldn't remember the name of the damned cross-street to save my life) if it hadn't been for the minor miracle that the Pizza Hut on the corner of Apoquindo and Capitanía was still there.  But I remembered the house was on Nevería, a block from the street that hit Apoquindo at the Pizza Hut, and with the cross-street I could locate it.  So I went looking.  And what did I find?  Big apartment buildings! 

Could that kind of change happen in America?  I have my doubts.  In my last post, I briefly discussed the high cost of American zoning laws.  Such laws prevent wholescale changes in land use, causing cities to sprawl more than they would have otherwise.  In other words, they lock in the existing pattern of land use, preventing the kind of wholescale change that in past decades gave us such delights as the boulevards of Queens and Wilshire, where high-rise corridors sprouted along formerly suburban strips.  Today, I don't know if that happens at all, with the exception of a few downtown districts.  When densification pressure starts in an American neighborhood characterized by single-family homes, zoning changes usually squash it, the way New York City has moved to protect the pristine environment of Queens from an onslaught of apartments.  Let alone, say, the Bay Area.  Imagine Palo Alto filled with high-rises and three times the population.

And no, Houston is not an exception.

Sometimes, libertarians have a point

  The New York Times today published a story on how foreclosures in New England are disproportionately hitting old triple-deckers.  “Triple-deckers” are squat three-story buildings common to the region (pictured below).  Most of them are condominiums these days, but many are owned by the resident of one of the units, who rents out the other two, or by absentee landlords. 

Unfortunately, the author didn't limit herself to simply stating that the foreclosures have disproportionately hit triple-deckers.  Instead, she decided to write a fact-free piece that implies, without any hard evidence, that the housing collapse is threatening to destroy the triple-decker, and with it, tear apart the urban fabric of New England.  What percentage of triple-deckers have are foreclosed?  We don't know.  What percentage of foreclosed triple-deckers are vacant?  We don't know.  We do hear stories about abandoned lots in New Bedford ... but New Bedford has been declining for decades.  Has the recent housing bubble really worsened things?  We have no idea.  It is a remarkably badly-written article. 

But there is one thing mentioned which, if true, is completely insane: 

Modern zoning laws, Ms. Friedman said, would never allow three units on such small lots.  “If we have four three-deckers on 12,000 square feet and could only get two on that amount of land now,” Ms. Friedman said, “we are losing six units. So it’s very important to us to sustain them.”

Can that be serious?  Boston zoning laws require less density than currently exists?  That is flat-out crazy.  I am not opposed to all zoning laws, of course.  I would hate to have somebody block out my ability to see the sun, for example.  But that is just egregious.  Of course, it’s only a problem if there is in fact demand for housing in the parts of Boston where buildings are being abandoned ... so I doubt the premise.  Ms. Friedman is probably worried about the housing for other reasons. 

That said, the general point holds.  Zoning is very costly in this country.  I do not approve. 

There is no bloody resource curse already

  So there are these people out there, notably the Oracle of Flat, talking about how high oil prices lead countries to do all sorts of crazy things, like take stuff or invade their neighbors or build weird shit. Which is a problem, see, because except for the building of the weird shit the real world just doesn't fit the model. 

Above you’ve got an example of weird shit.  Ditto to the right.  But what about the neighbor-invading or stuff-taking?  Well, I don’t have a whole lot to say about neighbor-invading at the moment, but there is some stuff-taking in the news: the Bolivarian Republic just cancelled all its oil service contracts.  That’s a form of stuff-taking, yet, as the great and immortal Onyx once said, but wait it gets worse!   The government also intends to nationalize the contractors’ assets.  That is stuff-taking of the purest form, which the “resource curse” models predict isn’t supposed to happen when oil prices are low.  After all, the government is supposed to need the service companies to keep production up.  And yet, here we are.

“Oil service companies” are at-their-simplest basically oil companies that extract petroleum for a fixed price on behalf the owner ... in Venezuela’s case, the government.   With nationalization of the oil services, the government gets a threefer:  the assets, the value of future payments, and the value of all unpaid bills.  But it loses the companies’ ability to run and maintain the assets and opens itself up to arbitration and lawsuits.  It also loses future investment.  Oil companies will tolerate expropriations-that-weren’t, like the Bolivarian Republics’s so-called “nationalizations” up until now.  They have less patience over the real thing.  It’s a particular problem for Venezuela because its wells tend to have a half-life around three years.  Without continual new investment, production will decline.

I’m not sure what Chávez’s motivation is, although I can speculate.  I am sure, though, that this is another sign that the whole petropolitics idea is worth a lot less than a gallon of crude, even at current prices.  Sure, it might be possible to take the political resource curse theories and mash them to fit recent events in Venezuela, but then you would wind up with a theory that predicted that governments nationalize when prices go up and they nationalize when prices go down; or that they nationalize when they don't need foreign technology and they nationalize when they do.  In other words, you would get a theory that predicted that the governments of oil producing states should always nationalize at all times. 

The proper word for such a theory?  Worthless. 

Churchill, paraphrased, sort of

  American electricity transmission is regulated in an odd way.  You’ve got 50 state regulators.  Then you’ve got three interconnected grids (the Eastern, the Western, and the Texan) and a separate grid in Puerto Rico.  (Alaska and Hawaii don’t have statewide grids.  Hawaii is an archipelago, and Alaska is too thinly populated.)  On top of the three Conus grids you’ve also got ten North American Electric Reliability Council (NERC) regions.  Only Texas, under the Electric Reliability Council Of Texas (ERCOT) coincides with an integrated grid.  Then on top of it all sits the Federal Energy Regulatory Commission (FERC).  The Energy Policy Act of 2005 — as best as I can tell, a not-bad piece of Bush-era legislation — gave it real powers for the first time.

A lot of that act was due to the work of Pat Wood, who ran FERC between 2001 and 2005.  Unlike a lot of political appointees from that era, Wood was supremely competent and very non-dogmatic.  You can get a taste of his approach in this 2001 interview.  He left FERC to go work for Airtricity, and thus in that capacity I’ve had the opportunity to hear him speak on several occasions.

Like a lot of people, he isn’t happy with America’s lack of an intelligent energy policy.  Where’s the carbon tax?  The centralized grid?  The feed-in tariffs?  And, of course, working in the Bush Administration didn’t help.  Admittedly, I last heard him back when “Drill baby drill” still echoed across the land, but as I watch the ugly sausage of cap-and-trade inching its way through the Congressional meat-grinder, with the threat of EPA regulation as a stick in the background, I can understand the disillusionment. 

Even if I wouldn’t take it quite so far as to say, in public, at an HBS conference, “Maybe in a country of 300 million people, democracy, even a republican form of democracy, doesn’t work that well.  But that’s a debate for the law school.”

Oh no he di’n’t

  Well.  One of the leaders of the Republican party, a former Speaker of the House, and a plausible presidential candidate, goes to the Bronx and calls Cristina Fernández a “semi-dictator.”   

No, seriously.  Chávez, though, got to be a full dictator, while poor Danny Ortega got lumped in with Cristina among the “semis.” 

Now that is funny.  Ortega, who unlike the other two has in fact engaged in election fraud, becomes the same as Fernández.  Now, it is true that about a year ago she tried and failed to make an end-run around Congress in order to impose an agricultural export tax.  But our last president tried and succeeded to make an end-run around Congress in order to detain suspects indefinitely and monitor all communications crossing the country's border ... and while George Bush the Younger was many things, a “semi-dictator” was not one of them. 

Meanwhile, I really do need to repeat that Venezuela is not a dictatorship.  Most of the anti-Chavista opposition recognizes that.  And even should Chávez turn it into one, Venezuela poses no threat to the United States.  Let him slosh money around!  He gets nothing for it.   

Still, I can understand how he makes a useful foil for American conservatives.  I've heard lefties say stupider things about President Uribe ... although never anyone as prominent as Newt Gingrich.  But making Argentina into an enemy of the United States?  Huh?  Argentina??

So I've really got to wonder.  Can somebody explain what's going on with the GOP and the crazy pills?  I'm at a loss.

I guess I must reluctantly come around to the position that it is time to eliminate the filibuster. 

What's the matter with Texas?

  Nothing, really.  Oh, the governor seems to have gone a little crazy, but that's because his party has decided to do its damndest to commit suicide, and he's got to be crazy in order to win the primary.  Have you read its platform? 

But Texans aren't crazy.  First, the percent who support secession is less than the Crazification Factor.  Second, if you'd asked the question in November 2004, I think you could've easily gotten a similar percentage of Californians or New Englanders to say they support taking up their marbles and leaving.  Remember the "United States of Canada"?    Finally, unlike most of the red states, Texas does in fact generally pay more to the federal government in taxes than it gets back.  Red are payments, blue are receipts, all data in 2008 dollars.

Now, these figures are rough estimates.  Pre-2005, the data are from the Tax Foundation; for 2006-07, they come from me using the same methodology.  And they leave out a lot.  Frex, a lot of federal spending comes from borrowing, rather than taxes, and these figures have made no attempt to allocate the future tax liabilities generated by borrowing.  They also leave out a chunk of federal spending:  mostly interest payments, which aren't allocated to states (and much of which goes to foreigners), but also foreign aid and imports purchased by the federal government. 

In addition, of course, joining a fiscal federation gets you more than just net tax payments.  It makes Keynesian policy much easier:  European countries, for example, have trouble using this tool because so much of any stimulus will leak away to the neighbors.  It adds insurance against asymmetric macroeconomic shocks:  if something bad happens to the economy of your jurisdiction, your residents will pay fewer federal taxes and get more federal benefits.  Finally, it allows for economies of scale in the provision of public services.  All three are why it probably makes economic sense for Iceland to become a Commonwealth, even at a fiscal cost of $109 million per year. 

In short, (1) Texans are no crazier than anyone else, and (2) the Republican Party is really going off the rails.  It isn't just Governor Perry; it's state legislatures in Georgia, Oklahoma, and South Dakota, which have taken to voting in favor of secession.  In another country, these might be worrying in terms of national unity.  In this one, there's no worry about national unity.  (Although I recommend these comic books anyway.)  Rather, there is a worry about the emergence of a de facto one-party democracy.  I know I've got readers who still aren't sure that the GOP isn't in on the road to suicide, but even they have to admit that the Tea Parties and aftermath are a big step down that path.  Right?

Democracy and the modern central bank

 Libertarians, like Marxists and deep greens, generally drive me nuts.  Why?  Well, they have no objective function outside their beliefs about social organization.  Their preferred way of organizing society is good regardless of the outcome ... something especially infuriating when they refuse to admit it, and insist, fairly crazily, that their desired form of social organization will produce good outcomes and we can't compare the “really existing libertarianism” that the U.S. and much of Europe lived under before 1914 (or 1933) because it wasn't perfect super libertarianism.  Something about the ICC, or maybe the Homestead Act.  I don't know.  Aargh. 

Megan McArdle is not like that at all.  She's a very smart non-doctrinaire libertarian.  She certainly makes you think, even when she's infuriating, and I don't get the impression that she would refuse to change her opinions in the face of facts. 

Here she isn't discussing libertarianism.  Rather, she's thinking about democracy as a way of organizing society.  Her conclusion is that small-d democracy isn't compatible with modern central banking, because “what the Fed is doing now is not much different from what most [non-democratic ideologues] want the Supreme Court to do on some issue or another:  rule it out of the bounds of majority debate.” 

But that's just wrong!  The Fed can be abolished at any moment.  All you need is 218 representatives, 60 senators, and the president to say so.  Less drastically, the Fed's mandate can be changed.  In fact, Congress has done exactly that.  In institutional terms, the Federal Reserve is not one of the undemocratic parts of the American constitution, for the simple reason that it's not in the American constitution.  The only reason that the Fed behaves independently is because there is a democratic consensus in this country that it should. 

The Federal Reserve is like the EPA, or OSHA, or the FAA, or the military.  A somewhat autonomous organization with a mission set by elected officials, plenty of oversight all the way, and an ever-existent possibility of abolition.  I don't see anything undemocratic about it. 

Am I wrong?

Another senate

  One rather strange thing, when you think about it, is the incredible influence that the United States Constitution has had over political structures in Latin America.  None of those polities developed under similar circumstances — the Argentine Republic comes closest, and it's not very close — and none of them had similar political traditions.  So its rather strange when you realize both how universal the American presidential-bicameral model has become and how durable it's proved. 

It turns out that Bolivia also has a U.S.-style senate.  Before the recent constitutional reform, each province enjoyed three senators.  Now each one has four.  Not much of a change there, unless the system for electing those senators (still undetermined) has the result of dividing the delegations from the other provinces while united the Media Luna ones, or vice versa.  That's remotely possible:  the old system worked like Argentina, giving the election winner two senators and the runner-up one, while the new system is proportional.  Depending on the election rule chosen, the effect would be to strengthen parties with overwhelming support within their province and split delegations from provinces with more divided electorates.  But we'll need to see both what proportional rules is chosen (the constitution seems unclear on whether the provinces or the legislature will set the rules) in order to know the actual effect.

In short, in terms of the Bolivian legislature, the new and awfully-named “Plurinational Legislative Assembly” doesn't change much.  Not only is equal representation preserved in the Senate; the new reserved “indigenous” seats in the lower house are designed to insure that the Media Luna's current representation will not change. 

My opinion of the Bolivian senate, however, is very different from my opinion of the Argentine, American, and Brazilian senates.  Those are undemocratic travesties that need to be reformed.  (Here's a much more democratic way of apportioning the U.S. senate among the states.)  Inertia and the power of special interests are the only reasons to keep them. 

The Bolivian senate, on the other hand, is a necessary compromise to hold a deeply-divided country together. President Morales's original proposal for a single-house FTFP legislature with a block of reserved “indigenous” seats would most likely have served only to keep fueling the political violence that wracked Bolivia last year.  Given that it's hard to see anyone benefitting from a breakup of the nation, the undemocracy of a senate is a price worth paying. 

¡Hasta la reelección siempre!

  I am starting to miss Anonymous.  He was obnoxious, abrasive, and arrogant, but I am now realizing that this blog is lesser sans his commentaries. 

But anyway, great news from Venezuela!  It looks like we just might have Hugo Chávez to kick around for a while more.  And I'll admit that I am in fact generally opposed to term limits.  What have they ever gotten the United States?  Eisenhower and Reagan were unlikely to have run again for health reasons, and a third Clinton term would have spared us ... you know.  All the stuff. 

Of course, Hugo isn't Ike, Ron, or Bill.  And there are circumstances under which term limits might make sense, especially in countries with histories of patronage politics.  But still.  In addition, the Bolivarian republic placed term limits on all elected offices, which is why Venezuelans voted on the following somewhat turgid question to change five different constitutional articles:

Do you approve the amendment of articles 160, 162, 174, 192 and 230 of the Constitution of the Republic, as approved by the National Assembly, that increases the political rights of the people by allowing any citizen holding elected office to be nominated as candidate for the same office for the constitutionally-established period of time, depending upon his or her possible election, exclusively by popular vote?

I like the “increases the political rights of the people” part.  Clever framing.  And, well, true. 

In short, as unenthused as I am with President Chávez, I can't view the outcome of this election as some sort of great loss for Venezuelan democracy. 

Plus, I'd bet against his victory in the next election.

International institutions 101

  What do international institutions do?  I'm not referring to the European Union, but the more garden-variety alphabet soup stuff, the arbitration panels and dispute-resolution mechanisms and the like?  After all, they usually don't alter domestic law, and when they do, the domestic law in question is usually pretty easy to un-alter.  There usually isn't a whole lot stopping countries from just breaking their agreement, and when there is, it tends to rely on sanctions from other individual states. 

Frex, the WTO.  Nobody has to write WTO rules into their constitution.  And the WTO doesn't sanction anyone.  All the WTO does is tell the aggrevied member state whether and how much it can sanction the offending party without breaking WTO rules.  In that case, what do you need the WTO for?

An answer below the fold.

Schoolhouse rock, Venezuelan-campaign style

 A friend of mine (who works for the government ... shhhh!) sent me this Venezuelan television commercial.  It's about the referendum on abolishing presidential term limits. 

Kinda catchy, I think.  Can the Sí-side match it?

The resource curse doesn't exist, and please stop talking about it

  My friend Will hopes that oil prices stay low, in order to insure that the Russian Federation remains behaved.

My response:  Please get the stupid, and I mean truly monumentally stupid, idea of the resource curse out of your heads?  It's a well-accepted idea, but it's just plain wrong.  No matter what Tom Friedman writes about it.

Stephen Haber and Victor Menaldo have a paper coming out that shows that there is no, squat, zero, ningún relationship between democracy and oil resources.  Haber and ... uh ... me ... will eventually have a paper showing the same thing for civil war. 

But hell, maybe Russia is different.  So my question for you all is simple.  Why would an authoritarian government, no, why would a dictatorship give up power because its export revenues went down?  That makes no bloody sense.  It could default on foreign debtors.  It could blame foreigners for any crisis.  It could shoot dissidents, you know, the way Panama did under Noriega. 

Is there any reason to believe that a fat Russia would be more democratic and less expansionist than a lean Russia?  No.  F@&k no.  There isn't any reason to believe the opposite either, of course ... but by God do I wish that people would stop fooling themselves.  Resource money has fueled democratic transitions and dictatorial takeovers, foreign expansion and foreign engagement.  Those who know Russia better will be able to predict that country's idiosyncratic political reaction to declining export revenues ... but why any of the information in this story, about governments trying to crack down on the bearers of bad news, would make an observer hope for sustained bad news is beyond me. 

Ah, here comes my first AFOE cross-post.  But your reactions first.  At least until I can find the damned keys to that blog.

Senates

  There is a debate going on downblog over the United States Senate. 

Let's take a brief tour of Senates around the hemisphere.  (To which we'll include the Philippines, due to its political history.)  The American example set in 1787 proved very influential, particularly for the larger nations of América.  Did their adoption of an upper house with equal representation for federal subunits make sense?  Did they keep it? 

Argentina:  The Argentine senate gives each province three senators.  That's obviously undemocratic.  Argentina, however, has a historical justification for the practice.  Like the United States, the Argentine Republic began as a federation of independent states.  Unlike the United States, the states that formed the Argentine Republic had very little autonomous political history; most had been created from city councils that simply declared independence in the wake of the political chaos that enveloped South America after 1808.  After a great deal of civil war, including the loss of Bolivia, Paraguay, and Uruguay, provincial forces decisively defeated Buenos Aires in 1852.  A convention that excluded representatives of Buenos Aires hammered out a constitution the next year.  That same constitution has remained in effect since then, at least juridically. 

The convention accepted equal provincial representation in the Senate in order to limit Buenos Aires's dominance.  It also had senators elected for nine-year terms by state legislatures and required them to be able to show a minimum annual income of 2,000 pesos.  (That's approximately US$67,000 today in terms of purchasing power.)  Thankfully, later amendments got rid of those latter features, but equal representation remains.  In short, while there isn't really any good reason to keep the apportionment of the Argentine senate, the institution has deep roots in Argentine political history.  The resemblance to the U.S. case is quite strong.

Brazil:  The senate of the Federal Republic of Brazil gives three senators to each state.  The historical roots of this institution, however, are rather shallower than in Argentina or the United States.  The 19th-century Imperial senate did not provide equal representation for the provinces.  When the empire fell to a military coup in 1889, the new leaders had to find ways to convince provincial elites to support the new government.  One of the ways that they did so was to provide the provincial governments with equal representation in the upper house, in open imitation of the American example.  (In fact, the constitution of 1891 named the country the United States of Brazil.)  Brazil has gone through multiple constitutions since then, but the institution of the Senate has remained.  Unfortunately. 

Mexico:  The constitutions of 1824, 1857, and 1917 all granted equal senate representation to each state.  There was never much historical justification for doing so, other than imitation of the United States.  (Mexican states gained much autonomy during the 19th century, and several declared independence, but that came about after the end of Spanish rule.)  Since the country's governments rarely ruled by the constitution, however, legal stipulations didn't matter.  Under Porfirio Díaz, for example, all legislative votes were unanimous after 1893.  Nor did senators necessarily come from their putative state.  Under those circumstances, the number of senators per state didn't make a difference.  The Revolution didn't change that.  Under President Álvaro Obregón, for example, recalcitrant legislators were often shot.  Then came the creation of the PRI, with its iron-lock over politics, and ‘nuff said.  Constitutional stipulations didn't become more important than party rules until the 1997 midterm election. 

Mexico, however, is now ruled by a democratic government, and the constitutional rules matter a lot.  As part of the transition to democracy, Mexican politicians amended the constitution in 1993 and 1996.  In theory, the reforms granted each state four senators, up from two.  In practice, the reforms created an upper house selected by a weak form of proportional representation.  The winning party in each state receives two seats.  The runner-up receives one.  The remaining 25% of senate seats are then allocated to each party in proportion to their popular vote share.  In effect, the Mexico's current senate keeps the form of equal representation for each state while abandoning much (but not quite all) of the substance. 

The Philippines:  The Philippine Autonomy Act of 1916 created a 24-person senate.  The act grouped the country's 50 provinces into 12 districts, each of which received two senators.  The 1935 constitution of the Philippine Commonwealth dumped that crazy system, but selected something even crazier in its place:   at-large Senate elections.  That is, every voter writes in 12 names.  The top 12 vote-getters then become senators for six years.  The exercise is repeated every three years, making for a total of 24 senators.  The 1987 constitution of the Philippine Republic retains the feature.

The only polity that I can imagine justifiably imitating the United States, Argentine Republic, and Federal Republic of Brazil in the 21st century is the European Union.  Then again, I may suffer from a lack of imagination.

An army in all but name

  So spoke the current U.S. defense secretary about Panama's police forces.  When you see these fellows in action, you can understand why he said that.

But they are not an army in name.  Article 310 of the Panamanian constitution reads as follows:

The Republic of Panama shall not have an army.  All Panamanians are obligated to take up arms in order to defend the independence and territorial integrity of the state.  In order to conserve public order, prevent criminal acts, and protect the lives, honor, and property of those under the jurisdiction of the state, the law shall organize the necessary police services, with separate commands and rank structures.  Under threat of external aggression, temporary special police services may be organized in accordance with the law in order to protect the Republic’s frontiers and the area under its jurisdiction.  The President of the Republic shall be the chief of all services established under this Title; such services, as agents of authority, shall be subject to the civil authorities; therefore they shall obey the orders issued by national, provincial, or municipal authorities in the course of carrying out their legal responsibilities. 

Recently, however, President Torrijos has been accused of violating Article 310 and remilitarizing his country.  Is that true?

Great Debate Attempt #3: The League of Democracies

  Expanding NATO to Ukraine and Georgia strikes me as a bad idea.  Expanding it to include Japan, Brazil, India, Chile, and Israel strikes me as a stunningly bad idea.  I'm a bit surprised to see one of the McCain campaign's poorer ideas — the League of Democracies — recycled by the Progressive Policy Institute.  

Why does Will Marshall think it's a good idea? 

“It would extend NATO's military reach and resources.”  That is just wrong.  NATO's ability to operate out-of-area is already too dependent on American resources.  Brazil and India don't bring anything to the table.  Brazil and India already provide U.N. peacekeeping troops; neither could operate with advanced NATO militaries that train together and share operational commands.   Japan could, but it has constitutional problems with using the organization formerly known as the Japanese Army outside of its own territory.  NATO is also a tightly-integrated military alliance, not quite as integrated as the stillborn EDC, but much more than any historical equivalent of which I am aware. (Jussi?)  You can't plug new militaries into it without spending a lot of money.

“The inclusion of such non-European powers as Japan, India, and Brazil also would ... enhance its legitimacy in the eyes of people who traditionally have been suspicious of the West.”  That's utterly unclear.  Will including India make NATO more legitimate to Pakistanis?  Will including Brazil reduce Bolivian anti-Americanism?  The answer, it would seem, is no. 

“It would continue to provide a hedge against turmoil and conflict in Eastern and Southern Europe and, if Georgia is admitted, in the Caucasus.”  It would also put Americans on the line if anything blows up in the Caucasus ... and Latin America ... and the Pacific ... and South Asia.  NATO is a mutual defense pact.  Marshall seems to elide over that.  The U.S. could wind up at war with Pakistan, and wouldn't that help the Afghan effort? 

“It would create an incentive for rising democracies like Brazil and South Africa to stay on the path of liberal reform.”  Let's ignore the strange aspertion cast upon Brazilian democracy.  Why would Brazil or South Africa want to join NATO?  The eastern European countries got extensive military aid and protection from Russia.  The idea that NATO promotes democracy presupposes that there is some cost to getting kicked out.  Poland faces such a cost.  Why would Chile? 

The League of Democracies was a bad idea.  A global NATO seems an even worse one.  Thoughts?

This goes out to James and Randy

  I am told that it can be difficult to get the Daily Show in Canada.  So, under the assumption that you might not regularly tune it in on the internets, I present to my Canadian friends the following very insightful group of talking heads:

The Daily Show With Jon StewartM - Th 11p / 10c

Provinces in Peril

Barack Obama Interview
John McCain Interview

Sarah Palin Video
Funny Election Video

Want to know more?  The preceeding story, “Provinces in Peril” is below the fold.

A view from the south

  So our neighbor to the north just prorogued its Parliament.  I have to say that I had never heard the word "prorogue" before.  It was confusing to an American.  And stuff like this didn't help. 

Here's what it looks like from down here, even among the Canadaphiliacs:

More thoughts about pirates

  Pirates attacked 11 vessels in the Gulf of Aden in November.  They attacked an additional 6 in the Indian Ocean off the Somali coast.  Of the 11 incidents in the Gulf, all occurred right outside Yemenese territorial waters, which passing ships have taken to hugging as they head to and from Suez.  Of the 11 attacks in the Gulf, the pirates took their targets six times.  NATO warships stopped three and a tanker crew managed to avoid the tenth.  Of the attacks in the Indian ocean, the Indian navystopped one (sinking the pirate vessel involved), the crews involved evaded three (two by outrunning the pirates and one by turning firehoses on them as they tried to board, knocking their shoulder-held RPGs into the water), and two took their targets. 

I can't link to the source; it's what I was told by intel officers in the U.S. Coast Guard.  Don't worry, it's unclassified.  Another good data source is here, and a third here.

So what is the scale of the problem?  Well, in 2006 roughly 51 vessels passed through the Suez Canal each day.  Given the length of the Gulf of Aden, the fact that the pirates seem to be able to range about 450 miles beyond that, and an average ship speed of 22 knots, that would mean approximately 90 ships within pirate range every day.  (This assumes that vessels headed around Cape Horn could fairly easily re-route to remain out of pirate range.) 

The implication is that a rotating flotilla of 180 armed vessels could probably deal with the problem.  Djibouti may no longer be a French territory, but it hosts several thousand French troops and at least 450 American ones at Camp Lemonier, and it has a (relatively) modern port.  In other words, it isn't right to think that stabilizing Somalia is the only solution.  Of course, the pirates use swarming tactics, where they attack with multiple boats, which poses a very serious tactical problem for the escort vessels.  (Under the current rules of engagement, there is maybe a 15-minute window to attack a pirate ship.)  Alternate strategies are possible; the real point is that the problem is manageable even without any attempt to stabilize Somalia or, alternatively, a smash-up of the pirates' coastal havens.  (The human cost of the latter would not be low.)  One could imagine alternative operations involving continuous aerial patrols of the effected areas, although speaking as someone with some experience, managing such a thing would not be easy and the chance of a major cock-up would be high. 

The big problem?  See below.

Observatorio Argentino 7: Argentina’s inexplicable pension nationalization

 I’ve been asked to discuss what's going on in Argentina.  So what’s going on in Argentina?  The short answer seems to be simple:  President Fernández just made a huge political mistake.  She’s nationalized the pension accounts funded by mandatory contributions in a most unwise fashion for a rather unnecessary reason, and probably sealed her political doom in the process. 

Hat tip:  Leticia Arroyo Abad. 

There are two ironies.  The bigger one I’ve already mentioned:  AFAICT, it’s bad politics, rather than just bad economics.  The smaller personal irony is that I am not a fan in general of “privatized” pension schemes in general (although they can, if designed right, increase savings) and I am certainly not a fan of the Argentine scheme in particular, yet I find myself thinking that ending the scheme the way the government wants to do it is simply insane.

And the weirdest thing is that it seems politically insane.  Weren’t the Kirchners supposed to be excellent politicos? 

As often, though, it gets a little complicated.  And so, more below the fold.

A thought on the politics of inequality

Something occurred to me while I was driving on I-595 earlier today, right after the bailout package failed in Congress.  Might it have been easier to pass had we not seen the massive increase in income inequality over the past few decades?  After all, when income differences between financiers and the average worker loom gigantic, it becomes very difficult to sell people on the idea that the financial system needs an infusion of government money.  On the other hand, if the banks were smaller and their executives poorer, people might feel more of an emotional connection to them, making a bailout easier to sell.

The real effect of a bailout wouldn't change, of course.  Executives would have been hosed under the Dodd-Frank plan, and the average person would have benefited hugely from keeping the financial system afloat.  But the emotional politics are all different in a world where the financiers have pulled away into a different economic universe from the person on the Port Everglades Expressway.

Does this make sense? 

A new constitution

Rafael Correa is the president of Ecuador.  He has a Ph.D. in economics from the University of Illinois.  Anti-Chávez well-educated high-earning professional Venezuelan women told me on multiple occasions that they consider him very attractive.

That, however, is not why he's in the news.  He's in the news because Ecuadorean voters approved a new constitution today.  Opponents call it “Bolivarian.”  Even non-opponents have called it “socialist.” Both are silly.  Correa is far from Bolivarian.  (Update:  It has been pointed out in comments that he declared himself Bolivarian in 2006, although he is generally considered to have distanced himself from Venezuela.)  Those same professionals who called Correa handsome also called him sensible, and I tend to agree.  Correa is relatively radical.  But he's also sensible and clearly a democrat. 

Which doesn't mean that the new constitution is a good thing for Ecuador.  More below.   

Postmodern commentary

Here is some excellent commentary on recent commentary on the events in Bolivia:

Two different takes on Bolivia’s political crisis, one from Larry Birns and Jessica Bryant, and the other from Marcela Sánchez. The first argues that the escalating tension is a result of a pattern of American disrespect to Latin American democracy. The second argues that Latin America showed a great deal of maturity in resolving the problem themselves, neither waiting for Washington nor using the crisis as a pretext to take pot shots at the Bush administration. I find Sánchez’s argument about ten million times more convincing.

Not everyone who blames the U.S. at every moment should be accused of blaming America first, but Birns and Bryant certainly seem predisposed to pointing the finger at Washington. Evo Morales kicks Ambassador Philip Goldberg out of La Paz, and its Goldberg’s own fault because “he failed to be helpful.” That’s a pretty high standard. Why is it in incumbent on a foreign ambassador to help in an internal political crisis? Any time there is a crisis in a foreign capital, should the American ambassador be tossed if he fails to be helpful? Also, how could the U.S. help by inserting itself into a complex and longstanding local political issue? Hasn’t that usually been a recipe for problems? Short of endorsing Morales, what could Washington do to satisfy Birns and Bryant? It essentially avoided stepping on Morales’ toes publically, which shows admirable restraint, given the number of times Morales has thumbed Washington in the eye, and that Washington is ideologically more closely aligned with the opposition than with Morales. At the risk of supporting W, it seems like the U.S. played this one right. It’s better to let Latin America solve its own problems without U.S. mediation.

The Birns-Bryant piece is also needlessly (and bizarrely) wordy. For instance, the phrase “the baleful consequences of the inherent disrespect the U.S. historically has exhibited toward the region” has about a third more words than necessary. Later, they refer to the need to “architect a new relationship with the region that can be deemed credible.” Architect as a verb? Why, when the Queen’s English offers us build, construct, create, develop, erect, carve out, and many other possibilities that are, in fact, verbs?

By the way, after the scare from the marches, it looks like things are calming down in Bolivia.  Evo deserves props for putting his constitution on the table and agreeing to sit down and talk with the opposition governors about the new constitution. 

(Semantic note:  the Bolivian title is in fact “prefect.”  A symbol of the crisis was, in fact, the self-promotion of the Santa Cruz “prefect” to “governor.”  That said, they've already got more power than the English “prefect” implies, so I'll be sticking with “governor” as my translation of “prefecto” until convinced otherwise.  I'll also stick with “province” as my translation of “departamento” because it sounds way way better and less confusing than “departament” in American English.)            

Going south?

Cooler heads may not have prevailed in Bolivia.  I'm not sure what to make of this report from Pronto, but is sounds doubleplusungood:

From email from my parents (who live in Santa Cruz): Evo has just announced an alleged a coup plot between Goldberg (the US ambassador expelled a few days ago), Costas (the Santa Cruz prefect), and a number of high-ranking military officers. Meanwhile, reports from Pando suggest that five of the bodies were Venezuelan soldiers, who are being repatriated. Costas has also asked Evo to call of the MAS protests who are still marching towards the city of Santa Cruz; he’s also called for a suspension of labor & a public assembly in the main plaza for a cabildo (a “popular assembly”) to decide what to do. (FYI: The last Santa Cruz cabildo proclaimed Costas “governor” & demanded regional autonomy.) Also, as of now, the 24 de Septiembre celebrations are cancelled — the first time that has happened in more than 50 years. This doesn’t look good at all.

The part about “Venezuelan soldiers” is particularly perplexing.

   

The good news is that it seems as though Evo agreed with Costas and got the marchers to stop.  So sanity still might prevail.      

Yankee go home

Human Rights Watch published an unflattering report about civil liberty under President Chávez.  As these things go, the report isn't all that damning.  It basically accuses him of, well, setting up a political machine:  (1) using the executive power of the state to go after political opponents; (2) undercutting the independence of the judiciary; and (3) denying resources to independent or opposition organizations.  It doesn't accuse him of tossing opponents in jail or ending freedom of expression. 

The reaction of the Bolivarian Republic?  Expel the authors.  The irony needs no comment.

Here is an English-language response to the report from the Venezuela government.  Here is an explanation of the expulsion.  Let me point out that the expulsion is entirely legal under Venezuelan law, and that many fully-democratic nations have similar (if seldom used) provisions. 

The HRW report is an interesting read, if you have the time.   

Old news from Santa Cruz

So Hugo declared on September 12th that he was prepared to intervene militarily if Bolivia's constitutional government came under threat.  The reaction in Santa Cruz?

As a patriotic American, I can't tell you how much it warms my heart to see demonstrators burn somebody else's flag.

UPDATE:  It gets better!  When the commander of the Bolivan troops sent to Pando arrived at the Cobija airport, he had to insist to an angry mob that he was not heading a Venezuelan invasion force.

No, it gets much better.  Chile's foreign minister, Alejando Foxley, publicly complained that President Chávez's antics nearly wrecked the Unasur summit.

Thankfully, Evo realized that Caracas wasn't helping him, albeit belatedly, and told his defense minister to reject Venezuelan overtures.  (It obviously would have been a bad idea for Evo to have done it himself.)  So far, negotiations with the Media Luna provinces seem to be going well.  Here's hoping. 

Cooler heads prevail

  An agreement has been reached to settle the conflict in Bolivia, at least for the time being.  The “Great National Agreement” is, IMHO, a thing of great beauty.  Basically, everyone involved realized that they were all going to lose if the violence escalated and decided to take a deep breath and calm down. 

Judge for yourself.  The text is below the fold.

Full moon rising?

Cooler heads may be prevailing in Bolivia.  The Army has taken control of Cobija, the capital of Pando province.  Governor Leopoldo Fernández has fled, accused of masterminding a massacre of government supporters.  Meanwhile, the National Democratic Council, which consists of the five governors of the Media Luna provinces (including Chuquisaca), announced that it will call off the roadblocks, although their supporters still occupy government offices outside Pando. 

Council representatives met throughout last night with Vice-President Álvaro García and the Vice-minister for Decentralization, Fabián Yaksic.  They seem to have arrived at an accord, which while not a resolution of the dispute, is at least an agreement to sit down and talk about it. 

Hugo Chávez, unfortunately, is being his own typically helpful self.  He's declared that Venezuela will intervene if Morales falls.  He's hurled accusations of treason at the head of the Bolivian armed forces, General Luis Trigo.  “I am willing to die for Bolivia,” said the President of the Bolivarian Republic. 

The president of Uruguay, Luis Alberto Lacalle, had an interesting response.  “Careful.  We've got Chávez, who suffers from verbal incontinence.  It could occur to him tomorrow to send a soldier to Bolivia, and that could cause a horrible conflict in the region.” 

Half moon at bay

The consequences of persistent inequality are with us today.  They appear to be pushing Bolivia towards civil war in slow motion.  Today there was a brief flutter of news about the situation because Evo expelled the American ambassador, and the U.S. followed suit, but in general you've got media silence in America.  The split is between the central government and “autonomists” in the “Media Luna,” which is marked off in dark green in this map taken from Mark Weisbrot: 

Things are bad.  How bad?  American Airlines just stopped flying to the country.  Autonomists in Santa Cruz have seized control of most federal offices in the province.  Tarija — which produces 60% of Bolivia's natural gas — experienced bloody riots yesterday, where autonomists seized the customshouses and airport and federalistas (my term, not a Bolivian one) blew up the governor's parking garage.  Meanwhile, the nightmare that my Brazilian and Bolivian colleagues discussed in Venezuela?  Well, it came true for about 12 hours. 

Brasilia is reacting in a manner that could best be described as confused, but understandably so.  On Tuesday, the Brazilian foreign minister committed a Kinsley, when he stated that if Morales can't secure the pipeline, then his government will be forced to open relations with the Media Luna.  Today, however, the Brazilian national security advisor reiterated Brazil's position that Bolivia has but one government and intimated that his government might send troops to support Evo. 

So what's it all about?  I'm sure you all can guess, but a rough overview is below the fold. 

Doug in Burundi, Part 9

Doug discusses three separate Burundian issues in his penultimate post in the Burundian series.  The first topic concerns the country's ethnic divide.  It's pervasive, but considering recent history the story is remarkably positive. 

The second topic concerns customs duties.  Burundi, like many African countries (and a few Central American ones) relies heavily on trade taxes for a quarter of its government revenues.  This is the unheralded elephant in the room during free trade discussions.  These countries have a pressing need for more public revenue, to build infrastructure and pay judges and carry out very basic state functions.  Yet they lack the administrative capacity to collect high levels of internal taxes.  Borrowing to build a state could square that circle, in theory; in practice, that hasn't worked out so well.  So what to do?

One possibility is to make like Angola or Mozambique, both of which have effectively handed control over their customs administration to foreigners.  (British foreigners, at that.  Crown Agents, whose flag is pictured above, specializes in running revenue collection in other countries.) 

That sort of empire-by-invitation doesn't seem to be on the table in Burundi, however, although one might think that the French government might be able to play a more pro-active role, if it wanted to.

The third and final topic concerns an issue I find fascinating:  how do banks function in an environment where the politics is unstable and the rule-of-law close to nonexistant?  I wrote my first book about that, and it's fascinating to watch a Togolese (or is it Nigerian?) bank and Burundian politicos deal with the same issues today.  Ecobank is an institution that bears further watching.   

Doug in Burundi, part 8

Here Doug discusses what cheap labor really means on the ground.  And he means cheap labor.  According to the U.S. State Department, workers in Burundi received on average 1,500 francs per day, or $1.40.  Since a 12-hour day wouldn't surprise me, Doug's estimate of 20 cents per hour might even be high.

You don't need to go to Western Europe to see just how poor that is.  To give an example with which Americans are familiar, production workers in Mexican maquiladoras cost US$2.64 per hour in 2006.  Production workers in all Mexican manufacturing cost US$2.75.  Total hourly direct pay for all employees (including benefits but not taxes and other social charges) averaged US$3.32 per hour.  (That'd be 5,752 pesos per month.)  Even farmworkers in the country's northern states make about US$1.50 an hour.  In short, Burundi is impoverished compared to Mexico.

Anyone who spends time in Latin America can see some of the effects of cheap labor, but nothing on the scale of what Doug describes.

Who cares about Georgia? Not the markets.

There has been a lot of talk recently about how the markets are punishing the Russian Federation for its actions in Georgia.  Dan Drezner, for example, writes:  “An estimated $21 billion left Russia last month, and the RTS Index has declined by more than seven percent this month ... this is a pretty high price to Russia to pay for creating two unrecognized buffer states.” 

It isn't just political scientists.  Investors also believe that the markets punish aggressors on their own.

I am not so sure.  No, let me be stronger.  I am almost positive that Dan Drezner is wrong about the economic damage that Russia is taking from its actions, even if I agree with his assessment of Russia’s weak political position. 

Markets do not punish successful aggressors.  Other countries can impose sanctions that punish aggressors, and that will hurt the markets.  That logic, however, runs exactly the other way from the sanguine belief that our brave new world of globalized markets contains automatic mechanisms that contain interstate war.

This chart shows the evolution of four different Russian equity indices.  The RTS-1 that Dan referred to in his post is in dark red.  The date that the Georgians started the war (August 8th) is represented by the bright red vertical bar.

Russian indices were in decline well before the war started.  If anything has happened since, it is that the decline has slowed.  This is not consistent with the hypothesis that the markets are punishing Russia for the war.

Below the fold is a closer look at the same data.  The closer look makes it even clearer that the markets are not punishing Russia for invading and carving off chunks of Georgia.

Daleyismo en Venezuela

I argued that President Chávez is building a political machine in Venezuela, not unlike the machines that used to riddle American politics.  Since Venezuela is obviously not a communist country, or even heading that way, I called it “Daleyism.” 

Anonymous responded:  “This is an absolutely retarded phrase. There is not a shred of evidence that this is happening in Venezuela. I’ve lived here for over three years, and know all kinds of families that do not belong to the PSUV, that absolutely hate Chavez, and have voted against him repeatedly, and they still have full access to ALL the benefits of the government, including state health care, education, subsidized food, pensions, etc. etc.” 

Anonymous, however, is wrong. 

How do I know that?  Simply put, because the Venezuelan government provided us with the data we need to see Daleyism in action.  In 2003, the opposition collected 3.5 million signatures calling for a recall election under the 1999 constitution.  In 2004, the government put all 3.5 million names on the web, including birthdates and addresses.  Chang-Tai Hsieh, Ted Miguel, Daniel Ortega (not this one, another Daniel Ortega), and Francisco Rodríguez realized that they could take the government’s list and check it against the Venezuelan household and industrial surveys.  The surveys follow 150,000 people twice a year, and include birthdates, gender, and residence, enough to match 87,100 of them against the list.  The industrial surveys track firms, but the identity of the firms’ board members is public.  Access to this data, then, let them see what, if anything, happened to the incomes and employment of signers versus non-signers. 

People who signed the recall petition saw a 4% drop in their incomes relative to non-signers.  Why?  Easy:  there is a big relative drop in public-sector employment of signers (4.3%), and signers who lost their jobs were more likely to have to move into the informal (and badly-paid) sector.  Now, Venezuela is a politicized society:  government supporters (ID’d as the signers of a counterpetition) saw an even bigger relative drop in their private-sector employment (5.9%), but they didn’t see a drop in their income, because they moved into the public sector.

Richard Joseph Daley would be impressed.

But Hugo Chávez is better than Richard Daley; no, he’s almost as good as Richard Nixon.  Remember my last post about Venezuela?  How Chávez has improved tax collection?  Well, as any American who remembers the Nixon administration knows quite well, a politicized and effective tax authority can be a very useful part of a machine.  Turns out that companies whose board members signed anti-government petitions saw a 33% relative increase in their assessed taxes.  (US$305,360 versus US$229,020.)  That’s the “ugly” part of Venezuela’s better tax administration.

They also received 51% less subsidized foreign exchange.  In a country where the government rations foreign exchange at subsidized prices, that’s one hella competitive disadvantage.

Brilliant machine politics!  Part of me can’t help but be impressed, although I suspect, given my general humorlessness about legal corruption here at home, that feeling would go away right quick were I in fact Venezuelan. 

More later on the misiones and PDVSA’s social spending.  But right now, back over to you, Anonymous.

Doug in Burundi, part 6, with hope and vaccines

Vaccination has made an astounding improvement in Burundian public health, even in the midst of civil war.  The question is how Burundi vaccinated so many in the midst of so much instability.  Below is a graph of disease incidence, indexed so that the number of cases in 1980 is set equal to 100.

There is some sad information in the data:  most of the improvement occurs before the outbreak of civil war in 1993.  (The Buyoya regime killed its opponents with impunity, but the state still functioned.  Mostly.)  Then there are disease outbreaks until 1997, which happens to be around the time the fighting started to trail off, right before the '98 peace agreement.  After that, disease resumes its downward trend, save for an outbreak of measles in 2000.

Burundi has not been peaceful since 1998, but nor has it been the scene of full-fledged civil war.  The state functioned.  In 2002, the vaccination program went into high gear, with many rebels even agreeing to respect the “Days of Tranquility,” during which the government set up 990 different vaccination sites around the country.    Here is a brief discussion of the logistics of vaccination campaigns in Africa.  Things were slightly easier in Burundi, where 77 percent of the population had access to health services in 2002 and foreign aid workers operated relatively freely. 

None of this is to minimize the accomplishments of the Burundian public officials who travelled off into the hinterlands to vaccinate the population.  It is simply to say that Burundi is not the worst of the worst in Africa, and the civil war was a terrible setback in a place where public health had been improving.  Backsliding is still a real worry.  Chronology here.

Doug, I would very much like to know more about the role of foreign officials in managing Burundian affairs.  There are countries (like Liberia and Afghanistan) where you can't turn around without encountering a foreign manager or a foreign agency carrying out state functions.  That happens even in Angola and Mozambique.  Elsewhere, foreigners are advisers, facilitators, and funders, but not managers.  What's the situation in Burundi?

Taxes and revolution

President Chávez has accomplished one big thing over the last few years:  he's significantly raised non-oil tax revenues.  Venezuela, like most Latin American countries, needs public spending on public goods.  For that, you need revenue ... preferably revenue that isn't directly tied to commodity prices.  For all the other mishandling of the Bolivarian Revolution, one necessary thing that the government has done right was bring on the fisc.

   

Of course, I had some doubts about this at the airport, where the first thing you see at customs is a big poster exhorting you not to cheat on your taxes.  That kind of thing is rarely a good sign.

But numbers are numbers.  The yellow vertical line shows the date of Chávez's inauguration; the vertical axis is the percentage of GDP collected by these other taxes.  The dotted blue line shows a continuation of previous policy.  Underlying numbers come from Seniat, the Venezuelan tax authority.

So how did he do it?  Ah, that's a good story, below the fold.

Building a machine

Chávez is building a very sophisticated political machine.  And I do mean machine.  The idea is to make key aspects of everyday life dependent on support for the United Socialist Party of Venezuela (PSUV).  It's not Communism; rather, it's Daleyism, put in charge of a country.  Do it right, and there will be no need for secret police or election stealing.  Do it wrong, and your government will eventually (if you're unlucky) start breaking heads or (if you're lucky) become like Mexico.

(Photo courtesy of oilwars.blogspot.com.)

The least machine-like part of the emerging PSUV machine involves the Mercal stores.  The Bolivarian Republic imports food and other basic products (or purchases them from approved suppliers) at market prices, and then resells them to the public through the Mercales.  I visited several; except for the one in a high-priced part of Chacao, there were always lines.  This should not be unexpected, of course.  If the idea is to get basic products into people's hands at subsidized prices, then lines are what should result, if the prices really are subsidized.

The problems?  Well, the first general issue is that it's never clear whether blanket subsidies are an effective poverty-fighting program.  It's also even unclear whether they are an effective vote-getting policy.  After all, Mexico's elected governments (see Chapter Six) have switched to targeted programs, as have Brazil's ... and politicos in both countries are very good at fighting for votes.  Mexico's IMSS and ISSSTE tiendas are no longer subsidized, or crowded, and the Conasupo stores are long gone. 

The second, Venezuela-specific issue is below the fold.   

A strange map

Normally I don't go in for this sort of thing very much, but I found the following map on pp. 378-79 of Volume 4, Global America 1915-2000, of Donald Meinig's magnum opus, The Shaping of America:  A Geographical Perspective on 500 Years of History.  The book was published in 2004, but Meinig states in the preface:  “I want to make clear that this half-millenium coverage ends in the 1990s. ... None of my commentary on America and the world has been shaped by 21st century events.” 

It seems like an attempt at a clean depiction of America's place in the world around 1999, without fetishizing national boundaries or becoming simple to the point of stupidity.  At least it does get me to thinking.  I'd have called the “Intervention Zone” the “extranjero vecino,” and I'd have placed Bosnia, Kosovo, and the countries of the Gulf Cooperation Council as falling under American protection ... and I don't really know what to make of the “Western Civilization” shade ... but it doesn't seem terrible.

It leaves out economics, grey areas (like Australia's own South Pacific near-abroad and France's “SysAdmin-on-the-sly”), and might lead a simple reader to not think enough about what “military protection” implies for the protector.  And it's probably misleading in all sorts of ways that I'm not noticing.  But it made me think about the world in 1999, the so-called “unipolar moment,” at least for a minute.  So here it is. 

ICSID v Chávez

So, President Chávez nationalized the cement industry the other day.  Venezuela agreed to buy 89 per cent of Lafarge for $267m and 85 per cent of Holcim for $552m, but Cemex requested $1,300m.  Venezuela sent in troops to take over Cemex's installation, and then offered $650m.  Chávez called the Mexicans “disrespectful.”  After accusing Cemex of tax evasion and excessive pollution, he went on say, “They're as Latin as we are, but they feel closer to el Norte.”  President Calderón of Mexico was not happy, but there was not a lot that Mexico could do about it. 

But there is someone who can ... ICSID.  I've mentioned it before.  ICSID is powerful.  When lefties blather on about "empire" or whatever, things like ICSID are what they mean, even if they don't know it.  ICSID can cause pain.  In fact, Venezuela's nationalizations have consistently (so far Exxon and Conoco are the only exceptions) given the nationalized companies everything that they want. 

Of course, it costs a lot to go to ICSID, and it costs even more to get national courts to actually order attachments after a ruling, so companies usually don't start an arbitration unless they think that they can win.

Cemex appears to think it can win.

And it seems that the Venezuelan government agrees with Cemex.  Right after Cemex announced that it was going to take the Bolivarian Republic to ICSID, Venezuelan officials announced that hey, yo, don't get all upset about the troops thing, let's talk.  Sixty more days, okay?  At which point President Chávez told the world that he has a secret letter from President Calderón that will help resolve everything.  “We asked the Mexican government to give us one more chance with Cemex's executives to see if we can come to a mutual understanding,” he said. 

My money is on Cemex getting something close to the $1.3 billion that it wants.  But it will be interesting to watch.  Even if you're a Cemex shareholder.

    

Bolivarians and Bolivians

Another thing that I didn't quite realize until I got to Venezuela is just how important the international dimension of the Bolivarian Revolution is to President Chávez. 

The above photo is of a speeding red jeep, of the sort that Chávez has distributed to various functionaries, with “Viva Bolivia libre” painted on the back window.  We were up in the “Country Club” neighborhood, a wealthy part of town where the government planned to build public housing until Chavista supporters started buying homes in the area.  Those plans, mysteriously, now seem to be on hold.

It was a Saturday, the day before Bolivia's recall referendum.  Chávez is deeply vested in Evo's success, and so he organized mass demonstrations in support of Evo Morales here in Caracas.  Parts of the city were a sea of red, gold, and green, and Evo supporters could be seen everywhere.  It formed a decent counterpoint to the opposition demonstration held on the same day. 

Bolivia is a member of the Alternativa Bolivariana para las Américas (aka, ALBA), along with Nicaragua, Dominica, and Cuba.  Honduras is on the verge of joining.  It isn't entirely clear what ALBA does (there's not a lot of institutional heft to it) but the Venezuelan government has vested a lot of rhetoric.  It also seems to have invested no small amount of money.  A back-of-envelope calculation from data in this Miami Herald article implies that subsidies to Cuba alone are worth around one billion dollars a year.  Information in this Reuters piece implies an even higher cost:  34 million barrels a year, worth around $4 billion, in exchange for Cuban doctors.  Chávez has given aid to Bolivia and Nicaragua under ALBA, purchased billions and billions of Argentine debt in support of the Kirchners, and finances oil purchases in the circum-Caribbean.

There are two mysteries to Chavista internationalism.  First, what's its extent?  How many resources has Caracas put into spreading Bolivarianism?  Second, what does President Chávez get out of it?  Neither one has a clear answer, but I'll take a very superficial stab at one below the fold.

26 leyes

Last weekend saw the opening of the Olympics and the outbreak of a genuine old-fashioned shooting war in the Caucasus.  Which means that the news from South America has been somewhat obscured.  I will take that as an opportunity. 

There are things that you can only really learn about a country by travelling there. I am now rather more certain both that the Revolución Bolivariana is fairly secure and that it will end badly.

On Saturday I attended an opposition demonstration that was rather poorly-attended for a country where the president had just decreed a series of reforms that had been rejected in a referendum less than nine months earlier. The big slogans were “No es no,” and “Pueblo, madura, esto es dictadura.”

The latter translates into the rather hectoring “Grow up, people, this is a dictatorship.” That’s not the slogan of an opposition that’s fired up and looking to convince people. No, that’s a cry of frustration.

More tellingly, the counter-demonstrators were good-humored and teasing, rather than angry and intimidating. “Oposición, madura, esto es locura” or “Opositores, maduran, cuanto tiempo durarán.”

Both sides had to do some violence to the proper placement of the emphasis in order to preserve the rhythm, but that’s what a good chant is all about!  Unfortunately, some of the demonstrators insisted on shouting “Pueblo, madura, esto es comunismo,” which just doesn’t work on any level.  Not when you keep strolling past branches of McDonald’s and ads for beauty creams on your way downtown. 

A bit more detail (and more pictures) below the fold.

Buy our book!

Go buy our book!  It is the best book.  Ever.  About anything.

 

Or not.  But is a very good book about Mexico since 1980.  Here are the chapters:

1. The second Mexican revolution: economic, political, and social change since 1980;
2. Mexico before 1982: the political economy of authoritarian rule;
3. The causes and consequences of free trade;
4. The Mexican banking system: the politics and economics of financial underdevelopment;
5. The transformation of Mexican politics;
6. Health, education, and welfare in Mexico since 1980;
7. Democracy and development in Mexico: future challenges and the legacy of authoritarian rule.

The book is a stand-alone, but it's really the second one in a planned trilogy.  You can buy the first part here.  Anyway, if you're interested in Mexico, economic development, or the importance of democracy, I'd recommend that you pick up a copy of Mexico Since 1980. 

Observatorio Argentino 4

What, no comment on Miami drivers?  Well, let's talk about Argentine politics instead.

On Tuesday, the government will be organizing counter-demonstrations against demonstrations put on by farmers angry over the Senate's looming approval of a hike in the country's soybean export tax.  The lead man organizing the counter-demonstrations?  The fellow in the black shirt in the below video:

That takes the phrase, "politics is a full-contact sport," to a whole 'nother level.  More below the fold.