The Power and the Money

Beer, banks, and revolution

  Doug Muir observes that breweries and banks seem to survive civil wars.  Now, Doug would never tell you, because he’s modest, but it so happens that he has a friend who’s a little bit knowledgeable about the effects of political violence and instability on economic activity.  His friend has even written an entire book about banking and instability. 

So, is Doug correct that banks and breweries tend to make it through political instability?  Short answer:  yes. 

Long answer:  well, let’s examine the data from one of the worst bouts of political instability to afflict any country with a substantial financial sector and developed manufacturing, at least outside the benighted continent of Europe.  Between 1910 and 1929, Mexico suffered a revolution, two insurgencies against the winner of the revolution, a counter-revolution, a counter-counter revolution, a civil war among the winners of the counter-counter-revolution, a military coup, another bout of civil war after an attempted coup by the Secretary of the Treasury, a presidential assasination, three more attempted coups, and a third civil war fought by angry Catholic guerrillas with a penchant for dynamiting passenger trains.  Among all that, what happened to the banks and breweries? 

Let’s start with the breweries.  Mexico’s domestic industry was created almost overnight during the last decade of the 19th century, with local monopolies established in virtually every major city by the 1900.  One of the industry’s leading firms (the Cervecería Cuauhtémoc of Monterrey, Nuevo León) came to control 28 percent of the national market.  It went on to spin off a glass bottle making company (Vidriera Monterrey) that quickly established itself as a domestic glass monopoly.  The other two major breweries were the Cervecería Moctezuma (of Orizaba, Veracruz) and the Compañía Cervecera de Toluca y México near Mexico City.  

During the civil wars, armed factions viewed factories as strategic assets that could be used to generate income for the army.  What typically occurred in occupied areas was that a faction would seize the factories and run them for its own benefit, or it would threaten to do so unless the management made a “loan” to the revolutionaries.  In April 1914 the forces of Pablo González took control of Monterrey.  For most of the year González occupied and ran the Cervecería Cuauhtémoc, where he continued to employ the brewery’s workforce.  By November the company’s stocks of raw materials had been used up. 

At that point, having extracted what he could from the operation, González returned the factory, apparently undamaged, to its owners.   

The upshot is that while production dropped during periods of generalized violence — 1914-19 and to a lesser extent 1922-24 — the breweries themselves pretty much came through intact.  In fact, beer was such a good market that the Cervecería Modelo started up in 1925, while the country was still rather unstable. 

So what about the banks?  Well, the banks didn’t fare that well during the civil wars.  They were where the money was. Governments and revolutionary factions plundered their cash reserves, forced them to make loans, and engaged in the unrestricted printing of currency.  It did not do good things for the banking system, which by 1916 ended up in government receivership — although in many cases the Carranza government wound up with little more than a Mexico City branch office and some papers.  On the other hand, the governments that came to power after 1916, however, regardless of their stated ideologies, all recognized that they needed a source of credit in order to restore political order.  

    

It took a while to put humpty-dumpty back together again.  A private banking system came back to life, but a December 1920 banking panic caused most of them to fail.  In 1921, President Álvaro Obregón announced that twelve banks would be returned to their owners; only five were able to reopen.  The government tried to regain access to foreign capital markets by restarting payments on the foreign debt, but the civil war triggered by Treasury Secretary Adolfo de la Huerta’s revolt put paid to that.  On the same day the revolt began, Banamex (the largest private bank, and one that existed before the Revolution) transferred $13.5 million to the International Bankers Committee.   The government simultaneously borrowed $5 million from the Huasteca Petroleum Company against future oil tax liabilities, with the intention of using the funds to make additional payments on the foreign debt.   Instead, the funds went to fight De la Huerta.  The diversion of funds meant that the government had to borrow from Banamex to pay foreign creditors ... on July 2nd, 1924, the government gave up and defaulted once again, this time for good.

In other words, this was not a healthy banking system.  A snapshot in 1917 would have showed it as pretty much dead ... but no matter how you put it, five banks did survive (including the two largest) and the system schlumped along despite the occasional civil war.  The government needed the bankers too much to kill the system dead.  In fact, it went out of its way to reactivate bank lending in 1925.

So how did they reactivate the banking system in 1925?  That’s another story.  The moral of this story is that Doug is right:  banks and breweries can survive even extreme levels of violence. 

Failure modes of the United States, part 1a, a counterfactual

  Gah.  Still can’t sleep, but my concentration keeps coming in-and-out.  Here goes a short post on a random topic.

The story of how the Supreme Court tried to hold up much of the New Deal is well known.  Roosevelt tried to appoint six new justices, which thankfully failed, and the Supreme Court reversed itself.  In an earlier post, I argued that it would have made little difference had the Court stuck to its initial rulings.  All that would have happened would have been a constitutional amendment reading something like the following:

Congress shall have the power to legislate in all cases for the general interests of the union, and also in those in which the states are separately incompetent, or in which the harmony of the United States may be interrupted by the exercise of individual legislation.

A less poetic version listed an economic laundry list (wages, health and safety, etcetera) and then said:

The due process of law clauses of the fifth and fourteenth amendment shall be construed to impose no limitations upon legislation by Congress or the several states with respect to any of the subjects referred to in Section 1, except as to the methods or the procedure for the enforcement of such legislation.

Such amendments would have changed pretty much nothing.  The Gun-Free School Zones Act of 1990 would have been upheld, and that’s about it.  So not a very big change.

That said, there was another very different amendment in play at the same time, proposed by Senators Burton Wheeler (D-Montana) and Homer Bone (D-Washington).  It had a lot of support, and since Wheeler was one of the biggest opponents of FDR’s court-packing plans, it was probably the most likely amendment to pass.  (Or so I take away from Bruce Ackerman’s book.)  It read:

In case the Supreme Court renders any judgment holding any act of Congress or any provision of any such act unconstitutional, the question with respect to the constitutionality of such act or provision shall be promptly submitted to the Congress for its action at the earliest practical date that Congress is in session, but no action shall be taken by the Congress upon such question until an election shall have been held at which members of the House of Representatives are regularly by law to be chosen.  If such act or provision is re-enacted by two-thirds of each House of the Congress to which such members are elected at such election, such act or provision shall be deemed to be constitutional and effective from the date of such re-enactment.

That is a bit like Canada’s “notwithstanding” clause.  Congress would have been able to override the Supreme Court with a two-thirds vote.  Unlike Canada’s clause, which requires a notwithstanding declaration to be re-authorized every five years, a Congressional override would have been permanent.  It also would have required a Congressional re-vote, rather than merely authorizing one.  On the other-hand, two-thirds is a rather high bar to jump over. 

Unlike the more concrete economic amendments, which would have changed very little, it is not unreasonable to conclude that the Wheeler-Bone Amendment might have had very significant effects on American history.  The question is how significant, and in what direction.  Could a removal of a veto point create a failure mode?   

For real, Economist, for real??

  First reaction to this:  Whoa whoa whoa whoa!  Is the Economist really castigating Catherine Ashton for belonging to the Campaign for Nuclear Disarmament in the 1980s?

Second reaction:  Are they really castigating her because, and I quote: 

“The Kremlin found CND and other ‘peace movements’ useful ways of undermining the unity of NATO, weakening the West’s defence posture and stoking anti-Americanism ... The ex-dissident Vladimir Bukovsky, an expert in Soviet penetration of the West, says, ‘the worldwide disarmament campaign in the early 1980s was covertly orchestrated from Moscow. To a substantial extent it was also funded by the Soviet bloc.’”

Third reaction:  Well, it didn’t appear in their print edition, but in a web-only column called Europe.view, so it doesn’t count.

Fourth reaction:  I’m not that old.  It counts.  Red baiting?  In 2009?  Really?

Fifth reaction:  Damn, the other columns in Europe.view are almost as crazy. 

Sixth reaction:  I’m still sick, but how often do you get to hear real funk music these days?  So I have other things to do, even though I will regret it. 

I leave you with a question:  has the rot from Lexington spread, or is this column just a one-off bit of teh crazy? 

The clock, unbeaten

  President Arias of Costa Rica just announced that his government will recognize the results of the Honduran election.  President Obama has been saying the same since the half-collapse of the U.S. attempt to broker a compromise, but now that someone of Arias's stature has signed on, it is pretty much over for Zelaya.  The clock will run out. 

 
The U.S. has handled things as well as could be expected.  For all my expressed (and ironic, for those of you who didn't pick that up) frustration at the lack of American power in Honduras, the truth is that Washington could have been much more muscly and forebearing.  It is a good thing (for the United States) that we were not. 

Brazil, not so much.  When it comes to the politics of energy, investment, and cross-border crime, the Brazilian administration has been very good at speaking softly and carrying a big stick.  When it came to a coup outside the country's normal sphere of influence, reverse it.  It wasn't bad until the declaration that they wouldn't recognize the elections, at which point it became pretty clear that Brasilia did not have much of a plan.  Moral stances are well-and-good, but absolute moral stances can do harm to the position that they are meant to support. 

Add the strange decision to invite the Iranian president for a visit to the Honduran imbroglio, and one has to wonder if Lula really knows how to play this game at the level his country has found itself at.  To be fair, he's been very good when his country's interests have really been at stake, so maybe I should stop complaining. 

End it, don’t MEND it

  So it appears as though the Nigerian government may have finally negotiated an end to the MEND rebellion.  MEND stands for Movement for the Emancipation of the Niger river Delta, and it has caused both the Nigerian government and the world oil industry major headaches over the past decade.  This success produced a lot of breathless hyperventilating about the unstoppable postimperial chaos overtaking the world ... only a matter of time before they blow up the Lincoln Tunnel!  Or something. 

 
The Yorkshire Ranter (who sometimes comments as Alex on this blog) summed it up pretty well.  MEND was not an amorphous group interested only in chaos, a sort of budget version of SPECTRE.  John Robb runs a website called Global Guerrillas, which postulates that the future lies with such unstoppable nihilists, who will use what he calls systempunkts to bring down our complicated economic systems.  (Calling Ashton Kutcher!)  Posts like this one assumed that MEND’s main goal, like SPECTRE, is chaos.(His math, I’ll add, is pretty fuzzy.  1.4 billion barrels disrupted?  Huh?  The increase in the oil price engendered by MEND attacks was a loss?  Wha?  The money was, what, burnt?)   

Rather, MEND in fact had specific goals that it wanted to accomplish and a specific set of tools to accomplish them.  Once the Nigerian government realized this, and got its act together sufficiently to deploy a rational set of carrots and sticks, the rebellion ended.  Now, the Nigerian government needs to follow through on its promises ... but MEND and the like seem to be standard guerrillas.  Inasmuch as they slid into criminality, they were standard criminals. 

Maybe I’m too much of a small-c conservative, or maybe I’ve just seen the movie before with good old General Manuel Peláez, who wrote the playbook later followed by Jomo Gbomo et al.  (God, that Wikipedia article is terrible.  Ni modo.)  But the Yorkshire Ranter is neither, and he saw through it. 

Which bring me to a question.  Why the resonance of all the “chaos is upon is!” mongering, when that is pretty clearly not the case?  Brazilian drug gangs notwithstanding.

We have seen the future, and it is California

  I can’t really claim to having said it first, but it looks as though Richard Yeselson, Ezra Klein, and Kevin Drum all agree with me.  Political polarization plus a stupidly-designed legislature have broken the American government.  We have seen the future, and it is California.

I mean, when someone as patently irrational as Joe Lieberman controls a veto point, we have a problem.  Maybe not a failure mode, but a clear problem. 

As they say, “Destruction leads to a very rough road, but it also breeds creation.”  Problem is, it isn’t clear that we're headed towards destruction, per se, just a slow decline as the health system collapses, the fiscal pressures ratchet up, and the climate goes kablooie on us.  Eventually, we hit the end state, or whatever 2030’s version looks like.

Counterarguments?

Honduran crisis over?

 It seems as though we may have an agreement to allow Zelaya back into office until the election.  Emphasis on “may.”  Congress and the Supreme Court need to approve it, and we still don’t know what limits it will place on Zelaya’s executive authority.  That said, the crisis may be over.

Once the Brazilians signed on to the Secretary General’s declaration that the clock won’t run out with the November 29th presidential election, some sort of resolution became imperative.  Yesterday the U.S. declared that it backed the Brazilian position, and a resolution become inevitable. 

One of the most striking things about the entire imbroglio has been the utter political incompetence of Roberto Micheletti.  Maybe he wasn’t responsible for the idiot decision to put Zelaya on an airplane out of the country instead of placing him under house arrest, but every dumb move after that lands on his desk.  He tried to justify the ouster with a fake letter of resignation from Zelaya.  He imposed and removed and imposed and removed restrictions of civil liberties that he had to know would neither stick nor intimidate the opposition.  He went head-to-head with Brazil for God’s sake, with an empty threat to storm their embassy. 

Honduran politics ain’t beanbag.  How did such a political incompetent ever get anywhere?  I mean, one usually expects politicians to be good at politics, right?

Not that the OAS (or even Brazil) showed itself to be particularly slick.  We’ll know more details later.  Still, I understand why the Brazilian government chose not to be slick.  The OAS, well, I have less sympathy for Insulza. 

Anyway, it does look as though the United States may have brought this mess to an end.  Of course, some idiots seem to think that we should have angrily backed Micheletti, regardless of the whole plane-packing  and opposition-from-rest-of-hemisphere issues.  Thank God that didn’t happen. 

Russia explained!

  So, there seems to be some evidence of disagreements between the President and the Prime Minister of the Russian Federation.  It shows up in trade policy, with Prime Minister Putin wanting to first cement the customs union with Belarus and Kazakhstan, and President Medvedev wanting to get the R.F. into the WTO ASAP.  It is hard to tell who's winning.  Other subtler signs of division have also emerged.  Who is in control? 

Well, Gancho tells us the answer.  It is all in this photograph. 

Hey Vladimir, what say we cut rugs at the discotheque tonight? Eh? A little dancing and some girls for the former president?

Shut up, pawn, or I bury you with fish in this water. Go away, you block my sun.

I say the Prime Minister is still in charge.  What say you?

Failure modes of the United States, part 1d

  I am superwhelmed at the moment, and so the backlog of posts (oil sands, other failure modes) piles up.  But I wanted to point out to readers that Brad Delong has cogently summed up the challenges facing the United States about which we've done nothing over the past two decades.  To paraphrase:

1. Medicare is gonna eat us alive, and we’ve known that for 20 years;
2. Private medical costs are gonna eat us alive, and avoidably kill a lot of people along the way, and we’ve known that for 20 years;
3. Congestion, global warming, and the need to play imperial policeman in the Arabian Gulf are gonna eat us alive, so we should start taxing coal and oil, and we’ve known that for 20 years;
4. As our relative power declines, other countries will eventually eat us alive, unless we do something to build an imperial exit strategy that leaves us secure, and we’ve known that for 20 years;
5. The deregulated financial system almost just ate us alive (and would’ve in fact eaten us alive without a willingness to throw money at the economy), and so needs to be re-regulated in a sensible way, and we’ve known that for about 20 months.

So here’s the question.  How much of the inaction is because the problems are hard to solve, and how much of the inaction is because the U.S. has a veto-filled political system?  Put another way, if the United States circa 1989 had somehow found itself with Canada’s constitution but the same distribution of political ideologies and interests that it actually has, would we have gotten more of a handle on these problems, or would we be punting just as much?

21st century something

  Now this is pretty cool.  It starts off as just a bunch of hardware rolling by.  Tanks, trucks, missile launchers ... although the blue digital camoflague on the missile launchers is a little odd.  What will they be defending, exactly?  Mongo?   Anyway, whatever.

And then comes minute 1:20. 

After which nothing is the same.  Watch it yourself.  But you want to put on your own soundtrack.  Rhythm-wise, “Tha Shiznit” is spot-on. 

China's 60th Anniversary national day - timelapse and slow motion - 7D and 5DmkII from Dan Chung on Vimeo.

I am speechless.  And highly entertained.  And sort of embarrassed for some of the participants.  What the hell was that with the hardhats and mirrors at minute 2:51? 

You can tell I had some trouble with the category tags here. 

Failure modes of the United States, part 2

  Today a conservative commentator for Newsmax called for a coup: 

There is a remote, although gaining, possibility America’s military will intervene as a last resort to resolve the “Obama problem.” ... Imagine a bloodless coup to restore and defend the Constitution through an interim administration that would do the serious business of governing and defending the nation. Skilled, military-trained, nation-builders would replace accountability-challenged, radical-left commissars ... Military intervention is what Obama’s exponentially accelerating agenda for “fundamental change” toward a Marxist state is inviting upon America. A coup is not an ideal option, but Obama’s radical ideal is not acceptable or reversible. Unthinkable? Then think up an alternative, non-violent solution to the Obama problem. 

The failure of the military to accept civilian authority was the second of Carlos’s proposed failure modes.  So let’s ask: could it happen here?  We won’t be the first.  Back in 1993, then-Lieutenant Colonel Charles Dunlap published an essay titled “The Origins of the American Military Coup of 2012.” 

In the scenario, the U.S. increasingly turns to the military, first to aid with domestic law enforcement and then, increasingly, to provide other services when the civilians deadlock.  (It’s too bad that the author missed the possibility that a collapsing private health insurance system might cause the government to mobilize domestic Medcaps.)  The military gains the experience to cheaply carry out governmental functions by becoming “the de facto government in many” places abroad where regimes had collapsed or been removed.  Finally, Dunlap postulates that a combination of the end of conscription, the exclusion of ROTC from liberal campuses, long overseas deployments, and attempts to improve on-post service life cause the military to continue to become ever more distinct from American society.  In 2007, Congress unifies the armed forces.  In 2010, the U.S. is soundly defeated in the “Second Gulf War.”  Dunlap doesn’t list the events that finally provoke the coup (a dolchstoßlegende is hinted at) but that wasn’t of course his purpose. 

Another deliberately vague treatment of an American military coup is in Starfarers, by Poul Anderson.  The book implies that the postulated coup occurs long after the elected parts of the United States government have become hollow shells, with a presidential “Advisory Council” calling most of the shots.  Anderson’s coup leader uses the military to oust the current crop of advisors and take their place, leaving intact the titular offices of President and Congress.  (Which is quite similar to what our conservative friend fantasized about today:  “Having bonded with his twin teleprompters, the president would be detailed for ceremonial speech-making.”)

Needless to say, there is no sign of any of this happening in the United States.  Discussion below the fold.

Cool stuff

  Crazy busy these days.  Will try to post more, promise!

In the meantime, two things.  First, I watched the first episode of Flashforward on ABC yesterday.  Not bad!  Despite being a little overly “cinematic,” my wife liked it too.  To her surprise.  The best thing?  They had “Quiet Dog” by Mos Def playing when everyone blacked out.  Awesome.

Second, this is old, but kinda cool.  I think.  Libby Dole and Lebed as the presidents?  Huh.

Passing the buck

  Most of you probably know by now that Manuel Zelaya has returned to Honduras and taken up residence in the Honduran embassy.  That is unexpected, but neither good nor bad.  What is both unexpected and bad is the reaction from the United Nations:  Secretary-General Ban Ki Moon just declared that the U.N. “does not believe that the conditions exist to organize credible elections that will bring peace and stability.” 

The good thing is that Lula is going to meet with President Obama in Pittsburgh to discuss the crisis.  If the U.S. is smart about this, and I have every reason to believe that our government will be, then we will defer to Brasilia.  It is probably true that our beloved hemisphere still needs a hegemon to preserve stability and insure prosperity.  It is also true that it would be better for my beloved country that said hegemon (a) not be the United States; (b) be a country a lot like the United States; and (c) be at the end of the day somewhat less powerful than the United States. 

Considering the low import of this crisis, I would once again recommend exactly the opinion what probably cost me my shot at a State job that I would not have accepted:  the United States does not need a Latin America policy ... as long as Brazil has one.

Then again, I have been blindsided by the possibility that this crisis might outlast the Honduran election.  So I ask you, gentle readers, what should Washington do about the situation in Honduras?  What should Brasilia do?

Failure modes of the United States, part 1c

  Many legislatures around the world have veto points.  If a particular party needs to be included in every plausible governing coalition, then that party wields an effective veto over policy.  Those situations, however, are rare.  They are also contingent on voter preferences.  One key election, and the veto player’s influence is gone. 

The U.S. Congress possesses multiple veto points.  One is the committee chairperson, who possesses almost absolute veto control.  Another is the Senate filibuster.  Neither of these are particularly new, but it is plausible to argue that two developments have made them far more problematic.

First, U.S. parties are far more parliamentary than they used to be.  It is now very difficult to peel away opposition legislators than it used to be, particularly among the Republicans.  Second, the Senate filibuster has become routine, creating a de facto 60-vote supermajority.  Thus, the emergence of two new veto points:  the Senate minority party and swing senators.  I wouldn’t bet on swing senators lasting all that long.  Moderate Republicans are down to two women from Maine.  Moderate Democrats are more common, but I suspect that the Democratic leadership will eventually figure out ways to discipline its members that are at least as strong as the Republicans’. 

I suspect, but do not know, that the above development is the half-threat to the American system of government that Carlos thought he might be seeing.

There are multiple ways in which this could cause the Argentinization of the United States.  The current employer-based health care system, for example, is collapsing.  A failure to reform won’t cause any sort of immediate disaster.  But it might (perhaps) cause inequality to increase while saddling those businesses that try to maintain coverage with unsustainable costs.  Over the decades, that could become a slow-motion catastrophe.  Conversely, American public finance is unsustainable over the long-term.  But the definition of “crisis” keeps ratcheting up.  You can punt for a long tine, as debt piles up and public services ratchet down, but unless a miracle occurs you eventually run down the public sector and with it, long-term economic growth.  In that story, we have seen the future, and it is California.  Finally, financial reform already seems to have been quite watered down.  You can’t blame Congress for that, and it might not even be a problem … but there are reasons to believe that we’re setting the stage for another October 2008.  Not to mention Simon Johnson’s suspicion that the U.S. government has been captured by a financial elite.  More veto points, the harder it will be to free the Republic from that capture. 

And then there is global warming.  There is no world government, which means that there is a coordination problem among the big players.  A U.S. incapable of making big decisions probably means that nobody makes the big decisions.  I don’t know, maybe the European Union would decide to impose carbon tariffs, or some farsighted Brazilian leader could bring together a coalition of everybody-but-America, but that seems unlikely. 

To be honest, I’m not convinced that the combination of the filibuster and parliamentary parties necessarily spells paralysis.  Nor does federal paralysis necessarily spell Argentinization:  this country has a lot of things going for it that Argentina never did.  But the legislative provisions of the U.S. constitution are not functioning well right now.  The growing ability of a minority to block Congressional action seems to me to bring a much greater chance of political failure than the presidential veto or judicial review. 

Failure modes of the United States, part 1b

  Judicial veto points seem unlikely to bring down the United States.  The judiciary has neither blocked needed political action, nor imposed great costs upon American business.  Peter argued in comments that it is possible to imagine a world in which lawsuits block everything and make legislation impossible to implement, but that hasn’t happened anywhere else and really shows no sign of happening here. 

What about America’s most famous veto point:  the President?  It is hard to envision a scenario in which this feature, by itself, could bring down the political system.  Congress can override it, and the voters can toss the President out every four years.  One can imagine a disasterous Herbert Hoover type vetoing legislation as the country sank into crisis, but it's hard.  Most of his vetoes were innocuous.  He vetoed the Tariff Act of 1930, a counter-productive piece of legislation if ever there was one.  He also ixnayed the Emergency Relief and Construction Act of 1932, but a compromise measure sailed through.  Congress overturned his other big vetoes.  In short, Hoover wasn’t stopping an activist Congress from fighting the Depression.  I suppose that one could imagine a situation in which a do-nothing President manages to let a crisis burn enough to have an even worse President elected in his or her stead.  Harry Turtledove tried.  But it is a bit far-fetched.

Failure modes of the United States, part 1a

  So how might the American system fail?  A few weeks ago, Slate ran a somewhat hyperbolic and rather uninformative series about the topic.  My friend Carlos Yu proposed five much more reasonable possibilities.  With classes about to begin, and not a lot of time to write more serious posts, I propose to take them in turn.  His first failure mode was:

There might be too many “veto points” in the Federal system to resolve new problems of government in a timely manner.

A “veto point” is simply a place in the political decision-making process where an individual or collective actor has the ability to call a halt.  In the political science literature that I engage with professionally, the phrase has a positive connotation.  Veto points stop expropriation and predation and civil liberties violation and the like.  But they can also stop needed reforms.  Many a ship of state has run aground because a powerful player prevented a change of course.

One veto point that it is not a problem in the United States is the judiciary.  This was not always true.  See Scott, Dred.  In the early 1930s, it once again looked like the judicial veto might cause a crisis, as the Supreme Court overturned on much of the New Deal.  This could have been a problem ... even if you don't like the New Deal (and parts of it, like the NIRA, were kind of silly), judicial stonewalling might have produced a far worse political backlash.

Only it didn't.  In fact, the judiciary turned out to be a bit of wet firecracker on the crisis-inducing front.  First, FDR tried to pack the court.  That was a bad idea, and died in Congress.  But the President had more ammunition in store:  several constitutional amendments to alter the meaning of the commerce clause were percolating in Congress.  One proposal would have given Congress the power “to legislate in all cases for the general interests of the union, and also in those in which the states are separately incompetent, or in which the harmony of the United States may be interrupted by the exercise of individual legislation.”  Others were less sweeping, but all made the point.  Either the Supreme Court changed its interpretation of the Constitution, or Congress would change the Constitution.

In the face of a credible constitution change, the Court reversed itself in 1937 and permitted most remaining New Deal legislation to sail through.  And if it had stood fast?  Well, we would have gotten a fairly innocuous constitutional amendment.  The Supreme Court didn't use the Commerce Clause to limit Congressional legislation until 1995, and even then it was over a small issue.    

Today the judiciary also exercises a veto power over egregious attempts to roll back civil liberties or use legislation to alter the social changes of the last 40 years.  Many have argued that in that veto has worsened political divisions, by taking abortion policy out of the political arena.  That may be true, but it is also true that almost all the social changes of the last half-century are quite popular, with the partial exception of affirmative action.  The judiciary, by exercising a veto, in fact allows the Republican Party (and, increasingly, pro-life Democrats) to attract socially conservative voters without any fear that they might suffer the national electoral consequences that would follow success in enacting truly socially conservative legislation.

In short, judicial veto points no longer stop constructive economic legislation, although they would be employed to stop Bolivarian-style expropriations.  The judiciary will not veto the federal construction of high speed trains, a national VAT, any conceivable health care bill, or carbon legislation.  Nor does the judiciary's regular overturning of social legislation create frustrations that will end in mass civil disobedience, let alone mass violence.  (Although small-scale violence tragically does occur.) 

Rather, the ironic result of the judiciary's defense of social change is to shore up social conservatism as a political force.  This is interesting, but unlikely to lead to the demise of the United States.  If one really believed in Jack Bauer, then one might argue that the judicial veto on things like torture and summary imprisonment could cause the demise of the nation, but I'm not going to bother with that one.

In short, if vetosclerosis is going to cause the failure of the American experiment, the judiciary is unlikely to be the source of the problem. 

Thoughts?

The value of hairshirts

  You ever have a thought that you were having trouble formalizing?  I’m there, and not just because I just got through spinning my wife around and yelling, “Jeter!  Jeter!”  Rather, it’s because I’m trying to express an argument that I think is wrong. 

Last week, I tried to understand why the Mexican federal government was busy cutting spending in the middle of a depression.  GDP is down 10 percent -- that’s a horrendous number, in the full depression zone, far worse than 1995.  Why would you cut spending in the middle of such a collapse, especially when the markets don't seem to be worried about the fiscal situation?  It has gone so far to prompt Mexican Ph.D. students at Ivy League universities to start wondering if the Labor Party has a point when it runs ads saying that things would have better under AMLO.   

Some smart observers whom I respect, however, support the government cuts.  Gancho draws attention to a column by Macario Schettino, an economic historian.  Schettino argues that Mexico's fiscal problem isn’t just a short-term problem caused by the Great Recession; rather, it’s a sign of long-term trouble, namely the decline of the country’s oil revenues:

“To respond to that we have only two options. One is to do the same as always, which we know how to do: fake change and place the country in debt. It’s a direct and, unlike on other occasions, short path off the cliff. ... The other path is more complicated. It implies recognizing the secular failure of a political project and making decisions of the same size as the crisis: historic.” 

But why can’t you have it both ways?  Run up the debt now, when doing so will prevent unnecessary suffering, and raise non-oil taxes later.  There isn’t any economic problem with that.  What I think Schettino fears is a political problem:  without economic pain now and a very hard budget constraint, the Mexican political system won’t make the tough decisions until it is too late. 

Of course, there is a slight contradiction in the sense that Mexico’s hard budget constraint is self-imposed.  Right now, Mexico still has oil revenues (albeit slowly declining) and the markets remain willing to lend.  Nothing is forcing (or even incentivizing) the government to refrain from borrowing more.  To use a strained analogy, Schettino seems to view the Mexican political system as a recovering drug addict who just got into a serious accident.  Painkillers would speed recovery and ease suffering, but he fears that their use could provoke a relapse.  The argument is a stronger version of the suggestions some of my colleagues (notably David Moss and Aldo Musacchio) made against Argentina’s debt repudiation back in 2005:  repudiation might make economic sense, but freedom from debt will also give the Argentine government freedom from the discipline imposed by the need to meet repayments.  That could open the door to damaging irresponsibility later.   In the Argentine case, Moss and Musacchio seem to have been more right than I was, as shown by the Argentine government’s subsequent faking of inflation statistics and general mismanagement under President Fernández.  

While the Argentine example is a strong one, I am not sure of the general principle.  Is a self-imposed constraint really a constraint?  Is the Mexican political system really so sclerotic that it needs a crisis now to avoid a crisis later?  And even if it is, why not wait for that hypothetical future crisis to arrive instead of plunging the country into a deeper depression now?  None of this is to say that I think the Schettino argument is specious.  It isn’t ... but I still don’t think it’s a good reason to cut government spending right now.   

But I’ve been wrong before. Does Mexico really need to impose pain on itself in order to reform?  Or is that just a good way to lose elections?  Thoughts welcome.

Is America in decline?

  I don't mean as a world-bestraddling empire and all of that; I mean as a polity with a government capable of responding to the needs of its citizens.  Here you can see a moderately-libertarian fellow worrying that the United States is headed the way of Argentina.  In comments you can read the counterarguments proposed by my friend and colleague, Carlos.  Or you can read this post on the same blog, which summarizes Carlos’s arguments.   

The above picture is of a beautiful woman in the most American part of America, the old stomping grounds of the Chase boys.  Clearly not Buenos Aires.  Could it become Buenos Aires, without the charm?  Could American political institutions cease working?  Read the links, then read the below, and tell me what you think.

Cha cha con ass

  On my one trip to the Philippines, the nation suffered an attempted coup just as I deplaned.  In Mindanao, On another, Abu Sayyaf started chopping off heads right before I got to Mindanao.  And then there was this.  So the country should maybe be worried about the fact that I just returned. 

In fact, the papers just announced that the city would be shutting down for tomorrow’s “SONA,” or “State of the Nation Address” from President Arroyo.  Mass demonstrations have been called, and the military in Manila has been placed on “red alert.” 

Why the fuss?  Well, you can sum it up in four short syllables:  cha-cha con-ass.  “Cha-cha” stands for “charter change,” or constitutional reform.  The reform in question concerns Article 12, Section 7, which prohibits foreigners from owning land.   H.R. 1109 calls for convening Congress as a constitutional assembly in which 3/4ths of all members would be needed to pass an amendment.  In effect, this would neuter the Senate, since there are only 24 senators against 242 representatives. 

The fuss, however, is not really because foreigners might be permitted to own land.  Rather, the fuss is over the possibility that the Con-ass might vote to switch the Philippine government to a parliamentary system, which many see as a way for President Arroyo to remain in power as prime minister, instead of stepping down as the current constitution requires.   It hasn’t helped that the National Security Advisor, Norberto Gonzalez, breached the idea of a “transitional government” headed by the Chief Justice of the Supreme Court, during which a new constitution would be drafted in time for the May 2010 elections. 

So we will see what the President has to say tomorrow.  It seems as though I’ll get another day to work in my hotel room, which is not a bad thing.

The Philippine legislature, corrected

  I while back, I ran a post about upper legislative houses in the Americas, including the Philippines, and a later one on Bolivia.  It turns out that I got the history of the Philippine legislature wrong.

The Constitution of 1935 established a unicameral National Assembly.  The reason was not that the drafters wanted a unicameral legislature.  (Although I'll be damned to understand why they didn't want one.)  Rather, the drafters wanted an upper house, but couldn’t decide on how it should be apportioned.  Delegates from underpopulated provinces wanted equal representation for each province.  Progressives proposed a Senate elected by proportional representation.  Conservatives wanted to keep the existing 12 senate districts, each with equal representation.  Each proposal lost in a vote.  Unicameralism emerged by default.  (See here, p. 144.) 

In 1937, President Quezon started to raise the bicameralism issue.  Publicly, he claimed that he feared that a unicameral legislature could create an “oligarchy.”  Privately ... well, who knows?  Ricardo Jose of the University of the Philippines believes that Quezon worried that a unicameral legislature could more easily challenge presidential authority, especially if a political enemy controlled it. 

Whatever the reason, Quezon got the Assembly to approve the change to bicameralism on September 15th, 1939.  (The amendment also changed the presidential term from six years to four and allowed re-election.)  How was the new chamber to be elected?  Article 4, Section 2:  “The Senate shall be composed of 24 Senators who shall be chosen at large by the qualified electors of the Philippines, as may be provided by law.” 

In other words, every three years Filipinos picked twelve names off a list of Senate candidates.  The top twelve vote-getters became Senators.  Sort of like proportional representation, only not.  The amendment passed the required popular referendum on June 18th, and President Roosevelt approved them on December 2nd.

As so often, however, the devil is in the details.  The 1941 election introduced “block voting,” in which a voter could check a box next to the name of a party, thereby automatically giving each of that party’s candidates one vote.  Under that system, a party that could muster a plurality would sweep all the Senate seats.  Unsurprisingly, Quezon’s Nacionalista Party managed to pull off just such a feat. 

For reasons unknown, the Philippine senate is still selected by at-large elections.  Yet another inexplicable upper house, out of so many that America has given the world.

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.