The Power and the Money

What would it take to get one billion Americans?

What would it take to get one billion Americans by 2100? Matt Yglesias does a good job of explaining why that would be a worthy cause in his book titled … well … One Billion Americans, but he doesn’t really say what it would take to get there. At best you can say that he proposes a bunch of policies that would be good in-and-of-themselves and will raise population growth on the margin. That’s pretty weak tea.

So what would it take? Well, here I’m going to focus on 2060 and 2100, since the Census Bureau projects out that far and I’m marginally likely to be alive, while my kids will be in their forties and (they better!) have kids of their own. According to the Census Bureau, the United States will have about 404 million people by 2060. The census projection then creeps upwards to 426 million by 2099 before starting to shrink.

The problem with that projection, as Lyman Stone will tell you, is that the Census is relying on outdated statistics. Both birthrates and net immigration have plummeted since they put together their estimates. I constructed a simple population model and plugged in actual Trump-era birthrates — i.e., 1.74 children per women instead of 1.89 and net migration of 0.6 million per year instead of 1.1 million. (I assumed the same improvement in mortality.) The result is a United States with only 362 million people in 2060. And that 2060 population will be falling, shrinking to 331 million by 2100 … a million fewer people than today.

So what could we do? Well, we could adopt Canada’s immigration policy. Using the net migration numbers for the “status quo” scenario put out by Canada’s Conference Board, American net immigration would rise to 2.7 million people by 2030. That’s about 4½ times the current number. Now, the current number has been pushed down by the Trump Administration, but immigration would still run about 2½ times the amount we averaged in 2000-16. (My calculations assume a ten-year phase-in period.)

But it would mean that the United States would accept a number close to all net migration into high income countries. According to the U.N., high income nations took in about 3.2 million people per year in 2015-20, down from a peak of 4.7 million per year in 2000-05. Now, I have no doubt that there is a lot of pent-up demand to emigrate held back by U.S. restrictions. But the United States is so big compared to Canada or Australia that it’s a real question whether we could attract this level of immigration over the next 80 years even if we wanted to. It is doubly unsure whether we could attract those numbers using the Canadian-style points system; we would almost certainly need to give bigger weight to other factors than Canada does or lower the cut-offs. 

And even that wouldn’t get us to 1 billion. Rather, the U.S. would hit 465 million in 2060 and 594 million in 2100. That’s a healthier population than you get under current policy, but it isn’t exactly the kind of dynamic growth that Yglesias (or I) would want to see.

To get to one billion by 2100 (or 570 million by 2060) you would also have to raise the total fertility rate (TFR) to 2.4 children per women. That is not a historically high number, but the only developed nation to maintain numbers that high is Israel. And even there, the number for secular Jews is only 2.2. At a TFR of 2.2, a Canadian immigration policy would get the USA to 534 million by 2060 and 851 million by 2100. A more realistic (but still hard!) TFR of 2.0 would get us 503 million by 2060 and 730 million by 2100.

But 730 million is not one billion.

I understand that hitting that target wasn’t Yglesias’s point. Rather, his point was twofold. (1) Here is a frame for a bunch of good policies! (2) Why the hell are most Americans afraid of aiming big anymore? For me, (2) is the salient point. We’re a technophilic nation, so it’s not that we’re afraid of change in general. What we’re afraid of is a certain kind of change, one involving big collective endeavors. We cower from building new cities, new roads, skyscrapers in our back yards, nuclear power plants, the Green New Deal. That’s a bad thing. We should stop. We will have a better future if we stop.

But sadly, absent some incredible rise in fertility or an unlikely drop in mortality, that better future won’t involve one billion Americans.

What if America had been unpopulated in 1492?

The long Twitter debate between Pseudoerasmus and Gabe Mathy was triggered by an essay in Jacobin by my friend and colleague Suresh Naidu. He wrote a piece about what North America would have been like had the native population avoided decimation from infectious disease.

As a piece of counterfactual history, the essay has problems. The first is that we really do not know the pre-contact population of North America. Using his assumption of 0.5% population growth thereafter, we get a range of 26 million to 234 million native Americans today. Needless to say, those are radically different scenarios. The second is that the presence of large-settled native populations would have changed the dynamics of later immigration; would as many Europeans have arrived if North America had 45 million people in it around 1800? Finally, it seems likely that a large native population would have derailed the development of the institutions that sustained rapid North American economic growth. 

But as a polemic, the essay is quite successful. The latter two arguments unambiguously strengthen Suresh’s overall point, which is that there was nothing inherent in English culture that insured that its settler colonies would become rich and democratic places. The presence of an exploitable settled population would have permanently derailed the American experiment. Pseudoerasmus and Mathy were debating whether the English would have created an apartheid scenario (Mathy) or something more like Mexico (Pseudoerasmus). Neither seemed to doubt that the resulting society would be more oppressive and less democratic than what really emerged in the northern United States and Canada. Nor does Randy McDonald in his discussion of the piece. 

The essay raises an interesting question, however. If larger native American populations would have prompted the creation of a more extractive and generally nastier North American state, potentially with multiple rounds of civil war, what would have happened if there had been no native Americans when the Europeans first arrived in 1492? What would have been different?

It turns out that James Axtell was there in 1987.

First and foremost, Spanish colonization changes completely. Without the great civilizations in the highlands of Mexico and Peru, the Spaniards take much longer to move inland. Without the Taíno in the Caribbean, it is entirely plausible (albeit unlikely) that the Spaniards give up on the whole enterprise. Still, somebody would eventually set up Caribbean and Brazilian plantations based on African slavery but Mexico and Peru will remain backwaters. Nobody settles in the Río de la Plata until the 19th century. (And I suspect that it will be British settlers who land there, claiming it from a moribund Spanish empire.) With no silver fleets there is no Sir Walter Raleigh and his tropical adventures. So no British Guyana, just a vague area where Venezuela meets Brazil. Ditto, there is no French empire in Canada. No fur trade, no New France. 

Second, when the British finally do settle the eastern seaboard, later than in our world, their expansion is slower and messier. There are no American domesticated food crops. There are no native American agricultural techniques to learn. And with no seasonal burning by the native Americans, the forests are that much harder to clear. There is no native American medicine. No snowshoes. No toboggans. No longhouses. No canoes. And idiotic English hunters crashing around in bright colors and scaring off the game. In short, the colonists will have to invent a lot of wheels for themselves that in our world they got from the Native Americans and that is going to slow initial settlement by a lot, decades at the very least, possibly a century.

New York and Pennsylvania in particular will develop more slowly; without the profits from the Indian trade, it will be much harder to raise capital for settlement. North America will be even more skewed to the slave south.

Third, no independence until well after 1776. Once the eastern settlements are finally established, expansion is going to rocket westwards with no Indians, French, or Spanish to slow it down. Slaves will get sucked into the south even faster, but there will also be more escaped slaves lighting out to form colonies in the interior. Axtell postulates, plausibly but without a whole lot of solid evidence, that absent the Indian threat American society would be a lot less religious and lose its “garrison mentality.” In his words:  “The jeremiads of New England would certainly have been less shrill in the absence of the Pequot War and King Philip’s War, when the hostile natives seemed to be ‘scourges’ sent by God to punish a sinful people. Without the military and psychological threat of Indians within and without New England’s borders, the colonial fear of limitless and unpredictable social behavior would have been reduced.”

With much more evidence, he also postulates that with no wars, there is no need for Britain to raise colonial revenues. Nor is there any reason for Britain to restrict westward expansion. That is probably enough to head off the Revolution. And if later revolts should occur, the colonists will have two huge problems. First, they will be more separated from any martial habits. No militias, no real combat experience, just a vasty totalitarian infrastructure of slave catchers. Second, they will have no Indian opponents from which to learn guerrilla tactics. 

So by 1850 you have a British slave empire that sprawls over the entire continent, well into northern Mexico. (Who knows? Maybe it will British Americans heading south who discover the mines in Zacatecas and exploit them with slave labor.) The northern reaches will not have slavery, for the same reasons as in our world, but they may be less religious and less moralistic, more crassly commercial and more dominated by large landowners. 

You have a Caribbean and a Brazil that do not look entirely unlike our own ... but which have less European settlement. (With no natives to conquer and no native women to marry, Iberian migration will be slowed.) You have growing slave populations around the Mexican lowlands, parts of Central America, and possibly parts of the Peruvian coast ... but I would venture not much in the latter. There is no Panama Real or Camino de Cruces across Panama; those routes, primitive as they were, were constructed by native American slaves captured from Nicaragua.

American silver was less important to sustaining Spanish imperialism in Europe than many realize, but there will be no Price Revolution or Columbian Exchange ... and that will change Europe in unpredictable ways. 

But in America, well, things look ugly. If a Revolution does come, it looks likely to take the form of a Treasonous Slaveowner’s Rebellion against the Crown, but that assumes that a British government unexposed to the shock of the American Revolution will be as open to the movement of public opinion as our own. This British crown might not take any serious moves against the horror, and thus provoke no rebellion. The strain of New England moralism that produced abolitionism in our world might be weaker, or not there at all. 

“We are trying to do for the national security apparatus what FedEx did for the Postal Service”

Thus spoke Erik Prince in 2007.

Looks like my decision to take a look back at Blackwater was prescient. (Well, I had some inside information.) Today the New York Times reported that people within the Trump administration persuaded Erik Prince to try to sell the Defense Department on expanding the U.S. operation in Afghanistan by using private military contractors.

This proposal begs several questions, not least: would it save any money? But let’s punt on that for a moment. Here I just want to briefly review America’s history with private military companies.

The first clear-cut use of American private contractors to carry out a core state function — perhaps the core state function, the use of violence to defend the people — dates back to the Revolution. The fledgling United States needed to interdict British supplies and defend its commerce with its French and Spanish allies. The problem was that the rebel states had no standing navy, and lacked the time to construct one. Congress solved the problem by issuing “letters of marque” to private merchantmen. Once possessed of a letter of marque, private merchantmen would finance the outfitting of their ships with weaponry and proceed to attack British and Loyalist shipping in return for a bounty per enemy ship destroyed. The Continental Navy never numbered more than 40 vessels — Congress commissioned only 64 ships over the course of the Revolution — whereas the number of privateers peaked around 450. Almost 1,700 private vessels conducted combat operations for the United States in 1776-82.

The U.S. again turned to privateers when it again went to war with Britain in 1812, Congress having refused to appropriate money for a standing navy. In that war, privateers earned approximately $40 million — 5.1 percent of the country’s GDP at the time.

Congress again turned to contractors during the Mexican-American War. When the Army needed to make an amphibious landing at Veracruz in March 1847, it chartered 54 private steamships and 249 other boats. The Army also hired teamsters, laborers, and mechanics for service in Mexico. Civilian personnel, however, refused to serve for longer than six months, demanded exorbitant wages, and many proved to lack the skills they claimed. Reports complained of price gouging. [1] An embarrassed Quartermaster-General suggested that the Army establish a corps of enlisted laborers and proposed that the Navy should operate transports: “[I was] constantly embarrassed by the want of that practical knowledge which nautical men only possess.” [2] Congress did not follow his suggestion, and the Army again employed contractors against the Seminole Indians in Florida during the 1850s. [3]

When the Civil War broke out in 1861, both sides found themselves unprepared. Confederate privateers attacked Northern shipping. The U.S. side, however, broke with the past and did not employ privateers. Rather, Congress drafted 600 civilian vessels into armed service, and recruited 70,000 sailors to man them. Congress did, however, contract with civilians to move military supplies. One entrepreneurial New Yorker purchased a used ship for $12,000 and earned $833,000 from the government — the modern equivalent of $1.2 billion. [4]

The U.S. may not have employed armed contractors at sea during the Civil War, but it did on land. The Army of the Potomac under George McClellan hired Allan Pinkerton’s “National Detective Agency” to gather intelligence in the South and conduct counterintelligence operations in the North. A problem arose, however, when the commander-in-chief of the U.S. Army, Winfield Scott, contracted with Lafayette Baker to provide similar services. In at least two cases, agents of one contractor wound up arresting employees of the other. More seriously, when President Lincoln fired McClellan in 1862, Pinkerton also resigned and took with him all the intelligence that he possessed about Confederate operations. [5] The Army eventually wound up bringing intelligence functions in-house. [6]

After the Civil War, military contracting went into eclipse. [7] The U.S. chartered private ships for use in the Spanish-American War of 1898, but only under strict military control. The federal government allowerd merchant vessels to arm themselves during both World Wars, but the centralized structure of the Merchant Marine bore little resemblance to the private contracting of the 19th century. In the Korean War, the South Korean government provided the U.S. Army with 50,000 civilian laborers to move supplies to the front, but the “Civilian Transport Corps” was never really a private organization, and the U.S. and Korean governments soon reorganized it into the paramilitary Korean Service Corps. [8] During the Vietnam War, the Military Sea Transportation Service hired private vessels to transport materiel to the war zone, but their crews were given Naval ranks and uniforms and came under military discipline while in-theater. [9] The Army employed private contractors to construct bases and ports in Vietnam, but military engineers outnumbered civilian ones 2-to-1. [10]

And that was that until the late 20th century. When the NATO occupied Bosnia and later Kosovo, the Clinton administration was reluctant to make the sort of mass reserve call-ups needed to sustain the occupying troops in the field. The figures are rather muddled and they include all sorts of non-support personnel, but about half of all DOD-funded people in the Balkans were technically civilians employed by somebody other than the U.S. government.

Which brings us to the modern era and another post.

Sometimes the simplest things are the hardest: explaining the $2 trillion Trump budget error to Uruguayans

Some of you may have heard of the ridiculous error in the Trump budget.

The error, in fact, is so ridiculous that you may have some trouble following the explanations. Matt Yglesias and Larry Summers, for example, managed to confuse me about something super simple. So how was I going to explain this to a bunch of incredulous Uruguayan economists? 

Finally, here is what I told them.

1. The Treasury Secretary published a bunch of tax cuts that would cost $4 trillion. But he then said: hey, no worries, the cuts will speed economic growth so their actual cost will be only $2 trillion.
2. The budget director took that estimate and said: we have tax cuts that cost $2 trillion, but hey, no worries, the cuts will speed economic growth so their actual cost be zero.

Uh ... yes, the error is that stupid. Thus, it was weirdly hard to explain.

Hechos alternativos in the Financial Times?

Today the Financial Times published a mysterious map purporting to show Mexican-American border disputes, according to Senator Patricio Martínez. I am more than slightly surprised that the newspaper is giving such credence to the Senator’s bizarro-world claims with no further fact-checking. 

It is a very nice map, except that we do not have the foggiest idea where it comes from, save perhaps the febrile imagination of Senator Martínez.

Article I of the Gadsden Purchase Treaty lays out the border pretty specifically. Martínez seems to be suggesting that nobody noticed that Nogales lies entirely inside Mexico. He also seems to be suggesting that the Gadsden Purchase Treaty said that the line west from El Paso should have run 115 miles instead of 100. Which would be fine, if the treaty didn’t, you know, say “one hundred miles.” 

The story in the FT piece about the Mexican government discovering that the stone cairns marking the border had been destroyed is true. The problem with the story is that the U.S. and Mexican governments spent six years resurveying and delineating the border in 1891-96. The Barlow-Blanco resurvey went over the whole damn thing and replaced all the missing border markers. You can read the whole report here. 

As for the 1897 note from the Mexican foreign minister, I have no idea. I do know that Matías Romero signed a border convention in October, so his objections, whatever they were, did not seem to be major. 

To conclude: the newspaper should report that a Mexican senator is claiming that the border is in the wrong place! But I would think that maybe, you know, they might also at least hint that there is pretty much nothing behind those claims. 

Hechos alternativos

A Mexican senator has called for Mexico to reopen all its border disputes with the United States in order to oppose the Trump administration. (Hat tip: Mexfiles.) According to Senator Patricio Martínez — who formerly served as governor of Chihuahua, a border state — the Mexican government should insist on the transfer of about 400 square kilometers that Porfirio Díaz asked for back in 1890. “Díaz was unsuccessful, but Mexico should send a new diplomatic note to Washington to rectify the border limits,as defined in the two 19th century treaties. If Trump refuses, Mexico should seek the intervention of the International Court of Justice, in the Hague.” 

Senator Martínez is planning to fund a commission “to document what has been known since the time of Díaz, that the treaties of Guadalupe Hidalgo and La Mesilla, which set the border between the two countries are not applied, and there are differences and errors in favor of the United States which must be corrected.”

That would be a great plan if there were any evidence that the United States and Mexico had any outstanding border disputes. Sadly, there does not seem to be evidence of any such conflicts, not since the Boundary Treaty of 1970. The idea that the U.S. is sitting on 400 square kilometers of Mexican territory would be an alternative fact.

Wagging the Dog: Lessons from France and Gabon

In 2011, France was wracked by corruption scandals in which African leaders, from Côte d’Ivoire and Gabon in particular, passed off millions of dollars in cash to the Jacques Chirac and Dominique de Villepin. It was the flip side an earlier scandal in which the French national oil company, then called Elf Aquitaine, funneled millions of dollars per year into the coffers of Gabonese leaders. The African tail had begun to wag the French dog; some politicians called it “reverse colonization.”

And now it looks like something similar could happen under President Trump. Consider our own former colony in the Philippines. President Rodrigo Duterte has appointed Jose E.B. Antonio to be Manila’s special representative to the United States. Antonio also happens to be the CEO of Century Properties Group, which is building the Trump Tower Manila and paid the organization around $5 million for the privilege of using the Trump name. More payments are due: one Trump deal in Puerto Rico involved a 12.5% share of profits plus a 4% slice of operating revenues in addition to the up-front fee. 

What happened in France was illegal. What is happening in America appears to be legal: the payments from the Philippines are not coming directly from the government.

But what happened in France had tangible effects on Africa. France continued to prop up the execrable Bongo dynasty well past its sell-by date. In 2008, for example, the French government shut down an investigation into the provenance of Omar Bongo’s Parisian real estate portfolio. In 2010, the American embassy in Cameroon reported that the Gabonese government embezzled funds from the Banque des Etats de l’Afrique Centrale — that is to say, one of the two central banks serving French West Africa — and used them to support President Nicolas Sarkozy. When Bongo’s son, Ali, won the 2016 election with a razor-thin (and clearly fraudulent) margin the country erupted into riots. Ironically, the 2011 corruption scandal made France reluctant to pressure Gabon with anything stronger than mild language: not because Gabonese oil is so important, and not because Hollande received Gabonese money, but because the public scandal itself made any French actions in Gabon appear to be a continuation of the illicit ties between the two nations. 

Right now, a legal battle between President Bongo and his sister is bringing some of the looting to light and the European Parliament threatened sanctions on February 2nd. But Bongo is still there and Gabon is looking far more fragile than an oil-rich coastal statelet of 1.5 million people has any right to be. 

So now in the Philippines you have Duterte running death squads and cozying up to China. Maybe no U.S. president would have been able to do much about the former (and the latter likely deserves no response). But President Trump is not even going to try. And maybe he would not have tried no matter what. But the stench of corruption lies about it. Françafrique, meet Philamerica.

And worse yet, there are other, even more depressing places involved. Wagging the dog, indeed.

Duterte or not Duterte?

 Imagine my surprise when the Economist told me that President Duterte made two quotes in his inaugural speech: “Abraham Lincoln, expressing mildly laissez-faire views; and Franklin Roosevelt, expressing gently left-leaning sentiments.” 

Oh, I wasn’t surprised that Duterte made contradictory quotes! No, I was surprised that Abraham Lincoln expressed “mildly laissez-faire views.” What might those be? Well, here is the quote from Duterte’s speech: “And from Lincoln I draw this expression: ‘You cannot strengthen the weak by weakening the strong; you cannot help the poor by discouraging the rich; you cannot help the wage earner by pulling down the wage payer; you cannot further brotherhood by inciting class hatred among men.’”

That certainly would be mildly laissez-faire! The thing is that the quote isn’t from Lincoln. Nope, it’s from William Boetcker, a Presbyterian minister, written in 1916.

What does “bias” mean?

The Washington Post publicizes a lot of good political science these days. (Thank you, Mr. Bezos!) They recently ran a column entitled, “Americans aren’t biased against Latino immigration. Here’s what they actually fear.” 

Short version: Morris Levy (USC) and Matthew Wright (American) surveyed a bunch of white Californians about their attitude towards immigration. They humanized their questions by asking the respondents about a particular individual, either a Mexican immigrant named “Juan,”  a Chinese immigrant named “Yuan,” or a German immigrant named “Johan.” In addition, half of all respondents were told that the immigrant they read about had lived in the United States for two years. The other half were also told that Juan/Yuan/Johan speaks English and has worked steadily as a waiter.

Here is what they found:

In other words, when there was no information about the immigrant, more white Californians supported legalization when thinking about somebody from Europe or China than from Mexico. But if they were told that the immigrant worked and spoke English, the gap disappeared.

The authors then conclude, “Discrimination against Latinos may grow not from hostility against an ethnic ‘outgroup,’ but rather stereotypes about whether they will contribute to the United States or become a burden.”

It’s a neat result, but I don’t understand the conclusion. They find that when told a male immigrant has assimilated, white Californians don’t care about his ethnic background. But they also find that without any information, Californians assume that Mexicans are much less likely to assimilate than other immigrants. They conclude that people stereotype Mexican immigrants as less educated and more likely to become a public burden. 

That is possible. But there is another explanation. They found that white people in California don’t consider Mexicans impossible to assimilate. But their results are consistent with the hypothesis that white people consider Mexicans to be intrinsically harder for the American melting pot to melt. 

Wouldn’t that make them an ethnic outgroup?

Is racial discrimination increasing in the NBA?

 OK, you want a truly surprising result? Two Japanese scholars constructed an unbalanced panel of NBA players from the 1985-86 season to the 2015-16 season and found this:

Contrary to the results of previous studies, we find that non-white players are paid equally to white players with similar characteristics in the 1980s and 1990s, but that white players started to be paid 20 percent more than non-white players in the last 10 years. Our results are robust in all specification checks such as the quantile regressions, controlling the sample selection and controlling different contract types. Non-parametrically estimated density of the counter-factual salary of non-white players confirms our results. In addition, we find that neither the employers preference nor income gap of white and black fans explain this increasing salary gap.

You want to know how much we are talking about? Well, with the caveat that these estimates are very imprecise, you can go to page 3: “Consistent with the previous literature, which shows that racial salary discrimination was disappearing in the 1990s, we find that during the 1980s and 1990s, there was no white premium. However, in the 2000s, we find that the white premium becomes about 9 percent (p < 0.05) and in the 2010s, it reached 26 percent.”

Italics mine. And warranted, I think. Is the result convincing, and if so, what is going on?

The United States has always been at war

 The New York Times had an article today about Obama’s “war presidency.” It isn’t a bad article, but it makes much of the idea that there is something new in the idea of a U.S. fighting foreign enemies in less than “an all-consuming national campaign, in the tradition of World War II or, to a lesser degree, Vietnam.” 

The article went on to say, “The longevity of his war record, military historians say, also reflects the changing definition of war.”

Except, as I wrote in 2012 in response to the debate around Rachel Maddow’s Drift, the definition of war hasn’t changed! I was disappointed that none of the people engaged in that debate recognized that history didn’t begin in 1945. So, it has lurched up again the idea that there is something new about having the U.S. continuously engaged in small-scale low-casualty low-footprint military actions, let me repeat what I said in 2012:

In 1898, the United States went to war with Spain. Between 1898 and 1902, American troops battled Philippine insurgents. Peace came to Luzon in 1901-02, but fighting continued on Mindanao until 1912. In 1904, the U.S. navy bombarded rebel positions in the Dominican Republic; eventually U.S. Marines wound up (with the permission of the local government) occupying the customhouses. In 1906-09, we occupied Cuba, although there was (to be fair) not much fighting. In 1907 and 1911, we deployed to Honduras to halt Nicaraguan invasions. Between 1912 and 1925, U.S. Marines actively hunted insurgents (the original Sandinistas) in Nicaragua. In 1914, we once again bombarded Dominican rebels; we also occupied Veracruz to prevent arms from getting to the government. Between 1914 and 1934, we occupied Haiti: unlike Cuba in 1906-09, that one did involve quite a bit of fighting. We did the same on the other side of Hispaniola in 1916-24. In 1916-17, we invaded northern Mexico after Pancho Villa attacked Columbus.

Then there was World War 1. After which ... 

In 1917-19, U.S. troops again garrisoned Cuba. In 1919, we landed in Honduras to protect a neutral zone during a civil war. Between 1918 and 1920, American forces blundered pointlessly around Siberia doing something or other, and sustaining a lot of casualties. For a few days in Guatemala, Marines saw combat during a civil war in that country. In 1925, we invaded both Honduras and Panama during periods of unrest.  In 1933 and 1934, we waved gunboats around Cuba, but no war was necessary, since we succeeded in overthrowing the government by what would today be called covert action.

And then, peace until 1941.

Counting ... between 1898 and 1934, the United States was at peace for all of ... well, never, actually.

It is true that with the exceptions of Mexico, Siberia, and Cuba, most of the American interventions were not sold as protecting what we would today call the Homeland. But those are three large exceptions! 

In short, President Obama’s experience as a “president at war” rather than a “war president” is nothing new. McKinley, Roosevelt, Taft, Wilson, Harding, Coolidge and Hoover would find it very familiar. 

Natural gas exports to Mexico

 ... are a big deal. Our earlier take here. The link goes to the Financial Times, where a good article discusses the fact that the real impact of Mexico’s energy reform is in the rapid growth of pipelines linking it to the United States. Even considering the overly-optimistic projections for U.S. LNG exports, exports to Mexico will outpace them. 

Mark to market: natural gas prices have been astonishing low for almost two years, yet American production continues to grow. I have some ideas, but unlike the persistence of tight oil production, it is not what I expected. 

Two of these places are not like the others

 So the intrepid data team at the Economist collated all internet mentions of the term “51st state” and came up with the following map:

Don’t ask me to explain the references to existing states. But for most of the foreign countries, I get it. Australia, Britain, Japan, very close treaty allies. Canada and Mexico, in NAFTA. (Canada’s also a very close treaty ally.) Taiwan, special relationship. Caribbean, Philippines, Ireland, lots of emigrants to the U.S. (Bora Bora and Brunei, that’s just weird, but whatever.) 

In fact, I’m surprised that more Latin American countries didn’t crack the top ten: Colombia, El Salvador and Panama have a right to feel slighted. 

But what are Russia and North Korea doing on this list?? Who refers to them as America’s 51st state? And why?

DMZ comic book easter egg reveal

 The previous post reminded me of DMZ, an excellent comic book about a future American civil war. 

Towards the end of the series, we get to see the President of the United States, who leads government forces in that war. He is never named. But you see his face. And he is ... Dennis Kucinich.

It’s a nice touch. Read the books. James Nicoll should review them as part of his Military Speculative Fiction That Doesn’t Suck series.

Children can handle the truth about American history

 So the other day the boy and I went down to the Lincoln Memorial. We started at the President’s house. He then wanted to see the Lincoln Memorial, because Lincoln is the best president. Why was he convinced that Lincoln was the best president? Well, he asked me, once he got over his consternation at learning that Barack Obama will not always be President, “Who was the best president?” Really, not a hard question. 

So we scooted over from the White House, down the Mall, to the Lincoln Memorial.

There is a tiny little bookstore inside the Memorial. My boy being like his father, he couldn’t resist. He ran in before I could intercept him and spotted a book by Laurie Calkhoven, called I Grew Up to be President, a bunch of short presidential bios accompanied by cute depictions of what the presidents probably looked like as little boys. 

And ... the book is terrible. Really really bad. And really bad for a simple reason: it whitewashes 19th-century American history to the point of doing violence. But it does so in this annoying lawyerly way, so that you can’t outright say they’re leaving things out ... but which will also allow irresponsible parents to be able to pretend that American history is all sweetness and light until sometime in the early 1970s and the only bad presidents were Richard Nixon and George W. Bush.

What sent me over the top was, of course, Abraham Lincoln. Here is the ridiculous passage:

By the time Lincoln was inaugurated, seven states had left the Union to form the Confederate States of America. They believed that Lincon, who was abolitionist, threatened their right to make their own decisions.

What the fuck? 

Andrew Jackson is worse. Nothing about him killing a man in a duel or the veto of the Second Bank of the United States, but I could forgive that. What I cannot forgive is this:

Instead of letting Congress lead the way in passing new laws, Jackson took charge and vetoed bills he didn’t like. Only one major law, the Indian Removal Act, was passed in his eight years in office.

Yes, that’s true. And that’s really all they have to say about that particular piece of legislation??

It isn’t a conservative bias: the book is age-appropriately critical of 37 and 43.

Listen, my children will be as flag-wavingly patriotic as they come. More than most, in fact, since at least one of their parents will want them to serve time in uniform. And they can handle the fact that Andrew Jackson was a racist genocidal maniac and the South seceded in order to keep their distant cousins in bondage. 

Scholastic should be ashamed of itself for publishing this dreck. 

What if the United States bordered Russia instead of Mexico?

The United Kingdom has been in the midst of a giant immigration backlash prompted by the net arrival of roughly 1.4 million Eastern Europeans since 2004. From my perspective, that was surprising. After all, the Eastern Europeans are white and Christian or post-Christian. Don’t we all know that the reason the United States — or at least Trump supporters — gets all wiggy about Mexican immigration is because most Mexicans don’t look “white”?

Well, do we really know that?

There is evidence that racial phenotypes have had a strong impact on Mexican-Americans. Before 1945, many southwestern states (well, Texas) treated Mexican-Americans as black for the purposes of segregation. The historic impact of that has been under-studied. There is evidence, however, that once the legal barriers fell away in the late 1940s and 1950s, Mexican-Americans began moving into the “white” category, both de jure and de facto ... until the 1970s and the advent of mass immigration from Mexico.

At that point, native-born whites began to react against the arrival of Spanish-speaking immigrants. But because those immigrants were (in most but not all cases) phenotypically different, native-born Anglos began to discriminate against anyone who looked like the new immigrants. That in turn made race more salient in the lives of native-born Mexican-Americans and impeded assimilation. This is the finding advanced by Tomás Jiménez in his book. (Discussed here in the context of Reihan Salam’s misinterpretation of Jiménez’s results.)

So there is evidence that prejudice against immigrants hits most second, some third, and a few fourth-generation Mexican-Americans.* 

But imagine for a moment that the United States bordered Russia to the south, instead of Mexico. Is there any evidence that Americans would have reacted better to the net arrival of 12 million Russian-speakers between 1970 and 2015? Russia is a violent and corrupt country. Assuming (reasonably) that a Russia right next to the United States would have neither nuclear weapons nor imperial ambitions, it is not at all clear to me that the anti-immigration reaction right now would be any less were most of the immigrants pale-skinned, blond-haired Russians.**

Rather, the difference would be that native-born Russian-Americans would be far less likely to be bothered by anti-immigrant sentiments than native-born Mexican-Americans. Not because the Russian-Americans would be any different than the Mexican-Americans in their underlying attitude. Rather, native-born Russian-Americans, being clearly white and indistinguishable from other white people, would not face day-to-day prejudice imposed upon them by the reaction of non-Russians to the presence of their newly-arrived cousins. 

In short, in that world, Trumpism might be stronger. 

I don’t understand West Virginia

 I don’t understand western Virginia either, but that’s a post for another day.

West Virginia is in the middle of a budget meltdown from low commodities prices. The governor does not want to further tap the rainy day fund, which has $784 million. I can understand that. But I do not understand the politics behind legislators in a poor and racially homogenous state refusing to countenance any tax hikes. The alternative is “closure of eight State Police detachments and 87 trooper layoffs; 350 jobs eliminated across colleges and universities and closure of at least four community college campuses; and layoffs of 166 workers at state hospitals.”

The state Senate passed a series of taxes imposed on tobacco, driving and professional services: dead so far in the House. Where they are mulling a $100 million tax break for oil and gas, the same industry which created the problem. Tax revenue from coal and gas falls, so cut revenue further from coal and gas, in the hope that the industry comes back for a future increase in fiscal dependency on coal and gas. Huh?

I am astounded to say this, but West Virginia could learn from Ecuador. 

But the real question is: what’s driving anti-tax mania in West Virginia? Somehow I doubt that it’s Keynesianism, which makes little sense in the context of economies as open as the typical American state. And I have trouble imagining that voters can be bamboozled by slick campaign ads when they see cuts affecting services they need. So what’s going on?

It almost makes you think nobody believed commercial fusion power was possible ...

 Courtesy of Will Baird:

So back in 1976, the USERDA published some projections about how much money they needed to get a demonstration fusion reactor running by 1990, 1993, 1998 and 2005 respectively. They all expected outlays to multiply. Instead they fell.

Either this is one of the most short-sighted budget savings in the history of the United States, or even back in 1978 nobody really thought that this unicorn would be found.

Saudi Arabia will not win its war on fracking

 At Fivethirtyeight, Ben Casselman suggests that Saudi Arabia may finally be winning its war on fracking. In his words:

Recently, though, there have been signs that the Saudis’ strategy might be working after all. On Monday, Chesapeake Energy, once the highest flier of the U.S. oil boom, had to deny publicly that it was preparing to file for bankruptcy; some 60 oil companies have already done so, and the research firm IHS estimates that as many as 150 companies could follow suit. On Wednesday, The Wall Street Journal reported that private-equity giant KKR & Co. was backing away from risky bets on oil companies. Industry leaders are starting to sound desperate: The New York Times quoted the head of a Texas oil group as telling his members that “today our goal is to survive.”

I have some doubts. But let’s say bankruptcies take hold across the sector and production does crash. What then?

Well, the rigs won’t be dismantled. The oil workers won’t lose their skills. The infrastructure won’t disappear. And drilling and completion of a known site takes only one month and costs about $6 million. (Page 13.) Even if you add in all pre-drilling activities you’ve got only about six months to complete a well.

In other words, once prices rise American production will shoot back up even faster than it falls. So what in the name of God does it mean to say that Saudi Arabia is “winning” its war on American production? You need one weird model of the oil market, in which removing American production sends prices up but bringing it back on does not cause prices to fall. (In that model, I should point out, Saudi Arabia would be doing the American industry a favor by forcing it to temporarily cut production.) Or one in which Saudi Arabia would be unable to sell as much oil as it wanted to in the face of full American production. Neither sounds particularly plausible.

Perhaps I am missing something, but the idea that the Saudis are warring on U.S. unconventional oil production does not make sense to me. It is a mighty expensive war and one that they cannot win. So why would they try?

Reality gets ahead of Ross Douthat speculation: Americans are from Venus!

 Ross Douthat is one of my favorite commentators at the New York Times. He comes from a fundamentally Catholic and small-c conservative background, from which he derives insights quite unlike my own. I rarely agree with him, but he does a very effective job of communicating how he arrives at his conclusions,  which I find very enlightening. You can see where common ground might be found. I encourage my readers to regularly peruse his stuff. 

Today Douthat is beginning an entertaining series of science-fictional tweets: 

Envisioning a future where the Bob Kagan of 2050 writes that "Europeans are from Mars, Americans are from Venus," and everyone nods.

— Ross Douthat (@DouthatNYT) February 11, 2016 

Dateline, 2035: Parisian tabloids scream "Yankee Cowards!" as socialist U.S. gov't opposes French invasion of Islamist-ruled Egypt.

— Ross Douthat (@DouthatNYT) February 11, 2016

Dateline 2032: Democrat-Socialist candidates promise "U.S. out of NATO" after American peacekeepers die policing Russo-Turkish armistice.

— Ross Douthat (@DouthatNYT) February 11, 2016

First, will humans still be peacekeeping in 2032? My guess is “yes,” but robots will be with them.

Second, it looks like fun!

Third, this blog got there first. His future has already come true! We just don’t realize it yet.

Reihan Salam needs to read the papers he cites

 I am generally in sympathy with Reihan Salam. (DISCLOSURE: I went to high school with his older sister, Rifat.) He’s an old-fashioned non-crazy conservative. I am not, but I sympathize with his pro-natalist and mildly-nationalist priors. I certainly support his skepticism about  government intervention and his arguments against zoning laws. And he wants to abolish Stuyvesant! What’s not to like?

But sometimes the poor guy just has to twist himself into knots in order to convince himself that the “conservative movement” to which he’s hitched his professional wagon isn’t batshit crazy. You can see him attempting to justify the recent nativist turn in the GOP here. 

Much of Salam’s article isn’t crazy. In fact, the entire first section is quite well argued. He says that the rise of Donald Trump is troubling and that the Republican leadership has no idea how to discuss immigration in an intelligent way.

If he had said the following in the second section I might disagree with the conclusion but not the analysis:

1. Admitting poor immigrants is not in the national interest;
2. It’s perfectly fine for Americans to want lower levels of immigration for whatever reason;
3. The current immigration backlash ain’t got nothing on the events of 1917-31, which gave us such gems as the Asiatic Barred Zone Act and mob killings of Filipinos;
4. So the GOP should favor a Canada-style system with a lower overall cap and strict employment enforcement.

But that wasn’t the argument that Reihan made in the second section. Rather, his piece suddenly made a 90-degree turn and started to argue that the descendants of the post-1965 wave of immigration aren’t following the path of their predecessors from the Ellis Island wave.

Lest I be accused of misrepresenting his argument, let me quote him: “Why haven’t less-skilled immigrants followed the path of the less-skilled Europeans who settled in the U.S. in the late 1800s and early 1900s?”

His argument has two parts: one about economic mobility, the other about social assimilation. I’m going to focus on social assimilation, which Reihan states is happening much more slowly for current immigrants than for their European predecessors. We’ll briefly discuss the economics at the end.

1. Reihan Salam’s argument

One what does Reihan blame this alleged slow assimilation? Well, he asserts, “The most important reason that today’s immigrants have had such a different trajectory from those of earlier eras is that in 1921 and 1924, Congress passed legislation that sharply curtailed immigration.”

Reihan goes on to talk about the Italians, who did indeed arrive in a single relatively short wave. (See the above figure.) Reihan: “The end of immigrant replenishment led to sharp increases in inter-ethnic marriages for Italian Americans and other white ethnics. Mexican Americans, in contrast, are part of an ethnic community that until recently was constantly being replenished by new Mexican arrivals, which in turn has sharpened the distinctiveness of Mexican identity.” The, same, he says, is happening to other goups. “Over the course of the 1990s, the percentage of Asians marrying whites, and Hispanics marrying whites, fell sharply.”

In other words, the reason behind the alleged difference between earlier immigration waves and the current one is that the current ones are continuously replenished by new immigrants. His sources are a book by Tomás Jiménez (Stanford) and a 2007 article by Zhenchao Qian (Ohio State) and Daniel Lichter (Cornell). Jiménez has an article that summarizes his main findings here.

And now comes the fisking you’ve all awaited. It is not that Jiménez, Qian and Lichter are bad scholars. They are great scholars. (Particularly Jiménez.) Reihan just gets their work wrong.

In fact, he gets their work so wrong that it’s hard to believe that he read them. (Rifat is a good sociologist — can I blame her for not schooling her little brother?)

2. Social assimilation

Let’s start with Jiménez. Jiménez has elsewhere pointed out the astonishingly high outmarriage rates of Mexican-Americans! Moreover, Jiménez points out that those outmarriage rates have risen for second and third-generation Mexican-Americans, despite the continual waves of new immigration. In other words, Mexican exogamy has proven resilient to replenishment.

Jiménez’s argument is that replenishment inflames native-born non-Mexican irritation at new Mexican arrivals, which spills over into over into continued prejudice directed at native-born Mexican-Americans. Let me quote Jiménez’s three conclusions:

1. “First, non-Mexicans’ expressions of nativism sharpen inter-group boundaries.” Reihan could have said that immigration makes natives act like racist basterds, and it is a bad thing to be a racist basterd, so to discourage racist basterdism we should cut immigration. That is a perfectly legitimate argument. But it makes the GOP base look bad, so Reihan doesn’t make it.
2. “Second, immigrant replenishment bolsters the salience of race in the lives of respondents. In a context of heavy Mexican immigration, non-Mexicans use racial markers as proxies for a combination of ancestry, nativity, and legal status.” Again, this makes the GOP look bad, so Reihan misrepresents Jiménez’s argument.
3. “Finally, Mexican-immigrant replenishment sharpens intra-group boundaries by informing the criteria for ‘authentic’ expressions of ethnic identity. Mexican immigrants and the young second generation have come to define and police ‘Mexicanness,’ which entails, at the very least, speaking Spanish and having non-Anglo American tastes. Mexican immigrants and young second-generation individuals call into question respondents’ authenticity for not being able to openly display the cultural characteristics that might ‘prove’ their ethnic authenticity. Mexican Americans respond to these boundaries by attempting to avoid them altogether, and by providing a corrective to those who impose such boundaries. Respondents attempt to avoid inter-group boundaries by emphasizing their American national identity.” And that italicized conclusion is the opposite of what Reihan implies Jiménez argues.

Aaargh!

To be fair, Jiménez does argue that Mexican migration is unlike the Ellis Island waves that produced the Brooklyn I grew up in. But Jiménez is not arguing that there is anything unprecedented about the continuing stream of Mexican migration. Rather, he explicitly points out that both the Germans and the Irish immigrated in century-long waves; if you want historical parallels to Mexican-Americans, those two groups are the ones you should look to. And if you wanna talk about hard-to-assimilate waves of endless immigration, by a people who had no reluctance to use politics to cram multiculturalism down the throats of hard-working English-speaking Americans, then you really wanna look at the Germans. (You gotta scroll down at the link for the relevant information.)

Reihan writes, however, as if the Italians were the first immigrant group to get off the boat in America.

Hey, Reihan’s from Brooklyn, I’m from Brooklyn, to some extent it’s understandable. I went to college honestly believing that a third of all the white people in America were of Italian descent. I mean this literally: my friend Dev Patnaik cracked open an encyclopedia and disabused me of that notion. (For some reason, I knew that my personal experience about the number of Jewish-Americans was not representative, but it never occurred to me that this might also be true of the cujines.) I completely get why Reihan might assume that the Italian experience is the normal expected baseline for the American immigrant experience.

But I was 18 and a college freshman. Salam is 36 and a major public intellectual.

Now let’s move on to Qian and Lichter’s findings. Compare column (1) and column (2) below. For people aged 20-34, intermarriages among native-born Asian-American men fell from 50% to 46%, while intermarriages among Asian-American women rose from 58% to 60%.

This is not the decline Salam writes about.

Moreover, column (2) excludes multiracial people. If you classify anyone who checks off the boxes as half-white as minority — i.e., you classify people the way the 1990 census did — you would compare column (1) and column (4) and find that between 1990 and 2000 interracial marriages for native-born Asian-American men rose from 50% to 55% and for women from 58% to 67%.

Nor do Qian and Lichter believe that intermarriage rates have declined for Latinos. They spell out why on page 85, where they attempt to account for confounding demographic shifts. Bottom line: “Intermarriage with whites increased significantly among native-born Asian Americans and Hispanics, by 36 percent and 13 percent, respectively. Significantly, these multivariate results are different from the modest 1990s’ declines in intermarriage reported in Table 2.”

Heck, Qian and Lichter don’t even find a decline in intermarrige for foreign-born Asian-Americans! Page 86: “Intermarriage ratios with native-born whites declined by 19 percent for foreign-born Hispanics, from 27 to 22, and increased by only 11 percent for foreign-born Asians, from 28 to 31, during the 1990s.” It is true that Qian and Lichter find the increase in intermarriage rates for foreign-born Asians smaller than they would have expected given the increase in the number of foreign-born Asians: in other words, they did find that foreign-born Asian-Americans became somewhat less likely to marry non-Asian native-born Americans between 1990 and 2000 when you control for everything else. But that seems a pretty small reed upon which to argue that assimilation slowed down during the 1990s.

3. Economic mobility

Reihan also talks about the skill level of immigrants and their economic success, but he makes no explicit time-series comparisons. All he does is point out that immigrants are disproportionately poor after which he asks, “Why haven’t recent less-skilled immigrants followed the path of the less-skilled Europeans who settled in the U.S. in the late 1800s and early 1900s?”

But that question makes no sense unless and until you establish that current immigrant waves are moving up the occupational and wage ladder more slowly than previous waves! Reihan does not do this. So I don’t have that much to say, other than that there is in fact a big literature on these issues. A not-bad place to start. For some economic history on the Ellis Island wave, see here. For even better economic history on the same topic, see this paper by Ran Abramitzky, Leah Boustan and Katherine Eriksson. For a broader look at current assimilation, see this piece by the very same Tomás Jiménez. For a complex long-term view, see this 2006 study by Jacob Vigdor (currently at the University of Washington). See also this NBER chapter on Mexican-Americans. Finally, this is a great short book comparing Italians from 1900 with Mexican migrants today.

Ironically, that latter three provide some support for Reihan’s underlying argument. To which, I repeat, I have some sympathy and could be convinced to support.

4. Summing up

In short, I am disappointed. Immigration restriction is a reasonable position. And I generally like Salam’s positions. Repeal zoning! Tax the childless! Good stuff, logical, makes America better. But I am saddened by this piece. It misrepresents facts in order to allow Salam to call for the Republican Party to address a cultural assimilation crisis that does not exist, except inasmuch as immigration is generating a native-born white backlash.

There is nothing wrong with the GOP being the party of immigration restriction. There is a lot wrong with the insane racist way that immigration restriction has come out in the 2016 primary race. Maybe you can justify the insanity, but Reihan only does so by misrepresenting the works he cites. For a broader takedown, using sources that Reihan doesn’t cite, see Alex Nowrasteh here.

I wag my finger at you, Reihan Salam of Brooklyn! Or in our shared old school vernacular, “You serious, B? Gedouttahere.”

The benefits of American empire

 “The United States provide the majority of security on earth. What would the world look like without that security? Would South Korea exist? Would they be selling us Hyundais and Kias? Would Taiwan exist? How would the Cold War have ended? Would Germany still be divided? Who would control the largest known oil reserves on earth? Would Israel exist? The armed forces of the United States guarantee certain conditions on planet Earth, conditions with which much of the Western world is happy. It is worth considering what the world would look like without them.”  

Those words come from a review by Adrian Lewis (U-Kansas) than damns with faint praise a book called State of War: The Political Economy of American Warfare, 1945–2011, by Paul Koistinen (Calstate-Northridge). Koistinen describes the rise of the national security state in the United States. He does not quite call the defense industry a “vampire squid,” but he does write: “The [defense] industry became characterized by inefficiency, waste, and corruption; defense contractors too often turned out defective or failed weapons and equipment. Over time, massive expenditures for defense have had a very deleterious effect on the economy. … Of crucial significance … DOD budgets have distorted public priorities and spending, denying adequate attention and resources to infrastructure, education, medical care, and other public services and interests.”

But Koistinen, like a lot of liberal critics, acts as though the national security state came out of nowhere and survives for no reason other than its ability to lobby. Lewis acerbically points out that Koistinen needs two more chapters. One should explain why the American people “continuously put into office political leaders who sustain the Military-Industrial Complex, and who, after the Vietnam War, failed to show up to fight.” The second should describe the threats that the national security state evolved to confront. The pithy paragraph opening this post comes from that second proposed chapter.

Lewis actually saves his final one-two punch for the end. It is a doozy: “I will recommend this book to some of my graduate students. There are a few points, however, with which I strongly disagree; for example: ‘Although the armed forces had acquired some new weapons and equipment, the military as a whole appeared to be in no better shape in 1989 than it had been in 1981’ (p. 29). Having served in the Army throughout this period, though, I know this is just not true.”

Ouch!

In short, State of War seems pretty mediocre, but Adrian Lewis has pithily penned one of the best and most succinct briefs in favor of the American empire (at least as it behaved until 1991) that I have read in a long time. 

What’s in a name?

 There is a broad literature that people with recognizably African-American names suffer from greater discrimination in the United States. (See here, here, here, here, and here.) Similar results have been found for Muslim names in France (here and here) and Sweden. In short, if you want your children to get ahead, even if you are a from a visible minority, give them a nondescript majority monicker.

There is some contrary evidence. Fryer and Levitt have argued that causality runs the other way, with black people trapped in the ghetto being more likely to choose distinctively black names than their middle-class counterparts. Their data, however, is only from California and is (as they admit) not conclusive. In addition, distinctive first names have become much more common in recent decades among all Americans, despite some evidence that people with such names face discrimination regardless of their race or religion. 

So far, so complicated. But wait, it gets worse! Before 1960, having a distinctively black name may have helped. All other things equal, in the century before 1960 black men and women with black names lived a year longer than their compatriots, conditional on having made it to age 10. 

In an amazing paper, Lisa Cook, Trevon Logan, and John Parman dug into the census data. First, they extracted a list of distinctively African-American names. Then they went through three million death certificates from Alabama, Illinois, Missouri and North Carolina between 1802 to 1970. Then they calculated differential death rates. Finally, they tried to see if having a distinctively black name was correlated with higher socio-economic status in any way. Overall, the reverse: as today, distinctive names were associated with lower status. In other words, the effect was even stronger than the headline numbers when you took other variables into account.

To be fair, it is still possible that there was name changing going on. But first, there is no evidence of such name-changing. And if there was, it would have to be mighty weird to change their results.

Their hypothesis is that having a distinctive name may have been a proxy for other, unidentifiable social capital: a strong sense of community, for example. And this was an age of open racial discrimination, during which assimilating to the dominant culture may have generated returns of zero (or negative, if white people reacted badly). So it may not have relevance for today.

But it sheds a fascinating look at the recent American past. Go, read. 

The Russians are coming?

 No probably not. But this is funny:

The graffiti says, “Alaska, ask Crimea the way home!” 

(Hat tip: Will Baird.)

Actually, I’m reminded of this NBC miniseries from 1982. We all watched it. I remember it being pretty good, which is why I remain sure not to re-watch it as an adult.

We also all watched this other miniseries a few years later, which I would love to see again if I could find it in a modern format. I don’t remember it being good at all, which is why I think seeing it again would be a hoot.

Wolverines! 

Sure, yes, the Gold Cup does not matter ...

 ... but WTF happened? First the loss to Jamaica, and now this. It was entertaining, in the way that a terrible match can often be entertaining. Consider Game 4 of the 2004 ALCS. Terrible baseball, but sort of weirdly entertaining for that. The U.S.-Panama third place game had that quality. 35 fouls! Ridiculous refereeing! Botched attacks against sleeping defenders! 

OK, this is what happens when two baseball countries play soccer. Only it isn’t! The U.S. is a rising soccer power. In theory, we’re about 15 years away from being a serious prospect to win the men’s World Cup; 11 years if things break right.

But right now 15 years seems impossibly soon. Feels more like 100, or never. Ugh.

Has the crackdown on money-laundering hit the average Mexican?

 In 2012, we reported about the scandal involving U.S. banks laundering narcotics money going back to Mexico. The scandal caused bankers to get scared. And so, they claim to be pulling back from their cross-border services, hurting everyday Mexicans. 

Hmm. The story at the link does show big U.S. banks pulling back, and goes deep into the hassles faced by Columbia professor when they found their accounts had to be shut down. But is it really affecting everyday people?

There do not seem to be any signs that people in the U.S. need to queue up in order to send money to Mexico. Absent a shortage of cross-border money-transfer services, then, one would expect restrictions on money transfers to show up in higher prices. Fortunately, the World Bank records the price of transferring money to Mexico. And they report (as a % of the sum transferred):

There is seasonality, which does make it seem that prices have recently ticked up ... but in context they have not. Moreover, the cost of moving money via non-banks has gone down monotonically, with only a recent bump. This is not surprising, since it would seem weird for a 2012 scandal to cause prices to rise in 2015.

An article from the New York Times says, “While immigrants say they have not noticed broad price increases from companies like Western Union, industry experts say higher costs are inevitable with fewer banks acting as middlemen for money transmitters.” Meaning that maybe costs will rise in the future, perhaps, but they have not yet.

So maybe the new regulations will impact everyday Mexicans. But not yet. And to be honest, probably not ever.

Be afraid! Be very afraid

 A long time ago, I worked on financial systems. And so, back in 1998, I was called to give some comments to a gathering in Mexico City’s historic district. (I still have the suit I wore, a very sturdy Christian Dior; it isn’t the one in the below photo from December 2014.) I kept my discussion short, since I was well-aware of my ignorance, having just lost a potential job at Columbia University due to overly sweeping claims of knowledge.* 

So, still chastised from the New York fiasco, I made only one claim to the gathered dignitaries from the Financial Ministry, the U.S. State Department, the IMF, and the big Mexican banks: shareholders must lose in a bailout. Give away money, write checks, defend depositors, make good guarantees on subordinated debt, throw bags of money at the banks’ creditors. But shareholders must be wiped out. 

And so, I am terrified to read today that a federal judge held that the U.S. government was too harsh when it bailed out AIG. The bailout, you see, wiped out the shareholders and ultimately made money for the Treasury while preventing a much worse financial collapse. But wiping out the shareholders, according to the judge, was too harsh. Better to have let the shareholders be ... uh ... wiped out with no public benefit.

Wait, what?

It gets even weirder than that. The AIG investors received nothing in damages ... the judge recognized that without the bailout they would have lost everything. But he still held that the government overstepped its bounds. I cannot parse the logic.

Which means one of two things the next time a financial crisis rolls around. One, no direct bailouts. Fun! Why have a second Great Recession when you can go full on to a second Great Depression? Two, bailouts (or bailouts in disguise) that enrich the already prosperous, who will face no consequences for their bad investments. Heck, let’s see just how unequal a modern automated economy can get! 

I don’t even have to mention the words “moral hazard” to make this look scary. But since I am on the topic: Moral hazard! Boo!

And so, I give you Judge Thomas Wheeler, a George W. Bush appointee still making the world a worse place. I guess it deserves some sort of prize.

I really need to respond to the comments in the Crazy Base World post, no?

Stress-testing the IVF hypothesis for the rise in the fertility of highly educated American women

 The title of this blog post is terrible, I agree, but nothing pithy-yet-comprehensible came to mind. One way to see if a social science hypothesis is worth pursuing is to assume a ridiculous limit case and see if it leads to a significant result. If it does not, then the hypothesis is not worth pursuing. So that is what this post will do with the hypothesis that improved fertility technology caused the recent massive increase in the fertility of highly-educated women. (The credit for this hypothesis goes to Bitsy.) 

Between 1998 and 2013, IVF procedures resulted in approximately 803,000 babies. Over the same period, postgraduate women born between 1970 and 1974 gave birth to about 4.61 million children. They had a completed fertility rate of 1.74 children per woman, up from 1.33 for postgraduate women born in 1950-54. If we assume that all 803,000 assisted fertility births were born to postgraduate women in that age cohort, then their non-assisted completed fertility rate would have been only 1.47.

So the hypothesis cannot be dismissed out of hand.

But there are a lot of women born before 1970 who would have gotten IVF over that period. (Our group of interest was aged only 24-28 in 1998.) We can effectively throw out the data before 2000, but that only cuts the number of IVF births 711,000. So the hypothesis still cannot be dismissed.

Given that we know the approximate age of IVF patients, we can guess that the maximum number of IVF births over the years 2000-13 that could have fallen to women in our cohort of interest was around 400,000. (This assumes that the age distribution at the link held in every year, a somewhat heroic assumption but one which does not, I think, have a particular bias.)

If all 400,000 of those births accrued to postgraduate women, then their non-IVF completed fertility would have been 1.59. IVF would account for 40% of the increase. But given that postgraduate women were only 13.8% of all women born in 1970-74, that also seems unlikely. We are still above a reasonable upper bound.

Let us say that half of all births accrued to them, say 200,000. In other words, imagine that postgraduate women resorted to IVF at a rate 3.6 times that of other women in their age group. That assumption gives us a non-IVF completed fertility of 1.66. In other words, IVF would be responsible of 20% of the increase. 

This seems like a reasonable upper bound, but tell me if you think there is a logical or arithmetical mistake!

If we assume that a quarter of IVF births accrued to postgraduate women at a rate twice that of other women (for a total of 27.6% of all IVF births), then non-IVF fertility for postgraduate women jumps to 1.70. That is within spitting distance of the actual 1.74; IVF would account for only 10% of the increase from 1.33 children over the past two decades.

In short, IVF was a significant factor, but is unlikely to account for more than 20% of the increase in fertility.

The reproductive revolution among postgrad women in historical perspective

 We have written that the fertility of postgraduate women has markedly increased among women born 1970-74 relative to earlier cohorts. Claudia Goldin’s (Harvard) work on college-educated women implies that the change is even greater than it seems. Now, Goldin is looking at all college graduates, not just women with postgraduate degrees ... but that makes her findings even more striking.

Among women born in the late 19th century, fully half of college graduates had no children. That fell over time (in part because, as per Gareth’s hypothesis many more women began to graduate college). Nonetheless, for women born in 1958-68 (cohort 5 in the above table) fully 26% of them had no children by age 40. 

Yet the cohort of postgraduate-educated women born just a few years later (1970-74) has a childlessness rate of only 20%. That puts them very near the rate experienced by the college-educated parents of the baby boom. For college-educated women childlessness has fallen even faster.

Something very dramatic is going on to make professional educated women who hit their peak childbearing years in the first decade of the 21st century choose both family and career. Bitsy makes too good suggestions in comments, although I am not sure how to test the first one. 

The big question, unanswerable until we have a handle on causes, is whether the fertility rise will continue in the next few decades.

My generation reproduces itself!

 The Pew Research Center and the U.S. census are out with the numbers for completed fertility among American women aged 40-44. And they are interesting! Moreover, they tell you more than the often-abused Total Fertility Rate, which is a constructed number for an imaginary woman. These numbers are for real women born between 1970 and 1974 ... i.e., people my age.

Let’s start with the overall numbers. Back in 1976, women born between 1932 and 1936 had each given birth  to 2.85 children on average. These women were the tail end of the generation that produced the baby boomers, so the high number shouldn’t be surprising. Only 10% of them were childless; a full 36% of them had more than four children. My mother was part of this group, having been born in 1936. 

In 1994, things had changed. Women born between 1950 and 1954 had on average only 1.90 children. 19% of them were childless and only 11% of them had more than four children. 

By 2014, however, the average number of children born to women aged 40-44 rose to 2.02, fairly close to replacement. (About 2% of American children tragically die before age 20, which would put replacement around 2.04. See Figure 5.) In the aggregate, the moves were all around the margins: childlessness fell to 15% and families with more than four kids rose to 12%. 

The real change, though, was for women with postgraduate degrees. There you had a revolution between 1994 and 2014. (IIRC, Carlos Yu predicted what would happen; Doug Muir was more doubtful.) Completed fertility skyrocketed from 1.33 to 1.74. Childlessness crashed from 35% to 20%. Four-child-plus families jumped from 5% to 7%. 

This change is huge.

Any thoughts as to why?

Interesting Canadian election!

 The New Democratic Party just won in Alberta. Rachel Notley will be the new premier.

This is not unlike the (old) Democratic Party winning in Texas. The Wildrose Party is as conservative as the Texas GOP. Meanwhile, the former ruling Conservatives may have had “Progressive” appended to their name but they weren’t progressive in any serious way.

I get the impression that the swing may have really been a vote against low oil prices. Alberta has been hammered far more than Texas. But I am not sure! Can anyone explain Albertan politics or point me in a good direction?

It is strange sometimes to wonder how my life might have been different had the Alberta job that I rejected in 1998 been on the table in 1997, before I got the offer from ITAM. I suspect that I would have taken it. I am very glad that I didn’t, but I have to say that I still wonder how things would have turned out. 

It is also strange to contemplate that Alberta would clearly be better off as part of the United States. Weirdly enough, the U.S. would also be better off with Alberta as a state. Simply put, Alberta would pay fewer taxes to Washington than it does to Ottawa, but the new state would still be a net payer into the federal system. Moreover, Alberta would be spared the economic problems that would come with independence; namely painful exchange rate choices. 

When U.S. law is an ass, but the Venezuelan government is a CENSORED

 Setty and I have been having a pretty good back-and-forth at his place. (Am I going to have to join Twitter? Please, no.)

We came to a consensus about the propiety of personal sanctions against foreign officials, in which we both changed our initial opinions. (Yes, it happens on the Internet!) Here is the state of play:

There is an argument for the use of economic sanctions against foreign officials. The opposition to their use generally stems from two sources. The first is a blanket aversion to the use of American power; we don’t have a lot to say about that. The second, however, is a worry that such sanctions are applied without due process. That is a reasonable worry, but it is misplaced.

It is possible for foreign residents to harm Americans while outside the reach of the police power of the U.S. government. The alternative to applied sanctions is the issuance of arrest warrant. The problem is that when the foreign resident is outside the reach of American law, issuing an arrest warrant is a hollow move. The only options would be to do nothing or dispatch American forces to carry out an arrest inside the territory of a foreign state. The former is practically unacceptable for any representative government; the latter runs massive foreign policy risks. Sanctions on individuals believed to have violated American law or otherwise harmed American interests is an excellent way to square that circle. 

The problem of extraterritorial jurisdiction is compounded when the targeted foreign resident is an official of a foreign state acting in their capacity as a member of the government. In that case, the U.S. has no right to simply criminalize their actions without tossing aside the totality of international law. Moreover, the U.S. has no way short of invasion to enforce any such criminalization. It can impose sanctions on the government. But imposing sanctions on the government harms civilians …. which sometimes is what you want to do, but sometimes is gratuitous or counterproductive. 

Once again, you come to personalized sanctions as the best option between a complete abdication of the state’s responsibility and an economic sledgehammer. 

In short, the analogy with due process doesn’t hold. We’re not on much of a slippery slope, either. First, individual sanctioning is not something new and it has not yet led us to perdition. Second, the wording of the Economic Powers Act, specifically section 1702, makes it clear that the President has less power here than your typical local government under America’s (admittedly appalling) civil forfeiture laws.

But there is another issue, which is that American law is an ass when it comes to human rights. Setty: “The U.S. should support human rights, without having to (pretend or really) pee itself in fear of the human rights violator or his or her country. I think this sort of language unnecessarily alarms and alienates some people who would be natural allies of efforts in favor of human rights. The U.S. continues to act like a scrappy underdog even when much of the world sees it as an over-muscled bully.”

Exactly! The International Emergency Economic Powers Act should be for actual emergencies. There may be cases where a foreign government’s internal political actions really do constitute “an unusual and extraordinary threat.” For example, a repressive government could be in the process of starting a civil war. Or it might be generating large-scale refugee flows. Or it might be threatening American expats. None of which is really yet on the table on Venezuela, thank the Lord. 

In other words, the U.S. needs better legislation. The Venezuela Defense of Human Rights and Civil Society Act of 2014 (ohmigod reading the name of that bill hurts HURTS makes me sad a crime against English it is) could have contained its own authorization instead of going through the Economic Powers Act. Better still, Congress could create a new sanctions law, along the lines of the Venezuela Rights Act. Even better than that would be a law authorizing the President to impose sanctions in pursuit of resolutions from the U.N. or OAS.

Still, absent that, we have the laws we have. They are not terrible. The law may be an ass, but the Maduro government may just need a kick from one.

Really, calling it a national security threat was the only way to sanction Venezuela

 Professor Greg Weeks (UNC) suggests that President Obama could have used the horribly-named “Venezuela Defense of Human Rights and Civil Society Act of 2014” to sanction Venezuelan officials without going through the foderol of calling the country a national security threat.

Well, no, he couldn’t. 

Section 5 of the Act does not independently authorize the President to do anything. Rather, it authorizes “The exercise of all powers granted to the President by the International Emergency Economic Powers Act.” [Italics mine.] 

Which means that President Obama still had to jump through all the hoops laid out by the Emergency Economic Powers Act, including the declaration of a national security threat.

Basically, the President had three options. (1) Don’t impose sanctions. (2) Break American law. (3) Declare Venezuela to be a threat to national security. He went with option (3).

Maybe option (1) is a better idea. (I know y’all have opinions!) But option (2) sounds like a really really bad one. Which left us with option (3) and a highly amusing kerfuffle, which although big on the Internet, really was brought to my attention the old-fashioned way.

Is Venezuela a threat to U.S. national security? No, but that does not matter

 I’m in Trinidad, and my father-in-law just asked me why President Obama would declare Venezuela to be a “unusual and extraordinary threat to the national security.” This was in the context of the kind of argument that he loves, where he insists that Venezuela’s economic woes are the fault of American intervention and I tell him that’s the dumbest thing I’d heard since that British guy in the previous post. We go back and forth, I admit that duh-obviously the U.S. cares, he admits that he has no reason to think that U.S. actions have contributed in any material way to the woes of the Bolivarian Republic. 

Then the President of the United States declares, “The situation in Venezuela ... constitutes an unusual and extraordinary threat to the national security and foreign policy of the United States, and I hereby declare a national emergency to deal with that threat,” and I gotta start all over again.

At the same time, my friend James Nicoll decides to make an anti-American jab. “DOES AMERICA NEED A CUBA? That is, some eternal enemy to show the other New World nations what the alternative to be a satrapy is? Just sticking to horrible petrostates, the Saudis do worse but they’re smarter diplomatically than the guys down in Caracas.” 

So here I am with an explainer.

(1) Nobody believes that Venezuela is a threat to national security.

The reason for the wording of declaration isthat the authority to sanction Venezuelan officials comes from the  International Emergency Economic Powers Act of 1977. From Section 1701: “The authorities granted to the President by section 1702 of this title may only be exercised to deal with an unusual and extraordinary threat with respect to which a national emergency has been declared for purposes of this chapter and may not be exercised for any other purpose.” 

And so the President had to declare that the situation in Venezuela was indeed an “threat to national security” if he was going to impose personal sanctions.

The legislative history behind the 1977 act is interesting. Presidents had long imposed economic sanctions in response to foreign events, especially under the Trading with the Enemy Act of 1917. The problem was that those emergency declarations were open-ended and subject to no oversight. The post-Watergate congresses were not happy about that, and so they passed the Economic Powers Act to regulate the imposition of sanctions. The law does not directly limit presidential power, but it forces him or her to make six-month reports on the actions being taken and gives Congress the ability to terminate those actions under the National Emergencies Act of 1976.

(2) The Administration cares about Venezuela because it is in this hemisphere and the U.S. cares about democracy in this hemisphere.

I would love to find that the U.S. has some nefarious purpose in Venezuela. In fact, I wrote an entire book  about U.S. actions in Latin America that had a nefarious purpose. (Go read! James, I will send you a free copy on request. Would you review it?) I am having trouble seeing how these sanctions will advance American goals in Venezuela. Regarding our public goals, the sanctions thus far apply to individuals and will not worsen the economic situation. Those individuals are unlikely to change their behavior due to the threat. 

For two decades, the U.S. has put democracy promotion atop its Latin American agenda. It is extremely difficult for the United States to claim that democracy is an important foreign policy goal when a major government is violating the norms of democracy. With the rest of the Latin America apparently unwilling to move (for various reasons) that left the United States few other options other than acquiescing to Maduro’s dictatorial actions. That is certainly an option, of course ... but why would you want the United States to do that?

While the sanctions themselves will not change behavior, they will have two salubrious goals. First, it will put Caracas on notice that it cannot cancel or subvert the upcoming elections without courting diplomatic isolation. Second, it will embolden the opposition, at least on the margin. Finally, as a Hail Mary it might exacerbate some cracks in the Chavista coalition.

As for private benefits from U.S. action ... well. American companies are not getting paid, but those are not the policies that the U.S. is sanctioning. Washington can and will leave that to ICSID and wait for Venezuela to default on those obligations. 

(3) Nobody in Washington cares about hypocrisy and neither should you.

The U.S. is inconsistent about supporting democracy in this hemisphere. Across time, well, our record is worse than bad. The only two periods where we supported democracy in any sort of remotely consistent way were the 1920s (really! It surprised me too) and since 1990. 

Across space, well, on the one hand we have (rightfully!) decided that it is time to open relations with Cuba and (not quite as rightfully) look the other way in Honduras. (I am not referring to the 2009 coup; I am referring to the current actions of the current government. Like these.) So we are not consistent, even in our hemisphere.

But so what? There are good reasons to engage with Cuba. There are good reasons not to sanction Honduras. I have no idea what purpose perfect consistency would serve.

In short: these are mild personal sanctions, imposed to declare that the U.S. is serious about democratic norms in Venezuela. They will have little direct effect, but at least on the margin they make it a little more likely that elections will be held on schedule. And I do not see a cost for U.S. interests. So why not?

I invite James to change my mind! Why should the Obama administration have done nothing instead?

What is Arnold Kling talking about when he says Jordan is tougher than the United States?

 A few weeks ago, I wrote about a review of my book by Elizabeth Cobbs Hoffman. I thought that she had a lot of good points, intriguing notions worth thinking about.

But I was very annoyed that she just plain ignored the facts of my argument. She wrote, “It’s hard to see how the horse-trading that achieved partial compensation for dispossessed investors was terribly different from any other bruising business transaction.” Only I presented lots of evidence that there was no horse-trading! The American investors got everything they wanted, and more.

Now along comes Arnold Kling to write about the decline of American empire hegemony. He writes of a possible cycle in which the U.S. feels less prosperous because there is less globalization, making its government less willing and able to intervene in the world, leading to more disorder and less globalization ... repeat. It is an intriguing notion, worth thinking about.

Only he goes on to just plain ignore the facts. He writes, rather unbelievably, “On a related note, what should we make of the fact that in response to the murder of one of its citizens, the United States is less forceful than Jordan?”

What??? Between February 5 and February 8, Jordan launched 56 airstrikes. And as of January 19, the United States Air Force alone had launched 9600, not counting sorties by U.S. Navy aircraft. Moreover, our F-22s escorted all of the Jordanian F-16s on those retaliatory raids that have Kling all kvelling.

So what in the name of God is Arnold Kling talking about? I find his speculations interesting and I am fine with his opinion. But I am very annoyed that he is just plain ignoring the facts.

Technology and social capital

 There are a lot of questions about how modern technology is transforming society and social interactions. (For modern technology, read smartphones mediated by social media software.) What is remarkable, however, is how little we really know about how older technologies affected society and social interaction. 

For example, television. How much do we really know?

Well, courtesy of Elisabeth Perlman, comes some evidence from Indonesia. From the abstract:

This paper investigates the impact of television and radio on social capital in Indonesia. I use two sources of variation in signal reception — one based on Indonesia’s mountainous terrain, and a second based on the differential introduction of private television throughout Indonesia. I find that increased signal reception, which leads to more time watching television and listening to the radio, is associated with less participation in social organizations and with lower self-reported trust. Improved reception does not affect village governance, at least as measured by discussions in village meetings and by corruption in village road projects.

That does not seem good. Maybe my Luddism does not go a far enough.

Elisabeth, I should add, has a neat paper on the effect of free rural mail service on politics in the early 20th century. From its abstract:

The rollout of Rural Free Delivery (RFD) in the early twentieth century dramatically increased the frequency with which rural voters received information. This paper examines the effect of RFD on voters’ and Representatives’ behavior using a panel dataset and instrumental variables. Communities receiving more routes experienced higher voter turnout and spread their votes to more parties. RFD shifted positions taken by Representatives to ones in line with rural communities, including increasing support for pro-temperance and anti-immigration policies. Our results are stronger in counties with newspapers, supporting the hypothesis that information flows play a crucial role in the political process

It is fascinating stuff.

Three reasons to build the Red Canal

 I do not think the Canal Rojo will be built. It makes no commercial sense. Most independent observers concur. Here, for example, is an article from the South China Morning Post, in which Andy Lane arrives at the same conclusion using different data. Mr. Lane has another good analysis here which doesn’t quite pan the project, but certainly leads towards skepticism.

All that said, I would like it to be built! Simply because it would be cool. But that will only happen if the government of the People’s Republic of China wants it to happen.*

So why might the government of the People’s Republic of China want it to happen?

Well, consider what China might gain from a Nicaragua Canal. Right now, it is nearly a wash between using Panama and using Suez from the East Coast of the U.S. to southern Chinese ports. Using Suez, however, also means going through the South China Sea. Most scenarios in which the South China Sea was closed to shipping would likely also involve fighting around the First Island Chain ... but not all. (An Indonesian collapse? A war with India?) And there are multiple scenarios in which Suez might be closed. A Nicaraguan Canal would provide an insurance route for cargoes to and from the east coasts of North America and Brazil. 

The problem? An expanded Panama Canal would do the same thing at lower cost. Remember: there is no way on God’s green earth that China could use the Nicaragua Canal in a situation in which Panama was closed to it. In addition, there would be political benefits to financing a second Panama Canal expansion over building a Nicaragua Canal. Financing a fourth set of Panamanian locks would set off some huffing among the usual suspects here in America, but serious observers (e.g., most plausible U.S. administrations) would be reassured by the fact that a Panama expansion would fall under the rubric of the Neutrality Treaty. Which means a greatly reduced chance of antagonizing Washington. Moreover, another Panama Canal expansion would be uncontentious in Panama ... the same cannot be said of the Gran Canal project in Nicaragua. In other words, all the security gains at less financial cost and less political risk.

In fact, Chinese companies in August of last year broached the possibility of financing a new Panamanian expansion. 

There is a second possible reason to build a Nicaragua Canal. Note that Lane does not think that the new canal will lead to price competition with Panama. His logic, however, assumes that the Nicaragua Canal is run as a business. Perhaps China does not plan to run the Canal Rojo as a money-making operation at all. Rather, it could  run it as a piece of necessary public infrastructure, operating at cost. In that scenario, a price war with the Panama Canal leading to HKND’s  bankruptcy would be a feature, not a bug. 

The problem with the second reason? Well, for China to want to do that, it would need to believe that the rates charged by the Panama Canal are a significant drag on commerce. There is not a lot of evidence for that proposition. Would reducing canal tariffs really cause Chinese consumers to buy much more raw material from the east coast of South America or prompt Chinese producers to sell many more goods to the east coast of North America? I have my doubts.

Moreover, how would China insure that its commerce captured the lion’s share of the gains from the Nicaragua Canal? As Carlos Yu and I showed in our book, when the United States tried to give preference to its own ships in the Panama Canal in 1912, British pressure forced the country to change tack. The only reason that the benefits of the Panama Canal went overwhelmingly to the United States during its first 25 years was that the Panama Canal overwhelmingly carried domestic traffic. Maybe China will be able to get away with favoring its commerce over other nations, but I doubt that too. Or maybe geography implies that most of the ships using a low-cost Nicaragua Canal will be carrying Chinese commerce. Maybe ... it would be a hell of a $50 billion bet. 

That leaves you with a third possibility: the project would be the 2020s equivalent of the 1960s landing on the Moon. China would be metaphorically planting its flag on the American continent. Sure, the U.S. Navy would remain in complete control of the sea lanes and the People’s Republic would have no sovereignty. But the opening of the Canal Rojo would trumpet the end of America’s informal empire more than anything ...

... other than the actual end of America’s informal empire. Which will not (inasmuch as it survives) be altered in a any substantive way by this project. As stated above, the U.S. Navy will still control the Western Hemisphere. Moreover, I do not see how building this project would win China diplomatic gains in Latin America worth the $50 billion cost. Perhaps I underestimate the power of symbolism?

In short, the Chinese state would obtain at least three advantages from the construction of a money-losing Nicaragua Canal:** 

1. Insurance against disruptions in Suez, the Indian Ocean, the straits of Malacca, or the South China Sea (although this insurance could be obtained more cheaply using Panama);
2. The chance to drive transit rates down to their operating cost;
3. Prestige.

Are those advantages enough for the Chinese government to lend billions of billions of dollars to an entreprise that will likely go bankrupt? 

Observatorio argentino 28: La cosa más rara en una historia ya rara

 By now I suspect anyone reading this is well aware of the Nisman saga in Argentina. For those of you who are not, Chris Hayes had a pretty good synopsis:

But that isn’t the weirdest thing. Nor are President Fernández’s weird rambling Facebook posts the weirdest thing. Not even her bizarre tweets are the weirdest thing. No, the weirdest thing, if correct, is a story for which I have not been able to find corroboration. According to Mercopress, when the House Foreign Affairs Committee announced that it would send a group of low-level staffers to Argentina to find out what the hell was going on, Ambassador Cecilia Nahon delivered an angry message saying: “Argentina will not tolerate any United States intervention in the investigation of prosecutor Alberto Nisman’s death, and will consider any attempt as an interference in the country’s domestic affairs and a violation of Argentine sovereignty.”

If true, and I am not yet sure that it is, that would be an incredibly dumb response to a pro-forma investigation by a House committee. It makes it sound like they are worried. But if they are, then they should not show that they are. 

But then again, this is the administration of the president that publicly mocked the accents of her Chinese hosts when trying to whomp up investment from that country. So who knows? The political incompetence is interesting to watch ... but I have the luck to not be Argentine. I suspect I would feel more strongly about it if I were; there is a reason why the apocryphal Chinese curse is considered a curse. 

Yet even more evidence that the oil price slump will be prolonged

 The new EIA projections show that even with falling rig counts, production will stay high. They have a great chart attached:

It is hard to see, but the new wells have very high depletion rates. Consider the dark brown band: wells that will be drilled in the first quarter of this year. Their production is estimated to fall by 54% in their first year and then another 38% in their second, for a total two-year decline of 71%. Yet production is still expected to rise, because we are getting much better at drilling: initial production is going up. Consider the Bakken in North Dakota:

Or the Eagle Ford in South Texas:

Or my favorite, the Permian in West Texas:

Of course, rig counts could go lower. How low would they need to go? Well, once again the indispensable bureaucrats at the EIA have done the work:

In other words, we have a long way to go before American production starts to fall. You heard it here.

And let me say that if I know this, then the very good technical people at Saudi Aramco also know this! Saudi oil strategy is not about trying to kill American unconventional production, no matter how much they head fake. It is, as we said here, about trying to kill substitutes for oil, including conservation.

And I am gratified to see that story make the front page of the Washington Post today!

Can Venezuela’s creditors grab Venezuelan assets in a default?

 If PDVSA defaults on its debts, then yes. It would be a standard commercial dispute. Once a court made its final ruling, U.S. officials would seize Citgo shares, sell them, and give the proceeds to the creditors after deducting expenses and taxes.

But if the Bolivarian Republic defaults, not PDVSA, then it gets harder. Let’s say I own shares in a company and I default on my debts. Creditors can go after my shares in the company, but they cannot go after the company’s assets. This is true even if I am the only shareholder in the company. (Limited liability goes both ways.)

This principle applies to companies owned by foreign states. An official House of Representatives report (see footnote 185 on page 196) bluntly stated: “Section 1610(b) [of the Foreign Sovereign Immunities Act of 1976] will not permit execution against the property of one agency or instrumentality to satisfy a judgment against another, unrelated agency or instrumentality. There are compelling reasons for this. If U.S. law did not respect the separate juridical identities of different agencies or instrumentalities, it might encourage foreign jurisdictions to disregard the juridical divisions between different U.S. corporations or between a U.S. corporation and its independent subsidiary.” 

So far, so clear. Citgo is safe from creditors of the Venezuelan government. 

But here’s the thing: I can’t hide from creditors by creating a separate me-controlled firm and transferring my assets to it. In the words of the Supreme Court, “where a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created, we have held that one may be held liable for the actions of the other.” Morever, there is a “broader equitable principle that the doctrine of corporate entity, recognized generally and for most purposes, will not be regarded when to do so would work fraud or injustice.” 

In 1983, the Supreme Court specifically extended that principle to foreign state-owned entities in First National City Bank v. Banco para el Comercio Exterior de Cuba (Bancec).

Here’s the backstory. In 1960, Bancec arranged to sell some Cuban sugar to a Canadian company. Citibank issued a letter of credit to Bancec for the sugar. Bancec handed it to the Cuban central bank  (the Banco Nacional) for collection. On September 15, 1960, the Banco Nacional presented the letter to Citibank. The next day, the Cuban government nationalized all Citibank branches. (This was remarkably poor timing.) Citibank, not surprisingly, did not pay Bancec. Bancec sued in the Southern District of New York. The Cubans let the claim sit around until 1975. When they picked it again, they argued that Bancec was an independent state-owned company; why should it be liable the Cuban government’s actions?  

The case went all the way up to the Supreme Court. The Supreme Court upheld the lower court ruling: “Bancec is not a mere private corporation, the stock of which is owned by the Cuban government, but an agency of the Cuban government in the conduct of the sort of matters which even in a country characterized by private capitalism, tend to be supervised and managed by government. Where the equities are so strong in favor of the counter-claiming defendants, as they are in this case, the Court should recognize the practicalities of the transactions. . . . The Court concludes that Bancec is an alter ego of the Cuban government.”

Alright, then. Easy! It might be impossible to seize Citgo assets because Citgo is clearly not an agent of Caracas, but it might be possible to take Citgo shares away from PDVSA. After all, it would not be hard to argue that PDVSA has not been an independent commercial entity since 2002. 

So I ran this past a lawyer friend of mine who works on this stuff.

And ... oh boy ... PDVSA does not own Citgo directly. It owns it through PDV America Inc which is in turn a subsidiary of PDV Holding Inc, both incorporated in Delaware. And those two companies are not legally beholden to PDVSA. 

So now you have to show that PDVSA has no independence and that PDV Holding Inc and  PDV America Inc have no independence. That ain’t so easy. In short, Lex is too sanguine about the prospects for seizing Citgo. It could happen, and my lawyer friends think it will happen ... but only after a long delay.

But there’s another problem! Venezuela has ICSID judgments against it. Unless Venezuela pays them, then ExxonMobil and ConocoPhillips will be sniffing around those assets. Their claims rank higher than claims by bondholders, since uncompensated expropriation, unlike default, involves a clear denial of justice. 

In short, you have a mess. Sure, the fact that Citgo is there will make the Bolivarian Republic think six times about defaulting. But the economic mismanagement in that country is of such a scale (sorry, Shah8 ☺) that Caracas no longer really has any other options.  

Now, creditors have another recourse.

The creditors could go after Venezuelan oil exports directly. There is a recent history of this. In 2007, Texas courts ordered American companies to turn over not only royalties but also physical oil due the Congolese Republic. (See here and here; the decision itself is here.) Now the legal approach used in Texas did not have legs. But to be fair, the suits were quite different than the suits that might happen regarding Venezuela. 

The Venezuelans could sell their oil at the point of embarkation and try to hide it, but that opens up foreign refineries to lawsuits. With the world awash in oil, many will be behooved to avoid going anywhere near the Venezuelan stuff. 

So here is the upshot: a default will cause much pain in Venezuela but it will not make creditors whole. Having Citgo as a target does not cancel out all the problems with legal enforcement of sovereign debt because even if the creditors win it will take forever and a day to collect. But because of the legal challenges to oil sales, default be a big enough disaster for Venezuela that the country will likely make an offer that 75% of its creditors will accept. They will then abandon any attempts to go after Citgo. 

Given what Venezuelan bonds are yielding, I’m tempted to buy them. How bad could the restructuring be?

A bad argument about the causes of the Civil War

 As mentioned in my last post, Dave Evans of Georgia took issue with my characterization of the Confederate flag as the “slaveowning banner.”

I should point out that Mr. Evans isn’t alone in thinking this. Even comparatively-normal Texas has this completely backwards monument to the Southern Confederacy on the lawn of the Capitol. “Confederate dead,” it says, “Died for state rights guaranteed under the Constitution. The people of the South, animated by the spirit of 1776, to preserve their rights, withdrew from the federal compact in 1861. The North resorted to coercion. The South, against overwhelming numbers and resources, fought until exhausted.”

So it is a common belief that the war was about something other than preserving the abomination of slavery. But Mr. Evans presents one of the silliest possible arguments in favor of that proposition. Over to him:

If it really had been “all about” slavery then why did Lincoln endorse and get the Northern dominated Congress to pass the Corwin Amendment which would have enshrined slavery in the US constitution making it irrevocable? Why did the original 7 seceding states not readily agree to re-enter the union with irrevocable slavery protected by the US Constitution?

The Corwin Amendment was a strange constitutional amendment that made it out of Congress in the dying days of the Buchanan Administration. A last ditch effort to prevent secession, it banned any future constitutional amendments to alter slavery: “No amendment shall be made to the Constitution which will authorize or give to Congress the power to abolish or interfere, within any state, with the domestic institutions thereof, including that of persons held to labor or service by the laws of said state.”

It was strongly backed by William Seward and President-elect Lincoln endorsed it in a letter. Why would they do that if they hated slavery?

Simple: they knew the Corwin Amendment would be toothless. In 1861 there were 15 slave states. That was enough to do a pretty good job of preventing any anti-slavery amendments to the Constitution, at least until the number of free states hit 45 ... which was not going to happen anytime soon. (There were 19 free states at the beginning of the war.) Even you think that Delaware and Maryland were going to abolish slavery in the immediate future, then the abomination of slavery would still be safe from constitutional amendments until the number of free states reached 39, even without the Corwin Amendment.

In other words, the Corwin amendment was complete bullshit. It prevented Congress and the states from doing what the current constitutional set-up already prevented them from doing. Devoted abolitionists knew that they were giving away precisely nothing by endorsing it. What it was, was a political Hail Mary pass ... maybe the secessionists would be dumb enough to be conciliated, even though it did nothing to guarantee the expansion of slavery and it did nothing to prevent Congress and the free states from continuing to whittle away at forced labor short of changing the Constitution. 

The South did not fall for it.

There was a real “compromise” proposal out there that would have satisfied the South: the Crittenden compromise. It allowed for the expansion of slavery and insured that escaped slaves would not become automatically free in the North. The Republicans were not having any of that. So it foundered.

Note what nobody offered to try to make peace: a deal to reduce tariffs. Not even an agreement to, say, turn over tariff revenues to state governments rather than fund internal improvements. That is because secession had nothing to do with trade policy or infrastructure spending. 

I doubt that much of this is new, although most of the easily accessible stuff fails to point out why the Corwin Amendment conceded nothing to the South. So I hope that I have added at least a little value. If not, enjoy the pictures of Austin!

Further thoughts always welcome.

Another turn in the South

 In 2004, a good friend and I drove around Georgia, Alabama and the Florida panhandle. I had just gotten back from Fort Huachuca, he was getting leave from Fort Benning, and we both had family in Broward County, Florida. (And in my case, Miami-Dade as well.) We had been to the region quite a bit ... but rarely outside the confines of an Army post. So why not take my old Ford Focus and tool around the deep southeast for a few weeks before heading down to Fort Lauderdale? 

It was a great trip. The South is definitely different. The first thing you notice is how the countryside is intensively farmed. In fact, there is this ah hah moment when you realize that most of the woods you have seen are actually tree farms. My buddy said, “We’re not in New England,” after which we started yelling “Niner niner!” every time we spotted anything really alien. For example, take Quitman, Georgia, with the decaying mansions set back from the streets and its obvious poverty and extreme segregation. Neither poverty nor segregation are alien to New York or New England, of course, but once-rich and now-poor all black small towns are not particularly common. The only thing not “niner” in that town was the small market catering to Mexican immigrants.

Or consider Dothan, Alabama. The town depends on Fort Rucker for its existence, but that was not what made it not like New England. Nor did the suburban sprawl around the town; most American towns look like they’ve exploded across the countryside. What made Dothan southern was the way the sprawl had sucked all the life out of the center of the town, leaving it mostly a vasty expanse of parking lots. There was none of the quaint cuteness that would have filled a similar town in New England; but even California towns have more life in their centers. (In that sense, Quitman was actually more like a northeastern town than most Southern ones.)

The deadness of the centers applied to the larger cities, as well. (Birmingham was a partial exception.) We arrived into Montgomery at night, so it was less than surprising that the central city seemed deserted. We did find a nice little brewpub next to a retro-style minor league ballpark. It closed early, but the patrons suggested two other nearby bars. We went to one on the first floor of a motel on a hill at the edge of downtown, where the buzz-cut bartender sold me a $15 contraband Cuban cigar (putatively) that I then got to smoke right at the bar. (Some differences, they are awesome.) But the difference really showed up during the  day, where the downtown seemed to never open. It was an expanse of parking lots, vacant storefronts and drive-through banks, punctuated by the piles of government buildings and frighteningly devoid of traffic. And I don’t mean just pedestrian traffic. Kids could have played hockey in the middle of Dexter Avenue at 10am, if there had been any kids. And lunch didn’t change anything. Did all those government workers stay holed up in their offices?

Now, it is not like the northeast did not have abandoned urban centers when I was growing up. Central New Haven circa 1990? Ugh. The once-great “Hub” of the South Bronx? Awful. Baltimore? You have seen the Wire. And my first visit to Buffalo in 1990 can only be called depressing, along with my second, third and fourth. 

No, what was weird to a northeastern sensibility was that downtown Montgomery felt abandoned but not decayed. The streets and plazas were spotless. The empty storefronts were well-sealed and well-maintained. It all looked as if it had been suddenly abandoned in the face of an invading army. It was strange.

But that was just weird. What made Montgomery downright eerie was all the Confederate memorials. Sure, Rosa Parks had her plaque. And there were no slaveowning banners. But you couldn’t escape the oddly-respectful memorials to the Lost Cause. Statues of “The Statesman,” e.g., Jefferson Davis. Murals in the state capitol (which the legislature no longer uses) celebrating horseback-riding antebellum aristocrats. A memorial to the Confederate dead who served in the “War of Southern Independence.” 

The monuments to the Civil War were even more common outside the big cities: the below picture is from Havana, Florida, and it captures just how strange the monuments are:

Consider exactly what those soldiers were defending their families, communities, state and nation from. And then consider that the term “nation” is in that sentence. Wait ... what?

In southeastern Georgia we saw many more slaveowning Battle Flags than in Alabama, including a bumper sticker on a truck bearing the ominous slogan: “It’s Not Over.” A Shell station off of I-75 right over the Florida state line flew a gigantic Third Flag of the Confederacy. The design of the Third Flag is sufficiently obscure that it leaves little doubt that whomever put it up knew exactly what it stood for; no pretending to hide behind “southern heritage” here.

It completely weirded me out. As I wrote at the time, “It’s not the Cavaliers and the Roundheads, it’s slavery, dude. I can see memorializing the poor bloody soldiers who suffered and died for the CSA, but the CSA’s leaders should be treated the way the Germans treat the Nazis.”

Now, this was late 2004, so some of the strange atmosphere was supercharged from the recent election. In Georgia, an angry pickup driver threateningly tailgated us on a rural road, probably incensed by my Kerry-Edwards bumper stickers. He pulled up next to us and looked like he was about to start something when he noticed my friend was wearing BDUs. He got solemn and suddenly sped off. In Gainesville, we overheard loud laments about the war in Iraq from hospital workers eating at a Japanese steakhouse made up to look like a pagoda. And in Birmingham, Alabama, a diner did in fact serve us “American fries.”

And while not directly election-related, we kept running into angry demonstrations against the use of “Happy Holidays.” This was not a new thing by 2004, but I had lived in Mexico from 1996 to 2002 and spent most of 2002-04 in New Haven, various Army posts, and overseas. So the angry demonstrations against a completely anodyne phrase that had been used in the more Jewish parts of America since before I was born took me completely off guard.

But for all that, the real strangeness had to do with the war. The war that had ended 139 years ago by that point and will reach its 150th anniversary this year. 

Which brings us to a recent comment by Dave Evans of Georgia, who took issue with my characterization of the Confederate flag as the “slaveowning banner.” In the next post, I will lift my response to him from the comments. I think it is worth highlighting. But for right now, I just want to leave it with the statement that driving through the English-speaking South is a far stranger experience for a New Yorker than anywhere in English-speaking Canada west of Quebec. 

U.S. oil exports to Mexico are not that big a deal

 The U.S. is about to export up to 100,000 barrels per day of light crude to Mexico. Some correspondents have asked me what this means. Something to do with Mexico’s energy reform? A collapse in Mexican output? A huge change in American policy?

No.

From the Mexican side, the news is not as earthshaking as it sounds. Mexico has a bunch of refineries that can’t process its heaviest crudes. What it does it export the heavy stuff to the U.S. and refine the light stuff at home, which leaves a bunch of its refineries below capacity. It imports gasoline and refined products from the U.S. to fill the gap. Now its decided that it will buy light oil from the United States and turn it into gasoline at home rather than buy gasoline directly from the United States.

The plan has been under consideration for quite a while. (Pemex thought hard about the cheapest place to get the crudes: America was not the only option.) It is not a response to falling crude prices: as you can see from the below chart, wholesale gasoline prices have been falling a little bit faster than crude prices. Rather, it is part of a long-standing plan to maximize the use that Pemex gets out of its existing refineries.

I should also point out that the U.S. has exported crude to Mexico before, albeit on a much much smaller scale. In 1996, Mexico imported 267,000 barrels of U.S. crude, followed by smaller imports through 2006.

So this is less than earthshaking for Mexico.

I’m not sure that the shipments are a big deal on the U.S. side either. The U.S. already exports crude to various countries. This year, exports to Canada have been running at 302,400 barrels per day, three times what Mexico is going to receive. For sixteen months in 1999 and the early part of 2000, the U.S. exported 40,400 barrels per day to Japan. Between 1996 and 2000, the U.S. exported 43,400 barrels per day to South Korea.  

The American oil export ban, in short, is a little leaky. That is deliberate. Under U.S. law, Canada enjoys various blanket exemptions from the export bans. The laws also give the President the power to permit exports elsewhere. In 1992, President Bush the Elder allowed oil companies to export up to 25,000 bpd of California heavy crude; President Clinton gave such permission to Alaska in 1996. Their orders are still in effect. (The above links go directly to the relevant legislation and presidential authorizations.) A historical precis can be found here, including additional copies of the relevant legislation and presidential findings.

So I’m not seeing this as a major precedent. The President can authorize exports already, although future administrations could reverse that. And Congress can abolish the export ban permanently if it wants. I’m not opposed to that, although it will raise domestic oil prices, simply because cheap domestic oil is not in our national interest. (Not least of which is that American oil producers face high costs, so their revenues get plunged into new spending rather than accumulate in their shareholders’ pockets.) And

If the Republicans really want to do something this term, then repealing the oil export ban is something they could do. I suspect that President Obama would sign such a bill.

Of course, maybe they prefer the current world where the president has control over exports, even if they don’t approve of the current occupant of the office. After all, when the U.S. really does become oil independent, then the president really will be able to reduce oil prices at the stroke of a pen ...

More reasons that the price of oil will stay low for a while

 It will be a while. We have stated some of the reasons, but there are two more to consider. First, just like the Mexican government, many U.S. firms are hedged. The price they face will not fall below $70 in 2015. Second, many U.S. firms are indebted: they need to keep generating cash flow. Ergo.

Plus the other stuff. How long is a while? Make me an offer and I might tell you. ☺

More seriously, if you can figure out a way to go long on oil and have a reasonably low discount rate, then you should do it. The price will rise and rise a lot. But it will not be this year. Nor would I bet on next year, unless you can afford a loss.

More evidence that U.S. shale will not collapse in 2015

 In October, we predicted that one of the reasons why U.S. tight oil production would not collapse in the face of low oil prices is that “when prices slump, so does the demand for all the specialized inputs that oil operations need. Geologists, rigs, roughnecks, all will cut their prices.”

Yesterday, the Financial Times reported that the oil majors were cutting the rates they paid contractors by 10%. An oil services company cut wages for 1,300 workers. And the majors have slashed their internal pay by 15%. 

The data comes from the United Kingdom, not the United States, but the same trends apply. We do not expect American tight oil (aka, “shale”) to fall significantly next year.

Your post-Boxing Day shaggy dogg family story with American Flagg!

 My boy and I are reading With the Fifth Army Air Force. He picked it out along with Fighter from the sidewalk shelves of a bookstore on the corner of 20th and P Street. It’s a picture book; we’re following it along. Which led to this exchange this morning.

“Poppa. Are you Japanese?”

“No. Are you Japanese?” 

“No! I’m American Flag!”

But it didn’t end there. “You’re an American flag?”

“I’m American Flag! I’m a banana American.”

“You’re a banana American?”

“I’m a outside American!”

I would like to think that there’s some sort of deeper meaning to this particular early-morning exchange, but I doubt it. Other than that reading World War 2 photo books with a 2½-year-old is an interesting experience.

Of course, some people are more modern and believe that little children should never be told anything that might possibly intimate that violence exists.

My wife and I are not of that school. But then again, I thought that this column in the New York Times today had a point. And while I will be very angry if my little girl or little boy (or any future siblings) do what we saw three skinny preteen boys do on Christmas day, I also have to admit that I felt some gratification in watching them skateboard down the middle of East-West Highway with no helmets on. (Two of them were on the shoulder. The third? Trying for a Darwin Award.)

OK, that was your shaggy dog story of the day. Happy day after Boxing Day!

More evidence that the oil price slump will be prolonged

 At some point we should go through this blog and mark our beliefs to market: which predictions did we get wrong?

But before we do that, here is some supporting evidence for our prediction that oil prices will stay low for a while. The reason is that tight (aka “shale”) oil production in the United States will not fall as quickly as many hoped. Here is a concrete example. Continental Resources plans to reduce the number of operating rigs by 40% and cut its drilling budget from $5.2 billion to $2.7 billion. At the same time, however, it expects the cost of a well to fall 15-20% and average production to rise 16-20%.

And Continental, bear in mind, is unhedged! Most American drillers are hedged, meaning that the price drop won’t affect them until 2016. Total rig counts are down only 1% in the past week and up by 6% on this time last year.

Add that to Saudi Arabia’s refusal to cut production and you’ve got a situation for a prolonged bust. We do, however, predict that oil prices will be back up near or over $100 within a few years ... but a few years is a few years. 

As for why Saudi Arabia wants a period of low prices, well, it isn’t that hard to understand. They have a big enough war chest to withstand the pain. Meanwhile, they get to (a) discipline OPEC; (b) slow down the growth of high-cost competitors; (c) prevent demand destruction; and (d) help out their patron, the United States, in a rough geopolitical time. What’s not to like?

Was independence essential to American economic success?

 A couple of posts down, I cast some doubt on the assertion that continued British rule would have slowed American economic growth after 1776. I have now come across a Gavin Wright essay that makes just that case. 

Wright argues, correctly I think, that a lot of early American growth was based on the creation of a labor market that excluded slavery from the Northwest (i.e., Wisconsin, Michigan, Illinois, Indiana and Ohio), a relatively egalitarian land distribution, a unified national product market and deep capital markets. If those three things do not happen under continuing British imperial rule, then North America will be poorer. 

On page 294, Wright suggests that the British parliament might have done less to exclude slavery from the Northwest. I am skeptical of that proposition. It is true that Indiana only rejected slavery because Congress would not have admitted it as a slave state under the written conventions on Senate balance. But it is also true that the imperial British parliament could have even more clearly and less contentiously banned slavery from the area. I do not see why London would be slower to act than Washington. After all, the Empire did ban slavery almost three decades before the United States. 

Wright raises the issue of a more egalitarian land distribution but then drops it. It seems uncontestable that American policy fostered a more equal land distribution. (Certainly in what was then called the Northwest.) two propositions remain unclear: (1) how much those policies worked relative to an imperial counterfactual and; (2) how much they mattered to growth as opposed to distribution. Color me agnostic.

It is true that independence fostered the growth of American capital markets. But Canada developed solid capital markets and a strong banking system. It is possible that internal disunity under British rule would have delayed the creation of an American capital market, but I am skeptical. There certainly would have been less fear of default among British colonial provinces than American federal states. 

What does that leave? Continued British rule might have led to interprovincial protectionism from each other combined with lower tariffs against Britain. Both outcomes are possible. Canadian history suggests otherwise, but only after a span of decades. For example, Canada, Nova Scotia, and New Brunswick only established reciprocal free trade in 1846. That on a continental scale would have made British North America poorer than our United States.

In short, had continued British rule fostered multiple small and protectionist provinces (as it did in Canada for a remarkably long time), then it would have been bad for North America.

But was that a likely outcome?

How Many ‘White’ People Are Passing? with apologies to Henry Louis Gates

 Hella more than you think. Frank Underwood, certainly.

For most of its history, the stereotype of the racial line in the United States was the one-drop rule. You had any African ancestry and you were considered black.

Of course, the stereotype of the American caste system never really held. The United States was never organized enough to universally enforce the one-drop rule. If you looked white enough to convince strangers, then it was possible for you to “pass” for white. We know that happened a lot. What we don’t know is how common it was. Consider Daniel Sharfstein: “According to just about anyone who has considered the question, the migration [from black to white] is impossible to reconstruct... At best, such evidence is scattered across local archives and county courthouses, in library stacks and microfilm reels. Beyond the isolated anecdotes, there seems to be only silence.”

Except that’s wrong! The U.S. census identified people by race; the census-taker did the identification. So we can, in theory, find out how many people moved from black to white and what happened to them.

And here come Emily Nix and Nancy Qian to do the work! And what do they find?

Using the full population of de-identified historical Censuses for ten Southern states during 1900-1940, we document that over one-fifth of black males “passed” for white at some point during their lifetime, a tenth of whom later reverse-passed to being black; passing was almost always accompanied by geographic relocation to communities with a higher percentage of whites; occurred at all ages; and was positively associated with political-economic opportunities for whites relative to blacks, such as schooling, earnings and voting rights.

The figures in their paper are even more surprising than that. The one-fifth number (21%, to be more exact) is a lower bound: it refers to the individuals that they were able to identify across censuses with perfect confidence. Their most likely estimates are much higher. Consider Table 5: of Southern black children aged 5-14 in 1900, 43% of them were identified as white in 1940. (The absolute lower bound for that number is 28%.)

They also find, less surprisingly, 95-97% of “passers” moved counties and 54% switched states. In addition, passing was associated with crappier conditions for black people in the county of origin. They are going to code up lynching in future work but I doubt that the results will surprise.

But there is still a lot we want to know! How did passers do relative to non-passers, adjusting for socioeconomic status? Did they marry whites or blacks and how did their children identify? What determined the counties that they moved to, besides having a higher percentage of whites? How many moved to the North, and where? What determined reverse-passing, e.g. going back to identification as black? 

The authors note that according to data from 23andme, the number of self-identified whites who would be black under the one-drop rule is about 20%. (The 23andme sample is far from random; I suspect the white people skew towards the descendents of Ellis Islanders.) If the Nix-Qian numbers are correct, however, then 20% is likely an underestimate unless one of three things is true: (1) The children of passers re-identified as black in significant numbers; (2) Passers showed significantly below-average fertility; or (3) Passers showed high levels of endogamy, that is, marrying other passers. 

Even in Jim Crow America, the color line is turning out to have been extremely fuzzy. 

Long live united Britain

 So far, we feel pretty confident in our long-standing prediction that the Kingdom will remain United. Hooray!

Now, can we get some more unifications up around here? I mean, seriously. All this country-splitting is getting a bit boring. Bring back Czecho-Slovakia! Unite the West Indies! Heck, unite the West Indies as part of Canada!

If we must get rid of the United Kingdom, why not have it join Canada? I would get behind that.

And why not have Iceland join the United States?