Surveying three centuries of economic history, a Harvard professor argues for a leaner global system that puts national democracies front and center.From the mercantile monopolies of seventeenth-century empires to the modern-day authority of the WTO, IMF, and World Bank, the nations of the world have struggled to effectively harness globalization's promise. The economic narratives that underpinned these eras—the gold standard, the Bretton Woods regime, the "Washington Consensus"—brought great success and great failure. In this eloquent challenge to the reigning wisdom on globalization, Dani Rodrik offers a new narrative, one that embraces an ineluctable tension: we cannot simultaneously pursue democracy, national self-determination, and economic globalization. When the social arrangements of democracies inevitably clash with the international demands of globalization, national priorities should take precedence. Combining history with insight, humor with good-natured critique, Rodrik's case for a customizable globalization supported by a light frame of international rules shows the way to a balanced prosperity as we confront today's global challenges in trade, finance, and labor markets.
In the era of Kennedy and Khrushchev, power was expressed in terms of
nuclear missiles, industrial capacity, numbers of men under arms, and
tanks lined up ready to cross the plains of Eastern Europe. By 2010,
none of these factors confer power in the same way: industrial capacity
seems an almost Victorian virtue, and cyber threats are wielded by
non-state actors. Politics changed, and the nature of power—defined as
the ability to affect others to obtain the outcomes you want—had changed
dramatically. Power is not static; its story is of shifts and
innovations, technologies and relationships.Joseph Nye is a
long-time analyst of power and a hands-on practitioner in government.
Many of his ideas have been at the heart of recent debates over the role
America should play in the world: his concept of "soft power" has been
adopted by leaders from Britain to China; "smart power” has been adopted
as the bumper-sticker for the Obama Administration’s foreign policy.
This book is the summation of his work, as relevant to general readers
as to foreign policy specialists. It is a vivid narrative that delves
behind the elusive faces of power to discover its enduring nature in the
This article evaluates the role of United Nations special rapporteurs through a systematic study of the perspectives of mandate-holders. Qualitative interviews with current and former rapporteurs and their assistants reveal that three central tensions inherent in the rapporteur’s task give the rapporteur room for individual experimentation. First, the tension between UN affiliation and independent status allows the rapporteur to determine his/her orientation toward the UN. Secondly, the tension between competing obligations to treat sovereign states as partners and as adversaries forces the rapporteur to develop innovative strategies to address national sovereignty. Thirdly, the tension between the universal scope of thematic mandates and the impossibility of realising that scope enables the rapporteur to travel between specific contexts and international norms. The unparalleled autonomy afforded by the position enables rapporteurs to define rights in real time, responding to situations as they unfold rather than after the fact. For that reason, any reform of the special procedures system should preserve the role’s unique features. Rather than expend political will on ambitious structural changes, reform advocates should focus on increasing funding, resources, and pressure on states to cooperate.
Joanna Naples-Mitchell is a former Undergraduate Associate (2009-2010).Download PDF
Lost in Transition tells the story of the “lost generation” that came of age in Japan's deep economic recession in the 1990s. The book argues that Japan is in the midst of profound changes that have had an especially strong impact on the young generation. The country's renowned “permanent employment system” has unraveled for young workers, only to be replaced by temporary and insecure forms of employment. The much-admired system of moving young people smoothly from school to work has frayed. The book argues that these changes in the very fabric of Japanese postwar institutions have loosened young people's attachment to school as the launching pad into the world of work and loosened their attachment to the workplace as a source of identity and security. The implications for the future of Japanese society—and the fault lines within it—loom large.
This study identifies how country differences on a key cultural dimension—egalitarianism— influence international investment flows. A society’s cultural orientation toward egalitarianism is manifested by intolerance for abuses of market and political power and a desire for protecting less powerful actors. We show egalitarianism to be based on exogenous factors including social fractionalization, dominant religion circa 1900, and war experience from the 19th century. We find a robust influence of egalitarianism distance on cross-national flows of bond and equity issuances, syndicated loans, and mergers and acquisitions. An informal cultural institution largely determined a century or more ago, egalitarianism exercises its effect on international investment via an associated set of consistent contemporary policy choices. But even after controlling for these associated policy choices, egalitarianism continues to exercise a direct effect on cross-border investment flows, likely through its direct influence on managers’ daily business conduct.
Scholars in science and technology studies (STS) have recently been called upon to advise governments on the design of procedures for public engagement. Any such instrumental function should be carried out consistently with STS’s interpretive and normative obligations as a social science discipline. This article illustrates how such threefold integration can be achieved by reviewing current US participatory politics against a seventy-year backdrop of tacit constitutional developments in governing science and technology. Two broad cycles of constitutional adjustment are discerned: the first enlarging the scope of state action as well as public participation, with liberalized rules of access and sympathetic judicial review; the second cutting back on the role of the state, fostering the rise of an academic-industrial complex for technology transfer, and privatizing value debates through increasing delegation to professional ethicists. New rules for public engagement in the United Sates should take account of these historical developments and seek to counteract some of the anti-democratic tendencies observable in recent decades.
On February 19, 2009, CNBC commentator Rick Santelli delivered a dramatic rant against Obama administration programs to shore up the plunging housing market. Invoking the Founding Fathers and ridiculing "losers" who could not pay their mortgages, Santelli called for "Tea Party" protests. Over the next two years, conservative activists took to the streets and airways, built hundreds of local Tea Party groups, and weighed in with votes and money to help right-wing Republicans win electoral victories in 2010.In this penetrating new study, Harvard University's Theda Skocpol and Vanessa Williamson go beyond images of protesters in Colonial costumes to provide a nuanced portrait of the Tea Party. What they find is sometimes surprising. Drawing on grassroots interviews and visits to local meetings in several regions, they find that older, middle-class Tea Partiers mostly approve of Social Security, Medicare, and generous benefits for military veterans. Their opposition to "big government" entails reluctance to pay taxes to help people viewed as undeserving "freeloaders"—including immigrants, lower income earners, and the young. At the national level, Tea Party elites and funders leverage grassroots energy to further longstanding goals such as tax cuts for the wealthy, deregulation of business, and privatization of the very same Social Security and Medicare programs on which many grassroots Tea Partiers depend. Elites and grassroots are nevertheless united in hatred of Barack Obama and determination to push the Republican Party sharply to the right.
The Tea Party and the Remaking of Republican Conservatism combines fine-grained portraits of local Tea Party members and chapters with an overarching analysis of the movement's rise, impact, and likely fate.
This paper measures “debt disputes” between governments and
foreign private creditors in periods of sovereign debt crises. We
construct an index of government coerciveness, consisting of 9
objective sub-indicators. Each of these sub-indicators captures
unilateral government actions imposed on foreign banks and
bondholders. The results provide the first systematic account of
debt crises that goes beyond a binary categorization of default
versus non-default. Overall, government behavior and rhetoric
show a strong variability, ranging from highly confrontational to
very smooth crisis resolution processes. In a preliminary analysis
on the determinants of coercive behavior, we find political institutions
to be significant, while economic and financial factors play
a lesser role. These results open up an agenda for future research.
Migrants to the United States are a diverse population. This diversity, captured in various
migration theories, is overlooked in empirical applications that describe a typical narrative for an
average migrant. Using the Mexican Migration Project data from about 17,000 first-time
migrants between 1970 and 2000, this study employs cluster analysis to identify four types of
migrants with distinct configurations of characteristics. Each migrant type corresponds to a
specific theoretical account, and becomes prevalent in a specific period, depending on the
economic, social and political conditions. Strikingly, each migrant type also becomes prevalent
around the period in which its corresponding theory is developed.
To evaluate the distributional impact of remittances in origin communities, prior research studied
how migrants’ selectivity by wealth varies with migration prevalence in the community or prior
migration experience of the individual. This study considers both patterns, and examines
selectivity separately in low and high prevalence communities and for first-time and repeat
migrants. Based on data from 18,042 household heads in 119 Mexican communities from the
Mexican Migration Project, the analyses show that (i) first-time migrants in low prevalence
communities come from poor households, while repeat migrants in high prevalence communities
belong to wealthy households, and (ii) higher amounts of remittances reach wealthy households.
These results suggest that repeat migration and remittances may be mechanisms for wealth
accumulation in the study communities. Descriptive analyses associate these mechanisms with
increasing wealth disparities between households with and without migrants, especially in high
prevalence communities. The study, similar to prior findings, shows the importance of repeat
migration trips, which, given sustained remittances, may amplify the wealth gap between
migrants and non-migrants in migrant-sending communities. The study also qualifies prior
findings by differentiating between low and high prevalence communities and observing a
growing wealth gap only in the latter.
Ronald Reagan and Barack Obama have at least one similarity. They both were confronted by
great economic challenges when they became president.
Mr. Reagan's immediate challenge was that inflation and interest rates were out of control. He met this great test by allying with the Federal Reserve chairman, Paul Volcker, in accomplishing a return to price stability, even through the 1982 recession when the unemployment rate hit 10.8%.
Reagan's success is not in doubt. Inflation and interest rates were reduced dramatically, and the recovery from the end of 1982 to the end of 1988 was strong and long with an average growth rate of real GDP of 4.6% per year. Moreover, Reagan focused on implementing good economic policies, not on blaming his incompetent predecessor for the terrible economy he had inherited.
Mr. Obama was equally in position to get credit for turning around a perilous economic situation that had been left by a weak predecessor. But he has pursued an array of poor economic policies, featuring the grand Keynesian experiment of sharply raising federal spending and the public debt. The results have been terrible and now, two and a half years into his administration, Mr. Obama is still blaming George W. Bush for all the problems.
Friday's downgrade of the U.S. credit rating by Standard & Poor's should have been a wake-up call to the administration. S&P is saying, accurately, that there is no coherent long-term plan in place to deal with the U.S. government's fiscal deficits.
The U.S. Treasury could have responded in two ways. First, it could have taken the downgrade as useful information and then focused on how to perform better to earn back a AAA rating. Instead, it chose to attack the rating agency as incompetent and not credible. In this respect, U.S. officials were almost as bad as Italian Prime Minister Silvio Berlusconi, who responded to warnings from S&P and Moody's about Italian government debt by launching police raids on the offices of the rating agencies in Milan last week. The U.S. Treasury's response also reminds me of Lehman Brothers blaming its financial problems in the summer of 2008 on evil financial analysts and short-sellers.
The way for the U.S. government to earn back a AAA rating is to enact a meaningful medium- and long-term plan for addressing the nation's fiscal problems. I have sketched a five-point plan that builds on ideas from the excellent 2010 report of the president's deficit commission.
First, make structural reforms to the main entitlement programs, starting with increases in ages of eligibility and a shift to an economically appropriate indexing formula. Second, lower the structure of marginal tax rates in the individual income tax. Third, in the spirit of Reagan's 1986 tax reform, pay for the rate cuts by gradually phasing out the main tax-expenditure items, including preferences for home-mortgage interest, state and local income taxes, and employee fringe benefits—not to mention eliminating ethanol subsidies. Fourth, permanently eliminate corporate and estate taxes, levies that are inefficient and raise little money.
Fifth, introduce a broad-based expenditure tax, such as a value-added tax (VAT), with a rate around 10%. The VAT's appeal to liberals can be enhanced, with some loss of economic efficiency, by exempting items such as food and housing.
I recognize that a VAT is anathema to many conservatives because it gives the government an added claim on revenues. My defense is that a VAT makes sense as part of a larger package that includes the other four points.
The loss of the U.S. government's AAA rating is a great symbolic blow, one that would cause great anguish to our first Treasury secretary, Alexander Hamilton. Frankly, the only respectable reaction by our current Treasury secretary is to fall on his sword. Then again, "the buck stops here" suggests that an even more appropriate resignation would come from our chief executive, who, by the way, is no Ronald Reagan.
The Treasury can cry foul all it wants, but the decision by Standard & Poor’s to downgrade America’s credit rating by one notch last
Friday, and the subsequent plunge in the stock market, are serious
symptoms of a loss of confidence—an assessment that is fundamentally
political, not economic.
There is little question about the technical ability of America to make
good on its debts—but there are grave questions about the political
system’s ability to resolve our nation’s financial problems.
The debt-ceiling deal between President Obama and Congressional
Republicans merely staved off a crisis of confidence for the moment. It
does not address our immediate need to avoid falling back into
recession, or our longer-term need to raise enough revenue to pay for
the social spending Americans want.
Moreover, the deal sidesteps the fundamental challenge the country now
faces: who will pay to fix what was broken during the past decade by
irresponsible tax cuts, ruinously expensive wars, failures of regulation
and the resulting housing and financial booms and busts?
In the short term, the plan cuts a bit of discretionary nondefense
spending, a category that in fact has not grown particularly rapidly.
This is a mistake. With unemployment at 9.1 percent, and long-term
joblessness at record levels, we need more spending, not less. But the
agreement all but rules out new spending to boost the economy, at a
dangerous time. The chances of a double-dip recession are growing—and a
further slowdown will increase, not reduce, the budget deficit.
The longer-term spending and revenue commitments are no better.
Certainly spending, in particular on Medicare and Medicaid, needs to be
restrained. But the deficits cannot be reined in without tax increases,
and the “framework” does little or nothing in this regard. The S. &
P. decision to downgrade reflects, in large part, the expectation that
Republicans will not allow the Bush tax cuts to expire.
The recent skirmishes all dance around the central issue: the United
States is in the midst of the world’s largest debt crisis. The Treasury
now owes the public almost $10 trillion, including $4.5 trillion to
foreigners—and that doesn’t include what households and companies owe.
For decades to come, Americans will face the core problem of every
heavily indebted nation: who will bear the burden of adjustment?
Countries borrow for many purposes: canals and railroads in the 19th
century, factories and highways in the 20th, and in the last decade, a
housing and financial boom in Europe and America. When the projects
don’t pan out and the debtor country falls into crisis, what happens to
the accumulated debts? Who pays? Creditors or debtors? Workers or
investors? Rich or poor? The European Union is tearing itself apart over
this question, which divides creditor nations from debtor nations and
which divides groups within nations. The American variant of this
conflict is just beginning.
Perhaps, some Americans believe, we can shunt the adjustment costs onto
foreigners. Indeed, our creditors worry that the United States will
reduce its debt burden the old-fashioned way, by inflating it away. A
few years of moderate inflation, and a weaker dollar, would
significantly lessen the real cost of servicing the country’s debts—at
our creditors’ expense.
But adjusting to the reality of America’s accumulated debts will
inevitably require sacrifices at home. The battle over who will be
sacrificing has already begun, albeit under veils of rhetoric. The
Republicans seem unconcerned about stimulating recovery, and primarily
concerned that none of the long-term costs of balancing our budget be
paid by upper-income taxpayers. No surprise: unemployment among the
one-third of Americans with the highest incomes is barely 4 percent,
while for the lowest third it is more than four times that level.
The Democrats, for their part, seem content to insist that the
adjustment burden not fall on beneficiaries of government spending,
whether public employees or recipients of social spending. This reflects
their base in the labor movement, the public sector and the poor.
We lost the first decade of the 21st century by squandering our wealth
and borrowing as if there was no tomorrow. We risk losing this decade to
an incomplete recovery and economic stagnation.
An economically responsible, politically feasible distribution of the
costs of working our way out of the crisis will require higher taxes, a
more efficient tax code, and restrained growth of social spending,
particularly Medicare. To ignore these realities, and the contentious
choices they entail, is merely to postpone the inevitable day of
reckoning—and probably to make it worse.
The recent debt deal will slash the defense budget over the next decade.
And if Congress can’t agree on an additional $1.5 trillion in cuts, the
law’s “trigger mechanism” will lead to deeper reductions in military
spending. The initial cuts will not imperil America’s national security,
but the deeper cuts could.
The administration of George W. Bush nearly doubled the defense budget
following 9/11. With the winding down of Mr. Bush’s two wars, we could
cut our ground forces to 1990s levels, reduce the planned purchases of F-35 Joint Strike Fighters,
make greater use of cheaper drones and other technologies, and deal
with the escalating costs of the defense health care system — without
serious damage to national security. Indeed, President Obama’s budget
had already planned for $400 billion in defense savings by 2023.
But it is not enough to tinker with the defense budget. We also need to
rethink how we use our military power. Unlike the state of affairs
during the cold war, the United States and its allies today account for
over 70 percent of world military expenditure. The No. 1 power no longer
has to patrol every boundary and seek to police every country.
Opponents of defense cuts are raising the specter of isolationism and
the weakening of American power. But there is a middle way.
At the height of the cold war, President Dwight D. Eisenhower decided
against direct military intervention on the side of the French in
Vietnam in 1954 because he was convinced that it was more important to
preserve the strength of the American economy. Today, such a strategy
would avoid involvement of ground forces in major wars in Asia or in
other poor countries. While it will take time to extricate ourselves
from Mr. Bush’s post-9/11 strategy, we must start, as the National Security Strategy of 2010
states, “by recognizing that our strength and influence abroad begins
with the steps we take at home.” Eisenhower could have said that — and
no one could accuse Ike of being an isolationist.
Counterinsurgency is attractive as a military tactic but it should not
lead us into a strategy of nation-building in places where we do not
have the capacity to engineer change. The maxim of avoiding major land
wars in poor countries does not mean withdrawing our military presence
from places like Japan and South Korea, or ending military assistance to
countries like Pakistan and Egypt. Some analysts call this “off-shore
balancing,” but that term must mean more than just naval and air force
activity. For example, in Japan and South Korea, our allies pay a
significant portion of the cost for basing American troops there because
they want an insurance policy in a region faced with a rising China and
a volatile North Korea.
Over the course of this century, Asia will return to its historic
status, with more than half of the world’s population and half of the
world’s economic output. America must be present there. Markets and
economic power rest on political frameworks, and American military power
provides that framework. Military security is to order as oxygen is to
breathing: underappreciated until it becomes scarce. That is why the new
bipartisan Congressional commission must provide the revenues that
allow America to continue to play this vital role while avoiding the
trap of overly ambitious nation-building.
Such a strategy is also sustainable at home. The British historian Niall
Ferguson, an enthusiast for empire, lamented at the time of the Iraq
war that the United States lacked the capacity for empire because of
three domestic deficits: personnel (not enough boots on the ground);
attention (not enough public support for long-term occupation); and
financial (not enough savings and not enough taxation relative to public
expenditure). He was correct.
Lacking a stomach for empire or colonial occupation is one of the
important ways in which American political culture differs from that of
imperial Britain. Americans like to promote universal values. But rather
than succumbing to the temptation to intervene on the side of “the
good,” we can do it best by being what Ronald Reagan called “a shining
city on a hill.”
The alternatives we face today are not an untouchable defense budget or
isolationism. A smart strategy for preserving America’s power and global
role will depend on wisely tailoring our foreign policy to fit the
cloth we have. Eisenhower knew this well.
The global crises of financial and housing markets are now being superseded by new crises of governments. The fiscal challenges for the weaker members of the eurozone are early warnings, as are analogous problems in American state governments weighed down by unfunded pension and healthcare liabilities. Without action, this new crisis of state competence could soon become just as damaging as its recent financial predecessor.
This week's US debt deal, along with the prospect of debate on fiscal solutions in the run-up to the 2012 elections, provides some room for optimism. But America's fiscal problems have deep roots. The recession of 2007-2009 stemmed from the unprecedented bust in the housing market, driven by reduced lending standards and propelled by congressional pressures on private lenders and the reckless expansions of Fannie Mae and Freddie Mac. It is, however, important to recognise that this mistake is now understood and will not be repeated.
In the aftermath of the debt ceiling agreement there will be calls for further stimulus for America's economy. This would be a grave mistake. In the financial turmoil of 2008, bail-outs by the US and other governments were unfortunate, but necessary. However, the subsequent $800bn American stimulus package was largely a waste of money that sharply enlarged the fiscal hole now facing our economy.
President Barack Obama's administration has consistently overestimated the benefits of stimulus, by using an unrealistically high spending multiplier. According to this Keynesian logic, government expenditure is more than a free lunch. This idea, if correct, would be more brilliant than the creation of triple A paper out of garbage. In any event, the elimination of the temporary spending is now contractionary and, more importantly, the resulting expansion of public debt eventually requires higher taxes, retarding growth.
I agree that budget deficits were appropriate during the great recession and, for that reason, the kind of balanced-budget rule currently proposed by some Republicans should be avoided. However, since government spending is warranted only if it passes the usual hurdles of social rates of return, the fiscal deficit should have concentrated on tax reductions, especially those that emphasised falls in marginal tax rates, which encourage investment and growth.
Despite relief at the debt-ceiling agreement, America's fiscal situation remains deeply problematic. Any attempt to head off a crisis of government competence must begin with serious long-term reform. Reductions in the long-term path of entitlement outlays have to be put on the table, with increases in ages of eligibility a part of any solution.
We also need sharp reductions in spending programmes initiated or expanded by Mr Obama and his extravagant predecessor, George W. Bush. Given the inevitable growth of the main entitlement programmes, especially healthcare, increases in long-term federal revenue must be part of an overall reform.
So what, specifically, can be done? An effective future tax package would begin by setting US corporate and estate tax rates permanently to zero, given these taxes are inefficient and generate little revenue. Next, it would gradually phase out major "tax-expenditure" items, such as tax preferences for home-mortgage interest, state and local income taxes, and employee fringe benefits.
The structure of marginal income-tax rates should then be lowered. Marginal rates should particularly not increase where they are already high, such as at upper incomes. The bulk of any extra revenue needed to make up the difference should then be raised via a broad-based, flat-rate expenditure tax, such as a value added tax. A rate of 10 per cent, with few exemptions, would raise about 5 per cent of gross domestic product.
Of course, such a new tax would be a two-edged sword: a highly efficient tax, but politically dangerous. To paraphrase Larry Summers from long ago, we don't have VAT in the US because Democrats think it is regressive, and Republicans think it is a money machine. We will get VAT when Democrats realise it is a money machine, and Republicans realise it is regressive. Obviously, I worry about the money machine property, but I see no serious alternative for raising the revenue needed for an overall next-stage reform package.
The raucous debt-ceiling debate represents a good start in forging a serious long-term fiscal plan. Substantial additional progress will be needed, sadly much of which will probably have to await the outcome of the next US election. Yet progress must be made - or the impending crises of governments, signalled by possible downgrades of US debt, will make the 2008-2009 recession look mild.
The work of a Harvard history
professor has bolstered the case of a group of elderly Kenyans who are
seeking reparations from the British government for rape, castration,
beatings, and other abuses that they say were part of systematic
colonial-era efforts to suppress Kenya’s Mau Mau uprising.The case passed a critical milestone in July when a British judge
allowed it to move forward despite government arguments that, if the
abuses happened, the current government isn’t liable for colonial
transgressions.The Kenyans are former detainees in British prison camps set up
during the 1950s Mau Mau rebellion, which set the stage for Kenyan
independence in 1963. The plaintiffs allege that their abuse came at the
hands of British jailers in what was a systematic and
government-sanctioned campaign to break the rebellion.Though there had been talk of reparations for colonial atrocities for years, the case was given new life by Professor Caroline Elkins’ Pulitzer Prize-winning book, Imperial Reckoning: The Untold Story of Britain’s Gulag in Kenya.
The book, published in 2005, blended government documents and
eyewitness accounts to tell a compelling story of a horrific, systematic
campaign by the British colonial government to crush the rebellion not
only in the field, but through abuse of those held in camps around the
country.“Caroline’s work has been absolutely fundamental to the case,” said Daniel Leader, a barrister for the London law firm Leigh Day & Co.,
which is representing the former Kenyan detainees. “She was uniquely
responsible for beginning to change the public’s understanding of that
period in history….The victims are forever in her debt. She put their
stories on the map.”It was Elkins’ work, Leader said, that indicated that the abuse was
not only systematic, but known by the British government in London.George Morara, program officer for the Kenya Human Rights Commission,
which has worked to identify plaintiffs who could bring the case before
the courts, said that Elkins’ research built an important foundation
that allowed the case to move forward.“Without her seminal work,” Morara said, “this story wouldn’t have come to the fore.”Elkins’ critics, however, have charged that, though there may have
been abuses in the system, there was no systematic effort by the
government to abuse detainees.The July 21 ruling denied a motion to dismiss the case on the grounds
that the current British government has no responsibility for actions
by the colonial government in Kenya. While the judge didn’t rule on the
merits of the case itself, the decision represents a key victory for the
former detainees.“I have decided that the claimants have arguable cases, fit for
trial,” High Court Judge Richard McCombe wrote in a summary explaining
his judgment. “I emphasize that I have not found that there was
systematic torture in the Kenyan camps nor that, if there was, the U.K.
government is liable to detainees, such as the claimants, for what
happened. . . . I decided that the FCO [Foreign and Commonwealth Office]
have not established that the claimants are bound to fail.”The decision sets up a hearing on a second government motion to
dismiss the case, Elkins said, this one based on a statute of
limitations for such cases. The court can make exceptions to the statute
of limitations, however, and Leader said the plaintiffs will use
examples of other atrocities cases that have been prosecuted long after
the acts were committed to illustrate that a fair trial is possible.
Should the case clear that hurdle, expected in early 2012, Elkins
expects the trial itself to begin next spring or summer.In addition to revelations contained in “Imperial Reckoning,” Elkins
and two other historians acting as expert witnesses have submitted
lengthy reports to the court; they’re also reviewing thousands of pages
of previously undisclosed, colonial-era documents the government has
brought forward because of the case. Elkins said the experts’ review of
these documents has already yielded numerous memoranda that further
substantiate both her thesis of systematized violence and the witness
testimony she collected recounting abuse and torture in the camps.For Elkins, the court decision and the new documents substantiating
her work provide a bit of vindication. Though her book garnered a great
deal of praise in the U.S., winning the 2006 Pulitzer Prize for general
nonfiction, it was also attacked in both Britain and Kenya as inaccurate
and based on unreliable witness testimony.Elkins said she’s grateful for those at Harvard who stood by her
while, as a graduate student, she worked on her dissertation, which was
the basis for “Imperial Reckoning,” and when, as a junior faculty
member, she endured the attacks on her work.In 2006, Morara and the Kenya Human Rights Commission began
interviewing veterans in hopes of bringing a case to British courts.
Three men and two women were chosen, one of whom, Susan Ciong’ombe
Ngondi, has since died. The four remaining plaintiffs, Ndiku Mutua,
Paulo Nzili, Wambugu Wa Nyingi, and Jane Muthoni Mara, are all elderly,
in their 70s and 80s. The case was filed in 2009.The case itself seeks an apology from the British government for
abuse in the camps and establishment of a welfare system for former
detainees, some of whom, Leader said, were unable to have children due
to their treatment. In Kenya’s traditional culture, where children
provide for their elderly parents, detainees’ inability to have a family
leaves them with little means of support, he said.From a historian’s viewpoint, the case is one of what actually
happened versus what people say happened, Elkins said. The government
and its supporters have dismissed the firsthand testimony and eyewitness
accounts of those who suffered, compounding what occurred in the
detention camps decades ago.“It’s now a duel between colonial-inspired history and revisionist
history,” Elkins said. “On top of it all, some have called the people
who survived these horrific tortures liars. The British government
behaved badly in Kenya, and many have continued to do so in an effort to
conceal or minimize colonial abuses.”
Like corruption, crime, and asbestos, “inflation” is a word that many
Americans imagine in all-red capital letters, flashing across TV screens
amid warnings of crisis. For anyone who remembers the gloomy, scary
1970s, when the inflation rate in the United States reached double
digits, the word is shorthand for an economy that has spiraled out of
control, the dollar losing value and prices climbing feverishly.
“Inflation is as violent as a mugger, as frightening as an armed robber,
and as deadly as a hit man,” said Ronald Reagan in 1978, as nervous
citizens imagined the day when they’d have to push a wheelbarrow full of
cash to the grocery store in order to buy a loaf of bread.That
particular nightmare never came to pass, thanks to drastic measures
taken by the Federal Reserve. For the better part of the past 30 years,
the dollar has stayed stable, reassuring American families and the
nation’s trading partners, with the central bank standing guard over the
economy and doing everything necessary to keep inflation low.You
might say that Kenneth Rogoff has been one of the guards. As a research
economist at the Federal Reserve during the first half of the 1980s, he
helped ensure that the word “inflation” would never again flash across
American TV screens. His reputation as a conservative-minded inflation
hawk followed him from the Fed to the International Monetary Fund to his
current position in the economics department at Harvard.But then
came the financial crisis of 2008, and the ensuing slump. And as the
economy has continued to stagnate, Rogoff, 58, has become the
flag-bearer for an unlikely position: that as we struggle to help the
economy find its way out of the darkness, inflation could be the answer.
It’s time, Rogoff says, to put Reagan’s “hit man” to work for the good
guys.Over the past several years, Rogoff has emerged as one of
the world’s leading experts on the history of financial crises and how
they work, a unique perch that has given him a long view on what is
happening to our economy and what lies ahead. In the bestselling 2009
book “This Time Is Different,’’ he and Carmen Reinhart, currently a
senior fellow at the Peterson Institute for International Economics ,
laid out a detailed analysis of financial crises that have taken place
around the world going back 800 years, and they put forth an alarming
idea about our current predicament. What we’re going through, they
argued—what we’ve been going through ever since the subprime mortgage
crisis—has not been just a typical recession, as our leaders have been
treating it, but something much worse, something that demands
altogether different tools to stop it.One
of these tools, Rogoff believes, is a temporary burst of inflation. And
for the past several weeks, as the stock market has convulsed and
debate raged over the Fed’s next move, he has been making his case
publicly, through syndicated opinion columns, high-profile TV
appearances, and numerous interviews. It’s an argument that Rogoff
himself admits is “radical,” and one he says he’d rather not be making.
But as he sees it, what’s holding the country back from recovery is not
just a lack of consumer confidence or suppressed demand, as in a normal
recession, but an immense overhang of debt: thanks to the collapse of
the real-estate bubble, millions of American families owe so much to
banks that they’re focusing all their energy on paying down their debts
instead of spending their money on new investments. There will be no
recovery until the painful process of working through that debt is
behind us, Rogoff argues, and an increase in the annual inflation rate,
which has floated around 2 percent since the early 1990s,would make it
easier for debtors to pay down what they owe.“There’s
no penicillin for this,” he said in an interview. “There’s no quick
getting better. What you’re really talking about is taking the edge off
the downturn and coming back to normal growth somewhat faster.”Rogoff’s
call to raise inflation has come under attack from several different
directions. Some economists think it wouldn’t do any good—that trying
to raise inflation wouldn’t create demand or spur growth the way Rogoff
thinks—while others believe that, given that prices actually seem to
be in danger of falling at the moment, the Fed couldn’t make it happen
if it wanted to. But perhaps the biggest problem for Rogoff is that, for
most policymakers, elected and otherwise, the idea of courting
inflation on purpose sounds downright crazy—not to mention politically
disastrous.“Going around the country saying, ‘We need more
inflation’ is not going to be a big seller,” said Michael Mussa, a
senior fellow at the Peterson Institute and a former adviser to Reagan.
“Inflation means that the costs of everybody’s goods and services are
going up … And I believe it’s a substantial symbol of mismanagement by
the government and the central bank.”Rogoff, however, remains
convinced that as the situation grows more desperate, our leaders will
feel pressure to start considering their options with more open minds.
“As more and more people realize that we’re not quickly going back to
normal,” he said, “they become more flexible.”Though Rogoff speaks with unflinching steadiness, hearing him explain how
badly our leaders misdiagnosed the economy after the crash, one imagines
a doctor banging his fists against the door of a surgery ward, trying
to warn his colleagues that he has checked their patient’s chart and
realized they’re about to make a huge mistake.The mistake we all
made, as Rogoff sees it, was thinking this was going to be nothing more
than a regular recession, the same kind of thing that has happened in
the United States once or twice every decade for the past 150 years.
These cyclical recessions come and go, and we have a pretty reliable
playbook for dealing with them: usually, an increase in government
spending and lower interest rates to encourage money to flow. Recessions
tend to end after about a year, at which point unemployment starts to
fall and normal growth resumes.Far
less frequently, something more serious grips an economy: a financial
crisis that breaks the pattern, and from which it is much more difficult
to recover. Rogoff and Reinhart’s book suggests that such contractions
are characterized above all by severe, widespread debt, which leads to
long periods of economic stagnation and uncertainty. Rogoff puts our
current situation in that category, along with the Great Depression, and
he fears that if we do not act quickly and creatively to dig ourselves
out of it, we risk settling into a long-term slowdown along the lines of
what Japan has been going through since the 1990s. Mistaking this
crisis for a typical recession, he says, is like mistaking pneumonia for
a stubborn cold. “They’re very, very different animals.”The
animal we’re wrestling with today, of course, was born of the vastly
overheated real estate market that collapsed in 2007, temporarily
paralyzing the global financial system and taking some powerful banks
down with it. Today, its legacy is a towering mountain of consumer debt,
government debt, and millions of underwater mortgages that are gumming
up the economy and preventing it from coming back to life.“It’s
very unlikely that all these debts are going to get repaid in full,”
Rogoff said. Banks have loans on their books that people simply don’t
have—won’t have—the money to pay off, and expecting it to happen
means we’ll just stay frozen in place, waiting. What needs to happen,
Rogoff says, is “some transfer from creditors to debtors.” The ideal way
for that to happen, he says, would be through loan renegotiation,
whereby banks would forgive some homebuyers and strike repayment deals
with others. But that sort of piecemeal renegotiation has proved very
difficult to carry out.A
more viable way to start fixing the nation’s balance sheets, Rogoff
argues, is by inducing a temporary bout of inflation. If the Federal
Reserve raises its target inflation rate by several percentage points—up from around 2 percent, where it’s been for the past decade, to
somewhere in the neighborhood of 4 to 6 percent—and injects new money
into the economy until it gets there, then debtors will get some relief
and the wheels of the economy will once again start to turn.Rogoff
first laid out the argument for embracing inflation in one of his
columns in December of 2008—a move that came as such a surprise to
people who knew his reputation that he got letters from central bankers
who were sure they’d misunderstood him. Rogoff had worked at the Fed
under none other than Paul Volcker, whose mandate as Fed chairman was to
drive inflation down at any cost. Under Volcker’s watch, inflation fell
from 13.3 percent in December of 1979 to just 3.8 percent four years
later. And though Rogoff at the time was just starting out as an
economist—indeed, he was still transitioning from his first career as a
professional chess player—he soon became an intellectual force in the
movement to make central banks the economy’s first defense against
inflation. In 1985, he published what would become one of his most
widely cited academic papers in the Quarterly Journal of Economics,
arguing that healthy economies depended on central banks being reliably
committed to holding inflation down in all but the most extreme
circumstances.Rogoff says he hasn’t changed his mind on how
central banks should behave, and still thinks our fears of runaway
inflation are well-founded. He just thinks that right now, it’s a risk
worth taking. “There’s certainly some benefit in a society having a
very, very strong conviction about keeping low inflation,” Rogoff said.
“But I think right now it’s not helpful. You can have a very strong
conviction that you don’t want to take medicines … And I respect that,
but there are times when there’s really no choice.”Though
Rogoff’s idea about raising inflation has so far not gained much
purchase in the economics profession - Mussa, for instance, called it “a
hare-brained crackpot scheme”— he is not alone in his thinking.
Versions of the same call have been taken up by several prominent
economists across the political spectrum, including Olivier Blanchard,
the chief economist at the International Monetary Fund; Joshua Aizenman,
co-editor of the Journal of International Money and Finance; Harvard’s
Greg Mankiw, a former adviser to George W. Bush; and Paul Krugman, the
Nobel Prize-winning New York Times columnist.THOSE
WHO disagree with Rogoff cite several key objections. One is that
inflation can be hard to stop once it starts: if the Fed turned on the
spigot, there’s no guarantee they’d be able to turn it off before
inflation got out of hand. Another objection is that if the Fed does
raise its inflation target, pumping more money into the system and
allowing the dollar to lose some of its value, lenders here and abroad
will lose faith in the currency and respond by raising interest rates,
which would ultimately make it harder for Americans to borrow money. A
third objection is practical: that even if the Fed tried to trigger
inflation, it simply might not be able to. The problem with the economy
right now, some critics say, is a lack of demand for workers and
products, and blowing air into the money supply would not change that.“This
idea that there’s some separate policy instrument called ‘creating
inflation,’ I think, is a little problematic,” said Lawrence Summers,
the former secretary of the Treasury and Harvard president who also
served as the director of President Obama’s National Economic Council.
Increasing demand should be the primary goal, with inflation a possible
byproduct, Summers said. “I don’t think the idea that you could simply
get more inflation by saying you want more inflation is a promising
one.”Rogoff is not swayed by these arguments. He emphasizes that
the level of inflation he is calling for is very modest—and that
there’s no really no reason to think that the Fed would be incapable of
inducing it or reining it in at will. As for damaging the central bank’s
credibility, Rogoff reiterates the extraordinary nature of the present
circumstances. “This is a very exceptional situation—a once in
Halley’s Comet kind of phenomenon,” he said. As he wrote in his column
earlier this month, “These are times when central banks need to spend
some of the credibility that they accumulate in normal times.”Trying
to persuade central bankers to go for that plan involves a different
kind of problem: a political one. Inflation devalues the dollar and
makes things more expensive, making it an easy political target. Earlier
this month, as Wall Street and Washington waited to hear how the Fed
would approach monetary policy going forward, Texas Governor Rick Perry
more or less threatened Fed chairman Ben Bernanke with violence if he
“prints more money” before the next election. What he was talking about
wasn’t even inflation, but a policy called “quantitative easing,” in
which the Federal Reserve injects new money into the economy by buying
billions of dollars worth of Treasury bonds from banks. The Fed has
already tried this twice since 2008, and each time it has been
controversial. While Rogoff’s plan to raise the inflation rate target is
conceptually different from quantitative easing, it would involve the
same mechanism, and would push the same political buttons in an even
more extreme way.Underlying
that opposition is more than just patriotism: it’s also a moral
objection. Transferring the debt burden from borrowers to creditors,
after all, effectively bails out borrowers by punishing the banks that
lent them money, as well as devaluing the savings of their more prudent
neighbors. That kind of rescue plan strikes many as fundamentally
unfair.Rogoff understands this objection, and doesn’t dispute
that what he’s proposing is on some level unfair. But ultimately, he
argues, this contraction is dragging us all down together, and even
those lenders and savers will be better off if America’s debt overhang
is taken care of swiftly. Once that happens, and the economy starts to
recover properly, we’ll be able to focus on designing better policies
that will make us less vulnerable to financial crisis in the future. For
now, a little inflation might just be the cost of getting us to where
that might be possible.“One way or another,” said Rogoff, “we’re going to be doing things we would not dream we would ever do before this is over.”
Keynesian economics—the go-to theory for those who like government at the controls of the economy—is in the forefront of the ongoing debate on fiscal-stimulus packages. For example, in true Keynesian spirit, Agriculture Secretary Tom Vilsack said recently that food stamps were an "economic stimulus" and that "every dollar of benefits generates $1.84 in the economy in terms of economic activity." Many observers may see how this idea—that one can magically get back more than one puts in—conflicts with what I will call "regular economics." What few know is that there is no meaningful theoretical or empirical support for the Keynesian position.The overall prediction from regular economics is that an expansion of transfers, such as food stamps, decreases employment and, hence, gross domestic product (GDP). In regular economics, the central ideas involve incentives as the drivers of economic activity. Additional transfers to people with earnings below designated levels motivate less work effort by reducing the reward from working.
In addition, the financing of a transfer program requires more taxes—today or in the future in the case of deficit financing. These added levies likely further reduce work effort—in this instance by taxpayers expected to finance the transfer—and also lower investment because the return after taxes is diminished.
This result does not mean that food stamps and other transfers are necessarily bad ideas in the world of regular economics. But there is an acknowledged trade-off: Greater provision of social insurance and redistribution of income reduces the overall GDP pie.
Yet Keynesian economics argues that incentives and other forces in regular economics are overwhelmed, at least in recessions, by effects involving "aggregate demand." Recipients of food stamps use their transfers to consume more. Compared to this urge, the negative effects on consumption and investment by taxpayers are viewed as weaker in magnitude, particularly when the transfers are deficit-financed.
Thus, the aggregate demand for goods rises, and businesses respond by selling more goods and then by raising production and employment. The additional wage and profit income leads to further expansions of demand and, hence, to more production and employment. As per Mr. Vilsack, the administration believes that the cumulative effect is a multiplier around two.
If valid, this result would be truly miraculous. The recipients of food stamps get, say, $1 billion but they are not the only ones who benefit. Another $1 billion appears that can make the rest of society better off. Unlike the trade-off in regular economics, that extra $1 billion is the ultimate free lunch.
How can it be right? Where was the market failure that allowed the government to improve things just by borrowing money and giving it to people? Keynes, in his "General Theory" (1936), was not so good at explaining why this worked, and subsequent generations of Keynesian economists (including my own youthful efforts) have not been more successful.
Theorizing aside, Keynesian policy conclusions, such as the wisdom of additional stimulus geared to money transfers, should come down to empirical evidence. And there is zero evidence that deficit-financed transfers raise GDP and employment—not to mention evidence for a multiplier of two.
Gathering evidence is challenging. In the data, transfers are higher than normal during recessions but mainly because of the automatic increases in welfare programs, such as food stamps and unemployment benefits. To figure out the economic effects of transfers one needs "experiments" in which the government changes transfers in an unusual way—while other factors stay the same—but these events are rare.
Ironically, the administration created one informative data point by dramatically raising unemployment insurance eligibility to 99 weeks in 2009—a much bigger expansion than in previous recessions. Interestingly, the fraction of the unemployed who are long term (more than 26 weeks) has jumped since 2009—to over 44% today, whereas the previous peak had been only 26% during the 1982-83 recession. This pattern suggests that the dramatically longer unemployment-insurance eligibility period adversely affected the labor market. All we need now to get reliable estimates are a hundred more of these experiments.
The administration found the evidence it wanted—multipliers around two—by consulting some large-scale macro-econometric models, which substitute assumptions for identification. These models were undoubtedly the source of Mr. Vilsack's claim that a dollar more of food stamps led to an extra $1.84 of GDP. This multiplier is nonsense, but one has to admire the precision in the number.
There are two ways to view Keynesian stimulus through transfer programs. It's either a divine miracle—where one gets back more than one puts in—or else it's the macroeconomic equivalent of bloodletting. Obviously, I lean toward the latter position, but I am still hoping for more empirical evidence.
In Somalia today, there are ominous parallels with 1992: pervasive
fighting among rival clans, far too little rain, and an inability among
international peacekeeping forces to restore order or ensure that food
aid reaches those in need. Nineteen years ago, the result was the death
by starvation of 300,000 Somalis. Will it happen again?It doesn't have to. But everything depends on how the world responds.In
some ways, the current situation is more complicated. One reason lies
outside of Somalia altogether: the painful set of memories associated
with our attempts to help in 1992, particularly in the United States.
Then, the U.S. response was a forceful military intervention. President
George H.W. Bush dispatched 25,000 American troops to Somalia, allowing
food deliveries to resume, and preventing as many as 200,000 additional
deaths. But in October 1993, famously,
two Black Hawk helicopters were shot down in Mogadishu, 18 U.S.
soldiers died, and the body of one dead American was dragged
triumphantly through the streets. Public outrage forced President
Clinton to terminate the mission. As a consequence, it's unlikely that
U.S. policy makers will come close to taking similarly dramatic steps
today.Meanwhile, two factors on the ground in Somalia itself
threaten to make the current crisis more dangerous than the previous
one. First, the drought is much worse this time -- perhaps the worst of
its kind in 60 years. Second, there is now an Islamist militant
controlling the southern region of Somalia, where the drought has been
most severe. The 2 million people living in this region cannot get food
aid, because Al-Shabab's leadership, which brags about its close ties to
Al-Qaeda, distrusts food-aid workers as spies. The propaganda they
project among those living under their control is that it is better to
starve than to accept help from the West.Under these seemingly
intractable circumstances, what can those outside Somalia do to prevent
mass deaths on the scale of the 1990s? Setting up relief camps in
neighboring countries and waiting for starving Somalis to walk across
the border is not a good option, because many do not survive the trip,
and those that do become helpless refugees. Camps along Somalia's
borders with Kenya and Ethiopia already hold 500,000 destitute people.
Paying large bribes to Al-Shabab fighters could get some food through on
the ground, but it is obviously not a sustainable solution, among the
reasons being that the government agencies financing the aid will not
ultimately tolerate it. Dropping food from UN airplanes will help, but
not nearly on the scale needed to make a significant difference.The
best policy option that the international community has available to it
in Somalia is to support as much as possible the feeding operations now
underway in the sizeable territories not controlled by Al-Shabab. The
United Nations World Food Programme (WFP) is currently feeding 1.5
million people in Somalia, including 300,000 in Mogadishu itself, but
these operations are constantly in danger of running out of resources.
For the Horn of Africa as a whole, WFP is facing a funding shortfall of
$252 million, so those wishing to help can start by focusing on ways to
make up this shortfall.The international community can also do
things beyond Somalia, and indeed beyond the exigencies of emergency
food aid. Rich nations, including the United States, can start by
delivering the support they have promised to build Africa's own
food-production capabilities. Small farmers throughout sub-Saharan
Africa need help to boost their productivity. If you visit a typical
farming community in Uganda, or Kenya, or Cameroon, or Benin, most of
those you meet will be women, most will be illiterate, and most will be
living at least a 30-minute walk from the nearest paved road. As well,
most will be farming with hand hoes, no irrigation, no electrical power,
no modern seeds, and no veterinary medicine for their animals. These
women are hardworking and highly resourceful, yet the returns on their
labor are minimal because they have so little to work with. Their cereal
crop yields are only one-tenth as high as those in Europe or North
America, their average income is only $1 a day, and one-in-three of them
is undernourished.What these farming communities need, above
all else, is increased public investment in rural roads, electrical
power, irrigation, clinics, schools, and agricultural research. But in
recent decades, most African governments failed to make these
investments because of a lack of international support. Between 1978 and
2006, the share of World Bank loans that went to agricultural
development fell from 30 percent to only 8 percent.The United
States has also reduced its aid to small farmers since the 1980s. U.S.
official development assistance to agriculture in Africa fell from $400
million annually in the 1980s to only $60 million by 2006. The political
right promoted this abandonment of agricultural-development assistance
on the erroneous assumption that private investment alone could do the
job. The political left went along on the equally erroneous belief that
modernizing African farming might be bad for social justice and the
environment.As international donors walked away from long-term
agricultural-development efforts in Africa, per capita food production
fell, leading predictably to an even greater need for emergency food
aid. By 2006, perversely, the United States was spending 20 times as
much shipping free food to Africa as it was spending to help Africans
produce their own food.A shock of much higher world food prices
in 2008 finally led donors to promise revived support for Africa's
smallholder farmers. President Obama announced in 2009 that he would ask
Congress for a doubling of U.S. agricultural-development assistance
worldwide, up to more than $1 billion by 2010. Later that year, at a
summit meeting of the G8, he convinced the world's rich nations to
pledge $22 billion collectively over three years to promote food
security and agricultural development. By 2010, however, donors in
Europe were facing a debt crisis, opted for budget austerity, and began
backing away from these promises.In the United States, the right
- and the Tea Party movement, in particular -- began demanding budget
cuts as well. In fiscal year 2011, Congress accordingly cut the expected
U.S. contribution to a new Global Agricultural Food Security Program
from $400 million down to only $100 million. And now a House
Appropriations subcommittee has just cut FY 2012 funding for the Obama
Administration's Feed the Future program by 18 percent. Only about half
of 1 percent of our federal budget goes to poverty-focused foreign aid,
so cutting these programs will have no significant budget impact at home
-- only damaging humanitarian effects abroad.In Somalia, if
these effects are to be prevented from cascading into a full-scale
disaster of the kind the country suffered through in the 1990s, the
international community will have to focus as much effort as possible,
as quickly as possible, where we can be most effective. This will mean
covering shortfalls to protect current WFP feeding operations in the
Horn of Africa. But also, especially from the United States, it will
mean delivering on promised support for farming across Africa (which in
turn will depend on Congressional appropriations committees feeling as
much pressure as the U.S. public can muster that they deliver on this
promised support). Around the Horn of Africa today, roughly 11 million
people face food risks, while on the continent as a whole there are now
an estimated 390 million Africans consuming less than the nutritional
target of 2,100 calories per day. Most of these hungry people are
farmers. Understanding what they need for a sustainable response to the
food crisis they face, and responding to that need directly, will be the
pivotal challenge in alleviating African famine.