Mark Chambers pointed me to this speech by Vermont governor and Democratic presidential aspirant Howard Dean. It’s a long time until 2004, but I think there’s a fair chance that someone like Dean, who’s openly opposed to war with Iraq, will look better than the majority of the Democrats who’ve waffled* on the issue.
* In the US, “waffle” means “speak evasively”, in Australia “speak to no purpose”. Both are applicable.
I’ve been pointing out for some time that it’s as least as likely that the US will be forced to use its veto power in the UNSC as it is that France will. This point has finally been noted by the Times
Britain and the United States are working behind the scenes to squash a Canadian-backed UN compromise.
The Canadian proposal calls for a deadline of March 28 for Iraq to fulfil a list of “key remaining disarmament tasks” drawn up by Hans Blix, the chief UN weapons inspector. If put to a vote, the Canadian plan could win majority support on the Security Council and force the US into a veto.
That would leave Britain in the position of deciding to go to war not just without a new resolution authorising action, but with a US veto overriding a potential compromise.
As the focus on Britain indicates, I can’t see Blair going ahead under these circumstances, hence the desire to prevent a vote. But, along with the renewed US demand for Saddam’s removal regardless of whether he disarms, and the continued failure to do anything concrete the Palestine issue, this may give Blair the push he needs to break away from Bush.
Here’s my view of the Hawke-Keating Labor government as a whole. It’s taken from a comparative assessment of the Australian Labor government (a qualified success) with the Lange-Douglas government in NZ (an unmitigated disaster, at least as far as domestic policy is concerned. You can read the whole thing , entitled Social democracy and market reform in Australia and New Zealand, on my website.
Despite its abandonment of many traditional social democratic policies, the Australian Labor government continued to defend its claim to represent the values of the labour movement. Until the recession that commenced in 1989, the government’s claims were supported by strong employment growth and reductions in the rate of unemployment. A more durable claim is that, although total spending on social welfare was constrained, the government improved targeting through means tests and introduced other innovative welfare programs such as family allowance supplements for low-income earners. This increased the redistributive impact of welfare spending and offset the rise in inequality in market incomes associated with policies of deregulation and privatisation.
Arguably, the Australian Labor government may be seen as having done relatively well in an unfavourable environment. Given the breakdown of Keynesian macroeconomic policy, the increasing irrelevance of economic development strategies based on tariff protection, the rising influence of financial markets and the fiscal demands created by increases in the demand for age pensions, unemployment benefits and publicly provided services such as health and education, any social democratic government would have faced a difficult task.
However, Labor’s rhetoric did not convey this message. Rather than presenting itself as adapting to undeniable realities while doing its best to protect its core constituency against the worst impacts of globalisation and competition, these two themes were embraced as the way of the future. In policy terms, the Labor government celebrated its successes in ‘opening up’ the Australian economy, and derided the policies of the 1950s and 1960s, a period remembered by most Australians as one of full employment and prosperity. At a personal level, the identification of leading Labor ministers with the wealthy beneficiaries of globalisation was too obvious to be ignored. By both opponents and supporters, Hawke and Keating are remembered primarily for ‘opening up the economy’, and not for innovations in social policy.
If I get time, I’ll post my assessment of some of the key personalities later on. In the meantime, you can read the views of many commentators on the Monday message board.
An excellent piece in the Times (free registration required) on the balance sheet manipulations associated with public-private partnerships in the UK.
The National Audit Office (NAO) said that Network Rail was a state entity: its assets and liabilities should be kept on the Government’s balance sheet, because the Government would bail it out if it ran into difficulties. But the ONS classified Network Rail as private, on the basis that Whitehall did not directly control it. Despite the urging of the Statistics Commission, ONS and NAO have still not agreed: they have agreed to differ, on the flimsy basis that the ONS was governed by EU accounting rules while the NAO was not. Yet the Treasury seems happy to let the ONS’s view prevail, which has the useful result of reducing the national debt by something in the order of £25 billion.
The Treasury’s attitude to London Underground is similarly ambiguous. It has happily issued to Tube contractors letters of comfort, which are effectively a guarantee that the Treasury would be the lender of last resort, while claiming that private contractors deserve a healthy premium under the Public Private Partnership (PPP) because they are bearing the risk.
National institutions like hospitals and railways must be kept on the books because governments will never let them go bust.
I had a go at this topic, pointing out the similarities to the Enron fiasco, here.
The Business Council of Australia has dropped its previous opposition to the Kyoto Protocol, moving to a neutral position.. The other main business body, the Australian Industries Group is reconsidering its position. This reflects the fact, which I’ve pointed out quite a few times, that the economic costs of implementing Kyoto are quite small. A few industries, like the heavily-subsidised aluminium industry, lose substantially but the effect on the rest of the economy is neutral or beneficial.
In fact, most modelling (even that commissioned by the government) shows that if the Kyoto protocol comes into effect, Australia is better off joining than staying out. We will lose some coal exports, but that will happen whether we ratify or not. I discussed this at length here, noting:
Some time ago, the government commissioned Warwick McKibbin, who’s a leading critic of Kyoto, to model the effects. The results he found are pretty striking. Whether Australia ratifies or not, there’ll be a negative impact on the coal industry because other countries will import less. But given that other countries have ratified, McKibbin finds that, at least until 2010, Australia is better off ratifying Kyoto and implementing emission-reduction measures than staying out. The gain is reversed by 2020, but the current agreement calls for new targets to be agreed and implemented by 2012, encompassing more countries. The other striking feature is how small the numbers are -the benefit of staying out in 2020 is 0.2 per cent of GDP or about $1 billion per year. Although I disagree with Warwick’s policy position on Kyoto, I compliment him for keeping his independence as a modeller. The government clearly didn’t like his results one bit.
To clarify, Warwick has an alternative version of Kyoto which he has pushed pretty vigorously but so far without gaining the support of the main ‘rejectionist’ governments, those of Australia and the US.
Update Ken Parish has an interesting take on developments in hydrogen fuel cell technology. Also Jon Stanford has a piece in today’s AFR (subscription required).
In considering the ‘brilliant supply-side academics’* proposed by Stephen Moore as alternatives to Greg Mankiw for CEA Chairman, I left for later the allegation made by Moore that Mankiw had misrepresented supply-side economics with his claim that a small group of economic ‘cranks and charlatans’ had convinced then-candidate Ronald Reagan that tax cuts could increase revenue. Moore like his colleague Bruce Bartlett, vehemently denies this. They are supported by Alex Robson and William Sjostrom
The first problem here is that there are two competing claims about what ‘supply-side economics’ means. In one usage, it refers to anybody who thinks economic policies aimed at increasing the productive efficiency of the economy are more important than Keynesian policies aimed at stabilising aggregate demand. In Australia, the same idea was captured in the shift of attention from macroeconomic management to microeconomic reform. The group of economists who are supply-siders in this definition is large, arguably a majority of the profession.
A narrower definition , more popular nowadays, confines the term ‘supply-side’ to supporters of large tax cuts and particularly to followers of economist Arthur Laffer and Wall Street Journal writer Jude Wanniski.
Laffer’s name is associated with the famous Laffer curve, but as everyone in this debate is agreed, the Laffer curve itself is neither new nor controversial.
The controversial points are what I’ll call:
(i) The ‘Laffer-Wanniski tax proposition’ namely that, as of 1980, tax rates in the US were such that the government was at or beyond the point at which tax reductions would actually increase revenue
(ii) The ‘Laffer-Wanniski Reagan claim’, namely that Laffer and Wanniski sold this idea to Ronald Reagan
It seems pretty clear that both Laffer (a senior economic adviser to Reagan) and Wanniski (an influential writer at the time) did in fact advance the Laffer-Wanniski tax proposition. The piece linked below implies it, though it doesn’t directly state it. I’ll try to locate an unambiguous statement of the proposition in Laffer’s 1982 book when I get time.
As regards the ‘Laffer-Wanniski Reagan claim, here’s what Wanniski has to say.
“In my 1978 book, The Way the World Works , I named that curve after Arthur B. Laffer, who was the first economist to turn the ancient intellectual concept into a visual graphic. I’d spent the previous four years trying to persuade liberal Democrats that while it is imperative that the richest citizens bear the greatest burden of government, there comes a point in the rates where the rich avoid paying the higher taxes, and the burden falls on those who are not rich. When no Democrats showed interest, I changed my party affiliation and, with the help of Irving Kristol, Jack Kemp, and The Wall Street Journal , sold the idea to Ronald Reagan. That’s the history.
Wanniski’s claim to have convinced Reagan is rejected by (broad sense) supply-siders who were around at the time , like William Niskanen (quoted by Alex Robson), and it seems unlikely that the truth can be determined.
Mankiw’s takes a middle course, saying that
… the argument was appealing to Reagan, and it shaped the 1980 Presidential campaign and the economic policies of the 1980s./.
This seems pretty much unassailable to me. The idea certainly was appealing to Reagan and his campaign – hence Bush Senior’s attacks on ‘voodoo economics’. Reagan and his administration may not have officially endorsed the Laffer-Wanniski tax proposition, but it certainly did shape the policy debate, making the extreme claims of people like Stephen Moore and Bruce Bartlett (soon to be enshrined in the Budget process as ‘dynamic scoring’) seem modest and reasonable by comparison.
*Kieran Healy reports that the National Review has quietly deleted the word “academic” from Moore’s description of his supply-side CEA candidates Malpass, Vedders and Wesbury. I suppose I can count that as a concession of error on my main point. Perhaps now Moore, Sjostrom or Robson will enlighten us as to what contributions these guys have made that would rank them as “brilliant” successors to Feldstein, Stiglitz, Greenspan et al.
Update Brad DeLong has more. He refers to my agnostic conclusion about Reagan’s mental states as “nihilistic-relativistic”, but then appears to endorse it “What Reagan thought in his heart-of-hearts is not very important ” and most of the rest of my analysis, with a lot more supporting detail. William Sjostrom also has more. He advises, contrary to what I inferred above, that he doesn’t have a view on Mankiw’s merits or the substance of Moore’s claims. He also has interesting discussions of why he’s not a macroeconomist and of the value (or otherwise) of a PhD.
Having voiced fears that the US would seek to install some form of puppet government in Iraq, I thought it was at least taking some time to consider Bush’s Feb 25 speech, promising democracy, and repudiating the idea that US occupiers would seek to exploit Iraqi resources for their own ends. Others, more cynical than I, ignored it completely. Two days later Charles Krauthammer was announcing the policies the US imperial government should follow, using Iraq’s resources to pay off scores against the French, the Russians and others
We need to demonstrate that there is a price to be paid for undermining the United States on a matter of supreme national interest. [emphasis added, para on UNSC snipped]
Second, there should be no role for France in Iraq, either during the war, should France change its mind, or after it. No peacekeeping. No oil contracts. And France should be last in line for loan repayment, after Russia. Russia, after all, simply has opposed our policy. It did not try to mobilize the world against us.
Unlike William Safire, who has been pushing a similar line for months, Krauthammer does not even bother with the figleaf of suggesting that these decisions would be taken by a grateful Iraqi government.
What’s really interesting about recent developments, though, is the developing attitude of the Republican establishment towards government debt, which is essentially that of banana republic populism. The three basic tenets of banana republic populism are:
(a) We should borrow as much money as we feel like spending, preferably from foreigners
(b) It’s OK to repudiate debts to “bad” foreigners
(c) Any foreigner who doesn’t do exactly what we want at all times is a “bad” foreigner
Greg Mankiw just got into a lot of trouble from hardcore Republicans for being insufficiently enthusiastic about (a). Krauthammer and Safire have repeatedly emphasised (b) in relation to a US-controlled Iraq, and the same line would obviously sell in relation to the US government’s own debt. And (c) is being shouted from the rooftops at every opportunity.
Banana republic populism actually has it easier in the US than in the Third World because the vast majority of US debt is denominated in US dollars. Rather than repudiating, the US government can simply print all the dollars it needs and use some of the proceeds to compensate the domestic holders of US public debt (a rapidly dwindling proportion in any case).
The only question arising from this is why foreigners should be willing to hold $2 trillion worth of such a dubious security at interest rates of 4 per cent, and, even more, why they should be willing to buy another $500 billion worth every year.
Various bloggers have been discussing issues relating to IQ, notably in relation to Herrnstein and Murray’s very bad book The Bell Curve (bad intellectually because it was sloppy and dishonest and bad morally because it used dishonest arguments in a bad cause). Although I’m not an expert on issues specifically relating to intelligence testing and heritability, I know enough about the literature to make the following point about measurement issues (on which I can claim to be an expert). The literature shows that, in Western societies, variations in both environment and heredity make a substantial difference to measures of intellectual performance (including educational achievement and IQ test scores). Furthermore both the literature and everyday experience tell us that these things interact in a very complex fashion.
When two causal variables interact in this fashion to determine a third variable of interest, the idea that there is a meaningful sense in which proportions of the variance in the variable of interest can be allocated to the causal variables (as in statements of the form “x per cent of variance in IQ is due to heredity”) is unsustainable. Minor changes in definitions, model structure and functional form will produce major changes in results.
As usual, I invite comments from all and sundry on any topic, asking only that you stick to civilised discussion and avoid coarse language. I hope to discuss the anniversaries of the Howard and Hawke-Keating governments during the week. Others may want to get in first.
Monday 2:30 The comments thread is already lively, with the various personalities of the Hawke-Keating era being critically assessed from a range of viewpoints. Mine will be coming soon.
One of the unquestioned assumptions in the Iraq debate has been that war would be over quickly. The political importance of this has increased with the likelihood that the UNSC will not authorise a war, so that a drawn out war would pose big political risks, particularly for Blair.
So what is the evidence for a quick war? The standard US strategy in recent wars has been a month or two of bombing before sending in ground troops. In the Gulf War, the ground attack was preceded by five weeks of bombing. In Kosovo, bombing lasted almost three months. In Afghanistan there was five weeks of bombing before Kabul fell. In every case, there were incidents where bombs went astray with large-scale civilian casualties. The obvious reason for this approach is to minimise US casualties.
A ‘quick-war’ strategy with the name “Shock and Awe” has been mooted. Apparently, it involves massive bombing of both military targets and civilian infrastructure, designed to break the enemy’s will in a matter of days. This is an old strategy – Guernica, Rotterdam, the Blitz, the Allied bombing of Dresden, ‘bombing Vietnam back to the Stone Age’ etc., and would almost certainly involve the commission of war crimes on a major scale. As the name indicates, it relies on the psychological assumption that bombing can terrify opponents into submission, an assumption that has proved unreliable in the past. I find it difficult to believe that Bush would adopt such a strategy, or that Blair would go along with it. Even Howard might balk at it.
A lot of readers are better-informed about military matters than I am. Is there a plausible US strategy that doesn’t involve either a lengthy period of bombing or an all-out blitz with massive civilian casualties?
Update Today’s SMH asserts that there is, claiming a large-scale, but ‘precision’ bombing of Baghdad that would spare civilian infrastructure will be accompanied by an immediate ground invasion.
John Quiggin 