April 2002 Archives Page

J. Bradford DeLong

But if you find any intelligent, liberal, and polite/well-intentioned/kind-spirited weblogs (okay, I'd be happy with two out of three), email me.

Semi-Daily Journal Archive: Current Journal | February-March 2002

Stuff Worth Reading: Daily

Wall Street Journal (alas! subscription only) | Economic Calendar | briefing.com | Morgan Stanley Global Economic Forum | Joshua Marshall | Economist | Arts and Letters Daily | National Journal (alas! subscription only) | Patrick Nielsen Hayden | blogdex | Andrew Tobias | Tom Tomorrow | Mickey Kaus | NYTimes Opeds | ZDNet Anchordesk | Metafilter | DayPop | MediaNews | American Prospect |


Jonathan Rauch | Virginia Postrel | Red Rock Eater News Service | (Unofficial) Paul Krugman | In the Loop... | I, Cringely | Paul Krugman | NBER Working Papers | Tim O'Reilly | Jim Dunnigan | Peter Lewis on Technology | IMF What's New | Arnold Kling | Glenn Fleishman | Jim Henley | Dan Gillmor | Glenn Reynolds | Nightly Business Report | Spinsanity | Kevin Werbach | Chris Bertram | Charles Dodgson | Frankston, Reed, and Friends | Ted Barlow | Avedon Carol | Gary Farber | Avram Grumer | Glenn Kinen | Ginger Stampley | Charles Stross |


Atlantic Monthly Online | Center on Budget and Policy Priorities | Institute for International Economics | Hal Varian | Andrew Odlyzko | Janes Information Group | CEA-JEC Economic Indicators | Clay Shirky | BEA Economy-at-a-Glance | NBER Business Cycle Dating |

2002-04-30: Strange and Sinister Sect of British Imperial Conservatives, Round II...

So I'm on the plane, hopping back from Claremont-McKenna College in suburban LA to Berkeley, reading a little book that Strobe Talbott (former Clinton DepSec State) and Nayan Chanda (author of a wonderful book about postwar Vietnam) edited about 911, when I come across what I hope will be the most boneheaded thing I read this month. Paul Kennedy, British historian residing at Yale, writes that:

"... the overtaking of Britain by the U.S. a century ago also involved two democracies, and the declining country found the process a painful one..."*

"Painful," I thought. "Painful compared to what? More painful than practicing the Hitler salute and sending one's Jewish neighbors off to the extermination camp?" That is, after all, what Paul Kennedy would be doing today if Britain had not been "overtaken" by the U.S.: a Britain that had successfully curbed the growth of American economic and strategic power around 1900 would have been a Britain where Hitler slept in Buckingham Palace in 1944. Paul Kennedy's failure to imagine that the "overtaking" of Britain by the U.S. was a powerful force multiplier for Britain where it counted most is one of the most boneheaded statements by a British historian I have read since... since... since... Donald Cameron Watt wrote that that Romans won the Battle of Cannae, or John Keegan wrote of Bulgaria's common border with the Soviet Union...

*Paul Kennedy (2002), "Maintaining American Power," in Strobe Talbott and Nayan Chandha, eds., The Age of Terror (New York: Basic Books: 0465083560), p. 72.

Recent Entries:

Paul Kennedy | International Productivity Comparisons | Krugman too Partisan? | Value of the Dollar | Politicizing the CEA | Jose Bove | Axis-of-Evil | Krugman: Bad Air Day | First Quarter GDP Release | Microsoft | Theology | We Are Californians | Argentina | Servants of the People? | Things That Make You Go "Hmm..." | Does It Matter That George W. Bush Is Dumb and Lazy? | Why There Will Be No Peace in Palestine | Ken Rogoff on the E-conomy | Amos Oz's Fantasy Plan | Morrison Plan for Peace in the Middle East | April Industrial Production Release | Dear Mr. Gutenberg | Recent American Antisemitism | Tax Day | Productivity Forecasts | Productivity Discrepances | Nightly Business Report | Writing About the Middle East | Milestone | Cognitive Anticipation | Neutrinos | Toxic | Dealing with Robert Skidelsky | What I Would Like to Have on My Laptop | La Existentialisme | NBER Macro Annual Conference | The Federal Reserve and Technocracy: Visiting the Eccles Building | Questions About India | Indian Retail Politics

|March| Twirlip of the Mists | Stephen Moore | Monetary Policy at the Zero-Interest Rate Bound | Laptops Outside | Steel Tariffs | Trade Deficit | David Brock

|February| ipaqs | The Unbearable Presence of the World Trade Center | Eating Meat

2002-04-29: It's Amazing What You Can Learn from the Manchester Guardian These Days...

"What Europe can teach Uncle Sam." In the second extract from his eagerly awaited new book, Will Hutton reveals why the American economic miracle is not all it seems. Monday April 29, 2002. The Guardian.

"... In some respects, it would be surprising if the US was not successful. It is a continent of 280 million people who share the same language, government, unified market and legal system. Throughout the 20th century, its companies have produced on a scale unknown in other countries, taking advantage of the simple rule that the more you make, the lower the unit cost. Yet in reality the US is no more productive than many European economies. Although little reported, during the past 20 years, output per hour worked in France, the Netherlands, Belgium and the former West Germany has risen so that it is now higher than in the US, because the Europeans have invested more and organised their businesses more effectively..."

(To order a copy of The World We're In, Published by Little, Brown, for £14.99 plus p&p (rrp £17.99), call the Guardian book service on 0870 066 7989. Delivery is 99p or £1.99 for 1st class.)

This American observer has a very different view of the statistics than does Will Hutton. Consider Belgium, for example: this observer thinks that Belgium has a higher output per hour worked than the U.S. because the Belgian government keeps Belgians who want to work but lack skills from getting jobs.

In Belgium in 1997 real output per hour worked was 8% higher than in the United States, but where we also think that material standards of living--output per capita--was 28% higher in the U.S. Why these huge differences between the numbers? First of all, 6 percentage points more of Belgians want jobs and can't find jobs than in the United States. And labor force participation rates are different. An astonishing 28 percentage points less of Belgians aged 15-64 are in the labor force than in the United States. Are all of these out-of-the-labor-force Belgian women and young men really happy with their out-of-the-labor-force status? Or are they out of the labor force because they think it would be hopeless to look for a job?

My back-of-the-envelope hunches are that all of differences in unemployment and one-third of differences in labor force participation represent social waste: enforced idleness that leaves Belgians no happier than if they were working. In my view, the right number is neither the +8% Belgian edge "output per hour worked" nor the +28% U.S. edge "output per capita" but instead a U.S. edge of 7% arrived at by taking account of involuntary unemployment and discouraged workers. A large chunk of the +28% U.S. edge in the often-cited "output per capita" figure is an illusion, due to the fact that Europeans choose and enjoy a more leisurely and slower-paced style of life. But in my view, at least, not all of the edge is an illusion.

My main point, however, is that the world is complicated, and single statistics are bound to be incomplete. There is immense regional inequality within the United States. There are important and and often-debated issues of measurement, and even of what we are trying to measure involved in international comparisons. Anyone who presents to you one single number for a nation--and then draws sweeping conclusions from it--is interested in driving you into the corral as if you were a panicked sheep. Don't pay attention to such people. Seek out those who regard it as their highest priority to give you a full picture, a thick description of the situation instead.

2002-04-29: Is Paul Krugman Too Partisan? A Conversation: "Do you think Paul Krugman's Times columns are too partisan?" "No. Remember 1993? His vicious [and IMHO unfair] attacks on Laura Tyson? His attack on Summers for joining the Japan-bashers in Peddling Prosperity? His inability to write the word 'Clinton' and so all the references to the 'Rubin-Greenspan economy'?" "Yeah. But people think he is." "Maybe." "He needs to find some worthwhile economic policy decision that Bush has made and praise it." "Yeah. But what?" (very long pause, followed by silence...)

2002-04-29: The Value of the Dollar: "Weighing against the dollar is... a mound of historical evidence suggesting that big current-account deficits always collapse in the end. A study by the Federal Reserve of large current-account deficits in developed economies found that deficits usually began to reverse when they exceeded 5% of GDP. And this adjustment was typically accompanied by an average fall in the nominal exchange rate of 40%, along with a sharp slowdown in GDP growth. America’s current-account deficit, at an estimated 4.2% of GDP, is currently under that threshold, but is growing at such a rate that it is likely to move into the danger-zone by the end of this year. In previous recessions, the deficit has narrowed as domestic demand and imports weakened. But consumers are continuing to spend. Morgan Stanley, an investment bank, predicts that the deficit could reach almost 6% of GDP by the end of 2003. That would be the biggest deficit run by any G7 economy in the past 30 years." From the Economist.

2002-04-29: from the New Republic...

Bush's war on honest economics.: Numbers Game, by Noam Scheiber

Post date: 04.29.02
Issue date: 05.06.02

In mid-February the White House Council of Economic Advisers (CEA) put out one of the several documents it generates each year. Under the headline "PRESIDENT BUSH'S 2001 TAX RELIEF SOFTENS THE RECESSION," the two-page report argued that without last year's tax cut, the economy would have shrunk much faster than it actually did. The study went on to make a few pro forma comments about "[increasing] the incentives for saving," and "reducing an important impediment to ... the overall accumulation of wealth," before noting that the tax cut would continue to work its magic in the coming months. "[B]y the end of 2002," the report concluded, "the President's tax relief will have helped the private sector to create 800,000 more jobs."

On its face, this was nothing out of the ordinary. Economists--particularly those employed in Washington--run these estimates as a matter of routine. But there was something curious about the CEA report: Nowhere did it contain so much as a hint as to the study's methodology--no statistical appendix, no footnotes about assumptions, not even a phone number you might call to request that information. In fact, the closer you looked, the less "economic" the report appeared. Logical contradictions stuck out like a sixth finger, among them the suggestion that the tax cut, which by definition dramatically decreased national saving (i.e., the surplus), was at the same time increasing saving. And some of the language sounded oddly political, like the suggestion, right out of a George W. Bush stump speech, that the tax cut had "strengthened families." As William Gale, a senior fellow at the Brookings Institution who served on CEA in the first Bush administration, recalls, "[T]he report ... was basically an assertion, not an analysis. If there was an analysis, it was nowhere to be seen."

A cynic might ask why anyone should be surprised. After all, CEA serves the president and as such its priorities and research agenda are set by the White House. "Life in the political world is different from academia," concedes Harvard economist Jeffrey Frankel, who was a member of the Clinton CEA and worked on the staff of the Reagan CEA. And yet, for most of its 56-year history, CEA has been notable for the lack of politics in its work. The Council is composed almost entirely of academic economists, on one- or two-year leave from universities, whose sole mission is to provide the president with objective economic advice. While bureaucracies like the Treasury, Commerce, and Labor Departments employ highly competent economists of their own, CEA is "the only group of economists in the government that doesn't have some agency ax to grind," as Nixon CEA Chairman Herb Stein famously quipped.

As a result, CEA economists are widely viewed in economic policy circles as scrupulously nonpartisan. In a 1992 article excerpted on the CEA website, former Reagan CEA Chairman Martin Feldstein wrote that "[t]he tradition of professionalis[m] is so strong that even in a presidential election year the CEA chairman appoints members of the staff for the coming academic year with the clear understanding that they will continue to serve even if the party in power loses the presidential election." And over the years CEA officials have been fiercely protective of their independence. Though a pro-business conservative himself, Feldstein quickly found himself out of favor with the Reagan White House for advocating deficit reduction and publicly supporting the Fed's tight monetary policy. Feldstein reportedly so infuriated Reagan Treasury Secretary Don Regan that Regan instructed members of Congress to "throw away" CEA's annual economic report.

All of which is to say that if the Bush administration were using its CEA to put an academic imprimatur on political decisions of questionable economic merit, it would be very big news indeed. Former Jimmy Carter CEA Chairman Charles Schultze once succinctly described CEA's mission as pushing decisions "as far as possible in the direction of sanity." If CEA is no longer pushing, there may be few limits on how far in the direction of insanity this administration will go.


For years CEA was pretty much the only game in town for serious economic analysis. But starting in the 1970s economists began cropping up in all corners of government. In response, recent presidents have tended to rely on a single entity to collect all the economic advice being offered. In the first Bush administration, this entity was called the Economic Policy Council (EPC), and was essentially managed from the Treasury Department. But having run on campaign themes like, "It's the economy, stupid," Bill Clinton needed a higherprofile body, and so he moved the EPC into the White House and renamed it the National Economic Council (NEC). All of a sudden CEA had a rival--and an intensely political one--in its own backyard. For much of the Clinton administration that rivalry never materialized. According to White House lore, Clinton CEA Chair Laura Tyson recognized the potential for conflict early on and worked out an informal arrangement with Robert Rubin, the first NEC head, to defuse it. "There was agreement about the relative size and relative makeup, and the difference in mission," Tyson says. As former Eisenhower aide Bradley Patterson explained it in his book The White House Staff, Tyson sought "to maintain CEA's long-standing reputation as the purveyor of hard, factual economic data-- gathered, analyzed, and distributed without any bending to political considerations or the need for `spin.'"

Remarkably, that arrangement more or less held up even after Tyson and Rubin left their respective positions. And because it did, CEA remained largely apolitical. That's not to say its arguments always held sway. Janet Yellen, Clinton's third CEA chair, recounts a discussion with NEC over a graph in the president's 1998 annual economic report that noted an alarming number of personal bankruptcies despite otherwise solid economic news. Yellen ultimately removed it after asking herself, "Is this really important? Does it really matter? ... We're not adding something untrue, but removing something marginal." But more often CEA stood its ground. For example, the Council convinced the Clintonites to adopt a market-based approach to key elements of the Kyoto Protocol. And it helped limit the president's protectionism on steel. Yellen recalls, "I told President Clinton protecting steel would cost about eight hundred thousand dollars per year per job ... [and] he's probably thinking, `Give me a break; I've got unions and senators and congressman from steel states breathing down my neck.'" In the end, though, the economists largely prevailed. "He didn't do nothing, but not nearly as much as Bush," says Yellen.

It wasn't long after the inauguration of George W., however, that the divide between the politicos at NEC and the economists at CEA broke down altogether. While the campaign's top economic adviser, Lawrence Lindsey, was quickly installed as NEC director and assistant to the president for economic policy, CEA lacked a chairman for more than a month. So Lindsey began filling the void. "Lindsey came and started to tell us he'd like to work with CEA really closely, that he would like us to start a weekly memo to him," says one former staff member.

This posed a big problem. After all, not only was Lindsey in a political job, but he was the primary author of Bush's tax cut and had earned a reputation as something of an ideologue. "We started to feel like, `Hey, he's acting like he's our boss. Gee, this doesn't feel right.' No one knew what to do about that," adds the staffer.

In the meantime, rumors swirled. Some feared the White House was planning to consolidate NEC and CEA. "After [Lindsey] became head of NEC, we were concerned about him having joint custody. Justifiably," recalls another economist. Others heard--and the press reported--that the administration was having difficulty finding a CEA chair because Lindsey's prominence within the administration would inevitably mean taking a back seat. And Lindsey did little to deflect these suspicions. At an early meeting with the CEA staff, for example, he allegedly referred to himself as the "de facto CEA chair." (Lindsey confirms through a spokesman that he convened the meeting but doesn't remember using the phrase.) One former CEA economist was so concerned she "got in touch with John Taylor [rumored to be a candidate for the CEA chairmanship] and he gave me a little pep talk.... He said, `Yes, it's right for you to worry about working with [Lindsey].'"

In many ways Lindsey was more a symptom of the problem than its underlying cause. From the beginning of his presidency, Clinton essentially cast his lot with Wall Street, betting that if he reined in the deficit, bond traders would reward him with lower long-term interest rates. In other words, Clinton's entire economic strategy hinged on winning credibility in the financial world, which made it vital that respected, mainstream economists play a prominent role in his administration. Bush, on the other hand, came into office having hitched his fortunes to a massive supply-side tax cut. But because supply-siders take it on faith that lowering marginal tax rates will trigger economic growth, establishing credibility among economists was much less of a concern.

All of which explains why the CEA staff was relieved when Columbia economist Glenn Hubbard was finally appointed to be the Council's chair. Though a committed supply-sider like Lindsey--and a devout proponent of the tax cut-- Hubbard was at least highly regarded as an academic. As one CEA economist puts it, "At least he was talking the same language as the senior staff."

But Lindsey continued to exercise considerable influence even after Hubbard's arrival, parceling out and supervising many of the Council's projects. As another CEA economist describes it, "In the current environment NEC functions as workload manager--distributing projects and watching projects.... NEC is more integrated in the work." And Lindsey's primary method for distributing and watching projects was the CEA chief of staff, Diana Furchtgott-Roth, a former colleague of his from the American Enterprise Institute (AEI), who had spent her career advocating for conservative economic causes and who once served as an economist at the American Petroleum Institute, the lobbying arm of the oil industry. Former CEA economists say Furchtgott-Roth exercises enormous authority over substantive issues. "Diana's job is very much taking what she hears in her meeting with Larry Lindsey each morning and turning it into CEA analysis," explains one former colleague. (According to Hubbard, Furchtgott-Roth attends the daily NEC staff meeting.) Another complains, "She [has] a blatantly political agenda," and recalls that Furchtgott-Roth once directed him to poke holes in work another agency had already done because "Larry Lindsey said ... they did this analysis incorrectly." (Furchtgott-Roth says through a spokesman that she has no recollection of the exchange.) "If you're looking for a villain, she's it," says the economist.

By most accounts, the power Furchtgott-Roth wields is unprecedented. The CEA chief of staff under Clinton was little more than an administrative position and almost never exercised authority over analytical questions. Many CEA chiefs of staff don't even have backgrounds in economics. According to Tyson, "The chief of staff when I was there was not involved in the substantive agenda.... It was representing institutional issues." "In the past, I remember getting direction from members," reflects another former CEA staffer. "In this case, we also got direction from the chief of staff. That was new." But even more troubling is Furchtgott-Roth's role in representing a political adviser like Lindsey rather than Hubbard, her ostensible boss. Peter Orszag, who worked in Clinton's CEA, says flatly: "In my experience at CEA, it would have been highly unusual for the chief of staff to represent the interests of anyone other than CEA. That was what the chief of staff did."


Hubbard seems to have responded to Lindsey's influence not by digging in his heels, like many of his predecessors, but by making CEA more political itself. One of his early acts as CEA chairman, say former employees, was to ask senior staff to identify the economic literature that showed a strong correlation between economic growth and tax cuts. "He had me talk with macro modelers like [well-known conservative] Allen Sinai to try to get more concrete empirical analysis that supported it," says a former CEA economist in charge of tax policy. On one occasion, Hubbard came across a report by the conservative Heritage Foundation that he found promising, and he asked for a more credible source that made a similar argument. "Hubbard was interested in it," the economist recalls. "But he said, `No one's going to believe this.' So he sent me off looking for other sources of information." (Hubbard has no recollection of the episode.)

Another CEA staff economist recounts a similar experience while working on Social Security. Hubbard had become interested in a short article by AEI Fellow Kevin Hassett comparing the returns under a hypothetical private pension system to actual returns under Social Security. Eager to make use of the analysis, Hubbard asked the staffer to reexamine Hassett's work to see if it checked out. When he did, the numbers proved misleading--the economist notes that Hassett's argument broke down "quickly once you worked past its carefully constructed example"--and Hubbard declined to recommend them for use elsewhere in the administration. But neither did he call attention to the shortcomings in the privatization argument. Instead, Hubbard simply tried a different approach: He dispatched another CEA economist, Jeffrey Brown, to help author the Bush administration's Social Security report, which made the case for privatization not on the basis of financial returns but on overtly political grounds like the value of individual choice. (Hubbard recalls a short, nontechnical piece he co-authored with Hassett for AEI, but not the incident in question; he confirms having assigned Brown to the Social Security task force.) In principle, one could defend the value of having an economist like Brown work on the report. Yet once CEA had discredited the economic rationale, it's not clear how much a CEA economist could contribute to a commission set up to propose privatization.

Of course, as Orszag points out, working at CEA means "there's always a tension between being relevant and being academically pristine." But usually this results in CEA economists and members agonizing over whether they're comfortable with an argument the administration favors--and respectfully disagreeing when they're not. Orszag, for example, recalls the Clinton administration's efforts to link free trade with job growth, whereas the real benefit lay not in adding jobs but in replacing them with better ones. "CEA was always very reluctant to say trade is good because it creates jobs, even though it was the rhetoric of other agencies and the president," he says. At the current CEA, however, these distinctions are almost never made. Instead, the basic operating assumption is that CEA's position is the administration's position--regardless of the underlying economics.

Perhaps the most glaring instance of this, former CEA officials say, was Hubbard's performance during last fall's stimulus debate. The original House bill, which the president supported, was by all accounts laughable. Even the president's own Treasury secretary, Paul O'Neill, referred to it derisively as "show business." Academic economists tended to see its numerous longer-term measures--a repeal of the corporate alternative minimum tax, a three-year-long tax break for investment--as exactly wrong for the short-term economic problems facing the country. Hubbard had even endorsed that logic himself in a 1996 academic paper. Nonetheless, he spent the fall defending a similar proposal and criticizing rival ones, often suspending the laws of economics to do so. In December CEA released the intellectual forebear to the February study--a two-page report asserting that the stimulus bill's business tax provisions "address[ed] the fundamental source of economic weakness over the past year." One month earlier Hubbard had dubbed it "a major fallacy to praise new [Democratic] spending plans as `stimulus'" in a Washington Post op-ed, which one former CEA member says "was just a joke." "This is no one's economics," the former member says. "It's not even right-wing economics.... If an undergrad wrote that, you'd give the statement and the logic behind it a D."

Would any one economic decision have come out differently had the Bush CEA been more independent? It's impossible to say. An assertive CEA might have objected to the Bush energy plan's near-exclusive emphasis on supply-- citing the potentially larger gains from reducing demand--or to the stimulus plan's long-term giveaways. But even if it had, an administration bent on rewarding the business interests that helped elect it probably wouldn't have backed down. Even former Clinton CEA officials concede they spent a lot of time being ignored.

On the other hand, there has been at least one instance where the White House was genuinely torn between economics and politics: the internal debate over steel tariffs, which, by all accounts, was agonizingly close. To his credit, Hubbard--like his predecessors in other administrations--opposed steel tariffs as economically counterproductive. But the reason some of those predecessors succeeded in blunting the political urge toward protectionism was their prestige as independent economists. By the time this spring's steel decision came along, Hubbard had already undermined that independence. And once you've lost your independence as an economist, you're just another political adviser--which means you might as well not be there at all.

2002-04-29: Modern European Antisemitism, part 5327: Left-wing anti-McDonalds anti-globalization "activist" Jose Bove: "It was thus alarming to see Bove, after a pro forma denunciation of anti-Jewish violence, informing viewers of the TV channel Canal Plus that the attacks on French synagogues were being either arranged or fabricated by Mossad. 'Who profits from the crime?' Bove asked. 'The Israeli government and its secret services have an interest in creating a certain psychosis, in making believe that there is a climate of anti-Semitism in France, in order to distract attention from what they are doing.' " From <http://www.weeklystandard.com/Content/Public/Articles/000/000/001/187bvgea.asp>


"I'm a farmer, and these (Palestinian) people are farmers too. So I am fighting with them to help them protect their land," Mr Bove told the watching media. With Mr Arditi caught in the middle of the crowd, the soldiers started elbowing reporters out of the way, and the shoving began. Minutes later one of the activists was arrested and dragged away. "No violence! No violence!" chanted Mr Bove and his friends. A group of Palestinians nearby took up chanting but maybe misheard the French accent as they shouted: "No peace! No peace!"

From Jim Henley: http://www.highclearing.com/

A Minor Streak - Unqualified Offerings enjoys Richard Cohen maybe a third of the time. The rest of the time it thinks he's a gasbag. But the man has had two good columns in two weeks now. In today's, he demolishes a recent op-ed that went out under the byline of Saudi Ambassador to the US, Prince Bandar bin Sultan, who first came to public prominence during the Iran-Contra hearings.

The truest thing in Bandar's piece is his anger. It is white hot. He feels, to his very depth, that the Palestinians are being -- and have been -- pushed around. He feels that they are treated like dirt.

I'm with Bandar on that. The persistent expansion of West Bank settlements is an outrage. Palestinians have been living under occupation long enough. When Arafat's man in Washington said on "Meet the Press," "I, Hassan Abdel Rahman, have been in exile 29 years," it overlaid the personal on the political so that it was, for once, easily understood.

Bandar may be entitled to his anger. But we are entitled to ask just what exactly his government did until very recently to advance the peace process. We are entitled to ask, in other words, what was the Saudi role before its own nationals started flying airplanes into American buildings and the kingdom embarked on a public-relations campaign, once again throwing money at a problem.

In an April 2nd column about the War in Israel and the Territories, he made some points I thought of working into my various pieces on disgorgement. Specifically, he compares the situation between Israel and the Palestinians to the Algerian civil war with France:

The Battle of Algiers is now being fought in Jerusalem and Tel Aviv, in Haifa and Netanya -- anywhere a Palestinian suicide bomber can infiltrate. It is being fought, too, with increasingly desperate Israeli tactics -- first pre-emptive assassination, now the virtual reoccupation of the West Bank.

The turn that the war -- the Palestinian struggle -- has taken may be lost on Sharon and, it seems, President Bush, but not on some of those involved. "If they kill us, we kill them," said Muhammad Odeh. "It will never stop." Odeh knows whereof he speaks. His son, Abdel Basset, blew himself up in Netanya last week, killing 22 others at a Passover seder.

In the week since reading it, I've come to realize that the "Algiers" column is not valuable chiefly for sort of echoing my own ideas on the topic, nor even as advice to Israel. No, it is most valuable for its implicit warning to the Palestinians. It does matter, however some deny it, how you win your independence. Algeria prevailed over France by adopting a Fanonist strategy. Their enthusiast, Jean-Paul Sartre famously said that "to shoot down a European is to kill two birds with one stone, to destroy an oppressor and the man he oppresses at the same time: there remain a dead man, and a free man; the survivor, for the first time, feels a national soil under his foot."

Things have worked out real well for independent Algeria. It's been suffering a vicious civil war between Islamist radicals and the aging socialist revolutionaries Sartre and Fanon so celebrated since the Algerian Army nullified the election of 1992. The Islamist parties turned, of course, to terrorism. The government to brutal counterinsurgency. But one of the things that hamstrung the government in the "hearts and minds" battle was its own genesis. Algeria was birthed in terrorism. Its founding myth necessarily reified that "dead man and free man" stuff. Its civic education stressed the rightness of terroristic violence in the nation's struggle for "freedom."

And their civics lessons bit them in the ass. Because while the religious radicals may have despised the Old Guard, they also took it as their model. And the Old Guard had no moral case to make over the heads of the terrorists to their people.

Palestinians who want the West Bank and Gaza for some reason other than the chance to engage in factional bloodletting unmolested should think about the Algerian example long and hard.

from Patrick Nielsen Hayden, Electrolite

March 13, 2002
There are no words

Via Little Green Footballs, this item from MEMRI, presenting

...No. I can't bring myself to print this stuff.

Look for yourself.

An article by a leading Saudi academic explaining how Jews extract blood from Gentiles to make Purim pastry.

By "columnist Dr. Umayma Ahmad Al-Jalahma of King Faysal University in Al-Dammam."

Published in the Saudi government daily newspaper Al Riyadh, March 10, 2002.

That was this past Sunday. While you were reading your New York Times, with its thoughtful thumbsuckers about the "Saudi peace plan." And living your happy Western lives.

Maybe you were going to church. Maybe you were sleeping in. Or reading Patrick O'Brian novels. Or blogging. Or watching TV.

Whatever you were doing, while you were doing it, Saudi newspaper readers were reading a calm, authoritative explanation that "the Jews" spilling human blood to prepare pastry for their holidays is a well-established fact, historically and legally, all throughout history. This was one of the main reasons for the persecution and exile that were their lot in Europe and Asia at various times."

Nick Denton dismisses anti-Saudi sentiment as part and parcel of "monstrously hawkish" blogger groupthink.

It feels strange and terrible to have lived into a future in which being shocked by an absolute monarchy that sponsors blatant Jew-hatred is regarded by otherwise intelligent people as "monstrous" and "conservative."

Please, please, this is the wrong future. Take me back, please. Start again.

2002-04-27: Martin Sieff in National Review: "President Bush's now famous--and notorious--inclusion of Iran in an international 'axis of evil' in his State of the Union speech this year is widely regarded in Tehran and, indeed, throughout the region, as a crucial turning point. Since then, pro-American sentiments in Tehran have been less enthusiastically expressed and popular feeling has coalesced anew behind a government that, for all its faults, is seen as a representative of the national interest against a potential direct threat from the dominant superpower."

2002-04-26: Paul Krugman: "Is there anything good to say about the Bush administration's air-quality plans? The answer is yes. But--you knew there would be a but --the good stuff is tentative and inadequate, while the bad stuff is being instituted with alacrity and determination..."

April 26, 2002

Bad Air Days


On Earth Day George W. Bush staged a photo op in the wilderness and touted his "clean skies" initiative. Democrats jeered and called him a tool of polluting interests.

Is there anything good to say about the Bush administration's air-quality plans? The answer is yes. But — you knew there would be a but — the good stuff is tentative and inadequate, while the bad stuff is being instituted with alacrity and determination.

The current system for controlling air pollution badly needs an overhaul. Back in the 1970's the Clean Air Act set strict rules, but only for "new" sources of pollution. Existing power plants, factories and so on were grandfathered. The idea was that over time, old, dirty facilities would close down.

The result was predictable. Polluters kept those old facilities operating, precisely because they were exempted from the new rules. Indeed, corporations poured money into existing power plants and factories, expanding their capacity, rather than build new ones.

The Clinton administration tried to crack down on this practice, suing companies that it said were creating new pollution sources under the guise of maintaining old ones. Not surprisingly, polluters hated "new source review," and they contributed millions to Mr. Bush's campaign.

There ought to be a better way, and there is. It's called "cap and trade." Under cap and trade, existing pollution sources receive permits to emit specified amounts of pollutants — but they can sell those permits to others. This creates an incentive to reduce pollution from old facilities in order to free permits for sale. Cap and trade has already been instituted for some pollutants, notably sulfur dioxide from power plants, with great success. And by gradually reducing the number of permits, the government can use cap and trade to achieve long-term reductions in pollution.

Sure enough, the substantive part of the Bush administration's air pollution plan is a cap-and-trade system for sulfur dioxide, nitrogen oxides and mercury. So what is there to complain about? Alas, lots.

First, the plan conspicuously fails to include carbon dioxide, the main cause of global warming. Aside from violating one of Mr. Bush's campaign pledges, this omission casts a long shadow over future policy. Environmental experts tell me that it would be much cheaper to reduce carbon dioxide emissions as part of an integrated, multi-pollutant strategy than to add on carbon dioxide controls later, after key investment decisions have already been made. So by doing nothing about global warming, this administration compromises the policies of future administrations too.

Second, the Bush plan still allows twice as much pollution as experts at the Environmental Protection Agency privately think appropriate. The cost of an additional 50 percent reduction in pollution, according to internal E.P.A. documents, would be pretty small. But the administration apparently prefers not to ask industry to bear even those small costs.

Finally, and most important, so far the administration's "clean skies" initiative is pie in the sky: no legislation has been introduced, and there doesn't seem to be any urgency. Meanwhile, the administration is moving rapidly to scuttle new source review, saving its financial backers billions in cleanup costs at the expense of the environment (especially in the downwind states of the Northeast). And by scuttling new source review, the administration may well be undermining political support for its own anti-pollution initiative. As long as they were under the gun, polluting companies favored a new, less cumbersome system of pollution control. Now they, and their powerful Congressional allies, would just as soon leave things as they are.

There is evident demoralization at the E.P.A., where the hazardous-waste ombudsman recently joined a parade of officials resigning in protest. Staff members feel that they have no backing from their political superiors. Eric Schaeffer, who recently resigned as the chief of civil enforcement, put it this way: "The E.P.A. is in the back seat, or maybe even riding the bumper, and the energy industry is having a field day."

So what's actually on offer is a modest new pollution initiative, maybe, eventually, if and when the administration gets around to it. Don't you know there's a war on? And meanwhile the big polluters get what they paid for in campaign contributions: a multibillion-dollar free pass.

2002-04-26: First Quarter GDP Release:

In the fourth quarter of 2001 U.S. businesses shrunk their inventories by $30 billion. In the first quarter of 2001 U.S. businesses shrunk their inventories by $9 billion. This reduction in the rate at which inventories declined all by itself induced a +3.1 percentage point swing in the rate of real GDP growth between the fourth quarter of 2001 and the first quarter of 2002.

Why? The national income accountants think of it this way: $21 billion more was spent on inventory investment in the first quarter of 2002 than in the fourth quarter of 2001. But this is just one quarter's change in inventories. If the reduced pace of inventory reduction was maintained for a year, over that year it would add up to an extra $84 billion of investment in inventories. So the swing in inventories is a swing of $84 billion in the inventory contribution to the level of GDP measured at an annual rate.

But this swing in the level of GDP measured at an annual rate is just one quarter's swing. If we were to have a similar swing over the next three quarters as well, it would boost the level of GDP by $336 billion--or 3.1%. Thus the swing in inventories boosts the rate of growth of GDP from the fourth quarter of 2001 to the first quarter of 2002 by 3.1%.

So the swing in inventories means that a -0.2% of a year's GDP reduction in inventories that was there in the fourth quarter of 2001 was not there in the first quarter of 2002. That meant that first-quarter GDP was 0.8% higher than fourth-quarter GDP. And this 0.8 percentage point jump in the level of real GDP in one quarter translates into a 3.1 percentage point contribution to the annual GDP growth rate: a *big* swing to come out of a $21 billion shift in spending patterns.

from briefing.com:


* Q1 GDP 5.8%, final sales 2.6%, price deflator 0.8%

Key Factors

* The rapid slowing in inventory contraction ($83 bln) lifted Q1 GDP by 3.1%. 
* Final sales (GDP ex inventories) rose a respectable 2.6%.  That's the Fed's focus next to business investment.
* Growth was entirely a consumer/government event.
* Personal consumption rose a strong 3.5% after the auto-boosted 6.1% in Q4. 
* Residential investment rebounded 15.7% afater a decline in Q4.
* Government spending surged a surprisingly strong 8% after the 10% Q4 boom.  Outlook is for significant softening.
* Business investment in equipment and software showed a 6th quarterly decline, but light at just -0.5%.
* Business investment in construction/structures dove by a weighty 20% after 34% Q4 plunge. 
* Stronger import growth (16%) than export growth (7%) left trade slicing 1.2% from Q1 growth.
* Chain-weight deflator of just 0.8% despite boost from energy prices.  Core PCE deflator up same 0.8%. 

Big Picture

"The boom through mid 2000 gave way to the bust and now recovery.  The corporate profit recession leaves businesses cutting costs as the manufacturing sector edges out of severe contraction.  The downturn never wounded the consumer despite massive equity losses, large layoffs, sharply reduced global trade and the 9/11 attacks which added to the decline in consumer confidence.  In sum, the economy is digging out of a recession as the transition turn in inventories add strongly to growth.  The economic recovery is in its early stage as a continued drag from business investment and a soft rebound from consumer spending argues for modest strength.  Fiscal and monetary policy are extremely stimulative and are resuscitating the economy.  Inflation concerns are void given the plunge in commodity prices and the weak global economy ..."

Economy Surged 5.8% in 1st Quarter As Businesses Slowed Inventory Cuts


The U.S. economy grew at a sizzling 5.8% annual rate in the first quarter, rocketing back after last year's recession and the terrorist attacks.

After limping through the last six quarters, gross domestic product -- the broadest measure of the economy's health -- posted its strongest showing since the final quarter of 1999, the Commerce Department reported Friday.

The figures reinforced the view that the country not only emerged from a recession that began in March 2001 but that the downturn will probably go down as the mildest in history.

The economy's first-quarter rebound is especially remarkable given that GDP shrank at a 1.3% rate in the third quarter of 2001. The economy grew at a 1.7% rate in the fourth quarter.

"Growth is back!" said Ken Mayland, president of ClearView Economic. "This economy is getting back on a good growth track, which down the road will mean good things for the restoration of jobs and companies' profits."

Economists' predictions of first-quarter GDP varied widely, according to a survey by Thomson Global Markets. On average the forecast was for a 5% rise, but predictions ranged from 3.5% to 6%.

The jump in GDP was driven largely by businesses eased off on paring inventory. Businesses also slowed their cuts to spending, and consumer spending -- a key component of economic growth -- remained healthy.

Business inventories fell just $36.2 billion in last quarter after falling a record $119.3 billion in the fourth. The change added 3.1 percentage points to GDP.

Friday's report also showed that businesses began shedding their reluctance to spend. Business investment, which has been dropping for more than a year, fell once again. But the 5.7% reduction was much milder than the 13.8% plunge in the fourth quarter. And spending on equipment and software declined by only 0.5% after sharper drops in previous quarters.

Consumer spending, which accounts for two-thirds of overall economic growth, rose at a 3.5% annual pace in the first quarter, down from the strong 6.1% pace in the fourth quarter. Fourth-quarter spending had been driven largely by temporary financing promotions from auto makers.

Spending on durable goods in the first quarter, which includes autos, fell by 8%. That was offset by an 8.4% gain in spending for nondurable goods such as clothing and food, as well as a 3.8% rise in spending for services. Home purchases jumped 15.7%.

Consumer Sentiment Ebbs

A separate report released Friday suggested consumers may not continue to spend at such a brisk pace. The University of Michigan's index of consumer sentiment dropped to 93 at the end of April, from a 94.4 reading at mid-month and 95.7 at the end of March.

The report, which is available only to subscribers, also showed that consumers' expectations for the future have fallen slightly. That index slipped to 89.1 from 92.7 in March. An index that measures current conditions fell to 99.2 from 100.4 a month earlier.

There are fears that a drop in consumer confidence could hurt spending. Other recent reports have shown that while consumers remained concerned about the economy, they are not likely to sharply cut back on their spending. The Conference Board said consumer confidence surged in March.

Meanwhile, the trade deficit remained a weak spot. The deficit shaved 1.22 percentage points off first-quarter GDP as the improving U.S. economy lifted Americans' demand for foreign-made goods. That compared with a reduction of 0.14 percentage point in the fourth quarter.

Federal Reserve Chairman Alan Greenspan told Congress earlier this month that the economy's outlook is looking brighter, but signaled that the central bank is in no rush to boost short-term interest rates, now at 40-year lows.

Friday's report showed that inflation continued to remain in check. The price index for personal consumption, a measure watched closely by Fed policy makers, rose by 0.6% after advancing 0.8% in the fourth quarter. The chain-weighted price index for gross domestic purchases increased just 0.7% after a 0.5% rise the previous quarter.

Updated April 26, 2002 11:01 a.m. EDT

2002-04-25: Charlie Cooper, Executive Editor/Commentary | CNet: "The integration of Internet Explorer into the operating system has been a disaster for innovation"

Flipping through Bill Gates' written testimony on the eve of his appearance in a Washington court this week, you're left with no doubt that the man believes what he says. The synopsis of his 155-page cri de coeur is that Microsoft's ability to innovate would be indelibly crippled by the adoption of proposals submitted by nine states opposing an earlier remedy worked out with the Justice Department and the remaining states in the antitrust lawsuit. My two cents: You can never predict the future, but you can sum up the past.

When it comes to accessing the Internet via browsing software, that verdict was in long ago: The integration of Internet Explorer has been a disaster for innovation. In the absence of a viable rival, Internet Explorer has advanced only in fits and starts. Ever since America Online acquired Netscape in 1999, Microsoft hasn't really needed to exert itself to develop a killer Web browser. Things were a lot different before Netscape sued for surrender. When the browser battle raged at full flame, the rivals constantly pushed each other to improve their respective Web offerings. (If the forward and back buttons are
the height of user functionality, then we're in a lot of trouble.) Without fighting the question of whether Netscape was done in by its own mistakes or by Microsoft's illegal exploitation of its desktop monopoly, it must be said that its removal from the scene as a serious contender has been a Net loss for us all.

Charlie Cooper, Executive Editor/Commentary | CNet

2002-04-25: A Pearl of Wisdom from Francis George, Called by Some Archibishop of Chicago:

"There is a difference between a moral monster... who preys upon little children... and... someone who, perhaps under the influence of alcohol, engages in an action with a... sixteen-year-old young woman who returns his affection."

In short, molesting pre-teen boys is wrong, but teenage girls are different. In Francis George's view, they are the Temptress Eve, Allies of Satan, Sinks of Iniquity, put on earth and armed with pheromones to try to lead good, honest priests astray...

In other news...

"Cardinal Bernard Law of Boston, who has been accused of mishandling sex abuse cases, did not attend a press conference that closed the meeting. Law has not spoken to the media in two months. 'Before he left ... last week he said that he probably was not going to be available to the press because he didn't want the issue to be about him, he wanted it to be about the conference, and what all the cardinals were trying to do," said Boston Archdiocese spokesman the Rev. Christopher Coyne.'"

"Vatican sources had said earlier that all the American cardinals would be at the press conference, including Cardinal Law. But the press conference was delayed for two hours because drafting the final document took longer than anticipated, and Theodore McCarrick of Washington, D.C., was the only cardinal from the U.S. hierarchy to appear before the press. In reply to questions, Bishop Wilton told reporters Cardinal Law was 'not dodging the press conference,' but could not attend because the late start clashed with another engagement..."

2002-04-23: Wow! We Are Californians After All!

For some time--years, actually--my wife Ann Marie and I have been sneering about how we will never be true Californians. We don't have even a trace of any of the California accents. We don't believe in human potential, or in the consumption of royal jelly hand-gathered from organic hives. We have even been known to say that they shook the country, and the flakes fell down to the west coast. But then came the moment when we were driving around Somerville, Massachusetts, at 7:00 AM on a Sunday morning, wondering, "Why aren't any of these gas stations open?"

It started innocently. We had a late morning plane to catch back to the west coast. I wanted to stop off and see my college roommate Paul Kafka-Gibbons, his wife Patty, and their children before going to the airport. But we also wanted to fill up the rental car--paying Avis $4 a gallon for gas struck us as highly uncool. So before going to bed the night before, we discussed whether we should get gas before or after breakfast. "Before," we decided, and went to bed

So we set out the following morning. "There's a gas station!" one of us would carol. Then, "Oh! It's closed."

After this had happened about five times, Ann Marie said to me, "Dear?"


"This is Massachusetts."

"I know Dear."

"Gas stations aren't open 24 hours a day 7 days a week in Massachusetts."

"I'm beginning to realize that, Dear."

"What kind of fools were we to think we could find an open gas station at 7 A.M. on a Sunday in Somerville, Massachusetts?"

"Big ones, Dear."

"We're really Californians, aren't we?"

2002-04-20: Argentina

I don't have an informed view about Argentina: when I need one, I borrow one from Barry Eichengreen next door or from Alan Taylor at U.C. Davis. These days their opinions are bleak indeed. Each of Argentina's provinces is printing its own private money to finance its continued expenditures. None of them are raising the taxes needed to cover their expenditures. Indeed, tax revenues are about to decline in real terms as inflation rises and the lag between tax assessments and tax collections drains government revenue of its real value. A government that cannot tax, continues to spend, and cannot borrow--the real resources needed to cover government spending cannot be created out of thin air, and are instead taken through the inflation tax, which is a very high tax levied on one particular very narrow class of assets.

Unless Argentina can bring its budget into balance very soon--either by collecting the taxes due to it (which it has failed to do for a decade in spite of increasingly shrill cries from the IMF that tax evasion must be brought under control) or by cutting spending--it risks renewed hyperinflation. Hyperinflation will reduce real incomes by perhaps a fifth, once again destroy a large chunk of domestic savings (making it much harder to convince anyone in the future to invest in Argentina), and pseudo-randomly redistribute wealth around the country, dividing it once again into profiteers and the robbed...

Meanwhile, the yahoos of the anti-globalization left are condemning the IMF for calling for cuts in Argentina's public spending, and being careful not to even whisper that what the IMF wants is a balanced budget--that they would be as happy with a successful tax evasion reduction campaign as with spending cuts. I cannot tell whether they know so little economics that the equation (continued spending) + (inability to borrow) + (low tax receipts) = (hyperinflation) = (economic disaster) escapes them, or whether they are simply cynical: Is it that because Argentina was held up as a neo-liberal model for much of the 1990s, it is important that its crash be as severe and devastating as possible?

From the Economist...

Eduardo Duhalde tried to persuade his countrymen that he had something to show from his first foreign trip since he became Argentina's president in January. But his meetings in Monterrey with Horst Kohler, the IMF's boss and Paul O'Neill, the United States' treasury secretary, produced only the news that the IMF will start formal talks on a rescue package in April. Any loan may be less than half the $20 billion Mr Duhalde wanted, and it remains subject to a long list of conditions. And when might it arrive? "Maybe in three months," said Mr O'Neill.

Argentina's currency and its government may not be able to wait that long. Mr Duhalde floated the peso in February, after the collapse of the country's fixed exchange rate. Recently, the peso's fall has turned to rout as Argentines queued at foreign-exchange houses, desperate for dollars at any price. On March 25th, the government imposed controls aimed at calming financial hysteria: the exchange rate for sales of less than $1,000 to individuals will now be set by the central bank. That brought temporary relief.

The peso's latest plunge was prompted partly by the melting of a freeze on bank savings imposed in December. Known as the corralito (or little fence), this triggered the bloody protests that brought down the government of Fernando de la Rua. But in January, under public pressure, the Supreme Court ruled the corralito unconstitutional. That prompted Mr Duhalde's congressional allies to start impeachment proceedings against the court. In apparent retaliation, the judiciary has granted injunctions returning deposits to tens of thousands of savers. Unless this haemorrhage is stopped, many banks may soon collapse (see article).

Surveys show that the price of a "basic basket" of groceries has risen by up to 50% since the start of the year. Argentines have begun hoarding household supplies. They fear the return of the hyperinflation that they suffered in 1989-90. Mr Duhalde is said to be preparing an emergency food-distribution scheme; he has pondered on price controls, though he admits these would be hard to enforce.

The economy's decline is continuing unchecked. So far this year, industrial output is around 15% below that of the same period last year. Argentines fear shortages of home-made goods, as well as imports. Though protests have subsided, falling living standards could stoke them again.

For Argentina to start recovering, Mr Duhalde needs the boost to confidence that an IMF agreement would bring. But several things still stand in the way. First, there is the fiscal question. Congress has approved a budget which cuts spending by 14%. But the fall in tax revenues means further cuts may be required. Despite a commitment to do so, provincial governments are making little effort to rein in their deficits. Instead, they are paying some bills with scrip--exchangeable IOUs which may never be redeemed.

The IMF wants a more watertight reform of provincial finance, and a more realistic budget. One way of achieving these would be to cut the hordes of political appointees at all levels of government. Such steps are the more urgent since Mr Duhalde faces demands to spend more on the poor, and on propping up the banks. The Fund also wants changes in a new law on bankruptcy (which favours debtors). Mr Duhalde has said he may not be able to achieve much of this, though he said he will try to amend another law, against "economic subversion", which had lain unnoticed for years until prosecutors started using it against bankers.

For the time being, Mr Duhalde retains the support in Congress both of his own Peronists and of Mr de la Rua's Radicals. But such support could evaporate if protesters return to the streets. Defections have started: Jorge Capitanich, the president's chief of staff, has said he will soon step down, without even telling his boss first.

Mr Duhalde says there is no "Plan B". Others are proposing alternatives. Pedro Lacoste, an economist, suggests removing the corralito and allowing the currency to fall. He argues that the central bank's reserves of $13 billion would be easily enough to buy up savers' freed (but devalued) pesos, thus eventually bringing stability to the exchange rate. Others suggest outright dollarisation, before the peso's plunge triggers hyperinflation. If Argentines continue to eschew pesos, dollarisation may happen anyway.

This discussion reflects a growing fear that the longed-for deal with the IMF may never come. Noting that neighbouring Uruguay has received swift IMF aid, some Argentines claim that their country is being made an example of for defaulting on its $155 billion public debt. But having been criticised for being over-lenient with previous Argentine governments, IMF officials seem determined to be tougher now.

Mr Duhalde, a populist now apparently converted to pragmatism, still inspires mistrust abroad. He came back from Monterrey seemingly shaken at the lack of faith that other world leaders had shown in Argentina. Decisive action in the next few weeks could yet secure an IMF deal, and his government's survival. But both things look to be in the balance.

From the BBC, April 21, 2002...

Argentina's entire financial system could collapse if the run on its banks continues, President Eduardo Duhalde has warned.

His comments come a day after all foreign exchange and banking transactions were halted indefinitely. Banks have come under renewed pressure because of increasing cash withdrawals after courts overturned restrictions on access to savings. Limits were first imposed last year as Argentina sought to tackle an economic crisis which began in earnest after it defaulted on part of its massive foreign debt.

Serious concern about the situation has been expressed by leading industrialised nations meeting in Washington. But no new agreement was reached in talks between the IMF and Argentine Finance Minister, Jorge Remes Lenicov, although the IMF is sending out a new mission to negotiate the terms of financial aid. In his weekly national radio address on Saturday, President Duhalde said a solution to the problem of capital outflows was urgently needed and that his advisers were working on alternatives. " We run the risk that the system will explode if the judges continue to authorise people to withdraw their money," he said. On Friday alone, account holders withdrew $200m dollars from banks in Argentina, according to one newspaper estimate. Huge crowds gathered outside banks as people tried to cash their salary cheques and get money from automated teller machines. The Argentine authorities had limited withdrawals to $500 a month in December, but individual account holders gained access to their savings after mounting legal challenges. Government figures say about $70m were withdrawn by individual savers armed with court orders in the first 10 days of April.

The government is hoping to pass a bill that would convert most depositors' savings into 10-year bonds, making it harder to legally overturn limits on withdrawals.

In Washington, IMF chief Horst Koehler said on Saturday he expected a team to go to Buenos Aires "as soon as possible, the middle of May". But he maintained that the Argentine Government still needed to adopt key reforms to qualify for a resumption of aid. BBC economic correspondent Andrew Walker says there are still differences between the two sides over how much Argentina should reduce the deficit in the government finances, and that Mr Koehler wants credible reassurances about the control of spending by provincial governments.

Argentina's Central Bank is suspending banking and currency exchange operations indefinitely from Monday. The BBC is reporting the move follows a growing number of court rulings that allow people to take money out of their accounts, despite Government restrictions on cash withdrawals. Argentine television has been showing emotional pictures of crying families unable to buy food and angry bank customers saying they have only a few dollars to last until the banks reopen. The banks are likely to remain closed until the Government can pass a new law restricting people to taking government bonds out of their accounts instead of cash. While that may be the only way of stopping the banks from collapsing, it will do little to stop the economic downward spiral in which Argentina is caught. There is a total loss of confidence in the system. The government appears to be putting all its hope in the International Monetary Fund, but at present it seems unlikely to get more than a minor loan.

2002-04-20: Was Mrs. T. a Good Thing?

2002-04-20: Life Without My External Brain Pack

2002-04-20: Weblog Form

2002-04-19: Wow! I'm certainly cranky today!

2002-04-19: Servants of the People?

I am sitting here, reading the second page of this book by Andrew Rawnsley, wondering whether I should go on with it or simply move it to the "do not read" pile. It's called _Servants of the People_: The Inside Story of New Labour_. It's about the rise to power of Tony Blair, Gordon Brown, and their political allies, and their subsequent exercise of power in the first British Labour government since the 1970s.

The problem is that on his second text page--page xiv--Rawnsley writes that New Labour's "... desire for hegemony... was chillingly suggestive to some of those tyrranical regimes which call themselves 'People's Democarcies' are are neither." Now in my view an author who writes such a sentence--who says that in the eyes of "some" Tony Blair = Josef Stalin--owes me another sentence immediately following. He can write that "such hysterical falsehoods serve as an index of how unbalanced the opposition to New Labour became." He can write that "there is some truth in the charge that New Labour's internal politics is profoundly undemocratic." He can write that "such charges are substantively true: Tony Blair is a tyrannical totalitarian thug." What--to my mind at least--he cannot do is raise the equivalence Tony Blair = Josef Stalin, attribute it to "some," and then back away, as if he could deny that he planted such a bomb by wiping his fingerprints off of it. When such a sentence goes off it must have an effect on the mind of the reader. The author has, I think, an obligation to diffuse this bomb or to set out the extent to which it is his view, rather than the view of "some."

Reading along, I discover that Tony Blair = Josef Stalin is Rawnsley's view, or at least is a view that Rawnsley wants to make sure is whispered into his readers ears, without, of course, leaving too many of his own fingerprints on it. I have found:

And we are only on the fourth text page of Rawnsley's book....

In the first four text pages of his book, Rawnsley repeatedly deploys the rhetorical tropes of dictatorship against Tony Blair and New Labour. The most polite thing that can be said about them is that they are gross overstatements. Tony Blair did not "take power over the country": he was *elected* by the voters of Britain. Tony Blair did not "seize control of [the Labour Party]": he was chosen its leader. Tony Blair did not shoot his way into the presidential palace at the head of a "junta who had executed a coup d'etat". Those who truly cannot distinguish between Stalin's Kremlin and Tony Blair's Number 10 Downing Street deserve only pity. Those who can distinguish and choose not to deserve only scorn.

Why the use of the grossly inappropriate rhetoric of dictatorship for the--popular--elected leader of one of the world's oldest democracies? There is only one explanation I can think of. Rawnsley wants to undermine Blair's claim to legitimate democratic authority. He can't do it head on. But he can whisper in his readers' ears by associating "Blair" and "dictator" as often as possible, and hoping that the connotations and rhetorical excess will leak across into denotations, and persuade people that Blair is somehow an illegitimate Prime Minister. Rawnsley has this goal, and resorting to the smarmy rhetoric of a partisan hack is the only weapon he can use.

Thus when Rawnsley comes to write a summary sentence about how it was that Tony Blair and his right-hand-man Gordon Brown were such an effective team in public, Rawnsley calls it a "tribute to the [(i)] discipline of both men and [(ii)] their mutual desire for power.." These are two somewhat discreditable reasons. Are there other reasons for their ability to become and remain a highly effective team? Yes. In addition to Rawnsley's (i) and (ii), I can think of:

Why do only reasons (i) and (ii) make it into Rawnsley's list, when there is at least as much evidence for each of (iii) through (vii)? Why if not that Rawnsley is trying very hard to make New Labour look bad wherever he can? Thus it is very clear how to read the book. If Rawnsley says something creditable about New Labour, believe it. If Rawnsley says omething discreditable, be very, very wary of trusting that you have the full or even an unmendacious account.

Indeed, I believe that if you read closely you can see the seams and bad stitching in Rawnsley's mendacious argument. So farI have read only one chapter closely: chapter 3, "Bank of Brown," about Chancellor of the Exchequer Gordon Brown's immediate post-election decision to shift responsibility for setting interest rates away from the (political) Treasury to the (technocratic) Bank of England. In thic chapter we learn that because of Gordon Brown's "pathological urge to be in control" he had long wanted to get rid of and had "in his [gun]sights" the Deputy Governor of the Bank of England, Howard Davies (p. 36). But the next time we hear of Davies, on page 41, Brown has offered Davies a promotion. He has asked him if he would become Chairman of a brand-new regulatory agency to oversee financial markets, the Securities and Investment Board, and thus be placed on a level equivalent to that of his current boss, Bank of England Governor Eddie George.

Thus the only possible human reaction is, "Huh?" If you are desperate to get rid of people, you do *not* immediately promote them to the headship of a powerful regulatory agency, the creation of which is going to be one of your flagship initiatives. Whatever the relationship between Brown and Davies, it is much more complicted than Rawnsley lets us know--and shame on him and on his editor for not thinking that we readers are too dumb to notice that what is said on page 36 is inconsistent with what s said on page 41.

Or consider another person whom Rawnsley says that Brown wanted to be rid of as part of his "pathological urge to be in control": Principal Secretary Terry Burns. By the end of chapter 3, we know two things about Burns: First, Burns's people had demanded "a month" to get ready for the handover of control over monetary policy to the Bank of England. Why? There is no conceivable substantive reason. At the U.S. Treasury in the early 1990s, John Auten's people--now Karen Hendershott's--could have gotten all the analytical and staffwork for such a decision done in two days if the Treasury Secretary had said that it was his highest priority (although they would probably have asked for a week). Either Burns was trying to demonstrate that he could keep things from happening quickly, and Brown had better get used to that, or Burns was hoping that delay would allow the assembly of a coalition that would block the shift of substantive power away from Burns's bailiwick and to Eddie George's--never mind that his boss the Chancellor wanted that shift of substantive power to happen.

Second, Burns had exceeded the limits of his authority and knowledge by promising Bank of England Governor Eddie George that "nothing was likely to happen about the Bank of England's [non-monetary and] other powers in the near future."

If I had a subordinate who had given false assurances about what I was going to do, and who had dragged his feet for no possible reason save bureaucratic cussiness with respect to my very first policy initiative, I would have wanted him gone too, and gone fast. No government department can afford to have a Humphrey Appleby (from the TV series, "Yes, Minister") at the head of its civil service, ever. Yet the only two things we learn about Terry Burns in chapter 3 seem to conclusively demonstrate that that was the role he was trying to play.

Moreover, there is one much more important criticism to be made about Rawnsley's book. One finishes reading chapter 3 without Rawnsley having provided any ******* information at all about the substantive issues at stake in Gordon Brown's policy decisions.

Had Rawnsley been interested enough to take notes and spent five minutes talking about the substance with Gordon Brown, Ed Balls, or any of a host of others, he could have easily written four concise and informative substantive paragraphs. Those four paragraphs would give a reader a good grasp of just why Gordon Brown thought turning over control over interest rates to the Bank of England was "the right thing to do". They would speak to the substance of government, rather than to the public relations. And they would be highly creditable to New Labour. Ten minutes with any of them, and Rawnsley would have been able to write as well just why Brown thought (and thinks) that a proper financial supervisory organization needs a certain independence from the banker-centered interest rate-setting Bank of England.

But does Rawnsley spend those ten minutes learning about the policy substance from Ed Balls? No. A reader finishes the chapter with his or her knowledge about monetary and regulatory policy completely unchanged. For those of us who think that the important thing about government is not that it is an amusing if badly-scripted soap opera, but that the government's policies shape real people's opportunities and lives, Rawnsley's astonishing ignorance of the substance of government is a high intellectual crime indeed.

Thus when Rawnsley complains--and he complains long and bitterly--about how so many in the Blair Administration are accomplished spin artists, masters of journalistic manipulation, my reaction is that he is the carnivore complaining that the antelope are speedy. The Blair Administration is filled to the brim with people who focus on the substance of policy, and of how policies can make Britain better. But Rawnsley does not care about them, does not talk to them, does not see them.

If he could see them, he would have written a much better, and a less dishonest, book.

2002-04-19: Things That Make You Go "Hmmm..."

So I was reading a book edited by Robert Cowley, _What If? The World's Foremost Military Historians Imagine What Might Have Been_, when I came across the first "thing that made me go, 'Hmmm...'" I was reading an essay by John Keegan, British military historian, and came across the passage: "Molotov, the Soviet foreign minister... proposed that the Soviet Union... guarantee Bulgaria's frontiers, despite already having taken a large share of Bulgarian territory..." I stopped. I reread it. Bulgaria? The Soviet Union doesn't border on Bulgaria. The Soviet Union never bordered on Bulgaria. What slice of Bulgarian territory did Stalin snatch? What could Keegan possibly mean?

And then it struck me: Romania. He means Romania. He has lost track of which Balkan country is which--forgotten that it is oil-rich Romania that borders on Russia and lost its northern Moldavian province to Stalin, and Bulgaria that is to the south and borders on Turkey.

But if you are going to build a reputation as a trustworthy military historian, shouldn't this be the kind of detail that you work very hard to remember, and sweat to get right?

And then there was D. Cameron Watt's _How War Came: The Immediate Origins of the Second World War_. At one point Watt writes of how the German offensive against Poland was planned to be a "... great encircling manoeuvre... on the model of a Zulu impi or the Roman armies against Carthage at Cannae..." Now I realize that the purpose of Watt's similes is not to inform the typical reader--few, very few, readers know in any detail the military organization established by Shaka Zulu, or have received a classical education. These similes are not there to help the reader by comparing what the author is describing to something the reader already knows well. These similes are there to impress readers with the breadth of Watt's mind and the depth of his scholarship.

But if Watts wants us to be impressed, shouldn't his scholarship and learning be deep enough for him to get the winner of Cannae correct? Shouldn't he remember that the Romans under the command of the consuls Lucius Aemilius Paullus and Caius Terrentius Varro did not encircle and destroy the Carthaginians at Cannae, but were themselves encircled and destroyed by the Carthaginian army commanded by Hannibal?

Now I know that nobody is perfect: even Homer sometimes nods. But that Hannibal won at Cannae is one of the first things anyone learns about Rome's Punic Wars. And that Romania is north of Bulgaria is not *that* hard a concept to hold on to...

2002-04-19: Hugo Award Nominees

The Curse of Chalion by Lois McMaster Bujold (HarperCollins/Eos)
American Gods by Neil Gaiman (Morrow)
Perdido Street Station by China Miˇville (Macmillan (UK)(2000); Del Rey)
Cosmonaut Keep by Ken MacLeod (Orbit (UK)(2000); Tor)
Passage by Connie Willis (Bantam)
The Chronoliths by Robert Charles Wilson (Tor)

2002-04-18: Edward Said on Why There Will Be No Peace in Palestine:

"...peace, which is a lovely word but in the present context usually means Palestinians are told to stop resisting Israeli control over their land..."

Not so. "Peace" means that the Palestinian Authority should resist Israeli control over their land by means other than sending suicide bombers to blow up guests at bat mitzvahs and at passover seders. Palestinians are free to use a wide number of other political tools to resist: tools that might actually be effective rather than counterproductive...

But as long as people like Edward Said define "blowing up guests at bat mitzvahs" as "resisting Israeli control over [Palestinian] land," there will be no peace.

2002-04-18: Ken Rogoff's Take on the 'E-conomy'

The National Bureau of Economic Research in the United States faced a similar quandary, and decided to call the US downturn a recession. In truth, the US downturn probably does qualify as an employment-growth recession, but probably does not qualify as a full-fledged output recession. The reason, of course, is that productivity growth held up to a degree that is quite unusual, so that even though employment growth was negative over several quarters, output fell only in one quarter. Productivity growth means the same number of workers are producing more. This is good news, and encourages us to think our optimistic analysis on productivity growth associated with the IT revolution in the October WEO was correct. There, based on historical analogy with earlier technological revolutions including electricity, railroads, and the steam engine, we argued that despite the current downturn, the medium-term productivity trend outlook was very positive, indeed not only for industrialized countries but also for developing countries.

2002-04-18: Amos Oz's Fantasy Plan for Peace in the Middle East

Amos Oz calls for unilateral Israeli withdrawal from Gaza and the West Banki, in return "...not [for] some paper signed by Yasser Arafat, but a solid agreement concretely linking Israel with Nato and the European Union, so as to deter the promoters of the Islamic holy war and to lay to rest once and for all the dream of eliminating Israel – and also to ensure that the end of the occupation will not be a shot in the arm encouraging those who are inflamed with warmongering Arab nationalism, and will not enable them to attack Israel after it relinquishes its control over the Palestinians..."

Can Amos Oz find a single European head of government--besides Tony Blair and Silvio Berlusconi--who would even consider for a moment extending NATO's umbrella over Israel?

2002-04-17: The Morrison Plan for Peace in the Middle East

A crack group of political scientists, social psychologists, techno-libertarians, socialist-technoids, and others, meeting at a secret base under the Antarctic have come up with a plan for peace in the Middle East: the Morrison Plan.

It has six simple parts:

(1) U.S. sealift command to move all Israelis to Utah immediately.

(2) U.S. airlift command to move all Palestinians to Afghanistan (alternatively, western Australia: the only desert even further from the Utah high desert than Afghanistan) immediately.

(3) No right of return for any of them, ever, to any spot in former cis-Jordan British Mandate Palestine. Any who violate this provision to be shot on sight immediately.

(4) Former cis-Jordan British Mandate Palestine to be rented out by the U.N. to the Walt Disney Corporation to establish religious-historical theme park: "Holy Land."

(5) Walt Disney Corporation to have all rights of high and low justice in "Holy Land," without appeal.

(6) Rent paid by Walt Disney Corporation to finance all other U.N. activities.

2002-04-18: Does it matter that George W. Bush is dumb and lazy? Recall his trip to Japan last February--the one where he momentarily destabilized the foreign exchange market by saying that Japanese Prime Minister Koizumi had stressed the "devaluation issue" (instead of "deflation issue"), and recalled the "century and a half"-long U.S. Japanese alliance (skipping over that little unpleasantness between 1941 and 1945: he was supposed to say "half a century"). Anyone who has ever given an exam will recognize these mistakes: they are the typical mistakes made by a student who has had too good a time during the semester, and hasn't cracked the books at all until the week before the exam. These are mistakes you literally cannot make unless you are kind of hazy about when World War II happened, and haven't yet firmly formed distinct neural pathways associated with each of the economic concepts you are supposed to know. Remember the White House lawn press conferences in the week after September 11--the ones in which Bush kept saying "the leader of Pakistan" because he could not yet recall that Pakistan's dictator is named Pervez Musharraf.

Defenders of Bush say that the fact that he is a slow study with a weak general knowledge base who doesn't crack the books too hard and doesn't think too fast doesn't matter. Why not? Because Bush has smart people to do his thinking for him: Condi Rice, Colin Powell, Donald Rumsfeld, Paul Wolfowitz, et cetera. In Bush's own words, "My job isn't to try to nuance. My job is to tell people what I think. And when I think there's an axis of evil, I say it. I think moral clarity is important..." Once the President has given his people clear moral clarity as to what the important things are, they will have their marching orders, and good policies will emerge.

The first problem with this is that the President's words are actions, and should be considered actions. If you have a potential adversary that you are trying to isolate--Iraq--and if its largest neighbor Iran hates Iraq more than it hates you, you should not pop up and in your State of the Union address say that Iraq, Iran, and North Korea are an "axis of evil." That instantly gives the country you are trying to isolate two new allies. There would be substantial benefits to having a President smart enough to know, while his State of the Union address was being written, that Iraq, Iran, and North Korea were not an "axis"--an alliance--of any sort. And there would be substantial benefits to having a President who would think far enough ahead to consider whether his State-of-the-Union rhetoric might make his diplomats' task of isolating Iraq needlessly harder.

The second, and more important, problem is that even the smartest group of subordinates will not generally produce good policy out of their mutual tug-of-war. You need somebody at the top smart enough to harmonize--to have a policy of his or her own into which the talents of subordinates can be fit. If you don't have a smart boss, then decisions about the views of which subordinate should prevail on which issue are made randomly as the boss chooses one over another on a case-by-case basis for no good reason. What emerges is not a policy, but an incoherent mishmash.

Thus Colin Powell tries to isolate Iraq through diplomacy. Karl Rove drafting the State-of-the-Union address wins Iraq two new allies--one of which, Iran, hated Iraq more than anything else up until the State-of-the-Union address gave them powerful interests in common. Colin Powell persuades Bush to call for Israeli withdrawal from the West Bank. Donald Rumsfeld blocks Bush's words from being backed by any deeds to put more than verbal pressure on Ariel Sharon. Karl Rove pushes the nice rhetorical line that the sponsors of terror are as guility of it and are as much enemies of the United States as the terrorists themselves. Donald Rumsfeld points out that the Saudis who financed Al-Qaeda and who finance Hamas today are necessary allies in any campaign against Iraq.

The net result? No one, anywhere in the world, has any idea of what American policy actually is. No one, anywhere in the world, thinks that they can trust American words to be backed up by American deeds. Neoconservatives like Michael Kelly try to assure us that this is all part of some deep, cunning plan. But it isn't. It is the inevitable result of having a dumb boss. Smart subordinates with different views of the world then play tug of war with the dumb boss in the middle, and the result is total chaos.

2002-04-17: April Industrial Production Statistical Release

In March industrial production in the American economy grew by 0.7%. At the pace of growth of the first three months of 2002, industrial production next December would be fully 6% higher than industrial production last December. This industrial production rise is the latest in a series of pieces of news that the U.S. economic recovery is on track, and that when the National Bureau of Economic Research's Business Cycle Dating Committee makes its decision, it will call the end of the recession as coming last December, only a month after they met to decide that the recession had begun in March of 2001.

Of the four key indicators of the state of the business cycle--incomes, sales, production, and employment--only employment is still signalling a possible continuation of the recession. Incomes never went through a period of decline at all. Sales growth since 911 has been strong. And the past three months have seen industrial production reverse the slide it began in June of 2000. Only employment continues to be flat, refusing to grow.

Why is employment sending a different signal? Because just recently, after stalling throughout the entire year of 2001 as the unemployment rate rose, President George W. Bush agreed to extend the duration of unemployment benefits for 13 weeks to cushion the impact of the recession on those among the unemployed who are having difficulty finding jobs. But whenever you extend unemployment benefits, you virtually guarantee yourself a half-a-percentage-point rise in the unemployment rate relative to its underlying trend: with longer benefits, people will take more time to find their next job. This may be a good thing (producing better matches between firms and workers) and this may be a bad thing (reducing total social welfare). But it is definitely a thing. President George H. W. Bush, after stalling throughout the entire year of 1991 as the unemployment rate rose, finally agreed to extend unemployment benefits at the start of 1992. He thus guaranteed himself bad unemployment news throughout the presidential primary season in spite of what appeared then and appears now to be a healthy recovery otherwise.

So why did President George W. Bush stall on extending unemployment benefits throughout 2001? Why did he agree to extend them only after what looks like the trough of the recession has passed? I can't understand it.

2002-04-17: Dear Mr. Gutenberg...

From: Nis Jasper Nicolaisen <jnicolaisen@gmx.de>
To: nettime-l@bbs.thing.net
Subject: <nettime> killing gutenberg
Sender: nettime-l-request@bbs.thing.net
Reply-To: Nis Jasper Nicolaisen <jnicolaisen@gmx.de>

Dear Mr.Gutenberg,

everybody's talking about your rotating press right now and what major
changes it's gonna bring in the way we write, read and even think.
But frankly, I don't see the point.

We've had words before, haven't we ? We even had an alphabet to write them
down.I have written thousands of letters in the course of my life and I'm proud
to say I've read almost ten books besides the bible.

So what's gonna change just because we're gonna have books produced faster
and in larger numbers ? Putting language in another form and distributing it
in another way doesn't change what can be said with it - or at least that's
what I think! Books are and will continue to be only for those trusted by
god with leading humankind - the church and the nobles, mainly.Why should books
be made available for the simpler folks, anyway ?

And how many books can one single human being read in his life anyway - 10 ?
20 maybe? That's just the way it is.That's human nature, and human nature
can't be changed.It's eternal.It's not subject to social and technological

And what good can printed books do anyway ? They certainly won't change the
world.The rich and the mighty are going to buy all your printing presses and
tell all the poor and supressed what to think - just like they've always
done.With the printing press, you've just invented another means for the ruling
classes to rule. In my opinion, the humble peasant would have a greater chance
to free himself from the bonds of slavery if he wasn't occupied with reading
all the time and having his mind poisioned by the lies of kings and popes and
the likes (I've borrowed the term 'ruling class' from a nice book I've
recently read).

So words are words and pictures are pictures and humans are humans and we've
all seen that before.Why print all of it again ? Just to make YOU rich,
Mr.Gutenberg ?

a thoughtful contemporary

P.S: : Is there any way for me to have this letter printed ? I'd like to use
the possibilities of the new media to spread my opinions about why they
won't do any good to anyone.


Jude Wanniski: September 11 Was the Fault of the Jews Department

If you [Mortimer Zuckerman] had agreed to meet with Min. Farrakhan when I begged you to, three years ago I think, perhaps you would have been able to persuade your colleagues [in the Jewish media conspiracy who control coverage of Israel] to shift gears enough to give the Arab/Islamic world some hope on Middle East matters. And 9-11 might not have happened.

Cornel West: No Comment Department

"Larry Summers strikes me as the Ariel Sharon of American higher education. He struck me very much as a bull in a china shop, and as a bully, in a very delicate and dangerous situation.... Professors do not have supervisors, brother. Professors are free agents to do their work, because there is a trust in their judgment about how they go about doing that work."

Alexander Cockburn: A Two-Fer Department

Certainly, there are a number of stories sloshing around the news now that have raised discussions of Israel and of the posture of American Jews to an acrid level. The purveyor of anthrax may have been a former government scientist, Jewish, with a record of baiting a colleague of Arab origins, and with the intent to blame the anthrax on Muslim terrorists. Rocketing around the web and spilling into the press are many stories about Israeli spies in America at the time of 9/11. On various accounts, they were trailing [Mohammed] Atta and his associates, knew what was going to happen but did nothing about it.... Some, posing as art students have been expelled, according to AP...


And on the topic of the New York Times, have you noticed how that great paper has had front page pieces rubbishing the Catholic Church as a nest of molesters every day for some time, especially since Sharon invaded Ramallah. The uncharitable could see this as a pre-emptive strike against Papal criticism of Israel's actions, and also a means to shift attention away from the blood-stained molestations of the adherents of one of the other monotheistic religions...

2002-04-13: Tax Day. I don't know how much taxes I owe for calendar year 2001 because I haven't finished doing them yet. However, I can look back at calendar year 2000--a highly prosperous year for the DeLong-Marciarille household--and calculate that that year we paid $91,400 in taxes: $43,700 in federal income taxes, $23,400 in federal social security and medicare taxes, $12,600 in state income taxes, $8,200 in local property taxes, and $3,500 in state sales taxes. At this point, here on the world wide web, I am supposed to rant about how this--heavy--tax burden is an unsustainable burden, an oppressive violation of my natural rights, crushing the spirit out of America's creative and entrepreneurial minorities, reducing us to a nation of ingenious tax cheats on the one hand and those desperate for a suck on the government teat on the other.

I say, "Bull****!"

From my perspective, my taxes are well-spent--a way of buying a lot of very important things I could never get any other way.

First, of course, is external security. 18% of federal government spending goes to defense and international affairs. Only sixty years ago you could count all the democracies in the world without taking off either of your shoes. Only sixty years ago, however, you could argue that this did not matter: the Atlantic and Pacific Oceans made the United States automatically secure by making invasion logistically impossible. Today--in this era of nuclear, chemical, and biological weapons, of airliners turned into kamikaze missiles, of dictators and others fearful of democracy, of free speech, and of female education--no one (save perhaps the High Politicans of the Bush Administration before September 11) believes that the U.S. can "disengage" from the pursuit of democracy, prosperity, and peace anywhere in the world. Foreign aid, the institutions of global economic management, and most of all the U.S. military are, from my perspective, extremely good investments funded by my tax dollars.

Second is internal security. We tend to think that our overwhelmingly civil, overwhelmingly peaceful, low-crime (by historical standards) and secure-property civilization is natural. But it isn't. As Alexander Jablokov wrote in his novel _Carve the Sky_, civilizations--spaces and times where houses have large exterior windows, and where valuable possessions are not carefully hidden--are hard work to build and maintain: "'Do you think our civilization exists by accident? Your house at Fresh Pond.... It exists because something else doesn't. Fresh Pond could be covered with pavement, and you could live in a mile-high tower. You could fight on its shore in blasted ruins for ancient cans of preserved beef.... These are all choices. Each benefits someone. Each displeases or oppresses someone else.' Anton didn't try to argue the point that a world of blasted ruins benefited someone. He'd met people who would have been perfectly suited for such a world." Our laws, our courts, our police, and most of all our democracy itself are items of extraordinary value bought by our taxes. They are worth our lives, our fortunes, and our sacred honor. To have to pay only a small part of our incomes for them is an extraordinary bargain. And we do pay a small amount: the administration of justice is usually included in the residual "other" category when government spending's components are set out.

The only piece of federal spending I begrudge is the 11% of federal spending that is interst on the national debt--the legacy left us by Ronald Reagan's Administration, and its extraordinary botch of fiscal policy.

Then comes the meat and fish of the government: social security--accounting for 23% of federal government spending--medicare, medicaid--health accounts for 19% of federal government spending--veterans' administration and the other social insurance programs--"income security" makes up 11% of federal government spending. The other 18% of federal spending and state and local spending give me a great deal: we get Burton Valley Elementary School; roads, traffic lights, bridges, and tunnels; the National Science Foundation, the National Institutes of Health, the Center for Disease Control, the Advanced Research Projects Administration, and the National Institutes of Science and Technology; the National Park Service. If the government simply provided external and internal security alone, I would think it a bargain. That it throws in Yosemite, Yellowstoned, the Grand Tetons, Sequoia, Point Reyes, and the Grand Canyon too closes the deal.

It is easy to convince yourself that one-third of government spending is wasted. I, at least, also find it easy to convince myself that the other two-thirds of government spending buy capabilities and accomplishments that the private market--which, remember, could not exist at all without the institutional underpinnings provided by the government--could never provide at all.

So I look at the $91,000, look at what I get back from the government, and think, "What an amazing deal!"

Of course, if you can find someone else willing to pay my share, so that I can keep my $91,000, have 'em give me a call...

2002-04-12: The broad universe of commentators and economists is still somewhat divided on what the medium-term future holds. Writers like Julie Kosterlitz of the _National Journal_ talk of how growth in the late 1990s was unsustainably fast because of the NASDAQ bubble. Nobel Prize-winning economist Joe Stiglitz talks of how there must be "real restructuring" because of the "capital overhang" produced by excessive investment that has created "overcapacity," and how the "real restructuring takes time."

By contrast, the smaller slice of economic forecasters have reached near consensus that the next decade of productivity growth is much more likely to see a continuation of recent trends than a renewed productivity slowdown. In their near-consensus analysis, the information technology revolution has driven rapid productivity growth because of the interaction of three factors. First, technological progress in and price declines of information technology capital goods have been extremely rapid. Second, the share of spending on adding to the information technology capital stock took an upward leap in the 1990s, and a higher spending share coupled with lower prices accelerated the pace of growth of the real information technology capital stock. Third, the share of total income attributable to the returns on the existing information technology capital stock jumped as well, which meant that the faster pace of growth of the information technology capital stock produced even faster growth in labor productivity. The effect of the ongoing technological revolution is proportional to the strength of these three factors multiplied together. And growth accelerated because all three of these factors took an upward leap in the 1990s.

The belief that the future will see rapid productivity growth is built on this quantitative foundation. The speed of growth can decline, in this near-consensus analysis, only if there is (a) a medium-term decline in the pace of the information technology revolution, (b) a decline in the share of total expenditure devoted to information technology goods, or (c) a decline in the share of total income attributable to the higher productivity made possible by information technology. The near-consensus analysis sees no sign of a decline in any of these three facts. And this implies, in standard economic growth models, that the future will be like the recent fast-growth past.

Moreover, there are four jokers in the deck: four things that could well make the future even brighter than the past since 1995...

The course of U.S. productivity growth during the recent recession is yet another piece of evidence that the productivity growth future looks bright. Usually recessions see falling productivity: firms hoard labor they cannot use productively now so as to have a pool of trained workers when demand picks up, and the pressure to find ways to economize on resources to expand capacity is absent in times of slack demand. But the 2001 recession saw productivity in the American economy rise. Consider the fourth quarter of 2001, in which hours worked in the U.S. economy fell at an annual rate of 3.3 percent. But in that quarter production rose at an annual rate of 1.7 percent, and productivity rose at an annual rate of 5.0 percent.

If you are a politician in office, such growth lets you score political points by saying that there was never a recession at all (never mind that the U.S. economy has shed so many jobs over the past year). But to an economist interested in forecasting more than the next three month's statistics, it suggests something much more interesting--that the process of automation and investment in information technology that fueled such rapid real wage and production growth in the late nineties is still going on under the surface even in the depth of the recession, even when businesses are under no immediate pressure to boost their capacity. This suggests that the underlying computer-driven productivity growth trend is rapid indeed.

There is, however, one significant puzzle confronting those who (like me) believe in optimistic scenarios about future productivity growth. If the information technology revolution is such a transformative technology, where is the accleration of productivity growth in western Europe? To this question, there are four answers: The first is that the premise is wrong, and that the U.S. is experiencing a short cyclically-related boost to output rather than a long-run upward shift in the rate of productivity growth. The second is that western Europe's productivity miracle is coming, but that processes of economic diffusion take time, and that one should not expect diffusion immediately to regions more remote in space and social distance from Silicon Valley. The third--Alan Greenspan's favorite--is that businesses will be motivate to move to more efficient computer-intensive modes of organization only when they see cost savings from doing so, that in Europe businesses by and large see neither the possibility increasing profits through cost saving nor the possibility of increasing profits through expanding production, and hence thorough-going neoliberal reform is necessary before Europe's economies can reap large aggregate benefits. The fourth is that it is not rigid labor markets and slack demand per se that account for the slow spread of the information technology revolution throughout Europe, but instead a failure of governments to cut their red tape. On the periphery of western Europe from Ireland to Finland, after all, the information technology revolution is doing just fine.

I do not have the answer to this puzzle. But it must be answered and answered correctly, if western Europe is to have as bright a productivity growth future as America seems to have right now.

2004-04-12: Productivity Discrepancies: The rate of measured economic productivity growth in the United States accelerated from 1.5 percent per year over 1990 to 1995 to 2.5 percent per year over 1995 to 2000. Or did it? Official productivity statistics are fundamentally based on the "production" side of the national income and product accounts. But there is another, "income" side of the national income and product accounts that is also used to measure economic growth. The "production" and "income" sides should tell the same story: a few technical adjustments aside, they are supposed to be identical by design. Their difference is the "statistical discrepancy"--a measure of the extent to which the two sets of measurements of what is supposed to be the same thing disagree. And this statistical discrepancy grows large in the late 1990s.

Suppose you look not at the production but at the income side. You find that the acceleration of economic growth is considerably faster. The acceleration of economic growth from 1990-1995 to 1995-2000 is not 1.0 but 1.6 percentage points per year. That means that the "new economy" is more than half again as large by the income-side measurements as by the product-side measurements. That means that today the U.S. economy is some 3.6% bigger according to the income side than it is according to the product side.

This large statistical discrepancy is unprecedented. Before 1995 the income and product side measures tended to run remarkably in harness.

Which of the two measures gives the correct picture of what was going on in the second half of the 1990s? I don't know. Neither does anybody else that I know. Martin Baily, who taught me all this, recommends splitting the difference between the two measures. That seems to me to be a good thing to do.

2002-04-12: I'm going to be on Nightly Business Report--90 seconds, which means 180 words, provided that the words are not big ones like "sesquipedalian." When I write, I have a very hard time writing anything less than 4000 words or so. When I talk, I have a very hard time figuring out how to compress what I need to say into less than 20 minutes. I find it an extraordinary, extraordinary trial to try to get anything down to the 800 words or so needed for a standard opinion-editorial without feeling that what I have written is either hopelessly simplistic, biased, or platitudinous. So how can I possibly figure out what to say that is worth saying in 90 seconds? Even my question to Rich Ivry was 230 words long, and that was just a question--not an attempt to provide an answer as well.

I have to find something that is (a) short, (b) interesting, (c) accurate, and (d) complete--I really don't want to become one of those people who pollutes the public discourse by sending half-truths out into the media stream. At the moment, however, I just have one idea: to talk about the fact that productivity growth has held up remarkably strongly in the 2001 recession, and the implications of that fact for growth over the next decade.

"Read the newspaper, listen to the TV, and it's hard to avoid the impression that the 'New Economy' of the nineties was grossly oversold. The crash of the NASDAQ and the dot-com bankruptcies demonstrated that a lot of late-nineties investment was socially-wasted fluff. The recession of 2001 showed that U.S. growth was not bound for the stratosphere.

"But if you hang out with the professional forecasters and builders of economic models, you hear a very different story. They are impressed by how small the recession of 2001 has been in terms of lost output, how rapid productivity growth has been throughout the recession, and they are expecting the next decade to look a lot more like the fast-growth second half of the nineties than like earlier periods of slow productivity and real wage growth. Consider the fourth quarter of 2001, in which hours worked in the U.S. economy fell at an annual rate of 3.3 percent. In a normal recession--a recession like those we have typically had since 1973--you would have expected such a steep fall in hours to be accompanied by an even steeper fall in production, for productivity typically falls when unemployment rises sharply and hours worked crash. But in the fourth quarter of 2001, production did not fall. Instead, it rose at an annual rate of 1.7 percent.

"If you are a politician in office, like Treasury Secretary O'Neill, this growth in fourth-quarter production lets you score political points by saying that there was never a recession at all (never mind that the U.S. economy has shed two million net jobs over the past year). But if you are an economist interested in forecasting more than the next three month's statistics, it suggests something much more interesting--that the process of automation and investment in information technology that fueled such rapid real wage and production growth in the late nineties is still going on under the surface even in the depth of the recession, even when businesses are under no immediate pressure to boost their capacity. This suggests that the underlying computer-driven productivity growth trend is rapid indeed.

2002-04-11: Over the past decade or so, the Journal of Economic Perspectives--the American Economic Association journal that I help edit, with Alan Krueger as boss--has been slowly working its gaze around the world, publishing mini-symposia on different countries and regions: Mexico, eastern europe, China, India. Now it is the turn of the Middle East, and because of the terror-attack-atrocity-destruction of the World Trade Center on September 11, there is more than the usual concern and urgency about getting this mini-symposium right. So what should American Economic Association members read in this symposium about the economies of the Middle East, and who should we at the Journal of Economic Perspectives try to persuade to contribute to it?

Suppose we think of four articles, at about 7000 words each...

One, clearly, has to be about oil (or "uhl un gaz", as we used to say in the Bentsen Treasury Department). How the price and quantity of oil exports are set, the implications of OPEC and other influences on the well-being of oil importing countries, and the success (or lack of it) of the oil-rich Middle Eastern nations in transforming their oil wealth into human capital-based wealth and industrial wealth are all subjects that this paper should deal with.

A second, clearly, has to be about diasporas: Pakistanis to the Persian Gulf, Palestinians to the refugee camps, Jews from the old Jewish Quarters of Damascus, Baghdad, and Cairo to Israel, Russian Jews to Israel. The Middle East is shaped to a large degree by these guestworker and refugee migrations, and these stories seem to me to be unusual enough and interesting enough to warrant a paper of their own.

A third, perhaps, should be about blockages to development in Middle Eastern countries where oil does not flow like water: Jordan, Syria, Egypt, Pakistan, perhaps Iran and Iraq. Why is it, exactly, that their growth is so slow? Why are they so poor? What are the prospects for reform? What maintains a wealth-destroying configuration of political power and economic control long after it has become obvious that it is not just not useful but positively dangerous to the long-run survival of the political elite?

And perhaps a fourth paper should be on a harder, more sociological topic. A rapidly-growing population in the process of moving from small-scale villages to large-scale cities, facing poverty, facing a lack of avenues for upward mobility, facing a highly corrupt elite which has little justification to offer for its dominant position--in past generations, we would have said that such a population is ripe for exploitation by Communist or Fascist or Nazi ideologues, and that we could expect a political explosion. But since the Iranian Revolution of 1979 it has become clear that these old ideologies are dead, and that the ideological core around which class warfare against the rich may take hold will have religious foundations. How do these processes work? What are we likely to see in the future?

I'm not sure that these are the right four articles to commission. I do think that they are four interesting articles. But I have no idea who to turn to to try to get them written...

2002-04-11: A milestone: my web site visited by more than 5000 different computers in one day (plus whoever accessed the cached pages maintained by AOL and others, and never showed up on my site

2002-04-11: A question that I asked Rich Ivry, Director of Bekeley's Institute of Cognitive and Brain Sciences, over lunch:

"Back when I was 17, on my high school's team for the local metropolitican area quiz-show jeopardy analogue, I learned quickly that success required two things. First, you had to maintain constant pressure on the buzzer so that only the tinyest finger movement, a tenth of an inch or so, was necessary to activate the buzzer that would halt the reading of the question and give you the opportunity to answer. Second, you wanted to press the buzzer not when you knew the answer, but when you thought that the next word in the question would give you enough information to answer the question.

"During the quiz show, I could feel--I could sense--I could know--the time interval between the instant I had decided to press the buzzer and when the buzzer sounded, and I could feel--I could sense--I could know--the time interval between when the buzzer sounded and when the host stopped reading the question. Yet during my daily life I am not conscious of these time intervals. I believe that my body instantaneously does whatever I command it to do, rather than that my brain is always 1/20 or 1/10 of a second behind.

"How is it possible that I have this illusion of living in the present, rather than a fraction of a second in the past, in my normal daily life? Given that I have this illusion, how come I could override it back when I was playing 'It's Academic'?"

Rich responded that there is indeed evidence that the processed sensory input we respond to does indeed anticipate the future. Show someone a movie of a galloping horse, cut it off in mid-sequence, show them a bunch of frames, and ask them what was the last frace they saw, and people are highly likely to point to a frame that they in fact did *not* see, that was later than the last movie frame they actually saw...

Things to Read Next:


2002-04-10: Tim O'Reilly: "Inventing the Future": the future is here; it's just not well-distributed yet...

Tim O'Reilly writes:

"The future is here. It's just not evenly distributed yet." I recently came across that quote from science-fiction writer William Gibson, and I've been repeating it ever since. So often, signs of the future are all around us, but it isn't until much later that most of the world realizes their significance. Meanwhile, the innovators who are busy inventing that future live in a world of their own. They see and act on premises not yet apparent to others. In the computer industry, these are the folks I affectionately call "the alpha geeks," the hackers who have such mastery of their tools that they "roll their own" when existing products don't give them what they need. The alpha geeks are often a few years ahead of their time. They see the potential in existing technology, and push the envelope to get a little (or a lot) more out of it than its original creators intended. They are comfortable with new tools, and good at combining them to get unexpected results.

What we do at O'Reilly is watch these folks, learn from them, and try to spread the word by writing down (or helping them write down) what they've learned and then publishing it in books or online. We also organize conferences and hackathons at which they can meet face to face, and do advocacy to get wider notice for the most important and most overlooked ideas.

So, what am I seeing today that I think the world will be writing about (and the venture capitalists and entrepreneurs chasing) in the years to come?

All of these things come together into what I'm calling "the emergent Internet operating system." The facilities being pioneered by thousands of individual hackers and entrepreneurs will, without question, be integrated into a standardized platform that enables a next generation of applications. (This is the theme of our Emerging Technologies conference in Santa Clara May 13-16, "Building the Internet Operating System.") The question is, who will own that platform?...

Let's take Web services as an example. Microsoft recently announced they hadn't figured out a business model for Web services, and were slowing down their ambitious plans for building for-pay services. Meanwhile, the hackers, who don't worry too much about business models, but just try to find the shortest path to where they are going, are building "unauthorized" Web services by the thousands.

Spiders (programs which download pages automatically for purposes ranging from general search engines to specialized shopping comparison services to market research) are really a first-generation Web service, built from the outside in.... There are now dozens of Amazon rank spiders that will help authors keep track of their book's Amazon rank. We have a very powerful one at O'Reilly that provides many insights valuable to our business that are not available in the standard Amazon interface. It allows us to summarize and study things like pricing by publisher and topic, rank trends by publisher and topic over a two-year period, correlation between pricing and popularity, relative market share of publishers in each technology area, and so on. We combine this data with other data gleaned from Google link counts on technology sites, traffic trends on newsgroups, and other Internet data, to provide insights into tech trends that far outstrip what's available from traditional market research firms.... There are numerous services that keep track of eBay auctions for interested bidders. Hackers interested in the stock market have built their own tools for tracking pricing trends and program trading. The list goes on and on, an underground data economy in which Web sites are extended by outsiders to provide services that their owners didn't conceive.

Right now, these services are mostly built with brute force, using a technique referred to as "screen scraping." A program masquerading as a Web browser downloads a Web page, uses pattern matching to find the data it wants, keeps that, and throws the rest away. And because it's a program, not a person, the operation is repeated, perhaps thousands of times a minute, until all the desired data is in hand.

For example, every three hours, amaBooks, our publishing market research spider, downloads information about thousands of computer books from Amazon...

2002-04-10: One of the nice things about the internet is that there are people out there prepared to act as my personal physics trainer...

rich@theculture.org wrote:

I think our models of stellar structure are very good, especially now that the solar neutrino shortfall has probably been cleared up...

jsb0027@unt.edu wrote:

In a good way? Or in a WE-HAVE-300-YEARS way?

rich@theculture.org wrote:

In a WE-HAVE-300-YEARS way. That's why I'm not panicking yet - three centuries is a long timescale for a disaster.

Seriously, it looks like the shortfall in the detection of solar neutrinos might be because of "neutrino mixing". The reactions in the Sun produce electron neutrinos and our detectors only detect that type of neutrino and not muon or tau neutrinos. However, now that we know that neutrinos have mass we know that "oscillations" which convert one neutrino type into the others as they travel across the space between the Sun and Earth might well be possible. I seem to recall hearing that such oscillations have been found and exactly account for the discrepancies between the predicted neutrino production and the number detected.

jbdelong@uclink.berkeley.edu wrote:

<tentatively raises hand> Ummm... Perfesser? I know you are going to say that the question I am about to ask is nonsensical, and is a reflection of my failure to rinse classical conceptions of reality out of my mind, but...

When an electron-neutrino changes into a muon-neutrino, what kinds of particles or energies are absorbed? And when a muon-neutrino changes into an electron neutrino, what kinds of particles or energies are emitted? I mean, an electron neutrino has a mass of 7 x 10^(-9) GeV/(c^2), right? And a muon neutrino has a mass of 3 x 10^(-4) GeV/(c^2), right? One can't change into the other and back again without a bunch of other interesting things happening, right Perfesser?

rich@theculture.org wrote:

That's a good question. I guess I'm going to have to explain neutrino oscillations in a bit more detail. I'll forget about tau neutrinos for the moment because the same sort of ideas apply but it's a little more complicated to explain with three types. The key idea is that it's misleading to think about "electron-neutrinos" and "muon-neutrinos" as separate types of particle. Instead, we should think of them as "lepton number eigenstates" of a single particle, the neutrino. This is analogous to the way we view spin-up electrons and spin-down electrons as different spin eigenstates of an electron. Similarly, we should think of the "low mass eigenstate" and the "high mass eigenstate" of the neutrino.

If there wasn't any neutrino mixing then a neutrino in the low mass eigenstate would also be in the electron-neutrino eigenstate and the high mass eigenstate would also be in the muon-neutrino eigenstate. Thus, saying the neutrino is an electron-neutrino and saying it has such-and-such a mass would be the same thing, as would be saying it's a\ muon-neutrino and saying it has such-and-such a higher mass. However, if there is neutrino mixing then these statements aren't equivalent. If we grab a neutrino that's definitely an electron-neutrino and measure its mass we find it has a large probability of having a low mass and a small probability of having a high mass. Similarly, if we measure the mass of a particular neutrino and find it has a low mass then it has a high probability of being an electron-neutrino and a low probability of being a muon-neutrino. Similar statements apply to the muon-neutrino and high-mass eigenstates. Saying that the electron-neutrino has a certain mass and the muon-neutrino has a different mass isn't an exact statement. The best we can do is say that on average electron-neutrinos have a particular mass and on average muon-neutrinos have a different mass.

Now, in quantum mechanics it's the energy (or mass) eigenstates that drive the time development of states. Particles that are in an energy eigenstate will stay in that state forever. However, if we look at particles that aren't in energy eigenstates, we find that their properties change with time. For our neutrinos, we find that if we start in an electron-neutrino eigenstate then the probability of being found in that eigenstate at a later time varies periodically (with a period that depends on the difference in the two masses) - hence "neutrino oscillations". As it take a while for the neutrinos to travel from the Sun to the Earth, oscillations can occur and so they have a probability of changing their lepton-number by the time they arrive.

How does all this fit with energy conservation? The answer is that just as we can't know the position and momentum of a particle exactly at the same time, we can't know the lepton number and the mass of a neutrino at the same time. In the case of solar neutrinos, we know that the neutrinos are being created in the sun as electron-neutrinos, but we thus can't say what the mass of the neutrinos created in the Sun is with arbitrary accuracy. Mass-energy is still being conserved, but there are various amplitudes for it being distributed among the reaction products in different ways.

(In the Standard Model the same thing happens for quarks - the weak interaction eigenstates are not the same as the mass eigenstate. Google for "Kobayashi-Maskawa mixing" if you're interested.)

Not that I fully understand what he said at any deep level, however...

2002-04-09: Dealing with Robert Skidelsky.

I wrote a review of the third volume of Robert Skidelsky's John Maynard Keynes biography, _John Maynard Keynes, 1937-1946: Fighting for Britain_, for the _Journal of Economic Literature_. I thought that I was writing a favorable review: "...finest biography of an economist that I have ever read... third volume... not quite...up to its predecessors...still a superb book...wit, charm, control, scope, and enthusiasm. You read these books and you knew Keynes... Skidelsky’s greatest achievements... Skidelsky is superb... Skidelsky is also superb... Skidelsky skillfully recreates the milieu... a few places in _Fighting For Britain_ where Skidelsky seems to me to lose his way... on this terrain Skidelsky is less at home, and his touch is less sure... claims are overstatements.... These blemishes do not greatly mar [Skidelsky's] achievement... amazingly well-constructed narrative... magnificent portraits of Keynes and his age... skill and care with which Skidelsky has drawn his portraits is breathtaking.... We are all deeply, deeply in his debt."

Skidelsky does not seem to agree that I was writing a favorable review.

The American edition of _John Maynard Keynes, 1937-1946_ has a newly-added preface, the relevant parts of which* read:

...Britain and America spent much of the war jockeying for post-war position. The battleground of this war was finance. I have called it 'Keynes's War' to distinguish it from 'Churchill's War'--because without Lend-Lease Britain could not have fought Churchill's War, and financial negotiations with the United States took up most of Keynes's time from 1941 till his death in 1946. The plot of this war was simple: America tried to get the highest price, Britain to pay the lowest price, for lend-lease.... It was as natural for the United States to use its wartime financial leverage to weaken Britain as a financial and commercial rival as it was for the British to try to minimise or evade the strings attached to American help. But it is not easy to get this message across, first because it shatters the myth of the United front against evil, secondly, becasue Americans tend to believe that their nation is uniquely idealistic, and therefore exempt from calculation of self-interest.

In a bold pre-emptive strike, the American economist Bradford DeLong has posted a rejoinder to my theme on his home Web page (www.j-bradford-delong.net). Essentially he denies or minimises the existence of wartime economic conflict between Britain and the United States.... DeLong's technique of refutation leaves much to be desired. He seems to think that I accuse America of having provided Britain with such 'niggardly' lend-lease help that it destroyed Britain as a great power. He refutes this by saying that even had the United States paid for the whole of Britain's wartime import surplus, Britain would have been too weak to have become the post-war leader of the western alliance. The proposition he attributes to me is nowhere to be found in this book, and the counterargument is therefore irrelevant.

What I do say is that the United States demanded that in return for lend-lease Britain pledge itself to abandon its imperial preference and sterling area systems, and that the way Washington managed the flow of lend-lease supplies had the effect, and possibly the intention, of leaving Britain dependent on US help after the war on whatever terms America chose to impose. Rather than deal with this argument, DeLong simply sets up an Aunt Sally to knock down.

DeLong claims that I widen the differences between the Keynes and White plans for post-war monetary reconstruction 'to an immense gulf' in order to dramatise the conflict between the two sides, whereas he is struck by the 'extraordinary similarities between the two plans'.... But... Keynes's Clearing Bank was, in effect, to be the central manager of global aggregate demand... White's IMF was conceived as a modest monetary add-on to a revamped gold standard. This was not a trivial technical disagreement..... The triumph of the White Plan... might well have led back to the 'bloc economics' and trade and currency wars of the 1930s had not the United States, starting with Marshall Aid, pumped large quantities of extra spending power into the 'free' world economy for geopolitical reasons.... In 1940, it was British vulnerability which threw it into the arms of the United States. America did not fail its fellow-democracy; but also used the occasion to settle old scores, and secure pole position in the post-war international order...

First--this 'Churchill's War', 'Keynes's War' business. 50 million people died in Churchill's (actually Hitler's) War. Zero people died in Keynes's War. To use the same word--war--for both is, in my view, a significant error: Hitler's War was a real war. Keynes's War was a metaphorical war. It's important to maintain distinctions between metaphor and reality, and not to elide them. Second, Skidelsky claims that I misrepresent him when I say that he "accuse[s] America of having provided Britain with such 'niggardly' lend-lease help that it destroyed Britain as a great power" and on the next page writes of how the United States used World War II to "...settle old scores [with Britain], and secure pole position in the post-war international order." Surely this is a difference of degree only?

Third, when I as an economist call something "technical" I am not calling it "trivial"... But why go on? Someone who makes sure to underline that the Marshall Plan was undertaken "for geopolitical reasons" reveals ignorance of American motivations.** A richer and more productive Britain after World War II would have been a better trading partner for America--as well as a better intermediate bulwark against Stalin. For Skidelsky to claim even implicitly that only "geopolitical reasons" impelled American post-WWII aid to make Britain grow faster reveals a misapprehension of what Truman, Marshall, Acheson, Vandenberg, and company were about: in their view (and mine) America tries to do good, and does well thereby. It's as false to reality to characterize the motivations behind the Marshall Plan as simply "geopolitical" as to characterize them as simply "altruistic."

And by the time one has made sure to put scare quotes around the "free" in "free world" to indicate that the post-WWII U.S. Atlantic Alliance was the "so-called free world" or the "not really free world" or the "world the Americans insist that we call free, and we have no choice but to humor them"--by this time one has passed out of reasonable argument and into silly anti-Americanism. And--face it--there is such a strain in Skidelsky. But--as I wrote in my review--it does not greatly mar what is a truly great work.

Moreover, I think Skidelsky, at bottom, agrees with me that he got the balance of his biography wrong in his theme of mourning how Keynes lost 'Keynes's War' against America and so lost for Britain "both Empire and greatness." The opening of the American edition strikes a very different note from the opening of the British edition. In the opening to the British edition Keynes, fighting for Britain, "fought to preserve Britain as a great power against the United States." In the opening to the American edition, he is fighting for something else. The beginning of the new preface reads:

'Fighting for Freedom' is a better subtitle for the American edition of this book than is its British subtitle 'Fighting for Britain'. It identifies the supreme value for which both Britain and the United States fought. The victory of freedom--requiring the defeat of Hitler's Germany and, a little later, Imperial Japan--was the overriding war aim of the Anglo-American alliance forged in the Second World War. Keynes fully accepted this, and all his actions have to be seen in that context.

For there is one other difference between the British and the American editions of volume III: the American edition has a new title: _John Maynard Keynes, 1937-1946: Fighting for Freedom_. John Maynard Keynes is no longer fighting a 'war' against America on behalf of British imperial power. Instead, he is--in his own sphere--fighting the real war against Hitler for freedom for the world, and fighting to win the peace as well by successfully building an institutional framework that gave the world economy the fastest generation of economic growth it has ever experienced. This is a much better cause for Keynes to fight for. This is a much better description of what was really going on. So I am very, very pleased by Robert Skidelsky's change of his book's title.

*The Entire Preface is:

'Fighting for Freedom' is a better subtitle for the American edition of this book than is its British subtitle, 'Fighting for Britain'. It identifies the supreme value for which both Britain and the United States fought. The victory of freedom--requiring the defeat of Hitler's Germany and, a little later, Imperial Japan--was the overriding war aim of the Anglo-American alliance forged in the Second World War. Keynes fully accepted this, and all his actions have to be seen in that context.

The British subtitle was designed to remind readers of something else: that national interests do not disappear just because the cause is noble. Britain and America spent much of the war jockeying for post-war position. The battleground of this war was finance. I have called it 'Keynes's War' to distinguish it from 'Churchill's War'--because without Lend-Lease Britain could not have fought Churchill's War, and financial negotiations with the United States took up most of Keynes's time from 1941 till his death in 1946. The plot of this war was simple: America tried to get the highest price, Britain to pay the lowest price, for lend-lease. Keynes summed up this British 'war aim' in a nutshell: 'the retention by us of enough assets to leave us capable of independent action'.

The novelty of my treatment is to place this financial 'war' in the foreground of my narrative, the military war in the background. This seems to be only right, inasmuch as this is a biography of Keynes, not of Churchill. It does not mean that I regard Keynes's War as important as Churchill's War. To say that Britain paid a much higher price than did the United States for victory over Hitler does not mean that it would not have paid an even higher price had it lost.

American readers might be shocked by the revelation in these pages of the bitterness of Anglo-American rivalry. They should not be. Commercial and financial conflict had embittered relations between the two countries in the 1930s, with each one blaming the other for breakdown of the world economy. It was as natural for the United States to use its wartime financial leverage to weaken Britain as a financial and commercial rival as it was for the British to try to minimise or evade the strings attached to American help. But it is not easy to get this message across, first because it shatters the myth of the United front against evil, secondly, becasue Americans tend to believe that their nation is uniquely idealistic, and therefore exempt from calculation of self-interest.

In a bold pre-emptive strike, the American economist Bradford DeLong has posted a rejoinder to my theme on his home Web page (www.j-bradford-delong.net). Essentially he denies or minimises the existence of wartime economic conflict between Britain and the United States. That I argue to the contrary must be due to the fact that I am not an economist, or that I have fallen 'under the influence of a strange and sinister sect of British imperial conservatives...'

DeLong's technique of refutation leaves much to be desired. He seems to think that I accuse America of having provided Britain with such 'niggardly' lend-lease help that it destroyed Britain as a great power. He refutes this by saying that even had the United States paid for the whole of Britain's wartime import surplus, Britain would have been too weak to have become the post-war leader of the western alliance. The proposition he attributes to me is nowhere to be found in thi sbook, and the counterargument is therefore irrelevant.

What I do say is that the United States demanded that in return for lend-lease Britain pledge itself to abandon its imperial preference and sterling area systems, and that the way Washington managed the flow of lend-lease supplies had the effect, and possibly the intention, of leaving Britain dependent on US help after the war on whatever terms America chose to impose. Rather than deal with this argument, DeLong simply sets up an Aunt Sally to knock down.

DeLong claims that I widen the differences between the Keynes and White plans for post-war monetary reconstruction 'to an immense gulf' in order to dramatise the conflict between the two sides, whereas he is struck by the 'extraordinary similarities between the two plans'. He quotes me as writing on p. 245: 'The White and Keynes Plans were based on different concepts... loans out of subscribed capital... [or] overdrafts [created] out of nothing...' But this was Keynes's own view of the essential difference between the two schemes (p. 250-1).

Keynes's Clearing Union was based on his theory of liquidity preference. In a global trading economy mass unemployment, he thought, resulted from the propensity of some countries--particularly the United States--to hoard their surpluses, which forced deflation on the defict countries, leading to a contractionary global spiral. The Keynes Plan was designed to prevent such an outcome by forcing adjustment on surplus countries. Countrieds which accumulated surplus balances would be forced to accept bancor' cheques in payment for their unrequited exports, ie., to accept money created by the global monetary authority as payment for exports which they did not match by corresponding imports. By contrast, the White Plan upheld the orthodox doctrine of debtor adjustment, an d aimed to provide only modest help to deficit countries whilst they put their houses in order. In due course they would be required to contract their demand for imports or to sell more exports in competition with those from surplus countries. Keynes believed that this would not check any pressure towards global recession.

Keynes's Clearing Bank was, in effect, to be the central manager of global aggregate demand, varying the supply of 'bancor' according to the demand for it; White's IMF was conceived as a modest monetary add-on to a revamped gold standard.

This was not a trivial technical disagreement. Keynes and the British Treasury thought that adoption of something like the British Plan was an essential condition of Britain's acceptance of a post-war liberal economic order. That is why they fought so hard for it. The triumph of the White Plan led Keynes back to the view that responsibility for full employment would inevitably remain national, not global. He insisted on inserting into the Bretton Woods agreement clauses which exempted member countries from IMF rules for a prolonged, and potentially indefinite, 'transition' period. This might well have led back to the 'bloc economics' and trade and currency wars of the 1930s had not the United States, starting with Marshall Aid, pumped large quantities of extra spending power into the 'free' world economy for geopolitical reasons.

To be reminded of the realities of alliance politics, even in the case of such close partners as Britain and the United States, is timely in the aftermath of the tragic events of 11 September, when the United States is working to construct a global coalition against terrorism. In 1940, it was British vulnerability which threw it into the arms of the United States. America did not fail its fellow-democracy; but also used the occasion to settle old scores, and secure pole position in the post-war international order. Today, the United States, faced with an unexpected vulnerability, calls in the Old World to redress the balance of the New. It, too, will have to pay a price for victory, though it will not be as high a price as Britain paid.

Keynes was an economist, thinker, and writer or genius who developed the theories he thought the times demanded. During the Second World War, propelled by events onto the field of action, he fought for the British position within the Anglo-American Alliance as a patriot, and, with eloquence and imagination of the highest quality, conjured up a post-war economic order which could combine full employment with liberty. These are the culminating themes of this biography.

**Since the inauguration of Franklin Roosevelt, that is. Hoover Administration economic policy--for example the Smoot-Hawley tariff--was motivated by different, more mercantilist principles.

2002-04-08: Where I Grew Up:

The federal government had strong evidence 15 years ago of possible buried chemical weapons and dangerous ground contamination... but failed then and in subsequent years to fully investigate the threat.... At one site, a former testing trench on Sedgwick Street, city officials are studying reports of unusual deaths and illnesses -- including aplastic anemia -- among residents.... The Army did not publicly reveal the existence of the 1986 analysis until 1993, after chemical munitions were accidentally uncovered in Spring Valley. The Army's failure to notify the District and neighbors in 1986 violated federal laws and military regulations, an internal Army audit concluded in 1995, according to documents obtained by The Washington Post.

Notifying the city and residents might have caused "potential economic as well as political and social consequences, such as diminished property values, community uproar and fear," according to the audit. "Maybe it wasn't the best decision, but it was the one we made," said Lewis Walker, the deputy assistant secretary of the Army who oversaw the 1986 investigation.

Documents and interviews further show that the Army Corps of Engineers and the EPA found elevated levels of arsenic in some soil after the 1993 discovery. But both agencies concluded that no cleanup was needed.... The Corps of Engineers returned in 1999 at the city's insistence... New findings continue to surface, including seven bottles containing lewisite or mustard -- both deadly chemical agents developed during World War I -- that the Army dug up last week in a yard on Glenbrook Road. The chemicals were still toxic.... Hundreds of toxic substances, including mustard gas, lewisite, cyanide phosgene and arsenic, were developed or tested over several hundred acres by more than 1,200 chemists and engineers.... "Permission was given to go far back on the university acres, to dig a pit . . . bury the munitions there, and cover them up to wait until the elements shall melt with fervent heat."... The Army did not relate its conclusion to city officials, residents or a development company building homes in Spring Valley.... In January 1999, the Corps of Engineers began excavating the new site: the South Korean ambassador's property on Glenbrook Road. More than two years later, it remains a wasteland. Extremely high levels of arsenic found there and at the home next door were just the first in a series of disturbing discoveries....

4840 Glenbrook Rd., N.W., Washington, DC

2002-04-07: Things Worse Than You Ever Imagined:

The Lord of the Rings: The Novelization
© Joe Crowe

The Lord of the Rings: Fellowship of the Ring
A Novel by Alan Kevin J.M. Salvatore-Foster-Stevens

Based on the Major Motion Picture From New Line Cinema
Adapted from the Screenplay by Peter Jackson, Fran Walsh, and Philippa Boyen
Adapted from the book by J.R.R. Tolkien
Excerpted by Joe Crowe for RevolutionSF by kind permission of the publisher, Broma House

Chapter the Third

Gandalf was back in town, it seemed, the hobbit Lumbertoe Proudfoot thought, as he rode by on his wagon with Frodo Baggins the hobbit boy. He gave him a scowl, a dirty look, because he was not happy to see him. Not happy to see him at all.

He thought of the last time he had seen Gandalf, when he had taken his son Edgewood on an adventure to the Forest of Darkness. His son mysteriously vanished, Gandalf had said. Or had he?

The hobbit children were all playing hobbit games until they saw Gandalf ride up on his wagon, which was pulled by a donkey. The children all liked Gandalf, because he had a pointy hat and fireworks. They ran after him, hollering "Gandalf!"

Then more children joined them, hollering "Gandalf!"
"Gandalf!" another child, young Billysmart Gamgee, yelled. What would his big brother think if he saw him yelling, Billysmart thought.

"Gandalf! Gandalf!" all the children said together, and they all chased him down the dusty trail, their hairy feet kicking up more dust.

But he did not stop, nor did he even say hello. Was Gandalf mad at them? Did they do something wrong, the children wondered?

Then out of the back of the wagon, fireworks went off. A little shower of them, going "Bing! Bang! Bing ka-boom!" and it made the kids happy. They knew Gandalf was not mad at them, and that made them happy. So did the fireworks.

Lumbertoe saw the kids being happy, and he could not help but smile. Then his wife, the she-hobbit Appleroot Stumptoe-Proudfoot, came out and saw Lumbertoe smiling at Gandalf.

Appleroot disapproved, and it made her mad to see Lumbertoe smiling at Gandalf. So Lumbertoe stopped smiling.

But he didn't stop thinking.

What if he could find Edgewood, his son? What if he sneaked out after Bilbo Baggins' party tonight, and went to find him on his own? Yes, he could do that, he thought. After all, it's not like he hadn't been on adventures before. He thought back to that time at the Prancing Pony. So many years ago... and what was that gorgeous elf's name?

Ah, yes.... Arwen.

Chapter the 37th

Arwen was on her horse, with Frodo, dying, in the saddle in front of her. It was a white horse. The Nazgul chased her, and chased her, and chased her. They chased her across plains, and past trees, and up and down hills. They went through the woods, but she still outran them. Her horse was fast. She knew she had to hurry, or her little friend Frodo would be dead.

Finally, she arrived at a stream. Her horse crossed it, clippity-clop, splash, clippity-clop, splash, splash. She could feel the breath of the Nazgul upon her neck, and it reminded her of Aragorn, but in a bad way.

Finally, she wheeled around on her horse. The Nazgul started to cross the stream, but drew back, as if they were afraid of water. Arwen drew her mighty sword, and held it before her. It was a mighty sword, she thought, mighty enough to cut someone if she had to.

"If you want him," she hollered, "Come and claim him!"

All of the Nazgul drew their mighty swords.

One of them yelled, "I'll cut you, bitch!"

Then the Nazgul started crossing the stream! Arwen thought, "I have to think of something, but what?"

Ah! Then she remembered -- she would use her power! Her power of hydrokinesis -- the ability to make water appear and do whatever you wanted it to do.

Summoning up her mental will, she looked down at the stream, and it started filling up with water! Then she looked up, and lots of water, a flood of it, started pouring down the river!

With a smirk, she made the water take the form of giant, wet horses as it hurtled down the river toward the Nazgul.

As the water reached them, and flowed over them, the Nazgul and their horses, black as midnight, were all swirled away as if by a rushing flood.

"I guess they're all wet, eh, Frodo?" Arwen laughed.

But Frodo felt like he was going to die. He was very sick. He had been stabbed. It hurt. Who was this woman with the funny ears, he wondered. All he could think about was how he had been stabbed. And he felt like he was fading away, and like he was very sick.

"We've got to get you to Dad! He'll know what to do!" Arwen shouted, and hurled Frodo on the back of her white horse.

"To Rivendell -- AWAY!!!" Arwen hollered, and her horse listened to her, because she was a kind mistress to him.

2002-04-07: What I would like to have on my laptop: a list...

2002-04-06: While Cleaning Out My Clippings File I Found:

From: "Peter G. Stillman" <stillman@vassar.edu>

...My wife and I found a live -- and vivant -- post-modern existentialist, or, rather, existential post-modernist, near the Universite de Montpellier last summer. Lost, we approached a traffic officer in a roundabout. My wife, pointing to the map in the red Michelin: "Monsieur, nous sommes perdus."

The officer, after a short pause: "Ah, Madame. Tous les hommes sont perdus."

Then, my wife told him where we wished to go -- an inn about three kilometres away.

And he said (I don't remember his exact French): "Madame, it is as difficult for me to direct you there as for me to tell you how to go from Paris to Marseille in a single sentence. There are too many possibilities, too many turns, too many ways." Then, like a modernist, he pointed out which road we should follow out of the roundabout.

We drove off -- geographically going in the correct direction, but ontologically completely befuddled.

GCU Savoire Fair

2002-04-05: NBER Macroeconomics Annual Conference, April 5-6, 2002, Mark Gertler and Ken Rogoff, organizers:


Kraay and Ventura

J. Bradford DeLong

Jim Stock and Mark Watson

Charles Engel

Alberto Alesina, Robert Barro, and Silvana Tenreyro

2002-04-03: The Eccles Building: The Heart of Technocracy:

Marriner Eccles: "... by monetary means exercised promptly and courageously we can greatly mitigate the worst evils of inflation and deflation..." "The management of the central bank must be absolutely free from the dangers of control by politics and by private interests, singly or combined..."

Since the start of the New Deal, considered in historical perspective, the Federal Reserve has been magnificently successful as a technocratic institution.

2002-04-03: Mughal Emperors:

Zahir-ud-din Babar 1525-1530
Muhammad Humayun 1530-1556
Jalal-ud-din Akbar 1556-1605
Salim Jehangir 1605-1627
Khurram Shah Jehan 1627-1658 (deposed) 1666 (died)
Aurangzeb Alamgir 1658-1707
Muazzam Shah Alam I Bahadur Shah I 1707-1712
Jahandir Shah 1712-1713
Farrukhsiyar 1713-1719
Rafi-ud-Darajat 1719
Nekusiyar 1719
Shah Jehan II 1719
Muhammad Ibrahim 1719-1720
Muhammad Shah 1720-1748
Ahmad Shah 1748-1754
Alamgir II 1754-1759
Shah Alam II 1759-1806
Akbar Shah II 1806-1837
Bahadur Shah Zafar II 1837-1858 (deposed) 1862 (died)

The later Mughals look even worse than the Wars of the Roses. Do children have to memorize all the reign dates?

2002-04-02: Questions About India

Thank you very much for your long and very insightful critique of the paper I did for Dani's "growth theory meets reality" conference. India is on my mind these days because we at the _Journal of Economic Perspectives_ are trying to edit our forthcoming India symposium (Ahluwalia on the past reform decade, Ravallion and Datt on poverty trends, and Tirthankar Roy on the long sweep of history). (Indeed, I have Roy's _Economic history_ and Gunchuran Das's _India Unbound_ on my bedside table right now.) Yet the more I think and learn, the less I think I know and understand about Indian economic development. There are fundamental and basic questions about which I am totally clueless.

For example:

(1) If relatively small reforms in the past decade and a half moving economic policies a few steps in a neoliberal direction have doubled the growth rate of Indian productivity, why was Indian growth so slow under the British Raj's largely classical policies back before 1947? (Roy seems to propose a four-part explanation: (i) extremely low net savings rates, (ii) next to no financial system to channel capital from savers to investors, (iii) astonishingly low rates of schooling, (iv) immense burdens from the rapid population growth produced by a delayed demographic transition, and (v) barriers to entrepreneurship, adjustment, and knowledge transmission produced by caste in the broadest possible sense--the most important barrier of which divided the Britain-born segment of the Ksatriya from the rest of the India-resident population.)

(2) The failure of state governments within India to imitate policies adopted by their neighbors that have proved successful. Kerala sticks out like a healthy thumb along many dimensions. I would think that in any election-based political system the campaign slogan "they did it in Kerala, we can do it here if only we throw the rascals out" would be unstoppable.

(3) How to divide the acceleration of growth in the 1980s, before the exchange rate crisis, into (i) beneficial effects of minor reforms that nevertheless raised potential output by improving (static) efficiency, (ii) beneficial effects of minor reforms that made it possible to greatly increase the efficiency of investment, and (iii) unsustainable increases in production above potential output that were the source of macroeconomic instability.

(4) The causes of the extraordinary divergence in state-level reforms in the 1990s.

(5) Whether India's pre-1990 performance should be taken as par for the course--about normal for a "developing" country, or whether India had sufficient unique advantages in 1947--political democracy, a large upper class literate in the world's leading technical language of English, effective rule of law, a competent civil service, and so forth--that its growth should have exploded thereafter, and only policies that turned out to be an order of magnitude more malign than those usually found could hold it back.

(6) Is it appropriate to call one of the leading currents in Indian politics today "fascism with an Indian face"--if fascism can be used as an analytical term rather than a term of abuse. Specifically, if one goes back to the foundation of European fascism around World War I, one finds:

--a glorification of the ethno-nation
--a belief that the ethno-nation will realize its glorious destiny only if it has strong leaders to follow
--contempt for the redistributive politics of parliaments dominated by interest groups.
--contempt for the "cretinism of parliaments" in general
--a belief that the ethno-nation not only should, but must band together because it has powerful enemies.

There is (or used to be) a strand in the political science literature that blamed the growth of this current of political thought in Europe on the stresses produced by rapid urbanization and industrialization--as all that's solid melts into air, an assertion of group identity with the ethno-nation and a search for a leader to make sense of it all becomes overwhelming.

(7) Given the extraordinary and visible benefits of the past decade or so of reform, how is it that the pace of reform remains so slow? I mean, where is the Coase theorem when you really need it?

(8) A deeper question: Europeans with state-of-the-art ships appear off the seas of India in the first quarter of the sixteenth century. Mongol-Turks with state-of-the-art firearms and tactics cross the Indus in the first quarter of the sixteenth century as well. At that moment the relative race for technology and organization between the European and the Muslim ekumenoi hangs in the balance: Mehmet II does, after all, employ the world's largest and most advanced cannon in the conquest of Constantinople in 1453. For the folllowing two centuries--until perhaps 1650--the Ottomans are regularly able to muster and supply armies and fleets that are larger and at least as technologically advanced and well-disciplined as their Spanish, Italian, Hungarian, and German adversaries.

Babur's army and tactics overwhelm Delhi Sultanate armies from five to ten times their size, and at a time when the Portuguese are barely able to hold on to Goa the Mughal Empire secures the entire Indo-Gangetic plain. Yet in spite of their (largely) alien religion and (largely) alien language, the Mughal cadres seem to leave little lasting impact. And two centuries later, as the struggle of the Mughal diadochi for the corpse of the Empire begins, it is armies trained by Europeans that have the advantage in organization, supply, and discipline, and that seem able to defeat enemy armies five to ten times their size...

Why the failure to keep up--indeed, why the loss--of Mughal social-organizational-capability?

(9) A naive macroeconomist looking at India's low tax yield and extremely high fiscal deficit would be really, really worried. If growth halts (for any reason) for three years, it seems likely to produce a loss of confidence, large scale capital flight, and a potential fiscal disaster of Argentine proportions. And if it then turns out that any substantial share of financial institutions or industrial corporations have debts that are effectively denominated in dollars, euros, yen, or pounds, then pandemonium... Would a not-naive macroeconomist who knows something about Indian institutions be really, really worried about the current situation too?

Until I can come up with half-convincing answers to these nine questions, I won't think that I understand India at all...

Sincerely yours,

Brad DeLong

2002-04-02: Indian Retail Politics:

>> I would think that in any election-based political system the campaign slogan "they
>>did it in Kerala, we can do it here if only we throw the rascals out" would be unstoppable.

I would think that too, and we'd both be wrong.


I am not joking, though I wish I were. The first time my father contested the elections [he lost], I went campaigning. Talked to people and here is a rough transcript:

X : The present MLA is so awful, he always treats us like dirt and does no work for us.
R : Then don't vote for him this time then
X : What difference does it make?
R : Vote for someone who would treat you like a person and would actually listen to you.
X : Nobody listens
R : If you vote out enough rascals, the rest would have to listen, wouldn't they?
X : Yes, but if he finds out...
R : Tai, it is a secret ballot system. No one will find out and you can say anything when asked whom you voted for..
X : Yeah....that is true...

At this point, I remember feeling a warm, golden glow. Then,

X : But....
R : But?
X : He is from my caste..how can I let him down?
R : He let you all down. And you said he is rude and unpleasant when you go to meet him.
X : Yes. But he is so nice just before elections..
R : Wouldn't it be better to have a neta who is nice all the time?
X : Yes, but that is impossible
R : Not at all
X: <laughing> You are an idealist, you dream weird dreams...

10 days, 20 villages, innumerable conversations - they were all the same. Go figure.So then I told them stories of how we won our independence and what that means and what their vote means and how careful use of this power allows them to control their future. A decade later, today, some of them don't laugh out loud when I start talking of politicians actually listening to people's grievances and addressing them. I am still not sure if caste still outweighs these considerations though - I plan to ask the next time I go over.