Keller and Krugman

In “Diplomats and Dissidents” Mr. Keller says when it comes to human rights, the idealists are sometimes the real realists.  Prof. Krugman explains “Why We Regulate,” and says Jamie Dimon and JPMorgan Chase couldn’t make the reason clearer.  Here’s Mr. Keller:

Dissidents are heroic. They speak truth to power and challenge us to be better. They put human faces on the victims of abhorrent regimes. Their stories inspire the less brave.

Dissidents are difficult. They moralize. They don’t compromise. They don’t know when to shut up. They don’t see the Big Picture. All the qualities that made them dissidents in the first place can make them irritants to American diplomats who have important business to transact with countries that don’t share our values.

The case of the blind Chinese dissident Chen Guangcheng, which briefly wrought havoc in the U.S. embassy, is a good occasion to contemplate the perennial tension between our respect for human rights and our need to deal with undemocratic regimes on issues like nuclear proliferation, trade, counterterrorism and climate change. Our relationship with China is perhaps the hardest test out there, because it has an atrocious human rights record but holds the keys to the deadly puzzles of North Korea and Iran, not to mention America’s mortgage.

At this writing Chen’s situation seems to be mostly resolved. It is likely that he moves to America with his family, unlikely that he returns to China anytime soon, and unknown whether reprisals will befall the outspoken friends who helped his daring escape from provincial house arrest. Despite some bobbles — suggesting an eagerness to get this distraction out of the way before a big bilateral meeting — the Americans handled this diplomatic grenade reasonably well. But I hope the experience has not left them feeling that dissidents are more trouble than they’re worth.

The fault line on human rights is not partisan; both Republicans and Democrats have at times been torn by internecine dissension over whether to speak up or intervene when freedom is tormented in faraway places. Candidates who talk a good game on human rights often lose their enthusiasm when they have to actually govern. The real divide is between camps that are crudely labeled realists and idealists.

Groups like Human Rights Watch and Freedom House and Amnesty International and a legion of more specialized lobbies labor passionately to force human rights onto the official agenda. They argue that American interests are inseparable from American ideals, and that high-profile cases like Chen’s are not distractions but opportunities. Their job is to hold official feet to the fire, and they can sometimes seem as unbending as the dissidents they defend.

But the most expert of these advocates understand (at least when the microphones are off) that America operates in the real world: that our influence over the internal abuses of other countries is limited; that it’s easier to condemn a relatively inconsequential regime than one that provides us with oil or military bases; that humiliating leaders of countries like China may strengthen the hand of hard-liners; that sometimes quiet diplomacy is more effective than a public rebuke. They get all of that, but idealists believe a consistent, patient mix of pressures and incentives, public and private, can nudge an authoritarian regime in a civilized direction. “At the end of the day, no one likes to be an outcast,” said Nicholas Bequelin, who covers China for Human Rights Watch.

The realists, whose reigning philosopher is that master of realpolitik Henry Kissinger, counter that wrapping ourselves in human rights may play well for domestic audiences, but it impedes progress on vital issues, especially in the case of countries like China that put a premium on respect.

“The Chinese are very focused on issues of face,” said Kenneth Lieberthal, a China expert who worked in the Clinton administration and now is based at the Brookings Institution. “It’s very hard to be effective if you are very public.”

The realists are not necessarily indifferent. They argue that we can more effectively influence autocracies by exposing them to our values, and by setting a good example at home. Fair enough. But realists, who put a premium on nuance in dealing with countries like China, can be remarkably unnuanced on this subject. In a wicked takedown of Kissinger’s 2011 book, “On China,” Andrew Nathan, a China expert at Columbia, pointed out that in arguing against the elevation of human rights Kissinger combines “three fallacies: that the universality of international human rights is a matter of opinion rather than international law, that human rights equals American principles of governance, and that promoting human rights means holding hostage progress in all other areas.”

President Obama’s record on human rights is — like that of most of his predecessors — mixed. Bill Clinton intervened to stop genocide in Bosnia, but he had to be dragged there. George W. Bush made “the freedom agenda” a signature of his administration, but America’s moral authority was seriously compromised by the excesses of the war on terror. Obama has shown little interest in beaming his personal spotlight on prominent dissidents — the Dalai Lama, to cite one conspicuous snub. He was slow to hail the 2009 Green Revolution in Iran. And the silence on the crackdown in Bahrain, which provides us both oil and a naval base, is excruciating. (“The U.S. is to Bahrain as Russia is to Syria,” one activist said, overstating an uncomfortable truth.) On the other hand, Obama has stopped American agencies from using torture; he has promoted Internet freedom; he sent special ops to pursue Joseph Kony, the crazed butcher of central Africa; he was cautious on the Arab Spring, but ultimately helped ease Mubarak toward the exit in Egypt and backed the opposition in Libya. Hillary Clinton’s speech embracing gay rights as a civilized international norm should be required listening — in North Carolina.

The first thing the U.S. did right in Chen’s case was to offer sanctuary. Given Chen’s prominence and bravery, this was an obvious call, but the Americans did not merely let him in, they smuggled him into the embassy past Chinese security, and promptly assembled a knowledgeable team to face the Chinese. It was a brazen show of what we stand for. When Chen declared his determination to stay in China, the State Department negotiated a truly extraordinary deal with the Chinese, including an understanding that he would be allowed to live his life more freely. (Whether the Chinese would have kept their side of the deal is an excellent question; we don’t know, because Chen changed his mind about staying.) The U.S. provided Chen with cellphones to keep in touch with supporters, and even to call in to a Congressional hearing — and in the face of American resolve, the Chinese let it all happen.

A couple of factors favored Chen. The Chinese Foreign Ministry, which seems to have won an internal debate with security services over his fate, had some potent arguments in favor of playing good cop. For one thing, local authorities who flouted Chinese law could be blamed for Chen’s persecution. For another, sending Chen to America means good riddance to a defiant voice. (Although in the age of social media, it’s no longer clear that exile means irrelevance. Chen’s adventure has been a phenomenon on China’s version of Twitter, including wonderful pictures of ordinary Chinese paying silent tribute to the blind lawyer by posting photos of themselves in dark glasses.)

Kissinger’s disciples argue that we need to keep these individual dissident cases off the table, lest they lead to deadlock on weightier issues. But China also has an interest in those weightier issues. This time, they were willing to bend in order to prevent an embarrassing drama from getting in the way.

Professor Nathan says when the U.S. soft-pedals human rights, it reinforces the view of many Chinese that the United States is in decline, inviting miscalculation of our seriousness. The Chen case, on the contrary, illustrates that — sometimes — if we stand firm we can have our diplomacy and our self-respect. “It is good Kissinger realism,” Nathan told me, “to show yourself to be strong in support of your own values.”

Now here’s Prof. Krugman:

One of the characters in the classic 1939 film “Stagecoach” is a banker named Gatewood who lectures his captive audience on the evils of big government, especially bank regulation — “As if we bankers don’t know how to run our own banks!” he exclaims. As the film progresses, we learn that Gatewood is in fact skipping town with a satchel full of embezzled cash.

As far as we know, Jamie Dimon, the chairman and C.E.O. of JPMorgan Chase, isn’t planning anything similar. He has, however, been fond of giving Gatewood-like speeches about how he and his colleagues know what they’re doing, and don’t need the government looking over their shoulders. So there’s a large heap of poetic justice — and a major policy lesson — in JPMorgan’s shock announcement that it somehow managed to lose $2 billion in a failed bit of financial wheeling-dealing.

Just to be clear, businessmen are human — although the lords of finance have a tendency to forget that — and they make money-losing mistakes all the time. That in itself is no reason for the government to get involved. But banks are special, because the risks they take are borne, in large part, by taxpayers and the economy as a whole. And what JPMorgan has just demonstrated is that even supposedly smart bankers must be sharply limited in the kinds of risk they’re allowed to take on.

Why, exactly, are banks special? Because history tells us that banking is and always has been subject to occasional destructive “panics,” which can wreak havoc with the economy as a whole. Current right-wing mythology has it that bad banking is always the result of government intervention, whether from the Federal Reserve or meddling liberals in Congress. In fact, however, Gilded Age America — a land with minimal government and no Fed — was subject to panics roughly once every six years. And some of these panics inflicted major economic losses.

So what can be done? In the 1930s, after the mother of all banking panics, we arrived at a workable solution, involving both guarantees and oversight. On one side, the scope for panic was limited via government-backed deposit insurance; on the other, banks were subject to regulations intended to keep them from abusing the privileged status they derived from deposit insurance, which is in effect a government guarantee of their debts. Most notably, banks with government-guaranteed deposits weren’t allowed to engage in the often risky speculation characteristic of investment banks like Lehman Brothers.

This system gave us half a century of relative financial stability. Eventually, however, the lessons of history were forgotten. New forms of banking without government guarantees proliferated, while both conventional and newfangled banks were allowed to take on ever-greater risks. Sure enough, we eventually suffered the 21st-century version of a Gilded Age banking panic, with terrible consequences.

It’s clear, then, that we need to restore the sorts of safeguards that gave us a couple of generations without major banking panics. It’s clear, that is, to everyone except bankers and the politicians they bankroll — for now that they have been bailed out, the bankers would of course like to go back to business as usual. Did I mention that Wall Street is giving vast sums to Mitt Romney, who has promised to repeal recent financial reforms?

Enter Mr. Dimon. JPMorgan, to its — and his — credit, managed to avoid many of the bad investments that brought other banks to their knees. This apparent demonstration of prudence has made Mr. Dimon the point man in Wall Street’s fight to delay, water down and/or repeal financial reform. He has been particularly vocal in his opposition to the so-called Volcker Rule, which would prevent banks with government-guaranteed deposits from engaging in “proprietary trading,” basically speculating with depositors’ money. Just trust us, the JPMorgan chief has in effect been saying; everything’s under control.

Apparently not.

What did JPMorgan actually do? As far as we can tell, it used the market for derivatives — complex financial instruments — to make a huge bet on the safety of corporate debt, something like the bets that the insurer A.I.G. made on housing debt a few years ago. The key point is not that the bet went bad; it is that institutions playing a key role in the financial system have no business making such bets, least of all when those institutions are backed by taxpayer guarantees.

For the moment Mr. Dimon seems chastened, even admitting that maybe the proponents of stronger regulation have a point. It probably won’t last; I expect Wall Street to be back to its usual arrogance within weeks if not days.

But the truth is that we’ve just seen an object demonstration of why Wall Street does, in fact, need to be regulated. Thank you, Mr. Dimon.

Jamie Dimon may not have an actual satchel full of cash, but I’ll bet the farm that his compensation package constitutes several satchels…

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