Coates, Cohen and Krugman

Bobo is off today, and we have Ta-Nehisi Coates as a guest columnist.  Mr. Coates has a question:  “Could Obama choose a man whose police tactics are determined by skin color?  Mr. Cohen is in Sarajevo.  In “Enough of the Daytonians,” he says in Bosnia, the time has come to move past division and denial.  In “Hitting China’s Wall” Prof. Krugman says all the signs coming from the economic data show that China is in big trouble.  Here’s Mr. Coates:

In 2003, State Senator Barack Obama spearheaded a bill through the Illinois legislature that sought to put the clamps on racial profiling. Obama called racial profiling “morally objectionable,” “bad police practice” and a method that mainly served to “humiliate individuals and foster contempt in communities of color.”

Obama was not simply speaking abstractly. In his 2006 book “The Audacity of Hope,” the future president wrote that he could “recite the usual litany of petty slights” directed at him because of his skin color, including being profiled by the police. “I know what it’s like to have people tell me I can’t do something because of my color,” he wrote. “And I know the bitter swill of swallowed-back anger.” That same bitterness probably compelled Obama, as president, to speak out after Prof. Henry Louis Gates of Harvard was arrested, and to famously note last year, “If I had a son, he’d look like Trayvon.”

That is why it is hard to comprehend the thinking that compelled the president, in a week like this, to flirt with the possibility of inviting the New York City Police Commissioner, Ray Kelly, the proprietor of the largest local racial profiling operation in the country, into his cabinet.

Kelly’s name has been floated by New York politicians of both parties as the ideal replacement for Janet Napolitano, who resigned last week. The president responded by calling Kelly “well-qualified” and an “outstanding leader in New York.” He sounded a pitch for bringing the commissioner into the White House’s fold.

“Mr. Kelly might be very happy where he is,” said the president. “But if he’s not, I’d want to know about it.”

There are some other things that the president should want to know about. Chief among them would be how his laudatory words for Kelly square with the commissioner’s practices and with the president’s deepest commitments.

The N.Y.P.D.’s stop-and-frisk program has been well-covered in this newspaper and elsewhere. It is now public knowledge that the police department, each year, stops hundreds of thousands of citizens, largely black and Latino men, for reasons as thin and subjective as “furtive movements.” Very few of those stops lead to actual charges, much less arrests, and according to the commissioner that’s fine.

“If you don’t run the risk of being stopped, you start carrying your gun, and you do things that people do with guns,” Kelly recently told The Wall Street Journal.

It’s certainly true that some number of people who are looking to carry guns will be less likely to if they know they are going to be searched. But Kelly’s formulation leaves out the hundreds of thousands of people who have no such intent and are simply unlucky enough to be caught in the wrong skin. Those unfortunates must simply pay the tax of societal skepticism.

The dragnet tactics don’t taper at the borders of black and brown communities. If anything, they expand. Last year, The Associated Press reported that the N.Y.P.D. has organized a network of agents and informants strictly for the purpose of spying on Muslim communities. The appropriately dubbed “Demographics Unit” has extended its reach along the Northeastern seaboard, sending informants to spy on Muslim rafting trips, mosques in Newark and Muslim organizations at Yale and the University of Pennsylvania. The Demographics Unit did not discriminate, at least among Muslims: second- and third-generation American citizens were subject to profiling. Despite this sprawling fishing expedition extending up the Atlantic coast, N.Y.P.D. officials admitted in a subsequent court case that the unit’s work had not yielded a single lead, much less the opening of an actual case.

It is often said that Obama’s left-wing critics fail to judge him by his actual words from his candidacy. But, in this case, the challenge before Obama is not in adhering to the principles of a radical Left, but of adhering to his own. It is President Obama’s attorney general who just this week painfully described the stain of being profiled. It was President Obama who so poignantly drew the direct line between himself and Trayvon Martin.

It was candidate Obama who in 2008 pledged to “ban racial profiling” on a federal level and work to have it prohibited on the state level. It was candidate Obama who told black people that if they voted they would get a new kind of politics. And it was State Senator Obama who understood that profiling was the antithesis of such politics. Those of us raising our boys in the wake of Trayvon, or beneath the eye of the Demographics Unit, cannot fathom how the president could forget this.

Next up we have Mr. Cohen:

Once upon a time there was an American-forged Balkan nation comprised of two entities, 10 cantons, a district and an overarching state where several hundred ministers presided over close to four million people but did little for them because preserving their privileges was a full-time job.

These ministers at the cantonal, entity, district and state levels were known as “Daytonians,” after an agreement reached in 1995 in Dayton, Ohio, that ended the bloodiest war in Europe since World War II. The accord stopped the killing but instituted an unworkable, many-layered political system whose chief beneficiaries were these fat-cat Daytonians and their hangers-on.

Every now and again somebody might ask if a small country needed 14 education ministers. The Daytonians responded in unison: “Of course it does!”

Somebody else might ask why the national anti-corruption agency was a complete joke, and would be told: “The European Union insisted on one, but, hey, why would we police our own perks?”

Daytonians came in various stripes: Bosnian Muslim (or Bosniak), Serb and Croat. They disagreed about many things and nursed bitter memories of a war that killed at least 100,000 people. But they agreed on the necessity of their self-perpetuation. They agreed that investigating the disappearance of hundreds of millions of dollars would be silly. They agreed on the need for political parties drawn on ethnic lines. They agreed on the efficacy of pre-election nationalist outbursts.

And so a failed system endured.

In the capital of Daytonland, on an avenue known during the war as “Sniper Alley,” the United States built a vast embassy resembling a high-security prison whose message to passers-by seemed to be: “America is under siege.”

One day in 2011 a radical Islamist opened fire on the embassy. He strolled around for 40 minutes shooting because nobody could decide if state or entity police or security forces should stop him.

Decision making in a land of entities — the very term was a reflection of disagreement on what to call the country’s component parts — is hard.

Inside the embassy, U.S. diplomats grew frustrated. Dayton was not supposed to be set in stone. It froze things at the worst moment of interethnic relations. It reflected the reality of 1995 but was no long-term basis to run a country. In fact it was designed to block a country. Still, it kept the peace.

Bosnians — facing high unemployment, rampant corruption, a venal judiciary and the need to join sectarian political parties to get a job in the state-run industries accounting for 60 percent of the economy — voted with their feet. They left for Düsseldorf. They headed for Detroit or St. Louis, where they could be plain “Bosnians,” not some ethnic subgroup.

Nobody was sure how many people remained in the country. A census was planned. It was unclear if it would happen. Numbers are political dynamite in a country where Daytonians depend on their ethnic majorities to dominate minorities.

The shadow of the war endured. Unidentified human remains were scattered through the valleys of the land. Serbs massacred many tens of thousands of Bosnian Muslims in the first six months of 1992 and another 8,000 at Srebrenica in 1995. Every week trucks passed the presidency loaded with coffins headed for burial. Just this month, 409 newly identified victims were buried near Srebrenica, 18 years after the killing.

Terrible crimes had happened here, not confined to one side, but perpetrated overwhelmingly by one side, the Serbs.

Still in the Serb entity, crucible of imagined victimhood, denial persisted. They funded efforts to deny the Srebrenica slaughter. They made a dumb effort to institute new identification numbers that would distinguish Serb babies from others — and thousands of people took to the streets to protest.

They dreamed of statehood, or union with Serbia, not noticing that in Serbia, a leading politician had talked of going down on his knees in shame at Srebrenica; not noticing that Serbia had negotiated an agreement with Kosovo; not understanding Serbia’s turn toward the European Union and away from the folly of Bosnia.

Young people grew impatient. They wanted to be Bosnians — not Bosniaks, or Serbs or Croats. They wanted to be citizens of their nation rather than ethnic pawns in Dayton’s blocked labyrinth.

At Srebrenica, in the Serb entity, a campaign began to register Muslims driven away from their homes, so they could vote. They did — and Camil Durakovic is now the young mayor of Srebrenica, working with a Serb deputy. Why stop there? The best answer to the Daytonians is to undercut the sectarian divide on which they thrive. Now the campaign has extended to registering all Muslims who fled the Serb entity and so change its warped politics.

In Bosnia the time has come to move beyond Dayton — not its peace (the great achievement of Richard Holbrooke) but the division and denial it has perpetuated.

And last but not least here’s Prof. Krugman:

All economic data are best viewed as a peculiarly boring genre of science fiction, but Chinese data are even more fictional than most. Add a secretive government, a controlled press, and the sheer size of the country, and it’s harder to figure out what’s really happening in China than it is in any other major economy.

Yet the signs are now unmistakable: China is in big trouble. We’re not talking about some minor setback along the way, but something more fundamental. The country’s whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be.

Start with the data, unreliable as they may be. What immediately jumps out at you when you compare China with almost any other economy, aside from its rapid growth, is the lopsided balance between consumption and investment. All successful economies devote part of their current income to investment rather than consumption, so as to expand their future ability to consume. China, however, seems to invest only to expand its future ability to invest even more. America, admittedly on the high side, devotes 70 percent of its gross domestic product to consumption; for China, the number is only half that high, while almost half of G.D.P. is invested.

How is that even possible? What keeps consumption so low, and how have the Chinese been able to invest so much without (until now) running into sharply diminishing returns? The answers are the subject of intense controversy. The story that makes the most sense to me, however, rests on an old insight by the economist W. Arthur Lewis, who argued that countries in the early stages of economic development typically have a small modern sector alongside a large traditional sector containing huge amounts of “surplus labor” — underemployed peasants making at best a marginal contribution to overall economic output.

The existence of this surplus labor, in turn, has two effects. First, for a while such countries can invest heavily in new factories, construction, and so on without running into diminishing returns, because they can keep drawing in new labor from the countryside. Second, competition from this reserve army of surplus labor keeps wages low even as the economy grows richer. Indeed, the main thing holding down Chinese consumption seems to be that Chinese families never see much of the income being generated by the country’s economic growth. Some of that income flows to a politically connected elite; but much of it simply stays bottled up in businesses, many of them state-owned enterprises.

It’s all very peculiar by our standards, but it worked for several decades. Now, however, China has hit the “Lewis point” — to put it crudely, it’s running out of surplus peasants.

That should be a good thing. Wages are rising; finally, ordinary Chinese are starting to share in the fruits of growth. But it also means that the Chinese economy is suddenly faced with the need for drastic “rebalancing” — the jargon phrase of the moment. Investment is now running into sharply diminishing returns and is going to drop drastically no matter what the government does; consumer spending must rise dramatically to take its place. The question is whether this can happen fast enough to avoid a nasty slump.

And the answer, increasingly, seems to be no. The need for rebalancing has been obvious for years, but China just kept putting off the necessary changes, instead boosting the economy by keeping the currency undervalued and flooding it with cheap credit. (Since someone is going to raise this issue: no, this bears very little resemblance to the Federal Reserve’s policies here.) These measures postponed the day of reckoning, but also ensured that this day would be even harder when it finally came. And now it has arrived.

How big a deal is this for the rest of us? At market values — which is what matters for the global outlook — China’s economy is still only modestly bigger than Japan’s; it’s around half the size of either the U.S. or the European Union. So it’s big but not huge, and, in ordinary times, the world could probably take China’s troubles in stride.

Unfortunately, these aren’t ordinary times: China is hitting its Lewis point at the same time that Western economies are going through their “Minsky moment,” the point when overextended private borrowers all try to pull back at the same time, and in so doing provoke a general slump. China’s new woes are the last thing the rest of us needed.

No doubt many readers are feeling some intellectual whiplash. Just the other day we were afraid of the Chinese. Now we’re afraid for them. But our situation has not improved.

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One Response to “Coates, Cohen and Krugman”

  1. Winston Herzog. Says:

    I’m curious why economists are intrigued by Chinese portrayals of events. Is it real estate moguls in the west are troubled by their losses? Is it the collapse of gold? Is it tied to the cyclical sci-fi horror story of oil supplies being shorter than it takes to send Voyager 1 to what Stephen Hawking claims is an Israeli settlement fundamentally at odds with the rich tradition of Islam and jihad? Or (aside) the recent threat to boycott Israel (no it is not Camp David’s mess this time) and its “occupation” of Texas, the Louisiana Land Purchase, Alaska, East Germany and South Vietnam. Or have I got my GPS turned on?

    How can MSFT make 4.x billion in the latest quarter while it writes down its tabla rosa? Less likely are Googles earnings. I think Google sent me some spam in my dreams. Forget NSA. At least they’re trying to protect rich Americans. Aren’t they? Therefore I am breathing.

    Well China. How’s that huge market for Treasuries doing fer ya? No Sarah Palin didn’t say that. She hasn’t been told to think it.

    What’s striking about Mr. Krugman’s analysis if that’s what guesswork is is that only now has it succumbed to its investment/consumption model. Or in the case of communists, strategy. Speaking of economics if u can’t ascertain with reasonable certainty what their data tells u than don’t drop the G word: GDP. I thought the answer to the poor grade in consumption/investment was their currency. Now we find out there are shadow banks. Where have I heard that before? I would avoid the surplus labor thesis and go to their failure to invest in their technology. Why all the spying? I suppose the alternative would be hard work. And we give them so much credit. When the Toyotas of the world expanded overseas in a place we call California and laughed GM and Saturn out of business they did it with their automation. Whatever happened to Cincinnati Milacron? It turns out that no nation is an island unto itself. No one peoples (+ outsourcing foreign nationals exempt from sequestration or Mexican laborers) can fix Humpty Dumpty anymore so than cheap labor in China. So how is America getting away with it albeit suffering a dose of its own medicine. By becoming immune to its own poisonous waste: Goldman Sachs. I submit that GS shoved the forward leasing Treasuries so far down China’s throat that word of Chang Kai-shek’s resurrection is being whispered far and wide in Yalta. Let’s take the bailout one step beyond the grave and think about what the bankers/traders on Wall Street could do or did do with the really itty bitty currency they were lent by the Treasury post subprime and Lehman? Think about it and use your deductive reasoning powers for good Superman.

    What I assume the end game is that the Chinese trade in our cheap money for debit. Wouldn’t that be a laugh. Enter Blankfein my friend. Don’t play for nothing.

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