Brooks, Cohen and Krugman

In “The Autocracy Challenge” Bobo gurgles that President Obama laid out his approach to dealing with aggressive autocratic rulers this week, but his vision is ill-suited for the challenge.  In the comments “craig geary” from Redlands, FL had this to say: “Once more we have a Times writer, who has never worn a uniform, never been to war, telling us more war is the solution. His party is full of the same, Viet Nam draft dodgers, National Guard avoiders, preaching perpetual war. With other peoples children. Cowards, to a man, talking tough.”  Mr. Cohen considers “Capitalism Eating Its Own Children” and tells us about a central banker who laments the market fundamentalism that breaks community and stirs mistrust.  In “Cutting Back on Carbon” Prof. Krugman says saving the planet would be a lot cheaper than you’d think.  Here’s Bobo:

It’s hard to remember, but back in the early 1990s there was a debate about how nations should emerge from Communism — the Russian way or the Chinese way. The Russians did political and economic reform together. The Chinese just did economic reform.

Reality doesn’t allow clean experiments, but the Chinese model has won in the court of public opinion. China’s success has given autocracy a legitimacy it lacked. In each of the past eight years, according to Freedom House, the number of countries that moved in an autocratic direction has outnumbered those that moved in a democratic one.

When you look at autocracies, you notice that many have undergone a similar life cycle. Autocrats may start out thinking they will be benevolent dictators. They may start out flirting with the West and talking about liberalizing reforms. But their regimes are almost always corrupt and inefficient. To stay on top, autocrats have to whip up nationalistic furies. They have to be aggressive in their regions to keep the country united on a permanent war footing. Unstable within, autocracies have to be radioactive abroad. Autocrats may start out claiming to be their country’s Deng Xiaoping, but they often end up more like Robert Mugabe.

Dealing with thuggish radioactive autocracies will probably be the great foreign policy challenge of the next decade. Aggressive autocratic rulers will challenge national borders and inflame regional rivalries. They will exacerbate ethnic tensions and gnaw at the world order. They have already made the world a more ornery place.

How will the United States respond? President Obama laid out his approach in a speech at West Point this week. He argued persuasively that the U.S. will have to do a lot more to mobilize democracies to take effective collective action against autocratic aggression. Moreover, his administration does champion democracy. On the same day Obama spoke, his ambassador to the United Nations, Samantha Power, gave a great commencement speech at Harvard’s Kennedy School of Government explaining why democracy promotion has to be at the core of American foreign policy.

But the president’s attitude seems to me in some ways ill-suited for the autocratic challenge. First, he might have the balance wrong between overreach and underreach. Perhaps drawing on the Iraq example, President Obama believes America’s problems have not been caused by too much restraint, but by overreach and hubris.

In the larger frame of history, this is a half-truth. In the 1920s and ’30s, for example, Americans were in a retrenching mood, like today. The result was a leaderless world, the gradual decay of the world order and eventually World War II.

As Robert Kagan shows in a brilliant essay in The New Republic, for the past 70 years, American policy makers have understood that underreach can lead to catastrophe, too. Presidents assertively tended the international garden so that small problems didn’t turn into big ones, even when core national interests were not at stake. In the 1990s, for example, President George H.W. Bush and President Clinton took military action roughly every 17 months to restrain dictators, spread democracy and preserve international norms.

This sort of forward-leaning interventionist garden-tending will be even more necessary in an age of assertive autocracies. If the U.S. restricts intervention to “core interests,” as Obama suggests, if it neglects constant garden-tending, the thugs will grab and grab and eventually there will be horrendous conflagrations. America’s assertive responses will not need to be military; they rarely will be. But they’ll need to be simple, strong acts of deterrence to preserve order. As Leon Wieseltier notes, if President Obama spoke in Kiev on his coming European trip, that alone would be an assertive gesture, like J.F.K. going to Berlin.

Second, President Obama underestimates how much the logic of force will remain central in the years ahead. It would be nice if autocrats thought in terms of international norms or according to the rational calculus of cost benefit analysis. But autocrats got where they are because they are primitives who perceive the world through the ancient calculus of power and force. What we perceive as prudence, they perceive as weakness. Absent clear and forceful counterpressure, they will cross red lines that the current or future president will have to enforce.

For most of the past 70 years, the U.S. had a two-level foreign policy. On top, American diplomats built multilateral coalitions to extend democracy. But at the bottom level, American presidents understood their responsibility as the world’s enforcer, occasionally operating according to the logic of menace and force.

If President Obama departs from that tradition and takes away that bottom level — for fear of overreach, or in a quest for normalcy, or out of an excessive belief in the limits of his own power — then he will undermine the top level that he admires. The autocrats will drag the world into an ungodly mess.

Now here’s Mr. Cohen:

Guildhall at the heart of the City can be a lulling sort of place after a long day. The statuary and vaulted timber ceiling of the medieval great hall lead the eye to wander and the mind to muse on Britain’s strangest quirk — its centuries of continuity. Grace is said, claret is served, glasses clink and dreaminess sets in. A keynote speech from a central banker is all that is required to complete the soporific effect.

Or so one would think, until Mark Carney, the Canadian governor of the Bank of England, lays into unfettered capitalism. “Just as any revolution eats its children,” he says, “unchecked market fundamentalism can devour the social capital essential for the long-term dynamism of capitalism itself.”

All ideologies, he continues, are prone to extremes. Belief in the power of the market entered “the realm of faith” before the 2008 meltdown. Market economies became market societies. They were characterized by “light-touch regulation” and “the belief that bubbles cannot be identified.”

Carney pulls no punches. Big banks were too big to fail, operating in a “heads-I-win-tails-you-lose bubble.” Benchmarks were rigged for personal gain. Equity markets blatantly favored “the technologically empowered over the retail investor.” Mistrust grew — and persists.

“Prosperity requires not just investment in economic capital, but investment in social capital,” Carney argues, having defined social capital as “the links, shared values and beliefs in a society which encourage individuals not only to take responsibility for themselves and their families but also to trust each other and work collaboratively to support each other.”

A stirring through the hall, a focusing of gazes — Carney has the attention of the chief executives, bankers and investors gathered here for a conference on “Inclusive Capitalism.” His bluntness reflects the fact that, six years after the crisis, the core problem has not gone away: The deep unease and anger in developed countries about the ways globalization and technology magnify returns for the super-rich, operating in a world of low taxation and lax regulation where short-term gain becomes a guiding principle, even as societies become more unequal, offering diminished opportunities to the young, less community and a growing sense of unfairness.

Anyone seeking the source of the anger behind populist movements in Europe and the United States (and the Piketty fever) need look no further than this. Anti-immigration, anti-Europe movements won in European elections because people feel cheated, worried about their children. As Bill Clinton noted a couple of hours before Carney’s speech, the first reaction of human beings who feel “insecure and under stress” is the urge to “hang with our own kind.” And the world’s greatest challenge is defining “the terms of our interdependence.”

There is still a tendency to think politicians must do this work of definition. But in Nobody’s World, driven by social media and global corporations, corporate leaders have more power to change things than elected officials. If short-termism prevails and the importance of social capital and community is dismissed, then anger will rise. Companies are not well served by boards that are too often, in the words of one participant, “male, stale and pale.”

Carney lays out the extent of the problem: “40 percent of recent graduates in U.S. are underemployed and youth unemployment is around 50 percent in the worst affected countries in the euro area.”

His prescription: End through strict regulation and resilience tests the scandal of too-big-to-fail, where “bankers made enormous sums” and “taxpayers picked up the tab for their failures.” Recreate fair and effective markets with real transparency and make every effort — through codes of conduct and even regulatory obligations — to instill a new integrity among traders (even if social capital cannot be contractual). Curtail compensation offering large bonuses for short-term returns; end the overvaluing of the present and the discounting of the future; ensure that “where problems of performance or risk management are pervasive,” bonuses are adjusted “for whole groups of employees.”

Above all, understand that, “The answers start from recognizing that financial capitalism is not an end in itself, but a means to promote investment, innovation, growth and prosperity. Banking is fundamentally about intermediation — connecting borrowers and savers in the real economy. In the run-up to the crisis, banking became about banks not businesses; transactions not relations; counterparties not clients.”

In other words, human beings matter. An age that has seen emergence from poverty on a massive scale in the developing world has been accompanied by the spread of a new poverty (of life and of expectations) in much of the developed world. Global convergence has occurred alongside internal divergence. Interdependence is a reality, but the way it works is skewed. Clinton noted that ants, bees, termites and humans have all survived through an unusual shared characteristic: They are cooperative forms of life. But it is precisely the loss at all levels of community, of social capital, that most threatens the world’s stability and future prosperity.

And now here’s Prof. Krugman:

Next week the Environmental Protection Agency is expected to announce new rules designed to limit global warming. Although we don’t know the details yet, anti-environmental groups are already predicting vast costs and economic doom. Don’t believe them. Everything we know suggests that we can achieve large reductions in greenhouse gas emissions at little cost to the economy.

Just ask the United States Chamber of Commerce.

O.K., that’s not the message the Chamber of Commerce was trying to deliver in the report it put out Wednesday. It clearly meant to convey the impression that the E.P.A.’s new rules would wreak havoc. But if you focus on the report’s content rather than its rhetoric, you discover that despite the chamber’s best efforts to spin things — as I’ll explain later, the report almost surely overstates the real cost of climate protection — the numbers are remarkably small.

Specifically, the report considers a carbon-reduction program that’s probably considerably more ambitious than we’re actually going to see, and it concludes that between now and 2030 the program would cost $50.2 billion in constant dollars per year. That’s supposed to sound like a big deal. Instead, if you know anything about the U.S. economy, it sounds like Dr. Evil intoning “one million dollars.” These days, it’s just not a lot of money.

Remember, we have a $17 trillion economy right now, and it’s going to grow over time. So what the Chamber of Commerce is actually saying is that we can take dramatic steps on climate — steps that would transform international negotiations, setting the stage for global action — while reducing our incomes by only one-fifth of 1 percent. That’s cheap!

Alternatively, consider the chamber’s estimate of costs per household: $200 per year. Since the average American household has an income of more than $70,000 a year, and that’s going to rise over time, we’re again looking at costs that amount to no more than a small fraction of 1 percent.

One more useful comparison: The Pentagon has warned that global warming and its consequences pose a significant threat to national security. (Republicans in the House responded with a legislative amendment that would forbid the military from even thinking about the issue.) Currently, we’re spending $600 billion a year on defense. Is it really extravagant to spend another 8 percent of that budget to reduce a serious threat?

And all of this is based on anti-environmentalists’ own numbers. The real costs would almost surely be smaller, for three reasons.

First, the Chamber of Commerce study assumes that economic growth, and the associated growth in emissions, will be at its historic norm of 2.5 percent a year. But we should expect slower growth in the future as baby boomers retire, making emissions targets easier to hit.

Second, in the chamber’s analysis, the bulk of the reduction in emissions comes from replacing coal with natural gas. This neglects the dramatic technological progress taking place in renewables, especially solar power, which should make cutting back on carbon even easier.

Third, the U.S. economy is still depressed — and in a depressed economy many of the supposed costs of compliance with energy regulations aren’t costs at all. In particular, building new, low-emission power plants would employ both workers and capital that would otherwise be sitting idle, and would, if anything, give the U.S. economy a boost.

You might ask why the Chamber of Commerce is so fiercely opposed to action against global warming, if the cost of action is so small. The answer, of course, is that the chamber is serving special interests, notably the coal industry — what’s good for America isn’t good for the Koch brothers, and vice versa — and also catering to the ever more powerful anti-science sentiments of the Republican Party.

Finally, let me take on the anti-environmentalists’ last line of defense — the claim that whatever we do won’t matter, because other countries, China in particular, will just keep on burning ever more coal. This gets things exactly wrong. Yes, we need an international agreement to reduce emissions, including sanctions on countries that don’t sign on. But U.S. unwillingness to act has been the biggest obstacle to such an agreement. If we start taking serious steps against global warming, the stage will be set for Europe and Japan to follow suit, and for concerted pressure on the rest of the world as well.

Now, we haven’t yet seen the details of the new climate action proposal, and a full analysis — both economic and environmental — will have to wait. We can be reasonably sure, however, that the economic costs of the proposal will be small, because that’s what the research — even research paid for by anti-environmentalists, who clearly wanted to find the opposite — tells us. Saving the planet would be remarkably cheap.

But it might cost one or two of the MOTU a buck so nothing will be done.


One Response to “Brooks, Cohen and Krugman”

  1. Eric Root Says:

    I tried to find Mark Carney’s speech, and the best I found was a brief article in Forbes. It sounds as though it is worth reading.

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