Ten Years Ago: Freedom Fries

I failed to note an anniversary last week. On March 11, 2003, Congressman Walter B. Jones and Congressman Bob Ney announced that henceforth menu items in the Congressional cafeteria would be renamed: "French Fries" would henceforth be listed as "Freedom Fries," and "French Toast" would be renamed "Freedom Toast."

This episode of international silliness started because France refused to join the United States in the invasion of Iraq.

Quickly forgotten by most Americans was that on September 12, 2001, NATO (including France) invoked Article 5 of the North Atlantic Treaty, declaring that if it was shown that the September 11 attack was coordinated from abroad, the Alliance viewed the attack on the United States as an attack on all members.

Early on in the effort to retaliate against Afghanistan, European members of NATO offered to contribute more military forces than the United States was willing to accept.

The Bush Administration sought special assistance from French Intelligence sources. France had by far the most complete intelligence in the Western world on Islamic extremism. They willingly shared this information with the United States. In fact, it is fair to say that French intelligence was essential to the early progress of the investigation.

When the United States turned its attention from Afghanistan to Iraq, France was not the only NATO member unwilling to support the invasion of Iraq. Turkey also refused to allow US forces to invade Iraq across the Turkish-Iraqi border.

Both Turkey and France were quite certain that Iraq had nothing to do the 9/11 attack on the US, and were equally certain that Saddam Hussein had not collaborated with Al-Qaida.

When asked much later about the "Freedom Fries" episode, Congressman Jones admitted he "wished it had never happened."

Europe - Not Looking Good

Mario Draghi, president of the European Central Bank, has brought the Eurozone back from the brink. He accomplished this by measures not unlike quantitative easing. Countries with troubled economies are at least not under so much pressure right now over sovereign debt.

But levels of unemployment in Spain, Italy, Greece and Portugal are much too high (on the order of 25%) and the economies of other Eurozone countries, including the Netherlands aren't much better. The economic distress is leading to a rise of extremist political parties.

Brussels Eurocrats and German bankers seem oblivious to the consequences of their obsession with financial austerity. To date, the result of all this austerity is larger deficits. Which leads to predictable calls by the masters of the system for even more austerity. Which will lead to even larger deficits.

I fear we know where this story leads. It all depends on whether Europe makes good use of the time Draghi won for them. Right now, that doesn't appear likely.

Meanwhile, next door in Hungary, an authoritarian government is grabbing even more power.

Wealth Distribution In America

A friend recently shared a link to a video exploring how wealth is distributed in America. There are a lot of different ways of presenting the same information or related information. We can look at income inequality. Over time, income inequality becomes wealth inequality.

Just this week, the stock market reached a new high. That has increased the wealth of some Americans at the top of the economic scale. Meanwhile, middle-class income has stagnated for forty years.

Here is a video examining wealth.

I will look for one that reveals income inequality and post the best one I find.

Then there is the issue of economic mobility.

We're number one, right?

As it turns out, countries in Western Europe and Northern Europe have more equal distribution of wealth, greater economic mobility and even higher levels of creation of small business than does the U.S.

Not to mention less expensive health care with better outcomes.

Americans need to get out more. Visit other countries. Keep an open mind. Might learn something.

Drones, War and Moral Hazard

There has been a lot of discussion by talking heads and writing (by writing heads?) recently about drones. And not just against terrorists. It almost sound like our domestic airspace will soon be full of drones.

Let's give some thought to what we are about. I'm not sure that dressing game console operators up in flight suits, paying them "incentive pay" (we used to call it flight pay), calling them "pilots" and giving them hero medals is what we should be doing.

What I think I'm hearing is a lot of relatively naive talk about "killing the bad guys" though it might be couched in more sophisticated verbiage.

In the popular imagination, war is about killing as many of our opponents as possible. In the professional imagination, Karl von Klausewitz was closer to the mark when he explained that "war is politics by other, namely violent means." What he means, is that there must be a point to what we do beyond killing "the bad guys."

War is not completely separate from diplomacy, either. I think presidential scholar Richard Neustadt got it about right a half century ago when he described the task of diplomacy as to convince enough people and the right people on the other side that what you want is what they also want, in order to further their own interest.

Some sources of human conflict are best moderated with deterrence, some with "compellance," and some with negotiation. Wisdom lies in knowing when. And to what end.

Violence, in the long run, is not a way of resolving human conflict. In international affairs, it is at best like the two by four the farmer hits the mule with. "That's to get it's attention," the farmer explains.

Once you get the opponent's attention, maybe it's best to sit down and reason together.

Back to the subject of drones. And moral hazard.

Let me repeat some earlier thoughts.

Economists talk about "moral hazard." This refers to a situation where there is a tendency to take undue risks because the costs are not borne by the party taking the risk. Like financial wizards who take in enormous bonuses just before the crash and leaves it to the rest of the country to pick up the pieces. We should extend the concept to war.

In 1941 and 1942 the attacking forces faced at least as much risk as those being attacked. This was true at Pearl Harbor, at Bataan and Corregidor, in the Coral Sea,  at Midway, and countless other battles.

It is usually not true of the political leaders who order a country to war. They do not bear the risks that face the military forces.

The equation of risk becomes distorted forever when attacks are conducted from halfway around the world by skilled gamers who sit in front of computers and direct robotic drones to destroy targets and people. It is the inhabitants of target areas who bear the risk.

Is this a kind of moral risk we are willing to take?

As a professional military officer, I always wanted to minimize the risk to my own sailors. At what point does this kind of planning cross a moral divide?

Apart from moral considerations, we may need to think about the message we convey. Is the message that our cause is not worth risking an American life? If so, we should say so. But we need to ask ourselves the question - if a cause is not worth dying for, is it worth killing for?

Duck And Cover!

Yulia Karbysheva, a fourth grade teacher in Chelyabinsk, Russia, saved 44 students in her class from injury by telling them to "duck and cover," the Cold War defensive maneuver from a half century ago. The teacher herself suffered an injury, but not her students. She didn't know what was happening when she saw the brilliant light from the meteorite that landed nearby, but she knew what to do.

Older residents of Chelyabinsk had likely been trained in such protective measures. Chelyabinsk has been a center of defense industry since Joseph Stalin moved huge factories East of the Ural Mountains in 1941 to get them beyond the reach of Hitler's invading armies.

A town of about 45,000 at the outset of World War I, Chelyabinsk experienced rapid growth during Soviet industrialization of the 1930s. Several industrial establishments, including a Tractor Plant and a Metallurgical Plant, were built at this time. Relocation of industries to the Urals in 1941 began a period of rapid expansion. There were several tank factories and plants to manufacture Katysha rockets. The town became known jokingly as "Tankograd" (Tank City). Chelyabinsk was essentially built from scratch during this time.

Later in the 1940's the area around Chelyabinsk (Chelyabinsk Oblast') became a center of nuclear weapons development. It is thought that much of the area has suffered environmental damage from plutonium pollution.

Perhaps the area will now become a center of the meteorite tourism industry.

Panama Canal Expansion

During a senate debate on the Panama Canal Treaty in 1978, United States Senator S. I. Hayakawa of California argued, "We should keep the Panama Canal. After all, we stole it fair and square."

One argument opponents of the treaty used was the claim that Panama would never be able to manage the canal effectively.

That was then. Now, under the auspices of Panama, a massive project to triple the cargo capacity of the original canal is halfway completed. It is scheduled to open in 2015.

The project is truly international. "The 16 lock gates," The Washington Post reports,  "some weighing 4,000 tons, were designed by the Dutch and built by Italians. Beginning next month, they will be lifted onto a barge by Belgians and shipped by South Koreans to Panama in a project managed by the French."

The United States is almost nowhere to be seen. Which doesn't mean we will be unaffected. Ports on the US East Coast, including New York City, Baltimore, Norfolk and possibly Savannah and Miami are being modernized to handle the larger ship sizes allowed by the expansion.

The modernization may even improve mobility of the U.S. Navy. Since completion of the USS Essex class of aircraft carriers at the end of WWII, aircraft carriers have been too wide to transit the canal. This will no longer be a problem after adding new channels 180 feet wide.

The expanded canal is expected to open in April 2015, The original canal opened in 1914, a bit more than a century earlier. 

On Cabals

Some years ago, then-First Lady Hillary Clinton asserted that a "vast, right-wing conspiracy" had targeted her husband, President Bill Clinton.

In today's New York Times, columnist Timothy Egan stimulated a better word: "Cabal." I like "cabal" for the purpose. Cabals don't have to be vast in order to be effective.

Wikipedia explains: "A cabal is a group of people united in some close design together, usually to promote their private views or interests in a church, state, or other community, often by intrigue." Wikipedia elaborates: "The term can also be used to refer to the designs of such persons or to the practical consequences of their emergent behavior, and also holds a general meaning of intrigue and conspiracy. The use of this term usually carries strong connotations of shadowy corners, back rooms and insidious influence; a cabal is more evil and selective than, say, a faction, which is simply selfish; because of this negative connotation, few organizations use the term to refer to themselves or their internal subdivisions."

Egan didn't use the word "cabal" in his column. Instead, he referred to "a knot of Tea Party extremists who will never consider a fresh idea and a House Speaker whose notion of compromise is to tell his Democratic counterpart in the Senate to commit an unprintable act. For John Boehner, his profane shout-out to Harry Reid passed for a New Year’s toast." It was one of Egan's readers who suggested that "cabal" is a better word than "knot" for the phenomenon.

I agree with the reader. For many years now, a small group of extremely wealthy individuals, most of whom got their money the old-fashioned way  (they inherited it) and who don't actually make anything but deals, have put their extreme wealth on the scales to change the rules that served the country well until the early seventies.

These are people who show nothing but disdain for Americans who actually work for a living. And they have proven adept at using intrigue to take resources from workers to line their own pockets.

That's the real story behind the "giant sucking sound" candidate Ross Perot talked about twenty years ago. Not the giant sucking sound of jobs fleeing to Mexico but of capital and jobs fleeing to China and India.

How can American workers (of all different-colored collars) counter  this trend?

Get smart! Vote for jobs.

When everyone is back to work, get control over the banks and other financial institutions.

Uncloak the cabal.

A Way Ahead For Europe - But Europe Won't Like It

Yesterday I posted a speech by professor Galbraith. He was speaking in Berlin.

The Eurozone problem is a German problem. Not a Greek problem or a Spanish problem or an Italian problem.

Professor Galbraith understands this and explains a lot about debt, especially international debt.

Here's a very illuminating interview.

Economic Changes - Existing And Prospective - Mostly Europe

Professor James K Galbraith made a really fine presentation December 6th at an IG Metall conference in Berlin. Conference theme: The Good Life. Thanks to Mark Thoma for the link. The title of professor Galbraith's presentation is "Change of Direction."

Professor Galbraith draws attention to the existence of one overarching worldwide crisis. "Yesterday," he says, "Professor Nouriel Roubini give a magisterial and very high speed tour of the world situation making it clear of course that the promised recovery has not occurred. But if Nouriel is Sir Isaiah Berlin’s fox, who knows many things, let me try this morning to be the hedgehog who knows one big thing, and that one big thing is that what we are experiencing is a single, unified, global crisis of the economy and of the financial system. It is not a cluster of distinct and separated events; a subprime crisis in the United States; a public debt crisis in Greece; a bank crisis in Iceland; a real estate bust in Ireland and Spain; nor are there distinct U.S. and European crises, nor can the financial be separated from the real, nor is Germany a country to which crisis has not yet come with the suggestion that there might be some separate way out. There is one crisis, only one crisis, a deeply interconnected crisis of the world system. This crisis has, I think, three deep sources going back not twenty years but forty years to the early 1970s and the end of what we sometimes call the “golden age,” the “glorious thirty” years in the immediate aftermath of the second World War."

This calls to mind Noah Smith's observation that "something big" happened  early in the 1970's. Smith doesn't know what.

Professor Galbraith has some ideas.

"The first of the three deep sources is, I think, the rising real cost of the resources that we use, of energy and of everything that we use energy for. This was a problem that emerged in the 1970s and was then submerged again; it was deferred by new discoveries, by the geopolitical situation, and by the financial power of the western countries, which because of the debt crisis in much of the rest of the world had the effect of suppressing demand for these core resources. But this is a problems that can no longer be avoided or deferred. The cost of energy is roughly twice of what it was a decade ago and the future is far more uncertain. Both of these factors, cost and uncertainty, place a squeeze on the surplus or profitability in regions, continents, and countries that are importers of these resources. And as we confront, as we must, the problem of climate change and as we begin, as we must, to pay the price of climate change this problem is going to become more difficult. That’s just an economic reality that we have to cope with as we face the imperative before us."

"The second great underlying issue ....is technical change, the particular character of which in our time is quite different from ... before. If you take the digital revolution together with globalization, the ease of transnational manufacturing and ... the outsourcing of services, we ... live in an era where technology ... supplants workers. ...[T]he computer and ... associated technologies ... are now doing to the office worker what a century ago the internal combustion engine did to the horse."

"And the third great source of our problem is ideological. It is the neo-liberal idea that has given us deregulation and de-supervision; that has given us the notion that markets can function on their own without breaking down or blowing up. It is this notion as applied especially to finance. This is the great illusion of the last generation, and it fostered a form of economic growth that was intrinsically unstable and unsustainable. Why? ... [I]t was based on declining standards for loans and ... lax accounting standards, it was based upon financial fraud, on the most massive wave of financial fraud that the world has ever seen.... It was known to be such to the lenders at the time. This was true of housing loans in the United States made by the tens of millions that were known to the lenders as “liar’s loans,” as “ninja loans,” no income, no job, no assets; as “neutron loans” destined to explode leaving the building intact but destroying the people. This was known at the time. These were loans that had to be refinanced or they would default.

"It was also true of loans to the public sector, for example Greece....The fact that Greece had a weak public sector and a weak tax system was not a state secret before the crisis...." 

"Rising inequality is often linked to these phenomena. But I think we should be clear about what the linkage is. It is not the case that inequality rose and people compensated for it by borrowing more so they could have a higher standard of consumption. This is not what happened. It certainly did not happen in the United States. What happened was, is that the lenders went out to find new markets often fostering fraudulent loans on low-information borrowers, poor borrowers, inner city home owners, for example, forcing those loans to be refinanced so that the recipient only saw a fraction of the debt with which they were ultimately saddled. And the inequality arose from the booking of fees on those loans. This is how bankers get rich. They make their money in this way. And you can see this in their tax statements and you can see it in the geographical distribution of income gains in the United States."

 Professor Galbraith goes into more detail. You will find it rewarding to read the entire presentation.

You may not find it reassuring.

Europe Is In Trouble

It looks like Europe is going into recession again. Not only is Greece suffering from 25% unemployment, so is Spain. The austerity measures forced on those countries aren't working. Prime Minister Mario Monti of Italy, the technocrat appointed to that office at the behest of Eurocrats in Brussels, largely responding to Germany.

Last year, things were really looking bad, but Mario Draghi, the new president of the European Central Bank, has managed to slow the deterioration. But there is a growing perception that in the long run, in the absence of greater European political integration, prospects for the Euro and the Eurozone are not good.

A book by Harvard professor Dani Rodrik, published last year, explains the problem:

"The Globalization Paradox: Democracy and the Future of the World Economy, W.W. Norton, New York and London, 2011, forthcoming.
Surveying three centuries of economic history, a Harvard professor argues for a leaner global system that puts national democracies front and center.
From the mercantile monopolies of seventeenth-century empires to the modern-day authority of the WTO, IMF, and World Bank, the nations of the world have struggled to effectively harness globalization's promise. The economic narratives that underpinned these eras—the gold standard, the Bretton Woods regime, the "Washington Consensus"—brought great success and great failure. In this eloquent challenge to the reigning wisdom on globalization, Dani Rodrik offers a new narrative, one that embraces an ineluctable tension: we cannot simultaneously pursue democracy, national self-determination, and economic globalization. When the social arrangements of democracies inevitably clash with the international demands of globalization, national priorities should take precedence. Combining history with insight, humor with good-natured critique, Rodrik's case for a customizable globalization supported by a light frame of international rules shows the way to a balanced prosperity as we confront today's global challenges in trade, finance, and labor markets."

In summary, by creating a common currency before political integration, Europe has put the cart before the horse. Probably because the horse simply wasn't going to happen.

In a recent interview with the Swedish journal Respons, Rodrik explains his views in detail. This is the best and clearest explanation of the European dilemma I have read. For anyone interested in European affairs, I recommend reading it.

After reading the article, I conclude that the best solution is to do away with the Euro. There plainly is no risk-free approach to a viable future for the Euro. Better to do away with it sooner than later.

Why does this matter to Americans? We export a lot of goods and services to Europe. Another European recession is not good news for the US economy.

Robots And Jobs

Paul Krugman has finally figured out that computerization and robotization (if there is such a word) might create a problem for jobs.

I'm glad he has decided this is a problem that merits study. I suggested this in a comment a couple of years ago to one of his blog posts. This is the first time he seems to take the idea seriously.

I'm not sure that at the present time fiscal efforts to expand the economy won't work. It also seems worthwhile to encourage manufacturing to return from foreign exile. The fact that Apple intends to bring some manufacturing back to these shores may be a harbinger  of good tidings. But not all that good, since most associated manufacturing is highly automated.

Jobs may consist largely of servicing robots. I mentioned this a couple of years ago, and suggested this may no longer be just a theme for science fiction.

http://mile181.blogspot.com/2011/02/robotics-and-economics.html

President Eisenhower's Wisdom

April 16, 1953. President Dwight David Eisenhower:

"The way chosen by the United States [after World War II] was plainly marked by a few clear precepts, which govern its conduct in world affairs.

"First: No people on earth can be held, as a people, to be an enemy, for all humanity shares the common hunger for peace and fellowship and justice.

"Second: No nation's security and well-being can be lastingly achieved in isolation but only in effective cooperation with fellow-nations.

"Third: Every nation's right to a form of government and an economic system of its own choosing is inalienable.

"Fourth: Any nation's attempt to dictate to other nations their form of government is indefensible.

"And fifth: A nation's hope of lasting peace cannot be firmly based upon any race in armaments but rather upon just relations and honest understanding with all other nations.

"In the light of these principles the citizens of the United States defined the way they proposed to follow, through the aftermath of war, toward true peace.

"This way was faithful to the spirit that inspired the United Nations: to prohibit strife, to relieve tensions, to banish fears. This way was to control and to reduce armaments. This way was to allow all nations to devote their energies and resources to the great and good tasks of healing the war's wounds, of clothing and feeding and housing the needy, of perfecting a just political life, of enjoying the fruits of their own toil....

"The worst to be feared and the best to be expected can be simply stated.

"The worst is atomic war.

"The best would be this: a life of perpetual fear and tension; a burden of arms draining the wealth and the labor of all peoples; a wasting of strength that defies the American system or the Soviet system or any system to achieve true abundance and happiness for the peoples of this earth.

"Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed.

"This world in arms is not spending money alone.

"It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children.

"The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities.

"It is two electric power plants, each serving a town of 60,000 population.

"It is two fine, fully equipped hospitals.

"It is some fifty miles of concrete pavement.

"We pay for a single fighter plane with a half million bushels of wheat.

"We pay for a single destroyer with new homes that could have housed more than 8,000 people.

"This is, I repeat, the best way of life to be found on the road the world has been taking.

"This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron. These plain and cruel truths define the peril and point the hope that come with this spring of 1953.

"This is one of those times in the affairs of nations when the gravest choices must be made, if there is to be a turning toward a just and lasting peace.

"It is a moment that calls upon the governments of the world to speak their intentions with simplicity and with honesty.

"It calls upon them to answer the question that stirs the hearts of all sane men: is there no other way the world may live?

Meanwhile, Across The Pond....

On economics blogs this week, the big news has been the latest World Economic Outlook published by the International Monetary Fund (IMF). The heart of the report:

"The main finding, based on data for 28 economies, is that the multipliers used in generating growth forecasts have been systematically too low since the start of the Great Recession, by 0.4 to 1.2, depending on the forecast source and the specifics of the estimation approach. Informal evidence suggests that the multipliers implicitly used to generate these forecasts are about 0.5. So actual multipliers may be higher, in the range of 0.9 to 1.7."

Multipliers? What's that about?

It is a dispute as old as the formal study of economics. Say and certain classical economists contended that government spending will have no effect on the economy as a whole. Government spending will "crowd out" private spending. There is  thus no "multiplier" from government fiscal measures that will improve the economy. In the long run the economy will fix itself.

"In the long run," economist John Maynard Keyenes quipped, "we will all be dead."

In recent years, the dispute has manifested itself in arguments over how big the multiplier is. Some have said, if it exists, the multiplier effect is very small. Not long ago the IMF official position was to that effect.

The new report says, in effect, "we were wrong."

Why is this important? Because the position of the IMF and that of some other powerful commentators has been that countries must reduce debt, even when their economies are experiencing little or no growth. The new insight: contractionary policies contract economies.

Duh.

Economist Kate McKenzie explains here. Australian economist Bill Mitchell explains here. Mitchell summarizes:

"1. The IMF is incompetent not because its staff are stupid but because the staff use the wrong models and operate in a make-believe world.
2. The world economy is enduring on-going stagnation because there is not enough spending.
3. Monetary policy – whether it being normal interest rate management or the aytpical operations such as quantitative easing – will not resolve a situation where the non-government sector is intent on not spending and the government is intent of pursuing fiscal austerity. The obsession that the policy watchers have with “what is the central bank going to do” is revealing but a waste of time.
4. Fiscal policy activism is desperately required and most nations should introduce new stimulus programs, targetted at direct job creation, to kick-start spending in their economies and provide some optimism to the private sector. This will also allow national income growth to occur, which, in turn, underpins the current desire of households and firms to reduce their precarious levels of debt (following the neo-liberal-inspired credit binge)."

Bottom line: now is not  the time to obsess over deficits and balanced budgets. Now is the time to put idle productive capacity to use by government spending.

I have said this before, but of course no one is paying any attention to me. Maybe some will listen to the IMF.

The core issue: "Who benefits and who pays?"

Related process: "blame the victim."

Chorus of the wealthy and the powerful: "There is nothing the government can do to fix the economy and it's all the president's fault."

Go figure.

Kissinger On China

Walter Pincus has a very good article in today's Washington Post summarizing former Secretary of State Henry Kissinger's observations on China.

Those of us who took Kissinger's seminar on national security policy at Harvard referred to him as "Henry the K." A few days after Richard Nixon won the presidential election and announced that Kissinger would be his national security adviser, seminar students arrived to find television video equipment crowding the classroom. "Pay no attention to the cameras," Kissinger advised his class, "it's good for my megalomania."

He was joking.

The seminar might have been titled "prominent guest of the week," because Professor Kissinger invited prominent academic and government figures to speak at his seminar. One week it might be Robert McNamara. The next week might be Tom Schilling. Then the sequence of prominent guests would be interrupted by one or two lectures given by Professor Kissinger himself. Those lectures were always the most focused and informative of all.

I didn't always view Kissinger's observations on European affairs as especially wise. Nor was I overly impressed with his views on the Soviet Union.

Based on Pincus' article, however, I view Kissinger as expressing great wisdom about China. In a talk at the Woodrow Wilson Center, Kissinger related discussions with each Chinese leader from Mao Tse Tung [I know the spelling has changed], including with the most probable new leader, Xi Jinping. Kissinger believes Xi Jinping will seek such enormous internal changes that “it’s unlikely that in 10 years the next generation will come into office with exactly the same institutions that exist today.

“This is one reason why I do not believe that great foreign adventures or confrontations with the United States can be on their agenda,” Kissinger said. But because Xi faces the need to make difficult domestic changes, he may be more assertive in responding to foreign critics, he added.

“What we must not demand or expect is that they will follow the mechanisms with which we are more familiar. It will be a Chinese version . . . and it will not be achieved without some domestic difficulties.”

Wise remarks.

Seventy Years Ago: Guadalcanal From Japan Point Of View

I just came across a really interesting historical article on Japanese plans for Guadalcanal, what they were attempting and why, and the Battle of Savo Island from their point of view. The article makes it plain that senior Japanese officers were consummate professionals.

By comparison with their US counterparts, Japanese Naval Officers had more difficulty coordinating Naval Operations with those of the Army. Unlike Nimitz and Halsey, who moved Army aircraft around as they wished, Japanese Naval Officers had no control over Japanese Army aircraft. This was a serious operational problem.

Another operational shortcoming for the Japanese is that their communications intelligence organization was not nearly as effective as ours. That's why they were caught completely off guard when the Marines stormed ashore on Guadalcanal in August.

It's a long article, but tells a very interesting story.

Rising Tide Lifts All Yachts

Lyndon Johnson was fond of observing: "a rising tide lifts all boats."

This was pretty true for twenty-five years following World War II. From about 1946 to 1971, income for all income groups tracked very closely with the increase in productivity for the US economy as a whole.

Then something happened. As economist Noah Smith put it in his blog about three months ago, "Something BIG Happened."

From that time to the present, productivity has continued to increase at about the same rate, but hourly wages for workers (adjusted for inflation) remains stuck at the 1971 level. Who gets all the profit from increased productivity? Mostly the top 1% of earners.

In other words, the rule now seems to be: "a rising tide lifts all yachts."  

Noah Smith is puzzled. In a blog post last July, he notes that this phenomenon seems not to have been studied. He thinks it should be.

So do I.

Noah has offered some ideas about concurrent events that might be related - for example, the change from fixed to flexible exchange rates in international commerce. Or possibly the oil crisis. But no one seems to know for sure.

Russia And Democracy

A wise professor of mine, Marshall D. Shulman, used to observe (in the 1960's) that the United States and the Soviet Union had a "limited adversary relationship."

His point was, that neither the United States nor the Soviet Union, even in the depths of the Cold War, was committed to the destruction of the other. In fact,the two countries cooperated in a number of efforts to limit the danger of war. One such effort was the agreement to limit incidents at sea. Concluded in 1972 under President Nixon, the agreement established an annual bilateral review of incidents and measures to lessen the possibility of conflict and misunderstanding. I had a minor role in hosting one of the meetings in Washington.

Measures to keep the relationship between the United States and the successor state of Russia a productive one, continues to be a challenge.

After the breakup of the Soviet Union, the United States Agency for International Development provided assistance to Russia in converting to a market economy. Among the most promising efforts was called the "rule of law" program. Other efforts included assistance in establishing democracy in the former Soviet Union.

These efforts are all in jeopardy, according to a report in the New York Times.

It isn't a surprise, but it doesn't help bilateral relations.

Even so, you do business with the countries that exist - not the ones you imagine.

History Update: Czechoslovakia Dissolved (Twenty Years Ago)

It isn't what we don't know that gives us trouble, it's what we know that ain't so.
 
Will Rogers

Note to national security expert Liz Cheney: There is no Czechoslovakia. For that matter, a lot of other things she talked about this morning on ABC seem not to exist.

I know that's just a technicality.

Ship Misidentification

During the Democratic National Convention, an evening was set aside to honor veterans and recognize their service to the nation. That's always a good thing to do.

But whoever put together the slide show included a dramatic photo of a group of Soviet warships, with what appear to be a formation of US aircraft flying over.

It was a good picture, but it would have been better to have a formation of American warships. Here's the account from the Navy Times.

 

 A bit embarrassing. Shouldn't have happened.

On the other hand, at least no one was killed, as happened in 1974 when the Turkish Air Force sank the Turkish Navy destroyer, TCG Kocatepe.

I've been reading a lot lately about WWII in the Pacific, and such episodes were not unknown. The truth is, identifying warships can be a challenge, even for a trained professional.

Now to the interesting part. The slide that was shown is in silhouette and the antenna arrays are pretty characteristic of Soviet warships. The hull and superstructure of the ships, though, look an awful lot like our Arleigh Burke class Aegis destroyers. There's a good reason for that. After years of study by naval intelligence and the Naval Ships Systems Command, our naval architects decided that the hull form used by the Soviets had much better sea keeping qualities in heavy weather than the shape we had used on destroyers and cruisers since early in the 20th century. So, for our newest combatant ship we borrowed heavily from Soviet Naval Architecture.

How do I know? Some of my friends did the research, and I saw the culmination of it when I worked on the details of the Arleigh Burke class combat system design.

It isn't a big secret, but I don't think the influence of Soviet designs on our ships is widely known. Compare the pictures, and you will see what I mean.

http://en.wikipedia.org/wiki/File:BCGN_Kalinin_1991.jpg

http://www.military-today.com/navy/arleigh_burke_class_l3.jpg

By the way, when it was formed in 1882, the Office of Naval Intelligence was formed for the purpose of seeking out and reporting developments in other navies. So we could copy the best. At that time in our history, we intended to modernize, but had not yet begun the "new steel navy." The first four steel warships were not authorized by Congress until 1883. We had a lot to learn about steel plating, assembly, modern steam plants, and large guns.

Why not learn from other navies? we thought then. Still not a bad idea.

Politics Stops At The Water's Edge

At least that's what Republican Senator, Arthur Vandenberg of Michigan said in 1947. It was early in the Cold War, and Vandenberg had renounced isolationism and had become chair of the Senate Foreign Affairs Committee. He played a helpful role in forging bipartisan support for the Truman Doctrine, the Marshall Plan and NATO.

A few years earlier, the 1940 Republican candidate for president, Wendell Willkie, assisted President Roosevelt by supporting Lend-Lease and other Roosevelt programs supporting internationalism and Civil Rights.

 It is a truism, especially in international relations, that we only have one president at a time. An earlier generation understood that.