Archives: February, 2010

Krugman: The Hubris of Central Planning

In the New York Times today, Paul Krugman discusses the Euro and the problem of Greece. He hastens to note that the problem is not debts, deficits, and government profligacy, which it sure might seem like to the untrained eye. But he fingers a different and deeper problem:

No, the real story behind the euromess lies not in the profligacy of politicians but in the arrogance of elites — specifically, the policy elites who pushed Europe into adopting a single currency well before the continent was ready for such an experiment….

It’s an ugly picture. But it’s important to understand the nature of Europe’s fatal flaw. Yes, some governments were irresponsible; but the fundamental problem was hubris, the arrogant belief that Europe could make a single currency work despite strong reasons to believe that it wasn’t ready.

Now, you’ll note that Krugman says that Europe wasn’t yet “ready” for a single currency, suggesting that in some happy day it will be. Because of course the logic of history is always to move toward centralization and conformity, right? Nevertheless, it’s great to see Paul Krugman criticizing the arrogance of elites and the hubris of the centralizing impulse.

Government-Run Monopolies or School Choice Competition?

Cato’s Isabel Santa uses school choice as an example of why competition is better than government-imposed monopolies. The video explains that government schools cost more and deliver less, which is exactly what one might expect when there is an inefficient monopoly structure. The evidence about the school-choice systems in Sweden, Chile, and the Netherlands is particularly impressive.

There are many other reasons to support school choice, including diversity and innovation. There also is no need for fights over school prayer and sex education when parents can choose schools that reflect their values.

Perhaps most important, school choice should be the civil rights issue of the 21st century. Many minority families live in areas where the government school monopoly does a scandalously poor job of educating children, even though these often are the school districts with higher-than-average per-pupil spending.

For more information about education issues, see what Cato’s scholars have written.

Same Old SAFRA Tune

Congressman George Miller (D-CA) is at it again, publishing a letter in the New York Times Saturday implying that the Student Aid and Fiscal Responsibility Act – which is, thankfully, languishing in the Senate right now – would save taxpayers $87 billion over ten years. 

Quite the opposite: The bill would almost certainly cost taxpayers additional tens-of-billions, not save money. But that doesn’t seem to deter Miller. Unfortunately, neither does the galactic national debt, nor that people appear to have had it with seemingly incessant expansion of federal power.

Fisking Pawlenty

Having fisked Newt Gingrich’s and John Goodman’s “best” health care reform ideas, I probably should do the same for Minnesota Gov. Tim Pawlenty’s similar oped in the Washington Post.  Pawlenty makes five recommendations:

  1. “Incentivize patients to be smart consumers.” Setting aside his use of the grating word incentivize (down with suffix creep!), Pawlenty is on the right track.  But he’s so vague as to leave (himself?) room for mischief.  “Make quality and costs more transparent”?  “Incentivize smarter health-care decisions”?  A pol could claim to be doing those things while falling far short of what he should be doing: letting Americans – rather than employers or government – control their health care dollars and choose their own health plan.  If that’s what Pawlenty means, heck, say it.
  2. “Congress should pass reforms that allow people to stop paying for procedures and start paying for results.” Pawlenty appears to think government should find the “right” payment system, rather than allow for competition between different ways of paying health care providers – between fee-for-service, capitation, and everything in between.  Such competition promotes all dimensions of quality.  Government isn’t equipped to define and pay for performance, and bad things happen when it tries.
  3. “Liability reform.” To recap: federal limits on med mal liability unconstitutional; Republicans unprincipled.
  4. “Interstate health-care insurance.” Pawlenty doesn’t seem to get that the point of letting individuals and employers purchase health insurance across state lines is to force regulators to compete.  His “interstate purchasing pool with strict standards” idea makes it sound like he doesn’t get it.
  5. “Modernize health insurance.” Again, with the vagueness.  If Pawlenty means he wants to let individuals control their health care dollars and choose their own health insurance – see here for how – then terrific.  But when he recommends that we should “make health insurance transferable so employees can keep their coverage if they switch jobs” and “prohibit insurance companies from discriminating against individuals whose preexisting conditions were covered under insurance they lost through no fault of their own,” it sounds like he thinks regulation is the solution.

Hotel Afghanistan: We Can Check Out but Never Leave

The U.S. remains stuck in Iraq, as the country moves toward a potentially messy and not so democratic (lots of disqualified parliamentary candidates, etc.) election.  Iran’s refusal to back away from its nuclear program has intensified calls for an American military strike – which, Sarah Palin assures, would even help the president politically.  North Korea unsurprisingly is showing reluctance to rejoin international talks over its nuclear program: renewed proposals for a U.S. military build-up in South Korea and even war against the North are likely to follow.  And then there is Afghanistan.

Even though President Barack Obama talks about deadlines and drawdowns, there is little in present policy to suggest that the U.S. will be able to leave Afghanistan in even the mid-term.  Afghan President Hamid Karzai certainly doesn’t think so.  He figures on U.S. military support for at least another decade, with continuing international financial support for years after that.

Reports the Associated Press:

Afghan President Hamid Karzai warned Thursday that foreign troops must stay in his country for another decade, as world powers agreed on an exit map including a plan to persuade Taliban fighters to disarm in exchange for jobs and homes.Divisions emerged between the U.S. and its partners over Kabul’s willingness to offer peace to Taliban leaders who once harbored al-Qaida, instead of the more limited deal for lower-ranking fighters emphasized by the Americans.

All agree that reconciliation means bringing on board what Mark Sedwill, NATO’s newly appointed civilian chief in Afghanistan, called “some pretty unsavory characters.”

The conference was called to help the U.S. and its allies find a way out of the grinding Afghan war amid rising U.S. and NATO casualties and falling public support. NATO has agreed to accelerate the training of Afghan security forces and gradually transfer more combat responsibility to them.

“With regard to training and equipping the Afghan security forces, five to 10 years will be enough,” Karzai told the BBC. “With regard to sustaining them until Afghanistan is financially able to provide for our forces, the time will be extended to 10 to 15 years.”

It sounds a bit like the Afghan equivalent of the Eagles’ Hotel California.  Defeat or bribe the Taliban and keep Karzai in power, and we will have “won” – but we still won’t be able to leave.  And the Afghan government, assuming it achieves a modicum of honest competence, will still have little incentive to meet even President Karzai’s distant check-out date.  Who in Kabul will want to do without abundent Western cash 10 or 15 years from now?

In 2001 the U.S. had a simple, important, and achievable mission in Afghanistan:  disrupt al-Qaeda and oust the Taliban.  American military forces succeeded.  Alas, we’ve spent the succeeding eight years attempting to build a nation state where none exists.  It’s time to draw down our forces and again focus on combatting terrorists.

Switzerland’s Strong Human Rights Laws Should Be Emulated, not Persecuted

In a rational world, Switzerland would be a role model for other nations. It is quite prosperous thanks largely to a modest burden of government. There is remarkable ethnic and religoius diversity, but virtually no tension because power is decentralized (sort of what America’s Founders envisioned for the United States). Yet despite these – and many other – attractive features, Switzerland is being persecuted because of strong human rights laws that protect financial privacy. Money-hungry politicians from other nations resent Swtizerland’s attractive policies, and they would rather trample Swiss sovereignty rather than fix their own oppressive tax laws. An official from the Swiss Bankers Association provides some background in a New York Times column:

In Switzerland, this tradition of treating a client’s financial affairs in confidence became law in 1934 when it was codified in Article 47 of the country’s first-ever federal banking act as a contemporary reaction to the economic crisis, various domestic political considerations and well-publicized cases of espionage involving France and Germany. …Banking secrecy…reflects the very high degree of trust that exists between the Swiss state and its citizens and it has strong democratic foundations. …The Swiss are proud of their system and they reward it with a high level of taxpayer honesty. It works because the Swiss vote their own taxes, they have a high degree of control over the way tax revenues are spent and over all they believe their tax system to be reasonable, comprehensible, transparent and fair. …Doesn’t Switzerland hear the snapping jaws and cracking whips of foreign finance ministers, tax collectors, O.E.C.D. bureaucrats, cash-dispensing government agents and other denizens of the encroaching real world as they circle round Mother Helvetia intent on biting huge chunks out of her banking secrecy, if not swallowing it whole? …In March last year the Swiss announced they would give up the evasion-fraud distinction for foreign bank clients and adopt the O.E.C.D. standards on information exchange in tax matters. …However, requests for assistance must be made with regard to a specific individual, and “fishing expeditions” — any indiscriminate trawling through bank accounts in the hope of finding something interesting — remain ruled out. …Switzerland demonstrates to the world that it is possible for a state to collect taxes with a high degree of taxpayer honesty and without the authorities being corroded with suspicion about the financial activities of their citizens. Citizens in a democracy would never allow their police force to have an automatic right of forced entry into their homes just on the off-chance of finding some stolen goods, so why on earth should the state have an automatic right of forced entry into citizens’ banks accounts just on the off-chance of discovering some tax evasion? There must be a limit to the extent to which respect for an individual’s privacy is sacrificed on the altar of international cooperation in tax matters.

Sadly, the United States is part of the effort to create a global tax cartel. An “OPEC for politicians” would be terrible news for taxpayers, though, much as a cartel of gas stations would be bad for driviers. So-called tax havens play a valuable role in curtailing the greed of the political class. Ask yourself a simple question: Would politicians be more likely or less likely to raise tax rates if they knew taxpayers had no escape options?

Is Madonna Eminent? Or Is This Just “Celebrity Domain”?

The AP reports:

In a land dispute pitting Madonna against African villagers, Malawi’s government has sided with the pop star who has pumped millions into the impoverished Southern African country and adopted two of its children.

Villagers have been refusing to move from a plot of land near the capital, Lilongwe, where Madonna wants to build a $15-million school for girls. The government, however, says it had originally planned to develop the plot, and only allowed the villagers to live there until a project was identified.

Lilongwe District Commissioner Charles Kalemba, accompanied by other government officials and representatives from Madonna’s Raising Malawi charity, on Thursday met with about 200 villagers and told them they would have to move. The villagers have been offered other government land.

“Government allowed you to occupy this land because there was no project yet. But now that Madonna wants to build you a school you have to give way,” Kalemba told the villagers. “You are lucky that Madonna has compensated you for your houses, gardens and trees.”…

Headman Binson Chinkhota urged residents to move, saying the school would benefit their children. But Amos Mkuyu said the $1 500 in compensation he received from Madonna for mango trees and three homes was not enough. He said his family had been living on his three-hectare plot for three generations.

Susette Kelo vs. Madonna – that would be a great battle. As usual, the government has a beneficent purpose in taking these people’s land. They took Kelo’s home for a development that would yield “new jobs and increased tax revenue.” They’re taking Amos Mkuyu’s home for a school.  But stealing land is not beneficent; it is not an act of kindness and charity.

In this case the Malawian government says that the villagers are living on government land. But Mkuyu says his family has been there for three generations. Sounds like they thought it was theirs. For a discussion of collective and traditional property inspired by the movie “Avatar,” click here. Hernando de Soto, author of The Mystery of Capital, has spent a career showing how the lack of well-defined property rights hurts the poorest people in the world.