Archives: 08/2014

US-Africa Summit Will Not Solve Africa’s Problems

As the U.S. President Barack Obama prepares to meet 50 African leaders on Wednesday, August 6, it is worth reflecting on the factors behind the recent progress occurring in countries of Sub-Saharan Africa. As we write in our new paper,

The real gross domestic product [in Sub-Saharan Africa] rose at an average annual rate of 4.9 percent between 2000 and 2008 — twice as fast as that in the 1990s. […] As a result, between 1990 and 2010, the share of Africans living at $1.25 per day or less fell from 56 percent to 48 percent, while the continent’s population almost doubled in size. If the current trends continue, Africa’s poverty rate will fall to 24 percent by 2030.4 Since 1990 the per-capita caloric intake in Africa increased from 2,150 kcal to 2,430 kcal in 2013.5 Between 1990 and 2012, the proportion of the population of African countries with access to clean drinking water increased from 48 percent to 64 percent.

Although Sub-Saharan Africa is also becoming more democratic and better governed, a large gap between the quality of its institutions and those in the West persists. The continent remains, for example, economically unfree and heavily protectionist, not just vis-à-vis the outside world but also within the continent. For 25 African countries, the tariff costs of exporting or importing manufactured goods are higher within Africa than with the rest of world.

While international summits cannot not solve Africa’s internal problems, our paper argues that the upcoming meeting is a good opportunity for the U.S. administration to eliminate the existing trade barriers facing African exporters – regardless of whether they come in the form of explicit tariff barriers or implicit ones, such as agricultural subsidies:

[T]he elimination of the existing barriers to trade should be at the forefront of the efforts to help. Such barriers include tariffs, particularly on agricultural exports, which make it difficult for African economies to fully exploit their comparative advantage. As Brookings Institution researchers Emmanuel Asmah and Brandon Routman note, the structure of the tariff protection in the United States — but also in the European Union — is a significant part of the problem. The tariffs imposed up to a certain amount of imports may be low, yet the tariffs imposed for imports above the permitted quota might be very steep, in some cases up to 350 percent. Furthermore, agricultural subsidies in rich countries cause surplus production, which is often dumped on the world markets, depressing prices and undermining the livelihood of farmers in poor countries.

Undercurrents of Liberty in China

BEIJING, CHINA—Everything in China is big.  Including the battle over its future.

I recently returned from the People’s Republic of China.  It’s always a fascinating place with a future as yet unresolved. 

The country is growing economically, but no one really believes the government’s statistics.  The “one child” policy has created a birth dearth that may leave the PRC old before it grows rich. 

The PRC’s future is not yet determined.  Politics remains authoritarian, and it isn’t obvious that democracy would yield a meek Beijing. Nationalism could become an even more dangerous force without the current government’s power to close off discussion. 

Nevertheless, the young are restless.  Those I met had little patience with the Chinese Communist Party. 

Many hoped to go to America for school, for both its educational opportunities and personal freedoms.  Moreover, they weren’t afraid to speak out in front of others.

#Escape2010

In response to my “Twitter fight!” blog post from Wednesday, Harvard Law Professor Lawrence Lessig charges me (in a post entitled “#Escapethe1990s”) with living in the campaign finance debates of the 1990s. There’s a better knock on me: I live in the 1790s, when the Bill of Rights was adopted, like some kinda freak!

Lessig really wants me to rely on modern Supreme Court precedents to argue that public funding of electioneering is unconstitutional: “And I challenge Harper to offer one bit of actual authority to counter that statement beyond his ‘this is the way I wish the Constitution were interpreted’ mode of argument,” he says, in “I-really-mean-it” bold.

I’ve had similar challenges to my starry-eyed and—I’ll confess—ideologically driven view of the Constitution. (I’m biased in favor of liberty.) For about a year, supporters of NSA spying bandied Smith v. Maryland “Supreme Court law,” saying that a person has no Fourth Amendment interest in phone calling data—until Judge Leon undercut them. Needless to say, the Court got its rationale wrong in Smith. Applying Smith to NSA spying is wrong. To the extent precedents might allow public funding of electioneering, they are wrong, too.

Professor Lessig devotes a good deal of time to the compromise he and others have made with conservative opponents since the ’90s. Perhaps because I’m not a conservative, but a libertarian, I don’t feel as though I owe it to them to come their way. To Lessig’s credit, he is not doubling-down on a bad idea, as others are, by seeking a constitutional amendment to allow government regulation of political speech. (The bill at the link was introduced Tuesday.)

What is most interesting is his utter certainty that an intricate scheme to mask government subsidy for political speech is good enough to slide over the First Amendment’s bar on “abridging the freedom of speech.” I thought I did a pretty good job on the subsidy question the first time, but I’ll do it again: Under Lessig’s plan, if you give money to a politician, you pay less in taxes. If you don’t give money to a politician, you pay more in taxes. Government tax policy would funnel money to politicians for their campaigns. That’s subsidy.

The EU’s Anti-Austerity Hypocrites

The European Union (EU) is still in the midst of an economic slump. Many members of the political class in Brussels claim that fiscal austerity is to blame. But, this diagnosis is wrong. The EU’s problem is one of monetary, not fiscal, austerity. Money matters. Just look at the accompanying chart. Private credit in the Eurozone has been shrinking since March 2012.

Never mind. The EU fiscal austerity bandwagon keeps rolling on with Matteo Renzi, Italian Prime Minister and current President of the EU, holding the reins. Indeed, Renzi recently went so far as to form an anti-austerity coalition with France and Spain. According to the coalition, its members simply cannot impose further spending cuts. They assert that their budgets have been cut to the bone. This claim is ludicrous. 

<--break->There is nothing to cut in Italy? Get real. Senior civil servants are being paid over 12 times the national average salary. As for France and Spain, their civil servants are “well paid,” too. It’s time for the public to stop listening to the EU’s anti-austerity hypocrites and start looking at the numbers.

Would We Start the Ex-Im Bank Today?

One point that I think gets overlooked in the Ex-Im Bank debate is whether we would create the bank today, if it did not already exist. If there were no export credit agencies out there already, what would the discussion over whether to start one look like? I have a difficult time believing that, based on current understandings of finance markets, a proposal to start using government-run export credit banks would gain any traction today.

So what we really have is a program that was created many years ago, vested interests have emerged to fight its repeal, and the practice has spread around the world. It’s basically just status quo bias that is keeping Ex-Im around, as I argue in this HuffPo piece:

It is difficult to imagine that we would create an Ex-Im Bank today if none existed. Yet we cannot seem to get rid of it.

The Ex-Im Bank was created in 1934, at a time when finance markets were undeveloped and international trade was filled with uncertainty. This was also a time of growing economic intervention in the economy, centered around the New Deal. As the Ex-Im Bank itself explains, “The Export-Import Bank was established by President Franklin D. Roosevelt, in 1934, as a New Deal program and to support his foreign policy.”

In the ensuing decades, economic thinking has changed radically, as our understanding of markets has grown. While it is possible that financing was simply not available for certain transactions at the time of Ex-Im’s creation, it is difficult to believe this is the case today. Finance is a sophisticated field with numerous options. If financing is not available for a particular transaction, it is almost certainly because the sale is not commercially viable. As The Economist recently put it, “The scarcity of private financing for certain exports reflects genuine risks that taxpayers are forced to assume.”

Of course, this problem of overcoming the status quo occurs in other policy areas as well. No doubt this blog’s readers can think of many examples where programs exist and linger on, even though they could never generate the support to start them today.

Should the U.S. Take the Lead on Climate Change Policies?

Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

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With its 2007 ruling in Massachusetts vs. EPA, the U.S. Supreme Court opened the door for the U.S. Environmental Protection Agency to regulate carbon dioxide emissions under the 1990 Clean Air Act Amendments. But to meet the Supremes’ criteria for regulation, EPA first had to find that the emissions of carbon dioxide and other greenhouse gases were an “endangerment” to public health and welfare. While the sitting Bush administration was reluctant to do this, President Obama’s EPA made the “preliminary” finding of endangerment a mere 94 days after his inauguration.

The “final” Endangerment Finding came on December 7, 2009, just in time to provide the United States credibility at the then-starting Copenhagen Conference, a United Nations affair at which a replacement to the failed Kyoto Protocol was to be enshrined. The meeting was the most disastrous yet for global warming hawks, but President Obama quickly declared victory and rushed off on Air Force-1, in order to beat what was to be the first of three bona fide blizzards in Washington that winter. He lost that race, too.

A torrent of regulations followed, “culminating” in EPA’s recent proposal to regulate greenhouse gas emissions from existing electric power plants. That controversial proposal, announced in early June, followed on the heels of EPA’s January proposal of regulations limiting greenhouse gas emissions from new power plants.

If adopted (and they will be), these proposed regulations will be the biggest diktats yet originating from Obama’s Climate Action Plan. Administration officials are already celebrating the salvation of mankind, even before the regulations are finalized.

The administration is holding “hearings” around the country so it can take your input to improve these already near-perfect rules. To help guide us, the White House just released a new report describing how the costs of climate change will skyrocket the longer we delay taking action to stop it.

According to EPA Administrator Gina McCarthy, the collection of administration actions on climate change is “changing the tone” in talks with foreign nations. No doubt encouraged by this “changing tone,” President Obama is scheduled to attend a UN climate “summit” in New York this September.

To what end? What benefit will “taking the lead” on climate change actually provide the United States?