Money matters. That’s why I have kept my eye on Greece’s money supply (M3). It’s been contracting in an increasing rate since February 2010. Since March 2010, I have concluded that the writing was on the wall and that all the debt sustainability numbers calculated by the International Monetary Fund, the European Union and the Greek government could be thrown in their respective bureaucratic trash cans. Well, even though the Bank of Greece is still behind the curve, it’s catching up. The Bank has just revised its forecast of Greece’s 2012 growth — down from ‑4.5% to ‑5.0%. The current annual rate of contraction (-19%) of the Greek money supply guarantees many more eruptions from that Balkan nation.
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Incentives for Unauthorized Immigration Remain
Michael Barone had an excellent piece in today’s Examiner where he wrote that the Mexican unauthorized immigration problem is going away because net Mexican migration is around zero for the first time since the Great Depression. Barone points out many reasons for this change: the size of the Mexican emigration cohort is remaining steady (Mexican women are about 1/3 as fertile in recent years as they were in 1970), U.S. economic growth is sluggish, sectors of the U.S. economy that employ unauthorized workers were some of the hardest hit in recent years, and Mexican economic growth is rapidly increasing incomes South of the border. All right so far.
But Barone is wrong to assume that just because Mexican unauthorized migration is abating that the problem will go away. For hundreds of millions of the world’s poor, the incentives to migrate remain.
Immigration is mostly driven by economics. The cost of moving here (ignoring the cost of dealing with the U.S.government) is going to continue to fall while the benefits will remain high. Since 40 to 50 percent of unauthorized immigrants entered the U.S. legally and overstayed their visas, some unauthorized migrants don’t need to cross a harsh desert anymore. Migrant source countries are changing again but the flow won’t stop.
Very poor countries don’t send many immigrants because the people there can’t afford to move. That’s why there aren’t many immigrants from the poorest nations of the world. People have to reach a certain level of prosperity before they can afford to migrate. After that point is reached, immigration continues until the gains from doing so shrink. The income gap between Mexico and the U.S. has narrowed so migration is slowing down on its own accord.
Other Central Americans still feel the economic pressure to migrate even if U.S. law doesn’t cooperate. This trend is reflected in the estimates of the unauthorized population compiled by the Department of Homeland Security. From 2000 to 2011 the unauthorized Mexican population increased by 45 percent. Over the same time the number of unauthorized Guatemalans increased by 82 percent and Hondurans by a whopping 132 percent.
Human smugglers have many informal routes into the U.S. Until recently they’ve mostly been serving Mexicans but they are diversifying into other countries and finding migrants who will pay more. Smuggling prices are hard to come by since it’s illegal but anecdotal evidence suggests Chinese pay $75,000 per person and Indians pay around $20,000 to come to the U.S. illegally.
The lack of a legal route for most potential migrants combined with a strict enforcement mechanism increases the costs and diminishes the benefits of migrating. But for millions the benefits of coming illegally still outweigh the costs of working in the informal economy. When economic growth in the U.S. recovers unauthorized immigration will also recover. The source countries for these immigrants may shift but at long as our immigration laws are restrictive and the benefits of coming here are greater than the costs, unauthorized immigration will persist.
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We Don’t Want the Cybersmoking Cybergun to Be a Cybermushroom Cybercloud
The House Committee on Homeland Security held a hearing today bearing the unsubtle title: “America is Under Cyber Attack: Why Urgent Action is Needed.” With the conclusion fixed in advance of the testimony—which, as promised, uniformly prophesied imminent cybercataclysm—you’d think the real question would be why a hearing was needed. The answer, of course, is to frighten off any second thoughts about cybersecurity legislation due for consideration this Friday, to which opposition has been mounting among some techies and civil libertarians.
Jim Harper has already done plenty of excellent work puncturing the more apocalyptic hype around cybersecurity—a favorite at this hearing was “Cyber Pearl Harbor”—which I need not rehash here. Even bracketing the question of how realistic some of the threat scenarios are, however, what struck me was that “cyber attack” is really something of a category error, at least as used at this hearing, where “attack” carries the grim overtones of a national security threat, and “America” as a whole is the target. In reality, you have a range of security problems facing a diverse array of public and private entities. Some are analogous to conventional state or terror‐group sponsored attacks or espionage. Most are the digital equivalents of what we’d normally label “crime”: theft, vandalism, corporate espionage, and so on.
At the extreme end, you have largely hypothetical attacks on the SCADA control systems that operate critical infrastructure like power plants or transportation networks. These have the potential to inflict the kind of damage we’d associate with a physical attack, but we’ve only got one known real‐world instance of this, and experts agree that it was almost certainly born in the USA. Such attacks are rare because they’re very difficult to carry off, involve identifying and exploiting vulnerabilities in uncommon task‐specific software systems, and would most likely require insider complicity—which means they’re probably best conceived as one aspect of the more general problem of hardening critical infrastructure targets. Ditto for attempts to compromise systems with sensitive government data—a hard problem for government IT departments, but not one Congress has an obvious role in beyond appropriating the necessary funds.
Then you have the vast majority of actual successful “cyber attacks,” which target ordinary private systems, and range from sophisticated spear‐phishing efforts aimed at exfiltrating valuable corporate commercial data to simple DDOS attacks launched by “script kiddies.” Some of these are serious and costly—but the costs are primarily borne by the targeted entities, which will more likely have the incentive, responsibility, and local knowledge required to respond appropriately.
These aren’t entirely unrelated problems: A malware‐infected private computer may be conscripted into a botnet or serve as a staging ground for an attack on a more critical target. But it hardly seems conducive to sober policy making to lump them together under the general heading of “cybersecurity.” First, because resources aren’t going to be prioritized well if officials in the grip of apocalyptic mass‐casualty scenarios start throwing money at programs that are primarily about making it harder for Anonymous to crash websites. Second, because the nature and scope of (for instance) the information sharing that might facilitate security improvements, and the privacy interests implicated by such sharing, may be quite different for these different types of cases, and be better dealt with under separate rubrics to the extent government has a role to play at all.
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Great Gaming Russia in Central Asia
For the sake of Afghanistan, U.S. officials routinely invoke the importance of nurturing economic growth across South and Central Asia. But when it comes to advancing policies meant to increase regional trade, Washington has shown little effort to ease the geopolitical differences between itself and one of Afghanistan’s key neighbors: Russia.
Secretary of State Hillary Clinton proclaimed late last year in Dushanbe, “we want Afghanistan to be at the crossroads of economic opportunities going north and south and east and west, which is why it’s so critical to more fully integrate the economies of the countries in this region in South and Central Asia.”
That sounds promising. So what is the problem? As George Washington University Research Professor Marlene Laruelle writes, present U.S. policies, like the “New Silk Road” initiative that Clinton hints at above, reflect an underlying economic rationale “to exclude Moscow from new geopolitical configurations.”
Echoing this interpretation is Joshua Kucera, a Washington‐based freelance writer and frequent contributor to Slate and ForeignPolicy.com. He points to Washington’s call to tie together the electrical grids of Tajikistan, Kyrgyzstan, Afghanistan, and Pakistan as well as Washington’s placement of the Central Asian states in a new State Department bureau. He writes, “What these all have in common is that they attempt to weaken the economic (and as a result, political) monopoly that Russia, by dint of the centralized Soviet infrastructure, has on these countries.”
Moscow already thinks that Washington’s promotion of NATO’s eastward expansion is a U.S.-led containment strategy. As we have seen in that part of the world, however, Washington’s attempts to marginalize Russia in its Central Asian post‐Soviet sphere will bump up against the region’s deep historical ties, cultural influence, and geographic contiguity with the Kremlin. This all might seem obvious, but apparently not, as it would require foreign policy planners to appreciate the overriding interests of neighboring great powers as they pertain to Afghanistan, even the ones we abhore. That will be difficult, and it is important to illuminate why.
Too many in Washington equate a less confrontational approach as a sign of weakness, and militant internationalism as a sign of strength. But in South and Central Asia, U.S. officials must understand that what they perceive to be in America’s interest does not always line up with the prospect of regional connectivity. Washington’s pursuit of primacy in this region is erecting hurdles to the very liberal‐internationalist goals that it claims to promote. If economic growth is to have any reliable chance of success, then the U.S. should not be attempting to foreclose constructive avenues for increased integration.
Pursuing policies that place the region’s general interest before America’s does not convey weakness. Rather, it is a recognition that some countries are better positioned to be key players in the region, especially in light of the last 11 years, which have amply demonstrated the limits of Washington’s ability to impose lasting change in Afghanistan.
As my colleague Doug Bandow alluded to the other day, Russia is not America’s “number one geopolitical foe”—it is a declining power with nukes. Whether officials in Washington are willing to countenance such thoughts is anyone’s guess. However, given the disproportionate power of foreign policy hawks inside the Beltway—from the liberal and conservative persuasion—I wouldn’t bet on it.
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Graffiti Problem … So Call in the SWAT Team!?
From today’s Washington Post:
Hethmon had an up‐close and unpleasant experience with the same kind of local police he had done so much to empower.The problem began with graffiti on a highway overpass in Bowie. Police there suspected that Hethmon’s teenage son might be involved and obtained a search warrant. They arrived at 7 a.m. on March 9 with a heavily armed team of county officers.
“Come in with masks, guns, screaming. You know, knocking everybody down,” Hethmon recalled. “I tried to explain to them, you know: ‘Look, I’m a lawyer, this is outrageous.’ [The reply was:] ‘Shut up and lie down on the floor.’ ”
Police said they found 2.5 grams of marijuana in the house. They filed charges against Hethmon, his son and his wife — all for the same drugs. The charges against Hethmon will be dropped, prosecutors said last week.
Hethmon said the experience has not changed his work.
“The fact that a law is legitimate and serving a purpose doesn’t mean that it can’t be abused,” he said. “Human beings are flawed people.”
And so, for the lesser‐known of this duo, there has been a personal test. After he did so much to place greater trust in local police officers nationwide, police in Prince George’s County sent a SWAT team to his house to look for . . . spray paint.
It would be comical if it were not so serious. Once the paramilitary unit arrives, heavy‐handed methods are often employed to ensure ‘officer safety,’ i.e. break windows to distract occupants from the doorway and flashbang grenades. The militarization of police tactics is out of control, but policymakers do nothing focus on expanding the power of the government.
11‐Year‐Old Entrepreneur Discovers Business Can Be a Picnic
In my home province of Quebec, an 11‐year‐old boy is building children’s picnic tables in his garage (using jigs his father built for him) and selling them at a very reasonable price at local home stores. You won’t need to speak French to get the gist of it. What he’s learning is surely invaluable, and it seems as though, in a sane world, this sort of activity would be readily available to all children who enjoy working with their hands.
Thanks to the rapid productivity growth enjoyed by earlier generations of North Americans, families in this part of the world no longer have to rely on the income generating capacity of their children for survival. But does it make any sense to divorce work and entrepreneurship from education as thoroughly as we currently do? In the places where co‐op work experiences are being offered to high school students, the practice seems popular. And in a truly free education marketplace, there would be an incentive for educators to meet that demand wherever it exists.
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Detroit Doesn’t Need More Federal Money
With the City of Detroit heading toward bankruptcy, The Hill reports that Mayor Dave Bing has signed a $330,000 contract with a Washington lobbying firm to help the city grab more money from federal taxpayers. At the same time, Rep. Hansen Clarke (D‑MI) wants up to a $1 billion in “emergency aid” (i.e., bailout) for Detroit from Uncle Sam.
I typed “federal funds Detroit” in a Google search and the following headlines popped up on the first page:
“Cockrel: ‘Idiotic Management of Federal Funds Cost Needy Detroit Resident a Chance at Jobs”
“Detroit Poorly Managed Federal Funds”
“Detroit Could Lose $20 Million in Federal Funds Due to Mismanagement”
“State Seeks Better Oversight of Detroit’s Federal Funds”
“Officials Examining Detroit’s Finances Find Federal Funds Poorly Managed”
As I clicked through the search pages a pattern emerged: most of the articles are either about Detroit receiving federal funds or Detroit mismanaging federal funds. And Mayor Bing and Rep. Clarke think the rest of the country should give Detroit more money?
Federal subsidies create a disincentive for local governments to prudently manage their financial affairs. Just like an unemployment check creates a disincentive for an unemployed worker to take a less desirable job that would at least get them back in the workforce, federal handouts allows local officials to avoid pursuing reforms that aren’t politically desirable in the short term, but that would be good for the city in the long‐term. In short, Detroit ultimately has to be responsible for Detroit.
A recent piece in the Wall Street Journal from David Beito and Daniel J. Smith, which compared the post‐tornado recovery efforts in Joplin, Missouri to Tuscaloosa, Alabama, is illustrative. According to Beito and Smith, “Joplin is enjoying a renaissance while Tuscaloosa’s recovery has stalled.” Why? Whereas Tuscaloosa has pursued central planning and federal aid, Joplin has taken a decentralized, bottom‐up approach that has enabled local businesses to spur the recovery.
Beito and Smith conclude:
In an age of mounting deficits and limited federal attention spans, hoping for more subsidies from Washington, D.C. is a risky bet at best. Joplin’s safer wager is in the good sense and independently generated resources of those individuals and businesses most directly affected by nature’s fury.
Detroit and other cities that are in financial trouble should take note.