Topic: General

Upcoming Cato Discussion on China’s Role in Dealing with North Korea

The United Nations Security Council has approved another round of sanctions against North Korea in response to its latest nuclear test. No one really believes that the new penalties, focused on Pyongyang’s coal and other exports, will have any effect. In fact, it is doubtful that China, which purchases most of the North’s goods, will fully enforce the new resolution.

Still, with most policymakers giving up any hope that the so-called Democratic People’s Republic of Korea will voluntarily negotiate away its nuclear program, Beijing remains the best option for constraining the DPRK’s nuclear ambitions. The People’s Republic of China so far has refused to play its assigned role, but Washington continues to press the PRC to act.

Getting Beijing to take strong action against North Korea is a long-shot, as I explain in an upcoming Policy Analysis, but worth serious effort by Washington. What that would involve is the subject of a forum at Cato at noon on December 8. Susan Glaser of the Center for Strategic and International Studies and Scott Snyder of the Council of Foreign Relations will join me in a panel discussed moderated by Cato Vice President Christopher Preble to discuss the challenges and possibilities of engaging China over the issue.

One thing is clear. Washington and its East Asian allies need to persuade rather than demand that the PRC act. How best to convince Beijing, and what mix of carrots and sticks would be most effective in doing so, will be among the issues discussed on the 8th. I hope you can join us: the details, including where to RSVP, are included here.

Does Higher Ed Prove We Need Bigger, Stronger Gates?

With school choice advocate Betsy DeVos slated to become the next U.S. Secretary of Education, the battle between regulation and freedom has suddenly become more intense, with people on both sides exchanging fire. Yesterday, Jason Bedrick weighed in against regulation, while today Jeffrey Selingo warns that a major reason “choice hasn’t necessarily led to better outcomes in higher education is the absence of a strong gatekeeper for quality control.”

This sort of assertion strikes me as more an article of intuitive faith than a conclusion based on evidence. If only some well-informed, smart group of experts decided what people could choose, choices would be much better. The problem is that no one has the omniscience to do the job, especially so effectively that the costs of bureaucracy, barriers to entry, and kneecapping of innovation don’t severely outweigh the hoped-for benefits.

OECD Economic Research Finds That Government Spending Harms Growth

At the risk of understatement, I’m not a fan of the Organization for Economic Cooperation and Development. Perhaps reflecting the mindset of the European governments that dominate its membership, the Paris-based international bureaucracy has morphed into a cheerleader for statist policies.

All of which was just fine from the perspective of the Obama Administration, which doubtlessly appreciated the OECD’s partisan work to promote class warfare and pimp for wasteful Keynesian spending.

What is particularly irksome to me is the way the OECD often uses dishonest methodology to advance the cause of big government:

But my disdain for the leftist political appointees who run the OECD doesn’t prevent me from acknowledging that the professional economists who work for the institution occasionally generate good statistics and analysis.

For instance, I’ve cited two examples (here and here) of OECD research showing that spending caps are the only effective fiscal rule. And I praised another OECD study that admitted the beneficial impact of tax competition. I even listed several good examples of OECD research on tax policy as part of a column that ripped the bureaucracy for some very shoddy work in favor of Obama’s redistribution agenda.

And now we have some more good research to add to that limited list. A new working paper by two economists at the OECD contains some remarkable findings about the negative impact of government spending on economic performance. If you’re pressed for time, here’s the key takeaway from their research:

Governments in the OECD spend on average about 40% of GDP on the provision of public goods, services and transfers. The sheer size of the public sector has prompted a large amount of research on the link between the size of government and economic growth. …This paper investigates empirically the effect of the size and the composition of public spending on long-term growth… The main findings that emerge from the analysis are… Larger governments are associated with lower long-term growth. Larger governments also slowdown the catch-up to the productivity frontier.

For those who want more information, the working paper is filled with useful information and analysis.

The Human Freedom Index 2016

We released The Human Freedom Index 2016 today. It is our second annual report that presents the state of overall freedom in the world based on a broad measure of personal, civil and economic freedom. Co-published by the Cato Institute, the Fraser Institute (Canada) and the Liberales Institut (Germany), my coauthor Tanja Porcnik and I look at 79 distinct indicators in 159 countries on issues ranging from freedom of speech and association to women’s freedoms, the extent of voluntary exchange, safety and security, the rule of law and more.

Given the rise of populism, nationalism and authoritarianism in many countries around the world in recent years, we think that it is becoming increasingly important not only to appreciate the inherent value of freedom, but also to better appreciate its central role in human progress. For that reason, we think it’s worth measuring carefully.

The top 10 freest jurisdictions are below. The United States ranks 23rd. Compared to 2008—the earliest year for which we have sufficient data for a robust index—the United States has been on a decline; it ranked 16th that year. In terms of economic freedom, for which we have decades of comparable data, the United States has been on a long-term decline since the year 2000. Surely, the war on drugs, the war on terror, the expansion of the regulatory state, the rise of crony capitalism and the erosion of property rights due to the abuse of eminent domain have contributed to the U.S. fall in the rule of law and overall human freedom. The United States can unfortunately no longer claim to be the world’s bastion of liberty.

Other country rankings of interest include Chile (29), the freest country in Latin America, while Venezuela (154) is the least free in the region (we don’t measure Cuba because of a lack of reliable data). India ranks 87th, Russia 115th and China 141st. Turkey ranks 73rd, South Africa 74th, Brazil 82nd and Egypt 144th.

The level of freedom matters for prosperity and overall well-being. For example, the average income per capita of the top quartile of countries is $37,147, far above that of the least free quartile ($8,700). All dimensions of freedom matter and reinforce each other. As countries become more free and therefore more prosperous, the data suggest that they first have relatively higher levels of economic freedom compared to personal freedoms, and that once they reach a high level of freedom, they have relatively higher levels of personal freedom compared to economic freedom, but all indicators of freedom are high. Put another way, if you want to live in a country with a high level of personal freedom, you better have a relatively high level of economic freedom (see graph below).

We also find a strong correlation between human freedom and democracy, which we measure separately. Hong Kong is an outlier in this regard and, given Beijing’s increasing interference there, we are concerned about it maintaining its high level of freedom. Read a discussion on that and more in the full report.

Nat Hentoff’s Interview with Che Guevara

Cato Senior Fellow Nat Hentoff once had the opportunity to interview Fidel Castro’s henchman, Che Guevara.  As Nat relates in this video clip, Che’s gatekeeper messed up–just assuming that since Nat wrote for the Village Voice, he would be another fawning lefty journalist.  Wrong!

In 2003, Nat wrote: “Having interviewed Cubans who survived Castro’s gulags, I have never understood or respected the parade of American entertainers, politicians and intellectuals who travel to Cuba to be entranced by this ruthless dictator who, for me, has all the charisma of a preening thug.”

And here’s Richard Cohen in today’s Washington Post: “Fidel Castro was a killer. He came to power in a revolution and so violence was probably inescapable. But he followed it with mass executions — the guilty, the innocent, it hardly mattered. He imposed a totalitarian system on Cuba even harsher and more homicidal than the one that preceded it. He persecuted homosexuals, dissidents, critical writers and journalists. He would not tolerate a free press, and his own political party was the only one permitted. In the end, he ruined his country’s economy while at the same time exporting terrorism.”  Read the whole thing.

Does “Wagner’s Law” Mean Libertarians Should Acquiesce to Big Government?

There’s a lot of speculation in Washington about what a Trump Administration will do on government spending. Based on his rhetoric it’s hard to know whether he’ll be a big-spending populist or a budget-cutting businessman.

But what if that fight is pointless?

Back in October, Will Wilkinson of the Niskanen Center wrote a very interesting—albeit depressing—article about the potential futility of trying to reduce the size of government. He starts with the observation that government tends to get bigger as nations get richer.

“Wagner’s Law” says that as an economy’s per capita output grows larger over time, government spending consumes a larger share of that output. …Wagner’s Law names a real, observed, robust empirical pattern. …It’s mainly the positive relationship between rising demand for welfare services/transfers and rising GDP per capita that drives Wagner’s Law.

I’ve also written about Wagner’s Law, mostly to debunk the silly leftist interpretation that bigger government causes more wealth (in other words, they get the causality backwards), but also to point out that other policies matter and that some big-government nations have wisely mitigated the harmful economic impact of excessive spending and taxation by having very pro-market policies in areas such as trade and regulation.

In any event, Will includes a chart showing that there certainly has been a lot more redistribution spending in the United States over the past 70 years, so it certainly is true that the political process has produced results consistent with Wagner’s Law. As America has become richer, voters and politicians have figured out how to redistribute ever-larger amounts of money.

By the way, this data is completely consistent with my recent column that pointed out how defense spending plays only a minor role in America’s fiscal challenge.

It’s DeVos for Boss! Hopefully, Just of the Education Department

Betsy DeVos, who has long championed private and charter school choice, has been named the next U.S. Secretary of Education. On the spectrum of education policy people, her support for choice puts her well on the correct side. But I have concerns: especially that President-elect Trump will see Ms. DeVos—or that she will see herself—not just as the education department head, but rather as the national education boss.

As I wrote yesterday, even though choice is great, it is not something people should want Washington providing. Nor—outside of the DC voucher program, military families, and maybe Native American reservations—is it something that the feds can constitutionally provide. My fear is that DeVos and Trump might not recognize the myriad problems with taking private school choice national. More concerning, the American Federation for Children, which DeVos chairs, has tended to favor more rules and regulations on choice than I would prefer. That could become a much bigger concern were rules and regs attached to national-level vouchers.

Then there’s the Common Core. DeVos has written that she does not support it, but some organizations she has backed have. She says she wants high standards, but indicates that she thinks they should be local, or at least “driven by local voices.” Assuming that means she will brook no federal influence over state standards—and I’m not sure her statement is entirely clear on that—that’s good news. The Common Core should thrive or die based on proving its worth, and people freely choosing it. You couldn’t get much further from that than the federal coercion used to get states to adopt it in the first place.

Another worry is that I have no idea where DeVos stands on early childhood or higher education issues, and the latter, especially, is gigantic, with Washington furnishing tens-of-billions of dollars in student loans, among other higher ed matters. DeVos will essentially be taking over a hugely bureaucratic lending company—with lots of regulatory power—that on a day-to-day basis could prove to be a far greater burden than she expected.

Finally, where DeVos could do immediate good is in rescinding—or something akin to that—“Dear Colleague” letters that have, for instance, pushed colleges to curb legal protections for students accused of sexual assault or harassment, or tried to force national decisions on controversial issues that involve competing rights and concerns, most notably bathroom and lockerroom access. Washington has a role in combatting discrimination by state and local governments, but should tread much more lightly.

It is good news that there will be a proven school choice champion holding the highest-profile education job in the land. But it needs to be absolutely clear that that does not make Betsy DeVos the national education boss.