The Enterprise Blog

Nick Schulz

Return of a Bad Idea: Utility Capitalism

By Nick Schulz

November 20, 2009, 4:37 pm

When New America’s Michael Lind wrote an essay arguing for a return to “utility capitalism,” he was met with a swift and convincing rebuke from Robert Shapiro. But bad ideas don’t go away forever. Now PIMCO’s Bill Gross is talking up utility capitalism, too:

The New Normal is likely to be a significantly lower-returning world. Diminished growth, deleveraging, and increased government involvement will temper profits and their eventual distribution to investors in the form of dividends and interest. As banks, auto companies and other corporate models become more regulated and therefore more like utilities and less like Boardwalk and Park Place, they will return less.

Of course, Gross is simply speculating on what he thinks is likely to happen over the next several years, whereas Lind was proposing this development as a good idea. But Gross also has the ear of the Obama administration, so the specter of utility capitalism bears watching.

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Newt Gingrich

Obama’s Unintended Impact

By Newt Gingrich

November 20, 2009, 11:44 am

The law of unintended consequences strikes without warning.

It struck the Obama administration with its recent plan to overhaul the healthcare system. In fact, more Americans now report that they would rather have less government intervention in their healthcare system than two years ago. In 2006, 69 percent of Americans wanted the government to take more responsibility in providing healthcare. Now, only 47 percent of Americans want government in that role.

Exactly at the time that the White House is doing more to expand the role of government in the most intimate facets of our lives, more Americans are resisting.

This movement is spreading rapidly through the country. Last week in Baton Rouge, Louisiana voters came out in numbers against a plan to increase taxes to pay for more city spending. In part through the initiative from the local Baton Rouge Tea Party, 64 percent of voters rejected this plan.

Similarly, in the light of President Obama’s decisive 24-point margin of victory in California, voters in that same state also overwhelmingly rejected a proposal to increase taxes to cover more spending.

This movement is known as localism, when more Americans want to take the power out of the hands of the federal government and bring it back closer to home. (Read more about it here in my column in today’s Washington Examiner.)

President Obama cannot ignore the unintended impact he is having on the American people. The lesson to be learned is that the harder you push the American people towards centralized government and big bureaucracy, the harder they will resist you.

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Mark J. Perry

Revolutionary Blogger and Freedom Fighter: Yoani Sanchez

By Mark J. Perry

November 20, 2009, 11:43 am

If you haven’t yet heard of the Cuban blogger Yoani Sanchez (pictured below) and her Generacion Y blog, it’s time to become familiar with a courageous woman who is proving that one determined individual with a computer, a blog, and limited access to the Internet can single-handedly challenge the entrenched communist regime in Cuba by bringing international attention to the struggles of daily life there.

yoani-sanchez

Examples of Yoani’s blog postings about life in Cuba under a repressive dictatorship include descriptions of the years of paperwork and “verification of ideological purity” required to purchase a car in Cuba, the hardships of climbing 14 floors of stairs for more than seven months because the Russian elevators weren’t working in her apartment building, frequent power outages, and the harassment of a Cuban entrepreneur whose restaurant was closed by Cuban authorities.

For those unfamiliar with Yoani Sanchez, she was featured in the Wall Street Journal article (December 22, 2007) “Cuban Revolution: Yoani Sánchez Fights Tropical Totalitarianism, One Blog Post at a Time”:

While there are plenty of bloggers who dish out harsh opinions on Mr. Castro, most do so from the cozy confines of Miami. Ms. Sánchez is one of the few who do so from Havana.

Not only does she write from Cuba, she even signs her name and posts a photo of herself on her Web site. Most Havana bloggers are anonymous. “Once you experience the flavor of saying what you think, of publishing it and signing it with your name, well, there’s no turning back,” she says. “One of the first things we have to do, a great way to begin to change, is to be more honest about saying what you think.”

The problem is, saying what you think in Cuba can be dangerous.

Freedom of expression in Cuba is a real danger for Cuban bloggers like Yoani Sanchez, who was detained and beaten as she walked to a peaceful demonstration last week in downtown Havana—see a Miami Herald report here and Yoani’s own account in her post “Gangland Style Kidnapping.”

And it’s not just the media that have recognized the growing influence of the Cuban blogger (Generacion Y gets more than 1 million visits a month and is translated from Spanish into 16 languages), she was recently awarded Columbia University’s Graduate School of Journalism 2009 Maria Moors Cabot Prize for outstanding reporting on Latin America and the Caribbean, but was denied permission by the Cuban government to travel to New York City to accept the prize in October.

And now Yoani Sanchez can add another major accomplishment to the growing international influence of her Generacion Y blog—she captured the attention of President Obama, who responded to seven questions she sent him in an effort to engage in some “popular diplomacy.” In a preface to his answers, President Obama wrote:

Your blog provides the world a unique window into the realities of daily life in Cuba. It is telling that the Internet has provided you and other courageous Cuban bloggers with an outlet to express yourself so freely, and I applaud your collective efforts to empower fellow Cubans to express themselves through the use of technology. The government and people of the United States join all of you in looking forward to the day all Cubans can freely express themselves in public without fear and without reprisals.

Obama next answered Yoani Sanchez’s questions, such as “For years Cuba has been a U.S. foreign policy issue as well as a domestic one, in particular because of the large Cuban American community. From your perspective, in which of the two categories should the Cuban issue fit?” See Yoani Sanchez’s post “President Obama’s Responses to Yoani Sanchez’s Questions.”

Yoani also posed six questions for Cuban President Raul Castro, but has not yet received a response, and probably won’t ever get an answer.

When the history of Cuba’s freedom movement is written, it’s likely that Yoani Sanchez will be recognized as a national hero and freedom fighter, the equivalent of Lech Walesa in Poland and Vaclav Klaus in the Czech Republic. Yoani Sanchez demonstrates that we should never underestimate the power of one courageous individual with a computer, a blog, and intermittent access to the Internet, or the individual’s power to change the world in the Information Age, especially with a message of freedom and individual liberty. The fact that the president of the United States, who is often recognized as the most powerful person in the world, has praised Yoani Sanchez’s blog and responded to her questions is a remarkable and historical event. Intellectual figures like Milton Friedman, Friedrich von Hayek, and Thomas Jefferson would be proud of Yoani Sanchez and her powerful message of individual freedom in one of the only remaining regimes of totalitarianism left in the world.

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Jay Richards

A Tale of Two Climate Laymen

By Jay Richards

November 20, 2009, 11:40 am

Yesterday I complained about the Left’s fawning over the climate advocacy of Al Gore, who wears his amateur scientific credentials on his sleeve. Despite his tendency to make demonstrable scientific errors, he’s treated respectfully even by scientists who ought to know better.

But as Anne Jolie explains in the Wall Street Journal Europe, laymen who question the received wisdom of climate catastrophists are dismissed—even when those laymen are demonstrably right. Stephen McIntyre is a retired Canadian businessman who has uncovered a series of embarrassing mistakes by climate scientists over the last few years. His exposés have led to grudging corrections by the UN’s Intergovernmental Panel on Climate Change, NASA, and others.

He has published several articles with environmental economist Ross McKitrick, and writes prolifically on the popular blog Climate Audit. So what do the scientists whose work McKitrick has corrected think of him? James Hansen of NASA “has dismissed him as a ‘court jester.’” Penn State’s Michael Mann, responsible for the now-discredited “hockey stick” graph supposedly showing a rapidly increasing global temperature, complains of “every specious contrarian claim and innuendo against me, my colleagues, and the science of climate change itself.” Stanford’s Stephen Schneider says: “‘You mention his name in my community, people just smile. It’s a one-liner to get a laugh out of a group of climate scientists.’”

These are key players on the catastrophist side of the debate—the experts that we non-specialists are supposed to trust. Contrast their obnoxiously dismissive responses to McIntyre—a statistically astute, intellectually precise, lay auditor of their work—with their acceptance of. . . Al Gore. Apparently for these scientists, intellectual orthodoxy trumps intellectual seriousness and scientific accuracy. Is it any wonder more and more non-scientists are doubting their credibility?

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A General Speaks

By The Editors

November 20, 2009, 8:15 am

General David H. Petraeus will be presented with the 2010 Irving Kristol Award. General Petraeus, who commands the United States Central Command, will deliver the Kristol lecture on Thursday, May 6, 2010.

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Jason Richwine

Concede Graciously, Mr. Hoffman

By Jason Richwine

November 19, 2009, 7:06 pm

Say it isn’t so. The closely watched NY-23 race may now sink into the pointless and wasteful legal morass known as… a recount. Doug Hoffman, the Conservative candidate who lost on election night, now claims various vote-counting irregularities cost him the election, and he’s soliciting donations to help “count every legal ballot.”

Last January I wrote a piece for NRO called “Abolish Recounts.” The title says it all. At the time, I was writing about the seemingly endless bouts of legal maneuvering between Republican Norm Coleman and Democrat Al Franken, as they competed for a Senate seat in Minnesota. Because I wanted Coleman’s election night lead to stand in that case, a left-wing blog called my piece “the newest right-wing talking point,” and a commenter assumed my position was “just sour grapes.”

I’m more principled than that, so let me make the point again in reference to this election. Democrat Bill Owens still has a commanding lead, but if the absentee votes narrow Owens’ lead as some expect, then the contest would become essentially a tie. There is too much randomness in voting for us to determine the “true” winner in such an election. From my NRO piece:

Where does this randomness come from? Weather patterns affecting turnout in certain areas, for starters. Some voters also forget to register or to mail in their absentee ballots, accidentally check the wrong box on their ballots, or show up too late at the polls. We have also seen bureaucratic errors made by poll workers, such as wrongly allowing or disallowing certain people to cast ballots. Even leaving aside these procedural mistakes, some voters are simply misinformed.

No recount can make up for the random error that plagues all close elections. Neither candidate deserves to win a statistical tie, and we can save a lot of time and money by just sticking with the initial winner.

Mr. Hoffman, do not challenge this election. As soon as the normal absentee vote-counting process is over, please concede graciously. You do not deserve to win, and the people of NY-23 should not have to endure a drawn-out recount process that is bound to dissatisfy half the voters.

Spend your energy plotting a 2010 rematch!

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Charles Murray

The Unbearable Paradox of Glenn Beck

By Charles Murray

November 19, 2009, 12:13 pm

About six weeks ago, I engaged in an exchange about Glenn Beck, arguing that he makes it harder to convert the unsaved to the cause of limited government, and got an earful in return, mostly in the form of thoughtful but forceful emails saying I hadn’t given him a chance. So I set up my Tivo to record his show and have spent many cocktail hours since then watching. Last night’s opening shot encapsulates everything that has driven me nuts about the experience.

Beck was, as usual, standing in front of his blackboard. Chalked on it was:

“The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.” Thomas Jefferson

It is a sentiment with which I completely agree. I’ve written whole books with that sentiment as the subtext. The problem: The quote is a fake. Thomas Jefferson never said it. Jefferson would have been sympathetic to the idea, as other writings clearly imply. But he didn’t actually say it. In front of a national television audience, Glenn Beck put up a quote that his researchers would have discovered is a fake if they had done the slightest bit of Googling.

It’s been like that for six weeks of watching. Beck is spectacularly right (translation: I agree with him) on about 95 percent of the substantive issues he talks about. He is a full-throated libertarian in a world of wishy-washy Republicans. The man is a gifted communicator. His style doesn’t happen to be one I like, but many times I’ve sat there on my sofa wishing I could make the same point as effectively.

But Beck uses tactics that include tiny snippets of film as proof of a person’s worldview, guilt by association, insinuation, and occasionally outright goofs like the fake quote. To put it another way, I as a viewer have no way to judge whether Beck is right. I have to trust that the snippets are not taken out of context, that the dubious association between A and B actually has evidence to support it, and that his numbers are accurate. It is impossible to have that trust.

So here’s the unbearable paradox. Beck really has had important effects on the way the Obama administration and its legislation is perceived. It is conceivable that if healthcare goes down to a razor-thin defeat, Beck will have made the difference. If that turns out to be the case, he will have made a far greater contribution to the survival of the American project than ink-stained wretches like me can dream of having. And I want to shut him up?

I don’t really want to shut him up. I want him to change. Take those enormous talents and make all the arguments that he can legitimately make. Keep the cutesy gimmicks (I understand that we’re talking entertainment here), but have an iceberg of evidence beneath the surface. Fox is making so much money from the show that it can afford the staff to do the homework.

Absent that change, and I’m not holding my breath, let me suggest to my colleagues who want a better public policy debate that we’ve got to avoid the if-I-were-God fallacy. It’s not in our power to decide whether Glenn Beck’s show continues. He will save the Republic or fail to save it whatever we do. All we can do is be honest about what we think. I’ll go first. I say it’s spinach and I say the hell with it. What Beck does is propaganda. Maybe propaganda has its place, but let’s not kid ourselves. Glenn Beck and Keith Olbermann are brothers.

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Jay Richards

Gore’s Choice

By Jay Richards

November 19, 2009, 12:12 pm

Al Gore’s new book, Our Choice, is getting the expected fawning media attention. I haven’t yet gotten my copy. Still, I can guess that he claims that even though we’re causing catastrophic climate change with fossil fuels, it’s easy and relatively painless to fix with other, greener sources of energy.

I can’t believe people treat Gore with such reverence. For as soon as he opens his mouth to talk about science and/or technology, bloopers fall out. The latest blooper was in his interview with Conan O’Brien, when he discusses the boundless potential of geothermal energy. The impression you get from Gore is that there’s all this cheap heat under the ground and we’ve just been ignoring it. He informs viewers that the Earth’s core (perhaps just a few kilometers down?) is “several million degrees.” (Here’s the video.) In fact, even the inner core is probably no more than about 7,000 degrees Celsius (estimates vary by a few thousand degrees).

This could be written off as an innocent mistake, but the comment perfectly typifies Gore’s pseudo-scientific style. He speaks of “kilometers,” which gives the air of scientific literacy since most nonscientists in the United States don’t use metric units. But then he effortlessly commits a scientific blunder that no one who has written several books on the Earth should make.

And he offers his views with a moral seriousness of biblical proportions. He has this Bible verse inside the front cover of the book (h/t to Greg Pollowitz):

I’m offering you the choice of life or death. You can choose either blessings or curses.

-Deuteronomy Chapter 30, Verse 19

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Philip I. Levy

Pick Your Stimulus

By Philip I. Levy

November 18, 2009, 12:20 pm

My esteemed colleague David Frum recently weighed in on the stimulus debate, defending Republicans who supported President Obama earlier in the year.

What alternative policy should have been adopted back in the spring, when interest rates had been cut to almost zero and the economy was still collapsing? Are vague bromides about big government anything like an adequate response to the worst economic crisis experienced by any American under age 80? …

A few days ago, I was talking to a roomful of young conservatives about the crisis. All agreed in denouncing both the bank bailouts done under TARP and the stimulus. I asked: OK fine—what was the alternative?

There was a short pause, and then somebody laughed: “I guess it’s lucky that we weren’t in power.”

It may be a good thing that those particular young conservatives were not in power, but there are others with better ideas. In today’s Wall Street Journal, Michael Boskin acknowledges that the president’s plan did have an effect, but writes:

The stimulus bill surely ranks dead last compared to the natural dynamics of the business cycle, the Fed’s zero interest rate policy, and the automatic stabilizers in the tax code (which have reduced taxes proportionally more than income) as far as explanations for the improvement in the economy.

Dead last might have been acceptable, had there been no alternative. But there was. Boskin goes on to write:

My Stanford colleague Pete Klenow and Rochester economist Mark Bils estimated that cutting the payroll tax by six percentage points (of the 12.4% Social Security component) would, under standard assumptions, increase employment by three million to four million workers—an amount equal to all the job losses since the stimulus was passed.

Such an approach could have been implemented far more quickly than the drawn-out spending plans of President Obama’s bill. It would not have afforded much opportunity to fund favored projects—a political downside, but a public policy perk.

Lest this idea seem like 20/20 hindsight, my colleague John Makin advocated for just such a payroll tax cut in December 2008.

Frum’s story illustrates not the paucity of alternative ideas, but the challenge of espousing and disseminating them in the midst of raucous political debates.

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Sarah Palin Polls: The Unqualified Future?

By Andrew Rugg

November 18, 2009, 12:19 pm

Corresponding with the release of Sarah Palin’s new book, several pollsters have updated questions on the former vice-presidential candidate. Yesterday, Karlyn Bowman discussed polls relating views on Sarah Palin and Joe Biden’s qualifications to be president. Several new polls show that Americans overwhelmingly think Palin is not qualified to be president. An ABC/Washington Post poll shows that 60 percent think she is not qualified to be president. In a CNN poll, 70 percent think she is not qualified. Sixty-two percent in a CBS News poll think she does not have the ability to govern effectively.

One large discrepancy between these polls is the number of undecided responses. Only 5 percent in the ABC/Washington Post poll have no opinion on whether they have a favorable or unfavorable view of Sarah Palin. However, in the CBS News poll, 37 percent are either “undecided” or “haven’t heard enough to say” whether they view her favorably or unfavorably. Such a wide discrepancy leaves doubt as to whether Americans have made up their mind on Sarah Palin or if she has room to grow (or fall) in American eyes.

There does seem to be evidence emerging that, fair or not, Sarah Palin is being identified with the future of the Republican Party. In the latest Rasmussen Reports poll, a plurality of 41 percent thought Sarah Palin represents a new direction for the Republican Party. In that same poll, an identical plurality thought she shares the values of most Republican voters throughout the nation. Unfortunately, other pollsters haven’t asked similar questions. The results, therefore, should be treated with a healthy dose of skepticism. It is true that opinions of Sarah Palin remain far more favorable among Republicans. In a November CBS News poll, 52 percent of Republicans, 4 percent of Democrats, and 21 percent of Independents have a favorable opinion of her. This isn’t surprising, but it does complement the Rasmussen data that shows her strong association with the Republican Party’s future.

Also, in polls that rank potential Republican presidential candidates for 2012, Sarah Palin consistently places near or at the top. The latest iteration of this ranking was done by CNN in mid-October. A quarter of national adults would support her as the Republican nominee, ranking behind Mike Huckabee’s 32 percent support. The CBS poll and the CNN poll might support the Rasmussen data in the conclusion that Sarah Palin represents a potential future for the Republican Party.

Andrew Rugg is a research assistant at the American Enterprise Institute.

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Gary Schmitt

Obama, Afghanistan, and Slips of the Tongue

By Gary Schmitt

November 18, 2009, 12:02 pm

According to a New York Times story based on an interview with CNN today, President Obama said he is “very close” to a decision on troop levels in Afghanistan and would make an announcement “in the next several weeks.”

Very close … next several weeks? Sorry, but “very close” and “next several weeks” do not compute in my vocabulary as synonyms of any sort.

The president then went on to say that he did not want his successor as president to inherit the Afghan conflict.

If Obama is a one termer, of course the next president will inherit the Afghanistan mission and, if he’s a two termer, given the history of counterinsurgencies, it seems likely U.S. troops will still be there in some numbers as well. Afghanistan is no short-term mission and to think otherwise is a sign that one is not serious about the task ahead. Tellingly, Obama didn’t say that he wanted to leave his successor with the mission headed towards “success.” Is that because he doesn’t really think success is possible in these matters and that what George W. Bush left him in the case of Iraq was not a mission on the road to success?

Finally, the president also said that a “multi-year occupation” would not serve the interests of the United States and he repeatedly referred to the Afghan mission as “this thing”—as in, “the American people will have a lot of clarity about what we’re doing, how we’re going to succeed, how much this thing is going to cost” and “what’s the end game on this thing.”

“Occupation?” Does the president really think of the Afghan mission as an occupation?  Doesn’t that, in turn, mean the Taliban are “freedom fighters?” Presumably, the president’s use of the term “occupation” was just sloppy on his part. And maybe his use of “this thing” is a product of a tired, travelling chief executive.

On the other hand, having spent several weeks supposedly knee-deep in reflection on Afghanistan and America’s role there, the fact that he would have such slips of the tongue is hardly reassuring that his Afghan strategy review is headed in the right direction or, as we used to say, “his head is in the right place.”

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Newt Gingrich

A Shift in American Opinion on Healthcare

By Newt Gingrich

November 18, 2009, 11:58 am

In November 2006, coming off a low point for the Republican Party, seven out of ten Americans supported having a government solution for healthcare. Now, according to a recent Gallup poll, more Americans favor keeping the current healthcare system (61 percent to 32 percent).

What has happened? Why the shift?

Perhaps more Americans realize that our country’s economy cannot handle an inflated government bureaucracy. Perhaps more Americans now understand that as our nation’s deficit continues to expand, China has already acquired $2 trillion worth of U.S. debt.

President Obama and Congress have two options: They can listen to the shift in opinion of the American people, and move in the direction of a healthcare system that contains costs and reduces fraud. Or they can ignore the shift in the American people, and suffer the consequences in the 2010 election. The decision is theirs but time is running out. Read more in my newsletter today.

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Andrew Smarick

Close Failing Schools and Start Afresh

By Andrew Smarick

November 18, 2009, 11:02 am

The latest column by the superb Washington Post writer Jay Mathews is about turnarounds and the stimulus.  Like me, he’s in favor of closing failing schools and starting fresh instead of trying to fix those in a persistent state of underperformance. (He uses arguments and data from my Education Next article “The Turnaround Fallacy” to build his case.)

A couple months ago, it looked like the turnaround train had built up enough steam to easily blow by any questions or concerns. But when someone like Mathews (author of Escalante and Work Hard, Be Nice, two of the most important books about pockets of educational excellence in urban America) starts yelling, “slow down!” the conductor is apt to take notice.

With $4.35 billion from the Race to the Top and $3 billion from the School Improvement Grant program at stake, our getting this right is critically important for disadvantaged kids and taxpayers as well.

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Jay Richards

Bishops Flex Healthcare Muscle

By Jay Richards

November 18, 2009, 11:01 am

Susan Ferrechio has a good piece in the Washington Examiner about the role of American bishops in the ObamaCare abortion debate. I think the bishops have been extremely effective in this debate. As she quoted me in the story:

“I frankly think this particular issue is one which the Council on Catholic Bishops will probably have more influence than they have had on any other issue in decades,” said Jay Richards, visiting fellow at the Heritage Foundation and a former teaching fellow at Princeton Theological Seminary. “I do think there is a strong chance that if the Senate comes up with a bill that strips out the House language, it could cost the bill. I do think it is that crucial.”

Religious groups, including the U.S. Conference on Catholic Bishops, make statements on public policy all the time. In fact, I think many of them dilute their influence by opining on subjects far afield from both their competence and the clear deliverances of their theological traditions. But taxpayer funding of abortion is one of those issues on which Catholic bishops will naturally have an informed opinion. Moreover, there are a number of legislators, such as Rep. Bart Stupak, who agree with the bishops. I think many of these members are acting out of principle, and not cynical political calculations. That will make it very hard for President Obama or House Speaker Nancy Pelosi to strong-arm them into compliance.

Of course, not all Catholic members of Congress agree with the bishops. They’re free to disagree, but they’re not necessarily free to vote for taxpayer funding for abortion and still claim to be good Catholics:

In Rhode Island, Rep. Patrick Kennedy, a Democrat who voted against the abortion amendment, received a public lashing by the bishop of Providence, Thomas Tobin, who released an open letter to Kennedy.

“It’s a deliberate and obstinate act of the will; a conscious decision that you’ve reaffirmed on many occasions,” Tobin wrote. “Sorry, you can’t chalk it up to an ‘imperfect humanity.’”

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How Green is God?

By The Editors

November 18, 2009, 7:29 am

Professor P.J. Hill is one of the most important figures in free market environmentalism. He recently sat for an interview with THE AMERICAN to discuss markets, morality, and the environment.

Hill was visiting Washington to deliver a lecture at AEI on the morality of capitalism.

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Mark J. Perry

World Poverty Rate Plummets

By Mark J. Perry

November 18, 2009, 7:19 am

In Kevin Hassett’s National Review article “The Poor Need Capitalism,” he points to a new NBER study, “Parametric Estimations of the World Distribution of Income,” and writes:

The chart [below] draws on a landmark new study by economists Maxim Pinkovskiy and Xavier Sala-i-Martin. The authors set out to study changes in the world distribution of income by gathering data from many different countries. As a byproduct of their work, they are able to count the number of individuals who live on $1 per day or less, a key measure of poverty.

poverty11

According to their calculations, the number of people living in poverty so defined has plummeted, from 967,574,000 in 1970 to 350,436,000 in 2006, a decrease of a whopping 64 percent. Whence the reduction? The biggest factor is the emergence of middle classes in previously poverty stricken China and India. And the spread of capitalism to other countries has similarly been followed by prosperity. The trend is even more impressive if one considers that the world population skyrocketed over that time, increasing by 3 billion.

If the trend continues for just 40 more years, poverty will have been essentially eradicated from the globe. And capitalism will have done it. There are those who have argued that the current financial crisis has served as proof that capitalism is a failed ideology. The work of Pinkovskiy and Sala-i-Martin suggests that there are about a billion people whose lives prove otherwise.

The NBER paper also finds that the world poverty rate fell by 80 percent, from 26.8 percent in 1970 to only 5.4 percent in 2006 based on the $1 per day poverty measure (see chart below).  poverty2

The study also estimates poverty rates separately for five geographical regions (see chart below), with some pretty amazing results for East Asia (China, Taiwan, and S. Korea), which in 1960 had the highest regional poverty rate in the world by far, at 58.8 percent, compared to 39.9 percent for Africa, 11.6 percent for Latin America, 8.4 percent for MENA (Middle East and North Africa), and 20.1 percent for South Asia. In the 36-year period between 1970 and 2006, the poverty rate in East Asia fell to only 1.7 percent, which is now below all of the other regions: Africa (31.8 percent), Latin America (3.1 percent), MENA (5.2 percent), and South Asia (2.6 percent). poverty3Bottom Line: The 80 percent decrease in the world poverty rate between 1970 and 2006 has to be the greatest reduction in world poverty in such a short time span ever in history, and the 97 percent reduction in the poverty rate of East Asia (from 58.8 percent to 1.7 percent) has to be the most significant improvement in a regional standard of living in history over such a short period. Thanks to Hassett for pointing out that capitalism is alive and well, and is spreading around the world helping to eliminate poverty.

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Nick Schulz

Intangible Assets and Economic Success

By Nick Schulz

November 18, 2009, 7:17 am

One of the major themes of From Poverty to Prosperity is that intangible assets (such as culture and laws) can matter much more to economic success and growth than visible, tangible assets—land, labor, machinery, and the like. This is true for countries and regions—and even individual firms.  A good example of this can be found at 3M, where I spent some time earlier this month with other folks who study innovation. Jeffrey Phillips was on the trip and made the following observations:

3M’s model is distinctively upper Midwestern—built on the concept of working together for the common good of the firm and the employees. The original founders embedded much of this philosophy, which was extended by William McKnight, who encouraged his managers to allow employees to experiment, to define the best way to do a job, and to tolerate mistakes…

Some of the other factors that sustain an innovation culture are also aspects of the Midwestern, rural roots. There’s a focus on individual initiative, which encourages people to identify opportunities and create solutions, and a “barn raising” mentality which encourages people to help each other with projects… Finally, the evaluation criteria for most people encourage working together and solving problems across geographies and product lines. These collegial attitudes, low personal aggrandizement, and attitudes to sharing insights and information rather than bottling up information in rigid silos creates an internal innovation community spread across geographies and over 40 different core competencies. With a powerful informal network, the conditions are ripe for innovation.

When pundits in the popular press talk about innovation they frequently mention Google or Apple or other Silicon Valley–based innovators. And those are great innovators in a highly dynamic region. But cultures of innovation and economic success can be found elsewhere, and such a culture seems particularly strong in the Minneapolis area that 3M calls home (as do Target, Cargill, General Mills, and many other highly innovative firms). A nation’s economic success is largely a product of similar kinds of vital intangible assets and policy makers would be wise to spend more time studying and bolstering them.

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Jon Entine

Is the Left Turning Against Cap-and-Trade?

By Jon Entine

November 17, 2009, 5:18 pm

With a post-Kyoto agreement looking increasingly unlikely to come out of the Copenhagen climate summit, environmentalists are regrouping and debating the best strategy for promoting greenhouse gas reductions. A consensus on the Left has emerged around a cap-and-trade formula, which is already in place in Europe and is being considered in the U.S. Congress. But the economic impact of cap-and-trade is a wild card and it has its skeptics across the ideological spectrum.

Most liberal analysts claim the European scheme is flawed but getting better, while many conservatives blast it for being both inefficient and for not reducing carbon emissions. Just recently, Kenneth Green of the American Enterprise Institute testified before the Senate Finance Committee and noted that cap-and-trade tries but fails to cap carbon emissions. Instead, it “caps economic growth.” Many conservatives argue for a carbon tax, claiming it is more cost-certain, which businesses crave. Liberal skeptics believe some conservatives disingenuously support carbon taxes as a way to throw a wrench into congressional debate and ultimately undermine support for carbon reduction legislation.

In recent weeks, the controversy has taken a new turn, as critics on the Right gained allies from the Left. While most environmental groups (ENGOs) are rallying for a worldwide cap-and-trade system, some aggressive ENGOs, including Friends of the Earth and Greenpeace, have long made the case that carbon offsets are a boondoggle that would not help the environment very much. Now the iconoclastic duo, joined also by Public Citizen, has launched a new attack, spearheaded by a report by Friends of the Earth titled “A Dangerous Obsession.” According to FoE, cap-and-trade has not produced sweeping results because of rampant corruption and inefficiency inherent within the system. It claims carbon trading schemes are allowing speculators to grow rich but are not delivering the emissions cuts promised.

The trade in carbon permits and credits, mainly based in Europe, was worth $126 billion in 2008 and is predicted to balloon to $3.1 trillion by 2020 if a global carbon market takes off. But instead of being a trade between polluting industries, says FoE, it has become one dominated by banks and speculators making big profits. It’s feeding a carbon bubble, FoE says, that when popped could rival the economic damage brought on by the sub-prime mortgage debacle. FoE and Greenpeace continue to push for a carbon tax, although it differs in structure from one advanced by many conservatives.

The renewed attack on cap-and-trade was greeted with glee by gum-up-the-works conservatives at The Wall Street Journal and on Capitol Hill. But the truly interesting response has been the defensiveness of the Left, which has been struggling to hold its cap-and-trade coalition together. The liberal site TreeHugger dismisses FoE’s claim, citing a study authored by liberal NGO economists and released by the German Marshall Fund that the trading systems in Europe have led to annual carbon reductions of 2.5 percent to 5 percent with the “carbon market now worth 56 billion U.S. dollars.”

Patrick Birley from the European Climate Exchange jumped into the fray, calling the report “misguided,” and accusing FoE of demonstrating a loose grasp of financial markets by relating carbon trading to complex sub-prime trading. “Carbon trading is a very simple trading tool much like trading in oil or gas,” he said. He pointed out that carbon trading is merely a tool to achieve carbon caps set by governments.

The fierce contretemps further dampens congressional prospects for a cap-and-trade system and leaves the Left in the position of fighting itself at the very moment it needs to close ranks behind a bill, any bill, that could get to the president’s desk.

AEI intern Moon Doh contributed research assistance for this post.

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Steven F. Hayward

A Rapprochement Between Right and Green

By Steven F. Hayward

November 17, 2009, 11:33 am

I don’t normally get to the obits page of the Washington Post, so it was only by chance that I happened to catch the obituary today for Tom Graff, who died at 65 from thyroid cancer a few days ago.

Graff was the head of Environmental Defense in Oakland, and as such you wouldn’t think he’d be someone to get a shoutout on Planet Gore, but Tom was exactly the kind of market-oriented environmentalist with whom it was easy to break bread. I used to know him when I worked out in the Bay Area, and he would always delight in attacking Gov. Pete Wilson from the right on water policy, remarking to me one time (circa 1990) that Wilson’s water plans “were more like something Gorbachev would do” than a genuine market reform.

The Post obit suggests some of this, but doesn’t capture how wholly market-friendly Graff was. He seemed to attract similar-minded folks the the ED office in Oakland, including economists who endorsed road pricing rather than mass-transit boondoggles as the cure for traffic congestion. Graff and his crew were probably outliers even in the ED community (Graff admitted one time he didn’t always see eye-to-eye with HQ in New York). If there were more “mainstream” environmentalists like Graff, a rapprochement between Right and Green would be easier to imagine. (Cross-posted from Planet Gore.)

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Karlyn Bowman

Biden, Unqualified to be President?

By Karlyn Bowman

November 17, 2009, 10:42 am
490px-biden_at_economic_forum_2003_crop

Courtesy World Economic Forum.

The pollsters are in overdrive measuring Sarah Palin’s popularity. Most of the new polls show that large majorities say she is unqualified to be president. To take just one, 70 percent in the CNN/Opinion Research Corporation poll gave that response. That’s what makes another finding in the same poll so interesting. Half say Vice President Joe Biden is qualified to assume the top job, but almost as many, 48 percent, say he’s not. Other polls are giving Biden mediocre ratings. In the October Gallup poll, for example, 42 percent had a favorable opinion of him and 40 percent unfavorable, down from 53 percent favorable, 29 percent unfavorable in January. President Obama, Secretary of State Hillary Clinton, and Secretary of Defense Robert Gates all had higher favorable ratings than Biden. Gallup notes that both former vice presidents Al Gore and Dick Cheney had higher initial favorable ratings than the current vice president, and higher overall ratings in the first year.

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Jay Richards

United Church of Christ et al. vs. Free (Conservative) Speech

By Jay Richards

November 17, 2009, 10:31 am

Over the last couple of weeks, Jeffrey Lord has written a series of columns and blogs exposing some troubling activities by United Church of Christ bureaucrats (see here, here, here, here, here, and here—Lord is himself a member of the United Church of Christ). The denomination already is one of the most left-wing Protestant mainline denominations, boasting pastors such as Rev. Jeremiah Wright, President Obama’s former pastor.

As part of an “interfaith” effort called So We Might See, which seeks “media justice,” the UCC’s “Office of Communications, Inc.”* is working to find ways to limit evil sources of information—you know, Glenn Beck, Rush Limbaugh, Bill O’Reilly, Fox News and so on. They’re all apparently guilty of “hate speech.”

And the campaign is not limited to just a few fringy church bureaucrats. As Lord says, “Leading this charge or involved in some capacity are at least one commissioner of the Federal Communications Commission [Michael J. Copps], seven national churches, one left-wing billionaire who helps as always with the funding [guess who?]—and last but certainly not least, the White House. Specifically that would be Messrs. Emanuel, Axelrod and Ms. Dunn.”

Through press events, petitions to the FCC, sermons, children and adult educational materials, and more, the group is attempting to define conservative commentary as “hate speech,” no doubt with the goal of getting such speech banned.

Fortunately, several supposedly affiliated Christian organizations are now denying their involvement (here and here) in some of the more egregious efforts of So We Might See. But the UCC center seems to be holding. It’s ironic that a religious group that originated with the persecution-fleeing Puritans is using its freedom in an Orwellian attempt to silence those with whom it disagrees.

*The Office of Communications, Inc., is separately incorporated from the parent denomination.

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Nick Schulz

The Other ‘Going Rogue’

By Nick Schulz

November 17, 2009, 9:23 am

povertytoprosperity1The other major publishing event of the year is happening this week. Arnold Kling’s and my book From Poverty to Prosperity will be out in stores. Arnold describes it as “intellectually heavy” and “not the sort of thing that can be digested in a single plane ride” (in our view that’s a feature, not a bug). Simon Johnson, who kindly blurbed the book, describes it as for anyone seeking “compelling visions for the future.”

Just this morning David Brooks laments that America seems to have lost its love affair with the future, and I agree that there’s a palpable sense throughout the political culture of limits and decline (there’s a reason people keep comparing today to the ’70s). But the thinkers we discuss in this book have not at all given up on the future, and the ideas we advance constitute a compelling case that you shouldn’t either.

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Gary Schmitt

KSM and Khadr’s Different Days in Court

By Gary Schmitt

November 16, 2009, 5:15 pm

There are all kinds of reasons to question the Obama administration’s decision to try Khalid Shaikh Mohammed, the mastermind of the 9/11 attacks, and four al Qaeda accomplices in a U.S. civilian court. Many of the key ones are spelled out by AEI colleague John Yoo today in the Wall Street Journal.

Yet another one has popped up, captured in a Toronto Star editorial today. Under the title of “Tainted Trial for Khadr,” the paper argues that “Canadians should be appalled that five Al Qaeda suspects in the 9/11 mass murder of nearly 3,000 people in New York will get a fair trial in U.S. civilian court, while a Canadian, Omar Khadr, will stand trial before a tainted military panel for allegedly killing a U.S. soldier in Afghanistan when he was 15.” Although the paper’s assessment that the military tribunals are “tainted” is more a reflection of the paper’s pandering to the Canadian Left than an accurate description of the military court, and it ignores the fact that the law Khadr broke was not U.S. domestic law but the laws of war, the fact is that KSM and friends are being given rights the young Canadian will not have. Of course, the point is not that Khadr deserves access to those rights but that KSM and the four other terrorists don’t. What they did was wage war on the United States and by treating their activities as principally a crime the Obama administration will have created a tangled set of expectations that will make dealing with the threat of jihadist terrorism more difficult, not less.

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Neena Shenai

Holding Obama’s Feet to the Trade Fire

By Neena Shenai

November 16, 2009, 2:30 pm

It seems that President Obama’s feet are finally being held to the fire on trade. Not by U.S. exporters or those in the United States who believe free trade may be an effective recipe for growth, but by Asian and other world leaders who believe that the president has simply let them down. With the campaign sloganeering, “Buy America” provision in the stimulus package, tariffs on Chinese tires, inordinate influence of Big Labor (just to name a few), it’s been well noticed that President Obama has plainly abdicated leadership on a cornerstone of post-WWII foreign policy during the first quarter of his administration. Did President Obama actually believe he could omit trade from his constructive engagement strategy, especially in Asia where trade is so important, and no one would notice?

However, we would be remiss if we did not credit President Obama for taking up a Bush administration initiative to pursue a regional free trade agreement (FTA) with Trans-Pacific Partnership (TPP) countries—Singapore, Brunei, New Zealand, and Chile. While it is the first FTA that the president has pursued, we would also be remiss to take this too seriously. In his announcement President Obama said that the TPP would ensure “the high standards worthy of a 21st-century trade agreement.” U.S. Trade Representative Ron Kirk likewise indicated that the agreement would be done “in close consultation with the United States Congress and with stakeholders at home.”

The problem is that those statements actually mean: “We’ll pack our demands with unworkable labor and environment standards to ensure ‘fair trade.’ We’ll then force you to agree to them, but then our Democratic colleagues on the Hill and anti-trade constituencies, such as Big Labor, won’t allow our agreement to go anywhere.” Then one realizes that the announcement was likely nothing more than mere rhetoric and instead provides President Obama cover to grandstand on trade. The president can purport to support an agreement for which progress will be slow and any political ramifications distantly prospective—and that is if the negotiations even go anywhere.

And that is if real negotiations begin. Deputy National Security Advisor Mark Froman’s press briefing shortly after the president’s speech leaves amorphous whether the president is in fact actually committed to the TPP.

If the president were really serious about trade, he would have already forged support among his Democratic colleagues in Congress to pass FTAs already negotiated—such as the U.S.-Korea free trade agreement KORUS—especially before going to Asia. This just may be a topic of conversation during the president’s imminent trip to Seoul.

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Michael Barone

Abortion Rates and Voting Behavior

By Michael Barone

November 16, 2009, 1:32 pm

One of the consequences of the deep recession of 2007–2009, and of the high unemployment rate which threatens to become semi-permanent, is the eclipse of abortion as a political issue. Over a period of three decades abortion was a staple of political discourse, often to the discomfort of politicians. The irony is that it need not have been a national political issue at all. When the Supreme Court issued its decision in Roe v. Wade in January 1973, 16 states with 41 percent of the nation’s population had in the previous five years liberalized their abortion laws, including California (where the legislation was signed by Governor Ronald Reagan) and New York. Three-quarters of Americans lived within 100 miles of a state where abortion was generally available. At that moment in 1973, legislatures in almost every state were beginning their sessions; some of them in other states would surely have liberalized their abortion laws. We would have ended up with an abortion regime like that in Europe, where abortion is widely available but subject to certain restrictions of the sort that the U.S. Supreme Court has declared unconstitutional.

The abortion issue was nettlesome to many politicians in the 1970s because it split both party’s coalitions. In my home state of Michigan, the leading proponent of abortion rights was Governor William Milliken, a Republican of considerable personal wealth and a graduate of Yale. The leading opponent of abortion rights was state House Speaker William Ryan, a Catholic and supporter of labor unions whose home in Detroit was next door to a nunnery. In a state like Iowa, where Catholics were a major source of Democratic support, the abortion issue caused many of them to vote Republican, which led to the defeat of Democratic Senator Dick Clark in 1978 and his Democratic colleague John Culver in 1980.

In time the two parties adapted. By the late 1980s there were few abortion rights supporters among active Republican politicians and few abortion rights opponents among active Democratic politicians. Among voters, too, pro-life men and women moved toward Republicans and pro-choice men and women toward Democrats. By the beginning of this decade there was a very high correlation between stands on abortion and party identification.

This continued to be the case up through and including the 2008 election. The Alan Guttmacher Institute, a pro-abortion rights organization, collects statistics that are widely accepted by advocates on all sides of the abortion issue. The institute provide a fascinating look at American society and American politics. If I am correct in supposing that in a time of economic distress abortion is likely to become a less salient issue, their latest compilation provides a look back at the way Americans live and the way they vote.

Two findings stand out.

The first is that Americans have been, as it were, voting with their feet against abortion. The abortion rate—the number of abortions per 1,000 women aged 15 to 44—has slowly but significantly fallen during the three-plus decades since Roe v. Wade. That rate rose sharply from 16.3 in 1973 to 19.3 in 1974, 21.7 in 1975, 24.2 in 1976, and 27.7 in 1977. It remained between 25.0 and 29.3 from 1978 to 1993, then began falling sharply, to 19.7 in 2004 and 19.4 in 2005, the latest figures in the Guttmacher Institute’s report.

The New York-based Guttmacher Institute notes also that the number of abortion providers has dropped precipitously, from 2,380 in 1992 to 1,787 in 2005. It makes much of the fact that 87 percent of America’s 3.141 counties have no abortion provider. Some advocates of abortion rights see this as a dire trend, preventing women in need of an abortion from being able to obtain one. That may come naturally to Manhattanites accustomed to walking not more than a block to take their clothes to the cleaners. But the fact that there is only one abortion provider in North Dakota and only two in Wyoming is, in my view, less of a problem for those seeking abortions. People in North Dakota are used to driving 200 miles to go to a shopping mall and high school football teams are commonly driven 150 miles in Wyoming to play weekly games. Abortion remains available in all 50 states and the District of Columbia for those who really want one, and the median cost of $523 is within reach of just about all of them.

But, and here is the second finding that stands out from the Guttmacher Institute’s statistics, the abortion rate varies widely among the states, and there is a high correlation between the abortion rate and voting behavior. Only 11 states and Washington, D.C. have abortion rates above the national average of 19.4. They include Hawaii, California, and Nevada in the West, Florida in the South, and seven of the eight states through which the Acela trains run in the Northeast—Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Delaware, and Maryland plus D.C. All of these voted for Barack Obama in 2008; all but Nevada and Florida voted for John Kerry in 2004 and Al Gore in 2000.

The correlation between abortion rates and voting behavior is shown in the following table in which the states are ranked by the percentage of the vote going to Obama, and in which higher-than-average Obama percentages and abortion rates are printed in boldface type.

States Ranked by Percent Voting for Obama and by Abortion Rate (abortions per 1,000 women aged 15-44, 2005)

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Eight of the top ten Obama states plus D.C. have above-average abortion rates; the only exceptions are tiny Vermont and Illinois, where the abortion rate is only slightly below the national average. The only other states with above-average abortion rates are New Jersey, Nevada, and Florida. The state with by far the lowest abortion rate, Wyoming, also had the lowest Obama percentage. The highest abortion rate states are clustered at the geographic edges, the northeast, southeast, and southwest of America; in the vast geographic heartland the abortion rates are relatively low.

Roe v. Wade imposed the same legal abortion regime on the entire nation and made abortion a national political issue. Yet Americans in different regions and states have in effect established very different behavioral abortion regimes. Abortion is very common in New York (abortion rate of 38.2) and New Jersey (34.3), only about half as common in Illinois (18.9) and Texas (17.3), and lower in South Carolina (7.9) and Utah (6.4). Cultural liberals have noted that divorce rates are relatively low in some politically liberal states like Massachusetts and relatively high in some politically conservative states like Oklahoma. But abortion rates seem highly correlated with cultural attitudes and with, at least during the time that abortion has been a major political issue, voting behavior.

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