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Preview: RealClearPolitics - Articles - Alvaro Vargas Llosa

RealClearPolitics - Articles - Alvaro Vargas Llosa

Last Build Date: Wed, 08 Apr 2009 00:00:00 -0600

Copyright: Copyright 2009

Crimes of State

Wed, 08 Apr 2009 00:00:00 -0600

But prosecutors built a devastating case demonstrating Fujimori's responsibility for the strategy, the operational structure and the political cover-up related to the Colina group's activities. The key figure in unlocking the case was Vladimiro Montesinos, a jailed army captain with a history of treason who would never have commanded the colossal power that he did without the only person who could delegate it to him -- Fujimori himself.

Military witnesses testified that soon after coming to power, Fujimori ordered the implementation of a new antiterrorist strategy based on the use of the National Intelligence Service and the appointment of Montesinos as its de facto head. Fujimori put two secret funds under Montesinos' control and authorized him to coordinate the activities of all the military intelligence services. Various testimonies confirmed the authenticity of two army manuals describing the need to create "special operations" teams authorized to kill. Eight members of the Colina group admitted killing suspects and that Montesinos was directly involved with the crimes of Barrios Altos and La Cantuta: In one case he gave a verbal order and in the second he discussed the killings with the head of the army soon after they took place.

In 1991, before the creation of the Colina group, Fujimori recommended in writing that its future members, assigned by Montesinos to infiltrate the police, be promoted. That same year, the president accompanied troops as they entered La Cantuta University to establish a base there. A year later, soldiers from that base would collaborate with Colina in the kidnapping of the nine students and the professor.

Months after the Colina group was formed, the head of the army, appointed by Fujimori at Montesinos' request, held a party in honor of the death squad and told its members that they constituted "the invisible part" of the antiterrorist strategy. In an interview after the collapse of the Fujimori regime, the head of Colina explained the chain of command: "A decision was made by those who governed the country and everything that happened must be interpreted as part of a decision made by the president."

When the crimes became public, Fujimori denied they had taken place. When evidence surfaced, he denied Montesinos and the army chief had anything to do with them. Under international pressure, the regime tried some Colina members in a secret military tribunal. They stayed in an army barracks for months until they were granted amnesty.

Ultimately, the defeat of Shining Path had nothing to do with the Colina group -- whose victims were not even affiliated with Shining Path -- but with the activities of a special police unit that captured the Maoists' leader in 1992.

It is extraordinarily fitting that, despite the disruptive actions carried out by Fujimori's party since he was extradited to be tried for human rights violations and corruption, and the campaign of intimidation against the prosecutors, the families of the victims and the judges, the court handed him a long sentence.

The decision should set a precedent for future trials in which political leaders who are responsible for destroying a country's institutions and rule of law seek to evade responsibility by hiding behind the absence of material proof of their involvement in dirty wars. In many ways, the history of Latin America has been one succession of strongmen who did just that. Fujimori's sentence sends the message that that tradition does not have to be honored forever.

Angela Merkel: Voice of Reason

Wed, 01 Apr 2009 00:30:00 -0600

In response to the pressure to boost public spending, the German chancellor offers this devastating logic: "This crisis did not come about because we issued too little money but because we created economic growth with too much money, and it was not sustainable growth."

One would think that Merkel is speaking from the comfort of a country that is being spared much of the punishment that others are receiving. Actually, as the world's No. 1 exporter, Germany's economy is on course to contract by 4.5 percent this year. No economy will be more affected than Germany's, in absolute terms, by the 9 percent drop in international trade forecast by the International Monetary Fund.

Under pressure from the Social Democrats who are part of her Grand Coalition, Merkel has already had to spend much -- about 4.5 percent of the country's GDP over two years -- in order to sustain demand. But she is saying enough is enough. Her opposition was crucial, for instance, in preventing the European Union from adopting a rescue package of $229 billion for Eastern Europe. She has steadfastly resisted the proposal to loosen the tight fiscal rules that govern the common currency, the euro. And she has withstood pressure from the Social Democrats to rescue Opel, the German subsidiary of General Motors, suggesting that bankruptcy might be in order.

Her skepticism is warranted not only by her country's history but also by that of other nations. Japan spent more than $2 trillion trying to lift itself out of recession after the bursting of its real estate bubble in the 1990s. But real estate prices and indeed the economy did not pick up until the following decade. By then, government debt amounted to two years' worth of Japan's economic production.

It is not uncommon, in moments of financial and economic panic, for governments to lose their nerve. They are, after all, subject to the ire of their people. Nobody likes to face the kind of mob scenes we saw during France's recent strikes, with livid workers accusing President Nicolas Sarkozy of "doing nothing." And we are talking about a government that has been so interventionist and "protective" of its people that it recently conditioned aid to France's automakers on a commitment to establish plants at home, rather than in countries such as the Czech Republic.

In this kind of environment, Merkel's stance is especially courageous. It is particularly noteworthy that she is taking this position just months away from Germany's general election, in which she will attempt to renew her tenure. Good luck.

American leaders have derided European socialism for years. But, following a trend started by George W. Bush, President Obama is now set to push federal spending to 28.5 percent of GDP, the highest level ever if we exempt World War II. In a little twist of history, it has now fallen on Germany, Europe's leading nation, to warn America against the siren song of socialist-level spending.

Promisingly, Merkel's message seems to have been heard at the grass roots on both sides of the Atlantic. Figures released in Britain this week show that, much like in the United States, the savings rate tripled in the last quarter. Despite monetary and fiscal efforts to the contrary, people are relearning to live within their means.

Albert Einstein is said to have described insanity as doing the same thing over and over again and expecting different results. The German chancellor is the one Western leader bearing this piece of wisdom in mind these days.

Has the G-20 Learned the Lesson?

Wed, 25 Mar 2009 00:10:00 -0600

This monetary alchemy was no different, in essence, from the one that led to the Crash of 1929: During the 1920s, the money supply grew more than 60 percent in total. It also echoed the Sherman Silver Purchase Act of 1890, when the government injected dollars into the economy through the purchase of silver. That brought on the depression of 1893.

Former Fed Chairman Alan Greenspan argues that foreign savings were the real culprit of the housing bubble because the Chinese pumped too much money into the U.S. by purchasing Treasury bonds. But it is the Fed that sets the interest rate target. By Greenspan's own logic, the Fed could have kept a higher target and taken out of the system the excess money originated in Chinese investments in the U.S.

Other factors were the government incentives and mandates that pushed banks to make loans to people who could not afford them. The incentives took the form of Fannie Mae and Freddie Mac, government creations that bought mortgages from banks and resold them with guarantees. The legal mandates included the Community Reinvestment Act, reinforced by Congress in 1999. And how ironic that the pooling and repackaging of mortgages in order to attract investors -- the much-decried securitization behind the housing bubble -- was originally an act of the Department of Housing and Urban Development, which created the mortgage-backed security in 1970.

The G-20 should also bear in mind how much regulation already exists and how ineffective it has been. A few months ago, in an article in Canada's National Post, Pierre Lemieux, an economist with the University of Quebec, enumerated the norms and bodies that regulate the U.S. financial system. The list includes the enormous powers given to the Federal Deposit Insurance Corporation in 1991 and 2002; the Sarbanes-Oxley Act that expanded the authority of the Securities and Exchange Commission; the obligation of financial firms to value their assets according to current prices, however undervalued they may temporarily be; the 31 pieces of regulation administered by the Fed; and a big expansion of the budgets of all the regulatory bodies in the last five years.

Every previous crisis has generated new regulations -- and the market, through innovation, has founds ways to stay ahead. When does this stop? When the government nationalizes the entire financial system? No, not even then, since the response would no doubt be a huge black market.

Washington also contributed to the crisis with its record of rescuing irresponsible banks. No regulatory deterrent is more powerful than the fear of failure, but that has been effectively removed from large parts of the financial system. Consider the ludicrous situation the American International Group, the financial giant bailed out by the government, finds itself in. A near-scandal broke out when politicians learned the names of the important American and foreign banks AIG had paid, after receiving taxpayer bailout funds. But wasn't the rescue of AIG based on the premise that if it went down it would drag all sorts of important institutions to whom it owed money?

A few days ago, professor Kevin Dowd of Nottingham University gave a lecture in London on the financial crisis. He offered the classical economist's definition of waste: a bus full of Keynesian economists goes over a cliff and there are still some empty seats. Lest the G-20 is tempted to "go Keynesian," it should keep the joke in mind.

Peru's Legacy of Graft

Wed, 18 Mar 2009 00:00:00 -0600

Quiroz's book presents corruption as a continuum that runs through the different types of governing systems Peru has endured. In doing so, it underscores the institutional as opposed to the episodic nature of corruption. Over the years, Peru's colossal graft can be attributed to the way in which power is organized and rules are set. The author attempts to quantify corruption, a daunting enterprise since the calculation includes the theft of public money and the wealth that could have been created in a more secure environment. His findings: Between 1680 and 1810, graft amounted to an annual average of 4.3 percent of the country's economy. Between the 1820s, when Peru gained its independence, and the beginning of the 21st century, the annual average was only slightly below -- about 4 percent -- that figure. In the 20th century, the worst decades were the 1920s, the '70s and the '90s. Under Alberto Fujimori and his spymaster, Vladimiro Montesinos, the last decade of the century saw graft equal 50 percent of government expenditures and 4.5 percent of GDP. Quiroz estimates that corruption has cost the country half of its development possibilities. But the book's contribution is more fundamental than its eye-popping statistics. It is the contention that "systemic corruption occurs when formal and informal, pro-growth, and constitutional rules -- protecting property rights, reducing transaction costs, discouraging rent-seeking, and guaranteeing political checks and balances -- are nonexistent, distorted or uncertain." A few years ago, I described in a book the "five principles of oppression" that were behind Latin America's relative backwardness: corporatism, mercantilism, privilege, wealth transfer and political law, whereby those who make the law are above it. In these societies, individual rights, private property and competition were stifled by authoritarian power. The colonial government unloaded on the backs of Peruvians 1 million laws that were disobeyed both by the enforcers and the victims. The independent republic shed itself of Spanish rule but not of the statist tradition. Brazil's viscount of Albuquerque was referring to the enduring power of unsound institutions over reformist attempts in the 19th century when, in a different context, he said that "a conservative is a liberal in office." Only in those countries where civil society was somewhat stronger and institutions less intrusive was corruption less pervasive -- Costa Rica, Uruguay and Chile. According to "Corrupt Circles," Peru's corruption has shifted its focus, depending on the prevalent trends and policies. During 20th-century military rule -- for instance, under Sanchez Cerro, Oscar Benavides and Manuel Odria -- graft in military procurement was especially high. In the period between the 1960s and the '80s, when economic nationalism swept Peru as it did most of the continent, corruption was linked to the government's protectionist and socialist policies -- such as under Gen. Juan Velasco. Corruption is a symptom of institutional inadequacy. It is the means by which ordinary people protect themselves from unrealistic rules -- a form of insurance against the risk of obeying the law -- and powerful people exploit the machinery of a state that places few limits on them. In 2001, just after the collapse of Fujimori's government, I suggested the need for an independently funded and run "museum of graft." Memory is one way in which my countrymen can start to modify some of the underlying causes of corruption. But there is little tradition of preserving political memory. A debate has been taking place in Peru over the initiative to create a "museum of memory" related to the horrific suffering inflicted on Peruvians, most of them from the Andes, during two decades of savage Marxist terrorism and the indiscriminate military response. Peru's minister of defense thought he was rendering a service to the military when [...]

Time to Decriminalize It?

Wed, 11 Mar 2009 00:00:00 -0600

Echoing the Prohibition era in the United States, illegality has engendered organized crime empires that, in order to supply narcotics, undermine the peace and institutions of many countries. The latest example is Mexico, where President Felipe Calderon has unleashed the wrath of the state against the drug lords. The war between the state and the cartels, and among the mafias themselves, has mostly taken place in northern cities such as Ciudad Juarez, Tijuana and Culiacan. Ten thousand people have been killed and drug-related corruption has been exposed at the highest levels, including the attorney general's office. The anti-drug budget worldwide is staggering: The United States alone devotes more than $40 billion yearly to the effort. Yet whenever attempts to limit supply manage to raise street prices in one country, prices go down in other countries: In Europe, the price of cocaine has dropped by half since 1990. But the crackdown has reduced the purity of the drug, increasing the harm to people's health. According to the police, in Britain the purity has decreased from 60 percent to 30 percent in a decade. Not to mention the consequences to individual liberty. Those who banned alcohol in 1920 felt compelled to amend the Constitution before they could pass Prohibition. No such amendment was ever presented to legitimize what Richard Nixon first called the "war on drugs" in 1971. The excesses committed in its name have created all sorts of social stigmas -- including the fact that about 30 percent of black males in America spend some time in jail in large part due to drug-related offenses. Three Latin American former presidents -- Brazil's Fernando Henrique Cardoso, Mexico's Ernesto Zedillo and Colombia's Cesar Gaviria -- recently put out a report condemning the war on drugs as a counterproductive failure, advocating a public health-based approach instead of repression. In anticipation of the meeting in Vienna, the latest issue of The Economist magazine, the bible of many current and aspiring enforcers of the law, devoted its cover, a survey and an editorial to making the case for legalization. For years, conservative publications such as The Wall Street Journal have run articles expressing the same view, including those by its expert on Latin America, Mary O'Grady. Leaders on the right (Henry Kissinger) and organizations of the center-left (George Soros' Open Society Institute) have also spoken out on the issue. No one knows exactly how drug use would be impacted by its legalization or its decriminalization. In countries where it is severely punished, consumption is high, which might mean that it would stabilize or even drop. Many European countries -- Spain, Portugal, Italy, several Swiss cantons -- have extremely lenient drug policies; consumption in those countries (except for Spain) is not very high. But even assuming a moderate increase in consumption, decriminalization or legalization would eliminate or substantially diminish the horrific side effects of the current war. A movement in favor of legalization has existed in the United States for years. Because it is associated with the cultural war that has raged since the 1960s, its impact has been small. But the debate goes on. In many states the police do not go after personal possession of marijuana, and California is considering a bill that would make it legal. The vestiges of Puritan dogmatism -- which H.L. Mencken memorably called the "inferior man's hatred of the man who is having a better time" -- have made it difficult to open a serious debate nationwide. Today we regard the Opium Wars of the 19th century -- by which the British retaliated against China for clamping down on opium imports -- as crazy. One and a half centuries from now, people will read in total amazement that so much blood and treasure was wasted in the failed pursuit of a private vice that a relatively small percentage of the world population [...]

Let Those Banks Fail!

Wed, 04 Mar 2009 00:00:00 -0600

The banking system is in a humongous mess. Potential losses by U.S. banks on loans and securities amount to nearly $2 trillion. The response by two consecutive administrations -- government-funded loans, capital injections and guarantees -- has not inspired confidence. The markets know that the banks are concealing the value of their bad assets by not selling them at the low prices investors would offer. The reason for not letting Citigroup, Bank of America, Wells Fargo and others go down is, we are told, that credit needs to keep flowing in order to avoid a depression. But that reasoning is backward. Credit is not the father but the child of economic prosperity. Garet Garrett, the intellectual giant of the 1930s, put it like this in "A Bubble That Broke the World," his classic on the credit craze that led to the Great Depression: "From the beginning of economic thought it had been supposed that prosperity was from the increase and exchange of wealth, and credit was its product." It is common knowledge that for years, Americans have lived beyond their means by saving too little and borrowing too much. If this is readily accepted, why is it so difficult to see that a government-induced expansion of credit at a time when American households are finally trying to pay back their debts and save for the future will only prolong the problem? In January alone, the annual rate of saving in the U.S. was the highest since monthly records began in 1959. That should be a reason to rejoice. Of course, businesses need credit and customers. But there are two ways to get them. One is by bailing out and then nationalizing the banks -- and paying a catastrophic price. The other is by letting the financial system purge itself of failed assets and giving consumers a bit of time to replenish their coffers. Few things give a worse name to the free-enterprise system than offloading bank losses onto taxpayers. The way to solve this crisis is to let "zombie" banks proceed to their beyond, allowing those banks that need restructuring to start doing just that while those in a position to fill the space left by failed institutions can jump in quickly. After all, a majority of the almost 9,000 U.S. banks, including regional institutions, did not engage in credit hanky-panky and would love a chance to increase their market share. I asked Michael Rozeff, a financial expert and professor emeritus at the State University of New York, if a market solution would interrupt credit. "Federal and state authorities," he responded, "should immediately encourage new banks to be chartered. These new banks can mobilize the immense amounts of money now locked up in money market accounts and Treasury bills. They can take over consumer loans, auto loans, and mortgage loans from older banks. Credit need not be interrupted." Failed banks could be restructured through the FDIC in order to preserve the insured deposits. The creditors and various sound banks would absorb some of the existing branches and the good assets of the bankrupt institutions; the bad assets would be sold at whatever price the markets decided. Obviously, the shareholders would be wiped out and the bondholders would probably get a "haircut" because the priority would be to protect the depositors -- as would happen in the case of a federal takeover, but without the heavy cost. Those who argue for temporary government ownership point to Sweden as an example of successful nationalization in the 1990s. I asked Fredrik Erixon, a Swedish economist who directs the European Center for International Political Economy, if he agrees. "Swedish policy," he responded, "had little to do with nationalization: No more than 15 percent of total credit ended up in banks owned by the government." The government bailed out a bank it already owned (Nordbanken) and bought just one regional bank (Gota Bank). How can anyone serious[...]

Slumdog Millionaire's Indian Critics

Wed, 25 Feb 2009 00:00:00 -0600

One example of this balderdash is a lawsuit filed by Tapeshwar Vishwakarma, who represents a charity and claims that the human rights of the slum dwellers have been violated. Another high-profile protester has excoriated the Indians associated with the production for accepting the use of the word "slumdog." Shyamal Sengupta, from the Whistling Woods International Institute in Mumbai, calls the film "a white man's imagined India" and "a poverty tour." How ironic, in the light of these highbrowed attacks, that, according to numerous news accounts, residents of the slums of Mumbai celebrated the triumph of Danny Boyle's movie at the Oscars as their own. They are the ones who have it right. The critics forget a few facts. The film is based on the novel "Q&A" by Vikas Swarup, an Indian diplomat. Although the director and the scriptwriter, both British, made changes in their adaptation of the story, they kept the essentials: An Indian slum orphan is arrested for getting too many answers right in a TV quiz show and the subsequent narration of his journey reveals to us that his correct answers did not come from cheating but from street wisdom picked up in a succession of experiences that attest to his instinct for survival. Not to mention all the on- and off-camera Indians associated with the movie, who feel proud of their role in it. Anyone who thinks Boyle set out to stereotype Indian slum grit clearly has not seen the director's depiction of Edinburgh's urban squalor in "Trainspotting," a 1996 film. In fact, one of the elements that make Boyle's treatment of moral degradation more tolerable and realistic in "Slumdog Millionaire" is the use of contained humor and bright color. As for the happy ending that some in India have criticized as a gimmick to make the sordid story more palatable to an international audience, have they forgotten that Bollywood, the Mumbai-based Indian film industry, thrived on rags-to-riches stories and soapy romances before it largely turned to gangster movies in the 1980s? The force of "uplifting" Indian filmmaking has been influencing the industry worldwide for some time. A decade ago, director Baz Luhrmann, credited with the revival of the musical film in the West with "Moulin Rouge," acknowledged his debt to Bollywood musicals of the '60s and '70s. In today's global era, the cross-fertilization among national industries renders the word "national" almost meaningless. When we learn that Steven Spielberg has decided to partner with Bollywood's Reliance ADA Group in order to fund his departure from Paramount/Viacom, we are witnessing the irrelevance of nationality in the movie industry. Perhaps one of Boyle's sins in the eyes of some of his Indian critics is that he does not play on Western guilt. His depiction of the Dharavi slum, with its beggar mafias who blind little boys, is revealing of the dark side of a city that in recent years has been associated with the wonders of globalization. But there is no political statement here. This is not, as some leftist critics have wistfully argued, a denunciation of foreign investment and the market reforms that started in 1991. It is simply a crucial part of the storytelling. If we wanted to squeeze a political message out of it, it would be the renunciation of victimhood and the defense of the individual against the forces that attempt to make the film's protagonist, Jamal Malik, a peg in the mechanism of local collectivist exploitation. The charge that "Slumdog Millionaire" exploits Mumbai's poverty is so absurd that by the same token Charles Dickens' entire body of work would have to be invalidated as a defamation of 19th-century England. Like all accomplished stories, "Slumdog Millionaire" is probably resonating with audiences because it gives a glimpse of complex truths and tells us something about ourselves that we had trouble definin[...]

Venezuela's Bright Side

Wed, 18 Feb 2009 00:20:00 -0600

Even though the opposition was not able to defeat Chavez this time, the referendum confirmed that he still faces millions of Venezuelans who abhor his regime. The opposition obtained 45.6 percent of the vote -- 9 percentage points more than in 2006, when Chavez won his third term. The "no" vote won in five key states and got more than 40 percent in nine others. He was only able to win in one of the five states governed by the opposition -- and lost the state of Merida, governed by a Chavista.

If in next year's legislative elections the opposition obtains similar results, it will control almost half of the National Assembly -- a big shift with respect to the current situation, with Chavez in total control because the opposition boycotted legislative elections in 2005.

Perhaps more significantly, the results confirm that Chavez's base in the major urban centers, where Venezuela's biggest slums are concentrated, has been seriously eroded: His power is increasingly reliant on the more rural or provincial parts of the country. The symbolism of Chavez's defeat in Petare, a major slum in Caracas, cannot be overstated. The penetration by the opposition into Chavez's former base has much to do with inflation and food shortages, a social drama that I witnessed a few months ago during an extensive visit to Caracas' poorest quarters. In the current world recession, things are likely to get worse.

Like most Latin American countries of late, Venezuela has been able to reduce poverty -- temporarily, at least -- through the redistribution of revenues generated by the export of commodities. According to a recent study by the Center for Economic and Policy Research, poverty in Venezuela has been reduced over 10 years from 43 percent to 26 percent of the population. The fact that Chavez is now encountering resistance in so many of Venezuela's slums implies that redistribution has reached its electoral limits. It can no longer conceal the many social ills affecting ordinary Venezuelans, including a crime rate that is already higher than that of drug-ravaged Colombia.

In order to meet its import bill, Venezuela needs the price of its crude oil to be above $45 a barrel. But to maintain his vast system of patronage and subsidies, Chavez needs the price to be even higher -- at least $85 a barrel. That the government has decided to take $12 billion from its reserves to make up for the fall in revenue is further evidence that the collapse in oil prices is a direct threat to Chavez's model -- a model that fits the classic definition of populism as expressed by a former Panamanian president: "If you hire your niece, it's called nepotism; if you hire somebody else's niece, it's called solidarity."

Sunday's referendum was marked by irregularities in at least 20 percent of the precincts, according to the well-respected Sumate monitoring organization. During the run-up, the government controlled 85 percent of TV airtime and unleashed violent mobs to intimidate the opposition. But one thing is certain: While the opposition does not command enough support to overcome Chavez's juggernaut, the Venezuelan president still does not command enough power to achieve his totalitarian dream.

Lest Chavez's opponents succumb to melancholy in the face of the setback, they should take heart in this: Millions of Cubans would probably trade their current tyranny for Venezuela, which, Chavez's relentless efforts notwithstanding, is still far from being a second Cuba. And that is the exclusive merit of his valiant foes.

Darwin and the Right

Wed, 11 Feb 2009 00:00:00 -0600

Darwin did not set out to deny God. Anyone who has read "The Origin of Species," "The Descent of Man" or his correspondence is immediately struck by how careful Darwin was to avoid what we would today call an "ideological agenda." But this diligent student of nature did make one shattering discovery: not the theory of evolution itself, which had been proposed many times and can be traced back to the Greeks, but the fact that evolution is a random process of natural selection whereby certain variations that become well-adapted to the environment are gradually preserved through hereditary transmission. Ultimately, all species have a common origin.

This finding posed a cataclysmic challenge to the established church, comparable to the re-examination of Aristotle in the 12th and 13th centuries or the displacement of the Earth from the center of the universe in the 16th and 17th centuries. But unlike the teachings of Aristotle, which were absorbed by the church through Thomas Aquinas, and the findings of Copernicus, Galileo and Newton, which were reconciled with religion by rational Christianity and Deism, Darwin's books have remained anathema to many believers. The pope finally accepted his teachings in the 1990s and the Anglican Church recently apologized to him. But for millions of Christians, Darwin remains unacceptable.

And yet science has confirmed and expanded Darwin's theory, using it to great advantage. What he called the "mystery" of variation in offspring was explained by modern genetics. DNA sequencing and molecular biology have helped to understand the evolution of viruses and therefore to protect people from diseases.

Darwin's teachings have been caricatured and grossly distorted. Social Darwinism, which turned his biological theory into a sociopolitical one to justify eugenics, harmed his reputation. But Darwin was an early opponent of slavery and, precisely because he identified a common origin in nature, he did more than anybody to debunk the notion that different races belong to different species.

Herein should lie Darwin's appeal to the right: The English naturalist gave scientific validity to the revolutionary idea that order can be spontaneous, neither designed by nor beholden to an all-powerful authority. The struggle for existence that drives natural selection according to Darwin has nothing predetermined about it. In fact, he maintained that the presence of certain habits, values and institutions, including religion -- themselves part of man's adaptation to the environment -- can impact evolution. The instinct of sympathy, for instance, drives some stronger members of the human species to help weaker ones, thereby mitigating the struggle for existence.

It is fascinating that conservatives who advocate for a spontaneous order -- the free market -- in political economy and decry social engineering as a threat to progress and civilization should resent Darwin's overwhelming case for the idea that order can design itself. In an essay in the British publication The Spectator, the conservative science writer Matt Ridley reflects on the paradox that the left has claimed Darwin even though leftist political ideas contradict his basic teaching: "In the average European biology laboratory you will find fervent believers in the individualist, emergent, decentralized properties of genomes who prefer dirigiste determinism to bring order to the economy."

The bicentennial of Darwin's birth is a good opportunity for those on the right who trash him as an icon of the left to give the author of "The Origin of Species" another chance.

China Bashing

Wed, 04 Feb 2009 00:00:00 -0600

China-bashers maintain that Beijing cheapened its exports through currency manipulation, encouraging Americans to devour them; the Chinese then invested part of that money and other savings in U.S. assets, prompting the drop in interest rates that in turn fueled the housing bubble. With variations, this view is shared by the previous and the current secretaries of the Treasury, the chairman of the Federal Reserve, some members of Congress, not to mention some well-known commentators. They claim that the U.S. has been spending too much because China has been saving too much (I kid you not!). Yes, in the last 10 years the real personal saving rate in the U.S. has been close to zero (although it is now going up in the midst of the recession), while that of China has been somewhere between 30 percent and 40 percent. If we add government and corporate savings, China's rate has been close to 50 percent, almost five times that of the U.S. But China has been saving much of its income since long before U.S. home prices skyrocketed, and it continues to save more than two years after the bubble burst. The idea that China's savings caused the low interest rates that pumped America's housing bubble does not square with the fact that, according to the International Monetary Fund's World Economic Outlook, the savings of the underdeveloped nations continued to rise between 2003 and 2007, when mortgage rates rose steadily in the U.S. after their ridiculously low years earlier in the decade. As economist Robert Murphy, the author of "The Politically Incorrect Guide to Capitalism," maintains in an article, when American consumers went on a binge because they dreamed that their houses would appreciate forever, the world's saving rate was actually lower than in the 1980s and much of the '90s. The U.S. financial mess and the ensuing recession were home-grown. Whether one subscribes, as I do, to the view that the consumers' frenzy and Wall Street's lunacy originated in the Federal Reserve's policy of easy money and the lowering of lending standards or, as many others think, in financial deregulation, the key decisions were made by Americans who were (or seemed) perfectly awake. China did not set U.S. interest rates, increase the money supply and pass laws such as the updated Community Reinvestment Act or the Federal Housing Enterprises Financial Safety and Soundness Act. And -- if one subscribes to the other view -- China is not the one that deregulated U.S. financial markets through laws such as the Gramm-Leach-Bliley Act in 1999. When a government -- as the Bush administration did -- engages in expensive foreign and domestic policies that feed on deficits and debt, and consumers decide to follow suit, you eventually run into trouble. The fact that another country decides to save half of its income and invest in the future should make Americans proud: The gospel of U.S. capitalism has finally spread to the unbelievers! Had it not been for Chinese, Japanese and British investors, the U.S. would have gone bankrupt. Given the amount of new debt that Washington is contemplating in order to "rescue"Americans from the smartest thing they have done in a long time -- save some money and try to adjust -- China-bashers should be aware that they will need foreign savers more than ever. None of this means that Beijing's economy is above reproach. For one, China increased the money supply irresponsibly and is now facing an economic slowdown that, as The Economist showed this week, is not primarily due to the drop in exports to the United States. But Washington should not blame the wrong culprit for its mistakes. Instead, Americans should accept that "the road of excess leads to the palace of wisdom" only in William Blake's prose. In real life, the road to paradise [...]

What Obama Can(not) Do for Latin America

Wed, 28 Jan 2009 00:20:00 -0600

A decade ago, the IMF was a major player in Latin America, having lent an accumulated $50 billion. Since Brazil and Argentina paid off their debts, the IMF became irrelevant: The fund's initials had the whiff of a bygone era. Now, because of reduced access to capital markets, a drop in exports and about $250 billion in debt that falls due this year, many governments are thirsting for funds. The IMF -- that hairy monster parents used to threaten their kids with when they didn't finish their meal -- is back! Other financial bodies are expanding their offers of credit. The Inter-American Development Bank has promised $6 billion to commercial banks and will make another $12 billion available for various public projects. This is an unwelcome return to Latin America's political and economic infancy when it relied on wealth transfers from the developed world. As Myles Frechette, a former U.S. ambassador to Colombia, wrote in a recent paper, it needn't be this way: "The United States can play a key role for Latin America and the Caribbean in recovering from this economic crisis. ... For most countries in the region, the U.S. is still the single most important export destination." While 15 trade agreements will link five Latin American nations with 11 Asian economies by 2010, Asia is also in trouble and exchanges between China and Latin America are only one-fifth of the amount of trade between the U.S. and Latin America. The second thing Obama can do is reform U.S. immigration. Ten free trade agreements between the U.S. and Latin American countries were signed in the last decade, but trade will not be free until there is labor mobility -- as the European Union eventually realized. The U.S. should listen to business leaders across the nation and heed the numerous studies that indicate that the American economy needs a steady flow of immigrant labor. The case for high-skilled immigrants is almost self-evident, but it is also strong for low-skilled immigrants. A study by the U.S. Department of Labor states that more than half of the growth in labor demand in the top 25 occupations will occur in low-skilled jobs that cannot be outsourced. There are numerous proposals flying around. In his recent book "A World of Wealth," Thomas Donlan, who is also the editorial page editor of Barron's, a conservative publication, proposes welcoming immigrants who have a job and agree to take no social services of any kind -- except education -- before they become citizens. These are the kinds of ideas a U.S. government interested in engaging its neighbors should be at least mulling over. Finally, the U.S. should rethink the war on drugs. In 1992, at a summit in Cartagena, the first President Bush agreed with his Mexican and Andean counterparts that the effort should be directed against consumption in the U.S. as much as against supply. Two decades later, neither has been stemmed. The bloody conflict in which Mexican President Felipe Calderon's government has been caught up -- and which has cost more than 8,000 lives in two years -- is a child of the ill-conceived approach to the drug issue over the decades. Public opinion in the U.S. is not ready for measures such as relaxing prohibition, but Obama should at least start a hemispheric conversation on ways to de-emphasize the crackdown approach. There are other measures Obama could take to endear himself to countries such as Brazil -- for instance, getting rid of the ludicrous 54 percent tariff on imports of ethanol from that country. And there are tactical approaches to be adopted in certain trouble spots -- such as letting Hugo Chavez hang with his own rope. But, ultimately, undoing the U.S. economic mess, beginning to look at the mobility of people -- and not just goods and services --[...]

January 20, 2009

Wed, 21 Jan 2009 00:00:00 -0600

Now, faced with the greatest economic crisis in generations, Obama will need to make a choice between his intellectual formation, which points to interventionist government, and his temperament, which pulls him toward restraint. There is a short-term and a long-term challenge. The first has to do with the recession, the second with government commitments that cannot be met and that will sap the capacity of Americans to remain prosperous. The response to the first problem, which is under way, has been extremely risky. In the last three months alone, the money supply has increased by an annual rate of 40 percent, if we don't count savings deposits. (It was 17 percent with savings deposits included.) That is half the rate of growth between 2001 and 2005, the period of easy money that created the conditions that led to the financial crunch in the first place. Since the Great Depression is the precedent most cited these days, we should remind ourselves that one of the most important causes of the crash of 1929 was the 61.8 percent increase in the money supply that took place between 1921 and 1929. The longer-term problem that Obama inherits is in the government's net operating cost. Considered a more accurate measure of the budget deficit, the net operating cost for the last fiscal year was $1 trillion. You can imagine what these numbers will look like at the end of the current fiscal year once the economic stimulus package, probably worth close to $1 trillion, is added. The government's overall debt amounts to $10 trillion -- a bit less than half related to Social Security and Medicare. In 2008, the cost of Medicare was already far in excess of the money generated by the tax that funds it; in 2017, when a second Obama administration would end, Social Security will be in the same situation. According to the Financial Report of the U.S. Government, which reads like a Stephen King novel, 15 years from now the debt will be higher, as a percentage of the nation's GDP, than at its worst period in American history. Obama's wise temperament faces this challenge from his socialistic intellectual formation: how to resist the pressure to continue to throw money at the recession, and how to reverse the entitlement growth that is turning the government into an albatross around the people's neck. He has two advisers who could help hold his formation in check: Paul Volcker, whose tight-money policy at the Federal Reserve in the 1970s facilitated the prosperity of the Reagan years, and Christina Romer, whose 1994 paper "What Ends Recessions?" sought to prove that fiscal spending was not the cause of recovery after the eight recessions that took place between World War II and the early 1990s. Obama's temperament should find reassurance in the Democrats and Republicans who, in the 19th century, resisted pressures to expand the money supply and increase the size of government in times of recession, ushering in long periods of economic growth. As Ivan Eland shows in his book "Recarving Rushmore," that was the case of Martin Van Buren in the Panic of 1837, Ulysses Grant in the Panic of 1873, Rutherford Hayes in a lesser meltdown the following decade, and Grover Cleveland in the Panic of 1893. The president's intellectual compass will be inclined to follow Franklin Roosevelt's example. But his temperament should remind his formation that the New Deal, an orgy of public spending, actually postponed the recovery. According to economists Harold L. Cole and Lee E. Ohanian, by 1939 unemployment was still high and real output was 25 percent below trend. Long-term investment did not pick up until 1941. A decade had been lost. If Obama's temperament prevails, he could be one of this coun[...]

Welcome to Washington

Wed, 14 Jan 2009 00:40:00 -0600

This is the one silver lining in the gathering storm of increased government power caused by the current recession. In the wake of the collapse of collateralized debt obligations and credit-default swaps, the government basically nationalized part of the financial services industry. A running joke in Washington used to be that the separation of powers was not the balance between the three branches of government but between Wall Street, where securities were traded, and Washington, where laws were traded. Now both are traded in Washington. As the money supply and fiscal expenditure expand astronomically in response to the recession, the one mitigating circumstance is that Washingtonians, who will implement many of the policies, seem to me to be deep down mistrustful of their main industry -- the government. I also believed, before coming to D.C., that Washington was a cultural bubble. Actually, it is a cultural flux. Even fierce nationalists are open-minded in Washington: They trade with the rest of the world, interact with immigrants, dine in ethnic restaurants, watch foreign films and occasionally say words in European languages. If Joe the Plumber -- the ambassador of conservative, small-town America -- came to Washington, he would probably volunteer for the French Foreign Legion! Another misconception about Washington is that it is secretive. We all know, of course, how much official information is leaked in this city. But until my first encounter with a CIA spook in a hotel across the Potomac, I had no idea that the real business of Washington's intelligence community is boasting, not hiding. As for the presence of spies on every street corner, for most of us the CIA is a highway directional sign we pass on the way to shop at a suburban mall (when we could afford to shop, that is). Washington's layout -- a reflection of Pierre L'Enfant's Baroque style -- also helps to dilute the effect of the bureaucracy on the local population. The open spaces, the long avenues and the grid-like order might be the result of central planning, but everything is spread out in such a way that one can breathe comfortably. George Washington's choice of farmland and hills filled with trees bordering the Potomac proved prescient: D.C.'s rural-like aura helps mitigate its political gravitas. Foreigners think of America as a country without history. The charge is absurd since the colonizers were themselves children of the ages. And Washington, of course, is infused with history. Here the past is not only an architectural presence in the form of monuments, or an industry that thrives on tourism and the memory of political and judicial decisions that shaped the nation. It is also a spirit. One is forever expecting to meet Thomas Jefferson around the corner, perhaps coming out of Bartleby's used-book store on 29th Street NW. Washington was the brainchild of the Founding Fathers, the greatest generation of political minds the world has known. The result of an intense negotiation between Northerners and Southerners, D.C. was always at the heart of the racial question. Slavery was abolished here earlier than in the Southern states, it welcomed freed slaves from the South, and desegregation happened here before it did in neighboring Virginia -- although white flight was an unfortunate response. Washington was also a theater of the civil rights conflict. At Ben's Chili Bowl in the U Street corridor, where Barack Obama visited last weekend, one can hear people reminisce about the riots that followed the assassination of Martin Luther King Jr. in 1968. Let's hope that the visitors who are flocking to D.C. for Obama's inauguration take some of this culture and history away with th[...]

The Decline of Israel's Leadership

Wed, 07 Jan 2009 00:00:00 -0600

That logic is self-defeating. Only a permanent occupation of Gaza could ensure the absence of rockets in southern Israel. But Israel's occupation of Gaza proved to be politically and practically unsustainable -- and the Israelis withdrew in 2005. Suppose Israel tried again. Hamas or some other organization, helped by Egypt's Muslim Brotherhood, would harass the occupiers from across the border. By Israel's logic, its army would then have to push into Egypt. In 1982, Israel went into Lebanon in pursuit of the Palestine Liberation Organization using the same arguments it is using in the case of Gaza today. It eventually withdrew, and the invasion did not prevent Hezbollah, another terrorist organization, from using Lebanese territory to attack Israeli civilians years later. Anything less than a permanent occupation of Gaza will guarantee Hamas' resurgence. A permanent occupation, on the other hand, will put the Palestinian Authority led by Mahmoud Abbas in the West Bank -- Israel's moderate interlocutor -- in the impossible position of either betraying the Palestinian cause or playing second fiddle to Hamas, something we are already beginning to see. The extremists will have a broader popular base in the West Bank and rockets will soon be fired across the border into eastern Israel. The Israeli security logic would then force a full occupation of the West Bank, pushing Palestinian terrorists into Jordan. And if rockets started to fly into an Israeli-controlled West Bank from Jordan, would the security logic dictate an Israeli invasion of the Hashemite kingdom? All of this is to say that Israel's leadership needs to accept (painfully) the futility of a purely defensive logic. Its best bet is to help create the conditions in which the Palestinian moderates are able to marginalize the fanatics with the help of a population that starts to see improving standards of living. That would mean making concessions and taking risks such as Menachem Begin did when he signed the peace treaty with Egypt in 1979, and in the way Rabin did when he signed the Oslo accords in 1993 and made formal peace with Jordan soon after. Gaza's living conditions since the end of Israel's occupation have been dismal. One has only to read the articles of moderates in the Israeli daily Haaretz or the testimonies of Western observers to realize the bitter resentment that the 1.5 million Gazans must feel under Israel's drastic commercial and transit restrictions. The severe limitations placed on daily life in the West Bank are also a source of humiliation for many Palestinians. This is not to say that Arab terrorists who fire rockets against innocent Israeli civilians are justified and it does not excuse the corruption and incompetence of the Palestinian Authority. But Israel's conduct does not help the Palestinian population place the blame where it belongs for Hamas' tyranny in Gaza and for Fatah's appalling governance in the West Bank. One senses that since the fiasco of the attack on Hezbollah in Lebanon in 2006, Israel's leaders have spent time preparing for a more efficient assault on Gaza rather than pushing toward the solution that moderate Israelis and Palestinians know is the only workable solution: two states living side by side with Jerusalem containing two capitals, acceptance by the Palestinians of the fact that the refugees will not be able to return to what is now Israeli territory, and acceptance by the Israelis of the fact that their settlements in Palestinian territory will have to be dismantled. In any "conflict between two rights" -- as Amos Oz, Israel's leading novelist, has called it -- the best outcome is one in which both sides e[...]

Mugabe's Cholera

Wed, 24 Dec 2008 00:00:00 -0600

The dearth of food is another byproduct of Mugabe's delirium. It can be traced back to the new wave of land reform that started in 2000, when under the pretext of undoing the legacy of colonialism, the government terrorized white farm owners by sending the War Veterans Association, supposedly a group of Zimbabweans who had fought for the country's liberation, to seize the farms by force. Even though Mugabe lost a constitutional referendum that would have legally empowered him to confiscate farms, more than 100,000 square kilometers were taken over in a matter of weeks. As had been the case with a more civilized land "reform" of the 1980s, most of the property ended up in the hands of cronies or peasants unable to engage in economies of scale in the plots that were distributed to them. Agricultural output was decimated in what was once known as the breadbasket of southern Africa.

This exercise in economic self-flagellation has taken place under a tyranny that has murdered thousands of citizens. Even after the power-sharing agreement signed by Mugabe last September in the wake of his defeat in the first round of the presidential elections and the subsequent, government-sponsored violence, people close to opposition leader Morgan Tsvangirai have been kidnapped or killed.

With the exception of Botswana, Tanzania and Zambia, the member states of the Southern African Development Community, South Africa in particular, have provided the regime in Harare with political cover on every important occasion. They whitewashed the rigged presidential election in 2002, called for Tsvangirai to recognize the legitimacy of Mugabe's dictatorship, blamed the opposition for most of the violence and did not protest when Mugabe refused to publish the results of the first round of the presidential election this year.

There are several reasons why Thabo Mbeki was a shameful president of South Africa until he was legally kicked out of power a few months ago -- including his contention that the human immunodeficiency virus (HIV), which according to the United Nations affects one in five people in his country, is not the cause of AIDS. Part of his foreign policy legacy is the protection of Mugabe all these years. In a recent conversation, former South African opposition leader Tony Leon told me that "Mbeki's liberation movement mindset led him to see Mugabe as a fellow comrade in arms and exculpate him from the evils of his government."

The cruel irony is that South Africa is now itself a victim of Mugabe's rule. The cholera epidemic and the looming famine have already sent many Zimbabweans across the Limpopo River into South Africa, leading many to question the de facto protection of Zimbabwe's regime. The fact that South Africa is under a caretaker president of sorts until the elections scheduled for next April probably means that the status quo will continue. Despite being out of power, Mbeki continues to be the "mediator" on the other side of the border.

Unlike former U.S. President Jimmy Carter, former U.N. Secretary-General Kofi Annan or activist Graca Machel (Nelson Mandela's wife), who were recently told they were not welcome, Mbeki has no trouble getting in and out of Zimbabwe.