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The response in the US to startling new allegations that the White House directed the forgery of evidence to support its case for the war in Iraq has been surprisingly muted so far. The charges may be false, of course, but if they are seriously examined and turn out to be true, this is – or ought to be – a Watergate-sized scandal.

Ron Suskind is a heavyweight: a Pulitzer Prize-winning journalist, and the author of a well-regarded book on the administration’s security policies, The One Per Cent Doctrine. His new book, The Way of the World: A Story of Truth and Hope in an Age of Extremism, which was published last week, contains the extraordinary new charge. It says that late in 2003 the White House ordered the Central Intelligence Agency to forge a memo dated July 2001 from Tahir Jalil Habbush, Saddam Hussein’s intelligence chief, to Saddam himself, affirming that Mohammed Atta, the September 11 2001 bomber, had contacts with the regime and that Iraq had an ongoing weapons of mass destruction programme.

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Having ignored the story for months, the press descends with barely contained glee on the John Edwards confession. Far be it from me to moralise (let him without sin…) but the episode surely takes a prominent place in the annals of male insanity. It’s not the affair; it’s not even the fact that his wife was ill. These aspects are unremarkable. It’s the fact that he was running for president and his marriage was the larger part of his campaign. His rock-solid decades-long partnership with Elizabeth was the essential antidote to his boyish good looks and aw-shucks southern charm. And didn’t he know it. He kept his marriage in voters’ faces all through his fight for the nomination. Now this. Incredible.

I will be interested to see how the hypocrisy angle plays out. You remember the exultation over the downfall of Larry “Wide Stance” Craig. “It’s not what he did,” said column after column, “it’s the hypocrisy.” In early coverage of the Edwards case, the regretful “it’s an inexplicable tragedy” motif seems to be far outdistancing the “what an outrageous hypocrite” line—with a particular affectation of sympathy for Elizabeth. Maybe that’s right. Maybe it would have been right in the Larry Craig case too. (He has a wife.) Some kinds of hypocrisy, it seems, are easier to put up with than others.

I’ve mentioned the Bill Gates/Mike Kinsley/Conor Clarke creative capitalism project before. A new highlight on the site is a piece by my esteemed colleague Martin Wolf. (This is what Martin does on his holidays.) I’m not entirely sure what Martin’s note has to do with “creative capitalism”–the idea is mentioned and dismissed in the last paragraph–but he has written the best short essay on the political preconditions for capitalism I have ever read.

Consider a society in which everybody was a profit-maximizer. What would it be like? It would be one in which rulers, soldiers, judges, bureaucrats would take whatever they could. It would be one in which bribery and corruption were the norms. It would be one in which market capitalism of the kind Professor Landsburg (and I) extol would be impossible. It would be one in which almost everybody would be poor. And because it would be one in which almost everybody was very poor, it would also be one in which the only way to obtain wealth would be to join in the race for political power. This would be all too natural. It would also be a negative-sum society, in which life tended to be nasty brutish and short.

Profit-maximization is not a generalizable norm for a successful capitalist society. Indeed, it is not an ethical principle at all, for it violates Kant’s categorical imperative — that one should “act only according to that maxim whereby you can at the same time will that it should become a universal law.” Profit-maximization is a situational ethic, applicable only to economic activity — that is, activity carried out under competitive conditions. Monopoly providers of public goods — security, justice and so forth — must not act under profit maximization.

We do not even want people engaged in private business to be profit-maximizers tout court. Let us suppose, for example, that a business knows of an undetectable way of dumping poisonous waste, thereby saving itself vast sums of money. Do we believe that it ‘ought’ to do this? I certainly do not. Do we believe businesses ought to create cartels? No, again. Do we regard it as right for business leaders to manipulate their pay — by back-dating stock options, for example — in order to steal as much as possible from their shareholders? No, yet again. Yet all these people are doing is maximizing their personal profits, as individuals in the market economy supposedly should

…

So the big problem with competitive capitalism is not that it is uncreative. It is certainly highly creative. The problem is that it is unnatural. There have to be rules, ethical norms and institutional constraints governing profit-maximizing behavior, to ensure that the maximization operates for the social good. Of course, pure libertarians would deny this. They believe that a society could be constructed on the basis of voluntary exchange, with no coercion. I think that would last until the first well-organized gang came over the hill, as Thomas Hobbes argued. We need the Leviathan. The question is how we tame it.

Reluctant as I am to follow that performance, it so happens I have posted a new contribution too. Mike and Conor asked me earlier for some thoughts on what Adam Smith would make of creative capitalism. If you’re interested, and with all due diffidence, I’ll post what I sent them after the jump.

Continue reading "Adam Smith on CSR"

A friend sends me this, which I urge you to read in full (the point of the story is in the details).

Ex-UI researcher faces deportation

Katarzyna Dziewanowska grew up in the “gray communist life” of Poland. But it was in America where she found a truly nightmarish experience with a bureaucracy. After nearly 14 years as a researcher at the University of Idaho, Dziewanowska has been denied permanent residency by U.S. immigration officials, who say she worked without authorization for eight months. She did that, she and her attorneys say, on the advice of the UI, and she quit working for a time when the university advised her to do so.

But her appeals have fallen on deaf ears with immigration officials. She’d like to take the case before an immigration judge, but that could take months or years. In the meantime, she can’t work and has no legal residency status. Because it is a family application, her husband – a UI researcher studying a promising treatment of retroviruses – can no longer receive grants. Her son can’t apply for a free-tuition program through his employer.

“She has no legal status,” said Michael Cherasia, her former attorney. “She’s not able to legally work. Certainly she can’t continue to do her research. (Agents) could come to her door any morning, arrest her, detain her and ship her out of the country.”

As I say, read the whole thing. Look at what she was researching. Look at her standing in her field. Look at why she now faces deportation.

One thing to say, no doubt, is that Dziewanowska broke the rules. By their lights, the authorities did nothing improper. Also, it seems odd to me that she and more particularly her employer did not see fit to hire a lawyer until it was too late. This is America. You do nothing without a lawyer. But this does not subtract much from the insane disproportion of the outcome–from her point of view, from her family’s, and not least from that of the US. What made me groan out loud was the meaningless glitch that ordained it: an application was rejected twice because a photo was not up to specification, in the second case because of glare on a lens of her glasses. From this, the rest followed. Two “rejections”, no appeal, life squashed. You have a problem with that?

I refuse to give up on a carbon tax. In a new column for National Journal (the link expires at the end of next week), I explain why, and criticise the approaches of both Obama and McCain to energy policy.

Much the most important part of [their] programs is the seemingly brave commitment both have made to a long-term cap-and-trade regime for control of carbon. This could indeed be, to use Al Gore’s favorite word, a “transformative” undertaking. Obama sets a goal to reduce carbon emissions to 80 percent below 1990 levels by 2050. McCain’s goal is a bit less ambitious–a cut to 60 percent below the 1990 benchmark by 2050. Both are promising, in effect, a wholesale restructuring of the U.S. economy around the goal of carbon abatement.

Let us assume this is desirable. Do they mean it? Do they understand what these commitments entail? (If they do, they certainly aren’t spelling it out to voters.) Is there any chance that either goal will be met?

You have to wonder. The country’s mood on global warming has changed–most people now seem to take the danger seriously–but public opinion on energy policy has two contradictory strands. People are worried about rising temperatures and changing climate; but they are also worried about expensive gas. If you are serious about reducing carbon emissions, expensive gas is not a problem; it is an unavoidable part of the solution.

Politicians of both parties take it for granted that the American voter cannot tolerate an explicit tax on carbon, which would be the best way to curb greenhouse gases. This supposedly immovable resistance is why the presidential candidates advocate a system of tradable emission permits instead. But if cap-and-trade binds tightly enough to make a difference, it will necessarily make carbon-releasing fuels more expensive. The system cannot work any other way: It can succeed only by attaching an implicit tax to carbon.

Do Obama and McCain think voters are too stupid to see this? When fuel gets more expensive, won’t voters object just as strenuously as they would have if a carbon tax had been imposed in the first place? You cannot hope to transform the economy and have nobody notice–can you?

And another thing: In setting their bold targets for 2050, Obama and McCain know they will not be held accountable for failing to meet them. Any such failure is 42 years away and somebody else’s problem. Politically, their best bet may be to take credit for seeming to confront the problem while deferring real action and its unpopular consequences another four or eight years.

Europe’s politicians have already worked out their own way of seeming bold on climate change while actually doing nothing: It is called the Kyoto Protocol. America’s promised cap-and-trade system could easily go the same way. Willingness to advocate an explicit carbon tax–or at any rate, to spell out the equivalent consequences of a binding cap-and-trade system–is the real test of whether either candidate is ready to confront this issue. So far, both are failing that test.

On the question of America’s diminishing skills (see my earlier column, blog post), here is a reading by Peter Wood  (via Arts and Letters) on why students are turning away from science.

The precipitous drop in American science students has been visible for years. In 1998 the House released a national science-policy report, “Unlocking Our Future,” that fussily described “a serious incongruity between the perceived utility of a degree in science and engineering by potential students and the present and future need for those with training.”

Let me offer a different explanation. Students respond more profoundly to cultural imperatives than to market forces. In the United States, students are insulated from the commercial market’s demand for their knowledge and skills. That market lies a long way off — often too far to see. But they are not insulated one bit from the worldview promoted by their teachers, textbooks, and entertainment. From those sources, students pick up attitudes, motivations, and a lively sense of what life is about. School has always been as much about learning the ropes as it is about learning the rotes. We do, however, have some new ropes, and they aren’t very science-friendly. Rather, they lead students who look upon the difficulties of pursuing science to ask, “Why bother?”

Success in the sciences unquestionably takes a lot of hard work, sustained over many years. Students usually have to catch the science bug in grade school and stick with it to develop the competencies in math and the mastery of complex theories they need to progress up the ladder. Those who succeed at the level where they can eventually pursue graduate degrees must have not only abundant intellectual talent but also a powerful interest in sticking to a long course of cumulative study. A century ago, Max Weber wrote of “Science as a Vocation,” and, indeed, students need to feel something like a calling for science to surmount the numerous obstacles on the way to an advanced degree.

At least on the emotional level, contemporary American education sides with the obstacles. It begins by treating children as psychologically fragile beings who will fail to learn — and worse, fail to develop as “whole persons” — if not constantly praised. The self-esteem movement may have its merits, but preparing students for arduous intellectual ascents aren’t among them. What the movement most commonly yields is a surfeit of college freshmen who “feel good” about themselves for no discernible reason and who grossly overrate their meager attainments.

Later in the article, by the way, Wood refers in passing to Larry Summers’ exit as president of Harvard–”pushed out … for speculating (in league with a great deal of neurological evidence) that innate difference might have something to do with the disparity in numbers of men and women at the highest levels of [the sciences]”. This reminds me to link belatedly to a recent post by Alex Tabarrok: “Summers Vindicated (Again)”. A new study of the mathematical ability of boys and girls has been widely reported as finding no difference between boys’ ability and girls’. I remember thinking, as I skimmed some of those reports, that Larry would have to revise his opinion. Obviously I should have smelled a rat. Alex explains that the reports were wrong, and the study in question (despite its title, and the evidently successful efforts of the authors to downplay the fact) actually bears out what Larry said. A revealing episode in more ways than one.

The US economy may not be in recession, but this is the nearest thing. In spite of the recent fiscal stimulus, output grew less than 2 per cent at an annual rate in the second quarter, slower than expected. That followed growth of 1 per cent in the first quarter and a contraction (on revised numbers) of 0.2 per cent in the fourth quarter of 2007. A recession is usually defined as two consecutive quarters of shrinking output. It has not happened yet, but it very well might in the next few quarters. Even if it does not, that would be little consolation.

Prospects for the second half of the year are poor. Some of the current boost from the fiscal injection delivered last quarter will keep feeding through, but consumer spending, the hitherto unstoppable engine of US growth, is stalling. The prices of food and petrol, together with still-tightening credit conditions and a housing market that has not yet touched bottom, are weighing it down. Net exports were the main accelerator in the second quarter – without that rise, in fact, output would have fallen, fiscal stimulus or no. But they cannot be relied on in future because growth in Europe and elsewhere is going to be limited by, among other things, policymakers’ worries about inflation.

Most forecasters are expecting a double-dip US slowdown – and the second dip could be a technical recession. Regardless, the labour market is already behaving that way. Unemployment moved up to 5.7 per cent in July, the labour department reported on Friday. Overtime is falling; involuntary part-time working is on the rise. Unemployment will climb above 6 per cent next year. While it may be true that the US has seen much worse, this is no mere “mental recession”.

The remainder of this column can be read here. Please post comments below.