Monthly Archives: May 2010

The administration of Barack Obama sees its new National Security Strategy – a statement the White House sends Congress from time to time – as a work of great importance, a radical departure from its predecessor’s thinking. It is neither; nor, for that matter, is it a strategy.

Continue reading “Obama’s security strategy falls short”

Andrew Brown’s article on Stieg Larsson is interesting. Larsson, author of the posthumously bestselling stories about the sexual abuse of children, the evils of capitalism, and the links between two, describes a Sweden that, in Brown’s phrase, is “entirely dystopian”.

Crime fiction always exaggerates, and Swedish left-wing crime fiction, the tradition to which Larsson belongs, is a genre quite as stylised as Agatha Christie’s. There will always be villainous millionaires and noble women. It is not enough to be a sadistic serial killer: You have to vote conservative as well. But what has changed since the genre was invented in the 1960s by the husband and wife team of Maj Sjöwall and Per Wahlöö is the overwhelming loss of confidence in the future, and in the state. This does reflect reality.

The Swedish model is not what it was.

I read the first of the Larsson books, but with growing unease. If not for the difficulty I have with putting books aside unfinished, it would have been discarded. I don’t understand their astonishing success.

Christopher Hitchens’ Vanity Fair piece on Larsson comes to mind. I admit I’m enjoying the backlash against Hitchens’ new memoir: this piece by Decca Aitkenhead is pleasingly brutal. He doesn’t write well: he blathers, and if his self-regard weren’t so ridiculous it would be intolerable. On the other hand, he sees things and says things that other writers won’t. And he was right about Larsson:

Sweden used to be notorious, in the late 1960s, as the homeland of the film I Am Curious (Yellow), which went all the way to the Supreme Court when distributed in the United States and gave Sweden a world reputation as a place of smiling nudity and guilt-free sex. What a world of nursery innocence that was, compared with the child slavery and exploitation that are evoked with perhaps slightly too much relish by the crusading Blomkvist.

Yes, “slightly too much relish”. The paperback edition I was reading ends with a few pages from the start of the next volume. Reasoning that these would fall outside the terms of my completion problem, I started in. The first paragraph, as I recall, describes a girl strapped to a table. Enough, I thought.

Obama defended his handling of the oil spill at his first full press conference for months. Polls are showing that the public is losing its patience with the administration’s response to the disaster. Gallup finds that more than half of those asked say that Obama’s performance has been poor or very poor. Karl Rove — who would have guessed? — says Yes, the spill is Obama’s Katrina. In fact, he reckons, it could be even worse.

The federal response to Katrina was governed by the 1988 Stafford Act, which says that in natural disasters on-shore states are in charge, not Washington. The federal obligation is to “support . . . State and local assistance efforts” by providing whatever resources a governor requests and then writing big checks for the cleanup. Mr. Bush had to deal with a Louisiana governor and a New Orleans mayor who were, by federal law, in charge.

But BP’s well was drilled in federal waters. Washington, not Louisiana, is in charge. This is Mr. Obama’s responsibility. He says his administration has been prepared for the worst from the start. Mr. Obama’s failure to lead in cleaning up the spill could lead voters to echo his complaint in Katrina’s aftermath: “I wish that the federal government had been up to the task.”

It is hard to say how the politics will develop. If the environmental damage proves as terrible as many fear, and the government’s best efforts seem puny in comparison, then sentiment may turn more harshly against Obama whether or not that is justified. My feeling, though, is that John Kerry is right to call much of the criticism ridiculous.

The notion that the government should be directing, as opposed to merely supervising, the effort to stop the leak — BP should be pushed aside; bring in the military — is absurd. So far as that side of the operations goes, all that matters is who has more technical expertise: the company or the administration? (If your house was burning down, would you want the White House directing the fire crews, or maybe calling in air strikes, as a sign of how seriously Obama takes your problem?)

There are complaints about the scale of federal resources committed to coastline defences and clean-up, but I don’t see evidence, yet, that the White House has chosen to do less than the feasible maximum. As for Rove’s legalisms, they are preposterous and count for nothing. The country blamed Bush for the appalling mismanagement of the Katrina aftermath, and was right to. I see no signs of a remotely similar shambles in the way the leak has been dealt with. Worse, in the crucial first few days after the hurricane, Bush seemed blithely unconcerned, and those images were juxtaposed against the awful and immediately apparent human consequences. Obama has not made that error. If he is unlucky, or if he slips up in an uncharacteristic way, this may not protect him. Still, I would be surprised if the political harm could be even half as bad as Bush’s self-inflicted injuries.

What Obama said today was correct. He admitted he was wrong to suppose that oil companies were ready to deal with accidents of this type. He was hardly alone in making that assumption. Ensuring that they are ready next time is the challenge for regulatory reform. But fixing those rules won’t help in managing the present emergency. The spill has happened, and there is only so much the government can do. I’d expect the public to understand that.

Is Apple (or some other tech company) about to repeat Apple’s great mistake? This is a question that keeps coming up. See Henry Blodget in January, for example. Just yesterday the idea had another outing in Apple’s Second Date with History in the WSJ.

Apple almost went out of business 14 years ago, and many would have blamed what seemed one of the seminal business blunders in history.

Bill Gates was chatting with students at Stanford at the time and recalled letters he’d written to Steve Jobs begging him to allow cloning of Apple hardware. Had Mr. Jobs complied, Apple’s operating system might have become the de facto universal standard, the one everybody wrote software for—a role that fell to Windows instead… If you think missing out on the riches that Microsoft created for its shareholders was an error, Mr. Jobs erred.

Did he, though? In the spirit of Zhou Enlai, it might be too early to say. The WSJ published its piece yesterday, just as Apple’s market value surpassed Microsoft’s.

Microsoft is a hugely powerful and profitable company in the tech world. Its Windows software runs 9 out of every 10 computers, while more than 500 million people use its Office software to perform their daily tasks, like writing letters or sending e-mail messages. These two franchises account for the bulk of Microsoft’s annual revenue.

But Apple has the momentum. “Steve saw way early on, and way before Microsoft, that hardware and software needed to be married into something that did not require effort from the user,” said Scott G. McNealy, the co-founder and longtime chief executive of Sun Microsystems.

Apple looks expensive at its current price, and Microsoft cheap…but still.

A couple of months ago I speculated that Apple had got the iPad wrong and said it wasn’t for me. It arrived about a week ago and I’ll share my impressions shortly.

Bryan Caplan calls me out for a misleading comment on healthcare in my note about Arthur Brooks’s new book (see previous post). I wrote:

Public spending is lower in the US, but not vastly lower once you remember to add state and local spending to federal outlays; the US healthcare anomaly accounts for a lot of the remaining difference.

Bryan points out:

According to 2007 OECD data, U.S. government [healthcare] spending as a percentage of GDP is actually slightly above the average of (Austria, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Norway, Spain, Sweden, Switzerland, and the UK).  As a percentage of GDP, the U.S. government outspends Canada, too!  And since U.S. GDP per capita is higher, the U.S. government actually spends a lot more dollars per person than the average country in Europe.  Lack of U.S. government spending on health care is not the reason why our government’s share of the economy is smaller than Europe’s.

He’s quite right. In fact it’s a point I’ve mentioned myself (here, for instance), and it’s important to be clear about it because people find it very surprising. The point in my head was not that low US public spending on healthcare explains low overall US public spending, but that the government’s small share of total health spending keeps overall public spending lower than it otherwise would be. The “US healthcare anomaly” is  not low government spending on health, which would be the natural interpretation of what I said; the anomaly is the government’s relatively small share of a very large total. I muddled the point at best, and stand corrected.

I found a lot to like in the new book by Arthur Brooks, The Battle: How the Fight Between Free Enterprise and Big Government Will Shape America’s Future, but also a lot I did not like. His column for the Washington Post on “America’s new culture war” gives you the basic idea.

This is not the culture war of the 1990s. It is not a fight over guns, gays or abortion. Those old battles have been eclipsed by a new struggle between two competing visions of the country’s future. In one, America will continue to be an exceptional nation organized around the principles of free enterprise – limited government, a reliance on entrepreneurship and rewards determined by market forces. In the other, America will move toward European-style statism grounded in expanding bureaucracies, a managed economy and large-scale income redistribution. These visions are not reconcilable. We must choose.

On the essential virtues of limited government, reliance on entrepreneurship, and rewards determined by market forces, I am with him. These are vital principles, too much neglected. But his framing of the broader issue is excessively Manichean. Those competing visions of private enterprise and statism are not irreconcilable, as Brooks insists. They have in fact been reconciled. The result is the mixed economy, which is what we all have. It is not a question of preferring one pure model or the other, but of choosing a point on a continuous scale. To put it another way, the US is not nearly as exceptional as Brooks says.

Unemployment in the US is high not just by its own past standards but by international standards, too, which is doubly strange. Figures also show a startling rise in long-term unemployment, to levels previously associated with Europe’s broken labour markets.

Continue reading “Monumental job losses in America”

Senate approval of the financial reform bill is a good thing. I disagree with those who argue that it was more important to keep debating the measure and improving it than to get the thing through. What makes anybody think that further debate would have improved it rather than made it worse? And continued inaction is unsettling. There was a lot to be said for prompt resolution (as it were). In any case, the bill was always going to leave lots of discretion to the regulators in framing how the new rules will actually work. It was best to activate the new job assignments quickly, so we will find out what the new rules will be. Even though the bill has passed, for instance, I still don’t know whether the Senate measure calls for a Volcker rule. It depends what you mean by a Volcker rule. Even if the Senate language survives, it depends what the Fed and the others subsequently make of it.

One thing I would have traded further delay for would have been simplification of the regulatory structure. The House and Senate bills — which are a lot alike, fortunately — both  leave the system at least as complicated as it is at the moment. That was a big part of the problem before the crisis, and if anything it has been made worse. (The council of regulators is a weak solution.) But simplification never seemed to be on the agenda at any stage. That is a shame, and something the architects will come to regret.

Howard Davies and David Green had an interesting column in yesterday’s FT. It concentrated on the debate in the UK, but what they say has wider application. They caution that no structure of regulatory responsibilities fared particularly well in the crisis. But they also note, among other things, an important advantage of integrated policy, and the need, in effect, to give central banks a second instrument –  macroprudential regulation — in addition to interest rates.

But the impact of ratcheting up capital requirements is most likely to be felt in the form of an increase in the cost of credit. Banks will seek to pass on the increased cost of lending to customers, which will in turn restrain credit demand… The impact may not be precisely the same as increasing the short-term interest rate, but if capital requirements are raised across the board, it will be close. So does it make sense for there to be a separate financial policy committee, as seems to be envisaged, to manage macroprudential policy? Surely the decision should be considered alongside interest rate policy, which is a matter for the monetary policy committee. Regarding the two instruments as separate, aiming at two different policy outcomes, looks wrong.

Good point. Something for the US council of financial regulators, once it starts work, to bear in mind.

These days the editor in me is usually well suppressed, but can still be provoked. “Inflation Rose in April at Lowest Rate Since the 60s,” said a headline in the New York Times yesterday. I scratched my head. The first paragraph said it again. How could this be?

Inflation fell in April on both of the usual measures. It did not “rise at its lowest rate since the 60s”. Consumer-price inflation was 2.2% in the year to April, down from 2.3% in March. Core inflation, which excludes prices of food and energy, was 0.9% in the year to April — the lowest since 1966 — down from 1.1% in March.  Core prices rose at their lowest rate since the 60s. But what’s a first derivative among friends?

Another thing. Why (oh why) was I made to read nine paragraphs, including one quotation telling me that the trend was soft and another that it was benign, before I actually got to the 12-month CPI figure? And if all this wasn’t annoying enough, look what happened to the markets.

The WSJ headline said: “Inflation at 44-Year Low”. Good. Thank you. Especially for not saying, “Inflation Rises to 44-year Low” — an easy mistake to make.

The remarkable thing about the European Union is how far this project has come without its partners ever deciding what it was for — or, more precisely, where it would stop. The crisis now facing the EU demands answers to those questions. But this is not the first time that circumstances have demanded such answers. The European way is not to provide them, which would be hard, but to keep on muddling through.

It has always worked before. As I say, the Union has come this far, and it has been a stunning achievement. Governments will doubtless try the same approach once more. This time, though, I wonder if they will finally hit the wall.

For reasons I explain in this column for National Journal, I think they will.

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

Clive Crook’s blog: A guide

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