Anda di halaman 1dari 215

HOOVER DIGEST RESEARCH AND OPINION ON PUBLIC POLICY

HOOVER DIGEST · 2011 · N O. 1 RESEARCH AND OPINION


ON PUBLIC POLICY
2011 • NO. 1 • WINTER
The Economy

Politics

Health Care

Social Security

Growth of Government

Property Rights

Education

Terrorism

The Military

Islamism

Afghanistan

Iraq

The Middle East

Egypt

China

Interviews

Values

History and Culture


2011 . NO. 1

Hoover Archives

T H E H O O V E R I N S T I T U T I O N • S TA N F O R D U N I V E R S I T Y
The Hoover Institution on War, Revolution and Peace was established at Stanford University
in 1919 by Herbert Hoover, a member of Stanford’s pioneer graduating class of 1895 and the The Hoover Institution gratefully acknowledges the support of
thirty-first president of the United States. Since 1919 the Institution has evolved from a library its benefactors in establishing the communications and information
and repository of documents to an active public policy research center. Simultaneously, the dissemination program.
Institution has evolved into an internationally recognized library and archives housing tens of
millions of books and archival documents relating to political, economic, and social change.
Significant gifts for the support of the Hoover Digest
The Institution’s overarching goals are to are acknowledged from
• Understand the causes and consequences of economic, political, and social change
Bertha And John Garabedian Charitable Foundation

• Analyze the effects of government actions relating to public policies


The Jordan Vineyard And Winery
• Generate and disseminate ideas directed at positive public policy formation
using reasoned arguments and intellectual rigor, converting conceptual insights Nancy And Charles Munger
into practical policy initiatives judged to be beneficial to society
Joan And David Traitel
Ideas have consequences, and a free flow of competing ideas leads to an evolution of ❖
policy adoptions and associated consequences affecting the well-being of society. The Hoover The Hoover Institution gratefully acknowledges generous support
Institution endeavors to be a prominent contributor of ideas having positive consequences. from the Founders of the Program on
In the words of President Hoover,
American Institutions and Economic Performance
This Institution supports the Constitution of the United States, its Bill of Rights,
and its method of representative government. Both our social and economic Tad And Dianne Taube
systems are based on private enterprise from which springs initiative and ingenuity.
Taube Family Foundation
. . . The Federal Government should undertake no governmental, social, or eco-
nomic action, except where local government or the people cannot undertake it for Koret Foundation
themselves. . . . The overall mission of this Institution is . . . to recall the voice of
and a Cornerstone Gift from
experience against the making of war, . . . to recall man’s endeavors to make and
preserve peace, and to sustain for America the safeguards of the American way of Sarah Scaife Foundation
life. . . . The Institution itself must constantly and dynamically point the road to

peace, to personal freedom, and to the safeguards of the American system.
Professional journalists are invited to visit the Hoover Institution to share their
perspectives and engage in a dialogue with the Hoover community. Leadership
To achieve these goals, the Institution conducts research using its library and archival
assets under the auspices of three programs: Democracy and Free Markets, American Institu- and significant gift support to reinvigorate and sustain the
tions and Economic Performance, and International Rivalries and Global Cooperation. These William and Barbara Edwards Media Fellows Program
programs address, respectively, political economy abroad, political economy domestically, and are acknowledged from
political and economic relationships internationally.
William K. Bowes Jr.
❖ ❖ ❖
William C. Edwards
The Hoover Institution is supported by donations from individuals, foundations, cor-
porations, and partnerships. If you are interested in supporting the research pro- Charles B. Johnson
grams of the Hoover Institution or the Hoover Library and Archives, please contact
the Office of Development, telephone 650.725.6715 or fax 650.723.1952. Gifts to the Tad and Cici Williamson
Hoover Institution are tax deductible under applicable rules. The Hoover Institution is
part of Stanford University’s tax-exempt status as a Section 501(c)(3) “public charity.”
Confirming documentation is available upon request.
RESEARCH AND OPINION
O N P U B L I C P O L I C Y 
2011 · NO.1 · WINTER

T H E H O OV E R I N S T I T U T I O N

S ta n f o r d U n i v e r s i t y
Hoover Digest
Research and Opinion on Public Policy
2011 • no. 1 • winter www.hooverdigest.org

The Hoover Digest offers informative writing on politics, economics, and HOOVER DIGEST
history by the scholars and researchers of the Hoover Institution, the public
policy research center at Stanford University. peter robinson
Editor
The opinions expressed in the Hoover Digest are those of the authors and charles lindsey
do not necessarily reflect the opinions of the Hoover Institution, Stanford Managing Editor
University, or their supporters. e. ann wood
Institution Editor
The Hoover Digest (ISSN 1088-5161) is published quarterly by the Hoover
Institution on War, Revolution and Peace, Stanford University, Stanford jennifer presley
Book Publications Manager
CA 94305-6010. Periodicals Postage Paid at Palo Alto CA and additional
mailing offices. POSTMASTER: Send address changes to the Hoover
Digest, Hoover Press, Stanford University, Stanford CA 94305-6010.
HOOVER INSTITUTION
© 2010 by the Board of Trustees of the Leland Stanford Junior University
herbert m. dwight
Chairman, Board of Overseers
Contact Information robert j. oster
We welcome your comments and suggestions at digesteditor@stanford.edu boyd c. smith
and invite you to visit the Hoover Institution website at www.hoover.org. For Vice Chairmen,
Board of Overseers
reprint requests, write to this e-mail address or send a fax to 650.723.8626.
john raisian
The Hoover Digest publishes the work of the scholars and researchers Tad and Dianne Taube
affiliated with the Hoover Institution and thus does not accept unsolicited Director
manuscripts. david w. brady
Deputy Director,
Davies Family Senior Fellow
Subscription Information richard sousa
The Hoover Digest is available by subscription for $25 a year to U.S. Senior Associate Director
addresses (international rates higher). To subscribe, send an e-mail to david davenport
hoover@press.uchicago.edu or write to Counselor to the Director
Hoover Digest
Subscription Fulfillment ASSOCIATE DIRECTORS
P.O. Box 37005 douglas bechler
Chicago, IL 60637 stephen langlois
You may also contact our subscription agents by phone at 877.705.1878 donald c. meyer
eryn witcher
(toll free in U.S. and Canada) or 773.753.3347 (international) or by fax at
877.705.1879 (U.S. and Canada) or 773.753.0811 (international). ASSISTANT DIRECTORS
denise elson
On the Cover mary gingell
james gross
A man and a boy huddle together with a jeffrey m. jones
book in this literacy poster in the Hoover noel s. kolak
Archives. The image dates from 1919, kathy phelan
during the short life of the Hungarian
Soviet Republic, and is uncharacteristically
gentle for early communist iconography.
Nonetheless, it had a serious purpose: visit the
visit the
HOOVER INSTITUTION
inculcating the masses with revolutionary
ideology, a project that Soviet Russia, with online at
HOOVER INSTITUTION
its Commissariat of Enlightenment, had
already begun. Read this poster’s story
online at
www.hoover.org

www.hoover.org
on page 208.
Contents HOOVER DIGEST · 2011 · NO. 1 · W I NTE R

T he E cono my

9 An End to the Quick Fixes


Our return to prosperity depends on permanent tax cuts, predictable
policies, and sane deficits. By george p. shultz, michael j. boskin,
john f. cogan, allan meltzer, and john b. taylor.

18 “Cash for Clunkers” and Other Lemons


Park those underperforming schemes; instead, put more cash in tax-
payers’ pockets. By robert j. barro.

21 Double Dips . . . or More


Economic recovery often means multiple ups and downs. Harmful
short-term policies only make the ride worse. By michael j. boskin.

25 How to Grow out of the Deficit


The pressure for big tax increases vanishes when profligate spending
does, too. By edward p. lazear.

28 Amnesia à la Keynes
Heaping up massive peacetime deficits has never helped rebuild an
economy, and it won’t now. By niall ferguson.

P ol itics

33 The Unbearable Heaviness of Governing


At midterm, the Obama age has become something no one expected:
an ordinary presidency. By morton keller.

Hoover Digest  N  2011 · No. 1


H ea lth Care

44 Poison Pill
Letting the government play doctor is bad medicine. By scott w.
atlas.

S ocia l Securit y

54 Days of Reckoning
Social Security is sinking while its would-be rescuers squabble over
how to save it. Time to make common cause. By charles blahous.

G rowth o f Govern m ent

60 A Medicine for Our Melancholy


A clue to that American “malaise”: even people comfortable with
government turn queasy when it gets too big. By richard a.
epstein.

63 Finding Optimism Again


Our characteristic hope for the future has been shaken. Growth in
per capita income can revive it. By gary s. becker.

P roperty Rights

68 Glimpses of Economic Liberty


Bit by bit, courts are being forced to ponder the laws and licenses that
stifle people’s freedom to work. By clint bolick.

Hoover Digest  N  2011 · No. 1


E ducation

81 The “War on Teachers” Is a Myth


Unions that defend the worst teachers are depriving children of the
best teaching. By eric a. hanushek.

T errorism

85 Gitmo Breakout
There is no quick way to dispel the legal murk surrounding
terror detainees. But these five ideas could let in some light. By jack
goldsmith.

T he Mi l itar y

90 Our Double-Edged Sword


The military’s “indirect approach”—battlefield restraint, cultural
savvy, the use of local troops—means a big shift in the way U.S.
forces operate. It demands a close look. By thomas h. henriksen.

I s la m ism

100 The Wages of Militancy


The planners of the “ground zero mosque” chose confrontation.
They should have chosen discretion. By fouad ajami.

104 Seeing Islamism Clearly


Americans are starting to grasp what radicalism means—and to
understand that moderate Islam is not the enemy. By daniel pipes.

Hoover Digest  N  2011 · No. 1


A f ghanistan

108 Great Game without End


Nobody wins in Afghanistan—at least not soon. Western democracies
need to stay nimble, reserve the power to strike, and remain patient.
By josef joffe.

I ra q

111 Unfinished Business


How America should carry out its new post-combat role. By
kori n. schake.

T he Middle E ast

114 Is a Deal within Reach?


When it comes to Mideast peace talks, this time the optimists may
have a case. By robert zelnick.

E g y pt

127 Thirty Years of Cold Peace


Hosni Mubarak has foiled the militants, kept the Pax Americana,
and above all retained his grip on power. No one seems to be
celebrating. By fouad ajami.

Hoover Digest  N  2011 · No. 1


C hina

133 China Backpedals


State-owned companies are cramping the private sector—and put-
ting a nascent market economy in jeopardy. By jialin zhang.

I nterviews

142 “We Can’t Afford to Stand Still”


In a world of emerging economies, says Hoover fellow michael
spence, there is no going back to the old “normal.” By nathan
gardels.

149 Peter Berkowitz’s Five Books


His reading list focuses on how liberty is won, lost, and neglected.
By jonathan rauch.

160 America, Dismantled


Hoover fellow thomas sowell digs in his heels against American
decline. By david hogberg.

V a lues

167 Decline Is a Choice. Let’s Reject It


America can decide to be itself again: free, fair, and thriving. By
victor davis hanson.

H istory and C ul ture

171 A Communist Rogues’ Gallery


His new Dictionary of 20th-Century Communism is no closed book.
Hoover fellow Robert Service says the movement that claimed tens
of millions of victims has “a living legacy, alas.” By john j. miller.

Hoover Digest  N  2011 · No. 1


177 Stalin’s Genocides
Yet another crime the Soviet dictator got away with: defining geno-
cide to exclude what he did. Hoover fellow norman m. naimark tells
how it happened. By cynthia haven.

H oover A rchives

182 You Have Been Warned


How subtle the techniques with which the KGB ensured compliance
. . . and how unsurprising to see them revived in today’s Russia. By
mark harrison.

191 Men with a Mission


The Scheinman collection brings to life the story of how two friends,
a white American and a black Kenyan, helped African democracy
bloom. By tom shachtman.

208 On the Cover

Hoover Digest  N  2011 · No. 1


THE ECONOMY

An End to the Quick


Fixes
Our return to prosperity depends on permanent tax cuts, predictable
policies, and sane deficits. By George P. Shultz, Michael J. Boskin,
John F. Cogan, Allan Meltzer, and John B. Taylor.

America’s financial crisis, deep recession, and anemic recovery have been
driven largely by economic policies that have deviated from proven,
fact-based principles. To return to prosperity, we must get back to these
principles.

George P. Shultz is the Thomas W. and Susan B. Ford Distinguished Fellow


at the Hoover Institution, the chairman of Hoover’s Shultz-Stephenson Task Force
on Energy Policy, and a member of Hoover’s Working Group on Economic Policy.
Michael J. Boskin is a senior fellow at the Hoover Institution, a member of the
Shultz-Stephenson Task Force on Energy Policy and Working Group on Economic
Policy, and the T. M. Friedman Professor of Economics at Stanford University.
John F. Cogan is the Leonard and Shirley Ely Senior Fellow at the Hoover
Institution and a member of the Shultz-Stephenson Task Force on Energy Policy,
Working Group on Health Care Policy, and Working Group on National and
Global Economic Markets. Allan Meltzer is a professor of political economy
at Carnegie Mellon University. John B. Taylor is the George P. Shultz Senior
Fellow in Economics at the Hoover Institution, the chairman of the Working
Group on Economic Policy and a member of the Shultz-Stephenson Task Force
on Energy Policy, and the Mary and Robert Raymond Professor of Economics at
Stanford University.

Hoover Digest  N  2011 · No. 1 9


The most fundamental starting point is that people respond to incen-
tives and disincentives. Tax rates offer a strong example because the data
are so clear and the results so powerful. A wealth of evidence shows that
high tax rates retard investment and lower productivity growth; raise tax-
es, and living standards stagnate.

Since the financial crisis began, annual federal spending has increased

by an extraordinary $800 billion—more than $10,000 for every American

family.

Moreover, when higher taxes reduce the reward for work, you get less of
it. Nobel Prize–winning economist Edward Prescott showed this when he
examined international labor market data and demonstrated that chang-
es in tax rates on labor are associated with changes in employment and
hours worked. From the 1970s to the 1990s, the effective tax rate on work
increased by an average of 28 percent in Germany, France, and Italy. Over
that same period, work hours fell by an average of 22 percent in those
three countries.
Long-lasting economic policies based on a long-term strategy work;
temporary policies don’t. The difference between the effects of per-
manent tax rate cuts and one-time temporary tax rebates is also well
documented. The former creates a sustainable increase in economic
output, the latter at best only a transitory blip. Temporary policies
create uncertainty that dampens economic output as market partici-
pants, unsure about whether and how policies might change, delay
their decisions.
As Milton Friedman famously observed, nobody spends somebody
else’s money as wisely as he spends his own. Having “skin in the game”
leads to superior outcomes. When legislators put other people’s money at
risk—as when Fannie Mae and Freddie Mac bought risky mortgages—
crisis and economic hardship result. When minimal co-payments and low
deductibles are mandated in the insurance market, wasteful health care
spending balloons.
Rule-based policies provide the foundation of a high-growth market
economy. For most of the 1980s and 1990s, monetary policy was con-

10 Hoover Digest  N  2011 · No. 1


Illustration by Taylor Jones for the Hoover Digest.
ducted in a predictable, rule-like manner that kept the economy stable.
We avoided lengthy economic contractions like the Great Depression of
the 1930s and the rapid inflation of the 1970s.
Abiding by such policies minimizes capricious discretionary actions
such as the recent ad hoc federal bailouts. The history of recent eco-
nomic policy is one of massive deviations from basic tenets, result-
ing in a crippling recession and now a weak recovery. The deviations
began with policies—as when the Federal Reserve held interest rates
too low for too long—that fueled an unsustainable housing boom.
Federal housing policies allowed home loans with no money down.
Banks were encouraged to make risky loans and securitization sepa-
rated lenders from their loans. Neither borrower nor lender had suf-
ficient skin in the game. Lax enforcement of existing regulations
allowed both investment and commercial banks to circumvent long-
established banking rules to take on far too much leverage. Regulators
failed, not regulations.

A wealth of evidence shows that high tax rates retard investment and

lower productivity growth.

The departures from sound principles continued when the Fed and the
Treasury responded with arbitrary and unpredictable bailouts of banks,
auto companies, and financial institutions. They financed their actions
with unprecedented money creation and massive debt issuance. These
frantic moves spooked already turbulent markets and led to financial
panic.
More deviations occurred when the government responded with inef-
fective, temporary stimulus packages. The 2008 tax rebate and the 2009
spending stimulus bills failed to improve the economy. Cash for clunkers
and the first-time home buyers' tax credit merely moved purchases for-
ward by a few months.
Then came the health care overhaul, which imposes taxes on savings
and investment and gives the government control over health care deci-
sions. Fannie Mae and Freddie Mac and their estimated $400 billion cost
to taxpayers have been given no path to resolution. Hundreds of new

12 Hoover Digest  N  2011 · No. 1


complex regulations lurk in the financial reform bill, with most critical
details left to regulators. Uncertainty reigns, and nearly $2 trillion in cash
sits in corporate coffers.
Since the financial crisis began, annual federal spending has increased
by an extraordinary $800 billion—more than $10,000 for every American
family. This has driven the budget deficit to 10 percent of GDP, far above
the previous peacetime record. The Obama administration has proposed
to lock a sizable portion of that additional spending into government pro-
grams and to finance it with higher taxes and debt.
The federal budget is perhaps the best indicator of the destructive path
blazed by these policy deviations. The chart on this page puts the fiscal
problem in perspective. It shows federal spending as a percentage of GDP,
an amount that is now 24 percent, up sharply from 18.2 percent in 2000.
As the chart shows, in all of U.S. history there has been only one period
of sustained decline in federal spending relative to GDP: in 1983–2001,

Hoover Digest  N  2011 · No. 1 13


spending relative to GDP declined by 5 percentage points. Two factors
dominated this remarkable period. First was strong economic growth.
Second was modest spending restraint—on domestic spending in the
1980s and on defense in the 1990s.
Future federal spending, driven mainly by retirement and health care
promises, is likely to increase beyond 30 percent of GDP in twenty years
and then keep rising, according to the Congressional Budget Office. The
reckless expansions of both entitlements and discretionary programs in
recent years have only added to our long-term fiscal problem.
The good news is that we can change these destructive policies by
adopting a strategy based on proven economic principles:

• Take tax increases off the table. Higher tax rates are destructive to
growth and would ratify the recent spending excesses. Our complex tax
code is badly in need of an overhaul to make America more competitive.
For example, the U.S. corporate tax is one of the highest in the world.
That’s why many tax reform proposals integrate personal and corporate
income taxes with fewer special tax breaks and lower tax rates.
But in the current climate, with the very creditworthiness of the United
States at stake, we would keep the present tax regime in place while avoid-
ing the severe economic drag of higher tax rates.

• Balance the federal budget by reducing spending. Publicly held


debt must be brought down to the pre-crisis safety zone. To do this, the
excessive spending of recent years must be removed before it becomes a
permanent budget fixture. The government should begin by rescinding
unspent “stimulus” funds, ratcheting down domestic appropriations to
their pre-binge levels, and repealing entitlement expansions, most notably
the subsidies in the health care bill.
The next step is restructuring public activities between federal and state
governments. The federal government has taken on more responsibilities
than it can properly manage and efficiently finance. The 1996 welfare
reform, which transferred authority and financing for welfare from the
federal to the state level, should serve as the model. This reform reduced
welfare dependency and lowered costs, benefiting taxpayers and welfare
recipients.

14 Hoover Digest  N  2011 · No. 1


• Modify Social Security and health care entitlements to reduce their
explosive future growth. Social Security now promises much higher ben-
efits to future retirees than to today’s retirees. The typical thirty-year-old
today is scheduled to get an inflation-adjusted retirement benefit that is
50 percent higher than the benefit for a typical current retiree.
Benefits paid to future retirees should remain at the same level, in terms
of purchasing power, that today’s retirees receive. A combination of index-
ing initial benefits to prices rather than to wages and increasing the pro-
gram’s retirement age would achieve this goal. They should be phased in
gradually so that current retirees and those nearing retirement are not
affected.

The federal government has taken on more responsibilities than it can

properly manage and efficiently finance.

Health care is far too important to the American economy to be left in


its current state. In markets other than health care, the legendary Ameri-
can shopper, armed with money and information, has kept quality high
and costs low. In health care, service providers, unaided by consumers
with sufficient skin in the game, make the purchasing decisions. Third-
party payers—employers, governments, and insurance companies—have
resorted to regulatory schemes and price controls to stem the resulting
cost growth.
The key to making Medicare affordable while maintaining the quality
of health care is more patient involvement, more choices among Medicare
health plans, and more competition. Co-payments should be raised to
make patients and their physicians more cost-conscious. Monthly premi-
ums should be lowered to provide seniors with more disposable income
to make these choices. A menu of additional Medicare plans, some with
lower premiums, higher co-payments, and improved catastrophic cover-
age, should be added to the current one-size-fits-all program to encourage
competition.
For Medicaid, modest co-payments should be introduced (except for
preventive services). The program should be turned over entirely to the
states with federal financing supplied by a “no strings attached” block

Hoover Digest  N  2011 · No. 1 15


grant. States should then allow Medicaid recipients to purchase a health
plan of their choosing with a risk-adjusted Medicaid grant that phases out
as income rises.
The 2010 health care law undermined reforms under way since the late
1990s, including higher co-payments and health savings accounts. The
law should be repealed before its regulations and price controls further
damage the availability and quality of care. It should be replaced with
policies that target specific health market concerns: quality, affordability,
and access. Making out-of-pocket expenditures and individual purchases
of health insurance tax-deductible, enhancing health savings accounts,
and improving access to medical information are keys to more consumer
involvement. Allowing consumers to buy insurance across state lines will
lower the cost of insurance.

• Enact a moratorium on all new regulations for the next three years,
with an exception for national security and public safety. Regulations
should be transparent and simple, pass rigorous cost-benefit tests, and rely
to a maximum extent on market-based incentives instead of command
and control. Direct and indirect cost estimates of regulations and subsi-
dies should be published before new regulations are put into law.
Off-budget financing should be ended by closing Fannie Mae and
Freddie Mac. The Bureau of Consumer Finance Protection and all oth-
er government agencies should be on the budget that Congress annu-
ally approves. An enhanced bankruptcy process for failing financial firms
should be enacted to end the need for bailouts. Higher bank capital
requirements that rise with the size of the bank should be phased in.

• Make monetary policy less discretionary and more rule-like. The


Federal Reserve should announce and follow a monetary policy rule, such
as the Taylor rule, in which the short-term interest rate is determined by
the supply and demand for money and is adjusted through changes in the
money supply when inflation rises above or falls below the target, or when
the economy goes into a recession. When monetary policy decisions fol-
low such a rule, economic stability and growth increase.
To reduce the size of the Fed’s bloated balance sheet without causing
more market disruption, the Fed should announce and follow a clear and

16 Hoover Digest  N  2011 · No. 1


predictable exit rule, which describes a contingency path for bringing
bank reserves back to normal levels. It should also announce and follow a
lender-of-last-resort rule designed to protect the payment system and the
economy—not failing banks. Such a rule would end the erratic bailout
policy that leads to crises.
The United States should, along with other countries, agree to a target
for inflation to increase expected price stability and exchange-rate stabil-
ity. A new accord between the Federal Reserve and Treasury should re-
establish the Fed’s independence and accountability so that it is not called
upon to monetize the debt or engage in credit allocation. A monetary rule
is a requisite for restoring the Fed’s independence.

These pro-growth policies provide the surest path back to prosperity.


Reprinted by permission of the Wall Street Journal. © 2010 Dow Jones & Co. All rights reserved.

Available from the Hoover Press is Ending Government


Bailouts as We Know Them, edited by Kenneth E. Scott,
George P. Shultz, and John B. Taylor. To order, call
800.935.2882 or visit www.hooverpress.org.

Hoover Digest  N  2011 · No. 1 17


T H E ECONOMY

“Cash for Clunkers”


and Other Lemons
Park those underperforming schemes; instead, put more cash in
taxpayers’ pockets. By Robert J. Barro.

“Supply-side economics” is a memorable phrase from the Reagan admin-


istration. These catchy yet misleading words pertain not to supply versus
demand but rather to incentives, good or ill. For income taxes, the key
point is that cuts in marginal tax rates spur the economy partly through
enhanced supply (greater work effort, higher productivity) and partly
through expanded demand (increased investment in plant and equipment
and in research and development).
President Reagan cut the average marginal income tax rate to 21.8 per-
cent in 1988 from 29.4 percent in 1981. The GDP growth rate between
1982 and 1989 was a strong 4.3 percent per year, and I estimate that 0.6
percent per year of that seven-year growth came from the tax cuts. Similar-
ly, George W. Bush cut the average marginal rate to 21.1 percent in 2003
from 24.7 percent in 2000. The GDP growth rate between 2001 and
2005 (including negative effects from the 2001 recession) was a respect-
able 2.7 percent per year, and I estimate that 0.5 percent per year of that
four-year growth reflected the tax cuts.
As the Obama administration considered whether to maintain the Bush
tax cuts or let them expire, little of the administration’s analysis referred to
incentives. Rather, the discussion mainly centered on whether the poor or

Robert J. Barro is a senior fellow at the Hoover Institution and the Paul M.
Warburg Professor of Economics at Harvard University.

18 Hoover Digest  N  2011 · No. 1


the rich spend a greater fraction of added disposable income, whether the
rich can afford to pay more taxes, and so on.
From the standpoint of incentives, the important point is that higher
marginal tax rates harm the economy. For example, I estimated that undo-
ing all of the 2003 Bush tax cuts (which alone reduced the average mar-
ginal rate by 2 percentage points) for 2011 would reduce the GDP growth
for 2011–12 by 1.1 percentage points.
Incentive-based arguments imply that it is best to cut marginal rates
where they are the highest—usually at the top of the income distribution
but sometimes for poor people who lose transfer-payment eligibility by
earning more money. A common suggestion is to cut the Social Security
payroll tax, but this change is less effective than a cut in the federal indi-
vidual income tax. In contrast to the income tax, the payroll tax is nearly a
flat tax and therefore generates a lot of revenue compared to the marginal
tax rate.

In a weak economy, extended jobless benefits incentivize unemployment.

Parts of President Obama’s economic agenda do rely on incentives, a


notorious example being “cash for clunkers,” the now-expired program
that encouraged Americans to scrap old cars and buy new ones. The two
main responses to this program were destruction of functional old cars
and accelerated purchases of new ones. Hence, used-car prices went up
and automobile sales followed a boom-and-bust pattern. Here, incentives
worked but in an unhelpful manner.
A more favorable case is the recent proposal for accelerated depreciation
allowances for business investment. This change delivers good economic
incentives and ought to be a permanent part of the tax system. Unfortu-
nately, the stimulative effects are likely to be weak in an economy where
nominal interest rates are close to zero. With low interest rates, businesses
value near-term depreciation allowances only a little more than far-off
allowances.
The extension of unemployment-insurance eligibility to ninety-nine
weeks had incentive effects as well, though not in the way it was intended.
According to recent Labor Department statistics, 57 percent of all people
receiving unemployment benefits were on extended programs—those for

Hoover Digest  N  2011 · No. 1 19


workers unemployed more than twenty-six weeks—and the share of the
unemployed getting benefits of some form was 67 percent.
We know from the U.S. Bureau of Labor Statistics (BLS) that in early
August 6.25 million, or 42 percent, of the unemployed had been job-
less more than twenty-six weeks. If we subtract the 5.67 million getting
extended unemployment-insurance benefits, we can estimate that 580,000
people were unemployed more than twenty-six weeks and not getting ben-
efits. That is, around 11 percent of the 4.93 million unemployed without
benefits were in the longer-than-twenty-six-weeks category.

Incentives certainly worked under “cash for clunkers,” but in an

unhelpful manner.

If more data were available, we could do serious research on the deter-


minants of unemployment duration for those eligible or ineligible for
benefits (by taking into account differences across the two groups in work
experience and other characteristics). Yet even with the available data, it
is not a great stretch to infer that the main reason for the sharply higher
unemployment duration among those receiving benefits is the eligibility
up to ninety-nine weeks. In a weak economy, extended benefits incen-
tivize unemployment even when the benefits offered by unemployment
insurance replace only 40 percent of previous wages.
I hope the administration shifts away from programs based on Keynes-
ian reasoning and toward policies that emphasize favorable economic
incentives. Extending the full tax cuts of 2001–3 and reducing the eligibil-
ity period for unemployment insurance would be good starts.
Reprinted by permission of the Wall Street Journal. © 2010 Dow Jones & Co. All rights reserved.

Available from the Hoover Press is Reacting to the


Spending Spree: Policy Changes We Can Afford, edited
by Terry L. Anderson and Richard Sousa. To order, call
800.935.2882 or visit www.hooverpress.org.

20 Hoover Digest  N  2011 · No. 1


THE ECONOMY

Double Dips . . . or
More
Economic recovery often means multiple ups and downs. Harmful
short-term policies only make the ride worse. By Michael J. Boskin.

The optimism that emerged in the early stages of the recovery from the
financial crisis has given way to more sobering assessments of the chal-
lenges to the global and national economies.
In many countries, people fear a prolonged period of slow and occa-
sionally negative growth, persistent obstacles to reducing unemployment,
and continued economic anxiety; worse, a Japanese-style “lost decade”
with multiple recessions; or, even worse, a depression (a fear that politi-
cians and intellectuals have stoked in an attempt to justify massive govern-
ment intervention for years to come).
Are multiple downturns unusual in periods of severe economic dis-
tress? It would be useful to know before trying repeatedly to pump up the
economy in the short run with costly policies that might worsen longer-
run prospects.
The global recession was severe, unmatched since World War II, with
the possible exception of the early 1980s (when, for example, the U.S.
unemployment rate soared to 10.8 percent as a byproduct of the disin-
flation from the double-digit price growth of the late 1970s). From the
beginning of the crisis in December 2007 to the apparent end of the reces-

Michael J. Boskin is a senior fellow at the Hoover Institution, a member of


Hoover’s Shultz-Stephenson Task Force on Energy Policy and Working Group on
Economic Policy, and the T. M. Friedman Professor of Economics at Stanford
University.

Hoover Digest  N  2011 · No. 1 21


sion in the summer of 2009, the decline in real GDP in the United States
was 3.8 percent.
All the other G-7 economies (Japan, Germany, Italy, France, Canada,
and the United Kingdom) experienced severe recessions as well during
this period. Major middle-income trading economies, such as Brazil,
South Korea, Singapore, and Taiwan, experienced brief but even sharper
declines. The downturn was so severe, and lasted so long, that some even
used the term “depression,” before settling on “Great Recession.”
How exactly is a recession defined? Different national statistical
agencies define, and therefore date, such episodes somewhat differ-
ently. In the United States, a nonpartisan, nonprofit private research
institution conducts the official dating, thus wisely depoliticizing the
measurement.

The 1973–75 period in the United States, with eight quarters of

alternating gains and losses in real GDP, might be seen as a single

quadruple-dip recession.

The point at which the economy stops growing is called the peak and
the point at which it stops contracting the trough. The period from the
point at which the economy starts to grow again until the point at which
it reaches the previous peak is called the recovery. Thereafter, growth is
labeled an expansion.
For economists, a recession is over when the economy starts to grow.
The economy falls to the bottom of a well, and then, as soon as it begins
to climb out, the recession is declared over, even though it may be a long
climb back to the top. Little wonder, then, that ordinary citizens consider
a recession over only when the economy has returned to “normal,” a point
when incomes are rising and jobs no longer desperately scarce.
A common rule of thumb is that two consecutive quarters of falling
real GDP constitute a recession. But sometimes recessions don’t satisfy
this rule. Neither the 2001 nor the 1974–75 U.S. recessions met that
criterion. In addition to real GDP, experts consider employment, income,
and sales, as well as the depth, duration, and diffusion of the downturn
throughout the overall economy.

22 Hoover Digest  N  2011 · No. 1


Sometimes dating a recession is a judgment call. The United States
had a brief, sharp recession in 1980, followed by a long and severe one in
1981–82. Many economists think of those years as making up one major
episode, which is probably the appropriate way to see them in a broader
historical context. But the economy did indeed grow in the interim—just
barely enough to register distinct recessions. And, since they were separat-
ed by a transition from President Jimmy Carter to President Ronald Rea-
gan, it was politically consequential that two recessions were identified.
Likewise, the recent recession was officially dated as starting in Decem-
ber 2007, but it could equally well have been dated as starting in the sum-
mer of 2008 because, in the interim, the economy grew.
Double-dip downturns are more the rule than the exception. If we focus
on real GDP and define a double dip as a historical sequence in which a
period long enough to be declared a recession is followed by a period of
recovery, and then quickly followed by a second outright recession, the
1980–82 period in the United States is a classic example. In fact, defined
more loosely as a sequence that includes periods of growth followed by
periods of decline, followed by further periods of growth and decline, the
1973–75 period in the United States, with eight quarters of alternating
gains and losses in real GDP, was a single quadruple-dip recession.

The economy falls to the bottom of a well, and then, as soon as it begins

to climb out, the recession is declared over, even though it may be a long

climb back to the top.

Around the same time, Germany had this type of double dip and Brit-
ain a quadruple dip. In the early 1980s, Britain, Japan, Italy, and Germany
all had double dips. America’s 2001 recession was one brief, mild double
dip. Within the current recession, we have already had a double dip; a dip
at the beginning of 2008, then some growth, then another long, deep dip,
then renewed growth. If the economy declines again—a highly plausible
prospect—we would have a triple dip, although perhaps not an outright
second recession.
History thus suggests that economies seldom grow out of recessions
continuously. Double dips, triple dips, and quadruple dips have been

Hoover Digest  N  2011 · No. 1 23


America’s recessionary experience since the Second World War, and simi-
lar episodes have been common in many other countries. Japan, for exam-
ple, had three recessions in its lost decade, starting in the 1990s, despite a
long string of large Keynesian stimulus programs that left it with the worst
public-debt burden among advanced economies.
While the baseline forecast seems to be slow global growth—in the
United States around 3 percent, about half the usual pace after deep reces-
sions—history suggests that another decline would hardly be surprising
before sustained stronger growth emerges.
Reprinted by permission of Project Syndicate (www.project-syndicate.org). © 2010 Project Syndicate, Inc.
All rights reserved.

Available from the Hoover Press is Getting Off Track:


How Government Actions and Interventions Caused,
Prolonged, and Worsened the Financial Crisis, by John
B. Taylor. To order, call 800.935.2882 or visit www.
hooverpress.org.

24 Hoover Digest  N  2011 · No. 1


THE ECONOMY

How to Grow out of


the Deficit
The pressure for big tax increases vanishes when profligate spending
does, too. By Edward P. Lazear.

Many lawmakers have fallen into a logical trap of their own making.
Although they recognize that tax increases hurt the economy, they argue
that our huge deficit requires Congress to raise revenue through a tax hike.
This argument rests on the flawed premise that we can reduce the defi-
cit only by increasing taxes, as if high levels of spending are a given. Not
so.
To reduce spending and reignite growth, Congress should take two
actions. First, immediately cut the level of spending that has been increased
so dramatically since 2008. Second, institute an “inflation-minus-one”
rule to constrain future spending increases.
Much public discussion focuses on the deficit, which is indeed at criti-
cal levels of around 10 percent of GDP. But even if President Obama
succeeds at lowering the deficit to 4 percent of GDP by 2013, our public-
debt-to-GDP ratio will still be dangerously high, at over 70 percent, or
nearly twice what it was during the Bush years. As the economists Car-
men Reinhart and Kenneth Rogoff have shown in the journal American
Economic Review, such high debt-to-GDP ratios are associated with low
growth.

Edward P. Lazear is the Morris Arnold Cox Senior Fellow at the Hoover
Institution and the Jack Steele Parker Professor of Human Resources Management
and Economics at Stanford University’s Graduate School of Business.

Hoover Digest  N  2011 · No. 1 25


Tax increases—which some suggest in order to reduce the deficit—also
impede growth. But Americans don’t have to choose between an enor-
mous deficit and high taxes. If we returned to the relative fiscal restraint
that prevailed during the Clinton and Bush years, when spending was
19.7 percent and 19.6 percent of GDP, respectively, we could avoid the
entire mess.
Spending, not the deficit, is the most important measure of fiscal
restraint. A fiscally irresponsible president could balance an out-of-control
budget by taxing too much. That approach would hardly be conducive to
economic growth.
To return to the healthier spending ratios of the past two decades, Con-
gress should begin by enacting a budget that brings spending for fiscal
year 2012 at least halfway back to where it was in 2008. Republicans in
Congress should make such spending reduction a priority.
Second, Congress should begin limiting future spending according to
an inflation-minus-one rule. That rule would hold that in any year when
the ratio of government expenditures to GDP exceeds 18 percent (the
thirty-year average of tax revenues), Congress could increase spending
only by the past three years’ inflation rate, minus 1 percentage point.
This would reduce the ratio of spending to GDP, because GDP growth
would almost always exceed budget growth. There would be wrangling
over what gets funded, but the amount of budget growth would be con-
strained. Further, because growth is tied to a historic number (the prior
year’s budget) rather than a forecast, the rule would be tough to circum-
vent.
Coupled with the initial cut in spending, such a rule would get us back
to 2008 ratios by fiscal year 2014. It would take three or four more years
to get to a balanced budget. And if an aggressive Congress cuts spending
even faster than the limit imposed, those additional cuts would be baked
into future budgets.
In emergencies, Congress could pass a one-year suspension of the rule
with a 60 percent vote of both houses. The base, then, would return to
the budget levels of the year before the suspension. The ability to suspend
the rule temporarily would help prevent the more draconian measure of
repealing it as soon as the first emergency presents itself.

26 Hoover Digest  N  2011 · No. 1


In addition, we should limit budget growth in any year that is under
the target ratio to no more than twice the prior year’s increase. And once
the spending-to-GDP ratio again exceeds 18 percent, the rule would kick
in and bring the ratio back down. Thus spending would stay constrained
within a narrow band around historic revenue-to-GDP ratios.

Americans don’t have to choose between an enormous deficit and high

taxes. If we returned to the relative fiscal restraint of the Clinton and

Bush years, we could avoid the entire mess.

The inflation-minus-one rule would allow us to grow our way out of


our fiscal problems without taxing a higher proportion of GDP. Eventu-
ally the deficit would vanish—and with taxes remaining at historic levels,
there would be no impediment to economic growth.
Calling for a rigid rule may seem wishful, but the alternative is a dan-
gerous false choice between high deficits and high taxes. Failing to take a
stand now will condemn subsequent generations to lower living standards
and fewer opportunities.
Reprinted by permission of the Wall Street Journal. © 2010 Dow Jones & Co. All rights reserved.

Available from the Hoover Press is The Road Ahead for


the Fed, edited by John B. Taylor and John D. Ciorciari.
To order, call 800.935.2882 or visit www.hooverpress.
org.

Hoover Digest  N  2011 · No. 1 27


T H E ECONOMY

Amnesia à la Keynes
Heaping up massive peacetime deficits has never helped rebuild an
economy, and it won’t now. By Niall Ferguson.

To those of us who first encountered the dismal science of economics in


the late 1970s and early 1980s, the current debate on fiscal policy in the
Western world has been—no other word will do—depressing.
It was said of the Bourbons that they forgot nothing and learned noth-
ing. The same could easily be said of some of today’s latter-day Keynes-
ians. They cannot and never will forget the policy errors made in the
United States in the 1930s. But they appear to have learned nothing from
all that has happened in economic theory since the publication of their
bible, John Maynard Keynes’s The General Theory of Employment, Interest,
and Money, in 1936.
In its caricature form, the debate goes like this. The Keynesians, haunt-
ed by the specter of Herbert Hoover, warn that the United States is still
teetering on the brink of another Depression. Nothing is more likely to
bring this about, they argue, than a premature tightening of fiscal policy.
This was the mistake Franklin Roosevelt made after the 1936 election.
Instead, we need further fiscal stimulus.
The anti-Keynesians retort that U.S. fiscal policy is already on an
unsustainable path. With the deficit already running at above 10 percent
of gross domestic product, the Congressional Budget Office has warned
that under its alternative fiscal scenario—the more likely of the two sce-
narios it publishes—the federal debt in public hands is set to rise from 62

Niall Ferguson is a senior fellow at the Hoover Institution and the Laurence
A. Tisch Professor of History at Harvard University.

28 Hoover Digest  N  2011 · No. 1


percent of GDP this year to above 90 percent by 2021. In an influential
paper published earlier this year, Carmen Reinhart and Kenneth Rogoff
warned that debt burdens of more than 90 percent of GDP tend to result
in lower growth and higher inflation.
The Keynesians retort by pointing at ten-year bond yields of around 3
percent: not much sign of inflation fears there! The anti-Keynesians point
out that bond market selloffs are seldom gradual. All it takes is one piece
of bad news—a credit rating downgrade, for example—to trigger a selloff.
And it is not just inflation that bond investors fear. Foreign holders of
U.S. debt, who account for 47 percent of the federal debt in public hands,
worry about some kind of future default.

Keynesians appear to have learned nothing from all that has happened in

economic theory since the publication of their bible in 1936.

The Keynesians say the bond vigilantes are mythical creatures. The
anti-Keynesians (notably Hoover senior fellow and Harvard economics
professor Robert Barro) say the real myth is the Keynesian multiplier,
which is supposed to convert a fiscal stimulus into a significantly larger
boost to aggregate demand. On the contrary, supersized deficits are dent-
ing business confidence, not least by implying higher future taxes.
And so the argument goes round and round, to the great delight of the
financial media.
In some ways, of course, this is not an argument about economics at all.
It is an argument about history.
When Roosevelt became president in 1933, the deficit was already run-
ning at 4.7 percent of GDP. It rose to a peak of 5.6 percent in 1934. The
federal debt burden rose only slightly—from 40 percent of GDP to 45
percent—before the outbreak of the Second World War. It was the war
that saw the United States (and all the other combatants) embark on fiscal
expansions of the sort we have seen since 2007. So what we are witnessing
today has less to do with the 1930s than with the 1940s: it is world war
finance without the war.
But the differences are immense. First, the United States financed its
huge wartime deficits from domestic savings, via the sale of war bonds.

Hoover Digest  N  2011 · No. 1 29


Margaret Thatcher, former prime minister of Britain, visits current
Prime Minister David Cameron last June. Like Thatcher, Cameron took
office with a promise of sweeping cuts to public spending amid a deep
economic downturn.

30 Hoover Digest  N  2011 · No. 1


Second, wartime economies were essentially closed, so there was no leak-
age of fiscal stimulus. Third, war economies worked at maximum capac-
ity; all kinds of controls had to be imposed on the private sector to prevent
inflation.
Today’s warlike deficits are being run at a time when the United States
relies heavily on foreign lenders, not least its rising strategic rival China
(which holds 11 percent of U.S. Treasuries in public hands); at a time
when economies are open, so American stimulus can end up benefiting
Chinese exporters; and at a time when there is much underutilized capac-
ity, so that deflation is a bigger threat than inflation.
Are there precedents for such a combination? Certainly. Long before
Keynes was born, weak governments in countries from Argentina to Ven-
ezuela used to experiment with large peacetime deficits to see if there
were ways of avoiding hard choices. The experiments invariably ended
in one of two ways. Either the foreign lenders got fleeced through default
or the domestic lenders got fleeced through inflation. When economies
were growing sluggishly, that could be slow in coming. But there invari-
ably came a point when money creation by the central bank triggered an
upsurge in inflationary expectations.
In 1981 the American economist Thomas Sargent wrote a seminal
paper titled The Ends of Four Big Inflations. It was in many ways the epi-
taph for the Keynesian era. Western governments (not least the British)
had discovered the hard way that deficits could not save them. With dou-
ble-digit inflation and rising unemployment, drastic remedies were called
for. Looking back to central Europe in the 1920s—another era of war-
induced debt explosions—Sargent demonstrated that only a quite decisive
policy “regime change” would bring stabilization, because only that would
suffice to alter inflationary expectations.
Those economists, like New York Times columnist Paul Krugman, who
liken confidence to an imaginary “fairy” have failed to learn from decades of
economic research on expectations. They also seem not to have noticed that
the big academic winners of this crisis have been the proponents of behav-
ioral finance, in which the ups and downs of human psychology are the key.
© Zuma Press

The evidence is very clear from surveys on both sides of the Atlantic.
People are nervous of world-war-sized deficits when there isn’t a war to

Hoover Digest  N  2011 · No. 1 31


justify them. According to a recent poll published in the Financial Times,
45 percent of Americans “think it likely that their government will be
unable to meet its financial commitments within ten years.” Surveys of
business and consumer confidence paint a similar picture of mounting
anxiety.

Western governments discovered the hard way that deficits could not

save them.

The remedy for such fears must be the kind of policy regime change
Sargent identified thirty years ago, and which the Thatcher and Reagan
governments successfully implemented. Then, as today, the choice was
not between stimulus and austerity. It was between policies that boost
private-sector confidence and those that kill it.
Reprinted by permission of the Financial Times. © 2010 Financial Times Ltd. All rights reserved.

Available from the Hoover Press is Bits, Bytes,


and Balance Sheets: The New Economic Rules of
Engagement in a Wireless World, by Walter B. Wriston.
To order, call 800.935.2882 or visit www.hooverpress.
org.

32 Hoover Digest  N  2011 · No. 1


POLITICS

The Unbearable
Heaviness of Governing
At midterm, the Obama age has become something no one expected:
an ordinary presidency. By Morton Keller.

At the midpoint of President Obama’s term, there is a widespread percep-


tion that he has not lived up to his initial promise. In truth, his record isn’t
all that slight, and the passage of health care reform in March 2010 and
financial reform in July add substantially to it. The problem lies rather
in the high expectations that Obama engendered among the chattering
classes and the widespread belief in the incompetence and misdirection of
the Bush administration, combined with the sense that Obama isn’t alter-
ing things all that much, and the lack of signs that he is broadening, or
even sustaining, his base of popular support.
Perhaps the most striking aspect of Obama’s performance so far is nei-
ther the gestures to the left that many conservatives bemoan, nor the
concessions to the middle way that many progressives bewail. Rather,
his administration is most notable for its ordinariness: for falling prey to
all-too-familiar misjudgments as to political power, policy choices and
their consequences, public attitudes and opinion. These missteps are the
common lot of American presidents, but were thought to be less likely
in this Regime of All the Talents. The unbearable heaviness of govern-
ing, it appears, falls with majestic impartiality on whoever occupies the
presidency.

Morton Keller directs the Hoover Institution’s Working Group on Critical


Junctures in American Government and Politics. He is a professor emeritus of
history at Brandeis University.

Hoover Digest  N  2011 · No. 1 33


How do we go about getting a fix on so elusive a president, with so
equivocal a record?

T H E U S E S O F A NALOGY
A president as distinctive as Obama attracts an unusually large flow of
analogy with his predecessors. To some degree this feast of comparison
has stood in the stead of attempts to define Obama’s presidency in more
self-referential terms, as was the case with FDR and LBJ (or, for that mat-
ter, Eisenhower, Reagan, and the Bushes). At the same time there has been
strikingly little discussion of the meaning and implications of his chosen
theme of the New Foundation, in vivid contrast to FDR’s New Deal and
LBJ’s Great Society. In the course of 2009 and the first half of 2010,
the New York Times and the Washington Post linked “Obama” and “New
Foundation” only forty-two times.

The Obama administration is most notable for its ordinariness: for falling

prey to all-too-familiar misjudgments about political power, policy

choices and their consequences, public attitudes and opinion.

It is a truism to say of Obama’s predecessor that for better or worse, what


you saw was what you got. (Progressive columnist Frank Rich observed
that while Obama has been equated with historical figures ranging from
Roosevelt and Reagan to Kennedy and Adlai Stevenson and even to Hitler
and Stalin, it was “amusing” that George W. Bush analogies tended to be
restricted to his parents and Hitler.)
There seems to be no clear consensus on the character or content of
Obama’s presidential leadership or on where he fits in the prevailing clas-
sification of America’s chief executives.
As Obama’s term progressed, the FDR/Hundred Days analogies thick
on the ground in the early months gave way to a different model: not a
president taking charge in a time of historic policy change, but a president
increasingly burdened by the weight of governance.
This progress (or descent) reflects the diminishing expectations
attached to the Obama administration. And it makes it highly likely
that how Obama will adapt his ambitious Big Government program to

34 Hoover Digest  N  2011 · No. 1


widespread public skepticism—and how he will respond to the recent
midterm elections—will dominate public discourse for the foreseeable
future.
By some margin, linkages of Obama with Bill Clinton have been the
most frequent in the course of his presidency. This may reflect not much
more than the fact that Clinton was the previous Democratic president,
and in retrospect is regarded as a successful one; is still (along with his
wife) very much in the public eye; and doesn’t overtax the media’s limited
historical perspective.

There seems to be no clear consensus on the character or content of

Obama’s presidential leadership.

Analogies with Jimmy Carter are fewer but make more sense. Both
Carter and Obama came to the presidency all but out of nowhere: Carter’s
two terms in the Georgia Senate and single term as governor were of a
piece with Obama’s brief stint in the Illinois Senate and a truncated term
in the U.S. Senate. Both ran campaigns that capitalized on widespread
distaste for the presidential leadership that preceded them (Nixon-Ford,
Bush II). And both spoke appealingly of rising above partisanship and
restoring honesty, competence, national unity, and self-confidence to
American public life.
Carter and Obama began their terms in office with full agendas of
issues and programs: the accumulated wish list of post-1960s liberalism
in Carter’s case, the agenda of post-1990s liberalism in Obama’s case. (It
is notable how much overlap there is: health care, energy, the economy, a
new and softer approach in foreign policy.) And both ran into unexpected
political turbulence in their first year in office.
Conservative commentator Philip Jenkins saw Obama’s election not
as an echo of FDR in 1932 or LBJ in 1964, but of Carter in 1976. He
foresaw no replay of the New Deal or the Great Society: “In three or four
years, the main political fact in this country could well be a ruinous crisis
of Democratic liberalism.”
It is accepted that Carter’s response to adversity was to hunker down:
to stick to his policy guns in the face of mounting evidence that they

Hoover Digest  N  2011 · No. 1 35


were of diminishing political effectiveness and, in consequence, to consign
himself to a one-term presidency. Bill Clinton’s midcourse correction after
the disastrous 1994 by-election is a frequently cited alternative model for
Obama to follow. His was a classic instance of political adaptability, with a
dramatically different political result: a solid second-term victory and con-
siderably higher standing than Carter in the presidential pecking order.
No one would claim that Clinton had anything like the large program-
matic goals of FDR or LBJ, to which Obama has given considerable rhe-
torical obeisance. Is Obama capable of echoing Clinton’s striking refusal

36 Hoover Digest  N  2011 · No. 1


to be a slave to the hobgoblin of consistency? Or is he more likely to
show Carter’s commitment to principle, however politically unpromising?
Or—and in the wake of the passage of ObamaCare and financial reform,
this has new standing as a possibility—will he persevere but, unlike Cart-
er, retrieve the popularity and élan of his administration’s creation?
Less frequent because they are more remote (but perhaps more ger-
mane) are linkages of Obama with Woodrow Wilson, the first Demo-
cratic president of the twentieth century, and Ronald Reagan, the most
transformative Republican chief executive in recent times. Here the model
Illustration by Taylor Jones for the Hoover Digest.

Hoover Digest  N  2011 · No. 1 37


changes: less the enactment of a legislative program, more the articulation
of basic political beliefs about government and society.
Equations with Reagan are admittedly a stretch. Wilson makes more
sense. Obama appears to have a full helping of Wilson’s self-assurance,
didacticism, and belief in a moral mission. In late 2007 he set forth a dec-
laration of his larger political goals that can only be described as Wilson-
ian: “A nation healed. A world repaired. An America that believes again.”
No less evocative was his observation after he became president: “I am
well aware of the expectations that accompany my presidency around the
world.” Like Obama, Wilson had early domestic policy successes. But the
flow of events and the primacy of the president’s role as commander in
chief drew him into the role of war leader and would-be architect of world
peace: a role that ultimately consumed him personally and politically.
Obama has not been reluctant to turn his moralizing style to the tempt-
ing if treacherous realm of foreign affairs. This is a path that presidents
frustrated by the hazards and ill fortunes of domestic politics are inclined
to follow. Think of FDR and World War II, LBJ and Vietnam, George W.
Bush and the war on terror.

T H E S T R U C T U R E OF POLITICS IN THE AGE OF OBAMA


But comparisons with predecessors, however illuminating, go only so far
in casting light on the causes of presidential policies. It is necessary as
well to see Obama’s actions in the context of the larger political culture to
which he belongs.
Why is a president of whom so much was expected, and who came
into office with the most favorable legislative and media environments in
decades, not doing better?
Obama’s communication skills and intelligence understandably contin-
ue to be admired by most of the chattering classes and much of the public
(although a shrinking share). And the scope of his ambition to oversee
systemic change—in the economy, health care, energy policy, education,
and foreign policy—remains undimmed in the face of the battering his
agenda has undergone in the course of its first year and more.
Much of this seems inevitable in retrospect, and is by no means Obama’s
fault. It is no small matter to satisfy a constituency that ranges from vola-

38 Hoover Digest  N  2011 · No. 1


tile college students and affluent members of the liberal left to African-
Americans and skeptical centrists.
The question remains: how will Obama adapt to the altered, decreasing-
ly sympathetic political atmosphere that surrounds him? Even FDR, in the
far more attention-focusing circumstances of the Great Depression, had to
make major course corrections in policy. He soon distinguished between
the immediate need to do something—anything—to relieve the most
searing immediate consequences of the Depression and the longer-term
social and economic policy changes that recovery and reform appeared to
require. This is a distinction that Obama has not so far chosen to make.
But then, he is confronted by a far less malign national condition.

Obama appears to have a full helping of Woodrow Wilson’s self-

assurance, didacticism, and belief in a moral mission.

Lyndon Johnson, second to none in his mastery of the machinery of


American government, ran aground on Vietnam and the negative effects
of the Great Society—less than four years after he won one of the great
electoral victories in American history. Obama has not yet had to deal with
so consequential a foreign policy setback. But there are signs of a similar
disconnect between the strongly social-democratic thrust of his domestic
initiatives and the predominant mindset of the American people: a poten-
tial replay of the reaction against Johnson’s War on Poverty.
Yet Obama remains one of the most interesting, intelligent, and origi-
nal politicians of recent times. It is proper to conclude that his difficulties
stem from the larger political milieu as much as from personal mistakes
and drawbacks.
The origins of the political culture in which he has to make his way lie
in the New Deal years of the 1930s. But it assumed its current form from
the 1960s on. Its most notable features are the decline of political par-
ties as prime dispensers of patronage and power, and the rise of polarized
groups on the tails of the political-opinion bell curve. Of ever-increasing
importance is an “independent” middle, susceptible to the siren call of
either party depending on the social-economic or foreign policy situation
and political mood of the time.

Hoover Digest  N  2011 · No. 1 39


Campaigning toward the center and then governing from the ideo-
logical edge has been typical of recent presidents. That was the case with
Bill Clinton before his sobering 1994 congressional election experience.
It was also the case with George W. Bush before his 2006 midterm elec-
tion setback. How will Barack Obama respond to the 2010 congressional
elections?

Why is a president of whom so much was expected, and who came into

office with the most favorable legislative and media environments in

decades, not doing better?

Gilbert and Sullivan’s observation in Iolanthe that “every boy and every
gal/That’s born into this world alive/Is either a little Liberal/Or else a little
Conservative” needs a second look. For some years now, self-described
independents have been at least equal to and often more numerous than
self-described Democrats or Republicans. The role of independents in the
elections of 2006, 2008, and beyond is widely held to have been decisive.
The will-o’-the-wisp of a permanent party majority continues to lure
political pundits and gurus. But the electoral and cultural basis for that
scenario is weak. The more accurate contemporary template is of an elec-
torate with partisan and ideologically committed bell curve tails, and a
substantial, growing, and politically determinant middle that is inclined
to vote on the basis of the candidate and/or the issues more than the party.

T H E N E W P O L I T ICAL CULTURE
What about that other distinctive new feature on the political scene: vocal
and well-financed special interests? Ideologically minded advocacy groups
are widely regarded as the most conspicuous new force in American poli-
tics. Their political action committees and so-called 527 organizations
reached a peak in money spent and attention garnered in the 2004 elec-
tion. But the 2008 contest, and political developments since, highlight the
volatility of contemporary American political culture. Left-wing fat cats
such as George Soros and politically ambitious bloggers such as Markos
Moulitsas and his Daily Kos, and Arianna Huffington and her Huffington
Post, turned out to be flash-in-the-pan influences.

40 Hoover Digest  N  2011 · No. 1


In this (as in much else) they resemble counterparts in the evangel-
ical-fundamentalist religious right or conservative-populist talk show
hosts Rush Limbaugh and Glenn Beck. All attract followings ample
enough to pad their egos and their wallets, but hardly enough to con-
trol the political process. The inability of the GOP right to block the
nomination of Senator John McCain, and the predominance in 2008
of Obama’s own fundraising and support-getting operation over the
advocacy groups, the blogosphere, the 527s, and organized labor, are
evidence that the reach and staying power of fringes right and left have
been exaggerated.
The rise of Obama demonstrates the continuing capacity of our main-
stream political system to reinvent itself. But it is subject to the iron law
of diminishing returns. His 13 million or so online supporters have not as
yet been successfully mobilized to be a force for his legislative program, as
they were for his election.
Instead, the most notable (and least expected) turn of the political
wheel has been the rise of the anti-big-government tea party movement,
which has echoes of the Ross Perot episode of 1992. But the tea party has
not yet demonstrated the staying power to be a significant force in the
2012 election.
The bottom line appears to be that interest/advocacy group politics
and populist political outbursts such as the rise of the Obama coalition
in 2008 and the tea party in 2009–10 are likely to be as transient and
ephemeral as those widely touted previous game-changers the PACs, the
527s, the right-wing talk show hosts, and the left-wing blogosphere.
One way of making sense of this new political culture is to see it as
shaped by an ongoing struggle between its major components. One of
these is a two-party system ordained and legitimized by the Constitu-
tion—in effect, the only way we have of doing our political business. The
other is the more variable political style generated by changing technology
and a vast, mobile population subject to new demographic and social-
economic conditions.
Finally, what about the media, whose political presence includes not
only the press and television but those explosive new players the Internet
and the blogosphere?

Hoover Digest  N  2011 · No. 1 41


The Democratic-liberal inclination of the mainstream print and TV
media is one of the more notable features of late twentieth- and early
twenty-first-century political discourse. While media ownership shifted
from opinionated (and usually right-wing) press barons to grayer corpo-
rate suits, reporters got to be more highly educated, more engaged and
adversarial in their reporting, and more likely to be left-liberal in their
social and political outlook. This did not occur in a cultural vacuum. It
was linked to, and bolstered by, a similar shift in the makeup and outlook
of colleges and universities, foundations, and other culture-definers.

The will-o’-the-wisp of a permanent party majority continues to lure

political pundits and gurus.

In life as in physics, every action has a reaction. The left-liberal tone of


the mainstream media and likeminded websites and blogs was not likely
to flourish unchallenged in a predominantly centrist-conservative nation.
Talk radio was a cheap and widely accessible outlet for the rise of a con-
servative counter-voice. So too were the Internet and the blogosphere.
Liberal-leaning CNN capitalized on the rise of cable TV, but it was soon
confronted, and eventually outgunned, by conservative-leaning Fox News.
Meanwhile, the mainstream media—big city newspapers, the national
news magazines, the three national television networks—eroded finan-
cially under the competitive pressure of cable TV and the Internet. From
2001 to 2008, newspapers as people’s major source of news declined from
50 percent of the population to 35 percent. Television slid from 82 per-
cent to 70 percent, while the Internet rose from 13 percent to 40 percent.
The shrinking newspaper and TV news-viewing habits of 18–29-year-
olds suggests that this will be a continuing fact of American public life.
But just as the major parties are able to retain their dominance over
American politics (indeed, third parties are at a historic low), so the demise
of the traditional media has been prematurely assumed. Television and the
movies retain much of their popularity in the face of newer technologies.
And it is not at all clear that supposed culture-changers like Facebook are
about to transform the form and substance of American politics. An awful
lot of old wine—what leads people to their political allegiances, the per-

42 Hoover Digest  N  2011 · No. 1


sistent need and hunger for news about the world outside, the continuing
capacity of the parties to respond to the political needs of most people—
sloshes around in the shiny new wineskins of the Internet age.

Interest/advocacy group politics and populist outbursts—tea partiers

included—are likely to be as transient and ephemeral as earlier, equally

touted game-changers.

It is in this new political world that Obama brilliantly made his way to
the presidency. And it is in this world that he must deal with the ideo-
logical, policy, and political realities that make governing so heavy a weight
to bear.
Excerpted from The Unbearable Heaviness of Governing: The Obama Administration in Historical
Perspective, by Morton Keller (Hoover Institution Press, 2010). © 2010 The Board of Trustees of the
Leland Stanford Junior University. All rights reserved.

New from the Hoover Press is The Unbearable


Heaviness of Governing: The Obama Administration in
Historical Perspective, by Morton Keller. To order, call
800.935.2882 or visit www.hooverpress.org.

Hoover Digest  N  2011 · No. 1 43


H E A LTH CARE

Poison Pill
Letting the government play doctor is bad medicine. By Scott W.
Atlas.

Medical care in the United States has been loudly derided as inferior to
health care systems in the rest of the developed world in highly publi-
cized rankings, most notably the World Health Organization’s World
Health Report, which looked at care in almost two hundred nations. These
rankings have gained tremendous traction despite being exposed in lead-
ing academic journals for gross distortions from methodological flaws,
including huge measurement errors that produce results with no statistical
significance, data missing from dozens of countries, biased assumptions,
and extreme subjectivity. Government officials, policy makers, insurers,
and even many academics have used this pseudo-data to justify their per-
sonal agenda: centralizing government power over health care by impos-
ing the radical changes in the Patient Protection and Affordable Care Act
(also dubbed ObamaCare) on a largely unwilling public.
Much of the American public assumes the criticisms of our system are
sound—the calls for change have been so ubiquitous and the topic so
complex. Indeed, a large majority have repeatedly concurred that their
health care system needs “fundamental change” or “complete rebuilding.”
But despite that general opinion, multiple studies show that more than
80 percent of Americans are satisfied with the quality of their own health

Scott W. Atlas, MD, is a senior fellow at the Hoover Institution, a member of


Hoover’s Working Group on Health Care Policy, and a senior fellow at Stanford
University’s Freeman Spogli Institute of International Studies. He is also a
professor of radiology and chief of neuroradiology at Stanford Medical School.

44 Hoover Digest  N  2011 · No. 1


care, a number that has risen steadily over the past several years. This strik-
ing contradiction, ignored by policy makers calling for radical changes in
the state of America’s health care, reveals a fundamental truth: Americans
understand from personal experience that their medical care is the best
in the world. They understand what they could lose in a government-
centralized health system in which government is empowered to exercise
unprecedented control over the most personal decisions in their lives.
The facts confirm that American health care is superior. The world’s
leading journals are full of studies demonstrating the superiority of Ameri-
can medical care to that found in countries with systems more heavily
controlled by government bodies. These studies verify better survival from
serious diseases like cancer; better access to treatment for the most preva-
lent chronic diseases; wider access to preventive care and cancer screen-
ing; broader availability of the newest life-changing medical technology;
wider access to the most accurate diagnostic technology; quicker access
to innovative, life-saving cures and safer, less invasive treatments; more
rapid access to highly trained specialists; and ultimately far better access to
the world’s leading doctors and medical scientists, who themselves are the
source of the world’s leading innovations.
But regardless of the amazing quality of American medical care that has
evolved over the past half century, there is broad consensus on a number
of significant problems. Costs are high and increasing. It is unlikely that
government and society can continue to spend such huge sums of money
and an increasingly large proportion of GDP on health care. The lack
of portability of health insurance in the American system, which largely
relies on employers for insurance, needs to be addressed. So does the fact
that millions of Americans are uninsured.
Congress and the Obama administration have claimed that a major
principle underlying their recently passed health care reform is more com-
petition among health insurance providers. Increasing competition would
seem to be a fundamental means of reducing cost, but unfortunately the
law will not do so. The health legislation creates massive new govern-
ment authority that controls access to medical care and dictates insurance
benefits. Rather than increasing private-sector competition, ObamaCare
will reduce choice, shift more regulatory power to bureaucrats, and hinder

Hoover Digest  N  2011 · No. 1 45


private sector innovation. Ultimately, the law is likely

Illustration by Taylor Jones for the Hoover Digest.


to serve as a rationale for shifting Americans to public
plans that further restrict access to care.

46 Hoover Digest  N  2011 · No. 1


The overall goal of any health reform plan should be to increase the
opportunity for good health for Americans and their families. Key prin-
ciples include reducing the number of uninsured, facilitating access to
affordable health insurance that people want rather than are forced to
purchase, making health insurance more portable, and promoting innova-
tion in health care, so that the excellence of our care is not sacrificed and

Hoover Digest  N  2011 · No. 1 47


individuals and their families are empowered to decide how best to spend
their money in health care decisions.

S I X W A Y S T O A DDRESS THE PROBLEM—RIGHT NOW


Here are six straightforward steps that the government could take, right
now, to increase competition in the health insurance markets and empow-
er consumers so that costs come down by value-based purchasing rather
than government edict. These reforms would reduce the number of unin-
sured, facilitate access to affordable insurance, make health insurance por-
table, and promote innovation.

Americans understand from personal experience that their medical care

is the best in the world.

A first step to increasing competition in the health insurance market is


to allow cross-state purchasing, so people can shop in a national market
for the insurance they actually want to buy. It is ill conceived, unneces-
sary, and self-defeating to force Americans to restrict their purchases to in-
state goods or services. Government can rapidly lower the price of health
insurance through the private insurance market by breaking down these
anticompetitive barriers, which result in shocking price variations among
states for equivalent coverage. Small businesses should be allowed to band
together in trade associations to purchase coverage for their employees.
If regulated by the Employee Retirement Income Security Act of 1974
(ERISA), they would be exempt from state health insurance mandates and
regulations. Since small-business employees make up the biggest propor-
tion of uninsured workers, this change would make a big impact.
Second, government can force transparency on the system, ensuring
that Americans have a clear understanding of the price and quality of
their doctors and hospitals as well as enough information about health
and diseases to make informed, value-conscious decisions. Under our cur-
rent system, few patients are aware of the charges about to be incurred
for their medical care. Generally, they have no reason to ask—the cur-
rent third-party-payer structure makes patients believe that someone else
is paying. This lack of demand for price information has allowed hospitals

48 Hoover Digest  N  2011 · No. 1


and doctors to cloak their price structure in a shroud of mystery. Let’s
allow the experts—medical scientists in their peer-reviewed literature—to
determine efficacy and clinical utility; government can ensure transpar-
ency of the prices and visibility of qualifications. When patients know
how much procedures cost, physicians and hospitals will be spurred to
provide competitive pricing.

ObamaCare will reduce choice, shift more regulatory power to

bureaucrats, and hinder private sector innovation.

Third, it is time to reduce the mandate-created distortions of health


insurance markets. State-based mandates alone now number above 2,100
and are a scandalous abuse of government dictates. They increase insur-
ance costs by 20–50 percent and force Americans to buy policies covering
massage therapy, acupuncture, chiropractors, in vitro fertilization, wigs,
and other services not necessarily wanted by more than a small minority of
American families. Instead of adding mandates that Americans rationally
do not consider a good value, the government should focus on creating
an environment in which insurance products can become attractive to
consumers.
Fourth, it makes sense to expand consumer choice by increasing instead
of restricting the availability of insurance, and simplifying rather than
complicating the rules and regulations governing lower-cost health plans,
such as high-deductible plans for catastrophic coverage with health sav-
ings accounts (HSAs). This will make insurance an attractive purchase—
a good value—for the millions of Americans, particularly younger and
healthier people, who can afford insurance but currently (and perhaps
wisely) choose to forgo a purchase they consider a poor value. Health sav-
ings accounts increase choice for consumers, expand individual ownership
and control over health spending, promote price visibility to allow value-
based purchasing, and provide incentives for savings to prepare for future
care needs. Congress should permit more flexibility in employer contribu-
tions to “disease management accounts” in lieu of traditional third-party
benefits, support tax reform proposals to allow parents’ HSA balances to
transfer to their children’s accounts tax-free, and allow holders of HSA

Hoover Digest  N  2011 · No. 1 49


plans who relocate because of a job change to purchase health insurance
across state lines without being subject to state mandates.

When patients know how much procedures cost, physicians and hospitals

will be spurred to provide competitive pricing.

Fifth, government can empower the consumer by revamping the tax


treatment of health care expenses. A number of such creative reforms have
been ignored. For instance, a national system of refundable health care tax
credits—actual cash even for those who pay no income tax—would foster
personal ownership and control of health plans and increase the market
competition that the administration claims it seeks to advance. The essen-
tial portability of insurance—truly owned and designed by American con-
sumers—would eliminate the fear that job loss would lead to loss of cover-
age and financial disaster, and create a huge new group of value-seeking
insurance shoppers working with a responsive private sector. Instead of
expanding dependence on the already-unsustainable government health
plans of Medicare and Medicaid and then reducing payments and restrict-
ing medical care, vouchers can partly or even totally replace those systems.
Innovation comes from the private sector, not government, and there is
no reason the health insurance industry would be an exception. This sin-
gle policy change would reduce health care expenditures on the order of
hundreds of billions of dollars, while eliminating the crippling burden of
health costs on American businesses created by historical accident rather
than thoughtful intention.
Sixth, Congress can finally muster the courage to push back against
the trial lawyers and fix the medical-liability system. Even acknowledging
the important goals of ensuring quality and protecting patients’ rights,
the medical-liability legal system imposes a tremendous financial burden
on the U.S. health care system, estimated at over $80 billion per year.
Doctors and hospitals not only pass on the direct costs of increased mal-
practice premiums but also provide a greater number of expensive and
relatively unproductive medical treatments out of fear of litigation. The
additional cost of defensive medicine is estimated to amount to tens of
billions of dollars per year, up to 6 percent of total costs. Research by aca-

50 Hoover Digest  N  2011 · No. 1


demics and government agencies suggests that commonsense reforms to
the medical-liability system—reasonable caps on noneconomic damages,
giving patients and providers more freedom to experiment with alterna-
tives to traditional courts for resolving disputes—can compensate victims
more quickly, reduce costs, and enhance incentives for doctors and hospi-
tals to take more appropriate precautions against medical errors. We need
to consider a significant rethinking of the entire legal relationship between
patient and care provider.

A T U R N I N G POINT
While our senators and representatives, under the direction of the Obama
administration, debated their ideas to remake America’s health care system
at a massive cost to our children and future generations, they continued
to deny the existence of clear alternative reforms that would lower health
care costs, increase choice of insurance, and maintain the excellence of
our medical system. Cloaked with the argument that “doing nothing is
simply unacceptable,” our government embarked on a sweeping takeover
of American health care. The result included government mandates and
penalties on individuals and businesses, a dramatic expansion of already-
unsustainable government insurance programs, and new government
authority to regulate access to medical care, physician-patient decision-
making autonomy, and insurance benefits.

Innovation comes from the private sector, not government. There is no

reason the health insurance industry would be an exception.

It may shock many Americans that the same health care systems held
up as models for an American overhaul are held in poor regard by the very
people who live under them. Meanwhile, evidence shows that countries
with heavy-handed, government-run health care systems have failed to
control escalating costs. Even welfare-burdened nations like Sweden are
introducing privatization as part of their solution to the economic chal-
lenges of health care.
Consider that 80 percent of Americans say that access to the most
advanced tests, drugs, and medical procedures and equipment is “very

Hoover Digest  N  2011 · No. 1 51


important” or “absolutely essential,” yet our government’s economic
advisers stress limiting their use. Worse, we risk a degradation of physi-
cian quality, owing to the impending price (and therefore wage) controls
for health care providers and hospitals. Does anyone believe that the best
and brightest will continue to pursue a profession requiring years of rig-
orous training and sacrifice when, in the end, government fixes wages
and bureaucrats dictate decisions? And does anyone think that the federal
government will refrain from trying to force doctors to accept lower prices
by tying additional licensure requirements to acceptance of those prices?

Countries with heavy-handed, government-run health care systems have

failed to control escalating costs.

Much of the urgency for reform was pressed on the American people by
distorting problems with the system and ignoring facts that point to the
excellence, indeed superiority, of American medical care. While the eco-
nomic failures of the growing burden of health care spending are enor-
mous and fearful to contemplate, the more dangerous consequences of the
impending radical transformation of America’s health care system also
menace our families. The leadership position of American health care,
with all its flaws, is at serious risk. All who value control of their own
health decisions, access to highly trained subspecialty doctors of their own
choosing, continued advances in new diagnostic methods, and safer, more
effective treatments must recognize what they are about to lose. We need
creative, bold leadership to stop the slide to nationalization of health care
that has been proven worldwide to reduce choice, restrict access, and harm
patient outcomes. If allowed to stand, this shift of power from patients
and their doctors to government bureaucrats would mark the end of
health care as we know it.
Adapted from Reforming America’s Health Care System: The Flawed Vision of ObamaCare, edited by Scott
W. Atlas (Hoover Institution Press, 2010). © 2010 The Board of Trustees of the Leland Stanford Junior
University.

52 Hoover Digest  N  2011 · No. 1


Vital Signs
Ten reasons why America’s health care system is in better condition than you might
think:
1. Americans have better survival rates than Europeans for common and rare
cancers among both men and women. Breast cancer mortality is 52 percent
higher in Germany than in the United States and 88 percent higher in Brit-
ain. Prostate cancer mortality is 604 percent higher in Britain and 457 percent
higher in Norway. The mortality rate for colorectal cancer among British men
and women is about 40 percent higher.
2. Americans have lower cancer mortality rates than Canadians, whose system
is a model of government-controlled health care. Breast cancer mortality in
Canada is 9 percent higher than in the United States, prostate cancer is 184
percent higher, and colon cancer among men about 10 percent higher.
3. Americans have better access to treatment for chronic diseases �and earlier
access to new, life-saving drugs than patients in other developed countries.
4. Americans have better access than Canadians to all commonly used preven-
tive cancer screening methods: mammograms, Pap smears, prostate-specific
antigen (PSA) testing, and colonoscopies.
5. Lower-income and elderly Americans are in better health than comparable
Canadians.
6. Americans spend less time waiting for care than patients in Canada and
Britain. Those patients wait about twice as long—sometimes more than a
year—to see a specialist, have life-changing elective surgery such as a hip
replacement, or get radiation treatment for cancer.
7. People in countries with more government control of health care—countries
put forth as models for our system—are highly dissatisfied and desire reform.
More than 70 percent of German, Canadian, Australian, New Zealand, and
British adults say their system needs either “fundamental change” or “com-
plete rebuilding.”
8. The overwhelming majority of Americans, about 80 percent, are satisfied
with their own health care. More Americans are satisfied with their care than
Canadians.
9. Americans have better access to important new technologies, including safer,
non-invasive medical devices and diagnostic tools such as CT scanners and
MRI machines, than do patients in Canada or Britain.
10. American doctors and medical scientists lead the world and are responsible for
the vast majority of the most important health care innovations.
—Scott W. Atlas
S O C IAL SECURITY

Days of Reckoning
Social Security is sinking while its would-be rescuers squabble over
how to save it. Time to make common cause. By Charles Blahous.

On Social Security, it sometimes seems as though everything has been


said dozens of times. Over the past two decades, there have been countless
books, articles, and advisory panel reports, all purporting to explain the
program’s operations and finances. Many of these argue for (and against)
specific measures to keep the program solvent. More than a few portray
Social Security as being under threat from the designs of others with
wrongheaded or malicious ideas.
After more than fifteen years of work on Social Security policy, first in
the U.S. Senate and later in the White House, I have reached the opposite
conclusion: everything has not been said—far from it. I believe there is a
dire need for another Social Security book, and in particular for a book
fundamentally different from those published to date.
My new book, Social Security: The Unfinished Work, is premised upon
the conviction that our national Social Security debate is more polarized
than it needs to be, even given the depth of legitimate differences over the
program’s future. Our Social Security disagreements often devolve into
shouting matches fueled by unexamined analytical differences. Unless we
identify and understand our initial assumptions, we will not be able to
fathom the conflicting policy initiatives that they drive.
Many of these conflicting assumptions are in turn fostered by con-
fusing program accounting that is a legacy of the 1983 Social Security
reforms. Before 1983, there existed profound disagreements about Social

Charles Blahous is a research fellow at the Hoover Institution and one of two
public trustees for the Social Security and Medicare programs.

54 Hoover Digest  N  2011 · No. 1


Security policy choices but general agreement on the state of Social Secu-
rity finances. Increasingly after 1983, there has been widespread disagree-
ment on both. This has paralyzed our capacity to agree upon adjustments
to Social Security policy and has perpetuated confusion that will fatally
undercut legislative discussions until it is untangled.
Illustration by Taylor Jones for the Hoover Digest.

Hoover Digest  N  2011 · No. 1 55


To understand where we are, we must understand what happened dur-
ing the 1983 Social Security reforms and how it has led to sharply diver-
gent views of program finances today. My book retraces this ground and
reviews the policy value judgments—from how generous and expensive
Social Security should be, to how redistributive it should be—that must
be made. It also addresses the analytical and scorekeeping controversies of
the Social Security debate. One person’s policy choice is incomprehensible
to someone trying to solve a different problem and analyzing it in a dif-
ferent way. Until there is broader understanding of how these analytical
differences drive opposing policy conclusions, we will continue to be like
the workers in the tower of Babel, speaking ever more passionately and
urgently but making ourselves less and less understood.

Social Security disagreements end up as shouting matches, fueled by

unexamined analytical differences.

We must decide together what kind of system we want, and then deter-
mine how to make it a reality.
Social Security is by no means the only area of mutual perplexity in our
national political discussion. From health care to energy, different individ-
uals’ prescriptions are shaped by different philosophical goals. Social Secu-
rity is nevertheless distinct. For example, individuals with the same philo-
sophical viewpoint will reach different policy conclusions if they happen
to look at different numbers. Just as readily, individuals can be confused
by the program’s complex accounting into taking positions whose sub-
stantive effects would run counter to their own philosophical inclinations.
Without better understanding Social Security’s relevant recent history as
well as a bit about its scorekeeping, we will be confused not only about
others’ positions, but even about our own.
Many now wrongly assume, for example, that the crafters of the 1983
legislation deliberately built up a significant trust fund to pre-fund a por-
tion of the baby boomers’ Social Security benefits. Given the substantive
consequences of the 1983 reforms, this misperception is understandable.
The historical record is clear, however, that no such pre-funding has actu-
ally occurred and indeed there was no such intent. Today’s large trust fund

56 Hoover Digest  N  2011 · No. 1


was actually an unwitting byproduct of the 1983 reforms—and, equally,
an unwitting destruction of the shared analytical clarity that had made
those reforms possible.

S H A R E D R E S PONSIBILITY, SHARED SOLUTIONS


We share a responsibility to arrive at a common understanding of the facts
and to act to secure Social Security’s future. To fulfill this responsibility, we
all need to do much better, starting now.
That statement warrants qualification: we needn’t necessarily do better
if we are indifferent to Social Security’s financial stability, intergenera-
tional fairness, or efficacy in serving societal goals. In that case, we can
keep on doing just as we are doing: allowing these aspects of the program
to deteriorate while we impugn one another’s motives and demonize the
actions required to place Social Security on a stable and effective track.

We must do more than listen to one another. We must be candid about the

downsides of proposals we favor.

We must, however, do better if we believe that Social Security’s finan-


cial stability is important and that it should serve future generations at
least somewhat as well as it has served us.
Even if we care about nothing beyond these principles, we need a loftier
Social Security policy discussion. We need to listen to policy opponents
without imputing malicious intent. When we cannot agree with their sug-
gestions, we need to develop alternative means of addressing their concerns.
Opponents of personal accounts, for example, need to fully hear why
many proponents favor them. Opponents need to understand the moti-
vating concerns (which include the declining program efficacy and inter-
generational inequities of pay-as-you-go financing, among others) that
have led so many to propose personal accounts, rather than to dismiss the
concept as the centerpiece of a dastardly plot. Similarly, personal-account
proponents need a clearer understanding of why so many strongly oppose
personal accounts within Social Security. If mutual understanding still
fails to lead to an acceptable design for personal accounts, then we must
look for other ways to address these valid concerns.

Hoover Digest  N  2011 · No. 1 57


Virtually every aspect of the Social Security debate must be treated this
way. If one side is disinclined to raise taxes, and the other disinclined to
contain costs sufficiently to avoid a tax increase, a way must be found
between these two extremes. Perhaps they can find a creative alternative to
a tax increase, as many bipartisan proposals have done.
Doing better means more than listening to one another. It also means
being more candid about the downsides of proposals we favor.
Opponents of raising taxes need to acknowledge that slower benefit
growth is the necessary alternative to a tax increase. Opponents of ben-
efit “cuts” must acknowledge that the alternative is much higher taxes for
future workers. And both sides need to recognize the tradeoffs implicit in
the status quo—it’s intellectually dishonest to pretend that a reformed sys-
tem has only disadvantages relative to current law. The financing hole in
Social Security has yet to be filled in. It’s pure sophistry to compare reform
proposals to a false construct in which the system’s shortfall is never felt in
either higher taxes or lower benefits.
Neither Democrats nor Republicans should refuse to come to the bar-
gaining table. Only those lacking the courage of their convictions need to
insist on having their own way before discussions even commence.

L E T D O W N B Y T HE EXPERTS
If there is a part of society whose conduct on Social Security has been
most disappointing, it is probably the community of experts within think
tanks and academia. Ideally, they would bend the least to external politi-
cal or parochial pressures and be the least susceptible to a herd mental-
ity. However, intellectual shortcuts, whether willful or accidental, are
common and foster profound misimpressions. Too often, “experts” have
fueled the ill-founded prejudices of their surrounding communities, bent
to the predilections of their funding sources, and slanted their messages
for political advantage. Perhaps more than any other group, the intel-
lectual class has poorly served American citizens in the Social Security
debate.
There is no excuse, for example, for credentialed academics and think
tank experts to continue to write that the projected Social Security prob-
lem is merely a figment of overly conservative projections. Nor is there any

58 Hoover Digest  N  2011 · No. 1


excuse for academics to issue what are effectively press releases for political
campaigns under their academic letterheads.

Perhaps more than any other group, the intellectual class has poorly

served American citizens in the Social Security debate.

More generally, we as a society must do better, and I believe we will.


The question is when. We are living through some growing pains of the
information age. The explosion of free information sources and the per-
sonal mobility of modern life have permitted us to increase our segre-
gation along cultural and political lines. More than ever, we can choose
to live and socialize with people who share our political predispositions.
More than ever, we can engage in systemic selection bias, frequenting
information sources that support our prejudices and implicitly filtering
out information that contradicts them. Americans will grow to realize
the intellectual perils of sealing themselves off from disagreements; reality
will persistently shove itself forward to contradict our fondest wishes and
beliefs. Each time it does, we will learn more lessons about the importance
of attending to inconvenient truths.
For the Social Security debate, the process cannot move quickly enough.
Each year that we dither, the cost facing younger generations grows larger.
We must do better—and soon. Our children and grandchildren are
depending on us.
Excerpted from Social Security: The Unfinished Work, by Charles Blahous (Hoover Institution Press, 2010).
© 2010 The Board of Trustees of the Leland Stanford Junior University. All rights reserved.

New from the Hoover Press is Social Security: The


Unfinished Work, by Charles Blahous. To order, call
800.935.2882 or visit www.hooverpress.org.

Hoover Digest  N  2011 · No. 1 59


G R O WTH OF GOVE RNMENT

A Medicine for Our


Melancholy
A clue to that American “malaise”: even people comfortable with
government turn queasy when it gets too big. By Richard A. Epstein.

You’ll always get a laugh with this announcement: “Trust me. I’m from
the government and I’m here to help you.” The laugh, of course, is cyni-
cal. It signals the shared belief of speaker and listener that the government
official who utters such a line has no clue how he is perceived by others.
This line could have provoked the same response at any point in our
political history; such is the durability of our distrust. Naturally, whenever
tales of corruption loom large, the government officials involved become
the target for such cynicism. But today the loss of trust in our public insti-
tutions does not stem from fear of corrupt actions by this or that dishon-
est official. Rather, the weariness arises from the deep conviction that we
should worry about conscientious government officials who are on a fool’s
errand. Global confidence is down. News stories bear headlines about how
“optimism fades,” or that “earnings are down,” or how even “the rich” are
cutting back and tightening the belt. The American dream is under siege.
This uneasiness about public trust would not be news if it were con-
fined to libertarians and other small-government types who resent any
state intrusion into private affairs. But the public malaise runs far broader.

Richard A. Epstein is the Peter and Kirsten Bedford Senior Fellow at the
Hoover Institution and a member of Hoover’s John and Jean De Nault Task
Force on Property Rights, Freedom, and Prosperity. He is the Laurence A. Tisch
Professor of Law at New York University Law School.

60 Hoover Digest  N  2011 · No. 1


It goes beyond the card-carrying libertarians who murmur before bed each
night, “Those who govern best govern least.”
No, the current unease is rising among people who are comfortable
with some substantial government role in providing jobs, supporting agri-
culture, subsidizing health care, financing education, or regulating bank-
ing. They have the visceral sense that things have gone too far. They are
clearly fortified in their view by the chronic levels of unemployment that
barely dip below 10 percent, in the face of an ill-conceived stimulus pro-
gram that seems to have done nothing to improve overall productivity.
And they are not amused when government pads its payroll with folks
who don’t do much of anything useful.

Amid this skeptical public mood, each expansionist move of the Obama

administration is like feeding sugar to a diabetic.

Behind the current disquiet lies an implicit marginal calculation that


makes good economic sense. Much of the modern rhetoric, especially
from the tone-deaf Obama White House, takes this form: “We did well
with the previous increases in taxation and regulation, so why worry about
the next round?” The answer is that too much of a good thing becomes a
bad thing. Yet, like a bad genie once released from the bottle, big govern-
ment is difficult to stuff back in.
Take, for example, higher taxes, some of which have been tele-
graphed in advance while others were hidden in the fine print of the
new health care and banking regulations. Sure, we can stand some
modest level of redistribution across classes. But as the higher taxes
threaten the liquidity of capital markets or the willingness of current
citizens to invest in new businesses, the large political middle becomes
skeptical about these new reforms. That is why the uneasy acceptance
of the initial Obama stimulus plan gave way to strong opposition to
its extension.
None of these folks (like most of us so-called expert types) are confident
that we can identify the optimal level of stimulus or wealth redistribution.
But at the same time we can look at the dislocations in Greece, Spain, and
Portugal, and the precarious financial situation in Great Britain a genera-

Hoover Digest  N  2011 · No. 1 61


tion after Margaret Thatcher left office. Five years later, we could be in
just that state.
Government officials have real clout. They can deny you permits,
investigate your business, call you into their offices, look at your books,
fine you, and send you to jail. Every piece of new legislation gives them
more discretion over issues in which they have no comparative expertise.
Unsurprisingly, every new piece of legislation erodes public trust in public
officials.

The public malaise goes beyond the card-carrying libertarians who

murmur before bed each night, “Those who govern best govern least.”

And so as big government gets still bigger, ordinary people’s confidence


in its institutions grows weaker. That weakness reflects itself not only in
a political resentment to the parties in power but in a gradual withdrawal
from the market, manifested by a greater unwillingness to consume or
invest. Amid this skeptical mood, each expansionist move of the Obama
administration is like feeding sugar to a diabetic.
So what is the cure? The diffuse nature of our uneasiness means it can-
not be satisfied by a small tweak in this tax subsidy or that statutory grace
period. It needs a clear commitment to halt the lurch toward ever-bigger
government. A clear majority of people favor smaller government, even if
they do not favor small government. The political powers that ignore that
shift in political climate do so at their peril.
Reprinted by permission of Forbes. © 2010 Forbes Media LLC. All rights reserved.

Available from the Hoover Press is Liberty Versus the


Tyranny of Socialism: Controversial Essays, by Walter
E. Williams. To order, call 800.935.2882 or visit www.
hooverpress.org.

62 Hoover Digest  N  2011 · No. 1


GROWTH OF GOVERNMENT

Finding Optimism
Again
Our characteristic hope for the future has been shaken. Growth in per
capita income can revive it. By Gary S. Becker.

The great majority of parents would like to see their children grow up
into a better standard of living. Yet polls suggest that in the United States
neither parents nor children are confident that this progress will happen.
These polls have been much remarked upon, but little systematic analysis
has delved into whether the average child will be better off than the aver-
age parent, and why pessimism about such progress has apparently been
growing.
The relationship between the earnings of adult children and those of
their parents at comparable ages depends on many factors unique to any
family. The abilities and health of the children relative to those of their
parents, the luck of both children and parents in occupation and other
choices, the level of parental concern to ensure that their children will
become better off, and many other considerations are special to that fam-
ily. Regardless of individual family idiosyncrasies, there are ways of assess-
ing how well the average person in one generation fares next to an average
person in his parents’ generation.

Gary S. Becker is the Rose-Marie and Jack R. Anderson Senior Fellow at the
Hoover Institution and a member of Hoover’s Working Group on Economic
Policy and Shultz-Stephenson Task Force on Energy Policy. He is also the
University Professor of Economics and Sociology at the University of Chicago. He
was awarded the Nobel Memorial Prize in Economic Sciences in 1992.

Hoover Digest  N  2011 · No. 1 63


Haitian kindergartners await a graduation ceremony in Port-au-Prince. Better schools,
especially for poorer children, are a strong ingredient of economic advancement.

The rate of growth in per capita income is by far the most important
variable in determining whether children will be better off than their par-
ents. If per capita income is stagnating over time—the lot of the world for
almost all of history—the average person in one generation will tend to be
about as well off as the average person in his parents’ generation. It would
have been atypical to expect during this long period that children would
be better off than their parents.
Yet during the past couple of centuries, much of the world has experi-
enced systematic growth in per capita income that has radically changed
such expectations. For example, if income per capita were growing at only
1 percent per year, the average individual in the next generation would
have about a 30 percent higher income than the average individual in the
present generation (I assume that generations differ by about twenty-five
years). From about the middle of the nineteenth century to the beginning
of the twenty-first century, per capita incomes in the United States grew

64 Hoover Digest  N  2011 · No. 1


on average close to 2 percent per year. This implies that over this period
of more than 150 years, or about six generations, the average income in
one generation would have been about 60 percent higher than the average
income in the prior generation.
Add in the rapid improvements in health during the twentieth century,
including drastic declines in mortality of mothers during childbirth and
children during their first three years, and the fact that huge numbers of
immigrants to America did vastly better than their parents. No wonder
optimism abounded in the United States about how children would fare
compared to their parents. Its decline is mainly related to declining expec-
tations about whether the United States will continue to grow at the rates
of the past.

Faster economic growth in America can compensate for growing


© Toronto Star/Lucas Oleniuk

government debt, growing inequality, and other factors that create

pessimism.

Rapidly developing nations show especially dramatic differences


between generations. Consider China, for example, with a per capita
income that has been growing at around 8 percent per year since about
1980. In such a growth environment, the average income in the next gen-
eration would be more than six times as large as in the present generation.
No wonder most Chinese families are content with what is happening in
their country and with their government’s policies, despite restrictions on
freedom of speech.
Health and income are not the only determinants of well-being and
optimism. Changes over generations in economic inequality also have
important effects. Since 1980, inequality has increased considerably in
the United States and many other countries, developing as well as devel-
oped. When inequality is growing, even if per capita income is stagnant,
families at the higher end of the income distribution in their generation
will be optimistic about their children’s prospects relative to their own,
as long as they expect their children also to be at the higher end of the
income distribution in the children’s generation. Conversely, under the
same conditions, parents at the lower end of the income distribution

Hoover Digest  N  2011 · No. 1 65


will be pessimistic about their children’s opportunities if they expect
their children also to be at the lower end of their generation’s income
distribution.
A third variable is the degree of intergenerational income mobility. That
is, the degree to which richer parents are likely to have richer children rela-
tive to the income of the children’s generation, and the degree to which
poorer parents are likely to have poorer children relative to the children’s
generation. When the degree of intergenerational mobility is lower, rich
parents will tend to be more optimistic about their children’s prospects,
and poorer parents will tend to be more pessimistic. Some evidence sug-
gests that intergenerational mobility in the United States has fallen over
time, which would lead to greater pessimism among poorer families about
their children’s prospects.

Huge numbers of immigrants to America did vastly better than their

parents. No wonder optimism abounded.

Notwithstanding the growing inequality and falling intergenerational


mobility, I believe that fears about economic growth are the main reason
for the growing pessimism about the United States’ long-term econom-
ic future. It bears repeating that faster economic growth in America can
compensate for growing government debt, growing inequality, and other
factors that create pessimism about the economic future.
I will stress three ways to improve long-term economic growth. Of
greatest importance are improvements in the K–12 school system avail-
able to students from poorer families, so that many more of these students
graduate from high school and those who graduate are better prepared
for college. (A recent report on ACT placement-test results is depressing
reading, showing that far more than half of students taking the test are
unprepared for college courses.)
Second, it is important to have low marginal tax rates on personal and
corporate incomes and on capital gains, to stimulate greater investments
and innovations.
Third, entitlements need to be brought under control by shifting much
more of the cost of medical care to patients through greater out-of-pocket

66 Hoover Digest  N  2011 · No. 1


payments, and converting public and other pension systems to defined-
contribution systems rather than defined-benefit systems.
America has always been optimistic about its future. The decline in
such optimism during the past couple of decades is understandable but
also reversible. The best way to restore optimism is to promote faster eco-
nomic growth. This can happen under the right policies, but it will not
happen automatically. Even America has no destiny to be optimistic with-
out important redirection of public priorities.
Reprinted from the Becker-Posner Blog (www.becker-posner-blog.com). All rights reserved.

Available from the Hoover Press is The Essence


of Becker, edited by Ramon Febrero and Pedro S.
Schwartz. To order, call 800.935.2882 or visit www.
hooverpress.org.

Hoover Digest  N  2011 · No. 1 67


P R O PERTY RIGHTS

Glimpses of Economic
Liberty
Bit by bit, courts are being forced to ponder the laws and licenses
that stifle people’s freedom to work. By Clint Bolick.

In one of the first economic-liberty cases I argued, the judge lamented that
the oppressive regulatory barriers that my client faced sounded more like
Russia than the United States. I replied that in fact we might have to seek
economic asylum for our clients in Russia, because these days there are fewer
barriers to entry in Russia than in our country. The judge laughed ruefully.
And then, shortly thereafter, he ruled against us. Not because he wanted to,
but because the weight of case law against economic liberty was too great.
Such was the state of economic-liberty jurisprudence as we entered this
millennium. Economic rights are consigned to the lowest level of judicial
scrutiny—the so-called “rational basis” test. As most courts have applied
it to economic regulations over the past eighty years, it has two features.
First, the regulation doesn’t have to be rational. Second, it doesn’t have to
have a basis.
It’s not much of a test, and almost no contested regulations ever flunk
it. As a consequence, law students are taught that when the rational-basis
test applies to a particular controversy between an individual and the gov-
ernment, the government always wins.
Leroy Jones had never heard about the rational-basis test, much less the
privileges or immunities clause, when the government tried to destroy his

Clint Bolick is a research fellow at the Hoover Institution and the director of
the Center for Constitutional Litigation at the Goldwater Institute.

68 Hoover Digest  N  2011 · No. 1


dream in the early 1990s. Jones was a cab driver in Denver, working for
the ubiquitous yellow cabs. He and some of his fellow drivers noticed an
oddity in the Denver taxicab market. Cabs were abundant at downtown
hotels and the airport. But if someone needed a cab in the low-income
Five Points neighborhood, they were scarce.
Jones and three of his colleagues saw an opportunity. They decided
to form a new taxicab cooperative, named Quick-Pick Cabs, that would
primarily serve Five Points and other taxicab-scarce neighborhoods. They
already possessed the requisite experience. They assembled the necessary
capital. They collected hundreds of signatures from Five Points residents
attesting to the need for additional taxicab service.
Indeed, the aspiring entrepreneurs had everything they needed to launch
a profitable enterprise that would provide a valuable service—except, that
is, a piece of paper from the Colorado Public Utilities Commission called
a “certificate of public convenience and necessity.” No problem, reasoned
Jones and his colleagues—their business was both convenient and neces-
Illustration by Taylor Jones for the Hoover Digest.

Hoover Digest  N  2011 · No. 1 69


sary. But after the agency completed its review, it delivered to Quick-Pick
Cabs the same verdict given to every other applicant for a taxicab permit
since World War II: application denied.

Law students learn that when the rational-basis test applies to a

particular controversy between an individual and the government, the

government always wins.

The rules of the game were rigged decisively in favor of the three exist-
ing taxicab companies. A new applicant had the burden of showing not
that there was a market need that was unserved, but that there was a need
that could not be met by the existing companies. It was an impossible
burden, exacerbated by the fact that the existing companies could inter-
vene in the proceedings and bleed their aspiring competitor to death with
massive and endless documentation demands.
Leroy Jones and his partners were denied the opportunity to pursue
their business for the most arbitrary and protectionist reasons. One could
hardly imagine a greater injustice. Yet when they went to federal court,
they lost. Once again, there simply was not enough case law for the judge
to render a favorable ruling. Having now been fired from the yellow cab
company, Leroy Jones ended up selling cold drinks under the hot sun at
Mile High Stadium, his dream of starting his own company crushed by
his own local government. (Lest the reader get too depressed, this story
has a happy ending—but I won’t reveal it until later.)

L I C E N S E D T O E XCLUDE
Most of the stories in similar circumstances, however, do not have happy
endings. One of the saddest and most frustrating cases I ever litigated
was on behalf of Junie Allick, a native Virgin Islands sailor. He made a
living shuttling tourists to the beautiful coral reef at Buck Island. He was
the only sailor in the business skillful enough to operate only with sails,
as opposed to the gasoline engines that polluted the reef. But after the
National Park Service assumed jurisdiction over Buck Island, it instituted
an “attrition” policy to reduce the number of boat trips to Buck Island.
For the first time, Allick had to navigate not only the waters off St. Croix

70 Hoover Digest  N  2011 · No. 1


but a sea of bureaucracy as well. Though Allick was a skilled sailor, he had
never learned to read or write, and he failed to fill out forms required by
the Park Service, which consequently shut his business down. Before long,
not a single native sailor was left in the Buck Island excursion business.
Yet when we brought Allick’s case to court, the federal judge was
incredulous that someone would waste the court’s time over a business
that netted only $15,000 a year. He dismissed the case, thereby destroying
the only livelihood Junie Allick had ever known.
The barriers encountered by Leroy Jones and Junie Allick are only the
tip of the regulatory iceberg. In all, at least five hundred occupations,
representing 10 percent of all professions, require government licenses.
Frequently, the government boards that determine the standards are com-
prised of members of the regulated profession, who are invested with the
coercive power of government and often wield it not for public health
and safety purposes but to thwart competition. Similarly, government-
imposed monopolies in businesses ranging from trash hauling to trans-
portation to the transmission of renewable energy have the same effect.
The economist Walter E. Williams, in his classic book The State against
Blacks, explained that occupational-licensing laws and entry-level business
restrictions have the pernicious effect of removing the bottom rungs of the
economic ladder for people who have little education and few resources.
“The laws are not discriminatory in the sense that they are aimed specifi-
cally at blacks,” he explains. “But they are discriminatory in the sense that
they deny full opportunity for the most disadvantaged Americans, among
whom blacks are disproportionately represented.”
A good illustration of Williams’s point is Stuart Dorsey’s 1980 study
of the Missouri cosmetology-licensing regime. Like most cosmetology-
licensing laws, Missouri requires a practical “hands on” examination and
a difficult written test. Dorsey found that blacks passed the performance
portion of the examination at the same rate as whites, but failed the writ-
ten portion at a much higher rate than whites. Thus were black candi-
dates disproportionately excluded from a profession for which they were
demonstrably qualified. In an economy that demands ever-greater edu-
cational qualifications for even the most basic jobs, there simply are not
nearly enough avenues for legitimate entry-level businesses or occupations

Hoover Digest  N  2011 · No. 1 71


to sustain arbitrary regulatory obstacles. Those hurdles cast otherwise
legitimate businesses into the black market, and many of their would-be
participants into crime or welfare dependency.

When we brought Junie Allick’s case to court, the federal judge was

incredulous that someone would waste the court’s time over a business

worth only $15,000 a year.

Lurking behind most of these regulatory obstacles are special inter-


ests—usually labor unions, competing businesses, or both—that invoke
the regulatory power of the state to keep newcomers out. In New York, for
instance, the powerful transit-workers union manipulates the city council
to maintain a ban on dollar vans, which operate mainly in the black mar-
ket to carry scores of passengers in Jamaica, Queens, over fixed routes for
a low price. Frequently, professions turn to the state to fix high barriers to
entry, and then gain control over the licensing process. In the early part
of the twentieth century, for instance, cosmetologists fought valiantly to
free themselves from control by barber-licensing boards—only to turn
around, once they succeeded, and lobby for cosmetology-licensing boards
that they would control. Today, even professions that trigger few public
health and safety concerns, such as interior designers and florists, seek
shelter from marketplace competition through licensing schemes. As a
consequence, government-enforced cartels now are ubiquitous.
Professions requiring more advanced skills, such as law and medicine,
typically persuade lawmakers to forbid paraprofessionals, who offer their
services at much lower cost, forcing them to become fully licensed even
though they seek to engage in only a small, specialized part of the profes-
sion. As a result, they penalize both the would-be paraprofessionals and
the consumers who might wish to use their services.
Perhaps the most troubling example in that regard is my own profes-
sion. Lawyers operate state bar associations that rigidly control entry into
the profession. They expansively define the unauthorized practice of law
so as to prevent skilled paralegals from making low-cost services avail-
able to people for routine transactions such as tenant evictions and simple
wills, divorce decrees, and bankruptcies. The arbitrary barriers raise the

72 Hoover Digest  N  2011 · No. 1


cost and limit the supply of the most basic legal services. Surely regulation
is sufficient to weed out incompetent paraprofessionals, but the bar typi-
cally opts instead for prohibition, the better to protect its cartel.
Equally pernicious are teacher certification schemes. As a certified
teacher, I can attest that none of my required classroom instruction (all
of which was state-required) enhanced my core subject-matter compe-
tence. Despite the fact that they often turn out ill-trained teachers, schools
of education fiercely defend their monopoly status over teacher certifi-
cation, resisting alternative certification and entry into teacher ranks by
professionals who are demonstrably competent in their subject matter.
The scheme ensures that many bad teachers enter the school system while
many good teachers are kept out.

Regulatory hurdles cast otherwise legitimate businesses into the black

market, and many of their would-be participants into crime or welfare

dependency.

Licensing is not a proxy for competence, neither in teaching nor in


many other professions. However, because licensing typically requires
many hours of prescribed training, it is an effective means of limiting
entry into professions. Licensing requirements are lucrative for schools
that teach the prescribed courses and insulate licensed practitioners from
competition. But they result in higher prices and fewer choices for con-
sumers and destroy economic opportunities.

S A F E G U A R D I NG A RIGHT
Such special-interest legislation greatly concerned the framers of our Con-
stitution, who sought to prevent it. James Madison argued in The Federal-
ist No. 10 that one of the strongest arguments for republican government
is “its tendency to break and control the violence of faction.” By faction
Madison meant what today is called a special-interest group: “a number
of citizens, whether amounting to a majority or minority of the whole,
who are united and actuated by some common impulse of passion, or of
interest, adverse to the rights of other citizens, or to the permanent and
aggregate interests of the community.” One means to limit the evil of fac-

Hoover Digest  N  2011 · No. 1 73


tion, Madison observed, would be to control its liberty of operation (as we
see today in the form of campaign contribution limits and other devices),
but Madison denounced such cures as worse than the disease. The better
course in dealing with the problem of faction, he offered, was “controlling
its effects” by “rendering it unable to concert and carry into effect schemes
of oppression.”

Frequently, professions turn to the state to fix high barriers to entry, and

then gain control over the licensing process.

The constitutional mechanisms designed in part to control the evils


of faction were many, including the establishment of a federal govern-
ment with limited and defined powers; the requirement that congres-
sional action be taken only to promote the general welfare; separation of
powers; an independent judiciary empowered to strike down unconsti-
tutional laws (as described by Alexander Hamilton in The Federalist No.
78); specific limitations of government power such as prohibiting the
impairment of contracts; and the Bill of Rights, including the protection
of unenumerated rights in the Ninth Amendment. Madison’s argument
also provided a philosophical foundation for the privileges or immuni-
ties and equal-protection guarantees of the Fourteenth Amendment a
century later.
Specifically, the framers understood that two of the principal objects of
factions were to gain power over the property of others and to restrict their
liberty. Thus the Fifth Amendment prohibited Congress from infringing
liberty or property without due process of law, and from using the power
of eminent domain except for public use and with just compensation. The
Fifth Amendment’s due process guarantee later would be replicated in the
Fourteenth Amendment, aimed in that amendment at curbing the power
of state governments.
One of the foremost liberties threatened by the evil of faction was eco-
nomic liberty. As Timothy Sandefur explains in his recent book, The Right
to Earn a Living: Economic Freedom and the Law, American law inherited
from its British forebears the principle that “people have the right to work
for their subsistence, to open their own businesses, and to compete against

74 Hoover Digest  N  2011 · No. 1


one another, without government’s interceding to confer special ben-
efits on political favorites.” British courts refused to enforce monopolies
because they violated rights granted by the Magna Carta. As Sir Edward
Coke observed in the Case of the Tailors of Ipswich in 1615, “at the com-
mon law, no man could be prohibited from working in any lawful trade,”
and “the common law abhors all monopolies, which prohibit any from
working in any lawful trade.”

America’s framers understood that “factions” would always set out to

gain power over the property of others and restrict their liberty.

Adam Smith likewise extolled the importance of freedom of enterprise


in his Wealth of Nations:

The property which every man has in his own labor . . . is the original
foundation of all other property, so it is the most sacred and inviolable.
The patrimony of the poor man lies in the strength and dexterity of his
own hands; and to hinder him from employing this strength and dexter-
ity in what manner he thinks proper, without injury to his neighbor, is a
plain violation of this most sacred property. It is a manifest encroachment
upon the just liberty both of the workman and of those who might be
disposed to employ him. As it hinders the one from working at what he
thinks proper, so it hinders the others from employing whom they think
proper.

Embracing that tradition, Thomas Jefferson wrote, “Everyone has a


natural right to choose for his pursuit such one of them as he thinks most
likely to furnish him subsistence,” and a “first principle” is the “guaran-
tee to everyone of a free exercise of his industry, and the fruits acquired
by it.” Likewise, Madison declared, “That is not a just government, nor
is property secure under it, where arbitrary restrictions, exemptions, and
monopolies deny to part of its citizens that free use of their faculties, and
free choice of their occupations.”
Those principles were embodied in the Virginia Declaration of Rights
in 1776, which in turn influenced the Declaration of Independence and

Hoover Digest  N  2011 · No. 1 75


the Bill of Rights. The first article of the Virginia Declaration of Rights
provides that “all men are by nature equally free and independent, and
have certain inherent rights,” which include “the enjoyment of life and
liberty, with the means of acquiring and possessing property, and pursuing
happiness and safety.”
Economic liberty was expressly protected in the U.S. Constitution by
such provisions as the due process clause, which protects life, liberty,
and property; the contract clause, which forbids state interference with
contracts; the privileges and immunities clause, which gives to anyone
traveling to other states the same rights as citizens of those states; the
commerce clause, which prohibits protectionist trade barriers among
states; and the prohibition against the taking of property through emi-
nent domain except for public uses. The right to pursue a trade or profes-
sion also was one of the “unenumerated rights” protected by the Ninth
Amendment.

Sometimes, in the light of media sunshine and an outpouring of public

support, the economic barriers fall.

The promise of opportunity and its protection by the rule of law


propelled American enterprise and made our nation a beacon of oppor-
tunity, luring to our shores countless newcomers hoping to earn a share
of the American dream. One would think that such principles would
protect a man like cabdriver Leroy Jones in pursuit of his livelihood.
After all, the regulations he faced led to a government-created taxi oli-
gopoly, closed to entry or competition from outsiders. It was procured
and maintained by the existing companies, not for the protection of the
public but for their own benefit. Those factors would place the regu-
lations squarely within the crosshairs of the constitutional provisions
designed to prevent special-interest groups from using government pow-
er to serve their interests through monopolies. And yet when he went
to court to protect the freedom of enterprise that is every American’s
birthright, Leroy Jones came away empty-handed—just like countless
other entrepreneurs who have sought to invoke judicial protection for
their economic liberty.

76 Hoover Digest  N  2011 · No. 1


A P A T T E R N OF BLIND DEFERENCE
It is difficult to appreciate today’s evisceration of the right to economic
liberty without considering relevant U.S. Supreme Court cases—three
in particular. In the 1955 case of Williamson v. Lee Optical, the court
sustained a statute prohibiting opticians from duplicating old or broken
eyeglass lenses, or from fitting old lenses into new frames, without a pre-
scription from a licensed optometrist. The challenged regulation stifled
a legitimate business and raised costs to consumers—not to protect the
public, but to insulate licensed optometrists from competition for lucra-
tive services. Yet the court had no trouble sustaining it. In a decision by
the self-styled champion of the common man, Justice William O. Doug-
las, the court ruled that even though the “law may exact a needless, waste-
ful requirement,” it is “for the legislature, not the courts, to balance the
advantages and disadvantages of the new requirement.”

Many regulations are imposed not by elected representatives, who are at

least theoretically accountable, but by regulatory agencies that are not

democratically accountable at all.

What is perhaps the quintessential modern economic liberty deci-


sion came twenty-one years later in City of New Orleans v. Dukes. There
the court was presented with a law that destroyed for many the classic
entry-level enterprise: hot-dog pushcarts. The plaintiff had operated her
pushcart in the French Quarter for many years until the city decided to
prohibit them—except for two vendors whose businesses were “grandfa-
thered.” The court of appeals found the prohibition totally arbitrary and
irrational, and struck it down. But the Supreme Court sustained the law,
declaring that “this court consistently defers to legislative determinations
as to the desirability of particular statutory discriminations.”
How complete this deference has become is illustrated in a more recent
case, FCC v. Beach Communications, decided by a unanimous Supreme
Court in 1993. There the court considered a federal statute that subject-
ed to regulation satellite master antenna television (SMATV) operations
that encompassed more than one property owned by different people, but
exempted such operations when they were confined to buildings owned

Hoover Digest  N  2011 · No. 1 77


by the same owners. Because SMATV does not use public rights of way,
the court of appeals could not discern any reason for Congress to draw
the dividing line where it did—and to inflict very divergent consequences
based on the distinction—so it struck the provision under the equal pro-
tection test. The Supreme Court overturned the court of appeals decision,
setting forth the extreme deference to administrative discretion in a set of
rules implementing the rational-basis standard:

1. “Equal protection is not a license for courts to judge the wisdom, fair-
ness, or logic of legislative choices. In areas of social and economic
policy, a statutory classification . . . must be upheld against equal-pro-
tection challenge if there is any reasonably conceivable set of facts that
could provide a rational basis for the classification.”

2. “On rational-basis review, a classification . . . comes to us bearing a


strong presumption of validity, and those attacking the rationality of
the legislative classification have the burden ‘to negative every conceiv-
able basis which might support it.’ ”

3. “Equal protection ‘does not demand for purposes of rational-basis


review that a legislature or governing decision maker actually articulate
at any time the purpose or rationale supporting its classification.’ ”

4. Because the government does not have to articulate its rationale, “it is
entirely irrelevant for constitutional purposes whether the conceived
reason for the challenged distinction actually motivated the legislature.”

5. Finally, “a legislative choice is not subject to courtroom fact finding


and may be based on rational speculation unsupported by evidence or
empirical data.”
Talk about an uphill battle! This is the nearly impossible burden litiga-
tors challenging economic regulations face when they go to court—and
why the courts felt compelled to turn away the claims of Leroy Jones and
Junie Allick.
The framers of our republican system of government never intended
the courts to blindly defer to legislative decision-making, especially where
the challenged laws were procured to advantage special interests and exact

78 Hoover Digest  N  2011 · No. 1


a large toll on precious individual liberties. But decisions such as those
discussed here have obliterated the constitutional protections the fram-
ers carefully crafted to arrest the evils of faction and to protect individual
rights. As the framers understood, only the courts can effectively police
the boundaries of legitimate government action. But decisions like these
make legislators the judges of their own power, and too rarely do they act
with restraint.
Even worse, many regulations are imposed not by elected represen-
tatives, who are at least theoretically accountable to the people, but by
regulatory agencies that are not democratically accountable at all. Most
such agencies are either made up of members of the regulated industry or
susceptible to special-interest influence. Their cumbersome rule-making
procedures are opaque and often mystifying to ordinary people. Yet the
courts accord them the same vast deference they give to elected representa-
tives, no matter how irrational, self-serving, excessive, or oppressive their
regulations may be.
Those who bear the burden of economic regulation rarely have the
resources to compete effectively in the political marketplace or adminis-
trative arenas against powerful special-interest groups, and so their consti-
tutional rights fall by the wayside. This fate has befallen economic liberty
not because judges are consistently restrained in exercising their powers—
after all, courts strike down laws every day. Rather, it is the result of judges
relegating economic liberty to a subordinate, almost completely unpro-
tected status.
That was not at all the fate our Constitution’s framers intended. Eco-
nomic liberty was intended to be protected among the foremost of our
civil rights, and an unfortunate decision of the U.S. Supreme Court her-
alded an era of judicial abdication that now has lasted nearly 140 years.
But the path toward reclaiming protection for freedom of enterprise final-
ly is before us.
Leroy Jones’s case is one step on that path. A federal judge examining
the Denver taxicab oligopoly concluded that under the rational-basis test,
he could do nothing to bring down the barriers that separated Jones and
his colleagues from fulfilling their entrepreneurial aspirations. But fortu-
nately, while the case was pending on appeal, the battle was won in the

Hoover Digest  N  2011 · No. 1 79


court of public opinion. In the light of media sunshine and an outpouring
of public support, the economic barriers fell. Editorials and exposés pres-
sured the state of Colorado to deregulate entry into the Denver taxicab
market.
Jones and his colleagues, realizing that their fight had broad ramifica-
tions, renamed their company Freedom Cabs. Today, dozens of purple
Freedom Cabs provide transportation to Colorado residents and visitors,
along with the opportunity for co-op members to own their own busi-
nesses, while Jones and others take their place in the pantheon of Ameri-
cans who refuse to cede their economic liberty.
Excerpted from Death-Grip: Loosening the Law’s Stranglehold over Economic Liberty, by Clint Bolick
(Hoover Institution Press, 2010). © 2010 The Board of Trustees of the Leland Stanford Junior University.
All rights reserved.

Available from the Hoover Press is Death-Grip:


Loosening the Law’s Stranglehold over Economic
Liberty, by Clint Bolick. To order, call 800.935.2882 or
visit www.hooverpress.org.

80 Hoover Digest  N  2011 · No. 1


Education

The “War on Teachers”


Is a Myth
Unions that defend the worst teachers are depriving children of the
best teaching. By Eric A. Hanushek.

Education reform is no longer an issue of liberals versus conservatives. All


sides of the educational policy debate now accept that the key determi-
nant of school effectiveness is teachers—that effective teachers get good
achievement results for all children, while ineffective teachers hurt all stu-
dents, regardless of background.
Signs of this broad consensus abound. In Washington, the Obama
administration’s Race to the Top program has rewarded states for mak-
ing significant policy changes such as supporting charter schools. The Los
Angeles Times has published the effectiveness rankings—and names—of
six thousand teachers. And nationwide, the documentary Waiting for
“Superman,” which strongly criticizes the public education system, has
drawn avid audiences.
Also increasingly accepted is that the interests of teachers’ unions aren’t
the same as the interests of children, or even of most teachers.
Until recently, the unions asserted that they spoke for teachers and
that they should judge which reforms are good. Any proposal they didn’t
like was labeled part of a “war on teachers.” Their first response to the
Times’ reporting and to Waiting for “Superman” was to drag out that
familiar line. According to the American Federation of Teachers, “The

Eric A. Hanushek is the Paul and Jean Hanna Senior Fellow at the Hoover
Institution and a member of Hoover’s Koret Task Force on K–12 Education.

Hoover Digest  N  2011 · No. 1 81


82
Hoover Digest  N  2011 · No. 1
Illustration by Taylor Jones for the Hoover Digest.
film’s central themes—that all public school teachers are bad, that all
charter schools are good, and that teachers’ unions are to blame for fail-
ing schools—are incomplete and inaccurate, and they do a disservice to
the millions of good teachers in our schools who work their hearts out
every day.”
What’s really going on is different. President Obama states that we
can’t tolerate bad teachers in classrooms, and he has promoted rewarding
the most effective teachers so they stay in the classroom. The Los Angeles
Times published data identifying both effective and ineffective teachers.
And Waiting for “Superman” (in which I provide commentary) highlight-
ed exceptional teachers and pointed out that teachers’ unions don’t focus
enough on teacher quality.

It’s increasingly accepted that the interests of teachers’ unions aren’t the

same as the interests of children, or even of most teachers.

This is not a war on teachers en masse. It is recognition of what every


parent knows: some teachers are exceptional, but a small number are
dreadful. And if that is the case, we should think of ways to solve the
problem.
My research—which has focused on teacher quality as measured by
what students learn with different teachers—indicates that a small propor-
tion of teachers at the bottom are dragging down our schools. The typical
teacher is both hardworking and effective. But if we could replace the
bottom 5–10 percent with an average teacher—not even a superstar—we
could dramatically improve student achievement. The United States could
move from below average in international comparisons to near the top.
Teachers’ unions say they don’t want bad teachers in the classrooms,
but then they act to defend them all, asserting that we can’t adequately
judge teachers. Thus unions defend teachers in “rubber rooms”—where
they are sent after being accused of improper behavior or found to be
extraordinarily ineffective—on the grounds that due process requires such
treatment. (In a perverse way, rubber rooms are good as long as it’s not
feasible to remove teachers who are harming kids; it’s better to pay these
teachers not to teach than to have more children suffer.)

Hoover Digest  N  2011 · No. 1 83


So we are seeing not a war on teachers, but a war on the blunt and det-
rimental policies of teachers’ unions. If unions continue not to represent
the vast numbers of highly effective teachers, but instead to lump them
in with the ineffective teachers, they will continue doing a disservice to
students, to most of their own members, and to the nation.

We are seeing not a war on teachers, but a war on the blunt and

detrimental policies of teachers’ unions.

There is a place for an enlightened union that accepts the simple prem-
ise that teacher performance is an integral part of effecting reform. As the
late Albert Shanker said in 1985, when he was president of the American
Federation of Teachers: “Teachers must be viewed . . . as a group that acts
on behalf of its clients and takes responsibility for the quality and perfor-
mance of its own ranks.”
The bottom line is that focusing on effective teachers cannot be taken
as a liberal or conservative position. It’s time for the unions to drop their
polemics and stop propping up the bottom.
Reprinted by permission of the Wall Street Journal. © 2010 Dow Jones & Co. All rights reserved.

Available from the Hoover Press is Courting Failure: How


School Finance Lawsuits Exploit Judges’ Good Intentions
and Harm Our Children, edited by Eric A. Hanushek. To
order, call 800.935.2882 or visit www.hooverpress.org.

84 Hoover Digest  N  2011 · No. 1


TERRORISM

Gitmo Breakout
There is no quick way to dispel the legal murk surrounding terror
detainees. But these five ideas could let in some light. By Jack
Goldsmith.

Nine years after the 9/11 attacks and two years into the Obama presidency,
our nation is still flummoxed about what to do with captured terrorists.
The Obama administration is stuck roughly where the Bush administra-
tion was, with little hope in sight.
Guantánamo Bay has proved harder to close than the administration
anticipated. Many terrorists in that prison are too dangerous to release
and, for a variety of evidentiary reasons, cannot be brought to trial. Our
allies have accepted fewer detainees than we would like. These men will
thus have to continue in U.S. custody, but neither lawmakers nor the
American people are keen on transferring them to the United States.
Military commissions have not worked well, either, as recent difficul-
ties with the trials of an alleged USS Cole bomber and a Canadian child
soldier showed yet again. Commissions still pose novel legal and political
issues; many in the military charged with operating them don’t like them;
and they bring few legitimacy benefits, especially abroad, because they
lower civilian justice standards and apply only to non-citizens.
Civilian trials for terrorists have also proven difficult. They gathered
disfavor when Attorney General Eric Holder said he would prosecute

Jack Goldsmith is a member of the Hoover Institution’s Koret-Taube Task


Force on National Security and Law, the Henry L. Shattuck Professor at Harvard
Law School, and a senior fellow and research director in public law at the
Brookings Institution.

Hoover Digest  N  2011 · No. 1 85


Khalid Sheik Muhammad and other alleged September 11 plotters in
civilian court in Manhattan. Disfavor grew when the failed Christmas
Day plotter, Umar Farouk Abdulmutallab, and the Times Square car-
bomber, Faisal Shahzad, were placed in the civilian criminal system and
read Miranda rights rather than detained and interrogated in the military
system. The Bush administration prosecuted scores of terrorists in civilian
court with little controversy. But the charge that the Obama administra-
tion is insufficiently tough on terrorists has made it harder for the current
administration to try terrorists in civilian court.
Difficulties with trials have left the Obama administration, like its
predecessor, relying primarily on military detention without trial to hold

86 Hoover Digest  N  2011 · No. 1


terrorists. Courts have given their general blessing to military detention
as a legitimate form of terrorist incapacitation. But military detention
Illustration by Taylor Jones for the Hoover Digest.

still raises hard legal questions, about which Congress has said practically
nothing. As a result, unaccountable judges are making fateful detention
decisions, demanding release of some who the administration thinks are
dangerous terrorists. President Obama pledged to seek congressional clar-
ity on detention but has yet to follow through.
The abundant dysfunctions in our system for incapacitating terrorists
have led to increased reliance on targeted killings and outsourced rendi-
tions. Neither tactic is optimal from an intelligence-gathering perspective.
Meanwhile, Khalid Sheik Muhammad spent time in military detention

Hoover Digest  N  2011 · No. 1 87


and before a military commission before Holder said he would be tried in
a civilian court. A year has come and gone, and we still don’t know where
Muhammad’s fate will be determined.
There is no silver bullet for this mess, but a few pragmatic steps can
bring progress toward resolution.
First, give up on closing the Guantánamo Bay facility. The administra-
tion long ago missed its initial one-year deadline. The symbolic benefits
of closure have diminished significantly, because the substitute for deten-
tion without trial at the island prison is detention without trial inside the
United States, with little if any change in legal rights. The main reason
to close the facility is to fulfill a first-week presidential pledge that now,
under different circumstances, is too costly.

Many problems with trials go away if we simply deny terrorists their

sought-after martyrdom.

Second, acknowledge that military detention will remain the primary


basis for holding terrorists, and strengthen the system. The president will
eventually need Congress’s help, not only to put Guantánamo detentions
on firmer footing but also to support the growing global fight against
terrorists beyond traditional battlefields. The main legal foundation for
targeting and detention in places such as Pakistan, Somalia, and Yemen
is the September 2001 congressional authorization to deal with the 9/11
attacks. But as dangerous terrorists have ever-dimmer connections to Sep-
tember 11, the government is bumping up against the limits of what this
authorization permits.
Third, stop using military commissions, which are a good idea in theory
but have for nine years proved unworkable in practice. Military detention
and civilian trials provide adequate legal bases for terrorist incapacitation.
Fourth, separate the legitimacy of civilian trials from the security of
such trials. Much of the opposition to trying Muhammad in a New York
civilian court was the potential for massive disruption in securing the
downtown venue. Objections to civilian trials diminish if they are moved
to more-remote places in the New York and Virginia districts where the
crimes occurred.

88 Hoover Digest  N  2011 · No. 1


Fifth, do not seek the death penalty at trial. Many alleged terrorists
plead guilty. Most of the hard legal and political problems in trials—
including the use of classified information and coerced confessions—arise
in the penalty phase, when defendants can seek and introduce any con-
ceivably probative evidence. Many problems with terrorist trials go away
if we simply deny terrorists their sought-after martyrdom.

The charge that the Obama administration is not tough enough on

terrorists has made it harder for the current administration to try

terrorists in civilian court.

These proposals, especially the last, are politically difficult. But not
taking bold steps to resolve our terrorist-detention quandary will leave
the nation in the increasingly unfortunate place it has been for nearly a
decade.
Reprinted by permission of the Washington Post. © 2010 Washington Post Co. All rights reserved.

New from the Hoover Press is Skating on Stilts: Why


We Aren’t Stopping Tomorrow’s Terrorism, by Stewart
Baker. To order, call 800.935.2882 or visit www.
hooverpress.org.

Hoover Digest  N  2011 · No. 1 89


T H E MILITARY

Our Double-Edged
Sword
The military’s “indirect approach”—battlefield restraint, cultural
savvy, the use of local troops—means a big shift in the way U.S.
forces operate. It demands a close look. By Thomas H. Henriksen.

The use of force alone is but temporary. It may subdue for a moment; but
it does not remove the necessity of subduing again; and a nation is not

© Agence France-Presse/Joel Saget


governed, which is perpetually to be conquered.
—Edmund Burke, Second Speech on Conciliation with America

America is embarking on a new way of war in Afghanistan and elsewhere


in which battlefield restraint, cultural subtleties, and armed nation-build-
ing enterprises matter more than destruction of the enemy. These inno-
vations represent a doctrinal break from how the United States waged
war in its most heroic chapters. The new doctrine relies heavily on the
use of indigenous surrogate troops, the goodwill of the local people,
societal reconstruction, and the host government’s legitimacy, policies,
and conduct. These underpinnings of the indirect approach, it must be
emphasized, often lie beyond Washington’s complete control or even lim-
ited influence. By working through—and being greatly reliant on—the
agency of others, the recently evolved American strategy strives to defeat
insurgencies and to deny terrorists havens from which to launch attacks
against the American people and their interests. Even exponents of the
indirect approach acknowledge that the strategy can never eliminate the

Thomas H. Henriksen is a senior fellow at the Hoover Institution.

90 Hoover Digest  N  2011 · No. 1


French soldiers, part of a NATO multinational force, fire a mortar in Afghanistan last Septem-
ber. The classic view of war called for force-on-force application of massive violence and
the utter defeat of the enemy on a battlefield. The new way of war in Afghanistan focuses
instead on battlefield restraint, cultural subtleties, and nation building.

need for the United States to ensure its own defense. Yet America cannot
intervene directly into every ungoverned space to eliminate terrorist nests.
Direct expeditionary intervention with a large conventional military foot-
print, accompanied by high-cost state-building undertakings, would lead
to America’s exhaustion and insolvency. The costs in blood, treasure, and
moral authority would be too steep.
Faced with an expanding list of undergoverned spaces in dysfunctional
states around the globe beckoning to local extremist cells or Al-Qaeda-
franchised terrorists, the United States urgently needs an effective and
reasonably inexpensive strategy.
The current version of the indirect approach borrows heavily from
the revamped counterinsurgency (COIN) strategy of the U.S. Army and
Marine Corps. Local armies and police are trained in current U.S. pop-

Hoover Digest  N  2011 · No. 1 91


ulation-centric techniques of conducting COIN operations as they part-
ner with American regular units and Special Operations Forces (SOF).
Although the indirect approach has many pluses, it demands substan-
tial societal transformation, massive financial expenditures, and West-
ern-oriented governments to serve as hosts for nation-building efforts.
These requirements spawn troubling caveats and concerns about fighting
through the medium of a transfigured political landscape.

America cannot intervene directly into every ungoverned space to

eliminate terrorist nests. The costs in blood, treasure, and moral

authority would be too steep.

As Napoleon remarked: “War is a simple art, all a matter of execu-


tion.” The United States has tried indirect campaigns in the past, and I
have studied the shortcomings and miscalculations of those campaigns
to help hone the art of indirectly combating insurgent-based terrorism.
How those campaigns were executed, and their implications for our cur-
rent operations, are treated in full in my recent monograph Afghanistan,
Counterinsurgency, and the Indirect Approach (Joint Special Operations
University, 2010). The new way of war deserves to be treated with a note
of caution.

T H A N K S F O R T H E “SURGE”
The new version of the indirect approach owes its rebirth to the “surge”
tactics employed in the spectacular turnaround in the Iraq War starting
in early 2007. To calm the raging Iraqi insurgency, the United States
military liberally paid, equipped, protected, and guided Sunni tribal
militias, which broke with the Al-Qaeda movement in Iraq because of
its near-indiscriminate violence and imposition of draconian religious
practices. This central dimension of the Iraqi COIN breakthrough,
along with the additional 28,500 combat personnel associated with
the surge operation, reshaped U.S. military thinking more profoundly
than any other event since the Vietnam War. Thus the indirect way
of war is in full tilt also in North Africa, the Horn of Africa, and the
Philippines.

92 Hoover Digest  N  2011 · No. 1


American forces employed variants of surrogate warfare in their frontier
battles in the Western plains, the Philippine insurrection, the Nicaraguan
incursions, and the Vietnam War. But the Iraq War re-catalyzed interest in
COIN techniques and the usage of host-country manpower. Despite the
unique complexities of the Iraq surge, the U.S. Army and Marine Corps
plan to rely on the indirect approach in Afghanistan (and beyond) by win-
ning over the population to furnish recruits for Afghan security forces, to
turn over information about the Taliban insurgents, and to bestow loyalty
on a foreign-created and -sustained central government in Kabul.
This is a non-Clausewitzian way of war, superseding an interpreta-
tion of the nineteenth-century Prussian military theorist’s views that was
mostly associated in American minds with the principles of conventional
war: force-on-force application of massive violence and the utter defeat of
the enemy on a battlefield. Some of Carl von Clausewitz’s writings have,
for longer than a century, influenced generals to see the object of war as
simply destruction of adversaries in detail. U.S. land-warfare officers pro-
claimed in Clausewitzian language that “the road to success was through
the unlimited application of force,” and such calls for maximum lethality
profoundly shaped U.S. military thought for decades. (In reality, Clause-
witz has often been misinterpreted; his writings emphasized the psycho-
logical aspects of warfare.)
Today, from privates to generals fighting in the Islamic Republic of
Afghanistan, the doctrine has taken root that the Afghan people are to be
protected more than the Taliban insurgents killed. Army General Stanley
McChrystal, recently retired as the overall commander of U.S. and NATO
forces in the mountainous country, made his view clear on the new mili-
tary metrics: “The measure of effectiveness will not be enemy killed. It
will be the number of Afghans shielded from violence.” Later, McChrystal
developed this point: “Success in the long term, more importantly, will
be when the people of Afghanistan develop trust and faith in their own
government and military.” As a force of four thousand Marines launched a
drive to clear the Taliban from Helmand province in the summer of 2009,
they aimed at the well-being of the citizenry. “It is not simply about kill-
ing the enemy but about protecting the population and improving their
lives, which will help prohibit the return of the insurgent elements,” said

Hoover Digest  N  2011 · No. 1 93


A Kabul hospital shows the effects of continuing violence in Afghanistan.
U.S. military strategists reason that schoolhouses, wells, usable roads,
and clinics will help win over the loyalty of indigenous peoples and ward
off future terrorist attacks.

94 Hoover Digest  N  2011 · No. 1


a senior officer quoted in the New York Times. Army Major General Mike
Scaparrotti declared during Operation Khanjar (Sword Strike) initiated in
July 2009: “But the fight, essentially, is about the support of the people.”
The new way of war embodies a prophylactic approach to terrorism.
If schoolhouses, wells, hard-packed roads, and medical clinics are built by
Americans and staffed by U.S.-trained indigenous peoples, the thinking
goes, the winning of hearts and minds will protect us from more terror-
ist attacks like 9/11. People in the world’s peripheries will fight extremist
movements and deny terrorists safe havens for their nefarious activities, if
we help them not only to defeat the insurgents in their midst but also to
join the global economy and the world’s democracies. The model of the
indirect approach to insurgency is to “clear, hold, build, and transfer.”

Clausewitz’s writings have, for longer than a century, influenced generals

to see the object of war as simply destruction of adversaries in detail.

The Al-Qaeda network, the Taliban, and other radical adversaries fight
fiercely against these American-led social re-engineering schemes for a
globalized planet. Their backward-looking ideology espouses a violent
separation from the outside world, not integration into it. In the middle
live the bulk of the people, who wish a plague upon both houses so as to
return to life before the conflict.

“ A W H O L L Y DIFFERENT KIND OF FORCE”


Until recently, the indirect approach and indeed COIN warfare had lin-
gered on the Pentagon sidelines. They were ostracized and demeaned in
the windowed E-Ring offices of the top brass, who planned for the epic
force-on-force battles of the twentieth century. High-intensity conven-
© Agence France-Presse/Massoud Hossaini

tional warfare represented a familiar and comfortable choice for regular


Army officers still swayed by the World War II experience.
The journey to the upper rung of military thinking was long and ardu-
ous. Arguably, COIN’s nadir came during the Vietnam War, when, its
exponents believe, it never received a fair hearing from the conventionally
minded military chiefs despite ground-level breakthroughs. The main-
stream generals, who wanted to fight the war in Southeast Asia with heli-

Hoover Digest  N  2011 · No. 1 95


copter-borne mobility and formidable firepower, shunted it aside in favor
of the conventional sweeps and heavy shelling of an elusive enemy.
Not even a popular and charismatic president could budge the hide-
bound generalship in the Pentagon to embrace the new realities of uncon-
ventional warfare. To the 1962 graduating class of West Point, President
John F. Kennedy explained:

There is another type of war, new in intensity, ancient in origins—wars


by guerrillas, subversion, insurgents, assassins; wars by ambush instead
of by [conventional] combat. . . . It requires . . . a whole new kind of
strategy, a wholly different kind of force, and therefore a new and wholly
different kind of military training.

This new strategy, force, and military training rose to front-rank impor-
tance during the initial phase of the Afghanistan intervention and then
again after the stalemated Iraqi occupation of 2003–6. One recent, well-
publicized example is the Army-Marine alliance with the Sunni Awaken-
ing Councils (Sons of Iraq) movement in early 2007 against extremists
and the Iraqi branch of the Al-Qaeda network. Now the principles of
COIN—winning the hearts and minds of populations under insurgent
threat, gathering detailed intelligence on foes, wielding psychological car-
rots more than military sticks, and working through, with, and by non-
U.S. partners—are accepted in the uppermost reaches of the Pentagon.

“Success in the long term, more importantly, will be when the people

of Afghanistan develop trust and faith in their own government and

military,” said General McChrystal.

The stakes for America’s COIN response are high and the risks cannot
be ignored. While COIN tactics—especially allying with former insur-
gents—enabled the United States first to topple the Taliban regime in
Afghanistan and then to turn the tide of the insurgency in central Iraq, the
history of conducting antiguerrilla campaigns is fraught with complexi-
ties and unintended consequences. Culture, politics, and local conditions
confound any rigid application, the creation of any template, to neutral-

96 Hoover Digest  N  2011 · No. 1


izing insurgents. The indirect approach may be a necessity, but it cannot
become a dogma. It must be applied with steely pragmatism.
The Army’s official studies and the writings of military intellectuals are
replete with miscalculation and even tragic error in planning for armed
engagements. Lest any student of military history forget, the Vietnam
War began for the United States as an advisory and partner-building oper-
ation with the South Vietnamese government and armed forces. Seeing its
limited resources as doomed to fail, Washington escalated its commitment
and backed into a multiyear, raging conflict that sapped the nation’s well
being.

Conditions within Afghanistan are currently quite different from those of

central Iraq.

Nor should a partnership strategy overreach by grafting a twenty-first-


century American societal model onto lands struggling to clamber into
the modern era. The indirect approach will always benefit from an appre-
ciation of societal and operational distinctions.

S U C C E S S E S THAT MIGHT NOT TRANSLATE


The vaunted Iraqi surge might be considered a ready-made model for
Afghanistan, but in Iraq the indirect approach drew from several inter-
related factors that are not yet present in Afghanistan. In central Iraq,
the foreign-led Al-Qaeda affiliate violated cultural norms with its nearly
indiscriminate violence, doctrinaire imposition of Islam, and finally tar-
geting for assassination of Sunni tribal leaders when they opposed Abu
Musab al-Zarqawi’s policies. By the end of 2006, U.S. ground forces had
begun to change the military balance on the ground in the cities of Fallu-
jah and Ramadi, the provincial capital of Anbar. The arrival of additional
combat troops early the next year gave the U.S. ground forces the upper
hand. The U.S. reinforcements and better COIN tactics confronted the
Sunni, who constituted only a fifth of Iraq’s population, with the prospect
of defeat. Instead, their tribal militias, amply bankrolled with U.S. cash,
joined with the coalition forces against Al-Qaeda. The United States was
greatly favored by the turnaround of the Dulaimi Tribal Confederation

Hoover Digest  N  2011 · No. 1 97


within Anbar province in central Iraq. This large, cohesive tribal grouping
laid the foundation of the “awakening,” bringing in other tribal entities.
Conditions within Afghanistan are currently quite different from those
of central Iraq. The Taliban observes most cultural taboos within the Pash-
tun community, the country’s largest ethnic group. The insurgents made
a comeback in the early 2000s, thanks to the brutality and corruption of
Kabul’s local officials. The Taliban responded to local concerns, instituted
an elementary form of law and order, and so far have avoided the excess-
es of the Al-Qaeda in Iraq terrorist movement. Moreover, the Pashtuns
deeply resent the Kabul government’s abuse of power, villainy, and perva-
sive corruption. Nor are there Afghan versions of the Sunni figures Abu
Risha al-Sattar and the Dulaimi elders, who spread the “awakening” from
tribe to tribe. The mountains and valleys of Afghanistan enforce territori-
al compartmentalization, making intertribal cooperation difficult among
the fragmented tribes with their internecine and overlapping conflicts.

The indirect approach may be a necessity, but it cannot become a dogma.

It must be applied with steely pragmatism.

At this juncture, U.S. and NATO forces are battling to establish suf-
ficient security in the violent southeastern belt to enable leaders to line up
their communities against the Taliban insurgents. Some notable break-
throughs have taken place. In early 2010, the Shinwari people—a subtribe
of the Ghilzai tribal confederation—joined with the central government
in its anti-Taliban campaign. Their cooperation marked a key realign-
ment; it points toward other Ghilzai subtribes taking the same step. West
of Kabul, in a less violent arena, the public protection programs (PPPs)
have begun to marshal community self-defense units, known as Guard-
ians, against the insurgents. The PPPs, begun in early 2009, will face a
daunting environment in the Taliban-contested zones along the Pakistani
border, across which the insurgents enjoy sanctuaries for recruitment,
training, and regrouping.
Backing and relying on tribal elements or village forces is a double-
edged sword, it could be argued, because the policy cuts at cross purposes
with the overarching goal of forging national institutions, such as multi-

98 Hoover Digest  N  2011 · No. 1


ethnic and merit-based police, army, and civil authority structures. Tribal
arrangements, to this way of thinking, are anachronistic; they look to
ancient customs and practices that have little to contribute to modern
states dependent on central governments. But as a practical matter, tribes
capture their members’ loyalty, administer rough justice, and control mili-
tias that can deal a blow to the Taliban and establish stability in the coun-
tryside. They represent innate, formed, and ready-to-use forces to wage
anti-insurgency struggles. As in so many other examples, matching ends
and means is the ongoing calculus of counterinsurgency.
Excerpted from Afghanistan, Counterinsurgency, and the Indirect Approach, by Thomas H. Henriksen, a
publication of the Joint Special Operations University (http://jsoupublic.socom.mil).

Available from the Hoover Press is Foreign Policy


for America in the Twenty-first Century: Alternative
Perspectives, edited by Thomas H. Henriksen. To order,
call 800.935.2882 or visit www.hooverpress.org.

Hoover Digest  N  2011 · No. 1 99


I S L AMISM

The Wages of Militancy


The planners of the “ground zero mosque” chose confrontation. They
should have chosen discretion. By Fouad Ajami.

From his travels last fall to the Persian Gulf—sponsored and paid for
by the State Department—Imam Faisal Abdul Rauf returned with a
none-too-subtle threat. His project would have to go on. Canceling the
proposed Islamic center near ground zero would risk putting “our sol-
diers, our troops, our embassies and citizens under attack in the Muslim
world.”
Leave aside the attempt to make this project a matter of national secu-
rity. The self-appointed bridge between America and the Arab-Islamic
world bore false witness to the sentiments in Islamic lands.
The truth is that the trajectory of Islam in America (and Europe for
that matter) is at variance with the play of things in Islam’s main habitat.
A survey by Elaph, the most respected electronic daily in the Arab world,
gave a decided edge to those who objected to the building of this New
York mosque—58 percent saw it as a project of folly.
Elaph was at it again in the aftermath of Florida pastor Terry Jones’s
threat to burn copies of the Quran last fall. It queried its readers as to
whether America was a “tolerant” or a “bigoted” society. The split was 63
percent to 37 percent in favor of those who accepted the good faith and
pluralism of this country.

Fouad Ajami is a senior fellow at the Hoover Institution, co-chairman of Hoover’s


Herbert and Jane Dwight Working Group on Islamism and the International
Order, and the Majid Khadduri Professor of Middle Eastern Studies at the School
for Advanced International Studies at Johns Hopkins University.

100 Hoover Digest  N  2011 · No. 1


This is remarkable. The ground burned in the Arab-Islamic world over
the past three decades. Sly preachers and their foot soldiers “weaponized”
the faith and all but devoured what modernists had tried to build in the
face of difficult odds. The fury has not burned out. Self-styled imams
continue to issue fatwas that have made it all but impossible for Arabs and
Muslims to partake of the modern world. But from this ruinous history,
there has settled upon countless Muslims and Arabs the recognition that
the wells are poisoned in their midst, that the faith has to be reined in or
that the faith will kill, and that the economic and cultural prospects of
modern Islam hang in the balance.

N O G A I N F R OM BELLIGERENCE
To this kind of sobriety, Muslim activists and preachers in the diaspora—
in Minneapolis and in Paterson, New Jersey; in Copenhagen and Amster-
dam—appear to be largely indifferent. They are forever on the lookout for
the smallest slight.
Islam in America is of recent vintage. This country can’t be “Islamic.”
Its foundations are deep in the Puritan religious tradition. The waves of
immigrants who came to these shores understood the need for discretion,
and for patience.
It wasn’t belligerence that carried the Catholics and the Jews into the
great American mainstream. It was the swarm of daily life—the grocery
store, the assembly line, the garment industry, the public schools, and the
big wars that knit the American communities together—and tore down
the religious and ethnic barriers.
There is no gain to be had, no hearts and minds to be won, in Imam
Rauf insisting that ground zero can’t be hallowed ground because there is
a strip joint and an off-track betting office nearby. This may be true, but
it is irrelevant.
A terrible deed took place on that ground almost ten years ago. Nine-
teen young Arabs brought death and ruin onto American soil, and discre-
tion has a place of pride in the way the aftermath is handled. “Islam” didn’t
commit these crimes, but young Arabs and Muslims did.
There is no use for the incantation that Islam is a religion of peace. The
incantation is false; Islam, like other religions, is theologically a religion of

Hoover Digest  N  2011 · No. 1 101


war and a religion of peace. In our time, it is a religion in distress, fought
over, hijacked at times, by a militant breed at war with the modern world.
Again, from Elaph, here are the thoughts of an Arab writer, Ahmed
Abu Mattar, who sees through the militancy of the religious radicals. He
dismisses outright the anger over the “foolish and deranged” Pastor Jones
who threatened to burn copies of the Quran. “Where is the anger in the
face of dictatorships which dominate the lives of Arabs from the cradle to
the grave? Would the Prophet Muhammad look with favor on the prisons
in our midst, which outnumber the universities and hospitals? Would he
take comfort in the rate of illiteracy among the Arabs, which exceeds 60
percent? Would he be satisfied with the backwardness that renders us a
burden on other nations?”

Sly preachers and their foot soldiers “weaponized” the faith and all but

devoured what modernists had tried to build in the face of difficult odds.

The first Arabs who came to America arrived during the time of the
Great Migration (1880–1920). Their story is told by Gregory Orfalea in
his book The Arab Americans: A History (2006). The pioneers were mostly
Christians on the run from the hunger and the privations of a dying Otto-
man empire. One such pioneer who fled Lebanon for America said he
wanted to leave his homeland and “go to the land of justice.” Ellis Island
was fondly named bayt al-hurriya (the house of freedom). It was New
York, in the larger neighborhood of Wall Street, that was the first home of
the immigrants.
Restrictive quotas and the Great Depression reduced the migration to a
trickle. This would change drastically in the 1950s and ’60s. The time of
Islam in America had begun.

A T A L E O F D I S C RETION
It was in 1965, Imam Faisal Abdul Rauf tells us, that he made his way to
America as a young man. He and a vast migration would be here as Ameri-
can identity underwent a drastic metamorphosis.
The prudence of days past was now a distant memory. These activ-
ists who came in the 1990s—the time of multiculturalism and of what

102 Hoover Digest  N  2011 · No. 1


the late Arthur Schlesinger Jr. called the “disuniting of America”—would
insist on a full-scale revision of the American creed. American liberalism
had broken with American patriotism, and the self-styled activists would
give themselves over to a militancy that would have shocked their forerun-
ners. It is out of that larger history that this project at ground zero is born.

Islam, like other religions, is theologically a religion of war and a religion

of peace. In our time, it is a religion in distress, fought over, hijacked at

times, by a militant breed at war with the modern world.

There is a great Arab and Islamic tale. It happened in the early years of
Islam, but it speaks to this controversy. It took place in AD 638, the time
of Islam’s triumphs.
The second successor to the Prophet, the Caliph Omar—to orthodox
Muslims the most revered of the four Guided Caliphs for the great con-
quests that took place during his reign—had come to Jerusalem to accept
the city’s surrender. Patriarch Sophronius, the city’s chief magistrate, is by
his side for the ceremony of surrender. Prayer time comes for Omar while
the patriarch is showing him the Church of the Holy Sepulchre.
The conqueror asks where he could spread out his prayer rug. Soph-
ronius tells him that he can stay where he is. Omar refuses, because his
followers, he says, might then claim for Islam the holy shrine of the Chris-
tians. Omar steps outside for his prayer.
We don’t always assert all the “rights” that we can get away with. The
faith is honored when the faith bends to necessity and discretion.
Reprinted by permission of the Wall Street Journal. © 2010 Dow Jones & Co. All rights reserved.

New from the Hoover Press is Torn Country: Turkey


between Secularism and Islamism, by Zeyno Baran. To
order, call 800.935.2882 or visit www.hooverpress.org.

Hoover Digest  N  2011 · No. 1 103


I S L AMISM

Seeing Islamism
Clearly
Americans are starting to grasp what radicalism means—and to
understand that moderate Islam is not the enemy. By Daniel Pipes.

The recent furor over the Islamic center in Manhattan, variously called the
ground zero mosque, Cordoba House, and Park51, has large implications
for the future of Islam in the United States and perhaps beyond.
The debate was as unexpected as it is extraordinary. One would have
thought that the event to touch a nerve within the American body politic,
making Islam a national issue, would be an act of terrorism. Or the discov-
ery that Islamists had penetrated U.S. security services. Or the dismaying
results of survey research. Or an apologetic presidential speech.
But no, something more symbolic roiled the body politic: the prospect
of a mosque in close proximity to the World Trade Center’s former loca-
tion. What began as a local zoning matter morphed over the months into
a national debate with potential foreign-policy repercussions. Its symbolic
quality fit a pattern established in other Western countries. Islamic cover-
ings on women have spurred repeated national debates in France since
1989. The Swiss banned the building of minarets. The murder of Theo
van Gogh profoundly affected the Netherlands, as did the publication of
cartoons of Muhammad in Denmark.
Oddly, only after the Islamic center’s location had generated weeks of
controversy did the issue of the individuals, organizations, and funding

Daniel Pipes is the Taube Distinguished Visiting Fellow at the Hoover


Institution.

104 Hoover Digest  N  2011 · No. 1


behind the project finally come to the fore—although these obviously
have more significance than location. Personally, I do not object to a truly
moderate Muslim institution in proximity to ground zero; conversely, I
object to an Islamist institution being constructed anywhere. Ironically,
building the center in such close proximity to ground zero, given the
intense emotions it aroused, will probably redound against the long-term
interests of Muslims in the United States.
This new emotionalism marks the start of a difficult stage for Islamists
in the United States. Although their origins as an organized force go back
to the founding of the Muslim Student Association in 1963, they came
of age politically in the mid-1990s, when they emerged as a force in U.S.
public life.

Targeting all Muslims is contrary to basic Western notions, lumps friends

with foes, and ignores the fact that Muslims alone can offer an antidote to

Islamism.

I was fighting Islamists back then, and things went badly. It was, in
practical terms, just Steven Emerson and me versus hundreds of thou-
sands of Islamists. He and I could not find adequate intellectual sup-
port, money, media interest, or political backing. Our cause felt quite
hopeless.
My lowest point came in 1999, when a retired U.S. career Foreign
Service officer named Richard Curtiss spoke on Capitol Hill about “the
potential of the American Muslim community” and compared its advanc-
es to Muhammad’s battles in seventh-century Arabia. He flat-out predict-
ed that just as Muhammad once had prevailed, so too would American
Muslims. While Curtiss spoke only about changing policy toward Israel,
his themes implied a broader Islamist takeover of the United States. His
prediction seemed unarguable.
September 11 provided a wake-up call, ending this sense of hopeless-
ness. Americans reacted badly not just to that day’s horrifying violence
but also to the Islamists’ outrageous insistence on blaming the attacks on
U.S. foreign policy and, later, their blatant denial that the perpetrators
were Muslims.

Hoover Digest  N  2011 · No. 1 105


A man hands out literature during a demonstration near the proposed
site of an Islamic cultural center in Manhattan. Dueling protest rallies
attracted thousands last September 11.

106 Hoover Digest  N  2011 · No. 1


American scholars, columnists, bloggers, media personalities, and activ-
ists became knowledgeable about Islam, developing into a community—a
community that now feels like a movement. The Islamic-center contro-
versy represents its emergence as a political force, offering an angry, potent
reaction inconceivable just a decade earlier.

Building an Islamic center in close proximity to ground zero will probably

redound against the long-term interests of Muslims in the United States.

The energetic pushback of recent months finds me partially elated:


those who reject Islamism and all its works now constitute a majority and
are on the march. For the first time in fifteen years, I feel I may be on the
winning team.
But I have one concern: the team’s increasing anti-Islamic tone. Misled
by the Islamists’ insistence that there can be no such thing as “moder-
ate Islam,” my allies often fail to distinguish between Islam (a faith) and
Islamism (a radical utopian ideology aiming to implement Islamic laws in
their totality). This amounts to not just an intellectual error but a policy
dead end. Targeting all Muslims is contrary to basic Western notions,
lumps friends with foes, and ignores the inescapable fact that Muslims
alone can offer an antidote to Islamism. As I often note, radical Islam is
the problem and moderate Islam is the solution.
Once this lesson is learned, the new energy will bring the defeat of
Islamism dimly into sight.
Reprinted by permission of National Review Online. © 2010 National Review, Inc. All rights reserved.

Available from the Hoover Press is Communicating with


© Sipa Press/Terrence Jennings

the World of Islam, edited by A. Ross Johnson. To order,


call 800.935.2882 or visit www.hooverpress.org.

Hoover Digest  N  2011 · No. 1 107


A F G HANISTAN

Great Game without


End
Nobody wins in Afghanistan—at least not soon. Western democracies
need to stay nimble, reserve the power to strike, and remain patient.
By Josef Joffe.

No soldier wants to be the last one to die in a war, according to the old
saw. In Afghanistan, make that “no coalition member wants to be the
last one to quit.” And so competitive withdrawal has practically begun.
According to President Obama, the United States will start drawing down
this year. Canada is preparing to exit. Poland is talking complete with-
drawal by 2012. Britain wants to end it all by 2015.
This is no way to win. It’s like a trainer announcing in round three
that he will throw in the towel in round six. His man will take no more
risks, while the other boxer will wait it out or go for the knockout
punch.
Already, President Hamid Karzai seems to be preparing for our depar-
ture by catering to the Taliban. And with every platoon that heads home,
our wards will increase their bets on whoever they think will step into the
vacuum—the Taliban, the warlords, the Iranians, or the Pakistani ISI (the
intelligence service that practically invented the Taliban in the days of
Charlie Wilson and the Soviets).

Josef Joffe is the Marc and Anita Abramowitz Fellow in International Relations
at the Hoover Institution, a senior fellow at Stanford University’s Freeman Spogli
Institute of International Studies, and publisher-editor of the German weekly
Die Zeit.

108 Hoover Digest  N  2011 · No. 1


This problem is built into any counterinsurgency strategy. Whose com-
mitment is more sustainable, hence more credible: the insurgents’ or the
intruders’? The “bad guys” fight where they live, and so they have nowhere
else to go. But we, who fight for abstract reasons only remotely related to
our core security, can always ship out. The locals—be they wards or war-
riors of God—know it.
They know that democracies fight wars of choice only if victory is
swift, bloodless, and reasonably priced. They don’t like operations that
are indecisive, and this one has lasted even longer than the war in Viet-
nam. The asymmetry has become crueler over time. Thirty-five years
after the fall of Saigon, postmodern Western society is horrified even
by blood we shed on the other side. This our enemies have learned as
well, hence the tactics of Hamas, Hezbollah, and the Taliban, which
lure our forces into killing (either real or make-believe) civilians.
Nothing has soured Germans more on the war in Afghanistan than
the scores of Afghans killed near Kunduz in a German-ordered bomb-
ing run by U.S. aircraft in 2009. How many were civilians? We’ll never
know.
Democracies will fight as fiercely as totalitarians when their own lands
are at stake. But they won’t fight to the end in a difficult war of choice, as
Afghanistan surely is. Yet the willingness to stay as long as it takes is the
alpha and omega of any counterinsurgency strategy. If we go in, we have
to be willing to stay sine die. We must not think like a traditional army
that knocks out the enemy and then goes home. We have to think like a
police force. The police stay on the beat forever. Only then can they tell
the good guys from the bad guys. Only then can they gain vital intel-
ligence from the locals. Only because they reliably serve and protect can
they conquer “hearts and minds.”
But why would we stay where interests (remote) and costs (high) are so
unbalanced? There are lots of good reasons. Our interests may be abstract,
but they are not unreal. The greater Middle East, from the Levant to Kash-
mir, will be in the twenty-first century what Europe was in the twentieth:
the arena where endless vicious conflict—strategic as well as ideological,
within as well as between states—will come home to haunt us if it remains
unchecked. Indeed, the Taliban pale against a failing, deeply anti-Western

Hoover Digest  N  2011 · No. 1 109


nuclear state like Pakistan or a revolutionary regime like Iran’s that believes
it is on a mission from God.
Here, then, is our conundrum: we must never set an exit date, as we
did not in Kosovo. But, for the past decade, Western forces have stayed
in Kosovo only because nobody dies, neither “them” nor us. American
troops are still in Germany because there are no IEDs on the autobahns.
The only way, therefore, for us to stay in Afghanistan is to go with our
advantages and dodge our weaknesses as democracies, which recoil sooner
or later from the sight of blood—theirs and ours.

The “bad guys” fight where they live, and have nowhere else to go. We

can always ship out. The locals—be they wards or warriors of God—

know it.

Our advantages are technology and training: skilled soldiers, “eyes in the
sky,” information processing, and standoff weapons ranging from drones
to aircraft carriers and long-range bombers. Civil War General Nathan
Bedford Forrest is (erroneously) credited with the counsel to “git thar fust-
est with the mostest” as a guarantee of military success. Today, the key is to
“git thar fustest with the bestest”—be swift and precise. Keep enemies off
balance, exploit surprise, rely on air- and space-borne intelligence, disrupt
their command and logistics networks (yes, even irregulars have supply
lines), immobilize them, keep them from massing, avoid “collateral dam-
age.” Deny them sanctuaries and stay away from the population, which
also means: forget nation-building. There is no nation in Afghanistan.
No, you can’t “win” that way—in the sense of enshrining a preferred
political order or routing the enemy for good. But you can constrain and
deter your foes by maximizing their costs and minimizing yours. Best of
all, a combination of watchful presence and nimble offensive can be sus-
tained indefinitely. And indefinite the twenty-first century’s “Great Game”
will be. The tactical payoff is the enemy’s growing conviction that we
won’t go home. The strategic benefit is that he might eventually recon-
sider and start talking in earnest. That’s the best we can do, but it’s better
than throwing in the towel in round six.
Reprinted by permission of the New Republic. © 2010 New Republic (www.tnr.com). All rights reserved.

110 Hoover Digest  N  2011 · No. 1


IRAQ

Unfinished Business
How America should carry out its new post-combat role. By Kori N.
Schake.

President Obama has highlighted his achievement in ending U.S. combat


operations in Iraq by the end of last August. Yet he declined to focus on
the months-long political stalemate that followed elections in Iraq, other
than saying it would have no effect on U.S. troops leaving, or the increase
in violence to Iraqis.
The president should be clear about our continuing combat commit-
ments in Iraq, reconsider the transfer to civilians some of the inherently
military tasks our civilian mission in Iraq will require, and revise the secu-
rity agreement with Iraq to provide for continuing presence of some U.S.
military forces after 2011.
Obama’s argument that setting a deadline to end operations would
force Iraqis to make hard political choices has proven false. Instead, the
deadline disinclined Iraqi political leaders to compromise and diminished
U.S. influence. This has significant implications for the Obama admin-
istration’s strategy in both Iraq and Afghanistan (where the drawdown of
that surge is arbitrarily set for July of this year).
In the speech last August at the Disabled American Veterans confer-
ence where he announced the end of combat operations in Iraq, Obama
declared that “our commitment in Iraq is changing from a military effort
led by our troops to a civilian effort led by our diplomats.” But our State
Department lacks the capacity to scope or conduct a mission of this mag-
nitude. It balked at the hundreds of tasks the military identified that

Kori N. Schake is a research fellow at the Hoover Institution and an associate


professor at the United States Military Academy.

Hoover Digest  N  2011 · No. 1 111


would need to be transferred. Rather than define what needs doing and
persuade Congress to provide the necessary resources, State defined the
requirements down. When Congress refused even that level of funding,
neither State nor the White House fought for the necessary resources.
To bring U.S. effort back into line with our equities as we conclude
the war in Iraq, the president should make three crucial changes to his
policies.

Setting a deadline to end combat operations made Iraqi political leaders

uninterested in compromise while diminishing U.S. influence.

First, be straightforward that some combat responsibilities remain. The


president has made it sound as though the only mission remaining for
U.S. forces in Iraq after August 31, 2010, was training Iraqi security for-
ces, but we are supporting as well as training Iraqis. That support extends
to providing for Iraq’s air defense and conducting air operations, because
Iraq has no air force to speak of. They are working towards self-sufficien-
cy, but as General Shawkat Zebari, the head of Iraq’s security forces, has
admitted, Iraqis will not be able to fully secure their country until 2020.
General Ralph Baker, deputy commander of forces in central Iraq, also
confirmed that timeline.
If the debacle of Clinton administration intervention in Somalia taught
us anything, it is that one of the worst mistakes an American president can
make in national security policy is to carry commitments without inform-
ing the American people. When the mission shifted from humanitarian
assistance to fighting Somalian warlords, the president did not prepare
Americans for the casualties that would occur when we became a party to
the conflict. Obama is setting himself up for a similar crisis. Both Turkey
and Iran have made military incursions into Iraq in the past several months;
the Iranians have constructed a fort inside Iraqi territory. An attack on Ira-
nian nuclear facilities by either Israel or the United States could provoke
attacks on U.S. installations and allies in the region. The president needs
to be clear that we will protect Iraq in these and other eventualities.
Second, reconsider full civilianization of the mission in Iraq. The State
Department has five thousand civilians in Iraq, its largest deployment in

112 Hoover Digest  N  2011 · No. 1


the world. Fully half those State Department personnel are involved in
providing security. Most are contractors. Even if equipped with Defense
Department helicopters, mine clearers, and armored vehicles, the State
mission will be consumed by providing security. Do we really want civil-
ians undertaking these inherently military jobs? We need to build an inte-
grated political-military strategy, not a strictly civilian one.
Third, make clear in public that we are open to renegotiation of the
security agreement to assist the government of Iraq for as long as it seeks
U.S. support. It would help stabilize the political machinations of Iraqis
and others who would influence Iraq for us to be engaged beyond 2011.

If the Somalia debacle taught us anything, it is this: one of the worst

mistakes an American president can make in national security policy is to

carry commitments without informing the American people.

None of these changes would require major increases in our commit-


ment to Iraq. None of them would be likely to increase the risk to U.S.
forces, and they would reduce Iraqi casualties by stabilizing the fracturing
political landscape in Iraq. Failing to achieve peace in Iraq will be all the
more disgraceful because so little is now needed to help Iraqis stabilize
their country in a way consistent with our interests.
Reprinted by permission of Foreign Policy (http://shadow.foreignpolicy.com) © 2010 The Washington Post
Co. All rights reserved.

Available from the Hoover Press is Managing American


Hegemony: Essays on Power in a Time of Dominance,
by Kori N. Schake. To order, call 800.935.2882 or visit
www.hooverpress.org.

Hoover Digest  N  2011 · No. 1 113


T H E MIDDLE EAST

Is a Deal within Reach?


When it comes to Mideast peace talks, this time the optimists may
have a case. By Robert Zelnick.

Last summer, when Israeli and Palestinian leaders agreed to the Obama
administration’s plan to renew face-to-face negotiations without precondi-
tions, most opinion makers reacted with deep skepticism. They and most
Middle East experts quickly lined up to dub the negotiations a frivolous
confrontation between an Israeli leader who wants no agreement and a
Palestinian leader too weak to get one.
Before my most recent visit to the region last June, my own instincts
would have mirrored those of my colleagues in the media. I covered Israel
for ABC News in 1984–86 and had returned to the area on writing assign-
ments three times between 2002 and 2007. Like many other journalists,
I had a sense of hopelessness produced by my experiences in the region.
After all, this conflict has survived war, peace negotiations, terrorist assaults
on civilians, an authorized suicide-bombing campaign, presidential arm-
twisting, even proximity talks. So it was with no great optimism that I
undertook another journey.
Yet I was surprised at how different the situation seemed. And although
I returned well versed in the reasons to be skeptical of an agreement, I part
company with colleagues who believe that the face-to-face talks will settle
nothing.
So what is different now? I offer the following observations based on
many interviews with senior diplomats, government officials, legislators,

Robert Zelnick is a research fellow at the Hoover Institution and a professor of


national and international affairs at Boston University.

114 Hoover Digest  N  2011 · No. 1


and negotiators on both sides, most of them working for peace with a new
urgency:

• The Israelis and the majority Fatah wing of the PLO now share a vital
interest in the containment of Hamas—the Iran-backed radical Sunni
group—which, during the summer of 2007, violently seized control of
the Gaza Strip.

• Recognition of this interest has already produced significant coopera-


tion in such matters as intelligence, the apprehension of suspected ter-
rorists, and the training and equipping of Palestinian security forces.

• Led by its widely respected prime minister, Salam Fayyad, and others,
the Palestinian Authority (PA) is finally developing an infrastructure of
statehood, which has generated cautious hope among many Israelis that
a Palestinian regime could be a source of stability and democratic values
in the region.

• The parties are much closer to agreement in such key areas as refugees,
land swaps, and post-accord security arrangements than is generally
reported. In addition, Israeli Prime Minister Benjamin Netanyahu,
who in the opening weeks of his administration evidenced ambivalence
about the two-state solution, is now firmly on board.

• Finally, after more than a year of erratic diplomacy, the Obama admin-
istration appears to appreciate the necessity to the peace process of
face-to-face negotiations. Issues such as the move of Israeli Jews into
contested East Jerusalem may rankle, but the White House seems to
realize that at this stage of affairs, giving the parties excuses for avoiding
such talks is counterproductive.

S H A R E D I N T ERESTS, OVERLAPPING GOALS


One of my most illuminating discussions was with a senior Israeli mil-
itary intelligence officer whom I had first met in 2007. He told me
he saw both good and bad news regarding the Palestinians. The good
news: “There is cooperation—tactical, military, and with civilian
infrastructure,”and “the PA has established order with troops trained

Hoover Digest  N  2011 · No. 1 115


in Jordan.” The bad news: “We cannot implement peace because [the
PA] does not have Gaza.  .  .  .  The PA is not capable of taking back
Gaza unless we do it for them, which we don’t want.” Reclaiming Gaza
is indeed a necessary step for any Israeli-Palestinian agreement to take

Illustrations by Taylor Jones for the Hoover Digest.

116 Hoover Digest  N  2011 · No. 1


hold. But both Israeli and Palestinian optimists argue that it need not
be the first step.
More immediately, the theme of close cooperation between Israeli and
Palestinian security officials is echoed by senior figures on both sides.
United by a common enemy (i.e., Hamas), the two longtime adversaries
appear to be building a de facto alliance even before the old epithets go
out of style. My military intelligence source expressed concern that the
failure to reach agreement with moderate Palestinians on a future state
could bring vital Israeli facilities within range of hostile fire: “We are very
close to a Palestinian state, so we cannot fail again. If we get two rockets
every day at Ben Gurion, we are done.”

The Israelis and the majority Fatah wing of the PLO now share a vital

interest in the containment of Hamas.

The overlapping strategic interests of Israel and Fatah extend from


Hamas to an Iran armed with nuclear weapons. Israelis overwhelmingly
regard this as an existential issue. The overwhelming consensus is that if
the United States fails to take decisive action, Israel will—beginning with
strikes against the Iranian nuclear enrichment facility at Natanz and the
uranium conversion plant at Isfahan. Former British prime minister Tony
Blair, who has developed close ties with both Israeli and Palestinian lead-
ers while serving as Europe’s representative in Jerusalem, took a similar
view of Israel’s likely response in a phone conversation he had with me
as he drove through the West Bank: “Personally, I think Israel would not
allow Iran to get nuclear weapons.” Sunni regimes in the region secretly
hope that this is true. Ironically, it may be Israel’s nuclear umbrella that
shields some of its conservative regional colleagues from Iranian attack,
completely revamping the region’s strategic picture.
I was fortunate to meet with Yasir Abed Rabbo, the diminutive, chain-
smoking Palestinian veteran of more negotiating sessions with Israelis
than he can count. Referring to the productive 2007 talks between Presi-
dent Mahmoud Abbas and Prime Minister Ehud Olmert that were tor-
pedoed by corruption charges, forcing Olmert’s resignation, Abed Rabbo
claimed that “the offer from Olmert was the ’67 borders with a 6.5 per-

Hoover Digest  N  2011 · No. 1 117


cent land swap. We offered about 2 percent, but Olmert didn’t say any-
thing.”
In fact, Olmert had plenty to say. He and Abbas met for face-to face
talks some thirty-five times, with significant progress made on such key

Illustrations by Taylor Jones for the Hoover Digest.

118 Hoover Digest  N  2011 · No. 1


issues as the division of sovereignty in Jerusalem along religious lines (with
holy places subject to international administration) and a broad right of
way in the form of a tunnel linking Gaza to the West Bank. Had Olmert
escaped the relentless criminal investigators, we might today be examining
the provisions of a negotiated settlement, although like most Palestinian
Authority veteran negotiators, Abed Rabbo bitterly recounts the impact
of Israeli West Bank settlements on the issues under discussion: “It’s as
though you ask me to sit and discuss the future of this table, but as we talk
you are slicing away the pieces of the table.”

“We are very close to a Palestinian state, so we cannot fail again. If we

get two rockets every day at Ben Gurion, we are done.”

The question of post-accord security for Israelis dominates every dis-


cussion of a deal with the Palestinians. The Obama-Bush transition does
not appear to have produced any significant glitches in the critical area
of permanent security arrangements. First outlined by Condoleezza Rice
and later fleshed out by retired General James Jones, Obama’s recently
departed national security adviser, all key points of the plan have been
presented to both sides without any deal breakers becoming apparent.
Under this plan, Palestine would become a “demilitarized state with a
strong police force.” As summarized by Abed Rabbo, “An international
force would be deployed on the borders and inside the Palestinian state.
No Israeli presence of any kind would be permitted inside the Palestinian
state. Israel would be able to nominate members or veto the proposals of
others. A member of the international force could not be removed with-
out the agreement of Israel, the United States, and Palestine.”
The Palestinian leadership maintains that its strategic goals dovetail
with those of Israel. Both have overriding interests in neutralizing Hamas
and offering the prospect of peace—and, in the case of the Palestinians,
statehood—to their constituencies. Fatah in particular has done a good
deal of soul-searching since its 2007 defeat in elections in Gaza, and its
subsequent rout by Hamas militias in Gaza. In interviews I conducted
with Fatah leaders, one after another offered the following analysis: after
the second Intifada, the Palestinians wanted nothing so much as a peace-

Hoover Digest  N  2011 · No. 1 119


ful resolution to the conflict with Israel; the removal of the burdensome
Israeli presence as reflected in checkpoints, detours, closed roads, and eco-
nomic misery; the opportunity to develop their own political institutions
in their own way; and the development of public institutions that would
enable them to reassert their national character and identity. What they
got instead was a stillborn peace process, burdened by ancient grudges and
derelictions, a corrupt leadership where the instant millionaires of the PA
regime prospered at the expense of their constituencies, and a government
in name only—one that was unable to provide the most basic services to
its people—health care, education, and security.

A veteran Palestinian negotiator complains: “It’s as though you ask me

to sit and discuss the future of this table, but as we talk you are slicing

away the pieces of the table.”

While both sides agree that Hamas must be dealt with, however, the
question of tactics remains touchy. Most of the Israeli leadership main-
tains that the Palestinians themselves must dislodge Hamas before any
final settlement can be achieved. But the more reflective Palestinians sug-
gest that Israel is once again asking the PA to treat the symptoms while
ignoring the disease.
“How do you get rid of Hamas?” the PA’s minister of planning, Ali Jar-
bawi, asked rhetorically in our conversation. “Produce results in the peace
process! Hamas is a symptom, not a reason. It flourishes on the lack of a
peace process.”
Nasser al-Kidwa, Yasser Arafat’s nephew, member of Fatah’s governing
central committee, and for many years the quite able Palestine Liberation
Organization representative to the United Nations, was equally vehement:
“We lost elections because we failed to deliver on promises to our people.
We failed to deliver a Palestinian state. We failed to deliver independence.
The overwhelming majority of people would definitely support a reason-
able settlement that offers peace, that offers a better life.”
Blair, too, insisted that the Hamas problem would solve itself under the
right circumstances. “I think to deal with Hamas you must create a strong
momentum toward progress on the West Bank,” he said in our telephone

120 Hoover Digest  N  2011 · No. 1


interview. “You must provide Hamas a choice: either get on board the
train or the train leaves without them. Hamas’s strength works in inverse
relationship to the progress of the peace process. I am absolutely sure of
this.”
Some believe that Blair and others have little but optimism to sup-
port their view. Critics note, for example, that Egypt strove for months to
produce a document setting forth the conditions by which Hamas could
return on good terms to the Palestinian Authority. Alas, the “Egyptian
Document” remains unsigned by the group.
Dissenters also see little evidence that Hamas can be made to knuckle
under. Israel’s former ambassador to Germany, Shimon Stein, said, “The
real question is, if we sign an agreement with Abbas, can he deliver? Can
he live up to it? Can he make Hamas comply? I don’t think so.”

“How do you get rid of Hamas?” Ali Jarbawi asks rhetorically. “Produce

results in the peace process! Hamas is a symptom, not a reason. It

flourishes on the lack of a peace process.”

A senior Western diplomat who has observed the situation closely dur-
ing the past five years warns, “The notion that a deal will come along
that forces Hamas to go along with it . . . I think that vision is pretty far
off, particularly given the makeup of the Israeli government. Meanwhile,
Hamas is getting paid by the Syrians and the Iranians. They’ll face tough
consequences if they stick their necks out.”

S E E K I N G R E FORMERS WITH CREDIBIL ITY


At least ten Fatah militias were unable to hold their own in Gaza when
pressed by the more disciplined Hamas, and given that weakness Israel has
a legitimate skepticism about security issues that will have to be addressed
before it considers a final accord with the Palestinians. Nor will security
alone fully satisfy the Israelis. Palestine needs leaders who understand
the art of governance and how to make government work, who would
help constituents comprehend the workings of free institutions, and who
would be prepared to declare their land ready for statehood. In Israel’s
view, there can be no more Gazas, no new Islamic threats, no tolerance for

Hoover Digest  N  2011 · No. 1 121


those urging destruction of the Jewish state or the Jewish people.
Apparently sensing the need for a reformer with political credibility,
Abbas selected Salam Fayyad as his prime minister. Fayyad is a mild-
mannered academic with a doctorate in economics from the University
of Texas and a career spent mostly with the World Bank, and then as the
IMF’s representative in Jerusalem. He has worked to reform the security
structure on the West Bank during his three years in Ramallah, to work
with the Israelis on the reduction of checkpoints, roadblocks, and security
barriers, and to persuade the occupying power to unblock millions of dol-
lars in tax revenues collected on goods traversing the borders—efforts that
have all drawn laudable international coverage.
I caught up with Fayyad on a Saturday morning in the village of Sal-
fit, high in the hills east of Nablus. Accompanied by a caravan of per-
haps a dozen vehicles, he was hopping from one small village to another,
announcing government grants and sharing his hopes for better times
ahead. He invited me to join him for the return drive to Ramallah.
It was clear from Fayyad’s answer to my first question—how he intends
to use the power that comes with international celebrity—that he sees the
task of leading his people out of four decades of occupation as paramount:
“People respond to the occupation and the adversity under the occupa-
tion in two ways: one is to react with complete submission, in which case
you can’t do much of anything, and the other is belligerence. In my view,
they are two sides of the same coin: defeatist.” He embraces a doctrine of
nonviolence in international affairs, and democracy at home undergirded
by strong security forces responsible to the national government. “Yes I
say to political pluralism, but definitely no to security pluralism,” he said
with emphasis.
Fayyad has gone further in security cooperation with Israel than any
previous Palestinian figure, an approach that he defends as beneficial to
both societies: “Security is not only an Israeli need; it is equally a Palestin-
ian need. And given the distances between us, it’s a small neighborhood,
and a rough one at that. Security is a shared interest, definitely.”
Along with Minister of Planning Jarbawi and others who think deeply
about the state they hope to see emerge from the negotiating process,
Fayyad has been developing the literature that will inform and instruct his

122 Hoover Digest  N  2011 · No. 1


constituencies. For example, the Palestinian National Authority official
program document outlining its agenda, Palestine: Ending the Occupation,
Establishing the State, proclaims that “the state will forever be a peace-
loving state that rejects violence; it is committed to peaceful co-existence
with the world community of nations.” The leadership further pledges a
democratic state that “respects human rights and guarantees equal rights
for all citizens. Its people live in safety and security under the rule of
law, safeguarded by an independent judiciary and professional security
services.”

Palestine needs leaders who understand governance, would help

constituents comprehend how free institutions work, and would be

prepared to declare their land ready for statehood.

The man serving as the national chief of police in the West Bank is
Hazem Atallah, a remarkably fit fifty-six-year-old Jordanian-trained for-
mer paratrooper who coordinates closely with Israel’s military and clan-
destine services and calls Israelis “cousins” because, as he puts it, “We are
all sons of Abraham.” In our talk he admitted that “there is coordination
with Israelis,” adding, “We are not ashamed. We try to show people, do it
in the sunlight because we believe it’s good for our people.”
The peace process falls under Abbas’s jurisdiction, and there have been
rumors of dissension, or at least coolness, between Abbas and Fayyad. Nor
is Fayyad, a member of the “Third Way” splinter party, certain to win
the support from Fatah that he will need to serve another term. What is
important is that Abbas and Fayyad present Palestine as a viable state, able
to navigate the rapids of independence and find a way to reunite Gaza
with the West Bank.
Fayyad’s internal reforms and endorsement of international nonvio-
lence play well with many Israelis. Many cite him as the sort of Palestinian
who will be necessary to the development of good bilateral relations. A
number of Israeli officials have even compared him to Israel’s own found-
ing father, David Ben Gurion, who is credited with developing the politi-
cal, military, economic, and social institutions of nationhood before full
statehood itself became possible. But he has also shown a sharp tongue

Hoover Digest  N  2011 · No. 1 123


in criticizing Israeli actions in Gaza and at the negotiating table. He has
called for Palestinian laborers to reject work on Israeli settlements, led a
ban on Israeli settlement products in the Palestinian economy (making it
illegal to sell hundreds of Israeli brands in Palestinian-controlled areas),
and sought to mobilize European sentiment against admitting Israel to the
Organization for Economic Cooperation and Development. None of this
has endeared him to Israeli officials.

D I S L O D G I N G H I S TORY’S DEAD WEIGHT


The ultimate dangers to the peace process are: on the Palestinian side,
the refusal of Hamas to retreat from its chokehold on Gaza, and on the
Israeli side, the difficulty Netanyahu will face knitting together the coali-
tion he will need to win ratification of a two-state solution, given likely
obstruction from his foreign minister, Avigdor Lieberman, and the defec-
tion he is almost certain to face from right-wing coalition partners. Yet
Netanyahu’s problems should not be overstated. He is not without politi-
cal resources. Of the sixty-one votes he would need for Knesset approval,
Kadima—Ehud Olmert’s party now outside the government—could pro-
vide twenty-eight, Labor thirteen, and minor parties at least another ten.
But the challenge will nevertheless require all the courage and statesman-
ship Netanyahu can muster. Those who recall the wild demonstrations
and protests that attended Israel’s withdrawal from Yamit in the Sinai to
fulfill its treaty obligation to Egypt, and the more recent evacuation of
Gaza, undoubtedly know that at best this will be an exercise fraught with
trauma and, quite possibly, violence.

“It’s a small neighborhood, and a rough one at that. Security is a shared

interest, definitely.”

Still, there appears to be no groundswell of Israeli public opinion against


the two-state solution. The implications of an Israeli state seeking to con-
trol an Arab population several times its size is not lost on Palestinian
observers. For example, Jarbawi, the minister of planning, asks, “Do I have
to advise the Israelis, ‘Take the two-state solution, because in twenty years,
you’ll be a minority and have to oppress us like apartheid, and in one hun-

124 Hoover Digest  N  2011 · No. 1


dred years you won’t exist’?” Even some Israelis—diplomat Shimon Stein
among them—acknowledge that more could be done to move the process
along: “The demographic issue is like climate change—no one wants to
pay today for what may or may not happen twenty years from now.”
In the last analysis, history itself may be the most intransigent partici-
pant in the negotiations. For the better part of twenty years, Fatah and
its PLO brethren dedicated their efforts to the eradication of the Jewish
state, modifying their basic covenant only when physically expelled from
contiguous territories or in response to game-changing regional conflicts.
Meanwhile, Israel adopted a mindless settlement policy in the West Bank
and elsewhere (much of it illegal under Israeli law) that created a new
Israeli constituency, the settlers, now a fully empowered part of Israel’s
political landscape and as extreme in their religious claim to the land as
any jihadists.
Part of that history is Oslo, too, which for a fleeting moment seemed
to suggest that sanity had at last prevailed. But despite Arafat’s glitter in
Gaza, and vigorous handshakes on the White House lawn, Oslo dodged
the tough issues, leaving them to be adjudicated in so-called “final-status
talks.” Progress under Oslo fell hostage to traumatic events: the assassina-
tion of Yitzhak Rabin and the debut of Hamas suicide bombers in Jerusa-
lem. Before long, Oslo had receded from memory, becoming part of the
history that oppresses rather than liberates this region. Final-status talks
at Camp David and Taba had broken down, and the parties had resumed
an activity at which both were exceedingly proficient: killing each other.
On its face, the current situation might seem to promise no real avenue
of escape from the tragic history that weighs upon this conflict. Tensions
in the area are high. The surge in U.S. popularity occasioned by the elec-
tion of Barack Obama is largely spent. Turkey, one of Israel’s few friends in
the Middle East, appears to be turning eastward in its drive for geopoliti-
cal influence, a move accelerated by continued confrontations involving
Israel’s interdiction of “relief ” supplies bound for Gaza.
Yet the landscape is far from bleak. Opportunities beckon for real pro-
gress in the development of Israeli-Palestinian relations.
Consider Hamas’s victory in the Gaza and West Bank elections of 2006,
and the subsequent takeover of Gaza by the terrorist group. Rather than

Hoover Digest  N  2011 · No. 1 125


produce a general collapse of moderate Palestinian camps, the PA instead
reacted in a mature fashion, concluding that its own failure to deliver the
promised peace had been the source of many of its political problems and
recognizing the benefits of cooperating with Israel. The resulting payoff
came quickly: even during the high-intensity Israeli incursion into Gaza
and the emotions it spawned, the West Bank remained calm, a tribute to
the new security arrangements.

Before long, Oslo had receded from memory, becoming part of the history

that oppresses rather than liberates the Middle East.

A second major breakthrough occurred as the PA, recognizing that it


had provided its people with few of the benefits of good governance, con-
cluded that reform was necessary. Today, a visitor traveling in the West
Bank sees evidence of progress: a growing economy, a coherent scheme of
security, and a leadership that talks seriously about such things as plan-
ning, education, and economic development. Palestinians of considerable
ability—Salam Fayyad, Ali Jarbawi, and Hazem Attallah, to name a few—
are at work developing the infrastructure of statehood.
And they are realists. Take, for example, the agreement of Palestin-
ian negotiators to accept serious limits on their military capabilities—no
heavy arms or aircraft, merely a well-equipped militia to provide law and
order—in exchange for Israel’s forgoing the right of any of its soldiers or
civilians, including settlers, to be posted in Palestine.
On borders, the parties have been within striking distance of a deal for
nearly a decade. Even allowing for the sensitivity of the right-to-return
issue and its ability to blow up negotiations, it is not too much to hope
that a compromise can be found if the right atmosphere prevails in talks.
Even those uninhibited by past failure understand how tough the road
will be. But there are more grounds for optimism than for despair, more
thoughtful participants than ever before, more on both sides committed
to making things work rather than pointing fingers at their colleagues,
and thus—even in a time when it has become suspect—more hope.
Reprinted by permission of World Affairs. © 2010 American Peace Society. All rights reserved.

126 Hoover Digest  N  2011 · No. 1


EGYPT

Thirty Years of Cold


Peace
Hosni Mubarak has foiled the militants, kept the Pax Americana, and
above all retained his grip on power. No one seems to be celebrating.
By Fouad Ajami.

He was there on the reviewing stand on October 6, 1981, when the assas-
sins struck down his flamboyant predecessor, Anwar Sadat. Few thought
that Hosni Mubarak, an unassuming military officer, would survive the
tumult of Egypt’s politics. The country was on the boil, the assassins who
took Sadat’s life had been brazen beyond imagination. They had stormed
the reviewing stand on the eighth anniversary of the October War of
1973. Lieutenant Khalid Islambouli, the leader of this band of assassins,
told Mubarak to get out of the way, for they had come only after “that
dog.”
Mubarak was spared that day, and still, three decades later, he rules.
Rumors of poor health swirl around him, and the Egypt he has dominated
for so long is a crowded, broken country. “I shot the Pharaoh,” Lieutenant
Islambouli said, without doubt or remorse. He and his band of plotters
had no coherent plan for the seizure of power. They would kill the defiant
ruler, for them an apostate, make an example of him, and hope that his
successors would heed his fate.

Fouad Ajami is a senior fellow at the Hoover Institution, co-chairman of Hoover’s


Herbert and Jane Dwight Working Group on Islamism and the International
Order, and the Majid Khadduri Professor of Middle Eastern Studies at the School
for Advanced International Studies at Johns Hopkins University.

Hoover Digest  N  2011 · No. 1 127


Egyptian President Hosni Mubarak, right, chats with Vladimir Putin during the Russian
leader’s visit to Cairo in 2005. For thirty years, Mubarak’s authoritarian, secular state, with
the army as its mainstay, has kept its grip on political power.

Mubarak would confound the militants. In his years at the helm, he


would stick to the big choices Sadat had made: he would stay in the orbit
of the Pax Americana and he would maintain the “cold peace” with Israel.
The authoritarian, secular state, with the army as its mainstay, would keep
its grip on political power. But there is no denying that Mubarak had
internalized the lessons of Sadat’s assassination.
Where Sadat openly embraced the distant American power, flaunted
his American connections, and savored the attention of the American
media, Mubarak has had an arm’s length relationship with his American
patrons. There was no need, he understood, to tempt the fates and to

128 Hoover Digest  N  2011 · No. 1


further inflame the anti-Western and anticolonial inheritance of his coun-
trymen.
America had come into Egypt in the aftermath of the 1973 October
War. There were Egyptians who took to this new world and its possibili-
ties, so keen were they to put the dreaded radical past with its privations
and restrictions behind them. But a fault line divided the country. The
pious and the traditionalists and those who believed that Egypt’s place lay
in the Arab world were offended by this new order. Mubarak would take
U.S. aid. Second only to the American subsidy to Israel, it was crucial to
his regime. There would be joint military exercises with U.S. forces. But
the Egyptian ruler was keen to show his independence from American
tutelage.

A L U K E W A R M PEACEKEEPER
Mubarak was at one with the vast majority of Egyptians in his acceptance
of peace with Israel. He hadn’t made that peace. It was not for him the
burden it was for Sadat. Egypt was done with pan-Arab wars against Israel.
She had paid dearly in those campaigns. Her national pride had been bat-
tered, her scarce treasure had been wasted, and the country had become
an economic backwater. And so Mubarak honored the peace with Israel,
© ITAR-TASS/Vasily Smirnov

but there would be no grand spectacles, no big visit to Israel, no stirring


speeches to the Israeli parliament. This had been Sadat’s way.
Mubarak was under no compulsion to come up with an “electric
shock” diplomacy of his own. He would, under duress, make a single,
brief visit to Israel in 1995 for the burial of Yitzhak Rabin. He said little.
The memorable funeral oration was made by the Jordanian monarch,
King Hussein.
If Mubarak was spared the wrath of the traditionalists, it must be
acknowledged that he has never led or defended a modernist course for
his country. This was no Mustafa Kemal Ataturk pushing his people into
a new culture and a new world. A suspicious autocrat, he has stepped out
of the way as a toxic brew came to poison the life of Egypt—a mix of
antimodernism, anti-Americanism, and anti-Semitism.
Egypt has struggled mightily since the mid-1800s to belong to the
modern world of nations. It had something of a democratic inheritance;

Hoover Digest  N  2011 · No. 1 129


the Mediterranean bordered this country and brought it its gifts. In the
interwar years, there had been a parliamentary system.
But this was not Mubarak’s impulse. He rules by emergency decrees and
has suffocated the country’s political life, reducing the political landscape
to something barren that he has been comfortable with: the authoritarian
state on one side, the Muslim Brotherhood on the other. Nothing stirred
or grew in the middle. No democratic, secular opposition was allowed to
sprout.

Mubarak would take U.S. aid. There would be joint military exercises with

U.S. forces. But the Egyptian ruler was keen to show his independence

from American tutelage.

For Mubarak, the appetite grew with the eating. The modest officer
of yesteryear had become a pharaoh in his own right. He flew under the
radar, as Egyptian authoritarianism was never on a par with the kind of
terror unleashed on Libya, Syria, or Saddam Hussein’s Iraq. He has refused
to give his country an orderly process of succession. He would never name
a vice president, even as his country clamored for one. By his own lights
a patriot devoted to his country, he left it prey to the doubts and dark
thoughts that cripple the life of “Oriental despotisms.” He let loose on
Egyptians the steady speculation that he had in mind dynastic succession,
bequeathing a big country to his son.
Egyptians with a feel for their country’s temperament have long main-
tained that Mubarak is a creature of his social class. He hails from middle
peasantry. He made his way to the armed forces and remains at heart a
man of the barracks. He has never trusted crowds and the disputations
of politics. (Sadat was formed in the 1930s and 1940s when Egypt was
a veritable hothouse of political ideas, with doctrines and opinions at the
ready.)
In the police state he rules, radical Islamists are hunted down or impris-
oned. The prisons are notorious for their cruelty. In time, Islamists from
Egypt, survivors of its prisons, would make their way to the global jihad.
They hadn’t been able to topple the Mubarak regime, so they struck at
lands and powers beyond.

130 Hoover Digest  N  2011 · No. 1


A young physician, then thirty years of age, a Cairene of aristocratic
pedigree, one Ayman al-Zawahiri was picked up in the dragnet that fol-
lowed Sadat’s assassination. He was imprisoned and tortured, then made
his way to the Afghan jihad and the world of terror, rising to second in
command of Al-Qaeda. It was Zawahiri, learned but merciless, who drew
a distinction between the “near enemy” (the regime at home) and the “far
enemy” (the American patrons of the regime), and who opined that it was
the permissible and proper thing to strike at distant enemies in prepara-
tion for bringing down the tyrant at home.
In the same vein, a blind preacher from a once-tranquil town on the
edge of Egypt’s western desert, Omar Abdul Rahman, quit his country
for Jersey City and Brooklyn. He carried the fire and the rage with him to
the new world, and was eventually tried and convicted for crimes stem-
ming from the investigation into the 1993 World Trade Center bombing.
Mubarak’s Egypt had grown skilled at channeling its troubles to distant
places.

D R I F T I N G A L ONG THE NILE


No great upheaval has taken place in the Egypt of Hosni Mubarak. But
the country on the banks of the Nile has stagnated. Its good cheer—one
of its fabled attributes—has given way, and the crowded country is an
unhappy, bitter place.

A suspicious autocrat, Mubarak has stepped out of the way as a toxic

brew came to poison the life of Egypt—a mix of antimodernism, anti-

Americanism, and anti-Semitism.

Egyptians had led the march of Arab modernity, and for decades they
lived on that sense, and memory, of primacy. All this is of the past. Other
Arabs have gone their way and negotiated their own terms with the world.
A sense of disappointment now suffuses Egypt’s political and cultural life.
There is peace with Israel, but it is unloved. There is a dependency on the
United States, but one of bitter resentment on the part of most Egyptians.
There are ideas of a big country at the crossroads of three continents, but
the reality of an unimaginative autocracy.

Hoover Digest  N  2011 · No. 1 131


Grant Hosni Mubarak his due: he has not dispatched his countrymen
on deadly expeditions and needless wars. He has kept the peace, he has
been the cop on the beat. But Egypt needed and deserved something bet-
ter, more ennobling, than a tyrant’s sterile peace.
Reprinted by permission of the Wall Street Journal. © 2010 Dow Jones & Co. All rights reserved.

New from the Hoover Press is Syria through Jihadist


Eyes: A Perfect Enemy, by Nibras Kazimi. To order, call
800.935.2882 or visit www.hooverpress.org.

132 Hoover Digest  N  2011 · No. 1


CHINA

China Backpedals
State-owned companies are cramping the private sector—and
putting a nascent market economy in jeopardy. By Jialin Zhang.

Those who speak for China’s government insist that during the past thirty
years the state and private sectors have been “flying wing to wing.” They
officially deny that state-owned enterprises have expanded at the expense
of private enterprise, pointing out that the private sector’s share of produc-
tion value, profit, employment, and growth rate exceeds that of the state.
Hybrid and interlocking asset ownership by state, non-state, and foreign
capital is still encouraged, they assert.
But most academics and journalists contend that such economic fig-
ures are unreliable and selective. Thus we are witnessing a heated debate
in China on whether the state sector is making a comeback after decades
of official encouragement of private enterprise (a reversal dubbed guojin
mintui, or, the state advances as the private sector retreats), and if so, what
the implications are for China’s economy.
The advance and retreat show themselves in many ways. The state still
refuses to let private companies enter many key industries, especially those
monopolized by state-owned enterprises; the government recently has
intervened more vigorously into the economy; the government has allo-
cated more resources to state firms than to private companies; and state
firms have expanded into competitive industries and grown bigger.
The Chinese government began encouraging private-sector growth
in the national economy, while downgrading the role of state-owned
enterprises (SOEs), with the introduction of market-oriented economic

Jialin Zhang is a visiting fellow at the Hoover Institution.

Hoover Digest  N  2011 · No. 1 133


reforms in the early 1980s. When China officially announced economic
reforms and an open-door policy in 1984, the SOEs were urged to initi-

Illustration by Taylor Jones for the Hoover Digest.


ate a “responsibility management system.” But they failed to reverse their
money-losing behavior. Then, in the early 1990s, Beijing started structural
reforms of the SOEs by “grasping the big, letting go of the small”—retain-
ing some large, vital SOEs while allowing most of the country’s medium
and small businesses to become private. In 1999, the central authorities
further redefined SOEs’ status, allowing them to remain in only three eco-
nomic domains: industries related to national security, natural resources
that the state monopolizes, and industries that produce public goods and
social welfare.

134 Hoover Digest  N  2011 · No. 1


Many SOEs had to abandon the competitive industries to private busi-
nesses. State-owned enterprises almost disappeared in food and beverages,
textiles and apparels, home appliances, and other consumer-goods indus-
tries. Legally, non-state-owned enterprises were allowed to enter even such
industries formerly monopolized by the state as finance, electricity, tele-
communications, railroads, civil aviation, and petroleum. As a result, the
share of SOEs in China’s industrial production fell from approximately 80
percent at the outset of the reforms to about 30 percent in 2008.
Their fate, however, was far from sealed. In 2003, the State Council
set up a new organ, the State-owned Assets Supervision and Administra-
tion Committee (SASAC). This agency was determined to revitalize the

Hoover Digest  N  2011 · No. 1 135


SOEs and to reorganize them from money-losing into profitable firms
through restructuring and consolidation. Li Rongrong, the chairman of
the SASAC, declared that major industries including electricity generation
and transmission, oil and petrochemicals, telecommunications, coal, civil
aviation, and shipping should be exclusively owned by the state, excluding
any domestic private entities.
In the meantime, Beijing was welcoming and attracting foreign invest-
ment to the SOEs. Indeed, the new policies benefited the SOEs’ perfor-
mance. They began to make money, reaping a profit of $147 billion in
2006. Among 149 centrally controlled SOEs under the direct supervision
of the SASAC, nineteen were on the Fortune 500 list. The SOEs had
started to resurface.

Most of the Chinese government’s $586 billion stimulus package was

contracted to state-owned enterprises, which also enjoyed favorable

borrowing terms.

State-owned enterprises also gained impetus from the 2008 global


financial crisis. Most of the Chinese government’s 4 trillion yuan ($586
billion) stimulus package, already earmarked for rebuilding infrastructure
such as railroads, highways, airports, and construction, was contracted to
centrally controlled SOEs. Moreover, these enterprises enjoyed the privi-
lege of borrowing from state banks. In 2009, around 80 percent of bank
loans, 9 trillion yuan ($1.4 trillion), went to SOEs.

B I G E N T E R P R I S ES GET BIGGER
As the global financial crisis weighed on China’s economy, exports declined
and bankruptcies and the unemployment rate rose. Beijing issued a “Plan
on Revitalization of Ten Industries” in early 2009 to encourage large
SOEs in steel, automobile, shipbuilding, equipment, and other industries
to merge with medium and small private enterprises, thus transforming
them into giants that could compete in the world market.
The SOEs, supported by financing from central and local governments,
made an impressive comeback after 2008. Among the major mergers and
acquisitions in 2009:

136 Hoover Digest  N  2011 · No. 1


• In the steel industry, the Shangdong Iron and Steel Group, long a
money-losing SOE, acquired private Rizhao Iron and Steel. This created
the second-largest steel company in China. The Baoshan Steel Group,
a famous SOE, acquired private Ninbo Steel. According to the govern-
ment’s plan, other big state-owned steel groups are supposed to merge
about 45 percent of the country’s steel production capacity by this year.

• In the oil industry, China Petroleum (CNPC) acquired most of the


non-state oil companies in Heilongjiang province. Almost no private
gas stations can now be found in northern China. More ambitiously,
the two oil giants, CNPC and CPCC (China Petroleum and Chemi-
cals), are planning to buy banking and trust companies.

• The China National Cereals Group invested and purchased private


Mengniu Dairy, the largest-ever deal in the Chinese food industry. Its
business goes far beyond food and beverage to include residential and
commercial real estate. It is now one of the “land kings” in upscale areas
of Beijing.

• In Sangxi, the provincial government ordered reorganization of the coal


industry. The share of private capital in that industry is to be capped at
30 percent.

Such SOE acquisitions and mergers have taken place in almost every
industry, including automobiles, shipbuilding, civil aviation, and finance.
Currently, the SOEs enjoy a monopoly over almost all of China’s resource
industries—petroleum, telecom, electricity, tobacco, coal, civil aviation,
finance, and insurance—forcing out private enterprises.
Furthermore, these SOEs have priority in going public and hav-
ing access to financing. Most centrally controlled SOEs are listed in the
Shanghai and Shenzhen composite indexes. Their capitalization has risen
rapidly. With abundant financial resources and backed by political power,
these special-interest groups can easily merge with and acquire other com-
panies and exercise monopoly behavior in many markets. In addition,
their growing liquidity has flowed to property and stock markets, thus
inflating a bubble economy.

Hoover Digest  N  2011 · No. 1 137


Recent data show that 80 percent of the profits earned by centrally
controlled SOEs come from fewer than ten huge conglomerates, includ-
ing CNPC, China Ocean Oil (CNOOC), China Telecom, China Mobile,
and China Telecommunications. Most of the other SOEs either have
overcapacity or are mismanaged, and must rely on government subsidies
and credit to survive. At the same time, many non-state enterprises are in
worse shape because they have no access to government loans and tax cred-
its, and many private enterprises in coastal areas have shut down. Thus,
the SOEs’ advance has not only promoted a threatening price bubble but
also increased structural imbalances in the Chinese economy.

M O N O P O L I S T S CREATE A REAL ESTATE BUBBLE


One of the adverse effects of the advance of the state-owned sector has
been the real estate bubble.
According to China’s law, all urban land belongs to the state. But local
governments can transfer the land-use right (for no more than seventy
years) of certain sizes of land to private or public bidders. The winning
bidders then become landlords, and can resell their land-use right for a
certain plot of land to developers for residential and commercial develop-
ment.

State-owned enterprises have a monopoly over almost all resource

industries—petroleum, telecom, electricity, tobacco, coal, civil aviation,

finance, and insurance.

Since the Beijing government liberalized the real estate market in 1992,
the nonstate sector has been the major player in this market. But the share
held by SOEs has been gradually rising—from an initial 8 percent to 60
percent. Many central and local SOEs that were never before involved
in real estate have been competing for a share of this booming market.
According to official data, over 70 percent of the 136 centrally controlled
SOEs, including China Chemical, China Railroad, and China Metallur-
gy, have entered the real estate market.
In the wake of the global economic slowdown, most Chinese manu-
facturing companies have experienced overcapacity. Their executives saw

138 Hoover Digest  N  2011 · No. 1


in the real estate market an easy way to earn a profit. Relying on low-cost
loans from state-owned commercial banks and high credit ratings, they
won land auctions in “golden districts” of Beijing, Shanghai, and other
metropolitan areas that smashed price records and created a number of
“land kings.” This has created a public outcry.

China’s new “land kings” are not rushing to resell their land to

developers for residential construction, despite a desperate need for

housing.

These new landlords are not rushing to resell their land to developers
for residential construction. Because the supply is limited, these land kings
usually hoard real estate and attempt to corner markets, expecting their
holdings to grow further in value. As a result, land in many urban areas
lies idle even as housing remains scarce. According to recent news reports,
the vacancy rate for new condominiums in many major cities exceeds 50
percent, while 85 percent of residents cannot afford to buy even a single
unit. Over the past four or five years, China’s land and resources prices
have quadrupled or more. Housing has become a source of social turmoil,
an unstable factor in society.

P R I V A T E E N TERPRISE, CHINA’S GROW TH ENGINE


Many Chinese scholars argue that in a market economy, government
should act merely as a regulator and not a stakeholder. They worry that
the surge of state-owned enterprises has grave ramifications and signals a
potential return to a command economy. Among their specific concerns:

• State-owned monopolies have combined assets and power in many


industries to limit market competition. This action brings market fail-
ure and widespread corruption.

• Because SOE revenues depend more on government spending and less


on market demand, their behavior may fail to boost consumer spending
and help the country achieve a more balanced economy. It would cer-
tainly change the transaction costs for transforming China’s economic
growth models.

Hoover Digest  N  2011 · No. 1 139


• Relying on government loans and subsidies instead of innovation and
technological progress could make the SOEs less efficient than private
companies.

• The SOEs pay high salaries and bonuses to their executives and employ-
ees, which means less money for the government and shareholders.

• Because many SOEs have invested in risky projects, bad loans will
increase if the bubble bursts and triggers a bank crisis.

Private enterprises have become the driving force of the economy.


According to official statistics, private enterprises now account for 65 per-
cent of the nation’s GDP, 80 percent of newly added jobs, and 65 percent
of government tax revenue. In 2009, private enterprises saw industrial
production rise 18.7 percent, compared to 6.9 percent for state enter-
prises; revenue increase 18.7 percent, compared to a 0.2 percent decline
for SOEs; gross profit rise 17.4 percent, compared to minus 4.5 percent
for state firms; and employment go up by 5.3 percent, against 0.8 percent
for the state firms.
In light of these data, many intellectuals are calling for the government
to loosen its grip, return legitimate rights to the private sector, and revital-
ize nonstate enterprises.
Beijing seems to have begun paying attention. As a first step toward
addressing the critical housing problem, in February 2010 the SASAC
ordered seventy-six large central SOEs whose core business was not real
estate to retreat from the property market. That action is now regarded as
part of a broader government plan for SOEs to divest and thereby rein in
fast-rising housing and land prices.
Apparently, the authorities also are responding more broadly to the
advance of the state sector. In late 2009, the government agreed at its Cen-
tral Economic Conference to promote private enterprises to create jobs,
increase market access for private investment, and protect the legitimate
rights and interests of private investors.
In March 2010, Premier Wen Jiabao announced an important new
policy—“Wen’s Four Guidelines,” as nicknamed by the media. With the
global financial crisis easing, Beijing has started to ponder an exit strategy

140 Hoover Digest  N  2011 · No. 1


from its stimulus program in order to diminish the state role and encour-
age private and foreign investments. These guidelines include the follow-
ing developments:

• Encourage and guide private investment in currently state-controlled


sectors such as infrastructure for transportation, telecommunications,
energy, public utilities, scientific and technological programs for
national defense, and affordable residential construction.

• Promote private innovation and upgrading through research and devel-


opment, and participate in state-managed science-technology programs.

• Encourage and guide private enterprises to participate in restructuring


and reorganizing SOEs through buyouts, shareholding, or joint share-
holding actions.

• Set up a sound administrative system to serve and guide private invest-


ment and amend unfavorable laws and regulations.

Beijing is beginning to act. As a first step toward addressing the housing

problem, the government ordered seventy-six large central SOEs to

retreat from the property market.

At the same time, Li Rongrong, head of the SASAC, has pledged that
state-owned enterprises will gradually retreat from competitive sectors to
make way for private enterprises to expand.
If all these new policies are implemented, some analysts say, it will
reverse the trend of “advance of the state, retreat of the private sector.”
Some $6.7 trillion in private capital would replace the government stimu-
lus plan and become the new engine for China’s post-crisis economic
growth.
Special to the Hoover Digest.

Hoover Digest  N  2011 · No. 1 141


I N T ERVIEW

“We Can’t Afford to


Stand Still”
In a world of emerging economies, says Hoover fellow Michael
Spence, there is no going back to the old “normal.” By Nathan
Gardels.

Nathan Gardels, Global Viewpoint Network: In a recent report


on “post-crisis growth,” you noted the resilience of China, which has
bounced back to high growth after the Wall Street crash and is now offi-
cially the second-largest economy in the world. What are the key factors
of China’s resilience? Will China be able to keep bouncing back, or might
the recessionary winds from across the Pacific cool things down?
Michael Spence: China—along with India and Brazil—is going to get
through this crisis pretty well and will be able to sustain its growth in the
years ahead. China in particular is capable of sustained growth if it can
properly manage structural change in several dimensions.
First, China is going through a “middle-income transition” in parts of
the country as earlier “growth drivers” in the export sector, notably low-
wage manufacturing along the coast, die off and must be replaced with
other drivers such as services. The domestic consumer will have to become

Michael Spence is a senior fellow at the Hoover Institution, a professor of


economics at New York University’s Stern School of Business, and the Philip H.
Knight Professor Emeritus of Management in the Graduate School of Business at
Stanford University. He was awarded the Nobel Memorial Prize in Economic
Sciences in 2001. Nathan Gardels is the editor of the Global Viewpoint
Network.

142 Hoover Digest  N  2011 · No. 1


more important so there is a better match between the productive poten-
tial of the economy and domestic demand.
Second, China is going to have to get quite a bit more income into the
hands of the household sector to drive growth from within the domestic
market. That means getting away from the very high levels of investment
in the corporate and public sector, where the marginal return on invest-
ment is declining. Disposable income as a percent of GDP is low, and the
savings rate is high, around 40 percent of GDP.
Third, the Chinese have to get their current-account surplus down in
the global economy or they will get a bad reaction from outside—protec-
tionism, for example. If they can get the surplus down, that will help the
global economy, but it will also help build domestic demand and house-
hold income.
This is a complicated set of changes to navigate, but I believe the Chi-
nese leadership is up to it. I’ve been able to listen in and participate in
some of their internal discussions, and I think they are going in the right
direction. Certainly there are interests that want to block these changes.
But the same qualities that have enabled China’s resilience so far—a long-
term horizon, decisive policymaking, and consistent follow-through by a
generally competent government—bode well for the future.
Because of their long-time horizon, there is a high level of understand-
ing by the leadership that the economy has to evolve. Looking out at
where they want China to be in ten or twenty years, they know that an
advanced economy cannot be based, as China is today, on labor-inten-
sive process manufacturing for export. They have seen how South Korea
has managed the middle-income transition. I’m sure they are intensively
studying that experience.
Gardels: With a nearly 9 percent annualized growth rate, Germany
has picked up as the bright spot, a saver and strong exporter among the
indebted consumer democracies of the West. Yet some say this so-called
“German miracle” is really “the Chinese miracle” since their dramatic
recovery is mostly due to high-end exports to China. Are we seeing a
“German miracle” from which the rest of the West could learn? Or is it
mainly due to a kind of “reverse coupling” where China is pulling Ger-
many out of the doldrums?

Hoover Digest  N  2011 · No. 1 143


Illustration by Taylor Jones for the Hoover Digest.
Spence: Germany is doing well for two related reasons. First, the export
sector is very healthy. And that is the result of the fact that over the past
decade Germany has gone through a major restructuring of its economy
in which workers traded some income for more job security, greater flex-
ibility of hiring and firing was allowed, and work-sharing instead of layoffs
during the downturn has enabled key companies to retain skilled workers
so they can get back on track quickly as demand rises. All of these reforms
have put German companies in a more competitive position.

“Looking out at where they want China to be in ten or twenty years, they

know that an advanced economy cannot be based, as China is today, on

labor-intensive process manufacturing for export.”

Second, as we’ve discussed, major emerging markets from China to


Brazil not only have restored growth but also are sustaining it. Germany’s
export sector is in a strong position to take advantage of that.
So, the “German miracle” is what has enabled that country to benefit
from the “Chinese miracle.”
Gardels: Where do you come down on the global debate between
whether it is time to cut back and move toward austerity versus continu-
ing stimulus spending by governments?
Spence: There are such large differences among countries that it is hard
to come down on any one position. There is a difficult balance between
maintaining enough support to avoid a deflationary downward spiral on
the one hand, and the longer-term costs of high debts and deficits on the
other. It is not surprising there is lively debate about this because there are
good arguments on both sides.
As far as the United States is concerned, I would be on the conserva-
tive side at the moment. On the fiscal stimulus side, we’ve done about
as much as we can do. I’m very much in favor of extending long-term
unemployment benefits because they are essential to protect people while
at the same time providing a stimulus. If you are going to spend limited
resources, this is a good place to do it.
But, beyond that, the United States is in for a period of painful restruc-
turing of balance sheets to deleverage decades of overspending by borrow-

Hoover Digest  N  2011 · No. 1 145


ing. That will take time to work through. I don’t think you can accelerate
the recovery by further government spending. It just won’t yield much
benefit.
America has clearly not yet come to terms with the fact that a healthy
long-term future depends on suffering short-term pain. As much as we
might wish it, there is no painless recovery after such a long bout of over-
leveraging.

“Germany has gone through a major restructuring of its economy in

which workers traded some income for more job security.”

That pain must involve both tax increases, partly to increase public-
sector investment in infrastructure that has been way too low, and budget
cuts in some government services to help further finance those same infra-
structure investments. Tax cuts, only if they stimulate job creation, must
also surely be part of the mix.
What worries me most is that as we—so far, unsuccessfully—try to
gather the political consensus to take decisive action, opportunities for the
younger generation are shrinking. They are going to pay a high price in
the short and medium term.
Gardels: Fifty years ago, California made the kind of massive public
investments—in a world-class university system, a vast road grid, and
canals to bring water from north to south—that China is making today,
from the world’s fastest trains to the cutting edge of clean-energy tech-
nologies. Yet, as we speak, California, like the United States as a whole, is
mired in debt and political gridlock.
In your final Commission on Growth and Development report, you
wrote in 2008 with China in mind that “experience suggests that strong,
technocratic teams focused on long-term growth can provide some insti-
tutional memory and continuity of policy”—in short, effective govern-
ment. “Leadership,” your report says, “requires patience, a long planning
horizon, and an unwavering focus on the goal of inclusive growth.”
Perhaps the Western consumer democracies, where the feedback sig-
nals of politics, the media, and the market all tend to steer society toward
immediate gratification, could learn something these days from China?

146 Hoover Digest  N  2011 · No. 1


Spence: Yes, we could especially learn from the way they think about the
evolution of the economy over the long term and then, in a pragmatic,
non-ideological way, set about getting things done.
Democracy makes it a much more complicated and time-consuming
process to get from A to B, to build consensus, and to invest in and support
those things that sustain long-term growth. It is not impossible to do that
in democracies today, of course. Brazil has turned itself around, and India
seems to be doing so. So there is something to learn from them as well.
And, as you point out in the example of California, we were able to do
that at one time in the United States. But we’ve forgotten what it takes.
Too often in some parts of the American political culture there is a narra-
tive that simply says that “the government should provide stability and the
private sector will take care of everything else.”

“America has clearly not yet come to terms with the fact that a healthy

long-term future depends on suffering short-term pain.”

It doesn’t work that way. And it never has, even in the United States. It
takes a commitment of resources and a long-term perspective. It is a bit
like the way venture capital works. You don’t know exactly how things will
unfold, but you have to have a portfolio of projects to try to create and
capture emerging opportunities.
In the developing countries that are successful, they think more in terms
of a complementary relationship between the public and private sector.
Gardels: Is there a cultural issue here? Do societies dominated by a con-
sumer mentality have the political gumption anymore to save and sacrifice
for the longer term?
Spence: I’m not sure I understand the underlying forces that have led us
to short-termism and underinvestment. But I do know changing that is
above all a political process of building consensus for responsible gover-
nance. Those who think all you need to do is cut taxes and everything else
will fall in place are wrong.
For a country of our level of income and wealth, the state of the infra-
structure has become an embarrassment. Why can’t we set a goal in Amer-
ica of having first-class infrastructure in fifteen years?

Hoover Digest  N  2011 · No. 1 147


Gardels: You said recently, “I have this gnawing feeling about the future
of America. When people lose their sense of optimism, things tend to
get more volatile. The future I most fear for America is Latin American:
a grossly unequal society that is prone to wild swings from populism to
orthodoxy, which makes sensible government increasingly hard to imag-
ine.” You mentioned the tea party movement as one example. What can
be done to prevent the United States from becoming like Latin America?
Spence: I don’t know how to get there politically. But I imagine there is
still a non-ideological middle in America that is patriotic but not overly
nationalistic. We were once a very pragmatic nation, with the ability to
compromise to move things forward.
If we believe what we say—that America is the land of opportunity for
all and that is why people want to come here—then we need the policies
that will make that actually true.

“It is a bit like the way venture capital works. You don’t know exactly

how things will unfold, but you have to have a portfolio of projects to try

to create and capture emerging opportunities.”

Many are worried about the stubbornly high U.S. unemployment rate,
but believe we will get back to normal after the recession is over. But going
back to where we were is not realistic. The emerging economies are going
to be more than 50 percent of global GDP in the not-too-distant future.
It is a changing world. We can’t afford to stand still and settle for endless
political gridlock.
I think the United States can change, but, to be honest, I just don’t see
the political will at the moment.
Reprinted by permission of the Global Viewpoint Network. © 2010 Tribune Media Services. All rights
reserved.

Available from the Hoover Press is Free Markets under


Siege: Cartels, Politics, and Social Welfare, by Richard
A. Epstein. To order, call 800.935.2882 or visit www.
hooverpress.org.

148 Hoover Digest  N  2011 · No. 1


INTERVIEW

Peter Berkowitz’s Five


Books
His reading list focuses on how liberty is won, lost, and neglected.
By Jonathan Rauch.

Hoover senior fellow Peter Berkowitz was interviewed for the blog FiveBooks
(www.fivebooks.com), whose mission is to “invite international experts to
recommend the best reading in their given fields of interest.”

Jonathan Rauch, FiveBooks: You’ve started with a very prominent


name in modern conservatism that oddly has not appeared on anyone
else’s list, Leo Strauss. Why Strauss and his 1968 book, Liberalism,
Ancient and Modern?
Peter Berkowitz: Strauss because he is, I believe, one of our most
instructive thinkers and commentators on the history of political
philosophy—ancient, medieval, and modern. This particular book
because it contains some of his most accessible essays. Many people
have opinions about Leo Strauss, but only a small portion of those who
have opinions have spent much time reading his books.
Rauch: He is something of a hate figure on the left, isn’t he?
Berkowitz: Very much so. Until 2003 or so that hatred was mostly
confined to university professors who taught political science and phi-

Peter Berkowitz is the Tad and Dianne Taube Senior Fellow at the Hoover
Institution, the chairman of Hoover’s Koret-Taube Task Force on National
Security and Law, and co-chairman of Hoover’s Boyd and Jill Smith Task Force
on Virtues of a Free Society. Jonathan Rauch writes for the blog FiveBooks.

Hoover Digest  N  2011 · No. 1 149


losophy. While I was immersed in the academy, I think it’s fair to say
that he was the most hated academic. But in 2003, with the run-up to
the Iraq War, he became more generally hated, because articles in the
New York Times, the New York Review of Books, and the Boston Globe
asserted that Strauss—who spent most of his life studying and teach-
ing the history of political philosophy [and who died in 1973]—was
somehow the architect of Operation Iraqi Freedom, the Bush admin-
istration policy in Iraq.

“Many people have opinions about Leo Strauss, but only a small portion

of those who have opinions have spent much time reading his books.”

Rauch: Which is a little bit odd if you read this book, right?
Berkowitz: Yes, this is a book of essays, but it is characteristic. Most of
the essays represent interpretations of classic works of political philoso-
phy—of a Platonic dialogue, of Lucretius. There’s an essay on the lib-
eralism of ancient political philosophy. What I was especially interested
in for this conversation, though, were the essays on religion and his two
essays on the importance of liberal education to liberal democracy.
Rauch: In the book he says that liberal education consists of listening to
the conversation among the greatest minds and also in reminding oneself
of human excellence, of human greatness. Is that what attracts you?
Berkowitz: I’m glad you mentioned those lines. There is much more
to it, but let’s start with the important lines that you’ve selected.
What does he mean by those lines, and what are the implications? He
means that the history of literature, the history of philosophy, and so
on is really a debate. Differences of opinion about what constitutes
human flourishing and how we should live our lives, what is justice,
what is injustice, what are the virtues that constitute a good life, and
so on; studying that conversation is the essence of the highest form
of education that our civilization offers. In other words, the educa-
tion that he recommends is anything but dogmatic. It’s sometimes
mistaken for a canonical education but the canon he is interested in
is a canon that is constituted by disagreement over these important
questions.

150 Hoover Digest  N  2011 · No. 1


Rauch: Why is he controversial then? When you put it like that it’s almost
like a “great books” truism.
Berkowitz: Great books have often been rejected by the universities,
so that’s the first answer: the truism is rejected. Secondly, setting aside
the Iraq War controversy, which made him nationally unpopular and
gave him widespread infamy, he was unpopular in the academy because
he was a critic of the left liberal orthodoxy taught in the universities.
In the departments I’m familiar with, especially political science, there
is often an emphasis on teaching differences of opinion. But when
teaching the correct opinion, usually it’s the correct progressive opin-
ion about this political matter or that political matter and most people
don’t like to have their opinions challenged. You would think that the
universities would select people who do, who live for the challenge of
ideas, but that turns out not to be the case. I have to add to this that
while Strauss became hated because of the way he challenged liberal
orthodoxy, a crucial aspect of his thought was to bolster liberal democ-
racy, to strengthen our understanding of what the foundations of lib-
eral democracy are and to provide inside instruction on how to make
the case for liberal democracy better. He was a critic but his criticism
was designed to strengthen, not to undermine.
Rauch: If someone new to Strauss wants to start, is this book a good place
to do it?
Berkowitz: It’s an excellent place to begin. I would begin with his
introduction in which he says a number of fascinating and accessible
things about liberalism, conservatism, and communism; and then the
two essays on liberal education, chapters one and two.
♦♦♦♦

Rauch: On the subject of liberal education, you’ve got another book


about education, but it’s a novel, Tom Wolfe’s 2004 book I Am Charlotte
Simmons, one of very few novels to make our list. Why?
Berkowitz: He’s on my list as a book that conservatives should read
and non-conservatives should read. Everybody with an interest in sex,
soul, and higher education should read I Am Charlotte Simmons. Those
are the great themes of the book.

Hoover Digest  N  2011 · No. 1 151


Rauch: This is a novel set at the fictional Dupont University as seen
through the eyes of an ingénue named Charlotte Simmons, who comes
expecting a great liberal education and finds things are very different?
Berkowitz: Yes. Charlotte grows up in Sparta, Georgia, I believe,
on the other side of the Blue Ridge Mountains. She comes from red
America and she’s a prodigy of red America—she’s the best student
that her community has seen in living memory. She wins a scholarship
to Dupont College and she’s sent off with great fanfare. What Wolfe
explores is what happens when a prodigiously intellectually talented
young woman, raised with a conservative sensibility, is parachuted and
dropped into a representative, elite institution of higher education.
What happens to her beliefs, what happens to her convictions, what
happens to her cultural conservatism?

“Everybody with an interest in sex, soul, and higher education should

read I Am Charlotte Simmons.”

Rauch: Is the answer that she finds herself in a conservative’s caricature of


liberal academia or is it a bit more complex than that?
Berkowitz: It’s a bit more complex than that, though I suppose some
people on the left will say that it’s a conservative’s caricature. The truth
is that many people who say that are people who have been out of
university for a long time and are quite lacking Tom Wolfe’s ability to
reconstruct scenes and situations, people lacking his journalistic flair.
The university he describes is a university that is very familiar to me.
The first wave of critics of I Am Charlotte Simmons dismissed the book
as reflecting the prurient interests of an old man who could not come
to grips with sex on campus of the younger generation. Of course that’s
nonsense. For one thing, the sex lives of today’s young students that
Wolfe describes are not that different from what you and I knew on
campus in the late ’70s and early ’80s. There’s a great deal of continu-
ity. It’s funny to listen to today’s fortysomethings wax indignant about
descriptions that really can’t be unfamiliar to them.
Rauch: In Dupont University learning takes a backseat to money and sex
and status—and, in your view, there is more to this than just fiction?

152 Hoover Digest  N  2011 · No. 1


Berkowitz: Oh yes.
Rauch: It’s a critique of modern university life and the unmooring of
traditional, liberal education values.
Berkowitz: Absolutely. What happens on the cultural level—the sex-
ual lives of students, the hook-up culture in which sex and love are sev-
ered, sex and marriage are severed, sex and family are severed—is some-
thing perfectly familiar to all of us who came of age post-1965. And
there is another dimension of it that’s very important. The other aspect
that Wolfe brings to life is that the education that the students get in
the classroom reinforces the de-romanticization of our sexual lives. He
focuses on two aspects, the right aspects I think. One is the resolute
determination to reduce all human conduct to our biology: biology is
fate. The other aspect is the postmodern tendency to deny that rea-
son is capable of identifying moral standards and making authoritative
moral judgments. These two lessons of the university curriculum sup-
port what happens outside the classroom.

♦♦♦♦

Rauch: That’s an interesting transition into After Virtue, by Alasdair


MacIntyre, written in 1981. MacIntyre was born in 1929. I think it’s fair
to say that this is his most important or best-known book.
Berkowitz: I think that’s right.
Rauch: It’s very much a critique of modern liberalism, which, in his view,
undermines virtue. Virtue is grounded in membership in a community
and he critiques modern society as “a collection of strangers each pursuing
his or her own interests under minimal constraints.” He says we all have
too many disparate and rival moral concepts and he speaks of the new
dark ages, which are already upon us. “This time, however, the barbarians
are not waiting beyond our frontiers. They have already been governing
us for quite some time.” Not a man given to understatement, and another
fairly scathing critique of modern liberal individualism.
Berkowitz: This is a sweeping book that goes from Aristotle up to
today. The argument is not just the collapse of communities, as you
suggested. It’s also about the transformation in how we think about

Hoover Digest  N  2011 · No. 1 153


the moral life that has purged the language of virtue from our speech
and from our sensibility. According to MacIntyre’s argument, up until
about two hundred years ago, up until about just after Jane Austen
finished writing her magnificent novels, through most of recorded
human history, the moral life was discussed, thought of, experienced,
in terms of the virtues. Were you courageous and self-disciplined? Gen-
erous and magnanimous? A good friend? Reliable? And so on. This
is what defined the moral life, your qualities of mind and character.
Round about the time of the high Enlightenment, especially starting
with Immanuel Kant, a new way of thinking of morality gained hold.
This way of thinking about morality emphasizes rules and intentions.
If you could just figure out the right rules and if you have an intention
to obey the right rules then you will have achieved moral excellence.
Rauch: MacIntyre emerges as a critic of this view, this substance-free
adherence to open-ended rules.
Berkowitz: Exactly.
Rauch: In some sense, one could argue that all three of the books you
mentioned are cries of protest against modern libertarian conservatism
with its notion of a completely open-ended commitment to individual
freedom above all. Or is that going too far?
Berkowitz: It’s probably true in many cases, but it might do an
injustice to some libertarians because there are some versions of lib-
ertarianism that are essentially, as I understand them, philosophies of
government’s relationship to the individual. After Virtue is not about
the relationship between government and the individual; it’s about the
individual and the moral life. In other words, I can affirm that govern-
ment has a very limited role and still believe with Alasdair MacIntyre
that the language in which we speak about morals has been degraded,
that the virtues and language that involves quality of mind and charac-
ter is the right language if we’re talking about the moral life. That this
way of thinking about the moral life makes sense in a lived community,
but that government doesn’t have much to do with all of this.
Rauch: But you could argue there’s a fundamental tension between the
anarchic anything-goes mechanism of capitalism and modern liberalism
and a vision of virtue rooted in community tradition and faith.

154 Hoover Digest  N  2011 · No. 1


Berkowitz: Yes, you could push back with that and you would be
justified in pushing back.
Rauch: MacIntyre published at the dawn of the Reagan era, in 1981. I
came to this book sometime later, but I saw it as a first shot over the bow,
that what came to be known as the religious right was reasserting some
very profound questions about enlightenment, liberalism, and libertari-
anism. It was itself starting to push back in ways that only became much
clearer as the next two decades ensued.

“I can affirm that government has a very limited role and still believe

with Alasdair MacIntyre that the language in which we speak about

morals has been degraded.”

Berkowitz: Yes, though in MacIntyre’s case the intended target was


not libertarians in America or in England but actually professors with
progressive doctrines, people like John Rawls and those who follow
John Rawls. But I think you’re right that the arguments that were tar-
geted for John Rawls, and the Rawlsians of this world and other left-
wing progressives, who thought that you could develop theories and
that theories would provide you with instructions on the moral reor-
ganization of social and political life, also strike important blows at
American libertarians.

♦♦♦♦

Rauch: Your next two books are both very recent books, and they’re not
by people who are thought of as very conservative writers. First is Walter
Russell Mead, God and Gold: Britain, America, and the Making of the
Modern World, 2007. It’s a grand sweeping theory of history, a rumina-
tion on the history of U.S. power which, as I understand it, argues that
Americans and others in the Anglosphere keep imagining that liberalism
and capitalism will bring about a day of peace and prosperity around the
world, yet history keeps tripping them up. Why Walter Russell Mead?
Berkowitz: Definitely not because he’s a conservative, because you’re
right, he’s not a conservative. I think it’s important for conservatives to

Hoover Digest  N  2011 · No. 1 155


read books that are not by conservatives. Non-conservatives have very
important things to say about the world as well. Of course in some
sense Mead is very difficult to categorize. I mainly think of him as
just about our smartest and most lucid commentator on international
affairs without the need to impose a label on him.

“Walter Russell Mead does not make the argument that America’s

success has been foreordained; he makes the argument that it’s been

good for the world. . . . America has certainly also been guilty of hubris.”

Rauch: What is the important insight in this book?


Berkowitz: There are lots of important insights. I think it’s extremely
valuable because the question of the meaning of American power got
raised anew during the two terms of George W. Bush because of the
September 11 attacks. The Bush administration response was to launch
a war in Afghanistan, to launch a war in Iraq, and to declare, as part of
American policy, the spreading of democracy and liberty abroad. The
bad reaction of much of the world to that policy and the obstacles that
the Bush administration confronted, the failures of the Bush administra-
tion, all of that made the question of what is American power, what is it
good for, where did it come from, what lessons should we draw from his-
tory, recent history, past history, made these questions very important.
Rauch: What do you take from Mead by way of an answer?
Berkowitz: I start with Mead’s conclusion that for all of America’s
errors and excesses, no country has done more to promote liberty,
democracy, and prosperity of human beings around the world than the
United States. In other words, the United States is absolutely essential
to most of the things that we prize.
Rauch: He’s also got a wonderful line toward the end: “The triumph
of liberal democratic capitalism has given new power and new energy to
the forces that oppose it.” A fascinating paradox. Is there a warning here
against the notion that America can remake the world in our own image,
steer history, and so on?
Berkowitz: Absolutely. On the one hand, the book is a history book.
It explains that America did not come on the scene out of nothing. We

156 Hoover Digest  N  2011 · No. 1


inherited the liberal, capitalist, international maritime order that the
British created. The Brits inherited the liberal, international, capital-
ist, maritime order that the Dutch created. It’s been a source of pros-
perity to the world and it has promoted peace. Another point that
Mead makes: He speaks of “order”—this Dutch, then British, then
American order. What distinguishes order from a word that critics
like to use, empire? It’s very important. He says the difference is that
in an order, states that are brought in are themselves encouraged to
eventually become free, liberal, and democratic. Great Britain has an
excellent record: Canada, Australia, New Zealand, Singapore, Pakistan,
India, Hong Kong. Then, go back and think of other empires in his-
tory. Wherever did you have an empire that encouraged its colonies
to become free and democratic? Similarly in the United States, where
do you have a victorious power, in this case after World War II, which
dedicated itself to reconstructing an international order and, beginning
with its archest enemies—Germany and Japan—encouraging them to
become free and democratic? If this is an empire that the United States
has created, it’s an empire that’s unlike anything the world has ever seen
before—notwithstanding America’s very serious and costly errors and
excesses.
Now, having said that, we need to circle back to your question. Mead
does not make the argument that America’s success has been foreor-
dained; he makes the argument that it’s been good for the world. His
complex and riveting historical account also instructs us that America
has certainly also been guilty of hubris, that the world is much more
complicated than American policy makers often appreciate, and that
the Bush administration project itself did not sufficiently take into
account the world’s resistance and recalcitrance.

♦♦♦♦

Rauch: Your last book is very recent, Paul Berman’s The Flight of the
Intellectuals, published in April 2010. Berman is someone I tend to think
of as being on the liberal side of things, though I could be wrong.
Berkowitz: No, you’re right.

Hoover Digest  N  2011 · No. 1 157


Rauch: This book enters a particular debate at a particular moment. This
is a moment when large numbers of Islamic immigrants are present in
Europe and a debate is taking place in Europe whether there is a funda-
mental clash of values and whether in fact this immigration may under-
mine liberal principles in Europe. Where does Berman come in? Why is
he on your list?
Berkowitz: Berman is on my list because he addresses two subjects
that are certainly of great interest to conservatives, but should be of
interest to all thinking people: Islamic extremism and the role of intel-
lectuals in our politics. As you’ve already nicely said, Europe is fac-
ing a very serious challenge in connection to the assimilation of large
numbers of immigrants who are Muslim. This is true in Germany,
France, the Netherlands, and Britain. Moreover, the United States faces
a problem because on September 11 we were attacked, and not for the
first time, by Islamic extremists who have declared war on the United
States, and have declared a kind of war in a way in which they ask for
no return of land, no change in our government, or no change in this
policy or that policy, but seem to be opposed to our very existence as a
free and democratic nation. Islam and Islamic extremism, which I don’t
equate, are very central issues, it seems to me, for the United States and
for Europe today. So that’s one reason why I am interested in Berman’s
book.
The second reason I am interested in Berman’s book is because he looks
at the role of the intellectuals in confronting this issue. The book, as you
know, is a considerable expansion of a huge article that appeared in the
New Republic a couple of years ago on Tariq Ramadan, the grandson of the
founder of the Muslim Brotherhood. He is handsome, suave, and intel-
ligent, and he has been embraced by many intellectuals in Europe—where
he grew up and where he lives—as the model of the moderate Muslim,
who provides a way of reconciling the claims of traditional Islam with
the politics and the morals of modern liberal democracy. Paul Berman is
suspicious. The book is, as was his article, a kind of detective story that
closely examines Ramadan’s statements and closely examines the doctrines
and practices of Islamic extremism in order to determine whether Rama-
dan is the moderate that many European intellectuals take him to be or

158 Hoover Digest  N  2011 · No. 1


whether he is a kind of wolf in sheep’s clothing whose ambition is to
insinuate radical Islam into the very heart of European civilization.
Rauch: Is there also a broader critique here of a double standard in which
those advocating multiculturalism and opposing Islamophobia are given
every benefit of the doubt, whereas those advocating standards of liberty
are raked over the coals by intellectuals?

“Paul Berman is on my list because he addresses two subjects that are

certainly of great interest . . . to all thinking people: Islamic extremism

and the role of intellectuals in our politics.”

Berkowitz: Well, that’s easy, yes. The final chapters of Berman’s book
deal with the case of Ayaan Hirsi Ali. She was very severely attacked by
two distinguished journalists as an “enlightenment fundamentalist.”
She was dismissed as a woman who fled from one dogma, the dogma
of extremism, to the dogma of enlightenment, whose attacks on Islam
were extreme if not unhinged—whereas Tariq Ramadan was treated
with great respect. What Berman attempts to show is that we have very
good reasons to be a great deal more skeptical about Tariq Ramadan,
although it’s a complicated case. People should read Berman’s book
because he draws no easy conclusions about Ramadan.

♦♦♦♦

Rauch: Themes often emerge in these interviews and in your case, with
the exception of Walter Russell Mead, four of your five books, in their very
different ways, argue for pushing back against a kind of creeping relativ-
ism. They argue for regrounding classical liberalism, Enlightenment liber-
alism, as a fighting cause for certain virtues and values that we hold dear.
Berkowitz: I would say that is what has interested me about all these
books and especially in bringing them here to discuss with you. All five
of these books teach us something important about how we, today, are
failing to understand, appreciate, and defend our liberty.
Reprinted by permission of the blog FiveBooks and its series on American conservatism (http://fivebooks.
com/america-conservatism). © 2010 The Browser Publications, AG. All rights reserved.

Hoover Digest  N  2011 · No. 1 159


I N T ERVIEW

America, Dismantled
Hoover fellow Thomas Sowell digs in his heels against American
decline. By David Hogberg.

Early in his administration, President Reagan confidently asserted that


“America’s best days lie ahead.” Noted economist Thomas Sowell, a senior
fellow at the Hoover Institution, thinks it’s no longer the case.
In his new book, Dismantling America, Sowell argues that this nation
is becoming one that many Americans no longer recognize as the country
they grew up in or expected to pass on to their children and grandchildren.
Rather, like Rome, America may be entering a prolonged period of decline.
Sowell sat down with Investor’s Business Daily to discuss the political,
social, and economic forces leading to this decline and what, if anything,
can reverse it.

David Hogberg, Investor’s Business Daily: What are the markers of


national decline? What characteristics are different from a few decades ago
that if they don’t improve will lead to this country falling apart?
Thomas Sowell: One of the most serious current signs is the governing
style of this administration, which is to impose as many things as possible
on the public from the top down, without even letting them know what’s
going on.
Huge bills that fundamentally change the way the economy operates
have been rushed through Congress without hearings, without debate,

Thomas Sowell is the Rose and Milton Friedman Senior Fellow on Public
Policy at the Hoover Institution. David Hogberg writes for Investor’s Business
Daily.

160 Hoover Digest  N  2011 · No. 1


and so fast that not even the members of Congress have a chance to
read them. That’s circumventing the notion of a constitutional govern-
ment, and that’s really at the heart of what the country is. The only
analogy I can think of from history is when the Norman conquerors of
England published their laws in French for an English-speaking nation.
The utter arrogance—you’re not even to know what the laws are until
it is too late.
Reckless spending is another. The deficit and the national debt, as a
percentage of GNP, are higher now than during any time except World
War II. Moreover, once World War II was over we stopped the spending
and started paying off the existing debt. We’re going in exactly the oppo-
site direction.
Of course, the one that trumps them all is on the international scene.
That’s where Iran is moving toward nuclear weapons. I’m just staggered at
how little attention is being paid to that compared to frivolous things. If
a nation with a record of sponsoring international terrorism gets nuclear
weapons, that changes everything and it changes it forever.
Someday, historians may wonder what we were thinking—when you
look at the imbalance of power between the United States and Iran, while
we sat there with folded hands and watched this happen, going through
just enough motions at the United Nations to lull the public to sleep.
That, I think, is the biggest threat.
Hogberg: Do you think the Israelis will take out Iran’s nuclear program
if they will be condemned by the “international community” and can’t
rely on backing from the Obama administration?
Sowell: If the choice is between condemnation or annihilation, I think
they will go for condemnation. There may be reasons why it isn’t feasible,
but it’s a tremendous choice to leave on them.
Hogberg: What has Obama done to hasten our decline?
Sowell: He has affronted our allies, but he’s very clever about it. He’s
done it in ways that the general public is unlikely to notice. But it is in
ways that people in other countries cannot mistake at all, such as the
downgrading of the visits of the prime minister of Britain or Israel. At one
time the visit of the prime minister of Great Britain meant a state dinner,
a press conference, and so on.

Hoover Digest  N  2011 · No. 1 161


His first foreign policy gambit was to fly to Russia and offer to renege
on the American commitment to put a missile shield in Eastern Europe,
in hopes of getting Russian cooperation with the United States. All he
really got out of that was a demonstration of his amateurishness and of his
willingness to sell out allies in hopes of winning over enemies. That ploy
was tried in the 1930s and didn’t work all that well.

“Someday, historians may wonder what we were thinking—when you

look at the imbalance of power between the United States and Iran, while

we sat there with folded hands and watched this happen.”

Hogberg: One big trend leading to America’s decline that came through
in the book was how politicians and activists use rhetoric.
Sowell: It’s partly that, but it is also that the education system has not
taught people how to see through rhetoric. Somewhere, Oliver Wendell
Holmes says that the purpose of education is to create a mind that can-
not be humbugged by words. Well, that is not the purpose of American
education now. Much of the humbugging by words takes place inside the
educational institutions themselves. Students are not generally taught to
see both sides of an issue and learn how to analyze in such ways to see what
the differences are and how you would sort it all out. Instead they’re given
one side and they’re told that one side is it.
Schools all around the country have shown Al Gore’s An Inconvenient
Truth. But I doubt that one-tenth of students have seen the British Chan-
nel 4 production called The Great Global Warming Swindle.
Hogberg: So if children are taught only one side as unquestioned truth,
what’s the value of experience and wisdom?
Sowell: At one time students were taught, “You’re young, you’re inex-
perienced, you have a lot to learn. It’s not up to you to make sweeping
conclusions about society.” Today that is not the message. Today when I
see young kids, sometimes elementary students, carrying banners for some
crusade, someone ought to tell them that you don’t even know anything.
Or you hear they are writing letters to the president on nuclear policy and
so on. Within the past week, I got a letter from a high school senior who
was about to inform me about economics in general and about the reason

162 Hoover Digest  N  2011 · No. 1


why there was a Great Depression and why it is necessary that Obama
does the things he does. I didn’t know whether to laugh or cry. But stu-
dents are encouraged to think that way.
Hogberg: You note in your book that Americans take a lot of good things
in this country for granted. How does that hasten our decline?
Sowell: You have to have a sense that freedom is always under siege, and
not just by people who don’t believe in freedom but by people who have
their own agendas and either don’t know or don’t care that those agendas
mean reducing other people’s freedom. So if you don’t have a sense of
the danger from those sources, you’re going to face a steady erosion of
freedom, because people put their own agendas ahead of other people’s
freedom.

“Somewhere, Oliver Wendell Holmes says that the purpose of education

is to create a mind that cannot be humbugged by words. Well, that is not

the purpose of American education now.”

Hogberg: The “vision of the anointed”—the idea that there is an anoint-


ed elite qualified to run other people’s lives—surely that must be playing
a role in the dismantling of America.
Sowell: Oh, absolutely! And I think no one believes in that vision more
than Barack Obama, with the possible exception of Michelle Obama.
They are the ones who know what we need. The very idea that anyone
would take over someone else’s medical care and think that it can be
run from Washington by bureaucrats is just staggering. There needs to
be a healthy fear of “making a difference” in areas where you have no
expertise. Some years ago I was in a hotel, and the hotel clerk called me
up and asked, “Is this Doctor Sowell?” I said yes. He said, “There is a
pregnant woman downstairs in labor. Would you please come down-
stairs and help with the delivery?” I was absolutely appalled. That ought
to be the reaction of most people when presented with an opportunity
to “make a difference” in an area where they don’t know what they are
talking about.
Hogberg: How does the housing crisis embody some of the trends in
the book?

Hoover Digest  N  2011 · No. 1 163


Sowell: Everything that was done wrong in the past has been continued
and escalated in the present. The recent so-called financial reform act left
out Fannie Mae and Freddie Mac. It’s like Hamlet without the prince of
Denmark. Fannie and Freddie are two institutions that are in the produc-
tion and distribution of moral hazard.
Nothing will increase risk more than by shifting it to somebody else. If
I thought the government would back me up, I’d go into the commodities
market and put a million dollars into soybean futures. Knowing that the
government is not going to back me up, I won’t go within a hundred miles
of the commodities market.

“You have to have a sense that freedom is always under siege.”

Politicians know that politically it pays to have the taxpayers pick up


the bill (as with Fannie and Freddie). People ask me sometimes, “Why do
politicians keep making the same mistakes? Don’t they ever learn?” And
I reply, “They do learn! They learn they can get away with it. That’s what
they learn.”
Hogberg: What is the “fallacy of fairness”?
Sowell: Most people would say that the government should treat every-
body alike, judge them by the same standards, reward or punish them
according to the same rules. That we can pretty much agree on.
But there is a more esoteric notion of fairness. Is it fair if one person is
born into the world in circumstances that virtually guarantee their failure
and others are born into circumstances that virtually guarantee their suc-
cess? That kind of fairness is not social injustice, because society doesn’t
create it and society can’t do much about it.
In my case I can see it pretty vividly. I was separated from my siblings in
infancy, grew up not knowing they existed, and learned about them later
on. We were all raised by poor people with very little education. But the
family in which I was raised was determined that although they had no
education, I should have an education. I remember what a fuss was made
when I was promoted to the seventh grade. I was taken aback by it and
someone said to me, “You’ve now gone further than any of us.”
Now contrast that with my younger brother, raised down in North
Carolina. One day, when he was a teenager, someone noticed he had

164 Hoover Digest  N  2011 · No. 1


on his Sunday clothes in the middle of the week. When asked why, he
said he was graduating from high school that day. No one came to see
him graduate or thought much of it, even though none of the people
in his family had ever gone to high school. So he had to do it all on
his own.
I had a sister who was also raised hundreds of miles away. And when
she went to Dunbar High School in Washington, D.C., which was an elite
school, there was resentment in her adoptive family. The reason was that
the biological daughters in that family were nowhere near smart enough
to go to that school.
Sociologists would come along and lump all three of these families
together. But the kinds of things that matter are the things that politicians
and bureaucrats can’t do much about.
Now, you can create scholarships, tutoring programs, and so on. But
you have to recognize that the values that the kids have are the crucial
things that will make or break them.
Hogberg: In your book you have two columns titled “ ‘Empathy’ Versus
Law,” and you discuss the rule of law versus the rule of lawyers and judges.
Explain how that is leading to our decline.
Sowell: Empathy is one of the weasel words of our time. It is a prettier
word than bias, but it means the same thing. Supreme Court Justice Sonia
Sotomayor, with those firefighters in Connecticut, gave a free demonstra-
tion of what empathy and bias mean. And yet not only was she confirmed;
there were Republicans who announced going in that they were going to
confirm her.
People have no sense of what the law is supposed to be. It’s not a matter
of righting wrongs.
In the days of the French Revolution, “representatives on missions”
were sent around the country to right wrongs. They had the power to
overrule any laws or local officials. They carried their own guillotines.
That notion of law, that’s the direction those who are pushing judicial
activism are going.
There was a time when we understood the judge’s job is not to have
empathy; his job is to carry out the law as written. And if it was a bad law,
it was up to the legislature to change it.

Hoover Digest  N  2011 · No. 1 165


Hogberg: What do you think of the tea party movement? Could it
reverse our decline?

“There was a time when we understood the judge’s job is not to have

empathy; his job is to carry out the law as written. And if it was a bad

law, it was up to the legislature to change it.”

Sowell: I’m sure it’s one of the elements. I think one of the things more
important than the tea parties is that so many people who were not polit-
ical activists before have been spurred into action by the kinds of things
that have been done and the dangers they see. The biggest danger is not to
see the danger. There are increasing numbers of people who see the dan-
ger. There are increasing numbers of people, according to the polls, who
have no confidence in the media. I was delighted that Newsweek magazine
is having so much trouble because they richly deserve it. There was a time
I wondered who they were going to put on the cover once the Obamas
were gone. So there are those signs, and as the great philosopher Yogi
Berra said, “It’s not over till it’s over.”
Reprinted by permission of Investor’s Business Daily (www.investors.com). © 2010 Investor’s Business
Daily, Inc. All rights reserved.

Available from the Hoover Press is Ever Wonder Why?


And Other Controversial Essays, by Thomas Sowell. To
order, call 800.935.2882 or visit www.hooverpress.org.

166 Hoover Digest  N  2011 · No. 1


VALUES

Decline Is a Choice.
Let’s Reject It
America can decide to be itself again: free, fair, and thriving. By
Victor Davis Hanson.

Juxtapose pictures of Frankfurt and Liverpool in 1945, and then again in


2010 (or, for that matter, Hiroshima and Detroit). Something seems awry.
Perhaps one can see, even in these superficial images, that something other
than military defeat erodes societies.
Of course, losing a war can end a civilization (ask the Carthaginians
in the Third Punic War or the Aztecs in 1521). But the chicken-and-egg
question reappears: why are some civilizations more vulnerable to foreign
occupation or more incapable of reacting to sudden catastrophe—such as
the pyramidal Mycenaeans rather than the decentralized Greek city-states?
In three wars, Republican Rome managed to end seafaring Carthage—
in part through the building ex nihilo of a bigger and better navy—and in
a dynamic fashion not repeated six hundred years later when a 1 million-
square-mile, 70 million-person imperial Rome—now top-heavy, pyrami-
dal, highly taxed—could not keep out barbarians from across the Danube
and Rhine.
At the end of the Second World War, the industrial centers of West-
ern and Eastern Europe were flattened. Russia was wrecked. China
and India were pre-capitalist. Germany and Japan themselves were in
cinders.

Victor Davis Hanson is the Martin and Illie Anderson Senior Fellow at the
Hoover Institution.

Hoover Digest  N  2011 · No. 1 167


The factories of the United Kingdom (despite the 1940 blitz and the
later V-1 and V-2 attacks) were largely untouched, and the United States
pristine. Both countries had incurred massive debt. Yet Britain in the late
1940s and 1950s socialized, vastly increased the public sector, and become
the impoverished nation of the 1960s and 1970s. In contrast, America
began to return to its entrepreneurial freedoms and geared up to supply
a wrecked world with industrial and commercial goods, paying down its
massive debt through an expanding economy. We thrived, yet socialist
Britain did not become a West Germany, Japan, or Singapore.
One can see that natural resources, while important, are not all-deter-
mining. Oil-rich Venezuela and Mexico are a mess; resource-poor Japan
and Switzerland are not. There are few economic refugees now fleeing
Shanghai to Hong Kong, as in the past; nor is east Germany still unlike
west Germany, as North Korea is unlike South Korea.
Cultural tradition plays a role, of course. But more important still is the
nature of politics and the economy. As a general rule, the more free the
individual and flexible the markets—with lower taxes, less bureaucracy,
constitutional government, more transparency, and the rule of law—the
more likely a society is to create wealth and rebound from either war or
natural disasters.

A R E N E W A L Y E T TO COME
These truths transcend space and time, and they trump race and nation-
ality, weather and climate, resources and geography. The notion that we
are doomed and the Chinese fated to prosper is not written in stone. It is
simply a matter of free will—theirs and ours. They must deal with a new
era of coming suburban blues, worker discontent, unions, environmental
discretion and regulation, an aging and shrinking population and greater
personal appetites, social protest, and nonconformity—in the manner
that industrializing Western nations did in the early twentieth century.
We in turn can easily outdistance any country should we remain the
freest, most law-abiding, and most economically open society, as in our
past. A meritocracy blind to race, gender, and ethnicity; equal applica-
tion of the law; low taxes; small government; and a transparent political
and legal system are at the heart of that renewal. America could within a

168 Hoover Digest  N  2011 · No. 1


decade become a creditor nation again, with a trade balance and budget
surplus, drawing in the world’s talent and capital in a way not possible in
the more inflexible or less meritocratic China, Japan, or Germany. Again,
that is our choice, not a superimposed destiny from someone else.

The more free the individual and flexible the markets, the more likely

a society is to create wealth and rebound from either war or natural

disasters.

Unfortunately, we are mired—as in the case of many complex societies


that become ever more top-heavy and bureaucratic, when their salvation
depends on becoming less so—in a new peasant notion of the limited
good. Anything produced is seen to come at the expense of others. We
would rather be equal and unexceptional than collectively better off, with
a few better off still.

S H R U N K E N BY ENVY
I, like most Americans (I hope), don’t care whether Bill Gates lives in a
mansion or Warren Buffett flies in a huge private plane or George Soros
has billions to give away to progressive causes or even that John Kerry
has millions to spend on power boats and sailing ships. The system that
created these excesses, if we even call them that, also ensured that my hot
water—and the hot water in nearby, rather poor, Selma—is no cooler
than theirs. My Honda and hundreds in town run as well as their lim-
ousines. Last time I went to the local Wal-Mart I counted a hundred cell
phones, and I doubt Al Gore’s gets any better reception. The better off
may or may not “at a certain point . . . (have) made enough money,” to
quote the president, but I have no idea where that certain point is (or
whether it includes vacations to Costa del Sol). I do know that once our
technocracy starts determining that point, there is a greater chance that
my town will not have as much hot water as the rich or Hondas that run
as well as their luxury cars.
Study the collapse of complex societies, and rarely is the culprit the
environment or the enemy across the border. Walls may be torn down,
rivers silt up, and volcanoes erupt, but social collapse hinges on the exist-

Hoover Digest  N  2011 · No. 1 169


ing nature of a society—whether it is flexible and wealth-creating or
inward, acrimonious, and wealth-redistributing. Chile will recover from a
far stronger earthquake than the one that hit Haiti. (I fear Haiti will not
recover easily, if at all.)

Unfortunately, we are mired in a new peasant notion of the limited good.

Anything produced is seen to come at the expense of others.

In 1521, a brutal Hernán Cortés could never have taken Britain with
his 1,500 conquistadors, but he quickly figured out how to destroy an
empire of 4 million with that same force. The test for the command econ-
omy of the Soviet Union—which it failed—was not just to repel a Nazi-
led invasion 3 million strong but to do so without losing 20 million of
its own, while creating a prosperous, sustainable postwar order inside the
USSR and at its periphery.
“Spread the wealth” and “redistributive change” occur only when the
enterprising, gifted, lucky, or audacious among us feel that they have a
good chance to gain something for themselves (and keep most of it) or to
extend to others something they earned—more often relying on both
motives, self-interested and collective. Deny all that, shoot their bigger
cow, so to speak, or burn down their towering grain, and we will end up
as peasants and serfs fighting over a shrinking harvest.
Reprinted from the blog Works and Days (http://pajamasmedia.com/victordavishanson).

Available from the Hoover Press is The Doomsday Myth:


10,000 Years of Economic Crises, by Charles Maurice
and Charles W. Smithson. To order, call 800.935.2882
or visit www.hooverpress.org.

170 Hoover Digest  N  2011 · No. 1


HISTORY AND CULTURE

A Communist Rogues’
Gallery
His new Dictionary of 20th-Century Communism is no closed book.
Hoover fellow Robert Service says the movement that claimed tens
of millions of victims has “a living legacy, alas.” By John J. Miller.

Hoover senior fellow Robert Service discusses his new book, A Dictionary of
20th-Century Communism (Princeton University Press, 2010; Silvio Pons,
co-editor), in a podcast for National Review Online.

John J. Miller, National Review Online: Professor Service, if a col-


lege student born after the end of the Cold War were to come up to you
and ask, “Why are you studying communism, why is it so important,
what was it?”—what would you tell them?
Robert Service: A lot of my students actually were born after the end
of the Cold War, and I don’t think they find it difficult to understand that
something very special happened when communism became a state phe-
nomenon, when it started to take over governments. This was early in the
twentieth century, when the one-party, one-ideology state was invented.
And it was a particularly intrusive and oppressive form of state. It was
reproduced on the right by Nazis and fascism. It was a particularly brutal
way of running a government, running a society, and running an econo-

Robert Service is a senior fellow at the Hoover Institution, a fellow of the


British Academy, and the professor of Russian history at the University of Oxford.
John J. Miller is national correspondent for National Review.

Hoover Digest  N  2011 · No. 1 171


172
Hoover Digest  N  2011 · No. 1
Illustration by Taylor Jones for the Hoover Digest.
my, and everybody needs to know something about it.
It’s a very, very important aspect of our future capacity
to sustain our liberties.
Miller: This is a big book. It’s 921 pages, has more than
400 entries, about 160 contributors. What are you trying to
accomplish with A Dictionary of 20th-Century Communism?

Hoover Digest  N  2011 · No. 1 173


Service: We—Silvio Pons, who is the co-editor, and I—thought there was
a gap on the bookshelves for the sort of work that brought together experts
on particular communist parties and particular communist societies all
around the world. And so we set out to make our choice of the outstand-
ing experts and asked them to fit into a framework, where we would look
at communism as it really existed. We would get away from the histories
of communism that start centuries back, and we would concentrate on
communist movements, communist states, communist parties that stood
a chance of getting power. We’ve used our access to specialists, not only in
North America and Western Europe, but further afield. We’ve gone to Chi-
na, we’ve gone to Eastern Europe, we’ve gone to Latin America, and we’ve
gone to Africa and Asia. That’s been the joy of putting this book together.
Miller: Ronald Reagan once predicted that the march of freedom and
democracy would leave communism on the ash heap of history. Is that
true? Have we dumped communism onto the ash heap of history?
Service: Well, it’s not yet gone from China, and it’s still alive and kick-
ing in Cuba, and there it is in North Korea still. So there are parts of the
world where it still exists. In the case of China, of course, it exists in a very
peculiar political and economic variance. The sort of variance that nobody
before, let’s say, 1970 would have ever predicted.
But it’s unlikely, I think, that an extreme left option will be picked up
by protest movements in quite the same way as happened in the former
Russian empire in 1917. That doesn’t mean that there aren’t lessons to be
learned. Some of the extremist ideologists and extremist movements and
extremist governments in the world today might not be communist, but
they have certainly picked up some of the techniques of communism. And
I will go back to what I said earlier: the Russian communists invented a
new way of running the state, running the government, and eventually
running society—and some of these ideas were picked up by people and
movements on entirely other parts of the political spectrum around the
world. To that extent, even though communism now appears to be more
or less dead, it still has a living legacy, alas.
Miller: Conservatives like to claim that Western leaders such as Ronald
Reagan or Margaret Thatcher were indispensable in defeating commu-
nism, tossing it on the ash heap. Is that true? Were they indispensable?

174 Hoover Digest  N  2011 · No. 1


Service: I think the defeat of communism in the USSR called for excep-
tional political skills, which Ronald Reagan certainly possessed in abun-
dance in relation to fighting communism. Also important were the politi-
cal skills of Mikhail Gorbachev, who was committed to really a utopian
objective, which was to humanize communism. In the end, he got rid of
it altogether from the USSR and dismantled the USSR itself.

“The idea that you could start poor but end up wealthy is so much

stronger in the United States than elsewhere. And I think that tended to

inoculate most Americans.”

But behind all of this, of course, is a long crisis of communism in the


countries where it’s been established for any length of time, not just the
USSR but also Eastern Europe and China and other parts of the world.
Communism doesn’t bring about a land of plenty for any people. It insti-
tutes all kinds of counterproductive and oppressive forms of government,
forms of running the economy that make it incapable of competing with
the market economy and democracy. All of these problems were building
very, very intensely in Eastern Europe and then in the USSR in the middle
of the 1980s, and that gave Ronald Reagan his chance. And, by golly, he
took it. He had an intuition that he could work with Gorbachev, and Gor-
bachev had an intuition that he could work with Reagan, and also that he
needed to do something about his own country, because the USSR was
decaying into a sort of decrepit superpower status that made it dangerous
and oppressive, even as it failed to bring the results to the Soviet people
that Gorbachev wanted.
Miller: Why did communism fail to become a major force as a political
party in the United States? Do Americans have antibodies that allowed
them to resist this ideology?
Service: I think the American system of economy and society gave a big
priority, a bigger priority than in any other major country in the world,
to social mobility. The idea that you could start poor but end up wealthy
is so much stronger in the United States than elsewhere. And I think that
tended to inoculate most Americans, even poor immigrant Americans,
against communism to a greater extent than in France or Italy, where after

Hoover Digest  N  2011 · No. 1 175


the Second World War both those communist parties had many members.
Communism had a much more vigorous growth in Western Europe than
in the United States. The United States was the outlier. Communism has
always been a serious threat on other continents.
Miller: Some scholars have estimated that communism had a hundred
million victims. That a hundred million people died because of this ideol-
ogy. Is that figure at least within the ballpark of accuracy?

“Some of the extremist ideologists and movements and governments in

the world today might not be communist, but they have certainly picked

up some of the techniques of communism.”

Service: I always bat this question back, because we don’t even know
exactly how many victims Stalin had in the 1930s. And why is that?
Because he brought about the deaths not only of the people that he put
up against the wall and shot, not only the people whom he starved to
death in the gulag system of labor camps, but also the people that he
deported—sometimes whole nationalities. The people he also forced to
undertake resettlement in inhospitable parts of the country. And what
about all those poor farmers who had their land taken away from them
and who had no grain to sow to sustain life? So the number of deaths
cannot just be calculated on the basis of those whom he shot and impris-
oned. The millions whose lives he ruined and brought to an end are
probably even greater than the number that you indicated. If you take a
global picture all around the world—if you add the USSR to Eastern
Europe to China—now there’s a terribly oppressive regime in the 1950s
and 1960s. Communism has had a very, very, very terrible record in
twentieth-century world history.
Reprinted by permission of National Review Online. © 2010 National Review Online, Inc. All rights reserved.

Available from the Hoover Press is The Economics


of Forced Labor: The Soviet Gulag, edited by Paul
R. Gregory and Valery Lazarev. To order, call
800.935.2882 or visit www.hooverpress.org.

176 Hoover Digest  N  2011 · No. 1


HISTORY AND CULTURE

Stalin’s Genocides
Yet another crime the Soviet dictator got away with: defining genocide
to exclude what he did. Hoover fellow Norman M. Naimark tells how
it happened. By Cynthia Haven.

Mass killing is still the way a lot of governments do business. The past
few decades have seen terrifying examples in Rwanda, Cambodia, Darfur,
Bosnia, and elsewhere. Murder on a national scale, yes—but is it genocide?
“The word carries a powerful punch,” says Hoover senior fellow Norman
Naimark, a history professor at Stanford. “In international courts, it’s con-
sidered the crime of crimes.”
Nations have tugs of war over the official definition of the word genocide,
which mentions only national, ethnic, racial, and religious groups. After all,
how it’s defined can determine international relations, foreign aid, and nation-
al morale. Witness the annual international tussle over whether the 1915
Turkish massacre and deportation of the Armenians qualifies as genocide.
Naimark, author of the new book Stalin’s Genocides (Princeton Univer-
sity Press, 2010), argues that the world needs a much broader definition
of genocide that includes nations killing social classes and political groups.
His case in point: Stalin, perpetrator of the multiple examples behind the
book’s plural title.
Naimark argues that the Soviet elimination of a social class, the kulaks
(higher-income farmers), the subsequent killer famine among Ukrainian

Norman M. Naimark is a senior fellow at the Hoover Institution and the


Robert and Florence McDonnell Professor of East European Studies at Stanford
University. Cynthia Haven writes about the arts and humanities for the
Stanford Report.

Hoover Digest  N  2011 · No. 1 177


peasants, and the notorious 1937 order that called for the mass execution
and exile of “socially harmful elements” as “enemies of the people” were,
in fact, genocide.
“I make the argument that these matters shouldn’t be seen as discrete
episodes, but seen together,” says Naimark, an authority on the Soviet
regime. “It’s a horrific case of genocide—the purposeful elimination of all
or part of a social group, a political group.”
Stalin had nearly a million of his own citizens executed, beginning in
the 1930s. Millions more fell victim to forced labor, deportation, famine,
massacres, and detention and interrogation by Stalin’s henchmen.
“In some cases, a quota was established for the number to be executed,
the number to be arrested,” says Naimark. “Some officials overfulfilled as
a way of showing their exuberance.”
Genocide was defined by the 1948 United Nations Convention on
the Prevention and Punishment of the Crime of Genocide. The conven-
tion’s work was shaped by the Holocaust, says Naimark. “A catastrophe
had just happened, and everyone was still thinking about the war that
had just ended. This always occurs with international law—they outlaw
what happened in the immediate past, not what’s going to happen in the
future.”
Both Hitler and Stalin, Naimark says, “chewed up the lives of human
beings in the name of a transformative vision of Utopia. Both destroyed
their countries and societies, as well as vast numbers of people inside and
outside their own states. Both, in the end, were genocidaires.”
All early drafts of the U.N. convention included social and political
groups in the definition of genocide. But the pen was guided by one hand
that wasn’t in the room. The Soviet delegation vetoed any definition of
genocide that might include the actions of its leader, Josef Stalin. And the
Allies, exhausted by war, deferred to their Soviet comrades—to the detri-
ment of subsequent generations.
Naimark argues that the narrow definition of genocide is the dictator’s
unacknowledged legacy to us today.
Accounts “gloss over the genocidal character of the Soviet regime in the
1930s, which killed systematically rather than episodically,” says Naimark.
In the process of collectivization, for example, thirty thousand kulaks were

178 Hoover Digest  N  2011 · No. 1


killed directly, mostly shot on the spot. About 2 million were forcibly
deported to the Far North and Siberia.
They were called “enemies of the people,” as well as swine, dogs, cock-
roaches, scum, vermin, filth, garbage, half animals, apes. Activists promot-
ed murderous slogans: “We will exile the kulak by the thousand when nec-
Illustration by Taylor Jones for the Hoover Digest.

Hoover Digest  N  2011 · No. 1 179


essary—shoot the kulak breed. . . . We will make soap of kulaks. . . . Our
class enemies must be wiped off the face of the earth.”
One Soviet report noted that gangs “drove the dekulakized naked in
the streets, beat them, organized drinking bouts in their houses, shot over
their heads, forced them to dig their own graves, undressed women and
searched them, stole valuables, money, etc.”

Both Hitler and Stalin, Naimark says, “chewed up the lives of human

beings in the name of a transformative vision of Utopia.”

The destruction of the kulak class triggered the Ukrainian famine, dur-
ing which 3 million to 5 million peasants died of starvation.
“There is a great deal of evidence of government connivance in the
circumstances that brought on the shortage of grain and bad harvests in
the first place and made it impossible for Ukrainians to find food for their
survival,” Naimark writes.
We will never know how many millions Stalin killed. “And yet some-
how Stalin gets a pass,” Ian Frazier wrote in a recent New Yorker article
about the gulags. “People know he was horrible, but he has not yet been
declared horrible officially.”
Time magazine put Stalin on its cover eleven times. Russian public
opinion polls still rank him near the top of the greatest leaders of Russian
history, as if he were just another powerful but bloodthirsty czar.
There’s a reason for Russian obliviousness. Every family had not only
victims but perpetrators. “A vast network of state organizations had to be
mobilized to seize and kill that many people,” Naimark writes, estimating
that tens of thousands were accomplices.
“How much can you move on? Can you put it in your past? How is a
national identity formed when a central part of it is a crime?” Naimark
asks. “The Germans have gone about it the right way,” he says, pointing
out that Germany has pioneered research about the Holocaust and the
crimes of the Nazi regime. “Through denial and obfuscation, the Turks
have gone about it the wrong way.”
Without a full examination of the past, Naimark says, it’s too easy for
it to happen again.

180 Hoover Digest  N  2011 · No. 1


Toward the end of his life, Stalin may have been preparing another
genocide. We’ll never know whether the concocted conspiracy of Jewish
Kremlin doctors in 1952 would have resulted in the internal exile of the
entire Jewish population. Whatever plans existed ended abruptly with Sta-
lin’s death in March 1953, as rumors of Jewish deportations were swirling.

Time magazine put Stalin on its cover eleven times. Russian public

opinion polls still rank him near the top of the greatest leaders of Russian

history.

One of Stalin’s colleagues recalled the dictator reviewing an arrest list


(really a death list) and muttering to himself: “Who’s going to remember
all this riffraff in ten or twenty years’ time? No one. . . . Who remembers
the names now of the boyars Ivan the Terrible got rid of? No one. . . . The
people had to know he was getting rid of all his enemies. In the end, they
all got what they deserved.”
Who remembers? If Naimark has his way, perhaps we all will: “Every
family had people who died. I’m convinced that they need to learn about
their own past. There’ll never be closure, but there will be a reckoning
with the past.”
Reprinted by permission of the Stanford Report. © 2010 The Board of Trustees of the Leland Stanford
Junior University. All rights reserved.

Available from the Hoover Press is Stalin’s Loyal


Executioner: People’s Commissar Nikolai Ezhov, 1895–
1940, by Marc Jansen and Nikita Petrov. To order, call
800.935.2882 or visit www.hooverpress.org.

Hoover Digest  N  2011 · No. 1 181


H O O VER ARCHIVES

You Have Been


Warned
How subtle the techniques with which the KGB ensured compliance
. . . and how unsurprising to see them revived in today’s Russia. By
Mark Harrison.

© Agence France-Presse/Andrey Smirnov


The KGB, the Soviet Union’s Committee of State Security, was the
“sword and shield” of the Bolshevik Revolution. When the KGB acted
as the sword, it engaged in harassment and arrests, executions, assas-
sinations, and “low intensity” military operations. We have a more vivid
impression of the sword than of the shield. Yet for much of Soviet history
KGB officers, especially in the provinces, spent more time acting as the
shield.
The files of the Lithuanian KGB, now on microfilm in the Hoover
Archives, show both shield and sword at work. In the first years after
World War II, Lithuania was an occupied country. KGB records from
this time tell of armed nationalist uprisings and Soviet counterinsurgency.
Gradually, Lithuania became more peaceful, and the sword largely gave
way to the shield. When acting as the shield of the Soviet state, the Lithu-
anian KGB still had plenty to do. Although increasingly quiet, Lithuania
was never “normal.” Because of its history of nationalism, strong Roman
Catholic affiliation, large emigration, open coast, and land border with
Poland, Lithuania continued to be regarded by the KGB as a frontline
theater of the Cold War.

Mark Harrison is a research fellow at the Hoover Institution and a professor of


economics at the University of Warwick.

182 Hoover Digest  N  2011 · No. 1


A security officer confronts a Red Square protester who opposes increasing the power of
the secret police, the Federal Security Service (FSB), successor to the feared KGB. The sign
depicts Soviet-era police chiefs Felix Dzerzhinsky and Lavrenty Beria, as well as current
Prime Minister Vladimir Putin, as supporting greater police powers.

What did the KGB do when it was shielding the Soviet state? In Lithu-
ania, KGB resources were spent on surveillance, information gathering,
and analysis. The information gathered was used in many ways, but one
important application was profilaktika.
The word profilaktika translates directly as “prophylaxis” or “preven-
tion.” In medical science, prophylaxis means the prevention of disease.
Soviet rulers correctly believed that their power was stabilized by mass
conformity to a fixed set of “healthy” ideas and behaviors. The KGB saw
oppositional ideas and behaviors as a disease that could be spread from
person to person through contagion. They developed the technique of
preventive warnings to isolate “unhealthy” expressions and prevent them
from spreading.
A contagion model of the spread of political ideas and national and cul-
tural identities has some foundation in behavioral science. Human beings

Hoover Digest  N  2011 · No. 1 183


copy each other from birth. Examples around us powerfully influence
how we dress, whether or not we use recreational drugs, the importance
we place on the rule of law, whom we have sex with and why, how many
children we have, which stocks we buy, which churches we attend, who
gets our votes, and whether or not we attend political rallies. This makes
it good sense for repressive regimes both to stay alert for “bad” examples,
exemplified by dedicated enemies or traitors, and to watch carefully the
wider circles of those who do not intend to be or follow enemies, but
whose behavior can be changed by the infectious example of others.

Soviet rulers correctly believed that their power was stabilized by mass

conformity to a fixed set of “healthy” ideas and behaviors. Oppositional

views were a disease.

Profilaktika was not intended to deal with highly motivated dissidents


or nationalists. The Soviet rulers regarded these as beyond curative treat-
ment, and victimized, exiled, imprisoned, or shot them. Preventive warn-
ings were intended to help previously “healthy” people who were at risk
of being drawn away from the path of conformity. If left untreated, these
people might become followers of enemies or become enemies themselves
in the future. Timely intervention could still save them. They were suit-
able cases for treatment.
This was a clear change from Stalin’s time, when the sword had prior-
ity over the shield. In the 1930s, Stalin developed the idea that many
people were “unconscious enemies” who were likely to betray the state if
put under sufficient pressure. Stalin’s treatment of choice was preventive
arrest, imprisonment, or execution. Compared to this, preventive warn-
ings were relatively humane.

W E H A V E A F E W QUESTIONS FOR YOU   .  . .


On October 18, 1978, thirty-four-year-old Algirdas Aulas came to the
KGB building in Vilnius for an interview. A section head in the Venta
radioelectronics design bureau and a candidate for party membership,
Aulas was cleared for access to “top secret” documents. He had an unblem-
ished record—until now.

184 Hoover Digest  N  2011 · No. 1


An informer had reported Aulas for “telling anti-Soviet jokes, denigrat-
ing Soviet society and party and government leaders, belittling the role
of the party and its youth league, and continually praising the American
way of life.” Other informers had been put onto the case; these had con-
firmed the allegations and exposed at least one more like-minded person.
To guard the informers’ identity, the KGB had also secured formal reports
from Aulas’s past and present colleagues.

Timely intervention could still save potential transgressors, the KGB

reasoned. They were suitable cases for treatment.

Aulas was interviewed by three officers, according to records in the


Hoover Archives. They told him they wanted to discuss “the causes of his
inappropriate behavior in the collective, expressed in the dissemination
of politically harmful propositions that denigrate our Soviet actuality.”
At first, the report continues, “Aulas behaved mistrustfully and insincere-
ly, and tried to show that he is not tolerating ideologically incorrect and
harmful judgments. But after he was provided with the concrete facts of
his unhealthy propositions, he admitted that amongst his circle he actu-
ally did sometimes repeat jokes, without hostile intentions, and tolerate
other incorrect propositions.”
At this point Aulas offered a plea in mitigation. He blamed his lack of
political understanding, and his inexperience and lack of preparation as a
section chief. By joking about the party, he was aiming “just to entertain
people so that their work would be worthy of the name. Comparisons
with the USA served only as a criterion for evaluation of work. After the
conversation he understood that in making comparisons it is necessary to
consider well so that everyone will understand it properly.”
At the end, Aulas “was warned of the unacceptability of similar facts
in the future.” In response, he promised to change his behavior. The
KGB passed this information to his workplace and neighborhood party
committees. Given his promises, the interviewers recommended not to
keep him under surveillance. But this recommendation was counter-
manded by their superior officer: “Organize surveillance for a period of
one year.”

Hoover Digest  N  2011 · No. 1 185


There was no single template for profilaktika, but this was a fairly com-
mon pattern. All cases were carefully prepared, and reports of the KGB
informer network were critical to the preparation. It was common for the
subject to deny the allegations at first, and then to back down when all
the evidence was presented. Surveillance was sometimes, but not always,
maintained for a while after the interview.

“After he was provided with the concrete facts of his unhealthy

propositions, he admitted that . . . he actually did sometimes repeat

jokes, without hostile intentions, and tolerate other incorrect

propositions.”

It is evident that the interview could be life-changing. There was a seis-


mic shift in the subject’s relationship with authority—and with friends,
colleagues, and others around them. The subject was made to understand
that the KGB knew everything about him. The KGB could know every-
thing only if those closest to the subject were informers. Devastated and
isolated, the subject nearly always took the only option on offer, the path
of repentance. At the end of this psychological demolition, it was not
uncommon for the subject to thank the KGB officers for their advice.

A Q U A R A N T I N E OF UNWELCOME IDEAS
The KGB issued preventive warnings in many cases that do not look polit-
ical at first sight. A large number, the largest single category in some years,
involved young Lithuanian women who were looking for a good time,
and found it by going down to the port of Klaipėda. Foreign sailors were
continually in and out of the port, handling Western currency and goods.
These women found themselves on the edge of petty currency violations,
low-level black marketing, and casual prostitution. The KGB aimed to
pick them up and warn them off, sometimes singly, sometimes in groups.
The point of this was not to control petty crime or prostitution as such,
however; what the KGB cared about was the women’s contact with for-
eigners.
A similar stream of cases was provided by Lithuanian sailors who
returned from the West with goods and currency. These gave them entry

186 Hoover Digest  N  2011 · No. 1


tickets into the same underworld of petty criminality and amoral behavior.
In such cases the KGB aimed to impose a cultural and moral quarantine,
stopping the spread of “unhealthy” Western-style values at the border.
For similar reasons, the KGB also tried to control the behavior of Sovi-
et citizens abroad. No one was allowed a passport to leave the country
without careful, intrusive checks into their political record and reliability.
Abroad, Soviet citizens had to conform to fixed rules of behavior. These
included staying with the group and following group leaders’ instructions.
Those who went off on their own, had unauthorized contacts with for-
eigners, or resold foreign goods or currency on their return were reported,
called in, and warned.
Many cases, like that of Algirdas Aulas, were of a more political charac-
ter. The KGB was particularly interested in anyone who expressed nostal-
gia for “bourgeois Lithuania” (i.e., the independent state that had existed
from 1918 to 1940), was indiscreet in letters to relatives abroad, or deni-
grated Soviet leaders or the Soviet way of life.

The subject was made to understand that the KGB knew everything about

him. This could be true only if those closest to him were informers.

Young people were a special problem. While some just wanted more
fun than could be found in official youth clubs, others developed roman-
tic feelings about political freedom and national identity. The KGB was
continually treading on the heels of groups that discussed independent
Lithuania, read nationalist poetry, or planned escapades involving leaflets
and slogans. These were often students. The 1960s and 1970s were a time
of student revolution; if in Paris or Prague, why not in Vilnius? Some stu-
dents were children of the Lithuanian party elite; the party wanted them
to aspire to lead Soviet Lithuania, not independent Lithuania. Sometimes
they needed to be taught a lesson, firmly but carefully, so that they would
return to the path of “healthy” ideas and behavior.
Most preventive warnings were conducted in the privacy of the KGB
offices, but another version of the drama was enacted in semipublic meet-
ings in schools and colleges, offices, or neighborhoods. This was some-
times applied to groups, for example student networks embarking on

Hoover Digest  N  2011 · No. 1 187


nationalist activity or groups of girls who were going down to the ports.
The emotional beating was administered not by KGB officers but by work
colleagues, teachers, fellow students, and community leaders.

H O W W E L L D I D IT WORK?
Preventive warnings seem to have been very effective. In eight years of the
late 1960s and early 1970s, according to KGB figures, more than 120,000
people were “treated” by profilaktika across the entire Soviet Union; only
150 were subsequently taken to court for an actual offense. There is no
way of auditing such figures, but a tenfold or even fiftyfold underestimate
would still represent a recidivism rate that Western penal systems can only
dream about.
On occasion, the system failed. In Lithuania in 1972, for example,
some of the KGB’s worst fears were realized. In March, a petition for
greater religious freedom that had circulated within the church reached
the West, with an astonishing total of 17,000 signatures. Things got worse
in May: a student, Romas Kalanta, burned himself to death in front of
the Kaunas Musical Theater, where the incorporation of Lithuania into
the Soviet Union had been announced in 1940. According to rumor, he
belonged to a nationalist student network, and the members had drawn
lots to decide who should do this. The KGB’s attempts to pre-empt funer-
al demonstrations only inflamed things, and two days of public disorder
took place. This was exactly what KGB surveillance and prevention were
supposed to forestall.
After the event, the KGB had to deal with hundreds of people who had
taken part in demonstrations. Some were demoted at work or taken into
the Soviet army. But the main emphasis fell on putting several hundred
people through the process of profilaktika. A report notes: “A number
were punished administratively. Warning conversations were held with
the majority by the city KGB and internal affairs (i.e. police) agencies.” In
other words, the government acted on the belief that most of those who
took part in the troubles could be put back on the right path.
Another report notes that most of those receiving warnings were young-
er than twenty-five, including many members of the Communist Youth
League. In nearly all cases, it was said, the warning was enough to change

188 Hoover Digest  N  2011 · No. 1


their behavior. “Such measures, as a rule, have positively influenced not
only those preventively warned but also those around them, and have
helped to uncover the factors giving rise to unwanted manifestations, to
eliminate defects, and to improve educational work in the college and
workplace collectives of those being warned.”

Sometimes the emotional beating was administered not by KGB officers

but by work colleagues, teachers, fellow students, and community

leaders.

After this time, Lithuania became quiet again. The KGB returned to
routine operations but continued to watch Lithuanians warily, especially
after the rise of Solidarity in neighboring Poland. This risk assessment was
essentially correct, because a mass opposition suddenly appeared again in
1988, spread widely among Communist Party and Youth League mem-
bers, and led directly to national independence in 1990.

R E T U R N O F THE GLOVED FIST


Preventive warnings were the shield of the Soviet state, rather than the
sword. Their hidden foundation was the KGB agent and informer net-
work. This network carried out the surveillance of society and sent signals
of individual behavior to the KGB to which the system of profilaktika
could respond. It made viable, at least for several decades, a police state
based on surveillance and warnings rather than mass terror. The stability
of this system depended on ceaseless vigilance, however. If the KGB let its
shield down, society could erupt at any moment.
On October 8, 2010, the Russian parliament gave the first reading to
a bill that authorizes new powers for the FSB (Federal Security Service),
the successor to the KGB. It allows the FSB to issue binding warnings to
citizens suspected of creating conditions, through negligence, passivity, or
incitement, in which crimes might be committed or facilitated. A warning
that is ignored can be followed by an unspecified penalty, even though the
actions that led to the warning may not be offenses in themselves.
This draft law restores the legal basis of profilaktika. Since now–prime
minister Vladimir Putin first became president of Russia in 2000, succes-

Hoover Digest  N  2011 · No. 1 189


sive administrations have aimed to stabilize the state’s “power vertical.”
Reinstating preventive warnings is part of this process. These warnings
rely on surveillance and informers for their effectiveness, so the law implies
that the population is being taken back under close, intrusive observation.
If this works as it should, Russian politics will return to its traditional pat-
tern of long periods without change, suddenly and unpredictably broken
when infectious ideas suddenly take hold and people rise up.
Special to the Hoover Digest. A longer version of this essay is available as No. 62 in the Political Economy
Research in Soviet Archives working paper series at http://go.warwick.ac.uk/persa.

Published by the Yale-Hoover Series on Stalin, Stalinism,


and the Cold War is Guns and Rubles: The Defense
Industry in the Stalinist State, edited by Mark Harrison.
To order, call 800.405.1619 or visit http://yalepress.yale.
edu/yupbooks/order.asp.

190 Hoover Digest  N  2011 · No. 1


HOOVER ARCHIVES

Men with a Mission


The Scheinman collection brings to life the story of how two friends,
a white American and a black Kenyan, helped African democracy
bloom. By Tom Shachtman.

In the fall of 1956, William X. Scheinman, a twenty-eight-year-old indus-


trialist, jazz enthusiast, and philanthropist, attended a lecture in Manhat-
tan by twenty-six-year-old Tom Mboya of Great Britain’s Kenya colony,
whose lecture tour Scheinman had helped underwrite for the American
Committee on Africa. This particular lecture was a dud. Scheinman fig-
ured Mboya was exhausted after giving dozens of lectures in a few weeks
about Kenya’s prospects for independence. Introduced to Mboya back-
stage, Scheinman asked if he had ever visited Harlem. Mboya had not,
and so Scheinman, a former publicist for the Count Basie band, took him
uptown. They talked all night.
Scheinman and Mboya soon began to correspond. Their friendship
would continue for the rest of their lives and deeply influence each other
and the futures of their countries. Together they would form the African
American Students Foundation (AASF), which would bring eight hun-
dred East Africans to the United States for college study, almost all of
whom later returned home to build their countries in the first flush of
those countries’ independence. Among those helped by the AASF were
Barack Obama Sr., father of the future U.S. president, and 2004 Nobel
Peace Prize laureate Wangari Maathai.

Tom Shachtman is the author of Airlift to America: How Barack Obama


Sr., John F. Kennedy, Tom Mboya, and 800 East African Students Changed
Their World and Ours (St. Martin’s Press, 2009).

Hoover Digest  N  2011 · No. 1 191


Eighty-one students arrive in New York in 1959, after the first flight to
bring East Africans to study in the United States. Knowing that an inde-
pendent Kenya would require well-educated native bureaucrats, educa-
tors, businessmen, doctors, lawyers, and engineers, Kenyans and their
American allies arranged for the airlifts. The flights made possible the
education of a generation of future nation builders.

192 Hoover Digest  N  2011 · No. 1


The friendship of Mboya and Scheinman and the history of their Afri-
can American Students Foundation are recorded in hundreds of letters,
telegrams, and reports in the Hoover Archives’ recently opened William
X. Scheinman papers.
The firstborn son of a sisal plantation overseer, Tom Mboya had studied
to become a “sanitary inspector” of milk and other agricultural products.
While working in that capacity for the Nairobi city government, he rose in
the union hierarchy. It was the time of what white settlers called the “Mau
Mau uprising”; Africans labeled it an anticolonial independence move-
ment. The colonial government declared an emergency and jailed tens
of thousands of suspected Mau Mau, mostly members of the dominant
Kikuyu ethnic group, along with such politicians as Jomo Kenyatta. A ban
on Kikuyu participation in politics aided the rise of Mboya, who belonged
to the Luo ethnic group. Charming, fluent in five African languages as
well as English, Mboya understood “how harmful to Kenya was the man
who saw only good in his own people and only evil in those of the other
tribes,” as he would write in the autobiographical Freedom and After. Work-
ing across tribal and racial lines, he averted national strikes, which led to an
invitation to attend Ruskin College at Oxford. There he wrote The Kenya
Question: An African Answer, advocating a steady march toward indepen-
dence, democracy, and capitalism. The pamphlet’s popularity, coupled with
Mboya’s increasing reputation as a speaker, led to his American lecture tour.
Bill Scheinman, the second son of a doctor, dropped out of the Bronx
High School of Science at sixteen to join the Navy, taking a new middle
initial, X, to distinguish him from others in his squad whose initials were
also WS. After World War II he attended the University of Kansas, then
spent two years as a professional gambler and a publicist for Count Basie.
Starting an airplane parts firm, Airnav, with a few hundred dollars, he
obtained government contracts lucrative enough to quickly make him a
millionaire. Interested in social justice, he contributed to and was asked
to join the board of the American Committee on Africa (ACOA), which
included many respected civil rights activists and was led by Protestant
minister George Houser. Frank Montero, an African-American real estate
Hoover Archives

entrepreneur and an executive of the National Urban League, became


Scheinman’s closest friend on the board.

Hoover Digest  N  2011 · No. 1 193


During Scheinman and Mboya’s all-night session in Harlem, they dis-
covered similar beliefs about the need for American-style democracy and
capitalism in emerging African states. Africa was a series of battlegrounds
in the Cold War, and Soviet influence was rising; in such colonies as the
Gold Coast (which became independent Ghana in 1957) and Tanganyika
(to become independent Tanzania), the triumph of democracy and capi-
talism were far from assured.

Charming, fluent in five African languages as well as English, Tom Mboya

understood “how harmful to Kenya was the man who saw only good in

his own people and only evil in those of the other tribes.”

On Mboya’s way home he wrote Scheinman twice before returning to


Nairobi and a race for a seat in the parliament. To finance that campaign,
Scheinman sent the money due from the lecture tour, and added some of
his own. By May 9, 1957, Mboya and several other “progressive” candi-
dates had been elected, and Scheinman in a letter urged Mboya to create
with the other elected members a national political party: “The election
has put you in a strategic position where much can be done in testing how
far the government will go [and that] will depend on how effectively some

Hoover Archives
type of national political organization can be developed.”

A P A R T N E R S H I P FOR DEMOCRACY
Scheinman’s growing closeness to Mboya presented an opportunity offered
to very few Americans since the Revolutionary War: to positively influence
the course of a nation struggling to be born. What Mboya obtained from
Scheinman can be seen in his inscription on Scheinman’s copy of Freedom
and After: “To Bill: For everything—encouragement and assistance during
our struggle and especially for the ideas, aims, and goals that we have so
very much in common for democracy and humanity.”
On May 17, 1957, Mboya reported to Scheinman that he had become
the de facto leader of the African elected members, but had also begun
to be attacked in the press. Over the next years, Scheinman continued to
push Mboya and compatriots to “lay down a specific, step-by-step pro-
gram and timetable covering the major outstanding issues such as redis-

194 Hoover Digest  N  2011 · No. 1


Bill Scheinman, shown counseling a student at the 1959 orientation, was a former profes-
sional gambler, a publicist, a jazz enthusiast, and a millionaire industrialist who in the late
1950s threw his support behind social-justice causes.

tribution of the land, constitutional reform, etc., and ending with the
complete attainment of freedom,” and made detailed recommendations,
many of which were ultimately adopted.
Scheinman felt he and his friend were practicing tusikosane, a Swahili
word that meant “let us not misunderstand one another,” as they con-
veyed to each other their innermost hopes and fears. When Mboya and the
elected members returned to Nairobi from a quick trip to London, during
which the group obtained promises from the new colonial secretary, they
were welcomed by tens of thousands, and Tom wrote Bill that “my people’s
affection, trust, and confidence in all its simplicity” was sobering as well
as exhilarating, as it “revealed to me the nature and extent of our respon-
sibility. It revealed to me very clearly that I must never let them down.”

Hoover Digest  N  2011 · No. 1 195


Scheinman continued to stiffen Mboya’s spine, later writing Tom that his
faith in him was based not only on friendship and shared beliefs,

but also because I know that you are a leader who will not compromise for
reasons of expediency or personal advantage. In the midst of the atomic
age and the Cold War perhaps the world at large needs the idealism that is
present in the struggle now taking place in Africa. . . . History has placed
a particularly heavy burden on your shoulders because it would seem that
the manner in which the situation in Kenya works out will also determine
the future of all of East, Central, and South Africa—and wherever a set-
tler minority presently dominates.

Between 1956 and 1958, Mboya frequently requested that Scheinman


buy airplane tickets for individual Kenyans who had won scholarships to
American colleges but lacked money for airfare. Happy to oblige, Schein-
man spent $15,000 for that purpose and also acted as a mentor to the
students, corresponding with them, housing them, and hiring them for
summer work in his New Jersey factory. This led, in late 1958, to the for-
mation of the African American Students Foundation.

Africa was a series of battlegrounds in the Cold War, and Soviet influence

was rising.

President Kwame Nkrumah of Ghana had convened a first pan-Afri-


can conference in Accra, and made Mboya conference chairman, a great
honor. Scheinman and Houser, attending for the ACOA, met in Accra in
December 1958 with Mboya and Gikonyo Kiano, a Berkeley graduate, to
Hoover Archives

discuss bringing many more East African students to the United States.
The best and most economical way, Scheinman suggested, was to charter
a plane. The AASF would underwrite that charter, shepherd the students
to their college destinations, and help them during their stays in America.
Mboya, Kiano, and Kariuki Njiiri would choose the students. Return-
ing to New York, Scheinman asked Frank Montero to assist, and he in
turn recruited labor lawyer Theodore W. Kheel, president of the National
Urban League, and, as student liaison, young Cora Weiss, wife of ACOA

196 Hoover Digest  N  2011 · No. 1


Democratic presidential candidate John F. Kennedy meets with Tom
Mboya, right, at Hyannisport in July 1960. Scheinman flew Mboya to
this meeting in his own plane. During the hard-fought 1960 campaign,
Kennedy’s camp emphasized his support of the student airlift in African-
American newspapers.

Hoover Digest  N  2011 · No. 1 197


Future Supreme Court justice Thurgood Marshall, left, had a strong interest in fostering
democracy in Africa. Here he attends a session of the Kenya Constitutional Conference,
which crafted a constitution for Kenya to use when it gained independence in 1963. Marshall
was a legal adviser to the Kenyan delegation, led by Tom Mboya, who was impressed with
the American’s courtroom success in pursuing civil rights. Scheinman underwrote Mar-
shall’s participation.

board member Peter Weiss. Cora Weiss would later serve as the organiza-
tion’s executive director.
The Nairobi and New York organizers knew very well why the “airlift”
was necessary. The British colonial educational system, a terribly narrow
pyramid, produced only a few hundred high school graduates every year
from a population of 6 million Kenyans, and then sent only a dozen or so
on to higher education. Higher education had to be done abroad because
East Africa had no true colleges, only a technical institute in Uganda. An
independent Kenya would require a cadre of well-educated native bureau-
crats, educators, businessmen, doctors, lawyers, and engineers; in Ghana,
because such a cadre did not exist, Nkrumah had to retain many white

198 Hoover Digest  N  2011 · No. 1


colonial administrators. The willingness of American colleges to offer
scholarships to East Africans made it possible to educate a generation of
future nation builders, even in the teeth of resistance from Great Britain.
Because of that expected pushback, Scheinman, Mboya, and associates
also knew that the airlift must be undertaken privately rather than by
the U.S. government, because the Eisenhower administration was under-
standably reluctant to sponsor a program that went against the wishes of
its closest foreign ally.

“I know that you are a leader who will not compromise for reasons of

expediency or personal advantage,” Scheinman wrote to his friend.

Scheinman and Montero, unable to decide which of three African-


American “entertainers”—singer Harry Belafonte, baseball player Jack-
ie Robinson, or actor Sidney Poitier—should be asked to sign a letter
requesting donations for the airlift, opted to ask all three. They agreed to
sign together; this was a triumph, Scheinman wrote Mboya, because “they
rarely, if ever, allow their names to be used for fundraising purposes.” The
letter brought in enough money to charter the plane. Robinson, retired
from baseball, also agreed to underwrite the expenses of several Kenyans,
Hoover Archives

and to have the AASF administer those scholarships. Martin Luther King
Jr. and groups in New York City, Pittsburgh, Chicago, and Berkeley
pledged to provide room and board for groups of students during their
stays in the United States.
Among the Kenyans considered for AASF assistance, Mboya wrote to
Scheinman on July 16, 1959, were “two for Hawaii.” One of those—
although Mboya did not mention him by name in the letter—was a fel-
low Luo named Barack Obama. Because Obama was going to Hawaii, he
would not be on the plane with the eighty-one going to New York, but
thereafter in Hawaii would receive one of the Jackie Robinson scholar-
ships and additional small grants from the AASF.

P L A N E L O A D OF FUTURE LEADERS
Mboya and Scheinman were adamant that this must be a self-help enter-
prise. The students had to obtain their own scholarships, and, to satisfy

Hoover Digest  N  2011 · No. 1 199


U.S. visa requirements, each had to raise $300—an amount far in excess
of the average East African annual family income. In order to obtain this
cash, students usually sought and obtained help from their neighbors and
communities.
The eighty-one were drawn from ten different Kenyan tribes, plus one
student each from Uganda and Nyasaland. Among them were a Maasai,
a former Kikuyu schoolteacher jailed under the “emergency,” and a home
economics teacher, one of thirteen female students. Meeting the plane,
the American press was keen to know whether Geoffrey ole Maloiy had
killed a lion to become a Maasai warrior, and why eight students would
choose to attend a small, historically black college in Little Rock, city of
recent headline-grabbing struggles with segregation. “I want the experi-
ence,” one said. “It might be useful when I go back home.” As with many
others on the plane, the eight would matriculate at a relatively low-ranked
college. Eventually, most of the airlift students transferred and worked
their way up through the American college system; several of the eight
emerged with doctorates.

The willingness of American colleges to offer scholarships to East Africans

made it possible to educate a generation of future nation builders.

Clippings recounting the 1959 arrival are part of the Scheinman archive;
they include a comment from the Chicago Daily News that was typical of press
Hoover Archives
reaction, calling the airlift program “mud-in-the-eye to the white-supremacy
specialists in Africa who prefer their Africans docile and uneducated. It is
also a powerful rebuttal to Communist propagandists selling the fiction that
Americans are somehow linked with African white supremacists.”
Seventeen colonies in Africa were to become independent in 1960, but
Kenya would not be among them, the British still refusing to cede power.
However, progress was expected at a Constitutional Conference in Lon-
don scheduled for January 1960. Believing that Mboya and his fellow
Kenyan delegates would need a helping hand from the U.S. civil rights
movement, Scheinman recommended Thurgood Marshall, chief counsel
for the NAACP and one of the foremost constitutional lawyers of his day.
Scheinman underwrote Marshall’s participation and accompanied Mar-

200 Hoover Digest  N  2011 · No. 1


Malcolm X, the public face of the Nation of Islam, talks to the African students in 1960 in New
York. Students in this second airlift were introduced to a variety of prominent Americans,
including African-Americans who had conducted sit-ins in the segregated South, college
presidents, and politicians.

shall to London. The conference, and the future Supreme Court justice’s
work on it, was later credited as essential in outlining the steps by which
the British worked with the Africans toward full Kenyan independence.
The success of the 1959 airlift allowed the AASF to dream of bringing
over three or four planeloads of East Africans in 1960. A letter asking
several hundred U.S. colleges for scholarships, sent out by the AASF over
the signature of Mrs. Ralph Bunche, wife of the 1950 Nobel Peace Prize
laureate, was answered enthusiastically and positively. Many institutions
of higher learning were now eager to have East Africans on campus.

Hoover Digest  N  2011 · No. 1 201


Sports legend Jackie Robinson, the man who integrated major-league baseball, was an early
supporter of the student airlifts. Along with Sidney Poitier and Harry Belafonte, he signed a
fundraising letter spelling out “an urgent matter which we are confident will appeal to your
sense of fair play.” Robinson also contributed thousands of dollars of his own money for
scholarships for Kenyans.

Since donations from individuals would not cover the cost of three
planes, the organizers believed that only the U.S. government or large
private foundations like Ford or Rockefeller could make an expanded pro-
gram a reality. Jackie Robinson, now on the AASF board, was close to
Vice President Richard M. Nixon, the presumptive Republican candidate

202 Hoover Digest  N  2011 · No. 1


for president in 1960, and that spring asked Nixon to reverse the State
Department’s refusal to help the airlift. Despite Nixon’s eagerness to do
so—he was the Republican elected official most knowledgeable and con-
cerned about Africa—he made no headway. The large U.S.-based founda-
tions also refused assistance.

Singer Harry Belafonte, baseball player Jackie Robinson, and actor Sidney

Poitier all signed a fundraising letter for the African students.

The AASF then turned to Senator John F. Kennedy, chair of the Africa
subcommittee of the Senate Foreign Relations Committee. Scheinman
flew Mboya and his brother to Hyannisport in his own plane on July 26,
1960, a few days after Kennedy had become the Democratic presidential
standard-bearer, to tell the candidate the airlift story and ask for support.
Kennedy pledged to have his family foundation pay for the airlift, but
wanted the pledge kept quiet. However, the AASF board was informed,
and someone—Robinson, Scheinman believed—reached the Nixon cam-
paign and, over a weekend, a Nixon associate persuaded the State Depart-
ment to reverse its policy and offer to transport the students. Mboya,
given a choice between the two offers, told Scheinman to take Kennedy’s,
as it was more certain.
On the Senate floor, Nixon ally Senator Hugh Scott of Pennsylvania
accused Kennedy of using his money for the airlift in an effort to buy
black votes. Scheinman and Montero supplied Kennedy with materials
for a speech refuting Scott’s claim that the AASF was cavalierly refusing
the State Department’s money. During the presidential campaign, the
Hoover Archives

Kennedy forces emphasized his airlift support in African-American news-


papers. This publicity was later deemed to have played a significant role
in the black community’s high turnout for Kennedy in one of America’s
closest presidential elections.
When Kennedy entered the White House in 1961 and Chester Bowles
became an undersecretary of state, the climate for AASF changed. Schein-
man and Mboya had never wanted to create and control a fiefdom, and had
viewed the AASF as an interim way to fill a need. Now another way was
possible. On June 16, 1961, Scheinman was able to send Mboya a telegram:

Hoover Digest  N  2011 · No. 1 203


SPECIAL MEETING WAS HELD YESTERDAY UNDER BOWLES
DEPUTY AND FIRM DECISION HAS BEEN MADE COM-
PLETELY REVERSING TRADITIONAL NEGATIVE APPROACH
STOP THEY HAVE DECIDED TO MOVE POSITIVELY TO MEET
NEEDS OF ALL AFRICAN STUDENTS ALREADY HERE AS WELL
AS ACCELERATE FLOW NEW STUDENTS YOUR END BEGIN-
NING WITH THIS SEPTEMBER STOP IN BRIEF EVERYTHING
WE WANTED WE GOT STOP

In 1963, Belafonte, Scheinman, Montero, the Weisses, and other AASF


board members attended the ceremonies to inaugurate an independent
Kenya as the special invited guests of the new government. Sixty-seven-
year-old Jomo Kenyatta became the country’s president, and Mboya, cho-
sen to lead an important cabinet ministry, was widely viewed as a likely
Kenyatta successor.

R I P P L E S O F C H ANGE ON TWO CONTINENTS


The correspondence continued and widened. Through his relationship
with Mboya, Scheinman extended his influence and interest to other Afri-
can leaders such as Julius Nyerere, president of Tanzania, and Kenneth
Kaunda, president of Zambia. Mboya also helped Scheinman emotionally
through a divorce and the loss of his fortune, and into a new career as a
stock analyst and a new marriage.
In 1965, Mboya’s economic planning ministry issued African Social-
ism and Its Application to Planning in Kenya, a copy of which he sent to
Scheinman. The “white paper” explained that African socialism was not
the socialism so feared in the West, but rather a plan to ensure that poor
farmers and low-wage Kenyans would not be shut out of property own-
ership and a route to better lives. Mboya was the most capitalistic of the
senior ministers in Kenyatta’s cabinet. Kenyatta, who called the paper “our
bible,” specifically said African socialism would not include nationaliza-
tion of industries.
The white paper’s toughest critic was Barack Obama Sr., who argued in
a lengthy article in the July 1965 East Africa Journal that the plan did not
go far enough in exploring ways to upgrade the lives of the poor. Obama

204 Hoover Digest  N  2011 · No. 1


had recently returned to Kenya after completing coursework for a doctor-
ate in economics at Harvard, and had long since left behind the wife he
had married in Hawaii and their child, Barack Obama II, whom he would
see only once more, during a month’s stay when the younger Obama was
ten. On the basis of Obama Sr.’s critique of the white paper, Mboya hired
him for the ministry.

Said one news report, “It is also a powerful rebuttal to Communist

propagandists selling the fiction that Americans are somehow linked with

African white supremacists.”

Gordon Hagberg, a former consular official in Nairobi who by 1966


was overseeing the student airlift program for the Institute for Interna-
tional Education, sent Scheinman a list of the positions in Kenya then
filled by thirty-six men and women from the 1959 airlift: “It is quite an
impressive list, and fully justifies your foresight in taking early action to
help meet Kenya’s critical manpower needs.” The airliftees were becom-
ing the founding fathers and mothers of Kenya: members of parliament,
cabinet secretaries, founders of colleges, university departments, medical
clinics, engineering firms, conservation districts, communications busi-
nesses, and international banks.
The airliftees also changed American culture. In a dozen instances, they
were the first dark-skinned students to reside on a campus, and, because
of how readily they were able to fit into the schools and the nearby neigh-
borhoods, they smoothed the way for those campuses to then matriculate
African-Americans, and truly integrate. Over time, Americans’ willingness
to educate an entire generation of East Africans influenced their countries
in ways that successfully countered Soviet influence, tilting those coun-
tries to the West for the next fifty years.
By chance, on July 5, 1969, Barack Obama Sr. was the last person
to whom Mboya spoke, on the sidewalk outside a pharmacy in Nairobi,
before the minister was assassinated. The ostensible murderer was soon
found, convicted, and hanged, but Mboya associates continued to believe
that his death had been politically motivated and planned, to prevent the
very popular Mboya from supplanting Kenyatta.

Hoover Digest  N  2011 · No. 1 205


Civil rights activist George Houser, Tom Mboya, Senator Hubert Humphrey,
and Bill Scheinman sit on the steps of the U.S. Capitol in May 1959.

A few days after the assassination, a grief-stricken Scheinman received a


letter from Mboya, posted shortly before he had gone to visit the pharma-
cy. A communication from a secretary subsequently informed Scheinman
that this was the last letter Mboya ever wrote. Scheinman put the Mboya
letter and his handwritten notation of the secretary’s information in a file
together with a 1959 photo of Tom, himself, George Houser, and Senator
Hubert H. Humphrey, on the steps of the Capitol, inscribed by Mboya
to Bill on the back:

206 Hoover Digest  N  2011 · No. 1


In these things we believe, our firm resolve and our deep concern for
the less privileged in Africa and in the world—we dedicate this pho-
tograph. Our friendship and your human and generous sympathy and
understanding is impossible to repay in any form except I hope by jus-
tifying your trust and faith. To this end I will totally commit myself till
VICTORY and FREEDOM be ours. Like every other human being we
all have weaknesses, but at least it will never be said that we did not make
our contribution.
After Mboya’s death, Scheinman continued to care for Mboya’s family,
monetarily and in other ways, while working as a stock analyst and writing
the 1970 best-seller Why Most Investors Are Mostly Wrong Most of the Time.
He restored his fortune and visited Africa yearly. In the 1980s he tried
to spur Kenya to begin fish farming of the Nile perch in Lake Victoria,
meeting with representatives of the Gorton’s seafood company and with
research scientists from American universities to determine if the enter-
prise could be commercially viable and environmentally neutral.
Upon Scheinman’s death in 1999, his family took his ashes to Kenya
and buried them on Rusinga Island in Lake Victoria, next to Tom Mboya’s
mausoleum.
Special to the Hoover Digest.
Hoover Archives

Available from the Hoover Press is Law and Economics


in Developing Countries, by Edgardo Buscaglia and
William Ratliff. To order, call 800.935.2882 or visit www.
hooverpress.org.

Hoover Digest  N  2011 · No. 1 207


On the Cover
The early communist era was not known for gentle imagery. Propaganda
posters overflow with blood, violence, macabre caricatures, shaken fists,
and revolutionary shouting. That is why this poster, commissioned dur-
ing the brief existence of the Hungarian Soviet Republic in 1919, is so
striking. It depicts a man and a boy, huddled together rather pleasantly, in
the glow of a book that drives away the darkness. Its slogan is mundane:
“The books are with the superintendent.” And yet this drowsy summons
to literacy was part of a forceful, carefully tended philosophy. To read was
to be taught; to be taught was to become a citizen and soldier of the new,
communist world.
“The laboring masses thirst after education,” proclaimed Anatoly
Lunacharsky, a writer and art critic who became Soviet Russia’s first peo-
ple’s commissar of enlightenment. Besides promoting approved art and
culture, his Commissariat of Enlightenment created “agitprop”—images
to teach and prod the masses. “Red Army men looking at posters before
battle . . . fight not with a prayer but with a slogan on their lips,” mused
poet and playwright Vladimir Myakovsky, an agitprop creator.
Meantime, Europe witnessed the birth of the Hungarian Soviet Repub-
lic, the first communist regime in the Russian mold. It was to last not
quite five months. It began on March 21, 1919, when Béla Kun over-
threw Mihály Károlyi’s democratic government, itself only four months
old. Eventually, Hungary’s counterpart to Lunacharsky emerged: Jozsef
Pogány, a former high school teacher and war correspondent, now peo-
ple’s commissar of education. During the brief communist reign, Pogány’s
commissariat churned out 680 different propaganda leaflets and handbills
promoting art, literature, education, and culture.
Among them was this poster, the creation of Transylvania-born artist
István Azary Prihoda (1891–1965). Prihoda was an illustrator and copper
engraver who studied at the Budapest Academy of Fine Arts. The poster
was printed by the Franklin Society Press, a Budapest publishing group.
Even as the Hungarian Soviet Republic claimed to shed light, as in the
poster, the regime employed terror and harsh censorship. In Soviet style, it
muzzled its critics and reduced the number of newspapers from fourteen
to two: a morning and evening edition of Vörös Újság (Red News). At the
end, because of shortages, Red News was printed on brown packing paper.
Combat over territory and internal struggles, including a failed coup,
doomed the state. On July 30, 1919, Romanian soldiers broke through
Hungarian lines; Kun and most of his government fled. In the years to
come, Hungary would become an ally of Nazi Germany, a satellite of the
Soviet Union, the stage for another fleeting revolution (in 1956), and
finally, in 1989, the parliamentary republic it is today.
Prihoda’s literacy poster suggests a limit to propaganda, a point ironi-
cally acknowledged by Lunacharsky, the Russian commissar of enlighten-
ment (and a victim as well as perpetrator of propaganda: his name was
posthumously erased from the party history during the Great Terror).
“The government cannot give it [education] to them, nor the intelligent-
sia, nor any force outside themselves,” he said. “Schools, books, theatres,
museums, and so on can only be aids. The people themselves, consciously
or unconsciously, must evolve their own culture.” As Hungary clearly did.
—Research by Yael Roberts
hoover institution on war, revolution and peace

Board of Overseers
Marc L. Abramowitz Herbert M. Dwight
Victoria (Tory) Agnich William C. Edwards
Frederick L. Allen Gerald E. Egan
Esmail Amid-Hozour Leonard W. Ely
Jack R. Anderson Charles H. (Chuck) Esserman
Martin Anderson Jeffrey A. Farber
Javier Arango Clayton W. Frye Jr.
George L. Argyros Stephen B. Gaddis
Robert G. Barrett James G. Gidwitz
Frank E. Baxter Cynthia Fry Gunn
Donald R. Beall Arthur E. Hall, CFA
Stephen D. Bechtel Jr. F. Philip Handy
Peter B. Bedford Everett J. Hauck
Peter S. Bing W. Kurt Hauser
Joanne Whittier Blokker John L. Hennessy*
William K. Blount Warner W. Henry
James J. Bochnowski Heather R. Higgins
Wendy H. Borcherdt Kenneth H. Hofmann
William K. Bowes Margaret Hoover
Richard W. Boyce Allan Hoover III
C. Preston Butcher Preston B. Hotchkis
Richard Call Philip Hudner
James J. Carroll III Leslie P. Hume*
Robert H. Castellini William J. Hume
Joan L. Danforth Walter E. Hussman Jr.
Paul L. Davies Jr. George B. James II
Paul Lewis (Lew) Davies III Gail A. Jaquish
John B. De Nault Charles B. Johnson
Kenneth T. Derr Mark Chapin Johnson
Dixon R. Doll Franklin P. Johnson Jr.
Susanne Fitger Donnelly Tom Jordan
Joseph W. Donner Steve Kahng
William H. Draper III Mary Myers Kauppila

210 Hoover Digest  N  2011 · No. 1


David B. Kennedy Richard M. Scaife
Donald P. Kennedy Roderick W. Shepard
Raymond V. Knowles Jr. Thomas M. Siebel
Donald L. Koch George W. Siguler
Henry N. Kuechler III William E. Simon Jr.
Peyton M. Lake Boyd C. Smith
Carl V. Larson Jr. John R. Stahr
Allen J. Lauer Alan G. Stanford
Bill Laughlin William C. Steere Jr.
James G. (Skip) Law Thomas F. Stephenson
Howard H. Leach G. Craig Sullivan
Walter Loewenstern Jr. Robert J. Swain
William J. Lowenberg W. Clarke Swanson
Donald L. Lucas Curtis Sloane Tamkin
Richard A. Magnuson Tad Taube
Robert H. Malott Robert A. Teitsworth
Frank B. Mapel L. Sherman Telleen
Haig G. Mardikian Terence W. Thomas
Shirley Cox Matteson Charles B. Thornton Jr.
George E. McCown Thomas J. Tierney
Bowen H. McCoy Joy Timken
Burton J. McMurtry William R. Timken Jr.
Roger S. Mertz David T. Traitel
Harold M. Messmer Jr. Don Tykeson
Jeremiah Milbank III Victor Ugolyn
John R. Norton III Gregory L. Waldorf
Robert J. Oster Jeanne B. Ware
Jack S. Parker Dean A. Watkins
Joel C. Peterson Dody Waugh
James E. Piereson Jack R. Wheatley
Billie K. Pirnie Lynne Farwell White
Jay A. Precourt Betty Jo Fitger Williams
George J. Records Norman (Tad) Williamson
Kathleen (Cab) Rogers Kay Harrigan Woods
David M. Rubenstein Paul M. Wythes
James N. Russell *Ex officio members of the Board

Hoover Digest  N  2011 · No. 1 211


The Hoover Institution on War, Revolution and Peace was established at Stanford University
in 1919 by Herbert Hoover, a member of Stanford’s pioneer graduating class of 1895 and the The Hoover Institution gratefully acknowledges the support of
thirty-first president of the United States. Since 1919 the Institution has evolved from a library its benefactors in establishing the communications and information
and repository of documents to an active public policy research center. Simultaneously, the dissemination program.
Institution has evolved into an internationally recognized library and archives housing tens of
millions of books and archival documents relating to political, economic, and social change.
Significant gifts for the support of the Hoover Digest
The Institution’s overarching goals are to are acknowledged from
• Understand the causes and consequences of economic, political, and social change
Bertha And John Garabedian Charitable Foundation

• Analyze the effects of government actions relating to public policies


The Jordan Vineyard And Winery
• Generate and disseminate ideas directed at positive public policy formation
using reasoned arguments and intellectual rigor, converting conceptual insights Nancy And Charles Munger
into practical policy initiatives judged to be beneficial to society
Joan And David Traitel
Ideas have consequences, and a free flow of competing ideas leads to an evolution of ❖
policy adoptions and associated consequences affecting the well-being of society. The Hoover The Hoover Institution gratefully acknowledges generous support
Institution endeavors to be a prominent contributor of ideas having positive consequences. from the Founders of the Program on
In the words of President Hoover,
American Institutions and Economic Performance
This Institution supports the Constitution of the United States, its Bill of Rights,
and its method of representative government. Both our social and economic Tad And Dianne Taube
systems are based on private enterprise from which springs initiative and ingenuity.
Taube Family Foundation
. . . The Federal Government should undertake no governmental, social, or eco-
nomic action, except where local government or the people cannot undertake it for Koret Foundation
themselves. . . . The overall mission of this Institution is . . . to recall the voice of
and a Cornerstone Gift from
experience against the making of war, . . . to recall man’s endeavors to make and
preserve peace, and to sustain for America the safeguards of the American way of Sarah Scaife Foundation
life. . . . The Institution itself must constantly and dynamically point the road to

peace, to personal freedom, and to the safeguards of the American system.
Professional journalists are invited to visit the Hoover Institution to share their
perspectives and engage in a dialogue with the Hoover community. Leadership
To achieve these goals, the Institution conducts research using its library and archival
assets under the auspices of three programs: Democracy and Free Markets, American Institu- and significant gift support to reinvigorate and sustain the
tions and Economic Performance, and International Rivalries and Global Cooperation. These William and Barbara Edwards Media Fellows Program
programs address, respectively, political economy abroad, political economy domestically, and are acknowledged from
political and economic relationships internationally.
William K. Bowes Jr.
❖ ❖ ❖
William C. Edwards
The Hoover Institution is supported by donations from individuals, foundations, cor-
porations, and partnerships. If you are interested in supporting the research pro- Charles B. Johnson
grams of the Hoover Institution or the Hoover Library and Archives, please contact
the Office of Development, telephone 650.725.6715 or fax 650.723.1952. Gifts to the Tad and Cici Williamson
Hoover Institution are tax deductible under applicable rules. The Hoover Institution is
part of Stanford University’s tax-exempt status as a Section 501(c)(3) “public charity.”
Confirming documentation is available upon request.
HOOVER DIGEST RESEARCH AND OPINION ON PUBLIC POLICY
HOOVER DIGEST · 2011 · N O. 1 RESEARCH AND OPINION
ON PUBLIC POLICY
2011 • NO. 1 • WINTER
The Economy

Politics

Health Care

Social Security

Growth of Government

Property Rights

Education

Terrorism

The Military

Islamism

Afghanistan

Iraq

The Middle East

Egypt

China

Interviews

Values

History and Culture


2011 . NO. 1

Hoover Archives

T H E H O O V E R I N S T I T U T I O N • S TA N F O R D U N I V E R S I T Y

Anda mungkin juga menyukai