Opinion

Nicholas Wapshott

Healthcare.gov: Private shame, public blame

Nicholas Wapshott
Dec 10, 2013 05:24 UTC

The glitches that have dogged the government’s universal healthcare site have cast a dark shadow over the presidency and over the Democratic Party as they enter an election year when they could easily lose the Senate. The failure of anyone within the Obama administration to notice in the three long years of preparation that something was seriously amiss is an abject failure of management that has led to a self-inflicted political catastrophe.

The inept rollout has allowed the president’s enemies to claim that that is what comes of allowing the government to interfere in the healthcare market. Obamacare’s troubled birth is cited as irrefutable evidence that the public sector is particularly ill-fitted to deal with something as important as healthcare. Had the process been left to the private sector, they argue, the website would have worked and Americans been better served.

But hold on. Obamacare may be a government-run enterprise, but the profound errors in building the site were overwhelmingly due to the incompetence of the private sector.

This is not just an example of a public enterprise failing, but the government investing too much faith in the efficiency of the private company that failed to build and deliver an operating site in good time. In the interest of political point scoring, private sector inadequacies are being passed off as inherent faults of the public sector.

The Department of Health and Human Services was in the position familiar to any hapless client when faced with buying software or devising a website. Public servants provided a specification to established web designers, only to find themselves adrift on a sea of incomprehensible technical jargon, mendacity, foolhardiness and obfuscation.

What Mandela meant

Nicholas Wapshott
Dec 5, 2013 22:04 UTC

Nelson Mandela will be remembered as the person who, more than any other, brought an end to apartheid, the heartless policy of “separate development” in which white, black and South Asian South Africans were obliged to live apart. It is part of his towering achievement that the very notion of racial segregation is anathema to democrats throughout the civilized world. He will be mourned as a freedom fighter and the father of his nation, whose wisdom, patience and courage tormented his oppressors and finally drove them to accept that racial discrimination should have no place in a system of government.

Along with eight other conspirators, in 1964 Mandela was accused of sabotage and armed insurrection against the apartheid state. (He admitted sabotage but denied conspiring to violently overthrow the government.) He spent the next 18 years caged in primitive conditions on Robben Island and a further six in Pollsmoor Prison. Outside the prison walls, the government insisted on “grand apartheid,” the creed that insisted that whites, “natives,” “Asians” and “coloreds” should live in separate areas. Education, medicine, public services, and public spaces and buildings were similarly apportioned by race.

The genius of Mandela lay in the power of his extraordinary character. From his lone prison cell, where he was allowed a single outside visitor and one heavily censored letter every six months, his example was used to undermine the legitimacy of apartheid. Outside of South Africa, his imprisonment became a symbol of racial oppression. His release from prison in October 1989 led directly to the collapse of white rule. His election as president concluded a dark and bitter chapter in the African continent’s history.

Does Japan show us the way out of secular stagnation?

Nicholas Wapshott
Dec 2, 2013 16:46 UTC

Is America’s economy adrift in the doldrums? Lawrence Summers, perhaps the nation’s most inventive applied economist, thinks so. Speaking to an IMF forum last month, he described America’s current condition as “secular stagnation” in which we are stuck in a rut of weak demand, low growth, and low employment. This is the “L-shaped” recovery, or — strictly speaking, non-recovery — some warned about after the financial freeze of 2008. It is also sometimes dubbed “the new normal.”

“We may well need in the years ahead to think about how we manage an economy in which the zero nominal interest rate is a chronic and systemic inhibitor of economic activities, holding our economies back below their potential,” Summers said. The phenomenon is not new; after all, before 2008, when Alan Greenspan had ensured endless cheap money through low interest rates, leading to asset bubbles, the real economy did not respond.

“Even a great bubble wasn’t enough to produce any excess of aggregate demand,” Summers said. “Even with artificial stimulus to demand, coming from all this financial imprudence, you wouldn’t see any excess.”

The twisted politics of enforced economic pain

Nicholas Wapshott
Nov 25, 2013 16:16 UTC

By the end of the year, American taxpayers will no longer be part owners of General Motors. That is good news all around. Nationalization of a private company rarely makes economic sense. Even for red-blooded socialists, the ownership of the means of production has long been an empty threat, a totemic cul de sac that for years led socialism down the wrong path. Regulation is a far better way to ensure an industry works for the public good.

The federal government is not best-suited to administer a private industry. The emergency that once threatened American motor manufacturing has passed. State intervention has forced much-needed restructuring into a hidebound business riddled with grandfathered practices and anachronistic benefits. Intervention avoided the deleterious knock-on effects of the collapse of a major domestic industry, helped the external balance of payments, and saved thousands of skilled jobs in good time.

The return of GM to wholly private hands will no doubt set off hand-wringing from those who would have preferred GM to go properly bust during the financial panic of 2008, then restructure itself without state help. Those who opposed Steven Rattner’s motor rescue argue that government intervention to prevent a company from going broke interferes in a timeless process of rebirth as natural as the change of the seasons.

The strange convergence of Bernanke, Hayek and Bitcoin

Nicholas Wapshott
Nov 21, 2013 16:05 UTC

Every time Federal Reserve Chairman Ben Bernanke opens his mouth, the markets move. But few could have guessed that in an offhand remark he would  add legitimacy to the Bitcoin, the virtual currency that competes with the American dollar as a reserve currency and an international trading medium.

Yet that is what he did when he held out a friendly hand to the notion of fantasy currencies in a letter to the Senate Committee on Homeland Security and Government Affairs. Understandably, this improbable endorsement from the guardian of the mighty dollar sent the value of the Bitcoin soaring.

Until recently, the Bitcoin was seen as a novel, experimental, somewhat piratical cyberspace Monopoly money that has proved useful in moving money around the world without the hampering and costly help of banks, which slow things down, waste days while the cash lingers in limbo, and take a hefty slice of every transaction. Bitcoin’s headiest moment was as the currency of choice of the Deepnet black market website Silk Road, which sold everything from crack cocaine to child porn, and was closed down by the FBI last month.

Hooray for inflation

Nicholas Wapshott
Nov 13, 2013 20:25 UTC

There have been some extraordinary headlines in recent days. Here’s the Economist: “The perils of falling inflation.” Here’s the Financial Times: “The eurozone needs to get inflation up again.”

For those with memories of hyper-inflation and “stagflation” in the 1970s, these cogent pleas for higher prices is heresy, an irresponsible clamor for the return of an ever-changing fiscal landscape that led to widespread misery and economic turmoil.

A little history. By the mid-’70s the Western world was engulfed in an inflation typhoon — with prices rising rapidly and out of control. As companies increased prices to keep up with the higher costs of basic raw materials — such as oil, deliberately hiked way beyond the norm by the Organization of the Petroleum Exporting Countries — trade unions demanded higher wages to protect their members’ standard of living. This led to higher costs, and higher prices, and so on.

No, austerity did not work

Nicholas Wapshott
Nov 7, 2013 18:09 UTC

There have been a lot of sighs of relief in Europe lately, where countries like Britain and Spain, long in recession, have finally started to grow. Not by much, nor for long. But such is the political imperative to suggest that all the misery of fiscally tight economic policies was worth the pain that there are tentative claims the worst is now over and, ipso facto, austerity worked.

Hold on a minute. Growth is good. Growth is what allows countries to pay down their national debt by increasing economic activity, putting the unemployed to work and making people prosperous enough to pay taxes. But gross domestic product growth alone is not enough to provide adequate sustained prosperity if it does not also lead to significant job growth.

Take Spain, which has just emerged from two years of recession by posting a third quarter growth rate of 0.1 percent. Technically the Spanish slump is over. But a glance at their job figures shows the country has a long way to go before it can genuinely say it has escaped the diminishing effects of austerity — in the form of tight fiscal policies, public spending cuts and labor and entitlement reforms — imposed indirectly by Germany through the European Union.

Enlightening the puzzled Republicans

Nicholas Wapshott
Oct 31, 2013 18:00 UTC

Moderate Republicans cannot fathom what has happened to their party.

Once a happy band of no-nonsense, pro-business conservatives, cautious in everything from money to marriage — including their wary response to the onward march of 1960s liberal social values — they were prepared, within reason, to trim their policies to match the voters’ mood. After all, to achieve anything in government you first have to win elections.

But that was before the revival in fundamental conservatism that has turned the GOP from a pragmatic party to a collection of inward-looking ideological tribes. Republicans puzzled by the rise of dogma and division in their party can find answers in a new survey that explains how large the factions are and what they think. They will be surprised by the findings.

The GOP has long been considered a three-legged stool: big business, Southern evangelical Christians and anti-government Westerners. But, largely since the world financial panic of 2008-9, these three have been joined by two new aggressive, popular movements: the Tea Party and the libertarians.

Can Tea Party afford the shutdown cost?

Nicholas Wapshott
Oct 23, 2013 20:35 UTC

Victories come in many sizes. The Battle of the Little Bighorn, for example, at first seemed an overwhelming win for the Sioux. But it soon became clear their success would not last. Who really won the Alamo? The Mexicans? Try telling that to a Texan. So, who won the Battle of the Shutdown 2013? The conventional view is that the Tea Party Republicans were seen off by the congressional leadership in both parties. Having made their protest, disrupted the nation and cost Americans a great deal in anxiety, time and treasure, they lost the battle — but promise to resume the war another day. Perhaps as early as January.

While moderation appears to have triumphed and dogmatic extremism held at bay, the 800,000 federal workers and those who need their services were the obvious losers of the budget and debt ceiling battle. But so were those who hoped to derail the Affordable Care Act, freeze federal government spending and balance the budget.

A complete audit of the shutdown, however, shows the Tea Partiers suffered a more profound setback than they would like to admit — or perhaps even know. The exact philosophy of the Tea Party is hardly clear, but in as much as there is a manifesto it states: the government is too big and should shrink; government borrowing is out of control and the nation should live within its means; big business executives are unfairly propped up by government even when they make sizable mistakes; the government should stop manipulating the dollar through quantitative easing, and taxes should be reduced but never be raised.

The GOP’s age of unreason

Nicholas Wapshott
Oct 10, 2013 21:00 UTC

If the federal government fails to pay its bills and the interest on its borrowing by the middle of the month, it is the overwhelming verdict of the nation’s smartest economists that financial mayhem will ensue.

Until this week, no one on either side doubted that. In fact, it was implicit in the Republican case for using the debt ceiling as a lever to cut public spending. Only with the threat of Armageddon in the markets and the prospect of a return to the Crash of 2008 did the Republican bartering made any sense.

Now the looser cannons on the GOP deck have changed their tune. At last count, seven House members and six senators have suggested the government can remain shut down in perpetuity and America can fail to make interest payments on its borrowing and nothing much will happen.

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