Opinion

Nicholas Wapshott

Has military Keynesianism come to an end?

Nicholas Wapshott
Mar 15, 2013 15:34 UTC

The outcome of the sequester ultimatum appears to have taken everyone by surprise. Two long summers ago, when the president and House speaker John Boehner conjured a prospect so terrible that even spending on defense would be deeply cut, they both assumed Congress would buckle rather than approve such a blow to the nation’s pride. According to Bob Woodward’s The Price of Politics, Boehner said, “Guys, this would be devastating to Defense. This is never going to happen.”

But neither man appears to have taken account of the clearly stated views of the Tea Party. There are few better ways of appreciating how the Republican Party has transformed in the last two years from a party of defense hawks to a party of deficit hawks than tracking how the sequester has turned from a threat to the nation’s defenses to an unparalleled opportunity to bring the government to heel.

If Obama and Boehner had taken heed of the strident voices offstage, they might have guessed their ostensibly idle threat to the Pentagon would be taken as a chance to reduce the size of the federal government. They didn’t, and the sequester is upon us, promising, according to the Central Budget Office and IMF, to throw 750,000 out of work and slow down already anemic economic growth by 0.6 points. No surprise there: If you take money out of an economy, activity flags and the economy shrinks.

What is surprising about the Tea Party calling the sequester bluff is not so much that fiscal conservatives are doing just what they said they would – one thing about a short, simple, absolutist dogma is that the slightest departure from the true creed is readily observable – as the quiet emanating from the defense industry, the defense hawks in Congress, the defense unions and the defense lobbyists. The whole panoply of vested interests surrounding defense that has ensured that federal spending on guarding our shores and keeping tyranny at bay has, since Eisenhower, become the main Keynesian engine of economic growth. Does the hushed response to this most profound assault upon defense spending mean the end of Keynesian militarism?

Keynes, long dead before American defense hawks adopted him as their patron saint, offered few views on whether spending on war was an appropriate use of his remedies for boosting economic activity. He had jokingly advocated absurd and wasteful ways of spending public money to increase demand, including filling bottles with bank notes, burying them in a hole, then paying others to dig them up. But as someone who helped the British Cabinet run the ruinous and murderous World War One, Keynes knew that spending on war was hardly as beneficial to society as building new roads and homes. But in the midst of a collapse in aggregate demand, any large-scale spending, including on war materiel, is welcome. In 1939, as Congress was granting Franklin Roosevelt billions to arm America for war against the Axis dictators, Keynes wrote, “If expenditure on armaments really does cure unemployment, a grand experiment has begun. We may learn a trick or two which will come in useful when the day of peace comes.”

What will 11 million new citizens mean?

Nicholas Wapshott
Feb 1, 2013 20:45 UTC

The United States is on the threshold of comprehensive immigration reform. Between the president and the coalition in the Senate, it looks likely it will pass, which means that within a few years we shall have 11 million new Americans with full voting rights. What will their emergence from the shadows do to our economy? And, perhaps more importantly, what will it do to our politics? Who stands to gain from this enormous influx of new blood into our democratic system?

The numbers who are here illegally have gone down since John McCain last tried to introduce reform measures in 2007. As the economy slumped after the financial crisis of 2008–09, migrant workers stayed at home and undocumented workers who could not find work began to repatriate themselves. Record numbers were also deported. Today, according to the 2010 census, 11.1 million illegals are in our midst. Assuming that Congress, led by a bipartisan coalition in the Senate, responds to the president’s appeal to seize the moment, in the next few years we will welcome them as full citizens. That means 11.1 million more people to be taxed and buy health insurance, and 11.1 million more able to vote.

Contrary to the common perception, a majority of illegal immigrants both pay taxes and make Social Security payments. The term “undocumented workers” is a misnomer. To get a job legally they need papers, which entails assuming identities to get official papers or obtaining forged documents. Either way, they are not the out-and-out shirkers opponents of immigration make them out to be. According to the most recent figures of the Congressional Budget Office, compared to the commonplace tax-dodging techniques employed by documented Americans, the majority of illegals are already model citizens.

Can Republicans tell the truth to themselves?

Nicholas Wapshott
Jan 29, 2013 20:14 UTC

To understand how far the republic founded by the famously truthful George Washington has become a mendacious nation, you need look only as far as the Weather Channel. According to a report, the meteorologists there deliberately and routinely tell untruths about the prospect of rain so that when it turns out to be sunny the network’s viewers feel unexpectedly happy. The practice, it seems, is widespread among weather forecasters. Joe Sobel, a meteorologist for Accuweather, tells his audience it will rain when he knows the likelihood is small because “when the forecast is for good weather and it’s bad, I certainly will get more grief than if the forecast is for bad weather and it’s good.”

When the accuracy of even weather forecasting, a once factual, rigorous, scientifically determined service relied upon by everyone from farmers to sailors, is compromised for fear of causing offense, America has reached a state of quotidian deceit even George Orwell did not reckon on. Lying over the weather is not the compulsive lying of Richard Nixon: “People have got to know whether or not their President is a crook. Well, I’m not a crook.” Or the visceral lying of Lance Armstrong, who even lied when he confessed to Oprah Winfrey, using the lying words, “I can’t lie to you …” and “I’m not going to lie to you or to the public …” Nor is it even the crooked lies of the price-fixing bankers who misled the markets and cost us all a pretty penny when they concocted the Libor lending rate to suit themselves.

Lying about the weather to please the masses is not so much lying as pandering on a prodigious scale. Bowing down before the voters has become so commonplace in Washington that when someone says something from the heart that is likely to provoke contemplation or discussion, they are dismissed as foolhardy. The president’s second inaugural address was full of soaring language and high ideals that reflected his ambitions for the nation. But Barack Obama was so liberal in his vision that the speech was derided by opponents as un-presidentially divisive and absurdly idealistic. The same charge was made against Ronald Reagan’s first inaugural address from the Democratic side. How dare the president say what he believes and where he is heading? Tell us what we like to hear, or at the least say something that will not offer hostages to fortune. Please pander more and stop talking like a leader.

Immigration reform could tear GOP apart

Nicholas Wapshott
Jan 25, 2013 17:06 UTC

Immigration reform is being discussed again on Capitol Hill. At his inauguration, President Barack Obama declared, “Our journey is not complete until we find a better way to welcome the striving, hopeful immigrants who still see America as a land of opportunity.” Senior Republicans, too, seem ready to make a deal. They sorely need to do so, because Mitt Romney’s damaging policy of self-deportation ensured that Hispanics voted overwhelmingly for Obama, and demographic changes mean unless the party changes tack fast it will keep losing. But there is an enormous gulf between what the Republicans need to do and what the base will go along with. What is at stake is whether the GOP remains a party of government or becomes a mere protest movement.

Although he does not have a majority in the House, the president appears in no mood to compromise. He wants to help create a more tolerant America and believes he has the country behind him. Recent polling confirms that his views on gay marriage, gun control, abortion, immigration and other social issues all chime with a majority of the electorate, and he is determined to press his case. His inauguration speech spelled out the direction he is heading in, and his Feb. 12 State of the Union address is expected to chart the course. He appears to be relishing the chance to embarrass the Republicans if they stand in the way of progress. Catching Obama’s new sense of purpose, House Speaker John Boehner has become convinced the president wants “to annihilate the Republican Party” and “shove [it] into the dustbin of history.”

Senior Republicans appear to be aware that they are out of step with America and need to make significant changes to policies and their public image if they are to stand a chance of winning the midterm elections in 2014 or the White House in 2016. Former Secretary of State Condaleezza Rice believes “the Republican Party certainly has to stop turning off large segments of the population” and urges it to face “the big issue,” immigration reform. Says Senator Lindsay Graham (R.-S.C.): “We’re in a death spiral with Hispanic voters because of rhetoric around immigration.” Senator John McCain (R-Ariz.), who burned his fingers pushing for immigration reform in 2006-07, thinks “we have to do immigration reform … There is no doubt whatsoever that the demographics are not on our side.” Conservative commentator Seth Mandel suggests it may be too late: “When they arrived here with nothing but the clothes on their back, desperate for a chance at a better life for themselves and their children, one party said, ‘Come on in,’ and the other said, ‘Turn around and go back.’”

Getting Europe out of its mess

Nicholas Wapshott
Jan 23, 2013 20:57 UTC

When the 2012 Nobel Peace Prize was awarded to the European Union, jaws dropped from Belfast to Belgrade. The citation said the EU had helped transform Europe “from a continent of war to a continent of peace,” and that its “most important result” was “the successful struggle for peace and reconciliation and for democracy and human rights.” Many think that is a strange way of interpreting the last 100 years, given that the maintenance of a free Europe since the end of World War Two is due more to the thankless diligence of NATO and the unsung generosity of the United States.

The timing of the award was also puzzling. The very existence of the European Union is under severe threat as it struggles to maintain its common currency, the euro. To protect the euro, EU bureaucrats in Brussels and political leaders in Berlin and Paris have made the poorer member nations the target of austerity measures that threaten to undermine those nation’s democracies. Instead of celebrating the EU as a benign force for peace and trans-national cohesion, the Nobel Committee might just as easily have condemned it for using the global financial crisis as a pretext to double down on its grand plan to forge a single European state. The award by the notionally apolitical Nobel Committee – whose host country, Norway, chose in 1972 and again in 1994 not to join the EU – appeared to be a desperately needed vote of confidence for an ambitious dream that has turned into a divisive nightmare.

Neither awards nor plaudits will save the European Union. Central bankers alone won’t fix it, either. That’s because a lasting remedy for what’s ailing the region must be political as well as financial. The modern history of Europe largely revolves around the bitterly fought and seemingly eternal contest between France and Germany, with Europe’s third great power, Britain, sometimes wisely and often mischievously maintaining the balance. Both of the 20th century’s ruinous world wars and several other destructive conflicts stemmed from Franco-Prussian enmity. It was primarily to bring this perennial conflict to an end that the EU founders – French diplomat Jean Monnet, French statesman Robert Schuman and the Belgian premier Paul-Henri Spaak – envisioned a Europe in which the nations were bound ever closer by an economic pact. The other unstated aim was to create a single European state to rival the United States in population and wealth, and, as time went on, to compete with the burgeoning economies of India, China, Russia and Brazil.

The looming currency war

Nicholas Wapshott
Jan 23, 2013 20:34 UTC

Are we about to be sucked into a currency war? As the world economy continues to splutter, countries are looking for ways to break out of the mire. One way of gaining popularity is to promote growth through making exports cheap. The key to an export-led recovery is to devalue a national currency, thereby lowering the prices of exports. By allowing its currency price to slide, a nation can launch a surreptitious trade war against its commercial rivals. Western nations have for years accused China of taking an unfair trade advantage by keeping its currency, and therefore export prices, artificially low. By allowing their currencies to devalue, Western countries are fighting back.

There are indications that the early skirmishes of a currency war have begun. This is a dangerous business. If countries undercut their competitors’ prices by devaluing their currencies, the stability of the world economy is put at risk. A full-fledged currency war invites deflation, a ruinous downward spiral of prices that in turn invites a worldwide recession. The cause of the conflict lies in the failure of the chosen measure to offset a Great Recession since 2008: wave after wave of “quantitative easing” (QE) by central banks to beat stagnant growth. QE was intended to funnel cheap money into national economies to boost economic activity and increase aggregate demand, thereby creating growth and jobs. But persistent QE has had an important unintended consequence. It has removed a key measure by which traders judge sovereign interest, or the ability of a country to pay its way.

Before the financial freeze of 2008-9, traders who worried about a country’s solvency would decline to buy government bonds or insist on a punishingly high return. That mechanism became confused when, to head off a precipitous Great Recession, finance ministers from the leading industrial nations agreed to pump vast amounts of newly minted money into their economies until the danger had passed. QE, or the buying of government bonds by central banks, was intended to reduce general borrowing costs and allow businesses to borrow cheaply to invest, and thereby employ the jobless.

How the NRA hijacked the Republican Party

Nicholas Wapshott
Jan 18, 2013 15:38 UTC

There are few better ways of grasping how far the Republicans have abandoned the middle ground, where they used to win elections, than the way their leaders have become agents of the gun industry. Conservatives used to consider themselves law-abiding citizens who put great store by the permanence of institutions, by the rule of law, and by the traditional caution and common sense of the sensible majority. Such devotion to stability, continuation, and moderation explains why so many conservatives were alarmed when the social revolution of the Sixties erupted. Suddenly, it seemed, everything was on the move. Children no longer believed in the wisdom of their elders, nor obeyed the unwritten rules that had guided every previous generation. The days of everyone knowing their place and remaining in it were overthrown and it appeared that anarchy had broken out in America.

Nowhere was this more evident to traditional conservatives than in the way African-Americans responded to the civil rights legislation enacted by Lyndon Johnson. Instead of being grateful for the overdue democratic changes wrested from reluctant Southern lawmakers, a significant number of African-Americans demanded more profound change. There were riots in Los Angeles, Detroit, and other major cities which were met by calls from conservatives for tighter gun controls. The Black Panthers, dressed as soldiers and carrying guns, as was their right under the Second Amendment, demanded that African-Americans be allowed to live in a separate self-governing state. In May 1967, 30 Panthers took loaded rifles, shotguns, and pistols into the California State Capitol to protest against new gun control laws. The California governor, Ronald Reagan, declared: “There’s no reason why on the street today a citizen should be carrying loaded weapons.”

After John F. Kennedy, Robert Kennedy, and Martin Luther King were assassinated, Johnson joined with conservatives to pass the federal Gun Control Act that stipulated a minimum age for gun buyers, restricted traffic across state lines to federally registered gun dealers, limited the sale of certain destructive bullets, required guns to carry serial numbers, and added drug addicts and the insane to those, like felons, who were already forbidden to own guns. When it transpired that Lee Harvey Oswald had bought the rifle that killed the president mail order from the pages of the National Rifle Association magazine, the NRA Executive Vice-President Franklin Orth backed an end to mail-order sales. “We do not think that any sane American, who calls himself an American, can object to placing into this bill the instrument which killed the president of the United States,” he said.

Austerity still doesn’t work

Nicholas Wapshott
Jan 16, 2013 16:26 UTC

Does austerity work? As many Tea Party activists and conservative economists suggest that the solution to America’s economic ills is a large spoonful of the bitter medicine of austerity, it is a question worth asking. A few months of misery may be worth it if the result is strong growth and full employment. First witness for the austerity prosecution is Latvia, for which some extravagant claims are being made. The economy of the former Soviet satellite and current member of the European Union was nose-diving in 2008-9. Now it is growing again.

Latvia’s premier, Valdis Dombrovskis, has written a self-congratulatory book, How Latvia Came through the Financial Crisis, with the help of Anders Aslund of the Peterson Institute, who claims that if America followed the Latvian example we would all be better off. Aslund extrapolates from the Latvian example, “Keynesian thinking has been tested, and it has failed spectacularly.” So what does Latvia’s experience of austerity really tell us? As you might expect, things are not quite as rosy as they are made out to be.

Back in 2008-9, Latvia was at its lowest ebb, losing a fifth of its output in just two years. Its second largest bank went bust, leaving thousands of Latvians without their lives’ savings. Unemployment was above 20 per cent, and 40 per cent among the young. Credit froze and construction, which prior to 2008 was booming thanks to low interest rates, collapsed. In December 2008, the Latvian government won a €7.5 billion bail-out from the IMF, the World Bank, and the EU – worth more than a third quarter of its annual GDP of $28.25 billion – on the condition that it introduce “structural reforms” and a generous, temporary safety net to offset the harsh effects of austerity. The reforms meant slashing public spending from 44 per cent of GDP to 36 per cent and removing legal safeguards from trade unions to reduce labor costs. By early 2009, violent rioting erupted on the streets of the capital, Riga.

The Oscars: Reflections of America

Nicholas Wapshott
Jan 11, 2013 21:03 UTC

When the Oscar presenters rip open the envelope for best picture at the Academy Awards next month they will be offering a rare glimpse into the soul of America.

Movies have held a special place in American cultural life since they first flickered on sheets stretched across theater stages. And the pictures and people chosen to receive the Oscars have come to represent an artistic aristocracy to revere and admire.Among the movies Academy members are considering are three that offer distinctly different views of how Americans see themselves and their place in the world.

Ben Affleck’s Argo is about a group of American diplomats in Iran who slipped out the back of the embassy in Tehran the day Islamic fundamentalists rushed in the front. They took refuge in the plucky Canadian ambassador’s residence and, by posing as Canadian filmmakers looking for locations for a nonexistent Hollywood movie, obtained papers that allowed them to fly to freedom.

Since when have personal guns been used to defend political liberty?

Nicholas Wapshott
Jan 9, 2013 21:23 UTC

Piers Morgan is the most unlikely campaigning journalist. The smooth-faced Morgan, who arrived from Britain to replace Larry King as CNN’s chief celebrity interviewer, can, if pushed, engage with serious guests on serious topics. But, as someone who cut his teeth writing showbiz tittle-tattle for Rupert Murdoch, he seemed more at ease pitching softball questions to boldfaced names plugging their latest products.

What a difference a massacre of children makes. After a frivolous November guest list that, despite the presidential election, included Mike Tyson, Kitty Kelley, Oliver Stone and Tyler Perry, among other gossip column fodder, he turned to a subject that celebrity interviewers keep well away from because, even in the wake of another mass killing, it is so painfully pointless to raise: gun control. And in doing so, Morgan found his voice. Americans have become so weary at the grip the NRA and other gun industry lobbyists have on the gun debate that the simple horror and amazement Morgan expressed on hearing of the Sandy Hook bloodbath came as a refreshing surprise. What sort of country, he asked, cannot defend its schoolchildren from mad people with automatic weapons? What has to be done to bring the repeated slaughter of innocents to an end?

For his pains, Morgan attracted a full magazine of gun nuts, including one Alexander Emerick “Alex” Jones, a self-described libertarian, “paleoconservative” and “aggressive constitutionalist” who once ran as a Republican in Texas House District 48 (facing certain defeat, he withdrew before Election Day). He believes George W. Bush was behind the September 11 attacks and Bill Clinton plotted the Oklahoma City bombings. He was so incensed that Morgan dare use his First Amendment rights to ask an awkward question about guns that he is demanding the president deport the chat show host for sedition. To find a more invidious example of muddle-headed, brazen hypocrisy, you have to go back to 2009, when anti-government Tea Party activists held up placards screaming “Government Keep Your Hands Off My Medicare.” Being a good Fleet Street tabloid editor, Morgan promptly invited Jones to make his case on Piers Morgan Tonight.

  •