The Changing State of Africa

This article centers on what I have talked about previously--the changing face of Africa and the development of its economy. However, there are some new and interesting ideas in this article that I would like to point out:

1. It talks about how rising commodity prices "bolster Africa's economy prospects." Sure, in the short-term rising commodity prices will boost Africa's economy, but commodity prices will not continue to rise for ever. If the resource-rich African countries  fail to ground their economies in good governance, leading to a wise fiscal policy and solid social safety-nets, then their economies will continue to be volatile; they will never achieve sustainable economic growth do to the booms and busts of commodity prices.

2. The article continues to discuss the fact that many countries, especially China, are "seeking to cash in on Africa's commodity bonanza." These foreign investments add to Africa's booming economy, but as soon as commodity prices begin their downward decent, foreign investors will turn and run. Thus, if Africa does not reform the structure of its government and economy, its economy will fall hard. The article mentions that according to the African Economic Outlook, "Africa needs a clear engagement strategy" when dealing with these foreign investors.

3. One very interesting point the article makes is the Chinese perspective on development. They believe that "new states need to build buildings and dignity, not simply strive to end poverty." In accordance with this strategy, they are investing in infrastructure, especailly along the coast of Africa. But isn't it better for long-term economic growth if Africa itself invested in its own infrastructure? This would definitely lead to less exploitation by employing African workers and African materials. Groups such as NEPAD, a program of the African Union, believe in this principle. NEPAD encourages African self-reliance by spearheading coordination between African countries to eradicate poverty and increase the standard of living.

4. The article remarks that Africa has a "youth bulge" in that it has the youngest population in the world. Unfortunately, Africa cannot fully take advantage of this valuable resource because it has "jobless economic growth." This phenomenon occurs due to Africa's resource curse and the foreign investors that I discussed in #3. Programs such as Aid for Trade, proposed during the currently-stalled Doha Round, may help create jobs by eliminating problems in the supply-side of Africa's exports.

5. Finally, the article mentions that better education, more government transparency, increased urbanization, a more favorable business climate, less corruption, and increased peace are all necessary for sustainable growth in Africa.

Ghana's 2012 Election

When I was in Ghana, the Ghanaians were quick to remind me that Ghana's election would be shortly after Obama was reelected (they hoped) in America--or as they liked to call it--"Obamaland." And sure enough, their election is set to take place on Dec. 7. Though four candidates are running, the contest is between the current President John Mahama from the National Democratic Congress and Nana Akufo-Addo of the New Patriotic Party. According to an article on VibeGhana.com, The debates have dealt primarily with eliminating corruption in government and managing the country's resources (i.e. oil, cocoa, etc.).

In the debates, Akufo-Addo asserted that he would lead by example in eliminating governmental waste and corruption. In terms of managing the profit from the recently-established oil industry, Akufo-Addo said that he would make secondary school free with these funds. President Mahama pointed out that his administration had already begun work to ensure that oil profits stay with Ghanaians, and he declared that in the future, he would work to pass legislation encouraging foreign extraction companies to buy products from Ghana and employ Ghanaians. On this topic, he said, "It doesn’t pay to have such a God-blessed resource and just have foreigners come and take it away without any benefit to your people."

Concerning corruption, former Ghanaian president John Rawlings, who still exerts a strong influence on public opinion, spoke out against governmental corruption. According to the Economist  he proclaimed, "Corruption permeates all facets of our society and it is because of the deep rooted moral and spiritual impurity that is currently embedded in our society." Interestingly, it is unclear whether Rawlings will support the current president or the opposition party. He initially endorsed his wife's bid for the presidency as a third-party candidate, but her paperwork was rejected so her candidacy has ended. He had met with Akufo-Addo, even though he is still considered to be a member of the NDC. Some argue that his endorsement is of little importance because "Ghanaians like him but there are just as many people who don't like him."

Regardless of political machinations, it is refreshing to hear key African leaders speak out in defense of their country's resources and against governmental corruption. Though the Mo Ibrahim Foundation found no African leader worthy of the five million dollar prize for "achievement in African leadership," Ghana scores relatively high in all four categories that the Foundation considers (Safety & Rule of Law, Participation & Human Rights, Sustainable Economic Opportunity, and Human Development). Initiatives like the ones to eliminate government corruption and promote healthy economic growth will only increase its scores in the future, so maybe the Foundation will deem Ghana's next president worthy of its leadership award.

Education (or lack thereof) in South Africa

This video from The Economist concerning South Africa's failing educational system supplement's my earlier post on the downturn of South Africa. It clearly shows a link between the quality of education of a country and economic growth/decline. Over half of young people in South Africa are unemployed because many do not have the requisite skills for a job. This mismatch between the labor market and the job market is endemic, and only a revamped educational system will solve it. The teacher's union will have to concede that it must not pursue policies that  promote and protect lazy and ignorant teachers. Nelson Mandella's party, the African National Congress, needs to ensure that both blacks and whites have equal access to quality education. (Note the gap between the educational attainment of blacks and whites in this video.) The party should engender a higher level of respect for the teaching profession and ensure that those who enter the teaching profession are compensated according to their competence and ability. If the problems of the educational system are properly addressed, the future of South Africa's economy will look much brighter.

The City of the Future

"Can you imagine a world in which your daily existence has no detrimental impact on the environment? If so you might be living in an eco-city." This is a quote from a recent BBC video that features an eco-city--Tianjin--that the Chinese are building from scratch. (The land used to be a wasteland.) It should be finished by 2020. The premise is to try to make the easy choices the right choices. For instance, the city will provide easy access to public transportation--such as hybrid buses. Also, the city planners have ensured that places of work and leisure are situated close together.

Just because it is eco-friendly does not mean it is inefficient. At least 350,000 people are expected to live there, and 600 companies, bringing more than $7 billion U.S. dollars have already signed on. In the video, the BBC journalist interviewed one of the city planners. The city planner remarked that the eco-friendly features of the city are not very expensive if they are planned from the beginning. He said that they are trying to balance the goals of economic efficiency and environmental protection, which are not necessarily mutually exclusive. While they could have idealistically targeted 100% renewable energy, they are aiming for 20% renewable energy because they believe this is a goal that the market can support. This innovated atmosphere makes Tianjin a "hot bed of ideas" because many of companies are using it as a platform to develop "green solutions."

One of the city-dwellers commented that it actually is relatively cheaper to live there than elsewhere even though it is an eco-friendly city. She can walk to work, walk to school, and walk to the shopping center. While the city planner admits that they do not have all the kinks worked out yet, they are well on their way to creating something that other cities can replicate. China, a signer of the Kyoto Protocol, is clearly committed to green innovation. America should also get on board because a city like Tianjin is the city of the future.

Recessions and the Multiplier

In our IPE class, we discussed whether the IMF has been misguided in telling countries to tighten their belts in the face of economic recession. A recent article in the Economist points out that although the IMF did warn that austerity might be painful in 2010, it underestimated the extent of the pain. This miscalculation laid the groundwork for many criticisms of the IMF's policies. But what exactly did/does the IMF use to predict the effect of its policies? The fiscal multiplier.

According to the Economist, a fiscal multiplier "describes the change in GDP that is due to a change in tax-and-spending policy." A fiscal multiplier can work both ways. It can be used to predict the amount of economic growth that will result from a stimulus or the amount of economic decline that will result from austerity. In the latter case, a fiscal multiplier of 1.5 means that for every dollar of spending cuts, there is $1.50 decline in GDP. Therefore, when the IMF advocates fiscal austerity, it is (hopefully) expecting a relatively low fiscal multiplier. While some economists argue that fiscal austerity can actually increase economic growth--even in the short-term--the general consensus is that austerity leads to short-term (but hopefully not long-term) decline.

Here's how the multiplier played out during the 2008 crisis: While many governments initially turned to stimulus to try to get out of the recession, in 2010 the IMF recommended fiscal austerity to try to decrease government deficits. It based this recommendation on the belief that the multiplier would be 0.5. (For every $1 in government spending cuts, there would be $.50 drop in GDP.) However, the actual fiscal multipliers since the recession have been much higher (between 0.9 and 1.7), leading many economists to question whether the IMF's recommendations hindered, rather than helped, countries' progress in overcoming the recession.

African Economies and the Politics of Permanent Crisis 1979-1999

In African Economies and the Politics of Permanent Crisis 1979-1999, Nicolas Van De Walle examines the on-going African economic crisis from a new perspective; like most other analysts, he explores the (mostly failed) economic policies that have contributed to a lag in African economic recovery, but he also broadens the discussion to consider political regimes and how their past decisions impact the current economy. Through his analysis of "neopatrimonial" governmental regimes and the dismal performance of African economies, Van De Walle concludes that postcolonial aid flows to Africa have actually contributed to, rather than prevented, continued economic crisis.

Though leaders first shied away from implementing the reforms required by institutions and countries providing aid, they began to realize that partial implementation not only served to placate donors, but also to derive political benefits. For instance, if they "privatized" certain industries, their personal bank accounts could reap the rewards. In essence, because regimes are first and foremost self-preserving, leaders only implemented reforms that strengthened, or at least did not threaten, their power and control. Leaders who might be perceived as relatively responsible inflicted fiscal austerity on populations by decreasing investment in infrastructure in order to balance out the increases in governmental consumption. In the long run, partial implementation generally resulted in either warlordism--due to an increasing focus on rent-seeking rather than rule of law--or an even greater centralization of power--due to increased governmental consumption. To Van De Walle, toothless statements of conditionality (concerning reform) that are attached to aid have contributed to, rather than solved, Africa's political corruption and economic hardship.

The political corruption inherent in many African governments is a byproduct of "neopatrimonialism." Van De Walle uses this term to describe hybrid governments that adopt the appearance of a Western rational-legal administration but continue to operate with clientelist tendencies, doling out privileges and offices to family members, friends, and political supporters. These regimes have high levels of autonomy, despite low capacity. Though many analysts equate autonomy with capacity, Van De Walle points out that while African governments were "endowed with little legitimacy" after colonization, (leading to low capacity), they remain highly stable and autonomous because non-state actors (i.e. interest groups) do not have enough resources or organizational structure to challenge the government.

Van De Walle further argues that postcolonial order has been maintained despite a long period of economic downfall and crisis because, and not despite, aid flows. For instance, even if commodity prices dropped sharply, governments did not feel as much pressure to change economic policies because aid flows sheltered them from the shock. Instead of increasing Africa's economic independence, aid flows have actually increased Africa's continued dependence on aid flows. Nevertheless, donors continue to lend because of internal pressure and few accountability mechanisms for failed programs. Van De Walle believes that institutions, such as the IMF, should reform their practices so that they fully consider a country's circumstances before providing aid and devising statements of conditionality and so that they work with a country's governmental regime rather than above it. For instance, by offering much higher salaries, the IMF has recruited many of the top minds in Kenya to work for it instead of the Kenya government. Though these practices hurt Africa in the long run, Van De Walle expresses hope that Africa's economy will soon recover. His optimism is due to decreasing aid flows to the region, which increases the government's need to respond to shocks and reform out-of-date policies. Nevertheless, his optimism is tempered by the fact that many of the African countries that have adopted democratic systems have not changed economic policies because they still have neopatrimonial governance. However, Van De Walle hopes that democratization will eventually increase political participation, which in turn would increase governmental accountability and lead to economic reform.

Van De Walle's exploration of Africa's permanent economic crisis widens the discussion from a purely economic approach to an economic and political approach. Nevertheless, he leaves some questions unanswered. He neglects to fully analyse the perceptions of Africans concerning donors, such as the IMF. Furthermore, he does not mention what effect, if any, educational reform would have on the economy. Should donors focus on improving the quality of education inside the country so that the skills of the work force will meet the demand of the job sector? Finally, I would have liked him to spend more time discussing the role (if any) that African values and culture play in the continuation of economic recession. Are neopatrimonial tendencies, resulting in clientelism, to some degree inherent in African governance due to the African value of kinship and community? Note that this book was published eleven years ago, and the discussion of African economics has since evolved. Nevertheless, Van De Walle's African Economies and the Politics of Permanent Crisis 1979-1999 greatly contributed to the discussion of African economic recovery by introducing additional components, such as political regimes and donor policies.

The Global Election

With the election looming only 3 days away, some economists are beginning to speculate about how the next president's policies will affect not just the domestic economy but the global economy. In Stiglitz's recently-published article, "America's Global Election," he laments the fact that although the next American president will have a huge impact on people from other countries, these people get no say in our election. He further argues that the non-Americans overwhelmingly favor Obama's reelection. Though he does not cite any evidence as to why a majority of foreigners support Obama, he contends that the fundamental differences in policy between Obama and Romney justify Obama's support from abroad.

Stiglitz argues that Romney's election would lead us back to Reagan-esque free-market economic policies, which Stiglitz claims "brought about the worst global recession since the 1930’s." He believes Romney's policies--like Reagan's--would continue to shrink the middle class and lead to greater income inequality. For instance, Stiglitz believes that Romney's "tax cuts for the rich," budget cutbacks, and lack of support for ObamaCare would lead America--and other countries--down the wrong path. However, Stiglitz failes to recognize that many of Romney's policies--especially his commitment to cut the corporate tax rate--would create jobs to grow the economy. (See Michael Boskin's article.)

Stiglitz presents a short (and weak) argument concerning both the candidates' views on globalization. He admits that Obama has not done much in regards to trade, finance, and climate change. However, he believes that Romney's policies concerning globalization, (which Stiglitz fails to present in detail), would take the global economy in the "wrong direction." Stiglitz argues that in the area of foreign policy Romney has failed to distinguish himself from Bush. This is a surprising argument considering that after the third and final presidential debate (about foreign policy) many analysts criticized Romney for not distinguishing himself enough from Obama.

A final point that Stiglitz makes is that Romney's stated stance against China does not leave him much room to maneuver if he is elected. According to Stiglitz, Romney "promises to launch a trade war with China, and to declare it a currency manipulator on Day One." Stiglitz points out that Romney fails to recognize that the renminbi has actually been appreciating for years (see graph), and that the stronger the renminbi gets, the more the U.S. will simply turn to other countries with relatively low-value currencies so that we continue to have an abundant supply of cheap goods. Furthermore, Stiglitz asserts that Romney does not understand or acknowledge that many countries are calling the U.S. a currency manipulator because of the Fed's recent "easing" policies.

I hope that whomever is elected will reach across party lines and do what is best for America--and the global economy--regardless of whether it adheres to his party platform.

'Tis the Season

With stores beginning to decorate for Christmas, I have been reminded that the holiday season is just around the corner... Though most college students will not start their Christmas gift shopping for a while, a discussion of Christmas gift giving is actually relevant to what we are talking about in IPE.

When I was an intern at American Enterprise Institute, Kevin Hassett, an economist and current advisor for the Romney campaign, shared with us (the interns) an article that he had written about the economic conundrum of Christmas gift giving. The Christmas season is increasingly profitable for retailers as Christmas gifts are becoming more and more extravagent over the years. However, because shoppers usually do not know exactly what the recipient wants, an estimated dead-weight loss of $79 billion dollars plagues the collective group of gift-givers each holiday season. Money would be the most efficient gift to give because then the recipient could simply buy what he/she really desires, eliminating the dead-weight loss. So why does the economically-inefficient practice of Christmas gift-giving continue to be popular? (Or the practice of passing out Halloween candy for that matter...)

Hassett eventually concludes that although economists are sometimes baffled by this apparent inefficiency, the spirit of the season is more than enough of a reason to continue to give gifts. He admits that an individual may not realize what he/she truly would like because his/her experience is limited. Therefore, gift giving provides a way for people to share their own experiences with others (i.e. give someone something that he/she never would have thought about purchasing). Hassett further states, "I believe that the holiday spending binge reflects our attempt to provide each other with the benefits of our collective experience."

How is Hassett's argument relevant to IPE? Well, as we've addressed briefly in class, the IMF and World Bank often give "gifts" of aid to countries that are struggling to stay afloat. However, many times the aid has statements of conditionality attached to it. This is the IMF's way of trying to reform the country's government or economy in hopes that a future economic crisis might be avoided. Nevertheless, though the IMF has threatened to reduce aid if the statements of conditionality are not met, often the aid is not decreased. (In some cases, it has actually increased over the years, despite non-compliance.) Sometimes the government is so corrupt that the aid eventually ends up in the dictator's personal bank account, though the IMF has taken steps to avoid this in recent years. Though the governments that are receiving aid must promise to try to fulfill the statements of conditionality, often these promises are not kept, and the same statements of conditionality are attached to the aid again the next year. Some regimes do work toward implementing reform, though even benevolent regimes only focus on the measures that don't threaten to weaken their power.  In some cases, partial reform has been estimated to cause even more problems than no reform at all. Also if the IMF has incomplete information about the politics and regime of the country, (as we talked about on Thursday), then maybe a country is better off not even trying to implement its generic measures.

So during this holiday season, while shoppers are completely justified in giving whatever gifts they choose to give, the IMF, World Bank, and aid-giving countries should consider the "gifts" they are giving. While I don't think that blindly throwing aid at a country with a struggling economy is prudent (especially if the regime in power is corrupt), I do think that statements of conditionality should be reconsidered on a country-by-country basis. Furthermore, these statements should definitely not be toothless; aid should be decreased if a country fails to implement the recommended economic policies.

Tightening Fiscal Policy in Sub-Saharan Africa: Prudent or Detrimental?

A recent article in The Star (Nairobi) entitled "Kenya: IMF Raises Concern Over High Public Debt" explains that the IMF believes that high public debt will lead to a decrease in short-term economic growth. While the IMF believes the interest rates are at a managable level right now, it worries about the current account deficit and the high public debt. However, the Central Bank of Kenya is not worried. The Kenyan economy has performed relatively well during the global economic crisis, and the economy is predicted to continue to grow by 5% per year, though the Eurozone crisis could decrease the rate of growth by 1% per year. The Central Bank believes that Kenyan institutions will continue to reform and remain competitive in the global economy in order to combat the potentially detrimental effect of the Eurozone crisis. Because the price of commodities has been declining, Kenya's export growth has taken place in the service sector, rather than in the agricultural or manufacturing sector.

Is the Fund meddling where it shouldn't be? Is its usual manatra of fiscal austerity detrimental to long-term growth? Is the Fund missing losing sight of the big picture and simply focusing on short-term goals? After all, as the article says, much of the "borrowed capital goes into large infrastructure projects, most of which require imported machinery and material," which affects the current account negatively. But should a developing country really refrain from investing in infrastructure in order to maintain a positive current account balance?

This IMF report talks about the complex relationship between fiscal policy and short- and long-term economic growth. Ultimately, it recommends that high public debt be lowered through a tightening of fiscal policy over a substantial period of time. It warns that other policies (monetary, financial, and structural) may need to be changed to support economic growth when fiscal policy is tightened so that the overall economy does not tank.

The Rise of Sub-Saharan Africa and the Downfall of South Africa

Today an article from the Economist addressed the fact that capital and labor has begun to steadily flow into Sub-Saharan Africa because economic stability, and therefore, investor comfidence in the area has increased. Multinational corporations are specifically targeting this region because it "desperately needs two things: more capital and skilled workers," which are exactly the two things that are abundant in the West. Furthermore, in terms of labor, Africa provides younger business people the opportunity to "work at a senior level with relatively little experience." The article cites four reasons that the Sub-Saharan Africa economy is gaining strength:

1. Healthy population growth--longer life expentancies and fewer children per family.
2. Urbanization--major cities are luring investors. I believe the growth of African cities has greatly contributed to economic development; the book I am reading for the precis, African Economies and the Politics of Permanent Crisis, states that "the growth of cities has been critically important to the historical development of both capitalism and the modern states." The book further claims that Africa now boasts some of the world's largest cities.
3. Technology--When I was in Ghana this summer, I was surprised by the prevalence of cell phones. Though they were far from a smart phone, they definitely did the job of connecting people over great distances. In fact, yesterday I listened to Lois Quam, the Executive Director of the Global Health Initiative, speak. She said that a surprisingly large number (I believe she said around half) of business transactions in Africa are done via texting.
4. Better/Less Corrupt Governance--Again, the book I am reading for class definitely addresses this point. In fact, one of the author's central arguments concerns the substantial affect that the ideologies and practices of political leaders/regimes have on the economy both in the short- and long-term.

All of these factors combine to make Sub-Saharan Africa a more viable place for capital and labor flow. If these economies continue to have stable growth, it is a great opportunity for investors because the continent as a whole is extremely large with relatively "non-existant infrastructure." See the Economist's map below to see just how large the African continent is relative to other countries.

 

Due to the investor confidence generated by the four factors I have already mentioned, foreign direct investment in the area has increased by 50% since 2005. Many analysts are optimistic about the continent as a whole; a World Bank economist remarked, "If current trends continue, most of Africa will be middle-income by 2025." Similarily, the IMF says the "continent's GDP will grow by 5% this year." However, it is important to note that the IMF and World Bank are far from skeptics or pessimists when it comes to Africa. In fact, according to my reading in African Economies... it appears that institutions such as the World Bank and IMF tend to be overly optimistic about African development in order to avoid criticism that the aid (much of it attached to toothless statements of conditionality concerning economic and political reform) that they have pushed into the continent over the past 5 decades (since African independence) has failed to spur the right kind of change and economic growth.

 

Furthermore, it is important that we not simply generalize about the entire African continent when there are clearly some outliers from the portrait of economic growth that was painted above. For instance, the Economist published another article recently about the downfall of South Africa. Though South Africa still has the most developed and largest economy of all the countries in Africa, it is quickly fading, and Nigeria is rapidly emerging. This is largely due to South Africa's horrible educational system; high unemployment related to a lack necessary job skills, which causes many job openings to remain unfilled; and corrupt governance.

 

South Africa's issues are directly addressed in yet another Economist article. South African politics needs to undergo significant change in the near future. The African National Congress--the legendary party of Nelson Mandella--was at one time a populist party committed to racial equality and anti-apartheid measures. Though there has been much progress in the civil-rights sphere since black-majority rule began, the African National Congress is now forgetting that it is accountable to the people. The political elite are getting richer and richer off of corrupt rent-seeking practices, creating a great divide between the rich and poor. A governmental position is so clearly the cause for material gain that men physically fight (and die) in an attempt to gain a position. Yet a large majority of the people continue to support the ANC, most likely because of its reputation from its past accomplishments. The Democratic Alliance is the next strongest political party, but it only garnered 17% support in the last election. The people view this party largely as the "white" party, so they are hesitant to support it, in fear of a return to racial segregation.

 

I will write more later (especially in my precis) on the economic implications of political regimes. For now, we should keep our eyes on South Africa and the Sub-Saharan countries to see if the one falls while the other rises, as the Economist predicts.

The Next Bubble

As we now begin to analyze the factors that create country-wide and global recessions, I think it's important to consider not just the past, but also the present and future. In America, 2008 was the year that the infamous "housing bubble" burst, and lending institutions began to realize the steep consequences for lending money without due consideration of the assets/credibility of the borrower. Analysis of historical trends and bubbles in America and other countries sheds some light on the anatomy of an economic crisis, but in our analysis, we should not overlook the steps that we, as a nation and as a global actor, need to take to avoid a bubble in another industry.

Prof. Dickovick briefly mentioned that many economists believe that student loans may form the next bubble. An article on MSN Money explains that the average college graduate has over $23,000 in debt upon graduation, and 2 out of 3 college graduates are in debt. This is due to the fact that college professors' salaries are increasing along with increased non-teaching staff employment, causing tuition to rise eight percent per year! Is this sustainable? Or is the cost of tuition way too high? It's definitely a hot topic.

Kahn Academy offers an (arguably) college-caliber education for free online. Maybe Americans are simply more willing to pay substantial prices for face-to-face education. (Remember the discussion that we had about personal, face-to-face services being safe from globalization...) PayScale  ranked American universities by the ratio of cost of attendance to estimated average lifetime earnings. Not surprisingly, engineering, research, and ivy league institutions comprise the top spots, because cost of attendance is largely overshadowed by future earnings. (Luckily, W&L is 48th out of 805.) So some schools can justify a high cost of attendance, while others (i.e. Judson University, Seton Hill University) cannot. Most graduates from top-ranked universities (i.e. Harvey Mudd, Caltech) will be able to pay off their student loans, while some graduates from the lower-ranked universities may struggle to pay them off--leading to a bubble. Just as in the housing bubble crisis, not everyone will default on their loans. Some people will pay back their student loans. But will there be enough people who can't pay back their student loans to create a crisis?

The MSN Money article also talks about a potential for a bubble to arise in the gold market, U.S.
Treasury market, health care sector, real estate market, and athlete incomes. For instance, the real estate market is more heavily regulated now, with the implementation of the Dodd-Frank Reform Act. There is also a potential for higher interest rates. Unemployment is still high, which affects disposable income, and in turn directly effects the commercial real estate market. Similarly, the sports industry is greatly dependent on individuals having a sufficient amount of disposible income. Many athletes have signed multi-million dollar contracts for many years in the future, but athlete incomes could be considered greatly overvalued if people do not spend as much money on entertainment activities.

If we can recognize these tendencies early, hopefully we can take steps to avert a crisis. However, just as the MSN article points out, governmental attempts to avert a bubble in one industry may lead to a bubble in another.

Romney at VMI

Here's what Romney had to say about globalization/free trade during his speech at VMI today:


I will make further reforms to our foreign assistance to create incentives for good governance, free enterprise, and greater trade, in the Middle East and beyond. I will organize all assistance efforts in the greater Middle East under one official with responsibility and accountability to prioritize efforts and produce results. I will rally our friends and allies to match our generosity with theirs. And I will make it clear to the recipients of our aid that, in return for our material support, they must meet the responsibilities of every decent modern government—to respect the rights of all of their citizens, including women and minorities… to ensure space for civil society, a free media, political parties, and an independent judiciary… and to abide by their international commitments to protect our diplomats and our property.

I will champion free trade and restore it as a critical element of our strategy, both in the Middle East and across the world. The President has not signed one new free trade agreement in the past four years. (See below.)  I will reverse that failure. I will work with nations around the world that are committed to the principles of free enterprise, expanding existing relationships and establishing new ones...

There is a longing for American leadership in the Middle East—and it is not unique to that region. It is broadly felt by America’s friends and allies in other parts of the world as well— in Europe, where Putin’s Russia casts a long shadow over young democracies, and where our oldest allies have been told we are “pivoting” away from them … in Asia and across the Pacific, where China’s recent assertiveness is sending chills through the region … and here in our own hemisphere, where our neighbors in Latin America want to resist the failed ideology of Hugo Chavez and the Castro brothers and deepen ties with the United States on trade, energy, and security. But in all of these places, just as in the Middle East, the question is asked: “Where does America stand?”

I know many Americans are asking a different question: “Why us?” I know many Americans are asking whether our country today—with our ailing economy, and our massive debt, and after 11 years at war—is still capable of leading.

I believe that if America does not lead, others will—others who do not share our interests and our values—and the world will grow darker, for our friends and for us. America’s security and the cause of freedom cannot afford four more years like the last four years. I am running for President because I believe the leader of the free world has a duty, to our citizens, and to our friends everywhere, to use America’s great influence—wisely, with solemnity and without false pride, but also firmly and actively—to shape events in ways that secure our interests, further our values, prevent conflict, and make the world better—not perfect, but better.

Our friends and allies across the globe do not want less American leadership. They want more—more of our moral support, more of our security cooperation, more of our trade, and more of our assistance in building free societies and thriving economies. So many people across the world still look to America as the best hope of humankind. So many people still have faith in America. We must show them that we still have faith in ourselves—that we have the will and the wisdom to revive our stagnant economy, to roll back our unsustainable debt, to reform our government, to reverse the catastrophic cuts now threatening our national defense, to renew the sources of our great power, and to lead the course of human events.

Sir Winston Churchill once said of George Marshall: “He … always fought victoriously against defeatism, discouragement, and disillusion.” That is the role our friends want America to play again. And it is the role we must play.

The 21st century can and must be an American century. It began with terror, war, and economic calamity. It is our duty to steer it onto the path of freedom, peace, and prosperity.

The torch America carries is one of decency and hope. It is not America’s torch alone. But it is America’s duty – and honor – to hold it high enough that all the world can see its light.


I checked out the highlighted claim above because I thought that it seemed like an exaggeration/distortion of the facts. In fact, in 2011 Obama signed free trade agreements with South Korea, Panama, and Columbia.

Nevertheless, I support Romney's general stance that we should continue to increase free trade. I also agree that we should increase/improve American leadership in the world, so that we don't end up in another Great Depression.

Of course, the Obama "truth team" anticipated Gov. Romney's speech at VMI and came out with ads attacking Romney's foreign policy/interactions with foreign governments:

http://www.youtube.com/user/BarackObamadotcom?feature=watch Failing the Commander-in-Chief Test
http://www.youtube.com/user/BarackObamadotcom?feature=watch Policy

Globalization as Portrayed during Election Cycle

Though tonight's debate will be focused on domestic policy, I am hoping there will be some talk about job creation, which could lead to some remarks on globalization. I thought last weeks' class discussion about the similarities and differences in the candidate's ads (particularly dealing with China) was interesting, and I found some more Obama and Romney ads on the subject. Look at the dates--note that this attack has been coming from both sides for months (and even over a year) now!

Obama ads:

http://www.youtube.com/watch?NR=1&v=o0tZK_qHHCc&feature=endscreen, July 7, "The Problem"
http://www.youtube.com/watch?v=Ud3mMj0AZZk, July 17, singing "Firms"
http://www.youtube.com/watch?v=kweMVAHE6vA September 26, "To Us"
http://www.youtube.com/watch?v=kweMVAHE6vA, October 1, "Since When?"

 Romney ads:

http://www.youtube.com/watch?v=58pq658byzI&feature=relmfu, September 13, "Failing American Workers"
http://www.youtube.com/watch?v=v9Q4Wu9x1Uw&feature=relmfu, July, 2011!, "Take China to the Mat"

Pay special attention to this last Romney ad from over a year ago. This gives a coorporation's perspective on international intellectual property protection (or lack thereof).

Kelo v. City of New London

Though we mentioned Kelo v. City of New London in our last class discussion, I wanted to draw some more attention to this landmark Supreme Court Case. Knowing the current state of property rights in our own country is important to the discussion we will have in class on Thursday. As Wolf remarks, "We know there are some things states must do -- protect property rights. This is a 'must have' if there is to be a sophisticated market economy" (67). After studying the Kelo v. City of New London case in a Constitutional Law class last year, I would argue that the Supreme Court's ruling in this case severly dismantles the private property protection that the founders originally established in the Constitution. The following is a paper that I wrote for my Con Law class about this case.

The Destruction of Private Property Rights:

Public Use v. Public Purpose

 

The conflict between the private interest in protecting property rights and the public interest in the general welfare of society is not new or unique to America. In many societies, the interest in the general welfare is so compelling that it has encroached on property rights in the form of socialism or communism. However, because America’s founding fathers believed that private property rights were fundamental to a capitalistic society, they virulently defended them against anything—including personal liberty—that could impinge. The framers of the Constitution, many of whom were philosophically opposed to slavery because of their belief in personal liberty, did not prohibit the institution of slavery in the Constitution because they sought to protect the “property” of slaveholders.[1] The founder’s reverence for private property is communicated in the strict provisions of the Fifth Amendment, stipulating that “private property [shall not] be taken for public use, without just compensation.” By expanding the Fifth Amendment’s Takings Clause to constitutionally justify governmental taking of private property for a public purpose in Kelo v. City of New London, the Supreme Court ultimately eviscerates the public use requirement of the clause; because of its inherent breach of an explicit amendment to the Constitution, the Court should overturn its decision.

The case of Kelo v. City of New London arose when the city’s economic development plan called for the procuring of private land—including that of Susette Kelo and eight other petitioners—for use by new businesses that potentially would revitalize the economy. The catalyst to this development plan was the announcement by the pharmaceutical company Pfizer Inc. that it was planning to build a global research facility in the city. The city, looking to capitalize on economic growth, thought potential new businesses would benefit the public more than the private structures that currently occupied the land.

In upholding the legitimacy and constitutionality of the city’s taking of private property for the use of new businesses, the Court relied on the test of public purpose—that is, any governmental taking of private property has to be shown to serve a public purpose. Whereas the public use requirement of the Fifth Amendment strictly limits governmental takings of private property to situations in which the land will be used by the general public, the public purpose requirement is not so much of a limit; it is an unwarranted grant of power.[2] In his dissenting opinion, Justice Thomas wrote that because government eviscerated the public use requirement “citizens are safe from the government in their homes, [but] the homes themselves are not [safe]” (577).[3] Justice O’Connor elaborated on the consequences resulting from an increased governmental takings power in her concurrence: “Under the banner of economic development, all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded” (574). This danger caused Thomas to call for a limitation on governmental takings to property that “it actually uses or gives the public a legal right to use” (577). Under this strict standard of purely public usage, the government could not take land from Susette Kelo to give to private businesses, regardless of the potential for economic growth.

The belief that government should not take land from a private entity to give to another private entity originates in common law. Thomas’ dissent quotes Blackstone—one of the foremost experts on English common law—on the fundamental belief in the sanctity of private property. Because the law reflects this belief, it will not tolerate governmental usurpations, even if they are a means to the end of ensuring the general welfare of the community. Therefore, any governmental taking of property must imitate the typical private transaction in that government should only take land for its own use. The government is not a real estate broker—it is not justified in “taking property from A and giving it to B” (577). Hence, the framers of the Constitution instituted the public use requirement to prevent governmental takings contrary to the common law tradition.

While the majority contested that property can be taken for the general welfare of society, the wording of the Fifth Amendment suggests otherwise. As Thomas pointed out, “the Constitution’s text … suggests that the Takings Clause authorizes the taking of property only if the public has a right to employ it, not if the public realizes any conceivable benefit from the taking” (576). He claimed that while the framers used the phrase “general welfare” in other sections of the Constitution, they purposely limited governmental taking to property which will be directly used by the public.[4] If they wanted the eminent domain power to be greater, they would have employed wording that would have broadened the power.

The majority asserts that the Public Use Clause should not be interpreted so strictly; it should be construed as a loose requirement that the taken land will serve a public purpose. According to the majority, the “Court long ago rejected any literal requirement that condemned property be put into use for the general public” (572). This claim is a result of the Court’s reliance on precedent—Berman v. Parker and Hawaii Housing Authority v. Midkiff. While O’Connor argues that these cases were decided correctly, but do not apply to the current case, Thomas contends that these cases should be overturned because they contradict the Constitution. His contention is based on the belief that “Berman and Midkiff erred by equating the eminent domain power with the police power of States” (577). In other words, the Takings Clause, with its public use and just compensation requirements, should not be confused or combined with the state’s police power, which allows a state to take land without compensation if the land is harmful to the health, morals, safety, and general welfare of the community. Because he believed those cases were decided wrongly, he claimed that the current ruling should not be based on them even if their precedent did apply to this case; basing decisions on unconstitutional precedent is not a valid exercise of jurisprudence.[5] Two rulings contrary to the Constitution, even if in agreement with one another, do not make either constitutional. In Thomas’ dissent, he argues, “When faced with a clash of constitutional principle and a line of unreasoned cases wholly divorced from the text, history, and structure of our founding document, we should not hesitate to resolve the tension in favor of the Constitution’s original meaning” (578).  O’Connor disagreed with Thomas’ view that Berman and Midkiff were decided wrongly. However, she did not believe those cases had any bearing on the current case because their circumstances were different.

            Berman v. Parker and Hawaii Housing Authority v. Midkiff expanded the government’s takings power. In both cases, the “extraordinary, precondemnation use of the targeted property inflicted affirmative harm on society,” whereas the property in Kelo did not (575). Also, each taking in Berman and Midkiff “directly achieved a public benefit,” whereas the taking in Kelo, achieved, if anything, an indirect public benefit (575). In Berman, the court upheld the constitutionality of a revitalization project for a blighted area of Washington, D.C. The project affected the area as a whole, not just random individuals. The majority contended that although the houses of the plaintiffs in the Kelo case were not blighted, the legislature’s determination that “the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference” (572). This logic gives too much power to the legislature to make judgments it is not fit to make. Legislators are not qualified as judges of home value and upkeep and are liable to err, which is evidenced in the fact that it allowed the taking of Susette Kelo’s property even though she had made “extensive improvements to her house” (571). If the legislature relied on facts to conclude that the properties involved in the Berman case were blighted, its determination should be respected. However, in the Kelo case, the legislature clearly did not rely on any such evidence, and therefore, an external judicial check is needed to reign in governmental powers.

In Hawaii Housing Authority v. Midkiff, the court upheld the legislature’s taking of property for the opposite reason of Berman—the properties were not blighted, but instead a few elites owned a majority of the land. The court determined it should defer to the legislature’s determination that in effect eliminated an oligopoly that was a “social and economic evil” (572). Just as the plaintiff’s land was not blighted, it was also not part of an oligopoly. By owning her land, the plaintiff was not negatively impacting society or the economy. While the majority implicitly claimed that the plaintiff was hurting the economy by occupying space that more lucrative businesses could have owned, this reasoning, while logical, is not constitutional. In Kelo, the state had no justification to take the property by its police power because the property did not interfere with the health, safety, morals, or general welfare of society. Government also did not have any justification for seizing it with its takings power, because the land was not going to be directly used for the public. As long as the private property does not directly harm society, government cannot take it and give it to another private entity—even if the entity is a business.[6] Because Midkiff and Berman concerned private property that was harmful to society, their precedents do not have any bearing on Kelo.

Another precedent that the majority employed in their decision in Kelo was that of deferring to legislative determinations of public use. O’Connor and Thomas found fault with this precedent. While O’Connor believed that deference to the legislature in determining whether the land serves a public use is valid, she contended that “an external, judicial check on how the public use requirement is interpreted, however limited, is necessary if this constraint on government power is to retain any meaning” (574). She then cited three categories of takings which the Court previously held to be constitutional: the least controversial—a transfer of private property to public ownership, more controversial—a transfer of private property to private parties who make the property available for public use, and most controversial—a transfer of private property to a private entity who may use the land privately in order to meet “certain exigencies” (575). Note that O’Connor did not believe economic development takings were constitutionally justified by any of the aforementioned categories. O’Connor believed that because the government could abuse the third category of takings, the Court must actively review—and sometimes overturn—legislative decisions in order to protect the sanctity of private property.

While O’Connor’s view on deference to the legislature was moderate, Thomas’ view was extreme. He attacked deference to the legislature, declaring that “there is no justification … for affording almost insurmountable deference to legislative conclusions that a use serves a “public use” (577). He claimed that because the public use determination is at its heart a legal question, the Court should review legislative acts just as it would review acts dealing with other provisions of the Bill of Rights—such as search and seizure. He brought this argument to life, claiming that because studies have shown that minorities are most often the victims of urban renewal plans, the Court, in accordance with the famous footnote in United States v. Carolene Products Co., has an even greater responsibility to review these plans.[7] Both O’Connor and Thomas criticized the majority’s insistence that the legislature’s judgment on situations dealing with the Public Use Clause is paramount. The Court needs to fulfill its responsibility to protect private property.

Not only did the Court shirk its responsibility by deferring to the legislature, it further deviated from its purpose by putting the burden on the each state to protect private property by reminding each state that it has the power to place “further restrictions on its exercise of the takings power” (574). O’Connor condemned the majority’s suggestion, calling it “an abdication of our responsibility,” because though the government is federal, the enforcement of private property rights against (primarily) state intrusions is the job of the federal government (576). Power is addicting and ever-expanding;[8] the Court must not rely on state governments to limit their own power.

In order to protect private property rights, the framers created strict requirements for governmental taking—the most important of which is the Public Use Clause. This strict requirement is a reflection of their reverence for private property. Thomas Jefferson, a Lockean scholar, thought property should be defined as that which is developed by a man’s “own industry or that of his fathers,” and should only be limited when he owns an excess of property resulting in “uncultivated land.”[9] Susette Kelo adhered to Jefferson’s conception of property. She did not have more land than she could feasibly improve—in fact, she made several improvements to her land. She was causing no direct harm to society; nevertheless, government took her land and gave it to another private entity. The majority decision in Kelo emasculates the main limit on the takings power of the federal government, and therefore conceivably puts all private property in jeopardy. Because of this decision, no longer are people protected from being deprived of their right to property, as the framers first established. This decision is an unconstitutional precedent that constitutes a slippery slope for possible future governmental encroachments on private property.

            

---

[1] Richard Beeman, Plain, Honest Men: The Making of the American Constitution (New York: Random House, 2009), 311-312.

[2] Justice Thomas’ dissent recognizes the increase of governmental power inherent in the public purpose precedent: “Once one permits takings for public purposes in addition to public uses, no coherent principle limits what could constitute a valid public use” (Rossom and Tarr, American Constitutional Law, Volume I, 577).

[3] In-text parenthetical citations are taken from Rossom and Tarr, American Constitutional Law, Volume I.

[4] Examples of sections of the Constitution that use the phrase “general welfare” are the Preamble and Article 1, Section 8.

[5] In his concurrence to Hein v. Freedom from Religion Foundation, Justice Antonin Scalia attacks the use of judicial minimalism, or stare decisis, when he declares, “Minimalism is an admirable judicial trait, but not when it comes at the cost of meaningless and disingenuous distinctions that hold the sure promise of engendering further meaningless and disingenuous distinctions in the future. The rule of law is ill served by forcing lawyers and judges to make arguments that deaden the soul of the law, which is logic and reason.”

[6] Justice Thomas would take issue with this argument. He would say that the government cannot seize private property with its police power at all. In his view, the Takings Clause is the only means by which government can take private property, and therefore it must satisfy both the requirements—public use and just compensation. According to Thomas, the fact that a certain piece of private property harms the health, safety, morals, or general welfare of society has no bearing on whether government can take it.

[7] The United States v. Carolene Products Co. footnote stated, “There may be narrower scope for operation of the presumption of constitutionality when legislation appears on its face to be within a specific prohibition of the Constitution.” The Court further decided that it should pay special attention to statutes “directed at particular religious … or national … or racial minorities” (571).

[8] Bernard Bailyn, The Ideological Origins of the American Revolution (Cambridge: Harvard University Press, 1992), 56-59.

[9] The first phrase is taken from Jefferson’s Second Inaugural Address in 1805. The second phrase is taken from Jefferson’s letter to James Madison on October 28, 1785. See Barbara Arniel, John Locke and America (Oxford: Clarendon Press, 1996). The chapter entitled “Locke, Jefferson and the Amerindian” is especially relevant to a discussion of Locke’s influence on Jefferson’s conception of property.



Unleashing African Ingenuity

5 observations I made while in Africa related to I.P.E.:

1. There are many intelligent people with many ideas for business startups.
2. There is a lack of know-how in terms of actually starting a business.
3. There is a lack of capital and credit availability, making it next to impossible to put a plan into action.
4. The access to Internet is very limited, especially in the villages.
5. In the rural areas, a "business" typically is little more than a glorified lemonade stand.

According to the BBC, the workplace of Africa's future might consist of technology hubs with wifi connection and meeting rooms, where many entrepreneurs can sit side-by-side and develop a business plan or continue their business in a more legitimate setting. Not only does having an "office space" give a business legitimacy, causing investors from around the world to be more likely to divulge their funds, it also gives entrepreneurs a system of support. Some of these tech hubs that have already successfully taken root, such as Hive CoLab, coach business people on how to protect their intellectual property. They also offer entrepreuners a chance to collaborate.

I think these cooperative tech hubs are a great way to encourage innovation and economic growth in Africa. Having a community of support is crucial for an entrepreneur. Another crucial component to starting a business: soliciting and maintaining investors, which is possible through reliable access to the Internet.

In my village in Ghana, Vodaphone, a major African telecommunications company had already built a relatively elaborate compound containing hundreds of computers, wifi, and the only airconditioning for miles. Though it seemed that many of the locals were simply using the wifi for Facebook, chatting, and YouTube, an ambitious Ghanaian may seize the opportunity to connect with investors from around the world. Nevertheless, Vodaphone's purpose for building the compound was not explicitly related to supporting entrepreneurs, and I think that having a tech hub with this explicit purpose would improve the success rate for startup businesses, simply due to the community of support.

Trade War?

The trade disputes between the U.S. and the E.U. over illegal subsidies to the aircraft-making industry continued today with the E.U. appealing to the W.T.O. for permission to impose $12 billion in annual trade sanctions against the U.S. for illegal Boeing subsidies. They claim that this steep punishment would make up for the unfair advantage that the U.S. has enjoyed the past several years. This latest step in the seven-year dispute leaves many, including the NY Times, wondering if we are headed for "an open trans-Atlantic trade war." In fact, the U.S. has said that it could impose up to $10 billion in trade sanctions against the E.U. for their (illegal) subsidies to Airbus. While the individual governments are ready to impose heavy sanctions, it seems that both Boeing and Airbus would like to negotiate. Hopefully this sentiment will prevail. We will have to continue to watch this story... The E.U.'s request is expected to be formally submitted to the W.T.O. on October 23.

Creativity Conference

I found this blog on the NY Times website about a technological creativity festival that recently took place in Oregon. At the conference, many developers of new technology--technology that will serve to connect people all over the world--spoke. However, the emphasis of the conference was NOT on the technology itself, but rather on the people that have used their creative abilities in developing and/or using new technology. According to the article, the festival was meant to "emphasize a new economy that is being reshaped."

I think this directly relates back to Friedman's flat world argument. The Internet connects people from all over the world, and allows people to fully explore and utilize their creativity, regardless of location. In this sense, the economy indeed is being reshaped. The article goes on to describe the new economy: "It defies tradition and prizes creativity, seeks direct contact with customers and an audience, and formalizes that process and scales it, so that instead of asking your relatives to finance your next film, people can make use of the network effect and generate support, social and financial, from a large network of people online." Indeed, the Internet not only cuts out the middle man, it exponentially expands the market.

The market can only be expanded to the point that people know about, have access to, and understand the new technology. Though the conference provided entertainment and a forum to celebrate creativity, it also posed these issues to conference-goers. Ensuring that people from all over the world are able to use new technology may undermine the relative dominance of the U.S. and other world powers, but more importantly, in the long-term all will benefit from a free flow of ideas and creativity.

Current State of the International Economy

As we pointed out in class the other day, it is important to pay attention to the date on which the author wrote the article/book we are studying. Because the two main texts we have been reading (Wolf and Stiglitz) were written 7 and 5 years ago, respectively, I wanted to see if there have been any reports published recently about whether the international community is tending toward protectionism or open trade. Unfortunately, according to the WTO, protectionist policies are on the rise.

This summer, The Economist published an article entitled "Protectionism Alert." (http://www.economist.com/node/21557766).  The article explained that though many policy makers understand that protectionism contributed to the 1930s Depression, they continue to enact "short-term" trade barriers that they think will not have a major impact on the global economy. But the aggregate of all of these "inconsequential" barriers does impact the overall international economy negatively. According to a more recent article in The Economist, world trade declined sharply in 2011 (http://www.economist.com/node/21562221). And no doubt due, at least in part, to protectionist policies, "the outlook is pretty bleak." The WTO is concerned, and we should be too.

Though the members of the G20, who together make up for 85% of world GDP, claim to support an open market, their actions often do not reflect their words. Nevertheless, According to the article, the "HSBC predicts that world trade will grow by close to 90% over the next 15 years—advancing modestly at first, because of the euro crisis, then vigorously." Let's hope that policy makers heed this warning from the WTO so that this prediction can come true.

Right Does NOT Make Might

Though some of Wolf’s passages seem overly biased toward western values and culture, (i.e. “Dynamism was the product of institutions, practices, and attitudes the emerged in western Europe over an extended period” (Wolf, 44)), I tend to agree with his implied view that American capitalism, somewhat moderated by features of a developed country, such as the welfare system, is the best, or at least “least worst” of the potential economic systems. I guess my public education, at one time promulgated by Thomas Jefferson as the way to perpetuate American democracy, has done its job. I am sufficiently patriotic. Nevertheless, I realize that America is far from having a completely liberalized economy. As I talked about in my previous post, I believe that a laissez-faire economy is ideal, but there are many complications in our imperfect world that make economic regulations necessary. America has a long ways to go to try to find the perfect balance between too much economic freedom and too much regulation, but I believe that America is ultimately on the right track.

After reading Friedman’s article “It’s a Flat World After All”, it struck me that we, as American citizens, have generally become too content in our assumption that America will remain a world leader. I think most Americans take for granted that liberty and equality, in the form of a democratic political system—or what we typically consider the American way— will continue to spread throughout the world, and as a result other countries will continue to bow to us, forever grateful to us for our contributions to humanity. As Friedman acknowledges, this is far from reality. The Internet and other communication technology allows ideas to disseminate throughout the world, in essence opening up the “marketplace of ideas” virtually everywhere. The playing field is being leveled, and being born in a developing country no longer excludes you from the possibility of contributing to innovation and technology.

The leveling of the playing field began many years ago. In fact, in my class on “Lincoln’s Statesmanship,” we have already read a speech from Frederick Douglass this term in which he describes the effects of globalization in 1857! : “Walled cities and empires have become unfashionable. The arm of commerce has borne away the gates of the strong city. Intelligence is penetrating the darkest corners of the globe. It makes its pathway over and under the sea, as well as on the earth. Wind, stream, and lightning are its chartered agents. Oceans no longer divide, but link nations together. From Boston to London is now a holiday excursion. Space is comparatively annihilated. Thoughts expressed on one side of the Atlantic are distinctly heard on the other.”

Though globalization was very pronounced during this period, as it is now, the sentiments of many Americans were different.  Instead of believing that the United States should be a leader in the global market economy, as many do now, there was a sizeable minority during that period that did not believe that there should even be a union of states. Many abolitionists believed, and reasonably so, that the slavery—a practice made possible through globalization—was such a gross atrocity that it would be better for the world if America did not exist, let alone lead. In fact, William Lloyd Garrison was one of the abolitionists who promulgated the idea that might, in this case American preeminence on the world stage, does not always make right.

The idea that might makes right—but only in the state of nature—was championed by political philosopher John Locke. He believed that without a system of government, if men are left to their own devices, might would determine what was right. However, he did not believe that this was a practical or desirable way to establish what is right, so he theorized that men could, and did, give up some individual rights in order to form a social contract to protect them against each other and foreign entities. When law ruled, instead of men, the minority could theoretically prevent the majority from encroaching on their rights. Under the rule of law, right could, theoretically, make might.

This principle was the basis for Abraham Lincoln’s proclamation in 1860: “Let us have faith that right makes might, and in that faith, let us, to the end, dare to do our duty as we understand it.” This statement clearly shows Lincoln’s opposition to a popular ideology of the time—popular sovereignty, or unfettered majority rule. People who advocated popular sovereignty during that time period wanted each of the states to have the power to decide whether there would be slavery in that particular state. Lincoln believed that there were some things—such as human captivity—there were inherently wrong and diametrically opposed to the principle of equality set forth in our nation’s Declaration of Independence. In other words, there are some things that were so wrong that might—or the majority—could never make right.  In cases like these, Lincoln hoped that right would make might—the wickedness of slavery would cause a majority to unite in support of an end to slavery, because he realized that the current majority--or might--was not making right.

To go even further with the notion that might doesn’t necessarily make right, William Lloyd Garrison, a leading abolitionist, went so far as to say, “Might is never right, excepting when it sees in every human being, ‘a man and a brother,’ and protects him with a divine fidelity.”

Though globalization was quickly growing in 1860 as it is now, I think our debate needs to change, and Friedman’s article addresses the contemporary issue that many have overlooked: It is no longer a debate about whether might makes right, it is a matter of whether what many Americans consider right—the principles of liberty, equality, democracy, capitalism, etc.—makes might. America is quickly losing its dominant position in the world, and I believe, as does Friedman, that we are not responding to the changing times. The fact that many Americans likely believe that the American Way is the best way, does not ensure that America will continue to lead on the world stage. Though right made might in Lincoln’s day, we need to recognize that on the modern-day world stage, right does not, it itself, make might, and move forward with provisions—such as measures to increase educational effectiveness (like I talked about in the previous post)—that will ensure that America remains a world leader.

Combating the Effects of Offshoring through Education

In his article "Offshoring: The Next Industrial Revolution," Alan S. Blinder posits that it is not necessarily the low-skilled jobs that will be offshored in the future. He predicts that jobs that can be done by means of communication technology anywhere in the world are more likely to be offshored from the developed countries to the developing countries than service-sector jobs that must be (or preferably are) done face-to-face. He does not think that the exponential increase in offshoring is, in and of itself, a problem for developed countries, such as the U.S., rather he thinks that how developing countries choose to manage it (or not manage/ignore it) will cause problems for their domestic economies, and the international economy as a whole.

Blinder emphasizes the importance of reforming the American educational system to proactively prepare for future offshoring. He believes the solution is not necessarily more education; some of the face-to-face jobs that he predicts will stay in the U.S. are low-skilled jobs, such as taxi driving, cleaning, and crane operating. He states, "In the future, how children are educated may prove to be more important than how much" (Blinder 125). I think this intriguing statement requires further discussion.

As a student at a liberal arts college, I have at times questioned the practical application of some of more theoretical classes that I have taken. When I talk with some of my friends from high school who have already completed technical/vocational school for their area of interest and have started working full time at jobs that they love, I sometimes wonder whether a significant number of students at 4-year universities are wrongly advised to get their Bachelor's Degree.

This idea is the premise behind the "UnCollege" movement: http://www.uncollege.org/manifesto/. The members of this group argue that many self-motivated individuals are actually held back from truly furthering their education when they enter the university setting. Instead, they believe that many young people would be better off using the money that they would spend getting a degree to start their own businesses. This entrepreneurial spirit would no doubt help America's economy.

More education is not necessarily better. Not only is the cost of education in America inflated, (one of my friends is considering the possibility of attending graduate school in Zurich, Switzerland because it is approximately $1000 per year... Though education in Switzerland is highly subsidized, there has to be some middle ground between highly inflated and highly subsidized education...) it is sometimes wasted. Because the American joblessness rate is so high, many college graduates simply enroll in graduate school or law school to bide their time before entering the job market. This phenomenon is no doubt contributing to the high job dissatisfaction rate among lawyers.

I think Blinder would agree that their should be more than one "conventional" track for education. People have different skills and abilities, and as such, their should be different educational programs with varying curricula and durations. If this more practical educational atmosphere is actualized, America will have a more efficient transition into the third Industrial Revolution--that involving information technology and offshoring--that Blinder predicts will happen.