The race to succeed Gordon Brown

Under starter’s orders

The job of prime minister is not yet vacant, but hopefuls are alert

THE poetry of Alfred Tennyson is the kind of thing Gordon Brown, perhaps Britain’s most literate prime minister since Winston Churchill, takes with him on the reading marathons he calls holidays. Yet even Mr Brown, now on his summer break in East Anglia (see article), will struggle to enjoy the Victorian poet laureate’s observation that “authority forgets a dying king”. For it hits too close to home.

Mr Brown, who replaced Tony Blair as prime minister only 13 months ago, may soon be toppled by colleagues who have lost confidence in his ill-starred premiership. On July 24th his party suffered a by-election defeat in Glasgow East, hitherto one of Labour’s safest seats. It was the latest of many proofs of Mr Brown’s unpopularity, following by-election routs elsewhere, an abysmal showing at May’s local elections, the loss of London’s mayoralty to a Conservative and months of opinion polls that put the Tories up to 20 percentage points ahead of Labour.

Mr Brown, with some justification, blames the economy. Other governments are meeting the same disdain on the part of voters struggling to make ends meet. After his decade as chancellor, few are better placed than he to cope with the crisis. And it is hard to point to real catastrophes on his watch. Data discs were lost but no one seems to have been defrauded. There was dithering over Northern Rock, a troubled mortgage lender, but customers were not the worse for it. Most of the losers from unpopular income-tax changes are to be compensated. And though Mr Brown’s troubles began when he allowed speculation over a snap election to run riot last year, that farce did not materially affect the lives of ordinary people.

Yet none of this moves either voters, who appear to have made up their minds that Mr Brown is not for them, or a growing bunch of Labour MPs, who hope that a new leader would at least avert a landslide defeat at the next general election (which must be held by June 2010), if not actually win it. A politician who once intimidated colleagues into submission is now routinely mocked in the press by Labour MPs (though still under cover of anonymity), including members of his own cabinet.

Mr Brown, for all this, does have a hope of clinging on, though it lies less in anything he does (he plans a fightback under the theme of “fairness” in the autumn, touching on issues such as fuel prices and housing) than in the sheer difficulty of dislodging him. Labour Party rules requiring a challenger to win the backing of 70 MPs make defenestration impractical. It is more likely that senior ministers (such as Jack Straw, the justice secretary) will tell Mr Brown he must go, but no one is anxious to be branded a traitor in a party that esteems tribal loyalty.

The political problems that come with electing a new leader also make it less likely that Labour will cashier the one they have. The spectacle of serving ministers fighting for the crown while the economy deteriorates would not impress voters. And whoever emerges victorious would be under pressure to call a quick general election—two unelected prime ministers in a row would be hard to excuse—that the Tories would still be fancied to win.

Runners and riders

Also in Mr Brown’s favour is the absence of a clear leader-in-waiting. The favourite is David Miliband, the 43-year-old foreign secretary who ignored pressure to run when Mr Blair stood down. On July 30th he fluttered the commentariat by writing an op-ed column for the Guardian, a Labour-leaning newspaper, which outlined his vision for the party. He did not declare his candidacy but championed ideas that Mr Brown has been famous for resisting, such as reform of the National Health Service; nor did he mention the prime minister. Although he is inscrutable ideologically (the left sees him as a Blairite, but Blairites complain that he lacks fervour for public-sector reform), he appears to have the backing of James Purnell, a reformist minister also thought of as a future leader.

If Mr Miliband has the right of the party to himself, the left may throw up a host of candidates. Ed Balls, the schools secretary and Mr Brown’s closest ally, is a likely runner and can match Mr Miliband for youth, if not smoothness. Further to the left is Jon Cruddas, a backbencher who ran a strong campaign for the deputy leadership last summer and pitches thoughtfully to Labour’s core vote. Harriet Harman, who defeated him and four others to become deputy leader, may also fancy her chances in another multi-candidate race.

Yet much of the focus is on two men who don’t fit easily into either of these camps. Mr Straw, 62 this month, has been a steady performer for years in high offices of state. He could attract support throughout the party—even his friends concede that he travels lightly when it comes to fixed beliefs. And in the dusk of his career he might be happy to mind the shop until the next election, after which the party would have time and space (most likely in opposition) to make a longer-term choice.

Alan Johnson, the 58-year-old health secretary, shares many of these virtues and may offer others. If Labour’s main area of weakness is communication rather than competence, Mr Johnson, a natural on television, may be the cure. Tories fear this genial Everyman. But there are doubts about his appetite for the job, and he once declared himself not up to it.

Counting against Mr Brown is his questionable right to demand loyalty—as chancellor, he let his allies destabilise Mr Blair. And there are limits to the parrying argument that a leadership contest would create a vacuum of power at a time when Britain needs a firm hand on the tiller. Little happened in Whitehall during Mr Blair’s last year in power, for civil servants knew that long-term commitments could be undone by his successor. If Mr Brown is now seen as certain to lose the next election, a similar stasis could afflict the government for two years—rather than the few months a leadership race would take. When authority seeps away, the kingdom suffers no less than the king.

The coming days

The week ahead

The Olympic games opens, and other news

POWER-SHARING talks in Zimbabwe between Robert Mugabe's ruling ZANU-PF and the opposition Movement for Democratic Change face a deadline of Monday August 4th. But the MDC's leader Morgan Tsvangirai has said that the date might be flexible and that he has been "fairly satisfied" thus far. The talks began after months of unrest and violence surrounding the a presidential election in March and a subsequent run-off that Mr Tsvangirai refused to take part in over fears that his supporters would suffer further violence and intimidation.

For background see article

SOUTH AFRICA'S biggest miners' union, the National Union of Mineworkers, is set to hold a national strike on Wednesday August 6th. The miners' industrial action will halt production in a country that is one of the world's biggest suppliers of gold and platinum. Unions have staged several strikes across the country in protest at rising energy prices in June.

For background see article

THE 2008 Olympic games opens in Beijing on Friday August 8th at 8pm—eight is a highly auspicious number for the Chinese—and runs for just over two weeks. Worries "extreme" pollution—ratings at the end of July were more than double the World Health Organisation's maximum acceptable level—have receded in recent days as smog has cleared and the sun has shone. China instituted emergency measures in the run-up to the games, restricting driving in the capital and shutting down polluting factories. But recent favourable weather, rain and breezes, may have helped just as much.

For background see article

BOLIVIA'S president, Evo Morales, and eight of the country's nine regional governors face a vote on Saturday August 10th on whether they should remain in power. Right-wing governors in four of the provinces have challenged the left-wing government by stalling land redistribution policies and are seeking greater local autonomy.

For background see article

Saturday, August 2, 2008

China before the Olympics

Welcome to a (rather dour) party

China is keen to show its best face at the games and that face is indeed a lot better than it once was. But do not expect any dramatic slide from authoritarianism

TENS of billions of dollars have been spent, lavish sport venues erected and the world’s biggest airport terminal built. Hundreds of thousands of police, soldiers and civilian security volunteers have been mobilised. Beijing is braced for the Olympic games and the country’s leaders for a huge political challenge. For them the event is about how an emerging great power will be judged by a sceptical world.

In a country still struggling to cope with the needs of millions of homeless and bereaved citizens in the aftermath of May’s deadly earthquake, and where recent outbreaks of unrest have roiled many towns, the leadership has declared that putting on a good games is its “number one priority”. Communist Party and government officials at every level know that their careers are at risk if anything occurs on their watch that disrupts the Olympics.

The government-organised vigilantes in their baseball caps and “Good luck Beijing” T-shirts patrolling the streets in search of potential troublemakers might look like a throwback to a China of the distant past: an era when no one was safe from the prying eyes of neighbourhood spies. But few people seem to resent their presence, or even the party’s relentlessly upbeat rhetoric about an event that has disrupted, sometimes massively, the lives of hundreds of thousands. Most Beijing citizens still seem proud and delighted that their country is staging the Olympics.

The party has tapped into a nationalist wellspring fed by history textbooks and popular culture that portray early 20th-century China as a country derided by foreigners as the “sick man of Asia”. The man regarded as the spiritual founder of China’s Olympic movement, a pre-communist educator called Zhang Boling, is quoted as saying that “a great nation must first strengthen the race, a great race must first strengthen the body.” Officials try to play down China’s medal prospects at the games, but the goal is clearly to win more than America and erase any last trace of the sick-man label.

This nationalism is both an asset to the party (it helps to bolster its sense of legitimacy) and a complication in its efforts to convince the world that China’s rise poses no threat to Western interests. One Chinese official says privately that he had worried about a “clash of civilisations” emerging between China and the West in the wake of the unrest in Tibet last March. Few would begrudge China some self-congratulation as it rakes in the medals. But with memories still fresh of the virulent outburst of anti-Western fervour, and with protests (sometimes unruly) by ethnic Chinese around the world at the West’s “bias” against China, nationalism will be under anxious scrutiny at the games.

China’s leaders would instead prefer outsiders to focus on how much the country has changed and how much it is at ease in the world. The official slogan of the games, “One world, one dream”, reflects this (albeit with an unintended hint of Maoist ideological conformity). But here too it has problems. The protests staged in Western cities in April against the Olympic torch relay raised the nightmare in the minds of China’s leaders of similar action at the games. To keep potential demonstrators out it has tightened visa restrictions, ignoring the complaints of foreigners whose business in China has been disrupted.

Without citing any evidence, Chinese officials say that these games have become more of a target for terrorists than any others in Olympic history. Western diplomats are not so sure. The presence of so many foreign dignitaries, including George Bush and Russia’s prime minister, Vladimir Putin, at the opening ceremony—and others, among them Britain’s Gordon Brown, at the finale—presents an obvious security risk. But there are widespread suspicions that China is over-egging the threat in order to justify blanket security and prevent the Dalai Lama’s supporters (and other dissidents) from taking to the streets. Tibetans who try to check into hotels can expect unusual security attention.

Protest-free games?

Well before the Tibetan unrest signs had appeared that China was tightening the screws on dissent in order to keep the games protest-free. In 2001 a senior Beijing official pledged that hosting the games would “benefit the further development of our human-rights cause”. Officials from the International Olympic Committee made similar predictions. But Amnesty International, a human-rights group, said in a report published this week that there had been a “continued deterioration” in China’s human-rights record.

Amnesty’s report lists numerous repressive measures adopted by China to ensure an orderly games: arresting dissidents, detaining people who try to present their local grievances to the central authorities in Beijing (a tradition that is officially sanctioned, but which often results in retaliation by local officials), and making more liberal use of a handy method of punishment, known as “re-education through labour”, which involves sending people to prison camps without trial.

AFPDoing really rather well, thank you

Among those detained is Huang Qi, an online activist based in Chengdu, a city near the earthquake zone. Mr Huang had been a prolific publisher of human-rights news on the internet; recently he had been trying to help parents of children killed in the earthquake in shoddily built schools. He has been accused of acquiring state secrets, a charge that often heralds a jail term. Last year the police arrested an activist in Beijing, Hu Jia, who had told a European Union parliamentary hearing that China had not lived up to its Olympic promises on human rights. He was jailed for 3½ years for “inciting subversion”.

The government worries about the sort of accusations made by Amnesty, even as it rejects them. On July 23rd it declared that three public parks in Beijing could be used for protests during the games (normally no demonstrations, except very occasionally anti-Japanese or anti-Western ones, are tolerated). But permits will still be necessary. It is safe to say that critics of Chinese policies on Tibet, Darfur, Xinjiang (where Muslim Uighurs are chafing at Chinese rule) or the outlawed Buddhist sect, Falun Gong, will not be getting them. Moreover, the parks are far from any Olympic venue. One of them contains a replica of the White House in Washington, a setting that China may have fewer qualms about seeing as a backdrop for protests.

Many Chinese, however, are neither surprised nor particularly disappointed that the Olympics will not offer a greater chance to speak out. Some determined activists such as Huang Qi and Hu Jia may be resentful, but many Chinese intellectuals would argue that over the past seven years since China was awarded the games their ability to speak out on sensitive topics has continued to grow. Although a few are jailed, many others whose words might have landed them behind bars in the 1980s or 1990s are still at large. Most ordinary urban Chinese would say that their lives have improved since the beginning of the decade, helped not so much by any change in party policy but by a booming economy.

Andrew Nathan of Columbia University in New York, who is co-editor of a forthcoming book on how Asians view democracy, says that of the eight countries and regions surveyed, public satisfaction with the regime was highest in authoritarian China. The other places studied were five new democracies (South Korea, Taiwan, the Philippines, Thailand and Mongolia), a non-democracy (Hong Kong), plus democratic Japan where satisfaction was lowest. The authors are not optimistic that China is on the brink of democratic change. It is, they say, “poised to join the list of developed countries with large middle classes and non-democratic regimes”.

This might be a disappointment to optimists who had hoped that the huge international attention focused on China as the games approached would help to change its authoritarian politics for the better. When Beijing was chosen to host the games, many wondered whether the 2008 Olympics might play a political role similar to that of the Seoul Olympics in 1988 and Mexico City’s 20 years earlier. In both those cases the games emboldened pro-democracy activists (although they did not restrain the Mexican authorities from shooting many dozens of them). The Beijing games have not had anything like such a galvanising effect—except in Tibet.

Enter the internet

Economic and social change over the past few years has a lot do with this. In 2001 China had recently all but completed a sweeping privatisation of urban housing. The impact of this was enormous. It stimulated demand for consumer goods and better housing and gave swathes of urban China a big economic stake in the preservation of the party-dominated status quo since anti-party unrest might jeopardise valuable new assets.

It also, crucially, nurtured the development of a non-party-controlled civil society of landlord associations, independent lawyers and environmental groups who pushed for the protection of property from the party’s arbitrariness or the value-destroying impact of pollution. These developments have been helped by the rapid penetration of information technology. China’s official internet-monitoring body announced this week that China had passed America to become home to the biggest population of internet users.

The internet’s spread has created an opportunity for vigorous public debate that hardly existed a decade ago. The authorities try to block sensitive discussions, using keyword filters and an army of “net nannies” employed by portals and internet service providers. But the impact of these efforts is limited, with savvy users quickly finding ways of circumventing government blocks. One clever technique has been to use online software to render Chinese-language script vertically instead of horizontally. This has baffled the keyword detectors, for now at least.

AFPIsn't it lovely about the games?

The torrent of information now accessible online (even if Amnesty’s own report is blocked in China) and the ability to discuss it give many young urban Chinese a sense of freedom that their parents could only dream of at that age. It is these young Chinese who lashed out most vociferously against the West earlier this year. Among their bitterest complaints was that some Westerners viewed them as brainwashed, an accusation that they hotly denied.

If there has been some positive impact from the Olympics themselves on political change in China, it has been in roundabout ways. Chinese troops in Lhasa preferred to let Tibetan rioters rampage for two days rather than move in to stop them, fearing that large-scale bloodshed would lead to boycotts of the games. The scale of the rioting that ensued in the security vacuum had what were probably unintended consequences: sympathy protests across the Tibetan plateau, an outcry from the West and the outpouring of nationalist sentiment across China.

It may well have been an effort to curb this outpouring and create a more positive atmosphere for the games that shaped the government’s response to the earthquake in May. A commentary on the government’s website called the disaster, which killed some 70,000 people, “a good opportunity” to improve China’s image ahead of the Olympics. Foreign and Chinese journalists (both normally kept on short leashes by the authorities during natural disasters) were allowed to pour in.

This unprecedented access stimulated a lively debate in China, in the traditional media as well as online, about the need for a freer press and a better flow of information from the government. Some of this advice appears to have been taken up. Very unusually, the official media have been quick to report the recent riots that have broken out in different parts of the country. The central authorities, which are normally especially secretive about such things before a big event, have tolerated—if not actively encouraged—such publicity.

Local thuggery

Another big change in China in recent years, however, has been the central government’s diminishing grip on the actions of local officials. China, as its defenders at home are quick to point out, is no longer totalitarian. It is a mix of jostling bureaucratic and economic interests which push officials sometimes towards thuggery and sometimes towards greater tolerance. The central government may be guilty of turning a blind eye, but some of the human-rights abuses that Amnesty describes are perpetrated by local governments at their own whim.

The government’s response to two of the recent riots illustrates this. On June 28th thousands of people rampaged through the town of Weng’an in the southern province of Guizhou, setting fire to a police station and burning several police cars. The violence was triggered by what many of Weng’an’s citizens believed was an official cover-up of a girl’s murder by a group of boys rumoured to be related to local officials. The police said the girl had committed suicide.

The town’s authorities tried to cover up the news, but people began posting accounts online. Internet censors tried to delete these as quickly as they appeared (the portals and service providers that do the censoring often prefer to err on the side of caution rather than risk losing their business by upsetting the authorities). But the news got through and the local government—bludgeoned in this case successfully by higher-level officials—lifted coverage restrictions. Chinese and foreign journalists flocked there.

Reports in the state-controlled media expressed unusual sympathy with the protesters’ grievances. Weng’an’s police stuck to their story about the suicide, but provincial leaders sent a clear signal that they too believed that the citizens had a point. They promptly dismissed the town’s government, party and police chiefs, accusing them of a long-term pattern of brutish behaviour and insensitive handling of people’s complaints.

Three weeks later another riot erupted, this time in the neighbouring province of Yunnan. Hundreds of people rioted in Menga, a village on the border with Myanmar, in a dispute between rubber farmers and the management of the factory to which they sold their produce. A villager was shot by police. When his son went to help him, he too was shot. Both men died.

Again the media responded quickly, but this time a nervous local government kept a grip on the news. Journalists were stopped at a police checkpoint several kilometres from the scene of the shooting. Provincial-level propaganda officials said they were unable to persuade the local authorities to co-operate. A foreign ministry official in Beijing (perhaps disingenuously) said that in emergencies local governments could override regulations introduced last year for foreign journalists that were billed at the time as allowing freedom to travel anywhere, except Tibet, during the Olympic period.

But even as security is being tightened around Beijing for the games, lively debate continues in the Chinese media about lessons that might be drawn from these riots. No one is openly calling for multi-party politics, at least not in the press. But more media freedom, less government secrecy and greater efforts to consult the public are being commonly demanded. Referring to the party’s insistence that “positive propaganda” prevail in the press, the Beijing News said that the only thing that could be called “negative news” would be a lack of timely access to information. Even the normally stodgy Xinhua News Agency has weighed in.

The government has made a cursory effort to make the internet more accessible during the games. Blocks have been lifted on a few banned websites: Wikipedia (an online encyclopedia), BBC News and Playboy, a site that offers pictures of naked women. But the Chinese-language sites of Wikipedia and the BBC remained barred.

If there is any hope in the near future for an acceleration of political change, the period after the games will be one to watch. Leaders and officials at every level will begin to relax after months if not years of preoccupation with this event. Olympic security restrictions will be removed. Dissidents will stick their heads up again. Debates spawned by China’s recent crises are likely to become less fettered.

Big questions will be asked in the build-up to the 30th anniversary in December of the party meeting that launched the country’s policy of “opening and reform”. Some liberal intellectuals have been saying that China is more than ready for the next stage of reform, namely that of its politics. The 20th anniversary next year of the Tiananmen Square protests will keep this issue simmering.

Stresses in the leadership, covered up for the sake of Olympic unity, may also become more apparent in the months ahead. In October there will be a meeting of the party’s central committee, the first since February, at which there is likely to be a lot of soul-searching. A sharp focus will be on the economy. With inflation persisting, the stockmarket in the doldrums and the pace of economic growth beginning to slow, there will be bickering over this issue too.

And when the party’s over?

After the Olympic party (a dour one if security officials do not relax), many in China are likely to wonder whether it was really all worth it. Wang Yang, a member of the ruling Politburo and one of the more outspoken leaders (a rare breed), has called for tolerance of public grievances. Attempting to suppress people’s views might create an “opinion quake lake”, he said recently, referring to the perilously unstable lakes that were formed by landslides during the Sichuan earthquake. China’s leaders would do well to take heed.

Apple

Jobs’s job

Who are the candidates to be the technology firm’s next leader?

THE fuss began in June when Steve Jobs, the boss of Apple, came on stage in San Francisco to make one of the theatrical product announcements for which he is known. His trademark black mock-turtleneck was drooping from a fleshless frame, and his neck and cheeks were hollow. In hushed tones, the audience began wondering whether his pancreatic cancer—which he was treated for in 2004—had returned. The firm blamed a “common bug”, but Apple’s shares moved on various rumours. On July 21st its finance chief insisted that Mr Jobs’s health was a “private matter”, worrying investors. A few days later Mr Jobs called a reporter at the New York Times to explain that his condition was not life-threatening, but he did so “off the record”, so no details are public even now.

Focused on the next iPhone, not the next chief executive

Mr Jobs is arguably unique in the extent to which his identity and fate are intertwined with those of his company. Imagining Apple without Steve Jobs, or Mr Jobs without Apple, is difficult—as his exile from the company between 1985 and 1997 made plain. Only Warren Buffett, whose investment skill made Berkshire Hathaway what it is, has a comparable importance to his firm’s shareholders. But Mr Buffett acknowledges as much. When he had some benign polyps removed from his colon, he volunteered the details in a press release. He also publicly clarified his succession plan. Mr Jobs has done neither.

So who might succeed him? Tim Bajarin, an analyst who has followed Apple for decades, thinks that Mr Jobs has bred such a strong culture within Apple that there is “nobody on the outside who could even come close” to taking the reins successfully. He also believes that Mr Jobs has recently groomed “the strongest team he’s ever had”, making it even more likely that the next boss will come from this group.

One possibility is Timothy Cook, who joined Apple from Compaq, another computer-maker, and is now chief operating officer. An Alabaman with a gentlemanly drawl, Mr Cook would be a very different manager from Mr Jobs. Mr Jobs is notorious for his temper tantrums and his ad hominem attacks on people who annoy him; Mr Cook prefers to dole out feedback discreetly. A cycling enthusiast, he is a picture of health. And he turned Apple from one of the least efficient manufacturers in the 1990s into one of the most efficient today.

Another choice would be Scott Forstall, a software wizard who has recently risen within Apple to take charge of the iPhone, the handset that is Apple’s hottest product and perhaps its future. Mr Forstall came with Mr Jobs from NeXT, the computer company that Mr Jobs started during his exile from Apple and which made the operating system on which all of Apple’s computers and handsets are now based.

Less likely, despite his important role within Apple, is Jonathan Ive, a soft-spoken British designer who is Apple’s deputy guru (second to Mr Jobs himself) in matters of beauty, elegance and style. Apple is at heart a design company. The most stinging accusation Mr Jobs has hurled at Microsoft, his arch rival, is that “they have no taste.” Mr Ive is the only person whose taste he seems to trust. But Mr Ive is a creative type, shy and self-effacing, and uncomfortable with managerial power.

There are other options. Bertrand Serlet is a humorous genius with a thick French accent who is in charge of Apple’s operating system, but he might seem to have too much of the mad scientist about him. Phil Schiller is the marketing boss and a familiar face because he usually assists the boss on stage in product demonstrations. But he occasionally looks like Mr Jobs’s court jester in this role, and the mere fact that Mr Jobs grants him such exposure may indicate that he is not the chosen one.

Lower Labor Costs Now!

by Llewellyn H. Rockwell, Jr.

Official data are starting to reveal what close observers have suspected for some time. Layoffs are increasing. Unemployment is on the rise. It now stands at a four-year high of 5.7 percent, which is not high by historical standards, but it stings when you consider that the rate dipped below 4 percent in the late 1990s.

What worries people is the trend line. This is the seventh straight month of reported job declines. Job instability is the number one factor that leads to public panic. It is more pressing than stock-price declines, general price increases, and a host of other bad trends, because it hits people in the most direct way by threatening to end the flow of money that puts bread on the table.

Don't blame the employers. They are faced with making cutbacks wherever possible. They have to worry about surviving in the downturn. It is not only labor costs that must be cut. Cutbacks must occur in every area.

In the past, we've seen policy intervention designed to do exactly the opposite of what needs to be done. The most typical is an expansion of unemployment benefits, and both parties have already agreed to this regrettable step. Such benefits amount to telling a lie to people, that they can continue to hold out for higher wages when the most important step workers can make is to lower their offering prices for labor on the market.

But, you say, it is unrealistic to expect people to devalue their work by lowering their wage expectations. If so, there is another way to go about the same thing: lower the costs of hiring on the market. The costs of employment to the employer go way beyond the wages and salaries they pay.

Among them are payroll taxes, of which the employer must absorb half, at least in an accounting sense. Once you add Social Security with Medicare with unemployment with workmen’s comp, the employer ends up paying about 10% of labor costs in taxes. The laborer also pays 6.2 percent. But these accounting divisions are purely formal. In an economic sense, the laborer ultimately pays the full tax. But the point is that there is no choice about this. If someone is hired, there must be a tax premium built into the cost of hiring this person, and this is before the worker has added any value at all to the work of the enterprise in question.

The payroll tax is a tax on employment because it is a forced price increase in the wage that everyone hopes to gain. If we eliminated this, we would see the costs of hiring plummet, and the benefit would be experienced directly and immediately by the worker. The worker would not have to lower wage and salary expectations. Instead of paying the government, the worker would be able to add that money to his or her own remunerative calculus.

Another tax on employment comes in the form of mandatory provisions of health insurance for firms of a certain size and employment of a certain time. When the costs of health care having risen beyond belief, this is a serious impediment to hiring. Employees tend to think of health insurance as a free benefit or even a right, but this is an illusion. The money paid comes out of the paycheck. Almost all employees would be better off arranging for their own private medical insurance or taking the risk upon themselves. The new demand for individual provision would make the market for health insurance more competitive and bring down prices. It would also increase the incentive of people to take better care of themselves, since the perception of "free" health care creates a moral hazard.

Another great step would be to eliminate the minimum wage. What this would do is decontrol the prices of labor in general. It would permit workers the freedom to offer their services at any rate privately negotiated between the employee and the employer. The minimum wage merely puts a floor on wages that reduces their flexibility on the market. It acts like any price control: in this case, it creates a surplus of labor services that go unpurchased. It outlaws some jobs.

There are other costs of hiring that are very high but ultimately incalculable. Discrimination law has gone from being a relatively clear (though ultimately wrongheaded) rule against racial and sexual discrimination to become a legal minefield that just boggles the mind. Once you consider the entire panoply of restricted "grounds" of discriminating, every single employee becomes a walking lawsuit.

The risks to hiring anyone are huge. It is no longer possible to imagine hiring full-time employees without feeling as if you are likely to be stuck with these people no matter how they perform and no matter what turn economic conditions take. On the margin, this makes employers far more risk averse to hiring anyone, especially in risky times. If regulators, bureaucrats, judges, and juries would back off here, we would see a great increase in employee mobility and new willingness on the part of every firm to take on new employees.

Now, the problem immediately presents itself. What will the poor government do if it is denied all this revenue? What will become of workers' rights if government ceases to protect victimized workers from nasty employers? Well, here is the problem. The choice right now isn't between a high-paying job with lots of benefits and a low-paying job with no benefits. The choice for many is coming down to having a job or not having one. As for government revenue to sustain transfer programs, I say tough: let the public sector suffer for a change.

A dramatic initiative to lower the costs of hiring could end up having great effects. It could wean us from the World War II-era mistake of pushing the costs of health care onto employers. It could force a desperately needed reform of Medicare and Social Security. It would shift the locus of control over employment contracts from government to those affected most directly by those contracts: namely the individual workers and the firms for which they work.

Of course what you read here is roughly the opposite of current policy trends, which are to increase rather than reduce the costs of hiring. This is how government ends up taking a bad situation and making it worse, which is what it has done consistently throughout history. This won't change until the public makes its demands known to the elites. The best anti-recession slogan right now would be: Lower Labor Costs Now.

US DoD Releases One Billion Dollars For Six F-35B STOVL Aircraft

illustration only

The U.S. Department of Defense has released $1 billion of funding to acquire six Lockheed Martin [NYSE: LMT] F-35B short takeoff/vertical landing (STOVL) aircraft as part of the second Low Rate Initial Production (LRIP) contract for the F-35.

The LRIP 2 contract, worth $2.2 billion for a total of 12 aircraft, was awarded in May. At that time the government authorized six conventional takeoff and landing (CTOL) F-35As, with release of $933 million, and gave provisional approval for the STOVL jets pending certain requirements.

Those stipulations were met by the first flight of the initial F-35B test aircraft on June 11 and by completion of a propulsion system review on July 22. The government exercised the option for the STOVL aircraft and released the $1 billion on July 22.

The government had previously released long-lead funding of $158 million in July 2007 for the 12 LRIP 2 aircraft. An additional $110 million of sustainment options remains to be authorized in the 4th quarter of 2008.

"Getting these STOVL aircraft into production quickly is critical to supporting the USMC's aviation recapitalization objectives," said Dan Crowley, Lockheed Martin executive vice president and F-35 program general manager.

"The F-35 Fighter Production System now has all 19 SDD aircraft and the first two LRIP 1 aircraft in flow. We will continue to ramp-up until we reach a peak rate of one F-35 per working day in the middle of the next decade."

Long-lead funds of $197 million for LRIP 3 were released on May 14 for 19 additional F-35s. The LRIP I contract for the first two F-35A production aircraft was finalized and issued in July 2007.

The U.S. Marine Corps is expected to operate about 340 F-35Bs. The United Kingdom's Royal Air Force and Royal Navy, and the Italian Air Force and Navy also will operate the STOVL variant, which will be the world's first STOVL aircraft to combine stealth with supersonic speed.

The first F-35A test aircraft has completed 45 flights and the first F-35B has flown nine times, with both planes demonstrating high reliability and exceptional performance. Nineteen other F-35s are in various stages of assembly, including the first two production-model jets scheduled for delivery to the U.S. Air Force in 2010.

The F-35 is a supersonic, multi-role, 5th generation stealth fighter. Three F-35 variants derived from a common design, developed together and using the same sustainment infrastructure worldwide will replace at least 13 types of aircraft for 11 nations initially, making the Lightning II the most cost-effective fighter program in history.

Lockheed Martin is developing the F-35 with its principal industrial partners, Northrop Grumman and BAE Systems. Two separate, interchangeable F-35 engines are under development: the Pratt and Whitney F135 and the GE Rolls-Royce Fighter Engine Team F136.

TEHRAN'S TRICKS

PLAYS ROPE-A-DOPE ON NUKES

Solana: Faces likely rebuff to watered-down offer to Tehran.

TOMORROW is the deadline for Iran to respond to the latest offer on its nuclear program. The package, shaped by the five permanent members of the UN Security Council plus Germany and offered in Geneva two weeks ago, offers a way out of the impasse.

But don't expect Tehran to call the lead negotiator, European Union foreign-policy czar Javier Solana, to say it's accepted the deal. Iran has made it clear it doesn't intend to show any flexibility.

"Supreme Guide" Ali Khamenei and President Mahmoud Ahmadinejad set the tone Wednesday in speeches at a gathering of officials and militants in Tehran.

"The only way to victory passes through resistance and steadfastness," said Khamenei. "We shall not allow anyone to dictate to us."

Ahmadinejad went further. "The United States is a sunset power," he said. "American foreign policy has failed everywhere and the American economy is facing collapse."

The EU compromise (offered in the presence of the No. 3 US diplomat, William Burns) was a timid attempt at opening a new space for negotiations. Under its formula, Tehran would freeze its uranium-enrichment program at present levels for six weeks. In exchange, the Security Council would undertake not to impose new sanctions during that period.

That deal represents a major concession to Iran - envisioning a suspension of enrichment and processing activities, not the total and verifiable end demanded by three mandatory Security Council resolutions.

When the Security Council passed the first of those resolutions last year, Iran had only a dozen centrifuges enriching uranium. Now it has more than 6,000. Thus, the "freeze" formula would let the Islamic Republic continue its nuclear project at levels far above what the United Nations once deemed completely unacceptable. Keeping Iran's enrichment activities stable at 6,000 centrifuges would enable it to produce enough weapons-grade material to build a dozen or so nuclear warheads by 2012.

Nor does the latest EU offer cover the plutonium plant that Iran is building in Arak, west of Tehran. Once completed, that plant could produce enough material for hundreds of warheads.

Indeed, Tehran is showing remarkable confidence in rejecting the EU offer. It could agree to a six-week suspension, then demand more negotiations to make the freeze permanent. The EU negotiators would be dragged into an endless dance in which the mullahs set the pace.

In Geneva, top Iranian negotiator Saeed Jalili presented a six-page "nonpaper" - a technical term that describes policy positions without legal commitment. This was designed to redirect negotiations away from the issue of uranium enrichment to that of the legal framework for pursuing the Iranian case.

Tehran demands that the issue be taken away from the Security Council and referred to the board of governors of the International Atomic Energy Agency, which would negotiate with Iran over "a redefinition of the areas of concern to both sides." Once those talks were completed, the issue would go to the IAEA director general. In practice, this would bury the issue in technical and bureaucratic disagreements.

Iran's "nonpaper" also envisages a "cooling down" phase in which IAEA inspectors would be able to assess the implications of Iran's program within a "reasonable" time frame of, say, two to three years. Iran then would enter into substantive talks "on a broader range of issues" with the EU group.

Tehran's formula could lead to talks lasting five to six years - the time Iran needs to master the nuclear cycle.

The beauty of the Iranian position (if one might grace it with such description) is that it doesn't allow the discovery of any smoking gun in the "cooling down" phase, since enriched uranium and processed plutonium can be used for both generating electricity and making bombs. And once Iran has enough weapons-grade material, it wouldn't matter whether it actually loaded it into warheads or not. Yet, unless that material were provably loaded into warheads, it would be hard to make a legal case accusing Iran of having violated the Nuclear Nonproliferation Treaty.

Iran's leaders say they aren't making bombs. How could they agree to end a program that they pretend doesn't exist?

There's ample evidence, however, that the regime's real intention is to build a nuclear-weapons arsenal - but intentions are hard to prove and inadequate as bases for a legal case.

The problem with the Islamic Republic is one of trust. If the EU group trusts Tehran, it should accept the claim that the nuclear project is for peaceful purposes only. But if they don't trust it, they'd gain nothing from the "freeze" formula.

Even if Jalili announces Tehran's agreement to a "freeze," who could guarantee that his promise would be honored? Iran could always continue a clandestine parallel program - it did so for 18 years without the IAEA ever finding out, despite more than 200 inspection tours.

Ahmadinejad has just created an informal committee to plan his campaign for next year's presidential election. He has built his image around the claim that he has defied the big powers, including the American "Great Satan," and won.

He genuinely believes that his radical brand of politics represents the future. He's placing himself at the head of the Nonaligned Movement and seeks the creation of a "global peace and justice front" to lead "the post-American world." He plans to launch his proposed "front" in New York in September, when he addresses the UN General Assembly.

Against such a background, it'd be naive to expect Ahmadinejad to go along with the EU's offer.