By Ed Feulner
It's been more than six years since our nation bid farewell to Ronald Reagan, born 100 years ago this month. Yet it seems at times as though he never left.
Consider how Reagan's name surfaced repeatedly after the most recent State of the Union address, as pundits both liberal and conservative weighed the speech's effectiveness. His photo-shopped image is on the cover of TIME, his arm draped around President Obama.
"If Obama has bounced back from the drubbing his party took at the polls last November," writes Richard Norton Smith in the magazine, "it is in no small measure because he has been acting positively Reaganesque as of late."
Acting, perhaps, but not governing. It's worth reminding ourselves as we mark the centennial of Reagan's birth what he accomplished -- and how.
It's important to do this in part because much of what passes for praise of Reagan is veiled criticism. Reagan is hailed, for example, as a great communicator. And with good reason; few politicians could match his rhetorical skill and his ability to articulate great themes that resonated with the American people.
But that's where many on the Left stop. What they really seek to emulate is not his policies or his agenda. They hope that, by studying his methods, a little of his "magic" will rub off on the liberal policies that have proven such a hard sell over the last two years. Dress the liberal agenda in "Reaganesque" terms, and the electorate is yours, right?
What condescending nonsense. It wasn't just Reagan's ability to communicate that endeared him to millions of Americans. It was the fact that he was articulating their most deeply cherished beliefs. It went well beyond the optimistic outlook -- which, although welcome, is something any president can attempt. It was because he spoke in direct terms that avoided the usual "buzzword" approach we get from Washington.
And he used that approach to say what many Americans thought: Taxes are too high -- let's cut them. Inflation is too high -- let's tame it. The Cold War can be won, not managed, and the world made safer for everybody -- let's do it.
The fable of the Left (the hard Left, anyway -- many others are coming around) is that this was all smoke and mirrors. But the facts tell a different story. Starting from the "stagflation" mess his predecessor handed him, Reagan created a genuine economic miracle. After a three-stage tax cut and a reduction in government growth, our economy began to expand -- by 31 percent from 1983 to 1989 in real terms. Americans of every class -- rich, middle-class and poor -- saw their wealth increase.
It was our nation's longest peacetime expansion in a long and prosperous history. By decade's end, we had added the economic equivalent of a new Germany to our gross national product. Inflation was cut by two-thirds, interest rates by half. Unemployment dropped to the lowest level in 15 years.
Even before the end of his first term, the signs of distinct progress were unmistakable. Small wonder that Reagan's famous "Morning in America" campaign resonated with so many voters, leading to a landslide re-election in 1984. He wasn't simply using a terrific sales pitch -- he was actually telling the truth.
And people loved him for it. That's why so many politicians, both Republicans and Democrats, seek to portray themselves as a latter-day Reagan. To decide whether they deserve this mantle, however, consider this quote from his farewell address:
"‘We the people' tell the government what to do, it doesn't tell us. ‘We the people' are the driver, the government is the car. And we decide where it should go, and by what route, and how fast."
Only a politician who agrees with this -- and governs accordingly -- can be considered Reagan's true heir.
Obama Following a Very Risky Strategy With Egypt
By Dick Morris
President Obama better hope that the crowds clamoring for an overthrow of the Hosni Mubarak regime really do achieve a functioning liberal democracy rather than an Iranian-style theocracy. His re-election hopes may be doomed if Iran takes over.
Just as Richard Nixon helped to discredit Harry Truman and defeat Democratic presidential nominee Adlai Stevenson in 1952 by trumpeting the question, "Who lost China?" Obama may well have to explain how and why he lost Egypt. If he permits Egypt to slip through our fingers and go over to the Iranian sphere of influence, he will pay for it politically in 2012. Imagine if this president, whose domestic policy initiatives are coming apart at the seams, loses office over a foreign policy blunder.
The Muslim Brotherhood is allied closely with Hamas. To the extent that it masquerades as a peaceful body, it is a wolf in sheep's clothing. Any coalition with the Brotherhood is as likely to remain secular as Adolf Hitler's early coalition with Paul von Hindenburg in Germany was likely to stay non-Nazi. The Muslim Brotherhood will take over if it gets its foot in the door.
By failing to back Mubarak, Obama is committing the same sin that Dwight Eisenhower did in Cuba and Jimmy Carter did in Iran. He needs to understand that the radical Islamists mean us ill and that any effort to appease them is bound to fail.
If Egypt falls, Obama will have permanently damaged America's vital interests. Look at what Carter's abandonment of the Shah has cost the world and is likely to cost it in the future. We now face the possibility that a radicalized Egypt could be Obama's gift to the globe.
Until now, Americans have regarded Obama's flirtation with the Arab street with a mild concern that he may be too naive in his understanding of that part of the world. But his policy of appeasement toward radical Islam has yet to have any bad consequence. We have had some terror attacks, to be sure, but none have risen to the level of a cataclysm. But losing Egypt to the grip of Islamic fundamentalism would be a huge blow to the United States, to Israel and to the entire Western world.
It would literally open the door to a theocratic Iranian-style empire stretching from Morocco to Iran. Inspired by an Islamic takeover in Egypt, he may find himself confronted with a Middle Eastern version of the old domino theory, where one nation after another falls to Islamism, with each new theocratic conquest destabilizing its neighbor.
Remember that Iran has a population of 79 million and Egypt has 75 million. Together, their 154 million almost equal the combined population of all the other nations in North Africa and the Middle East. If Egypt and Iran were to work in tandem, they could control the region.
By failing to back Mubarak and telling the Egyptian military to pull its punches and let the demonstrators take over the streets, the Obama administration has come to own responsibility for the outcome of the Egyptian revolution. If it goes south and leads to a disastrous outcome, it will be his foreign policy that will rightly shoulder the blame.
Obama should be backing Mubarak. Remember that Egypt was the first Arab nation to sign a peace deal with Israel and the only one to work with the Jewish state. It was in pursuit of peace that Anwar Sadat, Mubarak's predecessor, gave his life.
With the U.S. supplying $1.3 billion in annual aid to the Egyptian military -- in addition to $700 million in other assistance -- we have great leverage, particularly over the military. Our demands that they behave gently toward the demonstrators may doom their efforts to preserve the regime.
How much damage can one misguided American president do? We are about to find out!
The State of the Union: Broke
By Robert Robb
If President Barack Obama were being candid, he would have begun his speech on Tuesday as follows: "The state of our Union is ... we're broke."
However, it is clear that Obama does not regard the financial condition of the federal government as the most important challenge facing the country. Instead, he regards additional government actions and spending to improve our global competitiveness as more important.
Moreover, the real message of the State of the Union address is that Obama is not going to provide presidential leadership to put the federal government on a sound financial footing until at least after the 2012 election.
The federal government, however, really is broke. According to the Congressional Budget Office, the federal deficit will reach $1.5 trillion this year. That will be three consecutive years of deficits in excess of a trillion dollars.
This year, for each dollar the federal government spends, it will borrow 40 cents of it.
And it only gets worse from here.
So far, the Social Security trust fund surpluses have been helping to finance general governmental operations. That's coming to an end.
Benefits already regularly exceed income from dedicated payroll taxes for the Medicare hospitalization and Social Security disability programs. According to CBO, this year Social Security retirement benefits will also exceed dedicated payroll taxes. That deficit becomes chronic and growing beginning in 2016.
There are those who say, don't worry, the Social Security trust fund is owed trillions by the general treasury for all those years it was running a surplus. That's true. But the general treasury has no money to pay it back. The only way for the general treasury to get the money to pay its IOUs is to borrow even more.
So far, despite the sorry state of its finances, the federal government has been able to borrow at cheap rates. That has to be coming to an end. The dicey global financial conditions have artificially inflated the demand for the debt of the U.S. government. As investors gain more confidence in alternatives, loaning more money to an entity that is already borrowing 40 cents on every dollar is going to look a lot less attractive.
The wisdom of Obama's strategy of government investments to improve competitiveness can be debated. I'm dubious. But until the finances of the federal government are put on a solid footing, it doesn't matter.
Obama appointed a debt commission to make recommendations about putting the federal government's finances in order. It did a surprisingly good job. It produced a plausible blueprint on reducing spending and reforming taxes in a way that both raises more money and is better for economic growth. The only place it whiffed was on Medicare spending.
Obama, however, has not embraced the recommendations of his commission. Nor has he offered any proposals of his own that make more than a minor dent in the problem.
Now, I have no idea whether Republicans are willing to get serious about truly fixing the federal government's finances either. The assumption isthat doing so will be hugely politically unpopular. Neither side wants to go first.
Until now, the notion that truly fixing the federal government's finances would be politically suicidal was probably sound. But I sense that now is different, that the American people understand that the federal government has gotten in way over its head, and getting out is going to require big changes. The American people may now be ready to accept the sort of recommendations made by the debt commission or even the entitlement reforms House Republican Budget Committee Chairman Paul Ryan has proposed.
However, I also increasingly think it doesn't matter. At some point, people aren't going to be willing to loan the federal government huge sums at favorable rates. And then the politicians and the body politic won't have a choice.
That ugly day is probably coming sooner rather than later.
I Can Balance the Budget
By John Stossel
The Congressional Budget Office says the current year's budget deficit will be a record $1.5 trillion. It also says that over the next decade we're on track for annual deficits of "only" $768 billion. I suspect the CBO has hired Rosy Scenario to do the bookkeeping, but let's take that number at face value.
I'm now going to balance the budget, with the help of some experts.
I'll begin with things I'm most eager to cut. Let's privatize air traffic control. Canada did it, and it works better. Then privatize Amtrak. Get rid of all subsidies for rail. That'll save $12 billion.
End subsidies for public broadcasting, like NPR. Cancel the Small Business Administration. Repeal the Davis-Bacon rules under which the government pays union-set wages to workers on federal construction projects. Cut foreign aid by half (although we should probably get rid of all of it). So far, that's $20 billion.
Oops. That doesn't dent the deficit. We have to do much more.
So eliminate the U.S. Education Department. We'd save $94 billion. Federal involvement doesn't improve education. It gets in the way.
Agriculture subsidies cost us $30 billion a year. Let's get rid of them. They distort the economy. We should also eliminate Housing and Urban Development. That's $53 billion more.
Who needs the Energy Department and its $20 billion sinkhole? The free market should determine energy investments.
And let's end the war on drugs. In effect, it's a $47 billion subsidy for thugs in the black market.
I've already cut more than six times more than President Obama proposed in his State of the Union address. His freeze of nondefense discretionary spending would save only $40 billion.
But my cuts still total only $246 billion. If we're going to get rid of the rest of the CBO's projected deficit, we must attack the "untouchable" parts of the budget, starting with Social Security. Raising the retirement age and indexing benefits to inflation would save $93 billion. I'd save more by privatizing Social Security, but our progressive friends won't like that, so for now I'll ignore privatization.
The biggest budget busters are Medicare and Medicaid, and get this: the 400 subsidy programs run by HHS. Assuming I take just two-thirds of the Cato Institute's suggested cuts, that saves $281 billion.
How about the Defense Department's $721 billion? Much of that money could be saved if the administration just shrank the military's mission to its most important role: protecting us and our borders from those who wish us harm. Today, we have more than 50,000 soldiers in Germany, 30,000 in Japan and 9,000 in Britain. Those countries should pay for their own defense. Cato's military cuts add up to $150 billion.
I've now cut enough to put us $2 billion in surplus!
Can we go further?
"Repeal Obamacare," syndicated columnist Deroy Murdock said.
Reason magazine editor Matt Welch wants to cut the Department of Homeland Security, "something that we did without 10 years ago."
But don't we need Homeland Security to keep us safe?
"We already have law enforcement in this country that pays attention to these things. This is a heavily bureaucratized organization.
"Cut the Commerce Department," Mary O'Grady of The Wall Street Journal said. "If you take out the census work that it does, you would save $8 billion. And the rest of what it does is really just collect money for the president from business."
As the bureaucrats complain about proposals to make tiny cuts, it's good to remember that disciplined government could make cuts that get us to a surplus in one year. But even a timid Congress could make swift progress if it wanted to. If it just froze spending at today's levels, it would almost balance the budget by 2017. If spending were limited to 1 percent growth each year, the budget would balanced in 2019. And if the crowd in Washington would limit spending growth to about 2 percent a year, the red ink would almost disappear in 10 years.
As you see, the budget can be cut. Only politics stand in the way.
Clashes Erupt in Cairo Between Mubarak’s Allies and Foes
Clashes Erupt in Cairo Between Mubarak’s Allies and Foes
Pro-Mubarak demonstrators, below, clashed with anti-government protesters in Tahrir Square in Cairo on Wednesday. More Photos »
By ANTHONY SHADID, DAVID D. KIRKPATRICK and KAREEM FAHIM
CAIRO — The Egyptian government struck back at its opponents on Wednesday, unleashing waves of pro-government provocateurs armed with clubs, stones, rocks and knives in and around Tahrir Square in a concerted effort to rout the protesters who have called for an end to President Hosni Mubarak’s near-30-year rule.
Multimedia
Anthony Shadid on New Clashes in Street Protests
Amr Nabil/Associated Press
Pro-Mubarak protesters waved an Egyptian flag in Cairo Wednesday morning. More Photos »
After first trying to respond peacefully, the protesters fought back with rocks and Molotov cocktails as battles broke out around the square. A makeshift medical clinic staffed by dozens of doctors tended to a steady stream of antigovernment protesters, many bleeding from head wounds.
As the two sides exchanged volleys, the military restricted itself mostly to guarding the Egyptian Museum and using water cannons to extinguish flames stoked by the firebombs. And on Wednesday night, state media broadcast an order from the government for all protesters to leave the square.
Signs that the pro-Mubarak forces were organized and possibly professional were abundant. When the melee broke out, a group of them tried to corner a couple of journalists in an alley to halt their reporting. Their assaults on the protesters seemed to come in well-timed waves.
Some protesters reported that they had been approached with offers of 50 Egyptian pounds, about $8.50, to carry pro-Mubarak placards. “Fifty pounds for my country?” one woman said, in apparent disbelief.
The counterattack was undertaken in the face of calls from leaders in Washington and Europe for peaceful and rapid political change, with the Foreign Ministry releasing a defiant statement in the state news media saying that such calls from “foreign parties” had been “rejected and aimed to incite the internal situation in Egypt.”
It followed Mr. Mubarak’s 10-minute television address on Tuesday, in which he pledged to step down within months — an offer that was rejected by his opponents, who have demanded his immediate resignation — and was met with a call by President Obama for a political transition “now” that infuriated Cairo.
“There is a contradiction between calling on the transition to begin now, and the calls which President Mubarak himself has made for an orderly transition,” an Egyptian official said Wednesday. “Mubarak’s primary responsibility is to ensure an orderly and peaceful transfer of power. We can’t do that if we have a vacuum of power.”
The official said that the Egyptian government had “a serious issue with how the White House is spinning this.”
The White House kept up the pressure on the Mubarak government, however, with the presidential spokesman, Robert Gibbs, telling reporters in Washington that “now means yesterday.”
He added: “There are reforms that need to be undertaken. There are opposition entities that need to be in the conversation.”
Prime Minister David Cameron of Britain issued a strong statement deploring the violence, adding what appeared to be a veiled threat. “If it turns out that the regime is any way has been sponsoring and tolerating this violence, that would be completely and utterly unacceptable,” he said. “These are despicable scenes that we are seeing, and they should not be repeated.”
Meanwhile, a leading opposition leader in Cairo, Mohamed ElBaradei, issued a statement calling on the military to “intervene decisively to stop this massacre.”
The Egyptian health minister, Ahmed Sameh Farid, said that 596 people had been injured in the battles in Tahrir Square and that one man was killed when he fell off a bridge, The Associated Press reported.
The mayhem and chaos — with riders on horses and camels thundering through the central square — offered a complete contrast to the scenes only 24 hours earlier when hundreds of thousands of antigovernment protesters turned it into a place of jubilant celebration, believing that they were close to overthrowing a leader who has survived longer than any other in modern Egypt.
Such was the nervousness across the Arab world, spreading from its traditional heart in Egypt, that the leader of Yemen offered on Wednesday to step down by 2013 and offered assurances his son would not succeed him — the latest in a series of autocratic leaders bending to the wave of anger engulfing the region.
On Wednesday, the enduring standoff between Mr. Mubarak and his adversaries took an explosive and perilous turn, offering further proof that Mr. Mubarak had no intention of exiting earlier than he had announced. Hours after a call from Egypt’s powerful military for the president’s opponents to “restore normal life,” thousands of men, some carrying fresh flags and newly printed signs supporting Mr. Mubarak, surged into Tahrir Square.
For several hours in the afternoon, from a base in Talaat Harb Square, northeast of Tahrir Square, pro-Mubarak supporters wielding rebar, knives, pliers, long sticks and even a meat cleaver surged toward the antigovernment protesters, under cover of rocks thrown by their confederates in the rear and from a roof of a nearby building.
At regular intervals, men were carried away from the fight bleeding.
A red car and a motorcycle traveled to the front, by the historic Groppi’s café, and shuttled the injured men away to a makeshift medical clinic staffed by dozens of doctors. At about 4 p.m., agitated young men started throwing rocks at the windows of residents, without explanation. Men also threw rocks at the offices of an opposition figure, Ayman Nour, that overlooks the square.
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More Than Just Greed
More Than Just Greed
by Jeffrey A. Miron
In asking whether the recent financial crisis could have been avoided, the crucial fact is that crises of various flavors have occurred for centuries in countries around the world. Thus, any explanation based mainly on recent factors — subprime lending, derivatives trading, or financial deregulation — cannot be the whole story. A full account must identify factors that have been present widely, and for centuries.
One such factor, without question, is profit-seeking behavior by the financial sector (call it greed if you must). No one should deny that participants in these markets are there to make money and will aggressively pursue every opportunity to enrich themselves.
But this explanation for crises is also incomplete: every industry seeks profit, yet crises occur almost exclusively in the financial sector. Why? Because governments have long protected financial institutions from the risks associated with their lending and trading activities.
Jeffrey A. Miron is a senior lecturer and the director of undergraduate studies in economics at Harvard University and a senior fellow at the Cato Institute.
More by Jeffrey A. MironThe U.S. founded the Federal Reserve precisely to protect the banking sector from the losses they incurred during panics and runs. Before that, the Bank of England had long been a cozy partner of British banks, as have been central banks and treasuries in most countries for at least a century.
In recent decades, the too-big-to-fail doctrine made explicit that the U.S. will not let large financial institutions suffer the full brunt of their risk-taking; so, these institutions assumed more risk. And Fed reassurances in the early stages of the housing and credit bubbles, which the now infamous Alan Greenspan offered, just added fuel to the fire. The message emanating from the Fed was clear: don't worry too much about risk, since Uncle Alan will come to the rescue when things go wrong.
To avoid future panics, governments must learn to tie their hands and let markets punish excessive risk-taking. That is easier said than done, but nothing else can prevent future crises.
Government against the People
Government against the People
by Richard W. Rahn
Want more evidence that many government officials could not care less about protecting our person, property and liberty — which the American Founding Fathers saw as the basic purpose of government? Reports released this past week provided a bumper crop of evidence.
In May 2009, the Financial Crisis Inquiry Commission was established to investigate the causes of the financial and economic crisis. Six of the 10-member commission were chosen by the congressional Democrats, and four were picked by the congressional Republicans. (Rather than truly being independent, the commission was designed to protect the political flanks of many of those who had caused the problem.) The 500-page report that was sent to the president was only endorsed by the six Democratic members. Three of the Republicans filed one joint dissent, and the remaining Republican member, Peter Wallison, former general counsel of the Treasury under President Reagan and now a fellow at the American Enterprise Institute, filed his own 100-page dissent.
In explaining his dissent, Mr. Wallison wrote: "Like Congress and the Obama administration, the Commission's majority erred in assuming that it knew the causes of the financial crisis. Instead of pursuing a thorough study, the Commission's majority used its extensive statutory investigative authority to seek only the facts that supported its initial assumptions — that the crisis was caused by "deregulation" or lax regulation, greed and recklessness of Wall Street, predatory lending in the mortgage market, unregulated derivatives, and a financial system addicted to excessive risk taking. The Commission did not seriously investigate any other cause and did not effectively connect the factors it investigated to the financial crisis."
Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.
More by Richard W. RahnThe Democratic majority never answered the basic question to support its assertion: Why did bankers and Wall Street suddenly become more greedy, and how did this cause the financial crisis? The three dissenting Republicans blamed the crisis on government housing policy, failures in credit-rating and other factors. Mr. Wallison argues that without destructive U.S. government housing policies, the other factors were, by themselves, insufficient to create the global financial crisis. The Democrats' report clearly was one of self-interest — no surprise. The three dissenting Republicans are fine folks, but each had major policy responsibilities in the U.S. government in the past decade. In contrast, Mr. Wallison last served in government two decades ago and, more importantly, had been warning about the coming disaster for the past decade, particularly with the two government-sponsored housing giants, Fannie Mae and Freddie Mac. Mr. Wallison had been prescient in forecasting the collapse because he spent the time to look at the data and other evidence and had no vested interest in not seeking the truth.
The administration and most of the congressional Democrats seemed to have learned nothing. They passed the Dodd-Frank financial "reform" legislation in 2010 before understanding or even acknowledging the primary source of the problem: Fannie and Freddie. (As has been well publicized, both then-Sen. Christopher J. Dodd and Rep. Barney Frank had serious conflicts of interest with the mortgage giants.) In sum, the "housing crisis" will continue, and the financial crisis will return sooner rather than later.
On Wednesday, Ralph Nader wrote in the Wall Street Journal that the government had ripped off the Fannie/Freddie stockholders, of which he was one. What delicious irony that the man who has been telling us for decades to trust the government instead of private business was abused by the government. I wonder if he has learned anything.
Another no surprise last week was a report issued by the Congressional Budget Office that the budget deficit is even larger (a mere $1.5 trillion larger) than previously forecast and financial doomsday is getting closer. Again, having learned nothing, President Obama responded in his State of the Union address by proposing more government spending. He seems to be making a real effort to have the collapse occur in his first term.
Meanwhile, more reports surfaced about the fact that many state and local governments have not been disclosing relevant information about their finances to their bondholders. Executives in private firms would be fined or sent to jail for similar lapses, but government officials are largely immune to rules that the rest of us must follow. Municipal bonds are often held by retirees and others seeking low-risk investments, so reckless government officials are endangering the income of the people they claim to care about most.
Public choice theory explains why government officials and bureaucrats put their own interests ahead of the interests of those who they are supposed to serve. Those in favor of ever bigger government ignore this fundamental reality, which is demonstrated time and time again. The American Founding Fathers implicitly understood this, which is why they tried to design a system to protect people from government. Recent events have shown that their fears were all too justified.
Reagan Was No Neocon
by Gene Healy
Gene Healy is a vice president at the Cato Institute and the author of The Cult of the Presidency.
It's Ronald Reagan's 100th birthday on Sunday, and everyone on the Right is jockeying for a piece of the Gipper's legacy.
No surprise, then, that the latest issue of the Weekly Standard — the magazine that helped bring you the Iraq War — is a "What Would Reagan Do?" special, with a cover featuring Reagan blowing out his birthday candles. This isn't the first time the Standard's editor, William Kristol, has wrapped himself in our 40th president's mantle. In a famous 1996 article, "Toward a Neo-Reaganite Foreign Policy," Kristol and co-author Robert Kagan invoke the Gipper for an aggressive program of "global hegemony" and rogue-state rollback.
Nice try. During his career, Ronald Reagan often employed the sort of confrontational rhetoric neoconservatives thrill to, but, as president, Reagan was no neocon — and be thankful for that.
In foreign affairs, the Reagan legacy is one of realism and restraint.
In their 2004 book, America Alone: The Neoconservatives and the Global Order, Jonathan Clarke and Stefan Halper write that modern neocons have "attached a Reagan bumper sticker to their motorcade," but they "ignore much of the substance: the intense arms control commitment, the summitry, the minimal use of direct American military power."
Reagan had a genuine horror of nuclear weapons, and wanted them abolished. He called mutually assured destruction "the craziest thing I ever heard of." His three military interventions — Grenada, Lebanon and Libya — were "limited operations of short duration," and he carefully avoided direct confrontation with the Soviets.
This got Reagan into trouble with the neocons early on. They took to the oped pages to lament "The Muddle in Foreign Policy" (Irving Kristol) and chronicle the "Neoconservative Anguish over Reagan's Foreign Policy" (Norman Podhoretz).
Incredibly, Podhoretz accused Reagan of "following a strategy of helping the Soviet Union stabilize its empire," instead of "encouraging the breakdown of that empire from within."
Gene Healy is a vice president at the Cato Institute and the author of The Cult of the Presidency.
More by Gene Healy
In Reagan's Middle East policies, especially, there was much for hawks to rue, such as the administration's sharp condemnation of Israel's 1981 "preventive strike" on the Iraqi nuclear reactor at Osirak, and Reagan's decision to withdraw U.S. peacekeepers from Lebanon after a truck bomb killed more than 200 Marines.
In a 2007 debate, to the chagrin of Rudy Giuliani, Rep. Ron Paul, R-Texas, invoked Reagan to argue for getting out of the Middle East: "We need the courage of a Ronald Reagan."
Despite Reagan's "ringing speeches," he was "quite circumscribed in his efforts at democracy promotion," Colin Dueck writes in Hard Line, a new history of GOP foreign policy. Reagan viewed the U.S. as a city on a hill, a "model to other countries," not a crusader state with "an obligation to forcibly promote democracy overseas."
Most of all, what separates Reagan from his hawkish latter-day admirers was his optimism. He viewed the United States as dynamic and free — and, therefore, strong enough to outlast any enemy.
For the neoconservatives, however, it's always 1939, and the free world is always under siege, whether from a decrepit Soviet monolith of the 1980s or today's allegedly "existential threat" presented by several hundred cave-dwelling Islamists.
In the Gorbachev era, Norman Podhoretz accused Reagan of buying into "the fantasy of communist collapse." Some fantasy.
Reagan had been right when he proclaimed in 1981 that "the West will not contain communism; it will transcend communism," dismissing it as "a sad, bizarre chapter in human history whose last pages are even now being written." The Gipper's threat-addled fans at the Standard could use some of his confidence today.
In recent decades, Republicans have repeatedly honored Reagan's memory by naming federal buildings after him — a curious tribute indeed. They'd do better to look at his actual record.
In foreign affairs, the Reagan legacy is one of realism and restraint.
Cuomo the Conservative
Cuomo the Conservative
by Michael D. Tanner
Looking for a tax-cutting, budget-slashing, fiscally conservative governor? How about Andrew Cuomo? Yes, that Andrew Cuomo.
With the possible exceptions of California and Illinois, no state is facing as big an economic mess as New York. Years of profligate spending and crushing taxes have left the state with a $10 billion budget shortfall. The conventional wisdom said that despite having the nation's highest tax burden, and what Cuomo has called the "worst business climate in the country," New York would have no choice but to hike taxes yet again. That is, after all, the path that Illinois just chose, raising its state income tax by 75 percent.
Cuomo rejected that approach, early, often, and loudly. He vowed to balance the state's budget without borrowing and without raising taxes.
"The old way of solving the problem was continuing to raise taxes on people, and we just can't do that anymore. The working families of New York cannot afford tax increases. The answer is going to have to be that we're going to have to reduce government spending," Cuomo declared.
Cuomo's budget represents the first proposed year-to-year drop in state spending since the mid 1990s.
In fact, Cuomo didn't just rule out tax increases, he actually called for tax cuts. Already he has pushed through the state senate a bill establishing one of the nation's strongest caps on property taxes. For New York businesses and homeowners, this is a long overdue move. Nationally, the median annual property tax is $1,917. In some New York counties, the average property-tax bill exceeds $9,000.
Cuomo's proposal, modeled after nearby Massachusetts's successful Proposition 2½, would limit property-tax increases to no more than 2 percent or 120 percent of the inflation rate, whichever is lower. Significantly, it does not include traditional loopholes for things like government employees' health-insurance premiums or pensions. It would also eliminate the practice of localities' voting separately to approve school budgets without regard to their impact on taxes. And most important, the bill would require a 60 percent supermajority for voters to override the cap, ensuring that taxes would only be raised for genuine emergencies or the most worthwhile projects.
Cuomo also has announced that he will allow the state's "temporary" income-tax surcharge on the wealthy to expire as scheduled at the end of this year. That has outraged liberal groups, unions, and the New York Times, but Cuomo responds by warning that high taxes are a job-killer and would "just prolong the recessionary conditions in the state."
Of course, tax-cutting is always easier than budget-cutting — as Congress has shown in recent years — but Cuomo also seems serious about controlling state spending. In fact, Cuomo sounds almost Reaganesque, declaring flatly, "The state spends too much money."
Almost immediately, he imposed a freeze on salaries for state workers. While that move was more symbolism than substance, it was important symbolism. Public-employee unions have been some of the state's most powerful special interests. Since 2007, while most Americans have been struggling, New York public employees have seen their wages and benefits go up by 13 percent. Beyond the symbolism, Cuomo's freeze will save taxpayers $200 million this year. Cuomo is also set to cut the size of the state bureaucracy. His 2011 budget, released yesterday, calls for a reduction in the state work force of some 15,000 people, slightly more than 7 percent of the state's 200,000 employees. And he cut his own office's budget by 25 percent.
Overall, Cuomo's budget represents the first proposed year-to-year drop in state spending since the mid 1990s. Everything is on the table, from prison construction to state aid to New York City.
Cuomo also appears ready to go after the sacred cows of state spending: education and health care. He has pledged to eliminate state budget rules that lock in annual increases to educational programs and Medicaid — a 13 percent hike this year. But beyond doing away with the automatic $8 billion hike built into the budget formulas, Cuomo plans real cuts as well. His budget would cut Medicaid spending by $3 billion.
Michael D. Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.
More by Michael D. TannerHe would also shave nearly $1 billion from state education spending. And Cuomo has made it clear that he was talking about actual cuts, not just the traditional game of decreases in the rate of increase.
The proposed cuts have engendered the usual howls of outrage that it will lead to fired teachers, overcrowded classrooms, and sick people dying in the street. In response, Cuomo notes that New York spends more per pupil on education and more per enrollee on Medicaid than nearly any other state, yet has little to show for the money.
Andrew Cuomo apparently understands that the secret to economic growth is a smaller, less expensive government. It's an approach that some of his fellow Democrats in Washington — including the White House — could learn a lot from.
Mubarak Supporters Battle Protesters
CHARLES LEVINSON SUMMER SAID
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Ben Curtis/Associated Press Pro-government demonstrators, below, and antigovernment demonstrators, above, clashed in Cairo's Tahrir Square on Wednesday.
The political unrest gripping Cairo turned ugly Wednesday, as groups of supporters of President Hosni Mubarak charged antigovernment protesters, underscoring the difficulty of a smooth democratic transition to a post-Mubarak Egypt.
Bloody clashes in the city's main square escalated through the day, after Mr. Mubarak said Tuesday night he would step down after elections this year—angering protesters who demanded his immediate resignation after 29 years in power.
WSJ's Margaret Coker reports from Cairo clashes between pro- and anti-government protesters are spreading despite calls from the military for the protesters to disperse.
Newly appointed Vice President Omar Suleiman called for protesters to pull out of the square, and said protests must end before any dialogue between the regime and the opposition could begin, according to state media reports.
But opposition groups have refused to end protests until Mr. Mubarak tenders his immediate resignation.
Supporters of both sides faced off Wednesday, chanting slogans at each other, fighting and hurling missiles. Protesters at two entrances to Tahrir Square—by the Egyptian Museum and the route from downtown Cairo—came under attack from men heaving rocks and running into them with horses and camels.
The clashes marked a dangerous new phase for the confrontations. Earlier Wednesday, an army spokesman appeared on state television to ask protesters to return home to help restore order. The army said one soldier died Wednesday, and the Health Ministry said 600 were injured, according to statements on state television.
The Obama administration condemned the violence spurred by pro-Mubarak forces. "We are deeply concerned about attacks on the media and peaceful demonstrators," White House spokesman Robert Gibbs said in a statement.
Israel's prime minister said Iran wants to take advantage of the chaos to create "another Gaza" in Egypt, run by Islamic fundamentalists.
Speaking before the Israeli parliament, Benjamin Netanyahu said he expects any new government in Egypt to honor its three-decade-long peace agreement with Israel, the Associated Press reported. But he warned that Islamic groups have already taken over by democratic means in Iran, Lebanon and Gaza.
In Cairo, Mubarak supporter Sayed Mohammed Sayed, 37 years old, said the protesters pushed things too far by refusing to back down after the president agreed to pursue reforms and eventually step down.
"The situation is unacceptable," the air-conditioner technician said. "The majority of protesters are young people and aren't aware of their actions and consequences."
Journal Photos: Egypt Rises Up
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In Al-Arish, a town in northern Sinai near the border with Israel, a group of protesters took to the streets after prayers in solidarity with protests in Cairo.
Egypt Protests Wednesday
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Regional Upheaval
A succession of rallies and demonstrations, in Egypt, Jordan, Yemen and Algeria have been inspired directly by the popular outpouring of anger that toppled Tunisian President Zine al-Abidine Ben Ali. See how these uprising progressed.
Mohamed ElBaradei, the leader of the opposition's loose coalition, said in an interview that he had heard government supporters were sending men to Tahrir Square to attack protesters and warned against acts of violence. Attacks on demonstrators, he charged, would make it difficult to conduct negotiations with "a regime that is a bunch of thugs."
At the downtown entrance to the square, groups of Mubarak supporters started organizing charges, running up and down the street creating mayhem. Protesters responded by forming a human barrier three to four people deep to keep the Mubarak supporters out.
Mohamed Abdu, a 22-year-old graduate of Helwan University and a member of the Muslim Brotherhood, an opposition group, grew visibly shaken as the men began hurling rocks over the human barricade. One man on the protesters' side pulled out a pair of large light bulbs from his backpack and threw them at the Mubarak supporters. He was quickly shouted down by protesters chanting "peace."
Ibrahim Saadouni, 47, a lawyer who joined the protests, said he believed the violence was started by the thugs for hire that are a standard feature of Egyptian electoral politics. "They've come to create a civil war," Mr. Saadouni said. "They're doing this to make war so the army will step in to end the demonstrations, because we won't leave."
There were no signs of intervention by the police or military even when a number of men marched to Tahrir Square on camels and horseback and began running into people, as well as hitting and whipping them. A few minutes later, they were stopped by protesters opposed to the president.
"They forced the people to get off the horses and the camels, and they have beaten them badly," said Muhammad Khalifa, a translator.
Other witnesses said pro-Mubarak protesters tore down banners denouncing the president as they advanced across Tahrir Square.
Some witnesses said they saw members on both sides hitting each other with sticks. Some came away injured, with their heads bleeding.
In some areas, reporters were attacked by those who believe that the long-time ruler deserves to remain power.
The clashes in Cairo were a reminder of the high stakes for the many Egyptians who have benefited from the regime and rely on it for work or status. Many pro-Mubarak demonstrators also expressed skepticism about the motives of the opposition and its leaders.
From the Archives
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- Egypt Curbs Islamist Campaign (11/27/10)
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"We don't want ElBaradei or any American agent," said Hisham Zain, 38. "We want to continue with Mubarak until stability is formed and the end of his presidency. We want the presidency to be changed in a peaceful and smooth way."
The scene was dramatically than the almost carnival-like atmosphere that prevailed in Tahrir Square on Tuesday. Some 250,000 protesters turned out for a rally, many with their families in tow.
In Alexandria, Egypt's conservative second city, thousands of supporters of Mr. Mubarak displaced antigovernment protesters from around the Ibrahim mosque in the center of the city Wednesday, a gathering place for recent protests. But furious arguments and pushing and shoving hadn't come to blows by evening.
The two sides clashed late the night before, after Mr. Mubarak's televised speech, when witnesses said dozens of his supporters began throwing rocks at the antigovernment crowd. The army fired shots into the air in an effort to break up that fighting. On Wednesday, the two sides largely avoided each other as they criss-crossed the city through the afternoon.
"There won't be calm until Mubarak is gone. Take Mubarak out and Egypt will be stable again," said Samir Mohammed, a 45-year-old manager of a pharmaceuticals factory. "Wait until Friday," he added. "Friday's demonstration will be huge."
US condemns violence in Egypt
US condemns violence in Egypt, chides government
WASHINGTON – The United States criticized the government of President Hosni Mubarak and condemned violence in Egypt's capital as clashes between protesters and pro-government supporters demonstrated there would be no easy resolution to the unrest destabilizing America's closest ally in the Arab world.
A day after President Barack Obama pressed Mubarak to loosen his grip on power immediately, White House spokesman Robert Gibbs said the U.S. "deplores and condemns the violence that is taking place in Egypt."
"We are deeply concerned about attacks on the media and peaceful demonstrators," he added in a statement. "We repeat our strong call for restraint."
His comments came after the protests in Egypt's capital took a dangerous turn when several thousand Mubarak supporters, including some riding horses and camels and wielding whips, attacked anti-government protesters. In scenes of uncontrolled violence, some of the assailants were dragged to the ground by demonstrators and beaten bloody while the two sides rained stones and bottles down on each other.
State Department spokesman P.J. Crowley also urged calm.
"Egypt's path to democratic change must be peaceful," he said in a post to Twitter. He criticized the government over detentions and press restrictions. "The civil society that Egypt wants to build includes a free press."
The strife in Egypt was occurring a day after Obama prodded Mubarak to quickly loosen his grip on power, sternly telling the world that the longtime leader's transition from the presidency "must begin now."
Mubarak said Tuesday he would not seek re-election in balloting set for September. Yet he seemed determined to shepherd the political changeover from his authoritarian 30-year reign to an uncertain future.
The half-concession was angrily rejected by throngs of protesters in Cairo who say they are fed up with poverty and corruption and want him to step down immediately.
It also did not appear to satisfy Obama. After days of scrambling in the White House over how to react to the enormous and unanticipated protest movement, the president unmistakably sided with the demonstrators, even if he stopped short of demanding Mubarak's immediate resignation.
Behind the scenes, the White House had attempted to nudge Mubarak to the exits over the past 48 hours, dispatching former U.S. ambassador to Egypt Frank Wisner as a special envoy to deliver a message to him: The U.S. saw Mubarak's tenure at an end, didn't want him to seek re-election and wanted him to prepare an orderly transition to real democracy.
Keeping abreast of the situation, Chairman of the Joint Chiefs of Staff Adm. Mike Mullen spoke by phone Wednesday morning with his Egyptian counterpart, Lt. Gen. Sami Anan — their second conversation since Anan cut short a U.S. visit Friday to return to Egypt.
The general gave Mullen an update on developments, a statement said. Mullen expressed confidence in the Egyptian military's ability to ensure security in the country and around the Suez Canal.
Speaking Wednesday to American ambassadors gathered in Washington, Secretary of State Hillary Rodham Clinton said the unrest in the Middle East showed the importance of strong U.S. diplomacy.
"What's going on today — recent events in Egypt and certainly in that broader region — remind us all how crucial it is to have top-notch leadership on the ground and how quickly the ground can shift under our feet," she said.
"This is a critical time for America's global leadership," Clinton added. She said the United States needs to "be more nimble" in dealing with fast-paced international developments.
| Cairo clashes fuel Egypt turmoil | |||||
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| At least one dead and hundreds injured as pro-Mubarak supporters attack protesters seeking President Mubarak's ouster. | |||||
| Al Jazeera correspondents, reporting from the scene, said that more than 500 people had been injured in Wednesday's clashes that are still continuing. One of our correspondents said the army seemed to be standing by and facilitating the clashes. Latest reports suggest that the centre of the square is still in control of the protesters, despite the pro-Mubarak supporters gaining ground. 'Absolute mayhem' Witnesses also said that pro-Mubarak supporters were dragging away protesters they had managed to grab and handing them over to security forces. Salma Eltarzi, an anti-government protester, told Al Jazeera there were hundreds of wounded people.
"People are coming in with multiple wounds. All kinds of contusions. We had one guy who needed stitches in two places on his face. Some have broken bones." Meanwhile, another Al Jazeera correspondent said men on horseback and camels had ploughed into the crowds, as army personnel stood by. At least six riders were dragged from their beasts, beaten with sticks by the protesters and taken away with blood streaming down their faces. Al Jazeera's correspondent added that several a group of pro-government protesters took over army vehicles. They also took control of a nearby building and used the rooftop to throw concrete blocks, stones, and other objects. Many of the pro-Mubarak supporters raised slogans like "Thirty Years of Stability, Nine Days of Anarchy". "The people on horses are pro-Mubarak supporters, they are a very angry crowd looking for anyone working for Al Jazeera and for Americans. They are trying to get on the other side of the army tanks to get to the anti-Mubarak supporters. More and more pro-Mubarak supporters are coming in." Violence Fighting took place around army tanks deployed around the square, with stones bouncing off the armoured vehicles. Several groups were involved in fist fights, and some were using clubs. The opposition also said many among the pro-Mubarak crowd were policemen in plain clothes.
"Members of security forces dressed in plain clothes and a number of thugs have stormed Tahrir Square," three opposition groups said in a statement. "I'm extremely concerned, I mean this is yet another symptom, or another indication, of a criminal regime using criminal acts," ElBaradei said. "My fear is that it will turn into a bloodbath," he added, calling the pro-Mubarak supporters a "bunch of thugs". Determined protesters Despite the clashes, anti-government protesters seeking Mubarak's immediate resignation said they would not give up until Mubarak steps down.
Khalil, in his 60s and holding a stick, blamed Mubarak supporters and undercover security for the clashes. "But we will not leave," he told Reuters. "Everybody stay put." Mohammed el-Belgaty, a member of the Muslim Brotherhood, told Al Jazeera the "peaceful demonstrations in Tahrir Square have been turned into chaos". "The speech delivered by President Mubarak was very provocative as he used very sentimental words. "Mubarak is asking the people to choose between him or chaos." |
What's wrong with Greece
Business and management
Schumpeter's notebook
The euro-zone crisis
by Schumpeter
WE HAVE read plenty about Greece's dismal public finances and risible public book-keeping. But if the country is to have any chance of recovering in the long-term it needs to rethink its approach to entrepreneurialism, which is one of the most hostile in the world. A New York Times article makes this point forcefully by telling the story of one entrepreneur's brave attempt to establish a soft-drinks business in his home country:
DEMETRI POLITOPOULOS says he has suffered countless indignities in his 12-year battle to build a microbrewery and wrest a sliver of the Greek beer market from the Dutch colossus, Heineken.
His tires have been slashed and his products vandalized by unknown parties, he says, and his brewery has received threatening phone calls. And he says he has had to endure regular taunts—you left Manhattan to start up a beer factory in northern Greece?—not to mention the pain of losing 5.3 million euros.
Bad as all that has been, nothing prepared him for this reality: He would be breaking the law if he tried to fulfill his latest—and, he thinks, greatest—entrepreneurial dream. It is to have his brewery produce and export bottles of a Snapple-like beverage made from herbal tea, which he is cultivating in the mountains that surround this lush pocket of the country.
An obscure edict requires that brewers in Greece produce beer—and nothing else. Mr. Politopoulos has spent the better part of the last year trying fruitlessly to persuade the Greek government to strike it. “It’s probably a law that goes back to King Otto,” said Mr. Politopoulos with a grim chuckle, referring to the Bavarian-born king of Greece who introduced beer to the country around 1850.
The whole thing is worth reading if you want to understand just how messed up the country is, and how little the European Union has done to promote structural reforms in its member states.
More on beards
Brain power versus beard power
Feb 2nd 2011, 14:35 by Schumpeter
IN HIS special report on the global elite my esteemed colleague argued that "brains bring ever larger rewards". This is true enough, but I think that he missed an important wrinkle in the argument. The more productive economies become, powered, no doubt, by the cognitive elite, the more people can be rewarded for all sorts of talents, not just intelligence. Beards, as well as brains, can provide people with a livelihood, of a sort. From today's New York Times:
Jack Passion knows a thing or two about beards. With his orange-red “waterfall of hot lava,” as he called it, spilling from his chin, he is the country’s only full-time professional beard grower. It is not a lucrative job, really, but between the worldwide contests he wins and the book he wrote about beard growing, he can be considered an expert on the subject.
Economists and conflicts of interest
Jan 27th 2011, 0:05 by Schumpeter
ECONOMISTS have recently been debating whether to adopt a code of ethics, to deal with widespread worries about conflicts of interest. But dubious behaviour has a long history in a profession that is, by its nature, a magnet to people who are preoccupied by money. David Warsh recounts one of Paul Samuelson's favourite stories about David Ricardo and the huge profits he reaped after the Battle of Waterloo:
The bond trader had an observer stationed near the battle. Once the outcome was clear, he galloped quickly to where a packet ship was waiting. So Ricardo in London received the early news, and conveyed it to the British government.
Then he went down to his customary chair at the Exchange – and sold! Other traders, suspecting the worst, sold too, the prices of Treasuries tumbling, until at last, Ricardo reversed course and bought and bought and made a killing, his greatest coup ever, one that put even the Rothschild brothers in the shade.
“If not illegal, an ethical purist would have to fault Ricardo for in effect profiting from his own spreading false rumors,” Samuelson wrote. “In this millennium that might be something to criticize or even to litigate.” Even so, the ploy was not unheard of in the present day, he would confide, given that new news, not yet digested, was what sent markets spinning.
Emerging markets
The rise of emerging-market think-tanks
Jan 26th 2011, 18:00 by Schumpeter
THE rise of new economic powers is inexorably bringing the rise of new intellectual powers, too. For decades American think-tanks have ruled the world. They have the finest facilities, the cleverest scholars and the best lunches. They have defined the terms of the global debate and provided America's hard power with a halo of soft power.
This is still largely the case. But emerging-market think-tanks are growing rapidly, promising to broaden the global debate. The big ideas of the future are increasingly likely to come from them. Journalists, wanting a comment on China or an op-ed on the balance of power, may well phone up somebody in São Paulo rather than Washington (or they should do, anwyay, if they are up to their job).
Every year the University of Pennsylvania provides a huge public service by compiling a list of the world's top think-tanks. America leads the world in absolute numbers, with 1816 think-tanks. It also leads the world in quality, with lots of American institutions in the top twenty and the Brookings Institution, rightly, ranked as number one. But China and India are making impressive strides, with 425 and 292 respectively. Argentina also puts in a strong performance, with 181 think-tanks. Journalists need to update their contacts lists.
An ombudsman's lament
The future of the Washington Post
Jan 26th 2011, 15:44 by Schumpeter
ANDREW ALEXANDER, the Washington Post's departing ombudsman, pens a lament about the state of his paper that should strike a chill into the heart of anybody who cares about the future of journalism, both as an industry and as a craft:
Staggering financial losses have required unrelenting expense reductions to restore profitability. The loss of newsroom talent, through forced buyouts and voluntary departures, has been breathtaking. Some of the most respected Post journalists have left, along with institutional knowledge and leadership so desperately needed during a period of radical change.
Mr Alexander is undoubtedly right about the harsh environment. But the Post has brought some of this on itself. The rise of Politico shows that the paper was failing to satisfy its core audience. The Post did far too little to upgrade its business coverage as the region—now the fastest growing in the country—was transformed by the rise of the Dulles corridor. And some of its decisions were inexplicable: its decision to give an op-ed slot to Marc Thiessen, perhaps the least talented writer on the right, and a man who has never had an interesting thought in his life, is particularly unforgivable.
Public-sector unions
Jan 26th 2011, 11:32 by Schumpeter
IN A well-informed article in the Wall Street Journal Fred Siegel points out that, far from being part of the natural order of industrial society, public-sector unions were created by deliberate political decisions, as the Democratic Party saw a treasure trove of votes in organised public-sector workers. What was created by political will can also be undone by it:
The turbulent years of the 1960s and '70s are best known by the headline-grabbing civil rights and women's rights movements. But there was another "rights" movement, largely overlooked, that has also had a profound effect on American life. The looming public-pension crisis that threatens to bankrupt city, county and state governments had its origins in those same years when public employees, already protected by civil-service rules, gained the right to bargain collectively.
Liberals were once skeptical of public-sector unionism. In the 1930s, New York Mayor Fiorello LaGuardia warned against it as an infringement on democratic freedoms that threatened the ability of government to represent the broad needs of the citizenry. And in a 1937 letter to the head of an organization of federal workers, FDR noted that "a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable."
Interviewing Indians
Jan 21st 2011, 16:55 by Schumpeter | MUMBAI
I HAVE interviewed more than a dozen Tata executives over the past four days, and I am hungry for more. Western executives, and, I'm sad to say, particularly American ones, have become dreadful bores. They speak in management clichés (I feel like vomiting whenever I hear the phrase "walk the walk"). They are surrounded by plastic public-relations people who have managed to invent a language, PR-speak, that makes managementese sound like Shakespeare. Terrified of contradicting the company line, they all sing from the same dismal song-sheet.
Indians, or at least the ones I've been talking to, could not be more different. They speak proper English (although "synergy" and "core competences" make the occasional appearance). They litter their conversations with references to mythology, Indian political heroes, stories from the Raj, the Cambridge wrangler system and much else beside. Far from singing from the corporate hymn-sheet, they seem to be genuinely grappling with my questions, particularly those about the proper boundaries of the firm. A pity about all the cricket references, though, which quite escape me.
Indian sojourn, continued
Three faces of India (and two faces of Tata)
Jan 21st 2011, 13:50 by Schumpeter | MUMBAI
I STARTED the day on Tuesday by visiting Tata's steelworks in Jamshedpur. I found it awe-inspiring. The scale is mind-blowing: 2.5 hectares of industrial muscle. Even more mind-blowing is the steelmaking process itself: the giant cauldrons of molten steel, the huge trains shifting raw materials about, the fashioning of the molten steel into iron sheets. Three things struck me in particular. First, the relatively small number of people involved. Though based in a relatively poor company, this is a high-tech, high-skill, highly mechanised process. Second, the intelligence and enthusiasm of the people I talked to. These people love to talk about steel! And they love to recite war stories from their visits to other steel mills! (I apologise if I lost the plot every now and again). And third, the smoothness of the organisation. Every process seemed to be perfectly choreographed, and everybody seemed to know their role. Tata Steel has reduced its workforce from 78,000 in the mid-1990s to 35,000 today, while quadrupling the amount of steel it produces. We need a similar revolution in the public sector.
I spent the afternoon on a whirlwind tour of Kolkata, and a somewhat eccentric one, owing to linguistic problems. It is hard for even the most hard-hearted anarcho-capitalist not to be shocked by the poverty, and discombobulated by the confusion. You come across inexplicable things all the time. I watched a cheerful-looking gentleman wash himself carefully in the river, covering himself with a soapy lather, only to empty a huge bag of rubbish into the water when he had finished. On the positive side, I was struck by the omnipresence of entrepreneurialism. Even the most desperate people were constantly busy. People sit at the side of the road sewing on their Singer sewing machines or cobbling shoes. Truck stops, of which there were an inordinate number, generate service economies, with people selling tea, food and, one suspects, a lot else besides. People also preserve their dignity among the squalor: many women are brightly dressed, and a striking number of children wear smart school uniforms. You would not find the same energy or sartorial dignity in a British inner city.
The queue to get through security at Kolkata airport was more than a thousand people long—a grumpy fellow-passenger blamed it on the city being run by success-hating, business-loathing, cretinous and corrupt Communists—but thereafter I was transported into a different India. The flight was on time. Mumbai airport was shiny and new. A driver was waiting. And he whisked me, via a new and almost traffic-free road, to the Taj Mahal Palace, which is about as close to heaven on earth as you can get. The beautiful people of the new India, who were pouring out of the hotel when I arrived, really are beautiful; and the Taj's reputation for hospitality is richly deserved.
All this obviously raises the question of what a single conglomerate is doing running steel mills and luxury hotels. But here is a conjecture, driven, admittedly, by Taj-induced goodwill. Peter Drucker argued that the first job of a company is to create a customer. Most Western bosses would probably say that the first job of a company is to create a profit. But in the emerging world—and particularly the emerging India where Tata Steel and the Taj Palace were created a century ago—the first job of a company is to create order amid chaos. In their different ways, the steelworks and the luxury hotel are fortresses against the surrounding madness.
Consumer goods
Jan 19th 2011, 18:01 by Schumpeter | JAMSHEDPUR
FORGET about Coke and Pepsi: the prize for the most ubiquitous advertisements in India seems to belong to cement. I have counted dozens of different types of cement, including Atlus, Power and Idea, that compete for consumers' attention with brightly coloured ads and banners. After cement comes steel (I'm told that Tata even brands individual steel bars so that consumers know that they are buying the real thing).
The reason for all this noise is that things like cement and steel are consumer goods in emerging markets (if anything, cement ads, particularly for Cemex, are even more ubiquitous in Mexico). People build their own houses, sometimes investing their life savings and years on end to the project, so cement, steel and all the things that go into constructing houses are among the most important things that they buy. This is yet another reason for thinking that Vijay Govindarajan's idea of a $300 house has revolutionary implications, for the industrial order as well as for individual consumers.
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