(What’s Left of) Our Economy: Flint’s Water Crisis is Also a De-industrialization Story

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automotive, Detroit, Flint, General Motors, healthcare services, Jobs, manufacturing, Mexico, municipal finance, poverty, Rust Belt, services, taxes, third world, wages, water pollution, {What's Left of) Our Economy

When I began reading about the water crisis in Flint, Michigan, my first thoughts were of the Mexican factory towns near the U.S. border, where rapid and unregulated industrialization driven by manufacturing for the American market had produced pollution nightmares – including dangerously poisoned drinking water.

The shameful situation in Flint has many causes, but one that’s been neglected has been a development that makes the city a depressing mirror image of much of northern Mexico – rapid de-industrialization, stemming from the plight of the U.S. automobile industry, that has robbed Flint of the ability to pay for the kinds of public services Americans for decades have come to expect in a financially sustainable way.

According to Flint’s auditors, the city has long provided its citizens with “ a full range of services, including police and fire protection, the construction and maintenance of streets and other infrastructures, recreational activities and cultural events, water and sewer services, and sanitation/garbage pickup services.” The water crisis has made sadly clear that this standard agenda was in fact unaffordable for Flint. But the gap between the city’s first-world ambitions and resources that are markedly below that level has been evident for years from its chronic budget deficits and its heavy reliance on state and federal aid.

The earliest Flint budget figures on-line are from 2002, and show a $7.4 million deficit on $457.7 million in expenses and $445.3 million in receipts. Only 10.13 percent of those receipts came from combined income and property taxes. More than three fourths of the city’s take was generated by the Hurley Medical Center’s revenues. Last year’s figures make the city’s finances and tax base look stronger. The city ran a $568 million surplus on spending of $147.3 million and revenues of $147.9 million. And taxes represented 22.85 percent of those total receipts.

Those overall numbers, however, should tell you that something’s a little fishy. In fact, in 2011, the hospital was in effect taken off the municipal budget – despite its profitability. For that last year it was on those books, Flint’s government spent $567.3 million and took in $523.2 million, for a $44.1 million shortfall that was much larger proportionately than 2002’s. And taxes were a mere 6.15 percent of city revenue.

Even more disturbing, that 2015 Flint budget also removed all of 2014’s $24 million worth of sewer expenses and some $23 million of that year’s $44.2 million in water expenses. So even these necessities had revealed themselves as completely beyond Flint’s means.

Why is Flint is such a fix? Bad government is surely a big part of the answer. But so is dramatic economic deterioration. As has been widely noted, the city’s population is disproportionately poor and African American. But it’s also crucial to understand that over the last decade alone, Flint has steadily lost much of the material wherewithal that any municipality needs to be functional by recent American standards. Let’s start with the broadest economic indicators and then examine the trends in greater detail.

It’s tough for any country or community to succeed without economic growth, and Flint is a long-time laggard. According to Commerce Department figures (available at this interactive data base), from 2001 (the year before those earliest on-line financial reports date from) through 2014, Flint’s economy actually shrank in inflation-adjusted terms – by 8.67 percent. By contrast, America’s urban areas as a whole grew by 24.30 percent.

Census Bureau data show that the city’s population actually dropped more steeply from – 124,943 in 2000 to just over 99,000 in 2014. So in theory, there was more wealth to share in Flint. But in practice, it hasn’t worked out that way. Between 2000 and the Census Bureau’s estimated 2010-2014 average, median household income in the city fell by nearly 12 percent – and that’s before adjusting for inflation. No doubt a veritable and ongoing employment depression deserves much blame. During this period, the number of employed Flint residents cratered by 37.63 percent – from 45,885 to 28,618. And the poverty rate surged from 26.4 percent to 41.6 percent. That’s nearly triple the national rate in 2014 (14.8 percent).

Leading the way down in Flint has been manufacturing. Its real output (as also shown in that Commerce data base) plunged by 29.10 percent during this period, compared with 26.67 percent real manufacturing growth for all of the nation’s metropolitan economies. As a result, this sector shrank from more than 22 percent of the city’s economy after inflation to just over 17 percent. In U.S. metro areas as a whole, manufacturing stayed at somewhat over 11 percent of real gross product.

Flint’s manufacturing’s woes, in turn, overwhelmingly stem from the troubles of the American automobile industry. Flint is nothing less than the birthplace of General Motors, and has long been known as “Vehicle City.” Back in 1978, GM employed more than 80,000 Flint-area residents. Production figures are harder to come by – the Commerce Department doesn’t break out automotive output for Flint for most years precisely because it has been so GM-dominated, and therefore publishing the numbers would release proprietary data. But as of 2013, the automotive sector is recorded as representing nearly 71 percent of the Flint metropolitan area’s inflation-adjusted manufacturing production.

The GM employment footprint, however, had shrunk to some 8,000 by 2006, and as this time-line makes clear, the company has closed down many more and larger facilities in the area since the 1980s than its opened or expanded. Just as important, the rest of Flint’s economy didn’t fill in nearly enough of the resulting gap.

The entire private sector service providing complex in the city grew in real terms by only 5.71 percent – versus 30.31 percent for American metro areas as a whole. Flint’s hospital apparently couldn’t the city’s economy, either. In Flint, health care services expanded their output by only 16.76 percent after inflation between 2001 and 2014 – much less than half the nation-wide rate in cities (42 percent). And where services growth in Flint was strong – as in the information sector – it remained far too small to make a major difference.

Flint’s de-industrialization of course changed the city’s job mix, too – and not for the better. In 2000, according Census figures, manufacturing accounted for 23.2 percent of the jobs held by city residents. During the 2010-2014 period, this share sank to 14.1 percent. The rest of Flint’s major employing sectors fared much better relatively speaking – especially, it seems, the healthcare industry. Its supersector – what I’ve called the government-subsidized private sector – boosted its share of Flint employment from 23.5 percent to 27.9 percent during this period. But Flint’s biggest job loser – manufacturing – pays better than average wages. Except for that subsidized private sector, most of Flint’s biggest job winners pay below average wages.

As a result of the growth and job-related setbacks, Flint’s tax base shriveled. And the damage was hardly limited to individual taxpayers. According to the city’s 2015 financial report, “Property values within the City are believed to have hit the bottom, declining from $1.804 billion in 2002 to $1.192 in 2011 and further declining to $969.13 million in 2012.” Only “slight increases are projected over the next few years.”

Because de-industrialization isn’t responsible for all of Flint’s predicament, it’s way too early to say that the city is doomed to third world status. Other so-called Rust Belt municipalities have fared considerably better, no doubt in part because they weren’t so heavily invested in a single industry like Flint – and its much larger, also wheezing neighbor, Detroit. But because of manufacturing’s matchless record of creating middle class jobs for working class Americans, and because so many former manufacturing centers continue to struggle, expect de-industrialization’s impact to keep threatening Flint’s ability to deliver first world-level services, and its claim to first world status, for years to come.

(What’s Left of) Our Economy: No Easing American Poverty While Policy Blindspots Persist

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American South, Chico Harlan, Immigration, Jobs, mass transit, poverty, single mothers, The Washington Post, Trade, transportation, wages, welfare, {What's Left of) Our Economy

Chico Harlan and some colleagues at the Washington Post have done some terrific reporting recently on the poverty-heaviness of the American South and especially the new developments fueling it, and his piece this week on its increasing suburban-ization is no exception. (Click here and here for two earlier articles.) Except I take exception in one regard. Harlan here seems to gloss over the role played by poor – and avoidable – personal choices, both by currently poor southerners and by their forebears.

By following the odyssey-like travel forced on one young low-income Atlanta-area woman even to go job-hunting, Harlan convincingly shows the harm done by the dispersal of poor populations from inner cities combined with the lousy mass transit systems in suburbs and equally bad transit links between those suburbs and urban cores. And in fact, recent research makes clear that the transit dimension of poverty and near-poverty is hardly restricted to the south. So it’s completely appropriate to sympathize with Lauren Scott, who can’t afford a car, as she spends literally hours on buses heading to and from job interviews and following up other employment leads.  It’s just as appropriate to condemn the zoning laws and other state and local policies that make such travel so excruciating and time-consuming.

At the same time, I wish Harlan had spent more space discussing other aspects of Scott’s life that deserve more scrutiny, and that shed more light on poverty in America today. For example, she’s a single mother, which the author documents both pushed her below the poverty line to begin with, and which has limited the kinds of positions she could hold and applied for. In Scott’s case, Harlan writes, she was misled by a faulty medical diagnosis of permanent infertility. At the same time, that’s hardly the only, or even a major, reason for out-of-wedlock births by mothers who literally can’t afford motherhood.

In addition, she has a battery charge on her record. A dubious roommate helped drain her modest savings, and her family was in position to help. Her daughter’s father had flown the coop. Scott had “long ago lost contact with her mother.” The article makes no mention of her own father. And although one of her siblings is serving in the military, another has just been released from prison.

All of which puts in interesting, to say the least, perspective Harlan’s observation that “A generation earlier, even people in Scott’s situation had advantages that she lacks. They tended to live in the middle of Atlanta, near the subway, and they received welfare, cash payments from the government that were available to nearly all in deep poverty, regardless of whether they had a job.”

Not that the author implies that this system was ideal. But Scott’s personal and family history strongly indicates that it wasn’t even acceptable – and had destructive effects on its intended beneficiaries.

I also wish that Harlan had mentioned other sources of new and resurgent poverty in the south and elsewhere in America – especially the offshoring-friendly trade policies and Open Borders/amnesty-friendly immigration measures that have destroyed so many family wage job opportunities for the nation’s working class and working poor. Some attention is now being paid throughout the policy community to domestic moves that could alleviate poverty – like the aforementioned transportation improvements and more generous family and medical leave requirements, along with more familiar proposals like further expanding the earned income tax credit, raising the minimum wage, and of course improving the schools. But the near future could well see trade and immigration pressures on native-born workers – which have the greatest direct effects on job-creation and preservation – grow even stronger.

As a result, I’m hoping like heck that 2016 is a better year for Lauren Scott, who like many of America’s poor really does want to overcome past mistakes and work for a living. I just wish I was more optimistic.

(What’s Left of) Our Economy: Why the Latest World Trade Failure Should be Celebrated

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agriculture, Alan Greenspan, bubbles, China, Congress, developed countries, developing countries, Doha Round, Federal Reserve, Financial Crisis, George W. Bush, Global Imbalances, Information Technology Agreement, ITA, Obama, offshoring, poverty, Robert Zoellick, September 11, terrorism, TPP, Trade, trade law, Trans-Pacific Partnership, World Trade Organization, WTO, {What's Left of) Our Economy

Trade policymakers have just uncharacteristically – and perhaps unwittingly – given the world economy an important holiday gift: a virtual decision to kill the so-called Doha Development Round of world trade liberalization talks.

This outcome of the latest meeting of the World Trade Organization (WTO) in Nairobi won’t make an active contribution to solving global economic problems. But it greatly reduces the odds that additional multilateral trade expansion will keep worsening the kinds of international economic imbalances that helped trigger the last financial crisis and keep threatening to set the stage for a new meltdown.

The Doha round (named after the capitol of Qatar, where it was launched) was a product of the September 11 terror attacks, but was whoppingly misconceived both strategically and economically. Though intended to spur the prosperity needed in developing countries ostensibly needed to reduce terrorism’s appeal, its founders – notably President George W. Bush’s administration trade chief Robert Zoellick – seemed unaware that dangerous extremism had never taken hold in most world regions where poverty was most desperate, e.g., rural India and rural China. Moreover, the round’s explicit aim of channeling most of its trade liberalization benefits to developing countries completely violated the core principles of genuinely free trade.

But those mistakes and their impact paled next to the damage likely from a treaty reflecting the Doha goals – ever greater global financial instability stemming from trade flows that fostered the offshoring of production, and therefore income-earning opportunities, to countries that would still long remain too poor to consume adequately, and away from the rich-country populations (especially America’s) whose purchasing power was still crucial for adequate global growth.

By the time the Doha talks were inaugurated, in 2001, years of NAFTA-style, offshoring-centric U.S. trade liberalization decisions capped by China’s admission into the WTO had already recklessly placed the U.S. and world economies on a completely unstable course. The Bush administration and the Federal Reserve under Alan Greenspan further greased the skids for crisis with two decisive moves. The former filled the resulting American income and growth shortfall with renewed, and record, federal budget deficits. The latter even more powerfully fueled consumption with prolonged (then) record low peacetime interest rates. For half a decade, the United States experienced an unprecedented burst of debt-led, bubble-ized growth. And then the entire global economy nearly collapsed.

Success at Doha was always bound to magnify world trade imbalances further and ensure even more badly lopsided growth by requiring the United States and other developed countries to open their markets much wider and faster than low-income countries. Particularly important were measures practically certain to gut the U.S. trade laws that shielded America’s domestic economy from foreign predatory trade practices like export subsidization and dumping. In fact, the inequities were so egregious that even America’s staunchly pro-trade liberalization agricultural sector, which has long wielded outsized influence in Congress, balked; its reservations began the Doha hold-up that eventually brought its demise.

Unfortunately, another recent international trade policy decision is likely to add to dangerously distorted global growth – the new Information Technology Agreement reached under WTO auspices, which eliminates tariffs on many tech products but does nothing about the non-tariff barriers and predatory commercial practices used so heavily by so many U.S. trade rivals. New financial pressures may also be fueled if Congress passes the Trans-Pacific Partnership (TPP) trade deal pursued so avidly by President Obama. As I’ve often explained, this agreement’s text does target non-tariff barriers, but creates no mechanisms even remotely capable of actually curbing their use. Therefore, it’s all but certain to create the trade deficit-boosting, finance destabilizing effects of the previous American trade agreements on which it’s modeled.

All the same, TPP ratification this year looks doubtful, given election-year opposition by major Republicans in Congress. Doha’s death would represent a second “do no harm” decision in a single year – certainly not enough progress on the trade policy front, but considerably better than nothing.

Im-Politic: Impoverished Thinking About Anti-Poverty Programs

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entitlements, Im-Politic, poverty, transfer payments, Washington Post, welfare, Welfare State

What’s the main purpose of an anti-poverty program? The best answer I can come up with is “enabling recipients to live lives of reasonable well-being without the need for government assistance.” Keep in mind that I’m not talking here about welfare programs. There’s always going to be some overlap, of course, but what I’m getting at is the distinction between beneficiaries who are capable of self-sufficiency and those who aren’t.

Strangely enough, though – if this Washington Post article is representative – the goal of greater earnings power doesn’t seem to be much on the minds of the academics, other policy analysts, and politicians who dominate the national debate on the subject. Instead, if they’re to the right of the political center, they seem preoccupied with proving that all government transfer payments (even including entitlements like Social Security) do absolutely no good whatever, by any criteria. And if they’re on the left, their goal seems to be defending these programs against any and all criticisms.

The Post piece reports on academic research claiming that the effectiveness of anti-poverty programs is often understated because the federal government surveys that help gauge progress tend to suffer two major flaws. First, the target populations are harder to glean any answers from, for a variety of logistical and other reasons. And second, the answers often given significantly understate the levels of assistance beneficiaries receive.

According to University of Chicago public policy professor Bruce D. Meyer, the information gap is so big that “When the numbers are corrected, we see that government programs have about twice the effect that we think they do.” And as Post reporter Roberto Ferdman explains, ignoring the surveys’ shortcomings

“can have a profound effect on policy discussions concerning the two.

“On the one hand, it makes it look like the poor are doing much worse than they are. The official poverty rate now is higher it was three decades ago, but by almost any measure the poor are better off than they were then. Meyer believes that a more accurate gauge would show that things are better or, at the very least, not worse.

“On the other, it does government assistance programs a great injustice, by making them appear less effective than they actually are.”

I’m all for developing the best quality data and basing policy decisions on them. But the debate depicted above is entirely beside what should be the point. Who seriously doubts that big enough government checks or enough food stamps etc. can bring and keep recipients above whatever level of living standards is officially defined as the poverty line – and indeed can do so indefinitely? In other words, does anyone dispute that giving low-income folks enough money can make them better off, at least materially? Is skepticism about this proposition really the main basis of conservative attacks on the Welfare State? And is “proving” the affirmative really the best defense its defenders can raise?

Of course, it’s entirely possible that the answer to both questions is “Yes.” Which would make a wager that America won’t be meaningfully alleviating poverty any time soon an awfully safe bet.

Im-Politic: A Masterful Takedown of Ruling Class Economic Hypocrisies

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2016 elections, Afghanistan-ism, Bernie Sanders, boardroom liberalism, Clinton Foundation, Democrats, Elizabeth Warren, free trade agreements, Hillary Clinton, Im-Politic, Joe Biden, Noam Scheiber, Obama, offshoring, Paul Theroux, poverty, reform, The New York Times, Trade

Here’s a must-read for you: Paul Theroux’ op-ed in The New York Times today on the hypocrisy of members of the American corporate class who have made towering fortunes by offshoring U.S. jobs to developing countries, and then have contributed to and even fostered charitable efforts that seek to alleviate the poverty their business models have produced.

The highlights (lowlights?) are too numerous to list. And besides, the entire article really does deserve your attention. But given the burst of interest in recent years occasioned by all the fiftieth anniversaries of milestones of the civil rights movement, this paragraph on the impact of offshoring on some of that period’s most revered stretches of hallowed ground in Alabama is just jaw-dropping:

“Selma may have been a political success and a great symbol, but it is an economic failure; Greensboro has some effective well-wishers, but it does not look very different from the town that James Agee wrote about and Walker Evans photographed in ‘Let Us Now Praise Famous Men,’ which was published in 1941; Monroeville earns some revenue from the ‘Mockingbird’ literary pilgrims, but it lost more than 2,000 jobs when Vanity Fair Brands downsized its operations there. The catfish industry is faltering all over the state, thanks in part to fish imported from special-relationship Asia.”

In all, Theroux’ article is so devastatingly on target that I can only offer one observation to help round out, and one to help sharpen the author’s long overdue attack on the “strategy of getting rich on cheap labor in foreign countries while offering a sop to America’s poor ” through ostensibly good works – and implicitly on the pass this gimmick gets from our social, cultural, and political tastemakers. (That is, when they’re not explicitly praising and endorsing these crocodile tears displays).

First, Theroux’ inclusion of the role played in this snow job by the Clinton Foundation and its galaxy of one percenter business and entertainment industry supporters deserves much more attention, for two reasons. After all, the Clintons epitomize the politicians that the offshoring interests needed to buy with campaign contributions in order to push their agenda through Congress in the form of the string of job- and wage-killing trade deals that began with the North American Free Trade Agreement in 1993. Just as important – along with President Obama – they epitomize the Democrats and liberals who became champions of offshoring-friendly trade strategies even though they clashed violently with their avowed determination to fight poverty and expand opportunity and create more “inclusive growth.”

In this vein, their efforts to square this circle wound up fueling a broader approach to politics that New York Times labor reporter Noam Scheiber has insightfully called “boardroom liberalism.” Click here for a post where I discuss this phenomenon and describe it as “an especially insipid version of the ‘trickle down’ theories championed by most of [these liberals’] conservative rivals.”

Moreover, much of the fight for control of the Democratic party playing out in this year’s presidential campaign entails a fight between the boardroom liberals – represented not only by Hillary Clinton, but potentially by Vice President Joe Biden – and Vermont Senator Bernie Sanders. His supporters, of course, and those of fellow Senator Elizabeth Warren of Massachusetts, favor reform programs that, if not more realistic substantively than those supported by the boardroom liberals, flow from views of economic power and human psychology that seem far more accurate.

I also hope that Theroux recognizes that to some extent his piece conflates two related but distinct problems: the boardroom liberals’ offshoring hypocrisy on the one hand, and what has been called their “Afghanistan-ism” on the other. What I mean by that latter term is the tendency of many of society’s avowed do-gooders (and I’m not using that term as such as a pejorative) to focus on dramatic, high-profile, exotic, and geographically distant problems and injustices that (perhaps not so coincidentally) they can’t do much about rather than on equally serious but more mundane woes right under their noses that they can plausibly hope to address meaningfully.

The author does a terrific job of upbraiding the boardroom liberals not only for their responsibility for domestic poverty but for their neglect of this situation in favor of funding all manner of charitable endeavors focused overseas. My reference above to the chances of solving or at least significantly easing domestic versus foreign problems indicates that boardroom liberalism and Afghanistan-ism are certainly closely related – by suggesting that major reform at home is the last outcome boardroom liberals want. But they’re not identical.

In any event, please read Theroux article. It speaks volumes about why the current two-party system today represents an obstacle to the kinds of change America so urgently needs, rather than a potential change agent.

(What’s Left of) Our Economy: A Vital but Missing Voice on Urban Poverty

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African Americans, Baltimore, crime, education, Ferguson, infrastructure, inner cities, Jobs, manufacturing, poverty, skills, Trade, unemployment, {What's Left of) Our Economy

Quick – does the name William Julius Wilson mean anything to you? It sure as heck should, especially if you’re concerned about the inner-city black neighborhood woes that have burst into the headlines since Ferguson, Mo. police officer Darren Wilson shot unarmed African-American teenager Michael Brown last August.

Wilson is a Harvard University sociologist who wrote a landmark 1996 book that shed crucial light on modern urban poverty and its origins. The title said it all: When Work Disappears. It was widely praised and pretty widely discussed when it first came out, but gradually faded into the background, where it seems to have stayed despite the front page news seemingly continually generated these days from places like Ferguson and West Baltimore. I myself had forgotten about it till I saw the paperback at a book sale last weekend.

I haven’t gotten very far into When Work Disappears but its main theme should be powerfully shaping the U.S. public debate over fixing what’s wrong with huge swathes of black urban America. According to Wilson (writing before the two recessions that have struck so far in the twenty-first century, not to mention the financial crisis):

“For the first time in the twentieth century most adults in many inner-city neighborhoods are not working in a typical week. The disappearance of work has adversely affected not only individuals, families, and neighborhoods, but the social life of the city at large as well. Inner-city joblessness is a severe problem that is often overlooked or obscured when the focus is placed mainly on poverty and its consequences. Despite increases in the concentration of poverty since 1970, inner cities have always featured high levels of poverty, but the current levels of joblessness in some neighborhoods are unprecedented.

“The consequences of high neighborhood joblessness are more devastating than those of high neighborhood poverty. A neighborhood in which people are poor but employed is different from a neighborhood in which people are poor and jobless. Many of today’s problems in the inner-city ghetto neighborhoods – crime, family dissolution, welfare, low levels of social organization, and so on – are fundamentally a consequence of the disappearance of work.”

Further, Wilson cited “the increased internationalization” of the U.S. economy as one engine of this joblessness, and to underscore this point, noted that “Of the changes in the economy that have adversely affected low-skilled African-American workers, perhaps the most significant have been those in the manufacturing sector.” Of course, manufacturing is the economy’s most trade-intensive sector.

To be sure, Wilson doesn’t seem to have recommended any trade policy changes to fix these problems, preferring to focus instead on a raft of domestic policy responses like better job training, more family-friendly benefits for workers, a greater Earned Income Tax Credit, and more infrastructure programs (an idea that I’ve endorsed). In these respects, the 1996-vintage Wilson sounds a lot like President Obama during his years in the White House. Indeed, in a conference on poverty held two weeks ago in the wake of the Baltimore riots, Mr. Obama mentioned Wilson and touted the potential of these programs to heal inner cities.

Yet Wilson was writing when the current era of U.S. trade policy, launched with the negotiations to create the North American Free Trade Agreement, was just beginning. So he couldn’t have known that such purely domestic policy fixes have failed. President Obama, however, keeps pushing more of the same on the trade side despite the devastating impact on the inner city as well as on the economy as a whole – and insists that there’s no contradiction.  According to the president, what he has re-labeled “21st century trade agreements” are “as important to helping the middle class get ahead in this new economy as things like job training, and higher education, and affordable health care. They’re all part of a package.” What’s his excuse?

Just as important, however, where has William Julius Wilson been over the last year as Americans have struggled with these issues?  His insights are needed now more than ever.      

Our So-Called Foreign Policy: Why Power Remains Paramount

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Brookings Institution, civil society, climate change, foreign policy, international cooperation, international law, international organizations, internationalism, James Traub, nation-states, non-state actors, Our So-Called Foreign Policy, poverty, power politics, Russia, terrorism, transnational threats

It’s tempting to conclude that nothing could be less important than a Brookings Institution conference on “International Peace and Cooperation in an Age of Global Competition” even if invitees did include “senior foreign policy officials, scholars, and experts from G-20 member states and other pivotal countries.” After all, why would representatives of foreign governments disclose to an audience comprised of representatives of other foreign governments anything of consequence that was previously unknown?

At the same time, what’s learned about such gabfests can usefully remind the rest of us plebeians how completely out to lunch these supposed luminaries tend to be – especially regarding the main questions and choices they think they face. So FOREIGN POLICY magazine contributor James Traub deserves a big shout out for reporting the gist of this off this record session. For his account (unwittingly, to be sure) strongly indicated that those assembled (presumably including some American leaders) have totally forgotten the key enduring truth about international affairs.

It’s a maxim that prevails even in these turbulent times, and indeed especially in these turbulent times: As long as the world contains multiple, independent forces or parties of any kind, their hopes for success (however defined) will depend overwhelmingly on their relative power.

According to Traub, the attendees were all but consumed with the question of whether world affairs are still dominated by the kinds of nation-states that emerged centuries ago, or by the bewildering array of non-state actors and forces that seem to be popping up everywhere nowadays, ranging from terrorists to religious movements to civil society groups to the simple “demand of ordinary people for a better life than their government now affords them.”

The author quite rightly notes the dramatically different sets of policy implications that flow, at least logically, from either answer: the former militating for continuing to seek advantage over rival states, and win and keep allies; the latter pointing to a new, more cooperative agenda of solving or at least ameliorating a series of common problems underlying growing turmoil and transcending national borders (e.g., poverty, autocracy, and climate change).

Of course, anyone with a lick of intelligence (including the conferees) will recognize that life never divides so neatly. Indeed, as I’ve written, the internationalist ideology that’s governed U.S. foreign policy-making since Pearl Harbor has always sought to eliminate the social and economic conditions considered key to the appeal of its communist adversaries. Similarly, Traub reports that many of the conferees arrived at answers essentially amounting to “all of the above.” That is to say, a revival of traditional power politics, epitomized by Russia’s muscle-flexing in its immediate neighborhood, was being accompanied by the rise of transnational threats that are best handled cooperatively. And all the while, nation-states as a whole “are much weaker than they were,” with the United States either unable or unwilling “to reassure allies or scare off adversaries as it once could.”

But what apparently went unrecognized is that national power will remain decisive whether cooperative or conflictive impulses and dynamics wind up on top. The importance of power in a completely rough-and-tumble world should be obvious. Its importance in a world where more positive-sum logic is more widespread is admittedly more difficult to identify, but no less paramount.

The reason is that even within communities that have developed commonly recognized authorities for organizing action, cooperation will always have a structure, and that structure will tend to have significantly different effects on different parts of that community. To the extent that these differences matter (which is often the case), various community members will usually have different preferences for moving ahead. The winners and losers are often determined by the amounts of resources (economic power) they can mobilize on behalf of their causes, by the the bounds of existing law and policy, and by their relative persuasive gifts. Often outcomes result from some combination of all of these.

When no commonly recognized authority exists, as with international politics today, persuasion can sometimes work also. Existing policies rarely count for much, law for even less, but relative power typically plays the biggest role. Consequently, as long as it matters to Americans that their priorities (or something close) prevail in international cooperative ventures or negotiations, their leaders will need to bring as much power as possible, in all of its forms, to bear on the relevant planning or bargaining sessions at the relevant international organizations or other venues  – whether to pressure, to induce, or to threaten credibly or exercise the option of walking away if their course isn’t satisfactory.

A final argument for focusing on cultivating power should be especially compelling for those Brookings invitees – and others – who have had actual policy-making experience. They should know better than anyone else how suddenly unpredictably international challenges and opportunities can arise. Power is no guarantee of coping successfully. But who can doubt that the strong and the wealthy will fare much better, mainly because they enjoy more relatively good options, than the weak and poor?

Our So-Called Foreign Policy: How Obama’s Summit Could Make “Violent Extremism” Worse

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Al Qaeda, Coptic Christians, George W. Bush, ISIS, Muslims, Obama, Osama bin Laden, Our So-Called Foreign Policy, poverty, radical Islam, radical Islam denialism, September 11, Sharia, terrorism, violent extremism summit

Based on his reluctance to identify radical Islam as a major engine of global terrorism, I didn’t have much hope that President Obama’s Summit on Countering Violent Extremism would do much to make America and the world safer from groups like ISIS and Boko Haram and Al Qaeda in the Arabian Peninsula, and from the various lone wolves they continually inspire. After reading the president’s latest pronouncement on the issue, I’m even less hopeful. In fact, it’s all too likely that this three-day event will make the problem ever worse.

In an op-ed article on the summit in today’s Los Angeles Times, Mr. Obama did take one or two steps forward. His administration is no longer using the appalling euphemism “workplace violence” to describe the 2009 shootings at Fort Hood, Texas by an Army psychiatrist who had been in contact with the aforementioned Al Qaeda organization. In his piece today, the president placed the attack in the same category as the Boston Marathon bombing. He also – finally – identified the religion of the Coptic Christians ISIS has begun executing en masse. Also encouraging has been Mr. Obama’s recent acknowledgment that there exists “a particular problem that has roots in Muslim communities. “

But the rest of his article consisted of the same kind of politically correct drivel that has hamstrung the war on terror and indeed given the enemy talking points. For example, nearly every terrorist incident mentioned in the president’s article was perpetrated by Muslims. Then there’s the polling data we have. It’s true that such surveys in majority Islamic countries can be unreliable, because most are developing, or dictatorships, or both. But the evidence that is available strongly challenges the president’s claim that “the overwhelming majority of Muslims reject” a “nihilistic, violent, almost medieval interpretation of Islam” and in fact “are looking for the same thing we’re looking for.”

Although the numbers have been falling, shocking percentages of Muslims abroad agree that “Suicide bombings can be often/sometimes justified against civilian targets in order to defend Islam from its enemies.” Big majorities of Muslims all over the third world favor “making Sharia the law of the land,” with the numbers especially high in the Middle East, North Africa, Subsaharan Africa, South Asia, and Southeast Asia. And of these Sharia supporters, majorities favor extending its reach to non-Muslims.

Worse, the view of Sharia favored is extremely harsh, involving imposing the death penalty for those who leave Islam, stoning of unfaithful spouses, and corporal punishment for crimes like theft. Yet in his Los Angeles Times article, Mr. Obama clung to his oft-stated views about “the true peaceful nature of Islam.”

A related, equally serious flaw in this piece, and the president’s worldview: his tendency to blame economic and social injustices, rather than attitudes held by all too many Muslims, for most global terrorism. Ever since the identities of the September 11 hijackers were revealed, it should have been obvious that many of the most notorious Muslim terrorists – including Osama bin Laden himself – have come from privileged backgrounds. In addition, no one recently has detected a third world terrorist threat that is not dominated by Muslims.

So launching a U.S. or even global campaign against poverty, repression and alienation in the Muslim world and similarly dysfunctional countries – even if such an effort had a prayer of success in the foreseeable future – will mainly expend precious time and resources on the wrong targets.

As I’ve written previously, however, the president’s misconceptions are probably dangerous as well as sadly misguided. For they potentially might either create handy scapegoats for terrorist recruiters, or help them more effectively use existing propaganda. How difficult would it be for radical Islam’s firebrands and enablers to point out to embittered individuals Mr. Obama’s claim that “The world has to offer today’s youth something better” than “injustice and corruption” – and then remind them, “It’s not”?

I don’t mean to leave the impression that President Obama is the only recent American leader that has spread this claptrap. George W. Bush often voiced equally naive and potentially counterproductive thoughts. But as Mr. Obama likes to remind, he’s won the last two presidential elections. He could greatly strengthen his counter-terrorism and anti-extremism policies by starting to follow the simple Hippocratic directive, “First, do no harm.”

(What’s Left of) Our Economy: No Thinking in These Tanks on Trade

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consumers, debt, exports, Financial Crisis, imports, Jobs, Latin America, offshoring, poverty, Trade, trade agreements, Trade Deficits, {What's Left of) Our Economy

In a perversely egalitarian way, it’s comforting to know that it’s possible to work on trade policy for august think tanks like the Brookings Institution and the Peterson Institute for International Economics despite jaw-dropping ignorance on the subject. But only in a perversely egalitarian way.

Exhibit One: Ernesto Talvi’s column for the Project Syndicate website (perversely egalitarian, too?) calling for a major new U.S. trade agreement that would knit its existing Western Hemisphere trade deals into a Trans-American Partnership (TAP) that would rival in scale the Trans-Pacific Partnership (TPP) and transatlantic trade agreements (TTIP) Washington is already pursuing.

According to Talvi, a non-resident senior fellow at Brookings, the deal would create a vast new market comprising “620 million consumers, and…a combined GDP of more than $22 trillion (larger than the EU’s, and more than double that of China).” What could be more of a slam dunk for American businesses and their employees?

What Talvi either leaves out or doesn’t know is that the U.S. market already represents the vast majority of the TAP’s consuming power. Indeed, according to World Bank figures, the American economy is 68.56 percent the size of the entire $24.504 trillion Western Hemisphere economy, even including many countries that don’t yet have trade agreements with the United States. The U.S.’ share of the GDP of the combined hemispheric free trade zones it’s already created is that much bigger, mainly since that market excludes Brazil’s $2.246 trillion economy.

Even worse, other World Bank data make clear that the GDP figures greatly overstate the consumption and therefore importing potential of the Latin American countries currently in trade deals with the United States. For nearly two-thirds of the entire region’s population subsists on less than $10 per day.

So the big prize in Talvi’s scheme is an economic asset that Americans already have. Thus as has been the case with other U.S. trade agreements, most of what the U.S. economy can realistically hope to gain from more deals is even easier business access to vast quantities of cheap, highly trainable labor, not export access to thriving consumers. And as has also been the case with other U.S. trade agreements, the inevitable results will be higher trade deficits and therefore greater national debt.

Apparently just as clueless about U.S. trade policy is the Peterson Institute’s Tyler Moran. His July 31 blog post focuses on the allegedly forgotten impact of U.S. tariffs on American consumers, who are forced to pay higher prices for imports because of Washington’s determination to “protect domestic industry and jobs.” Even worse, according to Moran, “Poor households get hit hardest.”

But even if this argument were brand new – it’s anything but – what’s most important is what it reveals about the seemingly dysfunctional short-term memories of Moran and the organization employing him. Here we are, not even six years after a terrifying financial crisis ultimately caused by too many Americans substituting debt for their sagging real incomes in order to pay for their consumption. The U.S. is still woefully short of employment capable of financing consumption more responsibly. And Moran and the Peterson Institute are scolding policymakers for seeking to boost job-creation and wages – rather than enabling more consumption that would inevitably need to be paid for by more debt.

Oddly, Talvi and Moran are employed by organizations commonly known as thinktanks. Their work shows that, where trade issues are concerned, this term is a serious misnomer.

(What’s Left of) Our Economy: More Evidence that U.S. Trade Deals are Really Offshoring Deals

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Africa, Asia, Asian Development Bank, exports, incomes, offshoring, poverty, poverty line, third world, Trade, trade agreements, World Bank, {What's Left of) Our Economy

The U.S. trade policy front – thankfully – has been quiet lately. That means dim-looking short-term prospects that Congress will pass new fast track presidential trade negotiating authority, and new trade deals like the Trans-Pacific Partnership that are proven job- and growth-killers.

Nonetheless, these globalization measures still represent a rare point of agreement between President Obama and Congress’ Republican leaders, and the lobbying might behind such deals is still potentially overpowering. Therefore, it’s worth noting the recent appearance of more evidence refuting a prime argument made by supporters of new trade deals: that since 95 percent of the world’s consumers live outside the United States, Washington urgently needs to enable American businesses and workers access all that purchasing power to give the current recovery some real oomph.

Last March, I skewered that claim by pointing out that most of those foreign consumers, concentrated in very low-income third world countries, earn next to nothing, and therefore can’t possibly become strong consumers of U.S.-origin goods and services. This month, comparable findings from three respected sources should help bury the “95 percent illusion” for good.

The first throws buckets of cold water even on the idea that fast-growing Asia presents massive growth opportunities for the U.S. domestic economy. According to an August 20 Financial Times article, the Asian Development Bank, the World Bank, and India’s new government are seriously rethinking current official poverty lines. The former specifically has concluded that its existing $1.25 per day poverty line “was not enough to maintain minimum welfare in many parts of the region.”

Of particular interest to American trade officials, and their supporters and critics, the ADB calculated that raising the poverty threshold to a mere $1.50 per day would boost Asia’s poverty rate from 12.7 percent of its population to 41.2 percent. In other words, even without this statistical manipulation, more than one billion Asians considered to be above the poverty line, and potential customers for U.S. exports, were making only between $1.25 and $1.50 per day.

Moreover, as the Financial Times emphasized, many Asians’ incomes remain not only abysmally low, but highly precarious. Its analysis of World Bank data showed that nearly one billion people in the developing world overall were at risk of falling out of what is charitably called “the middle class.”

And as pointed out by my March article, even the meager income levels revealed in this data are present a thoroughly misleading picture of third world purchasing power. The reason: They’re measured according to a methodology known as Purchasing Power Parity – which adjusts the costs of goods and services down to the rock-bottom levels inevitably found in low-income countries. When these incomes are measured by their ability to buy products and services created at U.S. price levels, they turn out to be much lower.

The day before, the FT also (unintentionally) refuted a sub-myth of the 95 percent illusion – the belief that sub-Saharan Africa could well be the world’s most exciting future growth market. In an August 19 article, the paper reported findings by Standard Bank that the region would by 2030 see “ a burgeoning consumer market for items such as vehicles, insurance policies, property and health products” because of a tripling of its middle class households.

This does indeed sound pretty exciting, until it becomes clear that this tripling would bring the number of sub-Saharan Africa’s middle class households to only 22 million. That’s only slightly larger than the population of greater New York City today. And even the wealthiest of these African households would be earning a mere $42,000 annually. The poorest would be making only one-fifth that much.

Finally, the Gallup polling organization last week released a survey showing that fully 29 percent of the world’s working population is self-employed – and that far from representing “a positive sign of proactive entrepreneurial energy, high rates of self-employment can often signal poor economic performance.” Even more important: “The self-employed are three times as likely as those who are employed full time for an employer to be living on less than $2 per day.” And self-employment rates are by far the loftiest in highly populous developing countries.

These statistics reinforce what should have been clear to American leaders, the media, and the public for decades. The push for trade agreements fueled so prominently by multinational companies has almost nothing to do with finding new foreign consumers for American exports, and nearly everything to do with finding penny wage workers and other super-cheap factors of production for offshoring-happy corporations.