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February 6, 2012

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Newt’s Best Hope

February 6, 2012

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The Weekly Standard:

Last week Germany reclaimed its status as the leading power in Europe. In the two years since it became apparent that Greece was, essentially, bankrupt, there have been dozens of emergency meetings of the countries that use the common European currency, the euro. Most of the euro-using states believe that Germany—with a booming industrial economy, vast trade surpluses, a reputation for fiscal probity, and a history that makes it reluctant to reject the counsel of France—ought to cover the bill. Germany has long argued that Greece must become competitive again by selling off state assets and cutting government handouts. More recently, Germany has added another demand—that EU authorities be empowered to discipline Greece and other delinquent countries. At the Brussels summit on January 30, the Germans won.

Germany is fortunate to have, in the moment of its triumph, a chancellor who does not scare people. Angela Merkel is an East German intellectual, a physical chemist, the childless daughter of a clergyman. She mumbles. Her taste in clothing runs to pantsuits. She isn’t brawny and forceful like her Christian Democrat mentor Helmut Kohl, who presided over the reunification of Germany at the end of the Cold War. She isn’t eloquent and haughty, or tempestuous and randy, like her Social Democratic predecessors Helmut Schmidt and Gerhard Schröder, respectively. “This lack of a presidential demeanor is a big advantage,” says longtime Bavarian governor Edmund Stoiber, whom Merkel replaced as party leader. Germany’s economy naturally provides it with a leadership role, but its history means that that role is something Germany cannot be seen to claim. “Neither personally nor politically does she come off as wanting to blow her own horn, along the lines of ‘I am the leader of Europe.’ ”

By “Europe” Stoiber means the 27 countries that make up the European Union. The EU was launched in the wake of the Second World War as a way to organize Europe through economics, not war. This is a polite way of saying it was meant to keep Germany from dominating Europe with its army. A decade ago, the EU acquired a common money, the euro, which replaced the franc, the lira, the peseta, and the super-strong deutsche mark. The new monetary regime was meant to keep Germany from dominating the continent with its currency.

But the euro has backfired. In 1990 British trade secretary Nicholas Ridley was forced to resign for calling the EU “a German racket designed to take over the whole of Europe.” Ridley was quite wrong about Germany’s intentions, but he was right about the result. Joining Germany in a currency union meant playing by its rules. In fact, so big and rich is Germany—particularly now that reunification has brought its population to 80 million—that joining it in anything means playing by its rules. This is not Germany’s fault. It is the classic “German problem” that has confronted Europe for the whole modern era. It was camouflaged for six decades only by Germany’s reluctance to express any wishes whatsoever.

As long as Germany wasn’t complaining, others could make free with Germany’s credit card. Once in the euro, Greece, Italy, Spain, and other countries that bankers used to consider reckless or unstable could borrow at the same rates. (The treaties that bound all these dissimilar countries together stipulated that there would be no bailouts for those who borrowed too much, but bankers obviously didn’t believe that.) A boom in lending pushed up wages and prices in those “peripheral” countries, rendering them uncompetitive. After the financial crisis of 2008, the countries that had overborrowed were saddled with more debt than they could comfortably repay. The eurozone’s Mediterranean members have come to think that Germany ought to rescue them. But the Germany to which they are addressing their petitions is not the penitent, diffident, and easily browbeaten land that they came to know over the last three generations. Germany has its own ideas about economics and morality, and it is ready to insist that its weaker neighbors adhere to them.

On Your Mark

Those ideas are idiosyncratic. Germans never made their peace with twenty-first-century consumerism in the way other Westerners did. Their attitudes about money combine punctiliousness and distrust. Any business traveler who has ever asked for a receipt in Germany will have been astonished by the elaborate ritual of writing out a Quittung: You buy a newspaper for a few coins. The shop-owner retreats into a back room, emerges with stationery, writes a description of the transaction in elegant longhand, saves a carbon duplicate, stamps or embosses the paper, staples or clips the cash-register receipt to it, folds it, and slides it into an envelope for you.

Credit is frowned on. There are quite elegant restaurants that don’t take credit cards, and installment buying in general has been slow to take hold. Walmart tried to expand into Germany in recent years but had to close all 85 of its stores in 2006. Germans didn’t take to the faux-smiley demeanor of Walmart’s employees, and the company found it hard to keep prices low while complying with national labor laws. The car loan market is underdeveloped. Home equity loans are practically unknown. That is one reason why Germany had no mortgage bubble of the sort that upended so many Western economies over the last decade. Another is that Germany does not really have an investment banking sector as we would understand it.

Germans usually explain their eccentricities about credit by referring to the hyperinflation with which their leaders tried to mitigate the burden of reparations from World War I. Germany’s treasury printed so much money that, in 1923, prices were quoted in the trillions of marks, shoppers pushed their shopping money around in wheelbarrows, and restaurant menus were edited hourly. That inflation, and the austerity required to purge it, may have played a role in the rise of Hitler. Germans associate their emergence from the rubble of World War II, by contrast, with the deutsche mark, the currency set up under American military rule, and the Bundesbank, the conservative, incorruptible, and coldly competent institution established to preserve its value. Bundesbank presidents were revered figures, more often than not at loggerheads with the elected chancellors they served. And they cast their shadow over German democratic politics, according to Klaus-Dieter Frankenberger, foreign editor of the Frankfurter Allgemeine Zeitung. “You don’t advance your electoral prospects by loosening the tap of monetary policy,” Frankenberger said this fall.

The German public was dragged into the euro reluctantly and would never have consented to it had they been consulted. “The euro has always been the ‘Golden Calf,’ so to speak,” says Barclays’s economist Thorsten Polleit. “It was forced upon Germans.” There is still a lot of debate about how it was forced upon Germans. The most common explanation is that French president François Mitterrand insisted on the euro as a condition of Germany’s reunification. A number of Germany’s top politicians and economists assured citizens that the new currency would hold prices stable. That turned out to be right. They also promised that this would not mean sharing wealth and bailing out laggards. That turned out to be wrong—and perhaps catastrophically, apocalyptically wrong. In the late nineties, “many chief economists did a lot of client presentations where they told people the euro would be as stable as the German mark,” says Jörg Krämer, chief economist at Commerzbank. “I am quite happy I was young enough not to have had to do this.” …

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H/T Expat

City Journal:

What do a breast-implant scandal in Europe and the latest news about Paula Deen, the Southern-fried American chef, have in common? Both demonstrate, in their own ways, what’s wrong with Western health care. The free market alone can’t fix health care—but neither can the government. Instead, government must play a limited role and stick to it, allowing the market to work. That’s not happening today.

In Europe, tens of thousands of women have learned that they received industrial-grade silicon—the kind used in mattress filling—for their breast implants. As Britain’s Daily Mail reports, Frenchman Jean-Claude Mas, a butcher’s son, launched his breast-implant business, Poly Implant Prothèse (PIP), in 1991, selling the silicone sacs to clinics around France, Britain, and Latin America. To cut costs, he allegedly switched from medical to mattress filler, and skimped on a protective sheath. The result: the implants are rupturing much more frequently and faster than normal—causing pain, deformity, and anxiety. As Gemma Garrett, a former Miss Great Britain who paid to have her implants removed, told the newspaper, “it’s painful and unpleasant. . . . I am also very scared.”

Who’s responsible—and who pays the $233 million it would cost to remove up to 45,000 British women’s implants? Mas, of course, is the chief culprit. His business has been shut down. Last week, French police arrested him on suspicion of “unintentional harming.” More charges could follow. The rest of the trail of responsibility is straight as well. Breast implants, as an elective procedure, lie squarely in health care’s free-market province. Most of the 45,000 British women who got the implants did so for cosmetic reasons at private clinics. The clinics bought Mas’s product because it was cheap—too cheap. The victims’ recourse lies with these clinics, whose owners could, in turn, sue Mas to defray their own costs.

At first glance, recourse seems relatively straightforward, even though one in ten plastic-surgery clinics fails each year, meaning many women have no place to “return” their defective product. These women took a medical (and financial) risk in pursuit of a better appearance. Businesses fail. Existing clinics are concerned that they, too, will go out of business if they have to perform free surgeries to remove the implants they put in. Yet as the Mail editorializes, if companies “have given their clients a product which is unsafe, they—not the hard-pressed UK taxpayer—should ultimately foot [the] bill.”

Yet the bill may well fall into taxpayers’ laps. Britain’s National Health Service has said that it will pay to remove implants that women got after breast-cancer surgery. That sounds reasonable enough. But the French government has already said that it will pay to remove all victims’ implants, putting pressure on Britain to do the same. Britain is under fire, too, because implants are regulated medical devices in the U.K. As the Mail also notes, Britain’s Medicines and Healthcare Products Regulatory Agency (similar to the FDA in the U.S.), which approved the implants, may have ignored surgeons’ warnings. The government may want to pay up now to avoid scrutiny of its watchdog’s decision-making.

The NHS may pay for another reason: its medical experts could determine that doing so would avoid higher government costs later, as women suffer the ill effects of silicone seepage and come in for government-paid care. The NHS knows that it’s likely to do a better job treating these women than would a clinic whose managers view them as people they will never see again. Indeed, national health officials have said that the government might pay for implant removal if women show a “clinical need,” a standard they didn’t define.

Judging by the comments on U.K. websites, many Britons object to the idea of the NHS paying for breast-implant removal. A woman with money to buy breast implants, they figure, can surely afford to get them removed. But as the health-care industry changes, expect more of the same questions about who should pay. More and more “health care”— from bionic knees to back surgeries—is purchased not to alleviate acute pain or sickness but to improve “quality of life.” Is a middle-aged man requiring intensive surgeries so that he can keep jogging any less vain than a mother of four who wants perky breasts?

Furthermore, in America, the health-care industry has for more than a decade treated drug patients, at least, as consumers. Drug makers market expensive products to the public, not to doctors. Consumers want what they think is best, even if it’s expensive. It gets more complicated when you remember that more people go abroad for cheaper surgeries or for experimental care that they can’t get stateside. When something goes wrong with these “personal choices,” everyone else back home has to pay to fix it, whether through private or government insurance…

Read it all.

National Affairs:

After a financial crisis, a deep recession, and a stalled recovery, it should be no surprise that poverty in America is on the rise. This fall, the Census Bureau reported that a record 46 million Americans — 15% of the population — were living below the poverty line. This is a troubling figure, and it should certainly move us to act to help the poor as we strive to grow the economy.

But efforts to address poverty in America are frequently derailed by misguided ideology — in particular, by the notion that poverty is best understood through the lens of inequality. Far too often, policymakers succumb to the argument that a widening gap between the richest and poorest Americans is the fundamental problem to be solved and that poverty is merely a symptom of that deeper flaw.

Such concerns about inequality are not baseless, of course. They begin from a fact of the modern American economy, which is that, in recent decades, incomes among the poor have risen less quickly than have incomes among the wealthy. And such growing inequality, some critics contend, is both practically and morally dangerous. A growing income divide can foster bitterness and animosity between classes, threaten democracy, and destabilize the economy. Above all, they argue, it violates the cherished moral principle of equality.

Implicit in much of the critique of our income divide is the assumption that inequality per se is inherently unjust, and therefore that the gap between rich and poor is as well. That perceived injustice in turn spurs support for redistributionist policies that are intended to make levels of prosperity more equal across society.

President Obama commonly uses the language of justice and equality to advance such an agenda — speaking, for instance, of “the injustice in the growing divide between Main Street and Wall Street.” Other left-leaning politicians, commentators, economists, and activists say much the same. Some religious figures have even used their moral concerns about inequality to justify the imposition of specific redistributionist economic policies. For example, Jim Wallis, president of the liberal religious organization Sojourners, has said that inequality in America — “a sin of biblical proportions” — necessitates a higher minimum wage, higher taxes on the rich, and increased welfare spending.

But though the gap between rich and poor may be widening, this obsession with inequality — and this preferred approach to mitigating it — are fundamentally counterproductive. They are born of a misconception rooted in a flawed understanding of both justice and economic fact. Even if their premises and objectives were sound, these policies would have perverse unintended consequences — fostering class resentment, destroying jobs, and reducing wages and opportunities for the poor most of all. Such policies also tend to undermine the family and create a culture of dependence on the state — unleashing harmful consequences that would, again, fall disproportionately on the poor.

Before we can seriously address the state of the poor in America, then, we need to seriously question some popular assumptions about poverty, equality, and justice. We must ask whether justice is always synonymous with equality, and explore the economic realities underlying the claim that a resource gap is inherently unjust. Such an examination will show that the left’s intense focus on the income gap is severely misplaced — and that, if we fail to correct their error, our society runs the risk of neglecting the poor for the sake of an ill-advised ideological quest.

CREATED EQUAL

Equality is highly prized in liberal-democratic societies. Indeed, in America, we often use “equality” as a synonym for justice. A just society, we imply, is one in which everyone is treated equally. After all, the guiding first principle of the American founding, according to the Declaration of Independence, was that “all men are created equal.” Abraham Lincoln confirmed as much in his Gettysburg Address, proclaiming nearly a century after the Declaration that America was still “dedicated to the proposition that all men are created equal.”

But America’s founders knew that, while human beings are equal in some key respects, they are not equal in every respect. And justice also requires that we recognize these differences. Where people are equal, it is just to treat them the same; where they are different, it is unjust to treat them the same.

So in what respects are people equal? According to the Declaration of Independence, all men are equally endowed with rights to life, liberty, and the pursuit of happiness. The author of the Declaration, Thomas Jefferson, wrote elsewhere that no one is born either with a saddle on his back or with boots and spurs to ride his fellow man. In other words, no person has an inherent duty by birth to submit to another, nor does anyone enjoy an inherent right by birth to dominate another. On the basis of this principle, justice demands that all people be treated equally before the law.

Moreover, every life, by virtue of being a human life, is equal in value. No matter how young, old, weak, or poor a man may be, his life is just as worthy of respect and protection as any other. No one should be excluded from the opportunity to live freely and contribute to society.

But our equal worth as human beings does not mean that we must be treated equally in every sense and in every situation. We need not expect to possess equal faculties; society need not provide us with equal material circumstances.

Consider, for instance, an elementary-school class. It would be foolish (and unjust) to insist that the teacher and a third-grade student have equal say regarding every choice made in the classroom — including who gets to determine classroom rules, set the curriculum, and assign homework. It would also be wrong to insist that every student — regardless of ability, effort, and achievement — receive exactly the same grade. But if a school-bus accident during a field trip resulted in the teacher’s and students’ being admitted to a local hospital, all of them — as human beings whose lives are of equal worth — would have an equal claim to life-saving care.

This distinction was made particularly clear in the writings of James Wilson, a signer of the Declaration of Independence and one of the six original justices of the Supreme Court. Wilson argued:

When we say, that all men are equal, we mean not to apply this equality to their virtues, their talents, their dispositions, or their acquirements. In all these respects, there is, and it is fit for the great purposes of society that there should be, great inequality among men….[But] there is still one aspect, in which all men in society, previous to civil government, are equal. With regard to all, there is an equality in rights and in obligations….The natural rights and duties of man belong equally to all.

Thus, when we address fundamental human dignity and worth — our standing before God and the law, and the value of individual lives — equal treatment of all is required. In most other contexts, however, justice calls for treating different people differently.

ECONOMIC JUSTICE

How should this analysis of equality and justice apply when evaluating the American economy? To begin, a sound notion of economic justice must account for aspects of human equality as well as inequality. For instance, since all human beings possess equal dignity and an equal claim to life, a just economic system must seek to keep citizens from falling below a baseline of subsistence and dignity. A wealthy society should not stand by while some citizens starve, for instance. This threshold will differ according to circumstances; the baseline in a modern wealthy society will not be the same as that of a pre-modern or developing society. But the same principle applies: By virtue of equal humanity, every person should have access to at least the basic resources required to sustain life in his society. In the United States, this has come to include not only food, clothing, and shelter, but also free public education, legal representation in courts of law, emergency medical care, and other forms of basic welfare.

But establishing a baseline of dignity does not mean that the responsibility for providing these essential resources must belong exclusively to government. We should not narrow the obligation to only the state when, in fact, many social institutions — including families, private charities, churches, and businesses — share responsibility for sustaining a just society. The state should maintain the social conditions that allow these other institutions to contribute, in appropriate ways, to a minimum provision of basic economic resources for all citizens. The state is authorized and equipped to protect the public’s freedom, order, safety, and peace by meeting needs that require the use of force (such as defending against military threats, providing for public safety, enforcing contracts, and upholding laws). Civil-society institutions like families, churches, and community groups, in turn, are better equipped to fulfill mutual obligations and enable people to care for one another.

In other words, the state generally creates the conditions for a just society, and the institutions of civil society help citizens live out that vision of justice. For people who would otherwise slip through the cracks, government should step in to provide a basic safety net, but only as a last resort, temporarily, and in ways that support — rather than crowd out — civil society…

Read it all.

GOP Debate Prep

February 6, 2012

The Other Pipeline

February 6, 2012

Via Newsday

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