2008 Woodie Awards
Apparently, Paul Wolfowitz, now acting as president of the World Bank, called for a reduction in the farm subsidies that rich nations dole out. Farm subsidies amount to nothing more than welfare for big agribusiness, considering that only 30% of farmers actually receive the subsidies, with the rest of the $16.4 billion going to companies like ArcherDanielsMidland, Cargill, and Monsanto. On top of this corporate welfare, the subsidies themselves make it impossible for local economies in poorer countries to compete with subsidized goods from the U.S. and Western Europe. Lastly, its a bit hypocritical to require other countries, as a stipulation of development loans, to end subsidies while we increase them at home.
This is hardly the conservative line that most thought Wolfowitz would tow, but I think there’s much more at play than Wolfowitz’ concern for Africa. This is probably a conciliatory move to show how “reform-minded” Wolfie is, but will really only amount to mere talk or, as I suspect, a clever smoke and mirrors trick designed to give him cover for radical pro-America development policy changes.
Princeton Professor Paul Krugman has an excellent piece about reality today in the NYTimes, namely, about the losing middle class and how things such as equality and fairness have changed significantly in the last 50 years.
Just a note on Professor Krugman, even though many people dismiss him as a radical, he is one of only a handful of columnists who rigorously supports statements with numbers and facts that come from the known world (and not an imaginary one). And in the classroom at Princeton he treats material such as budget deficits and health care reform very evenhandedly, making sure to include both the strengths and weaknesses of both liberal and conservative agendas. This does not sound like the makings of a radical to me.
How do I know this? Well I took a class with him.
With Chairman Greenspan finally optimistic that the US economy is on “relatively firm footing,” it is to be expected that the Bush budget deficits (in the tune of 3.6% of GDP in 2004) will decrease this year and the next, as more tax revenues are collected. As the WSJ reports, the fiscal picture is turning rosier.
But this is no time to sit back and relax. Rather, this is an opportunity to begin some real tax reform to fight the looming deficits of the future. President Bush still wants to focus on Social Security, a relatively small fraction of the total budget shortfall. He is still quiet on the alternative minimum tax, a tax fo the rich, which is snagging more and more of the middle class; he still wants to happily devote the surpluses from Social Security to pay for his reckless spending; he still wants to keep cooking numbers (his pledge to cut the deficit in half by the time he leaves rests on an inflated budget deficit number for 2004, so that actually halving it will be easier).
Today the Congressional Budget Office Director Douglas Holtz-Eakin told Congress the federal agency insuring pensions will see a deficit of $71 billion in ten years. With defined-benefit plans, which promise care and is thus subject to grow with health care costs, this number is very likely to escalate as health care costs continue their upward march.
A little more responsibility and effort from the White House might help.
You’ll get left behind by the hyper-rich. Sorry.
With increasing frequency, President Bush has emphasized the linkages between America’s security and political conditions abroad.
However, as Columbia economist and special advisor to Secretary-General Kofi Annan Jefferey D. Sachs has long argued (most brilliantly, I might add, in his recent book An End to Poverty), international security remains inextricably linked to global poverty. Extreme poverty–defined by the World Bank as living under $1 per day–continues to plague populations across Sub-Saharan Africa, South Asia, and East Asia; the prospect of climate shock, disease, and natural disaster, coupled with the lack of adequate health care and education, continues to leave over one billion people in the most wretched and destitute condition imaginable. As a result, these societies continue to be mired in unrest, civil war, political instability, and small-arms trafficking, circumstances easily exploited by America’s enemies as both save haven and propaganda tool.
And yet, the world has a plan before it. The ambitious, yet achievable, Millenium Development initiative, signed by members of the United Nations, has laid out a plan to end extreme poverty by 2025. Sadly, the United States remains far behind its European counterparts in foreign direct assistance as a percentage of GDP; even worse, nearly every industrialized country has fallen far short of what has been specified by the Millenium Development program.
“The $450 billion that the United States will spend this year on the military will never buy peace if it continues to spend around one thirtieth of that, just $15 billion, to address the plight of the world’s poorest of the poor,” writes Sachs.
Some have correctly made the case for a connection between political conditions and international security. It’s time they broaden their vision, realizing that true freedom must also encompass, as FDR made clear so many years ago in his famous Four Freedoms Speech, freedom from want.
Thomas Friedman, since his outstanding book The World Is Flat came out, again hit the nail on its head today with his NYTimes piece. On rejecting the EU constitution, Friedman writes:
It is interesting because French voters are trying to preserve a 35-hour work week in a world where Indian engineers are ready to work a 35-hour day. Good luck.
Voters in “old Europe” - France, Germany, the Netherlands and Italy - seem to be saying to their leaders: stop the world, we want to get off; while voters in India have been telling their leaders: stop the world and build us a stepstool, we want to get on. I feel sorry for Western European blue collar workers. A world of benefits they have known for 50 years is coming apart, and their governments don’t seem to have a strategy for coping.
The answer often is protectionism, with Europe and the US, for example, still wrangling with China over textile quotas in order to stem the tide of cheap clothing. Outsourcing is still alarming to many, especially to politicians.
But such an answer of preservng the status quo, in a time when American schools are becoming more like the turtle than the hare in that famous race, is mistakenly a short-run one. Just like it would be fine for President Bush to currently run a huge deficit of 4-5% of GDP per annum if everyone no longer existed in say three years, protectionism would also be fine if we didn’t have to worry about the future. Problem is, in the short-run we’re not all dead, and short-run fixes to growing foreign competition is a futile attempt to counteract free market forces, forces driven by Adam Smith’s invisible hands in India and China.
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