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October & November 2012, No. 175, $6.00


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O CTOBER & N OVEMBER 2012, No. 175

3 UNCERTAINTY AND THE ECONOMY Policy instability, rocky recovery Scott R. Baker, Nicholas Bloom, & Steven J. Davis 15 REDUCING THE GLOBAL NUCLEAR RISK Sparing no effort to ensure safety and security Sidney D. Drell, George P. Shultz, & Steven P. Andreasen 23 THE CUBAN MISSILE CRISIS AS INTELLIGENCE FAILURE Fifty years of reluctance to draw an unwelcome conclusion Amy B. Zegart 41 RICH DONORS, POOR COUNTRIES The harm done when expectations exceed capacity M.A. Thomas 55 RELIGIOUS FREEDOM AND NATIONAL SECURITY Why the U.S. should make the connection William Inboden 69 ECONOMIC TRANSITIONS: LEARNING FROM CENTRAL EUROPE Policy prescriptions for the Arab world Dalibor Rohac

81 THE EXPANDING POWER OF THE PRESIDENCY Jay Cost on The Presidents Czars: Undermining Congress and the Constitution by Mitchel A. Sollenberger and Mark J. Rozell 86 THE MARKET DEMOCRACY PROJECT Robert Herritt on Free Market Fairness by John Tomasi 91 THE ELITEST ELITE Paul Kengor on The Presidents Club: Inside the Worlds Most Exclusive Fraternity by Nancy Gibbs and Michael Duffy

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Uncertainty and the Economy

By Scott R. Baker, Nicholas Bloom, & Steven J. Davis

he u.s. economy hit bottom in June 2009. Thirty months later, output growth remains sluggish and unemployment still hovers above 8 percent. A critical question is why. One view attributes the weak recovery, at least in part, to high levels of uncertainty about economic policy. This view entails two claims: First, that economic policy uncertainty has been unusually high in recent years. Second, that high levels of economic policy uncertainty caused households and businesses to hold back significantly on spending, investment, and hiring. We take a look at both claims in this article.

Scott R. Baker is a Ph.D. candidate in the Stanford University Department of Economics, where Nicholas Bloom is a professor. Steven J. Davis is deputy dean of the faculty and William H. Abbott professor of international business and economics at the University of Chicago Booth School of Business. This essay is excerpted from Government Policies and the Delayed Economic Recovery, published by Hoover Press in August.
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figure 1 Index of economic policy uncertainty, January 1985 to December 2011
250 Policy Uncertainty Index (mean = 100 prior to 2010) Debt Ceiling Dispute; Eurozone Crisis Lehman and TARP Obama Election; Banking Crisis

200 Balanced Budget Black Act Monday 1st Gulf War Clinton Election

9/11 2nd Gulf War Russian Crisis/ Bush LTCM Election


Stimulus Debate


50 2001 2003 2005 2007 2009 1985 1987 1989 1991 1993 1995 1997 1999 2011

Note: The index is an aggregation of four components: a scaled count of news articles that refer to the economy, uncertainty, and policy; a time-discounted sum of scheduled expirations of federal tax code provisions; and indexes of disagreement among professional forecasters about future cpi levels and about government purchases of goods and services. See text for details. Data and updates are available at

We start by considering an index of economic policy uncertainty developed in our 2012 paper Measuring Economic Policy Uncertainty. Figure 1, which plots our index, indicates that economic policy uncertainty fluctuates strongly over time. The index shows historically high levels of economic policy uncertainty in the last four years. It reached an all-time peak in August 2011. As discussed below, we also find evidence that policy concerns account for an unusually high share of overall economic uncertainty in recent years. Moreover, short-term movements in overall economic uncertainty more closely track movements in policy-related uncertainty in the past decade than in earlier periods. In short, our analysis provides considerable support for the first claim of the policy uncertainty view. The second claim is harder to assess because it raises the difficult issue of identifying a causal relationship. We do not provide a definitive analysis of the second claim. We find evidence that increases in economic policy uncertainty foreshadow declines in output, employment, and investment. While we cannot say that economic policy uncertainty necessarily causes these negative developments since many factors move together in the economy we can say with some confidence that high levels of policy uncertainty are associated with weaker growth prospects.
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Economic policy uncertainty over time

igure 1 plots our monthly index of economic policy uncertainty from January 1985 to December 2011. Before describing the construction of the index, we briefly consider its evolution over time. The policy uncertainty index shows pronounced spikes associated with the Balanced Budget Act of 1985, other major policy developments, the Gulf Wars, the 9 / 11 terrorist attack, financial scares and crises, and consequential national elections. Policy uncertainty shoots upward around these events, and typically falls back down within a few months. The experience since January 2008 is distinctive, We measure the however, in that policy uncertainty rose sharply and frequency of stayed at high levels. The last two years are especially noteworthy in this respect. While the most threatnewspaper ening aspects of the financial crisis were contained articles that by the middle of 2009, the policy uncertainty index stood at high levels throughout 2010 and 2011. contain terms The index shows a sharp spike in January 2008, related to the which saw two large, surprise interest rate cuts. The Economic Stimulus Act of 2008, signed into law on economy, policy, February 13, 2008, was also a major focus of ecoand uncertainty. nomic policy concerns in January 2008. The policy uncertainty index jumps to yet higher levels with the collapse of Lehman Brothers on September 15, 2008, and the enactment in early October of the Emergency Economic Stabilization Act, which created the Troubled Asset Relief Program (tarp). A series of later developments and policy fights including the debt-ceiling dispute between Republicans and Democrats in the summer of 2011, and ongoing banking and sovereign debt crises in the Eurozone area kept economic policy uncertainty at very high levels throughout 2011. So how do we construct our index? We build several index components and then aggregate over the components to obtain the index displayed in Figure 1. Interested readers can consult our 2012 paper for more details. Newsbased component. Our first index component quantifies newspaper coverage of policy-related economic uncertainty. Basically, we measure the monthly frequency of newspaper articles that contain terms related to the economy, uncertainty, and policy. The idea is that a greater number of news articles about economic policy uncertainty reflects the fact that households and businesses are facing a higher level of economic policy uncertainty. This news-based proxy for the level of policy uncertainty is by no means perfect, but we think it provides a useful indicator. How exactly do we proceed? We consider ten newspapers: Wall Street Journal, New York Times, Washington Post, usa Today, Chicago Tribune,
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Boston Globe, San Francisco Chronicle, Los Angeles Times, Miami Herald, and Dallas Morning News. We conduct an automated search of all articles in each newspaper from January 1985 to December 2011. For each newspaper, we obtain a count for the number or articles that contain three sets of terms. The first set is {economy, economic}, the second is {uncertain, uncertainty}, and the third is {policy, regulation, Federal Reserve, tax, spending, budget, deficit}. To make it into our count, an article must contain at least one word from all three sets. These search criteria would, for example, flag an article from the New York Times that contains the words economic, uncertainty, and tax. Of course, the raw count of articles that satisfy our search criteria might be influenced by changes over time in the length or We consider ten total number of articles. So, rather than use the raw monthly count of articles that meet the search critenewspapers, ria, we scale by the number of articles in the same paper containing the word today. Finally, we comincluding the bine the scaled count for the ten individual newspaNew York Times, pers to form our monthly news-based index of economic policy uncertainty.1 Wall Street As a robustness check, we applied the same Journal, Boston approach to a news-based index of economic policy Globe, and uncertainty using Google News, which covers hundreds of newspapers and online news sources. The Washington correlation between our Google News index of ecoPost. nomic policy uncertainty and our ten-paper index is 0.76 in the monthly data. We use the ten-paper index as a component of our overall index, because the underlying sources for Google News vary over time in ways that we cannot directly observe or control. Nevertheless, the broader coverage of Google News is quite useful for some purposes, and our work in our earlier paper exploits both the tenpaper approach and the Google News approach. We also conducted several cross-checks to evaluate the news-based approach. One check uses the news-based approach to construct an index of uncertainty about stock prices. Specifically, we use automated searches to obtain a (scaled) count for the number of news articles with at least one term from all three of the following sets: {economy, economic}, {uncertain, uncertainty}, and {stock market, stock price, equity price}. We compare this news-based index of stock market uncertainty to the vix the Chicago Board of Options Exchange Index of implied volatility in the s&p
1. Specifically, we first scale each papers raw monthly count by a one-sided 36-month moving average of the today count in the same paper. We then normalize the scaled counts so that the time-series standard deviation is the same for all newspapers. Next, we sum the normalized scaled counts across newspapers by month to obtain our news-based index of economic policy uncertainty. As a final normalization, we divide the news-based index by its mean from January 1985 to December 2009 and multiply the result by 100.

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500 stock price index. The two indexes move closely together. That is, our news-based index of stock market uncertainty closely mirrors the leading index of stock market uncertainty based on asset prices. The success of the news-based approach at tracking movements in uncertainty about stock prices gives us confidence that the same approach can accurately track other aspects of economic uncertainty. Scheduled tax code expirations. A second component of our overall index exploits data on federal tax code provisions that, as a matter of current law, are scheduled to expire at specified future dates. Many of these provisions are temporary tax measures that may or may not be extended, with Congress often waiting until the last minute and engaging in large political debates that cause uncertainty for the households and businesses affected by the provisions. To quantify the A recent example involves the federal governments use of temporary payroll tax cuts. The Tax frequency and Relief, Unemployment Insurance Reauthorization, importance of and Job Creation Act of 2010 instituted a temporary cut in the payroll tax rate, with expiration scheduled scheduled tax for December 31, 2011. The sluggish nature of the code expirations recovery in 2011 prompted many calls to extend the payroll tax cut for a second year. The possibility of we relied on data an extension, and how to cover the revenue loss, from the cbo. became an increasingly contentious and partisan political issue as the expiration date drew nearer. After much back and forth, Congress finally approved an extension on December 23, 2011 but only for two months. Then, just days before the tax cuts expiration in late February, it was extended until the end of 2012, allowing Congress to wait until after the November 2012 elections to decide the fate of the policy.2 This type of legislative indecision and last-minute action undermines the stability of and certainty about the tax code. To quantify the frequency and importance of scheduled tax code expirations, we rely on data from the Congressional Budget Office (cbo). Since 1991, the cbo produces annual reports that list federal tax code provisions set to expire over the next ten years. Using these data, we construct a discounted sum of future tax code expirations. This discounted sum serves as the tax code expiration component of our overall economic policy uncertainty index. This index component shows rapid growth over the past decade in the discounted volume of scheduled tax code expirations. By 2011, the volume of tax code provisions set to expire is about five times larger than in the late nineties. Our paper also constructs another index of scheduled tax code pro2. cbos The Budget and Economic Outlook: Fiscal Years 2012 to 2022 contains some discussion of recent payroll tax cut provisions and their budgetary consequences. Its available at (accessed September 5, 2012).

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visions, using data from the Joint Congressional Committee on Taxation (jct), and obtains very similar results. The cbo, and presumably the jct, did not produce data on scheduled tax code expirations before 1991 because the volume was too small to matter. In short, the evidence on scheduled tax code expirations indicates that the federal tax system has become an increasingly important source of uncertainty for businesses and households. Forecaster disagreement about inflation and government purchases. For the third set of components in our policy uncertainty index, we consider disagreement among economic forecasters. We get data from the Federal Reserve Bank of Philadelphia, which surveys about 50 professional forecasters every quarter. We look at how much the forecasters disagree on, first, the Consumer Price Index measure of quarterly inflation The disagreement four quarters ahead and, second, on the level of government purchases of goods and services four quarindexes point ters ahead. Larger forecast differences presumably indicate larger differences of opinion, which suggests to relatively more uncertainty about future developments than if high levels of forecasters mostly agree. Conversely, we take smaller uncertainty about forecast differences to indicate less uncertainty. To measure disagreement about future inflation, future purchases we compute the interquartile range the spread of goods and between the 75th and 25th percentiles of the four-quarter-ahead forecasts for the quarterly inflaservices by the tion rate. For government purchases, we follow the government. survey and treat federal government purchases separately from state and local purchases. That is, we compute an interquartile spread measure for the four-quarter-ahead forecasts of federal government purchases, and we compute an analogous measure for state and local government purchases. We then sum the two measures, weighting by size of purchases, to obtain our index component for uncertainty about future government purchases of goods and services.3 The disagreement indexes point to relatively high levels of uncertainty about future inflation in the first six years of our sample period (i.e., from 1985 to 1991), during 2008 and early 2009, and again since late 2010. They also show a pattern of high and volatile uncertainty about future government purchases in the first eight years of our sample period and again since the fourth quarter of 2008. The recent increase in uncertainty about government purchases is more pronounced at the state and local level than the federal level.
3. Specifically, we compute the interquartile range of four-quarter-ahead forecasts of federal government purchases of goods and services, scaled by the median four-quarter ahead forecast of the same quantity. We then multiply by a five-year, backward-looking moving average for the ratio of nominal federal purchases to nominal gdp. These steps yield a sub-index of forecaster disagreement about federal government purchases. After obtaining an analogous sub-index of disagreement for state and local purchases, we sum the two sub-indexes, weighting by the relative size of their purchases.

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Aggregating the components to obtain an index of economic policy uncertainty. To aggregate the components into our overall index of economic policy uncertainty, we give 50 percent weight to the news-based component, as it is the broadest measure, and equal weights to the scheduled tax code expiration component, the inflation disagreement component, and the government purchases disagreement component. All components show an increase in economic policy uncertainty in recent years, although to varying degrees. Because the index components share many similarities, the behavior of the overall index is not very sensitive to different weighting schemes.

Policy uncertainty and economic uncertainty

useful feature of the news-based approach to measuring uncertainty is its flexibility. We exploit that flexibility to quantify the extent to which policy-related uncertainty accounts for overall economic uncertainty. We also use the news-based approach to uncover specific sources of policy uncertainty. For these exercises, we rely on data from Google News. The higher volume of news articles captured by Google News is especially useful when we slice the data into particular policy categories. Figure 2 shows two indexes. The lower data line is our Google Newsbased index of economic policy uncertainty, constructed using the method figure 2 Policy uncertainty and overall economic uncertainty, January 1985 to December 2011
2nd Dissolution Gulf War of USSR 1000 Russian 9/11 1st Gulf Financial Crisis/ Clinton War LTCM 1987 stock Election Bush market Asian Election crash Financial Recession Crisis Fears Lehman and TARP Debt Ceiling Dispute; Eurozone Crisis

Normalized Number of News Articles (log scale)


Overall Economic Uncertainty Policy-Related Economic Uncertainty 10 1985 1990 1995 Year 2000 2005 2010

Note: The index of overall economic uncertainty is a scaled count of Google News articles that refer to the economy and uncertainty. The index of policy-related uncertainty is a scaled count of Google News articles that refer to the economy, uncertainty, and policy.

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we described above for the ten-paper index. The upper line is an analogous count of articles that mention the economy and uncertainty but may or may not mention policy. So, if a news article talks about the economy, uncertainty, and policy, it shows up in both indexes. If it talks about the economy and uncertainty but does not mention policy, it shows up only in the index given by the upper line. Comparing the two lines, we see that many articles from 1985 to 2000 mention economic uncertainty but dont refer to policy. Thats the gap between the upper and lower lines. Certain episodes recession fears in the second half of the 1980s, for example generated a lot of talk about economic uncertainty but not much talk about policy. Since 9 / 11, however, and especially from 2008 onwards, the two lines move together closely, and the gap between the lines is smaller (especially in proportional terms). So when news articles talk about economic uncertainty in recent years, they typically also discuss policy. Moreover, we found that the news-based index of economic uncertainty is more highly correlated with the news-based index of policy uncertainty in recent years than in the period before 9 / 11. These results support the view that policy-related concerns have become a more important source of economic uncertainty. The obvious next question is: Which aspects of policy are the most important sources of economic uncertainty? In our paper, we drill into the details of the articles in Google News that meet our criteria for economic policy uncertainty. We use more refined search criteria to construct counts for twelve broad categories of economic policy such as monetary policy, taxes, health care, financial market regulation, labor market regulation, and so on. Heres a three-point summary of what we found: 1. Monetary policy accounts for about one-third of policy-related economic uncertainty in the period from 1985 to 2011. Concerns related to taxes, government spending, and fiscal policy appear even more important, accounting for about 40 percent.

3. Although much less pronounced, we also found elevated levels of policy uncertainty in 2010 and 2011 in several other categories: entitlement programs, health care, financial regulation, labor regulation, and sovereign debt and currency issues. In short, our analysis indicates that the historically high levels of policy uncertainty in 2010 and 2011 mainly reflect concerns about tax and monetary policy and secondarily a broader range of other policy-related concerns. We also approach the connection between economic uncertainty and poli10

2. The historically high levels of economic policy uncertainty in 2010 and 2011 predominantly reflect concerns about taxes and monetary policy. Policy uncertainty in these two areas is more than four times higher in the last two years than on average from 1985 to 2011, judging by frequency counts of news articles.

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cy in a different way by examining the sources of stock market volatility. We first identified all daily movements in the U.S. stock market by more than 2.5 percent, up or down, from 1980 to 2011. We then consulted the next days New York Times, which invariably contained a major article about the big move. Usually, the article offered a broad explanation for the move in the first paragraph. We reviewed these articles and, on that basis, allocated each big stock-market move into one of several categories such as news about corporate earnings, macroeconomic news, policy-related news, and so on. Not surprisingly, we found a dramatic increase in the frequency of big daily stock market moves in the 20082011 period relative to the previous 28 years. More interestingly for present purposes, the number of big moves attributed to policy news skyrocketed from about one per year in the 19802007 period to twelve events per year from 2008 to 2011. The share of big moves attributed to policy rose to 39 percent in the past four years compared to 14 percent of a much smaller number in the earlier period. We see this evidence as strongly confirming the claim that policy uncertainty has been extraordinarily high in the past four years. Insofar as equity market volatility is harmful to the economy, this evidence also lends support to that claim that policy uncertainty has been a factor slowing the recovery.

Does policy uncertainty matter?

iven the evidence pointing to high policy uncertainty in recent years, it is natural to ask how much policy uncertainty matters for economic performance. At this point in our analysis, we must recognize that identifying causal relationships in macroeconomic data is very hard. What we can do is talk a bit about the theoretical connections between uncertainty and economic performance. We can also investigate empirically whether high levels of economic policy uncertainty are associated with weaker growth prospects. In the theoretical realm, the economics literature has focused on three channels. The first is the real options effect. There is a long literature on this topic and, in fact, one of the best known and earliest pieces is a 1983 paper by Ben Bernanke titled Irreversibility, Uncertainty and Business Cycles, recently extended and quantified by The Impact of Uncertainty Shocks, (Bloom, 2009) and Really Uncertain Business Cycles (Bloom et al., 2012). The premise is that when firms are uncertain, it is expensive to invest or disinvest and to hire or fire. So uncertainty encourages firms to delay, more so for longer-lived investments and decisions that are costlier to reverse. The second channel is similar but works on the consumption side. Households become more likely to postpone spending when uncertainty is high, particularly on consumer durables like cars and major appliances a key driver of the drop in demand during the Great Depression, as Christina Romer pointOctober & November 2012 11

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ed out in her 1990 article The Great Crash and the Onset of the Great Depression. So high uncertainty encourages people to spend less and to build up a buffer stock of liquid assets. A third channel involves financing costs. Higher uncertainty can raise the cost of capital, especially because much of policy uncertainty is macroeconomic in character and thus hard to diversify. Moreover, because many managers are not diversified in their wealth holdings they often have explicit or implicit equity stakes in their employers higher uncertainty encourages managers to adopt a cautious stance toward risk taking and investment, as Vasia Panousi and Dimitris Papanikolaou noted in 2011. As these brief remarks suggest, economic theory identifies reasons to suspect that high levels of policy uncertainty might undermine economic performance. To approach the issue empirically, we have estimated vector auto-regressions (vars) that include measures of output, employment, prices, stock market levels, and interest rates. We regress current levels of these variable on their lagged values and look at what predicts what. Figure 3 summarizes one of our main results in the form of estimated dynamic relationships. The top graph displays the estimated path of industrial production following a shock to the policy uncertainty measure from Figure 1. Similarly, the bottom graph displays the estimated path for employment. These graphs are predictions, based on an underlying statistical model, of what would happen over the subsequent three years if policy uncertainfigure 3 Industrial production and employment responses to an increase in economic policy uncertainty
2 1 0 1 2 3 4 5 0 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36

Employment Impact (millions of jobs)

Industrial Production Impact (% deviation)

3 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 Months after the economics policy uncertainty shock 32 34 36

Notes: Impulse response functions for industrial production and employment to a 112-unit increase in the policy-related uncertainty index (the measured increase from 2006 to 2011). Estimated using a monthly vector auto regression on data from 1985 to 2011.


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ty increases by the amount of the actual change from 2006 to 2011. Because the underlying statistical model is linear, we can turn the graphs upside down to get the predicted increase in output and employment if current levels of policy uncertainty returned to 2006 levels. To be clear, we cannot say that the dynamic relationships displayed in Figure 3 are causal without invoking strong assumptions. But we can say that a return to 2006 levels of policy uncertainty, similar to the average level over our sample period, would appear to be good news for future employment and output growth. Lubos Pastor and Pietro Veronesi identified, in their 2011 paper Political Uncertainty and Risk Premia, another potential negative aspect of policy uncertainty. They used our index to show that firm-level equity returns move together more closely when policy uncertainty is high, especially in the period since 2000. Greater co-movement in firm-level stock returns makes it harder for investors to diversify financial risks. That leaves investors with greater risk exposures and is likely to discourage risk taking, as discussed above. High levels of policy uncertainty probably lead to stronger co-movement of firm-level equity returns because much of the policy-related uncertainty is macroeconomic in nature.

Preliminary conclusions

his article summarizes our efforts to measure economic policy uncertainty and assess its effects on economic performance. Our research is ongoing, but we can draw a few preliminary conclusions at this point: Policy uncertainty has been at historically high levels over the past four years. This conclusion finds support in our new index of economic policy uncertainty and in our analysis of the factors that precipitate big movements in the stock market. Policy-related concerns now account for a large share of overall economic uncertainty. Here as well, this conclusion finds support in both the analysis of our news-based indexes and in our investigation into the factors that precipitate big stock market moves. A rise in policy uncertainty, similar in magnitude to the actual change since 2006, is associated with substantially lower levels of output and employment over the subsequent 36 months.

We think the weight of the evidence and the lessons of economic theory argue for assigning some weight to the policy uncertainty view. If policymakers can deliver a policy environment characterized by greater certainty and stability, there will likely be a positive payoff in the form of improved macroeconomic performance.
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Reducing the Global Nuclear Risk

By Sidney D. Drell, George P. Shultz, & Steven P. Andreasen

he times we live in are dangerous for many reasons. Prominent among them is the existence of a global nuclear enterprise made up of weapons that can cause damage of unimaginable proportions and power plants at which accidents can have severe, essentially unpredictable consequences for human life. For all of its utility and promise, the nuclear enterprise is unique in the enormity of the vast quantities of destructive energy that can be released through blast, heat, and radioactivity. To get a better grip on the state of the nuclear enterprise, we convened a group of prominent experts at Stanford Universitys Hoover Institution. The group included experts on nuclear weapons, power plants, regulatory experience, public perceptions, and policy. This essay summarizes their views and conclusions.
Sidney D. Drell is a senior fellow at the Hoover Institution, where George P. Shultz is Thomas W. and Susan B. Ford distinguished fellow. Steven P. Andreasen is a lecturer at the Humphrey School of Public Affairs at the University of Minnesota.
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We begin with the most reassuring outcome of our deliberations: Its the sense generally held that the U.S. nuclear enterprise currently meets very high standards in its commitment to safety and security. That has not always been the case in all aspects of the U.S. nuclear enterprise. But safety begins at home, and while the U.S. will need to remain focused to guard against nuclear risks, the picture here looks relatively good. Our greatest concern is that the same cannot be said of the nuclear enterprise globally. Governments, international organizations, industry, and media must recognize and address the nuclear challenges and mounting risks posed by a rapidly changing world. The biggest concerns with nuclear safety and security are in countries relatively new to the nuclear enterprise, and thepotential loss of control to terrorist or criminal gangs of the fissile material that exists in such abundance around the world. In a number of countries, confidence in civil nuclear energy production was severely shaken in the spring of 2011 by the Fukushima nuclear reactor plant disaster. And in the military sphere, the doctrine of deterrence that remains primarily dependent on nuclear weapons is seen in decline due to the importance of nonstate actors such as al-Qaeda and terrorist affiliates that seek destruction for destructions sake. We have two nuclear tigers by the tail. When risks and consequences are unknown, undervalued, or ignored, our nation and the world are dangerously vulnerable. Nowhere is this risk/consequence calculation more relevant than with respect to the nucleus of the atom.

he nuclear enterprise was introduced to the world by the shock of the devastation produced by two atomic bombs hitting Hiroshima and Nagasaki. Modern nuclear weapons are far more powerful than those early bombs, which presented their own hazards. Early research depended on a program of atmospheric testing of nuclear weapons. In the early years following World War II, the impact and the amount of radioactive fallout in the atmosphere generated by above-ground nuclear explosions was not fully appreciated. During those years, the United States and the Soviet Union conducted several hundred tests in the atmosphere that created fallout. A serious regulatory weak point from that time still exists in many places today, as the Fukushima disaster clearly indicates. The U.S. Atomic Energy Commission (aec) was initially assigned conflicting responsibilities: to create an arsenal of nuclear weapons for the United States to confront a growing nuclear-armed Soviet threat; and, at the same time, to ensure public safety from the effects of radioactive fallout. The aec was faced with the same conundrum with regard to civilian nuclear power generation. It was charged
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From Hiroshima to Fukushima

Reducing the Global Nuclear Risk

with promoting civilian nuclear power and simultaneously protecting the public. Progress came in 1963 with the negotiation and signing of the Limited Test Ban Treaty (ltbt) banning all nuclear explosive testing in the atmosphere (initially by the United States, the Soviet Union, and the United Kingdom). With the successful safety record of the U.S. nuclear weapons program, domestic anxiety about nuclear weapons receded somewhat. Meanwhile, public attitudes toward nuclear weapons reflected recognition of their key role in establishing a more stable nuclear deterrent posture in the confrontation with the Soviet Union. The positive record on safety of the nuclear weapons enterprise in the United States there have been accidents involving nuclear weapons, but none that led to the release of The nuclear nuclear energy was the result of a strong effort safety picture and continuing commitment to include safety as a looks relatively primary criterion in new weapons designs, as well as careful production, handling, and deployment procegood; the same dures. The key to the health of todays nuclear weapons enterprise is confidence in the safety of its cannot be said of operations and in the protection of special nuclear the nuclear materials against theft. One can imagine how differenterprise ent the situation would be today if there had been a recognized theft of material sufficient for a bomb, or globally. if one of the two four-megaton bombs that fell from a disabled b-52 Strategic Air Command bomber overflying Goldsboro, North Carolina, in 1961 had detonated. In that event, a single switch in the arming sequence of one of the bombs, by remaining in its off position while the aircraft was disintegrating, was all that prevented a full-yield nuclear explosion. A close call indeed. In the 26 years since the meltdown of the nuclear reactor at Chernobyl in Soviet-era Ukraine, the nuclear power industry has strengthened its safety practices. Over the past decade, growing concerns about global warming and energy independence have actually strengthened support for nuclear energy in the United States and many nations around the world. Yet despite these trends, the civil nuclear enterprise remains fragile. Following Fukushima, opinion polls gave stark evidence of the publics deep fears of the invisible force of nuclear radiation, shown by public opposition to the construction of new nuclear power plants in close proximity. It is not simply a matter of getting better information to the public but of actually educating the public about the true nature of nuclear radiation and its risks. Of course, the immediate task of the nuclear power component of the enterprise is to strive for the best possible safety record. The overriding objective could not be more clear: no more Fukushimas. Another issue that must be resolved involves the continued effectiveness of a policy of deterrence that remains primarily dependent on nuclear
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weapons, and the hazards these weapons pose due to the spread of nuclear technology and material. There is growing apprehension about the determination of terrorists to get their hands on weapons or, for that matter, on the special nuclear material plutonium and highly enriched uranium that fuels them in the most challenging step toward developing a weapon. The global effects of a regional war between nuclear-armed adversaries such as India and Pakistan would also wield an enormous impact, potentially involving radioactive fallout at large distances caused by a limited number of nuclear explosions. This is true as well for nuclear radiation from a reactor explosion fallout at large distances would have a serious societal impact on the nuclear enterprise. There is little understanding of the reality and potential danger of consequences if such an event were to occur halfway around the world. An effort should be made to prepare the public by providing information on how to respond to such an event. An active nuclear diplomacy has grown out of the Cold War efforts to regulate testing and reduce superpower nuclear arsenals. There is now a welcome focus on rolling back nuclear weapons proliferation. Additional important measures include the Nunn-Lugar program, started in 1991 to reduce the nuclear arsenal of the former Soviet Union. Such initiatives have led to greater investment by the United States and other governments in better security for nuclear weapons and material globally, including billions of dollars through the g8 Global Partnership Against the Spread of Weapons and Materials of Mass Destruction. The commitment to improving security of all dangerous nuclear material on the globe within four years was made by 47 world leaders who met with President Obama in Washington, D.C., in April 2010; this commitment was reconfirmed in March 2012 at the Nuclear Security Summit in Seoul, South Korea. Many specific commitments made in 2010 relating to the removal of nuclear materials and conversion of nuclear research reactors from highly enriched uranium to low-enriched uranium fuel have already been accomplished, along with increasing levels of voluntary commitments from a diverse set of states, improving prospects for achieving the four-year goal.

Three principles

t is evident that globally, the nuclear enterprise faces new and increasingly difficult challenges. Successful leadership in national security policy will require a continuous, diligent, and multinational assessment of these newly emerging risks and consequences. In view of the seriousness of the potentially deadly consequences associated with nuclear weapons and nuclear power, we emphasize the importance of three guiding principles for efforts to reduce those risks globally: First, the calculations used to assess nuclear risks in both the military and
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Reducing the Global Nuclear Risk

the civil sectors are fallible. Accurately analyzing events where we have little data, identifying every variable associated with risk, and the possibility of a single variable that goes dangerously wrong are all factors that complicate risk calculations. Governments, industry, and concerned citizens must constantly reexamine the assumptions on which safety and security measures, emergency preparations, and nuclear energy production are based. When dealing with very low-probability and high-consequence operations, we typically have little data as a basis for making quantitative analyses. It is therefore difficult to assess the risk of a nuclear accident and what would contribute to it, and to identify effective steps to reduce that risk. In this context, it is possible that a single variable could exceed expectations, go dangerously wrong, and simply overwhelm safety systems and the risk assessments on Its important to which those systems were built. This is what hapremember that pened in 2011 when an earthquake, followed by a the calculations tsunami both of which exceeded expectations based on history overwhelmed the Fukushima used to assess complex, breaching a number of safeguards that had nuclear risks in been built into the plant and triggering reactor core meltdowns and radiation leaks. This in turn exposed the military the human factor, which is hard to assess and can and civil sectors dramatically change the risk equation. Cultural habits and regulatory inadequacy inhibited rapid are fallible. decision-making and crisis management in the Fukushima disaster. A more nefarious example of the human factor would be a determined nuclear terrorist attack specifically targeting either the military or civilian component of the nuclear enterprise. Second, risks associated with nuclear weapons and nuclear power will likely grow substantially as nuclear weapons and civilian nuclear energy production technology spread in unstable regions of the world where the potential for conict is high. States that are new to the nuclear enterprise may not have effective nuclear safeguards to secure nuclear weapons and materials including a developed fabric of early warning systems and nuclear confidence-building measures that could increase warning and decision time for leaders in a crisis or the capability to safely manage and regulate the construction and operation of new civilian reactors. Hence there is a growing risk of accidents, mistakes, or miscalculations involving nuclear weapons, and of regional wars or nuclear terrorism. The consequences would be horrific: A Hiroshima-size nuclear bomb detonated in a major city could kill a half-million people and result in $1 trillion in direct economic damage. On the civil side of the nuclear ledger, the sobering paradox is this: While an accident would be considerably less devastating than the detonation of a nuclear weapon, the risk of an accident occurring is probably higher. Currently, 1.4 billion people live without electricity, and by 2030 the global demand for energy is projected to rise by about 25 percent. With the added
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need to minimize carbon emissions, nuclear power reactors will become increasingly attractive alternative sources for electric power, especially for developing nations. These countries, in turn, will need to meet the challenge of developing appropriate governmental institutions and the infrastructure, expertise, and experience to support nuclear power efforts with a suitably high standard of safety. As the world witnessed in Fukushima, a nuclear power plant accident can lead to the spread of dangerous radiation, massive civil dislocations, and billions of dollars in cleanup costs. Such an event can also fuel widespread public skepticism about nuclear institutions and technology. Some developed nations notably Germany have interpreted the Fukushima accident as proof that they should abandon nuclear power altogether, primarily by prolonging the life of existing nuclear reactors while phasing out nuclear-produced electricity and developing alternative energy sources. Third, we need to understand that no nation is immune from risks involving nuclear weapons and nuclear power within their borders. There were 32 so-called Broken Arrow accidents nuclear accidents that do not pose a danger of an outbreak of nuclear war involving U.S. weapons between 1950 and 1980, mostly involving U.S. Strategic Air Command bombers and earlier bomb designs not yet incorporating modern nuclear detonation safety designs. The U.S. no longer maintains a nuclear-armed, in-air strategic bomber force, and the record of incidents is greatly reduced. In several cases, accidents such as the North Carolina bomber incident came dangerously close to triggering catastrophes, with disaster averted simply by luck. The United States has had an admirable safety record in the area of civil nuclear power since the 1979 Three Mile Island accident in Pennsylvania, yet safety concerns persist. One of the critical assumptions in the design of the Fukushima reactor complex was that, if electrical power was lost at the plant and back-up generators failed, power could be restored within a few hours. The combined one-two punch of the earthquake and tsunami, however, made the necessary repairs impossible. In the United States today, some nuclear power reactors are designed with a comparably short window for restoring power. After Fukushima, this is an issue that deserves action especially in light of our own Hurricane Katrina experience, which rendered many affected areas inaccessible for days in 2005, and the August 2011 East Coast earthquake that shook the North Anna nuclear power plant in Mineral, Virginia, beyond expectations based on previous geological activity.

Reducing risks
o reduce these nuclear risks, we offer four related recommendations that should be adopted by the nuclear enterprise, both military and civilian, in the United States and abroad.
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Reducing the Global Nuclear Risk

First, the reduction of nuclear risks requires every level of the nuclear enterprise and related military and civilian organizations to embrace the importance of safety and security as an overarching operating rule. This is not as easy as it sounds. To a war fighter, more safety and control can mean less reliability and availability and greater costs. For a company or utility involved in the construction or operation of a nuclear power plant, more safety and security can mean greater regulation and higher costs. But the absence of a culture of safety and security, in which priorities and meaningful standards are set and rigorous discipline and accountability are enforced, is perhaps the most reliable indicator of an impending disaster. In August 2007, after a b-52 bomber loaded with six nuclear-tipped cruise missiles flew from North Dakota to Louisiana without anyone realizing there were live weapons on board, The absence of then Secretary of Defense Robert Gates fired both a culture of the military and civilian heads of the U.S. Air Force. safety and His action was an example of setting the right priorities and enforcing accountability, but the reality of security is the incident shows that greater incorporation of a perhaps the most safety and security culture is needed. Second, independent regulation of the nuclear reliable indicator enterprise is crucial to setting and enforcing the safety and security rule. In the United States today, the of an impending nuclear regulatory system in particular, the disaster. Nuclear Regulatory Commission (nrc) is credited with setting a uniquely high standard for independent regulation of the civil nuclear power sector. This is one of the keys to a successful and safe nuclear program. Effective regulation is even more crucial when there are strong incentives to keep operating costs down and keep an aging nuclear reactor fleet in operation, a combination that could create conditions for a catastrophic nuclear power plant failure. Careful attention is required to protect the nrc from regulatory capture by vested interests in government and industry, the latter of which funds a high percentage of the nrcs budget. In too many countries, strong, independent regulatory agencies are not the norm. The independent watchdog organization advising the Japanese government was working with Japanese utilities to influence public opinion in favor of nuclear power. Strengthening the International Atomic Energy Agency (iaea) so that it can play a greater role in civil nuclear safety and security would also help reduce risks, and will require substantially greater authorities to address both safety and security, and most importantly, more resources for an agency whose budget is only 333 million, with only onetenth of that total devoted to nuclear safety and security. In addition, exporting best practices of the U.S. Nuclear Regulatory Commission that is, lessons of nuclear regulation, oversight, and safety learned over many decades to other countries would pay a huge safety dividend.
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Third, independent peer review should be incorporated into all aspects of the nuclear enterprise. On the weapons side, independent experts in the United States from both within and outside the various concerned organizations are relied on to review or red team each other, rigorously challenging and debating weapons and systems safety, and communicating these points up and down the line. The Institute of Nuclear Power Operations (inpo) provides strong peer review and oversight of the civil nuclear sector in the United States. Its global counterpart, the World Association of Nuclear Operators (wano), should give a higher priority to further strengthening its safety operations, in particular its peer review process, learning from the experiences of the United States and other nations. Strong outside peer review combined with an enhanced capacity to arrange fines based on incidents occurring in far distant countries would help states entering the world of high-consequence operations to develop a culture and standard needed to achieve an exemplary safety record. Beyond these recommendations, the military and civilian nuclear communities can and should learn from each other. A periodic dialogue structured around assessing and reducing the risks surrounding the nuclear enterprise would be valuable, both in the United States and abroad, and could be organized by governments or academia (as was done in the conference at Stanford). An analysis of the probabilities of undesired events and ways to minimize them, including lessons learned from accidents such as Fukushima as well as close call incidents, should be put on the front burner, as should consequence management that is, what to do if a nuclear incident were to occur. An informed public is also an essential element in responding to a nuclear crisis. Greater public awareness and understanding of nuclear risks and consequences can lead to greater public preparation to handle post-disaster challenges. Fourth, progress on all aspects of nuclear threat reduction should be organized around a clear goal: a global effort to reduce reliance on nuclear weapons, prevent their spread into potentially dangerous hands, and ultimately end them as a threat to the world. A step-by-step process along the lines proposed by George Shultz, William Perry, Henry Kissinger, and Sam Nunn in a series of Wall Street Journal essays and demonstrated progress toward realizing the vision of a world free of nuclear weapons will build the kind of international trust and broad cooperation required to effectively address todays threats and prevent tomorrows catastrophe. Our bottom line: Since the risks posed by the nuclear enterprise are so high, no reasonable effort should be spared to ensure safety and security. That must be the rule in dealing with events of very low probability but potentially catastrophic consequences.


Policy Review

The Cuban Missile Crisis as Intelligence Failure

By Amy B. Zegart

he cuban missile crisis marks its 50th anniversary this year as the most studied event of the nuclear age. Scholars and policymakers alike have been dissecting virtually every aspect of that terrifying nuclear showdown. Digging through documents in Soviet and American archives, and attending conferences from Havana to Harvard, generations of researchers have labored to distill what happened in 1962 all with an eye toward improving U.S. foreign policy. Yet after half a century, we have learned the wrong intelligence lessons from the crisis. In some sense, this result should not be surprising. Typically, learning is envisioned as a straight-line trajectory where time only makes things better. But time often makes things worse. Organizations (and individuals) frequently forget what they should remember and remember what they should forget. One of the most widely accepted lessons of that frightening time that the discovery of Soviet missiles in Cuba constituted a stunning American
Amy B. Zegart is a senior fellow at Stanford Universitys Hoover Institution and the author, most recently, of Eyes on Spies: Congress and the United States Intelligence Community. She writes an intelligence column at
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intelligence success needs to be challenged. An equally stunning intelligence-warning failure has been downplayed in Cuban missile crisis scholarship since the 1960s. Shifting the analytic lens from intelligence success to failure, moreover, reveals surprising and important organizational deficiencies at work. Ever since Graham Allison penned Essence of Decision in 1971, a great deal of research has focused on the pitfalls of individual perception and cognition as well as organizational weaknesses in the policymaking process. Surprisingly little work, however, has examined the crucial role of organizational weaknesses in intelligence analysis. Many of these same problems still afflict U.S. intelligence agencies today.

he empirical record of U.S. intelligence assessments leading up to the crisis is rich. We now know that between January and October 1962, when Soviet nuclear missile sites were ultimately discovered, the cias estimates office produced four National Intelligence Estimates (nies) and Special National Intelligence Estimates (snies) about Castros communist regime, its relationship with the Soviet Bloc, its activities in spreading communism throughout Latin America, and potential threats to the United States. These were not just any intelligence reports. nies and snies were and still are the gold standard of intelligence products, the most authoritative, pooled judgments of intelligence professionals from agencies across the U.S. government. Sherman Kent, the legendary godfather of cia analysis who ran the cias estimates office at the time, described the process as an estimating machine, where intelligence units in the State Department, military services, and cia would research and write initial materials; a special cia estimates staff would write a draft report; an interagency committee would conduct a painstaking review; and a full-dress version of the estimate would go down an assembly line of eight or more stations before being approved for dissemination.1 The four pre-crisis estimates of 1962 reveal that U.S. intelligence officials were gravely worried about the political fallout of a hostile communist regime so close to American shores and the possibility of communist dominoes in Latin America. But they were not especially worried about risk of a military threat from Cuba or its Soviet patron. The first estimate, released January 17, 1962 (snie 8062), was a big-think piece that assessed threats to the United States from the Caribbean region over the next 20 years. Although the estimate considered it very likely that communism across the region would grow in size during the coming decade, it concluded that
1. Sherman Kent, The Cuban Missile Crisis: A Crucial Estimate Relived, originally published in Studies in Intelligence (Central Intelligence Agency, Spring 1964).

The pre-crisis estimates of 1962


Policy Review

The Cuban Missile Crisis as Intelligence Failure

the establishment of . . . Soviet bases is unlikely for some time to come because their military and psychological value, in Soviet eyes, would probably not be great enough to override the risks involved (emphasis mine). The time horizon is important, suggesting confidence that Khrushchev would be unwilling to risk establishing a Cuban base for at least several years. Indeed, the estimate later noted that its judgment about Soviet bases might not extend over the entire period under review. Considering that the review period stretched 20 years into the future, this is quite a statement; the intelligence communitys long-term estimate anticipated no short- or even medium-term crisis brewing. The second estimate was issued March 21, 1962 (nie 8562), and had a narrower time horizon and scope: analyzing the situation in Cuba and the relationships of the The pre-crisis Castro regime with both the Soviet Bloc and Latin intelligence American Republics over the coming year. Again, the estimate discounts heavily the possibility that estimates of 1962 the Soviet Union would defend Cuba or establish show the U.S. offensive military capabilities there. The estimate notes that despite Castros vigorous efforts to secure wasnt especially a security guarantee, the Soviet Bloc has avoided worried about any explicit military commitment to defend Cuba. Later, the assessment uses much stronger estimative the military threat language, stating that, the ussr would almost cerfrom Cuba. tainly not intervene directly with its own forces were Castros regime overthrown by internal or external forces and that although the Soviets would respond to an overthrow with strong political action, the ussr would almost certainly never intend to hazard its own safety for the sake of Cuba (all emphases mine). These terms are not just thrown around. Carefully chosen and reviewed in the estimates process, they are meant to convey a high degree of certainty. In fact, Khrushchev made the decision to deploy nuclear missiles to Cuba about ten weeks later, between May and June of 1962. Massive numbers of Soviet troops were roaming about the island by fall (although total numbers were not known for the next 25 years), and nuclear missiles began arriving in early September. The third estimate was disseminated on August 1, 1962 (nie 85262), just a couple of weeks after intelligence began indicating a major Soviet arms buildup in Cuba. Although the estimate notes that Soviet bloc military advisors and instructors were believed to be in Cuba, along with Bloc-supplied arms and equipment, the estimate once again notes that the Soviet Union has avoided any formal commitment to protect and defend the regime in all contingencies. The assessment further states, We believe it unlikely that the Bloc will provide Cuba with the capability to undertake major independent military operations or that the Bloc will station in Cuba Bloc combat units of any description, at least for the period of this estimate.
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The fourth and crucial estimate before the crisis was released September 19, 1962 (snie 85362). This time, however, the situation was vastly changed: Starting in mid-July, a stream of intelligence reporting from both technical and human sources began indicating a massive arms buildup. This reporting increased dramatically in August and September, and the estimates heading reflected these developments. Whereas the March and August estimates were blandly titled, The Situation and Prospects in Cuba, the Special National Intelligence Estimate of September 19th carried a more ominous title: The Military Buildup in Cuba. The estimate notes that between mid-July and early September, approximately 70 ships had delivered Soviet weaponry and construction equipment. That number was three to four times greater than total Soviet shipments for the entire first half of 1962. Indeed, so concerned was President Kennedy by the new intelligence that he made explicit public warnings on September 4th and again on September 13th that if the Soviets placed offensive weapons in Cuba, the gravest issues would arise, a warning understood to imply potential nuclear confrontation. Nevertheless, this crucial intelligence estimate still concluded that Soviet policy remains fundamentally unaltered. For the fourth time in nine months, a national intelligence estimate asserted that Soviet activities in Cuba were meant to deter an American attack there and sustain a vital ideological victory for the communist cause. Engrossed by the political threat of a strengthened communist regime in the Western hemisphere, the estimate considered but ultimately dismissed the possibility of a major offensive Soviet base. The establishment on Cuban soil of Soviet nuclear striking forces which could be used against the U.S. would be incompatible with Soviet policy as we presently estimate it, the estimate starkly concluded. The estimate justified this judgment at some length, noting that the Soviets had never placed any such weapons even in Soviet satellite countries before,2 that missiles would pose significant command and control problems, that they would require a conspicuously larger number of Soviet personnel in Cuba, and that the Soviets would almost certainly know that such a move would provoke a dangerous U.S. reaction. Two years later, Sherman Kent categorically concluded that the September
2. We know now that the Soviets had, in fact, deployed nuclear missiles to East Germany briefly in 1959 and that some U.S. intelligence officials suspected as much before the Cuban missile crisis broke. A January 4, 1961, memo from Hugh S. Cumming to the secretary of state, Deployment of Soviet Medium Range Missiles in East Germany, notes that a special intelligence working group has recently prepared a report which concluded that as many as 200 mrbms [medium range ballistic missiles] may have been moved into East Germany between 1958 and the fall of 1960. Yet this working group and its judgments never made it into the September 19, 1962, Cuba Special National Intelligence Estimate. Nor did the possibility of a precedent-setting Soviet nuclear missile deployment to a satellite country appear to reach the president. In the October 22, 1962, ExComm meeting, President Kennedy told his colleagues that no Soviet Eastern European satellite had nuclear weapons and that this would be the first time the Soviet Union had moved these weapons outside their own territory. Why the East German special intelligence report seems to have been unknown or disregarded by the estimating machine and its policymaking customers remains unclear.


Policy Review

The Cuban Missile Crisis as Intelligence Failure

19th estimates judgments about Soviet intentions turned out to be wrong; Khrushchev had zig[ged] violently out of the track of normal, and U.S. intelligence agencies had missed it. More recently declassified Soviet archives reveal that the intelligence communitys mistakes were not confined to misjudging Khrushchevs intentions. They also included erroneous conclusions about what Kent terms indisputable facts. For example, the estimate confidently asserts that Soviet military personnel increased from 350 to 4,000 during 1962, and that conspicuously larger numbers of Soviet personnel would have to be present to indicate a potential nuclear missile site. It turns out that conspicuously larger numbers of Soviet military forces actually were in Cuba at the time we just didnt know it. Soviet forces numbered 41,900, a figure ten times higher than the September estimate. cia estimators assumed this key indicator of a Soviet strategic missile base would be easy to see. Indeed, it would be conspicuous. Instead, U.S. intelligence officials were unaware of the full size of the Soviet troop deployment for the next 25 years.

The intelligence success narrative

or decades, scholars and practitioners have been reluctant to call the pre-crisis intelligence estimates of 1962 a strategic warning failure. Instead, the intelligence narrative of the Cuban missile crisis has taken two contradictory forms. One argues that intelligence warning succeeded, the other admits that no accurate warning was possible and that U.S. intelligence estimators did the best that anyone could. The first success narrative conflates causes and outcomes. Because the crisis ended without nuclear confrontation and gave Khrushchev a major political defeat, there is a natural tendency to conclude that the U.S. intelligence warning worked well. As James Blight and David Welch note, American intelligence did positively identify Soviet missiles prior to their becoming operational, which permitted the Kennedy administration to seize the initiative in attempting to secure their removal.3 Raymond Garthoff echoes these sentiments, writing, Intelligence did do its job.4 Yet two arguments suggest otherwise. First, although it is clear that U.S. intelligence officials discovered Soviet missiles in Cuba days before they became operational, it is equally clear that they utterly failed to anticipate the presence of Soviet missiles in Cuba every day before then. As Cynthia Grabo notes in her classic work Anticipating Surprise: Analysis for Strategic
3. James G. Blight and David A. Welch, What Can Intelligence Tell Us about the Cuban Missile Crisis, and What can the Cuban Missile Crisis Tell Us about Intelligence? Intelligence and National Security 13:3 (1998).

4. Raymond L. Garthoff, U.S. Intelligence in the Cuban Missile Crisis, Intelligence and National Security 13:3 (1998).

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Warning, the essence of warning is not presenting a list of iron-clad facts but anticipating and preventing the looming and murky danger of strategic surprise. To be sure, for most of 1962, there were no nuclear missiles in Cuba to be found.5 Still, none of the intelligence estimates sounded the alarm to be on the lookout for such a possibility; indicated specifically what factors, other than large numbers of troops, might conceivably change the assessment of Khrushchevs intentions; or urged policymakers to take seriously the idea that the Soviets could be up to something more. Quite the contrary. All four of the estimates had a distinctly reassuring quality to them, highlighting inferences and evidence in ways that suggested policymakers need not worry about a Soviet offensive base in Cuba. Rather than inoculating the Kennedy administration against the horrors of a possible Soviet missile surprise in Cuba, the estimates made the surprise all the more sudden, shocking, and total. Second, the contingency of history also cautions against finding intelligence warning success in chancy, happy outcomes. In the case of the Cuban missile crisis, each passing decade brings new and frightening evidence of how Kennedys seizing the initiative after seeing those u2 photographs of missile sites nearly led to nuclear disaster, not American victory. Transcripts of Kennedys secret Excomm meetings reveal that had the president made his decision on the first day of the crisis rather than the seventh, the United States would have launched an air strike against Soviet missiles in Cuba that could very well have triggered thermonuclear war. Scott Sagan has chronicled numerous instances during the crisis where mistakes (an American u2 pilot who accidentally flew into Soviet airspace, bringing with him American f102-a interceptors armed with Falcon nuclear air-to-air missiles) or routine military procedures (including a previously scheduled test tape of a Soviet missile attack that ran during the crisis and was mistakenly identified as a real incoming strike) nearly spiraled out of control. In 2002, scholars unearthed terrifying new evidence that one Soviet submarine captain actually did order preparations to launch a nuclear-tipped torpedo off the American coast. On October 27, bombarded by U.S. Navy depth charges and running out of air, the Soviet Captain gave the order to prepare a nuclear weapon for firing. Were going to blast them now! We will die, but we will sink them all. We will not disgrace our navy, the Soviet intelligence report quotes the Soviet captain as saying. But in the heat of the moment, another submarine officer, Vasili Arkhipov, convinced him to await further instructions from Moscow.6 In short, the mounting evidence of narrow misses during the crisis suggests that luck played a pivotal role, and that the outcome could easily have been tragic. One wonders whether observers would
5. Nor did Khrushchev give any indications that something was afoot. The Soviets mounted a substantial denial and deception program to keep the deployment secret.

6. Marion Lloyd, Soviets Close to Using A-Bomb in 1962 Crisis, Forum Is Told, Boston Globe (October 13, 2002).


Policy Review

The Cuban Missile Crisis as Intelligence Failure

feel quite the same about the performance of U.S. intelligence agencies had Soviet ss-4 nuclear missiles landed in South Florida. The second variant of the success narrative maintains that U.S. intelligence estimators may have been wrong, but they did the best that anyone could. Sherman Kent himself wrote in 1964, By definition, estimating is an excursion out beyond established fact into the unknown. An estimator, he notes, will undoubtedly be wrong from time to time. To recognize this as inevitable, however, does not mean that we estimators are reconciled to our inadequacy; it only means we fully realize that we are engaged in a hazardous occupation. In this particular case, Kent admits to being dead wrong but then claims no one could possibly have predicted Khrushchevs irrational behavior. No estimating process, he concludes, can be expected to divine exactly when the enemy is about to make a dramatically wrong decision. With a few exceptions, examinations of the Cuban missile crisis have picked up this theme. Blaming the adversary for his unpredictable behavior is an odd argument, to say the least. The logic suggests, for example, that U.S. intelligence agencies should also criticize the Chinese for their surprise entry into the Korean War, the Indians and Pakistanis for their unexpected 1998 nuclear tests, and Iranian President Mahmoud Ahmadinejad for his strange letters and on again/off again nuclear saber rattling (cant these people act more predictably?). This argument also contradicts one of the most important maxims of intelligence warning: Good warning analysis does not discount anomalies, it targets them. Grabos primer, which has been required reading for warning analysts for years, notes, While not all anomalies lead to crises all crises are made up of anomalies. By this measure, the Cuban missile crisis seems a textbook case of anomaly leading to crisis. The Soviets had never taken such risks before. Nor had they ever provided such an extraordinary level of military aid to Cuba. But starting in the spring of 1962, ships were sailing, and by summer, crates of weapons lots of them were being unloaded. Something different was definitely afoot, and U.S. intelligence officials knew it. Yet their estimates confronted these anomalies and declared them more of the same.

The benefits of calling a failure a failure

alling something a success or failure is not simply an exercise in semantics. The categorization itself directs researchers to examine different questions, mount different arguments, or as Allison put it so many years ago, fish in different conceptual ponds. In this case, viewing the Cuban missile crisis as an intelligence warning failure naturally shifts the explanatory lens from showing why warning was so hard to identifying what went so wrong. Doing so reveals significant research gaps. Seeking to explain why warnOctober & November 2012 29

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ing was so hard, intelligence research on the crisis has focused primarily on cognitive psychology and the pitfalls inherent in human cognition. Organizational explanations, by contrast, have remained an under-tilled area. While much has been made of bureaucratic politics in presidential decision-making, little has been done to examine the silent but deadly role of organizational weaknesses in intelligence during the Cuban missile crisis. But more recent analyses of the September 11 terrorist attacks and the faulty estimates of Iraqs weapons of mass destruction suggest that organizational weaknesses in intelligence can have devastating effects. And regarding the Cuban missile crisis, there are lingering questions surrounding such weaknesses. Why did estimators miss the signals of Khrushchevs true intentions? Rarely do we Signals and noise have been a major part of every examine the intelligence post-mortem since Pearl Harbor. Roberta Wohlstetter, who coined the terms, silent observed that intelligence warning requires analysts organizational to separate signals, or clues that point to an adverstructures and sarys future action, from a background that is filled with noise, or intelligence indicators that turn out processes that to be irrelevant, confusing, or just plain wrong. After determine the fact, of course, the signals are obvious. Like the whether signals detective-story reader who turns to the last page first, Wohlstetter writes, we find it easy to pick get noticed or out the clues.7 Detecting the right signals before disaster strikes, however, is another matter. ignored. Wohlstetters important insight warns against the perils of hindsight bias. But it has also generated analytic pathologies of its own, focusing our sites more on the ratio of signals to noise and the analytic techniques to improve individual perception than the organizational forces that cause signals to get noticed or missed. Each time an intelligence surprise occurs, commissions, congressional committees, and scholars are quick to ask, How many signals were there? How much noise existed? What analytic mistakes were made? The answer is always the same: too few signals, too much noise, too many erroneous assumptions or inferences. Rarely, however, do we examine the silent organizational structures and processes that determine whether signals get noticed or ignored, amplified or dispersed. We have missed the crucial role of organizations. A brief comparison of the Cuban missile crisis and the September 11 terrorist attacks illustrates the point. Immediately after the Cuban missile crisis, the steady refrain was that intelligence noise was tremendous while signals were scarce. cia Director John McCone wrote that his agency received
7. Roberta Wohlstetter, Cuba and Pearl Harbor: Hindsight and Foresight, Foreign Affairs 43 (196465).


Policy Review

The Cuban Missile Crisis as Intelligence Failure

3,500 human intelligence reports from agents and Cuban refugees (who were debriefed at a special cia center in Opa Locka, Florida) claiming to spot Soviet missiles on the island before the crisis. Nearly all were wildly off the mark. According to the Presidents Foreign Intelligence Advisory Board, just 35 of these reports turned out to be signals indicating the actual Soviet deployment. McCone finds even fewer, writing, only eight in retrospect were considered as reasonably valid indicators of the deployment of offensive missiles to Cuba.8 And Sherman Kent, who was responsible for the pre-crisis estimates, contends that at most, only three of these signals should have stopped the clock. McCone, Kent, Wohlstetter, Garthoff, and others argue forcefully that these were terrible odds for detecting signals of Khrushchevs nuclear gambit. But were they really? The crucial Looking back, the numbers actually look pretty darn good. Intelligence officials working in the weeks and warning problem months before the September 11 terrorist attacks isnt the number would gladly have traded signals-to-noise ratios with their Cuban missile crisis counterparts. In 1962, of signals but the there were just 5,000 computers worldwide, no fax organizational machines, and no cell phones. By 2001, the National deficiencies that Security Agency was intercepting about 200 million e-mails, cell phone calls, and other signals a day. ensure such Although processing technology had improved drasignals get lost. matically, it was nowhere near enough. The collection backlogs at nsa alone were so enormous that less than 1 percent of the intake was ever decoded or processed. Against this astounding noise level, signal detection remained about the same as it was in 1962. I found that in the two years before 9/11, U.S. intelligence officials picked up a grand total of 23 signals that al-Qaeda was planning a major attack on the U.S. homeland. As the comparison suggests, quantifying signals and noise tells part of the warning story, but not the most important part. In both cases, the crucial warning problem was not the precise number of signals; whether there were three or 30 or even 300 signals made little difference in the end. Instead, the crucial problem had to do with organizational deficiencies that ensured every signal, once detected, would eventually get lost in the bureaucracy. Chief among these organizational deficiencies was structural fragmentation jurisdictional divisions within and across intelligence agencies that dispersed and isolated signals in different places. Seven weeks before 9/11, for example, three of the fbis 56 U.S. field offices independently uncovered what turned out to be three key signals. In Phoenix, Special Agent Kenneth Williams identified a pattern of jihadists
8. John McCone, Memorandum for the President (February 28, 1963). Reprinted in Mary S. McAuliffe, ed., cia Documents on the Cuban Missile Crisis (cia History Staff, October 1992).

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Amy B. Zegart
attending U.S. flight schools and wrote a memo urging that flight schools be contacted, specific individuals be investigated, and other intelligence agencies, including the cia, be notified. In Minneapolis, fbi agents arrested Zacarias Moussaoui, a suspicious extremist who wanted to fly 747s and paid $6,000 in cash to use a flight simulator but lacked all of the usual credentials. He became the only person convicted in the U.S. for his connection to the attacks. Third and finally, the fbis New York field office began searching for Khalid al-Mihdhar and Nawaf al-Hazmi, two suspected alQaeda operatives who ultimately hijacked and crashed American Airlines Flight 77 into the Pentagon. Yet because the fbi field office structure was highly decentralized, none of the agents working these cases knew about the others. And because a gaping divide separated domestic It is the case and foreign intelligence agencies, the cia and the that in 1962 , rest of the U.S. intelligence community never seized just as in 2001 , these or other fbi leads in time, either. Instead, the Phoenix memo gathered dust, alerting no one. the Central Moussaouis belongings (which included additional leads to the 9/11 plot) sat unopened for weeks as Intelligence Minneapolis agents tried to obtain a search warrant Agency was unaware of the Phoenix memo or the existence of another terrorist in fbi custody who could have central in identified Moussaoui from al-Qaedas training name only. camps. An fbi agent went searching blindly for alMihdhar and al-Hazmi in New York hotels, unaware that the Bureaus San Diego field office had an informant who knew both terrorists. In these cases, and 20 others, someone somewhere in the intelligence bureaucracy noticed something important. These and other signals were not drowned out by the noise. They were found, and then subsequently lost in the bowels of the bureaucracy. Even a cursory look at the Cuban missile crisis suggests that structural fragmentation appears to have played a similar role then, isolating and weakening signals rather than concentrating and amplifying them. In 1962, just as in 2001, the Central Intelligence Agency was central in name only. Created just fifteen years earlier, the cia had been hobbled from birth by existing intelligence agencies in the State, Justice, War, and Navy Departments, all of which vigorously protected their own missions, budgets, and power. The cia, in fact, did not control the intelligence budgets or activities of the Defense Intelligence Agency, the National Security Agency, or any of the military intelligence services, all of which reported to the secretary of defense. Whats more, the Bay of Pigs debacle of April 1961 made a weak cia even weaker. Kennedys own distrust was so great that he sacked cia Director Allen W. Dulles and replaced him with a man none of his inner circle trusted: John McCone, a Republican businessman with staunch anticommunist leanings and no professional intelligence experience.
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This structure meant that intelligence reporting and analysis of the Cuban situation was handled by half a dozen different agencies with different missions, specialties, incentives, levels of security clearances, access to information, interpretations of the findings, and no common boss to knock bureaucratic heads together short of the president. The Defense Intelligence Agency photographed deck cargoes of Soviet ships en route from the Soviet Union. The Navy conducted air reconnaissance of ships entering and leaving Cuba. The cia ran human agents in Cuba, but jointly operated a special Cuban refugee debriefing center in Florida with the military. The State Department handled diplomatic dispatches. The National Security Agency intercepted communications indicating Soviet ship movements, radio transmissions in Cuba, and other signals intelligence. At first the cia, and then the Strategic Air Command, manned u2 Intelligence reconnaissance flights over Cuba. Estimates, finally, reporting and were technically produced by the cias Office of analysis of the National Estimates but coordinated and approved by an interagency group called the U.S. Intelligence Cuban situation Board. In short, in 1962, as in 2001, there were was handled by many bureaucratic players and no one firmly in charge of them all. half a dozen Although a more thorough organizational analydifferent sis of how every signal was processed through the bureaucracy lies beyond the scope of this essay, iniagencies. tial evidence does suggest that organizational fragmentation existed, and that it had the effect of delaying action and hindering signal consolidation. For example, retrospective examinations by both the cia and the Presidents Foreign Intelligence Advisory Board (pfiab) found that there was rigid compartmentation between aerial imagery collectors and cia analysts and that this structural divide kept the cia from disseminating reports and information about the possibility of offensive Soviet weapons in Cuba before the October 14th discovery of missile installations. The pfiab report on the crisis, which was completed in February 1963, finds that before October 14, cia analysts did not publish any information indicating a potential offensive buildup in Cuba in the presidents daily intelligence checklist, the most important current intelligence product. The reason: The agencys rules required that any report that could be verified by photographic evidence first had to be sent to the National Photographic Interpretation Center (npic), a separate cia unit located in the Directorate of Science and Technology. For cia analysts housed inside the agencys Directorate of Intelligence, this was the bureaucratic equivalent of Lower Slobovia. Whats more, there was no systematic process to inform analysts about the status of their aerial verification requests to npic, so requests could languish or simply disappear without any further action. Without any idea whether further action would ever be taken, analysts simply withheld information from their written products. The pfiab found that analysts misOctober & November 2012 33

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takenly interpreted the verification rule as an outright ban on publishing all reports of offensive Soviet weapons without definitive photographic proof. This same rigid bureaucratic division between analysis and photographic collection created a filter that appears to have hindered initial signal detection as well. According to the pfiab chronology, a September 9th report from Castros personal pilot claimed that there were many mobile ramps for intermediate range rockets, an item subsequently deemed significant. At the time, however, it was given only routine precedence because the cia analyst who saw it was charged with identifying information relevant for aerial surveillance, and thought the information was too general to be of targeting use. In short, preliminary evidence suggests that the same organizational barriers operating on 9/11 were Preliminary also at work during the missile crisis. Indeed, given evidence suggests the long and sordid history of intelligence coordination problems, it seems unlikely that Cuban intellithat the same gence reporting constituted a shining exception organizational where intelligence warning signals were collected, barriers operating assessed, and disseminated by a well-oiled coordination machine. Instead, in both cases, bureaucratic on 9/11 were jurisdictions and standard operating procedures also at work ended up creating invisible fault lines within and across intelligence agencies that kept signals from during the converging. Structural fragmentation made it likely missile crisis. that signals would get lost, even after they had been found. Why were all four of the pre-crisis estimates so consistent, even in the face of alarming new evidence of a Soviet military buildup? The four pre-crisis intelligence estimates of 1962 raise a second perplexing question: Why were these formal intelligence products so consistent even when intelligence reporting showed a dramatic uptick in Soviet military deployments to Cuba? Or more precisely, why did that final September 19th special estimate draw old conclusions about Khrushchevs intentions despite new evidence that the Soviets were sending weapons and personnel in unprecedented numbers at unprecedented rates in August and September? Recall that the estimate clearly indicated conditions on the ground had changed since the previous estimate, which was published on August 1, 1962. The September 19th estimate begins by defining its task as assessing the strategic and political significance of the recent military buildup in Cuba and the possible future development of additional military capabilities there. And it devotes substantial attention to discussing the precise nature of the buildup, declaring as fact that In July the Soviets began a rapid effort to strengthen Cuban defenses against air attack and major seaborne invasion. Notably, there are few estimative caveats in this section such as we judge, or we assess, or it is likely. Instead, the estimate states as a point
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of fact three developments: That the bulk of the material delivered to Cuba is related to the installation of twelve sa-2 surface-to-air missile sites on the Western part of the island; new shipments also include tanks, selfpropelled guns, other ground force equipment, and eight Komar class guided missile patrol boats to augment Cuban defenses; and a substantial increase in the number of Soviet military personnel from about 350 early this year to the current level of about 4,000. The estimate is more speculative and less certain about other aspects of the buildup: when existing sam sites would be operational, the possible installation of additional surface-toair missile sites on the eastern half of the island, the number of mig-21 interceptors deployed, future deliveries and missile capabilities of Komar class patrol boats, and the identification of recent crates, large boxes, and vans, which were believed to conWhy were all tain electronics and communications gear. Although the estimate notes that mig fighters could be used four pre-crisis for offensive purposes, it concludes, Nevertheless, estimates so the pattern of Soviet military aid to date appears clearly designed to strengthen the defense of the consistent in the island. face of evidence Other than the mig discussion, the estimate conof a Soviet fines its assessment of possible offensive weapons including a submarine or strategic missile base to military buildup. a different section titled Possibilities for expansion of the Soviet buildup. This report structure had the effect of sharply distinguishing present intelligence reporting about the military buildup from speculation about future possibilities. According to the estimate, intelligence about the buildup clearly showed the Soviets adopting a defensive posture, just as earlier assessments had concluded. The estimate does ponder the future, noting, The ussr could derive considerable military advantage from the establishment of Soviet medium and intermediate range ballistic missiles in Cuba, or from the establishment of a Soviet submarine base there. However, it concludes that Either development . . . would be incompatible with Soviet practice to date and with Soviet policy as we presently estimate it. In other words, earlier judgments about Soviet objectives and intentions still held. In the immediate aftermath of the crisis, Kent took a great deal of criticism for the September 19th estimate. Nearly all of it centered on analytic misjudgments, particularly mirror imaging or the tendency for analysts to believe an adversary will behave as they would. And as noted above, more recent scholarly work also focuses on problems of perception and cognition. According to this work, American estimators failed to see the world or weigh the costs and benefits of the missile deployment through Soviet eyes. But mirror imaging was not the only problem hindering the estimates process. Organizational pressures were also driving strongly toward conformity and consistency across the four Cuba estimates. These reports were
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not the product of a single mind, a single view, or even a single agency. They were collective reports that required interagency coordination and consensus. And that organizational fact of life tilted the whole estimating machine toward consistency over time. Why? Because consistency was what policymaking customers expected to find. Presidential advisors did not need to be convinced that the world essentially looked the same today as it did last month. But they did need to be convinced that the world looked different. Where consistency was a given, inconsistency had to be explained, justified, and defended. Changing a previous estimate required taking a fresh look, marshaling both new and old facts, and laying out what had shifted, and why. That, in turn, meant overcoming immense bureaucratic inertia convincing every intelligence agency involved in the estimating process that what Changing a it said or assessed or wrote or agreed to the last previous estimate time should be discarded or modified this time. required taking Changing an earlier estimate did not just take more work inside each agency. It took more work negotia fresh look, ating new agreement across them. Generating intermarshaling both agency consensus on a new estimate that said we have changed our collective minds was invariably new and old harder than producing a report that said once facts, and laying again, we agree with what we wrote last time. In short, organizational dynamics naturally gave conout what had sistency the upper hand. shifted and why. Political considerations exacerbated these problems. By political considerations, I do not mean to suggest that estimators bent their judgments to curry favor or told policymakers what they wanted to hear. Instead, my point is that switching course on an analytic judgment is always harder when the political stakes for the country and the administration are known to be high. In these situations, any new estimate that revises earlier judgments can be seized, however unjustifiably, as proof that earlier estimates were wrong. The political atmosphere surrounding the Cuba estimates was intense. The Cold War stakes had never been greater and the cia had already caused Kennedy a devastating defeat in the Bay of Pigs invasion just eighteen months earlier. Now, with midterm congressional elections just weeks away, the pressure to get Cuba right was tremendous. In this environment, an intelligence estimate that gave serious consideration to a new, more ominous reading of the Soviet buildup would almost certainly have been read as an indictment of earlier, less alarming estimates. And it would have contradicted earlier public assurances by the president himself, as well as his closest advisors, that the Soviet buildup was purely defensive in nature. Such considerations may not have been in the foreground of the estimates process, but it is hard to imagine that they were not in the background. At that precise moment, on that particular topic, consistency was a safe and prudent
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The Cuban Missile Crisis as Intelligence Failure

course while inconsistency carried substantial risks, both for the intelligence community and the president. Why didnt anyone offer dissenting views in the intelligence estimates? The above discussion helps illuminate why the estimates were consistent even when confronting dramatically new facts. It does not, however, explain why the estimates failed to contain any dissenting views. As noted earlier, footnotes were used to provide dissenting opinions in estimates of other subjects written during the same period. Why, then, were they not used in the pre-crisis estimates of 1962, particularly the September 19th assessment? The usual explanation is that no strong dissenting opinions existed. As Wohlstetter writes, let us remember that the intelligence community was not alone. It had plenty of support from Soviet experts, inside and outside the Government. At any Why didnt the rate, no articulate expert now claims the role of Cassandra. But there was at least one: cia Director estimates contain John McCone, who suspected Soviet missiles from dissenting views, the start. McCone was a paranoid anticommunist who always seemed to find signs of aggressive Soviet and where were behavior, and was often wrong. This time, however, the dissenting his hunch proved correct. footnotes in the McCone was no wallflower. In fact, the historical record shows that he forcefully advocated his 1962 estimates? hypothesis about Soviet missiles with senior Kennedy advisors on several occasions, starting in August 1962. And after sam sites were discovered, he sent a series of cables to Washington from his European honeymoon, again strenuously asserting his hypothesis (the sam sites, he believed, had to be guarding something important) and requesting additional reconnaissance. The cia director was not afraid to make his case or make it often. The question, then, is why he never did so in the national intelligence estimates. Some argue that McCone refrained from foisting his opinions or judgments on the estimates process, and conclude that this was a good thing. dci McCone deserves credit for allowing snie 85362 to contain conclusions that clearly contradicted his views, writes James Wirtz. If McCone had interfered in the snie in a heavy-handed way . . . analysts would have objected to what inevitably would have been viewed as politicization of their estimate.9 Organization theory, however, suggests a very different possibility: that the estimating machine may have been working so smoothly, it failed utterly. The key idea is a phenomenon called structural secrecy. Briefly put, the notion is that all organizations specialize to increase efficiency, and specialization turns out to be a double-edged sword. On the one hand, dividing
9. James J. Wirtz, Organizing for Crisis Intelligence: Lessons from the Cuban Missile Crisis, Intelligence and National Security 13:3 (1998).

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Amy B. Zegart
labor into subunits enables experts to tackle specialized tasks in specialized ways. On the other hand, however, specialization generates organizational structures and standard operating procedures that filter out information and keep an organization from learning. Standard ways of writing reports, assembly line production processes, and rigid communication channels all of these things help managers work across sub-units efficiently. But they also keep ideas that do not fit into the normal formats and channels from getting heard. Reports, for example, are written in certain ways, with certain types of information, for certain purposes, and certain audiences. This setup is designed to create a standard product precisely by weeding out nonstandard ideas and approaches. Organizations are filled with these kinds of standard formats and operating procedures. The trouble is that the more that things get done the same way Fifty years each time, the harder it is to do things differently. after the Cuban The entire system becomes a well-oiled machine that, by its very existence, keeps alternative ideas or missile crisis, ways of operating from getting through. intelligence Information that could be valuable to the organization remains hidden. Organizational structure crewarning is still ates its own kind of secrecy. plagued by many The estimates process in the Cuban missile crisis seemed ripe for structural secrecy problems. It was of the same highly specialized, with multiple units, offices, and challenges. agencies collecting and analyzing different pieces of the Cuba intelligence puzzle. It was also highly routinized. Kent himself describes the estimates process as a machine, with specific stations, regularized processes, and an assembly line production. The process was well-honed, and the product was highly standardized. Notably, one of the key features of the estimating machine was its evidentiary standard for revising earlier estimates or voicing dissenting views. Kent writes extensively about what it would have taken to revise the September 19th estimate or offer a dramatically different, stronger view of the buildup and concludes that the evidence was simply not there. These pre-October 14 data almost certainly would not, indeed should not, have caused the kind of shift of language in the key paragraphs that would have sounded the tocsin, he writes. The same was true of footnotes, which were ordinarily used for airing disagreements about evidence. In other words, the estimating process was all about data: collecting it, interpreting it, distilling it, and assessing what it meant. The machine started with evidence and ended with judgments. The cia directors approach never fit into this standard operating procedure. Indeed, McCone had it backwards. He did not have evidence in search of a judgment. He had a hypothesis in search of evidence. And there was no place in the National Intelligence Estimates or Special National Intelligence Estimates for such things. No wonder McCone never tried to inject himself into those reports. Instead, he
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worked within the estimating machine, requesting additional photographic reconnaissance to get the proof he needed. And while he waited for the estimating gears to grind, he made his case in meeting after meeting, cable after cable to Kennedy and his top advisors. Structural secrecy led the estimating machine to run smoothly into failure.

Lessons for today

ifty years after the Cuban missile crisis, intelligence warning is still plagued by many of the same challenges. Evidence misleads. Enemies deceive. Analysts misjudge. Failures result. The September 11 attacks and the faulty estimates of Iraqs weapons of mass destruction are potent reminders that intelligence warning remains, as Kent put it 48 years ago, a hazardous occupation. And yet, some of the most powerful barriers to effective intelligence warning remain relatively unexplored. Intelligence, at its core, is a collective enterprise. Organizations are not passive players, where individuals do all of the hard thinking and make all of the tough calls. Instead, organizations powerfully influence whether signals get amplified or weakened, whether analysis looks backward at continuity or leans forward toward disjuncture, and whether dissent gets highlighted or hidden.

October & November 2012


Rich Donors, Poor Countries

By M.A. Thomas

he shifting ideological winds of foreign aid donors have driven their policy towards governments in poor countries. Donors supported state-led development policies in poor countries from the 1940s to the 1970s; market and private-sector driven reforms during the 1980s and 1990s; and returned their attention to the state with an emphasis on governance and government social spending thereafter. Poor countries sometimes called low-income economies or least-developed countries have over the decades been a proxy battleground for the Western left and the right, with heated debates about the merits of infant industry protection, privatization of public utilities, government-provided health care, and the role of government more generally. Both liberals and conservatives in the West have more in common than they realize, however. Their policy preferences have evolved in the richest countries in the world, with well-financed governments that carry out an
M.A. Thomas is an associate professor of international development at the Paul H. Nitze School of Advanced International Studies at the Johns Hopkins University.
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ever-growing number of functions under the rule of law. Much of their sense of what is minimally acceptable in government is a relatively recent product of wealth. Yet they do not hesitate to apply their home-grown standards to governments in poor countries. While it may seem obvious that the governments of poor countries are themselves poor, donors have largely failed to appreciate the enormity of the gap between the revenues of poor country governments and of their own governments. They have taken for granted the government-provided prerequisites that make their favorite policies work at home. When their policy prescriptions fail in poor countries, donors blame the failure on corruption and weak political will for implementation. But even with clean government and the best will, many of their policy prescriptions are unlikely to succeed. The poorest countries do not have the resources to build weaker versions of Western governments. Their attempt to do so spreads government too thin, making it impossible for the government to deliver on its commitments and making both law and government policy declarations aspirational. Instead, poor countries will have to build sustainable governments commensurate with their resources, which will necessarily be governments of more limited function. Donors shrink before the hard choices, and their reluctance to acknowledge them undermines the quality of government in poor countries and deepens poor country aid dependence.

Development and government

ooks and articles that trace the intellectual history of development tell how development policy has been shaped by ideas of the role of government in richer countries. The story they tell divides development thinking into three eras: an initial era of state-led development; the Washington Consensus era, which focused on government retrenchment and market solutions; and the current era, which has been characterized as post-consensus or no consensus, but in which the pendulum swung back towards a more important role for government. The idea that government had an important role to play in managing the economy, educating the people, providing social safety nets and reducing inequality was well accepted in the United States and other industrialized countries when most poor countries gained independence. The Great Depression and World War II led the United States to adopt Keynesian economic policies, intervene in the economy, and begin to create social safety nets first for returning veterans and then for others. Alternative models available to leaders of newly independent countries were even more statist European and Latin American socialism, or Soviet or Chinese communism. Initially, poor governments attempted to fill an expansive role in leading development. They regulated international trade, currency exchange, and
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domestic markets; established state-owned enterprises; sought to protect and nourish infant industries; and sought to raise revenue for infrastructure construction and the provision of social services, such as education and the delivery of clean water. But by the 1980s, many began to have problems even paying the salaries of their civil servants and extending law and order to their territories. As bankrupt poor governments turned to the World Bank and the International Monetary Fund for loans, conservatives came to power in the United States and Britain. The international financial institutions began pressing for loan recipients to reduce the reach of the state and to adopt reforms, including privatization of state-owned enterprises, liberalization of trade and markets, civil service wage bill freezes, and fiscal discipline or austerity. Market ideologues claimed that those policies would spur growth and lower corruption, but the results were mixed at best in poor countries. The era of the Washington Consensus devolved into finger pointing, with the left accusing the World Bank and the imf of foisting unsound policies on poor countries in crisis, and the right accusing the governments of poor countries of having failed to implement the reforms properly. The current era is sometimes called one of post-consensus, or no consensus, but the pendulum has arguably swung left again. The debt relief initiatives that sought to reduce the debt stock of bankrupt poor countries were conditioned on the implementation of poverty reduction strategies, which tended to focus heavily on government provision of social services. In the United Nations Millennium Declaration governments pledged by 2015 to halve poverty levels, create universal primary education, reduce maternal mortality, reverse major diseases (including hiv/aids and malaria), provide assistance to orphans, improve the lives of slum dwellers, and promote gender equality, among other goals. Implicitly, this assumes a role for government in delivering or accomplishing these objectives. To better enable poor governments to make effective use of aid and to carry out such objectives, donors since the 1990s have focused on improving the quality of poor country governance through technical assistance and donor projects. This historical narrative of left, right, left is oft-told and familiar, and it is not wrong. However, it misses the biggest and most influential change in western ideas about government in the 20th century: the increased expectations of government function, quality of service, and the expansion of human rights norms concomitant with the tremendous growth in the size and functions of government.

October & November 2012

Expanding ideas of government function

hile liberals and conservatives have different preferences regarding the size and role of government, they are like two people sitting in a boat arguing about which way to row as the

M.A. Thomas
boat is carried rapidly downstream. In fact, the 20th century saw an explosive growth in government spending, size, and functions throughout the industrialized world. In 1902 in the United States, for example, total government spending was about 0.8 percent of the gross domestic product, or about $36.7 billion in 2011 dollars. By 2010, total government spending had risen to 35 percent of gdp, or about $5 trillion. This expansion of spending was accompanied by an expansion in the number and the extent of government functions. A few of the new U.S. government activities of the 20th century include the creation of a social safety net through the Social Security Act of 1965 (including the creation of Medicare and Medicaid) and unemployment compensation, federal aid to public education and federal financial A fundamental aid for students, and a host of new regulatory activities and the bureaucracies to carry them out e.g., obstacle to protections against discrimination on the basis of race or gender, labor laws such as those providing development is for workplace safety and restricting child labor, the inability of environmental laws and regulations including the poor-country Clean Air, Water Quality, and Clean Water Restoration Acts and the Endangered Species Act, governments to and market-supporting laws and regulations such as implement the antitrust, securities, and consumer protection laws. In addition to new functions, older functions of govpolicies that ernment grew in extent, complexity, and quality. donors push. Staff-patient ratios dropped in hospitals and student-teacher ratios dropped in schools where computers are increasingly seen as necessary teaching technology. Nor was this expansion of government peculiar to the United States. Increased public sector spending prompted economist Adolph Wagner to propose Wagners Law in 1893. Wagners Law states that there is a long-run tendency for the public sector to grow in relationship to the size of the economy in industrialized countries. Advocates have pressed to expand notions of human rights, with concomitant obligations for governments. The Universal Declaration of Human Rights, drafted shortly after World War II with strong participation from socialist countries, specifies in Article 25 a persons right to food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. Similarly, Article 26 provides that everyone has the right to free and compulsory elementary education and to technical and professional education. While the drafting committee was deliberately ambiguous about the corresponding duty of states to supply these goods, these articles have been used to support an argument of government duty where such a duty has not simply been assumed.
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Rich Donors, Poor Countries

The very wealth of rich countries is used as an argument for the emergence of new rights. In the United States, Jesse Jackson Jr. argued in a 2006 op-ed that government-provided health care of the highest quality is a human right on the grounds that we can afford health care for all our citizens. The Poverty and Race Research Action Council has argued for a right to housing because America has the resources to guarantee it.1 People in rich liberal democracies demand more, receive more, and expect more from government than they ever have before. These expectations have arisen in parallel with increased wealth and increased government revenue that allow governments to deliver new and better services. However, both aid donors and recipients err when they transpose this understanding of government functions derived from rich countries uncritically to poor governments.

he donor community has come to see the inability of poor governments to implement the policies that donors consider to be essential as a fundamental obstacle to development. Donors are focused intently on strengthening and reforming poor governments, by financing projects and providing technical assistance. They condition aid on the creation of new institutions, civil service reform, strengthening of budget and public expenditure systems, training of political parties and election monitoring, promotion of decentralization, and improving public service delivery. As a consequence, the good governance agenda for developing countries grew in importance. In 2010, World Bank lending for the Public Administration, Law, and Justice sector comprised 18 percent of the banks loans. In 2009 in Niger, for example, the United Nations, the World Bank, France, Germany, Japan, Canada, Italy, the United States, Spain, Sweden, Luxembourg, and Norway were funding more than 100 projects aimed at reforming or strengthening governance and civil society. Included were projects focused on promoting childrens rights, promoting womens rights, reforming the juvenile justice system, anticorruption, conflict prevention, promoting the free flow of information, decentralization, and government capacity building. Most donor attention has focused on what is termed the lack of capacity of recipient governments, meaning the lack of trained personnel, equipment, and infrastructure. Donors have attempted to build recipient capacity through training programs, equipment drops, the construction of infrastructure such as schools, hospitals, government buildings, and roads, incentive programs, and direct budget support.
1. Chester Hartman, The Case for a Right to Housing, Housing Policy Debate 9:2 (1998). .

The revenue gap

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Less attention has been given to the political constraints on the achievement of the good governance agenda because they are politically inconvenient. Many poor governments depend critically on the political support of persons who expect private benefits from government, such as government jobs, contracts, or opportunities for income generation through sale of influence or access to government property. While donors presume that the purpose of government is the delivery of public goods and services, this purpose is a distant second priority for those governments whose philosophy is, in the words of one development professional speaking privately, Capture the state, bleed it dry, help your friends, and screw your enemies. This is certainly an important constraint, because it means that there is fundamental disagreement between donors and many aid recipients about the purpose of government. Donors may Donors sometimes blame poor country governoverlook fiscal ments for their lack of political will to implement agreed reforms and projects. But there is an addiconstraints tional and equally important constraint that prebecause there are vents poor governments from implementing the no commonly donors policy agenda, including the governance agenda a constraint that is simultaneously very used metrics for obvious and somehow routinely overlooked. This is comparing the fiscal constraint. The governments of poor countries are themselves very poor too poor to afford government the type of government institutions and services wealth. upon which donors often insist. One reason why donors may be insufficiently focused on the fiscal constraint is that there are no commonly used metrics for cross-country comparisons of government wealth. Government budgets are too large to grasp intuitively. They are in different currencies. And as the countries themselves are not easily comparable, there is no reason to imagine that their governments should have the same budgets. A metric that could give an appreciation for available government resources for the provision of public goods and services might be revenue per capita. It is an admittedly crude measure because the size of the population is not the only factor that could influence the cost of providing government services, which is also influenced by factors such as quality of governance, area, population density, geographic remoteness, or the differing mix of public and private goods offered by different governments. But by looking at best estimates of revenue per capita, one can start to get an appreciation for the enormity of the gap between the resources available to donor and recipient governments. By way of comparison, in 1902 in the United States total government spending at all levels was about $438 per capita in 2011 dollars. In 2010, it was $16,417 per capita. Our data on government revenue is sketchy for poor countries, but drawing on data from the Central Intelligence Agency revenue per capita was about $77 in Niger in 2011, $64
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in the Democratic Republic of Congo, $52 in Afghanistan, and $44 in Burundi. It is easy to see how important aid is to recipient governments, increasing their resource envelope by a hundred percent or more. Using 2010 data on aid from the OECD, Niger had $77 per person per year to spend in revenue, but if aid is included (although in practice, aid is often not controlled by the recipient government) this total is $122. Uganda had about $72 per person; with aid, it rises to $124. Afghanistan, with $52 per person, has $263 per person with aid, reflecting large aid flows to support the government as the war continues. However, even with these increases, the gap between the resources available to poor governments and those available to rich governments is monumental. The U.S. government still has 132 times the amount to spend per person that Uganda has, even counting the aid that Uganda receives.

The unfunded mandate

oth poor governments and donors have expanded the mandate of government far beyond what can be financed with poor country domestic government revenues. The unfunded mandate undermines the quality of governance. Poor governments are adopting policies and institutions that they cannot afford to implement or sustain, often with donor encouragement, if not long-term commitments of support. The process began at independence, when former colonies adopted constitutions and formal government institutions modeled on those of their former colonial powers, and it continues today. In some cases, it is motivated by poor governments desire to provide their citizens with the very best which is taken by definition to be whatever is provided in rich countries without an understanding of or willingness to accept the constraint of poverty. Democratic pressures also play a role. For example, Uganda adopted universal primary education in 1997 as the fulfillment of a popular campaign promise. Primary education was extended more broadly at the expense of quality of education, leading one early observer to comment that he could not reject the null hypothesis that, taking the deterioration of quality into account, the cost of education had not changed at all. While donors provided some support for universal primary education, lack of resources meant that while children would not be turned away for lack of school fees, neither were they guaranteed a teacher, a classroom or a book. The worst of the overcrowding was eased by donor-financed classroom construction, but teacher morale has plummeted and teacher absenteeism rates are among the highest in the world. (As the prescient British parliamentary undersecretary of state for the colonies observed in 1965 regarding African independence, The moment you get fully representative government one man, one vote
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any political party, any government, is going to be under terrific pressure to spread education universally, but very, very thin. And nothing eats money more rapidly than universal free primary education. And yet, you may say, its the inalienable right of every child to have it.2) Uganda went on to adopt universal secondary education in 2007. Donors also contribute to the problem by failing to consider the cost to the recipient government of implementing donor supported and demanded policies, reforms, projects, and programs. And even where donors consider the initial costs to government of implementation, they often fail to consider recurring costs. For more than 30 years aid practitioners and scholars have called attention to the recurrent cost problem in aid, although donor awareness has not often translated into donor action. Donor funds pay for the construction of roads or schools but the future operation, maintenance, and repair costs fall on the aid recipient government. Too often the recipient government is either unwilling or unable to maintain the donor gift, and both donors and recipient governments ignore the liabilities that they are creating for future governments. As recently as 2005, donors issued the Paris Declaration in which they committed to provide support for recurrent costs, but there are few incentives for follow-through. Donors own budget cycles make it difficult for them to make long-term financial commitments, and supporting initial construction results in more visible and tangible outcomes that can be used to demonstrate donor effectiveness to their own domestic constituents. Efforts to convince donors to finance poor government budgets directly have been unsuccessful. While the recurrent cost problem is most obvious in infrastructure, where roads crumble and must be rebuilt after every rainy season, nearly every government policy and reform has implementation and recurrent costs. For example, donors support and demand legal changes, but rarely carry out an analysis of the cost of implementation of the policies for which the laws are vehicles. Antony Allott, a law professor at the University of Londons School of Oriental and African Studies, described in 1968 the failure to consider recurrent costs of legislative reform in the African context:
Whatever else African countries may lack in the way of modern armies, a literate population, an adequate infrastructure, large capital resources, and an experienced cadre of leaders at all levels, there is one thing they all have, which can be as rapidly and cheaply manufactured as paper money and which has the same tempting property of seeming to be available to solve all problems: that is legislative power.3

Allott described phantom legislation: A law is enacted, but the regional

2. Eirene White, Last Steps Towards Independence: The Three African Protectorates, African Affairs 64:257 (1965).

3. Antony Allott, The unification of laws in Africa, American Journal of Comparative Law 16:51 (1968).


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facilities for its application are as weak as are the administrative cadres generally, and nothing of significance happens. Even democracy is expensive, as Ottaway and Chung pointed out more than a decade ago.4 They urged donors to consider the sustainability and recurrent costs of their democratization work, and in particular elections, political party financing, and civil society support. Elections are costly and the cost goes up dramatically in the presence of conflict. The 1994 elections in Mozambique cost $65.5 million and the 1996 elections in Nicaragua cost $45 million; the bulk of these costs were donor-financed. Cambodia spent $24 million on its national elections in 1998, $15 million in 2002 on commune elections, and another $11 million in 2003 on National Assembly elections for a total of $50 million on one election cycle, or in total more than 10 percent of the governments The mismatch budget in 2003.5 More than half of that cost was between poor paid for by donors. governments The enormous mismatch between poor governments resources and their mandates undermines the resources and quality of governance in a number of important their mandates ways. The adoption of laws and policies that cannot be implemented means that rule of law and equality undermines the before the law become impossible. The unfunded quality of mandate increases government discretion as the government necessarily picks and chooses which of its governance. policies or laws to implement, at what time, and for whose benefit. This discretion in turn allows government officials to sell government implementation (or non-implementation) of laws and policies to the highest bidder, fueling corruption. It also makes government accountability impossible. When people are tasked with responsibilities that they could not possibly perform, how can they be blamed when they fail? When a recipient government fails to provide adequate education to those in its public education system, adequate health care to those in the public hospitals, or adequate care for those in prisons and it could not conceivably do so with the resources at hand, who can blame it? How can citizens judge the performance of government as a supplier of public goods and services? Instead, citizens are obliged to judge government by other criteria, such as its ability to deliver private goods and benefits that they can more easily monitor. Lastly, the adoption of policies that cannot be implemented and institutions that cannot be sustained without external funding deepens and continues poor country aid dependence. Even the very functioning of government depends on donors, who are not able to commit to long-term reliable
4. Marina Ottaway and Theresa Chung, Toward a new paradigm, Journal of Democracy 10:4 (1999).

5. See (accessed September 5, 2012).

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streams of funding. The dependence of poor country governments on donor funds gives donors strong leverage, which they in turn often use to press for expanded government obligations in a damaging downward spiral.

Delicate sensibilities

he premise of development is that poor countries economies will grow, and with economic growth comes increased revenue and a wider range of government policy choices. Poverty is not destiny, and there are a number of countries that, since the 1950s, have succeeded both in terms of economic growth and improved governance and graduated from the group of the poorest countries. But this still does not mean that Western governments are the ideal models for poor country governments, like hand-me-down pants into which one day every country will grow. There is no reason to imagine that every country in the world will one day be as rich as the richest countries, and even if so, it will not happen soon. If Burundi enjoyed a very respectable 5 percent growth in gross national income per capita year on year, it could aspire to be Mauritania in about 30 years and Botswana in 70. In the interim, rich countries economies will have been growing too, and doubtless their ideas of rights, entitlements, and government will have expanded further, forever moving the goalposts. While paying them substantial lip service, donors have largely failed to consider the implications for government function of the limited and unreliable revenue streams available to poor country governments. To be sure, there have been calls for greater donor harmonization, so that the ever growing number of aid donors does not collectively overwhelm understaffed poor governments with its projects and demands. And there have also been calls for more thoughtful sequencing and prioritization of the seemingly allencompassing donor governance agenda. But the problem is not just one of harmonization, or of sequencing or prioritization, which suggest that donors should put more thought into the question of how one builds a modern Western government. It is impossible for poor country governments to have modern Western governments with budgets of under $100 per person per year. Instead, sustainable and effective government in poor countries is likely to be very different in kind, with different and less expensive institutions and much more limited functions. Donors and aid recipients need to think about what an effective $100 per person government looks like, and what functions it will serve. The fiscal constraint is not the only constraint that prevents effective government in poor countries, but it is so important that even if there were no other constraints it would be enough to prevent poor governments from effectively carrying out their current mandates. Why then havent donors and recipients grappled with the question of what kind of government poor countries can really afford?
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One reason is that the idea that poor countries cannot afford the same kind and quality of government as rich countries is unpopular with both donors and recipients. Advocates framed education, health care, a pension, representation by a free attorney, a hearing by a judge, a minimal standard of living and care in prison, or government information on demand as human rights in order to raise them in priority over other demands on government resources and capacity. In doing so, they deliberately delegitimized the kind of cost-benefit analysis and balancing that can be used to make decisions about less important entitlements. This approach works as long as the government has enough money to provide these rights-based entitlements but leaves no guidance about how to make hard choices when the government does not have enough money to provide universal education, health, pensions or free legal It is impossible representation. Donors cannot bring themselves to advise poor governments to adopt policies that for poor-country would infringe on the entitlements they have come governments to to see as human rights or to recommend policies have modern that they themselves would not be willing to accept or that their constituents would find unconWestern scionable. And recipients bristle at any implication governments with that their lives or liberties might be worth less than those of people in rich countries, sometimes insisting budgets under on adopting the best policies from the rich coun$100 per person. tries because they know that they are not less deserving. Neither donor nor recipient governments are able to face the terrible choices that poverty requires. The ideal of egalitarianism can be seen to require that every citizen benefit equally from government services. Article 21 of the Universal Declaration of Human Rights states, Everyone has the right of equal access to public service in his country, and this theme is repeated throughout. But egalitarianism that results in the overextension of government can mean that no citizens get adequate services if public services have threshold effects whereby a minimum must be delivered for a recipient to get a benefit. Three days of schooling, ten feet of road, or a dose of antibiotics short of curative do no benefit and the latter is positively harmful. And where a public service is a service in name only, extension should not be the first priority. For example, donors have been pressing for equal citizen access to the formal justice system in poor countries. But in many poor countries, the formal legal system does not serve anyone well, is feared for its corruption, arbitrariness, and use of torture, and barely functions in the capital. Extending coverage more broadly before quality issues are addressed is a dubious benefit and could even have the effect of lowering the quality of justice further as thin resources are spread thinner. But the alternative is to accept that some will lack access to the system, a difficult proposition. Ottaway and Chung, after pointing out the unsustainable cost of some of
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the democratic institutions donors have worked to build or support in developing countries, cautioned:
Our argument is not that [less-developed countries] do not need or cannot afford democracy, any more than our comments about [the sustainability of infrastructure] development projects should be interpreted as a claim that these countries did not need schools or roads . . . Poor countries need democracy, but the democratic institutions and processes they can afford are limited, different from those in the established democracies, and probably less than ideal.6

While they were quick to disavow any claim that some poor countries cannot afford democracy, democratic rights, like any other rights, require money for meaningful implementation, and this means that it is indeed possible to be too poor to be a domestically sustainable democracy. If donors are to be effective they must be able to consider this and similarly awful possibilities in all seriousness, no matter how precious the value and no matter how uncomfortable the consideration. In fact, it seems likely that some of the poorest governments have insufficient resources to mount an effective government of even the most limited scope and functions. In that case, we must ask whether they are self-governing in any meaningful way, whether they can be in the foreseeable future, and what expectations donors and their own citizens should properly have of them.

Government lite

y pressing for broad unfunded mandates for poor governments, donors have helped set those governments up for failure and helped make rule of law and public accountability impossibilities, even as they claimed to be sponsoring interventions to strengthen rule of law and public accountability. Donors need to take poor government fiscal constraints seriously, and this will involve changing how they do business in a number of ways. Donors should ensure that all donor-supported or donor-demanded reforms or proposed interventions be accompanied by publicly available fiscal analyses that spell out the costs to the government (and implicitly, the public), including long-term recurrent costs. Such analyses are a standard part of the legislative and rulemaking process in the United States, but donors fiscal analyses tend not to look beyond the period of anticipated donor involvement. Poor governments lack the capacity to carry out such analyses themselves. Current thinking in development is that donors should not run parallel

6. Ottaway and Chung, Toward a new paradigm.


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programs and agencies that compete with the government for scarce technical staff and risk marginalizing government in the eyes of its own citizens. Instead, poor country governments should run the programs. But unless such programs are accompanied by adequate long-term donor finance, making the government publicly responsible for delivering services and programs that it has no money or capacity to deliver leaves the government to be scapegoated when such programs end or fail to deliver; and at the same time, it fails to create real accountability, as the government had no capacity to deliver such programs in the first place. Rather than assume that all service delivery should be done by the government, donors and recipient governments should consider a clear public demarcation of donor and government responsibilities that ensures that governments are not publicly committed beyond their own ability to deliver. This in turn would allow governments to be held accountable for what they can and do deliver. Recipients and donors together will need to reinvent government for poor countries, with the full understanding that such government will not be very similar to government in rich countries. Government that is fiscally sustainable with domestic resources will be much more limited in function, scope, quality, and the number of government-enforced rights. This is not a question of ideology; it is a question of pragmatism. The recognition that poor countries cannot afford a wide range of universal public services and well implemented rights should not mean a surrender of aspirations or a renunciation of the belief in basic human rights and dignities. Government law and policy can be guided by those aspirations and beliefs even if governments are never in a position to give them full voice. It may not be possible to give quality free primary education to every child, for example, but it may be possible to give it to one or more children in every family or every village. (Ugandas original target for its Universal Primary Education program was four children per family.) It may not be possible to assure that every defendant has a right to counsel, but it may be possible to assure that those facing the death penalty or sentences of life imprisonment do. It may be that the formal court system cannot adjudicate every type of dispute, but it may seek to assure a minimum quality of justice for the disputes that it can adjudicate. Only by bringing government functions and obligations back in line with government resources and capacities can poor countries reap the benefits of accountable and effective government.

October & November 2012


Religious Freedom and National Security

By William Inboden

t the end of the 20th century, if one wanted to predict what security threats would preoccupy the United States over the coming decade, a good place to start would have been a little-noticed congressional testimony by a relatively obscure State Department official. On October 6, 1999, Robert Seiple, the first ambassador-at-large for international religious freedom, testified before the House International Relations Committee on the State Departments inaugural International Religious Freedom Report. Seiples remarks also unintentionally anticipated the conflicts and security threats that would confront the United States in the ensuing decade. Looking back, the regimes that he identified for severe violations of religious freedom overwhelmingly coincide with those the United States was already at war with or would soon go to war with, or that would emerge as first-order national security concerns.
William Inboden is a distinguished scholar at the Strauss Center for International Security and Law, an assistant professor at the lbj School at the University of Texas-Austin, and an associate scholar with the Religious Freedom Project at Georgetown University. He formerly served on the State Departments Policy Planning staff and as senior director for strategic planning at the National Security Council.
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In his testimony, Seiple announced the designation of Burma, China, Iran, Iraq, and Sudan as Countries of Particular Concern subject to sanction for severe violations of religious freedom. He also noted that the secretary also intends to identify the Taliban in Afghanistan, which we do not recognize as a government, and Serbia, which is not a country, as particularly severe violators of religious freedom. Seiple then cited Saudi Arabia and North Korea as two other countries that likely merited designation as severe violators. The State Department eventually did so designate both of them, adding North Korea to the list in 2001 and Saudi Arabia in 2004. With the sole exception of Burma, every single one of the countries cited by Seiple were or were to become major national security concerns if not outright targets of military action. (The recent The correlation diplomatic opening with Burma might make it the exception that proves the rule, if Burmas inchoate between religious reforms include religious freedom and eventually persecution and induce more pacific behavior and distance from North Korea and China). At the time of Seiples tesnational security timony, the U.S. had only months earlier concluded its participation in the nato war on Serbian forces threats is not in Kosovo, and would maintain a troop presence in a 21 st-century Kosovo and Bosnia for years hence. The U.S. had phenomenon; it also the prior year launched strikes on Sudan, Afghanistan, and Iraq. Just two years later would has existed for come the September 11 attacks planned by al a long time. Qaeda from its base in Afghanistan, with fifteen of the nineteen hijackers citizens of Saudi Arabia. Within months, a U.S.-led force responded by toppling the Taliban. The year 2001 also witnessed the tense confrontation between the U.S. and China over the Hainan Island ep-3 spy plane capture, anticipating the growing concerns over the next decade about Chinas assertive military expansion and challenge to American interests in the Indo-Pacific. In 2002 North Korea admitted to its advanced nuclear weapons program, and Irans uranium enrichment efforts came to light as well, which only added to concerns about Irans longstanding sponsorship of terrorism. And in 2003, the U.S. invaded Iraq. This correlation between religious persecution and national security threats is not just a 21st-century phenomenon of postCold War dislocations, but also holds true over the past century. Including World War II, every major war the United States has fought over the past 70 years has been against an enemy that also severely violated religious freedom. Such was the case with Nazi Germany, North Korea, North Vietnam, and Saddam Husseins Iraq. This characterized other conflicts as well. The Cold War standoff with Soviet communism featured an opponent that engaged in systemic religious persecution. Numerous smaller-scale military interventions, such as Lebanon in 1983, Libya in 1986 and 2011, Somalia in 1993, Bosnia
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in 1995, and Kosovo in 1999, were also targeted against actors that embraced religious intolerance. These various enemies were religiously and ideologically diverse, from the Nazi Reich cult, to atheistic communism, to Serbian Orthodox nationalism, to Arab Baathism, to Islamist theocracy, to militant jihadism as practiced by Hezbollah or al Qaeda. They ranged from superpowers, to fragile states, to global ideological movements, to transnational terrorist organizations. Yet one of the very few characteristics that all shared was an abiding hostility to religious freedom. In short, tormenting the sacred often also amounts to profaning the international order and suggests that the purportedly spiritual concerns of religious liberty activists and the secular concerns of security professionals might not be such Countries with separate realms. Religious-freedom violations can take many egregious forms. For this article, they will be defined as coerviolations of cive restrictions on the liberty of individuals and communities to believe and practice their chosen religious freedom faith. Such coercion can sometimes involve violence, are largely the and sometimes emanate from a categorical hostility same as those to any form of independent religious belief, while other times it means privileging an exclusive version which pose a of one religion while repressing any deviations from that version. In practice, a vast range of entities and threat to the U.S. regime types restrict religious freedom, including national and local governments, majority religious groups, and nonstate actors such as terrorist organizations. Here it is important to clarify that in some cases, such as Saudi Arabia or Mexico, the government itself may actually be a partner of the U.S., but the internal conditions within the country such as intolerant Wahhabism or violent narco-trafficking may produce sub-state actors who promote religious intolerance and constitute a security concern Those actors with the most egregious religious-freedom violations are remarkably consonant with those that pose a potential threat to the United States and its interests. This suggests that there might be more of a relationship between these two issues than is commonly appreciated. Stated simply: There is not a single nation in the world that both respects religious freedom and poses a security threat to the United States. Yet as robust as this correlation might be between religious persecution and national security, it appears to be completely absent from the American government and strategic community. The promotion of religious freedom itself has made some progress in recent years, particularly after the 1998 passage of the International Religious Freedom Act created the Office of International Religious Freedom at the State Department (irf Office). However, as its former director Tom Farr has written, the irf Office and
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religious-freedom policy at the State Department have been effectively quarantined. In the minds of many at the State Department, international religious freedom remains at best a boutique curiosity and at worst an annoying irrelevance, and the irf Office remains mired in the bureaucratic margins at Foggy Bottom. The issue of religious freedom simply is not taken seriously as a policy issue by the broader national security community. This neglect is especially paradoxical given the United States own history and religious diversity. As the Economist editors John Micklethwait and Adrian Wooldridge have observed, one of Americas oddest failures in recent years is its inability to draw any global lessons from its unique success in dealing with religion at home. It is a mystery why a country so rooted in pluralism has made so little of religious freedom. The trends are not all negative. Religious freedom Nations engaged is inseparable from religion, and the latter has in religious enjoyed something of a renaissance in recent years persecution arent as a subject of serious analytical interest to policymakers and foreign policy scholars. A proliferation automatically of recent books, articles, task forces, and confersecurity threats to ences have all elevated religion as a significant factor for good and for ill in international relations. the U.S., but This renewed attention seems to be following a theyre more renewal of religion itself. Monica Duffy Toft, Timothy Samuel Shah, and Daniel Philpott argue in likely to be. their new book Gods Century: Resurgent Religion and Global Politics that a dramatic and worldwide increase in the political influence of religion has occurred in roughly the past forty years. Yet while religion is now being treated more seriously as an analytic category, religious freedom is still neglected as a policy priority. This oversight is all the more troubling in light of the scale of the problem. As a recent Pew Forum on Religion and Public Life study found, nearly 70 percent of the global population lives under high restrictions on religious freedom. A few qualifications should be noted. First, correlation is not causation, and just because a country might happen to be designated by the State Department as a religious persecutor and the Pentagon for attack does not necessarily prove that one caused the other. Second, the question of how the United States defines a security threat can be highly contested, with the recent Iraq and Libya interventions being two obvious examples. This article does not argue that nations engaging in religious persecution automatically present security threats to the U.S., but rather that entities engaging in religious persecution both states and nonstates are on balance more likely to pose a security threat to the U.S. Third, religious freedom may in some ways function as a proxy for the larger basket of democratic rights and institutions, and its relationship with security threats might approximate the insights of the democratic peace theory. Yet this goes only so far. For example, democratic peace theory applies only to relations between nation58 Policy Review

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states, while some of the security threats discussed here come from nonstate actors such as jihadi terrorists. Additionally, some scholars argue that the democratic peace is really a liberal peace, meaning that pacific conditions between countries depend not on procedural democracy but on the mutual embrace of liberal values and liberal institutions. Because religious freedom stands as one of the cornerstones of classical liberalism, does the fact that no religious-freedom-respecting nations pose a threat to the U.S. suggest that the liberal peace might even be a religious-freedom peace? The possibility of a religious-freedom peace also helps address another question: Why single out religious freedom when similar claims might plausibly be made on behalf of other human rights in relation to national security? This argument does not seek to diminish other human rights, but rather highlights some of the Freedom of characteristics of religious freedom that make it religion is one of uniquely salient for national security, more so than other important rights such as freedom of press or the cornerstones speech. of classical Because it is inseparable from religion itself, religious freedom implicates humanitys aspirations for liberalism. Might transcendence. For religious believers who make the liberal peace up the vast majority of the global population the be a religiousliberty to believe, act, and worship according to the imperatives of their faith is inseparable from their freedom peace? very identity and sense of place in the world. Religious liberty has both an individual and a communal component, as the obligations of a particular confession apply to individual and corporate body alike. Related to this, religion is often a determining feature of ethnic or national identity, whether Tibetan Buddhism, Hindu nationalism in India, Judaism and Israel, Russian Orthodoxy, or Turkish Islam. Just as it often correlates with ethno-nationalism, religion also connects with the eternal. Its eschatological dimension is often most compelling for believers yet most inscrutable for nonbelievers. It is this very eschatological dimension that, for good or for ill, often inspires some of the most notable religious actions, whether the jihadists belief in eternal rewards and Allahs approval, or the Hindu pacifists belief in reincarnation, or the Christian martyrs belief in the blessed hope of heaven. Finally, religion informs the most consequential matters even here on earth. Many religious believers hold that their ultimate loyalties lie not to a particular government or nation-state but to the divine reality as they understand it. In this sense, religious liberty is often described as the first freedom that undergirds other democratic freedoms because, as Peter Berger has observed, religion most emphatically proposes that there are limits to the legitimate power of the state. Or for another vantage point showing how religious freedom is not merely a proxy for other civil liberties but a foundational issue in its own right,
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consider the perspective of the oppressor. In the cases of actors such as alQaeda, the Taliban, the Iranian regime, and Saudi Arabia, religious intolerance is intrinsic to their own self-definition. Their entire existence is predicated on a religious narrative that is coercive, exclusive, and deeply hostile to any manner of religious dissent or diversity and that often justifies, even mandates, violence. This contrasts with other democratic rights such as media freedom, which the Taliban, for example, certainly oppose but by which they do not define themselves. Recent scholarship has begun to explore the empirical connection between religious persecution and security concerns. A new book by Brian Grim and Roger Finke, The Price of Freedom Denied: Religious Persecution and Conflict in the Twenty-First Century, conducts a robust statistical analysis of religious-freedom condiJihadist tions and incidents of conflict in 143 countries and terrorism, concludes that to the extent that governments and societies restrict religious freedoms, physical persetheocratic cution and conflict increase. As intuitive as this regimes, and might be, Grim and Finke provide substantial data to reinforce it. Controlling for related factors like authoritarian democratic institutions and respect for other human powers are the rights and civil liberties, they find that religious-freemain national dom restrictions play a distinctive role in fomenting conflict. This holds across multiple geographies, security threats regime types, and religious demographics. In short, in this realm. whether a nation is communist or nationalist, Islamic or Orthodox or secular, religious-freedom restrictions cause instability. Admittedly, the fact of conflict and instability within other nations does not intrinsically constitute a security concern for the U.S. But they can often be a leading indicator, and sometimes cause, of a potential security threat. A theoretical model developed by Daniel Philpott helps distil the relationship between regime type and propensity for political violence. The two most salient factors are the level of differentiation between religion and state, and the political theology of the majority religion. In Philpotts words, Religious communities are prone to violence when they hold a political theology that interprets their scriptures, traditions, and divine commands so as to favor an integrationist state, one that both makes its religion official and suppresses other faiths. They also tend toward belligerence when they are faced with laws and institutions either secular or sponsored by another faith that suppress their own practice and expression. Either cause may operate alone, but the two may also interact, reinforcing each other. Integrationist states those that permit little or no independence for religious communities include theocracies that use the state to advance the majority religion and authoritarian regimes that bring religion under the tight control or suppression of the state. Conversely, states with high levels
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of differentiation between religion and the government rarely display a propensity for political violence.

Religious persecution: Who does it?

roadly construed, religious persecution as a factor in national security seems to manifest in three categories of actors: jihadist terrorism, theocratic regimes, and authoritarian powers. Jihadist terrorism. While much analysis has been undertaken over the past decade on jihadist ideology and terrorist groups, surprisingly less attention has been paid to the religious intolerance that defines these organizations. Al Qaeda in its different iterations may be the most visible and extensive, but other groups such as Hezbollah, Hamas, Palestinian Islamic Jihad, and the Haqqani Network share similar antipathies towards religious freedom. While each organization has its own particular concerns, methods, and areas of operation, a common pillar that unites jihadist ideology is an aversion to religious pluralism and a commitment to their intolerant interpretations of Islamic law, with the ultimate goal being a strict Islamist political order. In turn this means the prohibition, and often persecution, of other religious belief and activity whether by Christians, Jews, or other Muslims who do not share the jihadists political theology. In the instances where jihadist groups have gained political control over a particular area, they have attempted to implement this vision. Hamas in governing the Gaza Strip has, in the words of the State Department, used its security apparatus to arrest or detain Muslims in Gaza who did not abide by Hamass strict interpretation of Islam. In a similar vein, targeting religious pluralism is a favored tactic to help assert political control. For example, al Qaeda in Iraqs (aqi) preferred targets included any manifestations of religious diversity. Most notorious was the February 2006 bombing of the Golden Mosque in Samarra, one of Shia Islams two holiest sites. While rightly understood as a vicious attempt to incite sectarian war within Iraq, the attack was also a direct assault on religious freedom. The Sunni jihadists of al-Qaeda believe Shia Muslims to be kaffirs, or infidels, and thus legitimate targets. Also among aqis declared enemies are Iraqi Christians, which aqi statements have dismissed as idolaters. In the aftermath of its October 31, 2010, massacre at a Baghdad church that left 58 Iraqi Christians dead, aqi declared that All Christian centers, organizations and institutions, leaders and followers, are legitimate targets for the mujahideen. This religious intolerance is also a distinguishing factor in the places that jihadist groups seek out as operational bases. Consider where al Qaeda operatives have sought safe haven over the past two decades, such as Somalia, Sudan, Afghanistan, Pakistan, Yemen all characterized by governments either unable or unwilling to protect religious liberty. Theocratic regimes. Though sharing some common tenets of political theOctober & November 2012 61

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ology with jihadist groups, theocratic regimes are distinguished by a government with effective sovereignty over a nation-state, and which adopts a particular religious ideology. Saudi Arabia and Iran are the two most prominent examples. Theocratic regimes are inherently inimical to religious freedom, as they define the states legitimacy by the propagation of their religious ideology in all dimensions of social and political life including the suppression of both minority faiths and adherents of the majority faith who dissent from the regimes doctrine. Hence Iran significantly restricts, and sometimes persecutes, its religious minorities such as Bahais, Jews, and Christians, as well as dissident Muslims. Saudi Arabia notoriously prohibits any public worship by non-Muslims and does not allow a single non-Muslim house of worship in the entire country, despite the presence of literally States, like millions of non-Muslim residents, predominantly Hindus and Christians, among the many expatriates Pakistan, that living and laboring in the Kingdom. Saudi Arabias arent theocratic restrictions also apply to Saudi Muslims who do not follow the Kingdoms officially sanctioned Wahhabi but are facing Islam, such as the Shia or the Sunni reformers who significant have challenged the Kingdoms chokehold on internal pressure Islamic orthodoxy. The security challenges posed by Iran are well in that direction known, from Tehrans sponsorship of terrorism to are just as its attacks on American forces on Iraq to its nuclear weapons program. Less appreciated, though, is how worrisome. the Iranian governments religious intolerance directly shapes this security threat. Since the 1979 revolution and Ayatollah Khomeinis institution of the Velayat-e faqih system of rule by Islamic jurists, the supreme leader and the Council of Guardians have defined the religious nature of the Iranian state in opposition to any entities seen as resistant to the divine mandate. Two principles of this system stand out. First, it restricts the rights of non-Shia Muslims such as Sufis and Sunnis as well as nonMuslims such as Christians, Bahais, and Jews. Second, it endorses violence as an instrument against those defined as its opponents, whether non-Shia religious minorities or external nations such as the United States and Israel. Moreover, because both of these principles stem from Velayat-e faqih, the regime believes they carry divine sanction. In the most serious cases, dissenters against the regime, including Shia, have been executed under the capital offense of moharebeh, or waging war against God. Saudi Arabia shows that the government of a theocratic regime might not necessarily define itself as an opponent of the United States, since the House of Saud has been an American strategic partner since the beginning of the Cold War. Yet the intolerant version of Islam that the regime cultivates at home and exports abroad continues to pose a security concern. The most acute demonstration of this came on September 11, when fifteen of the nineteen hijackers were Saudi citizens whose formative years had included incul62 Policy Review

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cation in Wahhabi ideology from Saudi mosques. This ideology included teachings that Christians, Jews, and Shia Muslims were subhuman and that fidelity to Islam meant participation in violent jihad. The wonder is not that so many Saudi citizens raised in this environment took up the mantle of terrorism, but that so few did. After al-Qaedas May 12, 2003, attacks on the residential compounds of expatriates living in Riyadh, the Saudi government awoke to its internal problem and embarked on a fierce and thus far largely successful effort to kill, arrest, or reform Saudis who had embraced jihadism. Yet as Reuel Marc Gerecht has observed, even after Osama bin Ladens death
Saudi Arabia . . . may well remain the big incubator of Islamic terrorism in the Sunni world, for the simple reason that the Saudi state perpetuates an unbridgeable contradiction. The Wahhabi creed is virulently intolerant of non-Muslims and Muslims who dont practice with the requisite rigor. Its no accident that so many of al-Qaedas foot soldiers have come out of Saudi Arabia the distance between the official creed and the ethos of those who become holy warriors, or admire them enough to support them financially, isnt great.

Equally worrisome are states that are not theocratic regimes but face internal pressures in that direction. Pakistan is a prominent example. On March 2, 2011, a Muslim extremist assassinated Minister for Minority Affairs Shahbaz Bhatti, Pakistans only Christian minister, for Bhattis criticism of Pakistans blasphemy law. This brought to international attention an issue that has preoccupied religious-freedom advocates for two decades. While ostensibly a democracy, Pakistan embodies many contradictions, including a blasphemy law that dictates the death penalty for Whoever by words, either spoken or written or by visible representation, or by any imputation, innuendo, or insinuation, directly or indirectly, defiles the sacred name of the prophet Muhammad. The law symbolizes Pakistans deeper religious fissures, yet it is more than merely symbolic. In practice it exacerbates religious extremism, provides a rallying point for Pakistans Islamists, and serves as a disturbingly effective weapon against religious minorities in Pakistan such as Christians and Ahmadi Muslims, not to mention progressive Muslims such as Punjab Governor Salmaan Taseer, also assassinated for his criticism of the blasphemy law. Pakistans inability or unwillingness to repeal the blasphemy law indicates its vulnerability to jihadist influences and continuing appeal to terrorists. Many of the same Islamist elements within the Pakistani security establishment, particularly the army and the InterServices Intelligence spy agency, that support the blasphemy law also maintain close ties with Pakistani militant groups such as the Harakat-ulMujahideen that appear to have helped shelter Osama bin Laden in his Abbottabad compound. Authoritarian powers. Not all authoritarian states violate religious freedom, but those that do are more likely to pose a security threat. Such
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regimes often also foment nationalism among their citizens and seek to bring any independent expressions of civil society under state control. Russia in the Putin/Medvedev era has increasingly adopted this model, as the state promotes the Russian Orthodox Church to sacralize Russian identity while restricting the practice of other faiths. So has China, as the Chinese Communist Party has embraced authoritarian capitalism with a nationalist edge. North Korea stands as an illustrative, albeit extreme, model with the Kim regimes personality cult, promulgation of its Juche version of communist ideology, and fierce persecution of religious believers. Particularities and differences notwithstanding, in all of these cases the authoritarian regime places the primacy of the state over any independent religious activity, and make the perpetuation of the states authority a The promotion transcendent goal. In these regimes, the states monopoly on political of religious power regards independent religious activity as an intrinsic threat, to be controlled or suppressed. The freedom can important qualification is independent. Often function as a authoritarian regimes permit or even encourage relimitigating factor gious activity that is subservient to the state, since religion properly controlled can serve to legitimate in ameliorating the state and bolster nationalism, or at a minimum existing security help pacify citizens. Thus Putin has increased state support for the Russian Orthodox Church, and threats. China permits religious observance only in registered outlets by its five recognized religions while subjecting independent religious groups to restriction or persecution. As Tom Farr has noted of China, the Communist government fears religion so vehemently that it admits capitalists into the Communist party but not religious believers. Authoritarian regimes also attempt to derive legitimacy from increasing their own power and projecting it abroad, particularly against perceived enemies or threats. Aaron Friedberg has observed that in China, the partys desire to retain power shapes every aspect of national policy. When it comes to external affairs, it means that Beijings ultimate aim is to make the world safe for authoritarianism, or at least for continued one-party rule in China. In a not-unrelated link, authoritarian governments also often disparage independent religious groups in their countries as agents of the West or American pawns. Moreover, because the United States occasionally advocates for religious liberty abroad, such advocacy sometimes increases the threat perception of authoritarian regimes that look suspiciously at such U.S. efforts. These regimes believe that religious groups contributed to the fall of the Iron Curtain and dissolution of communism in Eastern Europe, and are determined not to make the same mistake by allowing religious liberty. In Russia, trends of religious intolerance have mutually reinforced trends of political regression and the deterioration in Russia-U.S. relations. For
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example, the 1997 passage of a restrictive religion law heralded an upsurge in nationalism and backlash against pluralism prompted in part by the Russian Orthodox Churchs fears about losing its religious monopoly. This law should have served as an early warning of the erosion of Russian democracy. Upon attaining the presidency three years later, Vladimir Putin shrewdly capitalized on this trend to consolidate his power and curtail any inchoate democratic institutions. Religious liberty has continued to deteriorate in Russia over the past decade, as minority faiths such as Pentecostals, Adventists, Jehovahs Witnesses, and Mormons have been denied permission to meet and occasionally find their leaders imprisoned. Muslims have also faced growing discrimination and restrictions. Not coincidentally, Russia while not an explicit enemy of the U.S. has come to regard the U.S. warily as a strategic competitor. And while China does not inevitably present a threat to the U.S., the Chinese government sees the U.S. as its most likely adversary, and its ongoing military modernization program includes considerable efforts to counter U.S. force projection and capabilities, particularly in the western Pacific.

Implications for religious-freedom policy

f religious-freedom violations potentially lead to national security concerns, there are at least three ways that religious freedom can be better integrated with security policy. First, religious-freedom violations can serve as a diagnostic or leading indicator of a potential security threat. Second, religious-freedom promotion can function as a mitigating factor in ameliorating existing security threats. Third, improvements in religious freedom can also prevent the emergence of new security threats. Diagnostic. The United States devotes considerable resources billions of dollars, thousands of analysts, countless man-hours across the national security community to identifying potential security threats. Policymakers and analysts should add religious-freedom conditions to the set of indicators they use to identify and track possible security threats. Moreover, as Grim and Finke have found, violent religious persecution also helps cause social conflict and instability, and can be a leading indicator of a failing state or looming civil war. This is not to say that an increase in religious persecution automatically indicates a security concern, but that deteriorations in religious freedom increases the odds of instability and possible security threats. Consider Afghanistan before the September 11 attacks. While generally relegated by international policymakers to the back burner of priorities, Afghanistan occasionally lurched into international attention when the Taliban would engage in particularly egregious displays of religious intolerance. This included the destruction of the sixth-century Buddhas of Bamiyan statues in March 2001, or the imprisonment of two American women missionaries that same year. And those who consistently suffered the most under
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Taliban rule were Afghan Muslims who did not share the Talibans Islamist predilections. Internationally, before September 11 the Talibans depredations provoked the ire of religious-freedom advocates and womens rights advocates but were otherwise largely dismissed by foreign policy professionals as unfortunate but irrelevant to national security concerns. Yet the very same conditions of religious intolerance that were appalling to human rights advocates were appealing to al Qaeda. This is by no means to say that a more vigorous push for religious freedom would have prevented the September 11 attacks. But at a minimum, more attention to the Talibans religious persecution might have also helped reveal the potential terrorist threat. Religious-freedom violations can also be a leading indicator of authoritarianism. As Peter Berger has Protection of observed of China as Beijing increases its repression religious freedom of independent religious groups, modern authoriwont guarantee tarian rulers have understood instinctively that uncontrolled religion can be a threat. By the same stable and selftoken, violations of religious freedom frequently governing states foreshadow other measures of tyranny. Thus Chinese Christians today may resemble canaries in a in Afghanistan coalmine, their fate sending out an alarm. Ameliorative. The promotion of religious-freedom and Iraq, but it protections may in some cases help ameliorate will make such potential security threats. Consider the case of states more likely. Pakistan. If the blasphemy laws were to be taken off the books, Islamists would lose a favored instrument for targeting religious minorities, intimidating moderate Muslims, and enhacing the Islamist reach in government and society. Pakistans maladies are legion, so the end of the blasphemy laws would hardly be a blanket palliative. But it could serve as one ameliorating measure to undermine extremist elements. In a related vein, American support for religious-freedom protections for peaceful Muslims in divided, fragile societies such as Afghanistan or Yemen would also aid counterterrorism efforts by building trust among the populace and increasing their confidence in sharing intelligence tips. Religious-freedom promotion can also help mitigate some of the enabling factors behind authoritarian security threats. Independent religious groups can often serve as bulwarks against the pretensions of the state to exert control over all aspects of the society. In the case of China, a substantial step for the Chinese government would be to allow its millions of unregistered house-church Christians to worship legally and regularize their role in Chinese society. Their newfound liberties would enable these Christians many of whom occupy important roles in Chinas intellectual and commercial classes to shape Chinese society in a more pacific direction while eroding the bellicose nationalism that the Chinese Communist Party relies on in part for its legitimacy.
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Preventive. Ensuring religious-freedom protections can also play a constructive role in states that do not now pose a security threat but are at a crucible in their development and identity. Promoting religious freedom can help prevent a future security threat and destabilization from emerging. In Grim and Finkes words, the higher the degree to which governments and societies ensure religious freedoms for all, the less violent religious persecution and conflict along religious lines there will be. The troubled stabilization and reconstruction efforts in Iraq and Afghanistan are instructive. While each countrys new constitution offers some hortatory commitment to religious freedom, other clauses undermine this by privileging Islamic law. And in practice the conditions for religious minorities are precarious, as evidenced by the recent imprisonment and horrific treatment of an Afghan citizen for converting to Christianity. While religious-freedom protections alone will not guarantee the emergence of stable and self-governing states in Afghanistan and Iraq, their absence will make failure more likely. Egypt faces a similar reality in its ongoing political transition. While it faces manifest challenges in institution-building, economic growth, and democratic processes, one key determinant of Egypts democratic transition will be religious freedom. Specifically, Egypt will need to ensure robust legal protections for the rights of its Coptic Christian minority as well as the rights of moderate and progressive Muslims who do not share the Islamist agendas of the Muslim Brotherhood and the Salafists.

U.S. policy

oth the bush and Obama administrations have demonstrated at least a rhetorical appreciation for the relationship between religious freedom and broader security equities. For example, the Bush administrations 2006 National Security Strategy declared that against a terrorist enemy that is defined by religious intolerance, we defend the First Freedom: the right of people to believe and worship according to the dictates of their own conscience, free from the coercion of the state, the coercion of the majority, or the coercion of a minority that wants to dictate what others must believe. While the Obama administrations National Security Strategy does not address religious freedom, President Obama highlighted it in his 2009 Cairo speech as one of the key issues facing the Islamic world: People in every country should be free to choose and live their faith based upon the persuasion of the mind and the heart and the soul . . . Freedom of religion is central to the ability of peoples to live together. Yet in operational terms, the U.S. government has consistently treated religious-freedom promotion as at best a tertiary priority. While religious freedom exists as a normative good in its own right, its potential contributions to stability and security have been less explored, let alone appreciated.

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Understanding religious freedoms relationship with national security would mean moving it from the periphery towards the center of American policy. Designing effective implementation policies will remain a challenge yet a challenge worth embracing not only for American ideals, but for American security interests as well.


Policy Review

Economic Transitions: Learning from Central Europe

By Dalibor Rohac

hat practical lessons can the experience of postcommunist transitions in Central and Eastern Europe offer to countries that are attempting to overhaul their economic systems? With the Arab Spring, a window of opportunity has been opened in the Middle East and North Africa to put in place new institutions conducive to entrepreneurship, innovation, and economic growth. To be sure, the world today offers very few examples of genuine centrally planned economies. Even the worst performing low- and mid-income countries do have sizeable private sectors and experience with open markets. However, despite the wide-ranging scale of reform challenges in different societies, many countries in the mid-income world, which are undergoing significant political changes at the moment, will also need to privatize, remove distortionary subsidies, stabilize their public finances, and create space for the growth of the private sector.

Dalibor Rohac is the deputy director of economic studies at the Legatum Institute in London.
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Egypt, for instance, is suffering from an acute public finance problem, which is driven mostly by the existence of a distortionary subsidy system, aiming to keep prices of certain commodities low in order to help people in need. But, of course, indiscriminate subsidies to commodities chiefly benefit the wealthy and place a strain on public finance. Many Arab countries have sizeable public sectors roughly one third of Egypts economy is run by the military, for instance. As a result, a genuine transition to the market will necessitate privatizing state- and military-run enterprises albeit on a smaller scale than in countries where the whole of the economy was owned by the government. As a rule of thumb, Arab Spring countries suffer from suffocating barriers to entrepreneurship and corrupt bureaucrats enforcing those rules. The revolution in Tunisia was, after all, sparked by the self-immolation of Mohamed Many of the Bouazizi, an aspiring entrepreneur who was selling challenges fruit and vegetables illegally and was being harassed facing the Arab by the local authorities. Context-specificity matters, and the Middle East world today in 2012 differs from Eastern Europe in 1990. Still, many of the challenges facing the Arab world today are not that are not that different from those facing Eastern different from European economies twenty years ago. As a result, those facing one may hope that there are some lessons from Eastern Europe post-communist transitions that need to be kept in mind if the democratic transitions in the Middle twenty years ago. East are to succeed. Unfortunately, most current debates about economic and political transitions and desirable reform strategies are flawed, as they do not reflect the role played by dispersed knowledge in the economy and the incentive problems existing within the political sphere. It is not helpful to provide reform advice that is grounded in the assumption that reformers are omniscient and benevolent. After all, the central reason for the failure of planned economies was that they placed unrealistic epistemic and motivational demands on policymakers. In the same vein, many popular prescriptions for economic reforms implicitly assume that policymakers do not face cognitive constraints and that their motives are purely benevolent. This article, therefore, has the ambition to outline a few lessons that are more likely to pass the test of robustness with regard to less-than-ideal assumptions about policymakers knowledge and incentives. This essay is partly an attempt to rehabilitate the Washington Consensus. By focusing policymakers attention on variables that they could directly control, and by providing a simple laundry list of policies that are necessary, though not sufficient, for the success of transitions, this approach provided a more solid platform for economic transition than its alternatives. Although one might question the soundness of its economic fundamentals, it is not clear whether systematic improvements upon its
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results were possible without requiring unrealistic assumptions about the knowledge and benevolence of policymakers. This essay also calls for humility. Ultimately, success or failure of economic reforms does not depend on economic considerations alone. The success of transitions hinges mostly on how the undertaken economic reforms relate to the underlying informal institutions, culture, and expectations. In other words, ideas, culture, and rhetoric can go a long way in explaining the success or failure of economic reforms. Economists generally recognize the role of institutions but they seldom acknowledge that institutions cannot be changed at will. At the same time, as the experience of the past century shows us, ideas and rhetoric are not immutable. They do change, for worse and for better. Finally, this essay is a call for action. It is the obligation of public intellectuals in free countries to foster free discussion and rigorous thinking about economic policy and political institutions, not only in our own countries, but also in places that still suffer, or have until recently suffered, under authoritarian rule. Although Egypt, Libya, and Syria are very different from postcommunist Eastern Europe, their transitions away from authoritarian and heavy-handed government will not be successful unless they undergo a radical shift in the way their citizens think and talk about government, civil society, and economy.

What do we know about transitions?

or many in the economics profession, the fall of communism in 1989 came as a surprise. For decades, neoclassical economists maintained that centrally planned economies could perform just as well as market economies. In the famous socialist calculation debate of the 1930s, the mathematical economists advocating the theory of general equilibrium maintained that, in principle, a central planner could solve the problem of allocating resources and organizing production just as well as a competitive markets. As late as 1989, in their bestselling textbook, Paul Samuelson and William Nordhaus wrote, contrary to what many skeptics had earlier believed . . . the Soviet economy is proof that . . . a socialist command economy can function and even thrive. Only a minority of economists believed that central planning was doomed to failure, and their arguments were not easily amenable to mathematical formalization. Partly because of that, their ideas did not get much traction until relatively late on. Friedrich von Hayek, one of the leading critics of socialist economic planning, maintained that neoclassical theorists left a crucial factor out of their models. In the real world, the knowledge needed for economic planning is to a great extent tacit and decentralized. In other words, the relevant knowledge that individuals use in their economic life consists not only of technical or scientific information but also of knowledge
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of particular circumstances of time and place, which is seldom articulated and, therefore, difficult to communicate explicitly. One of the key functions of market prices is to communicate that knowledge and use it to make economic decisions. When frost suddenly destroys the crop of oranges in Florida, the price mechanism induces consumers to adjust their behavior, without them having any idea about the reasons for the sudden change in the supply of oranges. Price signals thus enable people to act on knowledge which they do not possess and which they could not reasonably be expected to collect. This feature of private markets does not depend on whether they are efficient in the neoclassical sense if anything, disequilibrium makes the role of price signals even more relevant than a situation of stationary equilibrium. By eliminating this mechanism, socialism placed unreasonable epistemic demands on the In economic planners who were expected to make economic transitions, decisions without being able to use the condensed bits of decentralized knowledge embodied in market macroeconomic prices. stabilization is Hayeks point about tacit knowledge was subtle. There was also a more mundane reason for the faila necessary ure of socialism, which had not been fully internalthough not a ized by the economic profession until recently. A sufficient part system where economic decisions were based on a process of bargaining over output and resources of any reform between factory managers and planners created perstrategy. verse incentives. Even if we agreed that socialist planning could, in principle, deliver efficient outcomes, it remains unclear whether the individual conduct needed to attain such outcomes is incentive-compatible. In planned economies, factory managers were motivated to provide planners with information that led them to either increase the factors of production given to companies and/or decrease the level of output relative to what it would otherwise have been. This public choice also led the planners to set prices artificially low, in order to induce shortages in product markets, because shortages created rents for those involved in the supply chain. These two considerations the problem of local knowledge and the problem of incentives in the government sector are central to our understanding of the economic problems of socialism. On a general level, problems of dispersed local knowledge and perverse incentives existing in the political sphere go a long way towards explaining the deficiencies of the political economy of the Arab world albeit the particular manifestations of these problems are different from those of centrally planned economies. Unfortunately, those two considerations were missing from most models that the economic profession had relied on, and the fall of communism caught many economists off guard just as the events of the Arab Spring caught off guard many observers of Middle Eastern politics. Yet, economists
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were then expected to provide practical solutions that would guide the transition of formerly communist countries to market economy. Did they do a good job? With the benefit of hindsight, what economic lessons can one safely draw from the experience of post-communist countries in Central and Eastern Europe?

Macroeconomic stabilization
nsurprisingly, when asked for advice, economists turned their attention towards a subject they knew and understood: macroeconomic stabilization. Economic structures that emerged after decades of socialism were bound to produce sizeable macroeconomic imbalances once exposed to genuine market forces. Prices of consumer goods, which had been kept below equilibrium at the time of the planned economy, needed to increase in response to liberalization, creating upward pressure on inflation. At the same time, countries could expect current account balance crises to materialize, as the markets existing under the Council of Mutual Economic Assistance disintegrated. The restructuring of national industry, including the closing down of large and wasteful heavy industries, was likely to increase unemployment, and, therefore, to apply pressure on the social safety net and on public budgets. From whatever perspective one approaches economic transitions, it is clear that macroeconomic stabilization was a necessary albeit not a sufficient element of any successful reform strategy. With this understanding, a leading group of economists was prescribing a strategy of rapid, systemic changes to the post-communist countries, with a strong focus on restoring macroeconomic stability. This approach was dubbed the Washington Consensus, because at the time it reflected the dominant view of the U.S. Treasury, the imf, and the World Bank on the policies that either were or should have been adopted by Latin American countries in the 1980s. Very quickly, partly through the work of Jeffrey Sachs and others, the idea that rapid macroeconomic stabilization is the key to success in economic transitions was translated into policy practice in the transitional world. Apart from the emphasis on containing inflation and budget deficits, and tackling external imbalances, this perspective argued that rapid privatization and liberalization both on the domestic, microeconomic front and also with regard to external trade and capital flows were of the essence. This approach emphasized the existence of complementarities between various elements of economic reform. Plausibly, price liberalization, without prudent monetary policy, would result in rampant inflation rates. Similarly, without the imposition of hard budget constraints, liberalization would not induce the right behavioral responses on the part of the firms. And speed was essential because the fall of communism provided a window of opportunity for reforms, which was likely to close once the initial euphoria dissipated.
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These rapid reforms, accompanied by macroeconomic stabilization, worked. Sure, in all countries, output contracted in response to liberalization and the collapse of the Comecon markets. As a rule of thumb, this contraction was related to the initial conditions of the economy the less agile economies, more dependent on the production structures of the Soviet-run economic cooperation, suffered more than those able to reorient trade and economic activity towards Western markets. The Baltic and the Visegrad countries were able to make that transition very quickly and very effectively. In contrast, most countries of the former ussr have had serious troubles along the way. But that is not, by itself, an indictment of the shock therapy. It is rather an unfortunate result of the distortions created by the logic of Soviet-style central planning. After all, the slump was deepest in countries that can hardly be accused Is seems nave of following a radical program of economic reforms to think that such as Ukraine or Moldova. Even in Russia, the failure to transition fully privatization towards democratic capitalism cannot be blamed on should be the radical reforms package put forward by Yegor postponed until Gaidar and his kamikaze team in 1992. For a complex legal instance, the price liberalization of 1992 was far from complete and the overall program lacked credand judicial ibility. That was not Gaidars fault. Russians had seen numerous failed attempts to fix the economy, framework is and had little reason to believe that this time was in place. any different. The Russian liberalization program was accompanied by an extremely accommodative monetary policy. As a result, the hard budget constraints that the reformers were trying to impose on Russian enterprises were quickly relaxed by the inflow of cheap credit, resulting in a catastrophic inflation rate of 2,500 percent in 1992. Numerous other pitfalls occurred on Russias way towards a market economy the uncanny alliance between big businesses and regional governments is probably the single most striking one. It resulted in an economic structure that fostered local monopolies and prevented the exit and entry of various industries, thus hampering economic growth. It also had unfortunate political repercussions, resulting in the persisting one-and-a-half-party rule. But none of those unfortunate outcomes can be blamed on radical economic reforms most importantly because Russias reforms were not all that radical. All things considered, it would be ill-advised to label the shock therapy as a failure. Its proponents such as Jeffrey Sachs or Stanley Fischer were not claiming that rapid and wholesale reforms would solve all economic ills. They were merely pointing out that macroeconomic stability was a prerequisite for successful reform, a belief that was largely confirmed by the events of the 1990s and the 2000s.
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It is true that the Washington Consensus has often been blamed for ignoring the problems of the institutional framework within which market economies operate. Privatization, liberalization, and macroeconomic stabilization, by themselves, are not always going to create an environment where private enterprise can flourish. But the relevant question is whether any quick fixes were available to address those problems.

Privatization v. restructuring

apid privatization, which was an integral part of the radical reform packages implemented in Central and Eastern Europe, has probably been the most contentious aspect of the post-communist transitions, partly because of its perceived unfairness. In many countries, shrewd individuals with political connections found themselves in possession of large companies employing thousands of people and worth billions of dollars. Worse yet, many of the new owners were arguably not in an ideal position to restructure the companies they purchased, and neither was the legal environment always conducive to the smooth functioning of the private sector. Was there an alternative to rapid privatization? The idea that privatization should have been postponed until a complex legal and judicial framework was ready to fully accommodate private enterprise has become dominant in certain circles, both in the economic profession and among the general public. Yet that belief seems nave at best. Effective legal rules cannot be created instantly by government fiat. And, even if they could, they would require informed judges and lawyers to enforce them. Practical issues aside, there was one central reason for rapid privatization: credibility. Historically, communist economies were subjected to numerous reforms. In the ussr alone, significant reforms occurred in the 1920s, 1950s, 1960s, and 1980s. All of them either failed and/or were reversed at some later stage. In such circumstances, the commitment of reformers to a market economy, especially if they were connected in any way with the previous political elite, was contestable, and piecemeal reforms would have been perceived as reversible and lacking credibility. The only way the new political elite could signal its durable commitment to the new economic and political order was to use the brief window of opportunity for rapid and encompassing reforms, including privatization. It is beside the point whether an optimal sequence of small-scale reforms and restructuring could have, in principle, worked better. In a situation where commitment to the emerging market order was in doubt, wholesale and rapid reforms were necessary. The large scale of the newly created private sector and its mass character were thus seen as a greater constraint for potential re-nationalization. A large body of economic literature has tried to map the effects of privatization on economic performance. On a superficial level privatization has

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improved the economic performance of companies. Of course, the relevant question is whether the counterfactual to rapid privatization was more likely to produce good economic outcomes and that question is more difficult to answer unambiguously. The general conclusion of the literature on the economic effects of rapid privatization is that privatization of a company guarantees a genuine transfer of ownership only if specific institutions are in place. Thus, when privatization occurred in a good institutional environment, it had a positive effect on corporate performance. Conversely, most studies fail to demonstrate a strong negative effect of privatization on economic performance of enterprises when institutional conditions are adverse. Overall, it appears that privatization was a winning strategy, although its results were better in some contexts than in others. Sure, in institutionally weak countries privatization has led to stagnation and the decapitalization of companies, instead of better financial results and increased efficiency. However, renationalization or postponement of further privatization was unlikely to provide any major gain. As John Nellis, a former World Bank economist observed, governments that botch privatization are equally likely to botch the management of state-owned firms. So while rapid privatization in Central and Eastern Europe did not always live up to peoples expectations, weve yet to see convincing evidence that its alternatives would have been any better.

Institutions and economic transitions

t is undeniable that the key problem of economic transitions was institutional. Market economies do not exist in a vacuum, and their performance depends on the presence of a complicated network of formal and informal norms, legal rules, and also trust and cultural expectations. Numerous economists were therefore quick to point out that reformers and policymakers who ignore those factors are unlikely to provide sound reform advice. The Washington Consensus has therefore quickly become a subject of harsh critique and ridicule. But what reform advice informed by a more thorough understanding of the role of institutions could one have given to prospective reformers in post-communist countries? The practical lessons of the neo-institutionalist approach, pioneered by University of Maryland economist Peter Murrell and Gerard Roland of uc-Berkeley, are limited to questions of timing and sequencing, where the approach advocates implementing more popular reforms first, in order to build political support for further reforms. These economists also emphasized the creation of a robust legal and institutional framework before privatization and liberalization take effect and a potentially large role for the government in the process of control and restructuring of state-owned enterprises. On a more general level, the neo-institutionalists were worried by the existence of externalities in the creation, design
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and destruction of large organizations. Clearly, new companies do not emerge out of thin air, and bad, inefficient companies do not disappear without imposing significant social costs. One corollary of this was the belief that there existed a trade-off between the creation of a new private sector and the decentralization and privatization of the government-run economy. One has to wonder whether the neo-institutionalist perspective does not ask too much from policymakers. Back in 1990, Vclav Klaus famously observed that we can
compare the transformation process with chess playing. If we want to play chess, we must know how to play. We must know how to move various pieces on the chessboard. We must know the basic opening strategies. But its not possible to know the situation on the chessboard after the 15th or 25th move.

Arguably, economic transitions are even more complex than that. Unlike in a chess game, in the real economy the chess pieces have a volition of their own. If Washington Consensus-style policies were seen as societal engineering, to use Rolands characterization, it is not clear what we can call the institutionalist approach to economic reform. Not only does it require that policymakers are able to identify the measures that are the most likely to elicit popular support at the beginning of the transition, but also that they are able to sequence the reforms in a way that leads to the desired outcome. Even the question of identifying winners and losers from particular policy moves is a more complex task than first meets the eye. Counterintuitively, the World Bank economist Branko Milanovic demonstrated that the biggest winners of the post-communist transitions were pensioners a finding that is at odds with the popular perception of pensioners as the most vulnerable victims of the allegedly ruthless transition towards capitalism. More fundamentally, it is a mistake to expect the progress in the creation of functioning and well-enforced property rights in transitional countries to come primarily from the perfection of the legal system. Particularly in the case of more complex assets and more intricate market relationships, it is essentially impossible to identify the desirable legal mechanisms in advance, without actually observing the practices that emerge on the markets. Of course, institutional order is key to the functioning of the market economy. However, the rules of market order are not something that can be designed and imposed on market participants from above in no time. Institutions matter. But just affirming their importance is unlikely to be enough. If creating the right legal and regulatory setting for a market economy to exist appears complicated, one should recall that there are essentially no known ways of creating, through the means of public policy, the informal and cultural norms that typically support a market economy. At the same time, the interaction between economic reforms and the underlying set of informal norms, cultural environment, and the local set of expectations
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Dalibor Rohac
which are sometimes called metis by scholars such as Peter Boettke of George Mason University is critical for the success of the transition. In countries where metis was receptive to a radical turn to a market economy and representative government, this transition seems to have occurred successfully. Not only did voters in the Czech Republic, Poland, and Slovenia not punish the reform governments for the pain of the reform, they have continually supported the change, even when it came at a cost. Backlash and unintended economic outcomes occurred in places where the underlying metis was not congruent with the institutional change that the reformers were trying to impose. In Russia, for instance, the efforts of Gaidars government were not met with much sympathy, either from interest groups or the electorate, neither of which had a deep appreciation of the need for institutional change. Economics The differences in metis might have to do with cannot really geopolitics and geography. In Central European countries, populations shared a clear sense of direccapture the tion they wanted to be part of the democratic underlying and capitalist Europe. In many places, there was still a memory of pre-war years when those countries sources of had been reasonably well-governed and prosperous. social change In Russia, perceptions were different, as many saw that determine the collapse of the Soviet Union as a defeat for the whether reforms Russian nation at large. While the Czechs and the Poles embraced the prospects of eu membership and succeed or fail. the legal reforms that accompanied it, no similar prospects existed in Russia. No wonder that no significant momentum for reforms developed there. Although geography matters, it hardly tells us the whole story. Even among the relatively successful countries of Central Europe, we saw substantial differences in metis, which affected the results of transitions. In Czechoslovakia, for instance, there existed a stark difference between the perceptions dominant in the Czech and the Slovak parts of the country. Slovaks believed that the radical transition package embraced by Klauss government did not suit Slovak economic interests, which would have been better satisfied by a milder reform program. This divergence of views, fueled by decades of Slovak nationalism, resulted in the Velvet Divorce of 1993. In subsequent years, Slovaks had to discover capitalism and create a free market on their own, through an iterative process, which first involved cronyism and reckless corruption but later brought about some bold reforms, turning the country into one of the fastest growing economies in Europe. The Czechoslovak example shows that metis is not something immutable. Ideas change, and so do the prevailing sets of cultural norms and expectations. Unfortunately, economists are not particularly well equipped to explain and understand these shifts. And the economic profession is even less well suited to forecast, manage, or mastermind such shifts in advance.
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Economic Transitions: Learning from Central Europe

This means that humility is of the essence, whenever we discuss institutional and economic shifts in the world especially in countries that we do not have an intimate knowledge of, such as those of the Arab world. Although there are not many genuine planned economies left in the world today, there are a great many countries, especially in the low- and midincome world, which have yet to create space for private enterprise and human flourishing. For those who are thinking about ways in which the West could foster successful transitions towards free market economy in places that are suffering from bad governance and massive government involvement in the economy, the central lesson from post-communist transitions is probably the importance of the metis, and the impossibility of altering it through policy interventions. Rather, freedom-loving people in the West need to invest in ideas and enable the elites and public in the emerging economies to see for themselves that there are no credible alternatives to free- market economy and representative government. This investment might bear fruit only in an uncertain and possibly distant future. But once an understanding of the role of the market and limited, representative government is established and translated into the way people think and talk about their country, then it will be very easy to solve the technocratic question of which reforms should come first and which should come second.

Fatal conceit
conomics can provide a willing reformer with a list of measures that are needed for a successful transition to market economy. In this respect, the old-fashioned laundry list of macroeconomic stabilization, liberalization, and privatization, implemented credibly and in a short time frame, gives as good a policy prescription as any other. Indeed, there is not much else that the prospective reformers are in a position to do. The idea that policymakers ought to design a perfect set of working institutions and legal norms ahead of the reforms, and that they carefully plan the sequence of gradual transitional steps, is a display of fatal conceit. To achieve that would require the policymakers to be at the same time omniscient and benevolent. Concurrently, economics cant really capture the underlying sources of social change that determine the success and failure of economic reforms. This should not come as a surprise, unless one adheres to a materialistic vision of society, in which institutions, culture, and ideas are mere by-products of its productive forces. After 1989, a change in ideas and rhetoric transformed much of Central and Eastern Europe into normal, prosperous countries. The same can happen again in the Middle East and North Africa.

October & November 2012


Books The Expanding Power of the Presidency

By Jay Cost
Mitchel A. Sollenberger and M a r k J. Ro z e l l . The Presidents Czars: Undermining Congress and the Constitution. University Press of Kansas. 356 Pages. $39.95. ince the founding of this republic there has been debate about the proper scope of the executive branch. Chastened by the tyranny of George III, the first independent state governments emphasized weak executives, and the Articles of Confederation prescribed none whatsoever. But the social and political turmoil of the 1780s taught the earliest generation that they had swung too far in the opposite direction and the Constitution was basically a compromise between the extremes of no executives and a totalitarian monarchy. It Jay Cost is a staff writer for the Weekly Standard and the author of the new book Spoiled Rotten. He lives in Pennsylvania.
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called for an executive that would have vast powers in foreign affairs, great limits in both managing domestic policy and initiating war, and above all a dependence on both the Congress and the sovereign states (and, eventually, the whole people). The debate over a strong executive branch would not end with the ratification of the Constitution, as vigorous presidents like George Washington and above all Andrew Jackson induced fears among ardent republicans that a creeping monarchism was afoot in the New World. Indeed, the extent of executive power became a focal point of the so-called Second Party System of 182460, as the National Republicans (later the Whigs) blanched at the strong executive leadership of Jackson King Andrew I, as he was derisively known as well as James K. Polk. The Abraham Lincoln presidency during the Civil War was the strongest executive the country had seen to date, but after Reconstruction the executive fell into the background for the next generation. Civil service reform took from the president a major source of his political power namely, patronage; the closeness of elections from 1876 through 1892 meant that no chief executive could really claim a governing mandate; and anyway the federal government had not yet claimed the kind of regulatory and redistributive powers needed to address the problems of industrialization, urbanization, and overexpansion into the West. In other words, the politics of the period were small, and so therefore was the executive branch. The progressive era brought a lasting change to this state of affairs. Presidents Theodore Roosevelt and
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Woodrow Wilson had a fundamentally different vision of the executive branch than their immediate predecessors, and indeed really any prior president going back to at least Jackson. They envisioned the presidency as the mediator of the national interest something quite distinct from what our Congresscentered Constitution prescribes and The standard text for any presidential history class remains Richard Neustadts Presidential Power, which unabashedly celebrates this modern presidency over the mere clerkship of the late 19th century. Whats more, presidential rankings by historians inevitably favor those commanders in chief who acted in a modern way fdr, tr, Wilson, etc. while leaders like Grover Cleveland and Coolidge are regularly dismissed as forgettable. How do we explain this change, in light of a written Constitution? After all, the very purpose of writing down the organizing principles of the government was to prevent slow alterations to the way politics is conducted. And yet, that is exactly what we have seen with the presidency. If anything, the only amendments to the Constitution since the 1700s have actually limited the power of the chief executive, formally limiting him to two terms, and yet the power of a Barack Obama is vastly superior to, say, Benjamin Harrison. What to make of this? An interesting quirk of our constitutional system is how it can be altered without amendment. If a leader usually the president takes power for himself that is not strictly within the boundaries established by the Constitution, and the people do not complain loudly and long enough, then the founding document is effectively amended, as a new precedent is established. This is the primary way that the country has developed an immensely powerful commander in chief, despite the fact that the Constitution dedicates less than 1,000 words to the executive branch. It has been in this manner that, over the last 100 years, the scope of the pres82 Policy Review

Enterprising chief executives innovate new pathways of power, are met with little resistance, and thus the innovations soon become norms. Most presidents since tr have contributed to this process, regardless of party or ideology.
thus saw the occupant of the White House as a ceaseless source of activity: communicating to the public about what the national interest requires, placing pressure on recalcitrant legislators, taking an active lead as head of a national political party, and generally rallying the nation to whatever cause he deems important. With the exception of the presidencies of Warren Harding and Calvin Coolidge from 1921 through 1929, this view of the presidency has more or less obtained ever since. Republicans and Democrats, conservatives and liberals, have all ascribed to it at least when their side resides at 1600 Pennsylvania Avenue. Whats more, this view has taken hold as a normative ideal both in the academy and the public at large.

idency has grown: Enterprising chief executives innovate new pathways of power, are met with little resistance, and thus the innovations soon become norms. Most presidents since tr have contributed to this process, regardless of party or ideology. No president or political movement has ever reversed the trend, nor really ever tried. It is undeniable that this expansion of presidential power has disrupted the traditional relationship between the executive and legislative branches. We can see this in a number of different dimensions. The Framers, for instance, carefully separated the power to declare war and execute a war between the Congress and the president, but today the president has power to do both and Congress merely ratifies the decision after the fact. Similarly, the power to make domestic policy and execute it was intentionally divided between the two branches, but today Congress regularly issues directives so broad that the executive is tasked with formulating and executing policy. (In a similar vein, the Congress has agreed to an effective end-run around the constitutional provision that all tax bills must originate in the House. The Senate regularly constructs such bills, and places them as an amendment to some otherwise mundane piece of legislation passed by the House.) Additionally, presidents often engage in extra-legislative policymaking through the use of executive orders. Even though their authority does not trace back to the Constitution, executive orders from Lyndon Johnson and Richard Nixon actually established the highly contentious principle of affirmative action in federal contracting. There is also the broader and broader invocaOctober & November 2012 83

tion of executive privilege, which is not to be found in the Constitution either but is now commonly cited for purely political purposes. Another extra-constitutional innovation, known as signing statements, have effectively granted the president a line-item veto, something the Supreme Court has explicitly rejected as unconstitutional. Nevertheless, presidents use signing statements as legal cover not to implement portions of laws that they find unacceptable. erhaps most disconcerting of all these extra-constitutional innovations is the rise of the czars, the subject of an excellent new study by Mitchel Sollenberger and Mark Rozell. The two authors explicitly reject the utilitarian approach of presidential scholarship embodied in the works of researchers like Neustadt or Charles O. Jones, who focused on what works or doesnt work for the presidential agenda and instead adopt a public law frame to analyze the rise of czars. In other words, they are primarily interested in the extent to which czars are compatible with the traditional notions of republicanism, or rule by the people, as well as the system of checks and balances that give Congress oversight of many executive activities. They then define a czar as an executive branch official not confirmed by the Senate but possessing power to impose rules and regulations, oversee budgets, or coordinate executive policy responses. They find that czars exercise substantial power outside the traditional constraints imposed by the Constitution. Perhaps no better example can be found in the person of Steve

Rattner President Obamas auto czar who set the terms of the bailouts of Chrysler and gm, based upon a rather tendentious reading of the tarp legislation, in ways that were contrary to longstanding rules in bankruptcy court and highly preferential to the United Auto Workers, a vital constituency of the Democratic Party. Though the czars have become an easy target of conservative criticism during the Obama years, it is a fact that presidents of both parties have made use of them. Indeed, it makes a great deal of sense because, unlike cabinet heads and other executive officers, czars operate independently of the Congress. Employing a very precise methodology for determining who really is a czar and who is mislabeled as such by the media, they find the first czars emanating (unsurprisingly) out of the Woodrow Wilson administration, and in particular the national response to World War I. fdr used czars to deal with the emergencies of the Great Depression and World War II, but in time czars transformed from an extraordinary position to deal with an extraordinary situation to a common appointment. Ronald Reagan had three czar positions, George H.W. Bush and Bill Clinton both had two, George W. Bush had eight, and Barack Obama who as a candidate complained about the executive excesses of his predecessor has a whopping twenty czars running around the West Wing, all of whom exercise substantial power independent of the Congress and, by extension, the people themselves. These czars like signing statements, executive orders, and the breakdown of clear lines of authority

between congressional and executive war-making and domestic policymaking trace back to the progressive innovation of the vigorous executive. We should not be surprised that occupants of the three branches search everywhere and anywhere to expand their power at the expense of their constitutional rivals. The public pressure of the exuberant presidency has induced the occupants of the White House to push harder than ever, as they know full well that they will be evaluated at the ballot box and then by history not by how well they have executed their duties under Article II but how they have managed the entire country. Put another way, if the public is going to praise or blame the president for the quarterly Gross Domestic Product report, then it should come as no surprise that he will do anything and everything he can get away with to make sure the numbers are good. This should trouble those who cherish our constitutional regime, one that envisioned a republic in which the Congress would take the lead in public policy and that prized checks and balances above the utility of a vigorous executive. And it is for such readers that Sollenberger and Rozell provide an additional service. Going against the 60-year trend in scholarship that celebrates implicitly or explicitly the active and energetic model of presidential action, the authors offer a stark warning about the republics czarist regime:
We are deeply troubled by these developments. Czars are a constitutional aberration, a direct violation of the core principles of a system of separation of powers and governPolicy Review

ment accountability. Presidents may find some utility in having czars. Many members of Congress may even be content to defer to the executive branch to undertake complex policy problems and the responsibility for any outcomes. Organized groups and many concerned citizens may also appreciate the seriousness that a president attaches to their issues when he appoints one person to solve them. None of that should override the rule of law. The constitutional framers did not create this delicately balanced system of separated powers for the convenience of officeholders or to achieve efficiency or immediate gratification of citizens. Different forms of government can better achieve those ends; ours should stay true to the principles of balanced and constrained powers. Czars do severe damage to our principles and the practice of creating and appointing them should be stopped.

Unfortunately, the authors stop short of how to remedy this situation, and perhaps with good reason. In Chapter Five, they note that the congressional response to the so-called imperial presidency of the Nixon administration was much heavier on the smoke than the fire, and after a few years of respite, we have seen the executive branch begin to encroach more and more, with little pushback from the other branches. That congressional inaction is worth considering in some detail. After all, the Constitution is what it is regardless of the informal innovations that have been heaped upon it in the last 100
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years meaning that Congress could, in theory, restore its primacy quite easily, if it were so inclined. Clearly, it is not as evidenced by the tepid response to Watergate as well as the widespread acceptance of the vast expansions of the executive under George W. Bush and Barack Obama. Why has Congress been so loathe to assert itself? The answer is as obvious as it is troublesome: The people do not want it to. Despite the bad publicity that has recently surrounded the czars, signing statements, presumptuous executive orders, and the like, the great majority of the people are sufficiently content with an active executive branch that they are willing to tolerate these excesses. Thus the rise of the czars, as well as other troubling aspects of the modern presidency, connect inevitably to the quantitative and qualitative growth of the federal government. Indeed, one cannot escape the warnings offered by Alexis de Tocqueville at the end of Democracy in America, when he conceived what a democratic tyranny would look like:
Our contemporaries are constantly excited by two conflicting passions: They want to be led, and they wish to remain free. As they cannot destroy either the one or the other of these contrary propensities, they strive to satisfy them both at once. They devise a sole, tutelary, and allpowerful form of government, but elected by the people. They combine the principle of centralization and that of popular sovereignty; this gives them a respite: They console themselves for being in tutelage by the reflection that they have

chosen their own guardians. Every man allows himself to be put in leading-strings, because he sees that it is not a person or a class of persons, but the people at large who hold the end of his chain.

of soft despotism that provides cradleto-grave amenities along with the illusion of popular control.

This is a fair description of the modern, federal welfare state, which provides each citizen with a panoply of resources from birth until death. It is not practical for the United States Congress so often unruly, divided, and undisciplined to offer such a comprehensive program of entitlements. Instead, the most sensible place to vest this power is in the presidency that fulfills Tocquevilles condition of apparent freedom but comforting servitude. Viewed from this perspective, the imperial presidency and the weak congressional response to it make much more sense. The people have made a rational, cost-benefit calculation: Sure, a broadly powerful executive branch imposes upon areas constitutionally owned by the Congress, but it also makes sure Social Security checks are cut on time, Medicare pays the doctors, and the Head Start programs stay open. All the while a false sense of individual liberty is retained. At the close of the Constitutional Convention in 1787, Benjamin Franklin was asked, Well, Doctor, what have we got a Republic or a Monarchy? He responded, A Republic, if you can keep it. Maybe the rise of the imperial presidency including the troubling creation of this czarist regime is a sign that, somewhere along the way, weve lost the republican character of our government, and instead, as Tocqueville worried, embraced a kind

By Robert Herritt
John Tomasi. Free Market Fairness. Princeton University Press. 368 Pages. $35.00. n e c o u l d h a r d ly imagine John Tomasis Free Market Fairness coming along at a more opportune time. Stump-speech rhetoric seems to have turned its attention (at least nominally) towards the concept of fairness. Questions concerning the distribution of income, although always present somewhere in Americas political conversation, have a starring role this election season. The proper role of government is up for debate again. But that Tomasi offers a clear-headed exploration of these and other issues during a moment of noticeable obtuseness and obfuscation in American politics is an accident of timing, incidental to his larger project, which is both ambitious and deeply needed. (As a matter of disclosure, I was a student of Tomasis.) Robert Herritt is a writer in New York City.
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The Market Democracy Project

Tomasis goal is to remake the conceptual landscape of liberal thought, the tradition of political philosophy of which Locke, Mill, Rawls, and Hayek were all canonical practitioners. The landscape hes referring to has been fixed for some time with libertarians and classical liberals situated on the right, sticking up for economic liberties and a formal notion of equality and often shunning lofty distributional schemes, and what Tomasi and others have called high liberals staking out a spot on the left, putting social justice concerns front and center and never being shy about using the states power to realize a substantive ideal of distributive justice. Its fair to say that most of the central disagreements that play out in the realm of liberal political theory and philosophy concern this division. And, as the two sides continue to push against one another, the prospects for progress seem bleaker by the day. As Tomasi describes this cold war of rival liberalisms, its economic freedom or social justice. Everyone has to choose. On the political level, as on the conceptual one, there exists no common ground. Thus the contestants enter battle knowing that, when the dust settles, one side will win and the other will lose. Tomasi admits from the outset that he has firmly fixed sympathies for libertarians and classical liberals. The author is at the same time eager to give credit to influential thinkers on the left for the theoretical headway they have made. But libertarians would benefit from getting over their particularly virulent case of what Tomasi calls social justicitis, and taking to heart some of
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the innovations and insights from high liberal thought. And as for the high liberals, that traditions disregard for economic liberties, Tomasi believes, isnt just unnecessary, given their moral commitments, but actually undermines their project. Property rights, Tomasi wants to tell high liberals, are rights too same as all the others.

Tomasi admits from the outset that he has firmly fixed sympathies for libertarians and classical liberals. The author is at the same time eager to give credit to influential thinkers on the left for the theoretical headway they have made.
Theres a tempting way to reconcile these two opposing schools, and one which Tomasi deserves credit for passing up. Its the fusionist tack, sometimes promoted by defenders of market-based policies, that says left liberals have their philosophy right but their economics wrong. Yes, some libertarians might say to the left, You should be concerned for the well-being of the poorest people; youre dead right that every citizen ought to have a fair shot at being prosperous and gaining access to affordable medical care; its unacceptable that so many lack a chance at developing the skills or acquiring the knowledge needed to succeed in modern society. If only you came around to the idea that markets can be har-

nessed to these ends, and that ambitious public sector programs are often a dead end. There is a certain parsimony to this open your heart to Milton Friedman argumentative strategy. And it has been used compellingly by, for instance, Brink Lindsey in his work on whats been unfortunately dubbed liberaltarianism. This is a move in the right direction. But for Tomasis purposes this schematic is unsatisfactory, or at least incomplete. The problem isnt that high liberals in todays philosophy and political science departments are simply confused about public policy. Their disagreements with the right actually stem from much deeper differences in conceptions of what it means to be a person in society and, for that matter, what society is. A quick seminar on Hayek isnt going to do the trick. Free Market Fairness sketches out a new liberal project, one that accepts some of the most persuasive insights from both traditions of liberal thought and finds a new framework in which to arrange them. Tomasi calls it market democracy. This history winds its way from Locke, through Scottish Enlightenment thinkers David Hume and Adam Smith, landing finally on the Austrian economist Friedrich Hayek. The strain of liberalism that results is committed to (1) a thick conception of economic liberty grounded mainly in consequentialist considerations, (2) a formal conception of equality that sees the outcome of free market exchanges as largely definitive of justice, and (3) a limited but important state role in taxfunded education and social service programs. This is the classical liberalism that many of us know and some of us love. Its during this history lesson that Tomasi begins to build his case. One thread that runs throughout high liberalism that he is quick to point out is its disregard for property rights or any formal (as opposed to material) notion of equality. Of all the liberties enjoyed by free citizens, those pertaining to the economic realm the freedom to control the means of production, say, or to negotiate ones own employment terms are the least essential and thus able to be downgraded to some extent (often in the name of justice). This is true of high liberalism from its origins in 18th-century France, from Rousseau to John Stewart Mill and John Maynard Keynes. Keyness timing, Tomasi notes, was impeccable. Just as the crash of 1929 has made people think twice about markets, Keyness work shows another way. Breakthroughs in social science would seem to have enabled the government to exert precise control over the economy, realizing a more substantive conception of equality, correcting the failures of the market, and impos88 Policy Review

he path to market democracy starts with a thoughtful genealogy of the conflict of visions from which it is born. Tomasi traces classical liberalism back to John Lockes 1 6 8 9 Second Treatise of Government. Locke was writing against two strong undercurrents of English social life, he notes. First, the lingering social eddies of feudalism . . . second, a stream of worries springing from the recent attempts by a series of English kings to establish themselves as absolute monarchs.

ing a form of distributional justice. The government, Keynes would have it, can now fix many of societys ills by spending money. And heres the kicker: All of this new spending isnt just the governments moral obligation; it actually stimulates the economy. Its a prospect that, not surprisingly, elicited a common response among politicians: Count me in. Enter John Rawls, easily the most influential political philosopher of the second half of the 20th century, who steps into a high liberal tradition that already has some momentum behind it, and devises an extraordinarily wellargued moral justification for its ideas of distributive justice. Somewhere along the way in the American academy, high liberalism triumphed. Debates over political philosophy largely became debates about which distributive model is best from a moral point of view. Those who saw the need to respect economic liberties as on par with, say, the right to equality of opportunity, found themselves in the minority. And when it came to advocating for concrete institutional set-ups, social democracy became a house favorite. omasi is here to deliver a message to many of his colleagues in the academy. Tamp down for a moment the conviction that a defense of economic liberties is but a wordy cover for corporate greed. And consider an idea that boasts an impressive pedigree: That much like those other political and civil liberties that many on the left hold dear, economic liberties are basic and necessary to respecting free citizens as the directors of their own lives a basic precondiOctober & November 2012 89

tion of a liberal theory. As Tomasi notes:

A society that denies people the chance to take up questions of long-term financial planning for themselves, or that restricts the ways in which individuals and families can respond to such questions, thereby diminishes the capacity of citizens to become fully responsible and independent agents. So too a society that limits the freedom of individuals to negotiate the specific terms of their employment, or that makes their ownership of productive property subject to calculations about social expediency, no matter how benevolent their intentions in doing so, thereby creates social conditions in which the moral powers of citizens can be exercised and developed in only a stunted way.

A consequentialist argument on the value of economic liberties, that they are part and parcel of the most efficient way to organize economic activity, is not enough. In order to persuade the left liberal that property rights and the like deserve a seat at the table, those rights must be revealed as a necessary condition for citizens to respect themselves and their fellow citizens as responsible self-authors. As for his brothers in arms in the classical liberal camp, Tomasi delivers a healthy dose of Benadryl to help them suppress their allergy to social justice. His strategy here is eminently reasonable, and involves something he calls the distributional adequacy condition, which states that a defense of any version of liberalism is adequate only if it includes the claim that the institutions being endorsed are deemed likely to

bring about some desired distribution of material and social goods. Classical liberals may talk tough about the market being the best and sometimes the only way to distribute holdings. But deep down, and whether they advertise the fact or not, classical liberals do harbor concerns about the distributions of goods, and specifically, seem to endorse the condition that a set of political and economic institutions, in order to be fully justified, must be expected to work to the benefit of the least well-off. As Tomasi gives a sampling of some flagship classical liberal thinkers on this point, one starts to realize how uncontroversial his contention is. Locke and Smith, Madison, and, wouldnt you know, even Ayn Rand can be found expressing the concern that institutions benefit the least well-off. These appeals to both the left and right are in fact just demolition work, intended to clear some ground on which to start construction of his new liberal edifice. And yet, this stage-setting is the most valuable part of the book. Coaxing liberal thinkers out of their ideological caves is a project that Tomasi, with his decidedly grown-up tone and his deep reverence for the contributions of left liberals (most notably Rawls) to the liberal tradition, carries out well. The book concludes with Tomasis attempt to write the next (or at least a new) chapter in a liberal philosophical tradition that has been divided for at least a century. What he calls market democracy isnt itself a comprehensive new view, but rather a research project that Tomasi is inviting political theorists and philosophers to contribute to. Market democracy borrows from the

left in its emphasis on justification. It demands that institutions be justifiable to all members of society including the least well-off. But it also takes seriously economic liberty in a way that places it squarely within the classical liberal tradition. In seeking to benefit the least well-off, we must take care to do so in ways that respect the autonomy and dignity of those citizens, Tomasi explains. In disregarding economic liberties, this is a requirement that left liberals have failed to fulfill. Market democracy, its important to understand, is merely a project, one within which can exist many different market democratic theories. His preferred theory is the one from which his book derives its title: free market fairness. This is an approach that tolerates material inequality in exchange for an institutional system that benefits the poorest among us through an emphasis on economic growth. Tomasi provides only a sketch, checking various boxes and demonstrating how such a theory through an emphasis on growth and a preference for market-centered policies can fulfill the many complex requirements of an upstanding liberal theory and address some of the trickier challenges often posed from left and right. Tomasis grand project is unlikely to inspire a new stripe of liberal theorist one who takes up arms with neither side in the ongoing turf war. Its more likely that the books lasting contribution will be for those who already consider themselves defenders of the free market, but who are selling many of their beliefs short through inadequate defenses that fail to address the lefts legitimate concerns about the poor in a convincing way. For those, Tomasi has
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shown not just in terms of policy and economics but, in fact, from the standpoint of moral philosophy that defenders of limited government and markets have a strong case. More than that, he has provided a philosophical starter kit to help those who defend some form of classical liberalism to participate in the moral discussion of politics at the highest level. longer for anyone to tell its story. A book on this club surely the worlds most exclusive seems a no-brainer. But isnt that what makes a brilliant concept? Somehow, all the other writers and journalists and historians missed this alluring subject until Nancy Gibbs and Michael Duffy came along. They have taken up the task of chronicling the club and all its intrigues, rivalries, and unique camaraderie. They have done so with a lengthy, detailed, well-written, wellresearched, nicely narrated, and ultimately fascinating page-turner. More than that, with The Presidents Club Gibbs and Duffy have also produced what is sometimes referred to in the book industry as an evergreen that is, a book relevant and revisable for recurring new editions with each and every president. And they have done so in a way accessible to the lay reader, the historian, and the scholar alike none of whom can ignore this extremely interesting book.

Nancy Gibbs and Michael Duffy. The Presidents Club: Inside the Worlds Most Exclusive Fraternity. Simon & Schuster. 656 Pages. $32.50.

By Paul Kengor

The Elitest Elite

think we ought to organize a former presidents club. So quipped Herbert Hoover to Harry Truman on the grandstand at Dwight Eisenhowers inaugural ceremony on January 20, 1953. Fine, smiled Truman. You be the president of the club. And I will be the secretary. And with that, The Presidents Club was officially christened. For some reason, it has taken much

Paul Kengor is a professor of political science at Grove City College. His books include The Crusader: Ronald Reagan and the Fall of Communism and Dupes: How Americas Adversaries Have Manipulated Progressives for a Century.
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he presidents club traverses presidential relationships beginning with Truman and Hoover, followed by Eisenhower and Truman, Kennedy and his club, Johnson and Eisenhower, Nixon and Reagan, Johnson and Nixon, Nixon and Ford, Ford and Reagan, Ford and Nixon and Carter, Bush and Clinton, Bush and Bush, and Obama and his club. Amid these is a chapter on The Golden Age of the Club, a period when there were no less than six living members: Bill Clinton (the standing chief executive), Nixon, Ford, Carter, Reagan, and Bush. Gibbs and Duffy appropriately start the book with a post-presidential inter-

view with Bill Clinton in his Harlem office, where the thinning, weary-looking ex-president ruminated on his experiences with the club. Clinton dwells on one president he misses Richard Nixon and another that he loves: George H.W. Bush. Clinton warmly tells the authors about a letter on Russia that Nixon wrote to him about a month before he died. And it was so lucid, so well written, says Clinton, that I reread it every year. Clinton, who during the Nixon presidency was anything but a Nixon supporter, said that when Nixon died, it felt like the loss of his mother: Just today I had a problem and I said to the person working with me, I wish I could pick up the phone and call Richard Nixon and ask him what he thinks we ought to do about this. Clinton was also touched by the wonderful letter the senior Bush left him. You will be our President when you read this note, wrote the man that Clinton unseated. I am rooting hard for you. It is this kind of unflinching grace, a patriotic, dutiful attitude of countryfirst/office-first, which is the chief rule in the club code. It is the common bond among club members as they happily assist the current reigning member. It is a code that (they all agree) must transcend party politics. As Gibbs and Duffy note, The Presidents Club has its protocols, including deference to the man in the chair . . . The club serves to protect the office. It also means that former presidents should not openly criticize the current occupant a code that most have followed (even when difficult), except for the rare exception, such as a Jimmy Carter (more on that later).

The club members are permitted to support whomever they like during presidential campaigns indeed, this is expected but once a new president is elected, the others act as a kind of security detail. They are dedicated to the security of the office and the successor who occupies it. It is the office that must be upheld. In a nice line, Gibbs and Duffy state that the clubs secret handshakes are less about membership than stewardship. But more than that, there is camaraderie that the presidents feel and share. They have all held a job that is unspeakable, indescribable, and that truly only another president can understand. It must be something like what war veterans feel: Your uncle who can talk about Normandy or Vietnam only with a brother who had been there. And yet, it is more than that, an even heightened level of awareness and gravity, given that you, as president, decide on things like precisely those wars and battles. Indeed, Eisenhower, the old general-turned-president, who commanded the invasion of Normandy a decade before becoming president, referred to the enormity of these presidential decisions as soul-racking. Said Ike:
The nakedness of the battlefield, when the soldier is all alone in the smoke and the clamor and the terror of war, is comparable to the loneliness at times of the presidency, when one man must conscientiously, deliberately, prayerfully scrutinize every argument, every proposal, every prediction, every alternative, every probable outcome of his action, and then all alone make his decision.
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Each and every occupant of the Oval Office faces that loneliness. It usually comes right away, when the new president receives that first ominous briefing about what a nuclear war would look like, and meets that guy in the military uniform (always nearby) who is carrying the briefcase with the codes to launch a nuclear war a moment that stunned the young John Kennedy. There is an immediate sense, says one senior presidential adviser quoted by Gibbs and Duffy, of what did I get myself into? Ive been set up. This sudden awareness of the enormity of the job is accompanied by a sudden awareness that the only people who can relate, and who are available for counsel and wisdom, are the previous occupants. No one, write Gibbs and Duffy, with the exception of [the current presidents] predecessors, knows what this is like. In some cases, the immediate predecessor is from the other political party, and was not respected by the new president, but now suddenly is. When Bill Clinton was asked if he thought more or less highly of certain predecessors, he replied without hesitation that he now thinks more highly of them all. ll the presidential relationships covered by Gibbs and Duffy are worth the read, with twists and tales in each plot and subplot. The details range from interesting policy advice provided by former presidents to (sometimes) petty squabbling and unhealed scars from past rivalries and insults. Among my favorite relationships in The Presidents Club are the group of Eisenhower, Kennedy, lbj, and Nixon.
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Prior to the presidency, jfk had seen Ike as the old man (worse, the authors quote jfk once calling Ike that old ass-e). That disrespect changed almost immediately, as Kennedy received those briefings on a nuclear war and, more so, dealt with the Bay of Pigs and Cuban Missile Crisis two episodes the authors detail and narrate exquisitely. With that, Ike soon became jfks best friend. jfk needed him in many ways. That was even more so for jfks successor, lbj, another Democrat who found himself leaning on the Republican Eisenhower. The insecure lbj, who wanted nothing to do with foreign policy, let alone Vietnam, was confounded over what to do in Southeast Asia. As only lbj could put it, I left the woman I really loved the Great Society in order to get involved with that bitch of a war on the other side of the world. What to do with that bitch? lbj went to the only former president who had been Supreme Allied Commander of nato and had defeated Hitler. He would depend on Ike in an unprecedented way for a sitting president. Especially absorbing are Richard Nixons relationships with sitting presidents, especially with jfk. The two had always been close friends and political comrades, dating back to their days in Congress. It is one of those incredible quirks of presidential history that they ended up squaring off in one of the tightest and most dubious presidential contests in history, where Kennedys supporters engaged in widespread fraud, and where a remarkably gracious Nixon did not contest the final results and demand a recount. An arrogant jfk had begun the presidency by

claiming, I dont know anybody who can do it any better than I can. A few months later, with the Bay of Pigs fiasco, he was singing a different tune. He met with his old friend Nixon, leaning on his shoulder. It really is true that foreign affairs is the only important issue for a president to handle, isnt it? said a depressed Kennedy to Nixon. I mean, who gives a sh-t if the minimum wage is $1.15 or $1.25, in comparison to something like this? Also compelling in The Presidents Club are the sections on Truman and Hoover. Harry Truman was always a very partisan Democrat, but he cast aside that partisanship in reaching out to Herbert Hoover, the Depression-discredited Republican. Hoover had been stung by fdr constantly trashing him, his record, his policies, even his character. fdr did not treat Hoover the way we hope and expect our presidents to treat each other today. Their relationship was toxic. Roosevelt couldnt stand him, said Truman of Hoover, and he hated Roosevelt. Truman corrected that slight, and then some. He saw Hoover as immensely talented, a resource to be tapped for literally the sake of humanity in the perilous post-war period. I knew what I had to do, said Truman of that challenging world, and I knew just the man I wanted to help me. And so, Truman employed Hoovers talents to an unprecedented degree. He enlisted Hoover in an intense effort to feed a Europe threatened by starvation and Soviet communism. When we think of that effort today, we think of the likes of George Marshall. Though Hoovers significant post-World War II role has been neglected by history, Truman made it happen. To say that

Hoover appreciated this is an understatement. He needed it, and Truman helped despite carping and moaning by fellow Democrats who had turned Herbert Hoover into a giant grim reaper, a poster boy for the Great Depression. Ironically, Trumans relationship with the next Republican president, Eisenhower, did not go as well. At first, it was splendid pure respect. But it turned sour, largely because of some serious misunderstandings and some heightened sensitivities. At the center of the friction was Senator Joe McCarthy, who was anything but a friend of the Truman administration. Truman felt that Ike not only didnt rebuke the senator but embraced him purely for political reasons to win the presidency. The Truman-Ike split reached a climax during the 1952 campaign, degenerating into what the New York Times called a bitter Eisenhower-Truman affair. The two went at it in the newspapers. Truman charged that any man who would seek the support of the likes of McCarthy was unfit to be entrusted with the presidency and the nations nuclear arsenal. He served up a vintage Truman appraisal: I skinned old Ike from the top of his bald head to his backside. Ike was not amused. Offering his appraisal of Truman, Ike growled to an aide: The man is a congenital liar. And yet, in perhaps the most moving moment in The Presidents Club, Truman and Ike, after a lengthy period of separation, spontaneously came together again. It occurred at a terrible moment: the funeral of the sitting member of the club, John F. Kennedy. Suddenly, as the two ex-presidents watched the hearse, and Jackie
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Kennedy, and the fatherless Kennedy children, they realized how petty their past bickering now seemed. They had a quiet lunch together at Blair House. It was a touching reunion in which bygones forever became bygones. ikewise of special interest in The Presidents Club are the sections on Jimmy Carter, where the authors are rightly highly critical. James Earl Carter was always a problem for the Presidents Club, write Gibbs and Duffy. His campaign of good works overseas and political redemption at home did not make him an easy man to work with. Stubborn, fiercely independent, and on occasion unusually sensitive, Carter had the habit of saying the wrong thing at the wrong time. He could be relied upon to engage in awkward self-promotion when cool modesty was in order. Gibbs and Duffy describe Carter as a self-righteous, impatient perfectionist, and say that Carter gave the rest of the club members an unusual gift: something for all the others to complain about. When nothing else seemed to unite its members, the club often bonded over what an annoying cuss Carter could be. Every club has its black sheep, note the authors, and when Nixon died, Carter assumed that role seamlessly. The other club members learned they did not want to find themselves in Carters way that is, as he jetted around the world meeting with dictators in his redemptive mission to salvage his failed presidency. This is not to say that the authors lack any appreciation of Carter. After all, he has been an especially active expresident. Just ask Carter: I feel that my role as a former president is probaOctober & November 2012 95

bly superior to that of other presidents. Carter was excellent in Panama in 1989, monitoring the fraudulent elections orchestrated by Manuel Noriega and his goons. Carter bravely informed the world, amid a dangerous situation, that the dictator was stealing the election from his own people. Gibbs and Duffy rightly called it a gutsy performance. Carter stood strong even as Gerald Ford (also sent by the Bush administration to monitor the elections) left the heat of battle to go golfing. Nonetheless, even with the good he has done, Carter, perhaps more than any member of the Presidents Club, has frequently breached the code of honor. Gibbs and Duffy note that Carter has proven both immensely useful and infuriatingly mutinous. As to the latter, they cite Carters mission to North Korea in 1994. He had gone at Bill Clintons request, but with very specific and limited orders namely, to deliver a message and bring back intelligence regarding Kims nuclear program. Instead, Carter, after delivering a litany of incredibly nave assessments of the North Korean regime, came back and announced to the American media that he had brokered a historic deal with the Stalinist despot. As White House officials gathered around the tv and watched the Georgian disclose his breakthrough, they struggled to contain their rage, with one official shouting that Carter was a treasonous prick. That is just one sample of Carters doings, often contrary to the intentions of the sitting president. Plenty of added examples came during the presidency of George W. Bush, particularly regard-

ing the war in Iraq. In fact, there are so many of these that one of my few criticisms of Gibbs and Duffy is that they didnt get them all. ibbs and Duffy wrap up with the current case of President Barack Obama. That chapter is a work-in-progress that already commands a revised edition. The salient characters of interest are ex-presidents Clinton and George W. Bush. The more that Obama blames Bush for every woe and self-inflicted wound, the more grist he provides to Gibbs and Duffy for an extended and engrossing revised chapter. Im sure they have been collecting a file. Obamas Bush-bashing is all the more grating when one considers the graciousness that Bush has shown to Obama from the outset, even as recently as June 2012, when Bush was pure grace during a ceremony at the White House. Bush would have been fully justified if he pulled Obama aside and said, Hey, buddy, could you stop blaming your fiscal disaster on me? But as Gibbs and Duffy document, Bush told Obama from the very start, shortly after the 2008 election: We want you to succeed. Why? Well, its the country and the office. As Bush told Obama, All of us who have served in this office understand that the office transcends the individual. Thats classic club. Beyond Obama and George W. Bush, the ongoing complex relationship between Obama and Bill Clinton is intriguing. Duffy and Gibbs note the tensions and jealousies and they have just scratched the surface. As I write, there is much more to this saga. As a fellow Democrat, Clinton is dutifully campaigning for the current club members reelection; he has not refrained, however, from early on in the campaigning occasionally saying nice things about Obamas Republican challenger. Clinton has honestly noted that Mitt Romneys business experience is impressive; in fact, sterling. Clinton has seemed to show himself as still a bit at odds with Obama, with whom he has had a complicated and sometimes bitter, uneasy relationship as most recently shown by Ed Kleins book, The Amateur, released too late for Duffy and Gibbs to work into their tome. They will need to. The Presidents Club is a fascinating window into our understanding of a most unusual and intriguing institution and group of individuals. It is an excellent work. The authors should be commended for a brilliant idea exceptionally researched and executed.


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