POLICYReview

April & May 2011, No. 166, $6.00

THE INEQUITY OF THE PROGRESSIVE INCOME TAX KIP HAGOPIAN A SMARTER APPROACH TO THE YUAN CHARLES WOLF, JR. AMERICA’S FADING MIDDLE EAST INFLUENCE SHMUEL BAR THE EUROPEAN UNION GOES EAST BRUCE PITCAIRN JACKSON ALSO: ESSAYS AND REVIEWS BY JOSEPH BOTTUM, LIAM JULIAN, DAVID SHORR, PETER BERKOWITZ, HENRIK BERING

A P u b l i c a t i o n o f t h e H o ov e r I n s t i t u t i o n
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University in 1919 by Herbert Hoover, a member of Stanford’s pioneer graduating class of 1895 and the thirty-first president of the United States. Since 1919 the Institution has evolved from a library and repository of documents to an active public policy research center. Simultaneously, the Institution has evolved into an internationally recognized library and archives housing tens of millions of books and documents relating to political, economic, and social change. The Hoover Institution’s overarching purposes are: • To collect the requisite sources of knowledge pertaining to economic, political, and social changes in societies at home and abroad, as well as to understand their causes and consequences • To analyze the effects of government actions relating to public policy • To generate, publish, and disseminate ideas that encourage positive policy formation using reasoned arguments and intellectual rigor, converting conceptual insights into practical initiatives judged to be beneficial to society • To convey to the public, the media, lawmakers, and others an understanding of important public policy issues and to promote vigorous dialogue Ideas have consequences, and a free flow of competing ideas leads to an evolution of policy adoptions and associated consequences affecting the well-being of a free society. The Hoover Institution endeavors to be a prominent contributor of ideas having positive consequences. In the words of President Hoover: This Institution supports the Constitution of the United States, its Bill of Rights, and its method of representative government. Both our social and economic systems are based on private enterprise from which springs initiative and ingenuity. . . . The Federal Government should undertake no governmental, social or economic action, except where local government, or the people, cannot undertake it for themselves. . . . The overall mission of this Institution is . . . to recall the voice of experience against the making of war, and . . . to recall man’s endeavors to make and preserve peace, and to sustain for America the safeguards of the American way of life. . . . The Institution itself must constantly and dynamically point the road to peace, to personal freedom, and to the safeguards of the American system.

POLICY Review
A PRIL & M AY 2011, No. 166

Features
3 THE INEQUITY OF THE PROGRESSIVE INCOME TAX Working harder and paying more Kip Hagopian 29 A SMARTER APPROACH TO THE YUAN Avoid the rush to rebalance Charles Wolf, Jr. 41 AMERICA’S FADING MIDDLE EAST INFLUENCE Speaking softly, wielding no sticks Shmuel Bar 53 THE EUROPEAN UNION GOES EAST A patient policy of long-term partnership Bruce Pitcairn Jackson

Books
65 BEING T.E. LAWRENCE Joseph Bottum on Hero: The Life and Legend of Lawrence of Arabia by Michael Korda. 70 BETTER BRAIN SCIENCE Liam Julian on Moonwalking with Einstein: The Art and Science of Remembering Everything by Joshua Foer and The Most Human Human: What Talking with Computers Teaches Us About What It Means to Be Alive by Brian Christian. 76 POWER AND ARROGANCE David Shorr on The End of Arrogance: America in the Global Competition of Ideas by Steven Weber and Bruce Jentleson. 82 THE GOLDSTONE MESS Peter Berkowitz on The Goldstone Report: The Legacy of the Landmark Investigation of the Gaza Conflict edited by Adam Horowitz, Lizzy Ratner, and Philip Weiss. 88 HOW PEACE GETS MADE Henrik Bering on How Wars End by Gideon Rose.

A P u b l i c a t i o n o f t h e H o ov e r I n s t i t u t i o n
stanford university

POLI CY Review
A p r i l & M ay 2 0 1 1 , N o. 1 6 6

Editor Tod Lindberg
Research Fellow, Hoover Institution

Consulting Editor Mary Eberstadt
Research Fellow, Hoover Institution

Managing Editor Liam Julian
Research Fellow, Hoover Institution

Office Manager Sharon Ragland

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The Inequity of the Progressive Income Tax
By Kip Hagopian

Class Wars: A Parable
nce upon a time in the land of America, there lived triplet brothers named Tom, Dick, and Harry Class. They were 45 years old, had virtually the same aptitude (skill), and were raised in the same home. Each was married and had two children. All three were employed as carpenters making $25 per hour, working 50 weeks a year. While they were almost identical in most respects, they had somewhat different preferences and values. For example, Tom, who worked 20 hours a week, had a different work ethic from his brothers, Dick and Harry, who each worked 60 hours per week. Neither Tom’s nor Dick’s wives worked, while Harry’s wife worked 40 hours per week as an office manager making $50,000 per year (the same hourly rate as her husband). Tom and Dick

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Kip Hagopian was a co-founder of Brentwood Associates, a California-based venture capital and private equity firm. This essay is an abridged version of a paper which is available in its entirety and for comment at www.kiphagopian.com.
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spent all of their income, and were relying on Social Security to take care of them when they retired. Harry and his wife, on the other hand, saved most of her after-tax income over many years, gradually accumulating $300,000. They invested this money in bonds and real estate that produced $25,000 a year in interest and rental income. This was the income of each family: Family Tom Dick Harry Work hours per Week: 20 60 100 Annual Wages Husband: $25,000 $75,000 $75,000 Wife: 0 0 50,000 Investment Income: 0 0 25,000 Total Income: $25,000 $75,000 $150,000

Despite their different priorities, the Class families were close; so much so that when a new housing tract was developed in their community, they each bought an equal-priced home on the same private street. Theirs were the only houses on the street. One day the brothers decided to pool their funds for the purpose of improving their street. Concerned about crime and safety, and desirous of a more attractive setting for their homes, the three families decided to: install a gate at the street’s entrance to deter burglars; add lighting for safety and additional security; repave the street’s surface to repair damage; and install landscaping to beautify the approach to their homes. The work was done for a total cost of $30,000. The brothers were quite happy with the outcome and felt the $30,000 was a worthy expenditure given the benefits provided each family. But when it came time to divide up the bill, the problems began. Harry thought it would be simple to divide the bill. Since the benefits to each family were equal, each brother should pay one-third, or about $10,000. But Tom and Dick objected. “Why should we pay the same as you?” they said. “You make much more money than we do.” Harry was puzzled. “Why is that relevant?” he asked. “My family makes more money than yours does because my wife and I work long hours and we earn extra money on our savings. Why should we be penalized for working and saving?” Harry looked at Tom and said, “I’m no smarter or more talented than you are. If you and your wife worked harder and saved more you would make as much as my family does.” To which Tom replied, “I don’t work more because I value my leisure time more than I value money. And I don’t save because I prefer the gratification of consumption today more than I will when I’m too old to enjoy it.” Tom was adamant. How could Harry, who was clearly “rich,” ask him to pay the same amount, when it was obviously harder for him to do so?
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Dick thought for a moment, and then said, “I’ve got an idea. Our aggregate income is $250,000, and $30,000 is 12 percent of that amount. Why don’t we each pay that percentage of our income? Under that formula, Tom would owe $ 3 , 0 0 0 , I would owe $ 9 , 0 0 0 , and Harry would owe $18,000. Since I make three times as much as Tom, I would pay three times as much. Harry, who makes twice as much as me and six times as much as Tom would pay two times as much as me and six times as much as Tom.” “No,” said Tom. “No?” Dick and Harry responded in unison. “Why not? What do you propose instead?” asked Harry. Tom was ready with his answer. “Paying the same percentage of our income is not fair. Instead, Harry, you pay $23,450; Dick, you pay $6,550; and I will pay nothing. This is the only fair division.” Dick was surprised at how completely arbitrary this proposal was. He was also surprised at how disproportionate it was, but since his suggested share was significantly less than under his own proposal, he didn’t object. Harry, however, was stunned. “You call that fair?! I make only two times as much as Dick, but you want me to pay three-and-a-half times as much as he does. I make six times as much as you but you expect me to pay almost 80 percent of the total cost while you pay nothing. And this is despite the fact that each of us is receiving the exact same benefits. Where did you get such a crazy idea?” he asked. “From no less an authority than the federal government,” said Tom as he pulled out a gray booklet. “It’s all right here in the irs tax tables. Under the current tax code, here is what each of us paid in income taxes last year:” Family Dick $75,000 6,550 8.7%

Tom Income $25,000 0 Taxes Paid1 Effective tax rate 0%

Harry $150,000 23,450 15.6%

Total $250,000 30,000 12%

“By an amazing coincidence, our total taxes paid were exactly equal to the $30,000 expended on our street improvements. This is the progressive income tax system all U.S. taxpayers live under, and I don’t see why the Class families should be different. In fact, I believe all future pooling of funds should be divided in this way.” “I’m in,” said Dick. So, by a vote of two to one, the cost of the street improvements was divided as follows: Tom $0 0% Dick $6,550 21.8% Harry $23,450 78.2% Total $30,000 100%

Dollars Percentage

1. The tax figures were calculated by The Shapiro Group, a Los Angeles tax accounting firm. The marginal rates and brackets are those applicable for the 2010 tax year. These figures are for illustration purposes only. They do not include the effect of certain tax credits (which some would consider transfer payments) that exist in the law. If these credits were included, Harry would pay a tax of $22,600, Dick would pay a tax of $3,700 and Tom would receive a refund of $7,100.

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Also by a vote of two to one, all future pooling of funds was to be divided up the same way. ike all parables, the story of the Class brothers is designed to illustrate a moral principle. In this tale, Harry is required to pay a disproportionate amount of the cost and value of the benefits he derives from his “mini-society,” simply because his family works harder than the families of the society’s other members. The moral question is: Is Harry being treated fairly? If not, how should this affect our thinking about progressive taxation? In the United States, the payment of taxes is effectively a “pooling of money” by the nation’s citizens to fund the services of government. These services include, but are not limited to: the national defense, infrastructure, the judicial court system, police and fire protection (delivered at the federal, state, and local levels), education (delivered at the state and local level), the general administration of government, and support for truly needy citizens. Deciding how much money should be appropriated for this pool and how it should be spent is almost always a subject of contentious debate. The same is true when deciding how taxes should be apportioned. As to the latter, the debate inevitably devolves into an argument over fairness and economic efficiency. The primary source of federal tax revenues (excluding Social Security and Medicare taxes) is a progressive tax on the earned income of individuals.2 This essay will make the case that the progressive income tax is plainly inequitable. It will also review the alternatives to progression in an effort to identify the most equitable (or least inequitable) tax system.

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Factors that determine income
merica’s free enterprise system provides an environment in which the substantial majority of its citizens can realize their fullest earnings potential. Within that environment, individual economic outcomes are the product of a combination of three elements: aptitude, work effort, and choice of occupation. Aptitude.3 For the purposes of this essay, aptitude is broadly defined as the capacity to produce, or to earn income. For the most part, it comes from
2. There are several other types of taxes levied by federal, state, and city governments, including taxes on capital gains, dividends, estates, sales, and property. These tax systems are outside the scope of this essay. 3. As defined here, the term aptitude is similar to but distinct from other terms used in the literature to describe capacity to earn: 1) “endowment,” which, in this context, is synonymous with genetic inheritance and is, therefore, too limiting; 2) “faculty,” which, like aptitude connotes capacity to earn, but is also used in the literature to describe financial wherewithal; and 3) “ability,” which, like faculty, is used to describe either capacity to earn or financial wherewithal.

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circumstances of birth and is distributed unequally. Aptitude may be derived from innate talents (cognitive, musical, artistic, athletic, etc.) or physical attributes (appearance, dexterity, possession of senses, etc.). Or it may be acquired from lessons learned from parents and other life experiences. Aptitude emanating from circumstances of birth (either innate or acquired) can be significantly enhanced by individual effort applied to strengthening one’s skills (see “Work Effort” below). Aptitude is measured from low to high in accordance with the monetary value placed on it in the marketplace. This is a measure of earning power and is not in any way an indication of an individual’s intrinsic worth as a human being. For most people aptitude is the most significant determinant of income. But it has to be understood as capacity; aptitude does not produce income until it is combined with individual effort. “Paying the same Work effort. For any given level of aptitude and percentage of occupation, work effort plays the decisive role in determining income, and in many cases may result our income is not in persons with lower aptitudes earning more than fair. Instead, their higher-aptitude peers. For the purposes of this essay, the term “work effort” includes not only the Harry, you pay number of hours worked, but also the intensity of $23,450; Dick, the effort applied during those hours. As noted above, it also includes work effort applied to you pay $6,550; strengthening one’s skills. and I will pay At every level of aptitude and in every profession, nothing.” whether the pay is in salary or hourly wages, there are workers who outperform their peers in each hour worked. They do this by performing tasks more quickly; focusing on the tasks more intently; finding and completing additional tasks that need to be done; and using some of their leisure time practicing or training to become more skilled. These people get more raises, larger bonuses, and more promotions than their peers. Thus, greater work effort can produce higher income whether the person is paid by the hour or earns a salary. In addition to producing higher income in its own right, work effort applied to strengthening one’s skill — resulting in “learned” or “enhanced” aptitude — can make a substantial contribution toward increasing income. The “rough” carpenter who spends nights and weekends developing the skills necessary to qualify as a more highly valued “finish” carpenter will move up the wage scale by doing so. Professional athletes, musicians, singers, and other performers can enhance their innate aptitudes substantially through extensive practice, and a great many are renowned for having done so. A classic example is Hall-of-Famer Jerry Rice, who is generally recognized as the best wide receiver in nfl history. He was one of the highest paid players in pro football for twenty years, an achievement largely credited to his intense practice and workout regimen. Perhaps the most effective way of enhancing aptitude is through increased study in school. Whether it is
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grade school, high school, vocational school or college, for any particular tier of aptitude, those who study the most almost always get the best grades, matriculate to the best colleges, and secure the best jobs. Choice of occupation. Choice of occupation is also important in determining income. Had Bill Gates decided to finish Harvard and become a high school math teacher, he almost certainly would have been successful, but he would not have become a multi-billionaire. Earned income is determined by a mix of the three factors described above, and the relative contribution of each varies by individual. Understanding the primary determinants of income and the implications of each for tax policy are essential to designing the most equitable tax system. Surprisingly, the literature contains only infrequent and oblique references to this crucial aspect of tax theory.

Alternative income tax systems
here is a consensus among economists and tax theorists that the best tax system is one that strikes the optimum balance between economic efficiency and equity. An efficient tax system is one that does the least to distort the allocation of resources in the economy, thus maximizing overall production. Accordingly, taxes that might alter consumer or investor behavior should be eschewed. As to equity, there is virtually unanimous agreement among scholars that the tax system should be “fair.” Unfortunately, there is great disagreement as to which system best meets this criterion. There are basically four systems of income taxation described in the literature: A per-capita, or “head” tax, which would require each person to pay his or her per-capita share of the costs of government. (Technically a per-capita tax is not an income tax, but it is almost universally accepted as the most economically efficient tax system.) A proportionate or “flat” tax, which would tax each dollar of income at a single rate. Embodied in virtually all proportionate tax proposals is a substantial broadening of the tax base through the elimination of most tax deductions, credits, and preferences, which has the benefit of simplifying the tax code and reducing the cost of compliance. The purest form of this system is a single-rate tax levied on all earned income from the first dollar, but different variations on this theme have been proposed. A degressive tax, which is a proportionate tax only on income above a certain threshold or exemption. The exemption makes the system progressive, but typically much less so than a system of graduated rates. A progressive tax, which taxes incremental income at higher marginal rates as income rises, resulting in an increase in taxes as a percentage of income as income increases.
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Each of these systems will be examined as part of the analysis of progressive taxation.

The case for progression
rogression has been in use somewhere in the world for more than two thousand years. And it is safe to say the debate on its merits goes back just as far. At present, the substantial majority of nations employ some form of progressive taxation. The first time a federal income tax was imposed in the United States was in 1861 as a means of financing the Civil War. The tax rates were decreased after the war and the income tax was allowed to expire in 1872. The concept of an income tax was legally quite controversial; so when a new income tax was levied in 1894, it was challenged in the courts, and in 1895 was found to be unconstitutional. It was not until 1913, with the ratification of the 16th Amendment to the Constitution, that the first constitutionally sanctioned income tax was enacted (which, incidentally, was progressive). Throughout history, many arguments have been advanced both for and against the progressive income tax. One of the most comprehensive examinations of the subject in the 20th century was a book published in 1953 and reissued in 1963, The Uneasy Case for Progressive Taxation, by Professors Walter J. Blum and Harry Kalven of the University of Chicago Law School. This book is an exhaustive review of the prior literature on this topic, interspersed with the authors’ own analyses and critiques of the arguments presented. In their words, the book is, “an effort to explore what might be called the intellectual case for progression.”4 Another particularly useful source of information and analysis was a book-length article published in 1 9 0 8 in the American Economic Association Quarterly, “Progressive Taxation in Theory and Practice,” by the noted economist and tax historian, Edwin R.A. Seligman.5 According to Blum and Kalven, “the most rigorous analysis of progression came only after the idea had become a political reality . . . whatever the reasons, it is clear that the political history affords little insight into the merits of the principle of progression.”6 The arguments in support of progression tend to fall into three main categories:7 economic efficiency, fairness, and reduction of income inequality.
4. Edward Blum and Harry Kalven, The Uneasy Case of Progressive Taxation (University of Chicago Press, 1953). 5. Edwin R.A. Seligman, Progressive Taxation in Theory and Practice (Princeton University Press, 1908). 6. Blum and Kalven, 14. 7. Some advocates of progression argue that a progressive income tax is needed to offset the putatively regressive nature of the payroll “taxes” that fund Social Security and Medicare. The conflation of these revenue streams is ill-conceived, inasmuch as each has a different purpose. Income taxes are used to fund a broad range of government services as described above, while payroll levies are collected for the express

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Economic efficiency. The argument is that progressive taxation increases worker productivity, yielding greater economic efficiency and higher aggregate incomes. The study of the impact of tax policy on economic efficiency and growth has for centuries been a fertile ground for economists, who have produced numerous analyses on the topic without reaching clear consensus. Since the focus of this essay is on the issue of tax equity, the economic efficiency arguments will not be discussed beyond noting that logic and the weight of empirical evidence appear to favor less progression rather than more. Fairness. The argument for progressive taxation on fairness grounds has three main strains. • The benefits principle. Taxes are payments made in return for government services and protections. People with higher incomes have disproportionately more to lose; therefore, they should pay disproportionately more for the protections afforded them by government; • Sacrifice theory and the marginal utility of money. Taxes are a burden on society that should be shared in an equitable manner. “Burden” is defined as the sacrifice made by the individual when he or she pays taxes. Since the marginal utility of a dollar declines as income rises, higher-income people should pay enough more in taxes to equalize their sacrifice relative to the sacrifice of lower-income peers. • Ability to pay. A fair tax system is one in which those with the greatest ability to pay should pay the most. Reducing Income Inequality. In this view, inequality is a social injustice that can be remedied or mitigated by a progressive tax system. It is often proffered as an argument for basic “fairness,” but since proponents haven’t united around a specific principle of fairness in its support, we will consider it separately. We will now examine each of the three fairness arguments in detail, then turn to the question of income inequality.

The benefits principle

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he benefits principle of taxation holds that the government provides benefits to its citizens that should be paid for in taxes by each beneficiary in accordance with the value he or she receives

purpose of providing income supplements and medical care during retirement. More specifically, Social Security levies are a form of forced savings, and Medicare levies are effectively prepaid medical insurance premiums. Neither of them finances government services per se. Since Social Security benefits when paid out are tied to the aggregate amount paid into the system by each beneficiary, it is inaccurate to call the levies regressive. In the case of Medicare, the amount paid into the system is proportionate to income while the benefits (paid health care) are essentially the same for each beneficiary; consequently, the system is redistributive.

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from government services. As a basic foundation for taxation, the benefits principle — also called “give and take” or “quid pro quo” — has probably received more examination and comment than any other. As we will see, the statement of the principle — payment of taxes in return for benefits — lends itself to widely varying interpretations. Historically, the use of the benefits principle to advocate progression relied on the “protection theory” of benefits, which asserts that the government’s primary function is the protection of property. The theory focuses on income as property, and analogizes the protections of government to an insurance company that insures property against loss. Those who cite protection theory as an argument for progression assert that individuals with higher incomes should pay a disproportionately greater share of the cost of government than lower-income individuals because the higher-income group would have disproportionately more to lose if the protections of government were withdrawn. Implicit in this interpretation of the principle is not just that the value of benefits received from the government increases as income increases, but that it increases more rapidly than the rise in income. As we will see, the statement of the principle — payment of taxes in return for benefits — lends itself to widely varying interpretations. When examined carefully, the “protection theory” interpretation of the benefits principle falls short in five different ways. First, the basic premise of the protection theory is flawed. Government protections extend to much more than property. The Founding Fathers made clear their vision for America in the Declaration of Independence when they spoke of the “unalienable rights” of all Americans to “life, liberty and the pursuit of happiness.” There is no basis for believing that a low-income person’s life is worth more or less to an individual (as contrasted with an insurance actuary, an economist, or a jury assessing damages in a wrongful death case) than the life of a high-income person. The same is true for liberty and the pursuit of happiness. The American military and other protective agencies and institutions of government exist to protect and preserve these rights for all Americans equally, regardless of how rich or poor they are. Second, there is no persuasive support in the literature for the claim that higher-income people derive a disproportionately greater value from government protection of property than lower-income people. Some progression advocates have argued that government exists in large part to protect rich people from poor people, while poor people need no such protection. Thus, the value of the rich person’s protection is disproportionately greater than that afforded the poor. Perhaps this was true centuries ago in some feudal nations, but it is not now and never has been generally true in the United States. Others argue that insurance is priced according to risk as well as value, implying that high-value property is at greater risk of loss. While this notion has conceptual merit, it does not follow that property owned by high-income people is at greater risk than property owned by low-income people. In fact, the rich are more likely to engage in self-protection (e.g.,
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build protective walls, install security systems, hire guards, etc.), which would result in reduced, not greater, risk. Seligman, Blum and Kalven, and others have examined the property protection arguments for progression and dismissed them as either untenably weak or without merit. Third, this interpretation of the benefits principle overlooks the principle of marginal utility. If, as virtually all economists agree, the marginal utility of a dollar of income declines as income increases, then people would place a lower value on protecting their income as it rises. To accept protection theory as an argument for progression, one would have to assert that each additional dollar of income earned is worth more than the previous dollar of income, which is nonsensical. Fourth, even if the protection argument had merit, it would, at best, argue for a proportionate rather than a progressive tax. To argue otherwise requires a belief that the price of property insurance increases faster than the value of the property (in this case, income), which is observably untrue. If the insurance analogy were applied, those with two times as much income or property would pay two times as much tax, which would be proportionate, not progressive. It’s no accident that “historically almost all exponents of benefit theory employed it to support proportion as against progression.”8 Fifth, the analogy to an insurance company is specious. The costs of the military and police and fire departments are not equivalent to property and casualty insurance, in which the policy is priced in accordance with the value of the property insured. There is no material difference in the cost of protecting persons with high incomes or high-value property than that of persons with low incomes or low-value property. (In fact, the cost might be less, since persons with high income tend to reside in low-crime areas.) Accordingly, there would be no difference in the cost of these protections based on property value. Thus, under the protection theory, the fairest tax system would more logically be per capita. A second interpretation of the benefits principle, and one that appears clearly to have more substance and more scholarly support, is that government benefits redound roughly equally to all people regardless of their income. More specifically, and as noted in the preceding paragraph, the value of benefits relating to life, liberty, and the pursuit of happiness, including the protection of property, is essentially the same for all citizens. Thus, each person should share the costs of government equally, in which case the fairest tax would be per capita. This is essentially what Harry proposed to his brothers as the fairest way of dividing the costs of their street improvements. There is yet another interpretation of the benefits principle that is arguably superior to the others, because it comes closest to placing a true value on the benefits of government. This interpretation posits that the ultimate benefit of government is the overall well-being each person derives from its services.
8. Blum and Kalven, 38. .

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The “Class Wars” parable imagined a society in which all of the members had the same aptitude. But in the broader society, aptitudes are distributed widely and unequally. This changes the picture substantially, as we can see by means of a simple thought experiment: Assume the society’s population has a normal (bell curve) distribution of aptitudes. Assume also that all of the persons in this society work exactly the same number of hours and at exactly the same intensity, resulting in incomes that correlate closely with aptitudes. In this hypothetical situation, and within each occupation, incomes would vary across a distribution curve almost identical to the aptitude curve. Accordingly, persons with more highly valued aptitudes would earn more income than their lower-aptitude counterparts, and thus derive greater value from government. It follows, therefore, that, all things being equal, higher-aptitude people should pay more in taxes than lower-aptitude people — not because they have more to lose (or to protect), but because they receive greater value from their government. Blum and Kalven touched obliquely on this concept when they noted:
Another approach [to the benefits theory] is more ingenious. It is founded on a double assumption: first, that the well-being of men, while not caused by the government, is dependent upon it in that government is a necessary condition for its existence; second, that the only aspect of wellbeing which is measurable is wealth or income and that it is therefore appropriate to take either of these as an index of the benefits flowing from government.9

It is noteworthy that this “ingenious” approach is entirely consonant with the “greater-value” interpretation of the benefits principle. The greater-value interpretation of the benefits principle is at odds with the cost-sharing concept described above (which suggests a per-capita tax), inasmuch as it argues that higher-income people should pay a higher price for their benefits because they have received greater value from their government, largely because of a more highly valued aptitude (which is a gift at birth) or some other good fortune. The merit of this notion can be inferred by imagining that aptitudes could be purchased on the open market. If such a thing were possible, it is certain that the more highly valued aptitudes — those that would produce higher incomes — would be bid up to amounts in excess of the per-capita cost of government. But how much more should higher-income people pay? The major fallacy in the use of the benefits principle as an argument for progression is the implicit premise that the value of government benefits increases more rapidly than income. Under the greater-value theory, since income — a proxy for well-being — is what each individual receives from the economic system, income is a reasonable measure of the value each individual receives from government. It is reasonable to conclude, therefore, that the fairest tax sys9. Blum and Kalven, 37. .

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tem is one in which each person pays tax in proportion to his or her income. It makes no difference whether the income is derived from aptitude (as defined), financial windfalls, random events, or privilege. In all of these cases, the tax should be levied in proportion to the value of the benefits received. Thus, a person who earns 10 times as much income as another would pay 10 times as much tax, while someone making 100 times as much would be taxed 100 times as much. A new and important contribution to the debate over fairness emerged in the mid-19th century when proponents of proportionate taxation realized there were both practical and intellectual reasons for exempting a portion of income from taxation. The practical reason was simply the futility of taxing that portion of a person’s income that was needed for survival. To do so would be self-defeating, since the hardship imposed would deprive the state of production. The intellectual basis for the exemption, from the point of view of the state, emanated from the notion that income needed for subsistence constituted an expense of production, while income above this amount was “surplus” or “clear” income, i.e., net of production costs (an insight attributed to the economist David Ricardo). From the point of view of the taxed, government benefits only have real value when the taxpayer earns a surplus of income over what is needed for subsistence. Most scholars who supported a proportionate tax system concluded that taxing only clear income was both practical and fair to both the individual and the state. This enhancement to the benefits principle, which introduced a mild degree of progression by comparison to a pure proportionate tax (a tax from the first dollar of income), became known as a “degressive” tax. It is important to note that, among the proponents of the degressive tax, there was clear consensus that the income exempt from tax should be set no higher than the level of subsistence. To do otherwise would be arbitrary and in the opinion of many, inequitable. The greater-value interpretation of the benefits principle stands as a rejection of a per-capita tax system and as a compelling case for either a proportionate or a degressive system.

Sacrifice theory and the marginal utility of money
acrifice theory is perhaps the most historically prominent and persistent argument in favor of progressive taxation. Stated simply, the theory posits that the fairest tax is one that extracts from each taxpayer an equal or proportionate “sacrifice.” The theory rejects the quidpro-quo notion that taxes are remitted in return for government benefits and instead treats taxes simply as a burden that must be shared in the most equitable way. Sacrifice theory is dependent upon the economic principle that
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holds there is a marginal-utility curve for money to the effect that the more money one earns, the less utility (or satisfaction) will be derived from the last dollar earned. Thus, if you plot a chart in which the vertical axis is units of marginal utility a person gets from money, and the horizontal axis is the amount of money the person earns, the curve will eventually have a downward slope. A downward slope indicates, for example, that an incremental $1,000 has greater utility to a person earning $10,000 a year than it has to someone earning $100,000. The economic principle of marginal utility on which sacrifice theory depends is sound. However, there are several difficulties with the sacrifice theory itself that render it untenable as an argument for progression. First, the basic premise of sacrifice theory is conceptually flawed. The notion that taxes are simply a burden that must be tolerated rather than a payment for benefits raises the question: Why would the citizens of a democracy vote to impose taxes on themselves if they did not expect benefits in return? And if the government does provide benefits (which of course it does), why would the payment of taxes be considered a sacrifice rather than a fair payment for value received? Did the Class brothers not receive benefits from their street improvements? If they did, what would be the logic of a tax based on proportionate sacrifice rather than one based on shared cost or value received? On conceptual grounds alone, sacrifice theory appears to be a very weak foundation for tax policy. Second, the validity of the theory depends on more than just the existence of a downward sloping marginal-utility curve. For progression to be justified under a theory of equal sacrifice, the curve must not only decline, but decline more rapidly than income rises. In the view of British economist Arthur Pigou and others, there is no way to prove this is true:
All that the law of diminishing utility asserts is that the last ₤1 of a ₤1000 income carries less satisfaction than the last ₤1 of a ₤100 income does. From this datum it cannot be inferred that, in order to secure equal sacrifice . . . taxation must be progressive. In order to prove that the principle of equal sacrifice necessarily involves progression we should need to know that the last ₤10 of a ₤1000 income carries less satisfaction than the last ₤1 of a ₤100 income; and this the law of diminishing utility does not assert.10

Seligman credits the Dutch economist A.J. Cohen-Stuart with debunking the notion that there is a universal marginal-utility curve that dictates progression. Here Seligman quotes Cohen-Stuart: “It is perfectly possible . . . to construct tables [curves] which lead not to progression, but to proportion and even to regression.”11

10. Arthur C. Pigou, A Study in Public Finance (Macmillan, 1951), 85-86. 11. Seligman, 219..

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Third, the sacrifice argument for progression is dependent upon the additional assumption that the marginal-utility curves of all persons are essentially the same. While it is well accepted that marginal-utility curves will eventually slope downward, it is by no means true that all curves have the same slope. In fact, in comparing the marginal-utility curves of Tom, Dick, and Harry Class, there are any number of reasons why Harry’s marginal utility curve might decline less steeply than Tom’s and Dick’s. Imagine, for example, that Harry has a learning-disabled son who needs costly special education, or that Harry’s wife has an illness that requires expensive medication not covered by insurance. Or perhaps Harry has an obsession with saving enough money to send his two children to the best private secondary schools and universities. Now consider Tom’s and Dick’s situation: Knowing that Harry is the most industrious of the brothers and was unlikely to need their help, Harry’s parents made it clear that when they died they would leave all of their rather significant estate to the less industrious brothers, leaving nothing to Harry. In this event, Tom’s and Dick’s marginal-utility curves are affected by their knowledge that they don’t need as much income to secure their future. Thus, Tom’s and Dick’s marginal-utility curves may have steeper downward slopes than Harry’s, even though Harry earns much more income. Seligman calls this the “very core objection” to sacrifice theory:
The imposition of “equal sacrifices” on all taxpayers must always remain an ideal impossible of actual realization. Sacrifice denotes something psychical; something psychological . . . Two men may have the same income, which they may value at very different rates. The one may be a bachelor, the other a man with a large family dependent upon him; the one may be well, the other ill . . . the one may earn his income, the other may receive it as a gift . . . The attempt to ascertain a mathematical scale of progression, so as to avoid a charge of arbitrariness, is foredoomed to failure.12

This inability to prove the sameness of the marginal-utility curves of different people troubled Blum and Kalven to the point that they dismissed sacrifice theory as a theory on which to base a fair tax system:
The error lies in trying to translate money, which can be measured in definite units, into corresponding units of satisfaction or well-being. In the end satisfaction in the sense of happiness defies quantification. Utility is a meaningful concept; units of utility are not. It is in the face of this difficulty that, even waiving all other objections, the whole elaborate analysis of progression in terms of sacrifice and utility doctrine finally collapses.13

12. Seligman, 222-223. 13. Blum and Kalven, 63..

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If there is no accurate way to draw any individual’s marginal-utility curve, there is no way to compare the curves of different persons. The only things that can be stated with confidence are that all persons have marginal-utility curves that are ultimately downward sloping and that the slopes of individual curves are determined by many factors in addition to income. And even if, as a general proposition, the curves are similar (as intuition would suggest), there are sufficient variations in them that sacrifice theory could not be applied without resulting in the inequitable treatment of an unacceptably large portion of the population. Fourth, for a substantial (but indeterminate) number of workers — those who work because they need the money rather than because they enjoy it — the number of hours they choose to work is determined by the marginal utility of the Among people income they earn from that work. Thus, for these workers, work effort has its own marginal-utility whose aptitudes curve that is essentially the same as the marginalare the same, utility curve for income. To illustrate: Harry’s famithe only way ly chooses to work 100 hours a week, while Tom’s family chooses to work 20 hours a week. Harry one person can and his wife work these long hours because the earn more marginal utility of the income produced from the than a peer is extra hours is greater than the marginal utility of leisure (up to that point). Conversely, Tom’s family by working has decided to work only 2 0 hours per week harder. because the additional utility of the income from the 21st hour is sufficiently low to him that he chooses to forgo it in favor of leisure. In this entirely plausible scenario, the marginal utility of one extra dollar to Harry might be equal to the marginal utility of one extra dollar to Tom. It is also plausible that the marginal utility of another dollar to Harry is even greater than it is to Tom, in which case, under its own logic, sacrifice theory would call for taxing Harry less than Tom. In either of these scenarios, taxing Harry at a higher marginal rate than Tom (as required by a progressive income tax) would be inconsonant with sacrifice theory, and by its own standard, inequitable. Fifth, the application of sacrifice theory would be plainly unfair to the people in a society who work the hardest. Among people whose aptitudes are the same, the only way one person can earn more than a peer is by working harder. But progression has the perverse effect of reducing average, after-tax hourly wage or salary rates as work effort increases. Consider the Class brothers: While Tom’s average, after-tax hourly wage was $25 (he paid no tax), Dick’s was $22.82, and Harry’s was only $21.10 (this assumes the tax on Harry’s $75,000 in labor income was $11,725 or 50 percent of the family’s total tax of $23,450). To put this into perspective, imagine you are interviewing for a job. When you ask what the job pays,
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your prospective employer says, “Well that depends on how hard you work.” You say, “Good, because I am a hard worker.” To which the employer responds, “You don’t understand. If you work 20 hours a week, I will pay you $25 per hour. But if your family works 100 hours a week and has income from savings, I will pay you about $21 per hour. The more hours you work, the less average hourly wage I will pay you.” John Stuart Mill gave full voice to this apparent injustice when he denounced progressive taxation as “a penalty on those who worked harder and saved more than their neighbors” and a “mild form of robbery.”14 On the surface, sacrifice theory appears to be a respectable argument for progression. But on close examination, it seems clearly without merit as a rationale for a fair tax system. By far the most compelling condemnation of sacrifice theory is not the argument over the slopes of the marginal-utility curves, but the unfair penalty it would impose on the hardest working and most productive people in society.

Ability to pay
he notion of “ability to pay” is most often identified with Karl Marx (“from each according to his ability, to each according to his needs”), even though the basic concept was considered by scholars long before Marx was born. While the phrase says nothing about progression, it has often been used to advocate it. Ability-to-pay has been the subject of considerable debate on definitional grounds alone. For example, a review of the literature on tax theory does not turn up a generally accepted definition of the word “ability.” What does “according to his ability” really mean? Does it mean (as some suggest) the financial wherewithal with which to pay taxes — which might come from either assets or income? Or does it mean the innate or learned ability to earn income, which would equate to aptitude? Both of these interpretations have been discussed in the literature. Either way, ability could as easily dictate proportion as it could progression. If the word means the financial wherewithal with which to pay taxes progressively, the basic concept lacks an underlying principle of fairness to support it. (Proponents of this meaning of ability-to-pay often draw on sacrifice theory for intellectual support, but as shown above, the application of sacrifice theory results in inequitable outcomes.) If the word ability means the innate or learned capacity to earn income, it is synonymous with aptitude, in which case, the greater-value interpretation of the benefits principle should be applied. This would lead to proportionate taxation.
14. John Stuart Mill, Principles of Political Economy with some of their applications to social philosophy, Vol. II (D. Appleton and Company, 1894), 99, 401.

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Reducing income inequality

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ne of the most persistent arguments in favor of progressive taxation is that it reduces income inequality. For example, University of Chicago economist Henry Simons writes:

The case for drastic progression in taxation must be rested on the case against inequality — on the ethical or aesthetic judgment that the prevailing distribution of wealth and income reveals a degree (and/or kind) of inequality which is distinctly evil or unlovely.15

To be sure, inequality exists in the United States as it does to a greater or lesser extent in all other nations. But why should we care? If it is social justice we are concerned about, what is the evidence that the level of American inequality is unjust? There are at least five methodologies used for measuring income inequality. The most commonly used measure is the “Gini coefficient,” developed by the Italian statistician Corrado Gini. The Gini coefficient is a method of measuring the statistical dispersion of (among other things) income, consumption, and wealth. The figure of merit for the Gini coefficient ranges from zero to 1.0, where zero equals total equality (all persons have identical incomes) and 1.0 equals total inequality (one person has all of the income). By this measure, the U.S. has higher income inequality than almost all other industrialized nations. In 2009, the U.S. Gini was .468, while the average Gini for the 27 European Union nations was .304, a ratio of 1.54:1. Interestingly, the per capita gdp in the U.S. in 2008 was $47,400, while the average per-capita gdp in the eu nations in that year was $32,900, a similar ratio of 1.44:1. The point is that strong economic performance can coexist with higher levels of income inequality (and vice versa). It is important to note that the U.S. income figures cited above come from the Census Bureau, which uses what it calls “money income” (income before taxes, excluding the value of non-cash benefits). Money income is the income definition most often used when citing income inequality measures,16 even though this definition of income does not include many variables that might affect inequality and standard of living, such as transfer payments, taxes, employer-provided fringe benefits (primarily retirement benefits and health insurance, which can amount to as much as 30 percent of income17), capital gains, dividends, imputed rent from owner-occupied
15. Blum and Kalven, 72. .

16. Gini coefficients cited herein come from The CIA World Fact Book 2010, the Census Bureau report on Income, Poverty, and Health Insurance Coverage in the United States: 2009 and other U.S. government publications, and Eurostat, the official statistical office of the European Union. 17. Bureau of Labor Statistics, “Employer Costs for Employee Compensation: December 2010.”

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housing, size of household, increases in the value of home equity and other investments, etc. Consequently, the value of using money income to measure either standard of living or inequality is quite limited. It has been widely reported that income inequality in the U.S. has been rising for “decades,” and by implication, that the rise is ongoing. These reports are arguably misleading. From 1967 to 2008 the Gini for money income rose from .397 to .468 (17.9 percent), about four-fifths of which occurred from 1967 to 1993. Roughly three-tenths of this increase occurred between 1992 and 1993 due to a change in the way data were collected. This change in methodology biased the Gini calculation upward. Accordingly, figures from the period before 1993 are not directly comparable with the period from 1993 to the present. During the 16 years between 1993 and 2009, the The consensus Gini increased from .454 to .468 (3.1 percent), view among and from 2001 to 2009 there was virtually no change in income inequality as measured by the economists Gini coefficient. is that the A more comprehensive measure of income yields a very different picture. The Census Bureau’s sobest measure called “15th measure of income” adds to money of living income, transfer payments, insurance supplements, standards over capital gains, Medicare, Medicaid, net imputed the long term is return on equity in owned homes, and subtracts taxes. This measure indicates that inequality consumption. declined 1.8 percent during the last 16 years (1993 to 2009) from a Gini of .395 to a Gini of .388. In any event, the consensus view among economists is that the best measure of living standards over the long term is consumption (determined not only by income but by savings, home ownership, borrowing, barter, region of domicile, and other factors), suggesting that consumption inequality is the inequality that counts the most. A 2005 study conducted by the Bureau of Labor Statistics found that in 2001 (the most recent year for which data are available) the Gini coefficient for consumption was .280,18 indicating that inequality with respect to this measure of U.S. living standards is relatively modest. It also appears that consumption inequality has barely changed in recent years. During the period 1986 to 2001, the consumption Gini went down slightly, from .283 to .280.19 Since the Gini for money income was virtually unchanged from 2001 to 2009, it is quite possible that the Gini for consumption was also relatively flat during that period; in which case, consumption inequality has not increased for 23 years or more. Support for
18. David S. Johnson, Timothy Smeeding, and Barbara Boyle Toney, “Economic Inequality Through the Prisms of Income and Consumption,” Monthly Labor Review (Bureau of Labor Statistics, April 2006), available at http://www.bls.gov/opub/mlr/2005/04/art2full.pdf. 19. Johnson, et al., “Economic Inequality.”

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this latter surmise comes from a 2010 study which concluded that “in the 2000s overall consumption inequality shows little change.”20 In addition to America’s substantial superiority in gdp per capita (which is a measure of the performance of the economy without regard to how income is distributed), the U.S. has a much higher standard of living than virtually all of the most advanced European and Asian countries. According to the Luxembourg Income Study (which uses a very comprehensive measure of income) median disposable personal income in the U.S. in 2002 was: 19.3 percent higher than Canada; 68 percent higher than Finland; 45 percent higher than Germany; 59 percent higher than Italy; 31 percent higher than Norway (despite its vast oil and gas wealth); 73 percent higher than Sweden; and 31 percent higher than the United Kingdom. It should be noted that the figures for The U.S economy g d p per capita and median income understate performed well America’s advantage because the median age of America’s population (about 36.8 years) is about in absolute and four years lower than the average of the median ages relative terms in Western Europe and almost eight years younger than Japan. Age (a proxy for experience) is one of over the 25-year the most significant contributors to income and is period from also, therefore, one of the most significant contribu1983 to 2008. tors to income inequality. In addition to higher median incomes, Americans have higher median net worths, which add further to the standard of living differential. There is no question that until the recent recession, the U.S. economy performed well in both absolute and relative terms over the 25-year period from 1983 to 2008. During this period, real compound annual gdp growth in the U.S. was 3.3 percent, substantially greater than the growth of its g-7 counterparts, which on a weighted-average basis (using either population or gdp), grew only 2.3 percent per year. Thus, the U.S. economy grew 43 percent faster per year than the non-U.S. g-7 countries. Moreover, in the recent recession, the U.S. economy contracted less than the world’s other advanced economies. For example, U.S. gdp shrunk 2.6 percent in 2009, substantially less than the 4.1 percent contraction experienced in the Euro area. In 2010, the U.S. grew 2.8 percent compared with only 1.8 percent growth forecast for the Euro area by the International Monetary Fund. Another common claim is that incomes in the U.S. have been stagnant for “decades.” But this claim is at odds with data from the Congressional Budget Office, which uses a measure of household income that, like the Luxembourg measure, is quite comprehensive, taking into account transfer
20. Bruce D. Meyer and James X. Sullivan, “Consumption and income inequality in the U.S. since the 1 9 6 0 s” (2 0 1 0 ) working paper, available at http://harrisschool.uchicago.edu/faculty/webpages/Inequality60s.pdf

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payments, health and retirement benefits, profits from retirement accounts, imputed interest on owner occupied homes, differences in household size, and taxes paid. Using this more meaningful definition of income, from 1983 to 2005 real median household income in the U.S. rose by 35 percent, which can hardly be considered “stagnant.” The presentation of these facts is not meant to suggest that income inequality causes higher living standards or gdp growth. But it is clear that it can co-exist with both high and low national living standards. Those who advocate redistribution of income on grounds of social justice should consider that America’s standard of living is higher and has grown faster than virtually all of the nations exhibiting lower measured inequality. This suggests that the most notable economic inequality in the world is that between Americans and the citizens of all other countries. The most compelling argument against the use of the progressive income tax to redistribute income is simply that it is inequitable. Blum and Kalven noted that when the tax system is used to redistribute income,
the welfare of one group in a society has been increased at the expense of the welfare of a different group. Stated this way there is no “general” welfare; there is only the welfare of the two groups and the wealthy receive no counter-balancing benefits for their surrender of income or wealth.21

As contrasted with the benefits principle and sacrifice theory, each of which relies on conceptions that purport to enhance equity, income redistribution is simply a coercive transfer of wealth from one group to another without an equity principle to support it. Note that $13,450 of Harry’s income was “distributed” to Tom and Dick. (This is the difference between Harry’s one-third share of the cost of the street improvements ($10,000) and the $23,450 he was forced to pay.) Ironically, a progressive income tax can even have the extraordinary effect of increasing rather than reducing income differences. Again, our parable is instructive: Assume that Harry’s boss is a construction foreman who works 40 hours a week at $37.50 per hour, thus earning $75,000 per year (which is the entirety of the family income). The foreman’s hourly rate is commensurate with his aptitude as a manager, while Harry’s $25 per-hour rate is commensurate with his aptitude as a carpenter. They both make $75,000 per year, but Harry does it working 60 hours per week and his boss does it working 40 hours per week. Under the current progressive tax system, Harry’s after-tax income will be $63,275 (after $11,725 in tax, which assumes that, since Harry’s labor income is 50 percent of his total family income, the tax attributable to him is 50 percent of the $23,450 tax paid by the family). His boss will take home $68,450 (after $6,550 in tax). Thus, a disproportionate amount of
21. Blum and Kalven, 75. .

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Harry’s income has been taken from him and redistributed, simply because his family worked harder. As noted by Blum and Kalven, and illustrated by our parable, redistribution requires that money be taken from some and given to (or not taken from) others. What is the equity principle that justifies this taking? Redistribution has been justified by some as a means of rectifying social injustice in the economic system. But proponents of this view have not provided a convincing argument that such injustice even exists.22 There is no persuasive evidence that reducing income inequality will increase economic well-being for the majority of people; in fact, America’s superior median standard of living relative to the other advanced economies is evidence to the contrary.

The case against progression
he strongest arguments against progression are the rebuttals to the arguments for progression. To wit: The pro-progression interpretation of the benefits principle is invalid because it depends on the untenable assumption that the value of government benefits increases more rapidly than the rise in income; on the surface, sacrifice theory is a respectable argument for progression, but on closer examination, it is clear that its application produces an inequitable outcome (this is most obviously so when applied to income derived from greater work effort); the ability-topay argument lacks an equity principle (other than sacrifice theory) on which to base a fair tax system; and redistributing income through a progressive tax system is inequitable. These rebuttals to the arguments for progression, should be sufficient to settle the case. But there are other important reasons to reject progressive taxation. Political irresponsibility. In 2008, the top 1 percent of taxpayers in America earned about 20 percent of all personal income and paid roughly 38 percent of federal income taxes; the bottom fifty percent of taxpayers currently pay only 2.7 percent of income taxes,23 and it is estimated that 46.9 percent of workers paid no federal income tax for the 2009 calendar year.24 Inasmuch as only a minority of taxpayers is affected by rises in tax rates, there is a built-in incentive for the majority to act in its self-interest, which opens the door to inequitable treatment of the minority.
22. To be sure, there are people in America who are needy or disadvantaged, in some instances grievously so. For such people the most effective remedy would be through direct spending programs. But the funding for such programs should come from a tax system that is equitable. 23. Mark Robyn and Gerald Prante, “Summary of Latest Federal Income Tax Data,” Fiscal Fact 249 (Tax Foundation, October 6, 2010), available at http://www.taxfoundation.org/news/show/250.html. 24. Roberton Williams, “Who pays no income tax?,” Tax Notes (June 29, 2009), available at http://www.taxpolicycenter.org/Uploaded pdf/1001289_who pay.pdf.

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Arbitrariness. Establishing a graduated rate scale and setting the top marginal rate on that scale are inherently arbitrary tasks. Scottish economist J.R. McCullough condemned this arbitrariness in the strongest of terms:
The moment you abandon . . . the cardinal principle of exacting from all individuals the same proportion of their income or their property, you are at sea without rudder or compass, and there is no amount of injustice or folly you may not commit.25

The progressive tax system rests on a very slippery slope, making the term “fair share” so subjective as to be an invitation to abuse. Did Harry’s brothers pay their fair share? Fomenting dissension. One of the inherent characteristics of the U.S. system of government (and that of all Western nations) is the tension that exists between the political system (majoritarian) and the economic system (free enterprise). Most Western nations are experiencing the effects of this tension, which manifests itself in vigorous disputes over tax and welfare policies. Many of those who favor income redistribution assert that inequality foments dissension. Whether this is true or not, dissension is just as likely to be caused by tax laws that are deemed unfair by those being taxed. By its nature, a system that taxes people progressively without the support of an accepted equity-based principle may breed resentment, particularly when so many pay no tax at all. The deepest resentment will most likely be among those whose tax rates differ solely because of their work effort.

A new doctrine of fairness?

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here is no perfectly fair tax system. But based on an examination of the various tax principles and theories described in the literature, together with a critical analysis of the arguments supporting and opposing progression, it’s possible to put forward a new doctrine of fairness. It is based on five principles: • The most equitable tax system is one based on the value of benefits received. • Income is the most equitable (or least inequitable) measure of the value of benefits; thus taxes should be levied in proportion to income. Wellbeing is the ultimate benefit of government and income is a reasonable proxy for well-being. Whether income is derived from aptitude (as defined), a financial windfall, a random event or privilege, it is fair (or less unfair) that it be taxed in proportion to value received. This princi-

25. J. R. McCullough, A Treatise on the Principles and Practical Influence of Taxation, or the Funding System (The Lawbook Exchange Ltd., 2007), 143-145.

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ple serves as a rejection of a per-capita tax system and establishes the affirmative case for proportion. • Only “clear income” — defined as income above the level of subsistence — should be taxed. From the point of view of the state, an individual’s earned income up to the level of subsistence is effectively the government’s cost of production and should not be taxed. From the point of view of the taxed, government benefits only have real value after the taxpayer earns a surplus of income over what is needed for subsistence. • The progressive taxation of income from work effort is inequitable. Income is derived primarily from a combination of aptitude and work effort. All things being equal, people with high-value aptitudes earn more than those with low-value aptitudes. Each tier of aptitude (whether there be 100 or 10,000 such tiers) comprises a “mini-society” in which differentials in income between the members are derived almost solely from work effort. Under a progressive tax system, workers whose work effort is above the median in their aptitude tier will pay higher average taxes per hour than those below the median. As a result, at any one point in time, an unacceptably large percentage of the total work force will earn less average, after-tax income per hour than their peers, simply because they worked harder. This is inequitable on its face. • The progressive taxation of income from aptitude is inequitable. Whereas the most equitable tax system is one based on the value of benefits received from government; and whereas the value of government benefits does not increase more rapidly than income, there is no equitable basis for taxing income progressively. Thus, even if it were assumed that income was derived solely from aptitude, progression would be unfair. Implicit in this fairness doctrine is that taxation in excess of a proportionate share of the value of benefits (defined as clear income) is an inequitable confiscation of property.

Critique of the doctrine

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here are weaknesses in the logic of this doctrine that make the fairness of a proportionate or degressive tax system less than perfect. First, some have argued that the benefit derived from economic well-being (as measured by income) should be considered separately from the benefits derived from government protection of life, liberty, and property. This alternative view has induced some scholars (John Stuart
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Mill, for one) to suggest that two types of tax should be imposed: a proportionate tax to pay for economic well-being and a per-capita tax to pay for the protection of life, liberty, and property. Putting aside the measurement difficulties of such a scheme, if this alternative quid pro quo principle were applied, and the two tax rates were blended to reflect the different values of the benefits, the most equitable tax would be somewhere between per-capita and proportion. Thus, a proportionate or degressive tax as proposed, would favor lower-income persons at the expense of higher-income persons. Second, a proportionate tax would only be fair if all income were derived from aptitude, when in fact a substantial portion of income is derived from work effort. The inequity of this is demonstrated in the Class Wars parable, in which Harry paid more than a per-capita share of the cost of the street improvements despite the fact that his benefits were exactly the same as his brothers. (Note that in this all-too-common circumstance, where both aptitudes and benefits are equal, even a proportionate or degressive tax is redistributive with respect to the hardest workers.) Thus, a proportionate tax favors people who work less over people who work more. Third, the merit of the clear income theory is somewhat undermined with respect to hard workers. Again this can be seen in our parable: Using a degressive tax system and assuming the subsistence level of income was $25,000, Tom would not have to pay any tax, even though he could easily pay his share of a proportionate tax simply by working three more hours per week. Thus, the degressive tax favors people who work less at the expense of those who work more. Since there is no perfectly equitable tax system, the goal must be to design the least inequitable system. This doctrine of fairness uses sound principles of equity to reject both the progressive and per-capita tax systems. At the same time, it establishes the affirmative case for a degressive system as being the least inequitable. Lastly, where the logic of the doctrine is flawed, in each case it errs on the side of taxing lower-income people less, regardless of the reason their income is lower.

Seeing income clearly
he flaw in virtually all of the intellectual arguments on the issue of the progressive income tax (both pro and con), is a lack of appreciation for how income is determined. Because of this, the crucial implications of the distinction between income derived from aptitude and income derived from work effort have been left out of the debate. When the importance of work effort is considered, the inequity of progression becomes clear. While the title of Blum and Kalven’s book appears to indicate that the authors’ analysis led them to become uneasy proponents of progression, the
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reality is more nuanced (and more uneasy). At the conclusion of the book, they wrote:
The case for progression, after a long critical look, thus turns out to be stubborn but uneasy. The most distinctive and technical arguments advanced in its behalf are the weakest. It is hard to gain much comfort from the special arguments [in favor of progression], however intricate their formulations, constructed on the notions of benefit, sacrifice, ability to pay, or economic stability. The case has stronger appeal when progressive taxation is viewed as a means of reducing economic inequalities. But the case for more economic equality, when examined directly, is itself perplexing.

The authors seem to be saying that the only argument for progression that could not be dismissed was the value they ascribed to reducing income inequality. And even that argument left them “uneasy.” But it is clear from a careful reading of the book that Blum and Kalven did not appreciate the implications of how income is determined, specifically the special nature of income derived from work effort. If they had, they almost certainly would have realized that taxing such income progressively is inequitable. In the event, their uneasy case for progression would have become an easy case for its rejection.

April & May 2011

27

Ne New from Hoover Instit tion Press m Hoo er Institution P I
Death Gri Death Grip ip
Loosening e Law’s Stranglehold over Loosening the Law’s Stranglehold over Economic Libe ty Economic Liberty er
B Cli t Bolick By Clint Bolick lin li k
“Slau “Slaughter-House is the case academics left and right love r “Slaughter-House left d right love to hate, Sup eme Court refuses to reco pr onsider. This to hate, but the Supreme Court refuses to reconsider. This explains why: returning to anything e to book explains why: returning to anything close to the original f Fourteenth Amendment would en original meaning of the Fourteenth Amendme t would too many jud -made doctrines. dge upset too many judge-made doctrines.”
Michael McConnell, Michael McConnell, the Richard and Frances Mallery Connell l Richard r Fr Frances Mallery ry Professor f Law Stanford University an Professor of Law at Stanford Unive ty and senior fellow rd ersit nd fellow Hoover at the Hoover Institution

“In Death Grip, Clint Bolick masterfully exp p plains why “In Death Grip, Clint Bolick masterfully explains why a 100-plus-year-old Supr es 100-plus-year-old S eme Court case provide the context Supreme Court provides context for mo important constitutional ost l for some of the most important constitutional issues of our day. Combining history day. Combining history and current controversies, along current controversies, constitutional theory real-world litigation experiga with constitutional theory and real-world litig tion experience, Death ence, Death Grip is an essential read for those interested in essential read for interested all of the rights guaranteed by the Constitution ” n. rights guaranteed by Constitution.
Scott Bullock, Scott Bullock, senior attorney at the Institute for Justice k attorney Insti e Justice itut and l lead attorney in Kelo v. City of New London torney attorney v. City f London

Clint Bolick Clint Bolick is a research fellow at the Hoover Ins k rese ch fello at ear fellow Hoover Institution and stitution serves also serves as the director of the Goldwater Instit e Scharfdirector r Goldwater Institute Scharftut Norton Center for Constitutional Litigation in Phoenix. He has Norton Center for Co onstitutional Litigation Pho oenix. oenix written many books, written many books, most recently Leviathan: The Growth of recently Leviathan: The Growth e ro Local Government and Erosion Liberty (2004 Local Government an the Erosion of Liberty (2004) and nd rosion 4) David’s Hammer: The Case Activist Judiciary David’’s Hammer: The Case for an Activist Judiciary (2007). r: e ry

March March 2011, 90 pages p ISBN: 978-0-8179-1314-4 $19.95, cloth 978-0-8179 9-1314-4

To order, call 800.621.2736 To order, call 800.621.2736
Hoover Institution Press, Stanford University, Stanford, California 94305-6010 Hoover Institution Press, Stanford University, Stanford, California 94305-6010 www.hooverpress.org w www.hooverpress.org

A Smarter Approach to the Yuan
By Charles Wolf, Jr.

he best law schools and public policy graduate schools inculcate in their students an ability to make the strongest possible case in favor of a position or policy with which they disagree. The test of whether the lesson has been truly learned is whether those who favor the position would accept its rendition as a fair and effective representation of why they favor it. With this in mind, I present below the argument for the U.S. stance favoring a substantial rise in the undervalued Chinese yuan. The U.S. position has been repeatedly stated, albeit in abbreviated and nuanced form, by President Obama and Treasury Secretary Geithner. It is also reflected in the large bipartisan majority in the House of Representatives that approved legislation to allow a retaliatory tariff on China’s exports to the U.S. unless China revalues its currency. It has been expressed more vociferously and combatively by key leaders in the Senate, and by politically-charged commentators including Paul Krugman.
Charles Wolf, Jr. holds the corporate chair in international economics at the RAND Corporation, and is a professor in the Pardee RAND Graduate School. He is a senior research fellow at the Hoover Institution.
April & May 2011 29 Policy Review

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Charles Wolf, Jr.
Once the case for this “pro” position has been presented fairly and fully, I will explain why I think it is fundamentally wrong. I will then go on to suggest measures that would be more appropriate and effective in contributing to a “rebalancing” of China’s international accounts as well as those of the U.S. than would a revaluation of the Chinese yuan. In early January, when President Hu Jintao met in Washington, D.C., with President Obama, the agenda for the meeting deftly acknowledged the presidents’ disagreement on the currency issue without discussing, let alone resolving, it.

The case for revaluing the yuan
he Chinese yuan (also known as the renminbi, or “people’s currency”) trades in foreign exchange markets at a rate of approximately 6.7 yuan per dollar (equivalent to about fifteen U.S. cents per yuan). Another measure that accords the yuan a considerably higher value is based on the goods and services the yuan can buy within China compared to what these same goods and services would cost in the U.S. This rate is referred to as the yuan’s purchasing power parity (ppp). The ppp valuation of the yuan is roughly two or three times higher (between 2.2 and 3.4 yuan per U.S. dollar, or between 30 and 40 U.S. cents per yuan) than the market exchange rate. Associated with the yuan’s value in foreign exchange markets is the fact that the value of China’s global exports of goods and services perennially exceeds by large amounts the value of its imports. Indeed, this excess has often been larger than the combined trade surpluses of the two countries that have the world’s next-largest trade surpluses, Germany and Japan. China’s annual global trade surplus is currently about $200 billion; the surplus has been considerably larger in prior years. More than half of this global surplus is China’s bilateral trade surplus with the U.S. When China’s net current earnings from other sources besides trade — including its net receipts from accumulated prior Chinese investments in the U.S., Europe, Asia, and the rest of the world, as well as the remittances it receives from Chinese residents abroad — are added to its trade surplus, the result is a Chinese global current account surplus amounting to about $300 billion annually. The value of a currency that underpins such a large surplus would normally be expected to rise (that is, to “appreciate”). The reason for this expected revaluation is that the dollar demand for that currency (the yuan) by other countries to pay for the imports they receive from China greatly exceeds the supply of yuan resulting from China’s requirements to pay for the imports it receives from the U.S. and the rest of the world. But this normal revaluation process is thwarted because China interferes with the functioning of this standard demand-supply interaction. China does
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A Smarter Approach to the Yuan
this by withdrawing the surplus dollars from the exchange market, thus neutralizing their effects on the exchange value of the yuan. This is accomplished by compensating exporters for their dollar earnings through direct issuance to them of additional domestic yuan, and then sterilizing the additional yuan by selling government bonds to absorb the expanded supply of yuan currency. This tidy result removes the surplus dollars from foreign exchange markets, while also limiting, if not eliminating, the risk of domestic inflation that might otherwise ensue because of the increased currency generated by exports and circulating in domestic Chinese markets. China is thus said to be guilty of “manipulating” the yuan’s value by preventing its appreciation, and keeping it below its “equilibrium” value. Such manipulation implicitly subsidizes China’s exports because the dollar cost of its exports is less than would be the case if the yuan were allowed to appreciate. The lower dollar cost of its exports thus enables China to maintain its trade and its current account surpluses, impeding the ability of other countries to expand their exports and to gain momentum for what in many instances — notably in the U.S. and much of Western Europe — has been a distinctly mild recovery from the Great Recession. Therefore, it is argued that China can and should appreciate its currency: that is, revalue the yuan upwards. The yuan should appreciate to a rate of, say, five yuan per dollar (twenty U.S. cents per yuan, rather than the current value of fifteen cents), thereby making China’s exports more expensive — hence, tending to decrease them. At the same time, this revaluation would make China’s imports from the U.S. and the rest of the world less expensive because fewer of the higher-valued yuan would be needed to buy dollar imports, which would tend to increase as a result. The argument concludes that, in the interest of both bilateral and global “rebalancing,” China should be persuaded or pressured to move in this direction. The official U.S. position urges persuasion, the more combative stance of prominent U.S. lawmakers and pundits favors pressure. What, if anything, is wrong with this argument?

The case against revaluation
he answer requires looking at the Chinese economy from the inside out, rather than from the outside in, which is the more usual perspective adopted by the revaluation advocates. What is striking about this inward look is that it highlights the extraordinarily high level of China’s domestic savings: between 45 and 50 percent of gdp! Such a high savings rate is without precedent during peacetime in modern economic history and is particularly rare in emerging market economies. It also flies in the face of conventional development theory. The theory presumes that, because developing countries are poor, they will have to consume most of what they produce and to invest the remainder. As a
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Charles Wolf, Jr.
result, so the theory goes, developing countries will have low savings rates, as well as trade deficits rather than surpluses, and therefore will need financial transfers and inward-bound investment from wealthier developed countries to supplement the developing countries’ low savings and to pay for their trade deficits. China stands as a striking counterexample to this standard model because it has an amazingly high savings rate (three or four times that of most developed countries, including the U.S.), accompanied by a large and growing volume of outward-bound foreign investment. China’s high savings rate — comprising the combined savings of privately-owned as well as state-owned companies, households, township and village enterprises, cooperatives, and central and local China has an government — is hard to explain. Despite the extenamazingly high sive research underway within as well as outside China, an adequate explanation is still elusive. The savings rate — reason for its elusiveness probably lies in the fact three or four that there are numerous contributing factors which vary in their prior, current, and future influence on times that of savings behavior by households, individuals, commost developed panies, and central and provincial governments. Demography figures prominently among the concountries, tributing factors. China’s population is aging rapidincluding ly: The proportion of its elderly (over age 65) will nearly double in the next fifteen years. China’s the U.S. dependency ratio (dependents as percentage of those of working age) will rise by nearly 50 percent within this period, and most of this increase will be due to the increasing numbers of elderly, their expectation of higher health care costs in the future, and their hope to ease the burden of these future costs by accumulating current savings. China’s long-standing one-child family policy has been a significant contributor to these trends, reducing the potential sources of support for aging parents and hence increasing the latter’s savings propensity. Another demographic imponderable that may affect savings behavior is the marked gender imbalance among China’s younger age cohorts — varying between 15 percent and 30 percent more males than females across China’s 37 provinces and special administrative regions. Fear by elder family members that a single male offspring might emigrate in the absence of a suitable partner in China may also conduce to precautionary savings. Along with these demographic trends, increased savings throughout Chinese society and social structure have doubtless been galvanized by delayed development of an adequate social security safety net. What has been taking shape in China is a social security system whose components will include a part that is based on defined contributions by the covered populace, along with a specified floor of defined benefits underwritten by the state. While progress in developing the system is underway, the delay has
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A Smarter Approach to the Yuan
doubtless stimulated higher savings rates as a source of protection for and by China’s rapidly aging population. But more than demography and social security affect savings in China. The rapid pace of economic growth and the rise in wages and other income that their recipients haven’t yet adjusted to may be another part of the explanation. Finally, the prevalence in some circles of generally bearish uncertainties about whether China will be able to sustain in the future its rapid growth of the past may be a further contributor to abnormally high savings as a form of protection against a possible future downturn. Whatever the validity and differing weight accorded to these numerous factors, China’s huge savings rate exceeds its investment rate by about six to seven percent of gdp. This excess is crucial for understanding China’s trade surpluses and current China’s annual account surpluses. The excess is also central to conglobal trade sideration of what might be done about China’s excess savings that would reduce these surpluses, surplus of about whereas tinkering with its exchange rate would not. $200 billion Central to this understanding is an inexorable economic relationship: namely, the excess of any reflects the excess country’s domestic savings above its domestic investof its savings ment must be exactly equal to the excess of its above its exports of goods and services above its imports of goods and services. In other words, its savings surinvestment. plus must equal its trade surplus! The relationship is inexorable because it follows from the way that the component elements are defined. The intuitive common sense behind it can be grasped by thinking of the trade surplus as a bundle of goods and services. That this bundle is saved means it is neither consumed nor invested domestically. The trade (savings) surplus can’t be an addition to domestic inventories because additions to inventories constitute investment, whereas the bundle represents the excess of savings above investment. Instead, the surplus bundle, as a part of China’s gdp, flows abroad to global markets. The savings surplus and the trade surplus are identical! China’s annual global trade surplus of about $200 billion reflects the excess of its savings (45 to 50 percent of gdp) above its investment (about 40 percent of gdp). The current account surplus consists of this trade surplus plus its other net current international receipts. As I noted earlier, these current international receipts consist principally of earnings from China’s accumulated and continuing investments abroad, including about $40 billion in payments by the U.S. Treasury to service China’s holdings of more than $1.6 trillion of U.S. government securities. China’s nontrade receipts also include earnings from its other holdings of about $800 billion of additional foreign assets — both corporate assets and sovereign debt assets — as well as remittances by Chinese residents abroad to recipients in China.
April & May 2011 33

Charles Wolf, Jr.
To count as add-ons to its current account surpluses, China’s current earnings from accumulated assets must be net of the earnings acquired by foreign investments in China. However, because China’s corporate and other income taxes are generally lower than corresponding taxes levied in the U.S. and in Europe, foreign investors in China often prefer to meet their tax liabilities in China, to retain their after-tax earnings in the form of yuan holdings, and thus to forgo seeking to convert and remit them as dollars or euros to their homelands. So, the proportion and amounts of China’s earnings from its investments that are remitted back to China and hence add to its current account surpluses tend to be larger than the proportion and amounts of earnings by foreign investors in China that these investors remit back to their own countries. It is an interesting facet of Revaluation China’s own nontrade earnings that, by adding to its would likely be current account surplus, they indirectly contribute financing for subsequent additional cross-border followed by keen investments by both state-owned and nonstate disappointment enterprises in buying foreign companies or equities in these companies, thereby generating additional among its earnings in the future. advocates, What I have referred to as an inexorable relationship underlying China’s trade surpluses is an iron and sharp law — what economists refer to as an “identity,” recriminations which simply means that the components of gdp — investment, consumption, imports and exports — by them. are so defined that the numbers measuring them must conform to this identity. The identity doesn’t say anything about causation — about the many influences that affect the size of savings, consumption, investment, and imports and exports — but it does establish inexorably how the parts relate to each other. China’s savings surplus is equal to China’s trade surplus. Hence, as long as the surplus of China’s domestic savings over its domestic investment persists, tinkering with the pegged exchange rate will have only slight and transitory effects on China’s imports and exports. Changing the yuan/dollar peg from fifteen cents per yuan to twenty cents would soon be offset by a compensating fall in China’s export prices and a compensating rise in its import prices. This sequence of events would ensue as a result of the inexorable identity between the savings surplus and the trade surplus. There is another reason why the offsetting price adjustments would be quick and decisive. Much of China’s exports consist of value added to imported inputs by processing imported raw materials and intermediate products to produce the final products for export. For example, imports of iron ore, copper, aluminum, cotton, and wool are processed and fabricated, subsequently emerging as exports of consumer products and machinery; and imports of computer chips and hard drives subsequently result in China’s exports of electronic and computer products. Often the value added by pro34 Policy Review

A Smarter Approach to the Yuan
cessing and finishing in China is less than half the corresponding final export from China. Were the yuan to be revalued, the nearly immediate consequence would be to lower the prices of imported inputs sufficiently to compensate, and in many instances to overcompensate, for what might otherwise be reflected in higher prices of the exported final products. Finally, because of the negligible effects that revaluation would have on China’s global surplus as well as on its bilateral surplus with the U.S., if revaluation were nonetheless to occur, it would probably have distinctly adverse political repercussions, quite apart from the absent economic effects. Revaluation would likely be followed by keen disappointment among its advocates, and sharp recriminations by them. Failure to realize the hopedfor turnaround in the bilateral trade balance would be attributed to various barriers impeding American exporters’ access to China’s domestic markets. Various types of nontrade barriers already and often afford preferential treatment to China’s own domestic firms relative to foreign firms in China. But the consequence of a failure of revaluation to achieve the results sought by its advocates would likely be a freshet of hostile charges and counter charges with adverse effects on U.S.-China relations.

A better way?
or the trade (savings) surplus to diminish and a significant “rebalancing” to occur, China should increase domestic consumption (decrease savings) more directly, more rapidly, and by larger amounts than it has done so far. This can be done through various measures. For example, taxes can be levied on savings above specified savings thresholds. In the tax filings of urban nonstate and state-owned enterprises, as well as of urban households and individuals, a savings threshold above, say, thirty percent of income after allowing for recorded investment expenditures by businesses and consumption expenditures by households could be subject to heavy taxation. Excessive saving above this threshold would thereby be discouraged. Moreover, the revenues produced by the tax levy could help finance accelerated development of the planned social security safety net referred to earlier. Additionally, excessive saving can be discouraged and added consumption can be encouraged by active yet prudent expansion of consumer credit. I make this suggestion in full recognition that, if an American economist proposes the idea, it is likely — and with good reason — to be viewed by China’s bankers and policymakers as ironic and hubristic. After all, one of the two or three principal causes of the global financial crisis was the egregious and imprudent expansion of consumer credit in the U.S. in the period preceding the Great Recession of 2008 and 2009. Subprime and Alt a mortgages extended in huge volumes to credit-unworthy borrowers by U.S. lending institutions, and then irresponsibly guaranteed with the “full faith
April & May 2011 35

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Charles Wolf, Jr.
and credit of the United States government” by Fannie Mae and Freddie Mac, were the largest and most flagrant part of the consumer credit bubble flooding the American economy in the first decade of the 21st century. So, in advancing the suggestion to rapidly expand consumer credit in China, I feel obliged to accompany it with an ample dose of humility. Nevertheless, there is a big difference between what was an imprudently excessive volume of consumer credit in the U.S. in the years preceding the Great Recession and the presently constricted availability of consumer credit in China. For example, the ratio of consumer credit to gdp in China is currently seventeen percent, compared with 40 percent in South Korea, 54 percent in Taiwan, and 65 percent in Malaysia. Furthermore, availability of consumer credit cards and debit cards is much more There has been limited in China than in the other emerging market countries in its neighborhood. Thus, there is ample a misplaced room for China to combine prudence with stimulus in encouraging consumption and curtailing excessive focus in the saving. Regulating the expansion of consumer credsoi-disant it, and preventing its abuse, can be readily accom“currency wars” plished in China by extending the purview of China’s Banking Regulatory Commission. There on the central would be no need to embark on anything like the importance of Dodd-Frank financial regulatory legislation in the U.S., which, within its 2,000-plus pages, created the the yuan’s peg Consumer Financial Protection Agency to guard to the dollar. against abuse of the various forms of consumer credit extensions. By targeting the repositories and sources of excessive savings, the measures I’ve described would affect the basic relationship underlying China’s trade (i.e., savings) surplus and its current account surplus, whereas exchange-rate tinkering will not. By reducing the excess of its savings over its investments, these measures will decrease China’s global trade surplus, as well as its current account surplus, and thereby contribute to global rebalancing. In furtherance of some degree of global rebalancing, there has been a misplaced focus in the soi-disant “currency wars” on the central importance of the yuan’s peg to the dollar. In reality, this mistaken focus will have little if any effect on global imbalances, and such effects as it may have will at most be transitory for the many reasons I’ve discussed. Instead, the focus of rebalancing efforts and debate should be on the real underlying problem: namely, China’s excessive savings. In the longer-term future, issues connected with valuation of the yuan might be resolved if China were to move to floating its currency, and allowing a freely functioning foreign exchange market to determine the yuan’s changing market value. China’s previous prime minister, Zhu Rongji, endorsed this prospect several years ago to take place in an indefinitely dis36 Policy Review

A Smarter Approach to the Yuan
tant future. Of course, such a scenario is precluded in the nearer term by the limited convertibility of the yuan for capital transactions. In any event, those who may favor this prospect, including myself, should bear in mind that, if it were to occur in something earlier than a very distant future, the yuan would be as likely to depreciate as to appreciate! At present, China’s banks have on their balance sheets more than 70 trillion yuan (about $10 trillion) in liquid deposits held by companies, household, individuals, cooperatives, and other entities — a sum that is twice the size of China’s gdp. Were full convertibility to be realized, some of the holders of these yuan assets would doubtless seek diversification of their holdings by converting a part of them to non-yuan assets, including dollar and euro assets. With the resulting increased demand by yuan-asset holders for nondollar assets, the yuan’s value would likely decline. This scenario seems remote at present but, with changing circumstances, its remote future may become a more plausible present.

Where does this leave us?
he preceding discussion appears to place all the burden of global rebalancing on China. In fact, the burden should be shared by the U.S., which should undertake precisely the opposite measures as China. Such reciprocal measures are necessary to reduce the chronic global trade and current account deficits of the U.S. by reducing the shortfall of its domestic savings compared to its aggregate investments. The excess of China’s savings above its investment, which most of the preceding discussion has emphasized, is distressingly paralleled by a shortfall of U.S. savings below its own investments. This shortfall includes the savings and investments of both federal and state governments — mostly large negative savings by these governments in recent years — as well as of U.S. companies, individuals, households, and other entities. Together, these result in a recurring shortfall in U.S. savings of about three to four percent of the U.S. gdp, largely comprised of substantial dissavings (negative savings, thus requiring borrowing) by government, and only modestly positive savings by households and retained corporate earnings in the rest of the economy. While the burden of global rebalancing should impinge on the U.S. as well as China, there is a critical asymmetry in the respective burdens they can bear. Measures required in China to reduce savings and boost consumption impinge on a Chinese economy that is buoyed by a real rate of gdp growth that remains high — above 9 percent. In sharp contrast, the measures required by the U.S. to limit consumption and raise savings would, in the short run, depress an already low rate of growth and an anemic recovery from the Great Recession accompanied by a near ten percent rate of unemployment.
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As a consequence of these immediate problems — problems that are made more serious because of political rather than economic considerations — U.S. monetary and fiscal policymakers have been more concerned with trying to boost the economic recovery by encouraging domestic consumption and investment, rather than addressing the underlying imbalance of a deficiency of aggregate savings compared to relatively excessive consumption and investment — the precise opposite of China’s imbalance. The Federal Reserve’s announcement at the end of 2010 of its second so-called “quantitative easing” (qe2) illustrates the short-term priorities of monetary policy in the U.S. qe2 consists of a $600 billion fund intended to monetize public debt, boost the money supply, and flatten the yield curve on government bonds by lowering longer-term China should yields. The goals of qe2 are to promote investment be more able to and job growth through lower interest rates on corporate and other fixed-income securities The goals rein in savings and the measures to advance them are understandand increase able for the short-term reasons mentioned above. consumption However, these measures run in a direction opposite than the U.S. to to what is required for a better degree of long-term rebalancing of the U.S. international accounts. To cut consumption further the longer-term rebalancing objective, U.S. policy should seek to raise aggregate savings above and boost aggregate investment: more specifically, to tamp savings. down consumption, both private and public consumption, reflected in smaller budgets and lower deficits in the budgets of federal and state governments. These are essential goals in the longer term, while the time horizons of political actors tend to be more or less coincident with the shorter terms for which they are elected and in which they usually aspire to be reelected. As a consequence, in the short run, the relatively heavier lifting to advance global rebalancing can more plausibly be borne by China because its efforts to sustain high gdp growth have been successful, whereas U.S. efforts to resume ample growth have been much less so. What this means in practical terms is that China should be more able to rein in savings and increase consumption than the U.S. will be able to curtail consumption and increase savings. From China’s point of view, reluctance to shoulder this heavier burden arises from the risk it entails of adding to the inflationary pressures recently evident in the Chinese economy. Current inflation in China has more than quadrupled over its rate not long ago: between four and five percent currently versus approximately stable prices in 2009. Efforts to boost consumption by the sorts of measures discussed earlier would likely add to the inflationary risks. Still, by combining a rise in prime interest rates (presently between three and four percent) with a rise in reserve requirements for its banks (recently raised to 19.5 percent), along
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A Smarter Approach to the Yuan
with appropriate administrative measures, China’s policy makers should be able to navigate these moderately roiling waters. According to a familiar scriptual precept (Luke 12:48): “To whom much is given, from him much will be required; and to whom much has been committed, of him they will ask the more.” Similar advice to a wise governor is provided by Confucius (Analects, chapter 12, section 2): “Wishing to be established himself, he assists others to be established; wishing to be successful himself, he assists others to be successful.”

April & May 2011

39

Ne New from Hoover Instit tion Press m Hoo er Institution P I
Healthy, Wealthy, d Wise Healthy, Wealthy, and Wise
Five Steps to Better Five Steps to a Better Health Care System Care System Edition 2nd Edition
By John F. Co F. Cogan, R. Glenn Hubbard, and ogan, Glenn Hubba d, ar P. Kessler sler Daniel P. Kess
During the past fty years, the US health care system t During the past fty years, the US health care system has yielded vast bene ts for large numbers of people has yielded vast bene ts for large numbers of people all around the globe. Yet today’s health care is far more all around the globe. Yet today ’s health care is far more e a costly than it needs to be. Unfor tunately, the Patient Procostly than it needs to be. Unfortunately, the Patient Protection and A or able Care Act of 2010 failed to address tection and ordable Care Act of 2010 failed to address rd a the awed incentives that have brought us to where the awed incentives that have brought us to where we are today. As this second edition of Healthy, Wealthy, and are today. As this second edition of Healthy, Wealthy, and Wise explains, there is better way. Wise explains, there is a better way. “ The costs US r re exploding. Co plo “The costs of the US health care system are exp ding. Cogan, care system are explo Cogan, Hubbard, r Kes ssler give plenty really ty Hubbard, and Kessler give us plenty of really useful ideas to to costs down and quality nd t vailabilit p t s get costs down an quality and availability up. Legislators, availability up. Legislators, read please read this book.” book.” —Ge ge P. Shultz eor —George P. Shultz former se etary of state, secretary o the Treasury, ecr former secretary state, secretary of Treasury, secretary of l bor, and director, r secretary f labor, d di labor, director, O ce of Manageme t and Budget en ce Management

F. Cogan John F. Cogan is the Leonard and Shirley Ely Senior Leonard Shirley y Senior Fellow at Hoover Institution, Stanford Un ersity. o f niv Fellow at the Hoover Institution, Stanford University. Glenn Hubbard r a R. Glenn Hubbard is the dean of the Graduate School of Graduate School Business at Colum University and a visitin scholar at mbia ng at Columbia University visiting at American Enterprise Institute. the American Enterprise Institute. professor law d Daniel P. Kessler is a professor in the law and business P. Kessler f at Stanford University fellow at schools at Stanford University and a senior fellow at the for fe ello Hoover Institution. Hoover Institution.

March March 2011, 130 pages 130 ISBN: 978-0-8179-1064-8 $19.95, cloth 978-0-817 79-1064-8 h

To order, call 800.621.2736 To order, call 800.621.2736
Hoover Institution Press, Stanford University, Stanford, California 94305-6010 Hoover Institution Press, Stanford University, Stanford, California 94305-6010 www.hooverpress.org w www.hooverpress.org

America’s Fading Middle East Influence
By Shmuel Bar

he middle east has gone through eras of projection of power by external powers, and it has adapted to the balance of power between them. This was the case during the age of colonialism (predominance of Britain and France), the Cold War (competition between the U.S. and the ussr), and the period of American predominance since the end of the Cold War. For the last two decades, the region has been characterized by the conflict between “status-quo” and “anti-status-quo” forces. The former were represented by the existing regimes in Egypt, Tunisia, Jordan, Saudi Arabia, etc., and the latter by Iran, the Islamic movement, Hezbollah, and their allies. For over two decades, the United States has been the predominant superpower in the region and the main force in maintaining the status quo. However, today, the Middle East is undergoing a sea change. The revolutions in Tunisia, Egypt, and Libya were the result of developments within the countries themselves: deep economic and social malaise and the perception of the loss of domestic deterrence by ossified regimes led by aging lead-

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Shmuel Bar is director of studies at the Institute for Policy and Strategy in Herzliya, Israel.
April & May 2011 41 Policy Review

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ers. However, the popular perception that the United States had abandoned its erstwhile allies to support those revolutions facilitated their spread to other theaters. This turnabout in American policy is not seen in the region as reflecting American power though intervention, but rather the decline of American power, manifested in a policy of “bandwagoning” after years of proactive American policy. Clearly, the decline of American projection of power in the region will have as profound an effect as the projection of American power had at its height. The policies of the United States under the Obama administration have given rise to a broad perception in the region that the United States is no longer willing to play the role of guarantor of the security of its allies there; America is indeed “speaking softly” but has neither the present intention nor the future willpower to wield “a big stick” if push comes to shove. This perception is reflected in seven, key interrelated regional issues: (1) Islam and jihadi terrorism; (2) revolution and democratization in the region; (3) nuclear proliferation; (4) Iran; (5) the Israeli-Arab peace process; (6) Iraq; and (7) Af-Pak. In all these issues, the U.S. is perceived as searching for the path of least resistance, lowering its strategic profile, and attempting to accommodate the de facto powers in the region. In all these areas, the United States is projecting an aversion to proactive action, disinclination to project power, and lack of resolve to support its allies. Remaining American allies in the region realize that they cannot rely on the United States and must adapt themselves to pressures of the masses, predominance of radical ideologies, and Iranian strategic hegemony.

Obama’s strategic Weltanschauung
he obama administration views the revolutions in the Arab world as a rerun of the fall of the Soviet bloc in 1989, which resulted in a surge of democracy that was conducive to American strategic interests. However, the transformation of America from staunch supporter of status quo (even in Iran) to surfer on the wave of revolutionary change is not without a price. Having lost the already waning confidence of its remaining allies from the “anciens régimes” in the region, it has not gained that of the new regimes, which have yet to take form. This transformation, though, did not take place overnight. It came after a long-perceived decline in the American support of its allies against external and domestic challenges, decline in its resolve to employ force to support them, and decline in its willingness to persevere. This perception was not unfounded; the Obama administration came to office with an agenda, according to which the United States is strategically overstretched and must implement a drastic reduction in its strategic profile. Such a change could be brought about, according to the worldview of the administration, only through engagement and dialogue with those very forces which had been
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perceived as anathema to the previous administration and by eschewing the confrontation — the projection (not to mention actual use) of hard power and unilateralism — which characterized the Bush administration. Islam and jihadi terrorism. The hallmark of the policy of the Obama administration towards the Middle East is its strategy of engagement with the Muslim world. President Obama came to office at a time when relations between the U.S. and the Muslim world had reached their nadir and he saw himself as particularly suited — as one who had lived in a Muslim country — to rectify them. This policy of engagement includes not only moderates and mainstream Muslims, but also the Muslim Brotherhood, its affiliates, and “moderate” Taliban elements on the Sunni side and Lebanese Hezbollah and Iraqi proxies of Iran on the Shiite side. The rationale for such engagement is rooted in a belief that these The Obama parties are not irrevocably anti-American but angry administration over American and Western support of Israel and of views the autocratic and oppressive regimes in their countries. Thus, they will respond to changes in the American revolutions in the policies on these issues. Engagement is also rooted in Arab world as a belief that preemptive engagement of these movements will neutralize their radicalism and anti- a rerun of the fall Western positions, and that unwillingness to invest of the Soviet the necessary soft and hard power perpetuates the “old guard” of pro-American regimes in the region. bloc in 1989. As part of this policy, the administration denies any link between Islam and the phenomenon of jihadi terrorism, presents the latter as an aberration with no real link to “true Islam,” downplays terrorist attacks on the part of individuals as acts of personal violence,1 and obfuscates the strength of the radical Islamist ideology in the Muslim street and the broad support that the terrorist organizations succeed in gathering.2 Unlike the Bush administration, the Obama administration does not view radical Islam as antidemocratic per se, but believes that once they come to power, the exigencies of power will moderate their positions. The Arab revolts and democratization. It is ironic that the Obama administration, which initially rejected what it perceived as the naïve effort of its predecessor to impose democracy on the Middle East, has become an even more forceful and vociferous proponent of immediate passage from old and tried autocratic regimes to untested “people power.” However, the American policy of support for revolution may not serve U.S. interests in the long run. While the U.S. has influenced events in Tunisia and Egypt, its power is limit1. See the U.S. “National Security Strategy” of May 2010, which refers to the challenge of terrorism as deriving from “a specific network — al-Qaida and its affiliates who support efforts to attack the United States, our allies and our partners.” The Department of Defense report on the Nidal Hasan attack at Fort Hood refrains from mentioning any link between the attacker and Islam or Islamic ideology. 2. President Obama’s Cairo speech is a case in point, and many of his utterances since have reiterated this view.

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ed to deconstruction and is not enough to be constructive. Paradoxically, the American posture did play a pivotal role in creating the tipping point which brought about the fall of the leaders in Tunisia and Egypt and encouraging the wave of protest in the Arab world. However, this influence was not the result of American projection of power but, rather, of the perception of American weakness. Similar to the encouragement that the Iranian protestors drew from reports that the Carter administration had abandoned the Shah in 1979, the Obama administration’s jumping on the bandwagon of regime change was viewed not as a sign of a strong America supporting democratic revolution, but rather of a weak America, which abandons its embattled allies. The loss of American support — explicitly for the regimes that were directly threatened, and implicitly for all the others — was perceived as rendering them vulWhile the U.S. nerable and encouraged the escalation of protest. has influenced The credibility of any American assurances, including strategic assurances against external threats events in Tunisia from Iran, for these regimes therefore has been draand Egypt, its matically degraded. power is limited The chances of democracy in Tunisia are greater than in any other country in the region. The emerto deconstruction gence of liberal democratic regimes in the other and is not endangered countries (Egypt, Libya, Bahrain, Jordan) seems unlikely. The only political force in enough to be Egypt or Jordan that can mobilize itself on short constructive. notice to take advantage of free elections is the Islamic movement. It will therefore at least be part of any coalition and will have an impact on the policy of any new regime. The Islamic movements in the region will not feel indebted to the United States for having turned its back on the old regimes when their downfall was already evident; the American policy is more likely to be interpreted as yet another proof of American duplicity and opportunism in the effort to maintain hegemony in the region. Furthermore, their anti-Western and anti-American sentiment is not political or circumstantial, but based on a deeply entrenched ideology, which blames all the faults of Muslim society on external forces. New regimes, which co-opt these forces, will not succeed in delivering the promises of the revolution in a short period of time and will be swift to point the finger at the enemy within and without: at the pro-Western secularists, Israel, and the United States. Finally, the Islamic movements will perceive the revolutions against regimes that had been supported by the United States as a victory against America and further proof of its decline as a force in the region. This impression will be reinforced by the anticipated U.S. final withdrawal from Iraq by the end of 2011, leaving Iran to play the pivotal role of power broker. From the point of view of the Sunni Arab states, U.S. policy in Iraq, allowing Iran a foothold in that country, acceptance of Hezbollah predomi44 Policy Review

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nance in Lebanon, and overtures towards the (relatively pro-Iranian) Muslim Brotherhood movement all indicate that the U.S. sees Iran as the future power in the region. If the impression of American support for popular revolution is not reversed, the dynamics of revolution in the region will spread. The administration has not clarified why, while it is has accepted the downfall of some of its key allies (who the administration suddenly realized were “autocrats”), it remains supportive of others. The key players, now in danger, are:
• Jordan. The rise to power of the Muslim Brotherhood in Egypt will be a force multiplier for its sister movements in other countries. The immediate casualty will be Jordan. The Muslim Brotherhood in Jordan is more radical than its Egyptian counterpart, its constituency tends to come from the Palestinian camps, and it has demonstrated a high level of support for the Jihadi-Salafi movement in Iraq. • Yemen. The fall of the Yemeni regime will open the door for both Iran and al Qaeda in that country. • Bahrain. The Shiites in the country will now be encouraged by Iran to call for full enfranchisement — a demand that the U.S. will find difficult to reject. Such a change may be the first step in toppling the regime and turning this key Gulf country into an Iranian satrap. • Saudi Arabia. The potential uprising of Shiites in the Eastern Province, who will demand equal rights or autonomy, would have a dramatic effect on the Kingdom. • Maghreb. Both Morocco and Algeria are home to much stronger and more radical Islamic movements than Tunisia. Unrest in these countries will almost certainly lead to the rise of those movements, particularly if it comes on the heels of Muslim Brotherhood ascendancy in Egypt. It is doubtful that the rebellion in Libya against the Qaddafi regime will result in a stable democratic government in that primarily tribal country.

Nuclear proliferation. The strategic worldview of the Obama administration towards the issue of the threat of wmd also stands out in contrast to that of its predecessor. It was expressed in no uncertain terms in a series of major policy documents issued during the administration’s first year.3 According to this worldview the threat of nuclear proliferation derives first and foremost from the stockpiles of nuclear weapons in the hands of the veteran nuclear powers and defensive concerns of the candidates for nuclear
3. Between February 1, 2010, and May 29, 2010, the administration issued the following policy documents: the “Quadrennial Defense Review Report”; the “Ballistic Missile Defense Review Report”; the “Nuclear Posture Review Report”; the New start Treaty, signed by the presidents of the United States of America and the Russian Federation; the Washington Nuclear Summit Conference declaration; and the “National Security Strategy” for 2010.

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armament. Hence these countries can be dissuaded from acquiring nuclear weapons by a policy of global nuclear disarmament, multilateral action by the international community to “isolate” offenders on one hand, and diplomatic engagement and extended assurances by the United States on the other hand. The threat of acquisition of nuclear weapons by terrorists is seen as one that can be dealt with through international cooperation.4 Relying on the experience of the Cold War, the risk that states in the region may actually use their nuclear weapons either intentionally or in scenarios of escalation is treated as low. The focus on nuclear disarmament in a world that seems rushing toward an era of hyper-proliferation seems somewhat inconsistent with reality. It is unrealistic to believe that the countries of the Had the U.S. Middle East may forgo acquisition of their own nuclear weapons in return for American-extended supported the assurances — particularly when the confidence in “Green American support has been so drastically shaken by Revolution” in the abandoning of its erstwhile allies in Tunisia and Iran it may have Egypt. The potential for availability of nuclear know-how and materials from Pakistan and North been able to keep Korea is likely to increase. There is no doubt that that movement under such conditions supply will breed demand and vice versa. The administrations counter-proliferviable. ation policy has no remedy for this scenario. Iran. Meanwhile, the perceived democratic uprisings in the Arab Middle East should not create the impression that the “Green Revolution” option in Iran is still on the table. Ironically, had the U.S. supported the “Green Revolution” in Iran, at least to the extent it did for the uprisings in Tunisia and Egypt, it may have been able to keep that movement viable. The conventional wisdom that Western support for the Iranian opposition is counterproductive will probably restrain the administration from expressing the type of support it expressed vis-à-vis the Arab rebellions. It is, however, this stark contrast between the American response to the unrest in Iran as opposed to the Tunisian and Egyptian (and, mutatis mutandis, Libyan) cases that reinforces the perception in the region that the U.S. has adopted an active policy not only of abandoning its old allies, but also of courting the Iranian regime and its proxies. The transfer of American support to the Iranian supported Maleki in Iraq and the lukewarm response to Hezbollah’s takeover of Lebanon are seen as further proof of this policy. The retraction of the military option by senior American officials has led to a perception that the U.S. has already reconciled itself to a nuclear Iran (at best) or even is realigning its interest in the region to accommodate Iranian predominance.5
4. See the above-mentioned “Nuclear Posture Review Report.” .

5. Secretary of Defense Robert Gates said in November 2010 that a military strike on Iran would unite that country’s divided population.

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The outcome of the administration’s engagement policy to date has been to encourage Iran to make more strident and provocative moves toward a nuclear capability. The sanctions regime creates an illusion of action in consensus, but few truly believe that it will achieve the necessary effect.6 While the U.S. can claim success of its engagement policy as a holding tactic, delaying Iran’s crossing the threshold, however, does not delay the process of decline in the willingness to rely on the United States. The cumulative impression of American reluctance to confront Iran out of fear of Iranian reprisal exacerbates the concerns in the region that the pro-Western countries will not be able to rely, when the chips are down, on the United States. The case for continuing this policy is primarily the absence of alternatives and particularly the potential consequences of an Iranian retaliation to a military strike. The argument The Obama against military action (or even threat of military administration action or perceived support for an Israeli strike) is has encouraged based on the assessment that such action would lead to severe reactions in the Muslim world, would Iran to make damage friendly regimes, and inspire terrorist activimore strident ties against the U.S., and it will be met with a broad Iranian military response, ignite a war between Iran and provocative and the Gulf States, cause a steep rise in energy prices, endanger American troops in Iran and moves toward a Afghanistan, and give the Iranian regime the oppor- nuclear capability. tunity to make short shrift of the “Green Revolution” opposition. However, behind this assessment lies the political truth that the United States does not have the willpower for another military adventure in the Middle East.7 The administration also seems to believe that Iran does not really intend to break out with a military nuclear capability but will suffice with being a “threshold nuclear power” along the lines of the Japanese model. This assessment leads it to redefine its objectives regarding the Iranian threat: from the complete prevention of a “nuclear” Iran to the acceptance of Iran as a nuclear threshold state, while convincing Tehran not to cross the threshold. However, these assessments are not shared by most of the parties in the region. There is broad anticipation in the region that Iran will not stop at the threshold and that the consequences of military action are far less catastrophic than those of a nuclear Iran. Nevertheless, there is little or no chal-

6. A poll of experts taken during the annual Herzliya Conference (taken, specifically, on February 9, 2011) showed that over 85 percent of the respondents did not believe that the current or even “biting” sanctions would deter Iran from acquiring a nuclear weapon. See http://www.herzliyaconference.org/eng/?CategoryID=461&ArticleID=2240 (accessed March 3, 2011). 7. As Secretary of Defense Gates expressed it in a speech to the United States Military Academy on February 25, 2011, “In my opinion, any future defense secretary who advises the president to again send a big American land army into Asia or into the Middle East or Africa should ‘have his head examined,’ as General MacArthur so delicately put it.”

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lenge within the U.S. administration to these assumptions. This also contributes to the perception in the region that the administration has reconciled itself to a nuclear Iran, believing that it can be contained. The Israeli-Arab peace process. The main area in which the administration sees a need to project active involvement in the region is the Israeli-Arab peace process.8 The efforts to promote Israeli-Palestinian negotiations — and possibly Israeli-Syrian talks in the future — and the willingness to risk confrontation and crisis with Israel is seen by the Obama administration as a means to garner Arab and Muslim sympathy. The result is an American policy vis-à-vis the peace process that is more Palestinian than that of the Palestinians. Washington demanded a total cessation of settlement activity, including in East Jerusalem, when the Palestinian The main way leadership itself did not, and joined the demand that Israel subscribe to the npt. The voices heard from in which the those close to the administration charging Israel, the administration Jewish lobby, and even Jewish figures within govsees a need to be ernment with subversion of strategic American actively involved interests in the region in favor of Israeli interests both reflect the true opinion of those individuals in the region is and serve as a lever for restraining Israel. The presentation of a fundamental conflict of interests through the between the U.S. and Israel in regards to Iran exacIsraeli-Arab erbates this narrative. The efforts of the administration to distance itself peace process. from Israel and to present an “even-handed” or even pro-Palestinian stance, however, have not significantly improved the chances of a peace settlement. The decline in the perception of American power was evident in the Palestinian leadership’s long refusal of American requests to renew direct negotiations. As American presence in the region wanes, the Palestinians and the Arab regimes will have to take into account growing domestic radicalization as a severe constraint against moving forward in the peace process. By distancing itself from Israel and by lowering its profile in the Middle East in general, the administration also distances itself from influence on the peace process. The image of American power in the region is an important component of Israel’s own deterrent image. This is expressed in the very image of American capacity to act in the region to support its allies and in the assumption of a strategic alliance and special relationship between the U.S. and Israel. The erosion of the image of American power is not due to
8. The view of the Obama administration that the Israeli-Palestinian conflict is the source of all evils in the region was best expressed by the former national security advisor, General Jim Jones, at the Herzliya Conference (on February 8, 2011): “I’m of the belief that had God appeared in front of President Obama in 2009 and said if he could do one thing on the face of the planet, and one thing only, to make the world a better place and give people more hope and opportunity for the future, I would venture that it would have something to do with finding the two-state solution to the Middle East.”

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the perception of American capabilities per se, but to the perception of willingness of the U.S. to act in the region to support its allies, buttressed by a perceived decline in U.S. economic preeminence. Erosion of the image of support for allies in general and for Israel in particular will have a detrimental effect on Israel’s deterrence. The erosion of Israel’s deterrence will have, in turn, a detrimental effect on that of the United States. Iraq. The primary aim of American foreign policy in Iraq is to end the war, withdraw U.S. forces, and hand security responsibilities over to Iraqi military forces. The goal of leaving Iraq a stable democratic pro-Western country has been replaced by the more modest goal of withdrawal of American troops “with their heads held high,” as President Obama said in his 2011 State of the Union address.9 Meanwhile, the sense of growing Iranian influence and declining After the U.S. American presence feeds the willingness of the Shiite withdrawal, Iraq parties to take the Iranian position into account. The American backing of the pro-Iranian candidate for will be the setting prime minister of Iraq (Maleki), instead of the candifor regional date backed by the Sunni Arabs, strengthened the struggles that perception in the region that the U.S. is not averse to engaging Iran in order to guarantee an orderly withwill not further drawal process. This raises concerns in the region of Iraqi or U.S. a “grand bargain” based on an Iranian commitment to cooperate in Iraq (and Afghanistan) in return for interests. a softening of the American position on the nuclear issue. Whether or not such a bargain is being contemplated by the administration does not change the perception in the region that it is likely, and it does not change the influence of such an assessment on the positions of the countries of the region. The Sunni countries surrounding Iraq are already developing their own areas of influence and nurturing relationships with groups inside Iraq. The U.S. may encourage this trend as a preferable alternative to Iranian influence. Iraq, after the American withdrawal, will become a microcosm of regional struggles at the expense of both Iraqi and wider American interests. Af-Pak. The American policy in the Afghani-Pakistani theaters is heavily focused on Afghanistan. However, there is no doubt today that the real threat to international stability will come from a nuclear, radical Islamist, and failed Pakistani state and not from its primitive and fragmented neighbor. The potential for a “vertical meltdown” of the Pakistani state is great. Such a meltdown would leave the semblance of a state intact but release the
9. In his address, Obama said, “Look to Iraq, where nearly 100,000 of our brave men and women have left with their heads held high. American combat patrols have ended, violence is down, and a new government has been formed. This year, our civilians will forge a lasting partnership with the Iraqi people, while we finish the job of bringing our troops out of Iraq. America’s commitment has been kept. The Iraq war is coming to an end.”

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various organs of the state to act on their own according to a variety of ideological and commercial interests. A Pakistan in which radical Islamist organizations provide open and extensive support for terrorist groups abroad (including but not only in India) with no interference on the part of a central regime, and in which the nuclear establishment engages in free marketing of its knowledge and hardware, may not be far away. Such a development would have the potential to severely undermine the stability of the Indian subcontinent. However, American policy towards Pakistan is tied to the need to co-opt the Pakistani military and intelligence to the war against al Qaeda. Public airing of the fears for the future of Pakistan would be counterproductive to that goal. The Afghani surge declared by President Obama in November 2009 has little chance of achieving the success of the surge in Iraq. This is due to fundamental differences between the two theaters. But by declaring that the American troops will start their drawdown from Afghanistan in mid-2011, the administration sent a message to all the actors in the theater that the present military effort is temporary and, if they can ride it out, the American agenda will eventually fizzle. The U.S. military has already recognized the futility of achieving the administration’s goals, and it has recommended a shift in focus from nation-building to simply destroying al Qaeda forces in Afghanistan and creating areas of stability under the central government in lieu of extending Kabul’s sway over the entire country. The U.S. may indeed attempt to stabilize only areas controlled by the central government in order to reduce terrorist attacks in these areas. Naturally, this will be perceived by the administration as an accomplishment. However, a rise in American casualties could cause a shift in American public opinion, which still sees the Afghanistan war as a “just war” against terrorism, as opposed to Iraq, which was the “wrong war.” Such a shift, bringing public opinion to perceive Afghanistan as a second Vietnam, may push the administration to look for a way to cut losses and initiate an even earlier withdrawal — or, alternatively, to invest further resources in order to achieve an image of success. The price of an American “cut and run” strategy in Afghanistan may be high. A resurgence of Taliban influence in Afghanistan will surely revive the Pakistani Taliban and further weaken the regime in Islamabad. A failed nuclear state of Pakistan will have dire consequences for the proliferation regime and the potential transformation of Pakistan and Afghanistan together into a staging ground for jihadist attacks against the West.

The strategic position of the U.S.
he future of American interests in the Middle East — and the interests of America’s allies in the region — hinge on the outcome of the civil rebellions in the Arab countries on one hand, and on the efforts to prevent Iran from acquiring a nuclear weapon on the other. Per
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the first issue, the region seems to have passed the point of no return on a slippery slope toward destabilization. At this point, the U.S. can only try to project that the abandoning of the regimes in Tunisia and Egypt is not a precedent that will be applied in the cases of other countries. It can also try to modify the impression that it is willing to accept the rise — albeit through quasi-democratic processes — of radical Islamist forces in lieu of the regimes that have already fallen. This should be done not only through declarations and public diplomacy but also by deeds, such as active support of real, secular, pro-democracy forces in these countries. Such a message may strengthen the liberal and democratic forces in those countries. An American policy of supporting the fall of despotic, secular, pro-Western regimes in favor of equally despotic Islamic regimes would be historical irony and run counter to America’s real interests. Iran is already Iran is already exploiting this period of Arab turexploiting this moil to cement its hegemony in the region. Even if the Muslim Brotherhood does not achieve full conperiod of Arab trol in the first stages of regime reorganization in turmoil to Egypt (and other countries) its co-option into the cement its fabric of the regime will enhance Iran’s influence and embolden Tehran. There is little hope that Iran will hegemony in become more pliable in regard to its nuclear prothe region. gram under such circumstances. Therefore, the Iranian challenge in the region will probably escalate in the wake of these events. If Iran is perceived as having crossed the nuclear threshold it will have “won” against the pressures of the international community. It will become a model for radical movements throughout the Muslim world and will be on its way to achieving its desired hegemony in the region. A prime example may be renewing its call for “leaving the security of the Gulf in the hands of the Gulf countries themselves” — a euphemism for Iranian hegemony without American or British presence. In this demand, Iran will be able to leverage the very failure of the U.S. to prevent Iran from going nuclear, and the regional image of the Obama administration as conciliatory towards Iran will diminish any faith that the countries of the region may have in American guarantees. The Iranian ability to employ subversion will also make it difficult for those regimes to continue to rely on the “infidel” to defend them against (Muslim) Iran. Other consequences will be felt in the heart of the Middle East; the chances of weaning Syria from the Iranian orbit and promoting stability in Lebanon, where Iran’s surrogate — Hezbollah — has already become the key power broker, will become even slimmer. Hamas, Iran’s Palestinian proxy, will feel that it has a longer leash. The chances that the Palestinian Authority will be willing to take bold steps towards a peace agreement with Israel will also wane. Failure to prevent Iran from nearing the nuclear threshold will certainly intensify the drive of other states in the region for nuclear weapons. This
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would be true for the current pro-Western regimes in the region, and moreover for radical regimes, which would be less willing to rely on American extended assurances and more likely to seek the prestige of becoming nuclear powers. The increased demand for nuclear materials and know-how will probably induce increased supply. The prime suppliers of these materials will be Pakistan and North Korea — two nuclear nations, which may become failed states on short notice. The possibility of a political meltdown in these countries may cause the elements responsible for the nuclear program to enter the market, followed by Chinese and Russian companies. Increased supply will most likely create additional demand, with countries in the Middle East and other regions speeding up their nuclear programs to take advantage of the market. The prospect that American promises of extended deterrence will stem the tide of proliferation to other countries, as it did in East Asia, have already declined and will decline further once Iran achieves even a nascent nuclear status. It is doubtful that the U.S. will be able to provide the high profile military deployment necessary to back up its assurances. Difficulties will come from domestic pressures in the region. Even if Islamic forces do not take full control, their influence on policy and their resistance to reliance on the U.S. will make it difficult for these regimes to develop a strategy against Iran with the U.S. In any case, these regimes would probably demand — at least for domestic reasons — that American promises of extended assurances include guarantees against Israel and efforts to disarm Israel as well as Iran. Thus, certain steps that the administration may take to counterbalance the decline in America’s projection of power may have an adverse effect on Israel’s deterrent posture. For the Wahhabi regime of Saudi Arabia, which came to the world as an anti-Shiite movement, Iranian (i.e., Shiite) predominance in the region is a nightmare come true. The growing anxiety in the Gulf States about a “Shiite threat,” due to the prospects of a nuclear Iran and increasing Shiite (Iranian) influence in Iraq, Syria, and Lebanon, could lead to enhanced strategic collaboration between these regimes and radical Islamic elements on the basis of an anti-Shiite platform. However, these regimes will not be able to compel the radical organizations they sponsor to restrict their militant activities solely to Shiite and Iranian targets and to avoid action against the Western “infidel” and Israel.

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The European Union Goes East
By Bruce Pitcairn Jackson

ovember 22, 2010, was an inauspicious day to hold a summit in Brussels between the European Union and Ukraine. Officials were still straggling back from Lisbon after the previous weekend’s nato and eu summits, and they were dreading the looming financial crisis in Ireland and the possibility of conflict in Korea. Ukrainian President Victor Yanukovych showed up for the event, accompanied by a small delegation of ministers. The twin European Union presidents, José Manuel Durão Barroso and Herman Achille Van Rompuy, were there too, as were Catherine Ashton, the new head of the unfortunately named External Action Service, and Enlargement Commissioner Stefan Fule. Only eight or at most ten officials had the energy to actually reach the summit. And yet by Monday evening, the European Union had taken the first real step in a new policy towards its eastern neighbors. As a part of the obscure Eastern Partnership, the eu agreed to give Ukraine an action plan
Bruce Pitcairn Jackson is president of the Project on Transitional Democracies, a nonprofit organization supporting post-Soviet and Balkan democracies in building closer ties with the European Union and NATO.
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for visa liberalization, a promise to accelerate comprehensive free trade talks, and a renewed commitment to invest billions of euros in the gas transit system of Ukraine. To put these technical agreements in perspective, one must think back to the n ato summit in Bucharest in April 2 0 0 8 when n ato ’s modest Membership Action Plan was vehemently denied to both Ukraine and Georgia. At the Bucharest meeting, nato and to a considerable extent the United States abdicated responsibility for the engagement and integration in Europe of the new democracies in Europe’s east. A few months later, in August 2008, war between Russia and Georgia underlined the obvious point: nato and the United States had no policy or even good ideas about how post-Soviet democracies would overcome their pasts and go about drawing closer to Europe. Moscow, on the other hand, had lots of ideas. Immediately after his election as President of Ukraine in February 2010, Victor Yanukovych was visited repeatedly by Russia’s President Dmitry Medvedev and Prime Minister Vladimir Putin. These visits resulted in, to name but a few of the immediate Russia-Ukrainian bilateral agreements, deals on gas prices, nuclear power, military transport, and an extended lease on Russia’s Crimean naval base. Weeks after the Russian-Ukrainian agreements had been signed in Kharkiv, Washington finally dispatched an assistant secretary to Ukraine to suggest that America could help with energy exploration or, perhaps, election reform. By June 2010, otherwise sensible think tanks in Washington and Brussels were seriously debating whether Ukraine might have departed the Euro-Atlantic world entirely and returned to some trade association of Slavic tribes on the Russian steppe. And this is what makes the November 22nd meeting so remarkable: A roomful of unelected officials unexpectedly launched a policy aimed at the comprehensive engagement of Europe’s east. With a single communiqué, a handful of European bureaucrats in Brussels brought Kiev into a closer association with European institutions than it has had in hundreds of years, if ever.

What is the eu up to in Europe’s east?
o answer this question, we must look at how Europe’s east and relations between Europe and Russia have been changing in the past twenty years and how incremental change has now produced a different political structure which, in turn, necessitates new policy in Brussels. Since 1989, the relatively stable geopolitical competition in and for Eastern Europe which lasted for most of the 20th century has given way to a more ambiguous geoeconomic problem. The traditional instruments of Western power — nato first and foremost, but also osce, the un, and the Minsk Group process — have proven to have little or no influence in the
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post-Soviet countries nearest to classical Europe in the beginning of the second decade of the 21st century.1 In a nutshell, those soft powers in which the European Union has long and annoyingly claimed a comparative advantage (if not a complete monopoly) appear to have finally supplanted the harder power of the United States, which protected Western Europe from 1945 to 1989. It is now obvious that whether or not there will ever be a wider Europe to include the east — a completed Europe, a Europe that is in the fullest meaning whole, free and at peace — will be decided on the uncertain terrain of economics, trade, pipelines, and visas. More importantly, the final contours of Europe and its position in world politics will depend on European decisions and on the strength of Europe’s institutions to a degree that would not have been true even a few years ago. Not to put too fine a point on it, but all of the perennial problems in European history hinge on whether the European Union — the benchwarmer of European history and free rider extraordinaire — can play the part of an enlightened Great Power east of the Vistula, the Carpathian Mountains, and the Bosphorus for the rest of this decade. There are several questions that follow from the problem of how the European Union responds to the challenge of building an “eastern policy” in a geoeconomic period of history, not to mention in the midst of a major recession. First, what problem is an eastern policy supposed to solve? What instruments will Europe use to execute its eastern policy? What could go wrong in the plan to bring Europe’s east closer to Europe? And, finally, how can Europe’s leaders explain to skeptical European voters why the eastern policy is important for the future of Western Europe?

The strategic problem of the east
n astronomy, “syzygy” refers to the alignment of three celestial bodies in a straight line. It turns out to be a rare occurrence. If one were to think of Russia, Turkey, and Ukraine as celestial bodies in the gravitational system of Europe, recent developments might seem to suggest a disturbing alignment. Russia’s revisionist views of European institutions and order are very well known. Whatever the merit or lack of merit of Russian policy statements on a sphere of Russian influence, the extraterritorial rights of the Russian peoples, or a new European security architecture, their strategic meaning is that Russia defines itself as a state which differentiates itself from Europe and contrasts its policies with those of Europe. Whereas the eu is an organization of democracies, Russia is a sovereign democracy. Whereas the eu is a direct descendant of the Coal and Steel Community, which coded free mar1. See Bruce Pitcairn Jackson, “A Turning Point for Europe’s East,” Policy Review 160 (April & May 2010), 49–61.

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kets and the free movement of peoples into the dna of modern Europe, modern Russia is increasingly dirigiste and tends to still command its strategic industries. In a word, Russia is a historically European state which now defines itself in non- or counter-European terms. Turkey has recently undergone an analogous, if not completely similar change in its orientation towards Europe. Foreign Minister Ahmet Davutoglu has promulgated a role for Turkey as a regional power in the greater Middle East and even in the Islamic world, a power without enemies among its non-European neighbors — with the possible exception of Israel, which is arguably its most European neighbor. Suffice to say, the foreign policy aspirations of the Erdogan-Davutoglu government are not typical of European states in pursuit of European integration. These policies are more appropriately seen as a significant development in Turkey’s search for a modern, post-Kemalist identity, which for the present is silent on what role Europe will play in its future. While it would be a major error to say that Turkey is becoming an anti-European state, it is probably fair to say that Turkey is not aligned with mainstream European policies and institutions. As is the case with Russia, the vocabulary defining Turkey today is non- and often counter-European. Ukraine’s strategic development has been more confusing and ambiguous than that of either Russia or Turkey. As a consequence of the Orange Revolution, Ukraine discarded the multi-vector policies of the Kuchma years in favor of a half-hearted, romantic appeal for European integration — romantic in the case of President Viktor Yushchenko, but half-hearted in the implementation of Prime Minister Yulia Tymoshenko. In the event, Ukraine’s European aspirations crashed at the nato Summit in Bucharest and burned in the vitriolic instability of the Yushchenko-Tymoshenko coalition. With the election of Victor Yanukovych in February 2010, Ukraine adopted a third policy for which its leaders have struggled to find a name. At first, the policy was called “neutrality,” which associated Ukraine with both Switzerland and Finland. Then it was changed to “nonaligned,” which evoked memories of the Bandung Summit and the nonaligned movement. Neither reference was intended, and today Ukraine refers to itself awkwardly as “nonbloc.” Despite the inelegant terminology, “nonbloc” accurately describes the current status of Ukraine as not a member of European institutions. In the history of Europe since the Peace of Westphalia, it is extremely rare to find the three largest states of the continent’s east all aligned in one way or another with non-European identity. Together, Russia, Turkey, and Ukraine represent over 2 5 0 million people or over one third of all European peoples. Collectively, their militaries are larger and presumably more powerful than those of all other European states combined, and together they control the vast majority of all the energy supply routes to Europe over land. This brings us to the meaning of the original Greek word syzygos, from which syzygy is derived. It means “yoked together,” which invites the ques56 Policy Review

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tion: What if the three great eastern states would become yoked together in their nonaligned, nonbloc, non-European alignment? It is important to stipulate at the outset that merely because three eastern states have become alienated from Europe at the same time does not suggest an authoritarian conspiracy, an insidious plot against Europe, or the formation of a dangerous military bloc. The question is more straightforward and agnostic. What will states that (for whatever reasons) have not found a place within Europe do outside of European institutions? It seems likely that states dissatisfied with their historical place or those in search of their modern identity will undertake a natural political process of discovery. And natural processes can have nasty consequences. It also seems likely that three adjacent states outside of European markets and institutions will quickly learn to cartel, both as a defensive measure and to force European markets to open, much as opec did in the early 1970s. Quite possibly Russia, Turkey, and Ukraine will learn to create coalitions of the unwilling within multilateral institutions to protect what they see as their sphere of influence, as Russia and Turkey did in blocking nato exercises in the Black Sea. One could imagine that over time the eastern nonbloc countries would be less eager to offer bases and transit for the projection of Western power into the Middle East, the Gulf, and subcontinent (e.g., Turkey rejecting U.S. forces in 2003). These would all seem to be perfectly natural and far from adversarial developments. Why should the eastern powers bear burdens for a Western system of which they are explicitly — by choice, by exclusion, or by identity — not a part? In strategic terms, the drift of one third of Europe into nonalignment is a highly negative development for Europe and also for the United States. In addition to further constraints on the already hamstrung hard power of the West and higher prices for basic commodities from Russia, Central Asia, and the Gulf, both the eastern neighbors and eu Europe will grow far less rapidly than if they had entered a free-trade system together. Should the nonalignment of Russia, Turkey, and Ukraine persist for the next quarter century, we should expect that a smaller, less-than-whole Europe will be an aging Europe of slow or no growth whose power in global politics is limited to its rhetorical skills and the durability of its tourism industry. In sum, allowing Europe’s east to drift out of Europe into terra incognita is an extremely bad idea.

The Eastern Partnership and Ukraine
n thinking about how Europe might arrest and reverse the drift of the eastern powers away from European institutions, neither Russia nor Turkey seems a likely point at which to begin. Russia and the West have been nursing an antagonism since the earliest days of Muscovy, through the schism of Christianity, and into and out of the Cold War. It is hard to imagine that the many issues in the relationship between
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Russia and Western Europe will be resolved in the near term and certainly not before the Russian presidential elections as early as 2012. By the same token, Turkey pursued negotiations on integration with the European Union for the better part of 60 years. These talks are now effectively deadlocked as Turkey pursues the higher calling of discovering itself as part of the Arab and Islamic world. For this situation to change, Turkey would have to, quite literally, turn about on the road to Damascus (such a conversion, like that of Paul of Tarsus, would require divine intervention upon which we cannot depend). This leaves the European Union with Ukraine, whose greatest selling point is that it is the most undecided of the nonbloc states and the most fearful of its prospects outside European institutions. It is hard to Due to circumstances discussed above, Europe does imagine that the not have a surplus of instruments with which to engage Ukraine. Both nato and Ukraine have ruled many issues in out membership in nato for Ukraine. Beyond the the relationship drudgery of monitoring Ukraine’s incessant elecbetween Russia tions, the osce has little to do in Ukraine. And Ukraine itself has already succeeded in entering the and Western wto and in securing a $15.6 billion recovery packEurope will be age from the imf, which, taken together, represents everything Ukraine could possibly aspire to with resolved in the non-European institutions. What all this boils down to is that Ukraine is the only game in Europe’s east near term. and the Eastern Partnership is the only card Europe has to play in the only game in town. The kindest thing that can be said about the European Union’s Eastern Partnership is that it was an afterthought. The triumphant Enlargement Policy was established first and succeeded in integrating all of Central and Eastern Europe, the Baltics, Cyprus, and Malta before slowing in the Balkans and running aground on Turkey. Some believe that the Enlargement Policy is, perhaps, the only instance of an eu policy that has been too successful. Enlargement was followed by the Neighborhood Policy, which was never in any danger of being successful. As a result of the extremely odd interaction between the former High Representative Javier Solana and the former eu President Romano Prodi, the Neighborhood Policy treated nearby post-Soviet democracies and North Africa states as fundamentally the same, because they were, well, neighbors. Balkan states, other than Slovenia and Greece, were held within the Enlargement portfolio to maintain the promise (or fiction) of the Thessaloniki Communiqué. It quickly emerged that the historical identities and political aspirations of the post-Soviet east and the North Africa Islamic states could not be more different, and as result the Eastern Partnership was formed presumably to break the Neighborhood Policy into two parts: an Eastern Association and a Mediterranean Dialogue (or Union, if you ask the French).
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The Eastern Partnership did not come along until the Swedish presidency of the eu in May 2009. It was conceived by Swedish Foreign Minister Carl Bildt and Polish Foreign Minister Radoslav Sikorski (with help from Lithuanians and Czechs) as a program of association with the six countries of Europe’s east (Belarus, Ukraine, Moldova, and the three South Caucasus) within which these states would have access to a wide range of relations with the European Union, short of membership. While the Partnership was explicitly a nonmembership track, by bringing these countries to the doorstep of Europe it certainly did not preclude membership at some point in the future. In fact, it was very hard to see how a country could be successful in the Eastern Partnership without ending up as a virtual member of the eu, like Norway, or a bona fide member who just showed up in Brussels one day, like Finland. At a minimum, the Eastern Partnership would keep the historically troubled and troublesome countries of Europe’s east gainfully occupied until such time as the European Union could figure out what to do with them. It became evident almost immediately that the Eastern Partnership was an idea, but not a policy. Or maybe it was a policy without a program. So, for the past 24 months, the offices of former Commissioner Oli Rehn and present Commissioner Stefan Fule have been trying to build a foundation of policies and programs, and with some success.2 Today, the eu-Ukraine Association Agreement is the signal success and only example of the Eastern Partnership in reality.3 A brief look at the component parts of the Eastern Partnership makes it obvious why Ukraine was perfectly positioned both geographically and economically to become the poster child for the Eastern Partnership. But if we examine the three major elements in the associative relationship between the eu and Ukraine — visas, free trade, and financial aid — each is revealed as slightly more or less than what it seems.
• Discussions of visa liberalization are much less than they appear. What began as a sincere attempt to provide Ukraine’s citizens the same ease of travel which Russians and other non-eu citizens enjoy quickly devolved into a roadmap to visa liberalization, which in turn proved too forward-leaning for some eu members. What was offered at the recent summit is an action plan for Ukraine to follow which might result in some unspecified visa liberalization in the future. This
2. A summary of Carl Bildt’s and Radek Sikorski’s October 2010 letter to Baroness Ashton and Commissioner Stefan Fule is available at http://euobserver.com/9/31109 (accessed February 24, 2011). 3. Ukraine has not jumped to the forefront of Association by its merits alone. Moldova has been unable to elect a president for over a year and could now face yet another parliamentary election in the next few months. And most recently in the elections on December 19, 2010, Belarus has confirmed its status as Europe’s last dictatorship and is ineligible to participate in the Partnership. Georgia, Armenia, and Azerbaijan, through no fault of their own, are too far away to take full advantage of trade or visa liberalization, and all three countries are preoccupied with the frozen conflicts on their territories to the exclusion of even the most generous European programs.

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is far less than Ukraine reasonably expected from the Association Agreement. • In contrast, the talks on a Deep and Comprehensive Free Trade Agreement (dcfta) are proving to contain too much for Ukraine to swallow in one bite. In order to access European markets, Ukraine must harmonize its tariffs and regulations with virtually the entirety of eu regulations, which would be a herculean task for any postSoviet economy. Even if successful, the eu insists on withholding access to agriculture, certain services, multiple products, and labor mobility, which negates much of the free market benefits for Ukraine. Free trade talks have proven to be a source of significant misunderstanding between the eu and Ukraine, and it remains to be seen whether Commissioner Karel de Gucht’s laudable effort to accelerate negotiations will be successful. • In the single area where the European Union has not reneged on its commitment to closer association, the proposal to help modernize the Ukrainian gas transit system to the tune of $3.5 billon, the eu investment is neither too little nor too much. It simply does not exist — other than in theory. The eu does not know how to modernize the gts; it does not have companies who will agree to participate; it has no plans about what a better gts would look like or how much gas it should carry; and it has no budget for the amount of money that it would take to repair and restructure the endlessly corrupt Ukrainian gas transit system.

Suffice to say, Commissioner Stefan Fule and his colleagues have a massive job in front of them to build out a functioning Eastern Partnership — a job whose scale and difficulty can be compared only with the Marshall Plan. The Eastern Partnership may become the engine which transforms Europe’s east, but so far the wheels are not turning and the democratic transformation of Kiev is moving at a snail’s pace.

Problems and contradictions
s I suggested earlier, the Eastern Partnership is the stepchild of earlier eu errors in conflating post-Soviet democracies with the nations along the southern shore of the Mediterranean, in creating unfair “class distinctions” between the children of the Balkans and the children of Moldova, and in severing association from Enlargement in the manner of King Solomon. In a sense the Eastern Partnership is the sum of European errors. As such, it is worth reviewing the conceptual problems and contradictions which reside in the Partnership policy and which make fixing its programs and implementation that much more difficult. It seems to me
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that there are five major questions which need to be answered before Europe can be said to have a functioning policy in its East.
1. Comprehensive or ad hoc? An Eastern Partnership promulgated by the European Union advances an implied claim to comprehensively engage all of what was once the Soviet Union, which would be the three states bordering the eu, the three states of the South Caucasus, and Russia itself. This has not proven to be the case. The Eastern Partnership focused solely on Ukraine and Moldova to the detriment of the South Caucasus and exclusion of Belarus. (Engaging Russia, of course, was never attempted.) This is far different than nato’s Membership Action Plan, which turned out to be sufficiently elastic and multi-faceted to accommodate the most disparate nato aspirants with ease. In this sense, the Eastern Partnership is simply a big tent for bilateral ad hoc-ery with five of seven of the eastern semidemocracies. As an arbitrary aggregation of multiple, bilateral diplomacies it suffers from all the expected weaknesses of ad hoc diplomacy: the absence of a body of programs; the impression of unfairness and double standards; gaping holes in coverage; confusion in the objectives of policy; and difficulty in justifying budget resources. Ultimately, a comprehensive Eastern Partnership will either have to be expanded to offer small, distant partners the same associative programs available to large, nearby partners or the Partnership will have to be cut back to a few uniform programs, such as visa liberalization roadmaps, which could be issued to the entirety of Europe’s east. 2. Conflicting motives of EU member states. A second question for the Eastern Partnership pertains to the conflicting motives of eu member states. It is not at all clear that every member of the European Union wants the Eastern Partnership to succeed or to succeed in the same way. Some nations believe that the Association Agreement is a waystation through which eastern partners pass on the road to membership status; others see the Partnership as an insurance policy against the application of any post-Soviet state for full integration into European political and financial markets. Support for the Eastern Partnership also divides Europe on north-south lines. Capitals north of Bratislava see the Eastern Partnership as a strategic imperative which rescues Europe’s east from the economic domination of Moscow and, curiously, also builds a bridge across the borderlands to Moscow — a bridge which someday Russia will cross in its return to Europe. Capitals south of Bratislava see the Eastern Partnership as a wasteful drain on resources to rebuild the Balkans and integrate the Mediterranean and little more than a source of prostitutes and unskilled labor. At a minimum, this confliction conveys a sense of Europe’s mental reservations to the eastern partners; in the extreme, these internal conflicts set the stage for intra-European guerilla war
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where one eu member builds bridges eastward and another eu member blows them up. Any foreign policy worthy of the name needs an enforcer to demand internal discipline, but it is not yet clear that President Barroso or Baroness Ashton see themselves in this role. 3. The incoherence of the European Commission. While the Eastern Partnership is uneven in its effect on the eastern partners and vacuous on the whole, it also stretches across a vast amount of bureaucratic space inside the European Commission. It is stupefying to try to imagine the internal coordination required for Commissioner Fule in Enlargement and Neighborhood to make the most modest decision regarding the Eastern Partnership. First, he should check with Baroness Ashton since the Eastern Partnership, like it or not, is a foreign policy. Then he should stop by Karel de Gucht’s office since the Free Trade talks are the salient feature of the Partnership. By the same token, Commissioner Fule should coordinate with Energy and Agriculture since the eastern partners depend on the import of energy from the east and the export of agricultural products to the West. If there is time left in the day, the Partnership commissioner should seek concurrences from Internal Market, Competition, and Justice and Home Affairs on a range of issues from market access to visa liberalization and labor mobility. Indeed, it is difficult to imagine a serious discussion of the Eastern Partnership without convening the entire European Commission. To the problem of the effectiveness of Europe’s eastern policy, what is the decision-making mechanism for the Eastern Partnership? For example, in the context of the multidimensional dialogue between the eu and Ukraine, who in Brussels can decide that the eu will give a little more on visa liberalization but will continue to protect certain agricultural markets? Effective policy must be able to adjust quickly, compromise when necessary, and calculate tradeoffs. 4. Foreign policy without federalism. The great stumbling block of Europe’s eastern policy since 1989 has been the problem of a diverse Western European community of now 27 states contending with highly centralized eastern states. Each time a decision has been needed with respect to Russia, the unity of the European Union fractures. The same can be said for decisions on energy and competition policy dealing with Gazprom. I am not suggesting that the Kremlin or the Management Committee of Gazprom has been scheming to divide Europe. I am arguing that Europe divides itself in discussions of Russia and energy.4 To a considerable extent, the Eastern Partnership

4 . There are signs that European Commissioner for Energy Gunther Oettinger and European Commissioner for Competition Joaquin Almunia are beginning to devise a clear competition policy for gas pipelines.

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is a combination of the question of Russia, the question of energy, and the question of the democratic condition of the partner countries, and, as such, is every bit as divisive of eu consensus as all the other problems in Europe’s east. Thus, the question arises: Can Europe ever have an effective eastern policy without federalizing significant competencies of the European Union? Without significant federal powers, it is difficult to see how the European Union designs and manages energy, trade, and Russia in a Euro-Atlantic political system of well over a billion people. 5. The absence of a narrative. In American political jargon, our campaign strategists refer to the “narrative” of the candidate or campaign, which means the story that summarizes the meaning of the campaign. “Honest Abe Lincoln and his path from a log cabin to the presidency” is an excellent example of a simple and immensely compelling narrative. The Eastern Partnership lacks any semblance of a popular narrative, and an eu citizen in Portugal could be forgiven for not having the slightest idea what the Eastern Partnership is supposed to do for him. Complicating the difficulty of connecting with eu voters is the general availability of competing narratives running either at a tangent or directly counter to the purposes of the Eastern Partnership.5 The Russian proposal for a new security architecture for Europe answers many of the same questions the Eastern Partnership purports to, as does the German doctrine of economic interdependence between Europe and Russia. The French are constructing a third narrative which contains both a pan-European architecture and elements of economics and trade. All three narratives are coherent and compelling to their target audiences. Much as I admire both Carl Bildt and Radek Sikorski, the Eastern Partnership remains the rarefied product of an intellectual foreign policy aristocracy. The alienation of policy in Europe’s East from the voters of Western Europe became a problem during the presidency of George W. Bush. The promotion of democracy in Europe’s east became little more than charity work with a pinch of evangelicalism and sanctimony thrown in for good measure. Not surprisingly, a few people’s ideas about charitable things to do with the money of others did not survive the first day of the current recession. For the Eastern Partnership to command the public support and resources necessary for it to prevail in Europe’s east, eu leadership will have to recast its policy to create a narrative that portrays a larger European community as being a vital economic interest of every eu household. The narrative of the Eastern Partnership needs to be about the creation of jobs, the security of
5. Ivan Krastev and Mark Leonard, “The Spectre of a Multipolar Europe” (European Council on Foreign Relations, 2010).

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energy, and the prospect of sustainable economic growth in Western Europe. The Eastern Partnership cannot survive unless it grounds itself in general narrative more firmly than the alternative political constructs.

What is at stake?
otwithstanding doubts about whether the leaders of the European Union will succeed in formulating and implementing an effective Eastern engagement, it is hugely consequential, particularly for the United States, that they do so. Despite Europe’s political growing pains and current financial crises, strategically speaking, Europe fails from its east. Across history, the existential threats to Europe arise from the east — the Huns, Mongols, Ottomans, Hitler, and Stalin. For Europe to find an inclusive answer to problems of its east is probably the U.S.’s longest-standing national foreign-policy objective, and once again among the most urgent. Zbigniew Brzezinski once wrote that Russia could not become an empire without Ukraine. There are so many other reasons that Russia cannot become an empire that Brzezinski’s insight is no longer particularly useful. It is closer to the point to say that the European Union cannot retain its current economic and political position in the world without a more effective policy to engage its east, beginning with Ukraine. Unless the European Union moves immediately to resource, reinforce, and embellish the Eastern Partnership policy, the strategic drift of major European powers, historically European peoples, rapidly emerging markets, and vast energy reserves away from Western Europe will continue and accelerate. For a time the leaders of Europe may feel relieved of the tiresome burden of engaging the post-Soviet democracies and post-Kemalist Turkey. They may even come to enjoy the quiet twilight of a smaller, austere, and inefficient Europe. But one day, someone in Western Europe will wake up and wonder how Europe became a declining, penurious, second-tier power. This disappointed European will be told that Europe failed to develop an effective, expansive, and generous policy towards its east. And should Europe fail to fill the strategic vacuum in its east, it is hard to see how the Euro-Atlantic system continues in its current form. An attenuated and disappointed Europe facing an alienated and very possibly unstable east almost certainly means a reduction in American military and economic power. For all these reasons, Americans should hope and pray that the European Union’s Eastern Partnership succeeds.

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Books Being T.E. Lawrence
By Joseph Bottum
Michael Korda. Hero: The Life and Legend of Lawrence of Arabia. HarperCollins. 762 pages. $36

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e wa s t h e best of England and the worst. A wastrel, in many ways, and a triumph, in others. A hero and a clown. A scholar and a soldier. A sophisticate and a naïf. A child and a grown-up. He was an adolescent, all in all: perhaps the greatest lifelong teenager the modern world has ever known, with every bit of the soaring self-confidence and crushing self-doubt the awkward years can bring. His name was Lieutenant Colonel Thomas Edward Lawrence. Or T.E. Lawrence, as he signed his books, or John Hume Ross and T.E. Shaw, the military pseudonyms under which he was concealed during the 1920s and 1930s — and notice, even in the ways he named himself, the inverted boast and the adolescent fantasy of famously hiding from fame.

Joseph Bottum is a contributing editor to the Weekly Standard.
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Of course, in his case, it wasn’t fantasy. It was simple reality, for he managed to be that unique figure, that strange bird, for whom it all came true. And that’s because, as Michael Korda notes in a new biography, he was always Lawrence of Arabia — the strange short man (only five-foot-five) who towered above his contemporaries: an “odd gnome, half cad — with a touch of genius,” as one soldier who served with him observed. What, in the end, are we to make of a nearly perfect soldier who was so psychologically crippled that, once he returned to England, he had to hire men to beat him? And that, even while he was producing the elegant prose of The Seven Pillars of Wisdom, his magisterial account of the Arab Revolt during the First World War? As it happens, after the failure of direct attack on the Ottoman Empire in the disaster of the Gallipoli campaign in 1915, much of the British high command considered the Middle Eastern theater a distraction from the main action of the war in France — and the Arab rising against the Ottomans even more of a distraction: “a sideshow of a sideshow,” as one officer complained at the time. But with the help of Lowell Thomas (a cynical American journalist prone to hero-worshipping, and no stranger himself to internal contradictions), Lawrence turned the Arab Revolt into center stage: the whole world watching as he battled his demons and the Turks across the ancient desert. Being Lawrence, he couldn’t just write the book about those days. He had to agonize over it, and toy with it, and dismiss it, and devote himself to it. He rewrote the manuscript several
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times — once after losing it at the Reading train station, which is as clear a symbol of psychological ambivalence as one is likely to find — before finally publishing the text in 1922 in an edition of eight copies. Convinced by his friends, notably the poet Robert Graves, that he ought to make it more widely available, he abridged the book somewhat and issued it in 1926 in a special subscribers’ edition. In the event, “more widely available” meant that he allowed two hundred copies to be made, a hundred of which he sold for 3 0 guineas each, although the illustrations and handbinding made the book cost almost double that to produce. The result was near bankruptcy, and he was forced, finally, to do what he ought to have done from the beginning — prepare a short version for general readers: the 1 9 2 7 Revolt in the Desert, “an abridgement of an abridgement,” as George Bernard Shaw sneered. It sold extraordinarily well and paid off his debts, which allowed him to hide, again, in the Royal Air Force as a mechanic under an assumed name. What a circus. On and on goes the adolescent unity of contradictions that was T.E. Lawrence. The illegitimate son of a minor aristocrat, he far surpassed his father in fame and accomplishment, but he never quite got over the fact of his bastardry. He was a natural leader, who mostly wanted to be alone. By all accounts a gentle man aimed, by predilection and education, at a scholar’s life, he was also a ruthless killer. Like Lord Byron during the Greek uprisings against the Turks in the early 19th century, Lawrence showed the surprising practicality that dreamers sometimes have, understanding far bet66

ter than his contemporaries just what gold and guns could accomplish. He showed, as well, the surprising brutality of dreamers: executing one of his own men to prevent a blood feud and admitting, to British dismay, that his Arab forces had slaughtered Turkish prisoners. He seemed, in many ways, a character out of time. Dispatches from the Western Front were filled with reports — Ypres, Verdun, Passchendaele — of thousands upon thousands dead, gassed, shell-shocked, or lost, all for tiny gains of ground. In the four months of the 1916 Somme campaign, the Allied forces managed to advance a mere seven miles, at the cost of 420,000 British casualties, 200,000 French, and 5 0 0 , 0 0 0 German. Meanwhile, Lawrence was filing dispatches of battles that seemed almost Victorian in their numbers and their victories: 300 Turks killed and a town captured, for example, at the cost of two of his Bedouin men killed. In a letter to a friend, he laconically described a 1917 attack on the railroad: “The whole job took ten minutes, and they lost 70 killed, 30 wounded and 80 prisoners.” His Arab forces suffered only one casualty, although they had to flee when a major Turkish rescue force arrived: “I lost some baggage, and nearly myself,” he added. “I’m not going to last out this game much longer: nerves going and temper wearing thin . . . This killing and killing of Turks is horrible.” imply as a commander, T.E. Lawrence proved he could do serious, theater-wide strategy. Ill with dysentery in 1917, he used the time to plan the whole campaign he
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and Prince Feisal would attempt. It would start by abandoning the old Arab plan of driving the Turks out of Medina and the other Arabian cities. The true success of the Arab Revolt, Lawrence saw, depended on forcing the Ottomans to abandon the northern cities: Jerusalem and Damascus, particularly. So he would begin with a series of pin-prick attacks on railroads, telegraph wires, and small outposts, requiring the Turks to spread their forces across the Middle East and alerting the squabbling Arab tribes to the unifying figure of Feisal. The next step would be the acquisition of Aqaba, a sea-port at which to receive British supplies. And the final step would be the building of a serious army with which to hold the ground gained by the Ottomans’ retreat back to Turkey. The amateur soldier could do superior battlefield tactics, as well. In February 1 9 1 8 , Lawrence helped direct the Arab forces in a old-fashioned set battle against three Turkish battalions at the village of Tafileh. “A miniature masterpiece,” the historian Basil Liddell Hart would later call it, as the Turks were tricked into a frontal attack on dug-in positions, then routed from the flanks by the highly mobile Arabs. The result was over 400 Turks killed, perhaps 6 0 0 taken prisoner, against Arab casualties of 40 men. And, of course, Lawrence had the almost impossible personal bravery and finely wrought character that made him perhaps the greatest leader of small forces in the 20th century. Rumors of the 1916 Sykes-Picot Agreement, carving up the Middle East between England and France after the war, deeply disturbed him. Preternaturally
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sensitive about his honesty, he decided that he had been soiled by lies to the Arabs about British support for independence. “Can’t stand another day here,” he wrote. “Will ride north and chuck it.” In a letter to one of his superiors, he added, “I’ve decided to go off alone to Damascus, hoping to get killed on the way: for all sakes try and clear

On and on goes the adolescent unity of contradictions that was T.E. Lawrence. The illegitimate son of a minor aristocrat, he far surpassed his father in fame and accomplishment, but he never quite got over the fact of his bastardry.
this show up before it goes further. We are calling them to fight for us on a lie, and I can’t stand it.” Leaving his forces behind, he made a 300-mile sweep behind Turkish lines — recruiting temporary companies from local tribes across Lebanon and Syria to help him destroy bridges and railways, and promoting revolt among clan leaders still under the Ottomans’ thumb. It may be the most extraordinary single act of the entire war, even if he undertook it in one of those dangerously fey moods into which young warriors sometimes fall, not much caring if they live or die. “At the time,” he explained in The Seven Pillars of Wisdom, “a bodily wound would have been a grateful vent for my internal perplexities.”

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Then came the almost mythic taking of Aqaba, the expansion of the revolt, and his capture and beating at Deraa while reconnoitering a railway junction. His possible homosexual rape, as well, although the only actual evidence is the coy but eroticized language with which he described it years later. Just before Christmas 1917, Jerusalem fell, and Lawrence made a triumphal entry into the city at General Allenby’s side. After a delay of some months (60 of the 90 British battalions were stripped off and sent to France), Allenby launched the Megiddo campaign: as complete a victory as the Allies had experienced in the war, the final answer to the defeat at Gallipoli three years before. It opened, naturally, with T.E. Lawrence. On September 17, he took his Arab irregulars, two regular army camel corps, a handful of Gurkha machine gunners, and a detachment of French mountain artillery, and broke the Ottoman railhead at Deraa. With extensive use of air power, Allenby smashed through the lines at multiple points. (The Royal Air Force essentially destroyed the Ottoman’s retreating Seventh Army in a single hour, catching it in the open just west of the Jordan.) Battalion after battalion of the trapped Turks surrendered, Damascus itself fell on October 1, and the entire Middle East campaign ended when the Ottoman government surrendered to the British on October 31. Not that Lawrence was there to see the culmination. Two days after the capture of Damascus, he was posted back to England. of biographies, stage plays, and documentaries — to say nothing of David Lean’s epic 1962 film — the world is inundated with information about the man, and Michael Korda’s new Hero: The Life and Legend of Lawrence of Arabia adds little that we didn’t know before. Still, Hero is a lively, well-written walk through the material, and Korda has a reason for writing it. In recent years, the trend among historians has been to debunk Lawrence’s legend. Why anyone would bother is something of a question. From the beginning, T.E. Lawrence has been as ambiguous a hero as we’ve ever known. But something there is in modern historical writing that cannot tolerate the idea of any heroism, and — as the title of Hero suggests — Korda wants to restore our sense of the man’s achievements. The longtime editor-in-chief of the Simon & Schuster publishing house, Korda is a nephew of the Hungarian émigré Alexander Korda, who helped create the British film industry — and actually owned, for a while, the movie rights for Lawrence’s story, although he sold them, over a casual lunch, to the people who would end up producing the 1962 extravaganza Lawrence of Arabia. In previous books on such figures as Ulysses S. Grant and Dwight Eisenhower, Korda has shown his appreciation for military success, and although he is no professional historian — his account of the Balfour Declaration and the moves toward establishing a Jewish homeland in Palestine is a little shaky — he works hard in Hero to reestablish our sense of T.E. Lawrence’s greatness. As well he ought, for in the context of modern sneers at the man,
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h e o n e t h i n g you can’t say about this story is that it’s little known. After dozens

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Lawrence’s reputation needs defending. In the context of Korda’s praise, however, one wants to say, Yes, but . . . The last section of the book is particularly concerned to cast Lawrence as a prophetic figure whose “advanced and radical ideas about the future of the Middle East” were simultaneously more idealistic and more practical than those of the diplomats who would not listen to him at the Paris Peace Conference after the war. That’s a curious claim, for Korda sees clearly that part of the future problem with “the brutal carving up of the Turkish empire” was that the enormous wealth, from the 1970s on, of the great oil reserves came to the most backward areas. It transformed “remote desert ‘kingdoms’ and ‘principalities’ into oil-rich powers, while leaving the more highly developed, better educated, and more populous parts of the area — Egypt, Syria, Jordan, and Lebanon — impoverished.” Lawrence hardly foresaw all this, and such lines from Korda as “On this subject, at least, Osama bin Laden and T.E. Lawrence would have stood as one” should give us pause. In truth, Lawrence was simply Lawrence: Who else but T.E. Lawrence possessed the personal reputation and charm that could force Prince Feisal and the Zionist Chaim Weizmann to sit down together in January 1919 and sign an agreement (drafted by Lawrence) to create an Arab-Jewish government in Palestine? And who else but T.E. Lawrence could have such a major accomplishment so completely ignored by the Allied powers as they settled up the Middle East? Perhaps the best way to understand him is as a fairly typical product of the
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British school system in his time, atypical only in being the absolute perfection, the complete achievement, of what that system seemed to want. As Edmund Wilson once remarked, Edwardian education (Lawrence studied at the City of Oxford High School for Boys before he began attending university at Oxford in 1907) aimed at

Something there is in modern historical writing that cannot tolerate the idea of any heroism, and — as the title of Hero suggests — Korda wants to restore our sense of Lawrence’s achievements.
only two essential goals: to produce classicists and to produce leaders of men. In T.E. Lawrence, it got what it was looking for — which is rather the problem, isn’t it? Certainly he had the scholastic background. His first-class honors thesis on crusader castles was a solid piece of work, completed after a thousand-mile walking tour of Europe in the summer of 1909. He absorbed languages like a sponge: French, German, Arabic, Turkish, Latin, ancient Greek (his 1932 translation of Homer’s Odyssey remains a superior prose rendering). And he used his skills, in the years before the war broke out in 1 9 1 4 when he was 26, to become a promising young archeologist. He was schooled, however, precisely at the moment in which British acade-

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mics made a strange turn. Essentially giving up on their Christian foundations, the British schools shifted into a modern Orientalism that persists to this day: the old biblical scholarship still directing attention to the Middle East, but the rejection of Christianity causing the emphasis to be placed instead on nonbiblical peoples. In the end, it proved a kind of Arabolatry, a philosemitism, that engulfed the universities and, through them, the British Foreign Office. Dying in a motorcycle accident in 1935, Lawrence had the advantage of living before he was forced to choose between Arabs and Jews, and even, to some degree, before he was forced to choose between serving England and aiding Arabia. But Michael Korda’s Hero is wrong to read Lawrence’s thoughts about the Middle East as something more than the kind of British intellectualism that, today, advocates the boycotting of Israel. For that matter, the man’s psychological development was of a piece with his intellectual training. In both, he proved the product of his place and time. England aimed its sons at golden moments, but to look back is to realize that those moments were the wild highs and lows of adolescence, not the steady maturity one hopes adults can find. There’s no denying that Lawrence was a great figure. At the moment of crisis, he proved a hero. But his biographies, even Michael Korda’s near hagiography, always end a little sad. T.E. Lawrence was a green bay tree that shot in its early years to an extraordinary height — and then never quite filled out. He was a glorious boy who could never quite discover how to be a man.
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Better Brain Science
By Liam Julian
Jo s h ua Fo e r . Moonwalking with Einstein: The Art and Science of Remembering Everything. Penguin Press. 320 Pages. $26.95. Brian Christian. The Most Human Human: What Talking with Computers Teaches Us About What It Means to Be Alive. Doubleday. 320 Pages. $27.95.

umanity has ever been a favorite topic of human writers. Start with the Iliad and the Odyssey — or even long before, with, say, the Bhagavad Gita — move through the tales of classical antiquity and the medieval ages, past the works of the renaissance, baroque, and modern periods, and what you’ll have traversed is a corpus of prose, literary and otherwise, obsessed with considering the human condition. This consideration has lately begun to narrow, and not merely because the popularity of ecumenical literature seems to wilt as that of insular memoir blooms. Consider the voguish pervasiveness of brain-science writing, a genre that endeavors to elucidate human actions by pinpointing where in the brain they originate, and how and why. Fine. Yet in too many of these Liam Julian is managing editor of Policy Review.
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books, the specific, scientific roots of human exploits are more significant than the exploits themselves. The expansive study of virtue tapers to the study of exact cause — the question becomes why, molecularly, a certain decision was made, and not necessarily whether the decision was right or good. “How to think?” is eclipsed by “How do we think?” Oliver Sacks is the chieftain of the brain-science clan and one of its moreresponsible members, although even his writing comes with a glaze of neurondeterminism. There is also Jonah Lehrer, a young polymath who in 2007 published the well-received and pleasant Proust Was a Neuroscientist, a book which contended (perhaps rather strainingly) that works by Proust, Cézanne, and Stravinsky foretold modern brain-science discoveries (Proust in this telling is said to have anticipated, with his famous madeleine, smell’s direct connection to the hippo-campus). 1 But for every brain-science writer like Sacks and Lehrer — sharp, stylish, generally measured — there are five others who lack eloquence, insight, and judiciousness. Two new authors have bounded into the clutter: Joshua Foer, with his book Moonwalking With Einstein, and Brian Christian, with The Most Human Human. Both books concern the mind. Both pull intermittently from Malcolm Gladwell’s dog-eared playbook (tell a shocking anecdote, then explain it with brain science) but, when they do, try to do so subordinately to broader inquisition. For all their books’ differences, Foer and Christian engage with science to seek instruction, not causation. They keep their considerations of humanity broad. The brain matters to them, but the lessons of literature, philosophy, and history matter, too. Moonwalking With Einstein is about memory. The story starts with Foer on a whim attempting to identify the world’s smartest person, undertaking some Google research to that end, and discovering Ben Pridmore, the reigning world memory champion, who is able to “memorize the precise order of 1,528 random digits in an hour” and of a shuffled deck of cards in 3 2 seconds. Pridmore knows 50,000 digits of pi. Foer is astounded by this. He considers how having such a memory would make his own life “qualitatively different — and better.” Reading would be richer, the lessons of books retained; navigating parties would be a cinch, names lined up in the mind and ready for recall. And he could finally reliably remember where he had parked. Especially intriguing to Foer are two sentences Pridmore gave to a newspaper reporter: “It’s all about technique and understanding how the memory works. Anyone could do it, really.” Two weeks later, Foer is in New York City, covering the 2 0 0 5 U.S. Memory Championship for Slate magazine. He meets Ed Cooke, a 24-yearold memory grand master from England, and the two hit it off. After the competition, hours of discussion, and several rounds of beer at a local bar, Ed offers to instruct Foer in the
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1. Two thousand seven was a good year for Proust and brain science: In addition to Lehrer’s book there was Proust and the Squid: The Story and Science of the Reading Brain, by Maryanne Wolf, a Tufts professor of child development. Proust and the Squid is a chronicle of how the human brain evolved to learn to read, and how this modernistic reading-brain’s development has affected humans’ development generally.

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techniques of memory, to be his “memory coach.” Foer accepts, and a year later he wins the American memory championship. How that triumph happened is a remarkable tale and the backbone of Moonwalking With Einstein (the title refers to a mnemonic Foer used in competition). Much of the book is not about Foer, though, but the world of memory and its peculiar characters. We are introduced to Solomon Shereshevsky, a Russian journalist who in May 1928, after being reproached by his editor for failing to take notes at a meeting, sought out the neuropsychologist Alexander Luria. Shereshevsky arrived at Luria’s door bewildered, having forgone note-taking at meetings not because he was lazy or impudent but because he always remembered everything said at them, word for word, and couldn’t conceive that others didn’t. He asked Luria to administer some memory tests, and Luria did so, first asking Shereshevsky (known in the scientific literature as “S”) to memorize a list of numbers, and then listening “in amazement as his shy subject recited back seventy digits, first forward and then backward.” Test after test returned the same result: “The man was unstumpable.” Luria finally realized that he would not be able to perform what, he later said, “one would think was the simplest task a psychologist can do: measure the capacity of an individual’s memory.” S had a condition called synesthesia; stimulation of one of his senses produced a reaction in all the others. For S, voices were colors and textures, and words immediately became vibrant images, or tastes, or smells. His memories were not abstract. Rather, they were
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vivid graphic images, ordered in relation to each other. “The nonlinear associative nature of our brains makes it impossible for us to consciously search our memories in an orderly way,” Foer writes. S’s memories were not nonlinear but “as regimentally ordered as a card catalog,” each memory sensation (a picture, a hue, a sound, flavor, or odor) assigned a precise location in his mental world. When he wanted to retrieve a memory, he simply went to the place where he had stored it. What S was doing, albeit unknowingly, was using an ancient recall technique called the memory palace, in which ideas are arrayed in the mind throughout a well-known space (a childhood home, say, or even a welltrodden route to work) and can then be retrieved later.2 The human brain, Foer explains, has evolved to be quite proficient at remembering spaces. Spend five minutes at a party walking through a stranger’s home, and you’ll naturally form a mental map of the place — where the kitchen is, how to get to the bathroom, where you left your wife. Our brains are far less adept at remembering information like phone numbers, names, and world capitals, and so the memory palace allows us to do what S did naturally: convert nonvisual data into visual images, and place those images in precise spots where we can later find them. “The idea,” Foer writes, “is to create a space in the mind’s eye, a place you know well and can easily visualize, and then populate that imagined place
2. The late Tony Judt, for instance, used this technique when immobilized by amyotrophic lateral sclerosis to sort out in wakeful nights the memories that became the essays that became his recently published book The Memory Chalet.

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with images representing whatever you want to remember.” Creation of the memory palace is credited to the Greek poet Simonides, who lived in the fifth century B.C., but the technique was first described, so far as we know, in a Latin textbook called the Rhetorica ad Herennium that was authored sometime between 86 and 82 B.C. Though no earlier writing makes mention of it, the memory palace was definitely in use in the 400-odd years between Simonides’s time and the Rhetorica’s publication. Cicero, for one, thought the palace techniques so wellknown that “he felt he didn’t need to waste ink describing them in detail.” Memory training was central to classical education. “In a world with few books, memory was sacrosanct,” and in the pages of extant books people with extraordinary recall abilities were exalted. Indeed, Foer writes that besides their goodness, “the single most common theme in the lives of the saints . . . is their often extraordinary memories.” Today, of course, memory is no longer so revered or commonly excellent. What happened? Technology, specifically writing. Foer quotes from Plato’s Phaedrus, in which Socrates tells how the Egyptian king Thamus rebuffed Theuth, the god who created writing and offered to bestow it on the land, for fear the invention would atrophy the people’s minds: “They will cease to exercise their memory and become forgetful,” says Thamus, and they will “rely on that which is written, calling things to remembrance no longer from within themselves, but by means of external marks.” This is precisely what came to pass. In a way, then, the memory competitors that Foer meets are in the business
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of reviving a lost craft. “This book is our bible,” Ed tells Foer about the Rhetorica, before also assigning him excerpts of Quintilian’s Institutio Oratoria and Cicero’s De Oratore and a ream of other musings on memory from Thomas Aquinas, Albertus Magnus, Hugh of St. Victor, and Peter of Ravenna. It is through these documents that Foer treads as he undertakes his own memory training. For half an hour each morning, and a few minutes in the afternoon, he practices, memorizing lists of words and numbers. He installs numbers in his memory palace by using the “Major System,” invented in 1648, which provides a simple code for converting numbers into letters. The number 34, for example, translates as mr. Vowels can be freely interspersed, so 34 might find a place in the memory palace as an image of the Russian space station Mir. For long strings of numbers, Foer learns moreadvanced pao systems, in which each two-digit number is associated with a different person-action-object image; 34 could be Barack Obama speaking at a lectern (or, more memorably, Obama dancing meringue with a toad). A six digit number can then be turned into a single picture by mashing the person of the first two digits with the action of the second and the object of the third. Each number between 0 and 9 9 9 , 9 9 9 thus gets its own, unique image. After a few months of such training Foer hits a plateau: his playing-card memorization time will not drop. Again, he looks to the past for answers. Help comes in the 1960s literature on speed-typing, from which he learns about the notorious “autonomous stage.” When a person, after practicing

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a given task, figures he has gotten pretty good at it, “the parts of the brain responsible for conscious reasoning become less active.” The person begins conducting the task on “autopilot.” The key, Foer learns, is to push through this wall by “consciously keeping out of the autonomous stage” while focusing on technique, remaining “goal-oriented,” and “getting constant and immediate feedback” on performance. With speed-typing, that means typing just a bit faster than you’re comfortable with, pushing yourself to continue hitting the keys even though the errors are piling up. Gradually, with focus, you’ll make fewer and fewer mistakes, even as your typing time drops. It’s much the same with memory training: Foer pushes himself to go faster and faster, and conscientiously marks his progress. “This is what differentiates the top memorizers from the second tier,” he writes. The best memorizers “approach memorization like a science” and “develop hypotheses about their limitations; they conduct experiments and track data.” “If I would have any chance at catapulting myself to the top tier of the competitive memory circuit,” Foer writes, “my practice would have to be focused and deliberate.” Foer focuses. He creates a spreadsheet to monitor his practice time and results, he graphs everything, and he keeps a journal. He buys a pair of industrialgrade earmuffs. His time starts to fall. ponders whether all his memorizing isn’t just a massive waste of time). Christian attempts something similar with The Most Human Human. In February, Ken Jennings, the legendary Jeopardy! contestant who won 74 straight games, was soundly beaten on the show by Watson, a room-sized computer created by I.B.M. Facing certain defeat, Jennings jokingly scrawled on his video screen, “I, for one, welcome our new computer overlords.” Humor aside, the questions raised by such artificial-intelligence successes are real. What, if anything, did Watson’s victory prove? Did the computer “think”? Did it “act human”? What, after all, does doing either of those things really entail? Such are among the questions that Christian undertakes to answer. His book’s scaffolding, from which its many digressions are built, is his participation in the annual Loebner Prize, a contest in which one group of humans (“judges”) engages in a battery of instant message conversations. In some of those conversations, the judges’ interlocutors are flesh-and-blood people (“confederates”) and in others are sophisticated, artificial-intelligence (a i ) computer programs. A judge decides about each conversation whether he was speaking to a human or a computer, and he rates his confidence in his determination on a 1–10 scale. Scores are tabulated, and the computer program that tricks the most judges into believing it a human wins the coveted “Most Human Computer” award and all the money and prestige that accompany it. Christian is after a different honor, though: The confederate who convinces the most judges of his humanity receives the title “Most Human Human.”
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oonwalking with Einstein is a book that could have easily followed the brainscience lodestar. Instead, Foer takes a smarter tack, following a multi-disciplinary guide that does not place all its wisdom in sparking synapses (he even

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The Loebner Prize launched in 1991, but the concept behind it dates to 1 9 5 0 , when it was proposed by British mathematician Alan Turing. Turing predicted that by 2000, five minutes of conversation would allow a computer to fool 30 percent of judges into believing it human. So far, no program has managed to hit this 30 percent mark, although in 2008 the top computer missed it by a single vote. The Turing test takes on significant meaning for Christian, who believes that “at bottom” it is “about the act of communication.” Its “deepest questions” are “practical ones” about connecting “meaningfully with each other” “within the limits of language and time.” He asks other questions, too: “How does empathy work? What is the process by which someone comes into our life and comes to mean something to us?” Such inquiries are the test’s fundamental ones, “the most central questions of being human.” “In a sense,” he continues, “this is a book about artificial intelligence, the story of its history and of my own personal involvement, in my own small way, in that history. But at its core, it’s a book about living life.” In The Most Human Human, as in Moonwalking with Einstein, the author achieves his goal; in the end, Christian walks away from the Loebner Prize having pocketed the quintessentiallyhuman designation. He describes his preparation for the contest, which consists not of regimented practice with decks of cards and sheets filled with random numbers but of research and rumination on the nature of humanity. Brain-science nuggets are interspersed with the author’s other musings, on subjects vast and varied, this being,
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after all, “a book about living life.” First up is a disquisition on what Christian calls “authenticating”; he moves from telling a story about a man with phonagnosia (the man cannot recognize voices, even his mother’s) to relaying the history of speed dating to dissecting the structure of a particular AI program called Cleverbot. Then it’s

Christian describes his preparation for the Loebner Prize, which consists not of regimented practice with decks of cards and sheets filled with random numbers but of research and rumination on the nature of humanity.
on to a consideration of machine translation of literature, a story about an ultimately successful call to a cellular phone company’s customer service department, four paragraphs about 50 First Dates (the 2004 comedy starring Adam Sandler and Drew Barrymore), and a tale about a 1989 “chatbot” program that argued for an hour and a half with an unsuspecting human. Sprinkled on top are bits of dialogue from Sex and the City, short anecdotes involving the author’s friends, and Nietzsche quotations. This is the initial, post-Introduction chapter. Subsequent chapters follow, similarly disjointed. Ingested as single-serving snacks, Christian’s brief commentaries are enjoyable, but taken together as a meal, in chapter- or book-form, they become

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a muddle. The book doesn’t have a narrative and needs one. A reader can understand what Christian is attempting here, a winding exploration of what it is to be human; can appreciate his curiosity and perspicacity, which are frequently evident; and still feel lost pushing through paragraphs with such subheads as “Intimacy: Form & Content” and “Suspicion; Roulette; Purée.” Occasionally a chapter coheres — “Getting Out of Book,” for example, is an impressive, incisive 30 pages about chess and grandmaster Gary Kasparov’s 1997 loss to I.B.M.’s Deep Blue computer — but more often it doesn’t, a victim of ambition. Unlike Foer’s memory competition, never absent from his book’s pages, the Turing test is frequently forgotten in Christian’s ramblings. It is referenced haphazardly, laboriously; one pictures the author, suddenly aware that he has wandered too far from the road, scrambling to get back on track. Add to the reader’s disorientation the annoyance of being bombarded from The Most Human Human’s pages with italicized words, not infrequently five or more of them shot from a single, short paragraph. Amid the withering barrage, one perceives the author is maybe too fond of his own cleverness, his ability to reveal hidden truths: “I don’t want life to be solved; I don’t want it to be solvable,” Christian writes, and quickly follows with, “The reason to wake up in the morning is not the similarity between today and all other days, but the difference.” This is very irritating. But to his credit, Christian, like Foer, eschews brain-science’s lowest-hanging fruit. He has written a book about humanity that looks to the vaunted
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(great literature and art) as well as the common (50 First Dates), the old (Sun Tzu) as well as the new (neuro-linguistic programming), and attempts to deglaze some essence from it all. But he includes too many ingredients. The author loses track of them, and so do we.

Power and Arrogance
By David Shorr
S t e v e n We b e r a n d B r u c e Jentleson. The End of Arrogance: America in the Global Competition of Ideas. Harvard Press. 224 Pages. $22.95.

he most interesting questions for U.S. foreign policy are variants of the following: How much has the world changed? As America tries to prod world affairs along its preferred trajectory, how has that task been complicated by new international realities? The debate over whether America is in decline misses the point. The signs of a significant shift in international power are just too plain and numerous for anyone to doubt that the United States faces new challenges in exerting its influence. But again, this leaves plenty of open questions about the nature of those challenges. Steven Weber and Bruce Jentleson’s new book, The End of Arrogance: David Shorr is a program officer at the Stanley Foundation.
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America in the Global Competition of Ideas, tackles these most basic issues head-on. The authors offer a bracing assessment of the international environment U.S. policymakers confront. If the first step in overcoming any self-delusion is to recognize that you have a problem, Weber and Jentleson are trying to jolt America out of its selfabsorption. Just to stretch the analogy, consider the book an intervention — its authors giving tough love to fellow foreign policy thinkers who are addicted to an outmoded ideology of American leadership. They liken the delusion to the Copernican paradigm shift undercutting the image of the earth at the center of the universe; the United States has lost its political gravitational pull. Putting it succinctly, the book answers this essay’s opening question by saying the world has changed a lot more than we have admitted to ourselves. Assumptions about America’s advantages are ripe for reexamination. The authors dissect even the milder conceptions of American exceptionalism. In other words, their critique covers conservatives and liberals alike. Among their targets is the notion that the U.S. political and economic model faces no significant rivals, because the supposed contenders have such limited appeal or applicability. The argument is indeed familiar — and comforting in its reassurance. The Chinese dynamo of export-led state capitalism is very hard to replicate. The Singapore model depends on its peculiar geography. Fundamentalist Islam is too inhuman. Anti-Americanism is a purely negative phenomenon. American-style democracy and free markets are dominant paradigms because no others are as coherent or
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systematic or can match their record of success. But this is a false comfort, Weber and Jentleson argue. The main fallacy — aside from the stubborn fact of China’s economic success — is that only universally applicable, all-encompassing theories can contend as rivals. In other words, while America presumes that it has won the grand historical argument about governance and economic management, we have misunderstood how that argument plays out in the real world of global politics. Resistance to American leadership and the emergence of counter-arguments don’t need to be undergirded by fully workable ideologies. So it is a mistake to view American approaches as vying in a war of ideas, in which one model decisively vanquishes another. And despite the use of the Copernican revolution as a reference point, the book also warns against the image of scientific advances, with theories gaining acceptance due to their superior explanatory power. A much better analogy for how it works, say the authors, is the competition of the commercial marketplace. In his recent state of the union address, President Obama adopted similar themes of American economic dynamism as strengthening national competitiveness, but End of Arrogance is a methodical reconception of U.S. foreign policy challenges in terms of the global competition of ideas. A main thread of the book is to warn against taking anything for granted, beginning with the “five big ideas [that] shaped world politics in the twentieth century”: the preferability of peace to war; benign (American) hegemony to balance of power; capitalism to socialism;

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democracy to dictatorship; and Western culture to all others. Jentleson and Weber portray an international order that is up for grabs at the beginning of the 21st century. Their claim that nations and leaders are working with a clean slate probably overstates the case, but most of the book charts a credible course to renewed U.S. global leadership. The heart of the book’s first section describes essential market dynamics and key principles:
In a functioning modern marketplace of ideas, at least three things are true of a twenty-first-century leadership proposition. First, we offer, but they choose. A market leader is fundamentally more dependent on the followers than the followers are on the leader . . . Second, the relationships are visible and consistency is demanded. Market leaders don’t depend heavily on private deals and subterfuge to hold their bargains in place . . . Finally, there is real competition. Markets are relentless in their ability to generate new offerings. tion that the United States can be more powerful and the world can be a better place at the same time. The belief that these two things could be consistent or even reinforce each other was the most valuable and precious advantage America had in the post-World War II milieu. It has eroded and that changes the nature of ideological competition dramatically. A new foreign policy proposition has to find a way to put that belief back into play.

The authors describe some key challenges in the contemporary marketplace, all of which lower the barriers to entry for our competitors. They highlight the revolution in information and communications technology, demographic trends that fill megacities with young people whose worldview is nonWestern, the openings provided by the diffusion of authority, and the permeability of national borders. The section concludes with a sobering assessment:
In 2010, globally, there remains a deep skepticism about the proposi78

A stark, yet apt, summary of our current strategic challenge. The book’s middle two chapters outline the substance of leadership propositions the United States could offer as a basis for equitably just societies domestically and new political terms for international order. Since the authors’ project is to shed those conceits that represent the toughest “sell” for the hegemon, their leadership propositions have a distinctly strippeddown character. In place of democratic ideology — electoral competition and the popular mandate — the essential elements of a just society are the empowerment of people to lead fulfilling lives and protection of the vulnerable, those buffeted by forces of rapid change such as extreme weather, industrial accidents, or spikes in the price of staple foods. As the authors step out of ingrained American worldviews to gain perspective on democracy, they make a compelling point about the weaknesses that others perceive. After all, democracy is a decision-making process rather than a tangible benefit for people’s lives. In the wide swath of the world where daily
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life is a grinding struggle, to idealize process and treat material conditions as secondary and contingent must seem exotic. Just as the book proposes revised standards of good governance, it issues a similar challenge to recast the international political order. Again the root of the problem is complacency; Americans are still trying to dine out on our authorship of the post-World War II order when the resonance of that creation myth has faded. Rather than dismissing the mere notion that the postwar order could be (or has already been) upended, we should try to get out ahead of the revision process. One of the authors’ refrains is that while the U.S. political elite is consoling itself that “there is no alternative,” much of the rest of the world is insisting that “there must be an alternative.” The leadership proposition that Weber and Jentleson put forward is a response to the interconnected 21stcentury world, and rightly so. The difficulty is that the precursors for a peaceful and prosperous order — which they identify as “security, a healthy planet, and a healthfully heterogeneous global society” — can only be achieved through combined effort. In other words, if all of the world’s key players deal with the international system by trying to maximize their own nations’ benefits and minimize their contributions, the world as a whole could face a pretty bleak future. As a key to spurring a more civicminded attitude from nations and their leaders, the authors offer an alternative to narrow and short-sighted conceptions of national interest: the principle of mutuality. When policy makers mull tough diplomatic compromises or tithes
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they might contribute toward global public goods, they should use an accounting system that takes a long view. They shouldn’t expect repayment or benefits of equal value, but should instead trust that if everyone does his part, “an ongoing set of mutuality moves will roughly balance out the accounts and leave us all better off than we were.” The book’s concluding chapter highlights four major foreign policy dilemmas that will test America’s international strategy. To stress the importance of those tough choices, the authors give their thoughts on the discipline of strategy: “Anybody can tell a story about the world they want to live in. Strategy is the discipline of choosing the most important aspects of that world and leaving the other stuff behind.” As they see it, the trickiest questions have to do with the proper role of nonstate actors versus official authorities; multilateralism as a false panacea for international challenges; populist pressures demanding more than democratic governance and free markets can deliver; and the difficulty of reckoning short-term costs in light of long-term risks (think climate change). e r e ’ s h ow i would answer my opening question about how much the world has changed: not as much as Jentleson and Weber say it has. The End of Arrogance works very well as a provocation, yet the authors’ insistence that we are back to the drawing board of a new global order is a bit excessive. Their report of the postwar order’s demise is greatly exaggerated. While it may be overly complacent to assert that “there is no alternative,” it’s also

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too early to declare the old rules invalid. Indeed, one of the book’s most dramatic claims is to declare the very notion of rules to be passé. In keeping with the idea of a relentlessly competitive, constantly churning marketplace, the new international order consists of a stream of intergovernmental transactions. As the authors put it, diplomatic deals are taking the place of international norms at the heart of the system. If they’re right, the world has been turned upside down, and most of us in the foreign policy establishment failed to notice it — international politics as a new global Wild West. Can that be right, though? I don’t think so. It’s one thing to face up to the political strains that indeed jeopardize the norms put in place over the last 65 years, and yet another to declare that the old rule books have gone out the window. When Weber and Jentleson describe a new political system in which each nation’s polity and social order are beyond the bounds of international relations, you have to give them credit for practicing what they preach about strategic discipline and abandoning secondary concerns. In one section, they try to get a jump on their critics with a preemptive defense against charges of betraying moral values. The authors insist that they fully share the values of liberty and democracy. It’s just that the authors’ own views — and by extension those of the American leadership and public — do not represent the weight of international sentiment and therefore do not set the terms for the global political order. As a matter of political assessment, they see only enough consensus among governments
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for them to deal with one another as equally sovereign authorities in the international arena. Governance principles for how they act within their own borders are too divisive and controversial to serve as a basis for international order. In such a system, would the United States be compelled to back Hosni Mubarak to the bitter end? End of Arrogance was published before the recent protests in Egypt, but the book says enough about the hazards of getting involved in others’ governance to allow for some extrapolation. Jentleson and Weber’s view doesn’t necessarily imply unstinting support for a dictator faced with mass discontent. Given their emphasis on political realities, it would be surprising if the authors called on U.S. policymakers to ignore the writing on the wall. Machiavelli himself would have recognized that Mubarak was neither loved nor feared enough to retain power. On the other hand, the authors’ views seem to align them with the series of U.S. ambassadors in Cairo who counseled against any serious pressure by Washington on Mubarak to reform Egypt’s political system. In other words, I interpret the book as an argument for giving Mubarak a shove at the end, but not laying a finger on him before then. Among their comments on democratic principles, the authors remind us of the long record of American hypocrisy — the dictators supported, the democratically elected governments overthrown. And remember, among their tenets of the marketplace of ideas is that a nation must be consistent to remain credible, given the market’s high degree of transparency. The apparent answer is to give up any
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pretense of defending democratic principles abroad. Given the scope and speed of change in today’s world, it is highly useful to have a book that keeps us from being too comfortable. U.S. foreign policy indeed confronts hard choices and trade-offs and must do a better job in wrestling with these dilemmas. Yet I have to ask whether this framework has boxed us in more than necessary. Must the discipline of strategy be so stringent that second-tier concerns be jettisoned rather than kept in proportion? Just because the norms of the old order have come under significant new skepticism and resistance, does that mean they are null and void? Does the global market demand such consistency that international publics cannot understand the competing pulls of democratic principles, stability considerations, and power realities? The United States must undoubtedly be more conscious of how it appears to others, less presumptuous about the advantages and self-righteousness it has enjoyed in the past, and more respectful of the needs and perspectives of other nations. U.S. foreign policy cannot press for democratic reform as if its value were universally recognized or it’s equally achievable everywhere, regardless of local power structures. Democratic values cannot be the top concern in countries where nuclear proliferation or global economic stability is the main worry. None of which, though, requires the extensive revision of American strategy that Weber and Jentleson advocate. Even if post-World War II legacy documents like the 1 9 4 8 Universal Declaration of Human Rights hold limited sway over abusive governments, as
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the authors point out, that doesn’t render them invalid. We should not be so quick to accept this kind of tacit withdrawal from the udhr or the other pillars of the so-called “international bill of rights” (the International Covenant on Civil and Political Rights and its twin Covenant on Social and Economic Rights). Repressive leaders

The United States must undoubtedly be more conscious of how it appears to others, less presumptuous about the advantages it has enjoyed in the past, and more respectful of the needs and perspectives of other nations.
should have to renounce such longstanding norms by formally abrogating the treaties their nations have previously ratified. The recent events in Egypt show the difficulties on both sides of the equation. It could hardly have been helpful to renounce the role of human rights norms in the international order when faced with such a popular outcry for political reforms. Nor would it have been a simple matter for the United States to question Mubarak’s legitimacy much earlier than it did. Clearly we haven’t figured out the right foreign policy balance, in this instance like so many others. To be sure, it’s vital that we do so, for America’s credibility, influence, and competitiveness.

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three-week war to find evidence of human rights abuses. No side escapes the report’s censure. But the documented evidence of Israeli misconduct — of reckless, perhaps even deliberate, destruction of life and property — creates a portrait of stunning aggression. For these acts of aggression, the report accuses Israel of likely war crimes and crimes against humanity, and calls on it to look deep into the actions of its military and undertake its own investigation. It also accuses Hamas, the party governing Gaza, of likely war crimes and possible crimes against humanity for firing rockets into southern Israel, and urges it to investigate its actions as well.

The Goldstone Mess
By Peter Berkowitz
Adam Horowitz, Lizzy Ratner, and Philip Weiss, editors. The Goldstone Report: The Legacy of the Landmark Investigation of the Gaza Conflict. N a t i o n B o o k s . 4 4 9 pages. $18.95.

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n the foreword, Desmond Tutu, archbishop emeritus of Cape Town, South Africa, declares that “The document at the center of this book, the report of the United Nations Fact-Finding Mission on the Gaza Conflict, better known as the Goldstone Report, is an historic attempt at seeking and speaking the truth.” According to Tutu, the Goldstone Report achieves this distinction through its impartial and intrepid examination of allegations of criminality arising out of Israel’s December 2008-January 2009 Gaza operation:
It takes on one of today’s most difficult conflicts, and does not blink but delves beneath the rubble of the

Peter Berkowitz is the Tad and Dianne Taube Senior Fellow at the Hoover Institution, Stanford University. His article “The Goldstone Report and International Law” appeared in Policy Review 1 6 2 (August & September 2 0 1 0 ). His writings are posted at www.PeterBerkowitz.com.
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Contrary to Tutu, however, even a cursory glance gives reason to believe that the Goldstone Report is more interested in taking sides than discovering the truth. While no side escapes the report’s censure and it does abound in evidence of destruction “of life and property” in Gaza, the report overwhelmingly focuses on allegations of Israeli unlawfulness; the “documented evidence of Israeli misconduct” — as opposed to victims’ testimony and unsubstantiated speculations about Israeli war aims and conduct of the war — is thin; and its urging of Hamas, which respects neither rights nor the rule of law, to undertake investigations of war crimes allegations is a risible indulgence. Naomi Klein’s Introduction echoes Tutu’s Foreword and effectively conveys the book’s overall message. A columnist for the Nation and bestselling author of The Shock Doctrine:
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The Rise of Disaster Capitalism, Klein displays in her opening paragraph a crucial misconception on which that message, as well as the report, relies:
A sprawling crime scene. That is what Gaza felt like when I visited in the summer of 2009, six months after the Israeli attack. Evidence of criminality was everywhere — the homes and schools that lay in rubble, the walls burned pitch black by white phosphorous, the children’s bodies still unhealed for lack of medical care. But where were the police? Who was documenting these crimes, interviewing the witnesses, protecting the evidence from tampering? [emphasis added]

Before investigation — Israel was far from completing its own, the Goldstone Report had not yet been issued, and nobody seriously expected that Hamas would undertake a reputable investigation — Klein concluded from casual observation during a visit that took place six months after hostilities ended that Israel had committed war crimes. Although she treats it as offering conclusive proof, the scene she confronted did not obviously present evidence of crime. Evidence of violence, destruction, and war, yes. Evidence of civilian suffering, to be sure. Evidence of human tragedy, no doubt. But evidence of crime? To conclude on the basis of what she saw on her visit to Gaza that Israel had committed crimes, Klein would have had to equate violence, destruction, war, civilian suffering, and human tragedy with criminal conduct. And, to assign guilt to Israel prior to investigation, she would have had to
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assume that fault for harm to civilians and civilian infrastructure automatically falls upon the invading army rather than, say, on fighters dressed in civilian clothes who take up positions in densely populated urban areas. There is, however, no foundation for such an equation or such an assumption in either international human rights law, which sets forth what is owed individuals in times of peace, or international humanitarian law (also known as the law of armed conflict), which deals with the protection in wartime of civilians as well as of soldiers no longer able to fight. Unfortunately, the Goldstone Report encourages Klein’s false equation and specious assumption. Indeed, the false equation of harm to civilians in war with criminal conduct and the specious assumption that legal liability for the death and destruction in Gaza falls automatically on Israel lie at the heart of the book, edited by journalists Adam Horowitz, Lizzy Ratner, and Philip Weiss, two of whom — Horowitz and Weiss — edit Mondoweiss.net, an online “news website devoted to covering American foreign policy in the Middle East, chiefly from a progressive Jewish perspective.” In addition to Tutu’s Foreword, Klein’s Introduction, an Editor’s Note, and the bulk of the 500-plus page Goldstone Report, the book contains eleven essays, all but one of which fail to take issue with the report’s damning factual and legal findings about Israel. And, like the Goldstone Report itself, ten of the eleven essays tread lightly concerning allegations of unlawful conduct by Hamas and the Palestinians. The report’s central and gravest finding, the takeaway heard around the

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world, was that Israel’s conduct of the Gaza operation was in itself unlawful. The report did not deny the legitimacy of Israel’s overall purpose in Operation Cast Lead, which was to stop the more than 12,000 rockets and missiles — every one a war crime — that Palestinian fighters directed at civilian targets in southern Israel over the previous eight years. Nevertheless, the report found that Israel launched “a deliberately disproportionate attack designed to punish, humiliate and terrorize a civilian population, radically diminish its local economic capacity both to work and to provide for itself, and to force upon it an ever increasing sense of dependency and vulnerability” (paragraph 1690). Justice Goldstone himself acknowledged in an interview in the Forward in October 2 0 0 9 , a month after the United Nation’s Human Rights Council published the report over which he presided, “If this was a court of law, there would have been nothing proven.” But that’s not how the Goldstone Report reads, or was read, certainly not by editors Horowitz, Ratner, and Weiss, not by Archbishop Tutu, not by Naomi Klein, not by ten of the eleven commentators assembled by the editors, and not by the vast majority of international human rights lawyers and progressive intellectuals throughout the West. In the book, for example, Raji Sourani, a human rights lawyer based in Gaza City and director of the Palestinian Center for Human Rights, contends that in Israel’s operation, “Public and private infrastructure throughout the Gaza Strip was extensively, and deliberately, targeted and destroyed.” Jules Lobel, a law profes84

sor at the University of Pittsburgh School of Law and vice president for the Center for Constitutional Rights, asserts that it is “neither new nor surprising” that “the overwhelming thrust of the Goldstone Report is that Israel attacked the civilian population during the Gaza war, including destroying the basic means of sustaining life (from clean water wells to poultry farms), and that these attacks violate two central bodies of international law: international humanitarian law and international human rights law.” Jerome Slater, a former professor of political science at s u n y /Buffalo and now University Research Scholar there, declares that the Goldstone Report is “extraordinarily detailed, and fully sourced.” Former Congressman Brian Baird can not see any cause for controversy: “I read the entire Goldstone Report, front to back, and I read it critically. And after all the flak it had taken, I thought, Well, what am I missing here? I didn’t have any beef with it at all.” And in an essay distinguished by the vitriol it directs against those who view the world differently, Rashid Khalidi, the Edward Said Professor of Arab Studies at Columbia University, maintains that the Goldstone Report “clinically documents the humiliations of Palestinians during the war on Gaza.” Only one essay, that of Moshe Halbertal, a professor of philosophy at the Hebrew University of Jerusalem and the Gruss Professor at New York University School of Law, registers a dissent. To the credit of the volume’s editors, it is a powerful dissent. Originally appearing in November 2 0 0 9 in the New Republic, “The Goldstone Illusion” highlights the
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report’s obscuring of Hamas’s deliberate strategy “to erase two basic features of war: the front and the uniform.” According to Halbertal,
In addressing this vexing issue, the Goldstone Report uses a rather strange formulation: “While reports reviewed by the Mission credibly indicate that members of the Palestinian armed groups were not always dressed in a way that distinguished them from the civilians, the Mission found no evidence that Palestinian combatants mingled with the civilian population with the intention of shielding themselves from the attack.” The reader of such a sentence might well wonder what its author means. Did Hamas militants not wear their uniforms because they were inconveniently at the laundry? What other reasons for wearing civilian clothes could they have had, if not for deliberately sheltering them among the civilians. As for the new “front” in asymmetrical warfare, we read in another passage, which is typical of the report’s overall biased tone, that “[on] the basis of the information it gathered, the Mission finds that there are indications that Palestinian armed groups launched rockets from urban areas. The Mission has not been able to obtain any direct evidence that this was done with the specific intent of shielding the rocket launchers from counterstrikes by the Israeli armed forces.” What reason could there possibly be for launching rockets from urban centers, if not shielding those rockets from counterattack?
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And what is the moral distinction that is purportedly being established here?

The moral, or immoral, distinction is between Hamas, whose cause the report treats with kid gloves, and Israel, for whose rights and interests it shows little sympathy. Tutu’s Foreword, Klein’s Introduction, the Editor’s Note, and all the other essays embrace that distinction. The report obscures Hamas’s erasure of the difference between combatants and noncombatants and prefers Hamas’s cause to Israel’s rights and interests in several ways. First, Goldstone and his team collected and presented evidence in an improper manner. The report relied largely on Palestinian testimony, even though Palestinians in Gaza live under the rule of an authoritarian power well known to punish viciously the expression of dissenting opinion. In addition, the report made many findings of law that turned on factual findings about the intentions in battle of Israeli commanders and soldiers. But since Israel refused to cooperate with the Goldstone Mission — it had no obligation under international law to do so, and plenty of reason, amply confirmed by the Goldstone Report, to suspect any undertaking initiated by the incurably compromised United Nations Human Rights Council — those legal findings were inherently defective. The report was certainly forbidden by principles of international law to infer that absence of evidence concerning Israeli understandings and intentions constituted evidence concerning the substance of those understandings and intentions.

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Second, the Goldstone Report failed to accurately characterize Hamas. Although the U.S. and the eu for good reason regard it — both its civil and political wings — as a terrorist organization, the report refrains from so referring to it. Indeed, the report ignores or barely discusses Hamas’s ideology and Charter, which call for The principle of distinction requires combatants to distinguish fighters and military objects from civilians and civilian objects, and to target only fighters and military objects. It also requires combatants to distinguish themselves from innocent civilians — by wearing uniforms, by carrying their arms openly, by not conducting military operations from within civilian areas — so that the other side can uphold its obligations. Israeli commanders and soldiers faced extremely difficult targeting decisions because Hamas fighters, in violation of the law of armed conflict, dressed as civilians; hid ammunition, rockets, and missiles in civilian buildings, including schools, hospitals, and mosques; and booby-trapped neighborhoods. The report concludes that much of the damage caused by Israeli military operations to civilians and ostensibly civilian objects in Gaza involved criminal conduct on Israel’s part, but it does not apply the proper legal test. The proper legal test asks whether a reasonable commander in the actual circumstances under scrutiny would believe that the target is being used to make an effective contribution to military actions. Since the Goldstone Report neither obtained information about the understanding and intent of Israeli commanders nor investigated Hamas’s systematic use of ostensibly civilian objects for military purposes — which causes those objects to lose their immunity — its many legal findings that Israel failed to properly distinguish civilian objects are inherently invalid. The report similarly misconceives the fundamental principle of proportionality, which requires that parties refrain from attacks in which expected civilian casualties and damage to civil86 Policy Review

The report misconceives proportionality, which requires that parties refrain from attacks in which expected civilian casualties and damage to civilian objects will be excessive in relation to the anticipated military advantage.
Israel’s destruction; Hamas’s overall terrorist strategy, including the military infrastructure it constructed throughout Gaza’s residential neighborhoods; its enforced Islamization of the Palestinian population of Gaza; and the flow from Iran through Egypt’s Sinai Peninsula into Gaza of rockets and missiles for attacking Israeli civilian populations. And, third, as Emory law school professor Laurie Blank shows in considerable detail in an excellent article, “The Application of i h l in the Goldstone Report: A Critical Commentary,” the Goldstone Report misapplies the principles of distinction and proportionality, the very cornerstones of international humanitarian law.

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ian objects will be excessive in relation to the anticipated military advantage. Civilian casualties and damage to civilian infrastructure in warfare are not in themselves unlawful or evidence of criminality. Moreover, the standard “excessive” is highly context sensitive, while the legal test of proportionality of which it forms a part involves, as with the test associated with the principle of distinction, reasonableness. Under international humanitarian law, a determination of whether the exercise of force was proportional depends on factual findings about what the commander and his soldiers knew and intended, on complex calculations about tactics and strategy, on the care with which decisions were made, on the prudential steps and precautions taken, and on the propriety of sometimes instant judgments in life and death situations. Suffice it to say that the Goldstone Report routinely ignores such legally essential considerations, which vitiates its sensational legal findings. he goldstone report is a deeply flawed document. If left uncontested and uncorrected, its errors will increase the dangers to which civilians and lawful fighters are exposed in an age of transnational terror. Without so stating, the report sets aside, or seeks to rewrite, international humanitarian law. It effectively shifts responsibility for civilian losses away from terrorists who deliberately violate the law of armed conflict by operating in civilian areas and onto the states fighting them. The result is to reward those who, in gross violation of the laws of war, strive to obscure the distinction between civilian and military
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objects and, in the case of liberal democracies such as Israel and the United States, to punish those who seek to uphold it. And because rewarding behavior encourages more of it, the Goldstone Report — and the Horowitz, Ratner, and Weiss volume designed to honor it — will cause more terrorists to operate within densely populated urban areas. If the report’s approach prevails, then, in the fight against transnational terrorists, liberal democracies will face a political and legal climate that all but criminalizes the exercise of their right to self-defense. In the short term, that may lead liberal democracies to increase the dangers to which they expose their own soldiers and civilians. In the long term, it risks impelling them to abandon international humanitarian law as hopelessly impractical, thereby undermining their own solidiers’ sense of justice and honor and increasing the peril to the other sides’ civilians. In the Editor’s Note, Horowitz, Ratner, and Weiss state their “hope that this book will keep the report alive and its findings relevant.” Indeed, memory of the Goldstone Report should be preserved, but not for the reasons that the editors intend. The report should serve as a potent reminder that, like other actors, international human rights lawyers and international bodies have passions and interests, biases and blind spots; they are capable of manipulating the facts and distorting the law; they often lack the expertise in military affairs that is necessary to responsibly apply international humanitarian law to the complex circumstances of asymmetric warfare; and their judgment is unconstrained by the discipline of democratic

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accountability and national security responsibility. The international law governing armed conflict — in Article 2 of the un Charter, Article 1 4 6 of the Fourth Geneva Convention, Article 17 of the Rome Statute creating the International Criminal Court — assigns to states with functioning judicial systems, which in particular means liberal democracies, the right and primary responsibility to investigate allegations of war crimes. The many and varied failings of the Goldstone Report illuminate the wisdom of this critical feature of international law. going in “slow and heavy,” defeating the enemy in detail, he intends to hit “fast and hard,” following the old Patton formula from Bastogne: “haul ass and bypass.” Just as in physics, he writes, where the impact of mass increases with velocity, so in war; “speed kills,” making up for lack of numbers. And with such advanced firepower as the U.S. possesses, the old textbook rule requiring a three-to-one advantage in the attacker’s favor no longer applies. As for the war’s aftermath, throughout the preparations Franks acts as if this is somebody else’s table entirely. In a revealing exchange, he growls at the deputy secretary of defense, “You pay attention to the day after, I’ll pay attention to the day of.” The result is well-known: Franks turned out to be only half right. A vast ground force was indeed unnecessary to defeat the Iraqi army. But trouble started almost immediately afterwards, with anarchy developing and too few American troops to contain it. Much of the infrastructure, which Franks’s attack had so carefully left untouched, was carried away by hoodlums. What followed was four years of a steadily deteriorating situation before the problem was addressed by the surge, a new military doctrine focused on protecting civilians, and more modest ambitions for Iraqi democracy. Indicative as it is of a disconnect between the different phases of a war and between the military and civilian side, Franks’s “day after, day of” quote stands out in Gideon Rose’s book How Wars End, which probes the final stages of America’s wars from World War I until today and the options that have faced U.S. administrations,
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How Peace Gets Made
By Henrik Bering
G i d e o n Ro s e . How Wars End. Simon and Schuster. 432 Pages. $27.00

n American Soldier, Centcom commander General Tommy Franks lays out his battle plan for Iraq: his campaign, he makes plain, is not going to be Desert Storm revisited. The Powell approach — with its slow buildup of some 560,000 troops, a month-long air campaign, followed by a massive ground invasion — Franks dismisses as old hat. This time around, things will be truly joint, with everything happening at once in the air and on the ground. And rather than

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Henrik Bering is a writer and critic.

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demonstrating how they all too often end up fighting the last war. As his epigraph, Rose has chosen Carl von Clausewitz’s classic statement from On War: “No one starts a war — or rather no one in his senses ought to do so without first being clear in his mind what he intends to achieve by that war and how he intends to conduct it.” As the use of military force should always serve policy, Clausewitz insists, the overall aim must be borne in mind throughout a conflict. Unfortunately, that is not always the case. “Time and again throughout history, politicians and military leaders have ignored the need for careful postwar planning or approach the task with visions of sugarplums dancing in their heads, and have been caught up short as a result,” Rose writes. Rose sees this unhappy situation as the result of an “artificial divide” between the military and the civilian side, “where by the start of the conflict, control is handed over to the generals and back to the civilians at the end.” Almost by definition, such a neat and tidy division is fraught with risk, he contends, as it ignores the fact that almost every aspect of war can take on a political dimension, even the most routine and seemingly straightforward task. For a while, this split may be covered up in all the general activity. “But at some point, every war enters what might be called the end game, and then any political questions that may have been ignored come rushing back with a vengeance.” At which stage, leaders are left to “improvise furiously.” Throughout the book, Rose carefully avoids sounding overbearing and know-it-all, a common affliction of scholars blessed with 20/20 hindsight,
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but calmly goes about his business, further exploring a theme previously struck in Eliot Cohen’s brilliant Supreme Command. roclaiming himself and his nation “too proud to fight,” Woodrow Wilson was an idealist who abhorred traditional power politics with its vulgar notions of spheres of influence. As a neutral during the first years of World War I, he sought to act as a gobetween, promoting “peace without a victory,” but found no takers. United States entry into the war transformed the contest, but as a southerner keenly aware of the bitterness caused by Reconstruction, Wilson thought it essential for Europe’s future that the Germans not be humiliated, but given a generous peace. His famous Fourteen Points called for general disarmament, free trade, and self determination. Instead of alliances, a collective security would be provided by the League of Nations. The European Allies did not buy his dreams. To the Brits, for instance, the idea of freedom of the seas was anathema. Considering himself too morally superior to be concerned with military matters, he was content to leave the drafting of the armistice to the generals, despite his fears that they might be too harsh: “It went without saying that the military commanders were alone competent to fix terms,” he proclaimed. And fix terms they certainly did, including the demand for stiff war reparations and the surrender of mountains of military materiel and of the German fleet. Rose quotes the French Marshall Foch: “[The armistice] might not bear the name of unconditional

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surrender, but virtually it would approximate to that.” Thus, according to Rose, Wilson failed to fuse the war’s military and political side and to use his clout while he still had it to get his allies in line. Instead, he put great faith in his ability to sway public opinion in Europe, but ended up cutting an isolated figure at that the German army had not been beaten on the battlefield, but had been stabbed in the back by treacherous politicians, a version eagerly peddled by German warlord Ludendorff, which made the rematch inevitable. Accordingly, when World War II came along, the Germans had to be cured of their warlike inclinations once and for all. This time around, the victory needed to be total so that no such new myths could arise. fdr was an infinitely more worldly and Machiavellian figure than the constipated Wilson and certainly felt comfortable intervening in military matters. Persuaded by the British arguments that an Allied landing in Normandy in 1943, let alone 1942, would be disastrous, he wisely overruled the advice of his own generals, who favored an early invasion, and opted for landings in North Africa instead. But fdr also had an idealistic side which, together with a privileged background, made him less clear-sighted than he should have been. Thus he combined the goal of total victory over the Germans with a vision of a postwar peace that was enshrined in the idea of the United Nations. Unfortunately, as Rose notes, the two goals did not combine well. The price required to keep Stalin on board was at variance with fdr’s political postwar order, as the Russian did not share his vision at all. Stalin wanted his own empire and he wanted complete control. Thus on the ambiguity of the Yalta agreement, Rose cites historian Bruce Kuniholm:
At Yalta, because Roosevelt could neither concede portions of Eastern Europe to Stalin, nor deny them to him [he] in effect [ended
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Roosevelt always grossly overestimated his ability to handle Stalin. Responding to a warning letter about Soviet objectives, he wrote, “I don’t dispute the logic of your reasoning. I just have a hunch that Stalin is not that kind of a man.”
Versailles. He could not even convince the U.S. Senate about the need for his League of Nations, which doomed the enterprise from the start. As Rose notes, “Even though he did not consider himself of this world of power politics, he should have recognized that he was in it, and thus at the mercy of its unforgiving logic.” In hindsight, rather than blaming it all on the Versailles treaty and on the failure of the U.S. to join the League of Nations, Rose rates the true failure of the victors their failure to work out a generous postwar financial settlement, plus the fact that America did not become part of a global institutional network. As it was, the Germans were left feeling betrayed by the sanctimonious Americans; worse, the myth grew

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up doing] both, the former through implicit understandings, the latter through the promulgation of principles that were interpreted differently by the Soviets and by the American people.

Roosevelt always grossly overestimated his ability to handle Stalin. Responding to a warning letter about Soviet objectives, he wrote, “I don’t dispute the logic of your reasoning. I just have a hunch that Stalin is not that kind of a man. Harry [Hopkins] says he’s not and that he doesn’t want anything but the security for his country, and I think that if I give him everything that I possibly can and ask for nothing in return, noblesse oblige, he won’t try to annex anything and will work with me for a world of democracy and peace.” Seeing the notion of noblesse oblige in connection with Stalin’s name is of course hilarious. Moreover, Rose notes, long-term planning was not fdr’s strong suit. He was prone to leaving things up in the air, trusting himself to be able to come up with a solution at the last moment. Almost to the very end, he toyed with the idea of reducing Germany to a permanent pastoral backwater, as urged by Secretary of the Treasury Henry Morgenthau. His preferred method of operating was pitting ministries and agencies against each other, leaving himself in control by keeping everybody in the dark, including his vice president, Harry Truman. In Rose’s view, Roosevelt did not hand over Eastern Europe to the Soviets, as claimed by the right. The issue was decided by the military facts on the ground. What he does blame fdr for is for failing “to accept with
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open eyes the full consequences of partnering with one historical monster to destroy another,” and for not having any contingency plans. It was left to Truman to sort out fdr’s mess of contradiction and ambiguity, rescuing Western Europe from chaos and Soviet domination with Marshall Plan aid, the Truman Doctrine, and the creation nato, and thereby bringing the military and political aspects of U.S. policy into alignment and mutual support. As Rose points out, the Cold War was thus a continuation of unfinished World War II business, and therefore inevitable. n J u n e o f 1 9 5 0 , North Korean forces struck in great strength across the 38th parallel; having recovered from the initial shock, General MacArthur’s triumph at Inchon, cutting across the enemy’s supply lines, and his drive beyond the 38th parallel raised hopes in Washington for a unified noncommunist Korea. These were rudely dashed when the Chinese attacked, forcing the un forces on a headlong retreat. MacArthur’s ground commander, General Ridgway, stubbornly had to fight his way back to the 38th parallel, and the war settled into a stalemate. The goal of a unified Korea gone, the Truman administration now wanted to end the war on the old line, while still protecting a noncommunist South. MacArthur of course wanted to go nuclear, and was fired, with Ridgway taking over. The opinion of the Joint Chiefs was expressed in Omar Bradley’s assessment at the MacArthur hearings that further escalation might result in “the wrong war, in the wrong place, at the wrong time and with the

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wrong enemy.” Negotiations for an armistice were initiated in July 1951, and after months of haggling, all important issues seemed resolved. Except one: Prisoner repatriation. Ashamed that the U.S. had agreed to the forced repatriation of Soviet prisoners of war in World War II, Truman was adamant that prisoners be given a choice on whether to return to their own countries. “We will not buy an armistice by turning over human beings for slaughter or slavery,” he said. The military had reservations and feared that insisting on this point might derail the negotiations. The main issue, in Ridgway’s view, was getting the American prisoners back. Ridgway’s fears proved correct: The Chinese broke off the negotiations on May 7. What caught the Truman administration by surprise were the sheer numbers of people who did not want to go back. Of the 132,000 North Koreans in un custody, only 70,000 wanted to return; and of the 25,000 Chinese, only 5,000. Humanitarian concerns are legitimate, Rose notes, but the issue was clouded by forceful methods of persuasion employed in the un pow camps by Korean and Chinese Nationalist prison trustees. The State Department did not want to give credence to Soviet propaganda, and Truman was not told. Exit Truman, enter Eisenhower. Ike had run on a platform of ending the war quickly, and in the administration’s own version, the war ended because Ike had rushed the means for delivering atomic weapons to the theater and made certain Chinese intelligence would pick up on it. But according to Rose, when coming into office, Ike really did not have a secret plan: “He
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still faced the same three unappetizing options: escalate and risk global conflict, stay the course in a costly and frustrating limited war, or back off on American demands regarding prisoner repatriation.” So his first months in office were spent slogging it out in the old Truman fashion, while threatening escalation. By May 1953, Rose writes, a frustrated Ike felt compelled to approve a policy change, encompassing “massive escalation up to and possibly including the use of atomic weapons against China.” But before he could make good on his threats, the Chinese backed down, whereupon the two sides concluded a settlement on July 1 9 5 3 “practically identical to the position two years earlier.” According to Rose, it was as much Stalin’s death that brought this about: The new leaders in Moscow were less forthcoming in their support of the Chinese and North Koreans. As Rose notes, as a result of the Truman’s administration’s failure to understand how its stand on repatriation was out of sync with its aim of ending the war, the issue prolonged the war for an extra one and a half years: Almost half of the u n casualties occurred after the start of the peace negotiations in July 1 9 5 1 , and 124,000 occurred after repatriation was the only unresolved issue. Rose questions whether it was worth the price. But at least the war left a sustainable regime in place in the South, which was not the case with America’s next conflict.

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ietnam has traditionally been used as a cautionary tale of what happens
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when the civilian leadership starts interfering in military matters and micromanaging from the White House. Rather, as Eliot Cohen convincingly argued in Supreme Command, Vietnam was “a deadly combination of inept strategy and excessively weak civilian control,” a case of the Johnson administration failing to test the strategy by asking the right questions. To Richard Nixon and Henry Kissinger, Vietnam was another wrong war in another wrong place, too expensive in men and materiel for a nation in retrenchment. The question was again one of how to get out. Having committed 550,000 troops to the effort, just upping and leaving as many Democrats suggested was not an option. U.S. credibility and its commitments around the globe were at stake: As Kissinger argued, for a nation seeking to cut back on its engagements, retaining credibility on core commitments is extra important, so as not to turn retrenchment into a rout. On entering office, both men, Rose says, looked to Korea for answers: Kissinger in his memoirs faults the Truman administration for having sharply reduced military operations in 1 9 5 1 upon entering negotiations, “thereby removing the only Chinese incentive for a settlement, ” while for Richard Nixon, having served as Ike’s vice president, the lesson of Korea had been “credible threats of massive escalation.” Accordingly, they first tried escalation, widening the war by secretly bombing sanctuaries in Cambodia and Laos, with threats of more to come, while simultaneously appealing to Moscow to make its client see sense. But Vietnam and Korea were very different countries. In Korea, there was a
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well-defined border to defend between North and South, and Syngman Rhee had been able to eliminate domestic insurgents. Not so in Vietnam, which had long and very porous borders, making a lasting stalemate like that in Korea unattainable. The administration combined escalation with training programs for the

Ashamed that the U.S. had agreed to the forced repatriation of Soviet prisoners of war in World War II, Truman was adamant that prisoners be given a choice on whether to return to their own countries.
South Vietnamese and with cautious troop withdrawals they believed would give them some breathing space, and which Nixon regarded as a masterstroke. “We were wrong on both counts,” writes Kissinger. “We had crossed a fateful dividing line. The withdrawal increased the demoralization of these families whose sons remained at risk. And it brought no respite from the critics.” It only confirmed the North Vietnamese in their determination to wait the Americans out. Forced to reconsider, the administration opted for stepped up “Vietnamization” — turning the war increasingly over to the South Vietnamese, while still providing crucial military muscle. A joint U.S.-South

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Vietnamese ground attack on bases in Cambodia only served to increase domestic furor. On the diplomatic front, Kissinger conducted intensive triangular diplomacy with the Soviet Union and China. To underscore their seriousness they bombed Hanoi and mined Haiphong harbor, culminating in the “Christmas bombing.” Rose sums up the January 1 9 7 3 Paris Accords as enabling the U.S. to get its troops out and its prisoners back “without directly betraying its client.” Whether Nixon and Kissinger themselves believed in South Vietnam’s survival is an interesting question, he notes, but at least the accords offered Thieu a tiny chance, which Congress would kill once and for all by cutting off all further aid. According to Rose, the Nixon administration had inherited a hopeless situation: This was the best that could be achieved under the circumstances. He simultaneously dismisses the right’s accusations that the Nixon administration sold out Saigon, and the left’s that the same agreement could have been had at a much earlier point. As to the latter argument, the North was only willing to sign the agreement once they were convinced that the U.S. had lost the stomach for further involvement. Describing the ordeal of the Nixon administration, Rose does not foam at the mouth but is eminently sensible. He writes, “The great irony . . . is that for all the neuroses and procedural irregularities, the basis foreign policy it pursued was sane and moderate, a reasonable attempt to chart a path out of the wilderness. And it almost worked — until blowback from the administration’s own flaws brought everything down in flames.”
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he carter doctrine, which in 1980 declared the Middle East an area of vital interest to the U.S., was the American response to the mullahs taking over Iran and the Soviet invasion of Afghanistan. So when Saddam Hussein a decade later invaded Kuwait, the Bush administration could not ignore an act that would leave the Iraqi strongman with a stranglehold on the region and the world’s oil supply: Bush decided to expel the Iraqi forces from Kuwait. “The wonder is not that the United States chose to use its power to reverse the Iraqi invasion, but that the decision to do so was at all controversial.” The war itself Rose characterizes as a textbook job of detailed planning and carefully lined-up allies. The same could not be said about its final phase, where Rose faults the administration for failing to link “its military operations directly to political objectives inside Iraq and not planning for a variety of postwar scenarios.” Throughout, Vietnam was very much on their minds — and counterproductively so — in what they saw as the need to avoid Third World nightmares and the need to avoid the kind of civilian interference Lyndon Johnson had engaged in from the Oval Office. “In practice, this meant . . . that politico military affairs were less well coordinated than they might have been, with consequences that became apparent only as the war was drawing to a close.” For their part, the military brass — headed by Joint Chiefs of Staff Chairman Colin Powell, who, as Rose reminds us, had not even wanted to fight over Kuwait in the first place —
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worried about being seen as butchers and wanted to wind down the war as fast as possible. As a result, they ended it too early, which permitted large formations of enemy troops to escape north. At the ceasefire talks in the border town of Safwan, Norman Schwarzkopf compounded the mistake by permitting the Iraqis to fly their helicopter gunships, which Saddam promptly used to quell the Shiite rebellion and against the Kurds in the north. In Rose’s view, Schwarzkopf should never have been allowed to conduct the ceasefire negotiations in Safwan on his own. He quotes Horner, the air commander: “Quite frankly, I think we were preoccupied with planning the war, and we thought that somebody else was planning the peace. . . . I think we were all surprised that there wasn’t somebody ready to jump on a jet and fly over to do the negotiations with the Iraqis.” Again, the artificial divide assets itself. Once the ceasefire had been proclaimed, the Bush administration’s leverage was gone for using the war to effect changes inside Iraq itself, as some civilians within the administration had wanted. Much of the problem stemmed from the fact that the principals “had decided that hope could indeed be a plan.” In a classic case of wishful thinking, Rose writes, they hoped — they even assumed — that some irate member of the Iraqi high command would pull a coup and kill off Saddam. “This magical Iraqi would act as a deus ex machina, miraculously appearing onstage at the end of the play and resolve everybody’s problem.” With Saddam having quelled all attempts at rebellion, the administration found itself having to improvise,
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providing safe havens for the Kurds in the North and imposing a no-fly zone — in effect, settling for a containment policy that lasted more than a decade but became increasingly hard to uphold. Cohen in Supreme Command spoke about “an abdication of authority by the civilian leadership in the postVietnam era.” Instead of ending the Vietnam syndrome, as the Bush crowd proudly bragged, Cohen argued, the Gulf War in fact strengthened it, by reinforcing the idea that the civilians should butt out of military matters, thus undercutting the principle of civilian control. hich brings us to the two current wars, Afghanistan and Iraq. In his determination to modernize the U.S. military and scrap a variety of weapons systems, Donald Rumsfeld did not hesitate to take on the military establishment. No, his flaws lay elsewhere. Rose sees Afghanistan and Iraq as examples of Rumsfeld’s “new, more expeditionary approach” to warfare. A light U.S. presence in Afghanistan working in concert with local forces initially defeated the Taliban regime quite handily, whereupon attention switched to Iraq. Here George W. Bush and his administration wanted to finish the job that had been left unfinished the first time around: getting rid of Saddam. Rumsfeld wanted a quick-in, quick-out operation, designed to avoid long status as an occupying power and anything that smacked of nation building. In yet another instance of wishful Washington thinking, it was assumed that with Saddam gone, the Iraqis

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would go merrily about the business of reconstruction and that Iraqi society would soon be up and running. The administration’s model, Rose writes, was not postwar Germany or Japan but France in 1944, where the liberators quickly put De Gaulle and his Free French in charge. But just as Vietnam was not Korea, so Iraq was not 1944 France: As Rose notes, historical analogues are tricky things. Thus Rumsfeld chose to ignore expert advice, including a U.S. Army War College study, which warned of the country’s intricate ethnic and religious make-up and of how political stability, the key element in any exit strategy, would require large forces. For all Rumsfeld’s contempt for nation-building, Rose notes, “clearing, holding and building ” has been the formula the U.S. has followed across the globe when successful: Success has depended on its ability to leave a structure in place, resting on indigenous forces. The surge of 2007 managed to stabilize Iraq; whether such a structure can be built in Afghanistan is the crucial point. The danger signs are obvious: a weak and corrupt government in Kabul and another porous border. But one cannot very well allow Afghanistan and Pakistan to slide into chaos. Warplanners often divide war into four phases, working forward towards some vaguely defined “victory” in phase four — an approach that easily mires one’s thinking in purely military terms. Rose recommends going about it the other way around, first carefully defining what it is one actually wants to achieve politically and what the eventual security arrangements will involve, and then working backwards from there. That way, the larger purpose is constantly kept in mind. As Rose notes, this may just be common sense. “But in war, as in life more generally, common sense is actually quite uncommon.”

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