The recent comeback of private contracting suggests that central governments have become weaker again, at least relative to the tasks they are undertaking. Alexander Tabarrok, my colleague (and sometimes co-author) at George Mason University, where he is also a professor of economics, traced the history of private contractors in a study, “The Rise, Fall, and Rise Again of Privateers” (The Independent Review, spring 2007, www.independent.org/publications/tir/article.asp?issueID=49&articleID=631). He showed that public navies and armies began to displace private contractors in the 19th century, as governments became more powerful and better funded.
Today, America no longer has a draft, its military bureaucracy can be inflexible and the public wishes to be insulated from the direct impact of war. Contractors are a symptom of government weakness, but are not the problem itself. The first Persian Gulf War, which enjoyed greater international support, was not reliant on contractors to nearly the same degree.
Among many Iraqis, Blackwater and other companies have a reputation for getting the job done without much caring about Iraqis who get in the way. But part of the problem may stem from economic incentives. If Blackwater is assigned to protect a top American official, who is later assassinated, Blackwater may lose future business. A private contractor doesn’t have a financial incentive to protect Iraqi citizens, who are not paying customers. Ultimately, this reflects the priorities of the United States military itself. American casualties are carefully recorded and memorialized, but there is no count of Iraqi civilian deaths.
It is harder to recognize when private contractors are being underemployed. During the Rwandan civil war in the 1990s, the United Nations debated using two private contractors, Executive Outcomes or Sandline International, to intervene. The U.N. rejected the notion and instead turned to a poorly trained Zairean police contingent. We’ll never know how private contractors would have fared, but the Zaireans were ineffective; some 800,000 Rwandans were murdered.
How America must handle the falling dollar, Lawrence Summers
The US has responded in an ad hoc way by carrying on a “strategic dialogue” with China – by far the largest economy with an exchange rate linked to the dollar – backed by congressional threats to address exchange rate issues using the tools of trade policy and references to communiqués from the Group of Seven leading industrial nations. In reality the dialogue is anything but strategic. Like so much of American international policy in recent years, it seems to confuse the firm statement of legitimate desire with the serious conduct of diplomacy.
Think of the questions Chinese policymakers must ask themselves. What is the highest US priority – global financial stability or market access for well-connected US firms? Can the US take yes for an answer or is it a certainty that a new president will insist in 18 months on a new set of economic diplomacy accomplishments with China? In which areas, if any, is the US prepared to adjust its policies in response to global interests? Given that the Chinese authorities have presided over nearly double digit annual growth for a generation, do US officials who make assertions about what is in China’s interest have the experience and knowledge of China that should cause their views to be taken seriously? Why is China being singled out? How could China – even if it wished to – act in ways that the US prefers without appearing to yield to international pressure?
We should turn the clocks forward, not back, John Kay
An Englishman, William Willett, drew attention to the inefficient use of daylight a century ago and proposed an ingenious solution. Now that governments controlled the time, they could make people turn their clocks forward or back. Willett’s campaign was quickly and unexpectedly successful. Summer, or daylight saving, time was adopted on both sides in the first world war.
The economic arguments were based on the implications of unnecessarily shortened daylight for industries such as farming and construction. Those arguments survived wartime exigencies. Today most places more than 30º latitude (Atlanta is 34º, New York and Madrid 41º, and London and Berlin 52º) shift clocks forward in summer.
Enforced time-shifting is an intrusive yet effective piece of economic and social engineering. Next week, even people free to rise when they choose, such as retirees and newspaper columnists, will get up later and go to bed later. Who would believe they could be induced to do this by government decree?
A Catastrophe Foretold, Krugman
A new report from Congress’s Joint Economic Committee predicts that there will be two million foreclosures on subprime mortgages by the end of next year. That’s two million American families facing the humiliation and financial pain of losing their homes.
At the same time, investors who bought assets backed by subprime loans are continuing to suffer severe losses. Everything suggests that there will be many more stories like that of Merrill Lynch, which has just announced an $8.4 billion write-down because of bad loans — $3 billion more than it had announced just a few weeks earlier.
Second, much if not most of the subprime lending that is now going so catastrophically bad took place after it was clear to many of us that there was a serious housing bubble, and after people like Mr. Gramlich had issued public warnings about the subprime situation. As late as 2003, subprime loans accounted for only 8.5 percent of the value of mortgages issued in this country. In 2005 and 2006, the peak years of the housing bubble, subprime was 20 percent of the total — and the delinquency rates on recent subprime loans are much higher than those on older loans.
Bush’s Dangerous Liaisons, François Furstenberg
MUCH as George W. Bush’s presidency was ineluctably shaped by Sept. 11, 2001, so the outbreak of the French Revolution was symbolized by the events of one fateful day, July 14, 1789. And though 18th-century France may seem impossibly distant to contemporary Americans, future historians examining Mr. Bush’s presidency within the longer sweep of political and intellectual history may find the French Revolution useful in understanding his curious brand of 21st- century conservatism.
Soon after the storming of the Bastille, pro-Revolutionary elements came together to form an association that would become known as the Jacobin Club, an umbrella group of politicians, journalists and citizens dedicated to advancing the principles of the Revolution.
The Jacobins shared a defining ideological feature. They divided the world between pro- and anti-Revolutionaries — the defenders of liberty versus its enemies. The French Revolution, as they understood it, was the great event that would determine whether liberty was to prevail on the planet or whether the world would fall back into tyranny and despotism.
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