Peter L. Berger's Blog, page 497

Thailand Pivoting to Beijing

When the U.S. made a big show of condemning Thailand after a coup in 2014, we worried that it would open the door for China to gain influence in the southeast Asian country. Since then, we’ve watched as Bangkok moved its gaze from Washington to Beijing. Now, Thailand’s finance minister says he looks forward to even more investment from China, according to The Diplomat:

China is already a significant investor in Thailand: during the first nine months of 2015, Beijing invested more than 12 billion baht (about $4 billion) into Southeast Asia’s second largest economy, making it the fourth biggest foreign investor there according to the Board of Investment (BoI). But with Thailand’s economy struggling to take off, officials have been eying even more investment from key countries, including Beijing.

The government has declared 2016 a “Special Investment Promotion Year,” with a range of investment privileges designed to woo foreign investors. These include a double depreciation expense for acquiring new assets, a fast track for the approval of public private partnerships (PPPs), and several tax deductions and exemptions.

Thailand is eyeing a series of construction of infrastructure projects, and it’s been working hard to make it easier for Chinese investment, in particular, to flow into the country. As China invests larger amounts and gains more influence, the United States loses. So this story is just the latest opportunity to recognize how self-defeating the State Department’s approach in Bangkok has been for American interests.

Sen. Mike Lee Stands up to Crony Capitalism

Over at Forbes, Utah Senator Mike Lee has an important op-ed on the explosion in the number of working-class fields that have implemented unnecessary licensing requirements over the last several decades, raising prices and squelching competition:

Security guards, florists, barbers, massage therapists, interior decorators, manicurists, hair stylists, personal trainers, tree trimmers and auctioneers work in just some of the many, many professions that state legislatures have seen fit to cartelize [ . . . ]

According to a study by University of Minnesota Professor Morris Kleiner, “Occupational licensing has either no impact or even a negative impact on the quality of services provided to customers by members of the regulated occupation.”Occupational licensing has grown not because consumers demanded it, but because lobbyists recognized a business opportunity where they could use government power to get rich at the public’s expense.

Lee frames the licensing problem as primarily a blow to consumers, noting that it forces Americans to spend $200 billion more on services each year. In this moment of anti-establishment fervor, however, it might be just as effective to describe the growing licensing cartel as a type of conspiracy against the working class. As Lee notes, dentists (median salary: $149,000) lobbied aggressively to create a licensing requirement for teeth whitening once their business was challenged by less-educated people performing the same service for a lower price. It might be hard to get voters riled up about occupational licensing the way they get riled up about illegal immigration, but this is nonetheless a real example of insiders with access to political power rigging the system against less credentialed workers. The Economist has reported on research that professionals protected by licensing see 18 percent higher wages than they would otherwise. Meanwhile, other workers lose out.

Taking on occupational licensing run amok is tricky, since most of it takes place at the state level. The Obama administration has put some pressure on states to scale back licensing requirements, and Senator Lee’s Committee will hold a hearing this week on “the relationship between the antitrust laws and cartels formed under the auspices of state authority.” Ultimately, however, it seems likely that most of the work in fixing this system will need to be done at the state level. Republicans are currently in a position of unprecedented power in state capitols; opening access to working class professions would be a good way for the GOP to show that it is serious about taking on insiders and sticking up for the little guy.

The EU Must Secure Its External Borders

The European Union is fast approaching a moment of decision: It must either take the necessary steps to get a handle on migration flows, or its very institutions will grind down amidst national finger pointing and imploding public trust. The public wave of anger following the assaults on women in Cologne during the New Year’s celebration is the symptom of ratcheting tension. If Europe suffers another terrorist attack linked to the current wave of migration from MENA, the public outrage and mistrust of elites will only grow. And joining the wave of migrants from the south is a trickle from new entry points in the east. The target countries for these flows remains predominantly Germany and Sweden for now, though this is likely to change. The numbers are daunting: Even now, in the midst of the winter lull, 2,000 migrants are entering Europe each day, with Greece alone having taken another 30,000 in January. The projected “spring surge” in March/April may bring numbers exceeding last year’s figures.

As a result of these staggering numbers, the migration crisis has now pushed beyond the boundaries of political correctness, or any talk about multiculturalism, parallel societies in a future Europe, or the Willkommenskultur that has traditionally defined the Western European approach. Tougher limits on German asylum policy, as put forth by Angela Merkel, and current efforts to develop an EU border force will not suffice. Clinging to the notion that the open flow of people across borders in Europe can somehow be maintained even as individual states like Greece fail to live up to their commitments to secure their borders only further undercuts the Schengen project.The need to close the EU’s external borders is about more than just preserving the freedom to travel across national borders. Schengen is already on life support, since states have de facto reestablished state border monitoring. Another deepening problem is Europe’s absorption capacity. Immigration into Germany is at a twenty-year high, and the core issue is not just the absolute numbers of people coming into the country (or other European countries for that matter) but rather the speed with which those thousands are pouring in. The current wave is compromising the ability of state institutions to process and provide services to the newcomers, and the rate at which they enter all but ensures that new arrivals will not be acculturated. The attendant societal stresses have allowed the public backlash to grow unabated, deepening Left-Right political divisions and fueling extremism. The net result is the further renationalization of European politics: the very phenomenon the EU project aimed to diminish.The migration crisis has moved the “virtualization of state sovereignty” in Europe from the internal to the external dimension, focusing attention on the border security functions of the state. The deficit in those functions is now plain for all to see: Europe, unable to offload state security functions onto all-European institutions, is now faced with the prospect that national-level responses will dominate as the crisis continues, further fragmenting the EU’s already strained institutions. This is not an issue of legal vs. illegal immigration; rather, the question is whether, in effect, the current policy has swept such distinctions aside altogether and mainstreamed what can be called “fait accompli immigration.”There is a larger security dimension to the migration crisis that augurs poorly for Europe’s ability to confront Russian aggression along its eastern periphery. An already visible side effect of the EU’s inability to secure its external borders is the deepening fissure between the older EU members and the former communist states in central and southeastern Europe, especially the hardening position on the resettlement of migrants by the Visegrad Four (Poland, Czech Republic, Slovakia, and Hungary). This “quid-pro-quo” dimension of the intra-EU debate over resettlement quotas across Europe is fueling the crisis and leaving the EU ever more internally fragmented. More so than debates over Russia sanctions or the Greek collapse, it is the issue of MENA migration into Europe that is shaking the European Union project to its foundations. Today the de facto policy of open and unrestricted immigration, initially championed by the Merkel government, has widened a gap between Europe’s elites and its publics, deepened divisions across the regions, and polarized societies to an extent that is unlikely to be overcome soon.European publics are rebelling against transnational elites who are engaged in what they see as sleight of hand: preaching acceptance, tolerance, and relativism, only to shrug their shoulders when the result is not acculturation but rather the emergence of more parallel communities. It aggravates the situation further that European governments lack the necessary data to distinguish those who can legitimately claim refugee status from economic migrants seeking work, ISIL terrorists, or simply those who for whatever reason are seizing the opportunity to migrate to a more affluent part of the world. The most injurious aspect of the criminality and growing violence against women in Europe is that it deepens the perception—now morphing into a conviction—that governments are failing in their most basic responsibilities toward their societies: namely, providing for security.Slowing down the migration flow into Europe to a level where the entrants can be processed, deported, or resettled is key if the EU is to get a handle on the situation. This will require the reform of EU law, as well as close cooperation with transit countries like Jordan and Turkey. Most of all, it will require securing Europe’s borders, even if it means ejecting from Schengen countries like Greece that have routinely failed to fulfill their obligations. A partial answer to the question of what needs to be done, however unpalatable it may be to Europe’s elites, can in fact be seen along the Spanish-Moroccan border, where, starting in 1998 and augmented in 2005, the Spanish government (with EU financial assistance) built a system of three fences twenty-feet high, monitored 24 hours a day by Moroccan soldiers on one side and the Spanish Guardia Civil on the other, creating a barrier against illegal migration. This is not a perfect system; there are no perfect solutions, and Spain has also experienced a jump in illegal migration with the current wave. But on balance, when it comes to slowing down the flow, the Spanish system has worked better than elsewhere. Other countries in Europe need to physically secure the external borders in order to slow down the rate of immigration and to allow time for adjusting the law and more effective processing.The urgent question of how immigration into Europe will be managed does not fall neatly along liberal-conservative lines, where most arguments unfortunately have played out thus far. Rather, it is about the future of the European project and the preservation of the fundamentals of normative and social cohesion, which have been the sine qua non of the European unification project since its inception. The notion that the current approach to this migration wave can continue into the spring, against gathering public opposition, is a fatuous myth that endangers the future of the European Union.

Not Even a $50 Rebound Could Save North Sea Oil

$35 crude is straining the budgets of every oil major and petrostate, and it’s forcing producers to take a hard look at their operations to decide what projects need to be shuttered. For North Sea producers, the problem is even worse, as many of the companies operating in that region were facing dim outlooks even when oil was fetching more than $100 per barrel. Now, as the FT reports, up to 50 North Sea fields are on the verge of closure, and for many, even a price rebound wouldn’t be enough to save them. More:

Wood Mac said oil companies were likely to halt output at 140 offshore UK fields during the next five years, even if crude rebounded from $35 to $85 a barrel. This compares with just 38 new fields that are expected to be brought on stream during the same period.

Thirty years ago, North Sea production helped remake the UK’s energy landscape in a manner similar to what fracking has done for the United States. In the 1980s, offshore production helped make the UK a net crude exporter and eventually a net exporter of natural gas as well. Today, it’s a net importer of both of those hydrocarbons as North Sea fields have matured and their productivity has declined. The industry delayed the decommissioning of many of its offshore drilling platforms, preferring to continue squeezing out increasingly meager quantities of oil and gas rather than incurring the high costs of closing up shop and bringing that equipment back onshore.

But those decommissioning delays have only put off the inevitable and set up a more dramatic decline for North Sea production—and that will still be true even if prices spike. While Russia and Venezuela and the rest of the world’s petrostates wring their hands over the global crude glut, they can perhaps take solace in this one example of a supply reduction.

Oil Stays Cheap over Doubts about Russia-OPEC Cooperation

Venezuela’s oil minister has started a round-the-world trip to some of the planet’s biggest petrostates, most recently stopping in Russia to try to drum up support for coordinated production cuts. Caracas is reeling from bargain crude prices, and has long agitated for OPEC to decrease production in an attempt to chip away at the glut that’s responsible for today’s bearish market. The Venezuelan minister’s visit comes at an interesting time, as the media (and the oil market) picked up reports last week that Moscow was open to the idea of working with OPEC to decrease the global supply of crude. That note was stuck again during the trip, Bloomberg reports:

Igor Sechin, chief executive officer of the largest publicly-traded producer Rosneft OJSC, discussed “possible coordination of efforts to normalize the situation on global oil markets” with [Venezuelan Oil Minister Eulogio Del Pino] in Moscow, the company said Tuesday. Russian Energy Minister Alexander Novak responded similarly to the Venezuelan minister Monday, saying he would be willing to attend a meeting with the Organization of Petroleum Exporting Countries and non-OPEC producers, should such a gathering occur.

As Bloomberg continues, analysts aren’t impressed by this rhetoric:

“Nothing serious here,” Alexander Kornilov, an oil analyst at Aton in Moscow, said of the meetings. “It would make no sense to collaborate with only Venezuela, with no support from other OPEC members, more powerful Arabic countries.”

From OPEC’s perspective, there’s little reason to trust that the Kremlin will follow through on any proposed production cuts. Russia has in the past fiercely defended its market share, and just this week announced that it produced a post-Soviet record of 10.88 million barrels of oil per day in January. There’s plenty of mistrust within OPEC, as well, and the cartel’s largest producer—Saudi Arabia—has pursued a strategy of inaction over the past year and a half, choosing to protect its own market share rather than make the necessary production cuts to induce a price rebound. Without Riyadh’s support, OPEC lacks the capacity to make a significant impact on prices, which naturally raises the question: Is the cartel obsolete?

On the one hand, Russia’s public—if still tentative—endorsement of further discussions of coordinating production is an illustration of just how bad things have gotten for the petrostate in today’s bearish crude market. All the talk over the past week provided a brief boost in prices, though they’ve dropped again this week as traders no longer have confidence that cuts are in the offing (they were down over 4 percent in trading today). There’s too much oil sloshing around the market, and with Iran already working to boost its own output following the lifting of Western sanctions, that doesn’t look likely to change.

Japan Moves Planes to Protect East China Sea

Tokyo has doubled the number of planes located at an Okinawan base, a move designed to protect the East China Sea from Chinese aggression. The Diplomat:

For the first time in about 50 years, the Japan Air Self-Defense Force (JASDF) has stood up a new air wing consisting of Mitsubishi F-15J all-weather air superiority fighters at Naha Air Base, located in the capital city of Okinawa, Japan’s most southern prefecture, according to local media reports.

The stationing of additional fighter jets is part of Tokyo’s efforts to enhance the defenses of the Ryukyu Islands chain (known in Japanese as the Nansei islands), which stretches southwest from Kyushu to Taiwan. The push comes amidst China’s growing assertiveness and military presence in the East China Sea . . .

Japanese PM Shinzo Abe has not shied away from confronting China in the East China Sea. Last month, Tokyo announced it would send patrols to meet any Chinese ship that sailed too close to the Senkakus. But then Beijing began sending larger ships past those same islands, which China calls the Diaoyus. Moving fighter jets to Okinawa appears to be just the latest salvo in this rapidly escalating dispute.

Central Asia Hits the Skids

The commodites downturn has been prompting Central Asian regimes to consolidate their power, and threatens to upend the social order and promote religious radicalism in the region. That’s the lesson from recent developments in Kazakhstan, Uzbekistan, and their neighbors. Radio Free Europe reports:

Faced with a deteriorating economic situation, the response of the Kazakh and Tajik governments so far has been to crack down on potential dissent. Schenkkan drew attention to Tajikistan, where the government last year eliminated Central Asia’s only registered Islamic party, the Islamic Renaissance Party of Tajikistan (IRPT), the second-largest party in Tajikistan. Schenkkan recalled that “the banning of the IRPT happened after the IRPT was essentially pushed out of parliament entirely after fraudulent elections, even more fraudulent than usual, and the IRPT has now been declared an extremist organization.”

Schenkkan also noted that while eliminating these potential political opponents, Tajik President Emomali Rahmon has been moving family members into high-level government posts.

So far, citizens have been relatively quiet in the fact of economic turbulence, but that’s starting to change:

Even in Turkmenistan and Uzbekistan, where protests are unheard of, there are signs the people’s patience is nearing an end. Some 200 unpaid workers in Turkmenistan’s gas industry staged a protest over unpaid wages in the eastern city of Lebap in April 2015, the first reported protest in authoritarian Turkmenistan in 20 years. There are reports from Turkmen opposition websites that around half the workers in Turkmenistan’s gas industry will need to be cut due to falling revenues.

Reports from Uzbekistan indicate a growing number of workers, including state employees, are not receiving regular wages and banks are running short of money. Frustrations appear to be boiling over in, for now, isolated cases.

The story gets worse: for many Central Asian families, emigration to Russia has been an important safety valve and remittances have helped many people in a very poor part of the world. Russia’s economic problems mean that migrants will have a hard time finding jobs there even as conditions at home worsen, and that the flow of money back home will slow quickly.

Give Central Asia’s restive Muslim minorities and central land-locked location, the region poses both the threat of more terrorism and that of yet another migration crisis. And as we wrote last week, Central Asia is fast becoming a battleground for a power struggle between Russia and China. Yet another part of the world to worry about.

Five Takeaways From the Iowa Caucuses

We generally avoid day-to-day horserace coverage here at TAI, but now that the dust has settled in the first contest of what looks like it will be a long and memorable primary campaign, here are five thoughts on the state of the race and the country:

1. It’s important to remember two things about Iowa electorate. On the Democratic side it skews to the left, and on the GOP side it skews evangelical. So the Bernie performance isn’t quite as spectacular as some (on the left and right) want it to be, and the omens for Cruz aren’t quite as good as they might seem (as former Presidents Huckabee and Santorum will tell you).2. In terms of the state of the parties, both parties had a good night. That is, both parties had healthy battles of the kind that mean people are engaged and passionate, but at least at this point the party infighting doesn’t look particularly destructive. The more-left versus more-center left split between Bernie and Hillary voters is a classic Democratic Party primary fight, and nine times out of ten the party is able to unify behind the winner and make a strong run at the general election. Similarly, the GOP, which was looking fragile before caucus night, looks a little bit healthier today. While some would point to the Cruz-Trump first and second-place finishes as a sign that the populists are going to burn down the house, the fact that neither got above 30 percent and that both were within a few points of each other suggests that the currents of discontent in the party aren’t coalescing into an irresistible tsunami. This is just the start of a long campaign season, and a lot of the talk about parties imploding looks overdone.3. The virtual tie between Sanders might not be the result Clinton wanted, but it might make her a better candidate in the long run. She actually performs better when she’s in trouble than when she’s cruising to a coronation. In 2008, Clinton was at her best when Obama had seized the lead, and she ran very well in some late primaries. When she has a commanding lead, she seems to embrace a “don’t make waves” strategy that makes her look remote and controlling. But when she’s worried and competing hard, she tends to come across as a more appealing personality. Clinton is still the overwhelming favorite for the nomination; unless African-American voters break for Sanders the way they did for Obama in 2008, it is hard to see how he beats her. But putting a good scare into her campaign could push her towards a stronger campaigning style.4. For the GOP, the question is whether this is the beginning of the end for Trump or just a speed bump on the road. Loss of momentum matters more for him than for more traditional candidates, and a lot of his appeal seems to be based on people’s desire to stand with a winner, and losing to a Canadian anchor baby is not something winners do. We should know fairly soon whether Trump can find a way to regain his momentum, or whether a kind of Palinization process progressively marginalizes him. In any case, Trump’s decision to skip the last debate, something that will likely go down in political annals as a big mistake, probably allowed the GOP to have something more like a normal party caucus, and that was a very good thing.5. At this point, it’s becoming clear that in spite of everything that is wrong with the American presidential election process (and there is a lot that is wrong with it), there is one thing that it does uniquely well, and that is probably a good thing for the country: It entertains us. It’s got everything that reality TV has, plus it is real—with real stakes. It gets some of the smartest and most ambitious people in the country to spend months and years traveling to places in flyover country they’d normally pay good money to avoid. It offers color commentary almost as good as anything professional wrestling can offer. It offers a theater where people can vent their spleen, vaunt and flaunt their identities, and it gives a diverse and in many ways disunited country a common narrative to follow. The political circus, with its crazy rituals and goofy clown acts, is part of the glue that holds us together. This isn’t what the Founding Fathers had in mind when they dreamed of a great Republic, and one doesn’t even want to think what Pericles or Cato would have made of us. Still: long live the American presidential process, and on to New Hampshire.

China Christian Crackdown

Xi Jinping’s crackdown on civil society appears to be moving onto sacred ground. The Chinese government has just arrested the pastor of China’s largest official Protestant church, as Time reports:

Pastor Gu Yuese, also known as Joseph Gu, was placed under “residential surveillance in a designated location” — the official term for facilities known more commonly as “black jails” — in the city of Hangzhou last Thursday, according to U.S.-based Christian rights group China Aid.

Gu, who headed Hangzhou’s prominent Chongyi Church, was reportedly removed from his post by China’s Three-Self Patriotic Movement (TSPM), the Chinese Communist Party–sanctioned authority that regulates churches, 10 days prior to his detention. He had been vocal in his opposition to the government’s destruction of crosses atop church buildings in China’s Christian-dominated eastern province of Zhejiang, a campaign that began in 2014.“His arrest marks a major escalation in the crackdown against those who oppose the forced demolition of crosses,” Bob Fu, president and founder of China Aid, said in a statement. “He will be the highest-ranking national church leader arrested since the Cultural Revolution.”

Pastor Gu’s detention represents the latest development in a dispute between China’s central government and the burgeoning Christian community in Zhejiang Province. In 2013, local authorities began a wide-ranging demolition campaign that was ostensibly aimed at “illegal structures,” most of which turned out to be Christian churches and prominent crosses atop them. An internal government document obtained by the New York Times put the lie to the government’s proclamations of neutrality, as it spells out the provincial government’s intention to “remove crosses at religious activity sites on both sides of expressways, national highways, and provincial highways…Over time and in batches, bring down the crosses from the rooftops to the facade of the buildings.”

After the demolition of their $3 million cathedral and the removal of their most sacred symbol from steeple and spire, Zhejiang’s Christians might have been hoping for a reprieve from Xi Jinping’s tightening grip on institutions he considers to be possible sources of dissent. However, if bookstore employees in Hong Kong are considered dangerous enough to spirit away, perhaps it’s unsurprising that the leader of the country’s largest Christian church, who has directly criticized government actions, was next on the list. Regardless, most previous Chinese government persecution of Christians was concentrated on illegal “house churches” and unsanctioned, “unpatriotic” Christianity. It appears that accepting a sanitized and officially regulated version of Christianity will no longer be enough to escape official harassment. For now, many of China’s Christians will worship in unmarked churches, hoping for a thaw.

If You Major in STEM, It Doesn’t Matter Where You Go to College

We’ve written before about how selective colleges function to perpetuate privilege, giving students access to exclusive resources, opportunities and networks that are unavailable to students who are just as bright but couldn’t impress an admissions committee at age 17—or who, for financial or personal reasons, didn’t want to go to a elite school. In yesterday’s Wall Street Journal, the economists Erica Eide and Michael Himler, who have tallied earnings data for students across colleges and across different majors, offer an important qualification to his phenomenon: it only seems to apply to students who earn liberal arts degrees. Students with similar characteristics who major in STEM fields earn roughly the same wherever they go to college:

We find no statistically significant differences in average earnings for science majors between selective schools and either midtier or less-selective schools. Likewise, there’s no significant earnings difference between engineering graduates from selective and less-selective colleges, and only a marginally significant difference between selective and midtier colleges.

…That said, the earnings picture is very different for other fields. Outside of STEM, it matters tremendously where a student receives a degree.The starkest earnings differences are for business majors, where graduates from the selective institutions earn 12% more on average than midtier graduates and 18% more than graduates from less-selective colleges. Likewise, social-science majors from selective colleges earn 11% more than their midtier counterparts and 14% more than those from less-selective schools.For education majors, the differences are 6% and 9%, respectively. In humanities, graduates of selective schools earn 11% more than those from less-selective ones, although they don’t earn more than those from midtier schools.

There are many interesting nuances to their findings not captured in the above excerpt, so read the whole thing. In the meantime, two preliminary points seem worth making:

First, the fact that STEM majors who go to inexpensive low-or-mid-tier schools do just as well, income-wise, as their counterparts who spend hundreds of thousands of dollars on an Ivy League education, suggests that there is plenty of room for cost-saving in these programs. Universities are starting to take advantage of this: Perhaps the most successful MOOC degree program to date is Georgia Tech’s online master’s degree in computer science, which costs 80 percent less than its in-person counterpart. Elite liberal arts colleges tout the value of face-to-face learning in a small classroom setting, and, indeed, this may be valuable to many students. But Eide and Himler’s findings suggest that, for scientists and engineers, such an experience doesn’t actually change students’ job prospects. At a time when college costs keep going up, and middle and working class families keep getting squeezed, these data highlight the need to find more efficient ways to deliver knowledge at lower cost.Second, the fact that there is such a dramatic difference between the earnings liberal arts majors from top colleges and students with similar abilities from lesser-ranked colleges suggests that the privilege-reinforcing effect of elite education discussed above can be very real. Not only is this unfair, it points to economic inefficiencies: If colleges are relying on the prestige of liberal arts students’ degrees, rather than their actual skills and knowledge, to make hiring decisions, they are probably selling themselves short. That’s one reason we proposed a system of national exams to allow students from, say, West Texas State to compete on equal footing in the job market with students from Princeton. One reason the incomes for STEM majors are comparable across schools is that many technology companies have essentially figured out how to do this for engineers. Companies that hire philosophy majors would do well to also start thinking along those lines.