Peter L. Berger's Blog, page 562

What Poland’s Elections Mean for the Global Climate Treaty

Ahead of a trip to Paris, Polish President Andrzej Duda vetoed ratification of a key climate change law which extends the Kyoto protocol on CO2 emissions through 2020. Fresh on the heels of a resounding victory by his Law and Order party in the general elections, Duda hoped to send a strong signal ahead of the upcoming climate talks in Paris that Poland would not be a pushover. A statement from his office said that “binding Poland to an international agreement affecting the economy and with associated social costs should be preceded by a detailed analysis of the legal and economic impact … these effects have not been sufficiently clarified”. The EUObserver reports:

[Former prime minister and Duda spokesman Jaroslaw Kaczynski] said a Paris climate summit deal “will only make sense … if it doesn’t bring harmful effects to the Polish and European economies, for instance, by undermining competitiveness or reducing energy security”. […]

[F]or Konrad Szymanski, a Law and Justice MEP who is tipped to be Szydlo’s EU affairs minister, climate change will be the biggest irritant in future Polish-EU relations.“I thought that migration is the most difficult issue in Europe, but now it looks like it’s going to be climate policies,” he told the Bloomberg news agency in an interview last Friday.

Poland’s affinity for coal is well known in Europe—the industry employs 100,000 people and supplies up to 85% of the country’s energy. And the Law and Justice party’s hardline stance on climate deals constricting Polish growth is, itself, already known. Back in August one party member put it this way: “Any binding stance that would be accepted at the conference in Paris will be harmful to Poland, so a failure of the summit is in Poland’s interest.”

Negotiators in Paris have their work cut out for them as they try and broker a compromise between the developed and developing worlds. Poland is a perfect example of the obstacles delegates are going to have to wrangle with, and with the rhetoric we’re already seeing from the country’s new government, it seems certain that Warsaw will be keen on throwing a wrench in to the proceedings.

Defense in a Disordered World

Unsurprisingly, Hillary Clinton’s appearance before the committee investigating the Benghazi debacle swept away everything else in the news—including another hearing on Capitol Hill the same day, in which I took part. Vanity aside, I wish that my hearing had received a bit more attention.

My testimony, which is reproduced below, took place at the outset of hearings convened by Senators John McCain and Jack Reed, chairman and ranking member respectively of the Senate Armed Services Committee. The witnesses consisted of two veterans of the George W. Bush Administration (myself and my SAIS colleague Thomas Mahnken), one former Obama Administration official (Kathleen Hicks, now at CSIS), and one non-partisan—The American Interest’s very own Walter Russell Mead. The discussion among witnesses and Senators alike was courteous, respectful, and not particularly ideological. Democrats and Republicans agreed more than they disagreed; there was a lot of “I agree with you, but only up to a point,” and “My take would be somewhat different,” but no histrionics, no raised voices, no staged outrage. It was actually rather heartening, if you care about the tone as well as the substance of democratic politics.Serious politicians and experts feel a rising concern that the United States faces multiple, worsening challenges at a time when much of its defense organization and policy is not quite right. Our armed forces suffer from inadequate doctrinal or organizational agility, excessively expensive (and often unsuccessful) acquisition projects, too much inertia—and too little success, when it comes right down to it. American foreign policy depends on many things, including most importantly the force of our ideas and example, but also on our military power. As Lawrence Summers once put it at a commissioning of Harvard ROTC cadets: “We are strong because we are free, but we are also free because we are strong.”What I wanted to address in my testimony—which draws on my forthcoming book, The Big Stick—were those qualities of organization and procedure that cost negligible percentages of a $600 billion defense budget, but have a disproportionate effect on what kind of armed forces we have. Money counts, as do raw numbers of troops, tanks, airplanes, and ships, but less tangible elements of strength count as well. The sinews of peace, in other words, are not merely material.Testimony Before the Senate Armed Services Committee, October 22, 2015Senator McCain, Senator Reed, thank you for inviting me here today. It is an honor to be asked to speak at these hearings, which have the potential to be at least as consequential as those held by Senator Henry Jackson in 1960 on national security organization, or those that gave birth to previous major legislation such as the Goldwater Nichols Act of 1986.Our task on this panel, as I understand it, is to bring together three things: a view of our international circumstances and American foreign policy; an assessment of the adequacy of our defense organization; and suggestions for directions this committee might pursue in exploring the possibilities of reform. This is a daunting assignment: I will do my best to approach it from the point of view of someone who has studied and worked with the American military in various settings for over 35 years, drawing on what I know as a military historian and what I have seen during service at senior levels in government.The Roots of Our Current Defense Organization and Strategic PostureThe theory taught at our war colleges—and I have taught at them myself—would say that we should begin by looking at our interests and policies, and then design a military to meet them. I am going to start the other way, with what kind of forces we have, for two reasons. First, as we all know, you do not get to redesign your forces afresh unless you experience utter calamity, and sometimes not even then. Secondly, because it is important to recognize the ways in which the military experiences and geopolitical assumptions of the past shape even seemingly technical questions today. It will be helpful to begin by appreciating how peculiar, from an historical point of view, many of the features of the armed forces that we take for granted really are.Today’s military is the product chiefly of 75 years of history. World War II, of course, not only provided a great deal of its physical infrastructure, including the Pentagon, but has left organizational legacies. No other country in the world, to take the most striking example, has a Marine Corps remotely sized like ours—today, it is larger than the entire British army, navy, and air force put together. That is a result of the Marines’ performance in World War II, and the legacy of raising a force six divisions strong for that conflict.But it is primarily the roughly 45 years of the Cold War, and some 15 years of unchallenged American preeminence thereafter, that have most left their mark.The Cold War has left us many, indeed most, of the platforms that equip the military today, including M-1 tanks, B-2 or B-1 bombers, and AEGIS class cruisers. Even weapon systems coming into service today such as the F-35 reflect Cold War assumptions about which theaters we planned to fight in, what kind of enemies we thought we might encounter, what kind of missions we would be required to conduct. From the Cold War as well emerged our highly professional career military built on the ruins of the draft military of the Vietnam War. Our weaving together of reserve and National Guard units with the active duty military reflects ideas first expressed in the late 1970’s.Even deeper than these things go certain assumptions about what war is, and how it should be waged. The Cold War military was largely a deterrent military, designed to put up a credible defense against Soviet aggression, while taking on lesser, included tasks such as peacekeeping and humanitarian intervention.The conventional tasks were assumed to be extremely intense but short—nothing like the multi-year wars of the mid-20th century. The result was an army, for example, that honed its skills in armored warfare at installations like the National Training Center to a level never seen in a peacetime military, even as it shunted aside the tasks of military governance that had characterized it through the 19th and 20th centuries. In this world, a large nuclear arsenal was designed for deterrence of more than use against the USSR. Naval power was to be used chiefly to protect the sea lanes to Europe and to project power abroad, not to contest command of the seas with a major naval power.When the Soviet Union fell and the Cold War ended, a period of unchallenged supremacy began: It has lasted barely 15 years, and although the United States is still the world’s strongest power, that supremacy is now contested. I doubt we will ever get it back. But it too has left legacies of thought and action. With great reluctance, a military that had pledged to itself after Vietnam that it would not do counterinsurgency again (as it similarly pledged to itself after Korea that it would not do land war in Asia) embarked on a mission that it found strange and distasteful in Afghanistan and Iraq. It learned, or rather re-learned, old lessons, but at a cost.One organizational legacy of this period has been the rise of special operations forces, particularly after the September 11 attacks and the ensuing conflicts. Others include the tremendous emphasis placed by combatant commanders on the conduct of military diplomacy, giving rise to multinational exercises that are less substantive than political in nature. Similarly, today’s senior officers often dwell on the importance of what they call Phase 0 operations—acts of military diplomacy to set the conditions under which we might fight. I believe that much of this focus has come at the expense of hard thinking about Phase III—war.From the transitional period between the Cold War and the age of supremacy arose strategic doctrines too, characterized by terms such as “end state” and “exit strategy” that previous generations would have found meaningless and that today are downright dangerous. In this period, as in the past, the heart of America’s strategic alliance system was to be found in Europe. Thus, it was (absurdly) with a NATO command structure that we have attempted to fight a war in Afghanistan. Thus, too, officers dismayed by the unfamiliar challenges of irregular warfare came to blame all other departments of government for failing to be able to understand problems and provide capabilities that, as history should have taught them, would have to be found within the military itself.The New World DisorderThe assumptions of both the Cold War and the brief period of American supremacy must now be cast aside. Instead of one major enemy, the Soviet Union, and its various clients and supporters, we face four major strategic challenges.

China, because of the sheer size and dynamism of its economy, poses a challenge utterly different than that of the USSR, and, unlike the Soviet Union, that challenge will take place in the Pacific, in an air, sea, and space environment unlike that of Europe.
Our jihadist enemies, in the shape of Al Qaeda, the Islamic State, and like movements, are at war with us, and we with them. This will last at least a generation, and is quite unlike any other war that we have fought.
We face as well an array of states that are hostile to our interests and often, in a visceral way, to our political system as well: These include, most notably, Russia, Iran, and North Korea, but others may emerge. All of these states are, or will be, armed with nuclear weapons that can reach the United States.
Finally, while our policy in the past has been to secure “the great commons”, as Alfred Thayer Mahan once put it, for the use of humanity, today ungoverned space—to include outer space, the high North, and cyberspace—poses new and deepening problems for us.

This means that our strategic problems are quite unlike those of the previous two periods. We can imagine, for example, conventional conflict with China that might not end after a few days, or be capped by nuclear threats. We are, right now, engaged in protracted unconventional warfare that is likely to spread rather than be contained. New technologies, from cyber-weapons to long-range cruise and ballistic missiles to unmanned aerial and maritime vehicles, mean that defending the homeland against conventional or semi-conventional attack must again be a mission for the armed forces.

We live in an era when our old strategic partners are weakening. One need only look at the appalling decline of the British military—the Royal Navy, which struggles to man the ships it does have, has a fleet less than half the size of semi-pacifist Japan’s just now—to measure the self-inflicted weakness of old allies. At the same time, new partners are emerging, particularly in Asia, with Japan, Australia, and even India coming into closer association with us.And it is not just the external politics of security that has changed: Our domestic politics is more deeply divided by questions of the use of force today than at any time since the worst periods of the Vietnam War. On the one hand, every President from now into the indefinite future has to accept that he or she will be a war President, ordering the pinpoint killing of terrorists in far corners of the earth, and probably sending our armed forces into harm’s way every few months. On the other, at no other time since the 1970’s have the American people been so reluctant to commit large forces abroad, or rather, so uncertain about the purposes that would justify it.I could extend this analysis indefinitely, but will not. After the Cold War there was a resizing of the military, a reconfiguring of its basing structure, and some realignment, but the sheer busyness of the post-1989 period has in many ways deferred a fundamental rethinking of what kind of military we need, and to what ends. Now is the time for such a rethinking.New Directions for Defense Policy and OrganizationThe time, then, is ripe for what the committee is undertaking. Of course, one scholar can only offer so much by way of recommendations, but I would like to suggest four, which flow from this fundamental diagnosis: that our problems will be so complex, so large, and so different from the past that we need to design a system that is much better at redesigning and reinventing itself than what we have got. It will not do, in other words, to conceive a new pattern of organization and impose it upon the Department of Defense. We will assuredly fail to foresee the crises and opportunities to come. We need, rather, to recover the creativity and institutional adaptability that produced in astonishingly short time the riverine flotillas of the Civil War, the massed bomber and amphibious fleets of World War II, and the Polaris program and espionage from space of the early Cold War.Here, then, are four ideas.First, remake our system for selecting and promoting general officers. Nothing, but nothing, is more important than senior leadership—especially creative leaders like Arleigh Burke or Bernard Schriever in the early Cold War. Our problem is that our promotion systems, in part because of the natural tendency of bureaucracies to replicate themselves, and in part because of the wickets (including joint service) that all have to pass through, is making it hard to reach deep and promote exceptional talent to the very top.We take it for granted that some of the best leaders of World War II were field grade officers when it began. For some reason, however, it does not occur to us that maybe there was something good about such a system that we should be able to imitate. Other large organizations—businesses and universities, among others—can seek out exceptional young leaders and bring them to the top quickly. We are long past the day when General Curtis LeMay could become head of Strategic Air Command at age 42, after having led one of the most important campaigns of World War II in his late thirties. It was a minor miracle when President Carter passed over scores of Army generals to make General Edward C. “Shy” Meyer Chief of Staff of the Army in 1979—I am not sure whether we could even do that today. Moreover, we need to find ways to promote and retain general and flag officers who are so unorthodox, so off the usual career path, that the system left to its own devices would crush them. Where would the nuclear Navy be without that unique, exceptionally difficult man, Hyman Rickover, for example? And where will the next one come from?Second, overhaul the current system for producing strategy documents on a regular basis. The Quadrennial Defense Review system, which consumes vast quantities of labor in the Pentagon and much wasted emotional energy as well, seems to be predicated on the notion that the world will cooperate with our four-year review cycle. It does not. The 2000 QDR, to take one example, was invalidated as soon as it hit the streets by September 11. So too will any document that has a fixed schedule. Moreover, most public documents, including the National Security Strategy of the United States, are the vapid products of committees. A much better system would be something like the White Papers produced by the Australian and French systems, not on a regular basis but in reaction to major international developments, and composed by small, special commissions that include outsiders as well as bureaucrats.Third, re-discover mobilization. Throughout most of the history of the United States, and into its colonial past, a key assumption was that the forces we would have at the outbreak of war would be insufficient in number and composition for the challenges ahead. Since the 1950’s, mobilization thinking and planning has languished. To be sure, under pressure from an active Secretary of Defense the Department can acquire mine-resistant vehicles or speed up the production of some critical guided weapon, but that is hardly the same thing.Serious military planning not only for expansion of the existing force, but for the creation of new capabilities in event of emergency, would be a worthwhile effort. For example, had serious thought been given before 2003 to identifying civilians who might contribute to military government in an occupied country, and thinking through the organizations needed, the Iraq War might have looked very different in 2004 and 2005 than it did. Mobilization thinking and preparation would require a willingness to contemplate unorthodox measures (direct commissioning, for example) on a scale that the Department is unwilling to consider in peacetime. Worse yet, it would require some brave thinking about the kinds of crises that might require such measures.Fourth, renew professional military education at the top. Our war colleges do a capable job at the mission of broadly educating senior officers at the O-5 and O-6 level, even as they help create a network of foreign officers who have been exposed to our system. But they do not create an elite cadre of strategic thinkers and planners from all the services and the civilian world. To do that, measures would have to be taken that would be anathema to personnel systems today: competitive application to attend a school, rather an assignment to do so as a kind of reward; extremely small class sizes; no foreign presence, or only that of our closest allies; and projects that are directly relevant to existing war planning problems. A two year institution would graduate no more than thirty or forty top-notch officers a year who would, in all but name, help constitute a real joint general staff. Of course, to manage the careers of such officers would require further departures from our current personnel system.Our current professional military education system produces extremely able tacticians and unit leaders; it does not produce, at least not in large numbers, officers who make their names as deep thinkers about the nature of modern war. Yet surely that is the heart of the military profession. You will see very few books or even deeply serious articles on modern war written by serving officers; fewer yet that transcend a service perspective. That is a pity, and a deficiency.While it is flattering to think that academics or think tanks can fill that void, the truth is that they can only do so much without the current knowledge, exposure to the most sensitive secrets, and sense of professional responsibility of top-notch officers. In the long run, a revitalized American armed forces requires that senior leadership, in Congress as well as the executive branch, pay a great deal of attention to military education, whose budget is trivial, but whose impact is potentially tremendous.These are, inevitably, but preliminary thoughts that will not be welcome in some quarters. But of this I am quite convinced: Our country faces a more turbulent world than it has at any time since the end of World War II. It is, in many ways, a more dangerous world, in which our children or grandchildren may live to see nuclear weapons used in anger, terrorism that paralyzes great societies, war in new guises brought to the continental United States, the shattering of states and seizure of large territories by force. As in the last century, the United States will be called upon to play a unique role in preventing those things from happening, maintaining some general standards of order and decency, and leading a coalition of like-minded nations. As ever, we will have a strong hand, thanks to the institutions of government under which we live, and the spirit of the American people. But that does not mean that we should take our military power for granted, or neglect thinking hard and creatively about how to mold it in the interval of peace that we have, such at is. New crises await, and alas, may not be far off.

Up Next: Capitulation on Syria?

In a notable about-face in policy, the Obama Administration extended an invitation to Iran to join the next round of consultations on Syria’s future, set to take place in Vienna on Friday. More than a dozen countries are slated to attend, including Saudi Arabia, Turkey, Qatar and the United Arab Emirates, who have all backed President Bashar al-Assad’s enemies in Syria. Previously, the United States and its Arab allies did not want to give Iran a seat at the negotiating table because Tehran has insisted that it will not help facilitate a political transition in Damascus.

During the long lead up to the nuclear negotiations, the President’s supporters would often rhetorically ask, why not talk? What’s the harm of it? But as the talks proved, there are negotiations and then there are negotiations. As was the case then and is now, if we were coming into the talks from a position of strength, inviting Iran would not be disconcerting at all; as it is, this looks like the prelude to an even bigger stand-down. Two signs as to which side thinks it has the upper hand:The United States made its most public admission that the Assad regime may in fact stay in place for an indeterminate amount of time. “We have very different views, and our coalition partners do, from the Syrian government, the Russians and the Iranians,” said National Security Adviser Susan Rice. “But I think there is the potential for an arrangement to be agreed wherein this transition begins, perhaps with Assad still in power, but it doesn’t end with him in power.”And secondly, though it was not immediately clear whether Iran would in fact attend—the Supreme Leader had earlier this month forbidden all negotiations with the United States outside of the nuclear program—news broke at time of writing that Iranian Foreign Minister Javad Zarif would be flying to Vienna.It’s become increasingly clear that the nuclear negotiation, far from taking a dangerous issue off the table so that we could put deal with Iran’s nuclear ambitions, put the whole region on the table for further negotiations—not just in Iran’s eyes, but in those of the (very frightened) Sunni powers and perhaps the U.S. Administration’s, too.“Friday obviously will be an important day,” Senator Bob Corker, the Republican chairman of the foreign relations panel, told reporters about the negotiations. “[The Obama Administration is] putting a lot of stock in Friday’s meetings.” We’ll certainly be keeping an eye out too.

Poland Elections Deliver Big Blow to Brussels

The final results are in from Poland, and they match what exit polls were telling us: the pro-EU Civic Platform party has been ousted from power in Warsaw. The BBC reports:

Poland’s conservative Law and Justice party won enough votes in Sunday’s parliamentary elections to govern alone, final results show.

The party won 37.58% of the vote, giving it a majority in the lower house of 235 out of 460 seats.Civic Platform, which led Poland’s coalition government for the last eight years, won 138 seats or 24.09%.It is the first time a single party has won enough votes to govern alone since democracy was restored in 1989.

Not only was the centrist Civic Platform thrown out, the Left coalition was completely decimated. It wasn’t clear until yesterday whether Law and Justice (PiS) would have enough votes to go it alone—PiS representatives were floating coalition arrangements with one of the smaller anti-establishment parties that made it into parliament at the expense of the traditional Left.

But now, free to rule alone (albeit by a slim margin), PiS is talking a big game. Domestically, it has pledged to impose additional taxes on foreign businesses in order to pay for more generous social programs. It is keen to protect its coal industry from the increasingly strident demands of the global green movement. (The incoming Prime Minister is a coal miner’s daughter.) Also it is likely to be , although it’s not clear how much they will be able to change the laws already on the books. Abroad, PiS will likely take an even more strident stance on immigration, and has said that it would like to expand its Visegrad Group bloc in the EU to include countries from the Balkans and Romania, giving it clout against Germany and France.Poland is a big country and an important one. The shift from a pro-German, don’t-rock-the-boat party to a more assertive and nationalistic government is going to be felt in Brussels as the EU’s increasingly besieged establishment struggles to cope in an ever more turbulent environment.

Indonesia Hopes To Join the TPP

Indonesian President Joko Widodo met with President Barack Obama yesterday and announced that his country would seek to join the Trans-Pacific Partnership trade agreement. The Associated Press:

“Indonesia intends to join the TPP,” Widodo said in the Oval Office, referring to the Trans-Pacific Partnership. He provided no other details, but described the Indonesian economy as open.

Obama said Widodo was leading Indonesia in the “right direction.”

“We want to be a partner with you,” he said.

Indonesia had previously expressed interest in joining TPP but this is the strongest indication yet that it is serious about joining the pact, which the U.S. has negotiated with 11 other nations. Once the pact is ratified and takes effect — a process that could take a couple of years — it would cut tariffs and streamline trade rules among nations that account for 40 percent of global GDP.

Indonesia has extensive trade relations with China and has traditionally walked a fine line between Washington and Beijing, so its willingness to join the U.S.-brokered agreement is very important. Still, U.S. Trade Representative Michael Froman seemed uncertain about Indonesia’s prospects for joining the deal, noting that the country would have to remove many problematic investment barriers. Even so, Beijing cannot be thrilled that so many countries are looking to join the TPP.

During this period of heightened tensions, it’s easy to forget that America’s goal is a world order that the Chinese participate in, not a world order that’s rigged to stifle them. From the American perspective, China should aspire to join the TPP and recognize that it too benefits from free trade.A final note: we hope Hillary Clinton in particular is paying attention. The deal she brokered and now disavows is already demonstrating its ability to strengthen a peaceful, trade-based world order.

The Disruption Proceeds

The wave of creative destruction unleashed by twenty-first century information technology has left no industry untouched, and the latest beneficiary (or victim, depending on your perspective) is the trucking industry. The Wall Street Journal reports on a handful of Silicon Valley backed startups looking to cut costs in the industry by reducing the need for intermediaries between truckers and customers:

Investors are pouring millions of dollars into startups hoping to disrupt the $700 billion trucking industry, the latest example of Silicon Valley’s efforts to upend the traditional economy.

A series of startups are vying to become an “Uber of trucking,” leveraging truck drivers’ smartphones to quickly connect them with nearby companies looking to ship goods. The upstarts aim to reinvent a fragmented U.S. trucking industry that has long relied on third-party brokers, essentially travel agents for trucking who connect truckers with customers.Silicon Valley’s interest in trucking has accelerated in recent months. San Francisco-based Trucker Path Inc. says it is aiming to reach a $1 billion valuation next year. The latest entrant, Seattle-based Convoy, said Tuesday it had raised $2.5 million in seed funding from investors including Amazon.com Inc. founder Jeff Bezos, Salesforce.com Inc. founder Marc Benioff, eBay Inc. founder Pierre Omidyar and Uber Technologies Inc. co-founder Garrett Camp.

Trucking was once a pillar of the blue model economy. Before a series of deregulation bills passed in the 1980s and 1990s, routes and prices were controlled by federal regulators. Trucking was also heavily unionized by the Teamsters, an organization whose Mafia ties were an open secret for much of the last century. Trucking was a vital link in the U.S. economy, and was under heavy pressure to cut costs. NAFTA opened U.S. border states to Mexican truckers, something the Teamsters fought bitterly for years. And now Silicon Valley is trying to work its own magic.

This is a classic case of blue model disruption. On the one hand, it chips away at embedded costs—high prices for trucking are like a tax on the economy, making everything more expensive. On the other hand, the beneficiaries of the old system, included truckers who benefitted from fixed rates and union wages, are in the crosshairs. Global competition and technological innovation made the old system harder and harder to maintain, and now technological innovation could be poised to kick out the last leg of an already tottering stool.Teamsters and the big trucking companies will likely to try to use their political clout to stop change in its tracks, and will cite everything from safety to fairness—as taxi medallion fleets have done against Uber, as teacher unions have done against charter schools, and so on. There will be some truth to some of these claims—no changes come without a cost. But what will really be driving their ire isn’t the general good of the public, but the mortal threat to the business models on which they depend. There is nothing wrong with that moral point of view—it’s only natural that people who are heavily invested in one way of doing business should organize to protect their way of life. In a democracy, citizens have every right to do this.But from a larger ethical standpoint, it is questionable whether the trucking companies and the Teamster members have the right to preserve their standards of living at the cost of what is essentially a tax on everybody else. The tax from preserving inefficiencies in the trucking industry is in effect a hidden sales tax, and like all such taxes it is regressive—the poor get hit hardest when the price of goods is artificially high. Moreover, anything that makes trucking and transportation more efficient will be substantially better for the environment, reducing the pollution associated with the transport of goods, and perhaps reducing the number of trucks on the road if they can be dispatched more efficiently.Still, it will strike many people that Silicon Valley venture capitalists are getting richer and that middle-class Teamsters are having their middle class standards of living threatened. To many partisans of the blue social model it will look like yet another example of the destruction of everything good and decent by the onrushing forces of unbridled capitalism.The turmoil in the trucking industry is a window into the social and economic changes sweeping the country; expect to see more industries faced with similar challenges as the blue economy fades away.Of course, the new trucking economy—if in fact Silicon Valley succeeds in making one—won’t be the end of the story. Next up: self driving trucks…

Beleaguered Saudis Consider Cutting Domestic Fuel Subsidies

Stocks plunged in Riyadh today as the country’s oil minister acknowledged that the House of Saud is thinking about cutting a popular fuel subsidy. Crunched by cheap oil, the petrostate is looking everywhere for ways to save money, and the regime’s price support for gasoline could be on the chopping block. The WSJ reports:

Asked if the kingdom is considering cutting energy subsidies in the near term, [Saudi oil minister Ali al-Naimi] told reporters in Riyadh: “What you are asking is: is it under study? And the answer is yes.”

Saudi domestic energy prices are among the lowest in the world. The country, the de-facto leader of the Organization of the Petroleum Exporting Countries, is losing potential export revenue by selling oil domestically very cheaply when international buyers pay much higher prices.The country currently spends around $86 billion a year on subsidies for petroleum products like motor fuel, making a gallon of regular gasoline cost about 46 cents.

Riyadh will point to its sovereign wealth fund, worth nearly three quarters of a trillion dollars, as a tool to help it weather this period of low oil prices. Without that pile of cash, the Saudis wouldn’t be able to pursue their strategy of waiting out this bear market—they’d be forced to concede to the overtures of some of OPEC’s poorer nations and sketch out a plan to cut production and set a price floor to the global oil market.

Instead, the Saudis have kept output up in a bid to compete for market share, but sub-$50 per barrel oil is wreaking havoc on their finances. The IMF believes Riyadh will run a budget deficit worth 20 percent of GDP this year, and if oil prices stay the way they are, the IMF expects Riyadh to deplete its rainy day fund in just five years. Military spending is up as the Saudis wage war against Houthis in Yemen and back rebels in Syria, and social spending has ballooned in recent years to help appease a restive populace—a step many regimes across the Middle East took in response to the Arab Spring. The oil price plunge came at a particularly inconvenient time for the Saudis.Al-Naimi’s open acknowledgment of the possibility of domestic fuel subsidy cuts is a sign of the times for Saudi Arabia, which finds itself in quite the predicament. Such is the fate of a petrostate in an oversupplied market.

Lithuania: We’d Welcome Migrants, But None Want to Come

Efforts to resettle refugees across Europe are hitting a snag: the refugees aren’t on board with the program. Reuters reports:

“We are prepared to accept refugees immediately, but there are no refugees in Italy or Greece who agreed to resettle in Lithuania,” Rimantas Vaitkus, deputy chancellor of the Lithuanian government told Reuters on Monday.

Lithuania has agreed to settle 1,105 refugees in the next two years, mostly from Italy and Greece, according to European Commision proposals which foresaw relocation of a total of 160,000 people.“It seems that refugees know about Sweden, Germany, France, the United Kingdom, which either have generous social security or have been actively attracting immigrants,” said Vaitkus.

Indeed they do. And that raises the second part of the problem: the Schengen Zone. Under this system, anyone in Europe is free to move from country to country, including to resettle for purposes of work, at will. And, as critics suggested months ago but EU officials are starting to put together, that could render redistribution quotas moot:

In an interview with Spanish daily El País, EU Commissioner for Neighbourhood and Enlargement Johannes Hahn said, “The real challenge is that refugees agree to be sent to this or that country [under the Commission’s quota scheme]. All the refugees that come to Europe cannot just go to Germany, Sweden or Austria. If you are fleeing because you fear for your life and your destination is Europe, you need to understand that, according to a quota, you have to go to this or that country and, in principle, you have to stay there.”

Brussels is currently promising two incompatible things. It’s telling the Germans they won’t have to host every immigrant that wants to come their way, because redistribution quotas will be mandatory, and it’s also telling the immigrants they’ll be welcomed, accepted, and integrated. But fully integrated Europeans can move to Germany or Sweden if they want to. And there’s the rub: over a million newcomers are expected this year, and the Germans have made it clear they can’t or won’t take them all. Absent some sort of mechanism to make sure the resettled refugees stay resettled, the quotas will be a dead letter. And with such a mechanism in place, the Schengen Zone ceases to exist.

Europe may soon have to choose between the two.

NYT Catching on to Higher Ed Bubble?

On Sunday, The New York Times ran a refreshingly sharp editorial on a topic we’ve been watching closely for some time—spiraling law school costs and the need to cut back on federal student loans for JD programs. The Times rightly points out that overly generous loan programs share a large part of the blame for the ongoing crisis in legal education:

The consequences of this free flow of federal loans have been entirely predictable: Law schools jacked up tuition and accepted more students, even after the legal job market stalled and shrank in the wake of the recession. […]

How can this death spiral be stopped? For starters, the government must require accountability from the law schools that live off student loans… Another good idea would be to cap the amount of federal loans available to individual schools or to students. This could drive down tuition costs, and reduce the debt loads students carry when they leave school.

This is all very reasonable—so it would be nice if the Times were more consistent on this question.

When it comes to undergraduate degree programs—many of which are also charging exorbitant prices, sucking up federal money, and failing to equip their graduates with the skills needed to pay back their loans—the Grey Lady has had no objection to expanding federal subsidies. In August, for example, the editorial board heaped praise on Hillary Clinton’s budget-busting college plan, which it said “aims to reduce college costs for students by giving federal grants to states and colleges and by allowing borrowers to refinance their student loans at lower interest rates.” In 2013, it condemned Republicans who wanted to scale back subsidized loans.The problem, as our friend Instapundit said, is that “when you subsidize something, the price goes up. This is true for all of higher education, not just law schools.” Loosening the flow of federal money is not the solution to the four-year college bubble any more than it is the solution to the law school bubble.That’s not to say that federal loans policies for JD and BA programs need to be identical. But it would be nice to see the Times critically evaluate the idea of federal subsidies in more of its higher education commentary. The current editorial line—that loans are the root of all evil when it comes to law school and the answer to all problems when it comes to undergrad—doesn’t make all that much sense.

Varoufakis Charging $60,000 per Speech

A new story is going viral in Greece: Yanis Varoufakis, the flamboyant motorcycle-driving self-described “Marxist libertarian” former finance minister, a man whose policies drove Greece into an even deeper hole, is collecting hefty speaking fees in an offshore bank account. The Times of London reports:

[Varoufakis] is allegedly charging almost £40,000 for speeches he is invited to make worldwide, seeking payment via an HSBC bank account in Oman, according to reports.

An email published by the Athens newspaper Proto Thema purportedly showed an agent of the London Speaker Bureau, which manages Mr Varoufakis, citing $60,000 as the standard fee for engagements outside Europe.The price drops to $5,000 for speaking events within Europe and $1,500 for in-house university lectures.Wherever he is speaking, Mr Varoufakis “would also require business-class travel, accommodation, airport and ground transfers, meals and incidentals”, Tatjana Marinko, the agent, wrote in reply to a query from a Proto Thema reporter posing as a prospective client.The reports contradict claims by the former finance minister that he had received only €1,100 for more than 40 paid appearances at public speaking events since he resigned from the finance ministry three months ago.

Per the OECD Better Life Index, the average Greek household has a disposable income of $18,575 per year—less than a third of what Mr. Varoufakis makes per speech. And of course, while Finance Minister, Mr. Varoufakis threatened Greeks who kept money in offshore bank accounts or concealed offshore income with audits. But perhaps we are being too harsh on the old Marxist when we point this out. After all, Mr. Varoufakis is the vanguard of the proletariat—maybe one day we will all live like this, comrades.