Peter L. Berger's Blog, page 615

Economic Reforms Smothered in Their Cradle?

Indian Prime Minister Narendra Modi came into power with a wildly ambitious liberal economic reform plan aimed at transforming India’s notoriously business-unfriendly climate. The plan relies on parallel measures to slash onerous read tape (known colloquially as the “license raj”), to make the acquisition of land for industrial infrastructure easier, and to federalize the disparate taxation schemes that make taking products or raw materials between India’s 29 states incredibly slow and costly.

Each of these efforts have been watered down and blocked at every turn by an obstructionist Congress Party smarting from its recent losses. And he latest bad news for Modi, who has been forced to give up on the land bill and who is making little to no progress on ousting the license raj, is that the end of the parliamentary session is upon him, and that spells doom for the federal taxation scheme as well. The Wall Street Journal has the details:

After nearly a month of partisan bickering, lawmakers ended a parliamentary session Thursday without passing a centerpiece of the prime minister’s agenda—a constitutional amendment to replace a thicket of varying state taxes with a more business-friendly nationwide levy. […]

It was always going to be a difficult balancing act [for Modi]—wooing investors and industrialists critical to prosperity in a country where large numbers of people live on less than $2 a day. Decades of socialism have sown deep suspicions about the benefits of private enterprise. […]Unless the government calls lawmakers back for a vote on the tax proposals, they will have to wait until at least the winter session, making it all but impossible for the government to meet its mid-2016 target to implement the changes.

The Indian economy will need to adapt as the population continues to balloon and geopolitical threats, like that posed by China (and, even more important to New Delhi, China’s warm and warming ties with Pakistan) necessitate a strong India to act as a regional counterweight. But the socialist streak in postcolonial Indian politics runs deep, and Modi’s enemies are proving more potent in opposition than many people predicted. If even a man as determined and as popularly-supported as Modi cannot liberalize India’s economic policies, can anyone?

Russia’s Energy Outlook Keeps Getting Dimmer

Moscow’s budget relies heavily on oil and gas revenues, so it’s no surprise that it’s been hit particularly hard by the price of crude plunging to a six year low. But for state-owned oil company Rosneft, a bear market isn’t the only challenge: Western sanctions have also undercut its ability to explore newer, unconventional oil reserves in Siberia and the Arctic. Rosneft put a brave face on its predicament this spring when it announced that it was looking to secure Chinese financing for some of its new projects, but now its chairman, Igor Sechin, is publicly admitting that those plans have been put on hold. The FT reports on Sechin’s statement that, instead, “We decided . . . to amend our business plan in the direction of increasing production at existing fields.”

This is a bigger deal than it might at first seem. While massive, Russia’s existing fields are stagnating as operators run the Red Queen’s race—working harder and harder just to maintain production as the most productive plays are used up. Sechin’s strategy of focusing on boosting production in these fields will be easier said than done, but more importantly it’s a short-term solution that will expose Russia to some very ugly problems in the coming decades.Investing in new fields (like Siberian shale) is vital for Moscow’s energy future. Rosneft’s abandonment—or maybe, more accurately put, tabling—of those kinds of new projects is understandable, considering the chilling effect sanctions have had on access to the technologies necessary to unlock those plays. And, like every oil company, Rosneft is having to cut capital expenditures now that crude is fetching less than half the price it was just one year ago. But this change in tack is going to have big implications for Moscow’s energy security years down the road.

Labor Shortages Leading Schools to Drop Teacher Certification

There is a nationwide shortage of “qualified” candidates for teaching positions, reports the New York Times:

Across the country, districts are struggling with shortages of teachers, particularly in math, science and special education—a result of the layoffs of the recession years combined with an improving economy in which fewer people are training to be teachers.

At the same time, a growing number of English-language learners are entering public schools, yet it is increasingly difficult to find bilingual teachers.

But what’s really interesting is what some schools are doing about this. The Times mentions that some schools in California are “hiring college students and teaching interns to full-time spots before they’ve completed the certification process.”

We suspect the Times wants us to wring our hands over this, but we’re not. In fact, there may be a significant upside to the end of certification requirements. Teacher licensing requirements typically have nothing to do with student outcomes and mainly serve as bureaucratic hoops to protect members of the guild. If the shortages lead to fewer hurdles for the young and the energetic to become teachers—even if they only see it as a way station rather than a final destination for their careers—so much the better. 

Pakistani Brit Calls Out Lefty Indulgence of Islamism

Maajid Nawaz is a sharply dressed, cosmopolitan European campaigner against “theocracy” and patriarchal society, so you’d think that he’d win plaudits from the left. Instead he’s been attacked in the pages of the Guardian—because he’s a Brit of Pakistani descent campaigning against Islamic radicalism. Somewhere in the past few years, the international left’s wires seem to have gotten crossed on the subject of Islam, such that the angriest voices in Islam are treated as the most “authentic” (frequently by privileged white Western lefties), while those in Islam who speak out against such voices, no matter how just their cause or how deep their roots in the community, get little support. Nawaz writes in the Daily Beast:

The great irony is that, unlike many of today’s champagne socialists and shisha-jihadists my entire life has been a prototype of their archetypal aggrieved Muslim. Unlike the Guardian’s private school, Oxbridge-educated journalist David Shariatmadari, I am a state school-educated Muslim and racial minority. I have been stabbed at by neo-Nazis, falsely arrested at gunpoint by Essex police, expelled from college, divorced, estranged from my child, and tortured in Egyptian prison, and mandatorily profiled. I’ve had my DNA forcibly taken at Heathrow Airport under Schedule 7 Laws, which deprive terror suspects of the right to silence at UK ports of entry and exit, among much else. I’ve been blacklisted from other countries. I am every grievance regressive leftists traditionally harp on. Yet their first-world bourgeois brains seem to malfunction because I refuse to spew theocratic hate, or fit their little “angry Muslim” box.

Well, Nawaz himself isn’t backing down. And sometimes the simplest truths take the most courage to say:

[I]t is as plain as the light of day to me—a Pakistani-British liberal Muslim—that any desire to impose any version of Islam over anyone anywhere, ever, is a fundamental violation of our basic civil liberties. But Islamism has been rising in the UK for decades. Over the years, in survey after survey, attitudes have reflected a worrying trend. A quarter of British Muslims sympathised with the Charlie Hebdo shootings. 0% have expressed tolerance for homosexuality. A third have claimed that killing for religion can be justified, while 36% have thought apostates should be killed. 40% have wanted the introduction of sharia as law in the UK and 33% have expressed a desire to see the return of a worldwide theocratic Caliphate. Is it any wonder then, that from this milieu up to 1,000 British Muslims have joined ISIS, which is more than joined the Armyreserves. In a case that has come to symbolize the extent of the problem, an entire family of 12 recently migrated to the Islamic State. By any reasonable assessment, something has gone badly wrong in Britain.

But for those who I have come to call Europe’s regressive-left how could Islamist tyranny—such as burying women neck deep in the ground and stoning them to death—possibly be anything other than an authentic expression of Muslim rage at Western colonial hegemony? For don’t you know Muslims are angry? So angry, in fact, that they wish to enslave indigenous Yazidi women for sex, throw Syrian gays off tall buildings and burn people alive? All because… Israel. For Europe’s regressive-left—which is fast penetrating U.S. circles too—Muslims are notexpected to be civilized. And Muslim upstarts who dare to challenge this theocratic fascism are nothing but an inconvenience to an uncannily Weimar-like populism that screams simplistically: It is all the West’s fault.

Except, as Nawaz notes, it isn’t. Voices like his need to be heard and encouraged. The whole essay is definitely worth your time.

Some Shale Still Profits at $30

Crude prices have dipped to their lowest level in more than six years, with Europe’s Brent trading close to $48 per barrel, and America’s WTI benchmark down under $43. That’s good news for consumers, but oil producers are having to make tough decisions as higher-cost plays become unprofitable. Many, therefore, expected that a bearish crude market might prove fatal to the shale boom; fracking is a relatively expensive process and just a year ago it was generally thought that few wells could operate profitably below $50 per barrel. But as Bloomberg reports, the price plunge has proven to be a galvanizing event for many in the American shale industry, and a number of firms are finding ways to make money:

Some parts of North Dakota’s Bakken shale play are profitable at less than $30 a barrel as companies tap bigger wells and benefit from lower drilling costs, according to a Bloomberg Intelligence analysis. That’s less than half the level of some estimates when the oil rout began last year. […]

In McKenzie County, North Dakota, one of the core areas of the Bakken, the median breakeven price is a little more than $29 a barrel, Foiles said. That’s about a third less than in nearby Williams County, and it’s less than half the average breakeven price for the Bakken that banks and research firms estimated last fall.

OPEC hasn’t cut production to stop the price slide the way it might have in the past because it hopes to outlast upstart shale producers in these unfavorable market conditions. It’s a high stakes game of chicken as fracking firms rack up more debt while petrostate budgets run deeper and deeper into the red, and so far those U.S. operators are stubbornly refusing to back down.

Shale drilling is a young industry, and there’s still plenty of fat to trim and processes to refine. For OPEC, this serves as a reminder: you bet against American innovation at your own risk.

The Secret Plot to Destroy Russia

I was struck by a recent headline that read “Most Russians Believe USA Wants to Turn Russia into Second-Rate Country.” If it were truly America’s goal to diminish, debase, and ultimately destroy Russia, then how, indeed, would Washington go about it? With that question in mind, consider the following story.

The text below, which appears to date from early 2015, seems to be an e-mail between two U.S. government officials identified only by pseudonyms, presumably codenames. Its authenticity cannot be confirmed; readers should judge for themselves how closely it tracks with reality.My Dear Wormwood,As you prepare to draft the annual Report to Congress on the Destruction of Russia, I wanted to outline for you the most significant accomplishments of our Interagency Working Group for the Destruction of Russia over the past year. A general point worth emphasizing to Congress is that, in the age of Wikileaks, we’ve managed to keep our work secret. True, many Russians believe that the United States is out to destroy their country. But only a handful of Russian patriots has begun to suspect just how we’re going about it.Thanks to our activities, Russia is careening toward total collapse. Domestically, corruption continues unabated, and Russia’s appalling business reputation acts both as a brake on foreign investment and a stimulus to capital flight. The sclerosis created by “managed democracy” appears effectively irreversible.The big news for 2014, of course, was the invasion of Ukraine. While the war is in one sense the logical culmination of years of patient work by our agents in Russia, the suddenness and scale of events have presented us with an unimagined windfall. The thoroughgoing alienation of a kindred nation, a quantum leap in the growth of Moscow’s burden of empire, the unsustainable militarization of Russia, estrangement from Europe and most of the post-Soviet space, repeated body blows to Russia’s sputtering economy—really, what’s not to love? The crowning touch is that our people in Russia have contrived to put the country in a hopeless no-win situation. Moscow has blown any chance of getting Ukraine to align with Russia voluntarily, while Russia lacks the wherewithal to subdue and occupy Ukraine by force but is much too deeply invested in the conflict to cut its losses and get out. The Donbass is a festering wound that threatens to infect the entire Russian body politic. High-fives all around!The war in Ukraine, of course, is just a part of our broader campaign throughout the post-Soviet space. “Our guys” have been trumpeting the idea of a Eurasian Union, which Russia’s neighbors can only see as a threat to their sovereignty and an attempt to use them as fodder for Russia’s geopolitical machinations. “Gas wars”, “milk wars”, or “phytosanitary” restrictions, ostensibly adopted to “persuade” reluctant states to join the Eurasian Union, are of course having the opposite effect. In addition, our agents of influence have ensured that the average CIS guest worker in Russia will be ruthlessly exploited by his employer, shaken down by the police, and threatened by racist thugs. Indeed, Moscow’s migration policy is tailor-made to inflict maximum damage—it does not seriously inhibit immigration of CIS guest workers, but ensures that the immigrants and their co-nationals at home develop the worst possible impression of Russia. Over time, these two phenomena—ham-handed pressure for Eurasian integration combined with mistreatment of CIS guest workers—will alienate both elites and ordinary people throughout Russia’s “near abroad.” With a little help from our friends in Russia, we can look forward even to Belarus’ eventual accession to NATO. Moreover, the massive energy subsidies needed to entice reluctant neighbors and keep them in the Eurasian Union will hasten Russia’s bankruptcy.Outside the post-Soviet space, our people have directed Russia further down the blind alley of unquestioning support for the most odious regimes around the world. In Syria the Russians have firmly lashed themselves to the mast of Assad’s ship, and. in so doing, Russia has outraged and alienated Europe and much of the Arab world. It is fitting that Russian analysts are calling for Moscow to defend its final stronghold in the Middle East. Thanks to the work of our agents of influence, Syria is set to become Russia’s Last Stand in the region. Even the short-term survival of the Assad regime only works to deepen the bitterness the Sunni majority feels toward Russia. Indeed, Russia’s identification with Shi’a forces—Iran, Assad, and Hizballah—ensures the wider alienation of Russia from the 90 percent of the world’s Muslims who are Sunni. As we’ve already seen in Libya, the inevitable collapse of Assad and other retrograde client states elsewhere will ultimately deprive Russia of the billions of dollars it invested there, and leave Moscow increasingly isolated and disliked internationally.And don’t forget to mention the salutary role of “our guys” in raising alarm about America’s supposed greed for Russia’s natural resources. We continue to reap enormous dividends from our disinformation efforts, especially the phony quotation of Madeleine Albright supposedly casting a lustful eye at the riches of Siberia. We’re incredibly fortunate that Russian officials and journalists can’t be bothered to verify their sources, since even the most basic fact-check would have revealed the quote as fraudulent! But then, amazingly few Russians realize that hydrocarbons are simply commodities that can be bought any number of places at prices set by the market; in this respect, a barrel of oil is no different from a can of soup. True, the enormous revenues generated by the hydrocarbons it sells us could help remedy many of Russia’s ills. Fortunately, our agents of influence have ensured that most of this revenue is stolen, squandered, or returned to the West via capital flight, shoring up our banks and our property markets. The irony is sweet—not only do we get Russia’s hydrocarbons, but most of the money we pay for them comes back to us as well! Why, indeed, would we need to take what Russia is giving us already?But the most delicious irony is that, while Russians obsess about hydrocarbons, we’re quietly plundering Russia’s true treasure: her human capital. Unlike oil, talented people cannot simply be bought. Being patriots, most educated Russians would prefer to realize their potential in their homeland, for the good of Russia. But thanks to the efforts of our agents, the most gifted Russians are increasingly driven to seek their fortune in the West. The value to us of Russia’s brain drain is incalculable and dwarfs whatever benefit we could gain even from outright ownership of Russia’s hydrocarbons.As you know, all our efforts nearly came to naught several years ago, when something like an “orange” revolution threatened to undo years of work. Had our people in Russia lost their heads, all might have come to nothing. However, they kept their cool and hit upon a strategy of unparalleled genius: anti- Americanism. By whipping up hatred of America for supposedly opposing Russian policy, they completely blinded Russians to the fact that we’ve actually been guiding Russian policy. Moreover, our agents of influence hit upon a brilliant stratagem to silence those Russians who refused to fall for this ruse. They have ensured that most Russians currently mistake knee-jerk great-power chauvinism for patriotism, while genuine Russian patriots, who strive for justice and a better life for their countrymen, are reviled as traitors. The Russian masses are scrambling like lemmings toward the cliff’s edge, while a few of their saddened, embittered compatriots pack their bags and quietly leave the country. At the rate things are going, I daresay that in a few more years our work will be complete, and we can wind up the Committee and head off to a well-deserved retirement.Oh, and don’t forget to remind Congress that all these achievements come at no cost to the American taxpayer. Our agents in Russia continue to do our bidding for free!V/R,Screwtape

In America, Identity Trumps Class

In perhaps the clearest distillation yet of the Democratic Party’s long-running shift toward becoming a “rainbow coalition” heavily reliant on women and ethnic minorities, it is severing ties with two of its great agrarian populists (or slaveholding white male oppressors, depending on your perspective): Thomas Jefferson and Andrew Jackson. The New York Times reported this week that Democratic parties in states across the country, including Connecticut, Missouri, and Iowa, are renaming their traditional Jefferson-Jackson dinners out of “a desire for greater racial and gender inclusion.”

The Times frames the party votes to scrap the two former presidents as an embrace of the politics of identity over the politics of class:

For all the attention this summer to the fight over the Confederate battle flag, the less noticed moves by Democratic parties to remove Jefferson and Jackson from their official identity underscore one of the most consequential trends of American politics: Democrats’ shift from a union-powered party organized primarily around economic solidarity to one shaped by racial and sexual identity.

But were the Democrats ever really a party “organized primarily around economic solidarity”, or has identity always been an important part of the mix? The party of Jefferson, and especially the party of Jackson, employed identity politics, too—albeit a different kind. As the historian Jeffrey Bloodworth has said, Andrew Jackson’s presidential coalition was composed largely of rural Scots-Irish immigrants, a “‘folk-community’ bound by poverty, pride and militant Christianity.” Jacksonianism embraced identity politics in the sense that it appealed to this cultural group’s particular interests, grievances, and resentments. Of course, there was an economic component to both Jeffersonianism and Jacksonianism in that they envisioned the family farmer as the basis of American society. But the economic message was tethered to what was unmistakably a form of identity politics—an assertion of the dignity of a particular social-ethnic group.

Even Franklin Roosevelt’s storied New Deal coalition would probably not have been able to hold together without its own kind of identity politics. Social security infamously excluded domestic and agricultural workers—i.e., Southern blacks, who were disenfranchised. Southern Democrats may not have acceded to the legislation if Southern blacks had stood to benefit as well. The New Deal coalition nominally united working class people of all races and creeds against elite economic interests, but identity politics—in particular, Southern white identity politics—were very much at play as well.Some Democrats oppose the decision to drop Jefferson and Jackson because they think it privileges the politics of identity over the politics of class. One strategist quoted in the Times story said:

Jefferson and Jackson and the ideas they stood for, spreading economic opportunity and democracy, were the beginnings of what was the Democratic Party. That is what unified the party across regional and other lines for most of the last 200 years. Now what unites everybody from Kim Kardashian to a party activist in Kansas is cultural liberalism and civil rights.

But this analysis is not quite right. While identity politics has a long history in America, pure class politics has never been nearly as successful. Partly because of our ethnic heterogeneity, partly because of our founding belief in free enterprise, egalitarian movements in the United States, from Jacksonianism onward, have usually relied at least in part on identity-based appeals in order to survive. In that sense, by dumping Jefferson and Jackson, the Democrats may not be so much departing from their history as repeating it.

Turkey Headed for New Elections

After high-stakes talks in Turkey between the AK Party and the Republican Party (CHP) broke down last night, the country appears to be headed for its second set of elections this year. The New York Times reports:

Prime Minister Ahmet Davutoglu said after the talks ended on Thursday that, while all chances for a coalition agreement had not been exhausted, “early elections are a strong possibility, the only possibility, even.”

The deadline for coalition talks is Aug. 23, so theoretically there is still time for a coalition to emerge, possibly matching Mr. Erdogan’s Islamist party — the Justice and Development Party, or A.K.P. — with a small, far-right nationalist bloc. But Mr. Davutoglu’s remarks on Thursday indicated that that was unlikely […]Reflecting the deep disagreements, Kemal Kilicdaroglu, the leader of the C.H.P., said Thursday that the two sides had never had meaningful discussions about a partnership, despite long hours in meetings. He said all Mr. Davutoglu had offered was a short-term arrangement that would lead to early elections.

The AKP, and particularly President Recep Tayyip Erdogan, may regard early elections as a win-win proposition. On the one hand, the party may be gambling that the war in Syria, combined with the internal anti-Kurdish crackdown and the weakness of a caretaker government, will lead to a demand for a strong new government, presumably one that’s majority-AKP. (The ongoing crackdown against the Kurds may also simply repress enough opposition to help the party get over the 50 percent threshold). On the other hand, as the Wall Street Journal points out, the President has outsized influence in the Turkish system in between elections: Erdogan, with his murky authoritarian aspirations and both the war and the internal crisis brewing, may be drawn to an opportunity to create mischief.

But the headwinds the AKP faces are real, including a still-faltering economy: The lira fell to a record low against the dollar after coalition talks broke down. As Stephen A. Cook wrote in these pages after the June elections, Turkey may simply be entering one of the periodic bouts of political instability that have historically beset the country. With elections now looming again, political uncertainty will likely, at the very least, be the rule for about the next few months.

War and Impending Financial Disaster for Ukraine?

Evidence that the war in eastern Ukraine is heating up continues to mount: Russian-backed Ukrainian rebels are canceling military leave and mobilizing their full force in preparation for combat, according to a Russian state-run TV station. Several hours before the mobilization was announced, Vladimir Putin reportedly called an emergency meeting with his security chiefs and defense minister. The Kremlin-backed station quoted a representative of the rebels saying that war could break out at any time.

Moreover, on Wednesday night, the OSCE reported its finding that several storage facilities where the rebels were supposed to be keeping their heavy armaments had been emptied. The Ukrainian government has been pointing to a significant escalation by rebels this week, saying its forces are being battered by heavy weapons, which February’s Minsk treaty technically banned. The government has authorized its troops to respond in kind, and notified the OSCE.As for Kiev, its problems sadly don’t begin or end with the conflict in the eastern breakaway regions. Between the cost of the war in the industrial heartland, rampant corruption, the dim prospects for the current government successfully to implement promised reforms, and soaring sovereign debt, Ukraine’s main problem is the sorry state of its finances. Things aren’t likely to improve on that front, as talks in San Francisco with one of its major foreign creditors—the bond fund Templeton—broke up today with no breakthrough in sight. Bloomberg:

The two-sentence statement left little scope to “read between the lines” on the state of progress, Nomura Holdings Inc. strategist Tim Ash said by e-mail. Ukraine, which needs to execute an agreement before a $500 million note falls due on Sept. 23, said Aug. 7 that this week marked the “final opportunity” for an accord.

“It’s a good sign that they are continuing discussions and not blaming each other for lack of cooperation,” said Jakob Christensen, an analyst at Exotix Partners in London, who expects creditors and the government will eventually settle on a 22.5 percent writedown to the face value of bonds. […]

“It’s a pity that after flying so far, Jaresko will leave with nothing,” Vitaliy Sivach, a Kiev-based bond trader at Investment Capital Ukraine, said by e-mail. “It looks like it’s time to prepare for Plan B — to default.”

Between a rock and a hard place, as they say. It would not be surprising to see Putin pushing a bit harder militarily in the coming days, just to see how destabilized Kiev can get.

Trouble on the Horizon for Prison Reformers

Support for prison reform has gained momentum recently as libertarian-leaning conservatives and civil-rights oriented liberals have increasingly argued that existing criminal justice norms are too punitive and expensive for a society with crime rates at historic lows. But the tremendous backlash against police violence in the past year may have led to a spike in the violent crime rate by, perhaps, reducing cooperation between police and the public and discouraging police from using certain tactics. The Economist reports:

Murders always increase in summer in America’s cities … but this summer has been particularly bloody. In July 45 people were murdered in Baltimore. That was the worst month the city has experienced since August 1972, when the population was almost 50% larger than it is today. And Baltimore is not alone […]

In Milwaukee, one of America’s most segregated cities, twice as many people were killed in the first half of 2015 as in the same period last year. In St Louis, the centre of protests against police since last year, the figure climbed by 60%; in New Orleans, by 30%; in Washington, DC, by 18%; in New York by 11%. The trend is not uniform: Los Angeles, Phoenix and San Diego have seen declines in the number of murders in the first half of this year. But the trend is widespread enough to concern police chiefs, several of whom met in Washington to discuss rising gun crime on August 3rd.

As the Economist says, it’s too early to know whether the country is facing a sustained crime wave or merely a temporary uptick in certain troubled cities. Hopefully it turns out to be the latter. But if murder rates stay elevated, the cause of bipartisan criminal justice reform—which we at TAI broadly support—could lose momentum very quickly.

The U.S. only came to the point where leading politicians of both parties are calling for reform because of the steep drop in crime that took place over the last two decades. From the 1970s through the 90s, when violent crime was upending the nation’s social fabric, a large majority of the public was crying out for tougher criminal justice policies. If high rates of murder, rape, and robbery return to America’s cities, public opinion could well swing back in the tough-on-crime direction. The new figures coming out should be a warning to criminal justice reformers: Proceed with caution.