Peter L. Berger's Blog, page 637

Misinformation Travels Fast in the Twenty-First Century

The Washington Post Magazine has a long feature article by former U.S. Ambassador to Belgium Howard Gutman on his painful experience navigating a pair of misinformation campaigns against him while he served at the American embassy in Brussels. Gutman’s story is a reminder of how quickly false allegations can spread in the hyperconnected 21st century, and how devastating they can be for people on the receiving end.

First, Gutman was fiercely denounced by Republican politicians and U.S. media outlets when a doctored version of his remarks on anti-Semitism began circulating in the blogosphere:

A freelance journalist reported that I had blamed Israel (rather than the increase in hostilities) for the rise of anti-Semitism in Europe. Going one step further, a newspaper put quotation marks around the paraphrase.

Truth often loses its way in Washington and never more quickly than during a presidential campaign. As the embassy was receiving first wind of the misquote, then-candidate Newt Gingrich tweeted that I was wrong about anti-Semitism and needed to be fired immediately. The rest of the Republican field — Mitt Romney, Rick Santorum, Michele Bachmann, Rick Perry and Jon Huntsman — joined the chorus of critics. Within hours, the story that I was an anti-Semite spread on the Web, onto cable news and across the conservative weeklies, making cameo appearances in mainstream newspapers, and even a front-page splash in North Dakota. A Jewish Republican group soon took out a full-page ad in the New York Times attacking Secretary of State Hillary Clinton and Secretary of Defense Leon Panetta and calling for my firing. The message traveled to newspapers in China, India and Thailand and continued to reverberate among bloggers throughout the world.

Gutman gradually recovered from that incident, but shortly before he was scheduled to return to the United States, he was confronted with yet another viral falsehood that he could not control:

A former member of the State Department’s inspector general office claimed that Clinton had covered up eight cases of alleged wrongdoing, including one ambassador who had “solicited” prostitutes in a park. A New York tabloid named me as the ambassador, creating a near-deafening roar in Belgium, across the Internet and throughout my world.

The leading Belgian newspaper filled the front four pages with coverage (though many of the stories were helpful, including one explaining that there had been no reports of any illegal activity in the park in the four years I had lived in Belgium and another quoting Belgian security officers explaining that they had often watched me without my knowledge, even when I did not have security, and that I had never engaged in any questionable activity). As the days passed, the stories online morphed as if part of an Internet game of telephone, growing uglier and more disgusting.

Gutman’s unfortunate saga should serve as a cautionary tale to journalists and readers alike to get the facts right. As the saying (often falsely—and ironically—attributed to Mark Twain) goes, “a lie can travel halfway around the world while the truth is still putting on its shoes.” That is all the more true in the modern world of clickbait and online outrage shaming. All stories should be approached with a healthy dose of skepticism—especially when they have managed to gin internet mobs calling for someone to be fired.

But there is a second reason why we should be especially wary of media allegations in the modern age: Russia’s propaganda apparatus is doubling down on smear campaigns against U.S. officials and others who criticize Russia. It is becoming more important that both government and media in the U.S. (1) to check allegations before going public with them and (2) give lots of attention and publicity to vindications of those falsely accused. The media environment is toxic enough on its own, but there are bad actors out there practicing dark arts.Read Gutman’s full essay to get a sense of how false accusations can distort politics and ruin careers.

Obama Lights Firestorm on Capitol Hill

The Obama administration’s determination to take the Iran deal to the UN Security Council before Congress votes on the agreement has set off a firestorm on Capitol Hill, with leading Democrats joining Republicans in calling on the President to wait. On Tuesday, Secretary of State John Kerry boasted that by having the Iran deal incorporated in a UN Security Council resolution, President Obama could tie the hands of future presidents, legally obligating them to abide by the Council’s resolution. From Foreign Policy:

“If Congress were to veto the deal, Congress — the United States of America — would be in noncompliance with this agreement and contrary to all of the other countries in the world. I don’t think that’s going to happen,” U.S. Secretary of State John Kerry told reporters Tuesday.

Congress isn’t happy. Late Thursday, Senator Ben Cardin of Maryland, the highest ranking Democrat on the Senate Foreign Relations Committee joined the Republican chair of the committee, Senator Bob Corker, in calling on the White House to hold its horses at the UN until Congress votes. As The Hill reports, Cardin told the press that:

“Acting on it at this stage is a confusing message to an independent review by Congress over these next 60 days. So I think it would be far better to have that vote after the 60-day review, assuming that the agreement is not effectively rejected by Congress,..”

On Friday, the House leadership spoke up as well. Democratic Whip Steny Hoyer (also of Maryland) issued the following statement:

I agree with Senators Cardin and Corker that the U.N. Security Council should wait to move ahead with a resolution implementing parts of the Joint Comprehensive Plan of Action until after Congress has completed its review of the agreement with Iran. I believe that waiting to go to the United Nations until such time as Congress has acted would be consistent with the intent and substance of the Iran Nuclear Agreement Review Act. 

Neither Cardin nor Hoyer is considered part of the liberal wing of the Congressional Democrats, and the President can still count on significant Democratic support. But if the Administration decides to press forward at the Security Council before the 60 day review period mandated in the carefully crafted bipartisan compromise that Cardin and Corker worked out last spring, the White House could face a serious revolt.

Dissing Congress is a risky move for American presidents. There have been widespread reports that many Democrats on Capitol Hill would like to support the President’s Iran policy, but are worried about the political fallout among voters back home. In the end, many of these waverers would probably support the President on the Iran deal in a straight up Congressional vote, but if the President does an end run to the Security Council, the waverers could—and many will—oppose him on procedural grounds. Both the Senate and the House are jealous of their Constitutional prerogatives, and voting to uphold the powers of Congress is a much easier vote for Democrats than voting against the President on an important foreign policy issue.

This is not likely to end well. President Obama was stretching both his Constitutional powers and his political mandate when he decided to short circuit the treaty process for one of the most important decisions that American foreign policy has taken in many years. There is precious little doubt that the Founders would have considered this a threat to the system of checks and balances they wrote into the Constitution. In modern times, presidential authority has expanded, largely because American foreign relations have become so complex and the world moves so quickly that it would be impractical to subject every significant agreement between the United States and other countries to the treaty process. But given the length of this negotiation process and the enormous stakes involved, the Iran agreement really ought to have been framed as a treaty. The President, to be fair, knew very well that he could never get a two thirds vote in the Senate for this agreement, and, believing as he does that this step is necessary to the safety of the United States, he framed the deal as an executive agreement to avoid exactly the scrutiny and vote that the Constitution requires.

Congress grudgingly went along with that, passing the Corker-Menendez law as a way of regularizing the President’s irregular choice. This tilted the playing field toward the President, as opponents would need a two thirds majority in both houses (instead of only a one third majority in the Senate) to block the deal for good.

That the President is blowing off this concession by Congress is a serious matter—more serious perhaps than the White House realizes. He is really requiring Congress to accept a permanent and significant diminution in its power for the sake of an Iran deal that few members view with enthusiasm. The precedent he is setting changes the Constitution, essentially abrogating the treaty power of Congress any time a President can get a Security Council resolution to incorporate the terms of an executive agreement.

Regardless of the merits or demerits of the Iran deal, this is the wrong way to proceed. If President Obama chooses to go this route, he is provoking a constitutional crisis in order to get sanctions relief to Iran sixty days faster than would otherwise happen. The Congressional Democrats calling on President Obama to refrain from this mischievous and foolhardy course are quite right; this is a bridge too far.

Realism and the American Republic

In the crude violence of the contemporary international scene—with Russia running rampant in Ukraine and rattling its saber toward the Baltic states, with Muslims and Christians facing slaughter by ISIS in the Levant, and with thousands of African migrants boarding overloaded scows to cross the Mediterranean in a perilous search for work—it may seem harsh to hold an American President to a moral standard of foreign policy any higher than “realism.”

But the moral aspirations of the American republic—even as framed by the current incumbent of the White House—permit a review of our foreign policy performance that is a bit more critical.By that measure, the current report card is not inspiring. Preoccupied by issues of criminal justice, civil rights, and medical care at home, and flummoxed abroad, we seem to have forgotten the broader ideals of internationalism that animated the founders. John Quincy Adams warned the new republic against venturing abroad seeking monsters to slay—but that was at a time when monsters were more easily thwarted and avoided, and when sailing ships from Europe took thirty days to arrive in North America. It was a time, as Adams’ near contemporary, President James Monroe opined, when the New World could be declared as a hemisphere peculiarly unavailable to autocratic powers. In a world now circled by air in 48 hours, with an international commerce that brings tens of thousands of container ships to American seaports, problems have no protective distance. There is no cordon sanitaire to protect the American homeland from chaos elsewhere.Nor does a thin-lipped “‘realism’ about American foreign policy warrant any different posture about moral catastrophe abroad. Lest we forget, human rights were at the center of the American Declaration of Independence in 1776, invoking Nature’s God as well as English common law traditions. The new American Constitution could not be ratified in 1788 until an enumerated Bill of Rights was promised. In the foreign policy of a country founded on those principles, the cruelty and radical disregard for human rights evidenced in the conduct of governments in so many regions may deserve a remedy more robust than a mere literary acknowledgement in annual reports from the State Department or Freedom House.Yet we often pull our punches, supposing that reticence will serve as aptly as speech or action. One example tainted the beginning of this Administration, when the White House failed to support the pro-democracy demonstrators in Iran, and did not venture beyond soft-spoken remonstrance at the wanton shooting of an innocent young woman named Neda Agha-Soltan during the 2009 protests against the mullahs near Tehran’s Azadi Square. Our interest in curbing Iran’s nuclear program by negotiation also has muffled the human rights complaints that should be aimed at Tehran for its execution of dissidents of every stripe, including Christians, still hung high from the gantry arms of construction cranes. So, too, in China, our quarrels with the regime’s violent persecution of political dissidents and Christians—as well as the arbitrary use of detention and hard labor to eliminate rivals of the commercial elite—were raised only in a measured and demure voice during Mr. Obama’s first visit to the capital city of Beijing. Perhaps subtlety is the most effective syntax within an Asian culture. But it also may be a subtle way of signaling the relative priority of commerce or comity over freedom.Even for a President inclined to prioritize domestic American problems, the global strategy of other great powers demands our attention. The 19th-century ground rules of President James Monroe for hemispheric autonomy no longer set the standard, as seen in China’s conspicuous entry into Latin America with significant investments in Argentina’s economy. Sino-Argentinian joint ventures in nuclear power and hydropower, mining, space technology, and financing may recast the loyalties of a key Latin state, advanced as well by Beijing’s support of the Argentinian demand for the “return” of the Falklands. The political assassination of Argentine prosecutor Alberto Nisman in January 2015, immediately upon his return to Buenos Aires to testify against President Christina Fernandez, also shows that a certain strain of fascism—strengthened by Argentina’s asylum for émigré European fascists after World War II—has never left the country. As steward of the world’s largest economy and Commander-in-Chief of the globe’s largest fighting force, an American President has a responsibility to police the global commons, and certainly to stabilize his own hemisphere. He might worry at these developments.So, too, China’s grand entrée into Africa—wooing governments, sending minions to build low-cost infrastructure, buying up land for factory farming and mining for industrial production—is something that a White House should watch, if only to understand the dynamic of having 53 African votes in the U.N. General Assembly as a potential counterweight to U.S. preferences, as well as the increased potential for China to become a double-coasted Atlantic power. Added to the “string of pearls” that China has built in the Indian Ocean—by subsidizing the construction of modern ports in Sri Lanka, Bangladesh, and Pakistan—an American President has to anticipate that China will project a far more agile (and potentially troublesome) global naval presence.To be sure, the shriveling of the American press has helped along White House abdication from these “details” of foreign policy—and this holds true for both political parties. American universities that purport to teach international relations have often abandoned area studies about real countries and regions, in favor of the simpler game of “international relations theory” – taking a familiar problem and analyzing it in light of vaunted (but tautological) schools of realism, institutionalism, constructivism, and liberalism. One wag has chided that the rather mechanical manipulations preached by each of these analytic “schools” is perfect for American students, because one doesn’t need to have traveled anywhere or learned any languages or know any history in order to move the pieces around.But the lack of attention to the chess pieces that affect international strategy and limit American influence is broader than that. There are, quite simply, no American newspapers covering the politics of Africa – for that, one must go to Jeune Afrique or Reuters, or the occasional story in the Economist. Detailed reporting on most of Asia is left aside as well by financially strapped newspapers, with the exception of the Wall Street Journal’s Asian edition, and the Financial Times. Our understanding of the politics of Latin America is cramped. What still sells newspapers, even after Hearst, is the simplicity and glare of violence, rather than the politics and plight of the 192 other members of the United Nations.What, then, is most urgently missing from our foreign policy? Perhaps first and foremost is our reluctance to call out what has gone wrong in the misuse of Islam by a new generation of European and Middle Eastern youth. The White House condemns what it numbly calls “violent extremism”—without any attempt to rebut and isolate the newly revived ideology of Islamic jihad that excites some young men and women in Europe and the Middle East and Asia. The recent White House conference on “violent extremism” was akin to a party game in which one has to guess the word that no one can say. It was not focused on Hindu violence in India or the Janjaweed’s attacks on Sudanese rebels stemming from rivalries between herders and farmers. Its impetus was the urgent problem of jihadist Islamic thought. But no one was permitted to frame and challenge the doctrines of radical Islam that have mobilized hundreds, if not thousands, of young jihadists. The only evident suggestion was to try to build economic opportunity for young men and women, and hope that ideology would cure itself.This unwillingness to name the problem will neutralize the cure, for the ethical constraints on violence within Islam must be framed within the religion itself. As it happens, the most sophisticated account of the Islamic law of war—when force can be used and when peace is required and what tactics are allowable—was sketched by an Iraqi-American scholar named Majid Khadduri, who taught at the Johns Hopkins School of Advanced International Studies. In Khadduri’s account, the permissible uses of violence in Islamic law have everything to do with whether Islam itself is in peril, and how that is to be judged. The exegesis of the point is complicated, and requires literacy in classical Arabic and Koranic studies. But proving to contemporary Muslim youth that classic Islam—as well as the modern law of war—strictly forbids the use of violence against innocents and demands tolerance for other religious faiths, will be key to turning around a generation. The evasive phrase of “violent extremism” doesn’t begin to frame the intellectual and social challenge needed for success in this venture. There appears to be no real successor to Khadduri in the American academy, and the best sources I have found are some astonishingly erudite military officers who taught themselves Arabic and read in the Hadith and other sources to understand their adversaries.This key question is not something in which the White House has chosen to invest—unwisely relying upon a purely economic (dare we call it “suburban”) cure for jihadism, and conflating all forms of what it chooses to call “violent extremism.” The moral fault of feckless violence may be the same, but its causes may different. One should take the ideology of an adversary as a matter to be understood.More than forty years ago, Yale sociologist Scott Boorman brilliantly analyzed Mao’s military strategy in the Chinese civil war in light of the rules of Wei-Chi, or the game of “go.” There may be a lesson that has escaped this White House—of seeking to understand an adversary by his own terms.In addition, we must understand that a renewed strategic game of resources and alliance is now afoot in all quarters of the globe. Despite the naming exercise of Amerigo Vespucci, the United States of America has no normative claim to hegemony over the Western Hemisphere, and we should not be surprised when our global rivals and adversaries, including some particularly nasty actors, attempt to strike their own deals with governments in the Western Hemisphere. Neither the French, nor Belgians, nor British should be surprised at the same mix-and-match in Africa and Asia.There was a time when things seemed more settled for America. The Monroe Doctrine held sway, by dint of the evident superiority of republican forms of government and the power imbalance between the United States and its competitors, with a tip of the hat to the robustness of gunboat diplomacy. But even in that earlier era, France’s ambitious Napoleon III attempted to win a foothold in Mexico, taking advantage of the distractions of the American Civil War (and dreaming of his own pan-oceanic canal). And during the Fidelista years of the 20th century, Venezuela and Bolivia came under the sway of Chavismo, with a froth that lingers even now. Thus, it is necessary to remember that in the realpolitik of the global marketplace, strategic location, natural resources, and nondemocratic forms of government will continue to attract self-interested actors looking for sport. Thus, there is no safe return to an earlier form of pan-isolationism, for strategic players will contest even the most established alliances.

A Softer Face for Conservatism?

In Friday’s Wall Street Journal, WRM reviews The Conservative Heart, a new book by Arthur Brooks, the president of American Enterprise Institute’s president (WRM is on AEI’s academic advisory board, unpaid). Brooks calls his fellow conservatives to deliver their limited government message with empathy, generosity of spirit, and attention to moral values:

When, for example, conservatives inveigh against increasing the minimum wage, the message voters hear is that conservatives don’t care about helping poorly paid workers. What they need to hear is that conservative opposition to hiking the minimum wage comes out of a passionate concern for the well-being of those who lose their jobs when the minimum wage increases. That can’t just be boilerplate; conservatives need to highlight the inequality and lack of opportunity that so many Americans feel. And they need to offer practical solutions. As Mr. Brooks remarks about anti-poverty and social-welfare programs in general: “While conservatives have criticized those outmoded policies, they have offered little in the way of alternatives.” […]

As a practical matter, Mr. Brooks is onto something important in this book. Developing a message that is grounded in widely acceptable moral values, attaching the message to appealing policy proposals, and projecting that message in a magnanimous way will be the high road to political success—not just in 2016 but for the long term.

Since the 2012 election, conservative leaders have acknowledged that they have a messaging problem, and a debate has broken out between Tea Partiers, establishmentarians, and reform conservatives of various stripes over how to address it. The Conservative Heart is a notable contribution to the ongoing efforts of one of America’s major political parties to reinvent itself to appeal to a wider audience. Read WRM’s full take in the WSJ.

China Growls as Remilitarization Plan Passes Japan’s Lower House

After making it through committee on Wednesday, a set of bills that codify Shinzo Abe’s reinterpretation of Japan’s pacifist post-war constitution passed in the lower house of the Diet, Japan’s parliament. Under the new interpretation, the country can take military action for purposes of “collective self-defense”, which means, essentially, on behalf of allies (as long as the threat to or attack on the ally is also construed as also threatening Japan). The issue has become wildly contentious in domestic politics, and the vote goes against a rising tide of public opinion in favor of the pacifist status quo. Defense News reports:

The bills were passed in a near half-empty chamber because the opposition Democratic Party of Japan, the Japan Innovation Party, the Japanese Communist Party and the Social Democratic Party all staged a walkout in protest […]

The legislation has met strong resistance from not only opposition parties, but was greeted by massive protests outside the Diet building on Wednesday, with estimates of the crowds numbering 60,000-100,000 demonstrators. Despite more than 100 hours of debate in the Diet, it is widely recognized here that the legislation is poorly understood and has at very best lukewarm support by the Japanese public, which is worried that the SDF may find itself embroiled in conflicts that have no direct bearing on Japan’s security.

One of Abe’s strongest arguments for remilitarization is that Japan must be able to respond to China’s rise, which, he rightly asserts, threatens to change the balance of power in East Asia in ways that won’t be in line with the interests of Tokyo or its neighbors. China, it seems, agrees with this analysis, and predictably, it’s already lashing out against the Diet’s vote in its underhanded and understated way. Reuters:

Chinese defense chief Chang Wanquan told Shotaro Yachi, who is a close ally of Abe’s, that the passing of the bill was an “unprecedented move”, state news agency Xinhua said, after the pair met in Beijing.

“This move will have a complicated influence on regional security and strategic stability,” the news agency said, paraphrasing Chang.He “urged the Japanese to learn from history, respect major security concerns of its neighbors and not to do harm to regional peace and stability”, Xinhua added.

Now the bills go to the upper house. Things could now slightly trickier, since, unlike in the lower house, Abe’s LDP doesn’t hold a majority there. It rules in coalition with another party, Komeito. But it bodes very well for the bills’ passage that Komeito has voted along with the LDP so far.

If things go according to Abe’s preferred plan, the next step will be the last one before Japan becomes pretty much a “normal country,” one that can send its troops where the government feels they are needed to protect and promote the national interest, whether that’s the Senkaku Islands, the South China Sea, the Middle East, or anywhere else.

After Bailout, Europe Worries about Far Right and Far Left

As the financial dangers surrounding the Greek bailout calm, Europe’s leaders are looking ahead to other, political dangers. The English edition of the Greek paper Kathimerini carries an interview with Donald Tusk, the President of the European Council, about the political fallout from the drama in Greece:

I am really afraid of this ideological or political contagion, not financial contagion, of this Greek crisis. Today’s situation in Greece, including the result of the referendum and the result of the last general election, but also this atmosphere, this mood in some comments – we have something like a new, huge public debate in Europe. Everything is about new ideologies […]

For me, the atmosphere is a little similar to the time after 1968 in Europe. I can feel, maybe not a revolutionary mood, but something like widespread impatience. When impatience becomes not an individual but a social experience, this is the introduction for revolutions. I think some circumstances are also similar to 1968.The most impressive for me was this tactical alliance between radical leftists and radical rightists, and not only in the European Parliament… The discussion about Greece, it means a discussion against austerity, a discussion against European tradition, anti-German in some part. Everything was provoking enthusiasm on both sides. It was quite symbolic.It was always the same game before the biggest tragedies in our European history, this tactical alliance between radicals from all sides. Today, for sure, we can observe the same political phenomenon.

Mr. Tusk is probably right to be concerned, for two reasons—one which he sees, but the other which he doesn’t and has actually played a role in creating.

The continuing alignment between parties across national lines on pan-European questions—what we have called the emerging politics of Europe—is a sign of the Continent’s maturity. But Tusk is right to point out that, historically, European extremists have helped one another out. Fascist parties have found common cause with other fascist parties, communist parties with communist parties, and even fascist parties with communist parties. The way non-extremist European parties, whether center or left, have recently reinforced one another suggests that this dynamic is still potentially viable. If fascism, communism, or other extremist parties do emerge in Europe, there’s good reason to be concerned about them feeding off one another.

But Tusk should ask himself why extremist parties might reemerge at this particular moment. In part, they owe new life to the timeless tactic of selling people a fantasy that helps them avoid ugly economic realities. But in part too, they’ve benefited from a leadership crisis: the Greeks and others have a political class that has repeatedly refused to do what it was voted into office to do. Now, admittedly, the Greek popular will is unworkable, but there’s only so much you can protect people from themselves. H.L Mencken’s quip that “Democracy is the theory that the common people know what they want, and deserve to get it good and hard” is famous because there’s some truth to it. Leaders who don’t do a reasonable job of honoring the popular will, even a misguided popular will, are likely to see vigorous opposition. 

Most European leaders, however well meaning, are essentially blind to the fact that people might want something other than what they’re offering. Tusk again:

This new intellectual mood, my intuition is it’s risky for Europe. Especially this radical leftist illusion that you can build some alternative to this traditional European vision of the economy. I have no doubt frugality is an absolutely fundamental value and a reason why Europe is the most prosperous part of the world

This blindness presents a particularly acute problem when the people see the European leaders not so much as offering a economic model as using their bail-out leverage to enforce it. In January, the Greeks voted Syriza into power to make radical changes. Now, for all the drama, they’re back where they began. If the Greeks or others are not getting what they want out of the ballot box, Tusk & Co. should be right to worry that they might start looking to other, less democratic, more radical options, such as Golden Dawn or the far left.

Our Measures of the Economy Don’t Work

American economic productivity is stagnating, or even falling—unless, that is, you’re in Silicon Valley. The Wall Street Journal has an article on Silicon Valley’s rejection of conventional wisdom about a productivity crisis:

Stanford economist Nicholas Bloom, who studies differences in productivity across companies and countries, says the idea of a productivity slowdown seems ridiculous to technologists [in Silicon Valley.]

“You can’t be in the Valley without thinking we’re in the middle of a productivity explosion,” Mr. Bloom says. […]In fact, Silicon Valley seems the exception to the larger U.S. economy. Its businesses are largely defined by their ability to produce impressive output with far fewer people than traditional companies. That means their productivity numbers—output per hour worked—are as sky high as their stock valuations.

Beyond the particular debate over productivity highlighted here, this article points to a crucial fact: Right now, we are trying to measure a 21st-century economy with 20th-century tools. Technology makes life easier and more convenient in all sorts of ways, most of which simply aren’t captured by tools that were developed to measure things like pig iron output. Many and perhaps most of the ways that technology makes our lives better escape the statisticians, and this means that our economic discussions are increasingly removed from reality. How, for example, does one measure the economic benefits of rural residents having access to a world of information online?

We don’t put a price on these things because the Internet doesn’t. There’s been a radical price deflation in the cost of information—down, in many cases, to zero. That can mean that both productivity and GDP can be going down on paper even as both increase in the real but unmeasured world.More, think of the convenience of online shopping. If a consumer sits on the couch and orders books from Amazon, movies from Netflix, and clothes from dozens of different brands and outlets, and does some comparison shopping at Consumer Reports and looks at reviews from scores of consumers—none of that shows up as a GDP gain. In fact, since she doesn’t have to gas up her car and spend hours of her life driving from mall to mall to do the same amount of shopping, perhaps spending less money because she is getting better deals, GDP figures might very well go down even as someone is getting more of her business done faster and better.There are other ways that the information revolution reduces inequality and increases opportunity. It is much, much easier for poor people to access a world of information and entertainment than it used to be. If you live in a bad neighborhood in a place where the economy is depressed, you can get information about better jobs, living costs, and rental markets all over the country. You can read, free or for very little money, the world’s best books. You can access more music than ever before. You can call your friends and family essentially for nothing using services like Skype. If you want to go somewhere, you aren’t dependent on local travel agents; you can hunt for the best fares on the Internet. You can rent out an extra bedroom with AirBnB. Your costs of starting up a business have dropped dramatically, thanks to Ebay, Amazon, and Craigslist—and you can sell in a national market.This doesn’t mean America doesn’t have real problems and challenges, but our economic discussion seems to be getting farther and farther away from the facts.

Mexico Makes History

Mexico made history this week when it auctioned off its first oil tenders in 77 years. 14 shallow water Gulf of Mexico plays were up for grabs to a list of pre-approved companies and investing consortiums. While the Mexican government initially suggested selling 30 to 50 percent of the blocks would mark a success, only two were sold in the auction—less than half of the possible fields that would have been needed to meet that threshold. So, was Wednesday a failure for Mexico?

Director of the Mexico Institute at the Woodrow Wilson International Center for Scholars Duncan Wood thinks so, telling Bloomberg that this week’s auction “has to be crushingly disappointing for the government. It has to be seen as a very clear message that they need to do a lot more to make the oil and gas opening a success.”Fair enough, but if our southern neighbor isn’t coming out of the block with any alacrity, it has a good excuse. To begin with, this is only the first of five separate auctions in just the first round of sales, with more four rounds to follow in subsequent years (the FT has a good run-down of the schedule ahead). So this week’s blocks were just the tip of the iceberg, so to speak, and the fact that those shallow water plays didn’t entice more qualifying bids wasn’t entirely unpredictable. “Shallow water is the minor leagues and these companies want to play in the major leagues”, a New York-based analyst told Bloomberg Wednesday. “Deepwater is where the major leagues are. The shallow waters have already been picked dry.” In other words, these weren’t the choicest cuts of meat, and the lack of a feeding frenzy doesn’t doom future sales.Moreover, this week’s two sales were the first of their kind since the Mexican government nationalized its oil back in 1938. There’s plenty of inertia to overcome here as foreign firms acclimate to these newly-available reserves and as the Mexican people come to terms with this radical reshaping of what for many years was a source of fierce national pride.It’s to be expected that Mexico’s denationalization and privatization of its crude resources will be characterized by fits and starts, but this week’s disappointing results shouldn’t distract from how necessary these reforms were and are. Pemex, Mexico’s state-owned oil firm, was running the Red Queen’s race, spending more money and hiring more workers just to stop output from sliding. Last year Mexican oil production hit a 19-year low as conventional shallow-water fields (like those sold this week) matured. The country needs the kind of risk-taking, technical know-how, and capital investment private companies can bring if it hopes to tap deep-water and shale reserves.This week’s sale won’t have blown anyone’s socks off, but it still marks an important event in Mexican history. Mexico has much more potential than the media likes to give it credit for, and as halting a step as this may have been, at least it was in the right direction.

China: Not Out Of The Woods Yet?

China’s Shanghai Composite Index has recovered more than 15 percent since it hit bottom a week ago, after Beijing limited trading and started propping up the market. But the depths of intervention are only now becoming apparent, according to the FT: 

China’s biggest state-owned banks have lent a combined Rmb1.3tn ($209bn) to the country’s margin finance agency in recent weeks to staunch a freefall in the stock market, casting doubt on whether the recent equities rebound is sustainable without government support.

China Securities Finance Corp was established in 2011 to lend to securities brokerages to support their margin lending to stock investors. Amid the tumble in equities beginning in late June, however, the government has deployed CSF as a conduit for injecting rescue funds into the stock market.

CSF has lent to brokerages to finance their investment in shares and has also purchased mutual funds directly. But the latest revelations indicate that state support for the stock market is much larger than previously disclosed.

This kind of intervention will reassure stock market investors and speculators that the government has their backs in the short term, but the combination of emergency measures (like forbidding major shareholders from selling stocks at all) and vast inflows of cash to support the market only demonstrates that despite government vows, China is moving toward more state guidance rather than less. Wholesale government intervention in financial markets on this scale creates massive opportunities for corruption, distorts the allocation of capital, and makes the task of real economic reform much more difficult.

That China’s financial authorities have chosen a set of policies that carry such heavy costs just shows how frightened they were at the spectacle of an overheated stock market facing Armageddon. The biggest takeaway here is the people who understand China’s economy the best are terrified by the prospect of an implosion.

Saudi Prince: Military Force Is an Option

Shocking, we know: the Saudis are none too pleased with the Iran deal, and after biting their tongues for a few days they’re letting their displeasure be known in public. The Times of London reports:

Saudi Arabia and the Gulf powers are prepared to take military action without American support after the Iran nuclear deal, a former Saudi intelligence chief has warned.

Prince Bandar bin Sultan, who served as ambassador to Washington for 20 years before running the country’s intelligence service from 2005 to last year, said that regional powers had lost faith in America.“People in my region now are relying on God’s will, and consolidating their local capabilities and analysis with everybody else except our oldest and most powerful ally,” he said.

Does the “everybody” include even Israel, which shares most of the Kingdom’s concerns? It would not surprise us in the least.

It’s hard to tell at this point if this is empty talk or represents another stage in Saudi Arabia’s new and assertive foreign policy. But if the Saudis are truly determined to take an independent line on Iran, then cooperation with Israel will be necessary. Given that the opposition is joining the government in Israel in condemning the deal, Jerusalem seems also to be looking at its options.Both countries at this point are terrified of an empowered Iran; both are furious enough at the Obama administration to make them cast about for ways to derail Washington’s Middle East agenda—or even just to damage the President’s prestige. Yet for all their rhetoric, both countries are in some ways profoundly conservative and cautious.Both also have good reason to be wary of Iran, especially when the American protector doesn’t seem to be tilting against it anymore. One of the consequences of “rebalancing” is that the countries that have been rebalanced against tend not to like it very much. And neither Israel nor Saudi Arabia are helpless client states. Feeling abandoned, both have the capacity for independent—or interdependent—action in an increasingly volatile Middle East.