Sunday, October 31, 2010

The Debate Continues At TPM Café

For those of you who have been following my debate with Dean Baker, he's answered again, and again, and I've answered him again, and again, in this string that plays out at TPM Café. Be sure to look through the "Comments" section. Our differences sharpen there.

By the way, some readers of this blog have concluded that I am opposed, in some way, to government action in creating employment. Actually, I wrote in Strategy and Business 13 years ago that the government will have to create work for the chronically unemployable during the long period of transition portended by an economy in which, if you are nothing but a digit, digital technology will replace you. More Boston "big digs," I say; more new universities, more bullet trains. But this is not like "digging holes" in the sense Baker means it--not an economy in which hiked consumption causes business formation in the way it did a generation ago.

Saturday, October 30, 2010

Economic History: A Last (Last) Answer To Baker

Dean Baker answered again, and there is enough of substance in his long post to warrant a long reply. You don't have to read Baker first to understand my post, but it helps. I suspect we are getting a head start on debating the soul of the Democratic Party over the coming year, as we prepare for 2012.

1. Of course the US government got America out of the Great Depression by spending on WWII. By 1947, the national debt was something over 110 percent of GDP. But the interesting historical question which Baker (relying on Dorothy’s ruby slippers) cheerfully avoids is, What was so unique about the American economy after the war, in the wake of the war, that staggering rates of growth over 20 years could mitigate the potentially harsh effects of accumulated debt?

Why did American GDP grow on average at nearly 4 percent a year from 1946 to 1973 (with many years at 10 percent), and with manageable inflation? Why, then, could the national debt be reduced to about 35 percent of GDP by the early 1970s? Moreover, what were the marginal income tax rates in America that allowed the government to keep spending and still draw down the debt?

The answer is not encouraging to economists who extrapolate from that time to this. After the war, America’s economy was the unrivaled manufacturing and financial powerhouse in the world. Its multi-national corporations dominated markets all over Europe, bought into Japan, etc., and controlled sources of supply in Latin America and the Middle East.

Americans needed one of everything, and novel TV advertizing ginned up demand; American mass production factories put barely skilled workers to work, while factories across the developed world were only beginning to learn from them—and, eventually, better the instruction. (Go back and read Jean-Jacques Servan-Schreiber’s 1967 book The American Challenge to get the French take on this hegemony.)

Inflation—which was about 6 percent in the 1940s—was kept below 3 percent during the 1950s and 60s, though the US government spent greatly on (comparatively unproductive things like) defense and (very productive things like) the GI Bill and the highway system. That’s because the US dollar was the world’s only reserve currency. The worldwide demand for dollars greatly restrained inflation. Besides, marginal tax rates on wealth were at 90 percent, so the government could recoup much more quickly.

So I’ll make Baker a deal. If he can show me that Japanese, Chinese, and European global corporations will exit the competitive landscape, that the American economy will grow at, on average, 4 percent a year for the next twenty years, that the euro will stop being an increasingly attractive alternative to the dollar as a reserve currency, and the Congress will reinstate 90 percent marginal rates on wealth—oh, and also that entitlement programs (Medicare especially) will not be in crisis owing to us aging boomers—I will concede that Obama blew it. All he ever had to do was tap his heels together and say, “There is no policy like spending.”

Then again, I suspect Baker would concede that many unfortunate countries spent their way out of, or spent to preempt, depressions, and then failed to grow anywhere near fast enough to pay for the privilege. The Begin government spent wildly in 1981 and Israel had 400 percent inflation by 1984.

Look, I am not saying the American economy today is what Israel's was then. Actually, I have high hopes for American electric vehicle technology, smart grid entrepreneurship, new media platforms, and other emerging sectors that should do for economic growth in the next decade what computers, telecom, and the internet did in the 1980s and 90s. I think the sheer gains in productivity from smart networks will help us. But these are not businesses that will employ nearly as many low skilled people as the factories of 1955 did. (I’ll come back to this.)

And the bigger logic is clear: at some point governments, like businesses, have to ask, am I really going to create more value than I am using up in the effort to create it? Am I eating my seed corn? America cannot live with the global competition of 2010 and think with patterns and numbers extrapolated from the 1950s--no more than it can predict the length of recessions today as if we were still back in the 1930s, when business plans got to investors by surface mail and telegrams, and you learned about the rest of the world with short wave radios.

2. Baker, sincerely perhaps, is distorting what I mean by stimulus needing to stimulate "trillions more" in private investment. My point is not about new spending in “physical investment in equipment and software.” It is, surely, that private sector investment capital dwarfs anything the American government can spend. The private sector still employs 8-9 times more people than the public. Almost all net new jobs over the past decade have been in entrepreneurial businesses.

So it matters what managers, entrepreneurs, fund managers, in America and around the world, think the American economy is going to look like in the next three to five years. They won't just be looking at how many people are going shopping this month. They will also be thinking about whether they are in sustainable jobs; about Americans as producers, not just as consumers. (If you are not producing today, will you be consuming tomorrow?)

3. Finally, and most important, perhaps, Baker is just missing my point about globalization. The problem is not simply the current rate at which foreigners buy American debt, but how long they will if they are not also buying American products at a corresponding rate. Baker thinks, oh, fine, let them stop lending, and let the dollar plummet. That will only boost exports; then they will buy our products. Well, this is true to some degree, but to what degree relevant to this discussion? Will a lowered dollar produce a competitive advantage that will mitigate the advantage of unskilled people working for one fifth of an American wage?

The question, remember is employment, not just growth. Jobless recoveries have been plaguing us since 2001. And the falling dollar will not produce anything like the kind of employment in manufacturing industries that mirrors what we saw in the 1950s and 60s? Baker says, well, Germany is a net exporter of manufactured goods, in spite of its high wages, as if this pertains to the discussion at all. He might have said Germany has been a net exporter of manufactured goods in spite of the comparatively high euro, but then he would be undermining his point, which is that devalued currency is cause and manufactured export is effect.

An economist who talks about things in such mechanistic ways is about as much help to us as a weatherman is to a farmer, or a sound engineer to a musician. Anybody who knows anything about manufacturing supply chains knows that a marginal swing in the value of the dollar will not boost exports in high labor components. Forgive the pedantry, but getting to know the business reality requires some time.

THE CHEVY VOLT, for example, will be "made" in Michigan, where it was designed, but when you increase the magnification, you see an integration of disparate components—battery pack, chassis, electronics, engine, suspension parts, etc.—each of which has a cost structure at the point of assembly that will determine where it can be made. Tax breaks, currency, etc., for component plants are a part of this puzzle but other considerations are much more important:

First, how "mature" is the component, that is, have its own sub-assemblies been integrated into a "solid state" design? (ABS brakes, for example, used to be two systems mounted on the rotors, but now they are one; how long before the additional system capturing braking energy in hybrid and electric cars will be integrated, too?) Second, how robotized are the process technologies producing the components? (People make much of "total quality" methods, pioneered in Japan, which inspired line workers to help management break conversion processes down to routine and mathematically monitored movements; actually, total quality paved the way for increasingly capable robots to replace those very workers.)

Third, how many of the same kind of component are needed for how many vehicle programs? (The more you need, the more a supplier can invest in economies of scale, automation, and so forth.) Fourth, how defensible is the intellectual property underlying a component's production? (Prototypes for very innovative components are almost always made in-house and supplied by carefully chosen partner-suppliers, no matter where they are.) Fifth, how difficult is the component to ship?

It is only now that the cost of "labor," the value of the currency, etc, in the cost structure can be seen in its proper context. A mature component, much in demand, and having no particularly innovative technology, will be mass produced in a way that requires comparatively little labor. It can be built anywhere local skill guarantees that quality standards in the plant will be met. Yes, the currency will matter, too, as will the question of unions helping or hindering production, the local costs of construction (do you need clean rooms?), and so forth. But these kinds of plants can be located anywhere near customers and they do not produce a great number of jobs.

One of the Volt's most mature components, for example, is its 1.4 liter gas engine, also used in many Opel models. It is made up of sub-assemblies now almost entirely produced by experienced suppliers whose smart machine tools and robots produce near perfect quality for whole families vehicles. The engine itself is assembled in highly automated lines, with no more than perhaps 10 per cent labor, mostly skilled technicians, in the cost structure. It is currently made in Austria, where wages are very high and quality engineering can be taken for granted. Baker's idea that Germany pays high wages and still exports is right. But he misses this point entirely: that the goods Germany exports are highly engineered, with highly skilled workers, and in production systems where the proportion of labor is small.

Then again, engines are big and heavy and expensive to ship. So Volt's production team is moving the engine's line to Flint in anticipation of the Volt hitting the mainstream market. Michael Moore will find this move satisfying, I suppose, but virtually no unskilled workers will be employed in the plant's assembly operations. What you'll need are people who can manage the robotics and flawlessly log quality data. When you consider that 14 percent of Americans are functionally illiterate, and how much higher this number is in Michigan, it is hard to see how Flint's piece of the 10 percent unemployment rate will be solved by "manufacturing"--though some of it will be solved by low-wage restaurant, hotel and custodian jobs adjacent to the plant. (McKinsey reports that most of the new employment in the 2000s were "service businesses" of this kind.)

In contrast, plastic and wire electronic harnesses on engines—also those new-fangled harnesses leading from the battery pack—require a much greater proportion of labor in the cost structure. Even mature harnesses are hard to manipulate and easy to ship. (Think clothing.) The proportion of labor in the assembly of harnesses—and in constantly changing electronic components more generally—will almost certainly remain double or even triple that of the engines. So we can forget about production of such electronic components leaving Mexico or the Far East, at least so long as UPS operates there efficiently.

IT IS COMFORTING, no doubt, for progressive Democrats to think that all we ever needed was a massive stimulus, that then there would be smooth sailing; that deficits don’t matter that much, that if the debt does not come down it only means manufacturing will be boosted (and unskilled workers will get jobs), that the problem of employment in America is simply a matter of boosting consumption—and that to think otherwise means either you are in the pocket of Goldman Sachs or gullible enough to believe their propaganda. Many of the comments I’ve read about my posts reflect this view.

I trust that Obama will continue to be skeptical of it, though he will keep droppin' his g's when he talks about endin' tax breaks for companies sendin' jobs overseas; skeptical even though Larry Summers has returned to Cambridge. That the president will continue to focus on the future and its productive foundations: investments in green mobility, greener infrastructure, investments in education, health care delivery and cost containment, immigration reform, technical standards for critical information platforms, and fiscal discipline.

Baker, no doubt, would be willing to accommodate the last thing if the other things could be advanced. But will they if we keep painting Obama the way Ted Kennedy painted Jimmy Carter, a stealth conservative who doesn't care about jobs and doesn't know what he's doing?

Thursday, October 28, 2010

Defending Obama II: A Response To Dean Baker

My last post prompted a strong response from Dean Baker, Co-Director of the Center for Economic and Policy Research, on TPM Café. This is my answer.

Tucked away in Dean Baker’s rejoinder to my post on Krugman’s column is this (remarkable) aside: “He [Krugman] even has repeated the nonsense about preventing a second Great Depression.” Baker meant to seal the point that Krugman has been fair, even generous, to Obama at times. Presumably, my posts have been wrong (half-again-more-than-completely wrong) to question whether Krugman, and Baker for that matter, have been reckless in depicting Obama as “deserving much of the blame” for the state of the economy. The stimulus was too small, says Baker. Case closed. And that’s Obama’s fault.

But was Krugman’s conclusion that Obama prevented a Great Depression really “nonsense”? (It was not.) And, if not, isn’t Krugman’s complaint about the size of stimulus (and a week before the election, to boot) disproportionate, if not irresponsible? What urgent considerations, other than the size of the stimulus, did Obama have to navigate during those tight-rope months of Winter, 2009?

To restart a recovery, didn’t any amount of government spending have to be dwarfed by trillions in investment coming from CEOs, pension fund managers, sovereign fund managers, private entrepreneurs, etc., in America and around the world? Who, after all, were the people that government spending was aiming to “stimulate”? How, on the other hand, might such people have been spooked?

And is Baker right that sustainable businesses in the US might really have been engendered with a one-time hike in “demand” to make up for a good part of what demand lost; not just cash for clunkers, but cash for consumption of all kinds. Obviously, job formation was urgent; eight million jobs were ultimately lost. But does this mean more spending per se by American consumers was the answer? Does it  not matter what kinds of jobs--and where?

Baker talks about stimulus as if the American economy were not global; as if the demand of American workers for basic things through the decade before the big recession had not created disproportionate business formation in Korea, China, Brazil and Japan, where many of the products (or products’ components) Americans buy at Walmart and car dealers are made.

Of course, emergency spending as a radical answer to recession had a role—Krugman supposes unemployment might well be at 12 percent were it not for what Obama did get. But the economy is not a national closed loop. It is not the case that, if American workers consume, job-making American businesses start up. And at some point your spending gets you a crisis like Greece. (Remember near 20 percent interest rates in 1979?)

Come to think of it, what if not the crisis in Greece, and the EU's bailout, seriously interrupted the recovery over the past summer? What could Obama do about that? Nor could the federal government jump-start an expanded rail system, university system, and smart grid overnight. (Need I add that it won’t at all if Obama continues to be discredited by his own people and Republicans wind up running things?)

NONE OF THIS seems to matter to Baker, at least not here, in his eagerness to put me in my place. But anyway, his defense of more stimulus is tangential to Krugman’s point, which is not that the state of the economy is actually Obama’s fault, but rather that Obama is to blame for the Republican resurgence. Why? Because people are angry—implicitly, about high unemployment. Obama is responsible for (what Cokie Roberts calls) the perception out there that his presidency has been a failure, or anyway not on the side of common people.

And why is that? Because—and here Baker’s argument circles back on itself—the stimulus wasn’t big enough to “restore the economy to full employment.” Arguably, 9.5 percent means anger; 7 percent or under, relief. As for investors, the rich, why care about their perceptions? Wasn’t so much of their money made in unspeakable ways? Don’t you have to be Larry Summers, a step-child of Goldman Sachs, to care?

But could Obama ever have gotten more, for God's sake? Is there a shred of evidence that doesn’t demonstrate the opposite: that he got as much as he could against Republicans determined to humiliate him and Blue Dogs nervous about spending? “Perhaps not,” Baker concedes. But he has a story and is sticking with it. Like Krugman, he implies that Obama is losing now because he should have fought for more then, “told the truth,” had a “coherent story,” not spoken of “green shoots of recovery.” Presumably, the President of the United States should have issued dire warnings of an impending “goddamn disaster”: nothing to fear but confidence itself.

Obama, so the argument goes, should have demanded the Congress come up with (if I am doing the math correctly) another 700 billion in spending. Then, presumably, the independents who are now deserting Obama would be trusting him. Republicans would not be surging. His “brilliant” advisors were wrong to count votes. The really brilliant thing to do was tell Baker’s story without flinching.

This story usually has two other wrinkles, incidentally, though Baker only alludes to the second here. The first is that the fear of deficit growth, which Obama has echoed, and which seems the real public anxiety fanning a pro-Republican backlash, the Tea Party, etc., is what we used to call in the Sixties a case of “false consciousness.” The deficit is not yet close to what it was during and just after World War II.

But doesn't the trade deficit prove America no longer dominates world markets as after World War II? Yes, but American manufacturing will revive if only the RMB can be prompted to rise, or the dollar can be prompted down. “In the long-term,” Baker glibly adds, “we have to get the dollar down so that our trade deficit gets closer to balance.”

AS IF THE manufacture of any product or component that, say, has over 25 percent labor in its cost structure (e.g., engine harnesses) will ever be built in the US again. As if products that scale up with smart automation (e.g., battery cells) will ever need enough unskilled laborers to bring unemployment down to where it was—as if the problem for an increasing number of American is not chronic unemployability in an economy that has been transformed.

Look, we are all with Baker in wishing HAMP worked more effectively; that it helped 2 million homeowners renegotiate, not just 500,000. I am all for taxing financial speculation. But how about we start with getting high incomes taxed, or at least with giving Obama credit at this crucial time for being in that “neighborhood”?

For the cumulative effect arguments like Baker’s post, along with Krugman’s various shots across Obama’s bow (about Larry Summers, and so forth), has been to create this weird environment in which educated people have decided, sighing knowingly, that Obama is not really worth defending, that he’s surrounded himself with people who can’t be trusted, because they hang out with Harvard arrogance and Wall Street money.

Gee, give us a real Republican, so I can know my enemy. It all started with TARP and then Geithner’s plan for the banks. Baker, March 2009: “The core problem is that many of the largest banks are bankrupt…These geniuses [Geithner, et al]… subsidize the bankrupt banks and keep them breathing a little bit longer, while offering opportunities for other Wall Street actors to get hugely wealthy,” etc.) Just watch Jon Stewart’s questioning of Obama last night and you get the idea.

So sorry about Obama, we say. That campaign was so promising, wasn’t it? (You know, the campaign in which the guardians of “the coherent story” started with John Edwards.) Stewart’s audience gives us a mandatory chuckle when the name of Larry Summers comes up. So do the talking heads on Sunday morning. And what do less well educated people hear?

I can tell you what my handyman in New Hampshire hears, with periodic prompting from Rush and Beck, though he had voted for Obama in 2008. That these elites who screwed us, these “geniuses” who think they’re so smart—these people who think they are know better than us, but can’t add two and two (or $700 billion to $700 billion),who tax us to tell us what to do and how to live and make their friends rich—well, they are all a bunch of phonies.

Baker can have the last word if he wants it. Obviously, it would take a book to explore the arguable, anachronistic economic assumptions that get progressive democrats this sanctimonious. As for me, I am on nobody's payroll, but am enjoying something better than Nixon, Reagan, and the Bushes just now. I fear the enjoyment will be short-lived if Democrats do not get past the year of magical thinking.

Tuesday, October 26, 2010

Krugman: The Narcissism Of Small Differences

Academic fights are so vicious, they say, because the stakes are so small. The narcissism of small differences, Freud said. But at times the stakes can be big, and the fighters can think they are still in the faculty club. It is a week before the congressional elections, Barack Obama is talking himself hoarse trying to rouse the Democratic base--especially impressionable young people, the un"likely" voters who made all the difference 2008--and Paul Krugman has decided this is a good time to stick it to Larry Summers just once more for good luck.

The real story of this election, then, is that of an economic policy that failed to deliver. Why? Because it was greatly inadequate to the task... If you look back now at the economic forecast originally used to justify the Obama economic plan, what’s striking is that forecast’s optimism about the economy’s ability to heal itself... Even without their plan, Obama economists predicted, the unemployment rate would peak at 9 percent, then fall rapidly. Fiscal stimulus was needed only to mitigate the worst — as an “insurance package against catastrophic failure,” as Lawrence Summers, later the administration’s top economist, reportedly said in a memo to the president-elect... Could the administration have gotten a bigger stimulus through Congress? Even if it couldn’t, would it have been better off making the case for a bigger plan, rather than pretending that what it got was just right? We’ll never know.

This is not so, or at least not in the categorical way Krugman is presenting things. Summers argued often during the winter of 2009 that in matters of stimulus one never knew just how much was enough, but "the risk of doing too little is greater than doing too much." As for the Congress, Henry Waxman--one of the House's most progressive representatives, and no wimp--told NPR just last week that Rahm Emmanuel was right to propose what he did, that he had carefully counted the votes in the Senate and the package passed was the best the president could get.

What about the administration being "better off" just making the case for "bigger," even if smaller was the only bill possible? Actually, it did make that case, though in the middle of trying to come up with a plan to keep "toxic assets" from sinking the banks, keep people with crushing mortgages in their  homes, save the auto industry, reform financial markets, reboot relations with the Arab world, and prepare a universal healthcare package, all the while trying to reassure investors who--unfairly, but what could then be done?--were the under 10% of Americans who controlled over 80% of the country's wealth.

Ah, but Krugman seems to be implying, the case for a bigger stimulus should have been made more strongly anyway; that there was at least some kind of public relations victory possible, a chance to control "the narrative," even if a tangible legislative victory was impossible against Republican leaders determined to both sabotage Obama's engine and then complain about its breakdown. (People I admire make more sophisticated versions of this case: John Judis says the administration might have struck a more "populist" chord, though "confidence" seemed more the watchword early in the precarious winter of 2009, and the inherent populism of the healthcare plan never really caught on as planned; Rick Hetzberg is certainly right to wonder about why we didn't get more of Obama's "outside game," especially when one saw the effect he could have on a crowd when he drove healthcare through.)

Still, if the issue is control of the narrative, not substantial achievement, has the administration really been the worst of the problem? Sure, it would have been better to see more of Ed Rendell and less of Larry Summers (or David Axelrod, for that matter) on the talk shows in the spring of 2009. But would it also not have been better for progressive columnists not to have appeared on the cover of Newsweek charging the Obama administration, which was actually blunted by Republican legislative veto, with selling its soul to Goldman Sachs? Where was the real catnip for 24/7 cable, shock radio, Fox, and even MSNBC? Oh, and who, now, thinks it would have been a good idea to have nationalized the banks? Who thinks the fight over the "public option" was really worth embarrassing Obama over, night after night for two months? Who thinks people who've defected from Obama have been more interested in the bigger stimulus as narrative than in whether it was really stupid for a cop to have arrested Skip Gates?

Look, Krugman is may be right to dislike Summers, his views, shows of arrogance, connections. (For my sins, I edited Summers at HBR in 1988, when he was working for Dukakis, and could have lived without the experience.) But even on the substance, good people might disagree. The persistence of unemployment, jobless recoveries, etc., in the new economy is a crisis for all progressive economists, not just Summers; and Krugman can be cavalier about these things himself. Keynes did not have to digest manufacturing robotics, smart networks, global sourcing, and financial instruments moving at light speed. Neither did Paul Samuelson or his rivalrous students. It is still not clear just what state action will produce the kinds of sustainable jobs and wages Krugman takes for granted when he speaks about, say, the Japanese government acting against the liquidity traps of the 1990s. Nor can one speak about deficits by calmly comparing America's rate of debt to GDP today to that of America after WWII, when the US was the science and manufacturing powerhouse of the world, and the world needed one of everything.

This week of all weeks, Krugman might be defending Obama's quite consistent vision, showing some admiration for his narrative, the way Rick Hertzberg (who saw what happened to Jimmy Carter) regularly has; or be defending investments in green infrastructure, higher education, and scientific entrepreneurship the way that other Times columnist does; or defending Obama's most populist of plans, the one to reimpose higher taxes on the (very) rich, a plan Austan Goolsbee is spearheading--or is Goolsbee's connection University of Chicago economics department a problem, too?

Who knows what will really happen on Tuesday. But we know that it will be followed by another Tuesday in 2012, and I don't see the broadcast media getting any more Morrowish by then, or the flocking of "independents" any less steered by who seems hot and what seems cool. Telling people you admire a president actually matters. A big piece of the narrative held against Obama is that liberals "always think they're better than ya'." I suspect Obama is now thinking this piece may be sadly true, and that we'll get, yet again, only the president we deserve.

Thursday, October 21, 2010

What The Palestinians Want

Not to be missed: Yesterday's little column in Haaretz by Palestinian Authority leader and sometime negotiator Nabil Sha'ath. He is not the most popular of leaders in the West Bank; he's grown curiously rich, and was never a man of the people. Still, he's a straight talking man, who clearly represents mainstream thinking in the Fatah leadership. And for all the talk about the difficulties of negotiation, or the PA turning down various Israeli offers, you read Sha'ath's very blunt statement of the the PA's opening (and, over the years, consistent) position and have to wonder exactly what requires such hard bargaining--if, that is, the basis of the negotiation is a framework agreement that can be made fair to both sides.

The key paragraph in Sha'ath's column is the one where he speaks of the Palestinian "right of return." All other issues are more clearly understood. The current Israeli government insists that the PA should recognize Israel as a "Jewish state," thus precluding some sly Palestinian intention to swamp Israel with returning refugees. Sha'ath states that recognition of Israel should not mean undermining "the rights of Palestinian refugees and the rights of the Palestinian citizens of Israel." Is this really code for the destruction of Israel?

No. Sha'ath, like most Israeli liberals, believes that the reality of Israel, a Hebrew-speaking state whose large majority is either ethnically Jewish, or practices Judaism, means Arab citizens will naturally acculturate to a patently Jewish state. But Palestinian leaders need not endorse residual deficiencies in Israeli democracy, that is, accept on behalf of the Arab minority the perverse way the current Israeli government defines "Jewish state." (If there is a sincere psychological impasse here, the US might secure an early agreement that both Palestine and Israel should be bound by "democratic standards of equality," and that each state respects the "cultural distinction" of the other.)

More important, though, a solution to the refugees' right of return is pretty much worked out, and Sha'ath was largely responsible for it. I interviewed Sha'ath for a Harper's piece several years ago. His position then, as now, is that this right be realized through a number of "modalities" he negotiated at Taba on 2001, and which were reaffirmed in the Geneva Initiative:

There would be financial compensation for lost property. There would be paid relocation to the Palestinian state. There would be contributions by donor countries, and even by Israel, to that state. (One economist present cheerfully put the amount of reparations at $137 billion.) There would even be a program of limited family reunification in Israel, up to a number “acceptable to the Israeli government,” say 10,000 a year over five years. Nobody could say justice of a kind was not being exacted.

The point is, the biggest problem of the negotiation is not what Palestinians want, or even the Palestinians Israelis fear. It is the Jews Israelis fear. Abbas sees delivering a deal for a state as his legacy--anyway, it's the only reason for his clinging to power. But the Netanyahu government, even if it can be drawn to the logic of Palestinian state, is trying not to confront its own great challenge, a mobilized settler (and settler-sympathizer) population, in and around Jerusalem, in and around the current government, that will resist any such state with unknowable force.

Tom Friedman is right: there will be no progress toward a deal if Netanyahu does not decide, or is not induced to decide by the US, that he must form a broader coalition and confront his own rejectionists--who are only getting stronger with each passing year.

Thursday, October 14, 2010

The Burden Of Roth's "Nemesis"

In 1943, Arthur Koestler published a little novel, which he called Arrival and Departure. The story, actually a kind of dramatized essay, features a young protagonist, Slavek, a student leader from Eastern Europe (we assume Hungary), who escapes the local fascists after they had tortured him brutally. He comes eventually to "Neutralia" (we assume Portugal, the way-station Koestler himself had escaped to), where he falls in love with the fetching Odette. Miraculously, the couple is offered safe passage to America. But Slavek is also given the opportunity to join the British Army. What to do?

Slavek finds himself so torn between, on the one hand, assuming his share of the responsibility for fighting the Nazis and, on the other, escaping into some private American happiness, that he suffers hysterical paralysis of his leg. (You can almost hear "As Time Goes By" playing between the lines.) But then the novel turns on a Koestlerian twist. Slavek presents himself to a psychoanalyst for treatment; and he finds out on her couch that his desire to fight injustice has been largely fueled by a neurotic impulse to self-sacrifice, even to moral grandiosity, deriving from irrational guilt over the accidental death of his brother many years before. Of course he would want to fight; that is his psychic disposition.

In record time (the plot is a contrivance, after all), Slavek is emancipated from the vise of this guilt and his leg recovers. Yet what emancipation is really possible from his terrible conundrum? Can knowing the tortured source of one's moralism--one's hubristic need to seem the champion--really help one decide a moral question? What should Slavek do, irrespective of his impulses, go to America or join the British army?

Koestler, it turns out, is not all that ambivalent. His Slavek chooses the army--the fight against the Nazis. Knowing what is understandable is not the same as knowing what is right. And right (here we see Koestler's admiration for Kant) cannot be grounded solely in knowing material facts, historical contingencies, universal pleasures--or psychoanalytic traumas. Some imperatives are, well, categorical: the need to see others as ends in themselves, even when you desperately want them to be your means; the need to do what you cannot ask others to do if you will not.

Indeed--Slavek concludes this--it is purely materialist explanations for human will that are themselves the problem; ethical systems that began with Bacon and Galileo culminated with Stalin and Hitler. In a farewell note to Odette, Slavek assumes the stance of a post-modernist prophet:

I'll tell you my belief, Odette, I think a new God is about to born. That is the kind of thing one is only allowed to say in certain moments... Praise to the unborn God, Odette. Do not try to divine his message or the form of his cult;  this will be after our time... For we are the descendants of Renaissance Man, the end and not the beginning..

Slavek might well have paraphrased Dostoyevsky: if there is no God, then all things are actions are understandable.

WHICH BRINGS ME to Philip Roth's extraordinary new novel, Nemesis, and J. M. Coetzee's diamond-like essay on the book in the current New York Review. Nemesis has been compared in this and various other good reviews to Camus' The Plague; and Roth himself told me he was reading a lot of Camus at the time of its writing. You can almost hear Roth's young protagonist, Bucky Cantor, echoing Camus' Dr. Rieux, that  there is no heroism in fighting the plague, only "decency." Coetzee writes that Nemesis is yet another book where "the plague condition is simply a heightened state of the condition of being mortal." Correspondingly, we surmise, standing up to the mysteries of mortality would seem Roth's version of existentialist spine.

Still, I wonder if the comparisons to Camus aren't a little rushed. Roth being Roth, we get a kind of a value-added existentialism in Nemesis, much like Koestler's in Arrival and Departure, only more dramatically convincing. We get, that is, a protagonist enhanced by our psychoanalytic knowledge of him and interpreted (this Coetzee wonderfully sees) by a narrator, another character, who may not be completely trustworthy. For Roth, I think, "being mortal" is even more complex and terrible than the way Camus presents the matter in The Plague--if not for the protagonist, then for us.

I AM ASSUMING that if you have been staying with me this far, you have either read Nemesis or read enough reviews of it that you know the plot. If not, here is the outline:

It is 1944, Newark; there is a polio epidemic. Bucky Cantor, 4-F, sees his buddies going off to do what Slavek determines to do. At first he stays on the job, utterly devoted, coaching febrile, vulnerable boys in the city. Soon, some of his wards start dying. Bucky's girl-friend, Marcia, is at a distant summer camp, and urges him to join her--a prelude to engagement and the embrace of her loving family. He refuses.

But, eventually, and in what might seem an effort to pluck some joy out of an unhappy fate--an epidemic nobody could control or be responsible for, after all--Bucky does join her. Yet he quickly comes to see this as a show of weakness. Ironically, he discovers a few days later that he is himself the silent carrier infecting his boys; that, tragically enough, he would soon succumb himself to the disease; that in abandoning his job and fleeing Nemesis (the job was anyway--though he did know this--about to be terminated) he actually may have saved other Newark boys, though he wound up infecting various children at the camp.

But now comes the real moral problem. Bucky recovers, though his marvelous, athletic body is paralyzed. What seems to plague him most (we cannot be sure) is the shame that he had failed to do his duty. We get this idea because, confined to a wheel-chair, he refuses to even see Marcia. Finally, however, reluctantly, he allows her to visit, and she begs him to marry anyway, which presents him the decision once and for all. What should he do? Marry knowing he could never give her what he will get from her, or break off the engagement?

BUCKY, MUCH LIKE Slavek (I am not at all sure like Dr. Rieux), chooses to break off the engagement. He concludes that it is right to do so. But is it? Is agreeing to have a loving woman to care for you--that is, committing to such asymmetrical caring--really like acquiescing in, say, a Nazi occupation, or just the spread of a fatal disease? Everyone around Bucky, including the narrator, considers marriage to Marcia what he should have chosen if he were not encumbered by some stubborn, excessive moralism.

Indeed--and this is Roth's special gift--we "understand" Bucky in a way we could never understand Dr. Rieux. Like Koestler, but more compassionately, Roth complicates things by sketching a map to his protagonist's psyche: his childhood unhappiness, his physical insecurities, his family shame, his over-compensations, his comparative sexual squareness, leading to what vaguely seems all along an exaggerated, hubristic, sense of duty. And Roth--adding a ball even to Koestler's moral juggling--gives us a not-disinterested narrator to tell Bucky's story, the once-admiring younger Arnie, who having recovered from polio himself, cannot really forgive Bucky for wasting his "life" as he would not. What then can we make of duty?

Coetzee, it must be said, sets up these questions, but he does not, I think, take them on as squarely as the book would invite him to. Anyway, he misses Roth's point because he wants things to fit into a classical tragedy, not the contemporary kind Koestler implies. Coetzee shows convincingly that Bucky aims for a kind of dignity Arnie cannot or will not appreciate. And yet Coetzee supposes that dignity in Nemesis is utterly classical, a rejection of the very concept of chance, a determination to see life as meaningful, serious, hence moved by the gods; that dignity means acknowledging, if not accepting, their verdict. He writes:

God may indeed be incomprehensible, as Marcia says. Nonetheless, someone who tries to grasp God's mysterious designs at least takes humanity, and the reach of human understanding, seriously; whereas someone who treats the divine mystery as just another name for chance does not. What Arnie is unwilling to see--or at least unwilling to respect--is first the force of Bucky's Why? ("this maniac of the why," he calls him) and then the nature of Bucky's No!, which, pigheaded, self-defeating, and absurd though it may be, nevertheless keeps an ideal of human dignity alive in the face of fate, Nemesis, the gods, God...Ill luck does not call for remorse on a grand, heroic scale: best to pick yourself up and get on with your life. In wanting to be regarded as a great criminal, Bucky merely reveals himself as a belated imitator of the great-criminal pretenders of the nineteenth century, desperate for attention and ready to do anything, even commit the vilest of crimes, to get it (Dostoevsky dissected the great-criminal type in the person of Stavrogin in The Possessed).

But Roth is implying a slightly different, and (if possible) even more heroic conception of dignity in Nemesis than what Coetzee suggests here. Bucky does not reject being a victim of chance, nor is he punishing himself in order to valorize a "mysterious design." Rather, he rejects living as a victim, period. For this move you cannot simply acknowledge "fate, Nemesis, the gods, God"--all of which imply some kind of order behind events. You need the "new God" Slavek introduces, a personal faith in the meaningfulness of things in the absence of design, a moral dignity that is itself mysterious.

Bucky, you see, is not wallowing in the verdict of the furies and refusing to get on with his life. He is getting on with his life. For "life," to him, means exercising his God-given powers, not surrendering to the powers of the gods. If he condemns himself, it is not for having fallen ill, even this infected others. He condemns himself, rather, first, for leaving his post when he thought he might make a difference (and even if, as things turned out, he could not). And he condemns, second, and preemptively, any Bucky who would impose an invalid on a lovely young bride before her life has really begun.

Coetzee sees only the former condemnation without fully appreciating its import ("The Bucky with whom Arnie does not sympathize is haunted by a suspicion that when he said 'Yes, I will flee the city,' the voice that spoke was not that of his daytime self but of some Other within him").  But the second is the more important one, and brings us back to Slavek's choice.

Okay, one might say, and as Arnie suggests, a man like Bucky could not stand the thought of living his life as a burden on Marcia or anybody. Yes, we know he has a psyche that would call for action "on a grand, heroic scale," or we think we know through Arnie's filter. Such people (as Coetzee suggests) can be dangerous. So what? One's propensity to "desperately seek attention" through "grand" moral acts does not, in itself, mean one's act is not morally sound. The residual problem is still whether it is right to live as a burden on the people we love. Roth, like Koestler, complicates things for us but the complexity only makes the simplicity of the moral question feel all the more compelling.

If Bucky love Marcia would he not wish her to exercise her powers more fully than caring for him would allow? True, Bucky's reach for dignity implicitly denies Marcia the chance to reach for something like the same thing. (What right does he have to "save" her? Then again, what if not Marcia's limited horizons, cuddly family, and exaggerated sexual infatuation explains her propensity to give Bucky what he cannot give her? Should we trust his No any less than her Yes?) What, in any case, makes life worth living if not living by our own lights, in our own integrity, even when we cannot really know what the hell the gods want?

Nemesis leaves us dangling in circular questions of this kind. Yet Bucky's peculiar courage seeps into the back of our minds. Roth seems to be implying that living means living autonomously--being our own best evidence for autonomy. Dignity cannot (always) mean living with ethical clarity. But it does mean living responsibly: we may not ask what we cannot imagine fair for everybody. Anyway, we have nothing but fictions about one another, as Arnie has of Bucky, as Marcia has of Bucky, and Bucky has of himself, yet we judge, judge!, and JUDGE.

The point is, this is not just a problem for unusual characters. Nor is the specific moral question Bucky deals with only for people crippled by disease. We all go the way of Bucky. I dare say every aging person, contemplating the diminution of his or her powers, and sickened by the prospect of becoming a burden to loved ones--actually, sickened by the prospect of no longer being oneself--thinks often about the question of when "life" is no longer worth living and even about the courage to end it. Who but Roth, the chronicler of the pathos of our autonomy, should help us be thinking about this now?

Tuesday, October 12, 2010

Silwan: The Blasting Cap

Last June, I wrote about Silwan, where the Jewish settler group Elad--with the cooperation of the Jerusalem municipality--has been planting a vanguard of extremist families. In the foreground, the desire to expand an archaeological dig, the so-called City of David, and Jewish tourist "gardens." In the background, the desire to expand the Israeli footprint in East Jerusalem--in of all places, this most densely populated and volatile neighborhood, which enjoys virtually no municipal services.

Now swallow hard and look at this video from last Friday. The driver of the car is the head of Elad, David Be'eri, who claimed "his life was in danger." Presumably, an "existential threat," which required the reassertion of "deterrence."

The kids were probably the same kids who had joined our peaceful demonstration last June; but the neighborhood was recently inflamed by the shooting death by an Elad security guard of Samir Sirhan, a 32-year old father of five. When the city descends into Bosnia-style civil violence, this is how it will start.

Monday, October 11, 2010

Jewish And Democratic?

In response to the government's passage of the loyalty oath bill, The Jerusalem Post asked a number of people to write short responses, which they published today. This is mine; regular readers of this blog will not be surprised by it:

Does anyone really understand what “Jewish and democratic” means? Cultural Zionists from Ben-Gurion to Yehuda Amichai did. They assumed a democracy with a Jewish character would advance the Hebrew language, whose modern revival was the real Zionist revolution.

The Declaration of Independence assumed just such a Hebrew republic when it mandated that all citizens – from any “race” and “religion,” and irrespective of individual “conscience” – might contribute to a common life that was Jewish in the national sense, but did not presume to straighten the crooked timber.

Today, then, our everyday words contain the nuances of Jewish history and literatures (the state is not named Edom, after all) but leave space to welcome anyone willing to be acculturated, even Arab writers like Salam Masalcha, say. This approach to nationality is common throughout the democratic world, from the European Union to Quebec. No other conception of Jewish can be democratic because it makes a nonsense of equality.

Is this the “Jewish” Justice Minister Yaakov Neeman expects loyalty to? No. He wants a state in which Halacha, and its rabbinic courts, have civil responsibilities. He wants citizenship and other material privileges to be based on J-positive blood or conversion by Orthodox law.

He wants a state whose founding is justified and capital established, not by standards of international law, but congregational presumptions about divine will. He wants a state that purports to represent Jews everywhere, as if the majority of liberal American Jews do not blush for him.

Now, Neeman says all immigrants – not just Arabs – should take an oath to his totalitarian idea. I would not have when I first came – and would not now.

Also, my friend Carlo Strenger writes with particular cogency in Haaretz today: 

Israel is now facing a fateful question: will it remain a liberal democracy, or is it on the way to becoming a totalitarian ethnocracy? This is not a rhetorical question. Democracies do not turn into autocratic regimes from one day to the next; it mostly happens step by step. The ugly wave of anti-liberal legislation we are witnessing shows that Israel has embarked on a slippery slope; and we cannot know where it will end. The day may well come when Lieberman and Yishai will argue that critical articles about the government are disloyal to the state, and must be forbidden; and the day may come where the repeated attempts to shut off academics who do not show sufficient “loyalty” will succeed, and they will be fired or jailed.

Wednesday, October 6, 2010

Bending Toward Justice

If President Obama is looking for a way to excite us with an American vision for a Palestinian state--one that can be started on even before core issues are (entirely) resolved, and which implies what is plausible about peaceful integration with Israel and Jordan--he could do worse than publicly get behind the RAND Corporation's ARC project, which has been refined significantly since its introduction four years ago. Largely the brainchild of urban planner Doug Suisman and RAND's own Ross Anthony, and promoted tirelessly by Chicago attorney Art Winter (all of whom I am proud to call friends), the ARC is a design for a transportation and basic infrastructure corridor which, as I suggested in The Hebrew Republic's conclusion, mirrors the Beersheva to Haifa/Galilee transportation arc on the Israeli side.

The current proposal skirts still contentious issues, such as the status of East Jerusalem, and the plausibility of building as long as Area C remains entirely in Israeli hands. But I defy you to watch this short video and think about the state the same way again.

Tuesday, October 5, 2010

Will Obama Be Strong?

Returning to Jerusalem from New Hampshire is always something of a shock, not just trading English for Hebrew (including trading the automatic if complacent multiculturalism of America's talking heads for the self-conscious if tortured parochialism of Israel's), but trading big space for big time, "nature" for "history." This week, however, the little shock of moving is magnified by the stalled peace talks, which fills the air with a sense of impending crisis. It is not that anyone really thought Netanyahu and Abbas would get very far on their own; the hope was that talks would create a context in which the Obama administration could finally put a thumb on the scales. But that is precisely why the peculiar way the talks are stalled seems so disquieting. For anyone with plane rides to reflect on the state of politics in Israel and America, the crisis seems a case of convergent pathologies.

M.J. Rosenberg points out that Netanyahu is not only the prime minister of Israel but another Republican for Obama to contend with: another Fox-News hero, darling of conservative columnists, embodiment of the war against "terror," champion of markets, beneficiary of powerful lobbyists. Moreover, moving Netanyahu to a deal is not just the chance to rack up a "foreign policy" victory. Getting a deal is a kind of Middle Eastern "stimulus," a crucial step in turning around a potentially catastrophic series of failures, which US troops are trying (and failing) to prevent. That Obama move Netanyahu is a matter of national interest. How he will move Netanyahu, if at all, will say much about whether he will overcome the forces that are discrediting his presidency beyond all reason.

I hasten to add (on this anniversary of the October War of 1973) that Netanyahu is making Israel the country of No, not because, as Time suggests, "Israelis" don't care about peace, but because he is afraid of becoming politically irrelevant, something like the way Yasir Arafat did when the Al-Aqsa Intifada started spontaneously in the fall of 2000. His governing party, the Likud, is not just a party in the Western sense. It is the rallying point for a proto-fascist settler movement which, if you add up all of its sympathizers in and around Jerusalem, and all of the ultra-Orthodox neighborhoods that march in lockstep with proponents of Greater Israel, probably numbers a million and half people.

They are led by a coalition of settlement council leaders, xenophobic rabbis, militant cynics from Russia, populists, anti-"elitists." Many of them are armed; they are willing to take the streets, preempt the law by changing facts on the ground, and oppose a Palestinian state (i.e., a huge Arab city-state engulfing Jerusalem) as a threat to their way of life. For them, freezing settlements is just a warm-up. All are waiting for Obama to dare force Netanyahu to make concessions regarding Ariel, or Jerusalem, or the "Jewishness" of Israel in the face of Israel's huge Arab minority.

Obama is offering the Israeli government a carrot, which Netanyahu may just manage to persuade his inner cabinet to take: an array of guarantees and weapons systems, if it will extend the moratorium on settlements by just two months. There is a certain logic to this offer: two months will get Obama passed the congressional elections, after which he will presumably have a freer hand, or at least a freer thumb. The time would hypothetically give negotiators a chance to progress on principles to base a final border on, which would make the question of whether a settlements' freeze is total or partial moot. Besides, as long as the sides are talking, the less likely it is that violence will break out. Nobody thinks Abbas can survive a new intifada. . 

But will there also be a stick? Netanyahu is not some regional Olympia Snowe; nor is his problem just a potential "coalition crisis." He may well be enough of a globalist to fear the economic hazards of isolation. But whatever his ideological drift, asking him to work with Abbas on a serious plan is like asking him to isolate himself--that is, join as a junior partner with leaders of Israel's secular (and narrowing) majority, centered on Tel-Aviv and Kadima, to preempt a potentially violent insurrection of the very people he has been leading; people he could never take into a deal on his own prestige, and who will slough him off as quickly as they did Sharon, Olmert, and Livni before him.

Obama is giving Netanyahu enough space to be another De Gaulle, and--who knows?--he may surprise us. But it will always be easier for Netanyahu to posture as Churchill and act like Sen. DeMint: count on Obama to make his prestige hostage to a successful negotiation, preclude success, and outlast the "Waterloo." Eventually, he thinks, Obama will run out of months, F-35s, and Senators. Which brings me to America's politics, and a little digression.

I CONFESS THAT I was one of Obama's supporters who believed that if he could notch some major legislative victories, nobody would doubt the power of his presidency--that his popularity would remain stable, in spite of the furnace that is Fox-News. Things have not quite worked out this way. Here we have a president who can reasonably claim to have saved the financial system while recovering most of the TARP funds, prevented a depression by passing the stimulus (meanwhile jump-starting the technologies of electronic mobility), saved the auto industry, achieved healthcare reform, put two superior women on the Supreme Court, jawboned BP into putting $20 billion into environmental recovery, reformed banking regulations and set up a consumer protection agency for borrowers, repaired relations with Russia--quite apart from getting the Israeli prime minister and Palestinian president into the same room. And yet, Velma is tired of defending him.

Now, one explanation for Velma is Iraq and Afghanistan, another is that people "are angry." But even Velma knows that Obama was stuck with wars, a recession, and a global transformation he did not create. (Another explanation, perhaps, is that Velma could not resist making the most of her fifteen minutes of fame). The most common explanation, at least in progressive circles, is that all of Obama's achievements are tainted by his tactical coziness with the corporate rich: arguably, Rubin's protégées should not have become the faces of recovery, the banks should have been nationalized, the stimulus should have been bigger, GM managers should have been allowed to fail, healthcare should have had a public option, the administration should have "cleaned house" at the oil industry's regulator, we should be taxing carbon. Yes, and investors should not be rich and fifty-five plus half-of-five should equal sixty.

Still, if Obama can be faulted for his decline--here, the plane-ride thoughts--it is because erudite, sober, articulate people like him resist some hard truths that offend the humility of reason; truths that the new media environment have made truer than ever; an environment you have to be away from nine months a year to fully detest. A great many Americans still respect Obama's arguments; he polls consistently at about 45% approval, remember. But many other people care more about leaders who seem strong, not merely smart (which is dangerously close to being "elite"). They are motivated most of all, as Orwell said, by a desire "to avoid looking a fool," which means they will dislike you if they think it is safe or cool to dislike you. For many, the 24/7 cycle is just another version of "Survivor": you get points for passion and steadfastness. Ed Rendell stays. How many faces of the Obama administration would?

I know I am not saying anything others have not. Obama himself has been complaining of late about a media drawn to the grotesque: he was talking about this very thing when that kid yawned in his face--and we know the kid was yawning because, well, the media is drawn to the grotesque. But as Paul Krugman never tires of reminding us, the most grotesque show this past two years has been Republicans ferociously undermining everything Obama has proposed, mocking him for the lack of progress--and getting credit for, of all things, ferocity. Like it or not, Obama is not going to get his "independents" back unless he can prove himself strong in something like this way. He can't count on nuclear missiles in Cuba to quarantine.

All of which brings me round to Netanyahu again. Sure, the offer he made to the Israeli government may be reasonable, but it feels vaguely like the offers made to Senator Grassley during the summer of 2009 over healthcare, and with about as much likelihood of ultimate success. Nor will displays of patience for Netanyahu's coalition get Obama credit anymore than paeans to bipartisanship did. Most Americans, including American Jews, think the settlements are a disgrace, the Dershowitzian defense--that the cause of the conflict is, not settlements, but rather Arab enmity--a non-sequitur. Even if there are secret negotiations to delineate a border, Obama's public opposition to settlements will only help them succeed.

Nor can Obama's opposition come only in a UN speech. It must be backed up with (as MJ and many of us have longed claimed) with proportional cuts to aid and other sanctions; it must be backed with a public explanation for this policy, the way Eisenhower publicly called for Ben-Gurion's withdrawal from Sinai in February, 1957. Enough!, as a candidate I heard once said. Obama must show Israeli globalists and Palestinian moderates that he has their back in a fight that will be tough and can no longer be put off. As with healthcare, Obama must show people in the region that he is prepared to frame the problem and make the fight. The point is, he has to show Velma, too.