Trade-off: aggregate prosperity and national autonomy

As Rana Foroohar and Ian Bremmer noted on CNN today, the world order is changing. The influence of international institution is waning while international policy in east Asia is increasingly dictated by the leaders of America and China. The trajectory of the post World War II ear, towards free trade between nations and deeper integration is going into reverse.

Most people never saw the benefits of globalization. For a majority in the West, GDP growth and stock market gains were simply abstractions, nothing more than a ticker feed on the news or sounds-bites in political speeches. Globalization, along with automation, also bought labor market disruption and kept median wage growth well below GDP and inflation. Along with the perceptions that institutions like the UN were weak and corrupt, faith in the free-market policies, at least with respect to in international trade, have come to be regarded as policies designed to enrich the haves, leaving the have-nots behind. The sense that government and the bipartisan consensus on international relations was no longer benefiting Americans lade to the election of a populist president in 2016¹.

At an aggregate level, the deepening of trade relations and the entanglement of countries in complex supply chains delivers economic growth but comes at the expense of national autonomy.

That was seen by policy makers after the Second World, not as a trade-off but as a double win; not only would countries be more prosperous, but the chance of armed conflict would be reduced. But as the prospect of war recedes that entanglement is seen less as a benefit ad more as an infringement on national sovereignty and self determination. The disaffection with globalization was harnessed by those who felt their local power was ebbing and flowing to centralized international bodies.              

 
In China the disaffection with the international order has different roots. China has concluded that the World order, with it structures systemically designed to favor developed countries by maintaining the economic status quo, was inconsistent with its economic ambitions.  So as its influence has it has grown, both economically and politically on the world sate, it has begun to create parallel and competing institutions. These now offer countries in the region a powerful incentive to defect from the existing order and join the rising Chinese sphere of influence.

These two forces, China's bypassing of the current international order, and America's withdrawal from it, is leading to a significant reshaping of international relations and the re-balancing of what has now come to be seen as a trade-off between aggregate economic growth and national autonomy. The pendulum is swinging back from global economic (and in Europe, political) integration toward bilateral deals making and greater national autonomy. The uni-polar post cold-war world order which to all intents a purposes revolved around the US is becoming bi-polar. With a weakening Europe, riven by internal tensions, both economic and political, the US and China will emerge as the foci of international relations in the 21st century.     

1. Similar trends were apparent on a smaller scale in Europe and led to Britain's decision to leave the EU

The Imperial Comma

The Imperial Comma, unlike the Oxford Comma, is not widely debated and remains happily uncontroversial. While its origins are unclear, it has been suggested that the name owes its existence to writing at the predominantly STEM institution, the Imperial College of Science, Technology and Medicine, formally Imperial College of Science and Technology. Its engineers and scientists (whose writing has a Stella reputation) often inadvertently, add commas in places in which they are, unnecessary or simply, incorrect giving rise, to the term the "Imperial Comma".     

PC "generativity"

Political correctness was, without doubt, a well intentioned idea. It was supposed to encourage bigots to avoid speech that was offensive to minority groups. In the process it signaled that stereotyping was frowned upon. That was a laudable goal.

However, it seems to have had two unintended consequences. First, because banned terms are, almost axiomatically, offensive only to minorities, it afford the majority the opportunity to ridicule the construct of PC, as the majority might consider the particular language inoffensive.

Second, it has sensitized people in minority groups who might not otherwise have considered some language offensive to now be on the lookout for its use, and be offended - because they've been told it is - when they hear it. 

Will no one rid me of this turbulent priest?

When Henry II asked "Will no one rid me of this turbulent priest?", this is widely accepted as a rhetorical question that was to all intents and purposes an implicit command; indeed it caused four knights of the realm to murder Thomas a Becket in Canterbury Cathedral.


So when another leader complains, vilifies and demonizes his enemies, is too much of a stretch to lay at least some of the blame at his feet when an ardent (and more than usually unhinged) supporter takes him at his word and sends pipe bombs to his lord and master's enemies?   

Barbaric

There is little doubt that Jamal Khashoggi was tortured and killed in the most horrifyingly barbaric fashion by members of Saudi Arabian security forces in the Saudi consulate in Istanbul on October 2nd. It also seems likely that the brutal assassination was ordered by Crown Price Mohammad bin Salman.

The incident has reveled some unpleasant truths. First, it highlights just how undemocratic regimes like the Saudi monarchy exercise power, in ways that would be unacceptable in Western democracies. It illustrates graphically the corrupting influence of highly concentrated power perpetrate brutality, and just how uncivilized some people can be. Some have remarked that Al Queada, the Taliban, and ISIS are living by values that the West left behind in the middle ages, yet here is a state actor behaving as if the Enlightenment had never happened.

Second, the incident shows how a complex web of relationship moderates what would otherwise be universal outrage and condemnation. Bob Gates noted on Armanpour & Co that Saudi Arabia has been a useful and important strategic ally in the Middle East, and has at least since 9/11, provided the US with important security information.  Trump, in originally excusing and thereby implicitly condoning the murder, noted that the kingdom makes substantial purchases of US weapon systems and that supports American jobs (while simultaneously taking large numbers of Yemeni lives). It is shocking but hardly surprising that he favors money over rights and values.

And finally it gave us the sordid sight of Televangelist Pat Robertson, supposedly an expounder of Christian values telling us that one man's murder shouldn't derail a multi-billion arms deal. 

     

Democracy - a Failed 100 Year Experiment

Although political systems that involve a plurality in decision making are not new, the idea of truly universal suffrage is; it first appeared in New Zealand in 1893, arrived in Britain 1928, and was not fully implemented in the United States until the Voting Rights act of 1965. Universal suffrage is thus a relatively new model of governance and has been evolving in the century since its adoption and it may be too early to tell whether Churchill's observation "that democracy is the worst form of Government except for all those other forms that have been tried from time to time" is indeed correct. China is currently pitting that assertion to the test.

Many have argued that for the US to retain its role as the worlds leading power, it must continue to support the rules based order, and by extension must nurture the international coalition of allies and partners it has built since the Second World War. Its ability to introduce Judaeo-Christian values as a component in international relations is a major contribution to civilization writ large, replacing the amorality of great power politics. Yet this ability to project values is waning.

During the Cold War, the American model was widely seen as superior to the juxtaposed alternative, Communism, which was philosophically flawed ("the end justifies the means") and demonstrably inferior in practice.  After the fall of the Berlin Wall, the US model was assumed to have won by default ; but that model had two components, once though to be inseparably intertwined; democracy and the prosperity attributed to free markets. China has shown this not to be the case.

The emerging Chinese model demonstrates that democracy is not essential for free markets, a rising middle class, declining rates of poverty and increasing wealth. At the same time, the US is finding that political deadlock and polarization is hampering long term strategic initiatives essential to maintain its economic leadership in the world, specifically a failure to maintain, let alone renew, crumbling infrastructure, declining investment in education, and the starving of funds for initiatives to promote research and development. It has also failed to evenly share the gains from globalization which has resulted in stagnation and even decline in prosperity for a significant proportion of the population. 

American style democracy is increasingly widely being viewed as less effective in generating prosperity, when compared to the Chinese model; freedom, it might be argued, is of little import when you can't put food on the table. And it is not only the US that is struggling with the unintended consequences of universal suffrage. Look no further than Brexit, the shift to the right in Hungary and Poland, all of which challenge the globalists' view of a rules based order. 

As universal suffrage becomes increasingly associated with poor economic outcomes and national economic decisions that do not benefit the plurality, the perceived attractiveness of America Style democracy will decline relative to the Chinese free-market one party system. As China continues to rise economically, and extend its soft power in the developing world, so will support for its system and by extension its values. There will come a point at which the majority of countries see China rather than the US as the exemplar system. As countries reforming their political system in the developing and the developed world look for models, it seems likely that they will adopt variants of the Chinese model rather than the US model, and universal suffrage will not be embedded in those reforms. Saudi Arabia, for example is currently reforming its monarchy-based system; but a model in which power remains fairly concentrated will clearly be more attractive to Mohammed bin Salman, than a democratic republic. And if China has show us anything it is that people will put up with what the West characterizes as human rights violations in return for order, predictability and prosperity.

\When the Chinese model comes to be broadly viewed as the exemplar, it will over time become the most widely adopted system of governance; and democracy, like Communism before it will be seen in the reviewed mirror of history as an interesting, but ultimately failed, experiment.

Constitutional crisis? It's already here

Much talk in the last two years has been about the constitutional crisis that wold ensure were Trump to cut short Mueller's investigation into Russian interference in the election. While that would indeed be appalling, the constitutional crisis has been growing quietly for several months.

Members of Trump's own Cabinet (for example Tillerson, Mattis  and Cohen) have been hiding information and memos, not acting on Trump's directives and generally only implementing policy that they consider acceptable.

Now that's a constitutional crisis!
 
 

In-judicial Temprament

After Blasey-Ford's compelling testimony before the Senate Judiciary Committee on Thursday, Bret Kavanaugh stepped into the spotlight seething with anger and self-pity.

His strong emotions, alternating between anger and self-pity, suggest one of two things. Either his guilt is manifesting as hostility, or his sense of entitlement is turning out outrage when, perhaps for the first time in his life, something he badly wants is being denied him. Paradoxically, perhaps, the latter affords support for the former; his sense of male entitlement might, at age 17, have extended to "getting his way" with women.

Whether Blasey-Ford's recollection that Kavanaugh was the perpetrator is accurate or not (and I happen to believe that it is), his reaction and the ensuing deeper dive into his past, raises four troubling question as to his suitability for a Supreme Court Justice.

First, he seems to lack the cerebral calmness that one should rightly expect of a Supreme Court justice. Anger, however understandable it may seem to some,  is only serves to cloud his judgement, and calls into question his ability to decide impartially. Some cases that come before the Court will evoke strong emotions; an inability to control them is problematic.

This is of particular concern given his evident political bias. While some who serve in a political capacity, in Kavanaugh's case in the Bush administration, but are themselves relative politically independent, that is clearly not the case here. Kavanaugh has nailed his colors very clearly to the mast. At a time when the legitimacy of institutions of all kinds (SCOTUS, Congress, academia to name but three) are increasingly being questioned, this only serves to further undermine public confidence in the Court.

His testimony also revealed a troubling lack of respect for the institution that is hiring him for the position. While it might be argued that one quality in a Supreme Court justice is not being supplicant to the other branches of government, a degree of civility and decorum is called for and Kavanaugh proved unable to muster either. That was poor political judgement.   

Kavanaugh's nauseating self pity suggest something else; an inability to empathize with Blasey-Ford and sexual assault victims more generally. Were he indeed innocent of the accusations leveled  against him he would be able to be much less strident in his denials and more sympathetic to the pain of his accuser. 

Finally, veracity; questions are being raised about his shading of the truth. His self-proclaimed choir-boy image is being called into question from all sides. People who knew him say he drank heavily in college and was often incoherently drunk. If he is willing to dissemble about his drinking how much store can one place in his statements concerning Blasey-Ford?

Whichever way the final vote goes, and I hope, though I don't expect it will, that the decision does not go in his favor, the incident has been another black eye for Congress, and for the GOP and the Administration in particular.

James G March - an appreciation

James March passed away yesterday. Much will be written in the days ahead about his writing, his contribution to the literature, and the enormous impact he has had in a career spanning sixty years. There is nothing I can add to the accolades that will come from scholars far smarter and more accomplished than me.  I can only add to the appreciation of his life some personal memories of an extraordinarily generous man.

I first came across his work, as many do, when I was a first year doctoral student in 1995. I was fascinated by his paper "Exploration and Exploitation in Organizational Learning". To better understand the paper I tried to replicate his model and failed - so I found his email on the then very new Internet and sent him a message asking if he could help me getting the model to work.

Almost immediately, he replied, not just with suggestions, but with the source code. I was astounded that a scholar of his stature would take the time not just to respond thoughtfully, but to generously share his code. That led to a meeting a year later when he visited Fontainebleau, an interesting discussion, and an offer of a glass of wine were I ever to be in the Bay Area. It was an offer I gratefully accepted four years later.

The next phase in my life came when Judith asked me to go back to California. I asked Jim if there might be a way for me to have access to Stanford's libraries as I finished my PhD. His solution, and one that was phenomenally rewarding, was to invite me to Scancor as a visiting scholar.  For 3 years I had the privilege of attending talks and classes at Stanford, and most importantly of continuing our conversations about learning and model building.

Despite his enormous knowledge, insight, experience and wisdom, he suffered fools like me with warmth, patience and understanding. He was truly one of a kind. I will miss you, Jim March.

John Brennan and Trump's vindictiveness

The revocation of ex-CIA director John Bernnan's security clearance is neither particularly surprising, given what we know about Trump's character, nor, in and of itself, particularly significant. It is, however, more evidence, if any were needed, of Trump's proclivity for discarding long established norm's of proper conduct to further his personal agenda.

As the serious news media have noted, Trump's "hit list" of those he is considering for similar treatment all have in one thing common; their vocal criticism of his conduct. None are likely to moderate their criticisms in the face of Trump's threat, indeed the opposite is likely. And while Trump doesn't value their counsel on national security matters, their successors and other IC colleagues might; so the IC is potentially less well severed as a result of Trump's decision. It seems likely that Trump acted impulsively and without much consideration of the wider national security ramifications of his actions.

But the bigger message this sends is that all widely accepted norms are up for grabs and subject to Trump's personal whims. This is broadly consistent with his admiration for authoritarian leaders, who he envies for the lack of constraint from their countries' institutions they enjoy. In his allegedly shady business dealings, he did much as he pleased and he has brought that mind-set into the White House.

It is not just the international institutional order that is under threat as Richard Haas sets out in his book "A World in Disarray: American Foreign Policy and the Crisis of the Old Order"; it is also the norms of domestic politics and even socially acceptable behavior that are being trampled.  Of course, he is not the only guilty party here; Mitch McConnell's refusal to hold confirmation hearings for Merrick Garland is another example, as is the GOP's refusal to stand by the principles they have long espoused such as support for free trade, opposition to tariffs and abhorrence of the budget deficit. And Trump's tacit support for white supremacists and his misogynistic and degrading treatment of women are undermining the albeit slow social progress that has been made in the country over the last half century.

Brennan's remark about treason may have been over the top (unless of course he knows something we don't yet know, which given is access to intelligence is quite possible), but his concerns about the lasting damage Trump is doing to the country are well founded.   

Market-based resource allocation

Capitalism, in its purest form, relies on the "invisible hand" -- the premise that self-interest alone, in the context of free markets, will lead to the Pareto-optimal distribution of resources. However, it is not clear that such as Pareto-optimal distribution is the same a compassionate society's preferred distribution of resources.

For example, if resources are moved to where they can be most productively used, then the severely disabled or sick, to the extent that they are less "productive", would likely be short changed if not completely abandoned. So an allocation commensurate with a caring society is not one that would likely be realized by free markets alone. Hence the need for government and moderation/management of markets.

Loyalty and Potential Exposure

Figure 1

I was wondering today why Trump is said to put so high a value on loyalty while appearing not to reciprocate.

Loyalty, after all is not transactional - you are loyal to someone whatever they do. But Trump is nothing if not transactional in all his dealings, something many commentators, even the dolts on Fox, have noted.

It dawned on me today that loyalty may not be the right term (any more than "trust" is an appropriate term for Denzel Washington's crew in training day - great film, J Brandon White).

What Trump may mean is simply not giving up where the bodies are buried. And it is highly transactional; keep quiet and in return you are included in the inner circle; defect and you become an enemy, a target.

And the corollary is that the greater the expected (negative) value of legal jeopardy, the greater the need for this variant of loyalty (see Fig 1)

Pompeo and circumstance

Secretary of State Mike Pompeo was very careful in his testimony to Congress today. When asked if the North Koreans had made a commitments to  denuclearize (which oddly includes chemical and biological weapons), he said only that "North Korea understands the US position". Spin it all you want but that's not a commitment.

And when asked about what Trump had committed to in Helsinki, he repeatedly stated only that the official US position had not changed. That wasn't the question asked, and sheds no light on what commitments Trump may, in a momentary lapse in judgement, have made to Vladimir Putin.

Negotiating with adversaries

Several people have made the point that talking to our adversaries is important. John Bolton noted that FDR met with Stalin (although that was at the end of the WWII); Nixon went to China; Reagan talked privately to Gorbachev (the Walk in the Woods). That's fine in principle, but it's not what many people are concerned about.

While there are always risks associated with this more unscripted approach, two things are have been tacitly assumed; first that the President's only agenda is advancing America's interests, and that he is sufficiently well informed and competent to do so. In Trump's case neither condition is met.

Many serious and well informed commentators including John Brennan, Leon Panetta, and even Dan Coats, Trumps own DNI, have explicitly or implicitly lamented Trump's comments and questioned the wisdom of his approach. Many are wondering whether he is putting personal interests above country.

What serious people are concerned about is not whether such Presidential diplomatic initiatives are a good idea as a means of changing the trajectory of bilateral relations, but whether Trump can be trusted to pull it off. The evidence so far suggests their concerns are well founded.

Process, Transparency, Autonomy and Accountability

Trump has been roundly criticized for his handling of the Helsinki Summit. He met Putin without going though the process that normally accompanies such a high-level diplomatic meeting - the prior talks between lower level officials to clarify an agenda, to negotiate and establish goals that both sides could reasonably expect to announce with satisfaction to their citizens. That didn't happen, at least on the US side (one assumes it probably did in the Kremlin).  Now the summit has concluded, many in the our government don't know what went on, and what was agreed to. Keeping secrets from his own top level officials, people Trump appointed is remarkable for its lack of transparency.  How might Trump's choice to take this highly unconventional approach be explained?

The answer, I think is autonomy and accountability (or rather lack thereof). By not setting out goals in advance, Trump feels he could frame any outcome, whatever it might be, as a negotiating triumph. That gives him enormous negotiating freedom and autonomy. Engaging in a formal process in which others help set the agenda reduces his his negotiating autonomy. Not being clear about what he wants to accomplish and not being transparent about what is said means he can't be held accountable. No one can point to goals not achieved, since neither the goals not the outcomes are stated.

This approach, maximizing autonomy and minimizing accountability, might have suited a one-person business, whether that was his real estate dealing or his reality TV show, but is poorly suited to international relations. A failure in either of Trumps two prior careers, such as a badly negotiated sale or a drop in ratings, would have been disappointing for him personally, but would not have had mattered much for anyone outside his family.  In negotiating with Russia, failure affects everyone in the US and to some degree has implications for every person on the planet. That's why his outlandish behavior is worrisome.     

Branding - the dark side

Once a brand becomes well known, manufacturers can and often do raise prices. The brand equity represents the additional margin that can be added to the competitive market or oligopolistic commodity price ("CMOCP"). The danger, however, is that when the brand loses its luster, the company must either reduce prices back to the CMOCP or lose sales. But in reducing prices, it reveals to its installed base and to potential future customers what the brand equity premium was. Those who paid it may feel cheated, and that might tarnish the brand for potential future buyers.   

The party of Trump

With Mark Sanford's defeat yesterday, one thing is becoming clear; for Republicans to win their primaries, they cannot criticise Donald Trump. While being critical of a sitting president has always been a difficult position for any elected official of the same party, the problem has never been this severe.

How did we get here? We got here because GOP partisanship overwhelmed values and standards. Appeasing the bully not only emboldened him, it also made obsequious subservience normal. Once critical mass was reached (which it evidently has been), resistance from individual Republicans is useless. The wall, the one that insulates Republicans from accountability for deceit, has been well and truly built.

   

Europe's Dilemma

I cannot begin to imagine what Europe's political leaders make of Trump. Normally political systems filter out the fools, those just in it for a a lark or self promotion. But America's system failed to do so in part because of Citizen's United, but also because none of the framers of the constitution probably could have imagined a wealthy reality TV star running for public office. This was an almost unimaginable confluence of circumstances.

Now the leaders of the world's leading democracies, who have been groomed and moulded by systems that reward, if not the exclusion of all else then to a large degree, serious policy engagement, must find a way of interacting with someone the like of whom they have probably never had to engage with in any serious fashion, someone who has no patience for, or understanding of, policy.

The two questions I imagine they much be asking themselves are these: how can Trump be contained in the short term from doing too much damage to the world order; and is this just a temporary aberration that will be gone in 30 months, or does it reflect a real underlying change in the USA's electorate's orientation to world affairs?

To the second I suspect only time will tell...  

Refusing to Serve

Sarah Sanders

Yesterday, Sarah Sanders was asked to leave a small restaurant where she had just stared to dine. The owner explained to Sanders "that the restaurant has certain standards that I feel it has to uphold, such as honesty, and compassion, and cooperation".

The decision was the owner's taken after consulting with her staff, which, it is worth noting, had served her as it would any other customer.  
  

As the WaPo reported: "Cole [who represented the gay couple who sued the owner of the Masterpiece Cakeshop in Colorado for refusing to make their wedding cake because of his beliefs about same-sex marriage] disagreed [that the situations were comparable].  'When people say the gay couple in Masterpiece Cakeshop could simply go down the street to another baker, that ‘it’s no big deal,’ that could also be said for Sarah Sanders. But it is a huge indignity to be turned away from a place that is open to the public.' "

A couple of points in rebuttal:

1. The couple turned away by the Masterpiece Cakeshop were equally the subject of an indignity in a public place (even if the shop were empty at the time).  
2. Indignity is something that Sanders routinely inflicts on the White House press corp, and indirectly on thinking people everywhere.
3. As a public figure, she cannot expect the anonymity.

It is also perhaps worth considering that there may be a n economic rationale; the restaurant is in a Democratic district in a Republican state, and having Sanders as a client might have caused her local clientelle to stay away.

Negotiating tactics

After five hundred plus days, I have just realized how Trump negotiates. Take North Korea. First he escalates the situation so that the likelihood of a terrible outcome for his opponent is higher than it would otherwise have been; then he offers a deal to take things back to where they were before he inflamed the situation. A second example is immigration. He implements a new draconian policy (separating children from their parents) so that he has something to give up in negotiation.

It's an interesting tactic - make things worse so that in a subsequent negotiated settlement, you can give something up that simply returns you to your original pre-escalation position; you have conceded nothing and (hopefully) gotten something else in return. Essentially it is hostage taking. I'll deprive you of something you value and the sell it back to you.

What is as yet unclear is whether it works - it clearly has not yet in the North Korea de-neuclearization. Whether it will get him what he wants in the immigration debate is less clear - I suspect this one he will win simply because the Democrats can't afford, morally or electorally, to turn their backs on the situation Trump has created. 

Two Wrongs

Two wrongs don't make a right, the adage goes. And in James Comey's case that couldn't be more true. His first mistake was deciding to go against FBI norms and make a public statement explaining his recommendation not to recommend changes be pressed against Hilary Clinton for using her private email server for the sending of classified information.  While his fear that not to prosecute would be viewed as favouring candidate Clinton, he violated a long-standing and important FBI norm in making that statement.

That the created a problem later on, when the Weiner laptop was "discovered". Having appeared to "let Clinton off the hook" he felt obligated to put her back on it when the laptop was found to have some of her emails on it. That was a second violation - commenting on a now on-going (reopened) investigation.

The first blunder infuriated Republicans who hated Hilary with a vengeance (think "Benghazi, Benghazi, Benghazi", as well as the emails). The second, writing to Congress to inform it that the investigation had been reopened, provided the GOP with much needed talking points and "dirt" on the eve of the election, and despite that fact that there was no "there" there, that impression wasn't correct for several days by which time votes had been cast and minds made up.  

What does China Want?

Much under-reported amidst all the media ballyhoo surrounding the Kim-Trump summit has been the question: "what does china want"? China matters because sanctions are effector only if China wants then to be. And if sanctions are what bought Kim to the summit, then China holds the cards.

China clearly doesn't want regime change in North Korea because that would likely lead to Korean unification and a non-communist regime less sympathetic to it than the DPRK. It would also provide a large potential base of operations for the projection of US military force in the Asia Pacific region.

On the other hand, China would like to see a rapprochement between the two Koreas and a formal end to the war. That would reduce the justification for the US to keep a military presents in the South. If the South were to decide that it was safer building a relationship with China than with the US, it might close its US military bases which would strengthen China's position in the region.  So China can be expected to keep up sufficient pressure on the North to force an end to the war and the expulsion of US military bases from the South, but without causing sufficient economic hardship that regime change or collapse becomes more likely.

Alienating allies

Last week Donald Trump behaved in an unprecedentedly (for a world leader) petulant manner towards the other members of the G7. He, and his minions, insulted Prime Minister Trudeau; he left early; and he refused to sign the joint communiqué.

Does this matter? After all, his counterparts must by now have gotten over the shock of his boorish behaviour and his lack of fidelity to the facts. They are grown-up enough to get past any personal feelings of (justifiable) animosity, although I doubt that any of them experted to have to exercise the same kind of restraint they need when dealing with the leaders of pariah states like Russia or North Korea when dealing with the President of the United Sates. When it comes to any call for joint action, it seems unlikely that they (Trump excepted) would let their personal feelings interfere with their rational decision making.  

But the answer to "does it matter" is a resounding: yes it does. A country's leader is not only the chief executives of its government; they are also figure-heads, with symbolic meaning for their citizens. When you insult a foreign leader, you insult that country's people. That makes cooperation with the US more politically difficult. Theresa May may have a harder time asking Parliament to go out on a limb to help the US (as for example, Tony Blair had to at the onset of the Iraq war) when MPs are facing an electorate that takes a dimmer view of the US than it did when Barack Obama was president.  That reduces America's influence on the world stage, and further paves the way for the rise of China. 

The US DPRK joint declaration - with commentary

The joint declaration, as reported by the New York Times:

"President Donald J. Trump of the United States of America and Chairman Kim Jong-un of the State Affairs Commission of the Democratic People’s Republic of Korea (DPRK) held a first, historic summit in Singapore on June 12, 2018. 

President Trump and Chairman Kim Jong-un conducted a comprehensive, in-depth, and sincere exchange of opinions on the issues related to the establishment of new U.S.-DPRK relations and the building of a lasting and robust peace regime on the Korean Peninsula. President Trump committed to provide security guarantees to the DPRK and Chairman Kim Jong-un reaffirmed his firm and unwavering commitment to complete denuclearization of the Korean Peninsula.

Convinced that the establishment of new U.S.-DPRK relations will contribute to the peace and prosperity of the Korean Peninsula and of the world, and recognizing that mutual confidence building can promote the denuclearization of the Korean Peninsula, President Trump and Chairman Kim Jong-un state the following.

1. The United States and the DPRK commit to establish new U.S.-DPRK relations in accordance with the desire of the peoples of the two countries for peace and prosperity.

2. The United States and the DPRK will join their efforts to build a lasting and stable peace regime on the Korean Peninsula.

3. Reaffirming the April 27, 2018 Panmunjom Declaration, the DPRK commits to work toward complete denuclearization of the Korean Peninsula.

4. The United States and the DPRK commit to recovering POW/MIA remains, including the immediate repatriation of those already identified.

Having acknowledged that the U.S.-DPRK summit — the first in history — was an epochal event of great significance in overcoming decades of tensions and hostilities between the two countries and for the opening up of a new future, President Trump and Chairman Kim Jong-un commit to implement the stipulations in this joint statement fully and expeditiously. The United States and the DPRK commit to hold follow-on negotiations, led by the U.S. Secretary of State Mike Pompeo, and a relevant high-level DPRK official, at the earliest possible date, to implement the outcomes of the U.S.-DPRK summit.

President Donald J. Trump of the United States and Chairman Kim Jong-un of the State Affairs Commission of the Democratic People’s Republic of Korea have committed to cooperate for the development of new U.S.-DPRK relations and for the promotion of peace, prosperity, and security of the Korean Peninsula and of the world."

Commentary

Timing

Usually, in this kind of high-stakes diplomacy, the principals only meet when the negotiation has been concluded to put their signatures on a done deal; that avoids the possibility of the appearance of failure at the highest level. Trump has chosen to reverse this order; starting the process with a top level summit and as laying the groundwork for negotiations. Some have suggested, perhaps rightly that the old way of doing things hadn't worked so why not try something new? I might be more persuaded by this were it not that I suspect Trump's motives to be slightly different; he's  less interested in the substantive terms of the deal than in being seen to have "delivered something" (whatever that something might be). And it could well be that the 'something' here is simply this communique,that nothing more will come of it. But that might be all wants running into the 2018 mid-terms to shore up the GOP base and keep the House and the Senate in GOP hands. So this is essentially about reducing the likelihood of  impeachment. 

Commitments and actions

1. "President Trump committed to provide security guarantees to the DPRK and Chairman Kim Jong-Un reaffirmed his firm and unwavering commitment to complete denuclearization of the Korean Peninsula".  The term security guarantees is fairly vague and open to braod interpretation, so there is little committed to by the US here, but the DBRK has "committed" to complete denuclearization of the Korean Peninsula which will not be fulfilled until the US removes its capabilities from South Korea; that's a strategy since it leaves Japan and the South less protected, and reduces the US presence in Asia at a time when China is becoming more bellicose and territorial. 
2. Of the four enumerated points,the first two are feel-good fluff and meaningless. The third deals with the "complete denuclearization of the Korean Peninsula", as noted above. And the fourth dealing with POW/MIA remains is a small concession by the DPRK (but a big deal to the families involved) that does not affect its strategic nuclear deterrence.  
3. Finally the declaration notes "The United States and the DPRK commit to hold follow-on negotiations, led by the U.S. Secretary of State Mike Pompeo, and a relevant high-level DPRK official, at the earliest possible date, to implement the outcomes of the U.S.-DPRK summit". which simply means that there will be more meetings to follow up on the undertakings in the declaration, some easy fixes, some highly problematic.

Reversibility

Some US concessions are probably easily reversible; the lifting and re-imposition of sanctions may be one (though their effectiveness may depend in part in the US' relations with its allies). So might be the suspension of joint military exercises with South Korea. Others may be more difficult to reintroduce. For example, bringing the war to a formal end might lead to South Korea deciding to remove US military bases from its soil. That would have adverse national security implication for the US and its regional allies; but those allies might consider they are better off making peace with China and North Korea than relying on the US for protection. 

Time will tell, but this feels like a staged reality-TV event, contrived for domestic political ends in both countries.  

'Beg your pardon?

Yesterday, Donald Trump used his pardon power to void the convictions of Dinesh D’Souza, who illegally and knowingly circumvented campaign finance laws by promising to reimburse individuals who made individual political donations to Wendy Long's Senate 2012 Senate election campaign. Trump is reportedly considering pardoning Martha Stewart, convicted of insider trading, and commuting the sentence of Rob Blagojevich, convicted for trying to barter his choice of successor to President-elect Obama's soon to be vacant seat in the Senate.

Trumps acts and statements are revealing. First the common threads; all three, D’Souza, Blagojevich and Stewart were guilty of violating both the law and the public trust for personal gain, demonstrating clearly how little regard Trump has for either the rule of law, his level of comfort with self-serving greed as a guiding principle, and his contempt for the optic (and reality) of violating societal norms. Second, it reveals who he thinks matters - all are well known "celebrities". This could reflect, as CNN seems to be suggesting, a preoccupation with fame and notoriety. But a more likely explanation is that he see this as  a way of achieving four goals; the boosting of some high-profile Obama critics and vocal Trump supporters; a signal to those who might be ready to testify against him that if they have his back he will have theirs; a further jab to undermine public confidence in the judicial system; and a signal that he is above partisanship (Blagojevich being a Democrat).

That he is commuting Blagojevich's sentence isn't simply about Trump showing generosity to the opposition. Rather, it could be interpreted as an indication that he considers both parties' platforms inconsequential, mired as they are in what they see as political and economic reality and he sees as needless quagmire; he is untethered to the past, to precedent, or the norms that have governed Washington for decades; the only voices he listens to are his own and Fox and Friends.

The country is at an inflection point; the Obama years steered the country gently in a more compassionate, centrist direction. Lots of folk, particularly the whites in the red states, feeling let down by decades of unfulfilled promises and a feeling that the political system was paying too much attention to fringe groups (like climate scientists) and minorities, decided to "stick it to the system" by electing a crude, misogynistic, racists, ignorant, dishonest, vain, paranoid, greedy, materialistic, self-serving huckster. Whatever the economic and security gains are made, on trade and in the international order,
that choice will resonate down the ages, a choice the unintended (and some intended) consequences of which we will be living with at least until after I'm long gone.

The question is: how does the country respond; and the signs aren't good. The left, rising to the bait with each insult spewing from the White house on a daily basis, is blinded by such anger and contempt that they seem unable  to focus on the issues the country faces. The right sees that as a direct attack on their (lack of) values and responds with nonsensical "what-aboutisms", distortions and lies with increasing impunity. Increasingly divided, siloed by social and cable media, the opportunity for seeing common ground is fast disappearing. If the next few years are filled with the same degree of division and disdain for "the other", many will turn away to focus on the daily grind, leaving public policy in the hands of those arguably least suited act in the interests of those they are supposed to represent.

Self driving cars

Self-driving cars have face two related problems; reliability and liability. First, it might make sense to distinguish between two kinds of accident - one in which the driver is injured or killed, the other in which another person outside the vehicle is. Those who get into the vehicle do so (hopefully) understanding the risk, so caveat emptor. Those who not in the car and are involved in an accident have a more substantial claim, since they did not chose to weigh the risk before hand. For these folk, the car maker's liability is likely to be much higher.

Self-driving car thus face two separate problems; one is reducing failures to the point that car buyers will assess the risk as acceptable and drive the product; and the second is reducing failures to the point that the profits are sufficient to cover potential liabilities, which means either pricing them high or reducing failure rates.

The problem is exacerbated by the fact that auto makers may be seen as having deep pockets (and thus good sources of income for lawyers). That will inhibit self-driving cars' roll-out. One solution might be to separate the car makers from the makers of self-driving control systems, which means separating the two components.

A public API that all car makers agreed to would provide an inviting platform for smaller companies to develop self-driving systems on. By having self-driving systems made by smaller start-ups, the population of  self-driving systems firms could survive the demise of one or more firms without that industry niche being crushed by litigation. 

North Korea Nuclear Deal

Will Trump get a successful deal from the North Koreans? Of course he will, and at least in his telling, it will be the greatest deal ever made. How can it be that the man with no plan might do something no other president in 20 years was able to?

First, the deal won't be his; it will be whatever the North, the South and China want. His only accomplishment is getting them to sit down to talks. And since he has no plan and his goal is only to put something, anything, on the score board that he can point to and say "look what I did", the terms are largely immaterial. So how did Trump get the parties to the table?

Kim agreed to the talks because he has a nuclear weapon and a delivery system and is negotiating from a fairly strong position.  What about the South? They likely felt that Trump was so unpredictable that the US could no longer be relied on. Trump might on a whim pull troops out of South Korea leaving it exposed to invasion from the North. So better make a deal quickly before something worse happens. As for China, North Korea will be less of a problem when it is less economically isolated and the lifting of sanctions will reduce the likelihood of mass migration from the North into China. The only part of the calculus Trump changed was sowing doubt in the South's leaders' minds that the US was a reliable ally; quite an accomplishment! 

Second, don't be fooled into thinking that the JCPOA, aka the Iran deal, represents the minimum acceptable set of terms. Trump doesn't really care about the details of the deal. He hated the Iran deal because it was Obama's not because he really thought it was a bad deal; he almost certainly doesn't know either the details of the deal or its implementation. As long as the North and South agree to something and China blesses it, he will trumpet it as a victory he, personally, the great negotiator, delivered. What will he have had to do with it? "How about everything" he will yell at anyone foolish enough to listen. 

The talks will conclude; Trump will declare victory; and the situation on the ground may be little changed other than the lifting of economic sanctions on the North.

What would you trade for a bonus check?

Big tax cuts for corporations and the rich doesn't look much like a winning populist strategy. So many firms, possibly prompted by the GOP, chose to use employee bonuses to demonstrate that they weren't only thinking of shareholders. These, of course, are a 'one-offs' and represent a much smaller commitment than wage increases which have to be paid for many years rather than just once.  But they have allowed the administration to boast that its tax cuts are putting money into peoples' pockets even if it's only a one time benefit, never mind that it has created an even bigger hole in the federal budget that at some point will cause a day of reckoning. And when that happens, the programs that will be cut will be those that help most vulnerable. But by then those who voted for the package will be safely retired from congress on their lobbyists salaries.

On the other side of the scale, the things the GOP and its voters have given up as part of the bargain they made electing Trump are many and intangible.

They have given up on the idea that our leaders set a moral tone to be aspired to.

They have abandoned the idea that honesty is a virtue.

They have chosen cynical self-interest over high-minded pursuit of a worthy common goal.

In short they have given up on some of the foundational ideas that underpinned the fabric of what America stood for.

And that's something that won't be easily or quickly rebuilt.  

Contestable labor markets

In economics, contestable markets are ones in which, because barriers to entry are non-existent, incumbents are prevented from raising prices (and profits) for fear that in doing so new entrants would flood in.

There has been much hand-wringing lately about the effect of the recent tax cuts. While many feared that companies would use the windfall only to buy back stock or pay dividends, an there has, according to David Brooks on the News Hour, been an appreciable (36%) increase in capital spending.

However reinvesting in building the business hasn't led to an increase in wages even as the labor market tightens to levels not seen in 17 years. With the low levels of unemployment, economists generally predict that as the economy continues to expand, faster than the labor supply, wages will rise. So why are they not?

Several suggestions have been proposed to account for this. The uncertainty surrounding the potential trade disputes with China and NAFTA renegotiation might be causing firms to hold off on hiring; but that's seems inconsistent both with a relatively good jobs report and the spending on capital projects. Another more compelling argument is that the decline of trades unions and a long period in which firms were unable to give any pay raises has blunted labor's ability to bargain effectively. That seems plausible. A third explanation is that the labor pool is larger than the figures suggest with people who had stopped looking for work and were therefore not counted as unemployed not coming back into the market. 

But here's another possible cause; the contestability of labor markets. Although the labor market may be tightening, people looking for work are no longer competing only with other people; they are increasingly competing with automation not to mention off-shoring. Both represent a more significant threat than they did before the great recession. Technology has improved and automation has therefore gotten cheaper; and supply chain logistics has become more robust and cheaper too, facilitating off-shoring. So while a tightening of the labor market 12 years ago might have led to a modest rise in wages, today there are more and more accessible and financially feasible alternatives for firms to consider. That trend is only likely to continue, so while economic growth in a tight labor market is not driving up wages today, expect growth and investment in the future to be met increasingly with labor-saving alternatives which will lead to downward pressure on wages. 

The correlation between unemployment and wage growth will weaken and may even turn negative. When firms are doing well and have money to invest, they may choose increasingly to use that opportunity to restructure, replacing domestic labor with foreign labor and labor in general with machines. 

Liberalization in China

For many years, as China rushed through a process of industrialization in a third of the time it took Britain, Europe and America, it was commonly held that an inevitable corollary of this would be increasing pressure for, and moves toward, democracy.

The logic, I assume, ran that industrialization could not be achieved without education and with a more educated populous, demands for freedom of expression and democracy would necessarily follow.  

What this argument misses is as old as the Roman Empire; "Bread and Circuses". Industrialization has forged ahead, and education too; but while standards of living have been rising people are willing to trade freedom for increasing prosperity.

Demands for political reform can be held in abeyance as long as prosperity continues to grow. When that stops, expect trouble.

A Sense of Identity

The recent upsurge in populism, coupled with the loss of trust in government, has been linked to the collapse of the socio-economic bargain made in the 1980s that promised prosperity in return for globalization. 

While clearly an important contributing factor, one aspect has been completely ignored; identity. To the extent that we have historically seen our identity constructed around what we do, and in particular what we do for a living, our identities are being assaulted by upheaval in the labor market.

When careers in a clearly defined field that lasted a lifetime are being replaced by jobs in a swirling, ever-changing gig-economy, identity can no longer be constructed from what we do for a living. And so in addition to a failed social contract, we have a broad swathes of society experiencing an identity crisis.

(And a testable proposition that follows from this is that in areas where old stable jobs are disappearing faster, opioid addition will be higher). 

Less Autonomous Vehicles

Autonomous vehicles (self driving cars) are supposed to be arriving in about 2 years. There are safety concerns of course, as highlighted by the unfortunate death of a pedestrian in Arizona last week. But until legislation arrives their progress and roll out will continue unabated.

Safety features are of course critical to their deployment; it has been suggested that because so many accidents are caused by errors in human judgement, self driving cars will actually made the roads safer.

Ultimately that's likely to be true but in the phase in which self driving cars and human-driven cars coexist on the same roads, autonomous vehicles will need an over-abundance of safety devices to cope with unpredictable humans in their environment.

In time human driven cars may become rare enough that autonomous vehicles will be far more likley to be surrounded by other self driving cars then their traditional predecessors. Coordination between cars - a network of vehicles talking to one another - might then provide information about road and traffic conditions as well as the ability to 'flock' (as in for example, computer simulations of flying geese).   

At that point, autonomous vehicles may be a misnomer; while today's cars are tightly coupled to their drivers but autonomous from other cars on the road, self-driving cars will be autonomous from their occupants but closely coupled to other cars, road furniture and other highway features. 

Market volatility

After the 2016 election, markets climbed in anticipation of the GOP tax cuts. The more certain they became the more the market priced them in. Naturally that climb stopped when they were enacted. 

Now they are being moved by the uncertainty generated by this administrations somewhat schizophrenic trade policy; the GOP stands for free trade (good for markets) and Trump for protectionism, trade barriers and tariffs (bad for markets). 

When it becomes clearer which side will prevail will might seem some stability returning. If it is protectionism, expect the markets to fall further. 

Just don't expect Trump to own it on the way down like he did on the way up.

The Heller Decision

I'm re-reading the Heller Decision, written for SCOTUS by Antonin Scalia. He makes the argument that the first ('prefatory') clause does not limit the scope of the second ('operative') clause to 'well organised militias'. I'm not as swayed by this argument as I was when I first read the opinion, but something else came to mind.

He concludes his analysis of the operative clause noting "we find that they guarantee the individual right to possess and carry weapons in case of confrontation". One rather odd aspect to this interpretation is the addition of the notion of confrontation. That in itself seems to limit the scope of the Amendment, and begs the question" does this right not exist in the absence of confrontation? If a confrontation is simply an argument or a disagreement, is one justified in carrying a weapon to any setting in which differences opinion are to be expected?

That is the first puzzle of the majority's ruling. The second is the notion of "arms". Scalia frequently uses weapons as a modern day synonym for arms. Note that the constitution does not refer specifically to firearms, which it could have done given that they did exist at the time of its drafting, but to arms in general. Knives must surely therefore be considered a subset of arms in general.

However there are numerous state regulations limiting the carrying of knives. For example this website summarizes the rules relating to the carrying of knives: "Carry laws forbid an individual from carrying, concealed or open, certain knives. For example, some states forbid an individual from conceal carry of knives over a certain length but open carry of that same knife is legal. Other states forbid the carry, concealed and open, of certain knives. Most knives that are barred from carry are ones deemed by society to have no utility uses and, therefore, their only use is as weapons".

That knives whose sole use is as a weapon are regulated. In New York State, for example, it is illegal to carry "a dirk, dagger, or stiletto with the intent to use it as a weapon against another". It might be argued that this permits the carrying of knives if the bearer is not intending to use it as a weapon, but that seems inconsistent with Scalia's addition that the Second Amendment applies "in case of confrontation".

Moreover, some types of knives are barred from being "kept" (owned) at all. As the "Knife Up" website notes: "Ownership laws forbid individuals from owning certain types of knives that society has deemed “deadly weapons” or “dangerous.” Most of the time, these knives were once associated with unlawful people such as gangs, the mob, and outlaws. It is for this reason that the Bowie knife has been outlawed in so many states".

So it appears that both the ownership and the carrying of knives are quite heavily regulated at the State level, but ought to be covered by the Second Amendment in the same way as guns are. So either the NRA is wrong about the limits to regulation the Second Amendment affords, or the States have on their books a raft of unconstitutional restrictions on the owning and carrying of knives. 

Keep 'em guessing

Anyone who is concerned that Trump means what he says (or tweets) is either not listening or delusional. Commentators were in a tizzy this week when he said he'd raise the legal minimum age for purchasing firearms, legislate universal background checks, and allow law enforcement to confiscate weapons from people who they consider a danger to themselves or others, prior to any legal process.

The NRA was, not surprisingly, furious: But they need not worry. Trump has said many things on the spur of the moment only to contradict himself only hours later. He lives in the moment, saying whatever he things will please his current audience, and has no intention of being good to his word.     

"Tac" everything

As an outsider, Americans seem to have a much stronger admiration / hero worship for members of the armed forces that the Brits (with the possible exception of WWII fighter pilots).

That translates into a marketing of things military; 'tac' lights or 'tac' glasses, for example ('tac' being short for tactical which is itself short-hand, as I understand it for "used by the military or the more heavily armed branches of law enforcement". Try Googling "tactical" and see what comes up. 

That in turn reinforces the fascination and demand for all sorts of military and military-style products; at the intersection of this and a fascination the projection of with lethal force, America has created a demand for the same weapons the military uses like the AR-15 (army) or the Glock hand guns (police departments). It seems that for many, probably NRA members mostly, their sense of identity is built in part on looking like the military, and that is behind their visceral opposition to any ban on semi-automatic assault rifles.  America, or at least parts of it, not only has a gun problem - it has a gun culture problem. 

Russian Collusion? Probably Not

Trump's repeated assertions that his campaign didn't collude with the Russians is probably what he truly believes. And it may indeed be the case that although he would have liked to have had their help, the campaign didn't wittingly engaged in any acts that would be construed as collusion with a foreign power. But even if that's the case, its still no reason for America and indeed the rest of the world not to be gravely concerned.

Trump's antipathy to the investigation and his refusal to take action to protect the integrity of America's electoral process can't easily be explained as a thin-skinned defensive reaction to allegations that he didn't win the election "fair and square".  If, as he asserts, he is completely innocent, then he shoudl welcome the investigation and act to secure American democracy.

That he has not suggests something else is going on and the Manafort investigation points to what that might be. If Trump's businesses were engaged in similarly shady financial dealings with Russian entities, he may be terrified that Meuller's probe might uncover things that would land him in jail, hence his disdain (and fear) of Meuller's investigation.

And it is the threat that Russia might release that information that is behind his refusal to impose the sanctions Congress voted for overwhelmingly, his refusal to act to strengthen the security and integrity of the electoral system, and his refusal to condemn Putin and the Russian government. If that's the case, it's the threat of blackmail everyone should be concerned about.             

Manafort's Gamble

Despite the guilty please of his long-time business partner, Rick Gates, Paul Manafort is refusing to take a plea deal. Given the documentary evidence Mueller has reportedly gathered and now with the likely corroborating testimony of Gates, it seems all but certain that, were the case to go to court, Manafort would be convicted. So what explains his refusal to accept a plea that would result in a lighter sentence?

The most likely explanation is that given his almost certain conviction, his best bet is a pardon from the President. Since Trump values personal loyalty above all, he has to demonstrate his loyalty to stand any chance of a pardon. Refusing to cooperate with Mueller won't affect his conviction, only his sentence, but sends a strong signal to Trump that he remains loyal to the end; an end that he hopes will be more sweet than bitter.

Trey Gaudy, très bêtes

It turns out when you boil it down, that Trey Gaudy's bone of contention with the FBI is really about font size. The Nunes memo, which he was trying to defend on Face the Nation this morning, alleges that the FISA warrant was granted solely on the back of the uncorroborated "opposition research" Steele dossier. This claim is almost certainly false because 1) this was a FISA warrant "renewal", not the first granting and the FISA process requires the judges, plural, hearing the application demand that prior warrants have produced material intelligence, 2) the filing contained a great deal of other supporting documentation, so the Steele dossier was by no means the only evidence presented, nor indeed was it likely to have been pivotal, and 3) the fact that the Steele dossier was opposition research was caveat-ed in the filing as a footnote. So it would seem that it is the size of the font of that foot note that is the central claim of malfeasance in the Nunes memo.

The Nunes Memo

The much heralded and controversial memo landed today with a dull thud. Rather than the shocking revelation the alt-right was shouting about, it was the usual mishmash of inaccuracies and conspiracy theories we've come to expect from the The Fox wing of the Republican Party. Most people will be left feeling a little (if not very) annoyed that so many conventions and norms of decent behaviour were trampled on, not to mention the damage it does to Congress' ability to work cooperatively with government agencies, for so little of substance. To the informed follower of current affairs this was just another attempt to muddy the waters and distract attention from the investigation into Russian meddling in the last election.

But in fact it's probably been more useful that many of the pundits have been suggesting. While it was so anti-climactic that most people are happy to shrug and move on, it has done something I think quite important; it has provided support and cover for the Fox wing to continue supporting their hapless president. And should the Mueller investigation actually uncover grounds for impeachment, that's a very useful from of insurance.

What he wants - the DACA débâcle.

There has been much discussion this week of what exactly it Trump wants. The question was bought into sharp relief by the DACA débâcle. Perhaps his clearest statement was at the Tuesday publicity stunt meeting in which he loudly declared he'd sign whatever the bipartisan group of senators brought to him.  Before they could present him their plan, John Kelly rather sneakily bought Tom Cotton to see him - something he didn't need to have done but which suggests that Kelly sees the opportunity to advance his own political agenda.  Suddenly Trump had stipulations as to what he would and wouldn't sign.

Now the Democrats are fuming that he reneged on his Tuesday commitment, and McConnell is reluctant to move forward without a clear indication from Trump as to what he actually wants.  That's a forlorn hope. Trumps has no fixed policy goals; what he wants is to look as though he's accomplishing something - anything - it doesn't matter the content as long as he gets the credit and praise to placate his insecurity. Trump is fundamentally weak and unprincipled, making him a prime target for manipulation by sycophantic toadies.  His behavior suggest he feels deeply undeserving and out of his depth. What he want's isn't any particular policy; it's to be admired, worshiped and adored. In the immortal words of Mr. T. "Pity the fool".       

OPEC's Fall

Forty years ago, OPEC's control over oil supply and hence prices was an important consideration in economic and international political calculus.  OPEC countries could use their leverage over oil prices for political ends. Two things have changed. First the world's demand for oil hasn't grown as quickly as was once forecast. Since oil fields take decades to develop and exploit, tat has led to some over capacity. That would not be so bad were OPEC still able to coordinate supply; but on the supply side, the shale revolution has put paid to that.

First, the small shale drillers provide flexible supply that comes online whenever prices rise. That serves to bring supply up to meet demand and keeps in prices from spiking were OPEC to turn down the taps. The Saudi's role as the world's marginal producer has been usurped.

The second effect is to put a spanner in the works of the OPEC "bargain", a bargain that is the only way it was able to persuade its members to abide by agreements to restrict output. When only OPEC countries were producing, the fall in revenue from reduced output was offset by the rise in prices. Whether this was "revenue neutral" I don't know but it clearly would have mattered. Now, when OPEC cuts production prices may not rise nearly as much since the shale driller will come on stream to help fill the gap between demand and supply. So OPEC members will see a fall in revenue from lower output that is no longer balanced by a rise in price. That makes it almost reaching a collusive equilibrium in this repeated PD game almost impossible.

"All the worlds's a stage"

Donald Trump's 55 minutes of live TV, in which he was seen chairing a meeting of senior Republicans and Democrats, was this week's moment of shock and awe, designed by the White House to show that the Commander in Chief wasn't as senile as Michael Wolff's book suggested.

Although there was some short term ohh-ing and ahh-ing, the PR benefit was quickly negated by three  things.  First there were the comments the following day that reinforced the idea that he can't really distinguish between his performance as an executive on "The Apprentice" and what he may believe is a performance as President. Welcoming people back to "the stage", and frequent references to critics and ratings suggest he sees himself playing role, one that I suspect he knows he is really not up to. 

Second was Trump's affirmative response to Senator Dianne Feinstein's suggestion that they proceed with a "clean DACA bill". That was a huge negotiating give-away, a disaster for the Republicans, and he was quickly corrected. But listen, we all make mistakes under pressure, right? Sure, but he's a self-proclaimed "stable genius", the best negotiator on the plant, so that rookie mistake is a big deal.

But most important of all was his promise to 'sign whatever they bring him', a commitment on which he reneged within 24 hours when he tweeted that he'd not accept any proposal that didn't include "the border wall". It must now be clear to anyone who may have been harbouring doubts, that he cannot be trusted to negotiate in good faith. Whether he doesn't remember what he has said or simply doesn't care is immaterial; a man is only as good as his word, and Trumps' word is not worth anything. That's not only something that Congress must be concerned about; every world leader, including Iran's and North Korea's, must now be wondering if there is any point negotiating with our president if his word can't be relied on. That weakens the US' standing in the world and its ability to shape the international order.   

"Shit-hole countries"

There's not been a lot of clarity in the analysis this week. The "shocked choirboy" mixed with the outraged liberal has all but obscured any discussion of the "effectively pragmatic world leader".  So let's break it down.

First, while it's jarring to hear the President referring to countries as "shit-holes", he'd not be the first to use vulgar language. And I'd put money on the fact that many of those who are expressing shock at the language have, at some point in their lives, used language as bad or worse. So let's put the vulgarity per-se to one side.

Next is the question of race. Here it is the juxtaposition of non-white countries collective labelled "shit-hole" countries and Norway which is widely perceived to be one of the least racially diverse countries in the world, that is the cause of the appropriately righteous indignation. That certainly does smack of racism, but let's be honest; that's not really headline news for Donald Trump, the man who single-handedly perpetuated the scurrilous "birther" myth, whose very first campaign speech branded Mexicans as rapists and drug-dealers, and who reputedly has a history of discriminating against racial groups of color in his property tycoon days.

As repugnant is his racist views are, as grating as his words, particularly to anyone who loves language adroitly used, are, the real story is the damage done to the United States' relationships with other countries; not only with those he has disparaged, but with every leader and diplomat involved in international diplomacy. In international relations (as in marriage) it's often best not to blurt out the first thing that comes into your head. We use the phrase "being diplomatic" for that exact reason. Yet this, which is far more consequential and will have a much a longer lasting impact, has been largely obscured by furore over race and propriety.

The media needs to stop being outraged by his personal characteristics; his narcissism, his insecurities, his bottomless capacity for bold-faced lies, and report on what his actions really mean for the country, and for the rest of the world. They need to take a collective deep breath, calm down, and do their effing job. 

Populism abandonded

An argument could be made that Washington had been captured by lobbyists and wealthy donors and  was not longer sufficiently responsive to voters. That sentiment fuelled the surge in populist rhetoric in the last election; it is what connected Trump voted to Bernie's supporters. "Drain the swamp" they chanted.

But as Fareed Zakaria points out, very little of Trump's populist promises have been fulfilled, nor are they likely to be. The wall won't be built as promised, and certainly won't be paid for by Mexico. A big infrastructure initiative looks very different from advertised. Jobs aren't coming back to coal, and outsourcing continues apace (even at Carrier, the HVAC company).      

Trump has spent much of his campaign and presidency undermining the institutions of civil society - and in reneging on his populist agenda he will have demolished a possible avenue by which government might have been reformed to answer to voters rather than moneyed interest groups. Populism as an idea has now been discredited as just another ploy to grab the levers of power, and then abandoned as quickly as it was embraced.

Globalization over promised and, over 30 years, has come to be viewed as having benefited the elites while betraying the aspirations of the majority. Education, particularly higher ed. is suffering a similar fate. And a populist-driven reconstruction of the institutions of democratic government has gone the same way, to be consigned to the dustbin of historical inevitability.     

The Economy, Stupid.

Much of the rise in the stock market can be attributed to the anticipated gains to corporate net income of the lower tax rate. Were corporations in the DJIA previously paying tax at 35% then the cut to 21% would have increased their net income by 66%, which translates to a rise in the DJIA index from 18,000 last year to 30,000; the markets are over half way there. In addition, some gains are likely to come from the rescinding of regulations put in place during Obama's administration.

Higher net income, if passed on to employees, will have a positive effect on GDP which may go some way (but not all the way) to pay for the tax cuts; estimates suggest that this will cost the Treasury about $150b a year, about 5% of the budget. If it is spent on automation, some gains may come from increased sales, and from the making of the equipment, though any related reduction in employment would dampen the effect. And if returned to shareholders, some might go back into the economy though increased spending, though at a lower multiplier than through increased wages.    

There are additional costs to which the relaxing of regulations will give rise; increase pollution will lead to sickness, lost work productivity, and increased demands on Medicaid, not to mention the clean-up costs that are less likely than before to be borne by the polluter and more likely now to be borne by tax payers. So while the fundamentals were in place before Trump took office, it would be fair to say that the Republican agenda over which he is now presiding is having a positive effect in the short term. Whether this will be outweighed in the long run by the unintended costs remains to be seen.   

The lost art of diplomacy

Whether making derogatory or provocative public statements works in the world of real estate, I don't know.  But I'm pretty sure it's not a good idea in international diplomacy. Take Pakistan, for example: the US may be unhappy with Pakistan's efforts to root out Taliban fighters in the Tribal regions, but a public shaming constrains Pakistan's choices in ways that are unhelpful to US interests.  Threatening to cut off aid in private could be effective leverage. Doing it publicly provokes a domestic backlash and will likely lead to a response for the Pakistani government that is not at all what the US would have wanted or might have achieved had this been negotiated diplomatically (in both senses of the word).

No Russia Collusion

Here's my guess. Mueller hasn't and won't find any clear evidence of collusion with Russia during the election. And indeed there may not have been. But I suspect what Trump is really worried about is an investigation of his finances. I'm speculating that he has entered into some deals with some relatively unsavoury individuals who may have involved him, wittingly or otherwise, in some financial arrangements that may have crossed the line into illegality. He may not have known exactly what his exposure was at the time, but probably now suspects that with the more diligent scrutiny to which his dealings are being subjected, they may represent a significant risk that he will be subject to legal proceedings once out of office.  

Trump: Bannon Banned

The rift between Donald Trump and Steve Bannon will end badly not only for "Sloppy Steve", but for the Democrats hoping to take back the House next November.  As noted earlier, Bannon is replaceable; Trump, the reality-TV star and on-air talent, is not, at least as far as his base is concerned. Bannon's agenda was truly populist and that was a threat to the GOP establishment. They are delighted to see him gone. No more will he be orchestrating far right challenges to its more main-stream candidates in the primaries. And that's where the Dems will lose out. By fielding less disreputable, less unelectable candidate, like Roy Moore, the GOP will have an easier time defending the seats they need to hold on to in the mid-terms. Perhaps the Dems best play in the fall, absent a coherent policy platform -- which looks as far away as ever -- is to secretly fund Bannon and his slate of primary challengers. 

Predictions for 2018

1. The Democrats will make gains in the House in the mid-terms but will not win a majority. They will not pick up any more seats in the Senate.
2. The US will tacitly and reluctantly accept North Korea as a nuclear power.
3. Muller will conclude his investigation without finding any concrete evidence of collusion between the Trump campaign and the Russian government and its proxies.
4. Social Security, Medicade and Midicare reform will be put in hold until after the mid-terms
5. DACA will expire without a resolution; ICE will begin deportation.
6. the GOP will pass an infrastructure bill that relies on private financing, with risk backstopped by the Government; it will receive no Democratic support. 
7. China will continue to gain influence and assert it's role in international affairs. 
8. Trump will not recertify the Iran Nuclear deal but all other parties will continue to abide by its terms, and the deal will de-facto remain in place. 
9. Brexit talks will lead to the development of a transitional period to allow the UK more time to disentangle itself from the EU.
10. South and North Korea will reconcile some of their differences and trade and labour flows will resume.     
11. No progress will be made in negotiations between Israel and Palestine. 
12. The rule of law in Afghanistan will continue to deteriorate.
13. US-Pakistan relations will reach a nadir in the summer but begin to improve towards the end of the year . 
14. Putin will win re-election.

Bannon Trump Split

An analogy might be informative: Trump is clueless pop star who fans idolize; Bannon is the producer and song writer who people have heard of but don't really care much about. Bannon will have a hard time finding another idol as popular is his first creation, but Trump will have plenty of producers and writer willing to hang their hats on his coat tails.