Friday, August 28, 2015

Caesarian Birth: Messing with Mother Nature

The birth process involves a complicated interplay during pregnancy, birth, and nurturing between the mother and the eventual infant.  What we think of as “maternal instinct” is really a sequence of timed releases of chemicals that—along with physical changes—produce the necessary responses.  Evolution has produced this procedure as an efficient path toward a survivable infant.  Interrupting or modifying this process can lead to unforeseen difficulties because medical researchers are not in a position to claim they understand everything that is going on.

Of particular interest at the moment is our recently recognized dependence on the microorganisms that inhabit our bodies.  Since bacteria are the most fundamental unit of life, and all animal and plant life developed from these bacteria, we have evolved bathed in a soup of microorganisms.  The term “microbiome” was created to recognize this coupling and interdependence between our visible physical bodies and our less visible allies.  A popular and exciting area of research is to discover the role that non-normal distributions of these creatures, particularly in our digestive system, play in causing various physical and mental maladies.  Unfortunately, it is quite easy to upset these populations and cause adverse effects.  Every time we change our diet, change our hygienic procedures, or take antibiotics, we are participating in a game of chance because we do not understand what the consequences might be.

One of the ways in which natural processes are commonly disrupted is via Caesarian birth in which the baby is surgically removed from the woman’s uterus rather than the intended vaginal delivery.  There are reasons why this form of delivery might be necessary.  Medical experts have concluded that in 10-15% of cases a Caesarian (or C-section) birth is better for the mother and/or the infant.  What is troubling is that the operation that can be lifesaving in certain circumstances is now being used routinely as a substitute for vaginal birth even when there are no medical justifications.  This is not a trivial concern.  Wikipedia provides this data on mothers:

“In those who are low risk, the risk of death for Caesarian sections is 13 per 100,000 and for vaginal birth 3.5 per 100,000 in the developed world.”

And this outcome for babies delivered by C-section:

“Higher infant mortality risk: In C-sections performed with no indicated risk (singleton at full term in a head-down position), the risk of death in the first 28 days of life has been cited as 1.77 per 1,000 live births among women who had C-sections, compared to 0.62 per 1,000 for women who delivered vaginally.”

Enhanced mortality is only one of the reasons this increased utilization of C-sections should be of concern to us.

A recent article in The Economist discusses this issue: Caesar’s legions.  Brazil is suggested as being the worst offender, with C-sections being more common than vaginal births overall, and consisting of about 90% of the deliveries in private health care.

“A year ago a hospital in São Paulo announced that its maternity ward would henceforth only admit clients from 10am to 4pm, Monday to Friday. The message was clear: births by appointment only—that is, by Caesarean section. For Arthur Chioro, Brazil’s health minister, it was equally unequivocal: the country’s attitude to birth ‘has become absurd’.”

“In 2009 Brazil became the first country where less than half of babies were born as nature intended. At the last count, in 2013, fully 57% of births were by Caesarean section, in which the baby is delivered through an incision in the abdomen and uterus—almost double the proportion two decades ago. In Brazil’s private health-care system, Caesareans now account for nearly nine in ten births. Brazilian mothers say, only half jokingly, that their obstetricians would not know how to pull out a baby without cutting them open.”

The reason why C-sections are so popular in Brazil is obvious.  As always, follow the money.

“….a study last year found that at the start of pregnancy, two-thirds of Brazilian women wished to deliver vaginally. That less than half end up doing so suggests they are being steered.”

“Hospitals’ neonatal wards profit handsomely from Caesareans, which tend to be performed pre-term. So do obstetricians, who are generally paid per delivery. In the time it takes to assist a single natural birth, a medic might perform several Caesareans. Some charge patients who insist on the time-consuming natural route ‘standby fees’, though they are not supposed to.”

The article provided this tabulation of the percentage of births by C-section versus maternal mortality.  Note that both axes have logarithmic scales.

Essentially all developed countries are performing C-sections at rates considerably higher than medically necessary, and many have higher than expected maternal mortality rates.  For the poorest countries, the highest levels of mortality arise from the inability to provide C-sections when they are medically necessary.

Mortality is not the only problem encountered.  Infants must develop the necessary cadres of microorganisms if they are to survive.  It is believed that an infant acquires its original population of bacteria from the mother.  One of the major opportunities for transfer is the long and intimate descent down the birth canal which is rich in vaginal bacteria.  A C-section eliminates this process entirely.  C-sections are major surgeries, and all surgeries are performed with antibiotics.  The effect of antibiotics taken by the mother before birth on the development of the infant’s microbiome is unknown.

Why the concern?  A study of Danish records compared health outcomes of children born vaginally with those of children born via C-section.

“In the study, recently published in the journal Pediatrics, Bisgaard and colleagues examined the correlation between C-sections and immunological disorders in two million Danish children born over a period of 35 years between 1973 and 2012.”

“The scientists were able to determine from the Danish register of births that:
Children born by C-section have been more frequently hospitalised than those born vaginally due to asthma, juvenile rheumatoid arthritis, inflammatory bowel disorder, immune system defects, leukaemia, and other tissue disorders during their lives.
More specifically, the risk of developing asthma is 20 per cent higher if you are born by C-section. The researchers conclude that there is an approximately 40 per cent greater risk of developing immune defects and a 10 per cent greater risk of developing juvenile rheumatoid arthritis.”

One researcher was concerned enough about this to begin collecting specimens containing vaginal emissions from mothers undergoing a C-section to see if smearing the material on the newborn might help it establish a more normal post-birth bacterial distribution.  Carey Goldberg provided Research: Could Birth-Canal Bacteria Help C-Section Babies?

“The usual drill is to wipe the effluvia of birth off of newborn babies, cleaning them up and readying them for snuggling.”

“But in a fascinating departure, researchers have begun to experiment with the opposite: collecting birth-canal bacteria and wiping them onto babies after birth.”

“Dr. Maria Gloria Dominguez-Bello, an associate professor in the Human Microbiome Program at the NYU School of Medicine, presented some preliminary results on that research at a recent conference of the American Society for Microbiology here in Boston. Those initial findings suggest that indeed, using gauze to gather a mother’s birth-canal bacteria and then impart them to babies born by C-section does make those babies’ bacterial populations more closely resemble vaginally born babies — though only partially.”

Dr. Dominguez-Bello also provided this insight:

“There is a lot of stress in labor and some people think that stress is healthy for both the mother and the baby. It’s a long process, so during all those hours, physiological changes occur in the mom and the baby. So I think we have not studied labor enough and tried to understand what it is about labor that is healthy.”

“Plus, with the restoration we did, we do restore the bacteria partially but not completely. And also, the mother’s body prepares to breastfeed, for example — and who knows how many other things — much better after a natural birth than a C-section. A C-section is a sudden interruption of a process before the process finishes. So the body of the mother doesn’t even know that the baby’s out. It takes a while for the body to realize, ‘Oh, there is no baby.’ It’s really an insult to a process that ideally should end naturally, and only by necessity should it be interrupted.”

Messing around with natural processes is risky.  And it is especially outrageous when the motivation is greed.  The birth process is more complicated than just squeezing a large head through a small aperture.  We don’t understand what all is involved, but clearly there are negative effects when the natural process is not followed—and we don’t know what other consequences are yet to be discovered.

Friday, August 21, 2015

The Welfare State, and the Inevitability of Welfare Spending

Anthony B. Atkinson has produced a number of proposals for actions that might be taken to reduce the economic inequality that has settled into many of our most developed nations.  These are discussed in his recent book Inequality: What Can Be Done?  As an economist, Atkinson felt it was necessary to justify his suggestions against the inevitable criticism that will come from his colleagues.  His book might have been a lighter read if he had just said “To hell with the old fools, this is what needs to be done.”  Nevertheless, the points made to justify his proposals provided some interesting insights.

Atkinson was particularly sensitive to the knee-jerk reaction that would say anything that could be construed as affecting productivity or the expense of conducting business in the “current business environment” was ridiculous and old-fashioned.  What exactly is it about the current business environment that makes actions that might reduce inequality ridiculous?  The most common response would include some claim about the increased competition that comes with globalization.  Atkinson is not convinced by such assertions, given that the modern welfare state had its origins in the first wave of globalization prior to World War I.  And at that time, social provisions provided workers were thought to be necessary for the economic and social health of the modern nation.

“….one of the main elements of the proposed measures—the welfare state—had its European origins in the nineteenth-century period of globalization.  It is therefore puzzling that the present period of globalization should elicit the opposite response—that we are compelled to dismantle the welfare state rather than, as I have argued here, strengthen it….”

The result of the Industrial revolution was to put a worker in a more precarious situation.  Prior to that, a worker and his family had more flexible options available.  One could earn a living by learning a craft, or hire oneself out as a common laborer, or produce goods for sale that could be made in the home, or all of the above if necessary.  With mass production methods, workers were presented with all-or-nothing jobs.  One worked full time if lucky, or not at all if business dropped or a factory went broke, or an injury was incurred while employed.

The increased competition that came with globalization put workers at greater risk.  Since workers were a necessary resource, it was deemed economically sound to protect them from economic risks.

“In Germany, which led the way, there were several motives for the introduction of the Bismarckian system of social insurance.  These included the need to preserve political and social stability in the face of the rise of workers’ organizations and the spread of socialist ideas.  But a significant factor was the need for social protection that arose from the precariousness of employment when Europe was exposed to greater competition in the 1870-1914 period of globalization.”

People in the US tend to consider social policies as having their origin in the Great Depression and the postwar years, but in Europe much of what would define the modern welfare state had already been put in place.  This was viewed as economically and socially sound—and being the Christian thing to do.

“This led towards the end of the nineteenth century, or in the early years of the twentieth century, to the establishment of unemployment insurance, industrial injury benefits, sickness insurance, and old-age pensions.”

“….the introduction of welfare-state programs in Europe should be seen as complimentary with, rather than in competition with, the achievement of economic goals.  In the early days of the European welfare state, social and economic policies were seen as working in the same direction.  This view persisted for several decades.  When in the United Kingdom, Beveridge drew up his 1942 plan for postwar social security, he collaborated with Keynes to ensure that macroeconomic and social policy worked together, notably via the role of social transfers in providing automatic stabilisers.  In the United States, Moses Abramovitz argued that ‘the support of income minima, health care, social insurance and other elements of the welfare state, was….a part of the productivity growth process itself.”

Eventually, this enlightened view would be subverted into its exact opposite.  One might interpret the timing of this transformation as being caused by the growth of the second great globalization era.  One might also attribute it to the cancer that is neoliberal economics taking root and being imposed throughout the world.

“Only later, in the 1980s and 1990s did the predominant view shift and come to see social protection as an impediment, rather than as a complement, to economic performance.”

Atkinson provides a chart indicating the percentage of GDP spent on social expenditures by each OECD country in 2011.  The data includes specification of both public and private spending. 

“Social expenditures are defined as benefits in cash or kind by public and private institutions provided to individuals or families during circumstances that adversely affect their welfare.  They include social security, health benefits, housing benefits, and active labour-market programmes.”

Let us compare three countries with the reputation for actively pursuing generous and effective social welfare policies using high tax rates to fund implementation.  Public spending by Denmark, Norway, and Sweden as a percentage of GDP comes in at 23%, 18% and 22.5% respectively.  What about the notoriously stingy United States?  Its rate of public spending comes in at 20% of GDP.  From just these numbers, one might assume that these are four similar nations.  Now add in the public contributions to social spending.  Denmark goes from 23 to 26.1%; Norway from 18 to 19.3; Sweden from 22.5 to 24.6%; the United States goes from 20 to 28.8 %.  When private spending is included, the United States spends more on social assistance than any country in the OECD except for France.

Several conclusions are suggested by this comparison. 

First: providing generous social assistance is not economically harmful in itself.  The Scandinavian countries are all economically healthy and need spend no more than the less-generous United States.

Second: the fact that the less-generous United States must contribute so much more from private sources suggests that trying to skimp on social spending is not only cruel, it is ineffective and probably wasteful.  Atkinson interprets the data as supporting the notion that social needs will be met—one way or another.  People will not be allowed to die of hunger; the sick will get treatment; the homeless will be helped.  If the state doesn’t provide for needs, then assistance will have to come from employers, families, or charity.  In any event, private funds will be removed from the economy in much the same way that taxation removes funds from the economy and reallocates them.  If so, then the state might as well do its duty and save some money by doing it more efficiently.

The way to minimize spending on social needs is not by cutting budgets.  Rather, we should seek a set of consistent economic and social policies that minimize the need for social assistance.  That seems to be the lesson to be learned from the three Scandinavian countries.

Saturday, August 15, 2015

Market Fragmentation and Social Fragmentation

The massive upheavals of two world wars and the Great Depression generated a need for cohesion within societies.  For a moment societies assumed that “we are all in this together” and if we stick together we can avoid a repetition of the fear, danger, and destruction from which we have just emerged.  In the immediate postwar years economies thrived as all that destroyed capital had to be rebuilt.  All classes benefited as income inequality plummeted.  However, that economic bounty would begin to dissipate in the 1970s and a period of great change would ensue.

Daniel T. Rodgers, in The Age of Fracture (2011), described the last quarter of the twentieth century as a period of disaggregation when the ties that bound society together unraveled.

“Across the multiple fronts of ideational battle, from the speeches of presidents to books of social and cultural theory, conceptions of human nature that in the post-World War II era had been thick with context, social circumstance, institutions, and history gave way to conceptions of human nature that stressed choice, agency, performance, and desire.  Strong metaphors of society were supplanted by weaker ones.  Imagined collectivities shrank; notions of structure and power thinned out.  Viewed by its acts of mind, the last quarter of the century was an era of disaggregation, a great age of fracture.”

Rodgers points to changes in economic thought as the initiator of this disaggregation.  It was a time of neoliberal ascendency that brought the concept of undirected markets driven by self-interested individuals to the fore.

“It stood for a way of thinking about society with a myriad of self-generated actions for its engine and optimization as its natural and spontaneous outcome.  It was….a disaggregation of society and its troubling collective presence and demands into an array of consenting, voluntarily acting individual pieces.”

Rodgers was onto something with his focus on economic changes, but changing attitudes and actions of tens of millions of citizens are difficult to relate to “ideational battle” between academics and politicians.  There may have been something much more direct occurring.

Brink Lindsey provides an interesting way in which to view changes that have occurred in the economy in an article for The American Interest: Frontier Economics.  Lindsey claims that for a long time economies were concerned with providing products that filled the well-defined needs of food, clothing, shelter and transportation.  He claims that it was inevitable that markets for such products would eventually stagnate in terms of growth.  If dynamic new markets were to be developed they would have to focus on providing goods and services that people desired rather than needed.  And if the desire was not to be found, marketing would have to create it.  Lindsey views this phase as one where companies and markets could come and go quickly and there is no clear picture of where progress might take us. Hence he uses the term “frontier economics.”

Mass market products that required large capitalization would be augmented by smaller, quicker companies that used new technologies to profitably target smaller segments of society.

“….that’s the direction advanced capitalism has followed ever since (except that it’s not a single direction, of course, but countless variations on a theme). As product varieties proliferated to suit every taste and social identity, what was being produced and consumed also changed. The richer we get, the more discretionary our purchases become.”

An economy that produces products “to suit every taste and social identity” could become the engine that drives the disaggregation of society.  To the degree that consumption becomes personalized, the sharing of common goals and desires may become proportionately weakened.

Paul Roberts worries about this issue in an article for The American Scholar: Instant Gratification.  He worries that the ability to learn so much about us allows companies to market products to us before we even realize that we will desire them.  This leads to an inner focus on individual goals.  And the speed with which these products can appear and be delivered spoils us by generating the instant gratification that provides the title of his piece.

The development of a consumer-focused economy has begun to change how we view ourselves within society.

“Sophisticated, large-scale industrial systems assumed the task of making many of the things we needed, and also began to focus on the things we wanted. As the consumer economy matured, an ever-larger share of economic activity came from discretionary consumption, driven not by need but by desire, and thus by the intangible criteria of people’s inner worlds: their aspirations and hopes, identities and secret cravings, anxieties and ennui. As these inner worlds came to play a larger role in the economy—and, in particular, as companies’ profits and workers’ wages came to depend increasingly on the gratification of ephemeral (but conveniently endless) appetites—the entire marketplace became more attuned to the mechanics of the self. Bit by bit, product by product, the marketplace drew closer to the self.”

We now have the ability to construct the life we wish to lead rather than deal with the one the world would otherwise provide us.

“….the entire edifice of the consumer economy, digital and actual, has reoriented itself around our own agendas, self-images, and inner fantasies. In North America and the United Kingdom, and to a lesser degree in Europe and Japan, it is now entirely normal to demand a personally customized life. We fine-tune our moods with pharmaceuticals and Spotify. We craft our meals around our allergies and ideologies. We can choose a vehicle to express our hipness or hostility. We can move to a neighborhood that matches our social values, find a news outlet that mirrors our politics, and create a social network that ‘likes’ everything we say or post. With each transaction and upgrade, each choice and click, life moves closer to us, and the world becomes our world.”

This tendency to create a physical and social (often virtual) environment that satisfies our personal desires weakens our need to find satisfaction through interaction with the larger social environment.

“It’s as if the quest for constant, seamless self-expression has become so deeply embedded that, according to social scientists like Robert Putnam, it is undermining the essential structures of everyday life. In everything from relationships to politics to business, the emerging norms and expectations of our self-centered culture are making it steadily harder to behave in thoughtful, civic, social ways. We struggle to make lasting commitments. We’re uncomfortable with people or ideas that don’t relate directly and immediately to us. Empathy weakens, and with it, our confidence in the idea, essential to a working democracy, that we have anything in common.”

“Community and family are undermined by our consumer culture of individual gratification. Worse, our political system, the traditional arbiter between public and private interests, has been colonized by the same bottom-line impulse. Political parties boil their philosophies down into extreme brands designed to provoke target audiences and score quick wins. Voters are encouraged to see politics as another venue for personalized consumption. We’ve lost the idea that politics is the means to build consensus and an opportunity to participate in something larger than ourselves.”

Steven Quartz and Annette Asp provide a different perspective on what a focus on personal consumption has done to us and affected how we relate to others in society as a whole.  They produced an article for the New York Times titled Unequal, Yet Happy. They attempt to explain why the first Gilded Age produced social unrest and political activism while the current Gilded Age has been a relatively sedate affair.

“Despite soaring inequality, worsened by the Great Recession, and recent grumbling about the 1 percent, Americans remain fairly happy. All of the wage gains since the downturn ended in 2009 have essentially gone to the top 1 percent, yet the proportion of Americans who say they are “thriving” has actually increased. So-called happiness inequality — the proportion of Americans who are either especially miserable or especially joyful — hit a 40-year low in 2010 by some measures. Men have historically been less happy than women, but that gap has disappeared. Whites have historically been happier than nonwhites, but that gap has narrowed, too.”

“In fact, American happiness has not only stayed steady, but converged, since wages began stagnating in the mid-1970s. This is puzzling. It does not conform with economic theories that compare happiness to envy, and emphasize the impact of relative income for happiness — how we compare with the Joneses.”

The assumption that status brings happiness and lack of status breeds discontent seems to no longer hold true.  The explanation the authors provide is based on the claim that consumerism has driven us to create our own groups and “tribes” within which we can strive for status rather than striving within society as a whole.

“A new generation of ethnographers has discovered an explosion of consumer lifestyles and product diversification in recent decades. From evangelical Christian Harley-Davidson owners, who huddle together around a motorcycle’s radio listening to a service on Sunday mornings, to lifestyles organized around musical tastes, from the solidarity of punk rockers to yoga gatherings, from meditation retreats to book clubs, we use products to create and experience community. These communities often represent a consumer micro-culture, a “brand community,” or tribe, with its own values and norms about status.”

The authors concur with Roberts that this is a disturbing trend.  Income inequality that was intolerable a hundred years ago seems of no great importance today, despite the noise made by the Occupy Movement.

“In a 2013 poll asking Americans to name the most important problems facing the country, only 5 percent cited income inequality or concerns about the poor or middle class (though a recent Gallup poll did find that 67 percent of Americans were dissatisfied with the current income distribution).”

Consumerism has likely contributed to the fragmentation (disaggregation) of society in the manner these various authors describe, but something else had to precede it.  The mid 1970s would be about the time those who had experienced the wars and economic devastation that generated the need for social cohesion began to settle into insignificance.  The next generation, one that had no such experience, would seek to flex its muscles and provide its own way forward. 

Tony Judt has commented often on the sadness of watching nations that believed “we are all in this together” and created great and just societies based on that principle slowly sink into the nastiness inherent in neoliberal economics.  In his book Ill Fares the Land he provided this assessment of where we stand today.

“We no longer have political movements.  While thousands of us may come together for a rally or a march, we are bound together on such occasions by a single shared interest.  Any effort to convert such interests into collective goals is usually undermined by the fragmented individualism of our concerns.  Laudable goals—fighting climate change, opposing war, advocating public healthcare or penalizing bankers—are united by nothing more than the expression of emotion.  In our political, as in our economic lives, we have become consumers: choosing from a broad gamut of competing objectives, we find it hard to imagine ways or reasons to combine these into a coherent whole.  We must do better than this.”

Social cohesion is unimportant—until it becomes absolutely necessary.

Monday, August 10, 2015

Who Has the Highest Marginal Tax Rate: the Rich or the Poor?

Anthony B. Atkinson has produced an in-depth discussion of inequality, its causes, and its possible remedies in his book Inequality: What Can Be Done?  Atkinson is a British economist who has been studying the issue for decades and is recognized as one of the foremost experts on the topic.  He ultimately arrives at 15 specific recommendations for changes in public policy that should contribute to a shrinking of the growing gap between the rich and the poor.

It is not surprising that more progressive taxation of income is one of his proposals.

“Proposal 8: We should return to a more progressive rate structure for the personal income tax, with marginal rates of tax increasing by ranges of taxable income, up to a top rate of 65 per cent, accompanied by a broadening of the tax base.”

Atkinson provides a discussion of all the ways an economist might choose to select the highest marginal rate with arguments about efficiency and incentives.  He casts aside all such efforts as being too imprecise for the task at hand.  Instead he decides on the value of 65% out of considerations of fairness.  Fairness?

One must recall that Atkinson is British so the particulars of his proposals tend to be specific to Great Britain.  Usually he translates the specifics of his discussions to the slightly different realities that exist in the United States, but he failed to do that in his “fairness” argument.  We shall do that for him.

Atkinson argues that a fair highest tax rate is one that is potentially applied to all taxpayers.  In particular, a high-income marginal rate should not be below any rate that people lower in income might be subject to.

“A maximum fair marginal tax rate—in terms of what people keep as a result of extra effort—should be the same for everyone.  Applying this principle suggests a quite different criterion for the top tax rate: that the marginal rate at the top of the income distribution should be the same as that applied at the bottom of the scale.”

What is of concern to Atkinson is what is referred to as “the poverty trap” or “the welfare trap.”  Assistance based on means testing is withdrawn as the beneficiary acquires income that exceeds certain levels.  As those income levels are reached the withdrawal of government benefits affects the income of the worker in the same way a marginal tax would.  If the benefits are withdrawn suddenly, the effective marginal tax rate can be quite large.  Atkinson’s proposal was chosen to match the targeted effective marginal rate that the UK has proposed as the most that people emerging from poverty should be required to pay: 65%.

That is an interesting application of the concept of fairness.  What might be derived from applying that same logic to the United States?  Fortunately that calculation has already been done and has been presented in an article in The Economist: Taxing hard-up Americans at 95%.  The title already provides the answer.

The results presented are based on a calculation by the Congressional Budget Office (CBO).  The CBO took the hypothetical case of a single mother with one child in the state of Pennsylvania and calculated the effective marginal tax implied by the loss of benefits with increasing income.  The article provides those numbers in the following chart.

Clearly, Atkinson’s approach to determining the top marginal rate could never be applied in the United States.  However, his emphasis on fairness does raise an interesting question.  When increases in tax rates are proposed, fairness is one of the primary arguments by the wealthy against being forced to pay a higher marginal rate.  The second standard argument in defense of the rich is that higher taxes act as a disincentive for the wealthy and they might not work as hard as they might otherwise if a greater fraction is taken from any additional income.  One has to wonder if the wealthy would accept the argument that high marginal rates for the poor would be unacceptable because they would be unfair and would act as too much of a disincentive to work harder.  They might, actually, if they took the time to think about it.

Another take-away from the chart above is that we have a complex system for providing assistance to the needy.  That is evident from the structure in the marginal tax curve.  There are a significant number of programs available to the needy, but the bureaucracies put in place to protect the funds we allocate to them from “abuse” make it difficult for any one person to access all, or even any of them.

 Couldn’t we at least recognize that a system that makes it more difficult to make headway for those trying to emerge from our welfare programs is bad policy?  Couldn’t we at least be cognizant of the problem and cap the disincentive as Atkinson claims the British are doing?

Friday, August 7, 2015

Greece: Is Germany Trying to Kill It, or Trying to Save It?

Greece had long been required to pay a much higher rate of interest on borrowed money than Germany because of the perceived greater risk that Greece might have difficulty in paying its debts.  Greece applied for membership in the eurozone and, after providing false data, managed to be accepted.  Suddenly Greece was no longer the risky country it had been and easy credit was available.  It took advantage of that situation as once sane and sober financial institutions decided it was safe to pour money into the country.  However, Greece was consistently providing inaccurate financial figures and was underreporting budget deficits.  In 2009 a new government was in place that sought to assess the fiscal state-of-affairs and discovered that a reported budget deficit was not 3.5% of GDP, but 12.5% (eventually determined to be 15.7% of GDP).  Eurozone countries are required to keep deficits below 3% of GDP.

The European community was shocked by these numbers and the fact that Greece had used misleading fiscal data to gain entry to the eurozone and had been providing inaccurate numbers ever since.  When it became necessary for Greece to request loans from that community to meet its bills, Greece’s economy and business practices came under severe scrutiny.  Eventually loans were provided, but only if Greece agreed to a number of dictated austerity measures, and to surveillance by international observers.

The severe spending cuts put the country in a deep recession that lasted until 2014 when a small gain in GDP was attained.  Meanwhile, the ratio of debt to GDP grew from 129.7% of GDP in 2009 to 177.1% in 2014.  Unemployment has grown to about 26% and is still growing.  The unemployment rate for young people is much higher.

Greece has suffered mightily under this austerity program.  Germany, as the richest nation in Europe, was viewed as responsible for representing the other European nations.  The harshness of Greece’s treatment provided numerous opportunities be bring up the Nazi occupation during World War II for comparison. 

The people of Greece were naturally unhappy and resentful of these imposed measures.  Early in 2015 an election produced a new Prime minister, Alexis Tsipras of the Syriza Party, and a new finance minister, Yanis Varoufakis.  It was expected that these two would lead negotiations that would result in some relief from the austerity measures and/or some relief in the level of debt that must be repaid.  By this time sympathy for Greece’s plight had been generated in a number of areas.  From a pure economic perspective, even the IMF has agreed that under the existing fiscal constraints it would be impossible for the country to ever be able to repay its debts.  Nevertheless, the Greek negotiators failed, and an even more severe austerity package was imposed on the country than had previously been planned.  How could this possibly make sense?

Tariq Ali is sympathetic.  He provides some insight in a note published in the London Review of Books.  He begins with this assessment.

“In the early hours of 16 July, the Greek parliament voted overwhelmingly to give up its sovereignty and become a semi-colonial appendage of the EU.”

Tsipras and Varoufakis had very little leverage to bring to the negotiating table.  They could refuse to accept the terms they were offered, but they really needed the money.  They could threaten to leave the eurozone (Grexit) and cause financial havoc, but the Greek people preferred to keep the euro, and, as it turned out, Germany, at least, was quite willing to see them leave.

“It is now known that Schäuble [Germany’s Minister of finance] offered an amicable, organised Grexit and a cheque for 50 billion euros. This was refused on the grounds that it would seem to be a capitulation. This is bizarre logic. It would have preserved Greek sovereignty, and if Syriza had taken charge of the Greek banking system a recovery could have been planned on its terms. The offer was repeated later. ‘How much do you want to leave the Eurozone?’ Schäuble asked Varoufakis just before the referendum. Again Schäuble was snubbed. Of course the Germans made the offer for their own reasons, but a planned Grexit would have been far better for Greece than what has happened.”

Ali provides this explanation for the apparently vindictive attitude of the Germans and their allies.

“The German attitude to Greece, long before the rise of Syriza, was shaped by the discovery that Athens (helped by Goldman Sachs) had cooked its books in order to get into the Eurozone. This is indisputable. But isn’t it dangerous, as well as wrong, to punish the Greek people – and to carry on doing so even after they have rejected the political parties responsible for the lies?”

Interesting question!

Further insight into the negotiations with the other European finance ministers is provided by Ian Parker in an article for The New Yorker: The Greek Warrior: How a radical finance minister took on Europe—and failed.  Varoufakis was Parker’s subject and he was provided considerable access to him in the critical months when these events transpired.  Prior to becoming finance minister, Varoufakis was teaching economics at the University of Texas at Austin.  He had maintained a presence in Greece by publishing political comments on the internet.

“It was as if Christopher Hitchens had woken up one day as Secretary of State. Varoufakis was no longer writing elegantly prosecutorial blog posts about Christine Lagarde, the managing director of the I.M.F.; he was meeting with Lagarde. Within days of Greece’s election, an academic with Marxist roots, a shaved head, and a strong jaw had become one of the world’s most recognizable politicians. He showed a level of intellectual and rhetorical confidence—or, perhaps, unearned swagger—that lifted Greek hearts and infuriated Northern European politicians. His reluctance to wear a tie seemed to convey the impossibility of containing his manliness.”

The storyline that emerges from Parker’s article suggests that Tsipras and his flashy finance minister were ill-prepared for the task ahead of them, and too inexperienced, if not incompetent, to carry it out.  Parker’s conversations with representatives from the other side claimed that the Greeks had no credible proposals to present.  When asked for details little was provided.

“Once, Varoufakis was asked what Greece’s target surplus should be, if not 4.5 per cent of G.D.P. He ‘had to give a lecture’ about the variables that made the question unanswerable in that form. ‘They’re not economists,’ Varoufakis said. ‘Most of them are lawyers’.”

“According to troika officials, Greek negotiators barely engaged at the technical level. Initially, this appeared to reflect only incompetence, but later there seemed to be some strategy in it—an effort to force the conversation into the political realm.”

“When Greece did engage, I was told by another representative of a troika institution, ‘the stuff they sent us was extraordinarily naïve.’ He recalled a measure, submitted by Varoufakis in March, designed to boost sales-tax compliance by hiring amateur spies: people, including tourists, would be trained to wear hidden cameras. The troika representative said, ‘It was stunning to see something like this in a document of a minister of an E.U. country’.”

Varoufakis seemed to believe that there would be a number of countries who would be supportive of what he hoped to accomplish if only Germany was not so adamantly opposed.  However he could only mention France and Italy as perhaps being in the anti-austerity camp.  Other observers have noted that while Schäuble was the inevitable spokesperson, there was little evidence that Germany was acting alone.

Were Germany and the other countries being merely vindictive—or might they have had a loftier agenda.  It is not possible to appreciate the German view on how to conduct an economy without a little historical perspective.  Jan-Werner Müller provides necessary insight in an article in the London Review of Books: What do Germans think about when they think about Europe? 

“Germany differs from the other member states of the EU in the particular economic ideology that holds sway there, and is supported by the country’s elites – not just those on the right. Ordoliberalism isn’t exactly the same as Anglo-American neoliberalism – it sees more of a role for the state. Many Germans believe it was responsible for the economic miracle of the 1950s….Ordoliberalism is what Angela Merkel wants for the Eurozone as a whole: rigid rules and legal frameworks beyond the reach of democratic decision-making.”

“The German establishment – not just on the right – has long subscribed to the theory of ordoliberalism, which was first elaborated in the 1930s and 1940s and underpinned Germany’s ‘social market economy’ in the 1950s. Ordoliberals thought of themselves as the true neoliberals: they alone had learned from the failures of laissez-faire in the 1920s; they alone had formulated a new vision of liberalism in which a strong state provided the framework for economic competition (and price stability), as well as a social safety net (to prevent socialism). In their eyes, other so-called neoliberals, from the Austrian School or the Chicago School, were really ‘paleoliberals’ stuck in 19th-century orthodoxies about self-correcting markets.”

What is critical in Germany’s view is that sound economic policies be followed not by choice, but by law.  Ordoliberals also feared the corruption of the government by what we would refer to as lobbyists for special interests.  They emphasized the need for the constraints to be exercised on the free market economy to be canonized as a part of the constitution so that they could not be subverted by easily-influenced legislators.  In Germany’s view, there can be no negotiation when there are laws that must be obeyed.

“Ordoliberalism is what Angela Merkel wants for the Eurozone as a whole: rigid rules and legal frameworks beyond the reach of democratic decision-making.”

So Germany clearly thinks it is doing the right thing and there is no alternative.  However, the people of Greece are suffering.  Terms like “cruelty” and “brutality” are being bandied about.  Is there any way in which the terms imposed on Greece can be interpreted as “being in Greece’s best interests?”  Perhaps.

Yet another perspective on the situation is needed.  This one is provided by Michael Lewis in his book Boomerang: Travels in the New Third World (2011).  Lewis devoted a chapter to Greece titled “And They Invented Math.”  He presents the view of a Greece that is not just insolvent—it is a country that is politically corrupt and socially dysfunctional as well.  It is not a place anyone should want to pour a lot of money into in hope of ever getting it back.

Lewis provides us with some examples of how Greece has conducted business in its public sector.

“In the past twelve years the wage bill of the Greek public sector has doubled, in real terms—and that number does not take into account the bribes collected by public officials.  The average government job pays almost three times the average private-sector job.  The national railroad has annual revenues of 100 million euros against an annual wage bill of 400 million, plus 300 million euros in other expenses.  The average railroad employee earns 65,000 euros a year.”

“The Greek public-school system is the site of breathtaking inefficiency: one of the lowest-ranked systems in Europe, it nonetheless employs four times as many teachers per pupil as the highest ranked, Finland’s.”

And then there are the pensions.

“The retirement age for Greek jobs classified as ‘arduous’ is as early as fifty-five for men and fifty for women.  As this is also the moment when the state begins to shovel out generous pensions, more than six hundred Greek professions somehow managed to get themselves classified as arduous: hairdressers, radio announcers, waiters, musicians, and on and on and on.”

Lewis learned the lengths Greek politicians will go to in order to remain in power in a discussion with an official of the tendency of government financial data to be false.

“....the finance minister stresses that this isn’t a simple matter of the government lying about its expenditures.  ‘This wasn’t all due to misreporting [of expenditures],’ he says.  ‘In 2009, tax collection disintegrated, because it was an election year.’
He smiles.
‘The first thing a government does in an election year is to pull the tax collectors off the streets.’
‘You’re kidding.’
Now he’s laughing at me.  I’m clearly naive.”

It is hard to run a country in which people don’t pay taxes.  Lewis obtained this insight from a Greek tax collector.

“…the only Greeks who paid their taxes were the ones who could not avoid doing so—the salaried employees of corporations, who had their taxes withheld from their paychecks.  The vast economy of self-employed workers—everyone from doctors to the guys who ran the kiosks that sold the International Herald Tribune—cheated (one big reason why Greece has the highest percentage of self-employed workers of any country).  ‘It’s become a cultural trait,’ he said, ‘The Greek people never learned to pay their taxes.  And they never did because no one is punished.  No one has ever been punished….’.”

“The scale of Greek tax cheating was at least as incredible as its scope: an estimated two-thirds of Greek doctors reported incomes under 12,000 euros a year—which meant, because incomes below that amount weren’t taxable, that even plastic surgeons making millions a year paid no tax at all.”

Society depends on the vast majority of people being willing to “do the right thing.”  If a person believes his neighbors are following rules, he is likely to follow them as well.  As more and more people begin to cheat the behavior cascades and the entire social fabric can unravel with disastrous results.  Greece seems to have reached that state.

“The Greek state was not just corrupt but also corrupting.  Once you saw it work you could understand a phenomenon that otherwise made no sense at all: the difficulty Greek people have saying a kind word about one another.  Individual Greeks are delightful: funny, warm, smart, and good company.  I left two dozen interviews saying to myself, ‘What great people!’  They do not share the sentiment about one another: the hardest thing to do in Greece is to get one Greek to compliment another behind his back.  No success of any kind is regarded without suspicion.  Everyone is pretty sure that everyone is cheating on his taxes, or bribing politicians, or taking bribes, or lying about the value of his real estate.  And this total absence of faith in one another is self-reinforcing.  The epidemic of lying and cheating and stealing makes any sort of civic life impossible; the collapse of civic life only encourages more lying, cheating, and stealing.  Lacking faith in one another, they fall back on themselves and their families.”

Lewis concludes his unpleasant and unpromising assessment of Greece and its society with this comment.

“It behaves as a collection of atomized particles, each of which has grown accustomed to pursuing its own interest at the expense of the common good.  There’s no question that the government is resolved to at least try to re-create Greek civic life.  The only question is: Can such a thing, once lost, ever be recreated?”

Even if Lewis’s description were a bit exaggerated, the facts still speak for themselves.  Is it surprising that when the agents of the European Union went into Greece to discover what had been going on they decided that no money could be loaned to a country in such a sorry state.  Enormous and quite painful changes would be required in order to make Greece look like a modern state, and the agents would have to remain in place in Greece to insure that the funds lent were used properly.  The time required to remake the country would be more than a few years.

Is Greece making progress?  One hopes so.  But a country tends to end up with the politicians they deserve.  The fact that Tsipras and Varoufakis displayed such incompetence in making their country’s case would support the notion that country is not yet ready to rule itself.

If the Germans and others are merely trying to protect their bankers and others who had foolishly invested in Greece, why would they encourage Greece to leave the eurozone and go it alone?  Such a course would surely involve a monetary devaluation and a loss of a significant fraction of those investments.  Given that governments act in their own self-interest, these countries may have decided that Greece was more trouble than it was worth.  But if Greece refuses to go away, the only recourse is to force it to behave—and that is what seems to be happening.

Ultimately, Greece must be released to run itself and be provided a huge reduction in debt if it is ever to regain its status as an independent nation of the European Union.  One hopes that the current treatment it is being subjected to is aimed at reaching such a time.  That is the only explanation of the current mess that makes any sense.

Saturday, August 1, 2015

The Militarization of Law Enforcement

For at least the past year the headlines have been full of stories of black victims of police violence.  In most instances a black has been thought to be in violation of some regulation, is confronted, and violence ensues—often resulting in the death of the suspect.  Since these occurrences inevitably involve a black suspect and a white (male) police officer, race is always indicated as a factor in the incident.  Crime statistics tell us that police preferentially will confront black offenders rather than white offenders.  There clearly is a racial issue in an administrative sense, and perhaps one in a personal sense.  The racial element can clearly be responsible for biasing the enforcement of laws, but does violence necessarily have to follow?  Does violence follow from racial animosity—or is there something else in play?

Are police overly aggressive physically because of the way they are trained, or are they more likely to resort to violence because policing attracts types who are ready and willing to use violent tactics?  And if the latter case is true, is it because of the nature of police work, or is it because police recruitment is designed to attract people who see police work as exciting because it provides access to military style weapons and threatening situations?  Should people who find the opportunity to fire guns at other people exciting be welcomed into law enforcement, or turned away at the door?

Daniel Denvir provided an article for CITYLAB (The Atlantic) addressing recruitment issues: Who Wants to Be a Police Officer?  He suggests that police problems with violence cannot be explained by white versus black bias.  There is plenty of evidence that black officers have not hesitated to use violence on black suspects.

“But to what extent does diversity, for all the discussion, make a difference when it comes to police conduct? Alex Vitale, an associate professor of sociology at Brooklyn College, says that research suggests it basically doesn't. ‘Black police officers are just as likely to use force as white police officers,’ says Vitale. ‘In fact there is some indication their behavior toward black suspects is actually worse than that of white officers’."

Denvir’s source, Vitale, indicates that police recruitment videos often emphasize the military gear and the rush of excitement from dealing with dangerous people.

"’The emphasis is totally on SWAT team, and shoot outs, and driving fast and all the militarized equipment, and nothing to talk about problem solving, dealing with the public, diverse skill sets, that can be helpful in policing,’ says Vitale. ‘Too many departments have completely emphasized the adventure-seeking aspects of the job, which are actually just a tiny fraction of what most police officers do every day’."

“Vitale says that a preference in many departments to hire military veterans, which has the advantage of bringing in older, more experienced recruits, may squeeze out other applicants and foment the warrior mentality.”

Denvir also provides this insight into where some police departments have been heading.

“….New Orleans scrapped a requirement that new officers without two years of military service have at least 60 college credits. The move might grow the department, according to a recent Times-Picayune story, ‘but research suggests the officers it takes on could be more likely to use force on the job’."

And how is two years of military service in any way equivalent to 60 college credits?

A recent article in The Economist suggested that without the allure of guns, excitement, and potential violence, recruitment of police officers is ineffective.

Radley Balko provided commentary on the recruitment issue and provided links to several videos in use by police departments in an article in the Washington Post: The disturbing messages in police recruiting videos.  He leads off with a video being used by the police department in Hobbs, New Mexico.

“Note the aspects of policing the video emphasizes: Shooting stuff. K-9 enforcement. Nabbing the bad guys. The SWAT team. This is the first step in the process.”

“(There’s also the separate but related question of why Hobbs — a town of 35,000 people — needs a SWAT team in the first place….the SWAT team has its own page on the Hobbs department Web site, complete with a video of SWAT cops shooting and destroying things, set to heavy metal music. The statement in the video that ‘The rules of engagement of SWAT are simple: Defeat the enemy . . . any way you can’ is also troubling. The mission of a SWAT team ought to be to resolve volatile situations without force and violence whenever possible.)”

“Note, too, what’s missing from the recruiting video: Public service. Cops walking beats. Community policing. Helping people.”

“Now ask yourself:  What sort of person would be attracted to a career in law enforcement based on the images and activities depicted in that video? And is that the sort of person you’d want wearing a badge and carrying a gun in your neighborhood?”

Balko has written a book on the subject of police militarization: Rise of the Warrior Cop: The Militarization of America's Police Forces.  He also provided an overview of that work in an article for The American Interest: SWATted: The Militarization of America’s Police.  In that piece he provides this perspective:

“Policing in some ways has become more professionalized, organized and regimented, but it has also become more aggressive, militaristic and belligerent. Put another way, there may be fewer cops going rogue today, but the kind of force now permitted and regularly practiced has changed to the point that it resembles rogue behavior en masse. The key case in point is the astonishing increase in the number and use of Special Weapons and Tactics (SWAT) teams. In America SWAT teams now violently smash into private homes more than a hundred times each day. The vast majority of these raids are to enforce laws against non-violent and consensual crimes, mostly having to do with illicit drug use.”

“In many cities, police departments have given up their traditional blues for “battle dress uniforms” modeled after soldier attire. They now sport armored personnel carriers designed for battlefield use, and some have helicopters, tanks and Humvees. They carry military-grade weapons. Most of this equipment comes from the U.S. military itself. Many SWAT teams are trained by current and former personnel from special forces units like the Navy SEALs or Army Rangers.”

“SWAT teams once used violence to defuse already violent situations and to save lives at immediate risk. Today they are primarily used in a way that creates violence and confrontation where neither needs to exist. They were once used to confront a suspect or suspects in the process of committing a violent crime. Today, they’re used as an investigative tool to search the homes of people only suspected of crimes, and not particularly serious or violent crimes at that.”

Compliant judges willing to issue “no knock warrants” (and the inability to find the correct address—10% error rate in New York City) leads to violent entries, damaged property, and people literally frightened to death for no good reason other than that is the way police now like to conduct business.

“But even if police were to get the right house every time, the more important question here is whether violently breaking into private homes to serve search warrants for nonviolent, consensual crimes (at least) 100 to 150 times per day is the sort of thing with which we should be comfortable in a free society.”

The situation has not been helped by blustering politicians craving attention.

“This sort of fear and demagoguery has always begun with politicians—the people who are supposed to hold police officials accountable. Nixon began the modern drug war, with all of its martial and apocalyptic rhetoric and dehumanizing of drug offenders. Reagan then intensified the rhetoric by declaring drugs a threat to national security, portraying the drug fight as a war between good and evil and at one point comparing it to the Battle of Verdun. In the years since, the martial rhetoric from politicians has only intensified. William Bennett once pondered whether drug dealers should be publicly beheaded. Daryl Gates once suggested that drug use was treason and suggested users be taken out to the street and shot. Representative Charlie Rangel once declared himself the drug war’s ‘front-line general.’ A few years ago, one sheriff in Georgia lamented that the drug war was being fought too much like the war in Vietnam. To win, he said, we need to fight it as if we’re storming the beaches at Normandy. And New York Mayor Michael Bloomberg has referred to the NYPD as the ‘the seventh largest army in the world’.”

The constant emphasis on use of force and the training that emphasizes danger lurking in every encounter cannot be healthy for an agency that spends most of its day treating mundane social issues unrelated to crime, violent or otherwise.

“Too many police departments today are also infused with a general militaristic culture. Cops today are too often told that they’re soldiers fighting a war, be it a war on crime, on drugs, on terrorism or whatever other recent gremlin politicians have chosen as the enemy. Cops today tend to be isolated from the communities they serve, both physically (by their patrol cars) and psychologically, by an us-versus-them mentality that sees the public not as citizens to be served and protected but as a collection of potential threats. Police are regularly told the lie that their jobs get more perilous by the day—actually, the job has been getting safer since the mid-1990s, and 2012 was one of the safest years for cops in decades. And they are told that every interaction with a citizen could be their last. Consequently, they are trained literally and conditioned psychologically to treat every encounter with a citizen as if it could be their last.”

What should be taken away from this discussion?  Perhaps all parents should be giving their kids “The Talk.”  Encounters with police should be taken seriously.  Think defensively and show the same decorum you would expect from the officer.  And remember, he or she may be more afraid of you than you are of them. 

We should also be defending our Fourth Amendment rights as fiercely as our Second Amendment rights.

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