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Breaking Up Big Tech Would Be Good for U.S. National Security

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When executives at the biggest U.S. technology companies are confronted with the argument that they have grown too powerful and should be broken up, they have a ready response: breaking up Big Tech would open the way for Chinese dominance and thereby undermine U.S. national security. In a new era of great-power competition, the argument goes, the United States cannot afford to undercut superstar companies such as Amazon, Facebook, and Alphabet (the parent company of Google). Big as these companies are, constraints on them would simply allow Chinese behemoths to gain an edge, and the United States would stand no chance of winning the global artificial intelligence (AI) arms race. That technology executives would proffer these arguments is not surprising, but the position is gaining traction outside Silicon Valley; even Democratic politicians who have been critical of Big Tech, such as Representative Ro Khanna of California and Senator Mark Warner of Virginia, have expressed concerns along these lines.

But the national security case against breaking up Big Tech is not just weak; it is backward. Far from competing with China, many big technology companies are operating in the country, and their growing entanglements there create vulnerabilities for the United States by exposing its firms to espionage and economic coercion. At home, market concentration in the technology sector also means less competition and therefore less innovation, which threatens to leave the United States in a worse position to compete with foreign rivals. Rather than threatening to undermine national security, breaking up and regulating Big Tech is necessary to protect the United States’ democratic freedoms and preserve its ability to compete with and defend against new great-power rivals.

Competition with China will define U.S. national security conversations for decades to come, and Americans need to think carefully about the role technology will play in this increasingly competitive environment. But to claim that the likes of Amazon and Google are helping counter China’s technological and geopolitical rise simply because they are American companies makes little sense.

Almost all big U.S. technology companies have extensive operations in China today. Google announced plans for an AI research center in Beijing in 2017 and is exploring a partnership with the Chinese Internet behemoth Tencent. Microsoft is expanding its data centers in China and has recently built an entire operating system, Windows 10 China Government Edition, for the Chinese government. Amazon’s cloud service in China is second in popularity only to that of its Chinese counterpart, Alibaba. Apple famously designs its phones in California but manufactures them in China. Facebook, notably, does not operate in China—but not for lack of trying. The company repeatedly attempted to gain access to the Chinese market only to be blocked by Chinese government officials.

Merely operating in China may seem harmless. Yet according to scholars, U.S. government officials, and even American business associations, any U.S. technology company working in China could very well be supporting the Chinese state and the expansion of digital authoritarianism. In the course of their operations in the country, U.S. companies routinely interact with Chinese companies, some of which are run or partly owned by the state. Those that are not still have informal ties to state and Communist Party officials and face strong incentives to behave as the state wishes even without direct pressure from the government.

Because the Chinese market and the state are intertwined in this way, Chinese companies that partner with foreign ones are highly likely to pass along operational and technological developments to the Chinese government and military, including in ways that could advance Beijing’s emerging surveillance state and accelerate its ability to spread its model of digital authoritarianism around the world.

These challenges are particularly clear in the case of AI, as commercial innovations in that field can also have military implications. Under Beijing’s doctrine of “civil-military fusion,” Chinese researchers and private companies are working ever more closely with the government and the military, which means that technological innovations that may have originated with a foreign company active in China can find their way to supporting the People’s Liberation Army. “If you’re working in China,” Ashton Carter, a former U.S. defense secretary, has said, “you don’t know whether you’re working on a project for the military or not.”

In addition to widely known concerns about Chinese espionage and surveillance, integration with the Chinese market also opens Big Tech—and the United States—to pressure from China, which can use that influence to hurt U.S. interests. Scholars refer to this tactic—turning economic interdependence into political leverage—by a variety of terms, including “geoeconomics,” “reverse entanglement,” and “weaponized interdependence.” Whatever it’s called, China has a long track record of doing it, across countries and industries. To retaliate against South Korea’s adoption of a U.S. missile defense system in 2017, China blocked Chinese travel agencies from offering trips to the country. And after the dissident Liu Xiaobo was awarded the Nobel Peace Prize in 2010, China temporarily blocked imports from Norway.

To avoid offending Chinese officials and potentially losing access to the country’s large market, companies are adapting their behavior even outside China’s borders. Hollywood studios have been accused of rewriting scripts and editing scenes for that purpose: choosing to blow up the Taj Mahal instead of the Great Wall of China in the movie Pixels, according to Reuters, and replacing China with North Korea as the main adversary in the 2012 remake of Red Dawn, according to the Los Angeles Times. In 2019, Daryl Morey, the general manager of the NBA basketball team the Houston Rockets, tweeted in support of pro-democracy protesters in Hong Kong; soon thereafter, he deleted the post. In the days that followed, the owner of the Rockets wrote that Morey did “NOT speak” for the team, and the NBA said it was “regrettable” that Morey’s views had “deeply offended many of our friends in China.” (After a public outcry, the NBA clarified that it would not censor or fire Morey.) A year earlier, Mercedes-Benz had posted a quote from the Dalai Lama on Instagram. After an online backlash in China, the automaker quickly erased the quote, and its parent company, Daimler, said that the post had contained an “erroneous message” and had “hurt the feelings of people” in China. The People’s Daily, China’s largest newspaper, later branded Mercedes-Benz as an “enemy of the people.”

Such conduct by Western companies illustrates a broader point: they act based on their commercial interests, not in the name of abstract democratic principles or for the cause of U.S. national security. The same is true when these companies try to influence government policy. The potential stakes are high. The U.S. Department of Commerce, for instance, has the power to set export restrictions on some sensitive technologies, including AI; those restrictions may be important from a national security standpoint, even if they negatively affect some companies’ bottom lines. Yet the dominant ideology among corporate lawyers today holds that the sole aim of managers is to maximize shareholder profits, and corporate lobbyists are thus likely to advocate public policies that support those profits even if they run counter to U.S. national interests.

Practically all U.S. companies active in China are subject to such pressures to one degree or another, and how to address that predicament is another question altogether. But the size and dominance of American technology companies are part of the problem. As the U.S. technology sector becomes more concentrated and the few players in it become more dependent on the Chinese market for consumers and profits, these firms—and, by extension, the United States—become more vulnerable to pressure from Beijing.

Antimonopoly policies could help remedy this problem: in a fractured market with many players, the sheer number of firms would all but guarantee that some would build supply chains that circumvented China, or build their products wholly in the United States, or simply choose not to engage in the Chinese market—whether because of idiosyncratic preferences, competitive dynamics, product differentiation, higher costs, or other factors.

Consider another industry whose structure resembles that of Big Tech: Hollywood. Like the technology industry, today’s entertainment sector consists of a handful of studios that are increasingly dominant at the box office and able to pressure theaters to give their content preferential treatment. If these big, integrated companies comply with Chinese censors out of a concern for market access, then U.S. consumers will not see content that offends the Chinese government.

By contrast, in a system with a large number of small studios and competitive distribution channels, many companies would lack the size, scope, or desire to cater to the Chinese market, let alone be dependent on it. Nor would they have the power or scale to lock out new competitors through vertical integration. The result would be a market in which Americans had a range of content choices, including entertainment that might not accord with the views of foreign censors.

Of course, in theory, it is possible that a small number of big U.S. technology firms, each with monopoly-like power, might be so profitable as to have no need for the Chinese market, whereas small companies with razor-thin profit margins might depend more on that market for consumers and profits. But this hypothesis has not been borne out. The current technology sector is already highly concentrated, and yet today’s technology companies are not forsaking the Chinese market; instead, they are desperate to expand their business there.

As they do so, they will likely be subject to the same pressures bearing down on Hollywood, the NBA, Mercedes, and other entities that want to operate in China. Companies such as Amazon and Google, which both produce their own content and distribute it through their platforms, may over time be tempted to make that content palatable to Chinese censors. And because those firms have immense market power within the United States, American consumers will be left with no serious, scalable alternatives.

A more competitive technology sector, with many smaller players, would also mitigate the ill effects of lobbying, for much the same reasons. Fewer companies would be dependent on the Chinese market, and those that were would be differentiated enough to often end up on different sides of policy debates. Their lobbying efforts would be less likely to cut in a single direction and thus less likely to capture government.

Big Tech’s market dominance, some will argue, has benefits: free of constant worries about vicious competition, technology giants can focus on the big questions. They have the time and resources to invest copiously in cutting-edge research, where success is rare but the potential payoff—for technological innovation and thus for U.S. competitiveness and national security—is massive.

Whether or not they say it explicitly, those who want to protect Big Tech from antitrust laws and other regulations are advocating a “national champions” model—a system in which the state shields a few select big companies from competition, allowing them to spend on research and development. But there is strong evidence that this approach is imperfect, at times even counterproductive. As the legal scholar Tim Wu has noted, it is usually competition, not consolidation, that fosters innovation. Competitors have to find ways to differentiate themselves in order to survive and expand. Large, protected firms become lethargic, are slow to innovate, and rest on their laurels.

Recall the race for supremacy in the electronics industry that played out between the United States and Japan in the 1980s. Japan, according to Wu, chose to protect its national champions, giving direct government support to such powerhouses as NEC, Panasonic, and Toshiba. The United States took the opposite tack. Its largest electronics firm at the time, IBM, came under antitrust scrutiny by U.S. authorities, and the ensuing decade-long legal battle discouraged the company from engaging in conduct that might run afoul of antitrust laws. That created the space for a variety of other hardware and software companies, among them Apple, Lotus, and Microsoft, to flourish. Competition led to innovation and the creation of some of the most forward-looking companies of the era.

National champions also have an incentive to hide breakthroughs that might undermine their market power. Bell Labs, one of the pillars of AT&T’s telecommunications empire, has long been celebrated for its role as an “ideas factory.” But Bell Labs and AT&T also suppressed innovations that threatened their business model. Starting in the 1930s, for example, AT&T’s management sat on recording inventions that could have been used for answering machines, for fear this innovation might jeopardize the use of the telephone.

Skeptics might argue that this time is different—that today’s next-generation technologies are so resource-intensive that smaller companies in a competitive environment couldn’t afford the necessary investments. But even if broken up and regulated, Big Tech’s main players would have considerable money left to spend on AI, robotics, quantum computing, and other next-generation technologies. Facebook would still have billions of users without Instagram and WhatsApp. Amazon’s platform would still have enormous market power in online sales even if it wasn’t allowed to produce its own products.

Whatever resource constraints did arise could be offset by greater public investment in R & D. As the economist Mariana Mazzucato has argued, such government spending has historically been a significant driver of innovation; the Internet, for example, began as a U.S. Defense Department network. There is no reason the government could not play the same role today.

Unlike research by national-champion firms, research funded by public investment would not be tied to the profit motive. It could therefore cover a wider range of subjects, extend to basic research that does not have immediate or foreseeable commercial applications, and include research that might challenge the incumbency and business models of existing companies. Public research could also de-emphasize areas of inquiry that may be profitable but are socially undesirable. For many of the biggest technology companies, surveillance, personalized targeting, and the eliciting of particular behavioral responses lie at the heart of their business models, which means that their efforts to innovate are geared in no trivial way toward improving those tactics. An authoritarian country may see those as valuable public goals, but it is not at all clear why a free and democratic society should.

Public investment in R & D also has the potential to spread the benefits of technology, innovation, and industry throughout the United States. At present, much of the country’s technological and innovative prowess is concentrated in a few hubs—the most prominent being Northern California, Seattle, and Boston. This is not surprising, as unlike the government, technology companies have no reason to want to spread development evenly. Amazon’s competition to decide the location of its second headquarters is a good example. After inviting countless pitches from cities across the country and much public attention, the company settled on New York and Washington, D.C.—two cities that hardly need an economic boost. Public investment, as the economists Jonathan Gruber and Simon Johnson have argued, could remedy these geographic imbalances and spur successful economies in dozens of midsize cities all over the country, with spillover benefits for their regions.

Mountains of data are needed to improve AI’s precision and accuracy, and some might think that only Big Tech can collect and handle data in such vast quantities. But this need not be the case, either. The United States could create a public data commons with data collected from a variety of government sources (and regulate it with strict rules about personal privacy), for use by businesses, local governments, and nonprofits to train machines. Any new data would be fed back into the data commons, allowing the quality and quantity of the information to improve over time.

Alternatively, the government could require technology companies to make their data available in interoperable formats. If those companies effectively have monopoly power over data, then they could be regulated as monopolies—with public access to the data sets as a condition for their continued protection as monopolies. No legal obstacles stand in the way of these options, and both would enable innovation and expand the number of players working on important technological developments.

For the moment, such public initiatives exist only as proposals. Big technology companies have considerable market power, and the U.S. government increasingly relies on their services, including to run its national security apparatus. Technology is, of course, a crucial aspect of warfare, and firms such as Amazon and Microsoft have contracts to provide cloud services to U.S. defense and intelligence agencies. These technology companies are fast becoming part of the United States’ defense industrial base—the collection of industries that are indispensable for U.S. military equipment. As they do so, the curse of monopoly capitalism that already affects the country’s overconsolidated defense sector—causing higher costs, lower quality, reduced innovation, and even corruption and fraud—will likely grow worse.

To see the challenge ahead, consider the present state of the U.S. weapons industry, which is already remarkably uncompetitive. In 2019, the Government Accountability Office found that 67 percent of 183 contracts for major weapons systems did not have a competitive bidding process. Almost half the contracts went to one of five companies—a stunning testament to the dominance of a handful of firms. And in 2018, the Defense Department released a report on the military’s supply chain that listed numerous items for which only one or two domestic companies (and in some cases none) produced the essential goods. Perhaps most striking of all, the report found that the United States no longer had the capacity to build submarines on a rapid timetable because of single suppliers and declining competition.

Unsurprisingly, as Frank Kendall, a former head of acquisitions at the Pentagon, has pointed out, large defense contractors “are not hesitant to use this power for corporate advantage.” In a recent article in The American Conservative, the researchers Matt Stoller and Lucas Kunce argue that contractors with de facto monopoly at the heart of their business models threaten national security. They write that one such contractor, TransDigm Group, buys up companies that supply the government with rare but essential airplane parts and then hikes up the prices, effectively holding the government “hostage.”

They also point to L3 Technologies, a defense contractor with ambitions, in the words of its one-time CEO, to become “the Home Depot of the defense industry.” According to Stoller and Kunce, L3’s de facto monopoly over certain products means that it continues to receive lucrative government contracts even after it admitted in the settlement of a 2015 civil fraud lawsuit that it had knowingly supplied defective weapons sights to U.S. forces.

As technology becomes more integral to the future of U.S. national security, Big Tech’s market power will likely lead to much the same problems. Technology behemoths will amass defense contracts, and the Pentagon will be locked into a state of dependence, just as it is currently with large defense contractors. Instead of healthy innovation, the government will have created what Michael Chertoff, a former homeland security secretary, has called a “technological monoculture,” which is unwieldy and vulnerable to outside attack. The cost to taxpayers will increase, whether due to higher prices or fraud and corruption, and much of their money—funding that could have been available for innovation—will become monopoly profits for technology executives and shareholders.

That technology companies do not want to be broken up is unsurprising. They are profitable, growing, and powerful. Nor is it a mystery why they try to play the trump card of invoking national security in their defense. But even from the viewpoint of national security, the case for shielding Big Tech from competition is weak. Technology companies are not competing with China so much as integrating with it, at significant risk to U.S. interests. In the United States, competition and public investment in R & D, not today’s consolidated technology sector, will provide the best path forward to innovation.

Policymakers should embrace proposals to break up and regulate big technology companies: to unwind mergers and acquisitions such as Facebook’s decision to buy the social networking and messaging services Instagram and WhatsApp. They should require technology platforms such as Amazon to separate from businesses that operate on their platforms. They should apply nondiscrimination principles drawn from public utilities and common carrier laws to digital platforms. And they should adopt stringent privacy regulations.

In this era of great-power competition, the best way to remain competitive and innovative is through market competition, smart regulations, and public spending on R & D. Breaking up Big Tech won’t threaten national security; it will bolster it.

Source: Breaking Up Big Tech Would Be Good for U.S. National Security

Listen to Hundreds of Free Audiobooks, From Classics to Educational Texts | Smithsonian Magazine

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With classrooms closed due to COVID-19, millions of students across the United States are venturing into the realm of distance learning. To support these efforts, Amazon’s audiobook service, Audible, has launched an online collection of hundreds of free audiobooks primed for both education and entertainment.

The website doesn’t require a log-in, sign-up or payment information. To peruse Audible’s selection of novels, poetry and fables—from classics to modern favorites—simply click “Start Listening.”

Source: Listen to Hundreds of Free Audiobooks, From Classics to Educational Texts | Smart News | Smithsonian Magazine

How Epidemics of the Past Changed the Way Americans Lived | Smithsonian Magazine

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In the 19th century, city streets in the U.S. overflowed with filth.

People tossed their discarded newspapers, food scraps, and other trash out their windows onto the streets below. The plentiful horses pulling streetcars and delivery carts contributed to the squalor, as each one dropped over a quart of urine and pounds of manure every day. When a horse died, it became a different kind of hazard.

In “Portrait of an Unhealthy City,” Columbia University professor David Rosner writes that since horses are so heavy, when one died in New York City, “its carcass would be left to rot until it had disintegrated enough for someone to pick up the pieces. Children would play with dead horses lying on the streets.”

More than 15,000 horse carcasses were collected and removed from New York streets in 1880. Human waste was a problem, too. Many people emptied chamber pots out their windows. Those in tenement housing did not have their own facilities, but had 25 to 30 people sharing a single outhouse. These privies frequently overflowed until workers known as “night soil men” arrived to haul away the dripping barrels of feces, only to dump them into the nearby harbor.

As civic and health leaders began to understand that the frequent outbreaks of tuberculosis, typhoid and cholera that ravaged their cities were connected to the garbage, cities began setting up organized systems for disposing of human urine and feces. Improvements in technology helped the process along.

Officials began introducing sand filtration and chlorination systems to clean up municipal water supplies. Indoor toilets were slow to catch on, due to cost, issues with controlling the stench, and the need for a plumbing system.

Source: How Epidemics of the Past Changed the Way Americans Lived | History | Smithsonian Magazine

State policies to promote shared prosperity in cities

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Across the United States, courageous leaders at the local level are responding with creativity and resolve to promote more inclusive growth, but they face a challenging combination of disruptive forces (Poethig et al. 2018). For example, the adoption of digital technologies and automation in the workplace is reshaping established industries, and workers hoping to access quality jobs require very different skillsets than in the past (Muro et al. 2017).

There are also profound demographic changes underlying these economic trends, yet there remain biases in many public policies that make it difficult for young and diverse populations to find economic success (Frey 2018).

Source: State policies to promote shared prosperity in cities

The Coronavirus Exposed America’s Authoritarian Turn

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The U.S. government’s response to the novel coronavirus pandemic has been confusing, inconsistent, and counterproductive. Since February, the data from China, South Korea, and Italy have clearly shown that the virus spreads rapidly in areas that do not practice social distancing—and that simple measures to keep people apart can significantly slow the rate of new infections. But the administration of U.S. President Donald Trump did not coordinate any social distancing. And even as acute cases overwhelmed Italy’s hospitals, the administration made few efforts to shore up the U.S. health-care system, increase the number of ventilators in hospitals, or make testing widely available.

Many blame these failures on the president, who initially downplayed the severity of the crisis. As recently as March 4, Trump insisted that COVID-19, the disease caused by the new coronavirus, was no worse than the flu. A week later, he claimed that the U.S. health-care system was well prepared for the outbreak. For encouraging the nation to sleepwalk into a crisis, Trump does indeed deserve blame. But even more blameworthy has been the president’s assault on U.S. institutions, which began long before the novel coronavirus appeared and will be felt long after it is gone.

By relentlessly attacking the norms of professionalism, independence, and technocratic expertise, and prioritizing political loyalty above all else, Trump has weakened the federal bureaucracy to such an extent that it is now beginning to resemble a “Paper Leviathan,” the term the political economist James Robinson and I use to describe autocratic states that offer little room for democratic input or criticism of government—and exhibit paper-thin policymaking competence as a result. Bureaucrats in these countries get accustomed to praising, agreeing with, and taking orders from the top rather than using their expertise to solve problems. The more American bureaucrats come to resemble autocratic yes men, the less society will trust them and the less effective they will be in moments of crisis like this one.

In just a little more than three years in office, Trump has upended many of the political norms that previously made the U.S. political system function—including the expectations that the president would not tell outright lies; would not interfere in court cases; would not obstruct law enforcement investigations; would not condone, let alone encourage, mob violence; would not materially benefit—or allow his family to benefit—from executive power and privilege; and would not discriminate against citizens on the basis of their race, ethnicity, or religion.

In eviscerating these norms, Trump has accelerated the polarization of U.S. politics—a corrosive trend that predated him but that has intensified on his watch. The costs of polarization are evident not only in the acrimony of political discourse but in the inability of politicians to compromise to solve basic problems such as lack of health care for millions, the precarious situation of the undocumented, and decaying public infrastructure—or even to prevent the government from periodically shutting down.

Trump’s tenure has been even more calamitous for one of the most important institutional pillars that for the last two centuries has constrained executive power: the civil service. To be sure, by granting the president sweeping powers to make senior appointments, U.S. political institutions don’t make it easy for nonpartisan professionalism to take root in the executive agencies. But even under administrations with very different priorities and policy agendas, most departments have managed to function effectively and pursue sound policies in fields as diverse as education, environment, commerce, aeronautics, space, and, of course, disease control.

By upholding nonpartisan rules and procedures and relying on technocratic expertise, professional bureaucrats who serve under political appointees function as a kind of guardrail for administrations, preventing their more extreme or nakedly partisan policies from being implemented. A professional civil service has also been the last, most powerful defense against natural disasters and health emergencies.

The Trump administration not only has failed to maintain the critical health infrastructure that protects the nation from contagious diseases—for example, he disbanded the pandemic preparedness unit that was part of the National Security Council until 2018—but has actively weakened the civil service. The president’s hostility to impartial expertise has forced many of the most capable and experienced federal employees to quit, only to be replaced by Trump loyalists. His persistent attacks against those who contradict his untruths or point out problems with his administration’s policies have created an atmosphere of fear that impedes bureaucrats from speaking up.

This reticence partly explains the slow, muted, and ineffective initial response to the coronavirus outbreak from federal health agencies such as the Centers for Disease Control and Prevention. The president has shown that he is willing to publicly assail individual civil servants who anger him, as he did Lieutenant Colonel Alexander Vindman, the former National Security Council staffer who testified in the impeachment investigation, and so the incentive to hew to his narrative—or at least not to contradict it publicly—is overwhelming.

Some officials, such as Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, have sounded the alarm anyway. But even Fauci has admitted that “you don’t want to go to war with a president. . . . But you got to walk the fine balance of making sure you continue to tell the truth.”

Some officials, such as Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, have sounded the alarm anyway. But even Fauci has admitted that “you don’t want to go to war with a president. . . . But you got to walk the fine balance of making sure you continue to tell the truth.

It is not too late to reverse the damage that Trump has done to U.S. institutions and to the federal bureaucracy. A first step toward doing so would be to give up the dangerous myth that the Constitution, designed masterfully by the Founding Fathers, can protect U.S. democracy even from a narcissistic, unpredictable, polarizing, and authoritarian president. James Madison proclaimed in Federalist No. 57 that “the aim of every political constitution is, or ought to be, first to obtain for rulers men who possess most wisdom to discern, and most virtue to pursue, the common good of the society; and in the next place, to take the most effectual precautions for keeping them virtuous whilst they continue to hold their public trust.” The U.S. Constitution has utterly failed on the first count. Why, then, should anyone trust it to succeed on the second?

No amount of constitutional checks or balances can rein in this president or another like him. The separation of powers hasn’t restrained Trump. To the extent that he has been contained, this has been thanks to the media, civil society, and the electorate. True, the House of Representatives has stood against many of Trump’s worst policies, going so far as to impeach him, but voters were the ones who forced the House to act by making their preferences clear in the midterms. Likewise, when the judiciary has acted—for example by staying Trump’s travel ban targeting majority-Muslim nations—it has often done so because of lawsuits and actions brought by organizations such as the American Civil Liberties Union.

With the Constitution failing to restrain the president, and the civil service under attack by him, it will take societal involvement in politics as well as leadership from state and local governments and private corporations to revitalize U.S. institutions. It won’t be enough to elect a new president in November 2020. The hard work must involve civil society and private enterprises working together with the state to tackle major institutional and economic problems.

With the administration and the federal bureaucracy failing to step up, civil society, the media, and experts outside of government must put additional pressure on the administration while at the same time picking up some of the slack themselves. It is a tall order, but Taiwan offers a model of how society can help develop solutions that complement government efforts to slow the spread of the virus and limit the death toll. The United States will have to do even more to strengthen its failing health-care system and, in the process, rebuild trust in state institutions.

Source: The Coronavirus Exposed America’s Authoritarian Turn

Middle class marriage is declining, and likely deepening inequality

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Over the last few decades, family formation patterns have altered significantly in the U.S., with long-run rises in non-marital births, cohabitation, and single parenthood – although in recent years many of these trends have leveled out.

Importantly, there are increasing class gaps here. Marriage rates have diverged by education level (a good proxy for both social class and permanent income). People with at least a BA are now more likely to get married and stay married compared to those with lower educational attainment. Back in the 1960s, marriage and divorce rates among these groups were nearly identical.

As our colleague Isabel Sawhill has written, “family formation is a new fault line in the American class structure.”

Source: Middle class marriage is declining, and likely deepening inequality

Why Current Saudi-Russia Oil Price War Is Not Déjà Vu | Council on Foreign Relations

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It’s happened several times before: geopolitical tensions between Saudi Arabia and Russia have led to a dramatic drop in oil prices in years past.

But the breakdown in Saudi-Russian cooperation in oil markets over the weekend is strikingly different this time. That’s because the backdrop of the COVID-19 crisis could significantly influence outcomes.

That two major producers would differ on oil strategy has been a frequent occurrence in the geopolitics of oil. As I have chronicled in my book with Rice econometrician Mahmoud El-Gamal, petro-states have been struggling to manage the up and down cycle of oil prices for decades, with a host of negative outcomes including wars, terrorism, financial meltdowns, and social repression.

But the current conflict comes amid strikingly new circumstances. First and foremost, COVID-19 is rapidly destroying demand for oil. Secondly, the oil demand shock comes amid long run signals that some of the world’s oil reserves will need to remain unexploited.

Source: Why Current Saudi-Russia Oil Price War Is Not Déjà Vu | Council on Foreign Relations

Russia’s Deep State Holds the Key to Succession

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Who will rule Russia when Vladimir Putin is gone?

The Russian president recently reignited speculation about his succession plans by proposing a series of constitutional changes, on which parliament will vote next week, and by installing Mikhail Mishustin, a near-anonymous technocrat who for years headed the country’s tax service, as his new prime minister.

Some experts predict Putin will step down before his fourth and final term ends in 2024; others insist he aims to create a new position enabling him to evade term limits and rule indefinitely. Everyone wonders whether Mishustin is the cipher he seems or a successor in waiting. Nobody, to say the very least, has any idea.

One reason so much analysis of Russia’s future reveals so little is that journalists, businesspeople, diplomats, and scholars—myself included—have too often asked the wrong questions. We focus too much on Putin himself, on his personality, his wealth, his approval ratings, his secret schemes. And we pay too little attention to the institutions that today define the Russian state. Putin’s single biggest achievement in two decades in power—his true legacy—has been to reempower the state bureaucracy.

He has paid salaries on time, increased budgets, let the government control a larger share of the national economy, and looked the other way as officials abused their power. No part of this bureaucratic apparatus matters more than the national security establishment—the vast, hydra-headed complex of military, intelligence, and law enforcement ministries.

These institutions may well determine not only who becomes the next president of Russia but what Russian politics will look like after Putin.

For decades before the communist order collapsed, Soviet officials assured Americans that the military, intelligence, and law enforcement bureaucracies deferred fully to the “civilian” authority of the Communist Party. It may even have been true. But now that a former KGB officer and head of state security has run the country for more than 20 years, that picture of how the system works badly needs updating.

Consider what would happen if Putin dropped dead tomorrow. The succession process would at first probably follow the constitution, which says that the prime minister—Mishustin, in this case—becomes the acting president. Within 90 days, an election would be held for a new president, to serve a full six-year term.

But that is not all that would happen. Soon after taking over as acting president, Mishustin would be on the phone to some of the people whose help he would need to win the election. Among them would be the heads of what Russians call the “power ministries”—the Interior Ministry, the Defense Ministry, the recently formed National Guard, and the intelligence and security services. (Mishustin tacitly acknowledged the importance of these institutions in one of his first actions as prime minister—doubling the pay of law enforcement personnel who deal with public disturbances.)

Russia’s power ministries have come to form a kind of “deep state”—in the same sense that Turks, Egyptians, and Pakistanis intend when they use that phrase to capture the outsize role that men in uniform play in their countries. Russians rarely speak of the deep state, but they talk all the time about the siloviki, a term some Western experts translate as “guys with guns.” It refers to a network of institutions whose leaders see themselves as responsible for assuring political continuity and social order (as well as their own privileged positions in that order).

The siloviki’s institutions operate with considerable autonomy alongside the democratic play-acting of Russian politics. During Putin’s long tenure, these institutions have claimed, both legitimately and corruptly, a growing share of national resources and wealth. And they are almost never overruled by “civilians.”

Grasping the role of Russia’s deep state has been made more difficult by competing conceptions of what Putinism is all about. We have been too impressed, for example, by its populist features. Putin is often lumped together with demagogic authoritarians such as Hungary’s Viktor Orban or Turkey’s Recep Tayyip Erdogan. Like them, he appeals to religious and cultural traditions and to national identity.

But in Russia, these themes are mostly decorative and have little impact on how the country is actually run. The comparison to Erdogan is particularly inapt. From the moment he was elected, Erdogan saw the secular-minded generals of the Turkish deep state as an unacceptable check on his autonomy. Through co-optation, confrontation, and even imprisonment, he has largely broken their power. Putin, by contrast, has brought the Russian deep state roaring back to life.

Putin has further misled us by claiming to have restored top-down management to Russian state institutions—what he calls the “vertical of power.” He wants credit for the sharp contrast between his management style and the bureaucratic disorder and dysfunction that preceded him. But whether or not full vertical control was ever his goal, it is far from certain that he has achieved it.

Empowering bureaucrats at all levels of the Russian state has ended up meaning the same thing it has meant for centuries—abundant opportunities to create self-dealing fiefdoms and ignore orders from above.

Even Putin occasionally acknowledges the limits of his authority. He spent much of his January State of the Union address—the same speech in which he outlined his plan for constitutional reform—complaining that government ministries had failed to spend enough of the funds he allocated for so-called national projects (big-ticket programs to deal with infrastructure, education, digital innovation, and more).

The result was a 2019 federal budget surplus of 1.9 percent of GDP—a mind-boggling amount that slowed last year’s economic growth and made Putin understandably angry. He had told the bureaucrats he wanted a big fiscal stimulus. For whatever reason, they didn’t give him one.

Putin doesn’t generally complain that the siloviki defy him, of course. That would be embarrassing. But we should wonder about the reach of his power—and what it says about the system his successor will attempt to master. Take the dramatic 2015 murder of the well-known opposition leader Boris Nemtsov on a bridge just outside the Kremlin. Chechen thugs were convicted of the crime, but few, in Russia or beyond, believed they were the real masterminds. At no level of Russian law enforcement was there an appetite to go after those who were ultimately responsible.

Was that, as some Western commentators charged, because Putin himself ordered the hit? Perhaps. But it is more likely that the cover-up reflected the uneasy—and far from secret—mutual accommodation between the Moscow police and various criminal organizations, Chechen mafiosi among them. Russia’s police have a complicated and profitable relationship with organized crime, and they don’t want others—not even Putin—butting in.

Once the conflicting interests that animate different parts of Russia’s military, intelligence, and law enforcement complex become clear, many Kremlin actions and choices that have been treated as Putin’s own need to be reexamined. In some cases, the president will be fully involved and in control. In others, he may choose a broad direction but let others handle the follow-through. In still other cases, he may know little of deep state doings until they blow up in the headlines.

The enormous size and divergent interests of the power ministries enable Russian officials at all levels to pursue their private agendas. Putin, moreover, has shown that he always stands behind his people. They don’t have to worry about getting into trouble just because they don’t get his approval in advance. Whether they are using exotic poisons, stealing emails, or assassinating politicians outside his office, the siloviki know Putin has their back. They will want the same of whoever succeeds him.

This system—solidly in place after two decades of Putin—could make the coming transfer of power turbulent. Unlike the Turkish, Egyptian, or Pakistani version of the deep state, Russia’s version is too divided to have a single leader or spokesman, much less to install its own man in the Kremlin.

Russia’s military, intelligence, and law enforcement complex has no senior officer. Yet its pluralism also makes it hard to subdue. Especially under a new president—likely to be weaker than Putin—many different institutions will be able to defend both their turf and the policy control that makes that turf so valuable.

Competition among elements of the deep state could, in an extreme case, turn violent. But even if the struggle stays peaceful, the price Russia’s next leader will have to pay for the siloviki’s support could be steep. The power ministries may want expanded autonomy, bigger budgets, perhaps even a greater say on issues beyond their existing domains. Mishustin surely knows that his pay increase for riot police won’t be the last inducement he offers the power ministries.

There is a warning in all of this for whoever becomes Russia’s next president. Taking on the deep state will be difficult, but failing to do so will mean accepting strict limits on presidential authority. In dealing with this dilemma, Putin’s successor will have several broad options. He could accept, at least at first, what the power ministries ask of him. He could try to play different institutions against each other in an effort to carve out more autonomy for himself.

Or he could pursue some version of the bargain Putin proposed to Russia’s leading oligarchs soon after he became president in 2000: I’ll let you run your businesses, you let me run the country.

A final option would be to challenge the deep state and try to cut it down to size. This approach would be the boldest, the riskiest, and probably the most tumultuous. But it can’t be ruled out.

Although deep states last a long time, they are not eternal. Periodically, they fall prey to domestic power struggles, losing their legitimacy, sense of purpose, and autonomy.

Source: Russia’s Deep State Holds the Key to Succession

A Review of “The Economists’ Hour” by Binyamin Appelbaum and “Transaction Man” by Nicholas Lemann

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Over the past 60 years, the United States has run what amounts to a natural experiment designed to answer a simple question: What happens when a government starts conducting its business in the foreign language of economists? After 1960, anyone who wanted to discuss almost any aspect of U.S. public policy—from how to make cars safer to whether to abolish the draft, from how to support the housing market to whether to regulate the financial sector—had to speak economics. Economists, the thinking went, promised expertise and fact-based analysis. They would bring scientific precision and rigor to government interventions.

For a while, this approach seemed a sure bet for steady progress. But several decades on, the picture is less encouraging. Consider, for example, the most basic quantitative indicator of well-being: the average length of a life. For much of the last century, life expectancy in the United States increased roughly in tandem with that in western Europe. But over the last four decades, the United States has been falling further and further behind.

A society is hardly making progress when its people are dying younger.

Binyamin Appelbaum makes this point in his new book, The Economists’ Hour. That book and another recent one—Transaction Man, by Nicholas Lemann—converge on the conclusion that the economists at the helm are doing more harm than good.

Both books are compelling and well reported, and both were written by journalists—outsiders who bring historical perspective to the changing role of economists in American society. Appelbaum tracks their influence across a wide range of policy questions since the 1960s. The language and the concepts of economics helped shape debates about unemployment and taxation, as one would expect. But they also influenced how the state handled military conscription, how it regulated airplane and railway travel, and how its courts interpreted laws limiting corporate power. Together, Appelbaum writes, economists’ countless interventions in U.S. public policy have amounted to no less than a “revolution”—well intentioned but with unanticipated consequences that were far from benign.

Lemann chronicles another, related revolution. In the first half of the twentieth century, especially after the calamity of the Great Depression, the conventional wisdom held that the power of corporations must be held in check by other comparably sized organizations—churches, unions, and, above all, a strong national government. But in the decades that followed, a new generation of economists argued that tweaks to how companies operated—more hostile takeovers, more reliance on corporate debt, bigger bonuses for executives when stock prices increased—would enable the market to regulate itself, obviating the need for stringent government oversight.

Their suggestions soon became reality, especially in a newly deregulated financial sector, where they precipitated the emergence of junk bonds and other questionable innovations. Like Appelbaum, Lemann concludes that economists’ uncritical embrace of the market changed U.S. society for the worse.

Unfortunately, asking economists to set a value for human life obscured the fundamental distinction between the two questions that feed into every policy decision. One is empirical: What will happen if the government adopts this policy? The other is normative: Should the government adopt it?

Economists can use evidence and logic to answer the first question. But there is no factual or logical argument that can answer the second one. In truth, the answer lies in beliefs about right and wrong, which differ from one individual to the next and evolve over time, much like people’s political views.

Lacking clear guidance from voters, legislators, regulators, and judges turned to economists, who resolved the uncertainty by claiming to have found an empirical answer to the normative question at hand. In effect, by taking on the responsibility to determine for everyone the amount that society should spend to save a life, economists had agreed to play the role of the philosopher-king.

Unfortunately, this outcome may have been possible only because, although the moral stakes were high, the financial stakes were not. No firm faced billions of dollars in gains or losses depending on whether the government mandated Mansfield bars. As a result, none had an incentive to use its massive financial resources to corrupt the regulatory process and bias its decisions, and the “don’t ask, don’t tell” system of using economists as philosopher-kings worked reasonably well.

The trouble arose when the stakes were higher—when the potential gains or losses extended into the tens of billions or hundreds of billions of dollars, as they do in decisions about regulating the financial sector, preventing dominant firms from stifling competition, or stopping a pharmaceutical firm from getting people addicted to painkillers.

In such circumstances, it is all too easy for a firm that has a lot riding on the outcome to arrange for a pliant pretend economist to assume the role of the philosopher-king—someone willing to protect the firm’s reckless behavior from government interference and to do so with a veneer of objectivity and scientific expertise.

Simply put, a system that delegates to economists the responsibility for answering normative questions may yield many reasonable decisions when the stakes are low, but it will fail and cause enormous damage when powerful industries are brought into the mix. And it takes only a few huge failures to offset whatever positive difference smaller, successful interventions have made.

Perhaps no one has captured the mindset that made possible such a massive regulatory failure—the mindset that economists really are philosopher-kings, who can instruct the public on right and wrong—better than Alan Greenspan, who was chair of the Federal Reserve at the time when Washington was easing regulations on many sectors. “Unfettered markets create a degree of wealth that fosters a more civilized existence,” Greenspan told a group of business economists in 2002. “I have always found that insight compelling.”

Corporate shareholders saw their earnings skyrocket, but the main effect of the changes was to empower the financial sector, which Greenspan, for his part, worked doggedly to unfetter. As Lemann writes, Jensen’s ideas also helped chip away at the power of the traditional Corporate Man—the sort of executive whose pursuit of profit was tempered somewhat by a commitment to noneconomic norms, among them a belief in the need to foster trust and build long-term relationships across company lines. Taking his place was Transaction Man, who focused on little more than driving up share prices by any means necessary.

Deregulation, coupled with the new ethos of Transaction Man, invited immensely destructive behavior.

Neighborhood activists tried to stop the destruction of human capital caused by debt that overwhelmed the tenuous lives of the working poor, the destruction of physical capital caused by thieves who stripped water heaters and copper pipe from abandoned houses, and the destruction of social capital caused by abandoned houses that turned into crime hot spots.

After more than a decade of damage to their neighborhood, the citizens of Chicago Lawn watched as the officials who would not even look into that damage saved the banks that had caused it. No amount of econosplaining could change the message this conveyed: everybody has to accept what the market gives them—except the people who work in the financial sector. Today’s record-low unemployment rate shows that ten years on, the most direct harm from the financial crisis has healed.

But deeper wounds remain. Wage growth for workers has been slow, and the crisis caused a massive and long-lasting reduction in incomes across the world—and perhaps an even longer-lasting populist backlash against the political institutions of many countries.

In their attempt to answer normative questions that the science of economics could not address, economists opened the door to economic ideologues who lacked any commitment to scientific integrity. Among these pretend economists, the ones who prized supposed freedom (especially freedom from regulation) over all other concerns proved most useful—not to society at large but to companies that wanted the leeway to generate a profit even if they did pervasive harm in the process. When the stakes were high, firms sought out these ideologues to act as their representatives and further their agenda.

And just like their more reputable peers, these pretend economists used the unfamiliar language of economics to obscure the moral judgments that undergirded their advice.

Throughout his entire career, Greenspan worked to give financial institutions more leeway and in doing so helped create the conditions that led to the financial crisis. He did so in the name of economics—indeed, in the public consciousness, he came to personify the field. But his opposition to regulation was invulnerable to evidence.

Until he took control at the Fed, he was a hired gun, ready to defend firms in the financial sector from regulators who tried to protect the public. In this role, he reportedly said that he had “never seen a constructive regulation yet.” If economists continue to let people like him define their discipline, the public will send them back to the basement, and for good reason.

The alternative is to make honesty and humility prerequisites for membership in the community of economists. The easy part is to challenge the pretenders.

The hard part is to say no when government officials look to economists for an answer to a normative question. Scientific authority never conveys moral authority. No economist has a privileged insight into questions of right and wrong, and none deserves a special say in fundamental decisions about how society should operate.

Economists who argue otherwise and exert undue influence in public debates about right and wrong should be exposed for what they are: frauds.

Source: A Review of “The Economists’ Hour” by Binyamin Appelbaum and “Transaction Man” by Nicholas Lemann

If you believe in nihilism, do you believe in anything? | Aeon Essays

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Nihilism is a constant threat. As the 20th-century philosopher Hannah Arendt recognized, it is best understood not as a set of ‘dangerous thoughts’, but as a risk inherent in the very act of thinking.

If we reflect on any specific idea long enough, no matter how strong it seems at first, or how widely accepted, we’ll start to doubt its truth. We might also begin to doubt whether those who accept the idea really know (or care) about whether or not the idea is true. This is one step away from thinking about why there is so little consensus about so many issues, and why everyone else seems to be so certain about what now appears to you so uncertain.

At this point, on the brink of nihilism, there’s a choice: either keep thinking and risk alienating yourself from society; or stop thinking and risk alienating yourself from reality.

Source: If you believe in nihilism, do you believe in anything? | Aeon Essays