Making healthy life easy (or not…)

There is a new disease stalking  the developed world.  Not ebola, or anti-biotic resistant tuberculosis, or MERS ( a new respiratory disease that emerged in Saudi Arabia).  They are bad enough.  This one is called NASH, and has an even more tongue-twisting actual name: non-alcoholic steatohepatitis.  Or in plain English, non-alcoholic fatty liver syndrome.

In NASH, the liver swells up from excess fat deposits, rather like the liver in a goose stuffed to develop into foie gras.  The result is virtually the same as alcohol-produced cirrhosis of the liver.  There is no cure, and in severe cases the only treatment is a liver transplant.

Thirty years ago, this condition was so rare in the United States it did not even have a name.  Now it is suspected to be occurring in 5 million Americans.  In 2001 cases of NASH were responsible for only 1 percent of liver transplants in the U.S.; by 2009 it had reached 10 percent, and by 2020 NASH is expected to be the leading reason for liver transplants.

Where did this epidemic come from?  Apparently, like smoking and drinking, we did it to ourselves.  NASH is linked to obesity and type-II diabetes, both of which stem from excessive intake of sugar and fats.  It is normally a progressive disease, striking people over 50, but in recent years  we have seen a sharp upsurge of NASH in children and adolescents, just like type-II diabetes.  Today the US performs about six to seven thousand liver transplants per year.  Yet if no treatment is found and current rates of  NASH continue, by 2025 — just ten years from now — the demand for transplants from people with failing livers could reach 5 million per year.

Now if 3D printers can print replacement livers for us by then, all may be fine.  But right now, it seems that millions would die for lack of available organs for transplant.

How did this happen?  Heroin is dangerous, so illegal.  Cigarettes and alcohol are dangerous, so they are illegal for teens and heavily taxed and regulated.  Sugar is just as deadly, when consumed in the quantities we now routinely make available in giant-sized sugary drinks at fast food restaurants, theaters, and convenience stores.

When I was a kid, we drank Coca-Cola in six ounce bottles, got our sugar rush, and that was it (we also turned in the bottle for a recycle fee if we could).  Today’s kids routinely drink 32 ounce sugary drinks.  At McDonald’s the “child-size” Coke is 12 oz., large is 32 ounces and “super-size”  is 42 ounces.  That is almost a half-gallon of soda, containing literally one-quarter pound of sugar! (113 grams)

I won’t go into fats here.  I know that a certain amount of sugar and fat is necessary and healthy, just like drinking wine in moderation is good for you.  But with almost any other substance sold in the marketplace that is dangerous when over-consumed, we regulate it, limit access for minors, and sharply limit marketing.  Yet with sugar, we have no limits!  We accept advertising, huge portions, and access for kids at every vending machine and cafeteria and corner store; when we make sugar consumption so attractive and so easy it’s no wonder we have problems linked to overconsumption.

Of course, just because we see a problem, have good scientific information on how to halt it, and care about children, doesn’t mean we will do a damn thing.  We saw that when Mayor Bloomburg tried to limit the sale  of super-large portions of sugary drinks in New York.

So very likely we will have another problem causing the unnecessary loss of millions of lives, children succumbing to a preventable maladies, and billions of dollars of health care costs added to our health insurance load — in short, another major public policy failure.

It may be impossible to stop hundreds of thousands of people from being killed in Syria and Iraq.  But we can easily stop millions of our own children and adults being killed right here at home — we just have to ban (or punitively tax) portions larger than 12 oz. for sugary drinks, limit the size and number of candy bars that children can purchase without an adult, and change the marketing of sugar-rich products to include health warnings.

But will we do it?  Or in ten years will we wring our hands over another challenge we faced and ignored?

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Two weeks, dismay and horror

I have spent the last two weeks attending three conferences and various lectures in Russia and the UK, on issues including Public Policy, International Security, and using history to forecast and explain events.

Sadly, it seems clear that neither public policy nor those who study international security have been doing a good job, or paying much attention, to using history to forecast and explain events.

Back in late January, about 3 weeks before the Maidan uprising in Ukraine, I wrote a draft paper that I sent to FOREIGN AFFAIRS (which they declined).  It was responding to an article they published in Jan/Feb  by Michael Mazaar.  Mazaar argued that the US had wasted a decade worrying about failed states, saying that fixing failed states is not the best way to fight terrorism and that we should stop worrying about them.

I argued that Mazaar had it all wrong — the purpose of trying to help strengthen failed states was not to stop terrorism, but to stop widespread regional crises that would produce collapsed governments and international conflicts.  I wrote:

“Ukraine’s decade since the Orange Revolution as an increasingly weak state rent by corruption and declining legitimacy has left it on the brink of civil war and a major source of tension between Europe and Russia. Unmanaged Shi’a-Sunni conflicts in Lebanon, Iraq, and Syria not only brought on civil wars; they continue to polarize the entire region into a confrontation between Sunni powers including Turkey and Saudi Arabia and an Iranian-led Shi’a axis that plays out through proxy wars and may lead to even greater conflicts.”

In the last few weeks, we have seen civil war in fact break out in Ukraine, which has caused the most serious Russian/NATO crisis since the end of the Cold War; and we are now seeing a collapse in Iraq that in conjunction with events in the failed state of Syria threatens to wreak havoc throughout the Middle East.  And in addition, we have seen a coup overturn the once-promising democracy in Thailand.  Regarding which I wrote, in a paper published in 2012, regarding the “Red shirt” protests:

“In the end, massive military violence ended the protests.  Yet that mode of response makes it unlikely that Thailand will emerge from authoritarian rule anytime soon.  The government has been discredited and relied on force rather than legitimacy to stay in power;  once that step is taken, governments are generally committed to that path.”

Sure enough, despite the hopeful election of Yingluck Shinawatra, once popular pressures for change arose, the military turned to force and staged a coup to depose the Shinawatra regime.

I don’t claim to be a soothsayer; I don’t have a crystal ball and expert predictions are notoriously weak in identifying rapid changes from the status quo.  But it takes no great prophetic powers, just a basic knowledge of history and revolutions, to realize that fragile states periodically collapse, creating regional and international disorder!  That is what “fragility” entails and why it is important to worry about it.

Yet policy-makers seem to have decided that, once the US extracted its troops from Iraq and almost from Afghanistan, that state fragility was no longer our problem.  So when states collapsed in Ukraine, Thailand, and now Iraq, we were wretchedly unprepared and “shocked, simply shocked” to see that we were reaping what we had sown.   Nigeria is also in the process of melting down in the north under assaults from Boko Haram that have exposed the inability of that state to protect its people.  That all of this happened just after we saw the wave of state breakdowns in the Arab Spring is just more reason to be dismayed — we should have been MORE alert to the risks of fragile and failing states, not less!

Still, ignoring the evidence is hardly unique to dealing with fragile states.  The  evidence is strong that immigration is helpful to countries — yet the US  and Europe and Japan refuse to embrace immigration, instead trying to roll up their borders (and people demand they do so, as shown by the defeat of Eric Cantor in the US and the rise of the UK Independence Party and other anti-immigration parties in Europe).  The evidence is overwhelming that the climate is changing in dangerous ways — yet people refuse to take any actions to ameliorate it.

I could add that action is needed on pensions to avoid debt explosions of the kind that felled Detroit and that will derail the state of Illinois and threaten other jurisdictions; that providing universal health care at reasonable costs is vital to keeping the US economy competitive; and that the U.S is becoming a sharply stratified society returning to gilded age levels of inequality but that could be stopped simply by going back to the same estate tax laws we had under Ronald Reagan.  Yet people prefer to turn away from these problems rather than solve them.

I should say that  one thing which was obvious is that I was the only person who was  at BOTH the policy and international security conferences AND the very academic conference on using history for forecasting and explanation.  I understand that; the latter conference had  papers on topics such as whether mathematical models of history can cope with important individual events, the collapse of Mayan civilization, the future of youth in Iranian politics, and other topics that seem to abstract or too far past or too much in the future to capture the interests of policy analysts or those studying current international relations.

Yet unless we do a better job bringing historical and theoretical knowledge of social dynamics to bear, we are not going to be prepared to deal with the dynamics of the world around us.

Sadly, that is where we are now, as we watch in dismay and horror at events unfolding in Iraq, Ukraine, Nigeria, Mali, the Central African Republic, Libya and will watch again in future collapses in other fragile states.

What did Santayana say?  That those who ignore the lessons of history are condemned to repeat it?





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And the winner is … !

In the United States, we think of elections as ending major conflicts and producing outcomes that everyone has to then accept and move forward.

Or rather, we used to think that way. Now, with the rise of the Tea Party and extreme polarization, we find that winning elections does NOT settle arguments. No matter that Obama was re-elected in 2012; Congressional Republicans still felt it was perfectly fine to try to overturn that victory in practice by attacking the President’s policies, blocking his appointments, and seeking to repeal his health care program. In other words, the Republican Party may have lost the race for President, with their candidate Mitt Romney being soundly defeated. But no matter — their zeal was undiminished, their determination to reject Obama’s policies only strengthened.

The United States used to be an exception in the world in the amount of faith we put into fair elections to settle outcomes. Now we have joined everyone else, for in much of the world we find that elections are not the conclusion of a political struggle; they are just one more thing over which to fight.

This week saw a large number of significant elections around the world. Field Marshall Sisi is running for President in Egypt, a position he is in because his military overturned the previously elected President, Mohammed Morsi. Narendra Modi, chief minister of Gujarat, was elected prime minister of India, with his Hindu nationalist BJP party winning national elections. Everyone in India is now waiting to see who they have elected: the hard-line Hindu nationalist who did little to help Muslim victims of hate crimes and who will polarize India, producing new conflicts, or the open-minded economic pragmatist who will help India resume rapid economic development? In Ukraine, a national election was held wherein anti-European forces prevented people from voting in two eastern provinces. Meanwhile Thailand sank deeper into a military coup that stepped into the power struggle between an popularly-elected government whose election was declared invalid and a conservative opposition who refuses to tolerate the outcome of recent elections.

Still, perhaps the strangest elections this week were those for the European Parliament. I tend to think that people believe the EU Parliament has so little real power that their votes are just symbolic, and won’t actually affect the conditions under which they live. This is wrong; but the results seem to me to be mainly a protest vote in which voters wanted to send a signal that they disliked the EU’s advocacy of austerity policies, of open immigration within the union, and expensive EU mechanisms that they do not understand. I do not believe European voters really want to give up the freedom to travel without restrictions within the EU, all the advantages of a unified free trade zone, and the environmental and safety legislation and the agricultural payments that the EU has provided for decades (and which voters now take for granted).

Otherwise, it is very hard to understand these results, with anti-EU parties winning the elections in several countries — elections to represent their countries in the very EU institutions they wish to dismantle. This is rather like having advocates of dog-fighting defeating all comers in elections for leadership of the SPCA (Society for the Prevention of Cruelty to Animals), or creationists winning elections for leadership of the National Science Foundation.

While election returns are still being counted, it appears that in France, the extreme right-wing National Front party has defeated both mainstream parties (Socialists and center-right UMP) for the first time since the NF was formed; in Britain the anti-EU United Kingdom Independence Party outpolled both Tories and Labour (the first time since 1910 that one of these parties did not win a nationwide election); in Italy the Five-Star party led by comedian Beppe Grillo will likely come a close second to the ruling Democratic Party; and in Denmark the euro-skeptic Danish People’s Party looks to emerge the winner.

Far-right parties, though not emerging victorious, still did better than previously even in Germany, whose policies toward immigrants are far more friendly and supportive than a decade ago. The new, anti-EU Alternative for Germany party won 7% of the vote, and even the neo-Nazi party won a seat in the EU Parliament for the first time ever. In Austria, the populist FPO party increased its support from 13% to 20%, and in Greece the extreme nationalist Golden Dawn Party won over 9%. Only in the Netherlands did a far-right party do worse than in the previous election, with Geert Wilders’ Freedom Party (PPV) getting only 13% of the vote.

Altogether, Euroskeptic parties will have the largest single bloc of delegates in the EU Parliament of any political grouping, with about 30% of the total. So this election surely looks to begin a struggle over the existence of the EU; it will be amazing to see how this plays out. Is this just a protest vote for what voters see as a meaningless body anyway (the EU Parliament?) Or is it really a portent of how they will vote in meaningful national elections, when these anti-EU and far-right parties will field candidates for leadership of their own nations? That may not be clear for several years, but the future of Europe hangs in the balance.

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Democracies fading? Thailand, Turkey, Ukraine…

People in America love Thai food. But beyond that, we don’t know much about Thailand as a country. It is a complicated place, caught between the conservative military and loyalists to the King, who have helped develop Bangkok into an international manufacturing and commercial center and Thailand into a prosperous exporter, and a new media-driven populist movement based in rural areas who are eager to share in Thailand’s economic growth, and get a larger share than they have gotten in the past.

Very roughly, this is the division between the “Yellow-shirts” (supporters of the first group) and the “red-shirts” (supporters of the second group). The critical support for the conservatives has come from the military; the critical leadership for the populists has come from the mobile phone tycoon Shinawatra family, Thaksin (Prime Minister 2001-2006) and his sister Yingluck (Prime Minister 2011-2014).

Thailand looked like another one of the promising, economically booming and democratic countries around the rim of East Asia (Japan, South Korea, Taiwan, Singapore, the Philippines, Indonesia). Then in 2006, the army staged a coup against Thaksin Shinawatra, replacing him with a conservative government and triggering massive protests by the red-shirt movement. The army cracked down hard in response, with gunfire in the streets. At the time, I wrote that this boded ill for democracy; once the military uses force to maintain power it is hard to go back to accepting popular legitimacy as the only route to power.

I was therefore happily surprised when the army allowed Thaksin’s sister Yingluck to run for office and take power after leading her brother’s party to a landslide victory. But it was not as simple as that. A few years into office, after trying to set the stage for her brother’s return, the conservatives struck back. The Constitutional court found grounds to dismiss Yingluck from the post of Prime Minister. Her party chose a caretaker government and called new elections; but due to a boycott by the opposition, the courts declared the new elections invalid. So the current government exists without a political mandate.

Naturally, the yellow-shirts want the current government to resign and have a conservative government appointed to rule in its place. They claim that until this happens, no fair election can be held, and have been protesting in the streets to demand this. The red-shirts have argued that their popularly-elected leader is being unfairly driven from office.

Yesterday, the army declared martial law in order to restore order. They claim this is NOT a coup. (Observers have called it a “Semi-coup.”) But what will happen to democracy? The Shinawatra’s party has the overwhelming support of the majority of Thailand’s people. But that support is very concentrated in the rural areas and Northern portions of the country. In the south and in Bangkok, the military and royalist parties have substantial support.   We thus have the spectacle of a country sharply divided between regions who support different leaders and different visions of their country.

This is a particularly difficult problem for a parliamentary country, where the chief executive represents only the ruling party, and the legislature is run by them as well.  It is hard to assure minorities their rights, or manage a compromise, in such conditions.  And it is doubly hard when the courts become politicized, dominated by the interests of one or the other party as well.

Turkey now finds itself in the same difficulty.  The AKP, led by Prime Minister Erdogan, has rock-solid support in the pious Anatolian heartland of the country, where the conservative business community has prospered and the Islamist population have supported them.  But in Istanbul and Ankara, and along the western coast, a more cosmopolitan population wants a more relaxed and secular regime, more attention to green issues and less tolerance of corruption.  The protests over Gezi Square park and other issues have polarized the country, making Erdogan more defiant and determined to have his way, and more disdainful and dismissive of those who disagree with him.  In recent months, he has packed the courts and media with his supporters, and wielding a solid parliamentary majority, there is little his opponents can do about it.  Democratic freedoms of protest and media criticism are being trampled; the independence of the courts has been sharply reduced, and anger at Erdogan’s disregard for the views of the population who do not support him is growing.  Yet Erdogan seems eager to pursue polarization.  At a recent visit to Soma, where a terrible mining disaster took the lives of over three hundred Turks, Erdogan’s staff kicked one protestor and Erdogan himself apparently slapped another.  Protestors wanted an apology from the government, as the opposition had requested a safety review of the formerly government-owned, recently privatized mine a month ago, but were rebuffed by Erdogan’s party.  They got nothing of the sort, just a statement that accidents like this are normal.

Erdogan is now setting the stage to run for the Presidency this year.  If he wins, it increasingly looks like it will be a one-man, one-party regime.

Ukraine is very clearly headed for the same difficulty — a country that is sharply divided across regions with different goals and visions of their country.  The west wants to be a European country and part of the European community.  The east distrusts Europe and wants to be closer to Russia, feeling that their cultural cousins and historical partners will in fact care more and do more for them than the distant Europeans against whom they fought in WWII.

How to manage such divided countries?  I have been rereading The Federalist Papers, and you have to marvel at the foresight and ingenuity of our founding fathers.  They anticipated that their country would expand over an ever-larger territory and risked being divided.  In fact, they knew from the need to manage the issue of slavery that they already had a divided country, with the plantation/agrarian/slaveholding south holding a different view of America’s future than the smallholder/commercial/manufacturing and free labor north.  So they put multiple protections into the government — a legislature with non-proportional representation (the Senate) that gave all states an equal vote regardless of size, and a complicated procedure for selecting a president and vice-president that pretty much ensured the President had to carry a majority of votes in a majority of the states, not just a simple majority of the total votes which might be heavily concentrated in one region.

The essence of democracy is compromise, not confrontation; giving everyone, including minorities, a sense that their interests are secure and will be represented, not trampled by the regime.  Madison argued that simple parliamentary regimes could lead to the tyranny of the majority, which a carefully designed republican form of government could prevent.

There is a clear lesson here for states like Thailand, Turkey, and Ukraine.  They need constitutions that assure all regions and views can be represented; that the  rights of all groups will always be  protected even if they are not in the majority; and that require numerous and broad compromises for laws to be enacted.  In recent years, it has become fashionable to bemoan the inefficiency and polarization of America’s divided government, calling it dysfunctional.  Yet we should recall that the ultimate function of America’s complicated political system is to preserve democracy for all.  In that it has succeeded, and the travails of countries such as Thailand, Turkey, and Ukraine show us why.

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A Great Country

I grew up in a great country. True, we only had one bathroom for a family of four; getting two cars for the family seemed like a dream come true, and travel for vacations was never much more than a 2 hour drive to Lake Tahoe (until age 18, my only travel outside of California was one trip to Hawai’i for a “once in a lifetime” vacation). I spent most of the very rainy winters playing pinochle and singing songs with my friends, summers in a day-camp in San Rafael hunting for scorpions, deer bones, and arrowheads or swimming in a lake and riding horses (and shoveling out the stalls afterwards!). From the age of 10, I spent many of my Saturdays working in our family business for a pittance; but if it was enough to buy a plastic model of a naval ship or a fighter plane to glue together in my spare time, I was happy to do it. The nearby Golden Gate Park and Sunset Beach were free, open, and well-maintained playgrounds, and the city was safe enough for a 14 year old to travel almost anywhere by public bus and streetcar. And oh yes, we could fill our time listening to the greatest new music ever – from Elvis and Johnny Cash to the Stones, Beatles, Beach Boys, Zepellin, Airplane, Simon & Garfunkel and so much more.

What made it especially great was our optimism about the future. Our country’s free public education system, starting in kindergarten, was the best in the world. If you could go to college and become a lawyer, doctor, engineer, accountant, or professor, you were assured a prosperous middle class life. And that college degree was available for free at some of the best universities in the world for anyone who qualified to enter. Business was another option, but didn’t seem all that glamorous: bankers had great hours but incomes not any greater than other successful professionals. Even becoming a high-school teacher seemed like an interesting, secure job that would provide a solid income to raise a family, and almost any white male with a 9-5 job got decent health care, and a paycheck that would cover a home, car, some vacations, and savings for the future. We knew things were getting better because since 1950, incomes of average folks had been going steadily upwards. And you could be almost certain of a decent pension when you retired. True, if you were black or a woman, your opportunities were still quite limited, and you had to fight enormously hard against prevailing social norms to get any kind of important position. For Latinos and Asians, things were not much better.

Today, I live in a very different country. Where I live today, if you are not a business executive or in investment banking, it’s almost impossible to have a top-tier income. I “made it” to become a successful research professor, with a greater income than I ever imagined when I was working for cents on the hour unpacking merchandise crates in the back room of my family business. Yet it is still often a struggle to live somewhere to obtain, or to pay for, a top-quality high school for my kids (overall, the 16-24 years olds in the country where I live now have the worst performance on technology and numeracy tests in any developed country in the world), to afford decent health care (women in my country now are twice as likely to die in pregnancy or childbirth as women in Canada, and infant mortality ranks 34th in the world), or even to manage the costs of keeping up a car, a house, and to save anything for times ahead. I’m not alone in that; most people in my country in their 50s and 60s have wholly inadequate savings for retirement, will not get a government or job-guaranteed pension that meets their needs, and will likely have to keep working much longer than they expected just to get by. And as for college, the days of the free four-year degree are a distant memory; where I live today the same university degree that cost nothing beyond the cost of used books and travel to campus where I grew up now costs over $30,000 per year for local residents, and almost $60,000 for those coming from further away. What’s more, even when youngsters here get a college degree, their future may still be limited; upward social mobility in the country where I now live is the lowest in the developed world, with kids in Denmark twice as likely to move up if born into a low-income family as kids here.

Of course, it is all the same country: The U.S.A. Most of this data is taken from a recent op-ed by Nicholas Kristoff in the NY Times.  Kristoff is one of many who have been pointing to how much the U.S. has changed in things that really matter to people in the last forty years. Of course, if you are lucky enough to make it into the top tenth of the top one percent, you are one-in-a-thousand and doing better than anyone in living memory. That’s 300,000 people who collectively have more wealth than the other 270 million Americans in the bottom 90%.

The big book on inequality at the moment is Thomas Piketty’s Capital in the 21st Century, which argues that this is the natural tendency of capitalism, and that the country that I grew up in – American in the 1950s and 1960s – was an anomalous place in an anomalous time. It benefited from the great destruction of accumulated wealth in the Depression and WWII, and the fact that America alone among wealthy countries avoided the devastation of the great war. With a unique global position, and a special period in technology that was boosting productivity but not yet enabling the outsourcing or replacement of workers on a large scale, the growth of average incomes and the reduction of inequality of that period was a once-in-forever situation that we will not see again.

And yet I can’t quite believe that’s the whole story. The country that I lived in believed in the future and invested for it. We put children first in building schools and parks (of course with the fast expanding youth cohort of the baby boom bursting upon us, we had to build new schools, train new teachers in the latest methods, build new colleges and fund them, or we would have had a generation of kids growing up in the streets.) We built up social security and medicare, created the interstate highway system and electrified America, and by the early 1970s we even tackled our terrible air and water pollution head-on in the Clean Air and Clean Water Acts. We fought a terrible war with tragic mistakes in Vietnam, but we thought we had learned our lesson (only to find out in Iraq and Afghanistan that this was untrue).

We did all of this with very progressive taxes – from 1941 to 1981, the top income tax rate was over 70%, and the tax rate on inherited estates was also 70% or higher – rates that today would be equated with instant economic collapse. Yet the U.S. thrived. Stock options and 15% capital gains rates weren’t yet around, so it was darn hard to get filthy rich just by having a managerial job. So instead, top managers sought to increase their power and influence by expanding the size of their companies and their work forces – a very different incentive than squeezing out costs (and workers) as much as possible to maximize profits for executives and share-holders.

A different book from Piketty’s that I think explains more is Hedrick Smith’s Who Stole the American Dream?  Smith shows how it was a deliberate decision of executives in America to campaign for a system of rewards and incentives that would let them maximize their wealth, while minimizing the share of national income that went to everyone else in the form of either wages or public spending or government benefits. The real fundamental change in America is that from the 1940s to the 1960s, to greatly simplify, we believed that broad social benefits and gains were good, and concentrated individual wealth was bad (a belief held over from the early days of the country, when the founding fathers, rich themselves but only middle class by the standards of European aristocrats, sought to discourage the formation of an aristocracy of wealth in the US, a trend reinforced in the Jacksonian era, and again in the Progressive era as well.) So we arranged our social and economic institutions to provide broad social benefits, and make it difficult to accumulate and pass on concentrated personal wealth.

Of course, we still applauded, rewarded, and encouraged people who built great businesses. The people who founded and ran Ford, General Motors, Bell Telephone, Bank of America, IBM, Xerox, and tens of thousands of other companies, and who invested in real estate in New York and California still got rich and were regarded as the natural leaders of society. They had schools and libraries named after them too, appeared on magazine covers, and were revered for creating “the affluent society” in the words of Harvard economist John Galbraith. Yet that was the point – they were lauded for creating an affluent society, not for being as personally wealthy, compared to fellow-Americans, as princes or kings of yore.

What has changed is that today we have a system that scrimps on providing social benefits but maximizes the personal return on high-end capital intensive activities, so that those with large amounts of capital, or those who manage large amounts of capital, find it easy to accumulate ever larger amounts of capital for themselves. High marginal tax rates encouraged those in earlier decades, once they had achieve a certain income, to put their time and effort into other things than further increasing their own incomes; today both the tax and basic reward structures (stock options and low capital-gains rates) do the reverse, encouraging people to continue to find ways to increase their personal incomes because they reap almost all the benefits for themselves.

The confusion over more progressive taxes is often severe because they are portrayed as an attack on successful business people. That is not right. Successful people DO deserve to be exceptionally rewarded. But the choice is over how they should be rewarded. Should it be with fame, adulation, respect, and power, or with as much personal material wealth as possible? There is nothing in the stars or the constitution that says a society can survive only by providing the maximum in concentrated material wealth to its economic elite. After all, scientists, soldiers, politicians, teachers, and government officials are all expected to excel at their jobs with modest material rewards; why should a bank manager be different from a general or a top civil official in what motivates them to perform well?

In fact, there is quite a lot of historical evidence that an over-concentration of wealth, as opposed to growing and generous rewards, for the economic elite is dangerous to a society’s well-being. If ordinary people are unlikely to benefit from growth, they will eventually be discouraged and not invest in their own human capital; or they may attack the rich as such or the economic assets of the society, rather than simply modifying the reward structure to keep motivating economic effort and success. The road to socialism, in fact, has not come from too-generous investment in promoting broad social prosperity. Historically, the road to socialism has been the conspicuous over-concentration of wealth for personal benefits to the few at the expense of the many, leading to a revolt against the social order and demands for radical change.

I believe in capitalism, and I do not believe it has an inherent tendency to concentrate wealth. Capitalism only survives when governments insure contracts and private property, and they can do that under a variety of conditions and terms. In Canada for example, no less a success in capitalism than the United States, the top 1% of income earners take home 10% of total income, not the 23% taken by the top 1% in the U.S. In Germany, another success, the top 1% take home under 10%. So evidently government policies, not iron laws of capitalism, make a rather large difference, and having a rising share of growth going to top earners is not necessary for an economy to do well.

Thus our problem is not how to tax the rich or redistribute income; it is how to make sure capitalism works for the benefit of all. Other countries do this much better than we do, and unsurprisingly, the result is that they score much better than the U.S. on measures of health and education while doing no worse (often better) on overall economic growth.

Oh by the way, we used to be one of those “other” countries. Can we be again?

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Apologies to all; had a slight crash and lost the last few lines of yesterday’s post. It appears in complete form below. Thanks for your patience!

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Back in the USSR

I am back in Moscow, in the USSR (er, Russia). But more than at any time recently, it feels like the USSR. Not economically; stunning new apartment towers are gleaming in the late May sunlight, women are smartly dressed in European jeans and heels, and the stores — very unlike the Soviet Days — are full of everything from the latest French beauty creams to Italian designer goods. German and Japanese cars fill the streets.

Nonetheless, the anti-Western hyper-patriotic mood is strong. “Victory in Europe” Day, May 9, which celebrates the victory over Nazi Germany, was celebrated with a special “whoop” this year. After all, Crimea’s joining the Russian Federation is being portrayed as “saving” its loyal population from the neo-Nazi fascists in Kiev, giving people today a taste of “Victory in Europe” in the here and now.

And the blare of propaganda, the way people are careful choosing their words about politics, and anxiety about what competition with the West (not cooperation, which seems lost) will bring, seem to hark back to Cold War Days.

Where is this heading? It is difficult to know. I remain hopeful, perhaps irrationally, that Putin has succeeded and will not move further into Ukraine. At this point, at minimal cost, Putin has secured Crimea, and shown that Ukraine is vulnerable to being split wide open if its government tries to pull the country too far toward Europe and away from Russia. For any government in Kiev, it should now be obvious that the only way to keep a united Ukraine is to pursue a course balancing between Europe and Russia, and compromising between the radical Ukrainian nationalism found in the western part of the country and the pro-Russian identification found in the eastern part.

This means that a united Ukraine will not join the EU or NATO anytime soon, which is Putin’s main goal. So in that sense, he has already obtained success. If things go further, with additional parts of Ukraine being split off or absorbed into Russia, the result will almost certainly be much more severe and painful sanctions, and a rump western Ukraine that will feel driven into the arms of NATO, creating a NATO state right on the border of Russia, which is exactly what Putin has been trying to avoid. So given these choices — stop now and reap all the desired benefits at little cost, or continue to pry apart the Ukraine and lose all the desired benefits and suffer a much higher cost — it seems reasonable to suspect that when Putin calls for negotiations among the government in Kiev and its eastern regions, and says he intends to pull his troops back to encourage peaceful progress, he is sincere. At this point, further deterioration of the situation in Eastern Ukraine will likely do Russia more harm than good.

Still, things have a way of spinning out of control once a revolution has begun, and as I have maintained, what began last December in Ukraine is a true revolution. The elections that took place this weekend may lead to new calls by rebels in Eastern Ukraine for Russia to accept them; how Russia reacts will be the best test yet of Putin’s plans.

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