Clive Crook

You may have read that Peter David, The Economist's Washington bureau chief and author of the paper's Lexington column, died in a car crash on Thursday night.

Peter was a superb journalist, one of the best The Economist ever hired. His range was stunning. He was recruited in 1984 to write science articles (he was working for Nature at the time), and did that with distinction. Later he became the paper's main authority on the Middle East. He wrote the Bagehot column on British politics. He ran the business sections of the magazine; then, as foreign editor, he ran the international sections. In many of these jobs he was, in The Economist's tradition, both editorial manager and senior writer. In both roles he was respected for his knowledge. As a boss he was known for his kindness and generosity, as a writer for his wit, even-handedness and unaffected elegance.

He was a brilliant man--but also wise, a rare combination. In argument, he was razor sharp, yet gentle. Gentleness was his most salient trait. He had no taste for stamping on opponents he had defeated. He would sometimes win arguments almost imperceptibly, guiding his challenger to the right answer. He took his work most seriously, worried about it more than he let on, and thought it mattered to be right, yet always took himself unseriously. He was funny, specializing in jokes at his own expense. The result of these perfectly balanced contrasts was a completely irresistible man.

He was the least demanding and most rewarding of friends. He never tried to charm, but never failed to. Everyone he met thought he was wonderful, and they were right.

One of the cruelest things about his death is that he had struggled with health problems and overcome them, and was looking forward to retirement as a new chapter with fresh opportunities. But he wouldn't want me to be mawkish about this. Some years ago, recovering from multiple coronary bypass surgery, he wrote to the office to say he was doing well, and included an account of his operation in the form of a recipe from a cookbook. (I'm paraphrasing from memory.) Cut sections from veins in the thigh; remove and reserve. Take a saw, cut boldly through the breastbone; crack and open...

The only thing about Peter that ever came close to annoying me was his modesty. This wasn't false: that is, it wasn't calculated. But sometimes it ran to the absurd. I often wondered if he knew how clever he was, and once or twice told him you could take self-effacement too far. He just laughed. He said he was annoyed by my inability to read and respond promptly to emails. "Clive, you surprise me. It's just good manners." Not long ago, he sent me an email with the subject line: "I loved your column". Opening it immediately, I read the text: "Now I have your attention, would you and Lori like to come over for dinner on Thursday?"

Peter had no particle of self-importance and no desire whatever to be well known. His professional ambition was to do his job as well as he could, without making a great fuss about it. Happily for him, and for The Economist, he found a home that recognized his talent and let him flourish. They were a perfect match. In a way, as I think Peter would have agreed with a smile, he had a marvelous career thrust upon him--and he loved it.

You can read Peter's last column here. It's a good one. Politico has some touching remembrances from other friends and colleagues.

This will take some getting used to. Peter had wonderful stories, and since he was the kind of man whose approval you crave, you'd make a habit of saving stories for him. I find I'm still doing it. Knowing he won't hear them is very hard to bear.

My heart goes out to Celia and the children. I am so terribly sorry for your loss. Your husband, your father, was a remarkable and much-loved man.

For as long as I can remember (which is a long time), the alpha and omega of UK election analysis has been the Swingometer. This is a BBC graphic that translates the shift in the national two-party vote--the swing--into parliamentary seats won and lost: a pendulum that sweeps across a list of constituencies ordered by size of the two-party majority. So simple. I recall Peter Snow gyrating idiotically beside ever more elaborately animated versions of this concept, election after election.

I've often wondered why I've seen no US version. (Maybe CNN has one. I don't watch CNN as often as I should.) The idea has obvious game-show appeal. And it's illustrative power is tremendous. Perhaps the idea of a roughly uniform national swing is unAmerican. Maybe it's a states' rights thing.

Anyway, the excellent Sean Trende alerts me to the fact that there is indeed a US swingometer, put together by Neil Stevens at Unlikely Voter. Trende, who understands these things, says that a uniform national swing from one party to the other "isn't a horrible assumption" because of something to do with PVIs. Give the thing a try. Plug in a swing and see what happens. Feel a bit British at the same time.

I see that Rasmussen's likely-voter tracking poll today has Romney at 49 and Obama at 45--a 4 point advantage. Obama's advantage over McCain in 2008 was 7 points. That's an 11-point swing. Plug it into the swingometer and Romney wins the electoral college 315 to 223, gaining Colorado, Florida, Indiana, Iowa, Minnesota, Nebraska (2nd District), New Hampshire, North Carolina, Ohio, Pennsylvania, and Virginia.

Well, now I see why Obama's people are so confident.

As a Brit from a working-class family, raised in a northern working-class town, who attended (at taxpayer expense) a fine quasi-private school and then went to Oxford, I'm interested in snobbery. It's a trait I despise. I've seen plenty of it in my time, though there's far less in Britain than there used to be.

As a young man I aspired to live and work in the US because I wanted to be part of a thriving classless society. Of course that was naive. America is not a classless society. I'm not talking about the 1% and the 99%, and I'm not talking about mainstream America and the underclass (shocking though that gulf is). I'm talking about elite disdain for a much larger segment of the country. It's a cultural thing: American snobbery.

At an event I attended today I listened to an expert on retailing speculate that the key to Target's success in the US was that it wasn't Wal-Mart. Target's a big-box discounter for people too pleased with themselves to go shopping at a big-box discounter. The idea struck me as absurd--and then, once I thought about it, as plausible. Many of my American friends have an irrationally intense loathing of Wal-Mart, as though delivering bargains to the masses isn't quite proper. I mean, have you seen the people who shop at Wal-Mart?

The retailing expert said that Target's appeal in Canada, "which really is a classless society", needed to be modified. I can vouch for the fact that in Britain shopping at Tesco or Asda, Wal-Mart's British equivalent (and subsidiary), isn't looked down on. Everybody does it.

In Britain, in fact, elite culture is being absorbed and marginalized by the demotic. These days, TV talking-heads are required to have regional accents. Talking posh is a disqualification. Oiks (a term that has fallen out of use: the US equivalent is rednecks, a term that hasn't fallen out of use) no longer try to pass for quality. It's the other way round.

In America elite and demotic cultures aren't merging, they are moving farther apart. The elite is ever more confident of its cultural superiority, and the demos, being American, refuses to be condescended to. I don't think it's economic pressure that causes much of the country to cling bitterly to guns and their religion, as Obama put it so memorably. It's a quintessentially American refusal to be looked down on.

I was still mulling the Target/Wal-Mart thing when I read this review by Frank Furedi of Charles Murray's "Coming Apart" (thanks for the link, RealClearBooks). Furedi crystallizes a thought that half-formed in my head when I read that book. Murray complains that the American elite has abdicated its responsibility to lead: It won't preach what it practices. I thought that was ridiculous: If only the elite would start preaching to Fishtown, cultural decline outside Georgetown and Greenwich would be arrested? Please. But Furedi makes the much more interesting point that the American elite does in fact preach what it practices--though not in a good way.

[I]s it really the case that [the American upper class] does not preach what it practices? [Murray] notes that, at the very least, this ruling class preaches the doctrine of non-judgmentalism. He also observes that, from time to time, the new upper class feels comfortable with using derogatory labels, particularly towards fundamentalist Christians and rural working-class whites. However, the preaching of this privileged elite is not confined to the denunciation of the backwoods redneck and the gun-loving members of the National Rifle Association. In fact, when it comes to preaching, Murray's SuperZips are in a class of their own. They may use a self-conscious rhetoric of non-judgmentalism - words like 'inappropriate' and 'challenging', or phrases such as 'people in need of support' and 'people with issues' - but they have no inhibitions about instructing others about what food they should eat, how they should bring up their children, or what forms of behaviour are healthy. Outwardly they eschew the language of morality. Instead of sermons, they use the language of 'raising awareness'.

Indeed, it could be argued that the unprecedented level of socioeconomic segregation in America is actively promoted by an elite that is continually attempting to create and inflate behavioural and cultural distinctions between itself and the rest of society. What is important about its lifestyle is not so much the values that it invokes, but that it is different in every detail from those obese, junk-food eating, gas-guzzling, gun-obsessed, fundamentalist Joe Sixpacks. The elite project of 'raising awareness' serves as a form of self-flattery, through which the upper classes can highlight their moral superiority to the rest of society.

American snobbery.

The continuing argument about plutocrats who want to be taxed more heavily is puzzling to me. It seems to cause confusion where there really shouldn't be any. There are those who say: If Warren Buffett wants to pay more tax, he should shut up and just send a check to the IRS. And there are those who find that idea ridiculous and irrelevant: Buffett's saying the tax code is unfair, and he can't put that right by sending in a donation.

Two of The Economists' bloggers (here and here) have been debating Stephen King's recent contribution to the tax-me-more literature. King's with Buffett.

I want [the rich] to acknowledge that in America, we all should have to pay our fair share. That our civics classes never taught us that being American means that--sorry, kiddies--you're on your own. That those who have received much must be obligated to pay--not to give, not to "cut a check and shut up," in Governor Christie's words, but to pay--in the same proportion. That's called stepping up and not whining about it. That's called patriotism, a word the Tea Partiers love to throw around as long as it doesn't cost their beloved rich folks any money.

One of The Economist's bloggers found this impressive--mainly, so far as I can tell, because King had chosen the right side. Apparently, all right-minded people want the "if-you-want-your-taxes-raised-why-don't-you-send-the-IRS-a-bigger-cheque" meme finally dead and buried.

All right, but before we bury it let's see if we can understand it. I think it's childishly simple once you recognize that two separate questions are involved.

1. Would IRS donations by Warren Buffett and Stephen King make the tax code fairer? No.
2. Would IRS donations by Warren Buffett and Stephen King help to remedy the inequity they say the tax code causes? Yes.

In other words, Warren Buffett and Stephen King should write generous checks to the IRS and not shut up, but keep demanding the fairer system they say they want.

Here's a parallel. Suppose I'm thinking of becoming a vegetarian. I think eating animals is immoral. I think there should be a law against it. But at the moment it's legal, and my giving up meat wouldn't really make much difference. So I intend to remain a carnivore until justice prevails and everybody is forbidden to eat meat.

It seems to me that this position is ethically unsatisfactory. My turning vegetarian would not be a pointless gesture. It would bear witness to my ethical convictions and might make others follow my example. And whereas my giving up meat really wouldn't have much quantitative impact, Buffett's tens of billions and King's hundreds of millions are fiscally non-negligible. It's a start. And anyway, continuing to enjoy the benefits of the tax system's gross unfairness is just plain wrong, isn't it?

So keep talking, by all means--but send in the checks as well.

The McKinsey Global Institute has just published a memo on the changing character of global trade. Trading myths: Addressing misconceptions about trade, jobs and competitiveness. The misconceptions aren't straw men. The report dispels a lot of confusion about "offshoring" and is well worth reading.

Myth 1: Mature economies are losing out to emerging markets in trade and thus facing increasing trade deficits. In fact the balance of trade between advanced and emerging economies isn't worsening.

Myth 2: Manufactured goods drive trade deficits. No, advanced economies have lately been in surplus in manufactures, even more so in knowledge-intensive manufactures. Imports of primary resources have been driving trade deficits.

Myth 3: Trade is the main cause of lower employment in advanced-economy manufacturing. The main causes are lagging demand and increasing productivity.

Myth 4: Advanced economies can create jobs only in low-end services. Actually trade in services creates high-wage knowledge-intensive jobs--more so than manufacturing.

Myth 5: Trade in services is small, and low-wage economies will capture any increase. Services exports already account for a quarter of rich-economy exports, and the share could be a third by 2030. Trade surpluses in services, properly measured, are growing.

Myth 6: Service economies like the US are the world leaders in services trade. You'd think so, but the US lags Europe in services exports (even discounting intra-EU trade).

The report concludes that rich-economy governments

should push vigorously for fuller liberalization of trade in services, where restrictions remain high. Trade-related policy should be geared to supporting, and benefiting from, comparative advantage in attractive stages of global value chains and avoiding an emphasis on sustaining or creating direct employment through manufacturing exports. Any improvement in net trade will offset the headwinds caused by deleveraging and, therefore, domestic job creation.

Good advice.

Larry Summers and Christina Romer both argue--convincingly, it seems to me--that Europe's pursuit of creditworthiness through fiscal austerity is failing. Their point is not that fiscal restraint is always bad. Normally, reining in deficits would strengthen the public finances. The point is that current circumstances are unusual. As Summers explains:

Systematic comparisons of the experience of different European countries or more global comparisons at the IMF are salutary. They suggest that, when economies are constrained by demand and safe short-term interest rates are near zero, policy measures that reduce the deficit by 1 per cent have a multiplier of 1 to 1.5. This implies a 1 per cent reduction in a country's ratio of spending to GDP or an equivalent tax increase reduces its GDP growth rate by 1 to 1.5 per cent.

This means austerity measures at the national level are likely to be counterproductive in terms of creditworthiness. Fiscal contraction reduces incomes, limiting the capacity to repay debts. It achieves only very limited reductions in deficits once the adverse effects of contraction on tax revenues and benefit payments are taken into account. And it casts a shadow over future growth prospects by reducing capital investment and raising unemployment, which takes a toll on the capacity and willingness of the unemployed to work.

In ordinary times, fiscal tightening would improve creditworthiness because its negative effect on demand and employment would be small, and monetary policy could be used to offset that effect in any case. Today the negative effect is bigger and the scope for monetary easing is limited. Belt-tightening by itself just won't work.

However, it isn't enough to say "choose growth". As Gideon Rachman says of Francois Hollande's promise to replace austerity with growth if he wins the French presidency, "Why didn't anybody think of that before?" If France unilaterally announced big new spending plans, the markets would drive its borrowing costs up. That goes double for Spain, where the cost of debt is already so high as to threaten the country's solvency, and where the future of the European Union may very well be decided.

Fiscal tightening won't restore Spain's creditworthiness: it shrinks the economy. Fiscal expansion won't do it either: that would spook the markets. So there's no way out? That's right--not for Spain acting alone.

Europe has to act collectively. The euro area as a whole is an economy comparable in size to the US. Its gross public debt is about the same, its balance of payments is stronger and its aggregate fiscal deficit is smaller. If euro area governments jointly backed its borrowing, Spain wouldn't need to pay 6% to persuade investors to buy its debt. That's the way out.

It's not a question of "choosing growth". Europe has to choose fiscal union. It might not want fiscal union, but it had better consider the alternatives. Adopting the euro was a mistake but there's no way back from that without truly colossal damage. The price of maintaining the current half-way position--monetary union without fiscal union--will be years of intolerably high unemployment in Spain and other parts of the EU. The only way to avoid this is for Germany to grit its teeth and embrace the closer political (i.e., fiscal) union it always said it wanted.

In Madrid this past week I've been surprised and impressed to find little resentment towards the European Union and the powers (Germany) that direct its policy. There's less ill feeling, I'd say, than in Ireland, for instance. It's hard for a foreigner to judge on a brief visit, of course, but the mood of the people I've talked to has been one of grim resignation more than anger at Brussels or Berlin.

What makes this all the more odd is that Spain did not bring financial ruin on itself in the way that Greece did. Going into this crisis its budget was in surplus and its public debt was much lower than the EU average. With hindsight, Spanish governments were at fault for failing to lean heavily against surging house prices and private borrowing, for allowing the trade deficit to explode and for letting wage inflation push Spanish unit labor costs so far out of line. But I don't know how many governments elsewhere would have avoided those errors if the same conditions had arisen. The housing boom was fueled by a wall of easy money from abroad--easy to interpret as a vote of confidence in Spain's long-term economic prospects, and a difficult thing to turn back. Also, if the borrowing was excessive and irresponsible, so was the lending. EU creditors are deeply implicated too.

When you consider the severity of the fiscal contraction now under way, the depth and likely duration of the recession, and the fact that the EU has so far been barking instructions rather than helping to cushion the blows, you'd expect more of a backlash. It's not that Spaniards don't understand what's going on. The unemployment rate is 23%; one in two people under 25 is without work. At the beginning of the week Spanish newspapers carried reports of new IMF projections that show Spanish output failing to recover its pre-crash level until 2017. A lost decade, one of the worst outlooks in Europe--and this is assuming no new setbacks. Doesn't Europe owe Spain a little more solidarity than this?

If Spain is slow to complain, it might be because membership of the EU is of surpassing importance to this country. It affirms a new political identity. It underwrites democracy and political modernity--in a way that Central Europeans find easy to understand, and Spain's fellow Western Europeans don't. It means there's a deep reservoir of goodwill towards EU institutions and a determination to make a success of the EU project. All the more reason, I'd say, why Spain's EU partners should do more to help it out.

ECB president Mario Draghi told the EU parliament today that Spain had made remarkable progress on fiscal policy. Effort, yes. Progress? That's debatable. The fiscal contraction is far tougher than it needs to be. With EU support, a more moderate pace of adjustment would be feasible. That would be progress. The EU owes Spain more than words of encouragement.

Real Madrid plays Bayern Munich at home tonight in the second leg of the Champions League semi-final. This afternoon I walked down to Plaza Mayor for some lunch and watched the German fans gather at the tables in the square. The mood was friendly and exuberant. Sitting right by me were four of the visitors, their table struggling to accommodate all the food and drink they had ordered. Beer, red wine, white wine, plates of tapas occupying every square inch and teetering on the edges. An elderly Spanish gentleman--not badly dressed, perhaps only recently down on his luck--was moving from table to table with his stool and box of polish offering to shine shoes. One of the visitors courteously availed himself of the service. The madrileno, delighted to have a customer, set to with enthusiasm as the diner leaned back and called for more wine.

I'm hoping Real Madrid does well tonight.

"The Night They Drove Old Dixie Down" was playing in a bar in Madrid tonight. You won't mind if I add my own poor tribute to the outpouring of affection for the great Levon Helm, who died last week.

I've always adored The Band's music. If ever there was a whole greater than the sum of its parts, this was it. Each member was unusually talented, Helm not least, but the chemistry was something else again. That's what made the sadness and acrimony that followed after the group broke up so tragic. But we have "The Last Waltz" (much as Helm resented the way it demoted him, as he thought) to remind us how they looked and sounded at their best. It's also good to know that before he died Helm's career enjoyed a second flourishing. He spent his last years doing what he did best, surrounded by family and collaborators who revered him. Not many of us can hope for that.

The second career came about through financial stress. He was broke and fighting throat cancer. He started doing small concerts at his home near Woodstock to raise money for his medical bills. Word spread and his comeback followed. He recorded new albums, "Dirt Farmer" and "Electric Dirt". Both deservedly won Grammys.

I went to one of these at-home concerts in 2009 and it was among the most memorable experiences of my life. That night, as often by this time, he couldn't sing, but it didn't seem to matter. You had his drumming and his presence. I wrote a piece about the concert for the Financial Times: it's here if you're curious.

The great man's taste in material is still broad and impeccable. Sets change almost entirely from show to show but last weekend there was a judicious sprinkling of Band classics - including a version of "It Makes No Difference" that would make a dead man weep - blues and country numbers, two contributions from the Grateful Dead songbook, and surprises such as "Do Right Woman" in a rendering that would have Aretha Franklin smiling.

Helm has surrounded himself with 11 superb musicians who are tight, yet fresh and relaxed. With nothing to prove, there is no showing off; the impression is of unstressed reserves of talent wherever you look on the stage. (Well, strictly speaking, there is no stage.) On the night in question, Helm was barely missed as a singer - the highest tribute one could pay to Larry Campbell, Teresa Williams, Brian Mitchell and daughter Amy Helm, fine singers all, who shared the vocals.

I mention in the article that we didn't do an interview--he was too tired, and I was too elated--but he invited my wife and me for a chat in his kitchen after the show. I asked him what he was listening to these days and he said, "Have you heard the Holmes Brothers?" I hadn't. It was a good recommendation and I pass it along from the man himself. Listen to "Everything is Free" from Simple Truths". Amy's records with Ollabelle are great too. Try "Northern Star" from "Riverside Battle Songs".

Not much more to say. I'll give "It Makes No Difference" another spin.

Where I am, not many people need that advice.

I traveled to Madrid yesterday, partly to help run a seminar that the Aspen Institute has put together this weekend on the future of capitalism. I don't know whether the timing for the event is good or bad. Spain has 23% unemployment (the youth unemployment rate is 50%) and its output is still contracting. It's also the new focus of Europe's debt-crisis anxieties. It's the fourth-biggest economy in the euro area, so if it's allowed to go the way of Greece it will overwhelm the EU's inadequate financial defenses. In one way our subject couldn't be more topical--but it's hard to look very far ahead when the ceiling's falling in.

Our background reading includes the IMF's new World Economic Outlook. This says the global situation has improved a little, but only a little. Chief economist Olivier Blanchard:

With the passing of the crisis, and some good news about the U.S. economy, some optimism has returned. It should remain tempered. Even absent another European crisis, most advanced economies still face major brakes on growth. And the risk of another crisis is still very much present and could well affect both advanced and emerging economies.

The report goes carefully into both aspects--the brakes on growth and the risks of another disaster--and I recommend it. The Fund's basic advice is obviously right: to strike the necessary balance between restoring confidence in financial markets and supporting short-term growth, governments need to put longer-term fiscal restraint in place but take care not to overdo it right now. This isn't hard to do in principle but in practice, apparently, it's nearly impossible. It takes overkill to convince markets that governments are fiscally serious, then as soon as the growth implications of fiscal overkill sink in, the markets decide they don't like that either. The Fund calls them "schizophrenic", which they are. But then whose fault is it that governments have so little credibility in the first place?

One link from the here and now to the future of capitalism is shifts in the respective shares of labor and capital in national income. The report looks at this briefly Box 1.1 on page 36.

[T]he recent recovery in the United States appears unusual from a historical perspective. The rebound in profits relative to labor income is much stronger this time around (although during all recoveries the labor share tends to fall). In fact, the most recent U.S. recovery looks very much like a typical European recovery. One possibility is that workers' fear of long-term unemployment has led to more subdued wages relative to labor productivity growth during the recent recovery. But it will take further research to determine the actual causes.

In many European economies, workers are not worse off after the Great Recession in terms of their share of national income. The labor share is still higher today than just before the Great Recession in many economies. Yet, in the United States and in a few European economies (especially Greece and Spain), the labor share remains well below the pre-crisis peak. Only time will tell the extent to which the latest labor share losses will add to the general trend decline.

I've just written a column for Bloomberg that has something to say about this. I'll be coming back to the subject.

So it's Kim after all. Amazing. It's a free and fair selection process, as we've been assured, yet the World Bank board has chosen America's nominee--just like last time, and the time before, and the time before...

Bloomberg reports,

The candidacies "enriched the discussion of the role of the president and of the World Bank Group's future direction," the board said in an e-mailed statement. "The final nominees received support from different member countries, which reflected the high caliber of the candidates."

Oh I'm sure they enriched it enormously. The system works. The American got the job, and there was a rich discussion too.

Plainly Kim's an outstanding man, even if not ideally qualified for the post. He might turn out to be exactly what the Bank needs (and better had do, after all this fuss.) I wish him well. But I hope that even he would agree that the process by which he was appointed is a disgrace and needs to be changed.

The Economist has a good and balanced note on the news. But I think I disagree with their commentator on one point.

[A]s Dan Drezner of the Fletcher School at Tufts University pointed out, Barack Obama was never, in an election year, going to give his opponents any unnecessary ammunition by failing to get his choice for the World Bank accepted.

True, once Obama nominated Kim, he was never going to accept any other outcome. The mistake was to nominate him--nominate any American, I mean--in the first place. In future, Drezner wants "the Americans and Europeans to gracefully and jointly commit not to nominate anyone for the next go-around of IFI leaders". Good idea! But why next time? What was wrong with this time?

Obama could have struck that bargain this year. It would have been a notable act of global statesmanship and would have won wide international applause. You say the Republicans would have attacked him for it? How, exactly? (a) The Bank is a waste of space and should be shut down. (b) It's vital than an American should be in charge. It doesn't really hang together. Fact is, the issue has no weight in domestic politics. Few voters care either way. (And for the few who think that America, on a point of principle, should never relinquish such prerogatives, Obama had a talking-point: Next time round an American would be eligible to run the IMF.)

It was a missed opportunity to do the right thing at little if any political cost. Those moments should be seized.

Bill Easterly asks a very good question. Jim Yong Kim, the White House nominee to lead the World Bank, has been so busy meeting privately with governments that, unlike the other candidates, he hasn't been able to explain his views on development to anybody else. Time is running out: a vote is due on April 16th. Easterly asks, what's the hurry?

The deadline seems especially unfortunate since [Kim's nomination]  has generated unprecedented controversy, and two credible alternative candidates have been nominated in Ngozi Okonjo-Iweala and José Antonio Ocampo.

The Centre for Global Development (CGD) and the Washington Post co-sponsored a forum that would have been an ideal place for Kim to address the controversies. Okonjo-Iweala and Ocampo spoke at the forum earlier this week, but Kim declined to participate.

An administration official kindly agreed to speak with me last Wednesday evening about why Kim did not participate in the forum. The official said it was purely logistical: Kim has been constantly on the road meeting member governments, and would continue to be on the road right up until the vote...

So let us grant the problem is simply logistical; that Kim would be happy to meet with his critics in a public forum and address their concerns, but there is simply no time left before the vote on Monday. This leads naturally to the question: what's the rush?

There is universal agreement that the World Bank presidential selection process should be transparent. There is now a historic opportunity, generated by unprecedented and widespread participation in the debate on the respective merits of the three candidates, for this to happen. It is in the interests of the constituents of the World Bank, and of Kim himself, that this opportunity be seized.

By the way the CGD website has reports on the presentations by Okonjo-Iweala and Ocampo. Earlier Nancy Birdsall, head of the center, wrote a good memo on what we need to know about the candidates.

Update: Contrasting visions of development are in play in this choice--"Big Development" and "Small Development", as Michael Woolcock puts it in this post for the World Bank's economics blog. Big Development is about entire economic systems. It calls for "wholesale investments in roads, ports, agriculture, education, justice, finance and public health--and, crucially, the corresponding government ministries to plan, fund, implement and assess it all." Lately, though, the other approach has been catching on.

Inspired less by transformational visions of entire countries and more by the immediate plight of particular demographic groups (AIDS orphans, child soldiers, 'the poor') living in particular geographic places (disaster zones, refugee camps, urban slums), Small Development advocates focus not on building systems in the medium run but on compensating for the failure of systems in the short run... The moral animus driving Small Development is the real and present "needs" of the groups in question; building "systems" is all well and good, advocates contend, but it's slow, imprecise, indifferent to context, prone to corruption, and in the meantime people are dying. We need to act now! For critics of Small Development, however, such activities amount to little more than "charity work"; it is noble and laudable work, to be sure, and is certainly difficult and often dangerous, but its net transformational effects are, well, small. Poor, marginalized individuals may have become less poor (or more "empowered") individuals as a result of such efforts, but it's not how any poor, autocratic and divided country became a prosperous, democratic and inclusive country.

These two visions of development are not incompatible, and reasonable people can cast their lot with either one. But the distinction between them matters and has significant consequences for how priorities are assigned, how resources are allocated, and difficult decisions are made.

Kim, it seems, is a Small Development kind of guy. The Bank has traditionally aimed for Big Development. There's a lot to discuss here if the US nominee can find the time.

A new memo from Third Way is worth reading. The authors look at a group of voters they call "swing independents": self-declared independents who have neither strongly favorable or unfavorable views of Obama and Romney. These people are 38% of all independents according to Third Way's poll, and 15% of the electorate as a whole. This crucial segment prefers Obama to Romney, 44% to 38%. The bad news for the president is that they are closer to Romney ideologically. The argument about fairness around which Obama seems to be organizing his campaign doesn't play well.

Swing Independents clearly preferred an economic opportunity frame when it was pitted against other messages, including those about fairness. For example, when asked which candidate they'd be more likely to support, 80% chose a candidate "focusing on economic growth and opportunity" while only 15% picked one "focusing on income inequality." Even when the question was asked in a way that made clear the second candidate wanted to reduce income inequality specifically "to help the middle class," 76% chose opportunity...

When asked about the best way to address income inequality, nearly three-fourths of Swing Independents said "to expand opportunities for the middle class," while only 22% chose "to ensure the rich are paying their fair share." And when offered the fairness argument versus a conservative message on the best way to reduce income inequality, Swing Independents split between lowering taxes on job creators (44%) or making the rich pay their fair share (44%).

Swing voters like Obama--and I'm sure they agree with him that the Republican party has lurched to the right. So I'll ask a question I've asked before: Why can't Obama and his advisers see this as an opportunity to seize the center? The middle has opened up, and the Democrats have a charismatic well-liked politician who could win those votes for their side. Yet he's choosing to press the Old Democrat themes of fairness and equality, and needlessly presenting swing voters with a dilemma. I'm sure I'm too simple-minded, but the logic of the strategy escapes me.

Josh Kraushaar is puzzled too. As he says, an us-against-them message won't work in center-right country. This doesn't mean Obama is bound to lose in November. It just means he's making things harder for himself than they needed to be.

At a recent meeting organized by Pew's Economic Mobility Project, I took part in a discussion with Harry Holzer, a professor at Georgetown University and an expert on the low-wage labor market. The subject of the disappearing middle came up--the idea, developed by David Autor and others, that the middle-wage part of the income distribution is being hollowed out.

Many low-wage jobs that have to be done on the spot--cleaning, gardening, and so on--can't be automated away. Not yet. The same goes for non-routine high-wage jobs requiring initiative as well as mere computing power. But in the middle are routine tasks (manual and non-manual) which are susceptible to automation. These, and the wages they command, are under attack.

Holzer said Autor was clearly on to something, but he expressed some skepticism about the force of this change. He thought there was plenty of scope for new middle-wage jobs in service industries with room to grow--health care, for instance, where some of the work that doctors do at great expense could be moved to nursing staff with additional training. That sounded right to me.

But job polarization keeps coming up. A new paper by Nir Jaimovich and Henry Siu--The Trend is the Cycle: Job Polarization and Jobless Recoveries--links the shrinking middle to the slow recovery of employment after recessions. After last Friday's jobs numbers, that connection is topical. Here's the abstract:

Job polarization refers to the recent disappearance of employment in occupations in the middle of the skill distribution. Jobless recoveries refers to the slow rebound in aggregate employment following recent recessions, despite recoveries in aggregate output. We show how these two phenomena are related. First, job polarization is not a gradual process; essentially all of the job loss in middle-skill occupations occurs in economic downturns. Second, jobless recoveries in the aggregate are due to jobless recoveries in the middle-skill occupations that are disappearing.

David Andolfatto of the St Louis Fed calls this a very interesting finding, and I agree. Interesting and worrying. Dave Altig's Macroblog, which first guided me to the paper, connects the new work to the debate over how much room the Fed has for additional stimulus.

A great column by Ron Brownstein underlines a crucial point about America's current political dysfunction. It's not that the country is closely divided, or that the parties are so deeply divided. What's frightening is the combination: voters so closely divided that neither side can expect to get its way, and Washington so deeply divided that compromise is out of the question. It's a formula for furious paralysis at a time when paralysis won't do.

Brownstein worries that, whichever way it goes, the Supreme Court's ruling on Obamacare will only aggravate the problem--partly because the Court itself is both closely and deeply divided.

The safe forecast through the election and beyond is heightened ideological confrontation in both Congress and the courts over Washington's reach. The alternative would be for each party to recognize that it lacks the electoral support to impose its agenda on the other--and instead to seek compromises that reflect the nation's diversity of opinion. Judging by last week's questioning, the Court seems less likely to point Washington toward that conciliatory path than toward a far more contentious one.

Maybe, but my take on what the Court will do is a little different. Though I'd be surprised if it said so, the Court will be mindful of the very prospect Brownstein describes. Precisely because the political division in Washington runs so deep at the moment, on a question of this importance the Court will be more inclined towards deference to the elected branches. Of course it will be criticized whatever it does, but at times like this, restraint is much safer as a matter of judicial standing and self-preservation. My guess is that of the putative no votes, Kennedy, at least, will find a way to support the mandate. (Despite his skeptical line of questioning at the hearings? Yes. What did anybody expect? He was bound to go through the motions of wrestling with a finely balanced decision. If you're the designated swing vote, that's part of the job.) Roberts might go along just for sake of 6-3. Regardless, I'll bet that when Kennedy votes as I expect him to, the minority won't be too disappointed.

We'll see.

I recommend "Why Nations Fail" by Daron Acemoglu and James Robinson to anybody interested in the role of the state in economic development. It's hard to think of a more important question, and the book is a brilliant compendium of stories that bear on the issue, drawn from centuries of economic history and from all corners of the planet. The closest thing to it is "Guns, Germs and Steel"--which is brilliant too, in its way, but less persuasive about the necessary and sufficient conditions for sustained economic growth. "Why Nations Fail" has been warmly and even extravagantly praised. At the level-headed end of the spectrum is this review by Bill Easterly, which I thought very perceptive.

Much as I liked the book, I explain in a review of my own for Bloomberg that I have reservations.

The book puts heavy emphasis on "inclusive" institutions--meaning, in the economic domain, property rights and the rest. Development is all about inclusive institutions, the authors say. My problem is that "inclusive" is one of those terms that demand agreement and shut down thought. If you say "property rights and contract enforcement", a skeptic is encouraged to reply, "That's fine if you've got property, but what about those who don't?" If you say "inclusive institutions", the skeptic is invited to keep his mouth shut. No right-thinking person can object to "inclusion".

As I mention in the review, the late, great Mancur Olson gave a lot of thought to these issues. His term for Acemoglu's and Robinson's "inclusive institutions" was "market-augmenting government". That's less comfortable, and more honest.

Olson believed, like Acemoglu and Robinson, that democracy helps to ground and protect the critical pro-growth institutions. But his reasoning was a bit different.

Observation of two-party democracies tells us that incumbents like to run on a "you-never-had-it-so- good" record. An incumbent obviously would not leave himself with such a record if, like the self-interested autocrat, he took for himself the largest possible net surplus from the society. But we are too favorable to democracy if we assume that the incumbent party or president will maximize his chances of reelection simply by making the electorate as a whole as well-off as possible.

A candidate needs only a majority to win, and he might be able to "buy" a majority by transferring income from the population at large to a prospective majority. The taxes needed for this transfer would impair incentives and reduce society's output just as an autocrat's redistribution to himself does. Would this competition to buy votes generate as much distortion of incentives through taxation as a rational autocracy does? That is, would a vote-buying democratic leader, like the rational autocrat, have an incentive to push tax rates to the revenue-maximizing level?

No. Though both the majority and the autocrat have an encompassing interest in the society because they control tax collections, the majority in addition earns a significant share of the market income of the society, and this gives it a more encompassing interest in the productivity of the society. The majority's interest in its market earnings induces it to redistribute less to itself than an autocrat redistributes to himself.

That's from Olson's Dictatorship, Democracy, and Development--best known for its account of "roving bandits", "stationary bandits", and the beginnings of government. An important advantage of a less rose-tinted view of voters' desires is that it directs attention to ways in which democracies can go wrong, a topic Olson studied in depth. (See The Logic of Collective Action.) If narrow interest groups, with small encompassing interests, get control of government, they will divert income in their direction even if it makes the majority worse off. (Calling Simon Johnson.)

Needless to say, political freedom is desirable in itself, regardless of its economic consequences. We ought to want it even if it made us poorer. The economic case for democracy happens to be strong as well--but it's subtle, and needing a little more in the way of qualification. I'd say it's less to do with "inclusion" than with individualism. Collectivism is "inclusive" but it's also economically harmful. Democracies promote growth if they successfully disperse and balance the power of rival interests. In doing that, their emphasis on individual rights is what counts. As Olson put it:

[Democracies] have the extraordinary virtue that the same emphasis on individual rights that is necessary to lasting democracy is also necessary for secure rights to both property and the enforcement of contracts.

It's not complicated. And the reason isn't Obama. Prepare to be astonished, but as the invaluable James Hamilton explains, it's all to do with world supply and demand. Current global production and consumption run at about 87m barrels a day. If the price had not risen over the past ten years, demand today would be around 100m barrels a day, Hamilton estimates. It took higher prices to hold demand equal to the available supply.

When it comes to global supply, the only country with meaningful short-term discretion is Saudi Arabia. Hamilton starts by quoting the Saudi oil minister...

"There is no rational reason for high oil prices," writes Ali Naimi, Saudi Arabian Minister of Petroleum and Mineral Resources, in today's Financial Times. Well, I can think of one-- if oil prices were lower, the world would want to consume more than is currently being produced.

... and concludes

The question is not whether there is a rational reason for high oil prices, but rather whether there is a rational reason the world is not producing 100 million b/d today. And if anyone knows the answer to that question, it should be Saudi Oil Minister Ali Naimi.

That about sums it up.

Like everybody else I was surprised that the administration's counsel was so poorly prepared to answer questions he must have known he would be asked. Even so I can sympathize with the fellow because his job was never going to be easy. The best reason to rule Obamacare constitutional--the one that makes the answer seem obvious--is a matter of common sense. But that's a case counsel isn't allowed to make.

The common-sense case goes like this. Contrary to what Justice Kennedy said this week, no important principle is at stake in this decision. For all practical purposes, the economic power of the federal government is no longer constitutionally constrained. By using its tax power, the federal government already forces you to save for retirement (Social Security), insure against disability (ditto), provide for health care in retirement (Medicare), and pay for all manner of stuff you may neither need nor want. The government could perfectly well use its tax power to pay for universal health insurance. Obamacare is a milder dispensation in terms of personal liberty than tax-and-spend schemes that are already in place or any number of tax-and-spend alternatives to Obamacare that would immediately pass constitutional muster.

Am I forgetting the Broccoli Question? If the government can force you to buy health insurance, what can't it force you to buy? The common-sense answer to this, as we've just seen, is straightforward. Nothing. The government can make you pay for whatever it likes--that's where things already stand, and striking down the mandate won't change it. The Constitution as interpreted by the Court these past decades allows the federal government to put your taxes up and use the proceeds to send you a weekly box of broccoli. If Washington instructed you to choose your own basket of fruit and vegetables or else pay a penalty, that would be a smaller infringement of your freedom than the Constitution already allows.

As a practical matter, in other words, there's no "limiting principle". As a legal matter, of course, the Justices who see Obamacare as good policy will bend over backwards to devise one, and those who see it as bad policy will find grounds to be unpersuaded. Justice Kennedy has already told us what this lawyerly criterion could look like.

But I think it is true that if most questions in life are matters of degree, in the insurance and health care world, both markets -- stipulate two markets -- the young person who is uninsured is uniquely proximately very close to affecting the rates of insurance and the costs of providing medical care in a way that is not true in other industries.

"Uniquely proximately very close." Well, something along those lines. But in worrying about whether a relatively liberal method of making you do something is constitutional, having previously determined that a less liberal method of making you do the same thing is perfectly fine, the Court is concerning itself not with an important principle but with a legal technicality. That's not to criticize--it's what courts do. The funniest part is that everybody understands this. If the mandate is struck down, Congress (voters permitting) could turn round and make the penalty a tax, and that would be that. Important principle my eye.

Now of course you can ask whether the Court has been right over the years to use the Commerce Clause to turn the Constitution inside out and dissolve the limits on the economic power of the federal government. That's not an easy question but on the whole I think it has in fact been right. The world has changed, and what we expect of the government has changed. The Constitution had to change as well, and that could be done either by amending it explicitly or having the Court draw on all its reserves of ingenuity and rewrite it judgement by judgement. In America, the Constitution is a quasi-religious document. Its constancy is an inviolable national myth. Changing it therefore falls to the Court and must be done by stealth, with a certain suspension of disbelief on the part of the citizenry. The big disadvantage of amendment by jurisprudence is that it takes an unavoidably political task out of politics and gives it to unelected judges. Obviously, that's also its big advantage.

Whether we like the way the Constitution has been rewritten is beside the point. The thing is, it has been. The Court has all but erased the limits on the economic power of the federal government. So let's not pretend that striking down the mandate would be a victory of principle rather than just a huge embarrassment for the White House, or that upholding it would mark a big new advance of government power. Politically, it matters. Constitutionally, it's a tremendous fuss about not very much.

Obama has bungled the World Bank succession, I argue in a new column for Bloomberg. The choice has had a better press than it deserves.

The prevailing view is that Kim is a smart solution to a tricky little problem: How to maintain a strong U.S. role in the bank while bowing to the growing economic might of developing nations such as China.

I don't think so.

First and foremost, the appointment of Kim, a U.S. citizen, would perpetuate the indefensible custom by which an American heads the World Bank and a European runs the International Monetary Fund. Until Kim's name was put forward, there was wide agreement that the job calls for a highly qualified non- American. The strength of sentiment against the traditional stitch-up is what made the nomination to succeed Robert Zoellick, who steps down from the bank this summer, more awkward for the White House than usual.

The unstated position of those who praise the choice seems to be that Kim isn't entirely American, that his Asian name makes him the next best thing to a foreigner. How clever: The White House gets to appoint both an American, thus preserving its feudal privilege, and a non-American, thus being an enlightened world citizen. The core of this reasoning is the dumbest kind of racism. So far as I know, the U.S. has just one class of citizenship. Kim is an American.

Let's remind ourselves, as we apparently need to, why the current arrangement is wrong...

Read on.

It might have been have a mistake to read Bill Easterly's review of Acemoglu and Robinson on "Why Nations Fail" before I finished reading it myself, but Easterly is not to be set aside. I'm two-thirds of the way through the book, and enjoying it very much--but with reservations, which I'll explain later. Nonetheless I dare say I'll be agreeing with Easterly's overall assessment.

"Why Nations Fail" is a vital work for these times, directing our attention to the big picture regarding the poverty and prosperity of nations. It an eloquent and powerful statement of the long-run success of democratic capitalism at a time when it is under attack.

The new Brookings Paper by Larry Summers and Brad DeLong, Fiscal Policy in a Depressed Economy, is an important document and should be widely read. It explains the conditions under which fiscal stimulus can be self-financing.

In normal times central banks offset the effects of fiscal policy. This keeps the policy-relevant multiplier near zero. It leaves no space for expansionary fiscal policy as a stabilization policy tool. But when interest rates are constrained by the zero nominal lower bound, discretionary fiscal policy can be highly efficacious as a stabilization policy tool. Indeed, under what we defend as plausible assumptions, temporary expansionary fiscal policies may well reduce long-run debt-financing burdens.

If you are at the zero bound, have hysteresis in output and employment (likely in severe recessions), and your long-term interest rates are low, you need only a fairly modest fiscal multiplier for stimulus to improve the long-term debt position. Not many countries are in this position--but the US is one, and the UK is another.