Lawrence Summers on European fiscal policy Lawrence Summers sees a parallel between European fiscal policy and 1970s U.S. policy in Vietnam. Back then, policymakers participated in a "stalemate machine" where they "were tragically caught in a kind of no-man's-land -- unable to reverse a course to which they had committed so much, but also unable to generate the political will to take forward steps that gave any realistic prospect of success." At every point in the European debt crisis, policymakers have done enough to stave off collapse without taking steps to ensure permanent solutions. "Perhaps inevitably, the gaps between emergency summits grow shorter and shorter," Summers says. This has hurt policymakers' credibility. Because they wrongfully believed Greece would be able to pay back 100 percent of its debt, they have less ability to convince us Spain and Italy rest on solid ground, even if they are right. Luckily, through all this, the new IMF director Christine Lagarde has stood by three principles. First, "multiple sovereigns with independent budgeting and banking regulation will over time place unsustainable strains on a common currency," Summers says. "There must now be simultaneously an increase in the central financial commitment to the financial stability of member states, and a reduction in their financial autonomy, if the common currency is to survive." Second, she has recognized that there is insufficient capital in the European banks. Third, Lagarde supports -- as her predecessors at the IMF have not -- an expansionary monetary policy. "Europe can handle its debts and contribute to a stronger global economy only if it grows. This will require both aggregate fiscal and monetary expansion." Finance ministers and governors of central banks will meet in Washington next week, Summers says, and they must take up some of Lagarde's prescriptions and find "a clearer way forward for Europe" or they will have failed.
Jeffrey Goldberg on Palestine "The Palestinian national liberation movement has arguably been the least successful such movement of the past 100 years," writes The Atlantic's Jeffrey Goldberg in Bloomberg View. "Even so, independence was within reach of the Palestinians at many different points in their history." Time and again they have rejected offers that would put them on the path to Palestinian statehood, Goldberg says. Now, Palestinian Authority President Mahmoud Abbas will seek statehood at the U.N., but this move "will only defer" the chances of an independent Palestine, Goldberg writes. Abbas will ask for a state on the West Bank and in Gaza, with a capital in East Jerusalem. But neither Israel nor the United States supports that solution. "Most Israelis view it as an attempt to limit their options in future negotiations, or to deny to them the holiest sites of the Jewish people and delegitimize the idea of a Jewish state." The U.S. opposes this proposal not because it rejects the idea of an independent Palestine, but because it sees it as a shortcut to the only true solution through negotiation. "The particular tragedy" here, Goldberg says, is that there exists "a pragmatic alternative to the fantasy-based approach to independence." Palestinian prime minister Salam Fayyad has restored security in the West Bank, prevented terrorist attacks on Israelis, created a transparent government, and helped create "a viable economy." "Fayyad has the potential to be the David Ben Gurion of the Palestinians -- a pragmatist, like Israel's founding prime minister, who builds the structures of a state in advance of statehood, as a means of showing the world that Palestine will be a viable and constructive addition to the community of nations." Netanyahu and his "increasingly right wing coalition" also stand in Fayyad's way, but Abbas is the real obstructor here, Goldberg writes, and his purposes might be more symbolic than anything. "If Abbas's goal at the UN is the enfranchisement of his people, then he will not succeed. If his goal to demonize and delegitimize his enemy, then he very well might."
Paul Volcker on price stability Ben Bernanke recently upheld the Federal Reserve's commitment to "price stability." Bernanke's resolve wouldn't be news, writes former Fed chairman Paul Volcker in The New York Times, except that it comes amidst calls for mild inflation. The calls arise from "a sense of desperation that both monetary and fiscal policy have almost exhausted their potential, given the size of the fiscal deficits and the already extremely low level of interest rates," Volcker writes. "Perhaps 4 or 5 percent a year would be just the thing to deal with the overhang of debt and encourage the 'animal spirits' of business, or so the argument goes." A little inflation might induce businesses to invest for later, it might resolve our debt problems, and it might decrease the trade deficit, supporters of inflation say. We should recall the lessons of economic history, Volcker says, and particularly the "stagflation" of the 1970s. If the Fed "remains vigilant," we will not see significant inflation, but Volcker warns that policy makers might slowly and purposefully allow the inflation rate to creep up. "What we know, or should know, from the past is that once inflation becomes anticipated and ingrained -- as it eventually would -- then the stimulating effects are lost," Volcker says. "It is precisely the common experience with this inflation dynamic that has led central banks around the world to place prime importance on price stability." Volcker urges Obama to take on Bernanke's commitment to price stability as well as deal with the Federal debt in the coming years.
E.D. Hirsch Jr. on SAT scores Last week brought news of another troubling drop in SAT verbal scores, writes literary critic E.D. Hirsch Jr. in The New York Times. The test provides important metrics of the strength of primary and secondary schools. "This score correlates with the ability to learn new things readily, to communicate with others and to hold down a job. It also predicts future income." Some say minority scores will not improve until larger problems like poverty are resolved, but a huge drop in scores across demographic groups in the 1970s shows that other causes are often responsible for declining performance. Back then, curricular changes that moved from a "content-rich" elementary school approach to a test prep approach led to the drop in scores, Hirsch says. Language learning in early childhood is particularly important because "those who are language-poor in early childhood get relatively poorer, and fall further behind, while the verbally rich get richer." That's chiefly because of "word learning." If one knows many words, he will acquire new ones more easily. "This sounds like an invitation to vocabulary study for tots, but that's been tried and it's not effective. Most of the word meanings we know are acquired indirectly, by intuitively guessing new meanings as we understand the overall gist of what we are hearing or reading." That means more time should be invested in making sure young children hear and understand what is read to them. "By staying on a subject long enough to make all young children familiar with it (say, two weeks or so), the gist becomes understood by all and word learning speeds up." "Current reform strategies focus on testing, improving teacher quality, increasing the number of charter schools and other changes." These changes, Hirsch says, are important but not sufficient.
Ray Takeyh on Iran's crumbling legitimacy The media coverage surrounding Iranian President Mahmoud Ahmadinejad's upcoming speech at the U.N. should focus on this: "The Islamic Republic has entered its post-authoritarian stage," writes Council on Foreign Relations fellow Ray Takeyh in The Washington Post. "To be clear, the clerical regime in Tehran is not embracing democratic principles, nor has it softened the forced repression central to its rule." But the regime depends on ideological conformity, and the Green movement, "has exposed the regime's systematic lies and turned an enduring light on its abuses." The Iranian regime hypocritically claims to "harmonize pluralistic values with Islamic religious injuctions." It calls for elections, for instance, but uses divine injunction to fabricate results. The regime's legitimacy rests on the people's willingness to accept its obvious lies. "For the Islamic Republic to survive, the Iranian public must deny some basic truths. The Iranian people have cooperated for decades," Takeyh writes. The Green movement has ended that complicity. "Through everyday acts of defiance such as work stoppages, student protests and denunciations through social media, the opposition contests the regime's justifications, unraveling its fabrications and denigrating its claims of omnipresence." The Arab Spring has unsettled the ayatollah and other leaders. The Green movement must take note and "move beyond de-legitimizing the regime into confronting it on the streets... The Green movement and the Arab Spring are intimately linked, sharing the same values and shaping each other's destinies." Takeyh concludes, "When Ahmadinejad takes the stage at the United Nations, the only thing that will become apparent is how the world -- now including the Iranian people -- has moved beyond his republic's stale shibboleths and discursive postulates."