Andrew Hagen

Originally posted to pen-l. Then, on 10 October 2001, I was removed from pen-l by the moderator, Michael Pearlman. Last edited: 15 October 2001.

Were the attacks justified? Can they be rationalized? If not, what would be the best response to them?

I feel that these are important issues for pen-l (Proceedings of Progressive Economists e-mail list, link because they concern the Left’s ethics, morality, and relevance. We need to figure out whether to take one side over the others, refrain from taking sides, or take an entirely original position. Obviously, not everyone on the Left will take the same position. We need to discuss this, however. The politics of old will not stand in the new century.

Let us not allow our respect for a man of Noam Chomsky’s stature to cow us from rebuking him, if, indeed, he deserves to be rebuked.

There is evidence of an emerging brouhaha over what may be called the Chomsky position. Chomsky has attracted criticism from leading commentators on the left, in Christopher Hitchens (see other pen-l messages), and the right, in David Horowitz. I’ll spare you Horowitz’s pathetic screed, but if you want to see it, it’s at this URI. David Horowitz column. (Note: 12 December 2003. This article is now available at another URI.)

Z Magazine is apparently the original print and electronic source of Chomsky’s oral interview with B92, the radio station. The URI is: B92 interview.

Besides the B92 interview, Chomsky has other “composite” interviews on zmag.org. I don’t know the origins of them. Chomsky is linked closely to Z Mag, so I consider authentic those words attributed to him on their site. Here are their URI’s: composite interview 1. | composite interview 2. | composite interview 3. | composite interview 4.| composite interview 5. | Z Magazine front page.

Chomsky’s responses are presented over and over in the anarchical organization inherent in the interview form. Below, I will characterize each of his main assertions, sometimes by quoting him, and then reject each of them in turn.

(Chomsky sometimes takes one position and then switches to another. For example, was it Bin Laden’s network or not? He says that it was at times, and then says we don’t know for sure elsewhere. I try to brush over this ambiguity in my summary of his views.)

SUMMARY OF THE CHOMSKY POSITION

Chomsky says the attacks were a “crime against humanity.” In addition, the attacks of September 11 were terrible in part because they resulted in more repression of the Palestinians.

Did the attacks have a reason? If so, it was not liberation, Chomsky says. Bin Laden and his network have no concern for the poor and oppressed people of the world.

Nevertheless, he says, “Just about every crime—whether a robbery in the streets or colossal atrocities—has reasons, and commonly we find that some of them are serious and should be addressed. At least, that is the course we follow if we have any concern for right and justice, and hope to reduce the likelihood of further atrocities rather than increase it. The same principles hold quite generally, with due attention to variation of circumstances. Specifically, they hold in this case.”

Moreover, “There are hysterical cries that we dare not look at the reasons that lie behind criminal acts carried out by our enemies (it’s fine in other cases) because that amounts to condoning them. Aside from the transparent absurdity, that stance is profoundly immoral, on the most elementary grounds: it increases the likelihood of serious harm. And like other immoral acts, we should ask what lies behind this disgraceful stance. The answers often are not pretty.”

Thus, to question whether the attacks had a reason is immoral. And we should discover the reason why people are so immoral in their questions.

So, according to Chomsky, why did the attacks take place?

The attacks, he says, were not direct consequences of US policy, but were indirect consequences. The “Afghanis” (Arab militant-radical-fundamentalist-terrorists trained in Afghanistan) have been on the West’s intelligence payroll for a long time. As a result, we have “blowback.”

Indeed, “the terrorists draw from a reservoir of desperation, anger, and frustration that extends from rich to poor, from secular to radical Islamist. That it is rooted in no small measure in US policies is evident, and constantly articulated to those willing to listen.”

As an illustration of this anger, “The Wall Street Journal published a review of opinions of ‘moneyed Muslims’ in the region: bankers, professionals, businessmen. They expressed dismay and anger about US support for harsh authoritarian states and the barriers that Washington places against independent development and political democracy by its policies of ‘propping up oppressive regimes.’ Their primary concern, however, was Washington’s twin policies of support for Israel’s harsh and brutal military occupation and devastation of the civilian society of Iraq. . . .”

Finally, Chomsky criticizes potential military retaliation as motivated by revenge. He criticizes the West’s failure to use diplomacy and international organizations to redress the crimes of terrorism.

CRITICISM OF THE CHOMSKY POSITION

The chief lesson of the 20th Century is that evil can happen without a discernible cause. Evil sustained is a choice. When it happens, one must respond in an intelligent and brave manner, or it will not be stopped. In the case of many crimes, such as serial murders, there is no “reason” why they happen. Science has not given us a complete profile of what creates a murderer, and it never will. It can’t. It is immoral to not confront evil once it is faced.

Does this crime have a “reason” or “reasons”? No. This was not a slaughter like that done by an army. This act converted civilian vehicles into weapons of mass destruction in an act that was calculated to kill as many as possible. The only political statement was that of a dislike of the US. We don’t know precisely the reason for the dislike. The only “reason” for the attacks was to kill. That is no reason.

Chomsky is right to find grievous fault in Western governments and intelligence agencies. But Americans never hijacked a civilian airliner of an Arab country and crashed it into a mosque, or another large building filled with innocent civilians. This attack is distinct from the atrocities committed by the US. This attack raises the bar.

Yes, there is resentment of America in the Arab world. It is unclear under Chomsky’s reasoning, however, why there was no network like Bin Laden’s in Nicaragua, Southeast Asia, or East Timor.

Chomsky does not attempt to show how Bin Laden’s network drew from the well of anger against America that inspired the attack. Where is the evidence that widespread anger contributed to the attack? Chomsky attempts to use resentment as a background prop on the stage he has set. I’d like to know why widespread resentment is important to understand the attacks.

Let’s take Chomsky’s advice and look for a reason why there is such resentment of America. In part there is resentment for policies that result in economic and political oppression of Arabs and Muslims. A large part of the hatred, however, is created by Arab propaganda that is wildly anti-Semitic
(yes, I know Arabic people are Semitic), anti-Western, and bloodthirsty in its calls for the death of Westerners and Jews. We have precious little such rhetoric here in the US, as such, or directed against Arabs or Muslims or even terrorists. Such rhetoric should not be considered benign. Let us not forget how the totalitarian regimes of the past succeeded in engendering hatred in their own populace for a designated scapegoat and enemy. That is in part what is happening here, against the US and Israel.

Diplomatic channels and international organizations should be used to redress crimes such as terrorism. Herein lies a known failing of the West. Chomsky fails, however, to condemn terrorists and the governments sympathetic to them for not using those same channels to redress their grievances, however.

To oppose Chomsky’s view does not entail either revenge or military strikes, only that the attacks were unjustified, unreasoned, and unprincipled. Many non-military options are both realistic and strategic alternatives. While I personally favor military strikes limited in duration and scope, I recognize that an alternative to military action may be a good idea.

My criticism of Chomsky is more informed than before. The problem with Chomsky is not that he unabashedly justifies the attacks. The problem is that he condemns the attackers with one hand, and appeases them with an unwarranted sympathy and understanding on the other. These thugs do not represent the Arabic peoples of the world, and they do not represent Muslims. They represent nothing but evil. I again call on Chomsky to apologize to the families of the victims for his statements.

If the Left is to remain a force that is at all moral, ethical, and thus relevant, we need to adopt a perspective distinct from the Chomsky position. Perhaps we must let the icons of the past go with good graces and honor into retirement.

Note:Originally posted to pen-l on 21 September 2001. Last edited 28 September 2001.

Noam Chomsky’s position on the attack of September 11 was carried by B92, and reprinted in Counterpunch.

Chomsky interview.

The initial question and its answer are striking. Chomsky is asked, “Why do you think these attacks happened?” In response, he engages in a long, predictable diatribe against US foreign policy. Bin Laden was a creature of the CIA, etc, etc.

Chomsky’s analysis is non-responsive, fallacious, and contentious. I call for Chomsky to apologize to the families of the victims. Below are the reasons.

Chomsky’s analysis is non-responsive. Chomsky never answers the question of why the attacks happened. He only speaks about the injustice that the US has perpetrated upon the world. Not explicitly, but by implication Chomsky sends the message that “we” deserved it.

The meaning of “we” is unclear. It could mean the body politic of the United States. It could mean the people who actually died, many of whom were not political decision makers. For example, did the 300 fire fighters deserve to die because they were too uncritical of US foreign policy?

Chomsky does not answer the question of why the attack happened. He only asserts that Muslims resent the United States. Yet, resentment does not generally lead to such atrocities.

Why is there evil in the world? Let us leave that question to the philosophers and theologians. (Although, since, when properly drawn, philosophy is never inconvenient, it is worthwhile to say that evil is often a conscious choice, as I explicate in the following essay, “Chomsky and his Critics.”) To answer the question that Chomsky leaves open, it happened because someone conceived of unleashing an attack of grand magnitude against the United States, and then put that idea into effect. In failing to address the question as put, Chomsky’s analysis is non-responsive.

It would behoove the Left to develop the reputation that its commentators answer questions in a straightforward manner. Chomsky’s analysis is of no help in this regard.

Chomsky’s analysis is also fallacious. The attacks were well coordinated, meticulously planned, and executed by agents who had to have received extensive training. Four airplanes were successfully hijacked, and no airplanes were targets of unsuccessful hijack attempts. The hijackers carried nothing more than short knives and box cutters (comparable to x-acto knives). (Note: 12 December 2003. Today we know that little if any evidence suggests the hijackers used box cutters.) They made some bomb threats. The audacity of the attacks indicates either total idiocy on the part of the hijackers backed by the best luck imaginable, or extreme confidence backed by a masterful plan that was rehearsed over and over. As an inference drawn from several media reports, there is a real possibility that all of the hijackers were using stolen identification documents. All of these facts point toward a military operation, paramilitary operation, or “black ops” operation.

Chomsky states that the attack occurred because America is resented. For the sake of argument, I grant that America is resented by the entire Muslim world. Nevertheless, it is a plain fact that the attack has NOT met with popular approval anywhere in the world, and no sustained popular approval in the Muslim world. While there were a few brief celebrations in the wake of the attacks in Palestine and elsewhere, those celebrations have subsided now that the truly horrific scope of the atrocity has become well known. From a population that resents us, it is striking how little approval the attacks have received.

While many may resent America, the attack came from a relative few who did not ask for and have not received popular support for their action. Many Muslims resent America, but none except for a very few of the Osama Bin Laden ilk have publicly supported the attack. Thus, even widespread resentment of America by Muslims could not have generated these attacks. These attacks could only have been generated by a relatively small group of dedicated people who see resentment, and hence hatred, as tools to be sharpened, not as necessary preconditions for a successful attack.

It is a sad commentary on the state of what passes for intellectualism on the Left today that the best that such a leading commentator can do is parrot the mass media in searching for a reason “why they hate us,” restated as why they “resent” us. Popular resentment or hatred is mere background to this picture.

Perhaps Chomsky would argue that the United States is so highly resented that an attack of this nature was inevitable. Maybe there is some cosmic justice in the sometimes menacing (Mossadegh, Allende) and often blundering superpower (Somalia pharmaceutical plant, Iranian airliner) finally getting a taste of what it dishes out.

Does Chomsky propose that there is some cosmic justice at work here? He often mentions the “cycle of violence.” Is this a spiritual force that is wreaking a terrible justice on America? Perhaps this is Chomsky’s belief, but it is unsupported, and I do not share it.

In a response to a later question, Chomsky suggests that the US is pressuring Pakistan to reduce humanitarian aid to the suffering people of Afghanistan. Even if true, that point breezes over the hard fact that the US is itself the provider of a significant proportion of humanitarian assistance to Afghanistan. This flawed statement of Chomsky’s is illustrative of my larger point.

Chomsky’s analysis is unsupported. To the extent he begins to answer the question posed, his reply is riddled with fallacies.

So far, I have argued that Chomsky’s analysis is both non-responsive and fallacious.

Chomsky’s response is also contentious. In failing to answer the simple question of why, and engaging in a reckless crusade of fallacies, Chomsky effectively blames the United States for the attack that befell its people. I would ordinarily understand such criticism. The foreign policy of the US is highly flawed and often immoral. Perhaps if American foreign policy were better considered, this would not have happened.

Chomsky has gone so far as to justify the attack, however. The attack occurred because the Muslims are concerned that the United States has been, among other things,

“propping up oppressive regimes.” Among the great majority of people suffering deep poverty and oppression, similar sentiments are far more bitter, and are the source of the fury and despair that has led to suicide bombings, as commonly understood by those who are interested in the facts.

(quoting Chomsky’s analysis)

I stand in solidarity with all the oppressed people of the world. Merely because one is oppressed, however, does not justify any action in support of liberation. For Chomsky, though, it is apparently all relative. Whatever seems expedient to throw off the yoke of the oppressors, including any manner of atrocity, is understandable to Chomsky.

Chomsky is not disturbed that suicide bombings are known to be generated by fury and despair. He still understands them. If enough emotional content is put into an action, is it inherently justified? No. Instead, we should insist on rationally considering the ethics of conduct. I stand for rational judgment, not the unwarranted pity Chomsky holds out as a prop. Liberation tactics must be ethical or they must be condemned.

It is contentious to justify these attacks as generated by resentment, when all the evidence points toward a lack of any popular approval. While I stand with Chomsky in his criticism of oppression supported by the US government over the years, the September 11th suicide attacks are beyond the pale of humanity. Whoever is responsible is a criminal of the first rank, both under the laws of the United States and under international law. There is no justification for the attacks whatsoever.

For Chomsky to suggest that this attack was somehow connected with a liberation movement is entirely irresponsible and invites his considerable audience into an irrational support of evil. I have argued that Chomsky’s analysis is non-responsive and fallacious. For the above reasons, Chomsky’s analysis is also contentious.

When the Left’s leading voice resorts to such knee jerk reactions, it is a sad day indeed. Chomsky’s thinking is appalling, deplorable, and symptomatic of an American left wing that is long overdue for an overhaul. As an American member of the political Left, I call for Chomsky to reconsider his remarks, and apologize to the families of the victims for the sentiments he has expressed.

Note: Originally published 19 March 2001. Updated 25 March 2001. Thanks to pen-l subscribers for critical commentary. Updated 12 December 2003 to remove the political commentary that appeared at the end.

When the US economy grew with less vigor in the fourth quarter of 2000, could Europe be starting to flex its muscles? Now, with the central bank of the US set to lower interest rates, a steady rise of the Euro against the dollar is possible. A fear of a fall off in the value of the dollar; a reduced US government surplus or potentially even a deficit; and a reduction in interest rates paid to lenders; all reduce the incentive to invest in the US economy. The overall economic outlook for the United States is thus poor.

U. S Gross Domestic Product increased 4.2% in 1999. In the four quarters of 2000, US real GDP increased at annual rates of 4.8% (1Q); 5.6% (2Q); 2.2% (3Q); and 1.1% (4Q). Growth slackened as the year progressed. Overall, real GDP grew 5.0% in 2000. BEA. The fourth quarter numbers are preliminary estimates.

The accumulated national debt now stands at $5.7 trillion. Treasury. Japanese investors alone hold about $350 billion in US treasuries, and $150 billion in other direct investment in the US (FDI). NYT. (Thanks to L. P. for the link.)

Lower expected returns would prompt some of these investors to liquidate and re-invest elsewhere, quite likely in other countries. Far beyond the fraction of US economic space these investments occupy, the effect of a sell-off would be felt in the US in the downward trend of the value of similar investments. For this reason and reasons analogous to it, the US central bank authority, the Federal Reserve’s Open Market Committee, does not have the room to maneuver that a monetarist response would require. If “the Fed,” as it is affectionately called, lowers interest rates too much, the value of the dollar will decline in relation to the euro and other world currencies. Japanese and other investors would have an incentive to take their money out of the US and put it into other countries. Thus, it is unlikely that they can budge interest rates down much more than they have already done. The Open Market Committee’s next move is set for tomorrow, March 20.

If a monetary policy won’t work, will a fiscal policy cut it? The Bush tax cut, a fiscal stimulus plan, is unlikely to have much effect because it will go in large measure to those taxpayers who already have relatively high incomes, and thus relatively high discretionary incomes. They will be free to invest the money rather than spend it. They will also use some of it to buy imports that will not help economic growth immediately. Investments can result in economic growth eventually, but only with time. Taxpayers with lower incomes and lower discretionary incomes would spend the money they receive much faster, resulting in a boost to consumption spending, and directly translating to an increase in GDP. If any tax reduction package is passed, it will have to be weighted heavily in the favor of the rich to win the President’s signature, however.

The US economy will clearly grow slowly in the first quarter of 2001, or actually decline. Reduced income tax receipts will follow, resulting in a lower budget surplus, or possibly a deficit. In a similar vein, some states are already reporting dramatically lower sales tax receipts. NPR, 19 March 2001.

Another impediment to a positive effect from tax cuts would be the need to phase in the cuts over time. Without front loading, no impact at all would be felt until 2002. President Bush advocates front loading (changing the withholding rates after the legislation is signed into law), but even then the plan’s largest impact will take place years from now, especially of that part of Bush’s tax plan which abolishes the so-called “death tax,” or estate tax, which applies only to the estates of dead people with a net worth greater than $675,000.

Reduced profit prospects in the US should steer capital to the other major capitalist economies: Japan and Europe. Japan, however, is in the midst of a long recession. If money was pouring out of the US, much of it should be going to Europe. The new European Union currency, the euro, should naturally benefit from this.

The euro is not going anywhere, however. One euro (€) is currently worth
0.897845 US dollar. See a web site for an up-to-date conversion. This represents a three-month low spot for the euro. Euro-zone consumer prices rose an unexpectedly high 2.6% annual rate in February 2001, uncomfortably high above the European Central Bank’s target of 2%. FT. The UK pound was not significantly better off against the US dollar than the euro over this period. Useful Java based graphs are available at The Economist. The €/$ ratio may increase, however, if American fortunes continue to decline, and European fortunes improve. If US interest rates decrease, the value of the dollar may decline in relation to the euro, and that could staunch the outflow of capital in the current account deficit, but it will not really help the situation, because the import-dependent American economy would have to spend more to buy badly needed imported goods and services.

The American outlook is particularly grim due to the export and import picture. The current account deficit (commonly known as the “trade deficit”) of the US grew spectacularly from $331.5 billion in 1999 to $435.4 billion in
2000. BEA. That much money flowed out of the US last year. Increases in the price of petroleum exports accounted for much of this.

It doesn’t help that OPEC nations are determined to raise the price of oil in order to protect their profits from the expected fall off in demand for their product. Yahoo. The reduction in world oil demand is a result of failing economic fortunes in Asia and the United States. The Bush tax cut plan would only exacerbate the current account deficit, albeit in non-spectacular manner, from the increased number of luxury imported goods that tax cut beneficiaries would buy. If only the European economies would now begin to take up the slack left by the American economy’s sluggishness, the world economy would continue to prosper. It does not look like Europe has the capability to be the world’s economic leader, however.

The economies of China and India, or even Russia, can draw upon natural resources and large populations, but none appear ready to grow as the then-lionized newly industrialized countries did in the 80s and 90s. Each of the three is too mired in corruption to attract much Western capital. Efforts at combating corruption are underway in both Russia and India, however.

Is OPEC to blame? The increases in 1999 and 2000 of fossil fuel prices has surely hurt the US economy, but not to the extent done by the 1970s oil price inflation.

Note: This was originally published on 1 February 2000.

There may be trouble in the economy. Most pressing are the unsustainably high levels of private debt and the trade deficit. Of lesser threat are public debt and inflation.

Although public debt has remained approximately equal to national income (GDP) for several years now, the trend is downward. Responsible for the end of the era of budget deficits is the burgeoning period of economic growth. Without a significant hike in the tax rate, tax revenues are nevertheless far above their previous level due to increases in wages, salaries, and profits. More governmental revenue and restrained government spending has resulted in the beginning of an era of budget surpluses. GDP grew 4.3% in 1999, including 5.8% over the last three months. Inflation remains largely curbed, with consumer prices rising 2.7% in 1999, and producer prices 3.0%. Unfortunately producer prices rose 4.5% over the last three months, possibly indicating more inflation ahead.

In my view, however, inflation is not a real danger. The unemployment rate remains steady at 4.1%, dropping only slightly from 4.3% last year. This leaves millions of workers looking for work. Controversy arises when right-wingers argue that approximately that many workers are likely transitioning between jobs, and on the other hand left-wingers argue that the unemployment rate undercounts the number of workers actually without jobs. While those on the right-wing argue that more economic growth cannot take place without bidding wars for scarce employees, the economy continues to boom with only slight inflation and a steady, if a slow reduction in unemployment. The only bidding wars going on are in very selective job categories, such as software developers. The unemployment rate undercounts by skipping those who aren’t seeking a job, and the underemployed. The ranks of the underemployed include those part-time workers who would prefer a full-time job, or simply more hours. If the full amount of unemployment were counted, the rate would be 2 or three times higher than it it today. There is quite a bit of slack left to take up in the labor market before inflation sets in.

Inflation might be limited further by surplus inventories. A number of companies, McDonald’s for example, took the Y2k precaution of stocking up on inventories of basic goods and supplies. Since few problems arose at the onset of the new year, such companies will need to draw down their inventories, reducing future purchases until their inventories are again at comfortable levels. It seems likely that the corresponding reduced demand for producer goods will maintain enough supply to stem any further rise in producer prices.

The Federal Reserve Board’s Open Market Committee, presided over by Alan Greenspan, will probably announce a relatively large increase of 0.5% in short-term interest rates to fight the threat of inflation. The greatest effect will be to soothe the inflation fears of investors, however. With inflation nearly stalled, the action does not seem appropriate outside the necessity of fulfilling public expectations.

A far larger problem than public debt is private debt. Private debt as a percentage of GDP has steadily risen, from 80% in 1960 to 132% today. This relatively high level of private debt has accrued due to low interest rates and continual economic growth. Should the economy begin to stall, however, this debt burden would significantly worsen the situation in households with high debt levels, and for employees of companies that can’t pay borrowers back.

A common theme in the news is a bemoaning of easy credit for consumers, and a moralized enjoinder to audience members to not immerse themselves in debt. Nevertheless, total household debt increased from 85% of total household income in 1992 to 103% in 1999. Historically, this is a high level. With low interest rates, consumers are spending more freely with credit cards and taking on more mortgage debt than they can easily pay back. It likely will not remain that high for long without fairly serious consequences.

The truly overbearing problem is not credit cards and mortgages, however, but the relation between stock market prices and the ability of consumers and businesses to service their debt burdens. One of the lessons supposedly drawn from the stock market crash of 1929 was that allowing speculators to borrow in order to increase their leverage in an equity was fraught with risk. Regulators seem to have forgotten the lesson. Over the last two months alone, as the major stock market indices have risen, margin debt has increased by 25%. Should share prices fall by a significant percentage, borrowers on the margin who lost their bets will be called to pay more into the house to keep playing. Should this scenario take place, would they have the money?

Additionally, many corporations are dependent upon a healthy share price to do such things as pay employees bonuses and merge or acquire other companies. For example, many Internet companies pay their employees miserly wages, relatively speaking, but make up the difference in stock options. With the late boom in the IPO market, many talented people have taken such jobs with an eye toward hitting it big when the IPO takes place. Many of these have been successful. Additionally, companies like AOL are able to buy others, like Time-Warner for $166 billion in an all-stock transaction. Non-financial corporations have bought back large chunks of their own shares despite borrowing above and beyond this level. Should a crimp in their cash flow take place, companies may halt their buybacks, further depressing share prices.

The biggest worry for the US economy is the trade deficit, however. Currently the trade deficit, or current account deficit stands at 4% of GDP. Translated, that means that 4% of national income is going to other countries. Another way of looking at it is that foreigners are holding a larger and larger chunk of debt in America. This has in part is a side-effect of the economic boom. With the American economy doing well, inherently and in comparison to others, an investment in American securities is wise. Looked at in still another way, this is another symptom of the US debt burden, both public and private. The American economy is awash in debt, not in investment. The savings rate is not nearly so high as it is in other countries, especially Japan. Thus, there will be less investment by Americans in foreign countries, and less profits coming home as a result of it. America is a victim of its own success. If it weren’t for the tremendous value American investments return to foreign savers, the trade deficit would disappear. But then, other problems would arise.

The recent news is that the euro (€) has fallen below the “psychologically important waterline of $ 1 / € 1. The European economies remain as a whole sluggish. The German economy in particular is an underachiever, with double-digit unemployment accompanying a meager 1.2% growth in GDP in 1999. The slow-growth situation in Europe has led investors to shun the euro, despite its heralded role of challenger to the dollar. Before we Americans start cheering, however, we’d best consider ways to weaken the dollar. The result would be more exports and a lowering of the trade deficit. The trouble with the trade deficit is that it makes debt harder to service. Foreign investors want what’s coming to them. If the American economy can’t generate enough export income to pay the piper, they will gladly take their part of national income. And should the economy tank, the low domestic savings rate will mean a continued American reliance on foreign investment. The only way to continue to entice it would be to raise interest rates. That’s just what you want to avoid when your economic cycle goes bust.

Let me strongly suggest that I am not a doomsayer. I am simply encouraging the private sector to follow the lead of the public sector and balance their budgets. I’m also suggesting that we attempt to increase exports wherever possible. It is a controversial political stance, but it is also a reality. The US is trading with China. President Clinton said it best in the State of the Union address. Our markets are already open to Chinese producers. The trouble is that their markets are not open to US producers. China already has one of the world’s largest economies. China is an extremely lucrative export market. One projection even shows that they will be a net importer of food within a few years. Opening more trade with China will enrich both countries. As for the moral qualms, I don’t see how trading with them will do any harm at this point. The Chinese are rapidly transforming their economy into the capitalist mode of production. It’s unlikely, in my view, that a rush of American goods will threaten that. The larger political question is if free trade doesn’t naturally bring about democracy (and no evidence indicates it ever does), do we wish to trade with them or isolate them. I say trade with them now or have to deal with them on a less peaceful basis in the future. Whatever that might be, peace and trade are vastly preferable.

Credit where it is due. Much of my figures and analysis come from the Economist, 22 January 2000. I recommend the Economist as a magazine worth reading. One probably needs to read between the lines, or simply be aware, however, to catch their political slant on things, well-justified or not. On the whole, though, it’s an excellent publication in an era where typos, quizzes, glossy photos, and bright color contrasts fill the popular news journals.