Streetwise Professor

Back when the South Korean corvette Cheonon sunk, I said to myself: if they raise it in two pieces, NoKo torpedo.

Why?  Because that’s what modern torpedoes do.  They don’t hit on the side of a ship.  They detonate underneath the keel, amidships.  The explosion creates a rapidly expanding air bubble that raises the center of the ship upwards.  The bubble works as a fulcrum, and the weight of the fore and aft sections of the ship pushing against this fulcrum break the ship  in two.

Here are a couple of examples:

Note that the ships destroyed in the videos were far larger (destroyers, about 8000 tons displacement) than the Cheonon (a corvette, of only 1200 tons). You can imagine the havoc on board the Korean ship.

And yes, it came up in two pieces:

Even though the cause of the sinking should have been a foregone conclusion once the salvage of the ship had taken place (indeed, once divers had found the ship in two pieces, split as with a saw amidships), the South Koreans undertook a thorough forensic investigation. This investigation provided other evidence that showed conclusively that a North Korean torpedo was responsible.

The reaction in South Korea, and even in the US, has been, shall we say, pianissimo. Yes, Hillary Clinton condemned the attack, and claimed that it could not be “business as usual” on the Korean Peninsula. And the US and SoKO announced joint naval exercises. But the reaction was decidedly muted.

It was deafening, however, when compared to the Chinese and Russian response. As for the Russians:

Russia will not announce an official position on the sinking of the South Korean Navy corvette Cheonan, it emerged Tuesday. Moscow sent three torpedo and explosion experts to South Korea and analyzed findings of an international probe from May 31 to June 7 and was expected to announce its official position early this month.

A Foreign Ministry official said the Russian experts will eventually finish drawing up a report and submit it to the Russian government, but it seems Moscow “has no plan to make any announcement about it.”

“No plan to make any announcement.”  Isn’t that precious.

And why not?  Political cowardice, or opportunism of the “let’s you and him fight” variety:

There is speculation that Russia decided to delay the announcement while the U.S. and China are at odds over the sinking at the UN Security Council.

The UNSC has been unable to reach any conclusion because China is declining to point the finger of blame at North Korea. If Russia endorses the findings of the international probe that the Cheonan sank due to a torpedo attack from the North, Russia would have to join the U.S., the U.K., and Japan, which support South Korea’s position, against the North, a long-term ally.

If it remains noncommittal, Russia could face criticism that it is standing up for a rogue state, as China already does. Its best course of action may be to postpone any announcement until the UNSC takes action against the North.

In other words, let China and the US have at it, stalemating the UN Security Council.  Russia then doesn’t have to take a stand.  I mean, one can understand their solicitous regards for Kim Jung Il’s feelings.  He’s such a tender, sensitive thing.

The psychostate of North Korea is a Soviet and Chinese creation.  It is kept alive through Chinese, and to a far lesser degree, Russian sufferance and support. The refusal of China and Russia even to condemn the attack (the Chinese official media is virtually silent on the entire subject) speaks volumes on their worldviews.  Neither China nor Russia (with China being the most culpable) have played a constructive role in dealing with North Korea since the mid-1990s.  For a variety of reasons, none of them admirable, they have permitted the situation to metastasize to a point where the likely outcomes are terrible or worse.

The whole episode demonstrates, as if further demonstration was needed, the pathetic nature of the UN, and the delusional nature of anyone who truly believes that it can play a decisive role in resolving any serious international dispute.  If anything, it is an obstacle to such resolutions.

Admittedly, North Korea is a hard case because it is governed by crazies and has nukes. So won’t the world be so much more fun when Iran, already governed by crazies, gets nukes too.  A development also facilitated by Chinese and Russian “statecraft” and Western (including American) pusillanimity.

The Cheonon sinking, and the world’s reaction to it (if “reaction” is at all the right word), says a lot about the way things are. Supineness in the face of deliberate provocation–murder, in fact–only brings more chaos in its wake.  Yes, damning the torpedoes and pouring on the steam creates its own hazards, but they pale in comparison to not damning them, and leaving the initiative in the hands of the crazy, the malign, and the crazily malign.

If you believe Russian police and prosecutors, Russian businessmen are among the most criminal and corrupt in the world: well over 100,000 are in jail. But, if you believe many of the entrepreneurs, the police, prosecutors, and security forces are the true criminals.  Businesspeople are allegedly routinely charged with crimes as part of extortion or robbery schemes.  As in this story:

Legislation isn’t enough to change the “predatory” culture of police, prosecutors and judges, according to Yana Yakovleva. The co-owner of Moscow chemical distributor Sofex Co. spent seven months in jail awaiting trial in 2006-07 before she was acquitted of trafficking in dangerous substances.

“The current environment is like swimming with crocodiles in a pool of sulfuric acid,” said Yakovleva, 38. “There’s a war on business people in Russia, and it’s purely business for officials. They can charge you with any crime and incarcerate you to extort money.”

Swimming with crocodiles in a pool of sulfuric acid.  Sounds like loads of fun.

Yalovleva elaborates:

“It has become so severe in Russia that entrepreneurs live with the fear of being arrested,” she tells RFE/RL. “It has become a way of making money [for law enforcement officials], a kind of conveyor belt.”

She’s not alone:

Many in Russia share her view. “That’s the way our law enforcement system functions, with the protection of the FSB security services,” says Yelena Lukyanova, a law professor at the Moscow State University.

“A trend has swept the country, and it already has a name: criminal-legal repression,” she continues. “It is a state within the state. This system has long cut loose and turned against the population, but now it has cut loose even from the federal authorities.”

And it’s not just the small guys either.  According to billionaire Alexander Lebedev, even the oligarchs quake in fear:

For Alexander Lebedev, hardly a week goes by without a call from a crooked security-services agent or cop angling for a chunk of his $3.4 billion fortune. It’s not a lifestyle he wishes for his son, Evgeny.

“Business in our country is like wrestling with bears,” Lebedev said in an interview with Bloomberg Businessweek for its July 12 issue. “I’m not sure you’d want to pass that on to your son — would you?”

Wrestling with bears.  Swimming with crocs.  Too bad Steve Irwin is dead.  Sounds like he missed his calling to do business in Russia.

This gets the nub of it:

“There is almost no such thing as private property in Russia,” said Stanislav Belkovsky, a former Kremlin adviser who now heads the National Strategy Institute, a Moscow-based think tank. “It’s no harder for the authorities to fire an owner than it is an employee.”

By comparison with virtually every other major post-War growth success story, Russia is notable for its low rate of capital investment.  Foreign direct investment is low, and successful Russians are notorious for trying to get their money (and their children) out of the country.

Given the risks, this should not be surprising.  Even a small probability of suffering through the kind of things described in the linked articles is a severe deterrent to entry into business.  (Is it any wonder that the rate of business formation is far lower in Russia than in, say, Poland?)  Even those who do go into business inevitably limit accumulation of capital that could be stolen or expropriated.  They will also spend inordinate amounts of time and effort to conceal assets.  And even those who avoid jail no doubt end up paying obscene sums in bribes.

As is his wont, Medvedev has spoken against the piratical environment in which businesses operate in Russia–and done precious little about it.  The Duma is considering a law that would reduce use of pretrial detention for business crimes.  But Russia’s problem is not too few laws.  It is the utter mendacity of those charged with enforcing them.  Until that changes–and I’m not holding my breath–Russia will remain an economic backwater.

Two major trades took place yesterday: the Russian-US spy exchange, and Lebron James’s trading Cleveland for Miami.

The haste with which the Russian spy episode ended is unsettling.  The rapidity with which the swap was arranged was a clear exception to historical practice.

Merely from an intelligence angle, it would be desirable to squeeze as much information from the ten individuals as possible.  That can’t happen overnight.  Reports are that the FBI is confident that they know all there is to know about this group and its connections.  But you don’t know what you don’t know; prudence would recommend a more thorough probing.  You have to ask questions.  Do the spadework to see if the answers add up.  If not, keep at it.  But it takes time to ask enough questions and investigate enough answers to determine whether you’ve squeezed out all the information you can.  And it may take a while in incarceration to convince people that their best interests are to cooperate completely.

Moreover, just keeping these people awhile would make some folks in Moscow nervous.   That could lead them to back off on other heretofore undiscovered operations out of fear that they have been compromised, or make a move that could lead to the disclosure of such an operation.  Not likely, but a possibility.

Moreover, the trade ratio–10 for 4, where the 4 includes one guy who is arguably innocent of espionage, and is certainly completely different from the illegals captured in the US–looks imbalanced.  The haste, the imbalance, and the palpable embarrassment of the administration (especially the State Department) that has been evident since the story broke, make the release look all too much like an apology.  This validates the Russian whines that they are the injured party.  I’ll bet dimes to donuts that that’s the way it is portrayed in Russia as soon as the 10 hit the Motherland.

You can bet that Putin in particular is snickering.  You know what he would do if he had been in our position.  He would have squeezed it for all it was worth.  He certainly wouldn’t be taking actions to let us save face, as we are clearly doing with the Russians.  He wouldn’t trying to get this “behind us” quickly: he’d be milking it.  This will only enhance the disdain he has for Obama.

It is evident that the “Reset” trumps all.  But if this is supposed to be a two way street, there should be some reciprocity in behavior.  The continued operation of an aggressive group of illegals hardly screams a changed Russian attitude.  And the “no harm, no foul” attitude taken by the US, and the clear anxiousness in the US to brush aside the episode will no doubt convince some Russian decision makers to conclude “if they let us get away with this in order to preserve the reset, what else can we get away with?”  The US approach communicates a certain neediness, a certain desperation to improve relations.  That’s how chumps negotiate.  And the Russians are nothing if not ruthless in exploiting chumps.

I’m not suggesting that a hysterical public campaign (a la Russia after the British spy rock in the park episode) is necessary; an extended period of public silence on the issue while the individuals remain in custody would communicate that although improved relations are desired, not everything will be tolerated to achieve that end.  That would make a true improvement of relations more likely than indulging the bad behavior of your desired interlocutor.

Moving to the other (more trivial) trade of places, I should say at the outset that my once intense interest in pro basketball waned, and dramatically, after Jordan’s retirement.  As a result, I really couldn’t care less about Lebron James.  Indeed, at the risk of sounding like a sports curmudgeon, the whole James phenomenon is emblematic of the reasons why I can’t take most pro sports that seriously anymore.

The one thing that did catch my interest (while watching Sports Center on the elliptical this morning) was Cavaliers’ owner Dan Gilbert’s outraged reaction to the James departure.  His response screams cognitive dissonance.   He considers James’s bolting for Miami a betrayal, and he clearly was willing to pay James as much as allowed under the rules to keep him.  But at the same time, he blasted James for his narcissism.  (A narcissistic NBA player?  What IS the world coming to?)  He also made the rather inflammatory charge that James was a cancer (my word but a fair summary of how Gilbert described him) who quit in all but one game of the Conference Finals against the Celtics.  So, if he’s a cancer, and a quitter who fails during the critical games (something that could never be said of Jordan, or Kobe Bryant, for that matter), why would you want him on your team? Why would you offer him huge money?  Why would you consider it a betrayal for him to go elsewhere?  Why not celebrate the selfish decision of someone you consider a jerk to take his “curse” somewhere else, and say “good riddance”?

In a way, Gilbert’s reaction is symptomatic of why the NBA has devolved in the way it has.  Marquee players are necessary to win, but not sufficient.  Marquee players are, for the most part, insufferable jerks.  Understandably so, but insufferable jerks nonetheless.  So, no doubt Gilbert is not alone in having a love-hate attitude towards superstars.  It’s just rather interesting to see the show-the-love-show-the-hate sides of this attitude in such close proximity–and in public.

* H/T Renee for her idea to pair these stories in a single post under this title.

When writing my post on the Progressive interpretation of the Declaration of Independence, I was curious at what, if anything, Obama would say on the 4th of July.  He spoke, and he didn’t disappoint.  By not disappoint, I mean that he made remarks that effectively confirmed what I’d written, not that I concur with what he said.

Speaking casually dressed from the White House balcony, here’s what Obama said:

“We celebrate the principles that are timeless, tenets first declared by men of property and wealth but which gave rise to what Lincoln called a new birth of freedom in America — civil rights and voting rights, workers’ rights and women’s rights, and the rights of every American,” he said. “And on this day that is uniquely American we are reminded that our Declaration, our example, made us a beacon to the world.”

The remarks are revealing, and contradictory; indeed, they are revealing because they are contradictory.  They are contradictory because the last sentence is directly at odds with the first statement that the Founders’ principles as set out in the Declaration are “timeless.”  Indeed, the “but” in that sentence makes it clear that Obama distances himself from the Declaration as originally written and understood, while he embraces various social rights that would have been alien to the Founders.

Let’s break it down.  First, Obama takes a typical Progressive swipe at the Founders: “men of property and wealth.” They wrote down some principles (unstated), but these were defective because they reflected the interests of the wealthy. But Lincoln corrected these deficiencies:  in a “new birth of freedom,” he gave life to the Progressive rights that are really important.

The conscription of Lincoln into the Progressive cause was quite common in the 1930s.  Leftists routinely claimed Lincoln as a proto-Progressive: perhaps the most memorable example is naming of a group of leftist–and largely Communist–Americans who fought for the Republican forces during the Spanish Civil War the “Abraham Lincoln Brigades.”  The leftists mischaracterized Lincoln then, as Obama does today.  It is ahistorical, and extremely so, to view Lincoln as a devotee of the kinds of social and economic rights that Obama praises.

The contradiction in Obama’s formulation deserves emphasis.  Those voting for a break from the King, and for the Declaration of Independence, had a conception of liberty and freedom that was primarily negative: they wanted freedom from tyrannical government action.  What Obama praises–the alleged product of Lincoln’s midwifery–is quite the opposite.   It is a justification for the intrusion of the state into every nook and cranny of people’s lives.  The allegedly “timeless” principles of the Founders have been discarded–properly so, in Obama’s view–and replaced by something quite different.  Arguably something quite the opposite; so much for timeless.  The contrast between what Obama praises and what the Founders endeavored to achieve is best characterized by what the British musicians played during their surrender at Yorktown: The World Turned Upside Down.

Looking at Obama’s speech, and the broader political debate, it is clear that your view of what happened 1776-1789 is highly correlated with your current political stance.  Obama and other Progressives are not well-disposed, to say the least, towards the ideals of the Founding.  In stark contrast, Obama’s most intense political opponents repeatedly invoke an originalist interpretation of the Constitution, and conspicuously wrap themselves in Revolutionary symbolism–such as the Gasden (“Don’t Tread on Me”) Flag.

If the Civil War was the Second American Revolution, we may be on the brink of the Third.  Not that it will break out into armed conflict, but there is a yawning philosophical and political gap that will spark intense and ugly political strife.  And on either side of that gap stand people with diametrically opposed interpretations of the Founding and its meaning.

Commentor Matt asked my views about the clearing portion of the Squam Lake Report on Fixing the Financial Crisis, which was written by a group of distinguished finance academics.  Since I know that the rest of you were waiting with bated breath but were just to shy to ask, here it goes.

In a nutshell: superficial, question begging, and at times contradictory.

The superficiality is perhaps understandable, because the report was intended to be a high-level overview understandable by policy makers and the public.  But it does undermine the persuasiveness of the report.  Indeed, it makes it potentially dangerous if policy makers aren’t fully aware of the limitations of the analysis.

The Report identifies “two important advantages of clearinghouses” (p. 113): netting and “by standing between counterparties and requiring each of them to post appropriate collateral, a well-capitalized clearinghouse prevents counterparty defaults from propagating.”

Many problems here.  First, as the Report itself acknowledges (pp. 116-117), although clearing has the potential to exploit more completely netting economies, if CCPs are fragmented, adoption of clearing can actually result in a loss of netting economies.

Second, netting benefits are largely private, and if counterparty risk is costly and collateral is a costly way to mitigate it (propositions that the Report accepts), why don’t market participants organize their transactions and create institutions to exploit efficiently these netting economies?  Indeed, mightn’t the growth of large dealers and the failure to implement clearing more comprehensively be the best way to exploit netting economies across the full range of derivatives products (and other scope economies between derivatives and non-derivatives businesses)?  The survivorship principle would suggest so.  These are important, but begged, questions that bear directly on the relative merits of cleared and bilateral markets.

Third, the Report veers into Steve Martinesque How to Make a Million Dollars Without Paying Taxes territory in assuming that CCPs will (or enjoining them to) choose “appropriate” collateral and are “well-capitalized.”  Define “appropriate.”  Define “well-capitalized.”  What are the informational requirements to make these determinations?  Who has the information?  Do the CCPs?  Will regulators?  What are the incentives of CCPs (and their members) to choose “appropriate” margins and be “well-capitalized”?  How do those incentives compare to those in place in a bilateral OTC market?  If negative externalities from default propagation among systemically important financial institutions are a flaw in the existing financial infrastructure, why would one expect a CCP whose residual risk bearers are systemically important financial institutions to choose margin levels and capitalization to internalize that externality?  More begged questions.

Fourth, the statement that CCPs “prevent counterparty defaults from propagating” is not necessarily correct.  Clearinghouses can fail, and lead to the propagation of defaults.  Indeed, one of the self-contradictory parts of the Report acknowledges this: “even a well-capitalized clearinghouse can fail.  The failure of a clearinghouse for all OTC derivatives is likely to have enormous systemic consequences” (p. 117).  Once you recognize this, you need to take seriously the issue of whether CCPs are more or less vulnerable to this propagation than bilateral structures.  The Report fails to address this crucial issue.

The Report is similarly schizophrenic on AIG.  In the chapter on clearing, it states that clearing would not have been sufficient to prevent “the AIG catastrophe” (p. 114).  But in its conclusions, it states “[f]inally, by giving AIG an incentive to use and clear standardized CDS contracts, our recommendations would have reduced AIG’s systemic importance” (p. 149).  Well, which is it?

The former judgment is correct; the latter, not.  Even based on the limited and rather one-sided characterization of the virtues of clearing, it is plain that clearing would not have made much of a difference in the AIG case.  Netting wouldn’t have made a damn bit of difference, because AIG wasn’t a dealer with a lot of offsetting positions.  It had a huge net position on one side of the market.  The same financial firms that would have been harmed by an AIG failure in September, 2008 would have been on the hook in an alternative world where the AIG deals had been cleared, either as members of the CCP, or as counterparties with large net positions that would have been owed money by the CCP, or likely both.  “Appropriate collateral” probably wouldn’t have made a whit of difference either.  The conventional wisdom at the time was that the instruments AIG traded were of very low risk, and hence it is highly likely that original margin amounts wouldn’t have been so large as to dissuade AIG from taking big positions.  Indeed, AIG’s creditworthiness and the low perceived risks of the positions led its counterparties to enter into big trades without demanding independent amounts; if a CCP had demanded cash collateral up-front, AIG could have used that creditworthiness and low perceived risk to borrow to fund the margin.  Moreover, the Report fails to analyze the full implications of a reduction in AIG’s positions resulting from clearing, or higher capital requirements, or whatever.  Since the AIG trades essentially transferred risks, how would hampering AIG’s ability to take on that risk have affected the amount of that risk in the financial system and the efficiency of the distribution of that risk?  The answers to those questions aren’t obvious, nor are they self-evidently that a reduction in AIG’s positions would have mitigated the effect of a real estate price collapse on the financial system.

The Report repeatedly assumes away crucial problems of implementation of its recommendations.  For instance, it recommends “appropriate differences between capital requirements that are cleared and not cleared.”  Again: What is appropriate?  What information do you need to make that determination?  Who has the information?  Do they have the incentive to use it?  Can such price controls–and that’s what they are–be gamed by parties better informed than those who set them?  Could the systemic consequence of such gaming be worse than the disease that the capital requirement differentials are designed to cure?

Relatedly, it recommends that due to the systemic importance of CCPs, regulators require “appropriate collateral” (there’s that “A” word again); “strong operational controls”; and “sufficient capital.”  All of the questions raised in the previous paragraph are begged on these issues as well.

The authors of the Report mimic Goldilocks on the issue of the structure of the clearing sector (pp. 116-117).  Too many CCPs are bad, because this fragmentation can impede exploitation of netting economies.  Too few CCPs are bad, because that makes the financial system too vulnerable to the failure of one of these behemoths.  So how many is just right, Goldilocks?  And how are we going to get there?

The answer:

[r]egulators and lawmakers should not intentionally or unintentionally promote the proliferation of redundant or specialized clearinghouses.  The proliferation of clearinghouses would create unnecessary systemic risk by eliminating opportunities to reduce counterparty risk (p. 117).

Thanks a lot.

Indeed, the evolution of this industry going forward will determine the effects of clearing mandates, or other measures to favor clearing.  For far more reasons than the Report mentions, it is quite possible that the industry will evolve in a way that worsens the stability of the financial system.  And there are strong reasons to believe that the industry will not necessarily evolve in a salutary way.

First, the pervasive scale and scope economies mean that the industry is unlikely to evolve in an efficient, competitive fashion, or that the resulting structure will be systemically more robust.  These economies tend to favor consolidation into a relatively small number of systemically vital, and vulnerable, CCPs.  Moreover, this structure can impede competition (a point that the Report acknowledges).

Second, the Report’s rather naive injunction to regulators and lawmakers aside, jurisdictional considerations will tend to induce fragmentation.  Every major jurisdiction wants a piece of the clearing pie, for economic reasons, and for reasons of political control.  It is also likely that governance and control issues will also lead some market participants to favor specialized  (by product or geographically) CCPs (over which they can exert influence) over broader ones.

Third, political economy considerations completely ignored in the Report–but not in the real world–will also affect the evolution of the infrastructure.  Market participants will attempt to influence legislators and regulators on capital levels, margin levels, operational risk controls, the numbers of CCPs, etc.  We are already seeing industry pressure regarding membership requirements for CCPs–an issue that has both competitive and systemic risk implications.

Just who knows what kind of structure will evolve from these cross-currents of economic and political forces (with the politics rooted, of course, in economics and rents)?  I don’t know for sure, but am deeply concerned that the political economy dynamics will seriously distort the process in a way that reduces the efficiency of the market during normal times, but doesn’t reduce–and may increase–its vulnerability to crises in abnormal ones.  The Olympian, and superficial, analysis of the Report doesn’t come to grips–at all–with these weighty matters.

In brief, the clearing chapter (and related material) in the Squam Lake Report is too incomplete, and sometimes flawed on those issues that it does address, to provide actionable policy guidance.  And since that’s the purpose of the Report, it it is unsuccessful on its own terms.

For a further illustration of  my earlier post on the dangers of reading too much into the apparent triviality of the Russian spy ring, it’s worth reading this account from the Wall Street Journal about how the KGB attempted to recruit a journalism student–who later held several influential government staff positions, and who is now deputy NYC police commissioner.  It demonstrates that the time horizons of some intelligence is very long.  It also demonstrates that intelligence services try to bird dog talent at very early stages, and get their hooks in early.  One imagines that the success rate is low, but the payoff of those few successes may be great.

The article, and the story of the Russian spy ring, also highlight the banality of most espionage.  Most espionage is not about The One Big Secret.  It is not about getting one’s hands on the secret plans to invade Freedonia.  It is about collecting bits and pieces of information, sifting it, sorting it, seeing if there’s a pattern.  Information is collected from a variety of sources and then much of it is analyzed, or stored for later analysis on an as needed basis.  Chinese intelligence, for instance, interviews returning students and travelers.  In so doing, it gleans countless facts and impressions that are useless in themselves, but contribute to a broader understanding of the intelligence target.

The US has, characteristically, put a technological spin on this, using data mining and pattern recognition software to extract nuggets of information from a mass of triviality.  This approach has proved incredibly valuable in Iraq, for instance, as a means of identifying, tracking, and apprehending–or killing–terrorists.

And in judging Russian motives, one should not forget potential cultural differences.  Going back to Czarist times, Russia’s rulers have had an enormous appetite for information about every aspect of their subjects’ lives, in large part because they viewed (and view) their subjects as potential adversaries.  Why would it be surprising that this mindset extends to their adversaries abroad?

Earlier this year, Obama announced the cancellation of NASA’s manned space programs, including a new manned moon mission.  He had more important things in mind for the space agency.  In an interview with Al Jazeera, part of an outreach initiative growing out Obama’s Cairo speech, NASA chief Charles Bolden said that Obama gave him three objectives:  First, inspiring more children to be interested in science and technology; second, building international relations, and, wait for it:

Third, and perhaps foremost, to find a way to reach out to the Muslim world and engage much more with dominantly Muslim nations to help them feel good about their historic contributions to science, math and engineering [emphasis added].

I am not kidding.  It is July 5, not April 1.  Don’t believe me, check out the interview (the quote is right at the beginning, around the 1:15 mark):

I am ambivalent about NASA, and government funded manned space travel.  I am not ambivalent about this drivel.  The first two “missions” that Obama charged Bolden with are juvenile (literally, in the first instance) and inane.  The third is utterly insane.  A pitch perfect paean to political correctness and therapeutic self-esteem politics.

If there is a case for NASA, it is that it invests in the creation of knowledge and technology that generates substantial spillovers: investments that would not be made otherwise either due to free rider problems, or the inability of private enterprises to finance investment at the efficient scale.  The missions that Obama charged Bolden with are about as far from this defensible mission as earth is from Alpha Centauri.

The Mission to the Crescent Moon is particularly grating.  Like most efforts ostensibly directed at improving the self-esteem of others, it is patronizing and condescending.  Moreover, it will be counterproductive because it plays right into some of the most self-destructive habits of thought prevalent in the Muslim world: habits of thought that encourage some to engage in other-destructive terrorism.

Specifically, the contrast between a mythical, glorious past and a squalid present naturally demands an explanation.  The prevalent explanation in the Muslim world is that it is the result of dark conspiracies hatched in the West: conspiracies of Christians, and especially Jews, to deny the followers of one true religion their rightful dominant place in the world.  Emphasizing past achievements (and probably exaggerating those) that far outstrip present ones as Obama charged Bolden to do can only feed the sense of grievance.

If anything, “dominantly Muslim nations” and their citizens could use a little less self-esteem, not more. Nothing feeds paranoia, alienation, and anger like an unrealistic self-regard at stark variance with true accomplishments.

NASA is not a social work organization.  It is not ACORN for science and math.  Its overriding purpose is to explore space.  If that doesn’t generate value that exceeds the cost, then shut it down.

Not only is the 4th of July the anniversary of the Declaration of Independence: it is also the anniversary of the surrender of Vicksburg in 1863.  That was the culmination of what to my mind is the most outstanding campaign of the Civil War, and arguably of American military history.  Indeed, it is one of the most impressive campaigns in all of military history.

Grant’s Vicksburg campaign was a masterpiece of what is now referred to as “the operational art.”  It involved an impressive and creative use of combined arms: Grant utilized David Dixon Porter’s riverine Navy force brilliantly to move his army to the south of the city and break a stalemate.  It employed deception: Grierson’s raid and Grant’s simultaneous threatening of multiple strategic points paralyzed the Confederate response and reduced Pemberton and Johnston to piecemeal, spasmodic, lurching reactions.  Grant utilized maneuver brilliantly, and as a result always had a substantial preponderance of force at every engagement.  The logistics of the operation were challenging and complex, but were accomplished faultlessly.

Grant had at his disposal an incredible army of hardy, strapping Midwestern farmboys.   They had ample combat experience, gained at battles like Donelson, Shiloh, and Corinth, but hadn’t suffered the shattering casualties that hampered the effectiveness of some armies, like the Army of the Potomac.

Grant has a reputation as a butcher, but Vicksburg belies that.  It is hard to find anything to criticize about the entire operation.

The surrender on the 4th did not fully open the Mississippi River: that didn’t occur until 9 July, when Port Hudson capitulated.  But that was inevitable once Vicksburg fell.

Vicksburg is worth a visit.  Although the most crucial battlefields of the campaign are not systematically protected, the ground of the siege is contained within the Vicksburg National Battlefield Park.  The siege works and many of the approach trenches are well-preserved.  The most important battle of the campaign, Champion Hill, is now accessible due to the work of the Civil War Preservation Trust, although much of the hill itself was excavated for gravel for I-10 decades ago.

Port Hudson is also a worthwhile trip, though beware!  On my visit there some years ago I just about stepped on the biggest damn water moccasin you’ve ever seen.  I was stepping gingerly after that, I’ll tell you what.

Renee’s blog post was featured at the top of the Pittsburgh Tribune-Review’s Best of the Blogs for this week.  Following her in the list were Josh Marshall, Jim Treacher (Washington Trawler), The Corner, Powerline.  That’s a pretty impressive 4th of July parade to be leading, Renee.  Keep it up!

Harry Jaffa argues that Lincoln was different from his political peers in that he believed the Declaration of Independence, rather than the Constitution, to be the seminal document of the American Founding.  Lincoln believed, and fervently so, that the Declaration literally meant what it said: that all men are created equal.  He further believed that it was his solemn duty as a statesman to ensure that the nation realized that ideal.

Obama has been compared to Lincoln, largely on the basis of some superficial similarities.  (Very superficial.  Like: “tall guys from Illinois.”)  But it is clear on the substance, and on the belief in the truth and relevance of the Declaration, that the comparison is decidedly inapt.  Indeed, laughable.  Lincoln’s commitment to the Declaration, and the belief that the United States was indeed the “last, best hope of earth” was fervent, undeniable, and repeatedly expressed.  Lincoln did believe that America was exceptional, and that it although it was flawed, it embodied an ideal that was an example for all of humanity.

In contrast, Obama’s views on those propositions are, at best, ambivalent.  As Charles Kessler of the Claremont Review of Books writes:

The second new element in President Obama’s liberalism is even more striking than its postmodernism. It is how uncomfortable he is with American exceptionalism—and thus with America itself. President Obama considers this country deeply flawed from its very beginnings. He means not simply that slavery and other kinds of fundamental injustice existed, which everyone would admit. He means that the Declaration of Independence, when it said that all men are created equal, did not mean to include blacks or anyone else who is not a property-holding, white, European male—an argument put forward infamously by Chief Justice Roger Taney in the Dred Scott decision, and one that was powerfully refuted by Abraham Lincoln.

In short, President Obama agrees with his former minister, Reverend Jeremiah Wright, much more than he let on as a presidential candidate. Read closely, his famous speech on that subject in March 2008 doesn’t hide his conclusion that Wright was correct—that America is a racist and ungodly country (hence, not “God Bless America,” but “God Damn America!”). Obama agrees with Wright that in its origin, and for most of its history, America was racist, sexist, and in various ways vicious. Wright’s mistake, Obama said, was underestimating America’s capacity for change—a change strikingly illustrated by Obama’s own advances and his later election. For Obama, Wright’s mistake turned on not what America was, but what America could become—especially after the growth of liberalism in our politics in the course of the 20th century. It was only liberalism that finally made America into a decent country, whereas for most of its history it was detestable.

Unlike most Americans, President Obama still bristles at any suggestion that our nation is better or even luckier than other nations. To be blunt, he despises the notion that Americans consider themselves special among the peoples of the world. This strikes him as the worst sort of ignorance and ethnocentrism, which is why it was so difficult for him to decide to wear an American flag lapel pin when he started running for president, even though he knew it was political suicide to refuse wearing it.

As President Obama hinted in his Berlin speech during the campaign, he really thinks of himself as a multiculturalist, as a citizen of the world, first, and only incidentally as an American. To put it differently, he regards patriotism as morally and intellectually inferior to cosmopolitanism. And, of course, he is never so much a citizen of the world as when defending the world’s environment against mankind’s depredations, and perhaps especially America’s depredations. In general, the emotionalist defense of the earth—think of Al Gore—is now a vital part of the liberalism of our day. It’s a kind of substitute for earlier liberals’ belief in progress. Although his own election—and secondarily liberalism’s achievements over the past century or so—help to redeem America in his view, Obama remains, in many ways, profoundly disconnected from his own land.

This is a very different state of mind and character from that of Franklin Roosevelt, who was the kind of progressive who thought that America was precisely the vanguard of moral progress in the world. This was the way Woodrow Wilson, Lyndon Johnson, and every great liberal captain before Obama thought about his country—as a profoundly moral force in the world, leading the nations of the world toward a better and more moral end point. Obama doesn’t think that way, and therefore his mantle as an American popular leader—despite his flights of oratorical prowess—doesn’t quite fit him in the way that FDR’s fit him. One can see this in the tinges of irony that creep into Obama’s rhetoric now and then—the sense that even he doesn’t quite believe what he’s saying; and he knows that but hopes that you don’t.

Obama’s ambivalence is, in many ways, the perfect symbol of the dilemma of the contemporary liberal.

As people have become increasingly aware of this ambivalence, Obama’s popularity has plunged.  And there is a growing realization that “ambivalence” might actually understate the matter.  Obama’s associations of a lifetime, of whom the aforementioned Reverend Wright is just one, are anything but ambivalent in their views of America.  If they believe that America is exceptional, it is only because they believe that America is exceptionally malign, evil even.  There is a suspicion that political caginess leads Obama to conceal his true sympathies for these views.  The habitual apologies, the routine criticism of his country while abroad, the notable imbalance between criticism and praise of the country’s past and legacy, all contribute to a palpable fear that Obama is actually the anti-Lincoln.

This unease–to put it mildly–that many people have with Obama is much more visceral, and much more important, than disagreements about this health care policy or that, or the handling of the Gulf oil spill.  Indeed, for many people the significance of these things is not the policy specifics themselves, but what these policies reveal about Obama’s heartfelt beliefs about the nation and its meaning.  A fear that he does not share their beliefs about the country, its ethos, and its values.

I think this helps explain the tremendous anxiety in the country.  Yes, dreary economic news and the steady bubbling of oil from the Gulf contribute to that anxiety.  But it is more than that.  More basic.  An anxiety rooted in a fear that they are being governed by a foreigner.  Not a foreigner in the birther “he was born in [state country of choice here]” (non-)sense.  But a foreigner in the sense of someone alien to, or at the very least alienated from, their beliefs about America and what it means.

Divides over belief are much more intractable than divides over policies.  The latter are amenable to compromise, and can be influenced by facts and data.  The former, cannot.  Which means that the next two plus years will be as tumultuous politically as any period in recent American history.  Obama and his ilk are notable for their Europhilia, and we are on the brink of descending into a European-style political conflict that America has largely avoided in large part because of a shared belief in some fundamental tenets about the country’s political meaning and heritage that is typically lacking in Europe.  The fear that the president, and a large fraction of his political allies, do not share those beliefs will make the coming political conflicts and campaigns of a like not seen in this country in living memory.