Hoover Digest, 2011, No. 2, Spring

HOOVER DIGEST RESEARCH AND OPINION ON PUBLIC POLICY
HOOVER DIGEST · 2011 · N O . 2 RESEARCH AND OPINION

ON PUBLIC POLICY
2011 • NO. 2 • SPRING
Politics
The Economy
Growth of Government
Labor
National Security and Defense
Education
Health and Medicine
California
Egypt
Afghanistan
Israel
Russia
China
Interviews
Values
History and Culture
Hoover Archives
2011 . NO. 2
T H E H O O V E R I N S T I T U T I O N • S TA N F O R D U N I V E R S I T Y
The Hoover Institution on War, Revolution and Peace was established at Stanford University
in 1919 by Herbert Hoover, a member of Stanford’s pioneer graduating class of 1895 and the The Hoover Institution gratefully acknowledges the support of
thirty-first president of the United States. Since 1919 the Institution has evolved from a library its benefactors in establishing the communications and information
and repository of documents to an active public policy research center. Simultaneously, the dissemination program.
Institution has evolved into an internationally recognized library and archives housing tens of
millions of books and archival documents relating to political, economic, and social change.
Significant gifts for the support of the Hoover Digest
The Institution’s overarching goals are to are acknowledged from
• Understand the causes and consequences of economic, political, and social change
Bertha And John Garabedian Charitable Foundation

• Analyze the effects of government actions relating to public policies

The Jordan Vineyard And Winery
• Generate and disseminate ideas directed at positive public policy formation
using reasoned arguments and intellectual rigor, converting conceptual insights Nancy And Charles Munger
into practical policy initiatives judged to be beneficial to society
Joan And David Traitel
Ideas have consequences, and a free flow of competing ideas leads to an evolution of ❖
policy adoptions and associated consequences affecting the well-being of society. The Hoover The Hoover Institution gratefully acknowledges generous support
Institution endeavors to be a prominent contributor of ideas having positive consequences. from the Founders of the Program on
In the words of President Hoover,
American Institutions and Economic Performance
This Institution supports the Constitution of the United States, its Bill of Rights,
and its method of representative government. Both our social and economic Tad And Dianne Taube
systems are based on private enterprise from which springs initiative and ingenuity.
Taube Family Foundation
. . . The Federal Government should undertake no governmental, social, or eco-
nomic action, except where local government or the people cannot undertake it for Koret Foundation
themselves. . . . The overall mission of this Institution is . . . to recall the voice of
and a Cornerstone Gift from
experience against the making of war, . . . to recall man’s endeavors to make and
preserve peace, and to sustain for America the safeguards of the American way of Sarah Scaife Foundation
life. . . . The Institution itself must constantly and dynamically point the road to
❖
peace, to personal freedom, and to the safeguards of the American system.
Professional journalists are invited to visit the Hoover Institution to share their
perspectives and engage in a dialogue with the Hoover community. Leadership
To achieve these goals, the Institution conducts research using its library and archival
assets under the auspices of three programs: Democracy and Free Markets, American Institu- and significant gift support to reinvigorate and sustain the
tions and Economic Performance, and International Rivalries and Global Cooperation. These William and Barbara Edwards Media Fellows Program
programs address, respectively, political economy abroad, political economy domestically, and are acknowledged from
political and economic relationships internationally.
William K. Bowes Jr.
❖ ❖ ❖
William C. Edwards
The Hoover Institution is supported by donations from individuals, foundations, cor-
porations, and partnerships. If you are interested in supporting the research pro- Charles B. Johnson
grams of the Hoover Institution or the Hoover Library and Archives, please contact
the Office of Development, telephone 650.725.6715 or fax 650.723.1952. Gifts to the Tad and Cici Williamson
Hoover Institution are tax deductible under applicable rules. The Hoover Institution is
part of Stanford University’s tax-exempt status as a Section 501(c)(3) “public charity.”
Confirming documentation is available upon request.
RESEARCH AND OPINION
O N P U B L I C P O L I C Y
2011 · NO.2 · SPRING
T H E H O OV E R I N S T I T U T I O N
S ta n f o r d U n i v e r s i t y
Hoover Digest
Research and Opinion on Public Policy
2011 • no. 2 • spring www.hooverdigest.org
The Hoover Digest offers informative writing on politics, economics, and HOOVER DIGEST
history by the scholars and researchers of the Hoover Institution, the public
policy research center at Stanford University. peter robinson
Editor
The opinions expressed in the Hoover Digest are those of the authors and charles lindsey
do not necessarily reflect the opinions of the Hoover Institution, Stanford Managing Editor
University, or their supporters. e. ann wood
Institution Editor
The Hoover Digest (ISSN 1088-5161) is published quarterly by the Hoover
Institution on War, Revolution and Peace, Stanford University, Stanford jennifer presley
Book Publications Manager
CA 94305-6010. Periodicals Postage Paid at Palo Alto CA and additional
mailing offices. POSTMASTER: Send address changes to the Hoover
Digest, Hoover Press, Stanford University, Stanford CA 94305-6010.
HOOVER INSTITUTION
© 2011 by the Board of Trustees of the Leland Stanford Junior University
herbert m. dwight
Chairman, Board of Overseers
Contact Information robert j. oster
We welcome your comments and suggestions at digesteditor@stanford.edu boyd c. smith
and invite you to visit the Hoover Institution website at www.hoover.org. For Vice Chairmen,
Board of Overseers
reprint requests, write to this e-mail address or send a fax to 650.723.8626.
john raisian
The Hoover Digest publishes the work of the scholars and researchers Tad and Dianne Taube
affiliated with the Hoover Institution and thus does not accept unsolicited Director
manuscripts. david w. brady
Deputy Director,
Davies Family Senior Fellow
Subscription Information richard sousa
The Hoover Digest is available by subscription for $25 a year to U.S. Senior Associate Director
addresses (international rates higher). To subscribe, send an e-mail to david davenport
hoover@press.uchicago.edu or write to Counselor to the Director
Hoover Digest
Subscription Fulfillment ASSOCIATE DIRECTORS
P.O. Box 37005 douglas bechler
Chicago, IL 60637 stephen langlois
You may also contact our subscription agents by phone at 877.705.1878 donald c. meyer
eryn witcher
(toll free in U.S. and Canada) or 773.753.3347 (international) or by fax at susan wolfe
877.705.1879 (U.S. and Canada) or 773.753.0811 (international). ASSISTANT DIRECTORS
ASSISTANT DIRECTORS
denise elson
On the Cover mary gingell
denise
mary
elson
james gingell
gross
Neptune, god of the seas, watches over jeffreygross
james m. jones
the Grand Harbor of Valletta in a Maltese noel s. kolak
jeffrey m. jones
travel poster from the Hoover Archives. kathys.phelan
noel kolak
He wields a trident, his emblem in both kathy phelan
war and peace. The small island of Malta,
crossroads of the Mediterranean, has wit-
nessed centuries of both conflict and calm, visit the
visit the
HOOVER INSTITUTION
ranging from prehistory to the violent
twentieth century. But the creator of this online at
HOOVER INSTITUTION
image, perhaps Malta’s most celebrated
artist, refused to let war and social upheav-
online at
www.hoover.org
www.hoover.org
al trespass on his sun-splashed tableaux.
Read this poster’s story on page 204.
Contents HOOVER DIGEST · 2011 · NO. 2 · S P R I N G
P ol itics
9 Now Prove It
Ten ways for Republican leaders to show they can solve America’s
problems. By keith hennessey.
15 Obama Recalibrated
Two years into the president’s term, his pedestal has been carted
away. Now his administration really begins. By fouad ajami.
19 Conservatism Revived
What did the midterm elections prove? That Americans yearn for
enduring principles—and dislike being pushed around. By peter
berkowitz.
T he E cono my
23 Hold the High Ground

In Washington, many are struggling to control spending and cut
taxes. History is on their side. By michael j. boskin.
27 Focus on the Fed

Although under intense political pressure, the Federal Reserve needs
to return to its apolitical core mission: monetary stability. By john
b. taylor and paul d. ryan.
33 The Money-Go-Round
More evidence that stimulus thinking is wishful thinking. By john
f. cogan and john b. taylor.
Hoover Digest N 2011 · No. 2

37 States of Hardship
With unions, pensions, and mandates helping to do the digging,
state and local governments find themselves in a hole even deeper
than Washington’s. By gary s. becker.
G row th o f Govern m ent
41 The Budget Binge that Never Was?

Federal spending may be busting out all over, but columnist Paul
Krugman claims he doesn’t see it. By charles blahous.
La bor
48 Union Made
To bring government budgets back down to earth, first puncture
those inflated labor contracts. By richard a. epstein.
N ational S ecurit y and D efense
52 Armed with the Odds

Proposed cuts in defense spending might not harm our national se-
curity—but only if the Pentagon plays its cards right. By thomas h.
henriksen.
61 Why We Spend What We Spend

The Pentagon’s budget is no ordinary line item. There are many
reasons not to cut it. By victor davis hanson.

E ducation
67 Shanghai Surprise
Students in China’s largest city just aced three global assessment
tests. If American education ever had a “Sputnik moment,” this is it.
By chester e. finn jr.
70 Your Child Left Behind

In advanced math studies, not a single American state or demo-
graphic group is keeping up with the rest of the world. Hoover fel-
lows eric a. hanushek and paul e. peterson ran the numbers. By
amanda ripley.
77 Spoken Like a World Citizen

Learning a foreign language is more than just a boot camp for future
soldiers and diplomats. By russell a. berman.
H ea lth and Medicine
81 In Harm’s Way
How we misjudge the risks—and non-risks—of daily life. By henry
i. miller.
C a li f ornia
87 Brown and Blue

The new old governor of the Golden State is preparing California for
budgetary penance. By bill whalen.
eg y pt
92 Tyranny Is Not the Arabs’ Fate

Egypt’s “heroes with no names” may steer history in a direction no
one expected. By fouad ajami.

97 Ingredients for a Lasting Democracy
Ousting an autocrat is only a start. The rules of power become just
as important as who holds it. By larry diamond.
A f ghanistan
102 The Gates Maneuver

The defense secretary’s great accomplishment? Not battles won or
budgets protected, but making the White House see sense on Af-
ghanistan. By kori n. schake.
I srael
107 The Palestinian Proletariat

Permanent refugees, generation after generation: these are the fruit
of a U.N. agency that blocks both peace and a Palestinian state. By
michael s. bernstam.
120 Why Israel Is Shunned

A shift in elite thinking leaves no room for such assertive, self-defend-
ing nation-states. By daniel pipes.
R ussia
123 Of Comrades and Capos

If there’s a plot against Russia, as Vladimir Putin claims, then it’s be-
ing carried out by those already in power. By robert service.

127 Where Russia Is Heading
One step forward, two steps back. Can Russians ever achieve simple
normalcy? By mark harrison.
C hina
133 But We Insist
Not long ago, China abruptly withheld certain rare minerals from
world trade. That was just the beginning. Beware China’s shifting
“core interests.” By jongryn mo.
138 China at Sea

Less flashy than stealth fighters or missiles, a versatile blue-water navy
is preparing to cast China’s influence upon the waters. By david m.
slayton and craig hooper.
I nterviews
151 “Time Is Not Our Friend”
Five things Hoover fellow charles blahous wants everyone to know
about Social Security reform—before it’s too late. By ryan streeter.
155 The Audacity of Gimmicks

Hoover fellow richard a. epstein knew Barack Obama when he
was teaching at the University of Chicago. Obama has the right tem-
perament for intellectual poker, Epstein believes, but is stuck with a
bad hand. By nick gillespie.
163 A Most Ingenious Trick

matt ridley, author of The Rational Optimist, insists that we hu-
mans must face the truth about ourselves—no matter how good it
might be. An interview with peter robinson.
V a lues
171 Sins of the Fathers, the Mothers, and Others
You can’t blame society for all the bad things people do. Hunting for
scapegoats distracts us from seeking the true causes of social pathol-
ogy. By thomas sowell.

H istory and C ul ture
174 The Multiple Futures of the Middle East

“Imperialist designs” have come to an end. Now, says the dean of
Mideast studies, the Arab-Muslim lands must shape their own desti-
nies. By bernard lewis.
185 The Man from Kinderhook

During a distinguished Army career, chris gibson, who spent a year
as a Hoover national security fellow, displayed brains, determination,
and courage. Now he’s testing his mettle in Congress.
188 Once a Marine, Always a Marine

It’s been more than sixty years since he helped capture Iwo Jima, but
Hoover fellow richard t. burress tells his old unit that some things
never change. By christopher c. starling.
H oover A rchives
192 A Room Alive with Memories

Every painting and object in the Nicolas de Basily Room tells a story.
Together their story is a search for lost time. By dennis l. bark and
linda bernard.
204 On the Cover

POLITICS
Now Prove It
Ten ways for Republican leaders to show they can solve America’s
problems. By Keith Hennessey.
The American people did not give power to congressional Republicans;

they took it away from congressional Democrats. Republicans now have
an opportunity to prove that they deserve majority status—that they can
operate not just as an opposition party, but as responsible leaders who are
willing to make hard choices and solve problems.
The goals of an ideal economic-growth agenda are simple and well
known: a large and thriving private sector and a small government;
reduced government spending, which means lower taxes (or at least not
higher ones) and smaller deficits; open trade and investment; taxes and
regulations that don’t distort decisions, discourage capital formation or
work, or provide rents to the politically powerful; deep and flexible labor
markets; a reformed financial sector that channels savings to where they
can do the most good; a society in which education and innovation flour-
ish and the most talented people in the world want to become Americans;
and a stable, low-regulation legal environment, in which monetary policy
is sound and business decisions issue from customers and competitors
rather than regulators and judges.
Practical policymaking is about moving incrementally in the right
direction rather than trying to achieve the ideal all at once. It’s easy for
elected officials to distract themselves with simplistic partisan fights that
are politically advantageous but either make little headway toward the
goal or distract from more important underlying problems. Progress on a
Keith Hennessey is a research fellow at the Hoover Institution and a lecturer

at Stanford University’s business and law schools.
Hoover Digest N 2011 · No. 2 9

practical growth agenda requires recognizing the limits of policy and tak-
ing political risks.
Here, then, are ten practical tips for elected Republican officials, who
are torn between trying to govern as a majority party and trying to oppose
President Obama’s agenda as a minority party.
1. Give priority to medium-term problems caused by the government

rather than trying to push businesses to expand more rapidly. The
economic-deleveraging process is painful, slow, and necessary. Tools to
mitigate the pain or accelerate the recovery have failed. So refocus: stop
trying to mess with the economy’s natural process of rebalancing. You’re
only making it worse with unintended consequences. Don’t restore the
homebuyer tax credit or try to put a floor on housing prices. Instead of
stimulating particular types of investment, or encouraging businesses to
hire, or searching for chimerical shovel-ready projects, spend your time
fixing the medium-term problems caused by flawed policies. It takes polit-
ical courage to admit that the short-term economic-adjustment process
will be slow and painful, but additional policy distortions will only make
things worse.
The government needs to worry less about the private sector and get its
own house in order. There is plenty of work to be done: cutting govern-
ment spending; preventing tax increases; replacing the failed Fannie Mae
and Freddie Mac with a competitive private market; enacting free-trade
agreements with Colombia, Panama, and South Korea; and undoing the
worst regulatory excesses of the past two years.
2. Set the right goal: creating the conditions for growth rather than
trying to create growth. Policymakers need to get the policies right and
let business leaders decide how to run their firms. Corporate leaders are
sitting on unprecedented piles of cash, waiting to see what Washington
will foul up next. Take Washington out of their decision-making by creat-
ing a stable, predictable, low-cost business environment. They will then
decide how best to hire, invest, and expand. Your job as an elected official
is not to create economic growth or jobs, it is to create the conditions
under which the private sector creates growth and jobs. Stick to your lane
and let business leaders stick to theirs.
10 Hoover Digest N 2011 · No. 2

3. Remember that spending is now even more important than taxes.
Every dollar spent by the government comes from current or future taxes.
If you focus your legislative energy on keeping current taxes low and do
nothing to slow future spending growth, you merely shift taxes to the
future. Without a spending-reduction plan, a “no tax increase” strategy is
incomplete. Don’t let the president raise taxes now or ever, and develop
your own credible and specific spending plan. Convince voters, taxpayers,
business leaders, and investors that if given more power, you would use
it to solve our entitlement-spending problem. Representative Paul Ryan’s
“Roadmap” is a good start—federal spending should not exceed 20 per-
cent of GDP. (I’d prefer much less.)
4. Don’t waste all your time on nickels and dimes and process reforms;
instead, slow entitlement-spending growth. Yes, it’s good to cut stimu-
lus spending. To eliminate earmarks. To cut discretionary spending back
to 2008 levels or lower, and to wage the usual left-right appropriations
battles. These are important for restoring confidence in government,
undoing some of the worst spending excesses of the past two years, and
atoning for Republican spending sins. Such actions will be popular with
many who voted to remove Democrats from power. Yet they are quantita-
tively insignificant in the long run.
With the retirement of the first baby boomers, the demographic wave
begins to swamp us. Further delay of entitlement reform guarantees
that tax increases will become part of a future solution. In Greece and
France, citizens rioted because their benefits were being cut. In America,
the new political force wants smaller government. Ignore the AARP’s
bleats and tell the truth about Social Security, Medicare, and Medic-
aid. We must make new, more modest, sustainable promises to younger
workers, who already know that the old promises are bogus.
We should raise the eligibility age for collecting full benefits to keep
up with demographic changes. We should transform these programs from
forced-savings vehicles into strong safety nets that protect future seniors
from poverty. We should tell younger workers that they must start saving
now to supplement that safety net, and that they will be responsible for
a greater portion of their retirement and health care costs than their par-

ents and grandparents were for their own. We should apologize to these
young Americans and their children for waiting so long and letting it get
this bad, and we should permanently restructure these programs so that
government does not expand over time.
Some Republicans will want to duck this political risk, to shirk their
responsibility and instead fight about millions in outrageous earmarks
rather than hundreds of billions in popular entitlement promises. Because
we have waited too long to act, we must now either grasp the nettle or
allow America to drift into European levels of taxation. Any congressman
who rejects the Roadmap and refuses to propose a quantitatively compa-
rable alternative is implicitly endorsing massive future tax increases. That’s
irresponsible and anti-growth. The politics of this issue are hard but the
decision should be easy.
5. Tax levels and tax structure are both important, but give levels
higher priority. Republicans and conservatives love to debate the ideal
tax reform. Structural reform is good, necessary, and very hard to enact.
By all means push for an improved tax code, but not at the cost of higher
tax levels or failing to develop a credible long-term spending plan. A per-
fectly structured tax code that collects 25 percent of GDP is worse than a
flawed tax code that collects 18 percent of GDP. Beware the siren call of
the money-pump VAT.
6. Don’t delink income-tax rates. The strategy we developed in 2001

and 2003 worked. Forced by reconciliation rules to sunset the tax cuts,
we set them all to expire on the same day. President Bush reframed the
top income-tax rates as small-business tax rates. This argument won the
day in 2003 and 2010 and will win again as long as the expiration dates
remain synchronized. Don’t fall for the trap of temporarily extending the
top rates and permanently extending the others. This would guarantee
future increases in the top rates.
7. Offer to help the president expand free trade and open invest-
ment. Rebuild the center-right free-trade coalition. The president will
need to deliver a few Democrats to offset the protectionist Republicans
(darn them). You can fight economic isolationism, raise American stan-

dards of living, help American allies in Latin America and Asia, coop-
erate with the president, and split congressional Democrats. That’s a
five-part win.
8. Offer to help the president fight the teachers’ unions and improve
elementary and secondary education. You agree more than you disagree
with the president on education. He has shown a limited willingness to
take on the teachers’ unions, and you need him to deliver Democratic
votes to overcome a Senate filibuster. Encourage the president and reward
him when he takes these risks. Prioritize education-reform legislation and
pull him farther than he’s willing to go. Treat this as an opportunity for
imperfect incremental improvements in law rather than perfect message
bills that die in the Senate. Education is a long-term economic issue of
paramount importance.
9. Now that cap-and-trade is dead, build a supermajority to stop

the EPA from pretending it’s a legislature, and then cut a deal. After
the Copenhagen implosion and the death of a domestic-economy-wide
carbon price, the president cannot block the EPA from fouling up the
economy without something to show for it. Offer a little more money
to further subsidize carbon-reducing-technology R&D in exchange for
legislatively stopping the EPA from taking over much of the economy. Its
unchecked use of regulatory authority would create uncertainty and be a
significant threat to future economic growth.
10. Lay the groundwork for repeal of the Obama health care laws in
2013. Develop multiple alternatives. Now that repeal has passed in the
House, pressure in-cycle Senate Democrats to take a stand, and make
repeal a centerpiece of the 2012 policy debate. In doing so, stop play-
ing the Medicare card. While the health care legislation cuts Medicare
spending in the wrong way, to prevent fiscal disaster we need even more
Medicare and Medicaid cuts than were enacted in those laws. If you use
Medicare to scare seniors and repeal ObamaCare but, as a result, cannot
address Medicare’s unsustainable spending path, you have made things
worse, not better.

It will be tempting to cherry-pick the easy partisan fights from this list
and postpone the politically risky elements for later. Republicans should
instead treat voters like adults. Explain the mess we’re in and stress that the
solutions will not be painless. Show the American people that you deserve
the responsibility provisionally granted to you.
Reprinted by permission of National Review Online (www.nationalreview.com). © 2010 National Review,
Inc. All rights reserved.
Available from the Hoover Press is Eight Questions You

Should Ask about Our Health Care System (Even if the
Answers Make You Sick), by Charles E. Phelps. To order,
call 800.935.2882 or visit www.hooverpress.org.

POLITICS
Obama Recalibrated
Two years into the president’s term, his pedestal has been carted
away. Now his administration really begins. By Fouad Ajami.
It was last spring when President Obama brought together a group of

presidential historians for what was supposed to be the first of many
meetings. By available accounts, he was curious about the rise of the
tea party, curious as to whether there had been precedents for this sort
of backlash against the established order. He listened to these experts
on the American presidency, but was prickly and didn’t give anything
away.
We shouldn’t be surprised. What most engaged Obama before his rise
to the highest office in the land was his own biography. He had stood aloof
from the weight and the lessons of American history; where so many of his
predecessors had sought comfort and guidance in the ordeal of presidents
past, there was no great deference in him to the burdens those forty-two
men carried. He didn’t look like those other presidents on the dollar bills,
he said early in his political odyssey.
“Ghosts,” he said in one meeting with his national security advisers
when the late Richard Holbrooke, his representative for Afghanistan and
Pakistan, tried to draw parallels between Lyndon Johnson’s dilemmas in
Vietnam and the current American engagement in Afghanistan. Vietnam
was not particularly relevant to him, he told Bob Woodward in Obama’s
Wars. He was thirteen in 1975, he said, when South Vietnam fell: “So
Fouad Ajami is a senior fellow at the Hoover Institution, co-chairman of Hoover’s

Herbert and Jane Dwight Working Group on Islamism and the International
Order, and the Majid Khadduri Professor of Middle Eastern Studies at the School
for Advanced International Studies at Johns Hopkins University.

I grew up with none of the baggage that arose out of the dispute of the
Vietnam War. I also had a lot of confidence.”
In truth, his dilemma in Afghanistan was remarkably similar to John-
son’s. It was a “bitch of a war,” Johnson dubbed the Vietnam dilemma, a
war he prosecuted without ever taking to it. By all appearances, there is an
echo of all that in Obama’s view of Afghanistan.
Now and then Obama’s devotees nodded to American history with evo-
cations of FDR’s New Deal and superficial parallels to JFK—the good
looks, the glamour, the young children. But Kennedy had seen combat,
was a Cold Warrior, and believed in the burdens of American power. Yes,
he charmed Parisians and Berliners—but as the standard-bearer of an
American empire of liberty. He never journeyed abroad to apologize on
behalf of his country.
To their credit, ordinary Americans caught in the grip of a terrible
economic malady still cared about the direction of the country and their
children’s burden of debt.
A president steeped in history would have never pushed ObamaCare on

so thin a reed of public approval. In the great movement of U.S. history,
Americans haven’t worshiped at the altar of charismatic leadership. They
have been the most skeptical of peoples. They may have trusted several
of their presidents through wars and economic downturns, but they have
insisted on the wisdom of the public and on the ability of this republic of
© White House Photostream/Chuck Kennedy. Licensed under Creative Commons
laws and institutions—and precedent—to see its way out of great dangers.
Americans have given big mandates to presidents only to send them
packing when they lose the contingent mandate given by the elector-
ate. Woodrow Wilson led the country through the Great War, only to
be rebuffed, and to die later a broken man when he tried to impose the
League of Nations on a country and a Senate dubious of it. Wilson was an
absolutist, which doomed his cause. Of “the League fight” he would say,
“Dare we reject it and break the heart of the world?” But the opponents of
the League were not intimidated.
In recent times, Johnson in 1964 and Richard Nixon in 1972 won huge
popular mandates only to be shunted aside when the consensus around

President Obama strides through the Cross Hall of the White House,
heading for a prime-time press conference. History offers a reminder
that even when voters trust their presidents through wars and economic
downturns, they still insist on the wisdom of the public and on the value
of laws, institutions, and precedent.

them cracked. Ronald Reagan lost only one state in 1984—Walter Mon-
dale’s home state of Minnesota, and only because his grace decreed that he
not campaign on his opponent’s turf—but Reagan was forever courting
House speaker and liberal Democrat Tip O’Neill.
A president steeped in history would never have pushed ObamaCare on so
thin a reed of public approval.
We have never wanted our presidents to be above the political fray. The
prerogatives of an “imperial presidency” may have grown, but the expec-
tation of political argument and disputation and compromise has deeper
resonance in the American tradition.
“As a student of history”—such is the way Obama described himself
in his 2009 Cairo speech—our president would have known that a com-
mand economy is alien to the American temperament, that unfettered
government spending was bound to arouse the antagonism of the Ameri-
can people. We were not all Keynesians after all, and the American peo-
ple—to liberals’ wonderment—care about budget deficits.
To be sure, there was panic in the midst of the recession of 2008. That
anxiety helped carry Obama to office; it bridged the gap between Obama
and the white working class in the Rust Belt states. But it did not last. To
their credit, ordinary Americans caught in the grip of a terrible economic
malady still cared about the direction of the country and the debt burden
their children would come to carry.
Obama had demonized the Bush tax cuts. They were, in the full length
of his campaign, emblematic of the politics of greed and heartlessness.
But he came around. There was no need to love or embrace them: it was
enough that the president came down from on high to accept the logic of
things and to step aside in the face of the popular revolt against big gov-
ernment and higher taxes.
The era of charisma, which began when Barack Obama was swept into
office by delirium and enthusiasm, has drawn to a close. With the resounding
repudiation of the midterm elections, the tax legislation, the ratification of a
strategic arms pact with Russia, and the end of “don’t ask, don’t tell” thanks to
the support of Republican senators, the Obama presidency has just begun.
Reprinted by permission of the Wall Street Journal. © 2010 Dow Jones & Co. All rights reserved.

POLITICS
Conservatism Revived
What did the midterm elections prove? That Americans yearn for
enduring principles—and dislike being pushed around. By Peter
Berkowitz.
As early as the first summer of the Obama presidency, there was little
doubt that a conservative revival was under way. Constituents packed
town-hall meetings across the country to confront Democratic House
members and senators who were ill prepared to explain why, in the teeth
of a historic economic downturn and nearly 10 percent unemployment,
President Obama and his party were pressing ahead with costly health care
legislation instead of reining in spending, cutting the deficit, and spurring
economic growth.
Still, whether that revival would have staying power was very much
open to question. It still is, notwithstanding the electoral momentum that
produced a Republican majority in the House and a substantial swing in
the Senate.
Sustaining the revival depends on the ability of GOP leaders, office-
holders, and candidates to harness the extraordinary upsurge of popular
opposition to Obama’s aggressive progressivism. Our constitutional tradi-
tion provides enduring principles that should guide them.
In the wake of Obama’s meteoric ascent to office, demoralized con-
servatives would not have dared hope for conservatism to enjoy any sort
Peter Berkowitz is the Tad and Dianne Taube Senior Fellow at the Hoover
Institution, the chairman of Hoover’s Koret-Taube Task Force on National
Security and Law, and co-chairman of Hoover’s Boyd and Jill Smith Task Force
on Virtues of a Free Society.

of revival so soon. To leading lights on the left, the notion would have
appeared absolutely outlandish.
In late October 2008, New Yorker staff writer George Packer reported
“the complete collapse of the four-decade project that brought conserva-
tism to power in America.” Two weeks later, the day after Obama’s elec-
tion, Washington Post columnist E. J. Dionne proclaimed “the end of a
conservative era” that had begun with the rise of Ronald Reagan.
And in February 2009, New York Times Book Review and Week in
Review editor Sam Tanenhaus, writing in the New Republic, declared that
“movement conservatism is exhausted and quite possibly dead.” Tanen-
haus even purported to discern in the new president “the emergence of a
president who seems more thoroughly steeped in the principles of Burkean
conservatism than any significant thinker or political figure on the right.”
Packer, Dionne, and Tanenhaus underestimated what the conservative
tradition rightly emphasizes: the high degree of unpredictability in human
affairs. They also conflated the flagging fortunes of George W. Bush’s
Republican Party with conservatism’s popular appeal. Most important,
they failed to grasp the imperatives that flow from conservative principles
in America, and the full range of tasks connected to preserving freedom.
Progressives like to believe that conservatism’s task is exclusively nega-
tive—resisting the centralizing and expansionist tendency of democratic
government. True, that is a large part of the conservative mission. Progres-
sives see nothing in this but hard-hearted indifference to inequality and
misfortune, but that is a misreading.
What conservatism does is ask the question avoided by progressive
promises: at what expense?
In the aftermath of the global economic crisis of 2008, Western liberal
democracies have been increasingly forced to come to grips with their pro-
pensity to live beyond their means. It is always the task for conservatives to
insist that money does not grow on trees, that government programs must
be paid for, and that promising unaffordable benefits is reckless, unjust,
and a long-term threat to maintaining free institutions.
But conservatives also combat government expansion and centraliza-
tion because those tendencies can undermine the virtues upon which a free
society depends. Big government tends to crowd out self-government—

producing sluggish, selfish, and small-minded citizens, depriving individ-
uals of opportunities to manage their private lives, and discouraging them
from cooperating with fellow citizens to govern their neighborhoods,
towns, cities, and states.
Progressives are not the only ones to misunderstand the multiple dimen-
sions of the conservative mission. Conservatives have blind spots, too.
In 2011—in an America where the New Deal long ago was woven into
the fabric of our lives—conservatives cannot reasonably devote themselves
just to limiting the growth of government. Government must effectively
discharge the responsibilities it has had since the founding of the repub-
lic, but also those it has acquired over more than two centuries of social,
political, and technological change.
Quite a few professional thinkers underestimated what the conservative
tradition rightly emphasizes: the high degree of unpredictability in human
affairs.
These responsibilities include putting people to work and reigniting

the economy—and devising alternatives to ObamaCare that will enable
the federal government to cooperate with state governments and the pri-
vate sector to provide affordable, decent health care.
A thoughtful conservatism in America—a prerequisite of a sustainable
conservatism—must also recognize that the liberty, democracy, and free
markets it seeks to conserve have destabilizing effects. For all their bless-
ings, they breed distrust of order, virtue, and tradition, all of which must
be cultivated if liberty is to be used well.
To observe this is not, as some clever progressives think, to have dis-
covered a fatal contradiction at the heart of modern conservatism. It is,
rather, to begin to recognize the complexity of the conservative task in a
free society.
To be sure, the current conservative revival was not in the first instance
inspired by reflection on conservative principles.
The credit for galvanizing ordinary people and placing individual free-
dom and limited government back on the national agenda principally
belongs to President Obama, former House speaker Nancy Pelosi and

Senate Majority Leader Harry Reid. Their heedless pursuit of progressive
transformation reinvigorated a moribund conservative spirit, just as in
1993 and 1994 the Clintons’ overreaching on health care sparked a popu-
lar uprising resulting in a Republican takeover of Congress.
A thoughtful conservatism in America must recognize that the liberty,
democracy, and free markets it seeks to conserve do have destabilizing
effects.
The Gingrich revolution fizzled, in part because congressional Republi-

cans mistook a popular mandate for moderation as a license to undertake
radical change, and in part because they grew complacent and corrupt in
the corridors of power.
Perhaps this time will be different. Our holiday from history is over.
The country faces threats—crippling government expansion at home and
transnational Islamic extremism—that arouse conservative instincts and
concentrate the conservative mind.
Available from the Hoover Press is Varieties of

Conservatism in America, edited by Peter Berkowitz. To
order, call 800.935.2882 or visit www.hooverpress.org.

THE ECONOMY
Hold the High Ground

In Washington, many are struggling to control spending and cut
taxes. History is on their side. By Michael J. Boskin.
Not long ago, President Obama and congressional leaders were con-
fronting calls for four key fiscal decisions: short-run fiscal stimulus,
medium-term fiscal consolidation, long-run tax reform, and entitle-
ment reform. The president sought more spending, especially on infra-
structure, and higher tax rates on income, capital gains, and dividends
(by allowing the lower Bush rates to expire). The intellectual and politi-
cal left urged him on, arguing that the failed $814 billion stimulus in
2009 was too small and that controlling spending any time soon would
derail the economy.
But economic theory, history, and statistical studies reveal that more
taxes and spending are more likely to harm than help the economy. Those
who demand spending control and oppose tax hikes hold the intellectual
high ground.
Writing during the Great Depression, John Maynard Keynes argued
that “sticky” wages and prices would not fall to clear the market when
demand declines, so high unemployment would persist. Government
spending produces a “multiplier” to output and income; as each dollar is
spent, the recipient spends most of it, and so on. Ditto tax cuts and trans-
fers, but the multiplier is assumed to be smaller.
Michael J. Boskin is a senior fellow at the Hoover Institution, a member of

Hoover’s Shultz-Stephenson Task Force on Energy Policy and Working Group on
Economic Policy, and the T. M. Friedman Professor of Economics at Stanford
University.

Macroeconomics since Keynes has incorporated the effects of longer
time horizons, expectations about future incomes and policies, and incen-
tives (including marginal tax rates) on economic decisions.
Temporary small tax rebates, as in 2008 and 2009, result in only a few
cents per dollar in spending. The bulk (according to economists such as
Franco Modigliani and the late Hoover senior fellow Milton Friedman) or all
(according to Hoover senior fellow Robert Barro of Harvard) is saved, as peo-
ple spread any increased consumption over many years or anticipate future
taxes necessary to finance the debt. Empirical studies (such as those by my
Hoover colleague Robert E. Hall and Rick Mishkin of Columbia University)
conclude that most consumption is based on longer-term considerations.
The best economic evidence testifies against increased spending and
increased taxes. Preventing tax hikes would be the best stimulus.
In a dynamic economy, many parts move simultaneously and it is dif-

ficult to disentangle cause and effect. Taxes may be cut and spending
increased at the same time, and those steps may coincide with natural
business-cycle dynamics and shifts in monetary policy.
Using powerful statistical methods to separate these effects in U.S. data,
Andrew Mountford of the University of London and Harald Uhlig of the
University of Chicago conclude that the small initial spending multiplier
turns negative by the start of the second year. In a new cross-national
time-series study, Ethan Ilzetzki of the London School of Economics and
Enrique Mendoza and Carlos Vegh of the University of Maryland con-
clude that in open economies with flexible exchange rates, “a fiscal expan-
sion leads to no significant output gains.”
Hoover senior fellows colleagues John F. Cogan and John B. Taylor,
with Volker Wieland and Tobias Cwik, demonstrate that government
purchases have a GDP impact far smaller in New Keynesian than in Old
Keynesian models and quickly crowd out the private sector. They estimate
the effect of the February 2009 stimulus at a puny 0.2 percent of GDP as
of December 2010.
By contrast, the last two major tax cuts—President Reagan’s in 1981–83
and President George W. Bush’s in 2003—boosted growth. They lowered

marginal tax rates and were longer lasting, both keys to success. In a survey
of fiscal policy changes in the Organization for Economic Cooperation
and Development over the past four decades, Harvard’s Alberto Alesina
and Silvia Ardagna conclude that tax cuts have been far more likely to
increase growth than has more spending.
Temporary, small tax rebates, as in 2008 and 2009, result in only a few
cents per dollar in spending.
Former Obama adviser Christina Romer and David Romer of the

University of California, Berkeley, estimate a tax-cut multiplier of 3.0,
meaning that $1 in lower taxes raises short-run output by $3. Mount-
ford and Uhlig show that substantial tax cuts had a far larger impact on
output and employment than spending increases, with a multiplier up
to 5.0.
Conversely, a tax increase is very damaging. Barro and Bain Capital’s
Charles Redlick estimate large negative effects of increased marginal tax
rates on GDP. Alesina and Ardagna also conclude that spending cuts are
more likely to reduce deficits and debt-to-GDP ratios, and less likely to
cause recessions, than tax increases.
These empirical studies leave many leading economists dubious about
the ability of government spending to boost the economy in the short run.
Worse, the large long-term costs of debt-financed spending are ignored in
most studies of short-run fiscal stimulus and even more so in the political
debate.
Uhlig estimates that a dollar of deficit-financed spending costs the
economy a present value of $3.40. The spending would have to be remark-
ably productive, both in its own right and in generating jobs and income,
for it to be worth even half that future cost. The University of Maryland’s
Carmen Reinhart, Harvard’s Kenneth Rogoff, and the International Mon-
etary Fund all conclude that the high government debt-to-GDP ratios the
United States is approaching damage growth severely.
Even sophisticated modeling has difficulty capturing the complexity
of a dynamic market economy (an idea stressed by Friedrich Hayek and
Robert Solow). But the best economic evidence indicates we should reject

increased spending and increased taxes. Preventing tax hikes would be the
best stimulus.
If anything, we should lower marginal effective corporate and personal
tax rates further (for example, along the lines suggested by the bipartisan
deficit commission’s Erskine Bowles and Alan Simpson). We should
quickly enact an enforceable gradual phase-down of the spending explo-
sion of recent years. That’s what the president and congressional leaders
should initiate. Then the equally vital task of long-run tax and entitlement
reform can proceed.
New from the Hoover Press is Death Grip: Loosening

the Law’s Stranglehold over Economic Liberty, by
Clint Bolick. To order, call 800.935.2882 or visit www.
hooverpress.org.

THE ECONOMY
Focus on the Fed

Although under intense political pressure, the Federal Reserve needs
to return to its apolitical core mission: monetary stability. By John B.
Taylor and Paul D. Ryan.
The Federal Reserve’s recent announcement that it would purchase $600

billion in Treasury securities has opened a much-needed debate over the
central bank’s proper role in economic policy decisions. We share the con-
cerns that many economists and policy makers have expressed about the
Fed’s decision to act.
The Fed’s recent departures from rules-based monetary policy have
increased economic instability and endangered the central bank’s inde-
pendence. It is time for commonsense reforms that refocus the Fed on
sound monetary policy and remove it from contentious political debates
over what policies are best to achieve other national goals.
Policy makers in Washington must recommit to laying the foundations
for economic prosperity. Low and equitable taxes, reasonable and pre-
dictable regulations, restrained and responsible spending, and sound and
honest money are the indispensable cornerstones of sustained economic
growth and job creation.
By rejecting Washington’s agenda of tax, spend, and borrow, American
voters took a critical step last November toward returning these founda-
John B. Taylor is the George P. Shultz Senior Fellow in Economics at the

Hoover Institution, the chairman of Hoover’s Working Group on Economic Policy
and a member of Hoover’s Shultz-Stephenson Task Force on Energy Policy, and
the Mary and Robert Raymond Professor of Economics at Stanford University.
Paul D. Ryan represents Wisconsin’s First Congressional District and is the
ranking Republican on the House Budget Committee.

tional principles to the center of our fiscal policy debates. But we must
Illustration by Taylor Jones for the Hoover Digest.

also realign our monetary policy if we are to achieve lasting prosperity.
Nearly a century ago, Congress established the Federal Reserve as an
independent central bank with the power to control the supply of money
and thereby achieve price stability. The administration of monetary policy
was rightly quarantined away from legislative deliberations on tax and
spending policies.

Yet in the 1970s, Congress endangered the Fed’s independence by giv-
ing it a dual mission: promoting “maximum employment” in addition to
maintaining “stable prices.” This dual mandate placed the central bank
in the middle of heated political debates over economic and fiscal issues.

The Fed’s latest unconventional program—commonly called quantita-
tive easing 2, or QE2—follows the unusual interventions of a year earlier
(now known as QE1), in which the Fed bought large amounts of not only
Treasury securities but also securities backed by private mortgages.
Quantitative easing is part of a recent Fed trend toward discretionary
and away from rules-based monetary actions. The consequences of this
trend are clear: the Fed’s decision to hold interest rates too low for too long
in 2002–4 exacerbated the formation of the housing bubble. And while
the Fed did help to arrest the ensuing panic in the fall of 2008, its subse-
quent interventions have done more long-run harm than good.
It’s time to remove the Fed from political debates over what policies are
best to achieve other national goals.
QE1 failed to strengthen the economy, which has remained in a high-

unemployment, low-growth slump, and there is no convincing evidence
that QE2 will help either. On the contrary, QE2 will create more econom-
ic uncertainty, stemming mainly from reasonable doubts over whether the
Fed will know exactly when and how to contract its balance sheet after
such an unprecedented expansion.
If the money created to finance these asset purchases is not withdrawn
in an expedient and predictable manner, the Fed risks higher inflation and
a depreciated currency. On the other hand, exiting these programs too
abruptly would also disrupt the economy.
Those economists who believe these risks are worth taking argue that
the trillion dollars Congress spent on short-term stimulus bills was not
enough, and that the Fed must now step into the breach.
While consistent with the “sugar-high economics” practiced in Wash-
ington of late, quantitative easing marks a further departure from the
foundations for prosperity and another step toward an increasingly politi-
cized central bank.
QE1 involved the Fed in areas of fiscal policy, such as credit allocation,
that are properly (and constitutionally) the domain of Congress. QE2 would
double down on these expansions, as the planned purchases of Treasury
securities would constitute a large fraction of soon-to-be-issued federal debt.

This looks an awful lot like an attempt to bail out fiscal policy, and such
attempts call the Fed’s independence into question.
For all of these reasons, Congress should reform the Federal Reserve
Act, particularly the section of the act that establishes the Fed’s dual man-
date. The Fed should be tasked with the single goal of long-run price
stability within a clear framework of overall economic stability. Such a
reform would not prevent the Fed from providing liquidity, serving as
lender of last resort, or cutting interest rates in a financial crisis or a reces-
sion.
Experience shows that a focus on price stability is the surest way for
monetary policy to lay the groundwork for strong economic growth. The
1980s and 1990s had better economic performance than the stagflation-
ary 1970s in part because the Fed did not waver from its primary goal of
checking inflation.
Advocates of aggressive Fed interventions cite the “maximum employ-
ment” aspect of the Fed’s dual mandate. But such interventions force Fed
policymakers to try to steer a middle course between inconsistent goals,
which unintentionally leads to lower employment and higher interest
rates.
Maybe it’s consistent with the “sugar-high economics” practiced in
Washington of late, but quantitative easing marks a further departure
from the foundations for prosperity.
Fed intervention is a poor substitute for sound fiscal policy. The central
bank should be taken off this particular beat.
Congress should also amend the act so that it once again requires the
Fed chairman to report on, and be accountable for, the Fed’s strategy for
monetary policy in writing and in public hearings before Congress. These
reporting and accountability requirements were removed from the act in
2000. They should be restored and strengthened.
In particular, the Fed should explicitly publish and follow a monetary
rule as its means to achieve price stability. Such a rule should include,
among other things: greater simplicity; a description of interest-rate
responses to economic developments, including how the Fed will achieve

those responses through money growth; and greater attention to com-
modity prices, including food and energy, as opposed to a myopic over-
emphasis on core inflation.
Within the context of crisis conditions, the Fed should have the dis-
cretion to deviate from its strategy of rule. However, it should have to
promptly report to Congress and the public the reasons for the deviation.
Establishing a goal of long-term price stability within a framework of
economic stability, including clear reporting and accountability require-
ments, would lay the monetary foundation for strong and sustained eco-
nomic growth and job creation. Strong foundations, not short-term quick
fixes, are required if we are to rebuild a prosperous United States.
Reprinted by permission of Investor’s Business Daily (www.investors.com). © 2010 Investor’s Business
Daily, Inc. All rights reserved.
Available from the Hoover Press is The Road Ahead for

the Fed, edited by John B. Taylor and John D. Ciorciari.
To order, call 800.935.2882 or visit www.hooverpress.
org.

THE ECONOMY
The Money-Go-Round
More evidence that stimulus thinking is wishful thinking. By John F.
Cogan and John B. Taylor.
For more than two years, economists have been debating the merits
of federal stimulus programs. President Obama’s compromise on the
Bush tax cuts late last year might be seen as at least partial recogni-
tion that keeping marginal tax rates from rising across the board is the
best stimulus now, especially if the deal leads eventually to making
the cuts permanent. The economic data rolling in confirm that recent
temporary, targeted stimulus programs have not worked, and that their
enactment was a triumph of Keynesian wishful thinking over practical
experience.
In September 2009, we reported empirical research showing that the
temporary tax rebates and transfer payments in the Bush and Obama
administrations’ stimulus programs were ineffective. Here we consider
new data on the impact of increases in government purchases, which were
heralded as a major stimulating factor in the Obama package.
The key tenet of Keynesian economics is that government purchas-
es of goods and services stimulate additional economic activity beyond
John F. Cogan is the Leonard and Shirley Ely Senior Fellow at the Hoover
Institution and a member of Hoover’s Shultz-Stephenson Task Force on
Energy Policy, Working Group on Health Care Policy, and Working Group
on Economic Policy. John B. Taylor is the George P. Shultz Senior Fellow
in Economics at the Hoover Institution, the chairman of Hoover’s Working
Group on Economic Policy and a member of the Shultz-Stephenson Task Force
on Energy Policy, and the Mary and Robert Raymond Professor of Economics
at Stanford University.

the amount of the purchase itself. The impact on GDP of the stimulus
depends on both the dollar volume of additional government purchases
and the size of the government-purchases multiplier, that is, the effect of
a change in government purchases on real GDP.
Although the policy debate has mainly focused on the multiplier’s
size, data covering the first year and three quarters of the 2009 American
Recovery and Reinvestment Act (ARRA) show that despite the large size
of the program, the dollar volume of additional government purchases
that it has generated has been negligible.
The ARRA attempted to stimulate government purchases in two ways.
First, it provided funds to finance federal government purchases of goods
and services (mainly for infrastructure, law enforcement, and education).
Second, it provided grants to states and local governments to enable them
to increase purchases of similar goods and services.
Recently released Commerce Department data show that of the $862
billion stimulus package, the change in government purchases at the fed-
eral level has, thus far, been extremely small. From the first quarter of

2009 through the third quarter of 2010, government purchases increased
by only 3 percent of the $862 billion ($24 billion). Infrastructure spend-
ing increased by an even smaller amount: $4 billion. In a $14 trillion
economy, such amounts are immaterial.
The Commerce Department also provides data on ARRA grants to
state and local governments and the amount of purchases by these govern-
ments. According to these data, state and local government purchases of
goods and services did not increase at all in response to the large federal
stimulus grants. These purchases have remained slightly below their pre-
ARRA level since the fourth quarter of 2008.
Meanwhile, state and local revenues fueled by the receipt of ARRA
grants have grown 10 percent over the same period. The low level of
state and local purchases is consistent with the initial falloff and subse-
quent slow growth in revenues excluding ARRA grants. Our statistical
analysis shows that once revenues are controlled for, ARRA grants have
no statistically significant impact on state and local government pur-
chases.
Of the $862 billion stimulus package, the change in government
purchases at the federal level has, thus far, been extremely small.
The absence of any discernible impact of federal grants on state and

local government purchases should come as no surprise to students of
U.S. fiscal policy history. In 1979, the late Ned Gramlich, former gover-
nor of the Federal Reserve Board and University of Michigan professor,
studied the impact of similar grants in stimulus packages of the late 1970s.
He found that the federal grants to state and local governments had little
effect on their purchases of goods and services.
Therefore, Gramlich concluded, “the general idea of stimulating the
economy through state and local governments is probably not a very good
one. Plain old permanent federal income tax cuts retain their superiority
as a fiscal stabilization device.”
So where did ARRA’s state and local grant money go? While some of
it increased transfer payments to individuals in the form of welfare and
Medicaid, the major part was used simply to reduce borrowing. As ARRA

grants increased, net borrowing by state and local governments decreased.
In the third quarter of 2010, for example, state and local governments
received $132 billion in stimulus grants at an annual rate. In that quarter
they borrowed $136 billion less at an annualized rate than they had in the
fourth quarter of 2008, even though their revenues from all other sources
were only $76 billion higher.
Plain old permanent federal income tax cuts retain their superiority as a
fiscal stabilization device.
The bottom line is that the federal government borrowed funds from
the public and transferred these funds to state and local governments,
which then used the funds mainly to reduce borrowing from the public.
The net impact on aggregate economic activity is zero, regardless of the
magnitude of the government-purchases multiplier.
This behavior is a replay of the failed stimulus attempts of the 1970s.
As Gramlich found in his work on the anti-recession grants to state and
local governments: “A large share of the [grant] money seems likely to pad
the surpluses of state and local governments, in which case there are no
obvious macrostabilization benefits.”
The implication of our empirical research and Gramlich’s is not that
the stimulus of 2009 was too small, but rather that such countercyclical
programs are inherently limited. The lesson is to beware of politicians
proposing public works and other government purchases as a means to
stimulate the economy. They did not work then and they are not working
now.
Available from the Hoover Press is Ending Government

Bailouts as We Know Them, edited by Kenneth E. Scott,
George P. Shultz, and John B. Taylor. To order, call
800.935.2882 or visit www.hooverpress.org.

THE ECONOMY
States of Hardship
With unions, pensions, and mandates helping to do the digging, state
and local governments find themselves in a hole even deeper than
Washington’s. By Gary S. Becker.
The federal government’s disturbingly large present and prospective fis-

cal deficits receive much attention, and deservedly so. Yet the finances
of many state and local governments are also in bad shape, and in many
respects they are far more difficult to solve.
California offers a dramatic example. It has a current annual budget
deficit of over $20 billion, which amounts to about 20 percent of its
annual spending. My home state of Illinois is not far behind, with a fiscal
deficit of about 20 percent of total spending. Nevada and other states run
even bigger deficits. Many cities, like Chicago and New York, also face a
dismal fiscal future. On the other hand, some states, including Texas, are
in much better fiscal health, because they have had greater fiscal discipline
or the Great Recession has had a smaller impact on their tax revenues.
Tax revenues will recover as the American economy recovers, and that
will help reduce state and local deficits. But for many states, such as Cali-
fornia and Illinois, the increased tax revenues from an economic recovery
are unlikely to eliminate the deficits. These states have a structural gap
between spending and revenues. They cannot easily cut spending because
Gary S. Becker is the Rose-Marie and Jack R. Anderson Senior Fellow at the
Hoover Institution and a member of Hoover’s Working Group on Economic
Policy and Shultz-Stephenson Task Force on Energy Policy. He is also the
University Professor of Economics and Sociology at the University of Chicago. He
was awarded the Nobel Memorial Prize in Economic Sciences in 1992.

a sizable part of it goes to education, welfare, health, roads, and criminal
justice—all categories with strong political support.
Nor is it easy for states and cities to greatly raise taxes. Taxpayer groups
are generally well organized to lobby against tax increases. Moreover,
competition among states and localities for companies and residents, and
competition from untaxed online sales, puts a ceiling on how high taxes
can be increased without badly hurting a state or local economy. Perhaps
states that have relatively low income taxes—Illinois has a flat tax of 3
percent—can raise them a little, but states with high income taxes (the
maximum in California already reaches almost 10 percent at moderate
income levels) would find it hard. Raise income taxes too much and you
encourage substantial out-migration of small businesses and richer indi-
viduals.
In states like California and Illinois, governments can’t easily cut
spending because much of it goes to categories with strong political
support.
As bad as their present fiscal situation is, the long-term picture for state
and local government finance is worse. The vast, looming problem is the
amount of unfunded liabilities for pensions and health care to retired gov-
ernment employees. Recent estimates place the present, or discounted,
value of state and local government unfunded liabilities at over $3 trillion.
This amounts to about 22 percent of American GDP, and it is more than
150 percent of annual state and local government spending. There are
several reasons unfunded liabilities are so large.
Most state and local government employees can retire when they are still
young, often after twenty to twenty-five years on the job. To make mat-
ters worse, these governments continue to use defined-benefit systems, in
which the amounts paid to retired workers are only very loosely based on a
worker’s contributions to the pension system. Retirement incomes depend
mainly on earnings during the last few years of government employment.
Earnings already tend to be much higher at older than at younger ages,
and workers sometimes make the relevant earnings even higher by taking
overtime pay shortly before retirement, and by other means.

Medical benefits to retired state and local government workers are
another important determinant of unfunded liabilities. These benefits are
usually generous, with low deductibles, co-payments, and premiums. Of
the $3 trillion in unfunded liabilities, about 20 percent is from expected
medical care, and the large remainder is from pensions. Since medical
spending has been rising rapidly over time, the share of state and local
liabilities due to medical spending is likely also to rise.
City governments could threaten the “nuclear option” of declaring
bankruptcy, hoping that bankruptcy courts would reduce their unfunded
retirement obligations.
Fiscal adjustment by states and cities is further complicated by heavy

unionization. Whereas unionization in the private sector declined drasti-
cally during the past several decades to only about 7 percent of the private
labor force, unionized state and local government employees grew dra-
matically, to about 40 percent of all those workers. Government unions,
like the teachers’ unions, are powerful and entrenched, and would battle
fiercely against efforts to greatly reduce any part of their total compensa-
tion.
The federal government also has immense unfunded medical and Social
Security liabilities for retired workers, but unlike state and local govern-
ments, the federal government can help finance these liabilities in a pinch
by effectively printing money through bonds that are directly or indirectly
purchased by the Federal Reserve. The federal government can also raise
taxes without worrying about the competition among states for businesses
or richer individuals, although federal income and other taxes have sizable
effects on incentives as well.
Despite the obstacles, state and local governments do have several
options for getting their unfunded liabilities under control. They could
delay retirement ages of most new employees, and even of many present
employees, until they reach their sixties (employees doing strenuous phys-
ical work could retire earlier). They would thereby require their employ-
ees to retire at about the same age as most nongovernmental workers. In
addition, they could begin to shift, as have many private employers, from

defined-benefit retirement systems to defined-contribution systems. In
the latter system, retirement benefits depend on the present value of pen-
sion taxes paid by each worker, accounting also for changes in returns on
assets. Finally, state and local governments could force present and future
retirees to pay for a larger fraction of their medical care.
Governments can oppose powerful unions if they have the strong sup-
port of the taxpayers who will be burdened with these unfunded obli-
gations. City governments could even threaten the “nuclear option” of
declaring bankruptcy, in the expectation that bankruptcy courts would
reduce their unfunded retirement obligations.
One way or another, cities and states with the most serious unfunded
liability problems would eventually be forced to either lower their spend-
ing or raise their taxes. Either choice would reduce their competitiveness
against other localities. It’s hard to come away with much optimism for
the economic futures of the states and cities with the biggest problems.
Reprinted from the Becker-Posner Blog (www.becker-posner-blog.com).
Available from the Hoover Press is Reacting to the

Spending Spree: Policy Changes We Can Afford, edited
by Terry L. Anderson and Richard Sousa. To order, call

GROWTH OF GOVERNMENT
The Budget Binge that

Never Was?
Federal spending may be busting out all over, but columnist Paul
Krugman claims he doesn’t see it. By Charles Blahous.
New York Times columnist Paul Krugman wrote a recent column titled
“Hey, Small Spender” in which the titular small spender is—sans delib-
erate irony—the federal government. He argued that accelerated federal
spending was called for to reduce unemployment and feed economic
growth—familiar turf for Krugman, who over the past couple of years has
argued that the federal government should spend more, and run still larger
deficits, than at present. But then he made the remarkable assertion that
no spending expansion had yet taken place.
“The whole story is a myth. There never was a big expansion of govern-
ment spending,” he wrote. Later he said, “Where’s all that spending we
keep hearing about? It never happened.” Krugman repeated this “never
happened” verdict twice more in the column. For good measure, he also
wrote of a “widespread perception that government spending has surged,
when it hasn’t.” This alleged misperception, he said, arose in part from a
“disinformation campaign from the right, based on the usual combination
of fact-free assertions and cooked numbers.”
Before delving into the particulars of Krugman’s policy arguments, let’s
eliminate the risk of fact-free assertions and examine the data pertinent
to government spending levels. If there is a disinformation campaign, the
Charles Blahous is a research fellow at the Hoover Institution and one of two
public trustees for the Social Security and Medicare programs.

conspiracy has grown quite wide, spreading to both the Congressional
Budget Office and President Obama’s own Office of Management and
Budget (OMB). It was the OMB that last year reported the history of
federal spending levels shown in Figure 1.
As the chart shows, federal spending reached historic levels in 2009—
to be surpassed again in 2010—a peak in relation to the overall economy
not seen since World War II. In 2009, federal spending soared to 24.7
percent of GDP, a figure not even closely approached since 1946.
The New York Times columnist attacks reports of a spending boom as a
“disinformation campaign from the right, based on the usual combination
of fact-free assertions and cooked numbers.”
Moreover, as the chart shows equally clearly, these levels of spending

were not solely the result of a gradual, inevitable evolution in the size of
government, but instead represented a sudden surge in response to the
recession. From 2008 to 2009, federal spending increased by 4 percent
of GDP in a single year. The spending increase that Krugman says never
happened was in fact the biggest single-year spending increase since 1952.
Lest anyone believe that the rise in government spending as a percent-
age of GDP was largely a function of a decline in GDP itself, it should
be noted that the absolute size of the spending increase over 2008–9 was
also of historic magnitude—exceeded since 1952 only by 1975 (a year in
which rapid nominal spending growth was partially fueled by high price
inflation).
This recent spending surge is the largest reason why the federal deficit
has arisen from 3.2 percent of GDP in 2008 to roughly 10 percent in
2009 and 2010. Once again, it bears recollection that these are the highest
levels for federal deficits since (sound familiar?) World War II.
Of what did this sudden spending increase consist? The OMB again
supplies the data. Altogether, federal spending rose by roughly $535 bil-
lion from 2008 to 2009. But at the same time, annual federal interest costs
on government bonds dropped by roughly $66 billion. Overall, then, the
government engaged in more than $600 billion in additional non-interest
spending in 2009 relative to 2008.

Figure 1.
Federal Outlays as a Percentage of GDP
To understand where all the new spending occurred, it may be help-

ful to rely upon the government’s methods for classifying spending. The
federal budget is classified each year into different categories by function
and subfunction. Figure 2 shows which functions had the biggest shares
of the $600 billion increase.
By far the biggest single expenditure increase in 2009 (44 percent of the
total) was in the budget function dubbed Commerce and Housing Credit,
where outlays for the TARP financial stabilization program were catego-
rized. Incredibly, the government projected to spend even more in 2010
than in 2009, despite the fact that TARP’s transactions turned around
completely during the past year. The OMB actually projected a positive
swing of more than $300 billion in TARP spending from 2009–10: from
a $292 billion net outlay in 2009 to a $25 billion net savings in 2010.
This fiscal improvement of more than $300 billion would be swamped,
and then some, by still more spending increases currently in process.
Behind TARP, the spending category most responsible for the 2008–9
increase was Income Security (which includes unemployment compen-
sation and other forms of relief ), followed by Social Security, whose
expenditures were swelled by a large 2009 cost-of-living adjustment as
well as a recession-induced uptick in disability and early retirement ben-
efit claims.

Figure 2.
Where the 2008–2009 Spending Increase Went
Krugman acknowledged these spending increases: “To be fair,” he

writes, “spending on safety-net programs, mainly unemployment insur-
ance and Medicaid, has risen—because, in case you haven’t noticed, there
has been a surge in the number of Americans without jobs and badly in
need of help. And there were also substantial outlays to rescue troubled
financial institutions, although it appears that the government will get
most of its money back.” Despite this acknowledgment, however, much
of his column was still devoted to arguing that this historic expansion of
federal spending never occurred.
Some of the government’s deficit spending in 2009–10 occurred some-
what automatically because of cyclical effects, while some of it was a con-
sequence of deliberate interventions. The recession itself depressed federal
revenue collections and increased federal benefit claims, each of which
adds to federal deficits. The depression of federal revenues will fix itself
once the economy recovers. By 2013, under OMB projections, federal
revenues will actually be higher than the historic average as a percentage
of GDP.
Even without further legislation, therefore, government fiscal practic-
es would have been countercyclical. Legislation such as TARP and the
“Recovery Act” has only added further to the base of government-provid-
ed fiscal stimulus that would otherwise have occurred.
It is important to distinguish between the wisdom and the fact of these
countercyclical relief and financial stabilization expenditures. Even if

we agree that they were appropriate, this doesn’t mean that they never
happened. All reasonable participants in the national discussion should
acknowledge that the federal spending increase is the largest in recent his-
tory.
The spending increase that Krugman says never happened? It was in fact
the biggest single-year spending increase since 1952.
Krugman staked his claim to the nonexistence of the spending binge

primarily on redefining what constitutes relevant federal spending. “When
people denounce big government,” he wrote, “they usually have in mind
the creation of big bureaucracies and major new programs. And that just
hasn’t taken place.” He then went on to cite the decline in the federal
workforce as evidence for his general claim.
That is, to put it charitably, an innovative argument, considering the
demonstrated and widely evident public unease with the current overcom-
mitment of federal resources. It seems absurd to suggest that the tea party
movement would never have materialized if only these ignorant dem-
onstrators had appreciated that TARP and the auto bailout were being
administered by existing government departments. Those who rightly
worry about untenable federal spending commitments are not basing their
concern on the number of federal employees required to administer them,
but on the fiscal commitments themselves. A willingness to spend money
within the existing federal bureaucracy does not a “small spender” make.
Let’s keep these facts in mind during the debate over the best direc-
tion for federal policy. Some advocates, like Krugman, call for additional
stimulus spending. Fine; that’s a point to be debated. But we need to
remember that the government is already engaging in historically unprec-
edented fiscal stimulus, to the tune of deficits equal to 10 percent of GDP,
most of this fueled by increased spending.
No one can say with certainty when exactly this level of deficit spend-
ing begins to produce diminishing or negative returns, that is, when the
cumulative effect of fiscal overextension begins to undermine even near-
term stimulative effect. It is reasonable to debate whether, given the cur-
rent state of the economy and the grim long-term budget picture, the

government should be running deficits equal to 6 percent, 8 percent, 10
percent, or 12 percent of GDP. We cannot even have that discussion if we
are unwilling to acknowledge the facts.
Reprinted by permission of e21 (www.economics21.org). © 2010 e21—Economic Policies for the 21st
Century. All rights reserved.
New from the Hoover Press is Pension Wise: Confronting

Employer Pension Underfunding—And Sparing Taxpayers
the Next Bailout, by Charles Blahous. To order, call

L A B OR
Union Made
To bring government budgets back down to earth, first puncture
those inflated labor contracts. By Richard A. Epstein.
Labor relations in the public sector continue to unravel. President Obama

signed a $26 billion bailout bill some months ago for states that can-
not afford to keep teachers and other municipal employees on their pay-
rolls. At the same time, the embattled Chicago Teachers Union (CTU)
was suing the Chicago Public Schools (CPS) in federal district court to
reverse the layoffs of close to 1,000 teachers and assorted other academic
personnel. The CTU complaint insisted that the teachers’ contracts were
protected property interests that could be terminated for unsatisfactory
performance only with an individualized hearing that would drag on long
past the start of the next school year.
The layoffs won’t put a dent in the Chicago schools’ $370 million
budget deficit. So we should forget the niceties of this collective bargain-
ing agreement and arrange a showdown in which both sides are likely to
blink, knowing that a compromise only postpones the day of reckoning.
The great temptation in dealing with such situations is to throw some
temporary patch over a larger problem that only gets worse. But no longer
can we duck the two deeper questions behind these endless legislative and
judicial struggles. First, what institutional arrangements give rise to these
constant showdowns? Second, what can be done to fix them—not only
Richard A. Epstein is the Peter and Kirsten Bedford Senior Fellow at the
Hoover Institution and a member of Hoover’s John and Jean De Nault Task
Force on Property Rights, Freedom, and Prosperity. He is the Laurence A. Tisch
Professor of Law at New York University Law School and a senior lecturer at the
University of Chicago.

for teachers but also for prison guards, police, firefighters, and all other
state and municipal workers?
Start with this brutal reality. Private sector employees outnumber pub-
lic employees by about five to one. Yet with the recent collapse of the auto-
mobile and construction industries, public sector union members, at 7.9
million, outnumber the 7.4 million union members in the private sector.
Put otherwise, the penetration rate of labor unions in the private sector is
at an all-time low, 7.2 percent. The similar number for public employees
is around 43 percent.
The great temptation is to throw some temporary patch over a larger
problem that only gets worse. It’s too late for that.
These figures are no accident. Major states like California, Illinois, and
New York require state agencies and local governments to negotiate with
unions. To avoid strikes, compliant public officials grant unions guaran-
teed wage and pension contracts that shift all the risk of the economic
downturn onto the public treasury. Bad times have led to a collapse in the
stock market and a decline in tax revenues. So what if private citizens are
taken to the cleaners? Who cares if discretionary public services are cut?
The union ship continues to ride high and untroubled on the roiling seas.
The public fury grows with each new social dislocation. To finesse the
blow, clever union leaders try, as in New York state, to direct all cuts to
future union members, thereby leaving untouched the wage and pension
package for current employees and pensioners. Too little, too late. Deep
cuts must be made today, not in a generation.
The only serious solution: do two things and avoid a third. First, launch
a frontal assault on the protected status of public unions. Second, cut pen-
sion benefits for present and future union retirees. Third, forbid the use of
federal tax money to bail out failing states and municipalities.
Regarding the first step, Calvin Coolidge underestimated the risks of
public unions when he famously said, “There is no right to strike against
the public safety by anyone, anywhere, any time.” No-strike laws address
this risk but create another one in its stead: excessive monopoly power
through the power of mandatory arbitration. The correct solution is more

comprehensive. No public body should ever be required or allowed to
confer monopoly power on an employee union—period.
In education, for example, we forbid powerful unions to block char-
ter schools, vouchers, or homeschooling. Any school, public or private,
should operate with an explicit legislative guarantee that all teachers and
other employers must agree not to join a union as a condition of employ-
ment. The “best interests of the student” cannot be allowed to become
a fig leaf for protectionist union legislation. Alternative paths of educa-
tion are the best way to reduce government expenditures and blunt union
power.
No public body should ever be required or allowed to confer monopoly
power on an employee union—period.
As for step two, the sweetheart pension agreements between union

leaders and sympathetic legislators, far from being sacred property rights,
represent the worst form of self-dealing. Some legislators sell out their
constituents in exchange for modest campaign contributions; others yield
to union threats of massive electoral retaliation if they do not go along
with union demands.
No taxpayer has ever been allowed to challenge these questionable
deals in court before they took effect. This must change. Any self-dealing
between a corporate board and its key officers wouldn’t last a minute;
these bloated union contracts should fare no better. They should be set
aside as unfairly obtained. Exactly how they should be trimmed is hard
to say.
Voters in Colorado, Minnesota, and North Dakota recently voted to
eliminate cost-of-living increases for present and future pensioners. It’s
a start, but it won’t be enough. In the end, the ultimate objective should
be to reduce pensions for public employees to the levels received by their
peers in private industry.
Three: no federal bailouts, like the recent $26 billion congressional
giveaway. Rewarding the profligate at the expense of the frugal is an open
invitation to another round of bloated union contracts. The federal gov-
ernment should not tax away the budget accomplishments of fiscally

responsible states—think Governor Chris Christie in New Jersey—to sub-
sidize the profligate ways of other states. We need to level up, not down.
In the end, this battle over union contracts and union pensions is part
of a larger political struggle. One the one side are those who think that
more regulation, more taxation, and more spending are required to dig
this nation out its current hole. Berkeley economist Robert Reich has sug-
gested that the federal government spend heavily to give interest-free loans
to states in financial stress.
No dice. We need to move in the opposite direction: deregulate, lower
taxes, and slash budgets. The choices could not be more stark.
Reprinted by permission of Forbes. © 2010 Forbes Media LLC. All rights reserved.
Available from the Hoover Press is The Case Against the

Employee Free Choice Act, by Richard A. Epstein. To

N A T IONAL SECURI TY AND DEFENSE
Armed with the Odds

Proposed cuts in defense spending might not harm our national
security—but only if the Pentagon plays its cards right. By Thomas
H. Henriksen.
Cutting the U.S. defense budget, even by a little, is fraught with predic-
tions and bets. Unlike other major federal spending, the defense budget is
a wager on what lies ahead overseas: Will it be peace, war, or deterrence?
Who are our potential adversaries, and what will become of the current
ones? Armies and navies are built and sustained over many years in response
to these deadly serious calculations about war and the prevention of war.
Even so, when Defense Secretary Robert Gates proposed cuts to the
Pentagon’s budget earlier this year, he set off more than the usual guns-
and-butter political debate. That same week, the national debt surpassed
a dubious milestone: $14 trillion, an all-time high. Analysts note that
soaring federal expenditures on entitlement programs will rise further as
President Obama’s signature health care program comes on line. Above all,
© USMC
Americans remain gripped by apprehension about perceptions of political

and economic decline.
The Gates cuts represent the first slowdown in the growth of the
defense budget in more than a decade. Such spending has risen an infla-
tion-adjusted 65 percent since the September 11, 2001, terrorist attacks,
and under Gates the budget will continue to rise, albeit at a slower pace.
His proposed cuts were driven not by the Defense Department but by the
White House, which is presiding over the mountainous and potentially
ruinous U.S. debt and now must confront a reshaped House of Repre-
Thomas H. Henriksen is a senior fellow at the Hoover Institution.

A prototype of the Marines’ amphibious Expeditionary Fighting Vehicle roars toward shore.
Defense Secretary Robert Gates ordered that the multibillion-dollar EFV project—plagued
by cost overruns, mechanical breakdowns, and failed tests—be scrubbed. Remarkably, the
Marine Corps commandant concurred, saying the Marines could spend the money better
elsewhere.
sentatives, many of whose members were elected on a promise to fix the

ballooning federal deficit.
The Oval Office had instructed the Pentagon to squeeze some $78
billion in growth from its projected spending over the next five years. Its
initial demands were for even greater defense belt-tightening, but Gates
reportedly pushed back against the commander in chief and his West
Wing appointees. The final plan excluded actual outlays for the ongoing
operations in Afghanistan and Iraq (Afghanistan alone consumes more
than $100 billion a year).

The defense secretary’s spending plan came with recommendations to
shrink the size of the U.S. Army and Marine Corps, eliminate certain
big-ticket weapons systems, and modernize older weapons and vehicles.
A closer look shows where the Pentagon is placing its bets on the current
conflicts in Iraq and Afghanistan, and how it is hedging its bets on China
and the growing Chinese military prowess.
A V OI D I N G “ H O L L OW ARMY” SYNDROME
Most obviously, Gates assumes a diminished need for ground combat.
The Army would see its active-duty troop levels fall 27,000, from the
existing 569,000, while the Marine Corps shrinks by as many as 20,000
troops, from its current size of 202,000, by the time of the presumed hand-
over of Afghanistan to national forces in 2014. The Gates budget bets that
land-warfare commitments will continue to shrink from their height three
years ago, when infantry-intense battles raged in Iraq and Taliban attacks
escalated in Afghanistan. It assumes that America can avoid interventions.
But since the end of the Cold War, U.S. forces have intruded on foreign
territory on average every two and a half years, and thus the odds are
against a stay-in-the-barracks military force.
The Gates cuts were driven not by the Defense Department but by the
White House, which is presiding over the mountainous and potentially
ruinous national debt.
The Pentagon assumption rests on several other near-term factors.

First, Iraq will persist in its demands that all 48,000 U.S. military person-
nel be withdrawn by the end of this year, per the 2008 agreement with
President Bush. Second, the Taliban and related groups will not ramp up
the insurgency while NATO forces continue to head for the exit. Third,
nuclear-armed Pakistan will retain its dubious stability and move against
Taliban havens on its territory, thereby sparing U.S. forces the job. Finally,
the gradually scaled-down Army and Marine units will not have to inter-
vene in Yemen, Somalia, or along the Mexican border to contain violence
connected to drug cartels. The Gates bet, then, depends on the known
problems remaining manageable for the next few years. As for unknown

contingencies, such as tumult in Egypt and elsewhere, the forecasts are
unclear.
In short, the lower troop levels rest on the belief that the Iraq and
Afghanistan wars will soon be history, with no repetitions elsewhere.
Since the Cold War, U.S. forces have intruded on foreign territory on
average every two and a half years. The odds are against a stay-in-the-
barracks military force.
Take a moment to reflect on how cuts in military personnel have been

handled, and mishandled, in the past. Severe troop reductions in the
post-Vietnam era created a byword: the “hollow Army.” Armed forces
in the 1970s felt the ax of anti–Vietnam War politicians. When Ronald
Reagan was elected president in 1980, he restored funding and morale
among fighting forces. But again, after the Berlin Wall collapsed, the
U.S. military underwent a less-criticized hollowing out in pursuit of
a post–Cold War “peace dividend.” The Army, the Navy, and the Air
Force experienced almost 40 percent reductions in size during the 1990s;
the Marines, the smallest of our forces, went down less drastically. The
Navy culled a nearly 600-ship fleet to fewer than 300. The Air Force
scaled down from 28 fighter wing equivalents in 1989 to 13 by 1997. It
retained its lethality, nevertheless, by the introduction of smart weapons,
satellite- and laser-guided munitions that enable pilots to hit targets with
pinpoint accuracy.
The Army was the biggest loser in the 1990s Pentagon worldview
because few military and civilian leaders envisaged protracted ground
combat after the Red Army withdrew from central Europe. The Army
went from 18 active divisions to 10 by the start of the Iraq War in 2003.
Just before the 9/11 attacks, moreover, the Pentagon civilian leadership
had been considering further Army reductions to just 7 active divisions—
so heady was the belief that an agile, mobile, and lethal force could knock
out any adversary with “shock and awe.”
Fortunately for the American enterprise in Iraq, that dangerous wager
was never executed. Still, it offers a warning to those who believe that
high-tech machines alone can win wars. As the Southwest Asia experience

confirms, only land forces can clear and hold terrain from entrenched ene-
mies. The unplanned-for insurgent warfare in Iraq—after the “shock and
awe” phase—taxed America’s ground forces unduly. It required repeated
tours of duty for infantrymen in the Army and Marines, prolonged acti-
vation of reserve and National Guard units, and implementation of com-
pulsory “stop loss” orders, which delayed some 140,000 service members
from leaving the ranks after their service commitments expired and con-
stituted the major factor in the extraordinarily high suicide rate among
young troopers with multiple combat tours. When defense bets lose, they
are costly.
Just before 9/11, steep Army reductions were on the table—so heady
was the belief that an agile, mobile, and lethal force could knock out any
adversary with “shock and awe.”
Gates’s projected downsizing over five years does not constitute a hol-
lowing out of America’s land forces, although it is still a bet on the future
we want, not on what we might get. Perhaps the American public’s dis-
enchantment with the expenditure of so much blood and treasure in the
lands east of the Persian Gulf will constrain Washington from venturing
again into gigantic conflicts that cost a trillion dollars and nearly six thou-
sand lives. But the future is unknowable.
T H E H E D G E D B E T ON CHINA
Another wager stems from the extraordinary rise of China to the front
ranks of world powers. Not since nineteenth-century Germany burst on
the international scene has a country so catapulted itself into the Ameri-
can consciousness.
The threatening armaments and blustering behavior of pre–World War I
Germany helped lock Europe into a collision course that European pow-
ers failed to avert. History need not repeat itself, but the historical warning
lights are currently blinking yellow over Sino-American tensions. Con-
flict between the United States and the People’s Republic of China over
Taiwan, North Korea, or tiny, disputed islands off the Asian continent is
far from preordained. Yet the emergence of China, like that of the Kai-

ser’s Germany, unleashes competitive forces, envy, dread, and resentment,
which could explode in an unexpected minor flashpoint, such as the assas-
sination in Sarajevo almost a century ago. Moreover, too much budget
austerity or bets on the wrong mix of jets, ships, and missiles might inad-
vertently signal to Beijing a lack of resolve or capability to defend Ameri-
can interests in the Western Pacific. Such an outcome would mean deter-
rence failed; the bet was unrealistic.
The Chinese military’s test flight of its new, stealthy J-20 fighter, which
coincided with Gates’s January visit to Beijing, was as welcome as shark
fins near the beach. Its arching across the sky, together with China’s sus-
tained, double-digit defense spending, aggressive pursuit of territorial
claims in surrounding seas, and failure to curb its North Korean ally, have
all contributed to a refreshing realism in Washington. Frank acknowl-
edgement of the People’s Liberation Army’s growing military might had
gone unspoken; instead, American officials referred obliquely to China
as if, like Voldemort in the Harry Potter novels, it “must not be named.”
Hence, Pentagon scenarios and budgets noted only an unidentified “area-
denial and anti-access” ability, without citing China’s growing militariza-
tion. Now that self-censoring veil has been stripped away, revealing an
emergent China with a modernizing arsenal of technologically advanced
weaponry.
Canceling or even trimming a weapon or closing a base triggers intense
politics. Closeouts always boil down to lost local jobs—and lost votes for
a sitting politician.
The defense budget proposal thus takes a modest crossover step from a
posture fixed on counterinsurgency war-fighting to glimmers of recogni-
tion that America is a Pacific power with vital interests in East Asia. Hence,
Gates’s last budget before his retirement might constitute a transition.
The proposed budget underwrites several systems suited to the new
Asian reality. Spending is designated for electronic jammers (to counter
Chinese electronic warfare), new radar for F-15 fighters, and carrier-
launched drones for surveillance over wide ocean areas and strikes against
threats to U.S. warships from other vessels or shore-based sites. It also

funds the plans for the Air Force’s next-generation penetration bomber, a
platform plainly unnecessary for the current low-intensity engagement in
Afghanistan.
K N O W I N G W H E N TO FOLD
Gates also laid his bets for and against weapons now being developed.
He is not the first defense secretary to cancel lingering white elephants,
of course. His immediate predecessor, Donald Rumsfeld, canceled the
Army’s Crusader, a self-propelled howitzer, and its Comanche, an armed
reconnaissance helicopter. The Rumsfeldian Pentagon also delayed and
reduced funding for the Army’s premier Future Combat Systems, a fleet
of manned and unmanned networked vehicles that finally died a dignified
death by being further studied under another program. As a consolation
to the Army, money chopped by Gates from its hoped-for new weapons
was designated to upgrade the Abrams tank, the Bradley Fighting Vehicle,
and the Stryker armored vehicle. This was prudent, since each of these
armored carapaces is deployed in hostile environments.
Gates inevitably also closed in on some favorite weapons packages that
the military branches, along with their corporate and political allies, will
fight to salvage. The Army lost its non-line-of-sight missile; the Marines
saw their variant of the F-35 Joint Strike Fighter placed on probation; and
the Corps also stood to lose its long-awaited seaborne vehicle. Longing
to return to their World War II beach-landing fame, Marine generals had
billed the Expeditionary Fighting Vehicle (EFV) as a fast and protected
transport from warship to shore-storming operations. The multibillion-
dollar amphibious EFV (being developed by General Dynamics) hit
heavy political seas. Plagued by cost overruns, mechanical breakdowns,
and failed tests, the expeditionary vehicle, in the view of Gates and other
experts, is an anachronism unsuited to the age of accurate cruise missiles
that can easily be fired at it from coastal batteries.
The decision to cancel the Marine vehicle might not stick; it has already
run into intense political and corporate lobbying. Ironically, the Marine
Corps commandant, General James Amos, has publicly praised Gates’s
decision to cancel the EFV, saying that the money saved by not produc-
ing the vastly expensive vehicle could be more usefully plowed into other

vehicles and systems. But if the history of the Osprey (a tilt-rotor aircraft
with a vertical takeoff and landing capability) is any indication, the EFV
might prevail. The Marine-backed Osprey encountered manifold prob-
lems, deadly crashes, and over tenfold cost overruns that prompted civil-
ian officials to cancel its development more than once. Today, the Osprey
flies in the Afghan skies carrying Special Forces and other troops as well
as Marines.
The Chinese military’s test flight of its new, stealthy fighter jet, which
coincided with Gates’s visit to Beijing, was as welcome as shark fins near
the beach.
Last year, Gates ran afoul of local interests in another venue when he
tried to eliminate the Joint Forces Command in Norfolk. Its founding
mission had largely been accomplished and it had become a contractors’
haven, with associated high defense expenditures. Parochial interests—
the bane of defense-cutting efforts for decades—forced a partial retreat.
Under congressional lobbying, the defense secretary decided that about
half of the JFC duties could be parceled out to other Defense Department
entities in Virginia’s Tidewater area. The JFC case shows how difficult and
complex it is to pare down the Pentagon’s budget. Canceling or even trim-
ming a weapon or closing a base triggers intense politics because closeouts
boil down to lost local jobs—and votes for a sitting politician. The process
is far from the best way to devise and implement a global defense strategy,
but it is as American as pumpkin pie.
C A R E F U L S T EPS FOR A TIME OF RESTRAINT

The defense budget, even with its trims, is not a doomsday omen for
America’s fighting forces. It avoids drastic military belt-tightening char-
acteristic of postwar eras while making some calculated bets, such as
anticipating smaller ground forces and making incremental changes to
the Pacific naval and air defenses.
In some respects, the Gates plan is a pre-emptive strike that tries to
frame the defense-budget debate for fiscal year 2012. Faced with the need
to trim federal spending, Gates sought to accommodate the prevailing

mood of fiscal restraint and husband military strength. His short-term
bets could be reversed next year if necessary. And, in the end, Congress
and the White House must scrutinize other federal expenditures, includ-
ing the swollen entitlement programs, to restore fiscal soundness and halt
runaway deficits. The Pentagon budget comes to slightly over 20 percent
of all federal expenditures, so even an unrealistic 10 percent cut in military
spending would fail to dent the immense federal budget outlays. Like
Willie Sutton, budget cutters must go where the money is—the bloated
and burgeoning domestic programs and subsidies—for large savings.
Special to the Hoover Digest.
Available from the Hoover Press is Foreign Policy

for America in the Twenty-first Century: Alternative
Perspectives, edited by Thomas H. Henriksen. To order,
call 800.935.2882 or visit www.hooverpress.org.

NATION A L S E C U R I T Y A N D D E F E N S E
Why We Spend What

We Spend
The Pentagon’s budget is no ordinary line item. There are many
reasons not to cut it. By Victor Davis Hanson.
Two bedrock beliefs of traditional conservatism are fiscal discipline and

strong national defense. Likewise, two general rules of budgetary reform
in times of economic crisis are, first, to scale back expenditures rather than
raise taxes, and, second, to look at defense for some of the deepest cuts.
Something therefore will have to give.
In the past two years the United States has piled up record $1.3 tril-
lion annual budget deficits. That red ink has pushed the national debt
beyond $14 trillion, approaching 98 percent of the nation’s gross domes-
tic product, a peacetime record. Worse still, there is no end in sight to
this massive borrowing. Trillion-dollar budget deficits are scheduled at
least through 2014 and will take our national debt beyond $18 trillion.
Washington is being chastised as profligate by everyone from Germany
to China, which worries about the solvency of its massive surplus dollar
accounts.
No wonder, then, that the quest for fiscal sanity became the signa-
ture of the tea party movement and fueled the recent Republican politi-
cal renaissance. Amid the talk of across-the-board budget freezes, radical
entitlement reform, and elimination of entire programs, is it fair to spare
defense from the anticipated cuts?
Victor Davis Hanson is the Martin and Illie Anderson Senior Fellow at the
Hoover Institution.

At first glance, clearly no. After all, the United States budgeted $680
billion for defense this past year—slated to rise to $712 billion for fiscal
year 2011—and well over $1 trillion when you include defense-related
expenses that are not counted in the official Pentagon budget. Depend-
ing on how one categorizes the figures, defense spending now represents
more than 19 percent of the federal budget and is nearing 5 percent of the
nation’s GDP. Over the past nine years, the Pentagon’s budget has grown
on average about 9 percent each year, more than triple the rate of infla-
tion—apart from the supplementary spending on the Afghanistan and
Iraq wars.
Amid across-the-board spending freezes, radical entitlement reform, and
elimination of entire programs, is it fair to spare defense from the ax?
Indeed, America now accounts for about 40 percent of the world’s mili-
tary spending. That is six times as much as its supposed chief rival, China.
And when America’s defense expenditure is added to the military budgets
of Europe, as well as those of Australia, Canada, Japan, South Korea, and
other allies, the Western alliance accounts for nearly three-fourths of all
global outlay on defense. Why can’t fiscal conservatives at least freeze Pen-
tagon spending in an era of near–financial collapse?
In addition, arms alone are not always enough to foster national securi-
ty and global influence. China, with an economy one-third the size of ours
and a military budget one-sixth the size of ours, is increasing its profile in
Africa and Latin America and is insidiously reminding Japan, the Philip-
pines, South Korea, and Taiwan that the time is approaching when a near-
bankrupt United States either cannot or will not support them in times of
existential crisis. Flush with nearly $2.5 trillion in cash reserves (the result
of huge ongoing trade surpluses and budgetary discipline), China reminds
both neutrals and rivals that it has plenty of money to buy, bribe, or per-
suade its way with nations—and will have even more in the years ahead,
even as its chief rival, the United States, will have less.
In Washington, meanwhile, the Democratic White House and Senate
are most likely to compromise on budget cuts if defense-spending freezes
or reductions are on the table—concessions that might both preclude

increases in income-tax rates and facilitate reductions in general social
spending. After all, most government bureaucracies have plenty of waste,
the Pentagon included—especially in a period of rapid expansion that saw
the military budget double in less than ten years and consume $1 trillion
in aggregate budget increases above the rate of inflation.
C O M P E L L I N G REASONS TO GO SLOW
Yet there are also compelling reasons not to cut defense, and these are
rarely discussed. The United States has an alarming record of courting
danger when it has slashed defense, or even been merely perceived abroad
to be pruning its military. In the 1930s the Germans and Japanese did not
take the United States seriously as a deterrent power, and understandably
so: it was not until 1943—after tens of thousands of American deaths—
that the United States finally deployed planes, armor, and ships that were
roughly equal in numbers and quality to those of its Axis enemies.
China reminds both neutrals and rivals that it has plenty of money to buy,
bribe, or persuade its way around the world—and will have even more in
the years ahead.
After World War II ended, America demobilized and returned to its

parsimonious military ways. The result: by August 1950 an outnumbered
and outclassed U.S. Army in South Korea was confined to the tiny Pusan
perimeter. For the first six months of hard fighting in Korea, the military’s
obsolete tanks, antitank weapons, and planes proved no match for Soviet-
supplied T-34 tanks and MiG-15 jets.
Three decades later, in April 1980, post–Vietnam War budget cuts were
the subtext of the humiliating failed mission (Operation Eagle Claw) to
rescue American hostages from revolutionary Iran. And the post–Cold
War defense cuts of the 1990s may have made it far more difficult to
pursue terrorists or fight in Iraq and Afghanistan in the new millennium.
As Rudyard Kipling wrote in his poem “Tommy,” the public demands a
superb wartime military as much as it neglects it in peacetime: “For it’s
Tommy this, an’ Tommy that, an’ ‘Chuck him out, the brute!’ / But it’s
‘Saviour of ’is country’ when the guns begin to shoot.”

At present, the world is not tranquil. At least a half dozen countries,
including Iran, North Korea, and Venezuela, have ratcheted up their bel-
licose rhetoric, spurned U.S. efforts at outreach, and either threatened
or harassed their neighbors. Our future relations with China, Syria, and
Turkey are at best problematic. Soon-to-be-nuclear Iran may start a new
strategic-arms race in the Middle East, as Sunni Arab states seek to deter
the Shiite Persian hegemon. Potentially more frightening are the increas-
ing tensions between Japan and both China and Russia that stem from
territorial disputes over islands near the Japanese mainland. It is almost a
given that anytime the postwar United States cuts its military or tires of its
global deterrent role, it will soon rue the effort and pay for its laxity with
blood and treasure.
Also, the United States military keeps international peace in many
quiet ways that transcend its more overt efforts to rid the world of
assorted thugs, genocidal dictators, and terrorist sponsors such as Sad-
dam Hussein, Slobodan Milosevic, Manuel Noriega, and the Taliban.
NATO, which would be impossible without the United States, cools a
number of traditional hot spots like Cyprus, the Aegean Sea between
Greece and Turkey, and the historically vulnerable eastern European bor-
derlands that abut Russia. The U.S. military hunts down Al-Qaeda from
the Horn of Africa to South America, fights Somalian pirates, organizes
tsunami relief in Indonesia, facilitates aid to earthquake-stricken Haiti,
and keeps sea lanes open from the China Sea to the Persian Gulf. These
costly deterrent and humanitarian efforts save lives and build good-
will—and many of them either would not occur or would be taken up
by less-conciliatory powers should the United States cut back its military
budget.
Much of the Pentagon budget is well spent on military personnel—at
least $150 billion—including college education and vocational training.
After twenty years as a professor in the California State University sys-
tem, I can attest that returning military veterans were more mature and
responsible in general, and were better-motivated students, than my aver-
age undergraduates, who often expanded their college experience to six or
eight years of intermittent study. In short, the military was able to train
twenty-year-old signalmen on aircraft-carrier decks to park $150 million

jet fighters wingtip to wingtip safely, in contrast to the college students
who zoom through campus parking lots.
Moreover, the United States is currently spending on defense (at least
on average) one point of GDP less than during the Cold War in the
1980s—which ended with the implosion of a Soviet Union that simply
could not produce a technologically sophisticated and disciplined military
commensurate with America’s re-equipped and expanded armed forces.
When the George W. Bush administration entered office, the United
States was spending only about 3 percent of GDP on defense, a historic
low, and the figure did not exceed 4 percent until the latter half of Bush’s
second term. In other words, in terms of the overall economy, the present
military budget is not historically high.
What is more, the U.S. military is billions of dollars behind in repair-
ing or replacing equipment worn out by years of fighting in Afghanistan
and Iraq and by its increased responsibilities in the war on terror. Indeed,
we sometimes forget that we are in a global conflict with radical Islamists
who most recently have attempted to kill thousands of Americans in the
New York subway system, in Times Square, and on both passenger and
cargo planes.
The failures of these planned operations are attributable in part to
stepped-up military intelligence, the elimination of thousands of terror-
ists in Afghanistan and Iraq, and the ongoing targeting of terrorists by
drone attacks in the badlands of Pakistan, Somalia, Sudan, and Yemen.
But this does not show that conventional weapons are unnecessary. As
personnel costs and the prices of weapons systems skyrocket, we are forced
to buy fewer planes and vehicles. Those economies increase both the per-
unit cost of acquisition and the hours of usage per asset. The result, for
example, is that in just twenty years the Air Force has gone from deploying
more than four thousand fighter aircraft to scarcely fifteen hundred. That
means fewer and more costly planes than ever before, and more wear and
tear on those the military can afford.
R E G A I N S I G HT OF STRATEGIC GOALS
Of course it is salutary to review carefully all Pentagon expenditures, and
to make sure we are not purchasing assets or fielding forces that we do not

need, or that are not in line with our strategic goals and responsibilities.
But we should also remember that near the end of the Cold War, in 1988,
income taxes were lower (28 percent on top brackets), budget deficits were
smaller (3 percent of GDP), and defense expenditures were proportionally
greater (5.8 percent of GDP) than they are now—reminding us that the
present budget meltdown reflects particular policies and priorities that
transcend both tax rates and defense spending.
The present military budget is not historically high.
In the end, the problem of national security in a time of budget restraint

is not so much about defense spending per se; instead it lies in two other
areas. First, we must establish our global responsibilities in the context of
our fiscal limitations and fund our military to fulfill the ensuing obliga-
tions. At present, defense spending is increasingly out of sync with any
clear and understandable strategic mission. Second, we must allow the
economy to grow. Our defense capability improved radically in the past
thirty years without a great leap in expenditures as a percentage of GDP,
simply because GDP grew at such a rapid clip. But unless we continue to
expand the pie, there will be fights over the size of the slices. A healthy
economy is the best national security measure of all.
Reprinted by permission of National Review Online (www.nationalreview.com). © 2010 National Review,
Inc. All rights reserved.
Available from the Hoover Press is The Best Defense?

Legitimacy and Preventive Force, by Abraham D. Sofaer.
To order, call 800.935.2882 or visit www.hooverpress.
org.

EDUCATION
Shanghai Surprise
Students in China’s largest city just aced three global assessment
tests. If American education ever had a “Sputnik moment,” this is it.
By Chester E. Finn Jr.
Fifty-three years after the Soviets launched Sputnik, the world’s first sat-
ellite, and shook up American education by giving us reason to believe
the Soviet Union had surpassed us, China delivered a fresh shock. On
math, reading, and science tests given to fifteen-year-olds in sixty-five
countries, Shanghai’s teenagers topped every other jurisdiction in all
three subjects. Hong Kong also ranked in the top four on all three
assessments.
Though Hong Kong took part in earlier rounds of the OECD’s Pro-
gram for International Student Assessment (PISA), the 2009 test marked
the first time that youngsters in mainland China had participated. The
tests were given only in Shanghai—the country’s flagship city, on which
Beijing has lavished much investment and attention, many favorable poli-
cies, and (for China) a relatively high degree of freedom. But Americans
would be making a big mistake to suppose that Shanghai’s results are an
aberration.
If China can produce top PISA scorers in one city in 2009—Shanghai’s
population of twenty million is larger than that of many whole coun-
tries—it can do this in ten cities in 2019 and fifty in 2029. Or maybe
faster.
Chester E. Finn Jr. is a senior fellow at the Hoover Institution, chairman of

Hoover’s Koret Task Force on K–12 Education, and president of the Thomas B.
Fordham Foundation.

I have misgivings about PISA—how it defines knowledge, what it tests,
and how it tries to divorce itself from school curriculum. But its interna-
tional rankings are widely trusted as a reliable barometer of how young
people in different countries compare on core academic subjects.
How did Shanghai accomplish this? The OECD folks offer some expla-
nations, terming Shanghai a “leader in reform.” They specifically cite the
city’s near-universal education system, its competitiveness (measured by
student admissions to universities and to the best secondary schools), a
very high level of student engagement, a modern assessment system, an
ambitious curriculum, and a program to intervene in weak schools.
Americans would be making a big mistake to suppose that Shanghai’s
results are an aberration.
Today most cities and towns in China don’t have these resources. But
tomorrow is apt to be a very different story.
Also near the top on PISA were five countries that should come as no
surprise: Singapore, Taiwan, Finland, South Korea, and Japan. In reading,
Canada, New Zealand, Australia, and the Netherlands also did well. The
United States was, once again, in the middle of the pack in reading and
science and a bit below the international average in math. So we’re not get-
ting worse. But we’re mostly flat, and our very modest gains were trumped
by many other countries.
Plenty of experts have been pointing out this trend for a long time.
But until this news emerged we could at least pretend that China wasn’t
among the countries that presented a threat. We could treat Hong Kong
as a special case—the British legacy, combined with prosperity. We could
allow ourselves to believe that China was interested only in building dams,
buying our bonds, making fake Prada bags, underselling everybody else,
and coating our kids’ toys with toxic paint, while neglecting its education
system.
Yes, we knew they were exporting Chinese teachers to teach Mandarin
in our schools while importing native English speakers to instruct their
children in our language. But we could comfort ourselves that their cur-
riculum emphasized discipline and rote learning, not analysis or creativity.

Today that comfort has been stripped away. We must face the fact that
China is bent on surpassing us, and everyone else, in education.
According to this test at least, we’re not getting worse. But we’re mostly
flat, and our very modest gains were trumped by many other countries.
Will this news be the wake-up call that America needs to get serious
about educational achievement? Will it get us beyond making excuses,
bickering over who should do what, and prioritizing adults over children?
I sure hope so.
Available from the Hoover Press is Advancing Student

Achievement, by Herbert J. Walberg. To order, call

E D U CATION
Your Child Left Behind

In advanced math studies, not a single American state or demographic
group is keeping up with the rest of the world. Hoover fellows Eric A.
Hanushek and Paul E. Peterson ran the numbers. By Amanda Ripley.
Imagine for a moment that a rich, innovative company is looking to draft

the best and brightest high school grads from across the globe without
regard to geography. Let’s say this company’s recruiter has a round-the-
world plane ticket and just a few weeks to scout for talent. Where should
he go?
Our hypothetical recruiter knows there’s little sense in judging a nation
like the United States by comparing it to, say, Finland. This is a big coun-
try, after all, and school quality varies dramatically from state to state.
What he really wants to know is, should he visit Finland or Florida? Korea
or Connecticut? Uruguay or Utah?
Economist Eric A. Hanushek, a senior fellow at the Hoover Institution,
and two colleagues recently conducted an experiment to answer just such
questions, ranking American states and foreign countries side by side. Like
our recruiter, they looked specifically at the best and brightest in each
place—the kids most likely to get good jobs in the future—using scores
Eric A. Hanushek is the Paul and Jean Hanna Senior Fellow at the Hoover
Institution. Paul E. Peterson is a senior fellow at the Hoover Institution,
the editor in chief of Education Next, and the Henry Lee Shattuck Professor of
Government and director of the Program on Education Policy and Governance
at Harvard University. Both are members of Hoover’s Koret Task Force on K–12
Education. Amanda Ripley is a Bernard L. Schwartz Fellow at the New America
Foundation.

on standardized math tests as a proxy for educational achievement. We’ve
known for some time how this story ends nationwide: only 6 percent of
U.S. students perform at the advanced-proficiency level in math, a share
that lags behind kids in some thirty other countries, from the United
Kingdom to Taiwan. But what happens when we break down the results?
Do any individual American states wind up near the top?
Incredibly, no. Even if we treat each state as its own country, not a
single one makes it into the top dozen contenders on the list. The best per-
former is Massachusetts, ringing in at number seventeen. Minnesota also
makes it into the upper-middle tier, followed by Vermont, New Jersey,
and Washington. And down it goes from there, all the way to Mississippi,
whose students—by this measure, at least—might as well be attending
school in Thailand or Serbia.
D E M O L I S H I N G CONVENTIONAL WISDOM
Hanushek, who grew up outside Cleveland and graduated from the Air
Force Academy in 1965, has the gentle voice and manner of Mr. Rog-
ers, but he has spent the past forty years calmly butchering conventional
wisdom on education. In study after study, he has demonstrated that our
assumptions about what works are almost always wrong. More money
does not tend to lead to better results; smaller class sizes do not tend to
improve learning. “Historically,” he says, “reporters call me [when] the
editor asks, ‘What is the other side of this story?’ ”
Over the years, as Hanushek has focused more on international com-
parisons, he has heard a variety of theories as to why U.S. students under-
perform so egregiously. When he started, the prevailing excuse was that
the testing wasn’t fair. Other countries were testing a more select group of
students, while we were testing everyone. That is no longer true: thanks to
better sampling techniques and other countries’ decisions to educate more
of their citizens, we’re now generally comparing apples to apples.
These days, the theory Hanushek hears most often is what we might
call the diversity excuse. When he runs into his neighbors at Palo Alto
coffee shops, they lament the condition of public schools overall but are
quick to exempt the schools their own kids attend. “In the litany of excus-
es, one explanation is always, ‘We’re a very heterogeneous society—all

these immigrants are dragging us down. But our kids are doing fine,’ ”
Hanushek says. This latest study was designed, in part, to test the diversity
excuse.
To do this, Hanushek, along with Hoover senior fellow Paul E. Peter-
son at Harvard and Ludger Woessmann at the University of Munich,
looked at the American kids performing at the top of the charts on an

international math test. (Math tests are easier to normalize across coun-
tries, regardless of language barriers; and math skills tend to better predict
future earnings than other skills taught in high school.) Then, to get state-
by-state data, they correlated the results of that international test with the
results of the National Assessment of Educational Progress exam, which
is given to a much larger sample in the United States and can be used to
draw statewide conclusions.
The international test Hanushek used for this study—the Program for
International Student Assessment, or PISA—is administered every three

years to fifteen-year-olds in about sixty countries. Some experts love this
test; others, like Tom Loveless at the Brookings Institution, criticize it as
a poor judge of what schools are teaching. But despite his concerns about
PISA, Loveless, who has read an advance version of Hanushek’s study,
agrees with its primary conclusion. “The United States does not do a good
job of educating kids at the top,” he says. “There’s a long-standing attitude
that, ‘Well, smart kids can make it on their own. And after all, they’re
doing well. So why worry about them?’ ”
Of course, the fact that no U.S. state does very well compared with
other rich nations does not necessarily disprove the diversity excuse: par-
ents in Palo Alto could reasonably infer that California’s poor ranking (in
the bottom third, just above Portugal and below Italy) is a function of the
state’s large population of poor and/or immigrant children, and does not
reflect their own kids’ relatively well-off circumstances. So Hanushek and
his co-authors sliced the data more thinly still. They couldn’t control for

income, since students don’t report their parents’ salaries when they take
these tests; but they could use reliable proxies. How would our states do if
we looked just at the white kids performing at high levels—kids who are
not, generally speaking, subject to language barriers or racial discrimina-
tion? Or if we looked just at kids with at least one college-educated parent?
Even if we treat each American state as its own country, not a single one
makes it into the top dozen contenders on the list.
As it turned out, even these relatively privileged students do not compete

favorably with average students in other well-off countries. On a percent-
age basis, New York state has fewer high performers among white kids than
Poland has among kids overall. In Illinois, the percentage of kids with a
college-educated parent who are highly skilled at math is lower than the
percentage of such kids among all students in Iceland, France, Estonia, and
Sweden. Parents in Palo Alto will always insist that their kids are the excep-
tion, of course. And researchers cannot compare small cities and towns
around the globe—not yet, anyway. But Hanushek thinks the study signifi-
cantly undercuts the diversity excuse. “People will find it quite shocking,” he
says, “that even our most-advantaged students are not all that competitive.”
Reading the list, one cannot help but thank God for Massachusetts,
which offers the United States some shred of national dignity—a result
echoed in other international tests. “If all American fourth- and eighth-
grade kids did as well in math and science as they do in Massachusetts,”
writes the veteran education author Karin Chenoweth in her 2009 book,
How It’s Being Done, “we still wouldn’t be in Singapore’s league but we’d
be giving Japan and Chinese Taipei a run for their money.” Is it because
Massachusetts is so white? Or so immigrant-free? Or so rich? Not quite.
Massachusetts is indeed slightly whiter and slightly better off than the
U.S. average. But in the late 1990s, it nonetheless lagged behind similar
states—such as Connecticut and Maine—in nationwide tests of fourth-
and eighth-graders. It was only after a decade of educational reforms that
Massachusetts began to rank first in the nation.
What did Massachusetts do? Well, nothing that many countries (and
industries) didn’t do a long time ago. For example, Massachusetts made

it harder to become a teacher, requiring newcomers to pass a basic lit-
eracy test before entering the classroom. (In the first year, more than a
third of the new teachers failed the test.) The state also required stu-
dents to pass a test before graduating from high school—a notion so
heretical that it led to protests in which students burned state superin-
tendent David Driscoll in effigy. To help tutor the kids who failed, the
state moved money around to the places where it was needed most. “We
had a system of standards and held people to it—adults and students,”
Driscoll says.
H O W T O “ O UT-TEACH” ONE’S RIVALS

Massachusetts, in other words, began demanding meaningful outcomes
from everyone in the school building. Obvious though it may seem, it’s
an idea that remains sacrilegious in many U.S. schools, despite the clumsy
advances of No Child Left Behind. Instead, we still fixate on inputs—such
as how much money we are pouring into the system or how small our class
sizes are—and wind up with little to show for it. Since the early 1970s,
we’ve doubled the amount of money we spend per pupil nationwide, but
our high schoolers’ reading and math scores have barely budged. Per stu-
dent, we now spend more than all but three other countries—Luxem-
bourg, Switzerland, and Norway—on elementary and secondary educa-
tion. And the list of countries that spend the most, notably, has little in
common with the outcomes that Hanushek and his colleagues put into
rank order. (The same holds true on the state level, where New York, one
of the highest-spending states—it topped the list at $17,000 per pupil in
2008—still comes in behind fifteen other states and thirty countries on
Hanushek’s list.)
Thanks to better sampling techniques and other countries’ decisions to
educate more of their citizens, we’re now generally comparing apples to
apples.
However haltingly, more states are finally beginning to follow the lead
of Massachusetts. At least thirty-five states and the District of Columbia
agreed this year to adopt common standards for what kids should know in

math and language arts—standards informed in part by what kids in top-
performing countries are learning. Still, all of the states, Massachusetts
included, have a long way to go. In 2009, a study comparing standard-
ized math tests given to third-graders in Massachusetts and Hong Kong
found embarrassing disparities. Even at that early age, kids in Hong Kong
were being asked more-demanding questions that required more-complex
responses.
Per student, we now spend more than all but three other countries—
Luxembourg, Switzerland, and Norway—on elementary and secondary
education.
Meanwhile, a 2010 study of teacher-prep programs in sixteen countries

found a striking correlation between how well students did on interna-
tional exams and how their future teachers performed on a math test. In
the United States, researchers tested nearly 3,300 teachers-to-be in thirty-
nine states. The results? Our future middle-school math teachers knew
about as much math as their peers in Thailand and Oman—and nowhere
near what future teachers in Taiwan and Singapore knew. Moreover, the
results showed dramatic variation depending on the teacher-training pro-
gram. Perhaps this should not be surprising: teachers cannot teach what
they do not know, and to date, most have not been required to know very
much math.
In 2009, President Obama reminded Congress, “The countries that
out-teach us today will outcompete us tomorrow.” Last September, Ontar-
io Premier Dalton McGuinty, visiting a local school on the first day of
classes, mentioned Obama’s warning and took note of the scoreboard:
“Well,” he said, “we are out-teaching them today.” Arne Duncan, Obama’s
education secretary, responded to the premier’s trash-talking a few days
later. “When I played professional basketball in Australia, that’s the type
of quote the coach would post on the bulletin board in the locker room,”
he declared during a speech in Toronto. And then his rejoinder came to a
crashing halt. “In all seriousness,” Duncan confessed, “Premier McGuinty
spoke the truth.”
Reprinted by permission of the Atlantic. © 2010 The Atlantic Monthly Group. All rights reserved.

EDUCATION
Spoken Like a World

Citizen
Learning a foreign language is more than just a boot camp for future
soldiers and diplomats. By Russell A. Berman.
These are troubled times for language programs in the United States.
Despite the chatter about globalization and multilateralism that has domi-
nated public discourse in recent years, these programs have been battered
by irresponsible cutbacks at all levels. Leaders in government and policy
circles continue to live in a bubble of their own making, imagining that
we can be global while refusing to learn the languages or learn about the
cultures of the rest of the world.
So it was encouraging to hear Richard Haass, president of the Council
on Foreign Relations and a fixture of the foreign policy establishment,
strongly support foreign-language learning in his keynote address last fall to
the American Council on the Teaching of Foreign Languages’ annual con-
vention. Haass is a distinguished author, educated at Oberlin and Oxford,
and an influential voice in American debates. In his talk, “Language as a
Gateway to Global Communities,” Haass recognized the important work
language instructors do as well as the crucial connection between language
and culture: language learning is not just technical mastery of grammar
but rather, in his words, a gateway to a thorough understanding of other
Russell A. Berman is a senior fellow at the Hoover Institution, a member

of Hoover’s Herbert and Jane Dwight Working Group on Islamism and the
International Order, and the Walter A. Haas Professor in the Humanities at
Stanford University.

societies. We in the language-learning community should take heed and
be sure to build curriculums that provide systematic introductions to
those histories, political systems, and ways of life. The Modern Language
Association has made curricular recommendations along these lines in the
report “Foreign Languages and Higher Education,” which ACTFL Presi-
dent Eileen Glisan praised in her remarks before the keynote address.

Haass said that in an era of tight budgets, we need convincing argu-
ments to rally support for languages. Of course that’s true, but—and this
is the bad news—despite his support for language as a gateway to other
cultures, he countenanced only a narrowly instrumental defense for for-
eign-language learning, limited to two rationales: national security and
the global economy. At the risk of schematizing his account too severely,
this means: more Arabic for national security and more Mandarin, Hindi,
and, en passant, Korean for the economy. It appears that in his view the
only compelling arguments for learning languages involve equipping indi-
vidual Americans to be better vehicles of national interest as defined by
Washington. In fact, at a revealing moment in the talk, Haass boiled down
his own position to a neat choice: Fallujah or Firenze. In other words, we
need more Arabic to do better in Fallujah, so we could have been more
effective in the Iraq war (or could be in the next one?), and we need less
Italian because Italy (to his mind) is a place that is only about culture.
Among other benefits, students who do well in a second language do
better in their first language.
In this argument, Italian—like other European languages—is a luxury.

There was no mention of French as a global language, with its crucial pres-
ence in Africa and North America. Haass even seemed to regard Spanish
as just one more European language, except perhaps that it might be use-
ful to manage instability in Mexico. Such arguments that reduce language
learning to foreign policy objectives get too simple too quickly. And they
run the risk of destroying the same foreign-language learning agenda they
claim to defend. Language learning in Haass’s view ultimately becomes
just a boot camp for our students to be better soldiers, more efficient in
carrying out the projects of the foreign policy establishment. That pro-
gram stands in stark contrast to a vision of language learning as part of a
way to educate citizens who can think for themselves.
Haass’s account deserves attention: he is influential and thoughtful, and
he is by no means alone in reducing the rationale for foreign-language
learning solely to national foreign policy needs. Yet why should all local
educational decisions be subject to Washington’s approval? Moreover, giv-

en the poor track record of foreign policy leaders in anticipating national
needs, why should we suddenly treat their analyses as the touchstone for
curricular planning? The contribution of language learning to student
intellectual growth is too large, complex, and dynamic to be squeezed
onto the menu of skill sets the government imagines it might need in the
future.
Arguments that reduce language learning to foreign policy objectives get
too simple too quickly.
Even on his own instrumental terms, Haass seemed to get it wrong.

If language learning were primarily about plugging into large economies
more successfully, then we should be offering more Japanese and German
(still two very big economies, after all), but they barely showed up on his
map.
The much more important issue involves getting beyond instrumental
thinking altogether, at least in the educational sphere. Acquiring a second
language is a key component of education because it builds student ability
in language as such. Students who do well in a second language do better
in their first language. With the core language skills—abilities to speak
and to listen, to read and to write—come higher-order capacities: to inter-
pret and understand, to recognize cultural difference, and, yes, to appreci-
ate traditions, including one’s own. Language learning is not just an
instrumental skill, any more than one’s writing ability is merely about
learning to type on a keyboard. On the contrary, through language we
become better thinkers, and that’s what education is about, at least outside
Washington.
Reprinted by permission of Inside Higher Ed. © 2011 Inside Higher Ed. All rights reserved.
Available from the Hoover Press is Freedom or Terror:

Europe Faces Jihad, by Russell A. Berman. To order, call

HEALTH AND MEDICINE
In Harm’s Way
How we misjudge the risks—and non-risks—of daily life. By Henry
I. Miller.
Risk experts sometimes joke about an apocryphal tourist, lounging on the

beach at Lake Michigan, who hears a rumor about a shark sighting and
decides to split. He quickly polishes off his six-pack, lights up a cigarette,
and, without fastening his seat belt, speeds off in a top-heavy SUV with
bald tires while texting his girlfriend.
(There are no sharks in the Great Lakes, by the way.)
Those of us devoted to raising the consciousness of the American pub-
lic about health and science are clearly failing. How else to explain the
plethora of common, serious mistakes of omission and commission? Con-
sider these extraordinarily antisocial or self-destructive examples:
• One-third of mothers answering a recent survey admitted that they did

not plan to have their kids vaccinated against the flu. Worse, more than a
quarter of health care workers polled also said they intended to avoid the
shot.
Such behavior is unwise and irresponsible. Flu not only causes misery
and economic losses, but it’s also a killer—of thirty-six thousand in an
average year in the United States. The more people who are immunized,
the greater the herd immunity, a kind of biological barrier to the spread
of the disease.
• An astonishing 40 percent of women who chronically take medicine

that is “contraindicated in women who are or may become pregnant”—
Henry I. Miller, MD, is the Robert Wesson Fellow in Scientific Philosophy and
Public Policy at the Hoover Institution.

based on evidence that the risks of birth defects outweigh any potential
benefits of the medication—fail to practice birth control as prescribed.
Their drug-refill patterns suggest that their compliance with oral con-
traception is no better than that of all women eighteen to forty-four
years old. They are, therefore, at high risk of having babies with birth
defects.
• Women who have a high risk of breast cancer can reduce their risk
substantially by taking drugs of two types—selective estrogen receptor
modulators and aromatase inhibitors—yet only one-fifth or fewer of eli-
gible women take one of the effective drugs.
• A recent study of 1.6 million women insured by Medco Health Solu-
tions found that on average only about half got an annual mammogram.
The frequency was highest for those fifty to sixty-four years old, but still
low at an average of 54 percent.
• Hypertension, or high blood pressure, is a common but symptom-free
illness that is a major cause of heart attacks, strokes, and kidney disease—
yet only 10 percent of patients take their blood-pressure-lowering medica-
tion as prescribed for more than one year.
• In addition, asthmatics, diabetics, and even AIDS patients have all been
shown to lower the dose or frequency of their therapy, or to skip it alto-
gether.
• Shoveling snow leads to an average of about 11,500 serious injuries and
medical emergencies treated in emergency rooms every year, according to
a March 2010 study that analyzed data from one hundred hospitals from
1990 to 2006. The most common kinds of injuries were acute musculo-
skeletal exertion (53.9 percent), followed by slips and falls (20 percent)
and being struck by a snow shovel (15 percent).
“ C H E M I C A L S ” A S A SCARE WORD
While they indulge in such high-risk behavior, many of these people wor-
ry about activities or products that pose only de minimis, or negligible,
risks. These include contact with minuscule amounts of chemicals that
have been in widespread and safe use for decades.

One high-profile target lately has been bisphenol A (BPA), a com-
ponent of certain plastics. BPA makes products as diverse as electrical
boards, contact lenses, water bottles, and cans strong yet flexible and
resistant to breakage. Another is chromium-6, which a recent study by
an environmental activist group found in the tap water of thirty-one out
of thirty-five cities in its nationwide sample. But although such studies—
in which one looks for a certain chemical in the air, water, or humans’
bodies—are increasingly common, for various reasons their significance
is questionable. First, analytical techniques have become so sensitive that
they can detect amazingly minuscule amounts of almost anything. Sec-
ond, even if a substance is found in our bodies, its mere presence does not
mean the substance is harmful. That applies even to chemicals that can
be deadly at high levels. Consider botulinum toxin, for example, which
in food can cause botulism, a particularly lethal form of food poisoning.
In tiny amounts, however, it is a valuable pharmaceutical, used to treat
muscle spasms and remove wrinkles. Its brand name is Botox.
How worried should we be about chromium-6? It can be harmful if
inhaled, and probably if ingested in large amounts. Water with high con-
centrations of chromium-6 fed to rodents causes gastrointestinal tumors,
indicating that it is a carcinogen—in those species. But rodents are not
little humans with tails. Toxicological findings often fail to translate well
from one rodent to another, let alone from rodents (which are very prone
to certain kinds of cancers) to humans.
It is useful to consider what California regulators have to say about
chromium-6. They have proposed a “Public Health Goal” (PHG) for
chromium-6 of 0.06 parts per billion (ppb) in water, which is the estimat-
ed “one in one million” lifetime cancer risk level. That means “for every
million people who drink two liters of water with that level of chromi-
um-6 daily for seventy years, no more than one person would be expected
to develop cancer from exposure to chromium-6.” They picked this very
conservative, very low level because “the ‘one in one million’ risk level is
widely accepted by doctors and scientists as the ‘negligible risk’ standard.”
But you would never know that from the hyperbolic pronounce-
ments of the Environmental Working Group, which inaccurately called
the proposed California PHG for chromium-6 a “safe maximum recent-

ly proposed by California regulators” and decried the fact that water in
twenty-five of the thirty-five cities tested was found to contain higher
concentrations. For their own purposes—that is to say, alarmism and fear
mongering (and fund-raising)—they completely ignored California regu-
lators’ blunt admonition that “a PHG is not a regulatory standard. It is only
one step in the process of developing an enforceable standard that is set
by the California Department of Public Health for drinking water that
public water systems must meet.”
E R I N B R O C K O V I CH, THE SEQUEL

But let’s put aside for a moment the hand-waving about the distinc-
tion between goals and standards and rodents and humans. We have the
advantage of data from what amounts to a long-term, real-world experi-
ment in which humans were exposed over a long period to chromium-6
in groundwater. This was in Hinkley, California, where the Pacific Gas
& Electric Company was accused of leaking chromium-6 into the town’s
groundwater for more than three decades. Eventually, the company paid
$333 million in damages to more than six hundred townspeople and
pledged to clean up the contamination. The litigation made a celebrity of
activist and paralegal Erin Brockovich, whose story was made into a film
starring Julia Roberts.
Even if a substance is found in our bodies, its mere presence doesn’t
mean the substance is harmful.
But here’s the denouement that both the litigation and the film missed:
a California Cancer Registry survey released last year failed to find a dis-
proportionately high number of cancers in Hinkley. To the contrary: from
1996 to 2008, 196 cancers were identified among residents of the census
tract that includes Hinkley—more than 10 percent fewer than the 224
cancers that would have been expected, given its demographic character-
istics.
Such surveys are probably not highly accurate, but this one does tell
us that if chromium-6 in water is a human carcinogen, it’s certainly not a
potent one.

The latest flap over exposure to chemicals was precipitated by an arti-
cle published by an activist professor at the University of California, San
Francisco, who used a database developed by a branch of the federal Cen-
ters for Disease Control and Prevention. She found, not surprisingly, that
“pregnant women in the United States are exposed to multiple chemicals.
Further efforts are warranted to understand sources of exposure and impli-
cations for policy making.” But she was not able to draw any conclusions
about any possible harm that might have occurred because the database
was not structured to determine whether the measured levels of a chemi-
cal constitute a hazard either individually or cumulatively. (However, the
researcher’s conclusory statements to the media seemed clearly to exceed
the limitations of her findings.)
A survey last year failed to find a disproportionately high number of
cancers in Hinkley, the town made notorious by Erin Brockovich.
As New York Times environmental writer Andrew Revkin observed, the

database is “focused on what is detectable in urine and blood samples”
and “is aimed at identifying research questions, but not particularly use-
ful in answering them.” The CDC warns that the “National Exposure
Report does not provide health or toxicity information, state- or com-
munity-specific data, specific product or environmentally related infor-
mation, or regulatory guidelines or recommendations,” and that “just
because we can detect levels of an environmental chemical in a person’s
blood or urine does not necessarily mean that the chemical will cause
effects or disease.”
But the spin by the researcher and the media on these rather banal find-
ings derived from the database suggested the sky is falling and children are
being poisoned in utero. Similarly, chemophobic activists and cynical
(or gullible) politicians continue to cite the “proven” dangers of BPA,
chromium-6, and a host of other chemicals. News programs are replete
with activists’ warnings about one chemical or another. They and their
enablers in the media have carried on an aggressive campaign against
“toxic chemicals,” aiming their propaganda especially at parents, scar-
ing them about insidious threats to their children’s health.

In the end, we return to the problem that people frequently make
unwise choices: eschewing drugs that prevent heart attacks or cancer
but exposing their kids to the real dangers of childhood viral and bacte-
rial diseases while “protecting” them from imaginary hobgoblins such
as BPA and pesticide residues in foods. Allowable chemical pesticide
residues in food are extremely low—and seldom exceeded—and 99.99
percent of pesticidal substances in food occur naturally.
Scientists, educators, and government officials must work harder
to disabuse the public of misconceptions about risk so they can
make better-informed, smarter decisions about their health and
well-being.
Available from the Hoover Press is To America’s Health:

A Proposal to Reform the Food and Drug Administration,
by Henry I. Miller. To order, call 800.935.2882 or visit
www.hooverpress.org.

CALIFORNIA
Brown and Blue

The new old governor of the Golden State is preparing California for
budgetary penance. By Bill Whalen.
On the day America commemorated the thirtieth anniversary of Ron-

ald Reagan’s first presidential inaugural, California Governor Jerry Brown
delivered a morning speech in Sacramento that was otherwise forgettable,
save for one quip. “I feel like Rip Van Winkle,” said Brown, who as usual
was ad-libbing.
That Brown was even in a position to speak as California’s chief execu-
tive—in 1975, he succeeded Reagan as California’s thirty-fourth governor,
and returned to his old job in January after a twenty-eight-year hiatus,
which is eight years longer than Rip’s supposed nap—was one of the more
remarkable stories of the 2010 election, which otherwise was unkind to
tenured Democrats. California’s choice of this political dynast to solve its
myriad woes (Jerry’s father, Pat Brown, governed the state for eight years
until Reagan defeated him in November 1966; Jerry’s sister, Kathleen,
was California’s Democratic gubernatorial nominee in 1994) says oodles
about the current state of the Golden State.
In a word: austerity.
It’s what passes for life in Sacramento after Arnold Schwarzenegger who,
despite his various successes and failures during his seven years as Califor-
nia’s governor, was always colorful. Gone are the days of the Governator’s
cigar-smoking tent adjacent to his Capitol office, bombastic one-liners
more befitting a movie action hero than a statesman, and his plethora of
elaborately staged events (for example, setting up a video link with Tony
Blair during the signing of California’s climate-change law).
Bill Whalen is a research fellow at the Hoover Institution.

In Schwarzenegger’s place: a bad-news, bad-cop governor. Awakened
from his long gubernatorial nap, Brown delivered little in the way of
optimism and long-term vision, and not the faintest glint of Hollywood
magic. Brown’s script is the mammoth budget deficit. First he broke with
tradition by eschewing a State of the State address (when your main obses-
sion is the budget, why bother with a policy agenda?). Proving he could
be a Grinch well after the holiday season, Brown seized tens of thousands
of state workers’ cell phones. (During his first stint as governor, recall that
Brown was known for sending frugal signals such as swapping the official
limousine for a Plymouth he drove to work himself.) That was after he
released a state budget that was equal parts spending cuts and tax increas-
es, thus setting the newly returned governor on a collision course with tax-
loathing Republican legislators, whose buy-in Brown needed to put his tax
proposal on the ballot for a June special election. Not since Dean Wormer
declared “no more fun of any kind” in Animal House, it seems, had an
authority figure seemingly taken this much relish in spreading misery.
Such is the current state of California politics: austere and contrarian.
Then again, in the California of 2011, misery loves company. The

Golden State continues to suffer double-digit unemployment. It will be
years before California recovers the million-plus jobs lost in the recession.
In Sacramento, where lawmakers must deal with a $28 billion deficit, the
reality is the state’s general fund revenues won’t return to their 2007–8
level for two more years at the earliest. Even if they do find a way out of
the current hole, lawmakers will be facing deficit-plagued budgets for the
foreseeable future.
Brown is far from the only governor facing these dire circumstances.
But what stands out is his low-octane approach, especially compared to
the more dramatic strategies adopted by other newly elected governors.
In New York and Wisconsin, for example, governors are at war with their
states’ public-employee unions over spending cuts and pension reform. In
Illinois, Democratic Governor Pat Quinn and legislators raised the per-
sonal tax rate from 3 percent to 5 percent—an act of daring or suicide,
depending on one’s ideology. In Florida, Republican Rick Scott believes
he can cut both spending, to solve his state’s budget, and taxes.

Meanwhile, in Sacramento, Brown chose not to brawl with the public-
employees union, à la Andrew Cuomo—or any special interest, for that
matter. His first instinct was to ask voters for a multiyear tax increase, the
antithesis of the Illinois power play. Unlike in Florida, there was no talk
of phasing out the corporate income tax to boost job creation. California,
supposedly the origin of cutting-edge thought and grand political trends
(a notion going back to the tax-limiting Proposition 13 and the rise of the
Reagan revolution, an epoch during which Brown was governor the first
time), didn’t seem to have anything all that exciting on the table.
In Arnold Schwarzenegger’s place: a bad-news, bad-cop governor.
Why would this be? Here are two explanations—aside from the fact
that the state took a timeout from electing a former Mr. Universe.
First, California’s leadership is, shall we say, dated. Democrats rule the
roost; for the second time in less than a decade, not a single Republican
holds a statewide constitutional office. Of the nation-state’s four most
influential Democrats—Brown, Senators Dianne Feinstein and Bar-
bara Boxer, House Minority Leader Nancy Pelosi—all are septuagenar-
ians, having emerged on the California scene four decades ago or longer
(Brown’s first statewide win came in 1970, the same year Reagan ran for a
second gubernatorial term). As such, they’re hardly fonts of cutting-edge
political thought—or action heroes. No other state’s political ruling class
is as gray, a terrific irony for youth-worshiping California. Moreover, that
ruling class is also a permanent class. Last fall, amid a national wave of
anti-incumbency, not a single incumbent California legislator lost his or
her job.
Then again, a low political ceiling may work to Brown’s advantage. At
seventy-three and in no way representative of a new political movement,
Brown is hardly in a position to meddle in presidential politics. That’s
a rarity among California governors, who tend to contract “Potomac
fever”—Brown himself being the worst offender, having mounted quixot-
ic presidential campaigns in 1976 and 1980 (even Schwarzenegger caught
the national bug; though foreign-born and constitutionally barred from
national office, he waded into debates over the future of the Republi-
can Party and the rise of an independent movement). Brown might also

decline to seek a second term in 2014, something California’s younger,
ambitious, and decidedly more progressive Democrats eagerly anticipate.
This makes Brown an odd political hybrid: both a political lame duck
and, at least in theory, an honest broker without ulterior motives who still
emits an aura of fiscal conservatism. What better messenger to sell Cali-
fornians on the concept of tough budget love?
That is, if Californians are willing to listen.
And that leads us to California’s second problem: an electorate that’s lost
faith in those it elects. Consider the fate of two measures on the California
ballot last November: Propositions 19 and 21. The former advocated the
legalization of recreational marijuana use (an idea also on the ballot in
1970, alongside Jerry Brown and Ronald Reagan); the latter would have
increased vehicle license fees to keep state parks in working order. The
disparate initiatives had a common theme: the promise of more revenue
for Sacramento. Yet both were soundly defeated, not the result one would
expect from a state tilting left of center in its choice of officeholders. In
fact, the one initiative on fall’s slate that did the most for Sacramento’s
ruling class—Proposition 25, which allowed a state budget to pass with a
simple majority instead of two-thirds—succeeded. That initiative, how-
ever, was sold to Californians as a way of punishing lawmakers by taking
away their per diem expenses if the budget wasn’t passed on time.
Brown is choosing not to brawl with the public-employees union, à la
Andrew Cuomo—or any special interest, for that matter.
Such is the current state of California politics: austere and contrarian.

The Golden State’s future, for the next four years at least, rests in the
hands of a career politician with four decades of experience but little to
offer in the way of hope and vision. Surviving the present ordeal, as Brown
has asked, requires California’s left to give ground on its precious public
safety net and the right to yield on its core aversion to higher taxation.
Jerry Brown is not new. Neither is his approach. But the idea of a
minus-one (spending cuts) plus another minus-one (higher taxes) leading
to a political net plus? Call it the “new math” in the Golden State.

E G Y PT
Tyranny Is Not the

Arabs’ Fate
Egypt’s “heroes with no names” may steer history in a direction no
one expected. By Fouad Ajami.
An old friend, an American-educated architect of deep culture and civil-

ity in his mid-seventies, reached me from Egypt. “Gamal Abdul Nasser
and Anwar al-Sadat and Hosni Mubarak had taken away from me the
love of my country,” he said. “I despaired of our people, thought they
had given up liberty for this mediocre tyranny. Then, on January 28,
leaving the Friday prayer, I saw an endless stream of humanity, heading
© UPI/Newscom/Stewart Innes
to Liberation Square. I never thought I would live to see this moment,
these people in that vast crowd. They gave me back my love of my
country.”
It will be said that this revolution is likely to be betrayed or hijacked,
that the hard-liners and the theocrats are certain to prevail at the end of
the day. The so-called “realists” will argue that this is a people without
the requisites of democracy, without the political experience to sustain a
reasonably democratic polity.
There is also a concern that the stability provided to Pax Americana by
this regime for three decades will be torn apart. But this view misses the
dark side of the bargain we made with the autocrat: we befriended him
Fouad Ajami is a senior fellow at the Hoover Institution, co-chairman of Hoover’s

Herbert and Jane Dwight Working Group on Islamism and the International
Order, and the Majid Khadduri Professor of Middle Eastern Studies at the School
for Advanced International Studies at Johns Hopkins University.

When candidate Ayman Nour (in glasses) failed to wrest Egypt’s presidency from Hosni
Mubarak in 2005, he and his supporters cried foul. Mubarak then jailed him for more than
three years. This year, Nour returned to the streets—and began vying for a role in a post-
Mubarak Egypt.
but enraged his population. And the furies repressed by this cruel, effec-
tive cop on the banks of the Nile came America’s way.
At the end, Mubarak took pride in the claim that he would not
quit the land, would not give up his country to chaos. His apologists
even said he should be given time to write his own legacy. For a last
few days he remained deaf to the sounds of his own country, blind
to the disaffection with him and his reign. Then, when the truth of
the tumultuous world beyond the isolation of his presidential pal-
ace finally shook his indifference and disdain, his abdication became
inevitable.

Thousands of Egyptians spill into the streets of Cairo in late January
as street protests swept away Hosni Mubarak. The Egyptian autocrat’s
resignation left the army to supervise an uncertain transition.

The protesters surprised him, and in the process they surprised them-
selves. “Heroes with no names” was how an Egyptian studying in Canada
dubbed the leaders of this uprising.
There has always been a great Egyptian pride in their country. This love
of home, the desire to retrieve the country from the grip of the autocrat
and his retainers, was what animated a hitherto submissive population.
This was not Iran in 1979; no turbaned ayatollah stepped forth to sum-
mon the crowd. A young Google executive, Wael Ghonim, energized the
protest when it might have lost heart, when it could have succumbed to
the belief that this regime and its leader were a big, immovable object.
Ghonim was a man of the modern world. He was not driven by piety. The
condition of his country—the abject poverty, the crony economy of plun-
der and corruption, the cruelties and slights handed out to Egyptians in all
walks of life by a police state that the people had outgrown and despaired
of—gave this young man and others like him their historical warrant.
A new Arab politics has been spawned in Liberation Square, a movement
of a piece with the modern ways of protest and reform.
The jihadists had been unable to overthrow this state, but we remem-
ber how they struck at American targets instead. Mohammed Atta
and Ayman al-Zawahiri were bred in the tyrannical republic of Hosni
Mubarak. Zawahiri, the vengeful Cairene aristocrat, was explicit about
that. He drew a distinction between what he called the “near enemy” (the
Mubarak regime) and the “far enemy”—the United States. The hatred of
America that drove Zawahiri was derivative of his hatred for the regime
that had both imprisoned and tortured him in the aftermath of the assas-
sination of Anwar Sadat.
© Chine Nouvelle/SIPA/Newscom/Ahmad Karem
The bargain with Mubarak was never a brilliant, unalloyed success.

American officials managing the Egyptian-American relationship were not
entirely in the dark about its workings. Several years ago, in the aftermath
of the decapitation of the Saddam regime in Baghdad, the administration
of George W. Bush made a run at Mubarak: Washington wanted him to
open up his country, give it a badly needed dose of reform. The adminis-
tration had taken notice of the anti-Americanism and the antimodernism

of his regime, how he had belittled the Iraq war and declared it a project
of folly. Mubarak spoke openly of Iraq’s need for the heavy hand of a
strongman. Democracy was not for the Arabs, not now, this autocrat of
the barracks proclaimed.
America befriended the autocrat but enraged his population. And the
furies repressed by the cruel, effective cop on the banks of the Nile came
America’s way.
Mubarak waited out that American moment of enthusiasm. He appealed

to his country’s nativism. He didn’t have to worry. The Bush administra-
tion would soon abandon its “diplomacy of freedom.” It had done heavy,
burdensome work in Iraq, and it would now leave well enough alone.
Mubarak then smashed a nascent challenge to his tyranny: a fragile liberal
movement whose name alone summed up the alienation between pharaoh
and his people: Kifaya, or “Enough!”
Egyptians know that this Arab revolution of 2011—and the upheav-
al has earned that name—did not begin in their metropolis, that it had
traveled eastward from Tunisia. But when that revolt arrived in Cairo, it
found a stage worthy of its ambitions. Umm al-Dunya, the mother of the
world, is what Egyptians and other Arabs call the fabled city of Cairo. It
was there, in that city founded a millennium ago, that Islam fashioned
a civilization, made its peace with the world, outwitted and outwaited
conquerors. And for decades now, Egypt has been the lens through which
Arabs see their history.
A new Arab politics was spawned in Liberation Square, a movement of
a piece with the modern ways of protest and reform. It will be said that the
great, enduring dilemmas of Egypt—a huge country that has lost out in
the game of nations—will still be there. There will be accounts to settle, a
struggle between those who were sullied by the dictatorship and those
who weren’t. The Egyptians will be tested again as to their fidelity to dem-
ocratic ways. But if the standoff that ended in the demise of the dictator is
any guide, the Egyptians may give us a consoling tale of an Islamic people
who rose to proclaim their fidelity to liberty, and who provided us with a
reminder that tyranny is not fated for the Arabs.

EGYPT
Ingredients for a
Lasting Democracy
Ousting an autocrat is only a start. The rules of power become just as
important as who holds it. By Larry Diamond.
What happens when the autocrat is gone? From Libya to Syria to Jordan,
people fed up with stagnation and injustice have mobilized for the kind
of democratic change witnessed in Tunisia and Egypt. Will the end of
despotism give way to chaos, as happened when Mobutu Sese Seko was
toppled in 1997 after more than thirty years in power in Zaire? Will the
military or some civilian strongman fill the void with a new autocracy, as
occurred after the overthrow in the 1950s of Arab monarchs in Egypt and
Iraq and as has been the norm in most of the world until recently? Or can
some Arab nations produce real democracy, as we saw in most of Eastern
Europe and about half the states of sub-Saharan Africa?
Regime transitions are uncertain affairs. But since the mid-1970s, more
than sixty countries have found their way to democracy. Some have done
so in circumstances of rapid upheaval that offer insight for reformers in
Tunisia, Egypt, and other Arab countries today. Here are five lessons.
O N E : U N I T E THE DEMOCRATIC OPPOSITION

When a dictatorship is on the ropes, a divided opposition can rescue it.
That is why autocrats so frequently foster those divisions, secretly fund-
ing a proliferation of opposition parties. Even extremely corrupt rulers
Larry Diamond is a senior fellow at the Hoover Institution and a coordinator of

the Iran Democracy Project at Hoover. He is also a senior fellow at the Freeman
Spogli Institute at Stanford University.

may generate significant electoral support—not the thumping majori-
ties they claim, but enough to steal an election—when the opposition is
splintered.
In the Philippines in 1986, Nicaragua in 1990, and Ukraine in 2004,
the opposition united around the candidacies of Corazon Aquino, Vio-
leta Chamorro, and Viktor Yushchenko, respectively. Broad fronts such
as these—as well as the Concertación movement that swept Christian
Democrat Patricio Aylwin to power in Chile in 1989 after the departure
of General Augusto Pinochet—often span deep personal and ideological
differences. But the time for democratic forces to debate those matters is
later, once the old order is defeated and democratic institutions have been
established.
Egypt is fortunate; it has at least one obvious alternative leader,
Mohamed ElBaradei, whom disparate opposition elements seem to be ral-
lying around. Whenever the next presidential election is held, ElBaradei,
or anyone like him leading a broad opposition front, would probably win
a resounding victory over anyone connected to Hosni Mubarak’s former
ruling party.
T W O : M A K E S U RE THE OLD ORDER REALLY IS GONE

The exit of a long-ruling strongman, such as Tunisia’s Zine al-Abidine
Ben Ali, does not necessarily mean the end of a regime. Fallen dictators
often leave behind robust political and security machines. No autocrat in
modern times met a more immediate fate than Romania’s Nicolae Ceaus-
escu, who was executed by a firing squad of his own soldiers in 1989 just
three days after a popular revolution forced him to flee the capital. Yet his
successor, Ion Iliescu, was a corrupt former communist who obstructed
political reform. Most of the former Soviet states, such as Georgia and
Kazakhstan, had similar experiences.
Countries are much more likely to get to democracy quickly if they
identify and embrace political leaders who are untainted by the old order
and are ready to roll it back.
T H RE E : R E A C H AN UNDERSTANDING WITH THE OLD ORDER

Victorious democrats will not be able to completely excise the pillars of the
authoritarian order. Instead, for the country to turn toward democracy,

those pillars must be neutralized or co-opted. This old order may descend
into violence when, as in Iraq, broad classes of elites are stigmatized and
ousted from their positions. In a successful bargain, most old-regime elites
retain their freedom, their assets, and often their jobs but accept the new
rules of the democratic game.
Groups that refuse to renounce violence as a way to get power, or that
reject the legitimacy of democracy, have no place in the new order.
Unless the military collapses in defeat, as it did in Greece in 1974

and in Argentina after the Falklands War, it must be persuaded to at
least tolerate a new democratic order. In the short run, that means guar-
anteeing the military significant autonomy, as well as immunity from
prosecution for its crimes. Over time, civilian democratic control of the
military can be extended incrementally, as was done masterfully in Bra-
zil in the 1980s and in Chile during the 1990s. But if the professional
military feels threatened and demeaned from the start, the transition is
in trouble.
The same principle applies to surviving elements of the state securi-
ty apparatus, the bureaucracy, and the ruling party. In South Africa, for
example, old-regime elements received amnesty for their human rights
abuses in exchange for fully disclosing what they had done. In this and
other successful transitions, top officials were replaced but most state
bureaucrats kept their jobs.
F O U R : R E W R ITE THE RULES

A new democratic government needs a new constitution, but it can’t be
drawn up too hastily. Meanwhile, some key provisions can be altered
expeditiously by either legislation, interim executive fiat, or national con-
sensus.
In Spain, the path to democratization was opened by the law for politi-
cal reform, adopted by the parliament within a year of dictator Francisco
Franco’s death in 1975. Poland adopted a package of amendments in
1992 after it had elected a new parliament and a new president, Lech
Walesa; a new constitution followed in 1997. South Africa enacted an

interim constitution to govern the country while it undertook an ambi-
tious constitution-writing process with wide popular consultation—the
ideal arrangement.
Even extremely corrupt rulers may win significant electoral support—
enough to steal an election—when the opposition is splintered.
An urgent priority, though, is to rewrite the rules so that free and fair
elections are possible. This must happen before democratic elections can
be held in Egypt and Tunisia, for example. In transitions toward democra-
cy, there is a strong case for including as many political players as possible.
This requires some form of proportional representation to ensure that
emerging small parties can have a stake in the new order, while minimiz-
ing the organizational advantage of the former ruling party. In the 2005
elections in Iraq, proportional representation ensured a seat at the table
for smaller minority and liberal parties that could never have won a plural-
ity in individual districts.
F I V E : I S O L A T E T HE EXTREMES
That said, not everyone can or should be brought into the new democratic
order. Prosecuting particularly venal members of a former ruling family,
such as those tied to the Philippines’ Ferdinand Marcos, Indonesia’s fallen
strongman Suharto, or now Tunisia’s Ben Ali, can be part of a larger recon-
ciliation strategy. But the circle of punishment must be drawn narrowly.
It may even help the transition to drive a wedge between a few old-regime
cronies and the bulk of the establishment, many of whom may harbor
grievances against “the family.”
A transitional government should aim for inclusion. It should test the
democratic commitment of dubious players rather than inadvertently
induce them to become violent opponents. However, groups that refuse
to renounce violence as a means of obtaining power, or that reject the
legitimacy of democracy, have no place in the new order. That provision
was part of the wisdom of the postwar German constitution.
Transitions are full of opportunists, charlatans, and erstwhile autocrats
who enter the new political field with no commitment to democracy.

Every democratic transition that has endured—from Spain and Portu-
gal to Chile, South Africa, and now, hopefully, Indonesia—has trod this
path.
Fragile democracies become stable when people who once had no use
for democracy embrace it as the only game in town.
Reprinted by permission of the Washington Post. © 2011 Washington Post Co. All rights reserved.
Available from the Hoover Press is When the AK-

47s Fall Silent: Revolutionaries, Guerrillas, and the
Dangers of Peace, by Timothy C. Brown. To order, call

A F G HANISTAN
The Gates Maneuver

The defense secretary’s great accomplishment? Not battles won
or budgets protected, but making the White House see sense on
Afghanistan. By Kori N. Schake.
When Napoleon marched his army into Berlin in 1806, he took his gener-
als to the tomb of Frederick the Great and announced, “Hats off, gentle-
men; if he were alive we wouldn’t be here.” The same could be said of the
Obama administration’s policy on Afghanistan: without Defense Secre-
tary Robert Gates, we would not be here.
Late last year the Obama administration concluded its Afghanistan
policy review, formally committing itself to prosecuting the war until
Afghan security forces are competent to undertake the work done by U.S.
and allied forces. Control of operations will gradually shift to Afghan
security forces as military commanders determine them capable of man-
aging the fight. The governments of Afghanistan and other nations pro-
viding forces aspire to complete that transition by 2014, although the
commander in Afghanistan is reluctant to promise that the target can be
met.
This outcome is diametrically opposed to the president’s intention
when he first announced the “surge” in Afghanistan more than a year
ago. Having been cornered by his own rhetoric about the “good war”
in Afghanistan recklessly under-resourced by the previous administration,
the president at that time accepted the need to increase forces. But in the
very same breath as he gave, he took away: “As commander in chief, I have
Kori N. Schake is a research fellow at the Hoover Institution and an associate

professor at the United States Military Academy.

determined that it is in our vital national interest to send an additional
thirty thousand U.S. troops to Afghanistan. After eighteen months, our
troops will begin to come home.”
Secretary Gates has a fine Florentine touch for orchestrating outcomes,
as we saw in his recent sleight of hand that convinced the public that
defense spending is being reduced. But trapping the Obama administra-
tion into a sensible alignment of objectives and resources for winning the
war in Afghanistan is his coup de grâce. His work repairing the adminis-
tration’s strategy merits studying.
Just before the president was to decide on the review, Gates took a
planeload of journalists to Afghanistan to hear for themselves what the
people fighting the war believe.
The first element was preventing the administration from adopting a

narrower set of objectives in Afghanistan. Both during the initial admin-
istration review announced in early 2009 and the exhaustively drawn out
second review, there was significant support by the political faction of
the administration for reducing the standard to something that could be
met without becoming a distraction from the president’s domestic agenda.
Gates made common cause with Secretary of State Hillary Clinton, and
standing together they were too formidable for Vice President Joe Biden
and others to assail. In his West Point speech announcing the conclusions
of the second review, the president emphasized that “our overarching goal
remains the same: to disrupt, dismantle, and defeat Al-Qaeda in Afghani-
stan and Pakistan, and to prevent its capacity to threaten America and our
allies in the future.”
Having established the goal, Gates put his men in place. Though Gen-
eral David McKiernan had drawn attention to the inadequate resources in
Afghanistan, he was judged by both Gates and Admiral Mike Mullen to
be insufficiently creative to be entrusted with designing and commanding
operations for this complex war. They replaced him with a counterin-
surgency expert, General Stanley McChrystal, and also put Gates’s mili-
tary assistant, General David Rodriguez, in the mix to ensure close ties
between the Pentagon and the war effort.

Third, Gates ordered the commander to undertake an indepen-
dent assessment of how to achieve the administration’s objectives. The
McChrystal review accepted the premise of the White House’s policy and
made an intellectually unassailable argument for what would be needed
in operations and resources, with options directly tied to varying levels of
risk. Once the McChrystal standard had been set, it was untouchable by
politicians. There was no way to reject the resources the commander said
he needed, given the president’s criticism of the previous administration.
Secretary Gates has a fine Florentine touch for orchestrating outcomes.
Fourth, Gates prevented the strategy debate from becoming a civil-

military schism. The White House felt betrayed by the military’s asking
for the commitment necessary to achieve the president’s objectives. But
when McChrystal injudiciously previewed his views, Gates made a fine
show of calling for discipline and insisting that views be conveyed through
the chain of command. Thus he protected the military from the White
House. When the report leaked (as was inevitable when people on both
sides of the argument believed that the administration was about to make
a terrible mistake), the Defense Department struck a principled pose
about not commenting on internal deliberations, reinforcing the percep-
tion of the military as apolitical.
Fifth, in making personnel decisions, Gates made the administration’s
strategic decision on Afghanistan. When McChrystal self-destructed,
Gates moved the smoothest civil-military operator among the command-
ers from Iraq to Afghanistan (General David Petraeus) and the finest war-
fighting mind of our time (General James Mattis) to CENTCOM. They
had written the counterinsurgency manual and were staunch advocates of
winning the war. Once they were in place, the White House essentially
ceded its preference for withdrawing in June 2011. (Bonus points to Gates
for capitalizing on a tactical loss—McChrystal—to achieve a strategic vic-
tory.)
Sixth, Gates, Clinton, and our military leadership cajoled NATO into
giving the president political cover to extend the deadline. If the United
States fails in Afghanistan, NATO fails, and Secretary General Anders
Fogh Rasmussen showed enormous skill in keeping allies committed

(even if only in name, not troop levels) until 2014 and announcing that
commitment at the Lisbon summit. NATO made the extension of the
timeline easier for the administration to accept, given its hallowed prefer-
ence for working through multinational institutions.
Seventh and finally, Gates worked the communications angle brilliant-
ly. A steady drumbeat of news stories about the importance of giving the
surge time to work began almost immediately, and then shifted to seeding
public expectations that the review would not advocate reducing forces
but essentially validate the current course. Just before the president was
to make a decision on the review, Gates took a planeload of journalists
to Afghanistan to hear for themselves what the people fighting the war
believe: it’s a tough fight, it will take time, but it’s winnable and we’re
winning. In case anyone failed to draw the correct conclusion, Gates said
he was convinced that the strategy was working, publicly delivering his
private counsel to the president. Those stories made it very hard for the
president to walk away from the war.
Hats off, gentlemen. But for Bob Gates, we would not be here.
Reprinted by permission of Foreign Policy (http://shadow.foreignpolicy.com). © 2010 The Washington Post
Co. All rights reserved.
Available from the Hoover Press is Managing American

Hegemony: Essays on Power in a Time of Dominance,
by Kori N. Schake. To order, call 800.935.2882 or visit
www.hooverpress.org.

ISRAEL
The Palestinian
Proletariat
Permanent refugees, generation after generation: these are the fruit
of a U.N. agency that blocks both peace and a Palestinian state. By
Michael S. Bernstam.
British Prime Minister David Cameron recently called Gaza a “prison

camp.” Former President Jimmy Carter has called it a “cage.” At first
glance, these characterizations of the Hamas-ruled province seem like
rhetorical excesses designed to cast Israel in the role of the unjust jailer
blockading the strip. But Cameron and Carter have got it right, in a way.
Gaza is a totalitarian paramilitary camp at war with its neighbors and
other Palestinians. It is a paramilitary camp because it is a unique type of
refugee camp. The narrow confines of the 139 square miles of the Gaza
district—surrounded by Israel to the north and east, Egypt to the south,
and the Mediterranean Sea to the west—feature eight separate Palestinian
refugee camps, plus dozens of surrounding ghettos. Altogether, they com-
bine the features of a refugee camp and a military camp and, cut off from
the world, look to some extent like the cages Carter mentioned.
These camps were established in 1949 and have been financed ever since
by the United Nations Relief and Works Agency for Palestine Refugees in
the Near East (UNRWA). Yet far from seeking to help residents build a
new and better life either in Gaza or elsewhere, UNRWA is paying mil-
lions of refugees to perpetuate their refugee status, generation after genera-
tion, as they await their forcible return to the land inside the state of Israel.
Michael S. Bernstam is a research fellow at the Hoover Institution.

Though pundits and foreign-policy experts focus on the question of
settlements or the current temperature of negotiations between Israel and
the Palestinians, UNRWA’s institutionalization of refugee-cum-military
camps is, in my view, the principal obstacle to peace in the Middle East.
The chances of achieving peace and security in the Middle East will con-

tinue to be remote as long as UNRWA is, in effect, underwriting a self-

destructive Palestinian cycle of violence, internecine warfare, and a per-
petual war against Israel.
The core issue is a phenomenon we can call “refugeeism.” For sixty
years, UNRWA has been paying four generations of Palestinians to remain
refugees, reproduce refugees, and live in refugee camps. It is UNRWA that
put them in refugee cages and watched the number of inhabitants grow.
The Palestinian refugee population in Jordan, Lebanon, Syria, the West
Bank, and Gaza has exploded
from 726,000 in 1950 to 4.8
million in 2010. About 95 per-
cent live under UNRWA care.
The unprecedented nature of
this guardianship is rooted in
the unusual nature of this insti-
tution. UNRWA is a suprana-
tional welfare state that pays its
residents not to build their own

nation-state, for, were they to do so, they would forfeit their refugee status
and its entitlements of cash, housing, health care, education, credit, and
other largess.
For sixty years, UNRWA has been paying four generations of Palestinians
to remain refugees, reproduce refugees, and live in refugee camps.
It is these perverse incentives above all that have undermined efforts to

improve the lot of the Palestinian people, such as those measures aimed
at fostering economic development in the West Bank undertaken by Pal-
estinian Authority Prime Minister Salam Fayyad and the Israeli govern-
ment. If the international community truly wishes to serve the needs of
the Palestinians and improve their lot, its first task would be the abolition
of UNRWA.
S trai ni n g a de f ini t ion

In their 1845 pamphlet “The German Ideology,” Karl Marx and Fried-
rich Engels coined the term lumpenproletariat. Marx later defined it as
“neither wage-earning workers nor peasants,” “classless elements,” “beg-
gars, alms-seekers, dole-seekers, paupers, and vagabonds.” In 1949, Josef
Stalin, who knew his Marx, instructed his envoy to the United Nations
to oppose a refugee agency devoted to Palestinian Arabs. He wrote: “We
should not vote for UNRWA. The goal should be to return Palestinian
refugees to normal productive labor so that they work for a living. We
need the Palestinian conscientious working class, not the Palestinian par-
asitic lumpenproletariat.” Yet on December 8, 1949, the United Nations
voted overwhelmingly to create the United Nations Relief and Works
Agency for Palestine Refugees in the Near East. The United States, West-
ern Europe, the Arab states, and even Israel voted for it. Acting on Sta-
lin’s orders, the Soviet Union and all the other communist-bloc countries
abstained.
Ever since, UNRWA has been among the most bizarre humanitarian
organizations in human history. It is a refugee-relief effort whose defini-
tion of “refugees,” a term meant to describe those in emergency flight
from imminent peril, includes the descendants of refugees.

UNRWA is unique by design. Whereas all other refugees and deportees
fall under the jurisdiction and care of the Office of the U.N. High Com-
missioner for Refugees (UNHCR), the Palestinians belong to UNRWA.
Only actual refugees qualify for aid under the UNHCR, and then on a
short-term basis. This draws a clear line between refugees as such and vari-
ous ethnic diasporas. The UNHCR’s mandate is to resettle and integrate
all refugees in their historical homelands or in new host countries—to
un-refugee them, so to speak. Out of the millions of refugees and deport-
ees who emerged after World War II and since—Germans, Poles, Czechs,
Hungarians, Finns, Russians, Ukrainians, Japanese, Indians, Pakistanis,
Jews, Turks, Chinese, Koreans, Algerians, Cubans, Vietnamese, Cambo-
dians, and many others—the United Nations provided Palestinians a dif-
ferent sort of relief.
Refugee camps no longer fit into former British prime minister Clement
Attlee’s dichotomy of warfare state and welfare state. They are both.
The UNRWA charter specified that the Palestinians who lived in Brit-
ish Mandate Palestine during the years 1946–48 and who subsequently
fled in 1948–49 qualified for refugee status together with all their descen-
dants. This open-ended definition of refugees applies for generations to
come. It bestows housing, utilities, health care, education, cash allowanc-
es, emergency cash, credit, public works, and social services from cradle to
grave, with many cradles and grand-cradles along the way, to its beneficia-
ries. In practice, this means multigenerational refugee camps and ghettoes
in Jordan, Lebanon, Syria, the West Bank, and Gaza. Close to one-third of
today’s refugees, about 1.4 million, live in fifty-nine refugee camps. There
is no room in UNRWA’s mandate and agenda for resettlement and inte-
gration. In 1959, UNRWA discarded the last remnants of such programs.
UNRWA’s mandate created, in effect, a multigenerational dependency
of an entire people—a permanent, supranational refugee welfare state
in which simply placing most Palestinians on the international dole has
extinguished incentives for work and investment. It has succeeded with
a vengeance. It has thwarted economic development, destroyed oppor-
tunities for peace in the Middle East, and created, along the way—both

metaphorically and literally—a breeding ground for international terror-
ism. The great-grandchildren of East Prussian refugees do not blow up
pizzerias in what used to be Konigsberg and is now the Russian city Kalin-
ingrad. But the great-grandchildren of the original UNRWA refugees do
blow up pizzerias in Jerusalem.
It is this open-ended refugee status—which necessarily envisions a vic-
torious return to the Israeli part of the former British Mandate Palestine—
that puts bread on the table in the rent-free house, together with an array
of social services. Only the triumphant return of the grandchildren and
the great-grandchildren to the ancestral land will mark the final deliv-
erance in this ideology. Until then, the permanent refugee welfare state
means permanent war. It is no longer the epitome of former British prime
minister Clement Attlee’s dichotomy of warfare state and welfare state: it
is both.
There is no room in UNRWA’s mandate and agenda for resettlement and
integration.
The permanent refugeeism of the UNRWA welfare state generates a

particular “right of return” claim—the argument that Palestinians should
be given title to the land they occupied before Israel’s independence—that
fuels perpetual warfare. To see its pernicious demographic and physical
meaning, consider what this claim is not, and then what it is. First, it is
not the right of return of actual refugees (as opposed to descendants) that
was created by international conventions since 1948 to prevent deporta-
tions and to mitigate the conditions of concurrent refugees who fled the
ravages of war. Nor is it the right of return of historical ethnic diasporas
to their own nation-states that Germany extends to all Germans, Armenia
to all Armenians, Greece to all Hellenes, and Israel to all Jews. Nor is it
the establishment of new nation-states where there were none, such as
the partition of British Mandate Palestine into the Jewish and Arab states
or the partition of the British Raj into India and Pakistan. Rather, the
claim of the Palestinian right of return is intended for one historical ethnic
diaspora of the descendants of perennial refugees to repopulate another
people’s existing nation-state, Israel.

This is not the right of return to a country; this is the right of return of
a country, a reconquest after a lost war. In Europe, a similar claim would
apply to the right of the Germans to a return of the Sudetenland from
the Czech Republic, farther Pomerania and Silesia from Poland, and East
Prussia from Russia. In Asia, it would mean the right of the Pakistanis to
parts of India.
This is not the right of return; this is a claim of the right of retake. In
the world of historical ethnic diasporas, the right of return-cum-retake
means a Hobbesian war of all against all. More than being detrimental to
Israel, it is destructive for the Palestinians because it gives more belligerent
groups, such as Hamas, an upper hand and prevents reunification of the
two potential Palestinian nation-states. It converts what was meant to be
a civil right into a civil war, on top of the war with Israel.
H o w it f a v ors terr o ris m

After Israel’s complete withdrawal from Gaza in August 2005, condi-
tions were in place for building a Palestinian nation-state. The Palestin-
ian Authority could have taken over the physical infrastructure of the aid
pipeline as well as social services from UNRWA. Instead, there soon fol-
lowed a violent takeover by Hamas, an internecine war with other Pales-
tinian factions, and an escalation of the Palestinian war against Israel. This
war became internationalized by flotillas sent by foreign organizations to
break the Israeli and Egyptian blockade of the terrorist regime ensconced
in Gaza. The Palestinian failure to take advantage of Israel’s withdrawal
to improve their lot is reminiscent of the old joke about the Soviet failure
to manufacture personal computers. The punch line was that no mat-
ter which blueprint the Russians took from the West, they always end-
ed up making a machine gun. Similarly, the perennial refugeeism of the
UNRWA welfare-warfare state always results in paramilitary formations,
perpetual warfare, and terrorism.
Indeed, UNRWA sponsors terrorism in two ways—one general and
one specific. The general way is the incessant warfare that is a corollary of
permanent refugee status and the concomitant claim of the right of retake.
James G. Lindsay, UNRWA general counsel in 2002–7, summarized this
experience: “UNRWA encouraged Palestinians who favor refighting long-

lost wars, discouraged those who favor moving toward peace, and contrib-
uted to the scourge of conflicts that have been visited upon Palestinian
refugees for decades.”
The U.N. High Commissioner for Refugees disqualifies individuals
who committed war crimes, crimes against humanity, and acts against
peace from refugee status.
UNRWA does not exclude them.
This is not the right of return to a country; this is the right of return of a
country, a reconquest after a lost war.
Lindsay described it from the inside: “UNRWA has taken very few
steps to detect and eliminate terrorists from the ranks of its staff or its
beneficiaries, and no steps at all to prevent members of organizations such
as Hamas from joining its staff.” And again: “The agency makes no effort
to discourage supporters or members of Hamas or any other terrorist
group from joining its staff.” Indeed, of some thirty thousand UNRWA
employees, fewer than two hundred are “internationals” and the rest are
Palestinian recruits, many of whom use UNRWA facilities and equipment
to serve terrorist organizations. Since it is the claim of the right of retake
that accompanies the eternal refugee welfare state, and warfare and ter-
rorism enforce that claim, the staff of UNRWA must ultimately converge
with the terrorist paramilitary organizations. Natural selection, if you will.
Lindsay cites numerous instances from his former agency’s history. In
1975–82, UNRWA’s Siblin Vocational Training Center in Lebanon was
used for storing weapons, housing combatants, and retooling military
equipment. At this facility, education converged with military indoctrina-
tion and recruitment. UNRWA textbooks represent what Lindsay calls a
“war curriculum.” Since 1987, UNRWA schools have exhibited posters
glorifying militants and suicide bombers and served, in effect, as recruit-
ment centers. In 2000–2001, Palestinian children received military train-
ing in militarized summer camps. UNRWA vehicles and drivers periodi-
cally transported armed fighters.
A most telling example of this institutional adaptation is the conversion
of the most important humanitarian service, ambulances, into a lethal

force. UNRWA ambulances routinely serve Palestinian combatants and
wounded fighters during hostilities with Israel, in addition to Gaza and
West Bank ambulances. They are the medical troops on one side in the
war. And more: Hamas members have been employed as UNRWA ambu-
lance drivers to transport combatants, weapons, and explosives in both the
West Bank and, especially, Gaza.
The point is not that terrorists have infiltrated UNRWA. The point is
that, by the logic of institutional evolution, even regardless of the policies
of specific Western managers, UNRWA has become a terror-sponsoring
organization.
c reat i n g a d e ma nd fo r pa up ers
This is not, of course, what the United States, Western Europe, and Israel
had in mind when they voted for UNRWA (or Stalin and his stooges when
they abstained). But institutions tend to evolve according to their own
intrinsic and devilish logic beyond the good intentions of their founders.
Malthus pointed out in his classic treatise on population that the English
Poor Laws, rather than alleviating poverty, actually reproduced, expanded,
and perpetuated it. By subsidizing poverty, they created a demand for
paupers, and demography duly provided the supply. This created the mul-
tigenerational underclass that Marx later dubbed the lumpenproletariat.
“The agency makes no effort to discourage supporters or members of
Hamas or any other terrorist group from joining its staff.”
The same pattern of demand and demographic supply characterized

the evolution of the U.S. welfare system’s Aid to Families with Dependent
Children (AFDC). AFDC was established during the Great Depression
in 1935 as a complement to Social Security. As the name indicates, it was
intended as relief support for families with underage children who lost
their breadwinner—primarily the middle-aged widows of workers like the
Appalachian coal miners. The program evolved into a multigenerational
dependency program for young, often teenaged, unmarried mothers of
the permanent underclass. Senator Edward M. Kennedy described the
mechanism: “We go to a young girl—a child of eighteen, or sixteen, or

even younger—and this is what we say: Abandon all your hopes. You
will never have a decent job. You will live in neighborhoods of endless
unemployment and violence. And then we say to this child: Wait, here
is a way, one way. We will give you an apartment and furniture to fill
it. We will give you a TV set and a telephone. We will give you clothing
and cheap food and free medical care, and some spending money besides.
And in return, you only have to do one thing: just go out there and have
a baby.” It was not until the Welfare Reform Act of 1996 that this trend
was reversed.
Ancient Rome was the first to encounter the proletarian problem
when it instituted a welfare state in 58 BC. According to British historian
Arnold Jones, it was intended initially just for the 220,000 plebeians who
had lagged behind the general rise in living standards. The program began
with grain allowances. But because the recipients did not want to both-
er baking bread, the grain allowance was converted into free bread. The
right to welfare became hereditary, and by AD 284 there were millions of
recipients. N. S. Gill reminds us that “the first part of the word proletariat
derives from the Latin word proles, which means offspring. The proletariat
were ‘producers of offspring.’ ”
There are some 250 theories of the decline of the Roman empire: mor-
al decay, fiscal failure, inflation, unemployment, endless wars, barbarian
onslaught, and so on. This 251st is as good as any, and synthetically sub-
sumes the others: mighty Rome could not sustain, simultaneously, the
welfare state and the warfare state.
However, the mighty UNRWA can. It can do so indefinitely because
the United States and the European Union finance it.
h o w t o o pe n the c ag e
UNRWA has been one of the most inhuman experiments in human his-
tory. Since UNRWA creates incentives for war and disincentives for peace,
conditions for Palestinian misery and disincentives for economic develop-
ment, it cannot be reformed and must be removed. The change in the
Palestinian incentive structure is necessary for both peace and statehood.
Palestinian sovereignty will be achieved only by liberation from UNRWA
and, like peace, cannot be truly achieved without this liberation. The first

order of business, then, is to dismantle the UNRWA welfare-warfare state.
If this were to be done, the future Palestinian state, or at least the West
Bank, would be able to join the family of prosperous nation-states. To
juxtapose President Carter and the last canto of Dante’s Inferno, open the
cage and enter the world.
But given the intractable nature of the problem and the strong sup-
port this destructive program retains in the international community,
how can this end be achieved? One possible first step is to merge it with
the U.N. High Commissioner for Refugees. Such a measure could allow
UNRWA to be abolished immediately. If the new, merged agency adopted
UNHCR’s program of short-term emergency relief, it would signal the
beginning of the end of the world body’s support for continuance of the
Palestinians’ agony. Alternatively, UNRWA could be held in place and
phased out gradually.
The process is not important. What is important is the change in mis-
sion. The new mandate should be resettlement, integration, and natu-
ralization—or at least the former two or the latter two, with integra-
tion being a central and necessary component. The task is, in short, to
transform 4.8 million people from dependent refugees into productive
citizens.
Another option is for UNRWA funding to be converted into interna-
tional subsidies earmarked exclusively for resettlement, integration, and
naturalization. The funds could be applied in the countries of current resi-
dence (reimbursing, too, those countries’ expenses), in Palestinian juris-
dictions, or in whatever country would admit refugees on an individual
basis. Israel is obviously unsuitable as a country of resettlement because
integration there is not feasible, and such a plan would defeat the whole
purpose of the scheme.
Most important, the transfer of UNRWA funding to the Palestin-
ian Authority and local authorities would dispose of the very institu-
tion of the refugee camps. They would become regular neighborhoods
and dwellings once their refugee status is removed. Integration would
also become easier once the refugee stigma is removed from these
neighborhoods. UNRWA schools, medical facilities, financial institu-
tions, and all social services could be given outright to the Palestin-

ian Authority, which would enhance its status, scope, and power as a
sovereign government of a new nation-state, and to local governments
elsewhere.
In fact, the dismantling of UNRWA would, by itself, facilitate and accel-
erate the task of resettlement, integration, and naturalization. This process
has been forestalled in many places by the very existence of UNRWA and
its refugee designation of the Palestinians.
In Jordan, more than 1.8 million of the nearly 2 million registered
refugees are already naturalized citizens of that country. Lindsay aptly calls
them “oxymoronic citizen refugees.” An additional 170,000 have per-
manent residency rights. Both citizens and permanent residents are inte-
grated into the labor market and commerce and are isolated from other
Jordanians primarily by the stigma of refugeeism—encaged, to rephrase
President Carter. These Jordanian Palestinians or Palestinian Jordanians
prefer to send their children to Jordanian schools that teach English and
computer science rather than to UNRWA schools that teach historical
mythology and use maps without Israel.
Palestinian sovereignty will be achieved only by liberation from UNRWA
and, like peace, cannot be truly achieved without this liberation.
In Syria, since 1957, Palestinian residents have had the same rights
as citizens in employment, commerce, and social services. They lack for-
mal citizenship and full property rights because the Syrian government,
in a concordat with UNRWA, committed itself to “preserve their origi-
nal nationality,” that is, to keep them trapped in their permanent refugee
status and the ensuing claim on retaking Israel. Without UNRWA, this
obstacle to integration would weaken even if the Syrian hostility toward
Israel remained intact.
Lebanon is the most difficult case. Of 414,000 registered refugees,
only 70,000 are citizens. Others do not enjoy employment rights, can-
not own land, and do not qualify for public education, health care, and
welfare. However, the transfer of the array of social and financial services
and facilities from UNRWA to the Lebanese authorities would contribute
to integration and help create jobs.

Those Jordanian, Syrian, and Lebanese Palestinians who cannot inte-
grate into those countries could be resettled in the nascent Palestinian
nation-state, which would master an expanded scope of sovereignty after
the liberation from UNRWA.
The end of UNRWA would automatically nullify the pernicious issue
of the right of return-cum-retake. It is unsolvable in the presence of
UNRWA, because it implies the repopulation of Israel with millions of
perennial paramilitary refugees. But once UNRWA is discarded, the refu-
gee status expires instantaneously or after a transition period, and the right
of return becomes a non-issue because of immediate and actually pressing
needs.
Though the agency’s defenders may claim that criticisms are ill inten-
tioned or biased against the Palestinians, the phasing out of UNRWA is
not only the Palestinians’ sole hope of finding a viable future. It also fits
well with Prime Minister Salam Fayyad’s hope of creating a viable inde-
pendent state. Though supporters of the Palestinians and even some
friends of Israel have come to believe that UNRWA is indispensable,
nation building from within is the only viable form of nation building.
Instead of perpetuating the dead end that the international welfare state
for the Palestinians represents, ending UNRWA’s horrific six-decade reign
would instantly create the conditions for an honest, meaningful, and via-
ble peace process to begin in the Middle East.
Reprinted by permission of Commentary (www.commentarymagazine.com). © 2010 Commentary Magazine.
All rights reserved.
Available from the Hoover Press is Israel’s Unilateralism:

Beyond Gaza, by Robert Zelnick. To order, call

I S R AEL
Why Israel Is Shunned

A shift in elite thinking leaves no room for such assertive, self-
defending nation-states. By Daniel Pipes.
As someone who deeply appreciates what Western civilization, for all its
faults, has achieved, I puzzle over the hostility many Westerners harbor
toward their own way of life. If democracy, free markets, and the rule of
law have created unprecedented stability, affluence, and decency, why do
so many beneficiaries fail to see this?
Why, for example, does the United States, which has done so much
for human welfare, inspire such hostility? And tiny Israel, the symbol of
rejuvenation for a perpetually oppressed people—why does it engender
such passionate hatred that otherwise decent people desire to eliminate
it?
Yoram Hazony of the Shalem Center in Jerusalem offers an explana-
tion for this antagonism in a profound and implication-rich essay, “Israel
through European Eyes.”
He begins with the notion of paradigm shift developed by Thomas Kuhn
in his 1962 study, The Structure of Scientific Revolutions. This influential
concept holds that scientists see their subject from within a paradigm,
a specific intellectual framework that underpins their understanding of
reality. Facts that do not fit the paradigm are overlooked or dismissed.
Kuhn reviews the history of science and shows how, in a series of scien-
tific revolutions, paradigms shifted, as from Aristotelian to Newtonian to
Einsteinian physics.
Daniel Pipes is the Taube Distinguished Visiting Fellow at the Hoover

Institution.

Paradigms also frame politics, and Hazony applies this theory to Israel’s
delegitimization in the West. Israel’s standing has deteriorated for decades,
he argues, “not because of this or that set of facts, but because the para-
digm through which educated Westerners are looking at Israel has shifted.”
Responding to the vilification of Israel by offering corrective facts—about
Israel’s military morality or its medical breakthroughs—“won’t have any
real impact on the overall trajectory of Israel’s standing among educated
people in the West.” Instead, the latest paradigm must be recognized and
fought.
The fading geopolitical paradigm sees nation-states as legitimate and
positive, a means of protecting peoples and allowing them to flourish.
The Treaty of Westphalia (1648), which ended the Thirty Years War, was
the key moment in which the sovereignty of nations was recognized. John
Stuart Mill and Woodrow Wilson endowed the nation-state ideal with
global reach.
According to the new paradigm, Israel isn’t the answer to Auschwitz. The
European Union is.
But Hazony asserts that this paradigm has largely collapsed. The nation-
state no longer appeals; many intellectuals and political figures in Europe
see it “as a source of incalculable evil,” a view that is spreading fast.
The new paradigm, based ultimately on Immanuel Kant’s 1795 treatise
“Perpetual Peace,” advocates the abolition of nation-states and the estab-
lishment of international government. Supranational institutions such
as the United Nations and the European Union represent its ideals and
models.
Jews and the Holocaust play a strangely central role in the paradigm
shift from nation-state to multinational state. The millennial persecution
of Jews, culminating in the Nazi genocide, endowed Israel with special
purpose and legitimacy, according to the old paradigm. From the perspec-
tive of the new paradigm, however, the Holocaust represents the excesses
of a nation-state, the German one, gone mad.
Under the old nation-state paradigm, the lesson of Auschwitz was “nev-
er again,” meaning that a strong Israel was needed to protect Jews. The

new paradigm leads to a very different “never again,” one that insists that
no government should have the means potentially to replicate the Nazi
outrages. According to it, Israel isn’t the answer to Auschwitz. The Euro-
pean Union is. That the old-style “never again” inspires Israelis to pursue
the Western world’s most unabashed policy of self-defense makes their
actions particularly appalling to adherents of the new paradigm.
Facts that do not mesh with the paradigm shift are overlooked or
dismissed.
Need one point out the error of ascribing Nazi outrages to the nation-
state? The Nazis wanted to eliminate nation-states. No less than Kant,
they dreamed of a universal state. Thus, followers of the new paradigm
mangle history.
The case of Avraham Burg shows how far the new paradigm has spread.
A former speaker of Israel’s parliament and candidate for prime minister,
he switched paradigms and wrote a book on the legacy of the Holocaust
that compares Israel to Nazi Germany. Now he wants Israelis to give up on
Israel as defender of the Jewish people. No one, Burg’s sad example sug-
gests, is immune from the new-paradigm disease.
Reprinted by permission of National Review Online. © 2010 National Review, Inc. All rights reserved.
Available from the Hoover Press is Islamism and the

Future of the Christians of the Middle East, by Habib
C. Malik. To order, call 800.935.2882 or visit www.
hooverpress.org.

RUSSIA
Of Comrades and
Capos
If there’s a plot against Russia, as Vladimir Putin claims, then it’s
being carried out by those already in power. By Robert Service.
A Spanish prosecutor makes headlines by telling an American diplomat

that Russia is a “mafia state.” Not a single Russian newspaper, not even
those that are chummy with the Kremlin, has failed to use such terminol-
ogy over the past two decades. Before the fall of the USSR few Russians
knew what the mafia was. Now the Sicilian name has entered all the Cyril-
lic lexicons—and always the core meaning is entanglement of politicians
and criminals to cream off the country’s assets by whatever means neces-
sary.
In the old Soviet Union, public theft was possible through a corrupt
political system without need for out-and-out hoodlums. Private dachas
were constructed at public expense. Factory profits were siphoned off into
the bank accounts of the nomenklatura. Elderly party bigwigs took their
pick of foreign merchandise in special shops banned to ordinary citizens.
De-communization changed all that. Privatization led to a vicious
scramble for the country’s abundant natural resources, and strikingly
imaginative schemes were dreamed up by the “new Russians.” Some of
them—the oligarchs—became billionaires, and they made themselves
useful to President Yeltsin at times of economic crisis and in election cam-
paigns. In return they exacted a price. Yeltsin had to promise to make it
Robert Service is a senior fellow at the Hoover Institution, a fellow of the

British Academy, and the professor of Russian history at the University of Oxford.

Russian Prime Minister Vladimir Putin, left, and President Dmitry Medvedev pilot a golf cart
at the Bocharov Ruchei, the presidential summer residence on the Black Sea. Medvedev’s
golden retriever, Aldo, accompanies them.
possible for them to lay their hands on ever-larger quantities of resources.

The greedy competition fostered enmities. Many oligarchs, having fought
their way up to wealth and fame, were keen to keep their money by illegal
and violent methods.
When Vladimir Putin came to power he acquired the image of a ruler
who would cleanse the filthy stables. He stood for order. He denounced
corruption and privilege. And although he never turned the clock back on
the privatization program, he arrested or intimidated those oligarchs who
failed to acknowledge his primacy. Mikhail Khodorkovsky objected. He
is now in prison in eastern Siberia. Boris Berezovsky wailed and criticized
before fleeing to political asylum in London.

To the fore came men like Putin. He drew on ex-comrades from the
KGB. He praised them for their patriotism, honesty, and dynamism.
All too quickly the assets seized from the dissident oligarchs ended up
in the pockets of the newcomers from the security and defense estab-
lishment. Everybody in Russia knows this. It was certainly no secret
from Putin during two presidential terms when he called repeatedly for
the installation of the rule of law. His protégé and successor, Dmitry
Medvedev, has been even more expansive about the need for reform and
legality.
All too quickly the assets seized from dissident oligarchs ended up in the
pockets of newcomers from the security and defense establishment.
Both men appreciate something, in theory: if Russia is to have a com-

petitive future in the world alongside its Chinese neighbor, it has to build
a framework where thrusting entrepreneurs can drive home from the
office without fear of a hail of bullets. And Putin and Medvedev know
that introducing an enforceable system of business contract legislation will
enhance foreign investment.
© ITAR-TASS/Dmitry Astakhov
The problem is that Putin and Medvedev—Mr. Alpha Dog and his
poodle—are products and beneficiaries of a thuggish regime. They them-
selves are thugs. Alpha Dog growls while the poodle simpers, but each has
a sharp bite. They are like eighteenth-century monarchs contemplating a
set of reforms. If they go too far too fast, an aristocratic clique may well
remove them in a coup. In today’s Russia the current badge of nobility is
the old KGB identity paper. Putin and Medvedev are jailers of the regime
but they are also its inmates.
Much that happens in Moscow is their responsibility and they deserve
the opprobrium heaped upon them by the plain-speaking Spanish pros-
ecutor. But how much faith should be placed in the U.S. ambassador’s
contention that Putin knew about the operation to assassinate Alexander
Litvinenko in London? This is much less credible. Putin is the big man
at the center of a system in which many operate—and diplomatic cables
(released by WikiLeaks) that caricature the internal reality of Russian poli-
tics fall short of penetrating analysis.

The man from Spain said nothing unusual in itself. More remarkable is
that such remarks at last surfaced in the public domain. Putin has been
quick to claim that there is a plot against Russia. There is indeed a plot
against Russia. It is one he knows a lot about from the inside.
Reprinted by permission. © 2011 Guardian News and Media Limited. All rights reserved.
Available from the Hoover Press is Politics, Murder, and

Love in Stalin’s Kremlin: The Story of Nikolai Bukharin
and Anna Larina, by Paul R. Gregory. To order, call

RUSSIA
Where Russia Is
Heading
One step forward, two steps back. Can Russians ever achieve simple
normalcy? By Mark Harrison.
Where will Russia go this year? Under Vladimir Putin and Dmitry Med-
vedev, Russia is not a democracy, but neither is the government heading
back to Soviet-type totalitarianism. The absence of political competition is
not Russia’s primary problem; it is the absence of the rule of law.
Russia today has markets and private property. It is not the Soviet total-
itarian state; nor is it, strictly, a “mafia state.” That is one step forward. But
Russia’s government seeks the power to intervene at will, selectively and
at its own discretion, in markets and property relations. The government
stands above the law. The result is two steps back. You can see this clearly
in the four stories that follow.
Story number one: Russia suffered a harvest failure and nobody
died. Last summer saw a severe drought across Russia. Harvests failed
disastrously. In the Soviet past, failures on similar proportions occurred in
1932 and in 1946. When those harvests failed, there were severe regional
famines in which millions of people starved to death.
After the harvest failure of 2010, two things happened that were in
striking contrast with the Soviet past. First, no one died. Instead, when
food prices at home threatened to rise, the Russian government responded
by imposing an export ban, requiring Russian food suppliers to break their
Mark Harrison is a research fellow at the Hoover Institution and a professor of

economics at the University of Warwick.

contracts with foreign buyers. Second, this exposed the fact that for the
first time since the 1920s, Russia is exporting food to the West. Under a
market economy, Russian agriculture has become a competitive success.
(It does not take much to be a success by Russian standards.)
The reflexive response of the Russian administration—to try to
control prices by restricting the market and breaking contracts—was a
bad sign, however. This will limit the incentives for Russian farmers to
make the forward-looking investments that will reduce harvest volatil-
ity in the future. Foreigners will become less ready to make forward

contracts for Russian exports, knowing the state can override them at
any time.
Story number two: President Medvedev has seen the future, but can
he make it work? In 2010, Medvedev visited Silicon Valley, the world’s

biggest concentration of innovative start-up ventures. Now, the Russian
government wants to build an analogue in the district of Skolkovo, out-
side Moscow.
The goal is to promote five presidential high-tech directions (one is
tempted to substitute the Soviet-era jargon of “priorities”) of moderniza-
tion: energy production, information technology, telecommunications,
and biomedical and nuclear technologies.
There is some sound logic behind this. Economic development does
require new urbanized configurations. And it’s true that Russians today
don’t live in the right places for innovation.
Most Russians are spread out across the country’s vast landmass in
small and medium-sized towns. They are too immobile (apart from the
ones who have gone to live abroad, many in places like Silicon Valley).
Lots of young people need to move to big sprawling cities and suburbs to
squash up and rub together, mix ideas and talents, get funding, and start
up innovative ventures. In fact, quite a lot of them would like to but can’t,
because Moscow is congested and operates a restrictive system of residence
permits.
Like other poor countries, Russia may also need to experiment in new
ventures to uncover comparative advantages.
In short, there is a respectable case for the Russian government to do
more to encourage movement away from rural districts and remote small
towns, and let its largest cities grow further. It should also stand ready to
subsidize pioneering entrepreneurs.
But what Medvedev actually has in mind is to create a controlled envi-
ronment for approved people and favored companies to sit in a green field
outside Moscow. This is not how Silicon Valley was born. The Russian
government will not be able to commit itself not to meddle and grab. The
powerful military-industrial lobby will not be able to stand aside and let
individual enterprise make and take profits.
If it is ever built, Russia’s innovation city will drain the state budget of
grants and subsidies. There will be just enough spinoffs that everyone will
declare it a success. The aggregate net benefit will be zero or negative.
Story number three: Russia writes a new law on the secret police.
After the Soviet Union collapsed, Russia went from a government system

of micro-controls on everything to too little government control. In the
1990s, public confiscation was replaced by “piratization” (from the title
of a book by Marshall Goldman). The Russian state went from having far
too much capacity to having too little capacity to raise taxes and regulate
public life. In fact, the thing that gave the first Putin administration its
legitimacy was public recognition that some restoration of state capacity
was deeply necessary.
Up to a point.
But Prime Minister Putin is a KGB alumnus, and part of his mission
has been to restore the power and prestige of Russia’s secret services.
Russia’s parliament has given first reading to a new law on the FSB (the
domestic security service) that illustrates the direction of movement today.
It gives the FSB the power to issue legally binding warnings to people who
might be about to undertake illegal actions. This reinstates the legal basis
of the KGB practice of controlling the behavior of people who were on
the edge of political or cultural deviance or defiance by warning them off.
The reinstatement of the early warning system matters not only in itself,
but also for what must lie beneath. The KGB’s ability to control deviance
by giving out early warnings rested on a vast apparatus of informers and
mass surveillance. It could hand out tens of thousands of warnings a year
across the vast Soviet territory because it kept individual tabs on millions.
Mass surveillance enabled the selective intervention that kept the popula-
tion quiet and conformist.
The new law on the secret police does not bring back totalitarian con-
trol, but it makes little sense unless the FSB is quietly rebuilding its net-
works of spies and informers on a mass scale.
Story number four: some go to jail, some go free. After violent dem-
onstrations in London over university tuition increases, the British police
identified and arrested 180 participants suspected of significant responsi-
bility. After race riots in Moscow, the Russian police rounded up no fewer
than 800 ringleaders (I don’t know what happened to them after that). So
there is something, at least, that the Russians can do better!
No one I know is likely to shed any tears over the fate of violent ultra-
nationalists and fascists. I confess to feeling ever so slightly sorry for them.
The Russian government used them as a lightning rod until the voltage

ran out of control; now they can be slapped down, at least for the sake of
appearances. Moreover, the same police who could locate and arrest hun-
dreds of suspects in the course of a weekend seem unable to find the mur-
derers of dozens of journalists killed in Russia during the Putin era. Hmm.
Which brings me to the latest victim of selective Russian justice:
Mikhail Khodorkovsky. Khodorkovsky was put away originally for trying
to break away from the “mafia state” that gave him his fantastic wealth.
The first time, he was put away for evading taxes on his company’s profits.
The second time, it was for stealing his company’s entire revenues.
If you treat this literally, it is then hard to explain how it was that his
company was making taxable profits at the same time that Khodorkovsky
was stealing the revenues. But the underlying principle is not that compli-
cated. In Russia, the state decides first who is guilty. Then it decides what
he is guilty of.
It is cheering to see violent thugs get what’s coming to them, but it is
still a mistake to cheer at the sight of a few unpleasant people put behind
bars. Under the rule of law, you go to prison because you have broken the
law, not because some official has decided you might be a threat.
These four stories suggest where Russia is moving: toward a state with
increased discretionary power to intervene as it chooses to control prices
and direct resources, subsidize favored interests, monitor deviance, and
lock up or kill inconvenient people. By the standards of Russia’s Soviet
past, they definitely represent one step forward. This one step is hugely
important. Russia is no longer a totalitarian state of mass mobilization and
thought police. But compared with the “normal” society that Russians
deserve, and Russia’s friends wish for, it is two steps back again.
Reprinted from Mark Harrison’s blog (http://blogs.warwick.ac.uk/markharrison).
Published by the Yale-Hoover Series on Stalin, Stalinism,

and the Cold War is Guns and Rubles: The Defense
Industry in the Stalinist State, edited by Mark Harrison.
To order, call 800.405.1619 or visit http://yalepress.yale.
edu/yupbooks/order.asp.

CHINA
But We Insist
Not long ago, China abruptly withheld certain rare minerals from
world trade. That was just the beginning. Beware China’s shifting
“core interests.” By Jongryn Mo.
Beijing’s decision to temporarily cut off shipments of rare-earth minerals

to Japan last year—apparently as part of a territorial dispute—raised a lot
of concerns about the strategic implications of China’s growing economic
strength. And well it should. Up to now, Beijing has worked hard to sepa-
rate economics from politics on the world stage as part of a strategy to
minimize global unease with its rise. That it is now willing to use an eco-
nomic lever in a political matter suggests that this approach is changing in
ways that could cause trouble for the rest of the world and for China itself.
The minerals embargo against Japan became publicly known on Sep-
tember 23, when the Japanese government reported that Chinese customs
officials were stopping all shipments to Japan in the middle of a dispute
over the two countries’ territorial claims to the Senkaku islands. On Octo-
ber 18, the export ban was extended to the United States and Europe.
The news media speculated that China was reacting to the investigation
that the Obama administration had opened on October 15 into whether
China violated international trade rules with its restrictions on rare-earth
exports.
China resumed the shipments to the United States and Europe on
October 28 and to Japan on November 18. But the issue lingers: China
Jongryn Mo is a research fellow at the Hoover Institution and a professor of

international political economy at the Graduate School of International Studies,
Yonsei University.

mines 95 to 97 percent of the world’s supply of these resources and already
had sharply reduced its export quotas for them in 2009 and 2010. At
the time of the resumption, only three thousand to four thousand tons’
worth of quota remained, suggesting that shipments could stop again if
the remaining quotas were filled.
While China has manipulated trade flows for strategic aims in
the past, this episode contains troubling new elements. The clearest
previous example was the threat of economic sanctions against the
United States last year. In January 2010, the Chinese defense ministry
announced a series of retaliatory measures in protest of the Pentagon’s
$6 billion arms sale to Taiwan, including sanctions on U.S. companies
selling to Taiwan. The Chinese government argued at the time that
the U.S. decision “seriously endangers China’s national security and
harms China’s core interests.” In 2008, France was subject to a tour-
ism boycott and various unofficial boycotts of French stores in China
after President Nicolas Sarkozy met the Dalai Lama and demonstrators
disrupted the Olympic torch relay in Paris to protest China’s policies
in Tibet.
Yet those earlier economic measures fit into a discernible pattern. They
showed that China would, like any other great power, employ all pos-
sible means at its disposal, including economic sanctions, to protect core
interests. And it was well understood that Beijing views its core interests to
include sovereignty and territorial claims over Tibet, Taiwan, and its Xin-
jiang region in the west. China’s economic measures were relatively tar-
geted, and economic relations returned to normal after a ritual exchange
of threats and protests restored the status quo ante.
The rare-earth case is different in three critical ways.
First, the incident demonstrates that Beijing’s list of “core national
interests” is not fixed. Many experts would now agree that the South
China Sea has joined the core-interest list. After the Senkaku incident,
the international community is being asked to accept those islands as yet
another core interest.
Given this development, it is natural to ask which issue will be next.
It could be the Yellow Sea. Some recent articles in Chinese media suggest
that the Korean Peninsula could also become a “core interest”; if true, that

would pave the way for Chinese efforts to constrain American and South
Korean responses to provocations from Pyongyang.
Second, the rare-earth embargo was much more aggressive than any
economic sanctions China had employed to date. Starting in 1979, Bei-
jing would tolerate or encourage warming economic ties with countries
even if its political relations with them were chilly. Economic disputes
tended not to spill over into the political sphere.
In June 2000, for example, Korea and China exchanged import sanc-
tions in a dispute over their trade in garlic, but did not allow this dispute
to affect their political relations. And threats of trade sanctions in response
to political events were rare and predictable. This was a smart policy on
Beijing’s part, since it allowed many East Asian countries to deepen eco-
nomic ties despite lingering suspicions on the political side.
Beijing’s list of core national interests is still changing. Thus it is natural
to ask which issue will be next.
In contrast, there is no way anyone in Tokyo could have reasonably pre-

dicted that a territorial dispute over some islands would lead to a cutoff in
the supply of minerals that are crucial to Japan’s high-tech economy. Both
the cause of the sanctions and the scale of Beijing’s response are surprising.
Third, the rare-earth dispute is the first time Chinese sanctions have
generated a significant level of countermoves from major trading partners
to weaken China’s economic leverage over them. This suggests that Chi-
na’s new strategy could lead to trade wars in a way that earlier economic
responses never did.
Before now, trading partners were willing to take the temporary hit to
trade, since they knew the episode would quickly blow over. This time,
though, all major trading partners are seriously contemplating alternatives
to Chinese markets in rare-earth supplies. Japan, naturally, has been most
active in looking for alternative sources, signing agreements with Vietnam
and Australia to develop new mines or renewing production in existing
mines.
The effects of this shift in China’s attitude toward economic sanctions
may not be evident immediately. For now, the rare-earth case resembles

earlier incidents insofar as trade appears to be returning to normal only
a few months after the trouble started. But it should raise some serious
questions on both sides.
China’s new strategy could lead to trade wars in a way that earlier
economic responses never did.
Beijing must remember the benefits it has reaped from separating the
political from the economic aspects of its rise. If nothing else, counterparts
abroad will be more likely to treat Beijing with respect if they see Chinese
leaders behaving responsibly on economic policy. But foreign leaders also
should understand that if China does not change course, they may find
themselves facing unexpected economic challenges as disputes pop up in
the political sphere. The best way to preserve strategic room to maneuver
may be to look for alternatives to total economic reliance on China.
Reprinted by permission of the Wall Street Journal (Asia). © 2010 Dow Jones & Co. All rights reserved.
Available from the Hoover Press is Democracy and the

Korean Economy: Dynamic Relations, edited by Jongryn
Mo and Chung-In Moon. To order, call 800.935.2882 or
visit www.hooverpress.org.

C H I NA
China at Sea
Less flashy than stealth fighters or missiles, a versatile blue-water
navy is preparing to cast China’s influence upon the waters. By
David M. Slayton and Craig Hooper.
China’s first unilateral marine assault, when it comes, stands to be an

enormous geopolitical irritant that may push the United States and China
toward conflict. In Washington, however, where old-fashioned amphibi-
ous assault is out of favor, defense policy makers are ignoring the dangers
posed by a large, modern Chinese amphibious fleet. Those Chinese forces
are growing; in time they will support the deployment of marines well
beyond the narrow confines of the first island chain. Managing the wary
coexistence of two independent-minded blue-water amphibious forces,
Chinese and American, presents an underestimated strategic challenge.
After six decades as the globe’s uncontested amphibious leviathan,
America is not ready to accept that this unique and useful capability will
be shared. In strategic circles, Chinese marines and their potential value
as a geostrategic tool are almost entirely a non-issue. Strategists prefer to
focus on the Chinese pursuit of a training carrier, long-range ballistic “car-
rier killer” missiles, stealth aircraft, and other “sexier” weapons meant to
deny a force freedom to move and maneuver—the so-called anti-access/
area-denial weaponry.
To Washington defense elites, China’s low-tech amphibious platforms
are comfortably unthreatening. The first modern blue-water amphibious-
Commander David M. Slayton (U.S. Navy) is a national security affairs fellow
at the Hoover Institution. The assessments and opinions expressed here are his own
and do not necessarily represent the views of the U.S. Navy or the Department of
Defense. Craig Hooper is the Director of the New Pacific Institute.

assault vessel, the 998 Kunlun Shan, a Type 071 Yuzhao-class landing plat-
form dock (LPD), earned little more than a dismissive shrug as it entered
service in the People’s Liberation Army Navy (PLAN) in 2008. Little more
than a traditional battle taxi, the ship can support a reinforced battalion of
four hundred to eight hundred marines, some landing craft, and a brace of
midsized helicopters anywhere in global littorals. The Yuzhao class itself,
based on twenty-five-year-old technology, bears a strong resemblance to
the U.S. Navy’s twelve Whidbey Island–class amphibious transports.
To Washington’s defense elites, China’s low-tech amphibious platforms
are comfortably unthreatening.
With front-line amphibious ships receiving little attention, the PLAN’s

mundane force of second-string amphibious-assault ships has been almost
entirely ignored. It is perilous to forget that China’s twenty-seven good-
sized, medium-endurance Yuting II, Yuting I, or Yukan class (Type 072III,
Type 072II, and Type 072, respectively) LSTs (for landing ship, tank) can
support the projection of amphibious forces beyond the Taiwanese coast.
These austere platforms may not be up to Western standards of comfort
and reliability, but they are, just like their World War II–era predecessor,
the venerable American LST, perfectly capable of projecting amphibious
power into the Pacific.
Beijing’s investments in modestly militarized amphibious-assault sup-
port platforms have also been overlooked. China’s 25,000-ton hospital
ship, the Anwei-class (Type 920) Daishandao, or “Peace Ark,” coupled
with a similar-sized, newly launched troop ship, all offer simple, cheap
transport for hundreds of Chinese personnel. Policy makers fail to fully
comprehend that these platforms, supported by China’s large amphibi-
ous cargo vessels, the Danyao-class Fisheries Law Enforcement Command
supply ship, and two Dayun-class (Type 904) South Sea bastion supply
ships, bolstered by an enormous blue-water civilian fleet and a potent
naval militia, can perform well in many amphibious operations short of
intense combat.
To blue-water war-fighters, all eager to point out that nobody has
engaged in a contested landing since Okinawa or Inchon, China’s amphib-

ious platforms are insignificant. On the “hot” littoral battlefields of the
future, the PLAN’s big, slow amphibians have little value, and, in any
conventional conflict, those ships will disappear quickly, buried under a
hail of ordnance.
But outside of an all-out blue-water fight, the geopolitical utility
of China’s amphibious force deserves a far more rigorous analysis. If it
can avoid a major shooting war, Beijing’s arsenal of cheap, simple-tech

amphibious-assault ships enables the PLAN to unilaterally project power
well beyond Taiwan and the first island chain.
W H A T A R E T HEY UP TO?
To date, China has dispatched its new amphibious-assault platforms to
support popular multinational maritime security initiatives, gaining valu-
able expeditionary experience and international “soft power” credibility.

Last year, the first deployment of the Type 071 amphibious transport ves-
sel to anti-piracy duties off Somalia passed uneventfully. The subsequent
dispatch of China’s new hospital ship to Africa and Asia was a success,
projecting the PLAN well beyond China’s traditional sphere of influence.
Beijing’s arsenal of cheap, simple-tech amphibious-assault ships will let
the Chinese navy unilaterally project power well beyond Taiwan and the
first island chain.
Today, as a second Type 071 transport nears completion, local observ-

ers now expect China to build up to six Type 071 vessels along with six
flat-deck helicopter carriers. In all, China appears to be planning for a
good-sized set of first-generation blue-water amphibious-assault plat-
forms, aligning well with the growing amphibious forces of Japan, South
Korea, and other Pacific neighbors.
To the international community, the Chinese navy’s buildup of
amphibious force is a welcome sign that Beijing is preparing to accept
greater responsibilities in the global commons. As the chairman of the
Joint Chiefs of Staff, Admiral Mike Mullen, told Congress in early 2010,
“China can—and should—accept greater responsibility for and partner
more willingly to safeguard the global trade and investment infrastruc-
ture.” With increasingly capable—and reliable—amphibious vessels,
the PLAN will range farther afield, supporting multinational initiatives,
peacekeeping missions for the United Nations, and other soft-power pro-
jects.
But the operational incentives to support multinational cooperation
will wane in time, leaving China with the skill and confidence to indepen-
dently pursue its core national interests, however they are then defined.
Amphibious forces, unlike traditional combat-based hulls, are utilitar-
ian and meant to be used for a range of contingencies. As Beijing starts
demanding a strategic return on PLA naval investments, Chinese marines
will lead the way.
The first tentative PLAN efforts to project amphibious power beyond
the first island chain will come in the coral atolls and volcanic islands of
the South Pacific.

Well off the world’s geopolitical radar, the tiny independent countries
of Oceania make for a diplomatic, intelligence, and economic backwater.
To most harried U.S. national security policy makers, Melanesia, Micro-
nesia, and Polynesia are idyllic, peaceful places, well within the U.S. sphere
of influence. In fact, they are neither peaceful nor secure.
Many South Pacific islands are troubled, ill-governed, and facing enor-
mous economic and environmental challenges. And as native islanders
grapple with an uncertain future, many are turning to violence, attack-
ing newly arrived ethnic Chinese who have, in disproportionate numbers,
made their home in the deep Pacific. With those ethnic Chinese com-
munities under regular threat, few Asian navies have a more compelling
rationale to apply amphibious force in Oceania than China. But unilateral
projection of Chinese amphibious forces into the Pacific—no matter how
strongly justified—risks pushing the entire region into perpetual crisis.
P E R I L S I N O CEANIA
People of Chinese ethnicity have long dwelt in the Pacific. But as China
opened three decades ago, an estimated 200,000 Chinese migrants left the
mainland to settle in South Pacific islands. These lands were economically
moribund and had fragile governments. Over the intervening years, the
Chinese migrants thrived while resisting assimilation, establishing thriving,
culturally separate Chinatowns and ethnically exclusive business networks.
The first tentative Chinese efforts to project amphibious power will come
in the coral atolls and volcanic islands of the South Pacific.
On Tonga, “newly arrived” Chinese own almost 70 percent of small

businesses. In the Marshall Islands, twenty years after officials used semi-
legitimate passport sales as a means to jump-start immigration, native-
born Marshall Islanders now own fewer than half of the 146 small and
medium-sized businesses in the capital atoll of Majuro.
But as the old political and economic orders shift, disenfranchised
native islanders grow resentful, harboring suspicions of the relatively
recent Chinese arrivals. Given the right trigger, this simmering racial ten-
sion explodes.

Chinese marines in camouflage stand at attention as Admiral Gary Roughead, then-
commander of the U.S. Pacific Fleet, visits their base in Zhanjiang in 2006. American amphib-
ious transport ships had arrived for a joint search-and-rescue exercise with the Chinese
navy meant to promote understanding and cooperation.
In 2006, rioters in Honiara, the Solomon Islands’ capital, burned 97

percent of the local Chinatown. The same year, race riots in the Tongan
Island archipelago left eight dead and, in the capital city of Nuku’alofa,
much of the Chinese-dominated business district was destroyed. In Papua
New Guinea, anti-Chinese rioting, reportedly involving tens of thousands
of people, broke out in May 2009. At least four people were killed and
Chinese-owned businesses were pillaged throughout the country.
To date, China’s response to ethnic violence has been measured, limited
to official calls for the protection of Chinese citizens; some deft, low-
profile evacuations via chartered jet; and no-strings-attached aid to sup-

port rebuilding. But as these provocations continue, protests from China’s
diplomats and domestic press are growing louder.
The failure of the Pacific’s weakly governed island states to protect Chi-
nese business interests and citizens of Chinese ethnicity is becoming a
higher priority for the Chinese Foreign Ministry. After largely ignoring a
trickle of race-based provocations throughout the 1990s, Beijing is signal-
ing its impatience. In 2009, after a spasm of ethnic violence in Papua New
Guinea, a Chinese Foreign Ministry spokesman warned that “the Chinese
government attaches great importance to the safety of the Chinese citi-
zens” in that country.
In Papua New Guinea, anti-Chinese rioting, reportedly involving tens of
thousands of people, broke out in May 2009. At least four people were
killed and Chinese-owned businesses pillaged.
The islands are on a collision course. A stronger China will not read-
ily tolerate chronic anti-Chinese ethnic violence, and yet, in the Pacific
Basin, continued immigration by Chinese, resource depletion, sea-level
rise, and institutional corruption make ethnic violence a certainty.
© USMC/Lance Cpl. J. J. Harper
At some level, prestige is at stake. No country can long tolerate a

besieged embassy or news of beleaguered nationals dying at the hands
of a mob. Given the frequency and intensity of anti-Chinese violence,
the prospect of Chinese military operations in the deep Pacific is certain.
Frankly, Beijing has little to lose. Oceania, with few security forces capable
of mounting more than token resistance, makes an almost ideal region for
the PLAN to test its fledgling fleet of modern amphibians—and if a local
intervention can be converted into a long-term strategic gain for China,
so much the better.
G O I N G A S H O RE—AND STAYING?
Continued anti-Chinese violence in the Pacific Basin will land the United
States, France, and other Pacific allies in a political quandary. The modern
precedent is set: when U.S. or other Western nationals are threatened,
U.S. Marines appear off the coast, ready to help with security or evacua-
tions. And when nationals are in peril, America sometimes dispenses with

diplomatic niceties. The United States and the international community
can expect the same response from Beijing when Chinese citizens are
endangered.
This would not be a problem except that in the larger geopolitical tool-
box, a national military response to aid threatened nationals can easily
evolve beyond this muscular form of consular support. Rescuing a “threat-
ened national” is a time-honored means to justify advantageous “non-
combatant” operations, constabulary actions—even outright annexation.
Just as Germany in 1897 exploited an outbreak of anti-European violence
to seize Qingdao, establishing a base for Imperial Germany’s forward-
deployed Far East Squadron, China may consider a similar gambit to
obtain a forward base that, in part, threatens America’s redoubts through-
out the Pacific.
Again, China can cite American precedent, pointing out that in 1983
© USN/Mass Comm. 1st Class Tiffini M. Jones

American medical students on the Caribbean island of Grenada served as
diplomatic justification for Operation Urgent Fury, a forcible rollback of
Cuban military influence.
At present, nothing is in place to dissuade China from a territorial
gamble. For the PLA, the temptation to transform a temporary interven-
tion into a permanent annexation may prove overwhelming. Once ashore,
China can remain “on station” to bring in troops, anti-access/area-denial
weapons, and more. A Pacific lodgment offers Beijing a strategic equiva-
lent of Diego Garcia—a forward base offering air coverage, ship mainte-
nance, and logistical support.
Prior territorial gambles granted the PLA leadership enormous divi-
dends. Throughout the 1990s, as China landed forces and developed a
permanent presence on Mischief Reef and other South China Sea islets,
the international community lacked the nerve to expel a tiny Chinese
vanguard perched at the outermost limits of Beijing’s then-modest air and
naval forces. Aggressive Chinese diplomacy and steady, incremental rein-
forcement allowed the PLA to expand its initial footprint, establish “facts
on the ground,” and, in time, use the acquisitions as a basis to claim the
entire South China Sea.
Lacking credible deterrence, Beijing’s seizure and effective appropria-
tion of the Paracel Islands and certain Spratly sea features is part of a

Admiral Gary Roughead, chief of U.S. naval operations, salutes Chinese sailors aboard the
hospital ship Daishandao at Qingdao, headquarters of Beijing’s North Sea Fleet, in 2009. The
vessel completed its first overseas voyage last fall after providing medical care in Africa and
South Asia and treating Chinese navy personnel in the Gulf of Aden.
pattern the world must expect to emerge again. To date, the calibrated
passivity on the part of the United States, Australia, Japan, and other key
beneficiaries of Pacific stability seems to have only whetted the Chinese
appetite for added maritime Lebensraum.
T H E P A C I F I C NEEDS A NATO
The United States has little time left to engage like-minded Pacific allies
and forge a viable strategic plan for the region. Without dedicated,
high-level attention and continued multiparty efforts to update security
arrangements, China will eventually find an opening to gain a permanent
foothold somewhere in Oceania.
The first step for the United States is to deploy diplomats. The region
is overdue for a diplomatic surge. While the former Cold War battlefield
of France is host to eight State Department offices, Washington manages

to maintain only seven embassies in the underdeveloped countries of the
south and central Pacific. American diplomats must move beyond their
tiny outposts in Fiji, the Republic of the Marshall Islands, the Federated
States of Micronesia, Papua New Guinea, the Republic of Palau, Samoa,
and Timor-Leste and develop permanent embassies in every island coun-
try in the Pacific.
Only a permanent diplomatic presence can establish firm partnerships
and allow for a more informed picture of what is happening in the islands.
If a permanent presence is impossible, then the Navy’s new Joint High
Speed Vessel or the Coast Guard’s National Security Cutters (or the future
Offshore Patrol Vessels) can be equipped with diplomatic “mission mod-
ules” and serve as mobile gap-fillers in isolated, representation-starved
islets.
Rescuing a “threatened national” is a time-honored means to justify
advantageous “non-combatant” operations, constabulary actions—even
outright annexation.
To promote stability, State Department diplomats need the resources

to grant economic, security, and law-enforcement/anti-corruption aid.
In an effort to bolster long-term viability of Pacific nations, services to
help the region safeguard its enormous exclusive economic zones deserve
more funding. The U.S. Coast Guard’s innovative “Fight for Fish” ini-
tiative merits expansion to improve regional surveillance and indigenous
fisheries enforcement. More small, robust patrol craft, similar to those
produced under Australia’s innovative Pacific Patrol Boat Program, along
with operational support and training funds, can help the Pacific’s small-
est and weakest nations march towards economic self-sufficiency, reduc-
ing the chance of ethnic upheaval.
Within the larger regional security framework, the United States and
other Pacific players have a strategic obligation to build a collaborative,
all-hazards crisis-response mechanism so that in the event of civic dislo-
cation, disaster, or ethnic violence, multinational forces can be in place
quickly enough to deter a unilateral intervention, annexation, or estab-
lishment of a permanent presence.

China’s navy can and will be a helpful contributor to the stability of
the maritime commons. Moreover, any country has a right to protect its
citizens. But the Chinese military’s growing frustration with the long-
established balance of power in the Pacific, coupled with Beijing’s habit
of embarking upon bold, geopolitically savvy land grabs, cannot be easily
dismissed.
With that threat in mind, it is critical to maintain credible surveil-
lance and forcible-entry resources in the region. The presence of a basic
force that could “kick in the door” under contested conditions and expel
an unwanted occupation force would be useful in dampening the PLA’s
appetite for taking risks.
T H E A M P H I B IOUS ERA IS FAR FROM OVER

China is not alone in its naval ambitions. Big amphibious-warfare plat-
forms, as a valued prerequisite for big-navy status, are proliferating all
over the world, offering relatively low-cost sea-basing options to emerging
naval forces.
Russia has finalized plans to buy four giant $900 million Mistral-class
assault ships from France, while Canada is mulling over a purchase of
two. China, almost finished with a second new amphibious-warfare vessel,
is in the early stages of a rumored building program of sixteen. Austra-
lia is planning a pair of massive helicopter carriers. South Korea, Japan,
and Indonesia are among the other nations building amphibious craft, all
capable of transporting and landing hundreds of fully equipped troops on
hostile shores.
The worldwide race to deploy amphibious-assault vessels reflects
the high-profile successes the United States has enjoyed in leveraging
amphibious forces for theater engagement, security cooperation, and cri-
sis response. But America’s success may have been a strategic anomaly, the
benefit of uncontested naval supremacy and a unified sense of strategic
aims within the international community.
Thirty years of relatively harmonious amphibious operations with like-
minded partners has led America to forget that amphibious-assault plat-
forms can be just as useful in sowing disorder as they are in imposing
stability. And with an ever-increasing number of nations poised to pursue

core national interests overseas, the long-unquestioned right of interven-
tion from the sea is set to grow into a far more complex, far more conten-
tious geopolitical challenge.
To curb China’s enthusiasm for its new amphibious capabilities, Amer-
ica needs to spend less time fretting about its high-tech military baubles
and get back to the basics of building comprehensive regional security
plans. And a critical first step is to recognize the potential impact of Bei-
jing’s low-tech amphibious ambitions.
Available from the Hoover Press is The Struggle across

the Taiwan Strait: The Divided China Problem, by Ramon
H. Myers and Jialin Zhang. To order, call 800.935.2882
or visit www.hooverpress.org.

INTERVIEW
“Time Is Not Our

Friend”
Five things Hoover fellow Charles Blahous wants everyone to know
about Social Security reform—before it’s too late. By Ryan Streeter.
Ryan Streeter, ConservativeHome USA: What does every voter in

America need to understand about the Social Security shortfall and why it
has gotten to this point?
Charles Blahous: If there is one thing every voter needs to better
understand, particularly every taxpayer—and even more particularly,
every fiscally conservative taxpayer—it’s that further delay in repairing
Social Security inevitably means bigger tax increases down the line. This
is partially because of demographics and partially because of the wage-
indexed benefit formula, but it’s also because we have a pretty firm bipar-
tisan consensus—from the most conservative members of Congress to the
most liberal—not to cut benefits for those already receiving them.
This means that with each passing year, we have millions of additional
baby boomers on the rolls whose benefits are politically inviolate. It’s then
too late to pre-fund those benefits, and they’re not open to renegotiation;
they can only be financed by raising tax revenue. The deck is thus really
stacked against those who worry about the growth of taxpayer burdens.
It’s not so simple as saying, “I don’t like this particular Social Security
deal—let’s come back in four or five years and strike a better one.” Four
Charles Blahous is a research fellow at the Hoover Institution and one of two
public trustees for the Social Security and Medicare programs. Ryan Streeter is
editor of ConservativeHome USA.

or five years later, we’re on the hook for much bigger tax burdens. Time is
not our friend here.
Now, that’s the main thing. But there are other issues that need to be
better understood. One is that the crafters of the 1983 Social Security
reforms never intended to build up a big trust fund, nor did they believe
that doing so would effectively fund future benefits; we’ve had a failure of
national memory on this point. Also, if we act now, future benefits don’t
need to decline in real terms. But again, that’s only if we act soon. We’d
benefit from broader understanding of all these points.
Streeter: You favor reforming Social Security to fix the shortfall by mov-
ing toward a defined-contribution approach. Can you explain what this
would mean for a middle-income family of four, where the parents are
between forty and forty-five years old?
“High-income Americans should prepare themselves to either depend less
on Social Security or contribute more to it.”
Blahous: I should clarify. In my ideal world, I would favor a “partial”

defined-contribution approach. Sticking wholly with pay-as-you-go
defined-benefit financing is the path of least resistance in the short term,
but the hardest on younger generations. Alternatively, immediate transi-
tion to a fully funded system would be great for future generations, but
murder on the transition generation, because they would have to pre-fund
all their own future benefits while also paying pretty much the entirety of
older generations’ benefits.
A partial defined-contribution system is the fairest middle ground
between these extremes. The parents who are forty to forty-five would
put aside a little income in a savings account so that their benefits
aren’t paid entirely by taxing the next generation. They couldn’t spend
that money, nor could the government spend it for them on additional
services.
Meanwhile, the growth of their taxpayer-financed benefits would be
scaled back. The kids would benefit enormously because they would be
excused from some of the mounting tax burdens under pay-go defined-
benefit financing. In sum, partial pre-funding means that today’s working

generations put aside a little savings in order to head off the mounting tax
burdens now facing their kids.
Streeter: When it comes to fixing Social Security, how would you weigh
the importance of raising the retirement age, instituting private accounts,
and constraining Social Security spending growth?
Blahous: Constraining Social Security spending growth is the highest
priority from the standpoint of program finances, whether it’s done by
changing the benefit formula or adjusting the retirement age. The math
is pretty simple: taxpayer costs go up because we have an aging society in
which people receive benefits for a lot longer, and because we are paying
them higher real benefits each year, even in per-capita terms. You have to
deal with both if you want to avoid a large rise in taxpayer burdens.
Of these items, I’d (perhaps surprisingly) rank the accounts last. They’re
important for arresting the decline in the money’s worth treatment of
younger generations, but all they can do is to arrest that decline—no mat-
ter what, younger generations still will get lower returns than earlier ones,
because of the enormous cost to them of financing trillions in unfunded
benefits over the next few decades. We can only limit the overall negative
hit if we contain the growth of costs, whether that’s done in the benefit
formula or through the retirement age.
“Four or five years later, we’re on the hook for much bigger tax burdens.”
Streeter: Let’s say Congress enacted the perfect Social Security reform
bill tomorrow. Which part of the American population would be most
negatively affected, and what can they do to prepare themselves?
Blahous: No question on this one: high-income Americans. Every sin-
gle plan will hit them disproportionately. Plans from the right do it by
constraining the growth of their benefits; plans from the left would raise
their taxes. But both sides of the aisle are trying to protect people on
the low-income end, which means people on the high-income end will
pay the price of getting to solvency. So high-income Americans should
prepare themselves to either depend less on Social Security or contribute
more to it.
They can also provide a signal to legislators indicating what they really
care about. The left believes that high-income Americans will withdraw

their political support if their benefit growth is constrained; the right
believes that high-income Americans are more worried about their tax
burdens. High-income Americans could actually help legislators resolve
this argument if they clearly conveyed to their own congressional offices
whether they would be more perturbed by higher taxes or slower benefit
growth.
“Partial pre-funding means that today’s working generations put aside
a little savings in order to head off the mounting tax burdens now facing
their kids.”
Streeter: If you were a newly elected member of Congress and you had
promised voters you would do something about America’s entitlement
crisis, what would you do upon arriving in your office?
Blahous: First, contain any immediate damage. Any spending increases
that haven’t gone into effect (some of which were recently legislated in the
health care bill) need to be stopped before there is a dependency on them.
It’s very hard to slow down spending once people already depend on it.
The logical place to start is with spending that hasn’t become entrenched.
Second, signal a willingness to work on a Social Security deal that con-
tains cost growth, possibly including a close look at the fiscal commission’s
recommendations.
Third, reassess the federal government’s myriad actions that fuel health
care cost inflation, including everything from government-subsidized
insurance to ages of eligibility to tax preferences for compensation in the
form of health benefits.
Reprinted by permission of the blog ConservativeHome USA (www.conservativehome.com). All rights
reserved.
New from the Hoover Press is Social Security: The

Unfinished Work, by Charles Blahous. To order, call

INTERVIEW
The Audacity of
Gimmicks
Hoover fellow Richard A. Epstein knew Barack Obama when he
was teaching at the University of Chicago. Obama has the right
temperament for intellectual poker, Epstein believes, but is stuck
with a bad hand. By Nick Gillespie.
Nick Gillespie, Reason : We’re two years into Obama’s presidency, and
he’s managed so far to post an even worse record than George W. Bush.
The economy has lost 3.3 million jobs, consumer confidence is at half of
its historical average, unemployment is over 9 percent and has been that
way for well over a year. To what extent is Obama responsible for this?
Richard Epstein: Well, I think certainly he added another nail to the
coffin. At least the early George Bush and Obama have a lot in common.
The difference between them, which is why Obama is the more danger-
ous man ultimately, is he has very little by way of a skill set to understand
the kinds of complex problems that he wants to address, but he has this
unbounded confidence in himself.
Gillespie: He is the perfect Chicago faculty member.
Epstein: No, he wasn’t on the faculty. He was actually a very bad Chicago
faculty member in this sense: to the extent that he was an adjunct and
Richard A. Epstein is the Peter and Kirsten Bedford Senior Fellow at the
Hoover Institution and a member of Hoover’s John and Jean De Nault Task Force
on Property Rights, Freedom, and Prosperity. He is the Laurence A. Tisch Professor
of Law at New York University Law School and a senior lecturer at the University
of Chicago. Nick Gillespie is editor in chief of Reason.tv and Reason.com.

we’d always hoped that he would participate in the general intellectual dis-
course, but he was always so busy with collateral adventures that he essen-
tially kept to himself. And the problem when you keep to yourself is you
don’t get to hear strong ideas articulated by people who disagree with you.
“Low, easy, and reliable taxation is what commits people to long-term
investments. If you give a short-term cut with a gimmick, then people
worry: what about next year?
Gillespie: Did you encounter him at all?

Epstein: Sure.
Gillespie: What kinds of interactions did you have?
Epstein: Usually in the breezeway, because he was always running and
gunning for some other kinds of things. I also knew him because my next-
door neighbor is one of his best friends, probably his best friend—Marty
Nesbitt—and I would see him there or speak about him. He was, I think
in many kinds of cases, always a tremendously engaging and charming
individual, but he is not the kind of guy who likes to be pushed. So what
he does in effect, he has a way of listening to you to make it appear as
though you are the only person in the world who matters. And then when
it’s all done, you say now what does he believe?
He is amazingly good at playing sort of intellectual poker. But that’s
actually a disadvantage, because if you don’t put your ideas out there to
be shot down, you are never going to figure out what kind of revision you
want. What is characteristic of his temperament of mind right now is that
he is basically set in concrete. If he thought a stimulus would work in
2009, he thinks it today.
Gillespie: Let’s talk about the stimulus. Critics say it’s like taking one
bucket of water from an end of the pool or a cesspool and dumping it
in the other—it doesn’t get you anywhere. Are there any surprises with
stimulus spending?
Epstein: No. I mean, I think only the following—when you run these
stimulus programs you tend to use models of consumer behavior that
work in good times, but there is no guarantee that they will work in bad
times. So the idea was that if you put more money into the pockets of

middle- and lower-income-class people, you get higher levels of consump-

tion. It hasn’t worked out that way. Why should it work out that way?
These people have consumer debts, they are behind in their mortgages,
and they want to save for college. They will change their strategies as they
see the world of opportunity shrink, so they will save more and spend less.
Gillespie: Would tax cuts have stimulated the economy?
Epstein: Permanent tax cuts would have that effect, and a flattening of
the tax rates. The old Adam Smith adage is correct: low, easy, and reliable
taxation is what commits people to long-term investments. If you give a
short-term cut with a gimmick, then people are going to worry—what
about next year?
Gillespie: What about people like David Stockman, who was Ronald
Reagan’s budget director, who says that given the huge amounts of federal
debt and deficit, extending the Bush tax rates forward at any level is a
problem? Does that make sense?
Epstein: I think the problem about the political economy of David
Stockman is he doesn’t realize that increased revenues don’t go to discharge

debts, they go to create new debts. So I have no confidence in that pro-
posal. What you need to do is to take a pickax or a hammer or some very
large tool and cut out huge numbers of government programs.
Gillespie: What is the first government program that you’d cut?
Epstein: It’s difficult to know, but agricultural subsidies and import bar-
riers are certainly a very obvious place in which to start. Knock out some-
thing like ethanol. Certainly you want massive liberalization with respect
to labor markets. You don’t want to have strong civil rights laws, which
only gum things up. You want to get rid of the Family Medical Leave Act
and so forth. You want to knock out the minimum wage—
“What you need to do is to take a pickax or hammer or some very large
tool and cut out huge numbers of government programs.”
Gillespie: What about entitlements?

Epstein: Medicare is a very hard thing to deal with because you create all
these expectations for people who are in midstream. What I would like to
see done under that is to increase the co-pays and to try to reduce the time
that you are in the program by raising the eligibility under these things,
and the same thing with Social Security.
Gillespie: Should there be means testing?
Epstein: Then you increase the level of income redistribution that is
going to take place in society. You get more high marginal taxes on the
most productive individuals and what you gain in the savings under the
Medicare program, you are likely to lose in overall terms of productivity.
I’m just basically a strong flat-tax guy, because I don’t think an economy
runs as well when you have all these peaks and valleys inside the operation.
You just have to cut back.
Gillespie: What aspects of President Obama’s health care bill do you
think will be most detrimental to patients?
Epstein: Well, I think the whole thing in many cases will be so, because of
the constant intrusion of third-party providers—i.e., the government—in
the physician/patient relationship. The one area that is causing the great-
est short-term problem is to try to figure out what you do with these
medical loss ratios with respect to private plans. Because what happened is

the Democrats in Congress, with some Republican acquiescence, said we
know that the reason why things are too expensive is that, by God, there is
too much waste in the system. Competition doesn’t control costs. So they
mandate price controls and it’s going to be just like rent control: the only
way you can meet the price control requirements is in effect to reduce the
quality of the services.
Gillespie: What’s the outlook for the legal challenge to ObamaCare?
Epstein: It’s actually better than one had thought. There are two kinds
of challenges that could be made; one of those is facial challenge on the
medical mandate. And when the case was brought—
Gillespie: That’s the coverage mandate that everybody has to enroll?
Epstein: Two thousand dollars if you don’t get these plans. Randy Barnett,
for example, who helped organize this, did a very clever job of advocacy
for two reasons. One, he dreamed up an argument which didn’t threaten
Social Security and Medicare with constitutional extinction; and two, he
gave a relatively clear line, so now it’s the government that has to face
the slippery-slope problem. If you could force us to buy [medical insur-
ance] . . . why can’t you force us to brush our teeth three times a day, have
certain kinds of balanced diets, do exercise? And it turns out that you get
yourself into a totalitarian state. So it was a peculiar mixture of libertarian
sentiments, with jurisdictional issues. It was very well done.
“I am just basically a strong flat tax guy, because I don’t think an
economy runs as well when you have all these peaks and valleys inside
the operation.”
Gillespie: What do you think the odds are on the legal challenge work-
ing to invalidate ObamaCare?
Epstein: Twenty percent, I would say, 25, but this is up from 5–10 per-
cent. But I do think that as the politics become more controversial and the
unpopularity of the plan becomes more evident, the willingness of judges
to entertain novel arguments will increase and therefore the odds will start
to move up.
Gillespie: Let’s talk about financial reform. In July, Obama signed the
Dodd-Frank Financial Reform Act. Will this bill make good on claims

that it will simplify consumer credit markets and inoculate us from bank
bailouts?
Epstein: Let me start with the consumer credit markets. I am now one
of the lawyers working for a bank called TCF, which is the old Twin City
Federal Bank, and we filed suit in South Dakota trying to declare this stat-
ute unconstitutional insofar as the Durban Amendment specifies in very
precise detail the amount of money that is collected that the retailer has to
pay to Visa for processing the stuff, its own bank for processing the thing,
and most importantly for the banks that issue the debit cards to maintain
their very extensive network. And essentially what happens in our case, to
give you the numbers, is right now on a typical $35 debit card transac-
tion, TCF Bank gets 47 cents. When you are done looking at the numbers
under this particular statute, that number is down to 7 cents.
“One of the terrible things in the Obama administration is they will not
‘let nature take its course’ by constantly trying to fend off foreclosures,
which means that the market never clears.”
The theory of the statute is, well, just raise your rates to your custom-
ers, as if you could do that. But unfortunately, all banks with under $10
billion in assets are exempt from the statute. We know what the market
looks like—if you raise your rates, you will lose your customers in droves.
So we are basically between a rock and a hard place, and the challenge is to
take the price restrictions on the one hand and the alternatives of unregu-
lated firms on the other, and you have a confiscatory/regulatory scheme.
We filed that case and I actually think it’s a pretty solid case. It’s unlike
the health care situation. These costs are very carefully analyzed and so
forth. The program is certainly going to create absolute chaos inside the
market and everybody knows that, and I think the constitutional chal-
lenges will win. I don’t think that constitutional challenges are likely to
win to the two-tier stuff that you see with respect to the rest of Dodd-
Frank—big banks that are too big to fail going in one area.
Gillespie: It definitely won’t inoculate us from—
Epstein: Nothing will inoculate us. These banks are insanely large. To
just give you a perspective, TCF is a pretty big bank—they have $18 bil-

lion in assets, a real company. Chase has a hundred times that size, it’s $1.8
trillion or something. The left hand does not know what the right hand
is doing. And the third feature is—Senator Dodd came here and spoke at
NYU and somebody asked him: What about Fannie and Freddie? He said,
“Oh, we couldn’t tackle it at this point.” Well, that is obviously the biggest
source of problems that we have, and if that continues—
Gillespie: How is that the biggest source?
“These guys impose these regulations like they are candy going down the
throat of a two-year-old.”
Epstein: Because these people are completely irresponsible in the way in

which they issue and guarantee loans. So what they do is they put more
crapola into the market and you get cheap mortgages and what you do
is you bid up the price of assets and then you wait for the crash to come
and you will get more default. In fact, one of the terrible things in the
Obama administration is they will not “let nature take its course” by con-
stantly trying to fend off foreclosures, which means that the market never
clears, these properties are held in overhang, and people who could actu-
ally afford to buy them at market prices are excluded from the market. On
this issue, they get themselves a straight “F.”
Gillespie: What are policies that Congress and the president could have
gotten behind that would prevent massive bank bailouts?
Epstein: For one thing, make it very clear that we don’t guarantee you in
the event of loss and that if counterparties want protection, they better get
it either from their trading partners or a third party. Because the tougher
you are at the beginning, the less likely it is that you are going to have these
kinds of situations and you won’t get the mad scramble where an AIG bail-
out essentially works for the benefit of Goldman Sachs, who is by far the
shrewdest player in all of this stuff. The more solid market depends upon
having large numbers of intermediate-sized players. Something like BB&T
Bank is about $150 billion worth of assets—that’s plenty big to do virtually
any transaction that you need—but it’s not going to create systemic risk. The
real systemic risk that you create is having five major banks, which amongst
them have $10 trillion worth of assets floating around in their coffers.

And you asked what I would do more generally. The basic mechanism
is mutual gains through trade. Every regulation basically has to be justi-
fied because the moment it limits gains from trade, you have to explain
why it’s needed. And these guys that impose these regulations like they
are candy going down the throat of a two-year-old: it just tastes sweet, we
better do more of it.
Gillespie: In the large sense of shifting from a rule by kind of an aris-
tocratic fiat or monarchical fiat to a government of rules—that’s an old
shift from a kind of feudal mentality to a republican one (small-R repub-
lican)—what do you do to spread that and make that more persuasive?
Epstein: You simply—and I think that’s the message that you get out
of this election—you show people that all the ingenuity of gimmicks
fails. You gave the figures at the beginning. We have more debt, more
unemployment, and less happiness in this country now, because hope and
change turns out to be discord and confusion. And there’s no way that you
can stop that. You cannot stop the blunders of one government program
by putting another one on top of it. That’s what I learned in the Yale Law
School. You don’t like what the minimum wage does, you create a welfare
program. You don’t like what a welfare program does, you just get a back-
to-work program. If you just got rid of the minimum wage, you would
get rid of three programs and free up lots of economies. What people have
to understand is that Mies van der Rohe was essentially a political theorist
when he said, “less is more.” You get more production out of fewer regula-
tions. And one of the great tragedies is that we’ve spent all this time on
monetary and fiscal policy, where regulatory policy, taken in the round
and taking particular cases, is in fact every bit as important.
Gillespie: A liberal friend of mine asked me to ask you: how do you sleep
at night?
Epstein: Let me put it this way: I don’t stay awake because of a guilty
conscience.
Gillespie: Well, thank you, Richard Epstein.
Reprinted by permission of Reason (www.reason.com). © 2010 Reason Magazine. All rights reserved.

INTERVIEW
A Most Ingenious
Trick
Matt Ridley, author of The Rational Optimist, insists that we humans
must face the truth about ourselves—no matter how good it might
be. An interview with Peter Robinson.
Peter Robinson: A former science and technology editor for the Econo-
mist magazine, Matt Ridley is a journalist and a best-selling author whose
many books include Genome: The Autobiography of a Species in 23 Chapters.
His most recent book is The Rational Optimist: How Prosperity Evolves.
Matt Ridley, thank you for joining us.
Matt Ridley: Thank you for having me on the show, Peter.
Robinson: I’m going to quote over and over again from The Rational
Optimist:
“Human progress has been a good thing and the world is as good a place
to live as it has ever been for the average human being. Richer, healthier,
and kinder, too.” So this is where the optimism comes in.
Ridley: That’s right.
Robinson: The book has been out for several months now. Have you had
any occasion to retreat from that assertion?
Ridley: Well, it contains the claim that the amount of oil spilled in the
ocean is down 90 percent since the 1970s. There was a big oil spill almost
immediately after the book came out . . . but you know, the trend is still
Peter Robinson is the editor of the Hoover Digest, the host of Uncommon
Knowledge, and a research fellow at the Hoover Institution. Matt Ridley is the
author of The Rational Optimist: How Prosperity Evolves (HarperCollins, 2010).

there. On average, we’re spilling less oil in the ocean. The numbers really
astound me, and no, I haven’t had to retreat from any of it because I keep
getting more examples.
Just last week, for example, Steven Pinker was telling me that the 2000s
look like the decade with the lowest number of war deaths for 150 years,
at least. Now, we find that surprising in the West because we’ve been
involved in some wars in the 2000s and we weren’t before that. But glob-
ally, the number of people killed in wars is down, per capita income is
trebled in my lifetime, child mortality is down by two-thirds in my life-
time. Lifespan is up by one-third. We’re adding lifespan globally. . . . It’s
an extraordinary achievement. Of course, there are things going in the
wrong direction.
Robinson: Who is in your mind as someone whom you must rebut?
What are you pushing against?
Ridley: When I was a student in the 1970s, I was told that the future of
the world was bleak. The grownups told me that. They told me the popu-
lation explosion was unstoppable, there was a cancer epidemic caused by
chemicals in the environment that was going to kill us off. The desert was
advancing. The oil was going to run out. I don’t remember anyone tell-
ing me, “Actually, you know, we could be on the verge of three decades of
faster economic growth, more reduction in poverty, more reduction in ill
health and hunger, and more democratization than in any period in his-
tory.” And yet that’s what actually happened. So I’m kind of writing this
to a version of myself thirty years ago, saying, “Here’s the book I wish I’d
been able to read in the 1970s.” Paul Ehrlich, for example, was specifically
predicting that lifespan in the West was going to drop to forty-two years
by the end of the twentieth century. Instead, it continues to rise. And you
know there was no great cancer epidemic.
Robinson: Let’s delve down a little more deeply into the evidence. That
summary argument of yours that the average human being is “richer,
healthier, and kinder.” Let’s take each of those in turn.
Ridley: Healthier—lifespan, but also the retreat, for example, of water-
borne diseases, which have almost entirely vanished as a cause of death in
the United States. Malaria has seen a huge retreat—it hasn’t retreated far
enough, it’s still killing a million people a year, but it used to kill people in

Russia, America, and all over Asia as well. Heart disease, declining pretty
steadily. Cancer, if you correct for age, is not going up. In fact, it’s going
down slightly.
“Globally, the number of people killed in wars is down, per capita income
is trebled in my lifetime, child mortality is down by two-thirds in my
lifetime.”
People think, “Well, OK, we’ve expanded lifespan, but only at the
expense of a lot of painful and miserable years at the end of life.” Actually,
that’s not true. Go and talk to most people in their eighties; they’re hav-
ing a great time. The evidence is that we’re compressing morbidity. We’re
spending a longer time living and a shorter time dying.
Robinson: That’s healthier. What about richer?
Ridley: Per capita income is the easiest measure. In real terms, it’s trebled
for the average citizen of the world since the late 1950s. The enrichment
of China is really the most extraordinary demographic and economic
phenomenon; India as well. Because not only is the world getting more
prosperous, there are more people joining the middle class and the world
is getting less unequal. Inequality is probably increasing in China because
some people are getting very rich, and it may be increasing in this country,
but it’s decreasing globally because the Chinese are getting richer faster
than the Americans. The poor people are getting richer faster than the
rich people.
Robinson: The third of these attributes: life is kinder. That’s harder to
argue, isn’t it?
Ridley: Well, look at charitable giving. It’s rising faster than GDP in
countries like the United States and Britain. Look at homicide: your
chances of being a victim of homicide were about ten times what they
are now in Europe in the Middle Ages. It’s been declining steadily ever
since. Look at the kinds of things that we don’t tolerate nowadays that
we thought routine before: slavery, racial prejudice, gender prejudice, you
know. We’re much less tolerant of unkindness now, and that’s a measure of
how much nicer we are. On the whole, there’s an awful lot wrong with life,
but it’s not that unkind compared with what it was in the past.

Robinson: I have one version or another of this question in virtually
every segment in my notes here: what is everybody complaining about?
Here in this country we hear over and over again about the plight of the
poor. This is kind of a trope on the evening news and in the newspapers.
In the New York Times there’s something about the poor on the front page
every single day, particularly during the recession. And you write in The
Rational Optimist: “Today, of Americans officially designated as poor, 99
percent have electricity, running water, flushing toilets, and a refrigerator.
Ninety-five percent have a television, 88 percent a telephone, 71 percent a
car, and 70 percent air conditioning.” So what is going on that we seem to
be stuck with these political tropes that are decades out of date?
“I’m kind of writing this to a version of myself thirty years ago, saying,
‘Here’s the book I wish I’d been able to read in the 1970s.’ ”
Ridley: Partly we’re interested in relative wealth. We adjust what we mean

by “poor”; we say you’re now considered poor even if you’ve got a car or
something else that would have been ridiculous in the early years of the
twentieth century. And partly, as I say, we’re getting kinder, and so that
means we want to show our kindness. One of the ways of showing our
kindness is to show concern about the fact that some people are not as well
off as others. So it doesn’t reflect badly that we talk about this, but it just
means that we keep forgetting to notice the improvement.
Why does that matter? Because in order to be ambitious to make
improvements in the future, you have to understand that it’s possible.
You have to look around, look at the recent past, and say, “My goodness,
we’ve dragged a lot of people up the income scale in the past thirty or forty
years. We’re not doing badly.” That means let’s do it again, let’s drag them
even further up the income scale.
Robinson: Now I’ll hit you with a criticism. Steven Malanga, in a review
that he published in City Journal, wrote, “Consider one glaring omission,
which we might call the twentieth-century problem—or more precisely,
the problem of the years 1914 to roughly 1989. . . . Two world wars that
killed some seventy million people; the rise of Hitler, Stalin, Mussolini,
and Japanese militarism; the Holocaust; and the Cold War, most of it

waged under the threat of nuclear annihilation. What is the theory of
progress that explains how the very people who were prospering from the
Industrial Revolution and the rise of democracy managed, starting in the
early twentieth century, to plunge themselves into destructive confronta-
tions that undercut much of what they’d spent a century achieving?” That
is a problem.
Ridley: It is a good question. It’s happened before and it’ll happen again.
That is to say, the prosperity produced by trade and commerce will pro-
duce regimes that then use that prosperity to wage war either on their
own subjects or on somebody else’s subjects. I regard it as a form of para-
sitism—a flea on the back of the thing that’s doing good. In other words,
human beings have always had two ways of prospering: one is to engage
in trade—to grow things or make things and swap them—and the other
is to simply steal, to plunder.
“Look at the kinds of things that we don’t tolerate nowadays that we
thought routine before: slavery, racial prejudice, gender prejudice.”
Robinson: Right.
Ridley: And you can do that by either becoming a king or becoming a
thief or some such version—even a bureaucrat, actually.
Robinson: I’m pretty willing to argue that your book suggests a par-
ticular, classically liberal point of view. Adam Smith was the first rational
optimist of whom I’m aware. You’re arguing, “Look, if we can have free
markets and limited government, we can get this cornucopia of goods and
services, of virtues being developed, but we must resist tyrannical govern-
ment, we must resist a kind of throwback to the old tribe, the Volk of Hit-
ler.” So this is pretty much an argument for limited government. You are
a tea party man, you just haven’t been told that yet. What do you reckon?
Ridley: To some extent, yes, I think there is an old-fashioned human
nature in us that wants to stab people in the back and plunder. We find
various ways of keeping that under control. And if you look at the story of
the twentieth century, do you end up concluding that there was too much
government or too little government? After a century with Mao and Hitler
and Stalin and Pol Pot and Mugabe and Mobutu and so on, it’s hard to

think of countries that had too little government in the twentieth century,
whereas there are far more examples of countries that had too much. So
yes, I do think that too much government is a much bigger risk than a lot
of the intelligentsia are prepared to admit.
Robinson: Two quotations, Matt. The first comes from former vice
president Al Gore. I’ll take a deep breath so I can deliver this as well as
he did: “Two thousand scientists in a hundred countries engaged in the
most elaborate, well-organized scientific collaboration in the history of
humankind, producing a consensus that we will face a string of terrible
catastrophes unless we deal with global warming.” The second quotation
comes from your own fine self in The Rational Optimist: “The extreme
climate outcomes are so unlikely that they do not dent my optimism one
jot.” Matt Ridley, how dare you?
Ridley: I think this is like previous scares we’ve heard. Yes, it’s real, there’s
no doubt that carbon dioxide emissions are changing the climate. But if
you go into the science properly and examine this in all the details and
you take what those two thousand scientists are writing to each other and
not what people are saying that they’re saying, then there’s no evidence
that this is either accelerating at an unprecedented rate or that it’s going
to reach a very dramatic level of warmth. The evidence to me is very per-
suasive that we have a high probability of a small warming and a low
probability of a big warming. Actually, that’s what those two thousand
scientists say. That’s what the IPCC says. It just says we need to plan for
that small probability—and that’s where the argument is.
“Human beings have always had two ways of prospering: one is to
engage in trade—to grow things or make things and swap them—and the
other is to simply steal, to plunder.”
I perfectly accept that we need to have an argument about how small

a possibility we need to take drastic measures for. But at the moment we
are rushing into measures that are doing real ecological harm and real eco-
nomic harm. Biofuels would be a classic example; they have minimal ben-
efits, even if we are facing one of these small probabilities of a catastrophic
event. We’ve got to be very much more careful to look at the costs and the

benefits. Otherwise we might find in fifty years’ time, as I put it, that we
have put a tourniquet around our neck to prevent a nosebleed.
Robinson: Around the neck of Western Europe and the United States.
The Chinese will not put up with this for a moment.
Ridley: That’s another point. In practical, political terms, the idea of tell-
ing two billion Asians that they can’t use the route to prosperity that we
used is unrealistic.
Robinson: I’d like to return to Steven Malanga, who says you mostly
ignore “the substantial problems that economists and demographers see
in birthrates that have fallen rapidly below replacement level, including
problems that are before us right now in countries like Japan and Italy—
notably, a rapidly aging population, which creates an increasing depen-
dence of pensioners on a shrinking labor force; declining national pro-
ductivity,” and so forth. So Russia is dying, Europe is hollowing itself out,
China will grow old before it grows rich. To which Matt Ridley replies—
Ridley: I reply that at least we’ve got the argument away from panicking
about population growth.
“If you look at the story of the twentieth century, do you end
up concluding that there was too much government or too little
government?”
Ten, twenty years ago, and still in a lot of places, people go on about
exponential, uncontrolled population growth. It ain’t happening. It’s slow-
ing down. Population growth globally has gone from 2 percent to 1 per-
cent in my lifetime. It’s going to hit naught percent sometime between
2050 and 2075, by the look of it, although things could change. But he’s
right about what that means in terms of a rapidly aging population in
some parts of the world. We’re going to have fewer working people to pay
for the benefits that support older people. But in a sense, I’m just simply
saying that the aging population and the declining birthrate are a lot easier
to deal with than the exploding population we thought we were going to
have.
Robinson: We keep coming back to the puzzle: why is everybody whinge-
ing and whining so much? Mark Steyn, for example, would argue that

the low birthrate in Europe is tied to, reflective of, a loss of civilizational
self-confidence. It almost seems that if only Europeans could all read The
Rational Optimist, they’d have more children. They’d say things aren’t so
grim after all. Do you think there may be something to that?
Ridley: You’d have to get to the Japanese, too, of course; they have an
even lower birthrate. I’m not persuaded that it’s a loss of civilizational self-
confidence. In a way, it’s sort of a sign of how comfortable we are about
our individual futures that we don’t feel we have to have lots of babies to
support us, lots of babies in case one dies, and things like that. So in some
ways it’s a sign of complacency, if you like, or comfort.
Robinson: Here’s my final question. Americans today are still reeling
from financial crisis and recession. Quite learned journals are using the
term “the new normal”—that we may have to get used to a much lower
rate of economic growth. The whole feeling that we may have to settle
into what happened to Britain in the Fifties, the loss of empire, that some-
how China is eclipsing us in all kinds of ways. If you could offer advice to
Americans and their leaders, what would you say?
Ridley: Openness. The secret is surely to recapture what you’ve been so
good at over the past two centuries, and that is to be open to the world in
terms of people and ideas and goods and services. That’s what got you
great: openness within your borders and openness outside your borders.
Excerpted from Hoover’s webcast series, Uncommon Knowledge (www.hoover.org/multimedia/uncommon-
knowledge). © 2011 The Board of Trustees of the Leland Stanford Junior University. All rights reserved.
New from the Hoover Press is My Times & Life: A

Historian’s Progress through a Contentious Age, by
Morton Keller. To order, call 800.935.2882 or visit www.
hooverpress.org.

VALUES
Sins of the Fathers, the

Mothers, and Others
You can’t blame society for all the bad things people do. Hunting
for scapegoats distracts us from seeking the true causes of social
pathology. By Thomas Sowell.
Children on welfare have only about half as many words per day directed
at them as the children of working-class families—and fewer than one-
third as many words as children whose parents are professionals. This is
especially painful in view of the fact that scientists have found that the
physical development of the brain is affected by how much interaction
young children receive.
Even if all children entered the world with equal innate ability, by the
time they were grown they would nevertheless have very different mental
capabilities. Innate ability is the ability that exists at the moment of con-
ception, but nobody applies for a job or college admission at the moment
of conception. Even between conception and birth, other influences affect
the development of the brain as well as the rest of the body.
The mother’s diet and her intake of alcohol or drugs affects the unborn
child. Differences in the amount of nutrition received in the womb cre-
ate differences even between identical twins. Where one of these identical
twins is born significantly heavier than the other, and the lighter one falls
below some critical weight, the heavier one tends to have a higher IQ in
later years. They may be the same weight when they become adults, but
Thomas Sowell is the Rose and Milton Friedman Senior Fellow on Public
Policy at the Hoover Institution.

they didn’t get the same nutrition back when their brains were first devel-
oping.
Inequalities have so many sources. This fact undermines the simple
dichotomy between believing that some people are innately inferior and
believing that discrimination or other social injustices account for eco-
nomic and social differences. Yet both people who are afraid of being con-
sidered racists and believers that the lower classes are born inferior often
buy into the notion that only the sins of “society” can explain why some
people end up so much better off than others.
Decades ago, Edward Banfield pointed out how the different ways that
children from different classes are raised helps or hinders them in their
later life. Yet he was demonized by the intelligentsia for saying what most
people would consider only common sense.
While it is heartbreaking to think of the large differences in ability and
behavior that can be created by the way different parents raise their chil-
dren, it is no less heartbreaking to think of other social differences that go
back to the way kids are brought up.
For example, anyone who watches the television program Cops will see
an endless succession of real losers who wreck their lives and the lives of
others through sheer irresponsibility and lack of self-control.
When one of these losers is being chased on the highway by a couple of
police cars, with a police helicopter trailing overhead, you wonder why he
doesn’t just stop and give up before his crazy driving kills himself or some-
one else. But you also have to wonder what his parents were doing while
he was growing up that they couldn’t raise him to become a rational adult.
A majority of the men in prison came from fatherless families. In some
cosmic sense, it may not be entirely their fault that they took the wrong
road. But that doesn’t change the fact that it was the wrong road—or
make it any less dangerous to turn them loose.
No doubt such concerns are behind efforts to “rehabilitate” prison-
ers or substitute “crime prevention” programs for incarceration. But
magic words do not create magic realities. Innocent people have been
killed by “rehabilitated” criminals who were set free. And prevention
programs do not prevent anything other than putting dangerous people
behind bars.

The pretense of having solutions can be more dangerous than the
problem. Yet there are whole armies of shrinks and social workers whose
jobs depend on pretending that they have answers, even when no one has
answers.
In terms of broader social policy, we need to make a sharp distinction
between saying that some people are victims of a tragic fate and saying
that they are victims of discrimination by employers, bias in the courts, or
the sins of other individuals they encounter. Scapegoating other people is
not likely to help—and it can distract attention from the real problems,
which are too serious to misdiagnose.
Reprinted by permission of Creators Syndicate. © 2010 Creators Syndicate. All rights reserved.
Available from the Hoover Press is Barbarians Inside

the Gates, and Other Controversial Essays, by Thomas
Sowell. To order, call 800.935.2882 or visit www.
hooverpress.org.

H I S TORY AND CULTURE
The Multiple Futures

of the Middle East
“Imperialist designs” have come to an end. Now, says the dean
of Mideast studies, the Arab-Muslim lands must shape their own
destinies. By Bernard Lewis.
According to a convention commonly agreed upon among historians, the

modern history of the Middle East begins at the turn of the nineteenth
century, when a French expeditionary force commanded by Napoleon
invaded and conquered Egypt and stayed there until it was forced to leave
by a Royal Navy squadron commanded by Admiral Horatio Nelson. This
was not the first Western advance against the previously dominant power
© ZUMA Press/Newscom/Ron Bull

of Islam. But it was the first incursion from the West into the heartlands
of the Islamic world. Bonaparte’s arrival and still more his departure dem-
onstrated two important facts: that even a small Western force could con-
quer, occupy, and rule one of these heartlands without serious difficulty,
and that only another Western force could get them out.
This began a period during which ultimate power over, and with it
responsibility for, what happened in this region resided elsewhere; when
the basic theme of international relations and of much else in the Middle
East was shaped by the rivalries of non–Middle Eastern states. These rival-
ries went through several successive phases—interference, intervention,
penetration, domination and, in the final phase, a sometimes reluctant,
sometimes relieved departure. From time to time the actors in the drama
Bernard Lewis is the Cleveland E. Dodge Professor Emeritus of Near Eastern

Studies at Princeton University.

Princeton historian Bernard Lewis contends that sooner or later the Middle East will again
become an object of interest to outside powers—and that it risks once again being a stake,
rather than a player, in the great game of international politics.
changed and the script was modified, but until the final phase the basic
pattern remained the same. In that final act of this drama, the two external
superpowers whose rivalry dominated the Middle East were the Soviet
Union and the United States. In their purposes and their methods, they
were very different, both from their predecessors and from each other.
Future historians of the region may well agree on a new convention—
that the era in Middle Eastern history that was opened by Napoleon and
Nelson was closed by George H. W. Bush and Mikhail Gorbachev. In the
crisis of 1990–91 precipitated by Saddam Hussein’s invasion of Kuwait,

neither of the two superpowers played the imperial role which tradition
and popular expectation assigned to it; the one because it could not, the
other because it would not.
It’s very difficult to forsake the habits not just of a lifetime but of a whole
era of history.
Moscow, once so great a force in Middle Eastern affairs, could neither

restrain nor rescue Saddam Hussein. Washington, having freed Kuwait
from occupation and Saudi Arabia from the threat of invasion, had accom-
plished its war aims and unilaterally declared a cease-fire, leaving Saddam’s
regime intact and permitting him, with only minor impediments, to crush
his domestic opponents and in due course resume his policies.
As long as the Soviet Union existed, and as long as the Cold War was
the main theme of foreign policy, American presence in the Middle East
was part of a global strategy designed to cope with a global confrontation.
With the ending of that confrontation, such a strategy became unneces-
sary. No discernible strategy has yet emerged to replace it.
H A BI T S O F D E P ENDENCE
In the historical interlude between the fall of the Berlin Wall and the ter-
ror attacks in the United States on September 11, 2001, Russia was out
of the game and likely to remain so for some years to come; America was
reluctant to return. This meant that in many significant respects the situ-
ation reverted to what it was before. Outside powers had interests in the
region, both strategic and economic; they could from time to time inter-
fere in Middle Eastern affairs or even influence their course. But their role
was no longer to be one of domination or decision.
Many in the Middle East had difficulty adjusting themselves to the
new situation created by the departure of the imperial powers. For the
first time in almost two hundred years, the rulers and to some extent the
peoples of the Middle East were being forced to accept final responsibil-
ity for their own affairs, recognize their own mistakes, and accept the
consequences. This was difficult to internalize, even to perceive, after so
long a period. For the entire lifetimes of those who formulate and conduct

policy at the present time and of their predecessors for many generations,
the vital decisions had been made elsewhere, ultimate control lay else-
where, and the principal task of statesmanship and diplomacy was as far
as possible to avoid or reduce the dangers of this situation and to exploit
such opportunities as it might from time to time offer. It is very difficult
to forsake the habits not just of a lifetime but of a whole era of history.
The difficulty is much greater when alien cultural, social, and economic
pre-eminence continues and even increases, despite the ending of alien
political and military domination.
Military and to a growing extent political intervention by the West had
seemingly come to an end, but the impact of its science and culture, its
technology, amenities, and institutions was, if anything, on the rise—here
as in other parts of the non-Western world.
In these circumstances, it was natural that Middle Easterners should
continue to assume—and proceed on the assumption—that real responsi-
bility and decisions still lie elsewhere. In its crudest form, this belief leads
to wild and strange conspiracy theories directed against those whom they
regard as their enemies—Israel, and more generally the Jews, the United
States, and the West. No theory is too absurd to be asserted or too prepos-
terous to be widely and instantly believed. Even among more responsible
statesmen and analysts, a similar belief in alien power, albeit in a less crude
form, often seems to guide both analysis and policy. Some even go so far as
to invite outside intervention, presumably in the belief that only outside
powers have the capacity to make and enforce decisions. A case in point
is the constant appeal to the United States to involve itself in the Arab-
Israel conflict, oddly coupled with the repeated accusation of “American
imperialism.” This particular charge reveals a misunderstanding of either
America or imperialism or, more probably, both. When the Romans went
to Britain two thousand years ago, or when the British went to India three
hundred years ago, an “exit strategy” did not figure prominently among
their concerns.
The strategic landscape was altered by the terror attack on American soil
on September 11, 2001. In the aftermath of that terrible day, the Ameri-
can policy of benign neglect of the Middle East ended swiftly. American
home security was at stake, and the United States was pulled into hitherto

unimaginable obligations and dangers. In time, the thought would emerge
that it was urgent to push for a wholesale reform in Arab and Islamic lands.
Reform was not easy, but the risks of the status quo—repressive political
orders, cultures of unreason and scapegoating—inspired this push with a
new sense of both urgency and legitimacy.
This was not what those who had perpetrated the terror attacks had in
mind. Their leader, the Saudi financier and jihadist Osama bin Laden, was
sure of the weakness of American resolve. As he saw it, the Islamic fighters
in Afghanistan had defeated and destroyed the mighty Soviet Union. Deal-
ing with the United States would be much easier. It was a lesson bin Laden
extracted from American responses to previous attacks; he expected more of
the same. There would be fierce words and perhaps the United States would
launch a missile or two to some remote places, but there would be little else
in terms of retaliation. It was a natural error. Nothing in his background or
his experience would enable him to understand that a major policy change
could result from an election. As we now know, it was also a deadly error.
Even among more responsible statesmen and analysts, a belief in alien
power, albeit in a more subtle form, often seems to guide both analysis
and policy.
The assault of 9/11 was surely intended as the opening salvo of a war of
terror that would continue until its objectives were obtained—that is, the
eviction of the United States from the world of Islam and, most impor-
tant, the overthrow of the Arab regimes seen by the West as friendly and
by Al-Qaeda and many of their own subjects as renegades from Islam and
puppets of America. But rather than head for the exits, America was to dig
in for a deeper presence in Arab and Islamic lands. If this was imperialism,
it was imperialism of a defensive kind.
Those who accuse the West and more particularly the United States of
imperialist designs on the Middle East are tilting against shadows from
the past. There is, however, another charge with more substance—that
of cultural penetration. American culture differs from all its predecessors
in two important respects. First, it is independent of political control and
extends far beyond the areas of American political dominance or even

influence, as for example in Islamic Iran or communist China. Second, it
is in a profound sense popular. Previous cultural expansions were limited
to political and intellectual elites. American popular culture appeals to
every element of the population and especially to the young. It also brings
a special message to elements disempowered in the traditional order, nota-
bly women. Not surprising, therefore, it is perceived as a mortal threat
both by the defenders of tradition and by the exponents of fundamental-
ist ideologies. How that threat is perceived is clear from the Ayatollah
Khomeini’s repeated characterization of the United States as “the Great
Satan.” No intelligence service is needed to interpret this epithet—just a
copy of the Quran. The last verses, the best known along with the first,
talk about Satan, describing him as “the insidious tempter who whispers
in the hearts of men.”
The challenge of Western culture has been a major theme in Middle
Eastern debate for almost two centuries. American popular culture pre-
sents this challenge in its most recent and also its most pervasive form.
Middle Eastern rulers, leaders, and thinkers have offered and will no
doubt continue to offer various responses to this challenge—imitate,
adopt, adapt, and absorb, or complain, denounce, and reject.
R I V A L I D E O L OGIES
Today, increasing numbers of Middle Easterners, disillusioned with past
ideals and—in many countries—alienated from their present rulers, are
turning their thoughts or their loyalties to one or other of two ideologies:
liberal democracy and Islamic fundamentalism. Each offers a reasoned
diagnosis of the ills of the region and a prescription for its cure.
In this struggle, fundamentalism disposes of several advantages. It uses
language that is familiar and intelligible, appealing to the vast mass of the
population in a Muslim country. At a time of economic deprivation, social
dislocation, and political oppression, many are ready to believe that these
evils are a result of alien and infidel machinations and that the remedy
is a return to the original, authentic way of Islam. The fundamentalists
also have an immense advantage over other opposition groups in that the
mosques and their personnel provide them with a network for meeting
and communication that even the most tyrannical governments cannot

suppress or entirely control. Indeed, tyrannical regimes help their funda-
mentalist opponents by eliminating competing oppositions.
The exponents of democracy, in contrast, offer a program and a lan-
guage that are unfamiliar and, for many, unintelligible. They have the fur-
ther disadvantage that the name of democracy and those of the parties and
parliaments through which it operates have been tarnished in the eyes of
many Muslims by the corrupt and inept regimes that used these names in
the recent past. In contrast, appeals in the name of God and the Prophet
to cleanse society by restoring his holy law have a force and immediacy
unattainable by democrats whose arguments, examples, and even vocabu-
lary are recognizably alien.
But things are changing. In countries where fundamentalists are a pow-
erful force and still more in those where they rule, Muslims are learn-
ing to distinguish between Islam as an ethical religion and way of life
and fundamentalism as a ruthless political ideology. In countries where
they have opposed the regime, such as Egypt and Algeria, fundamentalist
terrorists have shown a callous brutality that shocks and repels ordinary,
decent believers. In countries where they rule, such as Iran and at times
Sudan, they are, perhaps inevitably, disappointing the high hopes they
evoked. The regime of the mullahs in Iran is not noticeably less corrupt
than the one it replaced. It is more efficiently and pervasively repressive,
and increasing numbers of Iranians, in desperation, are turning against
Islamic fundamentalism and sometimes even against Islam itself. Many
good Muslims in Iran and elsewhere see in this a mortal danger to their
faith and civilization, and there is a growing movement that challenges
Islamic fundamentalism, not in the name of secularism, but in the name
of Islam. The most serious challenge to the Iranian regime, for instance,
may well come from within its own ranks.
The fundamentalist regimes are also failing by the more palpable test
of performance. In Iran, the effects of fundamentalist rule will for a while
be palliated by the availability of money from oil and the remarkably
skillful use made of this resource in dealing with foreign governments
and business corporations. But it is only a palliative, and of limited dura-
tion. Elsewhere, where no such palliative exists, the most visible effects of
fundamentalist rule are poverty, tyranny, and unending internal warfare.

The programs and activities of fundamentalist oppositions in other coun-
tries promise nothing better. It is becoming increasingly clear that what-
ever political and propaganda successes they may achieve, fundamentalist
movements—and governments—have no real understanding and there-
fore no solutions for the pressing problems of modern society.
W H A T W I L L BRING THEM TOGETHER?

In the struggle between democracy and fundamentalism for power in Mus-
lim lands, the democrats are obliged to allow the fundamentalists equal
opportunity to conduct propaganda and to contend for power. If they fail
in this duty, they are violating the very essence of their own democratic
creed. Paradoxically, it is the Western concern for democratic freedom,
even at the cost of Western values and of freedom itself, that sometimes
prevents the Muslim secularists from dealing with this problem in the tra-
ditional way. The fundamentalists are under no such disability. For them,
winning an election is one of several possible roads to power—and it is a
one-way road on which there is no turning back.
Saudi financier and jihadist Osama bin Laden was sure of the weakness
of American resolve, and acted accordingly.
The strength of the democrats, and the corresponding weakness of the

fundamentalists, is that the former have a program of development and
betterment, while the latter offer only a return to a mythologized past.
The problem is that the weaknesses of the democrats are immediate and
obvious; their strengths are long-term and, for many, obscure.
Some speak of a possible compromise between the rival extremes—a
type of representative democracy not formally secular, in which a moder-
ate but not fundamentalist Islam might play the role of the established
churches in Britain and Scandinavia or of the Christian democratic par-
ties in continental Europe. There is little sign of any such compromise as
yet, and at the present it seems unlikely. But the idea of a combination of
freedom and faith in which neither one excludes the other has achieved
some results among Christians and Jews and may yet provide a workable
solution for the problems of political Islam.

In an era when pan-Arab nationalism and the imperialisms against
which it was directed have faded into an ever more remote past, the only
common Arab cause remains the struggle against Israel. Only Israel’s
actions can from time to time revive the flagging fortunes of pan-Arabism.
In fact, some Israeli actions have already done more for the pan-Arab
cause than any Arab leader since Gamal Abdel Nasser. Similarly, Israeli
extremism, both nationalist and religious, is nourished and encouraged
by the tendency of some Palestinian organizations to resort to bloody ter-
rorism every time there is a hitch—or a success—in the negotiations. The
peace process may be halted, deflected, or even reversed by acts of folly or
fanaticism or the deadly combination of the two. Even the inexperience
of new leaders may cause grave damage. These dangers may come from
either side and may provoke a comparable response. Even so, as long as
the international and regional circumstances that brought the parties to
the negotiating table remain in effect, the peace process will continue,
surviving both setbacks and crises.
Muslims are learning to distinguish between Islam as an ethical religion
and way of life and fundamentalism as a ruthless political ideology.
In the long run, the future of Arab-Israel relations will be determined by

the outcome of the overarching regional struggle between democratic and
fundamentalist ideologies, by the choices made by the peoples and their
leaders. The triumph of democracy would eventually lead to a genuine and
not merely formal peace. The triumph of militant fundamentalism on either
side can result only in continuous and increasingly destructive struggle.
B E TT E R L I V E S A ND BETTER GOVERNANCE
The choice between democracy and fundamentalism will also be pro-
foundly influenced by the pace, or lack, of economic betterment. Democ-
racy and tolerance come easier to the affluent than to the indigent. There
is a related crossroads: between outward and inward modernization. Out-
ward modernization means accepting the devices, the amenities, and the
conveniences provided by Western science and industry while rejecting
what are seen as pernicious Western values. All too often, this means also

rejecting the science that produced these devices and amenities and the
way of life that made that science possible. One might put it this way:
outward modernization means buying and firing a gun; inward modern-
ization means learning to manufacture and ultimately design one. This is
not likely to happen in countries—like some in the region—where science
is taught from fifty-year-old textbooks.
Catching up with the modern world means more than borrowing or
buying modern technology. It means becoming part of the process by
which that technology is created—that is, undergoing the intellectual rev-
olution, the economic, social, and eventually political transformation that
precedes, accompanies, and follows technological change. In this respect,
the Middle East still lags far behind other more recent recruits to moder-
nity such as South Korea, Taiwan, and Singapore.
For the Islamic fundamentalists, winning an election is one of several
possible roads to power—and it is a one-way road with no turning back.
The Arab-Israeli conflict, in one way or another, will profoundly influ-

ence the development of the region as a whole. This could be positive or
negative. If the struggle becomes more bitter and acquires the enduring
quality of some of the other, more ancient quarrels of the region, it will
have a corrosive effect for Israelis and Arabs alike, diverting energies and
resources from creative to destructive purposes and preventing the prog-
ress of the region toward a new age of advanced technology and political
freedom.
Peace, in contrast, would help and speed that progress. If there is peace,
then the peoples of the Middle East, working together, might achieve their
own breakthrough as other regions have already done and resume the cre-
ative role they once played in the history of civilization. One way that this
might happen was described in a remarkably prophetic article titled “The
Changing East,” by T. E. Lawrence—Lawrence of Arabia—published in
1920:
The success of [the Zionists’] scheme will involve inevitably the raising
of the present Arab population to their own material level, only a little

after themselves in point of time, and the consequences might be of the
highest importance for the future of the Arab world. It might well prove
a source of technical supply rendering them independent of industrial
Europe, and in that case the new confederation might become a formi-
dable element of world power. However, such a contingency will not be
for the first or even the second generation.
The Middle East’s window of opportunity will not remain open for-
ever. Even when its oil and its transit routes, so crucial in the past, are out-
dated by modern technology and communications, the Middle East will
still be important—as the junction of three continents, the center of three
religions, a strategic asset or danger to be coveted or feared. Sooner or later
it will again become an object of interest to outside powers—old powers
reviving, new powers emerging. If it continues on its present course, the
region, lacking the capacities of India and China on the one side or the
technology of Europe and America on the other, will once again be a stake
rather than a player in the great game of international politics.
The study of Islamic history and of the vast and rich Islamic political
literature encourages the belief that it may well be possible to develop
democratic institutions—not necessarily according to our Western defi-
nition of that much-misused term but according to one deriving from
the Middle East’s own history and culture and ensuring, in their way,
limited government under law, consultation, and openness in a civilized
and humane society. There is enough in the traditional culture of Islam,
on the one hand, and the modern experience of the Muslim peoples, on
the other, to provide the basis for an advance toward freedom in the true
sense of the word.
But if freedom fails and terror triumphs, the peoples of Islam will be
the first and greatest victims. They will not be alone, and many others will
suffer with them.
Excerpted from The End of Modern History in the Middle East, by Bernard Lewis (Hoover Institution Press,
2011). © 2011 The Board of Trustees of the Leland Stanford Junior University. All rights reserved.

history and culture
The Man from

Kinderhook
During a distinguished Army career, Chris Gibson, who spent a year
as a Hoover national security fellow, displayed brains, determination,
and courage. Now he’s testing his mettle in Congress.
Chris Gibson, a Hoover national security affairs fellow for 2006–7,

rounded out his rich and varied Army career last year by command-
ing a humanitarian relief operation in Haiti. Then he deployed once
again: for Washington. Last fall he ran for Congress on his home
turf, the Twentieth Congressional District in upstate New York, and
won. Today, freshman representative Gibson, one of six new Repub-
licans from New York state, sits on the House Armed Services and
Agriculture committees and looks forward to making his mark in
the 112th Congress. “The number one priority is to get the private-
sector economy going,” he said in an interview on the day he took
office.
Gibson detailed his plans in a recent podcast on Ricochet.com, telling
co-host Peter Robinson that he was focused on helping his dairy and farm-
ing constituents in the largely rural district and on shaping the direction
of the U.S. military in three ways:
“The first one is to bring a rapid and successful conclusion to the
wars in Iraq and Afghanistan, so I’m very interested in working with the
Department of Defense on that and being a leader on the Armed Services
Committee—ensuring that we have the resources in the near term, but
also that we stay on plan in the midterm to successfully complete combat
operations by 2014.

Retired Army colonel Chris Gibson takes the oath of office in January, joined by his wife,
Mary Jo; friends and family members; and Majority Leader John Boehner.
“Two is to organize better to neutralize the existential Al-Qaeda threat.

“And three—and I think this is important for the Armed Services Com-
mittee—is to look out fifteen to twenty years from now and ask: how do
we reorganize the armed services to protect our cherished way of life in
a manner that is consistent with a republic, and one that we can afford?”
Among Gibson’s first actions in Congress was to issue a statement on
the first anniversary of the devastating Haiti earthquake.
“I had the distinct honor of commanding the Eighty-Second Airborne
Division’s Second Brigade Combat Team during the opening month of
humanitarian relief efforts, my last mission prior to retirement from the
Army,” he said. “The American people can be tremendously proud of the
work their servicemen and -women did in Haiti, amid such tragic and dif-

ficult circumstances. . . . I know the efforts of the Eighty-Second Airborne
saved lives and eased the pain and suffering of those who survived.
“A year later, my thoughts and prayers are with the Haitian people—
particularly the children—as they continue what unfortunately will be a
long road to recovery.”
Gibson also joined the majority vote to repeal last year’s health care leg-
islation, saying that “time and time again, I have heard from constituents
that we need health care reform, but that this bill was not the answer. . . .
I believe that when the American people see this replacement bill, which
will be a patient-centered solution, and evaluate it against the government
expansion bill, they will choose the replacement legislation. It’s time to
start over.”
While at Hoover, Gibson focused his research on the interaction of
civil and military leadership. An article he published in the Hoover Digest
singled out the talents of Generals George Washington and George C.
Marshall, calling them role models during two critical eras for the impor-
tant and delicate task of leading the nation’s military. Shortly after leaving
Hoover, Gibson published Securing the State, a book on national security
decision-making.
Gibson retired from the Army as a colonel after twenty-four years on
© U.S. Congress
active duty. He was deployed seven times, including four combat tours of
Iraq. He went to Kosovo, to the Southwestern United States for an anti-
drug operation, and to Haiti. He taught American politics at the United
States Military Academy at West Point and served as a congressional fel-
low with Representative Jerry Lewis of California, the chairman of the
Defense Appropriations Subcommittee.
He holds a master’s degree in public administration and a doctorate in
government from Cornell University. Gibson and his wife, Mary Jo, a
licensed clinical social worker, live in Kinderhook—birthplace of Presi-
dent Martin Van Buren—with their three children, Katie, Maggie, and
Connor.

h i s tory and culture
Once a Marine,
Always a Marine
It’s been more than sixty years since he helped capture Iwo Jima, but
Hoover fellow Richard T. Burress tells his old unit that some things
never change. By Christopher C. Starling.
Only days after Pearl Harbor, Richard T. Burress was among the thou-
sands of young men crowding into recruiting offices, determined to enlist.
A sophomore in college, the Nebraskan had gone to a dance on a Satur-
day night and awoken the next day to find the nation at war. Told that
the Japanese had bombed Pearl Harbor, “I said, ‘I always knew they’d hit
the Philippines!’ ” he joked recently. A native Nebraskan, “I’d never seen
either ocean. I’d never been as far as Chicago.” He would soon travel much
farther.
Burress, a Hoover senior fellow, rekindled memories of his wartime
service in a recent visit with his old unit, the First Battalion, Twenty-Third
Marines. In 1945, he was a fresh second lieutenant leading First Platoon,
Baker Company, into battle at Iwo Jima—a “four-day mission” that
turned into more than a month of combat. At twenty-one, he was among
four hundred replacement officers quickly trained for the assaults on Iwo
and Okinawa. Sixty-seven years later, Burress briefly rejoined his unit at
Camp Pendleton, where Marines in combat gear cheered and applauded
© USMC/Col. Christopher C. Starling
Richard T. Burress is a senior fellow at the Hoover Institution. Colonel

Christopher C. Starling (USMC), a national security affairs fellow at the
Hoover Institution in 2007–8, commands the Twenty-Third Marine Regiment
(Fourth Marine Division).

Hoover senior fellow Richard T. Burress meets with Major James Korth,
commanding officer of Company B of the First Battalion, Twenty-Third
Marine Regiment, as Burress’s old unit wrapped up pre-deployment
training at Camp Pendleton. Burress remarked on the major’s height
(six feet nine) and urged him to keep his head down.

him. His modern counterparts were wrap-
ping up rigorous training for a seven-month
deployment to Afghanistan, another distant
land with some familiar dangers for an old
Marine.
Burress told the young Marines about an
incident that happened on one of his first
days on Iwo Jima. He was handed a cup of
coffee at the company command post. After
the meeting adjourned, he wanted to linger
awhile and enjoy the coffee, but at the urgent
In 1945, Burress was a fresh behest of his platoon sergeant, a veteran of
second lieutenant leading
Saipan and Tinian, he dumped it out and set
First Platoon, Baker Company,
into battle. off for his platoon position. Seconds later,
a Japanese mortar round slammed into the
command post, killing or wounding everyone still there. Don’t bunch up,
he reminded the young Marines at Pendleton. Keep as dispersed as pos-
sible on the battlefield.
Other conditions seemed to have changed over the years. The water
on Iwo was always wretched, Burress said, so he would squeeze grapefruit
into it to make it palatable. Rations were scarce, too. One day, however, a
lance corporal handed him an unfamiliar kind of package with surprising-
ly decent food. Busily eating, he asked the Marine who had given him the
“new rations” where they had come from. “I took them from the colonel’s
jeep,” came the reply. Somehow both lance corporal and second lieuten-
ant avoided the wrath of a colonel who bore the nickname “Mad Dog.”
The “boondocks” of Camp Pendleton were certainly familiar to any
World War II Marine. “We were in the same hills worrying about the
same snakes,” he said of his six-week training on the rugged base after he
was commissioned. He watched companies of 1/23 as they engaged in
live-fire and scenario-based training for their impending deployment in
Operation Enduring Freedom. Towering overhead was a sheer hill known
to recruits in basic training as “the Reaper.” As Burress spoke to the troops
in Pendleton’s “Combat Town,” mock Afghan villages and rows of mine-
resistant vehicles stood in the background.

Burress reminded the Marines that they were making their memories
now, and that as Marines they would be viewed differently for the rest of
their lives. High expectations were a given. “The bad news,” he said, “is
that in sixty years you’re going to look like me. The good news is, you
share a special bond as Marines. Your close friendships today will be your
close friendships seventy years from now.” He encouraged the Marines to
learn and build on their experiences and to consider public service, per-
haps including elected office.
“I was impressed with how gung-ho they were,” Burress said back at
Stanford. “I told them that the American public was behind them and
really proud of them.”

H O O VER ARCHIVES
A Room Alive with

Memories
Every painting and object in the Nicolas de Basily Room tells a story.
Together their story is a search for lost time. By Dennis L. Bark and
Linda Bernard.
The Nicolas de Basily Room is among the hidden gems of the Hoover
Institution and a token of its illustrious history. The artwork, sculptures,
furniture, and historical mementos carefully arranged in this secluded,
celadon-colored room were described in a booklet published by the Hoover
Institution Press in 1972 and written by the donor herself, Madame de
Basily. But the room’s distinctive origins merit more than a booklet, as the
room has been an integral part of the institution’s activities for more than
three decades.
This story begins with a unique gift to the institution by the widow of
Nicolas de Basily, Lascelle Meserve de Basily. Her gift, made in 1964 and
following the loss of her husband the previous year, consisted of his per-
sonal papers and his entire seven-thousand-volume library, which includes
many rare first editions in Russian, as well as long out-of-print books on
the history of Russian painting.
Two years later, she decided that the couple’s entire collection of paint-
ings and objets d’art belonged with her earlier gift. Today, her husband’s
© Stanford Visual Art Services/Steven Gladfelder
papers and library are part of the institution’s rich holdings on the Russian
Revolution and imperial Russia. Those holdings include the records of
Dennis L. Bark is a senior fellow at the Hoover Institution. Linda Bernard is

deputy archivist at the Hoover Institution.

The Nicolas de Basily Room pays homage to Nicolas and Lascelle
Meserve de Basily, who collected artworks and objets d’art over the
course of their long and eventful lives. The Basilys gave the Hoover Insti-
tution materials not only of artistic but of enduring historical value.
The room features portraits by eighteenth-century Russian masters, who
painted four generations of Romanovs, and other artworks by celebrated
artists. At center right is a display case holding Nicolas de Basily’s
medals and awards, including the French Legion of Honor and a gold
medal he earned as a student. A miniature of Basily rests in the center.

the Paris branch of the Okhrana (the czarist secret police); the collection
of the Menshevik historian Boris Nicolaevsky; historical documents such
as the first issue of the Bolshevik Pravda when it resumed publication in
1917; and hundreds of original letters between Leon Trotsky and his son.
They also include more than forty thousand release certificates and state-
ments by Polish prisoners freed from Soviet camps in 1941 among the
Polish collections of the Hoover Archives (the locations of the camps were
made available to Aleksandr Solzhenitsyn while he was writing The Gulag
Archipelago).
Solzhenitsyn, in fact, used the de Basily Room as the location, in 1976,
for his first press conference in America. Four years earlier, the former
Soviet minister of culture, Yekaterina Furtseva, also had visited it. Furtseva,
however, had a criticism. She offered the opinion that the room’s famous
paintings of the Romanov rulers of the eighteenth century belonged to
Russia; Hoover’s then-director, W. Glenn Campbell, acknowledged that
indeed they once had, before the communist government began selling off
the rich cultural heritage of imperial Russia on capitalist auction markets.
The room that displays highlights of the Basilys’ collection is today an
elegant setting for receptions and dinners held by the institution’s direc-
tor. Its singular nature is defined by its collection of paintings by eigh-
teenth-century Russian masters. They are represented by portraits of four
generations of Romanovs—from Empress Elizabeth (who reigned from
1741 to 1762) to Catherine the Great (1762–96) to Emperor Alexander
I (1801–25).
Of equal caliber are the objets d’art as well as other paintings by
French, Italian, and English masters such as Sir Joshua Reynolds and John
Hoppner, Joseph Vernet, Paul Renouard, H. P. Danloux, Johann Niko-
laus de Groot, Lampi the Elder, and the Venetians Francesco Guardi and
Marco Ricci.
That the Basilys were astute and discerning collectors is hardly a sur-
prise, because their education and backgrounds made connoisseurs of
them both.
Nicolas de Basily, born in 1883, was the aristocratic son and grandson
of imperial Russian diplomats. His father had served as undersecretary
in the imperial ministry of foreign affairs, and Nicolas himself, educated

at the famous Lycée Alexander I in St. Petersburg, grew up in Constanti-
nople, Vienna, and Budapest. After a childhood of broad travel and supe-
rior schooling, he lost his father to Spanish influenza in Paris at the age of
nineteen, but began his own diplomatic career the following year, 1903,
when he joined the chancellery of the ministry of foreign affairs, an office
that dealt with political questions concerning Europe and America.
Aleksandr Solzhenitsyn used the de Basily Room as the location, in 1976,
for his first press conference in America.
Between 1908 and 1911 Basily served as secretary of the Russian

embassy in Paris and later as a member of the imperial ministry of for-
eign affairs. Like his father, he also held the title of chamberlain of the
imperial court, and between 1914 and 1917 was a member of the staff of
Czar Nicholas II’s diplomatic chancellery, of which he became director in
1916 when the chancellery was located at the imperial army headquarters
in Mogilev. His primary responsibility was to coordinate liaison between
the Russian general staff, the foreign ministry, and the offices of the czar.
It thus came to pass, in March 1917, that Basily drafted the abdication
decree for Nicholas II; annotated copies of all five of the drafts are in the
Hoover Archives among the de Basily papers.
After the czar’s abdication, Basily returned to France in 1917 as
counselor of the Russian embassy in Paris, and later became chargé
d’affaires with the title of minister. Despite the continuing civil war
in Russia, the embassy remained active and open (France did not rec-
ognize the revolutionary Bolshevik government until 1924), a period
during which the Hoover Institution was heavily involved in collecting
© Hoover Archives
Russian materials.
A B A N K E R ’ S B E AUTIFUL DAUGHTER
In the Paris of 1919 Basily, for the second time in his life, met Lascelle
Meserve, who was to become his wife later in the year. She had been
born in the United States in 1890 and brought up in Paris and elsewhere
in Europe, where she became fluent in French, German, Russian, and
English.

A faded photo shows the young Nicolas de Basily in a Cossack costume. The boy, born in
1883, was the aristocratic son and grandson of imperial Russian diplomats. Nicolas grew
up in Constantinople, Vienna, and Budapest, and began his own diplomatic career in 1903
after graduating from a prestigious lycée.
She was named after her grandmother of English ancestry and became
the stepdaughter of H. Fessenden Meserve, the eighth generation of an
English family that came to America in 1673, and a graduate of the Har-
vard class of 1888. Her ancestry and travels with her parents gave her a

Basily (center), shown in 1916, directed the czar’s diplomatic chancellery at imperial army
headquarters in Mogilev (in today’s Belarus), as revolution raged. Amid widening hunger,
bloodshed, and mutinies in 1917, he drafted the czar’s abdication letter. Years later, as an
exile living in America, Basily said of Russia, “It is no longer my country.”
unique and unusually broad perspective on both the old and the new
worlds, one that was attractive to and appreciated by her future husband.
She was, in addition, strikingly beautiful, as her wedding photograph on
display in the de Basily Room illustrates.
By the time she was first introduced to Nicolas de Basily in 1917 at the
opera in St. Petersburg, she had already been educated in Paris, had lived
in North Korea (where her father directed a gold-mining company on
fifty square miles close to the Manchurian border), and had traveled the
Trans-Siberian railway in Russia when her father was vice president of the
National City Bank of New York for Europe (later, the First National City
Bank), a period when he oversaw the war loans—the bond issues—made
by that bank to the Imperial Russian government (1915–17).
Meserve’s work included opening branches of the bank in St. Peters-
burg and Moscow. The revolution of 1917, however, brought an abrupt

end to his work; he closed the branches’ doors and fled by train with his
family, eventually taking up residence as vice president of the bank in
Paris, where his wife died of illness in 1919.
Nicolas de Basily drafted the abdication decree for Nicholas II, the last
czar. Annotated copies of all five of the drafts are in the Hoover Archives.
The Basilys were married in November of that year, whereupon Las-

celle Meserve received Russian citizenship (she also retained her American
passport); he was thirty-six and she was twenty-nine. They never returned
to Russia, they never had children, and they never regained Basily’s lost
lands and estates, or his fortune. They had indeed saved their lives, but
had escaped with nothing, and so decided to remain in France, where Bas-
ily went to work for an American banking house, Marshall Field, Glore,
Ward & Co.—work that took the Basilys throughout Europe during the
1920s and 1930s in both a diplomatic and business capacity. Among the
witnesses to their marriage in Paris was their close friend and then ambas-
© Hoover Archives
sador, Vasilii Maklakov, appointed by the short-lived Provisional Govern-

ment of Russia. It was a friendship that was to prove prophetic for the
Hoover Institution, which received, a number of years later, the Okhrana
records from Maklakov.
C O L L E C T I N G MEMORIES
In the 1920s, the revolutionary Russian government began divesting itself
of its great paintings housed in the storerooms of the Hermitage in St.
Petersburg and, along with pieces of fine French furniture, sold them at
auctions abroad. The core of the collection assembled by Catherine the
Great—namely, Western European masters—was removed from the Her-
mitage and acquired, via an agent, by Andrew Mellon. Today, these acqui-
sitions are housed in the National Gallery in Washington, D.C.
At the same time, Basily, with the help of a representative and undoubt-
edly with the financial support of his wife and father-in-law, began col-
lecting artworks of Russian painters of the eighteenth century, little
known outside Russia. Some he purchased in Berlin and in Paris, others
in New York, over a period of two decades. The Basilys thus formed the

nucleus of a collection of major significance, to which they added the
European paintings and objets d’art that are today also a part of the de
Basily Room.
In 1939, with Germany threatening Europe, the Basilys packed their
art collection, left their house near the Bois de Boulogne, left Paris on
the Rome express train, and sailed from Genoa on the Italian liner Rex to
arrive in New York City in early November, to be with her father (he died
in 1941).
Nicolas de Basily, who was well-known in foreign affairs throughout
Europe and in the United States, volunteered his services to the State
Department and, in response, was asked why he didn’t just go back to
Russia. Basily replied, “Sir, you are certainly aware that there has been a
change of regime in Russia. It is no longer my country.”
In 1942 the Basilys moved to South America to settle in Uruguay, and
remained there the rest of their married lives. Among their friends and visi-
tors were many Russians, as had been the case in Paris, who often included
the first cousin of Czar Nicholas II, the Grand Duchess Marie Pavlovna.
The Basilys never returned to Russia, they never had children, and they
never regained Basily’s lost lands and estates, or his fortune.
Nicolas de Basily died at the age of eighty in 1963, his heart full of
memories of a lost world. He had been forced first to flee his homeland
and then to leave his adopted home, Paris. He had succeeded, however, in
writing a history of Soviet Russia, published in Europe in four languages
in 1938. Titled Russia under Soviet Rule, it was noted for its descriptions
of the last days of imperial Russia and was awarded a prize by the Acadé-
mie Française. He was, in addition, recognized as a Commander of the
© Hoover Archives
National Order of the French Legion of Honor.

Ill health had prevented Basily from editing the memoirs of his dis-
tinguished diplomatic career, but these were published in English by the
Hoover Institution Press in 1973. In 1975 the press also published those
of his widow, Memoirs of a Lost World, a captivating narrative of aristo-
cratic and diplomatic lives, of which the Nicolas de Basily Room is a living
legacy.

The former Lascelle Meserve (1890–1989), a multilingual Harvard graduate and daughter of a
wealthy international businessman, married Nicolas de Basily in Paris in 1919. The revolution
had driven him from Russia, but in those uncertain years he served for a time as a diplomat
in absentia. Twenty years later, with Germany menacing Europe, the couple sailed to the new
world, living first in the United States and then Uruguay. Neither saw Russia again.
As a widow, Madame de Basily spent the remainder of her life travel-

ing between Europe and the United States, living in the Carlyle Hotel in
New York City, the Ritz in Paris, and the Hotel Richemond in Geneva.
She remained devoted to her husband’s memory, which explains why,

Nicolas de Basily’s Russia under Soviet Rule (1938) was published in
four languages, all represented in the Hoover Library. After Basily died,
Hoover published his account of his diplomatic career. His widow was
eighty-five when she finished her own account of their shared experi-
ences, Memoirs of a Lost World.
at the conclusion of her introduction to the collection, she wrote the
following:
My husband loved these paintings deeply. They were all that remained of
his lost country. . . . Today he would be happy—as I am—to know that
at the other end of the world these beloved treasures are now tended by
understanding hearts and hands.
Nicolas de Basily’s Russia under Soviet Rule, written in exile, was noted
for its descriptions of the last days of imperial Russia. It was awarded a
prize by the Académie Française.
She died in Switzerland in 1989 at the age of ninety-eight. Her ash-

es rest next to those of her husband in Baltimore, while her memory
abides with those still at the Hoover Institution who were fortunate to
have known her.
Available from the Hoover Press is Boris Pasternak:

Family Correspondence, 1921–1960, translated by

Nicolas Pasternak Slater and edited by Maya Slater. To

On the Cover
Neptune, god of the seas, watches over the Grand Harbor of Valletta in
a Maltese travel poster from the Hoover Archives. He wields a trident—
both a weapon to shake the waters in his wrath and a scepter to build
islands and calm the waves.
The statue—a creation of Flemish-born artist Giambologna (1529–
1608), who also executed a monumental Fountain of Neptune in Bolo-
gna—has watched many angry storms and placid tides come and go.
Malta has been ruled by Muslims and Normans, Vandals and Visigoths.
It knew Rome, Byzantium, and Napoleon. It has repulsed sultans and
corsairs and been bombarded from the sky by Nazi Germany.
The knights of the Order of Saint John, whose predecessors guarded
pilgrims in the Holy Land, came to the island in the sixteenth century.
After forcing Ottoman besiegers back into the sea, they made Valletta
their stronghold, naming it after their victorious grandmaster. They forti-
fied the deep natural harbor and built hospitals, palaces, and churches,
including Our Lady of Liesse (at right, with its eight-pointed Maltese
Cross), which commemorates a medieval miracle. Many years later, the
Neptune statue was moved from the fish market near Our Lady of Liesse
to the Grandmaster’s Palace where, surrounded by ferns and hibiscuses in
Neptune’s Courtyard, it can be visited today.
This poster of statue, church, and billowing clouds—and a line of
arriving warships—represents an interlude of peace, foreshadowed by war.
The image began as a painting by Edward Caruana Dingli (1876–1950),
one of Malta’s most celebrated artists. It probably dates from the interwar
1920s. It then served as the cover of a collection of his watercolors pub-
lished by the Maltese tourism commission. Years later, as the poster seen
here, it was printed by the well-known Neapolitan bookbinders, engrav-
ers, and lithographers Richter & Company, whose posters and luggage
labels enticed several generations of travelers to see the world.
But Caruana Dingli’s appealing, sun-splashed works express only a lim-
ited truth. “Caruana Dingli created a very specific and tailor-made view
of Malta, one in which there is no suffering, displacement, or hardship,
not even during one of the
worst periods of the island’s
history,” a modern Maltese
artist, Madeleine Gera, wrote
in Flair magazine. “Even as
bombs fell on Grand Harbor,
his paintings retained the
serenity of the Mediterranean
on a mild summer day.”
To Gera, Caruana Dingli
“hints at a mythical idyll, in
which fishermen left the har-
bor in their sturdy boats for a
solemn day of fishing in the
same waters where the [1565]
Great Siege was fought, and
nobody drowned.” Even the
Neptune statue has a fig leaf.
But though an artist may
refuse to acknowledge war,
history obliges. One of Mal-
ta’s darkest chapters was World War II, when Italian and German bomb-
ers savaged the British-held island because of its strategic position. The
Grandmaster’s Palace was damaged, though Neptune remained intact.
Our Lady of Liesse also was damaged, but was rebuilt soon after the
war.
In Caruana Dingli’s paintings, the Maltese rejoice in tradition and
simple tasks. Perhaps there was some truth to his artistic Arcadia and its
self-assured inhabitants. For their bravery during the war’s darkest hour,
King George VI awarded the Maltese the George Cross—the first time
the medal had ever been awarded collectively. Today the flag of indepen-
dent Malta proudly displays this honor. The calm waters in this poster
seem to suggest an abiding resilience, a tribute to the waves and to Malta’s
past.
—Research by Yael Roberts
hoover institution on war, revolution and peace
Board of Overseers
Marc L. Abramowitz Herbert M. Dwight
Victoria (Tory) Agnich William C. Edwards
Frederick L. Allen Gerald E. Egan
Esmail Amid-Hozour Leonard W. Ely
Jack R. Anderson Charles H. (Chuck) Esserman
Martin Anderson Jeffrey A. Farber
Javier Arango Clayton W. Frye Jr.
George L. Argyros Stephen B. Gaddis
Robert G. Barrett James G. Gidwitz
Frank E. Baxter Cynthia Fry Gunn
Donald R. Beall Arthur E. Hall, CFA
Stephen D. Bechtel Jr. F. Philip Handy
Peter B. Bedford Everett J. Hauck
Peter S. Bing W. Kurt Hauser
Joanne Whittier Blokker John L. Hennessy*
William K. Blount Warner W. Henry
James J. Bochnowski Heather R. Higgins
Wendy H. Borcherdt Kenneth H. Hofmann
William K. Bowes Margaret Hoover
Richard W. Boyce Allan Hoover III
C. Preston Butcher Preston B. Hotchkis
Richard Call Philip Hudner
James J. Carroll III Leslie P. Hume*
Robert H. Castellini William J. Hume
Joan L. Danforth Walter E. Hussman Jr.
Paul L. Davies Jr. George B. James II
Paul Lewis (Lew) Davies III Gail A. Jaquish
John B. De Nault Charles B. Johnson
Kenneth T. Derr Mark Chapin Johnson
Dixon R. Doll Franklin P. Johnson Jr.
Susanne Fitger Donnelly Tom Jordan
Joseph W. Donner Steve Kahng
William H. Draper III Mary Myers Kauppila

David B. Kennedy Richard M. Scaife
Donald P. Kennedy Roderick W. Shepard
Raymond V. Knowles Jr. Thomas M. Siebel
Donald L. Koch George W. Siguler
Henry N. Kuechler III William E. Simon Jr.
Peyton M. Lake Boyd C. Smith
Carl V. Larson Jr. John R. Stahr
Allen J. Lauer Alan G. Stanford
Bill Laughlin William C. Steere Jr.
James G. (Skip) Law Thomas F. Stephenson
Howard H. Leach G. Craig Sullivan
Walter Loewenstern Jr. Robert J. Swain
William J. Lowenberg W. Clarke Swanson
Donald L. Lucas Curtis Sloane Tamkin
Richard A. Magnuson Tad Taube
Robert H. Malott Robert A. Teitsworth
Frank B. Mapel L. Sherman Telleen
Haig G. Mardikian Terence W. Thomas
Shirley Cox Matteson Charles B. Thornton Jr.
George E. McCown Thomas J. Tierney
Bowen H. McCoy Joy Timken
Burton J. McMurtry William R. Timken Jr.
Roger S. Mertz David T. Traitel
Harold M. Messmer Jr. Don Tykeson
Jeremiah Milbank III Victor Ugolyn
John R. Norton III Gregory L. Waldorf
Robert J. Oster Jeanne B. Ware
Jack S. Parker Dean A. Watkins
Joel C. Peterson Dody Waugh
James E. Piereson Jack R. Wheatley
Billie K. Pirnie Lynne Farwell White
Jay A. Precourt Betty Jo Fitger Williams
George J. Records Norman (Tad) Williamson
Kathleen (Cab) Rogers Kay Harrigan Woods
David M. Rubenstein Paul M. Wythes
James N. Russell *Ex officio members of the Board

The Hoover Institution on War, Revolution and Peace was established at Stanford University
in 1919 by Herbert Hoover, a member of Stanford’s pioneer graduating class of 1895 and the The Hoover Institution gratefully acknowledges the support of
thirty-first president of the United States. Since 1919 the Institution has evolved from a library its benefactors in establishing the communications and information
and repository of documents to an active public policy research center. Simultaneously, the dissemination program.
Institution has evolved into an internationally recognized library and archives housing tens of
millions of books and archival documents relating to political, economic, and social change.
Significant gifts for the support of the Hoover Digest
The Institution’s overarching goals are to are acknowledged from
• Understand the causes and consequences of economic, political, and social change
Bertha And John Garabedian Charitable Foundation

• Analyze the effects of government actions relating to public policies

The Jordan Vineyard And Winery
• Generate and disseminate ideas directed at positive public policy formation
using reasoned arguments and intellectual rigor, converting conceptual insights Nancy And Charles Munger
into practical policy initiatives judged to be beneficial to society
Joan And David Traitel
Ideas have consequences, and a free flow of competing ideas leads to an evolution of ❖
policy adoptions and associated consequences affecting the well-being of society. The Hoover The Hoover Institution gratefully acknowledges generous support
Institution endeavors to be a prominent contributor of ideas having positive consequences. from the Founders of the Program on
In the words of President Hoover,
American Institutions and Economic Performance
This Institution supports the Constitution of the United States, its Bill of Rights,
and its method of representative government. Both our social and economic Tad And Dianne Taube
systems are based on private enterprise from which springs initiative and ingenuity.
Taube Family Foundation
. . . The Federal Government should undertake no governmental, social, or eco-
nomic action, except where local government or the people cannot undertake it for Koret Foundation
themselves. . . . The overall mission of this Institution is . . . to recall the voice of
and a Cornerstone Gift from
experience against the making of war, . . . to recall man’s endeavors to make and
preserve peace, and to sustain for America the safeguards of the American way of Sarah Scaife Foundation
life. . . . The Institution itself must constantly and dynamically point the road to
❖
peace, to personal freedom, and to the safeguards of the American system.
Professional journalists are invited to visit the Hoover Institution to share their
perspectives and engage in a dialogue with the Hoover community. Leadership
To achieve these goals, the Institution conducts research using its library and archival
assets under the auspices of three programs: Democracy and Free Markets, American Institu- and significant gift support to reinvigorate and sustain the
tions and Economic Performance, and International Rivalries and Global Cooperation. These William and Barbara Edwards Media Fellows Program
programs address, respectively, political economy abroad, political economy domestically, and are acknowledged from
political and economic relationships internationally.
William K. Bowes Jr.
❖ ❖ ❖
William C. Edwards
The Hoover Institution is supported by donations from individuals, foundations, cor-
porations, and partnerships. If you are interested in supporting the research pro- Charles B. Johnson
grams of the Hoover Institution or the Hoover Library and Archives, please contact
the Office of Development, telephone 650.725.6715 or fax 650.723.1952. Gifts to the Tad and Cici Williamson
Hoover Institution are tax deductible under applicable rules. The Hoover Institution is
part of Stanford University’s tax-exempt status as a Section 501(c)(3) “public charity.”
Confirming documentation is available upon request.
HOOVER DIGEST RESEARCH AND OPINION ON PUBLIC POLICY
HOOVER DIGEST · 2011 · N O . 2 RESEARCH AND OPINION
ON PUBLIC POLICY
2011 • NO. 2 • SPRING
Politics
The Economy
Growth of Government
Labor
National Security and Defense
Education
Health and Medicine
California
Egypt
Afghanistan
Israel
Russia
China
Interviews
Values
History and Culture
Hoover Archives
2011 . NO. 2
T H E H O O V E R I N S T I T U T I O N • S TA N F O R D U N I V E R S I T Y

Hoover Digest, 2011, No. 2, Spring

Caricato da

Informazioni sul documento

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Hoover Digest, 2011, No. 2, Spring

Caricato da

Copyright:

Formati disponibili

HOOVER DIGEST RESEARCH AND OPINION ON PUBLIC POLICY

HOOVER DIGEST · 2011 · N O . 2 RESEARCH AND OPINION

National Security and Defense

Health and Medicine

History and Culture

• Analyze the effects of government actions relating to public policies

23 Hold the High Ground

27 Focus on the Fed

Hoover Digest N 2011 · No. 2

G row th o f Govern m ent

41 The Budget Binge that Never Was?

N ational S ecurit y and D efense

52 Armed with the Odds

61 Why We Spend What We Spend

Hoover Digest N 2011 · No. 2

70 Your Child Left Behind

77 Spoken Like a World Citizen

H ea lth and Medicine

87 Brown and Blue

92 Tyranny Is Not the Arabs’ Fate

Hoover Digest N 2011 · No. 2

102 The Gates Maneuver

107 The Palestinian Proletariat

120 Why Israel Is Shunned

123 Of Comrades and Capos

Hoover Digest N 2011 · No. 2

138 China at Sea

155 The Audacity of Gimmicks

163 A Most Ingenious Trick

Hoover Digest N 2011 · No. 2

174 The Multiple Futures of the Middle East

185 The Man from Kinderhook

188 Once a Marine, Always a Marine

192 A Room Alive with Memories

204 On the Cover

Hoover Digest N 2011 · No. 2

The American people did not give power to congressional Republicans;

Keith Hennessey is a research fellow at the Hoover Institution and a lecturer

Hoover Digest N 2011 · No. 2 9

1. Give priority to medium-term problems caused by the government

10 Hoover Digest N 2011 · No. 2

Hoover Digest N 2011 · No. 2 11

6. Don’t delink income-tax rates. The strategy we developed in 2001

12 Hoover Digest N 2011 · No. 2

9. Now that cap-and-trade is dead, build a supermajority to stop

Hoover Digest N 2011 · No. 2 13

Available from the Hoover Press is Eight Questions You

14 Hoover Digest N 2011 · No. 2

It was last spring when President Obama brought together a group of

Fouad Ajami is a senior fellow at the Hoover Institution, co-chairman of Hoover’s

Hoover Digest N 2011 · No. 2 15

To their credit, ordinary Americans caught in the grip of a terrible

children’s burden of debt.

A president steeped in history would have never pushed ObamaCare on

16 Hoover Digest N 2011 · No. 2

Hoover Digest N 2011 · No. 2 17

A president steeped in history would never have pushed ObamaCare on so

thin a reed of public approval.

18 Hoover Digest N 2011 · No. 2

Hoover Digest N 2011 · No. 2 19

20 Hoover Digest N 2011 · No. 2

Quite a few professional thinkers underestimated what the conservative

tradition rightly emphasizes: the high degree of unpredictability in human

These responsibilities include putting people to work and reigniting