DAVOS, Switzerland -- In this tiny skiing resort village that once a year at about this time bears the overwhelming burden of having to host thousands of success-crazed egomaniacs from all over the world, the name of the game here is competition.
There is competition at the World Economic Forum for parking space, for admission to the hot panels, for decent hotel rooms, even for outside phone lines. There is also competition among corporations eager to catch the eye of the world by impressing these prominent globe trotting WEF delegates with their amazing excellence. And there is even competition among nations for high approval ratings for their national policies from many of the economists, CEOs, media specialists and academic experts.
Perhaps no competition is more intense, in a very real if low-key sort of way, than the one between Japan and China. And while there may be no clear winner this year, the image edge would have to go to China, even in this Davos forum, which scarcely treasures communist ideology.
The reason is that at Davos certain standards of achievement are held in higher regard than others. Undoubtedly for this year, the overriding Davosian emphasis is on domestic economic reform and the use of the Internet for e-commerce and business efficiency.
In one valuable session Friday titled “Revamping the Japanese Model,” Japan was raked over the coals-- and several of the rakers were themselves Japanese. The political system was trashed as inflexible if not moribund; and the nation’s internal economic reforms were adjudged to be, with some exceptions, tepid and tentative. Worst of all, Japan was knocked for being maddeningly slow to make full use of computer technology and the Internet, which at Davos are economic factors regarded as akin to godliness. Personal computer penetration in Japan is only 11%; the number of computer users per capita is only one-third of what it is in the United States.
By contrast, China, despite the fact that it is an infuriatingly bureaucratic communist single-party state, is getting the better reviews. Its government received praise for sticking with its own tailor-made reform program and avoiding the importation of one-size-fits-all International Monetary Fund reform schemes. It won applause for not devaluing the currency, keeping inflation under control, preventing capital flight that can devastate a country and avoiding the kind of “Bolshevik shock therapy” that has virtually brought Russia to its knees. Indeed, over the past 20 years, WEF participants were told, China increased per capita income four-fold, while Russia saw a decline by a third. Internet usage is up all over Asia, but the rate of growth is most furious in China.
It was not lost on the Davosians that China has a very long way to go before it is even remotely in the same economic league as Japan, which for all its problems is still the world’s number two economy. Indeed, China is thoroughly absorbed at getting enough food on the tables of its 1.3 billion people and making sure there are roofs over all their heads.
That means its economic strategy remains glued to low-tech, labor-intensive industry -- in large part because in China there is such an abundance of cheap labor. And right now that’s China’s competitive advantage in this global marketplace. This society is not in any serious sense a technology leader.
In addition, Japan is starting to wise up to their Internet disadvantage. One major telecom provider is signing up something like 20,000 new accounts a day.
The Japanese are now marketing hand-phones that can access the Internet with a simple push of the button. E-commerce may be on the verge of an explosion as retailers are delivering goods via orders placed via the Internet.
Hitotsubashi University is aiming to become globally competitive with the MITs of the world by launching an English-language MBA program targeted at the smartest business whiz kids in Asia.
But high access costs and cultural difficulty with the English language continue to pose serious challenges for Japan. By contrast, the European Union is wiring up so fast, it could leave Japan behind in the dust. And down the road China, that slow but steady turtle, may finish high up on the world economic ladder, especially if the Jiang-Zhu team remains at the helm.
It’s true that China’s hierarchical and starchy political culture is struggling to repress the logical implications of the Internet’s tendency to promote unstructured dialogue, thought and communication. But in the end the censors will lose the battle: Forced to choose between economic success and ideological purity, pragmatism will win out. The West would err badly if it underestimates the fierce commitment of the current government to bring their country out of the economic stone age and into the globalized dot.com world. That’s the kind of money-talking policy the people at Davos love to hear.
[Editor's Note: The first top-level international meeting of 2000 opened on Wednesday in Davos with the 30th Annual Meeting of the World Economic Forum. Defining the future of the Asian business model, a panel including Rudiger Dornbusch, professor of economics at Massachusetts Institute of Technology, and Fan Gang, director of China's National Economic Research Institute, will discuss topics on Friday including -- is the region moving toward developing a "new economy" of its own? It is the first gathering of the 21st Century of some 3,000 political/civil society, global business, scientific, academic and media leaders. Theme of the Annual Meeting 2000 is New Beginnings: Making a Difference. Tom Plate is Director and Founder of the Asia Pacific Media Network, a regional alliance of blue-chip news-media institutions. Professor Plate is a public policy ethicist at UCLA. Asia Pacific is edited by Alice Wu. She may be contacted at Email firstname.lastname@example.org -- Prof. Plate's Email is email@example.com].
2000 Copyright, The Asia Pacific Media Network
WASHINGTON -- Following the last State of the Union address to ever be deliverd by President William Jefferson Clinton, Senator Collins, stated that -- Our Republican agenda is driven by the simple but powerful truth that America will continue to lead the world as long as our government allows opportunity, initiative and freedom to flourish. Letting people create what they can dream has transformed our economy.
As we reflect on our economic health, we should never forget that America's recent success is, above all, a triumph of values. Americans will never let our country become rich in things and poor in spirit.
The achievements of the "dot-com" generation rest on the foundation built by our parents and grandparents. They prevailed through the Depression, defeated the force of fascism and made personal freedom the hallmark of countries around the globe.
To pay tribute to those great Americans on whose shoulders we stand, we are honor-bound to keep our promise to protect Social Security. Last year, for the first time in 39 years, the federal budget was balanced without dipping into the Social Security trust fund.
We'll do it again this year, and we'll pay down even more of the national debt. We've already paid off $150 billion in the last two years. Now, our goal is to eliminate the $3.6 trillion debt entirely in the next 15 years.
To promote job growth, we'll continue to help our small businesses. That means reducing burdens like the federal "death tax" -- so that when parents work their whole lives to leave their children a family business, it won't have to be sold just to pay the I.R.S.
Taxes, in general, are simply too high. We will continue to fight for tax relief for American families so that they can keep more of what they earn.
We'll honor our commitment to our brave men and women in uniform. Last year the Republican Congress approved the largest increase in military pay in more than a decade. And to protect our country from terrorist nations, we will build a shield against missile attack.
As important as all these issues are, there's something else that is vital to securing our future, and that is education.
We live in a time of unparalleled prosperity. But between Silicon Valley and Wall Street, many Americans still live in the shadows of the new prosperity. New technologies, unimagined a decade ago, provide exciting opportunities for some but pose unsettling challenges to others.
As we enter the 21st century, every young American must be educated to adapt to a changing workplace, and many in our current work force must be provided with new skills to succeed in the new economy.
A good education is the ladder of opportunity. It turns dreams into reality. That's why education is at the top of the Republican agenda.
Tonight I ask the president to join with Republicans in our commitment to bring a good education to all our children. Our four-point plan for educational excellence will ensure that all children have an equal opportunity to reach their full potential.
First, we will continue to increase federal funds for elementary and secondary education. Last year the Republicans boosted education spending by $500 million more than the president's budget, and we added funds for children with special needs.
Second, rather than Washington dictating to communities how they should run their schools, we should listen to those who know best: our parents, teachers and local school boards.
The debate in Washington is not about money. It is about who makes the decisions. We need a change of approach -- one that recognizes that local schools, not Washington offices, are the heart and home of education. We will empower states and communities to use federal education dollars in the ways children need most.
Republicans want what all parents want for their children's schools: more federal help but less federal interference. Instead of imposing a one-size-fits-all straitjacket, our plan recognizes that one community may need more math teachers while another may need better reading programs -- and still others, new computers. It should be your community's decision, not Washington's.
In return for that flexibility, the Republican plan requires real accountability -- not more paperwork, but better results. Schools will be held responsible for what is truly important -- improving student achievement.
Third, our plan will strengthen teaching excellence. America's teachers need our help. About one-third of our new teachers get so discouraged that they leave the profession. Many are prevented from doing their very best because they don't have a chance to get enough training in the subject they teach.
We will increase federal grants to states and communities and give them the freedom to use that money to better prepare, recruit and retain good teachers. The lessons are clear -- we must encourage talented people to choose teaching as a career and keep them in the classroom.
Fourth, our plan will continue the longtime Republican support for higher education. Last year we increased Pell grants and student loans to open the doors to college for more low- and middle-income families. This year we will increase the amount that families can contribute to education savings accounts to make higher education more affordable.
Education today is America's broad band to the fixture -- a powerful conduit for achievement and success. Let us work together to ensure that all Americans have the educational opportunity for a bright fixture.
Senator Frist then add his comments -- I'm a senator from the state of Tennessee, but I've spent the better part of my life working in hospitals, caring for people with heart disease.
I've learned a lot by listening to my patients and to the people who work in hospitals.
Earlier tonight we heard the president talk about his latest health care proposals. The last time he proposed a health plan was seven years ago. And then it amounted to a federal government takeover of our entire health system. It would have forced every American into a Washington-run H.M.O. and denied them the right to choose their own doctor.
In the end, thank goodness, it was soundly defeated by Democrats and Republicans alike.
Now tonight, 84 months later, the president has unveiled a similar plan just as bad as the first. It makes government even bigger and more bloated because each new program we heard about tonight -- and there were about 11 of them in health care alone -- comes with its own massive bureaucracy. And each will cost you, the taxpayer, billions more of your tax dollars -- more than $1,000 for every man, woman and child.
During my surgical fellowship, I worked in England for the British National Health Service, and I saw firsthand the rationing, the lack of choice, the long waits and the denial of care for seniors.
I learned that socialized medicine -- whether in England or in Canada, where patients are fleeing to the U.S. for treatment -- just does not work.
In fact, if David Letterman had lived in Canada, he'd still be waiting for his heart surgery.
But I think we all know that America's health care system can be better. Costs are climbing. Too many people can't get insurance or breakthrough drugs. Too many heavy-handed H.M.O.'s tell doctors how to do their jobs.
And yet, we should remember that Americans still enjoy the best and most advanced health care in the world. That's why people from all over the globe come here for the latest treatments. If you have diabetes or arthritis or high blood pressure, chances are your medicines weren't even around 10 years ago. Today we live longer, and stay healthier, than ever before.
So a lot is good. A lot is working. But we still have to make it even better.
As Republicans in Congress, we're determined not to be guided by bigger government, but by your freedom to choose your kind of health care and to select the doctor of your choice. Already because of Republican efforts, five million more children now have access to health care; if you change jobs, you can now take your health insurance with you; new mothers can leave the hospital when their doctor, not some bureaucrat, says they're ready. And we're doubling medical research for more and better cures. A great start, but not enough.
As a doctor, I've cared for thousands of seniors. I know Medicare is their lifeline, their security.
But this 35-year-old program, with 130,000 pages of regulations, creates waste and abuse and leaves our seniors with confusing red tape and heartache. Worst of all, Medicare doesn't even include the mainstay of modern medicine -- outpatient prescription drugs.
The answer is NOT government-dictated price controls that stop life-saving research, or forcing the 65 percent of seniors who now have drug coverage to pay more or give up what they have.
Instead, both Republicans and Democrats in Congress have come together with a plan to build on two simple principles: choice and security. It lets people choose the type of medical plan that is best for them, including prescription drugs. No senior citizen, no mother, no person with a disability, will ever be told by a bureaucrat what plan to pick, what doctor to see or what service they can receive.
But just last year the president said "no" to this plan, put forth by the National Bipartisan Medicare Commission -- the very commission the president and Congress appointed to save Medicare.
However, I'm proud to say that I've asked for and received full assurances today from our majority leader, Trent Loft, that he is prepared to bring this needed bipartisan legislation to the Senate floor within two weeks. For this to happen, Mr. President, all we need is for you to tell the American people, "Yes," to this Democrat and Republican plan to fix Medicare.
And tonight, to show you that we are sincere and that we mean business, Republicans take a first step toward making Medicare stronger. To guarantee that seniors can rely on Medicare forever, we will add it to the Social Security lockbox, which will lock away the surplus for both Social Security and Medicare. We will not let anyone spend your Medicare money.
We believe that neither H.M.O.'s nor the government should be practicing medicine. That's why Congress will, for the first dare, send the president a real "patients' bill of rights" with strong patient protections. In our plan, if you're denied the treatment that you and your doctor decide is right, you'll get a quick appeal to an independent doctor.
Unlike the president, we see lawsuits as a last resort, not the first. Because as every American knows, your sick child needs to see a doctor, not a lawyer.
During the Clinton years, the number of individuals without health insurance has increased by six million people. But with the plan we announced yesterday, we will finally make it easier for low- and middle income families to buy the coverage of their choice.
I believe we will dramatically improve medical care in America. How could anyone not be hopeful, with what we've seen? Just look at our ability to correct heart defects in children, halt the progression of osteoporosis and treat breast and prostate cancer.
Soon we'll see revolutionary new treatments for conditions like Alzheimer's, sickle cell anemia and schizophrenia.
But all of these innovations require freedom, because progress and freedom go hand in hand.
You know, my father was a family doctor for 55 years. As a young boy making house calls with him, I remember his stethoscope, his doctor's bag and best of all, his wonderful and compassionate heart. But these were his only tools. Just one generation later, he would join me on my rounds and he'd witness the miraculous new technologies and medicines that allowed us to transplant hearts and to give new life.
It's all possible because Americans are blessed with the spirit to dream, the freedom to explore and the work ethic to produce.
And so tonight, Mr. President, I ask you to put your trust in the American people -- in their creativity, in their resourcefulness, in their ability to achieve -- free of government interference.
Mr. President, please, no more red tape. Instead, give us a health care plan that includes choice and security.
The American people deserve no less.
On behalf of Senator Collins and myself, thank you for being with us. Good night, and may God bless all of you and our great nation.
2000 Copyright, The Daily Republican Newspaper. All rights reserved.
SAN DIEGO -- With Taiwan and the U.S. both electing presidents this year, Washington must steer a 'just right' course with Beijing.
America needs a sense of balance about China. So here's an idea. Just as the U.S. economy has been called a "Goldilocks" economy -- not so overheated as to generate inflation, not so cool as to sink into recession -- America needs something like a Goldilocks Policy for relating to China: neither too chummy nor too aloof but just right.
Balance surely would help, agrees noted RAND security analyst Michael Swaine, author of an important new monograph on U.S. policy toward Taiwan and co-author of a new RAND book "Interpreting China's Grand Strategy". But he gets real irritated with politicians, academics and journalists (like me) who try to compress the complex China relations question into a snappy slogan or catch-all phrase. America should be done with those one-word labels, such as containment and constrainment, or strategic alliance and strategic competition: "We should treat China like a great power, period," says Swaine, "but without appeasement."
China is a lot easier for Americans to hate than to love, but it's hard to know what to feel about the astonishing corruption scandal that surfaced last week.
Like China analysts all over the world, Swaine watched with fascination as the international news media reported the mind-boggling story of colossal corruption in the Chinese port city of Xiamen, only 100 miles off Taiwan's shore. The bootlegging and smuggling network, headed by party and government officials in the south eastern coastal province of Fujian, looks to be the biggest such scandal since the founding of the People's Republic of China in 1949.
That it was made public at all appears to be a political achievement for Premier Zhu Rongji, champion of an anti-corruption offensive designed to pare down the rot and make Beijing more competitive in this globalized world.
For a preeminent China expert like Swaine, these embarrassing public revelations offer further proof of the leadership's preoccupation with economic growth, and the de-prioritization of almost everything else. This even includes the volatile issue of Taiwan, which will elect a new president in March. Beijing regards the island as a disrespectful wayward son that must -- some day -- be returned to the family fold.
But "the disincentives for the Chinese to invade are high," reasons Swaine. "They will only do it if they have no choice." Taiwan doesn't want war with China either. It could not hold out alone for long, so Taiwan's survival would ultimately require intervention by U.S. forces, a scenario the U.S. military would much rather avoid.
Swaine believes that the United States will create serious problems for itself with Beijing, now and in decades to come, if it moves into a closer strategic relationship with Taiwan. "It's not that we shouldn't get closer to Taiwan simply because Beijing doesn't like it," he explains. Instead, we should avoid strategic intimacy because "in the cost-benefit analysis we gain more by not doing too much than if we do."
Transforming the U.S.-Taiwan relationship into an outright, explicit, formal alliance, as some in Congress actually want, would not enhance the island's security but rather undermine it. That's because it would uproot Beijing's stake in improving its relationship with America, a Beijing priority that keeps its Taiwan ambitions in check. "Please understand what the Taiwanese authorities are doing when they request more high-profile arms than they can possibly use anyway," warns Swaine. "It's a mistake to make them look like a formal ally, like South Korea or Japan. Besides, they're not."
That both the Taiwan and the United States are electing new presidents this year could trigger major debates and policy reviews. We need to convey a consistent and clear message that the American people want to get along with the Chinese people, but at the same time the American people don't want to see Taiwan kicked around. Yes, the new Taiwan president needs to protect the interests of his people, who on the whole want no part of the Beijing regime.
But that must be achieved without goading Beijing into a course of action that will lead to tragedy for everyone involved. Swaine argues that China is at least 15 to 20 years of major economic development and military buildup away from having the capability to become anyone's worst nightmare. That should give America and China enough time to get the relationship right or mess it up for time immemorial.
Anticipating the historic upcoming vote in Congress to grant China permanent normal-trading status, a congressman involved quipped that the vote would be close in part because: "This is not a date, this is a marriage."
Not quite. We have serious differences with many of nations to whom we have granted normal-trading status. Trying to create a relationship with China is far more an exercise in prudence than polygamy. Yes, the U.S. needs a steady policy without extremes: one that is "just right."
[Editor's Note: Tom Plate is Director and Founder of the Asia Pacific Media Network, a regional alliance of blue-chip news-media institutions. Professor Plate is a public policy ethicist at UCLA. Asia Pacific is edited by Alice Wu. She may be contacted at Email firstname.lastname@example.org -- Prof. Plate's Email is email@example.com].
2000 Copyright, The Asia Pacific Media Network
WASHINGTON -- Western civilization began on the shores of the Mediterranean. The world's cultures still meet there, at the nexus of political East, West, North, and South. It's a place of synthesis and conflict, where Europe, North Africa, the Middle East and Eurasia struggle to define the world's new order.
In a report, published this week in Mediterranean Quarterly it was disclosed for the first time that the largest group of delegates at the 1945 conference that created the United Nations was not from Harvard or Oxford, but from the American University of Beirut. This places university academics from Europe and the Middle East at ground-zero in the original inception of the controversial international agency. This fact goes a long way in explaining the underlying conflicts the UN has been emersed in since 1945.
The Greek educational system, like those of many European nations, is highly centralized, focused on career training more than liberal learning, and based on slavish concentration on a single examination as the sole determinant of academic success.
While degrees from Anatolia are not recognized in Greece, and its graduates are thus excluded from public-sector jobs, Greek students are flocking to the college because its liberal-arts education provides them with a better chance at admission to graduate schools in other countries.
Despite such success, U.S. support for the institutions has fallen in the wake of the cold war. These schools provide some continuity and a fabric of shared values and loyalties that the Clinton administration has relied upon to shore-up relations with key states like Greece or Egypt.
Today, with the emerging new international order and in the face of widespread resentment with the concept of a single superpower pervasive, these universities are a power not to be taken lightly.
[Editor's Note: Dr. Jackson is a former foreign-service officer who is president of Anatolia College, in Greece. The articles in Mediterranean Quarterly express the individual opinions of their authors and do not represent the viewpoints of the journal or its editors. MQ is committed exclusively to bringing its readers a universal spectrum of subjects with thoughtful opinion by men and women of established reputations in their respective fields. The article is not available online, but information about the journal may be found at http://users.erols.com/mqmq/].
2000 Copyright. The Daily Republican Newspaper. All rights reserved.
WASHINGTON -- The Clinton administration says ``reinventing government'' has saved $137 billion. Republicans dispute that. Three yeatrs ago, Senator fred Thompson, R-Tenn, cited the General Accounting Office in pointing to 25 areas of government operations that we must focus on to avoid squandering billions of taxpayer dollars. As of today, despite the Clinton's administration's reports of record level tax surpluses, the major areas of government waste, fraud and abuse are still going strong.
GAO reports that DOD wastes billions of dollars each year on unneeded and inefficient activities, is vulnerable to additional billions of dollars in waste by buying unnecessary supplies and risks overpaying contractors millions of dollars for services not rendered.
It reports that the Internal Revenue Service's accounting is so poor that it cannot effectively manage the collection of the over $113 billion owed the U.S. Government in delinquent taxes. In addition, GAO again criticizes the management of the IRS' computer modernization effort. Just last week, certain IRS officials conceded that this `modernization' has already cost the taxpayers $4 billion and `does not work in the real world'.
IRS is not the only Federal agency having a problem coming to grips with the electronic age. Over the last 6 years, the Federal Government has spent $145 billion on computers but continues to have, according to GAO, `chronic problems harnessing the full potential of information technology to improve performance, cut costs, and enhance its responsiveness.'
The security of sensitive data on Government computers and how well the Government converts its old computers to run in the 2000 were also identified by GAO as areas that posed a risk to the Treasury.
Making matters worse, billions of dollars in waste, fraud, and abuse occur in Federal benefit programs. GAO reports, in the supplemental security income program alone, taxpayers are losing over $1 billion a year in overpayments. The $197 billion Medicare Program, according to GAO `loses significant amounts due to persistent fraudulent and wasteful claims and abusive billings.'
The risk of losses from the $941 billion Federal loan portfolio is another source of taxpayer vulnerability. Currently, the Clinton administration has $44 billion of defaulted guaranteed loans on its books and has written off many billions more over the last few years. According to GAO, three loan programs (student, farm, and housing) are especially vulnerable due to poor agency management.
GAO also calls for improving Federal contract management at several agencies that spend tens of billions of dollars each year on contractor support.
Finally, the 2000 census was placed on the high risk list. The census has tremendous implications in the allocation of billions of dollars in Federal funding and for the apportionment of seats in the House of Representatives.
However, GAO was not all doom and gloom acknowledging that, `after decades of seeing high risk problems and management weaknesses recur in agency after agency,' Congress has moved to enact several Government -wide reforms to address the situation. GAO mentions five such laws as key to improving operations in the Federal Government -- the Chief Financial Officers Act of 1990, the Government Performance and Results Act of 1993, the Federal Acquisition Streamlining Act of 1994, the Paperwork Reduction Act of 1995 and the Clinger-Cohen Act information management and procurement reforms of 1996.
These laws are designed to get the Federal Government to operate in a sound, businesslike manner. It is up to Congress and the administration to ensure that these management reforms are implemented to improve Government performance and results.
Citizens Against Government Waste says $625 billion has been saved since 1984, when the Reagan-era Grace Commission made recommendations. Schatz, the group's president, said that's not very much, considering that the savings took 15 years.
``A lot of things get done, get undone and get redone,'' he said. ``It's very difficult to get rid of a program entirely.''
Waste, fraud and abuse has been a favorite theme of presidents Clinton and Reagan and earlier administrations, and congressional Republicans hope that resurrecting it will boost their prospects at the polls in November.
House Budget Committee Chairman John Kasich, R-Ohio, plans to kick off the campaign this week with a report chronicling more than $19 billion in waste he calls ``just the tip of the iceberg.''
``We will begin to eliminate the rampant waste, fraud and abuse that plagues so much of the federal bureaucracy,'' House Majority Whip Tom DeLay, R-Texas, declared last week.
While that promise would seem as popular as defending motherhood and apple pie, the effort faces daunting challenges.
Republicans haven't decided just how to do it, with GOP senators less enthusiastic than their House counterparts about the campaign. For example, Kasich's study derives its entire $19 billion in waste from Medicare, food stamps and other popular benefits that many Republicans are reluctant to be seen as criticizing in an election year.
In addition, the political payoff may be limited because Democrats say they won't be outmaneuvered and will join in eliminating any valid problems uncovered.
``I don't think we should lose sight of the problem just because we have burgeoning surpluses,'' said Rep. John Spratt of South Carolina, ranking Democrat on the Budget Committee.
And with government waste often in the eyes of the beholder, powerful constituencies in and out of Congress frequently succeed in protecting targeted programs. This leads analysts to question whether much will be achieved beyond rhetoric.
``In terms of actually getting something done, I think it's problematic because it's an election year,'' said Tom Schatz, president of the conservative Citizens Against Government Waste.
Even so, DeLay and House Speaker Dennis Hastert, R-Ill., promise to move forward. They have no specific strategy beyond Kasich's report and his plans to hold a hearing on it next month.
Republicans want to cut spending in part to bank as many savings as they can to pay for their cherished tax cuts.Casting spending reductions as slicing government waste can provide them with a rationale for paring the budget, even as vast surpluses have left voters feeling little urgency to make cuts. In a poll this month by the nonpartisan Pew Research Center, cutting federal spending did not rank in the top 20 when people were asked to list the nation's priorities.
The GOP effort also could soften the image of a party that in years past has sought to abolish entire agencies, including the Education Department. ``There's more political popularity to reducing waste, fraud and abuse than there is to reducing the size of government,'' said Marshall Wittmann, congressional affairs director for the conservative Heritage Foundation.
Another partisan benefit: The crusade implicitly blames the problem on the Clinton administration. That includes the leading Democratic presidential contender, Vice President Al Gore, who led a ``reinventing government'' effort begun in 1993 that the White House says has cut more than 350,000 federal jobs.
But Kasich's committee said the number of government agencies at high risk of wasteful spending has grown during that period. ``The Republicans are being an echo to Al Gore's voice,'' Gore campaign spokesman Chris Lehane countered, citing successes in streamlining government.
Erasing waste, fraud and abuse will join other GOP themes this year on Capitol Hill, including cutting taxes, reducing the national debt and protecting Social Security.
It is hard to say definitively how successful past efforts to trim waste have been, largely because there is no objective, non-political way to do so.
[Editor's Note: Send E-mail complaints or reports of government fraud and abuse to the GAO E-mail address. Exercise discretion in sending sensitive material via E-mail. Provide as much detail as possible concerning the who, when, where, what, how and how much. You do not need to provide your name (confidentiality). However, please note the privacy disclaimer if you use a FraudNET Form to report allegations.]
1999 Copyright. The Daily Republican Newspaper. All rights reserved.
WASHINGTON -- In the brief period since William Bennett's Index appeared, we have experienced what seems to be a remarkable turnaround.
Crime, including violent crimes and those against property, has decreased by more than 15 percent nationally; the murder rate in New York City has declined to levels not seen since the mid-1960s.
Divorce rates, which had already begun a downward trend in the 1980s, continue on that path. Starting in 1995, the illegitimacy rate ceased its upward climb and began to decline slightly.
The teenage pregnancy rate dropped eight percent between 1991 and 1996; among black teenagers, it fell 21 percent.
Welfare caseloads have dropped by as much as a quarter nationally, and states at the forefront of welfare reform, such as Wisconsin, have seen astonishing reductions of up to 75 percent.
Americans' general level of trust in their institutions and in one another, though difficult to gauge, has risen. In 1991, for example, only 15 to 20 percent of Americans said they trusted the federal government to do the right thing most of the time; by the end of the decade that percentage had rebounded to between 25 and 30 percent.
What are we to make of these improvements? Are Americans at century's end being blessed not only with a booming stock market and a near full-employment economy but a restoration of cultural health as well?
Many conservatives, notably social scientist Charles Murray and historian Gertrude Himmelfarb, don't think so. The changes, they argue, are too shallow and recent they may be the product of more jails and stiffer sentencing rather than any true improvement in moral behavior.
One conservative activist, Paul Weyrich of the Free Congress Foundation, was thrown into such despair last summer by the public's refusal to repudiate President Bill Clinton despite a sex scandal and impeachment proceedings that he publicly declared that Americans have never been more degenerate than they are today.
But conservatives are wrong to dismiss the good news contained in the social statistics. In fact, there has been a shift back to more traditional social values, and they should take credit for helping to bring it about.
It would be a mistake to become complacent, or to think that our social and cultural problems are now behind us. But there is good reason to think that American society is undergoing a degree of moral regeneration.
There is still a great deal of confusion over the sources of moral decline, however, and over the nature of moral renewal. Liberals need to confront the reality of moral decline and the importance of socially beneficial, less self-centered values.
Conservatives have to be realistic and recognize that many of the developments they dislike in contemporary society are driven by economic and technological change--change brought about by the same dynamic capitalist economy they so often celebrate.
Moral decline is not a myth or a figment of the nostalgic imagination. Perhaps the most important conservative achievement over the past couple of decades was to convince the rest of American society that these changes had occurred, that they reflected a disturbing shift in values, and that consequently not every social problem could be addressed by creating a new federal program and throwing money at it.
This reconception of social problems began with two large government-funded studies published in the mid-1960s: Daniel Patrick Moynihan's report, The Negro Family: The Case for National Action (1965), and James Coleman's Equality of Educational Opportunity (1966). Moynihan, then working for the U.S. Department of Labor, argued that family structure, and in particular the absence of fathers in many African American homes, was directly related to the incidence of crime, teenage pregnancy, low educational achievement, and other social pathologies.
Coleman's study showed that student educational achievement was most strongly affected not by the tools of public policy, such as teacher salaries and classroom size, but by the environment a child's family and peers create.
In the absence of a culture that emphasizes self-discipline, work, education, and other middle-class values, Coleman showed, public policy can achieve relatively little.
Once published, the Moynihan report was violently attacked. Moynihan was accused of "blaming the victim" and seeking to impose white values on a community that had different but not necessarily inferior cultural norms.
Liberals at first denied the reality of massive changes in family structure, and then fell back on the argument that single-parent households are no worse from the standpoint of child welfare than traditional ones--the kind of argument Moynihan was later to label "defining deviancy down."
By the early 1990s, however, conservatives had largely won the argument. In 1994, the publication of Sara McLanahan and Gary Sandefur's book Growing Up with a Single Parent (1994) made the social science community's shift more or less official.
The two well-respected sociologists found that a generation's worth of empirical research supported Moynihan's basic conclusion: growing up in a single-parent family is correlated with a life of poverty and a host of other social ills.
Few Americans understand that they were not alone in experiencing these changes. All of the industrialized countries outside Asia experienced a massive increase in social disorder between the 1960s and '90s--a phenomenon that I have called the Great Disruption of Western social values.
Indeed, by the 1990s Sweden, the United Kingdom, and New Zealand all had higher rates of property crime than the United States. More than half of all Scandinavian children are born to unmarried mothers, compared with one-third of American children. In Sweden, so few people bother to get married that the institution itself probably is in long-term decline.
While conservatives won their case that values had changed for the worse, they were on shakier ground in their interpretation of why this shift had occurred.
There were two broad lines of argument. The first, advanced by Charles Murray in his landmark book Losing Ground (1984), argued that family breakdown, crime, and other social pathologies were ultimately the result of mistaken government policies.
Chief among them was Aid to Families with Dependent Children (AFDC), which in effect subsidized illegitimacy by paying welfare benefits only to single mothers.
But there were other causes, such as new court-imposed constraints on police departments won by civil libertarians. In this interpretation, any improvement in social indicators today must be the result of the unwinding of earlier social policies through measures such as the 1996 welfare reform bill.
The second conservative line of argument held that moral decline was the result of a broad cultural shift. Former federal judge Robert Bork, for example, blamed the 1960s counterculture for undermining traditional values and setting the young at war with authority.
Others, such as philosopher John Gray, reached further back in time. They revived the arguments of Edmund Burke and Joseph de Maistre, tracing moral decay to an Enlightenment commitment to replacing tradition and religion with reason and secular humanism.
While there is more than a germ of truth in each of these interpretations, neither is adequate to explain the shift in values that occurred during the Great Disruption. Detailed econometric studies seeking to link AFDC to illegitimacy have shown that although there is some causal connection, the relationship is not terribly strong.
More important, illegitimacy is only part of a much broader story of family breakdown that includes divorce, cohabitation in place of marriage, declining fertility, and the separation of cohabiting couples. These ills cut across the socioeconomic spectrum and can hardly be blamed on a federal poverty program.
The second line of argument, which sees moral breakdown as a consequence of a broad cultural shift, is not so much wrong as inadequate. No one who has lived through the last several decades can deny that there has been a huge shift in social values, a shift whose major theme has been the rise of individualism at the expense of communal sources of authority, from the family and neighborhood to churches, labor unions, companies, and the government.
The problem with this kind of broad cultural explanation is that it cannot explain timing. Secular humanism, for example, has been in the works for the past four or five hundred years.
Why all of a sudden in the last quarter of the 20th century has it produced social chaos?
The key to the timing of the Great Disruption, I believe, is to be found elsewhere, in changes that occurred in the economy and in technology. The most important social values that were shaken by the Great Disruption are those having to do with sex, reproduction, and the family.
The reason the disruption happened when and where it did can be traced to two broad technological changes that began in the 1960s. One is the advent of birth control. The other is the shift from industrial to information-based economies and from physical to mental labor.
The nuclear family of the 1950s was based on a bargain that traded the husband's income for the wife's fertility: he worked, she stayed home to raise the family. With the economy's shift from manufacturing to services (or from brawn to brains), new opportunities arose for women. Women began entering the paid labor force in greater numbers throughout the West in the 1960s, which undid the old arrangement.
Even as it liberated women from complete dependence on their husbands, it freed many men from responsibility for their families. Not surprisingly, women's participation in the labor force correlates strongly with divorce and family breakdown throughout the industrialized world.
The Pill reinforced this trend by shifting the burden of responsibility for the consequences of sex to women. No longer did men need to worry greatly if their adventures led to pregnancy.
One sign of this change was found by economists Janet Yellen, George Akerlof, and Michael Katz. Between the 1960s and '90s, the number of brides who were pregnant at the altar declined significantly. The shotgun wedding, that ultimate symbol of male accountability, is increasingly a thing of the past. Humans share a fundamental trait with other animal species: males are less selective in their choice of sexual partners than females, and less attached to their children.
In humans, the role that fathers play in the care and nurture of their children tends to be socially constructed to a significant degree, shaped by a host of formal and informal controls that link men to their families. Human fatherhood is therefore more readily subject to disruption. The sexual revolution and the new economic and cultural independence of women provided that disruption.
The perfectly reasonable desire of women to increase their autonomy became, for men, an excuse to indulge themselves. The vastly increased willingness of men to leave behind partners and children constitutes perhaps the single greatest change in moral values during the Great Disruption. It lies at the core of many of the period's social pathologies.
What are the chances of a moral renewal? What are its potential sources? Renewal must be possible. While conservatives may be right that moral decline occurred over the past generation, they cannot be right that it occurs in every generation. Unless we posit that all of human history has been a degeneration from some primordial golden age, periods of moral decline must be punctuated by periods of moral improvement.
Such cycles have occurred before. In both Britain and the United States, the period from the end of the 18th century until approximately the middle of the 19th century saw sharply increasing levels of social disorder.
Crime rates in virtually all major cities increased. Illegitimacy rates rose, families dissolved, and social isolation increased. The rate of alcohol consumption, particularly in the United States, exploded. But then, from the middle of the century until its end, virtually all of these social indicators reversed direction.
Crime rates fell. Families stabilized, and drunkards went on the wagon. New voluntary associations--from temperance and abolitionist societies to Sunday schools--gave people a fresh sense of communal belonging.
The possibility of re-moralization poses some large questions: Where do moral values come from, and what, in particular, are the sources of moral values in a postindustrial society?
This is a subject that, strangely, has not received much attention. People have strong opinions about what moral values ought to be and where they ought to come from. If you are on the left, you are likely to believe in social equality guaranteed by a welfare state.
If you are a cultural conservative, you may favor the authority of tradition and religion. But how values actually are formed in contemporary societies receives little empirical study.
Most people would say that values are either passed along from previous generations through socialization (which fails to explain how change occurs) or are imposed by a church or other hierarchical authority. With the exception of a few discredited theories, sociologists and cultural anthropologists haven't had much to contribute. They have had much more success in describing value systems than in explaining their genesis.
Into this breach in the social sciences have stepped the economists, who have hardly been shy in recent years about applying their formidable methodological tools to matters beyond their usual realm.
Economists tend to be opponents of hierarchy and proponents of bargaining--individuals, they say, act rationally on their own to achieve socially productive ends. This describes the market.
But Friedrich A. Hayek (among others) suggested that moral rules--part of what he called the "extended order of human cooperation"--might also be the product of a similar decentralized evolutionary bargaining process.
Take the virtues of honesty and reliability, which are key to social cooperation and that intangible compound of mutual trust and engagement called "social capital." Many people have argued that such virtues have religious sources, and that contemporary capitalist societies are living off the cultural capital of previous ages--in America, chiefly its Puritan traditions.
Modern capitalism, in this view, with its amoral emphasis on profits and efficiency, is steadily undermining its own moral basis. Such an interpretation, while superficially plausible, is completely wrong.
A decentralized group of individuals who have to deal with one another repeatedly will tend as a matter of self-interest to evolve norms of honesty and reliability. That is, reputation, whether for honesty or fair dealing or product quality, is an asset that self-interested individuals will seek to acquire.
While religion may encourage them, a hierarchical source of rules is not necessary. Given the right background conditions--especially the need for repeated dealings with a particular group of people--order and rules will tend to emerge spontaneously from the ground up.
The study of how order emerges spontaneously from the interaction of individual agents is one of the most interesting and important intellectual developments of the late 20th century.
One reason it is interesting is that the study is not limited to economists and other social scientists. Scientists since Charles Darwin have concluded that the high degree of order in the biological world was not the creation of God or some other creator but rather emerged out of the interaction of simpler units.
The elaborate mounds of some species of African termites, taller than a human being and equipped with their own heating and air conditioning systems, were not designed by anyone, much less by the neurologically simple creatures that built them. And so on, throughout the natural world, order is created by the blind, irrational process of evolution and natural selection. (In the 1980s, the now famous Santa Fe Institute was created to support studies of just this type of phenomenon, so-called complex adaptive systems, in a wide variety of fields.)
Indeed, there is a good deal more social order in the world than even the economists' theories would suggest. Economists frequently express surprise at the extent to which supposedly self-interested, rational individuals do seemingly selfless things: vote, contribute to charities, give their loyalty to employers.
People do these things because the ability to solve repeated dilemmas of social cooperation is genetically coded into the human brain, put there by an evolutionary process that rewarded those individuals best able to generate social rules for themselves.
Human beings have innate capabilities that make them gravitate toward and reward cooperators who play by the community's rules, and to ostracize and isolate opportunists who violate them. When we say that human beings are social creatures by nature, we mean not that they are cooperative angels with unlimited resources for altruism but that they have built-in capabilities for perceiving the moral qualities of their fellow humans.
What James Q. Wilson calls the "moral sense" is put there by nature, and will operate in the absence of either a lawgiver or a prophet. If we accept the fact that norms have spontaneous as well as hierarchical sources, we can place them along a continuum that extends from hierarchical and centralized types of authority at one end to the completely decentralized and spontaneous interactions of individuals at the other.
There is a second dimension. Norms and moral rules can he the product of rational bargaining and negotiation, or they can be socially inherited or otherwise a-rational in origin.
In order to clarify the origins of re-moralization, I have constructed a matrix that organizes these alternatives along two axes. Different types of moral rules fall into different quadrants. Formal laws handed down by governments belong in the rational/hierarchical quadrant; common law and spontaneously generated rules concerning, say, honesty in market relations, fall in the rational/spontaneous quadrant. Because, according to most recent research, incest taboos have biological origins, they are a spontaneous, a-rational norm. Revealed religion--Moses bringing the Ten Commandments down from Mount Sinai, for example--occupies the a-rational hierarchical quadrant. But folk religions--a cult of rock worshipers, for example--may be a species of spontaneous, a-rational order.
This taxonomy gives us a basis for at least beginning a discussion of where norms in a postindustrial society come from. Economists, following their rational, nonhierarchical bent, have been busy populating the upper-right quadrant with examples of spontaneously generated rules. A case in point is the database of more than 5,000 cases of so-called common pool resource problems compiled by Elinor Ostrom. Such problems confront communities with the need to determine rules for sharing common resources such as fisheries or pastureland.
Contrary to the expectation that the self-interest of each individual will lead to the depletion of the resources--the famous "tragedy of the commons"--Ostrom finds many cases in which communities were able to spontaneously generate fair rules for sharing that avoided that result.
Max Weber, the founder of modern sociology, argued that as societies modernize, the two rational quadrants, and particularly the hierarchical quadrant, tend to play a strong role in the creation of norms.
Rational bureaucracy was, for him, the essence of modernity. In postindustrial societies, however, all four quadrants continue to serve as important sources of norms. Modern corporations, for example, have discovered that they cannot organize complex activities and highly skilled workers in a centralized, formal, topdown system of bureaucratic rules. The trend in management is to reduce formal bureaucracy in favor of informal norms that link a variety of firms and individuals in networks. We now have a framework in which to discuss how the socially corrosive effects of the Great Disruption are being overcome, and what continuing possibilities for change there might be. In the quest for the source of authoritative new rules, one starting point is the rational-hierarchical quadrant, which is the sphere of public policy.
Crime rates are down across the United States today in no small measure because government is embracing better policies, such as community policing, and spending more on law enforcement, prisons, and punishment. But the fact that tougher policies have brought crime rates down would not be regarded by most people as evidence of moral renewal.
We want people to behave better not because of a crackdown but because they have internalized certain standards. The question then becomes, Which of the three remaining quadrants can be the source of moral behavior?
Many cultural conservatives believe that religion is the sine qua non of moral values, and they blame the Great Disruption on a loss of religious values. Religion played a powerful role in the Victorian upsurge during the second half of the 19th century, they note, and, therefore, any reversal of the Great Disruption must likewise depend on a religious revival.
In this view, the cultural conservatives are supported (in a way) by Friedrich Nietzsche, who once denounced the English "flathead" John Stuart Mill for believing that one could have something approximating Christian values in the absence of a belief in the Christian God.
Nietzsche famously argued that God was on his deathbed and incapable, in Europe at least, of being resuscitated. There could be new religions, but they would be pagan ones that would provoke "immense wars" in the future. Religious conservatives can reply that, as an empirical matter, God is not dead anywhere but in Europe itself.
A generation or two ago, social scientists generally believed that secularization was the inevitable byproduct of modernization, but in the United States and many other advanced societies, religion does not seem to be in danger of dying out. Some religious conservatives hope, and many liberals fear, that the problem of moral decline will be resolved by a large-scale return to religious orthodoxy--a transformation as sudden as the one Ayatollah Khomeini wrought 20 years ago by returning to Iran on a jetliner.
For a variety of reasons, this seems unlikely. Modern societies are so culturally diverse that it is not clear whose version of orthodoxy would prevail. Any true form of orthodoxy is likely to be seen as a threat to important groups and hence would neither get very far nor serve as a basis for widening the radius of trust. Instead of integrating society, a conservative religious revival might only increase social discord and fragmentation.
It is not clear, moreover, that the re-moralization of society need rely on the hierarchical authority of revealed religion. Against Nietzsche's view that moral behavior inevitably rests on dogmatic belief, we might counterpose Adam Smith, the Enlightenment philosopher with perhaps the most realistic and highly developed theory of moral action.
Harking back to a kind of Aristotelian naturalism, Smith argued that human beings are social and moral creatures by nature, capable of being led to moral behavior both by their natural passions and by their reason.
The Enlightenment has been justly criticized for its overemphasis on human reason. But reason does not have to take the form of a bureaucratic state seeking to engineer social outcomes through the wholesale rearrangement of society. It can also take the form of rational individuals interacting with one another to create workable moral rules, or, in Smith's language, being led from a narrowly selfish view of their interests to the view of an "impartial spectator" exercising reasoned moral judgment. Religious conservatives, in other words, underestimate the innate ability of human beings to evolve reasonable moral rules for themselves. Western societies underwent an enormous shock during the mid-20th century, and it is not surprising that it has taken a long time to adjust. The process of reaching a rational set of norms is not easy or automatic. During the Great Disruption, for example, large numbers of men and women began to behave in ways that ended up hurting the interests of children.
Men abandoned families, women conceived children out of wedlock, and couples divorced for what were often superficial and self-indulgent reasons. But parents also have a strong interest in the well-being of their children. If it can be demonstrated to them that their behavior is seriously injuring the life chances of their offspring, they are likely to react rationally and want to alter that behavior in ways that help their children.
During the Great Disruption, there were many intellectual and cultural currents at work obscuring from people the consequences of their personal behavior for people close to them. They were told by social scientists that growing up in a single-parent family was no worse than growing up in an intact one, reassured by family therapists that children were better off if the parents divorced, and bombarded by images from the popular culture that glamorized sex.
Changing these perceptions requires discussion, argument, even "culture wars." And we have had them. Today Barbara Dafoe Whitehead's controversial 1993 assertion that "Dan Quayle was right" about the importance of families no longer seems radical.
What would the re-moralization of society look like? In some of its manifestations, it would represent a continuation of trends that have already occurred in the 1990s, such as the return of middle-class people from their gated suburban communities to downtown areas, where a renewed sense of order and civility once again makes them feel secure enough to live and work.
It would show up in increasing levels of participation in civil associations and political engagement.
It would be manifest in more civil behavior on college campuses, where a greater emphasis on academics and more carefully codified rules of behavior are already apparent.
The kinds of changes we can expect in norms concerning sex, reproduction, and family life are likely to be more modest. Conservatives need to be realistic in understanding how thoroughly the moral and social landscapes have been altered by powerful technological and economic forces. Strict Victorian rules concerning sex are very unlikely to return.
Unless someone can figure out a way to un-invent birth control, or move women out of the labor force, the nuclear family of the 1950s is not likely to be reconstituted in anything like its original form. Yet the social role of fathers has proved very plastic from society to society and over time, and it is not unreasonable to think that the commitment of men to their families can be substantially strengthened.
This was the message of two of the largest demonstrations in Washington during the 1990s, the Nation of Islam's Million Man March and the Promise Keepers' rally. People were rightly suspicious of the two sponsors, but the same message about male responsibility can and should be preached by more mainstream groups.
There is also evidence that we are moving into a "postfeminist" age that will be friendlier to families and children. Feminism denigrated the work of raising children in favor of women's paid labor--an attitude epitomized by Hillary Clinton's dismissive response to questions about her Arkansas legal career that she could have just "stayed home and baked cookies."
Many women are indeed now working--not as lawyers or policymakers but as waitresses and checkers at Wal-Mart, away from the children they are struggling to raise on their own after being abandoned by husbands or boyfriends. Many women like these might choose to stay at home with their children during their early years if the culture told them it was okay, and if they had the financial means to do so.
I see anecdotal evidence all around me that the well-to-do are already making this choice. This does not represent a return of the housewife ideal of the 1950s, just a more sensible balancing of work and family.
Women might find it more palatable to make work and career sacrifices for the sake of children if men made similar sacrifices. The postindustrial economy, by undermining the notion of lifetime employment and steady movement up a career ladder for men, may be abetting just such a social change. In the industrial era, technology encouraged the separation of a male-dominated workplace from a female-dominated home; the information age may reintegrate the two.
Religion may serve a purpose in reestablishing norms, even without a sudden return to religious orthodoxy. Religion is frequently not so much the product of dogmatic belief as it is the provider of a convenient language that allows communities to express moral beliefs that they would hold on entirely secular grounds.
A young woman I know does not want to have sex until she is married. She tells her suitors that she follows this rule out of religious conviction, not so much because she is a believer but because this is more convincing to them than a utilitarian explanation.
In countless ways, modern, educated, skeptical people are drawn to religion because it offers them community, ritual, and support for values they otherwise hold. Religion in this sense is a form of a-rational, spontaneous order rather than a hierarchical alternative to it.
Re-moralizing a complex, diverse society such as the United States is not without pitfalls. If a return to broad orthodoxy is unlikely, re-moralization for many will mean dropping out of mainstream society--for example, by home-schooling one's children, withdrawing into an ethnic neighborhood or enclave, or creating one's own limited patch of social order. In his science fiction novel The Diamond Age, Neal Stephenson envisions a future world in which a group of computer programmers, realizing the importance of moral values for economic success, create a small community called New Atlantis.
There they resurrect Victorian social values, complete with top hats and sexual prudery. The "Vickies" of New Atlantis do well for themselves but have nothing to say to the poor, disorganized communities that surround them.
Re-moralization may thus go hand in hand with a sort of miniaturization of community, as it has in American civil society over the past generation. Conversely, if these small communities remain reasonably tolerant and open, they may light the way to a broader moral revival, just as Granges, Boy Scout troops, immigrant ethnic associations, and the other myriad small communities of the late 19th century did.
The reconstruction of values that has started in the 1990s, and any renorming of society that may happen in the future, has and will be the product of political, religious, self-organized, and natural norm building. The state is neither the source of all our troubles nor the instrument by which we can solve them. But its actions can both deplete and restore social capital in ways large and small.
We have not become so modern and secularized that we can do without religion. But we are also not so bereft of innate moral resources that we need to wait for a messiah to save us. And nature, which we are constantly trying to evict with a pitchfork, always keeps running back.
[Editor's Note: The Book of Virtues:A Treasury of Great Moral Stories, 1996. A thoughtful collection of stories, essays, poems and speeches assembled with commentary by Bennett to illustrate various moral virtues such as self-discipline, compassion, and honesty. Touchstone Books ISBN: 0684835770 ]
1999 Copyright. The Wilson Quarterly
SAN DIEGO -- Before too long, another major blowup will erupt between America and Japan. It has been too quiet on the Eastern Front for too long.
The last trans-Pacific dustup occurred two years ago, at the height of the Asian financial flu. Washington was then declaiming that the region's economic problems had nothing to do with mistakes by Western financial institutions but had everything to do with Asia -- especially with Japan's failure to reform and suck up enough imports from other Asian economies to get the region back on its feet. Since then, of course, Asia as a whole has bounced back, even though many of the reforms required for Asian resurgence haven't been implemented. So much for U.S. omniscience.
Before that came the furious exchange of transoceanic insults during the deep U.S. recession of the early 1990's, when the phenomenal Japanese balance-of-trade advantage was depicted as a cause of American woes. Today, of course, the U.S. economy is soaring, despite the same huge trade deficit with Japan. Interesting, isn't it?
But the U.S. economy may well stumble this year after all these months of remarkable expansion. And the Japanese are already starting to pull back on bank restructuring and other major reforms. The pullback is only just beginning: With the all-important Lower House parliamentary election set for October, how many Japanese politicians will take on the many vested interests opposed to reform? And with the U.S. congressional and presidential elections set for November, watch out, especially if there's a U.S. downturn. Many politicians will be sorely tempted to point the finger at easy targets like Japan, with its eternal trade surplus and stubbornly unchanging ways.
The danger, though, is that a suddenly unglued U.S.-Japan relationship will unhinge Asia, already rocked by Russia's renewed anti Americanism, Indonesia's new uncertainties, the shock nuclearization of South Asia, never ending tensions on the Korean Peninsula, the Chinese missile buildup and the U.S. bid to drape a so-called anti-missile system over the region, including Taiwan.
What's really annoying about the recurring agony between the U.S. and Japan is that much of it is based on plain misunderstanding. Japan's failure to open its economy and bend to U.S. ways is not a product of willful Japanese stubbornness, much less a national failure to recognize that serious changes in their economy are needed. Indeed, just such a clarion call for change, written in prestigious Japan Times earlier this month by Kyoto University professor Takamitsu Sawa, ran under the telling headline, "A Nation Adrift."
The Japanese are well aware they are in a deep soup but this soup is largely the well-cooked stock of their embedded culture. For instance, the infamous, intricate network of relationships and corporations known as keiretsu which is like a legal mafia if Americans needed a quick parallel, would enrage any red-blooded U.S. anti-trust lawyer, to be sure. But they represent unbroken centuries of custom that can be traced back, in this instance, to the 17th century's House of Mitsui. Today the corporate children of the Mitsui group, which pump out everything from noodles to missiles, rake in -- even in the current recession -- annual sales equal to the gross domestic product of the Russian Federation.
Given such success, wouldn't you be reluctant to change your ancient ways? So, too, with the Japanese aversion to firing workers. This custom is due not to any intellectual failure to comprehend the meaning of labor costs, but to long experience with the benefits of keeping workers on payroll even during hard times. For instance, the late Matsushita Konosuke, whose empire now includes many worldwide brand names, is a legend even today in Japan because of a famous incident -- In 1929, when the Depression cut his company's sales in half and massive firings seemed the only alternative to bankruptcy, "Matsushita refused to do this," notes journalist Mark Weston in his superb new book The Giants of Japan.
The rest is legend -- Within a few years, sales soared back to normal and contemporary Matsushita subdivisions like Panasonic and Quasar are doing just fine. In the book's introduction, former U.S. ambassador to Japan Walter Mondale remarks, "It is important that Americans learn as much as they can about Japan…Even among educated Americans, I have often found a shocking ignorance.... Ignorance is always dangerous. But in international matters, it can lead to ... human hatred, and even war."
In truth, Japan and America have more in common than their strategic and economic interdependence. They have strikingly parallel inadequacies. Consider that the United States' economic and social system, markedly successful until now, empowers the free market as the main arbiter of people's fate. By contrast, Japan's approach, until relatively recently the wonder of the world, ignores free-market ideology if it engenders unacceptable social or political consequences.
The criticism of the Japanese approach is that it is not as economically efficient as the American one (true). The knock on the latter is that it yields income disparities and social inequalities that dwarf anything to be found in the former (also true). Find a system that blends the American commitment to efficiency and the Japanese commitment to equity and you may have uncovered the long-desired Third Way.
Rather than locking horns, America and Japan should be putting their equally stubborn heads together not only to solve their own problems, but also to offer some world leadership to others. Is that too much to ask?
[Editor's Note: Tom Plate is Director and Founder of the Asia Pacific Media Network, a regional alliance of blue-chip news-media institutions. Professor Plate is a public policy ethicist at UCLA. Asia Pacific is edited by Alice Wu. She may be contacted at Email firstname.lastname@example.org -- Prof. Plate's Email is email@example.com].
2000 Copyright, The Asia Pacific Media Network
NEW YORK - We are within weeks of establishing a record for the longest economic expansion in this nation's history. The 106-month expansion of the 1960s, which was elongated by the Vietnam War, will be surpassed in February. Nonetheless, there remain few evident signs of geriatric strain that typically presage an imminent economic downturn.
Four or five years into this expansion, in the middle of the 1990s, it was unclear whether, going forward, this cycle would differ significantly from the many others that have characterized post-World War II America. More recently, however, it has become increasingly difficult to deny that something profoundly different from the typical postwar business cycle has emerged. Not only is the expansion reaching record length, but it is doing so with far stronger-than-expected economic growth. Most remarkably, inflation has remained subdued in the face of labor markets tighter than any we have experienced in a generation. Analysts are struggling to create a credible conceptual framework to fit a pattern of interrelationships that has defied conventional wisdom based on our economy's history of the past half century.
When we look back at the 1990s, from the perspective of say 2010, the nature of the forces currently in train will have presumably become clearer. We may conceivably conclude from that vantage point that, at the turn of the millennium, the American economy was experiencing a once-in-a-century acceleration of innovation, which propelled forward productivity, output, corporate profits, and stock prices at a pace not seen in generations, if ever.
Alternatively, that 2010 retrospective might well conclude that a good deal of what we are currently experiencing was just one of the many euphoric speculative bubbles that have dotted human history. And, of course, we cannot rule out that we may look back and conclude that elements from both scenarios have been in play in recent years.
On the one hand, the evidence of dramatic innovations--veritable shifts in the tectonic plates of technology--has moved far beyond mere conjecture. On the other, these extraordinary achievements continue to be bedeviled by concerns that the so-called New Economy is spurring imbalances that at some point will abruptly adjust, bringing the economic expansion, its euphoria, and wealth creation to a debilitating halt. This evening I should like to address some of the evidence and issues that pertain to these seemingly alternative scenarios.
What should be indisputable is that a number of new technologies that evolved largely from the cumulative innovations of the past half century have now begun to bring about awesome changes in the way goods and services are produced and, especially, in the way they are distributed to final users. Those innovations, particularly the Internet's rapid emergence from infancy, have spawned a ubiquity of startup firms, many of which claim to offer the chance to revolutionize and dominate large shares of the nation's production and distribution system. Capital markets, not comfortable dealing with discontinuous shifts in economic structure, are groping for sensible evaluations of these firms. The exceptional stock price volatility of most of the newer firms and, in the view of some, their outsized valuations, are indicative of the difficulties of divining from the many, the particular few of the newer technologies and operational models that will prevail in the decades ahead.
How did we arrive at such a fascinating and, to some, unsettling point in history? The process of innovation, of course, is never-ending. Yet the development of the transistor after World War II appears in retrospect to have initiated an especial wave of innovative synergies. It brought us the microprocessor, the computer, satellites, and the joining of laser and fiber-optic technologies. These, in turn, fostered by the 1990s an enormous new capacity to disseminate information. To be sure, innovation is not confined to information technologies. Impressive technical advances can be found in many corners of the economy.
But it is information technology that defines this special period. The reason is that information innovation lies at the root of productivity and economic growth. Its major contribution is to reduce the number of worker hours required to produce the nation's output. Yet, in the vibrant economic conditions that have accompanied this period of technical innovation, many more job opportunities have been created than have been lost. Indeed, our unemployment rate has fallen notably as technology has blossomed.
One result of the more-rapid pace of IT innovation has been a visible acceleration of the process of "creative destruction," a shifting of capital from failing technologies into those technologies at the cutting edge. The process of capital reallocation across the economy has been assisted by a significant unbundling of risks in capital markets made possible by the development of innovative financial products, many of which themselves owe their viability to advances in IT.
Before this revolution in information availability, most twentieth-century business decisionmaking had been hampered by wide uncertainty. Owing to the paucity of timely knowledge of customers' needs and of the location of inventories and materials flowing throughout complex production systems, businesses, as many of you well remember, required substantial programmed redundancies to function effectively.
Doubling up on materials and people was essential as backup to the inevitable misjudgments of the real-time state of play in a company. Decisions were made from information that was hours, days, or even weeks old. Accordingly, production planning required costly inventory safety stocks and backup teams of people to respond to the unanticipated and the misjudged.
Large remnants of information void, of course, still persist, and forecasts of future events on which all business decisions ultimately depend are still unavoidably uncertain. But the remarkable surge in the availability of more timely information in recent years has enabled business management to remove large swaths of inventory safety stocks and worker redundancies.
Information access in real time--resulting, for example, from such processes as electronic data interface between the retail checkout counter and the factory floor or the satellite location of trucks--has fostered marked reductions in delivery lead times and the related workhours required for the production and delivery of all sorts of goods, from books to capital equipment.
The dramatic decline in the lead times for the delivery of capital equipment has made a particularly significant contribution to the favorable economic environment of the past decade. When lead times for equipment are long, the equipment must have multiple capabilities to deal with the plausible range of business needs likely to occur after these capital goods are delivered and installed.
With lead times foreshortened, many of the redundancies built into capital equipment to ensure that it could meet all plausible alternatives of a defined distant future could be sharply reduced. That means fewer goods and worker hours are caught up in activities that, while perceived as necessary insurance to sustain valued output, in the end produce nothing of value.
Those intermediate production and distribution activities, so essential when information and quality control were poor, are being reduced in scale and, in some cases, eliminated. These trends may well gather speed and force as the Internet alters relationships of businesses to their suppliers and their customers.
The process of innovation goes beyond the factory floor or distribution channels. Design times and costs have fallen dramatically as computer modeling has eliminated the need, for example, of the large staff of architectural specification-drafters previously required for building projects. Medical diagnoses are more thorough, accurate, and far faster, with access to heretofore unavailable information. Treatment is accordingly hastened, and hours of procedures eliminated.
Indeed, these developments emphasize the essence of information technology--the expansion of knowledge and its obverse, the reduction in uncertainty. As a consequence, risk premiums that were associated with all forms of business activities have declined.
Because the future is never entirely predictable, risk in any business action committed to the future--that is, virtually all business actions--can be reduced but never eliminated. Information technologies, by improving our real-time understanding of production processes and of the vagaries of consumer demand, are reducing the degree of uncertainty and, hence, risk. In short, information technology raises output per hour in the total economy principally by reducing hours worked on activities needed to guard productive processes against the unknown and the unanticipated. Narrowing the uncertainties reduces the number of hours required to maintain any given level of production readiness.
In economic terms, we are reducing risk premiums and variances throughout the economic decision tree that drives the production of our goods and services. This has meant that employment of scarce resources to deal with heightened risk premiums has been reduced.
The relationship between businesses and consumers already is being changed by the expanding opportunities for e-commerce. The forces unleashed by the Internet are almost surely to be even more potent within and among businesses, where uncertainties are being reduced by improving the quantity, the reliability, and the timeliness of information. This is the case in many recent initiatives, especially among our more seasoned companies, to consolidate and rationalize their supply chains using the Internet.
Not all technologies, information or otherwise, however, increase productivity--that is, output per hour--by reducing the inputs necessary to produce existing products. Some new technologies bring about new goods and services with above average value added per workhour. The dramatic advances in biotechnology, for example, are significantly increasing a broad range of productivity-expanding efforts in areas from agriculture to medicine.
Indeed, in our dynamic labor markets, the resources made redundant by better information, as I indicated earlier, are being drawn to the newer activities and newer products, many never before contemplated or available. The personal computer, with ever-widening applications in homes and businesses, is one. So are the fax and the cell phone. The newer biotech innovations are most especially of this type, particularly the remarkable breadth of medical and pharmacological product development.At the end of the day, however, the newer technologies obviously can increase outputs or reduce inputs and, hence, increase productivity only if they are embodied in capital investment. Capital investment here is defined in the broadest sense as any outlay that enhances future productive capabilities and, consequently, capital asset values.
But for capital investments to be made, the prospective rate of return on their implementation must exceed the cost of capital. Gains in productivity and capacity per real dollar invested clearly rose materially in the 1990s, while the increase in equity values, reflecting that higher earnings potential, reduced the cost of capital.
In particular, technological synergies appear to be engendering an ever-widening array of prospective new capital investments that offer profitable cost displacement. In a consolidated sense, reduced cost generally means reduced labor cost or, in productivity terms, fewer hours worked per unit of output. These increased real rates of return on investment and consequent improved productivity are clearly most evident among the relatively small segment of our economy that produces high-tech equipment. But the newer technologies are spreading to firms not conventionally thought of as high tech.It would be an exaggeration to imply that whenever a cost increase emerges on the horizon, there is a capital investment that is available to quell it. Yet the veritable explosion of high-tech equipment and software spending that has raised the growth of the capital stock dramatically over the past five years could hardly have occurred without a large increase in the pool of profitable projects becoming available to business planners. As rising productivity growth in the high-tech sector since 1995 has resulted in an acceleration of price declines for equipment embodying the newer technologies, investment in this equipment by firms in a wide variety of industries has expanded sharply.
Bad high prospective returns on these capital projects not materialized, the current capital equipment investment boom--there is no better word--would have petered out long ago. In the event, overall equipment and capitalized software outlays as a percentage of GDP in nominal dollars have reached their highest level in post-World War II history.
To be sure, there is also a virtuous capital investment cycle at play here. A whole new set of profitable investments raises productivity, which for a time raises profits--spurring further investment and consumption. At the same time, faster productivity growth keeps a lid on unit costs and prices. Firms hesitate to raise prices for fear that their competitors will be able, with lower costs from new investments, to wrest market share from them.
Indeed, the increasing availability of labor-displacing equipment and software, at declining prices and improving delivery lead times, is arguably at the root of the loss of business pricing power in recent years. To be sure, other inflation-suppressing forces have been at work as well. Marked increases in available global capacity were engendered as a number of countries that were previously members of the autarchic Soviet bloc opened to the West, and as many emerging-market economies blossomed. Reductions in Cold War spending in the United States and around the world also released resources to more productive private purposes. In addition, deregulation that removed bottlenecks and hence increased supply response in many economies, especially ours, has been a formidable force suppressing price increases as well. Finally, the global economic crisis of 1997 and 1998 reduced the prices of energy and other key inputs into production and consumption, helping to hold down inflation for several years.
Of course, Europe and Japan have participated in this recent wave of invention and innovation and have full access to the newer technologies. However, they arguably have been slower to apply them. The relatively inflexible and, hence, more costly labor markets of these economies appear to be an important factor. The high rates of return offered by the newer technologies are largely the result of labor cost displacement, and because it is more costly to dismiss workers in Europe and Japan, the rate of return on the same equipment is correspondingly less there than in the United States. Here, labor displacement is more readily countenanced both by law and by culture, facilitating the adoption of technology that raises standards of living over time.
There, of course, has been a substantial amount of labor-displacing investment in Europe to obviate expensive increased employment as their economies grow. But it is not clear to what extent such investment has been directed at reducing existing levels of employment. It should always be remembered that in economies where dismissing a worker is expensive, hiring one will also be perceived to be expensive.
An ability to reorganize production and distribution processes is essential to take advantage of newer technologies. Indeed, the combination of a marked surge in mergers and acquisitions, and especially the vast increase in strategic alliances, including across borders, is dramatically altering business structures to conform to the imperatives of the newer technologies. We are seeing the gradual breaking down of competition-inhibiting institutions from the keiretsu and chaebol of East Asia, to some of continental Europe. The increasingly evident advantages of applying the newer technologies is undermining much of the old political wisdom of protected stability. The clash between unfettered competitive technological advance and protectionism, both domestic and international, will doubtless engage our attention for many years into this new century. The turmoil in Seattle last month may be a harbinger of an intensified debate.
However one views the causes of our low inflation and strong growth, there can be little argument that the American economy as it stands at the beginning of a new century has never exhibited so remarkable a prosperity for at least the majority of Americans.
Nonetheless, this seemingly beneficial state of affairs is not without its own set of potential challenges. Productivity-driven supply growth has, by raising long-term profit expectations, engendered a huge gain in equity prices. Through the so-called "wealth effect," these gains have tended to foster increases in aggregate demand beyond the increases in supply. It is this imbalance between growth of supply and growth of demand that contains the potential seeds of rising inflationary and financial pressures that could undermine the current expansion.
Higher productivity growth must show up as increases in real incomes of employees, as profit, or more generally as both. Unless the propensity to spend out of real income falls, private consumption and investment growth will rise, as indeed it must, since over time demand and supply must balance. If this was all that happened, accelerating productivity would be wholly benign and beneficial.
;But in recent years, largely as a result of the appreciating values of ownership claims on the capital stock, themselves a consequence, at least in part, of accelerating productivity, the net worth of households has expanded dramatically, relative to income. This has spurred private consumption to rise even faster than the incomes engendered by the productivity-driven rise in output growth. Moreover, the fall in the cost of equity capital corresponding to higher share prices, coupled with enhanced potential rates of return, has spurred private capital investment. There is a wide range of estimates of how much added growth the rise in equity prices has engendered, but they center around 1 percentage point of the somewhat more than 4 percentage point annual growth rate of GDP since late 1996.
Such overall extra domestic demand can be met only with increased imports (net of exports) or with new domestic output produced by employing additional workers. The latter can come only from drawing down the pool of those seeking work or from increasing net immigration.
Thus, the impetus to spending from the wealth effect by its very nature clearly cannot persist indefinitely. In part, it adds to the demand for goods and services before the corresponding increase in output fully materializes. It is, in effect, increased purchasing from future income, financed currently by greater borrowing or reduced accumulation of assets.
;If capital gains had no evident effect on consumption or investment, their existence would have no influence on output or employment either. Increased equity claims would merely match the increased market value of productive assets, affecting only balance sheets, not flows of goods and services, not supply or demand, and not labor markets.
But this is patently not the case. Increasing perceptions of wealth have clearly added to consumption and driven down the amount of saving out of current income and spurred capital investment.
To meet this extra demand, our economy has drawn on all sources of added supply. Our net imports and current account deficits have risen appreciably in recent years. This has been financed by foreign acquisition of dollar assets fostered by the same sharp increases in real rates of return on American capital that set off the wealth effect and domestic capital goods boom in the first place. Were it otherwise, the dollar's foreign exchange value would have been under marked downward pressure in recent years. We have also relied on net immigration to augment domestic output. And finally, we have drawn down the pool of available workers.
The bottom line, however, is that, while immigration and imports can significantly cushion the consequences of the wealth effect and its draining of the pool of unemployed workers for awhile, there are limits. Immigration is constrained by law and its enforcement; imports, by the willingness of global investors to accumulate dollar assets; and the draw down of the pool of workers by the potential emergence of inflationary imbalances in labor markets. Admittedly, we are groping to infer where those limits may be. But that there are limits cannot be open to question.
However one views the operational relevance of a Phillips curve or the associated NAIRU (the nonaccelerating inflation rate of unemployment)--and I am personally decidedly doubtful about it--there has to be a limit to how far the pool of available labor can be drawn down without pressing wage levels beyond productivity. The existence or nonexistence of an empirically identifiable NAIRU has no bearing on the existence of the venerable law of supply and demand.
;To be sure, increases in wages in excess of productivity growth may not be inflationary, and destructive of economic growth, if offset by decreases in other costs or declining profit margins. A protracted decline in margins, however, is a recipe for recession. Thus, if our objective of maximum sustainable economic growth is to be achieved, the pool of available workers cannot shrink indefinitely.
As my late friend and eminent economist Herb Stein often suggested: If a trend cannot continue, it will stop. What will stop the wealth-induced excess of demand over productivity-expanded supply is largely developments in financial markets.
;That process is already well advanced. For the equity wealth effect to be contained, either expected future earnings must decline, or the discount factor applied to those earnings must rise. There is little evidence of the former. Indeed, security analysts, reflecting detailed information on and from the companies they cover, have continued to revise upward long-term earnings projections. However, real rates of interest on long-term BBB corporate debt, a good proxy for the average of all corporate debt, have already risen well over a full percentage point since late 1997, suggesting increased pressure on discount factors. This should not be a surprise because an excess of demand over supply ultimately comes down to planned investment exceeding saving that would be available at the economy's full potential. In the end, balance is achieved through higher borrowing rates. Thus, the rise in real rates should be viewed as a quite natural consequence of the pressures of heavier demands for investment capital, driven by higher perceived returns associated with technological breakthroughs and supported by a central bank intent on defusing the imbalances that would undermine the expansion.
We cannot predict with any assurance how long a growing wealth effect--more formally, a rise in the ratio of household net worth to income--will persist, nor do we suspect can anyone else. A diminution of the wealth effect, I should add, does not mean that prices of assets cannot keep rising, only that they rise no more than income.
A critical factor in how the rising wealth effect and its ultimate limitation will play out in the market place and the economy is the state of government, especially federal, finances.
The sharp rise in revenues (at a nearly 8 percent annual rate since 1995) has been significantly driven by increased receipts owing to realized capital gains and increases in compensation directly and indirectly related to the huge rise in stock prices. Both the Administration and the Congress have chosen wisely to allow unified budget surpluses to build and have usefully focused on eliminating the historically chronic borrowing from social security trust funds to finance current outlays.
The growing unified budget surpluses have absorbed a good part of the excess of potential private demand over potential supply. A continued expansion of the surplus would surely aid in sustaining the productive investment that has been key to leveraging the opportunities provided by new technology, while holding down a further reliance on imports and absorption of the pool of available workers.
I trust that the recent flurry of increased federal government outlays, seemingly made easier by the emerging surpluses, is an aberration. In today's environment of rapid innovation, growing unified budget surpluses can obviate at least part of the rebalancing pressures evident in marked increases in real long-term interest rates.
As I noted at the beginning of my remarks, it may be many years before we fully understand the nature of the rapid changes currently confronting our economy. We are unlikely to fully comprehend the process and its interactions with asset prices until we have been through a complete business cycle.
Regrettably, we at the Federal Reserve do not have the luxury of awaiting a better set of insights into this process. Indeed, our goal, in responding to the complexity of current economic forces, is to extend the expansion by containing its imbalances and avoiding the very recession that would complete a business cycle.
If we knew for sure that economic growth would soon be driven wholly by gains in productivity and growth of the working age population, including immigration, we would not need to be as concerned about the potential for inflationary distortions. Clearly, we cannot know for sure, because we are dealing with world economic forces which are new and untested.
While we endeavor to find the proper configuration of monetary and fiscal policies to sustain the remarkable performance of our economy, there should be no ambiguity on the policies required to support enterprise and competition.
I believe that we as a people are very fortunate: When confronted with the choice between rapid growth with its inevitable insecurities and a stable, but stagnant economy, given time, Americans have chosen growth. But as we seek to manage what is now this increasingly palpable historic change in the way businesses and workers create value, our nation needs to address the associated dislocations that emerge, especially among workers who see the security of their jobs and their lives threatened. Societies cannot thrive when significant segments perceive its functioning as unjust.
It is the degree of unbridled fierce competition within and among our economies today--not free trade or globalization as such--that is the source of the unease that has manifested itself, and was on display in Seattle a month ago. Trade and globalization are merely the vehicles that foster competition, whose application and benefits currently are nowhere more evident than here, today, in the United States.
Confronted face-on, no one likes competition; certainly, I did not when I was a private consultant vying with other consulting firms. But the competitive challenge galvanized me and my colleagues to improve our performance so that at the end of the day we and, indeed, our competitors, and especially our clients, were more productive.
There are many ways to address the all too real human problems that are the inevitable consequences of accelerating change. Restraining competition, domestic or international, to suppress competitive turmoil is not one of them. That would be profoundly counterproductive to rising standards of living.
We are in a period of dramatic gains in innovation and technical change that challenge all of us, as owners of capital, as suppliers of labor, as voters and policymakers. How well policy can be fashioned to allow the private sector to maximize the benefits of innovations that we currently enjoy, and to contain the imbalances they create, will shape the economic configuration of the first part of the new century.
[Editor's Note: Since the early 1990s, the annual growth rate in output per hour of nonfinancial corporate businesses outside high tech has risen by a full percentage point. The emergence of many alternate technologies in areas where only one or two will set the standard and survive has created high-risk, high-reward outcomes for their creators. The desire to spread risk (and the willingness to forgo the winner-take-all return) has fostered a substantial number of technology sharing alliances. The inflation expectations employed in this calculation are those implicit in the gap between the interest rates on ten-year Treasury inflation-indexed notes and those on a nominal security derived from Treasury STRIPS constructed to have comparable duration. The latter are used because they have the same relatively limited liquidity as inflation-indexed notes. Chairman Greenspan delivered this address before the Economic Club of New York on Jan. 13, 2000.]
©2000 Copyright, The Daily Republican Nespaper. All rights reserved.
WASHINGTON (AP) - The Clinton administration, seeking to operate in the new world of budget surpluses, adopted rules Thursday that will allow the government to buy back up to $30 billion of the national debt this year,something that hasn't happened for at least a century.
Treasury Secretary Lawrence Summers, in making the announcement, called the debt buyback program ``an important new tool'' for the government to use in managing the $5.76 trillion national debt.
``Reducing the supply of Treasury debt held by the public brings enormous benefits to our economy,'' Summers said. ``It means that there will be less pressure on interest rates than there would otherwise have been and therefore lower borrowing costs for businesses and lower interest payments for American families.''
The administration, which first proposed the idea of debt buybacks last August, has sought to portray its proposal as the responsible way to utilize the government's burgeoning surpluses, the product of the current economic boom, in contrast to Republican calls for large tax cuts.
Board of Directors: President Clinton said the debt buyback plan was a ``dramatic reminder'' of how much the government's economic fortunes have improved after decades of rising budget deficits and would allow the government to ``refinance old debt and pay it down on the best terms possible.''
Under the rules the government adopted, Treasury will conduct what is known as a ``reverse auction,'' in which the government will offer cash to bond holders who indicate their willingness to sell government bonds back to the government.
The price will be set in a bidding process designed to make sure the government pays prevailing market rates for the bonds it buys.
Treasury Under Secretary Gary Gensler, who oversees the debt operations, said Treasury records show it has been at least a century since the federal government has offered cash to buy securities that have not yet matured.
Gensler said the Treasury conducted limited swap operations in the 1960s and as late as 1972, swapping new bonds for older bonds held by the public in an effort to reorganize the types of bonds outstanding.
Summers said the debt buyback program would be launched in the coming weeks with several operations conducted in the next 12 months, totaling up to $30 billion. Officials said the exact timing of the program and the size of each buyback program had yet to be determined.
The national debt now stands at $5.76 trillion, with the amount of that debt held by the public totaling $3.6 trillion. The rest of the debt, some $2 trillion, is held by the government's large trust funds, primarily the Social Security trust fund.
Summers noted that under current surplus forecasts, the entire $3.6 trillion in debt held by the public could be eliminated over the next 15 years.
However, private economists caution that those long-range projections are based on assumptions that the current good economic times, which have triggered the swelling revenues, continue and that Democrats and Republicans resist the urge to spend the surplus on new government programs or in tax cuts.
Elimination of the $3.6 trillion of publicly-held debt would mark the first time that the debt held by the public has been eliminated since President Andrew Johnson accomplished the feat in 1835.
However, even if that goal is accomplished, it would still leave the sizable $2 trillion in debt the government owes to the Social Security trust fund, money that will be needed to finance the Baby Boomers' retirement.
Participants in financial markets offered general support for the debt buyback approach.
``The $30 billion was on the high side of market expectations and the initial market reaction has been positive,'' said David Jones, chief economist at Aubrey G. Lanston & Co., a government securities dealer in New York.
The amount of the national debt held by the public has been reduced over the past two years by $140 billion, reflecting the fact that the government has posted back-to-back surpluses over the last two years for the first time since Dwight Eisenhower was president.
The extra cash allowed the Treasury to reduce outstanding debt simply by selling fewer new bonds at its regularly scheduled auctions than the amount of old bonds coming due.
That procedure will be employed again this year. But officials said the new buyback procedure will allow them to better control the government's interest costs by buying back longer maturities and substituting shorter-term maturities with lower interest payments.
©2000 Copyright Associated Press. All rights reserved.
PENTAGON -- In a new survey released late last week thousands of members of the U.S. military told interviewers they are overworked, underpaid, and lack the resources needed to get their jobs done.
The study follows major cuts in the size of military forces, and a 300 percent increase in foreign deployments. Frustrations are blamed for an exodus of the military's best-trained and most talented people - at a time when the services face ever more complex and difficult missions.
A group of scholars and retired generals from the Center for Strategic and International Studies surveyed 12,000 active duty and reserve service members and interviewed 125 small groups of officers and sergeants.
In the 18-month study, service members creported they could make more money in civilian jobs that don't require the risk, family separation, and hardship of military life. They also complain that medical care offered to service members and their families is inadequate, and mired in foolish bureaucratic tangles.
The soldiers, sailors, and marines also complain that constant deployments in peacekeeping, humanitarian, and drug fighting operations, make them worry they won't be ready to do their main job - fight and win the nation's wars. They also say they need more money for equipment, spare parts, and training.
Pentagon leaders have said for several years they are having difficulty recruiting enough educated, talented, physically fit young men and women to fill the ranks, and can not keep skilled pilots, mechanics and electronics technicians. Pentagon officials have blamed cuts in military budgets and the roaring civilian economy for the problems in recruiting and retention.
The researchers conclude the economy is one factor, but flawed leadership is also a serious problem. They urge the services to change the current officer promotion system that they say encourages timid leaders to micro manage their troops.
They say the complex and changing challenges of the 21st Century will demand skillful military leaders who are bright, flexible - and willing to take risks.
[Editor's Note: Jim Randle is a Voice of America radio correspondent assigned to cover the Pentagon. American taxpayers currently spend a little over $105 million a year for the Voice of America, excluding transmission costs, and approximately $422 million for all of America's international broadcasting elements. $105 million is approximately half the cost of a B1 bomber. In a speech to the Foreign Policy Association and Overseas Press Club of America in NY on December 13, 1999 Sanford J. Ungar, Director, Voice of America asked the question, "Should American taxpayers continue to pay my salary and those of my 1100 colleagues at VOA?"]
©2000 Copyright, The Daily Republican Newspapewr. All rights reserved.
AGANA, Guam -- Yesterday afternoon, I attended the sentencing hearing of former Senator Angel Santos and the super hotshot federal judge gave him six month jail term. A "Chamorro" federal Judge Unpingco said: "We are a free and orderly society . . . and Santos is "dangerous to the community."
There were around 140 people jammed into the small federal district court room and stood outside in grim resolve and support for Senator Santos.
How can Santos be dangerous to the community when all he is doing is non-violently standing up for his private property rights? Santos is not a threat to the community but the actions of the court are clear evidence of the court's political agenda.
Western democracy in Guam, in the past five decades, had been less than a mixed blessing to the indigenous people. The local Government of Guam is ruled by a tyrant - a creation of and funded by the United States of America. It goes without saying that corruption, waste, and abuse are endemic.
The only people doing well and "feeling like winning the super lottery every day" are those in power and the selected few with money. The majority are conditioned to be content with government jobs and handouts, which were forced upon them. This includes the land for $1.00 per year for 99 years. That land will never be theirs. It belongs to the government.
Without a voice, there is no choice and no economic growth and prosperity for all. The conditions speak for themselves.
In the Artero family's case, my father, Antonio Cruz Artero, received a Congressional Medal of Freedom after World War II for his bravery in the two-year ordeal harboring Mr. George Ray Tweed, a U.S. Navy man who elected to rely on the boonies and help from the Chamorros over surrendering to the Japanese.
My dad risked his life, his family, and the entire Artero clan. I was three years old then and turned five before the war was over.
The irony here is that the very land my father sheltered Tweed in was taken by force without just compensation. Then the Navy built a McDonald's fast food restaurant on it competing with the private sector while some of us are forced to be in government housing, on food stamps, and welfare.
In 1898, Guam and its people became part and parcel of America's fortunes of war after the Spanish-American War. Forty-three years later Japan attacked and occupied Guam. America re-conquered Guam from the Japanese and took the opportunity again as part of its fortunes of war as the victor in that conflict to increase its ill gotten gains on our small island.
The gains this time were at the expense of private property interests of the Guam residents, but all the while the United States claimed and continues to claim that the battle and all its destruction and sacrifices were to protect those very same interest. America took productive private lands out of use, taking much more than needed. This was done without just compensation under circumstances that would have embarrassed even a Soviet Commissar.
This heavy handed exercise of raw power by America, instantly transformed the island and its people from self-sufficiency to permanent dependency which lasts to this day. Like all tyrannical actions this too will not withstand the test of time.
Like most other social injustices perpetrated by the powerful over the weak, this one too has its apologists who would seek to justify this type of piracy and butchery of private property and individual rights.
This time though the efforts to consolidate the spoils of war are being done with sophistry and sophisticated legal maneuvers.
The lands taken by the U.S. Federal Government were transferred from private hands to the U.S. government from behind closed doors in Washington, D.C. without an arms length transaction. A less than honorable day for the people of the United States.
In the same spirit, the federal court ruling against Angel Santos was less than honorable. Those actions violate the first tenet of a free and orderly society -- the sanctity of private property rights.
All things considered, the people of Guam have been misled and no one who is a property owner can sleep well tonight knowing that President Bill Clinton is still pulling strings.
The people of Guam noted U.S. news reports of Mr. & Mrs. Clinton's purchase of a $1,700,000 colonial style home in Chapaqua, New York, yesterday. Mrs. Clinton did not say where she got the money to finance an upcoming campaign for a N.Y. Senate seat nor for her outright purchase of the aging bungalow, but said they had not owned any private land since 1973. Campaign contributions?
Mr. Clinton could not be reached for comment on his sudden wealth, nor on the federal court sentence of Senator Santos to hard time in prison for protesting the seizure of his home on Guam. The people here know the Clinton's battle-cry is "...I got Mine!"
[Editor's Note: Tony Artero is the Daily Republican Newspaper's chief of the Pacific News Bureau on Guam.].
©2000 Copyright, The Daily Republican Nespaper. All rights reserved.
SAN DIEGO -- Not so many years ago it was the Year of the Woman in U.S. politics -- women were breaking into politics all over the place. For the first time, California had two women as senators and suddenly, it seemed, the issue of whether women could have it all was moot. They could, they should and they would.
Even in Asia, thought of as the bastion of traditional values, there were stirrings in the American direction. More and more, Asian women looked to be stepping out of the ancient mold. Country after country gave birth to the heretofore unheard of -- the women's rights group.
But how much has the status of women in Asia really changed? More than globalization, Islamic militancy, environmental degradation and so on, the question of the Asian woman's role may be the most difficult millennial issue of all for this region hoping to make the next one hundred years the "Asian Century."
Asia used to boast that its patriarchal tradition, for all its faults, at least protected its women from the domestic violence so common in the West. But new research is starting to suggest that this isn't true. Studies at the University of Michigan show that Japanese women, believed to be buffered from high levels of spousal abuse and the like, are actually in the same boat as their counterparts in America.
It turns out, for example, that about one third of all women killed in Japan are slain by their partners, as in the U.S. According to Mieko Yoshihama, the academic who conducted the study, and who is co-founder of the Domestic Violence Action and Research Group in Japan, violence against women has been hidden behind the thick veil of Asian patriarchal tradition.
It is noteworthy Japan didn't even open a rape-crisis center until 1982 -- and the legal definition of domestic violence was last revised in 1907. It is simply not an issue that has been given enough attention throughout Asia, from Japan to India.
The regional pattern is reinforced by another valuable new study on women's rights, conducted by the U.S.-based Asia Foundation. The constitution of Mongolia, for example, failed to accord women equality with men until 1992.
India, despite the occasional showcase woman prime minister, remains a Hindu nation over which the caste system hangs heavily, with all its restrictions on women. Not until recently had Nepal, a largely Hindu nation, conducted a single national survey on violence against women. In otherwise democratic Sri Lanka, women have had the right to vote since 1931 but even today cultural inhibitions severely restrict the participation of women in politics.
Women's groups in Asia are pressing the good fight, but they are well aware that progress is made difficult by doubts in their cultures that the Western way is best.
Even in Singapore, with undoubtedly the highest percentage of educated women careerists anywhere outside the West, there are second thoughts. In an interview there, Senior Minister Lee Kuan Yew told me: "One of the fundamental global issues is the education of women. I see two extremes between the Japanese and the American ways. The Japanese keep their women in their traditional role....Their task is to bring up the next generation. Work is temporary: the moment they get married and have children, they stop work. They have deprived themselves of half their brainpower and probably about one quarter of their muscle power. But they have done well. Their women have produced the next generation of salaried men."
The Western way with women leaves Lee and many other Asians unsettled. When colonial Britain withdrew four decades years ago, Singapore's founding government decreed that women should have the same opportunity and education as men not because of confidence in the cultural philosophy of equal rights but out of economic pragmatism: After all, a male-only workforce would be merely half the size of one that included women. Liberating women to work was an economics numbers game. So they went the American way and equalized women in education and in the workplace. Lee sounds regretful now -- "I may sound like a male chauvinist but then the next generation is left to [the day care of] television. Children are brought up by television and weekend parents. The price is paid by the next generation. We have unraveled a system that existed for thousands of years from the agricultural era. It is a fundamental problem, worldwide. It cuts across all ideological lines. The Chinese in China also face the same problem…."
Lee's reservations find deeply embedded resonance across the Asian continent. Perhaps the tsunami of globalization and its concurrent economic winds will roll over all objections -- sexist or not -- and force Asia to adopt Western values and ways about women. Perhaps the wave of democratization across the region will empower women with the vote and steamroller all reservations.
For now, though, many in Asia just aren't convinced that the West -- with its high rate of divorce and juvenile delinquency -- has got the basic issue right. In more than one respect, let's hope they're wrong.
[Editor's Note: Tom Plate is Director and Founder of the Asia Pacific Media Network, a regional alliance of blue-chip news-media institutions. Professor Plate is a public policy ethicist at UCLA. Asia Pacific is edited by Alice Wu. She may be contacted at Email firstname.lastname@example.org -- Prof. Plate's Email is email@example.com].
1999 copyright, The Asia Pacific Media Network
WASHINGTON -- In a report by the Pentagon's Joint Chiefs released today, the Clinton administration is said to have cut back the Navy's fleet of attack submarines so much that it will place U.S. operations at risk.
Gen. Henry H. Shelton, chairman of the Joint Chiefs of Staff and Navy officials welcomed the report. "We're not a self-licking ice cream cone," said Rear Adm. Malcolm Fages, director of submarine warfare.
But some naval experts question the need for enlarging the fleet, expressing skepticism that intelligence missions could have expanded so substantially since the Cold War, or that submarines offer the only way to carry them out.
"The intelligence stuff is difficult to assess because it's secret," said Ivan Eland, director of defense policy studies at the Cato Institute here. "But all the rogue states we say we're now worried about -- Iran, Iraq, Libya and so on -- existed during the Cold War, and we were doing a lot of intelligence gathering then. I can't believe a lot of new requirements have suddenly developed."
The new Joint Staff study couldn't have been released at a more appropriate moment. The Clinton administration is drafting its final fiscal 2001 budget request to Congress this week as the military joint chiefs are trying to find out where the surplus went. Why? It seems that Mr. Clinton's budget is suddenly short billions of dollars for necessary projects.
Last January, President Clinton's stood befor Congress and the nation and pledged $112 billion in additional defense spending over the next six years and more billions in fiscal year 2000. However, according to the report, Mr. Clinton is now coming up short by about $14 billion. That's just about the same amount the Joint Cheifs requested last year for a fleet of 68 attack subs to replace America's aging 18 ballistic missile subs which play a key role in the nation's nuclear deterrent.
1999 copyright, The Daily Republican Newspaper. All rights reserved.
WASHINGTON - The Clinton administration is down playing a number of critical Y2K related computer failures in essential services like electricity and communications.On Sunday President Clinton's top Y2K adviser, John Koskinen, told reporters "We expect there will continue to be small glitches."
In fact, there were at least seven nuclear power plants reporting computer problems, and the Pentagon disclosed has now disclosed a reconnaissance satellite shut itself off for a number of hours.
``For a short period we were not able to process the information the satellites were sending us,'' Deputy Defense Secretary John Hamre said, describing a problem that emerged Friday night when Pentagon computers rolled into the new year.
He said the computers were down for hours. By noon on Saturday the Defense Department had not yet fully restored its back-up system. Hamre declined to further identify the satellite system, except to say it did not involve Americans' early warning defense systems.
The nuclear power plants reported Y2K related problems with computer systems used for security access.
The Clinton White House has spent an estimated $100 billion in the United States alone to overcome the Y2K problem in computer databases installed and maintained in the White House basement and other offices and buildings all over the nation after Mr. Clinton was elected.
Paul Strassmann, a former Defense Department official who is chairman of Information Economics Press in New Canaan, Conn., says he was not surprised that the transition to 2000 was "one of the most reliable end of year computer operations ever."
The year-2000 problem cost $100-billion to fix in the United States but left the nation in better shape. "More than half of the $100-billion was spent," Strassmann says, "on maintenance that should have been done earlier but for various reasons had been postponed."
For PC repair companies there is an overall shortage of computer techs, especially in software and Web site development that has been postponed to deal with Y2K work. The greatest demand is for people who can design Internet software, especially for electronic retailing as the expertise of most companies and workers is in the older computers and programs.
1999 copyright, The Daily Republican Newspaper. All rights reserved.
WASHINGTON, D.C. -- On the first day of the Year 2000, the nation's banks, thrifts and credit unions are conducting business as usual, federal regulators said. No significant disruptions resulting from the century date change have been detected, the regulators added.
The Federal Deposit Insurance Corporation, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the National Credit Union Administration are closely monitoring financial institution operating performance during the first week of the Year 2000.
The Federal Reserve reported that the nation's payment systems are functioning well and that currency supplies have been more than adequate to meet demand. Credit cards, debit cards, checks and automated teller machines are all working normally.
U.S. bank customers remain confident that their banks are ready for the Year 2000 according to a new report issued by the Gallup Organization. Nine out of ten bank customers continue to express confidence in their bank's readiness.
The report is based on about 1,800 interviews completed between November 13, 1999, and December 12, 1999, as part of an ongoing survey of adult Americans who have bank accounts. The ongoing survey is being sponsored by the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation (FDIC).
The survey results also indicate that the public remains confident that basic payment systems will work properly. Most American adult depositors believed that they would have access to their money; that checks would continue to be processed accurately; and that automatic teller machines, credit card systems, and electronic direct deposits would function normally.
Over the past several years, FDIC-insured financial institutions have been identifying and overhauling computer systems to make them Year 2000-ready. At the same time, regulatory agencies have been closely monitoring their efforts. Based on their findings, the regulators said that the banking industry is prepared for the Year 2000 and that it will be business as usual for bank customers.
For the past three years, federal financial institution regulators have overseen the efforts of banks, thrifts and credit unions as they prepared their computer systems for the Year 2000 century date change.
Analysts at the Gartner Group Inc. in Stamford, Conn., say Y2K preparation cost as much as $600 billion worldwide. At IDC, Gantz estimates worldwide Y2K costs at $280 billion so far, plus at least $40 billion more that will be spent in 2000 and 2001.
The United States, he said, will have spent an estimated $122 billion, followed by Western Europe at $91 billion, and the Asia-Pacific region at $54 billion.
The rest of the world, including Latin America, the Mideast and Africa -- will have spent about $15 billion. Gantz said IDC arrived at those figures after surveying the IT budgets and anticipated Y2K spending of 10,000 organizations in 17 countries around the world.
Had the countries not addressed the Y2K issue, and computers crashed, Gantz estimates lost revenues of $21 billion worldwide.
On the other habd, one of the glitches that has been reported is at the Pentagon. A spokesperson said Saturday a failure in a ground-based system prevented officials from handling critically important information from some U.S. intelligence satellites for a few hours Friday night. However, Pentagon officials withheld news of the glitch New Year's Eve, telling reporters only after the big millennial celebrations in Washington and New York had finished.
In France one of its defense satellite systems lost the ability to detect equipment failures. And several hospitals in Sweden and Egypt reported non-lethal problems in medical equipment. celebrations in Washington and New York had finished.
More ominous was the malfunction of a computer linked to radiation monitoring systems when it seized up at a Japanese nuclear power plant triggering a radiation panic. celebrations in Washington and New York had finished.
Here in the U.S. door locks sealing off sensitive areas refused to open after midnight on the eve of the new century at a nuclear plant in President Clinton's home state of Arkansas.
[Editor's Note: The Federal Reserve, the central bank of the United States, was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Fed's duties fall into four general areas: (1) conducting the nation's monetary policy; (2) supervising and regulating banking institutions and protecting the credit rights of consumers; (3) maintaining the stability of the financial system; and (4) providing certain financial services to the U.S. government, the public, financial institutions, and foreign official institutions.]
1999 copyright, The Daily Republican Newspaper. All rights reserved.