Reconstruction assistance for Ukraine should include local governments

A basic lesson from the Marshall Plan for postwar reconstruction of Europe in 1948 was that foreign reconstruction assistance can be much more effective when it helps to promote reforms that will be fundamental for successful future development.   Reforms that have been widely considered vital for Ukraine’s future development include strengthening ties with the European Union and increasing the capacity of local governments to serve their communities.

The first of these considerations has motivated a recent CEPR report’s recommendation that all foreign reconstruction assistance should be coordinated and supervised by an agency of the European Union.   That is, even reconstruction assistance from the United States should be channeled through an EU agency, because government officials in Ukraine can benefit from the experience of working with the EU’s fiscal regulations and standards, given that closer integration with the European Union could be vital for Ukraine’s future prosperity. 

Reconstruction work must be under the direction of officials of Ukraine’s sovereign democratic government.  But donors should recognize that, in 2022, the people of Ukraine have been fighting to defend a system of government that includes responsible locally elected officials as well as nationally elected officials of the central government. 

Citizens are willing to risk their lives to defend their country against insurgency or invasion when they see a connection between service to the state and leadership in their own community.  When Russian agents began actions to subvert some eastern regions of Ukraine in 2014, however, government in Ukraine was highly centralized along the old Soviet model, and local authorities were dependent on the national leadership in the capital.  Accordingly, even under national democracy, people in some regions might understand that their local government was controlled by politicians who were elected by voters from other parts of the country.  In such regions, even the most prominent local leaders could feel alienated from the state which had no use for them.  Who would then organize their communities to defend the state at need? 

Decentralization reforms in 2015 created a new system of local governments throughout Ukraine, establishing about 1400 territorial communities (hromadas) in the country by 2020.  These locally elected community governments were given a significant share of local taxes to provide local public services, which had formerly been the responsibility of nationally-appointed district governors.  The results have included measurable improvements in local public spending.

Thus, since 2015, democratic decentralization has ensured the emergence of elected local leaders with real power to organize and maintain local defense.  Since the Russian invasion began in February 2022, there have been regular reports of mayors leading their communities in resisting the Russian invaders.   As Tymofii Brik and Jennifer Murtazashvili have observed, citizens have rallied not just in support of President Zelenskiy in Kyiv, but also to defend their locally elected mayors and community councils.  

To support and advance this vital growth of local government in Ukraine, a significant share of foreign reconstruction assistance should be set aside for use by local governments.  That is, while the largest portion (perhaps two thirds) of foreign assistance should be directed by officials of Ukraine’s national government, a significant portion (perhaps one third) should be budgeted for allocation by local reconstruction boards that consist of locally elected officials.  In each district of Ukraine, an official of the European assistance agency could work with the local mayors and other locally elected officials to help them develop and implement a plan for allocating their district’s share of the locally directed portion of foreign assistance.  In this way, the process of rebuilding the infrastructure of Ukraine can also help to promote the development of local governments’ capacity to serve their communities, which is vital for Ukraine’s successful democratic development.

Ukraine’s success in resisting a massive Russian invasion in 2022 has been based on its people’s confidence in the ability of an independent Ukraine to provide a better future for them, and reforms to establish responsible local governments have contributed to this confidence.  After the war, the international community should generously support the development of an independent democratic Ukraine that can build peaceful and mutually beneficial relations with all its neighbors.  But above all, the postwar reconstruction of Ukraine should aim to fulfill its people’s hopes for a better future, for which they have given so much.

How Joe Biden can achieve unity

Co-authored by Roger Myerson and Kael Weston.

President Biden has promised to work as hard for those who did not vote for him as for those who did. This unifying promise will require a different kind of politics, however. Where the 2020 presidential campaign focused on pivotal purple states, now President Biden needs a team to reach voters in the red states that supported Donald Trump.

In these states, the legacy of Trump’s divisive rhetoric has induced many Americans to view the new Biden administration with suspicion or even hostility. Some rejectionists may still favor extreme action against the democratic transfer of power and must be treated as serious threats to our democracy.  

We write as a theorist and a practitioner of state building with experience supporting democratic governments in foreign lands. Since September 11, 2001, much has been written on counter-insurgency doctrine as practiced in places like Iraq and Afghanistan. After January 6, 2021, however, our gaze must shift inward – to homegrown violence within our national borders. State-building lessons that were learned in foreign conflicts must now be applied at home. 

The most important of these lessons is that distrust in government can become virulent in communities where people have no sense that anyone in the national leadership cares about their problems. People in a community can begin to trust a government only when it has someone who will listen to them and convey their concerns to national policy-makers. Such local political outreach is critical even when it is not possible to reach full agreement about all issues and even while some extremists might seek conflict.

The Congress is America’s institution for communicating local perspectives to the center of government. But many Republican representatives might consider it against their political interest to help President Biden prove his commitment to serve all Americans. History gives us ample reason to fear that Republicans in Congress may refuse to work constructively with a Democratic administration.  

Against that possibility, the Biden administration needs an alternative strategy for actively reaching out to people in the districts that voted for Trump by the widest margins. The President and members of his administration should make plans to visit such districts. They should initiate discussions there with citizens and local officials about how the federal government could better serve their communities, and about what people can do to find common ground and defuse threats of violence.

In the vital outreach to voters whose Republican representatives reject bipartisan cooperation, President Biden should get essential guidance from the Democratic candidates who recently campaigned to represent these districts. These discussions will be hard, and they should include local Republican officials who are willing to participate. Local Democrats who know these districts can help find local Republicans who are ready to engage in constructive discussions about local and national concerns.

In 2020, one of us ran as a Democratic candidate for Congress in a gerrymandered and very red district in Utah, working hard to engage Republican voters there. In an old truck, over 8,000 miles were traversed to show up in places where Democratic candidates were not expected to listen – in small towns surrounded by alfalfa fields and ranches amid red rock deserts. Blunt conversations were held with gun owners, the unemployed, the uninsured, anti-maskers, and numerous other Trump supporters. Points of agreement were found about the importance of keeping rural post offices open and safeguarding healthcare access.

These repeated visits to the reddest Utah counties did not turn them blue on election day, but the four Democratic congressional candidates in Utah together earned over 500,000 votes. They know how to help the Biden administration connect with voters in their districts, and the same can be said for Democratic candidates who ran and lost in many other Republican-dominated states. 

The new Biden Administration has already signaled its intent to reexamine National Monument boundaries in Utah. Cases like this will be crucial tests of the federal government’s willingness to work with local elected officials toward agreements that take shared interests into account.

Ultimately, the goal of the President’s outreach to red-state Republican voters should not be to make them Democrats but to remind them that they should expect both major parties to offer policies for improving people’s lives and protecting their communities. Americans must confront the divisive legacy of campaign arguments that an entire party was somehow trying to steal or destroy the country. The whole point of democracy is that voters can benefit from two parties competing to offer them better public service. The President must act now to reaffirm this vital truth in the reddest parts of America.

This article was originally published in The Hill.

On the Secret to the Development of Great Nations

[Remarks prepared for remote delivery at the 7th international workshop of the Institute for New Structural Economics at Peking University in Beijing, China, on 15 Dec 2020]

I am glad to join in this celebration of the work of the Institute for New Structural Economics, which promotes research into the determinants of modern economic development.  Having been established in China during a period of momentous economic growth, this Institute is particularly well positioned to offer valuable insights into the secrets of successful development. From this perspective, research at the Institute has been based on recognition that synergies between an effective market and a facilitating government can be vital to achieving an economic transformation that materially improves people’s lives.

People in poor countries today should consider China and America, along with other successful countries, as role-models for identifying paths to modern economic prosperity.  Although the paths of our countries may differ in many ways, they may also have some important elements in common.

When I was last in Beijing for a conference of the Institute two years ago, one of the speakers inspired me to think about parallels between Market Socialism as it has been applied in China and Federalism as it has been applied in America.  If you do not see the connection, let me try to explain what they might have in common.

A market is a place where consumers can choose among goods for sale from different competitive producers.  In a socialist country, government officials can be expected to play an active role in supporting and sponsoring productive enterprises.  Now consider what should happen when two enterprises are selling similar products, but one enterprise is sponsored by local officials in a small town while the other enterprise is sponsored by high officials in the national government.  Which enterprise should get the most customers?  Under Market Socialism, the answer is that the customers should buy from whichever enterprise offers them the quality that they want for a lower price.  That is, Market Socialism prescribes a kind of balanced equality between the opportunities of different levels of government to promote productive enterprises that serve the interests of the consuming public.  I believe that this principle has served the people of China very well.

In America, we also understand that our welfare depends on a balanced relationship between our local governments and our national government, and this system of distributing powers between different levels of government is called Federalism.  The importance of Federalism can be observed at many points in American history, but never more starkly than this year, after our 2020 Presidential election last month.

If you want to understand how a nation can achieve positive developmental synergies between markets and government, you must study how its government works, as well as how its markets work.  For better or worse, the American system of democracy makes it very easy for anyone to see how people win high offices in the American government: they do so by making a vast number of public speeches to earn the trust of voters throughout the country.  Americans may disagree with each other about many things, but we are united in the conviction that we can be best served by a government whose leaders have been chosen by the voters in a competitive election.

This year, however, when our incumbent President lost the November election, he denied the results and demanded to be certified as the winner in spite of the announced vote totals.  Among the members of Congress in Washington DC who are members of the President’s party, the vast majority have been unwilling to speak out against the President’s attempts to reverse the election results during the past month.  But America’s presidential elections are not managed by officials in Washington DC.  Our elections are managed by elected officials of our local governments, and their positions depend on the approval of the people in their communities, not on the President.  And this year we found that, among these local officials, even those who were members of the President’s own party were willing to speak the truth against his false claims, and they upheld the results of our election.

Our incumbent President has offered a lot of theories about what makes America great, and the secret to the development of great prosperous nations is also the subject of research at the Institute for New Structural Economics.  So I want you to understand that the greatness of America has always depended on its federal distribution of power between the local and national levels of government, but we have never needed this balanced federalism more than this year, in 2020.

Defining broader national security priorities after a pandemic

Americans have long accepted the need to invest a substantial part of our national income on defense to keep our country safe, but we have not been safe against a pandemic. Even with a vast national security budget, we have been neglecting public health investments that could have made our nation much more secure against the risks of a new contagious disease like COVID-19. The devastating cost of this year’s pandemic should warn us against identifying national security only with military security. We need a broader definition of national security, if America is to be better prepared for the next non-military challenge.

In the broadest sense, national security spending should include any public investments that can reduce the likelihood and potential cost of any foreseeable risk that involves a possibility of devastating damage to our nation. Even when the probability of a catastrophic risk is low, it may be worth spending money to make it even lower.

Against the risk of pandemic disease, America could have invested in a reserve manufacturing capability for emergency production of personal protective equipment and medical test kits, which would have been at least as valuable for our national security this year as any missiles or warships. The next deadly pathogen could appear in a poor country, and then Americans would be safer if we had a large mobile medical reserve corps ready to deploy and help contain the initial outbreak. From this perspective, an American withdrawal from the World Health Organization seems a step in the wrong direction.

We should also consider national investments to reduce our vulnerability to the risks of increasingly catastrophic damage from storms and wildfires. Those who are skeptical about the risks of climate change may believe that its probability of causing catastrophic damage is relatively small, but even small-probability risks should be taken seriously when a significant part of our nation is at stake.

Even within the scope of 21st-century military operations, the effectiveness of our national security spending has been reduced by its focus on purely military capabilities. America’s ability to achieve the goals of military missions in Afghanistan and Iraq was severely limited by inadequate investment in civilian capacity to support post-conflict restoration of order.

Investments to provide security against national catastrophic risks generally require public funding, because the demand for national security cannot be left to private markets. Society would not permit a private investor to extract from millions of people the full value of saving their lives in a national disaster. A competitive market for insurance against national catastrophes would be inhibited by rational doubts about a private firm’s ability to pay huge claims when the whole economy has been devastated.

Standard models of economic growth that ignore such risks have suggested that a policy of minimizing taxes would encourage private investments in economic growth which could increase everybody’s welfare in the long run. But when possibilities of rare catastrophic risks are admitted, we find that reliable long-run growth may actually require substantial taxation for public investments in defensive measures, even though these investments might seem unnecessary and wasteful in most years.

We cannot afford to provide full security against every catastrophic risk that people can imagine, nor should we credit all suppliers’ claims about the effectiveness of the defense systems that they would like to sell. With limited resources, we must prioritize investments that have a real possibility of making serious risks less likely or potentially less damaging. Decisions about public investments in any area of national security should be guided by the best available analysis from independent experts in the area.

Ultimately, our elected political leaders must determine funding priorities in the broad national security budget, and so we need national leaders who will make effective use of all available expertise for these vital decisions. After all the bitter losses that people have suffered in this pandemic year, we should recognize the paramount importance of electing leaders who can be trusted to thoughtfully and prudently assess how our nation should invest in keeping us safe against the complex risks of the world – not just against military threats.

This article was originally published in The Hill.

The Dilemma of Presidential Impeachment

“Impeachment, though it is a fine ceremony, and though it may have been useful in the seventeenth century, is not a proceeding from which much good can now be expected. Whatever confidence may be placed in the decision of the Peers on an appeal arising out of ordinary litigation, it is certain that no man has the least confidence in their impartiality when a great public functionary, charged with a great state crime, is brought to their bar. They are all politicians. There is hardly one among them whose vote on an impeachment may not be confidently predicted before a witness has been examined.” Thomas Babington Macaulay (1841).

The question of impeaching an elected President and removing him from office raises a conflict between two fundamental principles of constitutional democracy. One basic principle is that no individual can be above the law. Another basic principle is that everyone must respect a decision that has been made by the voters in a free democratic election. But the deterrent against unlawful abuse of power by an elected President necessarily involves some threat of removing the President from office, even though doing so would effectively nullify a decision of the voters from the previous presidential election. To preserve the integrity of our constitutional system, advocates on both sides of any impeachment debate should regularly affirm their respect for both principles, even as they work to maintain an appropriate balance between them.

Of course, impeachment is a partisan political process. In congressional oversight of the presidency, it is inevitable that the President’s partisan opponents will take the lead in scrutinizing his actions for any evidence of wrongdoing, while the President’s partisan supporters will take the lead in defending his actions. Indeed, the fundamental reason why we should want to live in a multi-party democracy is because, in a one-party state, nobody has any incentive to expose abuses of power by high officials. But in America today, the President’s defenders have chosen to impugn their opponents’ motivation and attack the process of impeachment itself, regularly portraying it as a partisan attempt to reverse the results of the 2016 election.

The high requirement of 2/3 majority in the Senate to remove a President implies that there is actually very little danger of any presidential election ever being nullified by an impeachment, except in cases where the evidence of high crimes by the President is so strong as to persuade many of those who originally voted for him. In the current impeachment process against President Trump, it is hard to see any realistic possibility of him actually being removed from office. But there is a very real possibility that, by portraying impeachment as an attack on the political rights of those who voted to elect him in 2016, the President could turn the impeachment process to his advantage in energizing his base for re-election in 2020.

From this perspective, we should recognize a fundamental threat to our constitutional democracy. When the President’s supporters defend his presidency by denigrating the institution of impeachment itself, the success of this strategy would raise the prospect of a President whose vast powers are no longer subject to any effective constitutional check. If the President is re-elected by a winning coalition of voters who have been convinced to support him even against the impeachment process itself, then there will be nothing to deter the President from any form of autocratic behavior.

What can be done? The ultimate purpose of the impeachment process is really not to remove the President but to deter the President from unconstitutional abuse of power. It is worth asking whether this purpose might be better served if the current Articles of Impeachment were amended and rewritten as Articles of Censure by the House, condemning the President’s wrongdoing and resolving to continue investigations toward the possibility of stronger Articles of Impeachment in the future. When there is a virtual impossibility of achieving a 2/3 Senate vote to remove the President, a vote of censure against Presidential wrongdoing would not have any less practical result than a vote of impeachment, but a censure could not be construed as an attempt to nullify the decision of those who voted in 2016 to elect Donald Trump.

Any benefits that the President could have hoped to derive from the abuses of power that are detailed in the first Article of Impeachment have been effectively countered by publicly exposing these abuses, and so they do not raise any urgent reasons for removing the President now. Indeed the best punitive deterrent against future wrongdoing by this President might be the deferred threat of an impeachment in the House and trial in the Senate near the end of his term after he loses his bid for re-election.

We should also be seriously concerned about the possibility that a Senate vote against removing the President could be interpreted as a vindication of the President’s obstruction of impeachment investigations, which is the basis for charges in the second Article of Impeachment. It is vital that the Congress should forcefully condemn the President’s obstruction of the impeachment investigation, but Republicans in the House and Senate would be more likely to support such a condemnation if it were not tied to the removal of the President.

Perhaps the best conceivable result from a House vote of impeachment now might be if a bipartisan coalition in the Senate could vote to send the Articles of Impeachment back to the House for further investigation, while admonishing the President to cooperate fully with this investigation. When the voters in 2016 chose to elect a President who had no record of exercising public power within constitutional limits, they were implicitly relying on regular congressional oversight to help the President stay within these limits. For this purpose, what is essential is that any presidential abuse of power can be publicly exposed and condemned by an impeachment investigation. Issuing two Articles of Impeachment now does not end this ongoing responsibility for oversight.

Postscript (Dec 18, 2019): Two days after writing the above note (and just a few hours before the House’s scheduled debate on impeachment), I learned about an article by Laurence Tribe, where he argues that, after passing Articles of Impeachment, the House can and should delay sending them to the Senate until a fair trial there is considered possible. Apparently John Dean has made a similar argument. I agree that Tribe’s suggestion may be better than the alternatives that I explored in my essay above (although articles of impeachment that are not forwarded for trial could be considered as effectively equivalent to articles of censure).

What really causes America’s chronic deficit in international trade

A fundamental error that seems to motivate the Trump administration’s policy on international trade was starkly articulated on Firing Line recently by Peter Navarro, the President’s assistant for trade and manufacturing policy. The Firing Line host Margaret Hoover asked Navarro to explain the Trump administration’s actions against trade with Germany. He responded: “If you look at our trade deficit with Europe, it’s $150 billion, right? Just rough rule of thumb is $1 billion of trade deficit is 6,000 jobs you ship offshore, okay? So it’s a big number. And the only reason why we have that deficit is because of a whole range of unfair trade practices that Europe engages in.”

One may question Navarro’s assertion about how a trade deficit affects employment, but let us focus here on his expressed assumption that America’s trade deficit with other countries is caused by their unfair trade practices against American exports. This sounds so logical that few people bother to question it, but it is wrong.

America’s trade deficit is the difference between the total value of the goods and services that Americans buy from other countries (our imports) and the total value of the goods and services that Americans sell to other countries (our exports). These are big aggregates, and they are affected by many factors. But the primary factor that ultimately drives America’s total trade deficit is the desire of foreigners to invest in America.

When Americans buy goods and services from foreigners, we pay them in US dollars. But there is just one basic reason for anybody to want US dollars: because they can be used to buy things in America. US dollars can be used to buy goods and services in America, or they can be used to buy investments in America. Foreign purchases of American goods and services are counted as exports in America’s trade balance, but foreign purchases of American stocks and bonds are not, and that is the key to understanding what causes imbalances in international trade.

If foreigners had no desire to invest in America, then they would use all the dollars that they got from us to purchase American goods and services, which would be counted as exports in America’s international-trade accounts. Even if foreign governments “unfairly” imposed taxes and quotas on American exports, foreigners would still want to use their American money as well as possible to buy things from America. Foreigners who do not want to invest in America would certainly have no motivation to simply hoard the dollars that we paid them for our imports.*

So in a world where foreigners did not want to acquire investments in America, America’s international trade in goods and services would be generally balanced, as all the dollars that Americans spend on imports would return promptly in demand for American exports. In this world, unfair trade barriers could reduce the volume of trade and could affect the exchange rate between the US dollar and other currencies, and trade barriers could affect the distribution of deficits and surpluses in America’s bilateral trade relationships with individual countries; but trade barriers could not affect the overall balance between the total global values of America’s exports and imports.

If we really want to understand America’s deficit in the international trade of goods and services, we must recognize that this trade deficit is just equal to the net investment that is flowing from the rest of the world into America. When foreigners want to invest their savings in safe bonds from the US government or in securities from well-managed US corporations, the dollars that are needed to buy such investments can only come from the excess of the dollars that Americans send abroad, in payment for US imports, over the dollars that foreigners send back to pay for US exports.

In effect, investments in American stocks and bonds and other assets may be viewed as America’s “stealth exports” that balance the international trade accounts. If foreigners want to acquire these investments from America then they must sell more goods and services to America, and that is the force that drives the trade deficit. When we count the jobs that are lost or gained because of international trade, we should remember to include the gain of jobs from corporate and government spending that are funded from global investments in American stocks and bonds. We may doubt that Peter Navarro was considering these jobs in his estimate of the effects of a trade deficit on employment, even though a substantial portion of the $150 billion deficit with Europe has surely been invested in US Treasury bills which helped to fund Mr Navarro’s own salary.

Among the investments that America is selling to the world, none are more important than the debt of the US federal government. The US Treasury sells its bills, notes, and bonds to investors all over the world. So it may be appropriate to look for a link between the two famous deficits, the US government’s fiscal deficit and America’s international-trade deficit. These two deficits fluctuate differently from year to year, but both have averaged around $500 billion per year since 2000. Thus, in recent decades, America’s trade deficit has effectively brought in enough foreign savings to finance the fiscal deficit of the US federal government. Of course, much US federal debt is still held by Americans, and foreigners have also purchased other assets in America. But we should understand that America’s trade deficit has been driven more by global demand for US federal debt than by any unfair foreign trade practices.

If there is something to worry about in this picture, it is the increasing debt of the US government, which will be a real burden on American taxpayers in coming generations. Trade barriers in any country can harm its domestic consumers and its foreign suppliers, but trade barriers are not the root cause of America’s chronic overall trade deficit. As long as America is generally considered the safest and most reliable country in the world, global economic growth will cause a chronic deficit in America’s international trade, so that people throughout the world can get the dollars that they need to acquire the investments that they want in America.

 

*Note: Dollars are issued by the US Federal Reserve as a form of US government debt that does not pay interest, and so a hoard of US dollars can also be considered an investment in America.

 

Senators should abolish the filibuster

The Senate filibuster has done much harm and little good in the history of our country. It was long used to defend local policies of racial injustice, and in recent years it has contributed to a legislative paralysis which has eroded public confidence in the traditional rules of our political system. We need to understand more clearly why the filibuster has persisted, and how it should be reformed.

Senators have regularly tried to justify the filibuster with noble arguments about the value of deliberation and the importance of protecting minority rights. But each party can also find noble arguments to support its legislative program, and it is hard to see how one set of arguments could have prevailed so consistently over the other without some force of vested interest in the Senate. Under the Constitution, a majority in the Senate can determine the rules of its proceedings, and the same majority that wants to pass today’s legislation could also vote to eliminate the filibuster if they did not expect to benefit from it in the future.

Thus, the institution of filibustering could not have survived in the Senate unless most senators generally expected that, in the long run, they could benefit from maintaining this institution. In a long career, each senator must expect to be in the minority some fraction of the time, and then the senator may benefit greatly from the power to block legislation, even though such minority obstruction may seem inconvenient when the senator’s party has a majority in the Senate. If senators expect these minority benefits to be worth more than the corresponding majority costs, then they should prefer to maintain the filibuster.

So we need to understand why the prospective benefits of filibustering for the minority can be worth more to senators than the costs of obstructing the majority’s legislative program. The basic economic reason is that the benefits of increased minority influence from filibustering accrue entirely to members of the Senate, whereas the political costs of failing to pass the majority’s legislative program are shared by the President and members of the House of Representatives. For evidence that the Senate’s incentive for preserving the filibuster is derived primarily from its rivalry with the House, notice that the Senate has been willing to give up the filibuster in its confirmations of executive appointments, in which the House is not involved.

To put it starkly, the filibuster has survived because it tends to make the Senate more important than the House, and senators can benefit from such importance. When there are more groups that can block legislation in the Senate, the result is that lobbyists for new legislation must allocate more of their resources to winning support in the Senate than in the House. Thus, the possibility of filibusters in the Senate tends to increase the total contributions that interest groups give to senators, and so the average senator can expect to gain from maintaining the filibuster.

But these benefits in the Senate are largely at the expense of the House, and there is no compelling reason why such a transfer of power from one legislative chamber to the other should be considered beneficial for Americans in general. In the long history of bills that have been blocked by Senate filibusters, we can find many cases where most Americans today would regret the results of the filibuster, most notably including the anti-lynching bills which otherwise might have prevented the public racially-motivated murders of thousands of Americans in the early twentieth century. It is hard to identify any historical cases where a Senate filibuster prevented the passage of a bill that most Americans today would consider detrimental.

However, a broader reading of the history may reveal a public benefit of the filibuster that might be worth preserving. Throughout history, there have been filibusters that were intended, not to block a bill, but to demand consideration of some other bill which had broad popular support but was not approved by the Senate leadership. We have had a recent example this year, when Senate Democrats filibustered against a general spending bill, not because they opposed any particular provision in the bill, but because they wanted to force the Senate’s Republican leadership to permit a vote on a DACA immigration bill.

The long history of filibustering should remind us that any procedural rule which allows individual senators to claim the Senate’s attention for any period of time can also be used to reduce the amount of time that the Senate can devote to other essential business. The simplest way to prevent filibustering is to let the Senate’s majority leader exercise full centralized control over the allocation of time in the agenda for the Senate whenever it is in session. But such centralized agenda control creates the possibility that some legislative initiatives which might have been supported by a bipartisan majority could be blocked if the Senate majority leader refuses to schedule any time for them in the Senate’s agenda. Thus, to prevent the majority leader from having an effective veto against popular legislation, it might be better if the filibuster were replaced by some rule which would still allow a minority party to raise serious alternatives for consideration on the Senate floor.

For example, a reform that enables the Senate majority to limit procedural delays against its legislative agenda could still include a guarantee that, whenever the majority leader schedules a bill for a final vote in the Senate, time must be allowed also for a vote on one final amendment to substitute an alternative minority version of the bill, provided that this alternative version has been endorsed by more than one-third of all senators. (When the majority and minority alternatives each have support from more than one-third of the Senate, it is mathematically impossible for any other alternatives to have such support.) By eliminating the institutionalized requirement for 60% super-majority support to prevent a filibuster, such a reform would have opened the way to Senate approval for a bill like the recent Democratic proposal on DACA which could attract some Republican votes.

But senators’ inherent interest in maintaining the filibuster makes them unlikely to eliminate it unless such a reform is demanded by the voters who elect them. In the early history of our country, filibustering tactics could be even more obstructive in the House of Representatives until, in the 1890s, voters’ outrage at the resulting legislative paralysis induced both parties to support procedural reforms that centralized agenda control in the House (see Gregory Koger’s excellent book on the history of filibustering). Today, public frustration with legislative gridlock has caused many voters to prefer a President who has minimal interest in maintaining traditional rules of our political system. We cannot afford to undermine the foundations of our constitutional democracy in this way. Senators of both parties should show now that they place the country’s interests above their chamber’s interests by abolishing the filibuster.

[The central ideas in this note have been developed formally by Daniel Diermeier and Roger B. Myerson, “Bicameralism and its consequences for the internal organization of legislatures,” American Economic Review 89(5):1182-1196 (December 1999).]

Geopolitical impact of the America-first presidency: a perspective for 2018

President Trump’s 2018 budget blueprint includes plans to increase military spending, while cutting the State Department’s budget. But the proposed new investments in military hardware are not likely to make any difference for America’s geopolitical power. Recent frustrations of US foreign policy have not been due to any lack of military capability, but instead have been due to a weakness of diplomatic capabilities for turning battlefield successes into positive political developments. In both Iraq and Afghanistan, America’s policy-makers continue to focus more on winning battles than on cultivating local political leaders, and so America’s influence in the Middle East has continued to decline in spite of costly military efforts. There is no indication of any plan to invest in state-building capabilities that could reverse this trend.

A nation’s power in international affairs depends as much on its ability to make credible long-term commitments as on its military might. In this regard, President Trump’s shift to an opportunistic America-first policy could actually weaken America’s ability to achieve foreign-policy goals. For example (as discussed here), sanctions against North Korea cannot be effective without China’s full support, and such support cannot be expected as long as China fears that any political change in North Korea might open the way for American forces in Korea to advance toward China’s border; so diplomatic success in Korea would depend on credible assurances against such an advance. America’s withdrawal from major international agreements will make it harder to build confidence in any newly negotiated promises. In this environment, the best hope for effective containment of North Korean militarism may be found in security agreements directly between China and South Korea, even though such agreements could be interpreted as evidence of a weakening of America’s alliances in Asia.

Meanwhile, the North American Free Trade Agreement is at risk after being blamed by the President for contributing to America’s longstanding trade deficit. But this trade deficit has been primarily driven by strong international demand for US debt, based on global confidence in the stability and reliability of the United States government. America-first policies could erode this confidence and weaken global demand for US debt, making US federal deficits harder to finance under President Trump than they were under Presidents Obama or Reagan. The result could be substantially higher US interest rates after tax cuts in 2018.

On the problem of commitment in Korea

I have argued that the key to achieving America’s long-term goals of security and peace in Korea could be a credible long-term commitment to keep American forces out of North Korea, because of China’s special security concerns in this area. Sanctions against North Korea cannot be effective without China’s full support, and such support cannot be expected as long as China fears that any political change in North Korea could open the way for American forces in Korea to advance toward China’s border. Thus, America could increase its ability to achieve its goals in Korea by conceding the priority of Chinese security concerns in the northern part of the Korean peninsula. Such a concession could benefit American interests, even if China offered no specific promises in return, because the reassuring nature of this concession would help to bring China’s interests into closer alignment with America’s interests in this region.

However, these benefits of such a commitment could be realized only if China considered the commitment to be credible. Several commentators have expressed doubts that the American government could make a credible commitment not to expand its military alliance with South Korea over the entire Korean peninsula, if such an expansion were to become possible after a change of regime in the North. Certainly, when the President has withdrawn from major international agreements that had been negotiated by his predecessors, it becomes more difficult for the international community to have confidence in the future credibility of his own long-term promises.

But even when an ability to make credible commitments seems questionable, it is still important for us to consider what such a commitment could achieve. If we do not recognize how a reputation for maintaining commitments could be beneficially applied in international relations, then we will not understand how shifting to an opportunistic America-first policy may actually weaken America’s ability to achieve its foreign policy goals today. Furthermore, once we realize that credibility is at the core of the problem, then we can look for other ways to achieve it.

In this case, there is another option. If America’s credibility is weak, then it could be better for South Korea to take more leadership in these strategic questions. After all, American forces are stationed in the Korean peninsula only as allies of South Korea. The South Korean government could stipulate that these allied forces are permitted on its territory only for the limited purpose of repelling or retaliating proportionately against an attack by North Korea. South Korea could further promise that it would never allow its foreign allies to undertake the extended occupation of any territory in North Korea, unless China jointly agreed to such an intervention. Of course the exact terms of such a statement should be the subject of diplomatic discussions with both China and America. My main point is that it could actually be in America’s interest to encourage discussions between South Korea and China about how to craft a mutually acceptable agreement that could be credible and reassuring to China.

Solving the Korean crisis with game theory

People have asked me whether game theory can offer any insights for finding a solution of the North Korean nuclear crisis. Let me suggest that the answer may be Yes, as I will try to explain here in a nontechnical note without mathematical analysis. Based on a few general points that one can learn from game-theoretic analysis, I will explain why an effective strategy for encouraging moderation and political change in North Korea may be possible only with a long-term American commitment to recognize and respect China’s vital security interest in North Korea.

The first lesson that students learn from game theory is that we should try to think about any conflict situation from the perspectives of all the parties involved. Game theory also teaches us that a strategy for inducing others to behave better should include, not only a threat to punish their bad behavior, but also a promise to reward their good behavior. If we have a problem in making such threats and promises credible, then it may be necessary to stake our reputation on them, so that we would lose our ability to influence others in the future if we did not act as promised in this situation. But game-theoretic analysis often finds that a party can increase its current power to influence others by accepting such commitments that could reduce its own freedom of action in the future.

Several years ago, I argued that American military threats against Iran only tended to increase Iran’s motivation to acquire its own nuclear deterrent; and so an effective strategy for deterring Iran from acquiring nuclear weapons had to include an offer of better relations between America and Iran if Iran complied with international standards of nuclear nonproliferation. But I would be less optimistic that North Korea’s nuclear ambitions could be deterred by such an offer of detente. The rulers of North Korea must fear that their grip on power may require perpetual military tension with South Korea and its American ally, because peaceful relations could enable the people of North Korea to discover the vastly greater prosperity and freedom that Koreans enjoy in the South.

As a result, North Korea has become a perennial source of international tensions, and it has invested heavily in destructive military capabilities, so that any military operation against North Korea would be extremely dangerous for its neighbors. Economic sanctions have remained as the primary instrument for deterring North Korean provocations, but such sanctions cannot be effective without China’s full cooperation. In the past, a lack of such cooperation has undermined America’s efforts to use sanctions for inducing better behavior by North Korea.

Thus, an effective American strategy for managing the Korean crisis depends on finding a way to induce better Chinese cooperation with international sanctions against North Korea. Threats to extend trade sanctions against China are unlikely to induce full cooperation, and such a trade war would be at least as harmful to America as to China. But it is a mistake to think only about threats when searching for strategies to induce others to cooperate. Americans need to think also about promises that America could offer to make China prefer full cooperation with sanctions against North Korean violations of nuclear nonproliferation agreements.

It might seem surprising that China has not been a stronger supporter of sanctions against North Korea’s nuclear program. After all, no country would want an unreliable neighbor to acquire nuclear weapons. So what has limited China’s willingness to cooperate with America against North Korea? We must look at the situation from China’s perspective to understand what kind of promises could elicit the Chinese cooperation that is essential for solving the Korean crisis.

When we ask how the Korean situation looks from China’s perspective, we should recognize, first and foremost, that Korea was the starting point of the Japanese invasion of China in the early 20th century. Once Japan had achieved military dominance of Korea in 1905, Korea served as Japan’s base for invading China until the end of World War II in 1945. Of course the leaders of China know that their country is one of the most powerful nations in the world today, but people in China cannot forget the devastating Japanese invasion that entered China through Korea. We must understand that the people of China remember this history and demand that their leaders, who are responsible for their country’s security, must never permit the conditions for such an invasion to happen ever again.

But any threat that can effectively deter the rulers of North Korea must entail some risk of causing them to lose their grip on power. And any process of political change in North Korea, once it begins, could naturally open the way to a reunification of the peninsula under the government of South Korea, which already hosts American military forces. In that case, what would prevent American forces from moving north to the Chinese border? Such a possibility was intolerable to China in 1950, and we should understand that it is still intolerable for China today. This fear has made China resist any threat that could destabilize the North Korean regime.

Thus, to get China’s effective cooperation against North Korean militarism, America needs to provide some assurance that political change in North Korea would not expose China to any risk of foreign military forces on the Chinese border there. Indeed, one could argue that an American failure to recognize Chinese security concerns has been a factor in the Korean crisis since 1950, when America first tried to settle the crisis by moving its forces north to the border with China. Since then, China has seen only one clear way to ensure that powerful foreign forces should never return to its Korean border, and that is by maintaining the xenophobic regime of Kim Il Sung and his heirs as a buffer against all other powers. So any possibility of political change in North Korea will be strongly resisted by China unless it gets some credible assurance that its vital long-term security interests there would be respected even in the event of a regime change.

The fact that America and its NATO allies actually did move their forces eastward toward Russia after the end of Communism in Eastern Europe constitutes an unhelpful precedent which must be addressed. But there is nothing in North Korean history to resemble America’s long historical connection with Poland and other parts of Eastern Europe. Strong statements by American diplomats and leaders of both parties could give China some confidence that America would not use regime change to expand its power into northern Korea.

In the old language of 19th-century realpolitik, the key is for America to recognize the northern half of the Korean peninsula as being in China’s sphere of influence. Today, of course, agreements among great powers to recognize each others’ spheres of influence would be generally viewed as inconsistent with the principle of political self-determination for the people of every country. But in this case, a promise by America and its allies to respect a long-term Chinese sphere of influence in northern Korea could be actually the essential key to creating some possibility for the people of North Korea to change the political course of their country.

Thus, a credible commitment to keep American forces out of northern Korea could be the basis for a strategy to achieve long-term American policy objectives in Korea with Chinese cooperation. Some observers might consider such a commitment as a concession by America, but a game theorist would recognize it as a concession which could actually strengthen America’s ability to influence the situation.

See also the sequel “On the problem of commitment in Korea.”