The West Must Face Reality in Turkey
Richard N. Haass
NEW YORK – Now that Turkey is at loggerheads with its erstwhile ally, the United States, the country’s currency crisis has morphed into a political problem of the first order. The immediate issue is Turkey’s refusal to release the American pastor Andrew Brunson, who is being held on charges of terrorism, espionage, and subversion for his alleged role in the failed July 2016 coup against Turkish President Recep Tayyip Erdoğan.
The US government is right to object to Brunson’s detention. But its reaction has been counterproductive. In particular, the imposition of additional US tariffs on imports of Turkish steel and aluminum could further undermine confidence in Turkey’s economy, triggering a wider crisis that would do serious harm to the global economy. Moreover, tariffs allow Erdoğan to blame his country’s economic woes on America, rather than on his own government’s incompetence.
It is still possible that the Turkish government will find a way to release Brunson, and that US President Donald Trump, anxious to demonstrate fealty to the evangelicals who form a core part of his base, will rescind the tariffs. But even if the immediate crisis is resolved, the structural crisis in US-Turkish relations – and Western-Turkish relations generally – will remain. We are witnessing the gradual but steady demise of a relationship that is already an alliance in name only. Though the Trump administration is right to have confronted Turkey, it chose not only the wrong response, but also the wrong issue.
The relationship between Turkey and the West has long been predicated on two principles, neither of which obtains any longer. The first is that Turkey is a part of the West, which implies that it is a liberal democracy. Yet Turkey is neither liberal nor a democracy. It has effectively been subjected to one-party rule under the Justice and Development Party (AKP), and power has become concentrated in the hands of Erdoğan, who is also the AKP’s leader.
Under Erdoğan, checks and balances have largely been eliminated from the Turkish political system, and the president controls the media, the bureaucracy, and the courts. The same failed coup that Erdoğan cites as grounds to imprison Brunson has also served as an excuse for detaining thousands of others. At this point, it is impossible to see how Erdoğan’s Turkey could ever qualify for EU membership.
The second principle underlying Turkey’s “Western” status is alignment on foreign policy. Turkey recently bought more than 100 advanced F-35 fighter jets from the US. Yet, in recent years, Turkey has also supported jihadist groups in Syria, moved closer to Iran, and contracted to purchase S-400 surface-to-air missiles from Russia.
Above all, Turkey and the US find themselves on different sides in Syria. While the Syrian Kurds have been close partners of the US, they have been deemed terrorists by Turkey, owing to their ties to Kurdish groups inside Turkey that historically have sought autonomy, if not independence. Against this backdrop, it is not far-fetched to imagine US and Turkish forces coming to blows.
Some might say that the current level of US-Turkish friction is nothing new; the two countries have long had their share of differences. The Turks were not happy with the US decision to withdraw medium-range missiles from Turkey as part of the deal that ended the 1962 Cuban Missile Crisis. The two countries clashed repeatedly over the Turkish intervention and subsequent occupation of Northern Cyprus in 1974, and over US support for Greece. Turkey refused to give US military forces access to Incirlik Air Base during the Iraq war in 2003. And in recent years, the Turkish government has been infuriated by America’s refusal to extradite the Pennsylvania-based cleric Fethullah Gülen, whom Erdoğan believes masterminded the 2016 coup attempt.
Still, what we are seeing today is something different. The anti-Soviet glue that kept the two countries close during the Cold War is long gone. What we have now is a loveless marriage in which the two parties continue to cohabitate under the same roof, even though there is no longer any real connection between them.
The problem is that the NATO treaty provides no mechanism for divorce. Turkey can withdraw from the alliance, but it cannot be forced out. Given this reality, the US and the European Union should maintain a two-pronged approach toward Turkey.
First, policymakers should criticize Turkish policy when warranted. But they must also reduce their reliance on access to Turkish bases such as Incirlik, deny Turkey access to advanced military hardware like F-35s, and reconsider the policy of basing nuclear weapons in Turkey. Moreover, the US should not extradite Gülen unless Turkey can prove his involvement in the coup with evidence that would stand up in a US court and satisfy the provisions of the 1981 mutual extradition treaty. Nor should the US abandon the Kurds, given their invaluable role in the fight against the Islamic State (ISIS).
Second, the US and Europe should wait until the Erdoğan era is over, and then approach Turkey’s new leadership with a grand bargain. The offer should be Western support in exchange for a Turkish commitment to liberal democracy and to a foreign policy focused on fighting terrorism and pushing back against Russia.
Erdoğan recently warned in the New York Times that the US-Turkish partnership “could be in jeopardy,” and that Turkey would soon start looking for new friends and allies if US unilateralism and disrespect were not reversed. In fact, the partnership was already in jeopardy, largely because of Turkish actions, and Erdoğan had already begun the process of looking for new friends and allies. It is time for the US and Europe to adjust to this reality.
Richard N. Haass, President of the Council on Foreign Relations, previously served as Director of Policy Planning for the US State Department (2001-2003), and was President George W. Bush's special envoy to Northern Ireland and Coordinator for the Future of Afghanistan. He is the author of A World in Disarray: American Foreign Policy and the Crisis of the Old Order.
THE WEST MUST FACE REALITY IN TURKEY / PROJECT SYNDICATE
THE TAX-AND-SPEND HEALTH-CARE SOLUTION / THE WALL STREET JOURNAL OP EDITORIAL
The Tax-and-Spend Health-Care Solution
Honest subsidies beat cross-subsidies. They’d encourage competition and innovation.
By John H. Cochrane
Why is paying for health care such a mess in America? Why is it so hard to fix? Cross-subsidies are the original sin. The government wants to subsidize health care for poor people, chronically sick people, and people who have money but choose to spend less of it on health care than officials find sufficient. These are worthy goals, easily achieved in a completely free-market system by raising taxes and then subsidizing health care or insurance, at market prices, for people the government wishes to help.
But lawmakers do not want to be seen taxing and spending, so they hide transfers in cross-subsidies. They require emergency rooms to treat everyone who comes along, and then hospitals must overcharge everybody else. Medicare and Medicaid do not pay the full amount their services cost. Hospitals then overcharge private insurance and the few remaining cash customers.
Overcharging paying customers and providing free care in an emergency room is economically equivalent to a tax on emergency-room services that funds subsidies for others. But the effective tax and expenditure of a forced cross-subsidy do not show up on the federal budget.
Over the long term, cross-subsidies are far more inefficient than forthright taxing and spending. If the hospital is going to overcharge private insurance and paying customers to cross-subsidize the poor, the uninsured, Medicare, Medicaid and, increasingly, victims of limited exchange policies, then the hospital must be protected from competition. If competitors can come in and offer services to the paying customers, the scheme unravels.
Photo: iStock/Getty Images
No competition means no pressure to innovate for better service and lower costs. Soon everybody pays more than they would in a competitive free market. The damage takes time, though. Cross-subsidies are a tempting way to hide tax and spend in the short run, but they are harmful over years and decades.
We have seen this pattern over and over. Until telephone deregulation in the 1970s, the government wanted to provide telephone landlines below cost. It forced a cross-subsidy from overpriced long distance and a telephone monopoly to keep entrants out and prices up. The government wanted to subsidize small-town air service. It forced airlines to cross-subsidize from overpriced big-city services and enforced an oligopoly to keep entrants from undercutting the profitable segments. But protection bred inefficiency. After deregulation, everyone’s phone bills and airfares were lower and service was better and more innovative.
Lack of competition, especially from new entrants, is the screaming problem in health-care delivery today. In no competitive business will they not tell you the cost before providing service. In a competitive business you are bombarded with ads from new companies offering a better deal.
The situation is becoming ridiculous. Emergency rooms are staffed with out-of-network anesthesiologists. Air ambulances take everyone without question, and Medicare, Medicaid and exchange policies underpay. You wake up with immense bills, which you negotiate afterward based on ability to pay. The cash market is dead. Even if you have plenty of money, you will be massively overcharged unless you have health insurance to negotiate a lower rate.
Taxing and spending is not good for the economy. But it’s better than cross-subsidization.
Taxing and spending can allow an unfettered competitive free market. Cross-subsidies must stop competition and entry at the cost of efficiency and innovation. Taxing and spending, on budget and appropriated, is also visible and transparent. Voters can see what’s going on.
Finally, broad-based taxes, as damaging as they are, are better than massive implied taxes on very few people.
This is why continued tinkering with the U.S. health-care system will not work. The system will be cured only by the competition that brought far better and cheaper telephone and airline services. But there is a reason for the protections that make the system so inefficient: Allowing competition would immediately undermine cross-subsidies. Unless legislators swallow hard and put the subsidies on the budget where they belong, we can never have a competitive, innovative and efficient health-care market.
But take heart—when that market arrives, it will make the subsidies much cheaper. Yes, the government should help those in need. But there is no fundamental reason that your and my health care and insurance must be so screwed up to achieve that goal.
Mr. Cochrane is a senior fellow of the Hoover Institution at Stanford University and an adjunct scholar of the Cato Institute
ANTI-AGING BIOTECHNOLOGIES WILL MAKE SOCIAL SECURITY AND MEDICARE OBSOLETE / MAULDIN ECONOMICS
Anti-Aging Biotechnologies Will Make Social Security and Medicare Obsolete
Extending lives by another few years, they say, will only increase the amount of time that people are receiving transfer payments.
Poverty and Security in Russia
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THE WINNERS AND LOSERS IN A CASHLESS SOCIETY / BARRON´S MAGAZINE
The Winners and Losers in a Cashless Society
By Ben Walsh
llustration: Gunnar Rathbun/Invision for Walmart
If you have been to a gentrified burrito chain or a venture-funded salad shop recently—and frankly, as a reader of a fintech newsletter, the odds are you have—you’ve probably noticed that some of these places have stopped accepting cash.
Slate’s Henry Grabar has a comprehensive look at the rise of cashless stores and restaurants. Places are going cashless for pretty much the reasons you would expect. Their customers can pay with a card (“almost everyone who used cash had a card,” according to Dos Toros’ co-founder Leo Kremer), and dealing with cash is sort of a pain.
Big companies like Walmart and Target have installed machines to count and account for cash in their stores and they “recycle” it back to cashiers to cut costs. Walmart says the machines helped them eliminate 7,000 accounting jobs.
But it’s not just that cash has downsides. The middlemen who facilitate card payments are out there promoting card payments and trashing cash. And payment processing is a great business to be in. The total value of processing fees paid by American merchants last year—$97 billion—actually exceeds the estimated $55 billion annual costs of cash (theft, transportation, etc.) Find a hedge fund analyst who owns Visa or Mastercard and they will tell you why payments processing is maybe the greatest business ever (or ask Dan Loeb about Paypal).
With cash, virtually no one has an incentive to promote it. Yet when you describe it in basic terms, cash is amazing: “It can be given by anyone, accepted by anyone, settled and cleared instantaneously,” University of California at Irvine professor Bill Maurer told Grabar.
Refusing to accept cash excludes some people, but for certain stores, it won’t necessarily exclude any customers. That’s another way that fintech is replicating the pitfalls of traditional finance: The well-off and the well-banked are paid to make cashless purchases, while the poor and underbanked pay dearly for things like money orders.
There are things like Amazon Cash out there, which lets customers convert physical U.S. dollars into digital 7-Elevens and CVS’s, and turn them into Amazon bucks that they can then spend on Amazon. It’s a novel idea, but by design it traps customer money at Amazon. And really, the most expensive problems and biggest inconveniences the un- and underbanked have don’t center around buying things.
The best idea that could help the un- and under-banked would be postal banking. Until such a program sharply reduces the number of people without sufficient access to the financial system, cashless merchants will be a clear marker of who the intended customer is, and is not.
Bienvenida
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Las convicciones son mas peligrosos enemigos de la verdad que las mentiras.
Friedrich Nietzsche
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
Lao Tse
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
Warren Buffett
No soy alguien que sabe, sino alguien que busca.
FOZ
Only Gold is money. Everything else is debt.
J.P. Morgan
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Proverbio Chino
Quien no lo ha dado todo no ha dado nada.
Helenio Herrera
History repeats itself, first as tragedy, second as farce.
Karl Marx
If you know the other and know yourself, you need not fear the result of a hundred battles.
Sun Tzu
We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.
Paulo Coelho

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