What Trump Got Wrong, and Right, on North Korea

The summit meeting in Hanoi revealed the hazards of his personal approach to diplomacy.

By The Editorial Board


President Trump and Kim Jong-un, North Korea’s leader, abruptly ended their second summit meeting on Thursday after talks collapsed. Credit CreditDoug Mills/The New York Times



There’s no sugarcoating the failure of President Trump’s second summit meeting with the North Korean leader, Kim Jong-un.

Despite the buildup — Mr. Trump’s fawning over the love notes they exchanged, the “beautiful” relationship they share and the predictions of great success — the “Joint Agreement Signing Ceremony” the White House had planned was canceled, and the scheduled news conference with Mr. Kim went forward as a solo act by Mr. Trump.

“Sometimes you have to walk,” he told reporters in Hanoi as two days of talks intended to put curbs on North Korea’s nuclear program came to an end.

It was a restrained, sensible reaction from a president who seemed to be in a headlong rush for any deal that would give him at least the appearance of a foreign policy victory. Maybe he learned something since the first meeting last June, when he declared the North was “no longer a nuclear threat,” only to learn that it still was.
The outcome in Hanoi, Vietnam, demonstrated the hazards of the personal diplomacy with authoritarian leaders that has become Mr. Trump’s stock in trade. From Vladimir Putin’s protestations of innocence on election meddling to Prince Mohammed bin Salman’s denial that he had the journalist Jamal Khashoggi murdered, Mr. Trump has shown that he trusts despots over his own government. His fawning over dictators like Mr. Kim continues to erode the moral foundation that for generations has supported American diplomacy, and its notion of America’s role in the world.

This time he said Mr. Kim denied having known about the condition of Otto Warmbier, the American college student who died of brain damage after he was released from a North Korean prison in 2017, “and I will take him at his word.”

While such one-on-one discussions can be fruitful — see Ronald Reagan and Mikhail Gorbachev in Reykjavik — the failure in Hanoi demonstrates again the administration’s unwillingness or inability to prepare adequately for high-stakes meetings.

What made the meeting collapse isn’t yet certain. If the American explanation is correct — that North Korea wanted all economic sanctions lifted in return only for dismantling its nuclear complex at Yongbyon — then Mr. Trump made the right call in walking away.

North Korea’s foreign minister, Ri Yong-ho, holding a rare news conference, said his government made a “realistic” proposal for a partial removal of sanctions. But when the Americans “insisted that we should take one more step beyond the dismantlement of nuclear facilities at Yongbyon,” he said, it became clear the United States “was not ready to accept our proposal.”
Yongbyon, which is used for making nuclear fuel and many other activities, is central to the country’s nuclear program, which includes 10 to 20 assembled warheads, fissile material for as many as 60 warheads and the missiles to deliver them. In a September 2018 declaration with South Korea, Mr. Kim said he was willing to permanently dismantle the complex if the United States takes unspecified corresponding measures.

In advance of the Hanoi talks, there were reports that the administration might agree to more economic interaction between North Korea and South Korea, a declaration acknowledging the end of Korean War hostilities, expansion of people-to-people exchanges and liaison offices in each other’s capitals.

But Mr. Trump has invested a lot in tightening sanctions on North Korea, his biggest leverage, and beyond Mr. Kim’s agreement to dismantling Yongbyon, Americans would want a full declaration of his country’s mostly hidden nuclear facilities, materials and weapons; dismantling of his nuclear stockpile and other nuclear facilities scattered around the country; and a verifiable halt of the production of ballistic missiles.

The administration still insists North Korea must give up its entire nuclear program, even though the American intelligence community has said that will never happen. Even if complete denuclearization is elusive, persuading North Korea to sharply limit its program is vital for Asian stability.

But that is best achieved through a step-by-step process by which both sides agree to take corresponding actions.

So what happens now?

It was a good sign that the president discussed the outcome in calm and measured tones. Secretary of State Mike Pompeo, who leads the negotiating effort, spoke of making “real progress,” without defining it, and expressed hope that the two sides “will get back together in the days and weeks ahead and continue to work out what’s a very complex problem.”

That suggests a willingness on the American side, at least, to continue working-level negotiations, which are the only way to achieve an agreement on complex issues. For that to have a chance, North Korea must concur and continue its 400-plus-day self-imposed moratorium on nuclear and ballistic missile testing. Mr. Trump said Mr. Kim planned to do that. Even if he does, the situation is far from stable, since the North continues to produce nuclear fuel and missiles.

No matter how chummy Mr. Trump and Mr. Kim may still be now, the window for diplomacy won’t remain open forever.


Big oil and the environment

The truth about big oil and climate change

Even as concerns about global warming grow, energy firms are planning to increase fossil-fuel production. None more than ExxonMobil



IN AMERICA, THE world’s largest economy and its second biggest polluter, climate change is becoming hard to ignore. Extreme weather has grown more frequent. In November wildfires scorched California; last week Chicago was colder than parts of Mars. Scientists are sounding the alarm more urgently and people have noticed—73% of Americans polled by Yale University late last year said that climate change is real. The left of the Democratic Party wants to put a “Green New Deal” at the heart of the election in 2020. As expectations shift, the private sector is showing signs of adapting. Last year around 20 coal mines shut. Fund managers are prodding firms to become greener. Warren Buffett, no sucker for fads, is staking $30bn on clean energy and Elon Musk plans to fill America’s highways with electric cars.

Yet amid the clamour is a single, jarring truth. Demand for oil is rising and the energy industry, in America and globally, is planning multi-trillion-dollar investments to satisfy it. No firm embodies this strategy better than ExxonMobil, the giant that rivals admire and green activists love to hate. As our briefing explains, it plans to pump 25% more oil and gas in 2025 than in 2017. If the rest of the industry pursues even modest growth, the consequence for the climate could be disastrous.

ExxonMobil shows that the market cannot solve climate change by itself. Muscular government action is needed. Contrary to the fears of many Republicans (and hopes of some Democrats), that need not involve a bloated role for the state.

For much of the 20th century, the five oil majors—Chevron, ExxonMobil, Royal Dutch Shell, BP and Total—had more clout than some small countries. Although the majors’ power has waned, they still account for 10% of global oil and gas output and 16% of upstream investment. They set the tone for smaller, privately owned energy firms (which control another quarter of investment). And millions of pensioners and other savers rely on their profits. Of the 20 firms paying the biggest dividends in Europe and America, four are majors.

In 2000 BP promised to go “beyond petroleum” and, on the face of it, the majors have indeed changed. All say that they support the Paris agreement to limit climate change and all are investing in renewables such as solar. Shell recently said that it would curb emissions from its products. Yet ultimately you should judge companies by what they do, not what they say.

According to ExxonMobil, global oil and gas demand will rise by 13% by 2030. All of the majors, not just ExxonMobil, are expected to expand their output. Far from mothballing all their gasfields and gushers, the industry is investing in upstream projects from Texan shale to high-tech deep-water wells. Oil companies, directly and through trade groups, lobby against measures that would limit emissions. The trouble is that, according to an assessment by the IPCC, an intergovernmental climate-science body, oil and gas production needs to fall by about 20% by 2030 and by about 55% by 2050, in order to stop the Earth’s temperature rising by more than 1.5°C above its pre-industrial level.

It would be wrong to conclude that the energy firms must therefore be evil. They are responding to incentives set by society. The financial returns from oil are higher than those from renewables. For now, worldwide demand for oil is growing by 1-2% a year, similar to the average over the past five decades—and the typical major derives a minority of its stockmarket value from profits it will make after 2030. However much the majors are vilified by climate warriors, many of whom drive cars and take planes, it is not just legal for them to maximise profits, it is also a requirement that shareholders can enforce.

Some hope that the oil companies will gradually head in a new direction, but that looks optimistic. It would be rash to rely on brilliant innovations to save the day. Global investment in renewables, at $300bn a year, is dwarfed by what is being committed to fossil fuels. Even in the car industry, where scores of electric models are being launched, around 85% of vehicles are still expected to use internal-combustion engines in 2030.

So, too, the boom in ethical investing. Funds with $32trn of assets have joined to put pressure on the world’s biggest emitters. Fund managers, facing a collapse in their traditional business, are glad to sell green products which, helpfully, come with higher fees. But few big investment groups have dumped the shares of big energy firms. Despite much publicity, oil companies’ recent commitments to green investors remain modest.

And do not expect much from the courts. Lawyers are bringing waves of actions accusing oil firms of everything from misleading the public to being liable for rising sea levels. Some think oil firms will suffer the same fate as tobacco firms, which faced huge settlements in the 1990s. They forget that big tobacco is still in business. In June a federal judge in California ruled that climate change was a matter for Congress and diplomacy, not judges.

The next 15 years will be critical for climate change. If innovators, investors, the courts and corporate self-interest cannot curb fossil fuels, then the burden must fall on the political system. In 2017 America said it would withdraw from the Paris agreement and the Trump administration has tried to resurrect the coal industry. Even so, climate could yet enter the political mainstream and win cross-party appeal. Polls suggest that moderate and younger Republicans care. A recent pledge by dozens of prominent economists spanned the partisan divide.

The key will be to show centrist voters that cutting emissions is practical and will not leave them much worse off. Although the Democrats’ emerging Green New Deal raises awareness, it almost certainly fails this test as it is based on a massive expansion of government spending and central planning. The best policy, in America and beyond, is to tax carbon emissions, which ExxonMobil backs. The gilets jaunes in France show how hard that will be. Work will be needed on designing policies that can command popular support by giving the cash raised back to the public in the form of offsetting tax cuts. The fossil-fuel industry would get smaller, government would not get bigger and businesses would be free to adapt as they see fit—including, even, ExxonMobil.


How Millennials Could Restore American Prosperity

By Matthew C. Klein  
How Millennials Could Restore American Prosperity
Photo Illustration by Joel Arbaje 




The millennials are coming—and that could be good news for economic growth.

About 73 million Americans were born between 1981 and 1996. This oft-maligned cohort will become the single-biggest age group in the U.S. this year, according to the Pew Research Center. Their maturation will have significant consequences for American society. One of those consequences could be a marked acceleration in productivity growth over the next two decades.

That would be welcome news, because Americans seem to have stopped getting much more efficient in recent years. According to an estimate from the Federal Reserve Bank of San Francisco, the underlying productivity of the U.S. economy has grown just 5% since 2005. Had productivity increased at its 1947-2005 average rate since 2005, the value of what Americans produce today would be about 15% greater. The shortfall effectively cost the U.S. about $3.1 trillion in 2018 and is likely to be even bigger this year.

Many pixels have been devoted to arguing about the causes of—and potential solutions to—the productivity slowdown. Some, such as Robert Gordon of Northwestern University, believe humanity has simply run out of big new areas for improvement. His fatalistic thesis is that today’s innovations (Uber, but for dog-walking) are simply less meaningful than electric lighting, indoor plumbing, and the airplane.

On the opposite end of the spectrum are those, usually in the tech industry, who deny the existence of the problem entirely because they believe standard measurement techniques are insufficient to capture the massive benefits attributable to, say, algorithmic recommendations for streaming videos.

The slowdown is not unique to the U.S. A 2017 study by economists at the International Monetary Fund found that the yearly average growth rate of underlying productivity slowed by about one percentage point across the rich world since the mid-2000s. Part of the explanation, in their view, was the financial crisis. Businesses put off making new investments in research and machinery because they were afraid of losing access to credit, or simply wanted to avoid ending up stuck with excess capacity in a world with fewer customers. Entrepreneurs had a harder time raising funds to support new businesses, while unemployed and underemployed workers had less time to gain professional experience and job skills.

The financial crisis, however, while significant, could not have been the only explanation, because the slowdown predated the recession by several years. Moreover, the severity of each country’s productivity slowdown does not seem to be closely correlated with the severity of its crisis. One explanation is that companies now require many more researchers to generate a given amount of technological innovation than they did in the past, and this “cost” continues to rise for everything from semiconductors to pharmaceuticals to agriculture. Another is that competition has declined across industries, with rising concentration and higher returns to the winners in decreasingly dynamic markets.

The rate of productivity growth is also affected by the composition of the workforce. Not all workers are equal. Some have more schooling than others, some have more experience than others, some are more creative than others, and some are more hidebound than others. Changes in the relative proportions of these types of workers can have substantial economic effects.

The rapid pace of U.S. productivity increases between 1940 and the mid-1970s is partly explained by the soaring share of Americans graduating from high school and college during that period. In 1940, just 38% of Americans had finished high school by the age of 30, and just 6% had received a four-year college degree. By 1975, those ratios had increased to 85% and 25%, respectively. Since then, however, further increases in educational attainment have been modest: As of 2017, the high school completion rate was 92% and the college completion rate was 36%.

The overall age of the workforce is also important. Dartmouth College economist James Feyrer first made this argument in 2002. Workers who are young and inexperienced tend to be bad at their jobs, while those who are old tend to be set in their ways and unwilling to embrace new ideas. Feyrer found that the growth rate of productivity tended to track changes in the proportion of workers aged 40-49.

Most patents in the U.S. are filed by workers in their 40s, and the managers best able to adapt to new technologies are neither too young nor too old. Subsequent research showed that this relationship holds across countries.
U.S. productivity began to slow to a crawl as young and inexperienced baby boomers flooded the workforce. Between 1965 and 1981, the share of Americans aged 40-49 collapsed. The growth rate of underlying productivity followed shortly thereafter. By 2003, however, those same boomers had matured into their most productive decade, dramatically boosting the share of workers in their 40s by nearly 10 percentage points. Feyrer predicted (correctly) that U.S. productivity growth would slow after that as the boomers aged. Since 2005, the number of Americans aged 40-49 has shrunk more than 10%.

The good news is that the millennials will soon come to the rescue. Most of them are now in their early 30s, but this cohort will soon reach their most productive years in the next two decades. According to the latest projections from the United Nations, the number of Americans aged 40-49 will hit bottom in 2019 before rising by more than 20% by 2039. Among Americans of working age (20-64), the share aged 40-49 should rise by more than three percentage points.



The slowdown is not unique to the U.S. A 2017 study by economists at the International Monetary Fund found that the yearly average growth rate of underlying productivity slowed by about one percentage point across the rich world since the mid-2000s. Part of the explanation, in their view, was the financial crisis. Businesses put off making new investments in research and machinery because they were afraid of losing access to credit, or simply wanted to avoid ending up stuck with excess capacity in a world with fewer customers. Entrepreneurs had a harder time raising funds to support new businesses, while unemployed and underemployed workers had less time to gain professional experience and job skills.
The financial crisis, however, while significant, could not have been the only explanation, because the slowdown predated the recession by several years. Moreover, the severity of each country’s productivity slowdown does not seem to be closely correlated with the severity of its crisis. One explanation is that companies now require many more researchers to generate a given amount of technological innovation than they did in the past, and this “cost” continues to rise for everything from semiconductors to pharmaceuticals to agriculture. Another is that competition has declined across industries, with rising concentration and higher returns to the winners in decreasingly dynamic markets.

The rate of productivity growth is also affected by the composition of the workforce. Not all workers are equal. Some have more schooling than others, some have more experience than others, some are more creative than others, and some are more hidebound than others.

Changes in the relative proportions of these types of workers can have substantial economic effects.

The rapid pace of U.S. productivity increases between 1940 and the mid-1970s is partly explained by the soaring share of Americans graduating from high school and college during that period. In 1940, just 38% of Americans had finished high school by the age of 30, and just 6% had received a four-year college degree. By 1975, those ratios had increased to 85% and 25%, respectively. Since then, however, further increases in educational attainment have been modest: As of 2017, the high school completion rate was 92% and the college completion rate was 36%.

The overall age of the workforce is also important. Dartmouth College economist James Feyrer first made this argument in 2002. Workers who are young and inexperienced tend to be bad at their jobs, while those who are old tend to be set in their ways and unwilling to embrace new ideas. Feyrer found that the growth rate of productivity tended to track changes in the proportion of workers aged 40-49.

Most patents in the U.S. are filed by workers in their 40s, and the managers best able to adapt to new technologies are neither too young nor too old. Subsequent research showed that this relationship holds across countries.

U.S. productivity began to slow to a crawl as young and inexperienced baby boomers flooded the workforce. Between 1965 and 1981, the share of Americans aged 40-49 collapsed. The growth rate of underlying productivity followed shortly thereafter. By 2003, however, those same boomers had matured into their most productive decade, dramatically boosting the share of workers in their 40s by nearly 10 percentage points. Feyrer predicted (correctly) that U.S. productivity growth would slow after that as the boomers aged. Since 2005, the number of Americans aged 40-49 has shrunk more than 10%.

The good news is that the millennials will soon come to the rescue. Most of them are now in their early 30s, but this cohort will soon reach their most productive years in the next two decades. According to the latest projections from the United Nations, the number of Americans aged 40-49 will hit bottom in 2019 before rising by more than 20% by 2039. Among Americans of working age (20-64), the share aged 40-49 should rise by more than three percentage points.
 
If past relationships hold, this could lead to a meaningful acceleration in the growth rate of underlying productivity. Those with a long-term time horizon should be optimistic the future will be better than the recent past.


Interview with Kenneth Clarke on Brexit

'We Can't Carry On Being So Insane'

Interview Conducted By Jörg Schindler

In an interview, former British government minister Kenneth Clarke, the longest-serving member of the House of Commons, discusses the destructive force of Brexit and the "fanatics" inside his own Conservative Party, who he believes are still seeking revenge against Margaret Thatcher.

British Member of Parliament Kenneth Clarke
British Member of Parliament Kenneth Clarke


Before he extends his hand in greeting at his office, Kenneth Clarke says he's never seen such a "crazy situation" in all his whole life. The politician, a veteran of the Conservative Party, will soon have spent a half-century in the British parliament. He's been a part of many of the biggest battles over Europe in Westminster. He served as a government minister under Margaret Thatcher, John Major and David Cameron and might well have made it to the top, "if I hadn't been so pro-European," as he confides. Next to Michael Heseltine, many consider Clarke to be the best prime minister Britain never had.

The 78-year-old member of parliament says he has never seen the kind of discord that has unfolded in recent weeks as the deadline for Brexit approaches.

In an interview, he discusses if and how things might proceed from here.

DER SPIEGEL: Mr. Clarke, you seem to be pretty relaxed considering the circumstances.

Clarke: Yes, well, it is a bizarre situation at the moment. Since the prime minister has committed herself to persuade the Europeans to reopen the Withdrawal Agreement, everybody is waiting for a miraculous solution. In the meantime, the government is trying to avoid having any serious business in the House of Commons. On Monday, we spent a whole day debating sports! I have been here a very long time, but I have never seen such a crazy situation in all my life on such a serious subject.

DER SPIEGEL: Why has the prime minister chosen this path regardless of signals from the European Union that the Withdrawal Agreement is nonnegotiable?

Clarke: The prime minister is obsessed with keeping the Conservative Party in one piece. I have argued for months that the moderate majority of the House of Commons should come together on a cross-party basis. We can only reach an agreement if Tory remainers and Labour remainers strike a compromise. But Theresa May has not really reached out to them. Instead, she is making a desperate effort to win over the hardline right-wing people of our party.

DER SPIEGEL: Let's assume the European Union does make last-minute concessions on the so-called Northern Ireland backstop: Would that secure a majority in parliament?

Clarke: No. The hardcore euroskeptics in my party will never accept it. Some of them might wobble, but not enough I am afraid.

DER SPIEGEL: And then?

Clarke: I like to think that, in the end, common sense will prevail, and the prime minister will get her deal through. I just don't know how. We can't solve this in 50 days of childlike nonsense. We need a year or more to work it out.

DER SPIEGEL: But that would only buy time.

Clarke: We have a history of being quite good in processing democratic government. We can't carry on being so insane.

DER SPIEGEL: What are the deeper roots of the eternal struggle over Europe in your party?

Clarke: There was always a group of nationalists in the Tory party that didn't come to terms with our changed role in the world. In their eyes we have an imperial destiny. But that was fading away and we were becoming a rather pro-European party in the 1980s under Margaret Thatcher. Remember, it was us who had to persuade the Germans and French of the single market.

DER SPIEGEL: But Thatcher turned into a euroskeptic herself at the end of her term as prime minister.

Clarke: She rejected Jacques Delors' idea of a more social Europe. Her fall in 1990 enraged the Tory far-right. They thought it was all a kind of pro-European plot. The European issue became symbolic of the betrayal of Margaret Thatcher. It became a spiritual event -- revenge for Margaret. And then there was the question of the euro and the Maastricht Treaty, which became symbols for the destruction of our independence and sovereignty.

DER SPIEGEL: Since Thatcher, every Tory leader tried to appease the euroskeptics, but all of them failed. Why has nobody learned a lesson?

Clarke: I don't know. This has been going on for years and years and years. You have to keep in mind that most of our national newspapers were bought by fanatic anti-European campaigners like Conrad Black and Rupert Murdoch. The leadership of the Conservative Party was always frightened of them. After this dreadful decision to hold a referendum, David Cameron didn't campaign around the benefits of being in the EU. It would have annoyed the euroskeptics in our party and in the press. He didn't want to upset them. Instead, he told people that they would be poorer after Brexit, that house prices would fall. It was project fear -- and it didn't work out.

DER SPIEGEL: Cameron wanted to marginalize the hardline euroskeptics in the Tory party, but instead they are gaining ever more influence.

Clarke: They have formed a party within the party. They have their own leader, they have their own whip. I would love to see them leaving the party. It would help. And it would stop Theresa May in giving too high a priority to trying to keep these ultrafanatics on side.

DER SPIEGEL: The irreconcilability in the political system seems to be mirrored in British society. What is happening to your country?

Clarke: It's a very nasty climate out there. People are retreating into angry simplicities. Half the population is angry about politicians not getting on with it, they're not following the detail, they haven't a clue what the Irish backstop is, and they couldn't care less. They just want it to be over. The other half does follow quite fairly, intensely, more than usual. They are divided in angry remainers who are ever more ferociously for remaining and angry leavers who ever more ferociously feel they are being betrayed.

DER SPIEGEL: Are you worried?

Clarke: Of course, I am. The Brexit debate has absolutely crippled our party-political system and it has distorted the usual process of political debate. We have lots and lots of other really big things we should be getting on with. We urgently need to create an economy that distributes benefits more fairly. But we're not, because the political class is obsessed with Brexit. This is almost a nervous breakdown, we need to stop it.


The Irish Border Question

What will Ireland look like after Brexit?

By GPF Staff

 

With less than two months to go before the United Kingdom is supposed to leave the European Union, the Irish border issue remains unresolved. The Republic of Ireland and the EU have been adamant that there cannot be a border separating the Irish Republic from Northern Ireland. Instead, they have proposed the so-called backstop, which would effectively keep Northern Ireland in the EU’s single market, while both Northern Ireland and Britain would remain in a customs union with the EU “unless and until” they reach a deal that removes the need for the backstop. Northern Ireland’s Democratic Unionist Party has fiercely opposed the idea and any other solution that would treat Northern Ireland differently from Britain.

Calls to hold a vote over what to do with the Irish border have gained momentum. Last weekend, Mary Lou McDonald, head of the Republic of Ireland’s nationalist Sinn Fein party, called for Northern Ireland to begin preparing for a border poll. The DUP has rejected the idea, referring to McDonald’s suggestion as “nothing but stunt politics.” It remains to be seen whether the politicians or the people will be the ones to make the final decision.