Voting with their eyeballs

The biggest indictment of Donald Trump’s sham trial is that most Americans have ignored it


FOR METROPOLITAN trendsetters and the masses, the impeachment trial of Andrew Johnson was the great event of 1868. The Senate galleries were crammed for it, with “the most lovely as well as the most distinguished ladies of daily attendance”, according to one record.

Police officers meanwhile struggled to control the crowds that heaved outside the Capitol, “continually asking questions, making appeals and muttering threats”. Entering the Senate this week, by contrast, your columnist spotted a single, lonely protester wearing a sign that read: “Donald Trump is going to pee on you.”

Considering the passions that the president stirs, for and against, most Americans’ lack of interest in his trial may be its most remarkable feature. The public gallery has been half-empty for most of it. The few dozen anti-Trump protesters who have gathered outside the Senate are nothing to the hundreds who flocked to Justice Brett Kavanaugh’s confirmation hearing. The trial’s opening two days drew a modest prime-time TV audience of 7.5m.

That is similar to the audience for Bill Clinton’s trial, once an increase in average viewership is factored in, though Mr Trump’s is taking place in a far more feverishly politicised environment. It is also more popular than Mr Clinton’s trial was. Only a minority of Americans thought Mr Clinton should have been impeached for lying about sex; a small majority think Mr Trump should be sacked for trying to extort personal favours from his Ukrainian counterpart.

Even Republican senators who denounce Mr Trump’s impeachment as a “political sham”, in the phrase of James Inhofe of Oklahoma, seem slightly piqued by the public’s disregard. Quizzed on the thin showing in the gallery, the Oklahoman hyper-partisan told one newspaper he was “really surprised…because this is kind of historic”. He shouldn’t have been. The reason most Americans find Mr Trump’s trial tedious is because they know how it will end: with the president, though guilty—as even some Republicans acknowledge in private—nonetheless acquitted by them.

A last-ditch wrangle—as this column went to press—over whether Mitch McConnell might allow testimony from John Bolton, a former national security adviser, would make that scarcely less likely. It raises no prospect of the requisite 20 Republicans joining the Democrats in a vote to remove Mr Trump. Immaterial to the outcome, the kerfuffle is therefore mainly indicative of the extent to which the Republican Senate leader has otherwise controlled the trial and so predetermined its outcome.

Mr McConnell claims to have modelled it on Mr Clinton’s trial, which relied almost exclusively on evidence sent up by the House of Representatives. Yet the circumstances of the two trials are quite different. The evidence against Mr Clinton was gathered during a nine-month-long criminal probe, backed by a grand jury, which allowed its investigators to secure the testimonies of nearly a hundred witnesses, thousands of documents, and a sample of the president’s blood.

The evidence against Mr Trump consists of an edited White House transcript of a phone call between him and Volodymyr Zelensky, testimonies from the handful of mostly mid-level officials who were prepared to defy the administration’s non-co-operation order, and the president’s Twitter account.

Additional evidence against Mr Trump is available—including a leaked account by Mr Bolton, first reported by the New York Times, which appears to demolish the president’s defence. But, as Mr Trump’s lawyers noted this week, it is inadmissible. Testimony from the former national security adviser, a plain-speaker with a grudge against Mr Trump and a book to sell, would be more informative—and probably fraught for some, such as Vice-President Mike Pence, allegedly complicit in Mr Trump’s ruse.

Yet a single explosive testimony would probably leave little mark on Mr McConnell’s whitewash. The fact that a few moderate Republicans may demand to hear from Mr Bolton should be understood in that context. Were they also to request testimony from Mr Pence, half a dozen other cabinet members and, naturally, the president, it would look like a serious bid to uncover the truth and confront their voters with it. Inviting only Mr Bolton, on the legally irrelevant basis that he is willing to testify, would look like virtue-signalling to the independent voters they fear to alienate.

It is of course no mystery why that is as much as they may be willing to contemplate. To stand against the president is suicidal in the Trump cult their party has become. Mr Bolton, a feared baby-eating bogey of the left for over three decades, has already been denounced on Fox News, his former employer, as a “tool for the left”. It should also be acknowledged, as is so often the case, that while Republicans may be setting new records for shamelessness, the Democrats are not blameless either.

Chuck Schumer is also trying to extract political benefit from the trial, by trying to force Republicans up for re-election this year to make embarrassing defences of the president. Having largely achieved this, some suspect, he may be quietly willing to bring the trial to its inevitable conclusion rather than risk damage to his party by prolonging it. In that case, neither party would be committed to its oath to try the president and hold him to account.

Running down the Capitol

No wonder Americans seem disengaged from the Senate trial. Indeed, though you would not know it from the polished grandeur of its atriums, or the lofty bonhomie with which its members, of both parties, still hail each other there, the Senate is an institution hurtling towards irrelevance. Its tradition of debate is long dead. Under Mr McConnell, it barely passes bills; this Congress could be the most unproductive in half a century.

And meanwhile the populist furies that propelled Mr Trump, and which he has done so much to exacerbate, are not dissipating. Dissatisfaction with democracy was reported this week to have increased by a third in America since the 1990s. It will have gathered more steam last month.

The costs of a declining population

Some of the economic consequences are obvious: fewer people make and consume less stuff

Robin Harding

Population Decline Graph
© James Ferguson

In 1937, John Maynard Keynes gave a lecture on “Some Economic Consequences of a Declining Population”.

Many at the time felt the world was overpopulated and fewer people could only be a good thing, a view that Keynes himself shared. But the purpose of his lecture was to issue a warning: declining populations come with nasty economic side effects.

Keynes, it turned out, was worrying a couple of generations too soon. Births jumped in the postwar baby boom. Today, though, his warning reads like a prophecy.

Population is already falling in countries such as Japan and a future global decline is more plausible than ever before. As in the 1930s, many welcome the prospect — largely for environmental reasons — but the economic downside may be more severe than even Keynes anticipated.

Future populations will reflect a truly remarkable fall in global fertility. In rich countries, fertility rates have hovered below replacement levels of 2.1 children per woman for decades, but they are now below that threshold in middle-income countries across the world, from Iran to Thailand to Brazil. In South Korea, the fertility rate dipped to just 0.98 last year, and even in the US it hit an all-time low of 1.73 births per woman.

Given parental desire to invest in each child, a fertility surge in rich countries is improbable. According to the latest World Population Prospects from the UN, 27 countries have fewer people now than in 2010, and it expects 55 nations — including China — to experience declines between now and 2050. In the 21st century, falling populations will become normal.

Some of the economic consequences are obvious: fewer people make less stuff, so a declining population means slower economic growth or even falls in output. But fewer people also consume less stuff: what matters for living standards is output per person, and the crucial question is whether declining population can affect it. There are at least theoretical reasons to think the answer is yes.

Bar chart of Fertility rate (children per woman), selected countries showing Declining fertility rates are not just a problem for developed economies

Keynes’s main concern was weak demand for investment in a world where companies expect a falling population of customers. That, he feared, would lead to deficient demand and thus high unemployment.

Demography was closely linked to Alvin Hansen’s original 1930s theory of “secular stagnation” — a situation of entrenched low growth and interest rates — which has been revived in recent years.

The solution Keynes proposed was strikingly similar to modern debates: “With a stationary population we shall, I argue, be absolutely dependent for the maintenance of prosperity and civil peace on policies of increasing consumption by a more equal distribution of incomes and of forcing down the rate of interest.” The latter has certainly come to pass.

For Keynes, the risk from a falling population was unemployment — he did not see any reason why it should affect living standards or the advance of new technology. Modern economics, which tries to explain the pace of scientific discovery, is less sanguine.

In a new paper, provocatively titled “The End of Economic Growth?”, Stanford University economics professor Charles Jones models what might happen in a world of declining population. Rather than per capita growth chugging along, even as overall output declines, Mr Jones argues that living standards would stagnate as the population gradually vanishes.

He assumes that economic growth ultimately comes from new ideas, and the discovery of new ideas depends on the number of people researching them. If population began to decline at the global level, it would mean ever fewer people devoted to research and thus ever slower progress, at a time when new technologies already seem to have become harder to find.

Mr Jones’s work suggests falling population could cause slower growth in living standards. But there is an even more alarming possibility: a vicious cycle in which low fertility in one generation causes low fertility in the next, leading to a downward spiral in population. That is the scenario that demographer Wolfgang Lutz and colleagues call the “Low-Fertility Trap Hypothesis”.

They propose a set of mechanisms whereby low fertility can pass itself from generation to generation. In particular, they suggest that willingness to marry and have children depends partly on whether a couple can meet their material aspirations. But low fertility goes hand-in-hand with ageing populations and a rising tax burden to pay for pensions and healthcare. In places with low housing supply, falling interest rates also lead to high house prices, putting even more pressure on the finances of the young.

There is reason to suspect these mechanisms are already at work in suppressing fertility. In Japan, for example, almost all recent income growth for people of working age has been soaked up by tax rises and social insurance premiums.

Keynes concluded: “I only wish to warn you that the chaining up of the one devil [of population growth] may, if we are careless, only serve to loose another still fiercer and more intractable.” It is time to take that warning to heart.

U.S.-China Trade Détente, but a More Dangerous World

Some of the trade war’s aims were accomplished, but many weren’t

By Nathaniel Taplin

Two years, innumerable late-night tweets and reams of newspaper articles later, the U.S.-China trade battle royale of 2018 and 2019 is winding down. A few of its purported aims were accomplished. Many weren’t.

The most lasting impact is a marked, rapid deterioration in Sino-U.S. relations overall. Overt trade hostilities might remain on hold for now as the U.S. election season approaches, but technological, security and ideological competition, always undercurrents to Sino-U.S. relations, have been supercharged by the bitter conflict.

Investors will be dealing with the consequences for years to come as economic “decoupling” raises costs, cooperation on issues like carbon emissions becomes harder, the risk of military conflict in Asia rises and technology buyers increasingly need to choose between competing U.S. and Chinese systems and standards.

The deal itself is both less and more than it appears. Most tariffs will remain in place for now. U.S. exporters, mainly farmers, will gain, to an extent, from big additional Chinese purchases.

But trying to fix a country’s overall trade deficit by focusing on just one partner is a lot like trying to fix a very leaky dike with one finger. China can buy a lot more U.S.-produced pork or manufactured goods, but that will push up U.S. prices, making such goods less attractive at home and in other markets abroad. That means more exports to China, but probably far less to other places and, in some cases, offsetting imports.

President Donald Trump, right, speaks before signing a trade agreement with Chinese Vice Premier Liu He at the White House, Wednesday. Photo: Evan Vucci/Associated Press

The way targeting China worked out last year illustrates this well. In the 12 months ended in November 2019, the U.S. deficit with China was $56 billion lower than in the 12 months ended in November 2018, data from CEIC shows. But the deficit with the rest of the world rose $49 billion, offsetting nearly 90% of that drop.

The overall U.S. goods deficit only dropped $7 billion, and much of this was due to a falling bill from net oil imports. The biggest near-term impact of the deal is simply removing some of the pernicious uncertainty created by the trade conflict itself.

And the conflict is far from over.

Even as negotiators sign off on the trade deal, Washington is considering measures to further restrict sales of U.S. equipment to Chinese 5G telecommunications champion Huawei and boost federal funding for U.S. 5G research. As the trade fracas has dragged on, it has metastasized into a broader deterioration in relations.

Some aspects of the U.S.’s more combative stance—condemning human-rights abuses and Beijing’s attempts to silence critics or spread disinformation overseas—are overdue and welcome. Others, such as efforts to restrict U.S. semiconductor sales, risk backfiring as U.S. firms lose revenue or shift production abroad.

One thing the trade conflict has noticeably failed to accomplish is any serious commitment from Beijing to abandon its own state-led industrial policy. Instead, China’s leaders have received the message that the U.S. doesn’t welcome its technological rise—and redoubled their determination to promote domestic champions.

Deteriorating relations have spilled over into the security realm as well, most obviously with the Trump Administration’s designation of China as a strategic competitor and statements by top U.S. officials warning of a “clash of civilizations.” Tariffs now in place look unlikely to be scaled back substantially.

That means economic decoupling will continue—just as China’s military is nearing the point where it could plausibly prevail in conflicts near China’s periphery. The risk of mistakes and miscalculations is rising at the same time economic interests in avoiding confrontation are disengaging.

Investors are used to thinking of the Middle East as the real hot spot for political risk. Over the next decade, it seems increasingly likely to be Asia.

Democratizing the ECB

Recent tensions within the European Central Bank's Governing Council have underscored the need to manage disagreement better. The status quo, whereby the president presents a policy decision as a consensus, after which one or more Governing Council members may issue a dissenting statement, makes everyone look silly.

Barry Eichengreen

eichengreen136_Thomas LohnesGetty Images_christine lagarde

AMSTERDAM – The European Central Bank is undergoing a changing of the guard: a new president, a new chief economist, and two new Executive Board members. And the ECB’s new leadership is facing a contentious year in 2020.

For starters, former ECB President Mario Draghi’s last policy meeting was marked by disputes over quantitative easing and the president’s role in decision-making, underscoring disagreement within the Governing Council (comprising the Executive Board and national central bank governors) about monetary strategy. Should the ECB retain its point target for inflation but make that target symmetrical, in contrast to the present “below but close to 2%”? Or should it abandon all hope of coming close to 2% and settle for 1.5%?

Then there is the assertion by Draghi’s successor, Christine Lagarde, that the ECB should focus on climate change, even though the issue is not part of the central bank’s mandate (and even though monetary policy is not an obvious instrument for tackling it).

It is timely, therefore, that the ECB has launched a comprehensive review of its policy strategy. Frank discussion of alternatives, buttressed by systematic staff analysis, can only help. But while pondering alternatives is all well and good, the idea that a strategic review should produce a consensus on targets, instruments, and strategies is misguided. Even well-informed people can disagree about the nuances of policy, because, as often happens, they weight different variables differently. Consensus can reflect groupthink, and groupthink can cause policy committees, which are strengthened by a diversity of views, to overlook important risks.

The question is how to manage disagreements. The status quo, whereby the president holds a press conference and presents the policy decision as a consensus, after which one or more Governing Council members may issue a dissenting statement, makes everyone look silly. It undermines the legitimacy of policy, because the ECB provides only partial and conflicting information about decision-makers’ views and the rationales underlying them.

Recently, Ignazio Visco, the governor of the Bank of Italy, proposed that the Governing Council should vote on consequential decisions and announce the results. The Fed, the Bank of England, the Bank of Japan, and the Sveriges Riksbank, among others, already do so. Dissent, when it occurs, shows that policymakers are engaged in a healthy exchange of ideas. When their votes are announced, they feel pressure to explain why they have chosen to side with the majority or dissent from it.

Central bank independence is tenable only when policymakers are accountable for their actions. And they will be accountable only if they are compelled to defend their decisions in the court of public opinion. If transparency is essential for accountability, then the release of votes, together with minutes – and, with a delay, transcripts – is the ultimate form of transparency. Today, with central bank independence under threat, it is all the more essential.

Moreover, announcing votes has other advantages. It helps to signal future monetary policy. In other words, it acts as a sort of forward guidance, which is an essential tool in a low-interest-rate environment. Votes are also a source of information about policymakers’ macroeconomic outlook, which is helpful for investors.

The argument against releasing votes is that the ECB’s Governing Council is numerically dominated by central bank governors who are appointed nationally, and who thus will feel pressure to support policies that are in the national interest, rather than that of the eurozone. This is different from the situation of other central banks. In the United States, Reserve Bank presidents are selected by directors residing in their districts. But some of those directors are appointed by the Federal Reserve Board – that is to say, nationally. Since the enactment of the Banking Act of 1935, which reformed the Fed, it has been understood that members of the Federal Open Market Committee vote with the interests of the entire US economy, not their home region, in mind.

Evidently, this is not the attitude of Europe’s national leaders, who worry that ECB policy affects different countries differently. Were their votes released, Governing Council members would be more likely to cater to narrow national priorities. Otherwise, they would risk replacement by more pliable lackeys.

Such cynicism underestimates Europe’s central bankers. They may have made mistakes, but they have not shown a readiness to bend to popular opinion in order to retain their jobs. As important as their vote, moreover, is their ability to convince their colleagues of the validity and integrity of their arguments. Blindly obedient central bankers who lack this integrity will be unable to persuade their colleagues. They will find themselves isolated and consistently in the minority.1

Voting, it is said, is a duty in a democracy. Unlike in democratic elections, however, those who set the ECB’s monetary policy should not only vote, but also reveal how they cast their ballots.

Barry Eichengreen is Professor of Economics at the University of California, Berkeley, and a former senior policy adviser at the International Monetary Fund. His latest book is The Populist Temptation: Economic Grievance and Political Reaction in the Modern Era.

Returning to the Beginning

By: George Friedman

In recent weeks, I have been writing on the very ordinary but precious moments of my life. I wrote about the complexity of my family’s holidays and of a vacation, with what I hope came across as humor.

All this is in preparation for my return to my original project: to place geopolitics in the philosophical tradition. There may seem to be no connection between the ordinary moments of life and something as exalted as philosophy, but they are intimately connected.

Ordinary life is extraordinary.

The task of philosophy and geopolitics is to find the sacred in everyday life, and to do so with deep irony, which requires being able to laugh heartily. For who are we humans to speak of our lives and the sacred?

Anyone who tries must do so with a deep sense of its pretentiousness. In elevating a rum punch during a beach vacation to a subject worthy of deep thought, we do three things: We elevate the ordinary, force ourselves to realize that there is little that is ordinary there, and face the chasm separating our attempt to understand the world and the absurdity of the attempt.

But in that rum punch, in the game it plays with your mind, there is a freedom to both elevate yourself and mock yourself.

The problem of philosophy is that it tends to be boring. It is boring because it is complex and because it is abstracted from the lives that people live. The great philosophers give you a window through which to see yourself. That window is irony or, for those of us less elevated, humor.

The entire idea of philosophy is humorous.

Here we are, human beings who know many things, being told that we do not know the most important things. But humans know well the most important things: doing one’s duty, nurturing children, battling nature and society to provide for them, being just without being a martyr, being kind and being forgiving, even to those who won’t forgive.

This is a random list, and many things can be refined and added, but if philosophy is the study of the true and beautiful, then it at best makes elegant the things we already know. Philosophy holds no surprises, except for one profoundly important one: that human beings, in the course of their lives, should contemplate such matters without holding an advanced degree. And with that, philosophy contributes its most important gifts: irony and caution.

Irony is telling a truth in such a way that we can see it through the veil of laughter. As Plato infers, who are we mere humans to dare to think such exalted thoughts? I think of my father, who survived the Mauthausen concentration camp and a Soviet occupation, whom life had crushed too many times, who still had the ability to hope for something better and laughed at me, saying I was such a scrawny child to place his hopes in. He had faced Hitler’s and Stalin’s ideas directly and survived them, yet could still know that all homes, especially the most urgent, must be clothed in laughter.

Philosophy must also cloak the best and worst from the world. A philosopher is not someone with an advanced degree. It is someone who has confronted the best and worst of the world, and discovered that it takes courage to face both. I have an advanced degree and wrote books and articles that were designed not to enlighten but to demonstrate my brilliance through their obscurity. Later, doing other work, I discovered that philosophy does not live in the academy where justice is discussed but in the world, where justice must be lived.

Geopolitics is not recognized as a field, so I made it a business. But geopolitics is at the heart of philosophy. If we agree that all the examples I cited can be summed up by the question “who is man?” then the first answer is that humanity is divided into two parts: man and woman, and all that follows from this. The first discussion of duty must somehow revolve around this.

Geopolitics is a field that tries to define, explain and forecast the relationship among communities. The story it tells is a story of greatness and horror, but it begins in the simplest things that make us human.

The first question I have raised in other places is, what creates a community or nation?

The answer is the love of one’s own, the love of the things you were born to, and being brought up to know that their loves are yours and their hates are yours as well. But where does the love of one’s own come from?

The irreducible truth is that the love of one’s own must be preceded if not with love then at least with lust. To have a child you must have sperm and an ovum. However we reengineer the human being and reproduction, and whatever journey in life the child undertakes, it begins with the sperm and ovum, and most usually the man and woman, retelling the oldest story there is.

Philosophy ought not to be about pontificating, and certainly not advocacy of policies, although listening to a professor discussing the just war is a hoot. But it is a hoot meant not to reveal hidden things but to set rules unrelated to reality. He is saved by the grace of indifference.

This may strike you as pointless or obvious.

But that is the purpose of philosophy, to hold up to the light things that you are intimately familiar with and suddenly see something you never imagined you would see there. And those things are easiest to see when you see how preposterous it is for you to be seeing them.

Next week, I will try to start climbing the mountain.