Governemnt is not a Business, and it should not be allowed to claim bankruptcy

After the American Century

In the US there is suddenly talk of lettering state governments declare themselves insolvent, and go through some form of bankruptcy. This is a very bad idea, and not just, as several people immediately pointed out, because such talk will immediately raise fears on the bond market. States will start to pay a premium in interest to get anyone to buy their bonds, as the New York Times has noted. Such bonds have long been thought to be the epitome of what is safe to invest in. Not much profit, but not much danger either. Take away the security of state bonds, and the markets are going to become restless.

But that is not my main argument against this idea. The chief problem is that allowing states to declare bankruptcy allows them to become irresponsible. It allows legislators to start things they cannot finish. It invites them to pass bills, to make promises, to offer pensions to state employees, that are not funded through sufficient taxation. This is the modern form of Greek democracy, and it has been tried already in Greece, and found wanting.

The American people are among the richest per capita on earth. If they do not have enough money in their state budgets, it is because they have resisted paying taxes sufficient to meet their obligations. California is the most obvious example, as its population voted to cap taxation at an unreasonably low level. Their tax revolt in the late 1970s was irresponsible then, it was irresponsible since, and it remains so.

If the Republican Party were really a party of fiscal responsibility, it would oppose this idea with every ounce of its collective energy. Instead, it seems to be part of the problem. Members of both parties are exploring this idea. If it comes to fruition, the United States will have taken a step toward self-destruction. The US will be correctly judged a more dangerous place to invest money. State employees will live with the threat that their pensions may never be paid out. And all citizens will find that the cost of government rises, in the form of higher borrowing rates, while the money available to provide services correspondingly falls.

This may be the worst idea to come along since the courts decided that corporations were "persons." Government is not a business that can periodically fail. It is the foundation of society. It is a contract between the citizens that cannot be broken, not a corporation that can be reconstructed by and for bankers. Talk of letting government fail financially cannot be separated from a more general failure of trust between the citizens. Government is about mutual obligation. It is not an investment that one pulls out of.

Americans have lived with a stable system so long that they have no historical experience of the disasters that come with fiscal irresponsibility. Undermine the state government, and you undermine the dollar itself. I am not talking about the dollar losing a few percentage points against the Euro. I am talking about the Japanese and the Chinese deciding not to buy dollar debt anymore, because it is too risky. For a taste of what that might mean, look at Greece, right now, with the difference that the EU has come along to bail out Greece. But no economy is big enough to bail out the United States.

Merry Christmas, after all

After the American Century

There is, objectively speaking, not so much to be merry about. The weather here in Denmark has been unrelentingly cold and the snow has blocked roads and even made it hard for me to get out of my own street. The Danish government promises endless cutbacks, and makes ill considered reforms. And my mother in law is here for six days, pretending that she is not smoking cigars in the basement, wearing suffocating perfume, and insisting on hearing elevator music on the radio.

Nevertheless, there are reasons to be happy, even if merry is a bit over the top. The US and Russia are reducing their nuclear arsenals. The German and US economies are reviving, and the Chinese and Indians never really faltered in the first place. The Danish stock market went up a whopping 35% in the last year, wiping out the losses of the previous year. 

And on a professional level, I have enjoyed teaching this fall, been invited to more places to lecture than I could accept, and managed to steer a new BA curriculum through four stages of a six stage process needed to get it approved. I have seldom written much here about my personal life - it isn't that sort of column - but I will say that things are good there, too.

So, on the whole, I can say Merry Christmas, too, and hope that 2011 will be an improvement.

PISA test results

After the American Century

The 2009 PISA results can be seen in the table accompanying this article. (For the 2012 results, click here ) Both Europe and the United States must do a better job educating their children if they are to keep up with Asia. On the reading test European countries were not so far apart, and ranged from a low of 483 (Greece and Slovenia) to a high of 508 (Netherlands). That is only a 25 point spread. But the difference between the Netherlands and Shanghai was 48 points, almost twice as much. Well, actually Finland did get 536, far and away the best showing for Europe. The pattern was the same in Science and in Math, where China was by far the best, while the Europeans clustered well behind. The United States was mediocre in all three categories.

Sadly, education budgets are being cut in many European countries, which are not investing in new schools or more teachers. Indeed, Denmark has just decided to let the size of classes in elementary school get larger, a serious mistake. Larger classes tend to be harder to keep focused, and they demand far more of teachers, who can scarcely give individual attention to students who need extra help or those who need extra stimuli.

If you take the three test scores and add them together, this is the result (not all nations surveyed are included in this list).

Shanghai               1731
Hong Kong           1637
Finland                  1631
Singapore              1630
Korea                    1623

Japan                      1588
Canada                   1580
New Zealand         1559
Australia                1556
Netherlands           1556
Switzerland           1552

Estonia                  1541
Germany               1530
Belgium                1528

Poland                   1503
Norway                 1501
Britain                   1500
Denmark               1497

Average Score      1492

France                    1491

United States         1489

Ireland                   1489
Sweden                  1486                

If the future belongs to the best educated, then the future belongs to Asia, Canada, New Zealand, Australia, the Netherlands, and Switzerland. Judging by this list, being a wealthy country helps, but it is not the determining factor. Norway has no national debt and a huge public surplus, yet achieved only average results, while Finland, which has less money per capita than Denmark or Norway, was at the top. And the United States, which for decades was the wealthiest large nation in the world, scores below the average.

See also World University Rankings

The Ignoble Cause of the Confederacy

After the American Century

We are on the eve of the 150th anniversary of the Civil War, and the Confederacy is about to be celebrated, strange as that may seem. The American South often presents itself as the victim in the Civil War. This is patent nonsense. The Southern states succeeded from the United States, and they attacked Fort Sumter. They were the aggressors, and they remain aggressive in promotion of themselves as hapless victims of the North. Pathetic nonsense.

This celebration of defeat would merely be sad and pathetic self-delusion if the same people who are gearing up for the 150th anniversary of the Confederacy did not insist on presenting the commemoration in political terms. They will spend millions of dollars in television advertisements that claim the war was about preserving their own freedom. It was  about slavery.

The rebellion of the Confederates was the worst crime ever committed against the United States. Those who fought against the North were traitors, and they got off all too lightly at the end of the war. More than 300,000 men from the North died in that war, and thousands of them were starved to death in the South's inhuman prisoner of war camps. The South committed war crimes against Northern soldiers, notably at Andersonville, where 13,000 men died of malnutrition, disease, and exposure in the 14 months it was open. There is absolutely nothing to celebrate. The Confederacy was an ignoble cause, a delusion.

The Confederacy represents nothing less than treason, torture, and slavery. It was and remains an abomination. There is no reason to celebrate the Confederacy, as many Southerners are about to do with a grand ball in Charleston. Succession was a crime. It should be remembered with memorial services for the dead. Its symbol should be a shroud.

When the South lost the war, some of its "patriots" conspired to assassinate President Abraham Lincoln. Will the people of Charleston celebrate that, too? 

Abandoned plantation house, 1930s