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

Move Danish Universities Abroad (following Danish corporations)

After the American Century

This is a thought experiment, making logical deductions from recent actions of the Danish government. If there seems to be anything objectionable (or worthwhile) in this proposal, think about what that government has been doing.

In a globalized world, there is no reason why Danish universities should remain in Denmark, if they can educate their students just as well at a lower price in another place. Just as Danish slaughter houses are moving to Germany and Eastern Europe, just as Danish companies seeking assembly line workers move that part of their activity to Asia, so, too Danish universities should consider the option of moving off-shore.

The advantages of this proposal are obvious.

1. Student SU (grants in aid) will buy more goods and services abroad.

2. Books, clothing, food, and computers will be cheaper, as the faculty and students will not need to pay the 25% Danish VAT.

3. University services can be outsourced more cheaply in other labor markets. There is no reason to pay high Danish wages to cleaners, cooks, and maintenance people, who would be much less costly to hire elsewhere.

4. Careful site selection would place the new Danish universities in mild climates, saving on the cost of heating.

5. Recruitment of non-Danish faculty would not be hindered by the complex and ever more stringent regulations for work permits.

6. In a digitized world, the library resources would be on-line, with no need to build up a physical collection of books and journals.

7. Travel to the new universities need not cost any more than the Danish railways charge to commute from Odense or Aarhus to Copenhagen. Indeed, with the proliferation of budget airlines, it may be cheaper to get to the new universities than to the old ones.

8. Housing will also be less expensive, and at the same time thousands of apartments will be made available in Denmark, solving the housing problems of its cities.

9. Foreign language acquisition will be faster and better, as students will be learning a local language through immersion in another culture, as well as in class.

10. Since Danish business is moving abroad, the Danish students trained overseas will be right where they are needed, and available to work at the lower salaries in the wage markets of those nations.

Since the funds available for university teaching and reseach have declined in real terms for years, this proposal is a rational response to the Danish government's cost-cutting.

Initially the BA programs could be sited off-shore, with the more specialized MA and Ph.D. courses remaining in Denmark for a few years of transition. Logically, the programs in Danish history and Danish language and literature might be left behind to thrive in their native environments, but the natural sciences, much of the humanities, and most of the social sciences would benefit from going off-shore. Indeed, there would be useful synergies with local universities in the host nations that could not be achieved through exchange programs.

By 2030 it should be possible to move most of Danish university education to such places as Ireland, Poland, Southern Spain, Turkey, and Thailand. Those who earlier immigrated into Denmark from these countries would become valuable as translators and bridge builders between the Danes and the host countries.

Once business and the universities have moved abroad, it will be time to think about what else to locate overseas. Quite possibly some hospitals and primary schools also could be moved to the new Danish foreign enclaves.  The eventual result would be to empty Denmark of most university students and many workers, while the number of pensioners abroad would certainly increase as well. They would leave behind a smaller population to operate Denmark as a center for high-tech industries and as a theme park for tourists.

Denmark would thereby become the most completely globalized of all nations. There is no time to delay, as other nations that Denmark likes to compare itself to may be the first movers. The best locations and the biggest savings will go to those who seize the opportunity now.

Danish Law Would Discourage Future Nobel Prize Winners From Seeking Work

After the American Century

The Danish government has proposed rules for admission to the country that would discriminate against the vast majority of the world's PhDs. Notably, the new rules would favor only two of those who received the Nobel Prize in 2010. The restrictive regulations that the right-wing government has proposed would give bonus points to anyone with a degree from one of the world’s top twenty universities, as determined by the London Times annual poll. Restricting the list to just the top 20 schools is a serious mistake. It should include at least the first 200 schools, especially since none of the Danish universities are anywhere near the top twenty. The rather nasty implication is that foreigners  (or the Danes themselves!) with Danish PhDs are not really good enough.

In the London Times, DTU is ranked 122, Aarhus 167, and Copenhagen 177. As a group the Danish universities have fallen in the rankings considerably in recent years.

The danger of excluding Nobel Prize winners is by no means a hypothetical exercise. A few years ago, one of this year's winners, Konstatin Novselov was offered a position at the University Copenhagen, but his admission to the country became so snarled in red tape that he went to get his Ph.D. in Holland, at the University of Nijmegen. Just how many top quality doctoral students and faculty are lost in this way? Some never apply in the first place, because Denmark has become known as a nation whose government creates problems for non-citizens.

The list below includes the universities that the 2010 Nobel Prize winners either attended or now teach in.  I have put in parenthesis each school’s position in the London Times world ranking. Note that seven of the universities associated with this year’s winners are not even in the top 200 universities, much less the top 20.

Carnegie Mellon University (20)

Edinburgh University (40)

Essex University (not in the first 200)

Hokkaido University (not in the first 200)

Jilin University (China) (not in the first 200)

London School of Economics (86)

Madrid University (not in the first 200)

Manchester University (87)

MIT (3)

Nijmegen University (not in the first 200)

Northwestern University (25)

Peking Normal University (not in the first 200)

Purdue University (106)

Russian Academy of Sciences, Chernogolovka  (not in the first 200)

University of Delaware (159)

University of Tokyo (26)

University of Wales (not in the first 200)

The world’s top 20 Universities according to the London Times

1            Harvard University        USA

2            California Institute of Technology           USA

3            Massachusetts Institute of Technology    USA

4            Stanford University            USA

5            Princeton University            USA

6            University of Cambridge       United Kingdom           

6            University of Oxford             United Kingdom           

8            University of California Berkeley   USA           

9            Imperial College London  United Kingdom           

10          Yale University   USA           

11          University of California Los Angeles    USA

12          University of Chicago       USA           

13          Johns Hopkins University    USA

14          Cornell University            USA

15          Swiss Federal Institute of Technology Zurich Switzerland           

15          University of Michigan            USA           

17          University of Toronto            Canada           

18          Columbia University            USA           

19          University of Pennsylvania            USA

20          Carnegie Mellon University, USA

See also World University Rankings, 2011- 2012, elsewhere on this blog (October, 2011)

Perils of a Point System for Immigrants to Denmark

After the American Century

Danish politicians, particularly those on the right side of the political spectrum, are toying with the idea of introducing a point system for immigration. The idea is to admit applicants for residence in Denmark based on points that reward such things as advanced education, mastery of Danish before arrival, a strong knowledge of English, and specific skills.  The uneducated, and especially the illiterate, would be pretty much excluded under this system, unless they were excellent football players. The idea clearly is to attract those who can enrich the country and keep out those who would be a drain on its resources.

A related idea being discussed is to make new residents wait for several years before they are eligible for unemployment and some social services. People would earn points toward full membership in the welfare state after  two or even three years. This is a seriously flawed idea. Why should someone who is highly educated and skilled want to come to a country that will treat them as a second-class citizen for years? Danish society will not have paid for their education or training, yet it will immediately benefit from their contribution and from their taxes. It is hard to see any good reason for such a rule, or any way that such a rule can help attract the talented.

Furthermore, the logic of such rules could spread to the Danes themselves. Why should a new university graduate qualify for unemployment before he or she has worked for three years, just like the skilled immigrant? The only difference between them is that the native Dane has already cost society quite a large sum, so, logically, the native Dane should contribute for much longer than just two or three years before eligible for any benefits. I am not advocating this idea, merely pointing out that if the political calculus becomes that of only giving benefits to those who have earned them, then many unlucky Danes would perhaps never qualify for benefits from their own welfare state.

There is one other scenario to consider as well. Suppose a highly trained person, say a physicist or surgeon, comes to Denmark and after two years still is earning points toward full eligibility. Before he or she can "cash in," however, a new job offer comes from a country without such silly rules. The physicist and the surgeon leave, and Denmark loses their services. Worse yet, they decide to sue Denmark for recovery of the value of the "points" they accumulated. Since the government has created such a system, these "points" will have a clear monetary value. Would not the European Court likely rule that at least some of the taxes immigrants paid for welfare services they could never enjoy ought to be refunded? 

This is just an example. Many other lawsuits could be imagined, as lawyers calculate the value of unused "points" lost. The lawyers and the accountants would make money. The government would have to hire more people to deal with the complaints and the lawsuits. And, of course, Denmark's reputation would be damaged by the controversy, regardless of who won the individual cases. A brilliant idea, obviously.