Policy Review, April & May 2011, No. 166

POLICYReview April & May 2011, No. 166, $6.
00
THE INEQUITY OF THE PROGRESSIVE

INCOME TAX
KIP HAGOPIAN
A SMARTER APPROACH TO THE YUAN

CHARLES WOLF, JR.
AMERICA’S FADING MIDDLE EAST INFLUENCE

SHMUEL BAR
THE EUROPEAN UNION GOES EAST

BRUCE PITCAIRN JACKSON
ALSO: ESSAYS AND REVIEWS BY

JOSEPH BOTTUM, LIAM JULIAN, DAVID SHORR,
PETER BERKOWITZ, HENRIK BERING
A P u b l i c a t i o n o f t h e H o ov e r I n s t i t u t i o n
stanford university
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POLICY Review
A PRIL & M AY 2011, No. 166
Features
3 THE INEQUITY OF THE PROGRESSIVE INCOME TAX
Working harder and paying more
Kip Hagopian
29 A SMARTER APPROACH TO THE YUAN

Avoid the rush to rebalance
Charles Wolf, Jr.
41 AMERICA’S FADING MIDDLE EAST INFLUENCE

Speaking softly, wielding no sticks
Shmuel Bar
53 THE EUROPEAN UNION GOES EAST

A patient policy of long-term partnership
Bruce Pitcairn Jackson
Books
65 BEING T.E. LAWRENCE
Joseph Bottum on Hero: The Life and Legend of Lawrence of Arabia
by Michael Korda.
70 BETTER BRAIN SCIENCE

Liam Julian on Moonwalking with Einstein: The Art and Science of
Remembering Everything by Joshua Foer and The Most Human Human:
What Talking with Computers Teaches Us About What It Means to Be
Alive by Brian Christian.
76 POWER AND ARROGANCE

David Shorr on The End of Arrogance: America in the Global
Competition of Ideas by Steven Weber and Bruce Jentleson.
82 THE GOLDSTONE MESS

Peter Berkowitz on The Goldstone Report: The Legacy of the Landmark
Investigation of the Gaza Conflict edited by Adam Horowitz, Lizzy
Ratner, and Philip Weiss.
88 HOW PEACE GETS MADE

Henrik Bering on How Wars End by Gideon Rose.
A P u b l i c a t i o n o f t h e H o ov e r I n s t i t u t i o n
stanford university
POLI CY ReviewA p r i l & M ay 2 0 1 1 , N o. 1 6 6
Editor
Tod Lindberg
Research Fellow, Hoover Institution
Consulting Editor
Mary Eberstadt
Managing Editor
Liam Julian
Office Manager
Sharon Ragland
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The Inequity of the
Progressive Income Tax
By Kip Hagopian
Class Wars: A Parable
O
nce upon a time in the land of America, there lived triplet
brothers named Tom, Dick, and Harry Class. They were 45
years old, had virtually the same aptitude (skill), and were
raised in the same home. Each was married and had two chil-
dren. All three were employed as carpenters making $25 per
hour, working 50 weeks a year.
While they were almost identical in most respects, they had somewhat dif-
ferent preferences and values. For example, Tom, who worked 20 hours a
week, had a different work ethic from his brothers, Dick and Harry, who
each worked 60 hours per week. Neither Tom’s nor Dick’s wives worked,
while Harry’s wife worked 40 hours per week as an office manager making
$50,000 per year (the same hourly rate as her husband). Tom and Dick
Kip Hagopian was a co-founder of Brentwood Associates, a California-based

venture capital and private equity firm. This essay is an abridged version of a
paper which is available in its entirety and for comment at
www.kiphagopian.com.
April & May 2011 3 Policy Review

Kip Hagopian
spent all of their income, and were relying on Social Security to take care of
them when they retired. Harry and his wife, on the other hand, saved most
of her after-tax income over many years, gradually accumulating
$300,000. They invested this money in bonds and real estate that produced
$25,000 a year in interest and rental income. This was the income of each
family:
Family
Tom Dick Harry
Work hours per Week: 20 60 100
Annual Wages
Husband: $25,000 $75,000 $75,000
Wife: 0 0 50,000
Investment Income: 0 0 25,000
Total Income: $25,000 $75,000 $150,000
Despite their different priorities, the Class families were close; so much so
that when a new housing tract was developed in their community, they each
bought an equal-priced home on the same private street. Theirs were the
only houses on the street.
One day the brothers decided to pool their funds for the purpose of
improving their street. Concerned about crime and safety, and desirous of a
more attractive setting for their homes, the three families decided to: install a
gate at the street’s entrance to deter burglars; add lighting for safety and
additional security; repave the street’s surface to repair damage; and install
landscaping to beautify the approach to their homes. The work was done
for a total cost of $30,000.
The brothers were quite happy with the outcome and felt the $30,000
was a worthy expenditure given the benefits provided each family. But when
it came time to divide up the bill, the problems began.
Harry thought it would be simple to divide the bill. Since the benefits to
each family were equal, each brother should pay one-third, or about
$10,000. But Tom and Dick objected. “Why should we pay the same as
you?” they said. “You make much more money than we do.” Harry was
puzzled. “Why is that relevant?” he asked. “My family makes more money
than yours does because my wife and I work long hours and we earn extra
money on our savings. Why should we be penalized for working and sav-
ing?” Harry looked at Tom and said, “I’m no smarter or more talented than
you are. If you and your wife worked harder and saved more you would
make as much as my family does.” To which Tom replied, “I don’t work
more because I value my leisure time more than I value money. And I don’t
save because I prefer the gratification of consumption today more than I will
when I’m too old to enjoy it.” Tom was adamant. How could Harry, who
was clearly “rich,” ask him to pay the same amount, when it was obviously
harder for him to do so?
4 Policy Review
The Inequity of the Progressive Income Tax
Dick thought for a moment, and then said, “I’ve got an idea. Our aggre-
gate income is $250,000, and $30,000 is 12 percent of that amount. Why
don’t we each pay that percentage of our income? Under that formula, Tom
would owe $ 3 , 0 0 0 , I would owe $ 9 , 0 0 0 , and Harry would owe
$18,000. Since I make three times as much as Tom, I would pay three times
as much. Harry, who makes twice as much as me and six times as much as
Tom would pay two times as much as me and six times as much as Tom.”
“No,” said Tom. “No?” Dick and Harry responded in unison. “Why
not? What do you propose instead?” asked Harry. Tom was ready with his
answer. “Paying the same percentage of our income is not fair. Instead,
Harry, you pay $23,450; Dick, you pay $6,550; and I will pay nothing.
This is the only fair division.” Dick was surprised at how completely arbi-
trary this proposal was. He was also surprised at how disproportionate it
was, but since his suggested share was significantly less than under his own
proposal, he didn’t object. Harry, however, was stunned. “You call that
fair?! I make only two times as much as Dick, but you want me to pay
three-and-a-half times as much as he does. I make six times as much as you
but you expect me to pay almost 80 percent of the total cost while you pay
nothing. And this is despite the fact that each of us is receiving the exact
same benefits. Where did you get such a crazy idea?” he asked. “From no
less an authority than the federal government,” said Tom as he pulled out a
gray booklet. “It’s all right here in the irs tax tables. Under the current tax
code, here is what each of us paid in income taxes last year:”
Family
Tom Dick Harry Total
Income $25,000 $75,000 $150,000 $250,000
Taxes Paid1 0 6,550 23,450 30,000
Effective tax rate 0% 8.7% 15.6% 12%
“By an amazing coincidence, our total taxes paid were exactly equal to
the $30,000 expended on our street improvements. This is the progressive
income tax system all U.S. taxpayers live under, and I don’t see why the
Class families should be different. In fact, I believe all future pooling of
funds should be divided in this way.” “I’m in,” said Dick. So, by a vote of
two to one, the cost of the street improvements was divided as follows:
Tom Dick Harry Total

Dollars $0 $6,550 $23,450 $30,000
Percentage 0% 21.8% 78.2% 100%
1. The tax figures were calculated by The Shapiro Group, a Los Angeles tax accounting firm. The mar-
ginal rates and brackets are those applicable for the 2010 tax year. These figures are for illustration pur-
poses only. They do not include the effect of certain tax credits (which some would consider transfer pay-
ments) that exist in the law. If these credits were included, Harry would pay a tax of $22,600, Dick
would pay a tax of $3,700 and Tom would receive a refund of $7,100.
April & May 2011 5

Kip Hagopian
Also by a vote of two to one, all future pooling of funds was to be divided
up the same way.
L ike all parables, the story of the Class brothers is designed to

illustrate a moral principle. In this tale, Harry is required to pay a
disproportionate amount of the cost and value of the benefits he
derives from his “mini-society,” simply because his family works harder
than the families of the society’s other members. The moral question is: Is
Harry being treated fairly? If not, how should this affect our thinking about
progressive taxation?
In the United States, the payment of taxes is effectively a “pooling of
money” by the nation’s citizens to fund the services of government. These
services include, but are not limited to: the national defense, infrastructure,
the judicial court system, police and fire protection (delivered at the federal,
state, and local levels), education (delivered at the state and local level), the
general administration of government, and support for truly needy citizens.
Deciding how much money should be appropriated for this pool and how
it should be spent is almost always a subject of contentious debate. The
same is true when deciding how taxes should be apportioned. As to the lat-
ter, the debate inevitably devolves into an argument over fairness and eco-
nomic efficiency.
The primary source of federal tax revenues (excluding Social Security and
Medicare taxes) is a progressive tax on the earned income of individuals.2
This essay will make the case that the progressive income tax is plainly
inequitable. It will also review the alternatives to progression in an effort to
identify the most equitable (or least inequitable) tax system.
Factors that determine income
A
merica’s free enterprise system provides an environment
in which the substantial majority of its citizens can realize their
fullest earnings potential. Within that environment, individual
economic outcomes are the product of a combination of three elements:
aptitude, work effort, and choice of occupation.
Aptitude.3 For the purposes of this essay, aptitude is broadly defined as
the capacity to produce, or to earn income. For the most part, it comes from
2. There are several other types of taxes levied by federal, state, and city governments, including taxes on
capital gains, dividends, estates, sales, and property. These tax systems are outside the scope of this essay.
3. As defined here, the term aptitude is similar to but distinct from other terms used in the literature to
describe capacity to earn: 1) “endowment,” which, in this context, is synonymous with genetic inheri-
tance and is, therefore, too limiting; 2) “faculty,” which, like aptitude connotes capacity to earn, but is
also used in the literature to describe financial wherewithal; and 3) “ability,” which, like faculty, is used
to describe either capacity to earn or financial wherewithal.
6 Policy Review
circumstances of birth and is distributed unequally. Aptitude may be derived
from innate talents (cognitive, musical, artistic, athletic, etc.) or physical
attributes (appearance, dexterity, possession of senses, etc.). Or it may be
acquired from lessons learned from parents and other life experiences.
Aptitude emanating from circumstances of birth (either innate or acquired)
can be significantly enhanced by individual effort applied to strengthening
one’s skills (see “Work Effort” below). Aptitude is measured from low to
high in accordance with the monetary value placed on it in the marketplace.
This is a measure of earning power and is not in any way an indication of an
individual’s intrinsic worth as a human being. For most people aptitude is
the most significant determinant of income. But it has to be understood as
capacity; aptitude does not produce income until it
is combined with individual effort. “Paying the same
Work effort. For any given level of aptitude and
occupation, work effort plays the decisive role in percentage of
determining income, and in many cases may result our income is not
in persons with lower aptitudes earning more than
their higher-aptitude peers. For the purposes of this
fair. Instead,
essay, the term “work effort” includes not only the Harry, you pay
number of hours worked, but also the intensity of
$23,450; Dick,
the effort applied during those hours. As noted
above, it also includes work effort applied to you pay $6,550;
strengthening one’s skills. and I will pay
At every level of aptitude and in every profession,
whether the pay is in salary or hourly wages, there nothing.”
are workers who outperform their peers in each
hour worked. They do this by performing tasks more quickly; focusing on
the tasks more intently; finding and completing additional tasks that need to
be done; and using some of their leisure time practicing or training to
become more skilled. These people get more raises, larger bonuses, and
more promotions than their peers. Thus, greater work effort can produce
higher income whether the person is paid by the hour or earns a salary.
In addition to producing higher income in its own right, work effort
applied to strengthening one’s skill — resulting in “learned” or “enhanced”
aptitude — can make a substantial contribution toward increasing income.
The “rough” carpenter who spends nights and weekends developing the
skills necessary to qualify as a more highly valued “finish” carpenter will
move up the wage scale by doing so. Professional athletes, musicians,
singers, and other performers can enhance their innate aptitudes substantial-
ly through extensive practice, and a great many are renowned for having
done so. A classic example is Hall-of-Famer Jerry Rice, who is generally rec-
ognized as the best wide receiver in nfl history. He was one of the highest
paid players in pro football for twenty years, an achievement largely credited
to his intense practice and workout regimen. Perhaps the most effective way
of enhancing aptitude is through increased study in school. Whether it is
April & May 2011 7

Kip Hagopian
grade school, high school, vocational school or college, for any particular
tier of aptitude, those who study the most almost always get the best grades,
matriculate to the best colleges, and secure the best jobs.
Choice of occupation. Choice of occupation is also important in deter-
mining income. Had Bill Gates decided to finish Harvard and become a high
school math teacher, he almost certainly would have been successful, but he
would not have become a multi-billionaire.
Earned income is determined by a mix of the three factors described
above, and the relative contribution of each varies by individual.
Understanding the primary determinants of income and the implications of
each for tax policy are essential to designing the most equitable tax system.
Surprisingly, the literature contains only infrequent and oblique references to
this crucial aspect of tax theory.
Alternative income tax systems
T here is a consensus among economists and tax theorists that the

best tax system is one that strikes the optimum balance between
economic efficiency and equity. An efficient tax system is one that
does the least to distort the allocation of resources in the economy, thus
maximizing overall production. Accordingly, taxes that might alter con-
sumer or investor behavior should be eschewed. As to equity, there is virtual-
ly unanimous agreement among scholars that the tax system should be
“fair.” Unfortunately, there is great disagreement as to which system best
meets this criterion.
There are basically four systems of income taxation described in the liter-
ature:
A per-capita, or “head” tax, which would require each person to pay his
or her per-capita share of the costs of government. (Technically a per-capita
tax is not an income tax, but it is almost universally accepted as the most
economically efficient tax system.)
A proportionate or “flat” tax, which would tax each dollar of income at
a single rate. Embodied in virtually all proportionate tax proposals is a sub-
stantial broadening of the tax base through the elimination of most tax
deductions, credits, and preferences, which has the benefit of simplifying the
tax code and reducing the cost of compliance. The purest form of this sys-
tem is a single-rate tax levied on all earned income from the first dollar, but
different variations on this theme have been proposed.
A degressive tax, which is a proportionate tax only on income above a
certain threshold or exemption. The exemption makes the system progres-
sive, but typically much less so than a system of graduated rates.
A progressive tax, which taxes incremental income at higher marginal
rates as income rises, resulting in an increase in taxes as a percentage of
income as income increases.
8 Policy Review
Each of these systems will be examined as part of the analysis of progres-
sive taxation.
The case for progression
P rogression has been in use somewhere in the world for

more than two thousand years. And it is safe to say the debate on
its merits goes back just as far. At present, the substantial majority
of nations employ some form of progressive taxation.
The first time a federal income tax was imposed in the United States was
in 1861 as a means of financing the Civil War. The tax rates were decreased
after the war and the income tax was allowed to expire in 1872. The con-
cept of an income tax was legally quite controversial; so when a new income
tax was levied in 1894, it was challenged in the courts, and in 1895 was
found to be unconstitutional. It was not until 1913, with the ratification of
the 16th Amendment to the Constitution, that the first constitutionally sanc-
tioned income tax was enacted (which, incidentally, was progressive).
Throughout history, many arguments have been advanced both for and
against the progressive income tax. One of the most comprehensive exami-
nations of the subject in the 20th century was a book published in 1953
and reissued in 1963, The Uneasy Case for Progressive Taxation, by
Professors Walter J. Blum and Harry Kalven of the University of Chicago
Law School. This book is an exhaustive review of the prior literature on this
topic, interspersed with the authors’ own analyses and critiques of the argu-
ments presented. In their words, the book is, “an effort to explore what
might be called the intellectual case for progression.”4 Another particularly
useful source of information and analysis was a book-length article pub-
lished in 1 9 0 8 in the American Economic Association Quarterly,
“Progressive Taxation in Theory and Practice,” by the noted economist and
tax historian, Edwin R.A. Seligman.5
According to Blum and Kalven, “the most rigorous analysis of progres-
sion came only after the idea had become a political reality . . . whatever the
reasons, it is clear that the political history affords little insight into the mer-
its of the principle of progression.”6
The arguments in support of progression tend to fall into three main cate-
gories:7 economic efficiency, fairness, and reduction of income inequality.
4. Edward Blum and Harry Kalven, The Uneasy Case of Progressive Taxation (University of Chicago
Press, 1953).
5. Edwin R.A. Seligman, Progressive Taxation in Theory and Practice (Princeton University Press, 1908).
6. Blum and Kalven, 14.
7. Some advocates of progression argue that a progressive income tax is needed to offset the putatively
regressive nature of the payroll “taxes” that fund Social Security and Medicare. The conflation of these
revenue streams is ill-conceived, inasmuch as each has a different purpose. Income taxes are used to fund
a broad range of government services as described above, while payroll levies are collected for the express
April & May 2011 9

Kip Hagopian
Economic efficiency. The argument is that progressive taxation increases
worker productivity, yielding greater economic efficiency and higher aggre-
gate incomes. The study of the impact of tax policy on economic efficiency
and growth has for centuries been a fertile ground for economists, who have
produced numerous analyses on the topic without reaching clear consensus.
Since the focus of this essay is on the issue of tax equity, the economic effi-
ciency arguments will not be discussed beyond noting that logic and the
weight of empirical evidence appear to favor less progression rather than
more.
Fairness. The argument for progressive taxation on fairness grounds has
three main strains.
• The benefits principle. Taxes are payments made in return for govern-
ment services and protections. People with higher incomes have dispro-
portionately more to lose; therefore, they should pay disproportionate-
ly more for the protections afforded them by government;
• Sacrifice theory and the marginal utility of money. Taxes are a burden
on society that should be shared in an equitable manner. “Burden” is
defined as the sacrifice made by the individual when he or she pays
taxes. Since the marginal utility of a dollar declines as income rises,
higher-income people should pay enough more in taxes to equalize
their sacrifice relative to the sacrifice of lower-income peers.
• Ability to pay. A fair tax system is one in which those with the greatest
ability to pay should pay the most.
Reducing Income Inequality. In this view, inequality is a social injustice
that can be remedied or mitigated by a progressive tax system. It is often
proffered as an argument for basic “fairness,” but since proponents haven’t
united around a specific principle of fairness in its support, we will consider
it separately.
We will now examine each of the three fairness arguments in detail, then
turn to the question of income inequality.
The benefits principle
T he benefits principle of taxation holds that the government

provides benefits to its citizens that should be paid for in taxes by
each beneficiary in accordance with the value he or she receives
purpose of providing income supplements and medical care during retirement. More specifically, Social
Security levies are a form of forced savings, and Medicare levies are effectively prepaid medical insurance
premiums. Neither of them finances government services per se. Since Social Security benefits when paid
out are tied to the aggregate amount paid into the system by each beneficiary, it is inaccurate to call the
levies regressive. In the case of Medicare, the amount paid into the system is proportionate to income
while the benefits (paid health care) are essentially the same for each beneficiary; consequently, the system
is redistributive.
10 Policy Review
from government services. As a basic foundation for taxation, the benefits
principle — also called “give and take” or “quid pro quo” — has probably
received more examination and comment than any other. As we will see, the
statement of the principle — payment of taxes in return for benefits — lends
itself to widely varying interpretations.
Historically, the use of the benefits principle to advocate progression
relied on the “protection theory” of benefits, which asserts that the govern-
ment’s primary function is the protection of property. The theory focuses on
income as property, and analogizes the protections of government to an
insurance company that insures property against loss. Those who cite pro-
tection theory as an argument for progression assert that individuals with
higher incomes should pay a disproportionately greater share of the cost of
government than lower-income individuals because the higher-income group
would have disproportionately more to lose if the protections of government
were withdrawn. Implicit in this interpretation of the principle is not just
that the value of benefits received from the government increases as income
increases, but that it increases more rapidly than the rise in income. As we
will see, the statement of the principle — payment of taxes in return for ben-
efits — lends itself to widely varying interpretations.
When examined carefully, the “protection theory” interpretation of the
benefits principle falls short in five different ways.
First, the basic premise of the protection theory is flawed. Government
protections extend to much more than property. The Founding Fathers made
clear their vision for America in the Declaration of Independence when they
spoke of the “unalienable rights” of all Americans to “life, liberty and the
pursuit of happiness.” There is no basis for believing that a low-income per-
son’s life is worth more or less to an individual (as contrasted with an insur-
ance actuary, an economist, or a jury assessing damages in a wrongful death
case) than the life of a high-income person. The same is true for liberty and
the pursuit of happiness. The American military and other protective agen-
cies and institutions of government exist to protect and preserve these rights
for all Americans equally, regardless of how rich or poor they are.
Second, there is no persuasive support in the literature for the claim that
higher-income people derive a disproportionately greater value from govern-
ment protection of property than lower-income people. Some progression
advocates have argued that government exists in large part to protect rich
people from poor people, while poor people need no such protection. Thus,
the value of the rich person’s protection is disproportionately greater than
that afforded the poor. Perhaps this was true centuries ago in some feudal
nations, but it is not now and never has been generally true in the United
States. Others argue that insurance is priced according to risk as well as
value, implying that high-value property is at greater risk of loss. While this
notion has conceptual merit, it does not follow that property owned by
high-income people is at greater risk than property owned by low-income
people. In fact, the rich are more likely to engage in self-protection (e.g.,
April & May 2011 11

Kip Hagopian
build protective walls, install security systems, hire guards, etc.), which
would result in reduced, not greater, risk. Seligman, Blum and Kalven, and
others have examined the property protection arguments for progression
and dismissed them as either untenably weak or without merit.
Third, this interpretation of the benefits principle overlooks the principle
of marginal utility. If, as virtually all economists agree, the marginal utility of
a dollar of income declines as income increases, then people would place a
lower value on protecting their income as it rises. To accept protection theo-
ry as an argument for progression, one would have to assert that each addi-
tional dollar of income earned is worth more than the previous dollar of
income, which is nonsensical.
Fourth, even if the protection argument had merit, it would, at best, argue
for a proportionate rather than a progressive tax. To argue otherwise
requires a belief that the price of property insurance increases faster than the
value of the property (in this case, income), which is observably untrue. If the
insurance analogy were applied, those with two times as much income or
property would pay two times as much tax, which would be proportionate,
not progressive. It’s no accident that “historically almost all exponents of
benefit theory employed it to support proportion as against progression.”8
Fifth, the analogy to an insurance company is specious. The costs of the
military and police and fire departments are not equivalent to property and
casualty insurance, in which the policy is priced in accordance with the value
of the property insured. There is no material difference in the cost of protect-
ing persons with high incomes or high-value property than that of persons
with low incomes or low-value property. (In fact, the cost might be less,
since persons with high income tend to reside in low-crime areas.)
Accordingly, there would be no difference in the cost of these protections
based on property value. Thus, under the protection theory, the fairest tax
system would more logically be per capita.
A second interpretation of the benefits principle, and one that appears
clearly to have more substance and more scholarly support, is that govern-
ment benefits redound roughly equally to all people regardless of their
income. More specifically, and as noted in the preceding paragraph, the value
of benefits relating to life, liberty, and the pursuit of happiness, including the
protection of property, is essentially the same for all citizens. Thus, each per-
son should share the costs of government equally, in which case the fairest
tax would be per capita. This is essentially what Harry proposed to his
brothers as the fairest way of dividing the costs of their street improvements.
There is yet another interpretation of the benefits principle that is
arguably superior to the others, because it comes closest to placing a true
value on the benefits of government. This interpretation posits that the ulti-
mate benefit of government is the overall well-being each person derives
from its services.
8. Blum and Kalven, 38. .
12 Policy Review
The “Class Wars” parable imagined a society in which all of the members
had the same aptitude. But in the broader society, aptitudes are distributed
widely and unequally. This changes the picture substantially, as we can see
by means of a simple thought experiment: Assume the society’s population
has a normal (bell curve) distribution of aptitudes. Assume also that all of
the persons in this society work exactly the same number of hours and at
exactly the same intensity, resulting in incomes that correlate closely with
aptitudes. In this hypothetical situation, and within each occupation,
incomes would vary across a distribution curve almost identical to the apti-
tude curve. Accordingly, persons with more highly valued aptitudes would
earn more income than their lower-aptitude counterparts, and thus derive
greater value from government. It follows, therefore, that, all things being
equal, higher-aptitude people should pay more in taxes than lower-aptitude
people — not because they have more to lose (or to protect), but because
they receive greater value from their government. Blum and Kalven touched
obliquely on this concept when they noted:
Another approach [to the benefits theory] is more ingenious. It is found-
ed on a double assumption: first, that the well-being of men, while not
caused by the government, is dependent upon it in that government is a
necessary condition for its existence; second, that the only aspect of well-
being which is measurable is wealth or income and that it is therefore
appropriate to take either of these as an index of the benefits flowing
from government.9
It is noteworthy that this “ingenious” approach is entirely consonant with

the “greater-value” interpretation of the benefits principle.
The greater-value interpretation of the benefits principle is at odds with
the cost-sharing concept described above (which suggests a per-capita tax),
inasmuch as it argues that higher-income people should pay a higher price
for their benefits because they have received greater value from their govern-
ment, largely because of a more highly valued aptitude (which is a gift at
birth) or some other good fortune. The merit of this notion can be inferred
by imagining that aptitudes could be purchased on the open market. If such
a thing were possible, it is certain that the more highly valued aptitudes —
those that would produce higher incomes — would be bid up to amounts in
excess of the per-capita cost of government.
But how much more should higher-income people pay? The major fallacy
in the use of the benefits principle as an argument for progression is the
implicit premise that the value of government benefits increases more rapidly
than income. Under the greater-value theory, since income — a proxy for
well-being — is what each individual receives from the economic system,
income is a reasonable measure of the value each individual receives from
government. It is reasonable to conclude, therefore, that the fairest tax sys-
April & May 2011 13

Kip Hagopian
tem is one in which each person pays tax in proportion to his or her income.
It makes no difference whether the income is derived from aptitude (as
defined), financial windfalls, random events, or privilege. In all of these
cases, the tax should be levied in proportion to the value of the benefits
received. Thus, a person who earns 10 times as much income as another
would pay 10 times as much tax, while someone making 100 times as
much would be taxed 100 times as much.
A new and important contribution to the debate over fairness emerged in
the mid-19th century when proponents of proportionate taxation realized
there were both practical and intellectual reasons for exempting a portion of
income from taxation. The practical reason was simply the futility of taxing
that portion of a person’s income that was needed for survival. To do so
would be self-defeating, since the hardship imposed would deprive the state
of production. The intellectual basis for the exemption, from the point of
view of the state, emanated from the notion that income needed for subsis-
tence constituted an expense of production, while income above this amount
was “surplus” or “clear” income, i.e., net of production costs (an insight
attributed to the economist David Ricardo). From the point of view of the
taxed, government benefits only have real value when the taxpayer earns a
surplus of income over what is needed for subsistence. Most scholars who
supported a proportionate tax system concluded that taxing only clear
income was both practical and fair to both the individual and the state. This
enhancement to the benefits principle, which introduced a mild degree of
progression by comparison to a pure proportionate tax (a tax from the first
dollar of income), became known as a “degressive” tax. It is important to
note that, among the proponents of the degressive tax, there was clear con-
sensus that the income exempt from tax should be set no higher than the
level of subsistence. To do otherwise would be arbitrary and in the opinion
of many, inequitable.
The greater-value interpretation of the benefits principle stands as a rejec-
tion of a per-capita tax system and as a compelling case for either a propor-
tionate or a degressive system.
Sacrifice theory and the marginal

utility of money
S acrifice theory is perhaps the most historically prominent and

persistent argument in favor of progressive taxation. Stated simply,
the theory posits that the fairest tax is one that extracts from each
taxpayer an equal or proportionate “sacrifice.” The theory rejects the quid-
pro-quo notion that taxes are remitted in return for government benefits and
instead treats taxes simply as a burden that must be shared in the most equi-
table way. Sacrifice theory is dependent upon the economic principle that
14 Policy Review
holds there is a marginal-utility curve for money to the effect that the more
money one earns, the less utility (or satisfaction) will be derived from the last
dollar earned. Thus, if you plot a chart in which the vertical axis is units of
marginal utility a person gets from money, and the horizontal axis is the
amount of money the person earns, the curve will eventually have a down-
ward slope. A downward slope indicates, for example, that an incremental
$1,000 has greater utility to a person earning $10,000 a year than it has
to someone earning $100,000.
The economic principle of marginal utility on which sacrifice theory
depends is sound. However, there are several difficulties with the sacrifice
theory itself that render it untenable as an argument for progression.
First, the basic premise of sacrifice theory is conceptually flawed. The
notion that taxes are simply a burden that must be tolerated rather than a
payment for benefits raises the question: Why would the citizens of a democ-
racy vote to impose taxes on themselves if they did not expect benefits in
return? And if the government does provide benefits (which of course it
does), why would the payment of taxes be considered a sacrifice rather than
a fair payment for value received? Did the Class brothers not receive benefits
from their street improvements? If they did, what would be the logic of a tax
based on proportionate sacrifice rather than one based on shared cost or
value received? On conceptual grounds alone, sacrifice theory appears to be
a very weak foundation for tax policy.
Second, the validity of the theory depends on more than just the existence
of a downward sloping marginal-utility curve. For progression to be justified
under a theory of equal sacrifice, the curve must not only decline, but
decline more rapidly than income rises. In the view of British economist
Arthur Pigou and others, there is no way to prove this is true:
All that the law of diminishing utility asserts is that the last ₤1 of a
₤1000 income carries less satisfaction than the last ₤1 of a ₤100 income
does. From this datum it cannot be inferred that, in order to secure equal
sacrifice . . . taxation must be progressive. In order to prove that the
principle of equal sacrifice necessarily involves progression we should
need to know that the last ₤10 of a ₤1000 income carries less satisfac-
tion than the last ₤1 of a ₤100 income; and this the law of diminishing
utility does not assert.10
Seligman credits the Dutch economist A.J. Cohen-Stuart with debunking

the notion that there is a universal marginal-utility curve that dictates pro-
gression. Here Seligman quotes Cohen-Stuart: “It is perfectly possible . . . to
construct tables [curves] which lead not to progression, but to proportion
and even to regression.”11
10. Arthur C. Pigou, A Study in Public Finance (Macmillan, 1951), 85-86. .

11. Seligman, 219..
April & May 2011 15

Kip Hagopian
Third, the sacrifice argument for progression is dependent upon the addi-
tional assumption that the marginal-utility curves of all persons are essential-
ly the same. While it is well accepted that marginal-utility curves will eventu-
ally slope downward, it is by no means true that all curves have the same
slope. In fact, in comparing the marginal-utility curves of Tom, Dick, and
Harry Class, there are any number of reasons why Harry’s marginal utility
curve might decline less steeply than Tom’s and Dick’s. Imagine, for exam-
ple, that Harry has a learning-disabled son who needs costly special educa-
tion, or that Harry’s wife has an illness that requires expensive medication
not covered by insurance. Or perhaps Harry has an obsession with saving
enough money to send his two children to the best private secondary schools
and universities. Now consider Tom’s and Dick’s situation: Knowing that
Harry is the most industrious of the brothers and was unlikely to need their
help, Harry’s parents made it clear that when they died they would leave all
of their rather significant estate to the less industrious brothers, leaving
nothing to Harry. In this event, Tom’s and Dick’s marginal-utility curves are
affected by their knowledge that they don’t need as much income to secure
their future. Thus, Tom’s and Dick’s marginal-utility curves may have steep-
er downward slopes than Harry’s, even though Harry earns much more
income. Seligman calls this the “very core objection” to sacrifice theory:
The imposition of “equal sacrifices” on all taxpayers must always
remain an ideal impossible of actual realization. Sacrifice denotes some-
thing psychical; something psychological . . . Two men may have the
same income, which they may value at very different rates. The one may
be a bachelor, the other a man with a large family dependent upon him;
the one may be well, the other ill . . . the one may earn his income, the
other may receive it as a gift . . . The attempt to ascertain a mathematical
scale of progression, so as to avoid a charge of arbitrariness, is fore-
doomed to failure.12
This inability to prove the sameness of the marginal-utility curves of dif-

ferent people troubled Blum and Kalven to the point that they dismissed sac-
rifice theory as a theory on which to base a fair tax system:
The error lies in trying to translate money, which can be measured in

definite units, into corresponding units of satisfaction or well-being. In
the end satisfaction in the sense of happiness defies quantification. Utility
is a meaningful concept; units of utility are not. It is in the face of this
difficulty that, even waiving all other objections, the whole elaborate
analysis of progression in terms of sacrifice and utility doctrine finally
collapses.13
12. Seligman, 222-223. .

13. Blum and Kalven, 63..
16 Policy Review
If there is no accurate way to draw any individual’s marginal-utility curve,
there is no way to compare the curves of different persons. The only things
that can be stated with confidence are that all persons have marginal-utility
curves that are ultimately downward sloping and that the slopes of individ-
ual curves are determined by many factors in addition to income. And even
if, as a general proposition, the curves are similar (as intuition would sug-
gest), there are sufficient variations in them that sacrifice theory could not be
applied without resulting in the inequitable treatment of an unacceptably
large portion of the population.
Fourth, for a substantial (but indeterminate) number of workers —
those who work because they need the money rather than because they
enjoy it — the number of hours they choose to
work is determined by the marginal utility of the Among people
income they earn from that work. Thus, for these
workers, work effort has its own marginal-utility whose aptitudes
curve that is essentially the same as the marginal- are the same,
utility curve for income. To illustrate: Harry’s fami-
ly chooses to work 100 hours a week, while Tom’s
the only way
family chooses to work 20 hours a week. Harry one person can
and his wife work these long hours because the
earn more
marginal utility of the income produced from the
extra hours is greater than the marginal utility of than a peer is
leisure (up to that point). Conversely, Tom’s family by working
has decided to work only 2 0 hours per week
because the additional utility of the income from harder.
the 21st hour is sufficiently low to him that he
chooses to forgo it in favor of leisure. In this entirely plausible scenario,
the marginal utility of one extra dollar to Harry might be equal to the
marginal utility of one extra dollar to Tom. It is also plausible that the
marginal utility of another dollar to Harry is even greater than it is to
Tom, in which case, under its own logic, sacrifice theory would call for
taxing Harry less than Tom. In either of these scenarios, taxing Harry at a
higher marginal rate than Tom (as required by a progressive income tax)
would be inconsonant with sacrifice theory, and by its own standard,
inequitable.
Fifth, the application of sacrifice theory would be plainly unfair to the
people in a society who work the hardest. Among people whose aptitudes
are the same, the only way one person can earn more than a peer is by
working harder. But progression has the perverse effect of reducing average,
after-tax hourly wage or salary rates as work effort increases. Consider the
Class brothers: While Tom’s average, after-tax hourly wage was $25 (he
paid no tax), Dick’s was $22.82, and Harry’s was only $21.10 (this
assumes the tax on Harry’s $75,000 in labor income was $11,725 or 50
percent of the family’s total tax of $23,450). To put this into perspective,
imagine you are interviewing for a job. When you ask what the job pays,
April & May 2011 17

Kip Hagopian
your prospective employer says, “Well that depends on how hard you
work.” You say, “Good, because I am a hard worker.” To which the
employer responds, “You don’t understand. If you work 20 hours a week, I
will pay you $25 per hour. But if your family works 100 hours a week and
has income from savings, I will pay you about $21 per hour. The more
hours you work, the less average hourly wage I will pay you.” John Stuart
Mill gave full voice to this apparent injustice when he denounced progressive
taxation as “a penalty on those who worked harder and saved more than
their neighbors” and a “mild form of robbery.”14
On the surface, sacrifice theory appears to be a respectable argument for
progression. But on close examination, it seems clearly without merit as a
rationale for a fair tax system. By far the most compelling condemnation of
sacrifice theory is not the argument over the slopes of the marginal-utility
curves, but the unfair penalty it would impose on the hardest working and
most productive people in society.
Ability to pay
T he notion of “ability to pay” is most often identified with Karl

Marx (“from each according to his ability, to each according to his
needs”), even though the basic concept was considered by scholars
long before Marx was born. While the phrase says nothing about progres-
sion, it has often been used to advocate it.
Ability-to-pay has been the subject of considerable debate on
definitional grounds alone. For example, a review of the literature on tax
theory does not turn up a generally accepted definition of the word
“ability.” What does “according to his ability” really mean? Does it mean
(as some suggest) the financial wherewithal with which to pay taxes —
which might come from either assets or income? Or does it mean the innate
or learned ability to earn income, which would equate to aptitude?
Both of these interpretations have been discussed in the literature. Either
way, ability could as easily dictate proportion as it could progression.
If the word means the financial wherewithal with which to pay taxes pro-
gressively, the basic concept lacks an underlying principle of fairness to sup-
port it. (Proponents of this meaning of ability-to-pay often draw on
sacrifice theory for intellectual support, but as shown above, the applica-
tion of sacrifice theory results in inequitable outcomes.) If the word
ability means the innate or learned capacity to earn income, it is synony-
mous with aptitude, in which case, the greater-value interpretation of
the benefits principle should be applied. This would lead to proportionate
taxation.
14. John Stuart Mill, Principles of Political Economy with some of their applications to social philoso-
phy, Vol. II (D. Appleton and Company, 1894), 99, 401.
18 Policy Review
Reducing income inequality
O
ne of the most persistent arguments in favor of progressive taxa-
tion is that it reduces income inequality. For example, University of
Chicago economist Henry Simons writes:
The case for drastic progression in taxation must be rested on the case
against inequality — on the ethical or aesthetic judgment that the pre-
vailing distribution of wealth and income reveals a degree (and/or kind)
of inequality which is distinctly evil or unlovely.15
To be sure, inequality exists in the United States as it does to a greater or

lesser extent in all other nations. But why should we care? If it is social jus-
tice we are concerned about, what is the evidence that the level of American
inequality is unjust?
There are at least five methodologies used for measuring income inequali-
ty. The most commonly used measure is the “Gini coefficient,” developed by
the Italian statistician Corrado Gini. The Gini coefficient is a method of
measuring the statistical dispersion of (among other things) income, con-
sumption, and wealth. The figure of merit for the Gini coefficient ranges
from zero to 1.0, where zero equals total equality (all persons have identical
incomes) and 1.0 equals total inequality (one person has all of the income).
By this measure, the U.S. has higher income inequality than almost all other
industrialized nations. In 2009, the U.S. Gini was .468, while the average
Gini for the 27 European Union nations was .304, a ratio of 1.54:1.
Interestingly, the per capita gdp in the U.S. in 2008 was $47,400, while
the average per-capita gdp in the eu nations in that year was $32,900, a
similar ratio of 1.44:1. The point is that strong economic performance can
coexist with higher levels of income inequality (and vice versa).
It is important to note that the U.S. income figures cited above come from
the Census Bureau, which uses what it calls “money income” (income before
taxes, excluding the value of non-cash benefits). Money income is the
income definition most often used when citing income inequality mea-
sures,16 even though this definition of income does not include many vari-
ables that might affect inequality and standard of living, such as transfer
payments, taxes, employer-provided fringe benefits (primarily retirement
benefits and health insurance, which can amount to as much as 30 percent
of income17), capital gains, dividends, imputed rent from owner-occupied

16. Gini coefficients cited herein come from The CIA World Fact Book 2010, the Census Bureau report
on Income, Poverty, and Health Insurance Coverage in the United States: 2009 and other U.S. govern-
ment publications, and Eurostat, the official statistical office of the European Union.
17. Bureau of Labor Statistics, “Employer Costs for Employee Compensation: December 2010.”
April & May 2011 19

Kip Hagopian
housing, size of household, increases in the value of home equity and other
investments, etc. Consequently, the value of using money income to measure
either standard of living or inequality is quite limited.
It has been widely reported that income inequality in the U.S. has been
rising for “decades,” and by implication, that the rise is ongoing. These
reports are arguably misleading. From 1967 to 2008 the Gini for money
income rose from .397 to .468 (17.9 percent), about four-fifths of which
occurred from 1967 to 1993. Roughly three-tenths of this increase
occurred between 1992 and 1993 due to a change in the way data were
collected. This change in methodology biased the Gini calculation upward.
Accordingly, figures from the period before 1993 are not directly compara-
ble with the period from 1993 to the present.
During the 16 years between 1993 and 2009, the
The consensus
Gini increased from .454 to .468 (3.1 percent),
view among and from 2001 to 2009 there was virtually no
economists change in income inequality as measured by the
Gini coefficient.
is that the A more comprehensive measure of income yields
best measure a very different picture. The Census Bureau’s so-
called “15th measure of income” adds to money
of living income, transfer payments, insurance supplements,
standards over capital gains, Medicare, Medicaid, net imputed
the long term is return on equity in owned homes, and subtracts
taxes. This measure indicates that inequality
consumption. declined 1.8 percent during the last 16 years (1993
to 2009) from a Gini of .395 to a Gini of .388.
In any event, the consensus view among economists is that the best mea-
sure of living standards over the long term is consumption (determined not
only by income but by savings, home ownership, borrowing, barter, region
of domicile, and other factors), suggesting that consumption inequality is the
inequality that counts the most. A 2005 study conducted by the Bureau of
Labor Statistics found that in 2001 (the most recent year for which data are
available) the Gini coefficient for consumption was .280,18 indicating that
inequality with respect to this measure of U.S. living standards is relatively
modest. It also appears that consumption inequality has barely changed in
recent years. During the period 1986 to 2001, the consumption Gini went
down slightly, from .283 to .280.19 Since the Gini for money income was
virtually unchanged from 2001 to 2009, it is quite possible that the Gini
for consumption was also relatively flat during that period; in which case,
consumption inequality has not increased for 23 years or more. Support for
18. David S. Johnson, Timothy Smeeding, and Barbara Boyle Toney, “Economic Inequality Through the
Prisms of Income and Consumption,” Monthly Labor Review (Bureau of Labor Statistics, April 2006),
available at http://www.bls.gov/opub/mlr/2005/04/art2full.pdf.
19. Johnson, et al., “Economic Inequality.”
20 Policy Review
this latter surmise comes from a 2010 study which concluded that “in the
2000s overall consumption inequality shows little change.”20
In addition to America’s substantial superiority in gdp per capita (which
is a measure of the performance of the economy without regard to how
income is distributed), the U.S. has a much higher standard of living than
virtually all of the most advanced European and Asian countries. According
to the Luxembourg Income Study (which uses a very comprehensive mea-
sure of income) median disposable personal income in the U.S. in 2002 was:
19.3 percent higher than Canada; 68 percent higher than Finland; 45 per-
cent higher than Germany; 59 percent higher than Italy; 31 percent higher
than Norway (despite its vast oil and gas wealth); 73 percent higher than
Sweden; and 31 percent higher than the United
Kingdom. It should be noted that the figures for The U.S economy
g d p per capita and median income understate
America’s advantage because the median age of performed well
America’s population (about 36.8 years) is about in absolute and
four years lower than the average of the median ages
in Western Europe and almost eight years younger
relative terms
than Japan. Age (a proxy for experience) is one of over the 25-year
the most significant contributors to income and is
period from
also, therefore, one of the most significant contribu-
tors to income inequality. In addition to higher 1983 to 2008.
median incomes, Americans have higher median net
worths, which add further to the standard of living differential.
There is no question that until the recent recession, the U.S. economy
performed well in both absolute and relative terms over the 25-year period
from 1983 to 2008. During this period, real compound annual gdp
growth in the U.S. was 3.3 percent, substantially greater than the growth
of its g-7 counterparts, which on a weighted-average basis (using either
population or gdp), grew only 2.3 percent per year. Thus, the U.S. econo-
my grew 43 percent faster per year than the non-U.S. g-7 countries.
Moreover, in the recent recession, the U.S. economy contracted less than
the world’s other advanced economies. For example, U.S. gdp shrunk 2.6
percent in 2009, substantially less than the 4.1 percent contraction experi-
enced in the Euro area. In 2010, the U.S. grew 2.8 percent compared with
only 1.8 percent growth forecast for the Euro area by the International
Monetary Fund.
Another common claim is that incomes in the U.S. have been stagnant for
“decades.” But this claim is at odds with data from the Congressional
Budget Office, which uses a measure of household income that, like the
Luxembourg measure, is quite comprehensive, taking into account transfer
20. Bruce D. Meyer and James X. Sullivan, “Consumption and income inequality in the U.S. since the
1 9 6 0 s” (2 0 1 0 ) working paper, available at http://harrisschool.uchicago.edu/faculty/web-
pages/Inequality60s.pdf
April & May 2011 21

Kip Hagopian
payments, health and retirement benefits, profits from retirement accounts,
imputed interest on owner occupied homes, differences in household size,
and taxes paid. Using this more meaningful definition of income, from 1983
to 2005 real median household income in the U.S. rose by 35 percent,
which can hardly be considered “stagnant.”
The presentation of these facts is not meant to suggest that income
inequality causes higher living standards or gdp growth. But it is clear that
it can co-exist with both high and low national living standards. Those who
advocate redistribution of income on grounds of social justice should consid-
er that America’s standard of living is higher and has grown faster than vir-
tually all of the nations exhibiting lower measured inequality. This suggests
that the most notable economic inequality in the world is that between
Americans and the citizens of all other countries.
The most compelling argument against the use of the progressive income
tax to redistribute income is simply that it is inequitable. Blum and Kalven
noted that when the tax system is used to redistribute income,
the welfare of one group in a society has been increased at the expense
of the welfare of a different group. Stated this way there is no “general”
welfare; there is only the welfare of the two groups and the wealthy
receive no counter-balancing benefits for their surrender of income or
wealth.21
As contrasted with the benefits principle and sacrifice theory, each of

which relies on conceptions that purport to enhance equity, income redistri-
bution is simply a coercive transfer of wealth from one group to another
without an equity principle to support it. Note that $13,450 of Harry’s
income was “distributed” to Tom and Dick. (This is the difference between
Harry’s one-third share of the cost of the street improvements ($10,000)
and the $23,450 he was forced to pay.)
Ironically, a progressive income tax can even have the extraordinary
effect of increasing rather than reducing income differences. Again, our
parable is instructive: Assume that Harry’s boss is a construction foreman
who works 40 hours a week at $37.50 per hour, thus earning $75,000
per year (which is the entirety of the family income). The foreman’s hourly
rate is commensurate with his aptitude as a manager, while Harry’s $25
per-hour rate is commensurate with his aptitude as a carpenter. They both
make $75,000 per year, but Harry does it working 60 hours per week
and his boss does it working 40 hours per week. Under the current pro-
gressive tax system, Harry’s after-tax income will be $63,275 (after
$11,725 in tax, which assumes that, since Harry’s labor income is 50
percent of his total family income, the tax attributable to him is 50 per-
cent of the $23,450 tax paid by the family). His boss will take home
$68,450 (after $6,550 in tax). Thus, a disproportionate amount of
22 Policy Review
Harry’s income has been taken from him and redistributed, simply because
his family worked harder.
As noted by Blum and Kalven, and illustrated by our parable, redistribu-
tion requires that money be taken from some and given to (or not taken
from) others. What is the equity principle that justifies this taking?
Redistribution has been justified by some as a means of rectifying social
injustice in the economic system. But proponents of this view have not pro-
vided a convincing argument that such injustice even exists.22
There is no persuasive evidence that reducing income inequality will
increase economic well-being for the majority of people; in fact, America’s
superior median standard of living relative to the other advanced economies
is evidence to the contrary.
The case against progression
T he strongest arguments against progression are the rebut-

tals to the arguments for progression. To wit: The pro-progression
interpretation of the benefits principle is invalid because it depends
on the untenable assumption that the value of government benefits increases
more rapidly than the rise in income; on the surface, sacrifice theory is a
respectable argument for progression, but on closer examination, it is clear
that its application produces an inequitable outcome (this is most obviously
so when applied to income derived from greater work effort); the ability-to-
pay argument lacks an equity principle (other than sacrifice theory) on
which to base a fair tax system; and redistributing income through a pro-
gressive tax system is inequitable.
These rebuttals to the arguments for progression, should be sufficient to
settle the case. But there are other important reasons to reject progressive
taxation.
Political irresponsibility. In 2008, the top 1 percent of taxpayers in
America earned about 20 percent of all personal income and paid roughly
38 percent of federal income taxes; the bottom fifty percent of taxpayers
currently pay only 2.7 percent of income taxes,23 and it is estimated that
46.9 percent of workers paid no federal income tax for the 2009 calendar
year.24 Inasmuch as only a minority of taxpayers is affected by rises in tax
rates, there is a built-in incentive for the majority to act in its self-interest,
which opens the door to inequitable treatment of the minority.
22. To be sure, there are people in America who are needy or disadvantaged, in some instances grievously
so. For such people the most effective remedy would be through direct spending programs. But the fund-
ing for such programs should come from a tax system that is equitable.
23. Mark Robyn and Gerald Prante, “Summary of Latest Federal Income Tax Data,” Fiscal Fact 249
(Tax Foundation, October 6, 2010), available at http://www.taxfoundation.org/news/show/250.html.
24. Roberton Williams, “Who pays no income tax?,” Tax Notes (June 29, 2009), available at
http://www.taxpolicycenter.org/Uploaded pdf/1001289_who pay.pdf.
April & May 2011 23

Kip Hagopian
Arbitrariness. Establishing a graduated rate scale and setting the top mar-
ginal rate on that scale are inherently arbitrary tasks. Scottish economist J.R.
McCullough condemned this arbitrariness in the strongest of terms:
The moment you abandon . . . the cardinal principle of exacting from all
individuals the same proportion of their income or their property, you
are at sea without rudder or compass, and there is no amount of injus-
tice or folly you may not commit.25
The progressive tax system rests on a very slippery slope, making the term
“fair share” so subjective as to be an invitation to abuse. Did Harry’s broth-
ers pay their fair share?
Fomenting dissension. One of the inherent characteristics of the U.S. sys-
tem of government (and that of all Western nations) is the tension that exists
between the political system (majoritarian) and the economic system (free
enterprise). Most Western nations are experiencing the effects of this tension,
which manifests itself in vigorous disputes over tax and welfare policies.
Many of those who favor income redistribution assert that inequality
foments dissension. Whether this is true or not, dissension is just as likely to
be caused by tax laws that are deemed unfair by those being taxed. By its
nature, a system that taxes people progressively without the support of an
accepted equity-based principle may breed resentment, particularly when so
many pay no tax at all. The deepest resentment will most likely be among
those whose tax rates differ solely because of their work effort.
A new doctrine of fairness?
T here is no perfectly fair tax system. But based on an examina-

tion of the various tax principles and theories described in the liter-
ature, together with a critical analysis of the arguments supporting
and opposing progression, it’s possible to put forward a new doctrine of
fairness. It is based on five principles:
• The most equitable tax system is one based on the value of benefits
received.
• Income is the most equitable (or least inequitable) measure of the value
of benefits; thus taxes should be levied in proportion to income. Well-
being is the ultimate benefit of government and income is a reasonable
proxy for well-being. Whether income is derived from aptitude (as
defined), a financial windfall, a random event or privilege, it is fair (or
less unfair) that it be taxed in proportion to value received. This princi-
25. J. R. McCullough, A Treatise on the Principles and Practical Influence of Taxation, or the Funding
System (The Lawbook Exchange Ltd., 2007), 143-145.
24 Policy Review
ple serves as a rejection of a per-capita tax system and establishes the
affirmative case for proportion.
• Only “clear income” — defined as income above the level of subsis-
tence — should be taxed. From the point of view of the state, an indi-
vidual’s earned income up to the level of subsistence is effectively the
government’s cost of production and should not be taxed. From the
point of view of the taxed, government benefits only have real value
after the taxpayer earns a surplus of income over what is needed for
subsistence.
• The progressive taxation of income from work effort is inequitable.
Income is derived primarily from a combination of aptitude and work
effort. All things being equal, people with high-value aptitudes earn
more than those with low-value aptitudes. Each tier of aptitude
(whether there be 100 or 10,000 such tiers) comprises a “mini-soci-
ety” in which differentials in income between the members are derived
almost solely from work effort. Under a progressive tax system, work-
ers whose work effort is above the median in their aptitude tier will
pay higher average taxes per hour than those below the median. As a
result, at any one point in time, an unacceptably large percentage of the
total work force will earn less average, after-tax income per hour than
their peers, simply because they worked harder. This is inequitable on
its face.
• The progressive taxation of income from aptitude is inequitable.
Whereas the most equitable tax system is one based on the value of
benefits received from government; and whereas the value of govern-
ment benefits does not increase more rapidly than income, there is no
equitable basis for taxing income progressively. Thus, even if it were
assumed that income was derived solely from aptitude, progression
would be unfair.
Implicit in this fairness doctrine is that taxation in excess of a proportion-

ate share of the value of benefits (defined as clear income) is an inequitable
confiscation of property.
Critique of the doctrine
T here are weaknesses in the logic of this doctrine that make

the fairness of a proportionate or degressive tax system less than
perfect. First, some have argued that the benefit derived from eco-
nomic well-being (as measured by income) should be considered separately
from the benefits derived from government protection of life, liberty, and
property. This alternative view has induced some scholars (John Stuart
April & May 2011 25

Kip Hagopian
Mill, for one) to suggest that two types of tax should be imposed: a pro-
portionate tax to pay for economic well-being and a per-capita tax to pay
for the protection of life, liberty, and property. Putting aside the measure-
ment difficulties of such a scheme, if this alternative quid pro quo principle
were applied, and the two tax rates were blended to reflect the different
values of the benefits, the most equitable tax would be somewhere between
per-capita and proportion. Thus, a proportionate or degressive tax as pro-
posed, would favor lower-income persons at the expense of higher-income
persons.
Second, a proportionate tax would only be fair if all income were derived
from aptitude, when in fact a substantial portion of income is derived from
work effort. The inequity of this is demonstrated in the Class Wars parable,
in which Harry paid more than a per-capita share of the cost of the street
improvements despite the fact that his benefits were exactly the same as his
brothers. (Note that in this all-too-common circumstance, where both apti-
tudes and benefits are equal, even a proportionate or degressive tax is redis-
tributive with respect to the hardest workers.) Thus, a proportionate tax
favors people who work less over people who work more.
Third, the merit of the clear income theory is somewhat undermined with
respect to hard workers. Again this can be seen in our parable: Using a
degressive tax system and assuming the subsistence level of income was
$25,000, Tom would not have to pay any tax, even though he could easily
pay his share of a proportionate tax simply by working three more hours
per week. Thus, the degressive tax favors people who work less at the
expense of those who work more.
Since there is no perfectly equitable tax system, the goal must be to design
the least inequitable system. This doctrine of fairness uses sound principles
of equity to reject both the progressive and per-capita tax systems. At the
same time, it establishes the affirmative case for a degressive system as being
the least inequitable. Lastly, where the logic of the doctrine is flawed, in each
case it errs on the side of taxing lower-income people less, regardless of the
reason their income is lower.
Seeing income clearly
T he flaw in virtually all of the intellectual arguments on the issue

of the progressive income tax (both pro and con), is a lack of
appreciation for how income is determined. Because of this, the
crucial implications of the distinction between income derived from aptitude
and income derived from work effort have been left out of the debate. When
the importance of work effort is considered, the inequity of progression
becomes clear.
While the title of Blum and Kalven’s book appears to indicate that the
authors’ analysis led them to become uneasy proponents of progression, the
26 Policy Review
reality is more nuanced (and more uneasy). At the conclusion of the book,
they wrote:
The case for progression, after a long critical look, thus turns out to be
stubborn but uneasy. The most distinctive and technical arguments
advanced in its behalf are the weakest. It is hard to gain much comfort
from the special arguments [in favor of progression], however intricate
their formulations, constructed on the notions of benefit, sacrifice, abili-
ty to pay, or economic stability. The case has stronger appeal when pro-
gressive taxation is viewed as a means of reducing economic inequalities.
But the case for more economic equality, when examined directly, is
itself perplexing.
The authors seem to be saying that the only argument for progression
that could not be dismissed was the value they ascribed to reducing income
inequality. And even that argument left them “uneasy.”
But it is clear from a careful reading of the book that Blum and Kalven
did not appreciate the implications of how income is determined, specifically
the special nature of income derived from work effort. If they had, they
almost certainly would have realized that taxing such income progressively
is inequitable. In the event, their uneasy case for progression would have
become an easy case for its rejection.
April & May 2011 27

Ne from
New m Hoover
Hoo er Institution
Instit
I tion Press
P
Death
Death Grip
Griip
Loosening thee Law’s
Loosening Law’s SStranglehold
tranglehold over
over
EEconomic
conomic Liberty
Libeerty
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By Clint
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lin Bolick
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““Slaughter-House
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Slaughterr-House is the case academics lef
leftt and
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Court refuses
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to reconsider.
reconsider
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book eexplains
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why: returning
returning to
to anything
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or iginal meaning off the Fourteenth
original Fourteenth A mendmeent w
Amendment ould
would
upset ttoo
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many judge-made
jud
dge-made doctrines.
doctrines.”
Michael
M ichael McC
McConnell,
Connell
onnelll, the R
Richard
icharrd and FFr
Frances
rances Mallery
Mallerryy
PProfessor
rofessor off LLaw Stanford
aw at Stanfor rd University
d Univ eersitty and
nd senior fellow
an fellow
at the HoHoover
over Institution
“I
“Inn D eath Grip
Death p, Clint
Grip, Clint Bolick
Bolick masterfully
masterfully explains
expplains why
why a
100-plus- year-old Supr
100-plus-year-old SSupreme
eme C ourt case pr
Court ovidees the ccontext
provides ontext
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or some of the most moost important
important cconstitutional
onstitutionall issues of our
da y. C
day. ombining hi
Combining story and cur
history rent ccontroversies,
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SScott
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Bullock,
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attorney
orney at the Institute
Instiitute for Justic
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and lead
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orney in Kelo vv.. C
attorney ity off New LLondon
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Clint Bolick
Clint Bolickk is a rresearch
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nsstitution and
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Litigation in Phoenix.
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owth of
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nd the ErErosion
rosion Liberty
osion of Lib erty (2004)
(2004 4) and
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ctivist Judiciarryy (2007).
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A Smarter Approach
to the Yuan
By Charles Wolf, Jr.
T
he best law schools and public policy graduate schools
inculcate in their students an ability to make the strongest
possible case in favor of a position or policy with which
they disagree. The test of whether the lesson has been truly
learned is whether those who favor the position would
accept its rendition as a fair and effective representation of why they favor it.
With this in mind, I present below the argument for the U.S. stance favor-
ing a substantial rise in the undervalued Chinese yuan. The U.S. position has
been repeatedly stated, albeit in abbreviated and nuanced form, by President
Obama and Treasury Secretary Geithner. It is also reflected in the large
bipartisan majority in the House of Representatives that approved legisla-
tion to allow a retaliatory tariff on China’s exports to the U.S. unless China
revalues its currency. It has been expressed more vociferously and combat-
ively by key leaders in the Senate, and by politically-charged commentators
including Paul Krugman.
Charles Wolf, Jr. holds the corporate chair in international economics at the
RAND Corporation, and is a professor in the Pardee RAND Graduate School.
He is a senior research fellow at the Hoover Institution.

Charles Wolf, Jr.
Once the case for this “pro” position has been presented fairly and fully, I
will explain why I think it is fundamentally wrong. I will then go on to sug-
gest measures that would be more appropriate and effective in contributing
to a “rebalancing” of China’s international accounts as well as those of the
U.S. than would a revaluation of the Chinese yuan.
In early January, when President Hu Jintao met in Washington, D.C.,
with President Obama, the agenda for the meeting deftly acknowledged the
presidents’ disagreement on the currency issue without discussing, let alone
resolving, it.
The case for revaluing the yuan
T he Chinese yuan (also known as the renminbi, or “people’s

currency”) trades in foreign exchange markets at a rate of approxi-
mately 6.7 yuan per dollar (equivalent to about fifteen U.S. cents
per yuan). Another measure that accords the yuan a considerably higher
value is based on the goods and services the yuan can buy within China
compared to what these same goods and services would cost in the U.S. This
rate is referred to as the yuan’s purchasing power parity (ppp). The ppp val-
uation of the yuan is roughly two or three times higher (between 2.2 and
3.4 yuan per U.S. dollar, or between 30 and 40 U.S. cents per yuan) than
the market exchange rate.
Associated with the yuan’s value in foreign exchange markets is the fact
that the value of China’s global exports of goods and services perennially
exceeds by large amounts the value of its imports. Indeed, this excess has
often been larger than the combined trade surpluses of the two countries
that have the world’s next-largest trade surpluses, Germany and Japan.
China’s annual global trade surplus is currently about $200 billion; the
surplus has been considerably larger in prior years. More than half of this
global surplus is China’s bilateral trade surplus with the U.S. When China’s
net current earnings from other sources besides trade — including its net
receipts from accumulated prior Chinese investments in the U.S., Europe,
Asia, and the rest of the world, as well as the remittances it receives from
Chinese residents abroad — are added to its trade surplus, the result is a
Chinese global current account surplus amounting to about $300 billion
annually.
The value of a currency that underpins such a large surplus would nor-
mally be expected to rise (that is, to “appreciate”). The reason for this
expected revaluation is that the dollar demand for that currency (the yuan)
by other countries to pay for the imports they receive from China greatly
exceeds the supply of yuan resulting from China’s requirements to pay for
the imports it receives from the U.S. and the rest of the world.
But this normal revaluation process is thwarted because China interferes
with the functioning of this standard demand-supply interaction. China does
30 Policy Review
A Smarter Approach to the Yuan
this by withdrawing the surplus dollars from the exchange market, thus neu-
tralizing their effects on the exchange value of the yuan. This is accom-
plished by compensating exporters for their dollar earnings through direct
issuance to them of additional domestic yuan, and then sterilizing the addi-
tional yuan by selling government bonds to absorb the expanded supply of
yuan currency. This tidy result removes the surplus dollars from foreign
exchange markets, while also limiting, if not eliminating, the risk of domes-
tic inflation that might otherwise ensue because of the increased currency
generated by exports and circulating in domestic Chinese markets.
China is thus said to be guilty of “manipulating” the yuan’s value by pre-
venting its appreciation, and keeping it below its “equilibrium” value. Such
manipulation implicitly subsidizes China’s exports because the dollar cost of
its exports is less than would be the case if the yuan were allowed to appre-
ciate. The lower dollar cost of its exports thus enables China to maintain its
trade and its current account surpluses, impeding the ability of other coun-
tries to expand their exports and to gain momentum for what in many
instances — notably in the U.S. and much of Western Europe — has been a
distinctly mild recovery from the Great Recession.
Therefore, it is argued that China can and should appreciate its currency:
that is, revalue the yuan upwards. The yuan should appreciate to a rate of,
say, five yuan per dollar (twenty U.S. cents per yuan, rather than the current
value of fifteen cents), thereby making China’s exports more expensive —
hence, tending to decrease them. At the same time, this revaluation would
make China’s imports from the U.S. and the rest of the world less expensive
because fewer of the higher-valued yuan would be needed to buy dollar
imports, which would tend to increase as a result.
The argument concludes that, in the interest of both bilateral and global
“rebalancing,” China should be persuaded or pressured to move in this
direction. The official U.S. position urges persuasion, the more combative
stance of prominent U.S. lawmakers and pundits favors pressure.
What, if anything, is wrong with this argument?
The case against revaluation
T he answer requires looking at the Chinese economy from the

inside out, rather than from the outside in, which is the more usual
perspective adopted by the revaluation advocates.
What is striking about this inward look is that it highlights the extraordi-
narily high level of China’s domestic savings: between 45 and 50 percent of
gdp! Such a high savings rate is without precedent during peacetime in
modern economic history and is particularly rare in emerging market
economies. It also flies in the face of conventional development theory. The
theory presumes that, because developing countries are poor, they will have
to consume most of what they produce and to invest the remainder. As a
April & May 2011 31

Charles Wolf, Jr.
result, so the theory goes, developing countries will have low savings rates,
as well as trade deficits rather than surpluses, and therefore will need finan-
cial transfers and inward-bound investment from wealthier developed coun-
tries to supplement the developing countries’ low savings and to pay for
their trade deficits.
China stands as a striking counterexample to this standard model because
it has an amazingly high savings rate (three or four times that of most devel-
oped countries, including the U.S.), accompanied by a large and growing
volume of outward-bound foreign investment.
China’s high savings rate — comprising the combined savings of private-
ly-owned as well as state-owned companies, households, township and vil-
lage enterprises, cooperatives, and central and local
China has an government — is hard to explain. Despite the exten-
amazingly high sive research underway within as well as outside
China, an adequate explanation is still elusive. The
savings rate — reason for its elusiveness probably lies in the fact
three or four that there are numerous contributing factors which
vary in their prior, current, and future influence on
times that of
savings behavior by households, individuals, com-
most developed panies, and central and provincial governments.
countries, Demography figures prominently among the con-
tributing factors. China’s population is aging rapid-
including ly: The proportion of its elderly (over age 65) will
the U.S. nearly double in the next fifteen years. China’s
dependency ratio (dependents as percentage of those
of working age) will rise by nearly 50 percent within this period, and most
of this increase will be due to the increasing numbers of elderly, their expec-
tation of higher health care costs in the future, and their hope to ease the
burden of these future costs by accumulating current savings.
China’s long-standing one-child family policy has been a significant con-
tributor to these trends, reducing the potential sources of support for aging
parents and hence increasing the latter’s savings propensity. Another demo-
graphic imponderable that may affect savings behavior is the marked gender
imbalance among China’s younger age cohorts — varying between 15 per-
cent and 30 percent more males than females across China’s 37 provinces
and special administrative regions. Fear by elder family members that a sin-
gle male offspring might emigrate in the absence of a suitable partner in
China may also conduce to precautionary savings.
Along with these demographic trends, increased savings throughout
Chinese society and social structure have doubtless been galvanized by
delayed development of an adequate social security safety net. What has
been taking shape in China is a social security system whose components
will include a part that is based on defined contributions by the covered
populace, along with a specified floor of defined benefits underwritten by
the state. While progress in developing the system is underway, the delay has
32 Policy Review
doubtless stimulated higher savings rates as a source of protection for and
by China’s rapidly aging population.
But more than demography and social security affect savings in China.
The rapid pace of economic growth and the rise in wages and other income
that their recipients haven’t yet adjusted to may be another part of the expla-
nation. Finally, the prevalence in some circles of generally bearish uncertain-
ties about whether China will be able to sustain in the future its rapid
growth of the past may be a further contributor to abnormally high savings
as a form of protection against a possible future downturn.
Whatever the validity and differing weight accorded to these numerous
factors, China’s huge savings rate exceeds its investment rate by about six to
seven percent of gdp. This excess is crucial for
understanding China’s trade surpluses and current China’s annual
account surpluses. The excess is also central to con-
global trade
sideration of what might be done about China’s
excess savings that would reduce these surpluses, surplus of about
whereas tinkering with its exchange rate would not. $200 billion
Central to this understanding is an inexorable
economic relationship: namely, the excess of any reflects the excess
country’s domestic savings above its domestic invest- of its savings
ment must be exactly equal to the excess of its
exports of goods and services above its imports of above its
goods and services. In other words, its savings sur- investment.
plus must equal its trade surplus! The relationship is
inexorable because it follows from the way that the component elements are
defined.
The intuitive common sense behind it can be grasped by thinking of the
trade surplus as a bundle of goods and services. That this bundle is saved
means it is neither consumed nor invested domestically. The trade (savings)
surplus can’t be an addition to domestic inventories because additions to
inventories constitute investment, whereas the bundle represents the excess
of savings above investment. Instead, the surplus bundle, as a part of China’s
gdp, flows abroad to global markets. The savings surplus and the trade sur-
plus are identical!
China’s annual global trade surplus of about $200 billion reflects the
excess of its savings (45 to 50 percent of gdp) above its investment (about
40 percent of gdp). The current account surplus consists of this trade sur-
plus plus its other net current international receipts. As I noted earlier, these
current international receipts consist principally of earnings from China’s
accumulated and continuing investments abroad, including about $40 bil-
lion in payments by the U.S. Treasury to service China’s holdings of more
than $1.6 trillion of U.S. government securities. China’s nontrade receipts
also include earnings from its other holdings of about $800 billion of addi-
tional foreign assets — both corporate assets and sovereign debt assets — as
well as remittances by Chinese residents abroad to recipients in China.
April & May 2011 33

Charles Wolf, Jr.
To count as add-ons to its current account surpluses, China’s current
earnings from accumulated assets must be net of the earnings acquired by
foreign investments in China. However, because China’s corporate and other
income taxes are generally lower than corresponding taxes levied in the U.S.
and in Europe, foreign investors in China often prefer to meet their tax lia-
bilities in China, to retain their after-tax earnings in the form of yuan hold-
ings, and thus to forgo seeking to convert and remit them as dollars or euros
to their homelands. So, the proportion and amounts of China’s earnings
from its investments that are remitted back to China and hence add to its
current account surpluses tend to be larger than the proportion and amounts
of earnings by foreign investors in China that these investors remit back to
their own countries. It is an interesting facet of
Revaluation China’s own nontrade earnings that, by adding to its
would likely be current account surplus, they indirectly contribute
financing for subsequent additional cross-border
followed by keen investments by both state-owned and nonstate
disappointment enterprises in buying foreign companies or equities
in these companies, thereby generating additional
among its
earnings in the future.
advocates, What I have referred to as an inexorable relation-
and sharp ship underlying China’s trade surpluses is an iron
law — what economists refer to as an “identity,”
recriminations which simply means that the components of gdp —
by them. investment, consumption, imports and exports —
are so defined that the numbers measuring them
must conform to this identity. The identity doesn’t say anything about causa-
tion — about the many influences that affect the size of savings, consump-
tion, investment, and imports and exports — but it does establish inexorably
how the parts relate to each other.
China’s savings surplus is equal to China’s trade surplus. Hence, as long
as the surplus of China’s domestic savings over its domestic investment per-
sists, tinkering with the pegged exchange rate will have only slight and tran-
sitory effects on China’s imports and exports. Changing the yuan/dollar peg
from fifteen cents per yuan to twenty cents would soon be offset by a com-
pensating fall in China’s export prices and a compensating rise in its import
prices. This sequence of events would ensue as a result of the inexorable
identity between the savings surplus and the trade surplus.
There is another reason why the offsetting price adjustments would be
quick and decisive. Much of China’s exports consist of value added to
imported inputs by processing imported raw materials and intermediate
products to produce the final products for export. For example, imports of
iron ore, copper, aluminum, cotton, and wool are processed and fabricated,
subsequently emerging as exports of consumer products and machinery; and
imports of computer chips and hard drives subsequently result in China’s
exports of electronic and computer products. Often the value added by pro-
34 Policy Review
cessing and finishing in China is less than half the corresponding final export
from China. Were the yuan to be revalued, the nearly immediate conse-
quence would be to lower the prices of imported inputs sufficiently to com-
pensate, and in many instances to overcompensate, for what might other-
wise be reflected in higher prices of the exported final products.
Finally, because of the negligible effects that revaluation would have on
China’s global surplus as well as on its bilateral surplus with the U.S., if
revaluation were nonetheless to occur, it would probably have distinctly
adverse political repercussions, quite apart from the absent economic effects.
Revaluation would likely be followed by keen disappointment among its
advocates, and sharp recriminations by them. Failure to realize the hoped-
for turnaround in the bilateral trade balance would be attributed to various
barriers impeding American exporters’ access to China’s domestic markets.
Various types of nontrade barriers already and often afford preferential
treatment to China’s own domestic firms relative to foreign firms in China.
But the consequence of a failure of revaluation to achieve the results sought
by its advocates would likely be a freshet of hostile charges and counter
charges with adverse effects on U.S.-China relations.
A better way?
F or the trade (savings) surplus to diminish and a significant

“rebalancing” to occur, China should increase domestic consump-
tion (decrease savings) more directly, more rapidly, and by larger
amounts than it has done so far.
This can be done through various measures. For example, taxes can be
levied on savings above specified savings thresholds. In the tax filings of
urban nonstate and state-owned enterprises, as well as of urban households
and individuals, a savings threshold above, say, thirty percent of income
after allowing for recorded investment expenditures by businesses and con-
sumption expenditures by households could be subject to heavy taxation.
Excessive saving above this threshold would thereby be discouraged.
Moreover, the revenues produced by the tax levy could help finance acceler-
ated development of the planned social security safety net referred to earlier.
Additionally, excessive saving can be discouraged and added consumption
can be encouraged by active yet prudent expansion of consumer credit.
I make this suggestion in full recognition that, if an American economist
proposes the idea, it is likely — and with good reason — to be viewed by
China’s bankers and policymakers as ironic and hubristic. After all, one of
the two or three principal causes of the global financial crisis was the egre-
gious and imprudent expansion of consumer credit in the U.S. in the period
preceding the Great Recession of 2008 and 2009. Subprime and Alt a
mortgages extended in huge volumes to credit-unworthy borrowers by U.S.
lending institutions, and then irresponsibly guaranteed with the “full faith
April & May 2011 35

Charles Wolf, Jr.
and credit of the United States government” by Fannie Mae and Freddie
Mac, were the largest and most flagrant part of the consumer credit bubble
flooding the American economy in the first decade of the 21st century. So,
in advancing the suggestion to rapidly expand consumer credit in China, I
feel obliged to accompany it with an ample dose of humility.
Nevertheless, there is a big difference between what was an imprudently
excessive volume of consumer credit in the U.S. in the years preceding the
Great Recession and the presently constricted availability of consumer credit
in China. For example, the ratio of consumer credit to gdp in China is cur-
rently seventeen percent, compared with 40 percent in South Korea, 54 per-
cent in Taiwan, and 65 percent in Malaysia. Furthermore, availability of
consumer credit cards and debit cards is much more
There has been limited in China than in the other emerging market
countries in its neighborhood. Thus, there is ample
a misplaced room for China to combine prudence with stimulus
focus in the in encouraging consumption and curtailing excessive
saving. Regulating the expansion of consumer cred-
soi-disant it, and preventing its abuse, can be readily accom-
“currency wars” plished in China by extending the purview of
on the central China’s Banking Regulatory Commission. There
would be no need to embark on anything like the
importance of Dodd-Frank financial regulatory legislation in the
the yuan’s peg U.S., which, within its 2,000-plus pages, created the
Consumer Financial Protection Agency to guard
to the dollar. against abuse of the various forms of consumer
credit extensions.
By targeting the repositories and sources of excessive savings, the mea-
sures I’ve described would affect the basic relationship underlying China’s
trade (i.e., savings) surplus and its current account surplus, whereas
exchange-rate tinkering will not. By reducing the excess of its savings over
its investments, these measures will decrease China’s global trade surplus,
as well as its current account surplus, and thereby contribute to global
rebalancing.
In furtherance of some degree of global rebalancing, there has been a mis-
placed focus in the soi-disant “currency wars” on the central importance of
the yuan’s peg to the dollar. In reality, this mistaken focus will have little if
any effect on global imbalances, and such effects as it may have will at most
be transitory for the many reasons I’ve discussed. Instead, the focus of rebal-
ancing efforts and debate should be on the real underlying problem: namely,
China’s excessive savings.
In the longer-term future, issues connected with valuation of the yuan
might be resolved if China were to move to floating its currency, and allow-
ing a freely functioning foreign exchange market to determine the yuan’s
changing market value. China’s previous prime minister, Zhu Rongji,
endorsed this prospect several years ago to take place in an indefinitely dis-
36 Policy Review
tant future. Of course, such a scenario is precluded in the nearer term by the
limited convertibility of the yuan for capital transactions.
In any event, those who may favor this prospect, including myself, should
bear in mind that, if it were to occur in something earlier than a very distant
future, the yuan would be as likely to depreciate as to appreciate! At present,
China’s banks have on their balance sheets more than 70 trillion yuan
(about $10 trillion) in liquid deposits held by companies, household, indi-
viduals, cooperatives, and other entities — a sum that is twice the size of
China’s gdp. Were full convertibility to be realized, some of the holders of
these yuan assets would doubtless seek diversification of their holdings by
converting a part of them to non-yuan assets, including dollar and euro
assets. With the resulting increased demand by yuan-asset holders for non-
dollar assets, the yuan’s value would likely decline.
This scenario seems remote at present but, with changing circumstances,
its remote future may become a more plausible present.
Where does this leave us?
T he preceding discussion appears to place all the burden of

global rebalancing on China. In fact, the burden should be shared
by the U.S., which should undertake precisely the opposite mea-
sures as China. Such reciprocal measures are necessary to reduce the chronic
global trade and current account deficits of the U.S. by reducing the shortfall
of its domestic savings compared to its aggregate investments. The excess of
China’s savings above its investment, which most of the preceding discussion
has emphasized, is distressingly paralleled by a shortfall of U.S. savings
below its own investments.
This shortfall includes the savings and investments of both federal and
state governments — mostly large negative savings by these governments in
recent years — as well as of U.S. companies, individuals, households, and
other entities. Together, these result in a recurring shortfall in U.S. savings of
about three to four percent of the U.S. gdp, largely comprised of substantial
dissavings (negative savings, thus requiring borrowing) by government, and
only modestly positive savings by households and retained corporate earn-
ings in the rest of the economy.
While the burden of global rebalancing should impinge on the U.S. as
well as China, there is a critical asymmetry in the respective burdens they
can bear. Measures required in China to reduce savings and boost con-
sumption impinge on a Chinese economy that is buoyed by a real rate of
gdp growth that remains high — above 9 percent. In sharp contrast, the
measures required by the U.S. to limit consumption and raise savings
would, in the short run, depress an already low rate of growth and an ane-
mic recovery from the Great Recession accompanied by a near ten percent
rate of unemployment.
April & May 2011 37

Charles Wolf, Jr.
As a consequence of these immediate problems — problems that are
made more serious because of political rather than economic considerations
— U.S. monetary and fiscal policymakers have been more concerned with
trying to boost the economic recovery by encouraging domestic consump-
tion and investment, rather than addressing the underlying imbalance of a
deficiency of aggregate savings compared to relatively excessive consump-
tion and investment — the precise opposite of China’s imbalance. The
Federal Reserve’s announcement at the end of 2010 of its second so-called
“quantitative easing” (qe2) illustrates the short-term priorities of monetary
policy in the U.S.
qe2 consists of a $600 billion fund intended to monetize public debt,
boost the money supply, and flatten the yield curve
China should on government bonds by lowering longer-term
yields. The goals of qe2 are to promote investment
be more able to and job growth through lower interest rates on cor-
rein in savings porate and other fixed-income securities The goals
and the measures to advance them are understand-
and increase able for the short-term reasons mentioned above.
consumption However, these measures run in a direction opposite
than the U.S. to to what is required for a better degree of long-term
rebalancing of the U.S. international accounts. To
cut consumption further the longer-term rebalancing objective, U.S.
and boost policy should seek to raise aggregate savings above
aggregate investment: more specifically, to tamp
savings. down consumption, both private and public con-
sumption, reflected in smaller budgets and lower
deficits in the budgets of federal and state governments. These are essential
goals in the longer term, while the time horizons of political actors tend to
be more or less coincident with the shorter terms for which they are elected
and in which they usually aspire to be reelected.
As a consequence, in the short run, the relatively heavier lifting to
advance global rebalancing can more plausibly be borne by China because
its efforts to sustain high gdp growth have been successful, whereas U.S.
efforts to resume ample growth have been much less so.
What this means in practical terms is that China should be more able to
rein in savings and increase consumption than the U.S. will be able to curtail
consumption and increase savings. From China’s point of view, reluctance to
shoulder this heavier burden arises from the risk it entails of adding to the
inflationary pressures recently evident in the Chinese economy. Current
inflation in China has more than quadrupled over its rate not long ago:
between four and five percent currently versus approximately stable prices in
2009. Efforts to boost consumption by the sorts of measures discussed ear-
lier would likely add to the inflationary risks. Still, by combining a rise in
prime interest rates (presently between three and four percent) with a rise in
reserve requirements for its banks (recently raised to 19.5 percent), along
38 Policy Review
with appropriate administrative measures, China’s policy makers should be
able to navigate these moderately roiling waters.
According to a familiar scriptual precept (Luke 12:48): “To whom much
is given, from him much will be required; and to whom much has been com-
mitted, of him they will ask the more.” Similar advice to a wise governor is
provided by Confucius (Analects, chapter 12, section 2): “Wishing to be
established himself, he assists others to be established; wishing to be success-
ful himself, he assists others to be successful.”
April & May 2011 39

Ne from
New m Hoover
Hoo er Institution
Instit
I tion Press
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Healthy,
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March 2011, 130

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ISBN: 978-0-817
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Too order,
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H oover Institution
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Stanford, C alifornia 994305-6010
California 4305-6010
wwww.hooverpress.org
www.hooverpress.org
America’s Fading
Middle East Influence
By Shmuel Bar
T
he middle east has gone through eras of projection of
power by external powers, and it has adapted to the bal-
ance of power between them. This was the case during the
age of colonialism (predominance of Britain and France),
the Cold War (competition between the U.S. and the ussr),
and the period of American predominance since the end of the Cold War.
For the last two decades, the region has been characterized by the conflict
between “status-quo” and “anti-status-quo” forces. The former were repre-
sented by the existing regimes in Egypt, Tunisia, Jordan, Saudi Arabia, etc.,
and the latter by Iran, the Islamic movement, Hezbollah, and their allies. For
over two decades, the United States has been the predominant superpower
in the region and the main force in maintaining the status quo.
However, today, the Middle East is undergoing a sea change. The revolu-
tions in Tunisia, Egypt, and Libya were the result of developments within
the countries themselves: deep economic and social malaise and the percep-
tion of the loss of domestic deterrence by ossified regimes led by aging lead-
Shmuel Bar is director of studies at the Institute for Policy and Strategy in
Herzliya, Israel.

Shmuel Bar
ers. However, the popular perception that the United States had abandoned
its erstwhile allies to support those revolutions facilitated their spread to
other theaters. This turnabout in American policy is not seen in the region as
reflecting American power though intervention, but rather the decline of
American power, manifested in a policy of “bandwagoning” after years of
proactive American policy. Clearly, the decline of American projection of
power in the region will have as profound an effect as the projection of
American power had at its height.
The policies of the United States under the Obama administration have
given rise to a broad perception in the region that the United States is no
longer willing to play the role of guarantor of the security of its allies there;
America is indeed “speaking softly” but has neither the present intention nor
the future willpower to wield “a big stick” if push comes to shove. This per-
ception is reflected in seven, key interrelated regional issues: (1) Islam and
jihadi terrorism; (2) revolution and democratization in the region; (3)
nuclear proliferation; (4) Iran; (5) the Israeli-Arab peace process; (6) Iraq;
and (7) Af-Pak. In all these issues, the U.S. is perceived as searching for the
path of least resistance, lowering its strategic profile, and attempting to
accommodate the de facto powers in the region. In all these areas, the
United States is projecting an aversion to proactive action, disinclination to
project power, and lack of resolve to support its allies. Remaining American
allies in the region realize that they cannot rely on the United States and
must adapt themselves to pressures of the masses, predominance of radical
ideologies, and Iranian strategic hegemony.
Obama’s strategic Weltanschauung
T he obama administration views the revolutions in the Arab

world as a rerun of the fall of the Soviet bloc in 1989, which
resulted in a surge of democracy that was conducive to American
strategic interests. However, the transformation of America from staunch
supporter of status quo (even in Iran) to surfer on the wave of revolutionary
change is not without a price. Having lost the already waning confidence of
its remaining allies from the “anciens régimes” in the region, it has not
gained that of the new regimes, which have yet to take form.
This transformation, though, did not take place overnight. It came after a
long-perceived decline in the American support of its allies against external
and domestic challenges, decline in its resolve to employ force to support
them, and decline in its willingness to persevere. This perception was not
unfounded; the Obama administration came to office with an agenda,
according to which the United States is strategically overstretched and must
implement a drastic reduction in its strategic profile. Such a change could be
brought about, according to the worldview of the administration, only
through engagement and dialogue with those very forces which had been
42 Policy Review
America’s Fading Middle East Influence
perceived as anathema to the previous administration and by eschewing the
confrontation — the projection (not to mention actual use) of hard power
and unilateralism — which characterized the Bush administration.
Islam and jihadi terrorism. The hallmark of the policy of the Obama
administration towards the Middle East is its strategy of engagement with the
Muslim world. President Obama came to office at a time when relations
between the U.S. and the Muslim world had reached their nadir and he saw
himself as particularly suited — as one who had lived in a Muslim country —
to rectify them. This policy of engagement includes not only moderates and
mainstream Muslims, but also the Muslim Brotherhood, its affiliates, and
“moderate” Taliban elements on the Sunni side and Lebanese Hezbollah and
Iraqi proxies of Iran on the Shiite side. The rationale
for such engagement is rooted in a belief that these The Obama
parties are not irrevocably anti-American but angry
administration
over American and Western support of Israel and of
autocratic and oppressive regimes in their countries. views the
Thus, they will respond to changes in the American revolutions in the
policies on these issues. Engagement is also rooted in
a belief that preemptive engagement of these move- Arab world as
ments will neutralize their radicalism and anti- a rerun of the fall
Western positions, and that unwillingness to invest
the necessary soft and hard power perpetuates the of the Soviet
“old guard” of pro-American regimes in the region. bloc in 1989.
As part of this policy, the administration denies
any link between Islam and the phenomenon of jihadi terrorism, presents
the latter as an aberration with no real link to “true Islam,” downplays ter-
rorist attacks on the part of individuals as acts of personal violence,1 and
obfuscates the strength of the radical Islamist ideology in the Muslim street
and the broad support that the terrorist organizations succeed in gathering.2
Unlike the Bush administration, the Obama administration does not view
radical Islam as antidemocratic per se, but believes that once they come to
power, the exigencies of power will moderate their positions.
The Arab revolts and democratization. It is ironic that the Obama admin-
istration, which initially rejected what it perceived as the naïve effort of its
predecessor to impose democracy on the Middle East, has become an even
more forceful and vociferous proponent of immediate passage from old and
tried autocratic regimes to untested “people power.” However, the American
policy of support for revolution may not serve U.S. interests in the long run.
While the U.S. has influenced events in Tunisia and Egypt, its power is limit-
1. See the U.S. “National Security Strategy” of May 2010, which refers to the challenge of terrorism as
deriving from “a specific network — al-Qaida and its affiliates who support efforts to attack the United
States, our allies and our partners.” The Department of Defense report on the Nidal Hasan attack at Fort
Hood refrains from mentioning any link between the attacker and Islam or Islamic ideology.
2. President Obama’s Cairo speech is a case in point, and many of his utterances since have reiterated this
view.
April & May 2011 43

Shmuel Bar
ed to deconstruction and is not enough to be constructive. Paradoxically, the
American posture did play a pivotal role in creating the tipping point which
brought about the fall of the leaders in Tunisia and Egypt and encouraging
the wave of protest in the Arab world. However, this influence was not the
result of American projection of power but, rather, of the perception of
American weakness. Similar to the encouragement that the Iranian protes-
tors drew from reports that the Carter administration had abandoned the
Shah in 1979, the Obama administration’s jumping on the bandwagon of
regime change was viewed not as a sign of a strong America supporting
democratic revolution, but rather of a weak America, which abandons its
embattled allies. The loss of American support — explicitly for the regimes
that were directly threatened, and implicitly for all
While the U.S. the others — was perceived as rendering them vul-
nerable and encouraged the escalation of protest.
has influenced The credibility of any American assurances, includ-
events in Tunisia ing strategic assurances against external threats
from Iran, for these regimes therefore has been dra-
and Egypt, its matically degraded.
power is limited The chances of democracy in Tunisia are greater
to deconstruction than in any other country in the region. The emer-
gence of liberal democratic regimes in the other
and is not endangered countries (Egypt, Libya, Bahrain,
enough to be Jordan) seems unlikely. The only political force in
Egypt or Jordan that can mobilize itself on short
constructive. notice to take advantage of free elections is the
Islamic movement. It will therefore at least be part
of any coalition and will have an impact on the policy of any new regime.
The Islamic movements in the region will not feel indebted to the United
States for having turned its back on the old regimes when their downfall was
already evident; the American policy is more likely to be interpreted as yet
another proof of American duplicity and opportunism in the effort to main-
tain hegemony in the region.
Furthermore, their anti-Western and anti-American sentiment is not polit-
ical or circumstantial, but based on a deeply entrenched ideology, which
blames all the faults of Muslim society on external forces. New regimes,
which co-opt these forces, will not succeed in delivering the promises of the
revolution in a short period of time and will be swift to point the finger at
the enemy within and without: at the pro-Western secularists, Israel, and the
United States. Finally, the Islamic movements will perceive the revolutions
against regimes that had been supported by the United States as a victory
against America and further proof of its decline as a force in the region. This
impression will be reinforced by the anticipated U.S. final withdrawal from
Iraq by the end of 2011, leaving Iran to play the pivotal role of power bro-
ker. From the point of view of the Sunni Arab states, U.S. policy in Iraq,
allowing Iran a foothold in that country, acceptance of Hezbollah predomi-
44 Policy Review
nance in Lebanon, and overtures towards the (relatively pro-Iranian)
Muslim Brotherhood movement all indicate that the U.S. sees Iran as the
future power in the region.
If the impression of American support for popular revolution is not
reversed, the dynamics of revolution in the region will spread. The adminis-
tration has not clarified why, while it is has accepted the downfall of some of
its key allies (who the administration suddenly realized were “autocrats”), it
remains supportive of others. The key players, now in danger, are:
• Jordan. The rise to power of the Muslim Brotherhood in Egypt will
be a force multiplier for its sister movements in other countries. The
immediate casualty will be Jordan. The Muslim Brotherhood in
Jordan is more radical than its Egyptian counterpart, its constituency
tends to come from the Palestinian camps, and it has demonstrated a
high level of support for the Jihadi-Salafi movement in Iraq.
• Yemen. The fall of the Yemeni regime will open the door for both
Iran and al Qaeda in that country.
• Bahrain. The Shiites in the country will now be encouraged by Iran to

call for full enfranchisement — a demand that the U.S. will find diffi-
cult to reject. Such a change may be the first step in toppling the
regime and turning this key Gulf country into an Iranian satrap.
• Saudi Arabia. The potential uprising of Shiites in the Eastern

Province, who will demand equal rights or autonomy, would have a
dramatic effect on the Kingdom.
• Maghreb. Both Morocco and Algeria are home to much stronger and
more radical Islamic movements than Tunisia. Unrest in these coun-
tries will almost certainly lead to the rise of those movements, partic-
ularly if it comes on the heels of Muslim Brotherhood ascendancy in
Egypt. It is doubtful that the rebellion in Libya against the Qaddafi
regime will result in a stable democratic government in that primarily
tribal country.
Nuclear proliferation. The strategic worldview of the Obama administra-

tion towards the issue of the threat of wmd also stands out in contrast to
that of its predecessor. It was expressed in no uncertain terms in a series of
major policy documents issued during the administration’s first year.3
According to this worldview the threat of nuclear proliferation derives first
and foremost from the stockpiles of nuclear weapons in the hands of the vet-
eran nuclear powers and defensive concerns of the candidates for nuclear
3. Between February 1, 2010, and May 29, 2010, the administration issued the following policy docu-
ments: the “Quadrennial Defense Review Report”; the “Ballistic Missile Defense Review Report”; the
“Nuclear Posture Review Report”; the New start Treaty, signed by the presidents of the United States
of America and the Russian Federation; the Washington Nuclear Summit Conference declaration; and the
“National Security Strategy” for 2010.
April & May 2011 45

Shmuel Bar
armament. Hence these countries can be dissuaded from acquiring nuclear
weapons by a policy of global nuclear disarmament, multilateral action by
the international community to “isolate” offenders on one hand, and diplo-
matic engagement and extended assurances by the United States on the other
hand. The threat of acquisition of nuclear weapons by terrorists is seen as
one that can be dealt with through international cooperation.4 Relying on
the experience of the Cold War, the risk that states in the region may actual-
ly use their nuclear weapons either intentionally or in scenarios of escalation
is treated as low.
The focus on nuclear disarmament in a world that seems rushing toward
an era of hyper-proliferation seems somewhat inconsistent with reality. It is
unrealistic to believe that the countries of the
Had the U.S. Middle East may forgo acquisition of their own
supported the nuclear weapons in return for American-extended
assurances — particularly when the confidence in
“Green
American support has been so drastically shaken by
Revolution” in the abandoning of its erstwhile allies in Tunisia and
Iran it may have Egypt. The potential for availability of nuclear
know-how and materials from Pakistan and North
been able to keep Korea is likely to increase. There is no doubt that
that movement under such conditions supply will breed demand
and vice versa. The administrations counter-prolifer-
viable. ation policy has no remedy for this scenario.
Iran. Meanwhile, the perceived democratic uprisings in the Arab Middle
East should not create the impression that the “Green Revolution” option in
Iran is still on the table. Ironically, had the U.S. supported the “Green
Revolution” in Iran, at least to the extent it did for the uprisings in Tunisia
and Egypt, it may have been able to keep that movement viable. The con-
ventional wisdom that Western support for the Iranian opposition is coun-
terproductive will probably restrain the administration from expressing the
type of support it expressed vis-à-vis the Arab rebellions. It is, however, this
stark contrast between the American response to the unrest in Iran as
opposed to the Tunisian and Egyptian (and, mutatis mutandis, Libyan) cases
that reinforces the perception in the region that the U.S. has adopted an
active policy not only of abandoning its old allies, but also of courting the
Iranian regime and its proxies. The transfer of American support to the
Iranian supported Maleki in Iraq and the lukewarm response to Hezbollah’s
takeover of Lebanon are seen as further proof of this policy. The retraction
of the military option by senior American officials has led to a perception
that the U.S. has already reconciled itself to a nuclear Iran (at best) or even is
realigning its interest in the region to accommodate Iranian predominance.5
4. See the above-mentioned “Nuclear Posture Review Report.” .

5. Secretary of Defense Robert Gates said in November 2010 that a military strike on Iran would unite
that country’s divided population.
46 Policy Review
The outcome of the administration’s engagement policy to date has been to
encourage Iran to make more strident and provocative moves toward a
nuclear capability. The sanctions regime creates an illusion of action in con-
sensus, but few truly believe that it will achieve the necessary effect.6 While
the U.S. can claim success of its engagement policy as a holding tactic, delay-
ing Iran’s crossing the threshold, however, does not delay the process of
decline in the willingness to rely on the United States. The cumulative
impression of American reluctance to confront Iran out of fear of Iranian
reprisal exacerbates the concerns in the region that the pro-Western coun-
tries will not be able to rely, when the chips are down, on the United States.
The case for continuing this policy is primarily the absence of alternatives
and particularly the potential consequences of an
Iranian retaliation to a military strike. The argument The Obama
against military action (or even threat of military
action or perceived support for an Israeli strike) is
administration
based on the assessment that such action would lead has encouraged
to severe reactions in the Muslim world, would
Iran to make
damage friendly regimes, and inspire terrorist activi-
ties against the U.S., and it will be met with a broad more strident
Iranian military response, ignite a war between Iran and provocative
and the Gulf States, cause a steep rise in energy
prices, endanger American troops in Iran and moves toward a
Afghanistan, and give the Iranian regime the oppor- nuclear capability.
tunity to make short shrift of the “Green
Revolution” opposition. However, behind this assessment lies the political
truth that the United States does not have the willpower for another military
adventure in the Middle East.7 The administration also seems to believe that
Iran does not really intend to break out with a military nuclear capability
but will suffice with being a “threshold nuclear power” along the lines of the
Japanese model. This assessment leads it to redefine its objectives regarding
the Iranian threat: from the complete prevention of a “nuclear” Iran to the
acceptance of Iran as a nuclear threshold state, while convincing Tehran not
to cross the threshold.
However, these assessments are not shared by most of the parties in the
region. There is broad anticipation in the region that Iran will not stop at the
threshold and that the consequences of military action are far less cata-
strophic than those of a nuclear Iran. Nevertheless, there is little or no chal-
6. A poll of experts taken during the annual Herzliya Conference (taken, specifically, on February 9,
2011) showed that over 85 percent of the respondents did not believe that the current or even “biting”
sanctions would deter Iran from acquiring a nuclear weapon. See
http://www.herzliyaconference.org/eng/?CategoryID=461&ArticleID=2240 (accessed March 3, 2011).
7. As Secretary of Defense Gates expressed it in a speech to the United States Military Academy on
February 25, 2011, “In my opinion, any future defense secretary who advises the president to again
send a big American land army into Asia or into the Middle East or Africa should ‘have his head exam-
ined,’ as General MacArthur so delicately put it.”
April & May 2011 47

Shmuel Bar
lenge within the U.S. administration to these assumptions. This also con-
tributes to the perception in the region that the administration has recon-
ciled itself to a nuclear Iran, believing that it can be contained.
The Israeli-Arab peace process. The main area in which the administra-
tion sees a need to project active involvement in the region is the Israeli-Arab
peace process.8 The efforts to promote Israeli-Palestinian negotiations —
and possibly Israeli-Syrian talks in the future — and the willingness to risk
confrontation and crisis with Israel is seen by the Obama administration as
a means to garner Arab and Muslim sympathy. The result is an American
policy vis-à-vis the peace process that is more Palestinian than that of the
Palestinians. Washington demanded a total cessation of settlement activity,
including in East Jerusalem, when the Palestinian
The main way leadership itself did not, and joined the demand that
in which the Israel subscribe to the npt. The voices heard from
those close to the administration charging Israel, the
administration Jewish lobby, and even Jewish figures within gov-
sees a need to be ernment with subversion of strategic American
actively involved interests in the region in favor of Israeli interests
both reflect the true opinion of those individuals
in the region is and serve as a lever for restraining Israel. The pre-
through the sentation of a fundamental conflict of interests
between the U.S. and Israel in regards to Iran exac-
Israeli-Arab erbates this narrative.
peace process. The efforts of the administration to distance itself
from Israel and to present an “even-handed” or
even pro-Palestinian stance, however, have not significantly improved the
chances of a peace settlement. The decline in the perception of American
power was evident in the Palestinian leadership’s long refusal of American
requests to renew direct negotiations. As American presence in the region
wanes, the Palestinians and the Arab regimes will have to take into account
growing domestic radicalization as a severe constraint against moving for-
ward in the peace process.
By distancing itself from Israel and by lowering its profile in the Middle
East in general, the administration also distances itself from influence on the
peace process. The image of American power in the region is an important
component of Israel’s own deterrent image. This is expressed in the very
image of American capacity to act in the region to support its allies and in
the assumption of a strategic alliance and special relationship between the
U.S. and Israel. The erosion of the image of American power is not due to
8. The view of the Obama administration that the Israeli-Palestinian conflict is the source of all evils in
the region was best expressed by the former national security advisor, General Jim Jones, at the Herzliya
Conference (on February 8, 2011): “I’m of the belief that had God appeared in front of President
Obama in 2009 and said if he could do one thing on the face of the planet, and one thing only, to make
the world a better place and give people more hope and opportunity for the future, I would venture that
it would have something to do with finding the two-state solution to the Middle East.”
48 Policy Review
the perception of American capabilities per se, but to the perception of will-
ingness of the U.S. to act in the region to support its allies, buttressed by a
perceived decline in U.S. economic preeminence. Erosion of the image of
support for allies in general and for Israel in particular will have a detrimen-
tal effect on Israel’s deterrence. The erosion of Israel’s deterrence will have,
in turn, a detrimental effect on that of the United States.
Iraq. The primary aim of American foreign policy in Iraq is to end the
war, withdraw U.S. forces, and hand security responsibilities over to Iraqi
military forces. The goal of leaving Iraq a stable democratic pro-Western
country has been replaced by the more modest goal of withdrawal of
American troops “with their heads held high,” as President Obama said in
his 2011 State of the Union address.9 Meanwhile,
the sense of growing Iranian influence and declining After the U.S.
American presence feeds the willingness of the Shiite
withdrawal, Iraq
parties to take the Iranian position into account. The
American backing of the pro-Iranian candidate for will be the setting
prime minister of Iraq (Maleki), instead of the candi- for regional
date backed by the Sunni Arabs, strengthened the
perception in the region that the U.S. is not averse to struggles that
engaging Iran in order to guarantee an orderly with- will not further
drawal process. This raises concerns in the region of
a “grand bargain” based on an Iranian commitment Iraqi or U.S.
to cooperate in Iraq (and Afghanistan) in return for interests.
a softening of the American position on the nuclear
issue.
Whether or not such a bargain is being contemplated by the administra-
tion does not change the perception in the region that it is likely, and it does
not change the influence of such an assessment on the positions of the coun-
tries of the region. The Sunni countries surrounding Iraq are already devel-
oping their own areas of influence and nurturing relationships with groups
inside Iraq. The U.S. may encourage this trend as a preferable alternative to
Iranian influence. Iraq, after the American withdrawal, will become a micro-
cosm of regional struggles at the expense of both Iraqi and wider American
interests.
Af-Pak. The American policy in the Afghani-Pakistani theaters is heavily
focused on Afghanistan. However, there is no doubt today that the real
threat to international stability will come from a nuclear, radical Islamist,
and failed Pakistani state and not from its primitive and fragmented neigh-
bor. The potential for a “vertical meltdown” of the Pakistani state is great.
Such a meltdown would leave the semblance of a state intact but release the
9. In his address, Obama said, “Look to Iraq, where nearly 100,000 of our brave men and women have
left with their heads held high. American combat patrols have ended, violence is down, and a new gov-
ernment has been formed. This year, our civilians will forge a lasting partnership with the Iraqi people,
while we finish the job of bringing our troops out of Iraq. America’s commitment has been kept. The Iraq
war is coming to an end.”
April & May 2011 49

Shmuel Bar
various organs of the state to act on their own according to a variety of ide-
ological and commercial interests. A Pakistan in which radical Islamist orga-
nizations provide open and extensive support for terrorist groups abroad
(including but not only in India) with no interference on the part of a central
regime, and in which the nuclear establishment engages in free marketing of
its knowledge and hardware, may not be far away. Such a development
would have the potential to severely undermine the stability of the Indian
subcontinent. However, American policy towards Pakistan is tied to the
need to co-opt the Pakistani military and intelligence to the war against al
Qaeda. Public airing of the fears for the future of Pakistan would be coun-
terproductive to that goal.
The Afghani surge declared by President Obama in November 2009 has
little chance of achieving the success of the surge in Iraq. This is due to fun-
damental differences between the two theaters. But by declaring that the
American troops will start their drawdown from Afghanistan in mid-2011,
the administration sent a message to all the actors in the theater that the pre-
sent military effort is temporary and, if they can ride it out, the American
agenda will eventually fizzle. The U.S. military has already recognized the
futility of achieving the administration’s goals, and it has recommended a
shift in focus from nation-building to simply destroying al Qaeda forces in
Afghanistan and creating areas of stability under the central government in
lieu of extending Kabul’s sway over the entire country.
The U.S. may indeed attempt to stabilize only areas controlled by the cen-
tral government in order to reduce terrorist attacks in these areas. Naturally,
this will be perceived by the administration as an accomplishment. However,
a rise in American casualties could cause a shift in American public opinion,
which still sees the Afghanistan war as a “just war” against terrorism, as
opposed to Iraq, which was the “wrong war.” Such a shift, bringing public
opinion to perceive Afghanistan as a second Vietnam, may push the adminis-
tration to look for a way to cut losses and initiate an even earlier withdrawal
— or, alternatively, to invest further resources in order to achieve an image of
success. The price of an American “cut and run” strategy in Afghanistan
may be high. A resurgence of Taliban influence in Afghanistan will surely
revive the Pakistani Taliban and further weaken the regime in Islamabad. A
failed nuclear state of Pakistan will have dire consequences for the prolifera-
tion regime and the potential transformation of Pakistan and Afghanistan
together into a staging ground for jihadist attacks against the West.
The strategic position of the U.S.
T he future of American interests in the Middle East — and the

interests of America’s allies in the region — hinge on the outcome
of the civil rebellions in the Arab countries on one hand, and on
the efforts to prevent Iran from acquiring a nuclear weapon on the other. Per
50 Policy Review
the first issue, the region seems to have passed the point of no return on a
slippery slope toward destabilization. At this point, the U.S. can only try to
project that the abandoning of the regimes in Tunisia and Egypt is not a
precedent that will be applied in the cases of other countries. It can also try
to modify the impression that it is willing to accept the rise — albeit through
quasi-democratic processes — of radical Islamist forces in lieu of the regimes
that have already fallen. This should be done not only through declarations
and public diplomacy but also by deeds, such as active support of real, secu-
lar, pro-democracy forces in these countries. Such a message may strengthen
the liberal and democratic forces in those countries. An American policy of
supporting the fall of despotic, secular, pro-Western regimes in favor of
equally despotic Islamic regimes would be historical
irony and run counter to America’s real interests. Iran is already
Iran is already exploiting this period of Arab tur-
moil to cement its hegemony in the region. Even if exploiting this
the Muslim Brotherhood does not achieve full con- period of Arab
trol in the first stages of regime reorganization in
Egypt (and other countries) its co-option into the
turmoil to
fabric of the regime will enhance Iran’s influence and cement its
embolden Tehran. There is little hope that Iran will hegemony in
become more pliable in regard to its nuclear pro-
gram under such circumstances. the region.
Therefore, the Iranian challenge in the region will
probably escalate in the wake of these events. If Iran is perceived as having
crossed the nuclear threshold it will have “won” against the pressures of the
international community. It will become a model for radical movements
throughout the Muslim world and will be on its way to achieving its desired
hegemony in the region. A prime example may be renewing its call for
“leaving the security of the Gulf in the hands of the Gulf countries them-
selves” — a euphemism for Iranian hegemony without American or British
presence. In this demand, Iran will be able to leverage the very failure of the
U.S. to prevent Iran from going nuclear, and the regional image of the
Obama administration as conciliatory towards Iran will diminish any faith
that the countries of the region may have in American guarantees. The
Iranian ability to employ subversion will also make it difficult for those
regimes to continue to rely on the “infidel” to defend them against (Muslim)
Iran. Other consequences will be felt in the heart of the Middle East; the
chances of weaning Syria from the Iranian orbit and promoting stability in
Lebanon, where Iran’s surrogate — Hezbollah — has already become the
key power broker, will become even slimmer. Hamas, Iran’s Palestinian
proxy, will feel that it has a longer leash. The chances that the Palestinian
Authority will be willing to take bold steps towards a peace agreement with
Israel will also wane.
Failure to prevent Iran from nearing the nuclear threshold will certainly
intensify the drive of other states in the region for nuclear weapons. This
April & May 2011 51

Shmuel Bar
would be true for the current pro-Western regimes in the region, and more-
over for radical regimes, which would be less willing to rely on American
extended assurances and more likely to seek the prestige of becoming
nuclear powers. The increased demand for nuclear materials and know-how
will probably induce increased supply. The prime suppliers of these materials
will be Pakistan and North Korea — two nuclear nations, which may
become failed states on short notice. The possibility of a political meltdown
in these countries may cause the elements responsible for the nuclear pro-
gram to enter the market, followed by Chinese and Russian companies.
Increased supply will most likely create additional demand, with countries in
the Middle East and other regions speeding up their nuclear programs to
take advantage of the market. The prospect that American promises of
extended deterrence will stem the tide of proliferation to other countries, as
it did in East Asia, have already declined and will decline further once Iran
achieves even a nascent nuclear status. It is doubtful that the U.S. will be
able to provide the high profile military deployment necessary to back up its
assurances. Difficulties will come from domestic pressures in the region.
Even if Islamic forces do not take full control, their influence on policy and
their resistance to reliance on the U.S. will make it difficult for these regimes
to develop a strategy against Iran with the U.S.
In any case, these regimes would probably demand — at least for domes-
tic reasons — that American promises of extended assurances include guar-
antees against Israel and efforts to disarm Israel as well as Iran. Thus, certain
steps that the administration may take to counterbalance the decline in
America’s projection of power may have an adverse effect on Israel’s deter-
rent posture.
For the Wahhabi regime of Saudi Arabia, which came to the world as an
anti-Shiite movement, Iranian (i.e., Shiite) predominance in the region is a
nightmare come true. The growing anxiety in the Gulf States about a “Shiite
threat,” due to the prospects of a nuclear Iran and increasing Shiite (Iranian)
influence in Iraq, Syria, and Lebanon, could lead to enhanced strategic col-
laboration between these regimes and radical Islamic elements on the basis
of an anti-Shiite platform. However, these regimes will not be able to compel
the radical organizations they sponsor to restrict their militant activities sole-
ly to Shiite and Iranian targets and to avoid action against the Western “infi-
del” and Israel.
52 Policy Review
The European Union
Goes East
By Bruce Pitcairn Jackson
N
ovember 22, 2010, was an inauspicious day to hold
a summit in Brussels between the European Union and
Ukraine. Officials were still straggling back from
Lisbon after the previous weekend’s nato and eu sum-
mits, and they were dreading the looming financial cri-
sis in Ireland and the possibility of conflict in Korea.
Ukrainian President Victor Yanukovych showed up for the event, accom-
panied by a small delegation of ministers. The twin European Union presi-
dents, José Manuel Durão Barroso and Herman Achille Van Rompuy, were
there too, as were Catherine Ashton, the new head of the unfortunately
named External Action Service, and Enlargement Commissioner Stefan Fule.
Only eight or at most ten officials had the energy to actually reach the sum-
mit. And yet by Monday evening, the European Union had taken the first
real step in a new policy towards its eastern neighbors. As a part of the
obscure Eastern Partnership, the eu agreed to give Ukraine an action plan
Bruce Pitcairn Jackson is president of the Project on Transitional Democracies, a

nonprofit organization supporting post-Soviet and Balkan democracies in build-
ing closer ties with the European Union and NATO.

for visa liberalization, a promise to accelerate comprehensive free trade
talks, and a renewed commitment to invest billions of euros in the gas tran-
sit system of Ukraine.
To put these technical agreements in perspective, one must think back to
the n ato summit in Bucharest in April 2 0 0 8 when n ato ’s modest
Membership Action Plan was vehemently denied to both Ukraine and
Georgia. At the Bucharest meeting, nato and to a considerable extent the
United States abdicated responsibility for the engagement and integration in
Europe of the new democracies in Europe’s east. A few months later, in
August 2008, war between Russia and Georgia underlined the obvious
point: nato and the United States had no policy or even good ideas about
how post-Soviet democracies would overcome their pasts and go about
drawing closer to Europe.
Moscow, on the other hand, had lots of ideas. Immediately after his elec-
tion as President of Ukraine in February 2010, Victor Yanukovych was vis-
ited repeatedly by Russia’s President Dmitry Medvedev and Prime Minister
Vladimir Putin. These visits resulted in, to name but a few of the immediate
Russia-Ukrainian bilateral agreements, deals on gas prices, nuclear power,
military transport, and an extended lease on Russia’s Crimean naval base.
Weeks after the Russian-Ukrainian agreements had been signed in Kharkiv,
Washington finally dispatched an assistant secretary to Ukraine to suggest
that America could help with energy exploration or, perhaps, election
reform. By June 2010, otherwise sensible think tanks in Washington and
Brussels were seriously debating whether Ukraine might have departed the
Euro-Atlantic world entirely and returned to some trade association of
Slavic tribes on the Russian steppe.
And this is what makes the November 22nd meeting so remarkable: A
roomful of unelected officials unexpectedly launched a policy aimed at the
comprehensive engagement of Europe’s east. With a single communiqué, a
handful of European bureaucrats in Brussels brought Kiev into a closer
association with European institutions than it has had in hundreds of years,
if ever.
What is the eu up to in Europe’s east?
T o answer this question, we must look at how Europe’s east and

relations between Europe and Russia have been changing in the
past twenty years and how incremental change has now produced
a different political structure which, in turn, necessitates new policy in
Brussels. Since 1989, the relatively stable geopolitical competition in and for
Eastern Europe which lasted for most of the 20th century has given way to
a more ambiguous geoeconomic problem. The traditional instruments of
Western power — nato first and foremost, but also osce, the un, and the
Minsk Group process — have proven to have little or no influence in the
54 Policy Review
The European Union Goes East
post-Soviet countries nearest to classical Europe in the beginning of the sec-
ond decade of the 21st century.1
In a nutshell, those soft powers in which the European Union has long
and annoyingly claimed a comparative advantage (if not a complete monop-
oly) appear to have finally supplanted the harder power of the United States,
which protected Western Europe from 1945 to 1989. It is now obvious
that whether or not there will ever be a wider Europe to include the east — a
completed Europe, a Europe that is in the fullest meaning whole, free and at
peace — will be decided on the uncertain terrain of economics, trade,
pipelines, and visas. More importantly, the final contours of Europe and its
position in world politics will depend on European decisions and on the
strength of Europe’s institutions to a degree that would not have been true
even a few years ago. Not to put too fine a point on it, but all of the perenni-
al problems in European history hinge on whether the European Union —
the benchwarmer of European history and free rider extraordinaire — can
play the part of an enlightened Great Power east of the Vistula, the
Carpathian Mountains, and the Bosphorus for the rest of this decade.
There are several questions that follow from the problem of how the
European Union responds to the challenge of building an “eastern policy” in
a geoeconomic period of history, not to mention in the midst of a major
recession. First, what problem is an eastern policy supposed to solve? What
instruments will Europe use to execute its eastern policy? What could go
wrong in the plan to bring Europe’s east closer to Europe? And, finally, how
can Europe’s leaders explain to skeptical European voters why the eastern
policy is important for the future of Western Europe?
The strategic problem of the east
I n astronomy, “syzygy” refers to the alignment of three celestial

bodies in a straight line. It turns out to be a rare occurrence. If one
were to think of Russia, Turkey, and Ukraine as celestial bodies in
the gravitational system of Europe, recent developments might seem to sug-
gest a disturbing alignment.
Russia’s revisionist views of European institutions and order are very well
known. Whatever the merit or lack of merit of Russian policy statements on
a sphere of Russian influence, the extraterritorial rights of the Russian peo-
ples, or a new European security architecture, their strategic meaning is that
Russia defines itself as a state which differentiates itself from Europe and
contrasts its policies with those of Europe. Whereas the eu is an organiza-
tion of democracies, Russia is a sovereign democracy. Whereas the eu is a
direct descendant of the Coal and Steel Community, which coded free mar-
1. See Bruce Pitcairn Jackson, “A Turning Point for Europe’s East,” Policy Review 160 (April & May
2010), 49–61.
April & May 2011 55

kets and the free movement of peoples into the dna of modern Europe,
modern Russia is increasingly dirigiste and tends to still command its strate-
gic industries. In a word, Russia is a historically European state which now
defines itself in non- or counter-European terms.
Turkey has recently undergone an analogous, if not completely similar
change in its orientation towards Europe. Foreign Minister Ahmet
Davutoglu has promulgated a role for Turkey as a regional power in the
greater Middle East and even in the Islamic world, a power without enemies
among its non-European neighbors — with the possible exception of Israel,
which is arguably its most European neighbor. Suffice to say, the foreign pol-
icy aspirations of the Erdogan-Davutoglu government are not typical of
European states in pursuit of European integration. These policies are more
appropriately seen as a significant development in Turkey’s search for a
modern, post-Kemalist identity, which for the present is silent on what role
Europe will play in its future. While it would be a major error to say that
Turkey is becoming an anti-European state, it is probably fair to say that
Turkey is not aligned with mainstream European policies and institutions.
As is the case with Russia, the vocabulary defining Turkey today is non- and
often counter-European.
Ukraine’s strategic development has been more confusing and ambiguous
than that of either Russia or Turkey. As a consequence of the Orange
Revolution, Ukraine discarded the multi-vector policies of the Kuchma years
in favor of a half-hearted, romantic appeal for European integration —
romantic in the case of President Viktor Yushchenko, but half-hearted in the
implementation of Prime Minister Yulia Tymoshenko. In the event, Ukraine’s
European aspirations crashed at the nato Summit in Bucharest and burned
in the vitriolic instability of the Yushchenko-Tymoshenko coalition. With the
election of Victor Yanukovych in February 2010, Ukraine adopted a third
policy for which its leaders have struggled to find a name. At first, the policy
was called “neutrality,” which associated Ukraine with both Switzerland and
Finland. Then it was changed to “nonaligned,” which evoked memories of
the Bandung Summit and the nonaligned movement. Neither reference was
intended, and today Ukraine refers to itself awkwardly as “nonbloc.” Despite
the inelegant terminology, “nonbloc” accurately describes the current status
of Ukraine as not a member of European institutions.
In the history of Europe since the Peace of Westphalia, it is extremely
rare to find the three largest states of the continent’s east all aligned in one
way or another with non-European identity. Together, Russia, Turkey, and
Ukraine represent over 2 5 0 million people or over one third of all
European peoples. Collectively, their militaries are larger and presumably
more powerful than those of all other European states combined, and
together they control the vast majority of all the energy supply routes to
Europe over land.
This brings us to the meaning of the original Greek word syzygos, from
which syzygy is derived. It means “yoked together,” which invites the ques-
56 Policy Review
tion: What if the three great eastern states would become yoked together in
their nonaligned, nonbloc, non-European alignment?
It is important to stipulate at the outset that merely because three eastern
states have become alienated from Europe at the same time does not suggest
an authoritarian conspiracy, an insidious plot against Europe, or the forma-
tion of a dangerous military bloc. The question is more straightforward and
agnostic. What will states that (for whatever reasons) have not found a place
within Europe do outside of European institutions? It seems likely that states
dissatisfied with their historical place or those in search of their modern
identity will undertake a natural political process of discovery. And natural
processes can have nasty consequences.
It also seems likely that three adjacent states outside of European markets
and institutions will quickly learn to cartel, both as a defensive measure and
to force European markets to open, much as opec did in the early 1970s.
Quite possibly Russia, Turkey, and Ukraine will learn to create coalitions of
the unwilling within multilateral institutions to protect what they see as their
sphere of influence, as Russia and Turkey did in blocking nato exercises in
the Black Sea. One could imagine that over time the eastern nonbloc coun-
tries would be less eager to offer bases and transit for the projection of
Western power into the Middle East, the Gulf, and subcontinent (e.g.,
Turkey rejecting U.S. forces in 2003). These would all seem to be perfectly
natural and far from adversarial developments. Why should the eastern
powers bear burdens for a Western system of which they are explicitly — by
choice, by exclusion, or by identity — not a part?
In strategic terms, the drift of one third of Europe into nonalignment is a
highly negative development for Europe and also for the United States. In
addition to further constraints on the already hamstrung hard power of the
West and higher prices for basic commodities from Russia, Central Asia, and
the Gulf, both the eastern neighbors and eu Europe will grow far less rapidly
than if they had entered a free-trade system together. Should the nonalign-
ment of Russia, Turkey, and Ukraine persist for the next quarter century, we
should expect that a smaller, less-than-whole Europe will be an aging Europe
of slow or no growth whose power in global politics is limited to its rhetori-
cal skills and the durability of its tourism industry. In sum, allowing Europe’s
east to drift out of Europe into terra incognita is an extremely bad idea.
The Eastern Partnership and Ukraine
I n thinking about how Europe might arrest and reverse the drift
of the eastern powers away from European institutions, neither
Russia nor Turkey seems a likely point at which to begin. Russia and
the West have been nursing an antagonism since the earliest days of
Muscovy, through the schism of Christianity, and into and out of the Cold
War. It is hard to imagine that the many issues in the relationship between
April & May 2011 57

Russia and Western Europe will be resolved in the near term and certainly
not before the Russian presidential elections as early as 2012. By the same
token, Turkey pursued negotiations on integration with the European Union
for the better part of 60 years. These talks are now effectively deadlocked as
Turkey pursues the higher calling of discovering itself as part of the Arab
and Islamic world. For this situation to change, Turkey would have to, quite
literally, turn about on the road to Damascus (such a conversion, like that of
Paul of Tarsus, would require divine intervention upon which we cannot
depend).
This leaves the European Union with Ukraine, whose greatest selling
point is that it is the most undecided of the nonbloc states and the most fear-
ful of its prospects outside European institutions.
It is hard to Due to circumstances discussed above, Europe does
imagine that the not have a surplus of instruments with which to
engage Ukraine. Both nato and Ukraine have ruled
many issues in out membership in nato for Ukraine. Beyond the
the relationship drudgery of monitoring Ukraine’s incessant elec-
between Russia tions, the osce has little to do in Ukraine. And
Ukraine itself has already succeeded in entering the
and Western wto and in securing a $15.6 billion recovery pack-
Europe will be age from the imf, which, taken together, represents
everything Ukraine could possibly aspire to with
resolved in the non-European institutions. What all this boils down
near term. to is that Ukraine is the only game in Europe’s east
and the Eastern Partnership is the only card Europe
has to play in the only game in town.
The kindest thing that can be said about the European Union’s Eastern
Partnership is that it was an afterthought. The triumphant Enlargement
Policy was established first and succeeded in integrating all of Central and
Eastern Europe, the Baltics, Cyprus, and Malta before slowing in the
Balkans and running aground on Turkey. Some believe that the Enlargement
Policy is, perhaps, the only instance of an eu policy that has been too suc-
cessful. Enlargement was followed by the Neighborhood Policy, which was
never in any danger of being successful.
As a result of the extremely odd interaction between the former High
Representative Javier Solana and the former eu President Romano Prodi, the
Neighborhood Policy treated nearby post-Soviet democracies and North
Africa states as fundamentally the same, because they were, well, neighbors.
Balkan states, other than Slovenia and Greece, were held within the
Enlargement portfolio to maintain the promise (or fiction) of the Thessaloniki
Communiqué. It quickly emerged that the historical identities and political
aspirations of the post-Soviet east and the North Africa Islamic states could
not be more different, and as result the Eastern Partnership was formed pre-
sumably to break the Neighborhood Policy into two parts: an Eastern
Association and a Mediterranean Dialogue (or Union, if you ask the French).
58 Policy Review
The Eastern Partnership did not come along until the Swedish presidency
of the eu in May 2009. It was conceived by Swedish Foreign Minister Carl
Bildt and Polish Foreign Minister Radoslav Sikorski (with help from
Lithuanians and Czechs) as a program of association with the six countries
of Europe’s east (Belarus, Ukraine, Moldova, and the three South Caucasus)
within which these states would have access to a wide range of relations
with the European Union, short of membership. While the Partnership was
explicitly a nonmembership track, by bringing these countries to the
doorstep of Europe it certainly did not preclude membership at some point
in the future. In fact, it was very hard to see how a country could be success-
ful in the Eastern Partnership without ending up as a virtual member of the
eu, like Norway, or a bona fide member who just showed up in Brussels one
day, like Finland. At a minimum, the Eastern Partnership would keep the
historically troubled and troublesome countries of Europe’s east gainfully
occupied until such time as the European Union could figure out what to do
with them.
It became evident almost immediately that the Eastern Partnership was an
idea, but not a policy. Or maybe it was a policy without a program. So, for
the past 24 months, the offices of former Commissioner Oli Rehn and pre-
sent Commissioner Stefan Fule have been trying to build a foundation of
policies and programs, and with some success.2
Today, the eu-Ukraine Association Agreement is the signal success and
only example of the Eastern Partnership in reality.3 A brief look at the com-
ponent parts of the Eastern Partnership makes it obvious why Ukraine was
perfectly positioned both geographically and economically to become the
poster child for the Eastern Partnership. But if we examine the three major
elements in the associative relationship between the eu and Ukraine —
visas, free trade, and financial aid — each is revealed as slightly more or less
than what it seems.
• Discussions of visa liberalization are much less than they appear.

What began as a sincere attempt to provide Ukraine’s citizens the
same ease of travel which Russians and other non-eu citizens enjoy
quickly devolved into a roadmap to visa liberalization, which in turn
proved too forward-leaning for some eu members. What was offered
at the recent summit is an action plan for Ukraine to follow which
might result in some unspecified visa liberalization in the future. This
2. A summary of Carl Bildt’s and Radek Sikorski’s October 2010 letter to Baroness Ashton and
Commissioner Stefan Fule is available at http://euobserver.com/9/31109 (accessed February 24, 2011).
3. Ukraine has not jumped to the forefront of Association by its merits alone. Moldova has been unable
to elect a president for over a year and could now face yet another parliamentary election in the next few
months. And most recently in the elections on December 19, 2010, Belarus has confirmed its status as
Europe’s last dictatorship and is ineligible to participate in the Partnership. Georgia, Armenia, and
Azerbaijan, through no fault of their own, are too far away to take full advantage of trade or visa liberal-
ization, and all three countries are preoccupied with the frozen conflicts on their territories to the exclu-
sion of even the most generous European programs.
April & May 2011 59

is far less than Ukraine reasonably expected from the Association
Agreement.
• In contrast, the talks on a Deep and Comprehensive Free Trade

Agreement (dcfta) are proving to contain too much for Ukraine to
swallow in one bite. In order to access European markets, Ukraine
must harmonize its tariffs and regulations with virtually the entirety
of eu regulations, which would be a herculean task for any post-
Soviet economy. Even if successful, the eu insists on withholding
access to agriculture, certain services, multiple products, and labor
mobility, which negates much of the free market benefits for Ukraine.
Free trade talks have proven to be a source of significant misunder-
standing between the eu and Ukraine, and it remains to be seen
whether Commissioner Karel de Gucht’s laudable effort to accelerate
negotiations will be successful.
• In the single area where the European Union has not reneged on its
commitment to closer association, the proposal to help modernize the
Ukrainian gas transit system to the tune of $3.5 billon, the eu invest-
ment is neither too little nor too much. It simply does not exist —
other than in theory. The eu does not know how to modernize the
gts; it does not have companies who will agree to participate; it has
no plans about what a better gts would look like or how much gas it
should carry; and it has no budget for the amount of money that it
would take to repair and restructure the endlessly corrupt Ukrainian
gas transit system.
Suffice to say, Commissioner Stefan Fule and his colleagues have a mas-
sive job in front of them to build out a functioning Eastern Partnership — a
job whose scale and difficulty can be compared only with the Marshall Plan.
The Eastern Partnership may become the engine which transforms Europe’s
east, but so far the wheels are not turning and the democratic transforma-
tion of Kiev is moving at a snail’s pace.
Problems and contradictions
A
s I suggested earlier, the Eastern Partnership is the stepchild of
earlier eu errors in conflating post-Soviet democracies with the
nations along the southern shore of the Mediterranean, in creat-
ing unfair “class distinctions” between the children of the Balkans and the
children of Moldova, and in severing association from Enlargement in the
manner of King Solomon. In a sense the Eastern Partnership is the sum of
European errors. As such, it is worth reviewing the conceptual problems and
contradictions which reside in the Partnership policy and which make fixing
its programs and implementation that much more difficult. It seems to me
60 Policy Review
that there are five major questions which need to be answered before Europe
can be said to have a functioning policy in its East.
1. Comprehensive or ad hoc? An Eastern Partnership promulgated by
the European Union advances an implied claim to comprehensively
engage all of what was once the Soviet Union, which would be the
three states bordering the eu, the three states of the South Caucasus,
and Russia itself. This has not proven to be the case. The Eastern
Partnership focused solely on Ukraine and Moldova to the detriment
of the South Caucasus and exclusion of Belarus. (Engaging Russia, of
course, was never attempted.) This is far different than nato’s
Membership Action Plan, which turned out to be sufficiently elastic
and multi-faceted to accommodate the most disparate nato aspi-
rants with ease. In this sense, the Eastern Partnership is simply a big
tent for bilateral ad hoc-ery with five of seven of the eastern semi-
democracies. As an arbitrary aggregation of multiple, bilateral diplo-
macies it suffers from all the expected weaknesses of ad hoc diploma-
cy: the absence of a body of programs; the impression of unfairness
and double standards; gaping holes in coverage; confusion in the
objectives of policy; and difficulty in justifying budget resources.
Ultimately, a comprehensive Eastern Partnership will either have to be
expanded to offer small, distant partners the same associative pro-
grams available to large, nearby partners or the Partnership will have
to be cut back to a few uniform programs, such as visa liberalization
roadmaps, which could be issued to the entirety of Europe’s east.
2. Conflicting motives of EU member states. A second question for the

Eastern Partnership pertains to the conflicting motives of eu member
states. It is not at all clear that every member of the European Union
wants the Eastern Partnership to succeed or to succeed in the same
way. Some nations believe that the Association Agreement is a way-
station through which eastern partners pass on the road to member-
ship status; others see the Partnership as an insurance policy against
the application of any post-Soviet state for full integration into
European political and financial markets. Support for the Eastern
Partnership also divides Europe on north-south lines. Capitals north
of Bratislava see the Eastern Partnership as a strategic imperative
which rescues Europe’s east from the economic domination of
Moscow and, curiously, also builds a bridge across the borderlands to
Moscow — a bridge which someday Russia will cross in its return to
Europe. Capitals south of Bratislava see the Eastern Partnership as a
wasteful drain on resources to rebuild the Balkans and integrate the
Mediterranean and little more than a source of prostitutes and
unskilled labor. At a minimum, this confliction conveys a sense of
Europe’s mental reservations to the eastern partners; in the extreme,
these internal conflicts set the stage for intra-European guerilla war
April & May 2011 61

where one eu member builds bridges eastward and another eu mem-
ber blows them up. Any foreign policy worthy of the name needs an
enforcer to demand internal discipline, but it is not yet clear that
President Barroso or Baroness Ashton see themselves in this role.
3. The incoherence of the European Commission. While the Eastern

Partnership is uneven in its effect on the eastern partners and vacuous
on the whole, it also stretches across a vast amount of bureaucratic
space inside the European Commission. It is stupefying to try to
imagine the internal coordination required for Commissioner Fule in
Enlargement and Neighborhood to make the most modest decision
regarding the Eastern Partnership. First, he should check with
Baroness Ashton since the Eastern Partnership, like it or not, is a for-
eign policy. Then he should stop by Karel de Gucht’s office since the
Free Trade talks are the salient feature of the Partnership. By the same
token, Commissioner Fule should coordinate with Energy and
Agriculture since the eastern partners depend on the import of energy
from the east and the export of agricultural products to the West. If
there is time left in the day, the Partnership commissioner should seek
concurrences from Internal Market, Competition, and Justice and
Home Affairs on a range of issues from market access to visa liberal-
ization and labor mobility. Indeed, it is difficult to imagine a serious
discussion of the Eastern Partnership without convening the entire
European Commission. To the problem of the effectiveness of
Europe’s eastern policy, what is the decision-making mechanism for
the Eastern Partnership? For example, in the context of the multi-
dimensional dialogue between the eu and Ukraine, who in Brussels
can decide that the eu will give a little more on visa liberalization but
will continue to protect certain agricultural markets? Effective policy
must be able to adjust quickly, compromise when necessary, and cal-
culate tradeoffs.
4. Foreign policy without federalism. The great stumbling block of

Europe’s eastern policy since 1989 has been the problem of a diverse
Western European community of now 27 states contending with
highly centralized eastern states. Each time a decision has been need-
ed with respect to Russia, the unity of the European Union fractures.
The same can be said for decisions on energy and competition policy
dealing with Gazprom. I am not suggesting that the Kremlin or the
Management Committee of Gazprom has been scheming to divide
Europe. I am arguing that Europe divides itself in discussions of
Russia and energy.4 To a considerable extent, the Eastern Partnership
4 . There are signs that European Commissioner for Energy Gunther Oettinger and European
Commissioner for Competition Joaquin Almunia are beginning to devise a clear competition policy for
gas pipelines.
62 Policy Review
is a combination of the question of Russia, the question of energy,
and the question of the democratic condition of the partner countries,
and, as such, is every bit as divisive of eu consensus as all the other
problems in Europe’s east. Thus, the question arises: Can Europe ever
have an effective eastern policy without federalizing significant com-
petencies of the European Union? Without significant federal powers,
it is difficult to see how the European Union designs and manages
energy, trade, and Russia in a Euro-Atlantic political system of well
over a billion people.
5. The absence of a narrative. In American political jargon, our cam-

paign strategists refer to the “narrative” of the candidate or cam-
paign, which means the story that summarizes the meaning of the
campaign. “Honest Abe Lincoln and his path from a log cabin to the
presidency” is an excellent example of a simple and immensely com-
pelling narrative. The Eastern Partnership lacks any semblance of a
popular narrative, and an eu citizen in Portugal could be forgiven for
not having the slightest idea what the Eastern Partnership is supposed
to do for him. Complicating the difficulty of connecting with eu vot-
ers is the general availability of competing narratives running either at
a tangent or directly counter to the purposes of the Eastern
Partnership.5 The Russian proposal for a new security architecture
for Europe answers many of the same questions the Eastern
Partnership purports to, as does the German doctrine of economic
interdependence between Europe and Russia. The French are con-
structing a third narrative which contains both a pan-European archi-
tecture and elements of economics and trade. All three narratives are
coherent and compelling to their target audiences. Much as I admire
both Carl Bildt and Radek Sikorski, the Eastern Partnership remains
the rarefied product of an intellectual foreign policy aristocracy. The
alienation of policy in Europe’s East from the voters of Western
Europe became a problem during the presidency of George W. Bush.
The promotion of democracy in Europe’s east became little more than
charity work with a pinch of evangelicalism and sanctimony thrown
in for good measure. Not surprisingly, a few people’s ideas about
charitable things to do with the money of others did not survive the
first day of the current recession. For the Eastern Partnership to com-
mand the public support and resources necessary for it to prevail in
Europe’s east, eu leadership will have to recast its policy to create a
narrative that portrays a larger European community as being a vital
economic interest of every eu household. The narrative of the Eastern
Partnership needs to be about the creation of jobs, the security of
5. Ivan Krastev and Mark Leonard, “The Spectre of a Multipolar Europe” (European Council on Foreign
Relations, 2010).
April & May 2011 63

energy, and the prospect of sustainable economic growth in Western
Europe. The Eastern Partnership cannot survive unless it grounds
itself in general narrative more firmly than the alternative political
constructs.
What is at stake?
N otwithstanding doubts about whether the leaders of

the European Union will succeed in formulating and implement-
ing an effective Eastern engagement, it is hugely consequential,
particularly for the United States, that they do so. Despite Europe’s political
growing pains and current financial crises, strategically speaking, Europe
fails from its east. Across history, the existential threats to Europe arise from
the east — the Huns, Mongols, Ottomans, Hitler, and Stalin. For Europe to
find an inclusive answer to problems of its east is probably the U.S.’s
longest-standing national foreign-policy objective, and once again among
the most urgent.
Zbigniew Brzezinski once wrote that Russia could not become an empire
without Ukraine. There are so many other reasons that Russia cannot
become an empire that Brzezinski’s insight is no longer particularly useful. It
is closer to the point to say that the European Union cannot retain its cur-
rent economic and political position in the world without a more effective
policy to engage its east, beginning with Ukraine. Unless the European
Union moves immediately to resource, reinforce, and embellish the Eastern
Partnership policy, the strategic drift of major European powers, historically
European peoples, rapidly emerging markets, and vast energy reserves away
from Western Europe will continue and accelerate.
For a time the leaders of Europe may feel relieved of the tiresome burden
of engaging the post-Soviet democracies and post-Kemalist Turkey. They
may even come to enjoy the quiet twilight of a smaller, austere, and ineffi-
cient Europe. But one day, someone in Western Europe will wake up and
wonder how Europe became a declining, penurious, second-tier power. This
disappointed European will be told that Europe failed to develop an effec-
tive, expansive, and generous policy towards its east. And should Europe fail
to fill the strategic vacuum in its east, it is hard to see how the Euro-Atlantic
system continues in its current form. An attenuated and disappointed
Europe facing an alienated and very possibly unstable east almost certainly
means a reduction in American military and economic power. For all these
reasons, Americans should hope and pray that the European Union’s Eastern
Partnership succeeds.
64 Policy Review
Of course, in his case, it wasn’t fan-
tasy. It was simple reality, for he man-
aged to be that unique figure, that
strange bird, for whom it all came true.
Books And that’s because, as Michael Korda
notes in a new biography, he was
always Lawrence of Arabia — the
strange short man (only five-foot-five)
Being who towered above his contempo-
raries: an “odd gnome, half cad — with
T.E. Lawrence a touch of genius,” as one soldier who
served with him observed. What, in the
By Joseph Bottum end, are we to make of a nearly perfect
soldier who was so psychologically
Michael Korda. Hero: The Life crippled that, once he returned to
and Legend of Lawrence of Arabia. England, he had to hire men to beat
HarperCollins. 762 pages. $36 him? And that, even while he was pro-
ducing the elegant prose of The Seven
Pillars of Wisdom, his magisterial
H e wa s t h e best of
England and the worst. A
wastrel, in many ways, and
a triumph, in others. A hero and a
clown. A scholar and a soldier. A
account of the Arab Revolt during the
First World War?
As it happens, after the failure of
direct attack on the Ottoman Empire in
the disaster of the Gallipoli campaign
sophisticate and a naïf. A child and a in 1915, much of the British high com-
grown-up. He was an adolescent, all in mand considered the Middle Eastern
all: perhaps the greatest lifelong teenag- theater a distraction from the main
er the modern world has ever known, action of the war in France — and the
with every bit of the soaring self-confi- Arab rising against the Ottomans even
dence and crushing self-doubt the awk- more of a distraction: “a sideshow of a
ward years can bring. sideshow,” as one officer complained at
His name was Lieutenant Colonel the time. But with the help of Lowell
Thomas Edward Lawrence. Or T.E. Thomas (a cynical American journalist
Lawrence, as he signed his books, or prone to hero-worshipping, and no
John Hume Ross and T.E. Shaw, the stranger himself to internal contradic-
military pseudonyms under which he tions), Lawrence turned the Arab
was concealed during the 1920s and Revolt into center stage: the whole
1930s — and notice, even in the ways world watching as he battled his
he named himself, the inverted boast demons and the Turks across the
and the adolescent fantasy of famously ancient desert.
hiding from fame. Being Lawrence, he couldn’t just
write the book about those days. He
had to agonize over it, and toy with it,
Joseph Bottum is a contributing editor and dismiss it, and devote himself to it.
to the Weekly Standard. He rewrote the manuscript several

Books
times — once after losing it at the ter than his contemporaries just what
Reading train station, which is as clear gold and guns could accomplish. He
a symbol of psychological ambivalence showed, as well, the surprising brutali-
as one is likely to find — before finally ty of dreamers: executing one of his
publishing the text in 1922 in an edi- own men to prevent a blood feud and
tion of eight copies. Convinced by his admitting, to British dismay, that his
friends, notably the poet Robert Arab forces had slaughtered Turkish
Graves, that he ought to make it more prisoners.
widely available, he abridged the book He seemed, in many ways, a charac-
somewhat and issued it in 1926 in a ter out of time. Dispatches from the
special subscribers’ edition. Western Front were filled with reports
In the event, “more widely avail- — Ypres, Verdun, Passchendaele — of
able” meant that he allowed two hun- thousands upon thousands dead,
dred copies to be made, a hundred of gassed, shell-shocked, or lost, all for
which he sold for 3 0 guineas each, tiny gains of ground. In the four
although the illustrations and hand- months of the 1916 Somme campaign,
binding made the book cost almost the Allied forces managed to advance a
double that to produce. The result was mere seven miles, at the cost of
near bankruptcy, and he was forced, 420,000 British casualties, 200,000
finally, to do what he ought to have French, and 5 0 0 , 0 0 0 German.
done from the beginning — prepare a Meanwhile, Lawrence was filing dis-
short version for general readers: the patches of battles that seemed almost
1 9 2 7 Revolt in the Desert, “an Victorian in their numbers and their
abridgement of an abridgement,” as victories: 300 Turks killed and a town
George Bernard Shaw sneered. It sold captured, for example, at the cost of
extraordinarily well and paid off his two of his Bedouin men killed. In a let-
debts, which allowed him to hide, ter to a friend, he laconically described
again, in the Royal Air Force as a a 1917 attack on the railroad: “The
mechanic under an assumed name. whole job took ten minutes, and they
What a circus. On and on goes the lost 70 killed, 30 wounded and 80
adolescent unity of contradictions that prisoners.” His Arab forces suffered
was T.E. Lawrence. The illegitimate son only one casualty, although they had to
of a minor aristocrat, he far surpassed flee when a major Turkish rescue force
his father in fame and accomplishment, arrived: “I lost some baggage, and
but he never quite got over the fact of nearly myself,” he added. “I’m not
his bastardry. He was a natural leader, going to last out this game much
who mostly wanted to be alone. By all longer: nerves going and temper wear-
accounts a gentle man aimed, by ing thin . . . This killing and killing of
predilection and education, at a schol- Turks is horrible.”
ar’s life, he was also a ruthless killer.
Like Lord Byron during the Greek
uprisings against the Turks in the early
19th century, Lawrence showed the
surprising practicality that dreamers
sometimes have, understanding far bet-
S imply as a commander, T.E.
Lawrence proved he could do
serious, theater-wide strategy.
Ill with dysentery in 1917, he used the
time to plan the whole campaign he
66 Policy Review
Books
and Prince Feisal would attempt. It sensitive about his honesty, he decided
would start by abandoning the old that he had been soiled by lies to the
Arab plan of driving the Turks out of Arabs about British support for inde-
Medina and the other Arabian cities. pendence. “Can’t stand another day
The true success of the Arab Revolt, here,” he wrote. “Will ride north and
Lawrence saw, depended on forcing chuck it.” In a letter to one of his supe-
the Ottomans to abandon the northern riors, he added, “I’ve decided to go off
cities: Jerusalem and Damascus, partic- alone to Damascus, hoping to get killed
ularly. So he would begin with a series on the way: for all sakes try and clear
of pin-prick attacks on railroads, tele-
graph wires, and small outposts, On and on goes the
requiring the Turks to spread their
forces across the Middle East and
adolescent unity of
alerting the squabbling Arab tribes to contradictions that
the unifying figure of Feisal. The next
was T.E. Lawrence. The
step would be the acquisition of
Aqaba, a sea-port at which to receive illegitimate son of a minor
British supplies. And the final step aristocrat, he far surpassed
would be the building of a serious
army with which to hold the ground his father in fame and
gained by the Ottomans’ retreat back accomplishment, but he
to Turkey.
The amateur soldier could do supe-
never quite got over the
rior battlefield tactics, as well. In fact of his bastardry.
February 1 9 1 8 , Lawrence helped
direct the Arab forces in a old-fash- this show up before it goes further. We
ioned set battle against three Turkish are calling them to fight for us on a lie,
battalions at the village of Tafileh. “A and I can’t stand it.”
miniature masterpiece,” the historian Leaving his forces behind, he made a
Basil Liddell Hart would later call it, as 300-mile sweep behind Turkish lines
the Turks were tricked into a frontal — recruiting temporary companies
attack on dug-in positions, then routed from local tribes across Lebanon and
from the flanks by the highly mobile Syria to help him destroy bridges and
Arabs. The result was over 400 Turks railways, and promoting revolt among
killed, perhaps 6 0 0 taken prisoner, clan leaders still under the Ottomans’
against Arab casualties of 40 men. thumb. It may be the most extraordi-
And, of course, Lawrence had the nary single act of the entire war, even if
almost impossible personal bravery and he undertook it in one of those danger-
finely wrought character that made him ously fey moods into which young war-
perhaps the greatest leader of small riors sometimes fall, not much caring if
forces in the 20th century. Rumors of they live or die. “At the time,” he
the 1916 Sykes-Picot Agreement, carv- explained in The Seven Pillars of
ing up the Middle East between Wisdom, “a bodily wound would have
England and France after the war, been a grateful vent for my internal
deeply disturbed him. Preternaturally perplexities.”
April & May 2011 67

Books
Then came the almost mythic taking of biographies, stage plays, and docu-
of Aqaba, the expansion of the revolt, mentaries — to say nothing of David
and his capture and beating at Deraa Lean’s epic 1962 film — the world is
while reconnoitering a railway junction. inundated with information about the
His possible homosexual rape, as well, man, and Michael Korda’s new Hero:
although the only actual evidence is the The Life and Legend of Lawrence of
coy but eroticized language with which Arabia adds little that we didn’t know
he described it years later. Just before before. Still, Hero is a lively, well-writ-
Christmas 1917, Jerusalem fell, and ten walk through the material, and
Lawrence made a triumphal entry into Korda has a reason for writing it. In
the city at General Allenby’s side. After recent years, the trend among histori-
a delay of some months (60 of the 90 ans has been to debunk Lawrence’s leg-
British battalions were stripped off and end. Why anyone would bother is
sent to France), Allenby launched the something of a question. From the
Megiddo campaign: as complete a vic- beginning, T.E. Lawrence has been as
tory as the Allies had experienced in the ambiguous a hero as we’ve ever
war, the final answer to the defeat at known. But something there is in mod-
Gallipoli three years before. ern historical writing that cannot toler-
It opened, naturally, with T.E. ate the idea of any heroism, and — as
Lawrence. On September 17, he took the title of Hero suggests — Korda
his Arab irregulars, two regular army wants to restore our sense of the man’s
camel corps, a handful of Gurkha achievements.
machine gunners, and a detachment of The longtime editor-in-chief of the
French mountain artillery, and broke Simon & Schuster publishing house,
the Ottoman railhead at Deraa. With Korda is a nephew of the Hungarian
extensive use of air power, Allenby émigré Alexander Korda, who helped
smashed through the lines at multiple create the British film industry — and
points. (The Royal Air Force essentially actually owned, for a while, the movie
destroyed the Ottoman’s retreating rights for Lawrence’s story, although he
Seventh Army in a single hour, catching sold them, over a casual lunch, to the
it in the open just west of the Jordan.) people who would end up producing
Battalion after battalion of the trapped the 1962 extravaganza Lawrence of
Turks surrendered, Damascus itself fell Arabia. In previous books on such fig-
on October 1, and the entire Middle ures as Ulysses S. Grant and Dwight
East campaign ended when the Eisenhower, Korda has shown his
Ottoman government surrendered to appreciation for military success, and
the British on October 31. although he is no professional historian
Not that Lawrence was there to see — his account of the Balfour
the culmination. Two days after the Declaration and the moves toward
capture of Damascus, he was posted establishing a Jewish homeland in
back to England. Palestine is a little shaky — he works
hard in Hero to reestablish our sense of
T h e o n e t h i n g you can’t
say about this story is that
it’s little known. After dozens
68
T.E. Lawrence’s greatness.
As well he ought, for in the context
of modern sneers at the man,
Policy Review
Books
Lawrence’s reputation needs defending. British school system in his time, atypi-
In the context of Korda’s praise, how- cal only in being the absolute perfec-
ever, one wants to say, Yes, but . . . The tion, the complete achievement, of
last section of the book is particularly what that system seemed to want. As
concerned to cast Lawrence as a Edmund Wilson once remarked,
prophetic figure whose “advanced and Edwardian education (Lawrence stud-
radical ideas about the future of the ied at the City of Oxford High School
Middle East” were simultaneously for Boys before he began attending uni-
more idealistic and more practical than versity at Oxford in 1907) aimed at
those of the diplomats who would not
listen to him at the Paris Peace Something there is in
Conference after the war.
That’s a curious claim, for Korda modern historical writing
sees clearly that part of the future prob- that cannot tolerate the
lem with “the brutal carving up of the
Turkish empire” was that the enor-
idea of any heroism,
mous wealth, from the 1970s on, of and — as the title of
the great oil reserves came to the most
Hero suggests — Korda
backward areas. It transformed
“remote desert ‘kingdoms’ and ‘princi- wants to restore our
palities’ into oil-rich powers, while sense of Lawrence’s
leaving the more highly developed, bet-
ter educated, and more populous parts achievements.
of the area — Egypt, Syria, Jordan, and
Lebanon — impoverished.” Lawrence only two essential goals: to produce
hardly foresaw all this, and such lines classicists and to produce leaders of
from Korda as “On this subject, at men. In T.E. Lawrence, it got what it
least, Osama bin Laden and T.E. was looking for — which is rather the
Lawrence would have stood as one” problem, isn’t it?
should give us pause. Certainly he had the scholastic back-
In truth, Lawrence was simply ground. His first-class honors thesis on
Lawrence: Who else but T.E. Lawrence crusader castles was a solid piece of
possessed the personal reputation and work, completed after a thousand-mile
charm that could force Prince Feisal walking tour of Europe in the summer
and the Zionist Chaim Weizmann to sit of 1909. He absorbed languages like a
down together in January 1919 and sponge: French, German, Arabic,
sign an agreement (drafted by Turkish, Latin, ancient Greek (his
Lawrence) to create an Arab-Jewish 1932 translation of Homer’s Odyssey
government in Palestine? And who else remains a superior prose rendering).
but T.E. Lawrence could have such a And he used his skills, in the years
major accomplishment so completely before the war broke out in 1 9 1 4
ignored by the Allied powers as they when he was 26, to become a promis-
settled up the Middle East? ing young archeologist.
Perhaps the best way to understand He was schooled, however, precisely
him is as a fairly typical product of the at the moment in which British acade-
April & May 2011 69

Books
mics made a strange turn. Essentially
giving up on their Christian founda-
tions, the British schools shifted into a Better
modern Orientalism that persists to this
day: the old biblical scholarship still
directing attention to the Middle East,
Brain Science
but the rejection of Christianity causing By Liam Julian
the emphasis to be placed instead on
nonbiblical peoples. In the end, it Jo s h ua Fo e r . Moonwalking with
proved a kind of Arabolatry, a Einstein: The Art and Science of
philosemitism, that engulfed the univer- Remembering Everything. Penguin
sities and, through them, the British Press. 320 Pages. $26.95.
Foreign Office.
Dying in a motorcycle accident in Brian Christian. The Most Human
1935, Lawrence had the advantage of Human: What Talking with Computers
living before he was forced to choose Teaches Us About What It Means to
between Arabs and Jews, and even, to Be Alive. Doubleday. 320 Pages.
some degree, before he was forced to $27.95.
choose between serving England and
aiding Arabia. But Michael Korda’s
Hero is wrong to read Lawrence’s
thoughts about the Middle East as
something more than the kind of
British intellectualism that, today,
advocates the boycotting of Israel.
H umanity has ever been
a favorite topic of human
writers. Start with the Iliad
and the Odyssey — or even long
before, with, say, the Bhagavad Gita —
For that matter, the man’s psycho- move through the tales of classical
logical development was of a piece with antiquity and the medieval ages, past
his intellectual training. In both, he the works of the renaissance, baroque,
proved the product of his place and and modern periods, and what you’ll
time. England aimed its sons at golden have traversed is a corpus of prose, lit-
moments, but to look back is to realize erary and otherwise, obsessed with
that those moments were the wild highs considering the human condition.
and lows of adolescence, not the steady This consideration has lately begun
maturity one hopes adults can find. to narrow, and not merely because the
There’s no denying that Lawrence was popularity of ecumenical literature
a great figure. At the moment of crisis, seems to wilt as that of insular memoir
he proved a hero. But his biographies, blooms. Consider the voguish perva-
even Michael Korda’s near hagiogra- siveness of brain-science writing, a
phy, always end a little sad. T.E. genre that endeavors to elucidate
Lawrence was a green bay tree that human actions by pinpointing where in
shot in its early years to an extraordi- the brain they originate, and how and
nary height — and then never quite why. Fine. Yet in too many of these
filled out. He was a glorious boy who
could never quite discover how to be a Liam Julian is managing editor of
man. Policy Review.
70 Policy Review
Books
books, the specific, scientific roots of shocking anecdote, then explain it with
human exploits are more significant brain science) but, when they do, try to
than the exploits themselves. The do so subordinately to broader inquisi-
expansive study of virtue tapers to the tion. For all their books’ differences,
study of exact cause — the question Foer and Christian engage with science
becomes why, molecularly, a certain to seek instruction, not causation. They
decision was made, and not necessarily keep their considerations of humanity
whether the decision was right or good. broad. The brain matters to them, but
“How to think?” is eclipsed by “How the lessons of literature, philosophy,
do we think?” and history matter, too.
Oliver Sacks is the chieftain of the Moonwalking With Einstein is
brain-science clan and one of its more- about memory. The story starts with
responsible members, although even his Foer on a whim attempting to identify
writing comes with a glaze of neuron- the world’s smartest person, undertak-
determinism. There is also Jonah ing some Google research to that end,
Lehrer, a young polymath who in 2007 and discovering Ben Pridmore, the
published the well-received and pleas- reigning world memory champion,
ant Proust Was a Neuroscientist, a who is able to “memorize the precise
book which contended (perhaps rather order of 1,528 random digits in an
strainingly) that works by Proust, hour” and of a shuffled deck of cards
Cézanne, and Stravinsky foretold mod- in 3 2 seconds. Pridmore knows
ern brain-science discoveries (Proust in 50,000 digits of pi. Foer is astounded
this telling is said to have anticipated, by this. He considers how having such
with his famous madeleine, smell’s a memory would make his own life
direct connection to the hippo-cam- “qualitatively different — and better.”
pus). 1 But for every brain-science Reading would be richer, the lessons of
writer like Sacks and Lehrer — sharp, books retained; navigating parties
stylish, generally measured — there are would be a cinch, names lined up in the
five others who lack eloquence, insight, mind and ready for recall. And he
and judiciousness. could finally reliably remember where
Two new authors have bounded into he had parked. Especially intriguing to
the clutter: Joshua Foer, with his book Foer are two sentences Pridmore gave
Moonwalking With Einstein, and Brian to a newspaper reporter: “It’s all about
Christian, with The Most Human technique and understanding how the
Human. Both books concern the mind. memory works. Anyone could do it,
Both pull intermittently from Malcolm really.”
Gladwell’s dog-eared playbook (tell a Two weeks later, Foer is in New
York City, covering the 2 0 0 5 U.S.
Memory Championship for Slate mag-
1. Two thousand seven was a good year for
Proust and brain science: In addition to Lehrer’s azine. He meets Ed Cooke, a 24-year-
book there was Proust and the Squid: The Story old memory grand master from
and Science of the Reading Brain, by Maryanne
Wolf, a Tufts professor of child development. England, and the two hit it off. After
Proust and the Squid is a chronicle of how the the competition, hours of discussion,
human brain evolved to learn to read, and how
this modernistic reading-brain’s development has and several rounds of beer at a local
affected humans’ development generally. bar, Ed offers to instruct Foer in the
April & May 2011 71

Books
techniques of memory, to be his “mem- vivid graphic images, ordered in rela-
ory coach.” Foer accepts, and a year tion to each other. “The nonlinear asso-
later he wins the American memory ciative nature of our brains makes it
championship. impossible for us to consciously search
How that triumph happened is a our memories in an orderly way,” Foer
remarkable tale and the backbone of writes. S’s memories were not nonlinear
Moonwalking With Einstein (the title but “as regimentally ordered as a card
refers to a mnemonic Foer used in com- catalog,” each memory sensation (a pic-
petition). Much of the book is not ture, a hue, a sound, flavor, or odor)
about Foer, though, but the world of assigned a precise location in his mental
memory and its peculiar characters. We world. When he wanted to retrieve a
are introduced to Solomon memory, he simply went to the place
Shereshevsky, a Russian journalist who where he had stored it.
in May 1928, after being reproached What S was doing, albeit unknow-
by his editor for failing to take notes at ingly, was using an ancient recall tech-
a meeting, sought out the neuropsy- nique called the memory palace, in
chologist Alexander Luria. which ideas are arrayed in the mind
Shereshevsky arrived at Luria’s door throughout a well-known space (a
bewildered, having forgone note-taking childhood home, say, or even a well-
at meetings not because he was lazy or trodden route to work) and can then
impudent but because he always be retrieved later.2 The human brain,
remembered everything said at them, Foer explains, has evolved to be quite
word for word, and couldn’t conceive proficient at remembering spaces.
that others didn’t. He asked Luria to Spend five minutes at a party walking
administer some memory tests, and through a stranger’s home, and you’ll
Luria did so, first asking Shereshevsky naturally form a mental map of the
(known in the scientific literature as place — where the kitchen is, how to
“S”) to memorize a list of numbers, get to the bathroom, where you left
and then listening “in amazement as his your wife. Our brains are far less adept
shy subject recited back seventy digits, at remembering information like
first forward and then backward.” Test phone numbers, names, and world
after test returned the same result: “The capitals, and so the memory palace
man was unstumpable.” Luria finally allows us to do what S did naturally:
realized that he would not be able to convert nonvisual data into visual
perform what, he later said, “one images, and place those images in pre-
would think was the simplest task a cise spots where we can later find
psychologist can do: measure the them. “The idea,” Foer writes, “is to
capacity of an individual’s memory.” create a space in the mind’s eye, a place
S had a condition called synesthesia; you know well and can easily visualize,
stimulation of one of his senses pro- and then populate that imagined place
duced a reaction in all the others. For S,
voices were colors and textures, and 2. The late Tony Judt, for instance, used this
words immediately became vibrant technique when immobilized by amyotrophic lat-
eral sclerosis to sort out in wakeful nights the
images, or tastes, or smells. His memo-
memories that became the essays that became his
ries were not abstract. Rather, they were recently published book The Memory Chalet.
72 Policy Review
Books
with images representing whatever you of reviving a lost craft. “This book is
want to remember.” our bible,” Ed tells Foer about the
Creation of the memory palace is Rhetorica, before also assigning him
credited to the Greek poet Simonides, excerpts of Quintilian’s Institutio
who lived in the fifth century B.C., but Oratoria and Cicero’s De Oratore and
the technique was first described, so far a ream of other musings on memory
as we know, in a Latin textbook called from Thomas Aquinas, Albertus
the Rhetorica ad Herennium that was Magnus, Hugh of St. Victor, and Peter
authored sometime between 86 and 82 of Ravenna. It is through these docu-
B.C. Though no earlier writing makes ments that Foer treads as he undertakes
mention of it, the memory palace was his own memory training. For half an
definitely in use in the 400-odd years hour each morning, and a few minutes
between Simonides’s time and the in the afternoon, he practices, memo-
Rhetorica’s publication. Cicero, for one, rizing lists of words and numbers. He
thought the palace techniques so well- installs numbers in his memory palace
known that “he felt he didn’t need to by using the “Major System,” invented
waste ink describing them in detail.” in 1648, which provides a simple code
Memory training was central to classi- for converting numbers into letters.
cal education. “In a world with few The number 34, for example, trans-
books, memory was sacrosanct,” and in lates as mr. Vowels can be freely inter-
the pages of extant books people with spersed, so 34 might find a place in the
extraordinary recall abilities were exalt- memory palace as an image of the
ed. Indeed, Foer writes that besides their Russian space station Mir. For long
goodness, “the single most common strings of numbers, Foer learns more-
theme in the lives of the saints . . . is advanced pao systems, in which each
their often extraordinary memories.” two-digit number is associated with a
Today, of course, memory is no different person-action-object image;
longer so revered or commonly excel- 34 could be Barack Obama speaking
lent. What happened? Technology, at a lectern (or, more memorably,
specifically writing. Foer quotes from Obama dancing meringue with a toad).
Plato’s Phaedrus, in which Socrates tells A six digit number can then be turned
how the Egyptian king Thamus into a single picture by mashing the
rebuffed Theuth, the god who created person of the first two digits with the
writing and offered to bestow it on the action of the second and the object of
land, for fear the invention would atro- the third. Each number between 0 and
phy the people’s minds: “They will 9 9 9 , 9 9 9 thus gets its own, unique
cease to exercise their memory and image.
become forgetful,” says Thamus, and After a few months of such training
they will “rely on that which is written, Foer hits a plateau: his playing-card
calling things to remembrance no memorization time will not drop.
longer from within themselves, but by Again, he looks to the past for answers.
means of external marks.” This is pre- Help comes in the 1960s literature on
cisely what came to pass. speed-typing, from which he learns
In a way, then, the memory competi- about the notorious “autonomous
tors that Foer meets are in the business stage.” When a person, after practicing
April & May 2011 73

Books
a given task, figures he has gotten pret- ponders whether all his memorizing
ty good at it, “the parts of the brain isn’t just a massive waste of time).
responsible for conscious reasoning Christian attempts something similar
become less active.” The person begins with The Most Human Human.
conducting the task on “autopilot.” In February, Ken Jennings, the leg-
The key, Foer learns, is to push through endary Jeopardy! contestant who won
this wall by “consciously keeping out 74 straight games, was soundly beaten
of the autonomous stage” while focus- on the show by Watson, a room-sized
ing on technique, remaining “goal-ori- computer created by I.B.M. Facing cer-
ented,” and “getting constant and tain defeat, Jennings jokingly scrawled
immediate feedback” on performance. on his video screen, “I, for one, wel-
With speed-typing, that means typing come our new computer overlords.”
just a bit faster than you’re comfortable Humor aside, the questions raised by
with, pushing yourself to continue hit- such artificial-intelligence successes are
ting the keys even though the errors are real. What, if anything, did Watson’s
piling up. Gradually, with focus, you’ll victory prove? Did the computer
make fewer and fewer mistakes, even “think”? Did it “act human”? What,
as your typing time drops. It’s much the after all, does doing either of those
same with memory training: Foer push- things really entail?
es himself to go faster and faster, and Such are among the questions that
conscientiously marks his progress. Christian undertakes to answer. His
“This is what differentiates the top book’s scaffolding, from which its many
memorizers from the second tier,” he digressions are built, is his participation
writes. The best memorizers “approach in the annual Loebner Prize, a contest in
memorization like a science” and which one group of humans (“judges”)
“develop hypotheses about their limita- engages in a battery of instant message
tions; they conduct experiments and conversations. In some of those conver-
track data.” “If I would have any sations, the judges’ interlocutors are
chance at catapulting myself to the top flesh-and-blood people (“confederates”)
tier of the competitive memory circuit,” and in others are sophisticated, artifi-
Foer writes, “my practice would have cial-intelligence (a i ) computer pro-
to be focused and deliberate.” Foer grams. A judge decides about each con-
focuses. He creates a spreadsheet to versation whether he was speaking to a
monitor his practice time and results, human or a computer, and he rates his
he graphs everything, and he keeps a confidence in his determination on a
journal. He buys a pair of industrial- 1–10 scale. Scores are tabulated, and
grade earmuffs. His time starts to fall. the computer program that tricks the
most judges into believing it a human
M oonwalking with Einstein

is a book that could have
easily followed the brain-
science lodestar. Instead, Foer takes a
smarter tack, following a multi-discipli-
wins the coveted “Most Human
Computer” award and all the money
and prestige that accompany it.
Christian is after a different honor,
though: The confederate who convinces
nary guide that does not place all its the most judges of his humanity receives
wisdom in sparking synapses (he even the title “Most Human Human.”
74 Policy Review
Books
The Loebner Prize launched in after all, “a book about living life.”
1991, but the concept behind it dates First up is a disquisition on what
to 1 9 5 0 , when it was proposed by Christian calls “authenticating”; he
British mathematician Alan Turing. moves from telling a story about a man
Turing predicted that by 2000, five with phonagnosia (the man cannot rec-
minutes of conversation would allow a ognize voices, even his mother’s) to
computer to fool 30 percent of judges relaying the history of speed dating to
into believing it human. So far, no pro- dissecting the structure of a particular
gram has managed to hit this 30 per- AI program called Cleverbot. Then it’s
cent mark, although in 2008 the top
computer missed it by a single vote. Christian describes his
The Turing test takes on significant
meaning for Christian, who believes
preparation for the
that “at bottom” it is “about the act of Loebner Prize, which
communication.” Its “deepest ques-
consists not of regimented
tions” are “practical ones” about con-
necting “meaningfully with each other” practice with decks
“within the limits of language and of cards and sheets filled
time.” He asks other questions, too:
“How does empathy work? What is with random numbers
the process by which someone comes but of research and
into our life and comes to mean some-
thing to us?” Such inquiries are the
rumination on the
test’s fundamental ones, “the most cen- nature of humanity.
tral questions of being human.” “In a
sense,” he continues, “this is a book on to a consideration of machine trans-
about artificial intelligence, the story of lation of literature, a story about an
its history and of my own personal ultimately successful call to a cellular
involvement, in my own small way, in phone company’s customer service
that history. But at its core, it’s a book department, four paragraphs about 50
about living life.” First Dates (the 2004 comedy starring
In The Most Human Human, as in Adam Sandler and Drew Barrymore),
Moonwalking with Einstein, the author and a tale about a 1989 “chatbot”
achieves his goal; in the end, Christian program that argued for an hour and a
walks away from the Loebner Prize half with an unsuspecting human.
having pocketed the quintessentially- Sprinkled on top are bits of dialogue
human designation. He describes his from Sex and the City, short anecdotes
preparation for the contest, which con- involving the author’s friends, and
sists not of regimented practice with Nietzsche quotations. This is the initial,
decks of cards and sheets filled with post-Introduction chapter. Subsequent
random numbers but of research and chapters follow, similarly disjointed.
rumination on the nature of humanity. Ingested as single-serving snacks,
Brain-science nuggets are interspersed Christian’s brief commentaries are
with the author’s other musings, on enjoyable, but taken together as a meal,
subjects vast and varied, this being, in chapter- or book-form, they become
April & May 2011 75

Books
a muddle. The book doesn’t have a (great literature and art) as well as the
narrative and needs one. common (50 First Dates), the old (Sun
A reader can understand what Tzu) as well as the new (neuro-linguistic
Christian is attempting here, a winding programming), and attempts to deglaze
exploration of what it is to be human; some essence from it all. But he includes
can appreciate his curiosity and perspi- too many ingredients. The author loses
cacity, which are frequently evident; track of them, and so do we.
and still feel lost pushing through para-
graphs with such subheads as
“Intimacy: Form & Content” and
“Suspicion; Roulette; Purée.” Power and
Occasionally a chapter coheres —
“Getting Out of Book,” for example, is
an impressive, incisive 30 pages about
Arrogance
chess and grandmaster Gary By David Shorr
Kasparov’s 1997 loss to I.B.M.’s Deep
Blue computer — but more often it S t e v e n We b e r a n d B r u c e
doesn’t, a victim of ambition. Unlike Jentleson. The End of Arrogance:
Foer’s memory competition, never America in the Global Competition of
absent from his book’s pages, the Ideas. Harvard Press. 224 Pages.
Turing test is frequently forgotten in $22.95.
Christian’s ramblings. It is referenced
haphazardly, laboriously; one pictures
the author, suddenly aware that he has
wandered too far from the road, scram-
bling to get back on track. Add to the
reader’s disorientation the annoyance
of being bombarded from The Most
T he most interesting
questions for U.S. foreign
policy are variants of the fol-
lowing: How much has the world
changed? As America tries to prod
Human Human’s pages with italicized world affairs along its preferred trajec-
words, not infrequently five or more of tory, how has that task been complicat-
them shot from a single, short para- ed by new international realities? The
graph. Amid the withering barrage, one debate over whether America is in
perceives the author is maybe too fond decline misses the point. The signs of a
of his own cleverness, his ability to significant shift in international power
reveal hidden truths: “I don’t want life are just too plain and numerous for
to be solved; I don’t want it to be solv- anyone to doubt that the United States
able,” Christian writes, and quickly fol- faces new challenges in exerting its
lows with, “The reason to wake up in influence. But again, this leaves plenty
the morning is not the similarity of open questions about the nature of
between today and all other days, but those challenges.
the difference.” This is very irritating. Steven Weber and Bruce Jentleson’s
But to his credit, Christian, like Foer, new book, The End of Arrogance:
eschews brain-science’s lowest-hanging
fruit. He has written a book about David Shorr is a program officer at
humanity that looks to the vaunted the Stanley Foundation.
76 Policy Review
Books
America in the Global Competition of systematic or can match their record of
Ideas, tackles these most basic issues success.
head-on. The authors offer a bracing But this is a false comfort, Weber
assessment of the international environ- and Jentleson argue. The main fallacy
ment U.S. policymakers confront. If the — aside from the stubborn fact of
first step in overcoming any self-delu- China’s economic success — is that
sion is to recognize that you have a only universally applicable, all-encom-
problem, Weber and Jentleson are try- passing theories can contend as rivals.
ing to jolt America out of its self- In other words, while America pre-
absorption. Just to stretch the analogy, sumes that it has won the grand histori-
consider the book an intervention — its cal argument about governance and
authors giving tough love to fellow for- economic management, we have mis-
eign policy thinkers who are addicted understood how that argument plays
to an outmoded ideology of American out in the real world of global politics.
leadership. They liken the delusion to Resistance to American leadership and
the Copernican paradigm shift under- the emergence of counter-arguments
cutting the image of the earth at the don’t need to be undergirded by fully
center of the universe; the United States workable ideologies.
has lost its political gravitational pull. So it is a mistake to view American
Putting it succinctly, the book approaches as vying in a war of ideas,
answers this essay’s opening question in which one model decisively van-
by saying the world has changed a lot quishes another. And despite the use of
more than we have admitted to our- the Copernican revolution as a refer-
selves. Assumptions about America’s ence point, the book also warns against
advantages are ripe for reexamination. the image of scientific advances, with
The authors dissect even the milder theories gaining acceptance due to their
conceptions of American exceptional- superior explanatory power. A much
ism. In other words, their critique cov- better analogy for how it works, say
ers conservatives and liberals alike. the authors, is the competition of the
Among their targets is the notion commercial marketplace.
that the U.S. political and economic In his recent state of the union
model faces no significant rivals, address, President Obama adopted sim-
because the supposed contenders have ilar themes of American economic
such limited appeal or applicability. dynamism as strengthening national
The argument is indeed familiar — and competitiveness, but End of Arrogance
comforting in its reassurance. The is a methodical reconception of U.S.
Chinese dynamo of export-led state foreign policy challenges in terms of the
capitalism is very hard to replicate. The global competition of ideas. A main
Singapore model depends on its pecu- thread of the book is to warn against
liar geography. Fundamentalist Islam is taking anything for granted, beginning
too inhuman. Anti-Americanism is a with the “five big ideas [that] shaped
purely negative phenomenon. world politics in the twentieth centu-
American-style democracy and free ry”: the preferability of peace to war;
markets are dominant paradigms benign (American) hegemony to bal-
because no others are as coherent or ance of power; capitalism to socialism;
April & May 2011 77

Books
democracy to dictatorship; and tion that the United States can be
Western culture to all others. Jentleson more powerful and the world can
and Weber portray an international be a better place at the same time.
order that is up for grabs at the begin- The belief that these two things
ning of the 21st century. Their claim could be consistent or even rein-
that nations and leaders are working force each other was the most valu-
with a clean slate probably overstates able and precious advantage
the case, but most of the book charts a America had in the post-World
credible course to renewed U.S. global War II milieu. It has eroded and
leadership. that changes the nature of ideologi-
The heart of the book’s first section cal competition dramatically. A
describes essential market dynamics new foreign policy proposition has
and key principles: to find a way to put that belief
back into play.
In a functioning modern market-
place of ideas, at least three things
A stark, yet apt, summary of our cur-
are true of a twenty-first-century
rent strategic challenge.
leadership proposition. First, we
The book’s middle two chapters out-
offer, but they choose. A market
line the substance of leadership propo-
leader is fundamentally more
sitions the United States could offer as
dependent on the followers than
a basis for equitably just societies
the followers are on the leader . . .
domestically and new political terms
Second, the relationships are visible
for international order. Since the
and consistency is demanded.
authors’ project is to shed those con-
Market leaders don’t depend heavi-
ceits that represent the toughest “sell”
ly on private deals and subterfuge
for the hegemon, their leadership
to hold their bargains in place . . .
propositions have a distinctly stripped-
Finally, there is real competition.
down character. In place of democratic
Markets are relentless in their abili-
ideology — electoral competition and
ty to generate new offerings.
the popular mandate — the essential
The authors describe some key chal- elements of a just society are the
lenges in the contemporary market- empowerment of people to lead fulfill-
place, all of which lower the barriers to ing lives and protection of the vulnera-
entry for our competitors. They high- ble, those buffeted by forces of rapid
light the revolution in information and change such as extreme weather, indus-
communications technology, demo- trial accidents, or spikes in the price of
graphic trends that fill megacities with staple foods.
young people whose worldview is non- As the authors step out of ingrained
Western, the openings provided by the American worldviews to gain perspec-
diffusion of authority, and the perme- tive on democracy, they make a com-
ability of national borders. The section pelling point about the weaknesses that
concludes with a sobering assessment: others perceive. After all, democracy is
a decision-making process rather than a
In 2010, globally, there remains a tangible benefit for people’s lives. In the
deep skepticism about the proposi- wide swath of the world where daily
78 Policy Review
Books
life is a grinding struggle, to idealize they might contribute toward global
process and treat material conditions as public goods, they should use an
secondary and contingent must seem accounting system that takes a long
exotic. view. They shouldn’t expect repayment
Just as the book proposes revised or benefits of equal value, but should
standards of good governance, it issues instead trust that if everyone does his
a similar challenge to recast the interna- part, “an ongoing set of mutuality
tional political order. Again the root of moves will roughly balance out the
the problem is complacency; Americans accounts and leave us all better off than
are still trying to dine out on our we were.”
authorship of the post-World War II The book’s concluding chapter high-
order when the resonance of that cre- lights four major foreign policy dilem-
ation myth has faded. Rather than dis- mas that will test America’s interna-
missing the mere notion that the post- tional strategy. To stress the importance
war order could be (or has already of those tough choices, the authors give
been) upended, we should try to get out their thoughts on the discipline of strat-
ahead of the revision process. One of egy: “Anybody can tell a story about
the authors’ refrains is that while the the world they want to live in. Strategy
U.S. political elite is consoling itself that is the discipline of choosing the most
“there is no alternative,” much of the important aspects of that world and
rest of the world is insisting that “there leaving the other stuff behind.” As they
must be an alternative.” see it, the trickiest questions have to do
The leadership proposition that with the proper role of nonstate actors
Weber and Jentleson put forward is a versus official authorities; multilateral-
response to the interconnected 21st- ism as a false panacea for international
century world, and rightly so. The diffi- challenges; populist pressures demand-
culty is that the precursors for a peace- ing more than democratic governance
ful and prosperous order — which they and free markets can deliver; and the
identify as “security, a healthy planet, difficulty of reckoning short-term costs
and a healthfully heterogeneous global in light of long-term risks (think cli-
society” — can only be achieved mate change).
through combined effort. In other
words, if all of the world’s key players
deal with the international system by
trying to maximize their own nations’
benefits and minimize their contribu-
tions, the world as a whole could face a
H e r e ’ s h ow i would
answer my opening ques-
tion about how much the
world has changed: not as much as
Jentleson and Weber say it has. The
pretty bleak future. End of Arrogance works very well as a
As a key to spurring a more civic- provocation, yet the authors’ insistence
minded attitude from nations and their that we are back to the drawing board
leaders, the authors offer an alternative of a new global order is a bit excessive.
to narrow and short-sighted concep- Their report of the postwar order’s
tions of national interest: the principle demise is greatly exaggerated. While it
of mutuality. When policy makers mull may be overly complacent to assert
tough diplomatic compromises or tithes that “there is no alternative,” it’s also
April & May 2011 79

Books
too early to declare the old rules for them to deal with one another as
invalid. equally sovereign authorities in the
Indeed, one of the book’s most dra- international arena. Governance princi-
matic claims is to declare the very ples for how they act within their own
notion of rules to be passé. In keeping borders are too divisive and controver-
with the idea of a relentlessly competi- sial to serve as a basis for international
tive, constantly churning marketplace, order.
the new international order consists of In such a system, would the United
a stream of intergovernmental transac- States be compelled to back Hosni
tions. As the authors put it, diplomatic Mubarak to the bitter end? End of
deals are taking the place of interna- Arrogance was published before the
tional norms at the heart of the sys- recent protests in Egypt, but the book
tem. says enough about the hazards of get-
If they’re right, the world has been ting involved in others’ governance to
turned upside down, and most of us in allow for some extrapolation. Jentleson
the foreign policy establishment failed and Weber’s view doesn’t necessarily
to notice it — international politics as a imply unstinting support for a dictator
new global Wild West. Can that be faced with mass discontent. Given their
right, though? I don’t think so. It’s one emphasis on political realities, it would
thing to face up to the political strains be surprising if the authors called on
that indeed jeopardize the norms put in U.S. policymakers to ignore the writing
place over the last 65 years, and yet on the wall. Machiavelli himself would
another to declare that the old rule have recognized that Mubarak was nei-
books have gone out the window. ther loved nor feared enough to retain
When Weber and Jentleson describe power.
a new political system in which each On the other hand, the authors’
nation’s polity and social order are views seem to align them with the
beyond the bounds of international series of U.S. ambassadors in Cairo
relations, you have to give them credit who counseled against any serious
for practicing what they preach about pressure by Washington on Mubarak
strategic discipline and abandoning sec- to reform Egypt’s political system. In
ondary concerns. In one section, they other words, I interpret the book as an
try to get a jump on their critics with a argument for giving Mubarak a shove
preemptive defense against charges of at the end, but not laying a finger on
betraying moral values. The authors him before then. Among their com-
insist that they fully share the values of ments on democratic principles, the
liberty and democracy. It’s just that the authors remind us of the long record of
authors’ own views — and by exten- American hypocrisy — the dictators
sion those of the American leadership supported, the democratically elected
and public — do not represent the governments overthrown. And remem-
weight of international sentiment and ber, among their tenets of the market-
therefore do not set the terms for the place of ideas is that a nation must be
global political order. As a matter of consistent to remain credible, given the
political assessment, they see only market’s high degree of transparency.
enough consensus among governments The apparent answer is to give up any
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pretense of defending democratic prin- the authors point out, that doesn’t ren-
ciples abroad. der them invalid. We should not be so
Given the scope and speed of change quick to accept this kind of tacit with-
in today’s world, it is highly useful to drawal from the udhr or the other
have a book that keeps us from being pillars of the so-called “international
too comfortable. U.S. foreign policy bill of rights” (the International
indeed confronts hard choices and Covenant on Civil and Political Rights
trade-offs and must do a better job in and its twin Covenant on Social and
wrestling with these dilemmas. Yet I Economic Rights). Repressive leaders
have to ask whether this framework
has boxed us in more than necessary. The United States must
Must the discipline of strategy be so
stringent that second-tier concerns be
undoubtedly be more
jettisoned rather than kept in propor- conscious of how it
tion? Just because the norms of the old
appears to others, less
order have come under significant new
skepticism and resistance, does that presumptuous about
mean they are null and void? Does the the advantages it has
global market demand such consistency
that international publics cannot enjoyed in the past, and
understand the competing pulls of more respectful of the
democratic principles, stability consid-
erations, and power realities?
needs and perspectives of
The United States must undoubtedly other nations.
be more conscious of how it appears to
others, less presumptuous about the should have to renounce such long-
advantages and self-righteousness it has standing norms by formally abrogating
enjoyed in the past, and more respect- the treaties their nations have previous-
ful of the needs and perspectives of ly ratified.
other nations. U.S. foreign policy can- The recent events in Egypt show
not press for democratic reform as if its the difficulties on both sides of the
value were universally recognized or it’s equation. It could hardly have been
equally achievable everywhere, regard- helpful to renounce the role of human
less of local power structures. rights norms in the international order
Democratic values cannot be the top when faced with such a popular out-
concern in countries where nuclear pro- cry for political reforms. Nor would it
liferation or global economic stability is have been a simple matter for the
the main worry. United States to question Mubarak’s
None of which, though, requires the legitimacy much earlier than it did.
extensive revision of American strategy Clearly we haven’t figured out the
that Weber and Jentleson advocate. right foreign policy balance, in this
Even if post-World War II legacy docu- instance like so many others. To be
ments like the 1 9 4 8 Universal sure, it’s vital that we do so, for
Declaration of Human Rights hold lim- America’s credibility, influence, and
ited sway over abusive governments, as competitiveness.
April & May 2011 81

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three-week war to find evidence of
human rights abuses. No side
escapes the report’s censure. But the
The Goldstone documented evidence of Israeli mis-
conduct — of reckless, perhaps
Mess even deliberate, destruction of life
and property — creates a portrait
By Peter Berkowitz of stunning aggression. For these
acts of aggression, the report accus-
Adam Horowitz, Lizzy Ratner, es Israel of likely war crimes and
and Philip Weiss, editors. The crimes against humanity, and calls
Goldstone Report: The Legacy of the on it to look deep into the actions
Landmark Investigation of the Gaza of its military and undertake its
Conflict. N a t i o n B o o k s . 4 4 9 own investigation. It also accuses
pages. $18.95. Hamas, the party governing Gaza,
of likely war crimes and possible
crimes against humanity for firing
I n the foreword, Desmond

Tutu, archbishop emeritus of
Cape Town, South Africa,
declares that “The document at the
center of this book, the report of the
rockets into southern Israel, and
urges it to investigate its actions as
well.
Contrary to Tutu, however, even a

United Nations Fact-Finding Mission cursory glance gives reason to believe
on the Gaza Conflict, better known as that the Goldstone Report is more
the Goldstone Report, is an historic interested in taking sides than discover-
attempt at seeking and speaking the ing the truth. While no side escapes the
truth.” According to Tutu, the report’s censure and it does abound in
Goldstone Report achieves this distinc- evidence of destruction “of life and
tion through its impartial and intrepid property” in Gaza, the report over-
examination of allegations of criminali- whelmingly focuses on allegations of
ty arising out of Israel’s December Israeli unlawfulness; the “documented
2008-January 2009 Gaza operation: evidence of Israeli misconduct” — as
opposed to victims’ testimony and
It takes on one of today’s most dif- unsubstantiated speculations about
ficult conflicts, and does not blink Israeli war aims and conduct of the war
but delves beneath the rubble of the — is thin; and its urging of Hamas,
which respects neither rights nor the
rule of law, to undertake investigations
Peter Berkowitz is the Tad and Dianne of war crimes allegations is a risible
Taube Senior Fellow at the Hoover indulgence.
Institution, Stanford University. His Naomi Klein’s Introduction echoes
article “The Goldstone Report and
Tutu’s Foreword and effectively con-
International Law” appeared in Policy
Review 1 6 2 (August & September veys the book’s overall message. A
2 0 1 0 ). His writings are posted at columnist for the Nation and best-
www.PeterBerkowitz.com. selling author of The Shock Doctrine:
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The Rise of Disaster Capitalism, Klein assume that fault for harm to civilians
displays in her opening paragraph a and civilian infrastructure automati-
crucial misconception on which that cally falls upon the invading army
message, as well as the report, relies: rather than, say, on fighters dressed in
civilian clothes who take up positions
A sprawling crime scene. That is
in densely populated urban areas.
what Gaza felt like when I visited
There is, however, no foundation for
in the summer of 2009, six months
such an equation or such an assump-
after the Israeli attack. Evidence of
tion in either international human
criminality was everywhere — the
rights law, which sets forth what is
homes and schools that lay in rub-
owed individuals in times of peace, or
ble, the walls burned pitch black by
international humanitarian law (also
white phosphorous, the children’s
known as the law of armed conflict),
bodies still unhealed for lack of
which deals with the protection in
medical care. But where were the
wartime of civilians as well as of sol-
police? Who was documenting
diers no longer able to fight.
these crimes, interviewing the wit-
Unfortunately, the Goldstone Report
nesses, protecting the evidence
encourages Klein’s false equation and
from tampering? [emphasis added]
specious assumption.
Before investigation — Israel was far Indeed, the false equation of harm to
from completing its own, the civilians in war with criminal conduct
Goldstone Report had not yet been and the specious assumption that legal
issued, and nobody seriously expected liability for the death and destruction in
that Hamas would undertake a rep- Gaza falls automatically on Israel lie at
utable investigation — Klein concluded the heart of the book, edited by jour-
from casual observation during a visit nalists Adam Horowitz, Lizzy Ratner,
that took place six months after hostili- and Philip Weiss, two of whom —
ties ended that Israel had committed Horowitz and Weiss — edit
war crimes. Mondoweiss.net, an online “news web-
Although she treats it as offering site devoted to covering American for-
conclusive proof, the scene she con- eign policy in the Middle East, chiefly
fronted did not obviously present evi- from a progressive Jewish perspective.”
dence of crime. Evidence of violence, In addition to Tutu’s Foreword, Klein’s
destruction, and war, yes. Evidence of Introduction, an Editor’s Note, and the
civilian suffering, to be sure. Evidence bulk of the 500-plus page Goldstone
of human tragedy, no doubt. But evi- Report, the book contains eleven
dence of crime? essays, all but one of which fail to take
To conclude on the basis of what issue with the report’s damning factual
she saw on her visit to Gaza that Israel and legal findings about Israel. And,
had committed crimes, Klein would like the Goldstone Report itself, ten of
have had to equate violence, destruc- the eleven essays tread lightly concern-
tion, war, civilian suffering, and ing allegations of unlawful conduct by
human tragedy with criminal conduct. Hamas and the Palestinians.
And, to assign guilt to Israel prior to The report’s central and gravest
investigation, she would have had to finding, the takeaway heard around the
April & May 2011 83

Books
world, was that Israel’s conduct of the sor at the University of Pittsburgh
Gaza operation was in itself unlawful. School of Law and vice president for
The report did not deny the legitimacy the Center for Constitutional Rights,
of Israel’s overall purpose in Operation asserts that it is “neither new nor sur-
Cast Lead, which was to stop the more prising” that “the overwhelming thrust
than 12,000 rockets and missiles — of the Goldstone Report is that Israel
every one a war crime — that attacked the civilian population during
Palestinian fighters directed at civilian the Gaza war, including destroying the
targets in southern Israel over the previ- basic means of sustaining life (from
ous eight years. Nevertheless, the clean water wells to poultry farms),
report found that Israel launched “a and that these attacks violate two cen-
deliberately disproportionate attack tral bodies of international law: inter-
designed to punish, humiliate and ter- national humanitarian law and interna-
rorize a civilian population, radically tional human rights law.” Jerome
diminish its local economic capacity Slater, a former professor of political
both to work and to provide for itself, science at s u n y /Buffalo and now
and to force upon it an ever increasing University Research Scholar there,
sense of dependency and vulnerability” declares that the Goldstone Report is
(paragraph 1690). “extraordinarily detailed, and fully
Justice Goldstone himself acknowl- sourced.” Former Congressman Brian
edged in an interview in the Forward in Baird can not see any cause for contro-
October 2 0 0 9 , a month after the versy: “I read the entire Goldstone
United Nation’s Human Rights Council Report, front to back, and I read it crit-
published the report over which he ically. And after all the flak it had
presided, “If this was a court of law, taken, I thought, Well, what am I miss-
there would have been nothing ing here? I didn’t have any beef with it
proven.” But that’s not how the at all.” And in an essay distinguished
Goldstone Report reads, or was read, by the vitriol it directs against those
certainly not by editors Horowitz, who view the world differently, Rashid
Ratner, and Weiss, not by Archbishop Khalidi, the Edward Said Professor of
Tutu, not by Naomi Klein, not by ten Arab Studies at Columbia University,
of the eleven commentators assembled maintains that the Goldstone Report
by the editors, and not by the vast “clinically documents the humiliations
majority of international human rights of Palestinians during the war on
lawyers and progressive intellectuals Gaza.”
throughout the West. Only one essay, that of Moshe
In the book, for example, Raji Halbertal, a professor of philosophy at
Sourani, a human rights lawyer based the Hebrew University of Jerusalem
in Gaza City and director of the and the Gruss Professor at New York
Palestinian Center for Human Rights, University School of Law, registers a
contends that in Israel’s operation, dissent. To the credit of the volume’s
“Public and private infrastructure editors, it is a powerful dissent.
throughout the Gaza Strip was exten- Originally appearing in November
sively, and deliberately, targeted and 2 0 0 9 in the New Republic, “The
destroyed.” Jules Lobel, a law profes- Goldstone Illusion” highlights the
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report’s obscuring of Hamas’s deliber- And what is the moral distinction
ate strategy “to erase two basic features that is purportedly being estab-
of war: the front and the uniform.” lished here?
According to Halbertal,
The moral, or immoral, distinction
In addressing this vexing issue, the
is between Hamas, whose cause the
Goldstone Report uses a rather
report treats with kid gloves, and Israel,
strange formulation: “While
for whose rights and interests it shows
reports reviewed by the Mission
little sympathy. Tutu’s Foreword,
credibly indicate that members of
Klein’s Introduction, the Editor’s Note,
the Palestinian armed groups were
and all the other essays embrace that
not always dressed in a way that
distinction.
distinguished them from the civil-
The report obscures Hamas’s era-
ians, the Mission found no evi-
sure of the difference between combat-
dence that Palestinian combatants
ants and noncombatants and prefers
mingled with the civilian popula-
Hamas’s cause to Israel’s rights and
tion with the intention of shielding
interests in several ways. First,
themselves from the attack.” The
Goldstone and his team collected and
reader of such a sentence might
presented evidence in an improper
well wonder what its author
manner. The report relied largely on
means. Did Hamas militants not
Palestinian testimony, even though
wear their uniforms because they
Palestinians in Gaza live under the rule
were inconveniently at the laundry?
of an authoritarian power well known
What other reasons for wearing
to punish viciously the expression of
civilian clothes could they have
dissenting opinion. In addition, the
had, if not for deliberately shelter-
report made many findings of law that
ing them among the civilians.
turned on factual findings about the
As for the new “front” in asym- intentions in battle of Israeli comman-
metrical warfare, we read in anoth- ders and soldiers. But since Israel
er passage, which is typical of the refused to cooperate with the
report’s overall biased tone, that Goldstone Mission — it had no obliga-
“[on] the basis of the information it tion under international law to do so,
gathered, the Mission finds that and plenty of reason, amply confirmed
there are indications that by the Goldstone Report, to suspect
Palestinian armed groups launched any undertaking initiated by the incur-
rockets from urban areas. The ably compromised United Nations
Mission has not been able to obtain Human Rights Council — those legal
any direct evidence that this was findings were inherently defective. The
done with the specific intent of report was certainly forbidden by prin-
shielding the rocket launchers from ciples of international law to infer that
counterstrikes by the Israeli armed absence of evidence concerning Israeli
forces.” What reason could there understandings and intentions consti-
possibly be for launching rockets tuted evidence concerning the sub-
from urban centers, if not shielding stance of those understandings and
those rockets from counterattack? intentions.
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Books
Second, the Goldstone Report failed The principle of distinction requires
to accurately characterize Hamas. combatants to distinguish fighters and
Although the U.S. and the eu for good military objects from civilians and civil-
reason regard it — both its civil and ian objects, and to target only fighters
political wings — as a terrorist organi- and military objects. It also requires
zation, the report refrains from so combatants to distinguish themselves
referring to it. Indeed, the report from innocent civilians — by wearing
ignores or barely discusses Hamas’s uniforms, by carrying their arms open-
ideology and Charter, which call for ly, by not conducting military opera-
tions from within civilian areas — so
The report misconceives that the other side can uphold its oblig-
ations. Israeli commanders and soldiers
proportionality, which faced extremely difficult targeting deci-
requires that parties sions because Hamas fighters, in viola-
tion of the law of armed conflict,
refrain from attacks
dressed as civilians; hid ammunition,
in which expected civilian rockets, and missiles in civilian build-
casualties and damage ings, including schools, hospitals, and
mosques; and booby-trapped neighbor-
to civilian objects will hoods. The report concludes that much
be excessive in relation of the damage caused by Israeli military
operations to civilians and ostensibly
to the anticipated civilian objects in Gaza involved crimi-
military advantage. nal conduct on Israel’s part, but it does
not apply the proper legal test. The
Israel’s destruction; Hamas’s overall proper legal test asks whether a reason-
terrorist strategy, including the military able commander in the actual circum-
infrastructure it constructed through- stances under scrutiny would believe
out Gaza’s residential neighborhoods; that the target is being used to make an
its enforced Islamization of the effective contribution to military
Palestinian population of Gaza; and the actions. Since the Goldstone Report
flow from Iran through Egypt’s Sinai neither obtained information about the
Peninsula into Gaza of rockets and mis- understanding and intent of Israeli
siles for attacking Israeli civilian popu- commanders nor investigated Hamas’s
lations. systematic use of ostensibly civilian
And, third, as Emory law school objects for military purposes — which
professor Laurie Blank shows in con- causes those objects to lose their immu-
siderable detail in an excellent article, nity — its many legal findings that
“The Application of i h l in the Israel failed to properly distinguish
Goldstone Report: A Critical civilian objects are inherently invalid.
Commentary,” the Goldstone Report The report similarly misconceives
misapplies the principles of distinction the fundamental principle of propor-
and proportionality, the very corner- tionality, which requires that parties
stones of international humanitarian refrain from attacks in which expected
law. civilian casualties and damage to civil-
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ian objects will be excessive in relation objects and, in the case of liberal
to the anticipated military advantage. democracies such as Israel and the
Civilian casualties and damage to civil- United States, to punish those who seek
ian infrastructure in warfare are not in to uphold it. And because rewarding
themselves unlawful or evidence of behavior encourages more of it, the
criminality. Moreover, the standard Goldstone Report — and the
“excessive” is highly context sensitive, Horowitz, Ratner, and Weiss volume
while the legal test of proportionality of designed to honor it — will cause more
which it forms a part involves, as with terrorists to operate within densely
the test associated with the principle of populated urban areas.
distinction, reasonableness. Under If the report’s approach prevails,
international humanitarian law, a deter- then, in the fight against transnational
mination of whether the exercise of terrorists, liberal democracies will face
force was proportional depends on fac- a political and legal climate that all but
tual findings about what the comman- criminalizes the exercise of their right
der and his soldiers knew and intended, to self-defense. In the short term, that
on complex calculations about tactics may lead liberal democracies to
and strategy, on the care with which increase the dangers to which they
decisions were made, on the prudential expose their own soldiers and civilians.
steps and precautions taken, and on the In the long term, it risks impelling them
propriety of sometimes instant judg- to abandon international humanitarian
ments in life and death situations. law as hopelessly impractical, thereby
Suffice it to say that the Goldstone undermining their own solidiers’ sense
Report routinely ignores such legally of justice and honor and increasing the
essential considerations, which vitiates peril to the other sides’ civilians.
its sensational legal findings. In the Editor’s Note, Horowitz,
Ratner, and Weiss state their “hope
T he goldstone report is
a deeply flawed document. If
left uncontested and uncor-
rected, its errors will increase the dan-
gers to which civilians and lawful fight-
that this book will keep the report
alive and its findings relevant.” Indeed,
memory of the Goldstone Report
should be preserved, but not for the
reasons that the editors intend. The
ers are exposed in an age of transna- report should serve as a potent
tional terror. reminder that, like other actors, inter-
Without so stating, the report sets national human rights lawyers and
aside, or seeks to rewrite, international international bodies have passions and
humanitarian law. It effectively shifts interests, biases and blind spots; they
responsibility for civilian losses away are capable of manipulating the facts
from terrorists who deliberately violate and distorting the law; they often lack
the law of armed conflict by operating the expertise in military affairs that is
in civilian areas and onto the states necessary to responsibly apply interna-
fighting them. The result is to reward tional humanitarian law to the com-
those who, in gross violation of the plex circumstances of asymmetric war-
laws of war, strive to obscure the dis- fare; and their judgment is uncon-
tinction between civilian and military strained by the discipline of democratic
April & May 2011 87

Books
accountability and national security going in “slow and heavy,” defeating
responsibility. the enemy in detail, he intends to hit
The international law governing “fast and hard,” following the old
armed conflict — in Article 2 of the un Patton formula from Bastogne: “haul
Charter, Article 1 4 6 of the Fourth ass and bypass.” Just as in physics, he
Geneva Convention, Article 17 of the writes, where the impact of mass
Rome Statute creating the International increases with velocity, so in war;
Criminal Court — assigns to states “speed kills,” making up for lack of
with functioning judicial systems, numbers. And with such advanced fire-
which in particular means liberal power as the U.S. possesses, the old
democracies, the right and primary textbook rule requiring a three-to-one
responsibility to investigate allegations advantage in the attacker’s favor no
of war crimes. The many and varied longer applies.
failings of the Goldstone Report illumi- As for the war’s aftermath, through-
nate the wisdom of this critical feature out the preparations Franks acts as if
of international law. this is somebody else’s table entirely. In
a revealing exchange, he growls at the
deputy secretary of defense, “You pay
How Peace attention to the day after, I’ll pay atten-
tion to the day of.”
Gets Made The result is well-known: Franks
turned out to be only half right. A vast
By Henrik Bering ground force was indeed unnecessary
to defeat the Iraqi army. But trouble
G i d e o n Ro s e . How Wars End. started almost immediately afterwards,
Simon and Schuster. 432 Pages. with anarchy developing and too few
$27.00 American troops to contain it. Much of
the infrastructure, which Franks’s
attack had so carefully left untouched,
I n American Soldier, Centcom

commander General Tommy
Franks lays out his battle plan
for Iraq: his campaign, he makes plain,
is not going to be Desert Storm revisit-
was carried away by hoodlums. What
followed was four years of a steadily
deteriorating situation before the prob-
lem was addressed by the surge, a new
military doctrine focused on protecting
ed. The Powell approach — with its civilians, and more modest ambitions
slow buildup of some 560,000 troops, for Iraqi democracy.
a month-long air campaign, followed Indicative as it is of a disconnect
by a massive ground invasion — between the different phases of a war
Franks dismisses as old hat. This time and between the military and civilian
around, things will be truly joint, with side, Franks’s “day after, day of” quote
everything happening at once in the air stands out in Gideon Rose’s book How
and on the ground. And rather than Wars End, which probes the final
stages of America’s wars from World
War I until today and the options that
Henrik Bering is a writer and critic. have faced U.S. administrations,
88 Policy Review
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demonstrating how they all too often but calmly goes about his business, fur-
end up fighting the last war. ther exploring a theme previously
As his epigraph, Rose has chosen struck in Eliot Cohen’s brilliant
Carl von Clausewitz’s classic statement Supreme Command.
from On War: “No one starts a war —
or rather no one in his senses ought to
do so without first being clear in his
mind what he intends to achieve by
that war and how he intends to con-
duct it.” As the use of military force
P roclaiming himself
and his nation “too proud
to fight,” Woodrow Wilson
was an idealist who abhorred tradi-
tional power politics with its vulgar
should always serve policy, Clausewitz notions of spheres of influence. As a
insists, the overall aim must be borne in neutral during the first years of World
mind throughout a conflict. War I, he sought to act as a go-
Unfortunately, that is not always the between, promoting “peace without a
case. “Time and again throughout his- victory,” but found no takers. United
tory, politicians and military leaders States entry into the war transformed
have ignored the need for careful post- the contest, but as a southerner keenly
war planning or approach the task aware of the bitterness caused by
with visions of sugarplums dancing in Reconstruction, Wilson thought it
their heads, and have been caught up essential for Europe’s future that the
short as a result,” Rose writes. Rose Germans not be humiliated, but given
sees this unhappy situation as the result a generous peace. His famous Fourteen
of an “artificial divide” between the Points called for general disarmament,
military and the civilian side, “where free trade, and self determination.
by the start of the conflict, control is Instead of alliances, a collective securi-
handed over to the generals and back ty would be provided by the League of
to the civilians at the end.” Almost by Nations. The European Allies did not
definition, such a neat and tidy division buy his dreams. To the Brits, for
is fraught with risk, he contends, as it instance, the idea of freedom of the
ignores the fact that almost every seas was anathema.
aspect of war can take on a political Considering himself too morally
dimension, even the most routine and superior to be concerned with military
seemingly straightforward task. matters, he was content to leave the
For a while, this split may be cov- drafting of the armistice to the generals,
ered up in all the general activity. “But despite his fears that they might be too
at some point, every war enters what harsh: “It went without saying that the
might be called the end game, and then military commanders were alone com-
any political questions that may have petent to fix terms,” he proclaimed.
been ignored come rushing back with a And fix terms they certainly did,
vengeance.” At which stage, leaders are including the demand for stiff war
left to “improvise furiously.” reparations and the surrender of moun-
Throughout the book, Rose careful- tains of military materiel and of the
ly avoids sounding overbearing and German fleet. Rose quotes the French
know-it-all, a common affliction of Marshall Foch: “[The armistice] might
scholars blessed with 20/20 hindsight, not bear the name of unconditional
April & May 2011 89

Books
surrender, but virtually it would that the German army had not been
approximate to that.” beaten on the battlefield, but had been
Thus, according to Rose, Wilson stabbed in the back by treacherous
failed to fuse the war’s military and politicians, a version eagerly peddled
political side and to use his clout while by German warlord Ludendorff, which
he still had it to get his allies in line. made the rematch inevitable.
Instead, he put great faith in his ability Accordingly, when World War II
to sway public opinion in Europe, but came along, the Germans had to be
ended up cutting an isolated figure at cured of their warlike inclinations once
and for all. This time around, the victo-
ry needed to be total so that no such
Roosevelt always grossly new myths could arise.
overestimated his ability to fdr was an infinitely more worldly
and Machiavellian figure than the con-
handle Stalin. Responding stipated Wilson and certainly felt com-
to a warning letter about fortable intervening in military matters.
Persuaded by the British arguments
Soviet objectives, he wrote, that an Allied landing in Normandy in
“I don’t dispute the logic 1943, let alone 1942, would be disas-
trous, he wisely overruled the advice of
of your reasoning. I just
his own generals, who favored an early
have a hunch that Stalin is invasion, and opted for landings in
not that kind of a man.” North Africa instead. But fdr also had
an idealistic side which, together with a
privileged background, made him less
Versailles. He could not even convince clear-sighted than he should have been.
the U.S. Senate about the need for his Thus he combined the goal of total vic-
League of Nations, which doomed the tory over the Germans with a vision of
enterprise from the start. As Rose a postwar peace that was enshrined in
notes, “Even though he did not consid- the idea of the United Nations.
er himself of this world of power poli- Unfortunately, as Rose notes, the
tics, he should have recognized that he two goals did not combine well. The
was in it, and thus at the mercy of its price required to keep Stalin on board
unforgiving logic.” was at variance with fdr’s political
In hindsight, rather than blaming it postwar order, as the Russian did not
all on the Versailles treaty and on the share his vision at all. Stalin wanted his
failure of the U.S. to join the League of own empire and he wanted complete
Nations, Rose rates the true failure of control. Thus on the ambiguity of the
the victors their failure to work out a Yalta agreement, Rose cites historian
generous postwar financial settlement, Bruce Kuniholm:
plus the fact that America did not
become part of a global institutional At Yalta, because Roosevelt could
network. As it was, the Germans were neither concede portions of
left feeling betrayed by the sanctimo- Eastern Europe to Stalin, nor deny
nious Americans; worse, the myth grew them to him [he] in effect [ended
90 Policy Review
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up doing] both, the former open eyes the full consequences of part-
through implicit understandings, nering with one historical monster to
the latter through the promulga- destroy another,” and for not having
tion of principles that were inter- any contingency plans. It was left to
preted differently by the Soviets Truman to sort out fdr’s mess of con-
and by the American people. tradiction and ambiguity, rescuing
Western Europe from chaos and Soviet
Roosevelt always grossly overesti- domination with Marshall Plan aid, the
mated his ability to handle Stalin. Truman Doctrine, and the creation
Responding to a warning letter about nato, and thereby bringing the mili-
Soviet objectives, he wrote, “I don’t tary and political aspects of U.S. policy
dispute the logic of your reasoning. I into alignment and mutual support. As
just have a hunch that Stalin is not that Rose points out, the Cold War was
kind of a man. Harry [Hopkins] says thus a continuation of unfinished
he’s not and that he doesn’t want any- World War II business, and therefore
thing but the security for his country, inevitable.
and I think that if I give him everything
that I possibly can and ask for nothing
in return, noblesse oblige, he won’t try
to annex anything and will work with
me for a world of democracy and
peace.” Seeing the notion of noblesse
I n J u n e o f 1 9 5 0 , North
Korean forces struck in great
strength across the 38th paral-
lel; having recovered from the initial
shock, General MacArthur’s triumph at
oblige in connection with Stalin’s name Inchon, cutting across the enemy’s sup-
is of course hilarious. ply lines, and his drive beyond the 38th
Moreover, Rose notes, long-term parallel raised hopes in Washington for
planning was not fdr’s strong suit. He a unified noncommunist Korea. These
was prone to leaving things up in the were rudely dashed when the Chinese
air, trusting himself to be able to come attacked, forcing the un forces on a
up with a solution at the last moment. headlong retreat.
Almost to the very end, he toyed with MacArthur’s ground commander,
the idea of reducing Germany to a per- General Ridgway, stubbornly had to
manent pastoral backwater, as urged by fight his way back to the 38th parallel,
Secretary of the Treasury Henry and the war settled into a stalemate.
Morgenthau. His preferred method of The goal of a unified Korea gone, the
operating was pitting ministries and Truman administration now wanted to
agencies against each other, leaving end the war on the old line, while still
himself in control by keeping every- protecting a noncommunist South.
body in the dark, including his vice MacArthur of course wanted to go
president, Harry Truman. nuclear, and was fired, with Ridgway
In Rose’s view, Roosevelt did not taking over. The opinion of the Joint
hand over Eastern Europe to the Chiefs was expressed in Omar
Soviets, as claimed by the right. The Bradley’s assessment at the MacArthur
issue was decided by the military facts hearings that further escalation might
on the ground. What he does blame result in “the wrong war, in the wrong
fdr for is for failing “to accept with place, at the wrong time and with the
April & May 2011 91

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wrong enemy.” Negotiations for an still faced the same three unappetizing
armistice were initiated in July 1951, options: escalate and risk global con-
and after months of haggling, all flict, stay the course in a costly and
important issues seemed resolved. frustrating limited war, or back off on
Except one: Prisoner repatriation. American demands regarding prisoner
Ashamed that the U.S. had agreed to repatriation.” So his first months in
the forced repatriation of Soviet prison- office were spent slogging it out in the
ers of war in World War II, Truman old Truman fashion, while threatening
was adamant that prisoners be given a escalation.
choice on whether to return to their By May 1953, Rose writes, a frus-
own countries. “We will not buy an trated Ike felt compelled to approve a
armistice by turning over human beings policy change, encompassing “massive
for slaughter or slavery,” he said. The escalation up to and possibly including
military had reservations and feared the use of atomic weapons against
that insisting on this point might derail China.” But before he could make
the negotiations. The main issue, in good on his threats, the Chinese backed
Ridgway’s view, was getting the down, whereupon the two sides con-
American prisoners back. Ridgway’s cluded a settlement on July 1 9 5 3
fears proved correct: The Chinese “practically identical to the position
broke off the negotiations on May 7. two years earlier.” According to Rose,
What caught the Truman adminis- it was as much Stalin’s death that
tration by surprise were the sheer num- brought this about: The new leaders in
bers of people who did not want to go Moscow were less forthcoming in their
back. Of the 132,000 North Koreans support of the Chinese and North
in un custody, only 70,000 wanted to Koreans.
return; and of the 25,000 Chinese, As Rose notes, as a result of the
only 5,000. Humanitarian concerns Truman’s administration’s failure to
are legitimate, Rose notes, but the issue understand how its stand on repatria-
was clouded by forceful methods of tion was out of sync with its aim of
persuasion employed in the un pow ending the war, the issue prolonged the
camps by Korean and Chinese war for an extra one and a half years:
Nationalist prison trustees. The State Almost half of the u n casualties
Department did not want to give cre- occurred after the start of the peace
dence to Soviet propaganda, and negotiations in July 1 9 5 1 , and
Truman was not told. 124,000 occurred after repatriation
Exit Truman, enter Eisenhower. Ike was the only unresolved issue. Rose
had run on a platform of ending the questions whether it was worth the
war quickly, and in the administration’s price. But at least the war left a sustain-
own version, the war ended because Ike able regime in place in the South,
had rushed the means for delivering which was not the case with America’s
atomic weapons to the theater and next conflict.
made certain Chinese intelligence
would pick up on it. But according to
Rose, when coming into office, Ike
really did not have a secret plan: “He
92
V ietnam has traditional-
ly been used as a caution-
ary tale of what happens
Policy Review
Books
when the civilian leadership starts inter- well-defined border to defend between
fering in military matters and micro- North and South, and Syngman Rhee
managing from the White House. had been able to eliminate domestic
Rather, as Eliot Cohen convincingly insurgents. Not so in Vietnam, which
argued in Supreme Command, Vietnam had long and very porous borders,
was “a deadly combination of inept making a lasting stalemate like that in
strategy and excessively weak civilian Korea unattainable.
control,” a case of the Johnson admin- The administration combined esca-
istration failing to test the strategy by lation with training programs for the
asking the right questions.
To Richard Nixon and Henry Ashamed that the U.S.
Kissinger, Vietnam was another wrong
war in another wrong place, too expen-
had agreed to the forced
sive in men and materiel for a nation in repatriation of Soviet
retrenchment. The question was again
prisoners of war in
one of how to get out. Having commit-
ted 550,000 troops to the effort, just World War II, Truman
upping and leaving as many Democrats was adamant that
suggested was not an option. U.S. cred-
ibility and its commitments around the prisoners be given a
globe were at stake: As Kissinger choice on whether
argued, for a nation seeking to cut back
on its engagements, retaining credibility
to return to their
on core commitments is extra impor- own countries.
tant, so as not to turn retrenchment
into a rout. South Vietnamese and with cautious
On entering office, both men, Rose troop withdrawals they believed would
says, looked to Korea for answers: give them some breathing space, and
Kissinger in his memoirs faults the which Nixon regarded as a master-
Truman administration for having stroke. “We were wrong on both
sharply reduced military operations in counts,” writes Kissinger. “We had
1 9 5 1 upon entering negotiations, crossed a fateful dividing line. The
“thereby removing the only Chinese withdrawal increased the demoraliza-
incentive for a settlement, ” while for tion of these families whose sons
Richard Nixon, having served as Ike’s remained at risk. And it brought no
vice president, the lesson of Korea had respite from the critics.” It only con-
been “credible threats of massive esca- firmed the North Vietnamese in their
lation.” Accordingly, they first tried determination to wait the Americans
escalation, widening the war by secretly out.
bombing sanctuaries in Cambodia and Forced to reconsider, the administra-
Laos, with threats of more to come, tion opted for stepped up
while simultaneously appealing to “Vietnamization” — turning the war
Moscow to make its client see sense. increasingly over to the South
But Vietnam and Korea were very dif- Vietnamese, while still providing cru-
ferent countries. In Korea, there was a cial military muscle. A joint U.S.-South
April & May 2011 93

Books
Vietnamese ground attack on bases in
Cambodia only served to increase
domestic furor. On the diplomatic
front, Kissinger conducted intensive tri-
angular diplomacy with the Soviet
Union and China. To underscore their
T he carter doctrine,
which in 1980 declared the
Middle East an area of vital
interest to the U.S., was the American
response to the mullahs taking over
seriousness they bombed Hanoi and Iran and the Soviet invasion of
mined Haiphong harbor, culminating Afghanistan. So when Saddam Hussein
in the “Christmas bombing.” a decade later invaded Kuwait, the
Rose sums up the January 1 9 7 3 Bush administration could not ignore
Paris Accords as enabling the U.S. to an act that would leave the Iraqi
get its troops out and its prisoners back strongman with a stranglehold on the
“without directly betraying its client.” region and the world’s oil supply: Bush
Whether Nixon and Kissinger them- decided to expel the Iraqi forces from
selves believed in South Vietnam’s sur- Kuwait. “The wonder is not that the
vival is an interesting question, he United States chose to use its power to
notes, but at least the accords offered reverse the Iraqi invasion, but that the
Thieu a tiny chance, which Congress decision to do so was at all controver-
would kill once and for all by cutting sial.”
off all further aid. According to Rose, The war itself Rose characterizes as
the Nixon administration had inherited a textbook job of detailed planning and
a hopeless situation: This was the best carefully lined-up allies. The same
that could be achieved under the cir- could not be said about its final phase,
cumstances. He simultaneously dismiss- where Rose faults the administration
es the right’s accusations that the for failing to link “its military opera-
Nixon administration sold out Saigon, tions directly to political objectives
and the left’s that the same agreement inside Iraq and not planning for a vari-
could have been had at a much earlier ety of postwar scenarios.” Throughout,
point. As to the latter argument, the Vietnam was very much on their minds
North was only willing to sign the — and counterproductively so — in
agreement once they were convinced what they saw as the need to avoid
that the U.S. had lost the stomach for Third World nightmares and the need
further involvement. to avoid the kind of civilian interfer-
Describing the ordeal of the Nixon ence Lyndon Johnson had engaged in
administration, Rose does not foam at from the Oval Office. “In practice, this
the mouth but is eminently sensible. He meant . . . that politico military affairs
writes, “The great irony . . . is that for were less well coordinated than they
all the neuroses and procedural irregu- might have been, with consequences
larities, the basis foreign policy it pur- that became apparent only as the war
sued was sane and moderate, a reason- was drawing to a close.”
able attempt to chart a path out of the For their part, the military brass —
wilderness. And it almost worked — headed by Joint Chiefs of Staff
until blowback from the administra- Chairman Colin Powell, who, as Rose
tion’s own flaws brought everything reminds us, had not even wanted to
down in flames.” fight over Kuwait in the first place —
94 Policy Review
Books
worried about being seen as butchers providing safe havens for the Kurds in
and wanted to wind down the war as the North and imposing a no-fly zone
fast as possible. As a result, they ended — in effect, settling for a containment
it too early, which permitted large for- policy that lasted more than a decade
mations of enemy troops to escape but became increasingly hard to
north. At the ceasefire talks in the bor- uphold.
der town of Safwan, Norman Cohen in Supreme Command spoke
Schwarzkopf compounded the mistake about “an abdication of authority by
by permitting the Iraqis to fly their heli- the civilian leadership in the post-
copter gunships, which Saddam Vietnam era.” Instead of ending the
promptly used to quell the Shiite rebel- Vietnam syndrome, as the Bush crowd
lion and against the Kurds in the north. proudly bragged, Cohen argued, the
In Rose’s view, Schwarzkopf should Gulf War in fact strengthened it, by
never have been allowed to conduct the reinforcing the idea that the civilians
ceasefire negotiations in Safwan on his should butt out of military matters,
own. He quotes Horner, the air com- thus undercutting the principle of civil-
mander: “Quite frankly, I think we ian control.
were preoccupied with planning the
war, and we thought that somebody
else was planning the peace. . . . I think
we were all surprised that there wasn’t
somebody ready to jump on a jet and
fly over to do the negotiations with the
W hich brings us to the
two current wars,
Afghanistan and Iraq. In
his determination to modernize the U.S.
military and scrap a variety of weapons
Iraqis.” Again, the artificial divide systems, Donald Rumsfeld did not hesi-
assets itself. tate to take on the military establish-
Once the ceasefire had been pro- ment. No, his flaws lay elsewhere. Rose
claimed, the Bush administration’s sees Afghanistan and Iraq as examples
leverage was gone for using the war to of Rumsfeld’s “new, more expedi-
effect changes inside Iraq itself, as some tionary approach” to warfare. A light
civilians within the administration had U.S. presence in Afghanistan working
wanted. Much of the problem stemmed in concert with local forces initially
from the fact that the principals “had defeated the Taliban regime quite hand-
decided that hope could indeed be a ily, whereupon attention switched to
plan.” In a classic case of wishful think- Iraq.
ing, Rose writes, they hoped — they Here George W. Bush and his
even assumed — that some irate mem- administration wanted to finish the job
ber of the Iraqi high command would that had been left unfinished the first
pull a coup and kill off Saddam. “This time around: getting rid of Saddam.
magical Iraqi would act as a deus ex Rumsfeld wanted a quick-in, quick-out
machina, miraculously appearing operation, designed to avoid long sta-
onstage at the end of the play and tus as an occupying power and any-
resolve everybody’s problem.” thing that smacked of nation building.
With Saddam having quelled all In yet another instance of wishful
attempts at rebellion, the administra- Washington thinking, it was assumed
tion found itself having to improvise, that with Saddam gone, the Iraqis
April & May 2011 95

Books
would go merrily about the business of forces. The surge of 2007 managed to
reconstruction and that Iraqi society stabilize Iraq; whether such a structure
would soon be up and running. can be built in Afghanistan is the cru-
The administration’s model, Rose cial point. The danger signs are obvi-
writes, was not postwar Germany or ous: a weak and corrupt government in
Japan but France in 1944, where the Kabul and another porous border. But
liberators quickly put De Gaulle and one cannot very well allow Afghanistan
his Free French in charge. But just as and Pakistan to slide into chaos.
Vietnam was not Korea, so Iraq was Warplanners often divide war into
not 1944 France: As Rose notes, his- four phases, working forward towards
torical analogues are tricky things. some vaguely defined “victory” in
Thus Rumsfeld chose to ignore expert phase four — an approach that easily
advice, including a U.S. Army War mires one’s thinking in purely military
College study, which warned of the terms. Rose recommends going about it
country’s intricate ethnic and religious the other way around, first carefully
make-up and of how political stability, defining what it is one actually wants
the key element in any exit strategy, to achieve politically and what the
would require large forces. eventual security arrangements will
For all Rumsfeld’s contempt for involve, and then working backwards
nation-building, Rose notes, “clearing, from there. That way, the larger pur-
holding and building ” has been the pose is constantly kept in mind. As
formula the U.S. has followed across Rose notes, this may just be common
the globe when successful: Success has sense. “But in war, as in life more gen-
depended on its ability to leave a struc- erally, common sense is actually quite
ture in place, resting on indigenous uncommon.”
96 Policy Review
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POLICYReview April & May 2011, No. 166, $6.

THE INEQUITY OF THE PROGRESSIVE

A SMARTER APPROACH TO THE YUAN

AMERICA’S FADING MIDDLE EAST INFLUENCE

THE EUROPEAN UNION GOES EAST

ALSO: ESSAYS AND REVIEWS BY

The Hoover Institution’s overarching purposes are:

Ideas have consequences, and a free flow of competing ideas leads

In the words of President Hoover:

29 A SMARTER APPROACH TO THE YUAN

41 AMERICA’S FADING MIDDLE EAST INFLUENCE

53 THE EUROPEAN UNION GOES EAST

70 BETTER BRAIN SCIENCE

76 POWER AND ARROGANCE

82 THE GOLDSTONE MESS

88 HOW PEACE GETS MADE

Policy Review ® (issn 0146-5945) is published bimonthly by the

Subscription information: For new orders, call or write the

Class Wars: A Parable

Kip Hagopian was a co-founder of Brentwood Associates, a California-based

April & May 2011 3 Policy Review

Total Income: $25,000 $75,000 $150,000

Tom Dick Harry Total

April & May 2011 5

L ike all parables, the story of the Class brothers is designed to

Factors that determine income

April & May 2011 7

Alternative income tax systems

T here is a consensus among economists and tax theorists that the

The case for progression

P rogression has been in use somewhere in the world for

April & May 2011 9

The benefits principle

T he benefits principle of taxation holds that the government

April & May 2011 11

8. Blum and Kalven, 38. .

It is noteworthy that this “ingenious” approach is entirely consonant with

9. Blum and Kalven, 37. .

April & May 2011 13

Sacrifice theory and the marginal

S acrifice theory is perhaps the most historically prominent and

Seligman credits the Dutch economist A.J. Cohen-Stuart with debunking

10. Arthur C. Pigou, A Study in Public Finance (Macmillan, 1951), 85-86. .

April & May 2011 15

This inability to prove the sameness of the marginal-utility curves of dif-

The error lies in trying to translate money, which can be measured in

12. Seligman, 222-223. .

April & May 2011 17

T he notion of “ability to pay” is most often identified with Karl

Reducing income inequality

To be sure, inequality exists in the United States as it does to a greater or

15. Blum and Kalven, 72. .

April & May 2011 19

April & May 2011 21

As contrasted with the benefits principle and sacrifice theory, each of

21. Blum and Kalven, 75. .

The case against progression

T he strongest arguments against progression are the rebut-

April & May 2011 23

A new doctrine of fairness?

T here is no perfectly fair tax system. But based on an examina-

Implicit in this fairness doctrine is that taxation in excess of a proportion-

Critique of the doctrine

T here are weaknesses in the logic of this doctrine that make

Policy Review, April & May 2011, No. 166

Policy Review, April & May 2011, No. 166