Monthly Archives: October 2012

Racism in Student Selection

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Bill Powers, President of the University of Texas at Austin, put an op-ed into The Wall Street Journal in which he attempts to defend a particular version of “affirmative” action for admission to that university.  The case on which he commented is Fisher v. University of Texas at Austin, which is before the Supreme Court this term.  In this case, a young woman was denied admission in favor of a less qualified black student because, she argues, she’s white.

The subtitle for Powers’ piece is this:

My university once kept blacks out.  Now at Texas we ensure that their grandchildren can enter.

But what he omitted to say there is that UTA once kept blacks out for purely racial reasons.  Now UTA “ensures that their grandchildren can enter” also on racial grounds.

Before I expand on that, though, a couple of smaller points.  Powers wrote,

UT finds itself back in court superficially for the same reason—considering race in admissions—but with just the opposite motivation.

No motive can justify racism.  Woodrow Wilson’s racism was for lofty motives—poor, inferior blacks needed the protections of segregation.  Nor do the basest of motives justify it, as the Jim Crow laws demonstrated.  Racism is…racist.

Powers also wrote

[T]he fiction that will be dispelled by Fisher is that minority students are being admitted at the expense of more-qualified white students.  There are no unqualified students admitted to UT[.]

This is nothing but a non sequitur.  Admitting less qualified students at the expense of more qualified students in no way implies that unqualified students are being admitted.  Nor is this the argument Ms Fisher is making: she’s averring that race played the role, not qualifications.

But from his flawed logic, as illustrated by these minor nits, flows the larger problem.  Powers made his case thusly:

[D]iversity isn’t only acceptable but desirable in all aspects of life, especially education.  In my 38 years in the classroom, I often have seen how a diverse classroom enriches discussion, provides valuable insights and offers a deeper learning experience.

And

[W]e employ an entirely holistic review in which race is one of many factors along with leadership, extracurricular activities, awards, work experience, family-income level and community service.

With this argument, he’s demonstrated the bankruptcy of his race-based (however diffuse) admission policy.  That breadth of diversity for which he seeks—leadership, extracurricular activities, awards, work experience, family-income level, and community service—already is wide.  Moreover, those last two, family income and community service (which carry within them the diversity of communities in which his applicants live, that income is earned, and that service is performed), are alone richly diverse, and they contain ethnicity and race within them.  With that broad diversity built into his selection paradigm, there’s no need to consider race separately.  Doing so is just separate but equal papered over.

What diversity actually would accomplish, were it not for Powers’ double counting of race in  it, would be to give all disadvantaged applicants equal opportunities for access, rather than giving superior access to those belonging to Powers’ favored race.  Giving preference to race—regardless of the strength of that preference—is to give preference to race.  There’s no amount of lipstick that can be smeared on this bigotry by those who should know better that can disguise that.

There’s Defense

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…and then there’s defense.

According to Fox News, there was this exchange during and immediately after a day of testimony before the House Committee on Oversight and Government Reform last Wednesday.  At the end of his testimony, wherein he had expressed his frustration at not only not getting the additional security personnel and equipage he’d been requesting for the security of the consulate in Benghazi but getting the assets he already had materially reduced, LtCol Andrew Wood, former head of our Tripoli embassy’s military security, said

We were fighting a losing battle. We couldn’t even keep what we had[.]

Eric Nordstrom, erstwhile head of regional security for State, closed his own testimony by recounting a conversation he had had earlier with State about his own request for more security personnel.  That conversation included this Nordstrom frustration remark:

You know what (is) most frustrating about this assignment?  It’s not the hardships, it’s not the gunfire, it’s not the threats.  It’s dealing and fighting against the people, programs and personnel who are supposed to be supporting me.

And I added it by saying, “For me, the Taliban is on the inside of the building.”

In response, Under Secretary of State for Management, Patrick Kennedy, in a post-hearing press conference called for the purpose, emphasized that Wood’s team was in Tripoli, not Benghazi.  He also carefully pointed out that expanding Wood’s team and extending its area of responsibility to include Benghazi would not necessarily have prevented the attack on Benghazi.  After all,

The assault that occurred on the evening of Sep 11…was an unprecedented attack by dozens of heavily armed men[.]

Hmm….

Deterrence is not the only means of defense, as Nordstrom and Woods—and anyone with any competence in security—understands.  Sometimes defense involves, well, actual defense.  Actually shooting back.  Actually killing the attackers.  Even those taking part in “an unprecedented attack by dozens of heavily armed men.”

Listening to the experts on the ground, rather than putting the political theater of “acting normal” in a still-fluid environment (however hard the Libyan government and people may be trying) ahead of the lives of our embassy staff, would have put more assets into the area, would have beefed up the security at the Benghazi consulate.

Sure, the attack would have gone in, anyway.  As we now know—and as it turns out, State knew at the time—this was a terrorist assault that was going to occur.  Period.  But the plussed-up security might have successfully defended the consulate against those dozens.  Even without that, it might have saved the lives of our Ambassador and those three men who died with him in the terrorist assault.

But it’s more important to maintain the Obama narrative and get him reelected than it is for State—and the Executive Office—to do their jobs and to allow the security personnel they’ve emplaced for actual security to do theirs.

Marbles

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The Wall Street Journal confirmed what’s been widely predicted: the Governor of the People’s Republic of China’s central bank has announced he won’t attend this month’s annual meeting of the International Monetary Fund because it’s being hosted by Japan.  Instead, the PRC will be represented by Zhou Xiaochuan’s seconds, neither of whom will have the authority—or the contacts or trust—necessary to conclude any substantive agreements.  Not that the PRC is interested.

The PRC’s cancellation is just an escalation of its protest over another territorial dispute: Japan refuses to acknowledge that its Senkaku Islands in the southern part of the East China Sea belong to the PRC.  Eswar Prasad, late of the IMF with the PRC portfolio and now with the Brookings Institution, has the right of it:

China clearly does not feel the need to be subtle or nuanced in making apparent its displeasure about the escalation of the territorial dispute with Japan.  China is making it clear that it puts territorial sanctity above all other political and economic considerations.

The PRC made its intentions clear with the threat it issued through Xinhua, which the PRC government routinely uses for its public communications. In the context of the IMF cancellations, the PRC said the dispute (over the Senkakus) was “now starting to weigh on the world’s economy.”

However, if the PRC were truly serious about its territorial sanctity, it would withdraw its forces back to within its own borders.  It would cease its grab for the South China Sea right up to the borders of Vietnam, Philippines, Malaysia; it would cease its occupation of Tibet; it would acknowledge the independence of the Republic of China.  No, this is just another naked power grab, part of a collection of land and resource grabs the PRC feels safe in making in the growing power vacuum developing from the American military reduction.

In the end, the IMF meeting should—and it will—proceed, concluding such agreements as were on the agenda before the PRC’s withdrawal, as though China’s substantive presence does not matter.  Because it does not.  They’ve taken their marbles.  Let them stay home and play by themselves.

Monetary Policy

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This week’s print version of Der Spiegel has a cover depicting a slowly melting €1 coin captioned Vorsicht, Inflation! Die schleichende Enteignung der Deutschen, or roughly, “Caution, inflation! The creeping expropriation of Germans.”  Inflation erodes the value of (German) wealth.  An English translation of an article summarizing this cover theme can be found here.

Andrew Bosworth, chief portfolio manager for PIMCO in Germany (PIMCO is a global investment management firm of serious proportion), describes the underlying problem:

The industrialized world is stuck in a severe debt and growth crisis.  The central banks are fighting the disease with monetary infusions of previously unknown proportions[.]

Then he notes the problem this “cure” is generating:

[T]he side effect is a slow but dangerous devaluation of money.

And

Gradual inflation has a numbing effect.  It impoverishes the lower and middle class, but they don’t notice[.]

Indeed, paraphrases Spiegel Online,

For the past five years, governments from Berlin to London and from Brussels to Washington have been in crisis mode.  They rescued the banks in 2007 and 2008, then they stimulated the economy and, since 2010, have threatened to drown in their own debts.  The burdens are being pushed up the line, from private investors to central banks and government bailout funds.  But this doesn’t make the debts any smaller.

Despite this, though,

[T]he central banks of the United States, the euro zone, Great Britain and Japan jointly announced their intention to pump even more cheap money into the financial markets…. [The banks and the populations, both] recognize that governments seem to be willing to accept higher inflation if it facilitates debt reduction.

Especially since inflation, devaluing the relevant currencies, devalues the debts measured in those currencies.

What has a German portfolio manager to do with our situation in the US?  The inflation threat from throwing money at the problems of an economic dislocation is a basic principle of economics; it’s not unique to Germany.  Banks aren’t lending, or borrowers aren’t borrowing: throw money at the banks.  Folks aren’t spending because…pick a reason: throw money at the banks.  There’s too little economic activity, generally, because…pick a reason: throw (“stimulus”) money at the economy.  Whatever the mechanism, the response (I do not say “answer”) has been to increase the money supply.

But the outcome, whatever the path, is an enormous increase in the amount of money chasing a supply of goods and services that is not increasing at all in a stagnant economy, or one that’s growing more slowly than the population.  Or, at present, isn’t chasing at all because the recipients of all that money are sitting on it in some way: banks are chary of lending because, for instance, they’ll get hammered by our government for making bad loans, even as they’re currently yelled at by our government for not lending.  Citizens aren’t spending, preferring instead to pay down current debt or to save, husbanding their small wealth against a too uncertain future.  This is the textbook condition for enormous inflation when the dam breaks.

What are the Fed and the Obama administration doing in the US?  Throwing money at the banks (the Fed’s artificially suppressed—to essentially zero—interest rates and QE1, QE2, QE3,…,QE∞(?)) and the administration’s throwing money at our economy (stimulus “investing” nearly annually since winter 2009, sweetheart loans, and loan guarantees).

We have an increasingly vast supply of money chasing a supply of goods and services that is not expanding.

As I mentioned at the top, when inflation does strike, it will hit the poor and middle-income folks much harder than the wealthy: the former already spend the vast majority of their wealth on the necessities of life: food, fuel, clothing, and shelter.  Yes, more personal financial discipline would help—and folks should be exercising this discipline as a matter of course.  They are, too: the trend in savings rates, especially relative to income rates, has been to increase savings since the Panic of 2008 struck.  But the coming inflation explosion can easily overwhelm those efforts.

Heads up.

Solar and Wind Energy Subsidies

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There was sort of a debate presented in The Wall Street Journal a few days ago concerning the efficacy of Federal subsidies for solar and wind energy companies.  I say “sort of” because the Mark Muro’s arguments in favor of the subsidies demonstrate an utter cluelessness of the basics of economics as well as of how well the subsidies have already performed.

For instance, the WSJ‘s lede cites generic proponents as saying in all seriousness,

There is widespread agreement that pulling the plug on the subsidy at this point could hobble the wind-power industry.  Meanwhile, the biggest federal subsidy for solar power, a tax credit for 30% of the cost of installed equipment, is set to drop to 10% at the end of 2016.  A cash grant for up to 30% of solar equipment costs expired at the end of last year.

Proponents say wind and solar subsidies are needed for a few more years to allow these clean, renewable sources of energy to develop to the point where they can compete on price with electricity produced from coal and natural gas.

Yet, if the technology can’t compete in a free market on its own, if it needs the subsidy to survive, the technology is not ready for commercial use or sale.  Spending taxpayer money—private citizen money—on such a thing is a textbook example of Fraud, Waste, and Abuse.  As the proponents admit without realizing it in that second paragraph: “…wind and solar subsidies are needed for a few more years to allow these clean, renewable sources of energy to develop….”

Muro then says in his argument,

Let’s remember the point of these temporary subsidies: to help emerging clean-energy technologies gain toeholds in challenging markets and advance toward unsubsidized price-competitiveness.

And

The ultimate reward is cheaper, cleaner energy and greater energy diversity, which will help guard against price shocks, keep energy costs down through competition and lessen the damage our energy consumption does to the environment….

Except that it isn’t cheaper if it needs subsidies coupled with coal, oil, gas (hydrocarbon) prices that are artificially elevated by government mandates to include “green” additives as the Feds do, or to buy electric power from solar and wind generators, as California does, in order to compete.  Moreover, diversity is reduced, not expanded by limiting us to solar and wind—or even by demanding that we buy a certain amount of solar and wind, regardless of market forces—and actively blocking access to hydrocarbon energy.  And finally, if these really are viable technologies that will deliver cheap energy easily, private investors will flock to invest, and no taxpayer subsidy will be even in the picture.

On top of that, there’s no case for environmental “damage,” given the great amount of cleanup already done, and the falsified “damage” attributed, for instance, to fracking by the EPA.

Muro goes on:

Wind and solar need the help because the barriers for new technologies in the energy industry are tougher than those in any other industry in this country.  Fossil fuels, with the help of their own government subsidies over the years, are thoroughly entrenched, with trillions of dollars’ worth of infrastructure in place.

Never mind that that entrenched infrastructure sits on top of centuries’ worth of economical, unsubsidized hydrocarbon deposits in the ground right here in the US and Canada, and the infrastructure easily can be extended to reach into the deposits in our respective territorial and economic zone waters, as the People’s Republic of China already is doing, filling the vacuum left by the present administration’s slow-walking of drilling permits for American companies.

Additionally, the beef that “the barriers for new technologies in the energy industry” are tough is just a cynical red herring.  Those technical barriers existed for the hydrocarbon industries, also, as they were developing.  Why should solar and wind get special treatment?  Muro has no answer; he merely asserts the “need.”

Muro concludes with this long-standing “promise:”

In sum, onshore wind is likely just a few years away from true subsidy independence, while several forms of solar aren’t far beyond.

Like commercial fusion, we’ve been “just a few years away” for decades.  It’s an empty promise.

As Dr David Kreutzer points out in his argument against these subsidies, though,

Surely some alternatives to fossil fuels will be developed, but they will only work if they are affordable.  Wind and solar aren’t, and that isn’t changed by shifting the costs from consumers and producers to the taxpayers.

Bureaucrats and politicians shouldn’t be the ones deciding which technologies are the most promising or what timeline is too long or what losses are too deep.  The market will do a much better job of answering the question: are wind and solar power really viable?

Let’s get rid of the subsidies and find out.