But the real bombshell came two weeks later when FTC Commissioner Christine Wilson made a self-described “noisy exit” from the commission in the form of a Wall Street Journal op-ed on Feb. 14. It wasn’t Khan’s overhaul of antitrust law that Wilson said drove her out–the commission is bipartisan and dissent is commonplace. It was Khan’s alleged “disregard for due process and the rule of law” and “abuses of government power,” Wilson wrote, that prompted her, the lone Republican commissioner. to leave the FTC. (Noah Phillips, the commission’s other Republican, resigned in October 2022.) 

Wilson cites in detail Khan’s refusal to recuse herself from the commission’s failed bid to block Meta’s acquisition of Within. Before she joined the FTC, Khan had argued Meta (at the time named Facebook) should not be allowed to make any further acquisitions. Wilson says she objected to Khan’s refusal to recuse herself on both due process and ethical grounds but was overruled by the Democratic commissioners and Khan herself. Wilson made a similarly futile attempt to object to the recently proposed FTC blanket ban on non-compete clauses in employment contracts. 

The FTC is not an organization intended to be adversarial to the companies under its regulatory purview, but rather a neutral arbiter of whether any harm would come from mergers and other conduct it scrutinizes.  

More information regarding the rule violations alleged by Wilson is likely forthcoming. But those who have followed the antitrust philosophy of Khan and her allies on the progressive left should have little trouble connecting the dots between their antitrust goals and the wrongdoings alleged by Wilson. Fundamental to Khan’s vision is the scope and necessity for “good” government power to act as a check on bad “concentrated private power.” 

Khan ignited the left’s newfound interest in antitrust with a 2017 paper critical of the widely adopted consumer welfare standard (which focused on prices) as weak and overly permissive to mergers. Her Yale Law Review article took aim at Amazon, specifically its capacity for predatory pricing to harm competitors and vertical integration to compete with sellers on its own platform. Amazon was but one example. The point was encouraging a much more active use of antitrust enforcement to check what Khan and others believed was the outsized influence of large corporations—a point driven home by the title of Columbia Law professor, and Khan ally, Tim Wu’s book, The Curse of Bigness. 

Under this logic, the potential bad conduct by large private firms is limited only by one’s imagination. And prior to its ascendance in the Biden administration, the movement alternately known as “hipster antitrust,” “break up big tech,” and New Brandeisianism put its imagination to work. In addition to product market monopoly, there was labor market monopsony, vertical restraints, coercion and gatekeeping, and (as in the case of Meta and Within) power in predicted markets of the future. Perhaps the starkest case of this movement believing big is bad is their belief in the threat of market power to democracy. Some on the left have argued that large corporations, through their money, could boost certain political campaigns (likely to candidates who disagree with such hyperactive use of antitrust enforcement). 

None of these scenarios are implausible, but they remain hypothetical. Rather than clarify the types of conduct deemed anti-competitive, a long and expanding list for regulators to scrutinize is de facto discretionary power. In effect, the New Brandeisians sought to move from the consumer welfare standard of antitrust enforcement to the standard that mandates companies compete in the manner that regulators would like them to. 

Khan’s goal of restraining the growth and dynamism of American business as an end unto itself was on full display in Nov. 2022 when the U.S. Securities and Exchange Commission issued new policy guidance regarding its role under Section 5 of its charter to prohibit “unfair” competition. Claiming a mandate that went beyond antitrust legislation and court precedent, the commission stated that it could take action against competitive conduct deemed “coercive,” “exploitative,” “abusive,” or “restrictive,” leaving these terms subjective and undefined.

It was, as Wilson noted in her resignation op-ed, an “I know it when I see it” approach. Wilson’s concerns about due process and the rule of law appear well-founded. 

Khan now faces the public allegations that, in her first year as FTC chair, she waged war on the perceived specter of concentrated private power by concentrating an unprecedented amount of public power for herself and friendly FTC commissioners.

Thus far, her efforts have almost entirely failed. The tides could turn as neither Republicans nor Democrats appear eager to bury their respective hatchets with big tech. But the biggest name in the movement once sarcastically labeled the hipster antitrust movement as a throwback to the days before the consumer welfare standard has instead garnered criticism and a high-profile resignation for allegedly neglecting legal norms that have stood far longer tests of time.

The post FTC Chair Lina Khan’s consolidation of power is a feature of her approach to antitrust, not a bug  appeared first on Reason Foundation.

To be sure, certain government policies have made this situation worse than it otherwise would be. These policies include the failure to adopt international best practices and technologies at U.S. ports due to intransigent labor unions and their allied politicians, the duties on Chinese truck chassis that have tripled their price in recent years under the Trump and Biden administrations, and unprecedented federal COVID-19 relief, stimulus and unemployment money going to many households, which contributed to spending. However, while policy reforms could help improve the long-run resilience of the supply chain, the main source of these problems is unusual short-run consumer demand that public policy is ill-suited to address.

The COVID-19 pandemic caused a large shift in consumption from services to durable and nondurable goods, while total consumption has remained on-trend thanks, in part, to generous government assistance that kept personal incomes high throughout the pandemic. E-commerce, in particular, saw a massive boom, and the nature of e-commerce plays an outsized role in pushing various logistics segments overcapacity.

Here’s a simplified story that illustrates the cascading impacts of pandemic-induced changes in household consumption:

• The rapid flows demanded of e-commerce—from production to distribution to end consumers—caused warehouses that were already stocked with goods meant for pre-pandemic consumers to become more congested as they attempted to adjust to pandemic-caused increases and changes in goods demand.
• Because there was no space in the warehouses, goods were delayed in unloading from shipping containers on truck chassis in parking lots and loading docks outside the warehouses.
• Because warehouse parking lots and loading docks were overflowing with full containers and truck chassis, rail customers were not picking up their containers and chassis from freight rail ramps.
• Because rail customers weren’t picking up their goods from freight rail ramps, rail carriers could not return empty containers and chassis to seaports.
• Because seaports lacked the chassis to move containers out of ports to inland distribution centers, overflow storage quickly reached capacity at ports.
• And because there was no space in ports to unload containers from massive container ships, container ships waited for days and weeks offshore to unload their cargo.

Every hub and spoke of the logistics chain is strained due to this shift in consumption and spike in good demand. Unfortunately, attempting to address one link, perhaps by moving to 24-hour schedules at ports as supported by President Joe Biden, will not address problems in other parts of the chain and could possibly exacerbate them.

There are two possible ways out of this mess: consumer goods demand wanes to something closer to pre-pandemic trends or logistics capacity is added to support the “new normal” demand. The latter takes time, as firms must build and acquire a lot of additional structures and equipment, as well as hire new people to work them. Expanding capacity to meet a potential “new normal” of goods demand entails large risks to sunk capital investment from making big bets that present consumption patterns will persist, which is why firms may be reluctant to invest in additional capacity that may not be needed if consumers begin shifting from goods back to services as the pandemic wanes. An economic recession could also bring relief to strained supply chains, although this is obviously not preferable.

With the public and businesses feeling the impacts of supply chain problems and news stories already scaring parents that their Christmas toys may not arrive in time for the holidays, politicians are likely going to continue wanting to show they are doing something about the problem by holding summits with business and labor leaders, appointing “czars,” and engaging in other photo opportunities to present the illusion that they can solve these problems. But the reality is supply chain problems are largely out of policymakers’ control and almost certain to continue through 2022. Markets and businesses will adjust but not on a dime.

Despite politicians looking to blame opponents for supply chain issues and assurances from other politicians that they can fix it, there are no quick and painless ways out of this strange supply chain situation, which is largely yet another unpredictable consequence of a rare, 100-year global pandemic. Instead of asking politicians to do something out of their control, consumers must accept these COVID-related supply chain difficulties are here for the time being. For now, policymakers should be vigilant about avoiding well-meaning but counterproductive policy responses and, instead, work to improve long-run supply chain resilience by jettisoning existing harmful government policies.

The post There are no quick and easy fixes to our supply chain challenges appeared first on Reason Foundation.

President Donald Trump’s ongoing trade war with China has already exacerbated shortages by limiting imports of these products. According to Chad P. Brown, a senior fellow at the Peterson Institute for International Economics, the Trump administration’s tariffs on Chinese medical products “has forced China to divert the sales of these products…from the United States to other markets.”

Robert Lighthizer, head of the Office of the U.S. Trade Representative, defended the administration’s actions in The Wall Street Journal by claiming “the administration imposed no new tariffs on several key products needed to fight the virus, like breathing masks, oxygen masks, ventilators, and nebulizers.” However, as Reason’s Eric Boehm pointed out, other essential products including “hand sanitizer, patient monitors, thermometers, oxygen concentrators, medical protective clothing, sterile gloves, and more were targeted with tariffs in three phases since July 2018.”

Now, lawmakers including Sen. Tom Cotton (R-AR), Sen. Josh Hawley (R-MO), and Sen. Marco Rubio (R-FL) are doubling down on protectionist trade policies rather than embracing imports of essential goods. The White House is also considering issuing an executive order that would require US agencies to “buy American” in their procurement of pharmaceuticals and other goods deemed essential to public health.

In a press briefing last week, White House Trade Advisor Peter Navarro stated, “One of the things that this crisis has taught us…is that we are dangerously over-dependent on a global supply chain for our medicines like penicillin, our medical supplies like masks, and our medical equipment like ventilators.”

Calls to end reliance on Chinese supply chains have largely been justified by trying to use the incorrect assertion that 80 percent of America’s drug supply comes from China. In fact, the Food and Drug Administration (FDA) only tracks the number of manufacturing facilities that export drugs to the US, not the volume of drug imports from other countries. The FDA reports that, of the nearly 2,000 manufacturing facilities that produce drugs for the US, 230 are located in China, 510 in the US, and 1,048 in the rest of the world.

In a letter to President Trump, the Association for Accessible Medicines, a trade association for major pharmaceutical producers, argued that “a diverse pharmaceutical supply chain is precisely what enables the industry to respond quickly and make adjustments in its supply chain sourcing during natural emergencies and global public health crises.”

The letter also claimed, “Proposals to drive all manufacturing to the United States…overestimate the potential feasibility and underestimate the time and effort it would take to make such changes.”

Navarro clarified the impact of the proposed executive order saying it would not take effect “during this crisis because we don’t want to disrupt anything… but going forward, after this is over, the VA, HHS, DOD, and this government buys American for essential medicines, our medical countermeasures, and the medical supplies and equipment we need.” In fact, none of the proposals would have any effect on our response to COVID-19.

Trade hawks are using the once-in-a-lifetime global pandemic to justify misguided protectionist policies. Both in normal times and during a crisis, open international trade makes it easier and less expensive to produce and purchase goods in the most efficient manner possible. Discouraging imports only hurts American consumers and, in times of crisis like this, puts the health of Americans at risk.

The post Free Trade, Not Tariffs, Is How to Reduce the Medical Equipment Shortages Hurting the COVID-19 Response appeared first on Reason Foundation.

The link between the Endangered Species Act and the Export-Import Bank is that under the Act federal agencies are required to assess whether their actions will negatively impact endangered and threatened species, including the 628 foreign species currently listed. If there are negative impacts, then the proposed action, such as loan for the iron mine, can be terminated for being in violation of the Act. Several environmental pressure groups claim the port being built by the mine’s owners to export the iron ore will negatively impact a number of endangered species, including sea turtles, the saltwater crocodile and dugong (a relative of the manatee).

The Export-Import Bank approved the loan because the mine’s owners have agreed to purchase U.S. mining equipment, such as giant dump trucks from Caterpillar and rail equipment from General Electric, and this is supposedly good for the U.S. economy. In reality, the Export Import Bank is a prime example of corporate welfare, as Reason has detailed here and here, as well as cronyism because powerful, politically connected companies tilt the process in their favor to the detriment of less powerful companies. In the case of the Australian mine, Cliffs Natural Resources, which owns four iron ore mines in Minnesota and Michigan, opposed the Export-Import Bank loan because it would undercut their operations and cost an estimated $1.8 billion to the U.S. iron ore industry over the eight-year life span of the loan. Such is the zero-sum game of the Export-Import Bank and the government picking winners instead of the marketplace.

If projects like the Australian mine are such good opportunities for U.S. corporations to make money, then let them assume the risks, not U.S. taxpayers who are on the hook if Export Import Bank loans go bad. It’s also strange that the $694 million Export Import Bank loan is being portrayed by mine proponents as jeopardizing the future of the mine, when it’s only a relatively small part of the $7 billion the mine’s owners are trying to raise.

With the Export Import Bank’s charter due to expire in September, there is increasing pressure to abolish the Bank from across the political spectrum, including Republicans like Representative Jeb Hensarling of Texas and Senator Mike Lee of Utah, to Democrats such as Senator Elizabeth Warren of Massachusetts, and Senator Bernie Sanders of Vermont, who is an Independent but usually votes with Democrats. While opposition to the Export-Import Bank tends to come from those against of corporate welfare, such as Ralph Nader, and fiscal conservatives, including a coalition led by Americans for Prosperity, the loan for the Australian iron mine shows that opposition can come from unusual sources, including environmental pressure groups wielding the much-feared Endangered Species Act.

The post Endangered Species and the Export-Import Bank appeared first on Reason Foundation.

This journal article aims to present a history on the causes of the financial crisis that first emerged in the U.S. in 2007. Then it will analyze the roots of the current state of the economic crisis in Europe and the U.S. It will also assess the effects of the crises on the European and American economies. Consequently, a range of topics are discussed in the article, some of which have received deeper treatment elsewhere in economic literature, but have not been pieced together to provide a coherent past and present picture of the situation. The article concludes briefly on how this story relates to today’s economic environment and the next steps that need to be taken going forward.

Dr. Murat Yulek is vice dean of THK University in Ankara, Turkey and can be reached at mayulek@thk.edu.tr. Anthony Randazzo is director of economic research for Reason Foundation and can be reached at anthony.randazzo@reason.org. The article was originally published by the journal Insight Turkey in Vol. 14, No. 2.

The post Refining the Story of the Financial Crises in Europe and the USA appeared first on Reason Foundation.

Frustration over poor economic conditions and political repression ultimately boiled over into the sweeping protests displayed on television screens around the world. The narrative heard in the U.S. is that the Arab Spring is about democracy. Yet this lack of political representation is merely a symptom of the fundamental lack of economic freedom in Arab countries.

Every index of economic freedom-from The Wall Street Journal and The Heritage Foundation’s index to the Fraser Institute’s index-indicate that nearly all Arab countries in North Africa and the Middle East have high levels of economic repression. This denial of economic liberty resulted in the rampant corruption, runaway inflation, and instability that berthed the Arab Spring.

A number of wide-ranging economic restrictions have damaging consequences for the Arab world. Burdensome governments dominate consumption and investment, replacing individual choices with the politicization and bureaucratization of economic decisions. Property rights are hampered by the lack of an independent justice system. Over-regulation of credit and labor markets obstructs competition, while free trade is limited by restrictions on imports and exports.

The best hope to address this myriad of hindrances to economic freedom focuses on opening up international trade. Trade liberalization will not only promote inter-Arab movement of people, goods, and services, but will also encourage the implementation of wider reforms in favor of economic freedom.

Removing tariff and non-tariff barriers to trade through the creation of a large free trade area between Arab countries will encourage cooperation between national economies, increasing the market size for the productive businesses of each country. Investment opportunities will naturally rise, and costs will fall as firms benefit from economies of scale. The resultant success of private investment, long supplanted by the oppressive public sector, will encourage Arab countries to further engage in reforms conducive to economic freedom.

A free trade area will foster the spread of economic freedom as neighboring countries are allowed to compete for capital and skilled labor. Open borders will stimulate the movement of people and capital as the profit seeking process unfolds, favoring areas that encourage trade and freedom. In order to remain competitive with neighboring economies for valuable tax revenue, each country will be spurred on to undertake deep institutional reforms.

Previous attempts to liberalize trade between Arab countries, such as the Cooperation Council for the Gulf Countries or free trade agreements between Morocco, Jordan, Egypt and Tunisia, should be expanded upon. In the past, the creation of such an Arab free trade zone has been blocked by political considerations. Instead, a “bottom-up” approach must be adopted among businesses and civil societies, pressuring Arab leaders to overcome political and personal divisions by forging networks across national borders.

Such a strategy has repeatedly proved successful. Arab merchants pressured governors to render trade roads safer. British liberals formed the Anti-Corn League that led to the abolition of protectionist laws. Japanese companies, by developing supply chains during the 1960s with subcontractors from South Korea, Taiwan, and Hong Kong, were able to facilitate the emergence of the Association of Southeast Asian Nations.

By building up economic exchanges and strengthening ties between Arab nations, the benefits of trade liberalization will become so evident that politics will be forced to answer to public opinion and satisfy their need for an integrated Arab economic community. This will encourage not only the spread of free market ideas, but facilitate the economic integration of young people by providing sufficient opportunities for investment and jobs. If the people of the Middle East and North Africa are to capitalize on the achievements of the Arab Spring, free trade must be of utmost importance.

Hicham El Moussaoui is an Assistant Professor of Economics at the University of Sultan Moulay Slimane (Morocco) and analyst for www.unmondelibre.org.

The post How Economic Freedom Can Ensure an Arab Autumn appeared first on Reason Foundation.

1. Deaths and death rates from droughts, which were responsible for approximately 60% of cumulative deaths due to extreme weather events from 1900-2010, are more than 99.9% lower than in the 1920s.
2. Deaths and death rates for floods, responsible for over 30% of cumulative extreme weather deaths, have declined by over 98% since the 1930s.
3. Deaths and death rates for storms (i.e. hurricanes, cyclones, tornados, typhoons), responsible for around 7% of extreme weather deaths from 1900-2008, declined by more than 55% since the 1970s.

To put the public health impact of extreme weather events into context, cumulatively they now contribute only 0.07% to global mortality. Mortality from extreme weather events has declined even as all-cause mortality has increased, indicating that humanity is coping better with extreme weather events than it is with far more important health and safety problems.

Attachments

• FULL STUDY: The Decline in Deaths from Extreme Weather, 1900—2010

The post The Decline in Deaths from Extreme Weather, 1900 appeared first on Reason Foundation.

Turkey is possibly the world’s most politically stable Islamic country that has a pluralist secular democracy. And after decades of military interventions into the political sphere, Turkey appears to be turning a corner, as the Justice and Development Party (AK Party) won a third consecutive election with support from roughly 50 percent of the electorate.

Combined with a growing economy, a stable banking sector, a successful privatization program over the past several years, and increasing prominence in both NATO and the G-20, many have suggested the Turkish governance structure could be a model for Arab nations that are attempting to throw off decades of rule by the few to embrace democratic and liberalized reforms.

On first blush the idea is reasonable. Turkey shares many similar characteristics to Arab nations that are embroiled today in turmoil: it is predominantly Muslim, has a history of militaristic intervention in the political sphere, and has an affinity for strong leaders, such as Mubarak, Nasser, Qaddafi, Assad, and, naturally, Atatürk.

But if you dig further into understanding the Turkish model, it becomes clear that the nation’s unique secularism makes replication for any other country nearly impossible. The brilliance of the Turkish model is its ability to blend political Islam and a democratic government into a cohesive societal structure.

The model finds its roots in the founder of the Turkish republic, Mustafa Kemal Atatürk. He ensured the separation of mosque and state by abolishing Islamic law and making secular western-style reforms that paved the way for a secular government to flourish. Today, the ruling AK Party caries Atatürk’s vision of embracing Islam in society as a cultural identity but keeps it at arms length when setting public policy. The AK Party has spent the past 10 years working towards more economic and political freedoms, dramatically lowering Turkey’s inflation rate, giving political rights to the Kurds, selling state enterprises, leading it into the top 15 economies globally, and dramatically improving relations with neighboring countries.

The model is not without its challenges. It requires a constant tension between French-styled secularism, and the need to encourage freedom of religion expression. This is most profoundly played out in the public square through the debate over whether women should be allowed to cover their heads when entering public buildings.

The nature of the headscarf debate, however, is why Egypt, Libya, Tunisia, and Syria can’t perfectly replicate the Turkish model. Turkey’s uniqueness lies in its secularized view of Islam.

Ninety-nine percent of the population is Muslim, yet the definition of being a Muslim is different in Turkey than other Middle Eastern countries. The main difference is that the Turkish government separates state and religion. They do not impose Shari’a law or allow political parties that seek to impose Islamic rules on the state. In contrast, Egypt names Islam as the state religion and claims Shari’a as the framework for its laws.

Given Turkey’s primarily Muslim population there has long been a fear that Islamist leaning parties would undermine the state’s secular foundations. The military initiated four coups between 1960 and 1997 to stem what it viewed as rise of political Islam (not to mention the failed e-coup of 2007). The last of the coups was actually conducted through a memorandum that subsequently banned the ruling Welfare Party and dissolved the ruling coalition government. The secular leaning court system has struck down a number of political parties it viewed as outside the vision Atatürk set out for the country, and it ruled that the Welfare Party should be banned “because of its actions against the principles of the secular republic.”

Today’s AK Party is an outgrowth of the vanquished Welfare Party, and has faced judicial challenges of its own due to its leaders’ inclinations towards Islam. However, outspoken Prime Minister Recep Erdoğan has said time and again his party has no desire to implement Shari’a law or introduce political Islam into the government. Instead his party has pushed for more religious freedom, such as their push to end the ban on headscarves, as a part of an individual rights program meant to support Turkey’s candidacy for the European Union.

If Turkey were to end the ban on headscarves it might make their political model a bit more compatible with Arab nations in revolt, as most Middle Eastern countries highly esteem the hijab. For example in 2007 in Iran, the police began cracking down on women who were becoming lax about their dress. The police stopped pedestrians and cars warning them to wear the hijab and arrested them if they argued back. But there remain other differences.

Perhaps Turkey’s most unique identifier is their geographical position. Turkey is at the crossroads between Europe and Asia making them an inherently strategic country. This is seen in Istanbul where the Bosporus strait connects Europe on the western side and Asia on the eastern side. Turkey uses its strategic location to act as a bridge in uniting the Eastern and Western worlds. Turkish President Abdullah Gül says, “At a time that people are talking of a clash of civilizations, Turkey is a natural bridge of civilizations.”

Taking advantage of their prime location, Turkey’s ruling party has adopted a “zero problems with neighbors” approach to foreign policy. The AK party is working to mend relations with neighboring countries, such as Syria, Iran, and Armenia, where diplomatic ties have been strained or nonexistent in the past few decades. Foreign Minister Ahmet Davutoğlu, who developed the new policy, says that his goal in the Middle East is “to act as a force for stability in an unstable region.” Turkey has taken action on this goal by increasing trade with the Middle East. In December 2010, the Turkish Confederation of Businessmen and Industrialists organized a conference in Istanbul where hundreds of businessmen from Turkey and the Middle East signed business deals to increase trade between the two countries. Most recently, Turkey signed a trade pact with Iran that could potentially be worth $30 billion. Turkey has taken advantage of their strategic location and is able to benefit from both the eastern and western sides of the globe.

Syria and Egypt’s neighbors, including Israel, make this foreign policy goal much more difficult to achieve. The geographic irrelevance of Tunisia gives them a handicap. And though Libya’s oil fields make them internationally significant, their internal political instability will need to be the primary focus before a foreign policy shift. The more radically motivated religious populous of Libya also makes it unlikely they will be able adopt the domestic politics of the Turkish model.

Egypt and other Arab countries certainly can use the Turkish model to the extent that they show Islam and democracy can coexist and be quite compatible. Trying to create an exact replica of the Turkish government, however, would be a mistake. Turkey’s inherently strategic location at the crossroads between the East and West and secularized view of Islam have had such an impact on the government and mentality of the body politic that no other country would be wise to replicate it. Syria, Tunisia, Egypt, and other nations wrestling with reforming the future can take the core values that the Turkish model presents and adopt them al a carte as long as their goal is to create a more stable, politically liberalized, and economically free system of governance.

Amanda L. Patterson is a junior at The King’s College, New York City who recently participated in an international conference on Turkish-U.S. Relations at Bilkent University in Ankara, Turkey. Anthony Randazzo is director of economic research at Reason Foundation and coodinator of a new venture between Reason and Turkish think-tank Ankara Opinion and Research Center (ADAM).

The post The Turkish Model and Jasmine Revolution appeared first on Reason Foundation.

As a leading emerging market in terms of stability, with a growing footprint in the financial world, the Republic of Turkey is not just a causal NATO ally. Nor is it just a member of Goldman’s “Next 11” investable equity markets. It is an economic power with massive potential for partnership with the United States.

Turkey’s economy has been growing strongly for the past decade, and the Turkish government has realized this, attempting to open up commercial relations with other countries to continue this growth at an ever-quickening rate. Turkey signed a free trade agreement (FTA) with Lebanon in November of 2010 and has numerous other FTA proposals pending, in addition to its participation in the European Customs Union. Even Iran recently announced it would seek to triple its trade volume with Turkey in 2011 and remove all barriers to trade.

The United States ignores economic partnership with Turkey at its own loss. While Turkish exports to the US have stagnated since 2001, Turkish exports to the EU, Middle East, North Africa, and the Balkans have all increased by threefold in the same period. These countries have realized the advantages of freer trade with Turkey and are currently reaping the benefits.

With persistent unemployment plaguing American households the gains of free trade with Turkey are pointedly sharp. Free trade means lower Turkish tariffs on exported American goods, especially American food and agricultural products (which are currently at about 18%). Some other tariff examples include motor vehicles (10%), tennis shoes (17%), and cotton (7%).

Getting rid of these taxes would lower prices and increase demand, allowing American companies to expand their business in the ever-growing Turkish consumer market. This would also make capital investments in Turkey more attractive, opening up a wealth of opportunities. Increased demand and sales for American companies would then lead to creating jobs and stimulating the economy in the process.

The benefits of free trade are not only better, less expensive products in Istanbul and Izmir, freer trade would lower (or eliminate) US tariffs on Turkish imports into the US. Some products such as Turkish clothing currently cost between 15% and 20% more because of import duties. These tariffs are laid on American consumers; taking them away would allow Americans to pay less on everything from wool coats (16% tariffs) and leather goods (6%) to pillows (5%) and baby clothes (9%).

Some have argued that lowering US tariffs would create more competition for American companies and hurt workers here. However, considering that Turkey is a world leader in the apparel and leather industries, countless American businesses would see their input costs lowered by removing the taxes on imports from Anatolia. This would make business more profitable (read: more money to expand and hire laborers) while potentially lowering costs for American consumers as well.

Plus, Turkish firms in the US hire American workers. Companies such as Sarar, a predominantly menswear store with locations across the country, and Goldas, a jewelry manufacturer headquartered in New York, are subject to these high import duties. Eliminating such duties would allow them to grow their business in the US, where they would hire more Americans and provide business for other American companies, such as equipment manufacturers or maintenance firms.

The US currently has FTAs with 17 countries. Close military allies (Israel), Muslim countries (Jordan), and emerging economies (Chile) are all represented. These pacts remove most tariffs and other technical trade barriers, but they also attempt to facilitate cooperation and education efforts, illustrating to businesses the opportunities that exist and cutting down on the costs of market research.

Opening up trade with a country who is being compared to rising economic powers such as Brazil and South Korea is a no-brainer for the United States, especially considering the aforementioned economic benefits of free trade. Now that the Obama administration has made the Middle Eastern economy a trade priority, there is little reason to not consider Turkey for an FTA. Other countries have realized the gains of increased trade with Turkey. If the government continues to dawdle on trade with Turkey, it will indeed miss this fantastic opportunity to provide a much needed shot in the arm to the American economy.

The post US Missing Huge Opportunity by Not Opening Up Trade With Turkey appeared first on Reason Foundation.

But there are at least five reasons why neither India nor China will knock America off its economic perch any time soon, at least not by the only measure that matters: Offering the best life to the most people.

America Wastes No Talent

Conventional wisdom holds that America’s global competitiveness is driven by geniuses flocking to its shore and producing breathtaking inventions. But America’s real genius lies not in tapping genius-but every scrap of talent up-and-down the scale.

A 2005 World Bank study found that the bulk of a people’s wealth comes not from tangible capital like raw resources and infrastructure. It comes from intangible wealth: effective government, secure property rights, a functioning judiciary. Such intangible factors put the equivalent of $418,000 at the disposal of every American resident. India and China? $3,738 and $4,208 respectively.

America’s vast intangible wealth makes everyone more productive and successful. Personal attributes-talent, looks, smarts-matter only on the margins. Having witnessed the life trajectory of many Indian immigrants, what’s striking to me is that, with some exceptions, it doesn’t matter whether they are the best in their profession in India or just mediocre. Within 10 to 15 years of arriving, they land in a very similar space. They get good jobs, buy homes, have children, send them to decent schools and colleges and save for their retirement. The differences in their standard of living would have been far greater had they stayed home.

America Does Not Have India’s Infrastructure Deficit or China’s Civil Society Deficit

India’s gap with America extends not just to intangible capital but tangible capital as well. Basic facilities in India-roads, water, sewage-remain primitive. For example, a 2010 McKinsey Global Institute report found that India treats 30 percent of raw sewage, whereas the international norm is 100 percent. India provides 105 liters of water per person per day, the minimum standard is 150 liters. It needs to spend twice the slated expenditures over the next 10 years to deliver basic services.

China, meanwhile, has a major civil society problem. America has made about $100 trillion in Social Security and Medicare promises to seniors that it can’t fund. But American seniors face nothing like the kind of destitution that the Chinese do. China’s one-child policy has decimated the natural safety net that old people rely on in traditional societies. And China offers no public safety net to the vast majority of village-born. Worse, many Chinese have invested their nest eggs is various asset bubbles that will wipe out their only means of subsistence if they burst, making the Great Depression look like a beach party.

America Does Not Have Grinding Poverty

Despite all the recent hoopla about China becoming the world’s second biggest economy and India hoping to follow suit, the reality is that the per capita GDP-even measured by purchasing power parity-in both is pathetic. America’s is about $47,000, China’s $7,500, and India’s $3,290.

Worse, both still harbor medieval levels of poverty with 300 million people in each living on less than $1.25 a day. India’s IT boom gets big press, but it-along with all the tertiary industries it has spawned-employs 2.3 million people, or 0.2 percent of the population.

Neither country is a font of opportunity comparable to America.

American Education Is Superior

President Obama claims that America is in an “education arms race” with India and China. Rubbish.

Notwithstanding all the horror stories about American kids underperforming on standardized tests compared to Asian kids raised by Tiger moms, things are worse in India and China. India’s literacy rate is 66 percent. China puts its at 93 percent-but between 2000 and 2005, China’s illiterate populationgrew by 30 million. The same may happen in India, thanks to last year’s Right to Education Act whose regulations will cripple India’s private school market. The fundamental problem is that both countries put their resources into educating elite kids-and ignoring the rest.

College education in both countries, especially in engineering, is also vastly overrated. Harvard researcher Vivek Wadhwa has shown that, contrary to conventional wisdom, not only does America graduate comparable number of engineers to India and China-American engineers are vastly superior.

But unless more Indian and Chinese kids get access to a quality education, their countries won’t be able to actualize their human potential, precisely what America does so well.

America Doesn’t Have a Culture of Hype

An important reason why the gloom-and-doom about America is unjustified is precisely that there is so much gloom-and-doom. Indians and Chinese, by contrast, have drunk their own Kool Aid. Their moribund economies have barely kicked into action and they are entertaining dreams of becoming the next global superpower. This bespeaks a profound megalomania-not to mention lopsided priorities. There is not a culture of hope in these countries, as Giridhardas told Jon Stewart. There is a culture of hype.

By contrast, Americans are their own worst critics-always looking for lessons to improve what is working and fix what’s not. Alexis de Tocqueville observed that although Americans were the freest and most enlightened men placed in the happiest of conditions, “a sort of cloud habitually covered their features.” Why? Because “they were constantly tormented by a vague fear of not having chosen the shortest route that can lead to…their wellbeing.”

Indeed, Americans have a grab-the-bull-by-its-horns quality so that they simply don’t hang around hoping for things to get better on their own. If the public school monopoly is failing kids, by golly, then they’ll homeschool them themselves. (Public schools are dysfunctional virtually everywhere, but which other country has spawned anything equivalent to America’s homeschooling movement?) The government responds ineffectually to the recession, modest by historic standards, and Americans go into panic mode. Grass-roots movements such as the Tea Party emerge to rein in the government. Pay Pal founder Peter Theil has even given close to a million dollars to the Seasteading Institute to establish new countries on the sea to experiment with new forms of government. This might be wacky but it puts an outside limit on how out-of-whack Americans will let their institutions get before they start fixing them.

This American spirit, ultimately, is the biggest reason to believe that the American dream is and will stay alive-in America.

Shikha Dalmia is a senior analyst at Reason Foundation and a columnist at The Daily, America’s first iPad newspaper, where a version of this column originally appeared. This column first appeared at Reason.com.

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In the wake of all the hyperventilating, many Indian fashionistas, eager to assert their social consciences, adopted the sari as their pet cause. And now, barely a few years later, they are declaring victory in their struggle. No less than The Washington Post recently announced that, thanks to the efforts of India’s top designers, the sari has made a comeback. If only the Bengal Tigers were so responsive!

To most Indian women it would be news that the sari was ever gone. The garment has survived for over 4,000 years without any benevolent, top-down intervention-and I suspect it will continue to do so. That’s because saris have always enjoyed a special relationship with Indian women and Indian women with them. And globalization will strengthen, not sunder, this relationship, possibly even winning new paramours for the outfit along the way.

Concerns that globalization will wipe out the sari are not entirely baseless of course. After all, many a traditional dress has been swept away by modernity’s gales of creative destruction. In India itself, men, especially in cities, began trading their lungis, dhotis, and mundus-varieties of sarongs-for trousers and leisure or safari suits (mercifully out of fashion now!) even before liberalization. So thoroughly Westernized is male attire in Indian cities that at a family sangeet-a pre-wedding music and dance get together-in New Delhi some years ago, my husband was the only one sporting a traditional kurta-pajama-and he’s a Jew from New York. Likewise, in Scotland only guys utterly secure in their masculinity don the kilt anymore-and then only on special occasions. But the garment whose fate makes Indians clutch their brocade scarfs in terror is the kimono. This gorgeous, elegant, elaborate outfit that both Japanese men and women wore as a matter of routine till the early 20th century is now more prevalent in Japanese museums than in Japanese closets.

However, except for the fact that both the sari and the kimono inhabit countries east of the prime meridian, they have little in common.

For starters, the Indian government never embarked on an official program to mandate Western clothes in the workplace as the Japanese Emperor Meiji did in the early 1900s, triggering a decline in traditional outfits. It is out of the question that the Indian government would ever have attempted such a stunt-let alone pulled it off-without instigating a major national revolt, especially by Indian women whose sense of femininity is inseparable from this six yards of rectangular cloth.

Part of the Indian woman’s attachment to the sari no doubt stems from her cultural conditioning. Indian girls grow up wearing a mix of Indian garments (choli/lehnga, salwar/kamiz) and Western clothes (frocks, skirts, long dresses, and jeans) clothes-not saris. Saris are meant only for grown women who have fully come into their own. When a girl first wears one-typically at her school’s graduation or farewell party, the equivalent of prom night-it marks a rite of passage. The sari and all its resplendent accessories-glass bangles, chunky hand-crafted silver or gold jewelry, the bindi on the forehead-are their first full encounter with their femininity and, like a first love, it leaves an indelible impression.

But an Indian woman’s acculturation in the sari begins much before she actually wears one. Saris are an essential part of a bride’s trousseau that mothers sometimes start planning from the day a daughter is born. My mother had barely left the maternity ward when she decided that she would give me at least 21 silk saris when I got married. And, over the years, I witnessed her painstakingly assemble my collection with pieces from all over the country: rich, double-shaded benaresis; sumptuous tanchoies woven with strands of real gold; South Indian kanchiwarams whose bright magentas and fuchsias with contrasting borders are sadly out of fashion now; diaphanous, delicate chanderis; simple, weightless French chiffons in soothing pastels; Bengali kanthas whose elaborate embroidery depicts stories from ancient Hindu epics; and gorgeous, sumptuous tassars-my personal favorite-whose shine seems to come from an inner glow like the brides they often adorn.

By the time Indian girls exit puberty, they are acquainted with these regional designs and fabrics, having acquired an education during countless family shopping expeditions. I remember as a little girl scouring the bazaars of New Delhi with an entourage of cousins and aunts, all on a collective quest to find the perfect sari for some family function.

We’d start with the posh stores of Connaught Place such as Glamour where gray-haired, well-scrubbed salesmen in starched kurtas gingerly extricated sari after sari from white tissue wrappings, methodically unfurling them, one by one, on the gleaming glass counter till we’d thoroughly discussed and dissected every element of each: the border that runs across the bottom and drapes the feet; the middle that’s folded into pleats that cascade waist-down; and the pallu-the last two yards of the sari-that typically goes across the chest and over the left shoulder, covering the exposed mid-riff.

Next stop usually would be the crowded and squalid Karol Bagh market. The casual sensuality of their sales staff was so different from the sedate, prudish sophistication of the Connaught Place stores that we might as well have been on a different planet. Lissome sales boys in tight shirts and pants-sporting a long pinky nail that made us snicker-would spring into action the moment we entered the store. They’d pull out bundles and bundles of silks tied with cotton rope or nalla. At the slightest hint that we liked one, they’d leap up and wrap the sari around themselves, deftly making the pleats and tucking them into their belt-and then, in a final flourish, swinging the pallu across their shoulder to show us the full “get up.” Sometimes we’d walk away without buying even one after they had performed this modeling routine scores of times, leaving them forlorn to stash away yards and yards of fabric.

No doubt Japanese girls go through their own acculturation in the kimono. But there is something about the sari that gives it a unique staying power.

The sari, in a way, is the antithesis of the kimono. The kimono is a structured, multi-layered garment with many parts, all of which are meticulously tailored in advance before they are finally assembled on the woman with ties and sashes. It is like a stylized robe that encases the figure, compressing its curves and contours, imparting a regal but prim uniformity that is indifferent to the frame beneath.

The sari, by contrast, is formless and fluid. It moulds itself to the shape of the woman, highlighting-rather than obscuring-her special configuration. If a kimono is like a cloak that swaddles a woman, a sari is like a veil that hides or flaunts what a woman chooses. The sari’s formlessness opens up endless possibilities. Japanese women too are experimenting with different lengths and sleeve styles to give the kimono a more contemporary look. But there is a way in which the sari can completely transform itself without losing its integrity that is at the root of its enduring appeal to Indian women.

The fear that saris won’t survive globalization stems from an insecurity that somehow things traditional are incompatible with a modern lifestyle. Modernity’s fast pace breeds a rough-and-ready culture, a casualness of attire that allows people to move quickly to grab opportunities, get things done, deliver results. It is not a coincidence that jeans are the de facto national outfit of America! A sari, by contrast, is a time-consuming, fussy affair, difficult to drape (I still can’t do it without help) and even more difficult to maintain. It is cumbersome and constricts mobility, one reason Indian feminists regard is as a patriarchal invention designed to confine women to the home-although in Pakistan, where President Zia-ul-Haq declared a sari unIslamic in the 1970s, it has become a symbol of women’s liberation, a subversive pleasure that women indulge in to taunt authorities. Be that as it may, sari worry-warts have some empirical grounds for their pessimism in that as more Indian women have entered the workplace, the sari has lost its predominance in everyday wear.

But that hardly means that the sari is headed for extinction.

Globalization is certainly giving Indian women options outside the sari, forcing it to share wardrobe space with cocktail dresses, evening gowns, and corporate pant-suits. But it is also giving them more options within the sari. The stodgy-old men and the Indian guidos are still there in Connaught Place and Karol Bagh respectively selling traditional benaresis and tanchois. But these markets are now supplemented with trendy new malls such as Square One in the outskirts of New Delhi whose sales staff consists of well-turned out girls with trim figures. More to the point, Square One saris reflect a cross-pollination of ideas, a blending of traditional and Western elements, that wouldn’t be possible without globalization. The biggest transformation is the cocktailization of the blouses worn beneath the sari that are becoming skimpier and bolder-driving traditionalists crazy. But the saris themselves are experimenting with all kinds of new fabrics and designs, sometimes with absolutely stunning results. I am still fantasizing about a black crepe sari I saw some years ago studded with Swarovski crystals and kundan stones-kind of like rough-cut diamonds used in Indian jewelry-with a matching backless blouse, all for the modest sum of $10,000, which, incidentally, Indian woman can more easily afford thanks to the greater disposable income that globalization has put in their bejeweled purses!

I canvassed a group of Indian friends-engineers, Bollywood script-writers, entrepreneurs, executives, doctors, dancers-inside and outside India, all of whom have a healthy interest in fashion, and asked them how they felt when they wore a sari. The words they used were: feminine, beautiful, sexy, glamorous, chic, classy, different, comfortable, rooted, confident, and, above all, in keeping with our modern times, powerful. I am sure if I had posed the same question to women in my mother’s generation, they would have said: traditional, beautiful, honorable, appropriate, respectable, chaste/pure, domestic, spiritual.

In short, the sari has seamlessly transformed itself, trading the values of tradition for those of modernity. Some garments are specific, sociologically contingent. A sari is eternal because ever evolving. And as it evolves, far from fading in India, its appeal will likely spread, gaining it new converts outside India. I am waiting for Angelina Jolie to appear in a black lycra sari with a leather bustier in the next Tomb Raider!

All that designers need to do to “save” the sari then is to figure out what women want from their saris and give it to them. If they are looking for a crusade, the Bengal Tigers really could use some help.

Shikha Dalmia, a native of India, is a senior analyst at Reason Foundation and a Forbes columnist. This column originally appeared at Forbes. This column first appeared at Reason.com.

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Traditionally, then, the debate is less about preserving a specific economic group as about ensuring that those who are not in that iconic midsection of the national income distribution can get to a higher level. Our Founding Fathers designed our political institutions so that our economy and communities would be open and dynamic; it’s more important that you can get to where you want to go than whether you have already gotten to your destination. A big part of the current national political debate, set in the shadow of the stagnant recovery of the Great Recession, is over whether that dynamism is even possible.

Traditionalists have argued that dynamic, open-market economies are the most dependable institutions for vaulting individuals and households to a coveted level of income security, whether through entrepreneurship, homeownership, steady employment or the financial cushion of a pension or savings account. Now, these staples of social stability appear to be in jeopardy. That doesn’t mean the aspirations have gone away, or that these aspirations don’t motivate Americans in the workplace or the ballot box. Quite the opposite. The quest for economic opportunity, aspiring to enter the ranks of a new middle class, is in our cultural DNA.

The danger lies in thinking of the middle class as a static concept, an objectively defined benchmark of personal and familial achievement. In the mid-20th century, a middle-class lifestyle-a home, savings account, car, even a television-could be achieved through relatively low-skilled jobs at automobile, textile, or steel plants. In the 21st century, these manufacturing jobs have disappeared, and it’s the information technology, financial advisers and communications specialists who have the monopoly on economic opportunity. A television might have been an aspiration of the 1950s and 1960s, but in the 2000s it’s more likely to be the iPod, iPad or Xbox.

Dynamic economies and societies will always need a middle class because it represents what can be achieved. The national political debate may really be about whether the old way of securing these opportunities-through markets and individual freedom-is preferable to another way that embraces the heavy organizational hand of government.

Samuel R. Staley is the director of urban and land use policy at the Reason Foundation and co-author of Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century. This article originally appeared at NPR.org. This column previously appeared at Reason.com.

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Despite the global downturn, China’s economic growth rate remains above 10%. But there is mounting evidence that Beijing has misallocated vast amounts of capital, touching off a real-estate crisis that could yet drag the world’s second-largest economy down to earth.

When the global marketplace went into meltdown mode two years ago and Chinese exports dropped off, Beijing mounted a stimulus several times bigger relative to the size of its economy than in this country. It announced a four trillion yuan ($586 billion) stimulus for infrastructure projects and housing developments. Some of the stimulus was used to encourage local governments to lend money to state-owned companies to develop housing complexes, roads and bridges, on the theory that these are big employment generators because they boost heavy manufacturing-steel, cement-and other sectors of the economy.

Beijing also lowered capital reserve requirements for its state-owned banks ordering them to dole out loans to “support growth.” Though official data are unreliable, in 2009 Beijing apparently handed out somewhere close to 10 trillion yuan in new loans-more than twice the year before-and expanded the country’s total loan portfolio and money supply by one-third, according to Patrick Chovanec, associate professor at Tsinghua University’s School of Economics and Management in Beijing.

Prominent progressives in this country hailed the moves. Paul Krugman wrote: “China is doing what I’m constantly urging the Obama Administration to do, which is to reverse the economic decline by a large-scale stimulus.” Dean Baker, co-founder of the Center for Economic and Policy Research wrote in TalkingPoints Memo last year: “If only we could export our Blue Dogs and deficit hawks to China, we might be able to compete.”

But that ignores the nasty side effects. Fueled in part by this massive injection of liquidity, housing prices that had started dropping due to the recession began to soar again. Over the past year they increased nearly 12%, according to the latest figures from China’s National Bureau of Statistics. So many middle-class Chinese (especially young couples wishing to move out of their parents’ home) are being priced out of the market that their travails became the subject of a popular TV series called “Dwelling Narrowness.” Beijing banned the show, fearing it would cause unrest.

The problem is that government money is going to build homes not for occupancy but for ownership. Speculation, if you will. Andy Xie, a Shanghai-based economist formerly with Morgan Stanley, believes almost 25% to 30% of private commercial and housing stock in China is vacant. Entire cities, such as Ordos in inner-Mongolia, erected literally from scratch, stand empty.

“Chinese treat homes like gold bars buying multiple units as a store of value,” notes Mr. Chovanec. Chinese avoid the stock market because it is still volatile and risky, and banks and bonds offer a low yield. Hence, Chinese are content to buy homes and let them sit because, thanks to the absence of property taxes, holding costs are negligible. Having never experienced a housing slump since China privatized its housing market in the 1990s, they believe that home prices only rise.

This can’t last, but backers of China’s stimulus believe there won’t be any serious economic downside when the bubble bursts. Homeowners won’t be thrown on the street because Chinese buy their first homes outright through their savings-not loans. And when house prices drop, the excess stock will quickly get scooped up-not boarded up.

While Chinese homeowners are not generally leveraged, those who buy second homes do finance them. And developers, including local governments and state-owned companies, are massively leveraged. This poses a big problem-Shen Minggao, Citigroup’s Hong Kong-based China economist, estimates in Bloomberg Businessweek that at least 2.4 trillion yuan of the stimulus is already in nonperforming loans.

China’s autocrats understand that they have a bubble on their hands. They’ve mandated minimum down payments of 50% on second homes and are considering property taxes to rein in speculative purchases. However, this will mean that the houses put on the market will find fewer buyers.

Beijing is in a dilemma. It can cut spending and rein in its monetary expansion, releasing over time capital for more productive endeavors (especially if it opens up hitherto closed investment options) and putting the economy on a healthier footing. However, that would mean slower growth, lower home values, rising unemployment and potential political unrest. Alternatively, it can buy a few more years of faux-growth and stability by propping up the real-estate market-and risk making the day of reckoning far worse when it arrives.

Either way, Beijing’s mandarins haven’t discovered some magical formula to spend and inflate their way out of a recession. Pouring liquidity into real estate is the Keynesian equivalent of digging ditches and filling them with stones. Unfortunately, the Chinese economy has fallen into one-a ditch, that is. The U.S. might have endured a bad recession. But so long as it avoids the second stimulus that China enthusiasts are advocating, it might be up and running while China is still digging itself out.

Ms. Dalmia is a senior analyst at Reason Foundation and a Forbes.com columnist. Mr. Randazzo is Reason Foundation’s director of economic research. Reason Foundation research assistant David Godow provided research support. This article was originally published by The Wall Street Journal on August 21, 2010.

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