Entries from December 2002

Enough Preparation, It’s Time For Action

David Frum December 28th, 2002 at 12:00 am Comments Off

In
the war on terror, 2002 was a year of preparation and waiting. The year 2003
will be one of action and decision. Here’s a look back — and a guess at what
lies ahead.

After
the spectacular triumphs in Afghanistan in November 2001, the war on terror
went quiet — so quiet that it often seemed that nothing was happening at all.
In fact, serious and important work was being done in four separate areas –
and all of them are about to pay off.

First,
order was restored to Afghanistan. For all the questions about whether the
United States has done enough to stabilize Afghanistan, there’s no doubt at all
that the world’s wildest country has become freer and safer than ever before,
and that it has ceased to be a base of operations for al-Qaeda and other
Islamic extremists.

Second, the United States and
Great Britain have built themselves an advanced new network of bases and
facilities in the Middle East and Central Asia. The most important is the huge
new airbase — as large as Washington’s Dulles International Airport — put up
in less than a year in Qatar. Thanks to the Qatar base, the U.S. coalition is
no longer dependent on the Prince Sultan Airbase in Saudi Arabia, which means the
Saudis have lost their veto over Western military actions in the Persian Gulf.

Third,
2002 was the year that the Bush administration committed itself to fostering
democracy in the Arab world. In June, President Bush delivered his important
speech calling for a new and accountable Palestinian leadership. That speech
announced a new approach not only to the Arab-Israeli dispute, but to the more
general problem of violence and extremism in the Arab world. And it implied
that the goal of intervention in Iraq would be bigger than the mere toppling of
a dictator: The goal would be the creation of an Arab alternative, a new regime
that demonstrated that an Arab state that turned to law and liberty and peace
could deliver better results for its people than sheiks, mullahs, and
presidents-for-life.

Fourth
and last, 2002 was a year in which no major terrorist attacks occurred in the
West. It’s too early to say that the war on terror is being won. But it can be
said that police and intelligence work is disrupting the terrorist networks and
thwarting their plans. For most of us, this last is the most important success
of all.

The year ahead will be a year
of more visible activity. The United States and its allies are now ready to
strike at Saddam Hussein. The crucial date is Feb. 8, the end of the annual
pilgrimage to Mecca. The Americans are reluctant to move so long as large
throngs of potentially militant Muslims are gathered in one place. After they
leave, the way will be open for the fighting to start.

My
prediction is that the war will go with blinding speed. It has to, because the
greatest danger to the West is that Saddam will take his own people hostage. He
will say: "If U.S. tanks cross my borders, I will use chemical weapons
against the Shiites in southern Iraq — I will kill hundreds of thousands of
people and you will be to blame." The best way to defeat this threat is to
charge forward so quickly that Saddam’s forces are overwhelmed before they can
begin to use their poisons.

And
then will begin a truly searching debate about the future of Iraq — and of the
Arab world’s relationship with the West. Do the Americans install a pro-Western
strongman and get out? Or do they stay to do the long, slow work of building
representative institutions, of providing security without terror and of
restoring a functioning market economy?

At
the beginning of the war on terror, the war’s critics and opponents wondered,
"Why do they" — meaning the terrorists and their supporters –
"hate us?" It was a question that assumed that terrorism is somehow
provoked by terrorism’s victims. We are learning better now. Terrorism’s causes
are to be sought in the region and culture from which the terrorists came. And
it is there too that terrorism must be cured.

Ahmed
Chalabi, the leader of the Iraqi National Congress, once showed me a photograph
of seven Iraqi men, all in dark blue suits — the directors of the Iraqi sugar
company, which at the time was the largest company listed on any stock exchange
in the Arab world. One of the men was Jewish. Two were Christians. Two were
Sunni Muslims. Two were Shiites, including Chalabi’s father, the chairman of
the board.

"This
picture," Chalabi said, "was taken in 1942. If somebody had predicted
then that Germany would soon be a liberal democracy, who would have believed
him? If the Germany of 1942 could become a free and tolerant country, why not
this Iraq?"

Chalabi’s
"why not?" will test us all in 2003 — Arabs and Westerners alike.

Lots Of Reasons For Hope

David Frum December 24th, 2002 at 12:00 am Comments Off

It’s
Christmas, and the world is at war. Yet though so much of the news is grim, we
nevertheless live in a time of hope — and this season of Christian joy is as
good a time as any to remind ourselves of the reasons for hope.

We
live on a planet in which life is improving in more ways for more people than
ever before in human history. And if anything, life is improving fastest for
the people of the world’s poorest countries.

Between
1987 and 1998, the World Bank reports, the proportion of the world’s people
living in extreme poverty (less than US$1 per day) dropped from 28% to 23%.
This progress is all the more impressive since the 1990s were a decade –
probably the very last decade — of rapid world population growth. Although the
total population of the planet grew by more than one billion people between
1987 and 1998, the number of people living in extreme poverty dropped by nine
million.

For
the average person in a developing country, the 1990s were a time of strong and
steady economic improvement. Food production rose faster than population –
dramatically faster as a matter of fact. And since the 1990s were also a time
of rising world trade, wages rose at the same time as food supplies expanded.
As a result, average per-person private-sector consumption in the developing
world rose by 2.4% a year between 1990 and 1999, again according to the World
Bank.

"Consumption"
is an economist’s term for more and better food, healthier housing, modern
medicine, purer water, swifter transportation, books, eyeglasses, computers,
ballpoint pens, and a thousand other improvements and advances.

These
improvements and advances have cut infant mortality in the developing world in
half over the past thirty years, from 107 per thousand births in 1970 to 59 in
1999. Life expectancies rose for adults too. In 1970, the average person in the
developing world could expect only 55 years of life. In 1998, he or she could
expect 68 years.

The
human mind is progressing as much as the human body. World literacy rates have
soared since 1970. Thirty years ago, barely half the planet’s people could
read. Today, three-quarters of them can. And while it’s still true that boys
are much likelier to get schooling in the developing world than girls, the
male-female differential has been cut in half since 1980.

This
good news may shock those of us accustomed to a steady flow of dismal news from
Africa, Asia, and Latin America. But that does not make it any less true.

There
are many ways to sum up what happened in the 1990s. They were the decade of the
first European wars since 1945 and the first impeachment of a U.S. president
since 1868; of the Internet stock market boom and the creation of the single
European currency. But for the vast majority of the planet’s people, the most
important event of the decade was the decision of their various nations’
leaders to rejoin the global economy.

From
Penang to Patagonia, the 1990s were a decade when tariffs dropped and foreign
investment was encouraged, when free enterprise and free trade replaced
protectionism and state control. Significantly, two of the countries that
worked most assiduously to open their markets were India and China — the two
countries in which two billion of the developing world’s five billion people
live. India and China are very different in almost every way. India is a
democracy, China is not; India is trending in an increasingly pro-Western
direction, China is increasingly hostile. But one thing they shared was a
decision by their leaders to reject the failed ways of the centrally planned
past — and as a result, they led the way toward a healthier, better educated,
better fed planet.

There
is no shortage of grief and woe for the developing world. Africans are dying of
AIDS and Argentines have lost their savings to inflation and debt repudiation.
The Islamic world is at war with itself and its neighbours. And the turn toward
freedom in the developing world has been in most cases half-hearted and is
still hampered by the dead hand of the statist past — to borrow a phrase from
the best book yet written about globalization, Brink Lindsey’s Against the Dead
Hand.

But
though the progress is difficult, halting, and often reversed, it is real and
important. It is a testament to the universal power of freedom — and a tribute
to the universal ingenuity of our human species. Global affluence will of
course create problems of its own: environmental problems, problems of ideology
and of culture, of migration and of geopolitics. But if we can surmount the barriers
of hunger, disease, and illiteracy, aren’t we entitled to a little confidence
that human beings can solve those other problems too?

"Happy
New Year" is not just a wish. For more and more people, it is on its way
to becoming a fact.

Deadly Dangerous

David Frum December 23rd, 2002 at 12:00 am Comments Off

"At
some times I feel like a member of the Jewish community in Germany in the latter
stages of the Weimar Republic." — Ibrahim Hooper, Council on
American-Islamic Relations, quoted in The Washington Post
font-size:12.0pt'>, November 30, 2002

 

You
have to give CAIR’s Mr. Hooper credit: The man certainly knows how to turn a
phrase. "Turn" is the operative word. On the very same weekend that
the newspapers of the world reported that Muslim extremists fired on an Israeli
passenger jet in order to murder the 261 people aboard — and that other Muslim
extremists detonated suicide bombs at an Israeli-owned hotel in Kenya, killing
thirteen — Mr. Hooper frets that it is the United States that is going Nazi.
That is some reversal of reality.

 

The
year since September 11 has put American tolerance to an extreme test — and
Americans have passed with honors and gold stars. In all of 2001, the most
stressful and frightening year since 1962, there were 554 victims of
anti-Islamic offenses in the U.S., according to the annual report on hate
crimes released by the FBI in the last week of November. That’s obviously 554
too many. On the other hand, it is only half as many as the number of victims
of anti-Jewish offenses: 1,196. And unlike hate crimes against homosexuals, 665
of which inflicted violence on their victims, more than 80 percent of the
anti-Islamic offenses in 2001 involved only vandalism or threats.

 

On
the extremely rare occasions that anti-Muslim violence does occur, it is
swiftly and severely punished. In 2001, there were three murders in the United
States motivated by anti-Muslim prejudice. The man who committed the first
murder was insane; the killer responsible for the next two has been sentenced
to death by a Texas jury.

 

The
dark night of oppression has clearly not yet descended on the United States. So
why Mr. Hooper’s mood of foreboding? Why does a man whose own group has
co-sponsored rallies at which Jews are compared to apes suddenly feel this
remarkable affinity for them?

 

As
Hooper himself told The Washington Post
12.0pt'>, what alarms him now are not the decreasingly common attacks on
Muslims as individuals, but the increasingly common criticisms he hears of
Islam as a religion and a culture.

 

Some
of these statements have indeed been intemperate. When Franklin Graham called
Islam an "evil" religion, I found myself recalling the words of
James: "Every good endowment and every perfect gift is from above, coming
down from the Father of lights with whom there is no variation or shadow due to
change." Who would deny that many millions of people have been inspired to
good and holy acts by the words of the Koran and the teachings of Mohammad?

 

On
the other hand, criticism — even strident and unjust criticism — is something
that most organized religions in our democratic society have learned to
tolerate. Most — but not all. Compare two recent cases, one famous, one not.

 

Harvard
professor Daniel Goldhagen is an international intellectual celebrity. His
first book, which blamed German society and culture for the Holocaust, was a
bestseller here and in Germany too. His second one, A Moral Reckoning
font-size:12.0pt'>, argues that the Roman Catholic Church — not just
the Pope, but the entire hierarchy and the ancient doctrines — should be
regarded as complicit in the century’s greatest crime.

 

Strong
stuff, and it has been strongly resented by many Catholics. Yet so far as I know,
no Catholic has tried to kill Goldhagen — the very idea would be ridiculous.
When he lectures at universities, nobody shouts him down. Nobody tries to
intimidate his publishers into discontinuing his work.

 

Now
consider the story of Bat Ye’or. The week before Goldhagen’s book hit the
racks, Ye’or came to Washington, D.C., to lecture at Georgetown University.
Like Goldhagen’s, her work concerns the maltreatment of religious minorities by
a dominant religious group. But the dominant religion she studies is Islam, and
the minorities whose stories she tells are the dhimmi: Christians, Jews, and
Zoroastrians under Muslim rule.

 

Hers
is a deadly dangerous subject. From Pakistan to Britain, from Nigeria to
France, writers who express skepticism about the teachings or record of Islam
risk violent death. Bat Ye’or is a very great scholar: original, authoritative,
lucid. But she must publish under a pseudonym: Bat Ye’or, "daughter of the
Nile" — for she was born in Egypt and driven into exile by anti-Semitic persecution
in the 1950s. Her native language is French, but her French publisher timidly
let her book go out of print, despite scholarly accolades and strong sales.
When she spoke at Georgetown, irate Muslim students shouted her down,
unreprimanded by their university, and the same thing happened to her at the
University of London and at Brown.

 

I
spoke to Ye’or recently by telephone, and mentioned the difference between the
reception of her work and that of scholars like Goldhagen. "You can speak
about Christian anti-Semitism," she said, "just as my Christian
friends can speak to me about Jewish anti-Christian attitudes. It is a totally
different attitude from the dhimmi system, where free speech is not
tolerated."

 

During
the civil-rights struggles of the 1950s and ’60s, we learned to think in terms
of persecuted minorities and persecuting majorities. The idea that there might
be some within a minority group who aspire to something more than equality is
deeply alien to us. But it is not alien to those waging terror war on the West.
"In the Islamic world, no dhimmi could ever criticize anything done by a
Muslim," Ye’or explains. "This mentality has now migrated here."

 

The
dhimmi mentality can borrow the language of equality and tolerance. But
equality and tolerance are not its goals. Under the rules of jihad and
dhimmitude, Ye’or observes, "you cannot criticize the system that condemns
you to war or to subjugation." But under the rules of Western
civilization, fair and truthful criticism is not only permissible: It is a
duty. And so Ye’or urges: "You cannot become conditioned by the person who
wants to dominate you. You cannot let yourself be intimidated. You must
struggle to keep your liberty."

The Air War At Home

David Frum December 23rd, 2002 at 12:00 am Comments Off

In
the last week of November, the Bush administration handed down a new regulation
that will simultaneously reduce air pollution and increase energy conservation,
all without costing either taxpayers or consumers a dime. Is everybody happy?
Not hardly.

The
Natural Resources Defense Council instantly condemned the decision: "The
Bush administration decided to allow corporate polluters to spew even more toxic
chemicals into our air, regardless of the fact that it will harm millions of
Americans." The Sierra Club described the new rule as a step backward into
barbarian darkness: "The president is trying to give polluters permission
to ignore modern technology and keep fouling our air." To Sen. James
Jeffords of Vermont, Bush’s action was a "devastating defeat for public
health and our environment." And Paul Krugman warned readers of The New
York Times
to "breathe while you
still can."

Actually,
when you think about it, it’s a miracle any of us can breathe at all, what with
all that arsenic poisoning us. Yet it’s a very odd thing: At almost exactly the
moment that each environmental scare story exhausts its fundraising potential,
along comes another, even more horrific than the last. It’s safe to say that
the excitement over Bush’s revisions to the Clean Air Act won’t be the last
environmental blowup. It may, however, very well prove to be the silliest.

To
understand just how silly, you have to brace yourself for a little regulatory
history.

The
story begins a quarter-century ago, when Jimmy Carter stumbled into a
Washington political crossfire over his plan to reduce America’s dependence on
foreign oil. One obvious way to achieve that reduction was to use more coal –
and less oil — in factories and power plants. Unfortunately, coal is a very
dirty fuel. To appease environmentalists, the Carter administration drafted a
Clean Air Act in 1977 that allowed existing plants to continue in business –
but that required them to install expensive anti-pollution technology if they
changed or expanded. This rule was called "new source review," and
for 20 years few paid it much attention.

The
power shortages that began in California in 1999 and spread through the western
United States got people paying attention again. For the first time since the
days of fat neckties, electricity became a sexy topic. And suddenly a lot of
people began to notice the perverse effects of the new source rule.

Imagine
you own a coal power plant built in 1952. If you decide to upgrade your plant
– say by adding an additional generator, a new one that will produce more
power with less fuel and less pollution — you will trigger a new source review
that will force you to spend millions to clean up the otherwise protected,
older part of your facility. If, however, you decide to forget about
modernization and continue to run the plant the way your grandfather did — why
then, you are free to pump as much coal ash into the atmosphere as you like.
Result: Rather than build a cleaner new generator, you’ll probably just shovel
more coal into your old dirty one.

In
the name of environmental protection, new source review deters investment in
cleaner new technologies and artificially extends the life of obsolete, dirty,
and often dangerous old facilities. Freed from new source review, industry can
add new capacity without being forced immediately to update the old facilities
that the new plants are meant gradually to replace.

In
fact, even environmentalists quietly acknowledge that new source review was
perverse and counterproductive. That’s why they liked it. They calculated that
because the policy was so crazy, industry would cheerfully pay quite a high
price to get rid of it. They hoped to use the perversity of new source review
as a lever to force a massive new system of regulation of factory emissions
through Congress. Bush beat them to the punch — and that is why the
environmentalists are enraged.

Environmentalist
organizations may fulminate; everybody else should celebrate. The massive
scheme favored by environmentalist organizations would have dramatically raised
the price of power. And since many environmentalists also favor tax subsidies
to uneconomic power sources like wind and solar, their regulatory scheme would
have imposed large, hidden costs on taxpayers as well.

Of
course, higher electric prices do not bother enviros. They believe we have too
many gadgets already. The environmentalist answer to Americans worried about
energy security is a reprise of Sen. Robert Taft’s notorious answer to
housewives worried about the rising cost of food in the 1940s: "Eat
less." The enviros want us to consume less, and nothing reduces
consumption like high prices.

The
1990s were America’s first cheap-energy era since the 1960s, and that fact as
much as new technology may account for the decade’s fabulous boom. Over the
past three years, energy prices have been rising — and the pace of growth has
been faltering. "Eat less" remains a lousy answer to an important
question.

Yet
it has to be admitted: Environmentalists have a point about the dirt and danger
of coal. Here we are, more than half a century after the splitting of the atom
– and we’re still deriving more than half our electricity from the fuel that
powered the steam engine. It’s a fuel for which hundreds of miners still die
every year, that puts millions of tons of emissions into the atmosphere, and
leaves more millions of tons of ash and waste behind on the ground.

Though
wind and sun cannot substitute for coal, there is a fuel that can: nuclear
power. Nuclear power is the whispered theme of the report delivered in May 2001
by the Cheney energy task force. Of course, the enviros hate nuclear power even
more than they hate coal. But in the years since Jackson Browne strummed
outside nuclear reactors, the enviros have lost the public. During the
California energy crisis, in fact, polls found that majorities of Americans now
favored the expansion of nuclear energy. Do Americans still feel the same way
18 months later? The pollsters no longer ask, or at least the publicly
available pollsters no longer ask. But it would be interesting to know the
answer — to know whether there might be a bigger prize out there for the Bush
administration’s energy policy than the incremental improvement of the
technology of yesteryear, or rather yester-century.

Why Would Gore Pack It In Now?

David Frum December 17th, 2002 at 12:00 am Comments Off

WASHINGTON
- Why did he do it? Al Gore was the front- runner for the Democratic
presidential nomination in 2004. Every poll gave him a 3-1 lead or better over
any other candidate. He had the best resume, the most supporters, the best
organization, the most money. In all the United States, population 280 million,
Gore had to be reckoned of the three or four people most likely to become the
next president. Why in the world would he throw that chance away?

Gore’s
answer in his interview Sunday with 60 Minutes is not exactly convincing. He
did not want to run again against George Bush, he said, because such a race
"would inevitably involve a focus on the past that would in some measure
distract from the focus on the future that I think all campaigns have to be
about."

Gore’s
reluctance to focus on the past is a new thing. All through the 2002 campaign
cycle, he traveled the country whipping up partisan Democratic crowds by
asking, "Do you remember where you were when they stopped counting the
votes?" — meaning when the Supreme Court handed down its ruling that
effectively made George Bush President. In September, October, and November of
this year, no issue was more alive and vivid to Gore than the need to reverse
the verdict of the 2000 election. Why has he suddenly eschewed that issue now?

Well
there are focuses and there are focuses. By losing the presidency in 2000, Gore
opened the way for the Republicans to establish a solid majority in both houses
of Congress two years later — and very probably for them to keep those
majorities at least until 2007. And the question that more and more Democrats
are now asking is: How did Gore manage to throw his election away? He started
with every advantage: peace, prosperity, a predecessor who stood high in the
polls. He faced a challenger burdened with all kinds of disadvantages — a
challenger who was not verbally nimble, who stood well to the right of the
electorate as a whole, whose name was associated with wealth and privilege. Had
Gore run a halfway competent campaign, many Democrats feel, he should have
crushed Bush. Instead, Gore may have almost single-handedly inaugurated the
first decade of total Republican political dominance since the 1920s.

Two
months ago, Gore wanted Democratic loyalists to focus on the injustice
supposedly done to him by Bush v. Gore — that past he very much wished to keep
alive. Today, though, when those Democrats focus on the past, what they are
much more likely to see is the image of Al Gore bungling his way to defeat in
three presidential debates. When those loyalists focus on the past, they no
longer get so mad at Bush. Since Election Day 2002, they have been getting
angrier and angrier at Gore.

Gore
declined to run because he sensed that despite the enormous lead with which he
would begin, he might well not be able to win his party’s nomination in 2004.

So
what do the Democrats do now? Their field of candidates is rapidly dividing
into two groups: those who think that the 2002 elections were just a blip,
demanding no basic rethinking of the party’s old positions — and those who
perceive the elections as a warning and a danger that demands dramatic change
now.

The
blippers — John Kerry and Joe Lieberman are probably the two most important –
argue that the Clinton formula that worked in the booming 1990s will work just
as well in the terrorized 00s: Go very slightly to the left on economics,
emphasize quality of life issues like the environment, downplay foreign policy.
Kerry is against military action in Iraq. Lieberman is for it. But both agree
that Iraq is much less urgent and important a problem than the weakness of the
domestic economy.

So
far there is only one candidate in the changer camp: Senator John Edwards of
North Carolina. He’s a largely unknown quantity, a first-term senator of great
charm who has been talking more — and more seriously — about defence and
terrorism than any other Democrat.

It’s
rumoured that Edwards is Bill Clinton’s favourite candidate. If so, it shows
how effectively Clinton has mastered the first lesson: Don’t do what I did
under the circumstances then; do what I would do under the circumstances now.

Of
course, there’s another theory about what Clinton really wants in 2004: He
wants the Democrats to lose, so that the presidency is open in 2008, when
Hillary is ready to run. Gore’s decision to take a pass on the 04 contest means
that he too will be seeking the nomination in 2008 — which means that the big
story of the next political cycle will be the looming nomination fight between
Clinton and Gore; and that the greatest of all political kingmakers will be
Bill Clinton himself, who will finally have to settle the question he’s been
brooding over for years: Whom does he dislike more? His former vice-president?
Or his wife?

Bush Firings Signal Help Is On The Way

David Frum December 7th, 2002 at 12:00 am Comments Off

It
is supposed to have been Gladstone who said that a prime minister must first be
a good butcher. Gladstone would have been impressed by the butchery in
Washington this weekend: At 10:05 on a Friday morning, without so much as a
hint leaked in advance, the Bush administration announced that its two top
economic policy-makers would be gone by the end of the year.

White
House economic chief Lawrence Lindsey was dispatched in an especially bloody
way. Unlike Treasury Secretary Paul O’Neill, who was allowed to pretend that he
was departing of his own volition, somebody in the White House press office
told CNN that Lindsey had been asked to resign.

How
to understand this Friday morning massacre?

O’Neill’s
tenure at Treasury has been a shambles from the start. The man interpreted his
appointment as Treasury Secretary as an unconditional charter to unburden
himself of every thought that crossed his mind. He disparaged the Bush tax cut,
praised the Kyoto treaty, and mused to a friendly reporter that maybe the
administration ought to abolish the corporate income tax.

There
is nothing wrong with a cabinet secretary holding dissenting opinions. There is
nothing wrong with him pressing those opinions forcefully upon his colleagues
and the president. And if his dissent is serious enough and the issue is
important enough, it can be necessary for him to take his campaign public — as
for instance Colin Powell has done over the past 12 months with his opposition
to military action in Iraq.

But
the difference between Powell and O’Neill is precisely that O’Neill was never
serious. He didn’t break ranks in order to advance important principles; he
broke ranks because it never occurred to him that a man with the power to upend
every stock market on earth ought to think for a second or two before blurting
his latest passing fancy. The last straw broke six weeks ago, when he defied a
direct order from the President and speculated aloud about the possibility of a
second bailout of the struggling airline industry.

O’Neill
would have been fired a year ago if the Republicans had not lost control of the
Senate in May 2001. But with Senate Democrats demanding the repeal of the Bush
tax cut — and the economy in turmoil after 9/11 — the last thing the Bush
administration wanted to do was open a debate over economic policy by sending a
new Treasury nominee up to the Senate for confirmation.

Now,
with Bush’s leadership strengthened by the November elections and with the
Senate safely back in Republican hands, and with the State of the Union address
and a new economic agenda only a few weeks away, the administration can safely
replace its most visible economic spokesman.

The
real mystery about Friday’s events is why Lindsey was so brutally axed. Lindsey
was not an especially effective economic adviser. But he was nothing like the
kind of spectacular failure that O’Neill was. Why not gracefully ease him out
or shift him to another position?

Here
are three possible explanations.

1.
By firing the two men together, Bush made the firings less personal. Had
O’Neill resigned alone, the headline would have been: “Bush Dumps Treasury
Chief.” Now instead the headline is: “Bush Shakes Up Economic
Team.”

2.
By firing two prominent people and then waiting a while to name their
successors, Bush has bought himself up to a month of eager media reports about
his bold new economic agenda — reports that will obscure the less exciting
truth that he’s sticking with the same old economic agenda he has had since
1999.

3.
O’Neill had a background in industry. Lindsey was an academic before his
appointment to the Board of Governors of the Federal Reserve in 1991. Neither
had any direct experience in financial markets. But it is precisely those
markets that have suffered most from the downturn since the spring of 2000. If
you make cars for a living in Smyrna, Tennessee, you’re probably barely aware
of the recession at all; if you are an investor hoping to retire in the next
couple of years, you have probably lived through two of the worst years of your
life. By clearing away O’Neill and Lindsey, Bush has opened room to hire a team
that commands respect and attention on Wall Street — and that can signal
worried investors that their unhappiness has been noted and that help is on the
way.

How
much difference will Friday’s action really make? In the end, probably not all
that much. The U.S. economy is suffering from two things: the collapse of asset
values after the giddy boom of the 1990s and the collapse of confidence after
the terror attacks of 9/11.

For
the collapse of asset values, there is only cure: time. As the economy grows,
corporate incomes will rise and corporate assets will recover.

For
the collapse of confidence, there is also only one cure: decisive military
action against terror and the sponsors of terror.

There
is little that a new economic team can do to promote either cure. Which means
that for many months to come, the most important news for the U.S. and world
economies will be the news — not from the Treasury — but from the Pentagon.

Never Go Short On Uncle Sam

David Frum December 3rd, 2002 at 12:00 am Comments Off

Last
week, the Department of Commerce released a spate of data about the American
economy. Here’s what they found:

New
Home Sales in the month of October: Up 4.5%

Annual
Rate of GDP Growth from July 1 to September 30: 4.0%

Consumer
Confidence in November: Up 4.5 points to 84.1

Durable-goods
orders (October): Up 2.8%

Personal
spending (October): Up 0.4%

Personal
income (October): Up 0.1%

Up,
up, up, up, up, up. And did you notice too that America’s biggest retailer,
Wal-Mart, rang up the biggest day in its history on Friday? And that the Dow
Jones Industrial Average crossed 9,000 on Monday for the first time since this
summer? And that despite Iraq and political trouble in Venezuela, the price of
oil continues to bump along at the $25-$26 a barrel mark? And that the rise in
American unemployment rates appears to have stalled well short of 6%?

Technically
speaking, the recession that begin early in 2001 has already ended. But the
early stages of a recovery are often hard to recognize and the shock of 9/11 -
and concerns about the economic consequences of a war in Iraq – led many to
fear that America might relapse into a second recession in 2002. That did not
happen, and it now seems unlikely to happen in 2003 either.

Economics
is often described as a cold, dismal science, more concerned with numbers than
with people. Edward Burke memorably complained that the age of chivalry was
dead, replaced with the gloomy reign of sophisters and economists.

But
there is nothing gloomy – there is something downright inspiring – about the
spirit and power of the American economy after 9/11. A band of fanatics
determined to drag the whole world back to the 7th century attacks the symbols
of American wealth and power. They succeed in killing 3,000 people – and we
continue to mourn every loss. They aggravated and prolonged an economic slump
that had already begun. But the underlying wealth and power of America was as
unscathed by Osama bin Laden’s terror tactics as an Abrams tank struck by a
hand-forged scimitar.

This
is bad news for America’s enemies. It is bad news too for America’s false
friends, such as Prime Minister Chretien. Mr. Chretien was a rising politician
the last time America was hit by disaster, back in the mid-1970s. Those were
the days when the Canadian dollar rose up and over $1 U.S. – when Canadian nationalists
fantasized that Canada might become the Saudi Arabia of water – when the gap
between Canadian and American living standards seemed to be narrowing toward
zero.

Some
may have imagined that history would repeat itself in 2001 – that the shock of
9/11 would cast America into a prolonged slump that would allow other
countries, including Canada, to regain some of the ground they lost to America
in the 1990s. And though that fantasy has been falsified, America’s false
friends have not given up hoping that something else bad might happen.
Britain’s Independent newspaper gleefully predicted on November 16 that
“war against Iraq could cost the United States hundreds of billions of
dollars, play havoc with an already depressed domestic economy and tip the world
into recession because of the adverse effect on oil prices, inflation and
interest rates.”

Well,
stranger things have happened. But I’d bet my money on a very different result.

I’d
bet on a short, successful, and surprisingly inexpensive war in Iraq. (The Gulf
War cost $80 billion in today’s funds largely because Colin Powell demanded
that 500,000 American troops be shipped halfway around the world. Some suspect
that Mr. Powell picked the 500,000 figure because he thought it big enough to
frighten his civilian bosses into dropping the whole idea of fighting Iraq.)

I’d
bet that a victory by America and its allies will discredit and demoralize
radical anti-Westerners throughout the Islamic world, from Yasser Arafat’s
suicide bombers to the guerillas of the Philippines. I’d bet that terrorism
subsides and that Arab governments will suddenly scramble to prove themselves
friends and supporters of the winning coalition.

I’d
bet that oil prices quickly drop below $20 a barrel, that the dollar will rise even
as interest rates stay low, and that the Dow Jones Industrial Average will
jump.

Fear
of the unknown is a deep and unallayable human instinct, and I can well
understand why so many experts prefer to emphasize the dangers ahead and not
the opportunities. But I’d bet that those gloomsters who sound so wise and
sober today will look like absolute chumps in six months time. And I’d place my
last and biggest bet on the oldest of all investment rules: never, ever, ever
go short on Uncle Sam.