RSS Feed MenuClick here for all of David Frum’s blogposts on Mitt Romney’s “No Apology”.
In his book No Apology, Gov Romney thanks almost 2 dozen people in his acknowledgments for their contributions to the book. He might want to rethink his thanks to whoever it was that worked on chapter 2, a short essay on the theme “Why Nations Decline.”
While Chapter 1 is by turns intelligent and serious, and then intelligently cynical, Chapter 2 reveals a much more careless hand. (It does however contain two favorable references to CEOs, Bruce Henderson of Boston Consulting Group and Bill Bain of Bain Consulting.)
Chapter 2 quickly surveys the decline of the Ottoman, Spanish, Portuguese, Dutch, and British empires. For the most part it’s a mish-mash of poorly remembered undergraduate survey history textbooks. But there is one strange passage I’d have expected Good Romney to catch. It’s on p. 42.
“The Dutch also suffered from unearned wealth. Their trade monopolies, underinvestment in productive industry, complacency, and cultural decay led this condition to be called ‘Dutch disease.’”
The reference is very hazy: Is Romney talking about the (relative) decline of the Dutch economy in the 18th century? The placement of this material suggests that he is. Most historians attribute that decline to the exhausting cost of wars with Louis XIV, not “complacency.” But that’s quibbling.
The real surprise is that Mitt Romney seems not to know what the phrase “the Dutch disease” usually means to economists. In the 1960s, the Dutch discovered a huge natural gas field off their shores. To buy this gas, foreign customers first had to exchange their money for Dutch currency, thus bidding up the value of the Dutch guilder. As the guilder rose in value, non-resource Dutch companies found themselves priced off world markets. The resource windfall carried a penalty: the hollowing out of Dutch manufacturing. THAT is the Dutch disease, and it explains why so many resource-rich countries have difficulty translating their resources into more permanent wealth.
I’m genuinely surprised that Mitt Romney would not know that.
My surprise stirs a deep anxiety about Romney: Like many conservatives, I have credited Romney with very sophisticated economic understanding. Almost two years ago, however, a prominent Republican who has long followed Romney’s career cautioned me: Management consultants are not financiers. They understand organizations, not economies. The slapdash and often outright ignorant economic history propounded in Chapter 2 lends credence to my friend’s doubts.
ltoro1 // Mar 11, 2010 at 6:44 am
It’s about time someone realized that being an expert in one field does not make you an expert in another. That being said, I would prefer a management/organizational expert in the Oval Office to a macroeconomist.
kensilber // Mar 11, 2010 at 8:48 am
It could have been worse. He might have confused it with Dutch Elm disease.
Independent // Mar 11, 2010 at 9:17 am
DavidF trips over a non-gotcha moment: “The real surprise is that Mitt Romney seems not to know what the phrase “the Dutch disease”” and “I’m genuinely surprised that Mitt Romney would not know that. My surprise stirs a deep anxiety about Romney….”
Oh give it a rest DavidF.
Your surprise may stir a deep anxiety in you but that’s just because you’ve been a closeted drama queen –all speech writers are; it’s an occupational hazard for you guys. Gheesh.
The surprise I have at this segment of your page-by-page blogging of Mitt’s book is that you’ve exposed yourself as the kind of egghead that gives intellectuals a bad name. I can just imagine you writing later on: “Oh my gawd! Did you know that Romney, on page 211, didn’t know how many ounces were in a troy pound??? And on page 113, he couldn’t name the 4 states that voted against the 16th Amendment???? It’s all very, very distressing. These are serious matters that any man standing for election should know. I’m an emotional wreck over this serious, serious, very serious revelation. (PS> Mr Romney I’m available for speech writing -you know, I use to work for W?)”
Like I said, give it a rest DavidF. This kind of brain-numbing blogging is better suited for other venues and topics.
sinz54 // Mar 11, 2010 at 10:10 am
Independent:
But Romney is using the examples of the Ottoman, Spanish, Portuguese, Dutch, and British empires to make a point about 21st century America. And if he gets his history wrong, then his analogies are all called into question.
For myself, I find it odd that Romney surveys all these long-gone empires to suggest that America should learn from their examples. Is Romney suggesting that America is an empire and should succeed where those other empires failed? Should we even aspire to be an empire?
Seriously, what does any of that have to do with us? The United States is a revolutionary society, deliberately constructed to be different from the Europe we broke away from. We’re not trying to administer a far-flung network of colonial possessions. We gave up our last colonial possession–the Philippines–in 1946. We just happen to be a great nation that found itself the only game in town after everybody else was devastated in World War II–and as the top dog on the planet, we’ve been on the defensive ever since.
Frum is right: There are far more historical examples of nations–as well as empires–so exhausted by many years of war that they began a long term decline, sometimes collapse. Romney ignores that point. To their credit, the Left and the extreme Right have pointed that out, often.
franco 2 // Mar 11, 2010 at 10:13 am
Gee, and I thought “dutch disease” was what Tiger got from Jamie Jungers over there>>>
franco 2 // Mar 11, 2010 at 10:19 am
Romney’s Spotty Economic History
Why don’t you just hit on the Mormon thing?
I mean, you’ve proven you aren’t above trolling for readers interested in Jerry Springer style political and not-so-political gossip.
“…that’s quibbling.” Frum points this out so as to feign that the rest isn’t – the whole thing is quibbling! Really, David.
Stipulating Romney is mistaken on these arcane facts, please tell us, David Frum, compared to who? Barak Obama ? John McCain? Mike Huckabee? Hillary Clinton? Nancy Pelosi? Harry Ried?
Independent // Mar 11, 2010 at 10:38 am
sinz54 argues: “And if he gets his history wrong, then his analogies are all called into question.”
Sorry, but the issue isn’t empires, sinz54. It’s DavidF’s overwhelming “surprise and deep anxiety” that Romney doesn’t appear to know everything our dear DavidF knows about what economists categorize as “Dutch disease”. That’s DavidF’s take-away point above.
And the sidebar point: this is what passes for serious review of Romney’s book by DavidF. Blogging page-by-page is a silly exercise in gotcha punditry by DavidF.
I’ve read DavidF’s last 3 books; he couldn’t withstand even a single page of blogging commentary on his stuff. For instance, his take on Karen Hughes was mired in the greenest of envy… about her talents, about her access, about his failings to match up, man up and serve Prez Bush the way other professionals in the WH expected him to operate as a junior speech writer. The guy is still carrying a torch on that issue.
franco 2 gets it exactly right –DavidF’s effort to blog page-by-page is quibbling… I’d add, til we all throw up.
DavidF can do better. I know he can even if his record is spotty, at best.
WillyP // Mar 11, 2010 at 10:51 am
“In the 1960s, the Dutch discovered a huge natural gas field off their shores. To buy this gas, foreign customers first had to exchange their money for Dutch currency, thus bidding up the value of the Dutch guilder. As the guilder rose in value, non-resource Dutch companies found themselves priced off world markets. The resource windfall carried a penalty: the hollowing out of Dutch manufacturing. THAT is the Dutch disease, and it explains why so many resource-rich countries have difficulty translating their resources into more permanent wealth.”
It’s an interesting scenario. It seems to suggest that monetary autarky has some inherent flaws, particularly for small nations.. There is no solution to this problem but for dealing in currencies with a larger market, such that a new and prosperous industry does not have the destructive effects of destroying exports.
Alternatively, we could have revert to a gold standard, which would totally eliminate the problem.
WillyP // Mar 11, 2010 at 11:53 am
You know, I take that back. It was sloppy, rushed thinking. There is a natural market equilibrium that would be reached, I think…
Before the foreign consumers of natural gas are able to purchase, as Frum notes, they must purchase guilders. Because (presumably) the vast majority of guilders were among the Dutch who were not in the natural gas industry, they would first have to sell their guilders. These sellers of guilders would benefit from the high price induced by the new natural gas production. Guilders would appreciate against foreign currencies, and facilitate the purchase of more imports.
From an economic point of view, then, the non- natural gas producing Dutch would be filching off the revenue produced by the Dutch natural gas industry, leading to a rise in their real incomes (goods, that is, not guilders). All else equal, the higher global purchasing power of the guilder would decrease their incentive to work, because they can substitute imports for domestic production. This may explain the hollowing out of domestic manufacturing.
Thus, the “Dutch disease” is caused not by richness of resources, but by fiat money. No such perverse incentives would be possible with a common medium of exchange – i.e., gold.
Huch // Mar 11, 2010 at 3:09 pm
In my opinion Romney is arguably the most well-rounded businessman in our country. He worked as a management consultant who worked on turnarounds wherein he worked on operational goals as well strategy execution in multiple industries. But he was also very successful in private equity where he had to keep an eye on capital marekts as well in addition to return on investment in his portfolio firms. I think in comparison, for example, Mayor Bloomberg, a leader Ii admire greatly, is less balanced in that he worked only in investment banking and as a CEO of a financial information firm. IMHO, macroeconomists are too theoretical and far removed to assess on-the-ground job-creating impact of macro-policies.
WillyP // Mar 11, 2010 at 5:51 pm
Mitt is a super bright, super successful guy with a lifetime record of real achievement. I can’t imagine he’s even aware that Mr. Frum is biting his ankles. Whoop dee doo! We’re all now educated on the trivial “dutch disease” theory, which, as I’ve explained, is the spawn of floating exchange rates facilitated by fiat money.
So what’s the big takeaway lesson that Mr. Frum’s readers get after reading this article? That Mitt hasn’t spent his lifetime in a think tank. No, he hasn’t – he’s actually created companies, jobs, wealth…
He’s also a real conservative, unlike Bloomberg. Matter of fact, if Mitt hadn’t created the nightmare that is RomneyCare, he’d be very high up on my list. But a state mandate for health insurance? What was he thinking???
Independent // Mar 11, 2010 at 6:51 pm
Huch, welcome. You wrote: “In my opinion Romney is arguably the most well-rounded businessman in our country….”
Not only that, but when it came time to actually do something constructive with the Olympics, he succeeded.
Not so with the Obami and all their new found charming European friends.
Carney // Mar 12, 2010 at 2:08 pm
I’ve finally gotten a chance to look at the book. The most maddening thing about it is that this very intelligent man falls prey to the muddled thinking and confusion that runs rampant in most discussions of energy policy.
The worst example of this is when in talking about energy independence / energy security / how to get off foreign oil, or oil in general, people (as Romney does in the book) begin touting solar, wind, tidal, nuclear, and other ways of generating electricity. Obama and McCain had such an argument in 2008, touting solar and nuclear respectively, and making complete asses of themselves in the process, because:
Unless you like in Hawaii, your electricity DOES NOT COME FROM OIL. 97% of electricity in the US comes from something other than oil (50% comes from coal, 20% each from nuclear and natural gas, 5% from hydro-electric dams, and 2% from all “green” sources – solar, wind, etc. – combined. ALL DOMESTIC.
We are ALREADY energy independent when it comes to electricity Therefore the various forms of electric power generation, green or otherwise, are NOT alternatives to oil, only alternatives to each other.
If you want to get off oil, stop yammering about stuff like solar, tidal, or geothermal that has nothing to do with oil.
The source of our addiction to oil is NOT in electricity generation. It’s in TRANSPORTATION FUEL, where 97% (coincidentally) of all our cars are locked in to being able to use only petroleum-derived fuel – gasoline or petro-diesel.
The best, cheapest, and easiest way to transition to something other than oil for our transportation fuel is to mandate that all new gasoline-burning cars sold in America be fully flex fueled — also able to use any alternate liquid fuel based on alcohol such as methanol or ethanol. For more, see http://energyvictory.net