Federalism is a messy political system. Every state has its own housing policy, as does every city and county. Plus the federal government runs federal housing policies, enforces federal regulations, and offers state and private housing providers various housing subsidies.

For students debating the March/April topic–Resolved: The United States ought to guarantee the right to housing–the political and economic background to this value resolution is complex.

In addition to the horizontal separation of power across the legislative, executive, and judicial branches, outlined in the U.S. Constitution, “federalism” refers to the vertical delegation of powers to federal, state, and local governments. Housing powers and policies were not among the powers originally delegated to the federal government, but later legislation created federal programs and departments like HUD (Housing and Urban Development).

The resolution says “The United States” ought to guarantee a “right to housing.” Online resources offering an overview and history housing rights include the National Institute for Housing, “The Case for a Right to Housing,” which discusses limited codified housing rights:

How have housing rights evolved in the United States?
Some specific, although quite limited, rights/ entitlements exist in the housing area. Local housing codes (varying enormously with respect to coverage and standards) provide something of a right to decent physical conditions. But enforcement is a problem and market realities limit the benefits these regulations offer.

An essay in The Federalist (a conservative website) argues housing inequality and lack of affordable housing should be blamed on restrictive local housing regulations. “Local Governments Are The Source Of Housing Inequality,” reports on research by Matthew Rognlie on the key role of housing costs in the inequality debate (referencing Thomas Piketty‘s Capital in the Twenty-First Century):

Matthew Rognlie, a Massachusetts Institute of Technology doctoral student in economics, dismantles Piketty in his paper, “A note on Piketty and diminishing returns to capital.” Rognlie’s contention: “Recent trends in both capital wealth and income are driven almost entirely by housing…” Ronglie deploys sarcasm with effect, suggesting Piketty’s book would have been more accurately named, “Housing in the Twenty-First Century.”

Federalism provides housing researchers an avenue to compare the impact of policies across U.S. cities, counties, and states. Scott Beyer’s “Houston, Dallas & New York City: America’s Great 3-Way Housing Supply Race,” (Forbes, March 20, 2017) argues:

…a look at the numbers shows that…housing construction (or lack thereof) seems to be the driving factor behind whether or not large U.S. metros remain affordable.

Beyer draws from Census Bureau housing data to show that fast job and population growth need not raise housing costs. Cost are way up in Seattle, San Francisco, and around the Bay Area not because of the booming job markets but instead because homebuilding is blocked or delayed. The housing story from Texas cities contrasts sharply with California cities:

Houston and Dallas are the most notable examples of where such scarcity has not occurred–in fact, it’s almost been the opposite. Between 2010 and 2015, these two metros had the most net population growth, at 736,531 and 676,582, respectively. They are also perennially among the leaders in corporate and business relocation, job growth, and wage growth. But they have the 2nd and 3rd cheapest median home prices of the 11 metros, at $176,000 and $202,000, respectively (all housing price figures are from Zillow). Atlanta–with the nation’s 5th most permits since 2010–was just under Houston at $174,000.

Even more crucially, the prices in these two Texas giants have stabilized even amid this incredible population boom–especially in Houston. …

The Center for American Progress offered “Expanding Opportunities in America’s Urban Areas” in 2015, outlines five areas for reform, including “Ensure access to quality housing and transportation” and “Expand access to affordable housing.”

wooden-houses-796386_1280

Wooden Houses, Old Town, River, Finnish

Finland’s success in ending homelessness started nonprofit assistance to provide housing and rental contract rather than complex housing and homeless assistance programs. “What can the UK learn from how Finland solved homelessness?,” (theguardian, March 22,2017)

This week’s report by EU housing organisation Feantsa has found every country in the EU in the midst of a crisis of homelessness and housing exclusion – with one exception: Finland.

So how has the country done it? By giving homeless people permanent housing as soon as they become homeless, rather than muddling along with various services that may eventually result in an offer of accommodation.

 

Food safety is always a challenge. Insuring food safety from suppliers in distant countries like China is even more of a challenge. “Blockchain: A Better Way to Track Pork Chops, Bonds, Bad Peanut Butter?,” (New York Times, March 4, 2017) report new applications of Bitcoin’s Blockchain to food security:

Frank Yiannas has spent years looking in vain for a better way to track lettuce, steaks and snack cakes from farm and factory to the shelves of Walmart, where he is the vice president for food safety. When the company dealt with salmonella outbreaks, it often took weeks to trace where the bad ingredients came from.

Then, last year, IBM executives flew to Walmart’s headquarters in Arkansas to propose a solution: the blockchain.

Blockchain, the encryption protocol backing Bitcoin security is deployed for supply chain security. Modern manufacturing as well as food production is often spread across a wide network of suppliers around the world. All major companies from Ford and Toyota to Nike and Walmart hire third-party certification services both to monitor quality standards and working conditions with suppliers.

Nike never wants their shoes made by untraceable factories using low-quality materials, nor face news stories of Nike subcontractor factories with unsafe working conditions. Similarly Walmart and other companies selling food want to certify standards and safety from the original farms, through processing and distribution.

Blockchain provides an accounting system that makes it hard for later links in the supply chain to falsify earlier links (to hide low-cost unapproved suppliers, for example).

Nearly half a trillion dollars world of goods were shipped (or flown) from China to the US in 2016, and a significant part of the cost is documenting these goods. Maersk is a major shipping firm facing this challenge:

For Maersk, the problem was not tracking the familiar rectangular shipping containers that sail the world aboard its cargo ships — instead, it was the mountains of paperwork that go with each container. Maersk had found that a single container could require stamps and approvals from as many as 30 people, including customs, tax officials and health authorities.

…The cost of moving and keeping track of all this paperwork often equals the cost of physically moving the container around the world.

What’s more, the system is rife with fraud. The valuable bill of lading is often tampered with or copied to let criminals siphon off goods or circulate counterfeit products, leading to billions of dollars in maritime fraud each year.

Shipping fraud leads to food safety risks for companies like Walmart (and, of course, for customers).

FDA and USDA food safety agencies, apart from turf fights with each other, are challenged by incentive, information, and budget issues.

FDA/USDA Catfish fights offer a turf-war example. “Senate votes to end USDA catfish inspections, which just got underway,” (Food Safety News, May 26, 2016)

The U.S. Senate has voted to shut down the nation’s only catfish inspection program, a move that would put more Americans at risk of exposure to carcinogens and antibiotics from Asian white fish, such as Vietnamese pangasius.

…If it passes the House, it would still have to be signed by President Obama before the U.S. Department of Agriculture (USDA) catfish inspection program would be shut down. If that happens, catfish would likely revert back to the U.S. Food and Drug Administration (FDA), where only 1 to 2 percent of seafood imports are inspected because of budget constraints.

Sounds scary, but Food Safety News has its own perspective and bias, according to a NPR story discounting a Food Safety News scare story on supermarket honey, “Relax, Folks. It Really Is Honey After All,”

Maybe we’re too inclined to believe the worst about supermarket food.

How else to explain the reaction to a recent report about honey on the web site Food Safety News? Food Safety News is published by a lawyer who represents plaintiffs in lawsuits against food manufacturers and processors.

The post, by journalist Andrew Schneider, claimed that most honey on supermarket shelves isn’t really honey. As evidence, the site cited tests showing that there is no pollen in most of that honey. (Raw honey contains lots of pollen, which bees collect along with the nectar that they turn into honey.)

The Food Safety News story in NPR post focused on allegedly unsafe honey from China:

The article implied that this was part of a deliberate attempt to prevent anyone from detecting illicit honey from China. (The United States blocks imports of Chinese honey because U.S. officials decided that it was being sold at artificially low prices, undercutting American honey producers.) Schneider also reminded his readers that Chinese honey has had a history of safety problems, including contamination with banned antibiotics and lead.

This 2011 NRP story is valuable for its in-depth research on the honey industry, and gives a glimpse of the way many food safety scares (and lawsuits) develop.

One avenue to incentivize companies to keep food safe is to avoid expensive litigation and awards to customers hurt by unsafe food. Bad publicity provides a powerful incentive as well, as Chipote management and stockholders learned recently.

Most of economics is about incentives, and it is an open debate whether food safety regulations, potential litigation, or fear of bad publicity plays the larger role in maintaining and improving food safety. Critics of the FDA and USDA regulatory approach focus in agency incentives.

Government agencies suffer from incentive and information problems that slow innovation and hamper alternative food safety systems. Students have an opportunity to research the dozens of food safety certification systems that have developed to protect consumers.

A major concern with both domestic and imported food is possible overuse or misuse of pesticides and herbicides. Interesting to see how significantly U.S. pesticide and herbicide use has fallen, even as agricultural production has increased:

May 2014, the National Agricultural Statistics Service at the U.S. Department of Agriculture (USDA) issued its comprehensive report Pesticide Use in U.S. Agriculture. The agency found that herbicide usage peaked at 478 million pounds in 1981—a decade and half prior to the introduction of the first biotech crop varieties—and fell to 394 million pounds in 2008. So instead of the massive increase in herbicide spraying claimed by Benbrook, the USDA actually reports a modest decline. Insecticide applications peaked in 1972 at 158 million pounds, dropping to 29 million pounds in 2008. [Source: Chipotle Treats Customers Like Idiots, Aug./Sept. 2015 Reason]

For more on certification and regulation, here is a 2011 post on Certified Humane discussing the debate over expanded federal regulation and inspection of food, and critical of the claim that private sector food producers and importers can “self police.”

The Chairman of the Appropriations House Subcommittee, Jack Kingston (R-GA) said, “The food supply in America is very safe because the private sector self-polices, because they have the highest motivation.  They don’t want to be sued, they don’t want to go broke. They want their customers to be healthy and happy.”

The Centers for Disease Control (CDC) estimates that 28,000 Americans are hospitalized every year and 3,000 die every year from tainted food.

Even the Grocery Manufacturers of America are in support of doubling the FDA’s food safety budget, in light of the recent food scandals.Rep. Kingston also claims the high level of food safety is due to the private sector without the “nanny” state.  “That’s the private sector working,” he’s quoted as saying.

In reality, do you want to risk your life and the lives of your families on Rep. Kingston’s fantasy?  We saw the result of   de-regulation and lack of oversight in the financial sector, as we watched homes being foreclosed and savings and pension plans evaporating

If you want the FDA and the Food Safety Inspection Service at USDA fully funded, please write your Senators and let them know they need to put the funding back to provide us with safe food oversight. …

According to the article, increased federal funding for FDA and USDA inspectors could save lives, and those who say the private sector can “self-police” to keep food safe are living in a fantasy world.

However, today’s food industry relies on independent food safety certification organizations. These are generally NGOs (non-government organizations) that are in compliance with regulatory agencies like the FDA and USDA.

Here is page for Global Food Safety Initiative (GFSI) Certification with this introduction:

Due to complex challenges in today’s food supply chain, many of the world’s largest food retailers are mandating supplier certification to Global Food Safety Initiative (GFSI) schemes, which include SQF, BRC, IFS, FSSC, GLOBALG.A.P. and BAP and CanadaGAP.

NSF companies are the leading global certifier to GFSI benchmarked standards, with exceptional technical expertise, consistently calibrated auditors and capacity for a timely path to certification.

GFSI was established to ensure confidence in the delivery of safer food to consumers, while continuing to improve food safety throughout the supply chain.  These global standards address food, packaging, packaging materials, storage and distribution for primary producers, manufacturers and distributors.

So Third-Party Certification is key. Big grocery chains like Kroger and Safeway would like to believe the farms and food-processors who deliver food to their shelves each day have clean and modern facilities with strict procedures to keep equipment clean and free of microbes. However, the food industry runs on “trust, but verify.” They can’t afford to just believe what suppliers claim nor can most afford to hire their own inspectors to investigate each supplier.

Companies can’t just rely on government agencies like the FDA or USDA since they can be sued when customers are hurt even when they comply with federal regulations. FDA and USDA tend not to be up to speed with the latest technologies and data analytics.

So, instead, private sector firms rely on certification. Here is the NSF page: What Is Third-Party Certification?

Third-party certification means that an independent organization has reviewed the manufacturingScreen Shot 2017-03-24 at 9.14.48 AM process of a product and has independently determined that the final product complies with specific standards for safety, quality or performance. This review typically includes comprehensive formulation/material reviews, testing and facility inspections. Most certified products bear the certifier’s mark on their packaging to help consumers and other buyers make educated purchasing decisions.

NSF Certification
Recognized by regulatory agencies at the local, state, federal and international level, NSF certification demonstrates that a product complies with all standard requirements. NSF conducts periodic facility audits and product testing to verify that the product continues to comply with the standard. See the complete NSF product listings.

NSF’s programs include testing and certifying drinking water treatment products and water filters, commercial food service equipment and a wide array of consumer products such as bottled water, nutritional supplements, private label goods, personal care items and home appliances (washers, dryers and dishwashers).

Why Do Companies Seek NSF Certification?
Independent, third-party testing and certification through NSF helps organizations:
• Demonstrate compliance with national or international standards and regulations• Demonstrate independent validation and verification of their commitment to safety and quality  • Increase credibility and acceptance with retailers, consumers and regulators  • Benefit from enhanced product quality and safety

A Wall Street Journal headline writer likely sensed something amiss with calls by U.S. steel producers for more protectionism. The August 12, 2015 WSJ print edition article by John W. Miller was titled: “Steelmakers Lodge New Trade Gripe.” The online version, dated August 11, drops the “Gripe” for a less skeptical headline: “U.S. Steelmakers Again Ask for Tariffs on Imports” (as usual Google full title to find article ungated).

The article notes this was the third trade complaint of summer 2015 by U.S. steel producers, claiming foreign firms were “dumping” steel below costs:

The request targeted imports of hot-rolled coil—used in making cars—from Australia, Brazil, Japan, South Korea, the Netherlands, Turkey and the U.K. China wasn’t named in the petition because the U.S. already has tariffs on imports of that kind of steel from China. The petition was filed with the U.S. Commerce Department and the U.S. International Trade Commission.

This Wall Street Journal article doesn’t mention “dumping” by name, but a July 15, 2015 Duluth News Tribune article does: “Trade commission agrees foreign steel was ‘dumped’ in U.S.

The U.S. International Trade Commission on Friday announced a preliminary determination that imports of corrosion-resistant steel from China, India, Italy, South Korea and Taiwan injured the U.S. steel industry.

And:

 The companies claim that the increased below-cost imports of steel have reduced demand, in some cases forcing mill closures that have led to layoffs at Minnesota operations. …

“We are pleased the ITC has confirmed that the flood of unfairly traded imports of corrosion-resistant sheet steel has materially impacted our shipments, pricing and profitability,” said Mark D. Millett, chief executive office of Steel Dynamics. “SDI believes in fair trade, but the U.S. has become a dumping ground for world excess steel capacity.” 

However, the WSJ mentions the actual price of the hot-rolled coil steel used by U.S. carmakers and other manufacturers is actually higher than in Europe and Asia:

steel-mill-616536_1280The problem for U.S. steelmakers is sluggish prices, which are held down by inexpensive imports. The U.S. index price for hot-rolled coil, a benchmark product, has fallen more than 20% this year to $468 per ton.

That is still about $100 higher than the price in Europe and $200 above that in Asia, according to steel buyers, making the U.S. a tempting market.

Wait… what?  This hot-rolled coil steel–key for U.S. automakers–is 20% less expensive in Europe and 40% less expensive in Asia? Doesn’t that give a significant cost advantage to European and Asian automakers and other foreign manufacturers with access to significantly less-expensive steel?

If steelmakers in “Australia, Brazil, Japan, South Korea, the Netherlands, Turkey and the U.K.” are dumping steel in the U.S., they must be ultra-dumping steel in Europe and Asia. Either that or shipping costs are extraordinary low to U.S. buyers.

Imports of hot-rolled steel have increased according to steel industry executives, with the implication that foreign firms are dumping excess capacity onto U.S. markets:

Imports of hot-rolled steel from the seven countries named in the latest petition increased by about 73% from 2012 to 2014, rising from 1.9 million tons to 3.3 million tons, AK Steel said.

Wow, 73% is a big increase!  But also between 2012 and 2014 was a huge increase in U.S. demand, with booming rail and oil and gas infrastructure as well as auto manufacturing expanding, rising 19% in 2012, 7% in 2013, and 5.4% in 2014.

A May, 7, 2015 WSJ article, “U.S. Steel CEO Says Tariffs Could Be Needed On Chinese Imports” quotes Mr. Longhi, the new head of U.S. Steel, who has been cutting costs, laying off workers and boosting stock prices (and his pay). In addition to streamlining steel production, Mr. Longhi is trying to raise tariffs on imported steel, particularly steel from China:

Mr. Longhi blames the bulk of his latest woes on imports, especially from China. The U.S. imported 615,171 tons of steel from China during that time, up 25% from the same period a year before. Mr. Longhi said a failure to impose more tariffs on Chinese imports was an American political “weakness.”

In this article, steel tube is the focus, where demand has been hit hard and unexpectedly this year, after oil prices dropped by half last fall, and demand for steel pipe by shale drillers dropped soon after. The article blames imports:

Imports have been especially hurtful to the company’s business of making steel pipe and tubs for the oil and gas industries. 

Consider though that for U.S. manufacturers and U.S. consumers, lower prices for steel is a good thing. Only for the U.S. steel industry is lower-cost imported steel a problem.

Students researching U.S. trade policy with China can research these ongoing debates over steel imports and tariffs.

Tim Worstall in Forbes puts the question of steel tariffs this way in a June 4, 2015 column:

There’s two ways that we can describe the attempt by the US steel industry to gain anti-dumping tariffs against China and other countries. The first is that it is an attempt by that US business sector to protect themselves from that foreign competition. The other is that it’s an insistence that all Americans should become poorer in order that those profits and those jobs should be protected. Both of these descriptions are true: and the second follows logically from the first.

U.S. steel producers have continued their call for higher tariffs on Chinese steel. “U.S. steel producers to file charges against Chinese competitors,” (Reuters, September 22, 2016) reports:

The U.S. Commerce Department last week set preliminary antidumping duties ranging from 63.86 percent to 76.64 percent on stainless steel sheet and strip imports from China after preliminary findings showed the imports were being dumped in the U.S. market at below fair value.

The petition alleges that Chinese producers diverted their steel shipments to Vietnam “immediately” after the duties were imposed.

According to the petition, Chinese steelmakers sent their shipments to Vietnam, where they were modified to make them corrosion-resistant, and then sent them to the United States by paying Vietnam’s U.S. tariff rate, which is lower than for China.

Economist Richard Ebeling posted on Facebook a quote from an 1830s economics textbook, to give people a sense of economic principles taught nearly two centuries ago:

Here is what economics books used to sound like, from Thomas Cooper’s “Lectures on the Elements of Political Economy” (1830), on the principles and policies of economic logic and understanding on the benefits of freedom of trade and enterprise:

“The true principles of Political Economy, teach us that a system of restrictions and prohibitions on commercial intercourse, cuts off the foreign market, diminishes the number of buyers, and the demand for our national produce; hence, the consumer is compelled to pay more to the home monopolist.

“Hence, the wealth of the nation is wasted; every consumer is abridged of comforts that he might otherwise procure, and his means of purchasing even home-commodities are diminished.

“They teach us also, that men should be permitted, without the interference of government, to produce whatever they find it their interest to produce; that they should not be prevented from producing some articles, or bribed to produce others.

“That they should be left unmolested to judge of and pursue their own interest; to exchange what they have produced when, where, with whom and in what manner they find most profitable and convenient; and not be compelled by theoretical statesmen to buy dear and sell cheap; or to give more, or get less, than they might do if left to themselves, without government interference or control.

“That no favored or privileged class should be fattened by monopolies or protections to which the rest of the community are forced to contribute.

“Such are the leading maxims by means of which Political Economy teaches how to obtain the greatest sum of useful commodities at the least expense of labor. These are indeed maxims directly opposed to the common practice of governments, who think they can never govern too much; and who seek to prey upon the vitals of the community.”

This remains wisdom for our own time. 

Students debating U.S./China policy have an opportunity to learn the principles of international trade, and apply these principles to various reform proposals.

Much has changed in the Middle East over the last twenty years. Israel’s economy has shifted to more open and less socialist, and average income has increased. The Israeli government still controls much of the economy and subsidizes money-losing firms, but a vibrant tech sector is home for hundreds of innovative startups.Screen Shot 2017-03-14 at 8.08.53 PM

Christopher Schroeder’s Startup Rising: The Entrepreneurial Revolution Remaking the Middle East gives a glimpse of what to expect as venture capital first supports dozens, then hundreds, and soon thousands of Middle East entrepreneurs from the Palestinian territories to Jordan, Lebanon, the UAE, Egypt and countries now in turmoil.

Imagine the Middle East with millions carrying hand-held computers. That’s not some distant utopian tech future but today in the Middle East. For the over 75 million people in Turkey, nearly 90% have cell phones. Cell phones network friends and relatives, speed business communication, and allow access to news and information from the outside world.

The stories from Startup Rising paint an optimistic future for the Middle East. Israel already enjoys a dynamic tech sector, and now capital and expertise are surging into nearby Arab countries.

More on Startup Rising is available by “looking inside” on Amazon. Plus online videos with Christopher Schroeder, the author, tell his story. Here is link to a Google for Entrepreneurs video from December, 2013. About five minutes in, this Economist article is mentioned with its focus on “Startup Spring” in the Middle East. Excerpt from The Economist:

The story sounds like a common one from Silicon Valley or Silicon Roundabout, London’s start-up district. But Ms Taher tells it in a café in Amman. She is just one of several hundred entrepreneurs, many of them women (see article), who have started online firms in Jordan’s capital in recent years, making it one of the Middle East’s leading start-up hubs. Even more surprising, such clusters (“ecosystems” in the lingo) have been popping up all over a region that is better known for armed conflict and political strife. Whether in Beirut, Cairo, Dubai, Riyadh or even Gaza City, small technology firms are multiplying, creating a sort of “start-up spring”. (Link to source.)

In 2001, when Save the Children wanted to launch a version of Junior Achievement in Jordan, they asked Salti to be country director of what they called “INJAZ Jordan,” or Jordan Achievement. Holding her freshlScreen Shot 2017-03-14 at 8.18.01 PMy minted MBA from Northwestern, Salti accepted, eager to return home and make an impact. She later would found a regional INJAZ office to spread the model across fourteen countries in the Middle East. 

INJAZ was one of the earliest “private public partnerships,” as they are commonly called today. Salti and her mother started with a USAID grant that matched contributions from local businesses, and chose schools in conjunction with the Ministry of Education. Their goal was to hold additional classes at the end of each day to not only supplement education, but also to focus on job-related skills and to push kids to think about entrepreneurship and develop their own ideas. Their first volunteers were friends and family, and they soon began to recruit local business leaders and their staffs to mentor and train local youth in after-school programs.

Junior Achievement in Jordan also teaches entrepreneurship to youScreen Shot 2017-03-14 at 8.15.34 PMng people. Junior Achievement Middle East and North Africa on their JA website.

Instead of–or in addition to–advocating a two-state Israel/Palestine, U.S. policy could encourage technology entrepreneurs across the Middle East. The U.S. could promote reduced barriers to funding new enterprises and development and marketing their products.

Better policies would encourage employment and boost technology firms. Reforming broken or outdated U.S. policies helps promote prosperity in the Palestinian territories and across the Middle East.

Also an entrepreneurial success story: “Palestinians attempt to create their own start-up nation,” (Financial Times, May 1, 2016):

   Less than five years later, Yamsafer is one of the region’s largest hotel booking sites, according to its founder. It recently closed a $3.5m funding round in one of the biggest venture capital deals the Israeli-occupied Palestinian territories have seen.

    Yamsafer employs 70 people in Ramallah, a place where too many young university graduates are chasing too few jobs. “The people we hire are more hungry than people you would have hired in Dubai, Jordan or elsewhere,”

Princeton study claimed U.S. governance is more an oligarchy now than a democracy  and offered this definition of an oligarchy:

An oligarchy is a system where power is effectively wielded by a small number of individuals defined by their status called oligarchs. Members of the oligarchy are the rich, the well connected and the politically powerful, as well as particularly well placed individuals in institutions like banking and finance or the military.

For the Public Forum U.S./Israel two-state topic, residents of the Palestinian territories currently lack an option to consent to their governance. Without consent, how can governance of the Palestinian territories be legitimate? From the U.S. Declaration of Independence:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed,

Opposition to Israeli policies unites Palestinians, but like other Middle East/North Africa countries and territories, tribal conflicts make democratic reform difficult. Would a future Palestinian state develop into a peaceful democracy, a seething tribal conflict, or something in-between?

7 Things to Consider Before Choosing Sides in the Middle East Conflict,” (Huffington Post, July 28, 2014), was written during the 2014 Israel-Gaza conflict. The author is critical of both sides in the conflict, but concludes a two-state solution is needed. The author notes a “tribal” conflicts in that Jewish people support Israel and Muslims side with Palestinians.

Across the Arab world though, deeper tribal and clan relationships play a major role. “Palestinian Tribes, Clans, and Notable Families,” (Center for Contemporary Conflict, 2008?) explains why clans are stronger when states are weaker:

The clan structure in Palestine is far more consequential than the Bedouin tribes, and has become even more important since the breakdown of the Palestinian Authority structures during the second uprising, or intifadat al-Aqsa, beginning in 2000. A clan, or hamula (plural: hama’il), will consist of at least several extended families (a’ila) claiming a shared ancestry, and linked through the father’s male line. …

Where states are strong and can reliably protect citizens, clans weaken; where states are weak, clans are strong. This has become the central reason why Palestinian clans have flourished both under Israeli occupation and under conditions of PA breakdown. …

The study also outlines the importance of “Notable Families”:

The third clan-like grouping in Palestine in the urban elite notable family, a social formation typical throughout the Arab lands of the Ottoman Empire. Many of the most well known and prominent Palestinian families come from this notable, or a’yan, social class: Husayni, Nashashibi, Dajani, Abd al-Hadi, Tuqan, Nabulsi, Khoury, Tamimi, Khatib, Ja’bari, Masri, Kan’an, Shaq’a, Barghouthi, Shawwa, Rayyes, and others. These are extended families that dominated Palestinian politics until the 1980s, and are still relatively prominent today.

For the March Public Forum topic, “Resolved: The United States should no longer pressure Israel to work toward a two-state solution,” all sides in any debate should be familiar with the role of tribes, clans and “notable families” as oligarchs across the Arab world.

Critics of U.S. politics can also point to notable American families: from the Rockefeller, Ford, and Kennedy families of the 1900s, to more recent families like the Waltons (of Walmart), Kochs (oil, chemicals), Mars (candy), Cargill-MacMillan (grain), Cox (media), and Johnson (cleaning products). Here is Forbes  2016 gallery of richest families). (More recent notable families in politics would include Bush and Clinton families, and now Obama and Trump families).

Most “oligarchic” families in the U.S. struggle to maintain wealth and power past a generation or two, and rarely are able to slow or  block upstart entrepreneurs from disrupting established business empires. Of all the successful tech entrepreneurs, few if any came from “ruling elite” families. The U.S. economy features a steady stream of self-made success stories, as suggested by the turnover in each year’s Forbes 400. From “How America’s Richest Self-Made Billionaires Built Huge Fortunes From Humble Beginnings“:

More than two-thirds of this year’s Forbes 400 are self-made billionaires. That’s 266 out of 400 who can say they built their fortunes from scratch. Among the self-made group are eight of the nation’s 10 richest, starting with the top three, Microsoft cofounder Bill Gates, Amazon CEO Jeff Bezos and legendary investor Warren Buffett.

Top-down political control is far greater across Middle Eastern countries where oligarchies hold political and economic control. Intermarried military, political, religious, and business elites make and enforce regulations that govern countries from Iran to Egypt. These elites take positions in government enterprises and bureaucracies and find similar positions for relatives. Efforts to remove oligarchies ruling in Libya and Syria led quickly to violence as tribal groups battled for regional and national political control.

Intermarried ruling clans have political implications as “notable families” are more tightly related than in western countries. “Health fears question Arab tradition of cousin marriages,” (Al Arabiya EnglishArt & Culture, April 4, 2915) notes:

In a report in the Middle East Journal of Family Medicine, Dr. Aida Al-Aqeel, pediatric geneticist and endocrinologist at Riyadh Military Hospital, wrote, “ In Saudi Arabia like other Middle Eastern countries, first cousin marriages account for 60 – 70% of all marriages, leading to uniquely common disorders which are either rare by Western standards or are unknown.

Apart from health issues, intermarriage within and among leading families makes for powerful oligarchic control. Entrepreneurs outside the ruling families find access to investment capital and government permits difficult, plus face heavy regulations (the initial source of Arab Spring protests).

The PBS program with Hernando de Soto, “Unlikely Heroes of the Arab Spring,” explains:

Screen Shot 2017-03-13 at 11.36.33 AM… this public television special presents, for the first time, the basic human and economic events that led to the Arab uprisings in the Middle East and North Africa. The program shows that “The Arab Spring” was less a political event than it was about the coming of the industrial revolution to a region where over 90% of the population lives and works outside the rule of law…

Amid provocative images of the Arab uprisings of 2010 and 2011, De Soto introduces the people and events that recently rocked the Arab world…  it was his similarity to the 180 million informal Arab entrepreneurs; many of them under 30 and computer literate. Over 100 of them followed Bouazizi in acts of self-immolation.

A 2011 Freeman article, “The Roots of Egypt’s Revolt” reports on the history of Egypt’s oligarchic economic system (link to pdf handout). U.S. policy toward the Middle East has for decades helped maintain Egypt’s corrupt political and economic system. Consider: “United States has given the Egyptian government over $2.1 billion, including $1.3 billion in military aid, every year since 1980.” The Egyptian government is funded by tourism, the Suez Canal, and U.S. aid. That money flows to oligarchs who control the economy.

The ideal of citizens controlling a country through voting, critics argue, won’t solve America’s problems, won’t bring peace or prosperity to the Middle East, and won’t reduce terrorism around the world.

Voting can give people a say in their government. But constant elections and ever-changing constitutions add uncertainty and keep societies politicized.

The powers Constitutions give to governments are key, and each new government shouldn’t be able to draft its own constitution for majority vote. Egyptian President Morsi had his 2012 constitution approved, replacing a 2011 constitution passed after Mubarak was removed from power. Then in 2013 the Egyptian military suspended the 2012 constitution, ousted Morsi, and had a new new constitution passed in 2014. Constitutions that can be so easily altered and replaced do little to limit the size and scope of government power.

The U.S. purple-finger policy for Afghanistan, Ukraine, and the Middle East pushes people to vote and by their vote be obligated to submit to those elected. This is dangerous for tribal and clan-based countries. Kenya has some 42 tribes and when political parties were made legal, soon has 42 political parties.

Beyond the challenges of democracy in general are deeper problems of pushing political change on other countries, each with their own history and cultures. U.S. and U.K. governments, military, and aid agencies have been active in Middle East countries for over a century. This Cato Institution Commentary from 2003 reflects on President Bush’s initiative to promote democracy in the Middle East:

    In his recent speech before the National Endowment for Democracy, President Bush pledged that the United States would embark on a decades-long commitment to bring democracy to the Middle East. But democracy is not a gift President Bush can bestow on people in distant lands.
    Although the goal is laudable, the Bush administration will be disappointed with its effort to establish a stable liberal democracy in any Middle Eastern nation. That’s the verdict rendered by history, the contemporary reality of the region, and our own government experts.
    Today, the Middle East lacks the conditions, such as a democratic political history, high standards of living, and high literacy rates, which stimulated democratic change in, for example, central Europe and East Asia. Ironically, many Arab countries are ruled by authoritarian leaders who are more liberal than the citizenry they lead.

People should have a say in their governance, but not a say in how other people’s lives should be governed. Richard Pipes in Property and  Freedom  points out that governments were considered just when they enforced the laws already existing in society. Grotius and other legal scholars emphasized that society was not the state, and the state’s legitimate reach did not extend to private life, liberty and property. These views of just government were debated and advocates of aristocratic divine rule and absolute authority for English kings lost that debate.

The Dutch model of a commercial society self-governed with royalty of limited power came to England with William of Orange, replacing the French model James II had installed by force across the country. (Highly recommended summer reading:  1688: The First Modern Revolution.)

When the candidate from one ethnic group or tribe loses, so does the entire ethnic group or tribe. All of a sudden they lose subsidies and their protection from complex and detailed regulations. When their politicians are out of power, police and other government officials see their property and businesses as fair game for exploitation or expropriation. When we in America hear news from abroad of “ethnic unrest” or “tribal conflict” it is usually between those in political power and those out of power.

“Terrorists” and “revolutionaries” are mostly tribal and ethnic gangs battling rival groups in government. When the Irish ran Boston, Irish entrepreneurs had an advantage in business. During the Jim Crow era in the South, African-American entrepreneurs and businessmen had to get permits from white government officials to run or expand their businesses. (Echoes of Jim Crow laws still survive in local licensing regulations, like this one restricting hair-braiding in Utah.)

Economic freedom is the key to peace and prosperity in the Middle East. Democracy can as easily fuel conflict as contribute to stable governance. Voting should be for deciding who will run the government, but not for what the government will do once in power. Constitutional economics is all about limiting government authority so that voting doesn’t turn into a war of all against all, of each ethnic, tribal, and regional group against all others.

Across the Middle East, fast population growth crashed into closed economies where elites control jobs in government and connected businesses, while majorities struggle to make a living in the informal sector.  By “informal” we mean they work in enterprises without business permits. They live in houses their families may have lived in for generations, but they can’t get title for the land under their home.  Life is insecure because livelihood is insecure. Only elites in the oligarchy have access to the formal legal system.

Because the U.S intervention in Iraq wasn’t able to promote economic freedom there, and secure opportunities for everyday people to start business enterprises, Iraq continues to be a failed state. Megan McArdle’s Atlantic article reports on the lack of economic freedom in Iraq. McArdle’s blog post on the story is here.

Hernando de Soto led a research team to detail economic problems in Egypt, and writes about the findings in a 2011 WSJ article “Egypt’s Economic Apartheid More than 90% of Egyptians hold their property without legal title.” (google full title for access to article.) This short post in The Atlantic quotes from the article:

     The examples are legion. To open a small bakery, our investigators found, would take more than 500 days. To get legal title to a vacant piece of land would take more than 10 years of dealing with red tape. To do business in Egypt, an aspiring poor entrepreneur would have to deal with 56 government agencies and repetitive government inspections.
     All this helps explain why so many ordinary Egyptians have been “smoldering” for decades. Despite hard work and savings, they can do little to improve their lives.

On the upbeat side, here is success story: “Palestinians attempt to create their own start-up nation,” (Financial Times, May 1, 2016):

   Less than five years later, Yamsafer is one of the region’s largest hotel booking sites, according to its founder. It recently closed a $3.5m funding round in one of the biggest venture capital deals the Israeli-occupied Palestinian territories have seen.
   Yamsafer employs 70 people in Ramallah, a place where too many young university graduates are chasing too few jobs. “The people we hire are more hungry than people you would have hired in Dubai, Jordan or elsewhere,”

Kevin Williamson, in “A Misunderstood ‘Diversity’” (National Review, March 7, 2017) quotes David Brooks from a New York Times oped:

For the life of me, I can’t figure out why so many Republicans prefer a dying white America to a place like, say, Houston.

Houston has very light zoning regulations, and as a result it has affordable housing and a culture that welcomes immigrants. This has made it incredibly diverse, with 145 languages spoken in the city’s homes, and incredibly dynamic — the fastest-growing big city in America recently. …

The large immigrant population has paradoxically given the city a very strong, very patriotic and cohesive culture, built around being welcoming to newcomers and embracing the future.

Screen Shot 2017-03-10 at 8.04.07 AM

Montrose Neighborhood in Houston

Brooks (and Williamson) note the lack of zoning allows for some ugly and jarring development, with without the complexities, delays, and litigation surrounding zoning, housing costs are low in Houston, welcoming immigrants from around the world. Families pay far less for rent or mortgages, keeping the cost of living lower.

Plus, housing the homeless is a lot less complicated and expensive in Houston. Around the country zoning regulations are used to block or delay low-cost housing as well as both public and private temporary housing for homeless people.

In “Houston’s solution to the homeless crisis: Housing — and lots of it,” (Seattle Times, June 14, 2016):

Rather than open more shelters, they focused on getting people into housing. They told charitable organizations to sign on or lose out on funding.

They built a computer system to assess the homeless, prioritize them based on vulnerability, then connect them with programs. And they collected data, lots of data.

The results are surprising and have Seattle officials taking note: There are an estimated 1,050 homeless people without shelter in the area, according to a recent count, down about 75 percent from 4,418 in 2011.

So… the Houston narrative supports the claim that restrictive housing regulations in and around major cities like Los Angeles, Seattle, San Francisco and the rest of the Bay Area, cause much of housing affordability and homelessness problems.

Against this claim is “What Housing Shortage?” (The Urbanist, November 22, 2016). The article argues there is a natural delay from employment booms to housing construction responses:

Based on the expanded survey of supply and demand in Seattle, there is virtually no general shortage of housing. The data show supply responds to demand, just not immediately. The delay is likely due to the natural lag in construction and, beginning in 2010 the effects of a global financial crisis. Not only are Seattle builders now matching new population growth with new housing units, they are building at or near the construction industry’s capacity. Skilled construction workers are hard to come by. Seattle has more cranes than any American city yet they are still in short supply.

I live just 20 minutes south of Seattle in the town of Burien. When Seattle had half the jobs it does now, nearby communities, like Green Lake, just north of Seattle, were mostly single-family homes. Now Seattle is booming, with Amazon, Starbucks, Nordstroms, many new tech firms, plus Microsoft and Boeing nearby, these communities still have single-family housing. Zoning regulations has prevented density increases that would have allowed tens of thousands to live closer to Seattle. These neighborhoods mostly have older and often run-down homes, and employees of Seattle firms face very high rents or struggle with congested commutes from distant suburbs.

Meet the YIMBYs, Seattleites in Support of Housing Density:
A new movement is saying yes to urban density in all its forms” (November, 2016), looks at efforts to return to natural urban diversity and density policies:

By embracing the YIMBY concept, Maxana joins a growing community of activists, researchers, housing experts and community-based organizations that see growth as an opportunity to create housing for all the new people who want to live in cities, rather than a hostile invading force. These groups make up a loosely organized, informal coalition of organizations and individuals across the country and, indeed, the globe (groups using the YIMBY framework have sprung up from Melbourne to Helsinki to Iowa City), who believe that the root of housing affordability is a housing shortage, and that the solution to that shortage is simple: Build more housing.

For more on the economics of housing, see “How the Housing Market Works” (The Freeman, August 22, 2016). The author compares  markets for expensive, middle, and less expensive homes to similar markets for new and used cars:

However, a family may buy a relatively run-down home and then renovate it gradually over time as they can afford to do so. Still, the less-well-off in each category could afford decent housing – especially if regulations allow old A and B housing to be divided into smaller units – in the same way that it’s possible for them to afford a decent used car.

Housing markets are similar to others, but homes last long than hamburgers. Imagine a society where rich people bought large hamburgers, ate just a third, then passed them on to others. Sounds unfair (and un-hygienic) with hamburgers, but with housing, used homes can be kept up or even improved (remodeled). If local housing demands increase, and local regulations allow, used homes can be expanded and sub-divided.

[I’m renting a small room in a single-family home in Costa Mesa, California while attending a local debate tournament. The homeowners rent two rooms via Airbnb. For $50 a night I can afford to be here. At $80 or $90 a night, the costs at local hotels, I probably couldn’t.  — Greg Rehmke]

Screen Shot 2017-03-10 at 8.07.41 AM

 

Nation-states can be more trouble than they’re worth. For the Middle East, federalism, soft-partition, enclaves, and charter cities offer non-state paths to peace and prosperity.

The March Public Forum topic: “Resolved: The United States should no longer pressure Israel to work toward a two-state solution.”

Consider the most economically-free place in the world, Hong Kong, is not a state and was long a colonial charter city before handed over (or back) to communist China in 1997.

The Fraser Institute’s Economic Freedom of the World: 2016 Annual Report: 2016 (September 16, 2016), is relevant for both the China policy topic and the Israel/Palestine two-state topic. The reports top-rated countries:Screen Shot 2017-03-06 at 4.07.10 PM

Hong Kong and Singapore, once again, occupy the top two positions. The other nations in the top 10 are New Zealand, Switzerland, Canada, Georgia, Ireland, Mauritius, the United Arab Emirates, and Australia and the United Kingdom, tied for 10th.

Small and independent formerly British colonial territories Hong Kong, Singapore, and United Arab Emirates (“Abu Dhabi, Ajman, Fujairah, Sharjah, Dubai, Ras al-Khaimah and Umm al-Qaiwain”), plus New Zealand, Canada, Australia make up the top ten. Also in the top ten is Switzerland, an association of mostly-independent and diverse cantons. (However, not all former British colonies are wealthy or economically free, and the success of many today should not be taken as a defense of British colonialism.)

What lessons for Israel, Palestine, and the U.S. can be found in these diverse economic success stories of charter cities, federal republics, and common law traditions?

The people of Hong Kong were poor in the 1950s, as were people living in Palestine. Through the 1950s, millions of impoverished refugees arrived in Hong Kong, escaping from communist China.

Across the Middle East as in Asia, World War II disrupted and impoverished millions. Hundreds of thousands fled or were expelled from Palestine in the 1948 Arab-Israeli war. Then hundreds of thousands in long-established Jewish communities in Arab countries fled or were expelled.

Over the decades since 1950, Hong Kong residents have prospered, as have residents of Israel, but the economy of the Palestinian territories and its residents have not prospered.

Hong Kong’s charter with England protected international trade and investment, and taxes stayed low. Economic freedom and a great port enabled Hong Kong to grow rapidly prosperous. Could similar charter cities and economic freedom policies have enabled Palestinians and others in the Middle East to similarly prosper?

Turmoil and violence in Syria today turns on the Alawite minority’s long political and military control. Syrian could have been a much more prosperous place had the Alawites been able to keep their enclave independent from Syria. “Syria’s Ruling Alawite Sect” (New York Times, June 14, 2011). The article was written before the Syrian conflict erupted from Arab Spring protests, and as part of explaining Alawite history mentions:

During the French Mandate, there was even a short-lived Alawite “state” based in and around Latakia, created in 1922. As William L. Cleveland explained in his “History of the Modern Middle East,” the Alawite state was “administratively separate from Syria until 1942.”

EuropeMap1444Enclaves, charter cities, and other administrated territories have a long history across Europe as well. Just check out a map of Europe in 15th Century.

Political decentralization invites conflicts, but also open political competition where families and businesses can relocate to better governed territories. For an introduction to political decentralization, the Hanseatic League, and the potential of charter cities, see “The Politically Incorrect Guide to Ending Poverty,” (The Atlantic, July/August, 2010):

[Economist and entrepreneur] Paul Romer [is] trying to help the poorest countries grow rich—by convincing them to establish foreign-run “charter cities” within their borders. Romer’s idea is unconventional, even neo-colonial—the best analogy is Britain’s historic lease of Hong Kong. And against all odds, he just might make it happen.

Could the West Bank be a candidate for a charter city, perhaps administrated by an Arab country like Dubai or UAE?

In the Arab world, similar Hong Kong size countries have flourished without full statehood. Consider the colonial history of UAE, discussed in “The United Arab Emirates – A Product of British Imperialism?” (British Scholar Society, January 16, 2012)

Until 1971, the seven shaikhdoms that were to form the UAE had been known as Trucial States and been part of Great Britain’s informal empire in the Persian Gulf. British power in the area had been based on an interdependent system of military presence, formal treaty relations with the Trucial States, Bahrain and Qatar, as well as informal political influence on the local rulers.

——-
According to the Economic Freedom of the Arab World: 2016 Annual Report (Fraser Institute, December 3, 2016), Bahrain, Jordan and the United Arab Emirates (UAE) are the most economically free nations in the Arab world. From the Introduction:

Economic Freedom of the Arab World aims to provide a reliable and objective metric of economic policy throughout the Arab World. It measures the extent to which citizens of the nations of the Arab League are able to make their own economic decisions without limitations imposed by the government or by crony elites. The report provides sound empirical measurement of economic policy that can distinguish between phony reform that leaves economic and political power in the hands of crony elites, and real reform that creates new prosperity, entrepreneurship, and jobs, by opening business and work opportunities for everyone no matter whom they know.

Arab and Islamic societies have a rich trading tradition, one that celebrates markets open even to the humblest members of society. Economic freedom is consistent with that proud history and provides a path to a more prosperous and freer tomorrow. Economic freedom is simply the ability of individuals and families to take charge of their fate and make their own economic decisions—to sell or buy in the marketplace without discrimination, to open or close a business, to work for whom they wish or hire whom they wish, to receive investment or invest in others. As discussed later in this report, economic freedom has a proven fact-based record of improving the lives of people, liberating them from dependence, and leading to other freedoms and democracy. Unfortunately, many in the Arab world believe their nations have already gone through a period of free-market reform and that it hasn’t worked. This misconception deprives many of an economic alternative and vision for the future.

For Public Forum debaters considering past U.S. government pressure for a “two-state solution,” a focus on economic freedom provides an reform opportunity. It is true that Israel’s military control restricts freedom of movement and trade throughout the Palestinian territories, and Israeli officials and supporters insist this is to reduce possible terrorist attacks. But there are also major restrictions on doing business enforced by regulations and corruption of Palestinian officials.

Again, criticizing Palestinian officials is not to defend Israeli restrictions on economic freedom. But consider “Terrorists & Kleptocrats: How Corruption is Eating the Palestinians Alive,” (The Tower, June, 2014). (The Tower is Israel-based.)

By myopically focusing on “yes,” the U.S. is ensuring the Palestinian Authority will remain corrupt and therefore illegitimate in the eyes of the Palestinian people. My experience confirms Schanzer’s argument. The PA is an incredibly corrupt organization. So is its dominant party, Fatah. Together they form a motley crew of elites seeking to maintain power and the attenuating trappings, willing to do whatever it takes to ensure their power and position are not lost.

The 2016 Economic Freedom of the Arab World report rates the Palestinian Territories. Here is summary (page 23):

The Palestinian Territories overall score remained 7.3 and it stayed in 8th place. The Palestinian Territories maintained the same rank (5th) and score (7.7) in the size of government area. The territories’ score in rule of law declined to 5.7 from 6.2, coming in 13th, down from 10th last year. The Palestinian Territories had a score of 9.1 in sound money, up from 9.0, and ranked 11th, up from 12th. In the area of freedom to trade internationally, the Palestinian Territories scored 7.7, down from 7.8, with a rank of 8th, down from 6th. The rank in regulation remained the same as last year at 12th, with a score of 6.1, same as last year.

 

Comparing economic freedom in the PA to the freer and more prosperous UAE, Jordan, and Bahrain, the top three Arab countries, gives direction to reform proposals that the U.S. could encourage.

The report focuses on economic freedom’s role in increasing prosperity, creating jobs, and reducing poverty. …

Hong Kong and Palestine; what makes a country?” (REB Research Blog), offers some history of colonial Hong Kong and Palestine and a discussion of international agreements on what makes a county.

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