Wednesday, March 28, 2018

Diversity And Inclusion Are Underrepresented At The Top Ranks Of University Leadership

A diverse student body needs a diverse faculty, but not evidently a diverse leadership.

Take the 2018 U.S. News & World Report list of the top 20 national universities.  How many women and underrepresented minorities (URM) hold the positions of president and provost?

Among 20 presidents, there are 16 White males, 3 White females, and 1 Latin American immigrant who has lived most of his life in the U.S.

Among 20 provosts, there are 12 White males, 4 White females, 2 Black males, 1 Asian (born in India) male, and 1 Hispanic female.

Compare these numbers against the student bodies.  The overall averages for the 20 schools are roughly 50% female, 45% White, 20% Asian, 11% Black, 11% Hispanic, and a percent or two Native American and Pacific Islander.  Another 10% is international students.  There is considerable variation among the 20, some less White, etc.

To be fair, the pipeline is only now beginning to provide URM candidates for leadership.  Not so for women.  The Ivies have a stronger history of female presidents.

What’s hard to reconcile is the emphasis of White male presidents to diversify their faculties to better reflect their student bodies, while retaining the top leadership post for themselves.

Tuesday, March 27, 2018

Diversity and Exclusion

Diversity and Inclusion are the watchwords of American colleges and universities.  Pick any top 20 ranked national university, for example, my alma mater, Washington University.

Open its home page.

Click on “Campus Experience” and scroll down to “Diversity and Inclusion.”

Read Chancellor Mark Wrighton’s statement.  “Making the university more diverse and inclusive is not an option.  It is an imperative.”

Similar web pages and declarations are presented on the vast majority of every university’s web site.  Indeed, diversity and inclusion are defined as a core value of the university’s mission.

A typical definition of diversity and inclusion reads as follows.

“We are committed to ensuring that "our school" is a community where everyone is valued and respected.  Hate, bias, and discrimination are to be rejected.  "Our school" does not discriminate in access to, or treatment or employment in, its programs and activities on the basis of race, color, age, religion, sex, sexual orientation, gender identity or expression, national origin, veteran status, disability, or genetic information.

So far, so good.

But inclusion surely doesn't mean every culture, tradition, or practice.

For example, no respectable university would want to have among its faculty or student body those who espouse "honor killings."

Or those who support beheadings for "blasphemy."

Or gay-bashers.

Or Ku Klux Klan members.

Or Anti-Semites.

Or genuine Nazis.

Where is the line to be drawn between inclusion and exclusion?  No university of which I am aware has compiled a comprehensive list of excludables.  Admittedly, this is not an easy task.  At some point, exclusion and freedom of expression will clash.

If a Constitutional Convention was called for the limited purpose of considering the "Bill of Rights," how many would survive intact?  The first would be curtailed to reduce "hate speech."  The second might be eliminated, as former Supreme Court Justice John Paul Stevens recommended on March 27, 2018.  The Ninth and Tenth ceased to be effective a long time ago.  The Third would be deemed outdated.  The Fourth and Eighth would be relaxed in the name of national security. That was easy. So too for all the other Amendments.

What follows is the text of an article that appeared in Palo Alto Online over 23 years ago on March 3, 1995.

STANFORD: Hate speech code struck down

Judge rules that Stanford's prohibitions are unconstitutional

A Santa Clara County Superior Court judge ruled Tuesday that Stanford University's prohibition against hate speech is unconstitutional.

The code was crafted in 1990 after some students defaced a poster with racist caricatures, but it has never been invoked on campus. The code prohibits speech or actions that are discriminatory forms of harassment against individuals.

A group of students sued the university after it was adopted.

University officials had no immediate comment about a possible appeal, saying they first had to read the decision by Judge Peter Stone.

President Gerhard Casper was out of town this week.

"The speech code is contrary to everything Stanford should stand for in free discourse," said former law student Rob Corry, who argued the lawsuit for himself and eight other students in court.

Corry said Stanford students rejected the speech code by a large margin in a non-binding 1990 referendum.

"We were thrilled by the court's decision," Corry said. "This is a victory not only for Stanford students but for students all across the country."

While the speech code had never been invoked since its adoption, Corry said it had "a chilling effect" on students. "If a forbidden word crosses your lips, theoretically you can be expelled," he said."

Judge Stone ruled that Stanford's code violated the First Amendment, which guarantees free speech. In his decision, Stone ruled that Stanford's standard is too broad. He also endorsed a state law that guarantees free speech to students at private universities.

In his decision, Stone quoted from a 1949 Supreme Court case, Terminiello v. Chicago, stating that speech could not be prohibited "unless shown likely to produce a clear and present danger of serious substantive evil that rises far above public inconvenience, annoyance or unrest."

The speech code was contained in a 1990 extension of Stanford's "Fundamental Standard," a conduct code. The Fundamental Standard was established in 1896 by David Starr Jordan, Stanford's first president.

The standard states: "Students are expected to show both within and without the university such respect for order, morality, personal honor, and the rights of others as is demanded of good citizens. Failure to observe this will be sufficient cause for removal from the university."

After considerable debate by the Faculty Senate, the university adopted in 1990 what became known as the Grey Interpretation of the standard, after Thomas Grey, a law professor who wrote it. It was the Grey Interpretation that was stricken down. The university's Fundamental Standard is still in place.

The Grey Interpretation upheld the right to free expression, except when it involves harassment on the basis of sex, race, color, handicap, religion, sexual orientation, or national or ethnic origin.

The Grey Interpretation had expressly forbidden the use of "fighting words."

Stanford chose not to appeal the decision.  That was then.  Things are different now.

Thursday, March 22, 2018

Finland Is The Happiest Country In The World

To borrow a phrase from John McEnroe, “You cannot be serious!”

Let’s start with the weather.  It’s cold, dark, and dreary most of the year.  I first arrived in Helsinki in late May 1981.  The buds on the trees were just starting to open.  Even the long glorious days of summer can be wet and chilly.  The Finns cannot be happy about the weather.

Did you know that half of the people in the world living north of Helsinki, 60 degrees latitude, is Finnish?  Helsinki, on the southern tip of Finland, sits about halfway up Hudson Bay and Canada.

In my subsequent visits to Finland in 2000, 2002, and 2006, I never saw a Finn give a good belly laugh, or even smile.  A people that do not laugh cannot be happy.  Do a search for adjectives and nouns characterizing Finnish personality.  I think dour just about sums it up.

Finnish consumption per capita of coffee is the highest in the world.  Finns need an injection of caffeine to get from one hour to the next.

Food!  A few Michelin-starred restaurants serving the “Nordic” cuisine have popped up in recent years, but you might need to sell the family silver to pay for dinner.  Otherwise, ghastly.  In my experience, Russian restaurants are the best places to dine.

Culture.  Sibelius.

Language.  Incomprehensible (although most Finns speak good English).

Adult beverages. Mum’s the word.

Now to the most important reason.  The West is in the midst of a great  movement to increase diversity in top positions in all walks of life.  Diversity is almost impossible to find in Finland (although there is a no-go zone of Somalis living between the airport and downtown Helsinki).

The most recent population estimate of Finland is 5,516,872 (March 2018).  The foreign born population amounts to 6.5% of all Finns.  Those born in such Muslim countries as Iraq and Somalia amount to 6.9% of the foreign born, or .44% of the population.  Those born in Asian countries make up 8.2% of the foreign born, or .53% of the general population  Together they sum to .97%, just under one percent of the Finnish population.  The overwhelming majority of foreign born, 5.5% of Finland’s population, are from the former Soviet Union, Estonia, Sweden, and other European countries.

To all intents and purposes, there is no diversity in Finland.  It’s understandable.  Who would want to migrate to Finland when Germany, Italy, Greece, and even Sweden are better choices.

In the absence of diversity, Finns cannot be happy.

Having said all that, I’ve loved my visits to Finland as they were all in summer with the one in late May.  White nights are a wonderful experience.  Downtown Helsinki is easy to explore on foot.  The surrounding archipelago is gorgeous.

PS.  Please, no harsh comments from native Finns, those married to Finns, those who have relatives and good friends in Finland, or moved to Finland.  The reason is that you have no sense of what it is to be happy. 

Wednesday, March 21, 2018

Warning To Business Men and Women Seeking The Democrat Nomination for 2020: DON’T

If you try to pull a Democrat Party Trump, a political outsider running for president, you will be crushed!  The Democrat Academic Political Media Industrial Complex will destroy you.  Your purpose is to give money.  It’s just that simple.

Several dozen news sites have identified men and women from outside the political world who might be thinking about a run.

Mark Cuban:  charged with sexual misconduct
Mark Zuckerberg.  allowed Facebook data to be misused for political purposes
Sheryl Sandberg.  ditto
Howard Schultz. hateful symbols have appeared on Starbuck coffee cups
Tom Steyer
George Clooney
Dwayne “the Rock” Johnson
Oprah Winfrey
Kanye West
Bill Gates

It doesn’t matter if the charges are true or not.  The allegations will terminate a possibly candidacy.

If any of the bottom six rear his/her head seriously considering a run, that individual will be savaged within 24 hours.  A dozen or more Democrat politicians are in the queue for 2020.  They will not allow an outsider to take away their prize.

A word to the wise.  Open your wallet, but stay out of politics.

Tuesday, March 20, 2018

Red Guards 2.0 With American Characteristics For The Current Era

A large number of (self-defined) oppressed groups are actively fighting the White heteronormative male patriarchy for influence and power.  At present their influence is dissipated in fragmentation, with each group seeking its own redress.

What’s needed for greater success is to unify this myriad of intersectional communities into a brigade under a unified chain of command.

The solution is a little Red Book 2.0, modeled after Quotations From Chairman Mao Tse-Tung, first published in 1964. Each community should compile its slogans into a chapter (Mao’s quotations were categorized into 33 chapters).  The chapters should then be collated into a little Red Book 2.0 With American Characteristics.  (A photo of President Barack Obama could be placed on the inside front cover for inspiration.)  Then activists could wave their little Red Book 2.0 when shouting slogans at the privileged.

Here, in alphabetical order, is a partial list of chapters that might be included in little Red Book 2.0.

Abortion rights
Global Warming
Global Warriors
Marxist left
Safe spaces
Trigger Warning
Unconscious bias

I was in Hong Kong in September 1966 at the onset of the local Red Guard movement, which was unleashed as part of Mao Zedong’s Cultural Revolution.  We (my spouse and I) were visiting relatives in Hong Kong, who had made plans to leave for Australia in October 1966.  They lived in Cosmopolitan Dock, which was surrounded by a Chinese-populated neighborhood.  Each time we rode into and out of the Dock, gangs of youths waved little Red Books at us chanting pro-Mao slogans.

Riots broke out in Hong Kong in summer 1967.  After months of disruption, Hong Kong’s police crushed the movement as mainland Red Guards and Mao watched quietly from across the border.  (It took another decade for the Chinese army to extinguish the mainland Red Guard movement.)  China’s earnings of foreign exchange in Hong Kong were too important to the mainland to allow chaos and violence to shut down Hong Kong’s economy.  Conservatives who have been shouted down at American universities and escorted off campus with police protection will understand this experience.

American universities are still in the early stage of Red Guards 2.0 for two reasons.  First, unlike the Black Power movement of the 1960s, this time is different.  The movement extends way beyond Black Power due to Harvey Weinstein and others like him.  #MeToo has exposed the hypocrisy of Hollywood, the media, and politicians.

Second, the professoriate of American universities is overwhelmingly White males.  At Stanford, for example, Women and Minorities make up only 28% and 29% respectively of the faculty.  In general, female and minority academics are more liberal than White males, especially older White males set to retire over the next 10-15 years.  As their increasingly female and minority replacements settle in, universities will lean even more to the left on social, economic, and political issues.  From the universities this narrative will spread through K-12 education, the media, Hollywood, business, and government at all levels.

The Black Power movement of the 1960s ­­faded away after a decade, almost exactly as long as it took for the Red Guard movement to dissipate in China.  Perhaps the multi-dimensional character of the Red Guards 2.0 movement in America will last much longer, for a generation or more, until it transforms the American cultural landscape.

This is an exceptionally interesting time to be a historian.

Monday, March 19, 2018

Words Vs. Deeds: Comparing Trump With Bush/Obama

How shall I criticize thee?  Let me count the ways.  Here is a list, in alphabetical order, of some of the harsh words that liberal Democrat and conservative Republican (anti-Trump) members of the Academic Political Media Industrial Complex (the establishment) use to describe President Donald Trump:

unacceptable presidential behavior
worst president

What about the words used to describe presidents George W. Bush and President Barack Obama.  Bush came in for his share of liberal criticism, but nothing remotely close to that of Trump.  Obama was uniformly praised.  To liberals, Obama walks on water.  To conservatives, save a very few, barely a peep of criticism could be read or heard.  Silence was acquiescense.

Perhaps some comparisons can put these markedly different treatments in perspective.

First, foreign policy.  Bush and Obama launched three wars:  Afghanistan, Iraq, and Libya.  During their 16 years in office, U.S. military fatalities in Iraq and Afghanistan numbered 8,360.  Tens of thousands more were wounded, some requiring life care.  Several million civilians were displaced.  Trillions of dollars were spent.  Iran has gained influence in Iraq.  The Taliban still control large areas in Afghanistan.  Not a pretty picture.

Trump inherited this mess.  From his inauguration to March 15, 2018, U.S. war zone fatalities total 47.  Secretary of Defense James Mattis, fired by Obama, has stabilized the situation in both countries.

Second, economic policy.  Bush presided over the worst financial and economic crisis since the Great Depression.  Obama presided over the slowest post-recession recovery in decades.  Both presided over stagnant wages.  Between them, the national debt increased 300% (quadrupled), from $5 trillion to $20 trillion.

President Trump is presiding over the strongest job growth in decades.  He has managed, after decades, to cut the corporate tax rate to internationally competitive levels.  He has rolled back incentive-destroying regulations.

Third, social policy.  Obama set race relations back fifty years.  Trump has reached out to Blacks and Hispanics, who now enjoy the lowest unemployment rates since records have been kept.

I come from an older generation, guided by such phrases as “sticks and stones can break my bones, but names can never hurt me."

Now words are more damaging than deeds.  It’s alright to launch wars and shatter an economy, but  not to tweet!  I prefer tweets to wars and a financial crisis.

Is there anything that Trump can do to receive praise, however faint?  The only thing I can think of is for Trump to follow Nixon into history by resigning the presidency.  However, any such praise he receives at the moment will be short-lived and quickly give way to never-ending historical damnation. 

Wednesday, March 14, 2018

Herbert Hoover, A Good President Who Twice Lapsed From Grace

Three new biographies have created renewed interest in Herbert Hoover, who served as president from March 4, 1929, to March 4, 1933.  This affords an opportunity to weigh in on two policy failures that haunt his memory.

One is the Smoot-Hawley Tariff, which receives blame for exacerbating the Great Depression.  Tariff reduction began in earnest after World War II.

The second, which has received much less critical attention, is the Revenue Act of 1932.

In 1924, six years after the end of World War I, the top marginal rate of tax was 46.0%, which applied to taxable income over $500,000.  The rate was 43.0% for income between $100,000-$200,000.

Beginning with calendar year 1925, Secretary of the Treasury Andrew Mellon (1921-1932) succeeded in sharply reducing the top marginal rate to 25.0% for annual income exceeding $100,000.  Tax rates were reduced across-the-board for all levels of income.

Mellon’s rates remained intact until President Hoover signed the Revenue Act of 1932, which imposed a rate of 56.0% on income exceeding $100,000, topping off at 63.0% on income above $1,000,000.

Fifty years later, two Hoover fellows, Robert E. Hall and Alvin Rabushka, removed Hoover’s lapse from his namesake research institution.  Their 19% flat tax made the Hoover Institution the home of the most important new idea in tax policy in decades.  Building on the idea of a simple flat tax suggested by Milton Friedman in Capitalism and Freedom, Hall and Rabushka constructed a detailed, workable 19% flat tax as a replacement for the then steeply graduated income tax with its top rate of 70%.  A flat tax has been adopted in over 40 countries since the initial publication of their proposal in the Wall Street Journal of December 10, 1981.

The most recent edition of their book, The Flat Tax, can be downloaded free online.

Thursday, March 8, 2018

Common Data Set Comparisons Of First-Year, Non-Hispanic White Enrollment At Elite Private and Large Public Universities

Most, but not all, universities and colleges report information about their schools on a Common Data Set form.  Some reports are several years old, most notably Harvard.

The following information is taken from Table B2 on enrollment by race and ethnicity for fall 2017 (a few for 2016).  The data on non-Hispanic White, first-year, first-time enrollment include all private schools in the top 25 national universities (U.S. News and World Report Annual Ranking) for which numbers are available, and compares them with a selection of state universities.

For purposes of comparison, non-Hispanic Whites constituted 61.3% of the US population in July 2017.

Private Universities (Percent non-Hispanic White)

Princeton         43.8%     (2011, 49.4%)
Yale                 42.1       (2011, 46.9)
Pennsylvania    42.0       (2011, 43.2)
MIT                  32.1       (2011, 36.9)
Stanford           33.7       (2011, 34.3)
Vanderbilt        41.9       (2011, 62.8)
Dartmouth        49.2       (2011, 46.5)
Cornell             36.3       (2011, 41.6)
Northwestern    44.5       (2011, 55.2)
Rice                  35.9       (2011, 39.7)
Duke                 45.2       (2011, 49.9)
Notre Dame       67.2       (2011, 73.7)
USC                   40.5       (2011, 37.7)
Carnegie-Mell    27.6       (2011, 43.3)

Public Universities  (Percent non-Hispanic White)

Wisconsin          71.6%
Michigan            60.5
Ohio State         70.0
Nebraska           76.9
Kentucky           75.3
Tennessee         65.3
Georgia             68.0
Mississippi         79.7
Texas                40.2
Virginia             59.6
North Carolina   61.6
California          23.0      (2011, 29.0)  (2000, 39.0)  All Campuses

A few comments on the data.  Only Notre Dame still has a White majority in its first-year class.  Vanderbilt, Northwestern, and Carnegie Mellon have experienced reductions in first-year White enrollment of 19%, 10.7%, and 15.7% respectively.  White enrollment in seven others has fallen by 4-5% between 2011 and 2017, indicating very aggressive recruitment of non-White students.  Only four have experienced a minor or no reduction in White enrollment.  It is a point of pride and good public relations among almost all elite private universities that Whites have become a minority.

Every public university in the above list, save California and Texas, have White first-year enrollment at about or above the White share of the national population.  California and Texas have much higher shares of Asians and Hispanics than their national averages.

The private universities listed above are very competitive with admission rates ranging between 5-17%.  These schools can structure racial and ethnic composition of their student bodies as they choose.  Moreover, most offer substantial financial assistance to low-income households.  The same highly competitive admit-to-applicant ratio does not hold for public universities.

Reflecting the ethnic/racial transformation of undergraduate enrollment at the top private universities is the current emphasis on recruitment and retention of minority (and women faculty) and postdocs (the pipeline of future faculty) to better reflect the gains in undergraduate enrollment.  It will take some time before supply catches up with demand.

Elite universities view themselves as leaders, role models and trend setters in higher education.  As their model of greater minority and female faculty expand to more and more universities and colleges, current and future minority and women graduate students and postdocs will enjoy a very favorable job market for years to come.

Thursday, February 22, 2018

Sub-Saharan Africa Is Really Poor, Part Two

Transparency International has released its Corruption Perceptions Index 2017.  (Click on link)  The map reveals that Sub-Saharan Africa encompasses the most corrupt countries of any region or continent in the world.

Scroll down to the last country on the list, which is perceived as the most corrupt country in the world.  Twenty of the 37 most corrupt countries are located in Sub-Saharan Africa.  These are the same countries that are the poorest in the world.

Decades of post-independence financial aid, foreign experts, celebrity visits, and scores of university centers on African studies in North America and Western Europe have made little headway in reducing corruption.

Secretary of State Rex Tillerson is scheduled to travel to Africa in March 2018.  It will be interesting to observe his comments and press conferences with heads of states of those countries he visits.  And, what policy changes, if any, he recommends to President Trump.

Wednesday, February 21, 2018

Cash And Carry, Or Who Wants Which Countries’ Paper Money To Conduct Criminal Activity, Launder Money, And Evade Taxes?

An increasing number of monetary authorities and economists around the world are recommending that high denomination banknotes be removed from circulation on the grounds that they underwrite criminal behavior, money laundering, and tax evasion. 

Using the most current data I could find, (1) I recorded the amount of currency in circulation for nine hard-currency countries or zones (save China) that are freely convertible in world markets, (2) converted them into U.S. dollars, for purposes of comparison, at exchange rates of February 18, 2018, and (3) divided each country’s currency by its population to derive the amount of paper money in circulation per capita.

Here are the per capita ­­U.S. dollar values in descending order.

Switzerland        $9,165
Japan                   7,334
Singapore             5,982
United States        4,940
Eurozone              4,173
Australia               2,430
Canada                 1,859
United Kingdom    1,575
China                      654

Below I discuss efforts at withdrawing large denomination notes from circulation in several of the foregoing countries.


Swiss Franc (CHF) 1000 notes constitute 62.3% of the value of Swiss currency in circulation.  Most is held and used outside Switzerland.  CHF200 and CHF100 notes make up another 30.6%.  Although retail  prices in Switzerland are higher than in neighboring countries, small denomination notes of CHF10, CHF20, and CHF50 amount to only 6.9% of Swiss paper money in circulation.

Swiss banknotes are recalled from circulation and cease being legal tender when all the denominations of a new issue are put into circulation.  A statutory period of 20 years after the date of recall allows holders of the previous series to exchange them at full nominal value at the Swiss National Bank (SNB).

The sixth banknote series (the predecessor to the current eighth series) was issued in the 1970s and withdrawn from circulation effective May 1, 2000. These banknotes can still be exchanged for the new series until April 30, 2020. After this date, the banknotes lose their value or, at most, may gain collector's value. The SNB will only recall the notes from the eighth series 20 years after the last denomination of the ninth series has been issued, sometime in the future.  Going forward, in April 2017, in agreement with the SNB, the Federal Council proposed that the exchange period be abolished.

Switzerland has no current plans to remove its CHF1000 banknote from circulation.


The largest denomination note in circulation is the Singapore $10,000 (interchangeable with the Brunei $10,000 note), which the Monetary Authority of Singapore (MAS) ceased printing and issuance on October 1, 2014.  The S$10,000 note is being gradually withdrawn from circulation to “reduce the risk of money laundering.”  The notes will likely remain legal tender until they slowly get returned as they are damaged.  Singapore continues to print and issue new S$1000 notes.  The MAS estimates that as much as 80% of Singapore currency, largely its high denomination notes, is held and used offshore, chiefly in Indonesia.

Other Hard Currencies

The US $100 note constitutes 79% of the value of all U.S. currency in circulation.  Few Americans use $100 notes in daily lawful transactions.  Estimates range from 50-80% of $100 banknotes are held and used outside the United States.

The 500, 200, and 100 banknotes constitute 49.2%, with the €50 euro note 41.7%,  of the value of euro notes in circulation.  Despite the fact that US$100 notes are the preferred high denomination note for illicit activities, money laundering, evading taxes, or as a store of value in countries with unstable currencies, the European Central Bank nonetheless decided to cease production and issuance of new 500 euro notes at the end of 2018.  Those remaining in circulation will, for the time being, remain legal tender and retain their value.

Since May 12, 2000, Canada has been withdrawing its C$1000 notes from circulation on the grounds that they were being used for organized crime and money laundering.  As of 2014, C$100 notes were 53% of the value of all notes in circulation and C$50 a modest 16%.  The rest was small denomination notes.

By value, £20 bank notes represent 59.2% of the value of UK currency in circulation. The £50 pound note constitutes 21.3%, which suggests that the highest valued U.K. note is not a criminal’s preferred choice.  (It’s interesting that Scottish banks and the monetary authorities of Gibraltar and Jersey, which are in a currency union with the Bank of England, issue £100 banknotes.  These £100 notes are fully backed by deposits of sterling securities with the Bank of England and can be freely exchanged with its notes, but the amounts in circulation are too small to serve the purposes of money laundering or tax evasion.)

The Reserve Bank of Australia (RBA) reports that 300 million A$100 notes are in circulation (more than three times the number of A$5 notes).  Together with the A$50 note, the two denominations account for 92% of the value of all Australian paper money in circulation.  RBA officials believe that only about a quarter of the A$100 banknotes are in general circulation among the public.  Since few Australians report using or seeing A$100 notes in daily transactions, public officials believe that most are used for money laundering, drug deals, off-the-books payments such as home improvements, or hidden away as a store of wealth from prying eyes.

The Bank of Japan publishes the total value of its bank notes in circulation, but not the separate value of its ¥1000, ¥5000, and ¥10,000 notes, worth respectively a bit under $10, $50, and $100 respectively.  Over 70% of consumer purchases in Japan are transacted in cash.  Japanese are slower to adopt debit cards, credit cards, and other non-cash payments in everyday life.

Finally, China’s largest note, the Chinese Yuan (CNY 100), is worth $!5.77, which makes it unsuitable for large off-the-books transactions.  It may be that Alipay, Tenpay, and other digital payment systems will reduce cash transactions and eliminate the need for new higher denomination notes.

As part of the nuclear agreement with Iran, President Obama transferred $1.5 billion in cash to Iranian officials in the still of night.  Payment consisted of US dollars, euros, and Swiss francs.

Did Obama unwittingly aid Iranian criminal activity and money laundering?

Tuesday, January 30, 2018

Sub-Saharan Africa Is Really Really Poor

President Trump has instructed Secretary of State Rex Tillerson to take an extended trip to Africa in March 2018.   Perhaps the purpose of his trip is to sooth the hurt feelings and anger of  African leaders over the unsavory remarks President Trump allegedly made about African countries in discussing U.S. immigration policy.

What will Secretary Tillerson find?

The World Bank ranks all 187 countries in the world by GDP (in PPP dollars) per capita.  In 2017, of the bottom 34, 27 are in Sub-Saharan Africa.  They range from no. 153 (Cameroon, $3,359) to no. 187 (Central African Republic, $681).  GDP per capita is even lower in nominal (current exchange-rate) dollars.  To put this in perspective, in 2017 per capita GDP (in PPP dollars) was $39,388 in South Korea and $59,495 (2017) in the U.S.

The 27 countries, in alphabetical order, include Benin, Burkino Faso, Burundi, Cameroon, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Ethiopia, Gambia, Eritrea, Guinea-Bissau, Liberia, Madagascar, Malawi, Mali, Mozambique, Niger, Rwanda, South Sudan, Sao Tome and Principe, Senegal, Sierra Leone, Tanzania, Togo, Uganda, and Zimbabwe.

Between 1957 and 1965, 30 African countries secured their independence from the European colonial powers.  Another 10 achieved independence during 1966-70.  The vast majority of Sub-Saharan African countries have been self-governing for a half-century or more.

Most began as parliamentary democracies, but the new nations quickly gave way to authoritarian regimes of one form or another. Sub-Saharan democratic politics became known as “one man, one vote, one time.”  The most recent report of Freedom House, which classifies countries on the basis of political freedom and civil liberties as ”free,” “largely free,” “largely unfree,” and “unfree,” rates most Sub-Saharan countries “unfree.”

Since decolonization, Overseas Development Assistance (foreign aid) has poured into Africa.  Annual average aid amounted to $19.4 billion during 1970-79, $29.6 billion during 1980-89, $31.8 billion during 1990-99, $39.1 billion during 2000-09, and $56.6 billion during 2010-14 ($1.4 trillion dollars in all between 1970 and 2014) .

Loans to Sub-Saharan Africa amounted to $18.5 billion in 2010, more than doubling to $40.7 billion in 2013.  Excluding South Africa, the external debt of Sub-Saharan Africa increased from $228 billion in 2008 to $378 billion in 2013, despite cancellation of over $100 billion in debt. 

Individual countries and multinational organizations have also provided technical expertise, medical and educational assistance, and economic policy advice.  Western scholars and their graduate students have written hundreds of books and thousands of dissertations and articles about Sub-Saharan Africa.  Centers on African Studies are ubiquitous in American and European universities.  These organizations and individuals have a stake in the status quo.  Self-supporting and fast-growing African “tigers” are not in their financial or professional interest.

Celebrities from all walks of life have traveled to Sub-Saharan African countries to bring attention to the dismal plight of their people.

And yet, most of Sub-Saharan Africa remains mired in poverty.

Secretary Tillerson is likely to state that the U.S. wants to partner with Sub-Saharan countries to help improve governance and living standards.  He will likely offer additional financial and technical assistance.  He will tell Africa’s leaders that President Trump values their friendship and hopes they will join the U.S. in fighting terrorism.

And nothing will change.  Sub-Saharan Africa will remain mired in poverty until there is a change in governance, economic policies, cultural attitudes, and an end to tribal conflict.

I’m from Missouri, the “show me” state.

Saturday, January 20, 2018

Prosperit√† per L’Italia

Italy is a wonderful country.  It has spectacular monuments, museums, churches, castles, cuisine, wine, and beautiful women:  Sophia Loren, Gina Lollobrigida, Claudia Cardinale, Monica Vitti, and Virna Lisi to name a few.

Italy is among the best countries in the world to spend two weeks on holiday.  There is so much to see, do, eat, and drink.  But Italy is a dreadful place in which to live, work, and especially pay taxes.

All that could change on March 4, 2018.  Italian voters have a chance to restore prosperity for themselves and their country, and show the way forward for all of Europe.

A coalition of center-right parties (market-oriented, low-tax conservative parties in American parlance) agreed to an electoral pact on Thursday, January 18, 2018.  Silvio Berlusconi of Forza Italia, Matteo’s Salvini of Lega Nord, and Georgia Meloni of Nationalist Brothers of Italy listed ten measures in their joint platform.  Topping the list was a single-rate flat tax:  Salvini proposes 15%, Berlusconi about 20%, with Meloni concurring in the general concept.

Should the coalition form the next Italian government, the flat tax will be the first measure it submits to Parliament.  A text of the law already exists, with only the exact rate to be set.  It would be relatively easy to select, say, a rate of 18-19%, with an agreement to reduce the rate one percentage point each year to 15% if revenue materializes as projected.

Italy would likely experience the benefits shown by President Trump’s reduction in the U.S, corporate tax rate from 35% to 21%.  Money would pour into Italy all over Europe and offshore for investment.  Tax evasion would decline.  New jobs would be created.  Young Italians could move out of their parents’ apartments and buy their own place.  Those who moved abroad in to earn a better living would return home to grab new opportunities.

It’s that simple!

As one of the big three in the European Union along with France and Germany, other European countries would find it necessary to follow the Italian example and adopt similar low, flat taxes.  All of Europe would enjoy a sustained economic boom.

PS.  By way of disclosure, I carefully reviewed, and prefer, the Northern League’s 15% flat tax plan, which originated with its chief economic advisor, Armando Siri.  I also met with Berlusconi to discuss the flat tax.  I believe the narrow difference between the two plans can be easily resolved into a single flat-tax plan.

Wednesday, January 3, 2018

Sweden’s Cashless Economy Comes To America

On Tuesday morning, January 2, 2018, I went to the local post office in Palo Alto to mail a book.  There was no line.  I walked up to the counter, was greeted by a friendly employee, and placed the package on the scale.

The price came to $3.12.  I took out my wallet and coin purse to pay.  She asked me if I had a credit or debit card.  “Why?” I replied.  “Because we cannot accept cash this morning.”  “Why not?” I then asked.  “Is this a test of Sweden’s cashless economy?”  “No.” she replied.  “We are unable to open the safe this morning.”

“But I have exact change,” I said.  “No,” she said.  “Only credit or debit cards are acceptable until we can open the safe.”

I even offered to show my driver’s license with photo to accompany an exact cash payment.  No was still no.

A few customers in line turned around and left the post office.

Welcome to cashless America.  Now I will be prepared for my next visit to Sweden.

Tuesday, January 2, 2018

Evaluating Trump’s Tax Cut And Tax Reform

The commentariat has spilled millions of gallons of digital ink and spoken millions of syllables on the pros and cons of President Trump’s tax cut and the degree to which it represents real tax reform.

Supporters point to the lower 21% corporate tax rate and expensing (100% first-year write-off) of investment spending, the latter for only five years, but perhaps to be extended upon its expiration.  In combination, these should encourage investment in new business, expansion of existing business, new jobs, higher wages, and a higher return to capital.

Supporters also praise doubling the standard deduction, which is projected to reduce the share of individual tax returns with itemized deductions from about one-third to one-tenth.  This is an indirect way of simplifying the tax code by reducing the benefits of itemizing.  Ideally, it would be nice to eliminate all deductions, preferably by sheer brute political will in exchange for yet lower rates.

A 500-page law with 500 pages of explanation cover a lot of ground.  I will leave details to the tax lawyers and accountants.

Here I want to put the tax reform into a broader context, namely, how does it compare with an ideal income tax code:  a progressive, fully integrated, cash-flow expenditure tax.

You are correct if you recognize that ideal as the Hall-Rabushka Flat Tax, first proposed in 1981, which many commentators have called the “gold standard” of tax reform.  (The current edition of the book is free online at the Hoover Press.)  Its core features include (1) expensing of business investment, (2) a single flat rate on all labor and business income, (3) full integration, (4) progressive in the form of a personal allowance for all taxpayers based on the composition and size of households, in effect a zero rate up to a specified level of income, and (5) no taxation of interest, dividends, capital gains, gifts, and estates.

A variation of the flat tax has been adopted in more than 40 countries and political jurisdictions around the world.  Estonia, for example, has eliminated the corporate income tax.  I encourage you to have a look at specific legislation in these territories to see how a flat tax has been put into practice.

To summarize, pieces of the new tax code are a good start.  Much more remains to be done.  Perhaps in a second Trump term!