Category: Public Choice

“Bludgeoned by Years of Subservience to Their Masters in Beijing”

(p. C2) The salient fact that we have learned about Chinese administrative and managerial practices from this latest outbreak is not that China is capable of impressive infrastructure projects but that its vaunted system of top-down decision-making, state control and central planning is directly responsible in large part for the virulence, intensity and rapid spread of the disease that has already claimed more than 1,300 Chinese lives.

According to reports from Wuhan in this and other news outlets, one of the principal reasons that the virus spread so quickly and infected so many was because officials in Wuhan, bludgeoned by years of subservience to their masters in Beijing, were simply terrified of taking any initiative. Zhou Xianwang, Wuhan’s mayor, told reporters that he didn’t take measures to deal with the epidemic earlier because he needed authorization from his political bosses.

For the full commentary, see:

Gerard Baker. “China’s Crisis Exposes a Badly Flawed Model.” The Wall Street Journal (Saturday, February 15, 2020): C2.

(Note: the online version of the commentary was updated Feb. 14, 2020, and has the title “THE NEW NEW WORLD; A Loyal Chinese Critic Vanishes, in a Blow to the Nation’s Future.”)

Outspoken Admirer of Friedman and Hayek Disappears in Communist China

(p. A19) The disappearance of Mr. Ren, a longtime critic of the Chinese government, adds to fears that China is sliding backward and abandoning the reforms that saved it from extreme poverty and international isolation. Mr. Ren was no radical — he was a decades-long loyal Communist Party member, the former leader of a state-run company and a friend to some of China’s most powerful politicians. He emerged in what now seems a distant time, from the 1980s to the period before Mr. Xi became top leader, when the party brooked no challenge to its rule but allowed some individuals to question some of its choices.

Mr. Ren’s fate remains unclear. But if he was punished for his writing, it suggests China’s leadership won’t tolerate criticism no matter how justified it might be.

. . .

He was influenced by free-market economists like Milton Friedman and Friedrich Hayek. He believed government control needed to be checked.

“State power in any country is greedy, so it needs to be subject to public supervision,” he wrote in his autobiography. “Otherwise, the power will be abused and everybody will suffer from it.”

. . .

In 2011, near the peak of China’s openness to new ideas, Mr. Ren, an avid reader, started a book club. It drew China’s top entrepreneurs, intellectuals and government officials. Books included Alexis de Tocqueville’s “Democracy in America” and Hannah Arendt’s “The Origins of Totalitarianism.” The events became so popular that people had to apply through a lottery system to join. Some people flew to Beijing from all over the country to attend.

Mr. Ren said his goal was to help China’s young generation develop independent thinking so it would not follow the orders of authority slavishly. The government said no to some topics and speakers, but left it largely alone.

By early 2016, he had nearly 38 million followers on Weibo. But party attitudes toward expression were changing.

That same year, Mr. Xi declared that all Chinese news media had to serve the party. No Chinese leader since Mao Zedong had made that obligation so explicit. Mr. Ren shot back on Weibo, writing that the news media should serve the people, not the party, or the people would suffer.

Retribution was swift. His Weibo account was deleted. His party membership was suspended for a year. His passport was taken away. Members of his family weren’t allowed to leave the country. He faced constant investigations and interrogations.

. . .

Then came the coronavirus outbreak. When doctors working with the disease tried to publicly warn China about the outbreak, they were threatened by government officials. For Mr. Ren, friends said, this confirmed his argument that a media that serves the party couldn’t serve the people.

“Without a media representing the interests of the people by publishing the actual facts,” he wrote in the essay that circulated this year, “people’s lives are being ravaged by both the virus and the major illness of the system.”

He shared the essay with a few friends. Three days after his 69th birthday, he disappeared. His assistant and his son have disappeared, too.

For the full commentary, see:

Li Yuan. “THE NEW NEW WORLD; A Longtime Party Insider Vanishes, in a Blow to China’s Future.” The New York Times (Wednesday, April 1, 2020): A19.

(Note: ellipses added.)

(Note: the online version of the commentary was updated April 2, 2020, and has the title “THE NEW NEW WORLD; A Loyal Chinese Critic Vanishes, in a Blow to the Nation’s Future.”)

Scientists Are “a Political Interest Group Like Any Other”

(p. B15) Mr. Greenberg, who spent most of his professional life in Washington, became a science journalist at a time when many practitioners seemed to view their job as advancing the cause of research — a consideration that many researchers expected.

As an author, newspaper reporter and magazine editor, and as the founding editor and publisher of Science & Government Report, a newsletter he ran for almost 30 years, Mr. Greenberg took a different view.

From his vantage point in the capital, he tracked scientific rivalries and battles over the government’s science priorities, describing research not as a uniquely worthy activity but rather as one of many enterprises competing for federal largess.

“He recognized that science, and the scientific endeavor broadly, was a political interest group like any other, and they behaved like any other, and he covered them like any other,” said Daniel Sarewitz, a congressional staffer in the science policy arena in the early 1990s and now director of the Washington-based Consortium for Science, Policy and Outcomes at Arizona State University.

“He was not a toady or an advocate for the science community,” Dr. Sarewitz said. “He was a journalist covering science.”

Writing in The New York Times Book Review in 1968, Robert K. Merton, the eminent 20th-century sociologist of science, said Mr. Greenberg’s “perceptive” first book, “The Politics of Pure Science,” was one that “should be read by the President, legislators, scientists and the rest of us ordinary folk.”

For the full obituary, see:

Cornelia Dean. “Daniel S. Greenberg, 88, Science Journalist.” The New York Times (Thursday, March 26, 2020): B15.

(Note: the online version of the obituary was last updated March 26, 2020, and has the title “Daniel S. Greenberg, Science Journalist and Iconoclast, Dies at 88.” Williams’s question is in bold; Achorn’s answer is not in bold.)

The second edition of the book by Greenberg, mentioned in the passage quoted above, is:

Greenberg, Daniel S. The Politics of Pure Science. Second ed. Chicago: University of Chicago Press, 1999.

French Jobs Rise as Labor Regulations Fall

(p. A1) PARIS — One after another, the speakers in Parliament have denounced President Emmanuel Macron and his revolutionary plans, calling them “cynicism” and a “flagrant crime.” Outside, hundreds of protesters shout their fury. Other demonstrators, invoking a long French tradition, have called for his head.

. . .

(p. A6) Mr. Macron has upset the French, and he is deeply unpopular for it. So it has become the defining paradox of his rule that he remains much despised, even as his changes begin to bear fruit.

The intractable unemployment rate, slayer of his predecessors, appears finally to be bending to a French president’s touch, recently reaching its lowest rate in 12 years at 8.1 percent.

Working-age employment rates are up, worker-training programs are showing big gains, quality long-term job contracts are outpacing precarious, short-term ones.

All of those are advances plausibly attributed to Mr. Macron’s landmark loosening of the rigid French labor market.

For the full story, see:

Adam Nossiter. “As the French Call for His Head, Macron Is Reshaping the Nation.” The New York Times (Wednesday, February 26, 2020): A1 & A6.

(Note: ellipsis added.)

(Note: the online version of the story has the date Feb. 25, 2020, and has the same title “As Emmanuel Macron’s Impact Grows, So Does French Disdain.”)

At Nonprofit Hospitals Revenue Rises and Charity Care Falls

(p. 7) On paper, the average value of community benefits for all nonprofits about equals the value of the tax exemption, but there is tremendous variation among individual hospitals, with many falling short. There is also intense disagreement about how those community benefits are calculated and whether they actually serve the community in question.

Charity medical care is what most people think of when it comes to a community benefit, and before 1969 that was the legal requirement for hospitals to qualify for tax-exempt status. In that year, the tax code was changed to allow for a wide range of expenses to qualify as community benefits. Charitable care became optional and it was left up to the hospitals to decide how to pay back that debt. Hospitals could even declare that accepting Medicaid insurance was a community benefit and write off the difference between the Medicaid payment and their own calculations of cost.

An analysis by Politico found that since the full Affordable Care Act coverage expansion, which brought millions more paying customers into the field, revenue in the top seven nonprofit hospitals (as ranked by U.S. News & World Report) increased by 15 percent, while charity care — the most tangible aspect of community benefit — decreased by 35 percent.

. . .

The average chief executive’s package at nonprofit hospitals is worth $3.5 million annually. (According to I.R.S. regulations, “No part of their net earnings is allowed to inure to the benefit of any private shareholder or individual.”) From 2005 to 2015, average chief executive compensation in nonprofit hospitals increased by 93 percent. Over that same period, pediatricians saw a 15 percent salary increase. Nurses got 3 percent.

For the full commentary, see:

Ofri, Danielle. “Nonprofit Hospitals Are Too Profitable.” The New York Times, SundayReview Section (Sunday, February 23, 2020): 7.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Feb. 20, 2020, and has the title “Why Are Nonprofit Hospitals So Highly Profitable.”)

The Politico article mentioned in the passages quoted above, is:

Diamond, Dan. “Health Care; How Hospitals Got Richer Off Obamacare.” Politico (Posted July 17, 2017). Available from https://www.politico.com/interactives/2017/obamacare-non-profit-hospital-taxes/.

Chinese Communist “Tradition” of Local Officials Lying to Please Beijing Central Planners

(p. A27) There is a tradition in China (and likely much of the world) for local authorities not to report bad news to their superiors. During the Great Leap Forward, local officials reported exaggerated harvest yields even as millions were starving. More recently, officials in Henan Province denied there was an epidemic of AIDS spread through unsanitary blood collection practices.

For the full commentary, see:

Elisabeth Rosenthal. “Why Is Data on Coronavirus So Limited?” The New York Times (Saturday, February 29, 2020): A27.

(Note: the online version of the commentary has the date Feb. 28, 2020, and has the title “Sanders Is Stirring Cold War Angst. Young Voters Say, So What?.”)

Millennials Blame Capitalism for “the Crushing Burden of College Debt”?

(p. A22) “Millennials don’t remember the Cold War,” said Maurice Isserman, a history professor at Hamilton College who has studied democratic socialism. “They don’t react in the same way to the word ‘socialist’ and associate it with totalitarian communism.”

Instead, young voters have experienced a structural shift in the economy, including the 2008 financial crisis and the crushing burden of college debt, that has given them a more critical view of capitalism, he said.

For the full story, see:

Patricia Mazzei and Sydney Ember. “Sanders’s Views on Cuba Split Young and Old Voters.” The New York Times (Saturday, February 29, 2020): A22.

(Note: the online version of the story has the date Feb. 28, 2020, and has the title “Sanders Is Stirring Cold War Angst. Young Voters Say, So What?.”)

Commuters Riot after Lagos Governor Bans Motorbikes and Rickshaws

LAGOS — It is dark when Abisoye Adeniyi leaves home on the packed Lagos mainland, weaving through cars and minibuses. She reaches her bus stop as the sun rises.

The 23-year-old Nigerian lawyer used to hop on a motorbike – known locally as an okada – for a quick ride to the bus that carries her from the mainland, where most of Lagos’s 20 million residents live, to work in the island business district.

Since the bikes, along with motorized yellow rickshaws called kekes, became illegal in most of the city on Feb. 1 [2020], Adeniyi has added a 30-minute walk to her journey – stretching the commute to nearly two hours.

“It has not been easy at all,” she said.

Lagos state Governor Babajide Sanwo-Olu outlawed the loosely regulated motorbikes and rickshaws, citing safety and security concerns.

Gridlock in the megacity, whose traffic jams were already ubiquitous, has intensified to the point that riots with burning tyres broke out and #LagosIsWalking trended on Twitter showcasing residents with ruined shoes.

For the full story, see:

Reuters. “Burning Tires and Sore Feet: Lagos Bristles Under Bike Ban.” The New York Times (Monday, February 17, 2020). Online at: https://www.nytimes.com/reuters/2020/02/17/technology/17reuters-nigeria-transportation-ban.html?searchResultPosition=2

(Note: bracketed year added.)

Chinese Communist Officials Rewarded for Loyalty, Not for Competence or Boldness

(p. A1) The Chinese people are getting a rare glimpse of how China’s giant, opaque bureaucratic system works — or, rather, how it fails to work. Too many of its officials have become political apparatchiks, fearful of making decisions that anger their superiors and too removed and haughty when dealing with the public to admit mistakes and learn from them.

“The most important issue this outbreak exposed is the local government’s lack of action and fear of action,” said Xu Kaizhen, a best-selling author who is famous for his novels that explore the intricate workings of China’s bureaucratic politics.

“Under the high-pressure environment of an anticorruption campaign, most people, including senior government officials, only care about self-preservation,” Mr. Xu said. “They don’t want to be the first to speak up. They wait for their superiors to make decisions and are only accountable to their superiors instead of the people.”

The Chinese government appears to be aware of the problem. The Communist Party’s top leadership acknowledged in a meeting on Monday [February 3, 2020] that the (p. A9) epidemic was “a major test of China’s system and capacity for governance.”

. . .

Chinese officials are spending as much as one-third of their time on political studying sessions, a lot of which are about Mr. Xi’s speeches. Political loyalty weighs much more in performance evaluations than before. Now the rule of thumb in Chinese officialdom seems to be demonstrating loyalty as explicitly as possible, keeping everything else vague and evading responsibility at all costs when things go wrong.

. . .

On social media, low-level cadres are complaining that they are receiving so many instructions from the higher-ups that they spend most of their time filling out spreadsheets instead of getting real work done. In a social media post headlined “The Formalism Under the Mask,” the author wrote, “Most people in the system don’t do things to solve problems. They do things to solve responsibilities.”

For the full story, see:

Li Yuan. “In China, Virus Spurred Rush of Blame Shifting.” The New York Times (Wednesday, February 5, 2020): A1 & A9.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story was updated Feb. 14 [sic], 2020, and has the title “Coronavirus Crisis Shows China’s Governance Failure.”)

Incumbent Italian Firms Invest in Cronyism, Not Innovation

I heard an intriguing paper at the January 2020 AEA meetings in San Diego. It shows that, at least in Italy, big incumbent firms protect their position more through investment in cronyism than through investment in innovation. The abstract of the NBER working paper version of the paper appears below.

Do political connections affect firm dynamics, innovation, and creative destruction? We study Italian firms and their workers to answer this question. Our analysis uses a brand-new dataset, spanning the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data; (ii) social security data on the universe of workers; (iii) patent data from the European Patent Office; (iv) the national registry of local politicians; and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: When compared to their competitors, market leaders are much more likely to be politically connected, but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity – a result that we also confirm using a regression discontinuity design. We build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity.

The abstract quoted above is from:

Akcigit, Ufuk, Salome Baslandze, and Francesca Lotti. “Connecting to Power: Political Connections, Innovation, and Firm Dynamics.” NBER Working Paper #25136, National Bureau of Economic Research, Inc., Oct. 2018.

E.U. Farm Subsidies in Central and Eastern Europe Go to Cronies of Politicians

(p. 1) CSAKVAR, Hungary — Under Communism, farmers labored in the fields that stretch for miles around this town west of Budapest, reaping wheat and corn for a government that had stolen their land.

Today, their children toil for new overlords, a group of oligarchs and political patrons who have annexed the land through opaque deals with the Hungarian government. They have created a modern twist on a feudal system, giving jobs and aid to the compliant, and punishing the mutinous.

These land barons, as it turns out, are financed and emboldened by the European Union.

Every year, the 28-country bloc pays out $65 billion in farm subsidies intended to support farmers around the Continent and keep rural communities alive. But across Hungary and much of Central and Eastern Europe, the bulk goes to a connected and powerful few. The prime minister of the Czech Republic collected tens of millions of dollars in subsidies just last year. Subsidies have underwritten Mafia-style land grabs in Slovakia and Bulgaria.

Europe’s farm program, a system that was instrumental in forming the European Union, is now being exploited by the same antidemocratic forces that threaten the bloc from within. This is because governments in Central and Eastern Europe, several led by populists, have wide latitude in how the subsidies, funded by taxpayers across Europe, are distributed — even as the entire system is shrouded in secrecy.

For the full story, see:

Selam Gebrekidan, Matt Apuzzo and Benjamin Novak. “Populist Regimes Siphon Millions in E.U. Farm Aid.” The New York Times, First Section (Sunday, November 3, 2019): 1 & 12.

(Note: the online version of the story has the same date as the print version, and has the title “The Money Farmers: How Oligarchs and Populists Milk the E.U. for Millions.” The online version says that the title of the New York print edition was “Populist Politicians Exploit E.U. Aid, Reaping Millions.” The title of my National edition was “Populist Regimes Siphon Millions in E.U. Farm Aid.”)