Tuesday, April 28, 2015

My Amazon Review of Andrew Krepinevich's and Barry Watts' "The Last Warrior: Andrew Marshall and the Shaping of Modern American Defense Strategy"

Yoda of the Pentagon

Andrew Krepinevich and Barry Watts have written a hagiographic biography of their former boss. Andrew Marshall, a not well known wonk in the bowels of the Pentagon served our country for over 60 years in developing defense policy. He worked first as an analyst at the Rand Corporation during its heyday in the 1950's and 60's and then established the Office of Net Assessment within the Pentagon, a post where he just retired from at the age of 93. He was the oldest government employee in history and deservedly earned the nick name of Yoda; not bad for a depression era working class kid from Detroit.

Along the way he worked with a who’s who of the leading foreign and defense policy theorists of the second half of the 20th Century. These personages include Graham Allison, Bernard Brodie, Harold Brown, Elliot Cohen, Alan Enthoven, Robert Gates (who wrote the foreword), Charles Hitch, Samuel Huntington, Herman Kahn, Henry Kissinger, James Schlesinger, Albert Wohlstetter and Roberta Wohlstetter. And this is only a partial listing.

His job at the office of Net Assessment was to evaluate the long term threats facing the United States and to come up with options to counter them. In his work he introduced the organizational economics Herbert Simon to predict Soviet behavior and leading academics on competitive strategy in the business world. As the Cold War was winding down in the mid-1980s he focused his attention on the rise of China and was quick to point out how the revolution in military affairs (precision weapons, computerized command and control and information warfare) in the 1990s would significantly change the nature of future battlefields.

A small gem in the book is that the authors point out that Marshall offered up the best argument in favor of anti-ballistic missiles. He argued that they do not have to, and cannot, stop all incoming missiles. All they have to do is to stop enough of them to create uncertainty in the Soviet Union making them fearful of a counter attack. Hence it works as a deterrent.

Although very wonky, I would recommend this book to readers interested in how defense policy was made in the U.S. over the past 65 years.

The full Amazon URL is:


Monday, April 20, 2015

Double-Speak from Iran's Foreign Minister

In an op-ed in today's New York Times Iran's foreign minister Mohammad Javad Zaref stated and I quote directly:

"On a broader level, regional dialogue should be based on generally recognized principles and shared objectives, notably respect for sovereignty, territorial integrity and political independence of all states; inviolability of international boundaries; noninterference in internal affairs; peaceful settlement of disputes; impermissibility of threat or use of force; and promotion of peace, stability, progress and prosperity in the region."

Would that only be true with respect to the State of Israel? I won't hold my breath waiting for President Obama, Secretary Kerry and their choir in the media to comment on this notorious example of double-speak.

Monday, April 13, 2015

My Amazon Review of Brian McGinty's "Lincoln's Greatest Case: The River, the Bridge and the Making of America"

Lincoln as Railroad Lawyer

Abraham Lincoln made his living as a railroad lawyer specifically for the Illinois Central and the Chicago and Rock Island. Lawyer/historian Brian McGinty turns his keen eye on the now obscure struggle between steamboat and rail interests for dominance over Midwest transportation that chrystalized with sinking of the steamboat Effie Afton at the Rock Island Bridge. The owners of the Effie Afton supported by the St. Louis river interests sued for damages and argued that the bridge should come down because it was a hazard to navigation. Lincoln’s role in the case was to assist Norman Judd in defending the bridge and its railroad owners. This is a book more for history nerds than for the general reader.

The Rock Island Bridge was the first to cross the Mississippi in 1853 and sinking occurred in 1856. The steamboat interests rightly feared the railroads and fought tooth and nail against them with a strong ally in Washington, Secretary of War Jefferson Davis. Davis was not anti-railroad; he just wanted a more southern route to extend slavery into the southwest. As a Secretary of War he surveyed the west and came up with four potential routes. Although not mentioned in the book, those routes ultimately became the backbones of the Union Pacific, Southern Pacific, Santa Fe and Northern Pacific railroads, but that was to come later.

Lincoln’s main role at the trial was in his summation where without notes he demonstrated his knowledge about all things mechanical and his deep understanding of the currents of the Mississippi River. Although the jury verdict was not unanimous, the 9-3 vote in favor of the bridge opened the way for railroad penetration west of the Mississippi. Norman Judd, the lead counsel, ultimately would become one of the key backers of Lincoln’s presidential run three years later.

McGinty tells a good story, but there is lots of trial stuff here that only a lawyer would love.

Saturday, April 11, 2015

The Iran Deal: Congress Must Advise and Consent

Let me say at the outset that engaging Iran in negotiations on their nuclear programs is a good idea. However engagement is not enough and making a deal is not enough. It has to be a good deal that stands the test of time and is in the interests of both parties. It seems to me that President Obama and Secretary Kerry are far more eager to get a deal than the Ayatollah Khamenei and therein lies the problem.

For example President Obama is now in the process of selling a deal where there are two distinct interpretations with respect to the removal of sanctions, the intrusiveness of the inspections and the coverage of the inspections with respect to military facilities. Now Administration flacks are telling us that the Ayatollah's recent comments are for domestic political purposes only. Wrong! New York Times columnist Tom Friedman taught me a long time ago that unlike politics in the U.S. where private comments from political leaders should weigh more heavily than public comments; in the middle-east it is the reverse. It is practically irrelevant what the Ayatollah's minions say in private. What counts is what he says in public.

Furthermore with the Administration so invested in the deal, my guess is that they will look the other way if violations occur in the coming years. Indeed after the "red- line" in Syria and continued cuts to the military budget it makes it hard to believe that the current administration would act forcibly to correct violations of the deal.

Thus the deal has the smell of appeasement and it is the reason why Congress must use its power to advise and consent. If the shoe were on the other foot with a Republican president in power, Senators Obama, Biden and Kerry would screaming from the ramparts for Congressional involvement.

Thursday, April 2, 2015

My Amazon Review of Charles Calomiris' and Stephen Haber's "Fragile by Design: The Political Origins of Banking Crises and Scarce Credit"

Banking in a Political Context

According to Professors Calomoris and Haber banking does not exist in a political vacuum. In fact banks are product of a bargain between political coalitions and bankers; a social contract, if you will. In a very long book, too long in my opinion, the authors delve into the history of the banking systems of the United States, the United Kingdom, Canada, Brazil and Mexico and the political coalitions that underpin them.

Calomoris is a self-described Hamiltonian; he likes large banks with extensive branching systems. He credits Canada where a bank bargain between the political elites enabled a crisis free banking system. In contrast the United States with its agrarian populist combining with local banks created a crisis ridden small unit banking system. That system ended when a new coalition of mega-banks and urban activists enabled the creation of the banking system we have today. Simply put in exchange for supporting mega-mergers, banks channeled trillions of dollars into urban mortgages, some of which being of dubious quality. One thing that comes through is that lending on illiquid real estate lurks behind most of the banking crises experienced in the U.S. and U.K.

The political context rests on the fact that politicians need banks to fund government debt, support favored activities and to make it easy to finance government though an inflation tax. Brazil and Mexico are prime examples of using inflation to fund the government. In the United States banks and government sponsored agencies exist to fund housing programs off the budget.

This is more a history book than an economics book. Nevertheless it is very important for economists to understand the milieu their models are operating in.

The full Amazon URL is: