Growthology

Is American Education Getting Worse?

No, says Kauffman senior fellow Ben Wildavsky in an outstanding essay on Foreign Policy. And forget that myth about the rest of the world leaving us in the dust:

If Americans' ahistorical sense of their global decline prompts educators to come up with innovative new ideas, that's all to the good. But don't expect any of them to bring the country back to its educational golden age -- there wasn't one.

...

In this coming era of globalized education, there is little place for the Sputnik alarms of the Cold War, the Shanghai panic of today, and the inevitable sequels lurking on the horizon. The international education race worth winning is the one to develop the intellectual capacity the United States and everyone else needs to meet the formidable challenges of the 21st century -- and who gets there first won't matter as much as we once feared.

No one would deny that education is America can be vastly improved, but part of Ben's point is that educational inequalities within the United States matter much more than the ostensible gaps between countries. It's hard to avoid the conclusion, noted by Brink a couple of weeks ago, that education is at the root of many of America's economic difficulties. But arguments premised on alarmism are not an answer.

Time to Think About the Egyptian Economy

Now that Egypt has experienced a democratic revolution military coup, underlying problems in its economy must be addressed. Bob Litan and I argue, not surprisingly, that entrepreneurship needs to be a key piece of the Egyptian economic future:

Karl Marx famously insisted that a society's workers, not the bourgeoisie, must own the "means of production." But for broadly shared growth to take hold—for entrepreneurial capitalism to develop—the people must own the economy in a different manner. The must have the opportunity and the motivation to start and grow new companies. 

More here. (Carl Schramm gets full credit for this neat twist on Marxist thought.)

Many other countries need to chart the same course. Pakistan: pay careful attention.

Entrepreneurship in Egypt

Elmira Bayrasli:

Egypt is more populous and poorer today than it was 20 years ago.  But it is also more literate and connected to the world.  That is good and bad.  Young Egyptians are developing skills and becoming more aware of the opportunities around the world – (and the lack of them in their own country).  You extrapolate.

Increased freedoms would go far to ensure that these youth can access those opportunities.  Expanding entrepreneurship would guarantee it.  As much as Egyptians need and deserve freedom, they need and deserve the tools that will allow them to build vibrant and sustainable businesses.

More here, including some great numbers.

 

The Philosophical Depths of Political Revolt

Bernard Bailyn's landmark book, The Ideological Origins of the American Revolution, revealed the deep intellectual and philosophical roots of the American Revolution, its debates, and the subsequent work of "fulfilling" the Revolution in the form of the Constitution. Pamphlet wars raged in the 1750s and 1760s, relying heavily on strains of 17th-century English radicalism and its early eighteenth-century expressions, including Cato's Letters. The writers of these pamphlets argued incessantly over issues big and small and steadily groped their way toward coherent views on the eve of independence in 1776. Over a decade later, rhetorical struggle via pamphlets erupted again over the ratification of the proposed Constitution; the original incarnation of what became the Federalist papers first appeared in this milieu.

Not all pamphlets were as articulate as those of Madison, Hamilton, and Jay--and some were much more articulate. But it was the dialogic process, the persistent back-and-forth, that gradually constructed the intellectual underpinnings of the American republic.

There are clear boundaries to the usefulness of historical analogy, but I can't help wondering about the nature of contemporary political revolt and the role of social media (Twitter, Facebook) and the recent events in Tunisia and Egypt. Specifically, do you suppose that social media undercut the process of building a political and governance philosophy with which to replace the present regime? That is, if Twitter and Facebook allow events to proceed with unprecedented speed, while not really allowing for or encouraging deep reflection or debate, will an opposition or protest movement all of a sudden find itself filling a vacuum of power with nothing but rage?

I know, I know, there are several shortcomings with this. For one thing, Egypt in 2011 is definitely not colonial America in the mid-1700s. For another, I am operating in near-ignorance as to the state of political philosophy--underground or not--in Egypt. There could very well be a long-developing literature there, both religious and secular. 

In any case, I guess my question is: while social media certainly appear to help the process of rebellion (except when they don't), how much do they do for the day after?

More on Pakistan's Economy

Good post today by Nancy Birdsall, Wren Elhai, and Molly Kinder of the Center for Global Development on the challenges of Pakistani political economy:

U.S. policymakers should note well this series of events and remember a simple lesson. Billions of dollars of U.S. assistance-and a sustained diplomatic focus on the reform agenda-have not given the United States the ability to dictate the outcomes of Pakistan's political process. This is inconvenient for the United States, but not surprising. For the United States and for other major donors in Pakistan, money has never brought leverage.

They present some very good options for more effective ways the United States and the international community can use aid to force change. Our question from the other day still stands: what can we do now to promote and support entrepreneurship in Pakistan? Aid only takes you so far (or, in some cases, takes you backwards).

Thermodynamics and Economics

This is a terrific article by Timothy Garrett at the University of Utah, published in October: "On the coupled evolution of inflation, wealth, and atmospheric concentrations of carbon dioxide." Garrett devises a thermodynamic model of economic growth and energy use and his article is far deeper than what typically passes for energy economics analysis. Looking for a reason to stay awake at night? Look no further:

What remains is only to rapidly decouple civilization growth from CO2 emitting sources of energy. There is an important caveat however, which is that such decarbonization does not slow accumulation by as much as might be anticipated. Decarbonizing civilization promotes society [sic] wealth by alleviating the rise in atmospheric CO2 levels. But growing wealth is tied to energy consumption rates, and therefore to CO2 emissions themselves. Only a combination of extremely rapid decarbonization and civilization collapse keeps CO2 concentrations below 500 ppmv within this century. 

An Exciting Day

I just received in the mail a copy of Matt Ridley's forthcoming book, The Rational Optimist. I was fortunate enough to be able to attend a seminar last year at which Ridley discussed the book and solicited input and ideas.

Based on that discussion and Ridley's extraordinary intelligence and writing ability, this book will be stupendous, no doubt about it. Check out his blog here; good stuff.

My PBS NBR commentary on the Summit on Entrepreneurship

Last week (April 22), I offered a video commentary on PBS' Nightly Business Report: 

SUSIE GHARIB: For many economies around the globe, start up businesses are the little engine that could, creating jobs and revenues. But you might be surprised where some start up businesses are taking root. Here's commentator Tim Kane. He's senior fellow of research and policy at the Kauffman Foundation.

TIM KANE, SR. FELLOW, THE KAUFFMAN FOUNDATION: Next week, President Obama is hosting a summit for more than 50 countries with sizable Muslim populations and it's a summit on entrepreneurship. Maybe that sounds like small potatoes compared the big nuclear summit the White House hosted last week, but I think it's even more important. World peace will have economic roots. Muslim economies are eager to shift away from oil and they know a startup culture is key. Actually, these countries are already changing. The reality of this century is that economic growth is flowering almost everywhere, not just exotic places like China and Cupertino.

A big reason progress has been so measurable is simple. There's something to measure. Since 2004, the World Bank has been publishing the "Doing Business Report", which compares national economic policies across the globe. And according to the 2010 edition, nine out of 10 Middle Eastern and North African countries made at least one reform making it easier to do business, say start a company or hire a worker, with less regulation getting in the way.

Here's an example. In 2004, it took 42 days to start a company in a typical Middle Eastern country. Last year, 21 days. In the U.S., it took six days. But get this, in Saudi Arabia it took only five days to start a company. In fact, two of the top economic reformers in 2010 were Egypt -- fancy that -- and the United Arab Emirates. Saudi Arabia now ranks as the 13th best place to do business in the world. Who's number one? Let's just say the summit should arguably be held in Singapore, not Washington. I'm Tim Kane.

From "Brain Gain" to Brain Circulation

[Cross-posted from Progressive Fix]

A recent post highlighted the importance of new and young companies to job creation in the U.S., implicitly raising an important question for policy makers: How can we increase the number of startups? Assuming it can be done, such an increase would not solve all of the economic challenges facing this country, but it would certainly help. New companies not only create millions of jobs across all sectors of the economy — they also introduce product and process innovations, boosting overall productivity.

Saying startups are important is one thing, of course; actually designing policies to increase their number is something else entirely. Before making any recommendations, for example, we need to know more about the universe of startups. Are they more prominent in some sectors than others? Does the impact of new companies differ across sectors or geographic regions? Should policy focus on encouraging more new firms, or on enhancing the growth of those already in existence? How would any such policies affect established companies, large and small?

Policymaking around entrepreneurship is evidently not clear-cut as there is still quite a bit we do not understand regarding startups. In the coming weeks we will try to explore these questions and illuminate the world of startups for policymakers. We’ll start with the lowest-hanging fruit of all, though one that may seem like poison to some in Washington: immigration.

It’s commonly accepted that the United States is a nation of immigrants, settled and populated by those fleeing persecution, seeking commercial opportunities in a new land or looking for a fresh start. We have always recognized the important contributions of immigrants to the U.S. economy, from entrepreneurs like Samuel Slater (textile mills) to Andrew Carnegie (steel) to Andy Bechtolsheim (Sun Microsystems) to the laborers and workers who built this country with their hands.

Recently, researchers have begun to paint a broader picture of the economic role of immigrant entrepreneurs. For example, Vivek Wadhwa and his research team have found that, from 1995 to 2006, fully one-quarter of new technology and engineering companies in the U.S. were founded by immigrants. In Silicon Valley, the figure was one-half. These firms constitute only a sliver of all companies, yet contribute an outstanding number of jobs and innovations to the economy.

It makes sense, then, that if we are seeking to increase the number of new companies started each year in the U.S., we might look to immigrants. It turns out that Sens. John Kerry (D-MA) and Richard Lugar (R-IN) are thinking precisely along these lines, introducing the StartUp Visa Act (PDF) in the Senate. This bill would grant a two-year visa to immigrant entrepreneurs who are able to raise $250,000 from an American investor and can create at least five jobs in two years. Without question, such a visa is a good idea and this legislation hopefully paves the way for future actions that would reduce the pecuniary threshold and focus more on job creation.

Quite naturally, however, the promotion of immigrant entrepreneurs arouses suspicion among those on the right who harbor nativist views, and those on the left who perceive progressive immigration policies as a threat to American labor. Such views take the precisely wrong perspective: immigration, as we have seen, is a core American value. Immigrant entrepreneurs, moreover, come to the U.S. to make jobs for Americans, not take them.

Further, many of those who promote immigration as a way to boost economic growth narrowly focus on “high-skilled” entrepreneurs, those who might start technology companies. Clearly, as Wadhwa’s research indicates, such companies are important to American innovation. But we exclude non-technology entrepreneurs at our peril — every new company, including those founded by immigrants, represents pursuit of the American dream. By closing our borders to immigrants in general or welcoming only those with certain skills, we leave out many who will start new firms in other industries. If not in the United States, they will go elsewhere to start their companies and create jobs.

Entrepreneurs are implicit in Emma Lazarus’ poem: “Give me your tired, your poor/Your huddled masses yearning to breathe free.” Entrepreneurs start from nothing and work endlessly to build their companies, expressing their individual freedom through commerce. Why should we want to exclude them from the home of entrepreneurial capitalism?

ADDENDUM: Ben Wildavsky's new book, The Great Brain Race, will be released soon and I highly recommend it to anyone interested in higher education, globalization, and immigration. It is a fantastically written book and, as noted in the title of this post, Ben posits this wonderful notion of "brain circulation." When discussing globalization and immigration and job creation in the very recent past (and, for that matter, still in the present), we have usually spoken in terms like "brain gain" and "brain drain," implying a zero-sum contest between countries and regions. Ben's book makes quite clear that we are moving into a world of brain circulation, wherein people circulate among countries and institutions, starting companies, creating jobs, propagating innovations--adding to the economies of many countries at once. 

The Great Brain Race

My friend and colleague Ben Wildavsky is a senior fellow at the Kauffman Foundation and author of The Great Brain Race: How Global Universities Are Reshaping the World, to be published in May by Princeton University Press. May 12, Ben tells me.

 

Take a minute to read this excellent summary essay Ben recently published in Times Higher Education.

Here is a long excerpt to whet your appetite:

Long known primarily as the world's largest exporter of students, China is now doing much more to build its human capital at home. In addition to expanding the quantity and quality of its own universities, it is forging partnerships with Western universities that operate programmes in China. And it has lured home some academics who left for the West, but who now find appealing opportunities in newly revitalised universities.

Moreover, China is not alone. The yearning to create competitive universities is also vividly on display in Singapore, which seeks to become a world-renowned educational hub and has brought in numerous Western partners, including the Massachusetts Institute of Technology. South Korea, for its part, is creating what amounts to an academic free-trade zone in a 52,000-acre complex near Incheon International airport, playing host to branch campuses of many Western universities.

Nor is academic globalisation confined to Asia. The lavishly funded King Abdullah University of Science and Technology opened in Saudi Arabia last year, seeking to join the top ranks of world scholarship via alliances with the likes of Imperial College London and Stanford University. KAUST is also taking advantage of the new global talent market, poaching its first president, Choon Fong Shih, from the National University of Singapore.

The book's website is www.greatbrainrace.com. It features a book excerpt, a video interview, links to articles adapted from the book, and several online ordering options. The book has already been endorsed by Judy Woodruff of PBS Newshour, Yale president Richard Levin, Sebastian Mallaby of the Council on Foreign Relations, and Andrew Witty, CEO of GlaxoSmithKline. 

The Great Brain Race tells the story of the transformation of the global academic landscape in recent years. Nearly 3 million students now study outside their home nations; globe-trotting faculty hop from the United States to Singapore to Saudi Arabia; Western universities create branch campuses in the Middle East and Asia; and new or rejuvenated research universities in China, South Korea, Europe, and beyond vie with American giants for the top spots in global education rankings.

 

If you didn't know, Ben was once in charge of the annual U.S. college rankings for a major U.S. magazine. He agrees with me, by the way, that the Air Force Academy is the best all around undergraduate education available. So I guess all this global hubbub is about who is number 2, West Point or Annapolis, right?

 

Final note: Ben did not ask or know about this review. He is a great writer, this is a great topic, and I hope you make an effort to read this great book. To put the topic in context: economic growth is, we now know, fundamentally about ideas and the human capital that adopts and invents them. Globalization is about the evolving network of flowing goods, capital, and ideas. And labor. Growth and globalization cross paths in front of every university. Summed up, a central "battle" for 21st century leadership is the competition for brains. Ben Wildavsky's book could not be more important for America's leaders to understand what is at stake in preserving and expanding our prosperity.

Generational Shift? Fiscal Crisis Plus Global Migration Equals ...

What if they had a fiscal crisis, and nobody came? What if the chump generation figures out the Ponzi scheme? Bob Samuelson thinks the fallout will be political:

... As baby boomers retire, higher federal spending on Social Security, Medicare and Medicaid may boost Millennials' taxes and squeeze other government programs. It will be harder to start and raise families.

Millennials [ages 30 and younger] could become the chump generation. They could suffer for their elders' economic sins, particularly the failure to confront the predictable costs of baby boomers' retirement.

Samuelson asks the question in a political context, and that's how most analysts interpret the looming fiscal crisis, as if young voters will punish fiscally irresponsible representatives in Washington. My alternative theory focuses on the context of immigration. Already you may have heard about the millions of illegals who departed the U.S. when the Great Recession dried up job opportunities. A lot of crass nativists might think "Good Riddance!" but I wonder what they'll say when their own children seek greener pastures abroad in 10 or 20 years?

Consider: almost everyone younger than the Baby Boomers expects to get the short end of the fiscal stick. We were laughing about the unlikeliehood of getting Social Securiyt Checks when I was in high school in the 80s. So now that the reckoning is all but unkickable, do the Boomers think their kids and grandkids will just become fiscal serfs?  Think again.

The consequences of U.S. fiscal calamity will go hand-in-hand with globalization. The world is in the early stages of globalization, but already member states in the EU are feeling the effects of combining tax competition with the right of movement. A 2006 BBC report noted that nearly 10 percent of Britons lived aborad, a million in Spain.  Two emigrant types dominate: retirees and workers!  Here's a more recent report from the OECD

... the share of immigrants in the OECD population almost doubled from just over 4.5% in 1975 to 8.3% in 2005. It is also noteworthy that 45% of immigrants living in OECD countries in 2008 came from other OECD countries.

The threat America faces is a world that competes for our greatest natural resource: it's young. If we make the tax climate hellish, the U.S. is going to suffer outmigration as places like Canada, Australia, Brazil, Mexico, Chile realize what an opportunity they have to cream our entrepreneurial talent. If we don't, and let the deficit spiral out of control, the dollar will fall and workers will go elsewhere for value reasons. There's already a migratory tension in Europe, waged primarily with favorable tax treatment for high net worth immigrants.

Go ahead and worry about the fiscal crisis of 2020, and worry about its implications across the generations. Just make sure you worry on a big enough scale. We all know that globalization will deepen, and the national borders that seem so tall and vital today will look more and more like borders among the 50 states of yesterday. Remind me again, how difficult does Texas make it on fleeing Californians to move in to their state?

Why Denigrate Chile? A Tale of Two Charts

Paul Krugman just can't stand the praise being given to Chile's liberal economic reforms of the last 30-40 years, so he is denigrating them. Why would he do that?  He claims the economic liberalization in Chile is nearly mythical, and uses the following chart as his key piece of evidence.  It's scandalously misleading.

 
That chart does not jibe with my own experience following Chile's development, especially in contrast to other Latin American economies. And note the source: Total Economy Database. Why not use the Penn World Tables, or World Bank data? Paul's data says Chileans are just 15 percent wealthier than they were in 1970. The PWT Mark 6.3 indicates they are 161 percent wealthier. So who do you trust: the global standard for cross-country economic comparisons or the Nobel prize-winning NYTimes blogger?

Even my kids know the answer. Just look at the wikipedia entry on Chile's economy, and you'll find this chart:

 
For the record, anyone who travels in Latin America can attest that little Chile's role as a model is not what you might expect. Neighboring nations still like to think of Chile as their poor sibling, and pretend that its economic success does not exist. It's time to take off the rose-colored glasses.

UPDATE: The chart Krugman uses cuts off in 1991, so it's not the data source that's misleading. It's chart trickery with the X axis, a Tufte favorite.

Why Should Complexity Imply Fragility?

Last week historian Bryan Ward-Perkins authored an interesting Financial Times op-ed in which he compared the present recession to the post-Roman Empire economy in the British Isles. Conditions then, needless to say, were "extremely bleak." Part of the reason for this, wrote Ward-Perkins, was that there was such a long way to fall from the advanced Roman economy. Going further, however, he explicitly links the collapse to the level of advancement--no matter what type of wings Icarus wears, he will always fail simply because he flew so high and close to the sun.

"Almost certainly the suddenness and the catastrophic scale of the crash were caused by the levels of sophistication and specialisation reached by the economy in Roman times. The Romano-British population had . . . relied on widespread markets to sustain their specialised production. When insecurity came in the fifth century, this impressive house of cards collapsed."

Well, there you go: an economy can only push Adam Smith so far. Apparent market sophistication--trade, division of labor--will eventually (and, seemingly, inexorably) become a weak structure, vulnerable to the slightest perturbation, upon which it will collapse:

"The more complex an economy is, the more fragile it is, and the more cataclysmic its disintegration can be."

That second clause seems pretty valid: the higher you fly the further you fall. But I think it's actually quite arguable, and the reason is because the first clause, Ward-Perkins' main point that complexity increases fragility, is wrong. It makes intuitive sense, of course, and the house of cards analogy misleadingly reinforces that intuition. The more cards you add, after all, the more fragile that house becomes; everyone knows that.

But a complex economy is not like a house of cards. Much of the complexity research over the last thirty years or so--however you may judge its worth en toto--has demonstrated the robustness of complex networks. And, as readers of Joseph Tainter know (I assume Ward-Perkins has read Tainter), there is little reason to think that a complex society like Imperial Rome, having weathered many different stresses over several centuries, should all of sudden turn to a house of cards because of the very complexity that made it strong in the first place.

To argue that complexity is equivalent to fragility requires you to increasingly argue backwards for why complexity turns from strength to weakness. The ultimate cause for the collapse of complex societies, as Tainter showed, is not their complexity. It may end up being a proximate cause or contributing factor, but not the ultimate reason. The reason, in Tainter's telling, is the marginal returns curve: at some point, a society's investment in complexity may yield diminishing marginal returns. When and if collapse does occur, moreover, it is not necessarily a bad thing; to be sure, it may bring all sorts of negative consequences. But, if the marginal returns hypothesis is correct, then the disintegration of a once-complex society into several simpler constituent parts should reset that curve and yield, once again, increasing marginal returns. People may be better off and, in many cases, actively choose to dissociate from complexity.

It's easy, of course, to argue too far in this vein and rely wholly on the supposed robustness of complex systems as a reason why they should perpetuate themselves. The reason complex systems persist and survive shocks is not their innate robustness; it is that they contain deep wells of potential adaptations (exaptations). It's also tempting to ascribe too much worth to complexity in and of itself. In social science and many of the natural sciences we continue to equate "complex" with "better," "simple" with "worse." The notion of progress up a ladder of complexity is seductive, and underlies the arguments of both avid proponents of complexity and those, like Ward-Perkins, who see the danger in too much sophistication.

Picturing Emissions

Great chart from the WSJ today on emissions from the largest nations.  Which do you prefer: per capita, per unit of GDP, or sum total?

Growthology prefers "per capita," because that's the category where the U.S. ranks highest.
 

Remember When Twitter Overthrew a Religious-Military Dictatorship? Neither do I.

At the height of the post-election protests in Iran last summer, American media were abuzz with glee at the prospect that the paragon of utopian social media--Twitter--might actually play a key role in liberating Iranians from tyranny. We discussed this hyperbole-free topic a few times here at Growthology, but it seems that we now have actual evidence (as opposed to fact-free speculation) as to the role Twitter played. And? Quite small:

"[The study shows that such a tiny proportion of Iranians are on Twitter that any stories about a new movement based on the social network are meaningless."

Oh well.

 

What the Future Will Look Like

Via here.

Entrepreneurship Rates Around (Most of) the World: 2005

Two or Three? How many cheers for capitalism?

Peter Leeson evaluates the evidence for capitalism as a development strategy:

My findings are straightforward. The two cheers for capitalism view is wrong. Although many relationships in the social sciences are unclear, capitalism’s relationship to development is not one of them. Unless one is ashamed of unprecedented increases in income, rising life expectancy, greater education, and more political freedom, there’s no reason to be a milquetoast defender of capitalism. This is what sprawling free markets have meant for countries that became more capitalist over the last quarter century. On the other side, there’s no evidence that countries that eschewed the global trend toward freer markets and embraced substantially greater state control performed better on any of these indicators. On the contrary, they performed demonstrably worse. I also find that the two cheers for capitalism variant that desires markets, but “within reason,” is wrong. There is no evidence for a Lorenz curve-type relationship between capitalism and development. Rather, this relationship is linear. Maximal capitalism begets maximal development.

The paper has an educational and entertaining section on the theory of why capitalism works. The soapbox effect gets in the way of the meat of the paper, especially its position early in the text, but I do think it is a very worthwhile section for students. Later parts of the paper are even better. Here, for example, is a nice summary of why exploring income covers most other issues of interest:

Income is highly and positively correlated with pretty much every positive development indicator one can think of (for example, access to a clean water source), and highly and negatively correlated with pretty much every negative development indicator one can think of (for example, infant mortality). There are exceptions. But this strong tendency militates against depicting many of these relationships. Once the relationship between capitalism and income is established, for most purposes it becomes redundant to examine the relationship between capitalism and improved access to a clean water source, infant mortality, and so on. If the reader wishes to verify this for herself, she is encouraged to plot the data and see.

At bottom, this paper uses measures of economic freedom to show correlations with substantive progress. You have to admire Leeson's persistence and share his frustration with the ideology that manifests in the American university mindset which refuses to acknowledge the third cheer.

Bill Easterly vs. the Army

Can the U.S. military help economic growth in Iraq? Afghanistan? Africa? I've been pondering this question for some time. There seem to be a half dozen interesting articles and online debates all of a sudden. But let me start by confessing that I have looked at the historical data. Here's the abstract of a working paper I co-authored with Garett Jones:

The necessity of military force in providing security for nation-building is a common assumption among policymakers and international affairs experts, but there has never been an econometric analysis of the impact of troops on growth. We use a newly constructed disaggregated dataset on the deployment of U.S. troops over the years 1950-2000, and discover a positive relationship with host country economic growth, robust to multiple control variables.

My friend Dan Rice co-authored a WSJ oped today with John Nagl (both West Point grads and Iraq vets). Full disclosure: I am on the advisory board of Rice's Marshall Fund.

American counterinsurgency doctrine recommends that the majority of effort be spent on economic development and governance, not on direct combat operations. To date, however, we have not followed our own advice: The U.S. still spends more than 90% of its investment dollars in Iraq on troops, equipment, weapons and logistics.

True, as security has dramatically improved, U.S. commanders on the ground have expended more than $4 billion in emergency response funds to provide Iraqis with jobs such as street cleaning, repair and garbage collection, and on essential services such as medical care and water treatment. But this pot of money was never intended to create long-term jobs, and commanders are restricted from investing the funds in private-sector enterprises.

As we withdraw from Iraq's cities we must seek to replace our bases with businesses. An enterprise fund for Iraq is a good way to start the process of achieving victory through economic development.

I'm sure Bill Easterly would be skeptical of the Rice-Nagl proposal. He would probably claim that it makes the classic aid mistake of pushing investment. Indeed, Easterly very recently panned the Army Stability Operations Field Manual, touted among some as a Petraeus achievement in counterinsurgency strategy as opposed to conventional seek and destroy:

My usual MO is to ridicule such documents. But my wells of satire are starting to run dry after years of deployment against utopians like Jeffrey Sachs and Paul Collier. More in sorrow than in anger, I see the utopian social engineering craze might affect actions of people with guns. I am sad for Iraqis and Afghans that the U.S. Army is operating in their countries guided by such misguided ideas.

I tend to agree with Easterly that investment funds will flow into impoversihed regions - without an aid push - if the environment is right. And I have mixed feelings about the Field Manual. But I wonder if Easterly is painting with too broad a brush. Can we rule out effort to get the environment right? Some thoughts:

1. There are many different opinions in play in international development, so this is not a simple issue of two ends of a spectrum. Here is an online debate with articles by Collier, Easterly, and others at the Boston Review.Paul Collier diverges from others in the aid universe by calling for an expansive kind of intervention. Easterly, I believe, represents a camp that is skeptical of almost all development efforts. Others share his skepticism of internationalist (e.g. UN, IMF) efforts, but favor American/Western direct interventions. I assume President Obama is in this latter camp, along with many active duty soldiers and myself. Yet even within the military, there are many opinions about how to effectively defeat an insurgency.

2. Easterly is an Africa expert. But is he overapplying the failures of Africa and the futility of aid there to a broader lesson against any kind of intervention?

3. Isn't the real question whether the continued presence of U.S. troops in Iraq will help that country's economic institutions develop? It is discouraging that measures of institutions like the WSJ/Heritage Index of Economic Freedom are unable to score Iraq or Afghanistan.

4. What is up with Africa? Why is that region, in sharp contrast with the far East, stagnant despite the billions of dollars in aid and attention over the last 60 years? Take a look at the book Dead Aid by Dambisa Moyo, an African woman.

Protests = Democracy?

Events in Iran this week have been pretty riveting, true, but let's keep things in perspective: protests are neither equivalent to democracy nor do they automatically lead a country to democracy.

The American media has been breathless in reporting on the newfound power of the people in Tehran, and apostles of the new "social" media see this as sort of the tech version of the Rapture. On NPR this morning, one of the Americans who is commendably allowing Iranians to use his computer as a proxy server to send messages on Twitter averred that this is a turning point in the history of technology and democracy.

It is?

First, on a superficial note, the fact that allegedly doctored photos zip around the Internet doesn't herald a new era of media. Did we really need social media to tell us that Iran is a repressive country?

Second, on a deeper level, this raises that irritating academic debate about what, really, is democracy. As Fareed Zakaria and others have pointed out, there is a major difference between democracy as popular sovereignty, and democracy as constitutional limitations on the scope of government. The latter, "liberal" democracy, is what by and large characterizes the West. The former, "illiberal" democracy, too often gets mistaken for complete democracy. 

The election protesters in Tehran are rightly being hailed for their courage: Iran's illustrious history has been tarnished by repression. But what is it we in the West expect to come out of the protests? Popular sovereignty expressed through mass assembly can often be the enemy of liberal democracy (see Revolution, French or Africa, twentieth century). Let's say, in the end, Moussavi ends up assuming office: do we really believe this will cease all friction between Iran and the West? The Iranian public, if polls can be trusted, largely supports the nuclear program as an expression of prideful nationalism. And it's far from clear how the balance of power among the clerics, military, and "other" politicians stands, or how it is shifting.

There is little doubt that Ahmadinejad has been disastrous for the Iranian economy: per capita income is around $12,000, but this largely reflects oil and gas revenue, and most observers agree that it is unsustainable and unaccompanied by actual economic development. (The separate debate about the relationship between level of income and democracy sort of falters in cases like this.) But it's not clear that the necessary economic reforms will inexorably follow from the fissures of freedom now appearing.

In any case, we should cheer any challenge to oppressive authority. But let's not assume, or pretend, that this represents any sort of triumph (yet) of social media, of democracy, or economic development.