Eye Candy: the Arab world’s administrative divisions

NOL map Arab world admin divisions
Click here to zoom

Imagine if these divisions were all states in a federal republic. Myself, I think some of them,maybe even half of them, could be combined, but if that ever happened, and the resulting combined administrative divisions of the Arab world federated, the region would be in much better shape. (The federation of Arabia would need a Senate, of course.)

What if the OECD did the same? Or simply the US and it’s closest allies?

Revisiting Epstein’s Freedom and Growth

I was fortunate to be invited give the Epstein Lecture at LSE this March. The series is named after the great LSE economic historian Larry (Stephen) Epstein. Here I’ll summarize why it was such an honor to give the lectures. The content of the lecture will be another post.

Epstein was a historian whose origin field of expertise was medieval Italy. I encountered him through Freedom and Growth. Published in 2000, I first read it a couple of years later, perhaps in 2002 or 2003. At the time I was devoted to a story of economic growth shaped by Douglass North, particularly Structure and Change in Economic History (1981).

The focus of Structure and Change was on transaction costs. High transaction costs limited market exchange and kept societies poor for most of history. Sustained economic growth could only occur once transaction costs fell to a level that allowed markets to expand and the division of labor to develop. On this view, market expansion or Smithian growth was itself a stimulus to technological innovation. But what kept transaction costs high?

One answer North gave was the state. To paraphrase: the state had the ability to both keep a society mired in poverty through predatory behavior and to provide the preconditions for growth by securing property rights. The origins of sustained economic growth for North lay in institutional changes that occurred secured property rights and lowered transaction costs. The most important such institutional change was the Glorious Revolution of 1688.

North’s account received many challenges, but the issue that Epstein honed in on was the assumption that there was such a state, able to either revoke or secure property rights. It was assumed that “rulers rule”. Epstein contested this arguing that New Institutional Economists

“project backwards in time a form of centralised sovereignty and jurisdictional integration that was first achieved in Continental Europe during the nineteenth century; they therefore fundamentally misrepresent the character of pre-modern states.”

North, Wallis, and Weingast would address this in their 2009 Violence and Social Orders. But Epstein’s criticism was spot on in 2000. Epstein argued that alongside the problem of predatory states, a central problem was the lack of integrated markets. He attributed market disintegration to coordination and prisoners’ dilemma problems between political authorities. In so doing, Epstein set the agenda for the subsequent “state capacity” research agenda.

Epstein made several points which continued to be expanded upon by current research (see here). First, he documented that the lower interest rates that the British state paid after 1688 were characteristic of city republics from the middle ages onwards. He argued that the English monarchy in the 17th century was characterized by an anomalously backwards financial system. Lower interest rates after 1688 partly represent a convergence to the Republican norm achieved by Italian city-states centuries earlier.

Second, he challenged the argument that monarchies “overtaxed” cities. There was “no evidence that townspeople paid higher taxes under monarchies than republics”. Per capita taxes were likely higher in Republican city-states.

Third, he disputed that Republican city-states like Florence brought economic freedom noting that “republican subjects faced several limitations to their economic and political freedoms that monarchical subjects did not”. All of this challenged generalizations made by historical sociologists like Charles Tilly and economic historians like North.

Epstein’s historical evidence came from medieval Italy. Late medieval Italy was highly urbanized and prosperous by pre-industrial standards. According to Broadberry’s estimates, per capita GDP in Italy in 1450 was not matched by England until 1750. Like growth elsewhere in the premodern world, it was Smithian growth, driven by trade, market integration, and the division of labor. But unlike in England, this Smithian growth did not continue and blossom into modern growth. Epstein’s explanation for why this did not take place was that late medieval Italy suffered an “integration crisis”.

He saw the late medieval period as characterized by new opportunities for growth and innovation. Urbanization increased. Capital markets expanded and deepened. Interregional trade developed. Proto-industrialization took place. But Epstein contended these opportunities were only seized in areas where political authority was centralization.

In reference to proto-industrialization, he observed that

“Crucially, the success of regional crafts was inversely proportional to the concentration of economic and institutional power in the hands of a dominant city.”

With respect to the establishment of permanent fairs, he noted that

In fifteenth-century Lombardy, new fairs proliferated only after the balance of power shifted decisively from the former city-states to the territorial prince with Francesco Sforza’s victory in 1447.

Market integration was complemented and perhaps driven by political integration. Integrated urban hierarchies were themselves the product of political centralization.

“Centralisation underlies all the major institutional changes to market structures previously described. It lowered domestic transport costs, made it easier to enforce contracts and to match demand and supply, intensified economic competition between towns and strengthened urban hierarchies, weakened urban monopolies over the countryside, and stimulated labour mobility and technological diffusion.”

The more centralized parts of Italy — notably Lombardy — were better able to benefit from these trends than was Tuscany. But in general, political fragmentation and regional diversity were “distinctive features of pre-modern Italy” in general and an impediment to its long-run growth prospects.

Unlike in his analysis of interest rates, Epstein brought little data to bear on these claims and I am unaware of subsequent research on late medieval Italy. As such, the thesis of a late medieval integration crisis laid out in Freedom and Growth remains speculative. Epstein would no doubt have fill in the details had he lived longer. Subsequent research has mostly focused on early modern rather than medieval Europe (see here).  But the larger message: the importance of the state for premodern economic development has been central to subsequent research, including my own work (e.g. here).

10 Greatest Speeches of All Time

That’s the topic of my latest column over at RealClearHistory. Obviously, I took a break from my World War I-themed posts to do this one. Here is an excerpt:

4. Duty, Honor, Country speech by Douglas MacArthur: May 12, 1962. General Douglas MacArthur was a divisive figure in his day. For many, he was too martial for a constitutional republic, too outspoken for a General, and some of the policies he argued for (foreign and domestic) were a bit too hawkish for my stomach. William Manchester’s biography of Douglas MacArthur, American Caesar, helped show me how important republican governance was to the General, though. MacArthur thought deeply about republicanism and the effects that war had on a republican citizen’s virtues and characteristics. I have the slight advantage of having Manchester’s work on MacArthur etched into the back of my mind while reading through the latter’s speech, given to cadets at West Point two years before his death: “His name and fame are the birthright of every American citizen. In his youth and strength, his love and loyalty, he gave all that mortality can give. He needs no eulogy from me; or from any other man. He has written his own history and written it in red on his enemy’s breast.” You can read the whole speech here.

These columns are aimed at a different crowd that what I am used to here at NOL, but I think I do a pretty decent job of weaving rather mundane topics (great speeches from an American point of view) into the fabric of more fundamental questions about our global society. Read the rest to find out if I’m way off the mark on this one.

North Korea, the status quo, and a more liberal world

The tension on the Korean Peninsula can be felt throughout the entire Pacific Rim right now. North Korea, a dictatorship with a shaky grasp on its populace, has nuclear weapons and is launching non-nuclear missiles over Japan and threatening South Korea and the United States. To make matters worse, the only state in the region that Pyongyang deems worthy of dialogue, China, refuses to engage in much multilateral work to defuse the situation.

If I were South Korea and China I would have an advanced missile shield system right on the border of North Korea, and if I were Japan I would have an advanced missile shield system spread all along my massive coastline. However, China is engaging in trade sanctions against South Korea for trying to build a missile shield along it’s border with North Korea, ostensibly because such a missile shield would threaten Beijing’s territorial integrity. This is a huge strategic mistake on China’s part. North Korea is ruled by the son of a brutal dictator who is in the midst of remaking the People’s Republic in his image. Pyongyang is launching missiles over wealthy democracies and threatening perceived enemies with nuclear annihilation. China is ignoring all of this, and undertaking policies designed to underwhelm multilateral efforts at containing North Korea because Beijing wants North Korea to serve 3 purposes: 1) a useful buffer state (but read this), 2) a hostile reminder that it considers Taiwan as part of China, and 3) as a good bargaining chip when dealing with the United States in the region.

Given that the United States is not geographically a part of East Asia, and given that Washington figures prominently in not one, not two, but all three major reasons why China refuses to engage robustly in more multilateral actions against such a destructive neighbor, we must ask ourselves: Why is the United States still in South Korea? The answer is that Koreans want them there.

Check out the latest results of a Pew Survey asking people what they think about the United States:

blog Pew American 2

75% of South Koreans have a favorable or somewhat favorable view of the US even after the election of Donald Trump. That’s higher than the other baseball-friendly countries like Italy (61%) and Japan (57%), and much higher than next-door neighbor Mexico (30%) and longtime NATO partner Germany (35%).

China is wrong to believe that an American withdrawal would suddenly make North Korea a breezy member of the international community of states. Kim Jong Un’s regime depends on foreign enemies to survive. James Madison put it best:

The means of defense against foreign danger have been always the instruments of tyranny at home. Among the Romans it was a standing maxim to excite a war whenever a revolt was apprehended. Throughout all Europe, the armies kept up under the pretext of defending have enslaved the people.

North Korea would bully Seoul and Tokyo and cajole Beijing even moreso because Washington would not be there to bear the burden of Liberal Hegemonic Boogieman.

But I’m not a Chinese citizen and this is a post about a more liberal world, so I’d like to switch gears and focus on something that all libertarians are secretly obsessed with: money.

What kind of deal is the US getting by having troops stationed along the 38th parallel? I know the US is a target of a dictator’s nuclear arsenal because of troops along the 38th, and I know the US has to expend considerable resources on the Korean Peninsula to protect Seoul, so costs are understood, but what about benefits? What about payment? What does US get in return for protecting South Korea?

Trade – a big aspect of libertarian foreign policy – is not that big of a deal for either country: the United States makes up about 14% of South Korea’s exports, and South Korea makes up nearly 3% of the United States’ exports. This means that China, for example, is a larger, more important trading partner to both countries than either is to each other.

One of the benefits I’ve found is South Korea’s participation in multilateral military actions undertaken under the umbrella of US military leadership. South Korea has provided troops for dozens of current UN missions in sub-Saharan Africa and post-British Asia, and also participated in the US-led invasions and occupations of Afghanistan and Iraq (Seoul’s troops left Iraq in 2008 and Afghanistan in 2014). I also learned that South Korea deployed 325,000 soldiers to South Vietnam from 1964-1973, losing roughly 5,100 soldiers and welcoming home another 11,000 wounded soldiers.

Seoul’s participation in Vietnam was a shocking discovery for me. It forced me to reassess America’s relationship with South Korea. The status quo is actually a decent trade-off. The status quo is cooperative, not coercive. The status quo isn’t so bad from a libertarian standpoint: There is a trade-off with mutually beneficial exchange involved, there is a cooperative rather than coercive relationship between both sides, and tens of millions of people are freer than they otherwise would be because of it.

We can still make the alliance marginally better, though. We can still take small steps to a much better world. Consider federation between the two countries.

On the face of it, such an event is ludicrously radical and completely anathema to liberty and cooperation. I would have had the same reaction just a couple of years ago, but two books have fundamentally changed my mind about this: Daniel Deudney’s Bounding Power: Republican Security Theory from the Polis to the Global Village and David Hendrickson’s Peace Pact: The Lost World of the American Founding. Both scholars are American political scientists and, as far as I can tell, card-carrying Democrats.

Deudney’s book uses theory and history to show that, among other things, republican security theory is, and always has been, from antiquity to the present day, the most important question that scholars of international relations have had to grapple with. For centuries, republics started out with the best of intentions, the best of circumstances, and always managed to decay into despotism or succumb to conquest by neighboring despots. The United States, Deudney goes on,  managed to get out of this trap through federal union and, because of its peculiar geographic situation, a full-fledged republican security bargain was able to come to full fruition.

Deudney bases this part of his argument on Hendrickson’s little-known but immensely persuasive book. Hendrickson argues that the newly independent 13 states and their eventual federal union should best be viewed in an international relations framework. In order to protect themselves not only from powerful empires but more importantly from each other, the 13 states entered into a federal union that held them responsible for a limited number of shared responsibilities (such as international security and ensuring republican government in their domestic realms) and left plenty of space for each of them to exercise policymaking as they saw fit. In order to avoid a race to the bottom – where the 13 states formed security blocs between themselves and used Spain, France, and the UK to undermine their rivals – the 13 states built, piece-by-piece, a cooperative international system and called it a federation.

With America’s domestic liberties under increasing assault, largely because the current situation places so much emphasis on certain checks and balances over others, adding additional “states” in the form of South Korea’s provinces would breathe new life into all of the institutions necessary for both security and republican domestic governance.

The inevitable Korean bloc

The biggest fear that such a federation would bring about is the fear of a Korean bloc, or the disintegration of the precarious balance of power between the two parties in the US. Although partisans on both sides no doubt loathe that their side is even with the other in terms of influence and numbers, most Americans are very happy with the two party status quo (if they weren’t happy there would no longer be a two party status quo).

Admitting 5 to 7 new “states,” former Korean provinces, makes it seem like this delicate two party balance would be quickly destroyed with the advent of a Korean bloc which has no interest in traditional American politics. I assure you there would be no Korean bloc. Look at the most recent Korean elections:

blog korea elections map
You’ll notice there’s 5 parties instead of 2 like in the States. That’s because South Korea uses proportional representation whereas the United States uses the FPTP system. The end result of both systems is the same: a center-right bloc and a center-left bloc. In South Korea’s case, the red and the grey districts are right-wing, and the other three colors are left-wing. (source)

There is a Left-Right divide focused on policy and to a lesser extent ideology rather than an ethnic one, just like here in the States.

The Korean Left would line up nicely with Democrats (it even has an anti-American streak that isn’t anti-American at all, only anti-GOP, just like the Democrats!). The conservative wing of South Korea might form a Korean bloc but it would be ineffective in the House and Senate because of its small number.

Libertarians are often dissatisfied with the status quo, even though they’re often the first to point out that life in Western states continues to get better and better. The status quo relationship between South Korea and the United States is great. But it could always be a little bit better.

Lunchtime Links

  1. Trophy-taking and dismemberment as warfare strategies [pdf]
  2. optimally vague contracts and the law [pdf]
  3. Germanic and Carthaginian republicanism
  4. traditional resurgence in tropical Africa [pdf]
  5. crisis bureaucracy: homeland security and the political design of legal mandates [pdf]