Freedom Fries

Thanks again to the BBC's this day in history feed, I learned that the Battle of Agincourt took place in October. This battle, who is now remembered thanks to Shakespeare's Henry V, allowed England to achieve its maximum expansion in French lands. In some circles, it has been used to mock the French and their seeming inability to win wars, specially when compared to the English and Germans. I was once witness of those jests, and frankly, I thought it was wrong. I don't object the mocking of the French. I guess I don't object the mocking of anyone, specially when they take their nationalities too seriously. I disagreed with this mocking because, in this case, the stereotype does not have the slightest grounding on fact. Is as if they were mocking Italian or Jewish mothers for not being sufficiently protective of their kids: it makes no sense.

This whole prejudice has been based mostly by the disaster of May 1940, when the Germans invaded France. However, except for that event, the French military history is one of the most complex and interesting out there. And for Americans even to mock them, it takes an incredible dose of ingratitude or ignorance.

Let's start first with Agincourt. Yes, it was a French military disaster. However, while they lost that battle of the Hundred Years War, they won the last one, at Castillion. At the start of the war, the English crown controlled about half of modern France; at its end, the French king controlled pretty much all of France. The Hundred Years War, while costly, was a near total victory to the French.

Then, when Charles I of Spain became also Charles V, Holy Roman Emperor, France would become surrounded by the hostile Hapsburg powers: to the North, Spanish Flanders (modern Netherlands and Belgium); to the East, the Holy Roman Empire and the Spanish Franche Comte, to the Southwest, the new Spanish superpower. Charles V had the first worldwide empire, with his American, African and Asian possessions (with Phillip II, the Portuguese and Spanish crown would be briefly united, giving the Hapsburgs their colonies as well).

France would then follow a policy for self preservation that would eventually take them to European supremacy. While the kings were Catholic, they fueled the Protestant revolts in the Holy Roman Empire, undermining the Austrians. Ironically, this policy was advocated and implemented by two French princes of the Catholic Church (or Cardinals): Cardinal Mazarin and Cardinal Richelieu. Cardinal Richelieu would be the one to coin the term raison d'etat to justify these policies.

As a side note, while helping Protestants abroad, Cardinal Richelieu crushed the Huguenots, French Calvinists, at home. Their main stronghold, La Rochelle, fell in spite of help from the English. Many Huguenots would emigrate to the English American colonies and found the city of New Rochelle, in New York, where I live.

Coming back to the French, they consistently made war with the Spanish, weakening them. They even supported the Turks, a non-Christian nation, to further their European ambitions. Eventually, Spain, after fighting their Eighty Years War, which ended with the independence of their northern Flanders provinces (the new Dutch Republic), stopped being their menace. France had become the prevalent power in Europe. All the courts of Europe would speak French. And, in came the most magnificent despot history ever knew: His Most Christian Majesty, Louis XIV, King of France and Navarre, the Sun King.

The builder of Versailles was the best example of the enlightened despot. Great patrons of the arts, but absolute in power and believer on the divine rights of the monarch. During his reign, a totally fortuitous event would insure French supremacy for years to come. In Spain, Charles II, the mentally retarded king, died without an heir. The natural heir was the son of Maria Teresa of Spain: Louis the Grand Dauphin, the son of Louis XIV, and heir to the throne of France. This would have meant the union of the crowns of Spain and France. The first one in decadence, but with the largest ultramarine empire; the second one, the most populous and powerful country in Europe. Naturally, this was something that the rest of Europe could not accept, lest they all became eventually French subjects. Therefore, the first real worldwide conflict happened: the War of Spanish Succession.

While the war prevented the union, it did show that France would then, from then onwards, be the supreme power in Europe, and thus the world. Spain would be under the rule of the French royal family, the Bourbons. To this day, the kings of Spain bear that family name.

The French, as the most important continental power, had to have a large standing army. As a sign of that power, Versailles, the seat of the French kings, was built without military defenses. No foreign army was to get there. Louis XIV never thought that it would not be an army, but a Parisian mob, one that would breach his precious palace, kidnap the royal family, and eventually kill them all.

Anyway, in 1778, the English were confronting this revolt in their American colonies. Benjamin Franklin convinced Louis XVI to give the rebels support. France's intervention made the United States of America's existence possible. What greater gift than that one? Since then, the US has had in France their longest friendship. With the British, while they share the language, they went to war again in 1812; and if they hadn't passed a naval limitations treaty, they might have had another one between the 2 world wars.

The French would then kill their royal family and become the first communist state. The French Revolutionary Wars would start after that. Fortunately for the French, (1) they would win that war and (2) the communist (or Jacobin) terror, aptly called "The Terror", ended by the beheading of the mastermind of that insanity: Maximilien de Robespierre. The short and happy interbellum, the Directory years, ended with the rise of Napoleon, and then the Napoleonic Wars would ensue. In 1805, after the defeat in Trafalgar, Napoleon then knew that defending the French massive possessions in America would no longer be possible. Rather than surrendering them to the British, whom he hated, he sold them to the Americans. Thus happened the Louisiana Purchase.

So, no freedom fries for me. Give me the French version (even though they are originally from Belgium). When mocking the French, mention the stupidity of headbutting an opponent in front of a referee during the World Cup final match. But, don't call them surrender monkeys.

Zama

I just added this "On this Day in History" feed from the BBC into my blog. I am happy about that. I would not have known that Zama happened on an October 18. This event has, I believe, no real parallel in history. Zama was the culmination of a decades long conflict between the 2 great superpowers of the time: the well established Carthaginian empire, and the dynamic Roman Republic. To come up with a modern analogy, is as if NATO and the Warsaw Pact had gone to war at the apex of their power. Never in human history, has there been a titanic struggle for world domination like the Punic Wars. At stake was the dominion over the Mediterranean. The Greeks were already second rate powers, the future spoils of the winner.

The second Punic war, whose name was derived of the Latin naming of the Carthaginians, "Poeni", or Phoenicians, had some of the great dramas of human history: the epic of Hannibal Barca and Publius Cornelius Scipio Africanus.

This war gave the opportunity, in my not so humble opinion, for the greatest generals in ancient history to combat each other, and created the legend of Hannibal. This Carthaginian general was raised with hatred towards Rome, the upstart Latin Republic that had taken Sicily from Carthage in the First Punic War. He would then conquer Iberia (Spain) for his country, and from there, take an army with elephants through the Pyrenees, fighting through Gaul-infested lands (modern southern France), crossing the Alps, and finally falling on Rome's legions to utterly defeat them in Trebia (20,000 Roman losses), Lake Trasimene (30,000 Romans killed or drowned and 10,000 captured), and Cannae (76,000 Romans killed). The magnitude of these feats and the crushing victories on the several consular armies would have dealt a death blow to any city-state. In 2 years, one man and his army had been responsible for the death of over 120,000 Roman citizens in arms. After such massive losses, Hannibal ad portas would always become a phrase to describe a great calamity and fear. The word cannibal, it is said, derives from his name.

But this is where Rome showed its true character, and decided to show that they were destined to shape history and not be shaped by history. In my mind, while reading Polybius and Livy about this moment in human history, I cannot but find admiration in the leaders and spirit of those Romans. In spite of having lost almost everything, they did not give up. They raised another army. For years, the army would not present battle to Hannibal in Italy, but they would harass him and deny him victory. They learned. And then, the son of the Roman general dead in Spain, Publius Cornelius Scipio, came to age.

Scipio would not fight in Italy, but take the war directly to the enemy. First in Spain, where he conquered, and then in northern Africa, the seat of Carthage. At his arrival in Africa, the Carthaginians recalled Hannibal from Italy. Without fighting Hannibal in Italy, he had finally liberated Rome from its hated enemy.

The conclusion of this epic would take place near Carthage, in Zama. Two equally matched forces, two geniuses as generals. The two met before the battle, yet they could not agree to an armistice. If you read this in fiction, you would dismiss it as incredible. Yet, it happened. Scipio won. Thus, Scipio, the Roman general that would never lose a battle, defeated Hannibal, the most creative military genius of the Ancient world. For this, he would be given the cognomen Africanus. Scipio would end his life in a self imposed exile, reviled by a Senate that distrusted and would continue to distrust great men.

Carthage sued for peace afterwards. Its territory was reduced to the vicinity of the city itself. It's fleet dismantled, it would rely only on commerce. However, after so much hatred, Rome would also show eventually its darker side. Fifty years after the end of the Second Punic War, Rome would declare war on Carthage again, worried of the wealth created by its flourishing commerce. Carthage would be burned to the ground. Carthage would be no more.

A New Isolationism

As the relative economic strength of other countries in the world increases, the United States will have to rethink its international role. For example, the US economy is about 4 times larger than China’s. But, its military spending is almost 10 times larger than China's, the next country with the highest military spending. While the US wants to have the best military in the world, I am not sure of the objectives that such military spending want to achieve. For the United States, a new isolationism may be necessary.

The main reason for the military is to defend the homeland, deter foreign attacks, and provide some political leverage when negotiating with other countries. However, besides the military presence in Iraq and Afghanistan, the US has troops in Germany, South Korea, Japan, Kuwait, Italy, the UK, Bahrain, Qatar, Cuba (Guantanamo Bay), Spain, Turkey, Iceland, Pakistan, among others. A lot of this is just a residue from the Cold War. Why else then have so many troops in Europe, if the Soviet bear is no longer a threat? Actually, once the USSR disappeared, it is not clear to me what NATO’s mission is.

Once it ended, the world suddenly awakened to just one superpower. The mission creep started. The US fell into the Wilsonian temptation, and decided that they were going to be a military force for good. Down with human rights abuses, down with dictators and absolute monarchs! Viva self determination! The US had to rule the waves, to keep commerce going on, thus a massive navy. It became the arbiter of last resort in regional conflicts, so it developed a highly trained professional army to be easily deployed. The US defense spending dropped, but not by much. September 11, 2001 changed all that. Spending has rocketed again.

In the meantime, our NATO allies felt that there was no threat from the Russians, so they dropped their military spending. Even the new joiners to the EU and NATO, Poland and the Baltic states, with whom I share their deep hatred of communism, felt protected by this pusillanimous NATO alliance, so they haven’t spent in their own defense like they should. Nowadays, the US is now in this uncomfortable position where it is guaranteeing the defense of half of the world, but getting gratitude from almost no one. After all, the world sees the US as an empire, whose works are part of its duty, so no gratitude needed.

Ironically, the only military operations that can be fully justified in national security grounds are those in Iraq and Afghanistan: and those proved to be the most contentious. However, I don’t want to discuss these wars extensively, as it distracts from my current point: the US needs to extricate itself from most of these complex military arrangements and alliances. Even if the US decided to keep the defense spending, it could be directed towards research and intelligence gathering, rather than useless deployments abroad.

Let us take, for example, South Korea. If South Korea cannot create armed forces capable of withstanding an attack from the People’s Republic of Korea, they really deserve to be invaded. Just look at the picture below to see the relative wealth of the two countries. The US keeps 40,000 troops in South Korea to protect it from its famine-prone northern neighbor.

I think that withdrawing all the troops from South Korea and establishing diplomatic relations with the north would be the best policy:
(1) It would force the South Koreans to arm themselves some more and create an additional counterbalance to China
(2) It would take away the threat to North Korea, giving them incentives to abandon their nuclear program
(3) It would force the Japanese to rearm and to seek more cooperation from North and South Korea, creating a further counterbalance to China
(4) It would take away the need for the Chinese to support the PRK’s nuclear program. A nuclear PRK would then become more of a problem to China than to the US.

Now take NATO and the recent situation in Georgia. I really feel for Georgia. It really looks like Czechoslovakia in 1938. If you change the names of Abkazia and South Ossetia for Sudetenland, then the analogy is obvious. However, what possible benefit is there for the United States by defending this Caucasian country, no matter how democratic? Since when did the protection of an ideology, democracy, became a strategic interest? Ideology in the world of the XX and XXI centuries is what religion was to the Europe of the XVI and XVII century.

Lastly, take Taiwan. We have been having, since the Nixon administration, this ambiguity regarding Taiwan: one China, two systems. Over time, this will become unsustainable. Taiwan had many chances to become an independent nation and refused: either because of a hope of a change in the mainland, or because of a fear of China’s reaction. This window is now closed. China will eventually take over this island. Will the US go to war with the future great economy of the world for a Chinese-speaking island that never voted for independence anyway? Will this be the Punic War of our times? If so, I just hope that the US is not Carthage.

The benefits of this new isolationism I hope will be the following:

(1) A more assertive European Union, which will be forced to arm itself fully once it’s bullied an inch too far by the Russians. This will create another counterbalance to the great Chinese threat that will naturally gravitate towards the US, as it ascertains that the US no longer has “imperial” ambitions.

(2) More balance in the Pacific basin, with a rearmed Japan, South Korea, India and the US Pacific Fleet. I would expect North Korea to become a non-player over time, as it becomes the sandwich filling between South Korea and China.

(3) A less hostile Russia, as the US troops leave its "near abroad." However, if lucky, we can get a few more former Soviet satellites getting armed to their teeth and become independent not only by right, but by force. Eventually, this may be the seed of a more effective alliance of Western democracies.

(4) Smaller US defense spending, resulting in, I hope, less deficit spending.

The Tax Cost

So, in this presidential campaign the tax issue seems to be cursorily addressed. Beyond Joe the Plumber™'s tax bill, the discussion has been quite empty of substance. Again, this is an issue where McCain could have had a massive advantage, had he done his homework. There are several questions that a conservative politician should be able to answer regarding tax policy:

Q: What are income taxes for?
A: Income taxes are an imposition that the state creates on the people it governs to finance its activities.

Q: What income taxed should not be for?
A: Income taxes should not be used for wealth redistribution, to "spread it around", to do social engineering, to do welfare, or to subsidize businesses. This just creates a complicated set of tax codes and regulations that results in an additional tax. Only corporations big enough to pay for tax lawyers and accountants can navigate through the labyrinth of tax regulations. As always, Joe the Plumber™ won't be able to pay for all that and end up paying more than it should.

On this, I will elaborate a little further. I downloaded the US Tax Code and did a word count. Here's what I got:

8,590 pages

3,692,671 words

18,738,328 characters (no spaces)

450,767 paragraphs

489,619 lines

ASCII text file's size was 26 MB

As a comparison, the King James Bible, the Protestant standard of the Bible in English, has 783,137 words and 3,566,480 letters. The tax code is 5 times longer than the King James Bible! Worse, there are no stories, so it is not as entertaining. Well, maybe it is as entertaining as the Bible's book of Numbers. To comprehend that incomprehensibly massive piece of work we have developed a bureaucracy inside and outside the government. Checking at the IRS 2008 budget, this organization will spend in taxpayers' guidance and enforcement about $6.93 billion on 2008 out of a $10.9 billion budget. I don't know how much of that would be saved if we had a simpler tax code. Even if $6b is not a lot of money in US Government talk, a billion here, a billion there and pretty soon you're talking real money. However, that is not all the tax that this tax code creates. I checked the statistics of three of the Big Four accounting firms: PWC, KPMG, Deloitte, and E&Y. Using a very rough approximation I estimated their tax practices' revenues in the US approximating to $3 billion per firm, or $12 billion for the Big Four. Say these guys have 80% of the market, so, I am guessing $15 billion a year industry. This is without including tax lawyers whose revenue I haven't estimated. Additionally, we are training a bunch of people in colleges and universities around the country to deal with this creation of government, taking them away from other areas in which they would produce a more desirable output for society: doctors, engineers, entertainers, etc. That additional opportunity cost adds up to real money.

So, for a second imagine a tax code with zero corporate tax rate and no deductions beyond a large standard deduction. Capital gains taxes, with the base price being indexed by a deflator, would be lumped with ordinary income. Now, that would be simple, easy to monitor, and fair regardless of the progressive tax rates that the government undoubtedly would have to implement. Maybe John Lennon should have written "Imagine" for tax codes instead of peace in the world: he would have helped more.

I included an elimination of corporate income tax, as it makes no sense: corporations are not people. The outlays from these corporations to the people in form of compensation, dividends and share purchases should be the object of tax, which anyway would be lumped into the person's ordinary income.

Intellectual Sloth

One of the things that troubles me about this presidential campaign is the Republican abdication of coherent thoughts when making arguments. I don't know where this party is getting its leaders, but it is not getting them from the right pool. Is it too hard to ask, from a nation of 300 million people, for the presidential candidates of both parties to articulate and defend their ideas? McCain's performance has been pitiful at best, and it sometimes makes me wonder whether he is a small government conservative at all. Into this is what the party of Frederick Hayek's and Milton Friedman's ideas have degenerated?Let's look at the last presidential debate. There was a question on health care. That was a reasonable question, considering it is in the thoughts of a good portion of the electorate. How is it possible, given that health care has been an electoral issue for close to a decade, that McCain could not counter Obama's scheme? Is it so hard to defend a market-based health care system?

I tend to support McCain's elimination of the deduction for employers that provide health care coverage. The reasoning is simple: By forcing the patient to find health care coverage tailored to his or her needs, the resulting negotiation will most likely involve higher co-pays. However, over time, this will create incentives for the patients to shop around, resulting in a downward pressure on health care costs. Over time, costs will go down, and more people will be able to afford health care. Let's remember, the problem with today's health care is not that it's bad. The US has the best medical infrastructure in the world. The problem is that the costs are too high. Now, when the patient, who generally is part of the insured population, goes to a doctor, he doesn't care about finding cost-efficient ways of doing things, because the insurance pays. Therefore, the insurance claims are larger, resulting in higher premiums. Anyway, I digress.

There have been questions on the current financial crisis. It boggles my mind that McCain suspended the campaign to address the issue, yet he has not come up with an intelligent way of talking about it. Again, I think Obama has it wrong, but that is no excuse for the Republicans lack of a coherent response. In this case, if you want to be a serious conservative statesman, your first explanation to the public is that we need to tackle the causes of the problem, not the symptoms.

So, what, in my not so humble opinion, are the causes? Regrettably, I think that the politician which is nearest to the truth is Ron Paul. I say regrettably because I think that his gold standard idea is lunacy, putting under the spell of that nonsense a lot of his wonderful ideas.

(1) There was a market distortion: credit was too cheap, cheaper than what its risk adjusted value should have been. That is why we were going from bubble to bubble, as the money was going from one asset class (tech stocks in the 90's) to another asset class (real estate in the 00's).

(2) The distortion was caused by lax monetary policy. The Fed's mandate to develop policy to promote growth and price stability is akin to having a diet to promote weight loss by eating more calories and doing less exercise.

(3) The real estate asset bubble was compounded by Fannie Mae and Freddie Mac mandates to provide liquidity for the mortgage market. This problem was made worse recently by the present Congress when, as the sub prime crisis developed, they actually LOWERED their regulatory capital and expanding their mandate, making them more likely to default.

(4) So, as credit cheapened, it was profitable to come up with more complex structures to provide credit, so this MBS and ABS market flourished and infected the balance sheets of a good deal of the financial institutions.

So, is the solution to cap executive compensation? Is the problem "greed"? Sen. McCain decided that the problem is human nature: greed. I have no clue how you can regulate that.

This is evidence of a serious degeneration of the Republican Party. Conservatism will not flourish if the representatives of its ideas scoff at eloquence or defense of the ideas as elitism. After all, the founding fathers, the conservatives on whose shoulders Republicans stand, were the elite of this country, and created a system of government that restrained the passions of the mob. Populism and Republicanism, on average, should not mix.

Republicans need serious training on debating, economics, and government. Their so-called "Reaganism" sounds more like a religion than a political philosophy. Now, Republicans will have to go back to zero and explain, to a new generation of Americans, why a smaller government is better than a big one, and how market-driven solutions are better than centrally planned ones, in the context of the citizenry's present problems: economics, health care, and social policy.