Voice

The puzzle of private sector research

There's a lovely passage in John Le Carré's The Secret Pilgrim in which George Smiley explains why governments don't simply rely on open source information instead of spending gazillions on their own intelligence operations:  "governments, like anyone else, trust what they pay for, and are suspicious of what they don't." 

Oddly enough, in studying the global political economy, the sentiment often works in reverse in the academy.  Scholars, understandably, tend to prefer open source research while looking askance at private sector work that requires $$$ to unlock. 

I'm genuinely on the fence about this kind of question.  In writing about sovereign wealth funds, for example, I found the private sector stuff far superior on the empirics to the open source research.  The private sector stuff is also usually published before academics enter the breach (a good rule of thumb for aspiring IPE types -- if your literature review consists mostly of corporate research, then you are ahead of the academic curve on a new issue area).  On the other hand, the private sector work often lacked the analytical bite of scholarly work.  For some of it, I could not escape the sense that someone was trying to sell me something. 

I raise this conundrum because Martin Wolf's latest column is essentially a precis of a Goldman Sachs report that requires cashy money to read.  Wolf's summary: 

The paper points to four salient features of the world economy during this decade: a huge increase in global current account imbalances (with, in particular, the emergence of huge surpluses in emerging economies); a global decline in nominal and real yields on all forms of debt; an increase in global returns on physical capital; and an increase in the “equity risk premium” – the gap between the earnings yield on equities and the real yield on bonds. I would add to this list the strong downward pressure on the dollar prices of many manufactured goods.

The paper argues that the standard “global savings glut” hypothesis helps explain the first two facts. Indeed, it notes that a popular alternative – a too loose monetary policy – fails to explain persistently low long-term real rates. But, it adds, this fails to explain the third and fourth (or my fifth) features.

The paper argues that a massive increase in the effective global labour supply and the extreme risk aversion of the emerging world’s new creditors explains the third and fourth feature. As the paper notes, “the accumulation of net overseas assets has been entirely accounted for by public sector acquisitions ... and has been principally channelled into reserves”. Asian emerging economies – China, above all – have dominated such flows....

The authors conclude that the low bond yields caused by newly emerging savings gluts drove the crazy lending whose results we now see. With better regulation, the mess would have been smaller, as the International Monetary Fund rightly argues in its recent World Economic Outlook. But someone had to borrow this money. If it had not been households, who would have done so – governments, so running larger fiscal deficits, or corporations already flush with profits? This is as much a macroeconomic story as one of folly, greed and mis-regulation.

I'm pretty sympathetic to this argument, but I can't fully embrace it unless I can read the friggin' paper

Question to readers:  compared to academic work, how reliable is private sector research? 

Daniel W. Drezner

Trying for the full Huntington

As I've said before, I've greatly admired Samuel Huntington's career. Huntington's gift as an academic is that he has been unafraid to make the politically incorrect argument, regardless of the consequences. This doesn't always mean he is right -- but it does mean he's usually interesting. I suspect that John Mearsheimer and Stephen Walt are trying to copy the Huntington template in their essay, "The Israel Lobby" for the London Review of Books: Here's how it starts:

For the past several decades, and especially since the Six-Day War in 1967, the centrepiece of U.S. Middle Eastern policy has been its relationship with Israel. The combination of unwavering support for Israel and the related effort to spread democracy throughout the region has inflamed Arab and Islamic opinion and jeopardised not only U.S. security but that of much of the rest of the world. This situation has no equal in American political history. Why has the U.S. been willing to set aside its own security and that of many of its allies in order to advance the interests of another state? One might assume that the bond between the two countries was based on shared strategic interests or compelling moral imperatives, but neither explanation can account for the remarkable level of material and diplomatic support that the U.S. provides.

Instead, the thrust of U.S. policy in the region derives almost entirely from domestic politics, and especially the activities of the Israel Lobby. Other special-interest groups have managed to skew foreign policy, but no lobby has managed to divert it as far from what the national interest would suggest, while simultaneously convincing Americans that U.S. interests and those of the other country  in this case, Israel are essentially identical.

Well, that argument certainly won't rub anyone the wrong way. Interested readers should be sure to check out the longer, footnoted paper which is archived at the Kennedy School of Government. So do Mearsheimer and Walt achieve the full Huntington? No, not really. "The Israel Lobby" is the academic equivalent of waving a big red cape at one's ideological opponents, hoping they'll foam at the mouth and act stark raving mad because the authors cited Chomsky or CommonDreams, or because, "the Fatah office in Washington distributed the article to an extensive mailing list." [Or maybe they're pissed that they didn't crack the 100 Most Dangerous Professors in America!!--ed.] So let's avoid that bait. Reading the essay, I can conclude the following:

1) Mearsheimer and Walt make a decent case of arguing that interest group lobbying is responsible for some aspects of U.S. policy towards the Greater Middle East. Now this asssertion alone is enough to make people very uncomfortable at cocktail parties and other venues. Whenever I bring up ethnic lobbying in my American foreign policy class and mention Israel, everyone in the room tenses up. So kudos to Mearsheimer and Walt for speaking the taboo thought.

2) Shot through these papers are an awful lot of casual assertions that don't hold up to close scrutiny [Which makes it eerily similar to some of your blog posts!!--ed. True that.]. The authors assert that, "If Washington could live with a nuclear Soviet Union, a nuclear China or even a nuclear North Korea, it can live with a nuclear Iran. And that is why the Lobby must keep up constant pressure on politicians to confront Tehran." I'm pretty sure that there's more to U.S. opposition to Iran possessing nuclear weapons than the protection of Israel.

From the longer Kennedy paper, Mearsheimer and Walt make a fascinating logical assertion: "[T]he mere existence of the Lobby suggests that unconditional support for Israel is not in the American national interest. If it was, one would not need an organized special interest group to bring it about. But because Israel is a strategic and moral liability, it takes relentless political pressure to keep U.S. support intact." What's fascinating about this quote are the implicit assumptions contained within it: i) the only interest group in existence is the Lobby, and; ii) in the absence of the Lobby, a well-defined sense of national interest will always guide American foreign policy. It would be very problematic for good realists like Mearsheimer and Walt to allow for other interest groups -- oil companies, for example -- to exist. This would allow for a much greater role for domestic politics than realists ever care to admit.

Finally, they argue that the U.S. invaded Iraq only primarily because Israel and the Lobby -- in the form of neoconservatives -- wanted it. I wrote my take on this argument three years ago:

The notion that such a conspiracy exists rests on the belief that the administration's foreign policy principals -- Donald Rumsfeld, Condoleezza Rice, Colin Powell, Dick Cheney, and Bush himself -- have somehow been duped by the neoconservatives into acting in a manner contrary to their beliefs. But while critics have never lacked for accusations against these officials, being weak-willed is not among them. In the end, it's far more likely that Bush is exploiting the neoconservatives' ideological arsenal to advance his preferred set of policies than vice versa.

3) There are sins of omission as well as commission. Walt and Mearsheimer assert that Israel has been a "strategic burden." They do a good job of cataloging why that's the case -- but omit important examples of Israel being useful, such as the 1981 Osirik bombing. They also go into depth on the Bush administration's policy towards the Palestinian Authority, but never mention the arms shipment that Arafat lied to Bush about as a causal factor behind Bush's decision to freeze out Arafat.

4) The evidence is pretty thin in some sections. To demonstrate the current political power of the American Israel Public Affairs Committee, they cite a 1984 election where AIPAC was allegedly curcial. They argue that the Israeli-Palestine problem is at the root of Al Qaeda's beef with the United States -- which is funny, because I was pretty sure it was the presence of U.S. forces near the holy shrines of Mecca and Medina. They claim the Lobby is responsible for U.S. policy towards Syria, but that policy amounts to little more than some empty sabre-rattling.

After finishing the article, I began to wonder whether the paper is simple a massive exercise in explaining away a data point that realism can't cover. Most realists opposed the Iraq War, and Mearsheimer and Walt were no exception. They can and should take some normative satisfaction in being proven right by what happened after the invasion. However, I suspect as positive social scientists they are bothered by the fact that the U.S. invaded Iraq anyway when realism would have predicted otherwise. When realists are confronted with contradictory data, they tend to fall back on auxiliary hypotheses -- the cult of the offensive, the myth of empire -- that have very little to do with realism. Explaining away Iraq on The Lobby might have a whiff of the Paranoid Style, but it's certainly consistent with the literature.

In the end, I think Mearsheimer and Walt get to the full Huntington -- but alas, it's the Huntington of Who We Are? rather than The Soldier and the State. There's more I could write about, but I'm eager to hear what others think.

UPDATE: OK, I should have said, "I'm eager to hear what others think... after they read the article." Two final thoughts. First, I'm surprised and disappointed that the article has gotten zero coverage from the mainstream media in the United States. I completely agree with Walt and Mearsheimer that this is a topic that needs more open debate. Second, there's one non-event that keeps gnawing at me after reading the piece. If "The Lobby" is as powerful as Walt and Mearsheimer claim, why hasn't there been a bigger push in the United States for more fuel-efficient cars, alternative energy sources, and the like? After all, the only strategic resource that Israel's enemies possess is large quantities of oil. If "The Lobby" is so powerful and goal-directed, wouldn't they have an incentive to reduce the strategic value of their advesaries?

ANOTHER UPDATE: See this follow-up post on the Walt/Mearsheimer paper as well.