As my Northeast Regional train rattles towards our nation’s capital, I thought I’d share a few odds and ends.
Over at The New Republic, Isaac Stone Fish, a senior fellow at the Asia Society’s Center on U.S.–China Relations, has published an engrossing account of what he describes as “an epidemic of self-censorship at U.S. universities on the subject of China, one that limits debate and funnels students and academics away from topics likely to offend the Chinese Communist Party.” Fish’s reporting is well worth your time. One of the more interesting aspects of the story concerns the role of Chinese foreign students as a lucrative revenue source. “Beijing’s ability to direct Chinese students to cash-strapped universities — or take them away — gives universities a powerful incentive to act carefully.” Though I’ve often heard this subject discussed by academics in private conversations, complete with talk of corruption and the systematic manipulation of academic standards, it almost never comes up in the press. Fish deserves a great deal of credit for his willingness to cover this difficult subject, as do those who agreed to talk to him. His reporting brought to mind the important work of John Garnaut, a journalist who has played a leading role in drawing attention to the pervasiveness of the Chinese Communist Party’s influence in Australia’s intellectual and political life.
In the latest issue of The International Economy, Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics and the co-author of Currency Conflict and Trade Policy: A New Strategy for the United States, calls for a multilateral solution to a global problem: the shortage of safe assets. Rather than rely on the U.S. to serve as “the sole supplier of global safe assets,” or close to it, Gagnon proposes a larger role for the special drawing right, or SDR, issued by the International Monetary Fund. “The goal is not to replace national currencies with the SDR,” Gagnon explains. Rather, it is to use the SDR “to create more symmetry in the international monetary system, to supply a large quantity of relatively stable safe assets, and to create a more neutral standard for invoicing and payments.” Yes, this might not sound like the most scintillating of subjects. But as Michael Pettis often argues, the outsized role of the U.S. dollar in undergirding the global economy has proven extremely costly for Americans. Though often described as an “exorbitant privilege,” it is in fact an “exorbitant burden”: “For all the excited talk of politicians, journalists, and generals,” he wrote in 2011, “a world without the dollar would mean faster growth and less debt for the United States, though at the expense of slower growth for parts of the rest of the world, especially Asia.”
Finally, Justin Fox of Bloomberg Opinion observes that even as overall federal spending is higher than its been for most of the postwar era, investment spending by the federal government has drifted down to the lowest level since the 1940s as a share of GDP. State and local investment spending has picked up some of the slack, which, some will surely argue, is exactly as it should be. But consider that state and local governments across the country are facing mounting pension obligations that will almost certainly constrain their ability to finance infrastructure in the future. As David Schleicher of Yale Law School recently suggested, coming state fiscal crises might not result in dramatic outcomes (in default, or in bankruptcy), but rather in a slow-motion decline in state and local investment that contributes to a larger deterioration in the quality of our physical infrastructure, the quality of public education, and much else besides. This needn’t be all bad. Perhaps we’ll finally move towards replacing state highway departments with public-road enterprises that operate on a commercial basis, which would be a salutary development. And though I’m partial to public education, I can’t rule out that the private actors could step in if conventional public schools face a severe fiscal crunch. But the irony is that those who ought to care the most about future constraints on public investment are often the least concerned about underfunded public pensions.