Shaking Up the West Bank

The paradigm that has been the basis of peace negotiations between the Israelis and Palestinians is fundamentally flawed, and Mahmoud Abbas' quest for statehood is shining a bright light on the fundamental corruption of current Israeli policy.

It has long been my opinion that Israel has not been negotiating with the Palestinians in good faith.  The problem that I see is that Israel holds all the cards, and has within its power to annex the West Bank in its entirety tomorrow and grant the people who live there Israeli citizenship (whether they want it or not), effectively putting an end to this charade.  On the other hand, the Palestinians do not have it within their power to define and defend the borders of their proposed nation in a way that could halt Israeli incursion and settlement building.  Therefore, to posit peace based on the premise that the Israelis and Palestinians can negotiate as equal partners is ludicrous.  Asking this today would have been like asking Czechoslovakia to negotiate with Germany over the annexation of the Sudetenland in 1938.

So, it seems clear that each subsequent peace summit is simply an effort to buy time until Israel finally decides what it is they want to do with the occupied territories.  Within Israel there are conflicting camps and the debate is not just between Israel and the rest of the world, but very much between Israelis.  Many Israelis view it as their right, based on biblical history and by virtue of land gained during the 1967 War, to occupy all the land up to the Jordan River.  Other Israelis believe that the Palestinian people, who were expelled from Israel during the 1948 Arab-Israeli War, deserve to have a land to call their own and not live under Israeli occupation.  In the mean time, each subsequent Israeli government has supported settlement building, so the de facto position of the Israeli government is, and has been since 1967, that the West Bank is theirs to do with as they wish.

However, and this is why I say that the Israeli negotiating position is fundamentally corrupt, no Israeli leader that I can recall has ever stated that it is their intent to annex the West Bank and rewrite the map of Israel to extend to the Jordan River, even while their actions say otherwise.

In a speech he delivered to the U.N. General Assembly today, President Obama painted a beautiful picture of how, in light of the "Arab Spring" that has swept across the region, it is now finally time for the Palestinians to taste freedom, but cynically concluded that this could only be possible in the context of an Israeli/Palestinian peace accord.  In other words, Obama recognizes that the current situation is fundamentally immoral and unjust, but that he is not prepared to abandon the corrupt paradigm that has been a cancer and a source of regional tension for decades.

This is why Mahmoud Abbas is going to the U.N. to seek statehood for the occupied territories: he is taking the decisive political action that Israel has failed to do for over forty years.

Could Trade Protectionism Help Stimulate U.S. Manufacturing?

In ordinary times, trade protectionism is inflationary, discourages the efficient allocation of resources, and should be avoided. However, these are not ordinary times we are living in, and extraordinary times call for extraordinary measures.

The picture above is of the discharge from the Three Gorges Dam in China, which symbolizes the huge trade imbalance with China: manufactured goods flow from China to the U.S., but instead of manufactured goods, we are selling them U.S. debt instruments.  When money was cheap and fixed asset prices were rising fast, it made more economic sense to shutter a U.S. factory, sell the land, and ship the equipment off to China to have the goods manufactured and sold back to us cheaper than we could have bought them if we had made them here.  Initially a trickle, this became a huge flood that drained the lifeblood from the U.S. manufacturing sector and has resulted in high unemployment.

This loss of productive capacity has led to a debt crisis in this country that can only be fixed by getting back to what the U.S. has done better than any other country since the Industrial Revolution: MAKE STUFF.  However, bad domestic policies and government-subsidized manufacturing in China have bent the back of U.S. industry to the breaking point.

Therefore, I think we should seriously consider placing additional import tariffs on non-NAFTA goods to give U.S. manufacturers a fighting chance again.  While this could be inflationary in some sectors (those where we have lost almost all productive capacity), the Federal Reserve has proven that inflation is not currently the biggest short-term risk, but rather that deflation and general economic stagnation are bigger dangers. If we can jump-start the domestic manufacturing base, we can create jobs, allow the Federal Reserve and Federal Government to ratchet back their Keynsian stimulus policies and begin to work on a plan to put our country on a sustainable fiscal trajectory.