Review of Bismarck by Jonathan Steinberg

Bismarck:A LifeBismarck:A Life by Jonathan Steinberg

My rating: 3 of 5 stars

I enjoyed the book, although it was, in my opinion, light on the the great achievements of Bismarck in foreign policy. Bismarck was a truly monumental historical figure who dominated his era, both domestically and internationally. Steinberg, while writing a strong book in many respects, betrays his anti-Bismarck bias throughout. Steinberg acknowledges Bismarck as a genius, but takes great pains to point out some of the “character flaws” of the great man. Such flaws include losing friends (always the fault of Bismarck), being less than honest as he made the substantial changes to Prussia that resulted in a unified German state that became, and remains, a colossus ,having no real ideological or governing philosophy, (Bismarck did what was good for Bismarck),and the most serious charge, that a straight line existed between Bismarck and Hitler. Without question it must be granted that the edifice of government set up by Bismarck had strong deficiencies that contributed to the German disasters of the 20th century. But most certainly Bismarck’s statesmanship was not practiced by the venal, and quite frankly ignorant, Kaiser Wilhelm II, who dismissed Bismarck and promulgated policies that Bismarck spent his entire foreign policy career seeking to avoid. The German foreign policy, post Bismarck and pre-World War One, cannot be entirely blamed on the “edifice of government” in Prussia and Germany, but should be seen as the result of the Kaiser and other Bismarck opponents throwing off the shackles of Bismarck’s policies that they felt constrained Germany from achieving its dominant role in Europe. Rather than blaming Bismarck I look at it, at least in part, as the ankle-biters of government finally taking down the Iron Chancellor and getting a chance to put forward alternative strategies for Germany. Those policies led to the First World War, and the massive errors made after that war brought us Hitlerism.The Wikipedia entry for Wilhelm II notes: “Upon his enforced retirement and until his dying day, Bismarck was to become a bitter critic of Wilhelm’s policies, but without the support of the supreme arbiter of all political appointments (the Emperor) there was little chance of Bismarck exerting a decisive influence on policy.” Henry Kissinger, in his review of the Steinberg book, repudiated the “direct line from Bismarck to Hitler” theory: “The second caveat concerns the direct line Steinberg draws from Bismarck to Hitler. Bismarck was a rationalist, Hitler a romantic nihilist. Bismarck’s essence was his sense of limits and equilibrium; Hitler’s was the absence of measure and rejection of restraint. The idea of conquering Europe would never have come to Bismarck; it was always part of Hitler’s vision.”

Bismarck was indeed a “rationalist” unconstrained by ideology in determining the best way forward for Germany. That “rationalism” led him to accept restraint, and to attempt to preserve, rather than destroy, the European equilibrium. The original practitioner of “realpolitik’ explained his thoughts in a letter sent to an old friend, appalled that Bismarck would contemplate accommodation with Napoleon III:

“What the principle is that I am supposed to have sacrificed, I cannot correctly formulate from what you write … France only interests me as it affects the situation of my Fatherland, and we can only make our policy with the France that exists … Sympathies and antipathies with regard to foreign powers and persons I cannot reconcile with my concept of duty in the foreign service of my country, neither in myself nor in others. There is in them the germ of disloyalty to the lord or the land which one serves … As long as each of us believes that a part of the chess board is closed to us by our own choice or that we have an arm tied where others can use both arms to our disadvantage, they will make use of our kindness without fear and without thanks.”

With Bismarck there was not going to be any foreclosure of options due to ideological straightjackets imposed by those who wished to play chess with part of the board covered.

Bismarck was a true giant of history. Like many practitioners of government and diplomacy he was far from perfect, and as you read Steinberg’s biography you will get a good flavor for those deficiencies. The Kissinger review, in the New York Times Book Review, is worth a look if you are interested in Bismarck and this book.

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The book review by Henry Kissinger.

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Barry Eichengreen on Greek Crisis- From The Conversation Blog

Reprinted from The Conversation by Barry Eichengreen, Professor of Political Science and Economics at the University of California- Berkeley.

Path to Grexit tragedy paved by political incompetence

Barry Eichengreen, University of California, Berkeley

Since our last episode, the crisis in Greece has escalated further. Negotiations between the government and its creditors collapsed over the weekend, and restrictions on bank withdrawals will now follow.

The next step is for the government to issue the equivalent of IOUs to pay salaries and pensions. The country is seemingly on the slippery slope to exiting the euro.

Many of us doubted that it would come to this. In particular, I doubted that it would come to this.

Nearly a decade ago, I analyzed scenarios for a country leaving the eurozone. I concluded that this was exceedingly unlikely to happen. The probability of a Grexit, or any Otherexit, I confidently asserted, was vanishingly small.

My friend and UC Berkeley colleague Brad DeLong regularly reminds us of the need to “mark our views to market.” So where did this prediction go wrong?

Why a euro exit didn’t make sense

My analysis was based on a comparison of economic costs and benefits of a country exiting the euro. The costs, I concluded, would be severe and heavily front-loaded.

Raising the possibility, however remote, of exit from the euro would ignite a bank run in said country. The authorities would be forced to shutter the financial system. Economic activity would grind to a halt. Losing access to not just their savings but also imported petrol, medicines and foodstuffs, angry citizens would take to the streets.

Not only would any subsequent benefits, by comparison, be delayed, but they would be disappointingly small.

With the government printing money to finance its spending, inflation would accelerate, and any improvement in export competitiveness due to depreciation of the newly reintroduced national currency would prove ephemeral.

In Greece’s case, moreover, there is the problem that the country’s leading export, refined petroleum, is priced in dollars and relies on imported oil, which is also priced in dollars. So much for the advantages of a depreciated currency.

Agricultural exports for their part will take several harvests to ramp up. And attracting more tourists won’t be easy against a drumbeat of political unrest.

What went wrong?

How did Greece end up in this pickle? Some say that the specter of a bank run was no longer a deterrent to exit once that bank run started anyway due to the deep depression into which the Greek economy had sunk.

But what is remarkable is how the so-called bank run remained a jog – it was still perfectly manageable until the Greek government called its referendum on the terms of the bail out deal offered by international creditors, negotiations broke down and exit became a real possibility.

Nonperforming loans — ones that are in default or close to it — were already rising, to be sure, but the banks still had all the liquidity they needed. The European Central Bank supported the Greek banking system with emergency liquidity assistance (ELA) right up to the very end of June. Only when Greece stopped negotiating did the Central Bank stop increasing ELA. And only then did a full-fledged bank run break out.

So I stand by the economic argument. Where I need to mark my views to market, however, is for underestimating the role of politics. In particular, I underestimated the extent of political incompetence – not just of the Greek government but even more so of its creditors.

In January Syriza had run on a platform of no more spending cuts or tax increases but also of keeping the euro. It should have anticipated that some compromise would be needed to square this circle. In the event, that realization was strangely late in coming.

And Prime Minister Alexis Tsipras and his government should have had the courage of its convictions. If it was unwilling to accept the creditors’ final offer, then it should have stated its refusal, pure and simple. If it preferred to continue negotiating, then it should have continued negotiating. The decision to call a referendum in midstream only heightened uncertainty. It was a transparent effort to evade responsibility. It was the action of leaders more interested in retaining office than in minimizing the cost to the country of the crisis.

A hard lesson learned

Still, this incompetence pales in comparison with that of the European Commission, the ECB and the IMF.

The three institutions opposed debt restructuring in 2010 when the crisis still could have been resolved at low cost. They continued to resist it in 2015, when a debt write-down was the obvious concession to Mr Tsipras & Company. The cost would have been small. Pretending instead that Greece’s debts could be repaid hardly enhanced their credibility.

Instead, the creditors first calculated the size of the primary budget surpluses that Greece would have to run in order to hypothetically repay its debt. They then required the government to raise taxes and cut spending sufficiently to produce those surpluses.

They ignored the fact that, in so doing, they consigned the country to an even deeper depression. By privileging their own balance sheets, they got the Greek government and the outcome they deserved.

The implication is clear. Never underestimate the ability of politicians to do the wrong thing. I will try to remember next time.

The Conversation

Barry Eichengreen is Professor of Economics and Political Science at University of California, Berkeley.

This article was originally published on The Conversation.
Read the original article.

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Review of Steve Rattner’s “Overhaul” on Auto Industry Bailout.

Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto IndustryOverhaul: An Insider’s Account of the Obama Administration’s Emergency Rescue of the Auto Industry by Steven Rattner

My rating: 4 of 5 stars

A very good accounting of the events surrounding the U.S. Government bailout of the American auto industry. Rattner did not pull very many punches in his analysis of the problems facing the auto industry or of the individuals involved in the massive restructuring that saved G.M. and Chrysler. Rattner gave out some pretty harsh criticism of auto industry executives as well as some notable politicians, and the criticism, from my perspective, was fair and deserved. The condition of General Motors, and the absolute blindness of top executives to the management rot that brought an American manufacturing giant to the cusp of ruin, is highlighted through this book. Lots of money being paid to top managers at G.M. for negative results. Rattner goes through some of the details, including the fate of bondholders and the terms ultimately accepted by the U.A.W. , two of the areas where the results of the restructuring have come in for the most criticism. His defense of those terms is spirited, and takes into account Rattner’s fundamental understanding of what could be achieved politically with the UAW. Rattner couples his criticism of the auto industry with a fairly harsh attack on Congress, and that criticism is bi-partisan. He shows the hypocrisy on both sides of the aisle, but points at Congress as an institution:
“The auto rescue succeeded in no small part because we did not have to deal with Congress. Before taking up my post, I didn’t realize how important this would be. I went to Washington thinking I understood the strengths and weaknesses of our legislative branch. Either I’d been hopelessly naive when I’d covered Congress as a reporter or it had changed for the worse. I was stunned to realize that if the task force had not been able to operate under the aegis of TARP, we would have been subject to endless congressional posturing, deliberating, bickering, and micromanagement, in the midst of which one or more of the troubled companies under our care would have gone bankrupt. Congress yields authority only under the direst of circumstances, as the example of TARP shows.”
Spoken like a true executive! But despite Rattner’s pro-executive bias his estimations of Congressional preening and ego driven meddling ring true. Legislative bodies tend to be alike in many ways. Congress is at the top of the food chain in terms of the very worst tendencies of legislative bodies to ignore substance in favor of uninformed politics.
Rattner, for a guy with $200 million in the bank, makes it a point to highlight all the times he picked up a dinner or lunch tab. But his personal parsimony does not take away from what is a pretty good book. This issue, if handled differently by Mitt Romney, who comes from a family that ran American Motors, might have tipped the 2012 election in a different direction. At the end of the day the decision to save the U.S. Auto industry was indeed the correct course of action. Rattner helps us to understand the details that went into that decision.

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Henry Kissinger “White House Years” is Reviewed

The White House YearsThe White House Years by Henry Kissinger

My rating: 5 of 5 stars

This book, due to length and level of detail, will not be for everyone. But it is a vitally important work for those who want to understand some of the critical foreign policy events in American history. This book deals with Kissinger’s tenure as Richard Nixon’s National Security Advisor from 1969-1972, and is the first volume of his memoirs. An astounding amount of history is compressed into that time period, including the Nixon opening to China, the intractable problems of the Middle East, with special focus on the triangular diplomacy involving the Soviet Union, Egypt, and the United States, the war in Vietnam, and the exceedingly tortured negotiations to end that war, (with a good look at the Nixon decisions on the excursion into Cambodia, the “Christmas Bombing”, and the self described “brutal” treatment of the recalcitrant South Vietnamese as agreement neared), and the Indo-Pakistan war, and the “tilt” towards Pakistan. Any one of those items would be a book in itself, and the fact that Kissinger not only kept all of those balls in the air but manages, through this volume, to show how they were all “connected” is a testament to his brilliance. Dr. Kissinger has many detractors, and Nixon Administration policies, especially with regard to Vietnam, have drawn severe criticism over the years. Kissinger takes those critics on directly, and makes some strong and compelling arguments to justify his policy recommendations. Vietnam was a tragic error for the United States, but Kissinger brings an up close perspective to why many of the important players acted the way they did.
Kissinger’s devotion to the “realist” school of diplomacy is evident through his actions and policy prescriptions described in this volume. His hard headed and “realistic” approach to bargaining are laid out clearly in his approach to the negotiations with North Vietnam, where he recognized that an unfavorable “balance of forces” on the ground would lead to an unsatisfactory outcome from the perspective of the U.S. His devotion to “equilibrium” govern his negotiations on SALT, and advise his relationship and policy recommendations with the Soviets.
For the historian this book is essential. Kissinger dealt with some of the very true giants of this (or any other era), including Chou En-Lai, Indira Ghandi, Le Duc Tho, Leonid Breznhev, Andrei Gromyko, Mao Tse Tung, Moshe Dayan, Anwar Sadat, Golda Meir, and so many others. He seems to me to be exceedingly honest about his relationship with Richard Nixon, who he described as brooding, lonely, and filled with resentment towards so many. He, in my opinion, fairly describes some of the dysfunction of the foreign policy methodology of the first term Nixon Administration, and takes some of the blame onto himself. (The relationship with Secretary of State William Rodgers is a big part of this dysfunction) Kissinger is writing to make sure history records his perspective, but he does so in a way that brings valuable insight to a critical time in U.S. foreign policy, when change and bold steps produced much disruption in this arena. Love them or hate them the Nixon-Kissinger team shook US foreign policy and produced real change that impacts us to this very day. A must read for those who love history or foreign policy.

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Review of American Pharaoh: Mayor Richard J Daley

American Pharaoh: Mayor Richard J. Daley - His Battle for Chicago and the NationAmerican Pharaoh: Mayor Richard J. Daley – His Battle for Chicago and the Nation by Adam Cohen

My rating: 5 of 5 stars

A masterpiece that not only serves as a biography of Richard Daley, but shows us how the City of Chicago came to be what it is today. There have been some serious power brokers that have served as Mayors in America, but Richard Daley, in terms of acquiring and holding power, must rank at the top of that group. The book is detailed, but for those looking to see how municipal government works this might not be the book for you. In Chicago if Daley wanted it done it was done. Not a lot of grass roots organizing involved in getting decisions made and executed. The book properly focuses on how Daley’s perch as Chair of the Cook County Democratic machine was just as valuable to him, in many respects, as the Mayors job, allowing him to exert control not only in Chicago, but across the entire State of Illinois. The Democratic Convention of 1968 is covered very well, and is a history that many of us are familiar with. What I learned beyond my prior understanding was how official and conscious government acts by Daley contributed to the segregated housing landscape that existed in Chicago at that time. He molded the City, and his vision did not include integration of housing. Daley, due to these policies, had to try to face down Dr. Martin Luther King Jr., who came to Chicago to bring the civil rights movement to the urban north. Daley did not choose to overtly resist, but chose tactics that obfuscated his goals, promised progress, but delivered little.

A fascinating book that should be read by all those interested in the acquiring and holding of power. Daley, from that perspective and on a smaller scale, rivaled LBJ as a power politician. The book honestly depicts some of the awful things he did, but does its best to give Daley some credit where it might have been due. Having just read the Tom Menino book I think it could be fairly said that Daley predated Menino in putting forward malapropisms. A couple of great ones: “Gentlemen, get this thing straight once and for all. The policeman isn’t there to create disorder. The policeman is there to preserve disorder.”
“Today the real problem is the future.”

This book is highly recommended.

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