Daniel Schuchman's review of Harry G. Frankfurt's On Inequality

Beggar Thy Neighbor. By Daniel Schuchman
Daniel Schuchman's review of Harry G. Frankfurt's On Inequality (Princeton, 102 pages, $14.95)
http://www.wsj.com/articles/beggar-thy-neighbor-1444345359
Wall Street Journal, Oct 09, 2015

In a 2005 best seller, Harry Frankfurt, a Princeton philosophy professor, explored the often complex nature of popular false ideas. “On Bulls—” examined outright lies, ambiguous forms of obfuscation and the not-always-transparent intentions of those who promote them. Now, in “On Inequality,” Mr. Frankfurt eviscerates one of the shibboleths of our time: that economic inequality—in his definition, “the possession by some of more money than others”—is the most urgent issue confronting society. This idea, he believes, suffers from logical and moral errors of the highest order.

The fixation on equality, as a moral ideal in and of itself, is critically flawed, according to the professor. It holds that justice is determined by one person’s position relative to another, not his absolute well-being. Therefore the logic of egalitarianism can lead to perverse outcomes, he argues. Most egregiously, income inequality could be eliminated very effectively “by making everyone equally poor.” And while the lowest economic stratum of society is always associated with abject poverty, this need not be the case. Mr. Frankfurt imagines instances where those “who are doing considerably worse than others may nonetheless be doing rather well.” This possibility—as with contemporary America’s wide inequalities among relatively prosperous people—undermines the coherence of a philosophy mandating equality.

Mr. Frankfurt acknowledges that “among morally conscientious individuals, appeals in behalf of equality often have very considerable emotional or rhetorical power.” The motivations for pursuing equality may be well-meaning but they are profoundly misguided and contribute to “the moral disorientation and shallowness of our time.”

The idea that equality in itself is a paramount goal, Mr. Frankfurt argues, alienates people from their own characters and life aspirations. The amount of wealth possessed by others does not bear on “what is needed for the kind of life a person would most sensibly and appropriately seek for himself.” The incessant egalitarian comparison of one against another subordinates each individual’s goals to “those that are imposed on them by the conditions in which others happen to live.” Thus, individuals are led to apply an arbitrary relative standard that does not “respect” their authentic selves.

If his literalist critique of egalitarianism is often compelling, Mr. Frankfurt’s own philosophy has more in common with such thinking than is first apparent. For Mr. Frankfurt, the imperative of justice is to alleviate poverty and improve lives, not to make people equal. He does not, however, think that it is morally adequate merely to provide people with a safety net. Instead, he argues for an ideal of “sufficiency.”

By sufficiency Mr. Frankfurt means enough economic resources for every individual to be reasonably satisfied with his circumstances, assuming that the individual’s satisfaction need not be disturbed by others having more. While more money might be welcome, it would not “alter his attitude toward his life, or the degree of his contentment with it.” The achievement of economic and personal contentment by everyone is Mr. Frankfurt’s priority. In fact, his principle of sufficiency is so ambitious it demands that lack of money should never be the cause of anything “distressing or unsatisfying” in anyone’s life.

What’s the harm of such a desirable, if unrealistic goal? The author declares that inequality is “morally disturbing” only when his standard of sufficiency is not achieved. His just society would, in effect, mandate a universal entitlement to a lifestyle that has been attained only by a minuscule fraction of humans in all history. Mr. Frankfurt recognizes such reasoning may bring us full circle: “The most feasible approach” to universal sufficiency may well be policies that, in practice, differ little from those advocated in the “pursuit of equality.”

In passing, the author notes another argument against egalitarianism, the “dangerous conflict between equality and liberty.” He is referring to the notion that leaving people free to choose their work and what goods and services they consume will always lead to an unequal distribution of income. To impose any preconceived economic distribution will, as the philosopher Robert Nozick argued, involves “continuous interference in people’s lives.” Like egalitarianism, Mr. Frankfurt’s ideal of “sufficiency” would hold property rights and economic liberty hostage to his utopian vision.

Such schemes, Nozick argued, see economic assets as having arrived on earth fully formed, like “manna from heaven,” with no consideration of their human origin. Mr. Frankfurt also presumes that one person’s wealth must be the reason others don’t have a “sufficient” amount to be blissfully carefree; he condemns the “excessively affluent” who have “extracted” too much from the nation. This leaves a would-be philosopher-king the task of divvying up loot as he chooses.

On the surface, “On Inequality” is a provocative challenge to a prevailing orthodoxy. But as the author’s earlier book showed, appearances can deceive. When Thomas Piketty, in “Capital in the Twenty-First Century,” says that most wealth is rooted in theft or is arbitrary, or when Mr. Frankfurt’s former Princeton colleague Paul Krugman says the “rich” are “undeserving,” they are not (just) making the case for equality. By arguing that wealth accumulation is inherently unjust, they lay a moral groundwork for confiscation of property. Similarly, Mr. Frankfurt accuses the affluent of “gluttony”—a sentiment about which there appears to be unanimity in that temple of tenured sufficiency, the Princeton faculty club. The author claims to be motivated by respect for personal autonomy and fulfillment. By ignoring economic liberty, he reveals he is not.

Mr. Shuchman is a fund manager in New York.

International Courts and the New Paternalism - African leaders are the targets because ambitious jurists consider them to be 'low-hanging fruit'

International Courts and the New Paternalism. By Jendayi Frazer
African leaders are the targets because ambitious jurists consider them to be ‘low-hanging fruit.’
http://www.wsj.com/articles/international-courts-and-the-new-paternalism-1437778048
WSJ, July 24, 2015 6:47 p.m. ET

 

Nairobi, Kenya

President Obama arrived in Kenya on Friday and will travel from here to Ethiopia, two crucial U.S. allies in East Africa. The region is not only emerging as an economic powerhouse, it is also an important front in the battle with al Qaeda, al-Shabaab, Islamic State and other Islamist radicals.

Yet grievances related to how the International Criminal Court’s universal jurisdiction is applied in Africa are interfering with U.S. and European relations on the continent. In Africa there are accusations of neocolonialism and even racism in ICC proceedings, and a growing consensus that Africans are being unjustly indicted by the court.

It wasn’t supposed to be this way. After the failure to prevent mass atrocities in Europe and Africa in the 1990s, a strong consensus emerged that combating impunity had to be an international priority. Ad hoc United Nations tribunals were convened to judge the masterminds of genocide and crimes against humanity in Yugoslavia, Rwanda and Sierra Leone. These courts were painfully slow and expensive. But their mandates were clear and limited, and they helped countries to turn the page and focus on rebuilding.

Soon universal jurisdiction was seen not only as a means to justice, but also a tool for preventing atrocities in the first place. Several countries in Western Europe including Spain, the United Kingdom, Belgium and France empowered their national courts with universal jurisdiction. In 2002 the International Criminal Court came into force.

Africa and Europe were early adherents and today constitute the bulk of ICC membership. But India, China, Russia and most of the Middle East—representing well over half the world’s population—stayed out. So did the United States. Leaders in both parties worried that an unaccountable supranational court would become a venue for politicized show trials. The track record of the ICC and European courts acting under universal jurisdiction has amply borne out these concerns.

Only when U.S. Defense Secretary Donald Rumsfeld threatened to move NATO headquarters out of Brussels in 2003 did Belgium rein in efforts to indict former President George H.W. Bush, and Gens. Colin Powell and Tommy Franks, for alleged “war crimes” during the 1990-91 Gulf War. Spanish courts have indicted American military personnel in Iraq and investigated the U.S. detention facility in Guantanamo Bay.

But with powerful states able to shield themselves and their clients, Africa has borne the brunt of indictments. Far from pursuing justice for victims, these courts have become a venue for public-relations exercises by activist groups. Within African countries, they have been manipulated by one political faction to sideline another, often featuring in electoral politics.
The ICC’s recent indictments of top Kenyan officials are a prime example. In October 2014, Kenyan President Uhuru Kenyatta became the first sitting head of state to appear before the ICC, though he took the extraordinary step of temporarily transferring power to his deputy to avoid the precedent. ICC prosecutors indicted Mr. Kenyatta in connection with Kenya’s post-election ethnic violence of 2007-08, in which some 1,200 people were killed.

Last December the ICC withdrew all charges against Mr. Kenyatta, saying the evidence had “not improved to such an extent that Mr Kenyatta’s alleged criminal responsibility can be proven beyond reasonable doubt.” As U.S. assistant secretary of state for African affairs from 2005-09, and the point person during Kenya’s 2007-08 post-election violence, I knew the ICC indictments were purely political. The court’s decision to continue its case against Kenya’s deputy president, William Ruto, reflects a degree of indifference and even hostility to Kenya’s efforts to heal its political divisions.

The ICC’s indictments in Kenya began with former chief prosecutor Luis Moreno-Ocampo’s determination to prove the court’s relevance in Africa by going after what he reportedly called “low-hanging fruit.” In other words, African political and military leaders unable to resist ICC jurisdiction.

More recently, the arrest of Rwandan chief of intelligence Lt. Gen. Emmanuel Karenzi Karake in London last month drew a unanimous reproach from the African Union’s Peace and Security Council. The warrant dates to a 2008 Spanish indictment for alleged reprisal killings following the 1994 Rwandan genocide. At the time of the indictment, Mr. Karenzi Karake was deputy commander of the joint U.N.-African Union peacekeeping operation in Darfur. The Rwandan troops under his command were the backbone of the Unamid force, and his performance in Darfur was by all accounts exemplary.

Moreover, a U.S. government interagency review conducted in 2007-08, when I led the State Department’s Bureau of African Affairs, found that the Spanish allegations against Mr. Karenzi Karake were false and unsubstantiated. The U.S. fully backed his reappointment in 2008 as deputy commander of Unamid forces. It would be a travesty of justice if the U.K. were to extradite Mr. Karake to Spain to stand trial.

Sadly, the early hope of “universal jurisdiction” ending impunity for perpetrators of genocide and crimes against humanity has given way to cynicism, both in Africa and the West. In Africa it is believed that, in the rush to demonstrate their power, these courts and their defenders have been too willing to brush aside considerations of due process that they defend at home.

In the West, the cynicism is perhaps even more damaging because it calls into question the moral capabilities of Africans and their leaders, and revives the language of paternalism and barbarism of earlier generations.

Ms. Frazer, a former U.S. ambassador to South Africa (2004-05) and assistant secretary of state for African affairs (2005-09), is an adjunct senior fellow for Africa studies at the Council on Foreign Relations.

Five Bedrock Principles for Investors. By Morgan Housel

Brilliance isn’t the only key to Warren Buffett’s investing success. See rule No. 5.

WSJ, June 5, 2015 11:55 a.m. ET
http://www.wsj.com/articles/five-bedrock-principles-for-investors-1433519754

 

The U.S. economy shrank last quarter. The Federal Reserve is widely expected to begin raising interest rates later this year. U.S. stocks are expensive by many measures. Greece’s national finances remain fragile. Oh, and election season already is under way in the U.S.

Investors who are tempted to sell risky assets and flee to safety don’t have to look far for justification.

If you are one of them, ponder this: Most of what matters in investing involves bedrock principles, not current events.

Here are five principles every investor should keep in mind:

1. Diversification is how you limit the risk of losses in an uncertain world.
If, 30 years ago, a visitor from the future had said that the Soviet Union had collapsed, Japan’s stock market had stagnated for a quarter century, China had become a superpower and North Dakota had helped turn the U.S. into a fast-growing source of crude oil, few would have believed it.

The next 30 years will be just as surprising.

Diversification among different assets can be frustrating. It requires, at every point in time, owning some unpopular assets.

Why would I want to own European stocks if its economy is such a mess? Why should I buy bonds if interest rates are so low?

The appropriate answer is, “Because the future will play out in ways you or your adviser can’t possibly comprehend.”

Owning a little bit of everything is a bet on humility, which the history of investing shows is a valuable trait.

2. You are your own worst enemy.

The biggest risk investors face isn’t a recession, a bear market, the Federal Reserve or their least favorite political party.

It is their own emotions and biases, and the destructive behaviors they cause.

You can be the best stock picker in the world, capable of finding tomorrow’s winning businesses before anyone else. But if you panic and sell during the next bear market, none of it will matter.

You can be armed with an M.B.A. and have 40 years before retirement to let your savings compound into a fortune. But if you have a gambling mentality and you day-trade penny stocks, your outlook seems dismal.

You can be a mathematical genius, building the most sophisticated stock-market forecasting models. But if you don’t understand the limits of your intelligence, you are on your way to disaster.

There aren’t many iron rules of investing, but one of them is that no amount of brain power can compensate for behavioral errors. Figure out what mistakes you are prone to make and embrace strategies that limit the risk.

3. There is a price to pay.

The stock market has historically offered stellar long-term returns, far better than cash or bonds.

But there is a cost. The price of admission to earn high long-term returns in stocks is a ceaseless torrent of unpredictable outcomes, senseless volatility and unexpected downturns.

If you can stick with your investments through the rough spots, you don’t actually pay this bill; it is a mental surcharge. But it is very real. Not everyone is willing to pay it, which is why there is opportunity for those who are.

There is an understandable desire to forecast what the market will do in the short run. But the reason stocks offer superior long-term returns is precisely because we can’t forecast what they will do in the short run.

4. When in doubt, choose the investment with the lowest fee.

As a group, investors’ profits always will equal the overall market’s returns minus all fees and expenses.

Below-average fees, therefore, offer one of your best shots at earning above-average results.

A talented fund manager can be worth a higher fee, mind you. But enduring outperformance is one of the most elusive investing skills.

According to Vanguard Group, which has championed low-cost investing products, more than 80% of actively managed U.S. stock funds underperformed a low-cost index fund in the 10 years through December. It is far more common for a fund manager to charge excess fees than to deliver excess performance.

There are no promises in investing. The best you can do is put the odds in your favor. And the evidence is overwhelming: The lower the costs, the more the odds tip in your favor.

5. Time is the most powerful force in investing.

Eighty-four year old Warren Buffett’s current net worth is around $73 billion, nearly all of which is in Berkshire Hathaway stock. Berkshire’s stock has risen 24-fold since 1990.

Do the math, and some $70 billion of Mr. Buffett’s $73 billion fortune was accumulated around or after his 60th birthday.

Mr. Buffett is, of course, a phenomenal investor whose talents few will replicate. But the real key to his wealth is that he has been a phenomenal investor for two-thirds of a century.

Wealth grows exponentially—a little at first, then slightly more, and then in a hurry for those who stick around the longest.

That lesson—that time, patience and endurance pay off—is something us mortals can learn from, particularly younger workers just starting to save for retirement.

—Morgan Housel is a columnist at the Motley Fool.