Thursday, May 25, 2017

Why the Two State Solution is destined to fail miserably: The Failure of the Two-State Solution: The Prospects of One State in the Israel-Palestine Conflict (Library of Modern Middle East Studies) by Hani A. Faris (I.B.Tauris)


With Islamist forces waiting to take advantage of any power vacuum, the area would plunge into Somalia-like chaos.
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AN AERIAL view of Jerusalem’s Old City and the Temple Mount.. (photo credit:REUTERS)

Much has been written about the “two state solution” (TSS) or “two states for two peoples” (TSTP) as the path to resolving the conflict between Israel and Arab and Muslim countries and Palestinians, but at the same time there appears to be little understanding of why it consistently fails. It fails because it is focused on territory, Palestinian statehood, rather than ideology – Palestinian nationalism and Palestinianism, the belief that Jews have no right to a state and that Jewish nationalism, Zionism, is anathema and that Jewish history is a fraud.

The idea of separating Israeli Jews and Arab Palestinians into two separate states is logical, but practically it involves other issues which remain obstacles. Supporting Palestinian statehood, therefore, without including a resolution of or reference to other problems prevents a rational, comprehensive approach to finding a realistic solution.

The principle behind the TSS/TSTP seems simple: since Arabs don’t want to live under Israeli rule and Israelis don’t want to rule over them, give them a state in all or most of Judea and Samaria (the “West Bank”), the Gaza Strip and eastern Jerusalem.

Jews would be expelled from the Arab Palestinian state and not permitted to live there, but Israeli Arabs would remain in Israel as citizens. A population transfer/ethnic cleansing would occur in only one state.

Granting statehood, however, depends on resolving all other issues which were included in previous “peace plans” and agreements such as the Oslo accords: 1) ending the conflict, ending violence and incitement; 2) ending all claims against Israel, abandoning “the Nakba” (the catastrophe, Israel’s establishment); 3) ending the “Palestinian Right of Return” of refugees and their descendants to Israel; 4) shared status of the Temple Mount and Jewish rights in eastern Jerusalem and the Old City; 5) continued IDF presence in the Jordan Valley and other strategic areas; 6) land swaps to include areas of major settlement; 7) access to all holy sites; and 8) recognizing Israel’s right to exist as the nation-state of the Jewish People and its historical and religious connection to the land of Israel and the Temple Mount.

These basic, minimal requirements to advance the “peace process” and statehood were rejected by Palestinian leaders time and again. Supporting the TSS without including the fundamental elements upon which it rests – and dealing with the issues of ideology – renders it irrelevant. Focusing only on territory – a state – and Palestinian national self-determination without context not only distorts the problem, but prevents efforts to resolve it.

Virulent Palestinian nationalism, or more generally, Palestinianism, means only one thing: kill Jews and destroy the State of Israel. The roots of this toxic nationalism are found in the Grand Mufti of Jerusalem Haj Amin al-Husseini, who instigated pogroms against innocent Jews in the 1920s and ‘30s and actively supported the Nazis. His successors in the PLO, led by Yasser Arafat and Mahmoud Abbas, as well as Hamas, have not deviated from this path.

Ignoring this reality has led to the death of thousands. Despite Israeli concessions, compromises and unilateral withdrawals, and efforts by the international community to end the Arab-Palestinian-Israeli conflict based on the TSS such as the Oslo accords, “the Road Map,” and pressure on Israel by the Obama administration, nothing worked. Rather than diminish the conflict, they made it worse and led to more terrorism, antisemitism and anti-Israel sentiment throughout the world.

Although Arafat signed the Oslo accords on behalf of the PLO and was obligated to remove the clauses in the Palestinian National Covenant which call for Israel’s destruction, the PLO/ PA and Hamas continue to promote violence and seek Israel’s demise.

Why do they deserve a state? Rather than understand why attempts to promote Palestinian statehood failed, and consider alternatives, its supporters cling to fantasies.

Coaxing and bribing Palestinians to make a deal always fails because that would mean ending the conflict and accepting Israel – a betrayal of Palestinianism as expressed in the PLO and Hamas Charters.

Establishing a second Palestinian state, or third if one includes “Hamastan” in the Gaza Strip, would lead to destabilization and increase the chances for violence between competing entities, gangs and militias which could spill over into Israel.

Jordan might seek to expel its “Palestinian” citizens to the new state.

A power struggle would ensue over who represents the Palestinians and what constitutes the territorial basis for “Palestinian national identity.”

With Islamist forces waiting to take advantage of any power vacuum, the area would plunge into Somalia-like chaos.

Not only has the TSS been the basis for all “peace plans,” its supporters pressure Israel to prevent Jews from building in settlements and extending Israeli law to Area C of the West Bank, which is under full Israeli (military) control. The TSS idea also strengthens anti-Israel movements, especially boycott campaigns and political organizations, such as J Street, which accuse Israel of illegally occupying Palestinian territory. Accepting the TSS, therefore, concedes the question of Palestinian statehood as a given, without negotiations or considering alternatives.

A Palestinian state west of the Jordan River is not a realistic or viable option for the foreseeable future. The alternative is continuing to develop cooperative working relationships with Palestinians and with Jordan, Egypt and other countries based on humanitarian needs and concerns.

Some have suggested a confederated Israeli-Palestinian-Jordanian model – similar to one which the PLO approved in 1985 – based on local Palestinian self-government, minus statehood. This would offer Arab residents a range of possibilities rather than dooming them to the corrupt, autocratic rule of the PA and PLO.

Instead of the TSS trap, the goal should be to promote opportunity and prosperity and to ensure the security and stability of the region.

This shifts from form, statehood, to content and purpose, from the hopeless TSS to a hopeful multi-state solution which will inspire creativity and cooperation – the only raison d’etre of nation-states, the goal of community and civilization.

A Path to Peace: A Brief History of Israeli-Palestinian Negotiations and a Way Forward in the Middle EastNov 29, 2016 by George J. Mitchell and Alon Sachar Hardcover(Simon and Schuster)

More than the Two State Solution. The Many Possible Paths to Peace. What are we talking about when we talk about solutions to the Israeli-Palestinian conflict?



A general view of a part of Ma’aleh Adumim. (photo credit:REUTERS)

Judea and Samaria. The West Bank. Whatever you want to call it, this piece of land (which includes parts of Jerusalem) is 5,640 square kilometers of the most hotly contested real estate on the planet.

The landscape varies from barren desert to arable mountainous terrain. It has rocky terraces and graceful hills and gurgling springs and gnarled olive trees.

For Jews, it is the biblical heartland. It is where the patriarchs and matriarchs walked, where they are buried, where the Tabernacle and Temple stood, where the stories of the Bible played themselves out – where they were also massacred, expelled and returned.

For Palestinians, it is where they have lived for generations, and where they hope to establish a state of their own.

It fell into Israeli hands in a defensive war that lasted for six days in June 1967.

Ever since, there have been innumerable plans regarding ways to divide it up or annex it to Israel, without imperiling the country’s Jewish majority. Some of the plans – and they continue to be churned out – are realistic, some creative, some seemingly crazy. What follows is a brief historical survey of some of the more prominent plans that have been put – or are now resting – on the table. One of the earliest plans for the West Bank was submitted soon after the Six Day War in 1967 by then-Labor Party minister Yigal Allon. Allon’s basic idea was to give Israel defensible borders, while not significantly altering the demographic balance of the country.

As such, his plan called for Israel to annex most of the Jordan Valley – a ribbon some 15 kilometers in width from the Jordan River to the eastern slopes of the mountain ridge running through the West Bank – to serve as a buffer from attacks from the east.

The plan also called for the annexation of Gush Etzion, east Jerusalem, the Latrun salient, and a slice of the Judean desert extending about 15 kilometers from the Dead Sea westward to protect Jerusalem. In other words, Israel would annex one-third of the West Bank, and give up the other two-thirds.

At first Allon called for Israel to annex Gaza, and in a later permeation of the plan it was to become part of a confederated Palestinian-Jordanian state.

The densely populated Palestinian areas from the mountain ridge to the Green Line would not be annexed, and would either form a Palestinian autonomous region, or – in a later revision of the plan – be confederated with Jordan, and linked to the Hashemite kingdom by a corridor near Jericho.

An Israeli road link would be created to give Israel access across the corridor, and – likewise – a Palestinian road link would be created to provide the Palestinians a link from Bethlehem in Judea to Ramallah in Samaria, across the area today known as E-1. In addition, the plan called for Israel to hold on to the South Hebron hills.

The cabinet never formally adopted the plan, but until Menachem Begin’s rise to power in 1977, this plan animated Labor Party’s settlement policies.



For instance, in the first decade after the Six Day War, Labor governments established 21 settlements in the Jordan Valley and along the eastern slopes of Samaria, areas that under this plan Israel would ultimately hold onto.

Likewise, under Labor settlements were established in Gush Etzion, starting with the reestablishment of the pre-1948 community at Kfar Etzion in September 1967, the first settlement established after the war.

Jordan’s King Hussein rejected the principles laid down in the Allon plan in secret talks held with prime minister Levi Eshkol in September 1968, arguing that it “infringed on Jordanian sovereignty.” Nevertheless, the Allon Plan was a fundamental plank in the Labor Party platform up until 1987.

IN 1977, however, the country went to elections and voted in Begin, who had a different vision altogether. After signing the Camp David Accords, Begin laid down in the Knesset in December 1977 his principles for an autonomy plan.

The principles did not include any type of confederation, but rather self-government for the Palestinians.

“With the establishment of peace we shall propose the introduction of an administrative autonomy for the Arab residents of Judea, Samaria and the Gaza Strip,” he said.

The principles of the plan included the following points:

• Military rule in Judea, Samaria and Gaza would be abolished, replaced by administrative autonomy “by and for the Arab residents.”

• The Palestinians would elect an 11-member administrative council that would establish departments of education, transportation, construction, industry, agriculture, health, labor, refugee rehabilitation, legal administration and supervision of the local police force.

• Overall security and responsibility for public order – and sovereignty – would remain in Israel’s hands.

The residents of the territories could choose to hold either Israeli or Jordanian citizenship, and if they opted for Israeli citizenship would be able to vote, purchase land and settle in Israel.

Israeli residents, in turn, would be entitled to purchase land and settle in all areas of Judea, Samaria and Gaza.



Begin presented his plan to US president Jimmy Carter and Egyptian president Anwar Sadat, and preliminary talks on the matter began, although Palestinian groups refused to take part.

The plan petered out with the passage of the Jerusalem Law in 1980 and Sadat’s assassination in 1981, and the talks completely ground to a halt with the outbreak of the Lebanon War in 1982.

Plans from the Right

“What is your alternative?”

Those four words are constantly thrown at right-wing supporters who argue against a two-state solution. The two-state solution might not be perfect, its supporters argue, but – as former US secretary of state John Kerry famously said in his December 2016 speech blasting Israel’s settlement policies – it is the only viable alternative.

But, the Right argues, maybe Kerry is wrong.



The alternative plans from the Right range from extending Israeli sovereignty over all of Judea and Samaria and encouraging the Palestinians there to leave (almost no one wants to annex Gaza, with its 1.8 million Palestinians), to annexing Area C, and giving the 80,000 Palestinians living there Israeli citizenship.

On the far Right of the spectrum is a plan articulated by former Likud MK Moshe Feiglin, who advocates a plan for Jewish sovereignty over Judea and Samaria that includes the following:

• Annexing all of Judea and Samaria and making sure that Jewish sovereignty extends everywhere.

• The Arab population would have the following options: Either emigrate voluntarily with the aid of a “generous emigration grant”; receive permanent residency – similar to Green Card status in the US – but be unable to vote; “tie their fate to the fate of the Jewish nation, like the Druze,” and be able to go through a long-term process to attain citizenship.

• Encouraging Jews to immigrate and build massively in Judea and Samaria to absorb the new immigrants.

Jerusalem Post senior contributing editor Caroline Glick laid out a variation of this plan in her book The Israeli Solution. She, too, advocates sovereignty over all of the territory. Unlike Feiglin, however, she believes that Israel should assert sovereignty over all of Judea and Samaria and provide the Palestinians there with full civil and legal rights as permanent residents, who will also have the right to apply for Israeli citizenship.

Deputy Foreign Minister Tzipi Hotovely has also put forward a similar idea.

A RADICALLY different approach has been proposed by Defense Minister Avigdor Liberman. Liberman advocates taking all of the land – excluding Gaza – from the Mediterranean to the Jordan and redividing it along demographic lines. In this plan, large Jewish settlement blocs would be drawn into Israel, and the area of the “Triangle” with its large Israeli Arab population would be penciled into a Palestinian state.

His plan is often misunderstood as calling for the physical transfer of Israeli Arabs. It doesn’t. It calls for moving the border, but keeping the Arabs physically where they are. A resident of Umm el-Fahm, for instance, would continue to live in the same home, it’s just that he would no longer be an Israeli citizen but rather become a Palestinian one.

While Liberman has not explicitly spelled out where the lines would run, his idea is clear: draw as many Jews as possible into Israel, and as many Arabs from Israel into a future Palestinian state.



Some plans continue to live on, reflected in new suggestions. This is the case, for example, with the Allon plan that 50 years after its drawing up still offers inspirations to some “plans strategists,” with some obvious adjustments. Such a “planner,” for example, is Yoaz Hendel, who heads the Institute for Zionist Strategies, was Netanyahu’s spokesman in the past and is a known columnist today.

Hendel suggests Israel should gradually annex the settlement blocks, and – as a result – the PA’s status would be upgraded to a demilitarized state with temporary borders. In the “disputed territory,” the Israelis and Palestinians would carry the citizenship of their own state, and security supervision would remain in Israel’s hands.

His plan uses as its starting point the Oslo Accords division of the West Bank into three distinct areas: Area A – the 18% of the territory where the vast majority of Palestinians live and the PA has full civil and security control; Area B – 22% of the land, where the Palestinians have full civil control, but share security control with Israel; and Area C – the areas encompassing 60% of the territory, mostly in uninhabited desert regions in the east and south, where all the settlements and IDF bases are located.

“The most realistic practical option in the current circumstances is the drawing of borders along demographic lines,” he wrote in 2014. “Most Palestinians (98%) in the West Bank live in Areas A and B, under the control of the Palestinian Authority. These areas are spread over 40% of Judea and Samaria. Most Israelis live in 12% of the West Bank in large settlement blocs.”

“The remaining 48% of the territory has 100,000 Israelis and an equal number of Palestinians. The Palestinians’ territories should be upgraded to the status of a demilitarized state with interim borders and continuity based on A and B. The large settlement blocks can be annexed to Israel, and as a result of that the disputed territory would be immediately halved.”

SOME OF the other plans that have been put forward are variations of Begin’s autonomy plan from 1977.

Likud MK Yoav Kisch has a plan actually called “The Autonomy Plan of MK Yoav Kisch Based on the Principles of the Late PM Menachem Begin.”

Under this plan, Israel would annul the 1993 Oslo Accords, dismantle the Palestinian Authority and extend Israeli sovereignty over all of Judea and Samaria, except for 38% of the territory, which would become the area of Palestinian autonomy. Another 15% of the territory on the outskirts of the autonomous areas would be designated as Area I (Israel) and would be used to build transportation infrastructure connecting the various parts of the autonomous zones.

The Arab citizens in the West Bank outside of the autonomous area would be able to choose whether to become Israeli residents, and “eligible for Israeli citizenship as acceptable under the law of citizenship – or become residents of the autonomy. Kisch leaves the model of governance of the autonomous areas open for later determination, with the guiding principle being maximum self-administration while preserving Israel’s vital interests.

ANOTHER AUTONOMY-based plan is one proposed by Bayit Yehudi head Naftali Bennett. Under this plan, a Palestinian state already exists. Gaza, he argues, has all the requirements of statehood: a defined population, a defined territory, an effective government capable of using force, and the capacity to enter relations with other states.

Under his plan Israel will apply sovereignty to Area C, where some 400,000 Israelis live. The 80,000 Palestinians there would be offered Israeli citizenship or residency, something that would not significantly alter the country’s demographic balance.

Areas A and B would enjoy autonomy.

“A state manages taxes and postal services, hospitals, holds elections and provides education,” Bennett has said.

“The Palestinian Autonomy will do all that and much more, but be less than a state.” Bennett insists that there will be two restrictions: maintain an army and absorb “millions of descendants of refugees from 1948.”



The Center and Left plans Just as the maximalist alternative plans from the Right are very simple – annex all of the territories Israel gained during the Six Day War – so, too, are the maximalist plans of the Left equally uncomplicated: a complete withdrawal from all the territories.

Few Israelis, however, advocate such a policy, so over the years there have been numerous variations on this theme, all having to do with just how much territory Israel should withdraw from, and how much, if any, of its own territory it is willing to cede as part of a land swap.

The touchstone for these variations was the so-called Beilin-Abu Mazen plan, drawn up following secret negotiations that began in 1993 and concluded in October 1995 between Yossi Beilin, who was then Israel’s deputy foreign minister, and Mahmoud Abbas, at the time Yasser Arafat’s deputy.

Beilin hoped to get approval for the plan from Yitzhak Rabin, but the prime minister was assassinated just days after the plan was published. Abbas, meanwhile, distanced himself from the plan, but it has served as a basis for any number of proposals that have followed in its wake, even though this one was never formally published or ratified.

The Beilin-Abu Mazen plan introduced the idea of land swaps, whereby Israel would keep the large settlement blocs, about 4.5% of the territory, in exchange for a similar amount of Israeli territory – mainly near the Egyptian border in the Halutza area – and a “safe passage” for Palestinians from the West Bank to Gaza.

The guiding principle was to retain the maximum number of settlers inside Israel in the minimal amount of territory.

Jerusalem would be expanded into a super municipality, with both an Arab and Israeli municipality under it.

Israel would administer all the Jewish neighborhoods (“Yerushalayim”), including those beyond the Green Line, and the Palestinian municipality would administer the Arab neighborhoods (“al-Quds”). The Palestinians would fly their flag over the Temple Mount, but the site would be under extraterritorial sovereignty.

The new Jerusalem would include Ma’aleh Adumim and Givat Ze’ev.

The plan animated the proposals Ehud Barak put forward at the Camp David talks in 2000. Under these accords, that were never signed, Israel would eventually cede 91% of the West Bank and all of Gaza, and in exchange for annexing some 9% of West Bank, and would cede to the Palestinians 1% of the total territory inside Israel as a land swap (a 9:1 ratio).

Under this plan, Kiryat Arba would remain an Israeli enclave inside a Palestinian state, approachable by a road from the south. Israel would keep approximately 80% of the settlers in blocs, and would also hold onto the Latrun salient. The West Bank and Gaza would be linked by an elevated road.

Jerusalem would be shared.



THE CLINTON parameters of December 2000 moved the ball even further, with Israel ceding 94 to 96% of the West Bank, and the ratio of land to be swapped being 1% of territory inside Israel for 3% annexed to the Jewish state.

Like Camp David, the principles guiding the plan were that 80% of settlers would be incorporated into Israel; there would be territorial contiguity of the Palestinian areas; the amount of annexed land would be minimized; and there would be an attempt to minimize the number of Palestinians affected.

The solution for Jerusalem was not spelled out in detail, but the overall principle was two capitals, with the Jewish neighborhoods under Israeli control, and the Arab ones under Palestinian control. The Palestinians would have sovereignty over the Temple Mount, and Israel would have sovereignty over the Western Wall.

When this, too, went nowhere, Beilin got involved again – this time not as a government minister – going to Geneva in 2003 and drawing up the so-called Geneva Accord with former Palestinian minister of information Yasser Abed Rabbo.

This plan called for an independent, demilitarized Palestinian state based on the 1967 lines, but with slight modifications, giving Israel – for a 1:1 exchange – six settlements in western Samaria; Gush Etzion (excluding Efrat); Givat Ze’ev, Ma’aleh Adumim and Har Adar near Jerusalem; and the Jewish neighborhoods of east Jerusalem and the Old City’s Jewish Quarter inside the capital. The rest would be ceded to the Palestinians There would be an international religious authority controlling the holy sites in Jerusalem, with the Temple Mount under Palestinian sovereignty, and the Western Wall under Israeli sovereignty.



ALTHOUGH THE Geneva initiative was also never accepted, its approach had an influence on prime minister Ehud Olmert, who after some 30 meetings with Abbas in 2008, during the waning days of his tenure, outlined his plan to Abbas.

Olmert did not give the Palestinian leader the maps of his proposals, so Abbas sketched them on official Palestinian Authority stationery.

Olmert adopted the principle of the 1:1 swap from the Geneva Accords. Under this plan Israel would annex some 6.3% of the West Bank, but give up 5.8% in Israel to a future Palestinian state.

Unlike the Geneva Initiative, this plan called for the inclusion inside Israel of the Ariel bloc, as well as Efrat.

Under this plan, each country would have its capital in the part of Jerusalem that it controls, with a five-nation group overseeing the Holy Basin, over which neither Israel or Palestine would have sovereignty. This area included the Old City, the Mount of Olives and the City of David.

Abbas never responded to this offer.

A year later, in 2009, former defense minister Shaul Mofaz – at the time a Kadima MK – unveiled a plan of his own, the Mofaz Plan. Mofaz called for the immediate establishment of a Palestinian state in the West Bank on 60% of the territory, meaning the state would include all of Area A, Area B, and an additional 20% of Area C to provide contiguity. These borders would be temporary and negotiations would be held on a final status deal.

Mofaz ultimately envisioned a Palestinian state on 92% of the West Bank, incorporating the settlement blocs into Israel, but expanding them more than the Olmert plan did. On Jerusalem, he said the issue had to be dealt with sensitively, but “there is no chance if dividing Jerusalem.”

What was new in this plan was that Mofaz advocated acting immediately and not waiting for a negotiated solution. Since that time, in light of the ensuing failure of negotiations, ideas from the Center and Left have shifted from suggesting a road map to a negotiated solution, to putting forward plans either to bring the sides back to negotiations, or to separate unilaterally.

ZIONIST UNION MKs Isaac Herzog, Erel Margalit, Amir Peretz and Hilik Bar all have put forward various plans that differ primarily only on how to restart talks, and perhaps on the size of the blocs to be retained by Israel.

Zionist Union MK Omer Bar-Lev, meanwhile, advocates unilateral steps toward “separation.”


Israel, he argues, must separate from the Palestinians to retain its Jewish and democratic character, and while it would be best to negotiate the terms of this separation with a Palestinian partner, in the absence of such a partner, Jerusalem should move forward on its own to separate.

His steps include a halt to settlement construction beyond the main settlement blocs, passing a compensation law in the Knesset to grant generous compensation to settlers living outside the blocs who want to settle inside Israel, expanding Area B – the territory in the West Bank where the Palestinians have civil control, and Israel has security control – by another 20%, a move that would necessitate taking 20% from Area C, and the evacuation of some 35,000 settlers living in that part of Area C.

Once separation is achieved, Bar-Lev hopes the sides will negotiate a final status deal. His map has Israel ceding 95% of the West Bank, and needing to evacuate a total of 70,000 settlers.

A confederation, perhaps?

According to most European and US officials, the only solution to the Israeli-Palestinian conflict is a two-state solution, that is widely held to be axiomatic. That was one of the reasons that US President Donald Trump raised so many eyebrows during his press conference with Prime Minister Benjamin Netanyahu in Washington in March when he said that it really didn’t matter what solution was reached – one state or two states – the important thing was that the sides agreed.

While widely mocked, that statement showed that Trump was not locked into any one conception, something that has the potential for preparing the way to more out-of-the-box suggestions, that often haven’t received serious attention.

One such suggestion is a confederation, but not the worn idea of a confederation between a Palestinian state and Jordan, but rather between Palestine and Israel. One of the proponents of this idea, though he has not spelled it out in too much detail, is President Reuven Rivlin.

In December 2015 Rivlin indicated in an interview with two French journalists that the solution to the conflict might be a Palestinian state next to Israel in a confederated situation.

“There would be a confederation,” he said. “Decisions that concern the two states in the confederation – or the two states of the united Israel-Palestinian state – we will have to [make] together.”

During this interview he reportedly suggested land swaps between the two states, and said that while the two countries would have two parliaments and constitutions, the IDF would be the only army.

A variation of this idea has appeared in recent months pushed forward by an eclectic group of Israelis and Palestinians, including some Israeli settlers and former Palestinian security prisoners, called “Two States One Homeland.”

Under this plan, there would be “two sovereign states in one, open, land” – Eretz Yisrael/Palestine. The citizens of both states would be able to travel and live in all parts of the single homeland. Also, the states would agree on an equivalent number of citizens of the other state who could live in their territory as permanent residents. This would mean that Israelis could remain in the Biblical heartland of the Jewish people, and Palestinians could return to villages abandoned in 1948 inside the Green Line. Israeli permanent residents in Palestine, however, would vote for the Knesset, and Palestinian permanent residents in Israel would vote for the Palestinian parliament.

Jerusalem would be one city, with the holy sites managed by representatives of the different religions and the international community. Palestinians in the city would be residents of Palestine, and Israelis would be residents of Israel.

A different type of confederation idea has been put forward by former National Security Council head Giora Eiland, who placed on the table in 2010 a unique plan that could be called the United States of Jordan.

In this plan, Jordan would have three states; Jordan, the West Bank and the Gaza Strip – all governed by a federal government in Amman.

The West Bank and Gaza would have a budget, government institutions, laws, a police force and symbols of independence, just like the US states of Illinois and Alaska, but – like the American states – they would not have responsibility for foreign policy and military. Those duties would remain in the hands of the federal government in Amman.

Eiland has argued that the Palestinians would benefit from this arrangement because they would become part of a more viable, larger state, and it would not be ruled by Hamas. Jordan would benefit because it would not have to worry about a Hamas takeover in the West Bank. Israel would benefit because it would most likely get much more security from a West Bank confederated somehow with Jordan, than with a mini-state – likely to be a failed one – right on its doorstep.

Eiland has proposed another regional alternative that calls for creative land swaps between Israel, Egypt, and the West Bank, involving Jordan as well.

This plan has Egypt transferring some 720 sq. km. of land – including 24 km. along the Mediterranean coast toward El-Arish – to the Palestinians, to allow them to build a modern seaport, an airport as far away from Israel as possible, and a new city of some one million people. The area would be approximately 13% of the West Bank.

In return, Israel would give to the Egyptians an area in the Negev, along the border with Sinai, and will allow for a 10- km. tunnel to be dug just north of Eilat connecting Egypt by land to Jordan and giving it a land link – fully under Egyptian sovereignty – to the Persian Gulf.

At the same time, Jordan would transfer a ribbon of territory equivalent to 5% of the West Bank near the Jordan River to the new Palestinian state, and they might possibly be compensated for this by land given to them by Saudi Arabia along their border – the idea being that Egypt should not be the only Arab country to give up territory.

And the final part of this puzzle is that a Palestinian state would be established in the West Bank and enhanced Gaza.



Considering the land that will be added to Gaza from Egypt and to the West Bank from Jordan, the Palestinian territories would actually grow by 105% of the size of the original 1967 lines. Some 13% of Judea and Samaria, equivalent to the land given by Egypt, would be annexed to Israel, and this area – encompassing the large settlement blocs, plus some – would contain the vast majority of the settlement population.

SINCE THE end of the Six Day War, innumerable plans have been put forward from the Left, the Right and the Center about what to do with the historic land – and its inhabitants – that suddenly and quite unexpectedly fell under Israel’s control. That no agreement has been reached is due to a myriad of different factors, many of them not under Israel’s control. It seems that it is not, however, due to a lack of creative ideas.

Wednesday, May 24, 2017

Why Art Photography?by Lucy Soutter Paperback



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Why Art Photography? does not ask if the photograph is worthy of the museum or academy—that battle has been fought elsewhere—nor does Lucy Soutter, the book’s author, rewrite the treatise on how the medium has fared in an art-after-representation, post-Conceptual world.* Soutter thinks photography is doing fine—photographers are using new technologies, modes of distribution, and cross-medium experimentation to make works that are fertile and expansive to the experience of art. She writes that “photography has never been one medium, but many,” (129) and this is to its credit. What Soutter urges for in this book is unadulterated critical thinking when it comes to art photography—pure and clear—an autonomous art-historical approach within academic and institutional discussions when what is being discussed can be so much more.

Unarguably, I find this an interesting and legitimate cause. Soutter leads me to new avenues in thinking about thinking about art photography. Photography is an infinite pool from which to pull academic arguments and questions like Why Art Photography? But despite Soutter’s positive outlook, Why Art Photography? is not an electrifying invitation to feast on the ever-expanding and stimulating possibilities for photography as art. Rather, Why Art Photography? is an explicit and mind-numbingly comprehensive checklist that lays down a barrage of academic prerequisites for making and apperceiving art photography. “The art world today assumes a fairly high level of academic training in artists as well as critics,” writes Soutter, (27) and “the ideas that circulate around art photography are both necessary for interpretation and yet frequently difficult to access.” (17) I feel a bit like I am getting tips on how to join a cult.

Soutter makes her biases clear early on, in line with today’s academic circles: “photographs with a more formalist, modernist orientation tend to circulate in specialist photography galleries and fairs. The broader art world regards this photographic culture as somewhat insular and limited in outlook.” (6) Those poor souls who just had some “subjective, expressive urges” they wanted to pour out onto a damn sheet of photographic paper will find that these urges are “considered highly problematic within contemporary photographic education,” according to Soutter. And some hapless students have this to look forward to: “photography students on their individual journeys of discovery are often baffled as they hit the invisible postmodern barrier” (5)—these ones will have a hard row to hoe in the face of Soutter’s academy.
Soutter likes to present the binary oppositions. On deadpan photography, she writes: “for those most involved in thinking and writing about such work, the cool, uninflected surface of deadpan photography provides a springboard for some of the most ambitious aesthetic investigations in contemporary art. For many viewers, however, this work remains perplexingly blank, impersonal and boring.” (31) On digital photography: “When digital was first introduced, there was a kind of hysteria on the part of some writers and audiences, a panic that the new technology would undermine the truth-value of the photographic image … Some optimistic writers describe the introduction of digital technology as the dawn of an era of infinite creative possibilities for photography.” (93)





Soutter wants a place for these considerations in discussions, regardless of photography’s fluidity as a medium, with uses that are just as applicable to scientific diagnostic tests and cell-phone snapshots as avant-garde issues in art and culture, and she makes a fine argument for why this has nothing to do with Greenbergian medium specificity, where a photographer would have to pin down the essence of photography to make art, as—in Greenbergian terms—an abstract painter ideally channels the essence of paint onto the canvas surface. She makes other acutely astute observations, too, for instance noting that Hal Foster, David Bates, and David Greene with Joanna Lowry have all written responses to contemporary subjective photography (such as personal and self-referential images by Nan Goldin and Ryan McGinley) that, “move photography away from postmodern critiques of representation, yet none of them wants to describe what is happening as a move backwards into tropes of modernism.” Ostensibly, she sees room for improvement.

She guides us away from the anemic compromises to be made with terms like the art-of-photography or the artist-who-makes-photography. She delivers a book full of examples to bolster the cause for critical discussion about Art Photography—though, surprisingly, she doesn’t title upper-case her cause. But Soutter is not dogmatic; she is didactic. This book is not about living, being, and breathing as an artist. This book is a guide for how to behave in front of art. It’s a cheat sheet to memorize when faced with the expectations of academia and the institution. (I take this in and become short of breath:) “This is an insider’s guide, designed to empower readers to develop their own opinions about what is happening on the cutting edge of contemporary photography.” (WAP 1) I realize Soutter finds it to be of the utmost importance that you have done your homework before you make a photograph, or talk about one, but I don’t see room for my own opinion, and I’m resisting.

It’s like when you go to a Tony Robbins “Unleash the Power Within” conference and expect to make your way quietly to your seat, to focus on your own notes and observe the spectacle, and then you realize you can’t. The enthusiastic ushers make you high five them with laser-like force. Your seat mates want to chat you up immediately. And they make you dance… Tony Robbins makes you dance…. (Not quite a good analogy. I haven’t been to an “Unleash the Power Within” conference, but I’ve read things… I’m having a hard time coming up with an analogy because, of course, everything I can think of is a stereotype, something trite, clichéd, and unfair in its narrowness.) How about this? It’s like knowing when you enter a library you should be quiet. Or, no—it’s like going to a church and knowing to stand when you sing the hymns. But, no—really, it’s like knowing that you are supposed to put the salad fork on the outside of your dinner fork on the left side of your plate. It’s manners. It’s the “insiders guide”-quality of this book that feels like an ill-fitting suit.

I fell in love with photography looking at a late-18th-century photograph of a bare-branched tree. The texture of the albumen print, the shallow depth of field, this ancient and towering tree—this image put me right there to the extent that I could smell the mouldering leaves on the ground and the crispness of the Fall air. I consumed that image without looking at the ingredients and it consumed me right back. That love evolved into an abyss of curiosity about all kinds of photography. I like certain photo works and I don’t-so-much like others. I want to discover why I gravitate one way or the other. I appreciate the information, but Soutter’s disclosures might only get in the way.

My heart sinks when I read this passage: “one of the reasons I wrote this book was to provide answers for photography students who regard themselves as artists. Again and again I have encountered the same questions: ‘If contemporary photography is so eclectic, why can’t I do what I like?’ ‘Why does it seem like my teachers want me to repress my creativity and to feel so guilty about visual pleasure?’ ‘Why can’t I work the way photographers did in the past?’ ‘Why is my work required to have a critical rationale?’” The truth is, I don’t much like eclecticism for the sake of eclecticism, sentimental beauty shots, or derivative works, and I think artists who can vocalize their critical rationale for their work are pretty clever folk. But if Soutter is being asked these questions at all, it seems to me that she and her colleagues are failing their students—rather than exciting them about the potentials of photography, perhaps Soutter and the academics are overestimating contemporary bias and undermining the students’ willingness to explore and make aesthetic judgments of their own.

Soutter dispenses a lot of ideas in Why Art Photography?—and ironically, these ideas dictate that it is neither her ideas, nor yours, per se, that take precedence when you encounter a photograph, or have the urge to make one, but what everyone else—that ever-elusive bunch—is thinking in terms of art. Knowing this, perhaps Soutter hopes you will build a solid and admirable strategy to navigate this temperament that exists (almost a priori) out there in the world. You are meant to follow this certain temperament to get ahead (is that it? Does one get ahead by being on the “right” side?) and don’t forget that there are others out there who feel the other way about it (god bless their sorry souls—they didn’t get the memo. Watch out for that team…). There’s always something at stake, always something in crisis, always something to be won or lost. Or are we just bored?

* Other examples of exhibitions and a symposium on this topic would be: What is a Photograph? was a recent exhibition at the International Center for Photography of contemporary photographers that pushed the limits of the medium in a post-Conceptual-art world. The associatively-precarious Anxiety of Photography was an exhibition at the Aspen Art Museum in 2011 that explored the power of photography’s “in-between” status as a medium after Conceptual art. “Is Photography Over?” was a two-day symposium at the San Francisco Museum of Modern Art in 2010 that did not necessarily answer its own question—perhaps for a good reason.
cy Soutter, Why Art Photography?, (Routledge, 2013)

The Quilts of Gee's BendJun 13, 2017 by Susan Goldman Rubin Hardcover (Abrams Books for Young Readers)


  


Transporting readers to rural Gee’s Bend, Alabama, this handsome volume celebrates a deep-rooted, local needlework tradition by looking at individual quilt makers and their work, while tracing the history of this small, African American community. The ancestors of current residents were brought to the area in 1845 to work as slaves. Later, they became tenant farmers with little hope of owning their own land. Rubin’s account of their history continues with changes brought about by the New Deal, inspiration and determination that arose during the civil rights era, the formation of a sewing cooperative during the 1960s, and the quilts’ recognition by the national arts community after a 2002 museum exhibition. Writing with awareness of broad social forces as they affected the residents of Gee’s Bend, Rubin offers a concise account of local history while seamlessly weaving quilters’ reminiscences of family, community, poverty, and memorable events into an informative narrative. The spacious pages of this well-designed book create a fitting showcase for photos of the vivid, unusual Gee’s Bend quilts. Young readers inspired to try their hand at quilt making will find, in the back matter, simple directions for creating a hand-sewn quilt square. A colorful introduction to a uniquely American subject.

The Fence and the Bridge: Geopolitics and Identity Along the Canada-US Border. Heather N. Nicol. Wilfrid Laurier Press.



In The Fence and The Bridge: Geopolitics and Identity Along the Canada-US Border, Heather N. Nicol examines the ideas, narratives and perceptions through which these two North American countries see the boundary that both unites and divides them. The book contributes to the analysis and discussion of the historical transformation of the concept of borders, and the ideas that surround their management and maintenance. Specifically, Nicol examines and prompts readers to question the basis of current political ideas on US and Canadian borders and their significant impact on the design and implementation of their corresponding domestic and foreign policies. Nicol is particularly interested in and concerned about the rise of a securitisation agenda in North America after the events of 9/11, and how this has influenced and impacted Canada’s perception and management of its own borders.

The innovative aspect of Nicol’s work lies in highlighting the centuries-long struggle that underpins current understandings of, and policies on, US-Canadian border management. Through the analysis and discussion of various historical episodes and cultural expressions surrounding bilateral agreements on US-Canadian borders, she demonstrates that behind the practical commitments and bilateral policies established between the US and Canada on border control lies a number of ideological differences that are unlikely to be reconciled in the near (or even distant) future. Nicol argues that such differences result from perpetual attempts by the US to impose its hegemonic practices, ideas and culture onto other countries, including Canada, and the unceasing determination of Canadians to construct and maintain an identity of their own, i.e. not ‘American’. It is in the context of this discussion that Nicol introduces the idea of ‘reflexive transnationalism’, to understand and explain the ways and means through which Canadian and US nationalisms have been constructed, divided and even connected by their shared borders.

Nicol uses representations, metaphors, stereotypes and other popular culture references, such as cartoons, to identify and illustrate US and Canadian attitudes towards their common borders. She argues that these images and texts are just as important as political speeches or diplomatic documents in constructing national and transnational identities and hence ideas embedded in current border security arrangements. Most of these images and texts convey a hegemonic ideological and economic discourse from the US, which is portrayed as a continental giant always adamant to pressure, manipulate and even absorb an always ‘resistant Canada’, focused on nation-building.

For instance, Nicol discusses the content of newspaper articles written in the 1900s, which are said to represent the then allegedly pacific-but-imperialist narrative underlying US policies towards Canada. While some stated that ‘Canada today owes its national existence to the forbearance and to the pacific policy of the United States’, others straightforwardly confirmed a ‘national motive’ for the US invasion of Canada, which could only benefit from the protection of Uncle Sam – whether it wants it or not (71,76). Nicol argues that the rise and dissemination of these attitudes and ideas among people and policymakers on both sides of the North American borders progressively transformed them from mere geographical pointers into sites of securitisation. Through the analysis of these and other texts, Nicol concludes that the US and Canadian borders have never been solely markers of the confines of different socio-political communities, but have been built on the rationale of protection against hostility – be it from one’s neighbour’s hegemony or the threats of a post-9/11 world.
Image Credit: US-Canada border near Glacier National Park (mtsrs)

While Nicol’s analysis is noteworthy, the book is strongly oriented towards a Canadian audience and presents a partial view of Canada as an ever-pacifist country which has been subjected to US dominance. Depicting Canada as the sole target of US hegemony in the American continent is not only inadequate, but also inaccurate. For instance, Nicol incorrectly describes the ‘Manifest Destiny’ as ‘the belief that [the United States of] America had a divine role to play as a ruler of the North American continent’. She argues that this belief led the US to regard its border with Canada as nothing but an inconvenient line which needed to be erased.

Such an assertion, however, not only inaccurately describes the Manifest Destiny, but also underrates its impact on other countries, which were substantially more affected by the prevalence of this belief in the nineteenth and twentieth centuries than Canada has ever been. The Manifest Destiny was actually the belief that the United States were destined to expand throughout and dominate the whole American continent, i.e. not just Canada. Although Canada might have endured diplomatic and ideological pressure from the US resulting indirectly from the prevalence of the Manifest Destiny, Mexico, Cuba and the rest of Latin America endured direct military interventions, invasions and territorial losses directly resulting from this belief. By overlooking such substantial differences, Nicol compromises the potential use of the book in comparative political or international relations studies beyond Canada.

Moreover, the book’s significant emphasis on the emergence of a US-Canadian transnational identity, emerging from US hegemony and Canadian ‘nation-building’, inaccurately captures the expanding cooperation and ideological alignment that has occurred – either to the right or left – between various administrations, for instance those of President Jimmy Carter and Prime Minister Pierre Trudeau or Prime Minister Stephen Harper and President George W. Bush. The simplification of US and Canadian positions on border cooperation, cross-border trade and security initiatives seems to be aimed at reaffirming Canadian identity as ‘not American’, rather than analysing the basis of the unprecedented harmonisation of North American border, security and immigration policies.

In conclusion, Nicol makes a worthy contribution to US-Canadian border studies by providing a Canadian perspective on the increased hardening of what is ultimately an imaginary line dividing two imagined communities. Her work invites us to consider that ‘the meaning of borders is open to contestation’ (259), and that while their current management is a reflection of past popular understandings and nationalist ideas, these do not necessarily always mean the same thing to everyone. Indeed, a more cosmopolitan understanding of borders might emerge as peoples and countries uncouple the concepts of states and nations, through better and increased communication and understanding of each other’s soc
ieties. Nicol could increase her contribution to prompting such change by de-emphasising the differences between Captain Canuck and Uncle Sam, and examining in a more nuanced way the similarities between them.

Thinking Like a Political Scientist: A Practical Guide to Research Methods. Christopher Howard. University of Chicago Press. 2017.


In Thinking like a Political Scientist: A Practical Guide to Research Methods, Christopher Howard makes a compelling case for transforming how research methods are taught to undergraduate students of political science. Through its accessible, easy-to-follow approach, this new guide equips and encourages the next generation of political scientists to undertake research that has the potential to directly impact pressing political issues, writes Iván Farías Pelcastre.




There is an often overlooked fact at the heart of political science: the study of politics has been the realm of moral philosophers, legal thinkers and public administrators for longer than it has been that of scientists. Despite their late arrival, political scientists confidently argued that the use of the scientific method in their analyses of political phenomena enabled them to understand corresponding causes and effects in a better way than previously. They claimed they could study and explain the emergence, functioning and development of former and modern polities in an objective, rigorous and value-free way. This allowed them to rapidly appropriate a field that is nearly 2,500 years old. Ever since, the discipline of political science has been built upon the conviction that there is only one way to study politics objectively: through empirical, measurable and evidence-based research.

To become effective political scientists, then, contemporary students of political science (and by extension, international relations) are expected not just to learn about, but also conduct valued and insightful research on domestic and international political structures and phenomena. They are also expected to publish written work that provides suitable and innovative causal explanations about the origins, functioning and development of these same phenomena. Despite these high expectations, few books, and even fewer academics, ever manage to help students truly understand and think critically and systematically about the domestic and international political issues taking place around them. At times, teachers of political science introduce students to multiple theories, issues and debates, but fail in helping them to develop the critical judgement to analyse them. Moreover, many research methods textbooks (and teachers) nowadays are mainly, or only, concerned with teaching how to use statistical software packages in lieu of a comprehensive course on how to gain effective research skills. To address these gaps and contradictions, it is therefore necessary to change our collective approach to the teaching of research methods.

In Thinking Like a Political Scientist, Christopher D. Howard contributes to such a change. In this short but excellently written book, he makes a compelling case for transforming how research methods are taught to undergraduate students. Howard rightly argues that students of political science ‘are better off learning a handful of skills, and learning them well, rather than being overwhelmed by a multitude of concepts and formulas’ that is currently the subject of numerous research methods courses (4). The book’s main aim is to enable students to develop their own skills as researchers, so they can generate and advance our common knowledge about domestic and global politics. The book achieves this objective by introducing its readers, step-by-step, to political research design, while maintaining an excellent balance between substance and humour that is hardly ever seen in other research methods textbooks. Its accessible language and easy-to-follow structure and examples prompt students to move away from the mere memorisation of facts, formulas and theories towards a more critical evaluation of their own ideas and works – both inside and outside the classroom.
Image Credit: (Simone Smith CC BY 2.0)

The book is divided into two main parts: ‘Asking Good Questions’ and ‘Generating Good Answers’. In Part One, the author introduces readers to the significance and value of asking – and confidently answering – the three main questions underlying any worthy political research: ‘who cares?’; ‘what happened?’; and ‘why?’ Some of the skills discussed in this section include: how to ask (and successfully answer) causal questions featuring independent, dependent and intervening variables; how to pick good cases for testing a hypothesis; and how to distinguish causation from correlation. Answering these questions serves as the basis for teaching students other valuable research skills, including, for instance, how to work with ‘big’ concepts, such as democracy, peace and security. These lessons will prove relevant to students of any sub-discipline of political science and international relations, including comparative politics, political economy and political theory.

In Part Two, meanwhile, the author provides a short guide to some of the most common and essential tasks of political scientists, including how to choose an appropriate research design; how to choose and conduct experiments to test a given hypothesis; how to select suitable cases; and how to use evidence to adequately support one’s arguments and hypotheses. Throughout these sections, the author also discusses how to gain and strengthen other valuable research skills, such as writing strong literature reviews, recognising authoritative research and addressing common hurdles, such as the lack of sufficient data on a given issue or phenomenon.

Just as importantly, the book helps students to understand what political scientists – including their own research methods teachers – expect from them and their research. For instance, the book dispels the widespread myth that undergraduate papers should always offer a truly original argument. Howard reassures students that they do not need to search for (least find!) the ‘holy grail’ of politics when writing research papers. Instead, he clarifies that the main point of political research is simply ‘to figure out a way to move the conversation forward, even if only a little bit’ (23). It is this kind of valuable insight that makes Thinking Like a Political Scientist truly stand out from other research methods textbooks.

The book’s most important contribution to the literature, however, was probably unintended. It hints at the possibility of further change in our collective understanding of the main aim of political research. At first, Howard explicitly states that political scientists prize causal knowledge highly, following the longstanding convention that research should be simply devoted to explaining political phenomena – not changing material realities. Afterwards, however, he challenges the notion that political scientists should always conduct empirical, as opposed to normative, research in the pursuit of knowledge. He concedes that, at times, the most persuasive political research is when researchers ask normative questions, moving deliberately and decisively from abstract ideas and theories towards concrete proposals for addressing domestic and global political issues.

Finally, Howard acknowledges that political scientists will, and often do, try and engage in conversations that extend beyond academia. Hence, he encourages students to conduct research that goes beyond simple essay-writing, number-crunching and chart-making. Instead, he advises students to stop, reflect and ask themselves: ‘what makes a political puzzle so important that readers will devote some of their scarce time and attention to understanding it better?’ (25). He argues that students should aim to produce research that truly connects with its readers, that persuades them to stop, listen and engage with it. Perhaps then, in the future, the aim of political research will not only be to extend, refine and challenge our knowledge of domestic and global politics, but also to propose solutions to actual political problems affecting people around the world (25). Thinking Like a Political Scientist contributes to move the debate in this direction. And, most importantly, it does so in the most effective way: talking directly to the next generations of political scientists (and their teacher




The Booming Post Great Recession Economy has absolutely nothing to go with #OyVeyDonaldTrump:The Money Formula: Dodgy Finance, Pseudo Science, and How Mathematicians Took Over the MarketsMay 30, 2017 by Paul Wilmott and David Orrell Paperback (Wiley); Economic Modeling in the Post Great Recession Era: Incomplete Data, Imperfect Markets (Wiley and SAS Business Series)Jan 4, 2017 by Sarah Watt House and John E. Silvia Hardcover(Wiley);After the Crisis: Reform, Recovery, and Growth in EuropeAug 30, 2016 by Francesco Caselli and Mario Centeno Hardcover (Oxford University Press); The Great Recession Paperback – April 26, 2017 by Michael Riles (Solstice Publishing); After the Flood: How the Great Recession Changed Economic ThoughtMar 23, 2017 by Edward L. Glaeser and Tano Santos Hardcover (University of Chicago Press)

Image result for great recession

The state of the economy has little to do with Donald Trump, at least for the moment.

But the stock markets have been riding high since his election, just earlier this week the S&P 500 index reached a record high of 2400, which is 3.5 times its low of 683 in March ’09.
I’m sure some of you are familiar with the term FAANGS that describe five major stocks in that index: Facebook, Apple, Amazon, Netflix, and Google.

What you might not know, and what I didn’t know, is that those five stocks account for virtually all of the S&P gains in the past few months. In fact, the remaining 495 companies have LOST almost as much in market capitalization as the top five have gained.

And then there is the peculiar case of Amazon, which recently celebrated its twentieth anniversary of going public. By every measure, Amazon is a modern blue-chip stock: large, well-established, dominates its sector, and is a household name.

There is just one catch: it doesn’t make money, or at least not much. And its thin profitability is OK with founder Jeff Bezos, who has poured billions into Amazon’s cloud business rather than trying to improve the company’s bottom line.

Maybe Peter Thiel is right: the value of Amazon, or any firm, is the sum of all the money it will make in the future (discounted to its present worth). So at the moment shareholders believe Amazon will make enough profit in the future to justify its $460 billion market capitalization today.

Or maybe it’s wildly overvalued. David Stockman calls it one of the “greatest cash-burn machines ever invented.” Remember, this is a 25-year-old company, not some startup.
Stockman says: “In an honest free market, real investors would never give a quarter-trillion-dollar valuation to a business that refuses to make a profit, never pays a dividend and is a one-percenter at best in the free cash flow department — that is, in the very thing that capitalist enterprises are born to produce.”

The point here is not to pick on Amazon, or any of the tech companies like Facebook and Netflix that may never make much profit. Maybe there really is a new corporate paradigm with a long-term outlook, just like Sony used to have with its 50 year plans.

But there is something unsettling about companies that make their founders and major shareholders rich without generating a profit. David Stockman describes it as a casino rather than a market — everyone has to find the next Amazon to invest in like a horse at the track. But as we see in the S&P 500, there are hundreds of losers for every winner.

Maybe Amazon is an uneasy symbol of what seems artificial and unsustainable about our prosperity. And if the economy seems artificial and unsustainable, maybe that’s because it is artificial and unsustainable.

Whether the sky has fallen, or is falling, or is about to start falling, is more a matter of perspective than objective fact or even measured opinion — with apologies to the people who compile the almost useless GDP figures. Whether the economy is good or bad, growing or crashing, depends very much on whom you ask.

I suspect most people in this room have the good fortune to work in the knowledge economy, to have job or career opportunities or enough personal wealth to see the glass as half-full.
But we shouldn’t ignore the millions of people for whom the sky certainly has fallen:
  • 50- and 60-somethings who lost their jobs after the crash of ’08 and will never again have equivalent income or career prestige;
  • Blue-collar workers across the spectrum, from auto to coal miners to steelworkers;
  • Retirees who lost 40 percent of everything they had in the last stock market crash, and who were too scared to stay in the market;
  • A generation of millennials who may be the first generation in US history to simply accept as the “new normal” having huge amounts of debt and a declining standard of living;
  • A huge number of Americans who simply feel lost in a new economy with constant disruptions, no job security, fewer benefits, who fear outsourcing and offshoring and automation, and who aren’t ready to drop everything and move every three years in a gig economy.
Hopelessness is a severe form of poverty, one that’s spreading higher into middle class reality than at any time since the Great Depression.

So while most of us are big believers in capitalism and free markets and global trade, it’s facile simply to assume everyone else sees things the same way. There are winners and losers, even if the world is getting richer. The sky doesn’t fall for everyone at the same time, and it can fall in slow motion in ways that profoundly affect our grandchildren.

Obviously we can’t know the future, or what the economy will look like in five years or ten years. But let me offer three assertions.
First: the Fed and other central banks can’t make things better, but they sure can make them worse.
 

Creating new money and credit does not create new goods or services. We shouldn’t care about the quantity of money per se too much; prices can adjust. We should care very much, however, about the quality of money in the economy, the rate at which the supply grows, and the stability and certainty it provides to businesses and individuals trying to plan for the future.
Even the Janet Yellens of the world admit there are limits to monetary policy, and we’ve reached them. Central banks are the primary villains and enablers of our current economic drama, and money cannot be centrally planned any more than wheat production or factory worker wages or oil prices. The effect of central banks on culture and the choices humans make is one of the biggest untold stories of our time.
Second: we don’t really know what things cost.
 

David Stockman reminds us interest rates are the most important prices in an economy. When you manipulate them, it becomes almost impossible to know the honest price, meaning the true market price, of anything: oil, real estate, tech stocks, bread or milk.
Since about 1980, but especially since 2008, central banks have wildly distorted the global economy. When the cost of money is artificially cheap, lots of business ideas look good on paper. And when safe investments like Treasury bonds and CDs don’t pay much, we’re all forced into chasing yields through riskier investments. Activist central banks are profoundly dangerous for investors and savers. If central bankers stay active in the next few years, through more QE and negative interest rates, that’s a sure sign the emperor has no clothes and central bankers have made a political decision to kick the can down the road.
Third: the laws of economics apply to governments.
 

We think bubbles apply to stock and real estate, not government policies. But at some point economics applies to governments just as surely as the laws of gravity apply to all of us. Interest rates of just 3.5 percent on Treasury notes will be disastrous for the US federal budget over the next few decades. By the mid-2020s, interest on Treasury debt could exceed defense and entitlements as the single largest annual expenditure by the federal government.
Deficit spending and unpayable entitlements will be the downfall of western governments, the legislatures of which spent the last 100 years creating enormous debt and entitlement bubbles. Social Security and Medicare are certainly examples of slow motion catastrophes; it just took a long time to get here.
In any reasonable, lawful world, spendthrifts are punished. The rest of the world knows America will never get its fiscal house in order. No sane accounting standard would ever permit a government to keep trillions of dollars in entitlement promises off its balance sheet.
If we think about it rationally, this should mean creditors cut us off entirely, or at least demand junk bond interest rates. It should mean haircuts and means testing for Social Security and Medicare. It should mean selling off federal assets, including vast western lands. It should mean significant cuts to the federal budget. But Congress will do none of these things, nor can it. We’re past the point of political solutions.
I’ll close with some good news: we have to remember that “the economy” is 320 million people in the US and seven billion people worldwide, most of whom get up every day hoping to improve their economic circumstance. That motivation is very powerful, and often can overcome even the biggest screw-ups by governments and central banks. Short of outright authoritarianism — which is always possible — humans have a tremendous capacity for improving their material lives.
At least on paper, America still contains the raw materials for success:
  • A currency that for the moment is still the least dirty shirt in the laundry, and in uncertain times a flight to the dollar is still likely;
  • The best universities in the world and a relatively educated workforce;
  • Abundant energy. The Bakken Formation in the Western US means we have two times the amount of oil and three times the amount of natural gas;
  • More farmable land than any other nation: 17 percent of all US land can be farmed;
  • 500 million acres of timber;
  • Two huge oceans act as defense but also provide access to Eastern and European markets;
  • And most of all, a hard to define American sense of optimism which is almost a form of entitlement.
Let me close with a reminder: we believe in liberty, not fate. The sky falls only if we let it.