Red Flags: Why Xi's China is in Jeopardy by George Magnus

    Published in 2018, Red Flags is about the four economic traps China faces according to Magnus. They are first short-term challenges: (1) the debt trap and (2) the renminbi trap. Then, over the medium-term, China faces a demographic/aging trap and the middle-income trap.

Background and History

    The book begins with three chapters of background information. One covers the Chinese "Century of Humiliation," the next is the era of Communist rule, and the third is about the economic crossroads that China is at today. In these chapters, Magnus discusses how China was forced to pay massive indemnities again and again after losing wars in 1842, 1860, 1896, and 1900. Annual payments on debt in 1920 made up about 40% of GDP. A quick google search shows US federal debt service makes up 1.6% of GDP according to the CBO. In the second chapter, Magnus points out that Mao was unable, during his tenure, to stimulate strong economic growth like China had in the 1990s and 2000s, although some of the fundamentals were there early on. When the Communist Party came to power in 1949, income per head was $450, and by the time Mao died in 1979, it was $850. So better, but not by much, and Magnus says this is well behind South Korea, Taiwan, Singapore, and Hong Kong at the time. Between 1948 and 1978, Chinese proportion of world income rose to just under 5% and its share of world trade was just 1%, making it not very critical to the world economy. But even though China was not yet relevant by 1978, GDP grew at a respectable 6% annually on average until that point, and industry grew from 17.6% of GDP to 44%. Under-five mortality dropped from 205 per 1,000 live births to 73. And while 80% of China's population was illiterate in 1949, literacy was up to 80% by 1958 and then to 97% by 1975. Secondary school enrolment went from 6% to 50%, and average years of total schooling increased dramatically as well.

    With those benefits laying the foundation, China struggled to build on that, as they were unable to produce large food surpluses and had insufficient employment to create sustainable consumer demand and a classic Communist neglect of efficiency and incentives. It doesn't help that China allocates government funds in a completely opaque and political manner, ignoring any conception of a popular mandate. Funds are allocated more to maintain loyalty of Party supporters than to promote economic growth based on national objectives. While the labor force grew by 200 million Chinese people, only 40% entered the "modern sector," whatever that means. The agricultural labor force was 70% bigger in 1978 than in 1952 and the agricultural laborers were worse off than urban dwellers. However, during the decade from 2003-13, when Hu Jintao and Wen Jiabao were in power, China took off, going from the world's sixth-biggest to second-biggest economy, and income per head went up from $1,293 to $7,080, or $3,940 to $12,205 in purchasing power parity terms.

    In the 2000s, China's export surplus exploded, reaching 10% of GDP by 2007, and being the greatest in the world in aggregate today. However, despite being so huge, the surplus as a percentage of GDP has dropped to 1.4% as of 2017. In an aside, Magnus gives the reader some interesting information on the Chinese economy. He writes that State-Owned Enterprises account for only a fifth of output and a tenth of employment, but that doesn't mean the rest is private. Many of the rest of the firms have large or majority state owners who exercise significant control over their appointments of executives and corporate strategy, usually disguised by multiple layers of investment companies. With these included, the purely private sector of the economy is probably about 25%.

    A significant issue in the Chinese economy today is that the Chinese "hukou" system doesn't allow people to move freely. 44% of Chinese people are rural, for a total of 600 million people. Many of them try to migrate to cities for better pay and public services, but they do so at their own risk. When a Chinese family lacks an urban hukou, some of them will often try to migrate to the city to work, and those migrants make up 36% of the workforce. The hukou system was created in 1958 to restrict rural migrants to Chinese systems, and although changes have been made so that migrants no longer need a permit to work and live in cities legally, they still need a permit to have access to social services and welfare. In 2014, a new reform attempted to steer migrants away from larger cities towards smaller and mid-size cities by allowing big city municipal governments to set stricter settlement criteria, and urging them to control population inflows.

    China also faces a severe income inequality problem about on par with the United States. China has a Gini coefficient of .47 as of 2015, compared with .3 in the 1980s. This is considered a marker of very high inequality. 1% of Chinese households own a third of the country's wealth while just one percent of wealth is owned by the bottom 25%. These numbers were similar in the USA, which is incredibly bizarre to me since China is a "Communist" country. Obviously Communism is not "pure" in China or whatever but that's still pretty remarkable.

Debt Trap

    China faces major issues with both debt owed by the government and also household debt due to years of credit-funded investment growth. It worked for a long time. During the 2008 Financial Crisis, GDP growth only dropped to a low of 4% per annum, and by 2011 China briefly returned to double-digit growth. But China borrowed its way out of the crisis, with debt as a share of GDP increasing from 135% to 170% between 2008 and 2012. By 2016, China's debt to GDP ratio rose to 255% and by the end of 2017 it was over 300%. So this indicates that China has funded a huge amount of its growth with money it didn't have, putting major stress on their banking system. About half of all new credit between 2005 and 2016 came from China. The central government is not a major borrower, with debt of just 15% of GDP, although the accounting is opaque, says Magnus. Most of the debt is owed by companies, mostly SOEs, and local and provincial governments, which together amount to about 200 percent of GDP. But I'll say this: what the fuck is he talking about? I keep seeing IMF figures and everywhere that show Chinese debt is much lower, like 60-75% of GDP. This doesn't make any sense. I can't figure out what is being included and what isn't. I don't get it.

    Well. Anyway, Magnus says it won't be possible to grow its way out of its debt, since it's the higher creation that drives China's higher growth. Additionally, he writes that China's high savings rate can't save the country either. China's debt risk is not what many countries like Argentina or others have faced in which they owe large amounts of foreign currencies. Rather, China has to deal with high domestic debt involving Renminbi assets and liabilities. This would be more like the US situation in 2008 in which a high savings rate did not help much. I also honestly didn't understand this part too much either.

The Renminbi Trap

    The next trap China faces is how to raise the value of its currency. As of 2017, renminbi made up just 1.6% of international payments. The problem that China runs into is that since it has such a massive current account surplus, countries are constantly buying goods, bringing foreign currencies into China rather than exporting renminbi to the rest of the world.

    The Renminbi faced a major challenge in 2015-16 when the Chinese markets crashed, bringing the RMB down to 7 against the dollar by the end of 2016. The fall was only stabilized by China burning its foreign currency reserves by $500 billion. Luckily for them, their current account surplus from earlier years had meant that their foreign reserves increased from $400 billion in 2003 to $4 trillion in 2014. So it wasn't a huge problem for China, and they bottomed out with $3 trillion in January 2017. That's really an amazing amount considering that the USA has something like $250 billion (not that we need it since we can print dollars).

The Demographic (Aging) Trap and the Middle-Income Trap

    I am combining the demographic and income traps because I took fewer notes on these, and really not that much on aging because it is so straightforward. Because of dumb One-Child Policy (OCP) and the general trend of countries' fertility rates dropping as they get richer, China's population is set to crash over the next few decades, with a way higher proportion of people being too old to work than is good for the economy. Magnus writes that the Great Leap Forward (1960-62) crushed Chinese fertility as well as killing 40-45 million Chinese people. Fertility rates dropped from 6.4 children per woman to 3.1. Numbers climbed again into the early 1970s, reaching 5.8. But then, the CCP introduced family-planning policies that brought the rate down to 2.3, and then started OCP, bringing the fertility rate down to 1.45. Although numbers picked up to about 1.5-1.6 in the 2000s, they have not reached replacement levels since then. OCP was enforced by means of pension arrangements and its effect was large, but can be underestimated. Consider the fact that many places like Singapore, Taiwan, Hong Kong, and South Korea all reached lower fertility rates without such a policy.

    The other difficulty China faces is the so-called "middle-income trap." There seems to be some disagreement on whether such a "trap" exists. After all, the high-income countries deal with slow growth, and low-income countries have to deal with being poor. So everybody has problems. But the specifics of this are that countries' growth tends to slow down initially as per capita income moves into the range of about $10,000 and then again at around $15,000 (in terms of 2005 purchasing power parity to US dollars, so it would be higher now).  Googling says that China's GDP per capita is about $14,000, or $21,000 PPP adjusted. The World Bank does research on this sort of thing, and of the 101 countries that were middle-income in 1960, only 13 became high-income countries (although some aren't really "countries"). In case you were wondering, the group is: Hong Kong, Japan, Singapore, South Korea, Taiwan, Equatorial Guinea, Greece, Ireland, Israel, Mauritius, Portugal, Puerto Rico, and Spain.

    China was extremely impressive in the 2000s, with seven straight years of double-digit growth from 2003-10, and had also spent 23 years growing at seven percent or more. After ascending to become a low-middle-income country in 2001, China was already a high-middle-income country by 2010. but China has a lot of work to do. One problem is that a lot of the recent growth has been illusory, and due to massive real estate investment that has funded the building industries but has created too many useless buildings. Additionally, Chinese workers are under-educated. Only 17% of Chinese workers had tertiary education as of 2015, and the share of those in manufacturing was lower, at just 10%, whereas the number is 47% in the US. Moreover, China spends less money on research and development than its competitors, at just about 2% of GDP. The US spends (as of 2016) 2.7%, Germany 2.9%, Japan 3.5%, and South Korea 4.2%.

    I'll conclude by saying that this was a fact-dense, but very readable book. It is short so I was able to get through it quickly. My only real complaint is that I wish there was an update to read from George Magnus written after Coronavirus, but maybe I will be able to find more from him in newer articles.

Miscellaneous Facts:

• There is an interesting passage about the importance of the Shandong Peninsula in the north of China, which is known as a "dagger pointing at the heart of China." Magnus compares it to the Chinese version of Alsace-Lorraine, giving those who controlled it geographic command over Peking, the Yellow River, and the Grand Canal. Japan managed to get it from Germany after the Treaty of Versailles. If I remember correctly from other readings, it contains a disproportionate amount of the ports of northern China.
• Before war with Japan in the 1930s, three-fifths of Chinese factory output was produced by Chinese-owned factories, but a fifth was foreign and another fifth was Japanese-owned, mostly in Manchuria.
• The working-age population of China is in such decline that the old-age dependency ratio is expected to double between 2017 and 2020.
• During the Financial Crisis, apparently people used to say, "there's nothing right on the left side of the balance sheet, and nothing left on the right."
• I know it's communism but this shocked me: in China in 2015, when their stock market crashed, their version of the SEC prevented shareholders with stakes above 5% from selling for six months and ordered executives and board members of companies who sold shares in the six months prior to buy them back.
• Chinese shipping companies carry more cargo than any other country.
• China is home to five of the world's top ten container ports, the largest maritime law enforcement fleet, and a fishing fleet of over 200,000 vessels.

The Great Experiment: Why Diverse Democracies Fall Apart and How They Can Endure by Yascha Mounk

     The Great Experiment was a cool book I read and one of the many books I looked at after finishing The End of History and wanting to read more about politics and theory of governance and democracy. To be honest, after reading this book, which was very good, I remembered why I don't read too much of that genre. Far too little of this book was about specific, usable facts that I could log in my mental library, and so I found myself a little bored at points. But that said, Mounk is a really good writer with good ideas. It's just not my favorite genre unless there are some more good facts.

    The social and political problem that this book addresses is how multiracial/multiethnic democracies can succeed when the forces of diverging identities threaten to tear them apart. I think that is probably one of the most important if not the number one issue facing the world right now. Mounk focuses on Europe and the United States, however, I'm not sure that Europe fits in this book. European states are based on the nations that formed them. While the EU should embrace multinational/multiethnic democracy, I'm not sure why France needs to have any definition except for the home of the French. On the other hand, the United States is defined by its diversity, and I think that it is unavoidable (and very beneficial) that we will always be a diverse country. I think it would have been more interesting to replace analysis of Europe with African countries that are dealing with way more diversity. And while I'm being critical, I'll say that at some points, Mounk says things like "diversity has turned out to be a stumbling block rather than a strength" for many societies. But he's completely misstating the problem. Diversity has not caused any significant problem for any society in history. Racism and intolerance are the problem! Diversity is an inescapable part of living on God's green Earth. Racism is an evil choice that dumb people make, and that choice is the stumbling block for democracies, not diversity.

    Anyway, I think Mounk's book is a great defense for liberalism, and he makes great criticisms of what happens to societies that fracture on ethnic lines. Anarchy, writes Mounk, is not atomized in the way that Hobbes envisioned would occur on an individual level. Instead, it looks more like Afghanistan, fractured on a tribal and clan level, in which petty autocrats restrict the liberty of those beneath them. That is the true effect of total decentralization. Because some groups are always necessary, devolution leads to less individualism because it empowers local power-hungry individuals to take over instead of the disinterested, more central government that stays far away. Mounk makes a good point that minority groups don't just face oppression from outside their groups, but also from inside them. Individuals who face oppression from religious cults would be a good example of people in minority groups who need protection by the government from their own group.

    Mounk relies on the research of Gordon W. Allport to find out how to create a more racially harmonious society. In one of Allport's studies, he found that 64% of whites who had worked with blacks performing high-skill tasks or in professional roles had a favorable opinion of them. But when blacks worked subordinate to whites, the number dropped to 5%. After additional studies, Allport devised four conditions that have to be met for greater exposure between groups to have a positive impact. There must be (1) equal status between the groups, (2) common goals, (3) intergroup cooperation, and (4) support from authorities and customs. I can't see a reason why this isn't true, and it shows a more nuanced picture of how simply putting two groups together doesn't necessarily cure racism without some more beneficial conditions.

    Something that I've been thinking about for a long time that Mounk endorses is that citizens of different racial groups in one country need to share a common identity and an inclusive patriotism. Whereas nationalism is believing your country is better because you hate all the other countries, patriotism is the healthy belief that your country is better because you love your home. This means that we should not have government programs that are so race-conscious, and instead focus on class consciousness. Race-conscious policies create absurdities anyway. Like when the Small Business Administration emphasized giving loans to women and minority-owned businesses, a business owned by a black woman would benefit ... unless that black woman was married to a white man who owned a 50% stake in the company. Then, in theory she would not be as favored as if she were single. It would have prioritized money for Asian-owned businesses even when Asians generally out-earn whites. But the program was struck down. 

    Relations between groups should be governed by empathy, celebration of sharing rather than condemnation of "appropriation," and ultimately a focus on things other than racial and religious differences. Mounk cites interesting studies about how emphasizing demographic changes and racial differences poisons public discourse. Northwestern University professors Maureen A. Craig and Jennifer A. Robinson read two texts to experiment participants: on described America's current racial makeup and the other described projections of the future majority minority makeup of the country. Those who read about the majority minority change were much more likely afterward to say it would bother them if their child married someone from a different ethnic background and had more negative feelings toward racial minorities. This certainly makes me think of the negative effects of Democratic Party leaders believing that "demography is destiny." In another study, UK political scientists Robert Ford and Anoulk Koostra asked a randomly selected group of white Britons to what extent they felt it was the government's duty to reduce wealth/income inequalities. Many respondents were enthusiastic. But they were not nearly as enthusiastic about reducing racial inequalities. The same trend followed when discussing university scholarships. Ironically, in a lot of political messaging today, I see class issues turned into racial issues, which makes solving them less popular. It would actually be more effective to turn racial issues into class issues because to some extent, everyone can imagine what it would be like to be poor, but no one imagines that they will switch races. This is born out in a Yale study that Mounk mentions (but doesn't say who the authors are), in which scientists asked American respondents their opinions on the minimum wage, cancellation of student loan debt, or more permissive zoning laws. When presented in a race-neutral way, most respondents supported the policies. But when presented with "racial justice framing," support decreased dramatically not just among whites, but among all racial and ethnic groups (although more moderately among black people).

    In the last chapter of the book, Mounk proposes many solutions to our problems, but I'm not going to get into them here. Just know they are common sense ideas, and I suppose that means they will never come to pass.

Miscellaneous:

• Mounk envisions a country that is not a salad or a melting pot but a public park: open to everyone, with options for everyone, that creates a vibrant space for positive encounters between individuals and groups to get to know each other. I think that is a really good metaphor for what our country should be.
• Apparently the House of Representatives has something called the "Hastert Rule," an informal rule by which the Speaker of the House will not bring bills up for debate unless supported by a majority of his or her own members, which means many proposals that are popular with the majority of members overall don't get brought up since they're not popular with the majority of the majority party, which could be a minority.

The Euro: How a Common Currency Threatens the Future of Europe by Joseph E. Stiglitz

     In The Euro, Stiglitz is highly critical of the euro as a currency for all of Europe because it goes too far in some areas while not going far enough in others. The fundamental issue is that the euro pegs the entire eurozone together at one rate of exchange, taking away a major tool for countries to regulate their trade. If countries control their own currency, they can increase the supply to pay off debt or make their exports cheaper, or increase the supply to buy more foreign goods more cheaply. But with the euro, only the European Central Bank has that power. Meanwhile, only national governments deal with employment, creating a problematic system where national governments focus on both inflation and unemployment because they are responsible to their voters while the ECB focuses only on inflation.

    A major problem for the 1992 Maastricht treaty, which formed the eurozone, is that it created several automatic destabilizers in the event of economic crash. The first were the "convergence criteria," which were requirements that to join the euro, governments needed to reduce their deficits to less than 3% of GDP and debts to less than 60% of GDP. This was to make sure no countries that were borrowing excessively could join. But for the future, this would be a problem. In good times, it was not too difficult to meet these requirements, but in the Great Recession, many countries were short on tax revenue, creating deficits that needed to be closed. And at the same time, the economies needed money from the government to function. This created the austerity crisis in the wake of the recession, in which European countries implemented austerity measures to cut their own spending to meet euro requirements, which was the exact opposite of what their economies needed to rebound. Meanwhile, in the United States, the response was much swifter and stronger to just deficit-spend to get out of the recession quicker. 

    There are some important factors that make the single-currency system work in the United States where it doesn't in the eurozone. The first is that people can move more freely in the USA from one state to another than individuals can move between countries in the eurozone, including both the legal boundaries but also the cultural boundaries that make it more difficult to move from Greece to France than from California to Ohio. Americans don't worry about states becoming depopulated, whereas Europeans do worry about those immigration patterns so that countries in Europe can preserve their economies, cultures, and identities. Kentuckians and Americans from other states usually think of themselves as Americans first, whereas Europeans more frequently identify by their country, making them less sympathetic to the others. Second, it is critical that the US government has far more capacity than European government to respond to crisis and administer services. In fact, while the budget of the European Union is 1% of GDP, the US federal government's budget is 20% of GDP. In America, you can move from state to state and still get social security checks or other financial support. In Europe, welfare and most policy is set by countries, making it far more decentralized than the United States. And finally, in the USA, we have one banking system that is national and when a bank runs into a problem, the federal government can bail it out. In Europe, the EU has not been responsible for bailing out banks and lacks the funds to do so. If Europe were more centralized, individual banks could have been bailed out by Europe as a whole. But instead, individual countries had to bail out their banks, which then bankrupted their governments. Ireland's debt to GDP ratio went from the 20% range to the 90% range as a result of bailouts. Stiglitz writes that if Washington had been forced to bail out Washington Mutual, the biggest American bank to fail in the financial crisis, it would have been similar to Iceland trying to bail out banks ten times bigger than their GDP.

    By joining a common currency, eurozone countries eliminated their ability to lower their interest rates and exchange rates. This left them with only the ability to stimulate exports by fiscal policy, which is difficult to do under the convergence criteria because countries have little room to spend to subsidize their own industries. Instead, they can join a race to the bottom to lower wages and other costs to make their industries competitive. The European Central Bank is not a good replacement for each country's individual central bank. The ECB is mandated to focus on inflation, but that leaves out effects on unemployment and economies overall. This becomes especially problematic because Germany is such a massive exporter of over a trillion dollars of goods every year. Because Germany exports so much and the ECB keeps prices level, that means that other countries in the EU must become importers, as the ECB only pays attention to the average. More simply, when one country runs a trade surplus the other countries must combine to form a complementary deficit. And Germany runs a huge trade surplus. So those other countries would probably like to devalue the euro to stimulate exports, but that can't happen as long as Germany is in the mix. Stiglitz proposes that a Keynesian surplus tax would help to right the system.

    Stiglitz proposes that many of the problems of the eurozone could be fixed by forming a "banking union," which would guarantee deposit insurance, common regulations, and a resolution procedure across the EU. He writes that moves were made as of 2014 to move in that direction, but I don't know what has happened since. Additionally, Stiglitz proposes that Europe use the European Investment Bank to get more resources to loan in Europe or for the countries of Europe to form national investment banks to help them deal with crises.

    But in addition to being about the euro, this book is about Greece, and how Stiglitz believes that the country has been treated very unfairly by the EU and Germany. The trap that the EU made for Greece was the austerity that it imposed on the country, loaning Greece money that could only be used to pay off creditors and not to help the economy rebound. Only 10% of the Greek bailout made it to the people of Greece. What did make it to the Greek populace were new onerous regulation changes, like that Greece had to drop the "fresh" label on local milk so that international milk producers could better compete. The EU demanded that Greece end its regulations on bread loaves, which standardized sizes to increase competition within the sizes. So it feels kind of ridiculous the extent to which Europe feels entitled to enter Greek politics through a loan that doesn't even really reach the Greek people. And all of this is to keep Greece in the EU and the Eurozone but it is not clear that is good for Greece. Greece's largest economic downturns before joining the euro were in 1981-83, 1987, and 1993, when the economy shrank by 4%, 2.3%, and 1.6%. But in the recent crisis, Greece's economy shrank by 9% in 2011. While Greek unemployment had previously peaked at 12.1% in 1999, it shot up to 27% by 2013. So Greece is really doing worse in the eurozone than when it wasn't inside.

Miscellaneous Facts:

• Argentina pegged its exchange rate to the dollar in 1990, but it became intolerable by 2001, when it had to abandon the peg in the face of currency, financial and debt crises, allowing their exchange rate to fall by 75%. After the end of the peg, the economy grew quickly.
• As of 2014, Greeks worked 50% more hours on average than Germans.

Carthage Must be Destroyed: The Rise and Fall of an Ancient Civilization by Richard Miles

    This was a really sold book about the city of Carthage and the empire it built. The author is clearly some kind of expert on Carthaginian religion, and specifically the cult of Heracles-Melqart, which comes through many portions of this book, being brought up in early times and again in Hannibal's propaganda. I think the book could be improved by better depth of characters, as referring to "Hanno" and "Scipio" and "Hamilcar" could be referring to several different people, making it different to follow. The book focuses too much on events and not enough on individuals. But with that caveat, the book is very strong in its carefully weighed analysis of the historical record and its clarity in why we should not be willing to believe certain sources without reservation.

    Carthage's roots are found in the Phoenician city of Tyre, as it was Tyrians who first settled Carthage. The earliest occupation layers discovered by archaeologists are from 760 BC, but most believe that the founding date would have been further back. In the seventh century BC, Tyre faced serious difficulties that played to the advantage of Carthaginians and other Phoenician settlers in the west. While Tyre had to deal with the Assyrian Empire, the western Phoenicians had fewer large states to contend with. And while the metropole was distracted, the colonies thrived. Based on the large cemeteries that ringed the ancient city, scholars believe that Carthage maintained a population of 30,000 people by the beginning of the seventh century. Early Carthage practiced ceremonial burials with open casket viewings, and also likely practiced child sacrifice at some times in its early history, based on areas called "tophets," where archaeologists find huge repositories of children's bones, mostly babies.

    Carthage expanded first into Sardinia, where it defeated more primitive Nuragians to solidify its hold on the island. However, Greeks in Sicily and southern Italy as well as Etruscans and a small people called the Romans in central Italy gave the Carthaginians trouble. The first recorded treaty between the Carthaginians and the Romans dates from 509 BC, forbidding Romans from travelling into Carthaginian territory unless severely restricted, with Carthage swearing not to harm Roman cities on the coast and not to build any forts on the Latin coast. But Carthage ended up in frequent warfare most often with the Greeks in Sicily, especially the Greek state of Syracuse. I would get into the details but they are very confusing, especially because all the most important people in Carthaginian history are named Hamilcar, Hannibal, Bomilcar, Hasdrubal, and other similar or the same names (this is honestly insane; I think the author should have taken it onto himself to come up with some nicknames or something because I just could not follow). Basically, Carthage held onto western Sicily while Greeks controlled cities in the east. Carthage eventually kept a standing army on Sicily, which was a huge money pit, especially in a war with Corinth, the Greek city whose people founded Syracuse, in the 340s. In that struggle, Carthage suffered its greatest military defeat, losing 15,000 troops captured and 10,000 killed, including the heart of the young aristocrats that made up the elite Sacred Band. In 310, Agathocles, leader of Syracuse, nearly destroyed Carthage, but just barely failed thanks to other wars distracting him. The Carthaginians were not a dominant force by any means, but their wars led to development of their state.

    Due to frequent wars in Sicily, Carthage began to mint coins to pay mercenaries in the fifth century. Also in the fifth century, Carthage reduced the power of the Magonids, the dynasty that had ruled over the city and its empire for seventy years, from 550 BC to 480. After 480, Carthage vested political power in a Tribunal of One Hundred and Four, made up of aristocrats who oversaw the conduct of officials and the military. The Council of Elders, which had already existed, was granted more power to act over the treasury and foreign policy. And new members of the bureaucracy were appointed, including two annually elected senior executive officers (like the Roman consuls), and other commissioners. 

    In the mid-4th century, Rome and Carthage had peaceful relations, with Carthage sending an embassy to Rome in 351 and the two signing a treaty in 348, affording merchants of each empire rights and privileges abroad, and governing other commercial relations, which the author believes were part of a thriving trade. But by the time of the Pyrrhic War (280-275), relations frayed. When Pyrrhus of Epirus invaded Italy, Rome rejected Carthaginian aid, suggesting distrust between the two just eleven years before the start of the First Punic War (264-241).

The First Punic War

    The immediate trigger of the First Punic War was the group called Mamertines, mercenaries who had occupied the city of Messana (now Messina) in Sicily from 289. Under pressure from Greek Syracuse, the Mamertines appealed to both Rome and Carthage for aid. Carthage acted quickly, came to the Mamertines' aid, and stopped Syracuse from attacking. Carthage then garrisoned a force in the city, partially integrating it into their empire. Rome debated whether to aid Messana, and by the time Carthage had garrisoned a force in the city, Rome's involvement would be interpreted as aggressive by Carthage. But Rome chose to act to get a foothold in Sicily, landing tens of thousands of men on the island in 264-63. The Romans did not attack Messana initially, rather, they focused on taking Greek cities on the island such as Syracuse, thereby gaining a strong foothold on the island. 

    Critically, in those early years the incredibly strong Carthaginian navy failed in its duty to prevent Rome from landing on the island. The Carthaginian navy at the time was dominated by quinqueremes, mass produced ships with five banks of oars which had every plank marked with a letter for easy assembly. But Rome identified its weak navy as a problem, and by 260, four years into the war, Rome had built a fleet of 100 quinqueremes and 20 triremes, responding to Carthaginian raids from bases in Sardinia. Roman corvi served as equalizers in naval battles. The corvi were these massive ladder-like structures on Roman ships with teeth on the end and attached to pulleys so that Romans could get close to Carthaginian ships and drop them for easy boarding. This game Romans a huge new advantage. While the Carthaginians were successful in hit-and-run battles on land, their navy underachieved at sea, suffering defeats near the Aeolian Islands, Malta, and Cape Tyndaris.

    Carthage sued for peace in 241, agreeing to harsh terms. Carthage had to evacuate the entirety of Sicily, free all Roman prisoners, pay a ransom for their own, and deliver a massive indemnity over a period of twenty years. Carthage was only allowed to keep Sardinia. Carthage lost the First Punic War by having its stamina exhausted. It is no easy feat to fight over twenty years of war with Rome, and Rome offered no respite, which Carthage had gotten during its earlier Sicilian wars. The Syracusans had been willing to let a stand-off simmer, but the Romans were uncompromising, expansionist, and aggressive, demanding nothing less than total Carthaginian defeat and retreat from Sicily, a war aim that they won in 241.

Second Punic War

    In the wake of his defeat as primary general of the Carthaginians in Sicily in the First Punic War, Hamilcar Barca refused to participate in negotiations with the Romans, which preserved his reputation, and set off for Spain in 237. There, Hamilcar escaped Carthaginian civilian control of the military by recruiting and paying his own troops, and sweetening the deal for Carthage by conquering Spanish tribes and sending silver back to Carthage to pay off its war debts. After Hamilcar died in 228, his son-in-law, Hasdrubal took control in Iberia, and founded a city called New Carthage (modern Cartagena) on about the midpoint of the Spanish Mediterranean coast, complete with a good harbor, prime location of fishing and trade, and quick trade route to the interior for silver. The Barcids increasingly saw Iberia as their personal fief, rebuffing interference from Carthage itself as New Carthage became richer than the old. But Hasdrubal was assassinated in 221, and succeeded by Hannibal, the scourge of Rome, and just 26 years old.

    In 219 BC, Hannibal attacked the Roman ally of Saguntum on the northern Mediterranean coast of Spain, and in 218 Rome declared war on Carthage. By this time, Carthage had a much weaker navy than Rome, which controlled the western Mediterranean. So it was really not so crazy for Hannibal to attack over land. However, what was unexpected was that Hannibal would completely avoid Massalia (Marseilles) and instead cross the Rhone upriver and travel through the Alps to the Po Valley. Along the way, Hannibal and his forces dealt with attacks from Gauls, difficult weather, and nearly impossible terrain, but by 217, Hannibal had crossed the Alps and defeated Rome in a decisive victory at Lake Trasimene. The Romans reacted by making Fabius dictator, who pursued the successful but unpopular "Fabian strategy" of remaining in high, defensible positions and not allowing his forces to engage in battle with Hannibal. The strategy worked for a time, but Rome got impatient and elected two new consuls, Varro and Paullus.

    Varro and Paullus were a terrible team that blundered almost immediately. They led an army of 87,000 against Hannibal's 50,000, but they could not lead it. On campaign, they alternated command each day and strongly disagreed about how to fight Hannibal. While Paullus wanted to maintain the Fabian strategy, Varro wanted to attack Hannibal immediately. Varro was successful in managing to attack Hannibal, and led Rome into its worst defeat in battle in history at Cannae. Cannae was a disaster for Rome because of an unorthodox plan by Hannibal to place his weakest troops in front of the center of his line and his strongest troops at the flanks with his cavalry. The weaker troops buckled and were pushed back, but this created a U-shape that enveloped the Roman forces, and once Hannibal's cavalry beat the Roman cavalry, they came around the back and the Romans were surrounded, and spent a hot August day being slaughtered in the sun. 70,000 were killed and 10,000 were captured.

    After Cannae, many wonder why Hannibal didn't attack Rome. The first was his war aim. Hannibal was not fighting a war to wipe Rome off the map, and he wasn't prepared to do so. He just wanted to exact a favorable victory with brutal conditions like Rome had done to Carthage in the First Punic War. Second, since he didn't have that plan, Hannibal was unready, with too few troops, too little time, and not enough siege engines to attack Rome's formidable walls. And additionally, after Cannae, Hannibal was still 400 kilometers from Rome and his troops were tired from the campaigning of the summer. But while Hannibal expected to be able to dictate the terms of peace at this point, Rome refused to negotiate. Hannibal continued the war in southern Italy (Magna Graecia) with some success, turning Capua and some smaller cities to his side. However, because of the rivalries between these cities, Hannibal's success in turning Capua to his side turned Capua's rivals against him. He was unable to completely control the southern peninsula. Worse, his agreement with Capua absolved the city of the need to send him troops, and the lack of manpower hurt him in the years after Cannae. Hannibal's brother, Hasdrubal, was killed and his army destroyed by the Romans on his way to reinforce Hannibal, leaving the great general stranged.

    Even more problematic for Carthage was that while Hannibal marched around Campania and Magna Graecia, the Scipio brothers had marched Roman forces into Spain, where they had tied up three Carthaginian armies by 212. Carthage was able to make a treaty with Philip of Macedon to try to tie down Roman forces in Illyria, but Rome made diplomatic agreements with other Greek powers to do their fighting in Greece for them. Hannibal did eventually march to Rome, but turned around for unknown reasons, possibly a hailstorm (a bad omen). But in 209, one of the Scipionae clan besieged and took New Carthage in Spain, a massive defeat since it enabled the Romans to recruit from Spain and use the silver supply and mint there to pay more soldiers. Scipio also won a decisive battle against Hannibal's brother, Mago, in Spain, who then tried to reach Italy to aid Hannibal, but remained stranded in Liguria, unable to pass Roman forces blocking the way down the peninsula.

    Scipio then invaded Africa, in 204, and demanded that Carthage withdraw Hannibal from Italy, which they did. This created a fragile truce that was broken when some Carthaginians looted some Roman supply vessels driven ashore by a storm. Hannibal met Scipio inland at Zama, where Scipio defeated Hannibal by carefully parting his infantry so that Hannibal's war elephants would pass through and behind them, and with unusually strong cavalry, Scipio won the day and marched to Carthage, where Hannibal advised the city to accept defeat. The treaty was harsh, and forbade Carthage from fighting any wars outside Africa, and to ask for permission from Rome to fight wars within Africa. The treaty demanded 26,000 kilograms of silver, ten times the amount from the treaty that ended the First Punic War, and Carthage was forced to hand over all its war elephants and reduce its fleet to just ten war ships.

    After the war, Hannibal became a populist politician, trying to force the wealthy to pay their taxes and to audit public finances. But this earned him the enmity of Carthaginian elites, and he was forced from the city. He went to Antioch to the court of the Seleucid Emperor, where he advocated for attacks on the Italian peninsula, and he even led the left wing of a Seleucid fleet against the Romans off the Anatolian coast. But the Seleucids lost that war, and Hannibal ended up going to Bithynia. But the court of King Pruisas of Bithynia was visited by a Roman general in 183, who, once he found out about Hannibal's presence, demanded that the king hand him over. With Bithynian agents surrounding him, Hannibal drank from the vial of poison he always kept with him and died.

The Last Days of Carthage

    By the 180s BC, Carthage seems to have been surprisingly prosperous again. Freed from expenditures on their military, Carthage even offered to settle their entire indemnity to Rome forty years early, which Rome refused. But after years of prosperity, Carthaginians attacked Massinissa, the Numidian king, breaking their treaty with Rome, and Romans landed in Africa in 149 BC, starting the Third Punic War. In reality, the war was an excuse for aggressive Romans to destroy their enemy once and for all, since they thought Carthage was growing strong enough to be a threat again. 

    They demanded 300 hostages from the children of Carthage's elites before beginning negotiations and then, with 80,000 infantry and 4,000 horse landed at Utica, the Romans demanded that Carthage give over all their weapons and war machines, which they did. Finally, the Romans demanded the destruction of the entire city and that it be moved 16 kilometers inland. AT this point, Carthage refused, and entered into a three-year siege before being ultimately defeated.

    With Carthage destroyed (and Corinth taken in the same year, 146 BC), Rome was the undisputed master of the Mediterranean world. But with its prominence came major changes, and within a century of Carthage's destruction, Rome was on an unstoppable path towards the end of the republic and the beginning of Augustus's empire. Augustus decided to rebuild Carthage in 29 BC, destroying much of the old city in the process. But nevertheless, the city was rebuilt, this time as a far more Romanized city, although many of its citizens continued to speak Punic until long after the Western Empire was gone, into the 7th century AD.

Miscellaneous Facts:

• From at least the seventh century BC, Carthaginians were associating the Greek Heracles with their Tyrian god, Melqart, kind of combining the two.
• Elephants were introduced to classical Western warfare when Alexander went to India, finding out that Indians used war elephants. They were successful in warfare, however the forest elephants from North Africa were slightly smaller than Asian and bush African elephants (2.5 meters versus 3 meters) and also harder to control in battle.
• Hannibal tried to turn Romans against Fabius by burning the entire countryside except for Fabius's holdings, with the goal of making Romans think Fabius had worked out some kind of deal with Hannibal.
• Side note: calling a society "complex" is the anthropologist's/historian's version of a real estate agent calling a house "charming." Absolutely meaningless term that can be applied to any human society. I have never seen a society called simple unironically in a book published in modern times.
• When Septimium Severus, the first African Roman emperor, took power in 183 AD, he reburied Hannibal's remains in a mausoleum of fine white marble.

Progress and Poverty by Henry George

     I have been interested in Henry George and Georgism for a few years now, but I got especially interested in reading Progress and Poverty when I found out that Henry George's funeral was the largest funeral in New York City history when he died, surpassed only by JFK decades later. George published Progress and Poverty in 1879, at the tail end of the depression that followed the Panic of 1873, which was the worst economic crash in American history until the Great Depression. The fundamental thesis of the book is that the value produced by labor and capital is disproportionately captured by lucky landholders who happen to own property adjacent to the cities that spring up due to industry and progress. The book feels very much of its place and time. It is hard to ignore that George is writing at the same time as the "closing of the frontier," when land suddenly became scarce in America. Americans realized at this time that having new land constantly being opened up is a huge boon to economic growth, and once it is all owned, that path to prosperity shrivels.

    George separates out laborers, capitalists, and landlords as the three critical groups in the book. Laborers use their hands or skill to earn a wage. Capitalists use their money to earn interest (or what we might call a return today). Landlords use their land to earn rent. I've got to say that the first few "books" of the book (its divided into ten "books") are tedious. George goes through his definitions of each concept in painstaking detail that I won't go into here. At one point he gets into a whole refutation of Thomas Malthus that was interesting, but unrelated to my reasons for reading the book.

    The fundamental problem that George addresses is that "If I buy land for a small price and hold it until I can sell it for a large price, I have become rich, not by wages for my labor or by interest upon my capital, but by the increase of rent." If a capitalists risks his money by investing it and makes a return, we can say he earned it. If a laborer works through her skill to earn a wage, we can say she earned it. But when a landowner takes rent just for being located nearby the productivity of the other two, it is hard to say he has earned it. In book five, George writes:

Take now... some hard-headed business man, who has no theories, but knows how to make money. Say to him: "Here is a little village; in ten years it will be a great city—in ten years the railroad will have taken the place of the stage coach, the electric light of the candle; it will abound with all the machinery and improvements that so enormously multiply the effective power of labor. Will in ten years, interest be any higher?" He will tell you, "No!" "Will the wages of the common labor be any higher...?" He will tell you, "No the wages of common labor will not be any higher..." "What, then, will be higher?" "Rent, the value of land. Go, get yourself a piece of ground, and hold possession." And if, under such circumstances, you take his advice, you need do nothing more. You may sit down and smoke your pipe; you may lie around like the lazzaroni of Naples or the leperos of Mexico; you may go up in a balloon or down a hole in the ground; and without doing one stroke of work, without adding one iota of wealth to the community, in ten years you will be rich! In the new city you may have a luxurious mansion, but among its public buildings will be an almshouse.

The problem is that wages do not depend solely upon the productivity of the laborer and interest/return does not depend solely on the productivity of the capital. Both are only able to take the scraps left over once rent is taken out by the landowner. As productivity increases, wages should increase. But this can be overtaken by increases in rent, leaving more productive workers with less money. As George writes, 

But labor cannot reap the benefits which advancing civilization thus brings, because they are intercepted. Land being reduced to private ownership, every increase in the productive power of labor but increases rent--the price that labor must pay for the opportunity to utilize its powers; and thus all the advantages gained by the march of progress go to the owners of land, and wages do not increase. Wages cannot increase; for the greater the earnings of labor the greater the price that labor must pay out of its earnings for the opportunity to make any earnings at all.

    In this sense, land speculation can cause recessions in developing and progressing places. When, in these places, speculators expect a higher price of land, they may raise rents to the point that it becomes unproductive to employ people, raising the unemployment rate. And George makes a great point that any unemployment (defined as the rate of joblessness for those who want to be employed) is unacceptable. He writes that, "though custom has dulled us to it, it is a strange and unnatural thing that men who wish to labor, in order to satisfy their wants, cannot find the opportunity..." 

    But none of this is to say that land isn't important, but just the opposite. Land, to George, is the fundamental building block of the economy, and he compares it to the base of a pyramid. As long as that base is growing, the rest of the economy can grow. So just like the frontier expanding. But when the growth of land ceases, the rest cannot be built any further. So this is the cause of much economic strain- not that land is finite in the geological/geographical sense, but that land is finite in the useful economic sense. When all the land in and around a city is owned by sellers who are waiting for a higher price, rents rise. As a result, real wages fall, as do the returns on investment, killing motivation to work and reason to invest in a city, which will lead to the death of the city.

    George's thinking clicks into my own thoughts about capitalism and my recent reading in The End of History and the Last Man when he writes that "Everywhere, in all times, among all peoples, the possession of land is the base of aristocracy..." In that sense, as capitalism, the more free and efficient economic system has come to replace feudalism, ruled by the aristocracy, the private ownership of land is a holdover from the older, feudal system. That is fine on its own. However, the ability of landowners to earn speculative rents from their property (the passive income that everybody wants) is fundamentally aristocratic, undemocratic, and threatens the legitimacy of the capitalist system, which depends on the productivity of the laborer and the capitalist.

    The solution George proposes is to make land common property by taxing the economic rents from land appreciation. He argues that there is no natural right of any person to land and that it follows that current title is illegitimate. He says that it makes sense that someone would own something that they make, but since no one makes the land but God, it doesn't make sense for anyone to own it. The distinction between wealth and land is that wealth is made up of things that are the produce of labor and land is made up of the "gratuitous offerings of nature." So, George writes that a man who clears a forest or drains a swamp can claim the value of the improvements he made, but cannot claim the value of the underlying land itself. If I remember correctly, John Locke wrote that this would entitle a man to both the improvements and the land, so that would be a critical distinction.

    To affect his plan, Henry George proposes not that the government seize land, but that it create a tax on land that taxes the appreciation of land without including the improvements made on the land. This way, all landowners informally become tenants of land, who cannot speculate on it. This would make the government essentially the landlord of the entire country. The obvious issue with what George proposes is that people who are land rich but cash poor will lose in the changes that he would make. But George believes the societal benefits would be greater than the costs to that class. He points out that ownership of land isn't what makes it fruitful, but the security of labor, which often comes with ownership of land. A fixed level of rent can provide that security rather than ownership. One thing I don't think George clarifies enough is how to accurately assess the values of land without corruption causing problems. But I think his overall point is right when he says that if you take two people of equal incomes, one from labor and one from the rent of his land, the one who is laboring is far more beneficial to society, and he should be privileged under our taxes, not the other way around. It is really kind of crazy how much higher taxes are on labor through the income tax than they are on land through property or land value taxes. If you buy land and build a factory on it, you end up paying more taxes to operate the factory than you do on the vacant lot.

    In the end, I think George is heading in the right direction but with some significant issues. One is that land values may go down, and if the only tax is the one he proposes, that would kill government revenue. Another is that some land has resources on it, and that makes it more valuable rather than being next to a city, which would affect valuations. Another is that it is difficult to assess land values accurately and fairly. One last thing is that, partially because of when he is writing, George has a blind spot for conservation of natural land, where we would not want to encourage more development. But that said, I think there are definitely ways to implement more taxes on vacant lots and unused lands that could promote productivity. I imagine putting taxes on lands the highest in city centers, but then offset by reductions in taxes if you make improvements like housing, commercial, or industrial uses. Then parking garages and mansions would be the most expensive to maintain in city centers, pushing them out and pulling apartments and businesses in. Through some planning and zoning, you could also keep industrial uses isolated from the rest. Then I think you could let people keep land vacant and wooded, but on the condition that the public be able to access the natural area as a park. I would try to put these in pockets within cities and then in rings around cities. Ultimately, George is right about tax incentives and land, and this was a worthwhile read.

Miscellaneous Facts:

• It is crazy to read this book and see how little people knew back then. At one point, George writes that we cannot know whether or not the population of the Earth in 1879 was bigger than at any previous time, something that is now an obvious fact. Apparently, Montesquieu had asserted that the population of the planted had declined since the beginning of the Christian era. Very interesting is that George brings up ancient American civilizations to show that populations may have been larger. Of course, they were larger in the Americas until the spread of European diseases. I liked that George specifically mentioned the mounds of the Mississippi valley.

• When George discusses the social problem of land ownership, he identifies that peasants can only be freed by land reforms that make them the owners of the land or by urbanization, which frees them of the need to work the land.

The Hero of Ages (Mistborn #3) by Brandon Sanderson

     This was the best in the Mistborn series. I really liked how Sanderson finished this story in a very satisfying way. I will say, though, that there was too much exposition through the chapter-opening passages. It felt like Sanderson was getting towards a lot of the techniques he would later use in Stormlight but wasn't quite there yet. Like usual for these books, I wasn't taking notes like I do for non-fiction, so I'll just keep it short. This trilogy wasn't as good as Stormlight in my eyes, but it did good world-expansion and I really liked the characters Vin and Sazed. I'm interested to see what the Wax and Wayne books are like, but I don't think I'll start those for a while.