5_long-game_coverThis review could easily list 15 or 20 books on U.S. involvement in the Middle East since 9/11, and most of them would agree with David Kilcullen that the United States should be devoting more resources to the “Global War on Terror.” Andrew Bacevich is far outside the foreign policy consensus in arguing that the United States should simply withdraw from the region because its war cannot be won. Derek Chollet makes the case that Barack Obama has steered a sensible middle course between the binary choices of escalation and withdrawal. That course has been something closer to the Cold War strategy of “containment,” whereby you trust that your enemy will eventually fall victim to its own inner contradictions. But if our hope is that Islamist regimes in the Middle East will come round to liberal or Enlightenment values, we may be in for a long wait.

Kilcullen, a former colonel in the Australian army, focuses on the expeditionary wars of the past 15 years against Afghanistan and Iraq. Although he describes Iraq as “the greatest strategic screw-up since Hitler’s invasion of Russia,” he argues that the United States should still be there, and in much greater force. Once you have made the commitment, he writes, you have “only two choices: you can leave early, or you can leave well.” Bacevich, also a retired colonel, views such maxims as excuses for staying indefinitely. He wants the United States to withdraw completely from its project of bing the hegemon of the Middle East.

5_bloodyear-coverHow – and why – did the United States “get in” to begin with? Kilcullen has a strictly military perspective on what he calls “the War on Terrorism since 2001.” Bacevich goes back further, and takes a wider view. Before 1980, he notes, the United States had no significant military presence in the region and suffered few casualties there. Since then, thousands of U.S. soldiers have died in the Middle East (including Bacevich’s son, in 2005), but only a handful everywhere else in the world. What changed?

At the beginning of 1979 Ayatollah Khomeini returned to lead the Iranian revolution, and at the end of the year the Soviet 40th Army invaded Afghanistan. The U.S. strategic response was drafted by a mid-rank Pentagon official, Paul Wolfowitz. The United States had a “vital stake in the Persian Gulf,” he wrote, as a result of “our need for Persian Gulf oil and because events in the Persian Gulf affect the Arab-Israeli conflict.” Wolfowitz’s study led to the “Carter Doctrine” of January 1980, which committed the United States to using military force against any outside power that tried to gain control over the Gulf.

In 1980, America’s reasons seemed clear enough. It would protect the oil fields and Israel – which aim had priority could be left open to debate – and it would keep the Soviets out. But that a Soviet army might arrive at the Gulf was never credible, since it would have had to advance through the middle of the Iran-Iraq War. Afghanistan was more than enough for the Soviets: about 14,000 of their forces died, and perhaps a million civilians. After ten bloody years Gorbachev fell back on a “Bacevich strategy” of total withdrawal. The United States was left as the region’s sole claimant to primacy.

5_andrewjbacevich-americaswarThat primacy was promptly challenged by Saddam Hussein’s invasion of Kuwait in August 1990. If he had continued into Saudi Arabia he would have controlled up to half of the world’s reserves of oil, so the United States felt bound to move against him. The First Gulf War was fought on classic Westphalian grounds, to eject a nation-state that had violated its neighbour’s territory. The U.S. plan for the war was “Vietnam done right.” It would commit as many troops as to Vietnam at its peak: 500,000. But instead of being trickled in over years, they would assemble in Saudi Arabia and then strike all at once. The ground war was held off for seven months after Saddam’s invasion, but when it came it was over in a hundred hours. George H.W. Bush had gained a lightning victory; not only that, he had persuaded his allies to pay almost 90 per cent of the war’s cost. Bush stopped the war expecting that Saddam would soon be deposed by his own people. Instead he would cling to power until the Second Gulf War removed him.

Thirty-six years after the Carter Doctrine, the United States has not been able to find a consistently successful military or political strategy in the Middle East. The human cost to the United States in Afghanistan and Iraq has been just under 6,000 military deaths (unlike Vietnam, there has been no attempt to count up how many of the enemy, or local civilians, have died). The financial cost has been estimated by Linda Bilmes of Harvard at between $4 and $6 trillion, of which the greater part will be continuing medical and pension costs for veterans. Payments for World War II veterans peaked in the 1980s, so for these recent wars the peak will come around 2050. By then there will be further trillions in interest costs for the deficit financing that paid for the wars. George W. Bush made a shrewd political calculation by actually cutting taxes at the same time as he took the United States into war in Afghanistan and Iraq. Even now, neither Republicans nor Democrats (with the exception of Donald Trump) have shown much concern for the economic burden of U.S. military commitments.

But where are we on the war aims defined by Wolfowitz in 1979: “oil and Israel”? Oil has never stopped flowing over the whole period, and the current problem is rather that there is too much of it on offer. Israel, whatever one thinks of its conflict with the Palestinians, is probably more militarily secure and prosperous than at any time since 1948. If the United States remains committed to the Middle East, it is now not so much because it is for something as because it is against something: Islamic fundamentalist terrorism.

If this is what the U.S. presence is about, the question becomes one of tactics. Kilcullen gives an impressively detailed account of the multiple state actors and militias, and of Western attempts to bring them under control. Apart from the blitzkrieg of the First Gulf War, the West has vacillated between two doctrines. One is “Counter-Insurgency” (COIN), which overlaps with the state-building ambitions of the neoconservatives. The invading army tries to gain the support of the local people by protecting them from insurgents and improving their everyday lives. Hopefully, a more prosperous, secure and democratic civil society will come to reject the radicals who threaten it. The major COIN initiative in the Middle East in recent years has been the 2007–08 “surge” in Iraq, led by General David Petraeus. It was hailed as a success at the time, but has not proved a lasting one.

COIN has always had its opponents within the U.S. Army. It requires more personnel and expense than conventional war, over a longer or even an indefinite period. When occupying soldiers live closer to the people, they will suffer higher casualties. But the principal objection to COIN is that it assumes the local population can be won over to democratic values. Andrew Bacevich notes that when the United States moved into the Middle East in the 1980s it paid little attention to Islam. The main danger seemed to be Pan-Arab socialism and its Soviet patron. But if religion is the core issue, can there be any convergence of interests between the indigenous people and those who come from outside, peddling Enlightenment dogmas?

If COIN is doomed to failure by the religious (and linguistic) gulf between East and West, the only alternative strategy becomes Counter-Terror: killing your enemies wherever you can find them, at the lowest possible cost to yourself. Kilcullen, though himself an adviser to General Petraeus on the “surge,” seems to have switched to a Counter-Terror stance in the current struggle against the Islamic State in Iraq and Syria. The United States, he argues, should “go in hard” against the Islamic State with more bombing and more boots on the ground.

Counter-Terror means giving up on the hope that the local population will ever come over to your side – because of unbridgeable cultural differences, or internal conflicts such as Sunni versus Shi’i, or collateral damage from the Western way of war. What remains is something like the Israeli model (which to some extent the United States has deliberately imitated). Euphemisms like “price tags” or “mowing the grass” recognize that the aim is to manage rather than resolve the underlying conflict.

The paradox of Counter-Terror is summed up in the question asked by General Petraeus: “Tell me how this ends?” Kilcullen believes that going to war in Iraq in 2003 was a huge mistake, and seems to agree with General Michael Flynn that “drones create more terrorists than they kill.” But the War on Terror must go on, Kilcullen affirms, for the reason given by then–Australian Prime Minister John Howard: “It is impossible for a multicultural, maritime trading nation like Australia to be secure in an insecure world.” Or as George W. Bush put it, “We must fight them there before we have to fight them here.” By this reasoning, there is no point in asking how the Middle East wars end. We will be living with them indefinitely.

That rationale brings Kilcullen and Bacevich to a kind of agreement about what’s going on, though not about whether it should continue. The war is no longer about securing oil, defending Israel or promoting democracy. Oil will be marketed to buyers, Israel will defend itself and Syrians or Iraqis are not going to turn into Danes. To quote Wolfowitz again, the war is about the mission of the United States to “shape the future.”

It is significant that “shaping” has now become popular as a definition of U.S. strategic aims, because it begs the question of when or how or why the “War on Terror” might end. “Shaping” is not a well-defined war aim. The destiny of the United States, as the “exceptional” or “indispensable” nation, is to take the lead, primarily through the use or threat of military force. In June 2002 George W. Bush made the case for preventive war in a speech at West Point. The first responders to trouble in the Middle East would not be the State Department, but CENTCOM and SOCOM (Special Forces), both headquartered in Tampa, Florida. Leadership requires credibility, which requires projecting force and showing that you are ready to use it. The other side of the coin is that “weakness is provocation.”

Bacevich rejects out of hand the idea of leadership through force. He believes that an American order in the Middle East is unattainable, and that the costs of even trying to create it are too high. In the long run the region must arrive at its own order, through national and sectarian conflicts that will eventually burn themselves out.

Without proclaiming anything so sweeping as a “doctrine,” President Obama has tried to find a middle course between Kilcullen and Bacevich. He has tried to scale down the U.S. military presence and reduce its casualty count through reliance on drones, bombing and Special Forces. Diplomacy has tried to coax Iran into becoming a more liberal and constructive player in the region (which means making it a de facto ally against the Islamic State). Both Kilcullen and Bacevich excoriate Obama for what they see as indecision and half-measures, with Kilcullen complaining that he is doing too little to project American power and Bacevich complaining that he is doing too much. Derek Chollet argues that, given the constraints, Obama’s level of engagement has been about right. He has tried to turn “asymmetric warfare” in his favour: attacking the Islamic State from afar and making it very difficult for them to strike back against his forces. The Islamic State has responded with its own “price tag” campaign, against soft targets in the West.

One problem with criticizing Obama for not doing enough is that we cannot know everything about what he is doing. U.S. Special Forces have a headcount approaching 70,000, and there is also the CIA to be reckoned with (headcount about 21,000), and a shadow army of mercenaries. General Don Bolduc has said that Special Forces are active in 22 countries in Africa alone. David Vine has counted about 800 U.S. bases in 70 countries. Surveys have suggested that a small majority of the population wants the United States to “mind its own business” and do less abroad. But will that persuade the foreign policy and military establishments to change course? As Andrew Bacevich wryly observes, “Wherever the American army shows up, it tends to stay awhile.”

President Trump promises to do more and to do less simultaneously, making it impossible to discern any “Trump doctrine” for the region. But is there any clear path out of the present chaos? And where might Canada fit into such a new order?

Perhaps there is a lesson in China’s foreign policy, which has something in common with the commercial anti-imperialism of Richard Cobden in the 19th century. Why waste money on armies and gunboats, Cobden asked, when most countries do not need to be compelled into trade by military force? Why try to rule over the Persian Gulf when there is a global glut of oil and both friends and enemies are eager to sell it to you? Unlike Cobden, China is not motivated by pacifist idealism, but by a cold assessment of costs and benefits. It takes an aggressive posture in its immediate neighbourhood, but everywhere else it projects economic rather than military power. Its focus in the Middle East is to develop the “New Silk Road” between China and Europe. Having already built the high-speed rail line between Ankara and Istanbul, it has just completed a direct rail link to Iran. Urumqi, in western China, is in fact closer to Tehran than Toronto is to Vancouver. Instead of trying to “fix” Afghanistan, China is simply bypassing it through the Stans to the north. The business of China seems to be business.

Limited as he is by established interests, Obama has nonetheless edged toward a more “soft power” approach to the Middle East. One model might be the European Union’s success in fostering democracy and economic development in eastern Europe since 1989. This is surely a peaceful achievement on a world-historical scale, even if it is now threatened by the rise of nationalist parties across Europe. A comparable process is under way in the Balkans to resolve the savage ethnic wars of the 1990s. Nicolas Sarkozy also tried – prematurely, as it turned out – to move the Maghreb toward integration with Europe.

It may take the rest of this century, but the best hope for the Middle East remains a gradual evolution toward Enlightenment norms, through civil medicine rather than military surgery. If we think of that evolution as an organic process, it will not be furthered by violent interventions from outside. Another limit to U.S. reliance on a military approach is that since 1972 it has been directed against relatively small and weak countries in the Caribbean, Central America and the Middle East. Yet the future of the latter region must hinge on its three major countries: Turkey, Egypt and Iran. Each has about 80 million inhabitants, extensive territory and a diversified economy. No U.S. strategist with a minimum of common sense would be eager to invade them, and no politician would dare to reinstate the draft. That leaves diplomatic, cultural and economic relations as the only feasible means of engagement.


In this perspective, there is plenty for Canada to do in the region other than sending troops and warplanes. Nor should we be sending armaments to Saudi Arabia, whose invasion of Yemen is both a crime and a blunder (sadly, with the active support of the United States and Britain). If Canada took as its starting point “first do no harm,” it would still have many ways to relieve the enormous suffering inflicted by the Middle East wars. Between Kilcullen’s “more of the same” and Bacevich’s “walk away,” can Canada find its own middle path?

Alexander Masters, Stuart: A Life Backwards. London: Fourth Estate 2005.
Theodore Dalrymple, Life at the Bottom: The Worldview that Makes the Underclass. Chicago: Ivan R. Dee 2001.

As we walk through city streets, it normally does not trouble us that we know almost nothing about the lives of those whose paths we cross. City life is supposed to provide freedom from responsibility for others, apart from our family or friends. Everyone else just gets a casual glance – except for when a “street person” appears, someone obviously destitute or desperate. Our first instinct is to look away, before they can make us aware of something we would rather avoid: the needs of strangers.

Alexander Masters, a freelance writer in Cambridge, England, chose to keep looking at a homeless man he noticed on the street, Stuart Shorter. He has written Stuart’s biography, and made the claim that his is “an important life.” Most people who read this book will agree. It is the funny, fantastic and agonizing story of someone who made a complete mess of his life, and did much harm to others along the way. Failure, of course, is often more interesting than success; and absolute failure becomes more than that, a trip into the infernal regions beneath the affluent surface of Western cities. Stuart underwent pain, and inflicted pain, far beyond anything most of us have experienced. Then he chose to end his life – like Jesus, at the age of 33. Masters hints that Stuart, too, may have died for our sins, though one of the virtues of this book is that it suggests many other ways of telling the life of Stuart.

Stuart was one of the “chaotic homeless”: people who have no settled homes or relationships, who are rarely employed, who are unhealthy, violent and addicted to drugs. In the government agencies that deal with the homeless, the chaotic are often considered beyond repair. Their life expectancy in England is 42 years. They are 35 times as likely to commit suicide as an average person. Ten of them are male for each female. Why? Masters suggests that women may cope better with failure and disappointment. This is not a very satisfactory explanation, but one of the themes of Stuart is that it isn’t easy to explain anything about homelessness. The problems in a life like Stuart’s are so comprehensive, so majestic in their destructive power, that the standard sociological explanations of them look like the most feeble of clichés.

Masters does offer reasons why Stuart ended up living on the bottom level of the Lion’s Yard parking garage in Cambridge. Many reasons. His father was a gypsy who walked out when Stuart was small; Stuart was dyslexic and had muscular dystrophy; he was sexually abused by his brother, who later killed himself; he damaged his brain through glue-sniffing, head-butting, car-crashing and using heroic amounts of alcohol and heroin; his marriage failed (when he held his infant son hostage at knife-point); he had borderline personality disorder; he did time in 16 prisons. As Masters sums it up, “It isn’t a bedsit and employment that need; it is a new brain. At best we can keep them steady with drugs. At worst, we must throw them in jail, and hope that we are not in the room when they decide to hang themselves.”

18 Dalrymple web

In fact, “The System” (as Stuart calls the social services) provides much more for the homeless in England than drugs and restraint. Over the three years of their acquaintance, the government paid Stuart more than Masters, a Cambridge graduate in physics, managed to earn for himself. Once classified as unemployed and disabled, Stuart received about $400 a week and free rent. He regularly found ways to spend $150 a day on heroin. Apart from direct support, Stuart had guidance from the small army of social workers and administrators who deal with homelessness (Masters served in this army for a while). Theodore Dalrymple, in the other book under review here, described a hostel he visited that had 91 residents and 41 staff, most of them working behind locked doors so that they wouldn’t be bothered by their clients.

The government helps, and gets no gratitude in return:

All homeless people hate the System, even though many of its organisations – housing benefit, social security, the rough sleepers unit, dozens of charities – have been set up especially to make their lives easier.

The System is hated because it holds a carrot in one hand and a stick in the other. Hostels have many rules and penalties for bad behaviour; drug dealers make no demands on their customers, other than the price of their wares. Whatever the System gives to the homeless, it is never enough to repair the chaos of their lives. A homeless person has nothing and needs everything; how does one provide that?

Today, the state is close to throwing up its hands in trying to solve the problem of homelessness. Part of its despair comes from an intellectual failure. Psychiatry, medicine, sociology, criminology no longer claim that they even understand homelessness, still less that they know how to fix it. The most effective, and notorious, policy has been that of Rudolph Giuliani in New York: just drive the underclass out of central public places through ruthless law enforcement. Yet it is precisely in great and wealthy cities that homelessness seems to be growing fastest.

Alexander Masters began trying to understand Stuart by reading the social science literature, but Stuart himself would have none of it. “You grew up with order,” he told Masters, “so you’re going to want order to explain things.” Stuart can’t explain himself, so how can an outsider do better? Masters falls back on just telling Stuart’s story – and telling it backwards, from adult to child. First we see Stuart the psychopath and criminal; at the end of the book we see the chubby, smiling baby with his big brother. They are both going to kill themselves, but Masters never really tries to tell you why, or who is to blame.

What Masters gives us is the world according to Stuart; and he convinces us that Stuart is more interesting than most of the people on the other side of the college walls of Cambridge. But how much of Stuart’s fascination is put there by Masters’s talent as a writer? Masters rejects the compassionate social-worker approach, which would see Stuart as only a victim – one of the “socially excluded,” in current jargon. Stuart had his own social world; it just wasn’t a comfortable or law-abiding one. By joining that world on its own terms, Masters was “feasting with panthers,” in Oscar Wilde’s phrase. He was not looking for sexual excitement in consorting with Stuart and his friends, but prided himself on finding acceptance in an underworld that the solid citizens of Cambridge just wanted to avoid. Masters was lucky not to end up like Timothy Treadwell (portrayed in Werner Herzog’s film Grizzly Man), who lived with the grizzly bears for 13 years, until one of the grizzlies decided to eat him.

Theodore Dalrymple is the pseudonym of Anthony Daniels, who also writes under his own name on travel and other subjects. Until recently, Dalrymple worked as a psychiatrist in British inner-city hospitals and prisons. He belonged to the sharp end of government response to “the underclass” (as he calls it), where doctors, nurses, police and prison guards have clearly defined tasks of treatment and social control. Such people tend to be critical of the soft end, where social workers, hostel managers and poverty advocates do their work. Yet neither the hard people nor the soft ones seem to have great confidence in what they are doing, as the underclass has become a permanent feature of the urban landscape. Both Dalrymple and Masters are resigned to this, but their moral judgements are radically different.

One could say of Masters what Martin Amis said of himself, that he is “not terribly interested in disapproval.” People on either the left or the right might have their reasons to be indignant about Stuart’s life, but Masters mainly just wants to know what it’s like to be Stuart. Dalrymple, on the other hand, goes in for all disapproval, all the time. He is furious with how the System intervenes in the lives of his patients, and more furious with how it fails to intervene when it should. The reason for this dangerous passivity, Dalrymple says, is that “moral relativism … has been successfully communicated to those least able to resist its devastating practical effects.”

The thesis constantly repeated in the essays in Life at the Bottom is that “the fish rots from the head.” Misguided intellectuals, Dalrymple says, have undermined traditional beliefs in moral standards, free will and personal responsibility. There are two reasons to disagree with this. One is the fragility of the proposed causal chain: between Rousseau and Woodstock, or Nietzsche and the Nazis, there are too many links. What is the point of making such thinkers responsible for the distant and distorted “consequences” of their ideas? Today, people on the right like to blame disorder on “elites” and assume that ordinary folk, if they were not led astray, would come up with strong and simple values. In fact, populist ideas can also be traced back to intellectuals, just different intellectuals – Calvin rather than Montaigne, for example.

The other problem with the “intellectual decay” argument is that the underclass is not drifting in a value-free, postmodern cloud. They still have plenty of rules, and believe in reward and punishment; if anything their rules tend to be too savage, not too lax. In the Kingston Penitentiary uprising of 1971, the inmates held a mock trial of sexual offenders and tortured several of them to death.

Dalrymple’s book is full of horror stories about young women killed for breaking the rules of their immigrant communities, or old people persecuted by thugs. When he speaks of the “collapse of the British character,” he means that there is more violence, selfishness and addiction; this may be true, but woolly ideas are not the core of the problem. Nor is it plausible that “the tastes, conduct, and the mores of the underclass are seeping up the social scale with astonishing rapidity.” The British elite have no desire to join the underclass; they just think it can be a good joke to behave like them in superficial ways like wearing grubby clothes or dropping their aitches. That sort of play-acting has been going on since Marie Antoinette dressed up as a shepherdess. No middle-class person actually wants to live on a sink estate or send their child to a failing inner-city school.

Dalrymple’s book is a good read, nonetheless. He tells his stories well, and has a clear-eyed view of what makes life hard for immigrants and other “marginalized” people in cities. As a right-wing thinker, he also has some refreshing differences from the sort of American neoconservatives who praise him on his back cover. Dalrymple believes England is circling the drain; the neocons are so sure that America is the greatest country in the world that they turn a blind eye to much evidence to the contrary. Dalrymple, like Christopher Hitchens, has no love for faith-based solutions to social decay. He is hostile to vulgar consumerism; neocons believe that big houses and cars help to make America great. Dalrymple says the welfare state is not to blame for the underclass, because it’s only in the last 20 years or so that things have gone to pot; neocons say that welfare saps initiative. Dalrymple still resembles his Communist father in being appalled by many of the fruits of capitalism; neocons bang the drum for Anglo-Saxon economic freedoms.

Although he believes that order and responsibility are better than permissiveness and self-expression, Dalrymple sees the underclass as people who choose for themselves, not just products of the social machine. They are a much larger group than just the homeless, and they live on the margin because society gives them what they need to survive there:

They have no fear of failure and are utterly without the constraint of routine: their only daily task is to appear on time for a meal, and their only weekly task is to collect their social security. Moreover, they are automatically part of a fraternity – quarrelsome and occasionally violent, perhaps, but also tolerant and often amusing … It is difficult for most of us to accept that this way of life, so unattractive on the surface, is freely chosen.

The descriptions of a tramp’s life in George Orwell’s Down and Out in Paris and London show that Western societies used to deal with the homeless far more harshly than they do today. Orwell did not sentimentalize his tramps – he says of one that he has “a jackal’s character” – but he spent time at the bottom to get a perspective on the vices of those at the top. He viewed hardship below as a product of selfishness above.

Dalrymple, on the other hand, blames postmodern intellectuals for the chaotic lives of the underclass. Neither he nor Masters accepts Orwell’s old-fashioned leftist view of social inequality. In their different ways, they are both postmodernists. They look at the underclass as a distinct culture, with its particular rules. When members of one culture seek to judge members of another, they cannot appeal to any universal or national culture that overrules local patterns of behaviour. Dalrymple deplores this situation, to be sure, but he accepts that moral and social fragmentation are irreversible in contemporary Britain.

The multicultural model of society now includes groups – predominantly white, as Dalrymple notes – that used to be defined by their economic deprivation. Society is now a horizontal tapestry of cultures, not a vertical pyramid of classes. Economics has yielded to anthropology. Orwell still believed that the injustices of that pyramid could be dissolved, and that solidarity could bring about a happier and fairer future state. Now, as David Goodhart has argued, “The left’s recent love affair with diversity may come at the expense of the values and even the people that it once championed.”1 Goodhart sees Scandinavia as the exception: in a homogeneous population with an old-fashioned national identity, it is much easier to create a feeling of solidarity between rich and poor. There is an underclass in Scandinavia too, but it is proportionally much smaller than in the Anglo-Saxon countries.

In North America the right deals with the underclass by retreating into gated communities, or by trying to displace the poor from the public sphere of the city. The left tries to engage with them, but does not challenge values that are in fact destructive to those who hold them. Solidarity used to be the answer; but the lesson of recent decades is that solidarity is surely not forever. n

Continue reading “The World According to Stuart”

Edward Glaeser
Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier
New York: Penguin, 2011

338 pages.

Bill Bishop
The Big Sort: Why the Clustering of Like-Minded America is Tearing Us Apart
Boston: Houghton Mifflin, 2008

370 pages.

Feelings about American cities have always been mixed: some seek the centre, others flee from it. Edward Glaeser (like Richard Florida) celebrates city centres as magnets for ambitious people who seek richer and happier lives. “The enduring strength of cities,” Glaeser writes, “reflects the profoundly social nature of humanity.”

Nonetheless, we can see that many people prefer to express their social nature in suburbs or other kinds of decentralized living. Joel Garreau, for example, has argued that the real action has shifted to the urban margin, in the “edge cities” that have mushroomed up at freeway intersections 30 or 40 kilometres out. Going farther yet, John Kasarda locates the future in the “Aerotropolis.” New airports come first, on the outskirts of Bangkok, Dubai or Seoul, then a new kind of agglomeration follows them. Grandiose terminal buildings, built to the scale of 50 million passengers a year, are the cathedrals of the 21st century. Centrality yields to accessibility: Bangkok’s new airport at Suvarnabhumi is within three and a half hours’ flight time for one third of the world’s population.

These rival visions also divide those who look to the past and want to revitalize the traditional kind of city from those who look to the future and see old-style cities as obsolete. In the United States, this division pits Democrats against Republicans, the centre against the suburbs, the public against the private, the subway against the freeway. Edward Glaeser has lived most of his life in Manhattan and Boston, and he makes a vigorous case for the central city. But in Triumph of the City he slides over the fact that many U.S. cities have been experiencing more trouble than triumph.

Of the 16 largest U.S. central cities in 1950, six have now lost more than half their population. Detroit, probably the sickest of them all, has lost 58 per cent. Many of these declining cities have suffered from the hollowing out of U.S. manufacturing. But there are two broader and more powerful reasons for decline: the attraction of suburban living, and self-segregation by whites as many city centres have become predominantly black. American urbanization, like American politics generally, is still haunted by the legacy of race.

In recent years these population movements have taken on a more complex form, which Bill Bishop has called The Big Sort. Glaeser does not mention this book, but it gives a more convincing picture of where the United States is going. More and more Americans are choosing to live in “like-minded clusters” – often inside walls and gates – that are both politically and economically homogeneous.

There are now “Blue” towns and “Red” towns; on a larger scale, the liberal dwellers on the east and west coasts inhabit a different world from conservatives living in the midwest and south.

Bishop focuses on the massive increase in “landslide counties,” where more than 60 per cent of voters favoured one or the other presidential candidate. These areas, he argues, are becoming the geographical bases for rival tribes, where political allegiance is only part of an interlocking set of lifestyle choices. In Republican landslide counties, people have guns in their houses and oppose abortion; 45 per cent of the adult population belongs to a Bible study or prayer group. In Democratic landslide counties they fear global warming, favour gay marriage, drive Volvos and call their dog “Che.”

Counties voting for Bush in 2004 averaged 110 people per square mile; for Kerry, 836. As Karl Marx spins in his grave, Democratic landslide counties have higher levels of income and education than Republican ones. Instead of clustering around the political centre, opinions are polarizing, and this process expresses itself spatially as people move to be with their own kind.

Bishop does not consider the intellectual roots of American urbanism, but what is going on now resembles the kind of Puritan revivalism that has recurred throughout American history. John Winthrop’s “City Upon a Hill” defined American exceptionalism by proclaiming the ideal of a likeminded “godly” community. In Gore Vidal’s quip, the Mayflower colonists did not sail for New England because they were being persecuted, but because they were not allowed to persecute others. They had settled in Holland, the only country in the world that had established religious tolerance; but they feared that their children were absorbing the pluralist values of Dutch society. Once in New England, the Puritans could enforce conformity and drive heretics into exile. Quakers and witches could be hanged. When cities later became more secular and diverse, the alternative was the Frontier, an area of radical freedom and black-and-white values.

If most Americans are now living by “the Big Sort,” then the “creative city” touted by Glaeser or Richard Florida may be the exception that proves the rule. A dominant tendency in American culture has been the pursuit of mobility and outward expansion, a search for the “great good place.” Only a few cities formed dense pedestrianized European-style centres, usually because they were founded on peninsulas or islands: Boston, New York, San Francisco, Seattle.

These cities do indeed thrive, thanks to their financial or intellectual resources. But there can also be vitality in different models. Sprawling, doughnut-shaped cities like Phoenix, Houston or Dallas manage well enough without a residential downtown. There are also decentred creative regions, like Silicon Valley or the periphery of Washington, D.C. College towns or corporate campuses give a third model: Stanford University (familiarly known as “The Farm”) has become preeminent thanks to its 3,000 hectares of land. (Canadian universities are more likely to be in city centres, though it is not clear how much advantage they have gained from this.)

Greenwich Village and North Beach, as bohemian neighbourhoods, have certainly contributed to the success of New York and San Francisco. But Richard Florida’s idea that such areas are now central to economic development probably puts the causative arrow the wrong way round. Those two cities became the financial centres for the east and west coasts long before they became bohemian meccas for recent college grads. Bright ideas do not come to fruition in college dorms or trendy bars. As the movie The Social Network shows, their practical success is driven by networks of venture capital, a system that has little to do with bohemianism.

Dense city centres still have their uses, of course, even in the United States. As Glaeser notes, they have a lighter ecological footprint than sprawl cities like Los Angeles or Phoenix. The inhabitants of Dallas use more than three times as much energy per capita as those of New York City. Nonetheless, the United States will not easily give up its culture of McMansions, cheap gas and likeminded suburbs. Republicans will fight doggedly against government subsidies to mass transit, or zoning that promotes densification. Michele Bachmann has promised that if she is elected president, gas will sell for less than two dollars a gallon. On the other side, liberals and environmentalists are often the most rabid NIMBYites; they do their bit to ensure that housing in desirable cities will remain scarce and expensive.

Where do Canadian cities fit into Glaeser’s scheme? He has nothing to say about Toronto or Montreal. Vancouver he calls a success story as a “consumer city,” thanks to Asian immigration and a positive attitude to densification. What has been built on Vancouver’s downtown peninsula is certainly impressive, and its formula of residential towers, transit and public space is highly efficient. As Glaeser notes, a 1,200-square-foot apartment in a 40-storey building takes up 30 square feet of land – the size of a grave. In Vancouver, that apartment uses about $30 worth of electricity a month, including heating. Yet the low running cost of such compact space is dwarfed by the purchase cost – currently at least five times as much as similar space in a Sunbelt suburb.

Glaeser’s praise of Vancouver omits the awkward fact that it now has some of the most expensive housing in the world. This might not matter if incomes were equally high. New York and London have very high incomes because they are global financial capitals, and much of their wealth ends up in bricks and mortar. Incomes in Vancouver sit at precisely the Canadian average; in Calgary, incomes are one third higher and housing costs half as much. How long can this go on? Glaeser argues in a circle on this issue: when housing is expensive relative to income, he says, that just gives us a measure of how much people are willing to pay for “quality of life.”

Vancouver housing prices have become stratospheric because the city is relatively small, has geographical limits and is an international safe haven – the Zürich or Geneva of North America. But Switzerland has a closed door to immigration, Canada an open one. On the west side of Vancouver, about 600 houses are listed for sale at a given moment, and the only way to build a new house is to demolish an old one. China alone now has more than 500,000 people with a million dollars to invest, so a real estate bubble in Vancouver is probably unavoidable.

The weakness of the local economic base may be obscured by the flood of money coming in from the nouveaux riches of developing countries. But in the long run Vancouver needs to gear up its indigenous economy, and it’s not clear how that can be done. Glaeser suggests that manufacturing cities are in decline and “idea cities” on the rise. If so, what is Vancouver’s “idea,” beyond its natural beauty and agreeable lifestyle? Where are its “idea businesses,” on the scale of Microsoft or Amazon in Seattle, Intel or Nike in Portland?

The “Vancouverism” model is a huge bet on two propositions: that the expansive development of post–World War II North America can be reversed, and that a vibrant centre is bound to generate sustainable economic and cultural wealth. Glaeser largely takes such a “triumph of the city” for granted.

It makes for a good story, but urban history has followed a more erratic course. The white middle class has been fleeing American cities for decades out of dislike for one of the things cities do: force people of different races or incomes into proximity with each other. If oil rose above $200 a barrel, Vancouver could manage while U.S. sprawl cities would be in crisis; even so, politicians might respond by reducing gasoline taxes even further.

In any case, how quickly can they change their urban model? Vancouver’s dense centre has taken more than 50 years to build, since the West End was up-zoned in 1956, and it still accommodates only 5 per cent of the Lower Mainland population. Cities like Florence or Amsterdam have historic density, but have succumbed to the monoculture of tourism. Detroit and Dubai, in their different ways, are now facing collapse. Public transit may bring 100,000 people a day into the centre of Vancouver, but wealth and happiness are not guaranteed by their presence. As we have seen here and in London, the creative crowd can quickly turn into the destructive mob. Cities do demonstrate “the social nature of humanity,” but the better side of that nature does not always triumph.

Can Alberta learn from Norway and Ireland?
 Alberta’s economy has been growing about twice as fast as that of the rest of Canada, and if oil prices remain high it will continue to do so. The province is turning into a separate kingdom, with per capita income more than 50 per cent above the Canadian average.

But what is the right strategy for managing a prosperity that stems from a finite endowment of oil and gas? One traditional Canadian answer has been to cut the tall poppy down to size. Pierre Trudeau tried to do this with his National Energy Program in the 1980s, and we do it on an ongoing basis through equalization. While there have been calls for a more generous equalization program, Ottawa will probably do no more than tinker with equalization in coming years, while Alberta continues to pull away from the rest of Canada. When we consider its future, we might do well to look at two other societies transformed by recent wealth: Norway and Ireland.

Saving for the future

Their envious neighbours like to call the Norwegians “blue-eyed Saudis,” but the two countries could hardly be more different when it comes to spending their oil money. Saudi Arabia is a country of spectacular consumption by a feudal elite, while everyday work is left to foreign workers with no rights. Norwegians now have the highest per capita GDP in the world; yet as a society, they have been reluctant to enjoy their wealth. More precisely, they plan to spend it later, after most of their oil has gone. Norway’s great fear has been of the “oil curse”: wealth that has done more harm than good in the countries possessing it.

Oil was discovered in the Norwegian sector of the North Sea in 1969 and production began in the mid-1970s. Possession of oil contributed to Norway’s vote against joining the European Union in 1972, a decision reaffirmed in 1994. By 2000, Norway had become the third or fourth largest exporter of oil in the world, at more than 3 million barrels a day. Norwegian oil production peaked in 2001 and has been slowly declining. But in terms of revenue, this decline has been more than offset by the quadrupling of oil prices since 9/11. Most of the profits from Norwegian oil flow directly to the state, thanks to the dominant position of the national champion, Statoil.

By the beginning of this century Norway had paid off its national debt, and still the money poured in. In 1990 the Norwegian parliament, the Storting, voted to establish a Government Petroleum Fund to receive excess oil revenues. The fund reached US$240 billion by the spring of 2006, and it is now growing at about $3 billion per month. There is $52,000 in the fund for each Norwegian man, woman and child, and this amount is projected to double by the end of 2009. After that the fund’s value is expected to level off as oil reserves are depleted. When the oil is gone, Norway will have the fund as a cushion, a permanent benefit from the fat years of North Sea production.

The first aim of the Petroleum Fund has been to restrain the Norwegian oil boom by shifting consumption from the present to the future. The money going into the fund could have been distributed to the general population, following the example of Alaska’s oil dividend program. Norwegians might now be receiving a dividend of about $8,000 a year each. But their government has feared the twin perils of oil-driven inflation and the social corruption caused by easy money. The oil windfall needed to be sterilized so that it would not have any radical effect on the domestic economy. The fund therefore decided to invest entirely in foreign assets (initially bonds, later adding stocks and derivatives). It has also chosen to be a passive investor, not taking a big enough stake in any one corporation to exercise control. The fund has acted like a conservative individual providing for his or her old age. This mentality is reflected in a change of name in 2006: the “Government Petroleum Fund” has now become the “Government Pension Fund.” Knut Kjaer of the Norges Bank has called it “a tool to help the government face the challenge of an ageing population.”1

The fund’s passivity reflects Norway’s political culture. Since World War II it has been a classic Scandinavian welfare state, with very high taxes, a high cost of living and generous social benefits. The state has enjoyed legitimacy and authority as the guardian of every citizen’s welfare. Americans may mistrust government, the French may be angry at it, but Norwegians largely accept it. The directors of the Petroleum Fund have more money at their disposal than the government has, but they don’t throw it around. If blessings flowed from the fund, this would usurp the budgetary powers of Norway’s elected representatives. Only the state has the right to guide what happens in the economy or culture.

An egalitarian society like Norway’s will not be disposed to concentrate wealth for any narrow purpose. One should not expect to see in Oslo an art gallery to rival the Getty Museum, though the government is spending more than $800 million on a new opera house. The Petroleum Fund could do such things with a few months’ revenue, but its mandate prevents it doing anything that the government has chosen not to do. Private support for culture is limited, because state management of Norwegian oil has made it impossible for any Norwegian J. Paul Getty to emerge. The government could have set aside a small portion of its windfall to seek excellence in specific areas of culture or research, but it seems to consider excellence and equity irreconcilable, even when oil money has put excellence within its grasp. The fund is not just designed as a bulwark against inflation or wasteful consumption. It seeks also to prevent new oil wealth from having a radical impact on Norwegian society. In due course, the benefits of the fund will be returned to all Norwegians as they enter old age. Its resources will melt invisibly into the general comfort and prosperity.

Recently, the Petroleum Fund has moved toward activism in one area: investment policy. In 2005, it charged an “Advisory Council on Ethics” with establishing investment guidelines. The council proposed that the fund should only support “sustainable development”: it should not invest in companies that produce arms, violate civil rights or have questionable business practices. One of the council’s first acts was to send a series of sceptical questions to Wal-Mart. After the company failed to reply, the Council recommended in November 2005 that the fund no longer hold Wal-Mart shares or bonds. These holdings amounted to $400 million, about 0.2 per cent of Wal-Mart’s capitalization. The divestiture has taken place, along with other fund investments in arms manufacturers and the like. As with any sanction or boycott, the fund’s refusal to hold Wal-Mart shares would only have an effect if most other investors threatened Wal-Mart’s managers. That is not going to happen, evidently. Still, when Norway’s pensioners eventually draw an income from the fund, they will be able to feel that their money is relatively clean (though how much they get will depend on the success of global capitalism).

Taking a stand on corporate ethics is easier than taking responsibility for the strategic development of the Norwegian domestic economy. Norway has been afraid of “Dutch disease,” named after the side-effects of the Dutch gas boom in the 1970s. An influx of foreign currency from natural resource exports tends to drive up the recipient country’s exchange rate and price its manufactured goods out of their traditional markets. Norway’s main industry has been shipbuilding. If oil revenues had not been sterilized through the Petroleum Fund, it is argued, the kroner would have shot up and Norwegian ships would have lost their market. Instead, Norwegian shipbuilders specialized in more complex vessels (including oil rigs), prices have not risen excessively and the industry has remained healthy. New high-tech ventures have also flourished in Norway.

The Irish miracle

Does the threat of “Dutch disease” mean that oil revenues, unless sterilized, are bound to be a curse for small economies? This is a topical question for Alberta, and for other small jurisdictions open to global movements of trade and capital.

Many small nations or regions – of about two to five million people – are more successful, economically and culturally, than larger and more unwieldy countries. These small entities are well placed to deploy tax arbitrage against larger bodies that they are attached to. The most prominent example is Ireland, which for many years has set its corporate tax rates far below the European Union average. The current Irish rate is 12.5 per cent; larger EU countries are mostly in the 30 to 35 per cent range.

When Ireland entered the EU in 1973, it was relatively poor and without natural resources. But it qualified for EU subsidies, had a young and well-educated population and, after 1999, was the only English-speaking country in the Eurozone. Since the mid-1990s, a boom in foreign investment has pushed Irish GDP per capita above Britain’s, and 20 per cent above the EU average. With just over 1 per cent of the EU population, Ireland has in recent years attracted about a quarter of all U.S. investment in the EU. Per capita wealth is now higher in Ireland than in the United States. The aggressive use of tax arbitrage transformed the Irish economy in a single generation.

The new EU members from eastern Europe are emulating Ireland’s strategy. They too are experimenting with low corporate rates and flat-rate income taxes. Most of them are growing faster than the older members of the EU, while France and Germany complain about a “race to the bottom” by tax-cutters in the east. New investment in manufacturing is more attractive in Hungary or Slovakia than in France or Germany. Like Ireland, the eastern countries may be able to attract European headquarters of U.S. multinationals. Microsoft, for example, funnels all its European profits through Ireland because of its low tax rate. In 2005, Microsoft Ireland reported profits of $9 billion. Almost all of this money was earned in larger European countries, which were not pleased to see Ireland harvesting tax revenue on their behalf.

Norway could have used its oil revenues to cut its corporate taxes to zero and become the biggest European tax haven of them all. Or it could have cut the consumption taxes that have made it a very expensive country to live in and stifled its tourist potential. But such drastic measures would conflict with Norway’s social democratic sense of fairness and fear of the destabilizing effects of an open door for international corporations. If foreign investment should flood in, Norway would have to move even more of its government revenue offshore as a counterweight; otherwise the kroner would be driven up and the economy would overheat. Nonetheless, sterilization of oil revenue may not be the best strategy in the long run. Norway could have taken advantage of North Sea oil to diversify its economy more aggressively and lay a foundation for long-term growth. The opposition Progress Party wants to break out of the straitjacket of Social Democratic resource policy, but so far the Norwegian electorate has refused to give it a mandate to do so.

Alberta’s options

Not being a sovereign nation, Alberta has fewer tools for handling its oil boom than Norway does. Interest rates and the exchange rate on the Canadian dollar are determined nationally rather than locally. On the other side, labour shortages can be relieved by interprovincial migration. But the main instrument wielded by the government is the provincial budget, supplemented by the Alberta Heritage Fund.

Since 1994, Ralph Klein’s government has used oil revenue to strengthen its balance sheet, paying down the provincial debt from $23 billion to zero. Some oil revenues have also been directed to the Alberta Heritage Fund, a fiscal buffer that currently stands at about $15 billion (about $4,500 per capita). Alberta finance ministers have not managed the Heritage Fund according to any consistent plan. Like most finance ministers, they have found it convenient to have different pockets between which to move money as expediency requires. In the current fiscal year, absurdly enough, Finance Minister Shirley McClellan put $1.75 billion “surplus” revenue into the Heritage Fund, then took $1 billion out for program spending. McClellan has earmarked $750 million added to the fund as an advanced education endowment, intended to reach $3 billion in coming years. She also added $500 million to a separate endowment, the Alberta Heritage Fund for Medical Research.

Paying down the provincial debt was a sensible way of managing the flood of oil revenue. It was also a form of sterilization, since most of the money that paid off bondholders was leaving the province. In the past couple of years, though, Alberta fiscal policy has become a muddle. Klein seems to have run out of ideas as his mandate nears its end; meanwhile, the spike in oil prices provides the Alberta finance minister with income on an unprecedented scale. There are three ways of dealing with the revenue windfall: allowing it to pass through to consumption, investing in public works and shifting it into the future through an endowment fund. The 2006 Alberta budget dabbles in all three choices, including a $400 per capita oil dividend in imitation of Alaska. What is lacking is any coherent strategy for the province’s future. Major decisions await Klein’s departure at the end of 2006.

As already noted, there is one other way to dispose of the embarrassment of oil riches: equalization across provinces. Here one encounters the arbitrariness of national or provincial boundaries. Norway devotes a higher percentage of GDP to foreign aid than any other country, but still less than 1 per cent. It keeps almost all its oil wealth for itself. At the other extreme, Scotland has about the same population as Norway, but no fiscal independence. Once North Sea oil comes ashore in Scotland, the royalties are shared by all of the United Kingdom, with a population ten times that of Scotland.

Federal systems represent an intermediate position, but not all federations are the same. In the United States, there is no equalization between states. People equalize themselves, so far as they can, by moving to a better job in another state, or by moving from an expensive state to a cheaper one. Canada does more to help people stay where they are, in the name of preserving their language or culture.

Alberta, nominally in control of its own natural resources, nevertheless faces pressure to share its wealth with the rest of Canada. Newfoundland Premier Danny Williams and Bloc Québécois leader Gilles Duceppe have been demanding changes to equalization that would bring further golden showers to the Atlantic provinces and Quebec, and the recently released federal review of equalization would also make the program more generous.2 But strict equality will never be achieved as long as the provinces control their natural resources; nor is it obvious that equalization, in its present form, contributes much to Canada’s economic health. In the past, Ontario accepted equalization in exchange for political dominance and support for its manufacturing base. But if Ottawa wanted to make Alberta into a cash cow for less fortunate provinces, it is not clear what, if anything, Alberta would receive in return for slowing down the oil boom in this way.

Alberta could become “Canada’s Ireland” by cutting or even eliminating its corporate income tax. Expected revenues from this tax are estimated at $2.2 billion in 2006–7. The overall surplus is estimated at $4.1 billion, so elimination of corporate income tax would still leave the Alberta government in surplus. Such a drastic cut would fuel resentment in other provinces, as corporate head offices moved west. Some U.S. corporations might move to Alberta too: if Alberta had no corporate tax the Canadian federal tax, currently 21 per cent, would be well below the U.S. rate of 35 per cent. Head-office employment in Calgary is already growing steadily, but the westward tilt could speed up.

Other provinces already offer selective tax concessions: for movie production in British Columbia, automobiles in Ontario, Bombardier jets in Quebec. But Alberta could make itself extremely attractive to any established Canadian business with sweeping across-the-board tax cuts. Even if it was politically impossible for companies to move, they could still feel the heat. Air Canada, for example, is finding it difficult to keep up with WestJet, which benefits from its low-tax and union-free location in Calgary. The main limitation for businesses wanting to move to Alberta is simple lack of capacity. No large blocks of office space will be available in Calgary before 2009. Fort McMurray, the oil sands capital, shows the dire results of trying to put a quart of growth into a pint pot of infrastructure. In July 2006, Shell Canada reported that costs for its oil sands expansion had increased 50 per cent in one year.3

Oil booms inevitably spill over into the housing market. Prices in Calgary and Edmonton have risen by more than 40 per cent in the past year. Residential construction has to compete with the oil sector for scarce materials and labour. At the same time, housing shortages make it difficult to import workers from other regions, driving up labour costs even more. Interest rates, which are set nationally, cannot rise enough to choke off the boom. Finally, as the housing market heats up, speculators move in from outside the region to buy houses for profit, rather than to live in. Wherever money is available in a boom market at moderate interest rates – as in Alberta, Ireland or London – house prices rise far beyond their normal relation to average incomes. The surge of hot money into the housing market is perhaps the most dangerous side-effect of an oil or finance boom, and it may take a nasty recession to cure the problem.

Rising costs for oil sands development suggest another path to stabilization: simply leave the oil in the ground until it can be produced in a more orderly fashion. Whether or not global oil production is about to peak and then decline, countries such as the United States and Britain are certainly on a downward slope. If supplies remain tight and prices rise on the global market, a country can produce less and still increase its revenues. In the long run, the value of oil left in the ground may be greater than the returns from current production. If the Alberta government believed this, it could stretch out the period of oil sands development simply by delaying permits.

Canadian oil production in 2006 will be about 2.5 million barrels a day, equally divided between conventional oil and oil from the tar sands.4 While conventional oil production is gradually declining, oil sands production is projected to increase to 3.5 million barrels a day by 2015, and most of this extra production will be exported. It is very doubtful that the extra tar sands oil can be brought into production without rampant cost inflation, not to mention environmental damage. Restraint in oil sands development would leave more capacity for Alberta to diversify its economy and direct growth toward the populated south, where it can be accommodated more easily. Alberta’s “oil fund” would then contain more oil in the ground and fewer securities purchased after extracting and selling the oil. However, the latest policy statement from Alberta’s oil ministry argues for developing the tar sands as fast as possible, even using imported liquefied natural gas to do so.5

An explicit policy of holding back tar sands development would arouse hostility from the United States, which is counting on more energy imports from its politically stable neighbour. In the past, few countries have had a conscious policy of restraining oil production. They have preferred to keep pumping and accept whatever the market was willing to pay. Nominally, OPEC has existed to balance oil supply and demand; in practice, few countries have respected their quotas and Saudi Arabia has flooded the market when it feared that prices were getting too high. This situation may be changing now, thanks to political uncertainties in major producers (like Iraq, Iran, Nigeria and Venezuela) and rapid growth in demand from China and India. With overall production of about 85 million barrels a day, the loss of a million barrels a day is enough to affect the world price. There have been hints that Norway may be quietly holding back production to extend the life of its resource and help keep oil prices firm.

Slowing down the pace of oil sands development would be more than just speculation about the price of oil 10 or 20 years from now. The main argument for restraint is that the Alberta economy cannot grow faster than 5 or 6 per cent a year without major distortions and inflationary bubbles. A tax reduction strategy combined with an oil sands slowdown would redirect that growth: from resource industries to diversified new ventures, from the hinterland to the cities, and from the north to the south. Growth would become more complex, more granular and more sustainable. The best time to start shifting the economy away from oil is when you still have plenty of it left.

Continue reading “Embarrassment of Riches”