Today, David Henderson explains how economic freedom improves the lives of individuals at all income levels; Ross Levine lays out the moral hazards and financial dangers Kevin Warsh must confront if he is confirmed as the next chair of the Federal Reserve; and Amit Seru and David Larcker examine the shift in investors’ attitudes toward environmental, social, and governance investing over recent years.
Answering Challenges to Advanced Economies
At Defining Ideas, Research Fellow David R. Henderson explores the five elements of economic freedom—the moving parts that determine whether people can act on opportunities in their society. For America, the good news is that we rank fifth in the world for economic freedom, Henderson says. The bad news, he continues, is that economic freedom in the United States and the rest of the world is lower than it was seven years ago. This matters because it shows how freedom can shrink even under “temporary” expedients, such as pandemic measures, the economist writes. Even so, the lot of low-income people remains brighter in high-freedom countries, Henderson says, showing that economic freedom is not just something for the rich. Henderson concludes that economic freedom makes it possible for the vast majority of people to do well. Read more here.
Writing at Barron’s, Senior Fellow Ross Levine says that even though his Hoover Institution colleague Kevin Warsh hasn’t been confirmed by the Senate to serve as the next chair of the Federal Reserve, “economists and commentators are already speculating about what his tenure will look like and what stamp he will leave on the institution.” Joining this forward-looking analysis, Levine argues that Warsh’s tenure won’t be defined by interest-rate decisions, but rather “will be shaped by how he handles weakening financial market discipline and regulation.” Levine warns of the dangers of continuing with a “fake market” oversight approach at the Fed, wherein “investors and executives are insulated from catastrophic losses through explicit or implicit government protection.” Levine concludes, “Warsh’s legacy hinges on whether he confronts the dangerous approach that took hold in the Fed in 2008 and accelerated over the past year.” Read more here. [Subscription required.]
In an essay for the Harvard Business Review, Senior Fellow Amit Seru, Distinguished Visiting Fellow David Larcker and coauthor Brian Tayan analyze how attitudes among investors toward environmental, social, and governance (or ESG) investing have shifted in recent years. “As recently as five years ago, [ESG] was pitched as a market revolution—led by idealistic young investors and destined to reinvent investing. Five years and a few economic shocks later, the revolution looks more like a recalibration—but that doesn’t mean ESG has disappeared,” the authors find. They note that investors are significantly less willing today to sacrifice returns “to support environmental causes.” The authors conclude that ESG has not disappeared from investors’ minds, but is now more “subject to constraints, opportunity costs, and changing economic realities.” Read more here.
Confronting and Competing with China
“In the 1930s,” writes Visiting Fellow Miles Yu at the Hudson Institute website, “Adolf Hitler fixated the world’s attention on the Sudetenland, a small, German-speaking enclave within the sovereign state of Czechoslovakia.” Hitler and his regime wanted Britain and France to believe that this territory was “the one issue that must be ‘resolved’ at all costs.” “Today,” Yu continues, “the [Chinese Communist Party] wants us to believe Taiwan is China’s Sudetenland.” But Yu warns that “like Hitler, Beijing’s appetite extends far beyond a single territory,” as “China is simultaneously pressing claims against India, Japan, the Philippines, Vietnam, Malaysia, Brunei, Bhutan and others, both on land and at sea.” Recalling the history of the Sudetenland, Yu concludes that allowing China to conquer Taiwan will trigger “a long chain of aggression that will engulf the world once again in a global conflagration.” Read more here.
Library & Archives
The Hoover Institution Library & Archives has announced the opening of more than 30 interviews with influential political figures from the collection of author James Mann. The newly available material includes interviews with former Vice President Dick Cheney, former Secretary of Defense Colin Powell, former National Security Advisors Brent Scowcroft and Zbigniew Brzezinski, former Secretary of State George Shultz, and former US diplomat Richard Armitage, among others. Many of the interviews were conducted for Mann's book The Great Rift, which details the relationship between Dick Cheney and Colin Powell. These interviews complement existing Hoover collections related to late 20th- and early 21st-century American foreign policy, including the George P. Shultz, the Condoleezza Rice, the Donald Rumsfeld, and the George W. Bush administration records. Read more here.
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