The Weekly Dispatch


March 26 - April 1

Hello, and welcome to the Dispatch for March 26 - April 1!

My thanks this week to Luis and Harlan, who helped me better understand the situation in Argentina and direct my research. There’s no substitute for knowledgable and interested people, and I’m fortunate to have such good friends.

Let’s get started!


ECOWAS, the Economic Community of West African States, issued a warning on Wednesday to the leaders of the Malian coup, pressing them to restore the democratic government and placing peacekeeping troops on standby. The Tuareg rebels in the north took advantage of the chaos surrounding the coup and seized a swath of territory, culminating in the capture of Timbuktu on Sunday. Facing pressure from abroad and a severely deteriorated security situation, the coup leaders announced they would restoring the constitution and transfer power back to a transitionary government as soon as possible.

To say the coup has failed spectacularly is an understatement. Within one week, the leaders of the coup allowed the Tuaregs to capture more Malian territory than they have in almost a century of uprisings; indeed, with Timbuktu, they’ve now realized their full territorial ambitions. When civilian government is restored, it will be in a severely disadvantaged position as it attempts to negotiate the future of the northern region of the country. Last week, world leaders said the age of the coup was past, this week shows they may be right.


Nobel prize winner Daw Aung San Suu Kyi won a seat in Sunday’s much- anticipated parliamentary elections, according to her party, the National League for Democracy. The NLD itself is said to have won at least 40 of the 44 available seats.

Myanmar’s parliament consists of 664 seats, only 44 of which were contested this election. Still, the move is enormously symbolic: A year ago, it would have been unimaginable to see the NLD, and especially Aung San Suu Kyi, whose 15-year house arrest came to symbolize the country’s repression, in parliament. The speed of the country’s liberalization has been breathtaking, and as yet observers are left scratching their heads over the cause. The most credible theory is that the leaders of the military junta, now rather wealthy old men, would rather retire peacefully as heroes than wait for the Arab Spring to arrive at their door. In any case, the government is making all the right moves, and, as Hillary Clinton put it, that’s quite a nice sight to see in a season thus far dominated by Syrian tanks.


The Obama administration announced it was suspending trade benefits to Argentina over the country’s failure to pay $300M in awards to two American companies. The administration said it did not believe Argentina had acted in good faith concerning the awards, granted in the aftermath of the country’s 2001 default.

The $300M is owed to two companies: one is CMS Energy, an energy firm who won bids on large energy concessions in Argentina in the mid 90s, and the other to Azurix, a subsidiary of Enron, which won a bid to supply water around the same time. Both bids were awarded during a raft of privatizations taken as concessions for IMF loans during the 1990s, and the two companies were among the holdouts in Argentina’s debt restructuring during their 2001 default.

The history between Argentina and the US since WWII has been checkered at best - starting with the Marshall Plan, under which European nations were blocked from purchasing goods and services from Argentina in a bid to discredit Perón, the Argentine president at the time. The story since has been one of coups, debts, corruption, and concessions to external creditors, the end result of which is Argentina, once the 7th largest economy in the world, finds itself still struggling to access foreign credit markets. Argentine governance has frequently been fraught with corruption and ill-advised policy, but it’s awful hard to see any balance in this move: Argentina now joins Sudan, Syria, and Belarus as the only countries in the world ineligible for trade benefits, due mostly to two companies’ demands for more concessions from a bankrupt nation.

Oil Markets

The French Energy Minister confirmed talks with the UK, US, and Japan about releasing oil from the countries’ strategic reserves to bring down crude prices. The Saudi oil minister said his country would bring as much oil to market as needed to keep prices down, stating that high oil prices were beginning to have an effect on European growth. On Sunday, President Obama announced there was enough oil supply on the market to go forward with another round of sanctions targeting Iran’s oil exports without affecting global energy prices.

In a bit of election-year irony, the slow economic growth is helping the Obama administration take a hard line on Iran: oil demand is low, in part due to sluggish growth in Europe and slower than expected demand from China. The talk of releasing oil from the strategic reserves, though, belies the optimistic talk of Saudi supply. Iran is the second-largest producer of oil in the world, with output around 30% of Saudi Arabia’s. It’s extremely hard to imagine a scenario where shutting Iran out of the oil markets doesn’t impact prices.

As an aside: the Strategic Petroleum Reserve exists to handle genuine emergencies and short-term supply disruptions. Seeing it used it for what are fundamentally political purposes is an extremely poor development. If the administration thinks the benefits of pressuring Iran to abandon its nuclear program outweigh the potential cost of an increased price of oil, let them make that case, but to dip into the emergency fund by choice instead of necessity is both disingenuous and potentially dangerous.

Health Care

The Supreme Court heard arguments over the Patient Protection and Affordable Care Act, or Obamacare, this week. The case focused on the “Mandate,” the requirement in the law that individuals buy health insurance or pay a penalty. The Obama administration was confident at the start of hearings the law would stand, but by mid-week, the Justices’ questioning led many to believe they would strike the law down.

While it was expected the court would break along ideological lines, leaving Justice Kennedy the pivotal vote, Kennedy’s questioning of the Administration’s lawyer was extremely sharp, surprising most observers. The Justices have indicated their decision will be all or nothing: either the Mandate, and thus the law, stands, or the Mandate falls and the entire 2700-page law will be revoked.

The government’s arguments in favor of the mandate have centered on the Commerce Clause and the assertion that, at some point, everyone interacts with the health care market - because the government can regulate the health insurance and care markets, and because everyone will use the market eventually, the government has the ability to regulate the terms on which people enter that market. The argument of Attorneys General representing the states suing the government point out that this reasoning can be stretched to cover nearly every industry, including food: can the government thus compel us to buy broccoli as well? Either side can quote a large body of case law - going back to 1792, in some cases - and, no matter the ruling, the decision promises to be highly contentious.

Final Thoughts

I’ve talked before about my distrust of complexity - in fact, the Obama administration’s attempts to mold the oil markets to prevent spillover from Iran was the background for my previous comments on complexity, and that situation isn’t looking a lot better to me than it did then.

The individual health care mandate, the subject of the Supreme Court’s scrutiny, is another example of complexity serving ideology: the mandate exists to solve the inability of people with pre-existing medical conditions to get health insurance, and the subsequent bankruptcy of people whose only mistake was to get cancer. By all measures, the regulation against pre- existing coverage bans is wildly popular: 85% of people support it in recent polls. The only way to make that regulation economically viable, though, is to dramatically increase the number of healthy, dues-paying people on insurance company rolls. The mandate is designed to keep private insurance companies in business while achieving the rather laudable social goal of preventing the sick from being left to die on the streets. The problem is, it might be unconstitutional. The other problem is, it’s a terrible patch to a broken model.

We’re at a crossroads: we can either have profitable, market-driven insurance companies, or we can have a society in which an illness is not a death sentence, economic or otherwise. The mandate kicks the can down the road, but it’s not clear what other problem it solves: whatever its other virtues, it’s impossible to call a system in which individuals are compelled to buy health insurance a “free market solution.” If we really want coverage for those with dire illnesses, it’s well time to drop the pretense and move to the system we’re trying to jury-rig our way into: single-payer universal health care.

I’m not arguing whether single-payer is the best system - my argument is: if we’ve decided we want people who are sick to receive affordable medical care, the only way to accomplish that goal in a market-based system is apparently through actions which remove any real basis by which we can call the system market-based. At that point, the only thing we add to the system by pretending to include private enterprise is an incredible amount of complexity and bureaucracy, both in regulatory bodies and in the insurance companies themselves. It would be far, far better, cheaper, and more direct to cut out the middleman and enact what we’re really striving for than to keep patching together a broken system in hopes of creating a serviceable health care system.

Whatever the system we decide on, it’s well time we have a serious discussion: if we want a market-based solution, we need to accept the consequences, which will be measured in lives. If we’re not willing to accept the cost of a market system, we need to stop pretending half-measures will do the job and commit to paying the price of our moral preferences.

Thanks for joining me, and my best for the week ahead! Eric