Student Loans and the Building Crisis

Student loans are gradually becoming a crisis.  At the macro level, student loans are the only sector of consumer finance that is growing since the recession began 3 years ago.  Federal student loans outstanding now total more than $1 trillion.  That’s more than total credit card debt.  From Mybudget360.com:

Student loan debt only segment of household debt expanding

The Federal Reserve tracks federally backed student loan debt and the figures are astounding.  The only sector of household debt that has expanded in manic fashion during this recession is with student loans:

debt growth by sectors

Every sector has taken a hit including:

-Home equity revolving debt

-Automobile loans

-Credit card debt

-Other debt

Yet there goes student loan debt saddling countless students with back breaking debt.  Make no mistake, much of the for-profits are growing simply because of the government:

“(USA Today) For profit-schools. The highest default rates are at for-profit schools that tend to serve lower-income students and offer courses online. The University of Phoenix, the nation’s largest, got 88% of its revenue from federal programs last year, most of it from student loans.”

This is absolutely nonsense and shows how the coupling of Wall Street and the government have simply turned education into another commodity to water down and gamble on.  Like the multiple card game tables in Las Vegas higher education is the hottest game in town.

But unlike credit card debt, student loan cannot be reset or forgiven in bankruptcy court.  It’s a permanent burden on the former student.

In theory, the loan shouldn’t be a burden because it was an investment in greater earning power of the former student and now potential worker.  But since this current era of lesser depression or workers depressionbegan, incomes for the college educated have actually declined.  CalculatedRiskBlog quotes from the New York Times recent analyses of U.S. household incomes: (bold emphases are mine)

From the NY Times: Recession Officially Over, U.S. Incomes Kept Falling. A few excerpts:…

And on education:

Median annual income declined most for households headed by someone with an associate’s degree, dropping 14 percent, to $53,195, in the four-year period that ended in June 2011, the report said.

For households headed by people who had not completed high school, median income declined by 7.9 percent, to $25,157. For those with a bachelor’s degree or more, income declined by 6.8 percent, to $82,846.

What’s more, the unemployment rate is also up for graduates (and all other categories). Mybudget360.com puts a graph to the income dynamics:

 Yet if we look at the earnings potential during the bubble years we see a very troubling picture:

earnings-of-college-grads-and-cost-of-college

Source:  BusinessWeek

Since 2000, in real terms college costs are now up by 23%

Since 2000, in real terms real pay for college graduates is down by 11%

This means potential disaster for graduates and other former students. From Leo Komfield at New America Foundation’s Higher Ed Watch:

The Department of Education recently announced that the national student loan default rate has risen to over 8 percent and we know that this measure provides only a limited view of the troubles that borrowers are having repaying their student loan debt. In the current economy, we can only expect things to get worse unless the Education Department tackles this problem head-on.

Among the defaulters are a large percentage of unemployed college students. It’s bad enough to be unemployed; however, when you add to this difficulty with being classified as a defaulter, you are really in trouble. Defaulting on federal student loans results in a lifetime of financial purgatory — it destroys your credit, making it impossible to obtain a credit card, car loan, and home loan, and it puts you at risk of having your wages garnished, and your tax refunds intercepted by the IRS.

The student loan market is back in the news as it makes its unrelenting march to the $1 trillion mark.  This crippling figure comes in the face of a decade of lost wages for middle class Americans.  Just like the housing bubble people were supplementing a disappearing middle class with more debt.  The allure of housing was that never in our history have we seen national home prices fall, until they did in dramatic fashion.  The same cultural nostalgia for education in every respect has created a zombie higher education system that is now expanding like the mortgage markets at the height of the housing bubble.  Why?  For-profit schools have largely lured in countless Americans into a system that has provided very little economic gains for students while enriching these Wall Street listed companies.  It should come as no surprise that the highest default rates stem from the for-profit system and most of these loans are federal loans.  In 2010 there were $100 billion in student loan originations, the highest ever in the midst of the deepest recession since the Great Depression.

But it also spells a crisis on a much larger scale.  Reports are showing that the OccupyWallStreet movement (#OWS) is partially made up of significant numbers of young people and recent graduates in particular.  These are not the “dirty hippies” and “degenerates” that many conservatives have labeled them.  Rather, they are the people who followed the “rules”. They studied. They went to college.  In large numbers they took responsbility for their future by taking on student loans and investing in their human capital – all things society has told them to do.  Now, almost 4 years since the recession began, there aren’t any jobs for them.  They’ve graduated and now face payments on those loans.  But the jobs simply don’t exist.  When young people are educated and then are denied opportunity, there’s danger for society.  That’s the recipe for revolutions as we’ve seen in Tunisia and Egypt already this year.

 

It’s the Political Economy That Must Change.

Peter Dorman at Econospeak has an excellent post on the real challenges facing the U.S. today.  It’s the political economy that must change.  It no longer serves the interests of the vast majority of Americans. We need more discussion and action at these levels>

It’s the Political Economy, Stupid!, by Peter Dorman: Sometimes living in the world of ideas makes it harder to understand the real one. If you happen to be an economist, and the time is now, that is true in spades. Take Paul Krugman, for instance. After bemoaning the terrible policy choices of the last two years, he writes, “I’m still trying to make sense of this global intellectual failure.” It’s as if the core problem is that political leaders didn’t learn their macroeconomics well enough.

But Keynes was wrong about the power of “academic scribblers”. Idea-smiths provide language, narratives and tools for those in control, but the broad contours of policy depend on who the controllers happen to be. We are not living through an epoch of intellectual failure, but one in which there is no available mechanism to oust a political-economic elite whose interests have become incompatible with ours.

This is not some sudden development, much less a coup d’etat as is sometimes claimed. No, the accretion of power by the rentiers has been systematic, structural and the outcome of a decades-long process. It is deeply rooted in modern capitalist economies due to the transformation of corporations into tradable, recombinant portfolios of assets, increasing concentration of and returns to ownership, and the failure of regulation to keep pace with technology and transnational scale. Those who sit at the pinnacle of wealth for the most part no longer think about production, nor do they worry very much about who the ultimate consumers will be; they take financial positions and demand policies that will see to it that these positions are profitable.

The rapid and robust global restoration of profits post-2008 was not an accident. Public funds were used to bail out exposed creditors and shore up asset values, while the crisis was used to suppress wages and postpone meaningful regulatory reform. Indeed, I can predict with some confidence that many of the profits, particularly in the financial sector, that have been reported in official filings and blessed by the accounting firms will later be found to be illusory—but not before those who have claims on the revenues have cashed in to their own personal advantage. The institutions will be decimated, but those who owned, lent to or bet on them will be rich. This is not a failure, at least not for them.

You could make a case that, collectively, the interests of the financially endowed ultimately require a rescue of the real, nonfinancial global economy. Surely, when we take our painful plunge into the second dip of the Great Recession, their wealth will be at risk. But the ability to see it at a system level presupposes either a system-level organization of the class or the existence of individual interests that are transparently systemic. Neither appears to be the case today. From what we (you and me) can see from our vantage point, the ruling demands are to make sure my bonds are serviced, my counterparties pony up, the markets I invest in stay liquid, and expenditures for public welfare (i.e. the losers and chiselers) are slashed.

The first principle of political economy is that the scope of democracy depends on the range of views and interests (typically tightly linked) of the owning and controlling class. Genuine public debate and decision-making extends only to those issues on which the elites are divided. In what country today is there a significant division among political-economic elites over core economic questions? How would our situation be different if Obama, Cameron, Merkel, Sarkozy et al. had been on the losing side of their elections?

So, the current mess is not the result of a failure by intellectuals—although clearer, less ideologically-driven thinking by economists would certainly be a good thing and might make a small dent at the margin. As long as there are even a few economists who proclaim the virtues of austerity and deregulation, however, their views will dominate. They haven’t won a battle of ideas; they are simply the ones who have been handed the microphone.

The real problem is political, and it is profound. Unless we can unseat the class that sees the world only through its portfolios, they may well take us all the way down. Unfortunately, no one seems to have a clue how such a revolution can be engineered in a modern, complex, transnational economy.

There were also some excellent comments in the discussion:

PQuincy said…

I’m a historian, and I think the past confirms your assessment of elite behavior and priorities, not only in the last 2 centuries of mass-based polities, but since the rise of large-scale states altogether. Political contention is almost always limited to a narrow range of issues on which those with power disagree, meaning that significant change (and there has been significant change in the political sphere, as well as the economic one) generally results from elite conflicts, not from ‘popular’ pressure. In fairness, elite contention does open gaps for genuinely ‘progressive’ change, and that’s an important lever for intellectuals to remember…but as you say, academics, thinkers, et al. are as a rule never in a position to have more than a marginal effect.

It’s not a promising situation now, structurally: a series of positive feedback loops in the political sphere are actually concentrating the influence of what I am forced to call a “reactionary clique”, at a time when the policies pursued by that clique are, at least on a larger time-frame, seriously destabilizing. But the narcotic effects of power are such that those who drive the dynamics of elite conflict rarely see the larger picture — behave, for all practical purposes. as though they were incapable of seeing the larger picture (call it, if you like, discursive hegemony), and those who believe they see a larger picture are structurally excluded from bringing about changes in response to their perception.

And…

Re-Considering …. said…

Thanks for the very well thought out reasoning in you post.

While you correctly identify the problem and its solution (current “ruling class” and its unseating), you are shy in suggesting how a solution might come about. While I do not advocate violence, history has shown us that fundamentally there are two ways by which subjugated classes improve their position. A traumatic way and less traumatic one.

Revolutions (most egregious examples are the French, Bolshevik, Chinese, and Cuban revolutions), whereby the ruling class, along with its interests, are eliminated by the subjugated classes. A traumatic event indeed, but, in my opinion, not sustainable in the long run unless the entire world adopts those political and economic paradigms.

Less traumatic and, more sustainable in the long term, are the outcomes of strong labor and student movements like the ones that took place in Europe in the 60s and 70s. Those movements made sure to convey to the ruling classes the message that a more equitable wealth distribution and effective social safety net were needed to avoid the extremes and dispossession that a revolution would involve. Reluctantly, the ruling class complied and the social safety nets and income distributions typical of Western Europe emerged.

In the same light, one must interpret the recent unrests in Western European countries (UK, Greece, France) (and most recently in Israel) as a response to the austerity measures taken by conservative governments of these countries to protect rentiers and capitalists. The austerity movement is trying to undo at least some (ideally, all) of the achievements of the 60s and 70s and redistribute wealth away from the “ruled classes”, when it is clearly the “ruling class” that should bear most of the cost of its disastrous, reckless, and self-serving policies. While the current message in Western Europe is still not of the same intensity of the 60s and 70s due to a current better wealth distribution than that of the 60s, the message is similar in content and direction. Its intensity may increase if the rentiers and capitalists will insist with their policies.

So, why the US labor and student movements do not materialize or are active to the same extent of the ones in Europe? The answer is very simple… while in Europe the “ruled classes” realized a long time ago that there will never be cooperation between them and the “ruling class”, in the US people still believe and pursue the American dream, which is fueled by the once in a while admission of few “mortals” on Mount Olympus. Let’s also not forget that constant sense of guilt passed on by the Pilgrims that, somewhat, it is exclusively the individual’s fault if his/her life is not better… and, maybe, the Pilgrims they were right given that US citizens keep electing the same (type of) people over and over to lead them. After all, wouldn’t you rather have a beer with a nice guy from Texas or Hawaii than protesting in some square?

And…

TheTrucker said…

I stand fittingly chastised for my indictment of the economists.

The Tea Party may well have hit upon a method to overcome the current problems. A constitutional convention to propose particular modifications to federal government structure might seem to be the way out. But that is a holdover from the time when people rode a horse to the nation’s capital in order to be seated in the discussion chamber. The problem is best resolved buy an incorruptible on line polling system of direct democracy in which various policies are proposed and tested for consensus. I do not trust the pollsters and I do not feel that they ask the right questions. At present we have the “super committee” approach which goes in the wrong direction totally. This election of Dems or Pugs who then decide what is the best way to maintain their own power has got to go.

I know that the public is easy to fool. The Republicans prove it every day. Yet there is no acceptable substitute for self governance. When we look at the polls we find that taxing the rich is the majority opinion and that social welfare is a high priority. Yet there is no way to act upon this consensus because the rich own the government. That must change, and it cannot change from the top. Surely there must be a peaceful means of revolution.

If a policy and polling system can be created that is impervious to tampering and corruption then it is entirely possible to supplant the current system or to dramatically improve the current system’s performance. I see no other way.

Shock Doctrine, Neo-liberalism, and Current Events

Primarily for my Comp Systems and Political Economy students (this is part one):

As previously noted here, the events in Madison, Wisconsin are not unique.  There appears to be a concerted effort to roll-back collective bargaining rights for many workers and roll-back social programs all because of a supposed  “fiscal crisis”- the idea that government budgets are out-of-control in spending.  Yet, this “fiscal crisis” is largely contrived and to the extent it exists at all, it is due not to increased spending but from reduced tax collections resulting from the Great Financial Crisis Wall St. created and repeated tax cuts, especially for the wealthy.

So what we have is a “crisis” that supposedly justifies drastic cut-backs in social support, increased privatization, and reduced tax burden on the wealthy.  If it sounds familiar, that’s because it is.  It sounds a lot like the way neo-liberal “global capitalism” was forced onto much of the world over the last 40 years.  Naomi Klein, in her book Shock Doctrine explains the strategy used, including the fact that leading neo-liberal ideologues (in the U.S. they are called “conservatives” or “libertarians” but not with much accuracy) intentionally do so.  They idea is to use any crisis, be it a natural disaster (Haiti earthquake?), or invasion (Iraq?), or revolution to force political economy changes that people might not otherwise accept.

Paul Krugman at the New York Times observes how the pattern is being applied here at home now in Wisconsin and other states:

Shock Doctrine, U.S.A.

By PAUL KRUGMAN

Here’s a thought: maybe Madison, Wis., isn’t Cairo after all. Maybe it’s Baghdad — specifically, Baghdad in 2003, when the Bush administration put Iraq under the rule of officials chosen for loyalty and political reliability rather than experience and competence.

As many readers may recall, the results were spectacular — in a bad way. Instead of focusing on the urgent problems of a shattered economy and society, which would soon descend into a murderous civil war, those Bush appointees were obsessed with imposing a conservative ideological vision. Indeed, with looters still prowling the streets of Baghdad, L. Paul Bremer, the American viceroy, told a Washington Post reporter that one of his top priorities was to “corporatize and privatize state-owned enterprises” — Mr. Bremer’s words, not the reporter’s — and to “wean people from the idea the state supports everything.”

The story of the privatization-obsessed Coalition Provisional Authority was the centerpiece of Naomi Klein’s best-selling book “The Shock Doctrine,” which argued that it was part of a broader pattern. From Chile in the 1970s onward, she suggested, right-wing ideologues have exploited crises to push through an agenda that has nothing to do with resolving those crises, and everything to do with imposing their vision of a harsher, more unequal, less democratic society.

Which brings us to Wisconsin 2011, where the shock doctrine is on full display.

In recent weeks, Madison has been the scene of large demonstrations against the governor’s budget bill, which would deny collective-bargaining rights to public-sector workers. Gov. Scott Walker claims that he needs to pass his bill to deal with the state’s fiscal problems. But his attack on unions has nothing to do with the budget. In fact, those unions have already indicated their willingness to make substantial financial concessions — an offer the governor has rejected.

What’s happening in Wisconsin is, instead, a power grab — an attempt to exploit the fiscal crisis to destroy the last major counterweight to the political power of corporations and the wealthy. And the power grab goes beyond union-busting. The bill in question is 144 pages long, and there are some extraordinary things hidden deep inside.

For example, the bill includes language that would allow officials appointed by the governor to make sweeping cuts in health coverage for low-income families without having to go through the normal legislative process.

And then there’s this: “Notwithstanding ss. 13.48 (14) (am) and 16.705 (1), the department may sell any state-owned heating, cooling, and power plant or may contract with a private entity for the operation of any such plant, with or without solicitation of bids, for any amount that the department determines to be in the best interest of the state. Notwithstanding ss. 196.49 and 196.80, no approval or certification of the public service commission is necessary for a public utility to purchase, or contract for the operation of, such a plant, and any such purchase is considered to be in the public interest and to comply with the criteria for certification of a project under s. 196.49 (3) (b).”

What’s that about? The state of Wisconsin owns a number of plants supplying heating, cooling, and electricity to state-run facilities (like the University of Wisconsin). The language in the budget bill would, in effect, let the governor privatize any or all of these facilities at whim. Not only that, he could sell them, without taking bids, to anyone he chooses. And note that any such sale would, by definition, be “considered to be in the public interest.”

If this sounds to you like a perfect setup for cronyism and profiteering — remember those missing billions in Iraq? — you’re not alone. Indeed, there are enough suspicious minds out there that Koch Industries, owned by the billionaire brothers who are playing such a large role in Mr. Walker’s anti-union push, felt compelled to issue a denial that it’s interested in purchasing any of those power plants. Are you reassured?

The good news from Wisconsin is that the upsurge of public outrage — aided by the maneuvering of Democrats in the State Senate, who absented themselves to deny Republicans a quorum — has slowed the bum’s rush. If Mr. Walker’s plan was to push his bill through before anyone had a chance to realize his true goals, that plan has been foiled. And events in Wisconsin may have given pause to other Republican governors, who seem to be backing off similar moves.

But don’t expect either Mr. Walker or the rest of his party to change those goals. Union-busting and privatization remain G.O.P. priorities, and the party will continue its efforts to smuggle those priorities through in the name of balanced budgets.

“I Am Egyptian..”

I received the following email from Talaat Pasha, Ph.D., a fellow professor.  I think it rather concisely explains why the Egyptian people have arisen to change their government.

Dear American fellow people,I am Egyptian.

  • I have been ruled by the state of emergency for thirty (30)years, yes 30 years.
  • 40% of my people live under poverty line.
  • 30% to 40% of my people are illiterate.
  • 96% of the members of the Egyptian parliament are from the National Democratic Party ( Mubarak’s party) because of rigging the ballots.
  • No free and transparent elections (legislative or presidential) were ever done.
  • The average daily income for my people is $3.
  • No health insurance is provided to the have-nots.
  • Universities in my Egypt are not independent and are run by the police.
  • My people do not feel secure to practice their basic human rights without being harassed by the police.
  • There is a secret detective for every 5 people.
  • 10 percentage possess 90 percentage of Egypt’s wealth.
  • Mubarak’s wealth exceeds 40 billion $$$.
  • Average daily wage of university graduates is $4.00.
  • My people are out in the streets today to peacefully get their rights. But the police started using force (tear gas, plastic and live bullets) with totally civilian people.
  • Witnesses say that it is the (secret) police that set fire in public buildings and police stations.
  • My people are so civil that they are now out forming human fences to protect public and private properties.
  • My family reported that the Egyptian youth are now on guard of the neighborhood and they (the family) can taste the feeling of security for the first time in 30 years.
  • My people are now preparing hot meals for the military who are securing the streets after the flee for ALL police persons.
  • My Egypt will NOT be Afghanistan and WILL NOT be ruled by Taliban. This is what Mubarak has been wrongly telling the west and the U.S.; that he is a fence against Islamists and extremists.  My Ph.D. dissertation (from the University of Utah) talks about his issue.

My message to the free American people

Please step forward and stand to support your fellows in humanity and:

  1. Write and inform your House representatives and senators about the issue and ask them to support my people’s case and fair demands.
  2. Write to the editor of your paper.
  3. Educate your students and colleagues about the justice fairness of the Egyptian case.

Thank you

Income Inequality: Worse in US than Egypt/Tunisia

Washington’s blog observes:


Egyptian, Tunisian and Yemeni protesters all say that inequality is one of the main reasons they’re protesting.However, the U.S. actually has much greater inequality than in any of those countries.

Specifically, the “Gini Coefficient” – the figure economists use to measure inequality – is higher in the U.S.

Global Map of Income Inequality Gini Coefficients by Country

[Click for larger image]

Gini Coefficients are like golf – the lower the score, the better (i.e. the more equality).

According to the CIA World Fact Book, the U.S. is ranked as the 42nd most unequal country in the world, with a Gini Coefficient of 45.

In contrast:

  • Tunisia is ranked the 62nd most unequal country, with a Gini Coefficient of 40.
  • Yemen is ranked 76th most unequal, with a Gini Coefficient of 37.7.
  • And Egypt is ranked as the 90th most unequal country, with a Gini Coefficient of around 34.4.

And inequality in the U.S. has soared in the last couple of years, since the Gini Coefficient was last calculated, so it is undoubtedly currently much higher.
So why are Egyptians rioting, while the Americans are complacent?

Well, Americans – until recently – have been some of the wealthiest people in the world, with most having plenty of comforts (and/or entertainment) and more than enough to eat.

But another reason is that – as Dan Ariely of Duke University and Michael I. Norton of Harvard Business School demonstrate – Americans consistently underestimate the amount of inequality in our nation.

As William Alden wrote last September:

Americans vastly underestimate the degree of wealth inequality in America, and we believe that the distribution should be far more equitable than it actually is, according to a new study.

Or, as the study’s authors put it: “All demographic groups — even those not usually associated with wealth redistribution such as Republicans and the wealthy — desired a more equal distribution of wealth than the status quo.”

The report … “Building a Better America — One Wealth Quintile At A Time” by Dan Ariely of Duke University and Michael I. Norton of Harvard Business School … shows that across ideological, economic and gender groups, Americans thought the richest 20 percent of our society controlled about 59 percent of the wealth, while the real number is closer to 84 percent.

I accept the protesters at their word that inequality is a major part of what’s driving the protests, even though relative to the rest of the world, their income inequality is rather middling – certainly not as bad as the U.S.  As to why income inequality should fuel protests in Egypt/Tunisia while not in the U.S. where it is much worse, I suggest that age and expectations are part of it also.  Ariely, Norton, and Alden have a good point: Americans are largely ignorant of just how narrowly concentrated wealth and income are in the U.S..  It’s part of U.S. culture to pretend that everyone is equal or at least has an equal opportunity to become stinking rich, no matter how unlikely that truly is.

I think another factor has to do with age as my previous post points out. The power of income inequality to enrage and fuel revolution depends also on expectations and age as well as perception.  In the U.S., we do not perceive the inequality. We are generally older and older people are more interested in security and stability (death and old age is more real to them and adventure less attractive). Finally, our culture in the U.S. conditions us to expect that if we aren’t rich now, we could become richer soon. In Tunisia and Egypt I surmise, the young adults not accurately perceive the injustice and unequal distribution of wealth/income, but they likewise do not perceive that their prospects for the future are bright unless they revolt. They do not perceive that things have or are changing and so they need to push the change.

Tunisia, Egypt and “isms”

Note to regular readers: You may notice an increasing number of posts that deal with pure political economy or international issues.  In the past my posts have been dominated by macro-economic concerns and that’s largely because my teaching schedule was heavily macro.  I’m teaching a new class this term that is essentially Political Economy 101, so in addition to the usual macro and money and banking, there should be more pure political-economy stuff, such as this.

First Tunisia erupted in popular protest two weeks ago and drove a long-term autocrat/dictator from office.  Now inspiration from the Tunisians appears to be spreading throughout the Muslim and Arabic-speaking world of North Africa and the Middle East. Protests have been most notable in Egypt and Yemen, but have reportedly also occurred in Saudi Arabia (in Jeddah), in Jordan, and Lebanon.  In Lebanon, the Hezbollah party has peacefully and constitutionally emerged as the lead party in a new government.

But it’s in Egypt where most of the attention is focused right now.  Hosni Mubarak, the long-time Egyptian autocrat/dictator has dismissed his cabinet and announced he will form a new government (with himself still in charge), but it appears at this point to not be enough.  Instead, it looks as if Egypt, the 15th largest nation in population, (approx. same size as Germany) will experience a relatively peaceful revolution as a result of popular protest.  The events are capturing the attention of the world.  Although it is too early to tell, these events have a certain feeling that is reminiscent of 1989-1991 when waves of peaceful popular protests led to the collapse of the Berlin Wall, communism in Eastern Europe, and eventually the Soviet Union. Although the media will no doubt focus much attention on these events, it’s doubtful the media will shed much light on the deeper causes or dynamics of what’s happening.  That’s up to us to think through.  I’m going to try to shed some insight in a series of posts.

First, up is that I want to simply alert students to the complexity and nuances of our current, 21st century world as opposed to the categorizations of our textbooks.  Textbooks are still using terms such as capitalism, socialism, communism, democracy, totalitarianism, and dictatorship to describe and categorize different political-economic systems. But using these terms and their definitions may as easily hinder our understanding of some situations today as help us.  For example, how are we to describe the regimes and systems that just toppled in Tunisia and might topple in Egypt?  They clearly were not democratic in the sense that the people were able to regularly assert their will and have a government that represented them. They were/are repressive regimes. Yet, the governments had the forms and features of democracy: elections, national assemblies, constitutions, courts, etc.  Economically how are we to describe these countries? They clearly were not primarily socialist or communist.  The governments are involved in a few industries, but international capital is welcome and corporations can function. Private property clearly exists, even though it is not necessarily widely distributed. Yet neither were/are these countries, nor much of the Arabic-speaking world, truly free-market capitalist either. Private economic activity is heavily regulated and bureaucratically restricted.

I have no answers here. My purpose is to stimulate some thought. It seems to me that too much our existing thinking about political and economic systems is guided by  terms and thinking that are relics of the Cold War 50 years ago. Further, it may be that we pay too much attention to the titles and appearances of institutions rather than their performance.  For example, it should be clear that “holding elections” is not a sufficient criterion to make a system democratic. Those elections must also be free elections, the elected must be responsive and representative of the will of the people, and the electors must be informed and have options.  But these criteria are harder to define.  Just how do we tell if an election is “free”?