AEIdeas http://www.aei-ideas.org The public policy blog of the American Enterprise Institute Tue, 02 Sep 2014 20:22:40 +0000 en-US hourly 1 The 50 colleges over $60,000 in 2014-15 http://www.aei-ideas.org/2014/09/50-colleges-over-60000-in-2014-15/ http://www.aei-ideas.org/2014/09/50-colleges-over-60000-in-2014-15/#comments Tue, 02 Sep 2014 20:20:33 +0000 http://www.aei-ideas.org/?p=136455 read more >]]> Last week began Orientation Week for many college-bound freshmen and transfers across the nation. Last week also began, for many parents, what is probably more like Disorientation Week – especially with regard to their pocketbooks. Not only are mom and dad going Bed, Bath and Beyond the call of duty in order to furnish their child’s dorm rooms, but in July, Business Insider released a list of the 50 colleges that will charge over $60,000 for the upcoming school year.

$60,000?! That’s correct. You could buy a nice Mercedes or even a ridiculous remote-controlled, fire-breathing dragon for almost the same price as sending your son or daughter to Harvey Mudd College (#1, $64,527) or Columbia University (#5, $63,440) for a year.

This narrative is not new by any means, though. It seems like no matter what, every year the price of college continues to rise. And, regardless, every year all of the top-tier, highly-selective, private colleges and universities in the United States continue have no problem in filling seats in their classrooms. Is there any end in sight?

No. That’s the short answer. Institutions like Dartmouth (#7, $62,337) or Carnegie Mellon (#22, $61,422) will continue to charge these prices because that is what the market will bear. The long-term value, or at least perceived value, supersedes the cost. What’s more, not only do these schools manage to fill their seats to capacity at these current prices, but they also have an abundance of potential students who wish to purchase their product, but deny from doing so!

Quite simply, a college education from a top school is integral enough that people are, and will continue to be, willing to pay that $60,000 a year tab.

In the defense of these 50 schools (and the unnamed rest who lurk just beneath $60,000 line), just because they charge a high sticker-price does not mean that they do not provide a potentially affordable educational opportunity. Truthfully, since universities price discriminate via financial aid, many students do not pay the full-sticker price. We have to consider the pricing-cost mechanisms of these schools before we can chastise them for unabashedly sprinting past the $60,000 threshold.

To get a quick feel, I’ll use my alma mater, the University of Richmond, as an example.

  • Sticker-Price (Tuition plus Room and Board): $57,470
  • Average Need-Based Financial Aid Award per Student: $41,800
  • Percentage of Undergraduates Receiving Need-Based Aid: 39.5%
  • Average University Expenditure per Undergraduate Student: $73,848

As you can see,despite the $57,000 price tag, roughly 40% of students obtain need-based financial aid, to the tune of $41,800 on average. Interestingly, as you can also see, the average expenditure per undergraduate is much higher than the sticker-price itself. That means that all students, even the full-paying ones, are educationally subsidized by the school to a degree (through gifts, endowment returns, etc.). Then, the aid-recipient students receive an even larger subsidy on top of that, via the school and/or the government.Thankfully, every student does not have to bear the true cost of a degree.

However, just because these colleges are spending so much per student isn’t cause to pat them all on their collective backs, either. It is still unfathomable that a degree can cost $90,000 to produce. Some may say that this is money well spent due to the quality of education, but it is also questionable how much is spent on learning versus the “student experience.”

Given the notion of expenditures per student, we now can see one reason why there is no end in sight for tuition hikes: colleges have no incentive to curb their expenditures and there exists an arms race of sorts in the higher education marketplace. Universities ardently compete among each other over the quality of their educational inputs: students (yes, uniquely students are both consumers and inputs in education), faculty, facilities, etc. This leads schools to increase institutional expenditures continually from year to year.

Due to this fierce competition, typically played out in rankings like those in US News, universities are pressured to spend money to increase their position relative to their competitor schools. Why? Other universities are doing exactly the same. Curtailing these expenditures would leave a school vulnerable to a decrease in ranking, and in turn, a decrease in allure to potential students. Now, the money they spend comes from somewhere, that somewhere largely being revenue from tuition. Mind you, some of this money is definitely directed towards learning, but some is also spent on endeavors ancillary to academics, like dormitories resembling luxury hotels. As a result, as expenditures escalate quickly, prices escalate quickly, and, the academic quality of institutions may not be increasing at that same rate…

Tomorrow, check in to see what we can possibly do regarding the pervasive tuition increases in higher education.

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The sharing economy as locusts swarming the state http://www.aei-ideas.org/2014/09/the-sharing-economy-as-locusts-swarming-the-state/ http://www.aei-ideas.org/2014/09/the-sharing-economy-as-locusts-swarming-the-state/#comments Tue, 02 Sep 2014 18:30:24 +0000 http://www.aei-ideas.org/?p=136411 read more >]]> Uber has been banned, at least temporarily, in Germany. Here is Dieter Schlenker, chairman of Taxi Deutschland a “co-operative founded by taxi companies to provide services to the industry”:

“The Passenger Transport Act regulates the protection of drivers and consumers. That can’t easily be overturned no matter how neoliberal the company.” Mr Schlenker added: “Uber operates with billions in cash from Goldman Sachs and Google, wraps itself in a start-up-look and sells itself as a new economy saviour.” He described the sharing economy as a “locust”, which was harmful to “the state, society and employees alike”.

Wow, Mr. Schlenker kind of  sounds like Salon’s Andrew Leonard, who in a new piece expels a soul scream against Uber, capitalism, and modernity:

The real question we should be asking ourselves is this: What happens when a company with the DNA of Uber ends up winning it all? What happens when the local taxi companies are destroyed and Lyft is crushed? When Uber has dominant market position in every major city on the globe? “UberEverywhere” isn’t a joke. It’s a mantra, a call to arms, a holy ideology.

What happens when Uber’s priorities turn to generating cash rather than spending it? What happens to labor — the Uber drivers — when they have no alternative but Uber? What happens when it rains and the surge-pricing spikes and there’s nowhere else to go? A company with the street-fighting ethos of Uber isn’t going to let drivers unionize, and it certainly isn’t going to pay them more than it is required to by the harsh laws of competition. It will also dump them entirely in a nanosecond when self-driving cars prove that they are cheaper and safer. Making the case that drivers are benefitting from the current recruitment wars starts to look like a pretty short-term play. The more powerful Uber gets, the more leverage it will have over labor.

I don’t know that Lyft or other competitors will be crushed, and Uber will become some megamonopoly, though I would not be surprised if Leonard’s worst fears about automated taxis are eventually realized. But I think Leonard’s real gripe is about automation and how it will accelerate certain labor market trends. Should we be so worried about those trends that we seek to smash companies like Uber that produce actual consumer-relevant value? Easier that, perhaps, than better educating kids and adults, reducing occupational licensing barriers, creating a pro-startup regulatory environment, and offering wage subsidies for low-income workers. Oh, and how does Leonard like the current state-sanctioned taxi monopoly? Wait, is his piece satire, perhaps?

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

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Texas oil tops 3M barrels per day milestone again in June; as separate nation it would be world’s 8th largest oil producer http://www.aei-ideas.org/2014/09/texas-oil-tops-3m-barrels-per-day-milestone-again-in-june-as-separate-nation-it-would-be-worlds-8th-largest-oil-producer/ http://www.aei-ideas.org/2014/09/texas-oil-tops-3m-barrels-per-day-milestone-again-in-june-as-separate-nation-it-would-be-worlds-8th-largest-oil-producer/#comments Tue, 02 Sep 2014 17:52:27 +0000 http://www.aei-ideas.org/?p=136440 read more >]]> The Energy Information Administration (EIA) released new state crude oil production data yesterday for the month of June, and one of the highlights of that monthly report is that oil output in America’s No. 1 oil-producing state – Texas – continues its phenomenal, eye-popping rise. Here are some details of oil output in “Saudi Texas” for the month of June:

1. For the second straight month, oil drillers in Texas pumped out more than 3 million barrels of crude oil every day (bpd) during the month of June. The 3.074 million bpd in June was is the highest daily oil output in the Lone Star State in any single month since at least January 1981, when the EIA started reporting each state’s monthly oil production (see chart above). Texas reached the two million barrel per day oil production milestone in August 2012, and has since added a million more barrels of daily oil production in less than two years to reach the three million barrel milestone in May of this year. Compared to a year ago, oil output in Texas increased by 21.4% in June marking the 38th straight month starting in May 2011 that the state’s oil output has increased by more than 20% on a year-over-year basis.

2. Remarkably, oil production in the Lone Star State has more than doubled in less than three years, from 1.496 million bpd in August 2011 to 3.074 million bpd in June of this year (see chart above), and that production surge has to be one of the most significant increases in oil output ever recorded in the US over such a short period of time. A 1.58 million bpd increase in oil output in only 34 months in one US state is remarkable, and would have never been possible without the revolutionary drilling techniques that just recently started accessing vast oceans of Texas shale oil in the Eagle Ford Shale and Permian Basin oil fields. As I reported recently, both the Eagle Ford and Permian Basin oil fields in Texas are now producing crude oil at a rate of more than 1 million bpd, joining an elite international group of only ten super-giant oil fields that have ever produced that much oil at their peak.

3. The exponential increase in Texas oil output over roughly the last three years has completely reversed the previous, gradual 28-year decline in the state’s conventional oil production that took place from 1981 to 2009 (see arrows in chart) – thanks almost exclusively to the dramatic increases in the state’s output of newly accessible, unconventional shale oil.

4. As recently as mid-2009, Texas was producing less than 20% of America’s domestic crude oil. The recent gusher of unconventional oil being produced in the Eagle Ford Shale and Permian Basin oil fields of Texas, thanks to breakthrough drilling and extraction technologies, has recently pushed the Lone Star State’s share of domestic crude oil above 30% in each of the last 21 months, and all the way up to more than 36% of America’s crude output in both May and June.

5. Oil output has increased so significantly in Texas in recent years that if the state was were considered as a separate oil-producing country, Texas would have been the 8th largest oil-producing nation in the world for crude oil output in April (most recent month available for international oil production data) at 2.97 million bpd – behind No. 7 Iran at 3.23 million bpd.

6. The dramatic increase in Texas’s oil production is bringing jobs and economic prosperity to the state. For example, over the last 12 months through July, payrolls in the state of Texas increased by 396,200 jobs, which was a 3.53% annual increase in the state’s employment level, almost double the 1.88% increase in total US payrolls over that period. Every business day over the last year, more than 1,500 new jobs were created in the Lone Star State, and many of those jobs were directly or indirectly related to the state’s booming energy sector, which experienced a 9.1% increase in payrolls for oil and gas extraction jobs (9.500 new jobs) over the most recent 12-month period through July. Oil and gas companies in Texas hired more than 36 new employees every business day over the last year just for extraction activities, or almost 5 new hires every hour!

MP: The significant increase in Texas’s oil production over the last several years is nothing short of phenomenal, and is a direct result of America’s “petropreneurs” who developed game-changing drilling technologies that have now revolutionized the nation’s production of shale oil. Thanks to those revolutionary technologies, Texas is now home to two of only ten super-giant oil fields to ever produce more than 1 million barrels of oil per day – the Eagle Ford and Permian Basin.

For oil output in Texas to increase from 2 million to 3 million bpd in less than two years, and increase so dramatically that the state produced more than one-third of all US crude oil in each of the last 15 months (and more than 36% of US oil in May and June), is undoubtedly one of the most remarkable energy success stories in US history – and it’s just getting started. At the current pace of annual increases of about 25%, Texas oil production will likely surpass 4 million bpd by late summer of next year. With those projected increases in Texas oil output, the state could soon surpass Iraq, Iran and even Canada to move up in the international oil production rankings to become the world’s No. 5 oil producer in 2015.

“Saudi Texas” continues to be the shining star of The Great American Energy Boom.

Related: You can thank the US oil bonanza in Texas and North Dakota for “cushioning the impact of all the instability surrounding traditional global oil fields,” and in the process easing both oil prices and gas prices at the pump according to this NY Times article “A New American Oil Bonanza.”

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NY Fed: Yes, go to college — but your mileage may vary http://www.aei-ideas.org/2014/09/ny-fed-yes-go-to-college-but-your-mileage-may-vary/ http://www.aei-ideas.org/2014/09/ny-fed-yes-go-to-college-but-your-mileage-may-vary/#comments Tue, 02 Sep 2014 17:49:32 +0000 http://www.aei-ideas.org/?p=136428 read more >]]> Over at the New York Fed, Jaison R. Abel and Richard Deitz look at the data to determine how much a college degree is worth. In the first installment of their four-post series, they show that “despite what appears to be a set of alarming trends, the value of a bachelor’s degree for the average graduate has held near its all-time high of about $300,000 for more than a decade.” They look at tuitions, “opportunity costs,” wages, and more (go here to find all the details about their methodology).

Their chart below plots the net present value (NPV) for a bachelor’s degree between 1970 and 2013 expressed in 2013 constant dollars. They estimate that “the value of a college degree fell from about $120,000 in the early 1970s to about $80,000 in the early 1980s, before more than tripling to nearly $300,000 by the late 1990s, where it has remained, more or less, ever since.” So, despite a little decline in the Great Recession’s aftermath, the value of a bachelor’s degree has stayed high.

Net Present Value of a bachelor's degree, 1970-2013

And this chart below shows the time required to recoup the cost of a bachelor’s degree earned between 1970 and 2013.

Years to recoup the cost of a bachelor's degree, 1970-2013

The amount of time required to recover the costs of a bachelor’s degree has fallen from over 20 years in the late 1970s and early 1980s to about 10 years in 2013. That means the value of a college degree has remained high “while the time required to recoup the costs of the degree has remained near its all-time low.” Why is this the case? The authors conclude:

The primary reason is that the wages of high school graduates have also been falling, reducing the opportunity costs of going to school and keeping the college wage premium near its all-time high. While our estimates make it seem like college always pays handsomely, that may not always be the case for everyone.

Follow AEIdeas on Twitter at @AEIdeas.

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America suffering from ‘economic calcification’ – JP Morgan http://www.aei-ideas.org/2014/09/america-suffering-from-economic-calcification-jp-morgan/ http://www.aei-ideas.org/2014/09/america-suffering-from-economic-calcification-jp-morgan/#comments Tue, 02 Sep 2014 17:35:38 +0000 http://www.aei-ideas.org/?p=136437 read more >]]> Talk about two worrisome long-term trends. America, as I have written, is experiencing fewer business startups and less labor market churn. The result, according to a new JP Morgan research note, is the “economic calcification” of the US economy:

The churning that has long characterized the US economy, the  frenetic creative destruction of firms rising and falling, has become less frenetic recently. New business creation has  trended lower, as has the normally-massive amount of labor market reallocation. … This reduction in economic  dynamism has taken place over the course of the last few decades … Less churning in the economy can have beneficial  consequences, but the reality is that the negative effects likely outweigh the positive effects. The symptoms of reduced churn look similar to Euro-sclerosis.

Basically, a less dynamic economy will be marked by (a) less productivity and innovation, (b) less hiring and more labor force discouragement, (c) a lower natural unemployment rate since there will be fewer bouts of between-job unemployment. As evidence, JPM economist Michael Feroli summons a number of data points (reflected in the charts below). Let me paraphrase:

– Net job openings at new firms is down, averaging 1.3 million at the end of 2013 vs 1.5 million in the last business cycle and 1.8 million in the 1990s.

– Employment at newly-opened firms — not including reopening of seasonal firms  – was 0.7% of all employment vs. between 1.1% and 1.3% during the 1990s.

– Throughout the 1990s, quarterly job reallocation — measured by the Business Employment Dynamics report  – has fallen to around 12% vs. 15% and 16% in the 1990s.

–  Worker reallocation (the sum of the hiring and separations rate) has also trended lower, as measured by the Job Openings and Labor Turnover Survey.

JPMorgan

JPMorgan

JPMorgan

JPMorgan

Feroli’s analysis is based in part on the Jackson Hole conference paper, “Labor Market Fluidity and Economic Performance” by Steven Davis and John Haltiwanger. While Feroli concedes that an aging population and the emergence of big box retailers are playing a role here, there is more than that going on:

Davis and Haltiwanger speculate  that the increase in occupational licensing requirements may be reducing labor market dynamism, a cause which is readily addressable by policy interventions. Similarly, growth in  exceptions to the employment-at-will principle is a cause of calcification that can easily be reversed by changing policy. It  is not certain that policy can reverse the decline in American  economic dynamism, but given the stakes it is worth trying.

The consensus is building that the US economy isn’t just demand constrained but also faces some deep, structural, supply-side problems — and that harmful public policy is playing a role.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

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How regulation smothers productivity growth, in 1 chart http://www.aei-ideas.org/2014/09/how-regulation-smothers-productivity-growth-in-1-chart/ http://www.aei-ideas.org/2014/09/how-regulation-smothers-productivity-growth-in-1-chart/#comments Tue, 02 Sep 2014 16:53:41 +0000 http://www.aei-ideas.org/?p=136412 read more >]]> Surprise, surprise: It turns out more-regulated industries experience lower productivity growth, according to a recent Mercatus piece by Antony Davies. He writes that from 1997-2010 “productivity in the least regulated industries grew almost twice as fast as in the most regulated industries.” Check out the above graph. He adds:

From 1997 through 2010, the least regulated industries experienced 63-percent growth in output per person, 64-percent growth in output per hour, and a four-percent decline in unit labor costs. Over the same period, the most regulated industries experienced 33-percent growth in output per person, 34-percent growth in output per hour, and a 20-percent increase in unit labor costs. The data appear to confirm that greater regulatory burden is associated with lower levels of industry productivity.

For more on the topic, read Davies’ study on regulation and productivity here.

Follow AEIdeas on Twitter at @AEIdeas.

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Monday afternoon linkage http://www.aei-ideas.org/2014/09/monday-afternoon-linkage-3/ http://www.aei-ideas.org/2014/09/monday-afternoon-linkage-3/#comments Tue, 02 Sep 2014 16:18:24 +0000 http://www.aei-ideas.org/?p=136408 read more >]]> 1. Mark Mills: “The Data Are Clear: Robots Do Not Create Unemployment.”

2. Richard Rahn: “Hong Kong’s miraculous progress: Economic freedom has made a tiny seaport into an economic and financial giant.

3. Christina Sommers in TIME: “Five Feminist Myths that Will Not Die” — Women’s advocates need to take back the truth.

4. California’s Consensual Sex Contract/Checklist. “Per California Senate Bill 967, all sexual encounters on college campuses must be regulated and approved by college administration and/or State regulatory agencies.” /satire

5. Expect More Reshoring as American companies are falling out of love with China.

6. From today’s August 2014 Manufacturing ISM Report On Business — “The average PMI for January through August (55%) corresponds to a 3.9% increase in real GDP on an annualized basis. In addition, if the PMI for August (59%) is annualized, it corresponds to a 5.2% increase in real GDP annually.”

7. Creative Destruction. North American film industry had worst summer since at least 1997, after adjusting for inflation.

8. America, Here’s Your Senseless, Cruel and Expensive Drug War: a) Missouri inmate Jeff Mizanskey will likely die in maximum security prison for weed-only offenses, while rapists and murderers come and go and b) in 2008 a 9-Member SWAT team in CT broke down the door and shot and killed a man as he watched TV with his friend – no drugs were found and no arrests were made. The police shooter was named “Officer of the Year.”

9. Immunity. Cop Won’t Be Charged For Killing Napster Exec While Texting & Driving, Because It’s Apparently OK For Cops To Do That.

10. Markets in Everything: Southern New Hampshire University introduces a $10,000 Bachelor of Arts degree.

11. Rampant Grade Inflation on College Campuses. In the 1960s, only 15% of college grades were As; today, 43% of all college grades are As. 

12. Why Uber Must Be Stopped. “Because it’s the acme of ruthless and amoral profit-seeking.” (ht/Jon Murphy)

Cartoon of the Day

floppy

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How much school time do US kids get vs. kids around the world? http://www.aei-ideas.org/2014/09/how-much-school-time-do-us-kids-get-vs-kids-around-the-world/ http://www.aei-ideas.org/2014/09/how-much-school-time-do-us-kids-get-vs-kids-around-the-world/#comments Tue, 02 Sep 2014 15:11:30 +0000 http://www.aei-ideas.org/?p=136404 read more >]]> Hey, why aren’t Russian kids going to school more? More from Pew …

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

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Study: The Great Recession didn’t ‘cleanse’ the US economy http://www.aei-ideas.org/2014/09/study-the-great-recession-didnt-cleanse-the-us-economy/ http://www.aei-ideas.org/2014/09/study-the-great-recession-didnt-cleanse-the-us-economy/#comments Tue, 02 Sep 2014 14:58:23 +0000 http://www.aei-ideas.org/?p=136385 read more >]]> It may be the most famous bit of economic policy advice ever given to a US president. “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” Treasury Secretary Andrew Mellon told his boss President Hoover. “It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.”

Not that Hoover necessarily listened. As economist Steven Horwitz has argued, Hoover employed a “fairly aggressive use of government” to deal with the worsening downturn that became known as the Great Depression.

But Mellon’s advice continues to influence the policy debate whenever economies sputter and stall. At the start of the Great Recession, some modern-day liquidationists urged no federal bank bailout or Federal Reserve action to soften the downturn. Time again to (a) get the rot out the system, (b) end the economic distortion of bad policy such as years of low interest rates and federal housing help, and (c) allow economic resources — including jobs — to shift from low-productivity firms to high-productivity firms, including new ones. Now creative destruction happens all the time in the US economy. Liquidationists view downturns as opportunities to accelerate the process.

Again, Washington didn’t listen. Still, even with fiscal and monetary stimulus, the downturn was pretty bad. The jobless rate doubled. Former Fed Chairman Ben Bernanke has called it “the worst financial crisis in global history, including the Great Depression.” And the Dallas Fed estimates “the loss of national output as a result of the financial crisis and its aftermath at between $6 trillion and $14 trillion.”

So, you know, quite a bit of liquidating happened even despite government efforts. But was the economy cleansed and left more productive afterward? Was there a silver lining to the Great Recession? Not so much, according to the new study “Reallocation in the Great Recession: Cleansing or Not?” by Lucia Foster, Cheryl Grim, and John Haltiwanger:

The high pace of reallocation across producers is pervasive in the U.S. economy. Evidence shows this high pace of reallocation is closely linked to productivity. While these patterns hold on average, the extent to which the reallocation dynamics in recessions are “cleansing” is an open question.

We find downturns prior to the Great Recession are periods of accelerated reallocation even more productivity enhancing than reallocation in normal times. In the Great Recession, we find the intensity of reallocation fell rather than rose and the reallocation that did occur was less productivity enhancing than in prior recessions. …

Job creation falls much more substantially than in prior recessions and job destruction rises less than in prior recessions – taken together they yield less of an increase (or even a decline) in the intensity of reallocation. Second, we find reallocation is productivity enhancing. Less productive establishments are more likely to exit, while more productive establishments are more likely to grow. Third, we show these patterns are enhanced in recessions prior to the Great Recession. Fourth, we show reallocation is less productivity enhancing in the Great Recession as contractions become more severe. The gap in growth rates and exit rates between high productivity and low productivity businesses decreases rather than increases with larger increases in unemployment in the Great Recession. Fifth, we find that the implied increases in aggregate (industry-level) productivity indices from productivity-induced reallocation are substantial, with even larger effects in sharp contractions prior to the Great Recession and smaller effects in sharp contractions in the Great Recession.

So, no silver lining of this time around — at least not in the manufacturing sector that was the paper’s focus. As the researchers note later, ” … we show reallocation in the Great Recession differs markedly from earlier recessions. Job creation falls much more substantially than in prior recessions and job destruction rises less than in prior recessions – taken together they yield less of an increase even a decline) in the intensity of reallocation.”

So why was the Great Recession different from, say, the 1981-82 downturn? That the Great Recession was accompanied by a financial collapse and housing is one possibility raised in the study. I would also like to see more analysis on the impact of long-term trends including less labor market dynamism and the declining rate of startups. Too little creation after destruction. Perhaps it was that worrisome secular trend that was accelerated by the Great Recession.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

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Beijing plays Lucy with Hong Kong’s democratic hopes http://www.aei-ideas.org/2014/09/beijing-plays-lucy-with-hong-kongs-democratic-hopes/ http://www.aei-ideas.org/2014/09/beijing-plays-lucy-with-hong-kongs-democratic-hopes/#comments Tue, 02 Sep 2014 14:53:00 +0000 http://www.aei-ideas.org/?p=136392 read more >]]> Like Lucy in the Peanuts cartoon who always pulls the football away just as Charlie Brown attempts to kick it, so Chinese officials have once again pulled the prospect of true democratic reform out from under the citizens of Hong Kong.

Under Hong Kong’s Basic Law—the constitution endorsed by China as part of the agreement with the UK to handover the territory to China in 1997—the city’s chief executive would eventually be selected by “universal suffrage upon nomination by a broadly representative nominating committee in accordance with democratic procedures.” Come 2007, Hong Kong would be allowed to amend the law to make this a reality through a process beginning with Hong Kong’s legislative body initiating amendments and ending with the PRC’s National People’s Congress Standing Committee (NPCSC) giving a final okay.

However, in 2004, the NPCSC unilaterally changed the rules of the game by stipulating that Beijing alone would have both the first and final say on electoral reform, and then proceeded to reject any form of democratic selection for the chief executive in 2007. Then, as 2007 rolled around, it once again denied universal suffrage for the next election in 2012—although it seemed to temper that decision by suggesting that an election based on universal suffrage was “perhaps” in store for the next chief executive election in 2017.

Well forget it. Like Lucy, on Sunday, the NPCSC ruled that the citizens of Hong Kong would only be able to vote for candidates selected by a majority vote of a special Beijing-dominated nominating committee, with the winning candidate still requiring a final okay by the Chinese government itself.

For those of us who have been skeptical all along about Beijing’s intentions to keep its promises under the Basic Law, Sunday’s decision hardly comes as a surprise. Nevertheless, it ought to make those optimists who, in 1997, were inclined to see the transfer under the“one country, two systems” model as a sign that China’s leaders would use Hong Kong as a test-base for the country as a whole to gradually but inevitably liberalize blush for their naiveté. Like Charlie Brown, they too continue to have the ball pulled out from under them.

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