Washington Propping Up the Yen Won't Fix Japan's Monetary Woes

In response to the weakening yen, the U.S. Treasury decided on July 31 to commit up to $10 billion to prop up the yen. The yen initially strengthened upon the news. But it begs the question as to why America came to the rescue. It's not like Japan is some weak, unstable country. Japan is a sovereign and developed nation with one of the world's largest economies. Plus, it's not like Washington doesn't have enormous deficits, a national debt that has exceeded $40 trillion, and the U.S. Treasury has its own problems. 

Neither is this an isolated incident. Last year, the U.S. Treasury allocated $20 billion for a currency swap with Argentina. I know a currency swap is different, but it makes me wonder if Washington should be the currency backstop of every country that shows the slightest hint of struggle.

From a look at the data, it looks like currency intervention does something, at least in the short-term. A study from the International Monetary Fund (IMF) examining 26 countries shows that intervention can affect exchange rates positively in the short-run. Plus, the IMF points out that Japan intervened twice to prop up the yen in the 1990s. Guess what happened? Those gains were reversed within two weeks. 

Granted, that doesn't tell us what will happen this time. But if past economic history is any indication, the effects are likely to be temporary and should not substitute for macroeconomic adjustment. So if intervention simply buys time without fixing the underlying problem, what happens when it wears off? 

Japan can either allow the yen to return where market forces push it, or it can intervene again. If it chooses the latter, we could end up with a cycle of "yen falls, governments intervene, yen rises, intervention wears off, yen falls again." Sounds like a blast, doesn't it? 

This isn't theoretical. The yen is already showing signs of weakening. As of August 12, it was trading at around ¥159 per dollar, after briefly being at ¥155 per dollar at the beginning of the intervention. That doesn't automatically mean Japan will run out of money or that the intervention was necessarily unjustifiable, but it makes me wonder how many times governments will intervene in response. 

What began as a one-time rescue can turn into dependency, and that is where moral hazard enters the scene. The basic problem is one I discussed when Washington was deciding whether to bail out Silicon Valley Bank in 2023. The problem with rescuing people from the consequences from their decisions is the incentive created for the next decision.  

If Japan can count on the U.S. to help support the yen whenever it comes under serious pressure, some of the consequences of Japan's economic policies are de facto being insured by Washington. That could reduce the pressure on Japanese policymakers to make difficult choices. The IMF is similarly concerned about moral hazard because investors may become less inclined to protect themselves against currency losses. The IMF also recommends against using currency intervention as a way to avoid monetary or fiscal adjustments. 

Speaking of which, Japan is avoiding its own adjustments. As for what those are, they are not mysterious. The American Enterprise Institute points to Japan's massive debt and low interest rates as major culprits. The Brookings Institution takes it one step further by arguing that Japan has capped long-term government bond yields, which transfers those bad fiscal dynamics into the yen further. 

So what happens after the U.S. spends its $10 billion? Japan will still have a ton of debt. It will still face its interest-rate dilemma. And investors will still be staring at the same fundamentals as they were before the intervention. 

In short, the U.S. government will have spent billions trying to fight market forces, but it cannot fight the economic reality that Japan's underlying fiscal and monetary problems won't disappear simply because Washington decides to buy yen. At best, it will buy Japan some time. But that will only do a smidgen of good if Tokyo addresses its fiscal and monetary woes. Otherwise, the yen will come under pressure again, and Washington will be doing the same song and dance. 

At some point, the U.S. has to recognize that Japan's currency is Japan's problem and that the U.S. shouldn't become the world's currency backstop, especially when Washington is incapable of managing its own finances. 

The Sanctioning Russia Act Won't Stop Putin, But the Tariffs Will Expand Presidential Power

When Russia invaded Ukraine in 2022, Western governments responded with one of the most sweeping sanctions regimes in modern history. At the time, I questioned whether economic sanctions would compel Vladimir Putin to change course, noting that they often impose heavy economic costs while producing mixed political results. 

Four years later, Russia remains at war, and Congress is now debating legislation that would expand presidential tariff authority in an effort to increase pressure on Moscow. Instead of rushing forward, lawmakers should consider what the past four years have actually taught us about sanctions, tariffs, and constitutional government.

Ryan Young, a senior economist at the Competitive Enterprise Institute, scrutinizes the argument that the Sanctioning Russia Act would have any meaningful impact on the war in Ukraine. Since direct trade between the United States and Russia is already minimal, new tariffs would do little to reduce Russian export revenue. The bill's broader use of secondary tariffs against countries buying Russian energy also raises concerns. Young argues that these tariffs are unlikely to change the policies of major trading partners while potentially creating diplomatic conflicts and disrupting broader U.S. trade relationships.

The National Taxpayers Union's chief concern is not simply the size of the proposed tariffs, but the uncertainty surrounding them. The legislation gives the president broad discretion to determine which countries are targeted and what tariff rates they receive, while requiring the list of affected countries to be recalculated every 180 days. 

As global energy markets change, countries could move on or off the list with little warning. Businesses can adapt to almost any rule, but they struggle when the rules themselves are constantly changing. This is why Congress should write clear, predictable laws rather than leave fundamental trade decisions to executive discretion.

If that were not enough, there are issues with constitutional governance. Rather than asking whether additional sanctions on Russia are warranted, the Cato Institute asks whether Congress should grant the president another broad source of unilateral tariff authority. 

The bill allows the executive branch to determine which countries are targeted, what data are used to identify them, what tariff rates apply, and which nations qualify for exemptions. Such discretion extends far beyond Russia policy and could easily be used as leverage in unrelated trade negotiations. Congress should be reclaiming its constitutional authority over tariffs, not delegating even more of it to the executive branch.

Russia's aggression deserves a firm response, but good intentions are no substitute for sound public policy. If additional tariffs are create uncertainty for businesses, further erode Congress's constitutional authority, and are unlikely to change Putin's behavior, lawmakers should think twice before rushing this bill into law. 

Effective foreign policy requires realism, constitutional restraint, and a willingness to question politically popular ideas. Otherwise, Washington risks punishing everyone except the people it intends to punish. Hope is not a strategy, and tariffs are not a substitute for one.

Israel Recognizing Somaliland and the Awkward Truth About Secession

For most of the world, Somaliland is not even a blip on the radar when it comes to international politics. Formerly a British protectorate, Somaliland voluntarily united with Italian Somaliland in 1960 to form what is known as Somalia. But after years of dictatorship and civil war, Somaliland declared independence in 1991. Out of the wreckage of Somalia's collapse emerged the semi-free, democratic, mostly peaceful nation of Somaliland. It has held elections, collected taxes, and policed its borders. In spite of governing itself for over three decades, the international community has largely pretended that Somaliland is not a real state. 

Israel changed that equation a little over a week ago by recognizing Somaliland. By becoming the first country to acknowledge the nation, Israel took a step that other countries have avoided for years. To be perfectly clear, Israel is not doing this out of the kindness of its heart. It is a geopolitical move in which two rational actors voluntarily enter diplomatic relations. 

Why Recognition Benefits Both Parties

Somaliland sits on the Gulf of Aden, which would give Israel better access to the Bab el-Mandeb Strait. This is more useful given that Yemen lies along the Gulf, which would help Israel with maritime security and intelligence gathering. Generally speaking, Israel's diversification of its diplomatic and economic relations has been a part of its international policy. I pointed it out in 2017 with Israel and India, and I would point out that the Abraham Accords are another example of that. 

Israel is not the only one that stands to benefit. For Somaliland to receive recognition from even one state can break the years of diplomatic isolation that has plagued Somaliland. This recognition and subsequent recognition from other nations could improve foreign investment and trade relations, all of which can integrate Somaliland into the global economy and the diplomatic community. This recognition is another reminder that Jews and Muslims can indeed get along, but I will set that aside for the moment. 

The Objections: Borders, Precedent, and Institutional Norms

Mutual benefit is a feature of sound foreign policy, but that did not stop critics from coming out: 

• Somalia believes it is aggression and a violation of their sovereignty. Its claim has nothing to do with governance, consent, or control. It is solely based on legal continuity, not the reality of Somaliland's governance, which I will cover more momentarily. 
• The African Union objects because the borders at the time of independence should be preserved. This is in spite of the fact that Somaliland's borders are by and large the same as they were when it was a British protectorate prior to its unification in 1960. 
• China is upset for two reasons. One is that it has significant investments in the region, and does not want to risk losing money. The second is that it could set precedent or inspire Taiwan or Tibet. 
• The United Nations is less than thrilled because Israel and Somaliland bypassed their institutional norms. I can hardly blame Israel for not wanting to deal with the UN given its long-standing bias. And it is not exactly as if the UN has been there for Somaliland in terms of security or development. This recognition undermines the UN's institutional legitimacy while exposing its limitations. 

Debunking the Criticisms 

When you scrutinize these arguments, they strain credulity. Somaliland has not engaged in war since its independence in 1991, which minimizes the "regional instability" argument. As for the "borders are sacrosanct" argument, critics worry that Somaliland sets precedent other entities to want to secede, such as Scotland, Quebec, or Catalonia. Yet the world accepted the unilateral secessions of Bangladesh, South Sudan, and Kosovo without the outcry that is going on with Somaliland. And yet none of those secessions led to a secession domino effect. 

Somaliland Meets the Montevideo Convention

The reality is that Somaliland has functioned peacefully and autonomously from Somalia for over three decades. When I discussed other countries recognizing Palestinian statehood last September, I brought up the Montevideo Convention, which is the most widely used definition in international law to define a state. To be intellectually consistent, I will use those four criteria: 

Defined territory - Somaliland has a clearly defined territorial claim that corresponds almost identically to the borders of the former British Somaliland Protectorate.

Permanent population - Somaliland has a permanent population over 6 million people who have resided there on a long-term basis.

Capacity to conduct diplomatic relations - Somaliland has maintained informal diplomatic relations with other countries, hosts representative offices, and engages with international organizations. Israel's recognition of Somaliland strengthens the argument for its capacity. 

Single functioning government - Somaliland has had a single functioning government since 1991. It operates under a constitution approved by referendum, holds regular elections, has functioning courts, collects taxes, and maintains overall good control over its borders. This governance has been internal and self-sustaining, and has not needed foreign peacekeepers or international administration.  

Political Reality Trumps Abstract Norms

Ultimately, the objections to recognition are about maintaining territorial claims, avoiding precedent, and defending institutional authority, not about the people or their political reality. Somaliland has existed peacefully and autonomously for over three decades. To deny recognition in the name of abstract principles or potential "inspirations" for other secessions is to ignore the empirical reality on the ground. Pragmatic recognition, as Israel has undertaken, acknowledges what Somalilanders have built: a stable, self-governing polity whose place in the international system is long overdue. Refusing recognition to preserve theoretical rules that are outliving their usefulness is merely authoritarianism disguised as diplomacy. If countries want to operate in the empirical state of what is going on in Africa in 2026, they ought to recognize Somaliland, engage constructively, and let political reality guide diplomacy, instead of clinging onto delusions of what borders should be like.

Open Borders Require Integration: Illiberal Immigrants and European Policies Create a Perfect Storm in Europe

Immigration has the potential to unleash freedom and economic progress. That is more than textbook theory. At least in a U.S. context, I am all in favor of more immigration. Immigrants to the United States make a net positive contribution to the U.S. economy, including low-skilled immigrants. Immigrants to the United States also help improve fiscal health. In spite of the politics surrounding immigration in the United States, the case for immigration for the United States is a no-brainer. When I look across the Atlantic, it makes me stop and wonder. 

Immigration Tensions in Europe

In a European context, there is a deep fault line between many natives and immigrant communities, whether those rifts are caused by fears of cultural displacement, economic competition, or the burden on the welfare state. A number of natives worry that the immigrants will erode a sense of shared identity while straining public services. This tension is amplified by the fact that immigrants might not fully adopt local norms and might vote for more illiberal policies and influence culture to be more illiberal. These anxieties are not merely theoretical. 

Religious Law Versus Secular Institutions

The French polling and market research firm Institut français d'opinion publique (IFOP) released quite the eye-opening poll about three weeks ago. This IFOP poll looked at the connection that French Muslims have to Islam and Islamism. One disturbing finding was that 46 percent of French Muslims believe that sharia law should rule France. It is down from the 54 percent in 2008, but it is still high. 

Another jarring finding is that 57 percent of French Muslims from the age of 18 to 24 years old said the rules of Islam are more important than France's secular laws. (see below). This is in contrast to the 44 percent of all French Muslims, thereby suggesting that France's Muslim youth is more extreme in its beliefs. Even a minority today can shaper future trends, particularly among younger generations, which has the real potential to shift community expectations or voting patterns over time. Even worse, 38 percent of French Muslims sympathize with at least some positions of Islamism. To think this is happening in a country that has valued secularism (laïcité) to the point where separation of civil and religious society is in  Article I of the French Constitution. 

Muslim Immigrants with Extremist Views Is a Problem Throughout Europe

France is not the only country that is having problems with integrating its Muslim immigrants. An inability of Sweden to integrate its Muslim immigrants was the takeaway of my 2023 trip to Sweden. Take a look at this JL Partners poll of British Muslims last year (see below). 32 percent of British Muslims want sharia law, which is the same percent of British Muslims who believe that Islam should be the national religion of Britain. 65 percent believe the Muslim holiday of Eid-al-Fitr should be a public holiday in Britain. 27 percent of British Muslims are okay with outlawing homosexuality, which is not quite double of the overall British public. 57 percent of British Muslims want the compulsory use of halal food in all schools and hospitals. Then there is the 52 percent of British Muslims that want to make it illegal to show a picture of Mohamed. These findings indicate some authoritarian views in which Muslim immigrants want to impose their way of life onto Britain. 

A high prevalence of Islamism was also a finding in a study from Criminological Research of Lower Saxony: 67.8 percent of Muslim schoolchildren believe that the Koran should take precedent over German secular law (Dreißigacker et al., 2023). This trend of believing that religious rules are more important than secular ones dates back at least to 2008 when the Berlin Research Agency for Social Research (WZB) conducted a survey of over 9,000 Muslims throughout Europe (Koopmans, 2008). The WZB also showed that European Muslims are more fundamentalist than European Christian counterparts, whether it is believing that there is only one true interpretation; Islam should not be modernized; you should not have gay friends; or the Jews should not be trusted. 

In 2024, the European Union's Agency for Fundamental Rights (FRA) conducted a survey of 10,000 Muslims in Europe and details the discrimination that Muslims face in Europe. This discrimination is worth mentioning because if a sizable portion of European Muslims perceives profiling and discrimination that can and does lead to lower trust in secular legal institutions. All things considered equal, that could make sharia law more attractive to Muslims that can feel that the system is not working for them.  

Integration Challenges Across Europe

As I brought up earlier this year in my criticism of using "Islamophobia" as a cudgel to silent dissent, this illiberalism that a significant number of these immigrants import from their home country and attempt to implement in Western society is quite problematic. For a free democracy to work, the institutions that protect individual liberty (e.g., women's rights, gay rights, minority rights, freedom of religion) must remain intact. Looking at Muslim-majority countries, there is a general lack of freedom of speech, LGBT rights, and gender equality norms, all of which has me concerned about Europe. 

The societies of Muslim-majority nations by and large have sharia-based legal expectations in an honor-based culture. Bringing in immigrants en masse that do not respect liberal and democratic norms, institutions, or mores causes societal erosion and create institutional friction when religious practices clash with liberal, democratic values. Even if a small subset support at least some Islamist positions, their presence can influence schools, neighborhoods, and political discourse, thereby creating pressures that affect broader society. 

From a libertarian standpoint, the concern is not cultural differences themselves, but rather how voter preferences translate into state power. In majoritarian systems, large groups favoring restrictions on speech, gender equality, religious freedom, or market exchange can shift electoral outcomes that democratically erode liberal institutions faster than they can be rebuilt. When those illiberal preferences translate into illiberal laws, the outcome is predictable: expanded state authority and fewer individual rights.

Why a More Liberal and Open Immigration Policy Works Better in the United States Than Europe

It is not only immigrants with illiberal views that are to blame here. I can throw shade at European governments and how they govern. The cultural, linguistic, fiscal, and economic reality of Europe in contrast to the United States can explain why open immigration does not work nearly as well in Europe as it does in the United States. American institutions are built around economic absorption and adaptability, whether that is a more flexible labor market, greater geographic mobility, or a skills-oriented immigration system that accelerates integration. The United States also has historically maintained a long-standing assimilationist culture that encourages new citizens to adopt a shared civic identity. 

Europe cannot make such a claim. Europe is plagued by rigid labor markets and large universal welfare states. After all, Nobel Prize winner Milton Friedman argued that you cannot have both a large welfare state and open immigration. Furthermore, the linguistic and cultural fragmentation in Europe, not to mention the economic rigidity, slow integration and increase fiscal and social pressures in Europe. Aside from linguistic fragmentation, the complex licensing and labor laws along with a relatively regulated housing market make it more difficult for immigrants to move around to better job opportunities, which creates demographic mismatch. 

Postscript

Muslim immigrants who do not accept Western values combined with the lack of economic freedom and linguistic & cultural fragmentation on Europe's part create a cultural powder keg waiting to go off. Some potential policy solutions towards integration can include language programs, vocational training, and civic education, much like I suggested when providing alternative options to a burqa ban last month. Even though effective integration policies are theoretically available, Europe's institutional, cultural, and political realities have shown that widespread implementation is challenging.

In a free society, open borders are ideal. Human movement, voluntary exchange, and cultural pluralism are foundations of a free society. However, these ideals depend on institutional compatibility. A libertarian analysis cannot ignore that Europe's rigid markets, expansive welfare systems, and centralized governance structures prevent the kind of spontaneous-order integration that open borders require. Given Europe's current institutional design, the choice is not between "freedom" and "restriction," but rather between preserving and losing basic liberal order itself.

I would personally prefer a scenario in which Muslim immigrants can integrate into their respective newly founded country, but outside of some rare exceptions (e.g., Norway), that process has been quite elusive and hardly inspires confidence in me that matters will improve. 

Given the political reality and Europe's assimilation failures, there is a part of me tempted to say that restricting immigration or revoking visas for those who have ties to terrorist organizations or extremist groups, at least for now, seems to be one of the least-worst options available for safeguarding liberal institutions. I know such policies come with considerable tradeoffs, including the real potential for government expansion. But seeing how Europe is declining, it’s still tempting. Alternatively, scaling back the welfare state or a guest-worker or temporary-visa regime for sectors with high demand could also help with the matter, but that would be one option that would need other alternatives.

One thing for certain is that the status quo in Europe is untenable. Without such measures to improve integration or economic freedom, the resulting political, social, and legal friction continue to erode individual rights and push Europe towards an even more illiberal and authoritarian trajectory. 

Moody's Boosted Italy's Credit Rating, But Does Rome Really Deserve It?

For the first time in 23 years, the credit rating agency Moody's upgraded Italy's credit rating, from Baa3 to Baa2. Moody's finds that Italy has a "consistent track-record of political and policy stability which enhances the effectiveness of economic and fiscal reforms and investment implemented under the National Recovery and Resilience Plan (NRRP)." Moody's also anticipates greater growth and fiscal consolidation, as well as a gradual decline in Italy's government debt burden. This is a small but significant vote of confidence from international markets that Italy desperately needs. At the same time, Italy's economic foundations and long-running economic challenges tell a more nuanced story. This begs the question of whether Moody's upgrade is in alignment with the economic reality in Italy. 

Short-Term Positives

Before delving into my skepticism of Moody's upgrade, I do want to address some of the positives in favor of the upgrade: 

• As the International Monetary Fund (IMF) noted in its most recent Article IV Consultation with Italy, Italy's economy has remained resilient and has shown modest GDP growth and output that has surpassed pre-pandemic levels (IMF, p. 4). 
• Given the political instability of frequent elections, it is refreshing to see policy stability relative to Italy's post-WWII historical norms. 
• Labor market reforms have led to a rise in permanent contracts. The permanent contracts contributed to an increase in the employment rate to a record of 62.7 percent (IMF, p. 5). 
• Volatility in Italy's financial markets in early 2025 has largely subsided (IMF, p. 8).
• The fiscal deficit shrunk by more than half to 3.4 percent in 2024 (ibid.), and the deficit is projected to shrink further (European Commission). Italy was able to return to a primary surplus, which helps contain the growth of government debt relative to GDP, though overall debt dynamics also depend on interest payments and growth. 

Long-Term Structural Issues

I am glad that Italy is putting in effort to avoid a disaster in the short-run. At least for now, Italy's economic stability helps the rest of the Euro Area since Italy is the third largest economy in the Euro Area. However, much like I detailed in 2018 when analyzing the Italian economy, Italy still has long-term structural issues that make it difficult to justify a long-term optimistic view:

• One of Italy's main issues to date is its large debt-to-GDP ratio at around 135 percent. Aside from Greece, it remains one of the highest in the developed world (IMF). A literature review and analysis released by the Mercatus Center this past October suggests that once the debt-to-GDP ratio gets above around 80 percent, investment may become hampered, interest-rate risk could become heightened, and long-term growth could slow down. This is not to say that Italy is disadvantaged, but Italy has its work cut out for it. 
• While it is not negative, Italy's GDP growth is modest, at 0.6-0.8 percent (Istituto Nazionale di Statistica). This is far from adequate if one of the main goals is to reduce debt burden or improve the living standards for Italian citizens. 

• Weak productivity growth has resulted in subdued GDP growth, below-target inflation, and high public sector debt, all of which create challenges for public finances (IMF, p. 4). 

• Industrial production has been on the decline. In March 2025, output was 1.8 percent lower than it was the previous year (OECD). This decline in output exposes a weakness in Italy's manufacturing base.
• Much of the growth in Italy's economy depends on the Recovery and Resilience Facility (RRF) financing the NNRP program (European Commission). It is plausible that the economic growth could falter after this time-limited investment. Even worse, if the investments are not properly implemented, the debt dynamics might reassert themselves.
• There is a further drag in the declining birth rates and decline in the working-age population (IMF, p. 10-11).

Postscript

Moody's upgrade is defensible from a short-term perspective since fiscal consolidation, NRRP investment, recovery in consumer demand, and stable macroeconomic conditions lower the likelihood of an immediate crisis. However, weak growth trajectory, high debt, and structural rigidity all indicate that any optimism for the Italian economy should remain cautious at best. The upgrade reflects improved resilience as opposed to a legitimate, lasting transformation. Italy earns one, maybe two cheers, for macroeconomic stability, especially given its history. Nevertheless, Italy has quite the hill to climb if it hopes to achieve true economic strength.

The Veiled Threat: Italy’s Proposed Burqa Ban Won’t Fix Cultural Integration, But It Will Erode Liberty

In times of social tension, politicians often claim they are finding solutions in the name of safety, values, or protecting culture. It is amazing how liberty finds itself on the chopping block when the government pursues such goals. That dynamics is now playing out in Italy. Last week, the Fratelli d'Italia, which is the ruling party in Italy under Prime Minister Giorgia Meloni, proposed a "cultural separatist" bill in response to growing concerns over Muslim immigrants. Part of this bill includes a public ban on the burqa and niqab. Anyone caught wearing these garments would be fined anywhere from €300-€1,300. 

While there are various local jurisdictions throughout Europe with such bans, Italy would become the ninth country in Europe with a nationwide burqa ban. Proponents of these bans claim that they promote safety, liberate women from a form of religious oppression, and encourage integration. To be clear, I think Europe generally has had a major issue when it comes to integrating its Muslim immigrants. 

I first expressed my concerns in 2015. A lack of integration of Muslim immigrants was also a takeaway from my 2023 trip to Sweden. As I brought up earlier this year while criticizing the "it is Islamophobic to criticize Islam" argument, the influx of Muslim immigrants in Europe is importing oppressive and authoritarian practices and tendencies to the Western world. It is notable enough that I even question some of my views on immigration, at least contextually as they pertain to what is going on in Europe. That topic deserves its own discussion because I would need to think of how immigration in the U.S. is different from Europe. What I will say is that in spite of my considerable worries about Muslim immigrants not integrating into mainstream European society, a burqa ban is not the solution.  

I already have objections based on how this ban erodes freedom. A TikTok ban in the U.S. was based on "protecting values" or "security." A burqa ban uses similar justifications while giving the state a deeply concerning power over one's body and what one can wear. Unless you can prove a direct harm from a fashion choice, a burqa ban is a considerable violation of bodily autonomy. If a government can tell people what they can wear in the name of security or cultural cohesion, what else can the government dictate? 

At the heart of a liberal and free society is the principle that individuals have the right to live in accordance with their sincerely held religious beliefs, even if those beliefs are not shared by the majority or are uncomfortable. Without that freedom, I would not be able to freely practice Judaism. Article 9 of European Convention on Human Rights is supposed to protect this right, even in spite of the European Court of Human Rights upholding such bans. 

Like lockdowns, burqa bans show how governments respond to fear by restricting freedom rather than trusting individuals. All a burqa ban does is set the precedent that individual expression and religious identity can be quashed by majoritarian discomfort. By viewing clothing as a threat, Italy risks the problem of eroding the democratic pluralism it claims to defend. 

I find such a ban to be problematic more than on terms of freedom of expression, bodily autonomy, or freedom of religion. I have criticized bans over the years, showing that government uses bans as a blunt instrument that are prone to backfiring. This was the case with the gas stove ban when it restricted choice while not solving anything of substance. Burqa bans also do not solve anything of substance, particularly when it comes to whether they increase integration. 

One study from Cambridge University (Paul, 2024) covering French and Belgian bans indicates that "A law or regulation that prohibits or governs the wearing of Islamic veils in the public sphere, pressures pious Muslim women (that is, those who habitually wear veils in public) to stay home and to avoid public places." This study also found that a majority of women interviewed reduced their outdoor activities and made them feel like they were living in a jail. Even if some women are pressured into veiling, the solution is not to punish them by further isolating them from public life with a burqa ban. That doubles down on their marginalization.

Another study from Stanford University (Fouka and Abdelgadir, 2020) covered the 2004 France headscarf ban in public schools. The ban does only cover schools, but it does show the backfiring effect, which resulted in discrimination both from non-Muslim peers and Muslim community members who thought the girls were selling out. Muslim girls were shown to have lower rates of completing secondary education and were more likely to repeat courses. 

Then there is a study from the Open Society Foundations interviewing 35 Muslim women showing that a full veil ban resulted in increased mental health issues, isolation, disruption in family life, and avoidance of health services. While much of the evidence of these bans are qualitative in nature and limited in sample size, we are still able to get valuable insight into how these bans directly and negatively affect those most impacted by these bans. The problem with burqa bans is that they result in more alienation than they do assimilation. 

A burqa could represent illiberalism because it sends the message that women should not be seen or that it is a form of systemic subjugation. However, a ban is also an illiberal policy. You cannot fix coercion with another act of coercion. Bans are a broad, coercive, and typically counterproductive policy that disrespects the liberty of individuals to live their own lives. There is no strong evidence that a burqa ban would improve the integration of Muslim immigrants. 

Much like Trump making English an official language, age verification laws, or banning flag burning, a burqa ban is another form of right-wing virtue signaling. It is a costume change masquerading as a cultural fix because it is more concerned with optics than actual outcomes. The main question here is how do we maintain an open, liberal society that welcomes immigrants without becoming illiberal ourselves? 

A few suggestions come to mind. Provide women confidential support services for those who are in religious or cultural pressure situations. Increase legal and police protection for Muslim women who want to integrate and would otherwise face abuse or intimidation. Improve access to education and employment choice, both of which are shown to improve autonomous choice and independence of women. Prosecute the explicitly coercive acts, such as forced marriage and honor violence. Support community outreach and mentorship to break the segregation without banning cultural expression, much like the Migrant Women Mentoring Programme focuses on doing. Provide better training for instructors so they can help migrants learn basic civic, cultural and language skills. 

If your argument is that women are being coerced into wearing the burqa, empowering women with the skills to make their own choices is far more effective than banning clothing. Cultural integration needs to come from a place of education, dialogue, and leadership. Part of that includes criticizing Islamist ideology and influences, as well as rejecting Sharia-based legal frameworks to influence secular law. If attempting cultural integration comes from force, like we have seen in France, all it is going to do is isolate Muslims and increase resentment from Muslims about mainstream society. Criminalizing someone's fashion choices is not going to fix these multifaceted cultural issues, but they will erode freedom in an illiberal fashion in the meantime. 

The Fiction of Palestinian Statehood: Why Recognition Is a Dangerous Illusion

I am sure that pro-Palestine activists are feeling hopeful this week. In a matter of days, there were multiple Western democracies that recognized Palestinian statehood, including Australia, Canada, France, Portugal, and the United Kingdom. This recognition is being hailed as "long overdue" and a "bold diplomatic move." Beneath the ceremonial language and moral grandstanding lies a more profound issue about accountability, legitimacy, morality, and what it means to truly be a state. Having Western democracies recognize Palestinian statehood does nothing to erase these realities, as we will see shortly. 

Recognizing Palestine Will Not Incentivize Good Behavior

I want to start with this point because it is the underpinning argument for such a move. Many in diplomatic circles believe in Palestinian statehood as a moral imperative that will help foster a two-state solution between Israel and Palestine. The argument goes that by recognizing Palestinian statehood, Palestine will decide to play ball and work towards peace. The reality is that recognition without asking for any behavioral change on Palestine's part removes any incentive for it to reform or change, whether that is a demand to disarm, release the hostages, hold elections, reform its education to stop demonizing Jews, or make a concerted commitment to co-exist with Israel. Why implement reform when statehood is being handed to you on a silver platter?  

The idea that the "incentivize good behavior" theory will not end well is not mere conjecture. During the Oslo Peace Accords and the subsequent Camp David Accords, the Palestinian Authority received much of what they requested. They were granted semi-autonomy, international funding, and diplomatic legitimacy in exchange for peace. What resulted? Continued rejection of peace, massive corruption, and a second Intifada. 

Hamas is worse than Fatah. Aside from calling for the extermination of Israel in its initial 1988 charter, Hamas explicitly opposed the Oslo Accords, carried out atrocities, rejected negotiations, and has called for the destruction of Israel. In 2005, Israel unilaterally withdrew from Gaza to give them a chance to create a state. Gaza was given about two decades to establish a semblance of self-governance. What transpired? Hamas, a terrorist organization, takes over Gaza. Since then, Israel is barraged with rockets and multiple skirmishes with Hamas, and the October 7 attacks in which Hamas kidnapped, raped, tortured, and murdered civilians. The October 7 attacks is the reason why there is presently a war in Gaza. They could have chosen to live peacefully alongside Israel. Instead, it opted to build terror tunnels and focus on exterminating the only Jewish state with war and violence.

These are Palestinian case studies in how appeasement backfires spectacularly. They are also indicative of a larger pattern in the Middle Eastern conflict that dates back to 1948: Belligerent Arab entities attack Israel, Israel fights back in self-defense, Israel wins, Arab entities cry foul when they lose for trying to wipe Israel off the map, rinse and repeat.

Why would a new round of rewards suddenly change their incentive to behave properly? Recognizing Palestinian statehood rewards the absence of political reforms and the commission of human rights abuses against Israelis. In recognizing Palestinian statehood, it sends the message that you do not need to take responsibility or enact political reforms. It means that statehood can be recognized through bloodshed, terrorism, and rejecting your neighbor's right to exist. A worst-case scenario could be a precedent that incentivizes other aspiring states to use violence and bloodshed as a political strategy for future state recognition instead of accountability.

What Exactly Is Being Recognized?

With 156 countries recognizing Palestine as a state, I imagine you are wondering how I could possibly call it a farce or a delusion to recognize a Palestinian state. In part, recognizing Palestine is a classic example of argumentum ad numerum, which is the logical fallacy in which something is claimed to be true simply because a majority of people believe it. Simply because countries declare recognition of a Palestinian state does not make it so. 

While not binding globally, the Montevideo Convention is the most widely accepted legal framework for what constitutes statehood. It is important to apply those same objective standards to would-be states. In Article I, the Convention lays out four criteria: a defined territory; a single, functioning government; capacity to enter into foreign relations; permanent population. The supposed state of Palestine fails on at least three of those criteria. How so?

Defined territory - The West Bank and Gaza are territorially disconnected. The West Bank is governed by the PA (with partial Israeli control, depending on the Area of the West Bank), whereas Gaza is governed by Hamas. Also, there is no universally agreed upon definition of the border because they are disputed territories. 

Single functioning government - Which entity does the Western world recognize exactly? There never has been a sovereign Arab state called Palestine, and there is presently no coherent state. Neither Fatah nor Hamas have complete control over the territory, which is more important considering that the two factions are ideologically and militarily opposed to one another. The Palestinian Authority (PA) lost control over Gaza in 2007. Hamas rules Gaza, but because of its terrorist designation in multiple countries, is not a legitimate governing body under international norms. Abbas is in Year 19 of a four-year term, and he needs to rely on external funding and Israeli security to function. 

Diplomatic relations - Hamas cannot conduct international diplomacy due to being diplomatically isolated with its terrorist designation. While the PA has observer status at the United Nations, it lacks full diplomatic recognition. Between its internal divisions, donor dependency, and lack of institutional coherence, the PA is unable to effectively conduct diplomatic relations. International recognition of a state should follow institutional legitimacy, not the other way around. 

This is not an argument about Palestinian self-determination, although that could be another conversation for another time. This is about whether the entity known as Palestine in its current form is capable of such recognition. Statehood is not merely symbolic, but institutional. Palestine does not have defined borders, a unified government, or the institutional capacity to behave like a responsible member of the international community. Recognizing a state that does not exist in functional terms is as sensical as recognizing the statehood of Narnia. 

Recognition, in this case, is not sovereignty, but rather performative. It does not grant control over borders, airspace, security, or economic independence. Palestine remains a fragmented, dependent, and divided figment of the imagination as far as international relations are concerned. Diplomatic recognition cannot replace actual governance or territorial authority. 

Symbolic Recognition Undermines Real Diplomacy

If the goal is to help the Palestinian people, this is a lousy way of going about it. I do not say so simply because recognizing Palestinian statehood will do nothing to stop the fighting in light of the fact that Israel views this as too existential without seeing an actual good-faith effort from the other side. State recognition does not empower the moderates or the ones that would actually like to engage in a two-state solution. It entrenches Hamas and Fatah, the powers that have prolonged the conflict. The October 7 attacks were not a one-time outlier. They are part of a decades-long pattern of aggression and rejectionism towards the state of Israel, a pattern that symbolic recognition does nothing to break. 

By recognizing a state without actual governance or a peace agreement, it turns statehood into an empty gesture. Bypassing negotiations with state recognition removes leverage, thereby deepening division instead of resolving it. In short, it short-circuits the peace process instead of engendering it. If anything, it gives corrupt and violent actors the ability to pose as legitimate governments while perpetuating the conflict and oppressing its own people. Diplomacy without standards is merely performative. 

Symbolic Recognition Shows Western Moral Confusion

Recognizing Palestinian statehood creates a catch-22 argument. If Palestine is to be recognized as a state, it means that by definition, they must be held accountable as a state. After all, if they merit statehood, then they are sovereign enough to be held accountable for carrying out the October 7 attacks against Israel, thereby instigating this current war. If the developed world absolves them of responsibility, that means that by the standards of international law, Palestine does not meet the threshold for statehood. If the leadership is not responsible, they are not functioning as a state, which begs the question of why recognize their statehood in the first place. 

Statehood is more than airing a grievance; it is about moral and institutional legitimacy. You cannot have it both ways by demanding statehood while absconding from the responsibilities of statehood. This would mean that Palestine is not held to any standards while Israel is held to mythical double standards. 

By recognizing Palestinian statehood, these nations have shown how morally insincere they are. They say they want peace, but they cannot grapple with the consequences of legitimizing the terrorist organization Hamas or the fact that even Fatah does not want to have Jews in their midst. Ultimately recognizing statehood is to legitimize a dysfunctional, violent, and unaccountable leadership. Granting statehood would promote neither peace, justice, nor reform. It acts as a signal to bad actors that violence and bloodshed are acceptable forms of political strategy. This level of appeasement from Western powers will only perpetuate an unfortunate predicament in the Middle East. 

Morocco's Jobless Trap: When High Taxes, Labor Laws, and Corruption Stifle Economic Opportunity

Morocco is a country with such vibrant cities as Fez and Tangier, a diverse geography, a rich culture, a wealth of historic sites, and has been featured in such films as Casablanca and Game of Thrones. Guess what else Morocco has? High unemployment. According to the Moroccan government's Haut Commissariat du Plan, Moroccan unemployment is at 13.3 percent, which is slightly below the 30-year high (see below).

Youth unemployment is even worse, reaching a 25-year high (see below). Sadly, the problem is nothing new. NPR complained about high Moroccan youth unemployment in 2012. So what is causing this increase in unemployment? Sure, there was the COVID pandemic, but unemployment in Morocco is higher now than it was during the pandemic. 

As the International Monetary Fund (IMF) illustrates in its Article IV Consultation report, Morocco has withstood five droughts in six years that have led to production shortfalls of 40 percent. This seems like it explains the problem: lower agricultural output. However, Morocco's agriculture sector contributes about 15 percent to Morocco's GDP. That is a higher percentage, especially considering that high-income countries only have 2 percent of their GDP in agriculture. 

I bring this up because as economies develop and mature, they become less dependent on their agricultural sector. Similar to this recent article from the Institute for Research in Economic and Fiscal Issues (IREF), I argue that Morocco's dependency on agriculture is a larger symptom of government largesse getting in the way of true economic development. 

Taxation. Morocco's corporate tax can reach as high as 35 percent. You can read my analyses on corporate tax here, here, and here as to why that rate is too high. The standard value-added tax (VAT) in Morocco is 20 percent, which is higher than the global VAT average of 15 percent. A high VAT is significant because it reduces disposable income and discourages spending. On top of that, the Moroccan tax system has a narrow tax base and is riddled with tax exemptions that make evasion and avoidance common (Moutii, 2025). 

Government Spending. The good news is that Morocco is working on fiscal consolidation (IMF, p. 10). The bad news is that Morocco's debt-to-GDP ratio is 70.9 percent, which is about 30 percentage points higher than the recommended limit that should not be exceeded on the long-term for developing countries. Whether the Moroccan government can maintain fiscal discipline will determine how much this becomes a factor and avoids heading towards a fiscal cliff similar to that of the United States.

Labor Law Rigidity. The Legatum Institute details in its case study on Morocco that the Moroccan labor market is characterized by a lack of inclusion of women and youth, slow job growth, and low quality of jobs (also read this 2025 World Bank report on boosting the business environment in Morocco). This lack of labor market flexibility is brought on by a quickly growing minimum wage and high overtime costs, regulations that cause redundancies in businesses, rigidity on temporary contracts, and stringent barriers on terminating the employment of workers, all of which contribute to the high cost of labor. Additionally, a skills mismatch and lack of workforce development exacerbate the labor law rigidity (ibid., p. 50).

Corruption. According to Transparency International (TI), Morocco's corruption is worse than the global average. Even worse, its TI Corruption Perceptions Index score has declined since 2018. As I pointed out last year, corruption erodes economic growth. This is due to the fact that corruption impacts business confidence and hinders investment, as is illustrated by over 16,000 enterprises collapsing in Morocco last year. 

Postscript. It is true that there were global challenges such as pandemic and drought. It is also true that Morocco's high unemployment rate is more structural in nature. Punitive corporate taxes, a high VAT rate, and rigid labor laws make it difficult to modernize and diversify the economy. A richness in culture, geography, or global visibility is not going to save Morocco. It is a policy paralysis that will keep employment rates stubbornly high until the Moroccan government removes the barriers to economic prosperity.

Iran Is a Legitimate Threat to Israel, But Should the U.S. Have Bombed Iran's Nuclear Facilities?

About two weeks ago on June 13, Israel initiated a surprise attack on Iran known as Operation Rising Lion targeting top military officers and scientists, much like it did when Israel targeted Hezbollah operatives in September 2024. Iran fired missiles on Israel and there have been airstrikes since. These past few days have been an escalation of the animosity that has existed between Israel and Iran since the Iranian Revolution of 1979. 

Iran has financially backed Hamas, Hezbollah, Palestinian Islamic Jihad, and the Houthis. Then there was the Iranian attacks on the Israeli embassy in Argentina in 1992 and the 1994 AMIA bombing in Argentina, the latter of which was the largest terrorist attack in Argentinean history. On top of the proxy conflicts and historical tension, Iran has called for Israel's destruction multiple times over the past few decades. 

Israel attacked Iran on June 13 because Israel reportedly wanted to prevent Iran from developing a nuclear weapon that would annihilate Israel. This would make sense because the UN nuclear watchdog International Atomic Energy Agency (IAEA) submitted a report a day before Operation Rising Lion showing that Iran was in breach of its non-proliferation obligations. President Trump initially said that he will help Israel "if needed." And help he did. 

On June 22, the United States military carried out Operation Midnight Hammer to attack three nuclear facilities: Fordow, Natanz, and Isfahan. The White House is claiming that Iranian nuclear capabilities have been obliterated. Although Trump announced a ceasefire the following day, it is neither clear whether there will be further attacks from Israel or Iran, nor is it clear whether Iran's nuclear capabilities are decimated. As of now, the ceasefire is holding, but it is too soon to tell. Similar to what I pondered three years ago with Ukraine, the question I ask now is whether the United States should have militarily gotten involved in Iran. 

The answer depends in part on how much damage was done to Iran's nuclear facilities. Damage assessments are still preliminary. An initial assessment from the Defense Intelligence Agency (DIA) said that it was only delayed by a few months. On the other hand, the CIA released a statement saying that it would take years for Iran to rebuild. If Iran's nuclear capabilities remain largely intact, it could risk greater regional tension and drag the United States in yet another war in the Middle East. If their capabilities truly were hindered, then this limited military intervention could have prevented World War III. 

Whether the United States should have carried out Operation Midnight Hammer also depends on how the United States, Israel, and Iran will respond. If the United States gets further involved in terms of actual fighting, then it makes Trump look bad since Trump promised in his last presidential campaign that he would not start any new wars. To reiterate, Israel views Iran as an existential threat. While the IDF preliminarily finds that Iran's capabilities have been set back for years, Israel might escalate if it perceives that Iran has not been adequately incapacitated.

As for Iran, the Iranian government has already passed legislation to prohibit the IAEA from entering Iran.  Iran does not have the capability to attack the United States directly. Iran tends to avoid conventional conflict and instead advances its regional operations through propaganda and proxy operations. As such, Tehran could attack the Strait of Hormuz, which could send oil prices soaring. Tehran could also attack U.S. military installations in the Middle East, much like Iran attempted on June 23 with Operation Glad Tidings of Victory when it unsuccessfully sent missiles to the Al Udeid Air Base in Qatar. Domestically, I understand that Iran is militarily weakened and economically pummeled. At the same time, that desperation could encourage the Ayatollah to tighten the screws on its citizens. 

This is a roundabout way of saying that this conflict is very much developing and much is up in the air. Even if Iran has been hobbled, Iran remains a threat. I do not want another war in the Middle East, much like most Americans. Cato Institute calculated that if the war with Iran created displacement at the same rate as Syria, that would mean 23.4 million civilians, which would increase the worldwide refugee population by 76 percent. It would be a tragedy indeed. Ultimately, I hope that further conflict and bloodshed is avoided in the Middle East. Whether that ends up being the case is something that only time will tell.

Is the Reign of the U.S. Dollar Coming to an End?: Assessing the Future of Global Reserves

Tariffs notwithstanding, the United States has fiscally been in such a tumult in recent years. Last month, the credit rating agency Moody's downgraded the United States from Aaa to Aa1. This downgrading is significant for two reasons. One is that the United States is the largest economy in the world. The second reason is that Moody's is the final major credit rating agency to downgrade the United States below its top credit rating. Much like with Fitch's downgrade in 2023, Moody's cited long-term debt issues fueled by the mandatory spending. Moody's anticipates that the United States' fiscal performance is to deteriorate at a faster rate relative to other highly-rated sovereigns. 

This got me thinking about a major topic related to all this mess. The United States dollar (USD) is the most held currency in global reserves. However, that clout has been declining over the years (see above). International Monetary Fund (IMF) data show that at the end of 2024, 58 percent of foreign exchange reserves are USD. Contrast that with the dollar being 65 percent a decade earlier. How legitimate is the concern that the percent of dollars in foreign reserves will continue to decline over time?  We should first ask what could replace the dollar as the primary global reserve. 

• Chinese yuan (人民币). China has the second largest economy and is continuing to grow, hence why it is a main contender. However, as long the Chinese central bank (中国人民银行) has exchange rate regime (currency manipulation), capital controls, and institutional weakness, the Chinese yuan will not be a global currency reserve. 
• The euro. The European Union rivals that of the United States and has political stability. However, it has internal economic issues that I have critiqued since 2010 and have done so since then (see here, here, and here). It is not only the lack of a common treasury or a unified European bond market, not to mention that its capital markets are inadequately integrated to muster the assets necessary to become a global leader. As a research paper from the European Commission points out, the euro zone crisis last decade resulted in the downgrade the credit rating of various European countries, thereby strengthening the dollar (Arroyo, 2022). 
• Other currencies. The Japanese yen, Korean won, Australian dollar, Canadian dollar, and British pound lack the scale and liquidity to pull it off. The BRICS countries cannot cobble together a currency basket to rival the U.S. economy because of the structural challenges that do not make their countries' central banks robust. 
• Digital and blockchain alternatives. This option could have potential in the future. However, given current regulatory hurdles and the fact that these alternatives are still relatively nascent, they are not viable options, certainly in the short-term.

There is still no viable contender to step in and replace the U.S. dollar in the short-term. The United States remains a large, powerful economy that accounts for 26 percent of the world's GDP with rule of law and investor confidence. Because it takes a lot of time, money, effort, and political willpower to change currencies, there is inertia vis-à-vis the network effects that are in the U.S.' favor. The U.S.' market for Treasury securities remains large and liquid. The dollar is still the dominant currency choice for international trade transactions because the dollar is so entrenched in global trade and finance. That being said, it is clear from the Moody's downgrading that the U.S.' fiscal situation is untenable and it is looking like there is a lack of political will to change things. 

In July 2024, the CFA Institute surveyed nearly 4,000 global financial professionals. Not only did 77 percent of respondents find that the U.S.' finances are unsustainable, but nearly two thirds had the professional opinion that the U.S. will lose its global reserve status (52 percent in a marginal way and 11 percent in a material way). It was also interesting to see the reasons that respondents thought this would happen. Debt was number one, followed by a downright default (see below).

What does this mean for the global reserves system? Going back to the CFA Institute survey, what the respondents believed to be the most likely systems to replace the dollar would be a multipolar currency system, a digital currency, and hard currency (e.g., gold). If I were to speculate, I would say the system is becoming more multipolar and there will be an emergence of digital currency in global reserves. I believe that the dollar's prominence will remain in the short term but also decline gradually, much like it has in the past couple of decades. The fiscal cliff is not imminent, but it is the direction in which the United States is heading.

What came as a result of the COVID pandemic and the lockdowns has taught me to be more humble with my educated guesses, especially when prognosticating beyond a year or so. What I can say with certainty is that that more the United States government avoids meaningful fiscal reform and adds on deficit spending, the more that dollar will lose its dominance. The question simply will be a matter of how much dominance is lost, what will take its place, and how ugly of a process it will be.

Reexamining Economic Sanctions: Why Trump’s Syria Sanction Decision Was a Smart Move

In his second term, Trump has worked on trying to make Greenland great again by offering to buy it, as well as trying to make Gaza great again by proposing an annexation. Now Trump has his sights on making Syria great again by saying that he will remove economic sanctions. This decision is a considerable change in how the United States has dealt with Syria in the past few decades. 

The United States has implemented at least some form of sanctions on Syria since 1979, which is when the U.S. declared Syria a terrorist state. Sanctions intensified in 2004, and again in 2011 when the civil war began in Syria. The purpose of these sanctions, particularly the 2011 version, has been to deprive the al-Assad regime of resources to harm their citizens, as well as ultimately transition to a democratic regime. 

I am not here to say that the sanctions were the only thing to shock Syria in recent year. In addition to the civil war and the sanctions, there was the COVID pandemic, the Lebanese banking crisis that limited Syria's access to credit, an earthquake in 2023, the fluctuation in food prices caused by the Russia-Ukraine War, and regional conflicts that disrupted trade flows. That being said, it took about 13 years of civil war to finally overthrow Bashar al-Assad, and Syria is still not a democratic regime. Aside from that, the results do not look good:

• The World Food Programme reported in 2023 that "following 12 years of conflict, an economy crippled by runaway inflation, a currency that has collapsed to a record low and soaring food prices, 12 million people do not know where their next meal is coming from."
• As a February 2025 report from the United Nations Development Programme mentions, "Sanctions have played a key role in isolating Syria from the global financial system, restricting trade, increasing import costs, and significantly reducing both exports and remittances. These factors have contributed to the continued depreciation of the national currency." 
• A research paper from Security in Context shows how the sanctions deteriorated the humanitarian situation by bludgeoning the agriculture and health sectors (Arslanian, 2024).
• Even with carveout exemptions, financial institutions were wary of doing business with Syria, thereby cutting off banking channels and making it difficult to process transactions for humanitarian aid, trade, and private sector engagement (Human Rights Watch).
• Reuters reported on how the sanctions hit Syria hard. One such outcome was resorting to the black market for ill-gotten gains, particularly from fuel smuggling production of an amphetamine-like substance called captagon.

It is clear that the sanctions on Syria have not deterred human rights abuses, but rather has exacerbated human suffering in Syria. This is hardly the first time that economic sanctions have failed. As the Cato Institute points out in its academic review, sanctions can range from ineffective (see Pape, 1997) to backfiring because an oppressive regime's response to the desperation caused by the sanctions is to be even more repressive (e.g., Wood, 2008). 

A meta-analysis from the Peterson Institute for International Economics (PIIE) analyzing 200 economic sanctions from World War I to the early 2000s found that sanctions made at least "a modest contribution to a goal that was partly realized" 34 percent of the time (Hufbauer et al., 2007). If we are going to be fair to economic sanctions, economic sanctions have the potential to work when the scope is limited and the goals are targeted in nature. 

However, that has hardly been the case for Syria. The broad sanctions on Syria have caused humanitarian suffering to the point where 90 percent of Syrians live in extreme poverty, as well as having undermined Syria's ability to economically recover. If this recent transition has any chance of succeeding, Syrians need to see that their economic wellbeing is improving. 

This is not to say that removing the sanctions comes with zero risk. As the American Enterprise Institute points out, it is not clear that the current leader, Ahmad al-Sharra, has complete control of Syria. AEI also mentions that this could have spillover effects in terms of accelerating terrorist aggression in the Middle East. 

Forget for a moment that such an argument comes with mission creep and is well beyond the initial mission of quelling Assad's attack on his own people. Much like the Brookings Institution argues, continuing the sanctions could likely be more costly because Syria needs economic relief to best guarantee  a legitimate political transition. Given the humanitarian and economic situation in Syria, Trump is right in acknowledging that the costs of the sanctions outweigh the potential benefits.

Why the Government Should Shut Down USAID Permanently

Trump is shaking up the world of international development. On Trump's first day in office, he used an executive order to pause all foreign development for the next 90 days pending review. On February 1, the U.S. Agency for International Development (USAID) website was down. Last week, Trump announced that he is going to fire 95 percent of USAID staff, although it looks like a federal judge has at least been able to pause the order for the time being. All of this made me wonder about whether USAID should be shut down. I will start with some example of USAID mismanaging money to get the conversation going:

• Starting in 2015, USAID spent $280 million on a program intended to empower 75,000 Afghani women and help them find jobs in the Afghani workforce. How many women did USAID end up helping? According to a report from the Special Inspector General for Afghan Reconstruction (SIGAR), anywhere between 0 and about 60 women. 
• According to a SIGAR report, part of $1.46 billion in USAID funds that was meant to divert from opium production "inadvertently" funded poppy production. This on top of the $335 million in USAID for a power plant that was almost never used, $175 million spent on roads that were washed away within a month by a flood, and $7.7 million on an industrial park that had no power (SIGAR).
• As Bloomberg reported last year, USAID gave $29 million to an orphanage for Kenyan children. While it sounds noble to help orphans affected by AIDS, it also turned out that the orphanage who received this money embroiled in a major sex abuse scandal. 
• Then there is the matter of USAID funding the terrorist organization Hamas. The Middle East Forum identified $164 million in grants that went to radical organizations. The problem is bad enough where the USAID's Inspector General has expressed concern that there are lax vetting mechanisms with the oversight of aid going to Gaza. 
• USAID's Global Health Supply Chain program was a $9.5 billion program created to improve a country's ability to obtain medical supplies. It was supposed to be so effective that there would never need to be such foreign aid intervention again. What happened? Most shipments were not completed on time in the initial stages. Even when they got better with shipping items, there were still considerable delays. As this report from the Bureau of Investigative Journalism details, the program was riddled with fraud, undelivered supplies, and certainly did not help countries manage their own medical supplies and equipment supply chains.

Perhaps this list is damning enough. Perhaps we have to look at both the good and bad that USAID has done before making a determination. I am sure that proponents can highlight such program as its work in preventing and treating HIV/AIDS in multiple developing countries, the President's Malaria Initiative, or fighting tuberculosis. There is also USAID's Feed the Future program, which according to its own outcome monitoring, decreased extreme poverty from 7 to 36 percent. 

One could argue that USAID should still exist but still go under considerable reform, as the list of debacles above shows. However, I have a meta-argument about why we should not have an entire government agency devoted to foreign aid. When making this argument, I make the distinction between foreign aid and humanitarian assistance, the latter of which is a targeted, short-term form of aid (e.g., food, water, medical care, protection, shelter), typically in response to natural disasters or man-made disasters in war zones. 

As I detailed in 2016, trade liberalization does a lot better of a job of helping out those suffering in developing countries than foreign aid does. Furthermore, foreign aid has a negative impact on political institutions and democratization, as a World Bank study concluded (Djankov et al., 2007). As I have argued before, corruption erodes economic development. By using foreign aid to perpetuate weak political institutions, USAID undermines its long-term goals of bringing prosperity. 

As Cato Institute scholar Ian Vázquez points out, economic development is not a top-down process, as is implied by USAID's wealth transfers to poorer countries. The Cato Institute points out in its Handbook for Policymakers that foreign aid does not address the byzantine regulations and red tape, the trade protectionism, price controls, nationalization of industries, restrictions on investment, or inflationary monetary policy. As such, foreign aid keeps developing countries in a state of misery by continuing with poor policies, greater corruption and debt, and the inability to tackle the given country's problems head-on, particularly those problems that USAID proponents believe justify USAID's continued existence. 

It does not matter that the USAID budget is less than one percent of the $6.75 trillion U.S. federal budget. Since foreign aid is not accomplishing its goals, the agency should be nixed, shut down, cease to operate. Humanitarian assistance should be provided by the State Department. As for trying to use foreign aid to promote democracy or try to improve economic development, that is the sort of work that should not be part of U.S. foreign policy because it is a waste of taxpayer dollars.