Fareed Zakaria's "The Post-American World 2.0"

This book is a fast read looking at America's relationship with the rest of the world. It focuses on two up-coming competitors, China and India. Zakaria says interesting things. This is a solid book. There are no big surprises and nothing controversial.

He takes the US to task for failing to live up to its ideals in the post-9/11 world. There is too much fear, too much security and too little civil liberties, and too much fear of "the other". He gives some solid advice. Again, pretty mainstream stuff.

Here's a bit to give you a taste of the book:

As it enters the twenty-first century, the United States is not fundamentally a weak economy, or a decadent society. But it has developed a highly dysfunctional politics. An antiquated and overly rigid political system to begin with -- about 225 years old -- has been captured by money, special interests, a sensationalist media, and ideological attack groups. The result is ceaseless, virulent debate about trivia -- politics as theater -- and very little substance, compromise, and action. A "can-do" country is now saddled with a "do-nothing" political process, designed for partisan battle rather than problem solving. By every measure -- the growth of special interests, lobbies, pork-barrel spending the political process has become far more partisan and ineffective over the last three decades.

And this:

To foreigners, American officials seem clueless about the world they are supposed to be running. "There are two sets of conversations, one with Americans in the room and one without," says Kishore Mahbubani, who was formerly Singapore's foreign secretary and ambassador to the United Nations. Because Americans live in a "cocoon," they don't see the "sea change in attitudes toward America throughout the world."

The book is a pleasant read. It won't startle you, but it does give a perspective on America that most Americans don't have. Zakaria was born in India and came to the US for college and never left. As an American with a unique background -- and a day job at Time magazine and CNN that lets him monitor the world and think about politics -- he has some useful things to say which other Americans should listen to.

As a Canadian I find it startling that not only is the average US citizen ignorant of the outside world, they are even poorly educated about their own history and political system. Every American needs to spend more time thinking about the role of America in the world. Turn off the political demagogues and read something thoughtful and get a broader understanding. Zakaria's book is a good place to start.

Stupid Human Tricks

All kinds of odd things go viral on the Internet. Here's one that I like. The music is wonderful and I love the feeling of people "joining in"...



Here's Matt Harding explaining how the above came about:



And here's an early version of the above that has interesting sites around the world, but doesn't have the "feeling" of mad, fun, joining in that the version at the top has:



And here's one that shows how he got people to join in:



You can find more things at Matt Hardings' "channel" on YouTube.

End of Globalization

Here's what a collapse in the world's financial markets will do to you...

This is from a NY Times article by Floyd Norris entitled "Sharp Trade Contraction Knows No Borders". Here is the money quote:

The decline in trade, which began last summer, accelerated after mid-September, when Lehman Brothers failed. In the aftermath, credit became harder to obtain for importers and confidence waned among would-be buyers of many products.

The fact that exports are down in almost every country shows both the international nature of the recession and the fact that it has been impossible for any country to export its way out of trouble. Nonetheless, there may be protectionist efforts in a number of countries this year, aimed at improving each country’s trade position at the expense of others.

This is scary. The 1930s was a decade of trade that dried up with barriers thrown up and with the global economy shut down. It sure looks like a bad Hollywood sequel to me. Let's just hope that the script writers have a change of heart and put in a real Hollywood ending where some guy in a white hat steps up to save us all. Who could fill that role?

Here's a bit from an assessment of the "legacy" of the Bush era from the cornerstone of high finance, Barron's, written by Alan Abelson:

No argument that he [Bush] is leaving an economy in absolutely awful shape. Our budget deficit is ballooning toward the trillion-dollar mark and isn't likely to stop there. We are mired in the worst recession since the grandaddy of them all in the '30s; its end is by no means in sight. The stock market after crashing 35% to 40% last year (depending on which bourse you follow) has started off '09 on the wrong foot, not an auspicious omen for the year as a whole.

Unemployment is pressing remorselessly higher, housing is a wreck, industrial production is contracting at the wickedest rate in 35 years, the retail business is in the dumps almost across the board. Detroit is about as near to running on empty as you can get without grinding to a halt. There is a whiff of deflation in the air.

Not all of this, obviously, is Mr. Bush's fault. But it happened on his watch. Not the kind of stuff, we are afraid, that shining legacies are made of.

Here's a nice summary of the grim reality:

It is the norm in our politics for the winners to celebrate electoral triumph by taking a victory lap. However, Messrs. Bush and Cheney, donning entirely new personas, set precedent on its head -- and more power to them for doing so, we say -- by taking what can only be called a defeat lap.

The financial abyss that the reckless indifference of Bush to the real economy and the need for regulation, the fact that Bush remained ideological to radical laissez-faire capitalism to the very end is summarized by:

Whatever contraption is devised to relieve the banks' balance sheets of the burden of their mistakes and transfer that burden to the government's broad shoulders, we are talking humongous sums. The knowledgeable folks at ISI Group, who sedulously strive to err on the side of conservatism in their assays, reckon that the top four banks alone have something like $1.2 trillion in bad assets, a fearsome figure that swells to perhaps $2.4 trillion for the industry as a whole.

The whole article is well worth reading. It is sobering. It is sad. It is the reality that the rabid right wing Republicans have created for the US (and unfortunately passed on to the rest of the world). It will take decades to recover from the eight year nightmare of the Bush admin.

The Cruelty of Kindness

I get bothered by "do gooders" who blindly apply their own logic to the world. In the last US election a lot of Democrats are motivated by worries about US jobs and see a salvation in demanding an "even playing field" which throws up barriers to third world countries by demanding industrial work and safety standards and environmental standards that effectively bar the really poor from getting onto the first rung of the ladder to a better standard of living.

Nicholas Kristof at the NY Times has written many articles to push his concern about the poor and wretched around the world. Here is his latest op-ed:

Mr. Obama and the Democrats who favor labor standards in trade agreements mean well, for they intend to fight back at oppressive sweatshops abroad. But while it shocks Americans to hear it, the central challenge in the poorest countries is not that sweatshops exploit too many people, but that they don’t exploit enough.

Talk to these families in the dump, and a job in a sweatshop is a cherished dream, an escalator out of poverty, the kind of gauzy if probably unrealistic ambition that parents everywhere often have for their children.

“I’d love to get a job in a factory,” said Pim Srey Rath, a 19-year-old woman scavenging for plastic. “At least that work is in the shade. Here is where it’s hot.”

Another woman, Vath Sam Oeun, hopes her 10-year-old boy, scavenging beside her, grows up to get a factory job, partly because she has seen other children run over by garbage trucks. Her boy has never been to a doctor or a dentist, and last bathed when he was 2, so a sweatshop job by comparison would be far more pleasant and less dangerous.

I’m glad that many Americans are repulsed by the idea of importing products made by barely paid, barely legal workers in dangerous factories. Yet sweatshops are only a symptom of poverty, not a cause, and banning them closes off one route out of poverty. At a time of tremendous economic distress and protectionist pressures, there’s a special danger that tighter labor standards will be used as an excuse to curb trade.

...

When I defend sweatshops, people always ask me: But would you want to work in a sweatshop? No, of course not. But I would want even less to pull a rickshaw. In the hierarchy of jobs in poor countries, sweltering at a sewing machine isn’t the bottom.

...

Cambodia has, in fact, pursued an interesting experiment by working with factories to establish decent labor standards and wages. It’s a worthwhile idea, but one result of paying above-market wages is that those in charge of hiring often demand bribes — sometimes a month’s salary — in exchange for a job. In addition, these standards add to production costs, so some factories have closed because of the global economic crisis and the difficulty of competing internationally.

The best way to help people in the poorest countries isn’t to campaign against sweatshops but to promote manufacturing there. One of the best things America could do for Africa would be to strengthen our program to encourage African imports, called AGOA, and nudge Europe to match it.

This is one place where the Left has an ugly legacy. Pursuit of simplistic "solutions" has created sad facts on the ground. The developed world keeps moaning about the lack of development in the under-developed parts of the world, but they don't open their markets up to accept products from third world countries. Instead "foreign aid" is slathered over the open sore of poverty to make it better when all it does is lines of the pockets of the corrupt and blocks real progress.

In the 1970s/80s I worked on projects that delivered prestige projects to under-developed countries. These high tech toys were under-utilized and sometimes left to fall apart. Canada got to chalk up its contribution to "fight" poverty, but in reality the money was simply a subsidy to buy these prestige toys from Canada that had little or no real benefit to the under-developed country.

Oh, and while I'm complaining, I should mention that Canada has horrible pockets of poverty especially on native reserves. These are places where "dependency" has become a way of life. Suicide and drugs, unemployment, alcohol, depression are rampant. Canada likes to be smug about its social policies, but there are some real horror stories in out-of-the-way places.

What to Worry About

Here's a guy who's worth listening to when he lays out what people should be worrying about. This is an article entitled "The Global Consensus on Trade is Unravelling" written for the Financial Times by Larry Summers, Secretary of the Treasury, under Clinton:

With two wars still continuing and violence in Georgia dominating the foreign policy debate; and with the financial crisis and economic insecurity for families dominating the domestic debate, US international economic policy is receiving less attention in this presidential election year than usual. The limited attention it has received has focused on concerns about specific trade agreements, not broader questions of international strategy. That is unfortunate. ...

The current distribution of regional economic power is unlike anything that was predicted even a decade ago. The rise of the developing world, its growing share in global output and far greater share of global growth, is perhaps a quantitative but not a qualitative surprise. The qualitative surprise is this: with almost all the industrial world in or near recession, much of the momentum in the global economy is coming from countries with authoritarian governments that are pursuing economic strategies directed towards wealth accumulation and building up geopolitical strength rather than improving living standards for their populations. ...

But the problems are much deeper than the question of who sits around the negotiating tables. For all the disagreements over the past decades, there has been a shared premise behind international economic policy discussions – the goal of increased economic integration, the spread of market institutions and more rapid growth for all nations. While companies may compete, the premise has been that nations co-operate to build a stronger economy in the interests of all.

It is no longer clear that this premise remains valid. Nations are increasingly preoccupied with their relative economic standing, not the living standards of citizens. Issues of strategic leverage and vulnerability now play a bigger role in economic policy discussions. ...

But the success of the next administration could depend on its ability to engage with a wider range of global economic stakeholders, on a broader agenda, at a time when disagreements are increasing not just about means but also about ultimate ends.

Nuts to NAFTA!

That's right... There are a lot of nuts running off to blame NAFTA for everything.

So, it time to bring in the BIG guns. Here's Drew Carey (big enough for you?)...



I know the reasoned argument of Drew Carey is less emotionally satisfying than the over-the-top rhetoric of doom-and-gloom NAFTA bashers. They would convince you that all the ailments of current society can be traced to those shifty-eyed foreigners who -- when they aren't trying to steal our womenfolk -- are busy stealing our jobs. But economists have known since the days of Adam Smith and David Ricardo that free trade that the path to greatest economic growth is via open markets and free trade.

Sure, if you lost your job you aren't compensated by knowing that "on average" everybody is doing better because of free trade. But that's life. We do better with free trade. So quit bashing free trade and demand social programs that ease the pain of the adjustment to the creative destruction that capitalism wreaks on an economy in the process of giving us a better life.

The End is in Sight

When I was a kid I was fascinated by the cartoons of guys carrying signs saying "The End is Near". Well, I'm now willing to admit that the end may be in sight. Here is an aptly named article, "The End of Neo-Liberalism", by Joseph Stiglitz, Nobel-prize winning economist from Columbia University on the end of a economic/political illusion that has held the high ground for the last 30 years:

The world has not been kind to neo-liberalism, that grab-bag of ideas based on the fundamentalist notion that markets are self-correcting, allocate resources efficiently, and serve the public interest well. It was this market fundamentalism that underlay Thatcherism, Reaganomics, and the so-called “Washington Consensus” in favor of privatization, liberalization, and independent central banks focusing single-mindedly on inflation.

For a quarter-century, there has been a contest among developing countries, and the losers are clear: countries that pursued neo-liberal policies not only lost the growth sweepstakes; when they did grow, the benefits accrued disproportionately to those at the top.

Though neo-liberals do not want to admit it, their ideology also failed another test. No one can claim that financial markets did a stellar job in allocating resources in the late 1990’s, with 97% of investments in fiber optics taking years to see any light.

...

Neo-liberal market fundamentalism was always a political doctrine serving certain interests. It was never supported by economic theory. Nor, it should now be clear, is it supported by historical experience. Learning this lesson may be the silver lining in the cloud now hanging over the global economy.

Kids Helping Kids

Here's a heart-warming story of kids halfway around the world reaching out to other kids in a wonderful new economic model where preteens make clothing to sell to preteens...



The above has inspired me to consider other innovative economic ideas...

I think I can solve the impending health care problem and old age pensions created by the baby boomers by reclassifying people over 65 to be "property" (just like in the US Constitution!). That way you can buy and sell the old fogies and there will no longer be any of those pesky requirements for health care spending or pensions. Who does health care for a washing machine or gives a pension to a vacuum cleaner?

This concept can be generalized! If this trend of converting pesky "people" problems in to "property" is extended to other age groups, then maybe by the end of this century the only legal "persons" left will be the corporations. The rest of us will have become property and therefore have no more economic claims on the government.

What a great solutions!

Climbing the Economic Ladder

Harvard economist Dani Rodrik gives a very short talk (30 minutes) entitled "Why do some poor countries remain poor while others grow rich?" As he points out, he doesn't actually know the answer to this. He admits that the title was a "teaser" to get conference attendees to come to the talk.

What he does talk about is how economists think about the issues of international development. Towards the end of the talk he focuses on Turkey (where the conference is held) and points out that the problem in Turkey is not a failure to "innovate" or develop R&D. It is more structural. Lagging countries usually have a mix of economic enterprises. The best growth strategy is to remove impediments to the growth of the best, most productive parts of the economy to help lift the country up out of poverty. This is actually a "good news" story. It says you don't have to sink large funds into education or infrastructure development or do wholesale structural transformation to remove "crony capitalism" or other broad structural impediments. The simpler approach is simply to facilitate the growth of the better parts of the economy. In other words, growth is held back because backwards parts of the economy that are protected. What a poor country should focus on is making structural changes to remove structural favoritism of backwards parts of their economy and, instead, do limited structural changes to favour the more successful parts of their economy.

The talk is fun to listen to because he stays away from the arcane aspects of economics and speaks clearly because he is addressing a general audience interested in development, not specialists in economics. As well, this is a hopeful, positive talk saying that poor countries can close the gap with the rich and without terribly dramatic restructuring.

Drinking the Kool-Aid of the 'New' New Political Left

Bill Clinton's former US Secretary of the Treasury Lawrence Summers continues to make the case for globalization. But he now tries to present it in a way that is sensitive to the concerns of the left who are anti-trade, anti-immigration, and increasingly isolationist.

... the US is better off with than without trade agreements and that the world will be a richer, safer place with increasing economic integration. ...

But I suspect that the policy debate in the US, and probably in some other countries as well, will need to confront a deeper and broader issue: the gnawing suspicion of many that the very object of internationalist economic policy – the growing prosperity of the global economy – may not be in their interests. ...

... there are reasons to think that economic success abroad will be more problematic for American workers in the future.

First, developing countries increasingly export goods such as computers that the US produces on a significant scale, putting pressure on wages. ...

Second, the growth of countries such as China raises competition for energy and environmental resources, raising the price for Americans.

Third and most fundamentally, growth in the global economy encourages the development of stateless elites whose allegiance is to global economic success and their own prosperity rather than the interests of the nation where they are headquartered. ...

In a world where Americans can legitimately doubt whether the success of the global economy is good for them, it will be increasingly difficult to mobilise support for economic internationalism. The focus must shift from supporting internationalism as traditionally defined to designing an internationalism that more successfully aligns the interests of working people and the middle class in rich countries with the success of the global economy. This will be the subject of my next column...

The justification for free trade is sound, but many on the left decided it is a good issue to push because it is a populist appeal to nationalism, an "us versus them" view of the world, that can effectively mobilize political action. But it is a cynical, manipulative left that does this.
Traditionally the left was internationalist. The idea that free trade maximizes wealth should be a no-brainer for the left. But the "new" new left has decided to cynically ride this issue.

I, for one, and looking forward to the next column by Summers.

Dr. Freeman, or How I Learned to Stop Worrying and Love Globalization (kudos to Kubrick)

Richard B. Freeman, a Harvard economist, gave a talk on "The Challenges of Inequality and Global Capitalism to U.S. Democracy" at UC Berkeley on February 11, 2008. He notes that US inequality is well document, extreme (worst that other developed countries, roughly the same as China!), and growing. The good news is that the level of inequality around the world is shrinking, but paradoxically within most countries the level of inequality is increasing. He is not an opponent of globalization. He likes that it is helping to lift the world's poor up out of poverty. But, he points out that globalization is behind the phenomenon of falling wages because of a very simple fact: since China and India have joined the global capitalist system this has doubled the number of workers while keeping the amount of capital the same, so it has by the laws of supply and demand, given an edge to capital, so the returns to capital have gone up while wages have dropped in the developed world.

His talk is interesting. He is a quirky guy (oddball cartoons) which some will find distracting and others will see as part of his "charm". His mumbling and mannerism do detract from the quality of the delivery of his lecture. But, once you get past these and focus on his talk, you will find a lot of interesting facts and thoughtful ideas. The hour lecture is well worth spending the time: