Reflected Places

Disappearing Languages (Map)

2009-03-07T00:16:00.000-08:00

A Primate Family Picnic It’s Not

2009-02-23T05:18:00.000-08:00

By CHARLES McGRATH

Now that we’ve emerged the winners in the Darwinian struggle, we’re fascinated by our fellow primates, the ones who didn’t quite make it to the top of the class, and we even tend to sentimentalize them. We love the sexy bonobos, for example. We make tragic movies about giant apes. And there is a surprisingly large body of fiction about the Neanderthals, of all creatures — the human-like species that was driven to extinction 30,000 years ago, probably by our more warlike ancestors.

In the best of the Neanderthal novels, William Golding’s “The Inheritors,” they turn out to be a good deal more innocent and benign than we are. In John Darnton’s “Neanderthal,” their openness and inability to be deceptive is precisely what does them in. In Mark Canter’s “Ember From the Sun,” in which a Neanderthal embryo is transplanted into a human womb, the resulting creature has magical healing powers. And in Jasper Fforde’s “Thursday Next” series, Neanderthals can even read minds.

The way to really find out about Neanderthals, of course, is to bring one back to life, and far from being a sci-fi notion, that is now theoretically possible. Scientists are already talking about using the Neanderthal genome, reconstructed recently in Germany, to reprogram a chimpanzee embryo and give birth to a sort of neo-Neanderthal. Presumably you could also do this with a human embryo, but as is so often the case, the chimp idea dodges a lot of ethical issues.

Or does it?

The case of poor Travis, the 14-year-old chimpanzee who was shot to death last week by the police in Stamford, Conn., raises a number of vexing questions about human-chimpanzee interaction in general, and about the consequences of our studying, or even living with, other primates.

What do you do with your brand-new Neanderthal? Do you crank up the air-conditioning and keep him in an artificial Pleistocene, subsisting on leaves and berries? Or does he live in the lab, eating take-out from the cafeteria? Does he get to watch TV and use a computer? Do you make friends with him?

Travis was not, strictly speaking, an experimental animal except in the sense that he was raised almost as if he were human. He “couldn’t have been more my son than if I gave birth to him,” his owner, Sandra Herold, said. Travis used to do commercial work for Old Navy and Coca-Cola, and made occasional television appearances, but mostly he lived at home with Mrs. Herold, a widow whose husband had run their towing company. He fed, bathed and dressed himself, and was said to be toilet trained (though photographs in The New York Post showed him wearing what appeared to be extra-large Depends). He brushed his own teeth with a Waterpik. He loved to ride around in the family tow trucks and to pretend to drive Mrs. Herold’s pink Cadillac.

Travis enjoyed a nice steak dinner, washed down with a glass of wine. He knew how to log on to a computer and to channel-surf with a television remote control. He followed baseball, if you can believe Mrs. Herold, and briefly rooted for the Mets while Bobby Valentine, a Stamford native, was manager, and then switched to the Yankees. He liked to watch “anything with action,” Mrs. Herold said.

Travis, in short, enjoyed the life and displayed most of the essential character traits of a typical American male between the ages of, say, 18 and 35. If he had only had a disposable income, advertisers would have happily paid to attract his attention.

On Monday afternoon, though, Travis went berserk and severely mauled a friend whom Mrs. Herold called after he became overly rambunctious. The police arrived, along with paramedics, and when Travis began attacking them, they shot him. He died, heartbreakingly, after making his way back into his room.

No one knows for sure what set Travis off. He might have been suffering from Lyme disease, and one theory is that the illness could have caused him to become psychotic. At one point, apparently, Mrs. Herold gave him a cup of tea laced with Xanax, and in retrospect that may not have been such a great idea. Xanax sometimes makes even humans act aggressively.

But a prevailing theory, at least among primatologists, is that chimpanzees simply do not belong in a human environment. Chimpanzees “are not human and you can’t always predict their behavior and how they or any other wild animal will respond when they feel threatened,” said Colleen McCann, a primatologist at the Bronx Zoo.

But would Travis’s life have been happier, fuller had he never known the joys of TV-watching, the taste of a nice merlot? Humans are such anthropomorphizers that all we can say for sure is that, speaking for ourselves, we can’t imagine living in the trees without electricity and hot water and what’s so bad about offering a fellow primate a drink, a warm bed, a cooked meal?

We are also flattered — we think it adorable and charming — when a chimpanzee or any other animal chooses to act like us. And we tend to see in the roughly 4 percent genetic difference that separates us from chimps not an unknowable gap but merely a good reason to perform on them — or perhaps Neanderthals — experiments that we’d just as soon not perform upon ourselves.

China’s Silver Lining

2009-02-22T00:47:00.000-08:00

Why smoggy skies over Beijing represent the world’s greatest environmental opportunity

by James Fallows

Chinese cement plants and coal mines are grim enough taken separately. Often they come as a package, the plant built next to the mine to minimize transport costs for the vast quantities of coal the cement-making process consumes. Converting limestone and other materials to the intermediate form of cement called “clinker” requires heating them to more than 2,600°F. Getting kilns this hot requires burning about 400 pounds of coal for each ton of cement produced.

The clinker then cools before it goes through further processing—but the waste heat and exhaust gas are sent straight into the sky, at temperatures of 650F or more, along with the extra carbon dioxide the limestone emits as it becomes cement.

In coal-and-cement towns in China, people and buildings are colored black by the coal dust swirling around them, and coated gray and white by the cement dust that leaks from the kilns and clinker coolers and pours from the exhaust stacks. Driving through the foothills of the Tibetan plateau in western Sichuan province last year, my wife and I could tell from miles away when we were nearing a cement plant, from the grayish pall in the air and the thickening layers of dust on the trees and road. With so much of the country under construction so fast, and with China’s equivalent of America’s interstate highway system being built in the space of a few years, modern China can appear to be made out of concrete. Nearly half of the world’s cement is produced and used in China, and cement factories are a major source of both the country’s surging demand for energy and the environmental damage that is the most shocking side effect of China’s economic miracle.

Thus it was a surprise to drive toward a coal-cement complex in Zibo, a modest city of 4 or 5 million people in Shandong province, 230 miles southeast of Beijing, and see … no white haze. True, miners trudging along the street had blackened faces, and the city was dotted with 100-foot-high mounds of low-grade coal, previously trash but now worth picking over because of soaring world demand. But no white powder mixed with the black, and only wispy plumes of steam wafted from the fat, high smokestacks of the Sunnsy cement company (its name is from the Chinese shansui, or “mountain water”). Indeed, the fattest and somewhat rusty-looking central exhaust stack had been fitted with elaborate ductwork of obviously newer metal, which captured everything coming out of the stack and shunted it to a nearby new building.

Inside the new building was an electricity-generating plant, and what I was seeing was the handiwork of a Chinese engineer in his mid-40s named Tang Jinquan. Tang had never intended to get into the cement business. But when he graduated from the technical university in Harbin, in far northern China, the government was still assigning jobs to graduates—and his assignment was a cement-research institute in his hometown of Tianjin. “I am interested in heat generation, this place is about cement—no match!” he told me (through an interpreter) at the factory in Zibo. He spent nearly the next 20 years of his career in a long effort to make the dirty, wasteful, fast-growing cement industry less environmentally destructive.

The heart of his idea—easy to describe, tricky to implement—is capturing the enormous amount of heat normally wasted in cement making and using it to run turbines that generate electric power. This power can then be fed back into the factory, doing work that would otherwise require burning even more coal. The reduction of dust is a visible indicator of the more fundamental reduction of waste. Over the course of a long day, I heard about the many, many refinements Tang had made to this “co-generation” system since he first started working on it, in the mid-1980s. The punch line is that it now works well enough to cut the energy (mainly from coal) required to make clinker by 60 percent, and the overall power demands of the cement production line by 30 percent.

Four years ago, Tang left the cement-research institute to form, with two colleagues, a technology start-up company called Dalian East Energy Development, which sells co-generation systems to cement producers like Sunnsy. (It’s a long way from the days of government-assigned jobs.) The energy-recycling system at the factory I saw is expected to cover its multimillion-dollar cost (the exact sum is confidential) within four years, through reduced coal demand and government rebates for energy-saving investments. Sunnsy is a private firm, with annual sales of more than $1 billion and a recent $50 million investment from Morgan Stanley. According to Tang, the 120 similar installations at cement factories throughout China save 1.7 million tons of coal per year.

When I met Tang, he had just returned from a trip to Vietnam, where two of his systems are operating, and was about to head to Uzbekistan, where he has another (others are in India, the Philippines, and Pakistan). His dream now is to apply his co-generation technology to more of China’s most wasteful industries, starting with steel. “I have a long vision, which may not be realized before I die,” he told me when we had lunch. “Of course, that might not be so long!” he added, laughing and waving a cigarette at me—one of 60 he smokes per day.

Tang added that when he goes to class reunions from his university and sees that he is the only one in the cement business, “I feel unacceptable, because the industry is not good.” But he says he knows otherwise, and that he tells recruits to his firm to hold their heads high. “They should be proud of what we are doing! Other industries are consuming the Earth. We are preserving it.”

Here is what I learned by visiting the cement factory, and by seeing and asking about many similar “green” projects in China: China’s environmental situation is disastrous. And it is improving. Everyone knows about the first part. The second part is important too. Outside recognition of where and why China has made progress increases the prospects that it will make further advances. Recognition also clarifies the most important obstacles, political and economic, to such progress. And it is simply fair to the many people within China, including within the Chinese Communist Party, who are trying their best to make a difference—and who are having more success than most Westerners who rely on media accounts would suspect.

It is right, of course, that Western publications emphasize so often and so clearly the damage that China’s economic rise has inflicted on its own environment and the world’s. But the despairing tone of this coverage is itself becoming an issue within China—one more illustration in the long national narrative of not being fully appreciated or respected by the world’s established powers. It might also be having an effect on what the government does.

Surprisingly enough, even official sources within China have gone far to recognize the challenges the country faces and its responsibility to deal with them. Last November, the Chinese government released its 11th Five-Year Plan for Environmental Protection. The tone of this document would come as a shock to anyone familiar with the relentlessly upbeat nature of official Chinese pronouncements—or with the famous mock-news video released by The Onion this spring, in which Chinese authorities burst with pride as they announce their nation’s new status as the No. 1 polluter in the world. (The mock festivities include the “100 Widow Smog Dance” and a spokesman declaring, “The labor of the people has made the sky black with the smoke of progress. We are overjoyed!”)

The “environmental situation is still grave in China though with some positive development,” the real Chinese government said in the English translation it issued. It went on to catalogue a familiar set of problems: “The emissions of major pollutants far exceed environmental capacity with serious environmental pollution … The quality of coastal marine environment is at risk … The number of days with haze in some big and medium sized cities has some increase, and acid rain pollution is not alleviated … The phenomena of no strict observation of laws, little punishment to lawbreakers, poor law enforcement and supervision are still very common.” And on through a very long list, with this stark conclusion: “China is facing [a] grim situation in addressing climate change … Environmental problems at different stages of [the] industrialization process of developed countries over the past several hundred years [are now] concentrate[d] in China.”

The alarming trends mentioned in this report correspond with what the outside world has heard, read, and assumed about the environmental disaster of modern China. A new book or white paper on the topic seems to appear every day. The surprise is seeing them acknowledged in a paper issued not by an international research group but by the Chinese government itself, which has long been accused of refusing to see what is plain to everyone else. The problems, after all, are visible to any tourist from the moment of arrival. Everyone has heard or read about China’s big-city air pollution, yet visitors are still shocked the first time they encounter a bad day in Beijing—or Chongqing or Xian or Shenyang or any of the other large cities with chronically grimy skies.

And the problems that are less obvious at a glance are even more threatening. Toxic emissions into lakes, groundwater, and farmland; the drying-up of rivers and silting-up of dams; the rapid exhaustion of water in the northern half of the country that, in the view of many experts, is likely to be China’s next great environmental emergency; the millions of new cars that hit the road each year, spewing carbon dioxide; the billions of tons of coal that go up in smoke (yes, billions—China burns more than 2 billion tons of coal each year, about one-third of the world’s total); the engines on Chinese airliners that must be overhauled or replaced more frequently than elsewhere, an airline engineer told me, because operating in Chinese air corrodes the turbine blades … living here, I don’t have the heart to keep ticking items off. The title of one authoritative book on the subject, The River Runs Black, by Elizabeth Economy, of the Council on Foreign Relations, conveys the general idea, as does that of her follow-up Foreign Affairs article about China’s environment, “The Great Leap Backward?”

Also see:

JamesFallows.TheAtlantic.com

James Fallows keeps tabs, on his blog, of the smog levels outside his window.

Through nearly two years in China, including this past winter and spring in Beijing, my wife and I have found the bad air and other forms of pollution to be the only serious challenge—physical, practical, or emotional—we face. We are here temporarily and voluntarily, and we’re living like royalty compared with most local Chinese. Still, we continually face a basic choice. Either we decide we can’t stand the conditions, in which case we should leave—an option for most foreigners but few Chinese. Or we decide that the openness, possibility, and importance of today’s China justify these and other discomforts, in which case we should stop complaining, try to ignore what we don’t like, and be grateful for the historic opportunity we have. We keep deciding to stay. The point is, even privileged outsiders here must live with conditions they can’t change, and those conditions are only a tiny window on the endurance required of the Chinese public.

But remember that other phrase from the government’s 11th Five-Year Plan: there was “some positive development” amid the catastrophe. After travels around the country to look at factories, farms, and conservation projects, and talks with several dozen scientists, think-tank experts, officials, and business people from China and overseas, I came to think that the modestly positive developments merit more of the world’s attention than they’ve received.

SMOKELESS SMOKESTACKS: Elaborate ductwork at a Sunnsy cement factory shunts heat to a new electricity-generating plant

There will be no shortage of attention for the next big test of China’s environmental positive developments: the Beijing Olympic Games. A year before they were to begin, the economist Matthew Kahn ranked 72 major world cities on overall environmental “livability.” Beijing came in dead last, below Bangkok and Mumbai. In 2001, as part of its agreement to host the Olympics, the Chinese government promised to bring the air quality up to the standards of previous Olympic venues—in addition to making other commitments about reducing press controls and increasing civil liberties for its people. Whatever the government might or might not do toward keeping the political commitments, most people assumed that it would take any steps necessary to make the air acceptable by the opening ceremony, on August 8.

On a trip to Beijing in August 2006, I wondered when the authorities would ever get around to applying the clean-air plan. With each passing month, the woeful quality of Beijing’s air and the implausible nature of official statements increased my skepticism that a normal Olympics could occur. At a press conference broadcast live from Beijing soon after I moved here from Shanghai, last October, Jacques Rogge, the head of the International Olympic Committee, said that some events might have to be rescheduled unless things improved fast. My TV screen went black at that point, and his remarks were not covered in the local press. When the world-record holder in the marathon, Haile Gebrselassie, of Ethiopia, said he wouldn’t compete in that event for fear of hurting his lungs, the Chinese media pointed out that he hadn’t yet been named to the team anyway. The Beijing city government was mocked in the foreign (though not the local) media for reporting an ever-improving count of “blue sky days” per month, which had to refer to something other than the actual color of the sky. I myself have been incredulous at the skies I see regularly outside the windows of the apartment my wife and I have been renting here. As a personal chronicle, I take a picture of the sky each day I’m in town, so I can record when, if ever, things really improve in preparation for the Games. (Current plans are to impose sweeping factory shutdowns and other emergency clean-up measures starting about three weeks before the Olympics begin.)

But, as at the cement plant, after I spent a day with the group of more than 20 scientists in charge of measuring the real quality of the city’s air, I found myself less ready to scoff. These were physicists, atmospheric scientists, and other researchers from various institutes of the Chinese Academy of Sciences, or CAS. I met them at the Academy’s Institute of Remote Sensing Applications, which is next door to the main Olympic site on the north side of Beijing.

The sky was a brilliant blue that day, thanks to the frigid wind roaring in from Mongolia. When the wind comes into Beijing from the west, as it did that day, it pushes the city’s haze out toward the sea. But usually it comes from the south and southeast and brings smoke and dust from the hyperpolluted coal and steel regions of Shanxi and Shandong provinces, including the chokingly polluted coal city of Taiyuan, 250 miles southwest of Beijing. The smoke and dust from the south combine with Beijing’s own automotive and factory fumes and hang over the city, trapped by mountains on the western edge. That’s when the air is so dense and dark that spectators on one side of the Olympic Stadium would barely be able to see to the other.

I visited the scientists at a complex of about 15 research centers, plus an apartment block with housing for hundreds of CAS employees. The complex is just next to the Olympic grounds, in an area where new public buildings of all sorts are going up. In a series of briefings and outdoor tours, the scientists laid out the steps they had taken to get honest measures of Beijing’s air problems. They built 1,000-foot-high towers in and around the city to measure pollutants at different altitudes and predict how the wind would spread them. They shot laser beams at reflectors on distant buildings and assessed the return signal to measure what was in the air. They mounted sensors on cars and vans and drove them around the city’s ring roads to see where the pollution was worst. They converted the entire roof of their office building into an open-air lab overlooking the Olympic village. American-made spectrometers measured particulates and pollutants like ozone and nitrous oxide. A satellite dish received a steady stream of data from U.S. geophysical satellites, which was then matched with their local findings. And that was just a start.

I couldn’t judge the machinery, but everything about the people and process seemed serious and scientific rather than political. Therefore I was willing to listen when Liu Wenqing, the director of the Anhui Institute of Optics and Fine Mechanics, and Wang Yuesi, of the Institute of Atmospheric Physics, said that, according to the team’s readings, the air in Beijing was actually improving. Between 2000 and 2006, the city’s population went up by half, to 15 million, and in about the same time the number of vehicles on its roads doubled, to 3million (apparently the scare stories about a thousand extra cars per day joining Beijing’s traffic are true). But because of tougher auto-emissions standards that took effect in 2006—similar to America’s CAFE rules, but more stringent—and the forced closing of many factories in and around the city, the levels of all major pollutants fell during the same period. (The pollutants included nitrous oxide, ozone, and VOCs, or volatile organic compounds, like benzene.) These were long-term changes, not whatever emergency shutdown measures the government will take just before the Games begin.

The last PowerPoint slide in a presentation that one of the scientists showed me read, “We are confident that the air quality goals for Olympics 2008 will be met in Beijing.” When I asked, “Really?” all eyes turned toward the senior CAS official in the room, a British-trained scientist. “I personally am sure the goals will be met,” he said. Even if the winds are wrong? “Ninety-nine percent.”

I don’t know whether he is right, but what I took from the day was that sophisticated people are honestly trying to do the right thing, in ways official propaganda had not prepared me for. Like England, the United States, Japan, and others before it, China is passing through the environmental-disaster stage of industrialization and beginning to clean up. The difference is that those countries waited until they were rich before they started the process. China is still full of poor people, but for reasons of scale and impact, it cannot postpone cleaning up.

There are signs that Chinese officials at many levels are facing that fact. A recent episode that seemed to underscore China’s stubbornness actually shows the reverse.

In 2004, the “Hu-Wen team” of President Hu Jintao and Premier Wen Jiabao had recently come into power with the slogan of building a “harmonious society.” This specifically included greater harmony with nature. A man named Pan Yue, the deputy director of China’s State Environmental Protection Administration, had been giving speeches about the need to measure the environmental cost of economic growth. (Pan, a former soldier and journalist now in his late 40s—relatively young for an influential bureaucrat—has become the best-known spokesman for environmentalist causes in the government.) The agency, which this year became the Ministry of Environmental Protection, approached the World Bank for help in conducting the first comprehensive survey of the total cost to the country, economic and otherwise, of China’s air and water pollution.

“At first we were reluctant,” a bank official who declined to be named told me. “These measures are always controversial and difficult”—especially any attempt to measure a toll in human lives. But there were signs that progressive elements inside the Chinese government wanted the study for use “as inside argument for devoting more effort to the environmental issue.” The important background point is that even though the outside world tends to see China itself and “the Chinese regime” as a great homog-enous bloc, there are ideological, regional, and personal rivalries at every level.

The economic calculations were sobering enough, to say nothing of the health consequences. When the World Bank issued its draft report, “Cost of Pollution in China,” last summer, it said that China’s economic growth rate would be cut significantly—perhaps by half or more—if the government accounted realistically for what Pan Yue called the country’s “overdrafts” on resources. China’s announced growth rate has been 9 to 10 percent each year over the past two decades; the report said that environmental costs could represent between 2.9 and 5.8 percent, which would reduce China’s miraculous-seeming growth rate to sclerotic European levels. Estimating how many people were sick, dead, or deformed would of course be much more controversial.

According to widely reported leaks, the bank concluded that about 750,000 Chinese people die prematurely each year because of pollution. But the Chinese government requested that no total figure be included in an interim version of the report released last year, because it wanted to review the methodology behind the estimate. This move was blasted around the world as yet another sign of the government’s secrecy.

The odd part of the denunciation is that the report itself, which the Chinese government accepted, included every bit of shocking information except that final tally. There were calculations of childhood deaths from dysentery, lost “life-years” because of air pollution, increased hospitalization rates because of lung diseases and cancers, and other grim statistics, including the conclusion that air pollution in all its forms is probably 10 times more damaging to China’s health than all forms of water pollution. It is hard to imagine how anyone who opened the report could consider it a whitewash.

“The press reaction to the report really irritated us,” the bank official said. “It’s not just the Chinese—all governments we deal with are very careful with this kind of life-and-death data. All of us felt that the government was taking the exercise seriously and that it helped nobody to slap them down.” Several people I spoke with at other international organizations concurred. Sure enough, in March, after the hubbub had died down, a report on environmental policy by Xinhua, the state-run news agency, mentioned offhandedly that “a World Bank report said about 750,000 Chinese die earlier due to air pollution every year.”

The Chinese Communist Party unquestionably rules China, but in a more haphazard and uneven fashion than Westerners often recognize. About some things it is as inflexible, intolerant, and oblivious to outside criticism as the worst stereotypes would suggest. These hard-line areas include political challenges to the party’s legitimacy, criticism in the media, and any suggestion of regional separatism or “splittism”—notably, uprisings in Tibet fomented by what the state-run media always refer to, in English, as the “Dalai clique.” About many other matters, ranging from the daily practices of mayors or provincial governors to the deals struck by entrepreneurs, the central Communist government in Beijing is either unable to impose its will or uninterested in even trying. Economic development has been fastest in the parts of the country—mainly the south, far from Beijing—where the central government has been most hands-off.

The varied nature of the government’s approach explains a theme I heard in many interviews. Both Chinese and foreign environmentalists said the government is sending subtle but important bureaucratic signals that it now takes environmental protection more seriously. It is more tolerant of Chinese and foreign nongovernmental organizations working for green causes. It is allowing more of its citizens a chance to defend their environmental rights via lawsuits or organized protests. And it is changing the way it promotes and rewards its own officials, to move them toward an environmentalist outlook. There are still huge pressures in the opposite direction, like payoffs to mayors or governors from land developers. But the new signals are positive.

For example: until recently the curriculum at the Central Communist Party School, where future administrators are trained, included no environmental training whatsoever. In U.S. military terms, this was like the days when war colleges taught future generals nothing about counterinsurgency. That is now changing. I talked with two foreign representatives of nongovernmental organizations—Peggy Liu, of the Joint U.S.-China Cooperation on Clean Energy (JUCCCE), and Lila Buckley, of the Global Environmental Institute (GEI)—that have been working with the central and provincial party schools to develop new courses and emphases. Liu, a Chinese American veteran of the tech and venture-capital industries who now lives in Shanghai, started JUCCCE last year as a way of pooling Chinese and international efforts on the environment (its name is pronounced “juice” in English and “ju si” in Chinese, meaning “coalition of thinkers”). The group is developing bilingual Web sites intended to connect Chinese scientists, officials, and bureaucrats with their counterparts overseas, and is trying to connect party officials and factory managers across the country with international advisers.

“This can be like the Human Genome Project,” Liu said, referring to the way researchers around the world used the Internet to share the computational work of decoding the genome, thus completing the project in a decade rather than a century. So far, she said, the Chinese government has welcomed rather than impeded her projects. “The government’s green policies are among the most progressive in the world—seriously,” she told me. “The challenge is to build an environmentally conscious workforce and have it pervade at every level. It’s as if Starbucks were building a whole coffee culture at once.”

GEI, one of China’s few home-grown, locally run environmental NGOs, also trains future government leaders. Chinese authorities keep such a careful eye on NGOs that the very concept of a “non”-governmental organization is peculiar in China—and all the more so since the tradition of civic action is so weak. Still, GEI has been free to conduct traditional conservation efforts such as supporting wildlife reserves; it has promoted wider adoption of energy-saving systems like the one used in the Sunnsy cement factory; and it has brought to the Tibetan hinterland simple, cheap “biogas converters” with which Tibetan villagers produce fuel for heating and cooking from yak or cattle dung. (What about the smell? Buckley, an American in her 20s who is GEI’s only non-Chinese staff member, told me that the villages smell better with the converters than they did before, when the villagers burned the dried dung, and heaps of dung patties polluted their drinking water.)

And GEI has made a major push for a presence in party schools. This has required some delicate maneuvering, since the schools have naturally been slower than regular Chinese universities to bring in foreign experts. In 2006, GEI took two 12-member delegations of party instructors to the United States for three weeks of sustainable-development training at Stanford and Yale and for visits to the World Bank, Resources for the Future, and similar organizations.

By all accounts, the most important change in China’s bureaucratic culture is revising the performance-rating system for officials so they are graded on environmental protection rather than mainly on economic growth. To explain the long-term significance this can have, it is useful to think of the professional U.S. military, which resembles China’s nationwide Communist administrative system in this way: ambitious young officers are rotated through a variety of command posts on their way to the top. In both, the organizational culture is continually reinforced through mid-career training—war college for future U.S. generals, party schools for future ministers and provincial governors. And career success depends heavily on performance evaluations at the end of each assignment, which determine who moves up and who is sidetracked. Shifts in the rating system have a predictable and profound effect on individual behavior.

China’s national laws about air and water pollution are also shifting in an environmentally responsible direction. In China even more than in the United States, law is one thing and reality is another—but in general, I was told, these pollution standards are being taken more seriously than they used to be. For instance, this spring a spokesman for the Shanghai Economic Commission announced the city’s 20 goals for the coming year. Energy conservation and pollution control were at the top of the list.

“My sense is that local political leaders and the heads of big state-owned businesses understand that they really will be held accountable,” Charles McElwee, an American environmental lawyer based in Shanghai, told me. The goals are quite explicit. For example, greater Shanghai is supposed to improve its “energy efficiency”—the amount of energy used per 10,000 RMB (renminbi, the Chinese currency) of economic output—by 4 percent each year. The nationwide goal is to increase energy efficiency by 20 percent and decrease emissions of major pollutants by 10 percent by 2010, compared with 2006 levels. That goal is theoretically still within reach, though last year’s achievements fell short (for instance, energy efficiency improved by 3.3 rather than 4 percent). Last year, the reported level of COD—chemical oxygen demand, a major indicator of water pollution—went down by more than 3 percent nationwide, and the level of sulfur dioxide, a major air pollutant, by more than 4.6 percent. “When I saw those figures, it changed my perception of how things were headed in China,” McElwee said.

In parallel with its own incentives on environmental issues, the government has warily tolerated forms of organized citizen action that it would usually restrict. Even as it has opened the country economically and socially, the government has tried hard to limit independent sources of information and any type of organization outside its control. Yet Greenpeace maintains programs and offices in China, where it has launched an aggressive (by Chinese standards) campaign to persuade consumers not to buy furniture made of rain-forest wood, not to eat shark-fin soup, not to waste energy—and not to buy products from Chinese or foreign companies that undermine these goals. Greenpeace China is quoted frequently in the press—yes, the Chinese press. Environmental exposés are increasingly tolerated, as political exposés are not, and they draw widespread attention.

The rule of law is still shaky in China, but Chinese environmental lawyers have filed and sometimes won suits on behalf of citizens who are sick because of pollution or whose farms have been poisoned. A former journalist named Ma Jun has created the remarkable online “China Water Pollution Map” for his Beijing-based group, the Institute of Public and Environmental Affairs. Anyone using the Internet can zoom in on a city or village, click on a lake or river, and see the latest pollution readings—and also which factories or farms are creating the problem. Jane Goodall’s organization has started “Roots & Shoots” programs to teach Chinese children about environmental problems. Early this year, thousands of people poured into the streets of Shanghai to protest the downtown extension of a Maglev train line, which they believed would give off dangerous radiation near their homes. There was a similar mass protest last year about factory pollution in the coastal manufacturing town of Xiamen.

“China’s greatest environmental achievement over the past decade has been the growth of environmental activism among the Chinese people,” Elizabeth Economy, author of The River Runs Black, told me in an e-mail. “They have pushed the boundaries of environmental protection well beyond anything imaginable a decade ago.”

INDUSTRIAL AREAS of Shandong province are dotted with huge mounds of low-grade coal, now worth picking over because of soaring world demand. China burns more than 2 billion tons of coal each year, about one-third of the world's total.

How do we measure the good against the bad, the signs of progress against the devastated landscape and opaque skies? Here are three propositions to suggest, followed by one big challenge China poses to the world.

The first is simply that we acknowledge that the authors of the 11th Five-Year Plan were right. There are positive developments in China. And the situation is grave.

Renewable energy? More of it is coming online every day. Indeed, one of the world’s leading producers of photovoltaic cells, Suntech Power, is based in Wuxi, near Shanghai. It is listed on the New York Stock Exchange, and its owner, Shi Zhengrong, is a billionaire. I have seen large windmill farms in Xinjiang province, where GE and Siemens compete to sell turbines. But because demand for power is increasing much faster than renewable supply, China burns about 10 percent more coal each year than it did the year before.

Automobiles? A similar picture. China recently adopted fuel-efficiency standards higher than those in the United States. But China now has only about one-twentieth as many cars per person as the United States does—about 35 million cars for 1.3 billion Chinese, versus 185 million cars for 300 million Americans. It will close that gap, and even though China’s cars will become more efficient, there will be a lot, lot more of them. According to a recent analysis by the McKinsey Global Institute, China will have about 120 million vehicles by 2020. Outsiders, then, should give the Chinese credit for what they are achieving, without forgetting how much there is to do.

Second, the major problem with government policy in China is essentially the same one as in the United States: despite the differences in political systems and overall wealth, both governments are afraid to make the public pay the true cost of cleaning up the country. And that could slow the process, by many years.

What the United States has done for decades with oil and gasoline—namely, keep prices as low as possible, so its citizens can live the good life—the Chinese government has done with even more necessities. Gasoline is cheaper than in the United States, because the government subsidizes the refineries. Water, electricity, agricultural fertilizer, and above all coal—they all cost Chinese consumers less than their “real” cost to the country, in both environmental and economic terms.

“Just because a country is poor is not a reason to subsidize scarce goods,” David Dollar, an American who directs the World Bank’s China and Mongolia operations, told me in his office in Beijing. He explained the point this way: some places in northern China and Mongolia use more water per capita than much of Europe, even though they’re mostly desert and have nearly exhausted their aquifers. That’s because they are allowed to pay so little for water. If people had to pay more, they would use less: “Chinese people,” Dollar said, “tend to be very practical, if I may put it that way.” The same is true of fertilizers. China’s rivers and lakes are so foul in part because chemical fertilizers are subsidized. Farmers overuse them, and the runoff kills streams. If fertilizer cost more, farmers would use less, and less runoff would end up in streams. The Chinese government is planning a continental-scale system of canals to bring water from the south to the arid north. But over the next decades, Dollar argues, tens of millions of people are going to leave the northern farms for urban jobs in any case. It would be far saner—economically and environmentally—to scale back the canal-building and steer farms, factories, and people to the south, where the water is.

The urban version of this pattern involves electricity, gasoline, and public water supplies, all of them cheaper for consumers than their real cost to the country and the environment. Here, too, changes in price and policy can make large differences. For example: the Shanghai city government makes owning a car very expensive, and has relatively manageable traffic and excellent subways. The Beijing city government makes it cheap, and is being strangled and choked by cars.

“Underpriced energy is the world’s largest subsidy for environmental destruction,” William Chandler, of the Carnegie Endowment for International Peace, wrote in a report this spring. “The Chinese government continues to intervene heavily in energy pricing, recently even freezing—in a profoundly wrongheaded move—key energy prices.”

David Dollar is not Ebenezer Scrooge. The World Bank’s recommendations for realistic prices include many schemes to offset the burden they would place on the country’s impoverished majority. But he recognizes the trap the government is in. If China keeps these prices down, it will have even more trouble producing positive developments of any sort. If it lets them rise, it will face the anger of people for whom inflation is already the No. 1 domestic concern. Americans who reflect on their own experience with proposed hikes in gasoline taxes will recognize the difficulty of the choice.

The third proposition, which is more hopeful: the business of improving China’s environment can be a very attractive business indeed. For corporations, it can mean profits, as with the newly efficient cement factories. For the world as a whole, it opens the possibility of a longer-term profit, in dealing with shared climate-change problems. Over the past 20 years, the world got used to a “China price” for manufactured goods—the rock-bottom price for anything coming out of a factory. In the coming 20 years, the world could make use of a “China price” for pollution control, especially greenhouse gases—the rock-bottom requirement of money and resources needed to reduce emissions by a given amount. Precisely because many Chinese systems are now so wasteful, it can be cheaper and easier to eliminate the next thousand tons of carbon-dioxide output or the demand for the next million watts of electricity-generating capacity here than anywhere else.

Late last year I went to Tsinghua University in Beijing, China’s counterpart to MIT, to hear an American businessman address a group of young Chinese engineers. The visiting speaker was George David, the CEO of United Technologies Corporation, and he had come to give a lecture that at first struck me as implausibly upbeat.

China consumes less energy per person than America, David said, because its people live so simply, and so many are on farms. But China’s economy consumes much more energy per unit of economic output than America’s—about four times as much, in fact—and that, he said, is good news. So is the fact that China’s homes, schools, and office buildings are so wasteful in the ways they use energy for heating and cooling. China’s traffic system suffers extreme congestion, which wastes more fuel. More good news! “The U.S. is tremendously inefficient, and China is worse,” David said. “That is what gives us the opportunity”—both commercial opportunity for companies like his and strategic opportunity for groups fighting climate change worldwide.

He went on to make a point that became obvious once explained: precisely because so much of the Chinese system is profligate and sloppy, the opportunity to improve efficiency, and cut back on pollution and energy use, is greater here than nearly anywhere else—and the savings can be achieved more cheaply. The energy wastefulness of China’s economy affects the entire world because of the greenhouse gases it generates. And so as the world looks for ways to cut those emissions, China offers fast, easy, and inexpensive opportunities for improvement. For businesses, this means a market for efficient engines, sewage-treatment plants, solar cells and similar “clean” energy sources, and other technologies that help control pollution. For those working to control greenhouse-gas emissions, it means a fast, cheap way to make a difference.

David gave this illustration: commercial and residential buildings are a deceptively important source of pollution and greenhouse-gas emissions. Worldwide, the energy needed to heat, cool, and illuminate buildings, together with the energy costs of putting them up and maintaining them, accounts for nearly 40 percent of total energy demand—even more than the energy used by all forms of transportation. Chinese office buildings and apartments are leakier than those in developed countries. They require about twice as much fuel to heat and cool as those in similar climates in Europe or North America, because many were built in the days when insulation was one of many unaffordable luxuries. Therefore, in principle it’s cheap and easy to cut their power use: more insulation in existing buildings, higher standards for new ones.

Heating water by itself accounts for about 15 percent of the energy used in buildings. Switching to a different, technically proven means of heating water—“heat transfer” instead of “heat insertion”—would so dramatically improve efficiency that, according to David, it could lower total world energy demand by several percentage points.

Thus a corporate opportunity and an environmental opportunity coincide. Selling equipment and many other “green building” features to and within China will save money by cutting waste, plus modernize factories to reduce their energy use too. For George David’s arch-competitor, General Electric, that might mean selling windmill turbines to China; for his own UTC, it means selling elevators that, like hybrid cars, generate power whenever they brake and thus substantially cut total energy use. This in turn would have obvious benefits to the world. David and 10 other CEOs from industrial companies in North America, Europe, and Japan have formed the World Business Council for Sustainable Development, which is pushing for similar innovations in urban design and building construction.

I saw one demonstration in a manufacturing zone an hour’s drive west of Shanghai. A factory there will, when it becomes operational in a few months, produce a radically different sort of window glass for use in office buildings. The company, called Envision, is based in Alberta, Canada, and uses a technique designed in the 1980s in Switzerland. It replaces the double-glazed windows normally used in apartments and offices with a complex structure that looks like a normal pane but has internal membranes and other devices that almost totally block the transmission of heat. These are the windows used at the U.S. National Science Foundation’s research station at the South Pole, and they have been widely adopted in cold-climate buildings around the world—a government building in Minnesota, the airport in St. Louis, more than 500 installations in Canada and Europe. The company has a factory in Edmonton, Alberta, and another in Switzerland, where the equipment being installed near Shanghai was previously used.

At the factory, Albert Wong showed me the difference the windows could make. Wong, who is in his 50s, grew up in Shanghai and then studied chemistry at Louisiana State University, in Baton Rouge. (Time for a reminder: America’s universities are the crucial connection between the U.S. and China.) He worked for Shell Oil and DuPont; he became a Canadian citizen; and five years ago he returned to China to sell his windows. His company has taken infrared photos of Chinese buildings at night. The typical ones blaze red with radiating heat: much of what comes into the building, from the furnaces, goes right out through the panes. (As I write this, I am sitting in a two-star Chinese hotel in the hinterland. It is cold and windy outside, and the breeze through the half-inch gap between the window glass and its frame ruffles the papers on the desk.) Then he showed me comparable photos of buildings with his windows. They are deep blue, the heat trapped inside.

These windows cost 10 percent more than standard glass. But if specified from the start, they can reduce construction costs for an entire building by 15 percent or more, since the heating and air-conditioning systems can be reduced by half. Plus, they save money each year on fuel.

The bad news is that not one of the windows is used in China yet. After five years of effort, Wong has yet to make a single sale here. The factory near Shanghai will supply customers in Korea, Japan, North America—but not the surrounding provinces. The barriers are the conservatism of the construction industry (not the most adventurous group in any country), and the fact that even if his windows save coal for China, they will cut out an existing glass manufacturer.

Many green businesses are already enjoying better luck, and Wong says that Envision is in China for the long haul. But his start-up difficulties illustrate the importance of helping Chinese factory owners, builders, and citizens realize the many opportunities for saving energy—and money—and reducing emissions that are open to them. “China has a golden opportunity to leapfrog old, inefficient technologies and introduce cutting-edge technologies at a relatively early stage of development,” the McKinsey analysis said.

In one way or another, all the proposals for helping China make this new great leap forward do the same thing: apply money or other rewards or penalties to steer China in a greener direction, for instance, stricter requirements for the windows in office buildings. Many of the proposals involve a concept that the Bush administration has rejected but that Senators John McCain, Hillary Clinton, and Barack Obama all support: a world market in “carbon credits.” When a million dollars spent on better building standards in China—or better smelters, or smokestack scrubbers, or any of a hundred other possibilities—could make a bigger difference in controlling world pollution than that same million dollars spent in the United States or France, there should be a way to make sure that million dollars gets spent in China.

"When I was a child, it was incredible for my father to have even one cold beer,” a man named Sean Wang, who works for Envision, told me recently. He grew up in Beijing in the 1970s. “Now people want 24-hour heating, hot water, refrigerators. It is not sustainable unless we make a change.” We met in a shiny and spectacular new office tower in central Beijing. In every direction around us in the city were construction and bustle. In every direction around us in the country were people moving from the villages, where they had a few flickering lightbulbs and a bicycle, to the city, where they expected elevators, cars, and espresso machines.

The conclusions I’ve suggested so far all bear on the ways that China’s environment might be improving, however slowly, and whether and how that improvement might be speeded up. All of these improvements lead to one further and now unanswerable question, which is raised by Sean Wang’s comments. Promising as some trends might be, bright as is the potential for efficient, money-making green investments, does China’s scale and ambition, plus its reliance on coal, simply doom the world’s effort to control greenhouse-gas emissions?

China is no idle bystander to this discussion. Its major rivers originate in glaciers on the Tibetan plateau, which have begun to melt. Even if every building in China is better insulated and built with Albert Wong’s windows, and every factory is equipped with Tang Jinquan’s co-generation pipes, is China’s newfound commitment coming too late? One data point among hundreds: a recent study by Maximilian Auffhammer and Richard Carson, of the University of California, concluded that without some startling change in technology, China cannot avoid increasing its greenhouse-gas emissions faster than other countries can possibly cut theirs back.

Startling changes in technology have appeared over the past century. Antibiotics, to name the one that has made the biggest difference in human welfare. Telecommunications, from the radio to the Internet. Air travel and knowing our world from space. Startling changes in energy technology are now necessary—in producing, conserving, and containing the by-products of fossil-fuel combustion. This is the next big technological challenge for the world as a whole.

The world will have more time to work toward a solution if it nurtures promising developments in China—and if it recognizes that its most populous nation is doing some things right.

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Author: James Fallows
Original Source: The Atlantic
Date Published: June 2008
Web Source: http://www.theatlantic.com/doc/200806/pollution-in-china
Date Accessed Online: 2009-02-22

The world isn't flat, it's flattened

2009-02-18T02:23:00.000-08:00

It wasn't the world that got flat, contrary to New York Times pundit Thomas Friedman, but the emerging markets that got flattened.

Faddish conventional wisdom over the past few years held that American influence was fading as technology radiated to the far reaches of the world. When America's economy went into a ditch, though, the supposed economic superpowers of the future went flying, like children on skates holding onto the back of truck.

The American consumer, it turns out, played Atlas to the global economy, taking the exports of Asia, so that Asia could buy the commodities of Russia, Latin America and Africa. Remove the American consumer, and Asian exports crash, taking commodity prices along with them.

The financial crash exposes the fragility of large swaths of the world. The political consequences will be terrible. The worst of it is that America will not be around to moderate the melee, not if Democratic Senator Barack Obama is elected president, that is. Those who objected to America's role as world policeman will get what they wanted, but they won't like it: a religious war reaching from Lebanon to Pakistan, and Colombian-style narco-war spreading to Mexico and Brazil.

The wave of American self-pity that may carry Obama to the White House stems, in turn, from a global crisis that has sunk a good deal of the developing world. Worst affected are the most populous Muslim countries, and Russia's "near abroad". Pakistan, Ukraine and Belarus are out of funds and have applied for help to the International Monetary Fund. Indonesia and Turkey face drastically increased borrowing and import costs. Iran's economy will implode with oil in the mid-US$60s.

The table below shows the cost of default protection, a gauge of hard-currency borrowing costs, for some emerging markets. The numbers are somewhat arbitrary, reflecting a freeze on credit to emerging markets.

Annual cost of five-year default protection in basis points above the London interbank offered rate (LIBOR):

Country	Basis Points Above LIBOR
Argentina	3900
Ukraine	2750
Pakistan	2600
Venezuela	2260
Kazakhstan	1200
Indonesia	1200
Russia	1200
Turkey	900
Philippines	720
Egypt	720

That is, with LIBOR at 3.5%, the Russian government will pay roughly 15% for dollar funding, while Ukraine and Pakistan will pay about 30%, and Turkey about 11%. That does not accurately gauge the damage to their economies, though, for many of these countries depended on huge borrowings from short-term credit markets that now are frozen.

The economic crisis buoyed Obama out of his post-convention slump and exposed the emptiness of the Republicans. But it also has crushed the aspirations of the most populous Muslim countries. Even before the financial crisis, Pakistan and Turkey had turned towards political Islam. Pakistan's intelligence service is providing support to the Taliban in Afghanistan, jeopardizing the Western position. The financial crisis will push Pakistan further towards radical Islam. Now this proclamation will be preached from every mosque from Tyre to Lahore: "The corrupt West tried to seduce you with consumerism. Now the poisoned gifts of the West are shown to be an illusion, and those of you who lusted after them are left only with your humiliation."

Just what has the rest of the world done to challenge the economic hegemony of the United States? The commodities boom has evaporated in a matter of months, with most raw materials trading at half of their May 2008 peaks. Like the housing bubble in the United States, the commodities bubble turns out to have been a way for the capital of the West to invent profits where there were none to begin with. With the commodities bubble came a fad for investment in emerging market currencies, drawing hundreds of billions of dollars into high-yielding currencies like the Brazilian real, the Turkish lira and the South African rand. The most popular emerging market currencies have fallen by 30% to 50% from their peaks.

The stock exchanges of the BRIC (Brazil-Russia-India-China) combination have fallen half again as far as the US stock market this year in dollar terms:

Country	Stock Market Change 2008 to Oct. 22
Brazil	-59%
Russia	-72%
India	-62%
China	-62%
US	-40%

No one in Asia, it appears, knows how to make money when American import demand shrinks, and when Asian growth falls, raw materials prices collapse. No one in Latin America, for that matter, seems to know how to make money when raw materials prices collapse. For all the preening and posing of the emerging world's nouveau riche, it turns out that the American consumer was the center of the world economy, and without the American consumer, all that is left are busted stock markets and bad credit.
Most embarrassing for the flat-worlders is the observation that the emerging markets crashed when the world concluded that Washington would not be able to reverse the financial crisis. The economic bomb that detonated in America caused more collateral damage in the emerging markets than casualties at home.

Until July 2008, commodity prices rose as stock prices deteriorated because investors falsely assumed that Washington would set off a new wave of inflation as it rescued the banking system. The commodity producers thumbed their collective nose at economic distress in the industrial world and expected the boom to go on forever. Once the markets concluded that Washington would not be able to prevent a financial collapse, the commodity indices crashed along with stock prices. The commodity producers went from boom to bust almost overnight.

Iran's theocrats, as I reported in June (Worst of times for Iran, Asia Times Online, June 24, 2008), managed to steal $35 billion from oil revenues. Luxury real estate prices rose to Parisian levels while poor Iranians lacked necessities. With the collapse of the oil price, subsidies for essential items will disappear and the regime will face economic collapse. Before it does so, I believe Iran will undertake an adventure to assert its hegemony in the region, probably at the expense of Iraq.

The low level of violence in Iraq during the past several months owes something to the skill of American arms in the so-called "surge", but it owes even more to a tacit agreement between Iran and the George W Bush administration: in return for leashing its irregular forces in Iraq, Iran would get a free hand with Hezbollah in Lebanon, and American forbearance with respect to its nuclear weapons program.

The Bush administration's motive to bribe Iran and avoid political damage in Iraq disappears on US presidential election day on November 4. Whether the US administration (or for that matter Israel) has the nerve to launch an air strike on Iran's nuclear facilities is anyone's guess (and everyone is guessing that the answer is negative). Nonetheless, Iran has created the strongest Shi'ite presence since the original battles that determined the succession to the Prophet Mohammed. It can watch the Shi'ite cause fade away with the price of oil, or it can attempt to use its capabilities before they are lost for another thousand years. Nothing at all that we know of the Iranians indicates that they would go quietly into another long night of Sunni oppression.

Iran's leaders, in short, find themselves in a position similar to, but more urgent than, the one that Adolf Hitler described to his senior commanders three weeks after the German invasion of Poland. I have quoted this before, but it deserves to be tattooed onto the foreheads of analysts who think that economic weakness reduces the likelihood of armed conflict.

We have nothing to lose, but much indeed to gain. As a result of the constraints forced upon us, our economic position is such that we cannot hold out for more than a few years. [Hermann] Goering can confirm this. We have no other choice, we must act ... At no point in the future will Germany have a man with more authority than I. But I could be replaced at any moment by some idiot or criminal ... The morale of the German people is excellent. It can only worsen from here.

Iran's ultimate target will be Saudi Arabia, whose largest oil fields are found inconveniently in Shi'ite-majority areas just across the Persian Gulf from Iran. The Saudis will not sit quietly while Iran gains the upper hand in Iraq. Pakistan and Turkey, Sunni powers with large armies, will be loath to allow Iran to dominate the region, and they also will be all the more dependent on Saudi generosity.

A whole generation of Western analysts looked approving on Turkey's turn to Islamism, as I reported last summer (Turkey in the throes of Islamic revolution, Asia Times Online, July 22). Now Turkey will be Islamist - and broke. Turkey paid more than 20% for local currency deposits in order to attract the funds to finance a current account deficit amounting to 7% of gross domestic product. The Islamist government of Prime Minister Recep Tayyip Erdogan now faces the worst of all possible worlds. The Turkish lira has lost a third of its value in the past month, and almost all of the devaluation will turn up in higher domestic prices. Credit availability for Turkish businesses will vanish, and Turkey will enter a profound economic crisis.

A belt of ungovernability now stretches from Lebanon to Pakistan, with incalculable political and military consequences. I believe that a Shi'ite-Sunni version of Europe's 17th-century Thirty Years' War will engulf the region.

Latin America presents a different malady: it has the middle class that wasn't. The raw materials boom turned into a windfall for Brazil and Argentina, and the windfall financed spectacular rates of internal credit growth (31% and 38% respectively during the past year). For the first time, Brazil's auto manufacturers produced for internal demand rather than exports, and Sao Paolo choked in traffic while the helicopters of ethanol billionaires buzzed overhead. Argentina is now effectively broke, and the government of Cristina Kirchner has expropriated the country's private pension plans to obtain cash. Its foreign credit has collapsed completely.

Brazil's central bank still has formidable reserves, but the fragile political compromise that has kept a nominally leftist government in power cannot hold under present circumstances. Brazil's enormous underclass is ruled by drug gangs that are better armed than the police. A Brazilian congressional committee was told in February 2006 that corrupt elements in the Argentine army were selling heavy weapons to the Brazilian drug mobs, including anti-tank missiles.

Mexico in some ways is the most worrying place in the Western hemisphere. A low-level civil war between the drug cartels and the federal government has been fought over the past two years, and the cartels are winning. Senior Mexican officials charged with suppression of the cartels have been moving their families quietly out of the country. The collapse of the oil price and the likely collapse of remittances from Mexicans in the United States threaten the stability of the financial system, and the Mexican peso has lost nearly 40% of its value during the past several weeks. With the collapse of the American construction industry, a major source of employment for illegal Mexican immigrants to the US, the economic safety valve has broken, and the cartels have in inexhaustible supply of young men willing to risk their lives for a living.

Apart from Western and Central Asia and Latin America, the part of the world most affected by the economic crisis will be the Russian periphery. Ukraine has already joined Pakistan and Iceland at the mendicants' queue before the International Monetary Fund, and a number of other countries may not be far behind. Euphoria over the prospects of Eastern European economies permitted them to borrow massively on the now-frozen interbank market and eat up the proceeds in imports. Eastern Europe has the highest current account deficits in the world, and the greatest dependency on short-term foreign borrowings. "The risks of a hard landing are highest in Eastern Europe," warns the International Monetary Fund in its just-released Global Financial stability report.

Although Russia has taken on water in the crisis, its position relative to its former satellites has actually strengthened, as the table below makes clear:

Eastern Europe countries, current account deficit and net dependency on foreign bank borrowings

Country	Current Account (% of GDP)	Net Borrowing From Foreign Banks (% of GDP)
Bulgaria	-21.9	-29.0
Serbia	-16.1	-15.1
Latvia	-15.0	-72.5
Romnia	-14.5	-36.4
Estonia	-11.2	-78.7
Lithuania	-10.5	-45.6
Croatia	-9.0	-59.7
Ukraine	-7.6	-9.5
Hungary	-5.5	-54.1
Poland	-5.0	-17.1
Kazakhstan	-1.7	-8.0
Russia	+5.8	+2.2

Source: International Monetary Fund, Global Financial Stability Report (October 2008).

There are no winners, but losing the least is the next best thing to winning. If America turns inward, even an economically damaged Russia will loom larger in the world.

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Author: By Spengler
Original Source: Asia Times
Date Published: Oct 28, 2008
Web Source: http://www.atimes.com/atimes/Global_Economy/JJ28Dj07.html
Date Accessed Online: 2009-02-18

Obama, an economic unilateralist

2009-02-18T02:20:00.000-08:00

By Spengler

The silliest thing that clever people are saying about the world economic crisis is that the United States will lose its position as the dominant world superpower in consequence. On the contrary: the crisis strengthens the relative position of the United States and exposes the far graver weaknesses of all prospective competitors. It makes the debt of the American government the world's most desirable asset. America may deserve to decline, but as Clint Eastwood said in another context, "deserve's got nothing to do with it". President Barack Obama may turn out to be the most egregious unilateralist in American history.

America's supposed decline dominates the glossy magazines. Last September, Germany's Finance Minister Peer Steinbruck intoned, "One thing seems probable to me. As a result of the
crisis, the United States will lose its status as the superpower of the global financial system." The German official is quoted by Professor Richard Florida in the March 2009 Atlantic Monthly, who adds, "You don't have to strain too hard to see the financial crisis as the death knell for a debt-ridden, overconsuming and underproducing American empire - the fall long prophesied by [British historian] Paul Kennedy and others." (Florida's views are more nuanced).

And the ubiquitous Professor Niall Ferguson told a Vanity Fair interviewer on January 20 that America would crumble like Great Britain in the 1970s. "It certainly will be extremely painful ... Half the federal debt is held by foreigners. And if the US either defaults on debt or allows the dollar to depreciate, the rest of the world is going to say, 'Wait a second, you just screwed us.' And that's, I think, the moment at which the United States experiences the British experience - when, in the dark days of the 60s and 70s, Britain fundamentally lost its credibility and ceased to be a financial great power."

But is this true? In fact, the rest of the world has queued up to lend America as much money as it might wish to borrow in order to get its consumers to spend again, and buy the manufactures and raw materials of the rest of the world. It won't work, but that is another matter. As I wrote last October, the world isn't flat, contrary to New York Times pundit Thomas Friedman's vision of a level global playing field. It's flattened. (see The world isn't flat, it's flattened, Asia Times Online, October 28, 2008).

Here's a thought-experiment to gauge the merits of different national markets as a safe haven. Close your eyes and try to imagine what Germany, Japan and China will look like 30 years from now, that is, when a newly-issued long-term bond will mature. Citing Pope Benedict XVI's critique of economics, I argued recently that the market cannot form accurate long-term expectations; it only can imagine future states of the world. (See Benedict XVI is magnificently right, Asia Times Online, December 9, 2008). Let us see what imagination tells us about the world's largest capital markets. The conclusions of this exercise, I will show later, reinforce the founding premises of "supply-side economics", the theory that guided America out of the 1979-1983 mini-depression.

Imagination fails in the case of Europe and Japan. One out of every four Germans today is older than 60, and in 30 years the proportion will rise to two-fifths. Japan is even worse: 30% of Japanese today are above 60, and in 30 years the number will be almost half. What does a national economy look like when the demographics are so skewed to pensioners?

We never have seen anything like this before in all of history. Pension and health costs projected forward will crush these economies a generation from now. Taxes will suffocate the dwindling population of young workers. A straight-line projection of present trends takes us to the cusp of national failure. We do not know whether present trends will continue in a straight line, to be sure. The race is not to the swift, nor the battle to the strong, as Damon Runyon said, but that's the way to bet.

Children are the wealth of nations, provided that their nations can put tools in their hands and the rule of law at their back. Countries that lack children are poor. Aging Germans do not have young people to whom to lend. That is why they lent their savings to Americans, through the subprime market, and why European banks are if anything worse off than American banks.

Imagination also fails in the case of China, not because extrapolation of present trends is so frightening, but rather because economic growth cannot possibly continue at the pace of the past 10 years. China is a different country than it was 30 years ago, and it will be a different country in another 30 years. It is in the midst of the largest migration of peoples in the history of the world, the fastest rate of urbanization and the greatest economic expansion of which we know. Its political system and social structure will change so radically that it is impossible to form a clear picture of the country in 2040.

Great opportunities are attended by enormous dangers. China has more young people than any other country in the world, more than all of Europe put together, but too many of them are trapped in rural poverty, uneducated and untrained.

That is why Chinese save half their income, more than anyone else in the world. Part of China's steroidal savings rate can be explained by the one-child policy. People whose children will not care for them in old age require financial assets. What economists call precautionary savings, saving for a rainy day, explains a great deal of the Chinese demand for savings. The sun has shone on the Chinese economy for a generation, but when it rains, who is to say how hard it will rain? Extreme uncertainty about the future explains China's savings rate.

But America's future is not hard to visualize in 2040. In fact, America in 1979 was not much different from America in 2009. Minor adjustments await Americans over the next generation compared with the great changes affecting its prospective competitors.

China may offer greater prospective returns than America - a billion Chinese will make the transition from a low-productivity rural environment into a high-productivity urban environment during the next generation - but it also requires a greater appetite for risk. Nothing can compete with the United States as a safe-haven investment for the long term. German petulance about America's domination of world markets rises in inverse proportion to the German birth rate. The German finance minister should know better.

The Chinese have no such illusions. Luo Ping, a director general at the China Bank Regulatory Commission, told an American audience, "We hate you guys. Once you start issuing $1 trillion-$2 trillion ... we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do." (Financial Times, December 12, 2008.)

A fearful world is buying trillions of dollars of securities from the US Treasury. Of all the cash flows in the world, nothing is more reliable than the tax revenues of the American state, the longest-lasting government on Earth presiding over the world's largest economy.

During the 1960s, a young Canadian economist, Robert Mundell, argued that an increase in US government debt might represent a true increase in wealth under certain circumstances. It is relatively easy to capitalize corporate income streams through bonds, Mundell observed, but much harder to capitalize household income streams. If the government cuts taxes and issues bonds to replace the lost revenue, the increase in the float of the government bonds outstanding will represent an increase in wealth, provided that the tax increase stimulates growth, and the resulting growth brings in enough taxes to pay the interest on the bonds.

From this insight emerged the economic program of president Ronald Reagan. Drastic tax cuts, reducing the marginal tax rate from 70% to 40%, vastly increased the US budget deficit during the early 1980s. But the increase in revenues from a recovering economy more than paid the interest on the additional bonds, and the increase in government debt represented an increase in wealth. Mundell went on to win the Nobel Prize for Economics in 1999, for work in a different area.

America's economic crisis in 2009 bears little resemblance to the mini-depression of 1979. Then, the baby boomers were in their 20s and 30s; now they are in their 50s and 60s. As I wrote in my year-end essay, the Reagan administration made it easier for homeowners and businesses to obtain leverage (see Waking from Lever-Lever Land, Asia Times Online, December 25, 2008). Young people need leverage to start families; old people need savings. The medicine that cured the economy in the early 1980s turned into an addiction during the 2000s.

But there is a perverse parallel between the Treasury market of 1979 and 2009. In both cases, the market is willing to absorb an enormous increase in the float of US government securities. Looking into the future, no cash flows in the world are more secure than the tax revenues of the American Treasury.

The greater the uncertainty attached to all other cash flows, the greater the demand for US Treasury securities. America does not have to throw its political weight around to persuade the world to fund between $1.5 trillion and $2 trillion of new debt issuance; its political weight stems from the fact that the world needs the United States as a safe haven for its money.

The difference, of course, is that the increased issuance of Treasury securities during the Reagan years represented an absolute increase in wealth, capitalizing the recovery prospects of the US economy. All the other economies of the free world benefited. The Obama administration's multi-trillion dollar borrowing requirement constitutes a shift in relative wealth. Less capital will be available for other economies. The relative position of the United States will strengthen radically, which is to say that the position of many other parts of the world will weaken radically.
Obama isn't entirely to blame for this sorry state of affairs, to be sure, given that these trends were in place before he took office. Still, it is incongruous that the liberal consensus welcomed the multilateralist Obama and bade good riddance to the unilateralist Republicans. A radical shift in economic power in favor of the United States makes Obama the moral equivalent of a unilateralist, to a degree that Reagan never could have imagined.

To overpay unionized construction workers to build bridges, and bail out the bloated budgets of American states, the Obama administration will flood the world with so much Treasury debt that capital will flow out of the poorest countries to buy it. Rather than protest this outrageously unilateralist action, the rest of the world encourages him to do so, hoping that somehow the Obama stimulus package will get American consumers to buy their goods once again.

During the Reagan years, the rest of the world had the right to grumble about the dominance of the American economy. Now that American policy has become a millstone around the necks of most of the world's economies, the rest of the world's leaders flatter Obama while he beats them. No Republican president ever had it so good.

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Author: By Spengler
Original Source: Asia Times
Date Published: Feb 18, 2009
Web Source: http://www.atimes.com/atimes/Global_Economy/KB18Dj05.html
Date Accessed Online: 2009-02-18

Economic Lessons From Lenin’s Seer

2009-02-14T23:35:00.000-08:00

NIKOLAI KONDRATIEFF was not exactly a faceless bureaucrat in post-revolutionary Russia. He had held an important economic post in the last, short-lived government of Alexander Kerensky before the Bolsheviks took charge; then he founded an influential research organization, the Institute of Conjecture, and became an important theorist of the New Economic Policy under Lenin.

But he would long ago have been consigned to the dustbin of history had it not been for his quirky academic passion, which he pursued in a series of books and papers through the 1920s. Reviewing economic history since the late 18th century, Kondratieff came to a startling, doomsday conclusion: that capitalist economies were fated to go through regular and predictable cycles of around 50 years, inevitably culminating in a depression.

Despite having become a committed Communist and the author of a theory of inevitable if periodic capitalist collapses, Kondratieff was executed in 1938, a victim of the Stalinist purges. Apparently, he had raised too-trenchant questions about the government’s newfound enthusiasm for heavy industry and agricultural collectives. After spending eight years in the gulag, he left behind a final letter to his daughter, poignantly urging her to be “a clever and good girl” and “not to forget about me.”

It was a fitting epitaph, for whenever it seems Kondratieff is about to be forgotten, the economy nosedives. And once again, perhaps the most dismal of the dismal science’s practitioners is back in the news, which his disciples try to fit into the cycles, or “Kondratieff waves,” that he described.

Kondratieff and his disciples — among whom was Joseph Schumpeter, who wrote about capitalism’s “creative destruction” — identified four stages in each cycle, corresponding to the seasons. After spurting ahead in the spring phase, they said, the economy cruises through the summer, experiences a scary drop as autumn sets in, and then — despite the TARPs, TALFs and whatever else governments do — descends into a winter phase that can last up to 20 years.

In case you hadn’t noticed, it has been getting quite chilly lately.

Over the years, Kondratieff’s appeal has waxed and waned in counterpoint to the economy, falling out of favor in good times but charging back when things look bleak. But his theory has never been accepted by mainstream economists, who consider it an occult hall of mirrors in which any sort of pattern can be discerned by shifting starting dates and definitions.

Kondratieff’s adepts have cried depression before, for example in 1982. Reporting on the buzz his theory was getting during that downturn, a New York Times correspondent, Paul Lewis, wrote: “According to Kondratieffian analysis, the world is caught in the fourth great economic downswing since the 1790’s, a period of global recession that will probably last until near the end of the century when a new age of prosperity will begin — and there is little anyone can do about it.”

Today, Kondratieff’s disciples (a dwindling band, by the way) are just as certain that the bad times began in 2000, with that year’s stock market crash. That was followed by the autumn phase of the Bush years, characterized by an enormous (Kondratieff would say desperate) expansion of debt and leverage in an attempt to maintain the prosperity of the spring and summer years.

Evidently, Kondratieff waves tend to be in the eye of the beholder, and whatever value they have is descriptive, rather than predictive. After all, the American economy ultimately shrugged off several market drops like that of 2000, allowing the 25 years that followed 1982 to be a period of largely uninterrupted growth. But in the last decade of that period, the United States’s growth was driven by debt in a desperate attempt to maintain an unsustainable level of consumption, a stage that Kondratieff’s theory quite accurately describes.

“The people who do the predicting are usually not central within the discussion of economics,” said David Colander, an economic historian at Middlebury College, and an expert in the discipline’s crank theorists. But economies do “have this tendency to exceed” that Kondratieff and others have grasped, he added, and that is largely lost in modern economic theory.

He offers the Austrian School as a possible rival to Kondratieff’s line of thought. Austrian economists tend to emphasize a laissez-faire approach and entrepreneurship (not the most popular policies at this moment) and strict limits on money supply growth, usually by hitching the currency to the gold standard.

While considered outside the mainstream, the Austrian School is far more respectable, counting in its ranks two Nobel Prize winners, Friedrich Hayek and James Buchanan. Peter Schiff of Euro Pacific Capital — an adviser to the libertarian presidential candidate Ron Paul and one of the most prominent doomsayers in the current collapse — also subscribes to its theories.

Hayek is said to have successfully predicted the Great Depression and some Austrian School devotees are taking credit for calling this one. “The financial meltdown the economists of the Austrian School predicted has arrived,” Mr. Paul wrote in September, 11 days after Lehman Brothers filed for bankruptcy.

In the 1930s, John Maynard Keynes displaced Hayek and the Austrian School in intellectual popularity, establishing his “general theory” as the economic bible of the postwar decades. The Austrian line of thought made something of a comeback in the Reagan years, but never quite gained acceptance in the economic fraternity, Mr. Colander says.

“It probably should,” he says.

“A good profession should take its outsiders more seriously,” Mr. Colander says. “They make you look at things in different ways. The worst thing for policy makers is to think they are right.”

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Author: KYLE CRICHTON
Original Source: New York Times
Date Published: February 15, 2009
Web Source: http://www.nytimes.com/2009/02/15/weekinreview/15crichton.html
Date Accessed Online: 2009-02-15

Do We Need a New Internet?

2009-02-14T23:25:00.000-08:00

Two decades ago a 23-year-old Cornell University graduate student brought the Internet to its knees with a simple software program that skipped from computer to computer at blinding speed, thoroughly clogging the then-tiny network in the space of a few hours.

The program was intended to be a digital “Kilroy Was Here.” Just a bit of cybernetic fungus that would unobtrusively wander the net. However, a programming error turned it into a harbinger heralding the arrival of a darker cyberspace, more of a mirror for all of the chaos and conflict of the physical world than a utopian refuge from it.

Since then things have gotten much, much worse.

Bad enough that there is a growing belief among engineers and security experts that Internet security and privacy have become so maddeningly elusive that the only way to fix the problem is to start over.

What a new Internet might look like is still widely debated, but one alternative would, in effect, create a “gated community” where users would give up their anonymity and certain freedoms in return for safety. Today that is already the case for many corporate and government Internet users. As a new and more secure network becomes widely adopted, the current Internet might end up as the bad neighborhood of cyberspace. You would enter at your own risk and keep an eye over your shoulder while you were there.

“Unless we’re willing to rethink today’s Internet,” says Nick McKeown, a Stanford engineer involved in building a new Internet, “we’re just waiting for a series of public catastrophes.”

That was driven home late last year, when a malicious software program thought to have been unleashed by a criminal gang in Eastern Europe suddenly appeared after easily sidestepping the world’s best cyberdefenses. Known as Conficker, it quickly infected more than 12 million computers, ravaging everything from the computer system at a surgical ward in England to the computer networks of the French military.

Conficker remains a ticking time bomb. It now has the power to lash together those infected computers into a vast supercomputer called a botnet that can be controlled clandestinely by its creators. What comes next remains a puzzle. Conficker could be used as the world’s most powerful spam engine, perhaps to distribute software programs to trick computer users into purchasing fake antivirus protection. Or much worse. It might also be used to shut off entire sections of the Internet. But whatever happens, Conficker has demonstrated that the Internet remains highly vulnerable to a concerted attack.

“If you’re looking for a digital Pearl Harbor, we now have the Japanese ships streaming toward us on the horizon,” Rick Wesson, the chief executive of Support Intelligence, a computer consulting firm, said recently.

The Internet’s original designers never foresaw that the academic and military research network they created would one day bear the burden of carrying all the world’s communications and commerce. There was no one central control point and its designers wanted to make it possible for every network to exchange data with every other network. Little attention was given to security. Since then, there have been immense efforts to bolt on security, to little effect.

“In many respects we are probably worse off than we were 20 years ago,” said Eugene Spafford, the executive director of the Center for Education and Research in Information Assurance and Security at Purdue University and a pioneering Internet security researcher, “because all of the money has been devoted to patching the current problem rather than investing in the redesign of our infrastructure.”

In fact, many computer security researchers view the nearly two decades of efforts to patch the existing network as a Maginot Line approach to defense, a reference to France’s series of fortifications that proved ineffective during World War II. The shortcoming in focusing on such sturdy digital walls is that once they are evaded, the attacker has access to all the protected data behind them. “Hard on the outside, with a soft chewy center,” is the way many veteran computer security researchers think of such strategies.

Despite a thriving global computer security industry that is projected to reach $79 billion in revenues next year, and the fact that in 2002 Microsoft itself began an intense corporatewide effort to improve the security of its software, Internet security has continued to deteriorate globally.

Even the most heavily garrisoned military networks have proved vulnerable. Last November, the United States military command in charge of both the Iraq and Afghanistan wars discovered that its computer networks had been purposely infected with software that may have permitted a devastating espionage attack.

That is why the scientists armed with federal research dollars and working in collaboration with the industry are trying to figure out the best way to start over. At Stanford, where the software protocols for original Internet were designed, researchers are creating a system to make it possible to slide a more advanced network quietly underneath today’s Internet. By the end of the summer it will be running on eight campus networks around the country.

The idea is to build a new Internet with improved security and the capabilities to support a new generation of not-yet-invented Internet applications, as well as to do some things the current Internet does poorly — such as supporting mobile users.

The Stanford Clean Slate project won’t by itself solve all the main security issues of the Internet, but it will equip software and hardware designers with a toolkit to make security features a more integral part of the network and ultimately give law enforcement officials more effective ways of tracking criminals through cyberspace. That alone may provide a deterrent.

This is not the first time a replacement has been proposed for the current Internet. For example, modern Windows and Macintosh computers already come equipped to support a new Internet protocol known as IPv6 that would fix many of the shortcomings of the current IPv4 version. However, because of cost, performance and compatibility questions it has languished.

That has not discouraged the Stanford engineers who say they are on a mission to “reinvent the Internet.” They argue that their new strategy is intended to allow new ideas to emerge in an evolutionary fashion, making it possible to move data traffic seamlessly to a new networking world. Like the existing Internet, the new network will almost certainly have no one central point of control and no one organization will run it. It is most likely to emerge as new hardware and software are built in to the router computers that run today’s network and are adopted as Internet standards.

For all those efforts, though, the real limits to computer security may lie in human nature.

The Internet’s current design virtually guarantees anonymity to its users. (As a New Yorker cartoon noted some years ago, “On the Internet, nobody knows that you’re a dog.”) But that anonymity is now the most vexing challenge for law enforcement. An Internet attacker can route a connection through many countries to hide his location, which may be from an account in an Internet cafe purchased with a stolen credit card.

“As soon as you start dealing with the public Internet, the whole notion of trust becomes a quagmire,” said Stefan Savage, an expert on computer security at the University of California, San Diego.

A more secure network is one that would almost certainly offer less anonymity and privacy. That is likely to be the great tradeoff for the designers of the next Internet. One idea, for example, would be to require the equivalent of drivers’ licenses to permit someone to connect to a public computer network. But that runs against the deeply held libertarian ethos of the Internet.

Proving identity is likely to remain remarkably difficult in a world where it is trivial to take over someone’s computer from half a world away and operate it as your own. As long as that remains true, building a completely trustable system will remain virtually impossible.

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Author: JOHN MARKOFF
Original Source: New York Times
Date Published: February 15, 2009
Web Source: http://www.nytimes.com/2009/02/15/weekinreview/15markoff.html
Date Accessed Online: 2009-02-15

Oil Apocalypse Now? (Documentary)

2009-02-08T12:11:00.000-08:00

Oil Apocalypse Now?

This British Documentary tries to look at, investigate and understand the current history of oil (i.e. "Peak Oil") and the effect of this limited supply of oil will have on our human future including our ability to transport ourselves, our products and, ultimately, our food supply across the world.

Moscow, Tehran force the US's hand

2009-02-08T12:07:00.000-08:00

It may seem there could be nothing in common between the blowing up of a bridge in the Khyber, the usage of an air base nestling in the foothills of the Pamirs and the launch of a 60-pound (37.2 kilogram) satellite into the night sky that will circle the Earth 14 times a day.

But band them together and they trigger the political and diplomatic equivalent of what is known in the game of chess as zwischenzug, which means an intermediate move that improves a player's position.

Persians, who invented chess, would have mastery over zwischenzug.

Iranian Foreign Ministry spokesman Hassan Qashqavi said in Tehran on Wednesday, "Iran has no plans to stop its nuclear activity. At its forthcoming meeting, the 'Iran Six' should draw up a logical approach and accept the fact that Iran is a nuclear state."

The Taliban don't play chess
It is unlikely the Taliban factored Iran's imminent zwischenzug when they blew up the 30-meter iron bridge in the Khyber Pass 24 kilometers west of Peshawar in northwest Pakistan on Monday, which halted the supplies for North Atlantic Treaty Organization (NATO) troops in Afghanistan. But the disruption of traffic once again exposed the vulnerability of the main NATO supply route and focused attention on Tehran.

This is forcing NATO into a major policy shift. NATO's top military commander in Afghanistan, General John Craddock, admitted that the alliance would not oppose individual member nations making deals with Iran to supply their forces in Afghanistan. To quote Craddock, a four-star American general who is also NATO's supreme allied commander, "Those would be national decisions. Nations should act in a manner that is consistent with their national interest and with their ability to resupply their forces. I think it is purely up to them."

Craddock was transferring rapidly to the operational plane what the alliance's secretary general Jaap de Hoop Scheffer had said only a week ago that NATO member countries, including the United States, should engage Iran to combat the Taliban in Afghanistan.

Scheffer wouldn't have spoken without Washington's nod. Craddock underscored it. NATO is keen to use the new highway built by the Indian government from central Afghanistan to the Iranian border at Zaranj, which would allow access to Iran's deep-sea Persian Gulf port at Chabahar. The road is largely unused. The Indians completed work on the highway hardly a fortnight ago.
NATO is scrambling. It must somehow reduce dependence on Pakistani supply routes, which are currently used for ferrying about 80% of supplies. The irony cannot be lost on onlookers. NATO seeks an Iranian route when Tehran is demanding a US troop pullout from Afghanistan.

Last Thursday, Iranian Foreign Minister Manouchehr Mottaki remarked that Iran had paid attention to the plans of US President Barack Obama's administration to withdraw US troops from Iraq and "we believe this should be extended to Afghanistan as well".

The irony deepens insofar as a fortnight ago US Secretary of Defense Robert Gates in his first congressional testimony in the new administration leveled allegations about increased Iranian "interference" and doublespeak in Afghanistan, and implied that Tehran was fueling the insurgency.

Russia's zwischenzug
The heart of the matter is that the US's efforts to open supply routes from the north across the Amu Darya have got caught up in the great game in Central Asia. American spokesmen blithely claimed Russia and the Central Asian states were providing supply routes. But the geopolitics do not bear that out.

Kyrgyzstan President Kurmanbek Bakiyev dropped a bombshell on Tuesday by demanding the closure of the US military base in Manas, which is used for ferrying supplies for Afghanistan. He said this after talks with Russian President Dmitry Medvedev, during which Moscow pledged to Bishkek that it was writing off $180 million debt and would also provide Kyrgyzstan with a $2 billion soft loan and an outright grant of $150 million.

NATO's envoy to Central Asia, Robert Simmons, rushed to Bishkek in a last-ditch attempt to stall the Kyrgyz move, but only to regret the development and admit that NATO's Afghan operations would be adversely affected. Washington still hopes to salvage the situation, but that involves taking Moscow's help.

Moscow is willing, as always - provided the US is prepared to shelve its untimely geopolitical agenda to broaden and deepen its (and NATO's) strategic presence in Central Asia on the pretext of developing new supply routes for Afghanistan. Plainly put, Moscow feels irritated about Washington's abrasive diplomacy in Central Asia in recent weeks.

The US signed an agreement with Kazakhstan, Russia's key ally, offering to procure "a significant part" of its supplies for Afghanistan from that country. and in turn is pressuring it to make troop deployments in Afghanistan. Conceivably, Moscow (and Beijing) view with disquiet the US move to court their key Shanghai Cooperation Organization (SCO) and Collective Security Treaty Organization (CSTO) ally into the Western strategic orbit. Conceivably, Moscow's zwischenzug to evict the US military from Kyrgyzstan would enjoy tacit Chinese encouragement as well.

Nyet to selective engagement
Washington prefers "selective engagement" without addressing the underlying factors that caused the chill in relations. The Kremlin remains cautiously optimistic that Obama may address relations from a fresh perspective. The mood is reflected in a pithy comment by former Russian president Mikhail Gorbachev that "there are grounds for optimism, so far".

But an underlying sense of exasperation is visible. As a Moscow commentator put it, the George W Bush era may be over, but the "consequences are still there"; Obama might have new ideas, but the "old wire-pullers" are still there in the establishment in key positions; and, therefore, Obama might need "years rather than months to shape a new foreign policy".

So, Moscow resorted to zwischenzug. Last Saturday, the influential Moscow paper Nezavisimaya Gazeta reported that Russia proposed to reopen the key Soviet air base of Bombora on the Black Sea coast in Abkhazia. On Tuesday, Russia signed an agreement with Belarus setting up an integrated air defense system. On Wednesday, Medvedev used the CSTO forum to reiterate he was open to cooperation with the US in the fight against terrorism in Afghanistan.

Again, in related comments on Wednesday, Russian Deputy Foreign Minister Grigory Karasin said, "We hope that we and the United States will hold special and professional talks on this issue [of transit routes to Afghanistan] in the near future. We will see how effectively we can cooperate ... The US, Central Asia, China - we are all interested in a successful anti-terrorism operation in Afghanistan."

Karasin assured that the US's eviction from Manas "would not prove an obstruction". He said, "We [Russia] hope that we and the United States will hold special and professional talks on the issue in the near future. We will see how effectively we can cooperate."

In sum, the ball is in Obama's court. The big question is whether he can bulldoze the hardliners and jettison the heavy baggage of geopolitics that his faltering Afghan war is needlessly carrying.

Meanwhile, the shadow of US-Russian relations falls on the Hindu Kush. The Russian media reported that a high-level Afghan military delegation is expected in Moscow in the "near future". With a growing possibility that Obama may withdraw support for Afghan President Hamid Karzai, Moscow will be weighing its options.

The US is perched on a slippery slope in Afghanistan. The Taliban resurgence continues and the security situation is deteriorating, but NATO is unable to increase its force level or evolve an effective strategy. NATO supply lines have come under threat, but alternate routes are yet to be negotiated. The US's rift with the Karzai regime is widening, but a replacement is never easy to be catapulted into power in Kabul. Again, Washington should pressure Islamabad, but the situation in Pakistan is far too fragile to take any greater pressure.

It is against this complex backdrop that Iran's satellite took off into the star-studded night sky on Monday. Named Hope, its launch has a multiplier effect on geopolitics. Warning bells are ringing in Western capitals that any expectation of Tehran lowering its guard is misplaced. The launch can be seen as a technological feat, which it indeed is, but Hope also gives a hard message about Iran's military capability.

Experts estimate that the two-stage rocket used for its launch could easily carry a small warhead to a target 2,500 kilometers away. It may not be an inter-continental ballistic missile, but southern Europe comes within its range, as indeed the whole of Israel. Simply put, Iran has in hand a credible deterrent against a US-Israeli military attack.

White House press secretary Robert Gibbs described the launch as of "acute concern to this administration". German Foreign Minister Frank-Walter Steinmeir said after his first meeting with US Secretary of State Hillary Clinton, "We want to be helpful in making sure that the outstretched hand of President Obama is a strong hand." No doubt, these are strong words.

But an unmatchable German word is more to the point - zugzwang. It literally means "compelled to move". That is, a situation develops on the chessboard when any move a player makes can only weaken his position, but he is nonetheless compelled to make his move.

It may be far-fetched to say that Moscow and Tehran coordinated their respective zwischenzug, but certainly both keenly await Washington's zugzwang .

Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.

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Author: M K Bhadrakumar
Original Source: Asia Times
Date Published: Feb 6, 2009
Web Source: http://www.atimes.com/atimes/Central_Asia/KB06Ag02.html
Date Accessed Online: 2009-02-09

Our Epistemological Depression

2009-02-04T08:57:00.000-08:00

Major recessions are characterized by something novel. Opacity and pseudo-objectivity created the crisis today.

The history of socialism is the history of failure—and so is the history of capitalism, but in a different sense. For the history of socialism is one of fundamental failure, a failure to provide incentives and an inability to coordinate information about supply and effective demand. The history of capitalism, by contrast, is the history of dialectical failure: it is a history of the creation of new institutions and practices that may be successful, even transformative for a while, but which eventually prove dysfunctional, either because their intrinsic weaknesses become more evident over time or because of a change in external circumstances. Historically, these institutional failures have led to two reactions. They lead to governmental attempts to reform corporate and financial institutions, through changes in law and regulation (such as limited liability laws, creation of the FDIC, the SEC, etc.). They also lead market institutions to reform themselves, as investors and managers learn what forms of organization and which practices are dysfunctional. The history of capitalism, then, is the history of success through dialectical failure.

History rarely repeats itself. There are some standard patterns in economic recessions, but major recessions are characterized by something novel. If only this were not the case: economists have devoted a great deal of attention to learning the lessons of the Great Depression that began in 1929, not least Ben Bernanke. As a result, we are unlikely to make the errors of monetary policy made by the Fed in that era (of tightening money when it should have been loosened); or the errors of fiscal policy made by the Treasury (such as raising taxes when they should have been lowered); or the errors of ideological tone made during the 1930s, when anticapitalist rhetoric frightened many potential investors from making new investments. In all of these respects, we have learned from the past.

We should attend to what is new and especially problematic about the current downturn and why it may not respond to policies modeled on avoiding the errors of the past.

Unfortunately, initial conditions are too different from case to case to simply apply some historical template that would permit us to fully understand what is currently happening, let alone how to deal with it. Instead of explaining why this recession (or depression) is just like the others, we should attend to what is new and especially problematic about the current downturn and why it may not respond to policies modeled on avoiding the errors of the past.

What is old and what is new in the current economic downturn? Major recessions typically begin with a rapid change of prices in the market for some asset or commodity; that price decline then affects financial institutions (banks), leading to a decline in the availability of credit, and then to a decline in commercial activity. Usually, then, localized crises in capitalist societies are reflected in the financial sector. When the crisis reaches the financial sector, it becomes a more general crisis.

This time, too, there is an underlying commodity bubble, namely in housing. But it has had much wider ramifications, because financial institutions have become interconnected in two unprecedented ways. First, once distinct financial services became interconnected: banking, credit, insurance, and the trading of derivatives have become interlinked because they are conducted by the same companies. Second, financial institutions are more connected across national borders, so that there are entities across the globe that invested in toxic American-made instruments and are suffering as a result (including municipalities in Norway that invested tax revenues in American collateralized debt obligations, now worth 15 percent of their face value).

The financial system created a fog so thick that even its captains could not navigate it.

What we have is not so much the crisis of some underlying commodity that gets reflected in the financial system, as a crisis caused within the financial system itself. The most important bubble of the last decade or so was not of the housing sector, but of the financial sector, a bubble reflected by the 20 percent of S & P 500 profits that were made in the financial sector.

Some of the causes of our contemporary crisis are well known by now. There were governmental errors: monetary policy that was too loose; government monitoring agencies that were too lax; and government policies specifically intended to encourage home ownership among African-Americans and Hispanics that had the unintended but quite anticipatable effect of extending mortgages to those who lacked the ability to repay them. There were perverse alignments of market incentives, incentives that put personal interests at odds with corporate interests, and corporate interests at odds with the public interest. There were principal-agent problem within firms, where traders were remunerated with bonuses for selling collateralized debt obligations without regard to the long-run viability of the underlying assets. Rating agencies were corrupted because they were paid by the sellers of the goods they rated, offering unreliable evaluations that redounded against the purchasers of mortgage-backed securities. Large profits were made by companies that packaged and sold mortgages and mortgage-backed securities without needing to be concerned with their ultimate viability. It turns out that intermediation of risk reduces the incentives for adequate risk management: so long as risk is intermediated, from a mortgage loan broker to a commercial bank to an investment bank to an investor, there is really no incentive, at each stage of the game, to have adequate risk-managing policies in place.

These factors have received a good deal of attention. But they are not the whole story, and certainly not the most original part of the predicament. What seems most novel is the role of opacity and pseudo-objectivity. This may be our first epistemologically-driven depression. (Epistemology is the branch of philosophy that deals with the nature and limits of knowledge, with how we know what we think we know.) That is, a large role was played by the failure of the private and corporate actors to understand what they were doing. Most heads of ailing or deceased financial institutions did not comprehend the degree of risk and exposure entailed by the dealings of their underlings—and many investors, including municipalities and pension funds, bought financial instruments without understanding the risks involved. We should keep this in mind when we chastise government agencies such as the SEC for failing to monitor what was going on. If the leading executives of financial firms failed to understand what was taking place, how could we expect government regulators to do so? The financial system created a fog so thick that even its captains could not navigate it.

Diversification and complexity, which are both supposed to reduce risk, turned out to have unintended and unanticipated negative consequences. The purported virtues mutated into vices.

Recognizing the novel element of the present crisis means that getting out of it will require more than wise monetary and fiscal policy. Getting us out of the current mess requires calling into question several cultural patterns that have driven our corporate economy in recent decades. These are belief in the virtues of diversification and complexity, which are both supposed to reduce risk, and in the virtue of accountability, which is understood as rewarding performance based on ostensible measures of objectivity. Each of these has turned out to have unintended and unanticipated negative consequences. The purported virtues have mutated into vices.

The diversification of investment, which was intended to reduce risk to institutional investors, ended up spreading risk more widely, as investors across the country and around the world found themselves holding mortgage-backed American securities of declining and indeterminate value. There was a belief in the financial sector that diversification of assets was a substitute for due diligence on each asset, so that if one bundled enough assets together, one didn’t have to know much about the assets themselves. The creation of securities based on a pool of diverse assets (mortgage loans, student loans, credit card receivables, etc.) meant that when markets declined radically, it became impossible to determine an accurate price for the security.

There was also the fallacy of diversification of activities within the firm. This was predicated on the belief that the more areas you are financially involved in, the more protected you are from loss in any one area. But the unintended consequence of this is that the more areas you are involved in, the less you know about them, and the more subject you are to unexpected and unanticipated shocks, especially when the assets decline in tandem.

The diversification of financial firms, which was supposed to create efficiencies and synergies, ended up spreading contagion, as investment banks and other financial institutions such as AIG (once a successful insurance company) were brought down by divisions specializing in real estate or in derivatives.

The complexity of newly created financial instruments, which were supposed to use mathematical sophistication to diminish risk, ended up creating opacity—an inability of any but a few analysts to get a clear sense of what was happening. And the creation of arcane financial instruments made effective supervision virtually impossible, both by superiors in the firm, and by outside regulators.

As Niall Ferguson has put it, 'Those whom the gods want to destroy they first teach math.'

The cult of “accountability” was related to diversification. As companies grew larger and more diverse in their holdings, new layers of management were needed to supervise and coordinate their disparate units. From the point of view of top management, the diversity of operations means that executives were managing assets and services with which they have little familiarity. This has led to the spread of pseudo-objectivity: the search for standardized measures of achievement across large and disparate organizations. Its implicit premises were these: that information which is numerically measurable is the only sort of knowledge necessary; that numerical data can substitute for other forms of inquiry; and that numerical acumen can substitute for practical knowledge about the underlying assets and services.

A good deal of our current economic travails can be traced to this increasing valuation of purportedly objective criteria, so denoted because they can be expressed and manipulated in mathematical form by people who may be skilled at such manipulation but who lack “concrete” knowledge or experience of the things being made or traded. As Niall Ferguson has put it, “Those whom the gods want to destroy they first teach math.” The paradigm—and the precursor of our current crisis—was the rise and fall of Long Term Capital Management, founded by two of the fathers of quantitative options financing, Myron Scholes and Robert C. Merton. Knowing a great deal of math, but not very much history, they developed trading models that radically underestimated the risk entailed in their financial speculation, leading to a dramatic collapse of the company in the summer of 1998. But the phenomenon is more widespread. Attaching a number creates a belief that the information is more solid than is actually the case. That is what I mean by “pseudo-objectivity.” In each case, it is a response to what (to recoin a phrase) one might call alienation from the means of production, the attempt to substitute abstract and quantitative knowledge for concrete and qualitative knowledge.

The shibboleth of linking pay to performance created tremendous incentives for CEOs, executives, and traders to devote their creative energies to gaming the metrics.

The cult of “accountability” was linked to key innovations that turned out to have unanticipated undersides. One was the shibboleth of linking pay to performance, which put a premium on schemes that purported to measure performance. This tended to produce “hard” numbers that seemed reliable but were not. It created tremendous incentives for CEOs, executives, and traders to devote their creative energies to gaming the metrics, i.e. into coming up with schemes that purported to demonstrate productivity or profit by massaging the data, or by underinvesting in maintenance and human capital formation to boost quarterly earnings or their equivalents.

Two milestones in the process of creating the fog of finance were the transformation of Wall Street investment banks from private partnerships to publicly traded corporations (beginning with Salomon Brothers in 1986), and the repeal of the Glass-Steagall Act of 1933 through the Gramm-Leach-Bliley Act of 1999. The former created tremendous incentives for risk-taking, since the firms no longer invested using the money of their top executives, who instead were remunerated based in large part on the amount of business the firm conducted, creating incentives to increase business by producing ever more complex and opaque financial instruments, such as collateralized debt obligations, swaps, etc. Then along came Gramm-Leach-Bliley, which opened the door to unlimited contagion, so that when one financial sector turned downward, it took the rest with it.

Looking ahead, the sort of government regulation and private re-organization that will be most beneficial will focus on these epistemological problems. Some of this goes under the rubric of transparency: making the asset holdings of financial institutions more publicly visible in order to reduce the problem of counterparty risk. Equally desirable would be transparency through the reduction of complexity, which includes avoiding intra-institutional contagion through greater limits on the ability of financial institutions to engage in an open-ended variety of financial activities. It means, in short, the reformulation of something like the Glass-Steagall Act, which would separate savings banks, investment banks, insurance and brokerage from one another.

Over and above government action, private individuals and firms should make decisions with these epistemological considerations in mind. That would mean avoiding firms that are “too complex to manage” in Amar Bhidé’s memorable phrase. Companies should not expand beyond the ability of top management to comprehend the firm’s actual activities. That will mean smaller and less diversified firms. Investors may want to ask the question: is this firm so big, or engaged in such diverse activities that its management doesn’t understand the activities in which it is involved? (And by understand, I don’t mean simply the ability to read a current balance sheet, but rather to understand the underlying dynamics of the products or services being provided.) If not, decide to invest elsewhere.

Without financial institutions that people have faith in, a fiscal stimulus is unlikely to have much of a multiplier effect.

This message has not yet taken hold among public policy makers. There is much talk about monetary policy and fiscal stimulus. But without financial institutions that people have faith in, a fiscal stimulus is unlikely to have much of a multiplier effect. It is widely assumed that people will have faith in financial institutions if the Treasury injects capital into them. But the problem is not just that major financial institutions are short on operating capital: it is that recent experience seems to show that they are incapable of prudently managing the capital they have. In short, economic actors believe that other economic actors don’t know what they’re doing. Nor is the problem merely one of isolating “bad assets”—it is of a system that creates bad assets because of misaligned incentives and the fog created by opacity and pseudo-objectivity.

Confidence cannot just be conjured out of air. Nor can it be created with injections of capital or fiscal stimulus. It will be rebuilt to the extent that financial institutions take actions that lead us to believe that they know what they are doing. And they are more likely to know what they are doing if they are smaller, less diversified, and less engaged with financial instruments that are too clever by half.

Some recent policies seem likely to exacerbate the problems I’ve outlined. Take the Treasury’s encouragement of institutional consolidation through amalgamation. Bank of America was encouraged to take over Merrill Lynch; and JPMorgan Chase took over Bear Stearns, and then bought the assets of Washington Mutual. Whatever the purported advantages of these takeovers, the creation of ever larger and more diversified companies makes it more likely that these firms will be plagued by the epistemological problems noted above. The Treasury has created more firms that can’t really be understood (or whose riskiness can’t be assessed)—not by their managers, not by government regulators, and not by investors.

To speak of a crisis of financial epistemology may sound abstract, but it has had very concrete and disastrous consequences. Understanding this underrated aspect of our current crisis is a prerequisite for getting us out of the hole we’ve dug ourselves into.

Jerry Z. Muller is a history professor at The Catholic University of America and the author of “The Mind and the Market: Capitalism in Modern European Thought” (2002). His course “Thinking about Capitalism” has just been released by The Teaching Company.

Editor’s note: Amar Bhide has asked that it be noted that some of the ideas in this essay draw upon his articles, "An accident waiting to happen," which appeared on his website, and "Insiders and Outsiders," which appeared on Forbes.com.

Image by Darren Wamboldt/the Bergman Group.

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Author: Jerry Z. Muller
Original Source: American
Date Published: January 29, 2009
Web Source: http://american.com/archive/2009/our-epistemological-depression
Date Accessed Online: 2009-02-05

Found in Translation

2009-01-22T11:10:00.000-08:00

By the time I pull up to the farmhouse in the Spanish region of Navarre, the other students have already arrived. Waiting for lunch, we nervously pretend that we understand what’s going on. A blond woman whose name I can’t pronounce points to a bottle as she pours each student a glass and says, with exaggerated clarity, “Ardoa” (“wine”).

It’s the first word I learn at this barnetegi, or Basque-language immersion school, and its ordinariness comes as a relief. Until now, as an American living in Spain, the only Basque words I’d managed to glean have to do with violence and power: ertzaintza (“police”), kale borroka (“street violence”), etarra (“terrorist” or “freedom fighter,” depending on your point of view). The media use the words every time an arrest, a demonstration, or an assassination—there was one in September—takes place. Indeed, most of what anyone in or outside Spain hears about Basques has to do with ETA, the radical group that has killed more than 800 people in the past 40 years in its quest for an independent Basque homeland.

“In the rest of Spain, they only talk about us as a problem—the Basque problem,” says Amaia Marin, who is attending an intermediate course at the barnetegi. She is Basque but doesn’t know Euskera, the Basque language, because it was not taught in schools when she was growing up. She doesn’t see herself as particularly political and thinks of independence as little more than “a pretty dream.” But she was driven to learn Euskera, she says, because “being Basque is the thing I’m most proud of in my life.”

Thousands of years old, Euskera has no links to any other known tongue, living or dead. That alone makes it the clearest sign of Basque identity. Franco sought to suppress the language during his dictatorship. In Spain today, when Basques enjoy greater autonomy than at any time since the 19th century, and when Spanish conservatives see that autonomy as a threat to national unity, the language remains a political issue. In some parts of Basque country, a town meeting held in Spanish is reason for protest, even vandalism; meanwhile, new laws that require 2,000 large businesses to offer their services in both Euskera and Spanish have triggered strong opposition outside Basque country. But for people like Amaia, Euskera is a way out of the Basque problem, a way to be Basque regardless of politics.

The number of Euskera speakers has risen in recent years, from 657,000 in 2001 to 775,000 (out of a total Basque population of about 3 million) in 2006. This growth can be attributed largely to schools—parents can choose how much Euskera training their children get, and the majority favor some education in their ancestral tongue. Yet 100,000 of those speakers have learned the language as adults. In my group, Celia and Maite are here because their employer—Microsoft—is expanding into Basque country, while Italian-born Nicoletta, Chilean Paula, and Spanish Dani are married to Basques and have signed up because their children are learning Euskera in school.

In class, we struggle through introductions and learn to count to 10. (Actually, we learn to count to 100, but I’m so flustered by the compound words that I falter at the double digits.) We learn directions and body parts, including zakila (“penis”) and alua (“vagina”)—the Basques are nothing if not frank. In between lessons, we go for coffee in Bakaiku, a pretty mountain village west of Pamplona, where the stone houses are adorned with fat geraniums. It’s an idyllic place if you ignore the pro-independence graffiti and posters that spring up every night—one of which gives me my first thrill of comprehension: Euskal Herria Aurrera, “Forward With the Basque Country.”

No one teaches politics at the barnetegi, but subtle messages slip in among the vocabulary words heavy with x’s and z’s. A geography lesson shows the Basque provinces without any boundary delineating the three in France from the four in Spain. And we get an explanation of the ancient fueros, laws that granted the Basques certain rights and privileges in exchange for loyalty to the kingdom of Castile.

But the rise in Euskera has not necessarily fed secessionist impulses. “The fact that you learn the language doesn’t mean that you’ll vote for a nationalist party,” says Xabier Monasterio, the director of pedagogy at the Gabriel Aresti school, which runs this barnetegi. Support for the conservative Basque Nationalist Party has stayed relatively constant over the past 10 years. So has the percentage of Basques who want independence from Spain (35 percent) over the past two decades.

“I love teaching Euskera, because it is the language of our people,” Monasterio says. “It’s who we are. It’s not better or worse than any other language—it’s just ours.” I think about his words during the last class, which we spend singing Basque songs. There are hymns to innocent love and odes to sailors, but the most moving song consists of just the words gueria da—“it’s ours”—repeated over and over. To the tune of “Hava Nagila.”

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Author: Lisa Abend
Original Source: Atlantic
Date Published: January/February 2009 Atlantic
Web Source: http://www.theatlantic.com/doc/200901/basque
Date Accessed Online: 2009-01-22

How should Obama reform health care?

2009-01-20T01:34:00.000-08:00

In every industrialized nation, the movement to reform health care has begun with stories about cruelty. The Canadians had stories like the 1946 Toronto Globe and Mail report of a woman in labor who was refused help by three successive physicians, apparently because of her inability to pay. In Australia, a 1954 letter published in the Sydney Morning Herald sought help for a young woman who had lung disease. She couldn’t afford to refill her oxygen tank, and had been forced to ration her intake “to a point where she is on the borderline of death.” In Britain, George Bernard Shaw was at a London hospital visiting an eminent physician when an assistant came in to report that a sick man had arrived requesting treatment. “Is he worth it?” the physician asked. It was the normality of the question that shocked Shaw and prompted his scathing and influential 1906 play, “The Doctor’s Dilemma.” The British health system, he charged, was “a conspiracy to exploit popular credulity and human suffering.”

In the United States, our stories are like the one that appeared in the Times before Christmas. Starla Darling, pregnant and due for delivery, had just taken maternity leave from her factory job at Archway & Mother’s Cookie Company, in Ashland, Ohio, when she received a letter informing her that the company was going out of business. In three days, the letter said, she and almost three hundred co-workers would be laid off, and would lose their health-insurance coverage. The company was self-insured, so the employees didn’t have the option of paying for the insurance themselves—their insurance plan was being terminated.

“When I heard that I was losing my insurance, I was scared,” Darling told the Times. Her husband had been laid off from his job, too. “I remember that the bill for my son’s delivery in 2005 was about $9,000, and I knew I would never be able to pay that by myself.” So she prevailed on her midwife to induce labor while she still had insurance coverage. During labor, Darling began bleeding profusely, and needed a Cesarean section. Mother and baby pulled through. But the insurer denied Darling’s claim for coverage. The couple ended up owing more than seventeen thousand dollars.

The stories become unconscionable in any society that purports to serve the needs of ordinary people, and, at some alchemical point, they combine with opportunity and leadership to produce change. Britain reached this point and enacted universal health-care coverage in 1945, Canada in 1966, Australia in 1974. The United States may finally be there now. In 2007, fifty-seven million Americans had difficulty paying their medical bills, up fourteen million from 2003. On average, they had two thousand dollars in medical debt and had been contacted by a collection agency at least once. Because, in part, of underpayment, half of American hospitals operated at a loss in 2007. Today, large numbers of employers are limiting or dropping insurance coverage in order to stay afloat, or simply going under—even hospitals themselves.

Yet wherever the prospect of universal health insurance has been considered, it has been widely attacked as a Bolshevik fantasy—a coercive system to be imposed upon people by benighted socialist master planners. People fear the unintended consequences of drastic change, the blunt force of government. However terrible the system may seem, we all know that it could be worse—especially for those who already have dependable coverage and access to good doctors and hospitals.

Many would-be reformers hold that “true” reform must simply override those fears. They believe that a new system will be far better for most people, and that those who would hang on to the old do so out of either lack of imagination or narrow self-interest. On the left, then, single-payer enthusiasts argue that the only coherent solution is to end private health insurance and replace it with a national insurance program. And, on the right, the free marketeers argue that the only coherent solution is to end public insurance and employer-controlled health benefits so that we can all buy our own coverage and put market forces to work.

Neither side can stand the other. But both reserve special contempt for the pragmatists, who would build around the mess we have. The country has this one chance, the idealist maintains, to sweep away our inhumane, wasteful patchwork system and replace it with something new and more rational. So we should prepare for a bold overhaul, just as every other Western democracy has. True reform requires transformation at a stroke. But is this really the way it has occurred in other countries? The answer is no. And the reality of how health reform has come about elsewhere is both surprising and instructive.

No example is more striking than that of Great Britain, which has the most socialized health system in the industrialized world. Established on July 5, 1948, the National Health Service owns the vast majority of the country’s hospitals, blood banks, and ambulance operations, employs most specialist physicians as salaried government workers, and has made medical care available to every resident for free. The system is so thoroughly government-controlled that, across the Atlantic, we imagine it had to have been imposed by fiat, by the coercion of ideological planners bending the system to their will.

But look at the news report in the Times of London on July 6, 1948, headlined “FIRST DAY OF HEALTH SERVICE.” You might expect descriptions of bureaucratic shock troops walking into hospitals, insurance-company executives and doctors protesting in the streets, patients standing outside chemist shops worrying about whether they can get their prescriptions filled. Instead, there was only a four-paragraph notice between an item on the King and Queen’s return from a holiday in Scotland and one on currency problems in Germany.

The beginning of the new national health service “was taking place smoothly,” the report said. No major problems were noted by the 2,751 hospitals involved or by patients arriving to see their family doctors. Ninety per cent of the British Medical Association’s members signed up with the program voluntarily—and found that they had a larger and steadier income by doing so. The greatest difficulty, it turned out, was the unexpected pent-up demand for everything from basic dental care to pediatric visits for hundreds of thousands of people who had been going without.

The program proved successful and lasting, historians say, precisely because it was not the result of an ideologue’s master plan. Instead, the N.H.S. was a pragmatic outgrowth of circumstances peculiar to Britain immediately after the Second World War. The single most important moment that determined what Britain’s health-care system would look like was not any policymaker’s meeting in 1945 but the country’s declaration of war on Germany, on September 3, 1939.

As tensions between the two countries mounted, Britain’s ministers realized that they would have to prepare not only for land and sea combat but also for air attacks on cities on an unprecedented scale. And so, in the days before war was declared, the British government oversaw an immense evacuation; three and a half million people moved out of the cities and into the countryside. The government had to arrange transport and lodging for those in need, along with supervision, food, and schooling for hundreds of thousands of children whose parents had stayed behind to join in the war effort. It also had to insure that medical services were in place—both in the receiving regions, whose populations had exploded, and in the cities, where up to two million war-injured civilians and returning servicemen were anticipated.

As a matter of wartime necessity, the government began a national Emergency Medical Service to supplement the local services. Within a period of months, sometimes weeks, it built or expanded hundreds of hospitals. It conducted a survey of the existing hospitals and discovered that essential services were either missing or severely inadequate—laboratories, X-ray facilities, ambulances, care for fractures and burns and head injuries. The Ministry of Health was forced to upgrade and, ultimately, to operate these services itself.

The war compelled the government to provide free hospital treatment for civilian casualties, as well as for combatants. In London and other cities, the government asked local hospitals to transfer some of the sick to private hospitals in the outer suburbs in order to make room for victims of the war. As a result, the government wound up paying for a large fraction of the private hospitals’ costs. Likewise, doctors received government salaries for the portion of their time that was devoted to the new wartime medical service. When the Blitz came, in September, 1940, vast numbers of private hospitals and clinics were destroyed, further increasing the government’s share of medical costs. The private hospitals and doctors whose doors were still open had far fewer paying patients and were close to financial ruin.

Churchill’s government intended the program to be temporary. But the war destroyed the status quo for patients, doctors, and hospitals alike. Moreover, the new system proved better than the old. Despite the ravages of war, the health of the population had improved. The medical and social services had reduced infant and adult mortality rates. Even the dental care was better. By the end of 1944, when the wartime medical service began to demobilize, the country’s citizens did not want to see it go. The private hospitals didn’t, either; they had come to depend on those government payments.

By 1945, when the National Health Service was proposed, it had become evident that a national system of health coverage was not only necessary but also largely already in place—with nationally run hospitals, salaried doctors, and free care for everyone. So, while the ideal of universal coverage was spurred by those horror stories, the particular system that emerged in Britain was not the product of socialist ideology or a deliberate policy process in which all the theoretical options were weighed. It was, instead, an almost conservative creation: a program that built on a tested, practical means of providing adequate health care for everyone, while protecting the existing services that people depended upon every day. No other major country has adopted the British system—not because it didn’t work but because other countries came to universalize health care under entirely different circumstances.

In France, in the winter of 1945, President de Gaulle was likewise weighing how to insure that his nation’s population had decent health care after the devastation of war. But the system that he inherited upon liberation had no significant public insurance or hospital sector. Seventy-five per cent of the population paid cash for private medical care, and many people had become too destitute to afford heat, let alone medications or hospital visits.

Long before the war, large manufacturers and unions had organized collective insurance funds for their employees, financed through a self-imposed payroll tax, rather than a set premium. This was virtually the only insurance system in place, and it became the scaffolding for French health care. With an almost impossible range of crises on its hands—food shortages, destroyed power plants, a quarter of the population living as refugees—the de Gaulle government had neither the time nor the capacity to create an entirely new health-care system. So it built on what it had, expanding the existing payroll-tax-funded, private insurance system to cover all wage earners, their families, and retirees. The self-employed were added in the nineteen-sixties. And the remainder of uninsured residents were finally included in 2000.

Today, Sécurité Sociale provides payroll-tax-financed insurance to all French residents, primarily through a hundred and forty-four independent, not-for-profit, local insurance funds. The French health-care system has among the highest public-satisfaction levels of any major Western country; and, compared with Americans, the French have a higher life expectancy, lower infant mortality, more physicians, and lower costs. In 2000, the World Health Organization ranked it the best health-care system in the world. (The United States was ranked thirty-seventh.)

Switzerland, because of its wartime neutrality, escaped the damage that drove health-care reform elsewhere. Instead, most of its citizens came to rely on private commercial health-insurance coverage. When problems with coverage gaps and inconsistencies finally led the nation to pass its universal-coverage law, in 1994, it had no experience with public insurance. So the country—you get the picture now—built on what it already had. It required every resident to purchase private health insurance and provided subsidies to limit the cost to no more than about ten per cent of an individual’s income.

Every industrialized nation in the world except the United States has a national system that guarantees affordable health care for all its citizens. Nearly all have been popular and successful. But each has taken a drastically different form, and the reason has rarely been ideology. Rather, each country has built on its own history, however imperfect, unusual, and untidy.

Social scientists have a name for this pattern of evolution based on past experience. They call it “path-dependence.” In the battles between Betamax and VHS video recorders, Mac and P.C. computers, the QWERTY typewriter keyboard and alternative designs, they found that small, early events played a far more critical role in the market outcome than did the question of which design was better. Paul Krugman received a Nobel Prize in Economics in part for showing that trade patterns and the geographic location of industrial production are also path-dependent. The first firms to get established in a given industry, he pointed out, attract suppliers, skilled labor, specialized financing, and physical infrastructure. This entrenches local advantages that lead other firms producing similar goods to set up business in the same area—even if prices, taxes, and competition are stiffer. “The long shadow cast by history over location is apparent at all scales, from the smallest to the largest—from the cluster of costume jewelry firms in Providence to the concentration of 60 million people in the Northeast Corridor,” Krugman wrote in 1991.

With path-dependent processes, the outcome is unpredictable at the start. Small, often random events early in the process are “remembered,” continuing to have influence later. And, as you go along, the range of future possibilities gets narrower. It becomes more and more unlikely that you can simply shift from one path to another, even if you are locked in on a path that has a lower payoff than an alternate one.

The political scientist Paul Pierson observed that this sounds a lot like politics, and not just economics. When a social policy entails major setup costs and large numbers of people who must devote time and resources to developing expertise, early choices become difficult to reverse. And if the choices involve what economists call “increasing returns”—where the benefits of a policy increase as more people organize their activities around it—those early decisions become self-reinforcing. America’s transportation system developed this way. The century-old decision to base it on gasoline-powered automobiles led to a gigantic manufacturing capacity, along with roads, repair facilities, and fuelling stations that now make it exceedingly difficult to do things differently.

There’s a similar explanation for our employment-based health-care system. Like Switzerland, America made it through the war without damage to its domestic infrastructure. Unlike Switzerland, we sent much of our workforce abroad to fight. This led the Roosevelt Administration to impose national wage controls to prevent inflationary increases in labor costs. Employers who wanted to compete for workers could, however, offer commercial health insurance. That spurred our distinctive reliance on private insurance obtained through one’s place of employment—a source of troubles (for employers and the unemployed alike) that we’ve struggled with for six decades.

Some people regard the path-dependence of our policies as evidence of weak leadership; we have, they charge, allowed our choices to be constrained by history and by vested interests. But that’s too simple. The reality is that leaders are held responsible for the hazards of change as well as for the benefits. And the history of master-planned transformation isn’t exactly inspiring. The familiar horror story is Mao’s Great Leap Forward, where the collectivization of farming caused some thirty million deaths from famine. But, to take an example from our own era, consider Defense Secretary Donald Rumsfeld’s disastrous reinvention of modern military operations for the 2003 invasion of Iraq, in which he insisted on deploying far fewer ground troops than were needed. Or consider a health-care example: the 2003 prescription-drug program for America’s elderly.

This legislation aimed to expand the Medicare insurance program in order to provide drug coverage for some ten million elderly Americans who lacked it, averaging fifteen hundred dollars per person annually. The White House, congressional Republicans, and the pharmaceutical industry opposed providing this coverage through the existing Medicare public-insurance program. Instead, they created an entirely new, market-oriented program that offered the elderly an online choice of competing, partially subsidized commercial drug-insurance plans. It was, in theory, a reasonable approach. But it meant that twenty-five million Americans got new drug plans, and that all sixty thousand retail pharmacies in the United States had to establish contracts and billing systems for those plans.

On January 1, 2006, the program went into effect nationwide. The result was chaos. There had been little realistic consideration of how millions of elderly people with cognitive difficulties, chronic illness, or limited English would manage to select the right plan for themselves. Even the savviest struggled to figure out how to navigate the choices: insurance companies offered 1,429 prescription-drug plans across the country. People arrived at their pharmacy only to discover that they needed an insurance card that hadn’t come, or that they hadn’t received pre-authorization for their drugs, or had switched to a plan that didn’t cover the drugs they took. Tens of thousands were unable to get their prescriptions filled, many for essential drugs like insulin, inhalers, and blood-pressure medications. The result was a public-health crisis in thirty-seven states, which had to provide emergency pharmacy payments for the frail. We will never know how many were harmed, but it is likely that the program killed people.

This is the trouble with the lure of the ideal. Over and over in the health-reform debate, one hears serious policy analysts say that the only genuine solution is to replace our health-care system (with a single-payer system, a free-market system, or whatever); anything else is a missed opportunity. But this is a siren song.

Yes, American health care is an appallingly patched-together ship, with rotting timbers, water leaking in, mercenaries on board, and fifteen per cent of the passengers thrown over the rails just to keep it afloat. But hundreds of millions of people depend on it. The system provides more than thirty-five million hospital stays a year, sixty-four million surgical procedures, nine hundred million office visits, three and a half billion prescriptions. It represents a sixth of our economy. There is no dry-docking health care for a few months, or even for an afternoon, while we rebuild it. Grand plans admit no possibility of mistakes or failures, or the chance to learn from them. If we get things wrong, people will die. This doesn’t mean that ambitious reform is beyond us. But we have to start with what we have.

That kind of constraint isn’t unique to the health-care system. A century ago, the modern phone system was built on a structure that came to be called the P.S.T.N., the Public Switched Telephone Network. This automated system connects our phone calls twenty-four hours a day, and over time it has had to be upgraded. But you can’t turn off the phone system and do a reboot. It’s too critical to too many. So engineers have had to add on one patch after another.

The P.S.T.N. is probably the shaggiest, most convoluted system around; it contains tens of millions of lines of software code. Given a chance for a do-over, no self-respecting engineer would create anything remotely like it. Yet this jerry-rigged system has provided us with 911 emergency service, voice mail, instant global connectivity, mobile-phone lines, and the transformation from analog to digital communication. It has also been fantastically reliable, designed to have as little as two hours of total downtime every forty years. As a system that can’t be turned off, the P.S.T.N. may be the ultimate in path-dependence. But that hasn’t prevented dramatic change. The structure may not have undergone revolution; the way it functions has. The P.S.T.N. has made the twenty-first century possible.

So accepting the path-dependent nature of our health-care system—recognizing that we had better build on what we’ve got—doesn’t mean that we have to curtail our ambitions. The overarching goal of health-care reform is to establish a system that has three basic attributes. It should leave no one uncovered—medical debt must disappear as a cause of personal bankruptcy in America. It should no longer be an economic catastrophe for employers. And it should hold doctors, nurses, hospitals, drug and device companies, and insurers collectively responsible for making care better, safer, and less costly.

We cannot swap out our old system for a new one that will accomplish all this. But we can build a new system on the old one. On the start date for our new health-care system—on, say, January 1, 2011—there need be no noticeable change for the vast majority of Americans who have dependable coverage and decent health care. But we can construct a kind of lifeboat alongside it for those who have been left out or dumped out, a rescue program for people like Starla Darling.

In designing this program, we’ll inevitably want to build on the institutions we already have. That precept sounds as if it would severely limit our choices. But our health-care system has been a hodgepodge for so long that we actually have experience with all kinds of systems. The truth is that American health care has been more flotilla than ship. Our veterans’ health-care system is a program of twelve hundred government-run hospitals and other medical facilities all across the country (just like Britain’s). We could open it up to other people. We could give people a chance to join Medicare, our government insurance program (much like Canada’s). Or we could provide people with coverage through the benefits program that federal workers already have, a system of private-insurance choices (like Switzerland’s).

These are all established programs, each with advantages and disadvantages. The veterans’ system has low costs, one of the nation’s best information-technology systems for health care, and quality of care that (despite what you’ve heard) has, in recent years, come to exceed the private sector’s on numerous measures. But it has a tightly limited choice of clinicians—you can’t go to see any doctor you want, and the nearest facility may be far away from where you live. Medicare allows you to go to almost any private doctor or hospital you like, and has been enormously popular among its beneficiaries, but it costs about a third more per person and has had a hard time getting doctors and hospitals to improve the quality and safety of their care. Federal workers are entitled to a range of subsidized private-insurance choices, but insurance companies have done even less than Medicare to contain costs and most have done little to improve health care (although there are some striking exceptions).

Any of the programs could allow us to offer a starting group of Americans—the uninsured under twenty-five years of age, say—the chance to join within weeks. With time and experience, the programs could be made available to everyone who lacks coverage. The current discussion between the Obama Administration and congressional leaders seems to center on opening up the federal workers’ insurance options and Medicare (or the equivalent) this way, with subsidized premiums for those with low incomes. The costs have to be dealt with. The leading proposals would try to hold down health-care spending in various ways (by, for example, requiring better management of patients with expensive chronic diseases); employers would have to pay some additional amount in taxes if they didn’t provide health insurance for their employees. There’s nothing easy about any of this. But, if we accept it, we’ll all have a lifeboat when we need one.

It won’t necessarily be clear what the final system will look like. Maybe employers will continue to slough off benefits, and that lifeboat will grow to become the entire system. Or maybe employers will decide to strengthen their benefits programs to attract employees, and American health care will emerge as a mixture of the new and the old. We could have Medicare for retirees, the V.A. for veterans, employer-organized insurance for some workers, federally organized insurance for others. The system will undoubtedly be messier than anything an idealist would devise. But the results would almost certainly be better.

Massachusetts, where I live and work, recently became the first state to adopt a system of universal health coverage for its residents. It didn’t organize a government takeover of the state’s hospitals or insurance companies, or force people into a new system of state-run clinics. It built on what existed. On July 1, 2007, the state began offering an online choice of four private insurance plans for people without health coverage. The cost is zero for the poor; for the rest, it is limited to no more than about eight per cent of income. The vast majority of families, who had insurance through work, didn’t notice a thing when the program was launched. But those who had no coverage had to enroll in a plan or incur a tax penalty.

The results have been remarkable. After a year, 97.4 per cent of Massachusetts residents had coverage, and the remaining gap continues to close. Despite the requirement that individuals buy insurance and that employers either provide coverage or pay a tax, the program has remained extremely popular. Repeated surveys have found that at least two-thirds of the state’s residents support the reform.

The Massachusetts plan didn’t do anything about medical costs, however, and, with layoffs accelerating, more people require subsidized care than the state predicted. Insurance premiums continue to rise here, just as they do elsewhere in the country. Many residents also complain that eight per cent of their income is too much to pay for health insurance, even though, on average, premiums amount to twice that much. The experience has shown national policymakers that they will have to be serious about reducing costs.

For all that, the majority of state residents would not go back to the old system. I’m among them. For years, about one in ten of my patients—I specialize in cancer surgery—had no insurance. Even though I’d waive my fee, they struggled to pay for their tests, medications, and hospital stay.

I once took care of a nineteen-year-old college student who had maxed out her insurance coverage. She had a treatable but metastatic cancer. But neither she nor her parents could afford the radiation therapy that she required. I made calls to find state programs, charities—anything that could help her—to no avail. She put off the treatment for almost a year because she didn’t want to force her parents to take out a second mortgage on their home. But eventually they had to choose between their daughter and their life’s savings.

For the past year, I haven’t had a single Massachusetts patient who has had to ask how much the necessary tests will cost; not one who has told me he needed to put off his cancer operation until he found a job that provided insurance coverage. And that’s a remarkable change: a glimpse of American health care without the routine cruelty.

It will be no utopia. People will still face co-payments and premiums. There may still be agonizing disputes over coverage for non-standard treatments. Whatever the system’s contours, we will still find it exasperating, even disappointing. We’re not going to get perfection. But we can have transformation—which is to say, a health-care system that works. And there are ways to get there that start from where we are. ♦

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Author: Atul Gawande
Original Source: New Yorker
Date Published: January 26, 2009
Web Source: http://www.newyorker.com/reporting/2009/01/26/090126fa_fact_gawande
Date Accessed Online: 2009-01-20

'What I Want for You — and Every Child in America'

2009-01-15T01:48:00.000-08:00

By President-elect Barack Obama

Next Tuesday, Barack Obama will be sworn in as our 44th President. On this historic occasion, PARADE asked the President-elect, who is also a devoted family man, to get personal and tell us what he wants for his children. Here, he shares his letter to them.

Dear Malia and Sasha,

I know that you've both had a lot of fun these last two years on the campaign trail, going to picnics and parades and state fairs, eating all sorts of junk food your mother and I probably shouldn't have let you have. But I also know that it hasn't always been easy for you and Mom, and that as excited as you both are about that new puppy, it doesn't make up for all the time we've been apart. I know how much I've missed these past two years, and today I want to tell you a little more about why I decided to take our family on this journey.

When I was a young man, I thought life was all about me-about how I'd make my way in the world, become successful, and get the things I want. But then the two of you came into my world with all your curiosity and mischief and those smiles that never fail to fill my heart and light up my day. And suddenly, all my big plans for myself didn't seem so important anymore. I soon found that the greatest joy in my life was the joy I saw in yours. And I realized that my own life wouldn't count for much unless I was able to ensure that you had every opportunity for happiness and fulfillment in yours. In the end, girls, that's why I ran for President: because of what I want for you and for every child in this nation.

I want all our children to go to schools worthy of their potential-schools that challenge them, inspire them, and instill in them a sense of wonder about the world around them. I want them to have the chance to go to college-even if their parents aren't rich. And I want them to get good jobs: jobs that pay well and give them benefits like health care, jobs that let them spend time with their own kids and retire with dignity.

I want us to push the boundaries of discovery so that you'll live to see new technologies and inventions that improve our lives and make our planet cleaner and safer. And I want us to push our own human boundaries to reach beyond the divides of race and region, gender and religion that keep us from seeing the best in each other.

Sometimes we have to send our young men and women into war and other dangerous situations to protect our country-but when we do, I want to make sure that it is only for a very good reason, that we try our best to settle our differences with others peacefully, and that we do everything possible to keep our servicemen and women safe. And I want every child to understand that the blessings these brave Americans fight for are not free-that with the great privilege of being a citizen of this nation comes great responsibility.

That was the lesson your grandmother tried to teach me when I was your age, reading me the opening lines of the Declaration of Independence and telling me about the men and women who marched for equality because they believed those words put to paper two centuries ago should mean something.

She helped me understand that America is great not because it is perfect but because it can always be made better-and that the unfinished work of perfecting our union falls to each of us. It's a charge we pass on to our children, coming closer with each new generation to what we know America should be.

I hope both of you will take up that work, righting the wrongs that you see and working to give others the chances you've had. Not just because you have an obligation to give something back to this country that has given our family so much-although you do have that obligation. But because you have an obligation to yourself. Because it is only when you hitch your wagon to something larger than yourself that you will realize your true potential.

These are the things I want for you-to grow up in a world with no limits on your dreams and no achievements beyond your reach, and to grow into compassionate, committed women who will help build that world. And I want every child to have the same chances to learn and dream and grow and thrive that you girls have. That's why I've taken our family on this great adventure.

I am so proud of both of you. I love you more than you can ever know. And I am grateful every day for your patience, poise, grace, and humor as we prepare to start our new life together in the White House.

Love, Dad

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Author: President-elect Barack Obama
Original Source: Parade Magazine
Date Published: 01/14/2009
Web Source: http://www.parade.com/export/sites/default/news/2009/01/barack-obama-letter-to-my-daughters.html
Date Accessed Online: 2009-01-15

Taken for a Ride (Documentary)

2009-01-14T02:40:00.000-08:00

After living in Europe (in particular the beautifully organized transport system in Strasbourg, France) and traveling in places like Taiwan, I have to ask: Why Does America Have the Worst Public Transit in the Industrialized World, and the Most Freeways?

In Taken for a Ride, documentary filmmakers Jim Kleina and Martha Olson look at the history of how General Motors willfully dismantled the United States' mass transit systems in the early 1940s (in order to promote people to buy more cars). They show how the highway lobby has increasingly put pressure on government to encourage highway construction and limit mass transit system. We see today that when everyone uses cars in places like Los Angeles, transportation clogs up. Clearly, it's already too late to save the majority of these past public transportation infastructures, but maybe it's possible to renew interest in public transportation in order to create cities for people to live in rather than cars.

Philip Zimbardo: The Time Paradox

2009-01-13T21:12:00.000-08:00

In this video The Time Paradox, at FORA.tv, psychologist Philip Zimbardo offers an interesting account of subjective or psychological time. Namely, he considers that we have a select few frameworks of time reference:

1.) past time perspective - postie
2.) past time perspective - negative
3.) present time perspective - hedonism
4.) present time perspective - fatalism
5.) future time perspective - life-goal oriented
6.) future time perspective - transcendental
[#7.) holistic expansive present, based on experience of now (zen)]

After looking into the classic child psychological experiment with marshmallows concerning certain the ability of children to delay gratification. He then goes on the explain how early tendancies have important consequences in terms of how adults behave. These time perspectives, he argues, have dramatic consequences for how we live our lives and how we can learn to function effectively in multiple time perspective frameworks.

Wary of Islam, China Tightens a Vise of Rules

2009-01-08T00:35:00.000-08:00

KHOTAN, China — The grand mosque that draws thousands of Muslims each week in this oasis town has all the usual trappings of piety: dusty wool carpets on which to kneel in prayer, a row of turbans and skullcaps for men without headwear, a wall niche facing the holy city of Mecca in the Arabian desert.

But large signs posted by the front door list edicts that are more Communist Party decrees than Koranic doctrines.

The imam’s sermon at Friday Prayer must run no longer than a half-hour, the rules say. Prayer in public areas outside the mosque is forbidden. Residents of Khotan are not allowed to worship at mosques outside of town.

One rule on the wall says that government workers and nonreligious people may not be “forced” to attend services at the mosque — a generous wording of a law that prohibits government workers and Communist Party members from going at all.

“Of course this makes people angry,” said a teacher in the mosque courtyard, who would give only a partial name, Muhammad, for fear of government retribution. “Excitable people think the government is wrong in what it does. They say that government officials who are Muslims should also be allowed to pray.”

To be a practicing Muslim in the vast autonomous region of northwestern China called Xinjiang is to live under an intricate series of laws and regulations intended to control the spread and practice of Islam, the predominant religion among the Uighurs, a Turkic people uneasy with Chinese rule.

The edicts touch on every facet of a Muslim’s way of life. Official versions of the Koran are the only legal ones. Imams may not teach the Koran in private, and studying Arabic is allowed only at special government schools.

Two of Islam’s five pillars — the sacred fasting month of Ramadan and the pilgrimage to Mecca called the hajj — are also carefully controlled. Students and government workers are compelled to eat during Ramadan, and the passports of Uighurs have been confiscated across Xinjiang to force them to join government-run hajj tours rather than travel illegally to Mecca on their own.

Government workers are not permitted to practice Islam, which means the slightest sign of devotion, a head scarf on a woman, for example, could lead to a firing.

The Chinese government, which is officially atheist, recognizes five religions — Islam, Protestantism, Catholicism, Taoism and Buddhism — and tightly regulates their administration and practice. Its oversight in Xinjiang, though, is especially vigilant because it worries about separatist activity in the region.

Some officials contend that insurgent groups in Xinjiang pose one of the biggest security threats to China, and the government says the “three forces” of separatism, terrorism and religious extremism threaten to destabilize the region. But outside scholars of Xinjiang and terrorism experts argue that heavy-handed tactics like the restrictions on Islam will only radicalize more Uighurs.

Many of the rules have been on the books for years, but some local governments in Xinjiang have publicly highlighted them in the past seven weeks by posting the laws on Web sites or hanging banners in towns.

Those moves coincided with Ramadan, which ran from September to early October, and came on the heels of a series of attacks in August that left at least 22 security officers and one civilian dead, according to official reports. The deadliest attack was a murky ambush in Kashgar that witnesses said involved men in police uniforms fighting each other.

The attacks were the biggest wave of violence in Xinjiang since the 1990s. In recent months, Wang Lequan, the long-serving party secretary of Xinjiang, and Nuer Baikeli, the chairman of the region, have given hard-line speeches indicating that a crackdown will soon begin.

Mr. Wang said the government was engaged in a “life or death” struggle in Xinjiang. Mr. Baikeli signaled that government control of religious activities would tighten, asserting that “the religious issue has been the barometer of stability in Xinjiang.”

Anti-China forces in the West and separatist forces are trying to carry out “illegal religious activities and agitate religious fever,” he said, and “the field of religion has become an increasingly important battlefield against enemies.”

Uighurs are the largest ethnic group in Xinjiang, accounting for 46 percent of the population of 19 million. Many say Han Chinese, the country’s dominant ethnic group, discriminate against them based on the most obvious differences between the groups: language and religion.

The Uighurs began adopting Sunni Islam in the 10th century, although patterns of belief vary widely, and the religion has enjoyed a surge of popularity after the harshest decades of Communist rule. According to government statistics, there are 24,000 mosques and 29,000 religious leaders in Xinjiang. Muslim piety is especially strong in old Silk Road towns in the south like Kashgar, Yarkand and Khotan.

Many Han Chinese see Islam as the root of social problems in Xinjiang.

“The Uighurs are lazy,” said a man who runs a construction business in Kashgar and would give only his last name, Zhao, because of the political delicacy of the topic.

“It’s because of their religion,” he said. “They spend so much time praying. What are they praying for?”

The government restrictions are posted inside mosques and elsewhere across Xinjiang. In particular, officials take great pains to publicize the law prohibiting Muslims from arranging their own trips for the hajj. Signs painted on mud-brick walls in the winding alleyways of old Kashgar warn against making illegal pilgrimages. A red banner hanging on a large mosque in the Uighur area of Urumqi, the regional capital, says, “Implement the policy of organized and planned pilgrimage; individual pilgrimage is forbidden.”

As dozens of worshipers streamed into the mosque for prayer on a recent evening, one Uighur man pointed to the sign and shook his head. “We didn’t write that,” he said in broken Chinese. “They wrote that.”

He turned his finger to a white neon sign above the building that simply said “mosque” in Arabic script. “We wrote that,” he said.

Like other Uighurs interviewed for this article, he agreed to speak on the condition that his name not be used for fear of retribution by the authorities.

The government gives various reasons for controlling the hajj. Officials say that the Saudi Arabian government is concerned about crowded conditions in Mecca that have led to fatal tramplings, and that Muslims who leave China on their own sometimes spend too much money on the pilgrimage.

Critics say the government is trying to restrict the movements of Uighurs and prevent them from coming into contact with other Muslims, fearing that such exchanges could build a pan-Islamic identity in Xinjiang.

About two years ago, the government began confiscating the passports of Uighurs across the region, angering many people here. Now virtually no Uighurs have passports, though they can apply for them for short trips. The new restriction has made life especially difficult for businessmen who travel to neighboring countries.

To get a passport to go on an official hajj tour or a business trip, applicants must leave a deposit of nearly $6,000.

One man in Kashgar said the imam at his mosque, who like all official imams is paid by the government, had recently been urging congregants to go to Mecca only with legal tours.

That is not easy for many Uighurs. The cost of an official trip is the equivalent of $3,700, and hefty bribes usually raise the price. Once a person files an application, the authorities do a background check into the family. If the applicant has children, the children must be old enough to be financially self-sufficient, and the applicant is required to show that he or she has substantial savings in the bank. Officials say these conditions ensure that a hajj trip will not leave the family impoverished.

Rules posted last year on the Xinjiang government’s Web site say the applicant must be 50 to 70 years old, “love the country and obey the law.”

The number of applicants far outnumbers the slots available each year, and the wait is at least a year. But the government has been raising the cap. Xinhua, the state news agency, reported that from 2006 to 2007, more than 3,100 Muslims from Xinjiang went on the official hajj, up from 2,000 the previous year.

One young Uighur man in Kashgar said his parents were pushing their children to get married soon so they could prove the children were financially independent, thus allowing them to qualify to go on the hajj. “Their greatest wish is to go to Mecca once,” the man, who wished to be identified only as Abdullah, said over dinner.

But the family has to weigh another factor: the father, now retired, was once a government employee and a Communist Party member, so he might very well lose his pension if he went on the hajj, Abdullah said.

The rules on fasting during Ramadan are just as strict. Several local governments began posting the regulations on their Web sites last month. They vary by town and county but include requiring restaurants to stay open during daylight hours and mandating that women not wear veils and men shave their beards.

Enforcement can be haphazard. In Kashgar, many Uighur restaurants remained closed during the fasting hours. “The religion is too strong in Kashgar,” said one man. “There are rules, but people don’t follow them.”

One rule that officials in some towns seem especially intent on enforcing is the ban on students’ fasting. Supporters of this policy say students need to eat to study properly.

The local university in Kashgar adheres to the policy. Starting last year, it tried to force students to eat during the day by prohibiting them from leaving campus in the evening to join their families in breaking the daily fast. Residents of Kashgar say the university locked the gates and put glass shards along the top of a campus wall.

After a few weeks, the school built a higher wall.

Huang Yuanxi contributed research.

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Author: EDWARD WONG
Original Source: New York Times
Date Published: October 19, 2008
Web Source: http://www.nytimes.com/2008/10/19/world/asia/19xinjiang.html
Date Accessed Online: 2009-01-08

Town Asks Kung Fu Monks for Tourism Blessings

2009-01-08T00:30:00.000-08:00

GUANDU, China — The cluster of temples at the heart of this dusty, traffic-clogged town are picturesque reminders of China’s faded Buddhist past. On a recent day, dogs warmed themselves in the winter sun as a few toothless devotees bowed before smiling Buddhas. The only sounds were the occasional clanging of wind chimes and the splash of coins tossed into a mucky pond.

While soothing to some, the tranquillity is galling to Guandu’s city fathers, who recently spent $3 million to rebuild the four temples. They had become schools and warehouses during an earlier era, when the Communist Party sought to suppress nearly all religious activity, including that by Buddhists.

To sweeten the lure for free-spending tourists, they tore down the jumble of ancient homes that surrounded the 1,000-year-old temples and built rows of antique-looking shops that sell bootleg DVDs, sneakers and stuffed Santas.

Still no one came.

“The temples have been money losers,” grumbled Dou Weibao, the commissioner of ethnic and religious affairs in Guandu, which has long since been subsumed by the sprawl of Kunming, the capital of Yunnan Province.

Mr. Dou found a savior 1,200 miles away, in the Song Mountains of central China, where the warrior monks of Shaolin have mastered the art of monastery marketing. Since the early 1990s, the chief abbot, Shi Yongxin, has turned Shaolin into a lucrative draw for kung fu enthusiasts and has transformed his lithe disciples into global emissaries for the temple’s crowd-pleasing mix of Zen Buddhism and fly-kick combat.

In November, the two parties struck a straightforward deal. In exchange for managing the Guandu temples for 30 years, the monks will keep all proceeds from the donation boxes and gift shops. In a news release announcing the arrangement, Shaolin said its primary goals were to carry out charitable activities, maintain the temples and “spread the faith.”

Mr. Dou, who described himself as an atheist, sees things somewhat differently. “We’re going to use their fame to attract more business,” he said on Wednesday as he and a batch of newly arrived monks exchanged pleasantries.

Guandu officials say they will get no money from the deal, but they hope the Shaolin mystique will pull in the kind of crowds that have turned the flagship monastery, in Henan Province, into one of China’s most popular tourist destinations. Mr. Dou said the government would save the $88,000 once spent on temple maintenance each year. They are also counting on the tax revenue from a vast new mall that is nearing completion next to the temple complex.

The management deal has provoked howls among some Chinese, with many critics decrying the commercialization wrought by the Venerable Yongxin, who drives a Land Rover and has established Shaolin branches in Italy, Germany and Australia.

“Shaolin Chain Store,” read the headline of one recent posting written on Sina.com, a popular Web site. “There’s nothing wrong with chasing profits and fame, but they can’t use the name of Buddha.”

Such sentiments are hard to find in Guandu, where people seem to enjoy the sudden uptick in tourism. Last Wednesday, a squadron of incense vendors surged around visitors, and the Liu family noodle shop was doing a brisk business feeding the famished. “Before the monks came, the only people who came were old, and they didn’t spend any money,” said Cao Jinbu, the shop’s owner.

Wan Liqiong, who runs a trinket stand across from the temple gate, said she would probably have to switch some of her stock to include Shaolin-oriented souvenirs. “We’ve really been struggling here,” she said. Then she offered up an expression that roughly translates to “if you burn incense, they will come.”

After reading about the Shaolin deal in his local newspaper, Ying Daojin made the eight-hour journey by bus just to catch a glimpse of the monks. A 30-year-old corn farmer from northeast Yunnan, Mr. Ying described himself as a nonbeliever but seemed willing to give religion a try. “I’ve heard Buddhism can open your mind,” he said wide-eyed as a monk glided by. “Kung fu is also good for your health.”

According to his secretary, the Venerable Yongxin, the head monk based in Henan Province, does not give telephone interviews, but he encouraged a reporter to seek out Master Yanjiang, the abbot assigned to run the Guandu complex.

Master Yanjiang, however, proved just as elusive and refused to discuss his plans for the temples.

His monks were decidedly unapproachable.

The young men waved away inquiries. When one bespectacled monk found himself the subject of a photographer’s interest, he grabbed the camera and then offered a menacing martial arts pose when his demand to have the picture erased went unmet. Negotiations proved fruitless, and the pictures were deleted. The monk bowed, smiled and walked away.

Others were busy helping to renovate the gift shop while another group of monks was handling the bequest of an adherent who had stopped by bearing gifts.

A few days after their arrival, the monks taped a handwritten poster at the temple entrance advertising kung fu lessons. The cost: $44 for a month of instruction, nearly a full month’s wage for some Chinese workers.

The security guard at the front gate said the classes were selling well, with more than 100 people already signed up. He showed off the student roster, most of them children and teenagers. “Everyone loves the Shaolin monks,” he said with a smile.

Huang Yuanxi contributed research.

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Author: ANDREW JACOBS
Original Source: New York Times
Date Published: January 2, 2009
Web Source: http://www.nytimes.com/2009/01/02/world/asia/02shaolin.html
Date Accessed Online: 2009-01-08

Crisis of Faith in the Muslim World

2009-01-07T11:22:00.000-08:00

PART 1: Statistical evidence

Given the prominence of what Westerners call "Islamic fundamentalism", it seems odd to speak of a crisis of faith in the Islamic world. Several authors, including George Weigel [1] and Phillip Longman [2], support my contention that death of religious faith in Western Europe underlies its demographic decline. In slower motion, Islam faces a crisis of faith that will bring about a demographic catastrophe in the middle of the present century. I have called attention to the disturbing demographics of Islam in the past (The demographics of radical Islam, August 23), and here will offer evidence that the source of its demographic troubles is to be found in a failure of faith.

Striking statistical evidence supports this conclusion, which I shall present below. A wide range of fertility rates characterizes the Islamic world. Most of the variation in fertility can be explained by a single factor, namely, literacy: as Muslims (and especially Muslim women) learn to read, they drift away from traditional faith. The birthrate drops in consequence.

Radical Islam should be interpreted as a cry of despair in the face of the ineluctable decline of Islamic society. Read carefully, the leading Islamists say precisely this. At the close of the 19th century the Ottoman Empire was the sick man of Europe, and its former territories today comprise the incurables ward of geopolitics. From this vantage point, America's attempt to foist its own form of democracy on the Islamic world seems delusional.

As I have reported before, the demographic position of the Islamic world has set a catastrophe in motion. It is hard enough for rich nations to care for a growing elderly population, but impossible for poor nations to do so. Iran, along with most of the Muslim world, faces a population bust that will raise the proportion of dependent elderly in the population to 28% in 2050, from just 7% today.

If America faces discomfort, and Europe faces crisis, Muslim countries face breakdown. America now has a per capita gross domestic product (GDP) of US$40,000 and a diversified economy. Iran has a per capita GDP of just $7,000 and depends on oil exports for the state subsidies that keep its population fed and clothed - and Iran will no longer be able to export oil after 2020, according to some estimates.

America can ameliorate the impact of an aging population by raising productivity (so that fewer workers produce more GDP), attracting more skilled immigrants (and increasing its tax base), and, in the worst of all cases, tightening its belt. American life will not come to an end if more people drive compact cars instead of SUVs, or go camping for vacation instead of to Disney World. But the Islamic world is so poor that any reduction in living standards from present levels will cause social breakdown.

In 2002, the United Nations' Arab Development Report offered a widely-quoted summation of the misery of the present position of the Arab World, noting:
# The average growth rate of per capita income during the preceding 20 years in the Arab world was only one-half of 1% per annum, worse than anywhere but sub-Saharan Africa
# One in five Arabs lives on less than $2 per day
# Fifteen percent of the Arab workforce is unemployed, and this number could double by 2010
# Only 1% of the population has a personal computer, and only half of 1% use the Internet
# Half of Arab women cannot read.

Negotiating the demographic decline of the 21st century will be treacherous for countries that have proven their capacity to innovate and grow. For the Islamic world, it will be impossible. That is the root cause of Islamic radicalism, and there is nothing that the West can do to change it.

Among the Muslim states, Iran has seen the future most clearly, and drawn terrible conclusions. President Mahmud Ahmadinejad understands that life as Iranians know it is coming to an end, and has proposed drastic measures commensurate with the need.

In a program made public on August 15, Iran's new president proposed a pre-emptive response to the inevitable depopulation of rural Iran. He plans to reduce the number of villages from 66,000 to only 10,000, relocating 30 million Iranians out of a population of 70 million. In relative terms, that would be the biggest population transfer in history, dwarfing Joseph Stalin's collectivization campaign of the late 1920s.

A generation hence, Iran will not have the resources to provide infrastructure for more than 50,000 rural villages inhabited mainly by elderly and infirm peasants. In response, Iran will undertake the biggest exercise in social engineering in recorded history, excepting perhaps Cambodia under the Khmer Rouge.

America's fertility rate - the average number of children per woman - has stabilized at just around the replacement level. That is why America's elderly dependency ratio will stabilize around 2030. But the fertility rate of the Muslim world is falling much faster.

In the case of Iran, Algeria and many other Muslim countries, the fertility rate in 2050 is expected to fall below two children per woman. Replacement is 2.1. Even Saudi Arabia, the bastion of Islamic conservatism, will show a fertility rate below the replacement level, according to UN projections. I think the UN estimates err on the high side. Modernization is likely to push fertility down further than the demographers now calculate.

What is killing the fertility rate in the Muslim world? There really is no such thing as a "Muslim" fertility rate, but rather a wide spectrum of fertility rates that express different degrees of modernization. Where traditional conditions prevail, characterized by high rates of illiteracy (and especially female illiteracy) the fertility rate remains at the top of the world's rankings.

But where the modern world encroaches, fertility rates are plummeting to levels comparable to the industrial world. No single measure of modernization captures this transformation, but the literacy rate alone explains most of the difference in fertility rates among Muslim countries. Among the 34 largest Arab countries, just one factor, namely the difference in literacy rates, explains 60% of the difference in the population growth rate in 2005.

The population of Somalia, where only a quarter of adults can read, is growing at an enormous 4% per year. At that rate, the number of Somalis will double in just 18 years. But in Algeria, where 62% of adults can read, the population growth rate is only 1.4% per year. At that rate it would take 50 years for the population to double. Qatar, with a literacy rate close to 80%, has a population growth rate of just 1.2%.

Notes

[1] See here.
[2] The Empty Cradle, by Phillip Longman (Basic Books: New York, 2004). See my review in ATol, Faith, fertility and American dominance.

PART 2: The Islamist response

Note: The following essay, whose first installment appeared on November 1, was written in September, prior to the uprising of Muslim youth in France. Despair at the prospective dissolution of Muslim society is the mother of radical Islamism, and its path of least resistance goes toward violence. Nowhere is that more obvious than in France, where a spontaneous outburst of rage among disaffected Muslim youth has, over the past 10 days, mutated into an organized campaign of violence.

There is no evidence in the public domain that Islamist radicals initiated the violence. Nonetheless, generals are chosen by their

armies. The Grande Armee did not invade Russia because it was led by Napoleon Bonaparte; rather, Napoleon invaded Russia because he had half a million scavengers to lead, of whom only a tenth were French.

Albrecht von Wallenstein's army did not mutiny against the Austrian throne because its field marshal wished to betray his masters; rather, Wallenstein betrayed Austria because he could not maintain his locust-horde and be loyal to Austria at the same time.

A vast army of young unemployed Muslims, estimated to reach 25 million in the Arab countries alone by 2010, stands at the disposal of the would-be Napoleons and Wallensteins of radical Islam, and they have no choice but to lead it. The outcome well might be a new Algerian War fought on French soil, with all the horrors that attended that conflict just half a century ago.

For three years I have argued that Europe sought to avoid conflict with the Muslim world precisely in order to mitigate this danger, but that Europe's appeasement would be futile. Europe now faces a terrible reckoning which will not be paid in full for years.

Why does population growth fade in response to rising literacy in the Muslim world? It might be that Muslim women stop making babies as soon as they can read the instructions on a packet of birth-control pills, but the matter is not so simple.

The crisis of modernization first of all is a crisis of faith, and the attenuation of religious faith is the root cause of the birth rate bust in the modern world. Traditional society is everywhere fragile, not only in the Islamic world; by definition it is bounded by values and expectations handed down from the past, to which individuals must submit. Once the bands of tradition are broken and each individual may choose for herself what sort of family to raise, religious faith becomes the decisive motivation for bringing children into the world.

As Phillip Longman wrote in The Empty Cradle, "Faith is increasingly necessary as a motivation to have children." The collapse of traditional society has brought about a collapse of birth rates across cultures. Cultures that fail to reproduce themselves by definition are failed cultures, for the simple reason that they will cease to exist before many generations have passed.

That is why the Islamists - Muslims who seek a new theocracy - display a sense of extreme urgency. They are not conservative Muslims, for they reject Muslim society as it exists as corrupt and decadent. They are revolutionaries who want to create a new kind of totalitarian theocracy that orders every detail of human life. They are not throwbacks to the past, but products of modern education. Sayyid Qutb (1906-1966), the founder of the modern Islamist movement, formulated his theory while earning a master's degree in education at the Colorado State College of Education. He wrote in 1949:

Islamic society today is not Islamic in any sense of the word ... In our modern society we do not judge by what Allah has revealed; the basis of our economic life is usury; our laws permit rather than punish oppression ... We permit the extravagance and the luxury that Islam prohibits; we allow the starvation and the destitution of which the Messenger once said: "Whenever people anywhere allow a man to go hungry, they are outside the protection of Allah, the Blessed and the Exalted." [1]

The Islamists feel that they have nothing to lose, for the fear of cultural extinction surpasses the fear of physical death. The Islamist dream of theocracy, for example, Osama bin Laden's vision of a restored caliphate, represents what might be the last stand of an endangered culture, something like the Nazi hallucination of Aryan empire. The Islamists have nothing to lose, but they have much to gain: they perceive not only weakness, but also opportunity. Islamic life is dying, but far more slowly than the senile civilization of Western Europe.

Education and literacy appear to threaten traditional Muslim social relations. The cliff-like drop in Muslim fertility sets the stage for social crisis a generation from now. Islam threatens to join the list of failed cultures. By using the term "failed culture", I do not mean to deprecate Islam as a religion or Muslims individually. Islamist writers, starting with Sayyid Qutb, as quoted above, say precisely the same thing. It is not surprising that Islamist radicals are obsessed with survival. Although some of their behavior appears irrational, their underlying premise is not. The Islamist revival responds to the Muslim countries' failure to adapt to the modern world.

Urbanization, literacy and openness to the modern world will suppress the Muslim womb, in the absence of radical measures. Radical Islam is born of existential fear. In a new volume of academic essays on modern Islamic thought, two Islamist academics, Suha Taji-Farouki and Basheer M Nafi, observe, "Rather than being a development within cultural traditions that is internally generated, 20th-century Islamic thought is constitutively responsive; it is substantially a reaction to extrinsic challenges." [2]

The challenge stems from the transformation of Muslim life:

In the Middle East of 1900, for example, less than 10% of the inhabitants were city dwellers; by 1980, 47% were urban. In 1800, Cairo had a population of 250,000, rising to 600,000 by the beginning of the 20th century. The unprecedented influx of immigrants from rural areas brought the population of Cairo to almost 8 million by 1980. Massive urbanization altered patterns of living, of housing and architecture, of the human relation with space and land, of marketing, employment and consumption, and the very structure of family and social hierarchy. [3]

The sharp fall in the Muslim population growth rate expresses the extreme fragility of traditional society. Again citing Taji-Farouki and Nafi, this means"

A Muslim sense of vulnerability and outrage is further exacerbated by the seemingly unstoppable encroachment of American popular culture and modes of consumerism, and the transparent hypocrisy of the American rhetoric of universal rights and liberties. It is also stoked by Western ambivalence towards economic disparities in the world. [4]

The remarkable fact about Taji-Farouki's and Nafi's book is not the professorial observations quoted above. What is most remarkable, rather, is the alleged participation of one of the scholarly authors in terrorist enterprise.

Professor Nafi, who teaches history and Islamic studies at Birkbeck College, University of London, also happens to be under indictment in Florida for "conspiracy to murder, maim or injure persons outside the United States". He was deported from the US for visa violations in 1996, and was one of eight men, including three professors, indicted by a US District Court in Florida in 2003 for providing material aid to the terrorist organization Islamic Jihad. Nafi was indicted along with Ramadan Abdullah Shallah, an adjunct professor of Middle East Studies at the University of South Florida (USF). Reported Middle East analyst Daniel Pipes:

Even after the indictment, Arthur Lowrie, formerly vice chairman of USF's committee for Middle Eastern Studies, praises Shallah for his "good scholarly work". And Gwen Griffith-Dickson, director of Islamic studies at Birkbeck, describes Nafi as "highly respected", lauding him for his efforts "with energy and commitment, to encourage critical thinking about religious issues and academic balance in his students, and thus to encourage social responsibility". [5]

Basheer M Nafi is not the only Muslim intellectual to support violence in the cause of Islamic theocracy. Time magazine five years ago hailed the Geneva-based Professor Tariq Ramadan as one of the world's "spiritual innovators", for "creating a new kind of European Islam that bridges his Islamic values and Western culture". [6] "Ramadan's chosen task is to invent an independent European Islam ... With 15 million Muslims on the continent, Ramadan believes it's time to abandon the dichotomy in Muslim thought that has defined Islam in opposition to the West," Time enthused.

Ramadan's reputation grew such that Notre Dame University offered him its Henry R Luce professorship of "Religion, Conflict and Peacebuilding" in 2004. Before Ramadan could assume his position, however, the US Department of Homeland Security revoked his work visa on the grounds of alleged terrorist association.

Precise reasons were not given, but it turns out that the Department of Homeland Security was not alone in its evaluation of the Swiss Islamist. France had refused entry to Ramadan in 1996 because of alleged links to an Algerian terrorist then engaged in bombing attacks. [7] Ramadan since took up an appointment at Oxford, and in August this year was appointed to a panel advising British Prime Minister Tony Blair on Islamic matters.

A disturbing sort of observer effect is at work in the field of Islamic studies; it is hard to find coherent formulations of the Islamist position without finding that the formulator has already chosen involvement in terrorism. Westerners should not be too shocked at this turn of affairs, for stranger things have happened in the West. During the years before and after World War II, respectable academics who apologized for Soviet aggression often supported it covertly. Thanks to the Venona wiretap transcripts, we now are aware that prominent Americans who apologized for the violent actions of the defunct Soviet empire also were agents of Soviet espionage. [8] But the fact that prominent Islamist academics offer more than moral support for Islamist terrorism is a leading indicator of cultural despair.

We typically call terrorism "senseless". A Google search for the term "senseless and terrorism" yields more than half a million hits. But sense and rationality have an existential component, that is, we presume that we will continue to exist in order to be sensible and rational. If we know with near certainty that we shall cease to exist, or at least cease to exist in a recognizable way, the term "rationality" loses meaning. At this point we feel that we have nothing to lose, like Adolf Hitler in 1939. That is why the violent proclivities of Ramadan and Nafi must be explained existentially, rather than rationally.

Most of the world's cultures will go into oblivion without a fight, either because they cannot or do not wish to fight for survival. Of the world's endangered cultures, only one can and will fight to perpetuate itself, and that is Islam. Militancy is not unique to Islam.

Twice during the 20th century the nations of Europe fought each other for pre-eminence, with the result of their common ruin. Yet Islam's decline was not an accident, nor is the fearsome response to that decline offered by the Islamist radicals. Born in militancy, Islam among the world's religions offers a unique justification for conquest. The war that Islam will offer the West in its final throes will be a tragic, terrible, and prolonged war that cannot be avoided, but only fought to exhaustion.

Islam has one generation in which to turn its foothold in Western Europe into a governing power, before the effects of slowing population growth set in. Although the Muslim birth rate today is the world's second highest (after sub-Saharan Africa), it is falling faster than the birth rate of any other culture. By 2050, according to the latest United Nations projections, the population growth rate of the Muslim world will converge on that of the US (although it will be higher than Europe's or China's).

Islam has enough young men - the pool of unemployed Arabs is expected to reach 25 million by 2010 - to make its stand during the next 30 years. Because of mass migration to western Europe, the worst of the war might be fought on European soil.

Twenty million Muslims now live in western Europe; the dean of Islamic scholars, Bernard Lewis, predicts that Europe will be Islamic by no later than the end of this century. The numbers suggest otherwise; the end of the century will be too late.

Notes
[1] Social Justice in Islam, by Sayyid Qutb, translators John B Hardie and Hamid Algar (Islamic Publications International; Oneonta 2004)

[2] Suha Taji-Farouki and Basheer M Nafi, Islamic Thought in the Twentieth Century (Tauris: London 2004), page 9

[3] Ibid, page 2

[4] Op cit, page 14

[5] Terrorist Profs , February 24, 2003

[6] Trying to Bridge A Great Divide

[7] See Why Revoke Tariq Ramadan's US Visa?, by Daniel Pipes, New York Sun, August 27, 2004.

[8] http://www.cia.gov/csi/books/venona/venona.htm

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Author: Spengler
Original Source: Asia Times
Date Published: Nov 1, 2005 & Nov 8, 2005
Web Source: http://www.atimes.com/atimes/Front_Page/GK01Aa01.html
http://www.atimes.com/atimes/Front_Page/GK08Aa01.html
Date Accessed Online: 2009-01-08

Katrina and China's whirlwind growth

2009-01-07T10:53:00.000-08:00

China's economic growth arises from the greatest migration of peoples in history, involving the displacement of hundreds of millions to the coast from the interior over the course of a century. On a smaller scale, Hurricane Katrina emulates Chinese circumstances for the poor residents of New Orleans, the destruction of whose homes is the best thing that could have happened to them.

Inadvertently, the United States has taken a leaf from China's book. The US should stop worrying about the parity of the yuan and consider what it might learn from China's economic success.

Sunday's New York Times offered a piece titled "Katrina's tide carries many to hopeful shores", recounting the rising fortunes of impoverished New Orleans residents forced out of their flooded homes. The newspaper analyzed relocation patterns in 17 counties in and around Atlanta and Houston, two leading destinations for Katrina evacuees.

Like the Marcells, the average evacuee has landed in a neighborhood with nearly twice the income as the one left behind, less than half as much poverty, and significantly higher levels of education, employment and home ownership.

A Ms Marcell, a black woman interviewed by the Times, "was furious with Barbara Bush last fall when the former first lady, seeming to ignore the pain the storm had caused, said the evacuation was 'working very well' because most displaced families 'were underprivileged anyway'. Yet in calling [her new home] Atlanta a 'land of opportunity', Ms Marcell, from the other end of the class spectrum, is making a parallel point," the newspaper observed. I do not read the New York Times exhaustively, but this may be the first kind thing it has said about a member of the Bush family in a decade.

The best way to improve the lot of poor people is to move them out of poor regions into rich regions. Rich regions offer a culture of enterprise that easily assimilates new entrants, while poor regions labor under a cultural of poverty that stifles their most promising residents. Merely displacing people from poor regions, of course, does not necessarily improve their lot.

In the case of China, peasants arriving in cities improve their living standards manifold even with the humblest employment in an urban economy, and rapidly acquire skills that give them upward mobility. The same appears to be true for the refugees from Katrina.

That is the source of China's economic miracle. China's cities held only 135 million people in 1995, but will burgeon to 800 million by 2050, according to United Nations population forecasts. Peasants who spent their lives in rural poverty without hope of betterment are joining the global economy. At a 10% economic growth rate, China's output will double every seven years. It can sustain this growth rate as long as it can transfer people from low-productivity subsistence agriculture to high-productivity manufacturing. China's urban-rural population ratio now stands at about 1:2, but by mid-century will shift to 2:1.

The US long since accomplished the great transition from farm to city, but pockets of immiserated rural culture remain in the great cities. New Orleans notoriously enclosed the poorest black population in the United States. The city produced nothing of note, hosted no great financial institutions, attracted no entrepreneurs in the emerging technology industries, but offered an urban theme park to tourists attracted by the garish carnival, jazz funerals, decaying 19th-century architecture, Creole cooking, an officially tolerated sex industry - in short, the lurid slop of Anne Rice novels.

To the regret of tourists who no more will click their tongues over the quaintness of New Orleans culture, Katrina washed away the detritus of the US south's putrescent aristocracy. Brennan's, the city's best-known purveyor of local cuisine, will continue to cook gumbo at its Las Vegas location, joining the local reproductions of Venetian canals and the Eiffel Tower in America's commercial museum of world culture.

The former residents of New Orleans slums, meanwhile, find themselves in the promised land of shopping malls and suburban subdivisions. As the cited New York Times story says of Atlanta,

Growth is the region's secular religion. A half-century ago, Atlanta was a second-string province the size of Birmingham, Alabama. Now it is home to 4 million people and the world's busiest airport, with a prosperity that crosses color lines. Compared with blacks nationwide, the black population of Greater Atlanta is much better paid, much better educated and much more likely to be raising children with two parents at home.

Of course, the traditional culture of New Orleans will disappear, like most of the traditional cultures of the world. But the people of New Orleans are better off without it. Full disclosure: I never visited the city nor intended to, in part because I detest New Orleans jazz, but mostly because the ambience of louche hedonism annoys me. I read with indifference the innumerate eulogies to New Orleans culture.

Eulogies of this kind are becoming more frequent. Perhaps 90% of the world's languages will disappear during the next century. One is more likely to encounter KFC chicken or Domino's pizza in downtown Shanghai than the recondite and elegant cuisine that bears the name of the city.

Many beautiful things will disappear because poor people no longer will suffer to make them. One simply cannot find decent Mexican food in the United States, in part because traditional Mexican cuisine requires vast amounts of labor. Machine-made corn tortillas never will hold the savor of the hand-made article, but Mexicans migrate to the US precisely to escape a life of making tortillas by hand.

Atlanta, for readers whose main association with the Georgia state capital might be Gone With the Wind, has metamorphosed into an expanse of steel and glass surrounded by ticky-tacky housing developments, an emblem for the sort of urban sprawl that Europeans disdain. "I love New Orleans, don't get me wrong," one of the Katrina refugees told the New York Times. "But I thank God we are in Atlanta."

The best thing the US could do for the poor people of its urban ghettos is to expel them. One does not do poor people a favor by concentrating them in government housing (or for that matter refugee camps) where they depend on the public dole. Given the incidental costs of major hurricanes, there probably are cheaper ways to accomplish this, eg, simply pay them to leave.

This is difficult to accomplish in a democracy, to be sure, for the elected representatives of immiserated black Americans form a bloc large enough to thwart legislative attempts to better their conditions. Were the urban poor dispersed into the rich regions of the country, they no longer would vote as a bloc for the sort of congress members who now conspire to keep them poor.

It was the great luck of the poor blacks of New Orleans that a great wind came along to carry them away from servitude to their political leaders. The Black Caucus of America's Congress keeps urban blacks as political hostages, much as the regimes of the Arab world have exploited Palestinian refugees, whom they refuse to take in, and expel when convenient.

China's advantage is that it is not a democracy and can manage the great transfer of population by fiat (see China must wait for democracy, September 27, 2005). I favor democracy and abhor many practices of China's regime, but it is an ill wind that blows nobody good.

Nor do I mean to make light of the consequences of cultural deracination. Many of Katrina's refugees are ascending out of the humiliating poverty that blighted their lives back home. Now they will have the means to watch sex and violence on plasma-screen televisions, spend their free time in the esthetic dystopia of shopping malls, and worship in mega-churches.

Will more money make them happier? I do not think so, any more than the loss of traditional Chinese culture in the globalized urban jungle of the coastal cities will make Chinese peasants happier. With the admonition Careful what you wish for, I addressed that issue in a March 21 review of Rod Dreher's book Crunchy Cons.

What it will do, however, is enable them to contemplate their unhappiness with a sense of empowerment. People with money, education and opportunity may be as miserable as any illiterate dirt farmer, but they have the means - how did Thomas Jefferson put it? - for the pursuit of happiness. Whether they choose good or ill is not up to this writer. But it is a vicious form of condescension to condemn people to perpetual poverty in the name of preserving traditional culture.

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Author: Spengler
Original Source: Asia Times
Date Published: Apr 25, 2006
Web Source: http://www.atimes.com/atimes/China/HD25Ad01.html
Date Accessed Online: 2009-01-08

Suicide by Israel

2009-01-07T10:30:00.000-08:00

A policeman's nightmare is the prospective suicide who forces the constable to shoot in self-defense. No matter how justified the killing, others always will wonder whether the shooter had an opportunity to avoid a fatal outcome.

Peoples commit suicide as much as do individuals. The geopolitical cognate of "suicide by policeman" is Hamas' attempted suicide by Israel. Israel's objective is to eliminate Hamas rule. There are only two ways to do that: destroy Hamas' international support, or make its rule in Gaza insupportable.

I hate to be the one to bring up the unpleasant things that no one else wants to talk about, but just what do you do when a substantial group of people would rather die on their feet than live on their knees? For Hamas, to live on one's knees would be to accept a permanent Jewish presence in the historic land of Israel, an outcome which Hamas was formed to prevent in the first place.
One answer is that a slow-motion humanitarian disaster will gradually erode the fighting capacity and morale of Hamas and its popular base in Gaza, presuming that external sources of support can be throttled. What the International Red Cross calls "a full-blown humanitarian crisis" in Gaza is, in a certain sense, part of the solution, not part of the problem. A million and a half people have no way to live in Gaza except on the dole of the international community, in a Petrie dish for Islamist extremism.

As the pro-Israeli analyst Martin Kramer observes in his blog, economic sanctions against Gaza - that is, pressure on the civilian population - are an integral and entirely legitimate aim of Israeli policy. "Were Israel to lift the economic sanctions," Kramer writes, "It would transform Hamas control of Gaza into a permanent fact, solidify the division of the West Bank and Gaza, and undermine both Israel and Abbas by showing that violent 'resistance' to Israel produces better results than peaceful compromise and cooperation. Rewarding 'resistance' just produces more of it. So Israel's war aim is very straightforward, and it is not simply a total ceasefire. At the very least, it is a total ceasefire that also leaves the sanctions against Hamas in place. This would place Israel in an advantageous position to bring about the collapse of Hamas rule some time in the future - its long-term objective."

Israel's alternative would be to ignore Hamas, and instead attack Iran or Syria, Hamas' main supporters in the Muslim world. A humiliating blow against the state sponsors of Hamas would make it harder for an organization that represents itself as a non-state player to continue fighting. Last April, Israel had the opportunity to deal such a blow to Syria, and had it taken pre-emptive action against Syria at the time, it is unlikely that the present attack on Gaza would have been necessary. (Please see Ehud Olmert on the Damascus road Asia Times Online, April 15, 2009.)

War with Syria or Iran, to be sure, entails far more risk for the Jewish state. As Barak Ravid wrote in Ha'aretz: "Defense Minister Ehud Barak told [a December 20 conference in Tel Aviv] that Israel is strong enough to take down the Assad regime in case of war with Syria ... However, even if Israel strikes a severe blow, he told the conference, Syria 'even when battered and weak has a significant ability to inflict damage, as a result of the weapons it has and its capacity to use Hezbollah'. Barak emphasized that in the case of a confrontation with Iran, Syria and Hezbollah would also likely join the fighting, and that it is exceedingly difficult to forecast how another war in the Middle East would play out."

It is hard to fault Israel for not taking the risk of war with numerically larger, if technologically inferior, opponents, when those risks are very difficult to assess from the outside. Nonetheless, it seems clear that Israel chose to attack Gaza as a low-risk alternative. Hamas is a far softer opponent than Hezbollah during the 2006 Lebanon War. Hezbollah had received massive military support from Iran in building tunnel defenses and deploying sophisticated weapons. Hamas does not even appear to have night-vision equipment. A risk-averse strategic posture does not show Israel in a particularly strong light, whatever the merits or demerits of its present policy.

If the world had wanted Israel to adopt an alternative defense strategy, it should have encouraged an Israeli attack on Iran, or Syria, or both. Both the Bush administration as well as the Barack Obama transition team (via Obama's Middle East advisor Robert Malley) favored "engaging Syria", as did Israeli Prime Minister Olmert. That idea may have reached its best-used-by-date. As Lee Smith wrote December 24 on the Hudson Institute website, "The goal of trying to wedge Syria away from Iran is to return it to the so-called 'Sunni fold,' which includes, most importantly, Egypt and Saudi Arabia. The problem, however, is that over the last several years Damascus has alienated the Sunni powers, especially Saudi, whose King Abdullah has suffered multiple insults at the hands of Syrian President Bashar al-Assad. When enmity becomes personal, as it often does in the Middle East, there is no telling how or when it is likely to be resolved. In other words, there is no Sunni fold for the Syrians to return to: the Sunnis are hardly eager to embrace an Arab regime that over the last four years has served as the Persians' pitbull."

For the moment, Israel is treating Hamas as a state rather than as a state actor. As in any war, economic pressure on the civilian population, as well as military operations that kill civilians as collateral damage to the pursuit of military objectives, are legitimate instruments of warfare. It is hypocrisy to pretend otherwise.

To insist that Israel desist entirely from military activities that have a high probability of causing civilian casualties is doubly hypocritical. That would demand, in effect, that Israel value the lives of Palestinian civilians more than those of its own civilians, who are subject to rocket bombardment. That is something no state in the world can do, and it is silly to ask it. Israel has less reason than any other on Earth to heed such a demand. Never has the state of Israel been offered mercy by its enemies, nor has it any reason to expect it. They have nothing to lose and everything to gain by following the almost-golden rule: "Do unto others before they do unto you."

Israel is in the unenviable position of mopping up a problem created by the inertia of the international community. Fourth-generation "refugees" living in towns officially designated as "camps" never have existed under international law until the world community found it expedient to defer the "Palestinian problem" into the indefinite future. The Gazans cannot be economically viable on their 139 square miles of sand, and the humiliation of perpetual dependency and poverty makes a political solution unattainable.

The international community could help most by finding better homes for a few hundred thousand Gazans. The best-case scenario would be a parallel to Hurricane Katrina, which forced the mass evacuation of the city of New Orleans during 2005. Displaced to Atlanta, Georgia, Houston, Texas, and other cities with a strong black middle class, the poor African-American refugees soon were earning more and living better than they had in corrupt, backward New Orleans.

I reviewed the good fortune of the New Orleans refugees here (See Katrina and China's whirlwind growth Asia Times Online, April 25, 2006) and observed that the best way to help poor people is to move them out of poor regions into rich ones. The late Sam Kinison's stand-up comedy routine about world hunger applies doubly to Gaza. "You want to help world hunger? Stop sending them food. Don't send them another bite, send them U-Hauls ... we've been coming here giving you food for about 35 years now and we were driving through the desert, and we realized there wouldn't BE world hunger if you people would live where the FOOD IS!"

Otherwise, the default recommendation is what I offered five years ago, (See see More killing, please! Asia Times Online, June 12, 2003). As I observed at the time,

A recurring theme in the history of war is that most of the killing typically occurs long after rational calculation would call for the surrender of the losing side. Think of the Japanese after Okinawa, the Germans after the Battle of the Bulge, or the final phase of the Peloponnesian War, the Thirty Years War, or the Hundred Years War. Across epochs and cultures, blood has flown in proportion inverse to the hope of victory. Perhaps what the Middle East requires in order to achieve a peace settlement is not less killing, but more.

That is horrifying, but nonetheless true, and the international community simply may have to raise its threshold of horror.

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Author: Spengler
Original Source: Asia Times
Date Published: Jan 8, 2009
Web Source: http://www.atimes.com/atimes/Middle_East/KA08Ak01.html
Date Accessed Online: 2009-01-08

TED Video: Who was General Tso? and other mysteries of American Chinese food

2008-12-30T00:47:00.000-08:00

New York Times Reporter Jennifer Lee presents an interesting history of how Chinese American food got so Americanized and less and less Chinese.

Check it out at: TED Video: Who was General Tso? and other mysteries of American Chinese food

China to the Rescue? Not!

2008-12-26T08:26:00.000-08:00

Hong Kong.

I had no idea that many of those oil paintings that hang in hotel rooms and starter homes across America are actually produced by just one Chinese village, Dafen, north of Hong Kong. And I had no idea that Dafen’s artist colony — the world’s leading center for mass-produced artwork and knockoffs of masterpieces — had been devastated by the bursting of the U.S. housing bubble. I should have, though.

“American property owners and hotels were usually the biggest consumers of Dafen’s works,” Zhou Xiaohong, deputy head of the Art Industry Association of Dafen, told Hong Kong’s Sunday Morning Post. “The more houses built in the United States, the more walls that needed our paintings. Now our business has frozen following the crash of the Western property market.”

Dafen is just one of a million Chinese and American enterprises that constitute the most important economic engine in the world today — what historian Niall Ferguson calls “Chimerica,” the de facto partnership between Chinese savers and producers and U.S. spenders and borrowers. That 30-year-old partnership is about to undergo a radical restructuring as a result of the current economic crisis, and the global economy will be highly impacted by the outcome.

After all, it was China’s willingness to hold the dollars and Treasury bills it had earned from exporting to America that helped keep U.S. interest rates low, giving Americans the money they needed to keep buying shoes, flat-screen TVs and paintings from China, as well as homes in America. Americans then borrowed against those homes to consume even more — one reason we enjoyed rising wealth without rising incomes.

This division of labor not only nourished our respective economies, but also shaped our politics. It enabled China’s ruling Communist Party to say to its people: “We will guarantee you ever-higher standards of living and in return you will stay out of politics and let us rule.” So China’s leaders could enjoy double-digit growth without political reform. And it enabled successive U.S. administrations, particularly the current one, to tell Americans: “You can have guns and butter — subprime mortgages with nothing down and nothing to pay for two years, ever-higher consumption and two wars, without tax increases!”

It all worked — until it didn’t.

With unemployment now soaring across the U.S., said Stephen Roach, the chairman of Morgan Stanley Asia, Americans — “the most over-extended consumer in world history” — can no longer buy so many Chinese exports. We need to save more, invest more, consume less and throw out most of our credit cards to bail ourselves out of this crisis.

But as that happens, we need China to take our discarded credit cards and distribute them to its own people so they can buy more of what China produces and more imports from the rest of the world. That’s the only way Beijing can sustain the minimum 8 percent growth it needs to maintain the political bargain between China’s leaders and led — not to mention pick up some of the slack in the global economy from America’s slowdown.

However, if I’ve learned one thing here, it’s just how hard doing that will be. China’s whole system and culture nourish saving, not spending, and changing that will require a huge “cultural and structural” shift, said Fred Hu, chairman for Greater China for Goldman Sachs.

In China, for instance, to buy a home you have to put at least 20 percent down, and the average is 40 percent. If you try to walk away from the mortgage, the bank will come after your personal assets. Moreover, China can’t just shift production from the U.S. market to its own consumers. Not many Chinese villagers want to buy $400 tennis shoes or Christmas tree ornaments.

Also, China has no real Social Security, health insurance or unemployment insurance. Without that social safety net, it’s hard to see how Chinese don’t end up saving most of their stimulus. “You open up the newspaper every day and you hear about this factory shutting down or that supplier going belly up,” said Willie Fung, whose company, Top Form International, is the world’s leading bra maker. “You can never be too careful in this financial climate.”

As such, “the world should not have a false hope that China can cushion the global downturn,” by stimulating its domestic demand in a big way, said Frank Gong, head of China research for JPMorgan Chase. “The best thing China can do is keep its own economy stable.”

It’s good advice. China is not going to rescue us or the world economy. We’re going to have to get out of this crisis the old-fashioned way: by digging inside ourselves and getting back to basics — improving U.S. productivity, saving more, studying harder and inventing more stuff to export. The days of phony prosperity — I borrow cheap money from China to build a house and then borrow on that house to buy cheap paintings from China to decorate my walls and everybody is a winner — are over.

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Author: THOMAS L. FRIEDMAN
Original Source: New York Times
Date Published: December 21, 2008
Web Source: http://www.nytimes.com/2008/12/21/opinion/21friedman.html
Date Accessed Online: 2008-12-27

Geography of China in Maps

2008-12-26T07:37:00.000-08:00

Physical Map of China:

Political Map of China:Average Rainfall across China:

Climatic and Geographical Regions of China

Great Map of China's Geographical Climatic Regions

Religulous (Documentary, 2008)

2008-12-25T01:39:00.000-08:00

Religulous ：

Bill Maher's take on the current state of world religion.

Available in streaming through Watch-Movies.net: Click Here to Watch Religulous

After 30 Years, Economic Perils on China’s Path

2008-12-24T05:45:00.000-08:00

SHENZHEN, China — The ruling Communist Party threw itself a big party on Thursday. The country’s leadership marked the 30th anniversary of the reform era that transformed China into a global economic power and, in doing so, changed the world.

At a triumphant ceremony at the Great Hall of the People in Beijing, President Hu Jintao invoked Deng Xiaoping, who consolidated power in 1978 and began “reform and opening.” Mr. Hu emphasized the party’s unwavering focus on economic development. “Only development makes sense,” said Mr. Hu, quoting Deng.

But beyond the oratory, Mr. Hu and other Chinese leaders are now facing a new era in which Deng’s export-led economic model, as well as his iron-fisted political control, face unprecedented challenges. Global demand for Chinese goods has slumped, unrest is on the rise in the industrial heartland, and China is scrambling for a new formula to preserve stability and ensure growth.

The downturn is so swift — exports fell last month for the first time in seven years — that Beijing is being forced to abruptly shift priorities. Until recently, Mr. Hu had been trying to curb excesses like rampant pollution and income inequality that posed environmental and social challenges to long-term development. Now, those priorities seem eclipsed.

Instead, leaders are restoring tax breaks for exporters and pushing down the value of China’s currency to encourage exports. At the same time, they are casting about for ways to spur domestic demand and wean China’s economy off its dependence on foreign markets swept up in the global financial crisis.

Politically, Chinese reformers had hoped the symbolic weight of the anniversary and the nation’s post-Olympic glow might propel some measure of political reform to address official corruption and help defuse rising social tensions.

But as Beijing worries about strikes and mass layoffs even in some of its most prosperous areas, official tolerance of political dissent has seemingly narrowed. This month, a prominent dissident was detained after writing an open letter calling for greater democracy. An editor at one of the country’s leading newspapers was reassigned after publishing articles deemed too politically provocative. “We must draw on the benefits of humankind’s political civilization,” Mr. Hu said in his Thursday speech, according to Reuters. “But we will never copy the model of the Western political system.”

If any place symbolizes China’s reform era, it is Shenzhen, a city conceived from Deng’s imagination — and one now in the cross hairs of the economic downturn. Thursday’s celebration was timed to a 1978 political meeting, the Third Plenum, which anointed Deng as China’s leader and introduced “reform and opening.” Two years later, Deng pointed at a sleepy fishing village in coastal southern China, near Hong Kong, and ordained it the country’s first “special economic zone” to experiment with foreign investment and export manufacturing. Today, Shenzhen is a city of more than 10 million people ringed by thousands of factories.

A factory district just outside Shenzhen, Fuqiao Industrial Park, is a snapshot of the economic troubles rippling through the region. Several small factories in the park have closed in recent months. At Wang Jinda Industries, the lettering had been scraped off the entrance after the owner closed last week. Two customers had arrived for a shipment of goods only to find an empty factory.

Meanwhile, some factories that remained open were struggling. Workers at a large printing factory said the owners had stopped recruiting new workers in September while many others had quit. Several workers said wages had dropped significantly as the owners were reducing the length of shifts. A few workers accused owners of deliberately trying to drive down wages to force workers to quit. “Everybody is worried,” said Lin Baozeng, 26, a cashier at a canteen inside the industrial park. Her daily lunch crowd has dwindled to about 100 migrant workers from 500.

“If the economy is bad,” Ms. Lin added as her 3-year-old daughter played nearby, “how can I afford to raise my child?”

As yet, gauging the scale of factory closings remains difficult in Shenzhen and surrounding Guangdong Province, the country’s main export engine. Guangdong was already making a concerted effort to move up the manufacturing value chain at a time when rising labor costs and greater government regulations were making some smaller, cheaper exporters unprofitable. But the recent export slowdown is having an unanticipated impact. More than 7,000 small- and medium-sized factories have closed in recent months. Shenzhen’s mayor said 50,000 people in the city alone had lost their jobs in the last few months.

And there are mounting signs that the problems could be far broader. Over all, China’s economy will continue to expand next year, but some economists say the rate of growth could fall as low as 5 or 6 percent, far slower than the double-digit pace of the preceding several years.

State media have reported that 4.85 million migrant workers have returned to the countryside early before next month’s annual Lunar New Year holiday. Some inland provinces have already announced subsidies for unemployed returnees. On Thursday, the country’s official news agency, Xinhua, reported that 6.5 million migrant workers may be jobless next year.

Beijing has recently restored some export subsidies that had been repealed as part of earlier efforts to rebalance the economy toward domestic demand. Huang Yasheng, a management professor at the Massachusetts Institute of Technology, said such subsidies made short-term political sense, given the huge numbers of jobs provided by factories, but did not address China’s long-term economic challenges. “I see the export supports as a crisis measure,” Mr. Huang said. “They really have no other way to maintain employment.”

Mr. Huang said the government’s focus on exports and expanding the role of state-owned corporations since the 1990s had meant too little of the country’s wealth had trickled down to ordinary people. He said household incomes had lagged well behind overall growth, meaning that hundreds of millions of ordinary people still had relatively little spending money — a major problem when the government is trying to rapidly increase domestic consumption. “It’s a huge challenge,” said Mr. Huang, author of a recent book, “Capitalism with Chinese Characteristics.”

China’s immediate answer is a stimulus program focused on infrastructure like railways and ports. State-owned banks are being ordered to make credit easily available, and business taxes on real estate sales were waived this week. Such steps may be crucial to buttressing the Chinese economy and preventing a deeper global recession. Yet some Chinese officials are wary of the potential impact of another phase of state-led industrial development.

The government stimulus program enacted in response to the 1997-98 Asian financial crisis enabled China to avoid the recessions suffered by neighboring nations. Yet it also propelled the enormous investment in heavy industry that is a major reason China is now the world’s largest emitter of greenhouse gases.

In an opinion article in the online edition of People’s Daily, Pan Yue, the outspoken vice minister of the Ministry of Environment, blamed Western excess for the global crisis and warned that China risked ruin if it blindly pursued Western industrial models.

“China’s reform and opening has achieved in 30 years the economic gains of more than 100 years in the West — yet more than 100 years of environmental pollution in the West have materialized in 30 years in China,” Mr. Pan wrote. “The present global economic crisis shows that if China continues down the old road of Western industrial civilization, it will only come to a dead end.”

China is a far more open and dynamic place than the country Deng first unleashed three decades ago. Much of that change has come from ordinary people pushing for more space in society, just as much of China’s economic success has come from the entrepreneurial energy and hard work of its work force. Yet Communist Party leaders have been careful to hoard political power: independent unions and political opposition remain illegal.

Earlier this year, Shenzhen’s leaders seemed eager to position the city as a pioneer of political reform. Shenzhen officials published a reform plan that advocated some local elections and greater leeway for local legislatures and courts to make decisions. But those plans, later tempered by provincial leaders, now seem derailed as officials are focused on maintaining social stability.

Some influential Chinese say more should be done. Yu Keping, a scholar at a leading Communist Party research institute who has advised top leaders, published essays this week in leading Chinese newspapers about the need for greater democratization to combat corruption.

In an interview with The New York Times, Mr. Yu called for “breakthrough reform.” But he also said that change must come incrementally, given the need for social stability, with an initial emphasis on better governing and rule of law. “We need to promote democratization in China,” Mr. Yu said. “On the other hand, we need to promote social stability. If we had an election right now, we might end up like Thailand.”

In fact, the limited momentum toward modest political change could well be sidelined by economic problems, some experts say. “A real huge question is how the economic downturn is going to affect any sort of political reform,” said Joseph Fewsmith, a Boston University professor who studies Chinese politics. He said officials might deliberately slow efforts to carry out a new rural land reform law approved this fall to grant farmers the ability to transfer their land rights.

“People worried about social stability are going to proceed very, very slowly,” Mr. Fewsmith said.

Zhang Jing and Huang Yuanxi contributed research.

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Author: JIM YARDLEY
Original Source: New York Times
Date Published: December 19, 2008
Web Source: http://www.nytimes.com/2008/12/19/world/asia/19china.html
Date Accessed Online: 2008-12-20

Unmade in China

2008-12-19T21:23:00.000-08:00

Sticking to the last: shoe production in Wenzhou, known as China’s most entrepreneurial city but now hit by a fall-off in export demand

Juyi Shoes is the sort of entrepreneurial company that has helped turn China from a poor rural country into a manufacturing powerhouse. In 1988, Li Anlian borrowed money from relatives to start a workshop making shoes from spare bits of leather. Managed these days by her son, the company now employs 3,800 and produces 10m pairs a year for clients that include Zara of Spain.

Many of Ms Li’s neighbours have similar stories. Juyi is based in Wenzhou, a city 250km south of Shanghai whose resilient entrepreneurs have made it the standard-bearer of China’s private-sector economy. By some estimates, the city has 300,000 small businesses.

But there is one thing about Juyi that does not quite chime with Wenzhou’s reputation for rugged individualism. An entire floor of the company’s office is given over to celebrating the Chinese Communist party and one of the rooms for party members boasts six imposing framed portraits: in order, Marx, Engels, Lenin, Stalin, Mao, Deng.

China this week celebrates the 30th anniversary of its “reform and opening up” policy, when Deng Xiaoping loosened controls on the economy and unleashed a long stretch of high-octane growth that has pulled tens of millions out of poverty. Concerts, seminars and speeches will mark the event.

Yet the anniversary is taking place during a period of soul-searching about whether the impressive run of growth can continue and whether Chinese capitalism can survive its deep contradictions. In the short term, Wenzhou is a useful weather vane for the health of the global economy and the strength of consumer demand. A slump in export hubs such as Wenzhou means depressed consumers elsewhere. Beyond that, the fate of Wenzhou’s entrepreneurs will be an important test of China’s ability to move on from low-cost manufacturing and build a more sophisticated economy.

The immediate threat is from the global slowdown – news that Chinese exports declined in November heralds tough times ahead. But the weak economy has also reignited a debate about whether the entrepreneurial dynamism at the root of China’s success is being stifled by the remaining government controls over the economy. After three decades of reforms, the financial system is still dominated by the party-state, which means that funding often follows political connections rather than business acumen.

“China’s financial system has not opened up enough,” says Yao Xianguo, dean of the College of Public Administration at Zhejiang University. “Big private companies increasingly rely on the government while smaller firms suffer from their inability to get loans from state-owned banks.”

Wenzhou helps demonstrate how capitalism flourished from nothing after Deng took over. Little known outside the country, the city is legendary within China – evidenced by the many explanations for its success. Isolated by mountains on three sides, Wenzhou businesses just got on with it, some people say, at a time when Beijing still frowned on capitalism.

Some also say Mao refused to put important state-owned companies in the region because its location across the strait from Taiwan made it vulnerable to invasion, meaning it had to create its own economic base. Churches with red neon crosses dot the city’s skyline, prompting theories that Wenzhou’s business culture is rooted in a form of protestant individualism.

Whatever the reason, the city’s factories have become a global force in light manufacturing. For anyone who uses a cigarette lighter, there is a 70 per cent chance it was made in Wenzhou. Something similar goes for light switches, zippers and even sex toys. Nearby towns are big producers of hinges, plugs, bras, socks and ties.

Tales of cunning entrepreneurs abound. Nan Cunhui repaired shoes until he and a few friends started to make light switches from spare parts in the evenings. From that he has built up Chint, China’s biggest manufacturer of electrical power equipment, with sales of $2.3bn (£1.5bn, €1.7bn) a year. (One of his friends in the early business left to found his own company, Delixi, which is now the second biggest Chinese company in the industry.)

“The interesting thing is that the guys at Chint and elsewhere started off as peasants and have got where they have all on their own,” says Xie Jian, professor at Wenzhou University’s City College. Manufacturing success, he argues, has often come despite rather than because of the authorities in Beijing: “The companies have always been one step ahead of the government.”

Wenzhou’s private sector is also rooted in the city’s network of informal banks. Many of the factories got off the ground using money raised by a handful of relatives and family friends from underground banks, which exist in a legal grey area, tolerated but not formally approved by the authorities. This combination of light manufacturing and extended-family microfinance can be found elsewhere in China in smaller versions but it is often referred to as the “Wenzhou model”. Yet that model is under pressure. As exports drop off, low-cost manufacturing companies are particularly feeling the pinch.

Gaining an accurate picture of what is happening to Wenzhou’s industry is difficult – there have been few reports of bankruptcies among companies or underground banks, unlike the export hub in Guangdong in southern China. But Zhou Dewen, head of the association that represents the city’s small and medium-sized companies, says production has stopped or been cut at 20 per cent of Wenzhou’s factories, while exports have fallen 15 per cent this year.

“We have actually had a very strong year but the impact from the crisis is only just beginning,” says Lin Kefu, vice-president of Chint.

In Shuangyu, a Wenzhou suburb where the narrow streets once hummed with small workshops making shoes, the signs of the slowdown are visible – closed doors at some and large piles of inventory at others. Ye Yonglin, who owns Dilun Shoes, says that most of the factories have had to cut back. “If you are a small company and do not have regular contracts with clients or some edge in terms of quality or branding, you are suffering badly at the moment,” he says.

Building a brand and investing in technology cost money, however, and that is where the slump among Wenzhou manufacturers collides with one of the biggest debates about the future of economic reforms in China.

The Wenzhou model of informal financing, though useful for starting factories from scratch, is not so effective at taking companies to the next stage. Not only do loans in the informal market tend to be small but interest rates are also high – borrowers can pay as much as 40-50 per cent a year.

Formal finance in China is dominated by the state. The main commercial banks provide the bulk of the credit in the country and they mostly lend to other state-owned companies. So as private businesses grow and require more capital or land, some feel the need to get close to the various arms of the party-state.

In Wenzhou, this has led to an odd courtship over the last decade: companies looking for official patrons and the Communist party, nervous about the creation of a new power base, seeking to penetrate the private sector. The homage to the party and Stalin at Juyi Shoes is one example, but Chint boasts it was the first Wenzhou company to set up a party cell, even if founder Nan Cunhui has not been accepted as a party member. State media reported last year that 3,400 party cells had been established in Wenzhou businesses.

Forging close contacts with government is good business in any country – witness the photos of handshakes with the president-of-the-day in US executive suites. But for Yasheng Huang, a professor at MIT and author of a new book, Capitalism with Chinese Characteristics, it is part of a broader trend of the party-state smothering the country’s entrepreneurial instincts. The problem is not the photos with senior leaders, he says, but all the backroom deals that entrepreneurs have to enter if they want political protection.

According to Prof Huang, China has not seen a gradual transition from state control to capitalism over the last three decades. Instead, the real boom in entrepreneurship came in the 1980s when controls in rural areas were relaxed. But since the 1990s, the state has reasserted more control over the nascent private sector and focused more on government-led urban investment. By starving private companies of funding, he argues, China is risking a decline in its productivity that will damage future growth.

“One of the reasons Wenzhou is now in trouble is that the companies do not have enough capital to modernise,” he says. “China today resembles an oligarchic version of state-led capitalism” which could become “crony capitalism built on systemic corruption and raw political power”.

Prof Huang’s thesis has its critics, who point out that policies such as joining the World Trade Organisation in 2001 did a huge amount to stimulate the private sector. But his book has come at a time of intense debate within China about liberalising the financial sector – including tentative proposals for legalising underground banks.

The idea is opposed by some of the big state-owned banks, which fear more competition, and by some officials who worry it could lead to an explosion in new bank credit. There is also ideological opposition to ceding more state control of finance. But supporters say it will provide a shot in the arm to the economy at a crucial time by providing more and cheaper credit to well-run smaller companies.

“One of the most important things the government could do to help the economy is to legalise the underground banks,” says Mr Zhou from the small companies association in Wenzhou.

China’s leaders will rightly boast this week about the economy’s achievements over the last three decades. Yet if they are to sustain that growth record, they face some tough questions about just how much of the commanding heights of the economy they wish to keep controlling.

OPENING UP: LAND AT THE HEART OF REFORMS

At a Communist party meeting on December 18-22 1978, Chinese leaders took the first steps away from collective agriculture. In official histories, the meeting began the transition from a command economy, which later became known as “reform and opening up”.

In fact the timeline is a little hazy. Many of the decisions had actually been taken at a separate meeting the month before and peasants in Anhui province had already started dividing up communal land among themselves. But the December meeting has gone down in history as the victory of Deng Xiaoping (left) over the Maoists.

In the following three decades, China introduced a series of further reforms – most products are now based on market prices, swaths of state-owned companies have been privatised and China joined the World Trade Organisation in 2001. Liberal economists have called for two further totemic reforms – allowing farmers to use their land as collateral and reducing state control of the financial system.

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Author: Geoff Dyer
Original Source: Financial Times
Date Published: December 16 2008
Web Source: http://www.ft.com/cms/s/0/e8cd9db2-cba3-11dd-ba02-000077b07658,s01=1.html
Date Accessed Online: 2008-12-20

China kills chickens to frighten monkeys

2008-12-19T21:12:00.000-08:00

BEIJING - The recent arrest of Chinese dissident writer Liu Xiaobo after he took part in a high-profile signature campaign that calls for more freedoms and political reform is a sign that human-rights issues still touch a raw nerve with the Chinese government.

Liu, a prominent critic of the Chinese government who was imprisoned for 20 months for participating in the 1989 Tiananmen pro-democracy movement, was taken away by police on December 8 - shortly after "Charter 08" was circulated online to mark International Human Rights Day and the 60th Anniversary of the Universal Declaration of Human Rights.

A week later, his whereabouts remain unknown and his wife is still denied access to him, even though Chinese law requires police to notify the families of detainees within 24 hours.

On the same night, another prominent signatory of the declaration, Zhang Zuhua, a constitutional law expert, was detained for 12 hours on suspicion of "inciting the subversion of state sovereignty".

As of this week, dozens of others across China who have also signed the declaration have been interrogated by authorities, according to rights activists.

Charter 08, initially signed by over 300 intellectuals including lawyers, academics, writers and artists, appeals to the Chinese government to launch widespread political reform, such as granting its citizens speech and religious freedoms, respecting human and civil rights and establishing an independent judiciary, as well as ending its one-party rule.

And thousands of others have added their names to the petition since then, with signatures soaring beyond 5,000 as of this week, according to China Human Rights Defenders, a network of domestic and foreign human rights activists.

According to his lawyer, Mo Shaoping, Liu was probably detained because authorities considered him a chief organizer of the signature campaign.

His arrest and the harassment of other signatories have drawn concern from Western governments and international human-rights groups. Last week, the US State Department said it was "deeply concerned" about Liu's well-being as well as that of other Chinese citizens who have been interrogated for peacefully expressing their desire for greater freedoms.

A statement from the French European Union presidency this week also expressed "deep concern" at Liu's arrest and urged China to reveal the reason for Liu's detention and to respect his rights.

Gao Yu, a dissident writer, said she believed the authorities were nervous that the appeal might trigger a massive call for democracy that will spill over to next year, the 20th anniversary of the 1989 Tiananmen crackdown, and spark a fresh round of democratic movements.

"They are using Liu to warn other people against taking action over June 4," said Gao, who was herself questioned by police over her signing of Charter 08 last week.

Xu Youyu, a retired professor of the Chinese Academy of Social Sciences, said authorities over-reacted to what was a peaceful expression of opinions.

"I think this shows that the political atmosphere is very tense," he said. "I think the authorities' move is irrational and is hard to understand ... it is not a wise move."

Xu, a signatory himself, said none of the demands in Charter 08 posed a challenge to the government and warned that the over-reaction would likely prompt more people to get involved.

Bao Tong, a former aide of ousted reformist leader Zhao Ziyang, who lives under continuous surveillance, said the authorities' nervous reaction to Charter 08 shows just how badly China needs to make those changes for which the appeal is calling.

"This itself proves that Charter 08 is very necessary, because there is no rule of law, no citizens' rights, no democracy in China," said Bao, who was arrested just before the Tiananmen crackdown and jailed for seven years. "This was just a minor thing and now it's totally overblown - this is a very foolish move."

Nicholas Bequelin, senior researcher at the New York-based Human Rights Watch, said the unprecedented unity shown by such a large number of prominent citizens across the country had alarmed the authorities, who feared their movement might trigger broader demand for political change.

"My concern is that the authorities want to make an example of Liu Xiubo ... I think the statement is that they want to scare the intellectuals,” Bequelin said. "This is the old trick of killing a chicken to frighten the monkeys."

Just the reverse, "It might damage the party's ability to bring these people to their party. It just shows how arbitrary and brutal the party can be," Bequelin said.

But if the arrest of Liu is designed to put off others, it has not succeeded so far. Rights activists say more than 1,200 have signed an open letter circulating on the Internet calling for his release and over 5,000 have signed Charter 08, with the number increasing every day.

Liu, a former literature professor, has long been seen as a thorn in the side of the Chinese authorities for his articles that are openly critical of the government. After Liu's release from prison in 1991 for his Tiananmen pro-democracy movement involvement, he was closely watched by the authorities and was often put under house arrest around sensitive dates such as the anniversaries of the June 4 Tiananmen crackdown.

He was detained for three years in a "Re-education through Labor" camp between 1996 and 1999 for criticizing the Chinese government. Prior to the 19th anniversary of the Tiananmen crackdown this year, he was warned by the authorities against writing commemorative articles and was detained for a couple of hours on that day.

Cyber dissident Liu Di said the Chinese government had done itself a disservice by arresting Liu Xiaobo. "I think the arrest of Liu Xiaobao is like dropping a stone onto your own feet," said Liu, who was also questioned by state security agents for calling for Liu Xiaobo's release. "If they hadn't done that, the issue wouldn't have drawn so much attention."

Verna Yu is a freelance journalist from Hong Kong.

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Author: Verna Yu
Original Source: Asia Times
Date Published: Dec 20, 2008
Web Source: http://www.atimes.com/atimes/China/JL20Ad01.html
Date Accessed Online: 2008-12-20

Global economy: The age of obligation

2008-12-19T01:24:00.000-08:00

In the Old Testament Book of Leviticus, God commands the children of Israel to observe a jubilee every 50 years. Nowadays we tend to associate the word with celebrations of royal anniversaries such as Queen Elizabeth’s golden jubilee in 2002. But the biblical conception of a jubilee was more precise: that of a general cancellation of debts.

This point is spelt out in Deuteronomy: “Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the Lord’s release.”

Such injunctions may strike the modern reader as utopian. How could any sophisticated society function if all debts were cancelled twice a century – much less, as Deuteronomy seems to suggest, every seven years? Yet we know that such general cancellations of debt really did happen in the ancient world. In 1788 BC, for example, about 500 years before the time of Moses, King Rim-Sin of Ur issued a royal edict declaring all loans null and void, wiping out some of history’s earliest known moneylenders.

The idea of a generalised debt cancellation is not wholly unknown in modern times. The late Gerald Feldman, the world’s leading authority on the German hyperinflation of 1923, drew a parallel between the ancient Hebrew yovel and the wiping out of all paper mark-denominated debts as a result of the collapse of the German currency (though, as he was quick to point out, those whose savings were wiped out were far from jubilant).

In the hope of avoiding the mark’s meltdown, the economist John Maynard Keynes had repeatedly called for a general cancellation of the war debts and reparations arising from the first world war. Though no such intergovernmental jubilee was ever proclaimed, debt cancellation was effectively what happened after 1931, beginning with President Herbert Hoover’s one-year moratorium on both war debts and reparations.

As 2008 draws to a close, there are many people on both sides of the Atlantic who yearn for such a simple solution to the problem of excessive indebtedness. Parallels with the interwar period are not inappropriate. It is all but inevitable that we shall see serious political and geopolitical upheavals in 2009, as the recession takes its toll on weak governments (Thailand and Greece are already reeling) and raises the stakes in inter-state rivalries (India-Pakistan). In the words of Hank Paulson, the US Treasury secretary: “We are dealing with a historic situation that happens once or twice in 100 years.” The stakes are high indeed. Has the time arrived for a once-in-50-years biblical jubilee?

Excessive debt is the key to this crisis; it is the reason we are confronting no ordinary recession, curable by a simple downward adjustment of interest rates. It is the reason we still have to fear, if not a second Great Depression, then very likely the biggest recession since the 1930s. We are living through the painful end of an age of leverage which saw total private and public debt in the US rise from about 155 per cent of gross domestic product in the early 1980s to something like 342 per cent by the middle of this year.

With average household debt rising from about 75 per cent of annual disposable income in 1990 to very nearly 130 per cent on the eve of the crisis, a large proportion of American families are submerging under the weight of their accumulated borrowings. British households are in even worse shape.

Looking back, we now see just how big a proportion of US growth since 2001 was financed by mortgage equity withdrawals. Without that as a means of financing consumption, the economy would barely have grown at 1 per cent a year under President George W. Bush. Looking forward, we see just how hard it will be to stabilise property prices and the prices of the securities based on them. Already, at the end of September, one in 10 American home owners with a mortgage was either at least a month in arrears or in foreclosure. One in five mortgages exceeds the value of the home it was used to purchase.

The financial sector’s debts grew even faster as banks sought to bolster their returns on equity by “levering up”. According to one recent estimate, the total leverage ratios (on- and off-book assets and exposure divided by tangible equity) for the two biggest US banks were 88:1 for Citibank and 134:1 for Bank of America. The bursting of the property bubble caused such ratios, which were already too high on the eve of the crisis, to explode as off-balance-sheet commitments and pre-arranged credit lines came home to roost. Only by borrowing from the Federal Reserve on an unprecedented scale have the banks been able to stay in business.

With estimates of total losses on risky assets now ranging from $2,800bn (£1,850bn, €1,960bn) to $6,000bn, a chain reaction is under way that will leave no sector of the world economy untouched. The American economy is contracting at an annualised rate of 5 per cent. Commercial property is following the residential market into freefall. The Standard & Poor’s 500 index is down 43 per cent since its peak in October last year. The market for credit default swaps is pointing to a surge in defaults on corporate bonds. The automotive industry is already (against the will of Congress and the original intention of the Treasury) on life support. The US is at the centre of the crisis but Europe and Japan may suffer even larger aftershocks. As for the much feted emerging market “Brics” – Brazil, Russia, India and China – their stock markets have been dropping like, well, bricks.

What makes this crisis of burning interest to financial historians is the knowledge that we are witnessing a real-time experiment with not one but two theories about the Depression.

On one side, Ben Bernanke, Fed chairman, is applying the lesson of Milton Friedman’s and Anna Schwartz’s A Monetary History of the United States, which argued that the Depression was in large measure the fault of the central bank for failing to inject liquidity into an imploding financial system. Mr Bernanke has not merely slashed the federal funds rate to below 0.25 per cent. He has lent freely to the banks against undisclosed but probably toxic collateral. Now he is buying securities in the open market.

The result has been an explosion of the Fed’s balance sheet and of the monetary base. With assets approaching $2,263bn and capital of less than $40bn, the Fed increasingly resembles a public hedge fund, leveraged at more than 50:1.

On the other side, Mr Paulson has emerged as an unwitting disciple of Keynes, running a huge government deficit in an effort not merely to bail out the financial sector but also to provide a public sector substitute for sharply falling private sector consumption. Even before President-elect Barack Obama launches his promised infrastructure investment programme, estimates of next year’s deficit run as high as 12.5 per cent.

Once, monetarism and Keynesianism were considered mutually exclusive economic theories. So severe is this crisis that governments all over the world are trying both simultaneously.

Although commentators like to draw parallels with Franklin Roosevelt’s New Deal, in truth the measures taken since the crisis began in August 2007 more closely resemble those taken during the world wars. After 1914, and again after 1939, there was massive government intervention in the financial system. Banks and bond markets were reduced to mere channels for the financing of huge public sector deficits. That is what is happening today, but without the stimulus to manufacturing that the world wars provided. We are having war finance without the war itself.

Yet the effect of these policies is essentially to add a new layer of public debt to the existing debt mountain. Added together, the loans, investments and guarantees made by the Fed and the Treasury in the past year total about $7,800bn, compared with a pre-crisis federal debt of about $10,000bn. The Treasury may have to issue as much as $2,200bn in new debt in the coming year.

For the time being, the distress-driven demand for dollars and risk-free assets is pushing down the cost of all this borrowing. Treasury yields are at historic lows. But it is not without significance that the cost of insuring against a US government default has risen 25-fold in little over a year. At some point, with most big economies adopting the same fiscal policy, global bond markets are going to start choking.

Is it really plausible that the cure for excessive leverage in the private sector is excessive leverage in the public sector? Might there not be a simpler way forward? When economists talk about “deleveraging” they usually have in mind a rather slow process whereby companies and households increase their savings in order to pay off debt. But the paradox of thrift means that a concerted effort along these lines will drive an economy such as that of the US deeper into recession, raising debt-to-income ratios.

The alternative must surely be a more radical reduction of debt. Historically, such reductions have been done in one of four ways: outright default, restructuring (for instance, bankruptcy), inflation or conversion. At the moment, more and more American households are choosing the first as a way of dealing with the problem of negative equity, while more and more companies are being driven towards bankruptcy. But mass foreclosures and bankruptcies are not a pretty prospect.

Inflation, by contrast, is hard to worry about in the short term, not least because the Fed’s expansion of the monetary base is leading to no commensurate expansion of the broad money supply; the banks would rather shrink than expand their balance sheets.

That leaves conversion, whereby, for example, all existing mortgage debts could be wholly or partly converted into long-term, low and fixed-interest loans, as recently suggested by Harvard’s Martin Feldstein. (In his scheme, the government would offer any homeowner with a mortgage the option to replace 20 per cent of the mortgage with a low-interest loan from the government, subject to a maximum of $80,000. The annual interest rate could be as low as 2 per cent and the loan would be amortised over 30 years.

At the very least, this would rescue many homeowners from the nightmare of negative equity. A similar operation might also be contemplated for the debts of those banks that have been partially or wholly recapitalised by the state. This would not add to the federal debt in net terms and would reduce the interest burden, if not the absolute debt burden, of households.

Such radical steps would naturally represent a haircut for creditors, notably the holders of mortgage-backed securities and bank bonds. Yet they would surely be preferable to the alternatives. And they would certainly be a less extreme solution than the general debt cancellation envisaged in the Old Testament.

Financially, 2008 has been an annus horribilis. The answer may be to make 2009 a true jubilee year.

The writer is a professor at Harvard University and Harvard Business School, a fellow of Jesus College, Oxford, and a senior fellow of the Hoover Institution, Stanford

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Author: Niall Ferguson
Original Source: Financial Times
Date Published: December 18 2008
Web Source: http://www.ft.com/cms/s/0/85432b32-cd32-11dd-9905-000077b07658.html
Date Accessed Online: 2008-12-19

Economie chinoise : la fin du grand bond en avant

2008-12-18T05:43:00.000-08:00

Les turbulences mondiales sont en train de transformer le ralentissement cyclique de l'économie chinoise en un atterrissage brutal. La croissance économique en Chine est tombée en octobre au-dessous de 8 %. Ce freinage brutal fait suite à un ralentissement qui était sensible depuis le début de l'année, puisque le taux de croissance du produit intérieur brut est passé de 11,9 % au dernier trimestre 2007 à 10,4 % au deuxième trimestre 2008. Il montrait que l'économie avait atteint le point de retournement du cycle conjoncturel, après quatre années de croissance à deux chiffres, marquées par la création de surcapacités dans l'industrie et dans l'immobilier. Depuis fin 2007, le gouvernement menait d'ailleurs une politique monétaire restrictive, haussant les taux d'intérêt et plafonnant les prêts bancaires, afin de casser l'inflation et la spéculation.

Cette politique a fait sentir ses effets dans le secteur immobilier, qui a été le premier frappé par le retournement de tendance. Le volume des ventes a baissé à partir de janvier et l'investissement dans le bâtiment a reculé. Compte tenu du poids de ces secteurs (11 % du PIB), la contraction de leur activité a eu des effets en chaîne, réduisant la demande d'acier, de ciment, et provoquant des chutes de prix et l'accumulation de stocks dans ces secteurs en amont.

Par ailleurs, l'industrie manufacturière chinoise se trouve confrontée à des difficultés structurelles, car ses coûts salariaux augmentent. En outre, l'appréciation du renminbi (nom officiel de leur monnaie) - de 20 % entre juillet 2005 et juillet 2008 - a pesé sur la compétitivité des exportations dans les secteurs à forte intensité de main-d'oeuvre, comme le textile. Pourtant, au cours des dix premiers mois de l'année, les exportations ont continué à croître à un rythme soutenu (+ 22 % en valeur, 13 % en volume), quoique moins rapide qu'en 2007.

La croissance des exportations vers l'Europe, l'envolée des exportations vers l'Afrique et l'Amérique latine ont compensé le ralentissement de celles destinées aux Etats-Unis. Mais le choc de la récession mondiale sur les exportations chinoises va faire pleinement sentir ses effets au cours des mois qui viennent. En laissant le yuan se déprécier de 1 % par rapport au dollar début décembre, les autorités ont indiqué leur intention de soutenir autant que possible le secteur exportateur, qui représente environ 30 % de la production industrielle et contribue à une fraction importante de l'investissement interne.

PRESSION SUR LES SALAIRES

Face à cette conjonction de facteurs internes et externes de ralentissement, les autorités mènent désormais une politique monétaire qui soutient la croissance par une baisse des taux d'intérêt, et elles ont annoncé un vigoureux plan de relance. Il prévoit des dépenses de 4 000 milliards de renminbis (425,6 milliards d'euros) en 2009-2010, soit 8 % du PIB. Le programme inclut le financement d'infrastructures dans les transports, l'agriculture et le logement, des dépenses sociales dans la santé et l'éducation, des allégements fiscaux et le soutien des prix agricoles.

Cependant, des doutes planent sur sa portée, car il amalgame des mesures nouvelles et des projets déjà programmés ; quant à son financement, le budget central doit en couvrir environ 30 %, mais la contribution des gouvernements locaux est des moins assurées.

Comme le ralentissement de l'économie tient principalement à celui de la demande interne et qu'en 2009 la chute de la demande extérieure va à son tour contribuer à la baisse de l'activité, les prévisions sur le rythme de croissance qu'atteindra l'économie chinoise en 2009 (7,5 % selon la Banque mondiale, au moins 8 % selon les autorités chinoises) dépendent largement de l'efficacité escomptée des mesures de relance.

Tout porte à croire que c'est plus l'investissement public que la consommation des ménages qui soutiendra la demande intérieure. Le pouvoir d'achat des ménages va en effet être affecté par les réductions de main-d'oeuvre dans les industries exportatrices (qui déjà renvoient les travailleurs migrants dans leurs campagnes), et par la pression à la baisse sur les salaires, tout au moins hors du secteur public. Rééquilibrer l'économie en élargissant le marché intérieur au profit de la consommation des ménages reste un objectif, pour la prochaine décennie.

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Author: Francois Lemoine
Original Source: LE MONDE
Date Published: DECEMBER 17, 2008
Web Source: http://www.lemonde.fr/opinions/article/2008/12/17/economie-chinoise-la-fin-du-grand-bond-en-avant-par-francoise-lemoine_1132210_3232.html
Date Accessed Online: 2008-12-19

Buyers' or Sellers' Market? In China, Slump Stokes Activity; Caution in Shenzhen

2008-12-17T22:30:00.000-08:00

SHENZHEN, China -- In China's home market, there is good news and bad. The bad news is that prices are tumbling. The good news is that the decline seems to have sparked a surge of sales activity.
Last week, figures from China's official National Development and Reform Commission said that property-price growth in 70 of the country's largest cities in November dropped 0.5% compared with October, the fourth consecutive month-over-month decline in a country that hasn't seen such declines in the four years since the government began publishing the numbers. On a year-over-year basis, price growth was at 0.2%, a record low, with Shenzhen registering a 14.8% year-over-year drop.
But falling prices seem to be where the similarity between the Chinese market and ailing Western markets ends. In the U.S. and Europe, falling prices have done little to boost demand, as buyers sit on the sidelines worrying about the economy or expecting prices to drop further. In China, falling prices have triggered a surge in sales activity, a sign of enormous pent-up demand in that market.
According to Shenzhen's municipal government, 6,435 new flats sold in the city in November, or 215 units a day. That is up sharply from the last week of October, when an average of 58 units were being sold a day.

Property, a Key Market
China's property market has implications for the broader economy, which relies on real-estate investment for 9.2% of annual growth in gross domestic product, according to Merrill Lynch.
A decline in construction activity has been a major factor in China's recent economic slowdown and has been a focus of government stimulus efforts.
Prices are likely to fall further next year because there is still a glut of apartments that were built in recent years as speculators helped drive up prices beyond the means of many ordinary home buyers. Thousands of units also are expected to be added to the market next year.

'More Corrections'
Before China's home prices can recover, they first need to fall, says Nicole Wong, head of China property research for broker CLSA Asia-Pacific Markets. "It's going to take more corrections and policy moves for prices to see any rebound," Ms. Wong says.
Turning around China's slumping property market could depend on luring Jamie Chen and tens of millions of other potential home buyers to the table. The problem, she says: In many of China's biggest cities, falling home prices are still too high.
"If I had enough money to make a down payment, I wouldn't wait. I think it is a good time to buy now with all the policies to help buyers," said Ms. Chen, a 28-year-old project-management consultant living with her parents in a suburb of Shenzhen.
The fall in prices is a sharp turnaround from just a few months ago, when China was still posting nationwide year-on-year price growth in the double-digit percentages. Even so, Citigroup says the national average ratio of property price to household annual disposable income in China is 8.3 times, compared with an average of 6.5 times to 7.5 times for developing countries. In a major city like Shenzhen, the ratio last year was 12.4 times, up from 8.6 times just a year earlier.
Dropping prices haven't caused a foreclosure wave as in the U.S. because Chinese consumers typically put down at least 30% on a mortgage, and many still pay for their houses in cash. China's economy also is still expanding, giving a lift to national income levels. Mortgages remain attainable, and authorities slashed mortgage rates and loosened home-buying rules and taxes on Oct. 22 to reduce costs.
The Shenzhen Factor
Shenzhen, a manufacturing center of nine million people, is one of China's biggest and most mature property markets and is considered a bellwether for the nation's housing scene. The first major market hit by China's property slump, Shenzhen also was the first to see property developers slash prices.
Brokers say prices in parts of the city have fallen some 30% in the past year, following a 50% drop in number of units sold from a year ago. Still, prices in Shenzhen are 63% higher than in 2004, according to real-estate brokerage firm DTZ.
On a recent weekend at the MixC, a mall in Shenzhen, shoppers swarmed two large display booths promoting high-end apartments. A lot of brochures were picked up, but few commitments were made. "I'm not planning to buy now, but maybe next year," said one shopper, who picked up a brochure. "Things are definitely going to continue to go down."

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Author: JONATHAN CHENG
Original Source: Wall Street Journal
Date Published: DECEMBER 17, 2008
Web Source: http://wsjofharryliuhao.blogspot.com/2008/12/buyers-or-sellers-market.html
Date Accessed Online: 2008-12-18

A Lifestyle Distinct: The Muxe of Mexico

2008-12-14T00:59:00.000-08:00

Mexico City — Mexico can be intolerant of homosexuality; it can also be quite liberal. Gay-bashing incidents are not uncommon in the countryside, where many Mexicans consider homosexuality a sin. In Mexico City, meanwhile, same-sex domestic partnerships are legally recognized — and often celebrated lavishly in government offices as if they were marriages.

But nowhere are attitudes toward sex and gender quite as elastic as in the far reaches of the southern state of Oaxaca. There, in the indigenous communities around the town of Juchitán, the world is not divided simply into gay and straight. The local Zapotec people have made room for a third category, which they call “muxes” (pronounced MOO-shays) — men who consider themselves women and live in a socially sanctioned netherworld between the two genders.

“Muxe” is a Zapotec word derived from the Spanish “mujer,” or woman; it is reserved for males who, from boyhood, have felt themselves drawn to living as a woman, anticipating roles set out for them by the community.

Anthropologists trace the acceptance of people of mixed gender to pre-Colombian Mexico, pointing to accounts of cross-dressing Aztec priests and Mayan gods who were male and female at the same time. Spanish colonizers wiped out most of those attitudes in the 1500s by forcing conversion to Catholicism. But mixed-gender identities managed to survive in the area around Juchitán, a place so traditional that many people speak ancient Zapotec instead of Spanish.

Not all muxes express their identities the same way. Some dress as women and take hormones to change their bodies. Others favor male clothes. What they share is that the community accepts them; many in it believe that muxes have special intellectual and artistic gifts.

Every November, muxes inundate the town for a grand ball that attracts local men, women and children as well as outsiders. A queen is selected; the mayor crowns her. “I don’t care what people say,” said Sebastian Sarmienta, the boyfriend of a muxe, Ninel Castillejo García. “There are some people who get uncomfortable. I don’t see a problem. What is so bad about it?”

Muxes are found in all walks of life in Juchitán, but most take on traditional female roles — selling in the market, embroidering traditional garments, cooking at home. Some also become sex workers, selling their services to men. .

Acceptance of a child who feels he is a muxe is not unanimous; some parents force such children to fend for themselves. But the far more common sentiment appears to be that of a woman who takes care of her grandson, Carmelo, 13.

“It is how God sent him,” she said.

Katie Orlinsky contributed reporting from Juchitán, Mexico.

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Author: MARC LACEY
Original Source: New York Times
Date Published: December 7, 2008
Web Source: http://www.nytimes.com/2008/12/07/weekinreview/07lacey.html
Date Accessed Online: 2008-12-13

L'heure de vérité pour l'euro, par Pierre-Antoine Delhommais

2008-12-14T00:25:00.000-08:00

L'économiste américain et Prix Nobel Milton Friedman affirmait que l'on pourrait juger de la réussite de l'euro seulement le jour où les pays de l'Union monétaire entreraient en récession. On y est. Selon l'OCDE, le PIB de la zone euro devrait reculer de 0,6 % en 2009. La monnaie unique va-t-elle passer avec succès le "krach test" des subprimes ?

A cette question, les économistes apportent, comme il se doit, des réponses opposées. Dans des points de vue publiés par Project Syndicate, Martin Feldstein, professeur à Harvard, estime que l'euro est en grand danger ; Barry Eichengreen, professeur à Berkeley, juge au contraire qu'il va en sortir renforcé.

Premier argument des optimistes : la BCE, gardienne de l'euro, a gagné en crédibilité. Non qu'elle se soit montrée particulièrement perspicace - elle n'a pas plus que les autres vu arriver l'ouragan. Non que sa stratégie ait particulièrement convaincu - on se demande encore pour quelle raison elle a relevé ses taux en juillet et pourquoi elle a ensuite tant tardé à les baisser. Mais la Fed, de son côté, par la faute d'Alan Greenspan, s'est tellement démonétisée, la Banque d'Angleterre s'est tellement ridiculisée dans l'affaire Northern Rock, qu'en comparaison, la BCE donne presque l'impression d'avoir effectué un sans-faute.

Deuxième élément favorable à l'euro : les pays européens qui ne le possèdent pas souffrent encore plus que ceux qui le détiennent. A commencer par la petite et malheureuse Islande : son économie, dont les performances suscitaient pourtant l'admiration des organisations internationales, a implosé. La Bourse de Reykjavik a perdu 95 % depuis le 1^er janvier, et son déficit budgétaire devrait frôler les 13 % du PIB en 2009. Pour boucler leurs fins de mois, les Islandais bradent leurs 4×4, tandis que les étudiants partis dans des universités étrangères sont obligés de rentrer au pays, incapables de financer leur scolarité.

La Hongrie a elle aussi chaviré, tout comme la Lettonie, et seule l'intervention d'urgence du FMI a permis de sauver les naufragés. D'autres pays pourraient bientôt connaître le même destin, victimes de la fuite des capitaux étrangers qui leur assuraient jusqu'à présent leur développement. Même le Danemark a souffert, obligé de relever ses taux pour défendre sa monnaie, tandis que le Royaume-Uni se retrouve dans une situation à haut risque : la livre sterling baisse aussi vite que le déficit public monte, ce qui pourrait finir par poser de très gros problèmes de financement à l'Etat.

A Reykjavik, à Copenhague et un peu partout en Europe, on entend la même prière : saint Euro, adopte-nous et protège-nous des malheurs économiques de ce monde ! Même à Londres et en Suisse, certains hauts dirigeants politiques seraient prêts à se convertir.

C'est avant tout à sa taille que l'euro doit de s'être imposé comme bouclier anti-subprimes. En matière de monnaies et en temps de crise, les investisseurs préfèrent les grosses : celles dont la masse critique est telle qu'elles constituent à elles seules un gage de liquidité et de sécurité. Parmi elles, le dollar, le yen, l'euro, le franc suisse et, jusqu'à il y a peu de temps encore, la livre sterling. Bref, le prestige accru de l'euro se mesure au nombre croissant de pays désireux de rejoindre le club. Voilà pour les optimistes.

Les pessimistes maintenant. Pour eux, la crise des subprimes révèle et confirme le défaut majeur de l'édifice monétaire européen : l'absence d'une structure politique capable de prendre des mesures fortes dans des moments forts. Pour preuve, les bagarres franco-allemandes à propos de l'adoption du plan de sauvetage bancaire. Pour preuve, surtout, un plan de relance a minima (1,5 point de PIB), trois fois moins qu'aux Etats-Unis. De surcroît une simple addition des plans nationaux, sans aucune cohérence globale, certains misant sur l'offre, d'autres sur la demande. Comme si la Californie avait mis en place ses propres mesures de relance pendant que le Texas adoptait les siennes.

Reflet de ces tiraillements européens : sur les marchés, l'Italie doit aujourd'hui offrir des taux supérieurs de 1,4 % à ceux de l'Allemagne pour emprunter à dix ans, la Grèce de 2,1 %, contre seulement 0,2 % à 0,3 % avant le début de la crise. En d'autres termes, la zone euro est en train de perdre à toute vitesse cette homogénéité financière et monétaire qu'elle avait eu tant de peine à acquérir. Jusqu'où ces forces centrifuges agiront-elles ?

L'Allemagne se raidit, inquiète à l'idée que les déboires des "pays du Club Med" - comme un responsable de la Bundesbank les avait aimablement qualifiés - finissent par la contaminer. Ses plus hauts dirigeants monétaires, Jürgen Stark et Axel Weber, expliquent que la BCE ne doit pas aller plus loin dans la baisse des taux. Sur le plan budgétaire, Berlin estime qu'il n'a pas à casser la tirelire patiemment remplie grâce à ses efforts de modération salariale pour aider des pays ayant vécu au-dessus de leurs moyens et ayant accumulé les déficits. A l'inverse, jusqu'où les pays d'Europe du Sud - la Grèce en premier lieu - pourront-ils s'enfoncer dans la crise économique et sociale sans crier grâce, sans être tentés d'abandonner l'euro, devenu un carcan ? Dans ce cas, l'euro - et c'est le pronostic des plus pessimistes parmi les pessimistes - finirait par ressembler à s'y méprendre au deutschemark et à ses satellites. Ou pour paraphraser une formule célèbre définissant le football : "L'euro, c'est une monnaie qui se joue à quinze, mais à la fin, c'est toujours l'Allemagne qui gagne."

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Author: Pierre-Antoine Delhommais
Original Source: LE MONDE
Date Published: 13.12.08
Web Source: http://www.lemonde.fr/opinions/article/2008/12/13/l-heure-de-verite-pour-l-euro-par-pierre-antoine-delhommais_1130748_3232.html
Date Accessed Online: 2008-12-13

The High Price of Cheap Eats

2008-12-13T23:56:00.000-08:00

Dollar “value meals” at fast food restaurants may not be such a bargain when you look at the potential health costs.

Many of these low-cost menu items are packed with fat, salt, cholesterol and processed meat, notes The Cancer Project, a nonprofit cancer prevention organization. The group has produced a list of what it says are the five unhealthiest items sold at the nation’s largest fast food chains.

The organization’s dieticians reviewed so-called value menus at five of the largest fast food chains in the nation, awarding points for such unhealthy characteristics as sodium, fat and low-fiber content. Jack in the Box’s junior bacon cheeseburger topped the list as the worst offender. The burger costs just one dollar but is packed with 23 grams of fat, including 8 grams of saturated fat, 55 milligrams of cholesterol and 860 milligrams of sodium and just one gram of fiber.

The Cancer Project is affiliated with the Physicians Committee for Responsible Medicine, which aggressively promotes a low-fat, vegetarian diet. The organization’s list was spurred in part by a concern that during tough economic times, more people will resort to eating inexpensive fast foods, said Krista Haynes, a dietitian with the project.

A spokeswoman for Jack in the Box said that the junior bacon cheeseburger is a “great value” but that diners may also choose from healthier options, like salads and a fruit cup. They’re more expensive, however: an entrée salad with grilled chicken strips is $4.99, and a fruit cup is $2.29.

“Our guests can also customize their order, so if you’re dining on a budget you have a lot of choices at Jack in the Box,” said Kathleen Anthony, media relations manager at Jack in the Box.

The other four menu items on the cancer group’s list were:

* In second-worst place, the 89-cent Taco Bell cheesy double beef burrito, with 460 calories, 20 grams of fat and a whopping 1,620 milligrams of sodium.

* In third-worst place was the one-dollar Burger King breakfast sausage biscuit, with 27 grams of fat, including 15 grams of saturated fat and over 1,000 milligrams of sodium.

* Fourth worst went to the one-dollar McDonald’s McDouble, which contains 19 grams of fat and 65 milligrams of cholesterol.

* Last, and least-worst, was the Wendy’s junior bacon cheeseburger, for $1.53, with 310 calories and 16 grams of fat.

Being overweight can increase the risk for diabetes and heart disease, and the American Cancer Society recommends limiting high-fat foods, which are associated with an increased risk of certain cancers, and eating plenty of fruits and vegetables.

But Alice H. Lichtenstein, director of the cardiovascular nutrition laboratory at Tufts University in Boston, questioned whether the declining economy would have much effect on people’s eating habits.

“It would be nice if they decided it was better for their budget to start preparing food at home more often," she said.

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Author: RONI CARYN RABIN
Original Source: New York Times
Date Published: December 12, 2008
Web Source: http://www.nytimes.com/2008/12/12/health/10meals.html
Date Accessed Online: 2008-12-14

While Detroit Slept

2008-12-12T07:26:00.000-08:00

As I think about our bailing out Detroit, I can’t help but reflect on what, in my view, is the most important rule of business in today’s integrated and digitized global market, where knowledge and innovation tools are so widely distributed. It’s this: Whatever can be done, will be done. The only question is will it be done by you or to you. Just don’t think it won’t be done. If you have an idea in Detroit or Tennessee, promise me that you’ll pursue it, because someone in Denmark or Tel Aviv will do so a second later.

Why do I bring this up? Because someone in the mobility business in Denmark and Tel Aviv is already developing a real-world alternative to Detroit’s business model. I don’t know if this alternative to gasoline-powered cars will work, but I do know that it can be done — and Detroit isn’t doing it. And therefore it will be done, and eventually, I bet, it will be done profitably.

And when it is, our bailout of Detroit will be remembered as the equivalent of pouring billions of dollars of taxpayer money into the mail-order-catalogue business on the eve of the birth of eBay. It will be remembered as pouring billions of dollars into the CD music business on the eve of the birth of the iPod and iTunes. It will be remembered as pouring billions of dollars into a book-store chain on the eve of the birth of Amazon.com and the Kindle. It will be remembered as pouring billions of dollars into improving typewriters on the eve of the birth of the PC and the Internet.

What business model am I talking about? It is Shai Agassi’s electric car network company, called Better Place. Just last week, the company, based in Palo Alto, Calif., announced a partnership with the state of Hawaii to road test its business plan there after already inking similar deals with Israel, Australia, the San Francisco Bay area and, yes, Denmark.

The Better Place electric car charging system involves generating electrons from as much renewable energy — such as wind and solar — as possible and then feeding those clean electrons into a national electric car charging infrastructure. This consists of electricity charging spots with plug-in outlets — the first pilots were opened in Israel this week — plus battery-exchange stations all over the respective country. The whole system is then coordinated by a service control center that integrates and does the billing.

Under the Better Place model, consumers can either buy or lease an electric car from the French automaker Renault or Japanese companies like Nissan (General Motors snubbed Agassi) and then buy miles on their electric car batteries from Better Place the way you now buy an Apple cellphone and the minutes from AT&T. That way Better Place, or any car company that partners with it, benefits from each mile you drive. G.M. sells cars. Better Place is selling mobility miles.

The first Renault and Nissan electric cars are scheduled to hit Denmark and Israel in 2011, when the whole system should be up and running. On Tuesday, Japan’s Ministry of Environment invited Better Place to join the first government-led electric car project along with Honda, Mitsubishi and Subaru. Better Place was the only foreign company invited to participate, working with Japan’s leading auto companies, to build a battery swap station for electric cars in Yokohama, the Detroit of Japan.

What I find exciting about Better Place is that it is building a car company off the new industrial platform of the 21st century, not the one from the 20th — the exact same way that Steve Jobs did to overturn the music business. What did Apple understand first? One, that today’s technology platform would allow anyone with a computer to record music. Two, that the Internet and MP3 players would allow anyone to transfer music in digital form to anyone else. You wouldn’t need CDs or record companies anymore. Apple simply took all those innovations and integrated them into a single music-generating, purchasing and listening system that completely disrupted the music business.

What Agassi, the founder of Better Place, is saying is that there is a new way to generate mobility, not just music, using the same platform. It just takes the right kind of auto battery — the iPod in this story — and the right kind of national plug-in network — the iTunes store — to make the business model work for electric cars at six cents a mile. The average American is paying today around 12 cents a mile for gasoline transportation, which also adds to global warming and strengthens petro-dictators.

Do not expect this innovation to come out of Detroit. Remember, in 1908, the Ford Model-T got better mileage — 25 miles per gallon — than many Ford, G.M. and Chrysler models made in 2008. But don’t be surprised when it comes out of somewhere else. It can be done. It will be done. If we miss the chance to win the race for Car 2.0 because we keep mindlessly bailing out Car 1.0, there will be no one to blame more than Detroit’s new shareholders: we the taxpayers.

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Author: THOMAS L. FRIEDMAN
Original Source: New York Times
Date Published: December 10, 2008
Web Source: http://www.nytimes.com/2008/12/10/opinion/10friedman.html
Date Accessed Online: 2008-12-12

Strangers May Cheer You Up, Study Says

2008-12-09T07:42:00.000-08:00

How happy you are may depend on how happy your friends’ friends’ friends are, even if you don’t know them at all.

And a cheery next-door neighbor has more effect on your happiness than your spouse’s mood.

So says a new study that followed a large group of people for 20 years — happiness is more contagious than previously thought.

“Your happiness depends not just on your choices and actions, but also on the choices and actions of people you don’t even know who are one, two and three degrees removed from you,” said Dr. Nicholas A. Christakis, a physician and social scientist at Harvard Medical School and an author of the study, to be published Friday in BMJ, a British journal. “There’s kind of an emotional quiet riot that occurs and takes on a life of its own, that people themselves may be unaware of. Emotions have a collective existence — they are not just an individual phenomenon.”

In fact, said his co-author, James H. Fowler, an associate professor of political science at University of California, San Diego, their research found that “if your friend’s friend’s friend becomes happy, that has a bigger impact on you being happy than putting an extra $5,000 in your pocket.”

The researchers analyzed information on the happiness of 4,739 people and their connections with several thousand others — spouses, relatives, close friends, neighbors and co-workers — from 1983 to 2003.

“It’s extremely important and interesting work,” said Daniel Kahneman, an emeritus psychologist and Nobel laureate at Princeton, who was not involved in the study. Several social scientists and economists praised the data and analysis, but raised possible limitations.

Steven Durlauf, an economist at the University of Wisconsin, Madison, questioned whether the study proved that people became happy because of their social contacts or some unrelated reason.

Dr. Kahneman said unless the findings were replicated, he could not accept that a spouse’s happiness had less impact than a next-door neighbor. Dr. Christakis believes that indicates that people take emotional cues from their own gender.

A study also to be published Friday in BMJ, by Ethan Cohen-Cole, an economist at the Federal Reserve Bank of Boston, and Jason M. Fletcher, an assistant professor at the Yale School of Public Health, criticizes the methodology of the Christakis-Fowler team, saying that it is possible to find what look like social contagion effects with conditions like acne, headaches and height, but that contagion effects go away when researchers factor in environmental factors that friends or neighbors have in common.

“Researchers should be cautious in attributing correlations in health outcomes of close friends to social network effects,” the authors say.

An accompanying BMJ editorial about the two studies called the Christakis-Fowler study “groundbreaking,” but said “future work is needed to verify the presence and strength of these associations.”

The team previously published studies concluding that obesity and quitting smoking are socially contagious.

But the happiness study, financed by the National Institute on Aging, is unusual in several ways. Happiness would seem to be “the epitome of an individualistic state,” said John T. Cacioppo, director of the University of Chicago’s Center for Cognitive and Social Neuroscience, who was not involved in the study.

And what about schadenfreude - pleasure in someone's misery - or good old-fashioned envy when a friend lands a promotion or wins the marathon? “There may be some people who become unhappy when their friends become happy, but we found that more people become happy over all,” Dr. Christakis said.

Professor Cacioppo said that suggested that unconscious signals of well-being packed more zing than conscious feelings of resentment. “I might be jealous of the fact that they won the lottery, but they’re in such a good mood that I walk away feeling happier without even being aware that they were the site for my happiness,” he said.

The subtle transmission of emotion may explain other findings, too. In the obesity and smoking cessation studies, friends were influential even if they lived far away. But the effect on happiness was much greater from friends, siblings or neighbors who lived nearby.

A next-door neighbor’s joy increased one’s chance of being happy by 34 percent, but a neighbor down the block had no effect. A friend living half a mile away was good for a 42 percent bounce, but the effect was almost half that for a friend two miles away. A friend in a different community altogether can win an Oscar without making you feel better.

“You have to see them and be in physical and temporal proximity,” Dr. Christakis said.

Body language and emotional signals must matter, said Professor Fowler, adding, “Everybody thought when they came out with videoconferencing that people would stop flying across the country to have meetings, but that didn’t happen. Part of developing trust with another person is being able to take their hand in yours.”

Still, they said, it is not clear if increased communication via e-mail messages and Webcams may eventually lessen the distance effect. In a separate study of 1,700 Facebook profiles, they found that people smiling in their photographs had more Facebook friends and that more of those friends were smiling. “That shows that some of our findings are generalizable to the online world,” Dr. Christakis said.

The BMJ study used data from the federal Framingham Heart Study, which began following people in Framingham, Mass., after World War II and ultimately followed their children and grandchildren. Beginning in 1983, participants periodically completed questionnaires on their emotional well-being.

They also listed family members, close friends and workplaces, so researchers could track them over time. Many of those associates were Framingham participants who also completed questionnaires, giving Dr. Christakis and Professor Fowler about 50,000 social ties to analyze. They found that when people changed from unhappy to happy in self-reported responses on a widely used measure of well-being, other people in their social network became happy too.

Sadness was transmitted the same way, but not as reliably as happiness. Professor Cacioppo believes that reflects an evolutionary tendency to “select into circumstances that allow us to stay in a good mood.”

Still, happiness has a shelf life, the researchers found.

“Your happiness affects my happiness only if you’ve become happy in the last year — it’s almost like what have you done for me lately,” Dr. Christakis said. Plus, the bounce you get lasts a year tops. Better if your friends can spread out their happy news, and not, say, all get married the same year.

Another surprising finding was that a joyful coworker did not lift the spirits of colleagues, unless they were friends. Professor Fowler believes inherent competition at work might cancel out a happy colleague’s positive vibes.

The researchers cautioned that social contacts were less important to happiness than someone’s personal circumstances. But the effect of social contacts even three degrees removed — friends of friends of friends — was clear, and also occurred with obesity and quitting smoking. More distant contacts exerted no influence.

And people in the center of social networks were happier than those on the fringes. Being popular was good, especially if friends were popular too.

So should you dump melancholy friends? The authors say no. Better to spread happiness by improving life for people you know.

“This now makes me feel so much more responsible that I know that if I come home in a bad mood I’m not only affecting my wife and son but my son’s best friend or my wife’s mother,” Professor Fowler said. When heading home, “I now intentionally put on my favorite song.”

Still, he said, “We are not giving you the advice to start smiling at everyone you meet in New York. That would be dangerous.”
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Author: PAM BELLUCK
Original Source: New York Times
Date Published: December 5, 2008
Web Source: http://www.nytimes.com/2008/12/05/health/05happy-web.html
Date Accessed Online: 2008-11-03

College May Become Unaffordable for Most in U.S.

2008-12-09T07:33:00.000-08:00

The rising cost of college — even before the recession — threatens to put higher education out of reach for most Americans, according to the biennial report from the National Center for Public Policy and Higher Education.

Over all, the report found, published college tuition and fees increased 439 percent from 1982 to 2007 while median family income rose 147 percent. Student borrowing has more than doubled in the last decade, and students from lower-income families, on average, get smaller grants from the colleges they attend than students from more affluent families.

“If we go on this way for another 25 years, we won’t have an affordable system of higher education,” said Patrick M. Callan, president of the center, a nonpartisan organization that promotes access to higher education.

“When we come out of the recession,” Mr. Callan added, “we’re really going to be in jeopardy, because the educational gap between our work force and the rest of the world will make it very hard to be competitive. Already, we’re one of the few countries where 25- to 34-year-olds are less educated than older workers.”

Although college enrollment has continued to rise in recent years, Mr. Callan said, it is not clear how long that can continue.

“The middle class has been financing it through debt,” he said. “The scenario has been that families that have a history of sending kids to college will do whatever if takes, even if that means a huge amount of debt.”

But low-income students, he said, will be less able to afford college. Already, he said, the strains are clear.

The report, “Measuring Up 2008,” is one of the few to compare net college costs — that is, a year’s tuition, fees, room and board, minus financial aid — against median family income. Those findings are stark. Last year, the net cost at a four-year public university amounted to 28 percent of the median family income, while a four-year private university cost 76 percent of the median family income.

The share of income required to pay for college, even with financial aid, has been growing especially fast for lower-income families, the report found.

Among the poorest families — those with incomes in the lowest 20 percent — the net cost of a year at a public university was 55 percent of median income, up from 39 percent in 1999-2000. At community colleges, long seen as a safety net, that cost was 49 percent of the poorest families’ median income last year, up from 40 percent in 1999-2000.

The likelihood of large tuition increases next year is especially worrying, Mr. Callan said. “Most governors’ budgets don’t come out until January, but what we’re seeing so far is Florida talking about a 15 percent increase, Washington State talking about a 20 percent increase, and California with a mixture of budget cuts and enrollment cuts,” he said.

In a separate report released this week by the National Association of State Universities and Land-Grant Colleges, the public universities acknowledged the looming crisis, but painted a different picture.

That report emphasized that families have many higher-education choices, from community colleges, where tuition and fees averaged about $3,200, to private research universities, where they cost more than $33,000.

“We think public higher education is affordable right now, but we’re concerned that it won’t be, if the changes we’re seeing continue, and family income doesn’t go up,” said David Shulenburger, the group’s vice president for academic affairs and co-author of the report. “The public conversation is very often in terms of a $35,000 price tag, but what you get at major public research university is, for the most part, still affordable at 6,000 bucks a year.”

While tuition has risen at public universities, his report said, that has largely been to make up for declining state appropriations. The report offered its own cost projections, not including room and board.

“Projecting out to 2036, tuition would go from 11 percent of the family budget to 24 percent of the family budget, and that’s pretty huge,” Mr. Shulenburger said. “We only looked at tuition and fees because those are the only things we can control.”

Looking at total costs, as families must, he said, his group shared Mr. Callan’s concerns.

Mr. Shulenburger’s report suggested that public universities explore a variety of approaches to lower costs — distance learning, better use of senior year in high school, perhaps even shortening college from four years.

“There’s an awful lot of experimentation going on right now, and that needs to go on,” he said. “If you teach a course by distance with 1,000 students, does that affect learning? Till we know the answer, it’s difficult to control costs in ways that don’t affect quality.”

Mr. Callan, for his part, urged a reversal in states’ approach to higher-education financing.

“When the economy is good, and state universities are somewhat better funded, we raise tuition as little as possible,” he said. “When the economy is bad, we raise tuition and sock it to families, when people can least afford it. That’s exactly the opposite of what we need.”

This article has been revised to reflect the following correction:

Correction: December 4, 2008
Because of an editing error, an article on Wednesday about the increasing cost of higher education gave an incorrect context for two figures: the 439 percent increase in college tuition and fees and the 147 percent increase in median family income since 1982. Those figures were not adjusted for inflation. The error was repeated for the data in an accompanying chart. A corrected chart appears at nytimes.com/national.

The article also described incorrectly the report for the National Center for Public Policy and Higher Education that cited the figures. It is produced every other year, not annually.
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Author: TAMAR LEWIN
Original Source: New York Times
Date Published: December 3, 2008
Web Source: http://www.nytimes.com/2008/12/03/education/03college.html
Date Accessed Online: 2008-12-09

36 Hours in Taipei, Taiwan

2008-12-09T05:19:00.000-08:00

TAIPEI, the vibrant capital of Taiwan, distills the best of what Asian cities have to offer — great street food, crackling night life, arguably the world’s best collection of Chinese art, and hot springs and hiking trails reachable by public transport. With interest in mainland China surging, Taipei — one of the most underrated tourist destinations in Asia — offers a look at a different side of China, one that escaped the deprivations of early Communist rule and the Cultural Revolution. Here is a Chinese culture (some contend that it is uniquely Taiwanese) that practices bare-knuckled democracy and has preserved traditions thousands of years old in a way that was impossible to do on the mainland.

Friday

3 p.m.
1) ANCIENT WAYS

The National Palace Museum (221 Chih-shan Road, Section 2; 886-2-2881-2021; www.npm.gov.tw/en/home.htm) is considered by many to be the finest repository of Chinese art in the world; it houses artifacts dating back to the earliest days of Chinese civilization. The collection includes oracle bones, which have the first known written Chinese ideograms, as well as ritual bronze vessels, Ming Dynasty pottery and jade sculptured into the shapes of cabbage and fatty pork.

5 p.m.
2) TOP OF THE WORLD

But enough of ancient culture, at least for now. Immerse yourself in modern Taipei by going deep into the belly of the tallest building in the world, the 1,670-foot Taipei 101 (7 Xinyi Road, Section 5; www.taipei-101.com.tw/index_en.htm). The first five floors, with stores like Armani, Louis Vuitton and Sogo, should satisfy any shopping urge. Take a high-speed elevator to the indoor and outdoor observation decks, starting on the 89th floor, for unparalleled views of Taipei and its environs. In every direction lie city blocks and avenues winding among concrete-and-glass towers, with verdant hills rising in the distance. Wisps of cloud float past the windows. Beware of vertigo.

7 p.m.
3) OYSTERS IN THE SKY

Dinner is only a few floors away. Go down to the 85th floor of Taipei 101 to feast on traditional Taiwanese dishes at Shin Yeh (886-2-8101-0185). Try the deep-fried oysters and rolls stuffed with taro and shrimp. Set dinners start at about 1,600 Taiwan dollars per person ($50.40 at 31.75 Taiwan dollars to the U.S. dollar). Be sure to make reservations well in advance, ideally several weeks before arriving.

9 p.m.
4) MARTINIS WITH MOOD

Lounge bars have popped up all over Taipei. If you’re in a mood for dessert with your drink, try the bar in the consciously hip People Restaurant (191 Anhe Road, Section 2; 886-2-2735-2288). The attitude starts even before you enter: the double doors have no handles, nor do they open automatically. Figuring out how to get in is only part of the fun. Once inside, walk through the shadowy industrial rooms and take a seat at the bar or in the lounge, where cocktails are served in large glass globes. Next, saunter down the road to Rewine (137 Anhe Road, Section 1; 886-2-2325-6658), whose head bartender has won international awards for his unique cocktails.

Saturday

6 a.m.
5) CHANNELING INNER ENERGY

If you’re heading back to your hotel at dawn, or need some fresh air early in the morning, stop in at the largest public park in the city, Da An Park. It cannot compare to New York’s Central Park in size — the width and length each stretch only a few city blocks — but the smattering of tropical foliage, along with paths meandering across a level green field, endow the park with a serene air. You can watch Taipei’s dedicated tai chi practitioners going through their moves or perhaps an elderly woman doing a sword dance.

9 a.m.
6) STEAMY MORNING

After a quick breakfast at one of Taipei’s many corner bakeries, hop on the subway, called the MRT, to the New Beitou stop, about 40 minutes from downtown. The northern town of Beitou is renowned for its hot springs resorts, some modeled after those in Japan. Walk up the hill to take a soak at one of the newest of the spas, Villa 32 (32 Zhongshan Road; 886-2-6611-8888; www.villa32.com). It has all the atmosphere of a luxury spa in a uniquely Taiwanese setting, with outdoor pools of different temperatures shielded by wooden awnings and the shade of leafy trees. Rent a room for several hours or spend the morning with other bathers in the outdoor pools, separated by gender.

1 p.m.
7) READING TEA LEAVES

Taiwanese are discerning tea-drinkers, and going to teahouses is popular here. One local favorite is De Ye Cha Chi, near the Shandao Temple MRT station (3-1 Zhen Jiang Street; 886-2-2...). Jars of tea leaves sit against a wall in the quiet dining room, and guests can brew their tea in traditional pots. Try Oriental Beauty, an oolong tea with a naturally sweet taste that was supposedly given its English-language name by the Queen of England after she had a sip. Prices vary, but a pot can cost less than 300 Taiwan dollars.

3 p.m.
8) PLACATING THE SPIRITS

To get answers to weighty life questions, or just to observe traditional Taiwanese religious practices, head to Longshan Temple, on Guangzhou Street in the venerable Wanhua neighborhood of western Taipei. Built in 1738, its main altar houses a statue of Guanyin, the goddess of compassion, but many other gods — some red-faced, others long-bearded — also have their own shrines and worshipers. In the courtyard, Taiwanese burn incense and cast red, crescent-shaped pieces of wood to divine their fortunes.

5 p.m.
9) CINEMA OBSCURA

If your energy is flagging about now, sit down for coffee at the Spot, the favorite art-house cinema of many a Taipei resident (18 Zhongshan North Road, Section 2; 886-2-2511-7786). The white villa that houses the screening rooms, restaurant and bar was once the official residence of the American ambassador. It is one of the most atmospheric buildings in Taipei, redolent of colonial life in the tropics, with lush grounds that shield the villa from the street.

7 p.m.
10) ALL WRAPPED UP

There’s no avoiding Din Tai Fung, a mandatory stop on Taiwan’s restaurant scene (194 Xinyi Road, Section 2; 886-2-2321-8928). This crowded, brightly lit restaurant, with chefs rolling and stuffing dumplings in the front, specializes in xiao long bao, steamed soup dumplings. These are usually associated with Shanghainese cuisine, but the dumplings here are famous for skin that is much more delicate than those of their Shanghainese counterparts. Try the ones with pork, pork and crab meat or purely vegetables. Save room for taro dumplings as a first dessert. A full meal might cost 300 Taiwan dollars a person.

9 p.m.
11) SHAVED ICE

Head around the corner to Yongkang Street, a celebrated eating avenue, for your second dessert: a mound of shaved ice topped with fresh mango, strawberry or kiwi at Ice Monster (15 Yongkang Street). Then stroll along the Street, lined with traditional noodle shops, Japanese restaurants and sweet tofu dessert parlors.

10 p.m.
12) SMALL EATS

Taipei is as modern a city as any in Asia, but traditional night markets thrive in many neighborhoods. The biggest ones resemble beachside boardwalks, with cheek-by-jowl crowds, fun-fair games, knickknack stores selling everything from chopsticks to DVD’s and, of course, every kind of Taiwanese snack food. The liveliest markets are Raohe, by Ciyou Temple in the Songshan neighborhood; Shida, between the Guting and Taipower Building MRT stations; and Shilin, at the Jiantan MRT station.

Sunday

9 a.m.
13) INTO THE CLOUDS

Your last day? Take a bus or taxi over to Yangmingshan, the gently sloping dormant volcano that sits in a national park on Taipei’s northern edge. The rangers at the main visitor’s center can give you advice on the dozens of trails. If the weather is clear, consider walking up to Mount Cising, which at 3,674 feet is the highest summit in the greater Taipei basin. The wind-swept high meadows are covered in waves of silvergrass, and the views could well inspire you to start planning your return trip to Taipei.

The Basics

In mid-February, a quick Internet search showed that the cheapest round-trip flights from New York to Taipei for travel in early March cost $800 on Northwest Airlines (two stops) and $930 on United Airlines (one stop). You’ll pay about 1,200 Taiwan dollars ($31.80 at 31.75 Taiwan dollars to the U.S. dollar) to take a taxi from the international airport in Taipei to the city center. A shuttle bus to the main railway station, in the city center and a convenient place for subway connections, costs 120 Taiwan dollars.

Les Suites Taipei is an intimate boutique hotel that has two locations in the city (12 Ching Cheng Street; 886-2-8712-7688; and 135 Da An Road, Section 1; 886-2-8773-3799; www.suitetpe.com). Late last month, the weekend on-line rate for a double at the Da An location started at about $140 a night.

The Grand Hotel, at least architecturally, lives up to its name (1 Zhongshan North Road, Section 4; 886-2-2886-8888; www.grand-hotel.org). Built in Qing Dynasty style, it has been a centerpiece of Taipei’s luxury hotel scene for years, though the location north of the city center is somewhat inconvenient. Late last month, the weekend rate for a double started at 3,990 Taiwan dollars per night.
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Author:EDWARD WONG
Original Source: New York Times
Date Published:March 2, 2008
Web Source: http://travel.nytimes.com/2008/03/02/travel/02hours.html
Date Accessed Online: 2008-12-09