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The Economist - Leaders    [3 followers]  Follow    
  Full-text available via subscription Subscription journal
     ISSN (Online) 1358-274X
     Published by The Economist Group Homepage  [4 journals]
  • Multinationals: China loses its allure
    • Abstract: ACCORDING to the late Roberto Goizueta, a former boss of The Coca-Cola Company, April 15th 1981 was “one of the most important days…in the history of the world.” That date marked the opening of the first Coke bottling plant to be built in China since the Communist revolution.The claim was over the top, but not absurd. Mao Zedong’s disastrous policies had left the economy in tatters. The height of popular aspiration was the “four things that go round”: bicycles, sewing machines, fans and watches. The welcome that Deng Xiaoping, China’s then leader, gave to foreign firms was part of a series of changes that turned China into one of the biggest and fastest-growing markets in the world.For the past three decades, multinationals have poured in. After the financial crisis, many companies looked to China for salvation. Now it looks as though the gold rush may be over.More pain, less gainIn some ways, China’s market is still the world’s most enticing. Although it accounts for only around 8% of private consumption in the world, it contributed more than any other country to the growth of consumption in 2011-13. Firms like GM and Apple have made fat profits there.But for...
      PubDate: Thu, 23 January 2014 15:59:50
  • California: The recovery
    • Abstract: WHEN Jerry Brown took office as California’s governor in January 2011, the Golden State was a laughing stock. Its credit was poor, its politics venomous and its fiscal deficits larger than most states’ budgets. Campaigning in 2012, Mitt Romney compared California to European basket-cases like Greece. He would not do so today.Earlier this month Mr Brown unveiled a budget with a surplus for 2013-14 forecast at $4.2 billion. In his state-of-the-state speech on January 22nd he spoke of “California’s comeback” (see article). The state’s job-creation rate is among America’s best (though unemployment is still high at 8.5%), and in much of the state the housing market is reviving. Politically, Mr Brown is unrivalled; some excitable Democrats have even urged him to make a fourth run for president (although the first three, in 1976, 1980 and 1992, did not go well). Assuming that he seeks re-election in November, he should sail to victory.The tight-fisted Mr Brown—he is not above eating food from other people’...
      PubDate: Thu, 23 January 2014 15:59:50
  • Syria’s civil war: Desperate times
    • Abstract: NOBODY thinks that the Geneva negotiations, which began on January 22nd after months of effort, will bring peace right away. But with civil war raging inside Syria, just getting people around the same table feels like progress; and, it is argued, the talks might lay the ground for negotiations that may one day lead to a ceasefire, or even to power changing hands. Meanwhile, they can broker local truces and get relief to Syrians dying for lack of food and medicine.Anything that would alleviate Syria’s plight is welcome. But if America and Europe are serious about helping Syria, they should arm the rebels fighting the regime.Out-thinking, out-manoeuvring, inhumanThat is a message people do not want to hear. Then again, neither do they want to face up to the brutality inside Bashar Assad’s prisons. This is not casual thuggery but, as a security official who defected from the regime with thousands of horrific photographs has revealed (pictured), an audited policy of official terror administered on an industrial scale. The violence Mr Assad has used has driven reason and tolerance out of what was one of the Middle East’s most integrated countries. Well over 100,000...
      PubDate: Thu, 23 January 2014 15:59:50
  • Road safety: Reinventing the wheel
    • Abstract: DURING the past two decades astonishing progress has been made in fighting infectious diseases in poor countries. Polio has almost been eradicated; malaria is being tamed (see article); HIV/AIDS is slowly being brought under control. Yet almost unnoticed, another epidemic is raging across the developing world, this one man-made.Road crashes now kill 1.3m people a year, more than malaria or tuberculosis. On present trends, by 2030 they will take a greater toll than the two together, and greater even than HIV/AIDS (see article). The vast majority of victims die in poor and middle-income countries—1.2m in 2011, compared with 99,000 in rich ones. For every 100,000 cars in the rich world, fewer than 15 people die each year. In Ethiopia the figure is 250 times higher.It is tempting to see the carnage as the price of...
      PubDate: Thu, 23 January 2014 15:59:50
  • European climate policy: Worse than useless
    • Abstract: SINCE climate change was identified as a serious threat to the planet, Europe has been in the vanguard of the effort to mitigate it. The policies it has adopted are designed with two aims in mind: to cut European emissions drastically and to push other big emitters into adopting similar policies. By both measures, they have failed. That America and China have not taken serious steps to reduce their own emissions is hardly Europe’s fault. Yet had Europe’s policies worked better, other countries might have been more inclined to emulate the leaders in the field. That is one reason why the European Commission’s announcement on January 22nd of modest increases in its targets for emissions reductions and renewable-energy use, rather than a complete overhaul of the system, was such a disappointment (see article). Another is that the existing policies impose heavy costs on European consumers and companies, and well-designed ones could cut emissions much more cheaply.European climate policy has two...
      PubDate: Thu, 23 January 2014 15:59:50
  • Defence in Japan: Don’t look back
    • Abstract: IMAGINE that China decided to land soldiers on the disputed islands that it calls the Diaoyus. Japan, which administers the uninhabited rocks and knows them as the Senkakus, might, under its own laws, be unable to meet the incursion with force. The coastguard may repel private vessels, but not troops arriving from the air or from a submarine. It is not clear whether Japan’s pacifist constitution prevents its Self-Defence Forces from striking back until its own citizens are injured. Nor is it obvious that its main ally, America, would go to war to rid the Senkakus of the platoon of Chinese troops.This uncertainty is dangerous, because it could lure China into miscalculation. In addition, Japan’s alliances would be stronger and more dependable if the country were a fully active member of them, able to shoulder its burden and come to its allies’ defence. Yet, although Asia would be more stable if Japan were more normal, the shadow of the second world war means that the country’s neighbours worry that their old enemy is about to forsake pacifism. Shinzo Abe, the prime minister, should be trying to allay their fears. He has chosen instead to visit a shrine...
      PubDate: Thu, 16 January 2014 16:00:03
  • Technology and jobs: Coming to an office near you
    • Abstract: INNOVATION, the elixir of progress, has always cost people their jobs. In the Industrial Revolution artisan weavers were swept aside by the mechanical loom. Over the past 30 years the digital revolution has displaced many of the mid-skill jobs that underpinned 20th-century middle-class life. Typists, ticket agents, bank tellers and many production-line jobs have been dispensed with, just as the weavers were.For those, including this newspaper, who believe that technological progress has made the world a better place, such churn is a natural part of rising prosperity. Although innovation kills some jobs, it creates new and better ones, as a more productive society becomes richer and its wealthier inhabitants demand more goods and services. A hundred years ago one in three American workers was employed on a farm. Today less than 2% of them produce far more food. The millions freed from the land were not consigned to joblessness, but found better-paid work as the economy grew more sophisticated. Today the pool of secretaries has shrunk, but there are ever more computer programmers and web designers.Remember IronbridgeOptimism remains the right starting-point, but for...
      PubDate: Thu, 16 January 2014 16:00:03
  • Discretion: La Maison Blanche
    • Abstract: THE citizens of the world’s most powerful country have recently been distracted by a piece of meaningless tittle-tattle. The current issue of People magazine has revealed what le tout Washington knew anyway: that Barack Obama has been having an affair with Jennifer Aniston. This intrusion took place despite the president’s creditable attempts at discretion: putting aside the normal trappings of office, he travelled to Ms Aniston’s flat in the evening and left in the morning (after bagels had been brought by the Secret Service) on a scooter, wearing a helmet with the visor down to conceal his face.This reprehensible scandalmongering has focused attention on Mr Obama’s private life—which, as befits a man of stature, has been active and varied. His long-term partner was Hillary Clinton, whom he never married but with whom he has four children. Their political rivalry, alas, damaged their personal relationship, and he took up with Katie Couric, whom he installed as First Girlfriend in the White House. She has now been admitted to hospital—upset, as any journalist would be, at the publicity...
      PubDate: Thu, 16 January 2014 16:00:03
  • Bank capital: A worrying wobble
    • Abstract: IN THE immediate aftermath of the financial crisis, politicians and regulators from around the world stood shoulder to shoulder and promised to tame the excesses in the banking system that had brought the global economy to its knees. Among the first of their proposed reforms was to have more loss-absorbing capital in banks to reduce the risks of future taxpayer-funded bail-outs. How quickly memories fade.On January 12th the Basel committee, a club of central bankers and supervisors, released new rules that are weaker than their previous proposals (see article). The technical tweaks may let big banks—mostly European ones—off the hook of having to raise as much as €70 billion ($96 billion) in capital. Although banks will still have to meet a leverage target of at least 3%, the formula for calculating it has been softened. The next day brought a surge in the share prices of big banks, which had lobbied hard for a dilution of the rules. Investors’ elation ought to be worrying for taxpayers.One of the most...
      PubDate: Thu, 16 January 2014 16:00:03
  • Ariel Sharon: He may be missed
    • Abstract: HOW strange that a man widely reviled for most of his adult life as a warmonger, even by many of his fellow Israelis, might have been the one to bring about a lasting peace between Jews and Arabs—and a proper state for Palestine—had he survived in fair health for another five years or so as prime minister. Ariel Sharon, who died on January 11th after lying in a coma for eight years following a stroke that struck him down at the height of his political powers, was a man of moral as well as physical courage. He was a man of vision, too—an example to the current prime minister, Binyamin Netanyahu.For many years Mr Sharon saw Israel as a fortress to be defended so ferociously that no Arab could hope to destroy it. When, as prime minister, he dramatically changed tack by deciding to evacuate the Gaza Strip, evicting thousands of Jewish settlers for whom he had previously been the doughtiest champion, he faced down Israel’s hard right. It was an act of courage as well as pragmatism. At the time he sought to persuade the outraged settlers and their influential lobby that he would not then proceed to wrest the West Bank from their grip, handing it back to the Palestinians...
      PubDate: Thu, 16 January 2014 16:00:02
  • Privatisation: The $9 trillion sale
    • Abstract: IMAGINE you were heavily in debt, owned a large portfolio of equities and under-used property and were having trouble cutting your spending—much like most Western governments. Wouldn’t you think of offloading some of your assets?Politicians push privatisation at different times for different reasons. In Britain in the 1980s, Margaret Thatcher used it to curb the power of the unions. Eastern European countries employed it later to dismantle command economies. Today, with public indebtedness at its highest peacetime level in advanced economies, the main rationale is to raise cash.Taxpayers might think that the best family silver has already been sold, but plenty is still in the cupboard (see article). State-owned enterprises in OECD countries are worth around $2 trillion. Then there are minority stakes in companies, plus $2 trillion or so in utilities and other assets held by local governments. But the real treasures are “non-financial” assets—buildings, land, subsoil resources—which the IMF believes are...
      PubDate: Thu, 09 January 2014 16:00:03
  • France’s economic woes: Can François do a Gerhard?
    • Abstract: EUROPE’S weakness has been most evident around its periphery—in Greece, Portugal, Spain and Italy. Yet by some measures, France is in worse shape. Among EU countries in the past 25 years, only Italy has seen slower growth. France’s budget deficit is bigger than Italy’s and its current-account deficit is the largest in the euro zone. But it is the contrast with Germany that is most painful. Since the creation of the euro, in 1999, France’s GDP per head has risen by just 0.8% a year, against Germany’s 1.3%; its unit labour costs, then below Germany’s, are now higher; its exports, then worth almost 60% of Germany’s, now total less than 40%. Unemployment in France is near 11%, a 16-year high; in Germany it is just over 5%, a 20-year low. And whereas most of the euro zone is now growing, France may be entering another recession.This weakness is undermining efforts to fix the euro. The Franco-German engine that usually powers the EU is broken, and France’s failure to reform is provoking a backlash against efforts—such as the creation of a banking union—needed to shore up the single currency. Why, German taxpayers ask, should their credit support unreformed Gallic...
      PubDate: Thu, 09 January 2014 16:00:03
  • Securitisation: It’s back
    • Abstract: GIVEN their role in the 2008 meltdown, and their subsequent branding as toxic sludge, it is not surprising that “securitised” financial products have had a quiet few years. Yet the transformation of mortgages, credit-card debt and other recurring cashflows into new marketable securities is enjoying something of a resurgence. Once apparently destined for the financial history books, the alphabet soup of ABSs (asset-backed securities), MBSs (their mortgage version), CLOs (collateralised loan obligations) and others had a bumper year in 2013. More growth is expected this year (see article).Not everybody is thrilled. Some observers argue that the risks securitisation poses are too grave. But its revival should be welcomed, for it is probably essential to continued economic recovery, particularly in Europe.Use carefullyIn its simplest form, securitisation is straightforward and beneficial. For example, a carmaker expecting lots of monthly payments from customers who have taken out financing can get investors to fund its...
      PubDate: Thu, 09 January 2014 16:00:03
  • Britain’s planning laws: An Englishman’s home
    • Abstract: NOW that the economy is at last growing again, the burning issue in Britain is the cost of living. Prices have outstripped wages for the past six years. Politicians have duly harried energy companies to cut their bills, and flirted with raising the minimum wage. But the thing that is really out of control is the cost of housing. In the past year wages have risen by 1%; property prices are up by 8.4%. This is merely the latest in a long surge. If since 1971 the price of groceries had risen as steeply as the cost of housing, a chicken would cost £51 ($83).By subsidising mortgages, and thus boosting demand, the government is exacerbating the problem. But that is not the main reason for rising prices. Driven by a baby-boom, immigration and longer lives, Britain’s population is growing by around 0.8% per year, faster than in most rich countries. Foreign wealth, meantime, is pouring into London.If supply were rising fast too, increasing demand would not matter; but it is not. Though some 221,000 additional households are formed in England annually, just 108,000 homes were built in the year to September 2013.The lack of housing is an economic drag. About...
      PubDate: Thu, 09 January 2014 16:00:03
  • Drug legalisation: Of bongs and bureaucrats
    • Abstract: THEY came to Denver, the mile-high city, to get high. They shivered in the cold as they waited for the first legal recreational marijuana (cannabis) shops in Colorado to open on January 1st. It is too early to judge whether the experiment is working, but the early signs are good (see article). The first American state to allow toking-for-fun has not been seized by reefer madness. Its pot shops are more orderly than, say, a British pub at closing time. One report claimed that 37 Coloradans died of marijuana overdoses on the first day of legalisation, but it was in the Daily Currant, a spoof newspaper. Few readers were fooled: one reason why Americans keep voting to relax marijuana laws is that they have mostly come round to the view that dope is less hazardous than booze.Opponents of drug prohibition (a position The Economist has held since 1993) may be tempted to celebrate. There is no doubt which way the tide is flowing. Most Americans now believe that marijuana should be legalised,...
      PubDate: Thu, 09 January 2014 16:00:03
  • NAFTA at 20: Deeper, better, NAFTA
    • Abstract: A STEP to rival the creation of NATO, or a mortal threat to American jobs from cheap Mexican labour? The arguments for and against the North American Free-Trade Agreement (NAFTA) before its launch on January 1st 1994 were hyperbolic. Twenty years on, NAFTA’s backers have won the argument.The American and Canadian economies were already pretty well integrated before the creation of NAFTA, so there was no great leap in trade between the two. But America’s trade with Mexico increased by 506% between 1993 and 2012, compared with 279% with non-NAFTA countries. In 2011 America traded as much with Canada and Mexico as it did with the BRIC countries (Brazil, Russia, India, China), Japan and South Korea combined. The “giant sucking sound” that Ross Perot, a presidential candidate, predicted would be heard as Mexico hoovered up American jobs never materialised; if jobs have moved anywhere in the past two decades, they have gone to China, not Mexico. Industries from aerospace to cars have woven supply chains back and forth across North America’s borders. Some 40% of the content of imports from Mexico into the United States, and 25% of the content of imports from Canada,...
      PubDate: Thu, 02 January 2014 16:00:50
  • The world economy in 2014: Why optimism may be bad news
    • Abstract: ALMOST every year since the end of the financial crisis has started with rosy expectations among American forecasters, and this one is no different. Stockmarkets are buoyant, consumer confidence is improving, and economic seers are raising their growth forecasts for 2014. America’s S&P 500 share index is at a record high, after rising 30% in 2013—the biggest annual gain in almost two decades. Powered by America, global growth of close to 4%, on a purchasing-power-parity basis, seems possible. That would be nearly a full percentage point faster than 2013, and the best showing for several years.Yet amid the new-year cheer, it is worth remembering that almost every year since the financial crisis upbeat expectations have been disappointed. The biggest danger this time round is the optimism itself.Fiscal easeAll around the rich world, things are looking better. Britain’s recovery is gathering pace (see article). Japan’s economy seems strong enough to cope with the imminent rise in its consumption tax. Even Europe’s...
      PubDate: Thu, 02 January 2014 16:00:50
  • Corruption in Turkey: The Arab road
    • Abstract: WHEN the Arab spring burst onto the Middle East three years ago, hopeful democrats in search of a model were drawn to Turkey as a country that seemed to combine moderate Islam with prosperity and democracy. Unfortunately, the Arabs did not follow the Turkish path. Instead, Turkey has set off down the old Arab road to corruption and autocracy.In the past two weeks a Turkish prosecutor has detained dozens of people as part of investigations into illicit gold transfers and bribes allegedly paid by the construction industry. The suspects include businessmen close to the ruling Justice and Development (AK) party, as well as officials, politicians and the sons of three cabinet ministers. The prime minister, Recep Tayyip Erdogan (pictured, left), combative at the best of times, reacted with fury—stoked by reports that one of his own sons was next on the list. He reshuffled his government to put loyalists in place, sought to gain control of police investigations, and got the prosecutor removed from the corruption case. His ministers justified all this with talk of a “soft coup”.For Turkey, this is depressing. Mr Erdogan, in power for almost 11 years, has come to confuse...
      PubDate: Thu, 02 January 2014 16:00:50
  • Pharmaceutical pricing: The new drugs war
    • Abstract: OF ALL the goods and services traded in the market economy, pharmaceuticals are perhaps the most contentious. Though produced by private companies, they constitute a public good, both because they can prevent epidemics and because healthy people function better as members of society than sick ones do. They carry a moral weight that most privately traded goods do not, for there is a widespread belief that people have a right to health care that they do not have to smartphones or trainers. Innovation accounts for most of the cost of production, so the price of drugs is much higher than their cost of manufacture, making them unaffordable to many poor people. Firms protect the intellectual property (IP) that drugs represent and sue those who try to manufacture and sell patented drugs cheaply. For all these reasons, pharmaceutical companies are widely regarded as vampires who exploit the sick and ignore the sufferings of the poor.These criticisms reached a crescendo more than a decade ago at the peak of the HIV plague. When South Africa’s government sought to legalise the import of cheap generic copies of patented AIDS drugs, pharmaceutical companies took it to court....
      PubDate: Thu, 02 January 2014 16:00:50
  • Political insurgency: Europe’s Tea Parties
    • Abstract: SINCE 2010 or so, the Tea Party, a Republican insurgency, has turned American politics upside down. It comes in many blends, but most of its members share three convictions: that the ruling elite has lost touch with the founding ideals of America, that the federal government is a bloated, self-serving Leviathan, and that illegal immigration is a threat to social order. The Tea Party movement is central to the conflict that has riven American politics and the difficulty of reforming budgets and immigration laws.Now something similar is happening in Europe (see article). Insurgent parties are on the rise. For mainstream parties and voters worried by their success, America’s experience of dealing with the Tea Party holds useful lessons.The squeezed, and angry, middleThere are big differences between the Tea Party and the European insurgents. Whereas the Tea Party’s factions operate within one of America’s mainstream parties, and have roots in a venerable tradition of small-government conservatism, their counterparts in Europe are small,...
      PubDate: Thu, 02 January 2014 16:00:50
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