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from Edward Hadas:

The economic lessons from Scotland

Adam Smith, one of the leading figures of the 18th century Scottish intellectual enlightenment, liked free markets and restrained governments. The 21st century campaigns for and against a Scottish political liberation show that governments have acquired an economic importance which Smith could hardly have imagined.

If the government’s economic role was as limited as Smith would have liked, the debate preceding the Sept. 18 independence referendum would mostly have been about national identity and the advantages and difficulties of becoming a small country in a big world. The economy would hardly be an issue, since only the most rabid Scottish nationalist would accuse the English of cruelty in that domain.

In fact, though, the purely political issues seem less important than the question of what might be called political economy: would a Scottish government with full regulatory, fiscal and monetary control make the nation richer? The answers differ, of course, but there is a shared assumption that the government is right at the centre of the economy.

In a way, that is quite right. The remit of modern governments runs through the entire economy. They regulate, adjudicate and motivate. They are the largest employers and purchasers in any country. They run complicated welfare states. They build infrastructure, protect private property and make key investments. Their deficits help keep the economy on an even keel.

from Stories I’d like to see:

Just how strange is Governor Andrew Cuomo?

New York Governor M. Cuomo stands during a news conference following a bi-state meeting on regional security and preparedness in New York

1. What’s the matter with Andrew Cuomo?

By now I assume New Yorker editor David Remnick has assigned someone to do a profile of New York Governor Andrew Cuomo, who is fast becoming the Howard Hughes of big-time politicians.

But just in case he hasn’t, here’s a reminder for him or any other smart editor why it’s time to take a long look at the governor: The New York Times report in late July detailing how Cuomo interfered with his supposedly independent corruption commission was great stuff. Even better were subsequent accounts in the Times and elsewhere about the governor’s clumsy attempts to explain things once he got caught.

from Breakingviews:

Calculator: Does Scoxit = Brexit?

By Hugo Dixon

Hugo Dixon is Editor-at-Large, Reuters News. The opinions expressed are his own.

If Scotland votes for independence, there is a two-in-three chance that the remaining United Kingdom will quit the European Union, according to a new Breakingviews calculator. By contrast, there would be only a one-in-five probability of a “Brexit” (Britain leaving the EU) by the end of the decade if the Scots vote to stay in the UK on Sept. 18.

from Hugo Dixon:

Brexit risks have shot up

Brexit risks have shot up in the past few weeks. The chance of Britain exiting the European Union by the end of the decade is now probably around 50 percent.

The main factor driving Brexit is the knife-edge referendum on Scottish independence. If the Scots vote next week to quit the United Kingdom, it is highly likely that the rump UK will leave the EU. If the UK doesn’t break up, it is much less likely that it will then part from the EU, but this is still a risk.

from Edward Hadas:

Russia-Ukraine conflict shows money isn’t the root of all war

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Many people think politics is really a branch of economics. When the United States invaded Iraq in 1991, the common cry was that it was all about oil. On the same thinking, rich countries were indifferent to the brutal civil war in the Democratic Republic of the Congo – which has cost 5.4 million lives, according to the International Rescue Committee – because the economic stakes were too low to matter. This economic reductionism goes on in developed countries too. Pundits and pollsters argue that elections are won and lost above all else on the economy.

Such ideas can be traced back to the philosopher Karl Marx. He believed that material considerations motivated everything people do, including how they are governed. In modern surveys, people routinely say that the desire for better jobs or higher incomes is not what drives their voting behaviour. On Marx’s view, these respondents are either lying, or in denial. They may not realise that economic discontents and aspirations drive their action – and all of history.

from Hugo Dixon:

EU’s three big problems all linked

The outgoing president of the European Council, Herman Van Rompuy, said at the weekend that his successor, Donald Tusk, currently Poland’s prime minister, faces three big challenges: the stagnating euro zone economy; the Ukraine/Russia crisis, which he described as the gravest threat to continental security since the Cold War; and the risk that Britain will quit the European Union. The problems are all linked.

Euro zone weakness is one reason the EU is reluctant to take action against Russia. GDP growth, already anemic, ground to a halt in the second quarter. The inflation rate has fallen again, to just 0.3 percent, and the unemployment rate is stuck at 11.5 percent.

from The Great Debate:

Perry’s indictment: Crime and punishment, Texas-style

Texas Governor Perry, a possible Republican candidate for 2016 presidential race, answers questions from reporters following appearance at business leaders luncheon in Portsmouth

It’s a big country, where states have their own legal peculiarities, political cultures and definitions of what makes a debilitating political scandal. Take Texas, for example, where the Republican governor, Rick Perry, has been indicted for abuse of office.

In the past 25 years, we’ve seen politicians and government officials increasingly treat scandal less as catastrophe and more as just another cost of doing business. Perry, however, has taken this to a completely new level: He is wearing his indictment as a badge of honor and has smoothly returned to his 2016 presidential campaign without missing a beat.

from Breakingviews:

Review: Paul Ryan changes delivery but not direction

By Stephanie Rogan

The author is a Reuters Breakingviews columnist. The opinions expressed are her own. 

Paul Ryan has written a book, just like Hillary Clinton and Barack Obama before him. Unlike those of his Democratic rivals, though, the U.S. congressman and former vice presidential candidate’s is less memoir than campaign manifesto. Ryan’s fiscal prescriptions are familiar, but it’s also obvious he is trying to find a broader audience for them. Though it’s tempting to dismiss “The Way Forward” as just the musings of another presidential wannabe, the book’s title probably accurately reflects the notion that its contents will guide the Republican strategy in the years to come.

from Edward Hadas:

Do autocrats and strong economies go hand in hand?

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By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Are authoritarian governments bad for the economy? Turkish voters do not seem to think so. On August 10, Tayyip Erdogan won an absolute majority in the country’s presidential election. Observers say that the country’s increasing prosperity is a big part of his AK Party’s appeal. Erdogan is not the only popular authoritarian around. Viktor Orban, who reportedly endorsed “illiberal” government, wins similar majorities in Hungary. If Russia had an election today, President Vladimir Putin would win big. And Xi Jinping, who seems to be making one-party rule in China more authoritarian, would undoubtedly triumph if the government bothered with elections.

from Global Investing:

Sanctions bite Russia but some investors are fishing

By Andrew Winterbottom

Russian stocks are up today, for the fifth day in a row and at the highest level in two weeks. What's going on? As we wrote  here earlier in the week, foreign investors have been fleeing this market.  However it could be that some of them are starting to put aside concerns about the potential for further sanctions on Moscow and are scouring Russia's stock markets for contrarian buying opportunities.

Russian stocks, chronically undervalued, are trading now at a discount of more than 60 percent to broader emerging markets, and to China which by all accounts is the standout beneficiary of the Russian woes. Just how cheap Russian shares are can be gauged from the fact they trade at a discount event to turbulent Pakistan. Here is a link that compares Russian equity valuations with other emerging and developed markets:  http://link.reuters.com/guv77v

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