Chrystia Freeland

The view from Alcoa and McKinsey

Chrystia Freeland
Mar 1, 2011 20:12 UTC

At this morning’s Newsmaker “Thriving in the New Global Economy,” Alcoa CEO Klaus Kleinfeld and McKinsey Global Managing Director Dominic Barton told Chrystia their outlook for the world economy. From his perch atop one of the world’s leading aluminum producers, Kleinfeld was “really positive” about global growth prospects. Coming off a strong year in which aluminum demand rose 13 percent, the Alcoa chief forecast that aluminum demand will grow at a slightly slower rate of 12 percent this year thanks to China’s efforts to slow down its economy:

While also bullish on global growth, Barton noted that there was a sense of fragility in the world economy that concerned him. Specifically, the McKinsey head was worried about the government’s response to looming inflation, which he predicted would rise to the range of 6 to 7 percent. Mounting government debts and the rising cost of capital, which Barton believes will be “up fairly significantly” as savings rates in the emerging markets decline, will exacerbate the inflation problem:

“We’re in a slack period if you just look at what the cost of money is. It’s an incredibly unique period. I think that’s going to go away, and that’s going to make it challenging.”

Posted by Peter Rudegeair.

The uprising index, explained

Chrystia Freeland
Feb 25, 2011 15:57 UTC

The Uprising Index Chrystia refers to in this week’s column ranks 80 countries on the likelihood of a domestic uprising based on the average of four equally-weighted factors: corruption; vulnerability to rising food prices; political freedom; and internet penetration.  Our thesis is that an uprising is more likely in a country if corruption is high, if rising food prices have a big effect on a country’s economy, if political freedom is low, and if internet penetration is high.  After crunching the data, here are the 25 countries that scored highest by our measure (out of a maximum score of 1):

Uprising Index

As Chrystia noted in her column, this is a back-of-the-envelope calculation that’s meant to be suggestive and provocative, not definitive.  We limited our sample to the 80 countries for which we had data on vulnerability to rising food prices, and this excluded a few places that seem like they ought to have a high latent potential for rebellion, such as Iran, Jordan, and Cuba.

There are plenty of quants out there creating models that will predict the next uprising—the Political Instability Task Force has a model that predicts instability with over 80% accuracy over the period from 1955 to 2003.  One analyst I talked to compared this kind of approach to the search for “El Dorado:” attractive and desirable, yet elusive.

Predicting the next uprising

Chrystia Freeland
Feb 24, 2011 18:11 UTC

One casualty of the uprisings in the Middle East has been the professionals who didn’t see them coming. The International Monetary Fund has taken a hit for its April 2010 report on Egypt, which praised the country’s ‘‘sustained and wide-ranging reforms since 2004,’’ noting they had made the economy more durable and less vulnerable to external shocks. Ditto the C.I.A., whose director, Leon Panetta, endured the very personal ignominy of seeing his public predictions to Congress proven wrong within hours of making them.

For anyone who watched the collapse of the Soviet Union or the 2008 financial crisis, there is something very familiar about this failure of the experts. There seems to be something about swift, massive paradigm shifts — whether they are the bursting of a financial bubble that has been years in the making, or a popular revolt against a political regime that had been stable for decades — that we find hard to anticipate.

Research by behavioral economists like Dan Ariely of Duke University has suggested that part of the problem may be that when we have a vested interest in the status quo our brains are wired to view it as good and stable. Dr. Ariely’s work has focused on the cognitive blinders our financial self-interest imposes. But a similar bias may shape the views of political experts, who can end up developing a sense of ‘‘ownership’’ of the national elites they study that seems to be nearly as powerful as the proprietary feeling bankers had for the credit derivatives they created.

The Middle East and the Groupon effect

Chrystia Freeland
Feb 18, 2011 14:58 UTC

They are being called the Facebook revolutions, but a better term for the uprisings sweeping through the Middle East might be the Groupon effect. That is because one of the most powerful consequences satellite television and the Internet have had for the protest movements is to help them overcome the problem of collective action, in the same way that Groupon has harnessed the Web for retailers.

“It is a question of co-ordinating people’s beliefs,” said Daron Acemoglu, a professor of economics at the Massachusetts Institute of Technology, who, with Matthew Jackson of Stanford University in California, is working on a paper about the effect of social networks on collective action problems.

Protesting against an authoritarian regime is a prime example of this issue, Mr. Acemoglu said, because opponents of a dictator need to know that their views are widely shared and that a sufficient number of their fellow citizens are willing to join them to make opposition worthwhile.

When the hacker ethos meets capitalism

Chrystia Freeland
Feb 11, 2011 14:25 UTC

The uprising in Egypt has provoked the familiar “realism-versus-idealism” foreign policy debate in many Western capitals, as diplomats and politicians struggle to balance their ideological sympathy for the protesters against fears of chaos and the threat of a future anti-Western and anti-Israel policy from Cairo if the people do win.

What we have paid less attention to is that the demonstrations have forced some of the world’s hottest technology companies to engage in a very similar debate. The conclusions these technorati end up drawing may be as significant as the verdicts of Western governments. This new intellectual battleground is a further sign that in the age of the Internet and the global economy, foreign policy doesn’t belong just to professionals or to states any more.

The quandary Egypt poses for technology companies – particularly the power troika of Google, Facebook and Twitter – goes far beyond the classic corporate social responsibility concerns that have become standard operating practice at big multinationals.

The Authoritarian International goes on the defensive

Chrystia Freeland
Feb 4, 2011 15:00 UTC

It has been a bad couple of weeks for what Vitali Silitski, a political scientist, calls the Authoritarian International.

Mr. Silitski is from Belarus — a good background for studying authoritarian rulers — and he is a student of the troubling way in which the world’s autocrats responded to the “color” revolutions in some former Soviet republics a few years ago by increasing repression at home and forming a loose international support group.

China is the star of this Authoritarian International, with its robust growth guided by a government that quashed the 1989 Tiananmen Square protests but now wins plaudits even from many Western business leaders who concede that it is often better at getting things done than querulous democracies.

Davos Man in his natural habitat

Chrystia Freeland
Feb 3, 2011 20:10 UTC

When not anchoring her own talk show at the World Economic Forum, Chrystia let a few BBC cameras follow her around Davos as she attempted to document how the global super-elite are pulling away from the rest of us.  Watch her interview some of the plutocrats at the Davos Congress Center — and make spin paintings with Damien Hirst:

Posted by Peter Rudegeair.

Davos Today with Chrystia Freeland, January 27th Edition

Chrystia Freeland
Feb 3, 2011 20:09 UTC

On last Thursday’s edition of Davos Today, Chrystia interviewed a top Google executive about the internet giant’s recent management shake-up; chatted with President Obama’s former chief economic adviser about the State of the Union; heard from America’s principal union leader on what lessons Germany and Japan can teach the U.S. economy; and more.  Here’s the video and the guest list:

* Nikesh Arora, Senior Vice President and Chief Business Officer, Google

* Larry Summers, Former Director of the National Economic Council and Former Secretary of the Treasury

* Min Zhu, Special Advisor to the Managing Director, International Monetary Fund

Davos Today with Chrystia Freeland, January 26th edition

Chrystia Freeland
Feb 3, 2011 15:31 UTC

Last week at Davos, Chrystia anchored an hour-long daily talk show that featured many of the World Economic Forum’s most exciting participants.  Last Wednesday’s edition featured a segments on frugal innovation in India with two top Indian businessmen; the state of trust in business and government today with a behavioral economist and two CEOs; an appraisal of President Obama’s State of the Union from two pre-eminent economists; and more.  Here’s the video and the guest list:

* T.K. Kurien, CEO, Wipro IT

* Richard Edelman, President and CEO, Edelman

* Dan Ariely, James B. Duke Professor of Behavioral Economics, Duke University Fuqua School of Business

* L. Kevin Kelly, CEO, Heidrick & Struggles

* David Schlesinger, Editor-in-Chief, Reuters

* Raghuram Rajan, Eric J. Gleacher Distinguished Service Professor of Finance, University of Chicago Booth School of Business

The value of humanities

Chrystia Freeland
Feb 2, 2011 16:10 UTC

Throughout its 900-year history, Oxford University has survived the Bubonic Plague, the English Civil War, and a host of other maladies. Oxford Vice Chancellor Andrew Hamilton takes solace in the University’s resilient history as he grapples with the decision by the UK coalition to slash funding for higher education by 80%:

[The budget cuts] are pretty bad. The challenge for us obviously is the speed with which we have to confront the issues that result from them… One of the proposals that has been recently passed by government in the UK is to allow the cost of undergraduate education charged to students to rise. And again, that is happening in a very short period of time. Changes of this significant kind–I think we would all much prefer to be able to manage the cuts and manage any rise in tuition fees that will occur over a longer period, but we’re not being given that luxury. We’re going to have to manage them over a very short period of time, as little as two or three years. And that is going to be quite the challenge.

In an interview with Chrystia at Davos last week, when asked how large the tuition increase would be at Oxford next year, Hamilton said diplomatically that “Oxford is a place that cherishes consultation and extensive discussion,” and that the decision on the fee level will not be made until the end of March.