Opinion

Chrystia Freeland

Opportunity missed in U.S. bailout?

Chrystia Freeland
Dec 7, 2012 16:03 UTC

Sometimes, the aftermath is more devastating than the storm. That is the story of the 2008 financial crisis. It was disastrous at the time, but what has been worse is how long it has lingered. That halting recuperation is why the global economic meltdown is still at the center of the political debate in the Western world.

Much of the discussion is a replay of the familiar battle between the economists John Keynes and Friedrich Hayek: Is the solution stimulus or austerity? Amir Sufi, a professor at the University of Chicago Business School, has been doing provocative research that suggests we should be focusing on a different angle.

The real issue, in Mr. Sufi’s view, is where stimulus dollars should be targeted.

He believes the U.S. government made a costly mistake by focusing on bankers and not homeowners. Mr. Sufi’s argument matters, and not just because there will, inevitably, be another financial crisis. He thinks the intellectual bias that prompted the bailout of Wall Street but not Main Street risks derailing Europe’s recovery, too.

“In my view, excessive levels of household debt were the reason the recession was so severe,” Mr. Sufi told me, speaking by phone from Chicago. “If you look at the spending decline that drove the great recession, that was coming from the households.”

The imperfect world of George Soros

Chrystia Freeland
Nov 30, 2012 19:27 UTC

As it appears in the December 2012 issue of Foreign Policy magazine.

George Soros cites Isaiah Berlin as an important intellectual influence, so it makes sense to see Soros through one of the Riga-born philosopher’s best-known lenses — the division of the world into foxes and hedgehogs. In his public life, Soros is a broad-minded fox: As a hedge fund manager, his success rested on his ability to make many different bets every day. In his philanthropy, Soros is foxy too, supporting, under the broad umbrella of “open society” dozens of causes in dozens of countries.

But intellectually, Soros is a more narrowly focused hedgehog. He has been pondering, articulating, elaborating, and publicizing variations on one big idea for more than half a century. The way he describes that central thought today is “the significance of imperfect understanding as a motive force or determinant of history.”

Over the years, Soros’s written expositions of this concept have sometimes met with bafflement, even as his financial prowess and philanthropic accomplishments have been widely admired. For Soros himself, though, his big idea and many public initiatives are intimately connected; his intellectual framework, he believes, is what has made him good at everything else. And, to his delight, after years of struggling to be accepted as a public intellectual, the turmoil in the world economy has finally made the rest of us more receptive to his insight.

Income inequality: government, Warren Buffett and growth

Chrystia Freeland
Nov 30, 2012 18:57 UTC

When Branko Milanovic, a World Bank economist, published “The Haves and the Have-Nots,” a study of global income inequality last year, one of his most striking observations was the extent to which the subject was taboo in the United States.

As Milanovic explained, “I was once told by the head of a prestigious think tank in Washington, D.C., that the think tank’s board was very unlikely to fund any work that had ‘income’ or ‘wealth inequality’ in its title. Yes, they would finance anything to do with poverty alleviation, but inequality was an altogether different matter.”

“Why?” Milanovic asked. “Because ‘my’ concern with the poverty of some people actually projects me in a very nice, warm glow: I am ready to use my money to help them. Charity is a good thing; a lot of egos are boosted by it, and many ethical points earned even when only tiny amounts are given to the poor. But inequality is different: Every mention of it raises, in fact, the issue of the appropriateness or legitimacy of my income.”

Making the most of diversity

Chrystia Freeland
Nov 16, 2012 15:17 UTC

For America, 2012 will go down in history as the year of the Latinos, the blacks, the women and the gays. That rainbow coalition won President Barack Obama his second term. This triumph of the outsiders is partly due to America’s changing demographics. And it is not just the United States that is becoming more diverse. Canada is, too, as is much of Europe.

That is why it is worth thinking hard about how to make diverse teams effective, and how people who straddle two cultural worlds can succeed. Three academics, appropriately enough a diverse group based in Asia and America, have been doing some provocative research that suggests that our ability to comfortably integrate our different identities – or not – is the key.

In “Connecting the Dots Within: Creative Performance and Identity Integration,” Chi-Ying Cheng of Singapore Management University, Jeffrey Sanchez-Burks of the Ross School of Business at the University of Michigan, and Fiona Lee, also at the University of Michigan, argue that ethnic minorities and women in male-dominated professions are most creative when they have found a way to believe that their “multiple and conflicting social identities are compatible.”

Obama, the super-rich and the election

Chrystia Freeland
Nov 9, 2012 18:03 UTC

Among the losers in the United States this week are the super-rich, who spent unprecedented millions to evict President Barack Obama from the White House. The investing class turned sharply and vociferously against the president many of them had supported in 2008. On Tuesday night, the plutocrats lost their shirts.

“Boy, they threw away a lot of money,” Theda Skocpol, a Harvard professor, told me. “It was very interesting to hear on Tuesday night about all the corporate jets packed in Logan Airport” for Mitt Romney’s party in Boston.

One of the important questions in the United States today – and, eventually, in all democracies where income inequality has risen sharply, which is to say in pretty much all democracies – is what impact the political ineffectiveness of the super-rich at the ballot box will have on how the country is actually governed.

Africa: the next economic tiger?

Chrystia Freeland
Oct 19, 2012 14:36 UTC

If you are looking for some good cheer in a pretty gloomy world, consider the growing consensus among some of the world’s smartest money that the next big emerging market may be Africa.

Above all, that is great news for Africans: As we have seen across so much of Asia, economic growth has accomplished what decades of well-meaning development efforts failed to do, lifting hundreds of millions out of poverty. If that happens in Africa, the world will be transformed.

This case for Africa as the world’s new economic tiger is made forcefully in “The Fastest Billion: The Story Behind Africa’s Economic Revolution,” a data-packed collection of essays to be published at the end of this month and brought together under the aegis of Renaissance Capital, an investment firm with Russian roots and global ambitions.

America’s middle class goes global

Chrystia Freeland
Oct 15, 2012 20:17 UTC

President Barack Obama did a miserable job of making his own case last week. But speak to his supporters and the pitch is clear: The American middle class is being hollowed out; Obama’s self-appointed mission is to try to save it.

That is what I heard from Jeffrey Liebman, one of the president’s economic advisers, at a debate about the election I moderated at Columbia University on Monday. Liebman said the central difference between his candidate and Mitt Romney was the president’s view that trickle-down economics doesn’t work. Instead, he believes policy needs to focus on the middle class. Economic growth, he said, should come from the middle and radiate out.

In a separate interview, Mark Gallogly, co-founder of the private equity and credit investment firm Centerbridge Partners and one of Obama’s earliest supporters on Wall Street, likewise emphasized the middle class. The president’s overriding concern, Gallogly told me, was with the workers who make $24,000 a year. Their lot is a pressing issue, Gallogly argued, because even before the recession there had been persistent downward pressure on middle-class wages. Yesterday’s middle-class job can land you among the working poor today.

For government, it is not just size that matters

Chrystia Freeland
Oct 4, 2012 21:38 UTC

Photo: Joshua Lott/Reuters

One of today’s major debates is how big government should be. Maybe we are asking the wrong question. Our battle over the size of the state overlooks a problem that is just as important and that may be easier to muster the collective will to resolve: how effective government is, regardless of its scale.

After all, even in this age of polarized politics, there is one thing right and left agree on: Government needs to get better. Diana Farrell, an economist who recently returned to the consulting firm McKinsey after a two-year stint in the White House, thinks smart pragmatists should seize this common ground.

“We see a massive opportunity in what is a meaningful part of GDP to make it work better,” Farrell, who leads the new McKinsey Center for Government, told me. “Whether you believe government should be 20 percent or 80 percent of GDP is a political choice. But once that has been decided, then assuring that that part which is government works – that can be apolitical, that can be managerial. That is what we are trying to do.”

Globalization, the tech revolution and the middle class

Chrystia Freeland
Sep 21, 2012 15:04 UTC

YALTA, Ukraine — One of the paradoxes of our age is that we are simultaneously living through a time of positive economic innovation and also a time of the painful erosion of the way of life of many middle-class families.

Listening to Yuri Milner, the Russian Internet investor, at a conference in Ukraine a few days ago brought home this contrast. Milner is a billionaire thanks to his Internet investments: He has done well both in his homeland, supporting some of Russia’s most successful start-ups, and, even more spectacularly by venturing abroad, taking pioneering stakes in Facebook, Zynga and Groupon.

When Milner talks about the technology revolution, he paints a dazzling picture of literally unprecedented innovation, bringing tremendous savings and benefits to consumers.

Soros: The euro zone is about more than money

Chrystia Freeland
Sep 13, 2012 21:12 UTC

George Soros made headlines this week with a striking proposal that to save Europe, Germany must “lead or leave.” The leadership part was familiar: Outside Germany, at least, it is becoming conventional wisdom that Europe will survive only if the Union’s behemoth provides more decisive leadership — and writes bigger checks.

The catch is that the rest of Europe, particularly its beleaguered so-called Club Med countries, doesn’t seem to be in much of a position to coerce Berlin to do anything. That is where Soros’s second alternative — leaving — comes in. In an interview in Vienna last weekend and in a speech in Berlin on Monday, Soros added his influential voice to a cluster of iconoclasts who have asserted that Southern Europe’s fate need not be decided in Germany.

If Germany is unwilling to lead, Soros argues, the Southern Europeans should ask Germany to leave. His prediction is that these currently sickly nations would do perfectly well.

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