The Great Debate

The auto industry's Christmas present from the government -- in the form of a $1 billion loan to General Motors and a $5 billion stake in GMAC -- may have left other industries hoping that the giving season isn't over yet.

The steel industry is pressing President-elect Barack Obama to boost the flagging demand for U.S.-made steel by instituting a "buy American" clause in his infrastructure stimulus package, the New York Times reported.

"As steel production goes — and it is now in collapse — so will go the national economy," writes the New York Times, referencing the maxim once applied to The Big Three automakers.

But why stop at manufacturing industries? Rep. Frank Nicastro of Connecticut and some of his fellow legislators want to save two local papers, The Bristol Press and The Herald, which are hanging by a thread after their publisher said it cannot afford to keep them.

Which companies are really too big to fail? If you were writing the check, who would you bail out?

U.S. President-elect Barack Obama's 12-day vacation in Hawaii exposed tensions with the media that presage a possible combative relationship between a Democratic Obama White House and mainstream U.S. news organizations, which were often accused by Republicans of being too soft on him during the election campaign.

In short, the media organizations are pushing for greater access. They were annoyed that he appeared in public places on several occasions during the holiday without his traveling media pool, which by long-standing agreement between successive White Houses and the major news organizations always shadows presidents and presidents-elect.

The Obama camp, in turn, appeared irritated by criticism by some media outlets that the president-elect had deliberately ditched the pool the day after Christmas, when he took his daughters, Malia, 10, and Sasha, 7, to see a dolphin show. Aides said it was an honest mistake and blamed a breakdown in communication.

– Prof. James Post, an authority on corporate governance, teaches “Strategies for Nonprofits” at the Boston University School of Management. The views expressed are his own. –

I am inclined to think the Bernard Madoff affair has blown the lid off the financial madness of this decade.  We have been living in an age of fraud, and now must rethink the way we do business.  As John Kennedy once appealed to the nation’s better angels to call us into public service, Barack Obama’s inaugural address should instruct us on our obligation to serve the greater good.  It’s not just a moral concept; it’s good business.  I offer a corollary as well: Without good business, how far will a moral concept take you?

The management cliché about nonprofits goes something like this: What they lack in business savvy or operating budgets they make up for in passion and vision.  This notion was especially apt in an age of decreased governmental support.  And there’s a private-industry parallel declaring that firms may have a wealth of professionally trained managers but run in the red when it comes to inspiration.  Few organizations have it all, so private and public industry must continue to collaborate to serve the community.

– Kevin P. Gallagher is professor of international relations at Boston University and co-author of “The Enclave Economy: Foreign Investment and Sustainable Development in Mexico’s Silicon Valley” and “Putting Development First: The Importance of Policy Space at the WTO.” The opinions expressed are his own. –

On the campaign trail, President-elect Barack Obama pledged to rethink U.S. trade policy.   The initial nomination of Xavier Becerra as United States Trade Representative was a signal that Obama will work to fulfill that promise. Congressman Becerra declined the offer and former Dallas Mayor Ron Kirk has been chosen to head the office instead.  Given Kirk’s enthusiastic support for NAFTA, he will receive close scrutiny as he takes over a USTR that has the mandate of rethinking U.S. trade policy.

Regardless of the messenger, Obama has pledged to fundamentally change U.S. trade policy.  To this end, there are four early priorities for Kirk and Obama: honor existing commitments under the WTO, press for an equitable completion of the Doha Round, conduct a thorough evaluation of major U.S. trade agreements, and enact comprehensive trade adjustment assistance legislation.

President-elect Barack Obama has been getting a lot of advice these days on how to deal with Muslims and Islam. He invited it by saying during his campaign that he either wanted to convene a conference with leaders of Muslim countries or deliver a major speech in a Muslim country "to reboot America’s image around the world and also in the Muslim world in particular”. But where? when? why? how? Early this month, I chimed in with a pitch for a speech in Turkey or Indonesia.  Some quite interesting comments have come in since then. (Photo: Obama image in Jakarta, 25 Oct 2008/Dadang Tri)

Two French academics, Islam expert Olivier Roy and political scientist Justin Vaisse argued in a New York Times op-ed piece on Sunday that Obama's premise of trying to reconcile the West and Islam is flawed:

Such an initiative would reinforce the all-too-accepted but false notion that “Islam” and “the West” are distinct entities with utterly different values. Those who want to promote dialogue and peace between “civilizations” or “cultures” concede at least one crucial point to those who, like Osama bin Laden, promote a clash of civilizations: that separate civilizations do exist. They seek to reverse the polarity, replacing hostility with sympathy, but they are still following Osama bin Laden’s narrative.

– Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission.  The opinions expressed are his own. —

President Bush has agreed to lend GM and Chrysler $17.4 billion on the condition these firms complete a plan to accomplish financial viability.

The agreements set goals for automakers: converting two-thirds of their debt into equity; paying company stock to fund one half of the Voluntary Employee Benefits Associations, which fund retiree health care benefits and remove these costs from future liabilities; aligning wages, benefits and work rules with U.S. Nissan, Toyota or Honda operations.

– Paul Taylor is a Reuters columnist. The opinions expressed are his own –

He wasn’t present and he isn’t even in office yet, but Barack Obama was the elephant in the room at last week’s European Union summit on economic recovery and climate change.

The 27 EU leaders knew they needed strong agreements to reduce greenhouse gas emissions and give their recession-hit economies a big fiscal stimulus to make themselves credible partners for the U.S. president-elect.

– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.  The opinions expressed are her own. —

With President-elect Obama and the Democratic congressional leadership both viewing infrastructure spending as a magic stimulus that will end the recession, such spending will happen.  But will Congress write a sensible, well-targeted bill—or will timeliness and efficiency lose out to old-time politics?

Obama declared in his December 6 radio address that he wants “the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s.”  Moreover, House Transportation and Infrastructure Committee Chairman James Oberstar, Democrat of Minnesota, has outlined plans to spend $45 billion on transportation projects alone, never mind the schools, computers, and other public facilities listed hopefully by Obama.

– Paul Taylor is a Reuters columnist. The opinions expressed are his own –It’s time to get Russia back into proportion.Moscow’s resurgence as a major power, determined to be treated with respect and to stamp its influence on its neighborhood, has been one of the big stories of 2008.The sight of Russian tanks rolling into Georgia in August, coupled with a Kremlin drive to extend its control over energy supply routes to Europe, sent shivers through former Soviet satellite countries and drew loud condemnation from Washington.President Dmitry Medvedev’s threat to site short-range missiles in Kaliningrad aimed at Poland if Warsaw deploys part of a planned U.S. missile shield raised the rhetorical stakes.Yet the global financial crisis, the collapse of oil prices, the aftermath of the Georgia war and U.S. President-elect Barack Obama‘s victory have all cast doubt on Russia’s real weight.The credit crunch has hit Russia harder than other emerging economies, hammering confidence in its stocks, bonds and the rouble and forcing the central bank to spend some of its huge foreign currency reserves to stabilize the financial system.Foreign portfolio investors have fled and many Russian investors have parked more of their money in foreign currency abroad, at least partly due to heightened political risk since the military action in Georgia.State gas monopoly Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz), feared in many parts of Europe as a predator seeking a stranglehold on the continent’s gas supply, has lost more than two-thirds of its market capitalization since May.SHRINKING POPULATIONWith oil prices down from a peak of $147 a barrel in July to below $50 now, the heavily oil-and-gas-dependent economy looks more vulnerable, especially since Russia needs Western technology to boost its energy extraction.Alexander Shokhin, president of the Russian Union of Industrialists and Entrepreneurs, says that after a 10-year boom, growth will fall to between 0 and 3 percent next year.Russia remains a lucrative market for Western consumer goods, but concerns about state meddling in business, widespread corruption and shortcomings in the rule of law have contributed to its failure to diversify away from hydrocarbons and minerals.Compounding the weakness of its non-energy economy, Russia’s demographics are among the worst in the world, with a life expectancy of just 67 (60 for men) and the combination of a low birth-rate, an aging population and a public health crisis.The Organization for Economic Cooperation and Development (OECD) projects the population could shrink by nearly one-third by 2050 to 100 million from 143 million.Diplomatically, Russia overreached itself after its lightning military victory in Georgia by recognizing the breakaway regions of South Ossetia and Abkhazia as independent.Only Nicaragua followed suit. Major allies such as China and India, fearing the precedent, pointedly declined.The European Union, the main customer for Russian gas, has responded by accelerating efforts to reduce its dependency, planning an alternative supply corridor through Turkey and seeking new suppliers in Africa, the Middle East and Central Asia.Other former Soviet republics, including Azerbaijan, Belarus and Turkmenistan, have sought closer ties with the West.True, the U.S.-led NATO alliance has gone no further toward giving Georgia and Ukraine a roadmap to membership — the issue is off the agenda for now — and it has now resumed some frozen contacts with Russia, as has the EU.But Moscow’s efforts to reshape the security architecture of Europe, sidelining the role of the United States and of the Organization for Security and Cooperation in Europe, loathed by Moscow for its election monitoring, have gained little traction.STATUS QUO POWER?Russian analysts insist the Georgia war was a defensive action responding to pro-Western Georgian President Mikheil Saakashvili’s bid to retake control of South Ossetia by force.”Russia is a status quo power, not a recidivist aggressor on the prowl,” says Dmitry Trenin, head of the Moscow office of Carnegie Endowment for International Peace.Moscow has taken a number of steps recently to suggest it wants peaceful solutions to other “frozen conflicts” in its neighborhood, brokering the first summit talks between Armenia and Azerbaijan over Nagorno-Karabakh, and seeking a deal between Moldova and its breakaway region of Transdniestria.In Ukraine, the biggest former Soviet republic where a democratic “Orange Revolution” in 2004 infuriated the Kremlin, Russia has other political and economic levers it can pull to maintain influence without having to use force.Getting Russia into proportion does not mean ignoring Moscow or its security interests. Its location and the fact it supplies 40 percent of Europe’s gas imports mean it cannot be neglected.The United States and the EU have an interest in binding Moscow rapidly into rule-based international bodies such as the World Trade Organization and the OECD, although they put both processes on hold in reprisal for the Georgia war.Some Western analysts believe a weak Russia could be more dangerous, if mishandled, than a strong one.In NATO circles, some see a risk of the “Weimarisation” of Russia, comparing it to Germany’s economically enfeebled Weimar Republic that was swept away by the rise of Hitler’s Nazi party.Political humiliation and economic instability could lead to a surge of aggressive nationalism.After the collapse of the Soviet Union in 1991, wags branded Boris Yeltsin’s rump Russian Federation “Upper Volta with nukes,” capturing the paradox of a failed state with a ruined economy sitting on a huge arsenal of atomic weapons.When Vladimir Putin succeeded Yeltsin in 2000, he was determined to restore Russia’s power and pride after a decade in which many Russians felt the West ignored their interests by expanding NATO in ex-communist eastern Europe.Today, it sometimes seems that Russophiles and Russophobes in Europe and the United States have become objective allies in exaggerating the importance of or the threat from Moscow.A more self-confident Europe and a less unilateralist America need to find a way of engaging with Russia according to its true weight, without treating it as a giant.

John Kemp is a Reuters columnist. The views expressed are his own.

LONDON, Dec 8 (Reuters) – China’s decision on Friday to link domestic fuel prices to the international price of crude oil, but increase consumption taxes on gasoline and diesel sharply to spur more efficient use of energy in the medium term, raises the question whether the incoming Obama administration might be tempted to do the same.

China is taking advantage of a cyclical pull back in energy to push through a permanent structural increase in taxes and prices. The aim is to combine a short-term boost to the economy with longer-term and more consistent incentives for improving energy efficiency.

By consolidating a series of tolls and administrative charges into a single, easy to collect consumption tax, the government is simplifying the tax system, creating a new source of revenue, and ensuring the change will have no impact on the politically sensitive inflation rate.