Opinion

The Great Debate

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Regrouping for Detroit, GM’s bankruptcy evasion and Chinese corporate records

1. Kevyn Orr and a Detroit rebound?

Last Friday, I happened onto a C-Span broadcast of a speech to a national group of bankruptcy lawyers given by Kevyn Orr -- the emergency manager who Michigan Governor Rick Snyder appointed to take over Detroit’s finances and guide the fallen city through bankruptcy. Since I couldn’t stand watching the Yankees get slaughtered by the Los Angeles Angels of Anaheim, I stopped on the Orr speech for a minute. I stayed 45.

I had never seen Orr speak or paid much attention to Detroit’s troubles and his efforts to dig the city out from under. But if his talk -- riveting, funny, emotional, self-effacing, forceful, fact-filled, wholly convincing and seemingly off the cuff -- is any indication, both Orr and Detroit 2014 are big national stories.

They are worthy of coverage beyond the good work that’s been done by, among other local outlets, the Detroit Free Press, which ran this comprehensive story  last month, on the one-year anniversary of Orr leaving a lucrative partnership at the Jones, Day law firm to take on the rescue job.

It’s a job that involves balancing the needs of retired police officers and fire fighters, who had every moral right (and probably an impregnable right under the state constitution) to expect to be paid the pensions (averaging about $30,000 a year) they were promised against the need to relight the city’s street lamps and provide funds for ambulances and fire trucks to improve horrifying response times.

Orr negotiated a pension deal two weeks ago. He has had to figure out how to make sure the city’s stellar collection in its Detroit Institute of Arts doesn’t have to be auctioned to pay off bond-holders, while also creating incentives for investors to come back to Detroit. It’s all being done against the backdrop of a decades-long legacy of local government so incompetent and corrupt that there’s a stench associated with making good on any debts or union contracts it negotiated -- even if the people, particularly the pensioners, relying on those promises are not to blame.

A three-part plan for Obama’s pivot to Asia

President Obama embarked this week on an eight-day trip to Japan, South Korea, Malaysia and the Philippines. He has tried to reassure the leaders of those countries that his administration is committed to carrying out its signature foreign policy initiative: the rebalance towards the Asia-Pacific.

Obama entered office with the belief that the U.S. had over-invested in the Middle East, particularly in Iraq and Afghanistan. In an October 2011 essay-cum-policy statement, then-Secretary of State Hillary Clinton explained that with the wars in Iraq and Afghanistan winding down, the U.S. should “pivot” to the Asia-Pacific. In January 2012, the Department of Defense formalized her recommendation, announcing that the U.S. would “of necessity rebalance” towards the region.

Since then, however, crises abroad and changes in domestic leadership have tested the effort. With the emergence of a civil war in Syria, the administration faced pressure to rebalance back to the Middle East, or at least give equal priority to the Middle East and the Asia-Pacific.

Obama: Going ‘all in’ for the Asian Century

The reaction in Asia to the dominance of U.S. power is only surpassed by a fear that the United States is in retreat.

As President Barack Obama traveled to Asia Tuesday for a four-country trip, this fear should be foremost on his mind. What many of Asia’s political and cultural leaders  fear most, however, is the United States retreating inward while distracted by crisis after crisis — from Libya to Syria to Crimea. With China on the brink of becoming the world’s largest economy and the geopolitical puzzle pieces of the China seas seemingly in renegotiation, the Eastern world is asking where Washington stands. This is Obama’s moment to demonstrate the components of his much-heralded, but still largely  undefined, tilt to Asia.

The stakes for Obama’s legacy as a world leader — and for the U.S. position as a Pacific power — could not be higher. The president was right to signal a “tilt” in U.S. policy toward Asia. He now has an important opportunity to carry the Asia pivot through to a conclusion.

What Beijing can learn from Wal-Mart

“So, how?”

The question, short for “So, how do you want to handle this?” is a common, subtle way to invite someone to offer you a bribe in Asia. A traffic cop pulls you over for running a yellow light. He’s at your passenger window, a leather strap covering his name tag. He tells you to follow him to the police station so he can process your $100 fine. “So, how?”

If you slip 10 dollars into his ticket book — 20 dollars if you’re a foreigner — he’ll close it, and you’ll both be on your way.

It’s small scale — not like the graft that accompanied China’s high-speed rail system — but it happens all the time in Asia’s developing countries: in traffic, at customs offices, while getting and keeping licenses of all sorts. Nowhere is the bribery problem more severe, and more relevant to the rest of the world, than in China. Three years ago, China’s central bank reported that up to 18,000 officials have fled the country since the 1990s, taking some RMB 800 billion ($128 billion) with them. China lost almost $3 trillion in illicit financial outflows — crooked officials and businesspeople moving their dirty money out of the country — between 2000 and 2009, according to estimates by Global Financial Integrity, a Washington, D.C. financial watchdog. Because China is the world’s largest exporter, bribery in manufacturing and food production — and the related quality control issues — is a global problem.

Putin’s new ‘values pact’

Now that Russia President Vladimir Putin has swallowed Crimea, the question becomes: What if the peninsula doesn’t satisfy his appetite for new Russian territory? What if the only thing that will satiate his hunger for power is the goulash known as eastern Ukraine? Or does he then move on to Moldova, and then on and on?

Indeed, while the world watched the protests in Kiev and the Sochi Olympics last month, the Moldovan territory of Gagauzia quietly held a referendum about whether or not to join Russia if the rest of the country opts for stronger ties to the European Union. Its citizens, just like those in Crimea, have argued that they would be economically better off on Putin’s planet, rather than as meager satellites in the Western solar system.

The prospect of joining Russia, of course, sounds far better on paper than in reality. The promise of benefits is likely to evaporate when robust Western sanctions throw Russia’s economy into a steeper downturn. The ruble has already lost almost 9 percent of its value this year against the dollar. Many have argued (myself included) that very soon Putin won’t be able to survive the international blowback.

from Anatole Kaletsky:

The case against a Chinese financial crisis

A severe slowdown in China is viewed as among the greatest risks facing the world economy this year, and Thursday’s dismal news on Chinese manufacturing output exacerbated these fears. But the really important news from Beijing pointed in the opposite direction: Bank lending in China, instead of slowing dramatically as many economists had expected, accelerated in January to its fastest growth in four years.

This means China is unlikely to act as a brake on the global economy in the months ahead -- despite the recent weak manufacturing figures. It also suggests that predictions of a credit crunch or financial crisis in China will likely prove wrong -- or at least premature.

To welcome stronger bank lending in China is not to deny that credit growing at double the gross domestic product growth is unsustainable and will ultimately have to be curbed. The Chinese authorities themselves clearly believe this. The government and the central bank want to reduce credit growth and to replace the unregulated, opaque “shadow lending” system with properly supervised, well-capitalized modern banks.

Where does Britain stand in the global economic race?

Following the international financial crisis of the late 2000s, the world’s financial leaders have been working towards a standardized banking system that will strengthen banks at an individual level, and thus improve the banking sector’s ability to survive stress when it occurs.

In 2010 the Basel Committee produced a third accord outlining a set of regulations, with the goal of solving the banking system’s ongoing problems. Since then the conversation has yet to cease over whether enough has been done, since the peak of the crisis in 2008, to ensure a stable financial environment that supports growth on an international scale.

The importance of Basel III lies not only on an inter-continental scale, but for individual countries to maintain the required standard regulations to a point of sustainability. In Europe, the debate over the role Britain will play in Basel III has yet to be resolved. During early Basel III discussions in May 2012, Michel Barnier, the French European commissioner for financial regulation, clashed with British Chancellor of the Exchequer George Osborne over the suggestion of higher leverage ratios in the UK, stating that a distortion of competition within the EU had the potential to cause a continental disadvantage.

China’s air defense zone: The shape of things to come?

China’s announcement of an air defense identification zone (AIDZ) that covers substantial portions of the East China Sea has unleashed a storm of concern among China’s neighbors — as well as in the United States.

For China’s action reflects the deeper challenge now posed by its growing military capability and international activism. Vice President Joe Biden was on solid ground when he objected strenuously to this new air defense zone during his recent trip to the region.

Washington and Beijing each insists it wants to build a “new kind of major power relationship.” If they are to succeed, however, and enhance peace and stability across the region, they must develop new strategies to manage their growing tensions.

Human Rights Day: Still pursuing religious freedom

December 10 marks Human Rights Day, the 65th anniversary of the landmark Universal Declaration of Human Rights (UDHR), signed by 48 nations — with just eight abstentions.

Sixty-five years ago, naysayers insisted it was nobody else’s business how governments behaved within their borders. The declaration confronted this cynical view — and continues to do so today. Human rights abuses and their consequences spill beyond national borders, darkening prospects for harmony and stability across the globe. Freedom of religion or belief, as well as other human rights, are essential to peace and security. They are everyone’s business.

Each signatory nation pledged to honor and protect these rights. For example, the declaration provides the foundation for much of the agenda of the U.S. Commission on International Religious Freedom, on which we serve.

A shifting global economy brings Australia to a crossroads

Australia is no longer immune to the stagnation in the West. Despite a resilient housing market, Australia’s economy is slowing. With a worsening labor market, consumption is eroding, along with business confidence.

In the past two years, the benchmark interest rate has been almost halved to 2.5 percent. Still, Australia’s real GDP growth is likely to decrease to 2.4 percent during the ongoing year and will remain barely 2 percent until the mid-2010s.

Australia is at a new crossroads.

In the past decade or so, exported commodities fueled Australia’s terms of trade, thanks to rising commodity prices. While agriculture and natural resources each account for barely 3-5 percent of GDP respectively, they contribute substantially to export performance. True, the service sector of the economy, including tourism, education, and financial services, continues to account for some 70 percent of GDP. However, the country’s abundant and diverse natural resources attract substantial foreign investment.

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