Opinion

The Great Debate

Cuba and twisted logic, double standards

It is time for the United States to stop trading with China and ban Americans from travelling there. Why? Look at the U.S. Department of State’s most recent annual report on human rights around the world.

“The (Chinese) government’s human rights record remained poor and worsened in some areas,” the report notes. “Tens of thousands of political prisoners remained incarcerated (in 2009).”

U.S. relations with Egypt should also be frozen, because “the government’s respect for human rights remained poor, and serious abuses continued in many areas…Security forces used unwarranted lethal force and tortured and abused prisoners and detainees, in most cases with impunity.”

No American politician would consider sanctions on China, the U.S.’s second largest trade partner, or Egypt, one of its closest allies in the Arab world. They should, if they followed the logic that has underpinned five decades of a trade embargo on Cuba and a ban on travel to the island for most Americans.

Proponents of maintaining the sanctions routinely cite the State Department’s human rights reports on Cuba. The most recent, for 2009, lists 194 political prisoners and criticizes “harsh and life-threatening” prison conditions.

from MacroScope:

What are the risks to growth?

Mike Dicks, chief economist and blogger at Barclays Wealth, has identified what he sees as the three biggest problems facing the global economy, and conveniently found that they are linked with three separate regions.

First, there is the risk that U.S., t consumers won't increase spending. Dicks notes that the increase in U.S. consumption has been "extremely moderate" and far less than after previous recessions. His firm has lowered is U.S. GDP forecast for 2011 to 2.7 percent from a bit over 3 percent.

Next comes the euro zone. While the wealth manager is not looking for any immediate collapse in EMU, Dicks reckons that without the ability to devalue, Greece and other struggling countries won't see any great improvement in competitiveness. Germany, in the meantime, has sped up plans to cut its own deficit.  It leaves the Barclays Wealth's euro zone GDP forecast at just 1 percent for next year.

What the shipping market tells us about the air freight and export market

An interesting contrast is shaping up in global trade, where some indicators of the movement of raw materials are crashing even as exports from China and air traffic continue to show outstanding strength.

Depending on your reading of the data you could decide that the threat of a double-dip recession is overblown or, perhaps more simply, not a threat but a promise.

First, the good news, at least if you are exposed to Chinese exporters. China said last week that export sales rose a stunning 43.9 percent in June from the year before, taking the trade surplus to $20 billion, its highest in eight months.

Google, google everywhere

CEBIT/The following is a post by Stephen Adler, editorial director of Thomson Reuters professional, that was taken from one of his blog posts at aif.thomsonreuters.com. Adler is a moderator at some of the panels at the Aspen Ideas Festival, which runs through July 11. Thomson Reuters is one of the sponsors of the event. The opinions expressed are Adler’s own.

Do a Google search for David Drummond and you’ll learn, amidst the 211,000 hits, that he is Google’s senior vice president and chief legal counsel. What you won’t learn is that he’s an especially eloquent spokesperson for his employer as it tries to live by its own “Don’t Be Evil” rule in a world of complicated choices. You need to come to the Aspen Ideas Festival to learn that — or you could watch a video of him on You Tube, which is also, of course, owned by Google.

Google is on everyone’s mind because it has so quickly become essential to our lives and a powerful disrupter of orthodoxies. It always seems to be on the front lines, on one side or the other, in big societal battles over such issues as censorship, the right to privacy, the meaning of copyright, the evolution of 21st century antitrust law, the future of the news industry, even the nature of the workplace.

Shifting wealth: does the developing world hold the key to building a stronger economy?

The following is a guest post by Angel Gurría, Secretary-General of the Organisation for Economic Co-operation Development. The opinions expressed are his own.

The world’s economic center of gravity is changing. Global GDP growth over the last decade owes more to the developing world than to high-income economies. If these trends continue, by 2030 developing countries will account for nearly 60% of world GDP on a purchasing-power parity basis, according to OECD calculations.

While high-income countries have been languishing in the worst recession since the 1930s, China and India have continued to power ahead. This is not a single stand-alone event, but a sign of an important structural transformation in the global economy, a process we call “shifting wealth.”

China move like history in slow-motion

Asked about 175 years after the fact what he made of the French Revolution, Chinese Premier Zhou Enlai is said to have thought for a moment and concluded: “It is too soon to tell.”

Tell a U.S Congressman up for reelection or an unemployed auto parts worker in Ohio the same thing about China’s new policy to give the yuan more latitude in how it trades against the dollar and, once you’ve picked yourself up off the ground, you’ll have a different answer.

China on Saturday said it would end the yuan’s currency peg to the dollar, allowing it to trade more freely. It also made clear that no big move was forthcoming, preparing the way instead for “gradual” appreciation.

China hits a welcome turning point

CHINA

China’s massive supply of cheap labor may at last be drying up, a development that in time will bring higher wages, inflation, a stronger yuan and help to right dangerous global imbalances.

If these trends hasten financial liberalisation they could eventually set the stage for a broader Chinese bubble.
The formerly extremely unequal balance of power between workers and employers in China appears to be shifting.

Workers for a Chinese company which supplies Honda with auto parts have struck and successfully won large wage increases. Other strikes have followed, and firms have often been quick to compromise.

from The Great Debate UK:

Pranab Bardhan on the economic rise of China and India

In its May economic outlook, the Organisation of Economic Cooperation and Development projected upward growth outlooks for BRIC countries Brazil, Russia, India and China -- the world's four largest emerging economies.

Strong growth in those economies is helping to pull other countries out of recession, the OECD said. The Paris-based organisation projects that China’s GDP growth will exceed 11 percent for 2010, and anticipates that India's real GDP growth will be 8.3 percent. Russia's GDP growth is expected to be 5.5 percent, and Brazil's is projected at 6.5 percent. By comparison, the OECD projects that the Euro area will see 1.5 percent real GDP growth, while the UK will see a 2.2 percent growth.

The "BRIC" acronym was created by Goldman Sachs economist Jim O'Neill in 2001 to mark a shift of economic power from the West. In June 2009, the BRIC leaders met in Yekaterinburg, Russia, for a summit, which was seen as the beginning of a geopolitical alliance, although their economies are very different: Brazil's economy is based on agriculture; Russia's on energy exports; India's on services and China's on manufacturing. At that time, the BRIC countries accounted for 40 percent of the world's population and about 15 percent of its economy.

from MacroScope:

Spend Save Man Woman

Far from being lauded as a virtue, China's high savings rate has been blamed for the economic imbalances underlying the global financial crisis. The criticism being that the Chinese spend too little and rely too much on exporting to Western consumers.

The IMF and World Bank have long called for Beijing to ramp up social spending so its citizens will feel less need to save for a rainy day and instead consume more.

But in their intriguingly named paper,  'A Sexually Unbalanced Model of Current Account Imbalances', New York-based researchers Du Qingyuan and Wei Shang-Jin suggest China's gender imbalance could also be a significant factor in the persistence of its high savings rate. spendsavemanwoman

Euro woes increase risk of trade wars

Europe won’t just be exporting deflation to the rest of the world, it will export serious trade tensions as well: first between the United States and China, and, possibly, eventually between Europe and the United States.

The austerity required to get Greece and other weak euro zone nations’ budgets in shape will exert a powerful deflationary force, as many countries which formerly imported more than they exported will be forced to cut back.

As well, the euro has dropped very sharply. Germany’s quixotic campaign against speculators — banning naked short selling against government debt and government credit default swaps — gave the euro its latest shove downward, but the trend has been strong for months. The euro is now about 15 percent below where it started the year against the dollar, making U.S. exports less competitive and adding to pressure on the United States to be the world’s foie gras goose: being force-fed everyone else’s exports while its own unemployment rate remains high.

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