from MacroScope:
Is U.S. economic patriotism hurting?
Any Americans believing that their country is being bought up by the Chinese might want to pay heed to a new report from the Vale Columbia Center on Sustainable International Investment. It says that China is a minimal player in terms of foreign direct investment in the United States and that Washington should in fact be doing a lot more to get it to gear up its buying.
To start with, look at the magic number. In 2010, the last year for which numbers are available, only 0.25 percent of FDI into the Untied States came from China. Switzerland, Britain, Japan, France, Germany, Luxembourg, the Netherlands, Canada were all far bigger. In the U.S. Department of Commerce's report on the year, China, numbers were so small they were lumped into a category simply called "others".
This is not enough, the Vale Columbia report says. Given China's burgeoning economic role across the globe, America can benefit from a lot:
First, FDI provides an influx of capital into the struggling economy, increasing employment at no cost to the taxpayer. Second, jobs in foreign affiliates are typically better remunerated than similar jobs in domestically owned companies. Third, keeping the US open to foreign investment demonstrates a global example for international openness. Finally, Chinese money refused by the U.S. could alternatively be directed to competitors or even the U.S.’s enemies.
(On the latter point, its worth reading our global economic correspondent Alan Wheatley's story on China's influence in Europe)
The Vale Columbia report acknowledges that Chinese FDI is controversial - primarily because a lot of Chinese companies are state-controlled and therefore raise fears that FDI may be more strategic that profit-seeking. There is also the concern about subsidies, piracy and economic espionage.
But the gains from opening the door to Chinese outweigh the risks, the report -- entitled Economic Patriotism: Dealing with Chinese direct investment in the United States -- says, recommending a series of steps such as dumping reciprocity clauses in FDI bilateral dealings.
from Susan Glasser:
America’s biggest growth industry: declinism
By Susan Glasser The opinions expressed are her own.
Conservative agitator Pat Buchanan’s new book says America might not survive until 2025; it’s called “The Suicide of a Superpower.” Even less alarmist observers are suddenly sounding a lot like Buchanan, as economists now predict that China may surpass the United States as the world’s largest economy a lot sooner than we thought, and important conferences are convened to deal with what Fareed Zakaria memorably dubbed “the post-American world.”
Over at Foreign Policy, my colleague Joshua Keating (coiner of the “Amerislump” phrase) has taken to tracking all the gloom-and-doom punditry under the heading “Decline Watch” on our website—and not a day goes by without a classic example, from the poverty-stricken new muppet on Sesame Street who doesn’t have enough to eat, to the supposed cocaine slump on Wall Street and the new government initiative to attract Chinese shoppers here — so they can buy Made in China goods, but at the cheap prices caused by our undervalued dollar.
The zeitgeist about America is so bleak that Secretary of State Hillary Clinton even begins her speeches these days being forced to remind audiences that the U.S. economy is still the world’s largest and its workers by far the most productive. Clinton, no declinist, invariably does her best to convince us that America is not retreating from the world at a time of national angst. Or at least that it should not.
“Beyond our borders,” she wrote in a recent piece for Foreign Policy that argued that the United States should make a strategic pivot away from the wars of the Middle East and toward the economic opportunities of Asia, many now question “America’s intentions — our willingness to remain engaged and to lead. In Asia, they ask whether we are really there to stay, whether we are likely to be distracted again by events elsewhere, whether we can make — and keep credible economic and strategic commitments, and whether we can back those commitments with action.”
Clinton’s answer is a resounding yes, but the questions themselves are revealing — even extraordinary — coming from a sitting Secretary of State, and the context is pretty clear: These are angst-ridden times to be an unabashed advocate of America’s role in the world, when everyone from Tea Partiers at home to financial markets abroad wonders about the staying power of this humbled superpower.
Let’s review the past 2 decades. One can see a whole of lot bubbles, debt, .com & .house, recklessness, other runaway cancerous growths such as health care cost, etc.
What is the basis of all these ‘growths”?
I will pin the whole thing down to one thing. After the fall of the USSR, America got religious. Really religious. Yes there are TV evangelicals galore, Christian fundamentalism, Creationism, God this and Jesus that. But one religion, as it turns out, trump them all and contributed towards the sure path of national suicide.
Americans began to worship themselves. And when you worship yourself, you believe you can get away with anything. ANYTHING.
America still needs to engage the world
This is a response to Nader Mousavizadeh’s latest Reuters column, “A smaller America could be a stronger America.”
By David Miliband The opinions expressed are his own.
Nader’s statistics pointedly and appropriately speak to a dysfunctional political dynamic of short term promises without long term responsibilities in the U.S. It is also striking (and worrying) that both sides of American political debate are determined to persuade voters that they won’t be too concerned by the rest of the world.
But the U.S. is doomed NOT to become the Netherlands! U.S. GDP per head is ten times the Chinese level. Its universities still dominate in key areas. Its conventional military might is overwhelming. Its entanglement with the global system – notably in economics, but today that is inseparable from politics – means that it needs a “global posture.” So does every country, large or small.
I would say the strategic choice for the U.S. is rather different. It is whether to try to lead the reshaping of the multilateral system, not just the UN but economic institutions like WTO, conscious that such efforts are burdensome and rarely bring quick wins; or whether to hunker down around the current system, and try to address domestic problems, from K-12 education to business innovation.
Every campaign consultant will say there are no votes in the former course. But the truth is America has far more to lose from its neglect of global responsibilities. It cannot bring the world to heel on its own. But it needs to be part of a new global compact – not at the expense of jobs and housing and crime at home, but to address them.
If that means America needs an educator-in-chief as well as a commander-in-chief as its President, so be it.
US and the Western world jointly put an end to Sri Lankan Sinhala Buddhist Apartheid state terrorism in the name of humanity and peace to thee world.
Singapore is a success story where Eelam Tamils have joined hands with the Chinese and built the nation on equality, discipline, Rule of Law and prosperity.
The Sinhala leaders have no history of any success except they destroyed a beautiful nation due to their chauvinistic and corrupt policies.
China, Russia and India are corrupt, brutal and barbaric and it may take thousands of years before they become civilized. the US, EU and UK must play an important role in bringing peace and stability to the world.
from MacroScope:
The IMF to turn on the rich
The latest International Monetary Fund meeting ended with emerging market powers getting a pledge from the organisation for stronger and "more even-handed" scrutiny of what is going on in large advanced economies.
As Reuters correspondents Lesley Wroughton and Emily Kaiser report here, the decision is a response to long-running frustrations among emerging economies, which reckon the Fund has not been tough enough on its biggest shareholders, led by the United States.
The move reflects a number of things. First, it shows the growing clout of emerging economies within international institutions. The G-20, for example, is arguably now more influential than the old , richer G7. Secondly, it graphically underlines the current world-turned-upside-down state of the global economy, in which profligate rich economies are struggling to keep above water while supposedly poorer and less-developed ones enjoy solid growth and relatively stable finances. This graph makes the point:
One question that has been raised, meanwhile, is whether the IMF is capable of taking rich countries -- its primary paymasters -- to task. A comment from a craigbhill on the Reuters story encapsulates the issue:
This is like the bankers to the Mafia being politely asked to "give scrutiny" to the Mafia.
A bit harsh. But valid?
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.
Finally, Asian growth is under threat from tightening policies. Dicks says this is the least problem of the three, but there are indications that powerhouse China needs a period of slower growth to get things under control.
So, there are three problems -- and a not very bright outlook. Are there any others? Or are these three all being overstated?
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.
The pair argue that intensifying competition in the Chinese marriage market is causing men -- or indeed parents with sons -- to raise their savings rates to improve their relative allure among a shrinking pool of potential brides.
A draconian one-child policy, coupled with a traditional preference for male offspring and the availability of selective-sex abortion, has left the country of 1.3 billion facing its most serious demographic crisis.
An estimated 119 boys are born per 100 girls and the Chinese Academy of Social Sciences has warned that this could leave more than 24 million Chinese men of marrying age without spouses by 2020.
This anxiety over the worsening marriage prospects for men could explain why Chinese household savings as a share of disposable income has risen from 16 percent in 1990 to 30 percent in 2007.
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.
That Britain is now embarking on its own round of budget cuts will only make matters worse, adding up to one more important actor trying to consume less and export more courtesy of a devaluing currency.
Perhaps the best outcome is rising trade and currency tensions between the United States and China, while at worst this could set the stage for broader conflicts and a round of tit-for-tat tariffs to match similar currency devaluations.
Michael Pettis, a professor at Peking University, explains the issue succinctly on his blog, in which he says: “Make no mistake, if southern European trade deficits decline, someone somewhere must bear the brunt of the corresponding adjustment. The only question is who?”
The scale of the adjustment is large; taken together Spain, Italy, Portugal and Greece account for about 16 percent of global trade deficits. Add in France, which will surely share some of the pain, and we get up to about 20 percent. You simply cannot have savage recessions and budget cutbacks in these countries without it exerting a powerful force on their trade partners.
it is a monopoly game played by all the major stakeholders who push global trade to new heights. It’s all about profits – certainly not to ‘save 3rd world countries’ give me a $%@$%$#% break.
Certainly agree with ‘jbemory’. Buy local. That also means boycot mcdonalds, burger king, dennys’, target, walmart, homedepot.
scary isn’t it!Are there any mom-pops left at all?
Goodbye America, Hello China? Think again
For the growing number of Americans who see China heading for inevitable global dominance, nudging aside the United States, a brief walk down memory lane helps put long-term predictions into perspective.
Not so long ago, Japan was seen as the next (economic) number 1. American executives studied the 14 management principles of The Toyota Way, developed by the automobile manufacturer that grew into the world’s biggest car maker and is now recalling millions of defective vehicles.
Between the mid-1980s and early 1990s, books with titles such as Trading Places – How We Are Giving Our Future to Japan and How to Reclaim It (by Clyde Prestowitz) were required reading in Washington. Learned panelists expounded on the wondrous efficiency of “Japan Inc.”
A glut of “Amazing Japan” books, Chicago Tribune writer Ronald Yates noted in 1987, hammered home the same theme: Japanese technology is superior, Japanese management is better, Japanese products are unrivaled, Japanese people work harder, Japanese are smarter, Japan is No. 1.
Skip over the two decades of economic stagnation of Japan Inc. that soon followed the hype and fast forward to the present. The book which best reflects today’s American worries is entitled When China Rules the World: the End of the Western World and the Birth of the New Global Order, by British author Martin Jacques. His forecast is part of a growing library of essays, analyses and books on the 21st century belonging to China.
If history is any guide, there’s a better than even chance that the “goodbye America, hello China” school of thought will prove as embarrassingly wrong as the 1980s assessment of the relative strengths of Japan and the United States.
Long-term predictions tend to be more often wrong than right and the decline of the U.S. is a topic of seasonal regularity.
The comparison with Japan is a tired old chestnut. Japan has less than half the population of the U.S. while China has more than four times the population of the U.S. China has serious problems, but so has America. America can remain the leading nation, but only by working hard and smart, so your advice to “relax” is absurd. Anyway, my money is on India to be the leading nation in a hundred years time.
American nightmare: Al Qaeda at home
- Bernd Debusmann is a Reuters columnist. The opinions expressed are his own -
It has been a recurring nightmare of American counter-terrorist officials for years — growing numbers of home-grown al Qaeda recruits drawn from the Muslim-American community, plus blue-eyed, blond-haired would-be suicide bombers travelling on American passports.
That notion clashes with the widely-held belief that Muslims in the United States are not nearly as prone to being seduced by Al Qaeda propaganda as their co-religionists in Europe. But a series of recent terrorism cases involving American citizens have challenged old assumptions and thrown question marks over a host of surveys meant to show the American Muslim communities’ resistance to radicalization.
Incidents spiked in 2009 and included the arrest of five U.S. citizens in Pakistan, where they allegedly tried to link up with extremists, and the arrest of Daniel Boyd, a white convert to Islam who was accused of plotting to attack soldiers at the U.S. Marine Corps base in Quantico, Virginia. Early in the year, Bryant Vinas, a Hispanic American convert, pleaded guilty to having trained with al Qaeda in Pakistan.
Now, the lure of al Qaeda’s murderous ideas is seen as a real threat. “The group seeks to recruit American citizens to carry out terrorist attacks in the United States,” according to John Kerry, the chairman of the Senate Foreign Relations Committee. “These Americans are not necessarily of Arab and South Asian descent,” he wrote in the preface of a Jan. 20 report from his committee on al Qaeda in Yemen and Somalia. “They include individuals who converted to Islam in (an American) prison or elsewhere and were radicalized.”
“The prospect that U.S. citizens are being trained at al Qaeda camps in both countries deepens our concern…” not least, apparently, because an American official in Yemen told committee investigators that American converts living in Yemen included “blond-haired blue-eyed types.” That echoes then CIA chief Michael Hayden’s 2008 warning that al Qaeda was training “operatives that wouldn’t attract attention if they were going through the customs line at (Washington) Dulles airport.”
How many have done so is anyone’s guess. A January study by researchers from Duke University found that in the eight years following the September attacks, 139 Muslim-Americans had committed acts of terrorism-related violence or were prosecuted for terrorism-related offenses involving violence.
Political correctness has nothing to do with why the US is losing “the propaganda war.” They are able to recruit people as is without “take ‘em dead or alive” rhetoric fuming from the executive…they had for years before hand. It’s not a question of morality / the strength of ideas for those who find this message appealing, but as an answer to the concept of globalization. Rather than have a sanitized version of growth with consumerist overtones, a retreat to an idealized past is much more comforting.
I do enjoy that Bernd had an article a few weeks ago about the over-exaggeration of the terrorist “threat”, only to come full circle by joining the cocophony. Attempting to win the hearts and minds isn’t that horrible of a goal, but it has to be kept tempered by logic and the realization that there limits to any message. Additionally, keeping the military out of said message is important, for these are the same geniuses who burned a village to save a village many a time in the past.
from Commentaries:
Why Russia needs America
In the wake of President Obama's decision to scrap the U.S. missile defence shield in eastern Europe, many are pondering Russia's response. The relationship will remain in the spotlight this week, when President Medvedev heads to the U.S. for the G20 summit. Although the precise nature of Russia's reaction remains to be seen, it has a big incentive to improve relations. It badly needs American investment and co-operation to help solve serious economic problems at home.
Critics of Obama's decision worry that it will "embolden" Russia, causing more aggressive behaviour abroad. Yet they forget that the Bush administration's antagonistic policies failed to provide security to Russia's neighbours. These policies didn't prevent Russia's war with Georgia, the repeated gas disputes with Ukraine, and a serious cooling of relations with countries such as Poland. Far from being restrained, Russia's confrontational attitude had a lot to do with its perception that the U.S. was busy encircling the country with missile bases and alliances.
The critics also imply that Russia is preoccupied with external expansion, but that hardly seems appropriate today. Russia's GDP is set to plummet by 8 percent this year. Russian analysts estimate that the country needs up to $2 trillion to renovate its dangerously clapped-out infrastructure. In major industrial cities, Russia's dilapidated factories are mulling huge job losses. For the foreseeable future, Russia's leaders are likely to be preoccupied with thorny domestic problems. Faced with such daunting challenges, it's entirely logical that both Medvedev and Putin say they are keen to kick-start American trade and investment. Responding to Obama's decision -- which he described as "brave and correct" -- Putin immediately linked it to economic issues. He called for the U.S. to back Russia's entry into the World Trade Organisation (WTO), and scrap Soviet-era trade restrictions against Russian companies, especially those that regulate technology transfer to Russia.
On the same day, at an investment summit in Sochi, Putin held well-publicized meetings with the CEOs of General Electric, Morgan Stanley and Texas Pacific Group -- all major U.S. companies. When it comes to the economic sectors that Russia says it is most eager to develop, American investment will be especially crucial. The crisis has underscored the need for Russia to wean itself off dependence on natural resources, and develop new high-technology sectors, such as IT and nanotechnology, where U.S. companies are at the cutting edge.
This means that the U.S. still has plenty of bargaining chips left as it seeks to gain Russia's cooperation on global issues. The bigger problem could be persuading U.S. investors to come. No matter how much Russia's leaders appear to welcome foreign investment, there remain huge obstacles, including corruption and bureaucracy, which they seem largely powerless to deal with.
Nor does the tentative thaw mean an end to diplomatic tensions. Russia's relations with its immediate neighbours may well remain stormy, potentially causing renewed strains with Washington. Still, it's hard to argue that by extending his olive branch to Russia, Obama increases the likelihood of such upsets. The evidence of the last few years implies just the opposite. The frostier Russia's relations have been with the U.S., the more determined Russia has been to resist U.S. encroachment in nearby countries, increasing regional tensions.
Now, Obama's gesture has opened up the possibility of a fresh start, creating prospects for mutually beneficial economic cooperation. The Russians would be foolish not to jump at that opportunity.
Let’s remember…..Russia invaded Poland with the Nazi’s. Let’s remember that and if we ignored the Soviet Union…it may have been from these “compulsions:”. And just as a side note…how many of his own people did Stalin kill?
