China has become the world’s second biggest economy according to data released on Monday August 16th. Japan’s economy fell behind China’s at market exchange rates in the second quarter (it has been number three in PPP terms for some time). These numbers are not strictly comparable: Japan’s data have been seasonally adjusted while those for China have not. Quibbles aside, Japan will surely be eclipsed soon, if it has not been already. Data compiled by Angus Maddison, an economist who died earlier this year, suggest that China and India were the biggest economies in the world for almost all of the past 2000 years. Why they fell so far behind may be more of a mystery than why they are currently flourishing.
It started with the launch of Sputnik and ended with the Cuban missile crisis, but for a moment – so brief it has almost been forgotten – it looked as if the Russian dream of unrivalled prosperity would be realised. Francis Spufford on the lessons to be learned from the Soviet experiment 1962. At the airport, Harry Palmer – not yet played by Michael Caine, not in fact even named in Len Deighton’s original novel – stocks up on his reading. For the flight he buys the New Statesman and History Today. And then he adds a copy of the Daily Worker. Not just because our Harry (as we might as well call him) is a British spy, keeping up with the communist enemy, but also because Harry, unlike the uppercrust nitwits he works for, is classless and intelligent and up-to-the-minute, and so in a menacing way at this moment in the 20th century does communism seem to be, thanks to the public image of its homeland the USSR.
From Richard Wilkinson and Kate Picket, in Prospect
In our book The Spirit Level, Kate Pickett and I demonstrated that, first, many problems which are more prevalent lower down the social ladder are worse in societies with bigger income differences, and second, that almost everyone would benefit from reduced inequality. To some, however, these seem impossible notions. Writing in the August 2010 edition of Prospect, Matthew Sinclair from the Taxpayers Alliance claimed our research was “simply untrue.”
WHEN a book with the title Zombie Economics: How Dead Ideas Still Walk Among Us arrived on my desk, I figured it could go one of two ways. One possibility could be that the zombies were Keynesians, discredited in the 1970s but back in favour today. But the cover illustration of trickle-down economics and efficient financial markets illustrates that the Chicago school is deemed to be the haven of the undead.
It is an entertaining and thought-provoking book by an Australian academic John Quiggin, which also works as a good summary for non-specialists of how the economics debate has developed (NB the book will not be published until October).
Celia Orboc, a cake-seller in the Philippines, spent her little stipend on a wooden shack, giving her five children a roof over their heads for the first time. In Kyrgyzstan Sharmant Oktomanova spent hers buying flour to feed six children. In Haiti President René Préval praises a dairy co-operative that gives mothers milk and yogurt when their children go to school.
These are examples of the world’s favourite new anti-poverty device, the conditional cash-transfer programme (CCT) in poor and middle-income countries. These schemes give stipends and food to the poorest if they meet certain conditions, such as that their children attend school, or their babies are vaccinated.
There are all sorts of things very poor people living in poor countries don’t have. They lack secondary-school educations, usually, and good medical care. They lack steady work and life insurance, bank accounts and competent legal representation, adequate fertilizer for their crops, adequate protein in their diets, reliable electricity, clean water, indoor plumbing, low-interest loans, incubators for their premature babies, vaccinations and good schools for their children.
But the central thing they lack is money. That is what makes them, by definition, poor: International aid organizations define the “very poor” as those who live on less than a dollar a day.
On September 11, 2001 Megan K. Stack, the 25-year-old Houston bureau chief for the Los Angeles Times, was in Paris visiting her sister. After the terrorist attacks on that day, the Times asked if she would be willing to go to Afghanistan. For the next six years, before becoming the paper’s Moscow bureau chief, she reported on Afghanistan, Iraq, Lebanon, Libya, Yemen, Egypt, Saudi Arabia, and Israel and the West Bank. Her new book, Every Man in this Village is a Liar, describes all these places with a unique comparative perspective and moral engagement. n+1 spoke to her over Skype from Moscow.
How can the purportedly slowing rate of H-1B visa applications to the US State Department since April 2010 be interpreted? A recent article in Fortune magazine suggests that the reversal of the so-called “brain drain” points to a worrying trend related both to perceived long-term consequences of the current economic recession and the waning appeal of the specialised job market in the US.
Traditionally reserving a quota of 65,000 out of the millions of non-immigrant visas granted in the US each year, H-1B visas are granted to those with specialised knowledge - usually postgraduates taking jobs in science and industry, but also including professionals such as doctors and lawyers.
I believe that misconceptions play a large role in shaping history, and the euro crisis is a case in point.
Let me start my analysis with the previous crisis, the bankruptcy of Lehman Brothers. In the week following September 15, 2008, global financial markets actually broke down and by the end of the week they had to be put on artificial life support. The life support consisted of substituting sovereign credit—backed by the financial resources of the state—for the credit of financial institutions that had ceased to be acceptable to counterparties.
In the fall of 2007, after two Bear Stearns-owned hedge funds trading in subprime debt suddenly went bankrupt, I sat down with a friend of a friend who worked in finance to see if he could explain it to me. That conversation became the first in a series, which we began publishing at n+1. The conversations continued through the crisis and after, following the trajectory of one financier facing the hardest days he’d yet seen. This week HarperPerennial is publishing Diary of a Very Bad Year, the book that resulted from those conversations. We hope it’s a valuable contribution to the growing literature on the crisis. All this week on the site we’ll be featuring excerpts and outtakes from the book. —KG
The first intellectual consequence of the economic crisis was to undermine neoliberalism—or the belief in the sufficiency of markets to secure human welfare—as the age’s default ideology.
The second was to prompt a hasty resurrection of Keynes. “We are all Keynesians again!” the ghost of Richard Nixon might have declared as Gordon Brown and Barack Obama, leaders of the nations most squarely behind the neoliberal push of the last thirty years, changed the Anglo-American tune and, this past winter, begged their European colleagues to stimulate the Continental economy with borrowed money. The crisis also made the economists Paul Krugman and Nouriel Roubini into the ?rst Keynesian superstars since John Kenneth Galbraith. Their recommendations, on their invaluable blogs, of still vaster countercyclical spending and the temporary nationalization of banks were not taken up by the Obama administration, but they did confer new respectability on the idea of close state involvement in the economy.
This is the beginning of the end for the EU unless it can find the capacity to start again on radically new bases
Within a single month, we have witnessed Prime Minister George Papandreou of Greece announcing his country’s possible default, an expansive European rescue loan offered to him on the condition of devastating budget cuts, soon followed by the “downgraded rating” of the Portuguese and Spanish debts, a threat on the value and the very existence of the euro, the creation (under strong US pressure) of a European security fund worth €750bn, the Central European Bank’s decision (against its rules) to redeem sovereign debts, and the announcement of budget austerity measures in several member states.
By Tony Judt, in Institute for Public Knowledge, Transformations of the Public Sphere
One striking consequence of the disintegration of the public sector has been an increased difficulty in comprehending what we have in common with others. We are familiar with complaints about the ‘atomizing’ impact of the internet: if everyone selects gobbets of knowledge and information that interest them, but avoids exposure to anything else, we do indeed form global communities of elective affinity—while losing touch with the affinities of our neighbors.
In that case, what is it that binds us together? Students frequently tell me that they only know and care about a highly specialized subset of news items and public events. Some may read of environmental catastrophes and climate change. Others are taken up by national political debates but quite ignorant of foreign developments. In the past, thanks to the newspaper they browsed or the television reports they took in over dinner, they would at least have been ‘exposed’ to other matters. Today, such extraneous concerns are kept at bay.
Tell me about your first book, Dream of the Red Chamber by Cao Xueqin.
This book is believed by many to be the greatest Chinese novel ever written. For me it is like a bible for everything to do with Chinese culture. Cao belonged to the Han Chinese clan and the book is a huge family novel written in the 18th century. The family’s fortunes were tied up with the Kangxi dynasty and the book is all about the relationship between the family members and all the different classes.
It really is a wonderful book which has been translated by Penguin since 1970 and reprinted again and again. But many Westerners don’t know about this book, which is a shame because it is such a powerful book which I really love.
Why is it so important to you?
Well, it is such a good guide to our culture. In the book more than 100 people, buildings, poems, paintings and dreams are described in great detail. So you really find out the lifestyles of the people living there. I have read this book again and again ever since my childhood.
As the European debt crisis continues to unsettle financial markets, Nobel Prize–winning economist Joseph E. Stiglitz, a Vanity Fair contributor, talked to VF Daily about why the measures taken so far have failed to stem the crisis, whether there is a moral hazard in bailing out nations, and how Wall Street has made the situation worse.
VF Daily: This crisis seems to be never-ending. Why, after a trillion-dollar aid package was settled on, are people still so uneasy?
Joseph E. Stiglitz: Well I think it’s understandable. First, owing to the size of the package. Second, there’s maybe a recognition that what Germany had demanded were austerity packages that would weaken Europe and therefore exacerbate the downturn. Third, given the magnitude of the problems and the austerity package that are being demanded, there’s considerable uncertainty whether there will be political and social unrest, and therefore whether packages will be accepted. Fourth, once you look at the numbers you realize that a trillion dollars probably isn’t enough if things don’t work out well, and there’s a significant probability that they won’t.
A review of Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger by Fintan O’Toole
When I first came to the United States from Ireland in the early 1990s, Americans thought of my home country as a land of green fields, bibulous peasants, and perhaps the occasional leprechaun. Once, on a bus from Ann Arbor to Detroit, a fellow passenger heard my accent and asked if she could touch me for good luck. But something changed over the course of the 1990s and 2000s, as Ireland started to enjoy remarkable levels of economic growth. Blather about Guinness and the Little People made way for a new story line: the success of the Celtic Tiger economy. Between 1995 and 2007, Irish GDP grew at an average rate of 6 percent every year. Housing prices rose by 270 percent between 1996 and 2006. A country that had long been notorious for its high emigration rates started to import people instead. Gort—a tiny town in Galway—acquired a large population of South American immigrants, while Dublin supported no less than three Polish-language newspapers.
If you believe the papers, a lot of people think there’s going to be another Lehman. Only this time, it will come not from the recklessness of American finance, but from a sovereign debt default, the result of the infamous profligacy of the European welfare state. And given all the headlines—“The End of the Euro,” “The Death of the European Dream”—you would think these were the end times for the Eurozone itself.
The gloomy chorus has been building for months now: it is the leitmotif of the hyper-powered fund managers who are, as I write this, wagering on the demise of the euro, or profiting off the fear of its demise, or even, perversely enough, the fear of that fear. A February piece in the Wall Street Journal, “Hedge Funds Try ‘Career Trade’ Against Euro,” summed up the fervid atmosphere.
Not the least striking revelation of Michael Lewis’s excellent book, The Big Short, is that this author of financial best-sellers has changed his mind. In a column for Bloomberg News in early 2007, he praised the rapidly expanding market for derivatives. Visiting the annual meeting of financiers and policymakers at the World Economic Forum in Davos, Switzerland, that year, he was exasperated by the fears of some of the participants. “None of them seemed to understand that when you create a derivative you don’t add to the sum total of risk in the financial world,” he wrote, sounding arguments very similar to those made by Alan Greenspan. “You merely create a means for redistributing that risk. They have no evidence that financial risk is being redistributed in ways we should all worry about.”
Suicide bombing is one of the most passionately debated topics in academia, the government, and the intelligence community. The secondary literature on this subject has convincingly demonstrated that suicide bombing is sui generis in its historical contingency (rather than in its essence), that al-Qaeda’s practice of suicide bombing takes place in a globalized landscape which is at once moral and political, and that even the most murderous terrorists appropriate and objectify modern notions of humanity in describing their actions.
The Senate just voted, 96-0, to audit the Federal Reserve. Soon, we will know what the Federal Reserve did with the trillions of dollars that it handed out during the financial crisis.
A few months ago, such a vote would have been unthinkable. One senior Treasury official claimed he would fight to stop an audit ‘at all costs’. Senator Chris Dodd predicted that an audit would spell economic doom, while Senator Judd Gregg attacked accountability for the Fed as “pandering populism”.
Today, both the Treasury Department and Senator Dodd support this amendment. As for Judd Gregg, he was just on the floor of the Senate discussing — of all people — 19th century populist Presidential candidate William Jennings Bryan.
What happened?
People Power is what happened. We built a coalition of people on the right and the left, ordinary citizens and economists, ex-regulators and politicians, all with one question for which we demanded an answer: “What happened to our money?”
Translated from the Spanish by David Noriega. Read the original here.
According to Andy Warhol’s maxim, in the future everyone will be famous for fifteen minutes. This utopia of visibility makes sense in a society of the spectacle. Mexican political culture promises happiness in the opposite way: what is important is not what is seen, but what is hidden. A life of accomplishment doesn’t culminate in celebrity; it is achieved in secret. The Mexican utopia has consisted of enjoying your fifteen minutes of impunity.
Managers across Japan were stunned last month when a factory belonging to Ogihara, a Japanese diemaker, was sold to BYD, a Chinese carmaker that boasts Warren Buffett as an investor. In a sign of the sensitivity of the matter, the Japanese firm tried to keep the transaction quiet, never issuing a press release and refusing all interview requests.
Japan has a long history of resisting foreigners who seek to buy their way into the country. But most recent squabbles have at least been with firms from America, a political ally. Deals involving firms from the Chinese mainland are touchier because of the two countries’ uneasy relations. This has kept the number of Sino-Japanese mergers and acquisitions low, even as China surpassed America in 2007 to become Japan’s largest trading partner.
As a student during the 1980s, I gave the “European Union” section in the library a wide berth. The pall of soporific technocracy that hung over it made the adjacent shelves of books on law and political science enticing by comparison. A lot more has been written on the EU since then, most of it perpetuating that same “mortal dullness,” to borrow a phrase from the historian Perry Anderson. Dullness, on the other hand, is one charge no one has ever levied at Anderson, whose new book, The New Old World, is as insightful, combative and invigorating as its illustrious predecessors. Given Anderson’s long and intimate engagement with Europe, both as an editor of the New Left Review and a regular contributor to the London Review of Books for the past two decades, one looks forward to what one gets–a bracing assault from somewhere on the left on the conventional Europieties, and new perspectives on the evolution, and likely future trajectory, of one of the most important political and cultural experiments of our time.
Colin Marshall talks to B.R. Myers, author of “The Cleanest Race: How North Koreans See Themselves and Why it Matters”, in 3 Quarks Daily
Brian Reynolds Myers is contributing editor to the Atlantic and professor of international studies at Dongseo University in Busan, South Korea. In his new book, The Cleanest Race: How North Koreans See Themselves and Why it Matters, he examines North Korean propaganda meant for both internal and external consumption and through it constructs the closed country’s view of itself, its relationship to other countries and the Kim dynasty that has controlled it for 60 years.
Westerner to get the impression that everything a North Korean citizen might see or read or hear, every piece of culture they might encounter — paintings, stories, sitcoms — is, in some way, propaganda. How true is that notion?
I think it is true. Of course, the information cordon that used to isolate the country from the outside world has deteriorated steadily since the mid-1990s, when North Koreans began to leave the country to look for food. You have a lot of people who are smuggling into the country things like South Korean DVDs or Chinese TV sets — even cellphones, which can be used to call people outside the country. Average citizens now have some access to unorthodox sources of culture and information, but for the average North Korean on a daily basis, everything they encounter really is propaganda.
Compiled by Christian Lorentzen and Keith Gessen, in n + 1
[The government report is admirably lucid and bears a formidable textual apparatus, including 115 pages of endnotes. But it lacks an index. The result is a volume that repeats the very compartmentalization it's been charged with analyzing. To remedy this, and following the cue of n+1 friend Caleb Crain, we have assembled a team of indexers. Our approach has varied—sometimes tending toward the "zone defense" style of the CIA, elsewhere favoring the "man-to-man" coverage practiced by the FBI.]
IN 1980 American car executives were so shaken to find that Japan had replaced the United States as the world’s leading carmaker that they began to visit Japan to find out what was going on. How could the Japanese beat the Americans on both price and reliability? And how did they manage to produce new models so quickly? The visitors discovered that the answer was not industrial policy or state subsidies, as they had expected, but business innovation. The Japanese had invented a new system of making things that was quickly dubbed “lean manufacturing”.
The number of applications from prospective international students to American graduate schools has increased for the fifth consecutive year. In a report released last week, the Council of Graduate Schools says the 7% growth in 2010 is the largest since a 9% gain three years ago.
In what the council calls an “initial snapshot of graduate applications” taken in the American autumn, those from China were up 19% following a 14% increase in 2009. Similarly, applications from prospective graduate students from the Middle East and Turkey also rose by double-digits for the fifth consecutive year, by 18%.
The council represents more than 500 institutions of higher education in the US and Canada engaged in graduate education, research and the preparation of candidates for advanced degrees.
Yesterday, Joseph Stack deliberately flew an airplane into a building housing IRS offices in Austin, Texas, in order to advance the political grievances he outlined in a perfectly cogent suicide-manifesto. Stack’s worldview contained elements of the tea party’s anti-government anger along with substantial populist complaints generally associated with “the Left” (rage over bailouts, the suffering of America’s poor, and the pilfering of the middle class by a corrupt economic elite and their government-servants). All of that was accompanied by an argument as to why violence was justified (indeed necessary) to protest those injustices:
“I remember reading about the stock market crash before the “great” depression and how there were wealthy bankers and businessmen jumping out of windows when they realized they screwed up and lost everything. Isn’t it ironic how far we’ve come in 60 years in this country that they now know how to fix that little economic problem; they just steal from the middle class (who doesn’t have any say in it, elections are a joke) to cover their asses and it’s “business-as-usual” . . . . Sadly, though I spent my entire life trying to believe it wasn’t so, but violence not only is the answer, it is the only answer.”
From John Boudreau and Brandon Bailey in the San Jose Mercury News:
Just a few years ago, the mantra in Silicon Valley went like this: What’s your China strategy? A 2010 update could be: What’s your China headache?
China’s allure is stronger than ever. It remains a cheap place to manufacture goods, and its rapidly growing domestic market includes 400 million Internet users and 700 million mobile-phone subscribers, numbers unmatched anywhere else in the world. But a country already known for obstacles is becoming less welcoming to foreign businesses.
Google’s frayed relations with the Chinese government over intellectual property theft and censorship spotlight the growing discontent many Western companies are experiencing in the country. And American companies are certain to face even tougher conditions there if U.S.-China tensions continue to rise over issues such as China’s currency controls, which experts say boost China’s exports while limiting imports from the United States.
The latest revision to the country’s Electoral Law, which grants rural residents the same rights as their urban counterparts to elect deputies to people’s congresses but does not expand direct elections, shows China will adhere to its own mode of development instead of adopting Western-style elections, a top legislator has said.
“Different countries have different election rules and a socialist China won’t follow Western election campaigns,” Li Fei, deputy director of the legislative affairs commission under the Standing Committee of the National People’s Congress (NPC), the country’s top legislature, told China Daily following the adoption of the latest amendment to the Electoral Law last Sunday.
Li, who has been leading the revision, said some people want to expand direct elections, but the current priority is to perfect existing direct elections at county and township levels.
Whether in terms of justice or fairness, a society must pay more attention to “substantial democracy”, which in China means that there should be representatives from all areas, ethnic groups and walks of life, Li said.
International development agencies faced a “diminishing market” unless they partnered large emerging economies to bring development to the world’s poorest countries, Helen Clark, the head of the United Nations Development Programme, warned on Tuesday.
Ms Clark said the New-York based UNDP was seeking a global partnership with India, China and Brazil to deliver investment, technology and expertise to other developing countries.
It had already worked alongside India in a solar energy investment in Guinea-Bissau, efforts to boost agricultural productivity in Rwanda and civil and public service training in Afghanistan.
These days Orientalism has a bad name. Edward Said depicted it as a deadly mixture of fantasy and hostility brewed in the West about societies and cultures of the East. He based his portrait on Anglo-French writing about the Near East, where Islam and Christendom battled with each other for centuries before the region fell to Western imperialism in modern times. But the Far East was always another matter. Too far away to be a military or religious threat to Europe, it generated tales not of fear or loathing, but wonder. Marco Polo’s reports of China, now judged mostly hearsay, fixed fabulous images that lasted down to Columbus setting sail for the marvels of Cathay. But when real information about the country arrived in the 17th and 18th centuries, European attitudes towards China tended to remain an awed admiration, rather than fear or condescension. From Bayle and Leibniz to Voltaire and Quesnay, philosophers hailed it as an empire more civilised than Europe itself: not only richer and more populous, but more tolerant and peaceful, a land where there were no priests to practise persecution and offices of the state were filled according to merit, not birth. Even those sceptical of the more extravagant claims for the Middle Kingdom – Montesquieu or Adam Smith – remained puzzled and impressed by its wealth and order.
America and China need each other, but they are a long way from trusting each other, says James Miles.
“OUR future history will be more determined by our position on the Pacific facing China than by our position on the Atlantic facing Europe,” said the American president as he contemplated the extraordinary commercial opportunities that were opening up in Asia. More than a hundred years after Theodore Roosevelt made this prediction, American leaders are again looking across the Pacific to determine their own country’s future, and that of the rest of the world. Rather later than Roosevelt expected, China has become an inescapable part of it.
Back in 1905, America was the rising power. Britain, then ruler of the waves, was worrying about losing its supremacy to the upstart. Now it is America that looks uneasily on the rise of a potential challenger. A shared cultural and political heritage helped America to eclipse British power without bloodshed, but the rise of Germany and Japan precipitated global wars. President Barack Obama faces a China that is growing richer and stronger while remaining tenaciously authoritarian. Its rise will be far more nettlesome than that of his own country a century ago.
Written by Timothy Garton Ash The New York Review of Books
BOOKS DRAWN ON FOR THIS ESSAY
1989: The Struggle to Create Post-Cold War Europe
by Mary Elise Sarotte
Princeton University Press, 321 pp., $29.95
Uncivil Society: 1989 and the Implosion of the Communist Establishment
by Stephen Kotkin, with a contribution by Jan T. Gross
Modern Library, 197 pp., $24.00
Der Vorhang Geht Auf: Das Ende der Diktaturen in Osteuropa
by György Dalos
Munich: C.H. Beck, 272 pp., e19.90
NINETEEN-EIGHTY-NINE WAS a year of historic revolution and possibility. Popular and often nonviolent uprisings overturned communist rule in much of Eastern and Central Europe; and pro-democracy movements began to challenge its legitimacy in the Soviet Union and China. “Nothing in our past thinking, or in anyone else’s, prepared us for the remarkable turn of events,” wrote Irving Howe in 1990. “So much the worse for theory, so much the better for life!”
But has life changed dramatically for the better? While many economies have begun to liberalize, political illiberalism still lurks. And while many on the left hoped that social democracy might replace communism, many post-Soviet nations have adopted the policies of neoliberalism and the language of nationalism. “Any great social change unleashes great expectations,” Adam Michnik observed in 1999. “And therefore, of course, it leads to great disappointments.”
Dubai’s wealth came quickly, and it got a little carried away: artificial islands, gaudy hotels and pointy skyscrapers, spectacular or tasteless as they are, according to your viewpoint. But at first, wealth brought amenities we take for granted: running water, electricity, roads. Dubai’s first electric lights were hooked up in the Sixties. It put in taps and telephones around the same time.
When the Emir of Qatar married a Dubai princess, the dowry was to pay for the city’s first tarmac road; a year later, he paid for a bridge connecting the emirate’s two halves. He probably felt sorry for his backward neighbour, which had just been taken over by his eccentric new father-in-law, Sheikh Rashid bin Saeed al-Maktoum.
From The Economist
From Jule Treneer, in n + 1
by Jeff Madrick, in The New York Review of Books
by Omar Sarwar, in 3 Quarks Daily
By Mark Mazower, in The Nation
Colin Marshall talks to B.R. Myers, author of “The Cleanest Race: How North Koreans See Themselves and Why it Matters”, in 3 Quarks Daily
From The Economist
From John Boudreau and Brandon Bailey in the San Jose Mercury News:
From Zhu Zhe in the 
