Friday, November 30, 2012

Key economies in sharp slowdown; India set for decade-low growth; How Syria shut off the internet; India has too few wealth-creating tycoons

1 Key economies in sharp slowdown (BBC) A string of major economies have reported disappointing data. Economic growth slowed in India in the third quarter, while in Canada and Brazil it dropped surprisingly sharply. Meanwhile in the eurozone, unemployment hit a new high of 11.7% in October, as German retail sales fell unexpectedly and French consumer spending dropped. And in the US, citizens saw their incomes stagnate in October, while spending fell slightly, in large part due to disruption from Storm Sandy.

US personal incomes rose less than 0.1% from a month earlier, according to the Commerce Department, while spending fell 0.2%. Other recent data from the US has pointed to a strong rebound in the world's biggest economy, including a surprise upward revision of the country's third quarter annualised growth rate from 2% to 2.7%. North of the border by contrast, Canada's economy fared far worse over the summer.

2 Eurozone joblessness at new high (David Jolly & Jack Ewing in The New York Times) Unemployment in the euro zone rose to a new high in October, according to official data. But the head of the European Central Bank tempered the bad news by predicting that the region’s economy would begin to recover next year. Mario Draghi, the ECB president, cautioned that, “We haven’t gotten out of the crisis yet.” But he said, “The recovery for the entire euro zone will no doubt begin in the second half of 2013.”

That was a firmer forecast than Mr. Draghi gave earlier last month, when he said only that growth next year would be weak. And it came as separate data indicated that inflation continued to fall, giving the ECB more leeway to pump cash into the economy if needed.

To be sure, many economists remain skeptical. Mr. Draghi acknowledged that austerity measures by various governments would inevitably bring “a short-term contraction in economic activity.” But he repeated the central bank’s vow to do “everything necessary” to maintain stability in the euro zone. The central bank has promised to buy debt from countries like Spain in any amount necessary to hold down their borrowing costs, provided they agree to conditions.

3 India set for decade-low growth (The Guardian) The Indian economy extended its long slump in the quarter ending in September, with lower-than-expected growth keeping it on track for its worst year in a decade and underscoring the urgency of politically difficult reforms to spur a revival. Quarterly gross domestic product (GDP) grew 5.3% from a year earlier, below the 5.5% posted in the three months ending in June.

The number matched the performance of Asia's third largest economy in the January-March quarter, which was the weakest growth rate in three years. "The growth is bottoming and we will see an improvement from here, though not a very strong improvement," said Robert Prior-Wandesforde, director of Asian economics research for Credit Suisse in Singapore.

Growth was dragged down by subdued manufacturing output growth of 0.8% on the year and farming output of 1.2%. The number was lower than indicated by the finance minister, Palaniappan Chidambaram, last week when he warned that India faced "a difficult situation" and needed innovation to boost output.

4 How Syria shut off the internet (Caleb Garling in San Francisco Chronicle) In the classic analogy of a highway, the Internet has points where the information exits into a particular country. Electronic checkpoints allow one country's exit to interface with the greater Web highway, like the stoplight at the end of an exit. If the country's Internet service provider - a private business that manage the nation's network - barricades the exit, the country loses connectivity with the rest of the world.

Few outside of Syria know the exact sequence of events that led the country to go dark. But, it's probably as simple as a phone call or two from someone in authority. Syria has one Internet service provider, Syrian Telecommunications Establishment (Syriatel). In light of the advancing rebels, a call from President Bashar Assad (or one of his staff) could tell Syriatel, a company that is virtually an extension of the government, to turn off the Internet.

This is not unlike what the world saw when Egypt cut off access in 2011. Wired noted that when the country went digitally silent, it wasn't in one fell swoop, but staggered over a short period of time. Egypt has more than one telecom company. The cascading drop in Internet activity - to zero - likely reflected the government phone calls to each of them. An Internet shutdown of Syria's proportions would be very unlikely in the US, says Jim Dempsey, vice president for public policy at the Center for Democracy & Technology.

Syria's shutdown comes ahead of a UN summit next week set to discuss new international rules for the Internet. Other repressive governments have tried their own ways to control the masses with digital constraints. China has spent billions of dollars on "The Great Firewall," a sprawling network of censorship tools that filter content within the country and from abroad. Iran has gone so far as to start building its own Internet - somewhat like a company intranet - despite the concerns of human rights groups and skepticism from technical experts.

5 India’s pain: Too few wealth-creating tycoons (Sadanand Dhume in The Wall Street Journal) As the argument goes, like Mark Twain's America, India is a rapidly industrializing country marked by deep chasms of inequality. The large number of Indian billionaires—61 by Forbes magazine's count, up from none before the advent of reforms in 1991—underscores the unsustainable glitz of the times.

The emergence of dazzling wealth in a country that was long a byword for poverty is certainly noteworthy, but the "gilded age" metaphor can potentially mislead. To begin with, in per capita terms late 19th century America was already one of the richest countries in the world. The International Monetary Fund ranks India 130th of 185 countries on this score. Similarly, in terms of technology, 19th century America gave the world the telephone, the electric bulb, and much else. Even the loudest India booster can't claim that it occupies an analogous place in the front ranks of innovation.

After its election in 2004, the India government assumed tax revenues will keep rising. It ignored wealth creation by postponing structural reforms, and instead focused on redistribution through a rural jobs guarantee in 2005 and, now, a proposed food security bill. This political turn has affected the legitimate ways India's world-class companies were creating wealth. The economy can't hope to prosper without their active cooperation, but faced with policy drift and corruption many are choosing to invest overseas rather than domestically. The Mumbai-headquartered Tata Group, for example, now derives nearly 60% of its $100 billion in revenues from abroad.

In practical terms, this means finding ways to combat cronyism without adding to the woes of a private sector already overburdened by red tape and lackluster decision making. In philosophical terms, it means recognizing that India's problem isn't too many Ponty Chadhas, but too few Ratan Tatas. Only then can India hope to truly enter a gilded age.

Thursday, November 29, 2012

Jobless benefits may fall off 'cliff'; US birth rate at record low; UK is underemployed; Dubai back in mega-project mood

1 Jobless benefits may fall off ‘cliff’ (Kathleen Pender in San Francisco Chronicle) Talk about a hard landing: About 2 million Americans, including 400,000 in California, will abruptly lose their unemployment benefits after December unless Congress votes to continue federal funding for extended benefits. This part of the "fiscal cliff" has received less attention than tax increases and other spending cuts scheduled to take effect Jan. 1.

During recessions, the federal government pays states to provide additional jobless benefits to people who exhaust their regular state benefits, which typically last up to six months. About 2.1 million of the 5 million Americans receiving jobless benefits are on a federal extension that will end after Dec. 29, even if they have weeks remaining in their federal claim, according to Maurice Emsellem of the National Employment Law Project. "It's a hard cutoff," he said. "There is no phaseout," like there would have been every other time the program was in danger of extinction.

Congress has renewed extended benefits 10 times since the current round started in June 2008. At its peak, the program provided up to 73 weeks of benefits (99 weeks if you include state benefits), but now it provides only 14 to 47 weeks, depending on the state's unemployment rate. In California, the maximum is 47 (73 including state benefits).
When the program started, the national unemployment rate was 5.6%. After peaking at 10% in October 2009, it fell to 7.9% last month. Over the past 60 years, the highest unemployment rate at which federal benefits have been cut off was 7.2% in March 1985.
2 US birth rate at record low (BBC) The US birth rate hit a record low last year, led by the decline in child-bearing among foreign-born women, according to a Pew study. The overall US birth rate decreased by 8% between 2007-10, and by 6% among US-born women, found the data. The rate fell sharpest for those hardest hit by the recession: 14% among foreign-born women and 23% among Mexican immigrant women in particular. The 2011 rate was the lowest since 1920, when such records began.
Previous research by Pew concluded that states with the largest economic downturn from 2007-08, were most likely to have experienced fertility declines. But increased access to contraception for Latino women may also be playing a part in the falling birth rate, according to the National Latina Institute for Reproductive Health. Foreign-born mothers continue to give birth to a disproportionate share of the nation's newborns.
The overall US birth rate was 63.2 per 1,000 women of child-bearing age. It peaked in 1957 during the Baby Boom years, reaching 122.7 per 1,000 women.
3 UK is underemployed (Stephanie Flanders on BBC) Should we be surprised to learn that there are now one million more "underemployed" people in the UK than in 2008? We know that the economy itself is now operating well below potential. So it makes sense that a lot of people should find themselves working fewer hours than they would like.
The UK economy is now around 3% smaller than it was before the start of recession, in the first quarter of 2008. What has puzzled so many people - for so long - is that the number of people in work is now almost exactly what it was then. We are just producing less stuff. You can see how underemployment could help explain a part of that puzzle, if we were working fewer hours, as a country, but sharing those hours across a larger number of people. That is indeed a part of the story: the number of hours worked in the economy has not risen as sharply as employment, which suggests that quite a lot of people are working fewer hours than before - and, it seems, fewer hours than they would like.
4 Dubai back in mega-project mood (Dawn) Dubai is suddenly rediscovering its old habits. That means relentless hype and construction plans loaded with superlatives. Case in point: A proposed Taj Mahal replica four times bigger than the original. Leaders, too, are back swaggering with a mojo that seems aimed to wipe away memories of the city’s humbling fiscal collapse just three years ago. ”We do not anticipate the future,” said Dubai’s ruler Sheik Mohammad bin Rashid Al Maktoum in announcing plans for a new ”desertopolis” that will bear his name. ”We build it.”
It all rings very familiar. The same type of super-charged ambition reshaped Dubai beginning in the 1990s and left an impressive legacy including the world’s tallest skyscraper, a villa-studded island shaped like a palm, malls packed with top retailers and tourist and business networks that are the envy of the Middle East. But it also helped drive the emirate over the edge.
The global financial crisis smacked Dubai particularly hard after years of increasingly shaky construction funding schemes, where state-linked developers often used money collected for one unfinished project to start another. As credit dried up, the deeply indebted Dubai government had to scale back sharply just to meet its bills. It took a $10 billion bailout from oil-rich neighbor Abu Dhabi in 2009 just to give it some breathing room to begin selling off assets and negotiating with creditors for billions more owed by the city-state.
Now with another generation of outsized projects on the drawing boards some are questioning whether the pre-bust creed of bigger-is-better still makes sense in a more cautious world. So far, the only significant outrage from abroad is over a proposed version of the Taj Mahal  the ”Taj Arabia”  that’s four times larger than the original in Agra south of New Delhi.  ”It is patently wrong and absurd,” a former Agra legislator, Satish Chandra Gupta, told Indian media.
The Indian outreach doesn’t end there. A Bollywood theme park is part of a $2.7 billion five-park complex announced by the office of Dubai’s ruler. It also seems to be Sheik Mohammad’s grand response to the fiscal nosedive that shutdown plans for several theme parks, leaving more than one colorful gateway-to-nowhere in the desert. ”Hubris,” said Christopher Davidson, an expert on Gulf affairs at Britain’s Durham University, referring to the blitz of new mega-projects.

Monday, November 26, 2012

Eurozone agrees on Greek bailout; Arcelor Mittal no longer welcome in France; How secret offshore funds buy up London; Big business corrupting economics; UN condemns female genital mutilation

1 Eurozone agrees on Greek bailout (BBC) Eurozone finance ministers and the IMF have reached a deal on an urgently needed bailout for debt-laden Greece. They have agreed to cut debts by 40bn euros ($51bn) and have paved the way for releasing the next tranche of bailout loans - some 44bn euros. Welcoming the move, European Central Bank president Mario Draghi said it would "strengthen confidence in Europe and in Greece". The breakthrough came after 10 hours of talks in Brussels.

The deal should open the way for support for Greece's teetering banks and allow the government to pay wages and pensions in December. Greece has been waiting since June for the next tranche of bailout cash to help its heavily indebted economy stay afloat. The leader of the eurozone finance ministers' group, Jean-Claude Juncker, said the bailout did not just have financial implications. "This is not just about money. It is the promise of a better future for the Greek people and for the Euro area as a whole."

Greece's international lenders have agreed to take steps to reduce the country's debts, from an estimated 144%, to 124% of its gross domestic product by 2020. These include cutting the interest rate on loans to Greece, and returning 11bn euros to Athens in profits from ECB purchases of Greek government bonds.

2 Arcelor Mittal no longer welcome in France (BBC)  Arcelor Mittal is no longer welcome in France, its minister for industrial recovery, has said, accusing the steelmaker of "lying" and "disrespecting" the country. The multinational angered workers and the government when it announced a plan in October to close two furnaces at its steel plant in Florange. It gave the government a grace period of 60 days to look for a new owner. The Mittal family said they were "extremely shocked" by the comments.

"We no longer want Arcelor Mittal in France because they didn't respect France," Arnaud Montebourg told French business daily Les Echos. The minister, who previously opposed the closure of a Peugeot factory, accused the company of "overwhelming lies" and said the Florange closure breaks a promise made by chief executive Lakshmi Mittal during Mittal Steel's 26.9bn-euro (£21.8bn) takeover of Arcelor in 2006, which was strongly opposed by French ministers. The problem "isn't the furnaces in Florange, it's Mittal", said Mr Montebourg.

The government says it has received two offers for the Florange unit, but only for the entire site. Mr Mittal has refused to sell the full operation, which employs a total of 20,000 workers. As a result, Mr Montebourg has said he is exploring how to seize the entire Florange site should Mr Mittal refuse his demands.

3 How secret offshore funds buy up London (David Leigh, Harold Frayman & James Ball in The Guardian) The UK is increasingly turning into a property speculators' haven, thanks to tax loopholes and the offshore secrecy offered by the British Virgin Islands (BVI) that hides many property transactions.

The Guardian's investigation with the Washington-based International Consortium of Investigative Journalists (ICIJ), covering nearly 60 sample premises, shows how anonymous buyers are taking over more and more blocks of luxury housing. Some purchasers live abroad; other buyers live in the UK itself while they build up property empires using these artificial structures.

In 2011 alone, more than £7bn of offshore money flooded into potentially tax-exempt purchases of UK houses, flats and office blocks. Most buyers snapped up property in central London. These offshore buyers are a driving force of the capital's spiralling property prices versus the rest of the UK: since March 2009, property prices in prime central London have increased by 49% – five times more than the rest of the UK, according to estate agents Knight Frank.

Reckless bank loans to offshore entities have fuelled much of the historic property boom, handed over by lenders who subsequently had to be bailed out. British banks had £14.1bn outstanding in loans to BVI and associated offshore entities at the end of 2009, according to UK Treasury figures.

4 Hidden risk of ‘shadow finance’ in China (Lingling Wei & Dinny McMahon in The Wall Street Journal) There are hidden risks to banks from their links to China's fast-growing "shadow-finance" industry, a term for all types of credit outside formal lending channels. Shadow finance in China totals about 20 trillion yuan, according to Sanford C. Bernstein & Co., or about a third the current size of the country's bank-lending market. In 2008, such informal lending represented only 5% of total bank lending.

The sector is lightly regulated and opaque, raising concerns about massive loan defaults amid a softening economy, with ancillary effects on the country's banks. Banks often work with private lenders by selling loans to them or marketing investments on their behalf for a fee. "Regular banking and shadow banking are not isolated from each other. Many activities in the two systems feed into each other, and could influence each other if things start to deteriorate," wrote Xiao Gang, chairman of Bank of China Ltd., in an editorial in the China Daily newspaper.

Although China Credit has the legal responsibility to repay investors, according to Chinese law, "for reputation's sake and potential social stability reasons, a portion of these loans can be banks' contingent liabilities," said David Cui, China strategist with Bank of America Corp.'s Merrill Lynch unit. 

5 Big business corrupting economics (Aditya Chakrabortty in The Guardian) In their new book, Economists and the Powerful, Norbert Häring and Niall Douglas trace how the most powerful of all the social sciences became a doctrine for helping the rich – with the aid of huge sums from business. The history unearthed by Häring and Douglas is very disturbing – because they argue that vested interests have slanted some of economics' most fundamental ideas.

Take the Rand corporation, an American cold-war institution that the book describes as closely linked to the Ford Foundation, which in turn was closely linked to the CIA. "It is hard to overestimate Rand's impact on the modern economic mainstream, let alone modern society," write the authors. Yet the economics it promoted assumed a society that was highly individualistic and rational. In other words, nothing like society as most of us know it, with its organisations and institutions and cultures. But the Rand researchers got round that problem by producing heavily theoretical and maths-based work, and ignoring empirical reality. From there it was a short step to the neoliberal politics everyone knows today: the kind that argues there is no such thing as society.

By focusing on the economics of economics, the authors describe an evolution of the discipline that barely anyone talks about. It is a kind of corruptonomics: "An effort that was generously funded by businessmen and the military in the name of cementing the power and legitimacy of their selves and their beliefs." Häring started off as a "true believer" in economics. It took him years of delving into the archives to arrive, reluctantly at first, at the conclusion that the subject he had spent years studying and practising was rotten. And while the influence of money on the discipline is largely a US phenomenon, the lopsided subject it produced is now taught at all the leading universities and practised at the major institutions.

The IMF and the World Bank employ economists from all over the world, but it is striking how many of them come from so few universities. Mainstream economics now preaches a dogma that is particularly agreeable to the elite and has chased most dissenters out of its faculties. Meanwhile the other social sciences lack the confidence or the resources to take on economics.

6 First UN resolution on female mutilation (Straits Times) The UN General Assembly has passed its first resolution condemning female genital mutilation, which opponents say more than 140 million women worldwide have had to endure. Though outlawed in most nations, the measure represents the first time the traditional practice in African and Middle East nations has been denounced at such a high level in the United Nations.

More than 110 countries, including more than 50 African nations, co-sponsored the resolution in the General Assembly's rights committee, which called on states to "complement punitive measures with awareness-raising and educational activities" to eliminate female genital mutilation. About 140 million women worldwide are believed to have been subjected to the practice in which a young girl's clitoris and labia are removed, in the belief that this will reduce libido and keep a woman chaste. About three million women and girls each year are said to be forced to undergo the procedure.

Sunday, November 25, 2012

Worldwide web of sham directors; Young, jobless and Indian; China lands first jet on aircraft carrier; Surprise on the Nile; Hatching ideas by the dozens at MIT

1 Worldwide web of sham directors (The Guardian) The existence of an extraordinary global network of sham company directors, most of them British, can be revealed. The UK government claims such abuses were stamped out long ago, but a worldwide joint investigation by the Guardian, the BBC's Panorama and the Washington-based International Consortium of Investigative Journalists (ICIJ) has uncovered a booming offshore industry that leaves the way open for both tax avoidance and the concealment of assets.

More than 21,500 companies have been identified using this group of 28 "nominee directors". The nominees play a key role in keeping secret hundreds of thousands of commercial transactions. They do so by selling their names for use on official company documents, using addresses in obscure locations all over the world. This is not illegal under British law, and sometimes nominee directors have a legitimate role. But the evidence suggests this group of directors only pretend to control the companies they put their names to.

In 1999, the government claimed Britain's sham director industry had been "effectively outlawed" after a judge, Mr Justice Blackburne, said the court would not tolerate "the situation where someone takes on the directorship of so many companies and then totally abrogates responsibility". But our findings show this has failed to be policed. These nominee fronts conceal a wide variety of real owners, including those that are perfectly legal, from Russian oligarchs to discreet speculators in the British property market. Their only common factor is the wish for secrecy.

2 Young, jobless and Indian (Kunal Kumar Kundu in The Wall Street Journal) The global crisis, caused largely by the developed world’s financial excesses, and the ensuing balance sheet repairing have battered the world economy in a way not seen since the Great Depression. One of the hardest hit segments of the world population is its youth, who are finding it increasingly difficult to get jobs. The developed world has been most affected. According to recent data from Maudlin Economics, youth unemployment in the US is more than 17%. Youth is defined as those aged 15 to 24. The situation is worse in Europe, where youth unemployment in Greece is approaching 60%. Spain follows a close second with 55%, while Portugal and Italy are at around 35% and France is a little over 25%.

This is not only a developed market problem. The pain reverberates even in the generally faster growing emerging markets. Take India, one of the youngest countries in the world, where youth accounted for 20% of the total population in 2011, according to the Registrar General of India. More importantly, the dependency ratio – the number of children and elderly people per working-age person — declined 21% over the last three decades. In China, the ratio declined 31%, but in the US and Europe it dropped 1% and 7%, respectively, and in Japan it increased 8%, according to United Nations figures. At this rate, India will have the lowest dependency ratio out of these countries and regions by 2030. By that year, India’s working age population is expected to expand to 131% of the 2010 workforce.

However, youth unemployment remains high in India, and it hasn’t been helped by the global crisis. The latest World Development Report by the World Bank says India’s youth unemployment — as a percentage of the youth work force — was 9.9% for males and 11.3% for females in 2010. In 1985, the figures were 8.3% and 8%, respectively. Youth unemployment in India, like most countries, has consistently been above the national average. But of late, the data indicate rising youth unemployment, now virtually 50% more than the national average, or total unemployment rate.

Rising youth unemployment in a country that is expected to reap the demographic dividend is a concern. The latest NSSO survey shows there has been a drop in the labor force participation rates – as in, those who are willing to work – among the youth. Many young people are delaying their entry into the workforce, partly because they are extending their years of education. This at least is positive as it indicates a higher degree of skill formation in the young labor force.

3 China lands first jet on aircraft carrier (Dawn) China has successfully landed a fighter jet on its first aircraft carrier, which entered service two months ago, the country’s official news agency confirmed. The Liaoning aircraft carrier underscores China’s ambitions to be a leading Asian naval power, but it is not expected to carry a full complement of planes or be ready for combat for some time. Xinhua News Agency said the landing exercise marked the debut of the J-15 fighter jet, a carrier-based fighter-bomber developed by China from Russia’s Sukhoi Su-33.

Xinhua says the J-15 is able to carry anti-ship, air-to-air and air-to-ground missiles and precision-guided bombs. Since China’s Liaoning ship formally entered into service on Sept. 25, its crew members have completed more than 100 training and test programs. China bought the former Soviet navy’s unfinished carrier from Ukraine in 1998 and spent years refurbishing it.

4 Surprise on the Nile (Eric S Margolis in Khaleej Times) A year ago, I was mixing with demonstrators in Cairo’s Tahrir Square calling for an end to Hosni Mubarak’s dictatorship and democracy for Egypt’s 84 million people. What a difference a year makes. Tahrir Square is now packed with Egyptians protesting against the new revolutionary government led by the elected president, Mohamed Mursi.  Egypt is in political turmoil.

Mursi issued a decree granting him extensive — critics charge dictatorial — powers that exempts all of Mursi’s decisions and those of the elected constituent assembly from challenge by Egypt’s courts and other high government institutions. The decree is valid until a new parliament is elected. All this is very curious.  So far, Mursi has moved with extreme prudence to implement free elections, reassure Christians and secular liberals, and deftly break the iron grip of Egypt’s bloated armed forces. But, until this week, Mursi and his allies in the Muslim Brotherhood’s Freedom and Justice Party were unable to oust an entrenched cadre of Mubarak-appointed officials and henchmen in the judiciary, security police, academia, media and the diplomatic corps. They constitute what is known as Egypt’s ‘deep government’, the real power in the nation that reported directly to Mubarak’s entourage.  

Mursi’s biggest problem: Egypt can’t feed itself nor generate funds to import food. So Cairo is forced to rely on the US and, now, Saudi Arabia and the United Arab Emirates, for a financial lifeline. Mursi’s coup has scared a lot of Egyptians and done nothing to burnish the reputation of political Islamists.Maybe Mohamed Mursi will indeed renounce his newly assumed powers once a democratic parliament opens and a new constitution enacted. If he does, he will be hailed as a second Pericles or George Washington. Alas, as Lord Acton so famously and wisely warned, “all power corrupts; ultimate power corrupts absolutely”.

5 Hatching ideas by the dozens at MIT (Hannah Seligson in The New York Times) How do you take particles in a test tube, or components in a tiny chip, and turn them into a $100 million company? Dr. Robert Langer, 64, knows how. Since the 1980s, his Langer Lab at the Massachusetts Institute of Technology has spun out companies whose products treat cancer, diabetes, heart disease and schizophrenia, among other diseases, and even thicken hair. 

A chemical engineer by training, Dr. Langer has helped start 25 companies and has 811 patents, issued or pending, to his name. That’s not too far behind Thomas Edison, who had 1,093. More than 250 companies have licensed or sublicensed Langer Lab patents. Along the way, Dr. Langer and his lab, including about 60 postdoctoral and graduate students at a time, have found a way to navigate some slippery territory: the intersection of academic research and the commercial market. 

Over the last 30 years, many universities — including MIT — have set up licensing offices that oversee the transfer of scientific discoveries to companies. These offices have become a major pathway for universities seeking to put their research to practical use, not to mention add to their revenue streams. In the sciences in particular, technology transfer has become a key way to bring drugs and other treatments to market. “The model of biomedical innovation relies on research coming out of universities, often funded by public money,” says Josephine Johnston, director of research at the Hastings Center, a bioethics research organization based in Garrison, NY.

Thursday, November 22, 2012

Income inequality killing capitalism; Eurozone output shrinks again; Fear of Like in India

1 Income inequality killing capitalism (Robert Skidelsky in The Guardian) It is generally agreed that the crisis of 2008-2009 was caused by excessive bank lending, and that the failure to recover adequately from it stems from banks' refusal to lend, owing to their "broken" balance sheets. The problem now appears to be one of re-starting bank lending. Impaired banks that do not want to lend must somehow be "made whole." This has been the purpose of the vast bank bailouts in the US and Europe, followed by several rounds of "quantitative easing," by which central banks print money and pump it into the banking system through a variety of unorthodox channels.

But one can take another view, which is that demand for credit, rather than supply, is the crucial economic driver. After all, banks are bound to lend on adequate collateral; and, in the run-up to the crisis, rising house prices provided it. The supply of credit, in other words, resulted from the demand for credit. This puts the question of the origins of the crisis in a somewhat different light. It was not so much predatory lenders as it was imprudent, or deluded, borrowers, who bear the blame. So the question arises: Why did people want to borrow so much?

Let us agree that people are greedy, and that they always want more than they can afford. Why, then, did this "greed" manifest itself so manically? To answer that, we must look at what was happening to the distribution of income. The world was getting steadily richer, but the income distribution within countries was becoming steadily more unequal. Median incomes have been stagnant or even falling for the last 30 years, even as per capita GDP has grown. This means that the rich have been creaming off a giant share of productivity growth.

If governments, with their already high level of indebtedness, believe that they cannot borrow any more from the public, they should borrow from their central banks and spend the extra money themselves on public works and infrastructure projects. But, beyond this, we cannot carry on with a system that allows so much of the national income and wealth to pile up in so few hands. Concerted redistribution of wealth and income has frequently been essential to the long-term survival of capitalism. We are about to learn that lesson again.

2 Eurozone output shrinks again (BBC) Business activity in the eurozone continued to contract in November, a survey suggests. The Markit eurozone Purchasing Managers' Output Index was little changed from October, up to 45.8 from 45.7. A reading below 50 indicates contraction. The survey also warned of a 0.5% drop in GDP in the fourth quarter.

Official figures released earlier this month showed that the eurozone economy contracted by 0.1% in the third quarter, between July and September. "The PMI suggests that the downturn is set to gather pace significantly in the fourth quarter. The final three months of the year could see GDP fall by as much as 0.5%," Chris Williamson, chief economist at Markit said. Firms also continued to cut employment at the second-fastest rate since January 2010.

3 Fear of Like in India (The Wall Street Journal) The Indian state of Maharashtra ground to a halt last weekend following the death of extremist Hindu politician Bal Thackeray. But medical student Shaheen Dhada thought the fuss unwarranted. Being a typical 21-year-old, she wrote as much on Facebook: "Today, Mumbai shuts down due to fear, not due to respect." Her friend Renu Srinavasan "liked" the comment.

A day later, both women were arrested by local police and charged with hate speech at the behest of Thackeray's Shiv Sena party—a response that should be recognized as depressingly typical of a country that's losing its regard for freedom of expression. India has always placed more qualifications on the right to free speech than most other democracies. The government uses this leeway, it says, to prevent inflammatory statements inciting communal violence. In August, for instance, it censored websites and social networking streams to quell protests over attacks in Assam state.

But in the online sphere, the blurry line between preserving the peace and political intimidation disappeared altogether upon passage of the 2008 Information Technology Act. It criminalized "grossly offensive" communications and gave officials new tools to stifle speech and punish dissenters.

Last year, Kapil Sibal, India's telecommunications minister, called in Facebook representatives and demanded that they take down a page he found insulting to Congress Party chief Sonia Gandhi. April saw the jailing of West Bengal professor Ambikesh Mahapatra, who had emailed a cartoon mocking state leader Mamata Banerjee. Five months later, Mumbai police charged anticorruption cartoonist Aseem Trivedi with sedition and violation of the IT law for his work. The charges against both men were dropped. But the threat to speech remains.