The Bulgarian Prime Minster, Boyko Borissov, resigned today, amid charges of corruption, rising prices, and rising unemployment. The turmoil seems to be associated with the austerity programs imposed by the IMF and the European Union. Meanwhile, strikes spread in Greece for the same reasons.
An estimated 100 million workers in India went on strike, the beginning of a two day strike against rising prices. The Indian economy is slowing at a steady pace along with many other economies in the world. But prices for basic commodities continue to rise in spite of the slowdown.
For the first time in Saudi Arabian history, 30 women have been named to the 150-person Shura governing council. King Abdullah appointed the women to the council as part of a very gradual move to grant women more rights in the Kingdom. Most likely, women will have the right to vote in the next election. The move, while symbolically important, does not really change the nature of authority in Saudi Arabia which remains fully under the control of the King.
An important election will be held this weekend in Italy. The center-left and center-right parties seem to be getting the plurality of support, which leaves the center, led by the current Prime minister, Mario Monti, in the role of kingmaker. It is a tight contest, however, and one of the outcomes, the return of Silvio Berlusconi on the center-right, would have highly problematic consequences for the willingness of Italy to continue the austerity programs which have somewhat calmed the eurozone as of late. There could be rough seas ahead for Europe.
One of the central tenets of neoclassical economics is that free trade benefits everyone because of the greater efficiency brought about by comparative advantage. A new study, however, suggests that this proposition may not always be true, and that, in particular, it is definitely not true in the case of US-China trade. We will have to see how well this study stands up to close scrutiny.
One of the mysteries of the recovery from the Great Recession is the slowness of job recovery: why aren’t jobs being created at a rate consistent with previous recoveries? One partial answer is that the jobs are being taken by robots, and not human beings. That means that things will still be produced, but that people may not have the incomes to buy them. Which means that the recovery will be interminable. Not a happy conclusion.
Ecuador’s President Rafael Correa has won his third term. Correa is a populist, lefty leader who has made a point of trying to appeal to the indigenous populations of Ecuador. His admirers point to dramatic drops in the poverty rate during his tenure, while his critics point to a stifling of basic freedoms. Correa has close ties to Chavez in Venezuela and Castro in Cuba, and has tried to organize opposition to US influence in Latin America.
Pakistan has handed control of its strategic port at Gwadar to China, raising concerns in India about Chinese naval encirclement. The port has been largely built by the Chinese, but getting control is a big step forward for Chinese interests. The Chinese have been following a “strong of pearls” policy, building ports all along the Indian Ocean in order to safeguard the sea routes for Chinese trade. but India cannot help but view the policy as a strategic concern.
The global economic slowdown has finally had a salutary effect: sales of arms have dropped by 5 percent since last year. The Stockholm International Peace Research Institute (SIPRI) does an annual study of arms sales, and the end of the war in Iraq and the drawdown in Afghanistan were largely responsible for the decline. But it does also appear as if there is less interest in weapons trades because of the economic situation.
Free speech is a wonderful thing. For example, one can post a You Tube video that excoriates one of the largest corporations in the world. You can judge for yourself whether the charges are accurate. ExxonMobil received a cease-and-desist order to prevent this advertisement from being broadcast during the State of the Union Address.
One of the most persecuted groups in the world are the Hazara Shia in Pakistan. Over the last few months the program of extermination has accelerated and little has been done to protect them. It would be very difficult to intervene in Pakistan to carry out some form of humanitarian intervention, so there is little outsiders can do other than to bring attention to this tragedy.
Attitudes toward immigrants in the world have turned decidedly negative over the last ten years. There was a large protest in Singapore against new government policies. What makes the protest so remarkable is that Singapore very rarely has political protests of any kind.
There is an official summary of the remarks made by Xi Jinping to a recent meeting of Communist Party leaders which reveals a great deal of anxiety within the ruling circles of China. The remarks have not been published by the Chinese press, but it seems as if the summary is being passed around as a warning about the pace of change in China. Ominously, Mr. Xi raised the analogy of the Soviet Union as a lesson to be heeded when change outpaces ideology.
To add to China’s problems, The Guardian is reporting that North Korea has told China that it intends to test another nuclear bomb and another long-range missile later this year. So China has to deal with the backlash from other countries from these provocations, the loss of face because it lacks leverage over its ally, and the likely military buildup of its neighbors in response to the new threats posed by North Korea’s capabilities. This example is a classic case of the security dilemma gone wild.
Matt Taibbi is a reporter for Rolling Stone and one of the most dogged investigator of the behavior of big banks in the global economy. In his most recent installment he looks at how the British bank, HSBC, avoided prosecution for many years even though it was issued “cease and desist” by the US government over its role in money laundering to terrorist groups and drug cartels. It is a sordid story, and buttresses the diea that the biggest banks are clearly immune from the regulation that smaller entities and individuals expect and take for granted.
It is difficult to anticipate the consequences of climate change, and even more difficult to calculate the costs of trying to adapt to possible changes. The General Accountability Office has tried to estimate the costs to the US federal government of necessary adaptations to foreseeable changes. Needless to say, the costs could be considerable. It would seem far cheaper to try to avoid the changes than to adapt to them.
There is quite a controversy in Europe over the use of horsemeat in foods that are labeled “beef.” Ordinarily, such a story would not be something I would post, but it reflects a growing concern in the global economy over “hidden” inflation. We typically worry about price increases as the best index of inflation. But lowering the quality of goods and services is another way that firms can maintain profitability while charging the same price for those goods and services. Given that price increases are difficult to impose in a very slow economy, we can expect that other firms will also try to lower quality secretly.
The Japanese Defense Minister has suggested that the country should develop a pre-emptive strike capability. Such a capability would certainly arouse strong suspicions in East Asia over Japanese intentions. Admittedly, the Japanese are facing new military capabilities from both China and North Korea, and some changes to Japanese military posture were inevitable. A different rhetoric, however, might have been called for.
The economist, Edmund Saez, has been a pioneer in the field of refining statistics on income inequality in the United States. He has just updated his statistics with Internal Revenue Statistics from 2012 and his conclusions are that income inequality is getting worse. The vast majority of income growth since 2009 has been captured by the top 1% of the income earners. The statistics are rather stunning. The issue of underconsumption keeps getting more urgent in the global economy.
Many countries have detained prisoners without identifying who they were or providing access to legal counsel. But the recent memos institutionalizing this behavior in the US came as a shock to many, largely because of the long history of legal protections in the US. Now it appears that another democratic country, Israel, is engaged in similar activities. The erosion of human rights in liberal democratic states is a very worrisome trend.
This post has absolutely nothing to do with world politics, but it is an incredible story of a French driver whose car sped up beyond his control (to 125 mph) and how he survived driving it until the car ran out of gas. I don’t think I will ever buy a Renault.
North Korea has apparently conducted its third nuclear test. It claims that it has developed a smaller version of a nuclear bomb, one that can be placed on a missile warhead, a capability that raises great anxiety among most nations in the world. There are already severe sanctions on North Korea, so it’s not clear what additional measures could be applied to persuade the government to slow down its weapons capabilities. The Chinese, the lone supporter of the regime, has announced its strong opposition to the test, but it remains to be seen whether China will exert any greater pressure.
The G-20, the group of 20 countries that comprise the lion’s share of the world’s wealth, is meeting in Moscow next week, and the major concern of the group is the looming prospect of a currency war. It singled out Japan as a country that has initiated this worrying process. The Japanese has in fact devalued their currency substantially and its stock market has responded very positively to that move. But it is not a remedy that can be applied globally.
China has increased its naval presence in the Indian Ocean by building a port in the Pakistani city of Gwadar. Indeed, China is building a series of ports that some have dubbed the “string of pearls” in an apparent reference to their strategic effect of encircling India. The Indians are very concerned about this capability, but Chinese naval power is not yet strong enough to pose a serious threat to Indian interests in the Indian Ocean.
When many survey the global economy, some point to the success of the Scandinavian countries as a model to emulate. These countries, however, have evolved over time, and do not conform to some of the stereotypes typically applied to them. The Economist published an essay with a fairly accurate assessment of how their current economic and social policies are being implemented.
The global balance of power is shifting dramatically–perhaps the most significant shift since the end of World War I. How likely is such a shift in historical terms? More precisely, how likely was the shift that we are currently undergoing? Such questions are impossible to answer, but that does not mean that the questions are not worth asking.
There is an emerging “currency war” in the global economy. We have feared this development since the slowdown in various economies in 2008-09. Different nations have tried various strategies to stimulate their economies, and most of their efforts have failed. One sure-fire way to stimulate exports is to devalue one’s currency: as the value of the currency declines, a state’s exports become cheaper and global demand for those exports will pick up, stimulating the economy. The problem with this strategy is that other states will then try the same thing, and everyone ends up with a weaker currency and the demand for exports will then settle down at the stagnant level. Japan is furiously trying to devalue its currency (the Yen has declined by 20% in the last few weeks) and today Venezuela announced that it will devalue its currency. The last time we saw a global currency war was during the Great Depression, and the consequences of the war was a significantly weakened global economy.
The Irish response to the financial crisis was to accept harsh austerity programs with very little dissent. Other countries, like Italy, Spain, and Greece, have witnessed large protests. It now appears, however, that Irish patience is wearing thin. Large protests have occurred and the Irish people are demanding a return to economic stimulus. Whether the government has the will to follow this path remains to be seen.
The drone controversy continues, and the debate outside of the US is quite one-sided (I imagine that will change as other nations develop their own drone technology). The British press has been particularly harsh on the Obama Administration’s policy. The Guardian, a solid lefty newspaper, published an op-ed piece on the policy from the perspective of the laws of war.
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