The media peg on India’s “demographic dividend” is several years old. But it seemed too important to pass up, even at this late
date, if only because it is seldom raised explicitly in discussions of China’s (& India’s) future. In the short-to-medium term a low dependency
ratio (that of individuals in the economy relying on others for their daily living needs - the young & the aged - to the number of those capable
of supporting them, i.e. those in the working age range) is generally speaking an economic plus & a high one an economic drag. While globally the
overall dependency ratio is expected to be stable during the first half of this century, at 0.6, there will a significant shift in its make-up :
while today’s global “old age dependency” ratio is 0.11, it will more than double to .25, while the global “youth dependency ratio” will
decline from 0.50 to 0.35. Today there huge variations in the youth dependency ratio, from a low of .21 in Eastern- & .27 in Western Europe,
through .29 in North America, .37 in the Asia-Pacific region & .44 in Latin America to a high of .69 in the Middle East & Africa (in part due to
fertility rates as high as 6.0 in some Arab countries). And the following changes are expected in old age dependency ratios in the first half of
this century : India .08 to .22, China .10 to .40, US .20 to .33, Western Europe .24 to .48 and Japan .25 to .71.
It is a sobering thought in this age of “parachute parents” worrying about the safety of their children that, according to Phil Resnick, Head
of Forensic Psychiatry at Case Western Reserve University, an expert on filicide, the murder of children by their parents, that in Canada 90% of
all children murdered between 1977 & 2006 were killed by family members.
The British Cabinet has been told that the British passports of Israeli residents, fakes of which were used by some of the assassination team
that killed a Hamas leader in Dubai last month, had been copied by Israeli Immigration officials at Tel Aviv airport when they had briefly been
taken away from them during routine checks upon their return from trips abroad. The Dubai police since also announced that at least two members
of the team may have travelled on diplomatic passports, a strict non-no. If this was in fact a Mossad operation, as would seem more & more
likely, it must have seriously underestimated the efficiency of the Dubai police.
The steel underground barrier Egypt is building to stop traffic through the thousand or so tunnels from its territory into Gaza, when finished a
year or so from now, is expected to interdict 60% of the traffic now reaching Gaza through them, the volume of which can be gauged from the fact
that one cement importer claims to be bringing in up to 200 tons of cement daily through just three of them.
THE WORLD IN 2010
(Economist, Robin Bew)
∙ Much of the lift
in 2009 came from massive public spending, slashed taxes & interest
rates, and re-stocking. But warehouses are filling up again & production
could grind to a halt unless consumers regain their nerve. Two things
will happen in 2010 : in the developed countries the expectation of
a V-shaped recovery will finally
be laid to rest & in the developing countries policy makers will
be rejigging their economies for long-term, domestic demand-driven growth;
for continued high unemployment in the developed world
will stand in the way of further trade liberalization & ballooning
government debt there will end the pumping of more cash into the economy,
much as governments might want to.
Big
challenges for both sets of governments.
NEW DANGERS FOR
THE WORLD ECONOMY (Economist)
∙ Last year governments
solved the problem & saved the world economy. This year they are
the problem & there won’t be anyone to bail them out. Three
factors will determine if current fears are justified. Is the
recovery self-sustaining or stimulus-induced? The scale of the souvereign
debt problem, i.e. is Greece a ‘one-of’
or the canary in the coal mine? How deftly will financial policy
makers orchestrate a withdrawal of the policy stimulus?
∙ The picture on
growth is split. In the emerging economies growth is based on domestic
demand while there are few signs of robust private demand growth in
the rich world (America’s recent buoyant GDP growth numbers
were misleading since half of it was due to one-time re-stocking).
So, while the emerging economies can & must start winding down their
stimulus before inflation gets out of hand, the G-7 Finance Ministers
on February 7th rightly concluded it was still too early
for them to do so. But it is unfortunate that none had credible, medium-term
fiscal plans; for the sooner they make clear how they plan to address
their fiscal problems, the stronger their recovery will be.
Where’s
someone to motivate people to shed
“blood, sweat and tears”?
THE JIHAD AGAINST
JIHADIS (NW, Fareed Zakaria)
∙ 9/11 raised the
curtain on a world of radical Islam that had long festered in Muslim
world as polls revealed a deep anger against the West & support
for bin-Laden across it. But since then the moderates have been fighting
back. Once Saudi Arabia doled out vast dollops of money to Islamic causes
across the world to promote its fanatical Wahhabi doctrine; but, after
appeasing homegrown Islamists for three decades, terrorist attacks against
government buildings & oil industry compounds in 2003 opened its
eyes, and in 2005 King Abdullah ascended to the throne & launched
a campaign to discredit jihadism and pry control over education from
the clerics. The turning point was the 2002 UNDP-sponsored study of
the Arab world by Arab scholars that painted a picture of self-imposed
political-, social- & intellectual stagnation from the Maghreb to
the Gulf. Since then Indonesia, the world’s most populous Muslim country,
has succeeding in marginalizing the once waxing Jemaah Islamiah movement,
the local al-Qaeda affiliate, in Iraq even pious people were repulsed
by al-Qaeda’s brutality in areas of the country it controlled, and
in 2007 a one-time bin-Laden
mentor, Salman al-Odah, criticized him for “fostering a culture of
suicide bombings that causes bloodshed and suffering ... to entire Muslim
communities and families”, Saudi Arabia’s grand mufti issued a fatwa
prohibiting Saudis from engaging in jihads abroad & Abdul -Aziz
el Sherif, one of al-Qaeda’s top theorists, renounced its extremism,
calling on militants to renounce terrorism, and Cairo’s Al-Azhar University,
the oldest, most prestigious school of Islamic learning, now routinely
condemns jihadism. And most telling
was that their families informed the authorities of their worries about
the five Americans from Virginia arrested in Pakistan last year &
about the ‘underwear bomber’.
∙ Polls suggest
fewer people in m any Muslim countries now believe suicide bombings
against civilians are justified to defend Islam : in Jordan their number
has gone from 57% in 2005 to 12% today, in Indonesia those who say terrorist
attacks are “rarely/never justified” has gone from 70% in 2002 to
85% today (& from 43% to 90% in Pakistan where government is waking
up to the fact the extremism it fostered now threatens its survival).
On the other hand, in Afghanistan jihadis have associated themselves
with a movement among the majority Pashtun who feel dispossessed &
in Yemen the government cannot cope & education has been
‘Islamacized’. But even if the enemy is no longer winning over
Arab Street, the need remains to hunt down terrorists, even as the swamp
is being drained.
Too bad Obama allowed
himself to be diverted from his original tough line on the Israeli-Palestinian
peace process :for progress on thaqt score
would have deprived the jihadis of its
‘marquee issue’.
‘OVERREGULATION’
MAY SLASH BANK RETURNS (FP, Jonathan Ratner)
∙ According to JPMorgan
the proposed changes to bank capital, liquidity, taxes, size & scope
would reduce the average profitability of global banks by 54%, cost
them US$110BN in annual earnings, require them to raise $221BN in new
capital & reduce their RoE from 13.3% to 5.4% (unless they were
to boost charges to their customers by one-third).
As a big potential
loser, JPM is not a disinterested bystander. And should the banks be
any more ‘entitled’ to their status quo than anyone else?
WATCHING CHINA
RUN (NYT, Bob Hebert)
∙ China is racing
faster than anyone else in the world to develop clean energy despite
being a “poor country” with nothing like the US research-, industrial-
& economic resources. Letting this happen is criminally stupid.
The future of our country is at stake. The low carbon era is coming
: we can be dragged into it, or take up the challenge & remain a
world leader.
Too many of the research
resources he refers to are used to develop profitable cosmetic drugs
like Viagra or better military hardware rather
than socially meritorious ones. China each year produces more technical
graduates than there are technical students in all American universities
(most of them taught by non US-born, albeit often US-educated, people).
In financial markets you are only as good as your last deal & when
you start resting on your laurels, you’re toast. Ditto for nations.
‘MASSIVE GLUT’
BLAMED FOR HOLDING BACK OIL PRICES (G&M, David Parkinson)
∙ While developing
country demand returned to growth in the Fourth Quarter, in the OECD
countries - which still dominate the global oil market but perhaps
not much longer - it remained sluggish. So global demand in
2009 was up just 0.3%, still 2% below pre-recession levels. And higher
output in Canada, the US, Brazil & Russia, and cheating OPEC countries,
led to supply by the late 2009 exceeding demand by 1.3MM bbld.
China’s oil imports
were up almost 50% YoY in December & 33% YoY in January; even if
its base number is still relatively low, at this rate that won’t be
the case much longer.
IS IT TIME TO DUMP
MY GOLD? (CNNMoney.com, Walter Updegrave)
∙ Jim Rogers opined
it will go to US$2,000 (by 2020) while Nouriel Roubini proclaimed
this to be “utter nonsense” & argues it will settle in around
the US$1,100 level.
Roubini is the NYU
prof. riding high since he forecast the financial crisis & Rogers
was George Soros’ partner four decades ago in founding the Quantum
Fund, the template for every hedge funds since.
‘Retired’ for thirty years, a couple of years ago Rogers liquidated
his US assets & moved lock, stock & barrel to Singapore where
his children are being educated in Mandarin. His is a hands-on, globally-focused
track record whereas Roubini’s is more of an academic, US-centric
one. And the fundamentals favour Rogers : a weaker US
dollar will make for a higher US$ gold price, a stronger yuan will fuel
the traditional Chinese appetite for gold & conversion of the central
bank complex from a persistent net seller to a net buyer will allow
the fact that newly-mined production & recycling has long fallen
short of “disappearance” to finally start entering the demand/supply
equation.
RECESSION
’TIPPING POINT’ IN GLOBAL ECONOMIC POWER (FP, John Morissy)
∙ HSBC says the
emerging markets have stolen the mantle of leadership from the West,
with the economic crisis laying bare the strength of the industrializing-,
& the weakness of the developed-, economies. CEO Michael Geoghegan,
who has relocated from London to Hong Kong in a reversal of a 1993 move,
says “This underlines what we, as the world’s largest emerging markets’
bank, have known for some time ... the centre of economic gravity is
shifting” & Chief Economist Stephen King “No longer is it possible
to argue convincingly that the U.S. or European nations determine the
agenda for the world economy as a whole.”
PricewaterhouseCoopers
expects that by 2050 the economies of China, India, Brazil, Russia,
Mexico, Indonesia & Turkey will be 50% larger than those of the
current G-7 countries.
DEFICITS MAY ALTER
US POLITICS, GLOBAL POWER (NYT, David E. Sanger)
∙ The size of the
deficit is getting all the attention. But the focus should really be
on the fact that even by the President’s optimistic projections it
won’t return to a “sustainable level” (defined in the Clinton
years as 3% of GDP) until 2020, only then to start rising again.
Investors funding
the deficit at these low interest rates must assume the risk of not
being paid back in full & on time is low. But with what - more bonds,
like “an investment scheme that pays returns to investors from their
own money or from money paid in by other investors” (aka a Ponzi scheme)?
It’s basic economics that the price of a good of which there is an
infinite supply must inevitably gravitate to zero, and if investors
ever grasp this reality, US politicians will be in the same boat as
Greece’s today, forced to make politically nasty & highly unpopular
decisions.
THE PERILS OF PROSPERITY
(NW, Robert J. Samuelson)
∙ The consensus
is that, if we introduce tough regulation, suppress avarice & improve
Fed policies, we can prevent another financial crisis. This is outright
wrong. We experienced a classic bust. For prolonged prosperity dulls
people’s sense of risk & from 1983 to 2007 we had greatest prosperity
ever : inflation declined from 13% in 1979 to 1.6% by 2001, between
1980 & 2000 household securities’ holdings grew 11x to US$11TR,
and the median home price rose from US$62,200 in 1980 through US$143,600
in 2000 to US$221,900 in 2006.
Policy makers tend
to fight the last war (this is why after WW I the French built the Maginot
line). And as surely as night follows day, the
‘wealth effect’ characteristic of a boom era (when people feel no
need to save since they’re getting richer as they sleep) is followed
by a ‘negative wealth effect’ during the subsequent crash as people
start saving with a vengeance (in this case because US households
saw 20% of their ‘wealth’ melt away in the 24 months ended June
30th, 2009).
HOW TO REFORM THE
FINANCIAL SYSTEM (NYT, Paul Volcker)
∙ The phrase “too
big to fail” implies that some financial institutions (four or five
in the US & 25 or 30 worldwide) can count on public support at critical
times. This gives them a competitive edge in risk-taking & makes
for a more fragile financial system. So we must find better fail-safe
arrangements; for basic commercial banking is critical to a well-functioning
financial system by providing a key source of credit for business, people
& government.
∙ The starting premise
for the President’s proposal to limit proprietary trading by banks
is that the risks inherent in commercial banking shouldn’t be compounded
by other risks, especially when they create conflicts of interests between
banks’ proprietary activities & the interests of their clients.
Furthermore, that there is no need for commercial banks to engage in
such activities since they can be done equally well by other, specialist
entities, like hedge funds, that can, & regularly do, fail without
significant risk to the system.
∙ Some vested interests
seek a return to “business as usual”(with the continued comfort
of an official safety net), arguing they and intelligent regulators
& supervisors can maintain the needed surveillance, foresee the
dangers & manage the risks. But I’ve been a regulator, a central
banker, and a commercial bank official & director for almost 60
years & can tell you that memories always
dim, individuals always change and institutional & political
pressures always exist to “lay off” tough regulation, especially
when times are good.
Volcker was an early
Obama supporter & now is Chairman of his Recovery Advisory Board.
As Fed Chairman during the early Reagan years he
“wrestled inflation to the ground”, setting the stage for over two
decades of prosperity (aided by “financial disintermediation” that
broadened & deepened the financial system by creating ways of funding
economic activity other than bank credit, but also, in the process,
increased the leverage in the system).
RAVENS OWNER CASTS
GLOOM OVER NFL FINANCIAL FUTURE (AP)
∙ During a February
3rd news conference Baltimore Ravens’ owner Steve Biscotti
said several NFL owners face financial shortfalls that could “create
long-term problems for the league”. Three years ago the owners &
the players’ union signed a collective bargaining agreement that he
now calls bad the owners; for “I’ve got partners ... whose teams
are making less money than their linebackers ... We always knew this
was not a big cash-flow business ... but when you’ve got teams ...
staying at the minimum of what they have to spend on the salary cap
in order not to go upside down financially, we are ... having a structural
problem.”
The union claims the
owners seek an 18% across-the-board pay cut, & rates the chance
of a lockout in 2011 as “14 on a scale of 1 to
10". But professional sports team owners are caught between a Scylla
of rising salary- & (often new) facility operating costs & a
Charybdis of changing spending priorities of corporate box holders &
the hoi polloi who put ‘bums in seats’. And the erosion of the other
sources of income of some of them now make team ownership a less attractive
ego trip.
GAS DRILLING BELOW,
WATER FEARS ABOVE (AP)
∙ The Marcellus
formation lies 6,000 feet below parts of New York, Ohio, Pennsylvania
& West Virginia. It is believed to hold up to 500TCF of unconventional
shale gas, enough to meet US needs for up to two decades (&
it is only one, albeit perhaps the largest, of ten shale gas formations
identified so far in North America, incl. four in Canada). Producing
this gas requires multiple hydraulic fracturing (aka ’fracking’)
that forces a mix of water & chemicals down horizontal drill holes
to break the bond between the gas & the host rock. But as the gas
is produced, up to 40% of the water injected comes back to the surface,
5x as salty as sea water & replete with chemicals. Once it was trucked
to whatever sewage treatment plant would take it which, after treating
it, would flush it into nearby rivers & streams. But in October
2008 the level of dissolved solids in the water in Pensylvania’s Monongahela
River, the source of drinking water for 700,000 people, was found to
be way above government standards; while this was said to pose no serious
threat to human health, the water tasted & smelled bad, left a film
on dishes washed in it & had a corrosive effect on industrial machinery.
So Pennsylvania & West Virginia now limit the plants’ intake thereof.
This is only
half the story. The more important other half is that fracking requires
up to 100x the water of conventional gas production (much of which is
lost underground from the hydrological cycle & the rest of which
creates an environmental problem on the surface). It has since drawn
the attention of the House Committee on Energy & Commerce, and New
York State has imposed a moratorium on shale gas drilling in the state
to allow the process to be further evaluated, despite industry warnings
that unwarranted regulation could slow the development of the resource.
L.A. ENVISIONS
THE WORLD’S BIGGEST SOLAR FARM IN CALIFORNIA DESERT (Reuters)
∙ In 1913 Los Angeles
built aquaducts to move water from Owens Lake 320 kms. to the city.
By 1930 it had pumped it bone dry, leaving a dessicated salt flat which
it now wants to use for a 3-5 gigawatt solar farm & is fast-tracking
a 32 hectare, 6-10MW, US$40MM pilot plant.
Three to five gigawatts
is over 10x California’s current solar power output, and enough to
power 1+MM average homes & prevent the creation of up to 5,000 kilotons
of greenhouse gases.
CANADA MUST THINK
BEYOND THE U.S. MARKET (G&M, Jeffrey Simpson)
∙ Bank of Canada
Governor Mark Carney’s speech in early February was clear, precise,
descriptive of the economy’s recent past & current status but
also prescriptive. He said the challenge for Canadian business now is
to move beyond the cocoon of the North American economy &, more
specifically, that “Canadian business will need to develop new
markets as the traditional advantage of relatively open access to U.S,
markets becomes less valuable...” The question is whether it can think
beyond the U.S. market. That will be hard for a country with so many
branch plants, so few head offices, so much self-satisfaction &
long tradition of looking South. But if we don’t , we’ll miss most
of the new economic action.
If this is going to
happen, the impetus will have to come from the smaller companies (that
create most new jobs anyway).
CANADIAN ARCTIC
IS A HUGE NATURAL GAS STOREHOUSE (CanWest, Randy Boswell)
∙ A report released
early this month by the U.S. National Research Council summarized the
research done in recent years at the Mallik methane hydrate site in
the Mackenzie Delta. While the full results remain confidential, it
says that extraction efforts “demonstrated sustained methane production
... (with) continuous gas flow (during tests at)
rates generally ranging from 2,000 to. 4,000 cubic metres per day.”
(i.e. 75,000 to 150,000 CFD).
Why did a US entity
report on events on Canadian soil? Methane hydrate is locked in ice.
Some estimates are that global reserves of the stuff, of which this
is only a part, could be as much as 10x that of the known supply of
conventional natural gas. But great care must be taken that it does
not escape into the atmosphere once released from its frozen state because,
if it did so on any significant scale, it could create environmental
havoc.
RISKY PRODUCTS
MAY BE ESCAPING CONTROLS (G&M, Gloria Galloway)
∙ Health Canada’s
New Substances Assessment and Control Bureau by law has just 75 days
to rule on whether new substances are safe & if it doesn’t, they
are automatically placed on the 23,000+ name Domestic Substances List
of chemicals legal for use even if not rigorously scrutinized.
A recent audit observed “the bureau has had problems meeting its legislated
deadlines ... (and) was unable to identify the extent to which
this has occurred.”
And once a chemical
is on the list, the Bureau cannot ever question it again.
TORONTO WANTS NO
PART OF THE G-20 (CanWest, Andrew Mayeda)
∙ The city has asked
Ottawa to relocate this summer’s G-20 meeting for fear of being “severely
impacted” & of “serious disruptions in its downtown core”.
The headline is wrong
: what the city wants is to have it relocated from the downtown Conference
Centre to the somewhat more out-of-the-way Exhibition Stadium.
ISRAELI MEMBERSHIP
IN OECD HINGES ON REMOVING BRIBERY FROM ARMS SALES (G&M, Patrick
Martin)
∙ At the very time
the OECD Secretary-General Angel Gurria (a former Mexican politician)
visited Israel to preach the gospel of stamping out corruption, four
Israelis were caught in a US sting operation, seeking to bribe a foreign
government official to buy Israeli weaponry. Last year Israel stood
32nd in Transparency International’s Corruption Perception
Index, better than any of its neighbours, but not good enough for the
OECD. But it needs its US$6BN in annual arms sales to sustain an arms
industry it otherwise couldn’t afford.
For the OECD this
is an attempt to level the playing field for its own industry that faces
competition from Chinese companies for whom bribery is a routine
marketing tool.
IS THIS ISRAEL’S
CALM BEFORE THE STORM? (G&M, Patrick Martin)
∙ Most Israelis
feel pretty safe. No suicide bombings for some time. An economy that
survived the global recession better than most. A Prime Minister who
has kept his centre-right support & is doing well among centre-
& leftist voters (although he has lost support among the right by
agreeing to a temporary freeze on construction in the West Bank). And
Obama’s failure to restart the peace talks (& his backing down
on his hardline on settlement construction) has left the Netanyahu
& the hardliners gloating, and the Israeli peace camp marginalized.
∙ But warns Israeli
journalist Aluf Benn in Haaretz “Experience in the Middle East
shows calm can turn into tension, and tension into war, in an instance.”
In 1973 the Israelis, after their victory in the 1967 War, didn’t
see the Yom Kippur War coming, after the 1979 Israeli-Egypt peace treaty
& the routing of the PLO in Lebanon in 1982 they were blind to the
advent of the 1987 intifada, and after the Oslo peace process in the
late 90's they failed to anticipate the second, more violent intifada.
And there is no shortage of potential flash points. Thus, when Syrian
officials recently warned that in a war Israeli cities would become
targets, Foreign Minister & super hawk
Avigdor Lieberman lost no time warning this would topple the Assad regime
(the Syrian warning was prompted by Defence Minister Ehud Barak telling
an audience that without peace with Syria, Israel could face a needless
war; while intended as a wake-up call for those Israelis who cannot
envisage giving back the Golan Heights & believe “the Golan
has become part of Israel”, the Syrians took as a threat).
∙ Both Jordan’s
King Abdullah & Turkey’s Prime Minister Recep Tayyip have cautioned
Israel not to get too smug, with the latter saying “Israel should
give some thought to what it would be like to lose a friend like Turkey”
(while once an ally of Israel to the point both countries held joint
military exercises & the go-between in the Israeli-Syria peace discusions,
he incurred Netanyahu’s displeasure for criticizing Israel’s assault
on Gaza last year). But for every King Abdullah or Prime Minister Erdogan
urging caution, there is a Silvio Berlusconi or a Mike Huckabee to reassure
the Israelis they are doings things just right.
In a case like this
it is usually better to heed the advice of your neighbours than that
of those in distant places whose wellbeing
won’t be affected when your neighbourhood goes up in flames.
THE DRAGON STILL
ROARS (The Economist, Pam Woodall)
∙ China’s GDP
growth has averaged almost 10% a year for 30 years & many economists
expect its economy to overtake that of the US within 20 years. But,
while the same was expected of Japan in the 80's, the gap between the
US & Japanese economies is wider now than it was then. So some analysts
believe China now is like Japan was then, with chronic overinvestment,
excess capacity & falling returns, a tidal wave of bank lending
that heralds a future surge in bad loans & dangerously bubbly stock-
& property markets. But China’s per capita GDP is still less than
one-tenth of that of Japan or America, its economy is still in the early
stages of development with ample scope for adding to productive
infrastructure & lifting productivity. And its per capita capital
stock is one-twentieth of Japan’s & with half of its labour force
still in agriculture, it still has a lot of scope for increasing productivity
by moving surplus labour into industry & services. While there is
overcapacity in a few sectors, in 2009 most new investment went into
infrastructure. And while Japan built roads to nowhere to prop up its
economy, China’s infrastructure investments will facilitate future
growth.
∙ Over the next
decade China’s GDP growth rate will slow down, perhaps to 7%, &
its future growth depend less on exports. For its share of global exports
will hit 10% in 2010, up from 4% in 2000, and Japan’s experience suggests
there may be limits to a country’s share of world markets; for its
10% share of world markets fell as the Yen strengthened (& China
in 2010 will be under growing
foreign pressure to allow the yuan to resume its climb against the US
dollar). So more of China’s growth must come from domestic consumption;
for while infrastructure investment boosted demand quickly, longer term
more consumer spending & social services are the best way towards
long-term sustainable growth.
Japan’s export experience
may not be relevant; for when its exports hit 10% of the global total
its population accounted for < 3% of the global total. Taking
their 1989 GDP in current US dollars as a base 100 , the US, Japanese,
Canadian & Chinese economies by by 2009 they had grown to 269, 176,
260 & 1,633 respectively, although on a per capita basis the outcome
was less startling : 180, 150, 153 & 488 (these numbers to varying
degrees are affected by exchange rate fluctuations). And despite all
talk that China is about to become the second largest economy in the
world, on a per capita basis it still only ranks No. 110
WHY ANTAGONIZE
CHINA? (WSJ, George Glider)
∙ While seeking
to appease unappeasable foes like Iran & Hugo Chavez, the US treats
China, its critical economic partner, like an adversary. Treasury Secretary
Geithner lectured Premier Wen Jiabao on global warming, an area in which
he has zero expertise, President Obama fussed in a meeting with Senate
Democrats about the yuan-dollar relationship at a time investors were
more concerned that China could cause the dollar to crash & Hilary
Clinton took up the cudgel for Google on Internet policy, which is not
a government responsibility.
∙ Any serious foreign
policy would recognize the current regime in China is the best we can
expect for now, that China revitalizing Asian entrepreneurship has been
the most positive development in the world in the past 30 years, that
with tens of millions of Muslim citizens China is as threatened by radical
Islam as the US, & that, with a similar dependence on Taiwanese
manufacturing, China’s sabre rattling vis a vis Taiwan is more theater
than threat (especially since the latter’s entrepreneurs have established
links with China regardless of what their governments say or do). So
it is self-destructive folly to risk this core synergy by trying to
score points on global warming, the yuan-dollar relationship & Internet
politics.
Small wonder this
was reprinted in the China Post. Glider is a Harvard grad who
once wrote speeches for Nelson Rockefeller, George Romney & Richard
Nixon and now is a Senior Fellow at the Seattle-based Discovery Institute
(that “seeks to produce a positive vision of future practicalities
by the common sense tradition of representative government, the free
market and individual liberty”) where he heads its Program of Technology
& Democracy. He authored The Israel Test, which claims the
root cause of the Israeli-Arab conflict is not race
or religion, but human resentment of success, in the belief one person’s
success comes at the price of someone else’s pain & poverty.
CHINA LEADS GLOBAL
RACE TO MAKE CLEAN ENERGY (NYT, Keith Bradsher)
∙ China has vaulted
past Denmark, Germany, Spain & the US to become the world’s largest
maker of wind turbines, is now its largest manufacturer of solar panels,
and is seeking to build more nuclear reactors & develop more efficient
coal-fired power plants. President Obama in his State of the Union speech
alluded to this when he said “I do not accept a future where the jobs
in the industries of tomorrow take root beyond our borders.”
To compete, more than
‘talk the talk’ is needed.
THE TENDENCY OF
CHINESE CONSUMERS TO OVER-SAVE IS EXAGERATED
(FP, Jonathan
Ratner)
∙ Chen Zhao of Montreal-based
BCA Research says that as its gross savings rate rose from 36% of GDP
in 1990 to 50% in 2007, household savings remained in the 20-25% range.
This still leaves
scope for a massive increase in demand in absolute terms.
INDIA’S DEMOGRAPHIC
DIVIDEND (BBCNews, Kaushir Basu)
∙ In 2004 India
had 1,080MM people, 672MM of them in the 15-64 age group, aka the “working
age population”, & 408MM in the “dependent population”, those
deemed too young or old to work. This gave India a “dependency ratio”
(of the dependent- to working age-, population) of 0.6. But the fertility
rate has fallen from 3.8 in 1990 to 2.9 (& is still falling); so
its dependency ratio will decline to 0.4% by 2030, giving the Indian
economy an edge in the GDP growth sweepstakes going forward by having
more, younger & typically better-educated workers. This is called
the “demographic dividend”, when labour force growth outstrips that
of the dependent population.
The decline in China’s
dependency ratio from 0.7 in 1980 to the current 0.4 contributed to
its meteoric growth; for its one-child policy caused the decline in
the number of children to vastly outstrip the growth in the number of
old people. But in the next two decades, as India’s dependency ratio
declines from 0.6 to 0.4, China’s is expected to rise from 0.4 to
0.5.
AIR TRAFFIC CONTROLLERS
SALARIES OUT OF THIS WORLD (AP/AF-P)
∙ Spanish air traffic
controllers are technically civil servants but in 1999 were given control
over their own salaries. So now they make an average Euro375,000, &
up to Euro900,000 which has prompted emergence legislation to rein them
in.
Not surprising in
a country in deep recession, with 20% unemployment & a government
in dire fiscal straits that pays foreign workers to go home provided
they promise to stay away for three years.
SHELL BETS BIG
ON BRAZILIAN ETHANOL (WSJ, Guy Chazan & Paulo Prada)
∙ It is investing
US$ 1.63BN over the next two year in a JV with Cosan SA to produce ethanol
from sugar cane. This is its first ever major move into biofuels &
the biggest investment by any Western energy company in ethanol production.
It will primarily target the Brazilian market where all new cars now
must have engines that can run on a ethanol/gasoline mix.
Sugarcane-based ethanol
has a far greater energy efficiency than the corn-based stuff since
there is no need to use fuel to first turn carbohydrates into sugar
before converting the latter into alcohol. Meanwhile Shell’s arch
rival, ExxonMobil, has turned to ‘wildcatting’
in high risk ‘frontier’ regions around the world, incl. offshore
in the Philippines, the Black Sea, Libya, Brazil, Columbia, Madagascar,
New Zealand and most recently the Arctic, despite the fact that over
the years its track record in finding oil has not been impressive &
that it has typically ended up maintaining its reserves by buying assets
from typically smaller companies that are much better at that sort of
thing.
TOP COUNTRIES BY
TOTAL WINDPOWER (G&M, Richard Blackwell)
∙ At the end of
2009, the top five countries by windpower installed were the US (35,159MW),
Germany (25,777), China (25,104), Spain (19,149) and India (10,926).
And those that installed most new windpower capacity in 2009 were China
(13,000MW - up 102%), the US (9,922 - 39%), Spain (2,459 - 15%), Germany
(1,917 - 8%) & India (1,271 - 13%).
Canada, with 950MW
of new wind power installed in 2009 was ninth in that respect but didn’t
make it into the top ten in terms of total windpower capacity (i.e.
it had less than Denmark’s 3,465MW).
OUR UNSUSTAINABLE
ECONOMY (G&M, Gordon Laird)
∙ The message in
Raj Patel’s The Value Of Nothing - Why Everything
Costs So Much More Than We Think is summarized by this message on
his website : “From the 1970's onward, our economy was hijacked by
freemarket fundamentalists who mantra was greed is good, regulation
is bad ... But it gets darker still : We were all along for the ride.
We bought, we ate and drove more. And paid for it with debt, diabetes
& pollution ... We mortgaged our future ... And called it freedom.”
Patel also believes that by trying to spend our way back to normal &
salvage a broken status quo we are
depleting our ability to govern & address problems like unemployment,
health care & climate change, & argues our problem has been
our propensity to over-value destructive things - such as financial
derivatives & crude oil - and under-value truly valuable things
- such as sustainable food production, the climate and other market
externalities that market economies take for granted. And finally that
“The perpetual quest for economic growth at all cost has turned
mankind into an agent of destruction through the systematic under-valuing
of the eco-systems that keep our Earth alive, that the consumer economy
takes for granted and won’t pay for .”
Everybody, incl. the
US Tea Party crowd, is looking for someone to blame; for it is simply
too painful to even think that we all bear part of the blame, if only
because we chose to believe, & continued to elect to public office,
bunches of yoyos who told us there was a free lunch & who, once
in office, made it their first order of business to feather their own
nest & their second order of business to stay in office since far
too often it was the best-paying, most ego-boosting job they never had.
TIME IS NOW FOR
A BOTTOM-UP ANTI-POVERTY PLAN (G&M, John Githongo)
∙ We need a more
bottom-up, citizen-led strategy for sustainable development. While in
Africa there has been real improvement in the past decade, we now need
a new citizen compact to build thereon. But to get it African countries
need greater accountability (in which technology can be a big help),
less lionizing of leaders (which makes it difficult to criticize them),
more transparency (because thieves have more to hide) & more private
investment (to fund a rising generation of young African entrepreneurs).
There has been growing
disenchantment among young, well-educated professionals across much
of sub-Saharan Africa with the top-down approach of traditional foreign
aid that often benefited political insiders more than the hoi polloi
& didn’t take enough account of local sensitivities & priorities.
Or as Githingo puts it “to fix Kenya, start with its people”
(he headed the Kenya Chapter of Transparency International - of which
his father was a co-founder - until after the 2002 election the new
President, Mwai Kibaki hired him to head up the anti-corruption
unit in his office, from which position he found it necessary to resign
after a couple of years, by fax from London, after getting one too many
death threats for getting too close to implicating powerful political
insiders.
STRAWS IN THE WIND
∙ Twenty-five years
ago 4% & 11% of California’s budgetary spending went to prisons
& universities respectively; today these percentages are 9.5% &
5.7%.
This is due in part
to the “three strikes and you’re out”
policy, & in part to the rigid enforcement of parole provisions
that has people, who often were jailed for minor offenses in the first
place, end up back in jail for relatively minor violations of their
parole provisions.
∙ In Japan 46% of
those over the age of 14 own a car, in the US 44% & in South Korea
26%; the corresponding numbers for China & India are 4% & 1%
respectively.
With a combined population
of close to 2½BN, they present a massive potential car market.
In other words, more
than 8x China’s on a per capita basis. And in the Fourth Quarter its
GDP grew at an 18% annual rate, much faster than had been expected,
& in January its exports were up 75.8%, with those to China, its
biggest trading partner, up 187.8% YoY.
