segunda-feira, 30 de junho de 2014

Gideon Rachman: Revisionist powers are driving the world’s crises

The headlines are dominated by regional crises – in Ukraine, in Iraq and in the South China Sea. But is there a common thread that ties together these apparently unconnected events?

One global theory is advanced by Walter Russell Mead, a professor at Bard College, in a recent piece for Foreign Affairs, entitled “The Return of Geopolitics”. Prof Mead’s piece, together with a rejoinder by Professor John Ikenberry of Princeton University, offers a way of thinking through current patterns in world politics.

The shape of the world order that emerged after the collapse of the Soviet Union is fairly easy to define. Its key characteristics included a globalised economic system, functioning multilateral institutions and – most important of all – an unchallenged role for the US as the most powerful player.

The debate is about whether that system is now under threat. Prof Mead asserts that “China, Russia and Iran never bought into the geopolitical settlement that followed the Cold War and they are making increasingly forceful attempts to overturn it”. The crisis in Ukraine, which was taking shape as Prof Mead wrote his article, provides a vivid illustration of his thesis. Russia’s anger with the post-1991 settlement has led it formally to annex Crimea. China’s increasingly assertive territorial claims and Iran’s obvious dissatisfaction with the regional order in the Middle East form the other pillars of the argument. Prof Mead calls these three countries “revisionist powers” and argues that while “they haven’t overturned the post-Cold War settlement . . . they have converted an uncontested status quo into a contested one.”

Prof Ikenberry responds that “Mead’s alarmism is based on a colossal misreading of modern power realities”. As far as he is concerned, “China and Russia are not full-scale revisionist powers, but part-time spoilers at best”. The US, he points out, has “military partnerships with over sixty countries, whereas Russia counts eight formal allies and China has just one (North Korea)”. All told, the “military capabilities aggregated within this US-led alliance system outweigh anything that China or Russia might generate for decades to come”.

America is also the beneficiary of favourable geography because it is “the only great power not surrounded by other great powers”. The US also promotes ideas with global appeal, while Russia and China “have no appealing brand”.

Above all, however, Prof Ikenberry believes that the so-called “revisionist powers” are not really revisionists at all. They will not challenge the American-led world order because, ultimately, they benefit from it. He argues that “Although they resent that the United States stands at the top of the current geopolitical system, they embrace the underlying logic of that framework, and with good reason. Openness gives them access to trade, investment, and technology from other societies.” What is more, Russia and China are big powers with vetoes at the UN. Their interests are protected by the current system because – “they are geopolitical insiders”.

So which of these two analyses is more convincing? I should declare an interest. Back in 2010, I published a book called Zero-Sum World that predicted increasing geopolitical competition between the west and the governments in Beijing and Moscow. It always seemed likely to me that a relative decline in American power would provoke challenges to the US-led world order. So, naturally, I am sympathetic to Prof Mead’s arguments that current political developments do indeed demonstrate the failure of the west’s efforts to “shift international relations away from zero-sum issues toward win-win ones”.

That said, the debate is hardly settled. The rise in tensions in Ukraine and in the seas around China seem to fit the zero-sum thesis neatly. But neither Russia nor China has yet made a definitive break with the US-dominated global system. Indeed, if Russia fails to escalate the Ukrainian crisis, it could yet be argued that the Putin government – faced with sanctions – decided that the costs of a full-scale confrontation with the west were too high.

Iran more obviously matches the profile of an outsider, revisionist power. On the other hand the Iranian regime, impoverished by sanctions, seems to be trying to break its way back into the international system, by seeking
a deal over its nuclear programme.

Over the long run, China is surely the most important potential challenger. Unlike Russia it is a rising power and, by some measures, now the world’s largest economy.

Beijing has not yet attempted anything as reckless as the seizure of Crimea. And China adopts a lower profile on global issues outside its region than Russia does. But a pattern of more assertive Chinese behaviour in disputes with its neighbours, including some American allies, is now obvious.

Whether China is truly seeking to remake the global order or simply to become more assertive, within the current framework, is a debate for the seminar room. What does seem clear is that China’s traditional emphasis on economic growth is now increasingly accompanied by more nationalistic postures on political and security issues. That, in turn, is leading to an increase in tensions with China’s neighbours and with the US.

You can call that the “return of geopolitics”, or you can call it the rise of a “zero-sum world”. But whatever the terminology, it looks like a dangerous trend that is gathering momentum.

Gideon Rachman

Fonte: FT

sexta-feira, 27 de junho de 2014

Michael Ignatieff: A secessionist lust for power that tears lives asunder

Two prominent British politicians recently asked me for advice about how to stem the rising tide of independence in Scotland. The rough stuff – threatening to keep the Scots out of the pound or out of Europe – had failed. What, they wanted to know, had saved the cause of Canada during the Quebec referendum of 1995 when the secessionists came within a percentage point of victory.

In the Canadian case, I told them, heartfelt appeals to stay together were made. Thousands of anglophones from outside Quebec descended on Montreal in the week before the referendum to proclaim their love for the Québécois. But Canada survived, if by a razor-thin margin, not because mutual affection was rekindled but because a cooler consensus prevailed.

Both sides realised two nations could continue to coexist side by side in the same state. Loveless coexistence keeps us going to this day. Recent polling in Quebec indicates that, while 60 per cent of the younger generation reject separatism, only 30 per cent of them express any strong identification with Canada. Quebec is in effect master in its own house – it has “devo max”, as the Scots might say. This, together with a shared shudder at the thought of ever going through the ordeal of a referendum again, keeps Canada in one piece. Once was divisive enough.

This is what I told the British politicians but I felt I had sold my own convictions short. I am an English-speaking Canadian but my entire family – Russian exiles and the Canadians they married – is buried in Quebec, and if Quebec were to separate I would feel I had been cut in two. This is why my belief in multinational, multi-ethnic states, not just in Canada but also in Britain, Spain, the former Yugoslavia and now in Ukraine, has always been a matter of passion.

To me states such as these show that people who speak different languages, worship in different faiths and are heirs to painfully different histories can share institutions and defend democratic freedoms together. When I see Scots or Catalans thinking of breaking up a union, I feel what a poet called a “tidal heave in the chest”. I am invested emotionally in the survival of all multi-ethnic, multinational, multi-confessional experiments in democratic freedom.

It is not that I do not respect the visceral appeal of nationalist feeling: the desire to be master in your own house, to be at home among fellow countrymen who, as Isaiah Berlin said, understand not just what you say but also what you mean. Like Berlin, I have never thought that liberalism and national patriotism should be enemies or that the only good liberal is a cosmopolitan. Belief in liberal freedom and democracy is always belief in it in a particular place, in a national home with histories that only those who are born in a place or who adopt its citizenship can hope to understand.

No, my visceral opposition to Scottish, Catalan, Quebec and other projects of independence is not to nationalism, but to secession – to the breaking apart of political systems that, without violence, have enabled peoples to live together. For the breaking apart does not merely shatter a political union, it forces apart the shared identities that people like me carry in their souls.

Secessionists, whether in Scotland, Catalonia, Quebec or anywhere else, invariably assume that a person must either be Scottish or British, Catalan or Spanish, Québécois or Canadian. What about those who feel they are both? I know that I cannot share the same sense of being a minority my Québécois friends feel but I do know that Quebec’s soil, its language, its winter cold, its languid summers, are part of who I am.

I am not so exceptional. There are hundreds of thousands of Scots who acknowledge English, Irish or Welsh parts of their very being. Lives and destinies are similarly intertwined in Catalonia and Spain, in Ukraine and Russia. The same was true in the former Yugoslavia, where in the 1990s women with Croatian names and Serbian husbands used to ask me with tears in their eyes why the nationalists were forcing them to choose between parts of their being.

This is the moral sin of separatism. Separatist politicians, desiring to be presidents or prime ministers of little countries, force their fellow citizens to make choices that they should not have to make between identities that they have combined, each in their own unique way, and now watch being ripped apart – one portion of themselves flung on one side of a border, a damaged remnant on the other. If Scotland does secede, there will be many torn souls the day after.

I do not claim secession is never justified. When blood has been shed, people will fight to be free of an alien yoke. But where, as in the UK, Canada, Spain and Ukraine, peoples have lived side by side, perhaps not always in justice but usually in peace, secession is the worst sin in politics, a gratuitous infliction of political choice on peoples who do not want to be forced to choose.

Nor do I claim that the constitutional status quo in Spain, Canada and the UK cannot be improved upon. Further change may be necessary in each case. What I do believe is that these states work because they do not force free peoples to choose between identities. They allow them to be Scots or British, Canadian or Québécois, Spanish or Catalan, in whatever rank order a citizen chooses. This is the moral value that redeems multinational states, the freedom to belong, to order your ultimate loyalties as you think best.

If you destroy that freedom – and secession does destroy it – Scotland may be sovereign but its people will be the poorer for it. I hope believers in the union will start making this argument with the passion it deserves.

Michael Ignatieff, formerly a Canadian politician, teaches at the Harvard Kennedy School

Fonte: FT

quinta-feira, 26 de junho de 2014

Anjana Ahuja: Evolutionary roots of an urge to bite in a sporting competition

If the sound of cricket is the thwack of leather upon willow, is the footballing equivalent the crunch of enamel upon scapula? On Tuesday evening, during a World Cup group match, Uruguayan striker Luis Suárez appeared to sink his teeth into the shoulder of Italian defender Giorgio Chiellini.

While others seemed lost for words, former England footballer Ian Wright offered the pithiest punditry: “I feel sorry for [Suárez] because he’s obviously not in control of something . . . he needs help.” Having considered incriminating footage of Chiellini’s bruised shoulder, plus two previous offences of snacking on opponents, the sport’s world governing body has dished out a nine-match international ban, a four- month ban on all football and a fine of SFr100,000. He will not even be allowed to enter a stadium.

Suarez’s toothsome savagery appears to be almost primal behaviour of a kind more often associated with wayward toddlers than millionaire sportsmen. Inexplicable, uncontrollable urges live on the dark side of human nature. While Suárez’s bizarre urge to bite emerges only occasionally, apparently in response to extreme frustration on the pitch, some people are dogged by strange urges during every waking hour. In the case of obsessive-compulsive disorder , a compulsion emerges in ugly tandem with an obsession. An obsession with germs, for example, can lead to a compulsion to wash hands. Some sufferers hoard.

Keeping hold of stuff and avoiding excessive dirt may have given our ancestors a survival advantage; for this reason, some scientists speculate that OCD results when these brain circuits devoted to survival tip into overdrive. About one in 100 people has OCD proper – we are talking about mental illness here, not quirky neuroticism – but the true incidence is suspected to be at least double that because many are too ashamed to confess to a fragile mind.

Of course, not all thoughts become obsessions. The average person is said to have about 4,000 thoughts a day, and it is normal to harbour some that are ridiculous, irrational and scurrilous. The rich and famous are as afflicted as anyone else by odd thoughts and peculiar impulses. Winston Churchill avoided travelling by ship for fear he would jump into the sea. He had the good sense to disclose it to his doctor: “I’ve no desire to quit this world but thoughts, desperate thoughts, come into my head.”

Hans Christian Andersen, the spinner of fairy tales, was terrified by the prospect of being buried alive; his taphephobia (“fear of the grave”) led to him placing a note at his bedside each night explaining that he was not dead but asleep. Alfred Nobel, inventor of dynamite whose fortune was used to start the eponymous prizes, dreaded the same, leaving instructions that, on his death, his veins should be emptied and his corpse cremated.

All of these cases, plus the Ethiopian schoolgirl who felt compelled to consume a mud wall of her house, are documented in The Man Who Couldn’t Stop, a moving book on OCD by David Adam. For the past 20 years, he has grappled with an irrational fear of being infected with HIV. He describes the all-consuming grip of a compulsive urge as having “nowhere to hide and nothing to reason with. To resist a compulsion with willpower alone is to hold back an avalanche by melting the snow with a candle.”

Mr Adam eventually sought help after becoming a father and realising he was in danger of infecting his daughter with his obsession. Bill Brenner, a technology writer and author of The OCD Diaries blog, once told Forbes magazine, the mental condition “is kind of like a dark versus light power. When you are able to manage its darker elements, the drive it gives you can let you accomplish big things.”

Whatever the machinations of the Suárez brain, it has orchestrated great things. He is a goal conjuror of extraordinary talent, and one of the most celebrated players in club football. He is also one of the richest: Liverpool pay him a reported £200,000 a week.

Suárez does not normally go around biting people but, when under extreme pressure, he appears to struggle against a “darker element”. Unless he learns to restrain it, he will not be able to freely exercise the urge for which he is most admired: scoring goals.

Anjana Ahuja

Fonte: FT

quarta-feira, 25 de junho de 2014

Francis Fukuyama: Isis risks distracting US from more menacing foes

For some, it will always be 1939. We are forever telling ourselves how, in the 1930s, the US and Britain underestimated the threat from Germany and Japan, how Winston Churchill alone among western leaders saw the danger and summoned his country to a defence of democracy against the Nazis. The 70 years of American leadership following the second world war were a catalogue of Churchillian moments, from the Berlin airlift to the fall of the Berlin Wall.

There is much truth to this: the US and its allies performed admirably in creating a peaceful and liberal international postwar order in Europe and Asia. But this narrative is highly selective. There were many moments when western leaders believed they were Churchill: the UK’s Anthony Eden in the 1956 Suez crisis, US Presidents Lyndon Johnson in Vietnam and George W Bush in Iraq. They overestimated the threat they faced and made things worse, provoking unnecessary and counterproductive wars, while undermining political support for an internationalist foreign policy.

The focus of today’s debate ought to be: how should we prioritise the threats facing us and how bad are the most serious? This year we have seen a fast-moving sequence of events, from Russia’s annexation of Crimea to China’s assertion of sovereignty over the South and East China seas to the collapse of the Iraqigovernment’s power. Authoritarian forces are on the move.

It is on this point that US President Barack Obama’s foreign policy speech at the West Point military academy in May was wrong-headed. It laid out various abstract criteria for the use of force (actions must be “proportional and effective and just”; where no direct threat to US interests exists, “the threshold for military action must be higher”). It is hard to disagree. But he went on to state that the only direct threat we face is terrorism. He said virtually nothing about long-term responses to the two other big challenges to world order: Russia and China. There was great fanfare surrounding the US “pivot” towards Asia – one of the most important initiatives of Mr Obama’s first term – but he did not mention the word once.

Despite the recent successes of the Islamic State in Iraq and the Levant (known as Isis), I would argue that terrorism is actually the least consequential of these challenges in terms of core US interests. What we are witnessing in Iraq and Syria is the slow spread of a Sunni-Shia war, with local forces acting as proxies for Saudi Arabia and Iran. It is a humanitarian crisis in the making. However, we could barely contain sectarian hatreds when we occupied Iraq with 150,000 troops; it is hard to see how we can act decisively now.

Russia’s annexation of Crimea, on the other hand, crossed a very important threshold. The entire post-cold war order in Europe rested on Russia’s acceptance that ethnic Russian minorities stranded in neighbouring states would remain in place. President Vladimir Putin has thrown all that into question, with effects that will be felt from Moldova to Kazakhstan to Estonia.

Russia’s power is based, however, on a flawed economic model that in time will weaken its power. Not so with China: it already has the world’s second-largest economy, and may overtake the US in the coming years. China has been claiming territory in small increments while flying under the cover of more dramatic events elsewhere. It wants to be the dominant power in east Asia and to push the US out of what it claims as its sphere of influence.

The extremism of Isis will in the end prove self-defeating. By contrast, allies the US is sworn to defend are now threatened by industrialised nations with sophisticated militaries.

Yet, for all the seriousness of the challenges from Russia and China, this is still far from the situation of 1939. What would be an appropriate US response? Our priorities should be political: the reinvigoration of Nato as a real military alliance rather than a democracy-promotion club; and establishment of a multilateral framework for dealing with China that gives its neighbours an alternative to facing Beijing alone. Mr Obama talks a multilateral game but invests little capital in making it real.

Strategy is about setting priorities, saying that some things are more important than others and explaining why this is so. The notion that there is no place unworthy of US attention is not a strategy. Mr Obama has set the wrong rhetorical priority, continuing the original mistake of overestimating the terrorist challenge made by his much-criticised predecessor. Even so, he has been strangely passive, letting places such as Libya and Egypt deteriorate through inattention. And he has not invested nearly enough time and effort shoring up existing institutions and establishing broader frameworks for dealing with long-term challenges elsewhere.

The poles established by the neoconservatives on the one hand and isolationists on the other present false choices. Real strategy always has to lie somewhere in between.

Francis Fukuyama is a fellow at Stanford University and author of ‘Political Order and Political Decay’

Fonte: FT

terça-feira, 24 de junho de 2014

Martin Wolf: Defend Argentina from the vultures

Not far from the London offices of the Financial Times was the Marshalsea prison where debtors used to be sent. In the 18th century, more than half of London’s prisoners were incarcerated for the undischarged debt. The moral hazard Taliban of the day insisted that such harsh penalties were necessary. Then, in 1869, imprisonment for debt was abolished and bankruptcy introduced. Both economy and society survived.

Things sometimes go wrong. Sometimes this is due to bad luck and sometimes to irresponsibility. But society needs a way to allow people to start over again. This is why we have bankruptcy. Indeed, we allow the most important private actors in our economies – companies – to enjoy limited liability. This lets shareholders walk away from their companies’ debts unscathed. That idea, too, was condemned as a licence to irresponsibility when introduced. Limited liability does bring problems, notably in highly-leveraged businesses (such as banking). The ease with which US corporations can walk away from their creditors is breathtaking. But this is better than unlimited liability.

A similar logic applies to countries. Sometimes their governments borrow more than they turn out to be able to afford. If they have borrowed in domestic currency, they can inflate their debt away. But if they have borrowed in foreign currency, that possibility disappears. Usually, it is countries with a history of fiscal irresponsibility that find themselves obliged to borrow in foreign currencies. The eurozone has put its members in the same position: for each government, the euro is close to being a foreign currency. When the costs of servicing such debts become too high, then restructuring – default – becomes necessary. As Carmen Reinhart and Kenneth Rogoff of Harvard University showed in This Time is Different, this is an old story.

As I argued at the time, Argentina found itself in this position at the turn of the century. It was difficult to feel much sympathy for the country, which suffered from chronic mismanagement before its default in December 2001 and was to suffer yet more thereafter. But it had become impossible to service its public debt of $132bn at tolerable cost. Moreover, creditors had been rewarded for the possibility of default. Even at its lowest point, in September 1997, the spread of Argentine dollar bonds over US Treasuries was close to three percentage points. A creditor compensated for the risk of a default cannot be surprised by it. The solution is portfolio diversification.

While the principle of sovereign debt restructuring is compelling, in practice it is difficult. No court can seize and then liquidate a country’s entire assets. This legal limbo creates two opposing dangers: the first is that it is too easy for a country to walk away from its debts; the second is that it is too hard. The Argentine story illustrates both: confronted with an intransigent government, holders of 93 per cent of defaulted debt accepted exchanges for debt with a hugely reduced face value; but “holdouts”, who reject such an exchange, have blocked a clean resolution. The mess has lasted more than 12 years from the default.

As first deputy managing director of the International Monetary Fund, Anne Krueger advanced a proposal for a sovereign debt restructuring mechanism in 2002. She argued that the restructuring process could be delayed or blocked if some creditors were able to hold out for full payment.

Her ideas were more supranational than governments – above all, the US – could bear. But “collective action clauses” were at least introduced. Yet such clauses might not have prevented the success of holdouts over Argentina, led by Paul Singer of Elliott Management. As the IMF recently noted , these clauses “typically only bind holders of the same issuance”. A holdout creditor can “neutralise the operation of such clauses” if they secure a blocking position, normally more than 25 per cent.

Moreover, adds the IMF, US courts have interpreted a “boiler plate provision” of these contracts (the so-called pari passu clause) as requiring a sovereign debtor to make full payment on a defaulted claim if it makes any payments on restructured bonds. In addition, the US courts will force financial intermediaries to help creditors obtain hold of the sovereign’s assets. All this will make restructurings harder. Why should creditors accept an exchange for instruments with reduced value in future?

I am no lawyer, but to me the idea of equal treatment means treating like cases in the same way. Yet creditors who have accepted exchanges and holdouts are not like cases. To force debtors to treat them equally seems wrong. Moreover, the argument that holdouts are helping Argentines by punishing government corruption is absurd. It is up to Argentines to choose the government they desire. Worse, if Argentina is forced to pay holdouts in full, the price will be borne by Argentines. This is extortion backed by the US judiciary.

The immediate issue is how Argentina might settle these cases. The options – paying the holdouts, reaching a deal with them, transferring restructured debt into domestic law and outright default – look costly, humiliating, difficult or damaging. Worse are the longer-term implications for debt restructurings.

One possibility is to eliminate the pari passu clause. Another is to introduce stronger collective action clauses, particularly ones that cover all outstanding instruments. Another is to shift issuance from New York. But all three would apply only in future. Another possibility would be to amend US law. A final possibility, as José Antonio Ocampo of Columbia University notes, is to revive the idea of a global mechanism. These last two options look very unlikely.

Yet in a world of global capital flows, a workable mechanism for restructuring sovereign debt is not an optional extra. It is possible that Argentina is an exceptional case. It is more likely that the interpretation of the pari passu clause and the ability to pursue assets will now make it more difficult to restructure debt. A world in which the choice for sovereigns and their creditors is between full payment and absolute non-payment would be as bad as one in which debtors had to choose between starvation and prison. A better way must now be found.

Martin Wolf

Fonte: FT

segunda-feira, 23 de junho de 2014

Mark Schieritz: Anglo-Saxon economies should envy Germany’s rental culture

There is no shortage of explanations for the resilience of the German economy: its companies are strong; its political and social institutions stable; and the skills of its engineers legendary. There might, however, be another explanation: its approach to housing. The country’s property market differs widely from those in the rest of the world – and particularly from those of most Anglo-Saxon countries.

The International Monetary Fund pointed out this month that housing can do a lot of damage. An increase in prices provides an initial spur to the wider economy: construction activity is boosted and homeowners grow richer. But as a boom continues, leverage grows and price rises become unsustainable. The bursting of a bubble devastates bank balance sheets and leaves behind an economy that must painfully reallocate productive resources from a bloated construction industry to other sectors.

The IMF said that more than two-thirds of the recent systemic banking crises were preceded by boom-bust patterns in property markets. They triggered the biggest financial crisis in living memory, ruined Ireland and Spain, may soon wreak havoc on China and have put central London out of reach of the middle class, which is priced out of the market. Mortgages are, to adapt investor Warren Buffett’s quip about derivatives, the true financial weapon of mass destruction.

Some countries seem to be more prone to housing excesses than others. The IMF calculates that prices in the UK are 27 per cent above their long-run average relative to incomes, while in Germany they are 16 per cent below. What explains this important difference?

One reason is that living in a home you actually own is not as important as it is in the US or the UK. OECD data show the rate of home ownership is 41 per cent in Germany compared with 71 per cent in the UK and 69 per cent in the US.

This is partly a result of history. Germany needed to build homes after the second world war, during which many cities were destroyed. Supported by generous government subsidies, public, co-operative and private developers built millions of rental units in just a few years. The rental market is highly regulated, and tenants are protected by a body of laws. Most contracts are indefinite, for instance, and as long as rent is paid on time it is almost impossible for a landlord to terminate them. This means renting is a relatively comfortable option.

Mortgage finance also matters. Property loans are generally not as easily available in Germany as in other countries. Lenders typically demand at least a 20-40 per cent deposit. The interest rate is usually fixed for at least 10 years, and even 30-year fixed-rate contracts are on offer. In the case of an early termination of a contract by the borrower, banks can charge a penalty in order to recoup forgone interest payments.

This makes mortgage refinancing – a common reaction to reduced interest rates in the US and the UK – virtually impossible in Germany. It is also uncommon for consumers to borrow against the rising value of their home. As a consequence, interest rate cuts take much longer to feed through the system and are less likely to result in a housing boom. In fact, while prices have risen significantly in urban areas such as Berlin and Munich, there are few signs that leverage has reached a dangerous level.

Despite ultra-low rates, the volume of housing loans to private households grew by a mere 2 per cent in 2013 according to the Bundesbank. With the exception of a shortlived uplift in the east of the country, which was related to reunification, there has been no big nationwide property boom in Germany’s postwar history.

This has implications for the European Central Bank. In Anglo-Saxon countries, the housing market is an important transmission channel for monetary policy. A cut in interest rates by the central bank drives up prices and lowers the cost of serving mortgage debt, which spurs consumption. But if many borrowers cannot use lower market interest rates and a majority of the population rents, monetary policy is less effective.

Those arguing that more spending by Germans is what the eurozone needs to support economic rebalancing should prepare to be disappointed.

Mark Schieritz is the economics correspondent of Die Zeit

Fonte: FT

sexta-feira, 20 de junho de 2014

Julian Baggini: E-books v paper?

Choosing books to take on holiday has got more difficult in recent years. Now it is a question not just of what to read but how – on paper, tablet, e-reader, or perhaps even a phone – and people have strong opinions on which is best. But is there any more to the decision than cost and convenience? On this question, the answer suggested by numerous studies into the neuroscience and psychology of reading in different formats is an emphatic yes.

There is no shortage of people warning of the risks attendant on the rise of “screen culture”, as the neuroscientist Susan Greenfield calls it. Greenfield has repeatedly expressed concern that, as technology takes us into unknown territory, “the brain may be adapting in unprecedented ways”. Though she tends to stress that these changes might be good or bad, that hasn’t stopped her more negative speculations being picked up in the media and amplified in far more strident terms.

On the other side of the two cultures divide, the novelist and critic Will Self recently argued that the connectivity of the digital world was fatal for the serious novel, which requires all the reader’s attention. Looking ahead 20 years, he posed a question: “If you accept that by then the vast majority of text will be read in digital form on devices linked to the web, do you also believe that those readers will voluntarily choose to disable that connectivity? If your answer to this is no, then the death of the novel is sealed out of your own mouth.”

E-reading is certainly on the rise. The Pew Research Center reports that, as recently as 2010, hardly anyone in the US had an e-reader or tablet. Now half do. The proportion of the population who have read an ebook in the past year rose from 17 per cent in 2011 to 28 per cent just three years later. In the UK, figures from Nielsen, which monitors book sales, showed that one in four consumer titles bought in 2013 was an ebook, up from one in five a year earlier.

Is this cause for concern? There is some evidence that reading on screen can result in less comprehension and even affect sleep patterns. But the research here is complex and inconclusive and, in any case, it is actually doing something far more interesting than telling us which medium is superior. It’s making us think more about what it means to read.

As researchers examine the differences reading in different media make, they are also having to distinguish carefully between the different things that we do when we read. Take, for instance, the difference between “deep reading”, when you really get immersed in a text, and “active learning”, when you make notes in margins or put down the book to cross-reference with something else.

When Anne Campbell of the Open University in Scotland looked at how young people used Kindle readers and paper books, she found that the electronic devices promoted more deep reading and less active learning. This appeared to be a direct result of design. “They’re less distracted using this very basic Kindle,” she told me. “They’re almost being forced to focus on it because of the very lack of ability to do things like flick forward and flick back.” Another related, widely replicated finding, is that people read more slowly on screens than from paper.

Sara Margolin of the State University of New York has also conducted research in this area. She says that “slowing down may actually allow us to spend more time consolidating what we have read into a more cohesive mental representation of the text”; furthermore, “not skipping around during reading” could be “a good thing in that it forces the reader to read the text in order, and preserves the organisation the author intended”. However, it also discourages rereading, which is known to help with “metacomprehension” – readers’ ability to recognise whether or not they have understood what they just read.

This example alone shows how debates over whether print beats screen are hopelessly simplistic, not least because reading on a computer, with endless distractions a click away, is very different from reading on a dedicated e-reader. Much depends on what you’re reading and why. In a Taiwanese study led by Szu-Yuan Sun, the results suggested that reading linear texts in the manner of traditional paper books was “better for middle-aged readers’ literal text comprehension” but reading on computers with hyperlinks “is beneficial to their inferential text comprehension”. In other words, the joined-up environment of the web encourages people to make connections and work things out, while straightforward reading encourages them to take in what’s on the page in front of them. Hence the prevalence of hyperlinks and multiple windows on computers could be seen as creating either unwelcome distraction or more opportunities for active learning.

Where research has suggested that comprehension is diminished by screen reading, it is hard to know if this is an artefact of the particular piece of technology and people’s familiarity with it. “Having a device that requires a lot of attention to simply operate could essentially steal working memory resources,” says Anne Mangen, from the University of Stavanger in Norway. That did not appear to be the case in her own research, which she suggests was probably because “the device we used was fairly easy to manipulate and my participants were familiar with technology”.

This is a nice example of how hard it is to know whether the preferences we have for one type of reading device over another are rooted in the essentials of cognition or are simply cultural. As another researcher, Simone Benedetto, points out: “The fact that the large majority of the population is still trained to the use of paper since early childhood has a major influence on the preference for paper.”

We have to remember that ereaders are very new and developers are still improving them. For example, Margolin says that one of the biggest problems with screen reading is that back-lit screens used by tablets, laptops and desktop computers can lead to eye fatigue and, if done at night, can “upset our circadian rhythm, making sleep more difficult”. Newer screens, such as Kindle’s Paperwhite, are overcoming these problems.

With other issues, it isn’t obvious whether the drawbacks are inherent or not. For instance, Campbell explains how we create “cognitive maps” of what we’re reading, which include visual memories of whether certain passages were top of a left-hand page, for example, and kinaesthetic information based on heft and bulk, which tells us how much we have left to read. That helps explain why Benedetto has found that “scrolling impairs the spatial memory”, making it more difficult to find your way around a text. However, as Campbell, says, we’ve learnt how to create cognitive maps unconsciously, through years of reading, and it could be that people raised on ereaders simply won’t rely on the same cues and will instead use searchable keywords and toolbar data to navigate around. This might actually be more efficient.

A whole other area of research concerns motivation. One of the recurrent concerns of the internet age is that children are reading less. But there is some evidence that, used wisely, ereaders could encourage more reading. Campbell, for instance, found that children read more when using ereaders than paper books. She thinks the main reason for this is that it is small, light and portable, and you can pull it out at odd moments, such as “when waiting for the bus to arrive”.

Ereaders also have the advantage that, from the outside, it’s impossible to see whether someone is reading the latest teen vampire romance or a primer on differential calculus. “You could study surreptitiously,” says Campbell, giving examples of people using their readers in hairdressers or even at work. This reflects an aspect of reading we are all aware of but are often reluctant to admit. The book in your hand or on your coffee table is a public statement about who you are. Ereaders are, therefore, useful in getting over concerns with image and providing a kind of licence for us to follow our curiosity and interests more.

If used smartly, ereaders could provide a huge help to many, as evidenced by the title of one recent study by a Harvard team led by Matthew Schneps: “E-Readers Are More Effective than Paper for Some with Dyslexia”. Schneps told me that some dyslexics are “prone to becoming distracted by the words on the page adjacent to the target word being read at the moment”. Narrow columns can help with this, and of course “formatting is difficult to modify in a printed book, but trivial to alter in an e-reader.” With print, one size has to fit all, whereas with electronic devices, all manner of customisation is possible, potentially meaning that each user can create her own optimal reading environment.

Overall, there doesn’t seem to be any convincing evidence that reading on screen or paper is better per se. “If the cognitive component is strong,” suggests Benedetto, “the cultural one is even stronger.” For Margolin, “the preference for reading on paper or a screen seems to be just that: a preference.” And, increasingly, younger people are opting for digital. A large National Literary Trust survey last year found 52 per cent of 8- to 16-year-olds preferred reading on screen, with just 32 per cent preferring print.

Mangen suggests that we need more longitudinal studies, conducted over decades, before we can figure out which effects of different reading media are due to familiarity or lack of it, and which are “related to more innate aspects of human cognition”.

Yet research has already told us a lot about how we read now. First and foremost, it emphasises that even using paper, there are many different approaches. Most of us probably have a settled style: you might be a skimmer, a skipper, a front-to-back completist, a keeper of the pristine page or an obsessive writer of marginalia. Whatever the case, our habits have probably been created largely as combination of childhood experience and how the medium we read in is nudging us. Simply being more aware of the alternatives might help us to read better, avoiding distraction to get immersed in fiction, for example, or self-consciously breaking the flow of non-fiction reading to make sure we’re processing the information.

Second, we might benefit from being aware of just how much habit, fashion and culture shape our preferences. When we sit on a train with a book open in front of us, how much has our choice of reading being influenced by our ideas of what a proper book should be like, and how a proper adult should appear in public?

Because it is obvious that reading is important, it can easily seem self-evident what reading is. Perhaps the real contribution of ereaders will be to make us re-examine that assumption.

Julian Baggini is editor of The Philosophers’ Magazine and author of ‘The Virtues of the Table: How to Eat and Think’ (Granta)

Fonte: FT

quinta-feira, 19 de junho de 2014

Mark Lilla: The Truth About Our Libertarian Age

Excelente ensaio do Mark Lilla, um dos meus autores prediletos em história das idéias.

It is time, twenty-five years on, to discuss the cold war again. In the decade following the events of 1989, we spoke about little else. None of us anticipated the rapid breakup of the Soviet empire, or the equally quick return of Eastern Europe to constitutional democracy, or the shriveling of the revolutionary movements that Moscow had long supported. Faced with the unexpected, we engaged in some uncharacteristic big thinking. Is this the “end of history”? And “what’s left of the Left?” Then life moved on and our thinking became small again. Europe’s attention turned toward constructing an amorphous European Union; America’s attention turned toward political Islamism and the pipe dream of founding Arab democracies; and the world’s attention turned to Economics 101, our global Core Curriculum. And so, for these reasons and others, we forgot all about the cold war. Which seemed like a very good thing.

It was not. In truth, we have not thought nearly enough about the end of the cold war, and especially the intellectual vacuum that it left behind. If nothing else, the cold war focused the mind. The ideologies in conflict, whose lineages could be traced back two centuries, offered clear opposing views of political reality. Now that they are gone, one would expect things to be much clearer to us, but just the opposite seems true. Never since the end of World War II, and perhaps since the Russian Revolution, has political thinking in the West been so shallow and clueless. We all sense that ominous changes are taking place in our societies, and in other societies whose destinies will very much shape our own. Yet we lack adequate concepts or even a vocabulary for describing the world we find ourselves in. The connection between words and things has snapped. The end of ideology has not meant the lifting of clouds. It has brought a fog so thick that we can no longer read what is right before us. We find ourselves in an illegible age.

What is, or was, ideology? Dictionaries define it as a “system” of ideas and beliefs people hold that motivate their political action. But the metaphor is inapt. All practical activity, not just political activity, involves ideas and beliefs. An ideology does something different: it holds us in its grasp with an enchanting picture of reality. To follow the optical metaphor, ideology takes an undifferentiated visual field and brings it into focus, so that objects appear in a predetermined relation to each other. The political ideologies born out of the French Revolution were particularly potent because they came with moving pictures that disclosed how the present emerged from a comprehensible past and was now moving toward an intelligible future. Two grand narratives competed for attention in Europe, and then around the world: a progressive one culminating in a liberating revolution, and an apocalyptic one ending with the natural order of things restored.

The ideological narrative of the European left was a cross between Prometheus Bound and the life of Jesus. Mankind was assumed to be equal to the gods but bound to the rock of history by religion, hierarchy, property, and false consciousness. For millennia that was how things stood, until a miracle of incarnation occurred in 1789 and the spirits of freedom and equality became flesh. The problem was that redemption did not follow. Just as the followers of Jesus had some theological work to do when his return kept being deferred, so the nineteenth- and twentieth-century left developed a revolutionary apologetics to make sense of historical disappointment. It taught that while the French Revolution descended into Terror and Napoleonic despotism, it did prepare the way for the pan-European revolutions of 1848. These were short-lived but they inspired the Paris Commune. That lasted only a few months, but it set the example for the October Revolution of 1917. True, that was followed by the November Revolution and then Stalin and his terror. But after World War II the revolution’s pilgrimage wound its way to China and the Third World, globalizing the struggle against capitalism and imperialism. Then there was Cambodia, and the music stopped.

The counter-revolutionary right in Europe, though much stronger politically in the nineteenth century, could not offer a narrative nearly as glorious as the left’s. Formed in reaction and under duress, it was obscure and less inspiring. But in moments of crisis it could be very compelling. The story it told was a cross between the legend of the golem and the Book of Revelation. In the best-known version of the golem story, a rabbi places into the mouth of a clay figure a slip of paper bearing God’s name on it; the figure then comes alive and rages through a Jewish ghetto terrorizing its residents until the rabbi snatches the paper back. If we think of the golem as le peuple, the paper as the writings of Voltaire and Rousseau, and the destruction of the ghetto as the Terror, we have made our way into the mind of the reactionary right.

In the legend, the rabbi tames the golem. The forces of reaction, though, never could control the forces of revolution in the nineteenth century, which were scientific, economic, and technological as well. Railroads crisscrossed the unspoiled landscape. Cities replaced villages and country estates, factories replaced farms, secular schools replaced religious ones, unshaved politicians replaced dukes and earls, and the peasants became an undifferentiated mass of brutalized workers. As the century progressed, a romantic right dreaming of a restored age of sweetness and light was transformed into an apocalyptic right convinced that it was living through the Great Tribulation. And when the improbable Russian Revolution succeeded, and Marxism went from being a small sect to being a powerful global force, the face of the Antichrist was exposed for the world to see. The final battle had begun, and into it leapt nationalist redeemers who ruled their peoples with iron rods and “tread the winepress of the fury of the wrath of God the Almighty” (Revelation 19:15). We have now made our way into the mind of fascism.

Para ler o resto clique

quarta-feira, 18 de junho de 2014

The Limits of Logic Simon Blackburn, Beatrix Campbell, Iain McGilchrist. Shahidha Bari hosts.

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Logicians don't rule the world or get the most done. Could it be that a consistent world view is neither desirable nor achievable? If we abandon the straightjacket of rationality might this lead to a more powerful and exciting future, or is it a heresy that leads to madness? 

terça-feira, 17 de junho de 2014

Argentina seeks to restructure debt

Decisão infeliz e lamentável da Suprema Corte do Império que cria um serio precedente que poderá ter impacto em outros processos de reestruturação.

Argentina’s economy minister Axel Kicillof said he wanted to restructure debt held by foreign creditors under local law and the country would continue its fight against so-called “vulture funds”.

Mr Kicillof, speaking at a press conference a day after President Cristina Fernández delivered a 25-minute nationally broadcast speech arguing her government would not succumb to “extortion”, said the country was prepared to take the necessary steps to make sure it could honour commitments to its creditors.

His comments underline Buenos Aires’ increasingly frantic efforts to avoid being pushed into a sovereign default by the end of June after the US Supreme Court on Monday refused to overturn a New York district court ruling ordering the country to pay billions of dollars to some of its creditors.

The Supreme Court decision effectively means Argentina has to repay $1.5bn to “holdout” investors, led by hedge funds Aurelius Capital Management and NML Capital, a unit of billionaire Paul Singer’s Elliott Management Corp, at the same time as it services its restructured debt. A payment on the restructured debt of nearly $1bn falls due by June 30.

Mr Kicillof said the country would also send lawyers to speak to Thomas Griesa, the judge behind the New York district court ruling.

“If Griesa’s sentence is implicated . . . and Argentina has to pay the vulture funds, this would push Argentina into a default,” Mr Kicillof said, adding the funds were ruining government efforts made with debt restructuring programmes in 2005 and 2010.

Mr Kicillof and cabinet chief Jorge Capitanich are due to meet in Congress to discuss the implications of the Supreme Court ruling on Wednesday, with the opposition expected to call for the government to avoid a default.

“The question is whether Argentina wants to return to international markets or not,” said Fernando Navajos from the Foundation for Latin American Economic Investigations in Buenos Aires.

On Tuesday, Argentina’s sovereign credit rating was cut two notches by Standard & Poor’s.

S&P lowered its rating to ‘CCC-’ from ‘CCC+’ and maintained a negative outlook, citing the Supreme Court decision.

Analysts with the rating agency said they believed the outcome “raises the risk of payment interruptions”.

Fonte: FT

segunda-feira, 16 de junho de 2014

Gideon Rachman: The west cannot fix the puzzle of Iraq through war

The west’s instinctive reaction when an international crisis breaks out is to ask two questions: what should we do; and who are the good guys?

Yet, when it comes to the disintegration of Iraq, the gloomy truth is that there are no good guys to back, and no decent policy options. All we have are bad choices, confusion and tragedy. That makes it vital that policy be made with humility and a clear sense of priorities.

The news that the Islamic State of Iraq and the Levant, known as Isis, has seized Mosul, the country’s second-largest city, and may be heading for Baghdad, sounds like a clarifying moment. After all, this is an Islamist group that even al-Qaeda regards as intolerably vicious. The Iraqi central government, led by Nouri al-Maliki – for all its faults and its sectarianism – is clearly preferable to Isis.

Yet Mr Maliki’s closest ally in the region is Iran, a country the west still regards as the greatest strategic threat in the Middle East. And when it comes to Syria, Isis and the west actually share a common goal – the overthrow of Bashar al-Assad.

So, if the defeat of Isis is now the west’s primary goal, does that mean that we have to make common cause with the Syrian government, Iran and Russia? There is already talk of direct consultations between the US and Iran over Iraq – even as the west continues to confront Iran over its nuclear programme. But relations between the US and Russia are at their lowest ebb for years because of the Ukraine crisis.

A policy that focuses above all on “homeland security” might lead western governments reluctantly to conclude that the continued rule of President Assad in Syria is the lesser of two enormous evils. For all its sins, the Assad regime has never directly targeted the west.

But Mr Assad is also so immersed in blood that it would be a huge blow to the west’s self-image, and the notion of western values in the world, to make common cause with him. One of the strengths of liberal democracies is that – for all their mistakes and hypocrisy – they try to support values, as well as interests.

Well-meaning liberals try to square the circle by arguing that military aid should be channelled to the more liberal forces fighting both the Assad regime and Isis, simultaneously. There is no doubt that there are some brave and admirable people in the Syrian opposition. But it is a huge leap of faith to believe that, if only the west piles in behind them, things will get better. On the contrary, there is plenty of evidence to suggest that “liberals” have very little chance of holding on to power, after the fall of a Middle Eastern dictatorship. From Iraq to Libya to Egypt, the pro-western liberals have been swept aside.

Those who favour direct western military intervention in the conflict – and those who are opposed to it – are mining recent history to make their case. It is true that a US-led coalition invaded Iraq in 2003 and that the country is now a fractured, bloody mess, with a rampant Islamist movement. On the other hand, the west did not intervene in Syria – and that country is also a fractured, bloody mess with a rampant Islamist movement.

Pity the poor policy maker who has to make sense of all that. The temptation is to fall back on cold-blooded realism – of the sort that is popular in Moscow, Beijing and Tel Aviv – and to say that the only relevant question is: “What is in our interests as a nation?”

Given the extreme difficulty of engineering positive outcomes in complex societies that we barely understand, I am sympathetic to that approach. But the question “what is in our interests” is not as straightforward as it sounds. It makes sense to focus on terrorism. However, the interventionists argue that the ultimate incubators of terrorism are failed states and prolonged wars. Hence, we need to get involved to stabilise the situation. The anti-interventionists respond that it is precisely western involvement in wars in the Middle East that will provoke terrorism. For what it is worth, the security services – the ultimate realists – seem to share the anti-interventionist view. For the moment, they prefer to try to contain the terror threat through intelligence and drone strikes.

Amid, all this anguish, what principles should underpin western policy? I would suggest three: national interest, humanitarianism and humility. The main western goal must now be the defeat of jihadist forces. The main humanitarian goal is to contain the violence that is spreading across Iraq and which has already claimed more than 150,000 lives in Syria. Fortunately, that is consistent with the goal of stopping terrorism.

The humanitarian impulse should also make the west very cautious about military interventions that could just add to the death toll and further destabilise the region. Western military force should be applied only when there is a direct anti-terror rationale – or reason to believe that it will decisively tip the balance of power, in a way that will lead to a sustainable political outcome.

That is where humility matters. The history of the past decade in the Middle East suggests that western military force, while capable of achieving swift victories on the battlefield, has a dismal record of securing lasting and acceptable political outcomes. President Barack Obama seems to have learnt that lesson, even if his political opponents choose to forget it.

Gideon Rachman

Fonte: FT

sexta-feira, 13 de junho de 2014

Martin Wolf entrevista Edmund Phelps...

I have arranged to meet Edmund (Ned) Phelps, director of the Center on Capitalism and Society at Columbia University, at the Kongress Hotel in Davos during the World Economic Forum. It is old-fashioned and very Swiss.

I sit at our reserved table in a still-empty restaurant slightly before Phelps arrives. At 80, he is grey-haired but slim and active, physically and intellectually. I have long admired his originality, disarming modesty and courtesy.

Phelps won the 2006 Nobel Memorial Prize in economics for path-breaking work of the 1960s, particularly on the “natural rate of unemployment” – the idea that monetary policy cannot alter the long-run rate of unemployment.

Born in 1933, Phelps grew up in Hastings-on-Hudson, New York, and has been at Columbia since 1971. He is, in my view, a true Yankee, promoting the dynamism that made the north of the US the most dynamic, and enterprising region of the planet from the middle of the 19th century into the 20th century. In his latest book, Mass Flourishing (2013), Phelps calls the desire of individuals to shape their lives “modern values”.

We settle on pumpkin soup as remedy for a cold Alpine day, followed by tagliatelle for me and veal carpaccio (a second starter) for him. We stick with mineral water and focus on debating his ideas.

Phelps starts by telling me that at a dinner for Nobel laureates at Davos he had argued that “the state of Europe is not described simply by the financial crisis but is also due to a loss of innovation that happened a long time ago. For a while this was not visible because Europe transferred technology from the US. But the growth of productivity in the US also fell from the early 1970s. Then Europe was living on borrowed time.”

What, I ask, led to writing Mass Flourishing? He tells me he started thinking about capitalism and socialism in the 1990s. But “it was only around 2002 that I began to think about creativity. I realised that the economics profession was mired in the idea that advance is ultimately the result of scientific discovery.

“Joseph Schumpeter [an Austrian economist of the first half of the 20th century] said that it requires entrepreneurs to do the work of building commercial applications. Yet he also argued one hardly ever sees creativity in entrepreneurs.

“I was appalled by this. So I started to think about what drives innovation and what its social significance might be. The next step was to think: innovators are taking a leap into the unknown. That led me to the thought that it is also a source of fun and employee engagement.”

We are eating our soup with relish. Phelps goes on to tell me that me he felt this idea was sufficiently novel and questionable “that I’d better see whether I could find some supporting evidence and I did. In societies where one sees a higher prevalence of ‘modern values’ – individualism, vitalism and self-expression – there’s also higher reported job satisfaction.

“I went on to argue that it’s hard to see much innovation in Britain after the second world war and Germany never got back to the dynamism it showed from the era of Bismarck [the chancellor who united the country in the 19th century] to the 1930s. France, which came late to the innovation game, hung on a bit longer.

“Finally we see a sharp reduction in the rate of innovation even in the US. You could begin to see it in the late 1960s.” Phelps believes this decline in innovation is a tragedy “compared to the great times that most people had in the 19th century. I think the 19th century is an extraordinary period with a welling up of creativity and all kinds of experimentation and exploration going on at least until 1940.

“I thought I’d love to have some [contemporary] diaries or autobiographical scripts I could dig into, to see whether I could detect this joy of being involved in new stuff. But I thought that I couldn’t take the year or two off to do that. So I took a short-cut. I argued that we could see this experimentation and exploration in music and fiction.

“I suggest there was a new feeling of self-respect, mastery, engagement and creativity in the 19th century. Emma Griffin, author of Liberty’s Dawn [a 2013 history of the English industrial revolution that uses the first-hand testimony of hundreds of workers], finds evidence of people beginning to take control of their lives. She started with the 18th and early 19th centuries. Now she’s getting to the mid-19th century and has sent me an email about a teenager who went to work in the mines. Did he feel imprisoned? Far from it. He writes that he felt liberated and suddenly he had problems to solve and much to learn about how to operate in the mine, how to do it safely, and so forth. It changed his whole life.”

I note that this is hardly what Karl Marx saw. “He didn’t want to see it,” is Phelps’s response. I agree that the 19th century was economically creative. But how far did that lead to “mass flourishing”? Is this view not unduly romantic? As the waiter brings the second courses, Phelps says I’m the first person to suggest he is a “romantic”.

He continues to talk about 19th-century flourishing, in, for example, “owner-operated firms, blacksmith shops, which are constantly tinkering because it’s fun, but also because they hope they can get a better profit if they find a better way of producing. The rise of factories and cities was also a tremendous boon to job satisfaction and intellectual development. Moreover, real wages took off more or less pari passu with productivity.”

Many argue that, from the late-19th century onwards, innovation came increasingly from the research and development branches of large corporations. So even if he is right about the mid-19th century, surely most people ceased to be engaged in innovation during the 20th century?

“I’m sceptical about the thesis that innovation was bureaucratised to a large extent during this period,” Phelps counters. “The 1920s and 1930s were a period of sensational productivity growth, new products were springing up all over the place and most of those new products and new methods were developed by people who started their own companies.

“So it must have been a very exciting time, which is paradoxical, since the Great Depression intruded.”

Is he not, I ask, underestimating the impact of fundamental breakthroughs, such as electricity, the internal combustion engine, chemistry and the computer? Were such innovations not the real drivers? And isn’t the problem that we are no longer making breakthroughs on a big enough scale?

We pause briefly to order double espressos. Phelps goes on: “That spikes in innovation occur is neither here nor there. I can’t imagine a world in which it is impossible to conceive new things. So the question is rather why have we had fewer of these spikes recently? I think it has to do with the return of traditional values [values opposed to individual self-expression].”

Is he not, I suggest, ignoring the fact that in the early 19th century people could make innovations in their backyards – but one cannot make computer chips like that.

“I accept that what I’ll call ‘big innovation’ is now more technical. It’s less ‘grass-rootsy’. But there’s a huge amount of innovation that has nothing to do with science or engineering.

“What about the creative industries? In the arts, movies, publishing, fiction, we’ve had huge innovations in what we buy and what we consume that has no salient connection with science. Suppose science had never advanced at all since 1820. Would that mean that we couldn’t create anything new? We couldn’t create a new genre of movies, or a new genre of books, or a new kind of clothes?”

I counter that humanity has always developed such innovations: the novel was one. But if there had been no scientific advances, we would not have had the productivity improvements of the past two centuries.

Phelps says: “I’m not particularly interested in the growth of productivity, except as a measure of the rate of innovation. My fundamental interest lies rather in what’s happening to the experience of work and opportunities to exercise creativity.

“I’m saying that the innovative life which opened up in the 19th century made possible a satisfaction that had never existed before. With no advance in fundamental science, innovation would have yielded less growth than otherwise but there would not necessarily have been a reduction in innovative activity. Moreover, the rewards of the innovative life to the individual would have been undiminished.

“My argument is that now there is a decreased desire and capacity to innovate and this permeates the creative industries, as well. Who would disagree that the golden age of film was in the Berlin studios and later in Hollywood in the 1920s and 1930s?

“I think this whole science thing is just a red herring and it gets us away from the point that, however crucial science is to some industries, you’ve got to have a willingness and room to innovate.”

. . .

The waiter brings the bill as we turn to an area where there has been a lot of scientific innovation: information technology. Phelps points out that Steve Jobs would never have called himself a scientist, and I agree.

But, I argue, the silicon chip, the microprocessor and the internet created opportunities for innovators. Jobs was one. So where the possibility of deep innovation existed, it was exploited. It was limited to this area because that happened to be where there were opportunities.

He says: “A wave of scientific breakthroughs is said to explain innovation in America, Britain, Germany and France between the 1880s and 1940. But that leaves unexplained the paucity of innovation in Holland, Italy and Spain. So why should there be a presumption that the loss of innovation in America since the early 1970s is the result of a dearth of scientific breakthroughs rather than resurgence of traditional values? A values theory of history gives a better explanation of economic innovation than a science theory does.

“The resurgence of traditional values has brought forth a new materialism, which isn’t good for innovation, because innovation is a cerebral, intellectual thing. There’s also my point that the financial sector is short-termist. That now affects the way business is done in the heartland of America and I think these large, established corporations are hardly innovative at all. But that’s something new. There was a time when they were innovative.”

Also, he adds, “in the US every piece of legislation is now a thousand pages long, with all sorts of carve-outs and special tax breaks and special treatments . . . and the possibility of obtaining these special breaks, of course, excites lobbying, which then encourages more of it.

“This distracts chief executives from innovation, because there’s an easier way to improve the bottom line. Not only that, but vested interests have made it harder for newcomers to break in. And so established corporations don’t have to innovate any more.”

If a president really believed in the Phelps doctrine, what would his programme look like? “Well, it’s necessary to start with a national conversation on the importance of creativity and discovery but particularly business innovation. We need the people and government to ‘get with the programme’. I’m not against a big government. I’d love to have colossal employment subsidies, to revolutionise the terms on which low-wage workers are employed, and, if there are some exciting initiatives that the government could take to open the way for more innovation, that would be great. But we’ve got to stop all this social protection. We’ve got to use that tax money for things like low-wage employment subsidies – subsidising work, subsidising innovation maybe, subsidising investment maybe.”

. . .

What about unemployment benefit? Medicare? “I’m not against social insurance. In my ideal world, wage rates would be so pulled up at the bottom by employment subsidies that everybody would be able to afford good levels of medical and retirement insurance in private markets. But we don’t live in that world. So, I would be loath to crusade against social insurance.”

I suggest that it is difficult to draw the line between the “social insurance” he favours and the “social protection” he condemns “Yes. We have got to protect the indigent. But social protection is out of control now.”

Wouldn’t he also accept that government can provide unemployment insurance and health insurance better than the private sector can?

“Yes, I understand there are flaws in private insurance markets. But the balance of advantage might have been in favour of private insurance if we had distributed the fruits of work more justly.”

I turn finally to whether he thinks the decision to rescue the financial sector in 2008-09 was a terrible mistake?

Phelps admits banks are a problem: “If you can get to be the largest, then you’re going to have a good bottom line. So all the banks were trying to get larger and larger during the housing boom. Part of my vision is that the big banks should be broken up. I would like to see the American economy go back to small banks rooted in communities where the bankers know something about the local start-ups.”

With that, we leave. Phelps believes passionately that creativity allows individuals to live fuller lives and remake the world. He is a true American, in a good way.

Martin Wolf

Fonte: FT

quarta-feira, 11 de junho de 2014

John Gapper: The football disaster that conquered the world of sport

Welcome to the World Cup in Brazil, brought to you by Fifa, a corporate governance disaster that is also one of the most successful multinational enterprises on earth.

The contrast between the Fédération Internationale de Football Association’s cronyism, managerial entrenchment and corruption, and its achievement in spreading the British version of football around the world (leaving the US game in the dust), is striking. It demonstrates that Fifa has enormous strengths as well as egregious weaknesses.

The decision to award super-hot Qatar the 2022 World Cup has pushed Fifa’s contradictions to their limits. That choice is now disowned even by Sepp Blatter, its 78-year-old president, who covets a fifth term as “supreme leader” (Fifa’s ayatollah-like job description). If Fifa cannot reform, much will be lost.

The intriguing thing about Fifa is that a Swiss non-governmental organisation, which has operated in an unaccountable way, with a highly conflicted (and in some cases corrupt) relationship between its leaders and the football associations that are its closest equivalent to shareholders, has done so well.

Soccer captured 43 per cent of the worldwide sports event market by value in 2009, compared with 13 per cent for American football and 12 per cent for baseball, according to AT Kearney, the consultancy, and is growing faster. It has even started to penetrate US consciousness thanks to television coverage of European games.

Fifa is fortunate in having a superior product to market: football is a more elegant game than the complex strategy and head-crunching violence of American football, and is easier to play in parks or in schools. The accessibility of the amateur game helps to reinforce the professional sport.

But that is not a sufficient explanation: basketball and baseball are played casually, and Venezuela and other countries have shown that it is possible to ruin even a fail-safe commodity – in that case oil and gas production – through rent-seeking cronyism. Soccer could have been similarly cursed.

Fifa has avoided this fate until now because it has two competitive advantages over US sporting bodies. The first is that football is integrated – amateur and professional games are unified through associations. Professional soccer leagues such as Serie A in Italy and Germany’s Bundesliga are powerful and their clubs are wealthy, but they do not control the national game.

This sounds arcane but it makes a huge difference to the incentives: leagues exist to advance their own interests and those of their member clubs, while the central task of the associations is to cultivate the game. The state of baseball is of secondary interest to Major League Baseball; football is Fifa’s raison d'être.

Fifa’s second advantage is that it is truly multinational – it launched a sustained push into emerging markets before US and European multinationals such as Coca-Cola and Adidas, two of the big World Cup sponsors. It adjusted early to the shift in the global economy.

“Fifa took resources and put them into Africa and Asia, and that has paid great dividends,” says Stefan Szymanski, professor of sport management at the University of Michigan. “US sports have remained American because there has been no money to expand overseas.”

Fifa’s advantages have given football strength in depth and reach, and transformed the World Cup into a global tournament on a par with the Olympic Games (also run by a Swiss-based sports association).

All of this could be undermined by Fifa’s flaws.

Since 1961, when it was reformed in a cack-handed way, it has been managed through a structure that seems ideally designed to encourage cronyism and dysfunction. “Fifa is a patronage organisation. The people at the centre disburse financial rewards to those at the periphery responsible for electing them,” says Roger Pielke, a professor at the University of Colorado.

No board of directors oversees its president and executives. Instead, a 24-member “executive committee” of national association representatives, which is embroiled in allegations (and some confirmed cases) of corruption, wields patronage in an opaque fashion. Blatter, like Fifa presidents before him, has exploited this to entrench himself.

It should be swept away but it suits too many insiders to keep things as they are. Meanwhile, Fifa is bitterly divided between European countries, particularly the UK, that want Mr Blatter to resign and Fifa to combat corruption, and African and Asian officials who portray this as an attempt by the west to seize control of the game.

Trouble looms. The Sunday Times has accused Mohammed bin Hammam, the Qatari former Fifa vice-president, of paying bribes to African officials to bring the 2022 World Cup to Qatar. Mr bin Hammam stepped down in 2012 after Fifa found that he paid for votes. The newspaper has published emails allegedly showing that bribes were paid from a $5m slush fund.

Sports associations and leagues have proved fragile before and it is easy to imagine a Fifa split. What if the World Cup were removed from Qatar, and it held a tournament for resentful African and Asian nations at the same time? The European leagues, with their €20bn annual revenues, could sever their links with the rebels.

That would be a tragedy, not only because it could be avoided through governance reform, but because it would destroy Fifa’s achievements since 1904. It is a blatantly flawed enterprise but it has achieved great things. Think what it might do if it were run properly.

John Gapper

Fonte: FT

terça-feira, 10 de junho de 2014

Panic pushes Saudis towards detente with Iran

American and Iranian diplomats are this week trying to untie the tightest knots in the negotiations on Iran’s nuclear programme – especially to agree a level of uranium enrichment with which most of the Islamic Republic’s neighbours and the world can live. There is no guarantee they will succeed. But Saudi Arabia, long-term US ally and Iran’s rival for control of the Gulf, obviously suspects they might. The Saudis have dialled down their high dudgeon at the mere prospect of a rapprochement between Washington and Tehran.

Only last year, the Saudis were huffing and puffing about the perfidious Americans, hinting that President Barack Obama was so unreliable they would have to look elsewhere for allies. Exasperated by US failure to strike at the Iran-allied regime of Bashar al-Assad after last August’s sarin gas attack on rebel Syrian enclaves, and outraged by November’s interim nuclear deal between Iran and six world powers, Riyadh refused to take the UN Security Council seat to which it had been elected. Prince Bandar bin Sultan, then Saudi spy chief, warned of a “major shift” away from the US. Salman, the crown prince, pivoted the country towards Asia, signing a string of notional defence co-operation deals. The Saudis even made overtures to Russia.

But last month, Prince Saud al-Faisal, the Saudi foreign minister, extended an invitation to visit the kingdom to Javad Zarif, his Iranian counterpart. For now, the Iranians are playing hard to get, as is their wont, with Mr Zarif pleading he must first focus on the nuclear talks. Does this herald a regional sea change? U-turns do not come much bigger than this Saudi shift from obloquy to olive branch.

While there was always a histrionic element to Saudi anger – where, after all, could they get anything like the security guarantees the US provides? – it had been simmering for some time. Once Mr Obama gave his blessing to the toppling of close US (and Saudi) ally Hosni Mubarak in Egypt, began dealing with the Muslim Brotherhood – seen by the Saudis as a threatening rival to their brand of absolute monarchy and absolutist Wahhabi Islam – and then withheld military aid to Egypt after last July’s army coup, the House of Saud came to regard the US president as a handmaid of sedition.

But the Sunni Wahhabis’ hostility towards Iran – Shia and Persian – as it cut a strategic swath across Arab heartlands from Baghdad to Beirut is visceral. The Saudis support Syria’s (mostly Sunni) rebels largely because they want to hit Iran by bringing down its allies, but also because Wahhabism abominates the Shia as heretics and idolators. Yet, following Mr Obama’s visit to Riyadh in March, there has been a marked uptick in local diplomatic traffic.

Iran has had contacts with several of Riyadh’s Gulf allies; the emir of Kuwait was in Tehran this month. Saudis and Iranians stood back and allowed their allies in Lebanon to form a coalition government after an 11-month hiatus. And Prince Bandar, the Saudis’ adventurist point-man on Syria policy, looks to have been shunted aside.

Mr Obama appears to have convinced the Saudis he is serious about pursuing a nuclear deal with Iran, as well as a self-regulating balance of power in the Middle East and the Gulf. And he has made the point that the darkest threat to everyone, Saudis as well as Iranians, is the Sunni-Shia sectarian bloodbath in the Levant and concomitant re-emergence of al-Qaeda-style jihadism – dramatised on Tuesday as jihadis operating on both sides of the Syrian-Iraqi border over-ran Mosul, Iraq’s second city. Hopefully, Mr Obama will also have hinted at the limits to western tolerance of the Saudi habit of exporting extremists nurtured on Wahhabi fanaticism.

The key man in Saudi security is Prince Mohammed bin Nayef, the interior minister who prioritises counter-terrorism rather than regime change in Syria. The stars that have aligned here are not particularly bright. The tentative Saudi-Iranian detente arises out of panic – shared by the US and its allies – at the chain of regional upheavals that has undermined autocracy but re-energised jihadism. Prince Saud’s invitation to Mr Zarif did not come out of the blue.

David Gardner

Fonte: FT

segunda-feira, 9 de junho de 2014

The crisis shows moral capital is in secular decline

And still the revelations come. Leading banks pay yet more record fines for egregious behaviour ranging from sanctions-busting to facilitating tax evasion. Their involvement in rigging markets now extends beyond Libor, the rate at which banks lend to each other, to foreign exchange and the gold market. It appears to be a pervasive rather than occasional phenomenon. Even when they have been shopped, they do not give up. UK banks, we discover, have been underpaying compensation for mis-sold payment protection insurance.

All this corporate wrongdoing is combined with immense personal enrichment and a paucity of prosecutions of people at the top. How are we to make sense of this bizarre concatenation of events, in which the financial system appears to have become an ethics-free zone?

One fruitful way to look at it is to think of the financial system as having, at any given moment, a stock of moral capital. This complements an insight of economist John Kenneth Galbraith. In his book on the 1929 crash he argued that there is always an inventory of undiscovered embezzlement, which he called the “bezzle” – in other words, negative moral capital. When markets ride high the bezzle increases. Come the recession people become more suspicious, audits become more penetrating and the bezzle shrinks.

Galbraith described a cyclical phenomenon. Yet events since the latest financial crisis suggest that there is also a structural component to changes in the moral capital stock. In the corporate sector, and especially in banking, there has been an adverse step change in ethical values. One reason is the ineptly named “shareholder value revolution”, whereby a paternalistic corporate capitalism was replaced by a capital market pressure cooker in which senior executives were required to deliver progressive rises in short-term earnings. A second change was the move to performance-related pay and incentives tied to equity values.

In banking this bred a more transactional culture in which profits and personal rewards came increasingly from gaming the system. The globalisation of capital flows in the absence of an international regulator provided banks with ample opportunity for regulatory arbitrage, whereby questionable business could always be diverted to weaker jurisdictions.

At domestic level banks have shaped their business to minimise regulatory capital requirements. The great boom in securitised mortgages – the focal point of systemic risk and fraud in the crisis – reflected the lower capital requirements on mortgage-backed securities relative to those on conventional mortgage lending. At a personal level bonuses took precedence over virtually everything, including the customer.
As long as incentives are at odds with ethical requirements, common decency will be a minority pursuit. Scandals are inevitable. And as the gap between bankers’ pay and that of executives outside the financial system grows ever wider, business leaders lose moral authority, and the case for enlightened capitalism is devalued. There are honest people in banking. But it has become a less comfortable place for those with a strong moral conscience.

If this notion of a secular depletion in the moral capital stock in finance is right, attempts to instil ethics by refining incentives – however necessary and well meaning – will not be enough. In a mature industry in which the return on assets has been stagnant for years and higher equity returns have been achieved only through leverage and excessive risk-taking, heavy reliance on bonuses and equity-related rewards is an absurdity. Any significant rebuilding of the moral capital stock will have to come largely as the byproduct of structural change to make banking more like a utility.

Equally necessary is a retreat from the obsession with punishing corporations rather than senior executives. The supposed justification is that companies can be made to transform their culture and prevent future crimes. Much window-dressing results. Slapping huge fines on banks is potentially a more dangerous game. If the fines are big enough to do material damage, the resulting hit to bank capital may be a systemic trigger. Many innocent shareholders and employees will be the victims. If the fines are immaterial, they are pointless.

Jed Rakoff, the US district judge, argues that going after the company is technically suspect because you should not indict a company unless you can prove that some managerial agent of the company committed the alleged crime; and if you can prove that, why not indict the manager? He also sees it as morally suspect because punishing innocent employees and shareholders for crimes committed by unprosecuted individuals seems contrary to elementary notions of moral responsibility.

Modestly refining the carrots and using the wrong sticks is a poor formula for rebuilding the moral capital stock. There has to be a more radical way.

John Plender

Fonte: FT

quinta-feira, 5 de junho de 2014

Gavyn Davies: Draghi has done enough to silence the doubters

The European Central Bank’s decision to reduce the interest rate on deposits at the central bank to minus 0.10 per cent went as far as even the most ardent doves could reasonably have expected. Rates can probably fall no further. As Mario Draghi, the ECB president, said: “For all practical purposes, we have reached the lower bound.”

For that reason, the more technical elements of the package announced on Thursday in Frankfurt are in some ways the most significant. There was a €400bn injection of liquidity, in what the ECB called a “targeted longer-term refinancing operation” – a near copy of the Bank of England’s Funding for Lending Scheme. There was a form of quantitative easing, in which the central bank will buy securities backed by private sector loans. And there was the cessation of a “sterilisation” exercise, which had previously damped the monetary effect of the ECB’s purchases of government bonds.

Unlike the interest rate, which is now as low as it can go, all of these measures could be intensified if the eurozone recovery continues to disappoint. “We are not finished here,” Mr Draghi said, hinting at the possibility of further action “if need be under our mandate”. This statement was unanimous, and therefore presumablysupported by the Bundesbank, the arch conservative among the eurozone’s national central banks. It reduces the risk that the ECB will become trapped in a deflationary cycle, as Japan did in the 1990s.

Is this a “big bazooka”? It clearly falls some way short of a broad asset purchase programme of the kind pursued by the Federal Reserve and the Bank of Japan. None of the measures introduced on Thursday will produce a transformation in monetary conditions. After all, Denmark cut the interest rate on deposits at the central bank below zero a couple of years ago, with only moderate effects. True, the ECB carries more sway than the Danish central bank. Nonetheless, its move on interest rates should be seen in the same way as any other small reduction. One should not be too excited by the fact that it happens to have crossed the zero threshold.

A negative interest rate is, in effect, a levy on banks: instead of receiving interest on their deposits at the ECB, they will watch them shrink. But the TLTRO and liquidity injections cut the other way, perpetuating the ECB’s recent efforts to provide extremely easy conditions in the money markets. So far as I can see, the banks should gain more from easy money than they lose through negative interest rates. That may explain why bank shares rose after Mr Draghi’s statement.

The decision no longer to sterilise the central bank’s earlier purchases of government debt is a signal of intent, even if its direct effect is not very large. For the first time, the ECB is financing these purchases by creating money. Many had assumed that Mr Draghi would never embark on a QE programme big enough to make a substantial difference to inflation or the exchange rate, for fear of opposition from the German central bank. But having acquiesced in such a programme – albeit on a small scale – the Bundesbank would now find it harder to object on principle. The course pioneered by Haruhiko Kuroda at the Bank of Japan can no longer be assumed to be entirely out of the ECB president’s reach.

It is impossible to know whether the promise to start buying asset-backed securities will develop into a major initiative. At present, such securities are rare; unless the market starts creating them, there will be little for the ECB to buy. Mr Draghi is clearly minded to offer inducements – although technical obstacles have yet to be surmounted. Still, when the central bank makes itself the buyer of last resort, prospective sellers will take note.

The TLTRO is designed to encourage banks to increase their lending to the private sector, in sectors other than housing. The BoE has had some success with this approach. But in Europe, as in Britain, a lack of demand for loans may limit its effectiveness.

Thursday was an important day. The ECB’s balance sheet has been shrinking recently, as previous LTROs were paid off; now it will probably grow once again. More importantly, the central bank signalled that it was ready to back words with action.

Inflation in the euro area has fallen to about 0.5 per cent – and much lower in some countries. To many outside observers, it already looks extraordinary that the ECB has drifted so far from its inflation target of just below 2 per cent without adopting some form of QE. High unemployment in the eurozone is an indication that inflation is unlikely to return quickly.

Mr Draghi has acknowledged on many occasions that a prolonged period of low inflation is now inevitable. But he promised that any further worsening in the outlook would produce action from the governing council. His promises were beginning to look empty. Yesterday, he took action. For the immediate future, it should be enough.

Gavyn Davies

Fonte: FT

quarta-feira, 4 de junho de 2014

Tiananmen divided the workers of the world

When China’s Communist leaders under Deng Xiaoping launched their assault on the Tiananmen Square protesters in 25 years ago, they were supposedly following the socialist road and Marxist principles of proletarian rule. “Workers of all lands, unite!” declared Karl Marx and Friedrich Engels in the 1848 Communist Manifesto.

But the vast expansion of the world’s workforce unleashed by Deng following the crackdown on the pro-democracy protesters led to the opposite. The opening up of China through economic reform and foreign direct investment has, instead of uniting the proletariat, divided it.

This was not the revolution Marx envisaged but it was the outcome of Deng’s 1992 southern tour, on which the Chinese leader supported reform in cities such as Shenzhen, trying to strengthen party rule by offering the people opportunity. The fact that few Chinese now mark June 4, 1989 is a tribute both to party censorship and to Deng’s gambit.

It encouraged, as the economist Branko Milanovic has written, “the profoundest global reshuffle of people’s economic positions since the Industrial Revolution.” The top 1 per cent earners of the world’s population (especially the 0.1 per cent richest) and millions of new entrants to its industrial workforce have gained in different ways from Deng’s liberalisation.

Meanwhile, the non-bourgeois in advanced economies – manufacturing and service workers with low levels of education and limited skills – have suffered wage stagnation. The ability to bargain for higher wages has been undermined by a huge growth in the global supply of labour – by 1.2bn people between 1980 and 2010.

Deng did not shake up the world alone. When I was an employment correspondent in the late 1980s and early 1990s, the power of organised labour in the UK had already been weakened by Margaret Thatcher’s privatisation of state-owned industries and her defeat of the 1984-85 miners’ strike. Private sector union membership was falling and it continued to decline.

Political and economic upheaval coincided with the advance of the internet and rapid development of information technology in the mid-1990s. That led to the automation of jobs and more cross-border trade – it became easier for supply chains to stretch around the world.

But China’s rise toppled creaking barriers to trade and employment, forging a global labour market and rapid industrialisation. About 620m people globally were lifted from poverty by moving from farm to factory, and China’s gross domestic product per head rose from 3 per cent of the level in advanced economies in 1980 to 20 per cent by 2010, according to the McKinsey Global Institute.

In economic terms, this was good for the Chinese people – although it increased inequality, the gains were broadly spread. For many workers in advanced economies, however, it was like a whole new workforce turning up, eager to put in longer hours for lower pay. Their bargaining power has never recovered from the shock.

“For the individual as a consumer, it has been wonderful – there are many more products and services, much more choice, and it has all become cheaper,” says James Manyika, an MGI director. “For workers with limited skills, it is pretty awful. They were once protected, but now they compete with others who are cheaper and may be more skilled.”

The strongest effect has been felt in Europe and the US, where the share of income going to labour has decreased from 64 per cent in the postwar decades up to the 1980s to 58 per cent today. One Federal Reserve Bank of San Francisco study found that the sharpest drop occurred in industries such as textile manufacture that were most exposed to import competition.

By shifting labour-intensive parts of production to countries such as China and keeping the higher-value aspects at home, companies lowered their costs and raised their returns on capital. For the workers of the world as a whole, that amounted to a wage cut.

After a quarter of a century, this arbitrage is easing. Wages in China’s coastal cities have risen, making it more cost-effective to retain production in the US. But that does not guarantee a return to mass employment in manufacturing and primary industries – advances in technology mean factories now employ fewer workers.

According to a study for the Organisation for Economic Co-operation and Development, 80 per cent of the fall in labour’s share of global income has been caused by technological change and the shift toward capital-intensive production. Software and information technology have permitted “unprecedented advances in innovation”.

People in managerial and high-skilled jobs have gained – the average US college graduate earned 1.7 times the wages of a high-school dropout in 1980 but 2.7 times by 2008 – and will continue to have superior employment chances. McKinsey estimates that 95m people could be out of work in developing economies by 2020 because they have low skills.

Through the lens of history, the best time to be a member of the proletariat in an advanced economy was probably the postwar period up to the oil shock of the mid-1970s – when most of the Chinese and Indian population was poor and agrarian and there was little competition. The era was already ending when China implemented Deng’s plan.

“Today, hundreds of millions of Chinese are living far more comfortable lives than they were living in 1989,” writes Ezra Vogel in his Deng biography. Meanwhile, millions of employees in advanced economies are less secure. It is a workers’ revolution, but not a unifying one.

John Gapper

Fonte: FT