The Missile Man Behind China's 1 Child Policy

If this story sounds like a scene out of the world of Dr. Strangelove, it does: while doing some research on the origins of China's one-child policy, I came across this article in the well-regarded journal China Quarterly by Susan Greenhalgh. In her article, she identifies Chinese missile scientist Song Jian as the progenitor of China's one-child policy. If it weren't for his strong backing of the idea while having the ear of Deng Xiaoping, it probably is little exaggeration that China would be a significantly different place from how it is like today. It is a story of mind-boggling proportions, combining elements of cybernetics, the Club of Rome (Limits to Growth), and massive state coercion to make the one-child policy a reality. Who needs conspiracy theories when you can follow one of the largest social experiments of all time?

The entire article is a very good read, but here are some key sections, anyway. The military roots of social policy in the post-Mao era owe a lot to a past emphasis on defence policy:

In the revolutionary turmoil that was Maoist China, most of the social sciences were abolished, the natural sciences decimated. Yet because of Mao’s military view of the world and the very real threats of attack from the United States and, after 1960, also the Soviet Union, military science became a privileged site of knowledge and technology production. Most privileged of all was the strategic weapons community of scientists and engineers charged with building the atomic bomb and the missile systems to deliver the payload.

Deng Xiaoping identified runaway population growth as an obstacle to progress:

In 1977–78, Deng Xiaoping was reducing investment in military R&D and urging defence scientists to turn their energies to solving the nation’s many economic problems. One of China’s most serious problems was its huge and still swiftly growing population. After Mao’s death in 1976, a strong consensus had emerged at the highest levels of government that the rapid growth of a largely rural population was a major obstacle to the achievement of the “four modernizations.”

One of the most prominent missile scientists, Dr. Song, believed that he could apply his expertise in the area of population control. With scientism in vogue, he caught the zeitgeist of the moment very well:

Song immediately saw the promise of the systems science approach. Based on mathematics, this Western cybernetics of population would produce what seemed to him a precise, scientific solution to the population problem. Such a solution appeared far superior to the Marxian social science perspectives that had dominated for so long, leaving population control vulnerable to ideological attack. In the West, the Club of Rome work had provoked an outcry from social scientists concerned about the application of cybernetics’ mechanistic models to the solution of human problems. Song apparently did not encounter such critiques. Quite the contrary, the congress at which he discovered the new approach was infused with a spirit of scientific certainty, progress and messianic fervour about the potential of control science to solve the world’s problems.

Unconstained by Mao's periodic purges of social scientists, the engineers were far more emboldened to make large-scale changes:

Finally, in their years in the weapons development community, the physical scientists and engineers had imbibed that community’s culture of bold experimentation and risk-taking. Whereas the social scientists were encumbered by an ingrained caution and fear borne of years of political persecution, the military scientists possessed the self-assurance to enter an entirely new field, borrow a set of foreign techniques they had encountered only briefly, modify them in significant ways, and then employ those techniques to quickly develop and press for a radically new solution to social problems that had vexed the nation for decades. Of course, these bold manoeuvres carried risks and dangers. But those would emerge only later.

They went about casting population science as analogous to missile science:

In devising a scientific solution to the problem, Song and his colleagues (especially Yu) turned to the cybernetic techniques of optimal control whose use Song had pioneered in the development of missile guidance systems. From a mathematical point of view, missile control techniques lent themselves readily to population control problems, because the trajectories of missiles and populations charted over time followed similar lines, and because the optimization problems for controlling the two objects took functionally similar forms.

Once approved, Song's ideas about the one-child policy needed to be implemented by the state. Akin to a centralized missile programme, directives emanated from above. The rest is history:

As a defence scientist, Song had devoted his career to working on huge, complex and costly weapons projects that not only served statist ends but also required state-centric solutions. In an atmosphere of urgent threat to China’s national security, many of those projects were pursued with a “big-push” thrust that entailed total leadership commitment and massive mobilization of the nation’s resources. Song himself was a proponent of big-push approaches to weapons development...

The inappropriateness of the policy solution became painfully clear in 1983, when, in a changed environment, policy makers undertook a very big-push solution, a massive, nation-wide campaign aimed at jump-starting one-childization by sterilizing one member of all couples with two or more children and aborting all unauthorized pregnancies. Ordered to enforce this policy and reach targets no matter what, rural cadres had little choice but to use coercion against the people. The results were a record level of demographic achievements – 21 million sterilizations, 14 million abortions and fertility rates that dropped to just over 2.0 – and unexpected magnitudes of social suffering, as baby girls were killed, women’s bodies were damaged, and village life was torn by violence and fear.

In China at least, population control was rocket science. One of the ironies here given China's current environmental woes was that reaching environmental limits was one of the reasons touted for population control a la Limits to Growth. Despite worrying concerns over China's warped demographics, the policy thought up by a rocket man remain largely in place.

A Quickie Doha Post-Mortem

It comes as no surprise to probably anyone that the mini-ministerial did not produce much in the way of results, let alone a conclusion to the long-running Doha round before collapsing yet again. Perhaps the anti-globalization protesters kept away in droves because they knew that nothing would come out of this process, anyway. Save the plane fare and just catch the gory details of how all the negotiators' efforts came to naught in the end. Geneva may be lovely in the summertime, but that is not good reason enough to watch yet another sorry episode of the Doha World Tour, which will go on and on. Although I wished that I would be proven wrong, I am afraid that such is not the case here. There were some rumblings of hope, but they did not account for the multitude of conflicts which Reuters provides the talking points of below. As Viktor Chernomyrdin once famously said about dashed expectations in another context, "We hoped for the best, but it turned out like always."

Talks at the World Trade Organization (WTO) to salvage the seven-year-old Doha round foundered on Tuesday on differences between rich and poor countries and developing importers and exporters.

Here are the issues that proved insuperable.

HIDDEN OBSTACLE

* The deal broke down over a relatively obscure but complicated proposal to protect farmers in developing countries from a surge in imports.

* No one expected the "special safeguard mechanism" (SSM) to be the rock on which the talks foundered [these were over rice, cotton, and sugar--the WSJ has a podcast].

THE BIG ISSUES

* Going into the talks the main issues seemed to be the level of U.S. trade-distorting farm subsidies and the scope of exceptions for developing countries on industrial tariff cuts.

* This month's talks focused on agriculture and industry subsidy and tariff cuts, leaving most other areas until later.

* The United States made an early offer to cut its farm subsidies to $15 billion, and accepted a further cut to $14.5 billion in a compromise proposal last week.

* The new figure is less than one third of the current ceiling, but twice current outlays, so developing countries said it was not enough.

* Rich countries such as the United States and European Union members remained at odds with emerging nations such as China and India over proposals to shield developing countries' infant industries from the full force of industrial tariff cuts.

* One difference was the U.S. push to encourage developing countries to take part in voluntary agreements to slash or eliminate tariffs in individual industrial sectors such as cars or textiles in return for smaller overall tariff cuts.

* The United States said sectoral deals would create real market opening. India and China said the proposed tariff "credit" undermined the voluntary nature of the deals.

THE SAFEGUARD

* In the end it was the safeguard that blocked the talks. The way the safeguard proposal was framed failed to reconcile the vital interests of three important groups:

-- the United States, which sought assurances that market opening in other areas would compensate them for other concessions such as farm subsidy cuts

-- developing country exporters, which need growing farm exports to other developing countries

-- big developing countries, which need to protect subsistence farmers from a flood of imports that renders them uncompetitive.

* The safeguard proposal would allow importers to raise tariffs temporarily to counter a sudden surge in imports or collapse in prices.

* Developing importers such as India and Indonesia said this was necessary to stop their subsistence farmers being overwhelmed by market opening agreed in the talks [also see Indian Commerce Minister Kamal Nath's earlier statements highlighting the importance of Indian farmers' votes to the ruling coalition].

* The first volume trigger for the rise in tariffs was a 10-percent rise in imports. This led developing country importers such as Uruguay and Costa Rica to say the safeguard would stifle normal trade growth, not just deal with emergencies, and could even shut off existing trade.

* Another proposal would allow importers in some circumstances to raise tariffs temporarily above current levels agreed in the 1994 Uruguay round if imports grew more than 40 percent -- a deterioration in conditions for the exporters.

OTHER BIG ISSUES

* Even if WTO members had agreed on the safeguard, there were still big differences on a host of other sensitive issues.

* The United States is under pressure to make big cuts in its cotton subsidies, but has not yet made a proposal.

* Developing country exporters are also unhappy with proposals shielding developing imports from the full impact of farm tariff cuts on certain products for reasons of food and livelihood security or rural development.

* The European Union wants to tighten rules protecting the use of place names on wines and spirits, like Champagne. They also want to extend this protection to other products linked to regional names, like Parma ham. A big group of developing countries supports the EU, and also wants to protect the use of indigenous plants and folk wisdom in products such as drugs.

We should add three things to this list. First, despite--ho-hum--earlier hopes for a conclusion to the never-ending banana wars, the failure of this effort means that the associated deal for, erm, banana peace will need to be negotiated separately:

Ecuador, Costa Rica and other Latin American countries stand to lose a new deal with the EU which would have seen the bloc's import tariffs on their bananas fall sharply. That bilateral agreement was linked to a broader WTO deal.

Rival exporters in West Africa and the Caribbean whose bananas pay no EU import tariff, plus some small producers in the French territories of Guadeloupe and Martinique and Spain's Canary Islands, were deeply opposed to the EU-Latin America banana deal struck over the weekend.

Second, the momentary progress made in having industrialized countries at least begin to consider Mode 4 or the temporary migration of skilled service workers such as those from India is back on the back-burner [see here also]:

Representatives of the services sector hailed signs that countries were willing to make long-awaited moves on services, including a willingness by the United States and the EU to give more temporary visas for IT experts and other foreign professionals and by some developing countries that they were willing to relax restrictions on foreign investors. Progress in turning those signals into concrete offers is now on hold.

Third, the EU wasn't even negotiating coherently. Trade Commissioner Peter Mandelson remains at loggerheads with French President Nicolas Sarkozy over the matter of rich agricultural subsidies. Like many others, Sarkozy has a cushy farm electorate to consider:

French President Nicolas Sarkozy has complained to European Commission head Jose Manuel Barroso about a proposed deal on offer at crucial World Trade Organization talks here, a diplomatic source said Monday. Sarkozy called Barroso over the weekend and also demanded that the European Union's chief trade negotiator Peter Mandelson travel to Paris to explain his position - a demand that was refused, the source said.

France currently holds the rotating presidency of the E.U. The French government said Monday it wouldn't sign proposals for a trade pact as they stand because they show no progress on "essential" matters.

Mandelson is negotiating at the talks here in Geneva on behalf of all 27 members of the E.U., but the former U.K. cabinet minister is viewed with suspicion in Paris as a so-called "neo-liberal" who would be willing to sacrifice France's hefty agricultural sector for the sake of a deal. Any final deal must be approved by all 153 members. Within the E.U., all 27 members must also agree to support an accord.

Last Chance Saloon at the WTO

I have to run but the BBC has a video clip featuring the Indian, Chinese, and European negotiators commenting on what should be the last day at the mini-ministerial in Geneva attempting to salvage a deal. A big sticking point is over the so-called "Special Safeguard Mechanism" (SSM). Should India or other LDCs experience a surge of imports, tariffs can be applied to certain agricultural goods. What is on the table is for this SSM to come into effect given a 40% increase in such imports. India, joined by that other major LDC, China, argues that a 20% increase should be sufficient to trigger the SSM. More in a while...it's going down to the wire.

Fritz Hollings: US Was Built on Protectionism

Former US Senator Fritz Hollings had some interesting things to say in an interview with Bill Moyers of PBS. One of the things you often hear from heterodox economists sympathetic to Third World concerns is that, oftentimes, countries that are now developed widely used protectionist policies to nurture their own industries in the past. As a matter of historical fairness, then, it is only proper that developed countries not demand LDCs to lower their trade barriers so rapidly a la the Washington Consensus recipe of liberalize, privatize, and deregulate (e.g., the work of Ha-Joon Chang [1, 2]). Of course, the current state of WTO negotiation deadlock attests to the timelessness of this debate. With LDCS still holding out on protections developed countries want curtailed, we are going nowhere rather quickly.

Here, Hollings makes the case that the US should once again adopt protectionist policies [!] because, among other things, the country's founding fathers built the United States on protectionist practice. It's fun stuff to read even if you're not exactly on board:

BILL MOYERS: They would call you protectionist, they would call you--

FRITZ HOLLINGS: Yeah, I am a protectionist. You-- you got Social Security to protect you from the ravages of old age, Medicare to protect you from ill health. You got food and drugs and clean air, the water we drink, the food we eat, antitrust to protect the openness of the market and everything else. Before I open up Moyer Manufactory, you gotta have clean air, clean water, Social Security, Medicare, Medicaid, plant closing notice, parental leave, safe working place, safe machinery, antitrust. You can go to China for 58 cents an hour. They'd get you the plant, they own the workers, and you don't have any investments so you don't have to worry about it.

BILL MOYERS: You say all we need to do to make the country work, is follow the lead of the forefathers to compete in globalization. To build the country's economy Washington, Hamilton, Jefferson, and Madison, made sure the first bill to pass the Congress in its history on July 4th 1789--

FRITZ HOLLINGS: Seventeen eighty nine.

BILL MOYERS: Was a--

FRITZ HOLLINGS: Protectionist bill, tariff bill on 60 articles. We financed the country's development with tariffs. That's how we--that's the Treasurer's Building is the best building here in Washington. The best building in Charleston is the custom house. The best building in Brooklyn is the custom house. Treasury had the money. Teddy Roosevelt said, "Thank God I am not a free trader." Oh, Lincoln, everybody says, I'm either for Roosevelt, I'm a Lincoln Republican. He was a big protectionist. Oh, he raised tariffs. They were gonna build a transcontinental railroad on the Abraham Lincoln. And they said we could get the steel cheap from England. He said, ah - wait a minute, we're gonna build our own steel mills, and then we'll have not only a steel capacity, but we'll have the railroad. And so he was a builder. Everybody was a builder. Eisenhower, he protected oil. Jack Kennedy, I went to him, and he protected textiles. Ronald Reagan, he protected computers and Harley Davidson. He saved it. I saw George W. the other day about three weeks or a month ago, he was at the Harley Davidson plant, but protectionism saved it. That's why they were making money at Harley Davidson. Oh, he got--

BILL MOYERS: That's because of--

FRITZ HOLLINGS: Voluntarily restraint. Reagan got on steel, computers, machine tools, and automobiles. He got voluntary restraint and that's the only way to do it. Sober up.

Obama: (Trade) Nightmares of My Half-Brother

Barack Obama's first bestselling book was entitled Dreams of My Father. It seems, however, that he may not find some of his other relations so, well, dreamy. The press on this side of the Atlantic has been all agog over Obama coming over to enlighten us primitives. Nonetheless, while the Times is mock-extolling Europe's undeniable choice for next American leader, it currently features another article with decidedly sinister undertones. I haven't the slightest idea about how this article became the Times' most-read, but that it is at the moment: there is a feature in the newspaper on Obama's half-brother, Mark Ndesandjo. Potentially embarrassing relations better left unmentioned are not exactly novel in American politics. Think Roger Clinton. As a commenter to the Times article questioned, why is it that Americans should be any more concerned about Obama's half-brother when Roger Clinton was jailed prior to Bill Clinton's term? What can make Mark Ndesandjo a bigger electoral liability than an ex-con half-brother?

The answer is devastating: Remember America's much-vaunted scepticism about trade? Obama has, at least more so in the recent past, championed tacking on environmental and labour regulations to trade agreements, renegotiating NAFTA, and, this is verbatim--"stop[ping] countries from continuing unfair government subsidies to foreign exporters and nontariff barriers on U.S. exports." Hmm, sounds like China-bashing to me. Well, far worse than being an ex-con, Mark Ndesandjo has--get this--been acting as a middleman promoting cheap Chinese exports, and whose main export market is...the United States. There's a famous tagline for American bumper stickers that begin with, "I'd rather have a sister in a whorehouse than..." In this day and age of American trade hatred and the sport of China-bashing, perhaps the continuation for Obama is "...have a half-brother pimping Chinese goods to America." Oh [feigning indignation], for shame!

The Wrath of Nath: Deciphering India's WTO Stance

Many pundits (including yours truly) were surprised when the then-ruling BJP party was booted out by Indian voters in 2004. With its mantra of "India Shining," the BJP thought it could capitalize on the emergence of the Indian economy from the self-deprecatory "Hindu rate of growth" to something decidedly more pacey. Left out of the BJP's calculation were the many marginalized who felt that the benefits touted by the BJP did not reach them. In contrast, the Congress Party has typically adopted more egalitarian rhetoric. The Gandhian legacy remains strong, and Indian Commerce Minister Kamal Nath is surely not one who is outside this mold. The so-called G4 spearheading the WTO negotiations are led by, respectively, US Trade Representative Susan Schwab, EU Trade Commissioner Peter Mandelson, Brazilian Foreign Minister Celso Amorim, and India's Nath. Among these four, Nath strikes me as the most colourful (in a good way); cutting a distinctive figure. Is it just me or does he have a passing semblance to Tom Jones? Maybe it's not unusual.

Anyway, while searching for something else, I came across a transcript of a presentation by Nath at the Carnegie Endowment for International Peace on the very topic of WTO negotiations. There are many insightful comments from Nath in the transcript on India's stance at the WTO (or, at least the Congress Party's). Unsurprisingly, one of the points of emphasis is that agriculture, particularly subsistence agriculture, remains a widespread feature of Indian economic life:

We do talk of poverty, we talk of the LDCs, but sometimes when one sees numbers, the numbers of India’s growth...India’s prowess in the IT sector, one overlooks that India has 300 million people [living on] less than one dollar a day...India still has 650 million people engaged in agriculture, with about 80 percent – over 80 percent having land holdings of less than one hectare or one and a half hectares, which is not commerce but is subsistence agriculture. While we talk of India’s strengths in the manufacturing sector, in the high-tech manufacturing sector, we also look at the enormous cottage industries, the small-scale industries. We look at the large infant industry.

That is the picture of India, which has to be looked at in real terms, because sometimes I hear these words of large, developing countries, large, emerging countries. Of course we are large. Of course we are emerging. Well, what does that mean? That doesn’t mean we don’t have 300 million people [living on] less than one dollar a day. That doesn’t mean we don’t have 650 million people in agriculture, in subsistence agriculture, and I’m reminded that in Potsdam, telling the United States that you are one million people engaged, employed in agriculture – I have 1.5 million in my district. So that’s what you are talking about, and I said, you are batting for the protection and promotion of prosperity, and I am batting for the protection of livelihood. Now you don’t require any rocket science to understand what you should – what really should prevail.

OTOH, he seems to be asking for the impossible in liberalizing trade without downsides for those in the developing world:

We are growing at 9.4 percent. I want a formulation where I grow at 11 percent. I don’t need a formulation to grow at five percent. That is the crucial thing. And that’s what all the developing countries are saying: please give us a formulation which increases trade flows but does not dislocate because if you are going to dislocate in developing countries where there is no social net, in the ultimate analysis, you’re not going to have healthy economies, and that is the crucial thing which we must take note of.

And, of course, there's his case for greater Mode 4 migration:

We’ve got to be looking at services. I understand services is difficult. I understand services is – immigration is a sensitive issue. I don’t want to talk about immigration. But certainly I want to talk. I want to talk about contractual service providers. I want to talk about the one-month or the two-week or a five-week visa which is not immigration, where our software engineers cannot even integrate software development because they can’t get a visa for one month or three weeks. That’s not immigration. And if you don’t do that and if you have a domestic regulation which frustrates it, it’s a non-tariff barrier.

Nath also develops a theme on why the lack of Western corporate interest pushing the round has helped it falter:

If you compared it with the Uruguay round, the big difference with the Uruguay round was that there was strong private sector corporate interest in the United States and the EU pushing for the round, someone who really wanted the round. That’s not the case in this round. I mean, the private sector is almost conspicuous by its absence. So nobody really wants the round that badly, one.

Two, the whole thing about the Doha development agenda is a bit of a myth, I would say, because if you look at any study done on what the impact would be on the least-developed countries, even a study done recently by Carnegie, it’s completely ambiguous. The poorest countries tend to lose from preference erosion, food prices could go up by subsidy reductions, so it’s very mixed. So the whole Doha development agenda has been a bit of a sell and a myth.

So given all this and the electoral pressures and the timing pressure that you spoke about, isn’t the world and your efforts as well should be devoted to actually quietly laying this beast to rest and planning for the post-Doha world? I mean, it could be a very different world, and we have some ideas on what the world should look like, but carrying on with this trying to raise this beast that has no breath in it anymore, plan for – I mean, let’s be realistic, let’s be honest and say the Doha round is dead. Let’s get back to the drawing board and think creatively about what the drawing board should come up with.

There's a lot more in the transcript, though you can read it at your leisure. It's worth reading insofar as it does clarify some of his negotiating positions as perhaps the most important negotiator at the current WTO talks.

Unexpected: US Mulls India's Mode 4 Proposals

After the seemingly endless stream of negative rhetoric which has poured forth from Geneva thus far, this news is potentially welcome: The United States has actually begun to consider India's proposal to allow freer migration of service professionals to perform temporary contract work in the US. What's more, the EU signals that it too may be amenable to such overtures. Needless to say, this development could be something big. In the past, the US has treated so-called "Mode 4" migration of the sort described above as a migration and not a trade issue (see earlier post for an overview). However, it seems to be softening its stance here. I suspect that while India with its large pool of knowledge workers stands to benefit a great deal, the US is also considering repeated requests by American technology firms to allow more skilled foreign workers to ply their trade Stateside.

One of the things I keep telling my students is not to treat the "Third World" as a monolithic bloc. Divergence in their economic fates means that their interests by no means coincide on a multitude of issues. In the context of "green room" service negotiations, the Latin left of Bolivia, Cuba, Nicaragua, and Venezuela is not quite keen on availing of South-North Mode 4 migration in exchange for concessions on national treatment and market access for services. The Economic Times notes that the Latin left felt ambushed when developing countries which stand to gain on Mode 4 migration agreed to a services negotiation text that went beyond what the Latins felt comfortable with. In any event, here is the an update on the state of services care of Reuters:

The United States is prepared for the first time in world trade talks to discuss allowing more service professionals from India and other developing countries to work there, a U.S. industry official said.

U.S. trade officials were given permission to discuss the visa issue this week after months of consultation with White House national security officials and key members of Congress, Coalition of Service Industries president Bob Vastine said. "Whether they are in position to make an offer or even signal a specific kind of offer, I don't know. It may partly depend on the dynamic of the meeting," he told reporters on the fringes of a trade ministers meeting trying to reach a breakthrough in the nearly 7-year-old Doha round.

The Doha talks aim to open markets for farm, manufactured goods and services around the world but have struggled to overcome differences between rich and developing nations and they risk being put on hold for a couple of years unless a breakthrough is reached soon.

The issue of granting more temporary-entry visas for information technology engineers and other professionals from poor countries has been controversial in the U.S. Congress since the Bush administration did so several years ago in free trade pacts with Singapore and Chile. Many lawmakers objected to inclusion of what they said were "immigration" provisions in a trade agreement.

The new move addresses a key demand of developing countries as the United States tries to persuade India and others to open their markets in sectors like financial services, distribution, telecommunications and computer-related services.

The EU is expected to make an improved offer to open its market to foreign professionals on Friday, when discussions in Geneva are scheduled to turn to services after several days of negotiations on agriculture and manufacturing. "They're (the EU) probably not going to give the final figure because that's probably going to be the last thing they give in the negotiations in this round," said Pascal Kerneis, managing director of the European Services Forum.

Although India has made "very good offers" to open its market in areas such as telecommunications, distribution, computer-related services and energy services, it has not done so in financial services, Vastine said.

Indian Commerce Minister Kamal Nath told a news conference India needed to see what the United States and the EU were prepared to do on the visa issue before he could make his offer on financial services. "Let me make it clear India has no demand on immigration," Nath added, saying New Delhi only wanted to make sure burdensome rules do not block Indian professionals from performing contract work in the United States and the EU. At the same time, he said the outcome of services negotiations would be critical in India's assessment of proposed deals on agriculture and manufacturing.

The services talks suffered a setback on Wednesday, however, when Bolivia, Cuba, Nicaragua and Venezuela blocked adoption of a report laying out the future path for the negotiations, a participant in the meeting said. The four Latin American countries argue that a separate formal negotiating document on services is not needed.

The WTO's mediator on services, Mexican ambassador Fernando de Mateo y Venturini, had submitted a draft to the meeting which called on members to submit revised offers on services by Oct. 15 and final commitments by Dec. 1. Mateo will now report to the final session of this week's meeting of ministers, which may still decide to adopt dates for new services offers.

LDCs to EU/US: Take Your Ag Proposals and Shove It

Day 2 at the Doha mini-ministerial came and went with nary a trace of improvement as negotiations continue to fray along North-South lines. Earlier on, the EU tried to get the ball rolling on agricultural issues by offering to cut current tariffs on agricultural products by 60% instead of just 54%. LDCs weren't impressed by this, however. Next, the US said that it was now willing to cap agricultural subsidies to $15 billion per annum from a previous ceiling of $48.2 billion. This would look impressive were it not for the fact that the US is currently spending about $7B on agricultural subsidies. This figure appears low since agricultural commodities currently command high prices. However, if and when these prices fall back to being in line with more historic trends, then all sorts of support would kick in once again. In any event, the LDCs weren't impressed by the US offer, either.

As an aside, Indian Finance Minister Kamal Nath returned to India on Tuesday to vote on a motion of confidence over PM Manmohan Singh's leadership. This was sparked by the ruling coalition's erstwhile Communist allies showing their displeasure over nuclear cooperation with the United States. The motion in support of Singh passed 275-256, and Nath should be back in Geneva by tomorrow. From the Economic Times/Agence-France Presse:

Industrialised and developing economies failed to find common ground in global trade liberalisation talks Tuesday, with Brazil shooting down a US proposal a day after a European initiative went nowhere. The United States offered Tuesday to cut official aid to its farmers by two billion dollars to 15 billion dollars a year in a bid to spur movement at WTO trade talks but found no support from key player Brazil.

"Nice try," said a member of the Brazilian delegation, adding that the proposed new subsidy level was "still too high." Brazil has been acting here as an unofficial spokesman for developing countries. Brazil's chief WTO negotiator Celso Amorim subsequently struck a slightly more positive note, saying the US move "proves the engagement of US in the negotiations but with a low level of ambition."

Tuesday's exchange, highlighting a gulf between developed and emerging market countries, came as ministers from some 35 nations met in Geneva to try to break a seven-year deadlock in the Doha round of World Trade Organisation liberalisation negotiations.

Developing countries have voiced deep frustration at what they say have been inadequate offers on market-opening measures from rich participants such as the United States and the European Union. But on Tuesday, US Trade Representative Susan Schwab said the world's largest economy was now prepared to cut its farm subsidies in exchange for an "ambitious market access outcome." She stressed that the offer was conditional on improved access for industrial products in emerging countries and a guarantee that US farm subsidies would not face any further legal action at the WTO. "These reductions are not offered in isolation and must be accompanied by significant market openings" in both agriculture and industrial products, she told reporters.

The EU welcomed the US move but said there was still room for more flexibility from the Americans as talks continue throughout the week. "This is a reasonable offer at this stage," said EU trade spokesman Peter Power. "It is not the furthest the US could go but we assume this depends on the remaining negotiations and a balance being achieved in other sectors," he added.

Non-governmental organisations were scathing in their reactions however, with the Geneva-based Institute for Agriculture and Trade Policy (IATP) branding it "absurd" and Oxfam International saying it was "vastly inadequate." Fifteen billion (dollars) is around twice what the US is (really) spending at the moment. They would not have to cut a penny off current subsidies as a result of this offer," said Jeremy Hobbs, executive director of Oxfam International. Hobbs also denounced the US bid to secure immunity from any further WTO legal action as "tantamount to admitting intention to break the rules in the future. It adds insult to injury."

The US overture came after an abortive attempt by EU Trade Commissioner Peter Mandelson to jolt the talks into movement on Monday with an announcement that the European Union was ready to extend tariff cuts on agricultural products to 60 percent from 54 percent. But even Mandelson's fellow EU commissioner Mariann Fischer-Boel said the offer was "nothing new" and Brazil dismissed it as "propaganda."

The EU, as is the United States, is linking concessions in farm trade to steps by emerging countries to open up more to manufactured goods. Argentine negotiator Nestor Stancanelli said he saw "real negotiations" as beginning only Tuesday, pointing to the Doha round's NAMA component -- covering industrial products -- as a main sticking point. "The NAMA text, for many of us, does not reflect the positions of many members ... The NAMA text is presented as if it were already a result," he said.

Meanwhile, the negotiating process was further hampered by the absence of Indian Commerce Minister Kamal Nath, an important participant who was in New Delhi for a crucial government no-confidence vote sparked by left-wing opposition to a nuclear energy deal with the United States. The Indian government narrowly won the vote and Indian Commerce Secretary Gopal Pillai told AFP that Nath was due in Geneva early on Wednesday.

The Doha round of negotiations was launched amid high hopes in the Qatari capital in November 2001 but it has foundered ever since as developed and developing countries bicker over how to cut agricultural subsidies and tariffs on industrial goods.

Good Fun: The Varieties of NGOs

The current issue of the European Journal of International Relations features an article by Norbert Gotz concerning how the field of International Relations (IR) has largely neglected non-governmental organizations (NGOs) in relation to more standard IR fodder. As the field of International Relations has been quite state-centric in the past--inter-national--there has been some debate on how these organizations should be entered into the mainstream study of IR. As Gotz so aptly describes, IR is marked by "Westphalian nomeclature." The paper is quite a good read even if I don't really agree that it's mainly a matter of definition via negative language claims ("non-government") which require consideration. In particular, I am struck by this rather gratuitous passage on the proliferation of NGO forms as well as NGO catchphrases on pp. 232-33:

Best established of the sub-concepts is probably the INGO, the international non-governmental organization. The same phenomenon as projected by the GONGO [government organized NGO] has been insinuated by the interpretation of NGO as standing for ‘next government official’. Interestingly, there are multifarious subconcepts that question the non-governmental character of NGOs. Similar in content to the GONGO are the GINGO, the government-inspired NGO, and the GRINGO, the government regulated/run and initiated NGO. To a somewhat lesser degree, sub-concepts such as QUANGO (quasi NGO), PANGO (party-affiliated NGO), RONGO (retired officials NGO), DONGO (donor-organized NGO), DINGO (donor international NGO), and CONGO (co-opted NGO) are also closely tied to the sphere of government. However, the acronym CONGO is also used to denote both the Conference of NGOs in Consultative Relationship with the United Nations and commercially oriented NGOs, which brings us to the field of BINGOs (business interest NGOs), BONGOs (business-organized NGOs) and the MONGO (my own NGO), terms used to pin down for-profit or individual private interest NGOs. Both MONGO and MANGO can be used to denominate mafia(-organized) NGOs, but the latter acronym has been given several meanings and might also stand for manipulated NGOs or, value-neutral, for Macedonian NGOs.

Given this background, it is hardly surprising that the Tuvalu Association of NGOs is not unrivalled in using the acronym TANGO. While a regional anchoring is open in character, most of the sub-concepts mentioned above obviously exhibit tension vis-a-vis what still seems to be the main association with the plain concept of NGOs, namely the PINGO (public interest NGO) in general, and the RINGO (religious international NGO), the ENGO (environmental NGO), and the NGDO (non-governmental development organization) in particular. A specific variant of the latter is the Development Justice and Advocacy NGO (DJANGO). The acronym NGO has facetiously been interpreted as standing for En-J-Oy in regard to the staff of aid-receiving organizations, alluding to their special privileges that are unavailable to the surrounding communities. Similarly, such an interesting bird as the FLAMINGO, the ‘Flashy Minded NGO (representing the rich)’ has been suggested for adaptation.

The Lameness That is Doha, T-Shirt Edition

Oh dear, it's not a very good sign when the gift shop at WTO headquarters is now taking part in poking fun at the Canterbury Tales-length negotiation process officially known as the Doha Development Agenda. Agence-France Presse has cleverly entitled its feature on the T-shirt sales as "been there, done that, got the T-shirt." Actually, it's "been there, done that, saw the movie, bought the T-shirt." Unfortunately, I highly doubt that there are enough dramatic elements to make much of a box office hit out of the Doha round [zzzzzzzzzzzzzzz]. Even the anti-globalization protesters have been resolutely lame in the busting up property / attacking riot police departments. If they decide to make a picture anyway, I'd like to play Pascal Lamy despite looking absolutely nothing like the WTO Director-General and not speaking any French besides. My recurring line? "Mon ami, the deal ees jus round se corner" [rimshot!] Thank you, thank you, take my wife please, etc.

Lame jokes aside, this story nonetheless reminds me of Pietra Rivoli's book The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade. Take it out of the library if you have the chance.

Ministers suffering from "negotiation fatigue" as the World Trade Organisation tries yet again to break the deadlock on the Doha round can at least get a new outfit in the form of commemorative T-shirts. One such shirt distributed by the WTO, yours for a mere 35 Swiss francs (22 euros), reads: "The right Doha deal at the right time." [What does this say about the WTO when it tries to rip off delegates with a €22 T-shirt? The symbolism is not lost on me.]

Another bears the legend "Doha Round World Tour" on the front while the back included dates and location of previous ministerial meets -- not perhaps the most auspicious roll-call given the WTO's history of inconclusive and fractious meetings since the Doha round was launched in 2001.

Ministers from around 35 key countries are meeting in Geneva this week in a bid to hammer out a global trade deal which has so far proved elusive.

The Doha round of negotiations was launched with great fanfare in the Qatari capital in November 2001 but remains deadlocked as developed and developing countries haggle over concessions on issues such as agricultural subsidies and tariffs on industrial goods.

Cancunized: Brazil Says 4 More Years of Wait OK

Whoa, this latest salvo from the Brazilian Foreign Minister and chief negotiatior on behalf of the LDCs prior to the upcoming WTO mini-ministerial meeting in Geneva makes me even more curious about what will happen. Figuratively speaking, the Doha round has been traumatized, anesthesized, lobotomized...and now, perhaps deeply Cancunized after that legendarily tragicomic ministerial meeting in 2003. In the event that the rich industrialized countries are unwilling to move on agriculture, Celso Amorim is saying it would not be an especially big deal if the round were delayed for another four years [and the crowd chants, "four more years!"] if it takes that long to gain a better deal. Is it just me or are things going nowhere fast? It would be a minor miracle if a deal that advances matters significantly is brought to pass given the rancorous nature of the pre-meeting rhetoric from all sides involved which I have been posting on these past few few days. From Agence-France Presse:

Brazil is willing to wait until 2012 in order to secure a better deal on the negotiating table at the World Trade Organisation (WTO), its Foreign Minister Celso Amorim said Saturday.

Speaking to journalists in Geneva, where WTO talks are set to enter a crucial new phase on Monday, he said a failure next week would put back the conclusion of an agreement by another three or four years.

The Geneva meeting will bring together around 30 big WTO players in a bid to salvage the so-called Doha Round of trade liberalisation talks, launched in the Qatari capital in 2001 and which has struggled ever since with developed and developing countries alike refusing to budge on their core interests.

"If we wait, we will obtain a better agreement" than the one currently on offer, said the minister, adding that public opinion was "changing in our favour." Amorim is the developing world's main representative in the WTO talks and the public face of the G20, the grouping of developing countries co-led by Brazil and India.

He is seen as a hard negotiator committed to seeing wealthy countries cut agricultural subsidies that are barriers to farm imports from Brazil and other nations. Amorim accused developed countries of demanding too much from other countries. "One cannot snatch the maximum from the weakest and give only the minimum in exchange," he said.

French President Nicolas Sarkozy said at the end of May that the European Union, which is negotiating with the WTO, had "nothing" to gain from emerging countries on industrial products and services and had already made too many concessions over agricultural issues.

On this, Amorim said the agreement on the table with the WTO would oblige Brazil to reduce its customs duties on half its imports and that its highest duties would come down by a third from around 35 to 25 percent. On services he said that Brazil would make an offer on Thursday in Geneva after three days of negotiation dedicated to agriculture and industrial products.

Amorim, who had talks on Saturday with WTO head Pascal Lamy, said he had asked him to allow enough time for states to negotiate possible changes to draft agreements on the table. "Otherwise you may have a Cancun-like scenario," he warned, referring to WTO talks that collapsed in Mexico in 2003. He added: "I come here to have a deal. Of course, this is not an easy task and certain things will have to be clarified before we know if we have a deal."

At issue in next week's talks are agricultural and manufacturing trade barriers. The industrialized countries are seeking greater access to developing markets for their manufactured goods, while in return developing countries want lower farm subsidies and agricultural tariffs in the developed world.

Pre-Hyperinflation Zimbabwe: Mugabe, A Love Story

Where do I begin to tell the story of how great a love can be? In the not-so-distant past, Robert Mugabe was regarded as a hero of the global independence movement from the shackles of colonial rule and its offshoots. His struggles against white minority rule in what was then known as Rhodesia under Ian Smith, who unilaterally declared independence from British rule, are well-known and need little recounting here. At the current time, however, sympathies for Mugabe have largely disappeared in light of his attempts to establish a stranglehold on Zimbabwe. In particular, the severity of Zimbabwe's current bout of hyperinflation has attracted much discussion. While official figures peg it at a "conservative" 2,200,000%, others place the figure somewhere between 10-15 million percent. The BBC reports that a Z$100,000,000,000 note is on the way that can barely buy a loaf of bread. I suspect even that won't buy you a loaf of bread for long:

Zimbabwe is to introduce a bank-note worth Z$100bn in response to rampant inflation - but the note will barely cover the cost of a loaf of bread.

Some Zimbabweans are already calling for higher denominations in a country where the official annual inflation rate has exceeded 2,200,000%. Independent economists believe the real rate is many times higher. Zimbabwe's meltdown has left at least 80% of the population in poverty, facing mass shortages of basic goods.

The country's central bank has introduced several new notes already this year in response to the hyperinflation. In January, a Z$10 million note was issued, followed by a Z$50 million. By June the denominations had reached tens of billions.

In a notice in the state-controlled Herald newspaper, central bank governor Gideon Gono said the Reserve Bank of Zimbabwe would introduce the new notes - known as special agro-cheques - to help consumers. "This new $100 billion special agro-cheque will go into circulation on Monday," the notice said.

But Zimbabwe residents say the latest note is already worthless, and does not even cover their daily lunch. "Nowadays, for my expenses a day, I need about Z$500 billion," one resident said. "So Z$100 billion can't do anything because for me to go home I need Z$250 billion, so this [note] is worthless."

Zimbabwean hyperinflation has become the butt of Internet jokes, but the lives of Zimbabweans affected by these shenanigans are a gravely serious matter. This latest feat of economic history in the making jogged my memory of an article I read earlier in the Independent which potentially ties up some loose threads. First, why does Mugabe have such an intense hatred of all things British? Second, how did the "good" Mugabe of the independence movement turn into the "bad" Mugabe we know today? It is often said that truth is stranger than fiction, and the newspaper offers an explanation as good as any I've heard: like Darth Vader, the man has been twisted...by love.

The late wife of Robert Mugabe, Sally, is known as the mother of Zimbabwe. The Independent highlights the Home Office's threatened expulsion of Sally Mugabe due to a lapsed visa while she was in Britain to escape political persecution in Rhodesia. Then, as now, immigration was very much a political hot potato in Britain. The flip-flopping of the British government during an obviously trying time for Robert and Sally Mugabe is blamed for ultimately turning him against Britain:

The political climate made it too dangerous for [Sally Mugabe] to stay in Salisbury [today's Harare] and so, in 1963, she escaped the security services by fleeing first to Ghana with her son and then, in 1967, to self-imposed exile in London, where she found work as a secretary at the Africa Centre in Covent Garden. From the safety of Britain, she campaigned tirelessly for the release of her husband and other Rhodesian dissidents. She also supported her husband's studies by researching documents that the Salisbury Prison authorities had banned. Sometimes this meant transcribing very dry texts line by line and then posting them to her husband in prison.

There is no doubt that Sally Mugabe's support for her husband helped sustain him during his time as a prisoner in Salisbury. But, in 1970, while still locked up, Mugabe discovered his wife's immigration status was at risk and that the British government was planning to throw her out of the country because her visa had expired.

Now, documents released at the National Archives show that Mugabe was so enraged by the decision that he went to extraordinary lengths to help her. In March of that year, he wrote to James Callaghan, the then-Home Secretary [later PM], about his wife's situation. This letter went unanswered, prompting Mugabe to send a telegram to Harold Wilson on 8 June, asking the Prime Minister to grant his wife British citizenship. Again, there was no official response.

Ten days later, he pursued this request with a three-page, handwritten letter to Wilson setting out the case for reconsideration on the grounds of exceptional circumstances, pleading with the Prime Minister to understand his wife's predicament: shortly before Sally had come to England in 1967, tragedy struck the Mugabes when [their son] Nhamodzenyika died after succumbing to a severe attack of malaria. He was just three years old. With her husband in prison, Sally was left to bear the emotional burden of the loss alone. The confidential papers show that she later suffered a mental breakdown while living in London.

One of her supporters, Tony Hughes, secretary of the African rights group Ariel Foundation, wrote at the time that the strain of the bereavement, combined with the stress of her imminent deportation, had taken a great toll on Sally's mental state, and in a letter to the government, he wrote of the proposed deportation: "It is certainly unfair for the British government to add to the misery of her already broken life."

In his letter, Mugabe had told Wilson of the effect the death of his son had had on his wife, explaining that: "My wife, whose health has never been satisfactory since the loss of our son in 1966, is at present suffering serious emotional upset as a result of the decision by the Home Office. Surely then, the fact of my detention is enough suffering for her already. As I stated in my letter to Mr Callaghan, the reason my wife decided to work for the year (September 1969-June 1970) was to enable her to earn a little money for herself until October when she should enter university to do a degree in Household Science. The Home Office decision wrecks even this wholesome plan."

The Mugabes were caught up in domestic political football:

A confidential memo written by a Foreign Office diplomat set out the situation in plain terms: "We know very little about Mr Mugabe except that he is in detention and is the former founder and secretary general of Zanu." Nevertheless, the Foreign Office urged the Home Office to adopt a sympathetic approach on the grounds that they could ill-afford to alienate a potential ally in the road to black independence in Rhodesia: "If Mrs Mugabe has to leave Britain this would have a bad effect on her husband and could be politically embarrassing"...

Despite mounting pressure, the new Home Secretary, Reginald Maudling, refused to budge, and it was not until after a high-profile media campaign, and a petition signed by more than 400 parliamentarians, that the government finally relented and allowed Sally Mugabe to stay.

Yet, Robert Mugabe would never forget the attempts by the British to deport his wife at a time when she was at her most vulnerable. When his personal entreaties to Britain went unacknowledged for almost a year, the suspicion that neither a Labour nor Conservative government would be prepared to help him topple the Smith government, and install black-majority rule in Zimbabwe, must have hardened. (Indeed, [Tory PM Harold] Wilson later famously recounted that he knew the British public would never have countenanced an armed conflict with its "kith and kin" in Rhodesia.)

Although it is not mentioned at all in the article, I suspect that Mugabe's Marxist leanings did little to endear him to the British at the height of the Cold War. The handwritten correspondence of Robert Mugabe with the Home Office has been collated by the Independent and can be viewed online. As a piece of history, it is priceless.

As for the second question as to why Mugabe's more extreme, tyrannical instincts got the better of him in his later years, Sally Mugabe is portrayed as a counterbalance to Comrade Bob's excesses. With her passing away in 1992, the stage was set for him turning Zimbabwe into the basket case of a country that we know today. Love means never having to say you're sorry, indeed:

In the early years of Mugabe's rule, it was his wife who was credited with helping to temper his excesses. She could lighten his mood, said one of his former colleagues, just by entering the room. But the relationship began to falter when they discovered they were unable to have any more children and, as Sally's health failed, Mugabe began to have affairs.

Sally Mugabe died on 27 January 1992 from kidney failure and four years later Mugabe married his South African mistress, Grace Marufu. Without his first wife there to caution him against his extreme politics, Mugabe began to emerge as a tyrant. But that has not stopped Sally Hayfron from still being remembered affectionately, as the founding mother of the nation of Zimbabwe.

I Hereby Invoke Godwin's Law for the WTO Talks

Those hoping for a breakthrough in the upcoming WTO mini-ministerial meetings had better look away: Brazilian Foreign Minister Celso Amorim has launched a definite low blow on the upcoming WTO trade negotiations by comparing developed countries' rhetoric on agricultural subsidies to propaganda strategies employed by Nazi propagandist Joseph Goebbels [!] Those who have engaged in, shall we say, "heated" Internet discussions know Godwin's Law as that wherein flame wars degenerate into Nazi references somewhere down the line. To avid international economic diplomacy junkies like yrs. truly, this development is not a surprising one. Frustrations all around have led to cheap potshots. US Trade Representative accused Brazil and India not so long ago of trying to "destroy the Doha Round." Perhaps returning fire, Amorim now makes this analogy according to the Associated Press:

Some pre-negotiation jabbing turned into a potentially damaging diplomatic incident Saturday when Brazil's foreign minister said rich countries' deception in trade talks reminded him of tactics used by Nazi propaganda chief Joseph Goebbels.

His comments drew a sharp rebuke from the United States, whose chief trade negotiator, Susan Schwab, is the daughter of Jewish Holocaust survivors. Her spokesman described the reference to Goebbels as "incredibly wrong."

The controversy threatens to overshadow next week's last-ditch effort to save seven years of frustrating talks on a new global trade pact toward alleviating poverty around the world. The so-called Doha trade round is already teetering on the brink of collapse. President Bush has made a Doha deal a key part of his trade agenda.

Brazilian Foreign Minister Celso Amorim said the U.S., Europe and other wealthy economies have so frequently misrepresented the talks launched in Qatar's capital in 2001 that public perception has become totally warped. "Goebbels used to say if you repeat a lie several times it becomes a truth," Amorim told reporters at the World Trade Organization, where top negotiators from over two dozen countries are expected Monday for the official start of the talks.

Poorer countries have demanded cuts in the farm tariffs and subsidies used by wealthy countries, saying they hinder Third World development. In exchange, rich countries have insisted on better market access in developing countries for their manufacturers and service providers.

Amorim implied that rich countries were employing Goebbels' lying tactics in describing the agricultural concessions they claim they are willing to make, while criticizing poorer countries for refusing to liberalize their industrial markets. "I am reminded of Goebbels," said Amorim, whose country has co-led with India a broad coalition of developing countries at the WTO talks. Later, his spokesman qualified the remarks and apologized to Schwab.

Sean Spicer, spokesman for the Office of the U.S. Trade Representative, said he was horrified by the "personal venom" of Amorim's words. "We came here to Geneva to negotiate on substance," Spicer told The Associated Press. "For him to make remarks like this is so incredibly wrong. They are insulting."

Spicer noted that Schwab visited Amorim to soothe tensions immediately after negotiations collapsed in acrimony in 2006.

In an interview with the AP, Amorim's spokesman Ricardo Neiva Tavares said the minister "regrets if Susan Schwab or anyone else was upset by his comments on a historical fact. He certainly did not intend to hurt anyone's feelings, which he deeply respects.

The Joyless Economy: Roubini is Our Scitovsky

I have followed Nouriel Roubini's rise from a well-regarded academic whose speciality is international economics to one of the world's "Top 100 Public Intellectuals" according to Foreign Policy. Although economics blogs can be somewhat dry, Roubini's has always been a pleasure to visit with its incorporation of rich cultural references and its unabashed crankiness setting it apart from most. It is not much of a stretch to think of the American economy in terms of a Greek tragedy. Like all good stories, the relative decline of the United States which he catalogues has the ingredients of a good tragedy according to Aristotle: Plot, Characters, Diction, Thought, Spectacle, and Melody. What sets Roubini apart from your humdrum econo-blogger is his incorporation of these elements in his blog musings. Some may fault him for implying that the parlous state of America's finances is a moral failing as Americans rack up onerous future obligations to buy goods and services that don't seem to make them happy, anyway. I say he's right: unsustainable deficits, whether on a personal or a national basis, are welfare-reducing.

In his most recent post, Dr. Roubini looks upon the current follies of the American lifestyle with unconcealed contempt. Among other things, he takes aim at investment in huge McMansions that require excessive heating bills and are located too far away from urban centres; SUVs that consume way too much gas; and, of course, IOUs piled up from here to eternity on consumer debt, housing loans, auto loans, educational loans, and what else have you. The sad part of it all is that this glorious overspending hasn't resulted in many--if any--sustainable gains in consumer welfare. To the contrary, declining prices of McMansions and SUVs coupled with rising gas prices and heating bills are foreseen to end this subprime iteration of the American dream. In the end, what was the point of it all, really?

"Money can't buy happiness" is an adage that is generally well-understood. However, one of the things that has never been adequately explained by social scientists, psychologists, and the rest is why so many people still act as if money can buy happiness. Nouriel Roubini's latest missive is, in searching for clues as to why Americans engage in a seemingly endless jihad on consumer sanity, reminiscent of the earlier work of the late Tibor Scitovsky on The Joyless Economy. Here is a blurb on the book that I found which captures its pre-Roubini essence:

Scitovsky's book, The Joyless Economy (1976), received scant recognition when it first appeared, but some now are hailing it as a prophetic masterpiece. It is among "The Hundred Most Influential Books Since World War II," according to a survey of prominent scholars by the Times Literary Supplement (Oct. 6, l996). More recently, in Critical Review (Fall 1996), seven sympathetic critics and Scitovsky himself revisited the book's critique of consumer capitalism.

"Drawing on research in physiological psychology," Scitovsky began with the human inclination to avoid discomfort and seek pleasure, note Jeffrey Friedman and Adam McCabe, Critical Review's editor and research assistant, respectively. But he contested the notion that the dynamic is so simple. "In Scitovsky's view, there are two sources of displeasure: not only too much stimulus--pain, but too little--boredom." Affluent societies had produced widespread comfort--but too much comfort resulted in ennui. By seeking excessive comfort rather than stimulation, or by turning to such fleetingly satisfying types of stimulation as TV or shopping, people made "wrong" choices and got less enjoyment than they could out of life. "The remedy," Scitovsky said, "is culture" and the stimulation provided by music, painting, literature, and history. Consumers must be educated to make wiser choices.

Scitovsky's book was written in 1976, but his indictment of a consumer-driven economy built upon the edifice of sloth is as relevant now as it was then. The combination of cheap credit provided by foreigners with a desire for creature comfort has culminated in the subprime mess whose fallout will have far-ranging consequences on the American political economy. It is indeed ironic that this illusory quest for comfort has culminated in more pain as the value of these acquisitions declines further due to changes wrought by excess consumerism. Some may chafe at Dr. Roubini's flourishes on a theme by Scitovsky, but he is merely making the tragedy of it all realistic: You bought all this stuff and they only brought you misery in the end. In his own way, Dr. Roubini tries to redress the balance noted by Scitovsky with rich cultural references that only reinforce my belief that he is the heir to Scitovsky.

One of the critiques of the so-called "Anglo-Saxon" model of governance is putting consumer credit and consumption on a pedestal. It is of no mere coincidence that Anglophone countries such as the UK, Australia, and New Zealand which have modeled themselves on the US are similarly afflicted by such problems: gaping external imbalances, housing bubbles, and rising consumer indebtedness. Many other countries chafe when Americans try to lecture them about how to run their economies in an "Anglo-Saxon" way--why exactly would they want to be like America with the attendant problems noted above? Take heed: the path to ruin may be comfortable, but it leads to ruin nonetheless. If not necessarily providing the answers as to why Americans continue to act as if money can buy happiness, Scitovsky and his heir, Dr. Roubini, are at least asking the important questions about our existence in consumer-driven societies.

It's Official: PRC Loses to US in Auto Parts Case

It's now official: the WTO Dispute Settlement Body (DSB) has ruled in favour of the United States in its case against China regarding auto parts (DS 340). In February, I noted that a preliminary ruling was made in favour of the US along with the EU and Canada on discrimination against auto parts originating from the countries mentioned. The ball is back in China's court. It can abide by the decision or challenge the ruling at the DSB. However, if it chooses the latter option, then it will be subject to retaliatory tariffs against its exports should the ruling be upheld.

While news stories like those of Bloomberg and the Financial Times [HT: Trade Diversion] are correct in pointing out that this is the first defeat for China at the DSB, China backed down earlier on a more recent case filed by the US against it before further proceeding. The case in question concerns auto parts exports by the US, EU, and Canada to China for which Chinese authorities levied tariffs equivalent to those for complete automobiles if vehicles manufactured in China were deemed to have more than 60% of their parts coming from abroad. As the tariff rate that is supposed to be applied to auto parts is significantly lower than that for complete vehicles, the complaining countries were not chuffed by this misclassification and the ensuing discrimination. Detroit News hopes that US auto parts makers that have been hurt by the slowdown in US auto production can now find more business in China, the world's fastest growing auto market. Nuff said; here's the USTR's victory blurb, and I will try to get the Chinese response to this ruling if it comes along shortly:

U.S. Trade Representative Susan C. Schwab announced today that the first World Trade Organization (WTO) dispute settlement panel to address a dispute against China has issued a report finding that China’s treatment of U.S. and other imported auto parts is inconsistent with China’s WTO obligations.

“I am extremely pleased with the issuance of a very strong report by the WTO panel,” Ambassador Schwab said. “Enforcing trade agreements so that problems are solved – whether through dialogue or, if need be, litigation – is a critical part of the U.S. trade agenda. The panel report leaves no doubt that China’s discriminatory treatment of U.S. auto parts has no place in the WTO system.

“The auto industry is an important part of the U.S. economy, and we will continue our efforts to ensure that U.S. manufacturers and workers in this and other industries enjoy the benefits of open markets and a level playing field,” Schwab said. “Our pursuit of this case makes clear that we will not stand idly by when China or any other country adopts regulations or industrial policies that tilt the playing field against American goods or services.”

The United States was joined by the European Union and Canada, which also pursued dispute settlement proceedings with China on the same matter.

Background

Increasing access to China’s auto market was a key issue in China’s accession to the WTO. China imposes an additional charge on imported auto parts whenever the imported parts are incorporated into a final assembled vehicle that fails to meet certain local content requirements. The WTO panel agreed with the United States that these higher charges unfairly discriminate against the use of imported parts in the assembly process and discourage automobile manufacturers in China from using imported auto parts in the assembly of vehicles. They also put pressure on foreign auto parts producers to relocate manufacturing facilities to China.

In particular, all vehicle manufacturers in China that use imported parts must register with China’s Customs Administration and provide specific information about each vehicle they assemble, including a list of the imported and domestic parts to be used, and the value and supplier of each part. If the number or value of imported parts in the assembled vehicle exceeds specified thresholds, the Chinese authorities assess a 25 percent tax on each of the imported parts.

The United States argued, and the WTO panel agreed, that these regulations impose an internal charge on U.S. auto parts resulting in discrimination against U.S. auto parts, in violation of WTO rules. The panel found that China is acting inconsistently with several WTO provisions, including Articles III:2 and III:4 of the General Agreement on Tariffs and Trade 1994 and specific commitments made by China in its WTO accession agreement.

The United States requested formal WTO consultations with China on March 30, 2006. The WTO established the dispute settlement panel on October 26, 2006, the first such panel against China. China has the opportunity to appeal today’s report.

Peter Mandelson Literally Goes Bananas on Doha

I like "bananas" and you like "buh-nah-nuhs"...
Let's call the whole thing off

With apologies to Ira and George Gershwin, the endgame for Doha may be nearing fast. With Brazil and India adopting hardline stances on their pet issues, the space for mutually acceptable compromise is dwindling fast. Now, Agence-France Presse reports that the EU too has adopted another uncompromising stance on the never-ending banana dispute, now in its twelfth year. Yes, it's take it or leave it time for yet another member of the big four negotiators (the fourth being the US). I have long covered the saga of Latin banana exporters [1, 2, 3]--from whom the term "banana republic" originally came from--engaging in trade litigation at the WTO to end preferential treatment of EU banana imports from former African, Carribean, and Pacific (ACP) colonies. As noted below, the ACP countries are still bellyaching about the EU ending these preferences resulting in all sorts of doom and gloom scenarios. This follows the EU accepting WTO DG Pascal Lamy's proposed settlement of gradually reducing EU tariffs on Latin American banana exports from the current 176 to 116 euros/tonne by 2015. Bottom line for the EU: if there's no permanent deal struck involving Latin American producers and ACP countries, let's call Doha off -

European Trade Commissioner Peter Mandelson warned Thursday that if there was no accord with banana producers on imports in Europe, then there could be no wider deal on global trade liberalisation.

Speaking just days before crunch talks on the stalled World Trade Organisation Doha Round, Mandelson said a deal worked out by WTO head Pascal Lamy had to be accepted by both Latin American and African, Caribbean and Pacific producers.

He said Lamy's proposal was on a "take it or leave it" basis and no one was completely satisfied with it. At the same time, if it was not accepted, there would be no accord on trade in tropical agricultural products and so no wider WTO accord. That is why the EU had accepted the Lamy proposals, he said, adding that if others wanted to reject it, then they had to take responsibility for the failure of the whole Doha Round.

Earlier Thursday, the ACP countries said that the proposed cuts in EU banana import tariffs were an "unacceptable" threat to its producers. Hoping to give a boost to broader WTO talks, the European Commission said Wednesday it was ready for a sharp cut in its banana import tariffs in order to end a long-running trade dispute with Latin American producers.

But ACP nations, anxious to safeguard the preferential access to the European Union market that they have long enjoyed, said Thursday the move would only give "undue advantage to the Latin American producers.

"Should the proposed tariff cuts be applied as things actually stand, they would deal a lethal blow to the ACP banana industry and consequently, have an adverse effect on the ACP economies," it added.

The commission wants to resolve the long-running banana dispute before a meeting of 30 leading WTO players in Geneva next aimed at making a breakthrough in the stalled trade liberalisation talks.

For their part, the Latin American countries were confident of reaching a deal after the concessions by Brussels, a regional diplomat said Thursday. "We are positive we can agree on something. We are very close but not yet there," said the Latin American diplomat who requested anonymity.

Latin American banana producers have successfully challenged the EU's banana import regime before the World Trade Organisation on the grounds that it discriminates against them in favour of poor African, Caribbean and Pacific countries.

Under Lamy's proposals, Latin American countries would agree to a "peace clause," in effect promising not to reopen the case in return for the lower tariff. "We will be working hard during the weekend and try our best to reach an agreement before the ministerial meeting starts on Monday, or during the early days of next week," the diplomat told AFP.

Brazil, a "New Trade Geography" & WTO Ag Negos

Those pampered EU cows [moo] that have been estimated to receive $2.20 a day in subsidies while hundreds of millions of persons get by on less than that in the developing world are once again gaining centre stage as the latest WTO trade negotiations are scheduled to begin next week in Geneva. Like India, its G20 co-partner in the negotiations, Brazil has long been an active voice in international fora among LDCs. With additional economic clout, however, it is sometimes debated whether Brazil and India still represent the concerns of LDCs as much given that some now classify them as "middle income" countries. Nevertheless, Agence-France Presse reports that Brazil is still keen on winning greater EU/US agricultural market access, or no deal is forthcoming. Is Brazilian agribusiness keen on opening markets abroad or is Brazil keen on maintaining its first among equals status among LDCs by using relatively uncompromising rhetoric? Certainly, the "new trade geography" touted by Brazil sounds very much like the "new international economic order" of years gone by. Likely it's both:

Major agricultural exporter Brazil is to head into WTO talks on hammering out a global trade liberalisation deal next week as one of the principal representatives of the developing world. As co-leader with India of the G20 -- a coalition of developing nations determined to win greater access to US and EU markets for their farm exports -- Brazil is seen as having influence in the talks which start on Monday at World Trade Organization headquarters in Geneva.

British Prime Minister Gordon Brown said last week he believed Brazil, Latin America's biggest economy, was "key to a deal." Brazilian President Luiz Inacio Lula da Silva has made it clear only an "equitable" accord would suit the developing nations. A senior official in the Brazilian foreign ministry's economic department, Roberto Azevedo, told AFP: "If the rich countries continue to have a highly protectionist attitude... the round could be compromised."

The Doha round of trade liberalization negotiations, launched in the Qatari capital in 2001, has been bogged down as developed and developing countries alike refuse to make concessions on their core concerns.

Brazil's position as one of the "big facilitators" in the Doha Round of talks is reinforced by its ambition to "take on the role of mediator, to look for an intermediate solution between the various interests of developing countries and the Europeans and Americans," said a former adviser to the G20, Andre Nassar of the International Trade and Negotiations Institute (ICONE).

The pointman for Brazil's efforts is Foreign Minister Celso Amorim, a 66-year-old veteran diplomat who has a reputation for calming confrontations. Analysts credit Amorim with holding the G20 together since its inception in 2003, and to acting as a sort of bridge to the United States and Europe, with which he is in frequent direct contact. Amorim's chief negotiator, Azevedo, stated that the G20 would maintain "constant coordination" during the discussions next week.

That coordination has proved a strong strategy for the developing nations, though it requires a Herculean effort to keep it up given the different goals of the countries, which include big exporters with open economies such as Brazil and Chile, and those more interested in protecting their markets and producers, such as China and India. The focus of Brazil and the G20 is, as Lula has put it, to establish "a new trade geography" that will better benefit poorer countries.

The Doha Round is already four years behind schedule because of the dispute between richer and poorer states struggling for an accord. Brazil had remained distant from the WTO haggling, but now it is putting its full weight into the negotiations, even leaving aside possible bilateral deals that some of its industries and farmers were eager to secure.

It wants the G20, which represents more than half the world's population, to walk away with what globalization has promised but been slow to deliver: help for poorer countries. That means opening the markets of richer nations to the farm products of developing ones. Such a message of social justice has found support in the media, including in wealthier nations.

A study by a non-governmental organization, Social Watch, even asserted that it was better to be a cow in Europe than a citizen in Africa, Latin America or parts of Asia. The basis for that argument? Each European cow attracts a subsidy of 2.20 dollars per day, whereas half of mankind has to get by with less.

More WTO Talks Bombast: India Threatens Walkout

Whoa, there sure is a lot of posturing going on from developing countries, especially the G20 joint heads India and Brazil (see above post) as we head into next week's discussions. I mentioned earlier that with a lame duck US president in office, it's likely that most have figured negotiations are stalled anyway. In the absence of much will to push Doha to completion at the current time, officials may just be engaging in an exercise of "points scoring" to domestic audiences: "we're standing up to the West," etc. Just as Brazil is keen on facilitating agribusiness, India is keen on opening up service exports; both, of course, are areas where these countries have "comparative advantages" in economistic lingo. (See an earlier post on India's attempts to get temporary migration of service workers on the WTO agenda.) Once again, are they pursuing their agendas ahead of less advanced LDCs, or are their interests synonymous with others' concerns? Both seem to be giving no quarter if you listen to their rhetoric. From the Financial Express:

Days ahead of the World Trade Organisation ministerial meeting begining July 21, India on Wednesday warned that it would walk out of the talks if its core interests — protection of the livelihood concerns of its poor farmers and infant industries —are not taken on board.

“There will be no deal if we don’t get what we want. Our coalitions, the G-20, G-33 and Nama-11, are intact. We have the full option to walk out. There can be no agreement unless India agrees. We are not compromising on anything,” commerce and industry minister Kamal Nath told reporters here.

The global trade deal talks had collapsed last year as Nath and Brazilian foreign minister Celso Amorim, both representatives of developing countries, walked out in Potsdam (Germany) during their talks with the developed country representatives, the US and the European Union.

The Doha Round negotiations of the WTO began in 2001 and has been deadlocked owing to major differences between the developed and developing world on agricultural and industrial goods. Even in Potsdam, the differences remained the same, that is the developing countries demanding that the rich countries drastically reduce their “trade distorting” farm subsidies, while the developed countries in turn asking for more market access in the developing world for their industrial goods.

On Wednesday, Nath said the Special Products (SPs or agri products that are subjected to minimum or no duty cuts) and Special Safeguards Mechanism (SSM) available to protect the resource poor agriculture dependent population in developing countries from cheaper and subsidized imports are “ make or break issues.”

“These (SPs and SSMs) are not issues for negotiations,” the minister said. He added “we are concerned about our sensitivities in agriculture. Unless we get the package we want on SPs and SSMs, there is nothing we can agree to in other areas.” Also, India’s demands on being able to provide subsidies to its poor fishermen must be included in the agreement, he said. India is against a move by rich countries to disallow subsidies to poor fishing communities using small motorboats on the pretext that it would result in environmental damage.

Nath said the US has to reduce their “trade-distorting” farm subsidies from $55 billion to around $13-16 billion, while the EU had to cut their farm subsidies by 70%.

Turning to services exports, he said it accounts for 40% of India’s total exports of goods and services and was to the tune of $86 billion in 2007-08. The minister added that services exports account for 55% of the country’s GDP and the sector provides employment to around 142 million people, comprising 28% of India’s workforce.

India has been demanding better market access for its services in developed countries in sectors like health, in R&D, engineering, construction, telecommunication and computer related services. India is seeking more market access, particularly in outsourcing and movement of natural persons and service suppliers. But Indian professionals in these fields are unable to get short-term visas in several developed countries to offer their services due to their restrictive domestic regulations, Nath said.

“Unless binding commitments are made by developed countries in services, there can be no agreement. I have even written to WTO Director General Pascal Lamy on this,” he said.

As the UPA government seeking a trust vote in Parliament on July 21 and 22, Nath, a MP from Chhindwara (Madhya Pradesh), would be unable to attend the Ministerial Meeting on the same dates. “I have designated Commerce Secretary Gopal Pillai to represent me at the meeting. WTO has given us a special permission,” Nath said.

Nath said earlier he had consultation with Prime Minister Manmohan Singh on India's negotiating strategy for the crucial five-day meeting being convened from July 21 to finalise the modalities for completing Doha Round of trade talks that are already running much behind schedule.

“The Prime Minister is of the view that unless India's interests are protected we should not move forward,” Nath said.

He, however, added, “I am hopeful that this meeting will lead to progress and conclusion. I am optimistic and look forward to developed countries coming forward and recognising the current global economic situation, global food situations, structural flaws in agriculture that need to be corrected. The developed countries should come forth to be givers and not be takers.”

On industrial goods, Nath singled out clauses on anti-concentration and sectorals. As per the anti-concentration clause, sensitive tariff lines that would not be subject to tariff reduction cannot be concentrated in one particular sector. In the sectoral talks, certain sectors would be culled out from the entire list of goods and tariffs on these items would be brought down to zero within a specified period that would be decided during the talks.

Sectors like auto, textiles and chemicals are likely be severely hurt by these clauses, if they are included in the final agreement.

Pointing out that India needs flexibilities in protecting these sectors, Nath said “there would be no compromise on this. The EU has got strong demands on this (bring down duties in sectors) and it cannot be agreed to. There cannot be any agreement on industrial products that compromises or creates any kind of liberalization in auto, auto-components and textiles. These are sensitive areas and these infant industries are beginning to get investment.”

“In the auto sectors, most of the US and EU manufacturers are setting up plants in India. So their investments are coming here because they have jumped over the tariff barrier. We cannot have any compromise on this,” he said.

Short Take: PRC's Holdings of Agency Debt

I must admit that I couldn't resist taking yet another potshot at the investment record of the PRC. Loaded with the dollar, Treasuries, Blackstone stock, and tons of Fannie Mae and Freddie Mac guaranteed mortgage-backed securities, I've always thought of the Chinese government as a sucker for whatever detritus the Americans are trying to dupe the rest of the world with. As caveat emptor is the operative principle when it comes to investing, I am hardly surprised that China is once again taking it on the chin as spreads on agency debt are likely to widen in light of the current spotlight placed on the woes of these government-sponsored enterprises. Of course, you could make the argument that the losses in the Chinese official sector from putting the people's hard-earned money into these el crappo investments is more than offset by the gains China has made in the private sector which have been enabled by mind-boggling official accumulation of dollar-denominated assets. On the other hand, I like to use Chinese official investment as shorthand for what to avoid. If the PRC is piling into a particular asset class, perhaps it's best to avoid it like Michael Jackson at a children's party. Brad Setser has more, as does Bloomberg Asia columnist Andy Mukherjee; here's a snippet from the latter on China's lose-lose situation:

Besides, to the extent the U.S. has to resort to using real money to shore up confidence in Freddie and Fannie, the result may not be all good for China. A key risk is that Paulson's bailout plan may expand the U.S. budget deficit, which may be inflationary and push Treasuries lower.

At last count, China owned $502 billion in Treasuries. Including agency debt, its holdings are more than $1 trillion, about a quarter of China's gross domestic product, Setser says.

Will China panic and dump U.S. assets? Perhaps not.

Like most of China's economic policies, the nation's approach toward reserve diversification will also be gradualist. With China's reserves reaching $1.8 trillion in June -- a $280 billion increase this year -- Freddie and Fannie, even after losing their yield premium, are assured of the Asian country's reluctant patronage.

Dubai Commerce: Culture Clash Meets Thong Song

It is well-known that Dubai has been trying to attract expat talent and tourists to its shores via tax-free incentives and major new developments. At the same time, however, it has tried--like many other Arab states--to ring-fence decadent Western behaviour from polluting the minds of the local populace. This not-so-picturesque article from the Associated Press describes how the UAE decency police have been cracking down on topless sunbathers on its shores. I am often struck by the clash of cultures in interacting with those with the Muslim faith. Here in diverse Birmingham, for instance, I find it curious that Muslim women clad from head to toe escort their children who go swimming while bikini-clad women lounge at the local pool. (You would think I would be glad about the latter, especially now that it's summer--except that it's a lap pool and these loungers clog up the swimming lanes. As you can probably tell by now, bloggers are generally a very picayune lot.)

The same odd juxtaposition is happening on the beaches of Dubai. It's faintly ridiculous that they're cracking down hard as they've long promoted Dubai as an Eastern playground for Westerners. To some extent, the thong song will have to be tolerated. Sex on the beach? Those trying such stunts in the UAE are really pushing it, but somehow it's unsurprising given the climate being promoted:

Westerners were getting too racy on the beaches of this Persian Gulf tourist haven, and a police crackdown on topless sunbathing, nudity and other indecent behavior has resulted in 79 arrests in recent days.

Undercover officers are strolling the sand while others stand guard in new watchtowers [it gives a new spin to 'Baywatch', eh?] to enforce the social mores of this Muslim city-state, which is a booming business center that is attracting growing hordes of foreign tourists.

Authorities said they began the decency campaign after police detained a British man and a woman who were allegedly having sex on one of Dubai's sprawling beaches earlier this month. [Now we know why there will always be an England.]

Over the past two weeks, police have detained a total of 79 people whose behavior was "disturbing families enjoying the beach," Zuhair Haroun, a spokesman for Dubai's Criminal Investigation Department, said Monday.

First-time offenders may be issued a warning, but if caught twice, tourists could be referred to the public prosecutor for possible criminal charges, authorities said.

Thousands of European and Asian expatriates live and work in Dubai, where native Emiratis make up only about 20 percent of the estimated 1.2 million residents. Shopping malls and fast food restaurants have replaced traditional Arab houses, and English has overtaken Arabic as the emirate's lingua franca.

Many Emiratis and Arabs visiting from other Persian Gulf countries increasingly feel Dubai's ambition to become a cosmopolitan metropolis and tourist destination is overrunning their own traditions and contradict what they feel is culturally acceptable.

Unlike elsewhere in the conservative Persian Gulf, tourists in Dubai are often seen wearing skimpy bikinis on public beaches and walk the city's streets in shorts. Alcohol is freely available in hotel bars and restaurants in this regional businesses and entertainment hub.

While pursuing the police crackdown, Dubai has embarked on a public awareness campaign to remind its Western visitors and foreign residents that the city may have flashy hotels and glitzy skyscrapers but it also is a Muslim country with traditionally conservative values.

The city is installing signs warning tourists in Arabic, English and several other languages not to sunbathe topless or change clothes in public, said Abdullah Mohammed Rafia, an official with the Dubai Municipality whose office is overseeing the public awareness campaign.

Authorities are "taking action in response to numerous complaints" filed by people who visit the city's beaches, Rafia said. Complaints have ranged from families "offended by displays of nudity" to women sunbathers who say groups of men stare at them while at the beach.

The police campaign also will target people who harass beachgoers with acts "deemed offensive, immoral or disrespectful," including loitering and voyeurism, said Dubai's acting police chief, Maj. Gen. Khamis Mattar al-Mazeina...

Green Protesters Target Aussie Coal Exports

There's a famous English saying implying superfluousness which goes, "It's like bringing coals to Newcastle." Newcastle upon Tyne is, of course, famous for being a major coal mining site in England. Unbeknownst to many, however, there is another Newcastle in Australia which is very much associated with coal. The port of Newcastle is Oz's most active location for loading coal bound for world markets. Aussie mining giants like Rio Tinto and BHP Billiton use this port. Infamously, China is a very large customer for Australian coal. Combining China's voracious energy appetite with its relative nonchalance over environmental matters has resulted in dark, Satanic mills that manufacture climate change hell on Earth [just kidding!--I won't be offending Chinese readers because all Blogger sites are blocked in the PRC anyway.]

Recently, the environmental activist group Camp for Climate Action attempted to block the railways which feed into the port of Newcastle to protest Australia's growing coal exports. In large part, Australia is "the lucky country" due to commodity demand by countries such as China. I am actually sympathetic with the protesters on the uncleanliness of much of today's coal power. However, I hold out hope for carbon capture and storage technologies utilizing things like underground coal gasification which can mitigate the impact of coal power. Let's be realistic here: the likes of China and India won't be giving up on coal anytime soon, so coal has to be part of the package of solutions to climate change. Although this technology is prohibitively expensive at the current time, a concerted push to develop it should benefit the global commons. Given its relative abundance, coal shouldn't be demonized provided it can be used in a less environmentally damaging way. Reuters has this video clip on the climate riot. Meanwhile, the Sydney Morning Herald describes the chaotic scene where an estimated thousand protesters disrupted incoming trains into Newcastle for six hours:

37 demonstrators were arrested after about 1000 people halted trains in Newcastle yesterday in a protest against the coal industry's role in climate change. Police invoked some special powers, not used in a public protest since the Cronulla riots of 2005, enabling them to search vehicles, although organisers maintained the protest was peaceful.

Three coal trains bound for Carrington Coal Terminal - one of the ports which make Newcastle the world's biggest export point - were halted for about six hours after about a dozen protesters chained themselves to carriages. Hundreds of others lined the fence as mounted police held them back from the rail line from 11am until about 2.30pm.

The delivery of about 20,000 tonnes of Hunter Valley coal destined for export was delayed, although the coal loaders did not stop filling ships. "All rail movements were stopped because many protesters breached the perimeters and got on the trains," said Port Waratah spokesman, Matthew Watson.

The demonstration marked the third time in less than a fortnight that coal industry operations near Newcastle had been disrupted by protests against the industry's role in climate change. The demonstration was part of an international movement of "camps for climate action", which are designed to give people concerned about global warming a role in national debate about cutting greenhouse gas emissions.

"We have a really slim window of opportunity to act on climate change, so we need to take action," said a spokeswoman for the protesters, George Woods. "The status quo is fuelling a climate disaster, and today was about highlighting the role Australian coal plays in that. It's affecting all of the world, not just here."

Along with the nearby Kooragang Coal Terminal, Carrington terminal sees the export of coal which generates an estimated 216 million tonnes of carbon dioxide each year, and a third terminal is under construction. By contrast, the total emissions from road transport in Australia is 72 million tonnes, the Australian Greenhouse Office said.

The 37 people arrested yesterday were charged with a variety of offences, including hindering police, resisting arrest and trespass. They are due to appear at Newcastle Local Court. Demonstrators claimed some police were not displaying badges when they made arrests - which would contradict a pledge made by police during the Summit in Sydney last year. This was denied by police.APEC"There is no comment, other than that all police were in uniform," a spokeswoman said.

The Gold Rush Goes Global

"There's gold in them hills" is the siren song that lures folks from all walks of life in the pursuit of the once-again very precious metal. As the price (prize?) of an ounce of gold approaches $1,000/oz., there is no shortage of prospectors, from large mining firms to fly-by-night operators. Reuters has an interesting extended feature on the new gold rush unfolding the world over. Sometime ago, I featured an article about Californians getting their metal detectors out and searching for the precious metal in the Golden State. Unsurprisingly, this enthusiasm for finding buried treasure does not escape the attention of others. Given limited finds, though, there have been skirmishes and conflicts which sometimes turn deadly. Here is the introduction to the rather lengthy article; the rest is worth reading:

Poor men and women in Ghana, ex-militia fighters in steamy eastern Congo and farmers in Peru are among those joining the ranks of illegal miners and risking their lives as they seek to profit from soaring gold prices. As a new gold rush spreads to the world's remotest corners, the face-off between illegal, small-scale miners and multinational firms has cost millions of dollars and claimed lives.

Not all small-scale miners work illegally, but as international firms move into ever more remote and politically risky countries, they sometimes tread on the toes of artisanal miners who have worked that land for years. Alternatively, the mining conglomerate's trucks and cranes can act as magnets that draw small-scale miners to a previously unexplored area.

Whatever the dynamic, the result can be explosive. "The higher prices of gold have made illegal mining become an issue in areas where there wasn't any problem before," said Olle Ostensson, chief of the natural resources section at the United Nations Conference on Trade and Development (UNCTAD).

Gold prices have trebled over the past five years. After coming off recent highs, spot gold rose to above $950 an ounce last week as tensions in the Middle East continued to encourage investors to seek safe haven in bullion.

There are between 13 and 20 million small-scale miners around the world, according to Communities and Small-Scale Mining (CASM), a group focusing on social and environmental problems facing artisanal mining communities. They account for about 10 percent of the global production of metals and diamonds, and 75 percent of all gemstones. Around 100 million people are directly or indirectly dependent on small-scale mining.

"High commodity prices and declining resources around them (artisanal miners) in other areas are going to mean this is a growing phenomenon in many countries," said Jon Hobbs of the UK's Department for International Development (DFID).

Hobbs also chairs CASM, which is sponsored by DFID and the World Bank and is working with multinationals to draw up guidelines on how to tackle illegal mining. As security costs and the threat of plant closures mount, international firms are trying to find a solution.

"Companies have realized this is their biggest social problem ... and it is growing all the time ... there are mines that are getting 6,000 people (illegal miners) on their sites a week," said Kevin D'Souza, mining engineer and technical director at the consultancy Wardell Armstrong.

Hedge Funds Have Worst H1 on Record

The hedge fund industry--if you can call it that--has had probably the worst first half start to a year on record. While a collective -0.7% return on alternative asset classes is surely not indicative of disaster, there is widespread apprehension that things may get worse. Although 2002 is reportedly the only year when returns were negative, 2008 is looking like it may be another. Plus, regulators breathing down their necks, rumours of another major hedge fund going kaput, and general uncertainty about the state of credit markets in the near future all add up to "ask me again later." From the Times of London:

Fears of a fresh spate of hedge fund collapses grew today as it emerged that the $2 trillion industry had put in its worst investment performance during the first half of the year since most credible records began. The dreadful start, the worst in almost 20 years, was attributed to the slide in world equity markets, the onset of economic gloom in Europe and America and the continued souring effects of the international credit crunch.

Hedge fund returns during the first six months were more dismal than in 1998, when Long-Term Capital Management failed spectacularly, almost bringing the international financial system to its knees and when Russia defaulted on its debt obligations and the Asian crisis raged.

According to Hedge Fund Research, the investment performance among alternative asset managers globally fell by almost 0.7 per cent in June. This took the year to date return to minus 0.75 per cent. The Chicago-based researcher has not recorded such a bad start to a year since it began amassing records in 1990. It comes as the rate of hedge fund start-ups runs at its lowest level for seven years amid a sharp rise in fund liquidations, particularly among single managers and small teams...

The figures suggest that the high-rolling world of London and New York hedge fund managers, characterised by multi-million bonuses in the good years, could come crashing to earth this year. The industry has only posted one loss-making year, in 2002, according to HFR. Figures published yesterday suggested 2008 may break a six-year winning streak.

Taco Sieburgh, director of research at Liability Solutions, said that when set against the volatility of world stock and bond markets, the performance in the first half was actually relatively strong. Mr Sieburgh noted that the S&P 500 index in the US fell 13 per cent in the first half and that the Lehman Brothers high-yield bond index was down 1.3 per cent over the same period. "If you have markets moving that severely, being down less than 1 per cent is not a bad performance," he said. Mr Sieburgh said investors remained highly confident in hedge fund strategies and there was every chance that managers would return to positive territory by the end of the year.

The hedge fund industry has suffered several high profile collapses since the beginning of the year, including Peloton, the $2 billion bond fund set up by former Goldman Sachs bankers. Numerous London-based credit traders were also caught on the wrong side of the biggest change in market sentiment about interest rates in a generation early this year. Over a seven to ten day period, the City moved from being convinced that interest rates would fall over the near term to the near certainty that rates would rise. Some managers complained that being the wrong of bets on sterling had wiped out huge chunks of their performance for the year to date.

Hedge funds have never been under such scrutiny. In the past four weeks, the City’s chief regulator, the Financial Services Authority, has introduced stringent new rules governing the short-selling of shares in companies that are carrying out rights issues. The regulator also sharpened up disclosure rules on contracts for difference, a form of spread-betting. Both moves were seen as damaging to hedge funds.

A New Sport: Text Messaging

I was visiting the Wall Street Journal site when I came across this somewhat odd competition sponsored by the Korean firm LG Electronics, better known as "Lucky Goldstar" to oldsters like me who remember it before its move to a less geeky-sounding name. It turns out that this is the second time that the "LG National Texting Competition" has been held in New York. Last year, a 13 year-old won the competition. This year, the $50,000 prize went to someone else as the video will inform you. I suppose it's less inane a sport than, say, hotdog eating--there may be benefits in conveying more information in less time with a cell phone provided that the message itself is meaningful to some degree. Sports often arise from more mundane activities; for instance, the car begat automobile racing and so forth, so this particular application is not particularly surprising.

A caveat I have as a development scholar, though, is a pretty big one: Most of the folks in the developing world do not have these fancy models with QWERTY keypads. Instead, they have letters under numbers just as virtually all more basic models do. Given that the link between cell phone usage and development in LDCs is being touted more and more, this sort of thing would be a welcome activity. Perhaps LG or another firm could sponsor this competition in places like the Philippines where folks are famous for their text messaging prowess. However, the competition there should be run with bog standard keypads instead of QWERTY ones to reflect how most users type into their cell phones. Game on!

Pew: US is the Least Sanguine Country on Trade

Here's something to delight the trade sceptics: The most recent Pew Global Attitudes survey found that, in a sample of twenty-four countries, the United States came dead last in terms of viewing trade favourably. While the US (barely) ekes out a majority of respondents who view trade as either very or somewhat good, this position is certainly tenuous. There's nothing much to add to the bullet point provided by Pew on this matter: "Support for international trade continues to decline in the United States - 53% of Americans say trade is good for their country, down from 59% last year and 78% in 2002. Support for trade is lower in the U.S. than in any other country included in the survey." So let me get this straight: US GDP in Q1 2008 would have been nearly nothing had it not been for the contributions of net exports, yet America is the least trade-friendly country in this sample? Given current trends, it's certainly plausible that the trade sceptics already outnumber the pro-trade set. Just in time for the 2008 elections, too--it will be very interesting to see how this sort of sentiment will manifest itself come election time. The world awaits what the US has in store for it.

Gordon Brown Prods G8 on Aid Commitments

In the run-up to his first G8 summit in Hokkaido, Japan, PM Brown is calling for the G8 to reaffirm the aid commitments it made during the 2005 Gleneagles summit. Regardless of your views about the efficacy of official development aid (ODA), however, it is curious that the United Kingdom has not exactly been particularly generous on the the aid disbursement front according to OECD statistics. As the most recent Development Assistance Committee (DAC) figures indicate, the UK's net ODA contribution fell by 29% in real terms from 2006 to 2007. You can argue that Brown wasn't the PM for the entirety of 2007, but still, he did hold the government's purse strings as Chancellor of the Exchequer. Somewhat obviously, the UK's ODA as a percentage of GNI fell over the same period. With the country's ODA/GNI for 2007 at 0.36% or about half the UN's target figure of 0.70%, let's just say Brown is not exactly in the best position to ask other G8 nations to loosen their purse strings. Ah well, here's what PM Brown has to say on this and other related matters care of the Guardian:

Gordon Brown today warned Britain's G8 partners against a retreat into isolationism, and insisted that the looming threat to the global economy instead required a speeding up of the fight to tackle climate change and poverty.

Amid fears the credit crunch will cause the G8 to backpedal on pledges to cut carbon emissions and increase aid to poor countries by $50bn a year, the prime minister used an interview with the Guardian ahead of the G8 summit to stress the need for united action in the west to reduce dependency on fossil fuels and boost food production in developing countries.

"The world is suffering a triple challenge: of higher fuel prices, higher food prices and a credit crunch. My message to the G8 will be that instead of sidelining climate change and the development agenda, the present economic crisis means that instead of relaxing our efforts we have got to accelerate them. "This agenda is not just the key to the environment and reducing poverty, but the key to our economic future as well," Brown said.

After a year that has seen growth slow sharply in many G8 countries, including Britain, and oil prices double to $145 a barrel, he said the summit would be judged on whether it rolled back protectionism, supported projects for cleaner energy, and came up with blueprints for reducing global oil and food prices.

On the eve of his first G8 summit as prime minister, he said he would consider it to be a success if the G8 showed unity, gave strong backing to a new global free-trade deal, and pushed ahead on climate change and development. The prime minister said that the state of the global economy meant the summit would have echoes of those in the 1970s. "But in the 70s, many of the problems we faced were national, not global. The problems we have today are global and they require global solutions."

On climate change, the prime minister said he was hoping the G8 would make progress towards a new climate change deal in Copenhagen next year, agree to "turn the World Bank into an energy bank as well as a development bank", and show a "clear understanding of the importance of renewables to our energy and environmental future".

Britain believes that a stalling of progress on Africa in 2008 will make it impossible for the UN to hit its millennium development goals, set for 2015, but Brown said that fighting poverty was also in the best interests of the west. "Unless we help poor countries to become more prosperous through education, health and economic development, we will be piling up the problems of global inequality."

The UK is pressing the G8 to boost the number of health workers in poor countries, bankroll the expansion of education, and invest in higher farm production. "I'll be telling people that the worst possible thing would be to drop the development agenda because it holds the key to the economic challenge. If we don't produce enough agriculture, we are going to have food shortages, and Africa needs help to develop its agriculture. We can't solve the problems of food and fuel shortages unless developing countries are involved."

Christian Aid supported Brown's call for higher food production in developing countries, but said free trade had proved disastrous for many struggling nations. Oliver Pearce, author of a report released today by the development charity, said: "Food security will be high on the agenda when the G8 meets. Rich countries must accept that nothing less than a new, pro-poor agricultural revolution is needed if future shortages are to be avoided.

"Agricultural polices imposed on poor countries in the past few decades have had a ruinous effect. In return for trade and aid, they have been forced to remove protective tariffs from agricultural produce, reduce subsidies, and lift price controls."

Development charities blame the increase in land given over to biofuels for the food crisis, but the prime minister was noncommittal on the issue. "I feel there are good and bad biofuels," he said, in advance of the imminent publication of the government's Gallagher report into their impact...

Is Japan Leaving the US Behind in Green Tech?

While I have poked fun in the past at Thomas "flat world" Friedman, I must admit that he does have some good ideas. In a recent op-ed, Friedman repeated his idea that The Great American Project suitable for our milieu is clean technology. Unless you're a Lomborg cyborg, it is certainly plausible that going green will be a significant future source of enterprising activity. That the United States should take the lead in clean technologies is a no-brainer; even Barack Obama has harped on this theme. From the Obama 2008 website, we have this campaign pledge:

Obama will invest $150 billion over 10 years to advance the next generation of biofuels and fuel infrastructure, accelerate the commercialization of plug-in hybrids, promote development of commercial-scale renewable energy, invest in low-emissions coal plants, and begin the transition to a new digital electricity grid. A principal focus of this fund will be devoted to ensuring that technologies that are developed in the U.S. are rapidly commercialized in the U.S. and deployed around the globe.

As we all know, China is the country that faces some of the world's most difficult environmental problems. A few days ago, for instance, it was widely reported that Qingdao, the site of the sailing events for the 2008 Olympic Games, succumbed to yet another case of algal bloom. While we wait for the Obama enviro-platoon to arrive on the scene, TIME notes that Japan may be better placed--geographically and technologically--to address China's current environmental challenges. Despite the potential synergies, though, there are several historical grievances to overcome between these neighbours who haven't always gotten along:

It's hard to fathom China thanking Japan for anything. The relationship between the two Asian giants has been strained for decades and occasionally erupts into open hostility. Japan perceives China as a rising economic competitor and a rival for political influence in Asia. Many Chinese still believe Japan has never properly repented for the sins committed during its brutal invasion during the 1930s and '40s, during which the notorious Rape of Nanjing occurred. Only three years ago, that resentment exploded into anti-Japan demonstrations in several Chinese cities [I believe TIME is referring to then-Japanese PM Junichiro Koizumi visiting the Yasukuni war shrine which China believes honours war criminals].

However, the potential synergies are plentiful. Like China, Japan's rapid industrialization caused environmental headaches not too long ago. Like China, Japan was also compelled to reduce its reliance on costly oil--especially after the 1973 and 1979 oil shocks:

Yet on the issue of the environment, the two nations have strong reasons to heal old wounds. China's wasteful use of energy and escalating environmental degradation threaten the sustainability of the country's economic boom. Japan, one of the most environmentally conscious countries in the industrialized world, is brimming with the know-how that can help ease China's problems. China badly requires Japanese technology in everything from advanced nuclear reactors to clean steel mills to hybrid cars; Japan has every incentive to sell that technology to China to generate new business for its otherwise sluggish economy. That's why the environment was a top topic of discussion when China's President Hu Jintao and Japan's Prime Minister Yasuo Fukuda met in Tokyo in May. In a joint statement, they pledged to place "particular priority" on working together in green technologies. In a speech before Japan's chief business association, Nippon Keidanren, Hu said he hoped the two countries would make environmental protection "the new highlight of our economic cooperation..."

Not only does Japan have the technology and money to help China, India and the rest of emerging Asia reduce emissions, it also has the political will to share it. The government sees assistance as a way to bolster its waning influence in the Asian region, a phenomenon the Japanese people lament as "Japan passing." The country was once Asia's preeminent power as leader of the continent's miraculous economic renaissance, but that role is increasingly being usurped by a rising China. Miranda Schreurs, director of the Environmental Policy Research Center at the Free University of Berlin, says that Japan sees environmental protection "as a chance to improve its image within the region and to promote greater regional cooperation." Japan also has the experience necessary to transform developing economies from energy wasters to energy savers, since it, too, survived through its own era of environmental destruction. Much like China today, Japan in the 1950s and '60s placed modernizing industry and elevating incomes above protecting the environment. The air in Japanese cities was so laden with particulates that pedestrians wore masks. In the 1970s, the nation was also subjected to two oil price shocks, which exposed the vulnerability of the economy to the global oil market. A consensus formed that Japan needed to balance its growth with greater conservation and a nationwide effort was launched to reduce energy usage and clean up the environment.

The results are striking today: Japan uses one-eighth as much energy as China to generate a dollar's worth of GDP, to cite one example. "Japan was a front runner in economic development in Asia and suffered some bitter experiences," says Ichiro Kamoshita, Japan's Environment Minister. "Japan wants the countries that are now trying to develop to become prosperous without going through such bad experiences."

It's very interesting and timely stuff. There are also two more articles on a similar theme of Japan's Lessons for China" [1, 2]. Friedbama, take note--and maybe hasten your efforts.

Hot Under the Collar: China's New Capital Controls

There's a pair of interesting articles in the Financial Times on a new regulation by China aimed yet again at curtailing hot money inflows. These inflows have so far frustrated the PRC's efforts at controlling domestic inflation. First, the culprit singled out for control by the semi-infamous State Administration of Foreign Exchange (SAFE) in this instance is over-invoicing by exporters. By declaring exports revenues to be higher than they really are, these exporters are entitled to exchange more renminbi from their foreign exchange earnings, thus boosting the local money supply:

China announced a major strengthening of capital controls last night in an attempt to limit the amount of speculative "hot money" entering the economy and frustrating its efforts to contain inflationary pressures. In an announcement on its website, the State Administration of Foreign Exchange, the country's foreign exchange regulator, said exporters would be required to park revenues in special accounts while the authorities verified the funds were the result of genuine trade. The new system risks becoming a cumbersome burden for exporters such as suppliers of cheap goods to western retailers.

Exporters will now be required to provide documentary evidence that their invoices are based on genuine transactions if they wish to change dollars into renminbi. The regulator said the new computer system for checking invoices would be introduced from August 4. A trial period begins on July 14.

Recent leaked figures showed record inflows of capital entering China over the past two months. Officials believe some money came in illegally after companies exaggerated export revenues. China has become an attractive country for investors and companies because interest rates are now above US levels and the renminbi is expected to appreciate.

According to Reuters, China's foreign exchange reserves increased by a record $114.8bn (£57.6bn) in April and May to $1,800bn. Although it is impossible to calculate how much of that inflow is short-term, speculative capital, the figures were substantially higher than the combined numbers for the trade surplus and foreign direct investment.

The capital inflows have made economic management more difficult because, even though domestic inflation has been high in recent months, the Chinese central bank has been reluctant to raise interest rates for fear of attracting more hot money. Authorities have so far prevented the inflows from causing money supply to grow too sharply by issuing bonds and lifting bank reserve requirements.

There has been a growing discussion among private sector economists about whether the authorities should introduce a large, one-off appreciation of the currency in order to limit speculation. However, most economists believe that the government would be very reluctant to take such a step as parts of the export sector are already suffering badly because of higher costs, including the stronger renminbi.

In a follow-up piece, the FT author, Geoff Dyer, notes some idiosyncratic implications of this latest move by the Chinese authorities. Given that China is the world's largest goods exporter, verifying the content and value of exports from China is a Sisyphean task if there ever was one. Moreover, if Chinese exports have been overstated all these years so that exporters could accumulate more yuan, then perhaps the real value of Chinese exports has been overvalued as well. While Chinese export figures are indeed impressive, they may have been artificially boosted by invoicing sleights of hand:

On the face of it, China might not seem the obvious place to invest at the moment. The local stock market has collapsed, property markets are weak and the interest rate on bank deposits is about half the rate of inflation. Yet that has not prevented a record flood of capital inflows even higher than China's huge accumulation of reserves in recent years. In the first quarter, foreign exchange reserves rose by $154bn (€98bn, £78bn). On top of that, according to usually reliable figures leaked to Reuters, reserves jumped by $75bn in April and $40bn in May to a total of $1,800bn. Given that the inflows far outstrip trade and direct foreign investment, China appears to be receiving vast amounts of speculative "hot money".

China has two big attractions for foreign investors - interest rates are higher than in the US and the currency is expected to appreciate. "China's FX reserves seem to have turned into some kind of massive black hole for the world's liquidity," says Stephen Green, economist at Standard Chartered. The huge armoury of reserves was actually designed to withstand the volatile capital flows that helped cause the 1997 Asian financial crisis. However, ever-mounting reserves bring their own economic risks - inflation could be aggravated if the inflows cannot be managed and the financial system could suffer whiplash if investors decide to withdraw funds all at once...

Yet some economists believe the official numbers might actually understate the hot money inflows. As part of the creation of China Investment Corporation, a $75bn-$100bn chunk of reserves was transferred to the new sovereign wealth fund. If most of that transfer took place in the first quarter of this year - as some analysts believe - then the surge in hot money inflows has been even higher. Logan Wright at Stone & McCarthy analysts in Beijing estimates that hot money entering in the first five months could be as high as $150bn-$170bn.

There are plenty of legal routes to bring capital into China. Foreign residents can deposit up to $50,000 a year and Hong Kong residents have a much higher quota. But government officials also believe that illegal transfers are taking place - through foreign companies declaring that funds are for direct investment and then putting the money in the bank and exporters exaggerating the value of overseas revenues in order to bring in extra funds. (As an aside, economists point out that if fraudulent export receipts really are widely used to bring in hot money, China's politically troublesome trade surplus would actually be much lower than thought...)

However companies and analysts were sceptical that the new capital controls would limit illegal capital flows. One exporter in Beijing said that simply checking documents given to the customs would not expose exaggerated invoices: inspectors would need to examine the actual value of the cargo itself to prove fraud. More-over if this new process is rigorously applied, the risk is that it will increase the burden on genuine trade.

China's central bank has faced huge capital inflows for several years and has so far managed to limit the impact on the domestic economy by draining the excess liquidity in the financial system through bonds issues and obliging commercial banks to deposit more money in reserves. However, there are some signs that the system for sterilising inflows is reaching its limit. The higher reserve requirements are putting heavy pressure on some cash-poor, smaller banks. Minggao Shen at Citigroup says that the only countries in the world with higher reserve ratios are Zambia, Croatia and Tajikistan and that Chinese levels cannot go much higher. Moreover, the difference between Chinese and US interest rates means that the central bank is making a loss on its bond issues, which have been rare in recent months.

If the system of sterilising inflows is becoming hard to operate, then the Chinese authorities could find themselves in a trap. Facing inflation at home, the obvious response is to appreciate the currency or raise interest rates. But both those options attract more hot money that will feed inflation. "We are passed the point when there were easy solutions," says Michael Pettis, a finance professor at Beijing University.

Inflation in Zimbabwe: 165,000% or 4M% or 30M%?

It is perhaps ironic that the German government has told one of its firms to stop providing paper for Zimbabwe's central bank (or whatever passes for one there) to print its currency of infinitesimally meagre value. Interwar Germany has long been famed for its degeneracy: In the economic realm, currency was printed at an astonishing pace to pay off onerous war reparations, resulting in a bout of hyperinflation. In the social realm, the generally miserable conditions made licentious conduct normal in pursuit of cash. Life is a Cabaret, old chum, and all that. However bad inflation was in Weimar-era Germany, Zimbabwe with a global pariah in Robert Mugabe is giving it a run for its money--literally. Indeed, anti-globalization types should surely take note of the generally high levels of economic insulation achieved by Zimbabwe. So if worldwide economic integration is vile, head for North Korea, or better yet, Zimbabwe to enjoy the fruits of splendid economic isolation. As far as I can tell, though, far more people seem to be fleeing these godforsaken places than those wishing to enter. There must be a lesson in here somewhere.

Something that puzzles me though is the inflation rate in Zimbabwe under the economic stewardship of one Robert Mugabe. The Associated Press report below confuses me as it is rather sloppily written. It first says that the inflation rate in February reached 165,000% according to government sources (compiling statistics for Zimbabwe's government strikes me as a fascinating occupation.) However, it then goes on to say that the real rate of inflation is more like 4,000,000% according to a more impartial source. Not only is change in the level of inflation confused with the level of inflation, but the periods compared may also different--i.e., monthly versus annualized:

A German company that has been supplying paper used by Zimbabwe's central bank to print bank notes said Tuesday it is stopping shipments immediately at the request of Germany's government.

The move could be a new problem for the regime of President Robert Mugabe, which has been churning out currency amid skyrocketing inflation that forces Zimbabweans to shop with bundles of cash. A pint of milk can cost 3 billion Zimbabwe dollars, or about 30 U.S. cents.

Giesecke & Devrient GmbH of Munich said it would stop delivering bank note paper to the Reserve Bank of Zimbabwe "with immediate effect." It said the decision came in response to an official request from the German government and calls for international sanctions by the European Union and United Nations.

"Our decision is a reaction to the political tension in Zimbabwe, which is mounting significantly rather than easing as expected, and takes account of the critical evaluation by the international community, German government and general public," chief executive Karsten Ottenberg said in a statement.

Zimbabwe's currency needs have spiraled upward as a shattered economy spurs overheated inflation. Prices rose 165,000 percent in February, according to government figures, but independent experts say the real inflation rate is closer to 4 million percent.

Mugabe, who was sworn in as president for a sixth term Sunday after a widely discredited runoff election, was once hailed for leading Zimbabwe's independence fight. But he has grown increasingly unpopular for land seizures and other economic policies that wrecked the country's once-vibrant agriculture sector.

Newsweek further adds to the confusion by noting that the level of inflation was 165,000% in February, and that Harare's Financial Gazette recently said the inflation rate hit an even more astounding 30,000,000%:

As Mugabe squeezed, Zimbabwe's already desperate economic crisis worsened. Inflation, which topped 165,000 percent in February (according to Reuters)—already the highest in the world—recently hit a mind-boggling 30 million percent, according to Harare's Financial Gazette. Bread sells on the black market for 3.5 billion Zimbabwean dollars a loaf. As the U.S. ambassador in Harare, James McGee, put it, "Mugabe turned Zimbabwe from the breadbasket of southern Africa into its basket case."

Confusing, no? One thing's for sure--things cannot stay like this for long in Zimbabwe. When Mugabe goes, he's going like Elsie...[pardon the Cabaret overdose]

Marcos Senna / the IPE of Naturalized Footballers

Let's face it: given the immigration backlash in many parts of Europe amidst "look what these wretched foreigners are doing to our country"-style scapegoating, it's far from easy to become citizens of any number of Western European states. However, there is some wiggle room for those whose skills are very much in demand--especially talented footballers. The recent victory of Spain in Euro 2008--its first victory in a major international tournament in 44 years--is in large part due to the sterling efforts of the superlative holding midfielder Marcos Senna. A holding midfielder is a defensively-tasked player positioned between the backs and the midfielders. Like Senna, the best of them know how to take possession away from attacking players on defence and feed the other midfielders on offence with accurate passing. To top things off, he's also a scoring threat from long distance. At the moment, Marcos Senna is among the world's best at his position.

As the Belfast Telegraph notes below, Senna represents a growing trend of somewhat hasty naturalizations that European national teams are undertaking to fill in talent gaps in their national sides. Unsurprisingly, the main provider of exported footballing talent is Senna's homeland, Brazil. Perhaps there is no "foot drain" in the Brazilian case, but privileging footballers in the immgration queue does raise serious questions about the fairness of Western European immigration policies. Even at Euro 2008, joga bonito lives on:

For the man keeping [Juventus midfielder Xabi] Alonso out of Luis Aragones' side is Brazilian. Marcos Antonio Senna da Silva, aka Marcos Senna, took Spanish citizenship shortly before the 2006 World Cup but, apart from working in Spain, has no connection with the country. Initially there was some disquiet but Senna's genial personality and commanding performances have dispelled any criticism. In the recent Euro 2008 quarter-final he prevented Italy getting any meaningful service to Luca Toni, then dispatched a penalty in the shoot-out. In the semi-final he suffocated Andrei Arshavin, the gifted playmaker who was supposed to lead Russia to the final...

"Not everyone was in favour at first but there was no real outcry," said Graham Hunter, a Barcelona-based journalist. "In taking Spanish nationality Senna is part of a tradition that goes back through another Brazilian, Donato, to Alfredo di Stefano [who played for Argentina before playing for Spain]..."

It may be slightly embarrassing that the key player in the European Championship is South American but as Josef Hickersberger, the Austrian coach, said after Poland's Brazilian, Roger Guerreiro, had scored against his men: "All teams are trying to bring in players and to naturalise players in order to strengthen their own national teams. It is legitimate. These are possibilities which are open to every team according to the statutes."

Hickersberger also mentioned Eduardo, the Arsenal striker who would have led Croatia's attack but for injury. He could have mentioned Senna; Turkey's Mehmet (Marco) Aurelio; Portugal's Pepe and Deco, who, like their coach, Luiz Felipe Scolari, were born and bred in Brazil; or Germany's Kevin Kuranyi – who at least does have a half-German father.

That Kuranyi could instead have played for Hungary (his father's other antecedent), Panama (his mother's nationality) or Brazil (he was born in Rio de Janeiro) suggests Fifa's rules are flexible enough. Jack Charlton's Republic of Ireland reached a succession of tournaments in part because of keen exploitation of the "granny rule".

Recently, however, there has been a new development, one which owes something to globalisation and much to expediency. Coaches and governments have realised that while countries are not allowed to use the transfer market to strengthen teams, they can use helpful immigration laws.

Since Brazil is the greatest producer of football talent in the world it follows that footballers most likely to be naturalised are from Brazil. Those playing at Euro 2008 are just the most visible tip of a ball-juggling mountain. There are Brazilians playing for Bosnia, Bulgaria and Hungary. Azerbaijan have four Brazilians playing for them – the recent spell as coach of Brazil's 1970 World Cup captain, Carlos Alberto Torres, is undoubtedly a factor. Brazilians have been competing for Tunisia and Lebanon and for Japan and Qatar.

What these players offer was encapsulated by Leo Beenhakker, Poland's coach, who pushed for Guerreiro's naturalisation in time for this tournament. "He is great," the Dutchman said. "He's amazing, he's fantastic. He sees solutions and makes choices on the field that are, well, it's Brazilian. I cannot explain it in any other way."

Guerreiro's Polishness only goes so far. When he collected a man-of-the-match award after scoring against Austria, the honours were done in Spanish – no Portuguese speakers were available. Roger – as he is known locally – is unlikely to have learnt much Polish since 2006, when he left his native country to sign for Legia Warsaw.

Now he is, in Fabio Capello's phrase, Poland's "fantasy" player; then he was, said Tim Vickery, a Rio-based football analyst, "a nondescript left-back". Vickery, who watched Guerreiro playing for Flamengo and Corinthians, added: "Now he is an attacking midfielder full of ideas and confidence. He did none of that here but if a Brazilian who moves to Europe can cope with the cultural change they get far more respect, because they have that natural ability, than they did at home. Some shine with that confidence."

That appears to have been the case with Deco, whose adoption of Portuguese nationality met with considerable opposition in Portugal at the time, and Senna. While not fitting the archetypal ball-juggling image of a Brazilian, Senna's easy command of the ball, confidence in possession and explosive shooting mark him out as a product of the joga bonito...

With globalisation the blurring of national allegiances is only going to increase, especially given the value of an EU passport to players from outside the union. Had the Dutch government been more amenable Chelsea's Salomon Kalou, for example, then playing at Feyenoord, would have played for the Netherlands against an Ivory Coast team which featured his elder brother, Bonaventure, at the last World Cup. Senna is cousin to Marcos Assuncao, a former Brazilian international.

They will never play against each other at international level because Assuncao, who played for Santos and Roma, won 11 caps for Brazil between the 1998 and 2002 World Cups before being dropped after one poor game. Such is the depth of talent, he was never recalled. That is why Senna, who has lost and regained his place with Spain, and now stands on the cusp of winning the most precious medal outside the World Cup, will feel tonight that he has made the right choice of passport.

Jurgen Habermas, Eurosceptic

While the influential German sociologist / political philosopher Jurgen Habermas has undoubted Marxist leanings, he shares something in common with those on the opposite side of the political spectrum: Euroscepticism. It is slightly dismaying though that such an influential figure seems to rehash the usual Murdoch-esque arguments against the Lisbon Treaty--national sovereignty is being transferred to Brussels; democratic representation is being sacrificed in the process; the EU is a cover for American-led neoliberal globalization, etc. If this sort of thing sounds familiar, that's because it's the message that's relentlessly pounded day in and day out by the likes of Rupert Murdoch's Times of London and the Sun. Topless women on page 3, apocalyptic visions of European unity elsewhere pretty much sums up the level of sophistication of much of the debate.

Is the EU tactic of avoiding ratification of the Lisbon treaty through referenda in various EU countries a cynical plot of a European elite to bypass the mechanisms of democracy as Habermas and Murdoch suggest? I have always been sceptical of this argument. Given how much public discussion of the EU has been poisoned by the likes of Murdoch and the rest, there's limited reason to believe that the positive merits of further EU integration can come across. As with many things, fear and loathing [those wretched Eurocrats!] are far easier to sell than patience and understanding. To be sure, EU-friendly politicians have not made much of an effort towards selling the Lisbon Treaty. Can anyone really argue that the person in the street is more likely to come across yet more tabloid rants against the EU a la the Sun than to seek well-reasoned the arguments for further integration? That Habermas plays to the former crowd is indeed disappointing. Here are some excerpts from Der Spiegel:

European governments are at their wits' end. It is time for them to admit it -- and let the public decide about the future of the European Union.

…and everything comes to a grinding halt.

The farmers are upset about falling global prices [!!!--even dyed-in-wool agricultural protectionists should be aware of rising global commodity prices] and the new regulations constantly coming from Brussels. Those at the bottom of the social ladder are upset about the growing gap between rich and poor, especially evident in a country where both groups live in close proximity. The citizens despise their own politicians, who promise the world but who lack perspective and do not (cannot) deliver.

And then along comes a referendum over a treaty that is too complicated to be understood. EU membership has been more or less advantageous. Why should anything be changed? Doesn't the strengthening of European institutions necessarily lead to a weakening of democratic voices, which are only heard within the national public sphere?

The citizens sense that they are being patronized. Once again, they are to ratify something in the making of which they were not involved. The government has said that this time the referendum will not be repeated until the people give in. And aren't the Irish, this small, obstinate people, the only ones in all of Europe who are actually being asked for their opinions?

They don't want to be treated like cattle being driven to the voting booth. With the exception of three members of parliament who voted "no" on the issue, the Irish people and the entire Irish political class are entirely at odds. In a sense, it is also a referendum over politics in general, making it all the more tempting to send "politics" a message. This temptation is one felt everywhere today.

One can only speculate on the motives behind the Irish "no" vote. But the first official reactions have been clear. Suddenly roused out of complacency, European governments don't want to appear helpless. They are looking for a "technical" solution -- which would result in a repeat of the Irish referendum.

This, though, is little more than unadulterated cynicism on the part of the decision makers, especially given their protestations of respect for the electorate. It is also wind in the sails of those actively wondering whether semi-authoritarian forms of pseudo-democracy practiced elsewhere are perhaps more effective after all...

Until Nice, the integration process, fuelled by economic liberalism, was pursued by the elites over the heads of the population. But since then, the successes of economic dynamism are increasingly perceived as a zero-sum game. There are more and more losers across Europe.

Justifiable socio-economic fears and consequent short-sighted reactions may explain the unstable mood. But the public's frame of mind can be influenced by political parties -- by offering the electorate a credible vision. Unsolved problems should be taken more seriously than transient states of feeling.

The failed referendums are a signal that the elitist mode of European unification is, thanks to its own success, reaching its limits. These limits can only be surmounted if the pro-European elites stop excusing themselves from the principle of representation and shed their fears of contact with the electorate...

The price of this diffuse expansion project is a lack of political leverage in a global society that, while economically tightly knit, has been drifting apart politically since 2001. One only has to look at the miserable images of petty princes Gordon Brown, Nicolas Sarkozy and Angela Merkel, as they kowtow to US President George W. Bush, to realize that Europe is bidding adieu to the world stage.

But the problems of climate change, the extreme gaps between rich and poor, the global economic order, the violation of fundamental human rights and the struggle over dwindling energy resources affect everyone equally. Even as the world becomes increasingly interdependent, the global political stage is home to the proliferation of weapons of mass destruction and an increased willingness to turn to violence. Isn't it in the interest of a politically strong Europe to push for the constitutionalization of international law and an effective cooperation of the international community?

Europe, though, is unable to achieve political significance commensurate with its economic importance, precisely because its governments disagree over the purpose of European unification. Where the blame lies is clear. First and foremost, it can be pinned on the fact that governments themselves are at a loss -- and are thus spreading the malaise of a lackadaisical and morose "more of the same" attitude.

Naturally, the fundamental conflict over direction derives its explosive force from deeper-seated, historically-rooted differences. There are not grounds for criticism of any particular country. But in the wake of the Irish signal, we should expect two things from our governments. They must admit that they are at their wits' end. And they cannot continue to suppress their crippling dissent. In the end, they are left with no choice but to allow the peoples to decide for themselves.