Posts of June 2010

Wade on LDC Industrial Policy Post-Global Crisis

♠ Posted by Emmanuel in Credit Crisis,Development at 6/30/2010 01:22:00 AM

Robert Wade of the LSE should be very familiar to followers of international political economy. He has long been a champion of heterodox approaches to attaining economic growth, contrary to those espoused by the development mainstream for the longest time. His most famous work remains Governing the Market, in which he explained the case for state involvement in contrast to neoliberal orthodoxies involving liberalization, privatization, and deregulation as self-evident virtues. Until now, it is a standard work for those engaging with this literature. If you're new to this book, well, Google says it has 2,847 cites! Truly, it is a milestone whatever you make of the ideas expressed therein.

It seems that time has been rather friendly to the ideas expressed by Wade as the global financial crisis has laid to waste many of the key tenets of the archetypal Washington Consensus. IMF Managing Director Dominique Strauss-Kahn has practically buried it, while "third way" pioneer and former British PM Gordon Brown has declared that "laissez-faire has had its day."

In the midst of all this revisionism, what does Robert Wade now make of what developing countries should do? Fortunately, he has a new article out in the LSE house journal Global Policy that begins to map out his thoughts on where we should go after the demise of yet another Big Idea meant to deliver us to the land of economic milk and honey. What follows is the abstract of "After the Crisis: Industrial Policy and the Developmental State in Low-Income Countries." I can't say that these ideas are entirely original, but hey, I guess it's better to question whether they have merit in light of what has occurred instead of continuing with ideas that haven't fared so well:

The current global economic crisis has been disastrous for many millions of people. But it has also had the desirable effect of prompting a little more skepticism towards the economic beliefs that have constituted the mainstream view about public economic strategy for the past three decades, both in the major western states and in international lending organizations like the World Bank and the IMF. They have at their core the proposition that 'government failure is generally worse than market failure', which supports the default policy setting of 'more free market' in most countries most of the time. The new crisis-induced skepticism is good news because the previous confidence rested more on what J. S. Mill called 'the deep slumber of a settled opinion' than on a solid empirical base.

The present article begins by summarizing some powerful pieces of evidence that challenge core mainstream propositions in the context of developing countries, which have received less attention than they deserve. Having shown why the mainstream prescription for the role of government in development is questionable, the article describes some key points about the nature of industrial policy in East Asia and about the general rationale for a certain kind of industrial policy even where state capacity is relatively weak. The rationale is all the stronger in the world economy after the crisis, when a major surge of innovation around energy, water, nanotechnology and genetics is likely, rendering many existing specializations unviable. The article then presents an argument about the institutional arrangements of a 'developmental state' through which national strategies can be formed and implemented. It ends by describing small signs of new flexibility in World Bank and IMF thinking.

Cue Strauss-Kahn, eh? And here are the policy implications identified that, it must be noted, sound awfully familiar:

Liberalizing markets, attracting FDI and promoting good governance are not necessary conditions of long-term economic growth and development in low-income countries.
In the wake of the global financial crisis and the impending surge of new technologies, the role of industrial policy – promoting some sectors or products ahead of others – should be expanded.
Import replacement as well as export orientation are crucial components of a successful industrial policy.
Four organizational features are important in a developmental state: (1) an even balance between the state and business groups; (2) a public service mindset among state officials; (3) delivery of patronage resources separately from the economic bureaucracy; and (4) an industrial extension service, with tight limits on its officials' discretionary control of resources.
Developing country governments and firms should be prepared to push back against the shrinking latitude for industrial policy instruments allowed in international trade and investment agreements.

Ah well, read the rest for yourselves and see what you make of it.

G20 Protest: Battle in Seattle, Turmoil in Toronto

♠ Posted by Emmanuel in Anti-Globalization at 6/29/2010 10:17:00 AM

In case you missed it, the twin protests of the G8 and G20 summits recently held in Toronto, Canada were rather violent given the relatively quiet anti-globalization protests of the past few years. Even after spending massive sums on ensuring summit security, Toronto or "New York Run by the Swiss" as some of its adherents call it was hit hard:

The site of the weekend's Group of 20 leaders' meeting was rocked by some of the most violent protests to hit a global gathering in recent years, despite one of the most lavish security outlays in summit history. Bands of activists ran through the city's downtown Saturday, bashing windows and setting several police cars ablaze, halting public transit and prompting officials to lock down hospitals and a major shopping mall. Police responded with teargas and pepper spray, arresting nearly 600 people over the weekend, in addition to 32 detained before the summit began.

The violence had Canadian politicians and police wringing their hands after the country spent around $1 billion on security for the G-20 and a back-to-back Group of Eight summit in rural Huntsville, three hours to the north. Those precautions included a 20,000-strong security force in Toronto and a 2.4-mile-long chain-link fence surrounding a "Yellow Zone" that enclosed the area where the G-20 leaders met.

$1 billion spent on security? I am speechless. But, as the Canadian flag with the maple leaf replaced with a ganja leaf suggests in the clip above, these spontaneous outbreaks of anti-globalization sentiment are still as incoherent as before, diluting the movement (if there ever was one).

G20 Who's Who in Stimulus v Austerity Debate

♠ Posted by Emmanuel in Credit Crisis at 6/29/2010 12:06:00 AM

A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labour the bread it has earned - this is the sum of good government - Thomas Jefferson

The just-concluded G20 meetings are notable for who lines up where in the global political economy when it comes to stimulus versus austerity, AKA profligacy versus prudence. Unfortunately, we all know where the deficit-loving US government lines up, contrary to the wishes of America's great third president and in harmony with those of its current IOU junkie. However, it is also important to note who lines up where. With the removal of Mr. Golden Rule-Turned Stimulus Junkie Gordon Brown, the UK has moved solidly into the Jeffersonian column.

As for the rest, Irwin Stelzer has an interesting article discussing, among other things, who stacks up where:

Add to that the failure of these weakened leaders to agree how to fashion a sustainable recovery. Mr. Obama wants continued stimulus spending by surplus nations such as Germany to boost demand now that Americans are too deeply in debt to be the world's consumers of last resort. He is joined in that view by Mr. Strauss-Kahn and Indian Prime Minister Manmohan Singh. Mrs. Merkel prefers austerity, which she argues will create confidence and stepped up consumer spending. She has ECB President Jean-Claude Trichet, European Commission President José Manuel Barroso and China's President Hu Jintao in her corner. Mr. Sarkozy would like to see a bit of inflation to help pay down the debt his nation has run up with 30 years of unbalanced budgets, and push the euro exchange rate down further to make France more competitive in markets outside the euro zone and help it grow out of its indebtedness. Absent that, he fears, France, already paying a 0.5% premium over German bunds, will lose its triple-A rating, which would have a negative effect on "La Gloire Française," even more important to Mr. Sarkozy's constituents than higher interest rates.

If you needed any more proof that the IMF more often than not parrots the line out of Washington, its Managing Director Dominique Strauss-Kahn sides with the Americans.

So, for the record, at least on the rhetoric:

Deficit lovers: USA to a man (duh), IMF Managing Director Dominique Strauss-Kahn, Indian PM Manmohan Singh.

Deficit haters: German Chancellor Angela Merkel, ECB President Jean-Claude Trichet, EC President Jose Manuel Barroso, British Prime Minister David Cameron, Chinese President Hu Jintao.

And somewhere in between is the canny Nicolas Sarkozy who defies description and has his own quirky agenda!

Michel Foucault, Meet FIFA's No Instant Replay

♠ Posted by Emmanuel in Marketing,Sports at 6/27/2010 07:09:00 PM

When I was a wee lad and didn't know better, I liked watching "pro wrestling" with its wacky, deliberately staged antics. My favourite moment would be when, while the referee wasn't looking, one wrestler would grab a folding chair and slam it into his opponent. When the referee's attention returned to the action after some distraction--a tag team partner arguing with the referee, a player's manager blocking the referee's view, or whatever--the opponent hit with the chair would invariably be flat on his back and pinned for the three count. Ting, ting, ting! An instant "controversial" decision designed to elicit heated discussion among commentators and fans alike.

On the face of it, there is no explicable reason as to why instant replay is still not sanctioned by FIFA despite several football associations, players, owners, and who else have you clamouring for the technology. During the qualifying stages for the World Cup, France famously "defeated" Ireland via a Thierry Henry handball. The pathetic display by the French team during the World Cup itself only soured matters further. Today, we had two more sorry incidents that could've been resolved easily with instant replay. First, England's Frank Lampard had a fine strike that was disallowed since the officials weren't paying attention (in true "pro wrestling" fashion). Insofar as it would've tied the game 2-2, it certainly was a turning point in the game. Second, Mexico was incensed when the first goal by Argentina's Carlos Tevez was allowed to stand when he was clearly offside.

Now, any reasonable person would think FIFA President Sepp Blatter couldn't stop this avalanche of criticism regarding what were clearly poor decisions. In terms of procedural justice, it makes little sense. Yet, in the wake of the Thierry Henry handball incident, FIFA decided otherwise:

The International Football Association Board has ruled out the use of goal-line technology and video replays. "The door is closed. The decision was not to use technology at all," said Fifa general secretary Jerome Valcke [my emphasis]. The decision was reached after watching presentations of two systems, Cairos - a chip inserted in a ball, and Hawk-Eye - used in tennis and cricket.

The Football Association and Scottish Football Association had both voted in favour of further experiments. FA chief executive Ian Watmore was outvoted after the Irish FA and Welsh FA voted in line with Fifa. "In the end it came down to a difference of opinion about whether you believe the future of football involves technology or not," said Watmore. "We had supported the idea of investigating experiments into the use of technology on goal-lines and we would like to have seen it. But some of the arguments were very powerful and persuasive and we have to accept them."

Fifa has been under increasing pressure to use some form of technology to eliminate mistakes which are highlighted by TV replays.

As BBC commentators Gary Lineker & Co. noted afterwards, instant replays are banned from being shown on the stadium screens while matches are underway as to not provoke fan unrest over controversial refereeing decisions. However, during the Argentina versus Mexico game, a replay inadvertently showing Tevez clearly offside raised passions to the point that Mexican players were positively livid at halftime.

My French flatmate probably has it right: bad decisions are allowed to stand not in spite of technology, but because of deliberate design. Now, some French tend to be utterly cynical people who hold much in contempt (like "reality"), hence the entire postmodern genre that stands in stark contrast to the often dangerous naivete of the Americans.

If you go by Michel Foucault, disuse of instant replay is akin to enabling "tactical polyvalence": Powerful folks like FIFA honcho Blatter would rather retain the randomness of human errors of judgement not because the technology doesn't exist to make better informed decisions, but to make things livelier--to give commentators, fans, and the rest of the circus maximus that is world football something to fume about long after the action on the field is finished. Doing so can build rivalries. The storied England versus Germany one traces much of its history to the disputed goal of the 1966 final by Geoff Hurst. Today, many wags noted that England's goal being counted in 1966 was levelled out by today's judgment that a clear goal wasn't so.

And so the storied rivalry continues as counterfactuals that can never be proven will linger. Would the game have turned out differently had Lampard's clear goal been allowed to stand? Perhaps the English side would've continued in better spirits and not have felt hard done by, leading to an eventual victory. Could've, should've, would've. Regret is the stuff of high drama. Or, you can take the postmodern interpretation: perhaps Blatter foresaw the spectacle arising from such debacles. Imbibing pro wrestling "hit 'em with a chair" logic, the German goalkeeper Manuel Neuer has admitted to (quite successfully) pretending that the ball didn't go in by gathering it quickly and giving it the boot.

Surely, future fan interest on both sides will be driven by the build-up of these incidences. For, the bumbling referees without instant replay are meant to show incompetence like distracted referees in pro wrestling. That is, they play the villains others love to hate. And, in so doing, they create more perceived slights that must be avenged during future events that promise atonement--or, in the continued absence of instant replay, more controversial decisions meant to last a lifetime.

Final verdict after 90 minutes (+ stoppage time): Foucault = cynical, brilliant. Blatter = cynical, brilliant. Heck, WWE = cynical, brilliant, It's good marketing, pure and simple!

29/6 UPDATE: Or maybe not. Blatter has apologized to the English and Mexican football associations and seeks to reopen investigation of instant replay when FIFA reconvenes in July.

29/6 UPDATE 2: The text of the initial ruling maintaining the disuse of instant replay does indeed highlight Blatter's idea that controversy is part of the package in addition to quite frankly dubious assertions about the cost of introducing instant replay:

The human aspect: no matter which technology is applied, at the end of the day a decision will have to be taken by a human being. This being the case, why remove the responsibility from the referee to give it to someone else? It is often the case that, even after a slow-motion replay, ten different experts will have ten different opinions on what the decision should have been.

Fans love to debate any given incident in a game. It is part of the human nature of our sport [my emphasis]...

The financial aspect: the application of modern technologies can be very costly, and therefore not applicable on a global level. Many matches, even at the highest level, are not even televised. For example, we have close to 900 preliminary matches for the FIFA World Cup™, and the same rules need to be applied in all matches of the same competition. The rules need to be the same for all association football matches worldwide.

The experiments conducted by companies on technology in football are also expensive. The decision of the IFAB, after careful consideration and examination of studies conducted in recent years, to give a clear answer on technology in football is also positive in this regard as these companies will now not spend significant amounts of money on projects which in the end will not be implemented.

Ordo- v Neoliberal: Why Germany Clobbers England

♠ Posted by Emmanuel in Europe,Neoliberalism,Sports at 6/27/2010 04:38:00 PM

We hoped for the best, but things turned out like they always do - Viktor Chernomyrdin

And so England's overtattooed players from overindebted teams are going home early, joining their equally underwhelming fellow Anglo-Saxons the Americans after a 4-1 drubbing at the hands of Germany. (Heck, the English didn't even play body art poster boy David Beckham due to injury.) Not that this result is of any surprise to me as I've intoned before, but the magnitude of the defeat is especially disheartening for those who thought England would've been less embarrassing.

Where does this chronic performance deficit come from? Most visibly, it is illustrated in the first divisions of the respective countries. The UK's higher propensity to pay massive, financially unsustainable wage bills on experienced (especially foreign) players tends to crowd out national player development. By contrast, German leagues have not been as marked by as much overspending, Certainly, German teams do not win as many Champions League or UEFA Cup titles as their free-spending English brethren, but when the world's biggest tournament comes around when you can't throw as much good money after bad, the country whose league nurtures home players fares better.

The rot in the English system starts early. To set the stage for today's thrashing, recall the 2009 U-21 event in which Germany beat England 4-0 featuring prominently, like today, the menacing Mesut Ozil. As you know, many other young'uns from that German side played today:

This victory, so deserved the rather ugly trophy could almost have been handed over by Uefa president Michel Platini at half-time, leaves the Germans as European champions at Under-17, Under-19 and now Under-21 level, reminding the Football Association of the importance of cranking up the production line of young talent...

England need to nurture such match-winners, players who are about more than athleticism and hard work. “He’s an outstanding player, who takes up intelligent positions,’’ [England U-21 Coach Stuart] Pearce said of Ozil. Germany’s coach, Horst Hrubesch, said: “This win shows that the great cooperation between the German FA and the smaller federations, and the clubs and the Bundesliga, is being repaid right now with the tremendous young players we have.’’

So yes, they have a system of player development which works well in Germany, with a long line of promising players at every single age level and just entering the Bundesliga. By contrast the UK World Cup team is pretty much geezerized, with several "golden generation" individuals representing the oldest England team ever and the most senior in the competition even without Beckham. Why is this so? First, there is a tendency to give megabucks to those who've done their best in other leagues like Michael Ballack. He was already fairly advanced in age when Chelsea picked him up. Next, these aging stars block the career progression of younger players. Not only have England's younger players been beaten already by Germany's during youth competition, but their disadvantage is further widened since the English don't get as much experience as Deutschland's kids playing first division football.

And here's the coup de grace: the Bundesliga is better attended and more profitable than the no-holds-barred spending competition in the Premier League featuring, among others, oligarch Roman Abramovich (Chelsea) and the Emiratis (Manchester City). Cost control in the Premier League? To hell with that German idea; it's the "sugar daddy" model in excelsis:

The Bundesliga recorded a £146m profit as revenue increased by £116m and wages went up by just £68m, according to Deloitte’s Annual Review of Football Finance. The German first division also recorded the highest attendances in Europe for the seventh successive season – attracting 8,000 more people per game than the Premier League.

The Premier League remains by far the biggest division in terms of generating revenue, which actually increased by £49m, but this was swallowed up by a £132m increase in wages. English top flight clubs spent in excess of £1.32billion on employee salaries – more than Italy’s Serie A (£0.93bn), Spain’s La Liga (£800m), the Bundesliga (£684m) and France’s Lique 1 (£615m).

The average Premier League footballer earned an estimated £21,600 a week or £1.1m a year in 2008-09 as top flight clubs each spent an average of £41m on player wages.

Germany wins over and over and over: (1) The fans get to see games at reasonable prices and can take their families along; hence the better attendance. (2) Exciting young players who come up through the system face top-level league competition early and thus sharpen their skills when representing their country. (3) More balanced competition due to the absence of megaspending foreign owners results in greater parity among teams. It's not "what the market will bear." Fans shouldn't be ripped off so horribly that Manchester United and Liverpool fans are massively annoyed at their helplessly debt-addled American owners. Definitely, English fans should press for changes in governance in the Premier League to make it, ah, more Bundesliga-like lest even worse performances materialize.

There are indeed strong parallels between what's going on in German versus English leagues that reflect political-economic governance. While neoliberalism is an orgy of liberalization, privatization and deregulation reminiscent of today's Premier League, the Bundesliga is very much in the ordoliberal vein, preferring stability, sustainability, and development. There is much you can gather on the Internet about it, but here is a brief snippet from the NYT Economix blog on ordoliberalism in today's context:

But take careful note of the name Walter Eucken, whom [Hans-Werner] Sinn references with a reverential tone that could be found only in Germany. Mr. Eucken, who died in 1950, is closely associated with a school of economics known as ordoliberalism, which teaches that state regulations can help the free market produce results close to its theoretical potential.

After World War II, ordoliberals (also known, confusingly given the argot of today’s anti-globalization protesters, as neoliberals) defended capitalism but said the state needed to play a strong role in regulating what did not come naturally. That meant ensuring stable prices, protecting property rights and – oh, how prescient this sounds today! – ensuring unlimited liability for those daring capitalists so that they bear the rewards, but also the risks, of their behavior.

Just as you would much rather have a reliable, residual value-retaining Volkswagen than a Yankee crapmobile like a Chevrolet or its (somewhat better) GM Europe equivalent Vauxhall, it would be utterly senseless to put money on the UK or US over Germany in football time and again. World Cup 2010 only validates this assertion, as if you needed any more proof.

While I don't see Germany winning the entire event--and I would honestly rather see a first-time winner as I always do--their time will come whether in Euro or World Cup tournaments. The German team is the second youngest in the tournament, so it will mature nicely before becoming England-style geezerized. Over the long term, the evidence shows ordoliberalism beats neoliberalism whether in industry or sport. If things are unsettled at home, it reflects abroad--especially on the world's biggest stage. Neoliberalism promotes boom and bust, while ordoliberalism promotes consistency. Germany always comes to play as the record shows: three World Cups victories (1954, 1974, 1990); four times runners-up (1966, 1982, 1986, 2002); thrice third place (1934, 1970, 2006); once fourth place (1958). If that weren't enough, they've won the regional Euro competition thrice (1972, 1980, 1996) as well as being runners-up thrice (1976, 1992, 2008).

It's utterly hilarious how debt-loving American and English neoliberals keep telling Germans how to run their affairs when they are so far behind in understanding how the game is played, be it the political economy of industry or football. As the saying goes, Germany plans ahead to stay ahead in whichever domain you choose. To be Deutschland uber alles, you have to work at it and have the proper attitude and determination at all levels of society. If it's any consolation, at least a 4-1 defeat at the senior level is an improvement over a 4-0 defeat at U-21, eh?

UPDATE 1: The Scotsman has more on Ozil and the multicultural German squad.

UPDATE 2: I scoop an honest-to goodness football site Goal.com in describing how the rot has set into the English Daddy Warbucks system.

Socially and Environmentally Innovative Wal-Mart?

♠ Posted by Emmanuel in CSR,Environment,Latin America at 6/25/2010 08:15:00 AM

It may be hard to imagine given its share of criticisms regarding labour and environmental practices--think of its carbon footprint by virtue of sheer size--but Walmart in Brazil recently received an award in honour of the recently deceased "Fortune at the Bottom of the Pyramid" pioneer CK Prahalad. So yes, social innovation can occur with large MNCs operating in the developing world. In this context, to help preserve the irreplaceable Amazon rainforests:

The Corporate Eco Forum (CEF) today awarded Walmart Brazil and its CEO Hector Nunez the inaugural C.K. Prahalad Award for Global Sustainability Leadership for their historic work to preserve the Amazon. Mr. Nunez will accept the award tonight during the Gala Dinner at the 3rd Annual Meeting of the Corporate Eco Forum. "By taking extraordinary action to protect the Amazon, Walmart Brazil and Hector Nunez have carved out a place in history as both pioneering environmentalists and savvy business strategists," said MR Rangaswami, founder of the Corporate Eco Forum. "We created the Prahalad Award to honor the companies and individuals who best demonstrate that sustainability is the key driver of innovation. We can and must do a better job of integrating the principles of sustainability into core business strategy and Walmart Brazil, under Hector Nunez's leadership, has proven that it is not only possible, it is also smart business."

In June of 2009, Walmart Brazil convened a Sustainability Summit to introduce new mandates across their supply chain to protect the Amazon. At the Summit, Walmart Brazil announced historic plans to address some of the thorniest environmental and social problems in the world. Walmart Brazil will now ensure that its supply chain uses: no companies that employ slave labor; no soybeans sourced from illegally deforested areas; and no beef sourced from any newly cleared Amazonian land. The new mandates also call for a 70% reduction in phosphates in detergent and a 50% reduction in plastic bags by 2013.

Walmart Brazil recruited the presidents of the Brazilian operations of twenty major suppliers, including Cargill, Johnson & Johnson, Kimberly Clark, The Coca-Cola Company, 3M, Diageo, P&G, and Sara Lee, to sign an agreement on-stage at the Summit to meet these goals. The Brazilian Minister of the Environment and the head of Greenpeace in Brazil both spoke at the Summit and congratulated Walmart Brazil for its aggressive leadership.

Wal-Mart as an antidote to BP? You better believe it. Given the sheer vastness of its supply chain, Wal-Mart's actions have considerable knock-on effects, whatever you think of the firm's other practices.

Will UK Scuttle Iceland's EU Membership Bid?

♠ Posted by Emmanuel in Europe at 6/24/2010 01:42:00 AM

I'm sure that most of you are familiar with the events surrounding the collapse of Iceland's banking sector during the march of the global financial crisis which I've posted about in some detail before [1, 2, 3]. As the creditworthiness of giant Icelandic banks was called into question, many offshore depositors suffered collateral damage. In order to stem public panic, the governments of the Netherlands and the United Kingdom ponied up money to ensure these depositors got their money back. And, it doesn't really need to be said, collect from Iceland later.

However, there is still an ongoing spat over how much and when the Dutch and British would be compensated by the Icelanders. Aside from Iceland having to resort to IMF help, it too believes the Netherlands and the UK aren't considering the burden being placed on Icelandic taxpayers by making compensation due and demandable in short order. Unfortunately for Iceland, you can say that the EU member countries in this story have it all over the Nordics. For understandable reasons, Icelandic leaders have been keen on entering the EU as soon as possible as eventually adopting the euro should ease balance-of-payments pressures of the sort that sunk it. Still, approval will likely be contingent on reaching some sort of compromise with the Dutch and British:

Iceland was put on a fast track to join the European Union today, but the Cameron government served notice that it could block the country's membership unless it settled the £2.3bn Britain says it is owed as a result of the country's financial collapse two years ago. European government chiefs at a Brussels summit decided that "accession negotiations should be opened" with Iceland. At British and Dutch insistence, however, the summit said that Iceland would have to address "existing obligations such as those identified by the European free trade area surveillance authority", a reference to the fallout from the collapse of Icesave in 2008 that left 400,000 depositors in Britain and the Netherlands fearing for their savings.

The Icesave dispute generated acrimonious negotiations, with the terms for reimbursing the British and Dutch rejected first by Iceland's president and then by the Icelandic public in a referendum. Earlier this week, William Hague, the foreign secretary, made it plain that Britain could veto membership unless the dispute was settled. "Iceland will have to recognise its obligations," he said. "We won't block [opening negotiations], but we will want it clear at the start that Iceland meets its financial and legal obligations."

"We've taken note of that," Stefan Haukur Johannesson, Iceland's chief negotiator with Brussels, told the Guardian. "It's a contentious issue between our three countries. But we don't see it as linked with the accession process." In October 2008, following the collapse of Landsbanki, Icesave's parent, the Brown government sparked outrage in Iceland by invoking anti-terrorism laws to freeze Icelandic assets in Britain. The government in Reykjavik denounced the UK move as "an absurd decision".

Johannesson said that it was "self-evident that we will live up to our obligations" but insisted there could be no direct linkage between the financial row and the European negotiations. Iceland is otherwise likely to have a relatively smooth passage through the negotiations because it is in effect already part of the European single market.

As before the referendum that made Iceland delay its payments, I still believe that its best interests are served by "shut up and pay."

Harry Potter Theme Park: Why Orlando, Not London?

♠ Posted by Emmanuel in Europe,Travel at 6/23/2010 12:09:00 AM

London Mayor Boris Johnson is known far and wide as a loose cannon who unloads on friends and foes alike with regular abandon. A few days ago, he took aim at American politicians taking turns demonizing BP and hurting British pension funds and pensioners who rely on its stock and dividends, respectively. Given that BP has agreed to set aside £20 billion to cover potential damages, he's turned his attention to that poster boy of continued British influence in pop culture, the 'Harry Potter' franchise.

Apparently Orlando, Florida--the theme park capital of the world--has stolen a march on London for it has just opened a Harry Potter attraction inside of the Universal Studios theme park. In his regular Daily Telegraph op-ed, Boris Johnson urges Londoners to petition for the creation of a UK-based venue. After all, there is nothing inherently British about Orlando, Florida (or am I missing something?) Unfortunately, some good points are mixed with factually challenged points: Brits invented the Internet? EuroDisney is profitable? You must be joking that this sort of writing is worth the £250,000 'chicken feed' they're paying him...

You know, sometimes I don't understand what's wrong with us. This is just about the most creative and imaginative country on earth – and yet sometimes we just don't seem to have the gumption to exploit our intellectual property. We split the atom, and now we have to get French or Korean scientists to help us build nuclear power stations. We perfected the finest cars on earth – and now Rolls-Royce is in the hands of the Germans. Whatever we invent, from the jet engine to the internet [!--Tim Berners-Lee didn't invent the Internet but perhaps the World Wide Web], we find that someone else carts it off and makes a killing from it elsewhere. And now, in the crowning insult, I am being told by a 12-year-old that I have to start making preparations to take everyone to Orlando, Florida.

I want you to know that I have nothing against Orlando, though you are, of course, far more likely to get shot or robbed there than in London. In general I adore America. But I deeply and bitterly resent that Orlando is about to become the official place of pilgrimage for every Harry Potter fan on earth. On the 18th of this month they are unveiling a vast 20-acre attraction – a theme park – that will be called The Wizarding World of Harry Pottere_STmk, and the word in the industry is that it is gonna be huge. There will be animatronic whomping willows and exhilarating interactive quidditch-style rides, and vast latex-covered Hagrids rolling bonhomiously down the street.

In the words of Mr Thierry Coup of Warner Bros: "We are taking the most iconic and powerful moments of the stories and putting them in an immersive environment. It is taking the theme park experience to a new level." And of course I wish Thierry and his colleagues every possible luck, and I am sure it will be wonderful. But I cannot conceal my feelings; and the more I think of those millions of beaming kids waving their wands and scampering the Styrofoam turrets of Hogwartse_STmk, and the more I think of those millions of poor put-upon parents who must now pay to fly to Orlando and pay to buy wizard hats and wizard cloaks and wizard burgers washed down with wizard meade_STmk, the more I grind my teeth in jealous irritation.

Because the fact is that Harry Potter is not American. He is British. Where is Diagon Alley, where they buy wands and stuff? It is in London, and if you want to get into the Ministry of Magic you disappear down a London telephone box. The train for Hogwarts goes from King's Cross, not Grand Central Station, and what is Harry Potter all about? It is about the ritual and intrigue and dorm-feast excitement of a British boarding school of a kind that you just don't find in America. Hogwarts is a place where children occasionally get cross with each other – not "mad" – and where the situation is usually saved by a good old British sense of HUMOUR. WITH A U. RIGHT? NOT HUMOR. GOTTIT?

I know that Thierry and everyone at Warner Bros and Universal will do a magnificent job of making it look and feel authentic and faithful to the stories. But I know somewhere that's even better than Orlando at looking like London – and that is London. I want to know why this Kingdom of Potter is not being built in the UK, and I won't be fobbed off with any nonsense about the weather. They built Eurodisney in the Valley of the Marne, where it is at least as cold and drizzly as it is in London – and it has been a triumphant success...

My point is that this Potter business has legs. It will run and run, and we must be utterly mad, as a country, to leave it to the Americans to make money from a great British invention. I appeal to the children of this country and to their Potter-fiend parents to write to Warner Bros and Universal, and perhaps, even, to the great J K herself. Bring Harry home to Britain – and if you want a site with less rainfall than Rome, with excellent public transport, and strong connections to Harry Potter, I have just the place.

Boris Johnson also neglected to mention that public transportation in London is horrendously expensive, but hey, after two whoppers about the Internet and Eurodisney, who's keeping score other than me?

Turning Chinese: The Great Firewall of...Australia

♠ Posted by Emmanuel in Internet Governance at 6/22/2010 12:49:00 AM

Ah, yes, protecting innocent minds from the evils of the Internet. China famously employs an alleged 30,000 censors to stop all sorts of filth from contaminating the minds of the people. Apparently, these sorts of measures are no longer just fashionable with authoritarian regimes, but even in the outback as Australia gears up for (ostensibly) controlling child pornography and other forms of degeneracy. In the Aussie case, the digital czar is one Stephen Conroy. From TIME:

The concept of government-backed web censorship is usually associated with nations where human rights and freedom of speech are routinely curtailed. But if Canberra's plans for a mandatory Internet filter go ahead, Australia may soon become the first Western democracy to join the ranks of Iran, China and a handful of other nations where access to the Internet is restricted by the state.

Plans for a mandatory Internet filter have been a long-term subject of controversy since they were first announced by Stephen Conroy, the Minister for Broadband, Communications and the Digital Economy, in May 2008 as part of an $106 million "cybersafety plan." The plan's stated purpose is to protect children when they go online by preventing them from stumbling on illegal material like child pornography. To do this, Conroy's Ministry has recommended blacking out about 10,000 websites deemed by the Australian Communications and Media Authority (ACMA) to be so offensive that they are categorized as 'RC,' or Refused Classification. (See pictures of Chinese mourning the loss of Google.)

The government won't reveal an official list of the URLs on the current blacklist, but Conroy's office says it includes sites containing child sexual abuse imagery, bestiality, sexual violence, detailed instruction in crime, violence or drug use and/or material that advocates the doing of a terrorist act...

Since then, criticism of the proposed Internet filter has escalated. "Nobody likes it," says Scott Ludlam, a senator from the Australian Greens Party. "Everyone from the communications industry to child protection rights and online civil liberties groups think this idea is deeply flawed." Throughout 2009 GetUp!, an internet-based political activism organization, launched an advertising campaign to raise public awareness about the government's proposal.

In February, Anonymous, a community of Internet users, which include hackers, shut down the Australian Parliament's web site in their second attack against the filter, which they called "Operation: Titstorm" — a reference to the sexual content that the filter will be blocking. Save the Children has questioned the efficacy of the filter in protecting children, and in March, Paris-based Reporters Without Borders listed Australia as a country that's "under surveillance" in its annual "Internet Enemies" report, which rounds up the "worst violators of freedom of expression on the Net."

And while search engines Google and Yahoo! got into hot water in China over their willingness to bend over backwards to accommodate the PRC (at least initially), they are of a different mind in Australia. Insofar as Australia's mind control regime slows down searchable items, the quality of search results as well as the speed of their retrieval may suffer:

But the most high-profile criticism of the filter has so far been from net giants Google and Yahoo. In March, Google wrote to the Australian government with concerns that the scope of the filter was too wide. The search engine also warned it may slow down search speed. "Filtering may give a false sense of security to parents, it could damage Australia's international reputation, and it can be easily circumvented," the California company wrote in a submission to Conroy's Department of Broadband Communications and Digital Economy...

Indeed, only a cluster of Christian groups and child safety advocates have come out as supporting the filter. In a June 5 poll conducted on the web site of the Sydney Morning Herald, 99% of the 88,645 people who responded to the survey said they were against the Internet filter. Nevertheless, Conroy told the Sun-Herald in May that the policy "will be going ahead...''

Many say the biggest problem with the plan is that it simply won't work. "I don't see the point of blocking a site that no one would have come across, and making the criminals aware of the fact they are being watched. I am much more interested in seeing the Australian Federal Police work with international law enforcement agencies in tracking the site," Ludham of the Greens Party says. Jarrod Trevathan, a technology lecturer and researcher at James Cook University, agrees. "Once people know their site is being blocked they will just open up another URL, and then the filter will have to block that URL. Eventually the blocked list will contain countless URLs which will drastically slow down the speed of the Internet..."

Still, it's hard to see why the government is pressing ahead with a scheme that, in the view of many, will do more harm than good. "It's like trying to ban burglaries by banning pictures of crowbars," says Geordie Guy, vice chairman of Electronic Frontiers Australia, a non-profit national organization that has been vehemently opposed to the filter since its conception. "You stop burglaries the same way you stop pedophilia — by catching the perpetrators. If the government closes these websites than the [Australian Federal Police] will find it harder to track the real criminals."

The qualm many have isn't over freedom of speech per se but the implementation of the scheme. Still, it may portend even more similar efforts worldwide.

Mighty RMB! Nearly Hits +0.5% Limit on Monday

♠ Posted by Emmanuel in China at 6/21/2010 01:05:00 PM

Following up on a prior post, there isn't much to explain here other than say that the Chinese monetary authorities seem to have lived up to their word in not interfering with the upward momentum of the yuan. At the close of Monday's trading, it nearly hit the limit of the plus or minus 0.5% band (on the upside, obviously). While not interfering with trading, the daily fixing for Tuesday is set to be made at the mid-point of trading, not the limit, to delay the upward climb somewhat:

China's yuan soared on Monday to its highest against the dollar since the landmark 2005 revaluation, with the central bank stepping aside and tolerating broad gains on the first trading day since scrapping the currency's two-year peg to the dollar. The central bank declined to intervene for the of the few times in the yuan's modern history and appeared to want the market to drive intraday trade, backing up its weekend pledge to allow greater flexibility.

Traders said it was unlikely the yuan would repeat gains on the same scale in coming days, with Tuesday's mid-point setting serving as an important barometer of how much more appreciation the People's Bank of China is willing to stomach. "You cannot expect the yuan to shoot up 5 percent in two or three weeks, as the pace of Monday's rise implies," said a dealer at a North American bank in Shanghai.

Several dealers said they expected the PBOC to keep the mid-point unchanged on Tuesday, or even push it up as much as 50 pips, to effectively cap how much the yuan could rise. The yuan is allowed to rise or fall 0.5 percent versus the dollar from the daily mid-point but rarely moved towards the extremes of that tight trading band.

The yuan closed at 6.7976 against the dollar, up 0.42 percent from Friday's close and marking its biggest daily gain against the U.S. currency since the revaluation set the currency free to move in a managed floating exchange rate system. The yuan climbed as far as 6.7958 in intraday trade, another post-revaluation record and gaining as much as 0.47 percent from the central bank's mid-point, nearly reaching the 0.5 percent daily trading band limit.

These are fascinating developments. Whether the next few days will see moves of similar magnitude (approaching +0.5%) is certainly something to watch.

Al Jazeera's Genius of Western-Hating Commerce

♠ Posted by Emmanuel in Marketing,Middle East at 6/21/2010 12:09:00 AM

In the Eighties (for those old enough to remember them), Eddie Murphy came out with a novelty song called "Kill the White People" that parodied those ostensibly decrying all things Western while harbouring essentially commercial motives:

We sing of freedom and ooh equality
But we really don't care we just want money, money, money
We want to drive in a big black limousine
Get so high off ganja we can't even see
And then we kill the white people - ooh we gunna make them hurt
Kill the white people, yeah, ooh but buy my record first...

Which brings me to this interesting feature from The Economist on the rather nefarious cable channel Al Jazeera. Aside from pillorying the West endlessly, it also takes aim at any number of other Arabic governments that don't happen to be Qatar's. See, the Qataris--now owners of that rather decadent symbol of Western consumerism Harrods, if you remember--have been the funders of Al Jazeera from the get-go. Unlike the more sedate Saudi-funded Al Arabiya, Al Jazeera's declamatory--and, to be honest, inflammatory--style has made it far more of a success in the Arab world. As with many successful propaganda campaigns, you must have a simple message and pound it in relentlessly.

That, of course, contrasts with the essentially Western-ish commercial motives and production values behind Al Jazeera that you'd otherwise think its powers-that-be would decry. Yes, it's very much in the tongue-in-cheek kill the people, but buy my record first mould. The slyness of Al Jazeera, however, is that it clears up its tracks adequately enough while inflame passions on the Arab street in a way many others haven't--for commercial gain, of course:

The influence and reach of Al Jazeera continue to astound. It is certainly the most powerful news-and-current-affairs channel in the Arab world, well ahead of Al Arabiya, its Saudi-owned, more pro-Western rival. Al Jazeera claims to beam its main Arabic-language channel into around half of all Arab homes. Its English-language channel is said to reach 200m elsewhere, making waves in Africa, Asia and Latin America. Quite a lot of Europeans watch it, too.

This year, thanks to the munificence of the emir of Qatar, who is said to put at least $400m a year into its coffers, Al Jazeera’s clout may yet strengthen. The English-language channel and the Arabic one between them have at least 60 bureaus, with 12 in Africa alone, a number unthinkable for their shrinking Western rivals. Ten more, beyond Al Jazeera’s hubs in Doha, London, Washington, DC, and Kuala Lumpur, are expected to open by the end of next year. Coverage of events such as Sudan’s recent election, to which seven staff reporters and a score of technicians were assigned, put Western media in the shade.

The two language services are editorially separate. The English one’s choice of topics reflects the third-world interests of its viewers, concentrating more than its Western counterparts do on global poverty and the anger often felt towards America and the West. But it offers a wide range of opinion and covers Western politics well too. Both language services have bureaus in Jerusalem, Gaza and Ramallah (the Palestinian Authority’s seat), regularly giving Israelis a voice.

The Arabic service is a lot more controversial. Pro-Western Arab governments, particularly those of Egypt and Saudi Arabia, which denies Al Jazeera a bureau, repeatedly accuse it of bias. In particular they say it favours the Muslim Brotherhood, Egypt’s chief opposition, and Hamas, the Islamist movement that runs Gaza and refuses to recognise Israel...

Al Jazeera’s anti-Western populism was strongly echoed at its recent forum on “the Arab and Muslim world: alternative visions”. Many speakers, denoting piety or loyalty to political Islam, prefaced their remarks with incantations of reverence for the Prophet Muhammad. On Palestine, not a single one of 200-odd invited participants spoke up for a two-state solution...

On Iraq, not a single speaker, apart from a forlorn parliamentarian from the Iraqi prime minister’s party who made a desultory comment by video-conference, expressed a flicker of sympathy for the new Shia-led order, which several voices denounced as wholly illegitimate. The Gazan who edits al-Quds al-Arabi, a populist London-based newspaper that resonates in the Arab world, drew the loudest applause with a ringing call to back the continuing Iraqi “resistance”, even though the fight is now almost entirely between Arabs. No wonder Al Jazeera makes pro-Western Arab leaders, excoriated as puppets, feel queasy—Qatar’s, of course, excepted.

What can I say? Like it or not, more coverage will emanate from it as traditional Western media shrivels due to the unprofitability of selling newspapers and the like. Al Jazeera, like its near-polar opposite in terms of message Fox News, is brilliant in its own way even if the end product isn't what you'd consider as the pinnacle of journalism. While their messages may differ, both have a similarly masterful grasp of the medium. Just as the former has Fox News Babes, you can rest assured that the (rather better clad) anchorwomen on the latter do not fall short in the looks department. To paraphrase Eddie Murphy's incisive brand of satire, on Al Jazeera 24/7 it's kill the white people--but watch my channel first!

Roubini: Bah Humbug on Refloating the Yuan

♠ Posted by Emmanuel in China at 6/19/2010 10:09:00 PM

Much has been made of the announcement on the People's Bank of China website that it would "enhance the RMB exchange rate flexibility." Since July of 2008, the renminbi has been pegged at 6.83 to the dollar. However, the PBoC is now indicating that the time is right for moving away from this peg. Here are the key parts of the text:

In view of the recent economic situation and financial market developments at home and abroad, and the balance of payments (BOP) situation in China, the People´s Bank of China has decided to proceed further with reform of the RMB exchange rate regime and to enhance the RMB exchange rate flexibility...

The global economy is gradually recovering. The recovery and upturn of the Chinese economy has become more solid with the enhanced economic stability. It is desirable to proceed further with reform of the RMB exchange rate regime and increase the RMB exchange rate flexibility.

In further proceeding with reform of the RMB exchange rate regime, continued emphasis would be placed to reflecting market supply and demand with reference to a basket of currencies. The exchange rate floating bands will remain the same as previously announced in the inter-bank foreign exchange market.

China´s external trade is steadily becoming more balanced. The ratio of current account surplus to GDP, after a notable reduction in 2009, has been declining since the beginning of 2010. With the BOP account moving closer to equilibrium, the basis for large-scale appreciation of the RMB exchange rate does not exist. The People´s Bank of China will further enable market to play a fundamental role in resource allocation, promote a more balanced BOP account, maintain the RMB exchange rate basically stable at an adaptive and equilibrium level, and achieve the macroeconomic and financial stability in China.

That's all well and good. Do consider:

They've made similar noises in the past about moving prior to major international summits like the upcoming Vancouver G20 gathering, but did not follow through;
As you can read from above, those expecting a big move will be disappointed since (a) the daily trading band has not been widened and (b) the PBoC is citing China's narrowing external surplus as evidence that major currency appreciation is unwarranted.

Now, Nouriel Roubini suggests that "flexibility" may not satisfy the American China bashers since RMB too can weaken instead of strengthen given that the dollar is only of many currencies in the (unidentified) basket China uses as reference for its managed float. Given that the euro has fallen quite a lot in nominal terms since July 2008, the yuan may actually depreciate once currency movements since then are factored in. What's more, only expect a 3-4% revaluation over the next year, he says. Not much, if at all, to satisfy the China Currency Coalition crowd:

China's decision to move away from its currency peg might mean the yuan weakens against the dollar instead of strengthens as Washington wants, Nouriel Roubini, one of Wall Street's most closely followed economists, said on Saturday..."This is the first significant signal in years of a change in Chinese currency policy," Roubini, best known for having predicted the U.S. housing meltdown, told Reuters.

But it remains to be seen how China would put the new system into practice including the composition of a basket of currencies that Beijing will use as a reference point for the yuan -- also known as the renminbi -- and the base date for that basket, he said in an e-mail. "Since they have not changed the previous range for the band -- plus or minus 0.5 percent -- most likely on Monday China will allow the renminbi vs U.S. dollar to move," said Roubini.

The yuan has risen sharply in recent months against the euro, which sank over Europe's debt problems, so a stronger yuan could not be taken for granted, he said. If the euro were to continue to depreciate, "the renminbi would have to be allowed to depreciate relative to the dollar, a paradoxical outcome," Roubini said.

His comments echoed those of an adviser to China's central bank on Saturday. Li Daokui, an academic adviser to the monetary policy committee of the People's Bank of China, told Reuters in Beijing that the yuan could depreciate against the dollar if the euro falls sharply against the U.S. currency.

Roubini, like other analysts, said a major strengthening of the yuan looked unlikely. "Even if the Chinese were to allow a gradual renminbi appreciation relative to the U.S. dollar, the size of such appreciation would be modest over the next year, not more than 3 or 4 percent as the trade surplus has shrunk, growth is likely to slow down on China and labor/employment unrest remains of concern to the Chinese."

Ho hum, the more things change, the more things stay the same. You buying what the Chinese are saying, Chucky?

UPDATE: Reuters has a nifty article depicting a range of opinions on how far and how fast yuan appreciation will be. Also, US Treasury yields may increase in the coming week given that there is some precedent for them doing so in the aftermath of PRC exchange rate moves.

PIIGS Will Fly: Meet Japanese Fiscal Prudence

♠ Posted by Emmanuel in Japan at 6/18/2010 12:03:00 AM

It seems everyone except the United States is getting that old religion on fiscal prudence. True, the rather useless and non-binding US fiscal commission targets a primary budget balance by 2015 (meaning that revenues at least equal expenditures prior to interest payments), but Japan's effort is ever-so-slightly more credible in that their new PM Naoto Kan is leading the charge.

With Japan's total public debt amounting to about 200% of GDP, you have to wonder if these changes will be immediate enough to pacify markets about the fiscal state of Land of the Rising Sun. From Reuters:

Japan will set a goal of bringing its primary budget balance into the black within a decade in a fiscal reform strategy to be unveiled this month, Prime Minister Naoto Kan said, as part of efforts to rein its huge public debt. Kan, who took up his post after his unpopular predecessor quit abruptly this month, also repeated his pledge to keep fresh government bond issuance at or below this fiscal year's record 44.3 trillion yen ($483 billion) in the year from next April.

The plans spelled out by Kan are roughly in line with what financial market players say is needed for Japan to avoid a credit ratings downgrade. "We aim to include it in our fiscal goals," Kan told the lower house of parliament on Monday, referring to the target for the primary balance.

The primary balance, or the budget balance excluding revenue from bond sales and debt servicing costs, is in deficit by 33.5 trillion yen this fiscal year, or about 7 percent of GDP. The government, faced with the task of reining in public debt that is nearly twice the size of GDP, plans to lay out medium- and long-term fiscal targets before a G20 summit in Toronto next week.

Rating agencies have warned that Japan's sovereign debt rating could be cut unless Tokyo crafts a credible plan to fix the country's tattered finances.

The DPJ has made fiscal consolidation their party platform. What's more, Kan channels Blair and Clinton via Japanese-style triangulation and Third Way politics:

Japan’s ruling Democratic party on Thursday made fiscal consolidation a centrepiece of its latest election manifesto, with Naoto Kan, prime minister, signalling a possible doubling of the 5 per cent consumption tax. The moves underscored Mr Kan's determination to make reining in state debt a top government priority, a policy stance that is winning his new DPJ administration friends among business groups. Greece’s fiscal crisis and the growing market sensitivity to sovereign risk have brought new urgency to long-standing concerns about Japan's yawning fiscal deficit and a gross government debt equivalent to nearly 200 per cent of gross domestic product.

Unveiling the DPJ’s manifesto for next month’s Diet upper house election, Mr Kan, who replaced Yukio Hatoyama as Japan's prime minister this month, said Tokyo could not delay fiscal reforms aimed at preventing a Greek-style fiscal collapse. The manifesto pledges that the ruling DPJ will make “every effort” to ensure bond issuance in the year from next April does not exceed the record level likely to be set in the current fiscal year and promises an early start to cross-party discussions on “fundamental reform of the tax system, including the consumption tax”.

The DPJ has previously said it would not seek to raise consumption tax within the next three years, but Mr Kan said discussions on the “appropriate” rate should be completed by next March at the latest. He pointedly cited a proposal from the Liberal Democratic party for the consumption tax to be doubled to 10 per cent. “I want to take that as one reference,” said Mr Kan, whose previous efforts as finance minister to promote debate on a consumption tax rise were blocked by party colleagues...

Mr Kan has called for a new economic policy that he dubs a Japanese-style “Third Way”, saying it will offer a new approach after the “public works-centred policies” of the late 20th century and the “excessive market fundamentalism” of the last decade. “We must support the improvement of productivity, but at the same time it is all the more important to expand demand and employment,” he said last week.

German Football as Proof That Migration Works

♠ Posted by Emmanuel in Europe,Migration,Sports at 6/17/2010 12:08:00 AM

I naturally pull for Asian and African sides during this or any other World Cup given that neither continent has produced a championship squad (yet). All the same, even traditional powerhouses are of interest in that migration has produced a melting pot as of late. Think of the French title-winning 1998 squad or that which made it to the 2006 finals.

To be honest, the 2010 World Cup has produced a number of snoozers. Indeed, it was expected that Germany would send a team others could beat up at long last given its history of consistently performing squads. That Ghana's Kevin-Prince Boateng took out longtime German captain Michael Ballack during the FA Cup was thought to be the final straw in sealing a grisly fate for Germany right before the World Cup began. However, Ballack's injury is turning out to be something of a blessing in disguise as a new batch of German stars take centre stage.

It has been somewhat unexpected that the team which has produced the best show so far is the German squad populated with players who are relative minnows in the world of football. Mostly competing in the German league, these young guns (Germany has the second youngest side in South Africa) have largely escaped global media attention. With their 4-0 drubbing of Australia, however, they have established Germany yet again as a team to be reckoned with. Same old, same old, I guess. Just as its industrial might is second to none, so is its football player development [!] Much as I am reluctant to admit it since these guys advance far in practically every tournament, the current side's upbeat, attacking brand of football that is still quick to get back on defence is a pleasure to watch.

Up front, Germany features proven veterans Miroslav Klose and Lukas Podolski--proven players of Polish lineage. However, they have now been joined by young, pacey, and exciting compatriots who are similarly of mixed ancestry. Such parentages have produced competitors who are coming of age in the biggest event the world's most popular sport offers. Suminder Sandhu of Football Fancast explains the newfound diversity in the German squad:

It has been commented that the diminished number of ‘typically German’ players may in part be down to 11 of the 23-man squad not being from German heritage. [Mesut] Ozil’s parents are Turkish. [Marko] Marin is Bosnian by birth and plays alongside Ozil in Werder Bremen’s midfield. And [Sami] Khedira, whose father is Tunisian, was given his World Cup debut to fill the not-so-small shoes of an injured Michael Ballack. It may just be a coincidence but it does go some way in reflecting the German team’s playing style becoming more multi dimensional: these players all add a rounded, less predictable and more attacking dimension to the traditional tenets (power, strength, and efficiency) of German football. Then again, these young players are all German and it is their talents that have been nurtured well – not their nationality.

[German Coach Joachim] Loew’s willingness to assimilate future stars into the present squad is brilliant to see. Six of his players come from the German U21 European title winning team from 2009. The squad has an average age of under 25 and only three players over the age of 30. Podolski (25), Schweinsteiger (25), and captain Lahm (26) are three of the most experienced members in the team and, between them, hold a staggering 213 caps. Don’t let age fool anyone: these guys are still young but by no means inexperienced.

Others of note include Dennis Aogo (of Nigeria ancestry), Serdar Tasci (Turkish), Piotr Trochowski (Polish), Cacau (Brazilian), Jerome Boateng (Ghanian), amd Mario Gomez (Spanish). If imitation is the sincerest form of flattery, these fine new players are following the way of Klose and Podolski in assimilating traditional German footballing virtues--and more. One always hopes that the performance of the Mannschaft can be a springboard for greater appreciation of minorities in Germany, especially of the Turkish minority which originally came as guest workers but later established themselves there.

Still, European counterexamples abound. Despite featuring a high ratio of players of overseas origin, French footballing success has done little to improve race relations there. Current French President Nicolas Sarkozy isn't particularly known for improving matters, calling rioters in the banlieus "scum" during his days as French interior minister. Meanwhile, he and Chancellor Merkel are keen on limiting Turkey to second-class "privileged partnership" in the EU. I guess this analogy only goes so far. If only German leadership were as diverse as its pride and joy, I think things would be rather different.

PS: Is Arsenal about to throw a couple of million in Ozil's direction to bring his services to the Gunners? It goes without saying that he's one to watch.

18/6 UPDATE: Serbia has just beaten Germany 1-0. Spanish referee Alberto Undiano Mallenco went mad with yellow cards, handing 9 of them on often questionable calls. Klose got sent off with two yellow cards on very soft bookings and that was that. Ah well, you can't win them all, eh?

27/6 UPDATE: See my new entry on why England was destined to lose to Germany in their second round encounter.

5/7 UPDATE: Same theme from the German minister of sport.

Paul Martin Can Teach Economically Illiterate USA

♠ Posted by Emmanuel in Cheneynomics at 6/16/2010 12:09:00 AM

And now back to our regular programme of commentary on the godforsaken fiscal haemorrhage known as the United States of America. Not so long ago, Canada was the goat of the G7, with a massive fiscal deficit hovering around 8% of GDP. What happened? Fortunately, the story in Canada was a good one as the fiscally conservative but socially liberal Paul Martin went about his business making large cuts. But, unlike the British who are not exceedingly suave at explaining the needs for cuts to the public or the Americans who deny the need to do so--he's not called Tim "Deficits Still Don't Matter" Geithner for nothing--Paul Martin embarked on a programme of educating the public on the need for these cuts. Contrast this to Obama seeking $50B more from Congress to throw at broke state governments (and influential teacher's unions).

That is, you need to work at not allowing others to define you--with some justification--as either brutally insensitive (Cameron-style) or blissfully ignorant (Geithner-style). From the Financial Times comes this cautionary tale with a happy ending from a country that's been there, done that and come out fighting. It took Martin a lot of courage and imagination to do--something patently lacking among American politicians who serve as boilerplate fodder for rational choice theorists...

[Former Canadian Finance and later Prime Minister] Paul Martin has a word of advice for George Osborne as the chancellor starts taking aim at the UK’s towering budget deficit: keep your eye on the voters, not on the markets. As Canada’s finance minister in the 1990s, Mr Martin spearheaded a deficit-slaying strategy that is now widely seen as a model of how to restore fiscal discipline.

“The markets are not being cut, it’s the people who are being cut,” Mr Martin, now retired, tells the Financial Times on Monday. “If you prepare them well, people will understand. They will not stay with you unless they feel that the sacrifice you’re asking of them is going to succeed.”

Mr Martin became finance minister in 1993 after Canada’s Liberal party, led by Jean Chrétien, ousted the Conservatives in a general election. The federal deficit was running at more than 8 per cent of gross domestic product while the national debt had climbed to 70 per cent of output. With 36 cents of every tax dollar earmarked for interest payments, members of parliament were under growing pressure to rein in the deficit.

Wide public consultation played a critical part in his ability to push through budget cuts, Mr Martin says. He spent most of 1994 criss-crossing the country, bringing business executives and administrators to meetings with union leaders and teachers with education administrators.

“Everybody would be there saying: ‘You’ve got to cut the other person’,” Mr Martin recalls. “They understood that it wouldn’t be easy.” Events beyond Canada’s borders helped. The Mexican debt crisis broke just two months before Mr Martin was due to deliver his belt-tightening budget in early 1995. Canadians were jolted by a much-quoted Wall Street Journal editorial that described the Canadian dollar as the northern peso.

“People were really quite scared that we were on the precipice of a crisis,” recalls Don Drummond, the finance department’s budget chief at the time and recently retired chief economist at Toronto-Dominion Bank. “By 1995 the public was not only ready for it, but egging the government on,” Mr Drummond says.

Mr Martin decided on budget cuts by going through a list of government departments with Mr Drummond and David Dodge, the finance department’s senior civil servant who went on to become governor of the Bank of Canada. The 1995 budget trimmed departmental operating budgets by about 5 per cent. Cuts to grants and subsidies went far deeper. Some non-profit groups saw their budgets virtually wiped out.

“I would say: ‘Department of energy, how much can we cut and still maintain our priorities?’ They would say ‘35 per cent’, so I would write down 35 per cent,” Mr Martin says. “I was accused of being arbitrary and unreasonable. And I was. But if you spend five years doing this and engage in process, you’ll be nickelled and dimed to death. “At the end of it, we still hadn’t met our target, so we sat down and we did it again...”

Helped by low interest rates, a rebounding global economy and a falling Canadian dollar, Mr Martin balanced the books within three years. But the discipline did not last. The Liberal government and its Conservative successor, which took office in 2006, “saw unanticipated surpluses, and kept spending them”, Mr Drummond says.

Martin's successors have made something of a mess of things like Bush and Obama after Clinton, but given the place Canada begun which is highly reminiscent of the situations of any number of industrialized countries nowadays, there are lessons here.

What makes the USA so painfully pathetic nowadays is its inability to make sacrifices for the common good. If Bush told Americans that their patriotic duty after 9/11 was to go shopping, then Obama has effectively told them to go shopping some more. Essentially, that's what Tim Geithner told the G20. It's always someone else's fault in the blame-free, self-indulgent culture Americans have made their own--China's manipulation, Germany's export orientation, and so forth. Collectively, have they ever considered that accumulating $13 trillion in debt was somehow their fault?

Bottom line: if you want to run your country into the ground, feel free to follow the US example--American exceptionalism nowadays is that America is exceptionally bad. It seems to me that the key to getting things in reasonable shape in the world economy is not to indulge these overindebted, overweight, and overstimulated people but to put them in their place.

In the meantime, they (and we) can reflect on the Canadian example of enlightened politics. Unlike the primitive American scene where Democrats are unwilling to make cuts to social expenditures and bicker endlessly with Republicans who are averse to raising revenues, Canada's leaders patiently explained to key constituencies why cuts were required for the sake of all. If you are reasonable and adopt an understanding, patient attitude towards your constituents instead of engaging in the brainless brand of combative American politics, people are more likely to listen.

Oh Canada, you put America to shame. Then again, it's not so difficult to do nowadays, is it?

N Korea @ World Cup: Why Pirated Tape Delay?

♠ Posted by Emmanuel in Intellectual Property,Sports at 6/16/2010 12:08:00 AM

Well I'll be damned: contrary to almost everyone's expectations, North Korea fought toe to toe with mighty Brazil in their World Cup fixture. Up to the 55th minute, a stingy North Korean defence (OK, so they often kept five back, but I'd have done the same against Brazil) held things to nil-nil. Eventually, however, the laudable North Koreans tired somewhat and the genius of Brazilian football shone through. Still, Ji Yun-nam pulled one back with a brilliant goal near the match's end, reflecting the high-spirited play of North Korea.

It's a pity that the folks at home will have to make do with watching North Korea's valiant effort only a day after the rest of the world did. You see, South Korea holds the rights to broadcast this event in the Korean peninsula. What's more, the rather cash-strapped DPRK hasn't negotiated the rights to show World Cup matches in the Communist state. Additionally, the suspected torpedoing of a South Korean vessel by the North Koreans hasn't exactly been a reflection of sunshine policy. Hence, it should be of no surprise that North Korean state broadcasters stand accused of pirating South Korea's video feed.

On top of likely stealing the video feed, it's even being delayed to ensure the correct impression is made on the North Korean public. First, there may have been political messages in the crowd inadvertently flashed about the plight of North Korea. Second, the scoreline may need to be massaged to create the impression of "victory," howsoever defined. From the WSJ:

North Korea's TV station showed the opening game of the World Cup on Saturday though it didn't have the right to do so, and South Korea's official tournament broadcaster is trying to figure out if its signal was pirated for viewing in the North. State-run North Korea Central Broadcasting showed a taped replay of the South Africa-Mexico game, but the screen was enlarged to remove graphic elements [channel logos] from the picture, making it difficult to tell whether the station recorded a transmission from South Korea or China.

North Korea illegally used some South Korean broadcasts of the 2002 World Cup, but in 2006 it made an arrangement to obtain TV coverage legally from a South Korean network. For this year's tournament, the South Korean TV network SBS, which purchased broadcast rights for the Korean peninsula from World Cup organizer FIFA, held two meetings with North Korea's state-run broadcaster to pick up its coverage. But the two sides didn't come to an agreement, says Yang Chul-hoon, chief of the inter-Korean department at SBS. The network is now studying the video.

North Korea's soccer team qualified for the World Cup this year for the first time since 1966, when it reached the quarterfinals. But analysts say the country is unlikely to show live broadcasts of its own team—-legally obtained or not-—because of fears by its authoritarian government that the team will perform poorly or the prospect that protesters who dislike the North will be given screen time...

North Korea's coach, Kim Jong Hun, said during a news conference at the Ellis Park stadium in Johannesburg, where the team will play Tuesday, that the match will be broadcast in his country. "I am not involved in broadcast, but it will probably be shown on TV," he added.

Now that's what I call image management--albeit internal. But hey, if you're not a WTO member, do intellectual property rights really matter that much? To expand on Pierre-Joseph Proudhon, intellectual property is theft. If you're into the most trivial of trivia, though, the DPRK is a World Intellectual Property Organization (WIPO) member.

'Go North Korea!' Chant Chinese Fans in S Africa

♠ Posted by Emmanuel in China,Sports at 6/15/2010 12:44:00 AM

[UPDATE: Post match, see my newer post on how North Korea is likely pirating South Korea's World Cup video feed.]

I suppose this phenomenon is very much in line with the concept of bloc voting in the Eurovision Song Contest: Since competition judges cannot vote for their home countries, it has been observed (even by academic research) that national affinities matter in Eurovision voting. For instance, former Soviet satellite countries vote for each other, while Greek Cypriots thumb their noses at the Turkish entry but vote for their erstwhile compatriots.

To set the scene, tomorrow is going to mark the first appearance of perennial World Cup favourites Brazil against the team which seemingly redefines the concept of "underdog": North Korea. Earlier on, I blogged about how South Korea was mulling pulling the plug on redistributing World Cup broadcasts in North Korea due to the latter likely sinking a South Korean vessel and causing the loss of many lives. Now, however, I tend to fear for the North Korean players and what may happen to them if Brazil and others in Group G administer a drubbing. Upon returning home under such circumstances [defect, boys, defect!], will Kim Jong Il pump them full of lead and lock up their relatives to the fourth degree of consanguinity for embarrassing North Korea? It certainly isn't something to be ruled out given his erratic behaviour.

At any rate, however, take comfort in today's version of bloc voting. Also pilloried around the world for human rights violations, China has the dubious distinction of being North Korea's sole remaining financier. What's more, this sort of international condemnation seems to have warmed Chinese fans' attitudes towards North Korea. Although there are very few North Korean fans in South Africa for obvious reasons--difficulties in obtaining visas living in a pariah state and lack of money to spend on frivolous things like watching football games half a world away--rest assured that the Chines fans are backing their neighbours. There's also the small matter of free tickets involved...

Few North Koreans will be able to cheer their team at the World Cup in South Africa. So the country is recruiting 1,000 Chinese fans. The Beijing office of the North Korean Sports Committee is giving out tickets to the tournament, China’s state-run Xinhua News Agency reported. The Chinese fans will attend North Korea’s games against Brazil and Portugal, Xinhua said.

This is just the second time North Korea has qualified for the World Cup. It shocked the world with its first appearance in 1966 when it beat Italy and reached the quarterfinals. The Chinese fans who will support North Korea this time include celebrities who have led similar groups to cheer for Chinese teams in the past...

China is North Korea’s chief benefactor, and it apparently respected the wishes of the country’s reclusive leader Kim Jong Il last week when it refused to confirm his secretive visit to Beijing until he had left. Chinese support for North Korean sports teams is not new. A China-based sports apparel maker, Erke, sponsored all of North Korea’s teams in the Beijing Olympics two years ago, and it now sponsors the country’s football team.

Go North Korea?! Well, at least some people will be cheering for them (even if they're, well, effectively bribed to do so). In related news, North Korea's coach proves to be even more inscrutable than legendary boss Jose Mourinho. Given the political balancing act he faces, this observation is self-explanatory:

The World Cup has a new star and his name is Kim Jong-Hun. He is the manager of North Korea, but don't say so to his face. A woman from South Korea made that mistake in Johannesburg yesterday and Jong-Hun was having none of it. His face hardened - it was like Sir Alex Ferguson being asked if he comes from Kent - and he replied: 'Among the 32 teams at the World Cup we are Korea DPR. Please do not use any other name for our team.' Although Jong-Hun did say 'please', the words 'do not' carried a good deal more weight in the room.

The press conference was at Ellis Park, where Korea DPR (well, he did say please) meet tournament minnows Brazil on Tuesday night. It was prefaced by a FIFA press officer requesting no questions 'on politics or such'. A subsequent query on whether Korea DPR 'eternal president' Kim Jong-il has a say in team selection was met with silence. The Korean assistant beside Jong-Hun muttered 'nonsense' - in English.

Kim Jong-il was mentioned twice, reverentially, by Jong- Hun as 'our great leader' and the first time was at the end of a question about 1966. Then, of course, North Korea (whoops!) beat Italy 1-0 at Ayresome Park, then home of Middlesbrough, and reached the quarter-finals.

The heroes of '66 have been to the Koreans' camp to inspire. Maybe they were behind the nomination of Kim Myong-won, a striker, as a goalkeeper in the 23-man squad [but a third-stringer only, it must be noted fairly]. Jong-Hun's response to that was: 'He began as a keeper and basically that's what he is. But he is so fast we utilised him as a striker. You don't know about this.' No, we don't...But we know they are confident.

As Jong-Hun said: 'Our players are very talented, they don't fall behind other players in the world. If they win the game, they will bring great happiness to our great leader and show that the people of Korea DPR have a very strong mentality.'

And the No 24 in training, he could be their secret weapon. Beat that, Mourinho.

Dumb capitalists; what do they know about football?

Celeb Enviro-Activist James Cameron Defends BP

♠ Posted by Emmanuel in Energy,Environment at 6/15/2010 12:04:00 AM

Given that he is Hollywood's most bankable director--or among the top 3 at least--Avatar and Titanic director James Cameron certainly isn't an unknown quantity. As the former film would suggest, he is very much in the conflicted movie star mold: he makes a living selling commercially successful titles while deploring the surrounding commercial infrastructure that enables his very success. Certainly, he is no Charlton Heston--an actor with strong conservative conservative leanings.

However, one of the surprising things you may want to know about him is that, despite his left-of-centre and environmental stylings, Cameron does feel regret about the plight of poor old BP. Here is a guy who, in a Bono-esque frame of mind, is protesting the proposed construction of the Belo Monte megadam in Brazil. (If constructed, it would be the third largest dam in the world in terms of output.) A few days ago, I cam across an interesting interview of him with the Wall Street Journal's technology correspondent Kara Swisher that nobody else seems to have noticed. Among other topics, Cameron (James, not David) describes how he has offered help to BP as one of his interests is operating submersibles that may aid in the spill control efforts:
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MS. SWISHER: Let's talk a little bit about BP.

MR. CAMERON: It goes back to loving exploration and underwater technology.

For 22 years, I have been working with a number of the top people in the very small deep-submergence communities. They build the subs and I go in them or I build a robotic vehicle, take it down in a sub, do exploration, do forensic wreck surveys. I then have this hobby called directing movies that I do occasionally. Over the last few weeks, I have watched, as we all have, with growing horror and heartache, what is happening in the Gulf.

I know really, really smart people that work at depths much greater than what that well is at. They do not drill for oil, but they operate all kinds of vehicles, all kinds of electronic optical-fiber systems, and have all the remote manipulators and so on. Most importantly, they know the engineering that it requires to get something done at that depth. I thought, "Why don't I get all these people together for a brainstorming session?"

MS. SWISHER: You had gone to BP first?

MR. CAMERON: They could not have been more gracious, but they basically said we've got the assets on site that we need. We sat in a room for 10 hours and worked this problem out. It is a very, very complex problem. What you find out is there are things that hold [BP] back from the obvious things like, put a clamp on it, put a valve on it, screw something onto it. It is not a plumbing problem. If they make a mistake, they can blow out down below. It could come up in 30 places and then you will never contain it.

I never thought I would be defending BP. I think they have got some very good engineers working on this problem. I think there are a lot of political shenanigans going on, and there was no transparency whatsoever. I started to shift my perspective to this idea that the government really needs to have its own independent ability to go down there and image the site, survey the site, and do its own investigation and monitor it.

MR. MOSSBERG: So, what is the result of this?

MR. CAMERON: We are writing it all up and putting in reports to various agencies. This was done privately. This was not done under our government process.
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Is James Cameron merely America bashing like he did with the overt Iraq references in Avatar? Even Americans enjoy this "sport" which is perhaps more popular than football. Certainly, his environmental credentials would be put under doubt if he were siding with the pantomime villain here of BP. After all, Avatar was about resource exploitation. If a highest-profile environmental activist of all people could say that BP is tackling matters in good faith, then the US hysteria looks rather less justified, doesn't it?