Asian rebound

The Economist provides a solid analysis of Asia’s emergence from the global financial collapse. The magazine concludes that the rebound is real thanks to new consumer spending in the Asian economies as well as large cash infusions by governments. Those two points are not unrelated. As The Economist explains, governments were able to pour more money into their economies because they entered the economic crisis in better fiscal positions than Western governments. Likewise, high private-sector savings rates made it easier for consumers to spend stimulus money. (U.S. consumers are thought to have used stimulus money to pay down their debts.)

“Asia’s prudence during the past decade did not allow it to escape the global recession, but it made the region’s fiscal and monetary weapons more effective,” The Economist says. (The magazine also credits the cyclical nature of the manufacturing base and says global finance is flowing again.)

The Economist welcomes the shift in spending habits in the West and East as a sign of rebalancing. And that makes sense because this is exactly what economists have been prescribing for the global economy. The magazine adds, however, that it is still a question mark whether Asian governments can sustain the increases in consumer spending. That will require them to be far more flexible with exchange rates.

So, at the end of the day, we’re still talking about currency values.

Economy Snapshots: Zakaria on capitalism, ethics

The dust is clearing…

“American capitalism is being rebalanced, reregulated and thus restored,” Zakaria writes in his Newsweek column. “A few years from now, strange as it may sound, we might all find that we are hungry for more capitalism, not less.” The reason is simple: When countries need growth, they turn to markets. Capitalism is still “the most productive economic engine we have yet invented.”

Yet the critics of capitalism are still shouting. Those voices will be quieted in time as the system rebalances itself. This crisis isn’t the first time people have predicted ongoing disaster. Zakaria recounts that market watchers cried “crisis” time and time again—after the 1987 U.S. stock market crash, after the 1997 East Asian crisis and in 1998 after the collapse of the Long-Term Capital Management—only to be proven wrong. Today, China and India are already proving some of the cries wrong merely by maintain levels of economic growth.

As a whole, the global economy still has problems, but at least it is easier now to identify the reasons it collapsed.

So what went wrong? Zakaria cites three main problems:

1. Crisis of finance—financers (banks that were overly leveraged; loose regulations of derivatives; Greenspan eased up too much on money; easy credit; excess consumption—73 percent of the GDP in the U.S.)
2. Crisis of modern democracy—for too long politicians have supplied the public wants rather than the ones they need. “The system cannot impose any short-term pain for long-term gain,” Zakaria says. He suggests the government will eventually need correct U.S. hyperconsumption by raising taxes and cutting expenditures and by addressing problems with Social Security, health care and immigration.
3. Crisis of complacency and complexity—the global economy crashed because no one really knew how to drive the complex vehicle we call “globalization.” Zakaria describes a “mismatch between interconnected economies” and political processes that remain national.

In contrast to the issues above, the underlying capitalist system is not to blame and will survive. Furthermore, solutions for the specific causes of collapse will emerge.

The tougher question moving forward is answer is one about ethics. On this point Zakaria appears less clear. His typical logical-style of writing gives way to a more explorative prose.

Zakaria rightly suggests that it is too simplistic to view economic problems through the lens of a battle between good and evil—something other commentators have cited while calling for change. (The Catholic pope, for instance, has called for a “moral economy.) Zakaria says that “fundamentally, markets are not about morality.” But he goes on to say that the system of self-regulation failed and stronger ethics are needed in the face of tougher competition. The solution? Zakaria calls for a “deeper fix within all of us.”

The dust is clearing, yes. But as it does, the picture that is emerging just might be one we haven’t seen before.

Around the World in a Half Day

Imagine visiting the Caribbean, South America, the Pacific, East Asia, and Southeast Asia within a day. Now imagine traveling from country to country without the hassle of airports, passports, visas, and luggage. To some extent, that’s what Washington’s Passport DC festival allowed thousands of visitors to do on Saturday as foreign embassies took part in a collective open house party.
Granted, it takes some imagination to liken an embassy tour with an actual vacation in the country. But it’s worth the imaginative effort—not to mention an absolutely free outing.

Here’s a sampling of the sites:

I started the day with a visit to the tropical Republic of Trinidad and Tobago. It is so festive inside the embassy, that it’s hard to believe it is only 11:00 a.m. Drinks are aplenty, the wall paintings are bright and colorful, and a live steelpan band fills the rooms with the sound of Calypso music…. Perhaps, when I’m eighty years-old and ready for retirement, I’ll spend my days in the Islands watching the colorful and diverse birds that migrate through the Caribbean each year.




A luxurious and stately mansion accommodates Indonesia's diplomats to the United States. The embassy is filled with massive mirrors, ornate furniture and sculptures, and huge effervescent chandeliers. It’s hard to believe that a country with a GDP per person of $1,290 (compared with $41,640 in the United States) can afford an embassy worth more than $150 million. But I guess anything is possible in politics…. It’s interesting to note a bit about the building’s history. At the turn of the 20th century (1903), a young man from County Tipperary, Ireland built the 50-room mansion for $853, 000 after having struck it rich as a gold miner in Colorado. The Indonesian government bought the place in 1951 for $335,000—a fraction of the original cost.


The Columbian Ambassador to the United States opened up her home for the public’s viewing pleasure . Simply said, it was beautiful. It included amazing works by Fernando Botero, Ana Mercedes Hoyos and other Columbian artists, freshly painted and bright walls, and a tastefully-decorated dining room. Ah, now that’s a home worth seeing.

Save the dollar, not the day

Policymakers in Washington and in the Federal Reserve need to stop thinking about stimulating the economy in the short-run and start thinking about what’s right for the long-term. We need economic growth, not an influx of cash to stimulate consumer spending and financial lending. We’ve seen where a stimulus-oriented focus has produced: shady credit schemes, an unsustainable housing bubble, soaring energy and commodity costs, and a weakening dollar.

Want to know why the dollar keeps falling? John Chapman provides a solid explanation in a WSJ op-ed:

“But exploding fiscal deficits, the housing correction, protectionist threats and $200 billion in tax hikes scheduled for 2011 are fueling loss of confidence in the U.S. dollar.”

Want to know what this effect could mean for the U.S. consumer and investor? Chapman provides a glimpse:

“If foreign holders of dollars or dollar-denominated assets sell them, all the good effects of being the de facto international reserve currency start operating in reverse. Until fiscal and monetary policies change, all this implies future inflation and higher interest rates.”

Chapman notes that the Fed Reserve’s foundation for continuing to cut interest rates in spite of the rising inflation is flawed.

It’s time the Fed and Washington begin thinking about what’s in the long-term interest of the United States. Short-term measures for short-term relief are leading us in a dangerous direction.

The ‘Talking point’ TV Heads

A NYT report, Behind TV Analysts, puts a new meaning behind the term “talking heads.” It is a standard practice now for top television networks to hire former military officers to provide “expert” analysis about the U.S. war effort. The problem is, the networks have rarely, if ever, disclosed the fact that those same officers carefully coordinated their new analysis with the Pentagon. As FOIA records now show, they routinely met with Defense Secretary Donald Rumsfeld and used Pentagon talking point memos as guidelines to spin the media.

Listen with care.

For more information, see

Economist packs the house

Policy forums are regular occurrences in Washington, D.C. Forums that draw large crowds are less common. So it is noteworthy when a speaker—an economist no less—draws in hundreds of attendees on a gloomy Friday afternoon.

The host at the Johns Hopkins University SAIS event introduced his guest speaker as the “controversial and always thought-provoking” William Easterly.

Easterly is an economics professor at New York University and a senior fellow at the Center for Global Development who is controversial because he challenges the conventional wisdom about foreign aid programs. Easterly argues that the best foreign aid plan is to have no plan at all. His latest book, White Man’s Burden, is so contentious that it is a taboo object inside the doors of international aid agencies.

One former World Bank employee who shocked her colleagues by bringing the book to work one day likened the experience to bringing Lady Chatterley’s Lover inside a convent.

Easterly finds fault with the entire international aid establishment. He says IMF/World Bank Sourcebook Poverty Reduction Strategy papers are useless; UN Millennium Development Goals are unachievable; Columbia University Economist Jeffery Sachs is misguided; and Microsoft Founder Bill Gates is simply wrong about development.

Easterly’s thesis is that aid programs based on big utopian plans to help the poor consistently fail. For evidence, he points to Africa—the continent that has received the largest portion of foreign aid is still the world's poorest.

So, if foreign aid doesn’t achieve economic development, what does?

Initially, Easterly said he had no answer to that question. But since publishing his book in 2006, he has decided to provide one (mainly, to respond to critics who complain that he offered no solutions to the problems he cited). “I am feeling increasing pressure over time to come up with an answer to development,” Easterly said.

Easterly now concludes that the answer is individual freedom. “What will achieve the end of poverty is freedom,” he asserted.

Just what that means exactly for the developing world is not clear. Does Easterly propose freeing the “Third World” from international aid? No, he suggests that aid can still serve a role in feeding the hungry, healing the sick, and educating the masses. But none of those services will end poverty itself.

So why, I ask, would a free market system succeed in ending poverty? It would produce prosperity and economic growth. But like foreign aid, free markets will never eradicate poverty entirely.

By pretending that they will, Easterly advances neither the goal of free markets nor of foreign aid. What's needed is a discussion of how the developing world can freely participate in a global market system.

Another celebrity arrest -- but this one is different

Sometimes, it seems headline after headline emanating from Hollywood and saturating the American media involves an arrest of some famous actor or actress. Twenty-one year-old Lindsay Lohan posed for this photo after her July 2007 arrest charges of cocaine possession and drunk driving. Paris Hilton served time for violating a suspension of her driving privileges – a probation imposed after pleading no contest to a reckless driving charge. Hilton’s pal Nicole Richie was arrested twice for driving under the influence. And let’s not even discuss Brittney Spears.

Male actors wind up in trouble too. The web site, The Smoking Gun, lists Kiefer Sutherland, Matthew McConaughey, Macaulay Culkin, and Mel Gibson, among others. The charges? Drunk driving, drug possession, public brawling. Most all of these cases involve celebrities acting irresponsibly after a night out partying. They simple had too much fun and didn’t know when to say “when.” It’s a scene that seems to happen so far, the news story writes itself.

But here’s one that doesn’t happen often: a celebrity arrested for fighting on behalf of a cause -- a cause to save lives. Hayden Panettiere, an 18-yearold actress on NBC’s “Heroes,” displayed real-life courage last fall when she and a band of surfers intervened in a hunt of pilot whales of a Japanese coast of Taiji. For that act of violating international commerce, the Japanese government issued arrest warrants against Miss Panettiere and the band of surfers who joined the protest.



Whale hunting is a brutal sport -- unlike any other. Videos of the hunt are difficult to watch. The scenes of bloody red waters, helpless mammals, and vicious hunters are enough to turn one's stomach. It is much easier to turn away from such horror than confront it.

Miss Panettiere and her colleagues deserve credit for their courageous efforts to shine new light on the horrific practice of whaling by Japanese fishermen. It’s an issue worthy of a fight – and even an arrest.

Hayden Panettiere is in Washington, D.C. this week to raise awareness to the whaling issue. For more information, see SavetheWhalesAgain.org or watch one of the many videos posted on YouTube about whale and dolphin hunting by the Japanese, go to:
http://www.youtube.com/watch?v=PxQM1yi4f_s
or http://www.youtube.com/watch?v=T0YCD3Zcuw8&feature=related.

Crazy about corn subsidies in Iowa

Washington, D.C.—Sometimes political issues are best examined far from the nation’s capital, a place where backroom corporate lobbying, daily distractions of national news, and mind-numbing legislative details cloud the picture. Some topics are easier to grasp when they are viewed through the most basic lens. Simplicity yields insight.

At least that’s the case when it comes to the federal agriculture policy – a topic that is as complex as it is relevant to hundreds of millions of people who consume U.S. farm products. That’s what college graduates Ian Cheney and Curt Ellis discovered when they took the unusual step of moving to the Iowa countryside after graduating from college in Boston. King Corn, a limited budget documentary, tracks their lives as they farm an acre of corn in Iowa to learn about the U.S. food supply.

“We don’t know a thing about corn. It seems like a good time to find out,” they explain to a skeptical Iowan farmer at the beginning of the film when they ask to lease the land.

Cheney and Ellis discovered a life where the living is easy, the people are kind, and – thanks to Washington lawmakers – the corn is utterly inedible. In fact, according to the film, Iowa farmers can no longer feed himself with their own crop. So they ship it out of state for processing.

It’s easy to spot the villain in King Corn. Federal farm subsidies are to blame for distorting the market and producing some very unhealthy unintended consequences.

King Corn won’t satisfy fans of action-packed Hollywood blockbusters. Nor will it appeal to fans of hard-hitting exposés in the style of Sicko.

“I’m not Michael Moore,” said film producer Aaron Wolfe as he explained his simple approach.

King Corn’s unhurried pace will please filmgoers seeking an unembellished narrative that tackles a subject relevant to everyone who consumes corn-based products: beef, chicken, anything with corn syrup in it. If you eat, this film is relevant to you. However, you might prefer to opt for a good article on the subject rather than sit through this slow-moving film.