The Globalist Daily online magazine on the global economy, politics and culture Wed, 01 Oct 2014 17:18:22 +0000 en-US hourly 1 China’s Grudge Match Against Multinationals: Biting the Hand That Fed It Tue, 30 Sep 2014 06:00:03 +0000 By John West

What motivates China’s leaders to go up against Western companies?

Credit: gyn9037 - Shutterstock.comWhat motivates China’s leaders to go up against Western companies?

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By John West

What motivates China’s leaders to go up against Western companies?

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China has been making the news with charges of anti-competitive behavior and bribery leveled against large multinational companies operating there.

That is quite a sea of change. International businesses used to be welcomed with open arms in China. Deng Xiaoping’s decision 35 years ago to open China to international trade and investment was critical in launching the country’s rapid development.

All went according to plan: Western, Japanese and other Asian companies brought technology and global best practices to China. Chinese companies, workers and the economy benefited handsomely.

This is how China became the world’s biggest exporter. Even today, multinational companies account for one-half of China’s exports. This includes the iconic iPhone, iPad and many other electronic products which are often assembled by Foxconn, a Taiwanese company.

These international companies were granted many “incentives” (such as tax breaks and duty free imports) to establish themselves in China, usually in special economic zones.

As local custom would have it, many of these companies could not avoid getting entangled in corruption. It is, after all, the lubricant of the Chinese economy and society.

Many foreign companies are also in a position where they may charge more for their products in China than back home. By and large, this is due to the fact that China does not have open and competitive markets where prices could be bargained down.

China has been striking back at the hand that fed it

A whole string of automobile, technology and pharmaceutical companies has been accused and fined for anti-competitive behavior like price fixing and corruption. Companies like Microsoft, Qualcomm, Daimler, Chrysler, Volkswagen, and GlaxoSmithKline have all been involved in cases.

According to the American Chamber of Commerce in China, 60% of companies feel less welcome in China than before, sharply up from last year’s 41%. In a rare case of transatlantic harmony, some 61% of European companies that have operated in China for more than a decade said doing business in the country is getting more difficult, according to the European Union Chamber of Commerce in China.

China’s Prime Minister Li Keqiang denies the claim that foreign firms are being singled out. Li says that 90% of the firms charged under the anti-monopoly law are local.

There are increasing reports of harassment of foreign residents, especially ethnic Chinese with international passports. According to the U.S. State Department, “Reports of business disputes involving violence, death threats, hostage-taking, and travel bans involving Americans continue to increase, although American citizens and foreigners in general do not appear to be more likely than Chinese nationals to be subject to this treatment”.

Such equality of abusive treatment is hardly reassuring in a country with rampant human rights’ abuses and lack of rule of law.

Xi Jingping’s attack on domestic corruption

When I explored all of these issues on a recent trip to Beijing, I heard many explanations for this new trend, and there is likely to be an element of truth in them all.

Most insisted that President Xi Jingping is very serious about his economic reform program. And no one, including multinationals, can be exempt from reform.

An important dimension is this: As Xi is ferociously attacking domestic corruption, he cannot be seen to be giving foreigners a free ride. So multinationals are suffering from collateral damage. Xi believes that the very survival of the Communist Party is at stake and that he must do his utmost to shore up public support.

Claims that Xi is attacking foreign companies to provide indirect assistance to local companies may not hold water. If anything, with the economy now slowing down, China needs foreign investment. Indeed, it will still need investment and its accompanying technology transfers for many years to come.

This need has also led to a softening in Xi’s attitude to Japan, whose investment in China has weakened substantially over the past year or so. It now seems increasingly likely that on the margins of November’s APEC summit, which is hosted by China, Xi will accord Japan’s Prime Minister Shinzo Abe a long-sought-after meeting.

Geopolitics was also cited as a factor for striking at American companies. Xi is angered by Obama’s continued effort to undertake a pivot to Asia and the United States’ refusal to accept China’s proposal for new security arrangements, which would see a reduced role for the United States and a bigger role for China in Asia. Xi believes that the United States must make way for China as a rising power.

What’s Chinese for chutzpah?

President Xi is clear about the Western Pacific being a legitimate sphere of Chinese influence. And former Chinese foreign minister Yang Jiechi is famously quoted as saying, “China is a big country and other countries are small countries and that is a fact.”

Based on that “might makes right” viewpoint, sovereign countries evidently should not have the right to choose their own allies. China sees the countries of Southeast Asia as mere pawns in its “great game,” as it tries to redraw maritime borders by force – mainly by relying on a stunningly brazen concept called the “nine-dashes line.”

But the affected countries want no Chinese domination and are cooperating ever more closely with the U.S. government. Even Malaysia has reportedly invited the United States to fly spy planes out of East Malaysia on the southern rim of the South China Sea.

The venom of disenchanted neighbors also can be seen in the death of 18 Chinese nationals in the Philippines so far this year, 14 of those by murder or kidnapping.

Strident nationalism and anti-Japanese sentiment are evident in every conversation in China. The government has done a great job in pumping up the Chinese population, especially through TV shows and movies. Thus prosecuting big-name Western and Japanese companies panders nicely to popular nationalism.

China’s lingering past

The long, lingering shadow hanging over everything in China is its desire to recover from the century of humiliation that occurred between the mid-19th century opium wars and the civil war.

China wants to be treated with the respect due to a world power and the soon-to-be world’s biggest economy. Those are completely legitimate aspirations. However, realizing this vision, given China’s innate strength and size advantages requires generosity and magnanimous behavior rather than bully tactics.

In conclusion, from a Western perspective one may be tempted to see what’s going on in China these days as “China’s grudge match,” motivated by a chip on the shoulder. But as a leading China-watcher said to me, “the world looks different when seen from Beijing.” We also have to understand that, too.

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Modi and Obama: A Study in Parallels Mon, 29 Sep 2014 06:00:30 +0000 By Stephan Richter

Obama’s case in the U.S. suggests caution is warranted regarding the current hype about India’s one-man show.

united-states-india-flagsObama’s case in the U.S. suggests caution is warranted regarding the current hype about India’s one-man show.

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By Stephan Richter

Obama’s case in the U.S. suggests caution is warranted regarding the current hype about India’s one-man show.


It’s a rare moment in global politics when the political dynamics of India, the world’s largest democracy, mimic those of the United States. But here we are: Narendra Modi, India’s new prime minister, entered office with the same sense of excitement and boundless expectation as Barack Obama when he was elected the 44th President of the United States back in 2008.

Both elections were labeled historic. In the U.S. case, it was the arrival of the first black man in the nation’s highest office. In India’s case, it is about having somebody from truly humble roots as prime minister.

Mr. Modi has had a good start in office. He is going about reforming India in a methodical, yet determined manner. There surely is a lot to clean up in India, quite literally so, if one thinks of the prime minister’s own commitment to do away with defecating in public and ensuring there are enough toilets in the country.

Readying the world’s soon-to-be most populous nation for a brighter economic future is a matter of sheer survival for India. The echo effect of its much advertised demographic dividend is a tremendous need to create meaningful employment for all the masses of young people entering India’s labor force every year.

While everyone can only wish Mr. Modi the best for his tenure in office, whenever one deals with bouts of hype, as is the case with him, caution is well advised. In the United States, it was Oprah Winfrey, the talk show host, who famously referred to Obama as “the one.”

The fact that by now all but the most ardent supporters of Mr. Obama are quite disappointed — and certainly no longer believe in his “chosenness” — contains an important message for today’s India. The odds are that the “dream” is not going to come to pass.

Reasons for hope

After years, if not decades, of punting on important reforms by the previous Congress-led government, a can-do politician like Mr. Modi is sorely needed.

India is not just stuck with insufficient job creation for the young, but also an outdated infrastructure, a stagnating manufacturing sector, heavy doses of crony capitalism and a host of environmental issues, such as a dearth of water.

(Transferred to a different level of economic development, this list of ills isn’t so Indian after all; the U.S. faces several of the same challenges.)

Indian businesses are excited. They have pumped vast amounts of money into the Modi campaign, hoping that he will bring deliverance on the many trouble-laden issues described above.

And even though receiving overwhelming business support across all sectors of industry is the one big difference between Messrs. Modi and Obama, there are some important parallels to ponder in the political set-up of India and the United States.

Reasons for caution

Modi obviously benefits from the fact that he is a far more experienced administrator and political wheeler/dealer than Obama ever was and will be.

And yet, even though he won an impressive absolute majority in India’s national parliament, it is unlikely that the other political forces – while still in some shock — are simply going to roll over.

They will be driven by one simple insight: Modi may have received a 51% majority in the lower house, but he only received a total of 31% of the votes cast. There are also the manifold regional interests all across India.

For Modi, the obstacles don’t just include India’s upper house, in which he lacks the votes for the implementation of key legislative measures — and the consent of which is needed for passage.

The one key stumbling block where India is very much the same as the United States is that both countries have fiendishly complex political systems, with vested interests that are deeply entrenched, if at all movable.

In addition, individual states can — and will — easily assert their will, which can quickly stop any thoughts of a national agenda in its tracks.

It is important to recognize the belief in the near-magical powers of a single man (or woman) for what it really is: It is first and foremost a direct reflection of the underlying complexity of the political system as such.

The only way out of such a profound, homemade morass seems to be the belief that a savior is nigh. Immature as that belief may be, that thinking is certainly comprehensible — it offers concrete, personified hope to escape from the present conundrum.

A man vs. a monumental task

However, as the Obama case proved, converting hope into an effective political strategy is practically impossible. A people that is ultimately set in its tracks on being “disunited” is hard to manage in any efficient and integrated way.

For these reasons, it would be a miracle if Mr. Modi indeed managed to transcend that profound challenge and unite his country via his person. For India’s and the world’s sake, one must certainly hope for that, but better not expect it.

Editor’s note: This essay, originally published on The Globalist as “Modi: He’s the One! Or Is He?” on May 26, 2014, has been extensively updated and revised by the author.

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The Achilles Heel of the West Sun, 28 Sep 2014 08:00:43 +0000 By Ludger Kühnhardt

Tolerance is no purpose in itself, but a precondition for reconciling truth and liberty.

Credit: Lisa S. - Shutterstock.comTolerance is no purpose in itself, but a precondition for reconciling truth and liberty.

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By Ludger Kühnhardt

Tolerance is no purpose in itself, but a precondition for reconciling truth and liberty.

Credit: Lisa S. -

“The Open Society and Its Enemies,” Karl Popper once titled his book, written in his New Zealand exile during the totalitarian horror of Nazi Europe. Strangely and sadly, that topic is as relevant and virulent today as it was back then.

Yes, we have learned to live in harmony with each other. And we have been conditioned to believe in social progress. We have also assumed that turmoil elsewhere is not for the Western world to truly be concerned about.

That’s what we had thought until 2014. By now, we know better. The hubris to assume that we have answers to any global threat — or that we can manage any global pressure at our doorsteps or that even we remain invulnerable — has been replaced by intellectual shock and awe. Syria, Crimea, Ebola and ISIS are just a few of the recent incidences that have shaken our Western belief in the manageability of everything and anything.

When we are overwhelmed by events, it is especially important to stay cool-headed. Mass media means mass information — but potentially also mass hysteria. Pictures produce images, but they also become petrified symbols. The borderlines between what we truly know and what we genuinely should be concerned about are getting thinner and thinner.

Disinformation as a weapon of mass destruction

Little wonder then that disinformation has become the strongest weapon against the West with the biggest possible effect inside Western societies. The contemporary enemies of open societies use lies to cover up their contrasting understanding of political norms and values.

Putin’s propaganda machine has already somewhat succeeded in advancing Russia’s case behind the shades of grey of disinformation. In order to make people around the globe forget about the annexation of Crimea, Russia nourished violence in Donetsk and Luhansk, all the while talking about an armistice with Kiev.

Russia blames the West for breaking international law by bombing ISIS positions in Syria — thus making people forget who has helped the Assad regime in Damascus to survive the past three years.

Disinformation and propaganda are also what radical and criminal Salafists know how to handle well. Videos showing the beheading of innocent hostages are meant to provoke hysteria in Western societies. The point is to use this trigger mechanism to justify the (wrong) complaint that the West is against all Muslims.

Blurring the lines between propaganda and disinformation

Salafists systematically blur the borderline between information, disinformation and propaganda, The concept of “friend and foe” is the starting point of radical Salafists to attack open societies. Once ordinary life gives in to fear, the battle is lost.

This is why Western societies are as strong as they are vulnerable to falling into the mindset and rhetoric of thinking in terms of “friend and foe.”

Commitment to truth is noble, but shall not undermine liberty. Tolerance is no purpose in itself, but a precondition for reconciling truth and liberty. Therefore, any regressive kind of thinking in Western countries is a threat to the community of open societies at large.

This, not so coincidentally, is also the reason why the European Union is so sensitive to any increase in nationalistic and xenophobic thinking. It is not the issue as such, but the method of thinking which causes the real problem.

Hungary as a case study

A case in point can be studied in Hungary. Once the most successful (and open) country in the Eastern bloc (the happiest nation during the Soviet era), it has become almost the least successful country of post-communist transformation.

This decline manifests itself most clearly in the political culture of Hungary. Antagonistic language and misleading terminology – such as the plea of Prime Minister Victor Orban for an “illiberal democracy” — whatever that may mean – are pointing at the weakest entrance point of the arrow of Paris into the Achilles’s heel of Western societies.

Orban’s goal is to undermine trust by deliberately relying on a misleading language of ambivalence. Soviet apparatchiks, those that are still alive, must love the perverted sense of dialectics that this Hungarian “conservative” relies on to execute his political machinations.

The core not just of the Western credo – but any civilization’s credo — is this: The flip side of individual human dignity is individual responsibility. That leaves no room for any reasoning in the categories of “friend and foe” – only for a language of right and wrong.

And that, in turn, requires nothing more and nothing less than a language without lies. Standing up for that simple rule is the essence for anybody wanting Karl Popper’s legacy to prevail.

©2014 The Globalist


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Tax Carbon Consumption: Europe’s Best Environmental Strategy Sat, 27 Sep 2014 06:00:32 +0000 By Philippe Legrain

Why Europe needs to act on climate change – and how.

Credit: LehaKoK Shutterstock.comWhy Europe needs to act on climate change – and how.

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By Philippe Legrain

Why Europe needs to act on climate change – and how.

Credit: LehaKoK

Economies often need to adjust in conditions of radical uncertainty. Climate change is a good example.

Environmentalists tend to argue that Europe needs to act now to reduce greenhouse-gas emissions — as if there were great certainty about how best to proceed. By and large, these advocates backed the EU’s emissions-trading scheme, which was meant to curb emissions in a predictable and cost-effective way by putting a market price on them.

They also support specific targets for reducing the emissions produced in Europe, particularly by increasing the share of renewable energy and improving energy efficiency. Many categorically reject certain types of emissions-reducing alternatives, notably nuclear power and shale gas.

Skeptics, who have multiplied during the recent economic crisis, point out that every aspect of the issue is shrouded in uncertainty and that current policies are both costly and ineffective. They say that scientists have only a limited understanding of how today’s climate works and even less grasp of how it might change in the future.

Climate change is a complex issue

While both sides are partly right – environmentalists are right to worry about climate change, skeptics about current climate policies being often misconceived – both arguments are flawed. The case for curbing climate change is not that its consequences are certain. Nor is the uncertainty about its impact an argument for inaction.

Rather, the case for action is that the consequences of climate change are highly uncertain and could be catastrophic. Since the only livable planet we know of is Earth, it makes sense to take out insurance against disaster.

But as with any insurance policy, you want it to provide effective cover at as low a cost as possible. Since we don’t know how best to proceed, rigid bureaucratic prescriptions are not the solution.

Ineffective policies are not just a waste of money, they are politically corrosive. Unfortunately, both environmentalists and well-meaning EU officials are often the worst enemies of sensible climate policy.

 What is the best path to curbing emissions?

With so much uncertainty, what is the best way to proceed? To insure ourselves against a potential climate catastrophe, the level of carbon dioxide and other greenhouse gases in the atmosphere needs to be capped.

This will only happen if all major economies curb their emissions. While Europe is responsible for a big chunk of the increase in carbon dioxide in the atmosphere since the Industrial Revolution, it accounts for a diminishing share of new emissions – less than a seventh.

Emission reductions in Europe over the past two decades have scarcely offset higher emissions in the rest of the world, not least in China and other fast-growing emerging economies. Since it doesn’t make a bit of difference to the planet what Europe’s share of global emissions is, European policy can only be effective if it encourages others to curb their emissions, too.

In other words, Europe must either stimulate the development and spread of low-carbon technologies and energy sources that are cheaper than existing ones — or it must spur other countries to adopt policies that make emitting carbon more expensive. Nothing else will make much difference.

EU Policies have increased carbon emissions

The EU led the big push towards a global deal on limiting carbon emissions, but its efforts in Copenhagen in 2009 and the various global get-togethers since then have so far achieved little.

The EU has also set a target of reducing carbon emissions in Europe 20% from 1990 levels by 2020, with further cuts mooted by 2030. That sounds reasonable enough. But while emissions generated by production in Europe have indeed fallen, those generated by consumer consumption have soared – and shifting production of carbon-intensive goods abroad does no good to the planet whatsoever. In fact, it makes things worse if they are produced in a more polluting manner elsewhere.

Worse still, carbon production in the energy sector is now rising again because of the failure of the EU’s flagship emissions-trading scheme and the shale-gas bonanza in the United States.

The explosive growth of shale gas in the United States has caused gas prices there to plunge, leading power companies and other industrial users to replace coal with cheaper gas. As a result, U.S. carbon emissions have fallen, because shale gas generates only half the carbon emissions of coal.

Meanwhile, the surplus coal is being shipped to Europe, where gas remains expensive and the cost of burning coal has fallen as the price of carbon emissions on ETS has plunged (because too many emissions permits have been doled out).

Thus while America is shifting to cheaper, lower-carbon gas, Europe is burning more filthy coal. It is a cruel irony that, despite all the EU’s costly policies, America is becoming greener and Europe less so.

The EU also aims to meet 20% of Europe’s energy needs from renewable sources. In principle, trying to create a guaranteed market for renewable energy could stimulate innovation and generate economies of scale. Together, that should create new and cheaper alternatives to fossil fuels.

Misdirected environmental policies

But in practice, it has often led to exorbitant and often misdirected subsidies for substandard technologies. Cloudy Germany is now covered with pricey solar panels. Offshore wind farms in Britain generate eye-wateringly expensive electricity intermittently. In a return to pre-industrial ways, Europe is now burning vast amounts of wood.

Specific subsidies and targets for biofuels that, by some reckonings, generate even higher emissions than fossil fuels displace crop production, pushing up food prices.

Meanwhile, Angela Merkel has committed Germany to phasing out one economical form of zero-carbon energy: nuclear power. France and Bulgaria have imposed a moratorium on developing shale gas, which is much cleaner than coal and a backstop to intermittent wind and solar power.

Some greens lobby against capturing and storing the emissions generated by burning coal, a technology that is in any case not yet economical.

In short, Europe is neither a global leader in developing low-carbon technologies that could be deployed elsewhere, nor a role model for the rest of the world in crafting low-emissions policies.

Tax carbon consumption

How could Europe do better? It is worth persevering with efforts to agree on a global deal to limit carbon emissions. The chances of success are slim but the costs of trying are low.

More important, the EU should provide incentives for research into low-carbon technologies. As well as traditional research funding, why not offer prizes for developing promising new technologies? If that research bears fruit, it would more than pay for itself from the profits of deploying those new technologies worldwide.

The next step is to jettison the ineffective, corporate boondoggle that is the ETS and replace it with a tax on carbon consumption.

A carbon tax that rose steadily over time would provide some predictability for businesses, enable them to better plan long-term investments and encourage them to try to develop new low-carbon technologies. It would also give clean-tech companies a good idea of the price target they need to achieve to be competitive. That would allow them to raise funds and have a go at developing promising technologies.

Importantly, governments wouldn’t be trying to second-guess the best technologies or pick winners among the many clean-tech companies.

A carbon tax would be flexible: it could be raised or lowered at will, depending on how conditions evolve. It would be transparent and impartial, imposing the same price on all firms, with no opaque special favors for politically connected companies. And it would provide revenues that would enable governments to cut other taxes, rather than providing corporate handouts to polluters as ETS emissions permits do.

A tax on carbon consumption would be better than both the ETS and a tax on carbon production because it would actually reduce Europeans’ carbon emissions, rather than shifting them overseas (or achieving very little).

Europe must lead the charge on carbon taxation

While taxing carbon production would have a similar impact if the whole world were doing it, taxing carbon consumption is much more effective if only Europe and a few others go ahead first.

Better still, it doesn’t put European companies, or production in Europe more generally, at a disadvantage. Carbon-intensive products consumed by Europeans would be taxed whether they were made in Europe, America, China or elsewhere.

As a result, carbon-intensive European companies would have less incentive to lobby politicians against putting a price on carbon. And politicians would no longer have an incentive to impose protectionist “border-adjustment taxes” on carbon-intensive imports.

Instead, the carbon consumption tax could be levied much like a value-added tax is, on local as well as foreign production.

Better still, with the EU single market still the world’s biggest, EU standards often have a global impact – because firms that invest in tailoring their products for the European market then sell them elsewhere, too.

So a carbon-consumption tax would encourage firms everywhere to make their products in a low-carbon way, to gain a cost advantage in EU markets. Once that investment is made, it tends to be cheaper to deploy it elsewhere, too.

Editors note: Philippe Legrain’s new book, “European Spring: Why Our Economies and Politics are in a Mess – and How to Put Them Right”is out now. Find out more at

©2014 The Globalist


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Texas & Germany: Energy Twins? Fri, 26 Sep 2014 06:00:42 +0000 By Ben Paulos

Texas and Germany may hold the key to the future of the world's energy markets.

German wind/solar energy park. (Credit: Armin Kübelbeck - Wikimedia)Texas and Germany may hold the key to the future of the world's energy markets.

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By Ben Paulos

Texas and Germany may hold the key to the future of the world's energy markets.

German wind/solar energy park. (Credit: Armin Kübelbeck - Wikimedia)

In many respects Germany and Texas could not be more different. One is cold and northern and Old World, the other hot and dry and New World. They have starkly different political attitudes – Germany is one of the most liberal countries in Europe while Texas is the epicenter of Tea Party conservatism in America.

This carries over to their attitudes about environmental issues. Germany has set, and is achieving stringent climate goals while Texas Governor Rick Perry has said that the science of climate change is “all one contrived phony mess that is falling apart under its own weight.”

Yet Germany and Texas have some intriguing similarities when it comes to their electricity systems, and may share a common future.

Benefits of deregulation

Policy makers in both Texas and Germany believe strongly in competitive markets and have largely deregulated their power industries. Both regions have a large and growing amount of renewable energy and are likely to see much more in the future – in Germany, due to the strong policies of the Energiewende and in Texas, driven by abundant natural resources and the increasing maturity of wind and solar power.

In both places, belief in competition has led to “energy-only” wholesale markets, where generators compete to sell their juice on daily and hourly markets, an approach lauded by market economists as the most economically efficient approach. Many other states and countries provide long-term payments to power producers to be ready to provide power as needed, called a “capacity” payment.

These factors (and others) have led to very low wholesale prices in both Germany and Texas. Low prices are driving incumbent utilities toward bankruptcy, shuttering power plants and tightening operating margins, as well as triggering a contentious debate about reforms to market designs.

In Texas, near-outages in 2011 triggered the debate. Power plant owners argued that prices were too low, no new plants would be built, and power shortages were just around the corner. They were countered by large consumers, maintaining that low prices were simply the result of market forces at work, capacity payments were a form of welfare and adding them would drive up costs.

Earlier this year, under substantial political pressure, the state utility commission in Texas decided the market was “healthy” and made relatively minor fixes.

Renewable energy has its own pitfalls

In Germany, the same debate is just heating up. The ongoing growth of wind and solar is pushing conventional technologies out of the market, inflicting serious financial damage on the incumbent generation companies. Yet those traditional “dispatchable” power plants are needed for when the wind doesn’t blow and the sun doesn’t shine.

European generators E.ON, RWE, GDF Suez and Vattenfall all saw major losses in 2013. RWE has called it “a crisis in conventional power generation,” and has closed 12,600 MW of capacity since the start of 2013. Another 15,000 MW of conventional power plants have requested permission to shut down.

The companies are also lobbying hard for capacity payments to reduce their losses. Just as in Texas, though, there is strong resistance to capacity payments, for the same reasons of economic efficiency and competitiveness.

Energy Minister Sigmar Gabriel recently compared capacity markets to an unemployment program. “When it comes to capacity markets, this cannot be a [welfare program] for power plants—where you do not work but earn money,” he told an energy industry conference in June.

Reform is a complex challenge

A number of reform proposals have emerged and are being vetted by regulators and stakeholders. Most of them provide a limited amount of non-energy payments. One example is a “focused” capacity market that funds only the resources needed to fill the gap and maintain reliability.

An “ecological flexibility market” would require low emissions and operating flexibility. A “strategic reserve” is a set of power plants that would be deployed only when the market is tight and that otherwise don’t participate in the energy-only market. And a “decentralized” market would require every power retailer to ensure its own capacity.

These solutions highlight the fundamental disconnect between wind and solar and traditional energy markets. Because wind power and solar power are driven by natural forces, and not by demand or the market price of electricity, they are not responsive to the human laws of supply and demand.

Given that the goal of the Energiewende is an 80% share of renewable power by 2050, these market concerns are fundamental to the future of energy in Germany. And they are a harbinger of things to come in places like Texas, where wind and solar are competitive, the resources are large, and the pressure for pollution reduction is growing.

In this future, conventional power plants run less and less, but are still needed for reliability. If they aren’t going to make a living selling electrons, they need to make it selling reliability and integration services. And they must compete with “smart grid” technologies that are making the demand side more interactive.

To make it work, the money flows of power systems dominated by renewable energy will have to look fundamentally different from those designed for traditional power plants.

For more information see the Power Markets project at

Editors Note: This essay is based on a study which the author undertook on behalf of the Heinrich Böll Foundation.

©2014 The Globalist


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The Atlantic Civilization and Its Enemies Thu, 25 Sep 2014 06:00:37 +0000 By Ludger Kühnhardt

Squeezed between a self-destructive Russia and Arab world, Western nations need to focus on their roots.

Credit: ruskpp - Shutterstock.comSqueezed between a self-destructive Russia and Arab world, Western nations need to focus on their roots.

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By Ludger Kühnhardt

Squeezed between a self-destructive Russia and Arab world, Western nations need to focus on their roots.

Credit: ruskpp -

When the term “Atlantic civilization” was coined in the 18th century, the underlying idea was meant to combine the values of the French and the American Revolutions. They were seen as the two indispensable pillars of a single, yet divided approach to social modernization.

The values of the Atlantic civilization still hold true

The values of life, liberty and the pursuit of happiness as well as those of liberty, equality and fraternity may sound hollow today, yet they have not lost any of their resounding power when looking at their impact.

Related essay

The Achilles Heel of the West

The Atlantic civilization remains based on the primacy of individual dignity, property and rule of law, a strict separation between state and society the freedom of religion (to practice it as well as to renounce it) as well as the freedom to travel.
Our ability to engage in self-criticism remains the essential quality of the Atlantic civilization. While hoping for the universalization of our understanding of life, liberty and the pursuit of happiness remains an inherent driving force of our culture, we need to re-evaluate the world as it stands.

Time for self-reflection?

It is imperative for the future of the Atlantic civilization to realize the root causes of the conflicts which have taken us like a hurricane. The time has come to count the dead due to a series of acts of political violence committed over the past decade.

We must take account of undeclared wars (such as in the Ukraine), gruesome and barbarous acts of terrorism (as in Iraq and Syria), incapable states which cannot really “fail” because they never worked in the first place (such as Somalia), as well as states which can no longer prevent the outbreak of mass epidemics with global consequences (such as Liberia or Guinea).

The West may be keen to promote the rule of law and democratic participation, but we are confronted with upheavals in our borderlands that follow a different, if not altogether confrontational logic.

Russia is projecting its imperial glory, if only out of weakness. The Arab and Muslim world is undergoing a transformation with cultural, political and economic tensions of the highest order. While often clad in religious language, these tensions reflect age-old geopolitical controversies and rifts.

While we Westerners are ambivalent about the use of military power, knowing too well its limits and the curse of Pandora’s Box that comes with the use of military power, we can no longer escape a global tide that changes our way of thinking.

Aren’t we very scared of “foreign” fighters returning from Iraq or Syria, whether with a U.S. or EU passport? And what is our answer to self-declared “Sharia police” gangs patrolling the streets of London or Bonn, trying to prevent Muslim youth to enter “sinful” places such as discotheques and casinos?

No single country has the answer

The Atlantic civilization is united these days, or so it seems. In reality, Western nations are divided in their perception of, and proximity to, current hotspots. Whether we are engaged in sanctions against Russia or in organizing a military coalition against the barbaric terror of the self-declared “Islamic State caliphate,” the truth of the matter is this: Nobody has a good answer, and no strategy seems to work the way we thought these things happen.

What’s happening in Russia is about re-establishing spheres of influence, territorial and ethnic. The shift from Arab spring to a Caliphate winter represents almost the opposite: the individualized, decentralized and excessively violent, cruel and unpredictable use of force.

Understood properly, Eurasian imperialism and Arab radicalism are two sides of the same coin. They both reek of obvious helplessness and long-term self-defeat. They represent deep inferiority complexes to which the West has not developed any serious response beyond the usual policies of carrots and sticks.

The Atlantic civilization has to learn that political ideologies and violent conflicts which are no longer relevant in the West have found willing repetition outside our sphere. The Arab world may well have entered its genuine Thirty-Year War, while nobody knows how long Russian imperialism may last.

But as Russia’s and the Arab world’s inner tribulations have begun to penetrate the cohesion and stability of the West, they pose a threat to the Atlantic civilization that goes beyond the reaction of concerned neighbors.

An indispensable partnership

That is why it is time to reinforce the foundation of this unique experiment in the history of man’s search for freedom without coercion.

The Atlantic civilization needs to redefine its foundation: the search for truth cannot justify the destruction of freedom, one’s own and that of others; the rule of law and democratic participation include the protection of minorities; the outbreak of violence is the end of politics and not its continuation. In the end, this is what liberal democracy is all about.

It is against this backdrop that the success or failure of the Transatlantic Trade and Investment Partnership (TTIP) takes on a new dimension. These negotiations are about far more than a trans-Atlantic trade and investment partnership.

It is an investment into a common future of liberal democracy and it is about a partnership that cannot be traded on the altar of petty populism and myopic trends on either side of the Atlantic Ocean.

©2014 The Globalist


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Why S&P’s Latest Call on Germany Misses the Mark Thu, 25 Sep 2014 06:00:34 +0000 By Holger Schmieding

The emergence of some right-wing populists will not paralyze Germany's pro-euro policies.

Alternative for Germany Party (Credit: De Visu emergence of some right-wing populists will not paralyze Germany's pro-euro policies.

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By Holger Schmieding

The emergence of some right-wing populists will not paralyze Germany's pro-euro policies.

Alternative for Germany Party (Credit: De Visu

Does the rise of a populist protest party in Germany threaten to paralyze Germany’s pro-euro policies?

An S&P report claims that it will do so. According to the rating agency, the gains for the right-wing AfD in recently held German regional elections could force Chancellor Merkel to take a harder line on Europe.

S&P’s train of thought seems to be gaining traction, mostly among euro skeptics. However, these concerns are simply misguided.

Having failed to make it into Germany’s national parliament a year ago, the populist AfD scooped up between 10% and 12.6% of the vote in the EU election in May as well as in recent regional votes in three smallish East German states.

Populist protest parties have come and gone in German regional elections over the decades. The risk that the AfD may have more staying power than the previous outfits is a potential longer-term problem for Merkel and her CDU/CSU party.

However, a 10 – 12.6% share in regional votes is not really a scary upset. This is not going to cause Angela Merkel to adjust her signature policies of the last four years regarding Europe.

I see four reasons for that assessment.

Four reasons

1. The recent rise of the AfD is not about the euro. Yes, the AfD started as an anti-euro group. But that did not give it any significant traction in Germany beyond the 3% mark in opinion polls. Because of that, the AfD changed its tack and turned more into an anti-immigration and a general right-wing protest group. (In that sense, it is somewhat similar to UKIP in England.) That has given the party broader appeal.

2. Most of the recent gains for the AfD did not come at the expense of Merkel’s CDU/CSU. The AfD is attracting discontents from all political camps as well as from previous non-voters.

3. Most important, the overall principles of Germany’s European policies are rooted in deep-seated convictions held by political leaders across all major parties.

The German parliament has regularly endorsed these policies with majorities of 80-85%.

Moreover, the parties strongly backing this Germany-wide consensus won more than 80% of the popular vote in the election that counted, the last federal election in September 2013.

4. This pro-European consensus within German politics and society can only be strengthened further by the external threat to European values that manifested itself in Putin’s aggression against Ukraine.

Although EU members will always bicker over the correct course of action on any issue, external threats strengthen the determination to hold the lot together.

That a deputy leader of the AfD takes a clear pro-Putin stance only adds to the reluctance of German mainstream politicians to lean the AfD way.

Why Merkel won’t take the bait

Chancellor Merkel is a shrewd politician, acutely aware of the popular mood. But even more so, she is a strong leader. She has shown time and again in the euro crisis that, if she considers it necessary, she will do things that seem unpopular at first glance.

In this vein, she backed putting a lot of German taxpayer money on the line for Greece, Ireland, Portugal, Spain and Cyprus. She seems largely pleased with the resulting reforms at the euro periphery.

Merkel has backed the ECB on the decisive OMT program, even against the Bundesbank’s preferences. While her stance may not always be fully popular, most Germans actually appreciate that, as a leader, she occasionally does things which may not be immediately popular.

Berlin is opposed to ECB “quantitative easing” for the time being, Berlin does not want a major fiscal stimulus. But that has nothing to do with AfD.

If the economic situation worsened significantly further and Merkel saw a need for QE, she might then back Mario Draghi, the ECB head, in a decision to do that. We are probably not close to that for the time being. But if and when big decisions on the euro will have to be made, the AfD would not be a constraint on Germany’s policies.

©2014 The Globalist


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Filipino Climate Bonds, Here We Come Wed, 24 Sep 2014 06:00:52 +0000 By Sean Kidney

Bridging the gap between capital-rich and capital-needing countries.

Credit:  Roobcio - Shutterstock.comBridging the gap between capital-rich and capital-needing countries.

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By Sean Kidney

Bridging the gap between capital-rich and capital-needing countries.

Credit:  Roobcio -

I’m in Manila, in the Philippines.

It’s been gusty and raining – there’s a typhoon crossing the northern part of the island. A modest reminder of last year’s devastating storm that destroyed the southern coast of Luzon.

I’m here for a meeting of an “International Expert Group on Using Climate Finance to Leverage Sustainable Transport.”

Ironic really, as it took an hour to get eight miles through traffic from the airport. But of course this is a not a rich country; the route to the ubiquitous glass skyscraper zone I’m in passes through acres of teetering favelas, piled up close to the edge of the airport.

The growth rate here is finally up – now a blistering 6.4% a year. There is a lot of investment in the Philippines; but they need big slugs of capital if they’re going to be able to choose the expensive route of clean energy and low carbon transport rather than low cost coal and gas power – and yet more clogged highways.

There’s a deal to be made

Rich countries should invest capital into fast-growth, green projects in developing countries, which deliver long-term financial and environmental returns.

The trouble is, fast-growth projects in emerging markets look risky – and they may be so, buffeted as they are by the winds of big economies’ trade.

That’s where development banks and wealthier nations can step in – covering the bits and pieces of risk that freak out rich countries’ pension and insurance fund investors.

This is a kind of pact that bridges capital rich economies with aging populations, and capital-needy, fast-growing economies full of younger people with a long working life ahead of them.

A global win win

In fact, if you look at a global distribution of age groups, it’s a perfect spread for a strong economy.

It’s just that our artificial national boundaries compartmentalize some of us into aging populations with not enough young people to support all the pensioners and others into very young populations with not enough older people to invest where needed.

So, the older demographics offer lower-cost (but still good earning!) capital to the younger demographics, allowing them to choose green.

Finance, of course, knows no borders. It just needs someone to package the products that allow us to invest money in the right places. Filipino Climate Bonds, here we come.

©2014 The Globalist


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The Power of Video: From ISIS to the NFL Tue, 23 Sep 2014 06:00:28 +0000 By Richard Phillips

The power of the media to shape and shift public opinion.

Twin Design / Shutterstock.comThe power of the media to shape and shift public opinion.

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By Richard Phillips

The power of the media to shape and shift public opinion.

Twin Design /

It has always been a chicken and egg type of question. Does the media shape public opinion or does public opinion shape the media?

In this age of Fox News, Huffington Post, myriad blogs and abundant social media comments, the question becomes one of significant social and political importance.

This dynamic was highlighted in the United States over the past month by the release of two videotapes. One showed the ISIS beheading of James Foley and the other highlighted a left hook thrown by Ray Rice to the jaw of his girlfriend, Janay Palmer.

Although each video highlighted a different issue, together they provided a one-two punch in the power of the media to shape and shift public opinion.

Radicalizing American opinion

With the release of the James Foley video on August 19, public opinion in the United States concerning ISIS changed in the blink of an eye.

ISIS went from being viewed by most Americans as a remotely threatening Islamic fundamentalist uprising to being perceived as a band of bloodthirsty barbarians bent on the destruction of the American way of life.

In reality, there may not be much difference between these two positions, except that the videotape brought the ISIS threat home in a uniquely vivid and, yes, barbaric way. And that shift in perception resulted in a near-instantaneous shift in public opinion.

Following the release of the videotape, an almost irrational fear took over U.S. public opinion. According to a CNN/ORC International poll taken less than two weeks following the videotape’s internet debut, 90% of Americans had come to view ISIS as a threat to the United States and, more important, over 70% said that ISIS had the resources to launch an attack against the United States.

As a result, public opinion gave President Obama a blank check to take aggressive action to counter the ISIS threat. The same CNN poll showed 76% in favor of additional airstrikes against ISIS and 62% favored military aid to forces fighting ISIS. Out of this political dynamic came America’s “why” and “how” to intervene in Iraq and Syria.

A “snuff” film forms policy

We now find ourselves in a position where U.S. policy is being prosecuted at its core and in large part based on internet porn in its most lurid form – the proverbial “snuff” film.

You’ll find consensus in the United States that beheading is an unacceptable form of execution. But then, what is an acceptable form of execution?

Are the recently botched executions at U.S. prisons in Arizona or Oklahoma more acceptable? Is a drone strike that mistakenly takes out a wedding party in Pakistan while trying to execute a terrorist more acceptable?

For that matter, is the shooting of a black teenager on a Missouri street more acceptable?

The fact of the matter is that all of the victims ended up dead in an unfortunate manner, but there was videotape of ISIS beheadings and that made it different.

It gave license to politicians and pundits of all stripes to climb all over each other to decry ISIS’s barbarity. The usual militarist suspects in U.S. politics were quick to pound the war drums, saying that President Obama’s proposed response to ISIS didn’t go far enough to counter this hideous threat to American freedom.

An international “freak-out”

Internationally, British Prime Minister David Cameron abandoned his typically effete demeanor and effectively “freaked out” on the world stage, calling for the suspension of basic human rights that have been central to the post WWII geopolitical order.

Just to be clear, the purpose here is not to debate the relative merits of different forms of execution. Nor is it to criticize President Obama’s ISIS policy. Rather, it is to identify the influence of a particular media event on public opinion.

And this particular media event galvanized public opinion in a way that put the United States and its key global allies on an inexorable and potentially relentless course of escalating intervention in the Middle East.

Meanwhile, on the gridiron

Although the rise of ISIS is no doubt a much more compelling matter in most of the world than a National Football League wife-beating scandal, this may not be the case in the United States, where the NFL season is just beginning and there’s excitement in the air.

A star NFL running back, Ray Rice, was caught on videotape dragging his unconscious wife out of an elevator at an Atlantic City casino. The league suspended him for two games. Most people thought he got off light, but nonetheless, “that was that.”

Then came the second videotape and all hell broke loose. This videotape showed Rice’s then-fiancée, Janay Palmer, lunge meekly at Rice, who responded with a near-perfect left hook that sent her to the mat.

Within 48 hours, Rice’s two-game suspension went to a lifetime ban. Considering Rice’s only observable skill is to run with a football cradled in his arms, many deemed this punishment much too harsh, including many of the same people who thought his two-game suspension was much too soft.

None of the facts had changed, however. The first videotape of Rice dragging the limp body of his now-wife out of the elevator and Rice’s confession to law enforcement officers in Atlantic City as well NFL officials that he had hit her were already out there on the public record when he was suspended for two games.

The only thing that had changed was that the second videotape had emerged, where he was seen punching a woman. And Rice’s punishment went from a slap on the wrist to what for Rice is life without parole.

Once again, a particular media event had changed things. The story metastasized from there and lots of dirty NFL laundry was brought into the light of day, including an equally serious child abuse matter involving another star player.

The media enlisted legions of “expert” commentators to opine on the story, ranging from women’s rights advocates stridently demanding a zero tolerance policy to casually misogynistic sportsmen calling for leniency.

And now, the blame is falling on the NFL and its Commissioner for bungling the league’s response to the whole affair. The NFL has become the epicenter of debate on spousal and child abuse in America, even though there is scant evidence that the incidence of these acts in the NFL is any higher than it is in the general population.

Even so, many say this is a good thing, that a national debate on domestic abuse is healthy. And it is. It provokes a Freudian self-analysis for American society that many believe needs to happen.

But again, the point here is not to take sides in this controversy. It is merely to suggest that a single media event – a videotape that showed something happening that everyone knew had happened – brought about a massive shift in public opinion.

Taken together, the impact of these two videos raises questions about the responsibility of the media, because the videotapes in question presented images that produced an entirely visceral reaction.

And such was the power of that reaction that it effectively steamrolled cautious and reasoned discussion on two topics that, given their enormous social and political consequence, deserve cautious and reasoned debate.

©2014 The Globalist


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The Failure of Islam to Reform Mon, 22 Sep 2014 06:00:23 +0000 By Jean-Pierre Lehmann

Only Islam can extricate itself from the failures in its history.

Al-Azhar University (Credit: - Waj Islam can extricate itself from the failures in its history.

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By Jean-Pierre Lehmann

Only Islam can extricate itself from the failures in its history.

Al-Azhar University (Credit: - Waj

The existence of ISIS (the Islamic State of Iraq and the Levant) can be ascribed to the fact that, in contrast to Western European Christianity, there was never a reformation in the world of Islam.

While the reformed, primarily protestant nations of north-western Europe, especially Britain, the Netherlands, Germany and the Scandinavian states, as well as France (still mainly Catholic, but with a strong separation of church and state) created modernity, the Arab world essentially rejected it.

This represented a major turn of events. After all, it was Western Christian Europe that had witnessed the Roman Inquisition imprison Galileo Galilei for his advocacy of heliocentrism in the early 17th century (1615). By the 18th century, things had been completely transformed with the Western European Enlightenment.

The historical parallels of medieval Europe and the contemporary Arab world

There was no Arab Enlightenment in the 18th century, as there was no Islamic Reformation in the 17th century. Little wonder then that some of what we see today in the Islamic world is reminiscent of Christian Western Europe at the time of the inquisition.

The issue is vividly chronicled in a series of debates, recounted in Albert Hourani’s excellent book Arabic Thought in the Liberal Age: 1798-1939 (1983), held in the 1880s between the Islamic scholar Jamal al-Din Al-Afghani and the French philosopher and Arabist Ernest Renan.

Renan argued that science was incompatible with Islam as then practiced, as well as with the contemporary nature of Arab society. Al-Afghani, even though Iranian and Shiite, argued the contrary. In other words, Al-Afghani held that Islam and science were compatible and that the true villain of the Arab world’s backwardness lay in Western imperialism.

Al-Afghani is the subject of the second chapter (“The Strange Odyssey of Jamal al-Din al Afghani”) in Pankaj Mishra’s recent book, From the Ruins of Empire: The Revolt Against the West and the Remaking of Asia (2012).

An Ottoman Gutenberg?

As Western Europe came to embrace modernity and new technologies (wherever they might originate from), the Ottoman Empire resisted. This is well illustrated in the parallel narratives of the introduction of the printing press and its relation to sacred texts.

The German inventor Johannes Gutenberg first introduced the printing press with moveable type in the mid-15th century. In the ensuing decades, it rapidly spread across Western Europe. What became known as the “Gutenberg Bible” – i.e., the printed Bible – allowed for a widespread readership.

In contrast, the Ottoman Sultan Byezid II (1481-1512) expressly forbade Muslims from printing the Quran in Arabic. Though this ruling was eventually rescinded, in reality the printing press made very slow progress in the Muslim world.

As Daron Acemoglu and James Robinson point out in Why Nations Fail: the Origins of Power, Prosperity and Poverty:

Until well into the second half of the 19th century, book production in the Ottoman Empire was still primarily undertaken by scribes hand-copying existing books…This opposition to the printing press had the obvious consequences for literacy, education and economic success. In 1800, probably only 2-3% of the citizens of the Ottoman Empire were literate, compared with 60% of adult males and 40% of adult females in England.

Need one say more?

Yes. It is true that during the final agonizing collapse of the Ottoman Empire, Britain and France moved in aggressively.

There can be no doubt that Western imperialism shaped the region

The infamous 1916 Sykes-Picot Agreement, whereby Britain and France drew up plans to carve up the Middle East into respective spheres of influence after the (1914-1918) war, caused havoc. The havoc has been a marked feature of the 20th century and, after the Anglo-American invasion of Iraq in 2003, has remained a feature of the 21st.

That Arabs now feel resentful towards Britain, France and the United States for western imperialism is understandable. And yet, looking at the same issue — Western imperialism and the havoc that it created — through a wider lens, it is the case that Western powers’ conquests were not limited to the Middle East, but extended throughout most of Asia.

Nevertheless, Eastern Asia did not choose to reject globalization, as did the Arab cultures of the Middle East. This has made all the difference for East versus West Asia.

©2014 The Globalist


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Why the Military Campaign Against ISIS Will Fail Mon, 22 Sep 2014 06:00:10 +0000 By Jean-Pierre Lehmann

Thoughts on the future of the Arab world.

Credit: PeterPhoto123 - Shutterstock.comThoughts on the future of the Arab world.

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By Jean-Pierre Lehmann

Thoughts on the future of the Arab world.

Credit: PeterPhoto123 -

No matter how much Washington and its allies may wish otherwise, the military campaign against ISIS will fail, possibly with disastrous consequences.

Surprisingly, this outcome is not dependent on the issue that is currently so hotly debated – whether or not there will be “boots on the ground” (and whose).

To understand why, one needs to consider the dynamics and legacies of history. In the ultimate analysis, the existence of ISIS (the Islamic State of Iraq and the Levant) can be ascribed in good part to the fact that, in contrast to Western European Christianity, there was no reformation in the world of Islam.

This explains a core paradox: While Islam, in its earlier stages, was not just associated with, but was also the driver of great intellectual advances (in fields ranging from mathematics to philosophy, poetry and astronomy), the West nevertheless ended up taking its place as the originators and masters of the industrial and scientific revolutions that defined the modern era.

The key point is this: The Arab world was left way behind as the consequence of a serious lack of internal reform within the Arab world.

Many Arabs cite western imperialism as the major reason for its failure to join the modern world. Yet, looking through a wider lens at Western imperialism and the havoc that it created, it is the case that Western powers’ conquests were not limited to the Middle East, but extended throughout most of Asia.

Arguably, nowhere else were the Western powers’ conquests as destructive as in China.

China as role model

Despite the parallels in these regions’ fates, in the 21st century we are witnessing the resurgence of East and South Asia. The Chinese bitterly lament their century of humiliation, but the cure they have found lies in enterprise building, economic growth, education, innovation and investment in human capital – that is, in embracing capitalism and scientific modernity.

As the Chinese scholar Zheng Bijian has written: “The most important strategic choice the Chinese made [in the late 1970s] was to embrace economic globalization — rather than detach themselves from it.”

Meanwhile, West Asia remains a chaotic and backward mess. The Arab world is still in the mode of rejecting globalization rather than embracing it.

This does not just apply to the schismatic disputes, terrorism, inter-ethnic infighting, refugees, economic backwardness, political regimes, but also to society and science at large.

The seminal UNDP 2002 Arab Human Development Report identified three pivotal “shortages” – shortage of freedom, shortage of knowledge and shortage of womanpower. So long as these three shortages remain, prospects will be bleak.

If one bears in mind the immense contribution made by the Arab world to science and civilization in centuries past — and indeed the fact that not that long ago cities like Baghdad, Damascus, Beirut, Cairo and Alexandria were booming global centres of commerce and creativity — notably in the arts – then one can arrive only at one conclusion.

The panorama of the Arab world today is indeed depressing and discouraging. Compared with most other parts of the world, it is in regress as opposed to progress.

It can only be remedied by the Arabs themselves, based on a profound reform and indeed renaissance of Arab society. In the words of Zheng Bijian, it will take no less than an Arab “embrace of globalization” and modernity, by virtue of insight — and not by external military force.

Until and unless these reforms – this reformation and renaissance – occur in the Arab world, all Western interventions will fail, and indeed in all probability make the situation worse. The proposed battle to “the gates of hell” against ISIS will suffer the same fate.

What are the alternatives to intervention?

It should be made clear that “staying out” is not synonymous with “doing nothing.” Western countries must defend themselves, naturally, and try to prevent misguided youth from joining the ranks of the Islamist jihadists. We also need to provide what humanitarian assistance we can, especially to refugees.

Furthermore, while we cannot force the Arabs to embrace globalization – that would be highly counter-productive – we can be more engaging.

The Chinese Cultural Revolution – a fit of cult madness that killed and maimed millions – ended less than four decades ago. It would have been impossible to fathom in, say, 1974, two years before Mao died, that within 40 years a Chinese entrepreneur in IT would be making the biggest IPO in the history of the New York Stock Exchange.

If the Arab world could reform and embrace globalization, the glories of its civilization, respect and pride would surely return.

©2014 The Globalist


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Water: A Big Challenge for Africa Sun, 21 Sep 2014 12:00:10 +0000 By César Chelala

Can Africa provide clean, safe water for its urban and suburban communities?

Credit: polepole tochan- Shutterstock.comCan Africa provide clean, safe water for its urban and suburban communities?

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By César Chelala

Can Africa provide clean, safe water for its urban and suburban communities?

Credit: polepole tochan-

The rapid urbanization of our planet, which began in the 19th century, is one of the most notable changes in modern times. While in 1950, 29% of the global population lived in cities, that figure is estimated now at 50%. By 2030 it will reach 61%.

In Africa, urbanization experienced a rapid shift from 15% in 1950 to 41% today. It is estimated that by 2030, 54% of the population of that continent will be living in cities.

Not only are more people living in cities, but the cities themselves are also becoming larger and more densely populated. This situation poses unique problems related to the provision of water, sanitation and a healthy environment.

Africa has now 19 cities with populations of more than one million inhabitants. Because of slow economic growth, lack of effective development policies and limited resources, the development of infrastructure has not kept up with the increasing needs for shelter and services in growing urban populations.

At the same time, urban settlements in the developing countries are growing five times as fast as those in the industrialized countries.

This explosive growth of urban populations has resulted in African cities having overcrowded, informal settlements characterized by inadequate housing and poor infrastructure such as water supplies, sanitation and waste management services.

The consequence is that most cities, both in developed and developing regions, are showing trends towards segregation rather than social integration between rich and poor neighborhoods.

Waste management and sanitation

This is the case for many African cities, where local governments have been unable to keep pace with change and, as a consequence, have also been unable to provide inhabitants with proper infrastructure related to the provision of water and the collection, transportation, processing and disposal of waste materials.

In developing countries with economies under stress, waste management is a problem that often endangers health and the environment. In addition, this is given low priority by governments often besieged by other problems such as poverty, hunger, children’s malnutrition, water shortages, unemployment and even war.

Water supply, sanitation and health are closely related issues. Poor hygiene, inadequate management of liquid or solid waste and lack of sanitation facilities are contributing factors to the death of millions of people in the developing world, due to diseases that are easily preventable.

For example, lack of sanitation and inadequate disposal or storage of waste near houses can provide habitats for vectors responsible for several infectious diseases, such as amebiasis, typhoid fever and diarrhea.

Uncontrolled and inadequate landfills are a danger to the environment and also a health risk to the population, since they may lead to contamination of water and soil.

On a global level, more than 5 million people die each year from diseases related to inadequate waste disposal systems.

Water contamination

Contamination of water leads to a whole range of diarrheal diseases, including cholera, which kills 1.8 million people worldwide. An estimated 90% among them are children below five, mainly from developing countries. Most of the burden can be attributed to unsafe drinking water, inadequate sanitation and poor hygiene practices.

According to UNICEF, Infant Mortality Rates (IMRs) are almost always higher in poor urban areas than the national average and than those in rural areas.

A great proportion of the high mortality among the children of the urban poor can be attributed to diseases common in urban areas such as diarrhea, tuberculosis and parasitic diseases (intestinal worms) that are frequently associated with lack of safe water and sanitation. Malnutrition in children is often a consequence and a complicating factor.

Germs, particularly those present in water, food or on dirty hands are the most frequent cause of sickness worldwide. The lack of safe water and sanitary facilities are made worse by ignorance among the general population, particularly mothers, about the connection between dirt, germs and childhood diarrhea.

Experience has also shown that provision of clean water by itself only leads to minor health improvements. The most important factor is personal hygiene, with adequate public sanitation and clean water as additional, supporting components.

Several naturally occurring and human-made chemical substances present in drinking water can have a serious effect on health, particularly in high concentrations. Among chemicals that can be dangerous at elevated levels are fluoride, arsenic, lead, cadmium, mercury, nitrates and pesticides.

All these factors stress the need to implement policies that ensure the provision of safe water to the population, particularly in marginal areas lacking basic health and social services.

Sanitation needs

It is estimated that one in three Africans has no access to improved water or to sanitation facilities and the number of people lacking those basic services is increasing. Unless actions are taken now, the absolute number of people lacking basic services will increase from 200 million in 2000 to 400 million in 2020.

Despite progress, however, many Sub-Saharan countries will find it difficult to reach the Millennium Development Goals (MDGs) set for 2015, particularly MDG 7, which stipulates to halve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation.

According to the German Technical Cooperation (GTZ), official data on the progress in water and sanitation in sub-Saharan countries do not reflect the real situation on the ground. Coverage is overestimated in urban and rural areas.

The Sustainable Sanitation Alliance has defined a set of conditions to address the shortcomings of previous efforts to improve sanitation. It emphasizes that capital-intensive solutions tend to be costly, energy-intensive and inflexible, failing to reach large proportions of the new slum poor.

Importing sanitation models from the industrialized world and trying to implement centralized “one-size-fits-all” solutions is in many cases neither appropriate nor sustainable.

Rather, planning approaches must be adapted to better allow for the planning and implementation of context-specific sanitation systems. Among recent innovations in sanitation planning is a more integrated planning approach (strategic sanitation planning), and a greater emphasis on the actual needs and means of the users, encompassing close consultation with all stakeholders.

It is necessary to overcome the lack of integration between the various components of environmental sanitation: excreta, domestic and industrial wastewater, solid waste and storm water, which are often run by separate agencies or institutions. Better use of synergies can lead to more sustainable and cost-effective solutions.

To achieve adequate sanitation, it is necessary to convince local authorities, utilities and donors that there should be commitment and participation by all stakeholders. Several of these conditions are also applicable to improving the provision of safe water.

In both cases, it is important to provide incentives for good practice. One such incentive could be increased financial aid to municipalities that succeed in implementing effective sanitation and safe water programs.

It is also important to move from implementing a strategic planning process in a pilot municipality to disseminating results (through workshops, publications, exchange visits), followed by changes in legislation and procedures as necessary to replicate the process on a wider scale.

The constraints for improvement are neither financial nor technical; they are political, social and managerial.
At the same time, local authorities have to empower people through self-reliance and to support individuals and families in their efforts. Water-sector professionals, too, should combine their technical skills with the ability to communicate to those they serve.

Better water and sanitation services can improve everybody’s health and well being. The seriousness with which we approach this task will be a measure of our commitment to building communities better prepared to face the challenges related to sustainably securing potable water and adequate sanitation.

©2014 The Globalist


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Cycling in Eritrea: Five Photos That Capture a National Obsession Sat, 20 Sep 2014 06:00:41 +0000 By The Globalist

Eritrea has one of Africa's most unique sporting crazes.

Credit: Paul Wilkinson Flickr.comEritrea has one of Africa's most unique sporting crazes.

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By The Globalist

Eritrea has one of Africa's most unique sporting crazes.

Credit: Paul Wilkinson

Chris Keulen is a Dutch documentary photographer, interested in and concerned by the small stories of daily life.

Cycling is immensely popular in Eritrea. Every weekend, thousands of amateurs speed along isolated roads, over mountain passes and across deserts. Between them, the country’s 6 million people own some 500,000 bicycles.

The sport’s event of the year is the “Giro dell’Eritrea,” a 700-mile, 10-stage event, that is Africa’s oldest cycle race. It was first organized in 1946 by the country’s Italian expatriate community, but with local people barred from entering.

Political unrest led to the race being cancelled the following year, and it was only resurrected 54 years later in 2001, ten years after Eritrea had secured its independence.

The race has been run every year since then – always along roads packed with spectators. The event is a huge celebration in the country, followed by some one-third of the country’s population.

Text by Chris Keulen

 Enlarge   Eritrea’s Daniel Telehaimanot, the country’s most popular cyclist, is mobbed by spectators in front of Asmara’s Roma Theatre after finishing second in the Giro dell’Eritrea.” (Credit: Chris Keulen)

 Enlarge   (Credit: Chris Keulen)

 Enlarge   (Credit: Chris Keulen)

 Enlarge   (Credit: Chris Keulen)

 Enlarge   (Credit: Chris Keulen)

Chris Keulen is a Dutch documentary photographer, interested in and concerned by the small stories of daily life.

The Other Hundred is a unique photo-book project (order here) aimed as a counterpoint to the Forbes 100 and other media rich lists by telling the stories of people around the world who are not rich but who deserve to be celebrated.

Its 100 photo-stories move beyond the stereotypes and cliches that fill so much of the world’s media to explore the lives of people whose aspirations and achievements are at least as noteworthy as any member of the world’s richest 1,000.

Selected from 11,000 images shot in 158 countries and submitted by nearly 1,500 photographers, The Other Hundred celebrates those who will never find themselves on the world’s rich lists or celebrity websites.

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The Scottish Vote and Europe’s Future Fri, 19 Sep 2014 18:00:05 +0000 By Holger Schmieding

Scotland votes for more home rule within the UK, not independence.

Credit: Philip Lange, Shutterstock.comScotland votes for more home rule within the UK, not independence.

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By Holger Schmieding

Scotland votes for more home rule within the UK, not independence.

Credit: Philip Lange,

Europe can breathe a sigh of relief. A problem avoided. The EU does not have to deal with a possibly contentious case of a divorce within its ranks. It also does not have to ponder a membership application from a country just breaking away from one of its key members.

Relations between Edinburgh and London will remain an intra-UK affair. The EU and its other member states will have little interest in how the UK devolves powers to Scotland and the extent to which it also grants more autonomy to its other regions.

Some would-be separatists elsewhere in Europe may still be emboldened by the fact that Scotland had a referendum. But Scottish independence would have strengthened the case of, say, splitting Catalonia from Spain – instead of dampening it.

What about the UK in Europe?

The passions arising from the Scottish referendum debate may have strengthened the anti-EU UKIP in England and the overall case for a future UK referendum on EU membership. But relative to a Scottish divorce from the UK, Scotland’s clear “No” to independence reduces the risk of Brexit.

The risk of an anti-EU rebellion among the Conservative members of parliament against David Cameron, their own prime minister, would have been worse if Scotland had ended the 307-year union with England and Wales.

On the positive side, the UK actually has reason to be proud. Settling a highly controversial issue with a referendum to which both sides of the argument have fully agreed is admirable. In history, wars have been fought about such issues.

A precedent for other regions in Europe?

The fact that Scotland then settled for more home rule instead of independence may contain somewhat the enthusiasm of others to try and go for independence.

More important, the Scottish case has some special features which set it apart from many other potential cases.

Scotland is a historic nation with well-defined borders. Notably, the Scots are not an ethnic minority within a nation state.

Catalonia and the Basque country in Spain may claim the same status of a historic nation as Scotland. But the Basque nationalists can be vague about their borders (what about Navarra?).

In Flanders, the issue of Brussels (historically Flemish, but largely French-speaking) makes a Flemish break from Belgium extremely difficult if not virtually impossible. In short, most other potential breakaway regions in Europe cannot claim a status fully comparable to that of Scotland.

Moreover, because the UK lacks a written constitution, Prime Minister Cameron could be flexible and simply agree to the terms of a referendum with the leader of the Scottish nationalists.

Many other countries do not have a procedure for an orderly referendum. That makes it more difficult to get a mutually agreed referendum elsewhere.

And without a mutually agreed referendum, independence for other historic nations within nations would be virtually impossible within the European framework.

What about Catalonia?

In Catalonia, the pro-independence camp wants to hold a referendum on November 9, 2014. The national parliament and constitutional court in Madrid will likely prohibit such a plan as unconstitutional.

The Catalan regional parliament may call a snap regional election as a proxy referendum for November 9 instead.

However, the key Catalan party, the pro-independence center-right, might well lose such a regional snap election and hence control of the regional government to the left-wing Nationalists in the wake of a highly-publicized tax-dodging scandal of its erstwhile political leader. It remains unclear whether the Catalan centre-right will really want to call such a snap election as a proxy referendum.

If Madrid now wakes up and offers the Catalans more autonomy – say, similar to the powers enjoyed by Spain’s Basque region, with a transition period in which Catalan financial transfers to the rest of Spain are gradually reduced – then the center-right Catalans may settle for such a deal. The other option, escalating a conflict, would be bad for Catalan business interests (and hence a key part of the party’s constituency).

No unilateral independence

A mutually agreed divorce is the only potentially realistic way in which a new country could be born within the existing EU.

A unilateral declaration of independence for Catalonia would be self-defeating. On top of all other problems Catalonia would encounter, it could not remain part of the EU without the consent of EU-member Spain.

The simple fact that Spain will always hold a veto over Catalonia’s future in the EU means that Madrid and Barcelona would have to agree first, before a valid process towards a referendum and potential Catalan independence within the EU could commence.

That insight is ultimately likely to force Barcelona and Madrid to strike a deal, likely on expanded autonomy for Catalonia – but short of full independence.

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The UK’s Problems Have Just Begun Fri, 19 Sep 2014 16:42:06 +0000 By Denis MacShane

Far from settling everything, the Scottish vote has opened everything up.

david-cameron-400Far from settling everything, the Scottish vote has opened everything up.

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By Denis MacShane

Far from settling everything, the Scottish vote has opened everything up.


There was a Phew! of relief in London as it became clear that after three centuries of marriage Scotland and England have decided not to divorce. But the two nations are now living in different rooms without much common conversation. And the vote against separation is the beginning, not the end of Prime Minister David Cameron’s political difficulties.

Just the beginning?<h/4>

David Cameron was forced to make major concessions to the Scottish nationalist leader, Alex Salmond, in the days before the referendum. These include writing into law the so-called Barnett formula, which grants Scotland a disproportionate share of UK government revenue compared to England and Wales.

Already Conservative MPs are protesting that their constituents should not have to fork out more taxes to pay for the over-large state sector in Scotland or the generosity of free university tuition and health care largesse.

As long as the check from England arrives there will be no pressure on the Scottish government to modernize its state sector in the model of social democratic Nordic countries where private agencies run huge chunks of public services.

Mr. Cameron has also said that there will be a constitutional revolution with MPs elected in UK constituencies not being able to take part in legislation in the House of Commons on a common basis.

The sight of 59 silent sheep MPs from Scotland marching out of the House of Commons when it discusses health care or education, or policing which policy areas in Scotland are decided by the Scottish parliament means that the unitary parliament of the four nation kingdom is seeing its closing days.

The doctrine of parliamentary supremacy as defined by Edmund Burke and Walter Bagheot has been quietly buried by Mr. Cameron. Instead the UK will have to move to a more continental system of a written, legally enforceable constitutional contract setting out who has powers and how they can be used.

Scotland is now divided

The London elite establishment has taken a terrible knocking. How did the finest brains in the Westminster political-media matrix not notice until the last panic-stricken days what was going on? The prime minister has had to turn to his despised, hated foe Gordon Brown and – like a latter day Cincinnatus – call Brown from nursing his grievances in retreat to save the United Kingdom.

Labour joined in the last-minute promises about reform of parliament but if Labour’s Scottish MPs cannot vote on major policy decisions affecting England, especially on issues dear to Labour like health, welfare and education, where does Labour find a working majoroity to form a government?

Scotland is now divided between its western, Glasgow, post-industrial Catholic working class citizens who voted Yes and its Edinburgh, banking city-connected Calvinist better-off citizens who voted No to stay linked with the south.

The vote was bought, as was the original union between England and Scotland in 1707, with generous promises of money and political power that in cruder language might accurately be called bribes.

But in 1707, the newly formed United Kingdom was about to embark on two long centuries of economic and political aggrandizement. That is not the case today where Britain – whether of left or right – does not know how to find a new economic, social and cultural settlement that makes sense for the 21st century.

So the Scottish vote far from settling everything has opened up everything. There is little evidence that the Westminster political-media elite know how to think through what will be very difficult years ahead.

Problems with the EU will only intensify

In three weeks there will be another political earthquake when the first UK Independence Party MP enters the Commons after a by-election in Clacton, Essex. From then until the May 2015 election, the question of Britain’s union with Europe will dominate politics. Mr. Cameron has pledged an In-Out referendum – long called for by UKIP – which so far the two other party leaders, Ed Miliband and Nick Clegg reject.

Referendum politics are very different from parliamentary politics. After a rock-solid union of 300 years which few questioned until very recently, the Scots came close to separating from England. The UK union with Europe has lasted just 41 years but voters have been told by many politicians, business leaders and most of the press that the UK-EU marriage is a mistake and it might be better to separate.

Mr. Cameron had tears in his eyes as he expressed his love for the UK union and his fear of it coming apart. He has never shown the slightest warmth for the UK’s union with the rest of Europe and many of his ministers and MPs make clear it is a relationship they wish they were not in.

So along with the extraordinary constitutional and fiscal upheaval that will have to turn into law to honor the Cameron-Miliband-Clegg promises to the Scots, the UK will face turmoil over its relationship with Europe with Brexit a looming possibility.

The pound rallied slightly as the No vote won. But the politics of re-writing the rules by which the UK governs and the future imbroglios over Europe have all got a lot worse.

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Willful Ignorance on the Economy Fri, 19 Sep 2014 06:00:16 +0000 By Richard Phillips

Did the American political right's willfully ignorant view of the economy undermine it's recovery?

Credit:  Mega Pixel - Shutterstock.comDid the American political right's willfully ignorant view of the economy undermine it's recovery?

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By Richard Phillips

Did the American political right's willfully ignorant view of the economy undermine it's recovery?

Credit:  Mega Pixel -

Around midday on January 20, 2009, Barack Obama was sworn in as President of the United States. At that moment, the dollar/euro exchange rate stood at $1.30. Today, nearly six years later, this key rate continues to stand at roughly $1.30.

What’s wrong with that, you may ask?

The answer is, “Nothing is wrong.” And you would be right to say that stable exchange rates and a dollar that has found parity on global markets is a good thing.

So, what’s wrong? What’s wrong is that starting approximately 30 days after President Obama’s inauguration in 2009, politicians and pundits on the Republican right started to state emphatically and with remarkable consistency that the Obama Administration, along with the U.S. Federal Reserve Bank, were employing policies that would substantially devalue the U.S. dollar – in fact, make it “worthless.”

Since then, right-leaning and right-wing U.S. media have breathlessly reported and highlighted every downtrend in the value of the dollar to prove their point. But then, when those downturns proved to be little more than normal cyclicality, they made little or no mention of the uptrends.

In other words, the right was wrong in its long-term outlook for the dollar, but unwilling to admit that it was wrong. More importantly, it was wrong in the policy it prescribed to correct the dollar crash it saw as inevitable.

The dollar crash, like so much of the economic rhetoric emanating from the right, was a phantom. It never happened.

By embracing willful ignorance, the right has time and again managed to foist its brand of economic farce on a sometimes gullible American public.

Not only is willful ignorance evident in alarmist cries about exchange rates and other financial indicators. It also underpins the entire right-wing economic narrative of the Obama Presidency.

Conveniently understating reality

This narrative begins by grossly understating the severity of the economic events of 2008. According to the right, the crash was merely another cyclical downturn – one of the periodic pullbacks that have occurred with regularity throughout America’s economic history. This interpretation serves as the right’s foundation in its critiques of the Obama Administration

But such a view ignores the reality of those scarring economic events. It ignores the fact that, for the first time since 1929, the entire structure of global finance had become frozen.

Money markets had seized up. Eight of the ten largest U.S. banks were technically insolvent. Real estate, the primary form of U.S. savings, had become unsalable. Bond markets, stock markets and derivatives markets crashed. And companies started shedding jobs at the impossible rate of nearly a million a month!

Anyone even remotely connected to finance or the economy in 2008 recognized that, this time, the cyclical downturn was different. Yes, it was cyclical. But it was structural too, worse than any economic event since the onset of the Great Depression.

The right conveniently ignores this reality, because by understating the downturn, it has been able to overstate the slowness of the recovery. Sure, the recovery was slow for a normal cyclical downturn. But this was not a normal cyclical downturn.

The right’s willfully ignorant view of the severity of the downturn empowered it to undermine the policies of President Obama. It gave commentators on the right the provenance to make all sorts of predictions and forecasts. They weren’t bothered that all of their economic scaremongering turned out to be wildly off base – and served to undermine confidence in the recovery.

Austerity, austerity, austerity

According to the right, aggressive fiscal austerity would have hastened the recovery and prevented the Obama team from “ruining” the economy with its reckless policies.

But the policies of the Obama Administration have hardly ruined the economy. Today, five years after the crash, the U.S. economy is back on a much sounder footing and is growing stronger by the day.

Growth is solid and improving. Inflation is in check. Asset values have mostly been restored to pre-crash levels or above. And the Federal Reserve is about to finish its asset-purchasing program in November.

Even the U.S. employment picture is improving, in spite of serious structural impediments that the right conveniently ignores.

The reality here is that stubbornly high unemployment rates are fueled by globalization, which has fostered the migration of entire U.S. industries overseas, and by technological innovation. This has produced a rapid rise in worker productivity and created workplace dislocations not seen since the onset of the industrial revolution.

By willfully ignoring these important factors and focusing on the minutiae of each successive unemployment report – invariably highlighting the bad and ignoring the good — the right does a great disservice to the U.S. economic recovery.

The jobs picture: Misstated

For example, a positive employment report would be greeted with the inevitable “but they are not good jobs.” Of course they were not good enough jobs – good manufacturing jobs had already left U.S. shores and worker output was being cannibalized by technology and robotics.

Alternatively, any downtick in the unemployment rate would be met with “but this is because people are leaving the workforce.” True, people have been leaving the workforce at abnormally high rates.

But what makes this number abnormally high is that Americans are turning 65 at the rate of 10,000 per day – a factor beyond the control of any politician.

Finally, nearly every employment report since mid-2009 has been weakened by decreases in public sector employment. These decreases have taken place on the state level, especially in red ( Republican) states, where unemployment in general is higher than in blue (Democratic) states.

Method to the madness

As a result, willful ignorance supports an important skew to Americans’ view of their own economic recovery. This wouldn’t matter much, except that it gets translated into policy preferences. And policy preferences based on willful ignorance are — ok, I can’t resist – willfully ignorant!

An unrelenting string of alarming economic forecasts was the right wing’s hammer in prosecuting its agenda. But none of these dire forecasts – not one of them –have come to pass.

On the value of the dollar, they were wrong. They were also wrong about commodity price levels, inflation, interest rates and GDP growth. I could go on, but you get the idea.

The Obama Administration has pursued sound policies with respect to the economy. These policies have been based not on strident ideology, as the right would have it, but on empirical observation of recovery from past economic cataclysms.

The Obama economic brain trust understands the Great Depression better than their right wing counterparts. They understand how the do-nothing approach of the Hoover Administration so undermined the economic system that true recovery became a remote aspiration.

They also recognize how conservative demands for fiscal austerity every time the economy started to gain traction undermined President Roosevelt’s stimulative economic policies and stalled recovery in its tracks time and again.

By the same token, U.S. economic policies under Obama have taken their cue from the more recent Japanese experience. There, “healthy” doses of fiscal austerity were periodically applied to rebalance the economy. Paired with an aging population and a steep increase in foreign competition, these policies turned a cyclical downturn into a “lost decade” – now in its twentieth year!

Fortunately, the U.S. economy is robust enough to pick itself up, dust itself off and move aggressively forward in spite of the political bickering that has become the lifeblood of Washington, D.C.

But a single fact remains: Had the right not engaged in willful ignorance to promote a highly ideological and entirely unproven economic agenda, a far more robust U.S. economic recovery may have manifested itself years ago.

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10 Reasons To Oppose Scottish Independence Wed, 17 Sep 2014 15:00:30 +0000 By David Marsh, Meghnad Desai and John Nugée

Scotland’s independence would hurt Europe.

Credit: GrAl - Shutterstock.comScotland’s independence would hurt Europe.

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By David Marsh, Meghnad Desai and John Nugée

Scotland’s independence would hurt Europe.

Credit: GrAl -

The desire of smaller groupings of people, in democratically run and generally well-off states, to pin their futures on self-affirmation and self-government, appears to be growing. Some of the sought-after gains may be illusory. However, the potency of the hopes behind them is real.

At times in recent months, it has appeared as if the more lucid the arguments deployed against a Yes vote, the greater the Nationalists’ success in turning them to advantage by branding them as worthless or self-serving propaganda.

Nine months on, it is time to say that a Yes vote would have 10 major consequences for Europe and the world – nearly all of them negative.

1.  A Yes would make Europe more divided and less able to play positive role on the world stage

It would probably increase the likelihood of the remaining UK leaving the EU in a future referendum decision and would heighten the importance of separatist politics elsewhere in Europe.

Most European leaders know the break-up of an important EU state would worsen Europe’s problems and diminish its importance, in the eyes of the world.

A Scottish shift would have global consequences, making it harder, for example, for the UK (and probably France too) – in contrast to India, Brazil, Germany and Japan – to justify a permanent place and veto on the UN Security Council.

2.  A separated Scotland’s would be weak and palpitating

Monetary arrangements form any state’s heart. It is idle to believe that the Scots could carry on using the pound as though nothing had happened.

Centuries-long experience shows that a successful currency union requires political union, unless one region wishes to be permanently held in check by the more dominant player. It would be illogical for Scotland to vote for independence and then, in its fiscal and monetary relationship with England, take on the subservient part of a Liechtenstein in its link-up with Switzerland.

3.  Brains, money and jobs would hemorrhage southwards

Scottish banks and financial service companies would not be the only ones to move bases, business and people to Manchester, London and Carlisle, to Leeds, Birmingham and Newcastle.

By voting Yes, the Scots might manufacture a similar reason for the kind of destabilizing population flows that unification between East and West Germany in 1990 sought to forestall.

‘If the D-mark doesn’t come to us, we’ll come to get it,’ was the East Germans’ slogan as they forced the West German authorities to bring in Europe’s quintessential hard currency and then to reunite the country in 1990 to choke off massive streams of westwards migration.

Sterling may not be the D-mark, but the British currency, in recent years (for a mix of reasons) harder than the euro, has its attractions.

The exodus this time could be across not Berlin’s Wall but Hadrian’s.

4.  Independence would exacerbate, not alleviate, Scotland’s economic problems

Whether in pensions and social provision, research and development, commerce, trade and investment or their shopping bills, the Scots would probably soon find self-harm lurking behind self-determination.

This could be a bizarre re-run, in reverse, of the English-Scottish monetary union 307 years ago, after well-off Scots bankrupted the country and drove it into the arms of the English following a display of misplaced confidence in a capricious investment scheme to colonize the isthmus of Panama.

The ‘re-energization’ of Scotland promulgated by the Nationalists might one day happen, but, in view of the large number of anticipated initial problems, the Scots would probably have to wait a long while for the promised benefits.

5.  The early political outcome of a Yes vote in the UK would be destabilizing

Nationalist leader Alex Salmond’s victory fruits would not last long.

Despite the charm, pugnacity and skill with which he has deployed his campaigning talents, Salmond could risk ending up, like many revolutionary leaders, a disappointed figure. A better result, for him and for Scotland, would be to lose the referendum but win compensatory powers from Westminster.

If the Yes side wins, David Cameron, brimming with blandness yet bereft of foresight, would go down in history as a latter-day Lord North, the 18th-century prime minster who lost Britain’s American colonies.

A difficult stretch of negotiations with Scotland about implementing the separation, and especially on dividing up the UK’s assets and liabilities on a basis that all sides find equitable, would be conducted in an atmosphere of bitterness and recrimination that could poison relations for many years.

Cameron’s Conservative party probably would tilt further to the right and further from the EU. Ed Miliband, the Labor leader, would hardly profit. His party would lose a northern foothold that was too small to turn the referendum tide yet could be sufficiently large to deprive the party of a majority in any future rump UK election.

6.  A separate Scotland would not find immediate solace or support in Europe

The present UK’s successor state would have its seat in London, not Edinburgh. Other European governments are worried about secession in Catalonia, Flanders and elsewhere.

Salmond’s ruse to blackmail the English into accepting currency union, by otherwise refusing to accept Scots’ share of the UK national debt, is unlikely to succeed.

So Salmond would have two choices. He could fulfill his threat and renege on Scotland’s share of the hitherto all-UK national debt, which would negatively affect the division of all other assets and liabilities with the remaining parts of the UK. Or he could accept Scotland’s inherited and somewhat exacting debt burden, without fully adequate banking and currency arrangements.

Either path would reduce Scotland’s status and its negotiating leeway with the EU.

7.  The issue of Scottish debt

The debt issue would overshadow not just the relationship with Brussels, Frankfurt, Berlin and Paris, but also the entire workings of a separated Scottish government.

The greater the questions over the new state’s willingness and ability to honor its debts, the higher the interest costs demanded by investors in the debt of a future independent Scotland. And the greater the difficulty, too, of maintaining Salmond’s welfare, pensions, educational promises – yet more black marks against a separated Scotland’s economic proficiency and political credibility.

8.  The frequently over-stated riches of North Sea oil cannot represent Scotland’s salvation

A separate Scotland can negotiate revenue streams for new concessions. But – short of summary nationalization that has gone out of fashion even with African and South American revolutionaries – there will be no retroactive rewriting of valid legal agreements, no re-diversion of already-agreed revenues and no sudden windfall to swell Scots’ coffers.

Strong-arm methods against globally-operating energy companies at a time when the oil price is tending below $100 a barrel are not likely to achieve beneficial results for Scotland and its people.

9.  A Yes vote would impair the defense arrangements of the UK and its allies

Europe and NATO would be less able to intervene in the world’s trouble-spots.

A separated Scotland would dismantle the Trident submarine base at Faslane on the Clyde, confronting the London government (and NATO) with a new dilemma over the future of the strategic nuclear deterrent.

The 15,000 Scots in the 100,000-strong UK army mainly live outside Scotland, reflecting UK policy of basing soldiers away from their homes. They have not been given a vote to express their loyalty to the state they help protect, despite efforts by leading military figures to persuade the UK government to give them one. This would be just one of the factors hampering the army’s cohesion after a Yes vote.

10.  History is littered with cases where such uncontrolled processes have led to disaster

Whatever happens, the procedures for establishing the referendum and the terms under which it is being held run counter to best practice in mature democracies.

Many, now and in the future, may look with incredulity at Cameron’s decision to go ahead with the poll and make the result legally binding without any reference to the UK parliament and without the normal democratic prerequisites of constitutional change such as super-majorities and second-vote reconfirmations.

Not least for the UK’s European partners, the carousel-like development under which a residual UK shunned by Scotland might tilt further away from European integration should give rise to foreboding.

Thoughtlessness, expediency and a vein of unscrupulousness have coalesced to make possible a risky experiment of great destructive power. Onlookers with a stake in the outcome, but no direct role in Thursday’s referendum, can do little but hope that this will not be another one.

Editors Note: Sir Andrew Large, John Plender and Jack Wigglesworth also co-authored Official Monetary and Financial Institutions Forum.

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What Will The United Kingdom Look Like Without Scotland? Wed, 17 Sep 2014 13:00:42 +0000 By The Globalist

The impact is not as big as you think.

Credit: MarkWattsUK - Shutterstock.comThe impact is not as big as you think.

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By The Globalist

The impact is not as big as you think.

Credit: MarkWattsUK -

1. On September 18, 2014, Scotland will hold a referendum on whether it will separate from the UK and become an independent nation.

2. In 1707 — 307 years ago — Scotland and England joined to form the Kingdom of Great Britain.

3. In 1801, they incorporated the Kingdom of Ireland to form the UK.

4. If Scotland leaves the UK, it will be the first major change to the nation since the declaration of the Irish Free State in 1922.

5. Based on its estimated population of 63.5 million, the UK has the 22nd largest population in the world.

6. It ranks just behind France (64.4 million), the third-largest nation in Europe after Russia (142.5 million) and Germany (82.7 million).

7. If the UK loses the 5.2 million Scots, it  would have a population of 58.3 million.

8. The smaller UK would fall only one place in the world population league table, ranking behind Italy,  the world’s 23rd most-populous country.

Source: United Nations Population Division’s World Population Prospects: The 2012 Revision (medium fertility estimate for 2014) and

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10 Facts On The World’s Newest (Potential) Nation Wed, 17 Sep 2014 06:00:49 +0000 By The Globalist

An independent Scotland would have slightly more people than Turkmenistan.

Credit: Lynx Aqua - Shutterstock.comAn independent Scotland would have slightly more people than Turkmenistan.

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By The Globalist

An independent Scotland would have slightly more people than Turkmenistan.

Credit: Lynx Aqua -

1. If Scotland declares its independence from the UK on September 18, the new country will have a population of just 5.2 million people.

2. About a fifth of Scotland’s population live in just two cities — Glasgow, its largest city, and Edinburgh, its capital city.

3. As an independent nation, Scotland would rank as the world’s 116th largest – behind Turkmenistan (5.3 million) and just ahead of Norway (5.1 million).

4. Scotland would rank ahead of 78 of the UN’s current 193 member states in terms of population.

5. The average population of those 78 countries, based on UN estimates for 2014, is just over 1.6 million.

6. The combined population of these countries — 127.8 million — is in fact only about twice the current population of the UK.

7. Scotland’s departure would reduce the population of the UK — already the smallest nation of the five permanent members of the UN Security Council — to 58.3 million.

8. The other permanent members of the Security Council — each with veto power over UN resolutions — are France, Russia, the United States and China.

9. While a reduced UK will still be comparable in size to France (64.6 million), it will be significantly smaller than the other three members.

10. The smaller UK will have just over a third of Russia’s population (142 million), a sixth of the United States’ 322 million — and about one-24th of China’s 1.39 billion.

Source: United Nations Population Division’s World Population Prospects: The 2012 Revision (medium fertility estimate for 2014) and

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Smaller Nations in a Big World Wed, 17 Sep 2014 05:30:03 +0000 By The Globalist

How will an independent Scotland compare to other small nations?

Credit: stocker1970 - Shutterstock.comHow will an independent Scotland compare to other small nations?

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By The Globalist

How will an independent Scotland compare to other small nations?

Credit: stocker1970 -

The Scots are voting to secede from the United Kingdom. In the run-up to the independence referendum on September 18, many have made the case that Scotland is too small to exist as an independent nation.

We wonder: Of the 193 countries in the United Nations, how many are smaller than Scotland?

A. 23
B. 40
C. 78
D. 106

A. 23 is not correct.

Scotland is one of the four constituent parts of the United Kingdom. Together with the other three – England, Wales and Northern Ireland – the UK’s population, at 63.5 million, currently is the 22nd most-populous country in the world, based on UN projections for 2014.

Scotland is currently part of the United Kingdom, a federation of England, Scotland, Wales and Northern Ireland. A “yes” vote on the referendum would lead to the establishment of Scotland as an independent nation in March 2016.

In population terms, Scotland is the second-largest part of the UK. However, its 5.2 million are only a tenth of the 53 million English. (Wales and Northern Ireland together have about five million people.)

The loss of Scotland would reduce the United Kingdom’s population to
58.2 million people. However, the country would only drop one place in the world population rankings. The smaller UK would fall just behind Italy, currently the world’s 23rd most-populous country with 61 million people.

Scotland would be the first new country in Europe since Kosovo declared its independence in 2008. Other regions in Europe with separatist tendencies include Catalonia in Spain (7.6 million people), the Flemish region in Belgium (6.4 million) and the Veneto in Italy (4.9 million).

B. 40 is not correct.

The total number of UN member countries grew dramatically during the 1990s – from 159 in 1990 to 191 in 2002 – as several larger nations, most notably the Soviet Union and Yugoslavia, dissolved.

Of the 193 member countries today, 40 have a population of less than one million. The combined population of those 40 countries – which include Qatar, Cyprus, Bahrain, Luxembourg, Iceland and Barbados — is only about 12.5 million. While that is equal to only 0.17% of the world population, these nations control about 20% of the votes in the UN General Assembly.

The UK is the smallest nation with a permanent seat of the UN Security Council. Its five permanent members hold veto power over the organization’s substantive resolutions.

While the UK is barely smaller than France (64.6 million), it is significantly smaller than the other three members — Russia (142 million), the United States (322 million) and China (1.39 billion).

C. 78 is correct.

Scotland has a population of about 5.2 million, according to a government estimate for 2014. About a fifth of that population lives in just two cities – Glasgow, Scotland’s largest city, and Edinburgh, its capital.

As an independent nation, Scotland would rank ahead of 78 of the UN’s current 193 member states. It would become the world’s 116th most populous country – behind Turkmenistan (5.3 million) and just ahead of Norway (5.1 million).

The combined population of the 78 countries that have a lower population than Scotland’s 5.2 million — including Georgia, New Zealand, Mongolia, Jamaica, Kuwait and Botswana — is 127.2 million. That is just 1.8% of the world’s population – or just over two times the current population of the UK.

While Scotland accounts for just about 8% of the UK’s population, it accounts for about 32% of its territory. Despite the North Sea oil that provides a great deal of Scottish revenues, Scotland’s share of the UK economy – at about 10% — is much more in line with its share of the population.

One of the contentious issues relating to Scotland’s independence is whether it would be granted membership in the European Union. (It is currently part of the EU as part of the UK.) Of the EU’s 28 current members, nine have a smaller population than Scotland. While three — Denmark (5.6 million), Slovakia and Finland (both 5.4 million) — are just slightly larger.

D. Is not correct.

More than 100 countries – 106 to be exact – have a population of less than 10 million people. That is 55% of the UN’s total membership. Among those countries are Sweden, Austria, Haiti, Israel, Libya and Laos.

Together, the 106 countries with a population of under 10 million each have a combined population of 333 million people – roughly the size of the United States and a third of the size of China and India. Their average population – at 3.1 million – is even smaller than Scotland’s 5.2 million.

While that may be proof enough that Scotland is large enough to exist as an independent nation, the question is really what impact independence will on Scotland’s future.

Scotland’s economy is only about a tenth of the size of England’s and its per capita GDP is perhaps 15% lower. An independent Scotland would depend, at least in the short term, on revenues from North Sea oil exports to sustain its economy.

However, the UK has pumped 40 million barrels of oil out of its North Sea oil fields since its discovery in 1970, and as little as 16 to 24 million barrels may remain.

©2014 The Globalist


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