The two “obsessively” big issues circulating in the news and in discussions recently are 1.) the presidential election in the United States and 2.) the financial crisis in the United States and around the world. While to a certain extent these issues are often brought together (as all issues during election time seem to equate to what do the candidates think about this or that), it seems to me that the financial crisis has a much larger scope. In any case, my collection of articles for this week concern:
1.) The Financial and, ultimately, Economic Crisis
2.) On China
3.) Recent Scientific Research
From Financial Crisis to Economic Crisis:
Following recent events, numerous measures have been proposed, discussed, and taken by governments around the world. Considering the American disregard for European finances, it is worth noting that some have claimed that Europe’s response has been more coordinated and ultimately better than its transatlantic counterpart. The American plan seems to have changed courses and is starting to follow in Europe’s footsteps. Equally noteworthy is the number of news articles and web searches, which have reflected the growing interest in the so-called financial crisis (See Google Trends on “Financial Crisis” & in relation to “Recession” ). There is a lot of information to shift through and perhaps an impossible amount of information to go through. All the same, I’ve written some pages on this, which I hope to post in the coming days.
1.) A Comparable Future? Japan and its Bubble: In Life After the Bubble: How Japan Lost a Decade (New York Times, October 19, 2008), Jim Impoco explores how Japan in the 1990s went through its own financial crisis and bubble, which is often called Japan’s “Lost Decade.” During that time Japan was going through a huge boom: it had risen “from the ruins of the war to become the world’s second-largest economy” and “By the mid-1980s, America and Japan accounted for a staggering 40 percent of the global economy.” Around 1986 Japan’s rise went into “overdrive” as three factors met: “super-easy credit, frenzied financial speculation, and blistering industrial expansion.” Admittedly, unlike the US then and now, Japan was a manufacturing giant at the time producing the best products in the world (think of the Walkman and the Accord).
*”But Japan was also busy manufacturing a second bubble of comical proportions. Its real estate market made our recent mania seem downright restrained by comparison. At the start of the 90s, a square meter of prime Ginza real estate cost as much as $300,000. Homes were so expensive in land-scarce Japan that families took out multigenerational loans.My favorite example of how real estate had become an extreme sport: the property that housed the Imperial Palace in downtown Tokyo was believed to be worth (no one knew for sure because it wasn’t really for sale) as much as the entire state of California.Then the double bubble turned into double trouble when both burst at the same time. Denial followed denial. When officials did finally admit there was a problem, policy misstep followed misstep as Japan’s clever, selfless and indefatigable mandarins (our best and brightest went to Wall Street; theirs went to the Ministry of Finance) started acting like fumbling Soviet bureaucrats, minus the corruption.” *
The result for Japan was a decade of financial and economic setbacks.
The United Stats is far from denying the need for action during this financial crisis. In fact, I would go so far as to say that the United States is acting like it did after 9/11, namely people are looking for action, any action (though one must ask if such rash thinking is the right thinking?).
But while the United States is acting rather than denying, it has a few particularities in comparision to Japan:
- “Japan began its Lost Decade as the world’s largest creditor nation, and it still is. By contrast, America is now, as it was then, the world’s biggest debtor nation.”
- “whereas America has a negative savings rate and its citizens are neck-deep in debt, the Japanese have remained fanatical savers, frugal to a fault.”
2.) A Comparable Future? Sweden and its Bubble: In Crise financière : le spectre de la récession (Le Monde, 21.10.08), Daniel Cohen compares the current financial crisis with that of the 1929. It is clear to him as well as to most observers that their response then has not been the same as ours today. Namely, numerous actions have been proposed and been put into effect, and people are not simply expecting things to improve miraculously. Cohen goes on to look at Sweden response to their own financial bubble in housing, which “exploded” at the beginning of the 1990s:
Prévoir combien de temps la crise pourrait durer dépendra en partie de la façon dont elle sera gérée. L’exemple le plus convaincant d’une crise habilement contrôlée est celui de la Suède, au début des années 1990. A partir de 1985, le gouvernement suédois décide de libéraliser un système financier jugé sclérosé. La dérégulation provoque une bulle immobilière. Le crédit facile fait plonger le taux d’épargne suédois, qui devient négatif… Puis vint l’heure du retournement. Entre 1991 et 1992, la crise immobilière met en semi-faillite les principales banques du pays. L’Etat entre au capital des banques menacées et les sépare en deux. Une moitié hérite des bonnes créances. La mauvaise part hérite des actifs pourris, lesquels sont confiés à une structure indépendante. En 1993, la Suède touche le fond, et en 1994, la croissance est de retour. En 1997, les structures de défaisance sont liquidées. Le coût fiscal est au final minime. L’exemple suédois a tardé à s’imposer comme modèle de référence. Le plan Paulson ne prévoyait initialement aucune injection de capital, et le plan européen reste opaque sur le rachat de créances douteuses. Progressivement, suite notamment au plan britannique, une vision d’ensemble a fini par émerger, qui se rapproche du “modèle suédois”. Or la Suède connaîtra trois années de croissance négative, avant de rebondir. A cette aune, l’année 2010 ne sera pas brillante…”
The result in Sweden was three years of financial and economic staggnation before things started looking up.
3.) In This Bailout Doesn’t Pay Dividends, the New York Times presents a possibly dangerous argument for some of the problems with the United States’ bailout plan. 4.) In A Matter of Life and Debt novelist Margaret Atwood argues that our current financial crisis is actually rooted more in basic human behavior than complex economic factors, namely that “he debtor is only one twin in a joined-at-the-hip pair, the other twin being the creditor.”
The recent news in China has been focused on dealing with the financial crisis, a new proposal at rural land reforms, and talk of creating a revamped universal health care system. 5.) Misplaced Hopes: China’s Economic Growth Slows along with the World’s. As the world’s economy and financial institutions are taking a slow-motion nose-dive, eyes are turning again to China to stabilize the ebb and flow of capital and value. But in spite of hopes that their economy, in particular internal, domestic Chinese consumers would provide enough support to ailing American consumers, it seems that China’s economic growth has already started showing signs of slowing down. According to Liu Peng’s China’s Economic Growth Slows Down (The Economic Observer, 2008-10-21), “China’s economic growth has hit five-year low and slowed to a single-digit rate in the first three quarters of this year amidst a global credit crunch.” Admittedly, “that despite a slower growth rate, China’s overall economic situation remained well as the government had taken measures to cushion fall outs from the US financial crisis and global economic uncertainties.” The most striking number is that “country’s trade surplus decreased USD4.7billion to USD181billion.” In China**, an Engine of Growth, Faces a Global Slump (New York Times, October 23, 2008), JIM YARDLEY and KEITH BRADSHER add more evidence to the conclusion that China will also be affected by worldwide events. While China “sits on $1.9 trillion in foreign exchange reserves, accumulated from giant trade surpluses and heavy foreign investment in China,” it seems that factories are closing and unemployment is rising due to a decrease in demand for Chinese exports. This is troublesome, because it is predicted that China needs roughly an 8-percent yearly growth to provide enough job creation in order to pay for and support an aging Chinese population. Government officials are said to be preparing a large, government spending spree (similar to that of 1998-2000): “Today, improvements are needed in railroads and the electrical power grid. But China’s most conspicuous needs are the softer side of a modern economy — a health care network, lower tuition and fees for schools and universities and improvement in the rudimentary social safety net, economists say.” Even with these initiatives at builing confidence in spending over saving, it remains a fact that “Today, China still has more than 500 million people living on less than $2 a day; nationwide per capita income is only about $2,000. The social safety net remains so inadequate that most peasants save their spare earnings to protect against a medical crisis or as a thin cushion for old age.”
6.) Linking the Actual with the Historical. Since reading Jonathon Spece’s impressive book Search for Modern China, it is clear to me that China (like all countries) needs to be partially understand from the perspective its history. This is clearly no easy task, considering the length and depth of Chinese history. We can admittedly leave as lesser important, as Spence does, a certain amount of China’s history before 1600, but this does not remove the fact that for the Chinese the entirety of their history, literature and philosophy still touches and affects them in differing ways. During the Open Ceremonies at the Beijing Olympics, a vast array of Chinese symbols were incorporated to provide a certain “modern” vision of China, which attempts reconcile its past, present and future. Richard Wertz’s website Exploring Chinese History (http://www.ibiblio.org/chinesehistory/index.html) helps bring the mass of Chinese history and facts into a searchable and navigatable grasp.
7.) Challenging and Changing Ideology, not simply a question of language. In a startingly change in name, China’s Vice President Xi Jingpin “has proclaimed that the Chinese Communist Party (CCP) has turned itself from a “revolutionary party” into the “ruling party.” In ‘Red capitalists’ unravel the party line (Asia Times, Oct 17, 2008), Wu Zhong writes that:
*”Late paramount leader Deng Xiaoping’s political wisdom was to shelve thorny issues that might impede progress…Deng started economic reforms aimed at turning the socialist command economy into a capitalist-style market economy. He was fully aware this was a revolution that would spark fierce political and ideological debates which could ruin his goal. In turn, he used all his authority to suppress attempts to instigate such debate. The issue of whether the economic reforms were socialist or capitalist “must never be debated, not in 100 years”, Deng said in what was later called his “political will” during an inspection trip to the south in 1992, his last public appearance.” *
This pragmatic over ideological approach has gradually transformed the party from being the “vanguard of the proletariat” to the “all-peoples” party, which includes so-called “red capitalists.”
Wu Zhong writes: “It was against this backdrop that Xi Jingpin on September 1 told new students at the Central Party School, the CCP’s top training center of which Xi is the president, that the CCP has matured from a party of revolution into one which “holds the power to rule the country in the long term”.
8.) *Beijing’s Post-Olympic Blues** *
Recent Scientific Research
10.) American Dream a Biological Impossibility, Neuroscientist Says Peter Whybrow at Semel Institute for Neuroscience and Behavior at UCLA asks the troubling question, “What if people are biologically unsuited for the American dream? He say, “”We’ve been taught, especially in America, that happiness will be at the end of some sort of material road, where we have lots and lots of things that we want…We’ve set up all sorts of tricks to delude ourselves into thinking that it’s fine to get what you want immediately.” Specifically, he points to the fact that our “scarcity-driven evolution” doesn’t work with the social and economic reality around us. As such, Americans are constructing a reality that is poorly suited to how we “naturally” live or lived. In terms of spending on credit, Whybrow says, “The instinctive brain is well ahead of the intellectual brain. Credit cards promise us that you can have what you want now, and postpone payment until later.” Moreover, “America has always believed that it was the perfect society. When you have that mythology driving your culture, it’s hard to look around and say, ‘Is someone else doing it better than us?’” said Whybrow. “But you can trace the situation we’re in to our evolutionary origins. Now that we find ourselves in the middle of this pseudo-abundance, we’re in trouble. And the fantasy that we can restart the American dream just isn’t true.” Miscellaneous
11.) An Indonesian example for the US. This is an interesting article about a Muslim country we know little about. It looks at some of the recent hurtles they’ve overcome and upcoming challenges Indonesians are preparing to meet. Good read!
Etymology of the Week: “Maverick”
McCain has been proudly calling himself a maverick, but where does the word come from and what does it really mean? According to the family history at the origin of the word, the word maverick comes from the fact that Samuel Augustus Maverick didn’t brand his cattle. Thus, maverick meant those who are unbranded or without public allegiance. * *