Kishore Mahbubani, Dean of Singapore’s Lee Kwan Yew School of International Affairs, has written a stern piece on how Europe just “does not get it” in three strategic areas.

The greatest strategic challenge to Europe is the Islamic one. It exists within the body politic of many European societies. And the fastest-rising Islamic demographic is on Europe’s doorstep. Europe should, therefore, see it in its long-term interest to defuse Islamic anger. Instead, it has shown moral cowardice on the Israel-Palestine issue, refusing even to admit that an unbalanced American policy will hurt European interests more than American interests. No major European leader has the moral courage to speak truth to power on this issue.

Europe’s second error is to ignore its No. 1 strategic opportunity: Asia. [Asians] do expect Europeans to treat them with respect, not cultural condescension. This is another thing Europeans do not get. The protests in European capitals before the Beijing Olympics, the efforts to dictate human-rights clauses in the India-E.U. cooperation agreement and the obsession with Burma show both a lack of sensitivity and of strategic thinking. If Europe does not act fast, it will miss the boat on Asia.

The third strategic error is to remain obsessed with the transatlantic relationship. It is difficult to capture in a few words the strange mix of European attitudes towards America: admiration and resentment of American hyperpower, respect and condescension towards U.S. culture, dependence on and discomfort with American leadership. At the core of this is a deep European belief that culture is destiny and that the common Judeo-Christian heritage and common Enlightenment values will ensure an eternal commonality of interests. America will always put Europe first because Europe, not Asia, exists in American hearts.

Over the long run, geography — when combined with economic shifts of power — determines destiny. America’s interests in Asia are rising while its interests in Europe are declining. A growing Hispanic population will make Latin America more important. This is why the time has come for Europeans to think the unthinkable: the “natural” transatlantic partnership may someday come to an end.

Will it come to this?

by Dana on June 4, 2010

Are we really faced with an inter-generational struggle in resources for the coming decades?

The politics of the next decade will be dominated by a battle over public spending and taxes between the generations. Young people will realise that different categories of public spending are in direct conflict — if they want more spending on schools, universities and environmental improvements they must vote for cuts in health and pensions.

Schools and universities are more important for a society’s future than pensions. Yet every democracy around the world has made the opposite judgment. While many politicians claim to be obsessed with education — recall Tony Blair’s three priorities were “education, education and education” — in reality they support health and pensions to the point of national bankruptcy, while squeezing universities. The same applies to the many fiscal benefits heaped on pensioners over the years. Is it, for example, better for society to offer free bus travel to wealthy 80-year olds rather than students or impoverished youngsters looking for their first job?

Or will it find some kind of resolution not unlike the compromise made between developed and emerging worlds?

Does the increasing first-world sense of austerity give the rest of the world room to grow into middle-class status? If so, we need to find a few Saudi Arabias worth of oil to fuel their ensuing energy needs, and that seems unlikely. Or will we all meet in the middle somewhere, with declining resource requirements increasingly hard-wired into our makeup, the way it is already. happening already in Europe and elsewhere?

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Brain drain along linguistic lines?

by Dana on June 4, 2010

Evidence seems to show that the “brain drain” effect is strong along linguistic lines, so that the income distribution along the top income brackets for a few of the largest English-speaking countries move in tandem with each other.

I wonder if the same can be found for Spanish-speaking countries in Latin America?

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POLITICIANS ON ECONOMICS
Europe must focus on what works
FT- Chris Patten weighs in on the future of knowledge economy, security policy and enlargement in Europe.
Euro exit is ludicrous idea for any country: Hannes Androsch
preview.bloomberg.com- We must be prepared to bite the bullet with regard to pensions and social services, something our governments have shown little appetite for to date, says Austria’s former finance minister.
Vladimir Putin, transaction cost economist
streetwiseprofessor.com- Putin is advocating a system in which the state plays an important role in setting and administering prices, and governing contractual relationships between big firms. Coolidge once said “the business of America is business.”  In this case, the politics of Russia is business.

BUSINESS
Consumer adverts for pharmaceuticals: Impact on prices and sales
Voxeu- As a result of changes in regulation in the late 1990s, spending on direct-to-consumer advertising of pharmaceutical drugs in the US leapt from $150 million in 1993 to $4.24 billion in 2005.
Digital self-publishing shakes up traditional book industry
WSJ- Much as blogs have bitten into the news business and YouTube has challenged television, digital self-publishing is creating a powerful new niche in books that’s threatening the traditional industry.
How much the average American spends on entertainment
visualeconomics.com- On average, Americans devotes 5.6% of their budgets to entertainment. The biggest chunk? Audio and visual equipment and services.
The counter-revolution of development economics: Hayek vs. Duflo
aidwatchers.com- Experimentation, for Hayek as well as Duflo, is the chief instrument of social change. Making experimentation work for development requires institutional feedback mechanisms which can fit together newly-discovered ways of doing things in mutually reinforcing ways.

GLOBAL OVERVIEW

The world goes middle class, vs. the case for less
Infectious Greed- Does the increasing first-world sense of austerity give the rest of the world room to grow into middle-class status? Or will we all meet in the middle somewhere, with declining resource requirements increasingly hard-wired into our makeup.
As governments borrow, many people save
New York Times- The association of more public dissaving with more private saving continues to be confirmed with data from recent quarters.
Misguided compassion hurts the poor
city-journal.org- The more impoverished the country, the greater the need for foreign aid; the greater the foreign aid, the more privileged the elite; the more privileged the elite, the greater the adherence to policies that resulted in poverty.

BUSINESS
Spillonomics – Underestimating risk
NY Times- For all the criticism BP executives may deserve, they are far from the only people to struggle with such low-probability, high-cost events. Nearly everyone does.
World military spending soars in spite of recession
news.bbc.co.uk- Although military spending wasn’t usually a major part of the economic stimulus packages, it wasn’t cut either.
Switzerland ratchets up tax relief as rest of Europe fights hefty deficits
preview.bloomberg.com- Tax breaks under an “auxiliary company regime” have helped Geneva attract oil and commodity trading companies. One third of the world’s petroleum is traded through the city.

FINANCE & ECONOMICS
Why Europe is responding so timidly to its economic crisis
slate.com- A whiff of inflation and Americans think about Jimmy Carter. In Germany, when there’s a hint of a whiff of a trace of inflation, they think about Hitler.
Iran selling 45 billion euros of reserves for dollars
financialpost.com- Iran’s shift out of euros has been prompted by the single currency’s decline. Other central banks, including those of the Persian Gulf states, also are selling their euro.
When does large-scale public ownership work?
marginalrevolution.com- Very often governmental prestige stifles innovation and implies a series of more general insider, elitist, and sometimes authoritarian attitudes.
Why our poverty measure misleads
Real Clear Markets- People get richer but “poverty” stays stuck. The new “supplemental measure” raises questions about whether the statistic is tailored to favor a political agenda.

A while ago, I wrote about the mood changes in the Middle East, specifically the re-emergence of Turkey as a regional power.  Now in face of drama between Gaza and Israel, Americans and Europeans woke up to an angry Turkey.  Both are taken aback, albeit in different ways.

Americans suddenly realized their strategic partnership with Turkey is rapidly eroded by a more self-serving, assertive, and ambitious Turkish state.  Amazing what can happen in less than a decade while you are busy digging yourself out of two messy wars, no?

It is hard to admit, but after six decades of strategic cooperation, Turkey and the United States are becoming strategic competitors — especially in the Middle East. This is the logical result of profound shifts in Turkish foreign and domestic politics and changes in the international system.

Monday’s events might prove a wake-up call for the U.S. foreign-policy establishment. Among the small group of Turkey watchers inside the Beltway, nostalgia rules the day. U.S. officialdom yearns to return to a brief moment in history when Washington and Ankara’s security interests were aligned, due to the shared threat posed by the Soviet Union. Returning to the halcyon days of the U.S.-Turkish relationship, however, is increasingly untenable.

The stark reality is that while Turkey and the United States are not enemies in the Middle East, they are fast becoming competitors. Whereas the United States seeks to remain the predominant power in the region and, as such, wants to maintain a political order that makes it easier for Washington to achieve its goals, Turkey clearly sees things differently. The Turks are willing to bend the regional rules of the game to serve Ankara’s own interests. If the resulting policies serve U.S. goals at the same time, good. If not, so be it.

Europe, on the other hand, has little in common with the America’s strategic concerns in the region when it comes to its Islamic cousin.  Its point of reference is driven solely by its own narrow experience with the somewhat backwards (real or perceived) Turkish diaspora in Europe, and memories of Turkey’s desperate attempt to enter the Eurozone a few years ago.

Private savings and public dissavings

by Dana on June 2, 2010

Are people saving more to make up for government budget shortfalls?  There’s evidence to support that hypothesis.

Data from the most savings-obsessed country also supports that. It would make sense if you think about it – if you expect the government to cut back on everything from mortgage subsidies and employment benefits, to raising retirement age, healthcare co-pays and your children’s tuition fees, it would make a lot of sense to save.

And yes, all the aforementioned points are in hot debate, in preparation for the election next week in clogs country.

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Criticism from inside the EU

by Dana on June 2, 2010

Harsh criticisms over this non-optimal currency zone is now emerging from within the EU.

Here, president of the Czech Republic talks about the conflict that many Eastern European countries faced after the fall of communism: the need for closer integration with the west, in this case, western Europe, while shying away from the statist aspirations spear-headed by France and Germany that only reminded them days of Soviet rule.

People like me understood very early that the idea of a European single currency is a dangerous project which will either bring big problems or lead to the undemocratic centralization of Europe. My position was clear: With all my reservations, we had to apply for EU membership, but at the same time we had to fight against projects such as the euro.

His criticism separated the idea of European cooperation, from the euro project itself, which for all intents and purposes, has failed.  Klaus the economist says:

The huge amount of money that Greece will receive can be divided by the number of the euro-zone inhabitants, and each person can calculate his or her own “contribution.” However, the “opportunity” costs arising from the loss of a potentially higher growth rate, which is much more difficult for a non-economist to imagine, will be far more painful. I do not doubt that for political reasons this price will be paid and that the euro-zone inhabitants will never find out just how much the euro truly cost them.

Unsurprisingly, as the leader of a country that’s suffered dearly in the hands of communism, Klaus the politician minces no words in his critique of opaque bureaucracy centered in Brussels.

The recent dealings in EU headquarters in Brussels—literally behind closed doors—about the aid package for Greece demonstrated that there is no democracy there. The German-French tandem made the decision on behalf of the rest of the euro-zone countries, and I am afraid this will continue.

Not everyone heeds to this view, of course.  As late as March, many eastern and central European states still aspire to join the euro party, many already pegging their own small currencies to the euro.

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BUSINESS

Indian air safety: Mangalore crash shows systemic faults
time.com- Analysts have long warned that the sector’s phenomenal growth masks a laundry list of safety violations: inadequate infrastructure, poorly trained and overworked personnel, and insufficient disaster preparedness.
Wind power losing its punch
Dallas News- The high cost of building wind farms and transmitting their electricity to population centers coupled with a reduced price advantage has slowed the growth of the industry nationwide.
How Dell provides technical support through Twitter
labnol.org- Dell and Bank of America are using Service Cloud, a web-based application from Salesforce.com, that allows reps to answer Twitter based customer support requests in seconds.
Time to short Apple stock?
thedailybeast.com- Surely Jobs will one day tire of wielding his charismatic authority as CEO of Apple. And there is no woman or man alive who could fill that man’s turtleneck.
Balkanizing the web
mondaynote.com- The very absurdity of the global digital system is revealing itself. It created all the instruments for global access and, then, turned around and arbitrarily restricted its commercial use, paving the way for piracy.

FINANCE & ECONOMICS
The west re-examines the rat race
FT- While taking a more relaxed attitude towards the pursuit of wealth may make sense as a personal philosophy, it is an uncertain guide to public policy. Adjusting to a stagnant national income can be a painful process, as many European countries may soon discover.
Why the optimists are wrong about the eurozone
eurointelligence.com- Governments have chosen to chase speculators and to impress each other with austerity packages. They are only contributing further to the eurozone’s increasingly probable though still distant disintegration.
A mixed blessing
The Economist- The biggest worry for European business is not so much the decline of the euro itself but rather what it says about the European economy. The introduction of the single market and the single currency were supposed to spark a glorious period of innovation and productivity growth.

Beijing’s underground city

by Dana on June 1, 2010

image

Constructed by Chairman Mao in 1969, a second underground Beijing, should a nuclear war kick off.  Luckily nobody pushed the button, and “second city” nowadays lies in ruins.

More pictures here.

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While Horst Köhler’s resignation cannot be directly attributed to the euro crisis, it certainly epitomizes the clash between the post-war political configuration in Europe and the increasingly impatient Germany.

In the past, Germany has always provided the passive sheet-anchor stability that allowed Europe to work. Occasionally a Schmidt or a Kohl would find partners and a surge of European integration would take place. But now Germany has no idea of what to do next. It will not admit that its economic weltanschauung, based on relentless exports and damped-down internal demand, is now part of the European and world crisis of capitalism.

The new Germany would like to behave as a normal nation and certainly has national security on its mind.  Both domestic and European-wide politics have yet to catch up with it, even when the question of military interest is framed within the scope of expanding and protecting its economic interest.

Köhler made the point that German military capability was relevant to German interests, including German economic interests. As the world’s second biggest exporter after China, Germany has a self-evident interest in keeping the world as open as possible for the free flow of trade and commerce, and to help defeat the growing scourge of piracy. This is so worrying Nato policymakers that an entire session at the Nato parliamentary assembly’s spring session this weekend in Riga was devoted to the question of how to ensure peace and free traffic on the high seas.

Some political and business leaders are quietly applauding the continual slide of the euro as one of the tools to stimulate exports in the region, others argue that a weak euro do more harm than good in eroding business confidence in the region, which may prove to be the worst legacy resulting from this ongoing fiasco.

The biggest worry for European business, however, is not so much the decline of the euro itself but rather what it says about the European economy. European governments will have to reduce public spending dramatically to allay the market’s fears. Spain has already announced that it is cutting public-sector wages by 7% and Greece by 16%. This will inevitably remove spending power from the European economy and so dent its short-term prospects.

BUSINESS
European Commission targets ‘digital virgins’
blogs.wsj.com- Europe’s broadband penetration rate is still only 25%, 30% of Europeans have never used the Web, and only 1% of Europeans have ever used a fiberoptic connection.
Why we shouldn’t subsidize construction
Reuters- The main way that Spaniards have become rich in recent years is by sitting back and watching the value of their real estate grow exponentially.
Gary Vanyerchuk’s wine and social-media empire
newyorker.com- A relationship with Gary V means an ironclad guarantee that he’ll reply to your e-mail within four months, with at least a “thnx” or a “mwaa!”
Luxury shopping is making a comeback
slate.com- Just in time for the premiere of Sex and the City 2, there are signs that the orgy of luxury shopping that made the latter years of the credit bubble so much fun are back.

FINANCE & ECONOMICS
The electoral consequences of large fiscal adjustments
Voxeu- It is possible for fiscally responsible governments to engage in large fiscal adjustments and survive politically.
Two million idle Italian youngsters run risk of becoming ‘lost generation’
The Guardian- On the day Rome launched a desperate package of cuts to trim its debt and avoid the meltdown suffered by neighbour Greece, figures showed that two million young Italians are now drifting, neither studying nor working.
Spain is trapped in a ‘perverse spiral’ as wage cuts deepen the crisis
telegraph.co.uk- Spain’s unemployment was already 20.5pc even before this latest dose of shock therapy. There are 4.6m people without work. Dole payments alone account for half the budget deficit.

MATTER OF SCIENCE
Scientist infects himself with computer virus
news.cnet.com- A senior research fellow in the U.K. says he has become the first person in the world to be infected by a computer virus.
People with Asperger’s less likely to see purpose behind the events in their lives
scientificamerican.com- Why do we often attribute events in our lives to a higher power or supernatural force? Some psychologists believe this kind of thinking, called teleological thinking, is a byproduct of social cognition.
Who needs time zones?
tnr.com- One economic study on television schedules suggests that our sleeping patterns are affected far more by our need to synch up with other time zones than by when the sun rises and sets.
Celebrity product endorsements on the brain
miller-mccune.com- Brain-scan research suggests celebrity faces evoke specific happy memories, and those positive feelings rub off on the products they endorse.

Morning links: Matters of the brain

by Dana on May 28, 2010

BRAIN MATTERS
The web shatters focus, rewires brains
Wired- Brain activity of the experienced surfers was far more extensive than that of the newbies, particularly in areas of the prefrontal cortex associated with problem-solving and decisionmaking.
Alzheimer’s prevention strategies remain an elusive challenge
scientificamerican.com- Research advances in Alzheimer’s has arrived not in the form of new drugs but in technologies that track the underlying biology of the disease before the first symptoms appear.
Scientists prove even the thought of money spoils enjoyment
physorg.com- Subjects who were wealthier had a self-assessed lower level of savoring ability, and this undermined the positive effects of money on their happiness, although they were overall slightly happier than the less well-off subjects.

BUSINESS
Venture capitalists do it. Why shouldn’t philanthropists do it, too?
O’Reilly Radar- Entrepreneurs are most likely to help a field move forward if they build on the knowledge and the mistakes of the past rather than tripping down the well-trodden road.
Googling the book settlement
american.com- Clashes between competing visions of the good are more compelling than humdrum stories of good versus evil. This is no different.
The new investigators
cjr.org- Many of the new nonprofit centers are housed at universities, so the reporting could resonate and influence those most directly affected by the issue.
Music’s new entrepreneurs
forbes.com- From videogames to cookbooks, rockers are experimenting with ways to connect with their fans’ hearts and wallets.

FINANCE & ECONOMICS
Emigration up, birth rate down: Graying Germany contemplates demographic time bomb
spiegel.de- Unfavourable demographic shift is no news to Germans, although the net emigration trend cannot be too encouraging.
We’re all Swedes now
foreignpolicy.com- The Swedes themselves no longer believe in a Swedish model, or, when they do, it’s very different from the heavily regulated “people’s home” of myth.
Banks covertly financing Italy’s deficit
business.financialpost.com- Covert financing of the government’s deficit by Italian banks reinforces the solvency fears currently surrounding Italy, according to a new report from Lombard Street Research.
The economics of immigration are not what you think
ndn.org- Studies show that immigration has increased the average wage of Americans modestly in the short-run, and by more over the long-term as capital investment rises to take account of the larger number of workers.

Idealizing a world departed

by Dana on May 27, 2010

The rest of the world is slowly catching up to the long eroded ideals of Sweden, now making its reality through the world via its booming crime-writing industry.

Vast and irreversible social changes have eroded confidence in the government:

[W]hat has changed since the genre was invented in the 1960s by the husband and wife team of Maj Sjöwall and Per Wahlöö is the overwhelming loss of confidence in the future, and in the state. This does reflect reality.

And while the rest of the world looked to Sweden for its utopian narrative and reputation, Sweden has become more like the rest of the world.  Namely, the very anti-thesis of Swedish-ness, America.

The story of Sweden over the last 50 years has been one of a steady loss of exceptionalism. In some ways the outside world has grown more “Swedish” — we all wear seatbelts, drink less, and believe in gender equality. At the same time, Sweden has grown much more worldly — it drinks more, works and earns less, and struggles with the assimilation of immigrants. The Swedes themselves no longer believe in a Swedish model, or, when they do, it’s very different from the heavily regulated “people’s home” of myth.

A startling statistic:

There were 230 homicides in Sweden in 2009, compared with 143 in Washington, D.C., which has a population a bit more than half Sweden’s size. But compare these figures to what they were in the years when Sweden looked like a utopia. In 1990, there were 120 homicides in Sweden, and 472 in Washington. There is a convergence here that doesn’t flatter Sweden.

More readings while we are on the subject:
· New York Time’s feature on Stieg Larsson and his messy legacy, http://nyti.ms/cuN1H4
· The man who blew up the welfare state, by n+1 on the politics behind Larsson’s writings, http://bit.ly/a05JrO
· The Prospects looks at the complicated values and histories that define modern-day Sweden, http://bit.ly/2ZZWeN
· Christopher Caldwell probes deep into Islam on the outskirts of the Swedish welfare state, http://nyti.ms/aaRiVY

Morning links

by Dana on May 27, 2010

Courtesy of Viewsflow’s Daily Briefing.  You can also follow it here, get it in your inbox by signing up here.

TECH & MEDIA
Why I Switched from iPhone to Android
pcworld.com -”I used to feel that, to get the best smartphone software and hardware experience, I had to live in Apple’s walled garden. Now, the walls are getting higher, and life outside the garden looks better and better.”
Why you shouldn’t believe ‘Facebook backlash’ numbers
news.cnet.com – The lack of alternatives to Facebook means that many dissatisfied members probably will not delete. their accounts altogether. It’s more likely that they may be clamping down on privacy controls.
M.I.A.’s agitprop pop
NY Times – What Maya wants is nearly impossible to achieve: she wants to balance outrageous political statements with a luxe lifestyle; to be supersuccessful yet remain controversial; for style to merge with substance.
What’s the matter with Sweden?
pitchfork.com – Think the cool Swedish indie band you’ve just heard of on the radio made it out of the Nordic wild all by themselves? Think again. Across the western world, different states have long played, and some still are, a vital role in the promotion of music.

BUSINESS
How China is trying to go green
Newsweek – As China gets richer, it will slowly but surely create its own equivalent of a Whole Foods buying, eco-tourism-enjoying middle class. That’s the very group that will be most likely to question the cost of unbridled development.
Positive sign: Worker mobility
The Big Picture – The natural wanderlust of a segment of employees was suppressed, and is now busting out again.
Where the smart people live
blog.robpitingolo.org – Looking at educational attainment density measured as college degree holders per square mile, here are the cities and counties that made it to the top.
Are there too many psychopaths in Corporate America?
bakadesuyo.com – The prevalence of psychopathic traits in corporate professionals is higher than that found in community samples.

FINANCE & ECONOMICS