When Giants Fall

A Growing Relationship

2011-04-22T19:54:40-04:00

A recent Economist daily chart, "The Chinese Are Coming...to Africa," highlights the Asian power's growing relationship with the world's second largest and second most populous continent:

And why is that?

To paraphrase bank robber Willie Sutton, "Because that's where the resources are!"

The Perfect Complement

2011-04-12T20:21:42-04:00

Maybe it's just a coincidence, but this report --

"US Lacks Credibility on Debt, says IMF" (Financial Times)

The US lacks a “credible strategy” to stabilise its mounting public debt posing a small but significant risk of a new global economic crisis, says the International Monetary Fund.

In an unusually stern rebuke to its largest shareholder, the IMF said the US was the only advanced economy to be increasing its underlying budget deficit in 2011 at a time when its economy was growing fast enough to reduce borrowing. --

seemed the perfect complement to this one --

"Budget Cuts a Mix of Old and New, and Some Sleight-of-Hand" (Associated Press)

The $38 billion in spending cuts agreed to last week won't keep this year's budget deficit from setting another record high, estimated at $1.5 trillion.

The Treasury Department reported Tuesday that the deficit has already reached about $830 billion through the first half of the budget year.

Details of the budget cuts are emerging, and they show that most of the cuts either affect only future budgets, or amount to accounting gimmicks that won't reduce actual spending.

Another update on America, the next great...banana republic.

America Is 'Well Down the Road to Economic Perdition'

2011-04-04T19:45:57-04:00

Australia has been one our closest allies for more than half a century and has served alongside America in "every major conflict since World War I." And yet, as Institute for Public Affairs research fellow Ted Lapkin writes in an op-ed for The Australian, "We Can No Longer Rely on Debt-Laden US," America's escalating economic woes mean it's time for the "lucky country" to rethink its geopolitical options.

This year, the US government will borrow 40c out of every budget dollar it spends and will run a mammoth $US1.65 trillion ($1.59 trillion) deficit.

When Washington's current extravagance is piled upon profligacy from years past, this spend-a-thon brings the US's cumulative public debt to a whopping $14.2trillion. That sum represents 96 per cent of the $US14.8trillion gross domestic product of the US. In other words, the US government owes virtually the annual total worth of all goods and services produced by every US firm and individual. And that's not counting another $US6.3 trillion in state and local government debt and pension obligations.

Remarkably, military spending plays a minor role in the US's looming sovereign debt crisis. For all of its image as a free-market bastion, the US has become much more of a welfare state than is perceived. The real culprits in Washington's fiscal woes are government health and social programs.

Federal and state government payments and subsidies constituted fully one-third of all US wages and salaries paid last year. Medicare, the US government healthcare program for senior citizens, consumed 22.5 per cent of GDP that same year. By contrast, US defence spending - including on the wars in both Iraq and Afghanistan - constituted less than 5 per cent of GDP.

The grim upshot of this number crunching is that the US is on a fiscally unsustainable trajectory towards national insolvency. These are the wages of the country's long-standing economic sins. There are only two options for Washington to stave off catastrophe: draconian budget cuts or reducing the real value of its debt by debasing the dollar through inflation. Either way, the economic and strategic consequences for the world will be profound.

Last June, the chairman of the Joint Chiefs of Staff portrayed the US's debt burden as "the most significant threat to our national security". Former US Treasury secretary and Harvard University president Lawrence Summers asked in 2009: "How long can the world's biggest borrower remain the world's biggest power?" The answer is: not long. We can't know precisely when the US's fiscal day of reckoning will arrive, but when Moody's warned a few months ago that US Treasury bonds were facing a downgrade from AAA status, you can be sure it's coming.

It was Cicero who said money forms the sinews of war. And in straitened economic circumstances, defence spending is usually the first item to go. We see this in Britain, where the Royal Navy has been cut to the bone and beyond. Without carrier air capability in the fleet until 2019 at the earliest, Britannia won't be ruling the waves anytime soon.

With its own debt burden that mandates both fiscal restraint and an inflationary devaluation of the dollar, the US's strategic wings will be clipped as well. The first round of defence cuts came in January, with $US78 billion over five years sliced from the $US680bn level spent by the Pentagon last year.

But that's only a bit of foreplay to the serious business of getting the US's fiscal house in order. It's inevitable more radical cuts to the US defence budget loom. Given that near certainty, it's time for debate about what a militarily diminished US means for Australia.

Since the end of WWII, we've enjoyed the benefits of stability provided by a Pax Americana in the western Pacific. Even during the worst Asian flare-ups of the Cold War - Korea and Vietnam - the international sea lanes upon which Australia depends were never threatened.

As a result, Australia has consistently short-changed its military establishment, getting away this year with spending a paltry 1.8per cent of GDP on defence.

Australia Defence Association head Neil James notes: "There are three generations of Aussies who've grown up under America's protective wing. They've never even had to consider the possibility that one day they might not be able to rely on US strategic supremacy, free of charge".

But with the US well down the road to economic perdition, Australia can no longer rely on the presumption that the US will have our back.

But it's not just Australia. All you have to do is look around to see that a growing number of countries are reaching a similar conclusion.

Catching Up...or Moving Ahead?

2011-03-29T19:36:35-04:00

In "China 'to Overtake US on Science' in Two Years," BBC News highlights yet another area where our Asian rival is proving its mettle as a superpower-in-waiting.

China is on course to overtake the US in scientific output possibly as soon as 2013 - far earlier than expected.

That is the conclusion of a major new study by the Royal Society, the UK's national science academy.

The country that invented the compass, gunpowder, paper and printing is set for a globally important comeback.

An analysis of published research - one of the key measures of scientific effort - reveals an "especially striking" rise by Chinese science.

The study, Knowledge, Networks and Nations, charts the challenge to the traditional dominance of the United States, Europe and Japan.

The figures are based on the papers published in recognised international journals listed by the Scopus service of the publishers Elsevier.

A few more reports like this one and we may have to substitute "moving ahead" for "catching up" when we talk about China's standing relative to the U.S.

The Challenges, Charted

2011-03-22T16:50:13-04:00

Three charts highlight some of the biggest challenges we'll face in the years ahead.

Water

(Image: Source)

Food

(Image: Source)

Energy

(Image: Source)

Playing Catch Up

2011-03-21T19:33:12-04:00

While we were out fighting ill-conceived wars and expanding our empire to our financial detriment, other nations have been preparing for the real challenges that lie ahead.

They've been venturing out and making deals with other nations to ensure they have what they need to survive in a resource-constrained world.

Naturally, that means they have targeted those regions where resources like oil and gas, water, arable land, strategic minerals, and food are relatively plentiful, most notably Latin America.

Unfortunately, as with so many other things our leadership has failed to grasp or has wrongly taken for granted, our relationship with what has long been referred to as America's "backyard" has been neglected and allowed to deteriorate.

Now that we've cottoned on to the need to secure reliable long-term supplies of various essentials, we find that others have jumped in ahead of us.

In "China Grabs Latin America, Well Ahead of Obama's Outreach," the Christian Science Monitor reports on how the world's leading superpower is scrambling to catch up.

In the past year, China has secured some $65 billion in regional deals. President Obama's current visit to Latin America is seen as a counteracting move.

President Obama's current visit to Latin America is widely seen as a move to counteract the rising influence of China, which is in the midst of an unprecedented energy grab in the oil- and mineral-rich region.

From oil to refineries, China is capturing and integrating Latin America as much as it can, securing at least $65 billion in deals throughout the region since 2010. The deals are expected to eventually translate into at least a million barrels of crude oil and refined products per day and growing markets on both sides of the continent.

The grab is not only unprecedented but also a significant game-changer in China’s rise as a world power, especially because the US plans to increasingly meet its own energy demand with Latin American oil, setting the stage for a future competition between both countries.

“Latin America is very important for China. I think that it’s as important as Africa,” which in 2009 supplied roughly 30 percent of China’s oil imports, says Keun-Wook Paik, an expert in the Chinese overseas energy expansion at the London-based think tank Chatham House. Latin America supplied about 2.5 percent of China's oil imports in 2009.

Think you know South America? Take our geography quiz.

Brazil’s cool reception to Mr. Obama this past weekend contrasts with China’s quiet but effective cash diplomacy in the region, home to the world’s second-biggest reserves after the Middle East. The Chinese yuan is contesting US hegemony by funding stadiums and dams and investing billions in strategic sectors.

A Xenophobic Shift

2011-03-17T21:04:17-04:00

While some may be surprised, the shift was predictable (in fact, I predicted it in my last book): worsening economic conditions have stoked growing xenophobia, even in countries that have in recent years welcomed outsiders with open arms. Naturally, that has fomented the rise of political movements and parties that feed on those sentiments, as The Economist reveals in "The Far Right in Northern Europe: On the March":

Populist anti-immigration parties are performing strongly across northern Europe

FRANCE is not the only European country suffering a far-right surge. In an arc of countries spreading north-east from the Netherlands, populist parties are cutting a swathe through politics, appealing to electorates with various blends of nationalism, Euroscepticism (and euro-scepticism) and outright xenophobia.

Less than Hunky Dory Here

2011-03-15T22:10:36-04:00

While there is a great deal of focus on heightened unrest in the Middle East, north Africa, and Europe, that doesn't mean things are hunky dory at home. Aside from a growing number of protests over plans to rein in public sector and other unions and to raise tuition costs at public universities, some individuals have decided they've had enough of a system that seems increasingly rigged in favor of the moneyed interests. As The Atlanta Journal-Constitution reports in "FBI: ‘Sovereign Citizen' Cases on the Rise," they are adopting an especially aggressive approach to addressing the issue.

Federal authorities are seeing an increase in the number of foreclosed and unoccupied homes in metro Atlanta being seized by members of an anti-government group.

"I'm not sure I can connect it with the economy, but we've seen a surge of these in the last year, in particular," Stephen Emmett, special agent in the Atlanta field office of the FBI, said Saturday. Emmet said federal and local authorities increasingly are running into confrontations with members of a sect known as "sovereign citizens."

The group believes banks can't own land or property and that any home owned by a bank -- including the thousands of foreclosed properties throughout Georgia -- are theirs for the taking.

"They're expanding throughout the Metro Atlanta area," Emmett said. "DeKalb has had (its) fair share of problems with them and now Clayton."

On Friday, Clayton County SWAT was called to a foreclosed home near Riverdale where a couple had been living illegally. SWAT members surrounded the house after getting reports the people inside had threatened violence against anyone who approached the house. Gideon Israel and his wife, Deborah, had been living illegally in the bank-owned, gray stucco house on Stimson way near Riverdale in the northwest part of Clayton County and had submitted reams of fraudulent paperwork to county officials to try to block the eviction, according to Major Jeff Mitchell, who heads the enforcement division for the Clayton County Sheriff's Office.

An Ironic Twist

2011-03-09T21:01:03-05:00

America the great? The following report from WSFA, "82 Percent of US Schools May Be Labeled 'Failing,'" suggests otherwise.

Education Secretary Arne Duncan estimates a staggering 82 percent of U.S. schools could be labeled as "failing" under the nation's No Child Left Behind Act this year, and he's urging lawmakers to rewrite the Bush-era act.

"No Child Left Behind is broken and we need to fix it now," said Duncan during testimony before the House Committee on Education and the Workforce.

The Education Department's calculations, released Wednesday, indicate that the number of schools not meeting targets will explode from 37 to 82 percent in 2011. Those schools will subsequently face sanctions up to closure.

"This law has created dozens of ways for schools to fail and very few ways to help them succeed," Duncan said. "We should get out of the business of labeling schools as failures and create a new law that is fair and flexible, and focused on the schools and students most at risk," Duncan continued.

No Child Left Behind requires all U.S. public schools to meet annual targets, called Adequate Yearly Progress (AYP), with the goal of making every student proficient in reading or language arts and math by 2014.

The Obama administration wants to reform NCLB so that it recognizes and rewards high-poverty schools and districts that show improvement based on progress and growth.

Some might find it ironic -- or sad, perhaps -- that authorities are seeking to undermine a program that assesses school quality using the same approach that helped to undermine the educational system in the first place.

Unconventional Wisdom

2011-03-08T21:39:46-05:00

Conventional wisdom says that while the emerging world has expanded rapidly in economic terms, it still lags far behind the developed world when it comes to the firepower at its disposal.

Conventional wisdom also says that the U.S. has little to worry about when it comes to the question of whether it has enough arms and soldiers to meet any threats that might arise.

Finally, conventional wisdom suggests the geopolitical up-and-comers still have a long way to go before they might be able to take on their developed peers.

After reading the following Reuters report, "East-West Military Gap Rapidly Shrinking-Report," I reckon many of you will be wondering why they call it conventional wisdom.

* Think-tank sees "global redistribution of military power"

* State-on-state conflict could rise in Asia

* China could match US military power in 10-15 years

Western cuts and swiftly rising defence spending in emerging economies are redrawing the global strategic map, a leading think-tank said on Tuesday, with the danger of conflicts between states also rising.

In its annual Global Military Balance report, the London-based International Institute for Strategic Studies (IISS) said the shift in economic power was already beginning to have a real military effect and closing any strategic gap.

"Western states' defence budgets are under pressure and their military procurement is constrained," said IISS director general John Chipman. "But in other regions -- notably Asia and the Middle East -- military spending and arms acquisitions are booming. There is persuasive evidence that a global redistribution of military power is under way."

Asian Pacific nations particularly China were increasing defence spending by double digits annually, he said, with growing evidence Western states were losing their technological edge in areas such as stealth technology and cyber warfare.

Most estimates suggest Washington still accounts for roughly half of all global defence spending each year, much of it spent on conflicts in Iraq and Afghanistan. Estimates of Chinese defence spending vary wildly, with many analysts suspecting it dramatically underreports.

"HALF A GENERATION"

According to the report, the United States spent $693 billion on defence in 2010 -- 4.7 percent of its GDP -- compared to China's $76 billion (1.3 percent/GDP) and Britain's 57 billion dollars (2.5 percent/GDP).

Speaking to Reuters after the report launch, Chipman said if current trends were continued it would still take 15-20 years for China to achieve military parity with the U.S.

"We're talking about half a generation," he said. "The United States has always said it would never let another power get to parity so in the next few years it is going to have to make some very significant decisions on what it does."

An Important Distinction

2011-03-07T20:22:50-05:00

Up until recent years, many commodity bulls haven't made much of the distinction between investing in resource producers or the commodities themselves. But two recent reports highlight the potential risks involved in owning the former if and when governments decide to retain -- or even contemplate retaining -- ownership and the means of production for themselves.

"Ivory Coast President Nationalizes Coffee and Cocoa Industry" (CNN.com)

Ivory Coast President Laurent Gbagbo, who is fighting to keep a political title the United Nations says isn't his, on Monday nationalized the nation's two main cash crops, coffee and cocoa, according to state-run television.

In a statement read on air, the government announced that "the purchase of coffee and cocoa from producers and producer groups is done exclusively by the state on the entire national territory."

"The export of products of the coffee-cocoa sector is carried out by the state, by any legal person mandated by the state or holder of an exporter license," the government announced. "Approved exporters get their cocoa beans and green coffee from the state or any legal person mandated by the state."

The Ivory Coast is the world's largest supplier of cocoa beans.

"South Africa Slips in Mining Rankings" (Wall Street Journal)

Africa's ranking among major mining regions fell in a closely watched survey that assesses a region's attractiveness to mine investors and operators, leaving it just a few ranks above Zimbabwe.

Its poor performance comes as a segment of South Africa's ruling party is making more aggressive calls to nationalize the country's mines, and a dispute over a major iron ore mining-right is progressing through the courts.

South Africa leads the world in platinum and ferrochrome output and is a major coal, gold and other mineral producer.

The Fraser Institute's Survey of Mining Companies for 2010-2011 ranked South Africa 67th out of the 79 jurisdictions it tracks. That's down from 61 out of 72 from last year and down from 49 out of 71 from 2008-2009. Zimbabwe, where President Robert Mugabe has threatened to expropriate foreign-owned mining operations, ranked 71 out of 79. The province of Alberta in Canada ranks number one.

...

Recent mine-right disputes and calls to nationalize the mining industry by the Youth League of South Africa's ruling African National Congress party are making many investors and operators nervous. Over the weekend, Youth League leader Julius Malema reiterated his demand for the government to take a minimum of 60% of all mines.

Back in the Crosshairs

2011-03-04T20:05:09-05:00

Throughout history, individuals and groups with certain characteristics have proved to be convenient scapegoats. At various times and places, people of the "wrong" religion, race, or social class have been picked on, discriminated against, and ostracized because they have been deemed to be responsible for whatever has gone wrong, even if they had nothing to do with it. That said, one group, immigrants -- especially those in a country illegally -- has consistently been in the crosshairs of public ire during hard times. And right now, as ABC News reports in "Immigration Wars: More States Looking at Arizona-Style Laws," it looks to be happening again.

2010 Saw Record Number of Immigration Laws, 2011 Projected to Surpass That

Undocumented nannies, housekeepers or lawn caretakers in the state of Texas can perhaps breathe easier about deportation. While new legislation in the Texas House of Representatives would make it a state crime to hire undocumented workers, it excludes those employed in single-family households -- in other words, them.

The bill, introduced by state GOP Rep. Debbie Riddle, is the first of its kind in the country. It's unique in that while it appeases those who want more stringent immigration laws, it doesn't subject Texas households to the rule that would mainly apply to businesses and large employers.

Critics of the bill say it's hypocritical. Supporters charge it's needed in a state where the Hispanic population continues to climb swiftly.

Though it remains stuck in political limbo, the bill reflects a wider push toward implementing tougher anti-immigration laws at the state level. More than 100 immigration-related bills are pending in the Texas legislature alone, including those that would give state and local police officers the authority to enforce federal immigration laws, make English the official language and prevent undocumented students from getting in-state tuition and scholarships.

States across the country, including Georgia and Oklahoma, where the legislatures debated immigration bills this week, have been mulling controversial Arizona-style immigration laws.Thirty-seven states are considering tougher immigration bills, with multiple bills pending in some states.

"The mere fact that Arizona law has sprung up in over 24 other states within a few months of passage, I believe, is historic," said William Gheen, president and spokesman of Americans for Legal Immigration, a group that supports stricter immigration laws.

"We are going to pass more immigration enforcement legislation in the states in 2011 than any year prior. And what we don't get done in 2011 we will get done in 2012," he vowed.

States enacted a record number of bills and resolutions on immigration issues during the 2010 sessions, and every state that met in regular session in 2010 considered laws related to immigrants, according to a National Conference of State Legislatures report. Forty-six state legislatures and the District of Columbia passed 208 laws and adopted 138 resolutions for a total of 346.

The momentum, in part, is being driven by the ascent of Republicans in state legislatures and the U.S. House of Representatives. Many GOP leaders, especially in Southern and Midwestern states, made immigration a flagship issue of their campaigns.

Seeing It Again

2011-02-28T21:23:07-05:00

OK, I guess I'm a little frustrated.

It started with my 2007 book, when those who had failed to see Financial Armageddon coming or who were slow to grasp what was going on were suddenly being treated as knowledgeable "experts" who knew just what was happening and why.

And now we're seeing it again: mainstream analysts suddenly talking about the prospect of growing unrest and heightened instability around the world even though I (and some others) have been forecasting a souring of the social mood for quite some time (as some of you know, the third chapter of When Giants Fall, published in March 2009, is entitled "A Future of Violence.")

Here's one example:

"ANALYSIS-After the Crisis, a Worldwide Rise in Unrest?" (Reuters)

With the Middle East in turmoil, other authoritarian states jumpy and post-crisis economic pain prompting protest in western Europe and elsewhere, some suspect a systemic rise in worldwide unrest might just be beginning.

Instability in the already volatile oil-producing Middle East could produce a feedback loop where unrest pushes up energy prices, fuelling inflation and deepening discontent both in the region and around the world.

In most countries, the so-called "misery index" -- an aggregation of unemployment and inflation long seen as a warning of protest and instability -- is pushing higher.

"After an extended period of economic growth and political apathy across the developed and emerging worlds, we may have reached a new political cycle -- one where populations take out their grievances on their leaders and their associates," wrote Citi political analyst Tina Fordham. "This won't be limited to the emerging world."

In democracies, elections provide a release valve -- Ireland has seen some of the worst post-crisis economic pain but minimal unrest in part because voters knew they could oust the government they blame for the crisis in elections this weekend.

But Greece, Britain and others have seen anger expressed in the streets as their governments push through austerity, arguing they have little choice but to rein in unsustainable deficits even if it means cutting services, pay and benefits.

Most analysts agree North Africa's demographic "youth bulge", relatively high unemployment, long-serving leaders and recent Internet penetration made it particularly volatile. But strains are clearly visible elsewhere.

Almost without exception, authoritarian states around the world appear to have seen at least a modest uptick in protest following the ousting of presidents in Egypt and Tunisia.

Even China, whose breakneck growth has long been seen limiting discontent, has blocked terms such as "Egypt" on social networking sites and stepped-up arrests at small demonstrations.

"PERFECT STORM"

"Two crises are happening at the same time - which is unprecedented I think," said Joel Hirst, International affairs fellow at the US-based Council for Foreign Relations.

"An economic disaster and 'readjustment' of the developed world while the developing world fights for their freedoms. Add in there the oil/energy price, which could be seen as the link between the two, and it makes for a perfect storm."

Ah well, instead of getting worked up about it, maybe I just need a better PR agent.

No Need to Look Far

2011-02-23T16:36:43-05:00

While all eyes are on the violence overseas, the following CBS News report reveals that there's no shortage of it in a locale that is nearer to our shores:

Revolutionary Jeopardy

2011-02-21T20:51:44-05:00

"Current Events" for 200 points:

Answer:

They will all end the same way.

Question:

What do these four developments have in common?

"Yemeni President Vows Not to Quit Despite Tensions Soar" (Xinhua)

"Libya's Gadhafi, Clinging to Power Amid Violence, Says He's in Tripoli" (USA Today)

"Moroccan King Holds Firm After Call For Less Power" (Reuters)

"Ivory Coast: Financial Noose Tightens As Defeated President Clings to Power" (Time)

'Going to the US Is More Unpleasant Than Going to Soviet-Era Russia'

2011-02-18T20:17:53-05:00

As I've noted here and over at Financial Armageddon, I gather information from a wide range of sources (check out my blogroll in the right-hand column if you don't believe me). Sometimes the views come from bloggers and commenters who keep their identities secret for any number of reasons. Although there is nothing inherently wrong with anonymity, there's probably a greater risk that what is being said is false or misleading, or that reality is being distorted for some less-than-honorable ends. Under the circumstances, I tend to scrutinize such commentary more closely. However, in the case of this posting from reddit, "Why I Stopped Travellig to the US and I Largely Stopped Doing Business in the US," what I and others have experienced first-hand gives me little reason to doubt that the views expressed are accurate -- and reflect a more broad-based perspective:

With every trip I've taken to the US over the past 30 years, things have gotten a little worse every time. Things are now so bad that I have stopped visiting the US and i no longer have any clients in the US. Mostly because having clients in the US means having to go there. And I've grown to really dislike going to the US.

I'm a photographer. I mainly do street photography now, but i still do the odd bit of contract work. I travel with expensive gear though not that much of it. I like to travel light. The INS do not like that. If I turn up with just my camera backpack and a small bag of clean underwear for a one week stay I usually have to spend a lot of time being interrogated for my lack of a huge suitcase. (I guess they suspect I live in the US illegally. Which borders on comical since nobody knows more about my travel patterns than the US government. Besides, my passport is usually filled with stamps that should tell them that I travel a lot and that even if I lived in the US, I spend most of my time flitting around the world)

Paranoid as the INS are, the TSA are even worse. Mostly because they are a huge bureaucracy where nobody seems to be accountable and their on-the-ground personnel are mostly people who had to choose from a range of other low paying jobs. On several occasions I've had expensive gear disappear from my carry-on during security checks and last year a TSA agent dropped my Canon 1D Mk3, smashing both the lens and the camera body. No apology, but more importantly: I was never compensated. I'm not rich and that camera (and the lens) was important to my livelihood. An expensive piece of kit lost that meant that I basically didn't make any money that month.

Oh, and of course, now you have all this nonsense with pat-downs and backscatter X-rays which increases security with exactly zero percent and makes an already tense atmosphere even more tense. Well played.

Taking pictures in the US is another hassle. After 9/11 everyone is utterly paranoid and everyone from security guards to police, and even random passers-by, have hassled me. Claiming that I am breaking the law (I am not) or demanding I explain why I am taking pictures. Believe me, I have spent a lot of time figuring out what laws apply to photography in various states, but on the ground and with a camera in your hand, that means absolutely nothing. Explaining the laws in effect to a law enforcement officer only gets you into more trouble.

I've been to Russia before the cold war ended. I've been all over the middle east. I've been to China. I've travelled all over Europe. I've been to Cuba and I've been to Argentina, Brazil, Uruguay, Nicaragua.

What all of these places have in common is that going there was a far more pleasant experience than going to the US. Yes, you read correctly: going to the US is more unpleasant than going to Soviet era Russia or even Iran 10 years ago. Sure, you sometimes have to bribe people, but at least I've not had gear stolen off me during security checks or had people break my gear without at least compensating me.

And taking pictures. Well, let me put it like this: you are 20 times more likely to get hassled for whipping out your camera anywhere in the US than in, say, downtown Teheran.

I offer this as an observation from the outside. The US is isolating itself and it is becoming a very, very unpleasant place to visit. I often talk to fellow travellers and even a lot of business types in nice suits often relate how they'd rather not travel to the US if they could help it and that they'd rather work with people in Europe or Asia. I can relate to that.

More to It

2011-02-15T20:59:54-05:00

Some might describe it as MTV-generation myopia: the notion that the sweeping events that grab headlines for days on end can readily be explained by near term developments.

A politician is caught red-handed doing something he shouldn't; members of a minority group are victimized in a random attack; a protestor sets himself on fire -- and suddenly things go haywire. But is that all there is to it?

While such events can serve as catalysts or wake-up calls, history suggests the disruptive forces have usually been brewing for some time. Then, as with the build-up between two tectonic plates, the pressure erupts into an earthquake.

With that in mind, the following Christian Science Monitor report, "West Africa Rising: Could Rising Food Prices Spark Egypt-Style Revolt in Africa?" gives a better sense of where things stand nowadays than one can find in other mainstream publications:

Soaring food prices – such as wheat, which has hit a 2-1/2-year high – could feed political tumult in Africa, despite earlier proclamations that an Egypt-style revolt would not spread to sub-Saharan Africa.

Egypt's revolution was triggered by many sparks, one of which was bread; or rather wheat, a staple whose soaring price and insufficient supply could become the dry wood for political tumult across the African continent this year.

Prices for that staple crop now sit at a 2 1/2-year high, and Egypt – currently the world's biggest exporter of televised scenes involving young men waving flags – just happens to be wheat's biggest importer. And while academics will have semesters ad infinitum to weigh the relative importance of Twitter vs. bread in the fall of ousted President Hosni Mubarak, the more immediate question could be what comes next across Egypt's backyard: sub-Saharan Africa.

Thirty African countries are scheduled to hold elections over the next 12 months. The list includes food-scarce nations like Chad and Madagascar, alongside terminally unstable lands like Nigeria or the Democratic Republic of the Congo.

Think you know Africa? Take our geography quiz.

And yet, as of last month, food prices are already sitting on a record high. Last week, the United Nations announced average food prices climbed 25 percent in the past year, including a 3.4 percent jump in January alone.

"It's easy to see how the food supply can translate directly into political unrest," Lester Brown, founder of the Earth Policy Institute think tank in Washington, told The Guardian.

What's not easy to see, he added, is how the economy of what we eat will fundamentally improve over decades and elections to come.

To be sure, some of 2011's costly cuisine has been caused by short-term disasters, like erratic weather in Russia or bad crops in Canada.

But the affordability of food is also being undermined by longer-term trends, such as the growing chunk of farmland now dedicated to cultivating biofuels, or the emergence of China as a net food importer.

Underground water reserves in drylands like Saudi Arabia, Mr. Brown added, are on the wane. Plus, given the vagaries of climate change, Russia's wheat-withering changeable weather could prove to be a new norm.

"This isn't just about the Muslim Brotherhood and it isn't just about politics," the economist Jefferey Sachs told Reuters. "This is about hunger, about poverty, about food production, about a change of world economy. This is one large swathe of 10,000 miles of potential instability."

Further Evidence

2011-02-14T20:35:29-05:00

In a Wall Street Journal interview, "Former Sun CEO Worries About Region's Prospects," Scott McNealy discusses what has happened to an area of the country that has -- had? -- long been seen as a hotbed of high tech innovation:

I see a migration from the early days of the Valley. We aren't doing manufacturing; we aren't doing design; we aren't doing computers. It's all moving to Asia and other places where there are lots of technical engineers who are willing to work at a more reasonable salary because they don't have to spend $3.5 million on a home and pay half of it to taxes.

I think every new transition has created less job opportunity as technology has become very leveraged. I don't think our education system, our regulations, our government policies have kept pace with the changes that technology is driving.

Maybe I'm sounding like an old guy, but [Silicon Valley] ain't what it used to be. I, for one, don't think this is the best place in the world to start a company.

Unfortunately, these are not the only issues, and they are not confined to the West Coast. Many parts of America have seen changes in perspectives and operating conditions that favor getting things done -- or produced -- anywhere but here, as the The New York Times suggests in "When Factories Vanish, So Can Innovators":

American manufacturers are importing more of the components that go into their products. The imported portion has risen to more than 25 percent from 17 percent in 1997, according to Susan Houseman, a senior economist at the W.E. Upjohn Institute in Kalamazoo, Mich. The Boeing Company, to consider one striking example, once bought all of its components from American suppliers, or made them in its factories here. Now the wings of several of its airliners are manufactured by Japanese subcontractors and shipped across the Pacific in giant cargo planes.

Foreign-made parts might also be infiltrating the sleek business jets that the Gulfstream Aerospace Corporation makes at its United States factories. Joseph T. Lombardo, Gulfstream’s president, says he isn’t sure, although Gulfstream buys components exclusively from American suppliers. “What I don’t know,” he says, “is how many of the parts in those components were imported by our American suppliers.”

It is certainly more than we measure, Ms. Houseman says. An accurate count would reduce manufacturing’s share of the gross domestic product, or total national output, to less than the 11.2 percent that the Bureau of Economic Analysis has reported through 2009, the latest figure available.

That 11.2 percent would be closer to 10.5 percent, if all of the imported components were counted as imported instead of domestically made. Even the 11.2 percent figure is down sharply from the 14.2 percent share of just a decade earlier, and the nearly 30 percent of the heyday 1950s, when almost every product bought by Americans was also made here.

Concern is increasing that this decline has gone too far. “I think there is a growing recognition that a diminished manufacturing sector will undermine our economy,” says Mark Zandi, chief economist for Moody’s Analytics.

In fact, as Mandel on Innovation and Growth reveals in "The Health-Education Decade," we seem to have kissed goodbye many years ago to the notion of developing an economy geared towards producing the things we need:

We might as well put the 2000s to bed completely. From 2000 to 2010, health sector jobs grew by 3.3 million; Education sector jobs rose by 1.8 million; The rest of economy lost -7.1 million jobs.

Here’s some more detail if you want it.

All further evidence, I reckon, of an empire in decline.

Which Country Is Next?

2011-02-10T20:24:13-05:00

For those who've been paying attention, it's clear that the upheaval we've seen in Egypt and elsewhere stems from a globally contagious shift in the social mood. Given that, most people would probably find it helpful (or even essential) to know which country or countries might be next. Thanks to The Economist, we now have a reference source, "The Shoe Thrower's Index," that attempts to answer that question.

An index of unrest in the Arab world

The chart below is the result of ascribing a weighting of 35% for the share of the population that is under 25; 15% for the number of years the government has been in power; 15% for both corruption and lack of democracy as measured by existing indices; 10% for GDP per person; 5% for an index of censorship and 5% for the absolute number of people younger than 25. Jordan comes out surprisingly low on the chart, which suggests the weighting might need to be tweaked.

The Middle Class Loses Out

2011-02-09T21:36:21-05:00

In "We Don't Need No Stinkin' Jobs (in the U.S.)," Charles Hugh Smith, publisher of the Of Two Minds blog, highlights a development that's gone hand-in-hand with the polarizing and destabilizing rise in U.S. income and wealth inequality over the past several decades:

Global Corporate America has been decoupling from its country of origin for a long time, and the last weak bonds appear to be snapping.

Longtime correspondent Cheryl A. recently submitted this snippet from a recent The Atlantic article The Rise of the New Global Elite and this summary: "This is disturbing on so many levels."

The U.S.-based CEO of one of the world’s largest hedge funds told me that his firm’s investment committee often discusses the question of who wins and who loses in today’s economy. In a recent internal debate, he said, one of his senior colleagues had argued that the hollowing-out of the American middle class didn’t really matter. "His point was that if the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile means one American drops out of the middle class, that’s not such a bad trade," the CEO recalled.

The growing dependence of Global Corporate America on non-U.S. growth and profits, and the concurrent rise of its political power at the expense of the middle class, is displayed in this chart:

Click here to read the rest.