Dithering at the Top Turned EU Crisis to Global Threat

At a closed-door meeting in Washington on April 14, Europe's effort to contain its debt crisis began to unravel.

Inside the French ambassador's 19-bedroom mansion, finance ministers and central bankers from the world's largest economies heard Dominique Strauss-Kahn, then-head of the International Monetary Fund, deliver an ultimatum.

Greece, the country that triggered the euro-zone debt crisis, would need a much bigger bailout than planned, Mr. Strauss-Kahn said. Unless Europe coughed up extra cash, the IMF, which a year earlier had agreed to share the burden with European countries, wouldn't release any more aid for Athens.

Read More at The Wall Street Journal

Housing Imperils Job Gains

The prolonged U.S. housing bust is threatening to claim yet another victim: the nascent recovery in the labor market.

New data released Tuesday showed just how bad the housing market remains. Home prices in 20 major metropolitan areas fell 3.4% in October from the previous year, according to the S&P/Case-Shiller Home Price Index. It was the 13th consecutive year-to-year decline.

The job market, by contrast, has finally been showing signs of improvement. The unemployment rate fell to 8.6% in November, the lowest level in more than 2½ years, and recent weekly reports have suggested the trend continued in December. Consumers also remained surprisingly upbeat, according to a report released Tuesday. The Conference Board, a private research group, said its index of consumer confidence jumped in December to its highest level since April.

But now some economists fear the continued slump in housing could short-circuit the recovery in jobs by making it harder for Americans to relocate to find work.

Read  more at The Wall Street Journal

There could be trouble ahead

“YOU’RE right, we did it,” Ben Bernanke told Milton Friedman in a speech celebrating the Nobel laureate’s 90th birthday in 2002. He was referring to Mr Friedman’s conclusion that central bankers were responsible for much of the suffering in the Depression. “But thanks to you,” the future chairman of the Federal Reserve continued, “we won’t do it again.” Nine years later Mr Bernanke’s peers are congratulating themselves for delivering on that promise. “We prevented a Great Depression,” the Bank of England’s governor, Mervyn King, told the Daily Telegraph in March this year.

The shock that hit the world economy in 2008 was on a par with that which launched the Depression. In the 12 months following the economic peak in 2008, industrial production fell by as much as it did in the first year of the Depression. Equity prices and global trade fell more. Yet this time no depression followed. Although world industrial output dropped by 13% from peak to trough in what was definitely a deep recession, it fell by nearly 40% in the 1930s. American and European unemployment rates rose to barely more than 10% in the recent crisis; they are estimated to have topped 25% in the 1930s. This remarkable difference in outcomes owes a lot to lessons learned from the Depression.

Read  more at The Economist

Christmas Trees and the Logic of Growth

The ubiquitous greenery of the season has me thinking conifers and stock market crashes. There is much to be learned from the coned evergreen trees that form vast forests across the Northern Hemisphere. As the oldest trees on the planet, the mighty conifers have survived threats of catastrophic extinction since the time of the hungry herbivorous dinosaurs.

The conifer's secret to longevity lies in a paradox: Their conquest has been largely the result of episodes of massive forest destruction. When virtually all else is gone, conifers show their strength and prowess as nature's opportunists. How?

Read more at The Wall Street Journal

As the economic crisis deepens across Europe, the European Commission plans to launch the world's largest ever cultural funding programme, with €1.8bn allocated for visual and performing arts, film, music, literature and architecture. The commission's Creative Europe project plans to release the money between 2014 and 2020. If the scheme is approved late 2012, an estimated 300,000 artists are due to receive funding.

The proposal has received a mixed response from key cultural commentators, with some saying that banking on culture and the arts to help prop up EU member states and stimulate the economy is unlikely to work.

Dexter Dalwood, the UK artist nominated for the Turner Prize in 2010, is sceptical. “If the goal is to create social cohesion isn't it going to favour obvious visible targets like classical music, the performing arts and public art?” he says. “On paper this looks fine. [But] in reality who gets the money ? Is there a hefty application process where the outcome of the work has to be clearly stated? Is there any chance it could trickle down to the most needy creative people?” Dalwood suggests the most effective form of subsidy for artists would be to make affordable studios.

Read more at The Art Newspaper

A hard homecoming

BRETT QUINZON did two tours in Iraq before leaving active duty in May. Originally from Minnesota, Mr Quinzon now lives in Thomaston, a small town around 65 miles south of Atlanta. A grey December morning found him filling out forms in Atlanta’s large veterans’ hospital, seeking treatment for depression. Since returning from Iraq, he says he has “more anger issues”, and finds himself “more watchful and on-guard in public situations” than he was before he deployed. That is not unusual: many soldiers return from the battlefield with psychological scars. Between January and May, as he prepared to leave active duty, Mr Quinzon applied for hundreds of jobs. The search proved difficult: like many veterans, he enlisted right after high-school, and lacks a college degree. But persistence paid off. He is now an apprentice at a heating and air-conditioning company, and is being trained as a heavy-equipment operator.

Not all recent veterans are so lucky. Around 800,000 veterans are jobless, 1.4m live below the poverty line, and one in every three homeless adult men in America is a veteran. Though the overall unemployment rate among America’s 21m veterans in November (7.4%) was lower than the national rate (8.6%), for veterans of Iraq and Afghanistan it was 11.1%. And for veterans between the ages of 18 and 24, it was a staggering 37.9%, up from 30.4% just a month earlier.

Read more at The Economist

Economic growth revised down but jobless claims hit 44-month low

The U.S. economy grew at a sluggish annual rate of 1.8% from July through September, down from earlier estimates, the government said Thursday.

The new data threw some cold water on hopes that the economic recovery had picked up significant steam in the second half of the year. The initial estimate of third-quarter growth, released in October, was 2.5%, but the Commerce Department's Bureau of Economic Analysis has revised it down twice since then.

Read more at the Los Angeles Times

Using Propaganda to Stop China's Strikes

Less than two years after the worker suicides at electronics giant Foxconn and a strike at Honda (HMC) suppliers in Guangdong province, labor troubles are again roiling China. On Nov. 17 around 7,000 workers at a Taiwanese-owned New Balance supplier in Dongguan protested plans to relocate production to Jiangxi province and cut bonuses. Dozens of workers were injured when police moved in, according to reports and photos posted on the Internet. Five days later, 1,000 workers halted production to protest overtime rules at a Shenzhen company that, according to its website, supplies Hewlett-Packard (HPQ). In Shanghai, women workers at Singapore-owned Hi-P International, a supplier for Motorola Mobility (MMI) and others, struck on Nov. 30 over a planned shift of part of production to Jiangsu province. (Motorola confirms the incident, and says it is not directly involved in working toward a resolution.) “We are seeing an upsurge in worker activism that exceeds anything since the summer of 2010,” says Geoffrey Crothall, communications director at China Labour Bulletin, an advocacy group in Hong Kong. Some 180,000 riots, strikes, and protests occurred in 2010, according to Sun Liping, a professor at Beijing’s Tsinghua University.

On Dec. 1 the government announced the first contraction in manufacturing since 2009. “As the environment goes from bad to worse, a lot of factories want to find a way out,” says Willie Fung, chairman of Hong Kong bra-maker Top Form International. “They want to downsize, shut down, or move somewhere else, and this sparks labor disputes.” A strike at Fung’s Shenzhen factory ended after he agreed to a holiday bonus of $189 each for 500 workers.

Read More at Businessweek

Gangs and Politicians in Chicago: An Unholy Alliance

A few months before last February’s citywide elections, Hal Baskin’s phone started ringing. And ringing. Most of the callers were candidates for Chicago City Council, seeking the kind of help Baskin was uniquely qualified to provide.

Baskin isn’t a slick campaign strategist. He’s a former gang leader and, for several decades, a community activist who now operates a neighborhood center that aims to keep kids off the streets. Baskin has deep contacts inside the South Side’s complex network of politicians, community organizations, and street gangs. as he recalls, the inquiring candidates wanted to know: “Who do I need to be talking to so I can get the gangs on board?”

Baskin—who was himself a candidate in the 16th Ward aldermanic race, which he would lose—was happy to oblige. In all, he says, he helped broker meetings between roughly 30 politicians (ten sitting aldermen and 20 candidates for City Council) and at least six gang representatives. That claim is backed up by two other community activists, Harold Davis Jr. and Kublai K. M. Toure, who worked with Baskin to arrange the meetings, and a third participant, also a community activist, who requested anonymity. The gang representatives were former chiefs who had walked away from day-to-day thug life, but they were still respected on the streets and wielded enough influence to mobilize active gang members.

The first meeting, according to Baskin, occurred in early November 2010, right before the statewide general election; more gatherings followed in the run-up to the February 2011 municipal elections. The venues included office buildings, restaurants, and law offices. (By all accounts, similar meetings took place across the city before last year’s elections and in elections past, including after hours at the Garfield Center, a taxpayer-financed facility on the West Side that is used by the city’s Department of Family and Support Services.)

Read more at Chicago Mag

India’s economy: Slip-sliding away

EXPECTATIONS for India’s economic growth rate have been sliding inexorably. In the early spring there was still heady talk about 9-10% being the new natural rate of expansion, a trajectory which if maintained would make the country an economic superpower in a couple of decades. Now things look very different. The latest GDP growth figure slipped to 6.9% and industrial production numbers just released, on December 12th, showed a decline of 5.1% compared with the previous period, a miserable state of affairs. The slump looks broadly based, from mining to capital goods, and in severity compares with that experienced at the height of the financial crisis, in February 2009, when a drop of 7.2% took place. Bombast is turning to panic.

Several riders apply. The industrial production series is notoriously volatile—most economists admit to being baffled by its swings. The comparison with the prior year period was unflattering. And it would be surprising if India were not hurt by the agonies of the rich world—after all from China to Brazil investors are jittery about the outlook, too. Moreover the Reserve Bank of India (RBI) has been raising rates through the year to try to bring inflation, running at some 9%, under control. At Mumbai drinks parties, after a scotch too many, industrialists can be reduced to apoplexy on this subject—the central bank, they argue, has overreacted, killing growth to tame an inflation problem that is largely the result of structural factors such as poor food supply chains.

Read More at The Economist

The World in 2012

Contrary to the belief of a small industry that has grown up around a supposed Mayan prophecy, the world won’t end in 2012. But at times it will feel as if it is about to. That is because the West’s economy will flirt with disaster, thanks to the indecisiveness of politicians on both sides of the Atlantic. The euro zone is heading back into recession because it dithered too long over the debt crisis in the single currency’s periphery. Meanwhile, America, its politics still gridlocked, will suffer self-induced stagnation and find itself outgrown by Japan, let alone China.

Quite how bad the economy gets may well decide whether Barack Obama wins a second term. The race for the White House will be the highest-profile (and most expensive) electoral contest of 2012, but America is not the only big country that could see change at the top: four of the five permanent members of the United Nations Security Council are picking leaders. Nicolas Sarkozy, having come to power in 2007 promising change, will try to persuade French voters that he rather than the Socialists’ François Hollande is now the man to provide stability. The switches of power in Russia and China are more predictable, but they will still make for a nervousness in Moscow and Beijing.

So the world’s leaders will be preoccupied at home. Don’t expect too much, then, of global gatherings such as the “Rio+20” conference on sustainable development. The places to watch will be the bits of the world where dramatic change could come: Venezuela, for example, where Hugo Chávez will battle for his political life as well as for his health; and sub-Saharan Africa, where the Arab spring could spread. Read more at The Economist