News & Commentary:

January 2013 Archives


Africa is hooked on growth Financial Times Subscription Required
Sebastian Mallaby (FT) Jan 1, 2013
The shift of economic structure is not a continent-wide story. But the best managed African countries are pulling it off.

The Salafi surge Financial Times Subscription Required
Roula Khalaf (FT) Jan 1, 2013
The Arab uprisings have allowed a long-suppressed ultraconservative Sunni sect to gain influence, posing a threat to the shift from autocracy across the region.

How Capitalism Can Repair Its Bruised Image Wall Street Journal Subscription Required
Lynn Forester de Rothschild and Adam S. Posen (WSJ) Jan 1, 2013
With much of the public disaffected, large businesses can take specific steps to show the virtues of the marketplace.

Global imbalances: What role for the WTO?
Juan A. Marchetti, Michele Ruta & Robert Teh (VoxEU) Jan 2, 2013
Globally, large current account imbalances prevail. This column argues that they also continue to represent a systemic risk for the world economy. The WTO has a clear-cut role in the institutional effort to address these imbalances. However, this role has more to do with opening services and government procurement markets than with the often invoked trade sanctions in response to exchange rate misalignments.

The Unstarvable Beast
Kenneth Rogoff (Project Syndicate) Jan 2, 2013
As US President in the 1980’s, the conservative icon Ronald Reagan described his approach to fiscal policy as “starve the beast”: cutting taxes will eventually force people to accept less government spending. So why has the cost of government – not only in the US – continued to rise inexorably?

Europe’s Next Great Mistake
Harold James (Project Syndicate) Jan 2, 2013
In constructing Europe’s monetary union, political leaders did not think through all of the implications, which led to major design flaws. Worse, they do not appear to have learned from that experience, for they are about to take the same approach to the monetary union’s political counterpart.

Can You Fight Poverty With a Five-Star Hotel? Foreign Policy Subscription Required Recommended!
Cheryl Strauss Einhorn (FP) Jan 2, 2013
The story of how the World Bank's investment arm hands out billions in loans to wealthy tycoons and giant multinationals in some of the world's poorest places.

Europe’s Narrative Struggle
Ana Palacio (Project Syndicate) Jan 2, 2013
The euro’s survival in 2012 – if only by the skin of its teeth – confounded skeptics who forecast Greece’s exit from the eurozone and the single currency’s collapse by the end of the summer. Indeed, the EU’s future still seems acutely uncertain, owing mainly to a mismatch between rhetoric and reality.

Europe: Burnt and abandoned Financial Times Subscription Required
James Fontanella-Khan (FT) Jan 2, 2013
Fears of a fresh chapter in the continent’s protracted crisis heighten as companies slash investment and shut operations.

US has been let down by its leadership Financial Times Subscription Required
Nouriel Roubini (FT) Jan 2, 2013
A deal that extends unsustainable tax cuts for 98% of Americans is no victory.

The Political Economy of 2013
Mohamed A. El-Erian (Project Syndicate) Jan 3, 2013
Watching America’s national leaders scramble in the closing days of 2012 to avoid a “fiscal cliff” that would plunge the economy into recession was yet another illustration of an inconvenient truth: messy politics remains a major driver of global economic developments. This will become even more evident worldwide in 2013.

Dynastic Asia
Kishore Mahbubani (Project Syndicate) Jan 3, 2013
To the extent that culture matters in politics, the recent spate of leadership changes in East Asia suggests that Asian societies are more tolerant – if not supportive – of dynastic succession. But it is also clear that having distinguished relatives does not guarantee success in office.

Brain drain or brain gain? Evidence from corporate boards
Mariassunta Giannetti, Guanmin Liao & Xiaoyun Yu (VoxEU) Jan 3, 2013
Is the brain drain reversing? This column argues that increasing numbers of foreign-educated and economic emigrants are returning home. Evidence suggests that the best of the bunch bring with them strong corporate governance practises and an appetite for internationalisation. Through this ‘brain gain’, the return of skilled professionals boosts emerging markets’ economies.

The decline of western dominance Financial Times Subscription Required
Samuel Brittan (FT) Jan 3, 2013
The reversal towards an earlier norm has started. Developing countries now account for about half of total world output.

China’s anti-corruption drive is a sideshow Financial Times Subscription Required
Henny Sender (FT) Jan 3, 2013
There has always been a disconnect between macro economy and stock market. It seems again hopeful signs in real economy will not translate into gains.

The New Tell-All Fed New York Times Subscription Required
The best playbook for the economy right now may not be to stimulate it, but rather to avoid surprising it.

Happy 2013?
Charles Wyplosz (VoxEU) Jan 4, 2013
Financial market quiescence has removed pressure for immediate policy action on the Eurozone crisis. This column argues that while important repairs were made in 2012, the most difficult ones still lie ahead. Much remains to be done by unwilling politicians. Things will have to get worse before they get better. The best hope is that this happens in 2013 rather than in 2014.

China’s pure exporter subsidies: Protectionism by exporting
Fabrice Defever & Alejandro Riaño (VoxEU) Jan 4, 2013
The West perennially complains about China subsidising industry geared towards its domestic market. But what will happen when China enacts its latest Five Year Plan’s emphasis on domestic growth? This column argues that ending ‘pure-exporter subsidies’ – subsidies that boost Chinese exports while simultaneously protecting the least efficient, domestically oriented firms – will benefit Chinese consumers, but will cost the rest of the world.

Will More Integration Save Europe’s Social Model?
Daniel Gros (Project Syndicate) Jan 4, 2013
The claim that Europe needs more integration to save its social model has long lost its credibility. Integration is irrelevant to that question, and, in those areas where deeper integration really would benefit Europe, it appears to be the last thing that national leaders want.

How will advanced and developing countries interact?
Mohamed A. El-Erian (FT) Jan 4, 2013
In the 30 years that I have worked on and with developing countries, I have witnessed an amazing change in how conventional wisdom characterizes their economic relationship with the advanced world. And while conventional wisdom has not always kept pace with changes among this group of nations, it inevitably ended up in the right zip code.

Free exchange: Stoneless rivers Economist Subscription Required
Economist Jan 5, 2013 The great aid mystery
Jonathan Foreman (Spectator) Jan 5, 2013
Our rulers must know that development aid doesn’t work. So why do they throw money at it?

The Real Interest-Rate Risk
Zhang Monan (Project Syndicate) Jan 5, 2013
Since 2007, the financial crisis has pushed the world into an era of low, if not near-zero, interest rates, as most developed countries seek to reduce debt pressure and perpetuate fragile payment cycles. But, despite talk of a “new normal,” there is a strong risk that real interest rates will rise in the next decade.

Looking for a Jump-Start in China New York Times Subscription Required
Nicholas D. Kristof (NYT) Jan 5, 2012
China's next top leader has the potential to be a game changer, and to nourish China's rise with sweeping economic and political reforms.

Dealmakers warm to chance of oil tie-ups Financial Times Subscription Required
Anousha Sakoui (FT) Jan 6, 2013
Despite the slump in M&A in the sector in 2012, talk has been rekindled over potential for takeovers with some majors.

In Defense of the Fed's New Interest-Rate Policy Wall Street Journal Subscription Required
Frederic S. Mishkin and Michael Woodford (WSJ) Jan 6, 2013
The central bank needs to offset slow domestic demand, but it should clarify its goals on employment and inflation.

US votes on trade and migration
Paola Conconi, Giovanni Facchini, Max Friedrich Steinhardt & Maurizio Zanardi (VoxEU) Jan 7, 2013
As populations in rich nations continue to age and skill shortages begin to emerge, concern over getting immigration policy right is set to intensify. This column discusses new research on US policymaking, showing that many of the determinants of policymakers’ attitudes towards trade are also in operation when it comes to migration. Using the Heckscher-Ohlin model, it finds that US House members from districts where skilled labour is abundant are more likely to support both trade liberalisation and a more open policy for unskilled immigration.

The Post-Crisis Crises
Joseph E. Stiglitz (Project Syndicate) Jan 7, 2013
In the shadow of the euro crisis and America’s fiscal cliff, it is easy to ignore the global economy’s long-term problems. But, while we focus on immediate concerns, they continue to fester, and we overlook them at our peril.

Monetary Regime Transition in the Emerging World
Andres Velasco (Project Syndicate) Jan 7, 2013
Many central banks in the developed world appear set to replace inflation targeting with nominal-GDP targeting as their monetary-policy anchor. But, while central banks in emerging-market economies have had problems with inflation targeting from the outset, moving to nominal-GDP targeting solves none of them.

Brazil: Consumer rhythm Financial Times Subscription Required
Louise Lucas and Samantha Pearson (FT) Jan 7, 2013
Cracks are appearing in the economy but business leaders’ faith in the country’s spending frenzy remains unshaken.

Beware the ‘central bank put’ Financial Times Subscription Required
Mohamed El-Erian (FT) Jan 7, 2013
How far can central banks divorce prices from fundamentals?

Bank shares buoyed on a sea of scandal Financial Times Subscription Required
Patrick Jenkins (FT) Jan 7, 2013
The 2012 share price performances of lenders such as Barclays, HSBC and Lloyds seemed driven by some bizarre inverse correlation with their misdeeds.

Chinese 'Currency Manipulation' Is Not the Problem Wall Street Journal Subscription Required
Edward Lazear (WSJ) Jan 7, 2013
An analysis of trade patterns with the U.S. and Europe shows that the yuan's value has not affected the numbers.

Tribalism, Groupism, Globalism Recommended!
E.O. Wilson (Globalist) Jan 7, 2013
For all the talk about a world without borders and ever more interconnectedness, one fundamental human trait has not lost any of its power: the penchant of humankind to organize itself in tribes. E.O. Wilson, author of "The Social Conquest of Earth," examines the roots of ethnocentrism.

America going platinum
Economist Jan 7, 2013
America's government is full of oddities, and here's one: it is possible for the government to pass spending and tax bills which lead to an illegal amount of accumulated debt. The government's borrowing results from all the tax and spending choices made by past and present elected officials and leads to annual deficits that add to a stock of public debt. Once the tax and spending choices are made, the resulting debt load is a fait accompli, a residual. Yet said elected officials have also seen fit to pass a law declaring that debt must fall below a specific limit. From time to time, then, Congress has to pass a law raising the limit—essentially, declaring its past choices legal—or face dire fiscal consequences. If the limit is reached and not raised government outlays must be cut immediately and dramatically or the government must default on some of its debt-interest payments. Those are both terrible options, and so until recently the government has simply raised the limit when necessary.

Africa can help feed Africa: Removing barriers to regional trade in food staples
Paul Brenton (VoxEU) Jan 8, 2013
Africa is not achieving its potential in food trade, increasing the risk of widespread hunger and malnutrition. This column argues that the most serious problems for the continent are problems of political economy and barriers along the value chain. The good news is that, despite demand for food throughout Africa predicted to double over the next decade, governments can act now to overcome these problems. With a regional approach to food security, African governments can spur on benefits to farmers and consumers as well as job creation along the value chain of staples.

Meaningful banking reform and why it is so unlikely
Charles W Calomiris (VoxEU) Jan 8, 2013
Over the last few decades, banking regulators and supervisors have failed to do their job. This column argues that a failure of political will enabled stakeholders to pursue bad practices, and suggests a roadmap for reform. Enforcing a reform agenda marked by simplicity is plausible, and would avoid much of the collateral damage that comes from many hundreds of pages of complex, costly and misguided mandates that typically act as substitutes for credible reform. Overcoming the challenge of political will, however, remains a challenge.

Systems at Risk
Lee Howell (Project Syndicate) Jan 8, 2013
This year's World Economic Forum Global Risks Report reminds us of the many ways in which systems inevitably affect one another in our interdependent world. More important, the report warns of the dangers of multiple systems – like the economy and the environment – failing simultaneously.

American industry is on the move Financial Times Subscription Required
Sebastian Mallaby (FT) Jan 8, 2013
US groups are using ‘big data’ to improve their performance, setting the scene for a revival.

Spain needs tough decisions on debt Financial Times Subscription Required
Juan Rubio-Ramirez (FT) Jan 8, 2013
Determined action to bring about structural change is needed, not a series of stopgap measures.

Tide of change could engulf Asia’s banks Financial Times Subscription Required
Henny Sender(FT) Jan 8, 2013
The region’s banks have long been seen as a proxy for growth in their home markets but, as economies weaken, this year is likely to be challenging.

Desperately seeking a line in safe assets Financial Times Subscription Required
Ralph Atkins (FT) Jan 8, 2013
Risk of a sudden shortage of sufficiently high quality assets triggering a collateral crunch and paralysing credit flows into the real economy.

Companies: The rise of the zombie Financial Times Subscription Required
Michael Stothard (FT) Jan 8, 2013
Ailing businesses propped up by government-backed loans often spend all their cash servicing debt rather than investing in growth.

The appreciating renminbi
Philippe Bacchetta, Kenza Benhima & Yannick Kalantzis (VoxEU) Jan 9, 2013
China is perennially accused of currency manipulation. Yet, this column argues that a weak currency value doesn’t necessarily reflect currency manipulation. China is a fast growing economy with strong financial frictions and a high saving rate, and such countries naturally have weak currencies. Instead of focussing on accusations of currency manipulation, it might be more helpful for economists to encourage policies that foster Chinese consumption, gradually leading the renminbi to an appreciating path.

The Eurozone’s Agenda in 2013
Edmond Alphandéry (Project Syndicate) Jan 9, 2013
EU leaders concluded 2012 with a landmark agreement that places all eurozone banks under a single supervisor. But they have clearly refused, at least for now, to hold a serious discussion about deeper integration, without which the euro crisis cannot be overcome.

The Empires Strike Back in Europe
Tim Judah (Bloomberg) Jan 9, 2013
A new World View contribution from Europe should begin at the beginning. What is going to happen in 2013? There have been plenty of well-informed predictions for how Europe's debt crisis will unfold this year, most of which, as a simple fact of mathematics, will have to prove wrong.

The New Mercantilist Challenge
Dani Rodrik (Project Syndicate) Jan 9, 2013
Today, mercantilism is typically dismissed as an archaic and blatantly erroneous set of ideas about economic policy. But it is more accurate to think of mercantilism as a different way to organize the relationship between the state and the economy – a vision that holds no less relevance now than it did in the eighteenth century.

The World in 2030
Joseph S. Nye (Project Syndicate) Jan 9, 2013
In December, the US National Intelligence Council released a report detailing its view of the international order in 2030. While much remains uncertain, one thing is not: Whether the future holds benign or malign scenarios depends in part on the policies that the US adopts today.

The New Power Map
Aviezer Tucker (FA) Jan 9, 2013
World politics after the boom in unconventional energy.

Shale will change the US, not the climate Financial Times Subscription Required
Julio Friedmann and Armond Cohen (FT) Jan 9, 2013
Despite an improving energy mix, the mathematics of greenhouse gas accumulation remain the same.

"Financial coercion" heralds return of M&A Financial Times Subscription Required
Richard Madigan (FT) Jan 9, 2013
Private Bank predicts that the period of low interest rates will lead to renewed dealmaking among cash-rich corporations.

In Appreciation: James M. Buchanan Wall Street Journal Subscription Required
Donald Boudreaux (WSJ) Jan 9, 2013
The Nobel-winning economist who understood how politics really works.

EU hopefuls face stark choice on Customs Union
Robert Coalson (AT) Jan 10, 2013
Central Asian countries' desires for closer European Union ties are at odds with securing benefits related to the Russian-led Eurasian Customs Union, ensuring that the likes of Ukraine, Armenia and Moldova will have to make stark decisions in the next year or two amid key elections in all three countries.

Colonialism and development in Africa
Leander Heldring & James A. Robinson (VoxEU) Jan 10, 2013
Most of Africa spent two generations under colonial rule. This column argues that, contrary to some recent commentaries highlighting the benefits of colonialism, it is this intense experience that has significantly retarded economic development across the continent. Relative to any plausible counterfactual, Africa is poorer today than it would have been had colonialism not occurred.

Is China Enough?
Jose L. Machinea (Project Syndicate) Jan 10, 2013
For many countries in Latin America, demand from China has been essential to maintaining high GDP growth rates over the last decade. But will Chinese demand for commodity imports be sufficient to sustain the region in the coming years?

Why No Glass-Steagall II?
Barry Eichengreen (Project Syndicate) Jan 10, 2013
Say what you will about the Dodd-Frank Act of 2010, but it is weak soup by the standards of the US financial reforms enacted in the 1930’s. As a response to what is widely regarded as the most serious financial crisis in 80 years, why does it do so much less to change the structure and regulation of the US financial system?

Energy: Trial by oil Financial Times Subscription Required
Sylvia Pfeifer, Xan Rice and Andrew England (FT) Jan 10, 2013
A clutch of African nations are trying to avoid the mistakes of Nigeria, where crude wealth has fuelled corruption.

Era of independent central banks is over Financial Times Subscription Required
Stephen King (FT) Jan 10, 2013
Decisions are being made that do more to redistribute wealth than to stimulate the economy, that are more political than economic.

Economists, Consensus and Healthy Debates New York Times Subscription Required
Christia Freeland (NYT) Jan 10, 2013
The University of Chicago has led an effort to figure out what economists agree on, where they diverge and how certain they are about their views. There's more consensus than many would think.

Financial Crisis in the West Bank New York Times Subscription Required
NYT Jan 10, 2013
Arab states have a responsibility to make sure the Palestinian Authority remains viable.

Big China Short Shows Downside of Kleptocracy
Jonathan Weil (Bloomberg) Jan 10, 2013
Even by the wacky standards of Chinese accounting scandals, this week’s events at China’s second-biggest maker of construction equipment, Zoomlion Heavy Industry Science & Technology Co. (1157), were awfully strange.

Did China Really Lose $3.75 Trillion in Illicit Financial Flows?
Martin Kessler and Nicholas Borst (PIIE) Jan 11, 2013
A recent report from the think tank Global Financial Integrity (GFI) identifies China as the largest source of illicit financial flows in the developing world. The report, Illicit Financial Flows from China and the Role of Trade Misinvoicing, identifies $3.75 trillion in illicit outflows during between 2000 and 2011. The possibility of trillions of dollars [...]

Europe's Bankrupt Welfare State
WSJ Jan 11, 2013
The vaunted social model has struggled to generate growth or jobs for decades.

The End of Pasta?
Bjørn Lomborg (Project Syndicate) Jan 11, 2013
All of the major grains – rice, corn, and wheat – are already suffering from global warming, but wheat is the most vulnerable to high temperatures. That, however, does not mean that there will be less of it – or of other agricultural crops – as global temperatures rise.

Growth slowdowns redux: Avoiding the middle-income trap
Barry Eichengreen, Donghyun Park & Kwanho Shin (VoxEU) Jan 11, 2013
The rapid economic growth of emerging markets is the leading headline of our age. But growth is slowing. Using new research, this column asks why this might be, and how policymakers might remedy flagging economies. The answer seems to be education. Recent research suggests, for instance, that the rapid expansion of secondary and tertiary education helped Korea’s successful transition from middle- to high-income status, very much unlike Malaysia and Thailand. Whether China can avoid the middle-income trap will depend in part upon developing an education system producing graduates with skills that Chinese employers require.

India Grows at Night
Gurcharan Das (Globalist) Jan 11, 2013
Twenty-five years of high growth have made India one of the world's fastest-growing economies. A majority of Indians will soon emerge from a struggle against want. Yet, faced with corruption, Indians wonder why they need a government at all. India needs a strong liberal state that is tough on corruption and unresponsive bureaucracy.

India: Confessions of a Disillusioned Libertarian
Gurcharan Das (Globalist) Jan 12, 2013
India's growing middle class has achieved economic progress chiefly through individual efforts. India now needs strong governance to rein in a dysfunctional state and self-absorbed political parties. Gurcharan Das asserts that Indians must do the "hard work of politics" and demand reforms — because only then will their government's strength match the strength of India's society.

Global house prices: Home truths Economist Subscription Required
Economist Jan 12, 2013
Our latest round-up shows that many housing markets are still in the dumps.

Innovation pessimism: Has the ideas machine broken down? Recommended!
Economist Jan 12, 2013
The idea that innovation and new technology have stopped driving growth is getting increasing attention. But it is not well founded

Shadow banking: Economics and policy priorities
Stijn Claessens, Zoltan Pozsar, Lev Ratnovski & Manmohan Singh (VoxEU) Jan 12, 2013
The risks associated with shadow banking are at the forefront of the regulatory debate. Yet, this column argues that there is as yet no established analytical approach to shadow banking. This means that policy priorities are not clearly motivated. But if we analyse securitisation and collateral intermediation – the two shadow banking functions most important for financial stability – a solid framework that includes existing policy recommendations, as well as some alternative ones, begins to emerge.

Too much legitimacy can hurt global trade Financial Times Subscription Required
Arvind Subramanian (FT) Jan 13, 2013
Smaller and poorer countries have been given too big a role in a process that has gone too far.

A history of hubris and flawed hypotheses Financial Times Subscription Required
John Plender (FT) Jan 13, 2013
A sweeping study of economists’ repeated failure to predict crashes. reviews ‘Misunderstanding Financial Crises’, by Gary B. Gorton.

Taxation: Unsafe offshore
Vanessa Houlder (FT) Jan 13, 2013
Governments want to close loopholes that help multinationals avoid tax but will have to consider their need to attract big foreign investors.

Why Charity Hasn't Done Much for Haiti Wall Street Journal Subscription Required
Mary Anastasia O'Grady (WSJ) Jan 13, 2013
Three years after the earthquake, it is 183rd in the world in ease of starting a business.

The Centrists Cannot Hold
Kemal Dervis (Project Syndicate) Jan 14, 2013
By and large, democracy in developed countries is characterized by competition between fairly stable coalitions of the left and right. What, then, are centrists like Mario Monti, Italy’s technocratic prime minister, to do?

Ethics and Agriculture
Peter Singer (Project Syndicate) Jan 14, 2013
Should rich countries – or investors based there – be buying agricultural land in developing countries? While it has been claimed that foreign investors bring idle land into production, thereby increasing food production, much of this land was rich in biodiversity, and the output is typically exported to investors' home countries.

Balance of Payments in the European Periphery
Galina Hale (FRBSF) Jan 14, 2013
The countries of the European periphery are experiencing a balance of payments crisis stemming from persistent current account deficits and sharply lower private capital inflows, a condition known as a sudden stop. In countries with fixed exchange rates, sudden stops typically drain foreign reserves, forcing currency depreciation which eventually shifts the current account from deficit to surplus. However, the sudden stop has not prompted the European periphery countries to move toward devaluation by abandoning the euro, in part because capital transfers from euro-area partners have allowed them to finance current account deficits.

How to Lose $3 Million in 1 Second Recommended!
Chris Arnade (SciAm) Jan 14, 2013
Losing money is one of the loneliest feelings. It was Oct 22nd, 2008. Lehman Brothers, the investment bank, had filed for bankruptcy the month before. The markets were panicking. A thousand people surrounded me, almost all of us slouched in our seats, staring at computer screens. I had eight, all flashing prices of assets that I couldn’t touch, but, oh, I could feel.

A better way to design global financial regulation
Viral Acharya & T Sabri Öncü (VoxEU) Jan 14, 2013
Internationally prominent economists and politicians have been pushing for effective implementation and better coordination of the new financial regulations currently under construction across the globe. This columns argues that at a time of crisis, financial regulators were forced to act on systemically important assets and liabilities, rather than just on the individual financial institutions holding them. A key turning point towards better regulation will be when we recognise the need for such action ahead of time, building the essential infrastructure that ensures excessive risk-taking is discouraged.

What Happens When China Goes "Gray"?
Mark W. Frazier (Diplomat) Jan 14, 2013
Developed economies are beginning to struggle with aging populations and more retirees. China may soon join them.

Economic Ties Can Save Africa's Arab Spring
Ghazi Ben Ahmed & Ellen Laipson (Bloomberg) Jan 14, 2013
Two years after the fall of Tunisian President Zine El Abidine Ben Ali, the economic imperative for political stability in North Africa requires some bold and fresh thinking. One idea worthy of more attention is promoting regional economic integration.

Rating agencies: Outlook unchanged Financial Times Subscription Required
Stephen Foley (FT) Jan 14, 2013
Rocked by distaste for their role in the crisis, the sector’s big three were expected to reform – but their efforts have come unstuck.

Chinese shoppers are alive and thriving Financial Times Subscription Required
Jun Zhang and Tian Zhu (FT) Jan 14, 2013
The belief that China’s consumption is too low is based on a flawed theory and a superficial reading of official data.

Resilience and Dynamism
W. Lee Howell (FA) Jan 15, 2013
In today's world, where risks and their impacts are difficult to predict, the correct responses are uncertain, and no country solve every problem on its own, resilience and dynamism are key. Read

Trade liberalisation and embedded institutional reform: Evidence from Chinese exporters
Amit Khandelwal, Peter K. Schott & Shang-Jin Wei (VoxEU) Jan 15, 2013
The institutions that manage trade barriers are subject to corruption, imposing additional distortions. This column shows that in China, the government misallocated quota licenses permitting firms to export. When the US and EU abolished quotas governing textile exports in 2005, China experienced productivity gains not only from the actual elimination of the quota but also from the termination of the misallocation due to inefficient licensing.

Technology and the Employment Challenge
Michael Spence (Project Syndicate) Jan 15, 2013
New technologies of various kinds, together with globalization, are powerfully affecting the range of employment options for individuals in advanced and developing countries alike. How, then, should policymakers, especially in developed economies, address the new and difficult labor-market challenges that they confront?

The Global Indian
Shashi Tharoor (Project Syndicate) Jan 15, 2013
India is the only country that has an official acronym for its expatriates — NRIs, or “Non-Resident Indians.” It is also the only country whose government organizes an annual celebration aimed at making its expatriates feel welcome to return home.

In China, Slowdown Is a Bigger Danger Than Growth
Peter Orszag (Bloomberg) Jan 15, 2013
A slight acceleration in Chinese economic growth at the end of last year is reinforcing the common narrative that China’s expansion is a threat to other nations, including the U.S.

Thought It Was Safe to Forget Greece? Think Again
Megan Greene (Bloomberg) Jan 15, 2013
Just before Christmas, I met with former Greek Finance Minister George Papaconstantinou, and he talked about how excited he was to spend the holidays abroad, where -- unlike in Greece -- he could roam freely without a security detail. His holiday didn’t go quite as expected.

FT interview: Mariano Rajoy Financial Times Subscription Required
Tobias Buck and Lionel Barber (FT) Jan 15, 2013
After a year marred by political and economic crisis, the Spanish PM insists his reform programme will begin to bear fruit this year.

Cash wave washes China’s banks off course Financial Times Subscription Required
Simon Rabinovitch (FT) Jan 15, 2013
Some bank managers, sitting on so much underused cash, are alleged to have provided loans at low rates in return for kickbacks.

Japan should rethink its stimulus Financial Times Subscription Required
Adam Posen (FT) Jan 15, 2013
The initiative adds to long-term costs without addressing the real problem: a return to deflation and an overvalued exchange rate.

EU must respond to the shale revolution Financial Times Subscription Required
Alan Riley (FT) Jan 15, 2013
Geostrategically and economically the tectonic plates are already moving against the bloc, and the climate waits for no one.

Central banks continue to call the shots Financial Times Subscription Required
John Plender (FT) Jan 15, 2013
Looser monetary conditions have perked up global markets but too much depends on government policy and the scope for a reversion to risk-off is clear

Moving to Greenland in the face of global warming
Klaus Desmet & Esteban Rossi-Hansberg (VoxEU) Jan 16, 2013
There are two ways to deal with climate change: mitigation and adaptation. This column argues that in order to adapt, we need to take another look at an age-old coping mechanism: migration. Indeed, if overall hotter temperatures lower productivity in hot regions but raise productivity in what are currently cooler regions, the negative economic effects of climate change are likely to stem from frictions preventing the movement of people and goods. Without these frictions, adapting to climate change becomes that much easier. Climate change policy ought to aim at alleviating mobility frictions.

China’s Antifragile Ambitions
Andrew Sheng and Xiao Geng (Project Syndicate) Jan 16, 2013
In order to secure long-term prosperity, China must enhance its systems' "antifragility" – that is, their ability to benefit from uncertainty and stress. But success will require balancing China's centralized administration with its decentralized family-based traditions – a challenge with which China has struggled for centuries.

A Breach in the Eurozone Dike
Ashoka Mody (Project Syndicate) Jan 16, 2013
Throughout the crisis, it has been widely assumed – at least so far – that the the eurozone core would remain solid, and would continue to write the checks for the periphery’s distressed governments and banks. But, while all eyes have been on the European periphery, has the core been cracking?

Founding Father of the Quants Was Revolutionary Marxist
Colin Read (Bloomberg) Jan 16, 2013
One of the more interesting ironies of history is that the man who laid the foundation for modern quantitative finance began his career as a Marxist revolutionary.

Passionate European’s case for leaving Financial Times Subscription Required
Simon May (FT) Jan 16, 2013
It is irresponsible to ask, yet again, a country to renew its vows to a marriage whose very purpose it cannot abide.

Biggest growth story is outside the US Financial Times Subscription Required
Russ Koesterich (FT) Jan 16, 2013
Much of the bad news is already reflected in equity prices. It is ‘haven’ assets that appear most expensive.

A Brief History of U.S. Defaults
Uwe Bott (Globalist) Jan 16, 2013
If the United States defaults on its national debt obligations next month, it won't be for the first time. A recount of the country's deadbeat episodes.

WTO Members Begin Work to Choose New Director-General
Bridges Weekly Trade News Digest, Volume 17, Number 1 Jan 16, 2013
Candidates from nine countries have thrown their hats in the ring as possible contenders to succeed WTO Director-General Pascal Lamy, who has led the Geneva-based trade body since 2005 and who is slated to step down this August. As the year gets underway, WTO members are also in the midst of preparing for this December’s upcoming ministerial conference in Bali, where they have expressed the hope of possibly clinching a small package of deliverables from the long-running Doha Round of trade talks.

EU Leaders Continue Push for US Trade Talks
Bridges Weekly Trade News Digest, Volume 17, Number 1 Jan 16, 2013
In the early days of the New Year, EU leaders have continued their push for the launch of trade talks with the US, as the trade community awaits news in the coming weeks of whether a bilateral EU-US working group will indeed recommend that the two sides begin negotiating a trans-Atlantic deal.

Eurozone crisis: It ain’t over yet
Paolo Manasse (VoxEU) Jan 17, 2013
All G7 economies are struggling in the post-crisis climate, but US GDP has recovered to pre-crisis levels, while the Eurozone simply hasn’t. This column portrays the global crisis as a transitory shock for the US, but as a quasi-permanent shock for Europe. The policies that are needed get the Eurozone back on track do not seem to be politically feasible. As tension rises with every quarter of stagnation, prospects for the survival of the euro are not only not improving, they are actually getting worse.

Have we solved 'too big to fail'?
Andrew G Haldane (VoxEU) Jan 17, 2013
The Subprime Crisis became the Global Crisis when one too-big-to-fail bank was allowed to fail. This column argues that too-big-to-fail is far from gone despite years of reform efforts. It is important that it not be forgotten. Further analytical work, weighing the costs and benefits of different structural reform proposals, would help keep memories fresh and policies on the right track.

Capital controls: Gates versus walls
Michael W Klein (VoxEU) Jan 17, 2013
Capital controls are back in vogue. This column argues that we should distinguish between episodic controls (gates) and long-standing controls (walls). Research shows that the apparent success of 'walls' in China and India tells us little about the consequences of capital controls imposed or removed in countries like Brazil and South Korea, as circumstances change. Walls and gates are fundamentally distinct, and policy debate needs to take into account these differences.

'Great rotation' to stocks from bonds gains traction
Emerging Markets Jan 17, 2013
Investors' appetite for risk is at its highest in nine years and more funds go into equities, a survey of investors by Bank of America Merrill Lynch shows.

The Wrong Growth Strategy for Japan
Martin Feldstein (Project Syndicate) Jan 17, 2013
Japan’s new government, seeking to boost economic growth, could be about to shoot itself in the foot by destroying its one great advantage: the low rate of interest on government debt and private borrowing. If that happens, Japanese conditions will most likely be worse at the end of Prime Minister Shinzo Abe’s term than they are today.

Taming the Arctic Oil Rush
Arne Jernelov (Project Syndicate) Jan 17, 2013
The rapid shrinkage of Arctic ice cover is one of the most dramatic natural changes currently occurring anywhere on the planet, with profound environmental and economic implications. More immediately, the Arctic’s vast reserves of fossil fuels will become far more accessible than they are today – inviting highly risky exploitation.

Growth Out of Time
William Janeway (Project Syndicate) Jan 17, 2013
The economist Robert Gordon has attracted considerable attention recently by arguing that economic growth in the US is over. But a basic flaw in Gordon’s argument is immediately apparent – and becomes glaringly so on closer examination.

Oil optimism relying on fudged statistics
Nafeez Mosaddeq Ahmed (AT) Jan 18, 2013
The latest World Energy Outlook report from the International Energy Agency would lead you to think we are literally swimming in oil, a view echoed by other oil-industry forecasts. For that, they rely on an optimistic outlook for shale gas and oil sands, industries whose economics doom them from the start.

Reality not politics dictates cash hoarding Financial Times Subscription Required
Gillian Tett (FT) Jan 18, 2013
‘Changing trade conditions, improvements in technology and responses to market incentives’ are the main reasons why cash holdings are rising.

Return-free risk: why growth plays don’t pay Financial Times Subscription Required
Terry Smith (FT) Jan 18, 2013
Buy shares that look like bonds.

Fareed Zakaria
Fareed Zakaria (WP) Jan 18, 2013
With development comes protests and rage.

The expansion and convergence of compulsory schooling: Lessons for developing countries
Fabrice Murtin & Martina Viarengo (VoxEU) Jan 18, 2013
A workforce’s cognitive skills and ability to learn are regarded as crucial factors for countries hoping to develop and become competitive in the global knowledge economy. This column argues that many developing countries‘ basic educational attainment and learning outcomes remain wanting. Taking a look at Europe’s historical record can shed light on the developing-country context, and evidence suggests that simply expanding an ill-functioning educational system will be wasteful. It’s advisable for policymakers to pursue institutional reform aimed at cost-efficiency before they begin implementing school reforms.

The real exchange rate and export growth: Are services different?
Barry Eichengreen & Poonam Gupta (VoxEU) Jan 18, 2013
Increasingly, services form a larger and larger share a country’s exports. Do exchange rates matter as much for services and they do for goods exports? This column argues that they do. Distinguishing between traditional services (such as trade and transport, tourism, financial services and insurance) and modern services (such as communications, computers, information services) suggests that the effect of the real exchange rate is especially large for exports of modern services.

The Limits of China’s Consumer Revolution
Zhang Monan (Project Syndicate) Jan 18, 2013
After the global economic crisis weakened the external demand that fueled China’s economic growth over the last three decades, the country’s leaders agreed that domestic consumption must become the new engine of economic growth. But China cannot achieve stable, sustainable growth unless it also upgrades its manufacturing sector.

Can China and Turkey Forge a New Silk Road?
Anna Beth Keim & Sulmaan Khan (YaleGlobal) Jan 18, 2013
Trade, cultural exchanges enrich Sino-Turkish ties, but new Silk Road is a distant dream.

Will Europe’s Fiscal Compact Work?
Jeffrey Frankel (Project Syndicate) Jan 18, 2013
At the start of 2013, the eurozone’s “fiscal compact” entered into force, owing to its ratification on December 21 by a 12th country, Finland, a year after German Chancellor Angela Merkel prodded eurozone leaders into agreement. But will it enforce budget discipline any more effectively than previous agreements?

Outsourcing comes home
Economist Jan 19, 2013
Our special report explains why companies are rethinking their offshoring strategies.

Is the euro zone out of danger?
Economist Jan 19, 2013
Why the bond markets are too optimistic.

Health insurance, innovation, and technology adoption
Joan Costa-i-Font, Alistair McGuire & Victoria Serra-Sastre (VoxEU) Jan 19, 2013
Although healthcare innovation can make treatment cheaper, it can also make policy decisions more difficult by introducing new, better but more expensive technologies. This column argues that, unlike other technologies, healthcare technology is intermediated by insurance mechanisms, both private and public. Although health insurance coverage incentivises expenditure on innovation, it does not seem to heighten technology adoption, a challenge to the idea that innovation increases healthcare costs. Indeed, evidence suggests that technology diffusion is limited by other institutional barriers.

When exchange-rate volatility affects trade
Jérôme Héricourt &l Sandra Poncet (VoxEU) Jan 19, 2013
The increasing volatility of exchange rates after the fall of the Bretton Woods agreements has been a constant source of concern for both policymakers and academics. Does exchange-rate risk dangerously increase transaction costs and reduce gains to international trade? This column uses recent research to argue that there is indeed a negative impact of exchange-rate volatility on firms’ exporting behaviour, magnified for financially vulnerable firms and dampened by financial development. Thus, emerging countries should be careful when relaxing their exchange-rate regime.

How much global trade governance should there be?
Simon Lester (VoxEU) Jan 20, 2013
Trade agreements have become ‘deeper’ over recent years, and there are initiatives in the pipeline to globalise deeper trade governance through mega-regional agreements (such as the Trans-Pacific Partnership). This column argues that trade agreements in general – and the WTO in particular – should focus on what they do best, reducing protectionist barriers. Broader issues such as intellectual property and regulatory expropriation should be left to governments to deal with on their own. Governments that handle these issues most effectively will be the winners in the new world of supply-chain trade.

The union at Europe’s heart is frayed Financial Times Subscription Required
François Heisbourg (FT) Jan 20, 2013
Having been involved in the Franco-German dialogue for the past 30 years, one is deeply struck by the loss of intimacy.

Europe: An uneven entente Financial Times Subscription Required
Quentin Peel and Hugh Carnegy (FT) Jan 20, 2013
France must contend with Germany’s growing predominance and its differing vision for European integration,

The Economic Fundamentals of 2013
Nouriel Roubini (Project Syndicate) Jan 21, 2013
The global economy this year will exhibit some similarities with conditions prevailing in 2012 – no surprise there. But there will be some important differences, as fiscal austerity spreads to more advanced economies, the risk of a hard landing in China rises, and the threat of war in the Middle East grows.

Financing the Green Economy
Simon Zadek (Project Syndicate) Jan 21, 2013
According to new estimates that will be presented at this year’s World Economic Forum meeting in Davos, $100 trillion is needed by 2030 to finance infrastructure needs worldwide. Failure to green this investment will reduce economic growth, increase systemic risk, deepen inequality, and fuel social unrest.

'Strong Dollar' Is Lie Told in New Currency War
William Pesek (Bloomberg) Jan 21, 2013
Jack Lew’s first act once he becomes U.S. Treasury secretary will be to tell a lie. On Day One as Timothy Geithner’s successor, Lew is bound to say “I support a strong dollar” to reassure markets that there will be no change in long-standing U.S. policy. Nothing could be further from the truth, though, as the yen trades at 2 1/2-year lows and the world considers a response to Japan’s blitz on money markets.

Globalization’s European Test
Yannos Papantoniou (Project Syndicate) Jan 21, 2013
The eurozone’s sovereign-debt crisis represents a significant challenge for Europe and the global economy. But it is also an opportunity: overcoming the challenge will not only contribute to a sustained global economic recovery, but will also test our capabilities to control the dangers of globalization.

The Politics of Global Recovery in 2013
Barry Eichengreen (Project Syndicate) Jan 21, 2013
Could 2013 be a better year for the global economy than 2012 was? The answer, in principle, is yes; in practice, however, the answer could be more depressing, as policymakers in Europe, the US, and China shoot themselves in the foot.

The Stress Nexus
Peter Voser (Project Syndicate) Jan 21, 2013
In the decades ahead, as the world’s population continues to grow, the middle class continues to expand, and more people choose to live in ever-larger cities, the stresses on global energy, water, and food systems will become critical. Yet, around the world, little has been done to address the coming stresses in a comprehensive way.

China’s Green Drivers
Carlos Ghosn (Project Syndicate) Jan 21, 2013
Car sales in China, at 18 million in 2012, now eclipse those in the US, where consumers bought more than 15 million vehicles. Now the world’s biggest car market has declared a new goal: China wants to have the largest number of electric cars.

Will the Global Economy Add Up?
Lawrence H. Summers (Project Syndicate) Jan 21, 2013
While 2013 will not be a banner year for the global economy, it may nonetheless come to be viewed as the first year of the post-crisis period. The main danger is that around the world there seems to be far more planning for export-led growth than acceptance of reduced competitiveness and increased imports.

National Drift or Global Mastery
Gordon Brown (Project Syndicate) Jan 21, 2013
More than four years into the global financial crisis, the G-20's call in 2009 for a global growth compact remains unmet. Indeed, despite clear signs of change, there is little optimism about growth – and frequent talk of a lost decade – because slow growth requires a global solution, which has not been forthcoming.

The People Chase
Dennis Nally (Project Syndicate) Jan 21, 2013
While there have never been so many educated and mobile people in the world, recruiting the right ones – and getting them to where they are needed most – is more difficult than ever. The reason is that emerging markets' rise is creating chronic skills gaps and labor-market mismatches.

A Roadmap to Global Electrification
Brian Dames (Project Syndicate) Jan 21, 2013
An international initiative, called the “Electrification Roadmap,” is underway to connect 500 million people in developing countries to modern energy services by 2025. Electricity powers not only industrial development, but social and economic progress more broadly, and is crucial for lifting families and communities out of poverty.

Closing the Global Opportunity Gap
Brad Smith (Project Syndicate) Jan 21, 2013
Around the world, new job opportunities offer the promise of prosperity, but hundreds of millions of people are locked out because they lack the necessary education and skills. Unless current trends are reversed, this opportunity gap will deepen, creating even greater income disparities and stifling global economic recovery.

The Global Economy’s New Path
Zhu Min (Project Syndicate) Jan 21, 2013
Whether we like it or not, the world around us is in a state of constant change. But recent economic trends suggest that this change may be shifting its direction in a fundamental way, with external factors coming to play a larger role in output changes in advanced and developing countries alike.

Globalization’s European Test
Yannos Papantoniou (Project Syndicate) Jan 21, 2013
The eurozone’s sovereign-debt crisis represents a significant challenge for Europe and the global economy. But it is also an opportunity: overcoming the challenge will not only contribute to a sustained global economic recovery, but will also test our capabilities to control the dangers of globalization.

Saving the Euro, Dividing the Union
R. Daniel Kelemen (FA) Jan 21, 2013
The collapse of the eurozone no longer seems likely, thanks to its members' decisions to coordinate their fiscal policies more closely. But it is exactly that tighter integration that has made many Euro-skeptic Brits want to opt out of the EU altogether.

Berlin and Paris need a relationship reset Financial Times Subscription Required
Joachim Bitterlich (FT) Jan 21, 2013
The goal has to be to foster in a pragmatic way a European federation – or community – of nations.

Proactive policing needed for bankers Financial Times Subscription Required
Patrick Jenkins (FT) Jan 21, 2013
Behavioural controls cannot simply be reactive or standardised. Rogue traders and mis-sellers can game a system.

Economic self-interest won’t aid recovery Financial Times Subscription Required
Satyajit Das (FT) Jan 21, 2013
Autarky is a natural way to help in the management of competitive pressures but the trend will destroy market forces and create social tensions.

America’s debt dilemma: A looming crisis Financial Times Subscription Required
Robin Harding (FT) Jan 21, 2013
In the first of a series, an examination of the long-term fiscal challenges that will shape the nature of the US in the 21st century.

Why financial markets are inefficient
Roger E. A. Farmer (VoxEU) Jan 22, 2013
The efficient market hypothesis – in various forms – is at the heart of modern finance and macroeconomics. This column argues that market efficiency is extremely unlikely even without frictions or irrationality. Why? Because there are multiple equilibria, only one of which is Pareto efficient. For all other equilibria, the whims of market participants cause the welfare of the young to vary substantially in a way they would prefer to avoid, if given the choice. This invalidates the first welfare theorem and the idea of financial market efficiency. Central banks should thus dampen excessive market fluctuations.

Putting time and space back into finance
Biagio Bossone (VoxEU) Jan 22, 2013
Has unconsidered use of technology and exasperated market competition carried finance way afar from its original purpose, i.e. to serve the economy? This column offers a set of simple suggestions for complex interventions on the financial regulatory world. It suggests incentives be designed to lead financial institutions to place people’s real economic needs at the core of their mission, thus humanising finance.

Beggar Thy Currency Or Thy Self?
Mohamed A. El-Erian (Project Syndicate) Jan 22, 2013
One need not be an economist to figure out that, while all currencies can depreciate against something else (like gold, land, and other real assets), by definition they cannot all depreciate against each other. Yet, when push comes to shove, country after country is being dragged into a negative dynamic of competitive depreciation.

Why Stimulus Has Failed
Raghuram Rajan (Project Syndicate) Jan 22, 2013
The world suffers from a shortage of aggregate demand relative to supply, but more monetary and fiscal stimulus has done little to revive growth and employment. That is because years of a debt-fueled boom left behind an economy that supplies too much of the wrong kind of good relative to the changed demand.

Searching for Growth in a Low-Growth World
Austin Graff (PIMCO) Jan 22, 2013
We believe corporate profit growth will fall short of sell-side consensus estimates. But companies with inflation-linked revenues and supply side advantages to drive revenue growth, and those with ample cost levers to improve margins, are positioned for sustained earnings growth in the New Normal.

A Free Money Miracle?
Jonathan Goodwin (Mises Daily) Jan 22, 2013
The "Miracle of Wörgl," refers to the story of currency demurrage and the impact it had on the economy of Wörgl, a small town in Austria. For a bill of such currency to retain its face value, the currency holder must pay a regular, periodic payment (a tax) for a stamp or other marking. Wörgl is regularly touted by advocates of demurrage as a successful implementation of such a currency, one designed to encourage velocity due to the incentive to spend it in order to avoid the periodic tax.

A New Year of Global Conflict
Javier Solana and Ian Bremmer (Project Syndicate) Jan 22, 2013
Conflicts are much more likely to arise or persist when those with the means to prevent or end them cannot or will not do so. Unfortunately, this will be borne out in 2013.

Outsourcing tide is not likely to turn Financial Times Subscription Required
James Crabtree (FT) Jan 22, 2013
Western hopes that activity lost to Asian will return have been boosted by a trickle back, but as eastern economies adapt, a flood looks unlikely Read more >>

Exports Sagging? Try Some Free Trade Wall Street Journal Subscription Required
Matthew Slaughter (WSJ) Jan 22, 2013
The president did little to open markets during his first term. Here's hoping for the second one.

China's Information Challenge New York Times Subscription Required
Ian Bremmer (NYT) Jan 22, 2013
2013 will be about the increasingly free flow of ideas inside China, and the anxiety it creates for its leaders.

Schumpeter's long revenge
Chan Akya (AT) Jan 23, 2013
The recent demise of various high-profile companies, including HMV and Blockbuster, highlights the benefits of creative destruction, while posing uncomfortable parallels where non-market forces interrupt this process. While the French keep their industrial giants like Peugeot alive, capital thus wasted will add inexorably to longer-term liabilities.

Reinvigorating the trade policy agenda: Think supply chain!
Bernard Hoekman & Selina Jackson (VoxEU) Jan 23, 2013
The revolution in manufacturing – increasingly known as ‘global value chains‘ – has changed the world of trade policy as much as it has changed the global industrial landscape. This column discusses new research suggesting that border management and transport and telecommunications infrastructure services matter far more than trade tariffs. Improving infrastructure and management would increase global GDP far more than the complete elimination of tariffs. However, it won’t be easy. Tackling supply chain barriers will require dynamic and responsive national and international trade policymaking procedures that are more in step with industrial practices.

The Unloved Dollar Standard
Ronald McKinnon (Project Syndicate) Jan 23, 2013
The US dollar's role as international anchor is faltering, as emerging markets become frustrated by the Fed’s near-zero interest-rate policy and the US protests other countries' exchange-rate policies, especially China's. But such conflicts are generating ill will, while shrouding the real problem: America's huge fiscal deficit.

Modest Growth Pickup in 2013, Projects IMF
IMF Survey Jan 23, 2013
Global growth will strengthen gradually in 2013, says the IMF in an update to its World Economic Outlook (WEO), as the constraints on economic activity start to ease this year. But the recovery is slow, and the report stressed that policies must address downside risks to bolster growth.

WTO Members Look to Davos for Early Signals on Bali, Director-General's Race
Bridges Weekly Trade News Digest, Volume 17, Number 2 Jan 23, 2013
The annual World Economic Forum officially kicked off today in the Swiss mountain resort of Davos, against the backdrop of a tentative global economic recovery that many warn could still be at risk in the months ahead. Among the various events slated during the five-day gathering is the traditional meeting of trade ministers on the conference sidelines, where officials are expected to discuss possible next steps in preparing for the WTO's December ministerial in Bali, Indonesia. Several candidates for the role of WTO Director-General are also expected to be present at Davos, as the race to run the Geneva-based trade body gets underway.

EU Trade Talks with India, Canada Nearing Finish Line, Officials Say
Bridges Weekly Trade News Digest, Volume 17, Number 2 Jan 23, 2013
The European Union is on the brink of clinching trade deals with both Canada and India, officials have said over the past week. The negotiations for both of these high-profile agreements have faced a series of hurdles and delays in the past, with Brussels launching talks with New Delhi over five years ago and with Ottawa in May 2009.

Dollar to emerge stronger in new policy era Financial Times Subscription Required
Mansoor Mohi-uddin (FT) Jan 23, 2013
As the world’s central banks change course, foreign exchange investors will need to do so too.

When soft power fails
John Feffer (AT) Jan 24, 2013
China's attempts to expand its influence through soft-power are being undermined in Asia by hard-power posturing. The US, reluctant to reevaluate its own "soft power" when it seems so obviously a fig leaf for the assertion of military dominance, should consider China's failed efforts, while aspiring Japan and South Korea should also take note: you rarely can have it both ways.

The growth effects of democratisation: New evidence
Caroline Freund & Mélise Jaud (VoxEU) Jan 24, 2013
The Arab world is undergoing a major political transition. The final outcomes of the changes are far from certain. Nevertheless, there have been and will continue to be economic consequences from the moves towards democracy. This column looks at 90 attempts at transition and finds that countries with rapid transitions, irrespective of whether they are successful or failed, experience swift recoveries and a long-run growth dividend of about one percentage point relative to pre-transition growth levels.

Climate-Change Misdirection Wall Street Journal Subscription Required
Bjorn Lomborg (VoxEU) Jan 23, 2013
Fear-mongering exaggeration about effects of global warming distracts us from finding affordable and effective energy alternatives.

Writing the Future
Jeffrey D. Sachs Jan 24, 2013
More than we know (or perhaps care to admit), the future is a matter of human choice. So, will living standards rise worldwide, as today’s poor countries leapfrog technologies to catch up with richer countries, or will greed and corruption lead us to degrade the natural environment on which human well-being depends?

Germany’s Gold Delusion
Simon Johnson (Project Syndicate) Jan 24, 2013
For the first time since official gold transactions became more transparent, the Bundesbank has given notice that a significant portion of its holdings will be transferred home from France and the United States. Ostensibly, this is just a matter of monetary housekeeping, but why now?

Cooling our planet
Jim Yong Kim (WP) Jan 24, 2013
World leaders must work together to avert a climate catastrophe.

World is right to worry about US debt Financial Times Subscription Required
Kenneth Rogoff (FT) Jan 24, 2013
America is confronted by serious questions that have a direct bearing to its responsibilities at home and abroad.

Information asymmetry raises the cost of capital for corporations
James Choi & Hongjun Yan (VoxEU) Jan 25, 2013
Security-market regulations often seek to ensure that all investors have equal access to information about each company. But what are the actual costs of an unequal information playing field? This column reviews evidence from China, Finland, and the US, suggesting that information asymmetry raises companies’ cost of capital. This inhibits investment and thereby long-run economic growth.

Is the United States Yearning for Systemic Uncertainty?
Stephan Richter (Globalist) Jan 25, 2013
U.S. businesses like to talk about the need for long-term certainty. But when it comes to the long-term challenge of climate change, they insist that the short-term impact on jobs, investment and profits is far too great. Rather than relying on the United States to lead, other countries are now finding their own ways to engineer meaningful change.

Brexit, Voice, and Loyalty
Harold James (Project Syndicate) Jan 25, 2013
Albert Hirschman was a great economist with a gift for producing striking insights that transformed our view of a whole range of particular problems. One of his most far-ranging insights was his framework of “exit, voice, and loyalty,” which helps to explain the dilemma of today's EU.

The Return of the Trading City
Alan Berube (Project Syndicate) Jan 25, 2013
Although cities have enabled trade for more than 2,000 years, policymakers often neglect them when devising national trade policies. But supporting cities that are working to improve their competitive position by investing, organizing, and forging linkages with other cities is the key to long-term prosperity.

My Plan to Fix The World's Biggest Problems Recommended! Wall Street Journal Subscription Required
Bill Gates (WSJ) Jan 25, 2013
From the fight against polio to fixing education, what's missing is often good measurement and a commitment to follow the data. We can do better. We have the tools at hand.

Technological extinction: Only the digital dies Economist Subscription Required
Economist Jan 26, 2013
The newest technologies look most likely to vanish; the oldest may always be with us.

The world economy: Semi-rational exuberance Economist Subscription Required
Economist Jan 26, 2013
The world economy is improving. But not as much as some investors seem to think.

China’s population: Peak toil Economist Subscription Required
Economist Jan 26, 2013
In the first of two articles about the impact of China’s one-child policy, we look at the shrinking working-age population.

Unfinished reform threatens Chinese growth
Ligang Song (EAF) Jan 27, 2013
At 7.8 per cent, China’s GDP growth rate in 2012 was slightly higher than the target rate of 7.5 per cent set by the government earlier in the year; its average consumer price index fell to less than 3 per cent, one percentage point lower than the government target; and its industrial value-added output increased by 10 per cent.

Euro and trade will make EU irrelevant Financial Times Subscription Required
Wolfgang Münchau (FT) Jan 27, 2013
With development of a eurozone economic union and a transatlantic free-trade zone, the benefit of EU membership loses appeal.

The cost of China’s sprawling cities Financial Times Subscription Required
Simon Rabinovitch (FT) Jan 27, 2013
An analysis of the fast but flawed urbanisation underpinning much of the country’s growth is both cogent and colourful.

How to Break the Tyranny of Oil Wealth Wall Street Journal Subscription Required
Mary Anastasia O'Grady (WSJ) Jan 27, 2013
If Chavez believes the nation's oil billions belong to the people, why not give it to them directly?

Why Deleveraging Still Rules Markets in 2013
A. Gary Shilling (Bloomberg) Jan 27, 2013
I have structured my investment themes for 2013 in two ways. The first is geared toward the current “risk on” climate, even though I doubt it will endure. The other is a “risk off” scenario that I believe will unfold once investors recognize the unsustainability of what I call the Grand Disconnect between robust securities markets and subdued economic reality.

Government debt in the emerging markets – a comparative view
Markus Jaeger (DB Research) Jan 28, 2013
Governments in the advanced economies are facing sizeable short-, medium- and long-term debt sustainability challenges. By contrast, government debt in the EM has been trending down due to a combination of solid economic growth, low interest rates and, generally speaking, sustainable fiscal policies. More specifically, gross general government debt is set to remain stable or will decline only minimally over the next five years.

Financial Stars Behind Bars?
Luigi Zingales (Project Syndicate) Jan 28, 2013
Hardly a day goes by without a financial settlement between a bank and a US government agency, which invariably brings an end to the investigation. But recent academic research points to widespread, purposeful misrepresentation by banks, highlighting the need to address the industry's culture of deception by prosecuting wrongdoers.

Broader Sources of Growth Can Boost Asian Frontier Economies
IMF Survey Jan 28, 2013
To continue on the path to becoming emerging market countries, Asian frontier economies need to broaden sources of growth beyond natural resource wealth or agriculture, a Bangkok conference hears. Delegates note that Asia is already more diversified than Africa and the Middle East.

The ECB: The Last Central Bank Standing?
Jacob Funk Kirkegaard (PIIE) Jan 28, 2013
In recent months, it has looked as if all the major nominally independent central banks in advanced economies are committed to, or seriously contemplating, intervention in the markets to lower the value of their currencies. Excluding commodity exporters like Canada, Australia, and Norway, everyone is on board—except the European Central Bank (ECB).

The End of Hunger and Malnutrition
José Graciano da Silva (Project Syndicate) Jan 28, 2013
The UN Food and Agricultural Organization has decided that its goal will no longer be merely to reduce hunger, but rather to eradicate hunger, food insecurity, and malnutrition altogether. Achieving it will be a formidable challenge, though not as daunting as it seems.

A conspiracy of reasonable people Financial Times Subscription Required
Gideon Rachman (FT) Jan 28, 2013
If China stops playing by Davos rules, then the golden years of the World Economic Forum will be over.

Eurozone banking union is deeply flawed Financial Times Subscription Required
Hans-Werner Sinn and Harald Hau (FT) Jan 28, 2013
The rescue mechanism ignores a very significant danger.

Central banks must not ignore inflation Financial Times Subscription Required
Gerard Lyons (FT) Jan 28, 2013
In an era of growth targeting, policy makers in emerging and western economies must not take price pressures for granted.

Markets: Back in the zone Financial Times Subscription Required
Ralph Atkins and Mary Watkins (FT) Jan 28, 2013
There is an increasing belief that the danger of a eurozone break-up has passed but will it last?

The Conscience of a Radical Wall Street Journal Subscription Required
Bret Stephens (WSJ) Jan 28, 2013
Greece's Alexis Tsipras is right to challenge the European Union's toxic consensus.

Dollar Thrives in Age of Competitive Devaluations
A. Gary Shilling (Bloomberg) Jan 28, 2013
In periods of prolonged economic pain -- notably the 2007-2009 global recession and the ensuing subpar recovery -- international cooperation gives way to an every-nation-for-itself attitude. This manifests itself in protectionist measures, specifically competitive devaluations that are seen as a way to spur exports and to retard imports.

Lower Rates Push Yield Seekers to Higher Risk
A. Gary Shilling (Bloomberg) Jan 29, 2013
In recent years, a grand disconnect has opened between economies around the world, which are growing anemically if at all, and the bullishness of investors who only care that central banks are willing to continue shoveling out liquidity.

Relaunching the European Convergence Machine
Martin Raiser (Globalist) Jan 29, 2013
Over the past several decades, the economic unification of Europe has helped lift 100 million people in Southern Europe and another 100 million in the East nearer to the income levels of the North. With the right structural reforms, this powerful machine can be restarted for the benefit of current and future EU members.

Diversifying Russia
Simon Commander & Alexander Plekhanov (VoxEU) Jan 29, 2013
Russia aims to diversify its economy and reduce its dependence on natural resources. Despite laudable aims, this column argues that progress has been sluggish. Longstanding obstacles of corruption, low business-entry rates and weak competition afflict other countries that, like Russia, are in transition. Yet Russia comes pretty much bottom of the class. Crucially, the fact that economic diversification requires improvements to education and skills acquisition has been somewhat overlooked by the state. What attempts the state has made, such as supporting technology innovation, appear to have been ineffectual and, at times, counterproductive. Going forward, Russia would do well to focus on improving incentives for market-relevant research and development, complemented by private sector-led sources of finance for early-stage firms.

Chronic Europe
Gene Frieda (Project Syndicate) Jan 29, 2013
Europe’s great success in 2012 was to avoid becoming another of history's failed monetary unions. But, having escaped the markets' wrath, have Europe's political leaders again chosen to muddle through, rather than meld a resilient strategy?

China’s Last Soft Landing?
Stephen S. Roach (Project Syndicate) Jan 29, 2013
On the surface, the Chinese economy's resilience has been impressive – the first to recover, as Chinese leaders always want to remind the rest of the world. But, beneath the surface, the economy risks losing its capacity for resilience unless the authorities accelerate the transition to a more consumer-led economy.

The Asian Sleepwalkers
Yoon Young-kwan (Project Syndicate) Jan 29, 2013
Whether East Asia’s leaders like it or not, the region’s international relations are more akin to nineteenth-century European balance-of-power politics than to the stable Europe of today. Will the lack of an adequate regional security structure cause East Asian countries to blunder, like Europe prior to 1914, into a major disaster?

The Transparency Conspiracy
Ivan Krastev (Project Syndicate) Jan 29, 2013
One of the most troubling outcomes of the ongoing financial crisis has been a collapse of trust in democratic institutions and politicians. But those who insist that the solution consists in greater government transparency could end up making the problem worse.

Putting geopolitics back at the trade table
Pascal Lamy (WTO) Jan 29, 2013
While the world is mutipolarising at an unprecedented scale and speed, and production and trade value chains are multilateralising, trade governance seems to be bilateralising. We risk scattering the level playing field.

A perilous journey to full recovery Financial Times Subscription Required
Martin Wolf (FT) Jan 29, 2013
There are reasons to be optimistic about the future. A key to success everywhere will be timing the exit from exceptional policies.

China’s banks are too big to manage Financial Times Subscription Required
Yukon Huang (FT) Jan 29, 2013
A radical action would be to break up the big four into three regional banks to foster competition and improve governance.

Central bank hot air pumps up bond bubble Financial Times Subscription Required
John Plender (FT) Jan 29, 2013
Exuberance in the equity market has raised questions over US Treasury bond yields, but will that put a brake on further appreciation in equities?

Here We Go Again, Underpricing Europe Debt Risk
Nicholas Spiro (Bloomberg) Jan 29, 2013
Over the past six months, market sentiment toward the euro area has swung spectacularly from panic to growing confidence.

‘No gain without pain’: Antidumping protection hurts exports
Jozef Konings & Hylke Vandenbussche (VoxEU) Jan 30, 2013
The rise of international production sharing – ‘global value chains’ – has transformed international commerce and pushed economists into new territory. This column argues that there is evidence to suggest that old-fashioned protection can have an unexpected negative effect on firms that are part of a global value chain. In an increasingly globalised world, exporters’ success seems to positively depend on the free entry of imports rather than the other way round.

Central banks walk inflation’s razor edge Financial Times Subscription Required
Charles Goodhart (FT) Jan 30, 2013
Those changing the monetary policy regimes risk achieving short-term benefits that are then dwarfed by long-term pain.

Mexico: Aztec tiger Financial Times Subscription Required
Adam Thomson (FT) Jan 30, 2013
The country has emerged from Brazil’s shadow to become the darling of investors but Enrique Peña Nieto still faces formidable challenges.

The Real, and Simple, Equation That Killed Wall Street
Chris Arnade (SciAm) Jan 30, 2013
“If it weren’t for those meddling kids!” That was the punch line for every Scooby Doo episode. It also is the overly simple narrative that many in the media have spun about the last financial crisis. Smart meddling kids armed with math hoodwinked us all.

Trade Ministers at Davos Press for "Meaningful Results" in Bali
Bridges Weekly Trade News Digest, Volume 17, Number 3 Jan 30, 2013
WTO members should take stock at Easter on whether "meaningful results" at their upcoming December ministerial in Bali are possible, trade ministers from over 20 members said following an informal meeting last week in Davos. The gathering was held on the sidelines of the Annual World Economic Forum, where business leaders and policymakers gathered to review the tentative signs of recovery in the world economy. Trade, in particular, was a recurring topic during the five-day discussions, as speculation continues over the possible launch of US-EU negotiations amid the ramping up of the race for the new WTO head.

WTO Authorises Antigua to Move Forward on Retaliation in US Gambling Dispute
Bridges Weekly Trade News Digest, Volume 17, Number 3 Jan 30, 2013
On Monday, the WTO Dispute Settlement Body (DSB) authorised Antigua and Barbuda to retaliate against US intellectual property (IP), as part of their longstanding dispute regarding internet gambling services (DS285). However, it remains unclear what kind of measures will be put in place by the Caribbean nation, with experts suggesting US music and film industries as possible targets of the future retaliatory sanctions.

Where to Invest While Markets Remain 'Risk-On'
A. Gary Shilling (Bloomberg) Jan 30, 2013
In today’s markets, investors’ zeal for yield and disregard for risk favors the junkiest of the junk.

How Markets Could Shift to 'Risk Off'
A. Gary Shilling (Bloomberg) Jan 31, 2013
The huge deleveraging in private sectors in the U.S. and elsewhere, the unresolved frictions between northern and southern nations in the euro area and the needed shift in China to a domestically driven economy suggest that the current “risk-on” investment environment may collapse.

China and the end of extrapolation
George Magnus (VoxEU) Jan 31, 2013
In 2013, China is at an important crossroads in its economic development. This column argues that we cannot continue to extrapolate from China’s recent economic record. If growth is to remain high and stable, choosing the right course will require nothing less than a significant change in China’s economic model, brought about by what might be the most important political reforms since the 1980s. Whether or not its growth performance tips it into the middle-income trap depends on engaging with and implementing widespread reforms that may be incompatible with the primacy of the Communist Party.

Current-account rebalancing and international transfers (immaculate or not)
Giancarlo Corsetti, Philippe Martin & Paolo Pesenti (VoxEU) Jan 31, 2013
Current-account imbalances in Europe are at the heart of the crisis .This column argues that relative price adjustment need not be as dramatic as some observers claim. In order to foster rebalancing, policy should target obstacles to firms' entry, startup costs, and the incentives for product differentiation, letting relative prices and wages adjust in equilibrium. Setting up firms and new production lines is costly and in the current circumstances, policy should also address tight credit constraints on investment and firms’ activity.

The Millennium Development dilemma: What to target after 2015
Thomas Nah (Al Jazeera) Jan 31, 2013
To end poverty in Liberia, good governance and anti-corruption must be guiding principles.

Corporate bond issuance in Europe: Where do we stand and where are we heading? Adobe Acrobat Required
Orcun Kaya and Thomas Meyer (DB Research) Jan 31, 2013
High investor demand is fuelling corporate bond issuance in the EU. Deleveraging in some countries and the fact that some banks are paying roughly the same or even higher rates for their refinancing than their customers no doubt has pushed corporate debt markets. But the main driver for the high issuance volumes seems to be investors’ search for yield in a low interest rate environment. As sovereign bonds are offering historically low yields, corporate bonds have turned into a significant investment alternative in the present market conditions. However, in an era of Knightian uncertainty and high liquidity, strong growth in corporate bond market calls for attention to potential overheating.

Greece, Portugal, Spain become more competitive
Antonia Oprita (EM) Jan 31, 2013
The crisis forced the troubled eurozone economies to fire workers and cut salaries and this is boosting their competitiveness, a study shows

China’s Narrowing Policy Horizons
Yu Yongding (Project Syndicate) Jan 31, 2013
China's economic revival since the third quarter of 2012 should come as no surprise: as long as the government has room to wield expansionary monetary and/or fiscal policy, faster growth is always only a matter of time. But China's rapidly rising money supply and weakening fiscal position now threaten to change that for good.

Grand Mal Economics
J. Bradford DeLong (Project Syndicate) Jan 31, 2013
Industrial market economies have been suffering from periodic financial crises, followed by high unemployment, at least since the Panic of 1825, so we have had nearly two centuries since then to figure out how to deal with them. Why, then, have governments and central banks failed this time around?

Be Very Afraid When Fear Disappears From Markets
Dean Curnutt (Bloomberg) Jan 31, 2013
These days, many indicators suggest we are in an extremely low-risk market environment. The Chicago Board Options Exchange Volatility Index, or VIX, sometimes known as the fear index, has reached a five-year low. European sovereign-bond yields, long a source of anxiety, have eased since their uncomfortable march higher in 2011, and the euro has risen 13 percent from its 2010 low.

Markets: The road to redemption Financial Times Subscription Required
Robin Wigglesworth (FT) Jan 31, 2013
Since the crises of the 1990s, leading emerging markets have done much to combat ‘original sin’ – the inability to raise funds in local currency bonds – but threats to stability still linger.

Gazprom posturing masks Russia’s weakness Financial Times Subscription Required
Neil Buckley (FT) Jan 31, 2013
Energy group’s spat with Ukraine highlights how Russian energy dominance is under threat from regulatory and competitive challenges

Gloomsters buried the euro too soon Financial Times Subscription Required
Philip Stephens (FT) Jan 31, 2013
An examination of where the pessimists erred provides pointers to the future of the eurozone and the shape of Europe.

Looking for Mr. Goodpain New York Times Subscription Required
Paul Krugman (NYT) Jan 31, 2013
Where are the austerity successes? Britain? Ireland? Keep looking.

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