links for 2008-05-16

• Central bank communication - Vox EU
• Competitor Files Lawsuit Claiming Speedo Attempting a Monopoly - NY Times
• Study says visual system equipped with 'future seeing powers' - EurekAlert
• In defense of Larry Summers - Dani Rodrik
• Mommy, Why Do Revenues Grow? - EconomistMom
• McCain’s Budget: Largest Debt Since WWII - Wonk Room
• Minimum wages and monopsony: one mo' time - The G Spot
• Inflation Targeting and Global Supply Shocks - Twenty-Cent Paradigms
• Risk Management in Financial Institutions - Ben Bernanke
• Fed Adds Liquidity and Economy Avoids Recession - John M. Berry
• Malthus, the false prophet - Economist.com
• Newton, Einstein Lost in Space? - WSJ.com
• Fedspeak Highlights: Mishkin on Bubbles - Real Time Economics
• May You Live in Interesting Times: The Sequel - FRBNY
• How economists think about procrastination. - Slate Magazine

Comments

[hari]

Dani Rodrik is defending Larry Summers on his FT articles dealing with current state of academic debate on globalization.

I've read Larry as arguing against *protectionism* in US Congress and next WH occupant. He may be positing himself to defend on-going globalization which has leveraged the emerging Asian markets more than any other regional bloc.
Current global political economy and credit crunch followed by inflationary pressure is not going to allow OECD countries to revisit this international trade policy issue anytime soon, I suspect.

[hari]

Dani Rodrik is defending Larry Summers on his FT articles dealing with current state of academic debate on globalization.

I've read Larry as arguing against *protectionism* in US Congress and next WH occupant. He may be positioning himself to defend on-going globalization which has leveraged the emerging Asian markets more than any other regional bloc.
Current global political economy and credit crunch followed by inflationary pressure is not going to allow OECD countries to revisit this international trade policy issue anytime soon, I suspect.

[reason]

Malthus - the false prophet.

The Malthusian heresy ???? Is the economist pushing theology or science here?

Yes, Malthus was wrong about population. But there is an upper limit on food production. The world can't support any population at any standard of living. Merely pointing to the historical record doesn't misprove that.

[anne]

http://www.nytimes.com/2008/05/16/opinion/16fri2.html

May 16, 2008

Blackwater’s Impunity

After guards from Blackwater Worldwide protecting a State Department convoy killed at least 17 Iraqis in a hail of bullets last September, we hoped the Bush administration would rethink the folly of relying on mercenaries, who have no accountability to Iraqi or American law.

The ever-stubborn administration decided it couldn’t stay at war without its gunslingers. More than six months after the event, not a single charge has been brought against the guards. Last month, the State Department — which is supposed to be sensitive to local politics and perception — renewed Blackwater’s contract in Iraq for another year.

Patrick Kennedy, the under secretary of state for management, told James Risen of The Times, “If the contractors were removed, we would have to leave Iraq.”

That the United States is so dependent on 30,000 or so private guards to plug the holes in the understaffed military force underscores, once again, how badly this administration has mismanaged the occupation of Iraq — and why the United States must begin an orderly withdrawal as soon as possible.

The F.B.I. has still not concluded its investigation into the shooting. Some Blackwater guards might be indicted, but the company is not expected to face criminal charges. And while the Bush administration might have moved on, Iraqis — who see this as one more instance of American callousness and hypocrisy — have not.

Last October, the House passed a bill that would ensure that contractors working for the American government in conflict zones were liable for prosecution under American criminal law. It would also deploy special F.B.I. units to combat zones to investigate contractor crimes regularly. The bill, opposed by the White House, is stalled in the Senate....

[anne]

http://www.nytimes.com/2008/05/16/opinion/16fri3.html

May 16, 2008

A Disgraceful Farm Bill

Congress has approved a $307 billion farm bill that rewards rich farmers who do not need the help while doing virtually nothing to help the world’s hungry, who need all the help they can get.

President Bush should keep his promise to veto it and demand better legislation.

The bill is an inglorious piece of work tailored to the needs of big agriculture and championed by not only the usual bipartisan farm state legislators but also the Democratic leaders, including Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi. Every five years we get a new farm bill, and each time we are reminded that even reformers like Ms. Pelosi cannot resist the blandishments and power of the farmers.

The bill includes the usual favors like the tax break for racehorse breeders pushed by Mitch McConnell of Kentucky, the Senate minority leader. But the greater and more embarrassing defect is that the bill perpetuates the old subsidies for agriculture at a time when the prices that farmers are getting for big row crops like corn, soybeans and wheat have never been better. Net farm income is up 50 percent.

The legislation preserves an indefensible program of direct payments amounting to about $5 billion a year that flow in good times and bad. It raises support levels for wheat and soybeans, while adding several new crops to the list in a way that will make it easier for farmers to raid the federal Treasury even when prices go up....

[Eth, eth, ethanol.]

[anne]

http://www.nytimes.com/2008/05/16/world/asia/16pstan.html

May 16, 2008

Pakistan Defies U.S. on Halting Afghanistan Raids
By JANE PERLEZ

PESHAWAR, Pakistan — Pakistani officials are making it increasingly clear that they have no interest in stopping cross-border attacks by militants into Afghanistan, prompting a new level of frustration from Americans who see the infiltration as a crucial strategic priority in the war in Afghanistan.

On Wednesday night, the United States fired its fourth Predator missile strike since January, the most visible symbol of the American push for a freer hand to pursue militants from Al Qaeda and the Taliban who use Pakistan’s tribal areas as a base to attack Afghanistan and plot terrorist attacks abroad. In Afghanistan, cross-border attacks have doubled over the same month last year and present an increasingly lethal challenge to American and NATO efforts to wind down the war and deny the Taliban and Al Qaeda a sanctuary.

In an unusual step during a visit to Pakistan in March, Adm. Eric T. Olson, the commander of United States Special Operations Command, held a round-table discussion with a group of civilian Pakistani leaders to sound them out on the possibility of cross-border raids by American forces. He was told in no uncertain terms that from the Pakistani point of view it was a bad idea, said one of the participants.

Instead, Pakistani officials are trying to restore calm to their country, which was rattled by a record number of suicide attacks last year. Within days, they are expected to strike a peace accord with Pakistan’s own militants that makes no mention of stopping the infiltrations. In fact, Pakistani counterinsurgency operations have stopped during the new government’s negotiations with the militants.

“Pakistan will take care of its own problems, you take care of Afghanistan on your side,” said Owari Ghani, the governor of North-West Frontier Province, who is also President Pervez Musharraf’s representative in charge of the neighboring tribal areas.

Mr. Ghani, a key architect of the pending peace accord, believes along with many other Pakistani leaders that the United States is floundering in the war in Afghanistan. Pakistan, he said, should not be saddled with America’s mistakes, especially if a solution involved breaching Pakistan’s sovereignty, a delicate matter in a nation where sentiment against the Bush administration runs high.

“Pakistan is a sovereign state,” he said. “NATO is in Afghanistan; it’s time they did some soldiering.”

The pending accord, Pakistani officials said, is aimed at stopping suicide attacks in Pakistan, which became a focus of the militants’ wrath last year as the Pakistani government pursued a more assertive policy against them at the urging of the United States....

[anne]

http://www.juancole.com/2008/05/is-obama-apostate-or-bush-reply-to.html

May 15, 2008

A lot of observers think Obama is a "natural" candidate for Muslims abroad to support. But why? They see him as just another American, and they haven't had a good experience with American policies. In Pakistan, 50% of a sample said that they would like to vote in the upcoming American election. Of that group, 30% said they would vote for Hillary Clinton, 14% said they would vote for Obama, and 8% said they would vote for John McCain. So Luttwak's assumptions are incorrect in every way. Pakistanis don't care about Obama's background, they care that he threatened to bomb their country. American reporters are always asking if Hillary Clinton can get respect in the patriarchal Muslim world; but she is is the one the Pakistani public would vote for! Pakistani Muslims elected a female head of state, after all, something the patriarchal Americans haven't yet managed.

-- Juan Cole

[anne]

http://www.nytimes.com/2008/05/16/world/asia/16kandahar.html

May 16, 2008

Hunger and Food Prices Push Afghanistan to Brink
By CARLOTTA GALL

While there have been no riots yet in Afghanistan over spiraling food prices, the economic pain and hunger are hitting the poor and unemployed, aid agency officials are warning.

[War, war, war.]

[anne]

http://www.nytimes.com/2008/05/16/world/europe/16france.html

May 16, 2008

Strikers in France Challenge Sarkozy’s Plan to Reduce Jobs in the Public Sector
By STEVEN ERLANGER

The strike was another test of President Nicolas Sarkozy’s resolve in his efforts to cut down France’s large civil service to reduce budget deficits.

[Vivat!]

[anne]

http://www.nytimes.com/2008/05/16/world/asia/16afghan.html

May 16, 2008

U.N. Official Raises Alarms Over Killings in Afghanistan
By CARLOTTA GALL

A special investigator for the United Nations on Thursday accused foreign intelligence agencies of conducting nighttime raids and killing civilians in Afghanistan with impunity.

[Huh???]

[anne]

http://www.juancole.com/2008/05/mccain-unit-rolled-out-funeral-bombing.html

May 16, 2008

Al-Hayat reports in Arabic that the Mosul power elite is increasingly disturbed by the central government's military campaign in that city. They say that they would be willing to keep on the sidelines if the al-Maliki government just went after "al-Qaeda" (the Salafi Jihadis) in the city. But they say that the al-Maliki forces have arrested dozens of ex-members of the Baath Party, as well as former military officers. They say that if this campaign against the Mosul elite continues, they will be forced to act. The al-Maliki government had given them undertakings that it would only target "al-Qaeda", but in fact it has arrested over 900 persons, many of them ex-Baathists.

-- Juan Cole

[anne]

http://www.juancole.com/2008/05/mccain-unit-rolled-out-funeral-bombing.html

May 16, 2008

The US is cutting off relations with Iraqi politician and notorious embezzler and liar Ahmad Chalabi * for the fourth time. This time the issue is said to be his deteriorating relations with Prime Minister Nuri al-Maliki and his closeness to Brig. Gen. Qasem Soleimani, head of the Jerusalem (Quds) Brigades of the Iranian Revolutionary Guards. Actually my suspicion is that Chalabi is supporting the Mahdi Army of Muqtada al-Sadr and that is the real reason for the tension with him. Sadr wants the US out on a short timetable and opposes the passage of an oil law that the Bush administration desperately wants.

* http://www.mcclatchydc.com/iraq/story/37261.html

-- Juan Cole

[anne]

http://www.juancole.com/2008/05/mccain-unit-rolled-out-funeral-bombing.html

May 16, 2008

Friedman Unit and McCain Unit
By Juan Cole

Remember how Tom Friedman and Bush administration spokesmen kept saying that "the next six months" would be crucial for Iraq? They said it in 2003, 2004, 2005, etc., etc.

Now we have the new, improved, "McCain unit"-- which is apparently that the next four years will be crucial in Iraq. Indeed, McCain predicted "victory" by 2013, four years after he hopes to take office as the new president. Of course if victory does not come by 2013, then the next McCain unit would kick in, with the years leading up to 2017 being "crucial" for Iraq.

William Lind explains why McCain's fantasy of victory is highly unlikely to be fulfilled. * Lind calls Iraq a "fourth generation war" in which there is no real state capacity on which the US can build, and in which the enemy is shadowy and slips away before conventional forces (as in Basra, where rightwing commentators have mistaken the Mahdi Army's ability to melt away and lie low as a victory for the "non-existent" state). The US really only controls the ground on which its soldiers tread, and that reality may well not change during the next 4 years. If Lind is right, McCain is hanging US policy on a set of ideas out of the 1940s that have no application in Iraq today.

The McCain unit is already a public relations bust. It sounds like a timetable to Democrats. It is too far off for most people to take seriously. The beauty of the "Friedman unit" was that it seemed relatively near, but people could be depended to forget about its last use before it was invoked again. The McCain unit will tax the public's patience too much, not to mention their pocket books. His unit probably has a $1 trillion tax bill attached to it all at once. And his unit is too specific, calling for "victory." The Friedman unit was deliberately vague about what exactly would happen in the next six months that was "crucial" for Iraq.

http://www.upi.com/International_Security/Industry/Analysis/2008/04/22/military_matters_iraq_state_fantasy/1442/

[evagrius]

Poor, middle-income earners did not share in wealth boom
Canada has become a far richer country in 30 years, yet many have fallen behind

RICK GOLDMAN
As

William Watson correctly points out in commenting on two recent Statistics Canada reports, statistics can be selectively used to make the case that things are getting better or worse for the poor in Canada (“The rich get richer but so do the poor,” Opinion, May 13). Indeed, whether he realized it or not, Watson’s article included two examples of such selective use of statistics.

In terms of the percentage of Canadians living under our unofficial “poverty line” (StatsCan’s “low-income cutoff ”) Watson states that the picture has been quite rosy since 1996. And he’s right: the percentage of us living in relative low income dropped from 15.7 in 1996 to 10.5 in 2006. As Watson puts it, if you believe that neo-conservatives have been running economic policy in Canada during that period, well, they just might know what they are doing!

But 1996 was the end of a recession and poverty was at a peak. Taking a slightly longer view, StatsCan figures reveal that we are actually doing worse today than we were in 1989, when the low-income rate was 10.2 per cent. So, far from making dramatic progress, we are going nowhere fast.

But are the rich getting richer and the poor getting poorer? No, Watson, tells us. While the rich are getting richer, the incomes of the poor are also rising (though not quite as quickly). He is right here as well – as long as we compare the incomes of the richest 20 per cent of families withthose of the poorest 20 per cent and again use 1996 as the starting point (as Watson and the recent StatsCan report do). However, a May 2007 StatsCan study tells us that, if we narrow the comparison to the richest 10 per cent of families versus the poorest 10 per cent, and use 1989 as the starting point, the rich still got richer, but the poor actually lost about eight per cent of their after-tax income since then, even accounting for all government transfers.

So, what, if anything, can we state with certainty? Why it’s elementary, my dear Watson (sorry, couldn’t resist). In the past three decades, Canada has become a far richer country. Real GDP per capita grew by 51 per cent between 1981 and 2006. Yet we have been spinning our wheels, or even losing ground, with regard to poverty and inequality. Nor has the average non-poor “working stiff ” benefited from Canada’s long-term gains in prosperity. As one of the recent StatsCan studies reports, the median earnings of Canadians employed all year on a fulltime basis increased by just $53 – from $41,348 in 1980 to $41,401 in 2005 (in 2005 dollars).

As Watson points out, conservatives argue that this wage stagnation doesn’t matter, because many families have compensated by having two wage earners. But what kind of a social contract do we have when middleclass families can benefit from decades of economic prosperity only by sending both spouses out to work, instead of just one?

In fact, reducing poverty and inequality are not rocket science. One of the greatest success stories is that of Canadian seniors. In 1986, their low-income rate was 13.5 per cent. By 2005 it had dropped to 5.4 per cent – in other words, about half the lowincome rate for all Canadians. What happened? Canada simply resolved to adopt a pension scheme that provided all seniors with a certain minimum standard of living. Some countries have taken the same approach and extended it to all their citizens. For example, Finland and Sweden have overall low-income rates similar to Canada’s low-income rate for seniors.

“Aha!” conservatives

will shout, “but all that taxing and redistribution will make us an economic basket case.” In fact, the “high-equality” Nordic countries have held up well in terms of income per capita, labour productivity and total employment rates, compared with “smallergovernment” countries like the U.S. and Britain, while maintaining much higher levels of equality and much lower poverty rates. At present, Canada finds itself somewhere in between these two economic models, though considerably closer to the AngloAmerican one.

High-equality countries have also been much more effective at promoting other aspects of their citizens’ well-being, notably health outcomes. In his book, the Impact of Inequality: How to Make Sick Societies Healthier, Richard Wilkinson of the University of Nottingham points out that Greeks have a longer life expectancy that Americans – from the richest but most unequal developed country in the world – even though Greece has half the per-capita income of the U.S. Life expectancy is higher in Bangladesh than in Harlem. The infant mortality rate in the U.S. is more than twice that of Finland. Other studies show that “high-equality” countries score better than “small government” countries on social indicators like trust in fellow citizens and in government institutions, leisure time, incidence of drug use and homicides.

The incredible amount of new wealth that Canada has generated in the past three decades has, unfortunately, largely bypassed the poor as well as average wageearners. Canada has, thus far, squandered a wonderful opportunity to use that increased wealth to reduce poverty and inequality and improve the wellbeing, not just of the poor, but of all Canadians.

But, as the old saying goes: “better late than never.”

Canada has become a far richer country in 30 years, yet many have fallen behind
RICK GOLDMAN
As

William Watson correctly points out in commenting on two recent Statistics Canada reports, statistics can be selectively used to make the case that things are getting better or worse for the poor in Canada (“The rich get richer but so do the poor,” Opinion, May 13). Indeed, whether he realized it or not, Watson’s article included two examples of such selective use of statistics.

In terms of the percentage of Canadians living under our unofficial “poverty line” (StatsCan’s “low-income cutoff ”) Watson states that the picture has been quite rosy since 1996. And he’s right: the percentage of us living in relative low income dropped from 15.7 in 1996 to 10.5 in 2006. As Watson puts it, if you believe that neo-conservatives have been running economic policy in Canada during that period, well, they just might know what they are doing!

But 1996 was the end of a recession and poverty was at a peak. Taking a slightly longer view, StatsCan figures reveal that we are actually doing worse today than we were in 1989, when the low-income rate was 10.2 per cent. So, far from making dramatic progress, we are going nowhere fast.

But are the rich getting richer and the poor getting poorer? No, Watson, tells us. While the rich are getting richer, the incomes of the poor are also rising (though not quite as quickly). He is right here as well – as long as we compare the incomes of the richest 20 per cent of families withthose of the poorest 20 per cent and again use 1996 as the starting point (as Watson and the recent StatsCan report do). However, a May 2007 StatsCan study tells us that, if we narrow the comparison to the richest 10 per cent of families versus the poorest 10 per cent, and use 1989 as the starting point, the rich still got richer, but the poor actually lost about eight per cent of their after-tax income since then, even accounting for all government transfers.

So, what, if anything, can we state with certainty? Why it’s elementary, my dear Watson (sorry, couldn’t resist). In the past three decades, Canada has become a far richer country. Real GDP per capita grew by 51 per cent between 1981 and 2006. Yet we have been spinning our wheels, or even losing ground, with regard to poverty and inequality. Nor has the average non-poor “working stiff ” benefited from Canada’s long-term gains in prosperity. As one of the recent StatsCan studies reports, the median earnings of Canadians employed all year on a fulltime basis increased by just $53 – from $41,348 in 1980 to $41,401 in 2005 (in 2005 dollars).

As Watson points out, conservatives argue that this wage stagnation doesn’t matter, because many families have compensated by having two wage earners. But what kind of a social contract do we have when middleclass families can benefit from decades of economic prosperity only by sending both spouses out to work, instead of just one?

In fact, reducing poverty and inequality are not rocket science. One of the greatest success stories is that of Canadian seniors. In 1986, their low-income rate was 13.5 per cent. By 2005 it had dropped to 5.4 per cent – in other words, about half the lowincome rate for all Canadians. What happened? Canada simply resolved to adopt a pension scheme that provided all seniors with a certain minimum standard of living. Some countries have taken the same approach and extended it to all their citizens. For example, Finland and Sweden have overall low-income rates similar to Canada’s low-income rate for seniors.

“Aha!” conservatives

will shout, “but all that taxing and redistribution will make us an economic basket case.” In fact, the “high-equality” Nordic countries have held up well in terms of income per capita, labour productivity and total employment rates, compared with “smallergovernment” countries like the U.S. and Britain, while maintaining much higher levels of equality and much lower poverty rates. At present, Canada finds itself somewhere in between these two economic models, though considerably closer to the AngloAmerican one.

High-equality countries have also been much more effective at promoting other aspects of their citizens’ well-being, notably health outcomes. In his book, the Impact of Inequality: How to Make Sick Societies Healthier, Richard Wilkinson of the University of Nottingham points out that Greeks have a longer life expectancy that Americans – from the richest but most unequal developed country in the world – even though Greece has half the per-capita income of the U.S. Life expectancy is higher in Bangladesh than in Harlem. The infant mortality rate in the U.S. is more than twice that of Finland. Other studies show that “high-equality” countries score better than “small government” countries on social indicators like trust in fellow citizens and in government institutions, leisure time, incidence of drug use and homicides.

The incredible amount of new wealth that Canada has generated in the past three decades has, unfortunately, largely bypassed the poor as well as average wageearners. Canada has, thus far, squandered a wonderful opportunity to use that increased wealth to reduce poverty and inequality and improve the wellbeing, not just of the poor, but of all Canadians.

But, as the old saying goes: “better late than never.”