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  • Blankfein on a Stronger China

    Lloyd Blankfein spent an hour with Charlie Rose earlier this week, and gave as comprehensive a take we've seen him give on his approach to leading one of the world's most powerful financial institutions, Goldman Sachs. In this excerpt, he explains why he believes that an economically stronger China is something to be embraced and encouraged, rather than demonized and feared: Watch the full interview here .
  • Evan Osnos on 'The Age of Ambition' and Chinese Economic Reform

    If you want to understand China today, you have to understand the economic reform started in 1978 by Den Xiaoping's government. According to The New Yorker 's Evan Osnos , that reform touched off the "age of ambition" that we see today. Not coincidentally, Osnos has a new book out, Age of Ambition: Chasing Fortune, Truth, and Faith in the New China . He spoke about the book and the "new China" at the Carnegie Council . In this excerpt, he discusses Deng's "re-imagination" of the Chinese economy. Watch more from the event here .
  • What the Black Death Can Teach Us About Economic Development Today

    To understand the future of economic development, we must better understand economic history. So contends Peter Temin ,Gray Emeritus Professor of Economics at MIT. In a column at Vox , Temin takes us back to the 14th century, when the Black Death prompted an historic shift. The rise in wages as a result of the Black Death was sustained by a shift in marriage patterns that increased the age of women’s marriage, and reduced the rate of population increase. The adaptation to the initial shock led to a durable rise in people’s income. This, in turn, led to a demand for more meat in their diet, which, of course, was accommodated by more husbandry. The whole pattern fit together with the Black Death as a shock that shifted households and the economy from one demographic equilibrium to another. This research dovetails with Allen’s argument that the initial innovations of the Industrial Revolution emerged from tinkering by producers to reduce the costs of expensive labour and reap the benefits of cheap power. In response to the awareness that wages were generally high in western Europe, Allen (2009) went to some lengths to show that the small gains from these initial innovations were not profitable in either France or the Netherlands. Allen (2013) also argued that wages and energy prices in North America were close enough to the British pattern for policy initiatives – tariffs, education, and infrastructure investments – to create conditions hospitable to industrialisation. This was definitely true for countries in western Europe that followed the British pattern once industrial productivity advanced from its initial level. Although these countries did not have the factor prices to make the initial innovations of the Industrial Revolution profitable, the further development of these innovations rendered them profitable at factor prices close to those in Britain. And, as Allen noted, policy changes helped industrialisation along as it spread. But this was all within the high-wage area described by Voigtländer and Voth. They noted that the European marriage pattern extended only from the Atlantic to a line from St. Petersburg to Trieste. Other countries in Asia or Africa were low-wage economies, subject to Malthusian pressure on wages, and their factor prices were not close to the English ones. Small changes in economic policies were not sufficient to make industrialisation profitable in India or Egypt. The story that links the Black Death to the Industrial Revolution, therefore, is also a story telling why Europe industrialised in the past two centuries. Read The Black Death and industrialisation: Lessons for today’s South here .
  • Nouriel Roubini on Economic Roots to 'New Nationalismm'

    At Project Syndicate , Nouriel Roubini raises some concerns over the rising nationalism in Europe. Rising economic populism is a logical result of slow recovery. Policy makers must pick up the pace of recovery among poor Europeans, and especially among young workers, he argues. This new nationalism takes different economic forms: trade barriers, asset protection, reaction against foreign direct investment, policies favoring domestic workers and firms, anti-immigration measures, state capitalism, and resource nationalism. In the political realm, populist, anti-globalization, anti-immigration, and in some cases outright racist and anti-Semitic parties are on the rise. These forces loath the alphabet soup of supra-national governance institutions – the EU, the UN, the WTO, and the IMF, among others – that globalization requires. Even the Internet, the epitome of globalization for the past two decades, is at risk of being balkanized as more authoritarian countries – including China, Iran, Turkey, and Russia – seek to restrict access to social media and crack down on free expression. The main causes of these trends are clear. Anemic economic recovery has provided an opening for populist parties, promoting protectionist policies, to blame foreign trade and foreign workers for the prolonged malaise. Add to this the rise in income and wealth inequality in most countries, and it is no wonder that the perception of a winner-take-all economy that benefits only elites and distorts the political system has become widespread. Nowadays, both advanced economies (like the United States, where unlimited financing of elected officials by financially powerful business interests is simply legalized corruption) and emerging markets (where oligarchs often dominate the economy and the political system) seem to be run for the few. For the many, by contrast, there has been only secular stagnation, with depressed employment and stagnating wages. The resulting economic insecurity for the working and middle classes is most acute in Europe and the eurozone, where in many countries populist parties – mainly on the far right – outperformed mainstream forces in last weekend’s European Parliament election. As in the 1930’s, when the Great Depression gave rise to authoritarian governments in Italy, Germany, and Spain, a similar trend now may be underway. Read The Great Backlash here .
  • Avoiding Crises in Fast Growing Companies

    You want fast growth in today's economy? Fine, but with the pressure of speed comes increased danger of missteps. Kirk Dando covers a dozen mistakes that "derail growth hungry companies" in a new book, Predictive Leadership . He shares some of his key findings with Sara Murray of the Wall Street Journal 's NewsHub .
  • Knowing: Now More Than Half the Battle

    Knowledge is power. We get that. But that old statement may never have been more true than now. As Fareed Zakaria explains in this Big Think video, knowledge is now the lifeblood for any worker in the global economy. It is not an option, but essential.
  • Frankel: China's Economy Improving, But Not Yet #1

    Jeffrey Frankel is concerned that some analysts are misreading a new report from the World Bank that, among other things, touts China's increasing economic power. Yes, Frankel notes, China is getting more powerful economically by the day. But it will still take some years before it is the top economy. And it is not appropriate to call it a rich country. From Project Syndicate : Looking at per capita income, even by the PPP measure, China is still a relatively poor country. Though it has come very far in a short time, its per capita income is now about the same as Albania’s – that is, in the middle of the distribution of 199 countries. But Albania’s economy, unlike China’s, is not often in the headlines. That is not only because China has such a dynamic economy, but also because it has the world’s largest population. Multiplying a middling per capita income by more than 1.3 billion “capita” yields a big number. The combination of a large population and a medium income gives it economic power, and also political power. Similarly, we consider the US the number-one incumbent power not just because it is rich. If per capita income were the criterion by which to judge, Monaco, Qatar, Luxembourg, Brunei, Liechtenstein, Kuwait, Norway, and Singapore would all rank ahead of the US. (For the purposes of this comparison, it does not matter much whether one uses market exchange rates or PPP rates.) If you are shopping for citizenship, you might want to consider one of those countries. But we do not consider Monaco, Brunei, and Liechtenstein to be among the world’s “leading economic powers,” because they are so small. What makes the US the world’s leading economic power is the combination of its large population and high per capita income. It is this combination that explains the widespread fascination with how China’s economic size or power compares to America’s, and especially with the question of whether the challenger has now displaced the long-reigning champion. But PPP exchange rates are not the best tool to use to answer that question. Read China is Still Number Two here .
  • Ben Bernanke on Innovative Responses to Financial Crisis

    Ben Bernanke closed out a daylong discussion at the Brookings Institution titled Liquidity and the Role of the Lender of Last Resort. In his address, Bernanke talked about how the Fed--with him at the helm--responded to "unforeseen challenges" during the global financial crisis. Bernanke notes that the Fed had to be innovative because of limited legal powers.
  • IMF Releases Positive Economic Outlook Report on Asia and Pacific

    If uncertainty in Western developed economies has taught us anything this last decade, it is that the global economy depends on robust growth in Asia. So the latest projections from the IMF will be seen by many as welcome. Hitting these projections depends on Asia's policymakers staying on course. The IMF report suggests the risks are not as great as they were a year ago, but there are still clear risks: Risks to the outlook have become more balanced. Global growth has strengthened and overall global prospects have improved (especially in advanced economies). But Asia still faces new and old risks (geopolitical uncertainty, exit from unconventional monetary policy in the United States and low inflation in the euro area). The main external risk remains an unexpected or sharp tightening of global liquidity. Rapid movements in global interest rates could lead to further bouts of capital flow and asset price volatility. Pockets of high corporate leverage in some Asian economies could magnify the effects of higher interest rates and lower growth on balance sheets, and weaken domestic demand. Asia is also facing various risks emanating from within the region. Growth in China and Japan could also fall below expectations, with negative spillovers for the rest of the region. In China, a gradual slowdown as a result of reforms would be welcome as it would put growth on a more sustainable path. However, a sharp fall in growth—which remains a low risk—would adversely affect those regional trading partners that are most dependent on Chinese final demand. In Japan, Abenomics could be less effective than envisaged, resulting in lower inflation and weaker growth, with spillovers to economies that have strong trade and foreign direct investment linkages with Japan. Strong intra-regional trade integration, which is shown to have contributed to greater business cycle synchronization and spillovers over the years, could transmit geopolitically related disruptions along regional supply chains. Read the full report here .
  • A New Primer on China From McKinsey

    Do you have an hour for China? That is, do you have an hour you can spare to understand the leading economic story of the century? McKinsey's Jeffrey Towson and Jonathan Woetzel have written The One Hour China Book in an effort to bring us all up to speed on the key pieces to understanding what is happening in the world's most populous country and the impact of activity there on life everywhere. If you can't spare an hour just yet, here are the "six big trends" from the book, as shared at McKinsey Insights : Here's a little more on trend number 3: The American middle class was the world economy’s growth engine throughout the 20th century. Now, the engine is the Asia–Pacific region, which will account for two-thirds of the world’s middle class by 2030. While Chinese consumers’ focus on “value for money” has driven the rise of companies such as apartment builder China Vanke and Tingyi Holding Company—the business behind China’s dominant instant-noodle brand—buying habits are changing. As urbanization accelerates, consumer spending is becoming more like that of the West’s middle class. Urban Chinese are shopping to meet emotional needs, driving a skyrocketing demand for middle-class goods, food, and entertainment. As an example, China consumed more than 13 million tons of chicken in 2012—more than the United States. Tyson Foods’s China operations has facilities able to process more than three million chickens per week, and Chinese chicken consumption, which grew by 54 percent from 2005 to 2010, is expected to grow an additional 18 percent annually during the next five years. For additional evidence, look no further than the fact that the largest Chinese acquisition of a US company had nothing to do with technology, cars, or energy. In 2013, Chinese Shuanghui International spent $7.1 billion to buy American Smithfield, the world’s largest pork producer and processor. It’s not surprising, then, that agribusiness is one of China’s hottest new industries. Almost every aspect needs to be improved, from land and water use to logistics and retail. Legend Holdings, the parent company of Lenovo, now lists modern agriculture as one of its five core areas, with a portfolio that includes kiwi and blueberry farming. Read All you need to know about business in China here .
  • Dani Rodrik on 'Premature Deindustrialization' in Developing Economies

    At Project Syndicate , Dani Rodrik tries to make sense of "an unexpectedly large gap in productivity between large firms and small firms," in Mexico and other developing economies. This isn't what is supposed to happen. At least it doesn't follow the industrialization model of the last century and a half. "When economies develop the productivity gap between the traditional and modern parts of the economy shrinks, and dualism gradually diminishes, Rodrik writes. Today, the picture is very different. Even in countries that are doing well, industrialization is running out of steam much faster than it did in previous episodes of catch-up growth – a phenomenon that I have called premature deindustrialization. Though young people are still flocking to the cities from the countryside, they end up not in factories but mostly in informal, low-productivity services. Indeed, structural change has become increasingly perverse: from manufacturing to services (prematurely), tradable to non-tradable activities, organized sectors to informality, modern to traditional firms, and medium-size and large firms to small firms. Quantitative studies show that such patterns of structural change are exerting a substantial drag on economic growth in Latin America, Africa, and in many Asian countries. There are two ways to close the gap between leading and lagging parts of the economy. One is to enable small and microenterprises to grow, enter the formal economy, and become more productive, all of which requires removing many barriers. The informal and traditional parts of the economy are typically not well served by government services and infrastructure, for example, and they are cut off from global markets, have little access to finance, and are filled by workers and managers with low skills and education. Even though many governments exert considerable effort to empower their small enterprises, successful cases are rare. Support for small enterprises often serves social-policy goals – sustaining the incomes of the economy’s poorest and most excluded workers – instead of stimulating output and productivity growth. The second strategy is to enlarge opportunities for modern, well-established firms so that they can expand and employ the workers that would otherwise end up in less productive parts of the economy. This may well be the more effective path. Read The Growing Divide Within Developing Economies here .
  • China's Premier Says No to Stimulus Measures

    If you are waiting on China's government to make some policy moves to jump-start growth, you may want to find something to do with your time. As Aileen Wang and Adam Rose report for Reuters , Chinese Premier Li Keqiang has quashed any rumors of pending fiscal and/or monetary policy shifts. The almost unabated run of disappointing data this year has fuelled investor speculation the government would loosen fiscal or monetary policy more dramatically to shore up activity. But authorities so far have resisted broad stimulus measures. On Wednesday, the top economic planning agency said the government had less room to underpin growth because it did not want to inflate local debt risks. Still, authorities have take some steps to bolster growth. Earlier this month, they announced tax breaks for small firms and plans to speed up some infrastructure spending, including the building of rail lines. The national railway operator now plans to raise its annual investment by 20 billion yuan (1.9 billion pounds) to 720 billion yuan in 2014. There have also been moves to cut down on bureaucracy and to open up state-dominated sectors to private investors. In his speech, Li said China was positioned to sustain a reasonable level of growth over the long term. "We have set our annual economic growth target at around 7.5 percent," he said. "It means there is room for fluctuation. It does not matter if economic growth is a little bit higher than 7.5 percent, or a little bit lower than that." Read the full article here .
  • Zachary Karabell on Making Statistics More Meaningful

    Zachary Karabell is on a quest. He wants us to have a healthier relationship with economic statistics. And that means not placing too much pressure on those statistics to tell us more than they are designed to. In his latest book, The Leading Indicators: A Short History of the Numbers That Rule Our World , Karabell knocks some of the magic shine off of GDP and other key data that we follow closely. He recently spoke about GDP, income per capita, and other headline stats at the Carnegie Council . Here is an excerpt: For more information on the event, and to listen to the full talk, click here .
  • Planet Money: Greece's Economy May Stop Shrinking

    Greece's economy has a had a bad six years. At times, very very bad. But it may be getting better. The latest Planet Money podcast focuses on Greece, because the government there has put out a less-than-bad economic forecast. If the forecast is accurate, "the amazing shrinking economy will finally stop shrinking."
  • Pew: Americans Remain Bearish About the Economy

    Americans don't seem to be letting traditional economic indicators get in the way of their feelings about the economy. Andrew Kohut --Founding Director of the Pew Research Center --looks at some of the latest survey data he and his team has gathered, and calls citizens' "bearish" views of the economy as a big puzzle. As the new year began, the Associated Press summed up the optimistic outlook of experts succinctly: “Consumers will spend more. Government will cut less. Business will invest more. And more companies will hire.” In that regard, the Bureau of Labor Statistics first report of the year showed that the unemployment rate fell to a five-year low of 6.7 percent, and essentially remained at that level in February. But even so, much of the American public is still not over the Great Recession. And the factors that drive economic pessimism are not easily mitigated. Surveys show that a complex combination of partisanship and widening socio-economic gaps are in play, undermining chances of an improvement in the public mood any time soon. At the outset of what appeared to be a brightening economic climate, the Pew Research Center’s January national survey found just 16% of the public rating the national economy as excellent or good while a whopping 83% rated it as only fair or poor. This is little different than a year earlier when the survey found 12% giving the economy a positive rating and 86% rating it negatively. In fact, this is only modestly better than at any point since the onset of the Great Recession. The same pattern is seen in how Americans size up their personal finances. While Americans have a better opinion of their own finances than of the national economy, ratings of personal financial well-being remain well below what they were pre-recession. In 2007, and for much of the decade before it, about half of Americans rated their finances as excellent or good. Today, just 39% do. While there is a significant split on Americans' views about the economy based on political party affiliation, the split on personal finance issues is based on what Pew terms an education gap: Read the full article here .
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