Issue with Stiglitz

In Chapter 5 of "Making Globalization Work", Stiglitz briefly mentions the case of (former) Russian Oil Tycoon, Mikhail Khodorkovsky, citing him as an example of one of Russia's oligarchs that was righteously toppled by the Russian government in an attempt to reassert state control of former publicly owned assets. Stiglitz takes that stance that Khodorkovsky was a member of the group of oligarchs who were "stealing money from their own country". 

I don't know if this assessment is entirely fair. If I were a rich business man, and the government declared it would be selling the rights to the country's natural resources, I'd probably recognize the opportunity for major profit. No matter how cheap the prices for the resources were, they were BOUGHT, not stolen. Whats more, there is a lot of evidence that suggests that Khordorkovsky was arrested more for the growing traction of his political aspirations, than for the legality of his actions. When Khordorkovsky was arrested for not showing up as a witness in a court hearing, he was immediately presented with an enormous list of wrongdoings, suggesting that the government had been concocting an accuse for his arrest for sometime. In 2011 the European court ruled in favor of Khordovsky in a human rights violations case against the Russian Government. Just days before Amnesty International declared Khodorkovsky a prisoner of conscience in response to the Russian governments extension of Khordorkovsky's jail sentence through 2017. 

Stiglitz seems to support Putin's actions against Khodorkovsky, because he protected that states resources (or as Stiglitz would say, assets) from being stripped. But evidence suggests that Khordorkovsky was actually arrested because he posed a legitimate political threat to Putin's regime. Does this mean that Stiglitz prioritizes political stability and the protection of state resources more than he values the integrity of the political system that operates in a country?

Response to Imagine India

“Imagine India”, by Nandan Nilekani considers the past and present challenges that India has faced and is currently facing, and attempts to offer to insights on how India will continue to develop in the coming century. Nilekani is a successful entrepreneur in the burgeoning IT sector of India’s economy and represents the new face of India’s growing ingenuity on the global stage. “Imagine India” breaks down India’s troubles with education, urban planning, the IT sector, and healthcare, while also highlighting the enormous gains that India has made both economically, and culturally (specifically in the realms of education and expectations for a better future from the general populous). Ultimately, “Imagine India” is an optimistic vision and compelling argument for the future success of India in the global market. 

One of the themes that Nandan Nilekani explores during the course of “Imagine India” is the idea that India and China are both quickly developing nations, but their development is taking two very different paths. China represents an autocratic controlled capitalistic regime, where the government is able to make snap decisions without the input of the population. This has enabled China to accomplish enormous feats, such as the Three Gorges Dam without worrying too much about civilian dissent. India, despite all of its infrastructure and corruption woes, possesses a very healthy democracy, perhaps the healthiest of all the developing nations in the world. The difference in approaches to development means that China and India are experiencing different growing pains, and Nilekani contends that though India’s democracy presents challenges for growth, it also ensures that no major mistakes are made. He writes, 

“A common grouse we have in India is how slow we are—to reform, adapt and change, especially compared to our neighbor China. But my belief is that while democracies may be slow, they are also more cautious than autocracies, and this makes them less prone to committing truly egregious errors. Standing and ruminating over voter considerations after all is much more preferable to dashing straight into a gorge.”

An example that Nilekani cites is the two populations’ different methods for pursuing population control. Because China is an autocratic regime, it decided on and implemented the One Child Policy without the consent of its constituents. While efficient, the One Child Policy has resulted in unforeseen social tensions in China—there is a disproportionate number of men to women, their population is now rapidly aging, and human rights atrocities have been committed as a result of cultural preferences for male children. The flip side is India, where the government has never been able to effectively instigate a national birth control program because voters have never approved one. As a result, while India is still struggling with a massive population, this massive resource of human capital may prove beneficial to India as it continues to develop. The concept that Nilekani cites in this instance is the idea of “demographic dividend”, the idea being that civilizations progress the fastest when their birth rate remains high but their mortality rate drops, essentially a baby boom, that ultimately results in higher productivity and innovation in the following years.

            The point that Nilekani really wants to get across here is that China’s autocratic regime is often lauded for its high efficiency when it comes to implementing government programs, but this can sometimes be a major detriment. Take for example China’s Three Gorges Dam. A marvel of human ingenuity, the dam boosts China’s hydroelectric power and makes the Yangtze river more navigable. But at the same time the dam has displaced 1.4 million Chinese citizens, who had no say in the matter, and the dam now presents ecological problems within in AND outside of China (Check out this article, it is suspected that the Three Gorges Dam may be wrecking havoc on India’s rivers), including contributing to a major draught in China last year. The Three Gorges Dam and the One Child Policy are both examples of wide sweeping policies enacted by the Chinese government that have had major unforeseen consequences. Such sweeping projects with negative side affects would never occur in India, because the citizens have a voice in the government.

Aging Population--More Immigration?

In his article, "The IMF Strikes Back", Kenneth Rogoff closes with a call for a "Global Bargain", in which aging developed nations invest in younger developing nations. He writes that a Global Bargain is mutually beneficial for both the developed and developing nations, because developing nations need investment and funding right now, and developing nations need revenue in the future to pay for the population bulges that will be retiring. 

This point is echoed by Nandan Nilekani in "Imagining India", when he contends that one of India's major economic advantages in the coming century is that India has not yet reached the peak of its "demographic dividend" and should continue to see massive growth. This gives India an advantage over countries that have had to artificially control their population, such as China (a fact that Nilekani then uses to punch home a point on the advantages of democracy over autocracy). This means that India is poised to become a major economic power in the next century, should things continue smoothly. 

After reading and synthesizing these points, it seems especially imperative to me that the U.S. pursue solutions for the baby boomers looming retirement with more urgency. My generation has always grown up hearing "you'll be paying for the baby boomers", but this point is finally be driven home to me--in order for the United States to remain as competitive as it is today, we will need a larger, younger tax base, as well as younger creative individuals powering the economy as the U.S.'s population bulge retires. One possible solution to this problem that occurs to me is immigration. The U.S. is fortunate to be seen around the globe as a country of opportunity and wealth--and because of this the U.S. ranks number 1 in the world in the number of immigrants moving into the country. The US should use this allure to its advantage, by allowing more immigrants into the US, it could create a wider tax base. In addition, legislation such as the Dream Act, should be passed. The Dream Act seems like a fair trade to me--although these immigrants were originally illegal (through no fault of their own) they have proven themselves to productive members of society, who can only help the United States on a global level, by sheer numbers and the possibilities for ingenuity that the could bring to the American economy. 

Russia, China... UN Security Council?

Just finished reading Sorrelle's post on the UN Security Council's inability to intervene in Syria. I think that it is definitely an accurate assessment to say that the U.N. Security Council is in factions right now, but I don't think that the factions are merely just the result of skepticism due to recent US intervention efforts. This CNN article points to economics as one of the possible explanation for China's and Russia's reluctance to condemn the Syrian government. Russia has been dealing arms to the al-Assad regime, and China has been Syria's 3rd largest importer in recent years. However the divide between Russia and China and the other permanent members of the UN Security Council may also be an ideological divide. Looking at the 5 permanent member countries, Russia and China stand out as ideological black sheep. China is notorious for its human rights abuses, and over 100,000 protestors demonstrated in Moscow this weekend over allegations of voter fraud in Russia's last election. While I wouldn't go so far as to say that these two governments actively pose dangers to their citizens, they seem less concerned with their own citizen's well-being than they do with political stability. Which leads me to wonder how effectively two countries that are questionable when it comes to human rights can mitigate international conflicts and maintain peace? 

It isn't practical or prudent to kick China and Russia off the security council, but perhaps thought could be given towards reforming the veto clause. We've been discussing how economics sometimes clashes with human rights and the protection of life, and compared with the complexities of intellectual property laws, streamlining the ability of the UN Security Council to intervene on the behalf of innocent civilians seems like an easy fix. 

Patent Trolls

While reading the "Patents, Profit, and People" chapter of Stiglitz's book, I was reminded of a news report I heard over the summer detailing the rise of patent trolls. Here's a recent podcast done by a Boston University Law Lecturer, James Bessen, that explains the patent troll phenomenon in detail. Essentially, patent trolls are companies that buy up patents (specifically, what Bessen calls "garbage patents", patents that are broad and unclear) and then file lawsuits against companies for infringing upon these patents. Bessen headed a study that discovered that law suits filed by patent trolls could be held accountable for hundreds of billions of lost revenue. Bessen then continues, postulating that the patent trolls aren't just siphoning away money, but they are also slowing innovation, since tech companies need to settle lawsuits for new software or technologies before they can hit the market. This relates back to Stiglitz's point that the current patent system needs reform, since there are cases, such as patent trolls, where patents are actually stifling innovation.

Microfinance

In 2006 Muhammad Yunus of the Grameen Bank won the Nobel Peace prize for pioneering the concept of "microfinance"--giving out small loans to small impoverished households. His award brought international attention to the microfinance industry, which for a while seemed like a magic bullet for international poverty. Problems started in 2010, when reports of endemic suicide, caused by the stress of microfinance, started surfacing in India. In 2011, Bangladesh's government forced Yunus (A NOBEL PEACE PRIZE WINNER) to step down. Now according to the Economist, the government is trying to forcibly restructure and lay claim to the Grameen Bank. 

The rational for the government trying to intervene with the Grameen empire is somewhat nebulous, considering Grameen has partnerships with many companies abroad, which could be spooked by a government take over. That said, Grameen employs over 37,000 people and made over $592 million dollars worth of profit in 2010, making it a glistening jewel for a power hungry state… 

http://www.economist.com/node/21543547

Lobbyists

New tangent, same podcast. Here's another Planet Money podcast, this one dealing with lobbying in the United States. A recent study has discovered that lobbying Congress yields inordinately large sums of money--to the point where it could be considered a lucrative business investment. This podcast goes right to source, interviewing Jack Abramoff. 

I found the podcast extremely relevant to what Stiglitz is saying in Making Globalization Work. On page 79 he writes, "Special interests are largely to blame--not special interests in the developing counties resisting trade liberalization, as proponents of trade liberalization complain, but special interests in the developed world shaping the agenda to benefit themselves, while leaving even the average citizen in their own countries worse off. The negotiators, in representing their immediate "clients"--the corporations that lobby them heavily and constantly, partly directly, partly through lobbying congress and the administration--often lose sight of the big picture, confusing the interests of these companies with America's national interests or, even worse, with what is good for the global trading system."

Interesting what he says about the average American citizen. In fact, Planet Money details how one particular act that was heavily lobbied, the American Jobs Creations Act, has (in retrospect) been condemned by the Senate Permanent Subcommittee on Investigations as an act that "Did not produce any of the promised benefits of new jobs or increased research expenditures to spur economic growth". Corporations were given a 30% tax windfall and it did little to help the average citizen, a fact that sheds doubt on the relationship between corporate and American interests. 

Planet Money: The Original Chinese Capitalists

Ok last post on China for awhile… 

Stiglitz and Wolf both hold up China as an example of a developing nation that has flourished with globalization. Stiglitz writes on how China has averaged near 9% growth for the past 3 decades (11) and has lifted hundreds of millions of people out of poverty (23). While Wolf attributes this success to deregulation and the opening up of special economic zones, and Stiglitz attributes the success to careful management of a potential hazardous boom bust cycle, it is important to remember that following the Cultural Revolution, China was an extremely poor, vulnerable and economically depressed country. This podcast details the spark that arguably started China's meteoric rise. In 1978, farmers in a small town took a revolutionary step and started farming for themselves. This was extremely illegal in Communist China, where all goods were supposed to be collected by the government and redistributed. The end of result of these Chinese farmers' experiment has to be considered one of the most compelling arguments for the benefits of a capitalist system in the past 100 years (at least on a micro level). Check out this Podcast from NPR's Planet Money!

BBC Talks With Chinese Economist

http://www.bbc.co.uk/programmes/p00msxgh

In the same vein as last weeks post, BBC's Zeinab Badawi discusses China's recent economic growth pains with prominent Chinese Economist Cheng Siwei. During the course of the discussion, Badawi tries very hard to get concrete answers concerning the growing number of riots and public dissent that have come to light in Chinese society, and tries to make the case that these are signs that China's system is starting to show cracks. Cheng meanwhile contends that China's economy has only slowed because of the financial crisis in the West, which has slowed down demand for Chinese exports. This is interesting--showing tension between a newly developing country and countries that have been developed for sometime.

Mass Suicides at Chinese Microsoft Plant vs. Free Trade

http://www.cnn.com/2012/01/11/world/asia/china-microsoft-factory/index.html?hpt=hp_t3

Today in class we were asked whether or not we supported free trade. At the time my answer felt obvious, of course I support free trade. This was probably influenced by our first reading, from Martin Wolf, who makes the hypothetical argument that it makes little sense for America to set prohibitive barriers that create 50 separate economies. In same way, it doesn't make sense for the world to be divided into 200 separate economies. This logic seemed compelling at the time, but the more I think about it, the more unsure I become in the free market logic. Take for example the afore mentioned article. The details are a little sparse, but its slightly perturbing to think that in order for us to consume products for a "reasonable" price here in America, our goods need to be created by Chinese workers toiling in a sweat shop. Not just toiling, but treated poorly enough to consider mass suicides in order to improve working conditions. This article makes me reflect on my earlier assuredness in the free market, perhaps I do support some sort of regulation after all?