Who runs the world?
Wrestling for influence
The post-war global institutions have largely worked well. But rising countries and growing threats are challenging their pre-eminence
THE powerful, like the victorious, do not just write history. They grab the seats at the top tables, from the United Nations Security Council to the boards of the big international economic and financial institutions. They collude behind closed doors. They decide who can join their cosy clubs and expect the rest of the world to obey the instructions they hand down.
That is how many outsiders, not just in the poor world, will see the summit that takes place from July 7th to 9th of the G8, the closest the world has to an informal (ie, self-appointed) steering group. Leaders of seven of the world’s richest democracies, plus oil-and gas-fired Russia, gather this year in Toyako, on Hokkaido in northern Japan, to ruminate on climate change, rising food and energy prices, and the best way to combat global scourges from disease to nuclear proliferation.
But in an age when people, money and goods move around as never before, this little group no longer commands the heights of the global economy and the world’s financial system as the core G7 used to do when their small, purposeful gatherings of the democratic world’s consenting capitalists first got going in the 1970s. Nowadays summits produce mostly lengthy communiqués and photo-opportunities. And Russia’s slide from democracy into state-directed capitalism has lowered the club’s political tone.
In an effort to show that the G8 is still up with the times, Japan, like Germany last year, has invited along for a brief chat leaders from five “outreach” countries: Brazil, China, India, Mexico and South Africa. Yet this handshake between those who did best out of the 20th century and some potential shapers of the 21st leaves hanging the question of how the old world order should be adapting to the new.
Might the world be better managed by such a G13? Or a G15 or G16, to include a couple of weighty Islamic states too? Or, to preserve the group’s original globe-steering purpose, by a G12 of the world’s biggest economies? Meanwhile, the global institutions set up after the second world war are also having to look hard at their own futures. Unlike the G7/8, which takes on a bit of everything, these institutions basically divide into two sorts: economic and financial, and political.
At the pinnacle of world political management, but looking increasingly anachronistic, is the UN Security Council. Of its 15 members, ten rotate at the whim of the various UN regional groupings. The other five, which wield vetoes and are permanent, are America, Russia, China, Britain and France, roughly speaking the victors of the last long-ago world war. Alongside them is a secretary-general (currently Ban Ki-Moon from South Korea; this job, too, tends to go by regional turn), a vast bureaucracy at UN headquarters in New York, and hundreds of specialised agencies and offshoots (see table).
The world had to be saved not just from another war, but from a repeat of the Great Depression of the 1930s. That job went to a clutch of institutions: the World Bank and the International Monetary Fund (IMF), jointly known as the Bretton Woods institutions after the place of their creation; the Organisation for Economic Co-operation and Development, a rich-country think-tank set up in 1961; the much older central bankers’ Bank for International Settlements; and the World Trade Organisation (WTO, formerly the GATT).
They have been buttressed too by conventions, conferences, courts, declarations, dispute-mechanisms, special mandates and treaties governing everything from human rights to anti-dumping complaints. The whole elaborate architecture has had extra underpinning from strong regional organisations, such as the European Union, and less elaborate ones like the African Union and the various talking-shops of Latin America, the Arab world and Asia, as well as from steadying alliances, such as NATO. As a result, there has been no return to the disastrous global conflicts of the first half of the 20th century.
Yet that very success has become one of three powerful pressures to adjust the way the world is run, as new economic winners (and some new losers) demand a say. Pressure also stems from intensifying resentment and frustration. After ringing declarations on human rights and even the adoption by a UN world summit in 2005 of a “responsibility to protect” against genocide and crimes against humanity, the UN Security Council still finds itself unable to agree to do much to protect the people of Darfur, Zimbabwe, Myanmar and others from the murderous contempt of their rulers—just as in the 1990s the UN failed the genocide victims in Rwanda.
If the Security Council, with a charter of high principles at its back, shows such feebleness towards tyrants (or to those who cavalierly flout nuclear treaties), doesn’t it deserve to be bypassed? John McCain, the Republican candidate for president of the United States, supports the creation of a new League of Democracies which, its boosters argue, would have not only the moral legitimacy but also the will to right the world’s wrongs effectively.
The third impetus to rejig the way the world organises itself is a dawning realisation on the part of governments, rich and poor, that the biggest challenges shaping their future—climate change, the flaws and the forces of globalisation, the scramble for resources, state failure, mass terrorism, the spread of weapons of mass destruction—often need global, not just national or regional, solutions. The shift in 21st-century economic power alone is justification for rebalancing influence in the top clubs. Much harder to figure out is which bits of the global architecture need mere tweaking, which need retooling or replacing—and who should have the right to decide.
After decades of dividing the world into the rich and powerful West and the developing (or emerging) “rest”, China’s rapid growth and the economic dynamism of East Asia had led to talk of a new “Pacific” century well before the old “Atlantic” one had ended. On present trends, somewhere between 2025 and 2030 three of the world’s four largest economies will be from Asia. China will just pip America to top the global league, with India and Japan, both determined but so far unsuccessful campaigners for permanent seats on the UN Security Council, following on (though Chinese and Indians will still be, on average, much poorer than Americans or Japanese).
Not unipolar but what?
Yet talk of an Asian century sounds quaint. Despite America’s brief “unipolar moment” as its rival pole, the Soviet Union, collapsed, Russia has recovered to join a rising China, America, Europe and Japan in a new constellation of big powers that is based on far more than the old boot-and-rocket counts of the cold war. Bring India into the snapshot, and you capture 54% of the world’s population and 70% of GDP. Whether the leaders of this multipolar world will rub along or bash elbows remains to be seen.
Globalisation’s increasingly unfettered flow of information, technology, capital, goods, services and people has helped spread opportunity and influence far and wide. To re-emergent China and Russia, add not just India but Brazil (these four bracketed by Goldman Sachs in 2001 as the upcoming BRICs), Mexico, South Africa, Saudi Arabia, South Korea and Australia, to name just some of the new winners as money changes pockets and the world turns faster.
A modern map of power and influence should also include transformational tools such as the internet; manipulators from lobbying NGOs to terrorist groups; profit-takers such as global corporations and sovereign wealth funds; and unpredictable forces such as global financial flows. The principal characteristic of this world, argues Richard Haass of the Council on Foreign Relations in a recent Foreign Affairs article, is not multipolarity but “nonpolarity”. Dozens of actors, exercising different kinds of power, vastly complicate the effort to find a better balance of influence and responsibility. But the excuse of complexity is no answer to the demand for equity.
Some clubs have proved more responsive than others. China got a new economic start simply by ditching Marx, Lenin and Mao. But its reformers were able to tap the liberal rules-based system codified in the rules of the IMF and the World Bank (and later the WTO) for ideas as well as cash. China rejoined the bank in 1980 (the Nationalist government on Taiwan had been a founder member) just as its reforms got under way. Ironically, Communist-run China has since been one of the system’s biggest beneficiaries. But it is by no means the only one. Despite the latest stockmarket dips and credit squeezes, world income per head has increased by more over the past five years than during any other similar period on record.
The IMF and the World Bank, pragmatic institutions from the outset, have adapted already, in fits and starts. In April the IMF reformed the peculiar formula by which it allocates votes and financial contributions according to economic size, reserves and other measures (see chart). China’s share of votes will increase to 3.81%, still far short of its weight in the world economy. Meanwhile, old power patterns still determine who holds the two top jobs: the bank is run by an American, the fund by a European. But a bigger problem for both organisations is relevance.
Until the late 1990s the IMF, monitor of exchange rates and lender of last resort to struggling governments, had plenty of work. But emerging economies, once its chief clients and source of earnings in repaid interest and loans, are these days often awash with their own cash. Earlier this year the IMF board voted to cut staff and sell off about an eighth of its gold reserves (some 400 tonnes) to meet expected future funding shortfalls. With no obvious role in coping with the aftermath of the recent banking and stockmarket turbulence, its future role may be more as an expert economic adviser.
Some worry that the world may still need a lender of last resort. Critics think the fund’s days should be numbered and its reserves put to better use for development. Still others muse that what is needed is a World Investment Organisation, to set basic rules and better track the huge and complex flows of cash that now wash around in hedge funds, sovereign wealth funds, banks and financial markets.
The World Bank has a more certain future, but still needs to retool. Competition has stiffened from private capital markets. Many governments that once needed the bank’s help for dams, roads and other big projects are earning plenty from the sale of raw materials. Even in Africa, the readiness of China and India to spend liberally without strings in pursuit of oil and minerals means that the Sudans and the Congos can take the bank’s cash and ignore the conditions attached.
Yet the bank still has a role lending to unfashionable causes, or countries which donors neglect. It could also provide global public goods: funding energy-infrastructure and climate-change projects are two examples, agriculture another.
A bit too equal
While the bank and the fund are steered by their biggest shareholders, the WTO, though relying on a representative caucus of states to hammer out deals, belongs to all its members: India and Brazil, for example, are at the heart of the Doha round of trade talks. But egalitarianism can be a weakness as well as a strength.
Much admired, at least by government lawyers, are the 60,000 pages of jurisprudence that govern the workings of the WTO dispute mechanism, which has helped resolve many a trade spat. The WTO ensures that members do not discriminate among each other—the best deal they offer to anyone must be extended to everyone. This has helped level the playing field and expand world trade. Russia’s is the only large economy still outside the WTO, and that is its choice.
Yet those wanting to join must strike deals with each of the existing members—now a daunting 152. Operating by consensus means that the Doha “development” round has bogged down in disputes between developed and developing countries over complex, reciprocal cuts in farm subsidies and tariff barriers. The prospects for moving on to services look dim. Slow progress has helped push many to forge bilateral or regional deals instead. And if the Doha round fails completely, the recriminations could run far and wide—threatening any attempt, for example, to get agreement between the developed and developing world on new mechanisms to deal with climate change.
Economic and financial power is to some extent up for bids by governments with a stake in the game, and trade rules are (arduously) negotiable. Yet the distribution of political power has proved stubbornly—debilitatingly—resistant to change.
Most bitterly contested is membership of the UN Security Council, which has the right (whether exclusively or not is hotly debated) to decide what constitutes a threat to world peace and security, and what to do about it. In the UN’s other big decision-making institution, the General Assembly, all the world can have its say, and does. But here outsiders take their revenge: a caucus of mostly developing countries called the G77 (but these days comprising 130 members including China) tends to dominate and filibuster.
Might it assuage resentment and improve the council’s authority and the UN’s effectiveness if America, Britain, France Russia and China invited other permanent members to join them—and considered giving up their veto? When the P5, as they are called, first grabbed the most powerful slots, the UN had 51 members; decades of decolonisation and splintering self-determination later, it has 192. The obstacles to reform grow no smaller either.
Most recently a concerted effort by Brazil, Germany, India and Japan (a self-styled G4) to join the council’s permanent movers and shakers was thwarted by a combination of foot-dragging, jealousy and stiff-arming. African countries failed to agree on which of their several aspirants should join the bid. Regional rivals—Argentina and Mexico, Italy, Indonesia, Pakistan and others—lobbied to block the front-runners. China made it clear it would veto Japan; America, in supporting only Japan, helped destroy its friend’s chances.
New permanent members would broaden the regional balance. That could add authority and legitimacy to council decisions. Bringing in not only nuclear-armed India, but soft-powered Japan and the rest, would undercut the notion, perpetuated by the P5, that to be a winner you need first to crash the nuclear club.
But might the price of a larger, permanently more diverse council be more potential spanner-tossers and thus greater deadlock? The hope would be that once difficult outsiders got their feet permanently under the table, sharing the responsibility for managing the world would stop them protecting bad elements, as South Africa (currently a rotating member) has been doing with Zimbabwe, in part to defy the permanent five.
Prising the P5 from their vetoes might, however, have adverse effects. It was dependable veto power, ensuring their vital interests were never overridden, that kept America and Russia talking at the UN—and Nikita Khrushchev shoe-banging—through the darkest episodes of the cold war. Russia will not forget the mistake of the brief Soviet boycott of the council that led to force being authorised to repel North Korea at the start of the Korean war in 1950. China shows no sign of veto self-effacement, either.
But staying at the table does not guarantee agreement. The UN is deliberately an organisation of states, and states differ for reasons good and bad. George Bush went to war in Iraq without explicit backing from the Security Council (just as NATO went to war to end ethnic cleansing in Kosovo, despite Russia’s certain veto had the issue come to a council vote). But the council’s divisions on the most contentious issues have not prevented responsible stewardship elsewhere. A Security Council summit in 1992 agreed that the proliferation of weapons of mass destruction was a “threat to peace and security” to be dealt with forcibly if need be. After the attacks of September 11th 2001, new resolutions were passed to curb terrorists’ finance and keep nuclear, chemical and biological weapons out of their hands.
There has been a huge increase over the past 15 years in the numbers of blue helmets, with 100,000 soldiers and police currently deployed. This is credited with helping to reduce the number of conflicts between states, as well as calming civil wars from Bosnia to Haiti, from Cambodia to Sudan, from Congo to Lebanon. Acceptance, at least politically, of a “responsibility to protect” takes the council towards territory which, earlier this decade, it would not have approached: an International Criminal Court, for example, separate from the UN but able to take its referrals, and ready to prosecute the worst crimes.
Yet divisions among the P5 have often slowed deployment of peacekeepers where they are most needed, such as in Sudan’s war-torn province of Darfur. Pessimists doubt that China and Russia, both arch-defenders of the Westphalian principle that state sovereignty trumps all, will ever seriously contemplate authorising forceful intervention even to end a genocide. A new UN Human Rights Council has yet to prove it is any better than its discredited predecessor at bringing brutal governments to book.
Meanwhile it took years, and North Korea’s 2006 bomb test, for China to condemn Kim Jong Il’s nuclear cheating and let the Security Council pass judgment on it. The P5 plus Germany have worked together over the past three years, slapping a series of UN resolutions and sanctions on the regime in Iran for defiance over its suspect nuclear work, yet Russia and China have doggedly watered down each text, line by line.
Doing it for themselves
There is much the UN Security Council will never be able to do, no matter who occupies its plushest seats. And there are lots of other ways to get useful things done these days. The internet helps campaigners on human rights, as on other issues, to get their message round the world rather effectively. Stung by constant exposure and criticism of its policy in Sudan and Darfur, China appointed a special envoy (who soon found he had a lot of explaining to do) and shifted ground on the need for a UN force, even though deployment is agonisingly slow.
In some cases, regional organisations are better equipped to take the strain. Enlargement of the EU and NATO has helped stabilise Europe’s borderlands, with mostly European troops and police these days in the Balkans. Russia may protest, but its western frontier has never been more peaceful.
On a similar principle of African solutions to African problems, the African Union has provided troops in Sudan and elsewhere. But devolving security jobs to the neighbours can be a disaster: the AU delegated the problem of what to do about Zimbabwe’s Robert Mugabe to a southern African grouping, SADC, which left it to South Africa’s Thabo Mbeki, who did nothing. The hard-pressed people of Zimbabwe are still waiting for relief.
East Asia, the other big potential battlefront in the cold war, used to look very different from Europe, which has long had more than its share of shock-absorbing regional clubs and institutions. Now, alongside the Association of South-East Asian Nations (ASEAN), a still limited talking-shop, other regional conversations are starting up. The ASEAN Regional Forum draws in not only China, Japan and Korea, but Americans, Russians and Europeans; ASEAN-plus-three summits are clubbier, involving only regional rivals China, Japan and Korea. A new East Asian Summit excludes America but brings in India and Australia, among others; Americans naturally prefer to boost the Asia-Pacific Economic Co-operation forum (APEC). Meanwhile Russia, China and their Central Asian neighbours have founded the Shanghai Co-operation Organisation, in part to counter Western influence in the region as NATO battles on in Afghanistan, but in part so that Russia and China can keep an eye on each other. Annual joint military exercises are a new feature.
Problem-solving groups come in all shapes and sizes, from quartets (for promoting Middle East peace or trying to settle the future of Kosovo) to entire posses. Some 80 countries in the Proliferation Security Initiative (an “activity not an organisation”) exchange information and train together to sharpen skills for blocking illicit shipments of nuclear or other weapons materials. Like the P5 plus 1 talks on Iran (sometimes called the E3 plus 3 by Europeans), there are six-party talks hosted by China on North Korea (and including America, South Korea, Japan and Russia), which could yet evolve into a formal north-east Asian security dialogue.
More countries are taking the initiative. China, Japan and South Korea, East Asia’s rival powers, will meet this year for a first 3-minus-ASEAN summit. China, India and Russia meet from time to time to re-swear allegiance to multipolarity. They may have little more in common than an ambition to put Europe and America in the shade, but earlier this year the foreign ministers of the four BRIC countries got together for the first time; their economic and finance ministers will soon meet too. And with a wary eye to China’s growing economic and military weight, America, Australia and Japan have formed something of a security threesome, though Japan’s plan to include India too was deemed a bit provocative.
Quirky but familiar globe-spanning organisations include the Commonwealth, which knits together Britain’s former colonies plus other volunteers and does good works in all sorts of out-of-the-way places, and the Non-Aligned Movement, a cold-war hold-over with 116 members and communiqués that leave no prejudice unrecorded. But what of Mr McCain’s endorsement of a League of Democracies?
The notion isn’t new. An American sponsored Community of Democracies got going with fanfare in 2000. There is nothing wrong with mobilising freedom-loving governments to speak up for democracy. But there are difficulties.
Last time, America found it hard to say no to friends, and not all its friends are democrats. The new League (or Concert) of Democracies would have clearer rules for ins and outs. Supporters see it as potentially an alternative source of legitimacy, should the Security Council be hopelessly divided: a two-thirds majority of the roughly 60 countries that might qualify could even authorise the use of force to deal with threats to peace or to uphold the principle of a “responsibility to protect”.
But would a group of countries that spans all continents from Botswana to Chile, and Israel to the Philippines, ever manage to agree on much? A supposed democracy caucus at the UN has achieved little. Dividing the world ideologically again seems a step backwards to some. Nor could such a club solve pressing global problems. Coping with climate change needs China as well as India; energy security needs Saudi Arabia and Russia, as well as oil-dependent Japan or the Europeans.
The good news, given the rise of lots of new powers and players, is that this is not the 19th century. Then governments had few means other than gunboats to settle their differences. There are plenty of guns about these days, but also many other ways to settle the world’s disputes.
Asia.view
Overconfident India
Indians are complacent about the perils of multi-lateral diplomacy, and much else
IT CAME like monsoon rain, after a head-aching spell of summer heat. On July 7th, ending months of mixed messages and tiresome speculation, Manmohan Singh, the prime minister, said that India would press ahead “very soon” with a controversial policy: a civil-nuclear co-operation agreement with America.
This would give India access to nuclear fuel and technology, despite its refusal to sign the Nuclear Non-Proliferation Treaty. In a country with massive energy needs, and pretensions to global-power status, that would be momentous. Only, the deal is not yet done: it needs approving by the UN's International Atomic Energy Agency, the 45-nation Nuclear Suppliers Group (NSG) and America's Congress. Winning their blessings before President George Bush's term expires next January will be tight.
Feeling chuffedNot that you would necessarily know this from Indian media coverage of the saga. Most Indian commentators—including those within the ruling Congress party—appear to have concluded that, now that Mr Singh has plumped for it, despite opposition from his government's parliamentary allies, the deal is a dead-cert.
They may turn out to be right. Mr Bush will certainly push hard for it. But with several other NSG members having expressed concerns, and the attitude of China, India's great rival, still unknown, the deal's safe passage cannot be assumed. Then again, it is unsurprising that so many Indians do assume it. A pronounced feature of their country's rapid emergence is the awesome self-confidence—and sometimes hubris—it inspires in Indian breasts.
No visitor to the country can fail to be impressed by this. Its English language newspapers—admittedly, read mainly by a prospering minority—would never let them. They have long tended towards triumphalism—notwithstanding more sober recent headlines, inspired by high inflation and a plunging stockmarket. Thus, the latest foreign acquisition by “India Inc.”, as the country's private sector is known, is a sure-fire splash. On editorial pages, Indian economists have long predicted China-style, double-digit economic growth for their country.
Opinion polls—which tend to represent the views of relatively-rich city-dwelling Indians—also make rousing news. A survey of global attitudes, released last month by the Pew Research Centre, found that a higher proportion of Indians felt positive about their national economy than all except Chinese and Australians (though the proportion of sunny Indians, at 62%, was 12% down on the previous year).
Indeed, they have had lots to be cheered by. Over the past three years, India's economy has grown at a magnificent average of 9% a year. And the private sector—whose foreign investments last year exceeded those made in India by foreign firms—has led the charge.
As has been widely reported, the fruits of India's economic rise are rich and varied. The country's massive armed forces are modernising. The diplomatic corps is swelling. India's revered cricketers, who were never so rich and pampered, are doing consistently better than they have ever done before.
But, impressive as these successes are, they do not augur the imminent global dominance that many Indians seem to expect. Foreign visitors to India are also invariably impressed by its dreadful problems: the ever-present poor; perilous and congested roads; disorderly and congested airports; the moronic regulations still imposed by the state.
So, what makes Indians so buoyant? Perhaps, relief: that the dark decades of soaring population growth, inching economic growth and intractable poverty, are finally over. No doubt, too, some prominent Indians are a little naive about the realities of multi-lateral diplomacy and ill-informed about the paths to development that others have trod. With little opportunity to travel, and a whole world within their borders, Indians have tended, until relatively recently, to be rather inward-looking—unlike the country's vast and thriving diaspora.
Perhaps, too, there may be something about living always in a crowd that encourages loud and overconfident opinion-giving. Or maybe, in their national subconscious, Indians have calculated that audacity, however unfitting at the time, simply works for them. It is certainly a feature of their brilliant entrepreneurism: another national characteristic—exhibited in teeming slums as well as in corporate boardrooms.
As for the nuclear deal, Indians' blithe faith in its chances may stem from something else altogether. The Pew Research Centre found that Mr Bush's approval rating in India was “still astonishingly high” at 55%. In fact, Indians were the only people sampled who rated Mr Bush more highly than they did Vladimir Putin, Angela Merkel and Nicolas Sarkozy. So, perhaps they know something the rest of us don't?
Commentary by Mark Gilbert
July 10 (Bloomberg) -- ``Granddad Benny, is it true that capitalism committed suicide?''Granddad looked up from the fire he was stoking with bundles of 2006 and 2007 vintage mortgage-backed bonds. ``In a way, Joel, yes. In developed countries, people got too greedy, especially bankers, and everyone borrowed too much. In less developed countries, people racing to improve their living standards reawakened the slumbering inflation monster.''
Joel put down the stick he was using to scratch the dirt. ``Why did the Gigantic Global Bubble Burst of 2008 catch people unawares? Weren't there any warning signs, Granddad?''
``With hindsight, Joel, water should have set alarm bells ringing. Before the Giglobubu, wealthy people paid $15 per liter for Cape Grim bottled water from Tasmania, at a time when the Asian Development Bank estimated that 700 million people in Asia lacked access to clean water. Investment banks even started to invent securities betting that water shortages would arise. Even so, when the Water Wars started, the world wasn't prepared.
``Cyprus started buying water from its neighbor, Greece, because its dams were down to 7.5 percent of capacity and its desalination plants couldn't meet demand. Spain drew up plans to build a pipeline to funnel water from the Ebro River to Barcelona, the nation's second-largest city, amid the worst drought in half a century.''
Smell the Cappuccino
``Did people collect rainwater for drinking, like we do, Granddad?'' Joel asked. ``I've noticed how grumpy you get if there's not enough for you to make coffee in the morning.''
``Some did, Joel. Rich people, though, bought their coffee from shops, paying stupid money for buckets of flavored water with a dash of milk. It took Starbucks Corp. just four years to double in size, so when the company said in 2008 it planned to shut 600 U.S. cafes and chop 12,000 jobs, 7 percent of its global workforce, some clever people started to worry.
``Speaking of milk, that was another clue. All across China, millions of people earned enough to buy refrigerators for the first time. Then they rushed to the shops, buying pints of milk to put in their shiny new fridges. So energy prices surged to keep the fridges humming, and milk prices went through the roof along with other foodstuffs. Inflation climbed out of its coffin and started to terrorize the bond market all over again.''
Independent, Unelected
``What did the central banks do, Granddad? Weren't they the ones in charge of the economy?''
``Well, the most important parts of the global economy were certainly ruled by independent, inflation-targeting central banks. While their system worked fine in good times, it turned out to be a disaster when the going got tough. Governments were quick to grab back the reins of monetary policy from their unelected proxies, but with inflation spiraling higher and growth slumping, they only made things worse.''
``Did inflation kill capitalism, Granddad?''
``Capitalism sowed the seeds of its own demise because the benefits of a decade-long boom accrued to capital, with nothing flowing to labor. Telling workers who hadn't had a decent pay raise for years to tighten their belts once the good times ended proved disastrous.
``People started to realize that just because communism had lost, that didn't mean capitalism had won. Cracks started to appear. In New Zealand, the government nationalized the country's rail and ferry services, deciding it could do a better job of running the transport network than private industry.
Unraveling the Euro
``Then the euro, one of capitalism's crowning achievements, began to unravel. After Ireland rejected the Lisbon treaty in three consecutive referendums, its fellow single-currency members decided to kick the country out of the project. Once Germany and France realized how easy it was to thin the ranks back to the core gang of euro countries that they'd wanted in the first place, they started finding excuses to bar more nations, starting with Italy.
``With banks and mortgage lenders going bust faster than the government could arrange bailouts, every nut job with an Internet connection started demanding a return to something called the gold standard. When a bunch of academics joined in by denouncing fiat currencies, the general public lost all trust in money.''
``Didn't something bad happen to the animals, Granddad?''
``A locust storm forced China to cancel the 2008 Beijing Olympics. The honeybees started to die, followed by the penguins, then dolphins began to commit mass suicide on beaches all around the world. Pine beetles munched their way through the forests of North America. It got harder and harder to deny that the environment had been ruined.
Apocalypse Now
``So when a film came out called `The Road' about a post- apocalyptic world, people were already scared and angry. They started to form cults worshipping the author of the tale, a reclusive writer called Cormac McCarthy who never gave interviews and never did publicity, and had won a Pulitzer Prize in 2007. They decided he was some sort of prophet of doom.''
By the flickering firelight, Granddad could see Joel's eyelids beginning to droop.
``That's enough storytelling for one night, Master Bernanke. Go and make yourself warm under the blankets. We'll be safe in this cave until morning, then we'll press on toward the coast.''
July 10 (Bloomberg) -- John McCain has run for president twice, gone through four campaign managers, written five books and delivered hundreds of speeches. The one constant: Mark Salter, the Arizona senator's longtime aide and alter ego.
Salter, 53, is his most trusted adviser, traveling companion, image-shaper, sounding board, wordsmith and defender. He weighs in on almost every campaign decision, and in McCain's absence, even speaks for the presumptive Republican nominee.
``He's like a brother,'' said McCain, 71. ``There's no one closer to me in my life, besides my wife and kids.''
No president or potential president has had such a close relationship with an aide since John F. Kennedy relied on the counsel of his brother Robert Kennedy and speechwriter Theodore Sorensen, said Fred I. Greenstein, a historian at Princeton University in New Jersey.
Salter can read McCain's moods -- and anticipate his reactions and needs -- more keenly than anyone, allowing him to survive two shakeups of the campaign staff within a year.
It was Salter who persuaded McCain to take the offensive on the economy. He urged the candidate to emphasize the expertise he acquired as chairman of the Senate Commerce Committee, and suggested grouping McCain's wide-ranging proposals for U.S. energy independence under a single label, Lexington Project, a reference to a battle of the War of Independence.
Combative Approach
There is a downside to this comradeship, however, most notably because Salter's combativeness at times reinforces McCain's reputation for a hot temper.
When a May Newsweek article portrayed Republican campaign tactics in a negative light, Salter crafted a 1,289-word critique that called the piece ``scurrilous'' and sent it to the magazine without his boss's review.
In 2006, after the collapse of an effort by Barack Obama, now the presumptive Democratic presidential nominee, to work with McCain on lobbying and ethics, Salter wrote a letter on behalf of his boss accusing the Illinois senator of ``disingenuousness'' and ``self-interested partisan posturing.''
``Mark's kind of touchy about John,'' said Joe McCain, the senator's younger brother. ``Nobody is more loyal. He'd literally fight for John.''
Salter did just that in 1992 when an intruder caused a disturbance in McCain's Senate office. Salter escorted the man out.
`Fought Back'
``He slugged me and I fought back,'' Salter said. He held the man down until Capitol Police arrived.
Beyond protecting his boss from pests and menaces, Salter also is involved in most decisions, said Charlie Black, a senior McCain adviser.
Salter is ``a walking encyclopedia'' on ``everything John's ever done, every policy John took, every speech John made,'' Black said.
``There aren't key meetings that don't include Mark,'' said Carla Eudy, who supervises McCain's schedule.
After the fight between McCain and then-Texas Governor George W. Bush for the Republican nomination in 2000, antagonism between the candidates' advisers made it easier for McCain to oppose Bush, 62, on a range of issues, including his tax cuts.
`A Little Raw'
``Some of us were a little raw,'' Salter said.
Mark McKinnon, a former Bush media consultant now advising McCain, said Salter's role equals that played by three people in Bush's campaign: Karen Hughes, who could ``tell the candidate things he doesn't like to hear''; Dan Bartlett, who knew ``every detail of the candidate's history''; and speechwriter Mike Gerson, who could ``forge and articulate his message.''
This combination makes Salter at least as influential with McCain as Karl Rove was with Bush, who referred to his adviser as the ``architect'' of his White House campaigns.
Examples of this influence abound. When McKinnon wanted to use footage of McCain as a prisoner-of-war for an ad, it was Salter who persuaded the candidate to agree.
When McCain prepared to launch a ``biography tour,'' Salter came up with a catchier theme: the ``Service to America'' tour -- a reference to McCain's record of public service since age 17, when he enrolled at the U.S. Naval Academy.
Age Concerns
To allay concerns about McCain's age -- he turns 72 next month -- Salter urged him to talk up his mother, Roberta, who at 96, remains active.
Salter was born in Iowa. His father, a Korean War veteran, was a traveling salesman; his mother a schoolteacher. After graduating from Georgetown University in Washington, Salter wrote speeches for United Nations Ambassador Jeane Kirkpatrick. He joined McCain's Senate office in 1989 and became chief speechwriter, then chief of staff.
Salter and his wife, Diane, who was McCain's scheduler, have two daughters. They spend summers at a house in Maine they bought with royalties from the best-selling books Salter wrote with McCain, including his 1999 memoir ``Faith of My Fathers.''
Salter's intimacy with McCain would ``be dangerous if Mark wanted their relationship to be exclusive,'' Black said. ``But he doesn't; he's a great team player.''
McCain said the alter-ego label ``does a disservice to Mark.'' Salter said it was ``a myth'' because his advice is rejected ``all the time.''
Still, no one disputes their bond.
``What Salter does so exquisitely is to tell John McCain what he needs to know,'' said Kenneth Duberstein, President Ronald Reagan's White House chief of staff, ``not necessarily what he wants to know.''
July 10 (Bloomberg) -- Former Bank of England policy maker Charles Goodhart said the U.K. economy faces ``quite a recession,'' which will force the central bank to cut the benchmark interest rate.
``Output is going to fall, unemployment is going to rise, possibly quite sharply,'' Goodhart, a policy maker at the bank from 1997 until 2000, said in an interview on Bloomberg Television. ``It's a horrible situation.''
The central bank's Monetary Policy Committee kept the main interest rate at 5 percent today as policy makers gauged the threat of accelerating inflation. That has prevented them from lowering borrowing costs as house prices fall the most since 1993 and surveys show the rest of the economy is now contracting.
``The British economy is getting into quite a recession,'' said Goodhart, a professor at the London School of Economics. ``I remember when the Queen had an `annus horribilis,' and this is the annus horribilis for the MPC.'' He said the bank's next rate move will be ``down.''
Queen Elizabeth II faced what she called her ``annus horribilis,'' meaning ``horrible year,'' in 1992, when Windsor Palace caught fire and Prince Charles and his wife, Diana, divorced. The nation was then emerging from its last recession.
Job Cuts
Barratt Developments Plc today became the fifth homebuilder this month to announce job cuts, and surveys show the rest of the economy is now contracting. Together they have announced plans to shed more than 4,000 staff.
Goodhart said the timing of a rate reduction ``depends entirely on consumption.'' Retail sales unexpectedly rose 3.5 percent in May, the most since records began two decades ago, defying economists' estimates in a Bloomberg News survey for a 0.1 percent decline, a report by the Office for National Statistics showed on June 19.
``The last figure on consumption simply wasn't believed by anybody,'' Goodhart said. ``Assuming that the ONS gets their figures right next time, the next figure in consumption is likely to be a decline of pretty much the same amount. The next figure will be a horrible figure, and that will add to the general gloom,'' he said.
Rate Vote
The Bank of England has signaled it's more likely to follow the European Central Bank and raise rates rather than cut them. At least four U.K. policy makers have said they considered increasing borrowing costs last month. Minutes of today's meeting, showing how each member voted, will be published on July 23.
Consumer confidence fell to the lowest in 18 years last month, according to GfK NOP Ltd. Service industries, manufacturing and construction all contracted in June, according to surveys by the Chartered Institute of Purchasing & Supply. Lehman Brothers Holdings Inc. economists say a recession has already started and Goodhart said today that they may be right.
``The third quarter will show no growth, maybe even a marginal reduction in output,'' Goodhart said. ``I think it will last rather longer than is going to be comfortable. The situation looks dire.''
July 10 (Bloomberg) -- Fiat SpA has figured out how to beat the slump in U.S. auto sales caused by a slowing economy and record gasoline prices: sell a $115,000 sports car that gets 12 miles a gallon.
Sales of Fiat's Maseratis jumped 20 percent in the U.S. last month and are up 16 percent for the year to 1,353 vehicles, according to Autodata Corp. in Woodcliff Lake, New Jersey. Sales of all luxury cars have dropped 15 percent, and total vehicle sales are down 10 percent.
The Grand Prix-inspired Maseratis serve a niche of buyers who want something more exotic than Daimler AG's Mercedes-Benz, yet more affordable than Italian competitors Ferrari and Lamborghini, said Wes Brown, automotive analyst at Iceology, a Los Angeles-based market research firm.
``If you've got money, you want people to know you've got money, and people want to find something that not everybody has,'' Brown said. ``They are saying, `I don't want a BMW or Mercedes, which you can see on every corner.'''
Ferraris, also produced by Turin, Italy-based Fiat, cost more than $210,000 and have a years-long waiting list, Ruggero Mango, a marketing analyst for the brand, said in January. Lamborghinis, made by Wolfsburg, Germany-based Volkswagen AG, start at $190,600.
Ferrari sales slumped 9 percent in June and 3.9 percent for the first half of the year, according to Autodata. Volkswagen didn't provide sales figures for Lamborghini.
Fueling Maserati's growth are new models and an expanded network of 54 U.S. dealers, up from 32 six years ago, said Paul Faletti, vice president of sales at Maserati North America, based in Englewood Cliffs, New Jersey.
Buyer Perceptions
Customers see Maserati as more exotic than its primary competitors, the Mercedes S-Class or Bayerische Motoren Werke AG's 7-series sedans, Faletti said.
``Our biggest challenge is familiarity,'' he said in an interview. ``There is a perception in the marketplace that these cars are two or three times the price they really are.''
The typical Maserati buyer is a 54-year-old male with household income of $750,000, Maserati spokesman Jeff Ehoodin said.
Pat and Ron Eastman, who live near San Jose, California, bought a 2007 Maserati Quattroporte sedan in February for $108,000, replacing a Mercedes S-Class.
``This car is basically for play,'' said Pat Eastman, a 56- year-old money manager. ``It handles beautifully.'' Her husband, Ron, a 58-year-old venture capitalist, drives to work in a Toyota Motor Corp. Prius hybrid.
Fuel Economy
The 405-horsepower Maserati GranTurismo coupe has a top speed of 177 miles (285 kilometers) per hour, and accelerates from 0 to 60 in 5.1 seconds. Its Ferrari-built V-8 engine gets 13 miles per gallon in the city and 19 on the highway, according to the U.S. Environmental Protection Agency.
The Quattroporte, with a list price starting at around $120,000, reaches 167 miles per hour and goes from 0 to 60 in 5.5 seconds. It delivers 12 mpg in the city and 18 on the highway.
The manufacturer is required to pay a ``gas guzzler'' tax on the sale of each vehicle of $2,100 for the GranTurismo and $2,600 for the Quattroporte, according to the EPA.
Worldwide Maserati sales rose 33 percent to about 7,500 cars last year, while sales in the U.S., its biggest market, climbed 21 percent to 2,541, Ehoodin said.
Maserati turned profitable last year for the first time since Fiat bought the carmaker in 1993. The company may limit sales growth to maintain exclusivity, he said.
Decline of Lexus
Sales of Toyota's Lexus, the top-selling luxury brand in the U.S., fell 30 percent in June and are down 15 percent this year.
``When times get tougher, they are losing people at the lower edge of luxury,'' said Jim Hall, automotive product analyst at 2953 Analytics in Birmingham, Michigan, referring to Lexus. Those cars start at $31,000.
BMW sales fell 17 percent in June and 9 percent for the first half of 2008. Sales of Stuttgart-based Porsche SE declined 19 percent in the month and 16 percent so far this year. Mercedes sales dropped less than 1 percent in June and are up almost 1 percent this year.
Purchases of General Motors Corp. vehicles slid 16 percent in the first half of 2008 and sales at Ford Motor Co. declined 14 percent.
The U.S. economy has lost 438,000 jobs this year, pulling consumer confidence to a 16-year low. Wall Street firms alone have announced cuts of almost 90,000 jobs amid a collapse in sub-prime mortgage bonds. Home prices fell 6.3 percent in May from a year earlier, according to the National Association of Realtors, while regular gasoline prices reached a record $4.108 a gallon on July 6, according to motorist group AAA.
Return With Spyder
Maserati pulled out of the U.S. market as a closely held company in 1991. Fiat began offering the brand in the U.S. in 2002 with the Spyder coupe. In 2004, it released the Quattroporte, designed by Ferrari's styling group Pininfarina.
Earlier this year, Maserati also began selling the Pininfarina-designed GranTurismo, said Bill Morell, sales manager at Foreign Cars Italia in Charlotte, North Carolina.
``Maserati has a niche,'' Morell said. ``Exclusivity is a big factor. When the client pulls up to the country club in a Maserati, it's going to have a different impact than an S- Class.''
July 10 (Bloomberg) -- The Reverend Jesse Jackson's derogatory comments about Barack Obama could provide a boost for the presumptive Democratic nominee, giving him an opportunity to win over some voters who have been skeptical of his candidacy.
Jackson was appearing on Fox News on July 6 when a microphone picked up his remark suggesting that Obama was ``talking down to black people'' in recent speeches at black churches, according to a tape of the comments played on the Fox News Channel.
He then said, referring to Obama, ``I want to cut his nuts off,'' according to the Fox News Web site.
Jackson was speaking at the time to Reed Tuckson, executive vice president and chief medical officer of United Health Group Inc.
Jackson, 66, apologized for his remarks, telling CNN yesterday that they were ``crude.'' The comments may turn out to help Obama by emphasizing his call for personal responsibility, a favorite topic of Republicans, said Mark Rozell, a professor of public policy at George Mason University in Arlington, Virginia.
``It reinforces Obama's effort to present himself as an advocate of responsible personal behavior, a position that Republican candidates like to secure as uniquely their own,'' Rozell said.
The Illinois senator, who in August stands to be the first minority candidate to be nominated for president by a major political party, spent Father's Day last month at one of Chicago's largest black churches telling the audience that they should set better examples for their children and shouldn't abandon them.
`Any Fool'
``Any fool can have a child. That doesn't make you a father,'' Obama, 46, said at the Apostolic Church of God, which has more than 20,000 members. ``Too many fathers are AWOL, missing from too many lives and too many homes.''
Jackson, who unsuccessfully sought the Democratic presidential nomination in 1984 and 1988, said he didn't know the microphone was on when he commented on Obama's speeches.
``Anything I said in a hot-mic statement that's interpreted as a distraction, I offer apologies for that,'' Jackson said at a news conference yesterday after his remarks became public.
``I have supported Barack's campaign with passion from the very beginning. I thought the very idea made sense,'' Jackson said. ``We've been there all the way, because I think this campaign is a redemptive moment for America and a great opportunity to redefine America.''
Obama campaign spokesman Bill Burton said Obama ``will continue to speak out about our responsibilities to ourselves and each other, and he of course accepts Reverend Jackson's apology.''
No comments:
Post a Comment