This short video gives a wonderful presentation of declining fertility rates over the past fifty years and explains what falling fertility rates mean for the world. Go to the website here: The Baby Bust
This short video gives a wonderful presentation of declining fertility rates over the past fifty years and explains what falling fertility rates mean for the world. Go to the website here: The Baby Bust
... In this infographic we trace the iPhone supply and manufacturing chain. We’re providing snippets of information on both of the existing flagship model plus early breaking rumors for the next-gen iPhones. Did you know, for example, that 90% of all the rare-earth minerals used on an iPhone 5’s circuitry, screen, speakers, and glass cover are mined in China and Inner Mongolia? And did you know that Foxconn might soon be overtaken by Pegatron as Apple’s biggest manufacturing partner in China?
What does the rest of the world contribute to the making of the iPhone? Let’s find out!
The past century has been a competition between two metanarratives: communism vs. democracy and markets. Is it possible that there are other viable ways of organizing human societies? Eric Li offers a fascinating window into Chinese culture and suggests that there may indeed be viable alternatives. The Chinese model may not be viable in other cultures but that is his point. The future may be a variety of societal structures, not evolution toward one common mode of governance.
1. The United States had its financial bubble. Europe is having one too. Is China next? If it is, it could reshape the global economy and radically reshape Chinese government. Here is an interesting piece about China's real estate bubble.
2. Robert Tracinski thinks we are in midst of a Third Industrial Revolution.
... I like the idea of a breaking the Industrial Revolution into stages, but I would define them in more fundamental terms. The first Industrial Revolution was the harnessing of large-scale man-made power, which began with the steam engine. The internal combustion engine, electric power, and other sources of energy are just further refinements of this basic idea. The second Industrial Revolution would be the development of interchangeable parts and the assembly line, which made possible inexpensive mass production with relatively unskilled labor. The Third Industrial Revolution would not be computers, the Internet, or mobile phones, because up to now these have not been industrial tools; they have been used for moving information, not for making things. Instead, the rise of computers and the Internet is just a warm-up for the real Third Industrial Revolution, which is the full integration of information technology with industrial production.
The effect of the Third Industrial Revolution will be to collapse the distance between the design of a product and its physical manufacture, in much the same way that the Internet has eliminated the distance between the origination of a new idea and its communication to an audience. ...
3. Tyler Cowen has some thoughts about the impact our technological revolution as well Are we living in the early 19th century?
... Eventually all of the creative ferment of the industrial revolution pays off in a big “whoosh,” but it takes many decades, depending on where you draw the starting line of course. A look at the early 19th century is sobering, or should be, for anyone doing fiscal budgeting today. But it is also optimistic in terms of the larger picture facing humanity over the longer run.
4. You may have seen a deeply flawed viral video about wealth inequality this past week. I working on my own response but here is economist Mark Perry's response. In response to the viral ‘Wealth Inequality in America’ video
5. What are the contours of income inequality in the United States? This 40 minute video by Emmanuel Saez offers some important insights.
6. Futurist Ray Kurzweil is a little too sensationalist for my taste but this vid offers interesting food for thought about nanotechnology and the future sports. We will even be able to have meaningful sports competition?
7. Atlantic takes up at a frequently perpetuated myth. 'Women Own 1% of World Property': A Feminist Myth That Won't Die
The recovered wealth - most of it from higher stock prices - has been flowing mainly to richer Americans. By contrast, middle class wealth is mostly in the form of home equity, which has risen much less.
10. When looking at decisions in your own context, Seth Godin explains why Macro trends don't matter so much
Whether or not you think science is wonderful, the stereotype of all scientists being atheists is unrealistic. There is, however, a special dance.
12. I consider this good news. Old Earth, Young Minds: Evangelical Homeschoolers Embrace Evolution
More Christian parents are asking for mainstream science in their children's curricula.
13. Remember to keep Syria and Egypt in your prayers. Nearly 1 in 20 Syrians are now refugees
Mar 09, 2013 in Asia, China, Current Affairs, Economic Development, Economics, Religion, Science, Sports and Entertainment, Technology, Technology (Biotech & Health), Technology (Digital, Telecom, & Web), Technology (Energy), Technology (Food & Water), Technology (Manufacturing & Construction)), Technology (Transportation & Distribution), Weatlh and Income Distribution | Permalink | Comments (0) | TrackBack (0)
... Nonetheless, China has been transformed from the inside out over the past 35 years. This transformation is the story of our time. The struggle of China, in other words, is the struggle of the world. ...
Given our account of how China became capitalist, what can we say about the form of capitalism that has emerged in China? A persisting feature of China’s market transition is the lack of political liberalization. This is not to say that the Chinese political system has stood still over the past 35 years. The Party has distanced itself from radical ideology; it is no longer communist except in name. In recent years, the internet has increasingly empowered the Chinese to exercise their political voice. Nonetheless, China remains ruled by a single political party.
This continuity hides a fundamental change in China’s political reality. With the death of Deng Xiaoping, “strongman” politics was brought to a closure. Under Jiang Zemin and Hu Jintao, China is no longer ruled by a charismatic leader. In that sense, Chinese politics today is qualitatively different from the time of Mao and Deng. But the Chinese government has not come to terms with this political change on the ground; there have been few efforts at institution-building to prepare China for the new political reality.
The combination of rapid economic liberalization and seemingly unchanged politics has led many to characterize China’s market economy as state-led, authoritarian capitalism, which many people have rightly recognized as fragile and unsustainable. When and how China will embrace democracy, and whether the Party will survive democratization, are the main questions asked about China’s political future. In our book, a different perspective is offered. It provides a different diagnosis of the main flaw of the Chinese market economy: China has developed a robust market for goods, but it still lacks a free market for ideas.
The market for ideas points to an alternative way of thinking about China’s political future. Our reasoning is mainly based on the following two considerations. First, multiparty competition does not work unless it is cultivated and disciplined by a free market for ideas, without which democracy can be easily hijacked by interest groups and undermined by the tyranny of the majority. The performance of democracy critically depends on the market for ideas, just like privatization depends on the market for capital assets. Second, multi- party competition had virtually no precedent in Chinese history. Indeed, the Chinese word for the “party” (党) has a strong negative connotation in traditional Chinese political thinking. “Forming a party and pursuing self-interest” (结党营私) has been consistently denounced as undermining the political ideal, which is “what is under heaven is for all” (天下为公). In contrast, the market for ideas has a deep and revered root in traditional Chinese thinking; “let one hundred schools of thought contend” has been respected as a political ideal since the time of Confucius. In our view, the market for ideas promises a more gradual and viable approach to rebuilding Chinese politics on the principles of tolerance, justice, and humility.
Over the past 35 years, China has embraced capitalism not just in the economy. The Theory of Moral Sentiments has more than a dozen Chinese translations; the book has won the heart and mind of premier Wen Jiabao. The message of Adam Smith resonates strongly with the Chinese, not least because of its striking affinity with the traditional Chinese thinking on economy and society. A surprising outcome of China’s transition to capitalism is that China has found a way back to its own cultural roots. ...
The Chinese are running away with thorium energy, sharpening a global race for the prize of clean, cheap, and safe nuclear power. Good luck to them. They may do us all a favour.
... The aim is to break free of the archaic pressurized-water reactors fueled by uranium -- originally designed for US submarines in the 1950s -- opting instead for new generation of thorium reactors that produce far less toxic waste and cannot blow their top like Fukushima. ...
... The thorium story is by now well-known. Enthusiasts think it could be the transforming technology needed to drive the industrial revolutions of Asia -- and to avoid an almighty energy crunch as an extra two billion people climb the ladder to western lifestyles.
At the least, it could do for nuclear power what shale fracking has done for natural gas -- but on a bigger scale, for much longer, perhaps more cheaply, and with near zero CO2 emissions. ...
... The beauty of thorium is that you cannot have a Fukushima disaster. Professor Robert Cywinksi from Huddersfield University, who anchor's the UK's thorium research network ThorEA, said the metal must be bombarded with neutrons to drive the process. "There is no chain reaction. Fission dies the moment you switch off the photon beam," he said. ...
... Yet it leaves far less toxic residue. Most of the mineral is used up in the fission process, while uranium reactors use up just 0.7pc. It can even burn up existing stockpiles of plutonium and hazardous waste.
Cambridge scientists published a tantalising study in the Annals of Nuclear Energy in February showing that it is possible to "achieve near complete transuranic waste incineration" by throwing the old residue into the reactor with thorium.
In other words, it can help clean up the mess left by a half a century of nuclear weapons and uranium reactors, instead of transporting it at great cost to be encased in concrete and buried for milennia. It is why some `greens' such as Baroness Worthington -- a former Friends of the Earth activist -- are embracing thorium. Though there are other reasons.
The thorium molten salt process takes place at atmospheric pressures. It does not require the vast domes of conventional reactors, so costly, and such an eyesore.
You could build pint-size plants largely below ground, less obtrusive than a shopping mall, powering a small town the size of Tunbridge Wells or Colchester. There would be shorter transmission lines, less leakage, and less risk of black-outs. The elegance is irresistible....
A group of Chinese intellectuals has called on the government to implement urgent political reforms and respect human rights or risk "violent revolution".
In an open letter 71 top academics warned that growing economic imbalances were fuelling social unrest and an uprising could erupt if reforms were not implemented immediately, Hu Xingdou, one of the signatories, told AFP Monday.
"If urgent systematic reforms needed by Chinese society continue to suffer setbacks and stagnate, then official corruption and social dissatisfaction will boil up to a crisis point," said the letter, posted on the Internet last week.
"China will once again miss the opportunity for peaceful reform, and slip into the turbulence and chaos of violent revolution." ...
... While the latest call for reform steered away from Charter 08's advocacy of western-style democracy, it called on the Communist Party fully to implement the freedoms of speech, press and association that are protected by the constitution but routinely ignored by the authorities and police. ...
Marginal Revolution: Working Conditions in China: Supply and Demand - Alex Tabarrok
... The Times articles, part of a larger series, are well written and informative and no doubt they have prodded some changes at certain companies. China, however, is a very big place and the real story of better working conditions is a story of supply and demand.
Wages in Chinese factories have been low because wages in China’s agricultural interior were even lower and the great migration from the country to the city, one of the largest migrations in human history, meant that there was a ready supply of workers desperate for work and the more work the better. Even today many workers want longer hours:
In March, when Foxconn announced that workers’ hours would be reduced to China’s legal limits, employees began complaining. “Absolutely I’d like to do overtime to work more than 60 hours, but now there’s a ceiling on it,” said Ma Changqiao, a 23-year-old at Foxconn’s Chongqing factory.
As the great migration leveled off, however, wages began to rise. At first, workers wanted all of the increase in wages in money but as the more basic needs of workers and their families have been met the demand for better working conditions and more leisure has increased and this has made it profitable for firms to supply better working conditions.
Thus, the real story of better working conditions is not a spate of negative publicity, a mere blip in the face of much larger forces, but rising wages with a touch of Maslow’s hierarchy. ...
In short, economic development happened. Given relatively stable social institutions, this is what happen with expanded trade and improvement in productivity.
AP has a story summarizing Global Trends 2030, a report put out by the U.S. Intelligence community.
... The study said that in a best-case scenario, Americans, together with nearly two-thirds of the world's population, will be middle class, mostly living in cities, connected by advanced technology, protected by advanced health care and linked by countries that work together, perhaps with the United States and China cooperating to lead the way.
Violent acts of terrorism will also be less frequent as the U.S. drawdown in troops from Iraq and Afghanistan robs extremist ideologies of a rallying cry to spur attacks. But that will likely be replaced by acts like cyber-terrorism, wreaking havoc on an economy with a keystroke, the study's authors say.
In countries where there are declining birth rates and an aging population like the U.S., economic growth may slow.
"Aging countries will face an uphill battle in maintaining living standards," Kojm said. "So too will China, because its median age will be higher than the U.S. by 2030."
The rising populations of disenfranchised youth in places like Nigeria and Pakistan may lead to conflict over water and food, with "nearly half of the world's population ... experiencing severe water stress," the report said. Africa and the Middle East will be most at risk, but China and India are also vulnerable.
That instability could lead to conflict and contribute to global economic collapse, especially if combined with rapid climate change that could make it harder for governments to feed global populations, the authors warn.
That's the grimmest among the "Potential Worlds" the report sketches for 2030. Under the heading "Stalled Engines," in the "most plausible worst-case scenario, the risks of interstate conflict increase," the report said. "The U.S. draws inward and globalization stalls." ...
Here is the overview from the report:
Over the next two decades, the relative power of major international actors will shift markedly. Around 2030, after nearly a century as the preeminent global economic power, the United States will be surpassed by China as the world’s largest economy. With its trade in goods expected to nearly double that of the U.S. and Europe, China’s international economic clout will reach new heights. By 2030, India will become the world’s most populous country and third-largest economy, while Brazil’s economy will rank fourth in size. India and Brazil will join China at the high table of 21st century international politics alongside the United States, even as the relative weight of Russia and Japan diminishes. The European economy will remain in the top tier, but it is not clear whether Europe will be able to act with common purpose to leverage this source of strength.
With its enhanced economic base, Beijing could rival Washington in overall military spending, even as a slowing Chinese economy and internal political conflict complicate China’s ability to lead internationally. The United States will remain primus inter pares in light of its continued advantages across the full spectrum of national power and the legacy benefits of its leadership. It will, however, be operating in a post-Western world in which the bulk of global economic power is held by countries whose per capita incomes are far below those of the traditional great powers. This reality will leave China, India, Brazil, and other players focused on internal development and domestic challenges, torn between their desire to be global powers and their interest in free-riding on Western management of the international system.
How will the rise of the rest impact the international system? The National Intelligence Council’s draft Global Trends 2030: Alternative Worlds maps out three broad scenarios:
Reverse Engines. Under this scenario, the international system would consist of several powerful countries — but no single state or bloc of states would have the political or economic leverage to drive the international community toward collective action. Such a world, characterized by a global vacuum of power, assumes that the United States will no longer be willing or capable of sustaining the predominant leadership role it has assumed since 1945. With no other country able to step in to replace the U.S. as a global leader, the resulting divergence of interests would lead to fragmentation and the inability of great powers to work cooperatively to solve global issues. Mercantilism and protectionism could lead economic globalization to go into reverse, constraining technological breakthroughs required to manage scarce global resources. Conflict and disorder would follow.
Great Power Convergence. An alternative scenario is what the NIC calls a “fusion” world, in which major powers work together to adopt and enforce a set of globally accepted rules and norms. As U.S. predominance over the international system recedes, other emerging powers would step in to assume greater responsibility for the management of international affairs commensurate with their swelling economic might. Emerging powers emerge as full stakeholders in a global order that is transformed by power shifts but remains liberal and pluralistic. Great power concert (perhaps enabled by democratization in China) to meet global challenges increases the stability of the international system even as power is diffused within it. U.S. resilience enables it to create enduring partnerships with rising powers to sustain the basis of liberal order. Technological advances create new possibilities for joint management of key global challenges, rewarding positive-sum behavior by the great powers.
Multipolar Divergence—U.S. Primacy. A third scenario, one the NIC calls “fragmentation,” involves a multipolar system characterized by a divergence of views among great powers that challenges global governance. The United States would continue to maintain disproportionate global influence and leverage that influence to address global challenges by working through coalitions of like-minded states. A multispeed global economy accelerates the diffusion of power but an alternative coalition to the West does not form, with developing giants consumed by their domestic challenges – even as the global middle class explodes in ways that transform politics within the rising powers. With inclusive global institutions effectively stalemated, the United States instead turns to its old and new allies in Europe and Asia, who would continue to see Washington as their partner of choice in advancing the norms and rules of a liberal order. The risk of conflict increases with the continued rise of new powers like China and the rapid pace of technological change.
One key conclusion of the NIC study is that the future role of the United States in the international system is a decisive variable in determining what kind of “alternative world” will exist in 2030. The choices U.S. leaders make – about how to marshal (and preserve) domestic resources, how vigorously to assert U.S. military and economic leadership overseas, and how much to invest in alliances old and new – will be central to determining which of the above pathways the international system will follow over the coming 20 years. To a certain extent, the answer to the question of how the “rise of the rest” impacts the U.S.-led international system is that it is not up to them… so much as it is up to us.
(Reuters) - China's outgoing leader and his likely successor are pushing the ruling Communist Party to adopt a more democratic process this month for choosing a new leadership, sources said, in an attempt to boost its flagging legitimacy in the eyes of the public.
The extent of the reform would be unprecedented in communist China where elections for the highest tiers of the party, held every five years, have been mainly exercises in rubber-stamping candidates already agreed upon by party power-brokers.
The Communist Party, which has held unbroken power since 1949, is struggling to maintain its popular legitimacy in the face of rising inequality, corruption and environmental degradation, even as the economy continues to bound ahead.
President Hu Jintao and his heir, Xi Jinping, have proposed that the party's 18th Congress, which opens on Thursday, should hold elections for the elite Politburo where for the first time there would be more candidates than available seats, said three sources with ties to the party leadership. ...
One theory of economic development is that as long as the masses are poor, there is little incentive to develop sound economic and governmental institutions. As prosperity begins to emerge, those who have benefited have more to lose through arbitrary and ineffective institutions. The presence of a rising middle class creates a hope among the poor that they too can prosper. Citizens begin to press for better institutions and greater accountability. Better institutions and accountability leads to more prosperity. And on the cycle goes.
Is that happening here? Let's hope so.
China Daily: Higher costs forcing firms to relocate
Jobs going to other countries in China's 'great industry transfer'
Rising wages and shrinking export demand are forcing manufacturers to relocate to neighboring Southeast Asian nations and many that remain are seriously considering moving, a foreign trade official from the Ministry of Commerce said.
The official, who declined to be named, said that "nearly one-third of Chinese manufacturers of textiles, garments, shoes and hats" are now working "under growing pressure" and have moved all, or part, of their production outside China in what he called the great industry transfer.
Favored destinations are usually members of the Association of Southeast Asian Nations, especially Vietnam, Indonesia and Malaysia.
And in all likelihood, "the trend will continue" with more traditional labor-intensive manufacturers transferring production, he told China Daily. ...
... China's labor costs have surged recently by 15 to 20 percent annually, squeezing margins and driving some companies to bankruptcy.
According to the Ministry of Human Resources and Social Security, from January to June the minimum wage was raised, on average, by 20 percent in 16 provinces.
The minimum wage in Shenzhen now stands at 1,500 yuan ($238) per month, setting the highest standard for the whole Chinese mainland.
Many developing countries in Southeast Asia have lower labor costs.
The monthly wage for manufacturing jobs in Vietnam was, on average, 600 yuan in 2011, equivalent to the level of 10 years ago in Dongguan, an industrial town in South China's Pearl River Delta....
...But lower costs in other countries could soon change, some said.
"The advantage (of labor and production costs) in Southeast Asian countries will only last for a few years," said Chen Jian, a general manager of a garment company headquartered in Foshan, on the Pearl River Delta.
"The trend is just like what happened some 10 years ago when many manufacturing industries in Hong Kong and Taiwan moved to the Pearl River Delta to chase cheap labor. But now you can see how much our labor costs have gone up."
Technorati Tags: Association of Southeast Asian Nations, china, export, import, in-sourcing, indonesia, jobs, labor-intensive, malaysia, manufacturing, minimum wage, outsourcing, rising wages, vietnam, wages
Atlantic Cities: Online Grocery Shopping Is Returning to the Physical World
... Grocery stores that found success on the internet are instead returning to the physical world with a hybrid business model: the "virtual" supermarket, a shop for smartphone users that carries photographs and bar codes instead of food. After the success of locations in mass transit stations from Seoul to Philadelphia, the virtual supermarket is about to hit the city above ground. Chinese supermarket giant Yihaodian announced this week it is opening 1,000 brick-and-mortar locations. ...
... Grocery stores want to reach time-starved commuters, but they also seem to be capitalizing on consumers' desire to browse. It's one of the reasons why many people at least claim to still prefer physical bookstores, even as the monstrous success of websites like Amazon seem to negate that notion.
If you can't beat 'em, join 'em. Yihaodian has also experimented with subway stores, but the announcement this week marks a big move back into physical space. No longer will "virtual supermarkets" be only in mass transit stations. They'll occupy actual retail space in the city.
See my earlier post, The Grocery Store of the Future?
An interesting piece on how Chinese workers experience their changing lives. Very insightful.
New York Times: China Confronts Mounting Piles of Unsold Goods
GUANGZHOU, China — After three decades of torrid growth, China is encountering an unfamiliar problem with its newly struggling economy: a huge buildup of unsold goods that is cluttering shop floors, clogging car dealerships and filling factory warehouses.
The glut of everything from steel and household appliances to cars and apartments is hampering China’s efforts to emerge from a sharp economic slowdown. It has also produced a series of price wars and has led manufacturers to redouble efforts to export what they cannot sell at home.
The severity of China’s inventory overhang has been carefully masked by the blocking or adjusting of economic data by the Chinese government — all part of an effort to prop up confidence in the economy among business managers and investors. ...
... China is the world’s second-largest economy and has been the largest engine of economic growth since the global financial crisis began in 2008. Economic weakness means that China is likely to buy fewer goods and services from abroad when the sovereign debt crisis in Europe is already hurting demand, raising the prospect of a global glut of goods and falling prices and weak production around the world.
Corporate hiring has slowed, and jobs are becoming less plentiful. Chinese exports, a mainstay of the economy for the last three decades, have almost stopped growing. Imports have also stalled, particularly for raw materials like iron ore for steel making, as industrialists have lost confidence that they will be able to sell if they keep factories running. Real estate prices have slid, although there have been hints that they might have bottomed out in July, and money has been leaving the country through legal and illegal channels. ...
New York Times: Dire Poverty Falls Despite Global Slump, Report Finds
WASHINGTON — A World Bank report shows a broad reduction in extreme poverty — and indicates that the global recession, contrary to economists’ expectations, did not increase poverty in the developing world.
The report shows that for the first time the proportion of people living in extreme poverty — on less than $1.25 a day — fell in every developing region from 2005 to 2008. And the biggest recession since the Great Depression seems not to have thrown that trend off course, preliminary data from 2010 indicate.
The progress is so drastic that the world has met the United Nations’ Millennium Development Goals to cut extreme poverty in half five years before its 2015 deadline. ...
... The report contained a raft of statistics showing broad declines in poverty throughout the 2000s. For the first time since the World Bank started keeping statistics in 1981, poverty fell in every region of the world on a three-year timeframe. In sub-Saharan Africa, the proportion of the population living in extreme poverty fell below 50 percent for the first time. And between 1981 and 2008, poverty fell to just less than a quarter of the developing world’s population from more than half .
Much of the story was about China, which moved nearly 700 million people out of poverty between 1981 and 2008, with the proportion of its population living in extreme poverty falling to 13 percent from 84 percent during that period. The country’s annual pace of economic growth never dipped below 9 percent, even in 2009, when the world’s economy contracted.
But perhaps the most surprising success story is sub-Saharan Africa, where the proportion of people living in extreme poverty actually increased through the 1990s, before declining in the 2000s.
“People used to worry, ‘Is Africa going to be poor forever?’ ” said Mr. Kenny of the Center for Global Development. “Well, it doesn’t really look like it, does it?”
Extreme poverty in the Middle East and North Africa fell to just 2.7 percent in 2008 from 4.2 percent in 2002. And extreme poverty in sub-Saharan Africa fell to 47.5 percent in 2008 from 55.7 percent in 2002. ...
Harvard Business Review: New Math Will Drive a U.S. Manufacturing Comeback
Making the United States an even more attractive location for factories and investments is critical for the health of our nation. More domestic factories would help create more balanced trade flows and a more stable global economy. But company decisions on what and where to place production facilities, while influenced by many factors, ultimately depend on the math.
Thankfully, the math these days is starting to work in America's favor again.
Our research last year suggested to us that changing conditions in China would bring home some of the manufacturing work that migrated overseas during the past decade. We originally saw this "insourcing" phenomenon, as the White House now refers to it, starting around 2015.
We were deliberately conservative in our estimates and made clear that the coming manufacturing renaissance would benefit some industries more than others, with seven sectors benefitting the most: vehicles and auto parts, appliances and electrical equipment, furniture, plastic and rubber products, machinery, fabricated metal products, and computers and electronics. These seven sectors currently account for nearly two-thirds of the more than $325 billion the U.S. imports from China.
We noted that several factors had combined to push these sectors toward a tipping point, when U.S. manufacturing becomes an attractive alternative to China. These factors include China's rapidly rising labor costs, which we discussed in an earlier HBR blog; the increased value of the yuan; the challenge of managing long-distance supply chains; the quality control concerns that continue to haunt many manufacturers that have offshored production; and the significantly higher productivity of U.S. workers. ...
The Economist: Now for the good news
Poverty has fallen in all regions of the world
THE past four years have seen an economic crisis coincide with a food-price spike. That must surely have boosted the number of the world’s poor (especially since food inflation hits the poor hardest)—right? Wrong. New estimates of the numbers of the world’s poor by the World Bank’s Development Research Group show that for the first time ever, poverty—defined as the number and share of people living below $1.25 a day (at 2005 prices)—fell in every region of the world in 2005-08. Half the long-term decline is attributable to China, which has taken 660m people out of poverty since the early 1980s. But the main contribution to the recent turnaround is Africa. Its poverty headcount rose at every three-year interval between 1981 and 2005, the only continent where this happened. But in 2008, it fell by 12m, or five percentage points to 47%—the first time less than half of Africans have been below the poverty line. The bank also has partial estimates for 2010. These show global poverty that year was half its 1990 level, implying the long-term rate of poverty reduction—slightly over one percentage point a year—continued unabated in 2008-10, despite the dual crisis.
The Atlantic Cities: Why China's Urbanization Isn't Creating a Middle Class
The rapid rate of development in China manifests itself most clearly in its cities. With some populations rising into the tens of millions, China’s cities are the economic powerhouses of the country, and are helping to create a whole new era of financial prosperity. For some observers, this translates into 1.3 billion people who now have the money to afford the sort of commercial goods many of the country’s factories had previously been producing for the affluent populations of other countries. China is seeing its own affluence rise, and some surmise that this will translate into a Western-style nation of relatively well-off consumers; that, as this report from the McKinsey Global Institute suggests, China’s middle class is emerging to help propel the country’s economic success even higher.
The only problem is that this middle class doesn’t actually exist. And unless decades-old rules change, it won't.
In a recent paper published in the journal Eurasian Geography and Economics, geographer and University of Washington professor Kam Wing Chan argues that all of the country’s urban growth and prosperity is not actually filtering down to the majority of the rising urban population. The reason is that the majority of the urban population is prevented from fully participating in the booming urban economy because of a Mao-era rule that draws a harsh line between those from urban areas and those from rural ones.
Established in 1958, hukou establishes a two-tiered population structure of rural and urban citizens. Urban citizens are given access to social services and welfare programs, including public education and affordable housing. Rural residents are not. Status is hereditary, meaning that once a family is in one tier it will always remain in that tier. This has been a problem for many rural residents who want to leave their agricultural lifestyles to earn the higher wages in cities working in factories or construction, but who are faced with slum-like living conditions and an effective low ceiling over their social and economic mobility. ...
New York Times: What Cameras Inside Foxconn Found
... More tellingly, the broadcast showed 3,000 young Chinese workers lining up at the gates for Foxconn’s Monday morning recruiting session.
Now, these workers know about the 2010 Foxconn suicides. They know that the starting salary is $2 an hour (plus benefits, and no payroll taxes). They know they’ll have 12-hour shifts, with two hourlong breaks. They know that workers sleep in a tiny dorm (six or eight to a room) for $17 a month.
And yet here they are, lining up to work! Apparently, even those conditions, so abhorrent to us, are actually better than these workers’ alternatives: backbreaking rural farm work that doesn’t prepare them to move up the work force food chain.
Many observers are shocked at the child labor reported at Foxconn. Not only do these Chinese factories employ a lot of young people — the legal working age is 16 — but from what we saw on the ABC broadcast, all of these employees are young.
That’s also what a former Apple executive told me this week: that Foxconn is not a career. You don’t see 30- and 40-year-old heads of households on the assembly lines. The young Chinese see it as “something like a first summer job,” he told me — a way to make some bucks for a few months before heading home, or to get some work experience before moving up.
The second enlightening twist, for me, was a note sent to me from a young man, born in China and now attending an American university.
My aunt worked several years in what Americans call “sweat shops.” It was hard work. Long hours, “small” wage, “poor” working conditions. Do you know what my aunt did before she worked in one of these factories? She was a prostitute.
Circumstances of birth are unfortunately random, and she was born in a very rural region. Most jobs were agricultural and family owned, and most of the jobs were held by men. Women and young girls, because of lack of educational and economic opportunities, had to find other “employment.”
The idea of working in a “sweat shop” compared to that old lifestyle is an improvement, in my opinion. I know that my aunt would rather be “exploited” by an evil capitalist boss for a couple of dollars than have her body be exploited by several men for pennies.
That is why I am upset by many Americans’ thinking. We do not have the same opportunities as the West. Our governmental infrastructure is different. The country is different.
Yes, factory is hard labor. Could it be better? Yes, but only when you compare such to American jobs.
If Americans truly care about Asian welfare, they would know that shutting down “sweat shops” would force many of us to return to rural regions and return to truly despicable “jobs.” And I fear that forcing factories to pay higher wages would mean they hire FEWER workers, not more.
Anyway, now my aunt has been living in New York for one year after saving up money for a plane ticket and visa, and she is wonderfully happy to have escaped Asia and reunited with our family. None of this would be possible if it wasn’t for that “sweat shop.” ...
... In other words, the lessons of this controversy have more to do with China than with Apple. This is only marginally a technology story — I imagine we could find low-wage, tiring jobs at every factory in China, making everything that China makes. Every toy, every houseware, every garment. You could do a year’s worth of exposés.
Still, we should be happy that in this corner of the Chinese landscape, things are getting better. On ABC’s show, a Fair Labor Association inspector, Ines Kaempfer, called the last month a “Nike moment” for Apple. In the 1990s, Nike’s sweatshops weren’t the worst in the business, but they’re the ones that got the negative publicity. In response, it cleaned up its act, and thereby lifted the bar for the entire industry.
Clearly, the recent spotlight on conditions at Foxconn has performed a similar service for the electronics industry. Better wages are good. More careful monitoring is good. Transparency — like letting TV cameras into your assembly lines — is good.
New York Times: Chinese Labor, Cheap No More
... But while China’s industrial subsidies, trade policies, undervalued currency and lack of enforcement for intellectual property rights all remain sticking points for the United States, there is at least one area in which the playing field seems to be slowly leveling: the cheap labor that has made China’s factories nearly unbeatable is not so cheap anymore.
China has experienced sporadic labor shortages, which in turn have driven up its once rock-bottom labor costs. This trend is particularly evident in the weeks following China’s Spring Festival, or New Year, when more than 100 million rural migrants return to the countryside to spend the year’s biggest holiday with family. Coaxing those same migrants back into the urban work force has proven increasingly difficult. ...
... Numerous factors underlie China’s mounting labor woes. Until now the country has been able to achieve its stunning economic growth by shifting large numbers of farmers into nonagricultural jobs. Over the past several years economists have warned that China may be reaching the so-called Lewis Turning Point — the stage at which the rural surplus labor pool effectively runs dry and wages begin to rapidly increase.
At the same time, China’s population has been steadily aging, and by 2020 the nation will have more than 200 million people over age 60. Furthermore, rising living costs in urban China coupled with markedly improved conditions in rural areas are encouraging many would-be migrant workers to look for opportunities closer to home.
In addition to a shortage in the sheer number of available workers, China’s labor problems are further exacerbated by a shift in the quality and character of its work force. For the older generation, there is very little that a factory or foreman can dish out that seems too difficult to deal with, given that they witnessed, or grew up with parents who had witnessed, the nation’s rocky ride through the Communist Revolution, collectivization, the disastrous Great Leap Forward and the Cultural Revolution. These are the people who pioneered the model of migrant labor on which Chinese manufacturing has come to depend: long hours in substandard conditions, all for a fraction of what United States workers earn.
As illustrated by the recent headlines over working conditions at Foxconn, which makes components for Apple, there are plenty of migrant workers still living and working under that model. But by and large China’s younger generation is no longer willing to endure hardship without clear expectations that it is a temporary means to a more comfortable end.
According to the government report, a full 70 percent of rural migrants are now under 30. That means they are members of the so-called after-’80s generation — a euphemistic Chinese term to describe those who grew up during the nation’s economic revival and have thus never experienced real deprivation or acquired a taste for the chiku (“eating bitterness”) work ethic championed by previous generations.
In the past, China’s migrant workers were just thankful not to go hungry; today they are savvy and secure enough to start being choosy. Higher salaries, basic benefits, better working conditions and less physically taxing jobs are only the beginning of their demands, and for many factories, these are already too costly to be tenable. ...
Mark Perry links this story and several other stories about labor in China.
China illustrates the common economic development experience. Starting factories in pre-industrial societies leads to disruptions. What appear to us as "sweatshops" are frequently viewed as great opportunties by the people who choose them. That is how bad their daily existence is. And yes, those with governmental and economic power will often abuse the workers brought into industrial jobs.
But as more workers work longer at jobs, they become more proficient. They find themselves able to demand higher wages. As wages increase, they end up with more property. With more property, they have more at stake in having just governmental and economic systems. As they demand more just systems, producitivity increases leading to the creation of more business and more jobs. And upward the spiral goes.
I'm not saying we shouldn't be working against slave labor and that we shouldn't be pressuring corporations to behave in ethical ways. But too many activists see businesses in the these economies in purely static terms, believing that wages and conditions fixed unless someone strategizes to change them. It think it is often more helpful to see these firms on a trajetory of change, looking for ways to faciliate next steps toward a more just and prosperous society.
The American Interest: What is Governance? Francis Fukuyama
... We Americans tend to believe that democracy is an intrinsic part of good governance and that more democracy means better quality government. ...
... I have no doubt that more democratic accountability will improve governance in many poor countries in Africa, Latin America, and the Middle East. East Asia is different, however, insofar as it has a very long tradition of relatively high-quality centralized bureaucratic government. This begins with Shang Yang’s reforms in the early state of Qin, and continues to this day in the extraordinary record of the Chinese Communist Party in bringing China through one of the most complex economic transformations one can imagine. Many East Asians today wonder whether rapid democratization will in fact help or hurt the quality of governance there. What they don’t have is either democratic accountability or rule of law.
Conversely, I would argue that the quality of governance in the US tends to be low precisely because of a continuing tradition of Jacksonian populism. Americans with their democratic roots generally do not trust elite bureaucrats to the extent that the French, Germans, British, or Japanese have in years past. This distrust leads to micromanagement by Congress through proliferating rules and complex, self-contradictory legislative mandates which make poor quality governance a self-fulfilling prophecy. The US is thus caught in a low-level equilibrium trap, in which a hobbled bureaucracy validates everyone’s view that the government can’t do anything competently. The origins of this, as Martin Shefter pointed out many years ago, is due to the fact that democracy preceded bureaucratic consolidation in contrast to European democracies that arose out of aristocratic regimes.
This is not to say that I think the quality of governance is better in China than in the US. ...
This article illustrates well why calls for democracy as a pancea for what is troubling every struggling country is misguided. The issues are much more complex.
Women overseas are reaching new heights professionally. Here's what we can learn from our emerging market counterpart.
The mention of women in emerging economies often evokes a picture of oppressed and poverty-stricken victims, relegated to the sidelines of male-dominated cultures. That’s the usual narrative, exemplified by the best-selling Half the Sky by Nicholas Kristof and Sheryl Wu Dunn. Yes, these problems are real and of critical importance. But educated women in Brazil, Russia, India and China — the BRIC economies which represent the four largest emerging markets — and the United Arab Emirates, are telling a different tale: one of agency and power.
Just as in the U.S. — where female college graduates now outnumber men — BRIC women are flooding into universities and graduate schools. They represent 65% of college graduates in the UAE, 60% in Brazil and 57% in Russia. These figures represent more than just a tiny elite: Between 15 and 25% of young women in the BRICs/UAE are now college-educated — a substantial number. And they’re not just earning degrees: They are bursting with the desire to use them.
Highly educated women the world over are ambitious, but ambition and aspiration among BRIC/UAE women is off the charts. New data from the Center for Work-Life Policy show that 85% of female college graduates in India and 92% in the UAE consider themselves very ambitious, compared to a paltry 36% in the U.S. In India, 86% of college-educated women are shooting for the top job, closely followed by their counterparts in Brazil (80%) and China (76%).
And turbo-charged ambition is paying off. In Brazil, 14% of the CEOs of large companies are female; in India, the figure is 11%. Meanwhile, the number of women who head up Fortune 500 corporations in the United States and FTSE 100 firms in the United Kingdom is stuck at less than 5%. What’s behind these startling numbers? Our study — which is based on rich, new data — describes opportunities and obstacles, which are surprisingly different from those in the West. ...
National Geographic has a fascinating interactive map at their website that gives some valuable socio-economic perspective. The World of Seven Billion
Federal Reserve Bank of San Francisco: The U.S. Content of “Made in China”
Goods and services from China accounted for only 2.7% of U.S. personal consumption expenditures in 2010, of which less than half reflected the actual costs of Chinese imports. The rest went to U.S. businesses and workers transporting, selling, and marketing goods carrying the "Made in China" label. Although the fraction is higher when the imported content of goods made in the United States is considered, Chinese imports still make up only a small share of total U.S. consumer spending. This suggests that Chinese inflation will have little direct effect on U.S. consumer prices.
The United States is running a record trade deficit with China. This is no surprise, given the wide array of items in stores labeled “Made in China.” This Economic Letter examines what fraction of U.S. consumer spending goes for Chinese goods and what part of that fraction reflects the actual cost of imports from China. We perform a similar exercise to determine the foreign and domestic content of all U.S. imports.
In our analysis, we combine data from several sources: Census Bureau 2011 U.S. International Trade Data; the Bureau of Labor Statistics 2010 input-output matrix; and personal consumption expenditures (PCE) by category from the U.S. national accounts of the Commerce Department’s Bureau of Economic Analysis. We use the combined data to answer three questions:
• What fraction of U.S. consumer spending goes for goods labeled “Made in China” and what fraction is spent on goods “Made in the USA”?
• What part of the cost of goods “Made in China” is actually due to the cost of these imports and what part reflects the value added by U.S. transportation, wholesale, and retail activities? That is, what is the U.S. content of “Made in China”?
• What part of U.S. consumer spending can be traced to the cost of goods imported from China, taking into account not only goods sold directly to consumers, but also goods used as inputs in intermediate stages of production in the United States?
Although globalization is widely recognized these days, the U.S. economy actually remains relatively closed. The vast majority of goods and services sold in the United States is produced here. In 2010, imports were about 16% of U.S. GDP. Imports from China amounted to 2.5% of GDP. ...
... Obviously, if a pair of sneakers made in China costs $70 in the United States, not all of that retail price goes to the Chinese manufacturer. In fact, the bulk of the retail price pays for transportation of the sneakers in the United States, rent for the store where they are sold, profits for shareholders of the U.S. retailer, and the cost of marketing the sneakers. These costs include the salaries, wages, and benefits paid to the U.S. workers and managers who staff these operations. ...
... This U.S. fraction is much higher for imports from China. Whereas goods labeled “Made in China” make up 2.7% of U.S. consumer spending, only 1.2% actually reflects the cost of the imported goods. Thus, on average, of every dollar spent on an item labeled “Made in China,” 55 cents go for services produced in the United States. In other words, the U.S. content of “Made in China” is about 55%. The fact that the U.S. content of Chinese goods is much higher than for imports as a whole is mainly due to higher retail and wholesale margins on consumer electronics and clothing than on most other goods and services. ...
Figure 2 shows the share of U.S. PCE [personal consumption expenditures] based on where goods were produced, taking into account intermediate goods production, and the domestic and foreign content of imports. Of the 2.7% of U.S. consumer purchases going to goods labeled “Made in China,” only 1.2% actually represents China-produced content. If we take into account imported intermediate goods, about 13.9% of U.S. consumer spending is attributable to imports, including 1.9% imported from China.
Since the share of PCE attributable to imports from China is less than 2% and some of this can be traced to production in other countries, it is unlikely that recent increases in labor costs and inflation in China will generate broad-based inflationary pressures in the United States.
Christian Science Monitor: In China, middle-class affluence, not political influence
... These are the sort of people whose historical equivalents in 18th- and 19th-century Europe developed political ambitions to match their economic status and fueled the rise of democracy.
Mr. Liu laughs at the suggestion that the same thing might happen in 21st-century China. "Undeniably, the people in power hope the country will develop and people will have a better life," he says. "But the bottom line is that the people should not challenge their power. We have given up hope of changing the government." ...
... Money, he believes, is the only possible passport to some sort of personal autonomy in the absence of political freedom. ...
... "In theory, the Constitution gives everyone the right to vote; but in reality, the law is not enforced," adds her husband. "Nobody has ever asked me to vote, and I've never even seen a ballot paper. Even my class monitor in elementary school was not elected." ...
The dwindling allure of building factories offshore.
“WHEN clients are considering opening another manufacturing plant in China, I’ve started to urge them to consider alternative locations,” says Hal Sirkin of the Boston Consulting Group (BCG). “Have they thought about Vietnam, say? Or maybe [they could] even try Made in USA?” When clients are American firms looking to build factories to serve American customers, Mr Sirkin is increasingly likely to suggest they stay at home, not for patriotic reasons but because the economics of globalisation are changing fast.
Labour arbitrage—taking advantage of lower wages abroad, especially in poor countries—has never been the only force pushing multinationals to locate offshore, but it has certainly played a big part. Now, however, as emerging economies boom, wages there are rising. Pay for factory workers in China, for example, soared by 69% between 2005 and 2010. So the gains from labour arbitrage are starting to shrink, in some cases to the point of irrelevance, according to a new study by BCG.
“Sometime around 2015, manufacturers will be indifferent between locating in America or China for production for consumption in America,” says Mr Sirkin. That calculation assumes that wage growth will continue at around 17% a year in China but remain relatively slow in America, and that productivity growth will continue on current trends in both countries. It also assumes a modest appreciation of the yuan against the dollar. ...
... Many multinationals will continue to build most of their new factories in emerging markets, not to export stuff back home but because that is where demand is growing fastest. And companies from other rich countries will probably continue to enjoy the opportunity for labour arbitrage for longer than American ones, says Mr Sirkin. Their labour costs are higher than America’s and will remain so unless the euro falls sharply against the yuan. ...
Foreign Policy: More Than 1 Billion People Are Hungry in the World
An absolutely brilliant article. I've excerpted at length because it is such a long article but I would higly recommend reading the whole thing. It highligts well the challenge of applying simplistic models (whether "more aid" or "more markets") of economic devolopment .
But what if the experts are wrong?
… But what if the poor are not, in general, eating too little food? What if, instead, they are eating the wrong kinds of food, depriving them of nutrients needed to be successful, healthy adults? What if the poor aren't starving, but choosing to spend their money on other priorities? Development experts and policymakers would have to completely reimagine the way they think about hunger. And governments and aid agencies would need to stop pouring money into failed programs and focus instead on finding new ways to truly improve the lives of the world's poorest.
Consider India, one of the great puzzles in this age of food crises. The standard media story about the country, at least when it comes to food, is about the rapid rise of obesity and diabetes as the urban upper-middle class gets richer. Yet the real story of nutrition in India over the last quarter-century, as Princeton professor Angus Deaton and Jean Drèze, a professor at Allahabad University and a special advisor to the Indian government, have shown, is not that Indians are becoming fatter: It is that they are in fact eating less and less. Despite the country's rapid economic growth, per capita calorie consumption in India has declined; moreover, the consumption of all other nutrients except fat also appears to have gone down among all groups, even the poorest. Today, more than three-quarters of the population live in households whose per capita calorie consumption is less than 2,100 calories in urban areas and 2,400 in rural areas -- numbers that are often cited as "minimum requirements" in India for those engaged in manual labor. Richer people still eat more than poorer people. But at all levels of income, the share of the budget devoted to food has declined and people consume fewer calories.
What is going on? The change is not driven by declining incomes; by all accounts, Indians are making more money than ever before. Nor is it because of rising food prices -- between the early 1980s and 2005, food prices declined relative to the prices of other things, both in rural and urban India. Although food prices have increased again since 2005, Indians began eating less precisely when the price of food was going down.
So the poor, even those whom the FAO would classify as hungry on the basis of what they eat, do not seem to want to eat much more even when they can. Indeed, they seem to be eating less. What could explain this? Well, to start, let's assume that the poor know what they are doing. After all, they are the ones who eat and work. If they could be tremendously more productive and earn much more by eating more, then they probably would. So could it be that eating more doesn't actually make us particularly more productive, and as a result, there is no nutrition-based poverty trap?
One reason the poverty trap might not exist is that most people have enough to eat. We live in a world today that is theoretically capable of feeding every person on the planet. In 1996, the FAO estimated that world food production was enough to provide at least 2,700 calories per person per day. Starvation still exists, but only as a result of the way food gets shared among us. There is no absolute scarcity. Using price data from the Philippines, we calculated the cost of the cheapest diet sufficient to give 2,400 calories. It would cost only about 21 cents a day, very affordable even for the very poor (the worldwide poverty line is set at roughly a dollar per day). The catch is, it would involve eating only bananas and eggs, something no one would like to do day in, day out. But so long as people are prepared to eat bananas and eggs when they need to, we should find very few people stuck in poverty because they do not get enough to eat. Indian surveys bear this out: The percentage of people who say they do not have enough food has dropped dramatically over time, from 17 percent in 1983 to 2 percent in 2004. So, perhaps people eat less because they are less hungry.
And perhaps they are really less hungry, despite eating fewer calories. It could be that because of improvements in water and sanitation, they are leaking fewer calories in bouts of diarrhea and other ailments. Or maybe they are less hungry because of the decline of heavy physical work. With the availability of drinking water in villages, women do not need to carry heavy loads for long distances; improvements in transportation have reduced the need to travel on foot; in even the poorest villages, flour is now milled using a motorized mill, instead of women grinding it by hand. Using the average calorie requirements calculated by the Indian Council of Medical Research, Deaton and Drèze note that the decline in calorie consumption over the last quarter-century could be entirely explained by a modest decrease in the number of people engaged in heavy physical work.
Beyond India, one hidden assumption in our description of the poverty trap is that the poor eat as much as they can. …
… In Udaipur, India, for example, we find that the typical poor household could spend up to 30 percent more on food, if it completely cut expenditures on alcohol, tobacco, and festivals. The poor seem to have many choices, and they don't choose to spend as much as they can on food. Equally remarkable is that even the money that people do spend on food is not spent to maximize the intake of calories or micronutrients. Studies have shown that when very poor people get a chance to spend a little bit more on food, they don't put everything into getting more calories. Instead, they buy better-tasting, more expensive calories. …
… All told, many poor people might eat fewer calories than we -- or the FAO -- think is appropriate. But this does not seem to be because they have no other choice; rather, they are not hungry enough to seize every opportunity to eat more. So perhaps there aren't a billion "hungry" people in the world after all.
… Should we let it rest there, then? Can we assume that the poor, though they may be eating little, do eat as much as they need to?
That also does not seem plausible. While Indians may prefer to buy things other than food as they get richer, they and their children are certainly not well nourished by any objective standard. Anemia is rampant; body-mass indices are some of the lowest in the world; almost half of children under 5 are much too short for their age, and one-fifth are so skinny that they are considered to be "wasted."
And this is not without consequences. …
… The poor often resist the wonderful plans we think up for them because they do not share our faith that those plans work, or work as well as we claim. We shouldn't forget, too, that other things may be more important in their lives than food. Poor people in the developing world spend large amounts on weddings, dowries, and christenings. Part of the reason is probably that they don't want to lose face, when the social custom is to spend a lot on those occasions. In South Africa, poor families often spend so lavishly on funerals that they skimp on food for months afterward.
And don't underestimate the power of factors like boredom. Life can be quite dull in a village. There is no movie theater, no concert hall. And not a lot of work, either. In rural Morocco, Oucha Mbarbk and his two neighbors told us they had worked about 70 days in agriculture and about 30 days in construction that year. Otherwise, they took care of their cattle and waited for jobs to materialize. All three men lived in small houses without water or sanitation. They struggled to find enough money to give their children a good education. But they each had a television, a parabolic antenna, a DVD player, and a cell phone. …
… We often see the world of the poor as a land of missed opportunities and wonder why they don't invest in what would really make their lives better. But the poor may well be more skeptical about supposed opportunities and the possibility of any radical change in their lives. They often behave as if they think that any change that is significant enough to be worth sacrificing for will simply take too long. This could explain why they focus on the here and now, on living their lives as pleasantly as possible and celebrating when occasion demands it. …
The Economist: The Chinese are coming...to Africa
The decoupling continues.
New York Times Economix: As China Grows, So Does Its Appetite for American-Made Products
SHANGHAI — America’s huge trade deficit with China has raised concerns about American competitiveness and jobs moving overseas. But a new study offers a glimmer of hope to Americans: Last year, American exports to China soared 32 percent to a record $91.9 billion.
A study by a trade group called the U.S.- China Business Council says China is now the world’s fastest-growing destination for American exports. ...
From the Economist
Economist: Taming Leviathan
THE argument sounds familiar. The disruptive reforms that have so changed the private sector should now be let loose on the public sector. The relationship between government and civil society has been that between master and servant; instead, it should be a partnership, with the state creating the right environment for companies and charities to do more of its work. The conclusion: “We are in a transition from a big state to a small state, and from a small society to a big society.”
A Republican presidential candidate in America? David Cameron rallying Britain’s Tories? Neither: the speaker is supposedly China’s most highly regarded bureaucrat. Last year Ma Hong won the country’s national award for government innovation—a great coup for her department, which is trying to get more non-governmental organisations (NGOs) to take over parts of welfare, health and education services in the city of Shenzhen, just across the border from Hong Kong.
The award partly reflects the whirl of activity that is Ms Ma. She has dismantled most of the controls on local NGOs: rather than be sponsored by some government department, all they have to do is register with her. She began in 2004 with industrial associations, but has extended the net to include independent charities. Almost 4,000 “social groups” are now registered—nearly double the number in 2002, when they were all tied to the state. ...
... It is not hard to poke holes in China’s version of the Big Society, as we shall see later in this special report. But there is plainly a drive to make government work a little more like the private sector. “Just as a human has two legs, China has a very long economic one and a very short social one,” observes Ms Ma. “They should be of equal length.” ...
Very interesting article. Just starting in on the other articles that are part of the special report.
With exports from low-wage countries like China on the rise, the question of what this means for trade and jobs in developed countries is a furious war of words. This column, using firm-level data for France between 1995 and 2005, shows that competition from low-wage markets actually boosts the sales of high-quality goods – but it concedes the benefits are not universal. ...
Our results show that, over 1995-2005, a period characterised by the surge of low-wage countries in international markets,
- France has specialised in the production of higher quality goods.
- This specialisation has had a positive impact on France’s export performances, dampening the fall of its market share in foreign markets.
Beyond the effect on aggregate trade, such adjustments in specialisation patterns are likely to have important macroeconomic consequences. Hausmann et al. (2007), for example, discuss how countries that specialise in higher quality goods can enjoy better growth performances in the long run. However, changes in the structure of production can also have important transitory effects. In particular, if the relative content of production in skilled and unskilled labour is not the same depending on the produced quality, a reallocation of production in favour of high quality goods is likely to modify labour-market equilibria (see Verhoogen 2008).
This may be part of the story when it comes to explaining the rising wage premium and employment inequalities between skilled and unskilled workers observed over the last 20 years in most developed countries.
... For US firms, the decision to manufacture overseas has long seemed a no-brainer. Labor costs in China and other developing nations have been so cheap that as recently as two or three years ago, anyone who refused to offshore was viewed as a dinosaur, certain to go extinct as bolder companies built the future in Asia. But stamping out products in Guangdong Province is no longer the bargain it once was, and US manufacturing is no longer as expensive. As the labor equation has balanced out, companies—particularly the small to medium-size businesses that make up the innovative guts of America’s technology industry—are taking a long, hard look at the downsides of extending their supply chains to the other side of the planet. ...
From Carpe Diem
Economist: All the parities in China
Which countries match the GDP, population and exports of Chinese provinces?
(Go to the website to see the interactive version of this map.)
New York Times: China Replaced Japan in 2010 as No. 2 Economy
TOKYO — Japan’s economy contracted in the fourth quarter when compared with the previous three months, though analysts are optimistic about the country’s prospects for the rest of the year.
Japan’s gross domestic product fell 0.3 percent in the October-December quarter as the end of generous government incentives on environmentally friendly cars resulted in a temporary decline in spending. At an annualized rate, Japan’s economy shrank 1.1 percent from the previous quarter.
The contraction, the first in five quarters, brought Japan’s economy for 2010 to $5.47 trillion, the Japanese Cabinet Office said. That compared with a $5.88 trillion economy for fast-growing China. The latest numbers were further evidence of China’s rapid ascent as an economic superpower, as China surpassed Japan last summer after the half-year gross domestic product numbers were released. Just five years ago, China’s gross domestic product was around $2.3 trillion, about half Japan’s.
Japan’s economy has stagnated over the last two decades, reflecting its continued decline in economic and political clout.
The country had the world’s second-largest economy after the United States for much of the last four decades. In the 1980s, its rapid growth even led to talk of the Japanese economy’s overtaking that of the United States. ...
The Economist: The state of the world's forests
THE Food & Agriculture Organisation, a UN body, estimates that the world's forests covered 4.03 billion hectares in 2010. Although the world as a whole continues to lose forests, the annual rate of deforestation in the past decade has fallen to 5.2m hectares, compared with 8.3m hectares a year between 1990 and 2000. Some large countries, including China and India, increased their forest cover between 2000 and 2010. China’s increased at an average annual rate of 1.6%, while India’s went up by 0.5% a year. Norway and Sweden have also added forests over the past decade. With forests covering nearly 70% of its area in 2010, Sweden is one of the world’s most sylvan countries. Nigeria, by contrast, has been chopping its forests down at a rate of 3.7% a year. By last year only one-tenth of its land remained forested.
Boston.com: Made in the USA
US manufacturing still tops China’s by nearly 46 percent
... A recent Heartland Monitor survey finds “clear anxiety about the decades-long employment shift away from manufacturing to service jobs,’’ National Journal’s Ron Brownstein reported in December. The “decline of US manufacturing’’ is giving Americans a “sense of economic precariousness’’ — only one in five believe that the United States has the world’s strongest economy, versus nearly half who think China is in the lead. “Near the root of the unease for many of those polled is the worry that the United States no longer makes enough stuff.’’ When asked why US manufacturing jobs have declined, 58 percent cite off-shoring by American companies to take advantage of lower labor costs.
There’s just one problem with all the gloom and doom about American manufacturing. It’s wrong.
Americans make more “stuff’’ than any other nation on earth, and by a wide margin. According to the United Nations’ comprehensive database of international economic data, America’s manufacturing output in 2009 (expressed in constant 2005 dollars) was $2.15 trillion. That surpassed China’s output of $1.48 trillion by nearly 46 percent. China’s industries may be booming, but the United States still accounted for 20 percent of the world’s manufacturing output in 2009 — only a hair below its 1990 share of 21 percent. ...
... So why do so many Americans fear that the Chinese are eating our lunch?
Part of the reason is that fewer Americans work in factories. Millions of industrial jobs have vanished in recent decades, and there is no denying the hardship and stress that has meant for many families. But factory employment has declined because factory productivity has so dramatically skyrocketed: Revolutions in technology enable an American worker today to produce far more than his counterpart did a generation ago. Consequently, even as America’s manufacturing sector out-produces every other country on earth, millions of young Americans can aspire to become not factory hands or assembly workers, but doctors and lawyers, architects and engineers.
Perceptions also feed the gloom and doom. In its story on Americans’ economic anxiety, National Journal quotes a Florida teacher who says, “It seems like everything I pick up says ‘Made in China’ on it.’’ To someone shopping for toys, shoes, or sporting equipment, it often can seem that way. But that’s because Chinese factories tend to specialize in low-tech, labor-intensive goods — items that typically don’t require the more advanced and sophisticated manufacturing capabilities of modern American plants.
A vast amount of “stuff’’ is still made in the USA, albeit not the inexpensive consumer goods that fill the shelves in Target or Walgreens. American factories make fighter jets and air conditioners, automobiles and pharmaceuticals, industrial lathes and semiconductors. Not the sort of things on your weekly shopping list? Maybe not. But that doesn’t change economic reality. They may have “clos[ed] down the textile mill across the railroad tracks.’’ But America’s manufacturing glory is far from a thing of the past.
Washington Post: Chinese Christians aim to evangelize Muslim world
Although today is the dawn of the Chinese New Year, most people are unaware that Chinese Christians are gearing up to be the world's most potent missionary force.
China? Christians? Sure enough. For decades now they've had plans to evangelize the Muslim world that lies along the old Silk Road route. This could be one of the most ambitious missionary enterprises in 2,000 years of Christianity. No national church has amazed the world as much as that of the Chinese. From 1 million at the time of the Communist takeover in 1949, it's grown to 100 million followers, a breathtaking growth in 60 years.
Evangelical Chinese Christians have come up with a way to evangelize a large portion of the world that will never see a western missionary. These are countries with large Muslim, Buddhist and Hindu populations, most of them located somewhere along a 7,000-mile route stretching from Xian in central China to the cities of Jerusalem, Antioch and Istanbul in the Middle East. Those were the ancient terminuses of the famous Silk Road.
Mission experts estimate there are some 2 billion people in these countries who've never heard of Christianity. And what nationality has businesses and enterprises in every nation on the Earth? And which is the most populous country with the fastest-growing church? Starting several decades ago, Chinese Christians began to strategize how to secretly plant churches along this Silk Road through an initiative called the Back to Jerusalem movement. The idea was to start businesses in countries from India to Iran that would never suspect that the Chinese grocer or restaurant owner down the street would like to convert them.
In the past 20 years, preparations to send teams to these countries has ramped up considerably. ...
New York Times Economix: The Haves and the Have-Nots
This really is a fascinating chart but it is kind of like one of those pictures with all the dots. You look at it long enough and a dolphin appears.
Across the horizontal axis are ventiles (and no, they aren't related to gentiles.) Each ventile is 1/20, or 5%, of the population ranked from least to most income. The verticle axis is percentile of the world income distribution (All income is in inflation adjusted international dollars.)
So, the poorest ventile in the USA still recieves more than 68% of the rest of the world. Brazil has a wide disparity of income with the bottom ventile at the bottom of the world distribution and the top ventile nearly on a par with the USA top ventile. India's top ventile doesn't event make it the level of the lowest ventile in the USA.
Among other things we can see how much greater is the income inequality in emerging giants but their lines are very likely to mirror the USA line in coming years.
Speaking at a TED Salon in London, economist Martin Jacques asks: How do we in the West make sense of China and its phenomenal rise? The author of "When China Rules the World," he examines why the West often puzzles over the growing power of the Chinese economy, and offers three building blocks for understanding what China is and will become.
The Brookings Institution: Poverty in Numbers: The Changing State of Global Poverty from 2005 to 2015
... How many poor people are there in the world and how many Are there likely to be in 2015?
To calculate the number of people in the world living in extreme poverty, we update the World Bank’s official $1.25 a day poverty estimates for 119 countries, which together account for 95 percent of the population of the developing world. To do this, we take the most recent household survey data for each country, and generate poverty estimates for the years 2005 to 2015 using historical and forecast estimates of per capita consumption growth, making the simplifying assumption that the income distribution in each country remains unchanged.
Global poverty figures are then calculated by adding together the number of poor from each country. (See the Appendix for a full account of our methodology.) Our results indicate that the world has seen a dramatic decrease in global poverty over the past six years, and that this trend is set to continue in the four years ahead. We estimate that between 2005 and 2010, the total number of poor people around the world fell by nearly half a billion people, from over 1.3 billion in 2005 to under 900 million in 2010. Looking ahead to 2015, extreme poverty could fall to under 600 million people—less than half the number regularly cited in describing the number of poor people in the world today. Poverty reduction of this magnitude is unparalleled in history: never before have so many people been lifted out of poverty over such a brief period of time.
When measured as a share of population, progress remains impressive, but is more in line with past trends. In the early 1980s, more than half of all people in developing countries lived in extreme poverty. By 2005, this was down to a quarter. According to our estimates, as of 2010 less than 16 percent remained in poverty, and fewer than 10 percent will likely be poor by 2015.
The first Millennium Development Goal defines a target (MDG1a) of halving the rate of global poverty by 2015 from its 1990 level. In an official report prepared for the U.N. MDG conference this past September, the World Bank stated that we are 80 percent of the way toward this target and are on track to meet it by 2015, though the Bank warned that “the economic crisis adds new risks to prospects for reaching the goal.”3
Our assessment is considerably more upbeat. We believe that the MDG1a target has already been met—approximately three years ago.4 Furthermore, by 2015, we will not only have halved the global poverty rate, as per MDG1a, but will have halved it again.
Over the past half century, the developing world, including many of the world’s poorest countries, have seen dramatic improvements in virtually all non-income measures of well-being: since 1960, global infant mortality has dropped by more than 50 percent, for example, and the share of the world’s children enrolled in primary school increased from less than half to nearly 90 percent between 1950 and today.5 Likewise there have been impressive gains in gender equality, access to justice and civil and political rights. Yet, through most of this period, the incomes of rich and poor countries diverged, and income poverty has proven a more persistent challenge than other measures of wellbeing.6 The rapid decline in global poverty now underway—and the early achievement of the MDG1a target—marks a break from these trends, and could come to be seen as a turning point in the history of global development. ...
Here are some interesting charts and graphs:
I particularly liked this graph:
Nigeria will soon have more poor people than India.
China has been one of the world’s most dynamic economies in recent decades, but how did it fall so far behind? This column argues that the industrial revolution occurred in Europe rather than China because European entrepreneurs were eager to adopt machines to cut down on high labour costs. China didn’t “miss” the industrial revolution – it didn’t need it.
One of the big debates in economics is about the causes of the arguably most dramatic change in development trajectory in (recent) world history, the industrial revolution.
There is consensus about the fact that this change in growth pattern started in northwestern Europe, and gradually spread to large parts of the western and, after a lag, eastern and southern world.
Why this happened, and where it happened are topics of heated debate among historians. The recent “Chinese miracle” – fabulous growth since about 2000 – has had an important impact on this debate.
... Mixed modernity
This detailed comparison results in a very mixed picture of Chinese economic modernity compared with that of Western Europe. Yes, the Yangzi delta had a relatively advanced economy, with high levels of agricultural productivity and urbanisation and a high degree of structural transformation; we can accept this part of Pomeranz’s thesis. But this did not imply that it was “ready” for an industrial revolution.
The industrial revolution was a process of mechanisation in which expensive labour was substituted for by machines driven by coal – as Bob Allen (2009) has demonstrated. Chinese factor costs were not at all conducive to such a change.
Whereas entrepreneurs in Europe were very eager to develop new technologies that increased labour productivity via the capital-labour ratio, Chinese businesses barely had any incentive to do so. That the industrial revolution emerged in England was therefore not accidental or the result of luck, but the long-run effect of its fundamentally different factor prices, reflecting its different economic and institutional trajectory.
Bloomberg: U.S. Schools Are Still Ahead—Way Ahead
...Meanwhile, the perception is that American children live a relatively easy life and coast their way through school. They don't do any more homework than they have to; they spend an extraordinary amount of time playing games, socializing on the Internet, text-messaging each other; they work part time to pay for their schooling and social habits. And they party. A lot. These stereotypes worry many Americans. They believe the American education system puts the country at a great disadvantage. But this is far from true.
The independence and social skills American children develop give them a huge advantage when they join the workforce. They learn to experiment, challenge norms, and take risks. They can think for themselves, and they can innovate. This is why America remains the world leader in innovation; why Chinese and Indians invest their life savings to send their children to expensive U.S. schools when they can. India and China are changing, and as the next generations of students become like American ones, they too are beginning to innovate. So far, their education systems have held them back.
My research team at Duke looked in depth at the engineering education of China and India. We documented that these countries now graduate four to seven times as many engineers as does the U.S.The quality of these engineers, however, is so poor that most are not fit to work as engineers; their system of rote learning handicaps those who do get jobs, so it takes two to three years for them to achieve the same productivity as fresh American graduates.As a result, significant proportions of China's engineering graduates end up working on factory floors and Indian industry has to spend large sums of money retraining its employees. After four or five years in the workforce, Indians do become innovative and produce, overall, at the same quality as Americans, but they lose a valuable two to three years in their retraining. ...
New York Times: For China’s Women, More Opportunities, More Pitfalls
BEIJING — The question that dashed Angel Feng’s job prospects always came last.
Fluent in Chinese, English, French and Japanese, the 26-year-old graduate of a business school in France interviewed between January and April with half a dozen companies in Beijing, hoping for her first job in the private sector, where salaries are highest.
“The boss would ask several questions about my qualifications, then he’d say: ‘I see you just got married. When will you have a baby?’ It was always the last question. I’d say not for five years, at least, but they didn’t believe me,” Ms. Feng said.
Three decades after China embarked on dazzling economic reforms, much has changed for women. Unlike their mothers, whose working — and, often, private — lives were determined by the state, women today can largely choose their paths. Rural women are no longer tethered to communes; urban women no longer are assigned jobs for life or need permission from work units to marry, although all women must apply for permission to have a child.
Yet along with freedom has come risk, as socialist-era structures are dismantled and powerful cultural traditions that value men over women, long held in abeyance by official Communist support for women’s rights, return in force. Many employers are choosing not to hire women in an economy where there is an oversupply of labor and women are perceived as bringing additional expense in the form of maternity leave and childbirth costs. The law stipulates that employers must help cover those costs, and feminists are seeking a system of state-supported childbirth insurance to lessen discrimination.
The result is that even highly qualified candidates like Ms. Feng can struggle to find a footing. Practical concerns about coping in a highly competitive world are feeding into a powerful identity crisis among China’s women. ...
New York Times: The Mystery of Economic Growth
...For all its temptations, however, the search for a policy toolkit toward development is fraught with pitfalls. Over the last 60 years or so, the international development community has come up with model after model, theory after theory, in search of just such a toolkit.
It has, at various times, promoted the benefits of huge, often conditional, inputs of foreign aid, the rigors of shock therapy, the virtues of free trade and the promise of the Washington Consensus (a set of policies prescribed and often imposed by agencies like the World Bank, the International Monetary Fund and the U.S. Treasury).
Yet for all the efforts to come up with a general theory of development, the truth is that economic growth remains something of a mystery. This is the conclusion of a recent anthology, “What Works in Development?”, published by the Brookings Institution. The essays lead to the conclusion that there is no clear way to ease poverty, and — as the editors, William Easterly and Jessica Cohen, state in their introduction — “no consensus on ‘what works’ for growth and development.”
Mr. Easterly, a former World Bank economist, has elsewhere shown that there is little correspondence between a nation’s economic growth and the extent to which it follows international development prescriptions. Analyzing data for 1980 to 2002, he found that countries that grew the fastest received considerably less foreign aid and spent less time under I.M.F. tutelage than those that grew the slowest. This doesn’t mean that following the orthodoxy harms development, but it does suggest that rapid growth is possible without international aid or advice.
Part of the problem, it turns out, may be the very attempt to follow a model. Progress — economic or otherwise — is a notoriously subjective phenomenon. It is context sensitive, and highly dependent on local conditions. It is, in particular, resistant to the uniformity implicit in even the most sophisticated models. ...
... Facts speak for themselves. It has become increasingly evident that many of the most successful growth stories have resulted not from slavishly following an external set of policy directives, but from pursuing u nconventional — and locally attuned — solutions.
The rise of Southeast Asia (and more recently China), for example, represented a repudiation of textbook views about the proper role of the government and of the relationship between markets and the state. ...
And I loved this part:
... Ultimately, it is this sensitivity, this ability to accommodate context and local detail, that works best in development. The type of grinding, sweaty work it implies — time in the field, in villages and on farms, learning about cultures and social structures — is certainly less glamorous than designing overarching theories to rid the world of poverty.
But poverty is an unglamorous business. It is only fitting that the most effective way to address it would be through small, low-key and often backbreaking interventions.