banking.economics.sustainability and other shiny stuff
The Economist's Free Exchange blog has a handy table showing you when China's GDP will overtake America's. You can manipulate it by changing the projected growth figures, though under any reasonable assumption, China will become the world's largest economy in the next 8-12 years.
Dropping to second won't in itself hurt the US — it's not a zero-sum game and Americans, individually, will continue to be much wealthier than Chinese. But how to manage the transition from one global leader to the next?
Exactly once in the history of the industrialised world has a dominant great power lost its status to another dominant great power, and that already tiny sample size is of limited use in informing us about the future. Britain and America shared a language, a culture, and a general political philosophy of liberalism and democracy. They were explicit friends and allies. Perhaps most important, they were both rich, in per capita terms. Chinese culture is alien to Americans, and its primary political values appear to be quite different from those of the world's current hegemon. The two countries are not enemies, but their relationship is explicitly adversarial. And while America is rich, hundreds of millions of Chinese citizens will remain extremely poor at the time China assumes the top spot in the GDP league tables.
The Economist has written on the challenges likely to accompany this looming handover, but I think it's easy to underestimate just how unprecedented and historic a peaceful transition would be. The natural urge is to advise both countries to plan ahead, so as to make the process as easy as possible. But there is little in the way of past experience to suggest what the best approach ought to be. I'd generally recommend that America invest time and energy in building international institutions. But Americans are likely to view this as a preemptive relinquishing of power, and the Chinese may rightly see it as an attempt to tie their hands. Every step is fraught. One can only hope that the two nations perceive the clear mutual benefits of a cooperative relationship. But the clear gains from peace and trade did not prevent a breakdown in the international order in 1914.
The share price for stock in H&H Imports, Inc. went up 290% between the close of market on Friday to the end of the day today. The reason for the move? Entertainer/investor 50 Cent, who owns a portion of the tiny company, tweeted all weekend about how enthusiastic he was about the company's success. (He also appeared on CNBC.) By one calculation, 50 made $10 million with those tweets.
Think about apples for a second. There are Granny Smiths, Red Delicious, Fuji, etc. Now think about bananas. There are just, like, bananas, right? The only bananas that Americans eat — and they eat more of them than they do apples and oranges combined — are the Cavendish, which is just one variety out of at least one thousand. And now, a fungus is threatening to destroy pretty much every Cavendish in existence. How real a possibility is it that all of our bananas will be wiped out? It already happened once.
This week's New Yorker has a huge story about the banana industry that touches on all of the familiar complaints against it: the inherent lack of sustainability of their product, companies aiding anti-government military forces in banana-growing countries. But what it mostly focuses on is Tropical Race Four, a sort of super-fungus that turns Cavendish bananas into mush. So scientists are trying to build a better banana! One that is resistant! Here's the thing: It doesn't sound like they're making a lot of progress.
One of the most interesting pieces of info in the story is that this already happened once. See, the bananas that were originally eaten all over the U.S. weren't the Cavendish variety, they were Gros Michel bananas. (They were also, by all accounts, far tastier.) But a fungus called Race One, which is closely related to Tropical Race Four, wiped them out in the first half of the twentieth century. Really, one of the main reasons we have Cavendish bananas is because they're resistant to Race One. But it sounds like we might not have them for much longer either.
Actually, this whole banana thing has bothered me since I saw a New York Times op-ed a few years ago that is VERY similar to this New Yorker one. In an age of super-local, sustainable, organic, blah blah blah, how have bananas — genetically altered fruit shipped in from tropical climates — managed to escape scrutiny? We don't really want to admit this, but we used to be convinced that something like heirloom bananas would become the next big dessert trend (right about the time this book came out). But then, nothing! People just kept on eating Bananas Foster and peanut-butter-and-banana sandwiches.
But maybe now's the time for other banana varieties — Some are fuzzy! Some have striped skin! — to enter the U.S. market?
We Have No Bananas [NYer]
...Prospective parents put off by the rigor of traditional adoptions are bypassing that system by producing babies of their own—often using an egg donor from one country, a sperm donor from another, and a surrogate who will deliver in a third country to make what some industry participants call "a world baby."
They turn to PlanetHospital and a handful of other companies. "We take care of all aspects of the process, like a concierge service," says Mr. Rupak, a 41-year-old Canadian.
...During one client meeting over tea in Chicago, Mr. Rupak first answers a question about the possibility of breast-feeding if you're not the birth mother. Then, as the conversation wraps up, he says: "I have some good news for you. We'll be offering you and your husband complimentary teeth-cleaning while you're in Hyderabad."
From the WSJ, interesting throughout.
The state of Wisconsin has gone an entire deer hunting season without someone getting killed. That’s great. There were over 600,000 hunters. Allow me to restate that number. Over the last two months, the eighth largest army in the world – more men under arms than Iran; more than France and Germany combined – deployed to the woods of a single American state to help keep the deer menace at bay. But that pales in comparison to the 750,000 who are in the woods of Pennsylvania this week. Michigan’s 700,000 hunters have now returned home. Toss in a quarter million hunters in West Virginia, and it is literally the case that the hunters of those four states alone would comprise the largest army in the world.
Tired of being bossed around? Want your neighbors to treat you with more respect? Want to play in the majors? If so, you have to have your own nukes...
First, begin developing a civilian nuclear program. Under the NPT, you are not only entitled to a civilian nuclear program, you may even ask for help from the IAEA. The IAEA will provide you with the basic ingredients and much of the know-how for a military program. Moreover, you can legally buy reactor fuel, and thus do not have to acquire it by performing hair-raising stunts like those the Israelis pulled in 1968, when they had to hijack a ship carrying uranium after France stopped its supplies...
Too bad A. Q. Khan, the father of all nuclear smugglers, is no longer in business. He could have supplied you with everything you need to give the United States the finger: from centrifuges all the way to warhead designs. With Khan’s help, Libya almost made it into the nuclear club. But along came the Bush administration and shut down the Khan franchise. As a consequence, buying all the necessary items will now take longer and will probably cost you more; but, with enough patience and money, you will still be able to get what you need. North Korea will help you, just as they offered to help Iran and Syria. You need nukes; they need hard currency—a match made in heaven...
You will get caught, either by a US spy satellite (as in the case of North Korea), a disgruntled defector (as in the case of Iraq), or even an indigenous human rights group (as in the case of Iran). So what should you do if you get caught? First and foremost, do not overreact. Deny. Should the evidence become too powerful, then, change tack. Create a distraction. Argue that the uranium particles found in your country were purposely scattered by a hostile nation. Challenge the credibility of the information provided to the IAEA. Bring up Israel again.
Once these lame excuses have run out of steam, shift gear. Admit that you have indeed failed in certain cases to be as open as the NPT requires. Promise to cooperate with the IAEA from now on. But never admit that you are seeking anything beyond nuclear energy. If you are a Muslim country, you can also cite some arbitrary fatwas that argue that nuclear arms are incompatible with Islam. If none can be found, have one written by a clergyman.
Most importantly, continue to insist on your “inalienable right” to peaceful nuclear energy. Since the NPT is not very precise, the international community may spend years trying to agree what to do with you. Claim the “nuclear powers” are trying to deny your nuclear rights and protect the political and economic benefits of monopolizing nuclear weapons and energy. Accuse the IAEA of bias. Raise Israel again.
That's NATO's Michael Ruehle guide on how a non-nuclear nation might acquire a bomb or two. It ain't easy.
In 2008, along with most other commodities, the market for fertiliser had reached its highest price peak ever. It gave a taste to the people in the business how much money that could be had in feeding the world. Then the market eased and the takeovers begun. Strategic acquisitions by the major players meant that they were securing their positions to await the next price peak. So far this year, the biggest acquisition came from the Finnish company Yara which acquired Terra, an American firm, for $4.1 billion.
The explanation for all this is undoubtedly the open maw and changing dietary habits of the world’s fast-expanding population. It is expected to grow by around a third by 2050 to over 9 billion people, who will all need to be fed. Moreover, as people grow more prosperous they eat more meat, which will require even more crops to provide feed for livestock... The gods, it seems, are smiling on the fertiliser-makers.
Niall Ferguson writes:
One day, a seemingly random piece of bad news -- perhaps a negative report by a rating agency -- will make the headlines during an otherwise quiet news cycle. Suddenly, it will be not just a few policy wonks who worry about the sustainability of U.S. fiscal policy but the public at large, not to mention investors abroad. It is this shift that is crucial: A complex adaptive system is in big trouble when its component parts lose faith in its viability.
Over the last three years, the complex system of the global economy flipped from boom to bust -- all because a bunch of Americans started to default on their subprime mortgages, thereby blowing huge holes in the business models of thousands of highly leveraged financial institutions. The next phase of the current crisis may begin when the public begins to reassess the credibility of the radical monetary and fiscal steps that were taken in response. Neither interest rates at zero nor fiscal stimulus can achieve a sustainable recovery if people in the United States and abroad collectively decide, overnight, that such measures will ultimately lead to much higher inflation rates or outright default. Bond yields can shoot up if expectations change about future government solvency, intensifying an already bad fiscal crisis by driving up the cost of interest payments on new debt. Just ask Greece. Ask Russia too. Fighting a losing battle in the mountains of the Hindu Kush has long been a harbinger of imperial fall. What happened 20 years ago is a reminder that empires do not in fact appear, rise, reign, decline and fall according to some recurrent and predictable life cycle. It is historians who retrospectively portray the process of imperial dissolution as slow-acting. Rather, empires behave like all complex adaptive systems. They function in apparent equilibrium for some unknowable period. And then, quite abruptly, they collapse.
Washington, you have been warned.
