Week with “The Economist”
by Chandrakant Sampat and Niti Sampat-Patel
  
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This is what we found interesting from the current issue of the “The Economist” (September 8th- 14th September 2012)

 

The problems facing civil society today are structural and cannot be solved by linear thinking. So far, those in charge of national economies, i.e. the central bankers, politicians, elites and financial markets have attempted to solve the crises through various financial instruments like quantitative easing II have not been able to protect their countries from turmoil. The global risks still remain very high and economic sclerosis has firmly set in.

 

In the developed world this is the outcome of the unaffordable promises given to the people by their leaders. In the section titled ‘Leaders’ of this issue, titled, Asia’s next revolution (11) the newspaper has pointed out the risks confronted by the people at large. The case of Latin America is worse. The governments have collected insufficient tax revenues and are unable to cover their spending promises:

Asia’s governments are actually conscious of this. They have little desire to replace the tradition of hard work and thrift with flabby welfare dependency.” The entire world economy is “based on the piling up of debt for the future generation.”

 

When the rising population of the world outnumbers society’s ability to provide them with real resources, clever financial manipulation and debt is not likely to solve the magnitude of problems we will face.

 

Of course, printing resources is always easier than facing pain and paying for the consequences of our bad judgment.

 

As far as India is concerned, it fulfills ‘welfarism’ by incurring huge fiscal and current account deficits, which are financed by emotional Capital flows.

 

New cradles to graves: (21)

 

  1. “…Asia’s tigers kept social spending low as a percentage of GDP while their economies grew at unprecedented rates. This rapid economic progress was combined with big social advances in literacy and life expectancy.” (22)

 

  1. “One of Indonesia’s biggest fiscal giveaways subsidises motor fuel regardless of who uses it, and thus mostly ends up with the car-owning rich. Last year those subsidies cost the government nine times what health care did.” (23)

 

  1. “…The pensions Indonesia has promised to offer to the nation in 2015 will be partly on a ‘defined benefit’ basis, under which a person’s pension may not necessarily match his contributions.” (23)

 

  1. “Unfortunately, Mr. Widianto says, ‘no one is doing those calculations just now.” (23)

 

  1. “By 2030 Asia (excluding Japan) will account for over half the world’s elderly and about half the global burden of non-communicable diseases, like cancer and diabetes. If Asia’s welfare provision continues to widen and deepen, the region will host most of the world’s pensioners and patients.” (23)

 

Banyan: Too small an ocean: (31)

 

  1. “Certainly, India and China has been bumping heads in the western Pacific. And a visit by Mrs. Clinton to Beijing this week served only to underscore the difficulty in managing their rivalry.” (31)

 

  1. “America is the pre-eminent military power in the western Pacific, and wants to stay that way. That is the message of the Obama administration’s ‘pivot’ or ‘rebalancing’ to Asia, and its commitment to keep most of its naval forces in the Pacific.” (31)

 

  1. “China, newly confident in its wealth and military muscle, wants to challenge this American primacy so close to home.” (31)

 

The Democratic convention: Private effort, common good: (33)

 

  1. “Mr. Obama, in a second term, may be able to tackle America’s looming crisis of debt and public spending.” (33)

 

  1. “Mr. Clinton preferred to focus on practical measures to educate Americans for new sorts jobs, telling an adoring audience bluntly: ‘The old economy is not coming back’.” (34)

 

Buttonwood: Rover the regulator: (62) ‘Simple rules may be best for monitoring banks.’

 

1. “In practice, as Andrew Haldane of the Bank of England highlighted in a speech at the recent Jackson Hole meeting of central bankers, regulators have responded by trying to match the complexity of firms they supervise. The first set of Basel rules on bank capital was just 30 pages long; the second go had 347 pages; Basel 3 has 616. In America the Glass-Steagall act of 1933, which separated commercial and investment banking was a concise 37 pages; the Dodd-Frank act of 2010 ran to 848, and may spawn a further 30,000 pages of detailed rule-making by various agencies.” (62)

 

 

Your feedback is welcomed at nitisp@gmail.com and sampat@capitalideasonline.com