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NYT: We have entered the third depression. WashPost: Economics is now a shaky science. IHT: China edges into its second stage of globalization.
Third depression begins thanks to failure of policy
Columnist Paul Krugman writes in the New York Times that we are in the early stages of a long depression. He argues that this so-called third depression is a result of a “failure of policy” as governments focus on austerity measures and spending cuts when they should be spending more.
QUOTE: While long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating.
China must properly manage assertive workers
Jack Perkowski, JFP Holdings managing partner, writes in the Wall Street Journal that Chinese workers have long tolerated low wages and difficult working conditions. This, he argues, is why the protests in China have come as a shock to the nation. Unlike in the past, Chinese workers are demanding a greater share in the country’s prosperity. China must now manage this workforce and its growing assertiveness.
QUOTE: While some may decry the loss of cheap labor as a source of China's global competitiveness, this is part of the country's healthy transition. Future economic growth will increasingly be driven by domestic consumption, and production will utilize Chinese people's brains, as well as their brawn, to produce products the world wants to buy.
Disagreements at the G-20 risk causing another global downturn
Columnist Clive Crook writes in the Financial Times that cooperation between G-20 nations has gotten more difficult because they now have competing interests and needs. He argues that disagreements between the countries risks causing another global downturn.
QUOTE: Uncoordinated financial rules are self-defeating because of regulatory arbitrage. In financial reform governments have, or ought to have, the same goal: systemic safety, domestically and internationally.
China edges into the second stage of its globalization
Behzad Yaghmaian, Ramapo College of New Jersey professor of political economy, writes in the International Herald Tribune that China decided to revaluate its currency not to reduce global trade imbalances but to encourage a shift to high-tech, green production in the country. Letting the renminbi rise will increase the cost of production of low-value-added exports.
QUOTE: Though seemingly unrelated, the new exchange-rate policy, and the Communist Party’s tolerance of the strike movement, point to a new economic strategy. China is edging into the second stage of its globalization.
Obama understands need for freer trade with South Korea
An editorial in the Wall Street Journal welcomes President Obama’s announcement that he will support a US-South Korea trade pact. It argues that Obama has accurately concluded that freer trade will lead to more jobs and economic growth.
QUOTE: One of President Obama's economic failures has been his refusal to press for trade expansion, even for trade deals that are obviously in America's strategic and economic best interests. So it's a relief to hear that Mr. Obama is saying he'll try to salvage the US-South Korea trade pact he has assailed for three years.
Germany should run large deficits to help global growth
Sebastian Mallaby, international economics senior fellow at the Council on Foreign Relations, writes at CFR.org that the G-20 Summit will only succeed in promoting the “balanced” growth it has promised if China and Germany help stimulate the global economy. He argues that China is doing its part to reduce its trade surplus but that Germany must do more to help the global recovery.
QUOTE: Going into the summit, Chancellor Angela Merkel was the chief advocate of budget retrenchment—even though Germany's contribution to a balanced global recovery should be to run large deficits so long as global growth looks tentative.
Economics is now a ‘shaky science’
Columnist Robert J. Samuelson writes in the Washington Post that economics has become a “shaky science” as economists disagree over how to avoid a double-dip recession. Economics has become a lens through which to see the context of today’s policy disputes around the world.
QUOTE: The disconnect between theory and reality seems ominous. The response to the initial crisis was to throw money at it—to lower interest rates and expand budget deficits. But with interest rates now low and deficits high, what happens if there's another crisis?
G-20 Summit puts cost of recession on world’s needy
Naomi Klein, author of The Shock Doctrine: The Rise of Disaster Capitalism, writes in Toronto’s Globe and Mail that the G-20 Summit responded to global economic woes with plans that will hurt the world’s poorest most. Promises to cut public spending will hurt students, pensioners, public-sector workers and others who rely on government assistance.
QUOTE: Already, workers, pensioners and students have taken to the streets against austerity measures in Italy, Germany, France, Spain and Greece, often marching under the slogan: “We won’t pay for your crisis.”
China pushes its way into Europe’s periphery
Jonathan Holslag, Brussels Institute of Contemporary China Studies head of research, writes in the Financial Times that the European Union risks losing its status in Eastern Europe as China moves into the region. China is investing and offering aid to struggling nations on Europe’s periphery as it expands its reach.
QUOTE: China’s growing presence will make it more difficult for the EU to achieve its own regional objectives. In this, China’s rise challenges the EU to be more effective in translating its strained economic capabilities into political clout. And the longer Europe’s economic crisis persists, the more desperate political elites will seek business to the east.
US financial reform bill might bring higher costs to consumers
Journalist Ben Steverman writes in Bloomberg Businessweek that the US financial reform bill will hopefully bring some clarity to investors over how reform will affect them. However, an unintended consequence of the bill could be higher costs for consumers.
QUOTE: Industry professionals would like to see the investing public's faith in the financial system restored by reform. If accomplished, that could help bring customers' dollars back to their funds. However, a restoration of trust is only worthwhile if reform is not too costly to the economy—and to investors' pocketbooks.