Out of Control

If there was any silver lining to the global food price crisis, it was that countries around the world started tearing down long-standing trade barriers such as tariffs and quotas against food imports. But that silver lining proved short-lived as another threat to free trade emerged: export bans and export taxes on domestic food.

To return soaring food prices to earth and placate irate consumers (read: voters): India announced a temporary ban on some varieties of rice; China slapped export taxes on rice; Pakistan imposed a 35 percent duty on wheat; and Russia quadrupled wheat-export taxes to 40 percent.

But the problem with such measures is that the relief they provide will be temporary – and the pain they cause more enduring. Why? Farmers who can’t command the market price for their produce will have little incentive to invest in yield-enhancing technologies, making it much harder for food production to catch up with demand. Farmers will certainly lose out -- but so will consumers.

The only country that seems to understand this is South Africa which has refused to jump on the export-ban bandwagon. “We don’t believe banning exports will help us in the long run,” noted Lulu Xingwana, the South African agricultural minister.

Bonus:
Check out Noble laureate and Chicago econ prof Gary Becker's brilliant analysis of the Malthusian fallacies underlying the discussion of this issue here.

A growing number of laptop seizures by U.S. Customs from U.S. citizens entering the U.S., predominantly at airports, has concerned enough companies that they are now requiring employees to wipe their hard drives before traveling abroad. At least two multinationals, one American, one Dutch, have told employees not to carry confidential information on laptops when they travel overseas, according to the Washington Post.

The fact that corporations are instituting policies to protect themselves should signal how abusive this practice has become.

It what could amount to a case of illegal search and seizure, Customs agents are ordering employees of U.S. companies, be they U.S. citizens or foreign nationals, predominantly of Asian and Middle Eastern backgrounds, to surrender cell phones, BlackBerry devices, iPods and laptop computers when re-entering the country.

Customs agents will then copy phonebooks and calling information from phones, and browser and email data from the laptops. The Post reports that border agents have demanded users provide passwords to open hard drives – the information of which is often confidential. (What the Post does not report is that, should the laptop contain confidential financial information about the company, the password disclosure itself could be a felony under Sarbanes-Oxley Act, so the hapless employee is stuck between being arrested for not cooperating with Customs agents or opening himself and his entire company’s executive management to jail time).

A radio ad aired by Rudy Giuliani in New Hampshire has unleashed a firestorm of protest by the media. In it, Giuliani, a prostate cancer survivor, thanks God that he was treated in the United State’s (semi-socialized) medical system where survival rates for this type of cancer are 82 percent – as opposed to the (fully) socialized medical system in Britain where survival rates are allegedly only 44 percent.

But a number of reporters and pundits have pounced on the stat like a jackal on a bunny (actually, make that an ant). Rick Klein of ABC News accuses Rudy of “fuzzy healthcare math.” Ezra Klein of CBS denounces the stat as a “straight lie resulting from a basic mathematical error.” Washington Post’s Eugene Robinson intones that this is precisely the kind of “cherry-picking” of data that has caused 160,000 US soldiers to be bogged down in Iraq.

My, my! So what exactly is the truth, according to these oracles?

Well, WaPo’s Michael Dobbs claims that mortality rates for prostate cancer in the United States and UK are the same: About 25 men out of 100,000 die of prostate cancer each year in the two countries. But that comparison hides more than it reveals.

Rudy’s claim was taken from an article in a 2007 issue of the City Journal by Dr. David Gratzer of the Manhattan Institute – and a contributor to Reason Roundtable – that were based on 2000 OECD data. Gratzer admits the figures are now outdated -- although it is curious as to why he used 2000 figures in a 2007 article (he does provide an answer of sorts in a New York Post article linked below.) But Gratzer points out that Dobb’s comparison is based on overall mortality rates. That is, the percentage of all Americans who die of prostate cancer is similar to the percentage of all Britons.

However, Gratzer, who is also Rudy's health care policy adviser, notes, that this comparison misses the point given that a much higher percentage of Americans are diagnosed with prostate cancer than Britons. And the latest figures from Lancet Oncology, a respected journal, show that the five-year survival rate of people diagnosed with prostate cancer is much higher in the U.S. (99 percent) than in Europe (78 percent) and Scotland and Wales (71 percent). Britain’s latest figures are not yet available.

Gratzer’s detractors such as Eugene Robinson of WaPo, however, counter that the higher prostate cancer diagnosis in the U.S. is not the result of higher incidence of cancer -- but of early screening and detection. And that discredits Rudy and Gratzer how? Because very often this type of cancer is non-lethal and its detection bumps up U.S. survival rates among patients diagnosed with prostate cancer even when they are not treated or treated inadequately. Get it?

But even if these pundits were right that the higher diagnosis of non-lethal prostate cancer does artificially boost the survival rate of U.S. patients, can it account for the entire 22-27 percent differential between U.S. and European survival rate that the Lancet study found? Highly unlikely.

The bottom-line is that Rudy’s accusers have no fool-proof evidence of willful mendacity on his part. Rudy might have over-stated his case (Isn’t that shocking: a politician overstating!). But they have certainly engaged in over-kill.

All of which raises this interesting question: Where were these pundits when Al Gore was going around making movies claiming that global warming would cause sea levels to rise by 20 feet, when, in reality, the UN’s Intergovernmental Panel on Climate Change put the figure at no more than two feet: a ten-fold exaggeration?

How do you spell d-o-u-b-l-e s-t-a-n-d-a-r-d?

David Gratzer's column in the New York Post taking on his critics here:
http://www.nypost.com/seven/11052007/postopinion/opedcolumnists/uks_bad_medicine_901295.htm?CMP=EMC-email_edition&DATE=11052007

WaPo's Eugene Robinson's commentary here:
http://www.azstarnet.com/opinion/209570

I heard the most illuminating – and the most depressing – assessment of Iraq yet last Wednesday at Michigan State University where Stephen Biddle, one of the most – if not the most -- respected military strategists in the United States, was speaking. (Full disclosure: Biddle was invited as part of a lecture series called the Symposium on Science, Reason and Modern Democracy that my husband co-directs at the MSU political science department.)

Biddle, a fellow at the Council on Foreign Relations and award-winning author of Military Power: Explaining Victory and Defeat in Modern Battle, and an early opponent of the war, explained why America’s pre-surge strategy in Iraq was a colossal failure. And even though the current U.S. strategy is on the right track, he put its odds of success – defined not as the creation of some fancy-shmantzy pluralistic democracy in Iraq, but just “sustainable stability” -- at no more than 10 to 15 percent. And that too if the U.S. maintains the current approximately 160,000 troops for at least 8 to 10 years till a new generation of Sunnis, Shiites, and Kurds has had a chance to grow up without each side feeling that it was about to be slaughtered by the other. This is an enormously difficult and expensive proposition with huge opportunity costs. But if the U.S. is not prepared for such a commitment, he believed, it should hit the exit doors now. This would certainly lead to an all-out civil war with epical bloodletting and nightmarish geo-political consequences for the whole region – but at least it wouldn’t cost anymore U.S. lives.

What, most emphatically, wouldn’t work was the middle-ground that every Democratic presidential candidate, with the exception of Joe Biden, was proposing: Cutting troop levels in half and changing their mission from combat to peace-keeping. This would make U.S. troops sitting ducks for both Sunni and Shiite militias without preventing their mutual slaughter. “This is a situation where the extreme options – total withdrawal now or a big troop commitment for about 10 years -- are clearly better than the middle one.”

Meanwhile, Joe Biden’s plan for carving up the country into a loose federation of Sunni, Shiite and Kurdish enclaves was wishful thinking too, Biddle felt. To convince Sunnis, who have little oil in their areas, to go along with such an arrangement, Biden proposes that an oil-sharing formula be written into the Iraqi constitution. But who’ll enforce the constitution? Given that Sunnis constitute only 20 percent of the population and have only minimal political representation, it would have to be the Shiite-dominated government. So we would basically be asking the Sunnis to lay down their arms for the sake of a piece of paper that would be enforced by their mortal enemies.

But the most interesting part of the lecture was Biddle’s explanation for why America was not able to control the insurgency till General Petraus took over. Till then, Biddle noted, the U.S. was not fighting Iraq – it was refighting Vietnam. Essentially, there are two types of insurgencies: A classic ideological insurgency and a sectarian-communal civil war. Vietnam was the first type of conflict where different groups were struggling with each other to impose their idea of good government on the rest of the country. Iraq, however, is the second kind of conflict where each is trying to protect itself and its identity. “The Sunnis, Shiites and Kurds are fighting a zero-sum game with existential stakes.”

Indeed, U.S. efforts to apply the lessons of Vietnam to Iraq, namely political reconciliation through elections, economic reconstruction and rebuilding an indigenous military, actually “poured gasoline on the flames of the Iraqi insurgency.” For instance, consider the creation of an indigenous force: In an ideological conflict, this would make perfect sense. Afterall, unlike foreign troops, locals have a direct stake in the well-being of their country. Moreover, since they speak the local language, they can more easily separate innocents from guerillas and avoid targeting the wrong people – something that is essential to gain the confidence of the larger population. But in Iraq’s case, none of this applied. In a country riven by ethnic hatreds, there was no reason to believe that an indigenous army would protect all Iraqi lives equally – or that it would be possible to convince anyone that it would. Thus, as far as the Sunnis were concerned, Biddle noted, the force that we put together was nothing short of a “Shiite militia on steroids.” Their response under the cirumstances was completely rational: escalate their insurgency and prevent this force from ever taking root. Even the much vaunted elections in Iraq fuelled the sectarian fires because, in a war of identity, electoral politics creates a further incentive to demonize the other groups. They gave Shiites an opportunity to say to fellow Shittes, “Vote for me and I’ll protect you from the Sunni Devils” – and vice versa. “Elections, did not mitigate underlying conflict, they intensified the centrifugal forces that were breaking-up Iraqi society.”

If things have calmed down a bit since General Petraeus took over in February, it is not necessarily because going in he had a more accurate understanding of the nature of the conflict – but sheer dumb luck. Even though we were screwing up badly in Iraq, as it turns out, al Qaida was screwing up even more. In Anbar Province, a predominantly Sunni area, al Qaida was systematically terrorizing the local population, leaving Sunni leaders with no option but to approach our units as the lesser of the two evils.

The success in routing out al Qaida in Anbar with local cooperation gave birth to what, Biddle calls, Petraus’ new bottom-up approach in Iraq in addition to the top-down model that U.S. had hitherto followed. The top-down apporach aimed exclusively at controlling the security situation in Baghdad in order to create the politcal space for a power-sharing compromise. “Petraus has decided to do this (stabalize the country) retail, as opposed to imposing a wholesale formula from the top.”

The new approach involves cutting bilateral deals with every local faction – and Biddle counted 20 main ones – under which the U.S. gives them the following option: Either stop shooting at us and, in return, we will not only let you keep your arms but also place U.S. troops in your neighborhood to protect you from your enemies. Or, if you decline, we will raid your homes, take away anything that you can possibly use to defend yourself. “And, once we are finished, guess what your enemies across the street will do to you.”

“We have to counter existential stakes with existential stakes,” Biddle notes. “We can’t convince them to lay down their arms for three hours more of electricity a day.”

If the U.S. had the troop strength and the resources to fully implement both the top-down and bottom-up approach simultaneously, then U.S. prospects of succeeding would be better than the one- in-10 odds that Biddle gives them. But that would require nothing short of reinstituting the draft – a political impossibility. So sooner or later General Petraus will have to decide to give up one or the other.

In the end, Biddle noted that the administration’s strategy of maintaining current troop levels was rational – and CATO Institute’s strategy of getting out now was rational. Everything else was irresponsible or wishful thinking.

But these choices themselves testify that Iraq is a tar baby the U.S. never should have grabbed. Thank you President Bush!

Courtesy, the South Asian Journalists Association (SAJA), here is an interesting story about intellectual property enforcement gone amuck:
It seems that Penguin books and Harry Potter author JK Rowling won't be collecting $50,000 from a Durga Puja (Durga is a Hindu goddess and Puja means prayer) committee in Calcutta. A court threw out their claim of copyright infringement over a (huge) unauthorized replica of the Hogwarts school for wizards, constructed for the Hindu festival. The images (that can be viewed on Reuters) show the mockup (pandal) on the left and the actual, film version of Hogwarts on the right.

From a Daily Mail (UK) article on the decision:
Organisers of the festival in Calcutta said they were 'overjoyed' after claiming a court ruling allowed the hybrid Hindu-Potter festival to take place without any compensation payment. The community's lawyer, Ghose Chaudhuri, said: "The court has given us permission to use the Pandal (the structure) and whatever has been made till the 26th of October, no compensation has been directed to be paid."

From a BBC article, prior to the decision:
Members say that they make a different model every year - in the past they have built the Titanic. This year they chose Hogwarts School - as well as life-size models of Harry Potter and his friends. Organisers said a mock steam engine train is also being constructed next to it, to resemble Hogwarts Express. Correspondents say the construction is nearing completion and is expected to cost around 1.2 million Indian rupees ($30,000). But it is argued that the organisers did not seek permission, and so are being sued for breach of copyright.
I've been in Kolkata during Puja (when it was still Calcutta) and saw some of the more outlandish modern themes used for pandals - I vaguely remember a huge Rambo towering over us. These are scattered all over the city, along with more traditional takes on the festival.

Check out the 2 comments that follow the Daily Mail article - both from English readers:
I think this has taken Rowling down a few pegs in my estimation. The sheer greed, of someone who has millions, in trying to claim £25,000 from a simple religious non-profit making festival, is beyond belief. - Jennifer Thomson, Manchester England

Of course it is vital to both Rowling and Warners to get the money in from this type of thing to keep the franchise going. A few hundred million is never enough. What's next? Charging the kids for walking around as Harry Potter on Halloween? - Freddie, Dorset, England

More on Durga Puja at Wikipedia:
During the week of Durga Puja, in the entire state of West Bengal as well as in large enclaves of Bengalis everywhere, life comes to a complete standstill. In playgrounds, traffic circles, ponds -- wherever space may be available -- elaborate structures called pandals 'are set up, many with nearly a year's worth of planning behind them. The word pandal means a temporary structure, made of bamboo and cloth, which is used as a temporary temple for the purpose of the puja. While some of the pandals are simple structures, others are often elaborate works of art with themes that rely heavily on history, current affairs and sometimes pure imagination. Somewhere inside these complex edifices is a stage on which Durga reigns, standing on her lion mount, wielding ten weapons in her ten hands. This is the religious center of the festivities, and the crowds gather to offer flower worship or pushpanjali on the mornings, of the sixth to ninth days of the waxing moon fortnight known as Devi Pakshya

No mincing words here. Professor and libertarian thinker Tibor R. Machan weighs in on how the European economic history colored Monday’s ruling against Microsoft by the European Court of First Instance.

“Given the history of how most people in Europe had gained their wealth and economic dominance, namely, through politically and militarily backed conquest of and expropriation of resources from millions of subjects—the real exploitation of the feudal, not capitalist, era that gave credibility to Karl Marx’s theory of exploitation—it is perhaps understandable that many in Europe and elsewhere around the globe believe all wealth comes from malfeasance…

“The achievement of wealth through market processes is relatively new in human history and only taken to be the norm by most people in the United States of America and a few other places.”

Read the full comment here.

Given the title and subhead of this blog, here’s something that fits right in.

In Trends in Telecommunication Reform 2007: The Road to Next-Generation Networks, The International Telecommunication Union reports that since 1990, 123 ITU member countries had a private or privatized national incumbent, and several other countries have announced their intention to privatize.

Count this as one of the legacies of the late Milton Friedman. Just 25 years ago, the conventional wisdom was that telephone service was a natural monopoly. Even in Western European democracies, governments ran the phone company. In the U.S., AT&T operated for profit, but it operations were heavily regulated and its monopoly was largely preserved by policy. Long distance competition was just opening up back in 1980, when I was a cub reporter, but competition with a local telephone incumbent was still unimaginable.

The graph below, taken from the report, shows the percentage of ITU countries that have competition for various services.

The gradual introduction of long distance and wireless competition in the U.S., coming at a time when Friedman’s free market ideas were being sparked worldwide via the Reagan and Thatcher policies, showed the world the innovation and growth that could occur when government steps aside. Ironically, the latest political fad has been to re-nationalize: witness Hugo Chavez, current darling of the progressive set, whose government took over Venezuela’s CANTV after more than a decade of success in private hands. Guess it will be back to the days of five-year waits for phone lines.

For its part, the ITU report credits much of the expansion of next generation telecom services to privatization and competition.

“The objectives of privatization are to improve efficiency, productivity, and service quality, as well as to raise capital, improve management expertise and further develop the network,” the report states. “In addition, many countries have found that competition is often more fair when the state avoids being both a market player (as owner or part-owner of the incumbent) and a referee at the same time. Privatization sends the signal that policy decisions and regulations will be fair to all players.”

The entire report is available for SF 100 ($84). The executive summary and a sample chapter can be found here.

Not the John Edwards version.

In a TCS Daily interview, author/economist Philippe Legrain takes on the notion that America is being yanked apart by language:

I devote a whole chapter of the book to considering Samuel Huntington's argument that Latino immigrants are splitting America in two and find little evidence to substantiate his thesis. To quote just a few facts, census figures show that only 4.2 million of those born in the US - a mere 1.8% - speak Spanish at home and English less than very well, while only 1.2 million of the 232 million people born in the US - one in 200 - speaks Spanish at home and has poor or no English.

...

Huntington also claims that "Many Mexican immigrants and their offspring simply do not appear to identify primarily with the United States." But while only one in three foreign-born Latinos describe themselves as American, this rises to 85 percent among their US-born children - and 97 percent among the US-born kids of US-born Latino parents.

Bonus bit about immigrants with relatively high levels of education:

I certainly agree that the US immigration system is absurdly restrictive in granting visas to highly skilled foreigners, and that US companies suffer, or shift operations overseas, as a result. If you think that Google, Yahoo!, eBay were all co-founded by immigrants, and that nearly half of America's venture-capital-funded start-ups were founded by immigrants, keeping out foreign brainpower is a remarkably stupid policy.

Whole interview here.

RELATED: You know the deal with those immigrants

The ban on Internet gambling that passed last year could create a heap of trouble between the U.S. and the World Trade Organization.

Antigua and Barbados are pressing their WTO complaint that the ban violated the treaty because it effectively favors U.S. gambling interests over non-U.S. companies that house gaming servers in their countries. And the U.S. Trade Representative is not finding it as easy as he thought to simply state that Internet gambling is not covered by the treaty.

Turns out it just might be part of entertainment services covered by the treaty. And twice, in 2004 and 2005, the WTO ruled against previous U.S. attempts to curtail online gambling by preventing U.S.-based banks from processing transactions with gambling sites.

Although it does not seem likely the ban will be overturned anytime soon, another WTO ruling unfavorable to the U.S. could mean a fine between of up to $10 billion, according to Mark Mendel, attorney for Antigua in the WTO proceeding. And although a trade dispute over Internet gambling may seem trivial, international trade officials are watching the dispute closely and treating it seriously.

Got a whole lot of money that’s ready to burn
So get those stakes up higher!

In a recent post Alex references some bullet points from a recent Financial Services Forum report. The first points out that globalization has boosted living standards quite a bit; the second highlights America's trade deficit.

But the first point should render the second just about meaningless. If living standards are rising, why fret so much about trade deficits?

During the 1930s, the US "enjoyed" a trade surplus every year besides 1936. But those old days weren't exactly good.

From a 2001 paper by Cato's Daniel Griswold:

A survey of the U.S. economy since 1973 confirms that, by almost any measure—economic growth, employment, industrial production, poverty reduction—the economy has performed better in years in which the trade deficit rose than in years in which it shrank.

Related: If things are so great, why do I feel so lousy? Part 5

Two days ago, the Financial Times published an article based on a recent FT/Harris poll that supposedly proves people of rich countries are “backlashing” against globalization. Upon close inspection, however, the conclusions drawn from the poll are superficial and over-speculate opposition to globalization.

When looking at the full poll results, it is apparent that people hold an intricate view of globalization that is not adequately reflected by the poll and misrepresented in the article. The article reports that:

citizens of rich countries are looking to governments to cushion the blows they perceive have come from the liberalisation of their economies to trade with emerging countries.

Nevermind the fact that no question in the poll addressed trade with emerging countries. Only one question addresses the role of government in solving apparent problems of globalization, and that question dealt with the EU’s role. Individual governments were not addressed at all relating to the impacts of globalization. As well, the results show that people are weary of government intervention in the economy, with many across national boundaries believing the government is currently too large.

As well, while majorities of respondents in each country responded that globalization had an overall negative effect on their country, pluralities and majorities of respondents also believed that ‘free competition’ should be a goal of the European Union. This goes to show that people support the act of globalization, but have been taught to blame the name globalization for so many downfalls.

This leads in to the second problem with drawing significant conclusions from this poll: what people say and what people do are entirely different. While people say that they think globalization has negatively impacted their country, people in the countries polled clearly have a demand to wear more foreign fashion, feast on fast food or take countless trips abroad for family vacations. Indeed, consider these findings from a recent Financial Services Forum report:

-Living standards in the United States are $1 trillion higher per year than they would have been absent decades of globalization. This translates into an average gain of at least $10,000 per U.S. household per year.

-The overall U.S. trade deficit of $763.6 billion in 2006 masked a sizable services-trade surplus of $72.5 billion that partly off set a goods-trade deficit of $836.1 billion.

- A March 2007 WSJ/NBC poll found that 39% of Americans believe that trade agreements have helped the U.S. and 28% believe they have hurt the U.S.

-Global engagement fosters high productivity in American industries, but typically with substantial churn at the level of individual firms, with pervasive shutdown of inefficient plants and even entire companies.

-Looking ahead, a move to global free trade and investment in both merchandise and services will generate large gains for the United States and for the rest of the world as well. Annual U.S. income could be upwards of $500 billion higher; this translates into average gain of at least $5,000 per household per year still to be realized.

-From the mid-to-late 1970s to the mid-to-late 1990s, the real and relative earnings of less-skilled Americans was poor relative to both economy-wide average productivity gains and also the earnings of their more-skilled counterparts.

I doubt many people polled are opposed to these sorts of benefits they have experienced. All this report shows in the end is that globalization is still a dirty word. Good thing people still enjoy being prosperous in their actual lives.

So many of them are illegal, so they've already shown that they have no respect for our laws. Plus they're
young, poor, and can barely read--you just know they're out their stealing stereos or worse.

We've heard that before, and it is true that being young, poor and uneducated is usually associated with higher levels of crime. But a new paper by Kristin Butcher and Anne Piehl finds that immigrants are actually much more law abiding than the native born:

We have shown that immigrants have substantially lower institutionalization rates than natives, and that this differential has grown over the timer period that institutionalization expanded. In 2000, male young adult immigrants are institutionalized at one-fifth the rate of comparable native-born Americans. Although immigrants continue to be much more likely than natives to have low levels of education, this has not caused institutionalization rates to rise. In fact, when we predict the institutionalization rate for immigrants based on the experience of natives, we find that the observed rate is one-tenth of the predicted one.

Bryan Caplan puts it like this: "[I]f immigrants acted like otherwise similar natives, they were be ten times as criminal as they actually are."

Free version of paper here; newer NBER version here.

Can we at least harangue immigrants for stealing our jobs and depressing our wages? A recent PPIC paper says no:

This issue of California Counts examines the effects of the arrival of immigrants between 1960 and 2004 on the employment, population, and wages of U.S. natives in California. Among the study’s principal findings: 1) There is no evidence that the influx of immigrants over the past four decades has worsened the employment opportunities of natives with similar education and experience, 2) There is no association between the influx of immigrants and the out-migration of natives within the same education and age group, 3) Immigration induced a 4 percent real wage increase for the average native worker between 1990 and 2004, 4) Recent immigrants did lower the wages of previous immigrants.

PPIC study available here.

Related: How immigration boosts wages

Related: Queueless on Immigration

An article on Chinese computer maker Lenovo caught my eye today in the Wall Street Journal. Lenovo is opening up an international advertising hub in Bangalore, India. This is significant for two reasons.

First, its another indicator that China is truly embracing an outward, global outlook. It's indigenous businesses see themselves as global players, not just Chinese companies serving a burgeoning market. Part of this is recognizing that the best talent is not necessarily home grown:

Lenovo's India team will help dream up global marketing campaigns aimed at dozens of countries, including the U.S., France and Brazil, though not China. Marketing for the IBM Thinkpad line -- the quintessentially American brand that Lenovo inherited in 2005 when it purchased the personal-computer arm of International Business Machines Corp. -- will be handled mostly by the Bangalore hub.

Second, the move says as much about Globalization's economic impacts as anything else. The world, as Tom Friedman points out over and over again, is truly flattening:

Lenovo's decision reflects the continuing erosion of the geographic hierarchies that have long ruled the advertising industry. "The old model was you think it up in New York or London and send it around the world," says Shelly Lazarus, chairman and chief executive of WPP Group PLC's Ogilvy & Mather Worldwide, Lenovo's longtime ad agency, which is a partner in developing the India hub. "Now we have to be able to think it up anywhere. As our clients are thinking about their brands more globally, we've had to adjust our model."

Today I attended the Atlas Foundation’s monthly International Thursday. It was a great event with individuals from a variety of backgrounds both in the audience and on the panel speaking about the prospects of liberty in the international arena. As a place to learn about the prospects of liberty from abroad, the Atlas Foundation is a great source.

One of the interesting points brought up was by panelist Damian Merlo ( at the Otto Reich Associates). He pointed out that while corruption plagues most countries in the Western hemisphere, it can be combated by companies who are dedicated to follow the rule of law. One example he provided was how a national government demanded 20% of a project’s budget in a South American country for it to move forward (beyond any legal permit fees or anything like that). How did Otto Reich Associates challenge this? They did not give in, they did not negotiate, they did not try any complex scare tactics. They simply asked to meet with the President of the country to discuss the project. As soon as the request was made, the extortion demand went away and their meeting was a friendly “we’re glad we both have the country’s interests in mind.” A mere acknowledgement that corruption is taking place and desire to bring it to light even between the government and the business was enough to make it go away.

But perhaps the highlight of the event came at the end when Alexandre Pesey, the Directing General (if the translation was butchered, I apologize) of L’Institut de Formation Politique in France pointed out that there is hope yet for his country to combat socialism. President Nicolas Sarkozy has been an advocate of liberty in the country and won his last election by a large margin of voters. Not only that, but he is a conservative candidate who supports a new economic model for France that eases government restrictions on work. Referring to discussions with many people on a one-on-one basis in France, he said that dissatisfaction with the extreme economic limitations in the country is rising significantly and the national debt is becoming so overwhelming that people are beginning to worry. Will France completely reform in the next five years? Obviously not. But the recent history of the country shows promise towards a freer society.

President Sarkozy has fallen foul of intellectuals and critics who see his passion for jogging as un-French, right-wing and even a ploy to brainwash his citizens.

Attacks on Mr Sarkozy’s pastime, which he has made a symbol of his presidency, began on the internet as soon as he bounded up the steps of the Elysée Palace in shorts when he took office in May. That moment has become the icon of his hyperenergetic administration. The grumbling has now moved to television and the press.

“Is jogging right wing?” wondered Libération, the left-wing newspaper. Alain Finkelkraut, a celebrated philosopher, begged Mr Sarkozy on France 2, the main state television channel, to abandon his “undignified” pursuit. He should take up walking, like Socrates, Arthur Rimbaud, the poet, and other great men, said Mr Finkelkraut.

Of course, W is always doing it, so jogging must be right wing.

BTW, check out Sarkozy's picture, and then ask yourself why The Kids in the Hall's Kevin McDonald (far right, of course) hasn't been doing much lately.

Turns out I'm not the only one who's suspicious.

Just got back from a book party for Doug Bandow's new book, "Foreign Follies: America's New Global Empire."

The book's synopsis is as follows:
The U.S. once was a traditional republic, remaining aloof from foreign conflicts. Today there is no problem on earth with which Washington is not concerned. The result is an oversize military, perpetual intervention, and constant conflict. September 11 demonstrated that Washington’s enemies could strike America at home. Iraq shows how even great power does not ensure international success. It’s time for a new foreign policy. The U.S. should be engaged in the world, trading for economic advantage, maintaining friendly political relations, sampling foreign cultures, and accepting persecuted peoples. But military action should be a last resort. Costly and destructive, war is ill-adapted to shape liberal societies. Its prosecution undermines liberties at home. Moreover, in an age of terrorism intervention encourages more, and more deadly, attacks on America. Doing less will leave a messy world. But it will be messy irrespective of the pretensions of would-be peacemakers and nation-builders. America’s first priority should be to build a stable, safe, and prosperous republic at home. Such a society requires peace as well as free markets.

Even if you don’t agree with everything Bandow says, this book will make you think. He addresses misappropriation of government funding & abuse of power and effortlessly explains the link between unnecessary intervention by the United States and the threat of terrorism.

Pick-up “Foreign Follies: America’s New Global Empire” here.

In the most glaring example of junk science this side of An Inconvenient Truth, a BBC documentary series called Panorama this week claimed a wireless-enabled laptop puts out three times as much electromagnetic radiation as a cell tower. The report prompted Sir William Stewart, head of the U.K.’s Health Protection Agency, to call for an inquiry into the use of wireless Internet networks in schools because of concerns they could be exposing children to the risk of cancer.

When I saw this report yesterday, I thought the notion that a laptop WiFi card could actually be pumping out the same RF power as a cell site antenna to be so ridiculous no one could take it seriously. Come on, if it were true, the moment you switched on the your laptop it would jam every wireless device in a 50-foot radius: cell phones, AM/FM radios, garage door openers, toys and so on. That level of output would also deplete your laptop battery in, oh, about ten minutes. But it goes to show how many people can be taken in by scientific sensationalism.

Turns out the producers distorted the data to create a headline, the Manchester Guardian reported. (Brit spellings retained below ). They measured the RF output of the WiFi card from 3 feet away and the RF output of the cell antenna from 300 feet away.

Paddy Regan, a physicist at the University of Surrey, criticized the experiment at the heart of Panorama's claims because the measurements of signal power had not been made at equal distances from the mobile phone mast and the Wi-Fi laptop. A spokesman for the programme told the Guardian that the "three times higher" comparison was based on measurements taken one metre away from the laptop and 100 metres away from the phone mast, although material sent to journalists promoting the programme did not make this clear. Dr Regan said: "It's a basic fundamental of science measurement, that if you are trying to compare things you have to take into account the so-called inverse square law." To make a fair comparison between two radiation sources the measurements should be taken at the same distance away. The levels measured by the Panorama investigation were 600 times lower than levels considered dangerous by the government. "It does sound like a scare story to me," said Dr Regan.

The programme's evidence was criticised as "grossly unscientific" by Malcolm Sperrin, director of medical physics and clinical engineering at Royal Berkshire hospital. "It's impossible to draw any sort of conclusion from the data as presented there."

Pundits have designated either India or China as the heir apparent to the U.S.'s domination of the world economy. Both can make a good case--Indians have a time and economy tested track record for leading the IT economy. The multibillion dollar outsourcing giant Infosys is just the biggest player in an ever growing technology and services based world economy. India's problem is that it just hasn't gotten its act together economically. Millions of entrepreneurs are hamstrung by bureaucracy and red tape, and its political system refuses to open up its lumbering industrial sector to healthy domestic and international competition.

China, in contrast, has a vibrant and dynamic economy, plowing through its industrial revolution in less than half the time it took the US. China's biggest liability is its authoritarian political system, but even that systems influence appears to be on the wane in the everyday life of the Chinese.

After spending 10 days in China--visiting with officials and private entrepreneurs in Beijing, Shanghai, Chengdu, and Xi'an--I would bet on China the global economic race. While the environmental and political hurdles facing this nation of 1.3 billion people are formidable, the on-the-ground can-do attitude is infectuous. Moreover, the national government--the People's Congress--is working on legislation to strengthen property rights and markets as a key part to the next "phase" of the nation's economic development. There appears to be very little Marxism in China's unique brand of Communism.

At the current pace of economic reform, investment, job creation, and wealth creation, China is not competing with India. Their bar is far higher. Their benchmarks are set by the United States. The question is whether we are willing to take the steps necessary to be competitive with the Chinese.

Check out the starlet in a revealing CNN interview. Be sure to stick around for the bizarre ending.

BTW, here’s what Human Rights Watch says about Cuba. Seems a tad different than what goes on in the US.

Related: Trendy Che

On Tuesday Reason’s Bob Poole appeared on “Lou Dobbs Tonight” to discuss tollroad privatization. Being the self-styled champion of pitchfork-populism that he is, Lou doesn’t much care for things that might benefit corporate fat cats or--for the love of apple pie--foreigners. So it's no surprise that he misrepresented Bob's comments and mangled the whole issue.

Here Peter Samuel, editor of the excellent resource TOLLROADSnews, provides the CNN transcripts peppered with his own clever rebuttals to the many distortions in the segment.

The intro:

DOBBS: Coming up next, critically important parts of our national infrastructure are being sold.

SAMUEL COMMENT: Wrong. Sold means legal title is being transferred in perpetuity. Turned over unconditionally. Under the toll concessions legal title is being retained by the states. Private investors are being selected in return for concession fees to get longterm concessions to run the tollroads at their risk under the detailed terms of control of a concession contract. Those contracts give the state a continuing say in many aspects of how the road is operated and they usually contain caps on toll rates.

Another bit:

DOBBS: And incredibly, [privatization is] being done with the federal government's encouragement. The Bush administration likes this idea.

SAMUEL COMMENT: For a good reason. Tax funds are limited and totally insufficient to fund the construction needed to avert growing congestion on the roads. Hence it would be irresponsible for the federal government NOT to favor tapping private investment funds.

DOBBS: Some of the leading bidders: Foreign investors.

SAMUEL COMMENT: Of course, because the international groups have experience operating tollroads, whereas the US has not until now been hospitable to private investment in tollroads. The location of shareholders is irrelevant. Their conduct of the roads will be governed by US written contracts and US law. If they mess up the roads revert to the states. The investors can't roll up the roads and take them to Madrid or Sydney.

Then again, Samuel would say that. He is, after all, (DUM, DUM, DUM) a foreigner!

Related: Lou vs. Communist China

Related: Lou ignores the robot threat

Like many frustrated-but-not-surprised libertarians, the GOP’s congressional reign failed to meet my very low hopes. I took a “serves ‘em right” attitude toward the R’s recent defeat, and if I can muster any hope now it’s for the effects of gridlock, not for the other team.

A case in point comes from How Free Trade Hurts, a recent WaPo oped by Senators Byron Dorgan and Sherrod Brown:

The result [of free trade agreements] has been a global race to the bottom as corporations troll the world for the cheapest labor, the fewest health, safety and environmental regulations, and the governments most unfriendly to labor rights. U.S. trade agreements paved the way for this race: While rejecting protections for workers or the environment, they protected investors and corporate interests.

Worker activism, new laws and court decisions changed all that during the past century.

Greg Mankiw reacts:

That last sentence is striking. There is no doubt that most Americans have seen dramatic improvements in living standards and workplace norms over the past century. But should we really give most of the credit to "worker activism, new laws and court decisions?" I don't think so.

I would give most credit to economic growth, which in turn is driven by technological progress, a market system, and a culture of entrepreneurship. As the economy grows, the demand for labor grows, and workers achieve better wages and working conditions.

Economic studies of unions, for example, find that unionized workers earn about 10 to 20 percent more by virtue of collective bargaining. By contrast, real wages and income per person over the past century have increased several hundred percent, thanks to advances in productivity.

Similarly, working conditions are poor in less developed countries today because productivity is low there. The key to improving lives in those nations is economic growth, not "worker activism, new laws and court decisions."

The Sens included the requisite “race to the bottom” canard and also continue to whip up fears about the trade deficit. Apparently Americans should yearn for the days when our nation boasted a trade surplus.

A while ago Don Boudreaux (no link) offered an important reminder:

… in 102 of the 120 months of that most economically depressed decade, the 1930s, the U.S. ran trade surpluses. On an annual basis, America had a trade surplus for nine of the ten years of the 1930s (with 1936 being the only year of a trade deficit). For the whole of that decade, the U.S. ran a significant trade surplus. Exports over those dreary ten years totaled $26.05 billion while imports totaled only $21.13 billion.

Clearly, just as a trade deficit is no sign of economic malaise, a trade surplus is no sign of economic vitality.

Related: Dismantling another Dorganism

Via Don Boudreaux, here’s Daniel H. Pink in Wired:

Almost three years ago, Scott Kirwin was Wired's pissed off programmer ("The New Face of the Silicon Age," issue 12.02). Tossed from his job and raging against globalization, he had launched the Information Technology Professionals Association of America to lobby against offshored work and imported workers. These days, Kirwin still works with computers. He's just less pissed: In June, he shuttered the ITPAA. "I don't view outsourcing as the big threat it was," he says. What changed? Well, Kirwin found better work as an analyst and software architect. And he noticed that the talents that make him valuable – open-mindedness, a willingness to take risks, flashes of ingenuity – couldn't be reduced to a spec sheet and emailed to Hyderabad. If more Americans develop such abilities, Kirwin believes, the use of Indian programmers could even improve our economic outlook. Outsourcing isn't going away, he says. "But in the end, America may be stronger for it."

Related: More happy endings

Related: Even more happy endings in this study by Adrian Moore and me (see p. 18)

Related: When outsourcing was going to destroy America

Amid all the hubbub about immigration there are many calls for Mexico to right itself so that fewer folks will want to flee the nation. But when talk turns to what Mexico should actually do, the discussion often gets bogged down in vague references to “fighting corruption.”

How nice it is to when someone points to specifics. Jorge G. Castañeda, a former Mexican official, points to various obstacles that stand in the way of Mexico’s success.

Take monopolies:

The oil (Pemex) and electric power (Federal Electricity Commission) firms owned by the state are untainted by competition; the private virtual monopolies in telecommunications (Telmex), television networks (Televisa), cement (Cemex), bread and tortilla manufacturing (Bimbo and Maseca, respectively) and banking (Banamex/Citigroup and Bancomer/Banco de Bilbao) face only tepid competition at home, thanks to their cozy relationship with the state. Prices, supply, service and quality suffer as a consequence, and today these monopolies are stronger than ever.

Another obstacle:

the unions that have controlled the Mexican labor movement since the 1930s. They were granted immense leverage in workplaces, tremendous resources and political power. The power of such organizations as the teachers union (the largest in Latin America), the oil workers union (the richest in Latin America) and the Social Security employees union (that has thwarted any attempt at pension or health reform for years) remains largely unchecked to this day. These unions obtained all their perks in exchange for 70 years of support for the PRI. They retain those perks, though they no longer owe any support to the government.

I’d also put land reform near the top of the to-do list.

More here.

Related: How Mexico scores on Heritage’s Index of Economic Freedom

Jared M. Diamond became the darling of PBS with his book Guns, Germs, and Steel, and his thesis that the secret to economic development could be found in factors like geography and the availability of domesticated animals.

Tyler Cowen reviews a book with a different take:

In “A Farewell to Alms: A Brief Economic History of the World” (forthcoming, Princeton University Press,) Gregory Clark, an economics professor at the University of California, Davis, identifies the quality of labor as the fundamental factor behind economic growth. Poor labor quality discourages capital from flowing into a country, which means that poverty persists. Good institutions never have a chance to develop.

…
A simple example from Professor Clark shows the importance of labor in economic development. As early as the 19th century, textile factories in the West and in India had essentially the same machinery, and it was not hard to transport the final product. Yet the difference in cultures could be seen on the factory floor. Although Indian labor costs were many times lower, Indian labor was far less efficient at many basic tasks.

For instance, when it came to “doffing” (periodically removing spindles of yarn from machines), American workers were often six or more times as productive as their Indian counterparts, according to measures from the early to mid-20th century. Importing Western managers did not in general narrow these gaps. As a result, India failed to attract comparable capital investment.

Professor Clark’s argument implies that the current outsourcing trend is a small blip in a larger historical pattern of diverging productivity and living standards across nations. Wealthy countries face the most serious competitive challenges from other wealthy regions, or from nations on the cusp of development, and not from places with the lowest wages. Shortages of quality labor, for instance, are already holding back India in international competition.

More here.

Related: Ron Bailey on Diamond

There was once a time when you could count on lefties to defend free speech, but that time has passed. Today those who came of age during the Berkeley free speech movement are the ones sticking universities with sickening speech codes.

There once was a time when you could count on conservatives to keep spending in check, but that time has passed.

And for all its socialist wackiness, there once was a time when you could count on France to stand up for personal liberties, by for example, resisting the Puritanical American mindset that is so bent on banning smoking.

Sadly, that time might soon pass:

French smokers were making a painful mental adjustment as a parliamentary committee recommended a ban on smoking in public areas from next year and the government indicated it will act quickly on the advice.

It means that from September smoking in French bars, restaurants and nightclubs could be completely prohibited -- unless they provide hermetically-sealed "fumoirs" into which serving staff are not allowed to penetrate.

More here.

Years ago, right-wing funnyman P.J. O’Rourke wrote a very clever book about American politics. The title said it all: Parliament of Whores.

Now a left-wing Aussie has published a book that examines politics down under. The title of Mark Latham's book is similarly straightforward: Conga Line of Suckholes.

Latham doesn’t focus solely on politics. He also worries about the dearth of Steve Irwins, the wussification of the Australian male:

"One of the saddest things I have seen in my lifetime has been the decline in Australian male culture - the loss of our larrikin language and values," he writes. "Australian mates and good blokes have been replaced by nervous wrecks, metrosexual knobs and tossbags."

It seems fitting that this former prime ministerial candidate would worry about such things. He did, after all, break a cabbie’s arm in a drunken fare dispute a few years back.

Kind of interesting that Latham’s coming from the left, blaming (at least partly) neoconservatism. Often lamentations about withering manliness come from the right and the targets are often “bed-wetting lefties” and the like.

Apparently not privatized water.

Alex Tabarrok explains the United Church of Canada’s boycott; Thanks to Meredith for the heads-up.

Unless you have religious objections, check out our roundup of water privatization trends.

Related: How Privatization Quenches the Poor

Related: Water of Life

Lonely hearts in Germany can no longer count on Wal-Mart hookups, because the Biggest Box is pulling out of Deutschland.

The reason? Customers decided they didn’t want it and it went away, a much more civilized process than what typically happens in the states where politicos, judges, or 51 percent of voters deny choices to others:

Wal-Mart said on July 28 it would exit Germany after eight years and $1 billion in losses, defeated by Aldi Group and privately-owned Lidl, homegrown discounters which rule the segment in Germany. The Bentonville, Arkansas-based chain is selling its 85 German stores to Metro AG, the country’s biggest retailer, for an undisclosed amount.

The German rout follows failure in South Korea. Wal-Mart in May sold its 16 stores there to Seoul-based Shinsegae Co, the country’s biggest discounter.

Even in the UK, where shopping habits and language are similar, the chain is struggling. Its Asda supermarket group trails market leader Tesco Plc, which gained 1.2 percentage points in market share in the past year, compared to just 0.1 percentage point for the folks from Bentonville. Tesco, with 31.5% of the British market, has almost twice Asda’s 16.6% share.

Article here.

Take heart, WM haters, the difficulty the giant retailer seems to have in appealing to different cultures may one day prove to be the factor that stops it from spreading everywhere.

Related: South Koreans Boot the Box

That's been pretty well established.

But what about promoting better health in poor nations? Does that spur wealth?

Greg Mankiw points to this study:

there is no evidence that the large exogenous increase in life expectancy led to a significant increase in per capita economic growth. These results confirm that global efforts to combat poor health conditions in less developed countries can be highly effective, but also shed doubt on claims that unfavorable health conditions are the root cause of the poverty of some nations.

Mankiw’s bottom line:

Even if reformers (such as Jeff Sachs and Bill Gates) succeed in their admirable goal of promoting better health in poor countries, we should not expect that success to fix the problem of persistent poverty.

Mankiw has also woven together some different takes on income inequality. (See also this link.)

Related: When Inequality Matters

The world has more problems than resources needed to fight them all. What to do?

Russell Roberts points to this piece by John Baden, who recalls the Copenhagen Consensus Project , and then notes that the same sort of exercise was done again:

The experiment with economists was recently replicated by John Bolton, U.S. Ambassador to the UN. Not one to shrink from controversy, he empanelled UN diplomats from seven emerging nations, including India and China, to prioritize the issues. After hearing from experts in the problem areas, they ranked global crises ranging from climate change to migration. The top four were again health care, water and sanitation, education, and child nutrition. Climate change was, of course, dead last. No honest policy analyst would be surprised by these rankings.

While most agree that climate change is occurring, many proposed “solutions” are monumentally expensive, uncertain, and distant. They are, in sum, the sorriest of investments. Providing vitamin A, on the other hand, costs less than $1 per person per year, saves lives, and prevents childhood blindness. Encouraging breast feeding cheaply and effectively promotes infant health. These nutritional initiatives do not, however, offer a stage for pretense and drama. No matter how skilled the movie director, it’s hard to make public health reform a sexy issue.

One could argue that polar bears are more important than Pakistanis. The bears are indeed threatened by the melting of Arctic ice floes. Should we then invest to retard global warming, even if that investment could instead save millions of Pakistanis from easily preventable disease?

Related: Bjorn Lomborg on environmental priorities.

Modern-day lepers will soon have an airline all their own:

A new airline for smokers only is scheduled to make its first flights in March 2007.

Smintair (Smokers' International Airways) has been founded by a German businessman, Alexander W. Schoppmann, in the hope of attracting the Asian business market as well as pro-smoking Europeans. Smintair plans to fly jumbo jets with 30 first-class and 108 business-class seats equipped with televisions, DVDs, gourmet food and "charming and beautiful" flight attendants. And ashtrays, of course.

Article here, and from the Smintair website:

Allowing our guests to smoke is one of the freedoms we are happily prepared to grant. Non-smokers will find the cabin air more refreshing than on any other flight with any other airline, as SMINTAIR adds fresh outside air to the conditioning system! This is more expensive, as it burns more fuel, but it is seen as an additional service to our guests.

Related: A Pack of Lies: The Surgeon General hypes the hazards of second-hand smoke

In this 2005 study (pdf), Adrian and I point out that, although people think of poor developing nations when they think of offshore outsourcing, U.S. companies actually invest more in Ireland, than in China and India combined.

And now more of the same:

IBM, the world's biggest computer services provider, will invest 46 million euros ($58.6 million) in its Irish technology campus over the next three years and create 300 new jobs, Ireland's Minister for Enterprise said on Thursday.

Micheal Martin said the investment would help IBM, which has operated in Ireland for 50 years, grow its Dublin-based software development operations, establish a Business Incubation Center and improve the company's supply chain capacity.

IBM employs more than 3,200 people in several operations around Dublin, including manufacturing, sales and marketing, software development, consultancy, customer support and treasury.

Article here.

Turns out companies rather like places with low taxes and light regulations. After years of liberalization, Ireland now has the world’s third freest economy:

Ireland's modern, highly industrialized economy grew by 80 percent during the 1990s. The country has one of the world's most pro-business environments, especially for foreign businesses and investments, and Prime Minister Bertie Ahern, whose Fianna Fail party governs in coalition with the Progressive Democrats, has maintained this impressive inheritance.

Read the Heritage Foundation's profile on Ireland here.

The world's most populous nation, which has built its economic strength on seemingly endless supplies of cheap labor, China may soon face manpower shortages. An aging population also poses difficult political issues for the Communist government, which first encouraged a population explosion in the 1950's and then reversed course and introduced the so-called one-child policy a few years after the death of Mao in 1976.

That measure has spared the country an estimated 390 million births but may ultimately prove to be another monumental demographic mistake. With China's breathtaking rise toward affluence, most people live longer and have fewer children, mirroring trends seen around the world.

Those trends and the extraordinarily low birth rate have combined to create a stark imbalance between young and old. That threatens the nation's rickety pension system, which already runs large deficits even with the 4-to-1 ratio of workers to retirees that it was designed for.

Although it’s sort of chilling to consider what passes for liberalization, there are signs that the Chinese government is loosening up somewhat:

It now allows husbands and wives who were their parents' only children to have a second child, for example, and has eliminated a four-year waiting period between births for those eligible to have a second child.

More here.

YORKSHIRE firms are going bust because traffic queues are forcing shoppers to give up and go home in despair, according to one of Britain's biggest business pressure groups.

A campaign against congestion is being stepped up following the re-election of Leeds businessman Chris Glen as chairman of the Yorkshire and Humber policy unit of the Federation of Small Businesses (FSB).

Mr Glen, who was re-elected unopposed by the FSB's 14,500 members in the region, said the problem had reached crisis point.

According to FSB research, almost half of all businesses in Yorkshire and the Humber lost more than 50 working hours in the year because of traffic congestion, and 17 per cent lost more than 100 hours.

Nearly a third of the 1,400 businesses questioned in Yorkshire lost more than £1,000 because of congestion problems, while one in 10 lost more than £5,000.

Article here.

Related: Part I

Well the developed world’s most corrupt nation is France, according to a new monograph by London’s Institute of Economic Affairs:

The study of corruption in the developed world by economist Ian Senior awards Olympic-style medals for corruption at different levels of government and society, so that corruption by Presidents and Prime Ministers results in a gold medal and corruption by lesser politicians and officials leads to the award of silver or bronze medals.

According to this method, at the head of the medal table France receives four gold medals, Japan three gold medals and Italy two.

The UK lies in fourteenth place, with no gold or silver medals, but three bronze.

More here.

Related: Russia Robbing Itself

Not anymore, says Johan Norberg:

Long the paragon of social democracy, the Swedish model is rotting from within. Ironically, the unique social and economic foundation that first allowed Sweden to construct its political edifice--and which makes it such a difficult model for other countries to emulate--has been critically weakened by the system it helped create. Far from a being a solution for the new sick men of Europe, Sweden must face serious and fundamental challenges at the heart of its social model.

Recently, Sweden has adopted some market reforms:

In the early 1990s a deep recession forced Sweden to abandon a lot of the excesses from the 1970s and 1980s. Marginal tax rates were cut, the central bank was made independent, public pensions were cut and partially privatized, school vouchers were introduced, and private providers were welcomed in health care. Several markets were deregulated, like energy, the post office, transportation, television and, most importantly, telecom, which opened the way for the success of companies like Ericsson.

Well worth reading the whole thing.

No doubt attitude plays a role in this too. A Swedish friend of mine speaks about how Swedes regard financial success with suspicion, rather than admiration. According to her, even the founder of IKEA is seen as a scoundrel.

If there were fewer low-skilled workers would the wages of low-skilled American works go up or would employers just “hire” more machines?

Interesting post by Alex Tabarrok here.

My 2004 piece, War Against the Machines, is here.

That’s our transportation network.

I had an op-ed on that in yesterday’s Investor’s Business Daily:

Despite its massive $286.4 billion price tag, last year's federal transportation bill wasn't designed to beat back traffic congestion. Thankfully, the Transportation Department has just put gridlock in its cross hairs with a new plan that relies heavily on the user-pays principle and private highway financing.

And it's appropriate to take aim at congestion on this, the 50th anniversary of the interstate highway system. Early on, the system's chief architect promised it would take Americans "from anywhere to everywhere."

We might regard that vision as a tad outdated because new technology has given business a new kind of mobility. Armed with cell phones, laptops and BlackBerries, we can "be" almost everywhere without crawling into a car, train or plane. But good old-fashioned mobility — moving people, parts and products across physical space — still matters a lot. Just ask Austin, Texas.

Whole thing here.

According to Datamonitor, Morocco and Tunisia are ideal locations for customer care servicing French speaking nations, whose offshore outsourcing options are very limited. In addition, however, Morocco is developing bases of English and Spanish speaking talent.

Egypt continues to impress western investors with its mix of savvy and linguistically-talented agents, low costs and ever-growing blue-chip investors who have housed customer care in that location.

Sub-Saharan Africa, while not traditionally a location of choice for serving western customers, has emerged as a niche market for western customer service. Countries like Botswana, Ghana and Kenya have made headlines with their pro-active moves to put themselves on the BPO map.

South Africa remains a dominant and ever-maturing market for contact center outsourcing services, especially in the area of value-added functions. Spoken English is among the best anywhere and the commercial acumen of agents is first-rate.

More here.

Related: Wisdom from Minnie Driver

Related: Paging Bono, Bob, and Chris

Indian companies in India:

Infosys Technologies Ltd., a leading Indian software provider, will spend $100 million over the next year to hire and train 25,000 workers and college graduates culled from around the world, including from Massachusetts Institute of Technology and Harvard University. Tata Consultancy Services Ltd. of Bangalore will add 30,500 employees over the next year, including 1,000 from the United States.

In a case of reverse offshoring, Indian tech companies are beefing up their staffs by hiring Americans and foreigners to work in India. They also are opening offices around the world and recruiting local staff. The firms are launching the global recruiting effort because of labor shortages in India. Indian companies are expanding beyond data entry and back-office processes into areas such as design, research and development, and sophisticated business applications that require highly skilled workers.

Tata hired John Dubiel, 59, of Westford in November. Dubiel spent two weeks in India, learning about the firm's products and meeting his Indian counterparts. Dubiel now works out of Tata's Boston office as an executive helping North American companies solve their business problems with technology.
…

Since India has become a center for computer science, firms can teach new hires in India, where there is state-of-the-art training, said Surya Kant , president of Tata Consultancy Services America.

At Tata, new hires and professionals train in their own countries and then travel to India for orientation or full-time work. Tata employs 62,000, including 9,500 Americans, who mostly work in the United States.

Article here.

Related:

BANGALORE, India - Nate Linkon graduated from college last year with a business degree and a lot of offers. But he made an unusual choice: to pack his bags and move 9,000 miles away from corporate America to Bangalore. In his view, there’s no better place to beef up his résumé — even though the pay is much lower.

Article here.

Also related: My short piece on how outsourcing creates jobs for those “other” Indians.

Sam’s recent post and his article on how Kelo has validated the collectivization of land and property reminded me of something the OC Register’s eminent domain-watcher Steven Greenhut mentioned.

A local politician wary of anti-Kelo sentiment recently used a picture of a Brazilian favela in one of his campaign brochures to suggest that if wise planners weren't allowed to control communities as they saw fit, American cities would transform into third-world shantytowns. In other words, we Americans need to get over our obsession with property rights or some day we won’t even have indoor plumbing.

But as Hernando de Soto has pointed out, shantytowns are ramshackle largely because folks there lack of secure property rights. If they owned their land formally, they’d be more likely to improve it, more likely to be able to get loans, and so on.

So each time our property rights get dinged we take a baby step toward those shantytowns.

And speaking of Greenhut:

Check out this cover article in the LA Times' Weekend section today by David Reyes. It features the booming nightlife in Fullerton. Lots of hip restaurants, night clubs ... It's a real downtown. What caused this amazing boom, the creation of a Pasadena-like city in the midst of Orange County? The marketplace. As the article points out, "[T]his isn't the downtown that redevelopment built. Talk to the business owners and they'll confide that they shied away from redevelopment bucks because it had strings attached."

And, fortunately, redevelopment officials didn't do what they did in Brea -- bulldoze the downtown and huge subsidies to boring chain-outlets and movie theaters. In Brea, interesting independent businesses would not be able to start up. City planners and officials make sure the right places locate there. In Fullerton's real downtown, if you've got an idea and the money to get started, you can start interesting nightclubs. Brea is like an outside strip mall with fancy signs, wheras Fullerton is a real place, with interesting shops and places to discover. They don't need all the silly stuff to tell people that they are downtown.

Said Supervisor and former Fullerton Councilman Chris Norby in the article: "This whole area was driven by the market. No bulldozing. No eminent domain. This is what free enterprise developed."

Because Brea's eminent-domain-supporting council members like central planning and tax subsidies rather than free markets, their city's downtown will never be like Fullerton's.

In the U.S. the biggest box is chased out of town by city council members or activists who can scrape up 51 percent of voters who want to deny the other 49 percent the opportunity to shop where they please.

But in South Korea, shoppers themselves booted Wal-Mart. They did it not by denying choices to others, but by freely choosing to shop elsewhere:

Wal-Mart Stores Inc., in a highly unusual move, is leaving the South Korean market because it's proved too tough for the world's largest retailer to make a profit …

For Wal-Mart, the move also reflects the company's effort to boost what have been flagging returns on capital. And it reflects the difficulty of penetrating South Korea's locally dominated market.

…
Wal-Mart has left an international market only once before and in a much smaller way. In early 1998, Wal-Mart got out of a three-year-old partnership to run two supercenters in Jakarta, Indonesia, which didn't allow foreign investment in retail stores.

Article here.

TCS has a refreshing rundown of two recent studies that support the conclusion that less government allows for greater ... well, everything.

Here's a tasty snippet (though I highly recommend you read it in its entirety as it answers the most dim, er..., common questions small government naysayers natter on about):

First, a group of Swiss and Danish researchers from the WIF Institute of Economic Research in Zurich looked at whether government involvement in the economy is conducive to life satisfaction across 74 countries. The results show that life satisfaction actually decreases with higher government spending. This negative impact of the government is stronger in countries with a left-leaning median voter. It is alleviated by government effectiveness - but, crucially, only in countries where the state sector is already small. In general, a one standard deviation increase in government spending yields a median decrease of 4.42 percent in self-reported satisfaction by the voters, a drop in the degree of economic competition of 4.17 percent and a shift in voter preferences in rightward ideological direction of 4.15-9 percent.

Another comprehensive study released by the Centre for Policy Studies (CPS) in the UK summarized available data from various sources, to show that modern governments that spend less can, indeed, provide better public services, a better standard of living and more equitable incomes than high-spending governments. ...

According to the report, "the most surprising finding to some observers is what has happened to public services. In the leaner government group, the growth in spending on public services accelerated to an average annual rate of 4.3% in 2000-2005, up from 2.4% in 1980-90. This suggests that an increased share of national income left in private hands stimulated greater efficiency and faster growth in the private sector, thus boosting individual and corporate tax revenues despite lower rates." The report cites Ireland as the exemplary case of what is known in the economic literature as the expansionary fiscal contraction phenomena - the case of reduced fiscal burdens of the state spending leading to improvement in government revenue. As Ireland's corporate tax rate fell to 12.5 percent, expanding tax base supported 6.4 percent average annual increases in public service spending since 1999, compared with just 0.1 percent growth during the 1980s.

Alex Tabarrok has written an open letter on immigration that reflects the consensus opinion of economists.

Selected bits here:

Overall, immigration has been a net gain for existing American citizens, though a modest one in proportion to the size of our 13 trillion-dollar economy.

Immigrants do not take American jobs. The American economy can create as many jobs as there are workers willing to work so long as labor markets remain free, flexible and open to all workers on an equal basis.

Immigration in recent decades of low-skilled workers may have lowered the wages of domestic low-skilled workers, but the effect is likely to be small, with estimates of wage reductions for high-school dropouts ranging from eight percent to as little as zero percent.
…

We must not forget that the gains to immigrants from coming to the United States are immense. Immigration is the greatest anti-poverty program ever devised. The American dream is a reality for many immigrants who not only increase their own living standards but who also send billions of dollars of their money back to their families in their home countries—a form of truly effective foreign aid.

And one that doesn’t show up on official tallies of foreign aid.

Whole thing here.

Alex’s blog partner Tyler Cowen points to papers on Latino assimilation here and here.

A report for the Government, Feasibility study of road pricing in the UK, estimated that a national scheme could cut congestion by half and save £12bn a year. The study suggested charges from 2.4p to £1.34 a mile, depending on when and where the motorist was driving. At 3am on a minor country road, motorists would pay the lowest tariff - possibly nothing at all. At 9 am on a Monday on the M25, drivers would pay the highest levy. The report insisted that only around 0.5 per cent of traffic would pay the highest charges.

The technology behind the idea:

Automatic Number Plate Recognition uses high-definition cameras to record a vehicle's registration number, logged by date and time, which is then relayed to a central computer. This can be cross-checked against a database of registered users for charging purposes, or, in some cases, the vehicle's registered owner can be traced through DVLA data.

The "Tag and Beacon" system uses microwave radio beacons which interrogate tags or smartcards carried in vehicles. Passive tags merely provide basic information on the vehicle type or registered user.

The Global Positioning System is currently thought to be the ultimate technology, simply because it is usually highly accurate, and vehicle-specific details can easily be added to increasingly common SatNav devices.

Experts at the Chartered Institute of Logistics and Transport point out that the most essential feature is "inter-operability". In other words, the same technology should work wherever you are.

More here.

Related: Brits Still Support Road Pricing

Remember that rather embarrassing mess called Oil For Food (OFF)? The UN mandated black hole where billions and billions of dollars were laundered, err, misappropriated away from precisely the folks who were said to need the aid most?

In case you're drawing a blank, head on over to the GAO's website for their report of the day, appropriately titled: United Nations: Lessons Learned from Oil for Food Program Indicate the Need to Strengthen UN Internal Controls and Oversight Activities, GAO-06-330.

If you've ever questioned the competence of the UN, you'll definitely want to read this report. Nutshell ... the UN is utterly discombobulated and needs a shakeup (or should that be shakedown? Hmm…).

Abu Musab al-Zarqawi is shown wearing American tennis shoes and unable to operate his automatic rifle in video released Thursday by the U.S. military as part of a propaganda war aimed at undercutting the image of the terror leader. … Maj. Gen. Rick Lynch, spokesman for the U.S. command, mocked al-Zarqawi as the previously unseen footage showed a smiling al-Qaida leader first firing single shots from an automatic weapon. A frown creeps across al-Zarqawi's face as the weapon appears to jam. He looks at the rifle, confused, then summons another fighter. By contrast, portions posted on the Web showed the Jordanian-born al-Zarqawi confidently blasting away with bursts of automatic gunfire.

"It's supposed to be automatic fire, he's shooting single shots," Lynch said of the new footage. "Something is wrong with his machine gun. He looks down, can't figure out, calls his friend to come unblock the stoppage and get the weapon firing again."

Another clip showed al-Zarqawi dressed in a black uniform but wearing New Balance tennis shoes as he walked to a white pickup, Lynch said.

"And his close associates around him ... do things like grab the hot barrel of the machine gun and burn themselves," Lynch said. "Makes you wonder" about their military skills.

So this guy Zarqawi is really an unfashionable clod who leads a bunch of numbskulls who can barely operate their weapons?

So why are we having so much trouble with them?

Makes you wonder what goes on in military PR meetings.

Article here.

Another bad PR move (brought to you by Wal-Mart's legal team) here.

Compared to what’s going on in Bolivia:

The Bolivian president, Evo Morales's May Day decision to send in troops to "occupy" the country's oil and gas fields has, predictably, upset foreign investors in South America's poorest country. The decision to re-nationalise - Bolivia's hydrocarbons industry has twice been nationalised before - confirms the worst fears they had when Morales came to power in January following his landslide election victory a month earlier. The two largest firms involved - Brazil's Petrobras and Spain's Repsol - have made clear their disquiet.

Up until now, a good deal of ambiguity has surrounded the notion of nationalisation, but the government consistently made clear its determination - at the very least - to force foreign companies to sign new contracts, abrogating those signed at the time of privatisation in 1996. It is now clear that these will be service contracts, and that control of the industry and reserves will be in the hands of the state.

More here.

From the Tuesday Morning Quarterback:

the Patriots have the NFL's first official team Web site in Chinese. Here, in Mandarin, are the vitals on Patriots' cheer-babe Jie Ralls, born in Shanghai.

I think I now know how to write “Who’s your favorite recording artist?” in Mandarin.

Related: Miss Germany is Vietnamese, Miss Norway is Iranian and Miss Namibia is white.

Bikini-less globalization tales here and here.

After three years of fighting, there are 180,000 dead in the Darfur region of Sudan. And yet the world’s leaders continue to dawdle:

The government in Khartoum has scuttled the UN's plans to take control of the troubled peacekeeping operations currently being led by the African Union, and NATO recently stated publicly that a force of its own in Darfur is ''out of the question." Meanwhile, refugee camps and humanitarian aid workers continue to be attacked, and the 7,000 African Union troops remain overstretched and ineffective.

But according to J. Cofer Black, vice chairman of the private security firm Blackwater, there is another option that ought to be on the table: an organization that could commit significant resources and expertise to bolster the African Union peacekeepers and provide emergency support to their flagging mission.

A few weeks ago, at an international special forces conference in Jordan, Black announced that his company could deploy a small rapid-response force to conflicts like the one in Sudan. ''We're low cost and fast," Black said, ''the question is, who's going to let us play on their team?"

Private security companies like Blackwater have thrived in Iraq, where the US military has relied on them for everything from guarding convoys to securing the Green Zone. But these companies recognize that the demand for their services in Iraq will eventually diminish, and Blackwater, for one, is looking for new markets.

Apparently Blackwater has no interest in offensive missions:

Today, private military companies are offering defensive services-they propose to secure refugee camps and vulnerable villages, guard humanitarian aid agencies and NGOs, or, depending on the requirements of the contract, assist peacekeepers like the African Union troops in Darfur.

Article here.

Related: My 2003 interview with Blackwater president Gary Jackson

Government offshoring is very, very rare.

This GAO report searches for offshore outsourcing in six government programs (four are federally-funded state-administered and to are federally-administered).

For the federally administered programs, the GAO found no offshoring at all. There was some offshoring in the other programs but the amount was still “relatively small.”

Related: Offshoring a Rarity in California

More evidence of the success of China's market reform:

Bra producers have been forced to offer bigger cup-sizes in China because improved nutrition is busting all previous chest measurement records.

"It's so different from the past when most young women would wear A- or B-cup bras," Triumph brand saleswoman Zhang Jing told the Shanghai Daily from the Landmark Plaza of China's commercial hub.

"You...never expect those thin women to have such nice figures if they are not plastic."

The report, seen on the daily's Web site Tuesday, said that the Hong Kong-based lingerie firm Embry Group no longer produces A-cups for larger chest circumferences and has increased production of C-, D- and E-cup bras to meet pressing demand.

The Beijing Institute of Clothing Technology released a report last week saying the average chest circumference of Chinese women has risen by nearly 1 cm (0.4 inch) to 83.53 cm (32.89 inches) since the early 1990s, the daily said.

More here.

Related: Dog Size as a Proxy for Living Standards

Vaguely related: Boob ban averted

French President Jacques Chirac on Monday scrapped a planned youth job law that provoked weeks of pr