Coca Cola has recently been criticized by political activists for its ongoing support of Swaziland's King Mswati III. The king has come under international and domestic scrutiny for his lavish lifestyle in a country cited as one of the poorest in the world. While the company states that the King doesn't receive any direct benefit from the company's operations, activists still say that its presence constitutes a vote of confidence for the regime.  The company has flown the Mswati out to its headquarters in Atlanta, and has taken out ads in Swazi newspapers celebrating the monarch's birthday. 

According to activists cited by the Guardian, Coca-Cola alone contributes to nearly 40 percentof Swaziland's GDP. Though a real figure is undoubtedly difficult to procure, (especially since Coke isn't releasing any information), some studies have found that the number is a bit further from the truth.

Nearly half of Swaziland's exports are based on sugar and drink concentrates, the vast majority of which belongs to Coca-Cola. It's membership in several common markets, including the South Africa Customs Union (SACU) which includes South Africa and Botswana, has allowed it to ship hundreds of millions of dollars worth of product per year. As a result, Swaziland is the lead exporter of Coca-Cola products in Eastern and Southern Africa.

In a USAID Report from April 2008, researchers estimated that 35 percent of Swaziland's foreign exchange earnings came from Coca Cola's operations within the country. Foreign Exchange earnings are the proceeds from the exports of goods, and returns on investments in convertible currencies.  From the report:

In 1987, Coca-Cola made one of the biggest capital investments in Swaziland to-date by establishing a plant dedicated to the production of concentrates used in Coca-Cola beverage products. Coca-Cola Swaziland, also known, as "CONCO" is the largest supplier of Coca Cola concentrates in Africa, with production plants also located in Egypt and Nigeria. Having recently celebrated 20 successful years of operations in the Kingdom, CONCO is by far the largest foreign exchange earner for the Kingdom, contributing to 35 percent of GDP21.

It's a bit more difficult trying to figure out what portion of GDP Coca-Cola is actually responsible for. The World Bank estimated that exports contributed to 58 percent of Swaziland's GDP in 2010, which in dollar terms would be approximately $2.1 billion.  Assuming that 38 percent of exports were still drink concentrate as the USAID stated, Coca Cola would still be responsible for nearly 22 percent of Swaziland's GDP, just by selling bottles of Coke to Eastern and Southern Africa. This of course doesn't include the numbers from Coke purchasing Swazi sugar, labor, marketing and everything else that goes into making the nectar of college students everywhere.  It's certainly a bigger footprint than the 18 percent the Swaziland Sugar Association estimates, but a lot less than the 40 percent number going around in the media.  It's key to note that this number is not the amount that they pay in taxes to the Swazi authorities, as the number is being portrayed. 

While it doesn't help that statistics in Swaziland aren't exactly easy to come by, having one company control such a large portion of a country's total output in the 21st century is still striking.

Chinese media agency Xinhua reports that Foxconn, China's largest private-sector employer, is angling to replace more than 80 percent of its workforce over the next three years with robots.

The announcement comes a year after a string of employee suicides drew attention to poor working conditions at the company, which produces gadgets for Apple, Nokia, and Motorola, among others. At the time, management responded with a hodgepodge of measures, some to actually appease its workers (granting them pay raises and access to counselors), and some to just get them to, you know, stop killing themselves (forcing them to sign a pledge not to commit suicide and installing suicide nets on buildings to catch those who jump). But a report released this May by a Hong Kong-based labor watchdog suggests that working conditions remain worrisome.

Employee discontent aside, Foxconn's announcement appears more a response to the changing environment for Chinese manufacturers who look to produce cheap goods for export. Rising wages have made this model increasingly less sustainable. Foxconn reported a net loss of $218.3 million last year and has seen revenues decline 8 percent since 2009.

The company's location exacerbates its financial predicament. Half of its workforce operates out of its factories in the affluent region surrounding the southeastern Chinese city of Shenzhen, whose liberal business environment made it a major hub for Chinese manufacturing during the 1980s and 1990s. But the same success that first brought companies like Foxconn to Shenzhen has driven up wages and forced many manufacturers to relocate inland, closer to the homes of the migrant workers who make up the bulk of China's low-wage workforce.

Even moves inland can only work for so long. Chinese finance magazine Caixin says that, in the wake of the Foxconn suicides, almost every provincial government has legislated minimum wage increases over the last year. In the first quarter of 2011 alone, says Caixin, hikes in 13 provinces averaged more than 20 percent. Meanwhile, a May 5 report from Boston Consulting Group predicts that net labor costs in China and the United States will converge sometime around 2015.

If this is the end of the line for one million humans at Foxconn, the company probably could have done a better job breaking the news to its employees. The Xinhua report says that company chairman Terry Gou announced the measure last night at a workers' dance party. I'll bet the party petered out pretty soon after that.

It goes by several names:  The Iron Snake, the Lunatic Line, the Jambo Kenya Deluxe. Winston Churchill shot zebras sitting next to its great engines and man-eating lions stalked its trains' carriages, devouring men at night. Over the years, hundreds have perished in its iron body from faulty brakes, exploding gas tanks, and powerful floods that washed away bridges.

The mysteries and horror stories attached to the African railway are legendary. But, the system -- stretching through Kenya and Uganda -- is about to get a 21^st century facelift thanks to a nearly $40 million loan from the African Development Bank.

A new transportation plan is in the works for East Africa. Kenya Railways will build 12 commuter train stations to connect the Nairobi metropolitan area. The rail between the coastal city of Mombasa in Kenya, and Kampala, Uganda is to be re-vamped by 2017. There is also talk of railway lines connecting Lamu, Kenya to Juba, South Sudan, as well as Addis Ababa, Ethiopia. The last rail stations in Kenya were built in 1935. The BBC's Ruth Evans reports:

"Inside Nairobi station, it is like stepping into a time warp. The arrivals and departures board looks as though it hasn't been updated since I first did the journey 28 years ago...As we pull slowly out of the station shortly after 7pm, the sun is setting behind the shacks that have sprung up all along the track...The ticket collector tells me to close the windows and lock the doors before going to sleep. But the window doesn't shut properly, the fan doesn't work, and the lights keep going on and off...The road to the coast runs parallel with the railway for much of the route, and heavily laden trucks churn up the pot-holed tarmac, taking goods to Uganda, Rwanda, Burundi, Sudan, Congo and beyond."

The trains, which can run at a sloth-like pace of 18 mph are to be replaced with high speed trains. A once 15 hour ride from Nairobi to Mombasa will only take two or three hours. The new rail system won't just benefit commuters and tourists. It will also create a trade network for goods like coffee, cotton and gold. Kenya Railways is currently managed by Rift Valley Railways -- a mix of Kenyan, Ugandan, Brazilian and Egyptian companies. But the railway is plagued by great debt and a region battling high levels of corruption, not to mention the worst famine in decades. East Africa's perhaps grandiose rail endeavor will either be a boom or a bust.

Is the end nigh for Indian tech support? A British telecommunications company is moving one of its call centers from Mumbai to Burnley, 21 miles north of Manchester, to cut costs. New Call Telecom chief executive Nigel Eastwood explains the decision:

Salaries in India aren't that cheap any more. Add to that the costs of us flying out there, hotels and software, and the costs are at an absolute parity.

In the UK we will pay workers the minimum wage. Given the current economic environment, we will get good "sticky" employees who will also receive bonuses linked to performance.

With rents as low as £4 per square foot, prices for commercial real estate in Burnley are reportedly on par with those in Mumbai. Residential prices are similarly affordable; data from the property website Mouseprice indicates that four of the five most affordable streets in England and Wales are located in Burnley, a former mill town struggling with high unemployment. Meanwhile, salaries in the IT outsourcing industry in India are set to rise 11.9 percent in the upcoming year, and some business process outsourcing leaders in India have already admitted that, with unemployment high throughout the West, India's competitive advantage in call centers is shrinking.

Eastwood also notes that using British staff should make call handling more efficient as well, because British customers will find compatriots easier to understand. Although the rest of the world may beg to differ on that one.

While there will always be those who would rather chuck those chalky candy hearts than eat them with their sweetheart on Valentine's Day, anti-V-Day sentiments usually focus on how big, evil corporations make couples spend unnecessary cash on each other and how single people hate themselves. But how about the global implications of the holiday?

While examples of romantic gifts gone wrong like conflict diamonds are unfortunately already ubiquitous, some groups are spending this Valentine's Day raising awareness about the global impact of the cocoa trade. This year the focus on cocoa is especially relevant thanks to an ongoing political crisis in the world's biggest cocoa supplier: the Ivory Coast, which produced 1.2 million tons of chocolate's main ingredient last year. Avaaz, an activist group, has been pushing Hershey, Nestle, Cargill, and Cadbury, to boycott Ivorian cocoa, the trade in which is helping to prop up President Laurent Gbagbo's pariah regime.

The European Union's sanctions on the Ivory Coast's ports extend to cocoa. Last month, Alassane Ouattara, the internationally recognized winner of the most recent presidential election, embargoed cocoa exports for a month, in an attempt to cut off support to Gbagbo. He's threatened to extend the ban if Gbagbo doesn't leave office.

Another activist group, Green America, is pushing for increased awareness of the use of child labor in cocoa production. According to the U.S. State Department's 2009 Human Rights Report on the Ivory Coast, nearly a quarter of children between the ages of 5 and 17 who lived in cocoa-growing regions had worked on a cocoa farm, often in hazardous conditions. Green America suggests that buying Fair Trade chocolate can help combat child labor, as well as support small farmers and lessen environmental impacts.

Meanwhile, according to Reuters, cocoa futures prices have risen more than 20 percent since Ivory Coast's disputed Nov. 28 election. And the continuing ban in the Ivory Coast means prices are likely to continue to rise.

This year, instead of blood diamonds, chocolate … whatever, try giving your special someone a hug instead. It just might be sweeter.

Just in time for Hu Jintao's visit to Washington next week, economist Arvind Subramanian of the Peterson Institute for International Economics is coming out with a new set of GDP estimates showing that the Chinese economy may have actually surpassed the United States some time in 2010.

Subramanian's estimates rely on purchasing power parity (PPP) estimates, which take differing labor costs in rich and poor countries into account. While the IMF also produces PPP estimates, Subramanian believes these are flawed, overstating price increases between 2005 and 2010 to the detriment of China. Therefore:

The latest version of the Penn World Tables (version 7 to be released in early February 2011) have corrected these biases, which result in an upward revision for China’s PPP-based GDP by about 27 percent and for India by about 13 percent for the year 2005. I use the new PWT corrections as the starting point for computing new estimates for PPP-based GDP and GDP per capita.

A second correction relates to developments between 2005 and 2010. For this period, if the IMF data are taken at face value, they suggest an increase in the real cost of living in China relative to that in the United States (which is equivalent to a real appreciation of the Chinese currency) of about 35 percent. This seems implausible because three alternative ways of assessing currency changes point to a much smaller appreciation.[…]

These two adjustments increase China’s GDP from the current estimate of $10.1 trillion to $14.8 trillion (an increase of 47 percent, of which 27 percent is due to the revision in the 2005 estimate, and the rest due to smaller-than-assumed increases in the cost of living between 2005 and 2010). This $14.8 trillion figure exceeds US GDP of $14.6 trillion. It must be emphasized, of course, that the difference is small enough to be within the margin of error.

Applying the same adjustments to GDP per capita increases the estimate for China from $7,518 (the current estimate in the IMF’s World Economic Outlook) to $11,047. The GDP per capita (the average standard of living) is now about 4.3 times greater in the US than in China compared with a multiple of 6.3 without my corrections (and compared with a multiple of 11 if GDP is computed using market exchange rates).

Subramanian argued for FP in June that by discouraging high-skilled immigration from countries like India, the United States was only taxing its own international competitiveness. These new numbers should serve as a stark reinforcement for that point. 

According to official government figures, China's economy is still the second largest, having overtaken Japan in the second quarter of last year. 

Hat tip: Chris Blattman

Speaking  in Winston-Salem, North Carolina on Monday, President Barack Obama lamented America's stubbornly high unemployment and promised to outline for the gathered students a "vision that will keep our economy strong and growing and competitive in the 21st century."

There was applause as the students sat on the edges of their chairs in anticipation. Unfortunately, what followed only proved that the president should have gone to his eye doctor instead of the Winston-Salem. It was at best, a case of partial vision.

It began with a "recognition" that in the past few decades revolutions in technology and communications and the integration into the global economy of two billion new people in India and China had touched off fierce competition among nations for the industries and jobs of the future to replace the auto mechanics and machinists that Forsyth Technical Community College, where he was speaking, had been founded many years ago to produce. It continued with the argument that the winners of the competition would be the countries with the most educated workers, the most serious commitments to research, the best roads, bridges, high speed trains and airports, the fastest Internet connections, and the most innovation.

The president emphasized that the most important competition the United States faces is not the competition between Republicans and Democrats, but the competition between America and its economic competitors around the world. "That's the competition we've got to spend time thinking about," he stressed.

He went on to reassure the audience that America will win this competition because it has the world's best universities, smartest scientists, best research facilities, and most entrepreneurial people. Indeed, entrepreneurialism is "in our DNA" he said.

But then the vision became a bit cloudy. Despite the reassurances of American superiority, the president said the country is in danger of, indeed is, falling behind -- in high school graduation rates, the quality of math and science education, in the proportion of science and engineering degrees we hand out, in attracting research and development facilities compared to India and China, in R&D spending, and in Internet speed and connections.

Are you a little confused by how we could be falling so badly behind if we have the best universities, best research facilities, smartest scientists, and most entrepreneurial people? All I can tell you is that the president says we are facing in "Sputnik Moment", calling to mind the shock America felt in 1957 when the Russians launched the first earth satellite. To respond to this challenge, he emphasized that we must set the goal of "Made in America."

Hey, nothing wrong with that. At this point, I was cheering. He's the first president in my memory who has dared to say that we need to compete by actually making things. So I give the first half of the vision an A.

But then Obama turned to how we're going to come back and regain leadership by increasing education and R&D spending, improving our infrastructure, and doubling our exports by negotiating more free trade agreements like the one just concluded with Korea.

Aside from the Korea deal (which I'll address in a moment),these are all good things to do and we should do them. But doing them will not by itself reverse the decline in our competitiveness. Actually, the Korea deal illustrates both why this is true and why the president's vision is still impaired. South Korea's workforce is not better educated than America's. Nor does it spend more on R&D, nor is its labor inexpensive like that of China, and nor is it nearly as entrepreneurial. Yet the United States a growing trade deficit with South Korea and is far behind it in areas like liquid crystal displays, various kinds of semiconductors, cell phones, and much more.

What the Koreans do is target development of key industries with special financing and regulations and manage their currency to be undervalued versus the dollar as a kind of protection of the domestic market cum subsidy of exports, impede foreign penetration of domestic markets through a wide variety of formal and informal non-tariff barriers, fail to enforce intellectual property rights of foreign enterprises operating in South Korea, and make foreign investment in Korea extremely difficult as a practical matter.

I am not saying these things to attack South Korea. If these policies work, and they obviously do, South Korea has every right to keep them in place. But obviously Korea is engaging in a different kind of globalization than we are. And equally obviously, the president doesn't recognize that. Thus the president expects that this new free trade deal is going to increase U.S. exports to Korea and create 70,000 jobs in the U.S. But any deal that allows currencies to be managed in such a way as to stimulate exports and inhibit imports - to mention just one factor -- is not going to result in surging U.S. exports or in surging U.S. job creation.

The White House eye doctor needs to prescribe glasses that will allow the president to see the other half of the playing field and to recognize that he must play with a full deck of cards. More education and R&D? By all means, bring them on. But he also needs to respond to the industrial targeting, exchange rate, investment, and getting realistic about the globalization policies and practices of our economic competitors.

Clyde Prestowitz is president of the Economic Strategy Institute and author of The Betrayal of American Prosperity.  

The FT's Martin Wolf managed to find some encouragement in the final communiqué from the Seoul G-20 meeting. In a column earlier this week, he said that language describing the use of various measures of global imbalances and suggesting the need for action to rebalance chronic current account surpluses and deficits suggested that, under the radar, the U.S. and China are moving toward consensus on a way out of the apparent impasse reached in Seoul.

I told him that I marvel at his optimism. But let's say, for the sake of argument, that he's right and that the U.S. will move toward trying to produce more of what it consumes and exporting more of what it produces while China does the opposite. I think there remains the major question of whether either side can actually, physically do what is necessary to achieve rebalancing.

This question occurred to me last night after a chat with a friend from FedEx who mentioned that while his planes fly fully loaded from Asia to America, they return to Asia almost empty. Well, of course, that makes a lot of sense because we don't make much here in the United States that FedEx can take back. Of course, we do export to China, but in recent years our biggest or second biggest China bound export items have been waste paper and scrap metal, and those items go by ship. In the high-value, low-volume, high-tech category of goods that fly well, the United States, despite its self-image as the  world's high tech leader,  has a trade deficit that will likely exceed $150 billion this year.

Let's take a few major products to see how things might work. Steel, for example, is a key product for any industrial economy. The United States imports about 30 percent of the steel it uses while China has more steel making capacity than the rest of the world combined. So, in a rebalancing scenario, Washington would try to find ways to encourage U.S.  companies to buy more of their steel from American producers. But the government would run into the problem that there may not be enough actual production capacity left in the United States to allow a substantial reduction in imports.

Of course, more production capacity can be built, but not in any short period of time. Construction of a new steel mill, even if anyone would have the courage to build one in the United States knowing that China's producers could at any moment unleash a flood of cheap exports into the market,  would take one to two years.

At the same time, China already produces virtually all of the steel it uses and has enough production capacity to fulfill domestic demand many times over for a long time to come, even without increasing production capacity. So China's steel industry really can't rebalance. It can't sell a lot more than it already does at home, and if for some reason it stopped its overseas shipments it would be left with massive excess production capacity that could easily bankrupt its companies.

As another example, take the Apple iPad. Apple is an American based company to be sure, but virtually nothing in the iPad is made in America. Of course, the product is conceived, designed, marketed, and sold in the United States, but the components are mostly made in Japan, South Korea, Taiwan, and Singapore, and the assembly takes place in China. So rebalancing implies that maybe some iPad production would be switched to America.

In principle, there is no reason why the semiconductor chips, displays, and other key components of the iPad couldn't be made competitively in the United States and inexpensive assembly could, perhaps, be done in Mexico or elsewhere in Latin America. But that would mean that the major factories and investments that have been made in iPad production in Asia would have to be at least partly abandoned. That would result  huge financial and job losses to which Asian governments would object.

I sometimes wonder if economists consider these structural, nuts and bolts issues when they talk blithely of rebalancing. These are not things that can be turned on and off like a spigot. It takes a couple of years to build a new semiconductor plant and costs $5-8 billion. Once that investment is made, it is not quickly abandoned unless there is some major change in circumstances.

In his column, Wolf insisted that the U.S. and China must achieve rebalancing fairly quickly in order to avoid protectionism. But is it possible that the action actually runs in the opposite direction -- that some degree of protection might be necessary in order to create the change in circumstances necessary to achieve big shifts in the location of production and thereby also achieve the holy grail of rebalancing?

Clyde Prestowitz is president of the Economic Strategy Institute and author of The Betrayal of American Prosperity.

Those are the three unfortunate major economies projected to see negative GDP growth in 2010-2011, according to the IMF's new World Economic Outlook. (The small Carribean nations of Antigua & Barbuda and St. Kitts & Nevis are also in the red.) Greece, at -3.3 percent, has by far the most dramatic contraction of the bunch.

The outlook is most grim for Western Europe, much of which will see between 0 and 2 percent growth. Politically unstable Kyrgyzstan seems to be the only Asian country with less than 2 percent growth while similarly unstable Madagascar is Africa's outlier.

Iraq is still paying the world back for Saddam's actions -- literally. The Christian Science Monitor reports that the Iraqi government has agreed to pay $400 million to American citizens who claimed to have been tortured or traumatized by the Iraqi regime following Saddam's 1990 invasion of Kuwait. With a 15-30 percent unemployment rate, ubiquitous violence, and a still lacking infrastructure, why is the new Iraqi regime paying so much money to American citizens when it was all Saddam's fault? Because the payment may help Iraq's case to end U.N. sanctions that have lasted since Saddam Hussein's rule: 

Settling the claims, which were brought by American citizens, has been seen as a key requirement for Washington to be willing to push for an end to the UN sanctions.

"There was a lot of pressure on the Iraqi government to do something that gets Congress off their back," says one senior Iraqi official, adding that the settlement cleared the way for US efforts to bring Iraq out from under the UN sanctions.

That's right, Saddam is long gone but sanctions on the still rebuilding country aren't. In fact, Iraq has already paid Kuwait $27.6 billion in reparations and continues to devote five percent of its oil revenues in accordance with the U.N. sanctions resulting from Saddam's invasion. While many countries have cancelled a lot or all of Iraq's debt to them, Kuwait continues to support Iraqi reparations -- regardless of the $22 billion Kuwaiti budget surplus for the last fiscal year.

So if U.S. citizens get paid by the Iraqi government for Saddam's "traumatizing" from 20 years ago, what will the United States pay the families of Iraqi citizens that are actually killed by U.S. forces? Well, the U.S. government is trying to find ways for Iraq to pay for that too.

This week's quiz question:

The volume of global trade decreased how much in 2009?

a) 3 percent    b) 12 percent    c) 23 percent

Answer after the jump …

Read on

Quiz question for the week:

Which country had the lowest rate of economic growth in 2009?

a) Latvia    b) Lithuania    c) Iceland

(For those of you who don't subscribe to the bimonthly print edition of Foreign Policy, you're missing a great feature: the FP Quiz. It has eight intriguing questions about how the world works.)

Answer after the jump …

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Quiz question for the week:

Quiz: How much did new-car registrations change last year globally? 

a) 14 percent decrease    b) no change    c) 7 percent increase

(For those of you who don't subscribe to the bimonthly print edition of Foreign Policy, you're missing a great feature: the FP Quiz. It has eight intriguing questions about how the world works.)

Answer after the jump …

Read on

Tough times call for tough sacrifices. Economies everywhere, desperate to continue their uphill climb out of the global recession, have imbibed this sound logic, however grudgingly. The French, however, don't seem agree with the conventional wisdom: strikes erupted this morning across the country in response to President Nicolas Sarkozy's proposal to bump the retirement age from 60 to-gasp!-61 or 62.

Sarkozy has defended the new measure as a reasonable adjustment given increasing life expectancy. Indeed, he might be excused for merely following in the footsteps of his European colleagues-Germany recently raised the retirement age from 65 to 67. (Then again, these days any comparison to Angela Merkel may do more harm than help.)

So far, the French aren't buying the President's explanations, bringing the country to a near stand-still.  14 percent of teachers and 8 percent of hospital workers left work today to participate in protests, airport travel was disrupted, and even news agencies took a hit. NPR reported that "because there aren't enough journalists available to deliver news bulletins, the main public radio news channel in Paris is playing pop music intermittently."